B-35996, SEPTEMBER 1, 1943, 23 COMP. GEN. 154

B-35996: Sep 1, 1943

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STATE PRICE-FIXING ORDERS AS AFFECTING PAYMENTS UNDER GOVERNMENT CONTRACTS A CONTRACTOR OBLIGATED BY ITS CONTRACT TO FURNISH MILK TO A FEDERAL ACTIVITY IN CALIFORNIA AT A SPECIFIED PRICE PER GALLON IS NOT ENTITLED TO PAYMENT FOR THE MILK AT A RATE IN EXCESS OF THE CONTRACT UNIT PRICE. EVEN THOUGH SUCH UNIT PRICE IS LESS THAN THE MINIMUM FIXED BY THE STATE FOR DELIVERIES OF MILK IN THAT STATE. 1943: REFERENCE IS MADE TO YOUR LETTER OF JULY 26. WHILE NO VOUCHER WAS SUBMITTED WITH YOUR LETTER. THE CONTRACTOR'S ORIGINAL INVOICE AND COPIES OF CORRESPONDENCE SETTING FORTH THE PERTINENT FACTS WERE FORWARDED. IT IS UNDERSTOOD THAT IF PAYMENT OF THE INVOICE IS DETERMINED TO BE PROPER. THE QUESTION PRESENTED BY YOUR LETTER WILL BE ANSWERED AT THIS TIME.

B-35996, SEPTEMBER 1, 1943, 23 COMP. GEN. 154

STATE PRICE-FIXING ORDERS AS AFFECTING PAYMENTS UNDER GOVERNMENT CONTRACTS A CONTRACTOR OBLIGATED BY ITS CONTRACT TO FURNISH MILK TO A FEDERAL ACTIVITY IN CALIFORNIA AT A SPECIFIED PRICE PER GALLON IS NOT ENTITLED TO PAYMENT FOR THE MILK AT A RATE IN EXCESS OF THE CONTRACT UNIT PRICE, EVEN THOUGH SUCH UNIT PRICE IS LESS THAN THE MINIMUM FIXED BY THE STATE FOR DELIVERIES OF MILK IN THAT STATE. PENN DAIRIES, INC. V. MILK CONTROL COMMISSION, 318 U.S. 261, DISTINGUISHED.

COMPTROLLER GENERAL WARREN TO LT. COMDR. L. E. MEANY, U.S. MARITIME SERVICE, SEPTEMBER 1, 1943:

REFERENCE IS MADE TO YOUR LETTER OF JULY 26, 1943, REQUESTING A DECISION AS TO WHETHER PAYMENT MAY BE MADE OF AN INVOICE DATED MAY 31, 1943, IN THE AMOUNT OF $33.30, SUBMITTED BY SPRECKELS CREAMERIES, INC., BURLINGAME, CALIFORNIA, WHICH INVOICE REPRESENTS AN ADDITIONAL PAYMENT OF $0.015 PER GALLON ALLEGED TO BE DUE FOR 2,220 GALLONS OF MILK FURNISHED TO THE U.S. MERCHANT MARINE CADET BASIC SCHOOL, WAR SHIPPING ADMINISTRATION, SAN MATEO, CALIFORNIA, DURING THE MONTH OF MAY, 1943, PURSUANT TO CONTRACT NO. WSA201T-19, DATED APRIL 20, 1943.

WHILE NO VOUCHER WAS SUBMITTED WITH YOUR LETTER, THE CONTRACTOR'S ORIGINAL INVOICE AND COPIES OF CORRESPONDENCE SETTING FORTH THE PERTINENT FACTS WERE FORWARDED, AND IT IS UNDERSTOOD THAT IF PAYMENT OF THE INVOICE IS DETERMINED TO BE PROPER, IT WOULD BE PAID UPON A VOUCHER CERTIFIED BY YOU. THEREFORE, THE QUESTION PRESENTED BY YOUR LETTER WILL BE ANSWERED AT THIS TIME, BUT IN REQUESTING DECISIONS IN THE FUTURE ON QUESTIONS RELATING TO THE PAYMENT OF VOUCHERS PRESENTED TO YOU FOR CERTIFICATION, THE PROCEDURE CONTEMPLATED BY 21 COMP. GEN. 1128 SHOULD BE OBSERVED.

IT APPEARS THAT UNDER ITEM 1 OF CONTRACT NO. WSA201T-19 THE CONTRACTOR AGREED TO FURNISH, FOR DELIVERY AT THE AFOREMENTIONED CADET BASIC SCHOOL, DURING THE PERIOD MAY 1 TO MAY 31, 1943, AS ORDERED FROM TIME TO TIME BY THE SUPPLY OFFICER, AN ESTIMATED QUANTITY OF 2,000 GALLONS OF MILK, FRESH, GRADE A, PASTEURIZED, TYPE II, AT A UNIT PRICE OF $0.415 PER GALLON. APPEARS FURTHER THAT A TOTAL OF 2,220 GALLONS OF MILK WERE DELIVERED THEREUNDER FOR WHICH PAYMENT HAS BEEN MADE TO THE CONTRACTOR AT THE CONTRACT UNIT PRICE. THE INSTANT VOUCHER WAS PRESENTED BY THE CONTRACTOR TO THE U.S. MERCHANT MARINE CADET BASIC SCHOOL AS A SUPPLEMENTAL BILL FOR THE 2,220 GALLONS OF MILK DELIVERED UNDER THE CONTRACT.

WITH REGARD THERETO, IT IS STATED IN A LETTER DATED JUNE 7, 1943, FROM THE SUPPLY OFFICER AT THE CADET BASIC SCHOOL TO THE CHIEF PROCUREMENT OFFICER, U.S. MARITIME SERVICE--- A COPY OF WHICH WAS FORWARDED WITH YOUR LETTER OF JULY 26--- THAT THE CONTRACTOR'S BID OF $0.415 PER GALLON WAS THE LOWEST RECEIVED FOR SUPPLYING MILK TO THE STATION FOR MAY, 1943 AND, ACCORDINGLY, THAT THE CONTRACTOR WAS AWARDED CONTRACT NO. WSA201T-19; BUT THAT SUBSEQUENT THERETO, THE DEPARTMENT OF AGRICULTURE OF THE STATE OF CALIFORNIA INFORMED THE CONTRACTOR THAT THE LEGAL MINIMUM PRICE SET BY THE STATE FOR MILK DELIVERIES OF THE TYPE INVOLVED WAS $0.43 PER GALLON. IS STATED FURTHER IN SAID LETTER THAT THE STATE CLAIMS THAT IT HAS JURISDICTION OVER SALES OF MILK TO THE CADET BASIC SCHOOL HERE INVOLVED, AND THAT THE CONTRACTOR HAS SUBMITTED ITS SUPPLEMENTAL INVOICE AT THE INSISTENCE OF THE STATE. IN A MEMORANDUM DATED JUNE 18, 1943, FROM THE LEGAL OFFICE, U.S. MARITIME SERVICE, TO THE CHIEF FINANCE OFFICER--- A COPY OF WHICH WAS ENCLOSED WITH YOUR LETTER OF JULY 26--- IT IS STATED AS FOLLOWS:

1. IT IS THE OPINION OF THIS OFFICE THAT THE CALIFORNIA STATE DEPARTMENT OF AGRICULTURE HAS JURISDICTION OVER THE PURCHASE OF MILK IN THAT STATE BY THE U.S. MERCHANT MARINE CADET BASIC SCHOOL, IN VIEW OF THE DECISION OF THE SUPREME COURT OF THE UNITED STATES OF AMERICA IN PENN DAIRIES INC. V. THE MILK CONTROL COMMISSION OF THE COMMONWEALTH OF PENNSYLVANIA, NO. 399-- - OCTOBER TERM 1942, MARCH 1, 1943.

WHILE YOUR LETTER OF JULY 26 AND THE ENCLOSURES FORWARDED THEREWITH DO NOT CONTAIN ANY DEFINITE EVIDENCE TO SUCH EFFECT, IT IS ASSUMED THAT, AT THE TIME THE CONTRACT WAS PERFORMED, THE CADET BASIC SCHOOL AT SAN MATEO, AT WHICH THE SALE AND DELIVERY OF THE MILK FURNISHED BY THE CONTRACTOR TOOK PLACE, WAS NOT LOCATED WITHIN TERRITORY OVER WHICH THE FEDERAL GOVERNMENT HAD EXCLUSIVE JURISDICTION. OTHERWISE, THERE CLEARLY WOULD BE NO BASIS FOR THE CLAIM OF THE DEPARTMENT OF AGRICULTURE OF THE STATE OF CALIFORNIA THAT IT HAD JURISDICTION OVER SALES OF MILK TO SAID STATION. PACIFIC COAST DAIRY, INC. V. DEPARTMENT OF AGRICULTURE OF CALIFORNIA, 318 U.S. 285, 87 L.1ED. ( AD. OPS.) 560. ALSO, THERE WOULD APPEAR TO BE NO BASIS FOR THE STATEMENT IN THE MEMORANDUM OF JUNE 18, 1943, QUOTED ABOVE, THAT, IN VIEW OF THE DECISION OF THE SUPREME COURT IN THE CASE OF PENN DAIRIES, INC. V. THE MILK CONTROL COMMISSION OF THE COMMONWEALTH OF PENNSYLVANIA, 318 U.S. 261, 87 L.ED. ( AD. OPS.) 549, THE CALIFORNIA STATE DEPARTMENT OF AGRICULTURE HAS JURISDICTION OVER THE PURCHASES OF MILK BY THE CADET BASIC SCHOOL AT SAN MATEO.

THE QUESTION FOR DECISION, THEREFORE, IS WHETHER, ASSUMING THAT UNDER THE DECISION OF THE SUPREME COURT IN THE PENN DAIRIES CASE, SUPRA, THE DEPARTMENT OF AGRICULTURE OF THE STATE OF CALIFORNIA HAS JURISDICTION OVER THE SALE AND DELIVERY OF MILK IN THAT STATE BY A DEALER TO THE MERCHANT MARINE CADET SCHOOL HERE INVOLVED, THE UNITED STATES THEREBY IS REQUIRED TO MAKE PAYMENT TO SAID DEALER AT THE MINIMUM PRICE FIXED BY THE STATE FOR THE MILK DELIVERED TO SAID SCHOOL- - DESPITE THE EXISTENCE OF A CONTRACT BETWEEN THE DEALER AND THE UNITED STATES CALLING FOR DELIVERY OF THE MILK AT A PRICE WHICH IS LOWER THAN THE MINIMUM FIXED BY THE STATE.

IN THE PENN DAIRIES CASE, IT WAS STATED BY THE SUPREME COURT THAT THE APPLICATION OF A MINIMUM PRICE REGULATION ISSUED BY THE PENNSYLVANIA MILK CONTROL COMMISSION, PURSUANT TO A STATE LAW, TO THE SALE OF MILK BY A DEALER TO THE UNITED STATES--- WHICH SALE WAS CONSUMMATED WITHIN THE TERRITORIAL LIMITS OF THE STATE AND IN A PLACE SUBJECT TO ITS JURISDICTION --- DID NOT CONSTITUTE A VIOLATION OF THE IMPLIED CONSTITUTIONAL IMMUNITY OF THE NATIONAL GOVERNMENT FROM STATE REGULATION OF THE PERFORMANCE BY FEDERAL OFFICERS AND AGENTS OF GOVERNMENTAL FUNCTIONS, IN THE ABSENCE OF CONGRESSIONAL LEGISLATION FORBIDDING THE APPLICATION OF THE REGULATION TO SUCH A TRANSACTION. THEREFORE, THE COURT HELD THAT THE STATE HAD AUTHORITY TO CANCEL THE LICENSE OF A MILK DEALER FOR SELLING MILK TO THE FEDERAL GOVERNMENT, UNDER SUCH CIRCUMSTANCES, AT A PRICE WHICH WAS LESS THAN THE MINIMUM FIXED BY THE STATE MILK CONTROL COMMISSION. HOWEVER, THERE IS NOTHING IN THE OPINION OF THE COURT FROM WHICH IT MAY BE SAID THAT IT WAS INTENDED, EVEN REMOTELY, TO HOLD THAT THE FEDERAL GOVERNMENT WAS BOUND OR REQUIRED TO MAKE PAYMENT FOR MILK PURCHASED BY IT AT NOT LESS THAN THE MINIMUM PRICE ESTABLISHED BY A STATE MILK CONTROL COMMISSION, OR THAT A DEALER IS ENTITLED TO BE PAID FOR MILK DELIVERED TO THE FEDERAL GOVERNMENT AT THE MINIMUM PRICE FIXED BY A STATE COMMISSION, DESPITE THE EXISTENCE OF A CONTRACT BETWEEN SAID DEALER AND THE UNITED STATES CALLING FOR THE DELIVERY OF MILK AT A LOWER PRICE. ON THE CONTRARY, IN UPHOLDING THE STATE REGULATION CONSIDERED IN THE PENN DAIRIES CASE, THE SUPREME COURT POINTED OUT EXPLICITLY THAT---

HERE THE STATE REGULATION IMPOSES NO PROHIBITION ON THE NATIONAL GOVERNMENT OR ITS OFFICERS. THEY MAY PURCHASE MILK FROM WHOM AND AT WHAT PRICE THEY WILL, WITHOUT INCURRING ANY PENALTY. * * *

HENCE, WHILE IT MAY BE THAT THE STATE OF CALIFORNIA HAS JURISDICTION TO REGULATE THE SALE AND DELIVERY OF MILK TO THE CADET TRAINING SCHOOL HERE INVOLVED, TO THE EXTENT OF EXERCISING CONTROL OVER THE MILK DEALER, ITS JURISDICTION MAY NOT BE SAID TO EXTEND TO THE REGULATION OF THE FEDERAL GOVERNMENT, OR OF ITS OFFICERS OR AGENTS IN THE PURCHASE OF MILK FOR THE SAID SCHOOL. CONSEQUENTLY, THERE IS NO OBLIGATION ON THE UNITED STATES TO MAKE PAYMENT OF ANY AMOUNT IN EXCESS OF THE UNIT PRICE OF $0.415 PER GALLON STIPULATED IN CONTRACT NO. WSA201T-19, SUPRA, FOR THE MILK DELIVERED BY THE CLAIMANT DURING MAY, 1943, TO THE CADET TRAINING SCHOOL; AND, SINCE YOU STATE THAT THE CONTRACTOR HAS BEEN PAID ITS CONTRACT PRICE FOR THE MILK SO DELIVERED BY IT, NO AUTHORITY EXISTS FOR PAYMENT OF THE ADDITIONAL PRICE OF $0.015 PER GALLON CLAIMED ON THE SUPPLEMENTAL INVOICE.