Duhame v. United States, 516.

• Decision Date: 02 March 1954
• Docket Number: No. 516.,516.
• Citation: 127 Ct. Cl. 679,119 F. Supp. 192
• Parties: DUHAME et al. v. UNITED STATES.
• Court: U.S. Claims Court

119 F. Supp. 192

127 Ct. Cl. 679

DUHAME et al. v. UNITED STATES.

No. 516.

United States Court of Claims.

March 2, 1954.

David Reich, Washington, D. C., for plaintiffs. William L. Murphy, Washington, D. C., was on the brief.

Thomas H. McGrail, Washington, D. C., with whom was Asst. Atty. Gen. Warren E. Burger, for defendant.

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

LITTLETON, Judge.

In this suit plaintiffs seek recovery of certain sums alleged to be due them from the Government, under eight construction contracts entered into between the parties during 1941 and 1942. All contracts covered work to be performed on Federal installations in the State of Arizona, and the amounts sought to be recovered are excise or license taxes assessed against plaintiffs by that State in connection with the performance of these contracts. It is the position of the plaintiffs that these taxes should be included as an item of cost under the contracts. Their inclusion as an item of cost was rejected by the War Department and General Accounting Office.

Plaintiffs have set forth their claims as seven separate causes of action,¹ and the case is now before the court on defendant's motion for judgment on the pleadings as to certain counts predicated on two grounds: first, that the first and second causes of action are barred by our six-year statute of limitations, and second, that the first, third, fifth and seventh, fail to state a cause of action upon which relief may be granted.

After the filing of defendant's motion, plaintiffs requested and were granted leave to amend their petition. This amendment corrected certain dates referred to in the original petition. These corrections cured the defect raised by the defendant's plea of the statute of limitations, and the defendant's motion is, therefore, denied in so far as it seeks dismissal of the first and second causes of action on that ground.

This leaves for decision that part of the motion which is directed at the first, third, fifth and seventh counts, on the grounds that they fail to state a claim upon which relief may be granted.

At the time these contracts were executed there was in effect in the State of Arizona a revenue act² which contained the following provision:

Sec. 73-1303:

"From and after the effective date of this act, there is hereby levied and shall be collected by the tax commission for the purpose of raising public money * * * annual privilege taxes measured by the amount or volume of business done by the persons on account of their business activities and in the amounts to be determined by the application of rates against values, gross proceeds of sales, or gross income, as the case may be, in accordance with the following schedule: * * *."

Under this provision of the 1935 law the State Tax Commission of Arizona assessed the taxes in question against plaintiffs' contracts, and during 1946 plaintiffs paid them under protest. In the matter of Duhame v. State Tax Commission of the State of Arizona, 65 Ariz. 268, 179 P.2d 252, 171 A.L.R. 684, plaintiff, E. W. Duhame, carried his protest to the Supreme Court of Arizona and the decision of that court upheld the right of the commission to assess the tax.

All contracts here in question contained the following provision:

"ADJUSTMENT OF CONTRACT PRICE BY REASON OF CHANGE IN FEDERAL TAXES. — Unless otherwise indicated, the prices herein include any Federal tax or charge heretofore imposed which is applicable to the supplies or work covered hereby. If after the date of a written bid, the Federal Government shall impose, remove, or change any duty, sales, use or excise tax or any other tax or charge directly applicable to the supplies or work covered hereby or the materials used in the manufacture thereof or directly upon the importation, production, processing, manufacture, construction or sale of such supplies, work, or materials, which tax or charge must be borne by the Contractor because of a specific contractual obligation or by operation of law, or, in case of a decrease or elimination of a tax, where the Contractor is relieved to that extent, and if sic the case of an increase in an existing tax or the imposition of a new tax the Contractor has paid such tax or charge to the Federal Government, or any person, then the prices named herein will be increased or decreased accordingly and any amount due to the Contractor as a result of such change will be charged to the Government and entered on vouchers (or invoices) as a separate item: Provided, however, that the Government reserves the right to issue to the Contractor in lieu of such payment a tax exemption certificate acceptable to the Federal Government, and Provided further, that nothing contained herein shall be construed as requiring the Government to reimburse the Contractor for any Federal income taxes, income surtaxes or excess profits taxes."

The present dispute evolves around the application of this provision.

Defendant has moved for judgment on the pleadings, comprised of the petition and answer, contending that there exists no dispute as to any material fact, and that on the basis of the contracts, plaintiffs have failed to state a cause of action upon which recovery may be had.

It is the position of the plaintiffs that under this adjustment of price provision, they are entitled to...