A-4258, JULY 17, 1926, 6 COMP. GEN. 43

A-4258, JULY 17, 1926, 6 COMP. GEN. 43

CONTRACTS, COST-PLUS - PATENTS - GENERAL ACCOUNTING OFFICE, JURISDICTION WHERE THE TERMS OF A CONTRACT FOR THE CONSTRUCTION OF AIRPLANES FOR THE UNITED STATES STIPULATED THAT THERE SHOULD BE CHARGED ONLY SUCH ACTUAL EXPENSES THEREIN DEFINED AS ENTERED INTO OR APPLIED DIRECTLY TO SUCH CONSTRUCTION, THE AUTHORITY OF THE CONTRACTING OFFICER IS RESTRICTED TO THE EXERCISE OF A LEGAL DISCRETION WITHIN THE LIMITS OF THE CONTRACT TERMS, AND ANY DETERMINATION IMPUTED TO HIM WHICH RESULTED IN THE LEVYING OF AN EXTRANEOUS COST AS AN ADDITIONAL CHARGE UPON THE PRODUCTION IS INEFFECTUAL TO IMPOSE ANY VALID OBLIGATION UPON THE UNITED STATES. THE ACCOUNTING OFFICERS OF THE GOVERNMENT HAVE AUTHORITY TO INVESTIGATE THE ACTUAL CONDITIONS UNDERLYING THE TERMS OF ANY CONTRACTUAL AGREEMENT INVOLVING THE EXPENDITURE OF PUBLIC FUNDS AND IF, UPON THE FACTS AS DEVELOPED, IT APPEARS THAT A CONTRACTOR HAS BEEN UNDULY ENRICHED AT PUBLIC EXPENSE, THERE IS A QUASI-JUDICIAL POWER CONFERRED ON THE ACCOUNTING OFFICERS TO ADJUST THE ACCOUNT ACCORDINGLY, AS THE RIGHTS OF THE GOVERNMENT MAY REQUIRE, AND TO TAKE THE NECESSARY ACTION TO RECOVER ANY AMOUNT WRONGFULLY OBTAINED. A PROVISION IN A CONTRACT FOR THE CONSTRUCTION OF AIRPLANES FOR THE UNITED STATES TO PAY THE CONTRACTOR, IN ADDITION TO THE PURCHASE PRICE OF THE AIRPLANES, A PERCENTAGE UPON ALL OTHER SUCH DESIGN OF PLANES WHICH THE GOVERNMENT MAY MANUFACTURE, OR HAVE MANUFACTURED BY OTHERS, IS WITHOUT CONSIDERATION, AS THERE IS NO PROPERTY RIGHT IN A MERE DESIGN NOT OF A PATENTABLE CHARACTER WHICH MAY BECOME THE SUBJECT OF A VALUABLE GRANT.

DECISION BY COMPTROLLER GENERAL MCCARL, JULY 17, 1926:

GLENN L. MARTIN CO. REQUESTED FEBRUARY 25, 1925, RECONSIDERATION OF A DECISION DATED JANUARY 13, 1925, A-4258, WHEREIN IT WAS CHARGED WITH THE TOTAL SUM OF $22,461.53 DUE THE UNITED STATES ON ACCOUNT OF OVERPAYMENTS IN THE SUM OF $19,227.53 FOR CERTAIN CREDITS OR PERCENTAGES OF OVERHEAD INCORRECTLY CHARGED AND ALLOWED IN SETTLEMENT OF CONTRACTS FOR CONSTRUCTION OF AIRPLANES, PLUS $3,234 ERRONEOUSLY ALLOWED BY THIS OFFICE UPON SETTLEMENT OF A CLAIM TO ROYALTY ASSERTED TO BE DUE IN ACCORDANCE WITH A COVENANT INCORPORATED IN ANOTHER CONTRACT, AND ITS CLAIM TO FURTHER ROYALTY OF $35,337.25, BASED UPON THE LATTER CONTRACT, WAS DENIED.

CLAIMANT'S BRIEF IS DIVIDED INTO TWO SECTIONS; THE FIRST DESIGNATED AS TRANSACTION "A" CONCERNS THE SUM OF $19,227.53, CHARGED AS AN OVERPAYMENT ON ACCOUNT OF CONTRACTS, NO. 2611-A, DATED NOVEMBER 18, 1918, AND NO. 5444, DATED JANUARY 2, 1919, AND THE SECOND DESIGNATED AS TRANSACTION ,B" CONCERNS THE CLAIM TO ROYALTY, ASSERTED TO BE DUE IN ACCORDANCE WITH CONTRACT NO. 277, DATED JUNE 9, 1920, WHICH INCLUDES THE SUMS OF $3,234 AND $35,337.25, HEREINBEFORE REFERRED TO.

THIS BRIEF AS A WHOLE DOES NOT SUBMIT SUCH NEWLY DISCOVERED MATERIAL EVIDENCE AS WOULD INDUCE A REVIEW UPON A MISTAKE OF FACT, THE REQUEST FOR RECONSIDERATION BEING MAINLY DEVOTED TO ARGUMENT AS TO CERTAIN LEGAL CONSTRUCTIONS. THE BRIEF THUS HAS THE STATUS OF A DEMURRER, AND WHILE QUESTIONING THE APPLICATION OF LEGAL PRINCIPLES, IT, PERFORCE, ADMITS THE FACTS TO BE TRUE AS STATED. WHILE ANY CONSIDERATION OF WHAT IS SUBMITTED IS PROPERLY TO BE CONFINED TO SUCH LEGAL QUESTIONS AS ARE THERE PLACED IN ISSUE, IT IS NECESSARY TO CITE CERTAIN FACTS AS THE PREMISES UPON WHICH TO SUSTAIN THE POSITION TAKEN.

AS TO "A," WHICH CONCERNS $19,227.53, ERRONEOUSLY CHARGED THE UNITED STATES, THE ARGUMENT IS DIRECTED MAINLY TO QUESTIONING THE AUTHORITY EXERCISED BY THIS OFFICE IN REOPENING WHAT IS CALLED TERMINATION CONTRACT DATED OCTOBER 16, 1919, TO EFFECT AN ADJUSTMENT AND SETTLEMENT OF A BALANCE DUE UNDER A VALID SUBSISTING CONTRACT OF PRIOR DATE.

THERE WAS EVIDENTLY OVERLOOKED THE FACT STATED IN THE PREAMBLE TO THE DECISION IN QUESTION, THAT THE REOPENING OF THE TERMINATION CONTRACT WAS BY THE ADMINISTRATIVE OFFICE WHICH SUBMITTED IN PURSUANCE OF SECTION 236 OF THE REVISED STATUTES, AN ACCOUNT FOR CHARGING CLAIMANT WITH THE AMOUNT FOUND DUE THE UNITED STATES BY REASON OF OVERPAYMENT MADE UNDER THE SO- CALLED TERMINATION CONTRACT. AS TO THE RIGHT OF AN ADMINISTRATIVE OFFICER TO REOPEN, IT IS WELL SETTLED THAT A PUBLIC OFFICER MAY REOPEN AND RECONSIDER A DECISION MADE BY HIMSELF LIKE A COURT INVOLVING EITHER MISTAKE OF LAW, OR TO CORRECT MISTAKE IN MATTER OF FACT. COTTON V. UNITED STATES, 29 CT.CLS. 07; WADDELL V. UNITED STATES, 25 CT.CLS. 323, AND THIS RIGHT OF REOPENING EXTENDS TO SETTLEMENT OR FINDINGS OF A PREDECESSOR INVOLVING FRAUD, MISTAKE OF FACT ARISING FROM ERROR IN CALCULATION, OR NEWLY DISCOVERED MATERIAL EVIDENCE TO EFFECT A REVISION TO ACCORD WITH THE FACTS. SEE UNITED STATES V. BANK OF METROPOLIS, 15 PET. 377, IN WHICH THIS RULE IS ANNOUNCED. THIS RIGHT OF THE UNITED STATES TO REOPEN SUCH A SETTLEMENT MAY BE SAID TO REST PRIMARILY UPON THE GROUND OF WHETHER THE CONTRACTOR HAS RECEIVED PUBLIC MONEY WHICH IT IS NOT ENTITLED TO RETAIN. THE AMOUNT RECEIVED AS A PERCENTAGE OF OVERHEAD WAS COMPUTED ON THE COST OF CERTAIN CAPITAL EQUIPMENT CONSTRUCTED BY THE CLAIMANT FOR ITS OWN USE TO INCREASE THE FACILITIES FOR EXECUTING ITS CONTRACTS, THIS PERCENTAGE, HOWEVER, BEING CHARGED INSTEAD AS PART OF THE COST OF AIRPLANES MANUFACTURED FOR THE GOVERNMENT.

UPON THIS PHASE OF THE CASE, CLAIMANT HAS SUBMITTED UNDER DATE OF NOVEMBER 2, 1925, AN ADDITIONAL BRIEF WHEREIN THE SUM OF $19,227.53 IS ANALYZED INTO FIVE CONSTITUENT CHARGES IDENTIFIED AS ITEMS 1 TO 5, OF WHICH NO. 2 IS ITEMIZED TO EXHIBIT THE NATURE OF THE CHARGES. OF THOSE MAIN ITEMS, CLAIMANT CONTENDS THAT ITEM NO. 2, DIVIDED INTO BUILDING ACCOUNT AND FACTORY FIXTURES, SHOULD HAVE ENTERED INTO THE COST THE AIRPLANES INSTEAD OF BEING CAPITALIZED, BUT UPON WHAT GROUNDS IT IS NOT DEFINITELY STATED. SUCH CLAIM CAN NOT BE JUSTIFIED BY THE TERMS OF THE CONTRACT.

THE OPERATING CONTRACTS AS FINALLY EXECUTED, PROVIDED, AS PER ARTICLES 4 AND 5, RESPECTIVELY, THAT FOR THE CONSTRUCTION OF THE SPECIFIED AIRPLANES FOR THE GOVERNMENT THE CONTRACTOR SHOULD RECEIVE AS COMPENSATION THE ACTUAL COST OF THE AIRPLANES PLUS A PROFIT OF 12 1/2 PERCENT ON SUCH COST. IT WAS PLAINLY THE INTENTION AS EMBODIED IN THE AGREEMENT THAT ALL ELEMENTS ENTERING INTO THE COST WERE RESTRICTED BY THE GENERAL TERMS AND PURPOSES OF THE CONTRACT TO ONLY SUCH AS WERE PROPERLY CHARGEABLE TO PRODUCTION OF THE ARTICLES TO BE DELIVERED TO THE GOVERNMENT.

NOT EVERY EXPENSE INCURRED BY A CONTRACTOR IS NECESSARILY A COST OF THE WORK ON THE CONTRACT. CERTAIN OF THE EXPENSES MUST BE PAID FROM THE PROFIT DERIVED FROM THE CONTRACT. IN THE INSTANT CASE THE CONTRACT PROVIDED UNDER THE HEAD OF "GENERAL DEFINITION OF ACTUAL COST: "

THE ACTUAL COST OF PRODUCTION IN ARTICLE III REFERRED TO IS HEREBY DEFINED AS CONSISTING OF AND INCLUDING THE FOLLOWING ELEMENTS:

1. THE COST OF ALL DIRECT LABOR, DEFINITELY ASCERTAINABLE AS HAVING BEEN USED IN THE PRODUCTION OF THE ARTICLES CONTRACTED FOR.

2. THE COST OF ALL DIRECT MATERIAL AND DIRECT SUPPLIES DEFINITELY ASCERTAINABLE AS HAVING ENTERED INTO OR BEEN EXPENDED IN THE PRODUCTION OF THE ARTICLES CONTRACTED FOR.

3. THE DEPRECIATION ON THAT PORTION OF THE PLANT, EQUIPMENT, AND FACILITIES FURNISHED BY THE CONTRACTOR AND USED IN OR NECESSARILY RENDERED IDLE BY THE PRODUCTION OF THE ARTICLE CONTRACTED FOR, PROPERLY CHARGEABLE THERETO.

4. THAT PORTION OF OVERHEAD OTHER THAN ITEM 3, PROPERLY CHARGEABLE TO THE PRODUCTION OF THE ARTICLES PROVIDED FOR.

IT IS THUS EVIDENT THAT ONLY THE COST OF DIRECT MATERIAL AND SUPPLIES DEFINITELY ASCERTAINED AS HAVING ENTERED INTO OR EXPENDED IN THE PRODUCTION OF THE ARTICLES CONTRACTED FOR, WERE CHARGEABLE TO THE GOVERNMENT, AND, EXPENDABLE SUPPLIES ARE GENERALLY UNDERSTOOD TO BE SUCH AS ARE FABRICATED INTO THE PRODUCT OF MANUFACTURE, OR PERHAPS CONSUMED AS INCIDENTAL THERETO. ON THE CONTRARY, IT IS CLEARLY APPARENT THAT THE QUESTION OF ANY COMPENSATION INVOLVING PLANT, EQUIPMENT, AND FACILITIES WAS DISTINCTLY SEGREGATED AS A MATTER OF ALLOWANCE FOR DEPRECIATION ONLY.

THERE ARE NO GROUNDS UPON WHICH IT CAN BE SUCCESSFULLY CONTENDED, THAT THE BASIC COST OF THE EQUIPMENT SHOULD BE DIRECTLY CHARGED TO THE GOVERNMENT AS AN ELEMENT OF COST INCORPORATED IN THE ARTICLES MANUFACTURED; CONSEQUENTLY, THERE IS NO VALID REASON FOR CHARGING THE PERCENTAGE OF OVERHEAD ON COST OF EQUIPMENT TO THE GOVERNMENT WHEN THE BASIC COST THEREOF WAS NOT A VALID CHARGE, PARTICULARLY IN VIEW OF THE FACT THAT DEPRECIATION AS A SPECIAL ALLOWANCE ON PLANT, EQUIPMENT, AND FACILITIES, IS EXCLUSIVELY PROVIDED FOR IN PARAGRAPH 3 AND EXCEPTED BY PARAGRAPH 4 OF THE "DEFINITIONS OF COST.'

THE CLASSIFICATION OF ACCOUNTS AND COST-KEEPING SYSTEM, THROUGH OFFICIALLY PRESCRIBED, WAS MERELY A MEANS TO AN END, VIZ, THE EXHIBITION OF ACTUAL COST AS DEFINED BY THE CONTRACT, AND COULD NOT BE AVAILED OF AS THE AUTHORITY AND MEDIUM FOR ESTABLISHING AN UNWARRANTED CHARGE AGAINST THE GOVERNMENT.

WHERE, THEREFORE, THE CONTRACT TERMS STIPULATE THAT THERE SHOULD BE CHARGED ONLY SUCH ACTUAL EXPENSES THEREIN DEFINED, AS ENTERED INTO OR APPLIED DIRECTLY TO CONSTRUCTION OF THE SPECIFIC ARTICLES CONTRACTED FOR,THEN THE AUTHORITY OF THE CONTRACTING OFFICER IS RESTRICTED TO THE EXERCISE OF A LEGAL DISCRETION WITHIN THE LIMITS OF THE CONTRACT TERMS, AND ANY DETERMINATION IMPUTED TO HIM WHICH RESULTED IN LEVYING AN EXTRANEOUS COST AS AN ADDITIONAL CHARGE UPON THE PRODUCT IS INEFFECTUAL TO IMPOSE ANY VALID OBLIGATION UPON THE UNITED STATES.

IN CONSEQUENCE OF THE CIRCUMSTANCES RECITED TOGETHER WITH THE FACTS MORE FULLY SET FORTH IN THE DECISION, IT IS ONLY TOO APPARENT THAT DUE TO SOME ERRONEOUS ACTION, OR UNAUTHORIZED DETERMINATION, THE CLAIMANT HAS RECEIVED AN OVERPAYMENT WHICH EX AEQUO ET BONO, IT IS NOT ENTITLED TO RETAIN. THIS CONCLUSION APPLIES AS WELL TO THE SUBORDINATE ITEMS, INVOLVED IN THE SUM OF $19,227.53. NOTWITHSTANDING, IT IS ASSERTED THAT THE UNITED STATES IS BARRED TO RECOVER BECAUSE OF A TERMINATION SETTLEMENT PURPORTING TO CONCLUSIVELY COMPOSE ALL DIFFERENCES AND ESTABLISH THE BALANCE DUE, PAYMENT OF WHICH IS ASSERTED TO HAVE EFFECTUATED A FINAL ADJUDICATION NOT SUBJECT TO BE REOPENED BY THIS OFFICE.

AS STATED HEREINBEFORE, THE REOPENING WAS INITIATED BY THE ADMINISTRATIVE OFFICE, BUT APART FROM THAT THERE IS UNDOUBTED AUTHORITY CONFERRED UPON THIS OFFICE TO REOPEN SETTLEMENTS IN THE INTEREST OF THE UNITED STATES UNDER ESTABLISHED RULES, AND RECHARGE SUCH AMOUNT FOUND DUE THE GOVERNMENT.

ANY ACTION WHICH RESULTED IN THE OVERPAYMENT WAS THE RESULT OF ERROR, OBVIOUSLY ONE OF FACT. THE SO-CALLED TERMINATION CONTRACT, IN VIEW OF THE CIRCUMSTANCES WAS, AS STATED IN THE DECISION, ESSENTIALLY A STATEMENT OF ACCOUNT BETWEEN THE PARTIES, PAYMENT WHICH WAS MADE BY AN ARMY DISBURSING OFFICER. THE ACT OF JUNE 10, 1921, 42 STAT. 24, SECTION 236, PROVIDES AS FOLLOWS:

ALL CLAIMS AND DEMANDS WHATEVER BY THE GOVERNMENT OF THE UNITED STATES OR AGAINST IT, AND ALL ACCOUNTS WHATEVER IN WHICH THE GOVERNMENT OF THE UNITED STATES IS CONCERNED, EITHER AS DEBTOR OR CREDITOR, SHALL BE SETTLED AND ADJUSTED IN THE GENERAL ACCOUNTING OFFICE.

BY FORCE OF THE TERMS OF THAT STATUTE ANY PAYMENT MADE BY PUBLIC OFFICERS IN THE SETTLEMENT OF THE PUBLIC ACCOUNTS, OR TO BE MADE, BECOMES SUBJECT TO AN ADJUDICATION BY THIS OFFICE, AND THEREFORE A PAYMENT SO MADE BY ANY SUCH OFFICER CAN NOT CONSTITUTE A FINAL SETTLEMENT. ITS CORRECTNESS AND VALIDITY ARE FOR DETERMINATION BY THIS OFFICE.

IN COMMITTING THE UNITED STATES TO A CONTRACT NO PUBLIC OFFICER HAS AUTHORITY TO BIND THE GOVERNMENT TO ANY PAYMENT IN EXCESS OF THAT FOR WHICH IT IS JUSTLY OBLIGATED. ACCORDINGLY, IN ANY TRANSACTION INVOLVING AN EXPENDITURE OF THE PUBLIC FUNDS THIS OFFICE HAS AMPLE AUTHORITY TO INVESTIGATE THE ACTUAL CONDITIONS UNDERLYING THE TERMS OF ANY CONTRACTUAL AGREEMENT AND IF, UPON THE FACTS DEVELOPED, IT APPEARS THAT A CLAIMANT HAS BEEN UNJUSTLY ENRICHED AT THE PUBLIC EXPENSES, THERE IS A QUASI-JUDICIAL POWER CONFERRED TO ADJUST THE ACCOUNT ACCORDINGLY AS THE RIGHTS OF THE GOVERNMENT MAY REQUIRE, AND TO TAKE THE NECESSARY ACTION TO RECOVER ANY AMOUNT WRONGFULLY OBTAINED. THE AUTHORITY IN THIS OFFICE TO ADJUST AND SETTLE THE ACCOUNTS OF PUBLIC OFFICERS AS WELL AS CLAIMS AND DEMANDS BY AND AGAINST THE UNITED STATES MUST EXIST, ELSE THE DIRECTIONS IN THE ACT QUOTED, SUPRA, THAT ALL ACCOUNTS, CLAIMS, AND DEMANDS SHALL BE ADJUSTED AND SETTLED IN THE GENERAL ACCOUNTING OFFICE WOULD BE MEANINGLESS THROUGH INABILITY TO MAKE EFFECTUAL A NECESSARY ADJUSTMENT.

IN UNITED STATES V. KERR, 196 FED.REP. 503, AT PAGE 505, IT IS SAID:

(2) * * * IT IS A RULE OF LAW, WELL ESTABLISHED, THAT THE GOVERNMENT MAY RECOVER MONEYS PAID THROUGH ERRORS OF ITS DISBURSING OFFICERS, AS MUCH WHERE THE ERROR IS ONE OF LAW AS OF FACT, PROVIDED ONLY THE MONEYS BELONG TO THE UNITED STATES EX AEQUO ET BONO. UNITED STATES V. SAUNDERS, 79 FED. 407, 24 C.C.A. 549. THIS DOCTRINE IS WELL SUPPORTED BY THE CASE OF WISCONSIN CENTRAL RAILROAD V. UNITED STATES, 164 U.S. 190, 17 SUP.CT. 45, 41 L.ED. 399. IT WOULD APPEAR THEREFROM THAT AN ESTOPPEL OF THE NATURE HERE ATTEMPTED TO BE SET UP COULD NOT BE PLEADED AGAINST THE GOVERNMENT; NOR WOULD THE SETTLEMENT BY THE GOVERNMENT OFFICERS, ACTING EITHER THROUGH OR UNDER A MISTAKE OF LAW OR FACT, WHEREBY PAYMENTS HAVE BEEN MADE, PRECLUDE THE GOVERNMENT FROM RECOVERING FOR OVERPAYMENT.

SEE ALSO IN THIS CONNECTION THE RECENT DECISION BY THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO, WESTERN DIVISION, IN UNITED STATES V. THE DAYTON AIRPLANE COMPANY, EQUITY NO. 107, A CASE ON ALL FOURS WITH THIS, WHEREIN THE COURT SUBSTANTIALLY CONFIRMED THE PRINCIPLES HEREIN ANNOUNCED AS TO THE LIMITATION OF AGENCY POWERS POSSESSED BY PUBLIC OFFICERS, AND THE RIGHT INHERENT IN THE GOVERNMENT UNDER SIMILAR CIRCUMSTANCES TO GO BEHIND THE FINDINGS OF ITS OFFICERS AND AGENTS FOR THE PURPOSE OF SHOWING THEIR INVALIDITY, AS WELL AS THE AUTHORITY TO REOPEN SETTLEMENTS ACCOMPLISHED IN ACCORDANCE WITH SUCH ACTION, AND RECOVER ANY SUMS ERRONEOUSLY RECEIVED UNDER SUCH ILLEGAL CONDITIONS. IN THAT DECISION THE COURT SAID:

IT IS CONCEDED BY COUNSEL THAT FRAUD WOULD VITIATE EVEN AN EXPRESS SETTLEMENT AND PERMIT A REEXAMINATION OF THE MATTERS INVOLVED. PAYMENTS CLEARLY NOT WITHIN THE TERMS OF THE CONTRACT WERE MADE OR OTHER UNCONSCIONABLE ADVANTAGE WERE TAKEN OF THE GOVERNMENT, A CONSTRUCTIVE FRAUD WOULD BE COMMITTED. UNDER SUCH CIRCUMSTANCES AN APPLICATION OF THE DOCTRINES OF ESTOPPEL WOULD RESULT IN UNJUST ENRICHMENT OF THE DEFENDANT AND IN UNFAIRNESS AND INJUSTICE TO THE GOVERNMENT AND THEY WILL NEVER BE APPLIED UNDER SUCH CIRCUMSTANCES. A DEFENDANT WILL NOT BE PERMITTED TO CONTEND ON THE ONE HAND THAT IT HAS RECEIVED THAT TO WHICH IT WAS NOT LEGALLY ENTITLED AND YET THAT THE GOVERNMENT IS ESTOPPED TO RECOVER SUCH OVERPAYMENT BECAUSE, WITHOUT KNOWLEDGE OR NOTICE OR INTENTION SO TO DO, BUT THROUGH MISTAKE OF ITS EXECUTIVE AND ADMINISTRATIVE OFFICERS IT HAS SECURED A RELEASE FROM THE CONTRACTOR * * *. AND THE COURT FURTHER SAID:

IT IS THEN INSISTED THAT IF THE CLAIMS WERE NOT THE MATTER OF COMPROMISE AND SETTLEMENT, AND IF THE GOVERNMENT IS NOT ESTOPPED TO ASSERT THEIR INVALIDITY, YET THE GOVERNMENT CAN NOT RECOVER HERE, SINCE, BY THE TERMS OF THE CONTRACT, THE DECISION OF THE GOVERNMENT ACCOUNTING OFFICERS WAS FINAL AS BETWEEN THE PARTIES, AND GREAT RELIANCE IS PLACED UPON THE DECISION OF THE SUPREME COURT IN UNITED STATES V. MASON AND HANGER CO., 260 U.S. 323. THE CONTRACT INVOLVED IN THAT CASE DIFFERED MATERIALLY IN ITS TERMS FROM THE ONE HERE INVOLVED. * * *.

IT IS TRUE THAT THE COURT INDULGES IN A RATHER BROAD STATEMENT AS TO THE RESULT OF EXECUTIVE CONSTRUCTION, BUT THIS LANGUAGE IS FOLLOWED BY THE EXPRESS RESERVATION: "WE ARE, HOWEVER, NOT CALLED UPON TO PASS UPON THE CONFLICTING CONTENTIONS. THE CONTRACT CONTAINS OTHER PROVISIONS THAT DETERMINE THE LIABILITY OF THE GOVERNMENT.' BUT EVEN THE LANGUAGE THERETOFORE USED WOULD NOT, IN OUR OPINION, MAKE THE INITIAL DECISION OF THE GOVERNMENT ACCOUNTING OFFICER THAT CERTAIN EXPENDITURES WERE COVERED BY THE CONTRACT HERE IN SUIT BINDING UPON THE GOVERNMENT IN A CASE WHERE IT CLEARLY APPEARED THAT THEY WERE NOT SO INCLUDED UNDER THE CONTRACT. WE HAVE HELD IN THE MATTER OF AN INTERLOCUTORY MOTION HEREIN, CONSTRUCTION OF CONTRACTS IS A JUDICIAL AND NOT AN EXECUTIVE FUNCTION, AND WHILE PRACTICAL CONSTRUCTION OF THE PARTIES TO A CONTRACT IS ENTITLED TO GREAT WEIGHT BY THE COURT IN INTERPRETING ITS TERMS, SUCH PRACTICAL CONSTRUCTION IS NOT BINDING UPON THE COURT, AT LEAST IN CASES OF GOVERNMENTAL OVERPAYMENT, WHERE THE RIGHTS OF THE PARTIES ARE CLEARLY DEFINED TO THE CONTRARY. CHORPENNING V. UNITED STATES, 94 U.S. 397, 399; GRAND TRUNK WESTERN RY. CO. V. UNITED STATES, 252 U.S. 112, 121.

REGARDING THE PLEA IN THE PRESENT MATTER THAT IF THE SO-CALLED CONTRACT OF SETTLEMENT IS HELD VOID THE ENTIRE ACCOUNT BE RESTATED, STRICTLY AND, AS IT IS SAID, IN ABSOLUTE CONFORMITY WITH THE CONTRACT, AND THAT UPON SUCH RESTATEMENT, ITEMS 3 AND 4 OF THE ANALYSIS, IT IS TO BE SAID THAT OF THESE ITEMS, $2,094.73, ITEM 4, REPRESENTS ADJUSTMENT OF PROFIT--- 12 1/2 PERCENT OF ABOVE NET OVERCHARGES, WHILE ITEM 3 IS A CREDIT OF $1,303.92, REPRESENTING ADDITIONAL DEPRECIATION CHARGEABLE TO CONTRACTS 2611 AND 5444, THROUGH INCREASE OF CHARGES TO ASSET ACCOUNTS BY APPLICATION OF OVERHEAD EXPENSES. AS THESE ITEMS ARE DEBITS AND CREDITS, THE EFFECT OF THEIR ADJUSTMENT BY ELIMINATION WOULD BE A NET CREDIT OF $690.81 FOR CLAIMANT. HOWEVER, WHILE IT IS ALLEGED AND PETITIONED THAT THESE ITEMS SHOULD BE DISCARDED, THERE HAS BEEN PRESENTED NO EVIDENCE TO REBUT THE VERITY OF THE CHARGES BY THE WAR DEPARTMENT, AND IN CONSEQUENCE, IN THE ABSENCE OF COUNTERVAILING EVIDENCE, THE STATEMENT OF THE WAR DEPARTMENT AS AGAINST CLAIMANT MAY BE ACCEPTED AS PRIMA FACIE CORRECT, AND THE REQUEST FOR ADJUSTMENT OF THESE TWO ITEMS MUST BE DENIED.

ACCORDINGLY, IN VIEW OF THE FACT THAT THE CLAIMANT HAS RECEIVED, THROUGH A PUBLIC OFFICER, PUBLIC FUNDS TO WHICH IT APPEARS FROM THE TERMS OF THE OPERATING CONTRACT IT WAS NOT ENTITLED, THE ACTION OF THE ADMINISTRATIVE AND ACCOUNTING OFFICERS IN REVISING THE ACTION TAKEN AND CHARGING CLAIMANT WITH THE SUM OF $19,227.53 WAS JUSTIFIED BY THE LAW AND THE FACTS.

TRANSACTION "B" RELATES TO THE CLAIM TO A PERCENTAGE OF THE COST OF AIRPLANES MANUFACTURED FOR THE GOVERNMENT BY OTHER CONTRACTORS ASSERTED TO BE DUE CLAIMANT BY REASON OF A STIPULATION TO THAT EFFECT IN THE CONTRACT DATED JUNE 9, 1920, AS TO WHICH IT WAS HELD IN THE DECISION THAT THERE WAS NO DEFINITE CONTINUING CONSIDERATION TO REVIVE AND SUPPORT SUCH A PROVISION, NO GROUND FOR A LAWFUL CLAIM UPON THE UNITED STATES.

THE CLAIM WAS PRESENTED AS BEING ONE FOR THE PAYMENT OF A ROYALTY, AND WAS CONSIDERED AND DISCUSSED IN PART FROM THAT STANDPOINT, BUT REPRESENTATIONS MADE CONCERNING IT GAVE TO IT ALSO SOMEWHAT OF THE CHARACTER OF A BONUS WHICH WAS ALSO GIVEN CONSIDERATION.

FROM WHAT IS SET FORTH IN THE PRESENT BRIEF, BEGINNING WITH PAGE 37, IT IS APPARENT THAT WHAT CLAIMANT IS DEMANDING IS A SORT OF ROYALTY BASED UPON A DESIGN OF A TYPE OF AIRPLANE. THIS IDEA WAS PREVIOUSLY SURMISED, AND IS ONE WHICH INFLUENCES THE CONCLUSIONS ARRIVED AT IN THE DECISION IN QUESTION. SUCH CLAIM IS FOUNDED UPON A DESIGN BASED, HOWEVER, UPON SPECIFICATIONS EMBODYING THEREIN CERTAIN NECESSARY CHARACTERISTICS AND SPECIAL REQUIREMENTS THAT RESULTED IN THE PRODUCTION OF A TYPE OF PLANE TO WHICH THE GOVERNMENT IS SHOWN TO HAVE CONTRIBUTED LARGELY IN THE DEVELOPMENT OF THE DESIGN.

DESIGN DEALS WITH THE APPEARANCE ALONE RATHER THAN THE STRUCTURE, USE, OR FUNCTIONS; FOR WHERE A DESIGN CONTEMPLATES MECHANICAL FUNCTIONS, IT IS THE SUBJECT OF PATENT PROTECTION. IN THIS CASE, BASED UPON A MATTER OF DESIGN, IT APPEARS TO BE MERELY SUCH DESIGN AS MIGHT ENABLE EXISTING MECHANICAL FEATURES TO FUNCTION, POSSIBLY WITH GREATER EFFICIENCY, WITHOUT EXTENDING TO THE DEVELOPMENT OF A NEW AND PATENTABLE TYPE. THERE WAS NO MORE VALID GROUND FOR DEMANDING ADDITIONAL COMPENSATION FROM THE UNITED STATES MERELY BECAUSE IT HAS MORE OF SUCH GENERAL TYPE MANUFACTURED BY ITSELF OR OTHERS THAN THERE WOULD BE IF IT WERE SUBJECT TO PATENT PROTECTION AND THE INVENTOR FAILED TO SECURE SUCH PROTECTION AS IN THIS CASE.

THERE WAS NO OBLIGATION UPON THE UNITED STATES TO HAVE THE ADDITIONAL PLANES MANUFACTURED BY THE CLAIMANT, AND THE MERE FACT THAT THE GOVERNMENT DUPLICATED SUCH PLANES ELSEWHERE CONSTITUTES NO APPROPRIATION OF PROPERTY OR VESTED RIGHTS OF CLAIMANTS UPON WHICH TO FOUND ANY CONSIDERATION FOR A CLAIM. AS STATED, NO PUBLIC OFFICER HAS AUTHORITY TO BIND THE GOVERNMENT TO ANY PAYMENT IN EXCESS OF THAT FOR WHICH IT IS JUSTLY OBLIGATED, AND ANY COVENANT IN A CONTRACT TO SUCH EFFECT IS TO THAT EXTENT INVALID. FILOR V. UNITED STATES, 9 WALL. 45.

IF CLAIMANT FURNISHED MORE IN THE ARTICLE PRODUCED THAN ITS CONTRACT CALLED FOR, ANY REMUNERATION WOULD HAVE TO BE FOR SUCH EXCESS AS DISCLOSED BY ESTABLISHED FACTORS COMPUTED BY SOME SPECIFIED MEASURE OF VALUE (J. J. PRIES AND CO., CT.CLS. FEB. 12, 1925); BUT IN LIEU OF SUCH DEFINITELY ESTABLISHED ELEMENTS, SUBSTANCE IS NOT GIVEN TO A NEBULOUS CLAIM TO EXCESS PRODUCTION BY IMPOSING AN ASSESSMENT UPON THE PRODUCT OF ANOTHER CONTRACTOR. CONTRACT REQUIREMENTS ALLEGED TO HAVE BEEN EXCEEDED IN A GENERAL WAY AFFORD NO DEFINITE BASIS UPON WHICH TO ESTABLISH THE MEASURE OF POSSIBLE COMPENSATION UNLESS EVIDENCED BY SOME ASCERTAINABLE UNITS. ALL SUCH CASES WHERE THE UNITED STATES HAS PAID ADDITIONAL COMPENSATION FOR EXCEEDING CONTRACT REQUIREMENTS, THE EXTRA SUM, DENOMINATED BONUS, HAS BEEN PAID FOR EXCESSES OF SPEED, TIME, OR OTHER MEASURABLE UNITS OF SOMETHING ADDITIONAL RECEIVED BY THE UNITED STATES WHICH WOULD COMPRISE A MATTER OF CONSIDERATION FOR THE FURTHER PAYMENT.

IN THE PRESENT CASE THE CONTRACT REQUIREMENTS HAVE NOT BEEN EXCEEDED OVER ANY AGREED LIMIT OF MEASURABLE DEGREE, FOR WHICH ADDITIONAL COMPENSATION MAY BE COMPUTED UPON THE ARTICLES DELIVERED, AND THE CLAIMANT IS NOT SHOWN TO HAVE SUCH PROPERTY RIGHTS IN THE PARTICULAR TYPE OF MACHINE AS WOULD REQUIRE THE UNITED STATES TO COMPENSATE IT TO HAVE OTHERS CONSTRUCT DUPLICATES THEREOF.

CLAIMANT CITES IN SUPPORT OF ITS CONTENTION THAT THERE WERE CERTAIN PROPERTY RIGHTS EMBODIED IN THE PARTICULAR DESIGN OF CRAFT CONSTRUCTED UNDER THE CONTRACT OF JUNE 9, 1920, WHICH WOULD ENTITLE IT TO FURTHER PAYMENTS IN THE NATURE OF ROYALTY, THE CASES OF UNITED STATES V. HARVEY STEEL COMPANY, 196 U.S. 313; MIDVALE STEEL COMPANY V. HARVEY AND UNITED STATES V. HARVEY, 227 U.S. 165, AS BEING ON ALL FOURS WITH THE PRESENT CASE IN SEVERAL RESPECTS. THESE CASES ARE NOT IN POINT FOR THE REASON THAT THE HARVEY STEEL COMPANY HAD A SECRET PROCESS WHICH COMPRISED DEFINITE PROPERTY RIGHTS, SO THAT THERE THE GRANT OF A LICENSE AND A DISCLOSURE OF THE SECRET CONVEYED TO THE UNITED STATES A DISTINCT RIGHT TO A USE, WELL RECOGNIZED AS CONSTITUTING A VALUABLE CONSIDERATION TO SUPPORT THE COMPENSATION PAYABLE THEREFOR. IN THE PRESENT CASE THERE ARE NO ADDITIONAL SPECIAL PATENTABLE FEATURES ALLEGED TO SERVE AS A BASIS OF CONSIDERATION, BUT MERELY THE ASSERTION OF SUPERIOR QUALIFICATION. THERE ARE PROPERTY RIGHTS CLAIMED IN ANY DISTINCT IMPROVEMENTS IN THE PARTS OR DESIGN OF THE MACHINES PRODUCED UNDER THE CONTRACT, ASSERTED AS THE CONSIDERATION FOR THE ROYALTY STIPULATED FOR IN THE CONTRACT OF JUNE 9, 1920, THEN THEY ARE SUCH AS THE UNITED STATES APPEARS EQUALLY ENTITLED AS ACQUIRED BY AN EMPLOYER IN THE CONSTRUCTION OF A TYPE OF MACHINE WHICH IT HAD MANUFACTURED UNDER ITS SUPERVISION FROM ITS OWN SPECIFICATION, AT DETAILED COSTS, EMBODYING MANY IDEAS CONTRIBUTED BY IT.

IF THE CLAIMANT WORKED IN ANY NEW AND USEFUL IDEAS, THEN, IN THE ABSENCE OF ANY PATENT, THE UNITED STATES AS EMPLOYER WAS EQUALLY ENTITLED TO A FREE USE OF THEM FOR ITS OWN PURPOSE, EITHER RECEIVING THEM AS PATENTABLE FEATURES, OR MERELY AS ADDITIONAL DESIRABLE IMPROVEMENTS. SEE SOLOMONS V. UNITED STATES, 137 U.S. 342.

TO SUM UP, TO SUPPORT A CLAIM FOR SUCH FURTHER PAYMENTS IN THE NATURE OF ROYALTY UPON THE PRODUCT MANUFACTURED EITHER BY OR FOR THE UNITED STATES, THERE MUST BE SOMETHING IN THE WAY OF A CONTINUING CONSIDERATION. IT IS EVIDENCE SUCH CONSIDERATION DOES NOT ARISE OUT OF PATENT RIGHTS. AS TO ANY FEATURES IN THE NATURE OF STRUCTURE OR DESIGN, UPON WHICH SUCH CLAIM TO ROYALTY IS ASSERTED, IT IS ONLY NECESSARY TO REFER TO THE STATEMENTS OF LAWRENCE D. BELL, FACTORY MANAGER OF CLAIMANT, APPEARING ON PAGES 23 AND 24 OF THE PREVIOUS DECISION, TO DISCLOSE THAT, TAKEN IN CONNECTION WITH THE PRICE OF APPROXIMATELY $84,000 EACH, WHICH THE UNITED STATES PAID MAINLY FOR FUSELAGE AND WINGS OF THESE PARTICULAR MODELS OF PLANES, IT IS EVIDENT THAT THE GOVERNMENT MUST HAVE CONTRIBUTED THE MAJOR PORTION OF ANY DESIGN OR STRUCTURAL DETAIL. AGAINST THIS, THERE IS NOT DISCLOSED ANY EVIDENCE OF AN INDEPENDENT CONTRIBUTION BY THE CLAIMANT, OF SUCH DISTINCTLY DIFFERENT DESIGN OR STRUCTURE, OVER CONTRACT REQUIREMENTS, AS WOULD CONSTITUTE AN ADEQUATE CONTINUING CONSIDERATION TO SUPPORT A CONTRACTUAL OBLIGATION ON THE PART OF THE GOVERNMENT TO PAY AN ASSESSMENT IN THE NATURE OF ROYALTY UPON ANY ADDITIONAL PLANES IT MAY SUBSEQUENTLY HAVE MANUFACTURED BY OTHERS.

ACCORDINGLY, UPON RECONSIDERATION THERE DOES NOT APPEAR ANY GOOD REASON FOR NOT ADHERING TO THE FORMER CONCLUSIONS, AND THEREFORE THE DECISION MUST BE AND IS AFFIRMED.