B-125787, NOV. 30, 1955

B-125787: Nov 30, 1955

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THE USE OF THE EQUIPMENT WAS DISCONTINUED ON APRIL 30. THE AMOUNT CLAIMED IS ITEMIZED AS FOLLOWS: CHART 3 POSITION SWITCHBOARD. THE TERMINATION CHARGES ARE EQUAL TO 50 PERCENT OF THE UNBILLED MONTHLY RENTAL FOR SUCH EQUIPMENT FOR THE UNEXPIRED PORTION OF THE INITIAL SERVICE PERIOD. THAT THEREFORE THE TERMINATION RATE IS NOT CONSTANT BUT IS SUBJECT TO CHANGE WITH CHANGING RATES MADE PURSUANT TO LAW AFTER INSTALLATION OF THE EQUIPMENT. THERE IS NO CONTROVERSY OVER THE SECOND ITEM FOR $17. SINCE THE EQUIPMENT REPRESENTED BY THAT ITEM WAS INSTALLED AFTER THE INVOLVED RATE INCREASED BECAME EFFECTIVE. INSTALLATION OF THE EQUIPMENT WAS MADE UNDER THE ABOVE CONTRACT. IT BEING UNDERSTOOD FURTHER THAT WHERE PORTIONS OF THE FOLLOWING FACILITIES ARE TERMINATED WITHIN THE MINIMUM SERVICE PERIOD.

B-125787, NOV. 30, 1955

TO CAPTAIN R. P. DIXON, JR., FC, FINANCE AND ACCOUNTING OFFICER, DEPARTMENT OF THE ARMY:

BY SECOND INDORSEMENT DATED OCTOBER 13, 1955, THE CHIEF OF FINANCE, DEPARTMENT OF THE ARMY, FORWARDED TO THIS OFFICE YOUR LETTER OF SEPTEMBER 30, 1955, ALFFC-FA, REQUESTING AN ADVANCE DECISION ON THE PROPRIETY OF PAYING A VOUCHER STATED IN FAVOR OF THE INDIANA BELL TELEPHONE COMPANY FOR $28,554.63, REPRESENTING TERMINATION CHARGES FOR TELEPHONE EQUIPMENT AT CAMP ATTERBURY, INDIANA, FURNISHED UNDER CONTRACT NO. DA-49-068-SC-040, DATED SEPTEMBER 1, 1950, AS AMENDED. THE USE OF THE EQUIPMENT WAS DISCONTINUED ON APRIL 30, 1954.

THE AMOUNT CLAIMED IS ITEMIZED AS FOLLOWS:

CHART

3 POSITION SWITCHBOARD, 205

SELECTORS, 150 CONNECTORS AND

1 POWER PLANT INSTALLED 9/1/50;

16 MOS. AT $718.75 $11,500.00

144 SELECTORS AND 75 CONNECTORS

INSTALLED 1/16/53; 44 1/2 MOS. 17,054.63

$28,554.63

THE TELEPHONE COMPANY CONTENDS THAT BASED ON THE ESTABLISHED RATES AT THE TERMINATION DATE (APRIL 30, 1954), THE TERMINATION CHARGES ARE EQUAL TO 50 PERCENT OF THE UNBILLED MONTHLY RENTAL FOR SUCH EQUIPMENT FOR THE UNEXPIRED PORTION OF THE INITIAL SERVICE PERIOD, AND THAT THEREFORE THE TERMINATION RATE IS NOT CONSTANT BUT IS SUBJECT TO CHANGE WITH CHANGING RATES MADE PURSUANT TO LAW AFTER INSTALLATION OF THE EQUIPMENT. ON THE OTHER HAND, THE OFFICE OF THE COMMANDING GENERAL, HEADQUARTERS FIFTH ARMY, APPEARS TO BE OF THE VIEW THAT THE TERMINATION RATE EFFECTIVE AT THE DATE OF INSTALLATION DETERMINES THE AMOUNT DUE THE COMPANY FOR TERMINATION OF THE EQUIPMENT PRIOR TO EXPIRATION OF THE CONTRACT TERM, AND THAT THE FIRST ITEM OF THE COMPANY'S BILL SHOULD THEREFORE BE ONLY $9,800, INSTEAD OF $11,500, AS CLAIMED. THERE IS NO CONTROVERSY OVER THE SECOND ITEM FOR $17,054.63, SINCE THE EQUIPMENT REPRESENTED BY THAT ITEM WAS INSTALLED AFTER THE INVOLVED RATE INCREASED BECAME EFFECTIVE.

INSTALLATION OF THE EQUIPMENT WAS MADE UNDER THE ABOVE CONTRACT. THE TERMINATION PROVISION CONTAINED IN THE RIDER TO THE CONTRACT PROVIDES, AS FOLLOWS:

"PURSUANT TO THE TERMS AND CONDITIONS OF THIS CONTRACT, THE WHOLE OR ANY PART THEREOF MAY BE TERMINATED BY THE UNITED STATES UPON TEN DAYS' NOTICE IN WRITING TO THE CONTRACTOR,"SUBJECT TO ANY CHARGES APPLICABLE THERETO.' IN THE EVENT OF THE TERMINATION OF THE FOLLOWING FACILITIES FURNISHED UNDER THIS CONTRACT WITHIN THE MINIMUM SERVICE PERIOD OF FIVE (5) YEARS AT THE SAME LOCATION, A TERMINATION CHARGE SHALL APPLY, IN ACCORDANCE WITH THE GENERAL TARIFF OF THE CONTRACTOR, EQUAL TO SUCH PROPORTION OF THE BASIC TERMINATION CHARGE FOR EACH GROUP OF FACILITIES LISTED BELOW AS THE UNEXPIRED PORTION OF THE MINIMUM SERVICE PERIOD FOR EACH OF THESE GROUPS OF FACILITIES BEARS TO THE FULL MINIMUM SERVICE PERIOD. IT BEING UNDERSTOOD FURTHER THAT WHERE PORTIONS OF THE FOLLOWING FACILITIES ARE TERMINATED WITHIN THE MINIMUM SERVICE PERIOD, PRO RATE TERMINATION CHARGES APPLY.'

THE ORIGINAL TERMINATION CHARGE IS STIPULATED IN THE CONTRACT RIDER AS $39,450, AND THAT AMOUNT SUBSEQUENTLY WAS CHANGED TO MEET CHANGING CONDITIONS RESULTING FROM NEW INSTALLATIONS AND DISCONTINUANCE OF EQUIPMENT AND SERVICES. SUCH CHANGES ARE REFLECTED IN ADDITIONAL RIDERS ATTACHED TO THE CONTRACT CONTAINING DESCRIPTIONS OF THE INVOLVED FACILITIES, DATE OF INSTALLATION AND THE BASIC TERMINATION CHARGES. APPEARS THAT FOLLOWING THE RATE INCREASE REFERRED TO IN THE COMPANY'S LETTER OF FEBRUARY 15, 1952, THE RIDER REFLECTING SUCH INCREASE ERRONEOUSLY CARRIED THE BASIC TERMINATION CHARGE OF $39,450, WHICH ERROR CONTINUED UNTIL BROUGHT TO THE ATTENTION OF THE ADMINISTRATIVE OFFICE BY THE COMPANY'S LETTER OF JULY 28, 1954. IN THAT LETTER IT IS STATED THAT THE NEW BASIC TERMINATION CHARGE SHOULD HAVE BEEN STATED AS $43,125.

IT APPEARS FURTHER THAT ON NOVEMBER 21, 1950, THE TELEPHONE COMPANY FILED ITS PETITION WITH THE PUBLIC SERVICE COMMISSION OF INDIANA REQUESTING AN INCREASE IN RATES. NEW RATES AND CHARGES WERE ISSUED AND PROMULGATED BY THE COMMISSION ON MAY 31, 1951. THE COMPANY WAS DISSATISFIED WITH THE NEW RATES AND CHARGES AND ON JUNE 15, 1951, IT FILED AN ACTION IN THE MARION CIRCUIT COURT UNDER THE PROVISIONS OF SEC. 54-429, BURNS' 1951 REPL. (VOL. 10-PART 2), TO SET ASIDE THE VACATE THE COMMISSION'S ORDER. AS A RESULT OF COURT ACTION WHICH FOLLOWED--- AS TO WHICH SEE STATE V. MARION CIRCUIT COURT, 100 N.E.2D 888, AND PUBLIC SERVICE COMMISSION V. INDIANA BELL TELEPHONE COMPANY, 112 N.E.2D 751--- THE COMMISSION WAS ENJOINED FROM ENFORCING ITS ORDER OF MAY 31, 1951, AND THE DECREE ENTERED ON JANUARY 30, 1952, BY THE MARION CIRCUIT COURT APPROVING A NEW SCHEDULE OF RATES, WAS HELD TO BE A PART OF THE EXTENSION OF POWERS IN THE TEMPORARY INJUNCTION AND TO BECOME A PART THEREOF. IT WAS FURTHER HELD THAT THE DECREE OF JANUARY 30, 1952, WAS THEN IN EFFECT. THE COURT, HOWEVER, DIRECTED THAT THE MATTER BE RETURNED TO THE PUBLIC SERVICE COMMISSION TO CONSIDER THE NEW EVIDENCE AND FIX PROPER RATES, BUT FURTHER HELD THAT UNTIL THAT WAS DONE THE PROVISIONS OF THE TEMPORARY INJUNCTION SHOULD REMAIN IN EFFECT. THUS, UNDER THE COURT ACTION THE ORDER OF JANUARY 30, 1952, REMAINED IN EFFECT UNTIL THE COMMISSION CONSIDERED THE NEW EVIDENCE AND FIXED PROPER RATES. IT DOES NOT APPEAR WHETHER THE COMMISSION HAS TAKEN ACTION IN THIS RESPECT.

THE CHIEF, COMMUNICATIONS NETWORKS BRANCH, ARMY COMMUNICATIONS DIVISION, IN 1ST INDORSEMENT OF JULY 15, 1955, STATES THAT PURSUANT TO THE ABOVE COURT DECREE OF JANUARY 30, 1952, THE REGULATORY AUTHORITY PRESCRIBED A TARIFF WHEREIN THE TERMINATION CHARGE WAS FIXED AT "50 PERCENT OF THE UNBILLED MONTHLY RENTAL CHARGES FOR SUCH EQUIPMENT FOR THE UNEXPIRED PORTION OF THE INITIAL SERVICE PERIOD TO COVER THE COSTS OF INSTALLING, REMOVING AND RECONDITIONING PLUS ANY LOSS, ON ACCOUNT OF THE POWER PLANT.' THERE CAN BE NO QUESTION THAT THE "UNBILLED MONTHLY RENTAL CHARGES" HAS REFERENCE TO THE RENTAL CHARGES PREVAILING AT THE TERMINATION OF THE SERVICES.

IT IS WELL ESTABLISHED THAT RATES PROVIDED FOR IN A CONTRACT BETWEEN PUBLIC UTILITIES AND THEIR CUSTOMERS MAY BE SUPERSEDED BY A SUBSEQUENT EXERCISE OF THE STATE RATE FIXING POWER. MIDLAND REALTY CO. V. KANSAS CITY POWER AND LIGHT CO., 300 U.S. 109; TRANS WORLD AIRLINES, INC., V. CITY AND COUNTY OF SAN FRANCISCO, 119 F.SUPP. 516; 30 COMP. GEN. 435; 27 ID. 580. FURTHER, AS POINTED OUT IN THE 1ST INDORSEMENT OF JULY 15, 1955, ARTICLE 11 OF THE CONTRACT PROVIDES THAT UPON DISCONTINUANCE OF THE SERVICES THE DEPARTMENT SHALL PAY THE COMPANY ALL CHARGES FOR FACILITIES AND SERVICES ADJUSTED TO THE DATE OF DISCONTINUANCE, SUBJECT TO THE TERMS OF THE COMPANY'S ESTABLISHED REGULATIONS PERTAINING TO TERMINATION OF SERVICES. BY DEFINITION IN ARTICLE 1 (D) OF THE CONTRACT THE TERM "THE COMPANY ESTABLISHED REGULATIONS" IS DEFINED AS MEANING THE RATES, TERMS AND CONDITIONS IN THE REGULARLY ESTABLISHED TARIFFS.

ACCORDINGLY, NOTWITHSTANDING THE ERRONEOUS RIDER ATTACHED TO THE CONTRACT FOLLOWING THE RATE INCREASE, IF AT THE TIME OF THE REMOVAL OF THE EQUIPMENT REPRESENTING THE ITEM FOR $11,500, THERE WAS NO ORDER OF THE PUBLIC SERVICE COMMISSION AFFECTING THE RATES AND CHARGES AS FIXED IN THE COURT DECREE OF JANUARY 30, 1952, PAYMENT OF THE VOUCHER WHICH IS RETURNED HEREWITH, MAY BE MADE IN ACCORDANCE WITH THE RATES AND CHARGES ESTABLISHED BY THAT DECREE, IF CORRECT IN OTHER RESPECTS.