Borden v. United States, 49855.

• Decision Date: 01 December 1953
• Docket Number: No. 49855.,49855.
• Citation: 116 F. Supp. 873
• Parties: BORDEN v. UNITED STATES.
• Court: U.S. Claims Court

116 F. Supp. 873

BORDEN v. UNITED STATES.

No. 49855.

United States Court of Claims.

December 1, 1953.

Edward A. Lipton, New York City, for plaintiff.

Donald D. Webster, Washington, D. C., with whom was Warren E. Burger, Asst. Atty. Gen., for defendant.

Before JONES, Chief Judge, and LITTLETON, WHITAKER and MADDEN, Judges.

JONES, Chief Judge.

This is a suit for salary withheld from plaintiff on account of loss of payroll funds for which defendant claims plaintiff was responsible.

Plaintiff contracted with the Army Exchange Service, European Theater, to serve as senior accountant for a period of two years beginning January 12, 1948.

The contract stipulated that the employer might terminate the contract if it regarded the services of the employee as unsatisfactory, and might withhold salary for all claims against employee for fraud, breach of contract or negligence.

The plaintiff was assigned to the Post Exchange at Bremerhaven, Germany, as chief accountant.

The personnel section was charged with the duty of handling the German payroll. In each of the two months prior to the loss in question a suitcase containing the payroll had been deposited overnight in plaintiff's case with the knowledge and consent of the plaintiff.

On the occasion in question the plaintiff, as chief accountant, caused his acting cashier to go with the paymaster of the personnel section to the financial office where they obtained Deutsche Marks in the equivalent of $24,588.64 to be used for payroll purposes. The money was carried to the plaintiff's accounting office on the second floor of the Post Exchange building. After counting the funds, the money was delivered to the personnel officer on the third floor. Richard S. Proctor, personnel manager, had the money counted by the paymaster and gave the plaintiff a receipt for the full amount.

The same day plaintiff was required to attend an official investigation at the staging area of the Bremerhaven Port of Embarkation and was necessarily absent from his office from about 1:00 p.m. to 5:25 p.m., the closing time of the office being 5:30 p.m. At about 4:00 p.m. of that day the paymaster locked the Deutsche Marks in a wooden strongbox and delivered the box from the personnel office to the acting cashier in the plaintiff's office for safekeeping until the next morning. It was deposited in plaintiff's safe, but plaintiff was not advised of the delivery of the box and its deposit in the safe.

Upon his return to his office at 5:25 p.m. the plaintiff witnessed his cashier lock the safe and the door to the cashier's cage, inserted the two keys in an envelope, placed the envelope in the left-hand drawer of his desk and locked the desk. This was customary procedure on the part of the plaintiff.

The safe key was about 5½ inches long. Plaintiff had a conference with the other chiefs, including the general manager, following which a directive was issued which provided that the plaintiff was responsible for the safekeeping of the safe key, and that currency was to be deposited in accordance with existing directives at the earliest possible time. The plaintiff decided that the safest place to keep the key would be in his desk, and, after talking with the chief of security requisitioned through that official new locks for his desk and for his office doors. There is testimony to the effect that this was in accordance with the conference of chiefs held on April 28, 1949.

The building was enclosed by a fence and a military guard was maintained at the gate at all hours of the day and night. It was located within a large compound which was also fenced, with a 24-hour guard at its gate.

Between 5:30 p.m. August 10 and 8:05 August 11, 1949, an unknown person or persons broke into plaintiff's accounting office, forced open the drawer of plaintiff's desk, obtained the keys, opened the cashier's cage and the safe, broke open the wooden box, took out the Deutsche Marks, placed the wooden box back in the safe, locked the safe and the cashier's cage and returned the keys to the envelope in plaintiff's desk drawer.

The major portion of the funds was recovered, concealed in a sack of cement in the attic, but the equivalent of $1,677.14 was never recovered. The commanding general of the Bremerhaven Port of Embarkation appointed a board of officers to investigate. During the investigation the board inspected the plaintiff's office and heard the testimony of 12 witnesses. The board found that plaintiff was negligent in habitually keeping the keys to the cashier's cage and to the safe in his desk. It recommended that the plaintiff, the chief accountant, be held pecuniarily responsible. Accordingly, the amount of the loss was withheld from plaintiff's salary.

The facts are set out more in detail in our findings.

Plaintiff sues to recover the amount thus withheld from his salary. The defendant resists recovery on the ground that plaintiff was negligent, and that the contract of employment provided that salary might be withheld in the event of negligence. Plaintiff denies that he was negligent and the issue is thus drawn.

However, at the threshhold we are met with the plea on the part of the defendant that the United States cannot be sued on a contract of employment between the plaintiff as employee and the Army Exchange Service, European Theater, a nonappropriated funds instrumentality, as employer. The contract was signed Employer, Army Exchange Service, European Theater, by George C. Long, Lt. Colonel, SpS, Chief, Personnel Branch.

As set out in AR 210-50, issued on December 13, 1945, and effective during the period here involved, under the title "Basic Plan for Nonappropriated Funds" it is stipulated that certain revenue producing, welfare and sundry activities are necessary adjuncts to the Army and are designed to supplement activities supplied by the Government from appropriated funds and are designed to contribute to the comfort, pleasure, contentment, and mental and physical improvement of military personnel; the funds are to be dispersed solely for the benefit of military personnel; that such funds are not provided by the Congress; that they are termed nonappropriated funds and are under the control of the Secretary of the Army and Secretary of the Air Force. It is also provided in the Army regulations however, that the activities pertaining thereto are Government instrumentalities and, except as otherwise prescribed by competent authority, are entitled to the immunities and privileges of such instrumentalities. It is further provided that the Army Exchange Service has jurisdiction over them and provides staff supervision of all Army Exchanges and consists of officers and enlisted men and civilian personnel, and that as far as practicable Exchanges will be operated by civilian employees, with army officers in executive control. It is further stipulated in the regulations that Exchange contracts are solely the obligation of the Exchange; that they are not Government contracts and the distinction between Exchange contracts and Government contracts will be observed and clearly indicated at all times. It is further provided by the regulations that the funds accumulated will be dispersed solely for the benefit of military personnel.

In the case of Standard Oil Co. of California v. Johnson, Treasurer of California, 316 U.S. 481, 484, 62 S.Ct. 1168, 1170, 86 L.Ed. 1611, the Court uses the following language:

"The commanding officer of an Army Post, subject to the regulations and the commands of his own superior officers, has complete authority to establish and maintain an exchange. He details a post exchange officer to manage its affairs. This officer and the commanding officers of the various company units make up a council which supervises exchange activities. None of these officers receives any compensation other than his regular salary. The object of the exchanges is to provide convenient and reliable sources where soldiers can obtain their ordinary needs at the lowest possible prices. Soldiers, their families, and civilians employed on military posts here and abroad can buy at exchanges. The Government assumes none of the financial obligations of the exchange. But government officers, under government regulations, handle and are responsible for all funds of the exchange which are obtained from the companies or detachments composing its membership. Profits, if any, do not go to individuals. They are used to improve the soldiers' mess, to provide various types of recreation, and in general to add to the pleasure and comfort of the troops." Italics supplied.

Under the plan of operation these supplies are sold to officers, enlisted men and civilians operating the exchange at a figure slightly above cost and the expenses of operation are paid out of the profits from the operation of the exchange.

In a somewhat similar case, Bleuer v. United States, 117 F.Supp. 509, the District Court of the United States for the Eastern District of South Carolina on December 21, 1950, held that the plaintiff had no cause of action against the United States.

In the recent case of Edelstein v. South Post Officers Club, 118 F.Supp. 40, decided April 5, 1951, the District Court of the United States for the Eastern District of Virginia held that the United States has not waived its sovereign immunity as to contract obligations of the club, and that contracts made by the club are not obligations of the United States but solely liabilities of the club.

See also Kenny v. United States, 62 Ct.Cl. 328. In Kyle v. United States, 46 Ct.Cl. 197, 199, the court in dismissing a suit commented on the post fund as follows:

"* * * This sum is systematically expended in the betterment of post conditions, such as dish towels, powder for destroying objectionable insects, the establishment of an amusement room, etc., the whole matter being under the strict supervision of the proper military authorities. It is a commendable

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