B-167790, SEP. 15, 1970

B-167790, SEP. 15, 1970

CONTRACTS -- PAYMENTS -- STATE TAXES DENIAL OF CLAIM FOR STATE TAXES OF SIX CONTRACTORS WHO, DURING EMERGENCY CREATED BY HURRICANE CAMILLE, LEASED MOBILE HOUSING PURSUANT TO ORAL REQUESTS BUT WHO LATER EXCUTED CONTRACTS CONTAINING THE STANDARD TAX CLAUSE. CONTRACTORS WHO SIGNED CONTRACTS CONTAINING THE STANDARD TAX CLAUSE PLACING RISK FOR STATE AND LOCAL TAXES ON THE CONTRACTORS MAY NOT BE REIMBURSED FOR SUCH TAXES SINCE THERE IS NO LEGAL AUTHORITY FOR SUCH PAYMENT.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER OF AUGUST 13, 1970, FROM THE ACTING GENERAL COUNSEL, FORWARDING FOR OUR CONSIDERATION THE CLAIMS FOR REIMBURSEMENT OF STATE AND LOCAL TAXES OF SIX CONTRACTORS WHO LEASED MOBILE HOMES TO THE GOVERNMENT FOR USE IN THE AFTERMATH OF HURRICANE CAMILLE IN 1969.

THE SIX CONTRACTORS AND THE CONTRACTS INVOLVED ARE AS FOLLOWS:

CONTRACT

CONTRACTOR NO.

AKIN MOBILE HOMES, INCORPORATED H-1145

H-1160

GILBERT L. DOZIER, INC., ON NOVATION FROM

MCCONNELL MOBILE HOMES, INC. H-1147

STATEWIDE TRAILER SALES INC. H-1136

TEETER MOBILE HOME, INCORPORATED H-1159

H-1179

INTERIM HOUSING CORPORATION H-1161

H-1164

JEFFERSON SALES & DISTRIBUTORS, INC. H-1151

H-1181

DURING THE EMERGENCY CREATED BY HURRICANE CAMILLE, ARRANGEMENTS FOR THE LEASING OF MOBILE HOUSING WERE INITIATED IN ONE OF THREE DIFFERENT WAYS:

(1) TELEPHONIC OR OTHER ORAL REQUEST FOR QUOTATION;

(2) TELEGRAPHIC REQUEST FOR QUOTATION CONTAINING STATEMENT THAT "CONTRACTORS TO WHOM AWARDS ARE MADE WILL BE REQUIRED TO EXECUTE CONTRACT ON GOVERNMENT FORMS WITH STATUTORY AND OTHER PROVISIONS CUSTOMARY IN SUCH CONTRACTS"; OR

(3) TELEGRAPHIC REQUEST FOR QUOTATION CONTAINING STATEMENT THAT "CONTRACTORS TO WHOM AWARDS ARE MADE WILL BE REQUIRED TO EXECUTE CONTRACT, ... INCLUDING CLAUSES COVERING *** FEDERAL, STATE AND LOCAL TAXES (FPR 1- 11.401-1)."

THE ABOVE-LISTED CONTRACTORS WERE FURNISHED FOR EXECUTION, AND DID EXECUTE, FORMAL CONTRACTS CONTAINING THE STANDARD "FEDERAL, STATE, AND LOCAL TAXES" CLAUSE WHICH PROVIDES THAT "THE CONTRACT PRICE INCLUDES ALL APPLICABLE FEDERAL, STATE, AND LOCAL TAXES AND DUTIES." HOWEVER, THE CONTRACTORS CONTEND THAT THEY DID NOT INCLUDE IN THEIR CONTRACT PRICES VARIOUS STATE AND LOCAL TAXES THAT THEY HAVE BEEN REQUIRED TO PAY. THE CONTRACTORS SUBMITTING THE CLAIMS HAVE INDICATED THAT THEY DID NOT ANTICIPATE THAT THEY WOULD HAVE TO PAY TAXES ON ACCOUNT OF THE LEASE TRANSACTIONS.

PARAGRAPH I OF EACH CONTRACT PROVIDES THAT THE "FORMAL CONTRACT *** TAKES THE PLACE OF ALL ORAL AND/OR WRITTEN AGREEMENTS CONCERNING THIS CONTRACT AS THE DOCUMENTARY EVIDENCE OF THE CONTRACT AND CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES." IN BRAWLEY V UNITED STATES, 96 U.S. 168, 173 (1877), IT WAS STATED:

" *** THE WRITTEN CONTRACT MERGED ALL PREVIOUS NEGOTIATIONS, AND IS PRESUMED, IN LAW, TO EXPRESS THE FINAL UNDERSTANDING OF THE PARTIES. THE CONTRACT DID NOT EXPRESS THE TRUE AGREEMENT, IT WAS THE CLAIMANT'S FOLLY TO HAVE SIGNED IT. ***" "

IT IS APPARENT FROM THE FOREGOING THAT THE FORMAL CONTRACT REPRESENTS THE FINAL UNDERSTANDING OF THE PARTIES. FURTHER, THE CONTRACT TAX CLAUSE PLACES THE RISK OF APPLICABLE TAXES UPON THE CONTRACTOR ALONE. IF THE GOVERNMENT WERE NOW TO ASSUME THE BURDEN OF THE TAXES, IT WOULD SHIFT TO ITSELF THE CONTRACTORS' OBLIGATION TO PAY THE TAXES AS IMPOSED BY THE TERMS OF THEIR CONTRACTS. NO OFFICER OF THE GOVERNMENT IS AUTHORIZED TO RELINQUISH A VESTED CONTRACT RIGHT WITHOUT A COMPENSATING BENEFIT. THE PACIFIC HARDWARE & STEEL CO. V UNITED STATES, 49 CT. CL. 327 (1914); BAUSCH & LOMB OPTICAL COMPANY V UNITED STATES, 78 CT. CL. 584, 607 (1934); AND UNITED STATES V AMERICAN SALES CORPORATION, 27 F. 2D 389 (1928).

IN THIS RESPECT, IN DECISION B-134347, MARCH 1, 1966, TO A CONTRACTOR SEEKING REIMBURSEMENT OF STATE TAXES ON AUTOMOBILES LEASED TO THE GOVERNMENT, WE HELD:

" *** WHETHER THE UNITED STATES MUST REIMBURSE A CONTRACTOR FOR A STATE TAX IMPOSED ON THE CONTRACTOR ON ACCOUNT OF A SALE TO THE UNITED STATES, DEPENDS ON THE CONTRACT INVOLVED. WHERE THERE IS IN EXISTENCE A VALID AND BINDING CONTRACT COVERING THE FURNISHING OF SUPPLIES AND SERVICES AT FIXED PRICES THERE WOULD BE NO AUTHORITY FOR THE PAYMENT OF ANY TAXES OVER AND ABOVE THE PRICES STIPULATED IN THE CONTRACT, ABSENT A PROVISION IN THE CONTRACT SO PROVIDING." THE CONTRACT WHICH WAS THE SUBJECT OF THAT DECISION PROVIDED, AS HERE, THAT THE CONTRACT PRICE INCLUDED ALL APPLICABLE STATE AND LOCAL TAXES AND DUTIES.

THE ONLY OTHER ALTERNATIVE FOR CONSIDERATION IS WHETHER THE CONTRACTS MAY BE REFORMED. HOWEVER, IN B-141191, NOVEMBER 23, 1959, INVOLVING A SITUATION SIMILAR TO THE CASES AT HAND, WE HELD:

"THE COURTS AND AUTHORITIES HAVE HELD THAT A MISTAKE AS TO AN EXISTING SITUATION WHICH LEADS EITHER ONE OR BOTH OF THE PARTIES TO ENTER INTO A CONTRACT WHICH THEY WOULD NOT HAVE ENTERED INTO HAD THEY BEEN ADVISED OF THE ACTUAL FACTS, WILL NOT JUSTIFY REFORMATION AND THAT IT IS NOT WHAT THE PARTIES WOULD HAVE INTENDED HAD THEY KNOWN BETTER BUT WHAT THEY DID INTEND AT THE TIME INFORMED AS THEY WERE. SEE E. CLEMENS HORST COMPANY V FEDERAL MUTUAL LIABILITY INSURANCE COMPANY, 33 F. SUPP. 596; RUSSELL ET AL. V SHELL PETROLEUM CORPORATION, 66 F. 2D 864; WILLISTON ON CONTRACTS, SECTIONS 1548 AND 1549."

FURTHER, THE SITUATION HERE IS NOT UNLIKE ONE WHERE A CONTRACTOR MAKES AN ERROR IN ITS BID PRICE OF WHICH THE CONTRACTING OFFICER HAS NEITHER ACTUAL NOR CONSTRUCTIVE NOTICE. IN THAT RESPECT, THE COURTS HAVE HELD THAT WHERE AN ERROR IS UNILATERAL, THE CONTRACTOR IS NOT ENTITLED TO ANY REDRESS. EDWIN DOUGHERTY AND M. H. OGDEN V UNITED STATES, 120 CT. CL. 249 (1944), AND SALIGMAN V UNITED STATES, 56 F. SUPP. 505 (1944).

IN THE CIRCUMSTANCES, THERE APPEARS TO BE NO LEGAL AUTHORITY FOR REIMBURSEMENT OF THE TAXES.