Case: NORMAN J. MULHOLLAND v. THE UNITED STATES
Abbreviation: Mulholland v. United States
Decision Date: 1966-05-13
Docket Number: No. 4-63
Citation: 175 Ct. Cl. 832
Volume: 175
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: NORMAN J. MULHOLLAND v. THE UNITED STATES
Judges: Before Cowen, Chief Judge, Laramore, Dureee, Davis and ColliNS, Judges.
Pages: 832–861

Head Matter:
361 F. 2d 237
NORMAN J. MULHOLLAND v. THE UNITED STATES
[No. 4-63.
Decided May 13, 1966)
Donald B. WeTlford, attorney of record, for plaintiff. McCloy, WeTlford <& OlarJc, of counsel.
Q-erson B. Kramer, with whom was Assistant Attorney General John W. Douglas, for defendant.
Before Cowen, Chief Judge, Laramore, Dureee, Davis and ColliNS, Judges.

Opinion:
Per Curiam:
This case was referred pursuant to Buie 57(a) to Trial Commissioner Mastín G. White, with directions to make findings of fact and recommendation for conclusions of law. The commissioner has done so in an opinion and report filed on March 19,1965. Exceptions to the commissioner's report were filed by the plaintiff, briefs were filed by the parties and the case was submitted to the court on oral argument of counsel. Since the court is in agreement with the opinion and recommendation of the commissioner, with modifications, it hereby adopts the same, as modified, as the basis for its judgment in this case, as hereinafter set forth. Therefore, plaintiff is not entitled to recover on the claim, defendant is not entitled to recover on the counterclaim, and the petition and counterclaim are dismissed.
Commissioner White's opinion, as modified by the court, is as follows:
INTRODUCTION
The plaintiff, Norman J. Mulholland, is the trustee in bankruptcy of Pacific Grape Products Company, a bankrupt California corporation. At the time when it was actively engaged in business, Pacific Grape Products Company was a processor of fruits and vegetables, and maintained its place of business in Modesto, California.
According to the petition in the present action, the plaintiff trustee in bankruptcy seeks "recovery of amounts due the plaintiff by reason of the defendant's breach of a written contract between the United States and the bankrupt corporation *
The contract mentioned in the petition was entered into as of April 11, 1951, between Pacific Grape Products Com pany and the defendant (represented by a contracting officer of the Quartermaster Corps, U.S. Army). Under this 'contract, Pacific Grape Products Company undertook to furnish the labor, equipment, and storage capacity necessary for the assembly of 6,000,000 5-in-l rations, utilizing components and packaging materials furnished by the defendant. The original contract price was $278,796, but the price was subsequently reduced by change orders to $278,687.39. (For the sake of convenience, this contract will usually be referred to hereafter in the opinion as "the contract," and Pacific Grape Products Company will usually be referred to as "the contractor.")
The alleged breach of contract consisted of the issuance by the defendant's contracting officer on June 5, 1951, of a stop order which directed the contractor not to begin the final assembly of rations under the contract until further notice. Subsequently, the contracting officer permitted the contractor to begin the assembly of rations on or about July 16, 1951. Thereupon, the contractor promptly proceeded to perform its work under the contract. The first delivery of assembled rations to the defendant was accomplished by the contractor a few days after July 16, 1951, and the contract was completed on or about December 31, 1951.
THE STATUTE OE LIMITATIONS
The primary question requiring detailed discussion' arises from the defendant's affirmative defense to the effect that the plaintiff's claim is barred by the statute of limitations (28 U.S.G. §2501 (1958)), which provides that:
Every claim of which the Court of Claims has jurisdiction shall be barred unless the petition thereon is filed within six years after such claim first accrues.
The evidence shows that by December 31, 1951, the contractor had completed all the work required of it under the contract, and had borne all the increased costs that resulted from the issuance of the June 5, 1951, stop order. Accordingly, the right to demand payment for the increased 'costs vested in the contractor not later than December 31, 1951, and it must be concluded that the contractor's claim first accrued not later than that date. Battelle v. United States, 7 Ct. Cl. 297, 300 (1871); The L. E. Myers Co., Inc. v. United States, 105 Ct. Cl. 459, 478, 64 F. Supp. 148 (1946); Empire Institute of Tailoring, Inc. v. United States, 142 Ct. Cl. 165, 161 F. Supp. 409 (1958).
The petition in this case was filed on January 3, 1963. Consequently, it appears that the petition was filed approximately 11 years after the plaintiff's claim first accrued, and, therefore, that the claim is barred by the 6-year statute of limitations, unless the running of that statute was tolled for some reason until January 4, 1957, or later.
In this connection, the petition charges the defendant with "deliberate concealment of the true facts and reasons for the delay and the assertion of false and irrelevant facts," and the plaintiff contends that such "a fraudulent attempt to enable the defendant to evade its responsibility for the delay and to unfairly deprive the Contractor of the recovery for the damages it sustained through such delay" was sufficient to toll the running of the statute of limitations. In support of this contention, the plaintiff has cited 34 Am. Jur. Limitation of Actions § 231, pp. 188-189.
The proper evaluation of this contention by the plaintiff with respect to the tolling of the statute of limitations will require a rather extended exposition of the factual background for the issuance of the June 5, 1951, stop order.
As previously indicated, the contract covered the assembly by the contractor of 6,000,000 5-in-l rations. Such rations are in the category of operational rations. They are designed for situations where organized messing of military personnel cannot be accomplished, but where feeding in small groups is possible. 'Such situations arise when radar station or weather station crews are located at isolated outposts, or when gun crews, tank crews, patrols, or similar small groups are deployed beyond the range of their unit kitchens. Field cooking equipment is desirable but not required in connection with the consumption of 5-in-l rations.
The contract and the specifications that were incorporated in it by reference provided for the assembly by the contractor of the 5-in-l rations on the basis of five different menus. These menus were to contain various combinations of canned meat items, canned bread or bread-type biscuits, types of pudding, types of jam, several kinds of vegetables, sugar, milk, beverages, confections, clieese spread, and butter spread. Each menu was to be packed in a separate case or carton, and was to provide five men with three meals for one day. In addition, each carton was to contain a can opener, drawing gum, cigarettes, matches, water purification tablets, toilet paper, and soap.
Five-in-1 rations are to be distinguished from C-rations, which are also operational rations. The C-ration is intended for use when the tactical situation is so unstable that not even messing in small groups is possible, and no kitchen facilities are available. This ration is packaged so that it can be carried by an individual, and it provides one individual with three meals for one day. The C-ration, like the 5-in-l ration, is prepared in several different menus that consist of various combinations of food components (including meat items), plus cigarettes, matches, water purification tablets, and toilet items. The food items are prepared so that they may be eaten without further cooking.
The property which the defendant was obligated under the contract to furnish the contractor for use in assembling the 5-in-l rations consisted of more than 50 varieties of canned or packaged food items (including canned meats), plus auxiliary items of the sort previously mentioned and numerous varieties of packaging materials. The defendant made arrangements with various suppliers for the procurement of the ration components and packaging materials.
The contract was one of several contracts which the defendant entered into at about the same time with various persons, whereby the latter were to assemble operational rations from components furnished by the defendant. All these contracts were similar, except that some covered the assembly of 5-in-l rations and others covered the assembly of C-rations.
Beginning as early as February 1951 and extending into the summer of 1951, there was a shortage of meat in the United States. Meat animals were in plentiful supply at the time, but many animals that otherwise would have been marketed and slaughtered during the period were withheld from market because of ceiling prices imposed by the defendant. Due to the meat shortage, the defendant experienced difficulty in obtaining from suppliers the quantities of boneless beef, carcass beef, pork, pork products, and canned meats that were needed for the feeding of the defendant's military personnel. This situation became more acute for the defendant after April 30, 1951, than it had been previously. From the standpoint of the present litigation, the most significant aspect of the meat shortage related to the inability of the defendant to obtain from its suppliers adequate quantities of certain canned meat items that the pertinent specifications prescribed for inclusion in some of the 5-in-l ration menus and in some of the C-ration menus.
The meat shortage was first mentioned to the contractor by the defendant in a letter dated May 31, 1951, from the Chicago Quartermaster Depot, Department of the Army, which administered the defendant's contracts for the procurement of operational rations (among other things). This letter stated in part as follows:
The supply of the meat components for your Nation Assembly still has not been cleared to satisfaction. Lt. Colonel Hirschhorn? Chief of the Operational Nations Branch is in Washington, D.C., this date attending a conference to resolve the meat shortage. It is hoped that good news will be forthcoming in the near future.
Until you hear further it would be advisable to hold up hiring personnel for the purpose of commencing the 5-in-l Nation Pack.
At about the end of May 1951, the defendant had on hand approximately 3,000,000 5-in-l rations and approximately 19,000,000 C-rations. The Office of the Quartermaster General, Department of the Army, surveyed the situation with respect to the quantities of operational rations on hand, the prospective need for operational rations by the Armed Forces during the ensuing several weeks, and the difficulties that were being encountered in the procurement of certain canned meat items for use as components in operational rations. It was decided that, in view of the relatively stable military situation which confronted the defendant at the time, the supply of operational rations on hand was sufficient to meet any need for such rations during the next several weeks that might reasonably be anticipated, and that the further procurement of such rations should be suspended for approximately 45 days, in the hope that the shortage in the supply of certain canned meat items for use as components in operational rations would be relieved during the period of the suspension. Accordingly, the Office of the Quartermaster General sent a telegram to the Chicago Quartermaster Depot on June 2,1951, directing that the program for the assembly of operational rations be suspended until on or about July 16, 1951.
In accordance with the instructions received from the Office of the Quartermaster General, the Chicago Quartermaster Depot sent the following telegram to the contractor on June 5, 1951:
RE CONTRACT DA 11 DASH 009 QM DASH 9458 01 12011 DASH OPR DASH 51 REQUEST THAT NO ACTION BE TAKEN TO BEGIN FINAL ASSEMBLY UNTIL FURTHER NOTICE PD SUB ASSEMBLIES CAN BE STARTED WHEN YOU DESIRE
The contractor considered the telegram of June 5,1951, as a follow-up of the letter dated May 31,1951. Consequently, the contractor understood that the assembly of 5-in-l rations under the contract was being suspended because of the defendant's difficulty in securing certain meat components for such rations.
Instructions similar to those contained in the telegram of June 5, 1951, to the contractor were issued by the Chicago Quartermaster Depot to the other persons that held contracts at the time for the 'assembly of operational rations.
On June 15, 1951, the Chicago Quartermaster Depot sent the following telegram to the contractor:
RE CONTRACT DA 11 DASH 009 QM 9458 01 12011 DASH OPR DAST 51 TENTATIVE EARLIEST STARTING DATE FOR FINAL ASSEMBLY OF RATION SMALL DETACHMENT 5 DAST IN DAST 1 IS 16 JULY 1951 THIS OFFICE WILL NOTIFY YOU IF CHANGED
The contractor began tire final assembly of 5-in-l rations under the contract on or about July 16,1951, pursuant to the permission granted in the telegram of June 15, 1951. The first shipment of assembled rations to the defendant was made 'by the contractor a few days after July 16,1951.
When the contractor 'began the final assembly of 5-in-l rations on or about July 16,1951, with the permission of the Chicago Quartermaster Depot, the contractor still did not have on hand certain of the canned meat items prescribed by the specifications for inclusion in some of the menus. The final assembly of such menus was postponed by the contractor until the proper canned meat items were received. In the meantime, beginning on or about July 16, 1951, the contractor assembled and shipped those menus for which it had on hand all the prescribed food components.
The prejudice to the contractor from being required to delay 'the assembly of rations under the contract until on or about July 16, 1951, is indicated in the findings. It is not necessary, however, to summarize such data for the purpose of the present discussion.
The defendant was not justified, and breached the contract, in requiring the contractor to delay until July 16,1951, the assembly of ration menus for which the contractor had on hand the prescribed food components. Oliver-Finnie Co. v. United States, 150 Ct. Cl. 189, 196, 279 F. 2d 498, 503 (1960). On the Other hand, the evidence does not support the plaintiff's allegations that there was, on the part of the defendant, "deliberate concealment of the true facts and reasons for the delay and the assertion of false and. irrelevant facts," and "a fraudulent attempt to enable the defendant to evade its responsibility for the delay and to unfairly deprive the Contractor of the recovery for the damages it sustained through such delay."
The facts in the record show that the principal motivation behind the issuance by the Office of the Quartermaster General of its instructions to the Chicago Quartermaster Depot on June 2, 1951, that the assembly of operational rations should be suspended was the inability of the defendant to obtain adequate supplies of certain canned meat items that were prescribed by the pertinent specifications for inclusion in some of the 5-in-l ration menus and in some of the C-ration menus. No misrepresentations were made to the contractor in the stop order of June 5, 1951, or otherwise.
It is true that the defendant did not at any time furnish to the contractor a full explanation of the defendant's supply situation with respect to operational rations, particularly the fact that the defendant had on hand as of the end of May and the beginning of June 1951 a supply of operational rations that was regarded as sufficient to meet the reasonably anticipated needs for such rations during the next several weeks. Surely, though, one who openly breaches a contract is not under a duty to make a full disclosure to the victim of every facet of the thinking behind the breach, in order to avoid a charge of fraudulent concealment sufficient to toll the statute of limitations. Furthermore, the very issuance of the stop order in this case implied that the supply of 5-in-l rations was sufficient for the immediate future, since it was reasonable to presume that the defendant's procurement officials, as military men, would not stop the assembly of ration menus for which the prescribed components were on hand if the Armed Forces urgently needed the particular menus. Indeed, it was reasonable to presume that the procurement officials, as military men, would have authorized the substitution of other less desirable food components for the canned meat items that were unavailable for some of the menus if there had been an immediate need for the rations because of the military situation.
Everything considered, there is no justification for a finding that the defendant fraudulently made false statements to the contractor or fraudulently concealed material facts from the contractor.
It appears, therefore, that the running of the statute of limitations was not tolled in tins case by reason of any fraud on the part of the defendant.
Perhaps it should also be mentioned, in connection with the question as to whether the statute of limitations was tolled, that the contractor and the defendant were involved in two sets of administrative proceedings until August 9, 1957, and July 22, 1958, respectively. Both of these dates were within the 6-year period that immediately preceded the filing of the petition on January 3,1963.
One set of administrative proceedings was instituted by the contractor on December 19, 1951, when it submitted to the Chicago- Quartermaster Depot a claim in the amount of $61,453.59 for additional expenses incurred as a result of the stop order dated June 5, 1951. The contractor's claim, as revised somewhat in July 1953 on the basis of an actual audit of the contractor's expenses, was referred by the Department of the Army to the General Accounting Office, which denied the claim in a decision dated April 13, 1954.
In a communication dated August 20, 1954, and addressed to the attention of the ¡contracting officer, a representative of the contractor requested "that the Contractor be furnished with a final decision signed by the Contracting Officer covering the entire claim, together with findings of fact covering questions of law and questions of fact." In this connection, it should be mentioned that the contract contained the standard "disputes" article which is customarily found in Government contracts and which provides that disputes concerning questions of fact which are not disposed of by agreement shall be decided by the contracting officer, subject to a right of appeal to the head of the department. The contractor's request was denied by the contracting officer in a communication to the contractor dated August 25,1954, on the ground that there was no question of fact presented upon which the contracting officer had authority to make a decision.
The contractor thereupon took an appeal to the Armed Services Board of Contract Appeals (acting for the Secretary of the Army) from the action of the contracting officer. The appeal was denied by the ASBCA in a decision dated August 9, 1957 (ASBCA No. 3683).
The fact that the contractor was involved in administrative proceedings until August 9, 1957, on the claim that is involved in the present litigation did not toll the running of the statute of limitations. The authority of the administrative agency to render decisions under the "disputes" pro vision, of the contract was limited by the language of that provision to "question [s] of fact arising under this contract" and related to matters as to which the administrative authorities could grant relief under the contract. What occurred here was a breach of the contract, not an authorized stop order under the contract (which contained no suspension of work clause). Oliver-Finnie Co. v. United States, supra. Consequently, since the institution and prosecution of administrative proceedings relative to a claim based upon an alleged breach of contract could not be regarded as a prerequisite to the maintenance of a legal action on the same claim, such proceedings did not toll the statute of limitations. Thomas v. United States, 125 Ct. Cl. 76, 79-80 (1953); Art Center School v. United States, 136 Ct. Cl. 218, 226, 142 F. Supp. 916, 921 (1956).
Concurrently with the administrative proceedings previously mentioned, an affirmative claim of the defendant against the contractor was being processed under the "disputes" provision of the contract. That claim was originated by the contracting officer's findings of fact and decision which were forwarded to the 'contractor on August 26,1953, and which demanded payment of $158,936.11, representing costs to the defendant arising from the infestation of certain food components furnished by the defendant and in the custody of the contractor. A timely appeal from that decision was taken by the contractor to the Armed Services Board of Contract Appeals on September 25, 1953. The appeal was considered by the ASBCA after lengthy hearings. A final decision (ASBCA No. 2527) sustaining the contractor's appeal was rendered by the ASBCA on July 22, 1958. The ASBCA held that the contractor exercised the degree of care required of it under the law, and was not negligent in the storage and handling of the infested food components.
The administrative proceedings mentioned in the preceding paragraph were unrelated to — and certainly were not a prerequisite to the maintenance of — the present action for breach of contract. Hence, such proceedings did not toll the running of the statute of limitations with respect to the breach-of-contract claim that is involved in this case.
For the reasons outlined in this part of the opinion, it is my view that the contractor's claim first accrued not later than December 31, 1951, that the running of the statute of limitations was not tolled for any reason, and that the claim was barred by the 6-year statute of limitations when the present action was instituted on January 3,1963.
It necessarily follows that the petition should be dismissed.
THE COUNTERCLAIM
On April 13,1964, the defendant filed a counterclaim in the amount of $1,226.60.
With respect to the counterclaim, the evidence in the record shows that during the performance of the contract the defendant supplied to the contractor ration components and packaging materials in excess of the quantities actually needed by the contractor for the performance of the contract. In this connection, the contract provided that "Any components remaining on hand after the assembly of all food packets will be packed and returned to the Government within 30 days."
The excess Government-furnished property had a value of $3,226.60. Upon the completion of the contract, the defendant demanded the return of the excess Government-furnished property or the payment of its value. The contractor did not comply with the defendant's demand, but the defendant effected a partial reimbursement by withholding from the contractor the sum of $2,000 that was otherwise due the contractor. Hence, there is still due and owing the defendant from the contractor the sum of $1,226.60 on account of the excess Government-furnished property.
However, the successful invocation by the defendant of the statute of limitations against the plaintiff's claim requires the court to dismiss the defendant's counterclaim along with the plaintiff's petition.
It has long been held that the 6-year statute of limitations relative to the institution of actions against the United States in this court is jurisdictional in nature and limits the jurisdiction of the court. Kendall v. United States, 107 U.S. 123, 125 (1882); Soriano v. United States, 352 U.S. 270, 273 (1957); U.S. Nat'l Bank of Portland (Ore.) v. United States, 129 Ct. Cl. 777, 779, 125 F. Supp. 250, 252 (1954); Todd v. United States, 155 Ct. Cl. 87, 93, 292 F. 2d 841, 844 (1961). Therefore, since the petition in the present case was filed more than 6 years after the plaintiff's claim first accrued, the Court of Claims does not have jurisdiction of such claim.
The power of the Court of Claims to adjudicate a counterclaim asserted by the United States in a case before the court is derived from 28 U.S.C. §2508 (1958), which provides in part as follows:
Upon the trial of any suit in the Court of Claims in which any setoff, counterclaim, claim for damages, or other demand is set up on the part of the United States against any plaintiff making claim against the United States in said court, the court shall hear and determine such claim or demand both for and against the United States and plaintiff.
This statutory provision necessarily presupposes the assertion by a plaintiff of a claim as to which the Court of Claims has jurisdiction, since the attempted assertion in this court by a claimant of a claim outside the jurisdiction of the court would, in effect, be a void act. Therefore, as the Court of Claims is generally without authority to adjudicate claims by the United States against other persons, it has been held that where the United States has asserted in this court a counterclaim against a plaintiff and the plaintiff's claim is rejected because of a lack of jurisdiction, the counterclaim must be dismissed along with the plaintiff's petition, without regard to the merits of the counterclaim. The B. and O. R.R. v. United States, 34 Ct. Cl. 484, 508 (1899); Alloy Products Corp. v. United States, 157 Ct. Cl. 376, 383, 302 F. 2d 528, 532 (1962); Tuason Construction Co. v. United States, 166 Ct. Cl. 597 (1964).
Accordingly, as the plaintiff's claim in the present case is outside the court's jurisdiction, the defendant's counterclaim should be dismissed along with the plaintiff's petition, irrespective of the merits of the counterclaim.
FINDINGS of Fact
1. (a) Pacific Grape Products Company is a California corporation. At the time when it was actively engaged in business, the company was a processor of fruits and vegetables, and maintained its place of business in Modesto, California.
(b) Pacific Grape Products Company is now bankrupt. The plaintiff, Norman J. Mulholland, is the trustee in bankruptcy of the bankrupt corporation.
2. (a) As of April 11,1951, Pacific Grape Products Company entered into a contract (No. DA-11-009-QM-9458) with the defendant (represented by a contracting officer of the Quartermaster Corps, TJ.S. Army). Under this contract, Pacific Grape Products Company undertook to furnish the labor, equipment, and storage capacity necessary for the assembly of 6,000,000 5-in-l rations, utilizing components and packaging materials furnished by the defendant. The original contract price was $278,796, but the price was subsequently reduced by change orders to $278,687.39. (For the sake of convenience, the contract mentioned in this paragraph will usually be referred to hereafter in the findings as "the contract," and Pacific Grape Products Company will usually be referred to as "the contractor.")
(b) The contract provided that the components and packaging materials which the defendant was to furnish and the contractor was to use in assembling the 5-in-l rations were to be delivered to the contractor's plant in accordance with the following schedule:
to be delivered on or before 20 1951
to be delivered on or before 5 June 1951
to be delivered on or before 20 June 1951
to be delivered on or before 5 1951
to be delivered on or before 20 1951
to be delivered on or before 5 1951
to be delivered on or before 20 1951
to be delivered on or before 5 1951
(c) In connection with the furnishing by the defendant and receipt by the plaintiff of components and packaging materials for the 5-in-l rations, the contract provided in part as follows:
However, the Contractor warrants and agrees that it has available sufficient storage space for the storage of the entire quantity of the Government-Furnished Property and will, if required, store 'and handle the entire quantity of said Government-Furnished Property at no cost to the Government irrespective of this Schedule, during the entire life of the contract and for an additional ninety (90) days thereafter.
(d) Under the contract, the completed 5-in-l rations were to be delivered by the contractor to the defendant in accordance with the following schedule:
1,200,000 on or before 30 June 1951
1,200,000 on or before 31 July 1951
1,200,000 on or before 31 Aug. 1951
1,200,000 on or before 30 Sept. 1951
1,200,000 on or before 31 Oct. 1951
(e) The contract contained the following general provisions (among others):
2. CHANGES.
The Contracting Officer may at any time, by a written order, and without notice to the sureties, make changes, within the general, scope, of this contract, in any one or more of the following: (i) drawings, designs, or specifications, where the supplies to be furnished are to be specially manufactured for the Government in accordance therewith; (ii) method of shipment or packing; and (iii) place of delivery. If any such change causes an increase or decrease in the cost of, or the time required for, performance of this contract, an equitable adjustment shall be made in the contract price or delivery schedule, or both, and the contract shall be modified in writing accordingly. Any claim by the Contractor for adjustment under this clause must be asserted within 30 days from the date of receipt by the Contractor of the notification of change: Provided, however, That the Contracting Officer, if he decides that the facts justify such action, may receive and act upon any such claim asserted at any time prior to final payment under this contract. Failure to agree to any adjustment shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes." However, nothing in this clause shall excuse the Contractor from proceeding with the contract as changed.
12. Disputes.
Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. Within 30 days from the date of receipt of such copy, the Contractor may appeal by mailing or otherwise furnishing to the Contracting Officer a written appeal addressed to the Secretary, and the decision of the Secretary or his duly authorized representative for the hearing of such appeals shall be final and conclusive: Provided, That if no such appeal is taken, the decision of the Contracting Officer shall be final and conclusive. In connection with any appeal proceeding under this clause, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of its appeal. Pending final decision of a dispute hereunder, the Contractor shall proceed diligently with the performance of the contract and in accordance with the Contracting Officer's decision.
❖ ❖ ❖ # ‡
35. Liabhjtt on the Government on Account op its UNDERTAKING TO FURNISH COMPONENTS.
(a) The Govermnent will use its best efforts to cause components herein provided to be furnished by the Government, to be delivered to the contractor at the time or times herein specified but the Government cannot and does not guarantee that components will be so delivered.
(b) Any failure by the Government to cause components to be delivered as herein provided shall not be considered as a breach of contract on the part of the Government and the contractor shall not be entitled to receive damages by reason thereof, it being expressly understood and agreed that the right of the contractor to an extension of time for performance and a price adjustment as hereinafter provided in this article shall be in lieu of any remedy which might otherwise be available to the contractor.
(c) In the event of a failure of the contractor to receive components at the times specified in this contract which shall result in the inability of the contractor to make deliveries in accordance with the contract schedule for delivery of assembled food packets, the contract price will be adjusted to include any actual costs of performance which would not have been incurred except for such failure to receive components on time. Under no circumstances shall any price adjustment under this paragraph include compensation for loss of profit or any other element of damages other than actual increased costs of performance over the extended term of the contract to the extent that such costs would not have been incurred had components been received on time.
(e) Any components remaining on hand after the assembly of all food packets will be packed and returned to the Government within 30 days.
3. The contract and the specifications (MIL-N-10754 (QMC), dated 11 December 1950) that were incorporated in it by reference provided for the assembly of the 6,000,000 5-in-l rations on the basis of five different menus. These menus were to contain various combinations of canned meat items, canned bread or bread-type biscuits, types of pudding, types of jam, several kinds of vegetables, sugar, milk, beverages, confections, cheese spread, and butter spread. Each menu was to be packed in a separate case or carton, and was to provide five men with three meals for one day. In addition, each carton was to contain a can opener, chewing gum, cigarettes, safety matches, water purification tablets, toilet paper, and soap.
4. (a) Five-in-1 rations are operational rations. They are designed for situations where organized messing cannot be accomplished, but where feeding in small groups is possible. Such situations arise when radar station or weather station crews are located at isolated outposts, or when gun crews, tank crews, patrols, or similar small groups are deployed beyond the range of their unit kitchens. Field cooking equipment is desirable but not required for the preparation of 5'-in-l rations.
(b) Five-in-1 rations are to be distinguished from C-rations, which are also operational rations. The C-ration is intended for use when the tactical situation is so unstable that not even messing in small groups is possible, and no kitchen facilities are available. This ration is packaged so that it can be carried by an individual, and it provides one individual with three meals for one day. The C-ration is prepared in several different menus, and consists of meat items, bread-type units, fruit units, confection, beverage, jam and crackers, and cookies, plus cigarettes, matches, water purification tablets, toilet items, and welfare items. The food items are prepared so that they may be eaten without further cooking.
5. The property which the defendant was obligated under the contract to furnish the contractor for use in assembling the 5-in-l rations consisted of more than 50 varieties of canned or packaged food items, plus can openers, chewing gum, cigarettes, safety matches, water purification tablets, toilet paper, soap, and numerous varieties of packaging materials. The defendant entered into contracts with various suppliers for the procurement of the ration components and packaging materials.
6. The contractor was dependent entirely upon the defendant to furnish the necessary components and packaging materials for use in assembling the 5-in-l rations, to furnish and authorize the use of substitutes for components which were not available or in short supply, and to see that the components were supplied to the contractor at the times specified in the contract schedule.
7. The contract was one of several contracts which the defendant entered into at about the same time with various persons, whereby the latter were to assemble operational rations from components furnished by the defendant. All these contracts were similar, except that some covered the assembly of 5-in-l rations and others Covered the assembly of C-rations.
8. Beginning as early as February 1951 and extending into the summer of 1951, there was a shortage of meat in the United States. Meat animals were in plentiful supply at the time, but many animals that otherwise would have been marketed and slaughtered during the period were withheld from market because of ceiling prices imposed by the defendant. Due to the meat shortage, the defendant experi enced difficulty in obtaining from suppliers the quantities of boneless beef, carcass beef, pork, pork products, and canned meats that were needed for the feeding of the defendant's military personnel. This situation became more acute for the defendant after April 80, 1951, than it had been previously. From the standpoint of the present litigation, the most significant aspect of the meat shortage related to the inability of the defendant to obtain from its suppliers adequate quantities of certain canned meat items that the pertinent specifications prescribed for inclusion in some of the 5-in-l ration menus and in some of the C-ration menus.
9. On May 31, 1951, the Chicago Quartermaster Depot, Department of the Army, which administered the defendant's contracts for the procurement of (among other tilings) operational rations, wrote a letter to the contractor, stating in part as follows:
The supply of the meat components for your Nation Assembly still has not been cleared to satisfaction. Lt. Colonel Hirschhorn, Chief of the Operational Nations Branch is in Washington, D.C., this date attending a conference to resolve the meat shortage. It is hoped that good news will be forthcoming in the near future.
Until you hear further it would be advisable to hold up hiring personnel for the purpose of commencing the 5-in-l Nation Pack.
10. At about the end of May 1951, the defendant had on hand approximately 3,000,000 5-in-l rations and approximately 19,000,000 C-rations. The Office of the Quartermaster General, Department of the Army, surveyed the situation with respect to the quantities of operational rations on hand, the prospective need for operational rations by the Armed Forces during the ensuing several weeks, and the difficulties that were being encountered in the procurement of certain canned meat items for use as components in operational rations. It was decided by that office that, in view of the relatively stable military situation that confronted the defendant at the time, the supply of operational rations on hand was sufficient to meet any need for such rations during the next several weeks that might reasonably be anticipated, and that the further procurement of such rations should be suspended for approximately 45 days, in the hope that the shortage in the supply of certain canned meat items for use as components in operational rations would be relieved during the period of the suspension. Accordingly, the Office of the Quartermaster General sent a telegram to the Chicago Quartermaster Depot on June 2, 1951, directing that the program for the assembly of operational rations be suspended until on or about July 16,1951.
11. If there had been an immediate and urgent need for additional operational rations at the time, the Office of the Quartermaster General could — and would — have authorized the substitution of other food components for the canned meat items which were prescribed by the pertinent specifications for inclusion in the operational rations but which were in short supply as of June 2, 1951. However, operational rations with the substituted food components would have been less desirable than operational rations with the canned meat items called for by the specifications.
12. On June 5,1951, the Chicago Quartermaster Depot sent the following telegram to the contractor:
RE CONTRACT DA 11 DASH 009 QM DASH 9458 01 12011 DASH OPR DASH 51 REQUEST THAT NO ACTION BE TAKEN TO BEGIN FINAL ASSEMBLY UNTIL FURTHER NOTICE PD SUB ASSEMBLIES CAN BE STARTED WHEN YOU DESIRE
13. The contractor considered the telegram of June 5,1951, from the Chicago Quartermaster Depot (see finding 12) as a follow-up of the letter dated May 31,1951, from the same agency (see finding 9). Consequently, the contractor understood that the assembly of 5-in-l rations under the contract was being suspended by the Chicago Quartermaster Depot because of difficulty in securing certain meat components for such rations.
14. Instructions similar to those contained in the telegram set out in finding 12 were issued by the Chicago Quartermaster Depot to the other persons that held contracts at the time for the assembly of operational rations.
15. On June 15, 1951, the Chicago Quartermaster Depot sent the f ollowing telegram to the contractor:
RE CONTRACT DA 11 DASH 009 QM 9458 01 12011 DASH OPR DAST 51 TENTATIVE EARLIEST STARTING DATE FOR FINAL ASSEMBLY OF RATION SMALL DETACHMENT 5 DAST IN DAST 1 IS 16 JULY 1951 THIS OFFICE WILL NOTIFY YOU IF CHANGED
16. The contractor began the final assembly of 5-in-l rations under the contract on or about July 16,1951, pursuant to the permission granted in the telegram of June 15, 1951 (see finding 15). The first shipment of assembled rations was made by the contractor a few days after July 16, 1951.
17. When the contractor began the final assembly of 5-in-l rations on or about July 16,1951, with the permission of the Chicago Quartermaster Depot, the contractor still did not have on hand certain of the canned meat items prescribed by the pertinent specifications for inclusion in some of the menus. The final 'assembly of such menus was postponed by the contractor until the proper canned meat items were received. In the meantime, the contractor assembled and shipped those menus for which it had on hand all the prescribed food components.
18. The effect of the telegrams dated June 5 and 15, 1951 (see findings 12-17), was to delay substantially the contractor's ration assembly operations, and to increase the cost to the contractor of performing the contract.
19. During the "period between June 5 and July 16, 1951, the defendant continued to ship to the contractor those components for the 5-in-l rations that were being furnished by the defendant's suppliers. Since the contractor was unable, because of the telegrams dated June 5 and 15, 1951, to assemble the components into completed rations and ship the completed rations to the defendant until on or about July 16, 1951, the accumulation of components soon exceeded the storage capacity which the contractor had provided in the light of the schedules fixed in the contract for the receipt of components by the contractor and the shipment of assembled rations by the contractor. It was thus unexpectedly necessary for the contractor to rent storage space from other per- sous; and since such, space was difficult to obtain in the locality at the time, it was necessary for the contractor to rent some space in towns other than Modesto, which involved not only rental costs that the contractor had not anticipated but also unanticipated costs involved in transporting the Government-furnished property between the contractor's plant and the distant warehouses.
20. (a) On July 20, 1951, the contractor wrote a letter to the Chicago Quartermaster Depot, stating in part as follows:
This contract calls for the beginning of operations June 1st, but due to the inability of the Government to supply certain items, the operations were delayed until July 16th. The major portion of the items were shipped in on schedule. This placed a hardship burden on us as it required us to supply warehouse space which was not anticipated. Furthermore we were required to find what available space was to be had and to transport to these outlying warehouses at considerable additional expense to us. We realize that the contract calls for space sufficient to warehouse the entire components. However, this condition was not anticipated and we were advised that 90,000 square feet was the total amount of warehouse space necessary.
Warehouse space on the Pacific Coast at this time of the year is in short supply, due to the fruit season, and it seems ridiculous to force goods into this area from suppliers when there is ample space at the source. Not only is it causing a hardship on us, but it overburdens the facilities that are required for other purposes.
Attached is Schedule I, listing goods which we have in sufficient supply for a thirty-day or more ran. We want these items to be held and checked for a period of fifteen days, and from then on the shipments are to be made according to schedule as set forth in the contract.
H? # H* %
We are sure that you can appreciate the problem and hardship which has been trusted [sic] upon us. Our demurrage bill for last week was $1000. This condition we cannot bear. Our quotation on the assembly job was made at a very close figure and was based upon the assumption that the provision of the contract would be followed.
Immediate action by you on this problem will certainly be greatly appreciated.
(b) On July 25,1951, the contracting officer replied to the letter set out in paragraph (a) of this finding, and stated in part as follows:
We regret that you find yourself in this position, but we also regret that we can offer you no relief from our present delivery schedule.
We realize that you have a serious problem, but apparently the only solution is for you to acquire additional warehouse facilities to enable you to store the components as they arrive.
This office stands ready at all times to assist your firm in any problems that may arise, but unfortunately we are unable to assist you in this particular matter.
21. Under the date of September 6, 1951, the contracting officer issued a document which purported to be a change order and which stated in part as follows:
2. For the convenience of the Government, it is desired to delay Assembly of Nations covered by subject contract ; and therefore the original Schedule of Deliveries appearing on Page 1 of said contract is hereby deleted, and the following is substituted in lieu thereof:
i|: $ % Hi «
Nations on or before 16 1951
Nations on or before 16 1951
Nations on or before 16 Oct. 1951
Nations on or before 16 Nov. 1951
Nations on or before 16 Dec. 1951
3. By reason of these changes, the provisions prescribing the compensation to be paid under said contract are not affected.
4. Except as hereby amended, all the terms and conditions of the contract shall remain unmodified and in full force and effect and shall also apply in carrying out the provisions of this Order.
22. On December 19,1951, the contractor submitted a claim to the Chicago Quartermaster Depot, in the following language:
Under the general provisions of our Contract No. QM-9458, covering 5 in 1 Nation Assembly Operations, we are applying for relief from the burden of excessive costs in the amount of $61,453.59 which were brought about by the following conditions:
At the time, we filed our bid to assemble 6,000,000 units of 5 in 1 rations, we understood that it would require warehouse space, plus space for the actual assembly operation, of 90,000 square feet. We set aside this space and had the. Industrial Mobilization Division, Oakland Army Base, inspect and approve both the assembly plant and the warehouse space.
It was stated in the Bid that the components would be delivered as follows:
12%% by May 20th, 12%'% by June 5th, 12%% by June 20th, 12%% by July 5th, 12%% by July 20th, 12%% by August 5th, 12%% by August 20th and the final 12%'% by September 5th.
Also, we were to pack and ship as follows:
20% by June 30th, 20% by July 31st, 20% by August 31st, 20% by September 30th and the final 20% by October 31st.
Some of the components arrived by May 20th. However, due to some manufacturers not being able to meet the requirements or procure the necessary raw materials, some components did not start to arrive until the first of August — some of the other components arrived by July 20th. This made it necessary for the Quartermaster Depot to request us to delay the starting of packing operations from June 1st to July 16th. As of July 20th, we had received and stored about 45% of all the components, even if the following were in short supply:
Beef and Gravy — no receipts, Boast Beef and Hamburgers — only 12%% delivery, Peach Jam — 17%'%, Meat Balls and spaghetti, Frankfurters, Chewey Chocolates, Pad No. 2 and Pad No. 3 — only 25%, Salt — only 29%.
According to the Contract, we should have received, by July 20th, 62%% of all components with 33%% packed and shipped. As it actually turned out, we had received 45% of the total components and had only packed 3%. This caused us to have on hand 13% more components than required and we received after July 20th the balance of the components with some of them coming much faster than we could use them. The result being that we had to find additional warehouse space of better than 60,000 square feet at a rental cost of 40 per foot per month. Warehouse space during the summer months is at a premium in the territory surrounding Modesto, resulting in our having to use space that was not first-class and costing us additional expense to put same into shape so that it could be used. Also, we had to wait for certain of the warehouses until they were emptied before we could use them, costing us a large outlay of money for demurrage.
Due to the locations of the warehouses, which we rented, it was necessary to reship the arriving cars from Modesto to the outlying warehouses, creating an added expense.
The increased quantities of components that we had to store created a pallet shortage, making it necessary for us to purchase pallets which was also an added expense.
These expenses were not taken into consideration at the time we bid on the Contract as we felt that when we received an approval on the 90,000 square feet of floor space we could handle the operations in accordance with the Contract.
Due to the above conditions, we incurred expenses in excess of normal operating expenses as follows:
Rental of Outside Warehouses-$8,157.06
Repairs to Outside Warehouses- 1,161.13
Watchman, Service at Outside Warehouses_ 1, 545.00
Rental of Additional Warehouse Equipment- 967.95
Freight — Modesto to Outside Warehouses_ 7, 746.77
Demurrage due to Shortage of Warehouses_19,104.00
Backhaul from Outside Warehouses- 4, 685. 50
Own Warehouse Space used in Excess of 90,000
Sq. Ft_ 9,450.00
Glue required in excess of recommendation- 3, 069. 58
Warehouse Pallets — additional cost- 5, 566.00
61,453. 59
The figures for these Excessive Costs have been taken from our current records and are subject to audit by our Certified Public Accountants who are now working on our books and may be revised at a later date.
23. (a) The contractor completed the performance of the contract on or about December 31,1951. The extra costs resulting from the delay occasioned by the telegrams of June 5 and 15,1951 (see findings 12-18), were all incurred by the contractor not later than December 31,1951.
(b) The amount of $278,687.39 due the contractor under the provisions of the contract was paid by the defendant, except for the withholding of $2,000 as indicated in finding 31.
24. On July 31, 1953, the contractor's claim (see finding 22) was revised somewhat by the contractor on the basis of an actual audit of its expenses.
25. On September 9, 1953, the contracting officer wrote a letter to a representative of the contractor, stating in part as follows:
Your allegations concerning quantities and dates of delivery of Government-furnished components are confirmed by the records of this Office. Records of this Office likewise confirm your allegations that increased storage and transportation costs were incurred by the contractor as a direct result of delay by the Government in furnishing certain of the components. Although the alleged amounts of such increased costs are considered reasonable, pending verification by the Army Audit Agency these figures cannot be accepted by this Office.
Hi & # H* H*
In view of the foregoing, it would appear that there is no present dispute between your client and the Government as to any question of fact arising under the contract. Accordingly, this Office proposes to submit your client's claim to the General Accounting Office for direct settlement.
26. The contractor's claim, mentioned in findings 22, 24, and 25, was referred by the Department of the Army to the General Accounting Office. The claim was denied by the Comptroller General in a decision dated April 13, 1954.
27. The contractor was adjudged bankrupt in July 1954.
28. (a) In a communication dated August 20, 1954, and addressed to the attention of the contracting officer, a representative of the contractor requested "that the Contractor be furnished with a final decision signed by the Contracting Officer covering the entire claim, together with findings of fact covering questions of law and questions of fact."
(b) The request referred to in paragraph (a) of this finding was denied by the contracting officer in a communication to the contractor dated August 25, 1954, on the ground that there was no question of fact presented upon which he had authority to make a decision.
(c) The contractor took an appeal to the Armed Services Board of Contract Appeals (acting for the Secretary of the Army) from the action of the contracting officer mentioned in paragraph (b) of this finding.
29. The contractor's appeal was denied by the Armed Services Board of Contract Appeals in a decision dated August 9,1957 (ASBCA No. 3683). The decision contained the following factual determinations (among others):
Government-furnished components were not supplied in accordance with the contract schedule. Some were delivered earlier, while others were much delayed. On account of the latter, the contracting officer directed on 5 June 1951 that commencement of final assembly be postponed. By Change Order No. 2 the contracting officer on 6 September 1951 deleted the delivery schedule of the contract and substituted a delivery schedule providing for deliveries on or before 16 August 1951 and the 16th of the next four months.
A result of these departures from the schedule was the accumulation of a much greater quantity of components at appellant's plant than had been contemplated by the contractor and than would have been on hand at any one time had the schedules been observed. The total quantity of components to be assembled aggregated approximately 30,000,000 pounds, or 700 freight-car loads.
The full contract quantity of some components had been received by 20 July 1951, while no amount of others had been delivered. From 12%% to 99%% of the remaining items had been delivered, making an aggregate of 45% of all components, including those in short supply. Three percent had been packed, whereas the original schedules called for receipt of 6214% and shipments of 33% % of the entire amount by that date. This placed a storage burden on the appellant and its facilities.
Before the contract was completed, appellant had to use all four of its own plant buildings, comprising 250,-000 square feet, and in addition, rent space some distance away. The assembly operation was performed in appellant's Plant No. 2, whei'e there were stored components sufficient for a day's work. Incoming material was taken on the cars directly to a warehouse and brought to Plant No. 2 for assembly as needed.
30. Concurrently with the administrative proceedings referred to in previous findings, an affirmative claim of the defendant against the contractor was also being processed under the "disputes" provision of the contract. That claim was originated by the contracting officer's findings of fact and decision which were forwarded to the contractor on' August 26, 1953, and which demanded payment of $158,936.11, rep resenting costs to the defendant arising from the infestation of cereal bars in the custody of the contractor. A timely appeal from that decision was taken by the contractor to the Armed Services Board of Contract. Appeals on September 25, 1953. The appeal was considered by the ASBCA, after lengthy hearings, in docket ASBCA No. 2527. A final decision sustaining the contractor's appeal was issued by the ASBCA on July 22, 1958. The ASBCA held that the contractor exercised the degree of care required of it under the law, and was not negligent in the storage and handling of the cereal bars.
31. During the performance of the contract, the defendant supplied to the contractor ration components and packaging materials in excess of the quantities actually needed by the contractor for the performance of the contract. The excess Governmeut-fumished property had a value of $3,226.60. Upon the completion of the contract, the defendant demanded the return of the excess Government-furnished property or the payment of its value, $3,226.60'. The contractor did not comply with the defendant's demand, but the defendant effected a partial reimbursement by withholding from the contractor the sum of $2,000 that was otherwise due the contractor. Hence, there is still due and owing the defendant from the contractor the sum of $1,226.60 on account of the excess Government-furnished property.
32. (a) The petition in this case was filed on January 3, 1963.
(b) The defendant's counterclaim was filed on April 13, 1964.
CONCLUSION OP LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is not entitled to recover, and, accordingly, the petition is dismissed.
The court further concludes as a matter of law that the defendant is not entitled to recover on the counterclaim, and the counterclaim is also dismissed.
Alternatively, the petition asserts that "this action is brought against the United States for additional amounts due under the terms of a written contract with the United States for extra work and services performed by Pacific Grape Co. at the request of and on behalf of the defendant as a result of changes to the contract imposed by the defendant." The evidence in the record shows, however, that the bankrupt corporation performed for the Government only those services which the corporation had contracted to perform.
The defendant's delay In furnishing components that were in short supply did not breach the contract. See par. 35 of the general provisions, set out In finding 2(e).
As tlie court held earlier in this case, 165 Ct. Cl. 231. 233 (1964), proof of such fraud •would have tolled the statute of limitations. See Holmberg v. Armbrecht, 327 U.S. 392, 397 (1946) ; Westinghouse Electric Corp. v. Pacific Gas & Electric Co., 326 F. 2d 575 (C.A. 9, 1964).