National School of Aeronautics v. United States, 20-53.

• Decision Date: 05 June 1956
• Docket Number: No. 20-53.,20-53.
• Citation: 142 F. Supp. 933,135 Ct. Cl. 343
• Parties: NATIONAL SCHOOL OF AERONAUTICS, Inc., Operated as the National Trade School, v. The UNITED STATES.
• Court: U.S. Claims Court

142 F. Supp. 933

135 Ct. Cl. 343

NATIONAL SCHOOL OF AERONAUTICS, Inc., Operated as the National Trade School, v. The UNITED STATES.

No. 20-53.

United States Court of Claims.

June 5, 1956.

Paul W. Walter, Cleveland, Ohio, for plaintiff. Loyal V. Buescher and Walter & Haverfield, Cleveland, Ohio, on the brief.

David Orlikoff, Washington, D. C., with whom was Asst. Atty. Gen. George Cochran Doub, for defendant.

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

MADDEN, Judge.

The plaintiff sues to recover an amount, in addition to what it has been paid, for the training which it furnished to veterans during the period March 1, 1950, to February 28, 1951. Under Public Law 16, 78th Congress, 57 Stat. 43, Regulation No. 1(a), pt. 8, 38 U.S.C.A. following section 745, relating to the vocational rehabilitation of disabled veterans, and Public Law 346, 78th Congress, 58 Stat. 284, as amended, 59 Stat. 623, 38 U.S.C.A. § 693 et seq., relating to the education and training of veterans who were not disabled, the Government was to pay the tuition of the veterans in the schools in which they were enrolled. The question for decision in the instant case is whether the rate of tuition which the plaintiff was entitled to be paid during the year in question was the higher rate which had been set in the contract for the preceding year, or the lower rate which was set, over the protest of the plaintiff, in the contract for the year in question. The plaintiff contends that, under the provisions of Public Law 266, enacted August 24, 1949, 63 Stat. 631, 652 et seq., the rate of tuition contracted for in the year preceding the year in question became "frozen" as the legal rate, and hence the purported reduction of that rate by contract for the year in question was ineffective.

The plaintiff conducted a trade school in Kansas City, Mo., which had been established at some date prior to June 22, 1944, had discontinued operations, and resumed them in June 1946. It gave courses in shoe repairing, drafting, electricity, plumbing and automotive repair, for nonveterans, for disabled veterans under Public Law 16 and for nondisabled veterans under Public Law 346. Under Public Law 16, it was necessary for a school to make a contract with the Veterans Administration. The plaintiff made its first such contract on June 17, 1946, and it continued to train disabled veterans under a series of such contracts until February 8, 1952. It also commenced its training of nondisabled veterans under Public Law 346 in June 1946. It had no formal contract with the Veterans Administration for this training until March 1, 1949.

Public Law 346 did not, as did Public Law 16, require that contracts be made with schools for tuition. It provided, in Section 5, that the Veterans Administration should pay the school the customary cost of tuition, not to exceed $500 per year. It was apparently supposed that most of the Public Law 346 students would be in established schools which would have large numbers of students whose tuition was not being paid by the Government, and that if the Government paid the same rate for veterans as other students paid, it would not be in danger of being overcharged.

The Veterans Administration, by September 30, 1947, seems to have come to the conclusion that some schools were establishing unreasonably high tuition rates. Schools whose students were practically all veterans could publish rates within the $500 limitation but still unreasonably high in relation to the cost and value of the training, and if few nonveterans were willing to pay those rates, they could still collect them from the Government as the "customary rates." On September 30, 1947, the Administrator of Veterans Affairs authorized all the regional office managers of the Administration to negotiate contracts at fair and reasonable rates with schools as to which the regional office managers thought that procedure was necessary.

Change No. 4 to Veterans Administration Manual M7-5 was promulgated as a Regulation on May 17, 1948. It required that contracts be negotiated, beginning July 1, 1948, with certain schools operating for profit, including those which came into existence after June 22, 1944, the date of enactment of Public Law 346, and those which had increased their tuition rates in excess of 25 percent. The Kansas City Regional Office of the Veterans Administration concluded that Change No. 4 did not apply to the plaintiff because it had been in existence prior to June 22, 1944.

On February 18, 1949, effective March 1, 1949, Change 9 to Manual M7-5 was promulgated. It extended Change 4 by requiring schools to submit cost data and contract for fair and reasonable rates if they had not been in continuous operation since June 22, 1944. It also made the new requirements applicable to nonprofit schools, which meant that many more schools would be interested in and affected by the regulation. Change 9 applied to the plaintiff since, as we have seen, though it had existed before June 22, 1944, it had discontinued operations and not resumed them until June 1946. The plaintiff was then required to submit cost data, and it entered into a series of annual contracts covering the period March 1, 1949, to February 1952, at which time it ceased to operate.

Many schools refused to submit to the requirements of Change 9, or to enter into contracts, hoping that the courts would invalidate Change 9. There was much confusion. The Veterans Administration sought to have the substance of Change 9 incorporated in a statute. To the provision of the bill which was to be the Independent Offices Appropriation Act, 1950, appropriating funds for the education and training of Public Law 346 veterans, a proviso was added containing in substance the language of Change 9. On the complaint of representatives of the schools that it would be burdensome for them to have to file cost data year after year, a further proviso was added "freezing" the rate of the most recent contract after contracts had been executed for two successive years. The Independent Offices Appropriation Act, 1950, containing the provisions referred to above, was enacted August 24, 1949. It was Public Law 266.

On February 28, 1950, the plaintiff executed a contract with the Veterans Administration covering the education of veterans under Public Law 346 for the succeeding year, the year involved in this suit. It will be remembered that it had executed a contract a year earlier, pursuant to Change 9. The Government says that the March 1, 1950, contract was only the second contract, and that the lower rates embodied in it were the rates that became frozen, under Public Law 266. The plaintiff says that the contract made in 1949 under Change 9 was the second contract, or at least the second contract, since it had been making Public Law 16 contracts for the rehabilitation of disabled veterans since 1946, and also because other earlier writings which it had submitted concerning Public Law 346 veterans were contracts within the meaning of Public Law 266.

We consider first the question of whether the Public Law 16 contracts were contracts which froze the rates embodied in them, within the meaning of Public Law 266. In that Act, which made appropriations for all the independent offices of the Government, a separate part was applicable to the Veterans Administration. That part was divided into eight items, the appropriation for each item being separate from the others, and the funds not being transferable from one item to another. Two items relate to payment for vocational rehabilitation of disabled veterans under Public Law 16. One item with the heading "Readjustment benefits" appropriates money for payment for education and training benefits under Public Law 346. In this item are contained the provisions for the determination of fair and reasonable rates which are the subject of interpretation in this case.

The statute, on its face, would not suggest that the contracts mentioned in it as having the effect of freezing rates, making them ipso facto fair and reasonable, would be contracts other than those relating to the subject matter to which the language in question is a proviso, i. e., the expenditure of money for the education of veterans under Public Law 346. The impetus for the insertion of the proviso came from the Veterans Administration, which sought to cure what seemed to it to be an evil. If Public Law 16 contracts had the effect of freezing rates, the statute would have had little to operate on, since such contracts had been made from the beginning of the operation of Public Law 16, and rates in most schools would have been frozen before the enactment of Public Law 266, and even before the promulgation of Change 9.

Contracts under Public Law 16 were not arrived at in such a way as to safeguard the public funds, which was the intent of Public Law 266. The number of disabled veterans rehabilitated under Public Law 16 was only a relative handful compared with the number schooled under Public Law 346. The veterans Administration could not have afforded to make the careful study of cost data and value of the training for the relatively small saving which would result from keeping the Public Law 16 tuition down to a reasonable figure. Public Law 16 contracts were not, in fact, established by bargaining nor on the basis of cost data. They merely embodied the tuition rates charged to nonveteran students.

The plaintiff claims that certain other writings which passed between it and the Government...