# New York Mail & Newspaper Transportation Co. v. United States

> United States Court of Claims · July 31, 1957 · 154 F. Supp. 271

URL: https://www.frixlaw.com/law-library/cases/9625491

## Case

- **Full name:** NEW YORK MAIL AND NEWSPAPER TRANSPORTATION COMPANY v. the UNITED STATES
- **Court:** United States Court of Claims
- **Decided:** July 31, 1957
- **Citations:** 154 F. Supp. 271; 139 Ct. Cl. 751; 1957 U.S. Ct. Cl. LEXIS 119
- **Precedential status:** Published
- **Opinion:** Dissent by Madden
- **Judges:** Littleton, Whitaker, Madden, Laramore, Reed, Jones
- **Cited by:** 26 later opinions in the Frix Law Library

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## Opinion text

MADDEN, Judge
(dissenting).
I agree with what Judge LITTLETON has written in dissent, but, in order to give a somewhat different emphasis to what I regard as the crux of the case, I write this separate opinion.
I would attach little importance to the advertisement which took place in the spring of 1950, except as an historical fact confirming what was already obvious, i. e., that the plaintiff was the only possible potential contractor for a pneumatic tube mail contract in New York. I would pass, then, to the Act of December 27, 1950, under which the contract in suit must stand or fall.
The statute was a general statute, to be applicable anywhere, at any time in the future, for the transmission of mail by pneumatic tubes or other mechanical devices. Except in its section 3, which was particularly pointed to the New York situation, it had no more applicability to the New York situation in 1950 than to a potential situation in Chicago or Los Angeles in 1960.
Section 2 of the Act calls for advertising for bids and provides that no contract shall be let except to the lowest responsible bidder. In the instant case there was no advertising, if we disregard what had taken place months be *299 fore; there was no bidder; and the contract was arrived at by negotiation. If the 1950 statute required advertising, the requirement was not satisfied, and the contract was invalid.
I think the 1950 statute did not require advertising, in the circumstances. The general statute relating to advertising in the letting of Government contracts is R.S. § 3709, as amended, 41 U.S.C. (1946 ed.) 5, 41 U.S.C.A. § 5 . It says:
“Unless otherwise provided in the appropriation concerned or other law, purchases and contracts for supplies or services for the Government may be made or. entered into only after advertising a sufficient time previously for proposals, except (1) when the amount involved in any one case does not exceed $100, (2) when the public exigencies require the immediate delivery of the articles or performance of the service, (3) when only one source of supply is available and the Government purchasing or contracting officer shall so certify, or (4) * * *»
It would be impossible to imagine a situation in which exception (3) of this statute would be more clearly complied with, than the mail tube situation in New York in 1950. The postal officials and the managers of the 1950 legislation in Congress knew to a certainty and so stated in the committee reports, that if pneumatic tube service was to continue in New York, it would be continued by the plaintiff.
In the face of this knowledge, and the further knowledge that the existing contract with the plaintiff would expire four days later, and that therefore the enactment of the legislation was urgent, the court holds that Congress, on December 27, 1950, required the Postmaster General to go through the futile motions and subject the Government to the delay and confusion and expense of advertising for bids.
I think the general statute, section 5, quoted above, relating to advertising in the letting of Government contracts is as applicable to contracts for carrying the mail as it is to other Government contracts, and was as applicable to carrying the mail by means of pneumatic tubes in New York in 1950, as it was to other contracts for carrying mail anywhere, by any method. I find no suggestion anywhere that the reasonable exceptions to the general advertising requirement contained in section 5 would be less reasonable if used by the Post Office Department than they would be if used by the Department of the Interior,
As to the requirement of R.S. § 3709 that, in order to contract without advertising because only one source of supply is available, “the contracting officer shall so certify,” I think that requirement was satisfied because the Postmaster General himself signed the contract. If the contracting officer had been a lesser official, he would have had to certify to the Postmaster General, the chief of his department, the reason for the failure to advertise. The Postmaster General’s certification to himself would have been another useless gesture, comparable to the formality of advertising for nonexistent bidders.
It is apparent from what I have written that I think the plaintiff’s contract was valid and was breached. I would visit upon the United States the normal consequences of breach of contract.
JONES, Chief Judge, took no part in the consideration and decision of this case.
Findings of Fact
The court, having considered the evidence, the report of Commissioner. Marion T. Bennett, and the briefs and argument of counsel, makes findings of fact as follows:
1. Plaintiff, New York Mail and Newspaper Transportation Company, is. a corporation chartered by the State of New York and is a subsidiary of Lamson Corporation of Delaware.
2. From 1932 to 1954 plaintiff was the owner of an integrated system for for succeeding years based upon estimates as follows: (*)
1953 ..................... 183,844.47 107.17% 28,223.92 163.972.31 135,748.39
1954 ..................... 176,818.60 103.07% 27,144.15 163.972.31 136,828.16
1955 ..................... 173.747.10 101.28% 26,672.75 163.972.31 137,299.56
1956 ..................... 178.847.10 104.25% 27,454.55 163.972.31 136,517.76
1957 ..................... 182.866.10 106.60% 28,073.80 163.972.31 135,898.51
1958 ..................... 188.755.10 108.86% 28,668.99 163.972.31 135,303.32
1959 ..................... 192.554.10 112.24% 29,559.13 163.972.31 134,413.18
Totals 1,275,432.57 195,797.29 1,147,806.17 952,008.88
(*) The recoverable variable costs for 1954 are represented by the actual variable costs for 1953, other amounts are estimates which would be recoverable the succeeding year, none of which would exceed the maximum permissible under the contract.
*313 Excess of 1953 Over 1952 Variable Costs
46. In finding 42 it is noted that plaintiff received from defendant under the contract for 1953 the sum of $324,-149.95 for eleven months of that year. The contract allowance for December 1953 is reported in finding 40, other than amortization charges in connection with the electrical conversion which is allowed in full for the unamortized portion thereof in finding 34. The payments and the amount reported herein for 1953 were based in part upon the variable expenses incurred by plaintiff for 1952 and represent the recoupment in full for such expense. Plaintiff's variable expenses for 1953, which would have been recouped in full in 1954 were some $12,-285.16 in excess of its 1952 variable expense. Plaintiff claims this difference of $12,285;16 as a separate item of recovery.
The contract provided that, except for the first year of operations thereunder, the recoupment of variable expenses for any current year would be recovered in payments during the following year. Thus, the actual expense for variables during the last year of operations under the contract would never be recovered. The variable expenses paid during the first year of operation under this contract (1951) were based upon estimated sums which included an allowance of $40,250 representing an estimated sum for the amortization of the power conversion costs. The actual amortization taken by plaintiff in its 1951 variable costs was only $18,494.60. Thereafter the amortization was at the rate of $22,983.41 annually. The calendar year 1953 was the last year of contract operations. There is therefore no basis for allowing recovery of any of plaintiff’s 1953 variable costs. However, plaintiff’s 1953 variable costs actually incurred in that year have been included in the estimates projected over the following years for the purpose of determining plaintiff’s anticipated profits for those years.
New York City Special Franchise Taxes
47. Plaintiff is obligated to pay to the city of New York a tax payment due on April 1, 1954, being the second half of the special franchise tax levied on plaintiff’s pneumatic tube system for the tax year July 1, 1953, to June 30, 1954. The item “Special Franchise Taxes— Manhattan” is one of the items of variable cost under Schedule A of the contract. This tax bill due and payable on April 1, 1954, was such a special franchise tax. Had the contract continued during its term, such tax payment due on April 1, 1954, in the sum of $12,792.-18 would have been included as a variable cost for the year 1954 and plaintiff would have been entitled to be reimbursed therefor under the contract.
48. The State Equalization Board of New York assessed the value for special franchise tax purposes of plaintiff’s pneumatic tube system which is the subject of the contract, for the tax year July 1, 1954, to June 30, 1955, in the sum of $712,000. Plaintiff duly protested the assessment in a proceeding before the Supreme Court of the State of New York, Albany County, New York, on May 18, 1955, requesting that such assessed valuation be reduced from $712,-000 to zero because of the worthlessness of plaintiff’s pneumatic tube system resulting from the termination of the contract. No decision in the case has been announced by the court. The city of New York has levied a special franchise tax based upon the assessed valuation of $712,000 for the tax year July 1, 1954, to June 30, 1955, in the amount of $26,-700, payable one-half (or $13,350) on October 1, 1954, and one-half (or $13,-350) on April 1, 1955. Plaintiff has not paid any part of this tax. If it is determined by the Supreme Court of the State of New York that for the tax year July 1, 1954, to June 30, 1955, plaintiff’s pneumatic tube system had a value for purposes of special franchise tax, plaintiff will be obligated to pay the tax based upon such assessed valuation. Any such *314 tax so payable by plaintiff will be one of the items of variable cost under Schedule A of the contract under the heading “Special Franchise Taxes— Manhattan.” Had the contract continued during its term, any special franchise tax payments due on October 1, 1954, and on April 1, 1955, for the tax year July 1,1954, to June 30,1955, would have been included as items of variable cost for the years 1954 and 1955, respectively, and plaintiff would have been entitled to be reimbursed therefor under the contract.
Removal of Equipment from Government-Owned Stations
49. The contract of December 29, 1950, contained the following agreement:
“Fourth: That the contractor will at his expense remove the tubes, power plants, receiving and dispatching apparatus, equipment and devices from leased Post Office premises, at the expiration of the term, or, except as otherwise herein provided, at the termination of the contract, or at the termination of the lease of any such leased premises where no relocation of the station is involved, if requested to do so by the Postmaster General.”
50. At the time of the cancellation of the contract on December 29, 1953, by defendant, half of the post offices in which plaintiff’s dispatching and receiving equipment, power plants and other property used with the pneumatic tube system were located, were in buildings owned by the defendant and the rest were in buildings owned by others and leased by defendant. The defendant insisted that plaintiff remove its equipment from all postal premises both leased and Government-owned. The defendant advised plaintiff that if it did not take the action suggested the Government would dispose of the equipment and credit the proceeds, if any, against the cost of removal.
51. The plaintiff advised defendant by letter on March 17, 1954, that the defendant had no right to require that plaintiff pay for the cost of removal from Government-owned premises or to dispose of plaintiff’s equipment. Under protest, however, it advised defendant that arrangements would be made to remove the equipment from both Government-owned and leased post office premises and would include the cost of removal from Government-owned premises as a part of its claim against defendant. That claim, here presented, is for $25,-650.
52. Plaintiff sought purchasers and entered into a contract with a salvage company on March 24, 1954, for the purchase of all of plaintiff’s equipment in both Government-owned and Government-leased post office premises for the price of $60,000. The contract also provided that the plaintiff should pay to the salvage company the sum of $25,650 as the cost of removal of equipment from Government-owned premises. This was the best offer made to plaintiff and was reasonable. All of the property was removed by August 1954.
53. No action has been taken on plaintiff’s claim by Congress, by any department of the United States, or in any judicial proceeding, other than appears in these findings. No person other than the plaintiff is the owner or is interested in this claim. No assignment or transfer of this claim or any part thereof or interest in it has been made.
Defendant’s First Counterclaim
54. Defendant contends that the contract of December 29, 1950, was made “pursuant to discussions and negotiations, rather than pursuant to public advertisement as required by law with the result that the public competition in the letting of mail contracts contemplated by law was suppressed and defeated, and said purported contract was executed contrary to law, and is void and of no force and effect.” Defendant *315 claims that money paid by defendant during the period from January 1, 1950, to November 30, 1953, was illegally paid under an invalid contract and was greatly in excess of the fair and reasonable value of the services rendered by plaintiff and that defendant is entitled to recover from plaintiff the total amount so paid less such sum as plaintiff might prove to be the fair and reasonable value of such services.
It is found that the year 1950 is not properly in question under-the counterclaim because it was prior to the effective date of the contract in dispute. The total sum paid to plaintiff by defendant for 1951, 1952 and 1953 is $1,027,753.72. The reasonable value of plaintiff’s services during these three years was not less than the sum paid.
Defendant’s Second Counterclaim
55. Defendant asserts that plaintiff was under obligation to remove its equipment from defendant’s premises and to restore and repair damages caused thereto by installation and removal of such equipment. Defendant pleads that the reasonable cost to defendant to repair the buildings properly is approximately $28,600. There was no provision in the contract of December 29, 1950, relating to the repair or restoration of any premises in which plaintiff had installed its tubes and equipment, and the only provisions concerning the obligation of plaintiff to remove its property from post office premises at the termination of a contract related to removal from leased premises, with no mention of Government-owned premises. Some of the contracts between plaintiff and defendant prior to July 1, 1948, included provisions requiring plaintiff, at the request of the Postmaster General, to remove its property at the termination of the contract and to restore the premises to their condition existing before such alterations as were made for installation.
56. The tubes forming a part of plaintiff’s pneumatic tube system passed through various floors, ceilings, partitions and walls of the post office stations which they connected. Tubes were sometimes suspended from the ceiling by pipe hangers while receiving and dispatching apparatus was secured to the floor. Power units were mounted on concrete foundations imbedded in the basement floors of the post offices or were set into depressions made in the floors for that purpose. Certain steel trap doors, floor plating and concrete foundations, which had no, apparent use .except, in connection with plaintiff’s equipment, were not removed. Holes were not repaired in any way except that some were covered by steel plates. Holes were left in floors, partitions and ceilings and fireproofing in various buildings was damaged in removal of hangers used to support the tubes.
57. The defendant offered proof that the reasonable cost of repairing leased post office premises would be $39,685. It estimates the cost of reasonable repairs to Government-owned buildings at $1,295. Plaintiff denies liability for these repairs under the contract but offered evidence that their total cost, if allowable to defendant, as a matter of law, should not exceed $16,616. All of the foregoing figures include reasonable allowances for profit and overhead. In addition, defendant’s figures include 15 percent for drawings, specifications and supervision which would be required by the defendant but not by a private contractor for this type of job. A reasonable allowance for the repairs in question would be $20,000, if allowable as a matter of law.
58. Because of the nature of the equipment and the manner of its installation, it would have been impossible to remove it without some damage to the premises. None of the damages to the premises resulting from the removal of plaintiff’s equipment has been shown to be the result of any failure on plaintiff’s part to use ordinary care in doing such removal work.
*316 Summary
59. The various items of plaintiff’s claim for damages and the amount, if any, found to be recoverable on each item, are summarized as follows:
Amount Item of claim Recoverable
(a) Unreimbursed cost of power conversion equipment .. $141,564.47
(b) Cost of new set of carriers...................... 27,551.52
(c) Payment for December 1953 expenses............. 27,960.94
(d) Expenses of January, 1954 ...................... 6,241.69
(e) Anticipated net profits for 1954-1960 ............. 0
(f) Excess of 1953 over 1952 variable costs............ 0
(g) New York City special franchise taxes for the second half of the 1953-1954 tax year................. 12,792.18
(h) New York City special franchise taxes for 1954-1955 tax year..................................... 0
(i) Removal of equipment from Government-owned stations ........................................ 0
Total ................................... 216,110.80
Conclusion of Law
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiff is entitled to recover, and it is therefore adjudged and ordered that plaintiff recover of and from the United States two hundred sixteen thousand one hundred ten dollars and eighty cents ($216,110.80).
It is further concluded that the defendant is not entitled to recover on its counterclaims, and the counterclaims are therefore dismissed.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9625491. Public record. Not legal advice.