Syllabus HOUDAILLE INDUSTRIES, INC. (FORMERLY KNOWN AS HOUDAILLE-HERSHEY CORPORATION) v. THE UNITED STATES [No. 155-53. Decided May 8, 1957. Defendant's motion for rehearing overruled October 9, 1957] On the Proofs Contract; termination under Contract Settlement Act.-Plaintiff sues for reimbursement of certain unemployment taxes which it was compelled to pay to the State of Illinois as a result of its operations under a Government contract. It alleges that its contract was terminated and the suit is brought under the Contract Settlement Act of 1944, which would permit recovery of interest at 22 percent per annum on the amount found to be due. The Government contends that the contract was completed and not terminated and that plaintiff in any event executed a binding release to the Government. It is held that the Contract Settlement Act is applicable and plaintiff is entitled to recover the sum of $420,212.46, together with interest to run from the date of payment by plaintiff of the individual payments which went to make up the total. United States 74 (16) Same; Changes article; Joint Terminal Regulations.—The Government's contention that the contract was simply modified under the Changes article is not sustained. Under the Joint Terminal Regulations issued pursuant to the Contract Settlement Act a reduction in the amount of material called for by a contract was a method of termination specifically provided for. United States 74 (16) Same; release; consideration. It is held that the release executed by plaintiff is not valid due to a complete lack of consideration. Documents executed in connection with the release which plaintiff had not negotiated or bargained for do not constitute consideration. Nor does the fact that the release was executed under corporate seal import consideration. Under the statute in Michigan, where plaintiff was domiciled, a seal constitutes only a rebuttable presumption of consideration, and in the instant case plaintiff had adequately rebutted the presumption. 13 (1), 55 United States 74 (6) Release Same; reimbursable expenses.-Plaintiff's expenses were of a kind specifically provided for in the contract and the right to reimbursement is not affected by the fact that claim for reimbursement was not made until after the contract had expired. Opinion of the Court 138 C. Cls. It is sufficient that the expenses arose on account of plaintiff's operation under the contract. United States 74 (16) Mr. Leon D. Ratcliffe for the plaintiff. Mr. Charles Wright, Jr. and Messrs. Beaumont, Smith & Harris were on the briefs. Mr. Philip W. Lowry, with whom was Mr. Assistant Attorney General George Cochran Doub, for the defendant. LARAMORE, Judge, delivered the opinion of the court: This is a suit to recover $420,212.46 claimed to have been expended by plaintiff on account of its contract No. W-7405eng-149 (hereinafter referred to as contract 149) with the Manhattan District of the War Department. The claim is based upon excess unemployment compensation taxes which plaintiff was required during the years 1947 through 1950 to pay to the State of Illinois by reason of its operation under the contract of a Government-owned plant at Decatur, Illinois, on a cost-plus-fixed-fee basis. The plaintiff would not have been required to pay these excess taxes were it not for the adverse effects of its employment and unemployment experience under the above contract upon its rates of contribution in the form of taxes for those years. Plaintiff's rates of contribution were adversely affected during those years because of the substantial employment at the Government-owned plant and the terminations of employment in large numbers beginning in February 1945, and steadily increasing to and beyond the termination of production operations on November 21, 1945. These layoffs ultimately resulted in the filing and payment of claims for benefits to unemployed claimants in substantial numbers pursuant to the provisions of Illinois law. The amount of the claim represents the difference between the sum of the unemployment compensation taxes actually paid by the contractor for the years in question, and the sum of the taxes it would have been required to pay had its operations been confined to its three nongovernmental plants. Plaintiff contends that it would not have had to pay these additional taxes except for the adverse effect of its operations under the Government contract upon its postwar corporate rate of con 301 Opinion of the Court tribution, and that such costs are reimbursable. Suit is brought under the Contract Settlement Act of 1944, 41 U. S. C. 101 et seq.; 58 Stat. 649, on the ground that the contract was terminated on November 21, 1945, within the purview of the terms of that act; and, alternatively, suit is brought on the theory of contract, plaintiff alleging that the amount claimed is reimbursable under the provisions of the contract relying specifically on subsections g, i, m, t, and w of article IX thereof. If the plaintiff is sustained on the former theory it will recover in addition to the amount claimed, interest at the rate of 212 percent per annum, 41 U. S. C. 106 (f), otherwise the recovery will be only for the sum claimed. A third alternative theory, that of accord, is also pursued but is not necessary to the decision of the case. Defendant disputes plaintiff's right to recover on any theory and asserts that even if there is otherwise a valid claim, that plaintiff relinquished the right to it on January 25, 1950, by virtue of a release executed by it and transmitted to the Government's representative, a Mr. Hungerford. Thus, the issues presented to the court for determination in this action are: (1) Did the plaintiff release any valid claim it may have had against defendant by its release executed on January 25, 1950?; (2) Do plaintiff's claimed expenditures fall within the contractual provisions relative to reimbursable expenses?; (3) Was the contract completed according to its terms, or was it terminated within the meaning of the Contract Settlement Act, supra?; (4) If it should be decided that plaintiff has a valid recoverable claim and that the contract was terminated within the purview of the Contract Settlement Act, supra, from what date or dates is plaintiff entitled to interest? In order to resolve these issues it is necessary to review the facts which may be stated as follows: Plaintiff, a Michigan corporation, prior and subsequent to its performance under contract 149 with defendant, operated three manufacturing plants in the State of Illinois. which will hereinafter be referred to as its peacetime plants. A fourth manufacturing plant in that state was set up at Government expense by plaintiff on plaintiff's land at Decatur, Illinois, pursuant to the terms of the contract and was Opinion of the Court 138 C. Cls. known as the Garfield Division of Houdaille-Hershey Corporation even though the Government retained title to the buildings. This plant was engaged only in the work called for by contract 149 and certain operations under a related contract, W-7405-eng-55 (hereinafter referred to as contract 55), which is in no way the subject of the claims here in suit. Contract 149 was of the cost-plus-fixed-fee type. Title I thereof called for plaintiff to design and have a building built at Decatur, Illinois, and procure and install the necessary manufacturing equipment for the production of highly secret materials for the Government. Title II called for the production of a specified number of units of certain classified materials. The cost under both titles was estimated therein. The fixed fee provided for was $200,000 under title I and $650,000 under title II. Production was to start as of February 1, 1944, with completion scheduled for 11 months. Provisions, however, were made for extensions as well as additional fees if more time was needed to complete the contract. A standard termination provision was contained in article IV giving the Government the right to unilaterally terminate the contract at any time and providing for the payment of expenses under article IX, as well as for payment of the full fee called for by the contract in the event of termination. Article IX provided for reimbursement of the plaintiff's expenditures as follows: 1. Reimbursement of Contractor's Expenditures. The Contractor shall be reimbursed in the manner hereinafter described for such of its actual costs and expenses in the performance of the work under this contract, as may be approved or ratified by the Contracting Officer. "Actual costs and Expenses" as used in this Article shall include the following only. Following were some 23 sections spelling out those expenditures specifically reimbursable. Among those were the following within all of which plaintiff claims its expenditures here in suit fall: g The cost of losses or expenses not compensated by insurance or otherwise (including settlement made with the written consent of the Contracting Officer) actually sustained by the Contractor in connection with the work and found and certified by the Contracting Officer to be 301 Opinion of the Court just and reasonable unless reimbursement therefor is expressly prohibited; provided that such reimbursement shall not include any amount for which the Contractor would have been indemnified or compensated by insurance except for the failure of the Contractor to procure or maintain bonds or insurance in accordance with the requirements of the Contracting Officer. i Payments from its own funds made by the Contractractor under the Social Security Act and any disbursements required by State and Federal law, including sales and any use taxes, which the Contractor may be required, on account of this contract, to pay on or for any plant, equipment, processes, organization, and materials, supplies or personnel; and, if approved in writing by the Contracting Officer in advance, permit and license fees and royalties on patents used, including those owned by the Contractor. m Expenditures of the Contractor in connection with the termination of this contract, pursuant to Article IV. t Such other items not expressly excluded by other provisions of this contract as are, in the opinion of the Contracting Officer, to be included in the cost of the work. When such an item is allowed by the Contracting Officer, it shall be specifically certified as being allowed under this subsection. w Expenditures of the Contractor in connection with allowances and benefits relative to employment, including those relating to overtime, hospitalization, sickness, leaves, vacations, holidays and the like. *** Article IX 2. a and b provided for the manner of payment of the costs and fees of the contractor. Other articles provided for disputes, accountability of property and the like. Article XXXIV entitled "Changes" provided in part as follows: ARTICLE XXXIV. CHANGES The Contracting Officer may at any time, by written order issue additional instructions, require additional work or services or direct the omission of work or services covered by this contract. If such changes cause a material increase or decrease in the amount or character of the work and services to be done under this contract an equitable adjustment of the amount of the fixed fee to be paid the Contractor shall be made and the contract shall be modified in writing accordingly. ** * |