Hotpoint Inc. v. United States, 49524.

• Decision Date: 05 January 1954
• Docket Number: No. 49524.,49524.
• Citation: 127 Ct. Cl. 402,117 F. Supp. 572
• Parties: HOTPOINT INC. v. UNITED STATES.
• Court: U.S. Claims Court

117 F. Supp. 572

127 Ct. Cl. 402

HOTPOINT INC. v. UNITED STATES.

No. 49524.

United States Court of Claims.

January 5, 1954.

Ednyfed H. Williams, Chicago, Ill., Williams & Leonard, Chicago, Ill., on the brief, for plaintiff.

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

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

LITTLETON, Judge.

The plaintiff brought suit in this court pursuant to Section 13(b) of the Contract Settlement Act of 1944.¹ The plaintiff is suing for $18,934.88, representing charitable contributions made by it during the years 1942 to 1945 on the ground that the contributions are reimbursable costs under its cost-plus-fixed-fee contract with the War Department (now the Department of the Army.) The plaintiff's contract, entered into on March 18, 1942, did not expressly provide for reimbursement of charitable contributions. The contract was for the installation and operation of an ordnance facility at Cicero, Illinois, to produce caliber .50 armor piercing cores and caliber .50 tubular dowel pins. This contract was terminated on July 31, 1945. The contributions of $18,934.88, here claimed as a cost of performance, were included in plaintiff's termination claim and represented the portion of plaintiff's total contribution to the American Red Cross and the National War Fund, Inc., which plaintiff allocated to this contract. The allocation was made on the basis of the number of employees working on this contract. The plaintiff's request for reimbursement for these contributions as an item of cost of performing the contract was denied by the contracting officer and his decision was affirmed by the Appeal Board, Office of Contract Settlement.

The issue presented in this case is whether these contributions were a reimbursable item of cost within the terms of the contract.² There is no dispute as to the facts and both parties have moved for summary judgment.

The pertinent portions of the contract are as follows:

"TITLE II

"OPERATION OF PLANT

"Article II-A — Statement of Work.

"6. In carrying out the work under this Title II the Contractor is authorized to do and shall do all things necessary or convenient in the operating and closing down of the Project, or any part thereof * * *.

"TITLE III

"COST OF THE WORK AND PAYMENT THEREFOR

"Article III-A — Reimbursement for Contractor's Expenditures.

"1. The Contractor shall be reimbursed in the manner hereinafter described for such of its actual expenditures in the performance of the work under this contract, as may be approved or ratified by the Contracting Officer, and as are included in but not limited to the following items; * * *.

"1. Extra compensation to employees, discontinuance wages and a proper proportionate share of costs of maintenance of welfare, pension and other employee relations plans maintained by the Contractor; Provided, that the Government shall be chargeable therefor only insofar as the same are consistent with the general employee relations policies existing throughout the Contractor's organization, or are incurred pursuant to agreement made as a result of collective bargaining with the representatives of employees, or are expressly authorized in writing by the Contracting Officer.³

"General.

"5. No salaries of the Contractor's corporate executive officers, no part of the expense incurred in conducting the Contractor's main office or regularly established branch offices, and no overhead expenses of any kind, except as otherwise specifically provided herein, shall be included in the cost of the work under this contract; nor shall any interest on capital employed or on borrowed money be included in the cost of the work."

The plaintiff contends that it is entitled to reimbursement under either Article II-A, 6, or under Article III-A, 1, and that Article III-A, 5, is not applicable. The defendant contends that Article III-A, 5, precludes reimbursement.

The plaintiff argues, in support of its first contention, that these contributions were "necessary or convenient" to the operation of the project because they bore a direct relation to the welfare and efficiency of the employees. In our opinion this argument does not aid plaintiff because Article II-A, 6, only pertains to the statement of work to be done. We must look to Article III, the reimbursement section of the contract, to determine whether these contributions are a reimbursable item of cost.

The plaintiff contends that the clause in Article III-A, 5, which states: "* * and no overhead of any kind, except as otherwise specifically provided herein, shall be included in the cost of the work under this contract * * *" does not bar the claimed reimbursement because these contributions were not overhead but were indirect manufacturing expenses. The defendant contends that contributions, such as are here involved, were general administrative expenses and are therefore properly to be regarded as overhead. The defendant further argues that indirect manufacturing expenses, as that term is used by plaintiff, are included within overhead.

It is an elementary canon in interpreting a contract that the court should, where the language of the contract is unambiguous, ascertain and effectuate the intention of the parties as expressed by the language in the contract. In so doing the court should give the terms their usual and ordinary meaning even though the intention of one of the parties may have been different from that expressed. Hongkong & Whampoa Dock Co., Ltd. v. United States, 50 Ct.Cl. 213, and the cases cited therein.

The plaintiff introduced in evidence a copy of "Uniform Accounting Manual for the Electrical Manufacturing Industry," which states that charitable contributions are indirect manufacturing expenses. This manual also states that items (which are clearly accepted as overhead) such as depreciation, insurance, heat, light, and power are indirect manufacturing expenses. The manual also defines shop overhead as including indirect manufacturing expenses incurred in the operation, maintenance and administration of manufacturing activities. It therefore appears that the manual makes no distinction between indirect manufacturing expenses and manufacturing overhead.

We consider the definition of overhead as given by the court in the case of Lytle, Campbell & Co. v. Somers, Fitler & Todd Co., 276 Pa. 409, 120 A. 409, 410, 27...