Case: JAMES STEWART & CO. v. THE UNITED STATES
Abbreviation: James Stewart & Co. v. United States
Decision Date: 1924-03-03
Docket Number: No. B-21
Citation: 59 Ct. Cl. 295
Volume: 59
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: JAMES STEWART & CO v. THE UNITED STATES
Judges: Hat, Judge; DowNet, Judge; Booti-i, Judge; and Campbell, Chief Justice, concur.
Pages: 295–302

Head Matter:
JAMES STEWART & CO v. THE UNITED STATES
[No. B-21.
Decided March 3, 1924]
On the Proofs
Cost-plus contract; “ expediters ”; cost of work. — Where it was necessary for a cost-plus contractor during the World War to employ men, designated as “ expediters,” to traA'el around to different places to secure labor and the prompt delivery of materials for the work under the contract, and the employment of such men received the approval of the Government officer in charge of the work, the expenses of their employment was part of the cost of the work.
Same; war tax. — Where a cost-plus contractor was required to pay war taxes on freight bills, telegrams, express charges, and •passenger fares necessary in the prosecution of the work under his contract, such expenses were a part of the cost of the work.
The Reporter's statement of the case:
Mr. William. B. King for the plaintiff. King & King were on the briefs.
Mr. William F. Norris, with whom was Mr. Assistant Attorney General Robert H. Lovett, for the defendant. Mr. Barrett F. Brown was on the briefs.
The following are the facts of the case as found by the court:
I. On December 10, 1917, a contract was made between the United States, acting by the Secretary of the Navy, and the plaintiff, whereby plaintiff agreed to construct and complete at the naval operating base, Hampton Hoads, Va., certain bulkhead work therein described on the basis of cost plus a percentage. A copy of the contract, of the specifications No. 2729, of the general provisions forming a part of the specifications for public works, and of addendum No. 1, dated July 10, 1917, all forming a part of the contract, is attached to the petition as Exhibit A and by reference made a part hereof.
II. In proceeding under this contract, the practice followed was to submit all items of proposed expenditure both for labor and materials to the public works officer in charge of the work and secure his approval. The expense was then incurred by plaintiff, the bills were then presented by it to the public works officer and approved by him and passed to the disbursing officer, who paid them. No advance payments were made by the United States to- the contractor.
III. Upon completion of the work under this contract a release was given by plaintiff to the United States as follows :
CONDITIONAL RELEASE
Under contract No. 2729-A, with James Stewart and Company, Inc., dated December 10, 1917, for construction of bulkhead “A” and merchandise pier, naval operating base, Hampton Roads, Virginia.
Whereas, by provisions of the contract dated December 10, 1917, by and between James Stewart and Company, Inc., part}' of the first part, and the fJnited States, party of the second part, for construction of bulkhead “A” and merchandise pier, naval operating base. Hampton Roads, Virginia, it is contemplated that final payment therefor shall not be made until the party of the first part shall have executed and delivered a final release of all claims or demands growing out of the contract; and
Whereas all conditions, covenants, and provisions of the said contract have been performed and fulfilled by and on the part of the party of the first part:
Now, therefore, in consideration of the' premises and of the sum of seven thousand eight hundred ninety-eight .& 47/100 ($7,898.47) dollars lawful money of the United States, being the full and entire sum due upon the completion of the work, as aforesaid, to the said party of the first part in hand paid by the said party of the second part, the receipt of which is hereby acknowledged, the said party of the first part does hereby remise, release', and forever discharge the said party of the second part of and from any and all manner of action, suits, debts, dues, sums, and sums of money, accounts reckonings, bonds, bills, covenants, controversies, agreements, promises, claims, and demands whatsoever in law or in equity that the said party of the first part-lias or may have for or on account of or in connection with the contract aforesaid.
Provided, however, That the party of the first part does not release the party of the second part of and from the demands made by the party of the first part in the following sums:
(a) Disbursements made by the party of the first part covering expenses of expediters in connection with efforts to secure prompt delivery of material at the site of the work, not to exceed the sum of $4,060.82.
(&) War tax paid on freight shipments, not to exceed the sum of $790.96, subject, however, to the obligation of the party of the first, part to endeavor to obtain refund of such amounts so paid from the railroad companies or other common carriers to whom such payments of war tax -were made.
(e) Wages earned and not heretofore claimed by or paid to .employees, not to exceed the sum of $2,144.44, the same not being payable by the United States unless and until they are paid by the parties of the first part.
(a) Such sum as the parties of the first part may ultimately be obliged to pay under and by virtue of an action brought against them by the estate of O. C. Sawyer, an employee of the parties of the first part, on account of injuries resulting in death, contingent upon such recovery being in excess of $10,000, the insurable limit in an individual case.
In witness whereof the said James Stewart and Company, Inc., lias caused its name to be hereunto subscribed and its seal to be hereunto affixed this 16th day of August, 1920.
James Stewart AND Company, Inc.,
By Chas. F. Franson, 3rd Vice President.
Attest:
W. A. Rowan, Secretary.
In the presence of:
J. A. Meslin.
IV. Expedition of this work was important. During its progress labor and materials were scarce and difficult to obtain and transportation was greatly congested.
In order to insure a sufficient supply of labor- and material it became necessary to employ expediters of labor and materials. At the suggestion of the public works officer at the naval base, in charge of the work under this contract, plaintiff from time to time requested and received written authorization for the employment of such persons and for the incurrence of expenses by it in connection with such employment.
Such employment and expenses were duty approved in advance by said public works officer and were subjected to his supervision. The ivages of these expediters were all paid by the United States.
V. The expenses incurred by these expediters and paid by plaintiff were represented by separate subvouchers and were combined in two general vouchers, one for expenses amounting to $2,954.43 with 10 per cent added, a total of $3,249.81, and the other for $574.52 with 10 per cent added, a total of $631.91. These were submitted to the public works officer and by him approved.
These expenses consisted of the salaries of these expediters and their hotel and traveling and miscellaneous expenses.
Some of the materials expedited were diverted by Government officers to other Government work.
VI. The first of said vouchers was forwarded by the Navy Department to the Comptroller of the Treasury and a decision was rendered by him as set forth in 26 Comp. Dec. 688, holding' that plaintiff was not entitled to reimbursement of such expenses.
VII. During the early portions of this work it was necessary »for plaintiff to pay a war tax upon freight, express, passenger tickets, and telegrams in connection with the purchase of materials and performance of the contract. Plaintiff presented this matter to the public works .officer, who agreed to the continuance of such payments, and such payments made by plaintiffs were reimbursed to plaintiff by the disbursing officer in charge at the beginning of the contract.
A subsequent disbursing officer insisted that the war tax should not have been paid and refused to repay such sums to plaintiff. The public works officer endeavored to prevail upon the disbursing officer to reverse his decision.
Plaintiff was instructed by the acting public works officer to make these payments and could not have obtained the materials, telegrams, and passenger transportation without making these payments.
Plaintiff, at the direction of the public works officer, submitted a separate bill for such payments. The public works officer approved this and submitted it to the disbursing officer who also checked it as correct in fact.
Thereafter said disbursing officer arranged to’ haA^e exemption certificates supplied to: plaintiff and to other contractors relieving the railway corporation from collecting the war tax on freight shipments, but no such certificates were furnished for express shipments, telegrams, or railway passenger tickets.
VIII. The amount of taxes so paid during the period between the; refusal to continue payment ancl the use of exemption certificates, approved and checked as aforesaid, Avas $790.96.
The bills for these items Avere submitted by plaintiff to the public works officer ancl approved by him and were checked by the disbursing officer.
Jn some instances included, in tlie above sum material was delivered to Norfolk f. o. b., and plaintiff paid for the material less the freight charges and tax and then paid the freight charges and tax to the- railroads and was reimbursed b3>- the Government only for the freight charges without the tax.
IX. The Navy Department refused to allow the above expenditures on the ground that the contractor should get this war tax back from the public service corporations to which it had been paid.

Opinion:
Graham, Judge,
delivered the opinion of the court.
This suit arose out of what is commonly termed a cost-plus contract for the construction of the naval bulkhead at the Hampton Roads Naval Base. The defendant was to furnish and pay for all materials. The defendant was to repay the plaintiff the cost incurred in performing the work and a percentage fee on such cost. The work was completed according to the contract and the plaintiff was paid a certain amount, minus a sum which he claimed to be due, and signed a conditional release, reserving its rights to certain expenditures on which the defendant had refused payment. These reservations in effect cover the claims in this suit.
The amount involved here, including the percentage of the plaintiff, is not in controversy. The defendant admits that the expediters were employed and that the expenses were incurred.
The items in dispute here grew out of the difficulty which the plaintiff experienced in securing labor to do the work, owing to the competition with other Government work, the country being at that time at war, and having materials properly delivered. In order to hurry up the work and secure the necessary labor and expedite the shipments of materials the plaintiff, at the suggestion of the officer in charge of - the work, employed men termed " expediters," whose business was to travel to different places to secure labor, see that the labor was brought to the works, and to follow up and secure the prompt delivery of materials.
In some cases the approval of the officer in charge of the employment of expediters was secured in advance of cm- ployment. In every case when the bill was rendered for expenses incurred in connection with these expenditures it was approved by the officer in charge. The contract provided that the plaintiff should receive a sum equal to the cost of the work, plus 10 per cent thereof. In defining what was the cost of the work the following were embraced :
"(a) All labor and material applied to both temporary and permanent construction, exclusive of plant.
* ‡ * t'.i * Ü¡ *
"(6) Such other necessary expenses connected with the work not specifically excluded in this addendum, as may be approved by the officer in charge as representing actual and essential elements in the cost of the work."
It is plain, under section (5), that any necessary expenses not specifically excluded which should receive approval of the officer in charge were to be regarded as actual and essential elements in the cost of the work. All of these items not only received the approval of the officer in charge, but these employments originally grew out of his suggestion. As stated, the country was at war and it was necessary that work of every kind should be expedited as much as possible. The plaintiff acted in perfect good faith, performed the work according to his contract, and was within the time fixed by the contract. See Austin Co. v. United States, 58 C. Cls. 98, 134.
In addition to the sums claimed in connection with the employment of expediters there is a claim for war taxes paid by the plaintiff. While transportation for the United States was not subject to war tax, during the early part of the work no arrangements had been made with the railroads for exemptions with the result that the plaintiff in order to get the materials was obliged to pay a number of freight bills with war tax added. The tax so paid on these bills was repaid to the plaintiff by the disbursing officer. Thereafter there was a change in disbursing officers and repayment was refused. Later a system of exemption certificates was arranged, but before these arrangements were consummated the plaintiff had to pay out certain amounts for war taxes which, as stated, the disbursing officer refused to repay. Plaintiff had also paid out war taxes on telegrams, express charges, and passenger fares and these he could not avoid paying. These expenditures for war tax are clearly within the contemplation of the contract, and should not be borne by the plaintiff. In any event they were, in the view of the officer in charge who approved the vouchers, necessary expense in connection with the work and represented actual and essential elements of cost.
Judgment should be entered for the plaintiff against the defendant in the sum claimed in the petition, $4,672.80, and it is so ordered.
Hat, Judge; DowNet, Judge; Booti-i, Judge; and Campbell, Chief Justice, concur.