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LEEDS & NORTHRUP CO. v. UNITED STATES

December 27, 1951

LEEDS & NORTHRUP CO.
v.
UNITED STATES



The opinion of the court was delivered by: GRIM

The amended answer contains two defenses and a counterclaim. In the first and second defenses defendant, the United States, reasserts the jurisdictional objection which it has previously raised in its motion to dismiss. In its second defense the United States admits that plaintiff sold goods to the United States and delivered them on the dates and pursuant to the contracts as alleged in the complaint, except that as to the 16th cause of action the United States alleges payment of $ 305.45 on account of the claim alleged therein and that as to the 61st cause of action the United States alleges payment of $ 24.54 representing payment in full of the claim alleged therein. In its second defense defendant also alleges that plaintiff is indebted to the defendant in the sum of $ 23,516.19, with interest and costs.

 Plaintiff has conceded that subsequent to the commencement of this action it received payment from defendant in the sums of $ 305.45, a portion of claim 16, and $ 24.54, the total amount of claim 61. By reason of these payments the amount sought to be recovered by plaintiff is concededly reduced to $ 23,273.54.

 The counterclaim alleges that plaintiff is indebted to the United States in the amount of $ 23,516.19, with interest and costs, on the alleged ground that this sum was paid by mistake to plaintiff on or about December 11, 1944 as reimbursement for expenses allegedly incurred by plaintiff in the performance of Contract NOrd-957, entered into by the plaintiff and the Department of the Navy, which sum the United States alleges was not authorized to be paid to the plaintiff as part of the cost of performing the contract. In its reply plaintiff has denied the allegations of defendant's counterclaim except to admit a payment of $ 66,740.81 on or about December 11, 1944 on account of the performance of Contract NOrd-957.

 Plaintiff has filed a motion for summary judgment under Rule 56, Fed. Rules Civ. Proc., 28 U.S.C., which is the matter now before me.

 As appears from defendant's amended answer and plaintiff's concession that it received payments in the respective sums of $ 305.45 and $ 24.54, there are no issues between plaintiff and defendant as to the 62 claims alleged in the complaint. The orders and contracts described therein were fully performed by plaintiff and the amounts alleged as due and unpaid (other than the sums of $ 305.45 and $ 24.54 subsequently paid) have been withheld only because of a set-off alleged in defendant's counterclaim.

 The set-off does not arise out of any of the order or contracts alleged in the complaint, but our of a prior contract between plaintiff and the Navy Department, performance of which was completed in all respects prior to May 15, 1946. That prior contract, designated as Contract NOrd-957 (and hereinafter sometimes referred to as the Contract), was a cost-plus-fixed-fee contract.

 The Contract was duly performed by plaintiff and in accordance with the terms thereof monthly invoices supported by statements of costs incurred by plaintiff in the performance of the Contract were submitted to an authorized representative of the Bureau of Supplies and Accounts. After completion of performance by plaintiff the final invoice and statement of cost were submitted and plaintiff executed a general release in favor of defendant dated May 15, 1946. The Bureau of Supplies and Accounts through authorized representatives accepted all reimbursements made to plaintiff under the Contract, as is evidenced by the final certification made as of May 15, 1946 by the Navy Cost Inspector of the total costs, including fee, reimbursable under the Contract from its inception to completion.

 On September 14, 1948, more than two years after the final certification of Allowable Cost under the Contract, the General Accounting Office, following an audit of Navy Department accounts, took exception to reimbursements to plaintiff aggregating $ 23,775.64 theretofore made and approved by the Navy Department's Bureau of Supplies and Accounts pursuant to the Contract. The General Accounting Office was not a part to the Contract and was not mentioned therein.

 The Navy Department, in a letter dated May 3, 1949 replying to the notice of exception, justified the allowability of most of the cost items to which exception had been taken by referring to specific paragraphs of 'Explanation of Principles for Determination of Costs Under Government Contracts, War Department-Navy Department' pursuant to the terms of Articles 7(b) of the Contract. However, the Navy Department (through its Supervisory Cost Inspector) concurred in the General Accounting Office's exception to the extent of $ 351.77 with respect to Contract NOrd-957. How this figure was arrived at is explained in the margin. *fn1"

 The cost items, before apportionment to Contract NOrd-957, which the General Accounting Office and the Navy Department now agree should have been disallowed are as follows: Credit Men's Association (1943) $ 35.00, (1944) $ 35.00; Dinner at Union League Club (1943) $ 31.69; Documentary Stamps for Stock Certificates (1943) $ 25.10; Interest on Phila. Wage Tax accrued as of 12/31/42 (1943) $ 342.73; Manufacturer's Excise Tax (1943) $ 395.59; Oklahoma Sales Tax (1943) $ 677.45; and Illinois occupational Taxes (1944) $ 4,293.03.

 In a letter to the Navy Department dated August 24, 1949, the General Accounting Office revised its exception and reduced it to $ 23,516.19, which is the amount of defendant's counterclaim in this action. Plaintiff has refused to refund the sum of $ 23,516.19 on the grounds that this amount was properly paid under the terms of the Contract and that under Article 7(b) thereof the determinations made by the Bureau of Supplies and Accounts as to the reimbursability of the disputed items were final and conclusive on both plaintiff and defendant.

 Article 7 of Contract NOrd-957, among other things, provides as follows: '(b) Allowable Cost shall constitute the cost incurred by the Contractor in the performance of this contract and accepted by the Bureau of Supplies and Accounts as chargeable in accordance with 'Explanation of Principles for Determination of Costs under Government Contract, War Department-Navy Department' * * *. All disputes concerning questions of fact as to Allowable Cost arising under this contract shall be decided by the Chief of the Bureau of Supplies and Accounts subject to written appeal by the Contractor within thirty (30) days of the Secretary of the Navy or his duly authorized representative whose decision shall be final and conclusive upon the parties hereto * * .'

 The principal question in this case is: Under a contract of this type where it is provided that 'all disputes concerning questions of fact as to Allowable Cost arising under this contract shall be decided by the Chief of the Bureau of Supplies and Accounts * * * whose decision shall be final and conclusive upon the parties hereto', does the General Accounting Office have the authority to ...


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