HEGEMAN-HARRIS & COMPANY v. United States

• Decision Date: 16 April 1971
• Docket Number: No. 341-67.,341-67.
• Parties: HEGEMAN-HARRIS & COMPANY, Inc. v. The UNITED STATES.
• Court: U.S. Claims Court

194 Ct. Cl. 574, 440 F.2d 1009 (1971)

HEGEMAN-HARRIS & COMPANY, Inc. v. The UNITED STATES.

No. 341-67.

United States Court of Claims.

April 16, 1971.

Harold F. Blasky, New York City, for plaintiff; Max E. Greenberg, New York City, attorney of record for plaintiff; Max E. Greenberg, Trayman, Harris, Cantor, Reiss & Blasky, New York City, of counsel.

James A. Pemberton, Jr., Washington, D. C., with whom was Asst. Atty. Gen. L. Patrick Gray, III, for defendant.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON and NICHOLS, Judges.

NICHOLS, Judge.

This case is before us on cross motions for summary judgment. We conclude that the plaintiff is entitled to recover on part of the claim, in an amount to be determined in a Rule 131(c) proceeding.

Plaintiff was the successful bidder on a fixed-price contract for the construction of a United States courthouse and Federal office building in Albuquerque, New Mexico. The contract, designated by the General Services Administration (GSA) as No. GS-08B-3566, was awarded on February 8, 1963, and had a fixed-price of $6,368,000. Included in its provisions was the following:

1-9 FEDERAL, STATE AND LOCAL TAXES

* * * * * *

(c) (1) If the Contractor is required to pay or bear the burden (i) of any tax or duty, which either was not to be included in the contract price * * * or was specifically excluded from the contract price by a provision of this contract; or (ii) of an increase in rate of any tax or duty; whether or not such tax or duty was excluded from the contract price; or of any interest or penalty thereon, the contract price shall be correspondingly increased: Provided, that the Contractor warrants in writing that no amount for such tax, duty or rate increase was included in the contract price as a contingency reserve or otherwise: And provided further, That liability for such tax, duty, rate increase, interest or penalty was not incurred through the fault or negligence of the Contractor or its failure to follow instructions of the Contracting Officer.

* * * * * *

(4) Nothing in this paragraph (c) shall be applicable to social security taxes; net income taxes; excess profit taxes; capital stock taxes; unemployment compensation taxes; or any State and local taxes, except those levied on or measured by the contract or sales price of the services or completed supplies furnished under this contract, including gross income taxes, gross receipts taxes, sales and use taxes, excise taxes, or franchise or occupation taxes measured by sales or receipts from sales.

Subsequent to the award of the contract to Hegeman-Harris, the State of New Mexico increased the rate of its gross receipts tax from 1% to 1½% and the rate of the sales and use tax from 2% to 3%, both increases to be effective on April 1, 1963. The result of this tax increase was some additional tax liability for plaintiff and its subcontractors which had not existed at the time the contract was awarded and which plaintiff had not included in its bid price. There was the large amount of subcontracting usual with a major construction contract. Plaintiff invoked the escalation of para. 1-9(c) (1), supra, and applied to the contracting officer, under the standard disputes clause, for an adjustment to the price. Plaintiff duly warranted that no amount of the tax increase had been included in the contract price whether as a contingency or otherwise. Defendant has agreed that the increased liability has not resulted from any fault or negligence of plaintiff or its failure to follow instructions of the contracting officer. The contracting officer determined that plaintiff was entitled to an adjustment in the amount of $31,524.75, which represented only the increased taxes imposed directly on plaintiff as prime contractor and did not include any increased taxes on the subcontractors, whether or not passed on to plaintiff in any manner. The reason for denial in the case of the subcontractors was the contracting officer's reliance on an unrelated decision of the Comptroller General, No. B-156701, 44 Comp.Gen. 816 (1965), interpreting the phrase, "levied on or measured by the contract or sales price of the services or completed supplies furnished under this contract", to prohibit any adjustment in the contract price as a result of State and local taxes levied on purchases of materials incorporated in the construction project.

After receiving the final decision of the contracting officer, plaintiff sought relief from the GSA Board of Contract Appeals (Board). In conjunction with this appeal the parties entered a stipulation, dated July 10, 1967, which included the following three paragraphs:

8. The following taxes were levied and the amounts indicated collected by the state of New Mexico:

                Gross Receipts Sales Tax Total
                  (1) $31,840.00            $968.08     $32,808.08
                  (2)   3,675.82          11,657.50      15,303.32
                  (3)  19,553.92          20,484.74      40.038.66
                  (4)   5,500.00           5,585.46      11,085.46
                  (5)   4,679.73         ..........       4,679.73
                  (6)   5,147.70         ..........       5,147.70
                  (7)   1,132.49         ..........       1,132.49
                  (8)   5,143.97         ..........       5,143.97
                  (9)   5,658.37         ..........       5,658.37
                 (10)   5,775.72         ..........       5,775.72
                      ____________________________________________
                      $88,107.72         $38,665.78    $126,773.50
                

9. All of the taxes listed, except those on the first line totaling the sum of $32,808.08 are taxes paid by appellant\'s subcontractors.

10. Appellant\'s subcontractors each have a provision in its subcontract tying them to the provisions of the principal contract.

The stipulation was signed by the attorney for GSA and by the president of Hegeman-Harris, and according to defendant was submitted to the Board by plaintiff in response to the motion made by the GSA counsel to dismiss for lack of jurisdiction. Apparently the parties urged and the Board determined that there was no material dispute of fact but the only question was one of law, namely: that of liability for the tax increase. Defendant admits it told the Board it lacked jurisdiction and should dismiss on that ground. Defendant further admits, citing Nager Electric Co. v. United States, 396 F.2d 977, 184 Ct.Cl. 390 (1968), that it has thereby waived its right to have the case decided under the disputes clause of the contract. The Board actually dismissed the appeal, not because of the supposed lack of jurisdiction, but because any decision it rendered on a purely legal issue would not be accorded finality by the courts and would be "merely academic, and thus without any significance from a practical standpoint." See 41 U.S.C. § 322; W. H. Edwards Eng. Corp. v. United States, 161 Ct.Cl. 322, 328 (1963). (We do not ourselves subscribe to the quoted phrase for we find interpretations by tribunals having expertise to be helpful even if not compelling.) Hegeman-Harris then brought suit in this court and promptly moved for summary judgment.

The Government responded with its own motion for summary judgment and in addition asked to be relieved from the quoted paragraphs of the stipulation. The essential argument made is that the stipulation is contradicted by other evidence which is also in the record. As to paragraph 10 of the stipulation, defendant says that 37 of the subcontracts involved were in the Board record. The contention is that these documents are themselves the best evidence of what they contain and that an examination of these reveals that para. 10 is an erroneous conclusion of law. The Government also argues that the Board's refusal to decide the case renders the administrative proceeding a nullity, stripping the stipulation of any binding effect it might otherwise have.

It is true, as plaintiff's counsel points out, "that both public and judicial policy look with favor on stipulations designed to simplify and shorten litigation to the benefit of all parties." See Kramer v. United States, 406 F.2d 1363, 186 Ct.Cl. 684 (1969). And we adhere to what we said in John McShain, Inc. v. United States, 375 F.2d 829, 831, 179 Ct.Cl. 632, 635 (1967), that "A stipulation is a judicial admission binding on the parties making it absent special considerations." We think this case presents special considerations. Where the subcontracts themselves are part of the record, any stipulation as to their legal effect is not operative. Were we to rule otherwise, this court would be in the position of allowing counsel to stipulate the law, a function which, in the context of a judicial proceeding, is the province of judges. Not only has this court refused to be bound by a stipulation on an issue of law, Sac & Fox Tribes et al. v. United States, 315 F.2d 896, 161 Ct.Cl. 189 (1963), but the United States Supreme Court has made similar pronouncements, Swift & Co. v. Hocking Valley Ry., 243 U.S. 281, 37 S.Ct. 287, 61 L.Ed. 722 (1917). We also think it is contrary to the Attorney General's authority to manage defendant's litigation in this court, that he should be bound by a stipulation made by another counsel, in a proceeding before another tribunal, which did not approve or adopt the stipulation and made no fact findings at all. "A court may relieve a party of his stipulation if necessary to prevent an injustice, particularly where facts contrary to the stipulation are established by the evidence." H. B. Zachry Co. v. United States, 344 F.2d 352, 357, 170 Ct.Cl. 115, 123 (1965). In this case we have no record to review under Wunderlich Act standards and are privileged to make our own findings. See Utah Constr. & Mining Co. v. United States, 384 U.S. 394, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966). It is quite likely that the Board itself, had it heard this case, would have rejected the stipulation. We therefore do not hold the parties to the contested portions of the stipulation of July 10, 1967.

In the instant proceeding, the parties filed a "s...