Appendix — Tracy v. Rutcosky

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Text

48-392

=~ Supreme Court, U. &

FILED

SEP 26 1978

RODAK, JR., CLERK

IN THE

SUPREME COURT

OF THE

UNITED STATES

October Term, 1978

DR. HAROLD TRACY, et ux.; BIG BEND COMMUNITY

COLLEGE, et al.,

Petitioners,

ROGER R. RUTCOSKY and ROBERTA RUTCOSKY, hus-

band and wife,

Respondents.

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI

TO THE

WASHINGTON STATE SUPREME COURT

SLADE GORTON,

Attorney General

EDWARD B. MACKIE,

Deputy Attorney General

D, ROGER REED

JOHN P, GIESA,

Special Assistant

Attorneys General

Temple of Justice

Olympia, Washington 98504

(206) 753-6207

IN THE

SUPREME COURT

OF THE

UNITED STATES

October Term, 1978

DR. HAROLD TRACY, et ux.; BIG BEND COMMUNITY

COLLEGE, et al.,

Petitioners,

Vv .

ROGER R. RUTCOSKY and ROBERTA RUTCOSKY, hus-

band and wife,

Respondents.

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI

TO THE

WASHINGTON STATE SUPREME COURT

SLADE GORTON,

Attorney General

EDWARD B. MACKIE,

Deputy Attorney General

D, ROGER REED

JOHN P. GIESA,

Special Assistant

Attorneys General

Temple of Justice

Olympia, Washington 98504

(206) 753-6207

APPENDIX INDEX

STATE SUPREME COURT JUDGMENT AND Page

ORDER DENYING RECONSIDERATION .....+++2++-e+.tl

SUPERIOR COURT JUDGMENT AND

MEMORANDUM OP INION . . . * * * . * * * . * . * * * z z

SUPERIOR COURT FINDINGS OF FACT AND

CONCLUSIONS OF LAW . 2 es ew we we wh wo wo wo ew eh tl tlw ew 26

ARMY - B.B.C.C. PREP CONTRACT . ... ++ +o © « « » 62

GAO and V.A. COMMUNICATIONS . .. 1. 6 6 © © © oe wo o 2

Text GF i0 USC 2303. 2. 2 ss ec se eo eo wove vo eee o 6 9h

STATE SUPREME COURT ORDER DENYING

PETITION FOR RECONSIDERATION ......+ + + + + + 96

ie de ee Ca eit te eee i Ghee Ee CA te

8 et oe at tail

]

; IN THE

SUPREME COURT

OF THE

UNITED STATES

October Term, 1978

DR. HAROLD TRACY, et ux.; BIG BEND COMMUNITY

COLLEGE, et al.,

PRRs.

Petitioners,

j ROGER R. RUTCOSKY and ROBERT A RUTCOSKY, hus-

band and wife,

Respondents.

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI

TO THE

WASHINGTON STATE SUPREME COURT

(No. 44716. En Banc. February 2, 1978.)

ROGER R. RUTCOSKY, ET AL, RESPONDENTS, v. HAROLD L.

TRACY, ET AL, APPELLANTS.

BRACHTENBACH J. -- Plaintiffs were awarded

substantial damages against Big Bend Community

College (college). A review of the facts is a

necessary predicate to an adequate discussion of the

legal issues. In summary, plaintiff Roger R.

Rutcosky developed a program proposal which in about

4 years generated $10 million in federal funds for

the defendant college. The college would deny

plaintiff any compensation for his efforts; the

court, finding an express contract, upon conflicting

evidence as to the basis upon which plaintiff

developed his proposal, awarded plaintiff a percent-

age of the funds received by the college. We affirm

the judgment except for the award of prejudgment

interest which we reverse.

Plaintiff was an instructor at the college for

the 1970-71 year as a replacement for an instructor

on sabbatical, therefore he did not expect a contract

for the next year. Rather, he enrolled for graduate

work at Washington State University to secure his

doctorate. In July 1971, at a time when plaintiff

was not a college employee, he asked the college

president about the possible availabilities of

research funds to develop a program to attract more

local students to the college. The college presi-

dent told plaintiff that no funds were available for

such purposes, but showed plaintiff a letter from the

United States Army soliciting proposals for develop-

_or

ment and operation of a predischarge educational

program to assist servicemen to earn a high school

diploma. (The program is referred to as PREP.) The

proposal was for an Army division in Germany with

potential enrollment of thousands of soldiers.

At the time of the meeting between plaintiff

and the college president, no college employee was

preparing a response to the PREP solicitation; in

fact, the college probably would not have responded

except for plaintiff's work. At this initial

meeting no commitment was made by either party.

Plaintiff studied this proposal, did some

preliminary research and then discussed the matter

with the college president. There is conflict as to

this key and controlling conversation. Only the

plaintiff and the college president were present at

the meeting. Both plaintiff and the president tes-

tified that plaintiff asked for, and the president

promised, that plaintiff would be the dean of the

PREP program. That promise was fulfilled. The

critical point in which plaintiff and the president

disagree is additional compensation claimed by

plaintiff. Plaintiff testified that he asked for 30

percent of the revenue from the program and that the

president said that if the program were adopted the

plaintiff would be taken care of. The president

does not recall this conversation or alternatively

denies any agreement regarding compensation.

Plaintiff, after additional research on his own

time, prepared an 87-page proposal to develop and

administer the PREP program. In September 1971, the

college submitted plaintiff's unrevised proposal to

the Army. On October 22, 1971, Plaintiff filed a

federal copyright on his proposal document. On

October 28, the Army selected the college to imple-

ment a PREP program as outlined in plaintiff's

proposal.

Within a few weeks, plaintiff assembled a staff,

went to Germany and started the program. For reasons

which are not involved in this suit, plaintiff later

was lawfully discharged.

The PREP program has been successful. The col-

lege has been selected to provide PREP programs to

several other branches of the armed services. In 4

years the college has received approximately $10

million from the program. The college has operated

the program at a profit so that it has had PREP-

generated funds available for other college spending.

The trial court awarded plaintiff 5 percent of

the PREP revenues for the first 5 years of the pro-

gram and 2 1/2 percent for the next 5 years.

(1) The college attacks a number of the

findings and conclusions. We need not extend this

opinion with a discussion of the specifics. Two

points suffice. First, based upon conflicting

evidence, the court accepted the plaintiff's version

of the existence of a contract. There is substan-

tial evidence to support plaintiff's contention;

therefore the trial court's finding is binding upon

us. Second, was the failure of the parties to agree

upon the exact amount of compensation fatal to

plaintiff's recovery? Even by plaintiff's testimony

the college president did not objectively manifest

agreement with or accession to plaintiff's request

for 30 percent of the revenues. The trial court

found that there was an agreement and understanding

between plaintiff and the college that plaintiff

would receive a percentage of the generated revenues

if his proposal was accepted by the Army. There is

substantial evidence to support that finding.

(2) The general rule is that failure to agree

upon the precise amount of compensation does not

defeat the existence of a contract. In other words,

once the fact of compensation is established, fail-

ure to agree upon the precise degree of compensation

does not vitiate the performing party's right to

reasonable compensation. Jones v. Brisbin, 41 Wn.2d

167, 247 P.2d 891 (1952); 1 S. Williston, A

Treatise on Law of Contracts § 41, at 129 (3d ed.

1957). Consequently, a contract was formed although

the exact amount of compensation was unspecified.

Having disposed of the college's contention

that plaintiff is entitled to nothing, the question

is the proper amount of compensation.

Once the agreement as to the fact of compensa-

tion was established, the trial court was entitled to

invoke its equitable powers in determining a reason-

able amount of compensation. It did so in 28 pages

of carefully drawn findings of fact and conclusions

of law.

The court had before it the fact that the pro-

gram had expanded from one Army division into

multiple Army installations, Air Force units, even

to Navy ship programs. Yet the court recognized the

diminishing influence of plaintiff since he had been

lawfully discharged. Therefore, the court fashioned

an equitable remedy of 5 percent of gross revenues

for 5 years and 2 1/2 percent for an additional 5

years. Plaintiff's testimony was that he originally

asked for 30 percent of the gross.

We will not substitute our judgment for that of

the trial court, absent abuse of discretion. We

find no such abuse, but rather a careful, thoughtful

evaluation of the evidence and theories by a

ee ee

competent trial judge. We affirm the award.

Next the college claims that the contract, if

found to exist, is ultra vires. We do not reach the

merits of this issue since it is an affirmative

defense to be pleaded as required by CR 8(c). It was

not so pleaded.

At best, ultra vires was raised for the first

time on a motion for reconsideration. Even at that

stage it was framed as a defense of illegality. The

defense came too late; in any event, there was

substantial evidence of knowledge and ratification

by the Board of Trustees of the college.

(3) Third, does the oral contract violate the

statute of frauds? No. Full performance by one

party removed a contract from that statute. Becker

v. Lagerquist Bros., iInc., 55 Wn.2d 425, 434, 348

P.2a 423 (1960). Plaintiff prepared the successful

proposal and served as dean of the program until

lawfully discharged. He fully performed and the

statute is not applicable.

Fourth, the college contends that plaintiff's

agreement is illegal as violative of 10 u.s.c. §

2306(b).1 Its argument fails. 10 U.s.c. § 2306

references § 2304. That statute applies to procure-

ment by the armed services. Here the contract

specifically excluded any financial liability upon

the Army. Rather, all compensation came from indi-

Vidual soldiers assigning certain Veterans Adminia-

tration benefits directly to the college. The

statute is not applicable to this agreement.

(4) Fifth, the college argues that plaintiff

forfeited any common-law rights to his proposal by

obtaining a statutory copyright. It cites many

cases but they all involve competition between

common-law literary rights and statutory copyright

remedies. No authority is cited for the proposition

that filing a statutory copyright claim extinguishes

a prior contractual agreement relating to the

copyrighted material. We Suspect that no such

authority exists. It is recognized that a remedy

for a breach of contract exists apart from any

statutory remedies under the copyright statute.

Benelli v. Hopkins, 197 Misc. 877, 95 N.Y.S.2d 668

(1959).

l"Each contract negotiated under

sect

Z this title shall contain a warranty, Sohiiidhed

contractor has employed or retained no person or

selling agency to solicit or obtain the contract

meso: oa understanding or agreement for a commission

ee te igh or contingent fee, except a ;

pee fl emp oyee or established commercial or

Me Hg g agency maintained by him to obtain business.

Piper ner breaks such a warranty the United

Me plone. | ig the contract without liability or

pn sa oe icm ae percentage, brokerage, or

tion.” 10 U.S.C. 8 2306(b). ot ace,

Finally, the college contends that the court

erred in ordering it to "freeze" sufficient PREP

funds to pay the ultimate judgment. Relyinj upon

Centralia College Educ. Ass'n v. Board of Trustees,

82 Wn.2d 128, 508 P.2a 1357 (1973), the college

argues that it is a state agency which can appeal,

under RCW 4.92.030 and .080, without posting a super-

sedeas bond. We hold that the order is not the

equivalent of requiring a supersedeas bond within

the meaning of the statute. This is a unique case

and ovr conclusion is buttressed by the fact that

the legislature has mandated that the costs of PREP

programs shall be borne by non-state treasury sources.

RCW 28B.50.094. The theory behind the no supersedeas

bond requirement for appeal by state agencies is that

the state treasury is an adequate guaranty to the

prevailing party. Here the plaintiff is arguably

limited to PREP funds, although that specific issue

is not before us. Equitable considerations demand

that defendant make those funds available to satisfy

his judgment.

(5) The trial court did commit error in award-

ing prejudgment interest. There was no agreement on

the amount of compensation; therefore, plaintiff's

claim was unliquidated until the court established

his amount of recovery. Prejudgment interest is

10 |

recoverable only when the claim is liquidated. Prier

Vv, Refrigeration Eng'r Co., 74 Wn.2d 25, 442 P.2d

621 (1968).

We find appellants' other assignments of error

to be without merit.

Plaintiff cross-appeals urging error in the

reduction of royalties from 5 percent to 2 1/2

percent for the second 5 years of the award. No :

authority is cited but, in any event, no error is

present. The court fashioned an equitable remedy

within its reasoned judgment and discretion. We

will not substitute our opinion.

Judgment is affirmed, except as to the award

of prejudgment interest, which is reversed.

WRIGHT, C.J., and ROSELLINI, HAMILTON, STAFFORD,

UTTER, HOROWITZ, DOLLIVER, and HICKS, JJ., concur.

APPENDIX B

SUPERIOR COURT,STATE OF WASHINGTON,COUNTY OF SPOKANE

ROGER R, RUTCOSKY, et ux.,

Plaintiffs, NO. 219304

JUDGMENT

DR. HAROLD L. TRACY, et

ux., et al.,

)

vs. )

)

Defendants. )

THIS MATTER having come on for hearing this day

before the above-entitled Court, notice having been

given to all parties, the Court having assigned

Findings of Fact and Conclusions of Law in this

matter, now, therefore, it is

ORDERED, ADJUDGED AND DECREED that the

Plaintiffs shall have judgment against the Defendant,

BIG BEND COMMUNITY COLLEGE, as follows:

1. From all revenue whatsoever derived from the

PREP Program from its inception, and/or the State

Treasury, an overriding royalty as damages in a sum

of five percent (5%) of said gross revenue for a

period of five (5) years from the date of inception

of each such program on a separate company-by-company

basis (or other similar-size military unit) for the

G.I.s who were or are enrolled in PREP.

2. From all revenues whatsoever derived from

the PREP Program, and/or the State Treasury, at the

rate of two and one-half percent (2-1/2%) for an

additional five (5) years thereafter.

3. Payment of the Judgment hereunder shall be

measured from the date first revenues or monies were

or are received by BIG BEND COMMUNITY COLLEGE for

G.I.s enrolled in and taking PREP courses and instruc-

tion on a company-by-company basis (or other similar-

size military unit).

4. Said Judgment shall run against BIG BEND

COMMUNITY COLLEGE, and its successor, assigns, trans-

ferrees, etc., as well as against any person(s) or

entity(ies) who use or implement, directly or

indirectly, in any form or manner whatsoever, the

intellectuaf’ property and work product of ROGER R,.

RUTCOSKY, as contained in the PREP Proposal, to edu-

ebee military personnel.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED

that BIG BEND COMMUNITY COLLEGE shall have ninety

(90) days from the date of this Judgment to pay

damages accumulated and owing to the Plaintiffs

herein, with interest thereon, at six percent (6%)

per annum; and that further, BIG BEND COMMUNITY

COLLEGE shall have sixty (60) days after the render-

ing of each fiscal year report to pay to ROGER R.

RUTCOSKY, any monies owing to him as indicated pur-

suant to this Judgment. Any such monies as damages

not paid within said sixty (60) days will bear

‘a Sink at

interest at the rate of eight percent (8%) per annum.

That this Judgment will bear the rate of eight

percent (8%) per annum on all unpaid monies as dam-

ages until paid.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that

Plaintiffs shall be awarded their costs in the sum of

Eighty-Five and 15/100 Dollars ($85.15), in this

matter.

DONE IN OPEN COURT this 3rd day of January, 1976.

JUDGE

IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON

IN AND FOR THE COUNTY OF SPOKANE

ROGER R. RUTCOSKY, et ux.,

COURT'S MEMORANDUM

OPINION

No. 219304

Plaintiffs,

vs.

DR. HAROLD L. TRACY, et

ux., et al.,

Defendants.

Gentlemen: The Court has spent a great deal of

time in considering the disposition of this case. I

can assure both counsel that I have read several

times all of the memoranda submitted by both parties,

have reviewed the testimony presented and also I have

looked at the exhibits that were admitted. At this

14.

juncture, I would like to say that both counsel have

done an excellent job in presentment of the case,

both in the manner in which the trial was conducted,

the handling of the witnesses, and most particularly,

in the assistance given to the Court in the very

comprehensive and pertinent memorandums submitted.

In order to avoid excess length of this opinion, I

will hereafter refer to Big Bend Community College

as BBCC and Roger R. Rutcosky as RRR and the Predis-

charge Education Program as PREP.

The. plaintiff, RRR, is a man with an interest-

ing i ahaa He became involved in the educational

field after many years of diverse labors resuming his

education in 1966 after he hurt his back while working

as a truck driver. He obviously did well in school,

graduating with honors and in a shorter than normal

period of time. He came to BBCC at the request of a

Mr. Ledeboer for one year period to replace an

English instructor who was on sabbatical leave for a

year. He commenced work in September, 1970, and the

original contract period ended June 12, 1971. It

appears that RRR met Doctor Wallenstien, the

President of BBCC, during this period once or twice,

but there was never any conversation up until after

the end of the original contract period about PREP.

It further appears that RRR taught during the summer

session of 1971 from June 14 to July 23 at BBCC.

This summer employment had nothing to do with the

PREP program. RRR enrolled at W.S.U. in June of 1971

in order to get his Master's Degree in Literature.

It further appears that his plans were to visit his

parents in Wisconsin after he finished teaching the

summer session.

The first direct movement towards the PREP

program occurred on or about July 26, 1971, at which

time RRR went to Doctor Wallenstien's office to see

if there was any chance to get state funds for an

innovative teaching idea that he had. This was not

a prearranged meeting, and was merely an idea that

he had been contemplating. At this particular time,

Doctor Wallenstien was in receipt of an Army solici-

tation letter asking for submission of PREP proposals.

This letter was sent to various other institutions of

higher learning throughout the country. Doctor

Wallenstien showed the solicitation letter to RRR,

and there was discussion about the application of

RRR's ideas to the letter. RRR did certain work

after this initial conversation in order to research

the particular law that was applicable to this

program and later the same day returned to see Doctor

Wallenstien, at which time a further discussion was

entered into. Apparently, dollar amounts were

discussed at this time, and it was contemplated that

if the program were successful, large amounts of

money would be available to BBCC. The exact con-

tents of this conversation are somewhat in dispute.

RRR recalls the conversation to be directed toward

his wants and desires, at which time he informed

Doctor Wallenstien that he wanted a deanship in the

program and a percentage of the profits if the pro-

gram were successful. RRR recalls Doctor Wallenstien

saying something to the effect, "Don't worry. We

will take care of it or I will take care of you."

Doctor Wallenstien's recollection of that conversa-

tion is somewhat different. Doctor Wallenstien

apparently recalls discussion regarding a position in

the program if accepted but does not recall any

conversation about a percentage of the profits.

RRR undertook work on the proposal at this time.

This work basically was done in Wisconsin at his

parents' home. The work commenced about August 5,

1971, and RRR returned to Washington on or about

August 23, 1971, in order to get the history of BBCC,

to ascertain the requirements for a high school

education, which was one of the prime objectives of

the PREP program, that is, the ability to furnish a

high school diploma to the soldier/student and to

put the proposal in final form. It appears that the

ee ee a

Pre

Doe DAGRT gh ad cacti ae Gxtkbeny

final proposal was delivered to Doctor Wallenstien

about the first of September, 1971. RRR went to

work at BBCC as a counselor in the Special Services

Program about September 8, 1971, but this position

had nothering (sic) directly to do with PREP. The

proposal was then put into final form and forwarded

to the appropriate military authorities over the

signature of RRR. RRR recalls having some conversa~

tions at this time with Doctor Wallenstien in which

he indicates he was relying on the agreement with him.

It appears that the school and the parties

learned that the proposal had been accepted by the

Army about October 28, 1971. RRR recalls a conversa~

tion with Doctor Wallenstien about the same Gate in

which the doctor indicated that "we" will be rich and

famous. Doctor Wallenstien also indicated that he

was to pick the staff that was to go to Europe. RRR

indicates once again he told Doctor Wallenstien that

he wanted the deanship and a percentage of the money,

at which time the doctor indicated, "Don't worry.

There will be plenty of money for everybody." Doctor

Wallenstien, in his testimony, does not recall this

conversation. RRR was given a contract with the

college for Director of Instruction and left for

Europe on December 2, 1971. RRR recalls a meeting in

February of 1972 in Germany, at which time RRR again

indicated he wanted a percentage of the profits and

that he would take 5% off the top. Doctor Wallenstien

does not recall the conversation in February of 1972

and indicated he would have to take it up with his

attorneys when he got back to the States. Apparently

this was done, and at this time, Exhibit No. 42, the

letter to RRR, March 9, 1972, was sent. RRR sent

several messages to interested people regarding his

concern over his direct participation in the financial

aspect of the program, and this led to his eventual

discharge on June 22, 1972. In connection with the

PREP proposal, it should be noted that RRR had men-

tioned copyright in connection with the proposal

several times during the fall of 1971 and did, in

fact, apply for and receive a copyright on October 22,

1971.

The position of the defendants indicate, amon:

other things, that some of the ideas set forth ‘by RRR

in his proposal were not really new or unique ideas

and that some of the teaching methods and prceposals

of RRR had been used at BBCC previously and in one

of the high schools that was contacted by RRR. Also,

the Court received testimony from Vern Hagen and Mr.

Glaese; both of these parties were directly involved

in the program in Germany. The testimony from these

witnesses would indicate that the PREP proposal as

authored by RRR was not used in many specific area

(sic); for example, implementation of the LAPS and

LRC phases of the program were not implemented or

were at least not implemented to the degree indicated

in the original proposal. It appears that most of

the teaching that was done, at least during the time

periods when the witnesses were present, was under-

taken in the more traditional, formalized classroom

settings.

There is no question and it appears to be con-

ceded by all parties that the program has been highly

successful. The program initially was undertaken

through the Eighth Army in Europe but has been expan-

ded and is now being used by the Air Force and the

Navy. It appears to the Court that involvement of

these branches of the service was through the use

of the proposal authored by RRR. The large sums of

monies generated by the program are reflected in the

documents prepared by Mr. Fall of the State Auditor's

office.

The plaintiff advances several theories in

support of his argument that he should receive

compensation from BBCC in some form for the PREP

proposal. Plaintiff indicates that the Court would

be justified in entering judgment for the plaintiff

under any one of the theories advanced, namely,

express contract, implied-in-fact contract, implied-

in-law contract or promissory estoppel. The defendant

points out to the Court that in the law of contracts,

the courts cannot make new contracts for the parties

and that the Court should not imply in law terms of

a contract because of an alleged unjust enrichment on

the part of a party when the terms of the contract

are definite in themselves. In addition, the defen-

dants contend that the affirmative defenses of

Statute of Frauds, laches, res judicata and estoppel

should apply to this particular case. Rather than

review all of these contentions, theories and affir-

mative defenses in detail in this memorandum, suffice

it to say that I have reviewed all of them very care-

fully in arriving at my decision in this particular

case,

Both sides and rightfully so have made use of

the “but for" theory. In other words, BBCC would

never have entered into the program with the various

services but for the proposal authored by RRR.

Conversely, the defendants logically argue but for

the facilities, the history and the ability of BBCC

to meet the institutional requirements of the

services, the contract would not have been awarded.

Both of these arguments make good sense and are diffi-

cult to rebut either way. There appears to be little

question in the Court's mind that the proposal as

authored was an original work product by RRR.

Certainly some of the ideas and concepts used had

been thought of, used and discussed before. There

is very little in the whole domain of human knowledge

that is truly unique or original. Perhaps the thought

of Justice Story writing in the case of Emerson v.

Davies, 8 Fed. Cas. 615 (1845), wherein he said, "In

truth, in literature, in science and in art, there

are and can be few, if any, things which, in an

abstract sense, are strictly new and original

throughout." The decision goes on in much greater

length, but I will not quote it in full here, but I

think these few words convey a thought that has been

frequently referred to in cases of this type. It

appears to the Court that without the original efforts

of RRR, the contract, which has been of such benefi-

cial interest to BBCC, would never have been awarded.

It is the Court's opinion that RRR is entitled to

compensation beyond that which he has received to

this particular point in time.

The Court feels it could adopt more than one

theory to support a judgment for the plaintiff.

There obviously is a conflict in the testimony of the

parties as to the original conversations between the

parties, but if the Court were to adopt the conversa-

tions referred to by RRR, it is the Court's opinion

that I could, in fact, find an express contract was

entered into by the parties requiring a deanship and

a percentage of the profits to be paid to RRR. I

am, Of course, cognizant of the fact that the defen-

dants contend also that there was an express con-

tract that called only for work in the program and no

percentage or other method of compensation to RRR.

Secondly, the Court feels that the facts would

Support an implied-in-fact contract. It is incon-

ceivable. to me, considering the possibility and the

potential involved in this particular case, that RRR

would enter into this agreement only on the basis of

a promise of a position in the program. I feel that

the facts would indicate that there is justification

for finding that there was an implied-in-fact contract

not only for a position but for a percentage of the

profits.

However, the Court feels that the theory ean

best supports the plaintiff's position is an implied-

in-law contract upon the fundamental principle ae

one should not be unjustly enriched, quantum meruit,

at the expense of another. The efforts of RRR, his

compilation of the ideas and concepts (original or

not) was the catalyst that got this program off the

ground. The tremendous benefit to BBCC, both

directly and indirectly, in comparison to the status

of the school before the proposal is overwhelming.

The question that remains before the Court at this

time is how compensation should be arrived at.

The Court is very cognizant of the defendant's

position that any compensation due RRR was provided

for in an express agreement to employ RRR, and that

obligation was lawfully terminated and the termination

was confirmed in a subsequent Superior Court action

in Spokane County. In addition, the Court is aware

of the $2,000 stipend to be paid as evidenced by

exhibits in the file. I have read those exhibits

and am aware of the language contained in the exhibits.

It is, however, the Court's interpretation of the

testimony that all individuals that were going to

Europe were to be paid the $2,000. It was Doctor

Wallenstien's testimony that the group explained to

him that they were going in a pioneering effort, and

they felt that each individual was to receive $2,000.

The Court was not given the benefit of any additional

testimony from any of the other individuals involved

in this project as to this specific item.

The program continues to operate to the benefit

of BBCC. Indications are that the program will

continue to so operate for many years in the future

since all of the service branches involved seem to be

pleased with the operation. There is, of course, the

possibility that Congress could cut off the funding

for this particular program and then, of course, it

would immediately cease. It is this Court's opinion,

as indicated, that the product produced by RRR falls

into the category of an idea that was manifested in

the finished work product. It appears that the

courts in this area generally protect what might best

be called common law copyright. In this connection,

some type of a royalty seems to be the most equitable

method of compensation if there has been an infringe-

ment or appropriation of the work product or idea.

In this regard, the Court is cognizant of the fact

that protection under a copyright runs for a limited

period of time. I am not implying that we are bound

by copyright law in this particular case, however.

It does appear to this Court that the value of the

services rendered by Mr. Rutcosky would diminish < 4

be diluted with the passage of time. It nepieae to

me that this has already happened to some degree, and

with Mr. Rutcosky not being actively involved in the

program, it appears to me there is a distinct possi-

bility that this may continue to happen in the future.

It appears to the Court, based upon all of the cir-

cumstances and factors presented, that RRR is

entitled to a royalty based upon the gross revenues

received from the PREP proposal by BBCC. It is the

Court's opinion that this royalty should be 5% of

the gross revenues for a period of five years from

the date of the inception of the program and that

RRR should continue to receive royalty at the rate

of 2.5% for an additional five years. The only

figures that have been furnished to the Court are

those contained in the report of Mr. Fall, and these

are the figures the Court has in mind in arriving at

this decision. There has been some time lapse and

BBCC should have 90 days from the date of a judgment

to pay royalties accumulated to this date with inter-

est thereon at 6% per annum. BBCC should have 60

days after the rendering of each annual report to

pay to RRR any monies owing to him; any monies not

paid within the 60-day period will bear interest at

8% per annum. It is the Court's opinion that this

judgment should run against BBCC and not against the

individuals involved. It is the Court's finding that

all of the officers and employees of BBCC were acting

in their representative capacity, that their acts

were done inthe furtherance of the business of BBCC

and that the college is bound by the acts of the

various individuals. Appropriate documents may be

prepared and presented for the Court's signature.

DATED THIS 3lst day of October, 1975.

APPENDIX C

IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON

IN AND FOR THE COUNTY CF SPOKANE

ROGER R. RUTCOSKY, et ux.,

Plaintiffs, No. 219304

vs. FINDINGS OF FACT &

)

) CONCLUSIONS OF

DR. HAROLD L. TRACY, et ux., ) set

ot al, )

)

Defendants.

THIS MATTER, having come on for hearing before

the above-entitled Court for trial, the Plaintiffs

having indicated that they were ready for trial and

being represented by their attorneys, MARK E. VOVOS

and CARL MAXEY; the Defendants having indicated

they were ready for trial, and being represented by

the Attorney General, by and through JAMES KAISER;

and the Court having heard the evidence and the

testimony introduced by all parties, and considered

the files and records in this matter, the appro-

priate Memorandums of Law and Motions and every

other matter and thing pertinent to this cause as

Submitted by the parties, including the exhibits on

file therein, now, therefore, the Court makes the

following:

FINDINGS OF FACT

That this case was brought before this Court on

a Stipulated Change of Venue and the parties were

properly before the Court.

That ROGER R. RUTCOSKY was a resident of Grant

County Washington; and the Defendants, officers and

trustees of BIG BEND COMMUNITY COLLEGE, also reside

and act for and on behalf of BIG BEND COMMUNITY

COLLEGE in Grant County, Washington.

III

That judicial notice is taken that the Pre-

discharge Educational Program (PREP), authorized by

Public Law 91-219, as amended, is a program designed

to assist servicemen and servizewomen, who have been

members of the U.S. military services over one hun-

dred eighty (180) days, in obtaining high school

diplomas and/or to overcome educational inadequacies,

so that they may enter or successfully pursue a

post-secondary program of education and training.

That ROGER R, RUTCOSKY graduated from college

with honors and came to BIG BEND COMMUNITY COLLEGE

at the request of that school for a period of one

(1} year to replace an English instructor who was

on leave.

That ROGER R, RUTCOSKY was employed by BIG BEND

COMMUNITY COLLEGE and did work as an English instruc-

tor under an express written contract for the regu-

lar academic year commencing September of 1970 and

ending June 12, 1971.

That ROGER R, RUTCOSKY was employed by BIG BEND

COMMUNITY COLLEGE and did work as an English instruc-

tor under an express written contract for the regular

summer session commencing June 14, 1971 through July

23, 1971.

VII

That the summer employment from June 14 through

July 23, 1971, had nothing whatsoever to do with the

PREP Proposal, compiled out authored by ROGER R.

RUTCOSKY, or program.

VIII

That in June of 1971, to further his education,

ROGER R, RUTCOSKY enrolled at Washington State

University toward the end of obtaining his Master

Degree in English Literature. At this time, ROGER R,

RUTCOSKY had plans to visit his parents in Wisconsin

after he finished teaching the summer session which

ran from June 14, to July 23, 1971.

That on 21 July 1971, the Department of the

Army sent out a letter (with enclosures) to

institutions of higher education throughout the

United States, including a letter directed to and

received on July 23, 1971, by ROBERT J. WALLENSTIEN,

President, BIG BEND COMMUNITY COLLEGE, which

competitively solicited proposals that would:

* Ie Conceptualize an imaginative,

resourceful and flexible PRE-

DISCHARGE EDUCATION PROGRAM (PREP)

to provide instruction and study for

G.I.s in the Eighth Division,

Germany, to earn and receive a high

school diploma; and

2. Document and provide the institu-

tional capability to implement the

PREP Proposal as an educational

program.

That, on or about July 26, 1971, ROGER R.

RUTCOSKY went to the office of DR, ROBERT

WALLENSTIEN, the president of BIG BEND COMMUNITY

COLLEGE, to see if there was a chance of obtaining

State research funds re ideas he had for unique

application of educational methods and concepts

using audio-visual equipment and local teachers and

para-professionals etc. -- many of the same ideas

which later were articulated in his PREP Proposal.

That this meeting between DR, WALLENSTIEN and

ROGER R, RUTCOSKY on July 26, 1971, was not pre-

arranged and ROGER R, RUTCOSKY knew nothing up to

this time about the Army solicitation letter of July

21, 1971.

XII

That at this first meeting, DR. WALLENSTIEN

told ROGER R, RUTCOSKY there were no State research

funds available; however, DR. WALLENSTIEN did hand

ROGER R, RUTCOSKY the: letter from the Army to BIG

BEND COMMUNITY COLLEGE, dated July 21, 1971, and

after giving him an Opportunity to read it, DR.

WALLENSTIEN asked ROGER R. RUTCOSKY if he was

interested in applying his ideas to the Army's

request; that ROGER R, RUTCOSKY replied: "Yes!"

XIII

That BIG BEND COMMUNITY COLLEGE, including DR,

WALLENSTIEN or other employees of the college, on

July 26, 1971, had no plans and had not attempted to

do any work whatsoever in response to the Army

solicitation letter.

XIV

That after this conversation on July 26, 1971,

ROGER R. RUTCOSKY did research on the applicable

law (38 U.S.c. 81695-16972), toward the end of

applying his ideas to the Army solicitation letter

and then returned the next day, July 27, 1971, to

see DR. WALLENSTIEN at which time, ROGER R. RUTCOSKY

told DR. WALLENSTIEN that there were millions of

dollars involved for whichever college submitted

the best and most meritorious PREP Proposal and was

selected to implement it as a program.

That after the second meeting, on July 27, 1971,

DR. WALLENSTIEN gave ROGER R, RUTCOSKY the “go ahead”

to compile and author a PREP Proposal and Program

which would satisfy the Army solicitation letter of

July 21, 1971, so that BIG BEND COMMUNITY COLLEGE

could secure the Educational Services Contract with

the Army to implement the Pre-discharge Educational

Proposal.

XVI

That further, at this second meeting, on July

27, 1971, in response to the "go ahead" given by DR.

WALLENSTIEN ROGER R. RUTCOSKY specifically indicated

that he would compile and author the PREP Proposal

on his own time provided that if his PREP Proposal

were approved by the Army and BIG BEND COMMUNITY

COLLEGE was selected to implement it as a program,

that ROGER R, RUTCOSKY expected:

i. A deanship of instruction as well as,

ye A percentage of the generated revenues

if the program were successful.

DR. WALLENSTIEN recalled the meetings of July

26, 1971 and July 27, 1971 with ROGER R. RUTCOSKY,

but he did not recall promising to give ROGER R,

RUTCOSKY a percentage.

XVII

That in substance and effect, the intent and

understanding of BIG BEND COMMUNITY COLLEGE and ROGER

R. RUTCOSKY was for BIG BEND COMMUNITY COLLEGE to pay

ROGER R,. RUTCOSKY for the use of his intellectual

work product and property after implementation of the

PREP Proposal as an Educational Program for indivi-

dual student G.I.s.

XVIII

That BIG BEND COMMUNITY COLLEGE did not emp loy

or retain ROGER R, RUTCOSKY and therefore did not

agree to pay him a commission, percentage, or contin-

gent fee, to solicit or secure a contract with the

Army.

XIX

That after the conversations on July 26 and 27,

1971, ROGER R. RUTCOSKY was given the Army solicita-

tion letter of July 21, 1971, by DR. WALLENSTIEN,

and left the State of Washington to go to his

parents’ home in the State of Wisconsin where he

commenced work on the PREP Proposal on or about

August 5, 1971, and basically completed his work

endeavors on the project there prior to returning to

BIG BEND COMMUNITY COLLEGE on or about August 23,

1971, and upon returning he received the assistance

of BIG BEND COMMUNITY COLLEGE personnel in order to

get the history of BIG BEND COMMUNITY COLLEGE and to

ascertain the requirements for high school education

in the State of Washington. At this time, ROGER R,

RUTCOSKY put his PREP Proposal in final form.

xXx

That during the dates July 24, 1971, through

September 8, 1971, ROGER R. RUTCOSKY was not employed

by BIG BEND COMMUNITY COLLEGE as an instructor or

teacher nor did ROGER R. RUTCOSKY receive any

compensation from BIG BEND COMMUNITY COLLEGE for any

services during this period. ROGER R. RUTCOSKY was

receiving unemployment compensation during this

period of time, from July 24, 1971 through September

8, 1971.

XXI

The PREP Proposal was compiled and authored by

ROGER R. RUTCOSKY. It contained, 1) a point by point

response to the Army letter of July 21, 1971 to BIG

BEND COMMUNITY COLLEGE, and 2) the history of BIG

BEND COMMUNITY COLLEGE and its institutional capa-

bility and experience in conformity with the Army

letter of July 21, 1971.

XXII

The PREP Proposal as compiled and authored by

ROGER R. RUTCOSKY, content-wis2, was the exclusive

work product of ROGER R, RUTCOSKY and contained

along with the history of BIG BEND COMMUNITY COLLEGE

and its institutional capability and experience,

ROGER R. RUTCOSKY'S ideas and methods and concepts of

education adapted to satisfy the Army solicitation

letter of July 21, 1971. Some of the ideas and

concepts used in the PREP Proposal had been thought

of, used, and discussed before, both at BIG BEND

COMMUNITY COLLEGE and in one of the high schools

that was contacted by ROGER R. RUTCOSKY. The PREP

Proposal as authored by ROGER R, RUTCOSKY, contained,

among other ideas and concepts and methods of

education: individualized learning packets including

classroom cassette programs, learning resource cen-

ters, alternative learning experiences by self study,

staff and-instructional flexibility, etc.

XXIII

That the PREP Proposal as compiled and authored

by ROGER R., RUTCOSKY, content-wise is a plan of

education which contains his unique application of a

combination of educational ideas and theories and

concepts brought together in an innovative and

concrete form that serves a number of diverse needs

and objectives as set forth in the Army's solicita-

tion letter of July 21, 1971.

XXIV

That the PREP Proposal compiled and authored by

ROGER R. RUTCOSKY contained specific provisions for

adaptation and change as circumstances required.

The PREP Proposal as authored by ROGER R. RUTCOSKY

was not used in many specific areas. Certain phases

of the program were not implemented or not implemented

in the degree indicated in the original proposal.

Some of the teaching that was done after implementa-

tion of the proposal was undertaken in the more

traditional formalized classroom settings.

xXV

That the draft of the PREP Proposal, as compiled

and authored by ROGER R. RUTCOSKY, was delivered to

DR. WALLENSTIEN on or about the first week of

September, 1971.

xXxXVI

That on or about September 8, 1971, ROGER R.

RUTCOSKY was once again employed by BIG BEND

COMMUNITY COLLEGE and did work as a Counselor in their

Special Services Program, which position had nothing

whatsoever to do with the PREP Proposal solicited by

the Army.

XXVII

The final PREP Proposal as compiled and

authored by ROGER R. RUTCOSKY was delivered to DR,

WALLENSTIEN on or about the first week of September,

1971.

XXVIII

That on September 24, 1971, the typed 87-page

Proposal, "“PRE-DISCHARGE EDUCATION PROPOSAL, submit-

ted by Big Bend Community College, Moses Lake,

Washington, Compiled and Authored by Roger R.

Rutcosky," was transmitted to the Army as an enclos-

ure of a cover letter on BIG BEND COMMUNITY COLLEGE

official stationery, written and signed by ROGER R,

RUTCOSKY.

XXIX

That the BIG BEND COMMUNITY COLLEGE Board of

Trustees had notice and knowledge in the latter part

of 1971 and early part of 1972 about the proprietary

Claims of ROGER R, RUTCOSKY with respect to his copy-

right and overriding royalty demands; and BIG BEND

COMMUNITY COLLEGE, as well as its Board of Trustees

sought the advise (sic) and consulted extensively

with

the office of the Attorney General of the State

of Washington.

xxx

That the official minutes of Board of Trustees,

BIG BEND COMMUNITY COLLEGE, dated October 5, 1971,

under REPORTS states: “Prep Proposal: Mr. Rutcosky

has prepared a proposal to develop a program for high

school completion and preparing G.I.s to enter college

in Germany."

XXXI

That ROGER R. RUTCOSKY did apply for and receive

a Federal Statutory Copyright on October 22, 1971.

Thereafter ROGER R. RUTCOSKY notified DR. WALLENSTIEN

and other persons interested in PREP both at BIG BEND

COMMUNITY COLLEGE, the Washington State Board of

Community College Education, and responsible person-

nel with the Army, of his actions in this regard.

However, the effectiveness or validity of this

Federal Copyright was not an issue before the Court

in this suit and the Court refrains from making any

finding in this regard.

XXXII

That by letter dated October 7, 1971, to ROGER

R. RUTCOSKY, Paul T. Kunkle, SAFEGUARD Education

Officer, requested further information from ROGER R.

RUTCOSKY re the submitted PREP Proposal.

XXXIII

That ROGER R. RUTCOSKY and other interested

persons at BIG BEND COMMUNITY COLLEGE had telephone

conversations and communications with DR. ARVIL N.

BUNCH and other responsible officials representing

the Army re the submitted PREP Proposal.

XXXIV

That on or about October 28, 1971, pursuant to

its solicitation letter of 21 July 1971 and based on

the contents and merits of the responsive PREP

Proposal submitted by BIG BEND COMMUNITY COLLEGE

which was "compiled and authored" by ROGER R,

RUTCOSKY, the Army selected BIG BEND COMMUNITY

COLLEGE to implement its PREP Proposal as an educa-

tional program.

XXXV

That but for the PREP Proposal "compiled and

authored" by ROGER R, RUTCOSKY, the Army would not

have selected BIG BEND COMMUNITY COLLEGE to

institutionally implement PREP, Important considera-

tions in the implementation of the PREP Proposal are

the facilities, the history, and the ability of BIG

BEND COMMUNITY COLLEGE to meet the institutional

requirements of the services.

XXXVI

That on or about October 28, 1971, the Army

accepted ROGER R, RUTCOSKY'S PREP Proposal and agreed

to contract with BIG BEND COMMUNITY COLLEGE for

educational services. Further, on or about November

9, 1971, the Army and BIG BEND COMMUNITY COLLEGE

entered into an Educational Services agreement.

This agreement does not contain a “warranty against

contingent fees” provision either by amendment or

otherwise.

XXXVII

That on or about November 30, 1971, ROGER R.

RUTCOSKY, discontinued his job as a Counselor in

the Special Services Program.

XXXVIII

That on December 1, 1971, ROGER R. RUTCOSKY and

BIG BEND COMMUNITY COLLEGE entered into a standard

employment contract entitled "Predischarge Education

Program Community College Employment Contract,“

wherein BIG BEND COMMUNITY COLLEGE hired ROGER R.

RUTCOSKY as the "Director of Instruction of

Predischarge Education Program in Germany,” at a

salary and for a liquidated sum of Nine Thousand

Four Hundred Fifty Dollars ($9,450.00) for seven (7)

months.

XXXIX

That ROGER R. RUTCOSKY left for Europe to

implement the PREP Program on December 2, 1971; and

in February of 1972, while in Germany, ROGER R.

RUTCOSKY met with DR, WALLENSTIEN and again confirmed

his agreement and understanding with DR. WALLENSTIEN

that he was to receive a percentage of the generated

revenues for use of the PREP Proposal and ROGER R,

RUTCOSKY at this time agreed to take five percent off

the top of the gross monies being received; DR.

WALLENSTYEN recails this conversation in February of

1972 and DR. WALLENSTIEN indicated he would take it up

with his attorneys when he got back to the United

States.

That when he returned from Germany after his

visit in February of 1972, DR. WALLENSTIEN took this

matter up with attorneys representing the Office of

the Attorney General, and the college Board of

Trustees.

XLI

That on or about March 1, 1972, all key employees

of BIG BEND COMMUNITY COLLEGE, including ROGER R,

RUTCOSKY, in the PREP Program Europe were offered but

did not accept a stipend of Two Thousand Dollars

($2,000.00) by BIG BEND COMMUNITY COLLEGE as an extra

reward or bonus for their pioneering efforts to imple-

ment PREP, This in no way constituted a unique offer

or form of payment to ROGER R. RUTCOSKY for his pre-

vious specific work product, the PREP Proposal, but

on the contrary the same amount was offered to each

individual who initially went to Europe under ROGER

R, RUTCOSKY'S direction. The offer was to include

an assignment of all of ROGER R. RUTCOSKY'S rights

and interests in the PREP Proposal, an offer which

was unacceptable to ROGER R. RUTCOSKY.

XLII

That DR, ARVIL N. BUNCH, who was the agent re-

presenting the Army with respect to the PREP Program

Europe, on February 29, 1972, over Department of the

Army letterhead, and in answer to a letter from ROGER

R. RUTCOSKY dated 16 February 1972, and other inquir-

ies by ROGER R. RUTCOSKY calling attention to the

Army of his copyright of the PREP Proposal and the

alleged unauthorized use of the PREP Proposal,

stated: “We (the Army) are in no way involved in

your agreement with BIG BEND.”

XLIII

That while he was in Europe, after February,

1972, and after receiving the buy out offer letter

of March 9, 1972 from BIG BEND COMMUNITY COLLEGE,

ROGER R. RUTCOSKY sent letters to several interested

persons at BIG BEND COMMUNITY COLLEGE and in the

Army, regarding his concern over his direct finan-

cial participation in the revenues being generated

by the PREP Program as conducted in Europe, that is,

demand for a percentage of the action; and

i 43

subsequently thereafter he was discharged on June

a2, i972.

G.I. student to the Veterans

Administration in Washington,

ae D.C.; and

fae oh deat ee prc gecneg tte mass 4 The Veterans Administration, based

by the individual student G.I., after he or she has a a lee She oe

enrolled in the PREP Program and is taking or has draws a check in the name and favor

ee a of the individual veteran, thereby

paar eres Reh penae: releasing to the individual G.I.

tied ee quaticct acs student earned and vested educa-

cutes a reporting form supplied by tional entitlement monies; and

ae Saat nee ie 5 The Veterans Administration sends

led: Serviceman's Application for

Pre-Discharge Education Program

(PREP) (VA Form 22-1990p or 22-2990

or their equivalent) which lists

the check made out to the individual

G.I. student to BIG BEND COMMUNITY

COLLEGE; and

6. BIG BEND COMMUNITY COLLEGE exer-

inter alia the courses enrolled in and Fa ee earn

credit hours taken; and obtained from each separate service-

: eee aeten ta person to endorse the VA benefit check

on about enrollment, signs and exe- and thereafter deposit the amount of

aaa ee a ia a the check to the account of BIG BEND

Mepetore- pes COMMUNITY COLLEGE, Moses Lake, as

to endorse the VA check in favor of “local funds"; and

the college; and 4 BIG BEND COMMUNITY COLLEGE thereafter

° cane oe Wee ecu onee writes a “receipt” to each individual

submits these VA course enrollment G.I. student evidencing the payment

ht ee by the student G.I. for the educational

stot

services rendered by BIG BEND

COMMUNITY COLLEGE.

XLV

That implementation of the educational ideas

and concepts of the PREP Proposal, compiled and

authored by ROGER R, RUTCOSKY, was progressively

done by stages as the program got under way and

reached full momentum and operation.

XLVI

That the efforts of ROGER R. RUTCOSKY hereto-

fore mentioned on behalf of BIG BEND COMMUNITY

COLLEGE, was the catalyst not only for the initial

selection of BIG BEND COMMUNITY COLLEGE to implement

PREP as a program, but constitutes the on-going

catalyst for the performance by BIG BEND COMMUNITY

COLLEGE of educational efforts in this specific area

for the military.

XLVII

That the main thrust of the PREP Proposal, as

compiled and authored by ROGER R, RUTCOSKY, that is,

the opportunity to offer educational services

leading to a high school diploma through the unique

application of educational concepts in an innovative

form is directly traceable to the ideas and concepts

contained in the original work product of ROGER R.

RUTCOSKY as submitted in the PREP Proposal to the

Army.

XLVIII

That this effort on behalf of BIG BEND COMMUNITY

COLLEGE by ROGER R. RUTCOSKY was a tremendous benefit

to BIG BEND COMMUNITY COLLEGE both directly and

indirectly, and in comparison of the status to the

school before the PREP Proposal is an overwhelming

financial and status improvement.

xLIX

From the outset both ROGER R. RUTCOSKY and the

College knew and understood that the initial phase

of the PREP Program would continue for at least 18

months and that if the program proved successful it

would continue indefinitely subject to approval by

the Army and the institution concerned.

That the potential for expansion of the PREP

Proposal as an educational program was specifically

referred to by the Army in its 21 July 1971 solici-

tation letter, and by BIG BEND COMMUNITY COLLEGE in

its September 24, 1971, letter which transmitted to

the Army the PREP Proposal, “compiled and authored"

by ROGER R, RUTCOSKY.

That the PREP Proposal as an educational program

has expanded, that is, initially from the Army's

Eighth Division, Europe, to other Army divisions and

units in Europe, to the Air Force's divisions and

units in Europe, as well as to the Navy's divisions

and units in Europe,

LII

That the involvement of the Army, and subse-

quently of the Air Force and the Navy, is attribut-

able to the PREP Proposal of ROGER R. RUTCOSKY as

implemented as a program by BIG BEND COMMUNITY

COLLEGE,

LIII

That the original Army solicitation letter of

July 21, 1971, was directed to BIG BEND COMMUNITY

COLLEGE, not to ROGER R, RUTCOSKY; that the

Educational Service Agreement of November 7, 1971,

wherein BIG BEND COMMUNITY COLLEGE was selected to

offer the PREP Proposal as a program, was between the

Army and BIG BEND COMMUNITY COLLEGE, not ROGER R,

RUTCOSKY; and that other Educational Service

Agreements, or their equivalents (twx or letters)

Subsequently were entered into between BIG BEND

COMMUNITY COLLEGE, and the Army, Air Force and Navy,

and not between these branches of the Armed Forces

and ROGER R, RUTCOSKY: that all monies and revenues

generated and received for implementation of the PREP

Proposal and program have

been paid by the individual

“

student G.I.s to BIG BEND COMMUNITY COLLEGE, and not

to ROGER R, RUTCOSKY.

LIV

That the testimony relating to gross revenues

generated by the PREP Proposal came basically through

the testimony of Mr. Fall, the state auditor. That

his testimony and reports would indicate that begin-

ning April 1972 through December 31, 1975 total PREP

revenues from U.S. servicemen were received in the

amount of $10,442,872.00. Of the total amount of

generated revenues the college is investing approxi-

mately 54 percent (or $5,639,151) in instructional

services and 17 percent (or $1,775,288) in Central

administration in Europe.

That the State of Washington by and through the

agency of BIG BEND COMMUNITY COLLEGE is the holder

of all revenues and monies generated or received from

the PREP Program.

That ROGER R, RUTCOSKY is entitled to compensa-

tion beyond that which he received from BIG BEND

COMMUNITY COLLEGE as “direction of instruction, PREP

Europe"; that ROGER R, RUTCOSKY did not enter into

REP

an agreement to write and compile and author the P

Proposal only on the basis of a promise of an employ-

ment position in the program.

LVII

That there was not only an agreement and under-

standing between ROGER R, RUTCOSKY and the lawful

agent and president of BIG BEND COMMUNITY COLLEGE,

DR. WALLENSTIEN, that ROGER R. RUTCOSKY would receive

a position in the PREP Program in the event his PREP

Proposal was approved by the Army and implemented by

BIG BEND COMMUNITY COLLEGE, but also an agreement

and understanding that ROGER R,. RUTCOSKY would

receive a percentage of the generated revenues.

LWIII

That the value of the services rendered by ROGER

R,. RUTCOSKY will diminish and be diluted with the pas-

sage of time because ROGER R, RUTCOSKY no longer is an

active participant in the PREP Program.

LIX

That ROGER R, RUTCOSKY, on August 2, 1974, filed

this action based on recovery for use of his intellec-

tual work product and property within three (3) years

from the date the causes of action arose, that is, on

or after January 1, 1972, pursuant to R.C.W. 4.16.080

(3); ROGER R, RUTCOSKY filed his claims with the

State Auditor on September 20, 1974.

CONCLUSIONS OF LAW

That the Court has jurisdiction over the named

Plaintiffs and Defendants in this action,

That the employment contract between BIG BEND

COMMUNITY COLLEGE and ROGER R, RUTCOSKY, dated

December 1, 1971, wherein ROGER R, RUTCOSKY was hired

as "Director of Instruction, PREP Europe," sets forth

@ sum certain, that is, a salary of Nine Thousand

Four Hundred Fifty Dollars ($9,450.00), as compensa-

tion paid to liquidate amounts owing for the day-to-

day services of ROBERT R. RUTCOSKY (sic) for BIG BEND

COMMUNITY COLLEGE, and therefore this amount does not

constitute full satisfaction, as a matter of law or

equity, of the claims of ROGER R, RUTCOSKY re the use

and implementation of his PREP Proposal by BIG BEND

COMMUNITY COLLEGE.

Ift

That the Congress of the United States statutor-

ily authorized the PREP Program pursuant to 38 U.S.C.

868 1695 et seg. which states, inter alia, that its

purpose is to provide G.I.s “with an opportunity to

enroll and pursue a program of education and training

prior to their discharge or release from active duty

with the Armed Forces;" that the PREP Program is

administered by the Veterans' Administration and is

conducted with the cooperation and in coordination

of the Department of Defense.

That the PREP Proposal, compiled and authored

by ROGER R. RUTCOSKY and which content-wise is a

plan of education that contains, inter alia, his

unique application of a combination of educational

ideas and theories and concepts brought together in

an innovative form, is the “intellectual work product

and property" of ROGER R. RUTCOSKY, and consequently

constitutes a recognizable proprietary interest

protectible by law; that the PREP Proposal has no

literary, artistic, or intrinsic value other than

vis-a-vis use and implementation to enroll and edu-

cate qualified and interested G.I.s by any capable

educational institution or agency, that is, use and

implementation of intellectual work product and

property is the precise interest of ROGER R. RUTCOSKY

which is legally protectible in this particular case.

That there exists a contract, express as well

as implied-in-fact, between BIG BEND COMMUNITY

COLLEGE and ROGER R., RUTCOSKY for ROGER R. RUTCOSKY

to “compile and author" a PREP Proposal for and on

behalf of BIG BEND COMMUNITY COLLEGE which would

satisfy the requirements of the 21 July 1971 Army

sOlicitation letter in order that BIG BEND COMMUNITY

COLLEGE would be selected by the Army to implement

the submitted PREP Proposal as an educational pro-

gram in Europe vis-a-vis enrolling qualified and

interested G.I.s as students in courses which

instructionally could lead to a high school diploma.

That with respect to this contract, express as

well as implied-in-fact, between BIG BEND COMMUNITY

COLLEGE and ROGER R,. RUTCOSKY for ROGER R, RUTCOSKY

to “compile and author" a PREP Proposal for and on

behalf of BIG BEND COMMUNITY COLLEGE, etc., there was

no meeting of the minds and therefore no agreement as

to exactly what form or amount of consideration or

compensation was to be paid by BIG BEND COMMUNITY

COLLEGE to ROGER R. RUTCOSKY for his endeavors, al-

though consideration or compensation in some form

and amount was definitely within the contemplation

of the parties.

VII .

That there exists an implied-in-law contract

(guantum meruit) between BIG BEND COMMUNITY coLLEGE

and ROGER R. RUTCOSKY, running in favor of ROGER R,

RUTCOSKY and against BIG BEND COMMUNITY COLLEGE, in

order to prevent BIG BEND COMMUNITY COLLEGE from

being unjustly enriched due to the use and implemen-

tation as a program of the intellectual work product

and property of ROGER R, RUTCOSKY contained in his

PREP Proposal.

VIII

That there are substantial equitable considera-

tions underlying this case, particularly in light of

the constant and continuing stringent duty owed by

the State (BIG BEND COMMUNITY COLLEGE) in its con-

duct towards ROGER R, RUTCOSKY -- a fiduciary duty of

trust, scrupulously fair dealings, good faith, fair-

ness (not the morals of the marketplace), which

Support theories of promissory estoppel against BIG

BEND COMMUNITY COLLEGE estopping it from disclaiming

payments to ROGER R, RUTCOSKY.

That equitable considerations also require and

necessitate that a remedy be fashioned by the Court

which will ensure fair and just treatment of ROGER

R. RUTCOSKY, past, present and in the future.

: x

That ROGER R, RUTCOSKY shall receive as reason-

adle compensation for the past and on-going use as

well as implementation by BIG BEND COMMUNITY COLLEGE

of his intellectual work product and property con-

tained in the PREP Proposal, and be awarded as

damages, a royalty based upon the gross revenues

received by BIG BEND COMMUNITY COLLEGE £y¥om PREP

Europe; furthermore, this royalty -- after reviewing

and evaluating the amounts of gross revenues received

by BIG BEND COMMUNITY COLLEGE for its implementation

of the PREP Proposal as a program as reported by the

State Auditor up thr@™gh June 30, 1974, and taking

into consideration the fact that the value of the

services rendered by ROGER R. RUTCOSKY will diminish

and be diluted with the passage of time because ROGER

R. RUTCOSKY no longer is an active participate (sic)

in the PREP Program -- is determined by the Court to

be five percent (5%) of the gross revenues for a

period of five (5) years from the date of “inception”

of the PREP Proposal, compiled and authored by ROGER

R. RUTCOSKY, as an educational program by BIG BEND

COMMUNITY COLLEGE for the military, which shall be

measured, inasmuch as implementation is by stages,

by the date first revenues were or are being received

from the individual G.I.s assigned to each separate

company (or other similar-size military unit) who

were or are enrolled in PREP; and that ROGER R.

RUTCOSKY shall continue to receive a royalty at a

rate of two and one-half percent (2-1/2%) for an

additional five (5) years thereafter.

54 35

- 28B.50.092 through 28B.50.094 shall ultimately be

borne b rants or fe i

That BIG BEND COMMUNITY COLLEGE should have di es derived ‘from nonstate

treasury sources."

ninety (90) days from the date of the Judgment to

XIV

pay ROGER R, RUTCOSKY damages accumulated to this

That the Jud t h i ijed-

day, with interest thereon at six percent (6%) per peter Se ao aoe

in-law ant i -in-

annum; and BIG BEND COMMUNITY COLLEGE shall have (quantum meruit), implied-in-fact, express

contract, and promissory a j

sixty (60) days after the rendering of each fiscal ; ¥ a en eT ee

1, shal

year report to pay to ROGER R,. RUTCOSKY, any monies a alts

MMUN

owing to him as indicated above. Any damages and/or ma S9SSROS BSS SEED. CO sdaad

COLLEGE, and its successor

monies not paid within said sixty (60) day period will : oe

e. : assigns, transferrees, etc., as

bear interest at eight percent (8%) per annum.

well as against an erson(s) or

XII g y Pp (s)

E entity(ies) who use or implement,

That ROGER R, RUTCOSKY shall be entitled to

i ; : directly or indirectly, in any

conduct a periodic audit and/or accounting, at his

. . form or manner whatsoever, the

Own cost and expense, to verify said annual gross

intellectual property and work pro-

revenues as reported by BIG BEND COMMUNITY COLLEGE; viable itl P

duct of ROGER R. RUTCO as con-

furthermore, BIG BEND COMMUNITY COLLEGE shall fully UTCOSKY, as c

taine € t

cooperate in said audit and/or accounting by making a a en oe

available all relevant books and records and accounts, a eens ener mee

‘ 2. e payable out of any and all reven-

receipts and tabulations, etc., for inspection and are of f

es a r nies generated or

copying, at all European sites where PREP is being We: ROS" Se ee :

implemented as well as Moses Lake, Washington. ere se ee on cis

XIII COLLEGE, et al., for implementation

That R.C.W. 28B.50.094, Program for Military C8 CNS “PREP PECpOSS. GS 8 Peeyees,

Personnel -- Costs of Funding, provides re PREP: respuitiencisett colt tha in tase ipa tines leas

P tate a aw G

"The costs of funding programs authorized by R.C.W. S treasury inasmuch as by i BI

BEND COMMUNITY COLLEGE is an

instrumentality and agency of the

State of Washington and furthermore

the PREP Program and issuance of a

State qualified and approved High

School Diploma thereunder is statu-

torily authorized and sanctioned.

R.C.W,. 28B.50.092-094,

That members of the Board of Trustees, offi-

cers and employees of BIG BEND COMMUNITY COLLEGE,

are not liable in law or in equity, personally for

any of their actions or admissions.

XVI

That DR. WALLENSTIEN and other officers and

employees of BIG BEND COMMUNITY COLLEGE re PREP

were acting in their representative capacities for

and on behalf of BIG BEND COMMUNITY COLLEGE, all

with the knowledge and consent of BIG BEND COMMUNITY

COLLEGE Board of Trustees which expressly as well as

impliedly authorized, and even through acquiesence

(sic) ratified, BIG BEND COMMUNITY COLLEGE'S

participation in PREP Europe -- from authorizing

DR. WALLENSTIEN to take whatever actions and steps

were necessary to respond to and therefore satisfy

the requirements of the Army's 21 July 1971

solicitation letter in in (sic) order for BIG

BEND COMMUNITY COLLEGE to be selected to offer and

implement an approved PREP Proposal, to and through,

approval of the expansion of that implementation for

the Air Force and Navy -- and consequently the

college is bound by the acts and commitments of these

various individuals re PREP Europe.

XVII

That the November 9, 1971, Educational Services

Agreement entered into between the Army and BIG BEND

COMMUNITY COLLEGE is, in substance and effect, a

grant of permission or license or franchise for BIG

BEND COMMUNITY COLLEGE to offer and hold out its

Army-approved PREP Program, as set forth in the PREP

Proposal submitted by BIG BEND COMMUNITY COLLEGE in

response to the 21 July 1971 Army solicitation letter,

to individual G.I.s who elect whether or not to

accept those services by enrollment in PREP and

therefore each becomes as a student personally and

individually liable to BIG BEND COMMUNITY COLLEGE

for the services rendered.

XVIII

That, inter alia, the non-inclusion of a

“warranty against contingent fee” in the November

9, 1971, Educational Services Agreement presump-

tively was both intentional and purposeful and

lawfully omitted by the Army contracting personnel;

since it was written and issued by the Army, the

document cannot be presumed to be any less of an

instrument than it was as drafted and sent to BIG

BEND COMMUNITY COLLEGE by the Army and subsequently

signed and executed sy BIG BEND COMMUNITY COLLEGE

and the Army.

XIX

That, inter alia, kinds of contracts, 10 U.S.C.

§2306(b), 32 C.F.R. §6.103-20, Exec. Order No. 9001,

etc., are not penal laws nor do violations amount to

illegality per se.

That as a matter of law the communications, for

example telephone conversations BIG BEND COMMUNITY

COLLEGE and ROGER R. RUTCOSKY had with the Army

respecting their response to the Army's letter of

July 21, 1971, regarding the kind of PREP Proposal

being solicited by the Army and subsequently the

PREP Proposal which was submitted for consideration

by BIG BEND COMMUNITY COLLEGE and ROGER R. RUTCOSKY,

did not amount to or result in the exercise or use

of any improper means or undue influence by ROGER

R,. RUTCOSKY, and therefore no pollution of the

public or private honesty or integrity of responsible

Army officials like DR, ARVIL N. BUNCH occurred.

XXI

That the alleged defense of “illegality” of

contract between BIG BEND COMMUNITY COLLEGE and

ROGER R, RUTCOSKY, under 10 U.S.C. 82306(b), 32

C.F.R. 87.103-20, Exec. Order 9001, etc. is not

Supported by sufficient evidence in the record to

warrant conforming the Defendants’ pleadings to the

proof pursuant to CR 15(b) since, more particularly,

illegality of a contract will not be presumed and

defendants have not met the burden of proof of show-

ing by a preponderance of the evidence in the record,

which must be substantial and not a mere scintilla,

that either in fact or law there was an "illegal"

contract.

XXII

That no privity or legal relationship or duties,

contractual or otherwise, and therefore, no liabil-

ity or accountability exists or existed between

ROGER R. RUTCOSKY and the Army, or Air Force, or

Navy, with respect to the implementation of the

PREP Proposal as a program.

XXIII

That all parties necessary and proper and

indespensable (sic) to complete and full adjudica-

tion of all matters presented to this Court, based

upon the causes of action and theories of recovery

as well as defenses thereto plead and raised in this

action, were before the Court.

XXIV

That failure of the Plaintiff to file within

two (2) years, after January 1, 1971, with the State

Auditor his claims hereunder pursuant to R,.C.W.

43.09.1600, is not a jurisdictional bar to maintaining

this lawsuit sounding in breach of contract and

quantum meruit inasmuch as (1) application of R.C.W.

43.09.1600 would deny Plaintiff equal protection of

the law contrary to WASH. CONST. art. 1, 812 and

U.S. CONST, amend. 14 since it would vary the general

statute of limitations of three (3) years of R.C.W.

4.16.080(3) which Plaintiff met; (2) PREP Program

revenues are local funds and are not monies deposited

in the state treasurey (sic); (3) PREP educational

Program is a governmental and sovereign function;

(4) filing of a claim with the State Auditor is not

specifically required under R.C.W. 43.09.160 as a

condition precedent to maintaining a lawsuit;

(5S) the State equitably is estopped because of know-

ledge and notice of and actions taken by the State on

Plaintiff's claims within the two (2) year period;

and (6) the continuing breach of legal obligations

by the State on which sums are due and payable offers

a continuing opportunity for ROGER R, RUTCOSKY, which

he perfected on September 20, 1974, to file his

claims with the State Auditor.

XXV

That the Court incorporates, whether heretofore

set forth as Findings of Fact or Conclusions of Law,

its Memorandum of Decision dated October 31, 1975.

DONE IN OPEN COURT this 5th day of January,

1977.

APPENDIX D

EDUCATIONAL SERVICE AGREEMENT

l. Scope. This agreement entered into on the 9th

day of Nov. 1971, between the United States of

America, hereinafter called the "Government, "

represented by the Contracting Officer, and Big

Bend Community College, ar education institution

located at Moses Lake, Washington, hereinafter

called the "Contractor," is for educational services

to Government personnel who qualify under Sections

1695 - 1697, Title 38, United States Code, as

amended. The parties intend that the Contractor

shall provide instruction and counseling in accord-

ance with regulations prescribed by the Administra-

tor of Veterans Affairs and the Department of the

Army with standard offerings of courses similar to

those available to the public and shall receive

payment from the enrolled students or Veterans

Administration, as appropriate, for services rendered

in accordance with the Contractor's schedule of tui-

tion and fees applicable to the public and in effect

at the time the services are performed. This

Educational Service Agreement is intended by the

parties to fulfill the requirement of Veterans

Administration Regulation 14260(A) (2) (b).

2. Amendment. This agreement may be amended only

by mutual consent of the parties.

3. Review. The Government will review this agree-

ment annually before the anniversary of its effec-

tive date for the purpose of incorporating changes

required by Statutes, Executive Orders or other

directives; such changes will be evidenced by a

modification to this agreement or by a superseding

agreement. If the parties fail to agree upon any

such changes, the Government shall terminate this

agreement.

4. Duration. This agreement shall commence on the

effective date above and shall continue until ter-

minated.

5. Services To Be Provided. a. The Contractor

shall provide a course of instruction which will

qualify Government personnel who qualify under

sections 1695 - 1697, Title 38, United States Code,

as amended, for a secondary school diploma. Such

course of instruction shall be in accord with regula-

tions prescribed by the Administration of Veterans

Affairs and the Department of the Army. Upon

completion of the requirements for a secondary school

diploma, Contractor will issue the same to the stu-

dent without any charge therefor.

b. The Contractor shall also provide deficiency,

remedial or refresher course or courses required for

or preparatory to the pursuit of an appropriate

course or training program in an approved educational

institution or training establishment. Such course

or courses shall be provided to Government personnel

who qualify under sections 1695 - 1697, Title 38,

United States Code, as amended, and shall be in

accord with regulations prescribed by the Adminis-

trator of Veterans Affairs and the Department of

the Army.

c. The Contractor shall also provide a course

of instruction which will qualify Government

personnel who qualify under Title 38, United States

Code, for an Associate in Arts or Associate in

Science degree. Upon completion of the requirements

for such degree, Contractor will issue same to the

student without any charge therefor. (The

Associate of Arts program is not a part of PREP).

ad. The Contractor shall promptly deliver to

the Contracting Officer one copy of each catalog

applicable to this agreement and one copy of any

subsequent revisions thereto.

6. Payments. a. The Contractor shall be responsible

for collecting all charges for instruction from the

student.

The Department of the Army shall have no

responsibility for the payment of any appropriated

or nonappropriated funds under this agreement and

shall, under no circumstances, be responsible for

payment of any tuition, charges, fees, or other pay-

ments hereunder.

b. The Contractor shall have the right to

change any tuition and fees, provided that the

Contractor publishes such revisions in a catalog

or otherwise publicly announces such revisions and

applies them uniformly to all students pursuing the

same or similar curricula as Government students

enrolled under the agreement. The Contractor shall

provide the Contracting Officer notice of such

changes prior to their effective date.

7. Withdrawal. In the event a student withdraws

from a course or courses of instruction under this

agreement, the Contractor shall provide notification

of such withdrawal to the appropriate local GED

officials within one week of withdrawal.

8. Transcripts. The Contractor will obtain the

high school transcripts for all soldier participants

whose records indicate previous high school atten-

dance. Within a reasonable period of time after

withdrawal of a student for any reason, or after

graduation, the Contractor shall send to the student

or his designee one copy of an official transcript

showing all work by the student at the Contractor's

institution until such withdrawal or graduation.

66 67

9. Termination of Agreement. a. Either party may includes “semester," “trimester,” "quarter," or any

terminate this agreement by giving one hundred and similar word the Contractor may use.

twenty days advance written notice of the effective b. The word “course” means a series of lec-

date of termination. In the event of termination, tures or instructions, and/or laboratory periods,

the Government shall have the right, at its option, relating to one specific presentation of subject

to continue to require educational services until matter, such as Elementary College Algebra, German

completion of the school term. 401, or Surveying. Normally a student completes a

b. Termination by either party shall not be course in one term and receives a certain number of

the basis for any claim by the Contractor against the semester hours credit (or equivalent) upon success-

Government. ful completion.

10. Logistical Support. The Government shall pro- c. The word "curriculum" means a series of

vide logistical support designated in Appendix A to courses having a unified purpose and belonging pri-

this agreement. The Government shall provide as marily to one major academic field. It will usually

much advance notice as possible in the event it include certain required courses and elective courses

cannot supply all or a part of the logistical within established criteria. Examples include Busi-

support. If all or a part of the logistical support

ness Administration, Civil Engineering, Fine and

is terminated, the Contractor may revise his tuition Applied Arts, and Physics. A curriculum normally

of such logistical support shall not be considered diploma upon successful completion.

as a breach of this agreement and shall not obligate ad. The word “catalog” means any medium by

the Government to pay the Contractor any appropriated which the Contractor publicly announces terms and

or nonappropriated funds by reason of such termina- conditions for enrollment in the Contractor's

tion of logistical support. institution, including tuition and fees to be

ll. Definitions. a. The word “term" means the charged. quid Stadt “bulletin,” “announcement, "

period of time into which the Contractor divides the or any other similar word the Contractor may use.

academic year for purpose of instruction; this e. The word “tuition" means the amount of

money charged by an educational institution for

instruction, not including fees as defined below.

f. The word "fees" means those applicable

charges directly related to enrollment in the

Contractor's institution. This shall not include

any permit charge (e.g. parking, vehicle registra-

tion or charges for services of a personal nature

(e.g. food, housing, laundry)).

g. Tne word “charge” means payments for

services other than tuition or fee.

h.- The term "Contracting Officer" means the

person executing this contract on behalf of the

Government, and any other officer or civilian employee

who is a properly designated Contracting Officer;

and the term includes, except as otherwise provided

in this contract, the authorized representative of a

Contracting Officer acting within the limits of his

authority.

12. Conflicts Between Agreement and Catalog. To

the extent of any inconsistency between the provisions

of this agreement and any catalog or other document

incorporated in this agreement by reference or

otherwise or any of the Contractor's rules and

regulations, the provisions of this agreement shall

govern.

13. Examination of Records. The Contractor agrees

that the Government or any of its duly authorized

representatives shall, until expiration of three

years after the termination of this agreement, have ‘

access to and the right to examine any books, docu-

ments, papers and records of the Contractor, that

directly pertain to, and involve transactions relat-

ing to this contract on subcontracts hereunder.

The remaining portions of the Agreement are:

14. Equal Opportunity. Standard equal oppor-

tunity boiler-plates.

15. Disputes. Standard provisions regarding

disputes.

IN WITNESS WHEREOF, the parties hereunto have exe-

cuted this agreement as of the day and year first

above written.

THE UNITED STATES OF AMERICA

By: [s/f _R, F, ASKEY

R. F. ASKEY

Colonel, AGC

Dir. Army Educ & Morale Spt

CONTRACTOR

By: {s/f ROBT J.WALLENSTIEN,

President

Robert J. Wallenstien, Presi-

dent

Big Bend Community College

Moses Lake, Washington 98837

APPENDIX A

TAB III - Logistic Support Authorized by USAREUR

Regulation 700-28

1. Classroom space and office space with repair

and utilities, non-reimbursable

2. Clerical assistance from education centers

within current support capabilities

3. Intra-theater Class A telephone service, reim-

bursable

4. Customs exemption (USAREUR Regulation 550-175)

Sa Legal Assistance (USAREUR Regulation 608-80)

7. Housing, permanent, reimbursable (USAREUR

Regulations 220-13 and 210-14); not available -

family housing offices will provide usual assistance

given to military personnel seeking housing on

economy

8. Housing, temporary BOQ and transient billets,

faculty and administrative staff (USAREUR Regulation

210-13); when available

9. DD Form 1173 (Uniformed Services Identification

and Privilege Card USAREUR Regulation 606-10 and

AFR 30-20)

10. European Exchange Service (EES) privileges

(USAREUR Regulation 60-10 and USAFE Regulation

147-3)

ll. Class VI privileges (USAREUR Regulation 230-70

and USAFE Regulation 147-3)

12. Commissary privileges (USAREUR Reguiation

31-200 and AFR 145-15)

13. Local recreational facilities to include clubs,

open messes, theaters, craft shops, libraries, and

Similar activities (AFR 34-42 and USAFE Regulation

34-2)

14. Laundry and dry-cleaning facilities (USAREUR

Regulation 210-130 and AFR 148-1)

15. Use of bathing facilities

16. Medical services in accordance with AR 40-3,

AFR 168-7); emergency services expected and other

services available on a reimbursable basis

17. Use of Dependents' Schools (AR 350-290 and

USAREUR Regulation 621-321) Space-available, tuition-

paying category; on tuition basis

18. United States Forces Registration for privately-

owned vehicles

19. POL purchase privileges where motor vehicle

registration has been accomplished (USAREUR

Regulation 700-231 and USAFE Regulation 67-94)

20. Armed Forces Post Office services (AR 65-10 and

USAFE Regulation 182-20)

21. Armed Forces Recreation Center (USAREUR

Regulation 28-110)

22. Certificate of Status (USAREUR Regulation

606-25)

23.

Pets and firearms registration

APPENDIX E

UNITED STATES GENERAL ACCOUNTING OFFICE

WASHINGTON, D.C. 20548

HUMAN RESOURCES DIVISION

8 DEC 1977

B-140360

The Honorable Max Cleland

Administrator of Veterans Affairs

Veterans Administration

Dear Mr. Cleland:

We have reviewed the financial controls

exercised by the Veterans Administration (VA) over

the Predischarge Education Program (PREP). We

analyzed the program's financial data at nine schools

and at the offices of two consultants, who were

associated with some of these schools, and estimate

that they accumulated $9.9 million in surplus funds.

These surpluses represent excess VA payments

over cost incurred after October 1972, when legis-

lation established reasonable cost as the basis for

VA payments to PREP projects. The surpluses occurred

because VA did not have sufficient financial con-

trols to assure that such payments approximated

reasonable costs. We believe that VA should recover

most of these surplus funds.

VA's administration of PREP has ceased but it

is scheduled to resume about 1979. It is possible

that if the program resumes as planned, duplication

of effort may occur between VA's program and similar

Department of Defense (DOD) programs.

BACKGROUND

The Veterans Education and Training Amendment

Act of 1970 (Public Law 91-219) created PREP to

provide active duty military personnel with courses

for a secondary school diploma and for prerequisites

for postsecondary education. The act required that

VA pay PREP participants an educational assistance

allowance equal to (1) the established charge for

tuition, fees, books, and supplies, which the

educational institution required of nonveterans of

similar circumstances enrolled in the same or a

similar program or (2) $175 per month for a full-

time course, whichever was less.

Public Law 92-540 (Oct. 24, 1972) amended the

1970 act by authorizing VA to reimburse education or

training institutions for the reasonable cost of

PREP, when they did not have similar programs. The

law also increased the maximum monthly payment to

$220 for PREP participants.

Public Law 94-502 (Oct. 15, 1976) prohibited

PREP enrollment after October 31, 1976, except for

participants in the Post-Vietnam Era Veterans’

Educational Assistance Program, and then only

during the last 6 months of their first enlishment.

A VA official informed us that all PREP operations

have now ceased. The program is not due to resume

until about 1979, when servicemen again become

eligible for the program. At present DOD is funding

Similar educational programs to replace PREP for its

active duty members.

ACCUMULATED SURPLUSES

In April 1977 we requested VA's General

Counsel to comment on the recoverability of two

types of surpluses we found at the schools reviewed.

(See enc. I.)

--PREP payments made by VA in excess of

PREP costs and

--Unused PREP books, supplies, and equip-

ment retained by schools after PREP

terminated.

VA's General Counsel replied in June 1977 that

both types of surpluses were refundable to the extent

that they were accrued after the enactment of Public

Law 92-540 and were the result of applying a fixed

rate to cover rezsonable PREP costs. (See enc. II.)

VA and school officials informed us that all nine

schools were charging a fixed rate on October 24,

1972; therefore, any surpluses accrued after that

date are refundable.

Of the nine schools where we identified sur-

pluses, four had agreements for private consultants

to provide many PREP services. Consultant duties

included:

--Assisting in obtaining permission to

place and maintain educational facili-

ties and personnel on military bases

and vessels.

--Purchasing, warehousing, and furnish-

ing texts, materials, and supplies.

--Developing programs.

--Training administrators and teachers.

--Maintaining offices on military bases

and naval vessels.

--Maintaining a complete accounting and

financial reporting system, including

student registration, enrollment, and

termination data.

--Preparing tuition collection, rebate,

and refund reports.

For these services consultants received up to 85

percent of VA's PREP payments to the four schools.

Where consultants were involved, schools were

typically responsible for (1) arranging and main-

taining State and VA approval of the program; (2)

maintaining academic records, including course

outlines and student transcripts; (3) supervising

programs to assure maintenance of quality of instruc-

tion; and (4) hiring and compensating instructors.

Where consultants were not involved, the schools

performed all of the duties cited above. The VA

General Counsel's office said that since the consul-

tants acted in place of the school, they may be

subject to the same requirements as the schools;

therefore, surpluses accumulated by consultants after

October 24, 1972, may also be refundable.

The following table shows estimated VA payments,

costs, and surpluses of the nine schools and two

consultants. Some of these could not provide us

with complete PREP financial data at the time we

completed our fieldwork in July 1977.

Estimated

Payments Costs Total

Schools received incurred surplus

(000 omitted)

American Preparatory

Institute (Killeen,

Tex.) $ 4,682 $ 4,378 $ 304

Barstow Community

College (Barstow,

Calif.) 221 168 53

Big Bend Community

College (Moses Lake,

Wash.) 16,549 12,127 4,422

Concordia College

(Milwaukee, Wis.) 104 32 72

Estimated __

Payments Costs Total

Schools Zeceived incurred surplus

Ft. Steilacoom

Community College

(Tacoma, Wash.) $ 2,832 §$ 2,768 $ 64

Gavilan Joint

Community College

District (Gilroy,

Calif.) . 1,009 782 227

Olympic College

(Bremerton, Wash.) 5,619 4,614 1,005

St. Louis High

School (Honolulu,

Hawaii) 2,404 1,318 1,086

San Diego

Community College

District (San Diego,

Calif.) 3,400 3,163 237

Total 36,820 29,350 7,470

Consultants

Concordia PREP

program (Bremerton,

Wash.) :

at Concordia Laos eS 12

ModuLearn, Inc. (San

Juan Capistrano,

CaLité.) s

at Barstow 470 261 209

at Gavilan 2,004 1,409 595

at St. Louis 7,384 5,679 1,705

Total 11,121 8,600 2,521

Total for schools

and consultants $ 47,941 3 37,950 3 9,991

Surpluses at all of these schools, except Olympic

College, represent reported payments received, less

costs. In the case of Olympic College, however, the

surplus also includes

PREP funds expended for

non-PREP purposes $ 341,000

Unused PREP inventories

(at cost) 153,000

Total 2 494 000

Expenditures for purposes other than PREP but

charged to PREP included such things as TV studio

equipment, cameras, stereo consoles, furniture,

athletic equipment, and automotive testing equipment.

Inventory consisted of such things as new and unused

books, test materials, tape recorders, and self-

instructional material.

VA's General Counsel advised us that since there

is limited opportunity to use such PREP resources, VA

would consider our suggestions on their Manesition.

None of the schools' or consultants' financial

records we reviewed had final financial statements for

PREP expenditures. Closeout costs, such as the micro-

filming of PREP records and unemployment compensa-

tion for terminated PREP employees, were still being

incurred at the time we completed our fieldwork. We

could not accurately calculate these costs, but

consultants' and school officials' estimates indi-

cate that future closeout costs at all nine schools

wili not exceed a total of about $1.4 million.

Also, in some cases there were substantial receiv-

ables and payables which, in the aggregate, gener-

ally offset each other but may significantly affect

the surpluses of some individual schools and

consultants.

Conclusions

We believe that VA should recover surplus funds

accumulated after October 24, 1972, by schools and

consultants participating in PREP. Any unused inven-

tories may be of use to DOD or disposed of according

to General Services Administration procedures. We

believe, however, that there could be a final VA

audit before seeking recovery action because in some

cases, closeout costs, receivables, and payables

had not been settled at the time we completed our

fieldwork. These transactions should now be sub-

stantially completed.

Also since there were about 200 schools

involved in PREP, there may be more surpluses than

those we identified. Therefore, we believe that VA

should conduct audits of these schools, as appro-

priate, to determine if surpluses exist. We

recognize that it may not be practical to audit all

schools. A decision regarding which schools to

audit must be based on the potential amount of

recovery and the audit resources available. Our

experience indicates that a school with adequate

financial records can be audited in about 10 staff

days.

Recommendations

We recommend that VA

--conduct or provide audits of the nine

schools and two consultants we visited

to establish the amount of recove’ able

surplus,

--conduct or provide audits, as appro-

priate, at the remaining 200 schools to

identify whether additional recoverable

surpluses exist,

--take action to recover those surplus

funds that have been identified, and

--determine if the unused PREP inventories

at Olympic College, Bremerton, Washington,

can be used by DOD for its military

personnel still in training or disposed

of under appropriate General Services

Administration procedures.

INADEQUATE FINANCIAL CONTROLS

Surpluses have been accumulated by PREP schools

and consultants because VA did not exercise two

essential elements of financial control to assure

that payments to schools reimbursed them for only

reasonable costs.

First, VA did not issue regulations limiting the

types and amounts of costs that schools and consul-

tants could charge for providing PREP services. As

VA's General Counsel stated in his June 13, 1977,

letter (see enc. II), the intent of Public Law

92-540 is clear--that payments for PREP should

reimburse schools for reasonable costs incurred,

without the schools incurring either a profit or a

loss. Without the benefit of implementing regula-

tions, schools and consultants charged their PREP

accounts for a variety of types and amounts of

costs.

Second, a VA official told us that VA did not

make audits of schools‘ and consultants’ financial

records to determine if PREP payments equaled reason-

able costs. VA officials told us that as a result,

they were unaware of the amount of surpluses

accumulated by some schools and consultants and did

not request refunds. In the absence of periodic

financial audits and requests for refunds, some school

officials and consultants considered the surpluses

“earned profits," “a proper reward for the risks

involved," or “a surplus that is ours to keep.”

Conclusions

Significant amounts of surplus funds have been

accumulated by PREP schools and consultants because

VA has not (1) issued regulations defining the types

and amounts of PREP costs for which reimbursement

could be received and (2) made audits of schools'

and consultants’ financial records to determine if

it was reimbursing them only for reasonable costs.

Recommendations

If PREP resumes as planned, we recommend that VA

--issue regulations which clearly define the

types and amounts of PREP costs for which

reimbursement will be made and

--make appropriate audits of schools' and

consultants’ PREP financial records to enable

VA to (1) determine if there is compliance

with appropriate regulations and (2) take the

necessary steps to gain compliance, where

lacking.

FUTURE OF PREP

VA's PREP operations have been suspended but

are due to resume about 1979. In the interim DOD

received congressional approval to reprogram about

$50 million of its fiscal year 1977 and 1978 appro-

priations to expand its own high school completion

and remedial education programs to replace PREP.

In some cases DOD is using the same schools that were

affiliated with VA.

According to Public Law 94-502, when PREP is

again implemented, it will be available only to

eligible military personnel during the last six

months of their first enlistment.

DOD officials informed us that they prefer their

military personnel to receive PREP-type training

early in their enlishment because it is more bene-

ficial to the armed services. They, therefore, make

this type of training available throughout the en-

listment period.

Conclusion

If VA resumes PREP as planned, the probability

exists that DOD and VA will be making similar high

school completion and remedial education programs

available to military personnel. DOD prefers its

military personnel to not wait until the last 6

months of their first enlistment to take this type

of training and, therefore, offers it throughout

the enlistment period.

Recommendations

We recommend that before VA resumes operation

of PREP, it determine, in conjunction with DOD,

the need for it to participate in this type of

program.

We also recommend that if it is determined

that DOD is providing this type of training, VA

develop an appropriate legislative proposal to remove

PREP from VA statutes and eliminate future VA

activities in the program.

The contents of this report have been discussed

with VA's Office of the General Counsel and represen-

tatives of the Department of Veterans Benefits. Also

some of its contents have been discussed with DOD

officials. The comments received have been

considered in preparing this report.

As you know, section 236 of the Legislative

Reorganization Act of 1970 requires the head of a

Federal agency to submit a written statement on

actions taken on our recommendations to the House

Committee on Government Operations and the Senate

Committee on Governmental Affairs not later than 60

days after the date of the report and to the House

and Senate Committees on Appropriations with the

agency's first request for appropriations made

more than 60 days after the date of this report.

We are sending copies of this report to the

Chairmen of the House and Senate Committees on

Appropriations, House Committee on Government

Operations, Senate Committee on Governmental Affairs,

and House and Senate Committees on Veterans' Affairs;

the Director of the Office of Management and Budget;

and the Secretary of Defense.

We appreciate the cooperation provided by VA

officials during our review. We will be pleased to

meet with your office to discuss the audit techniques

we employed as well as to provide additional data on

the schools and consultants holding surpluses.

Sincerely yours,

/s/ GREGORY J. AHART

Gregory J. Ahart

Director

Enclosures - 2

ENCLOSURE I

UNITED STATES GENERAL ACCOUNTING OFFICE

WASHINGTON, D.C. 20548

HUMAN RESOURCES DIVISION

April 6, 1977

MR. Guy H. McMichael, III

General Counsel

Veterans Administration

Dear Mr. McMichael:

During our current survey of VA's Predischarge

Education Program (PREP), we noted instances where

schools had (1) used PREP funds for non-Program

purposes, (2) Program funds and resources after

Program termination, and (3) earned excessive

profits from Program operations.

We request that you provide us with a statement

of VA's position on recovering such misused and sur-

plus funds and resources. Please relate your posi-

tion to the following areas noted during our survey.

--Unused general Program funds and contin-

gency fund balances,

--Excess profits.

--Program funds and resources used for non-

PREP purposes.

~-Unused PREP resources on hand after

Program termination, i.e., books, supplies,

vehicles, typewriters, audio-visual

systems, and other equipment.

We have discussed the recovery of such resources

with Mr. Robert Dysland, your Deputy Assistant. Also,

we have talked with Mr. John Rowsey, Department of

Veterans Benefits, regarding relevant PREP regula-

tions and guidelines.

Inasmuch as our survey is well underway, we

would appreciate it if you could provide us with

VA's position paper as soon as possible. If you

have any questions, please contact Mr. Thomas A.

Quarry at 389-5287.

Sincerely yours,

/s/ GEORGE D, PECK

George D. Peck

cc: Mr. Busbee (IAS) Assistant Director

ENCLOSURE II

VETERANS ADMINISTRATION

OFFICE OF GENERAL COUNSEL

WASHINGTON, D.C. 20420

June 13, 1977

IN REPLY REFER TO: 021

Mr. George D. Peck

Assistant Director

Human Resources Division

United States General Accounting Office

Washington, D. C. 20548

Dear Mr. Peck:

This will respond to your letter of April 6, 1977,

requesting the views of the Veterans Administration

on recovery of misused and surplus funds and

resources from schools who were engaged in

Predischarge Education Program (PREP) education.

You specifically ask for our position on the follow-

ing areas;

1. Unused general Program funds and

contingency fund balances.

2. Excess profits.

3. Program funds and resources used for

non-PREP purposes.

4. Unused PREP resources on hand after

Program termination, i.e., books,

supplies, vehicles, typewriters,

audio-visual systems, and other

equipment.

At the time the PREP program was enacted into law by

Public Law 91-219, the Congress provided a program

calling for reimbursement to the school for the cost

of tuition, fees, books, and supplies. Under the

provisions set forth in section 1696(b) of title

38, United States Code, the school was not permitted

to make charges in excess of the established and

customary charges for similarly circumstanced non-

veterans. The House-Senate conferees, in their

report to the House and Senate on H, R. 11959 (House

Report 91-918, p. 14) stated:

"It is the purpose of this new program

to assist active duty servicemen in prepar-

ing for their future education and training

by providing certain remedial and refresher-

type training prior to the servicemen's

discharge from service. This program permits

the Administrator of Veterans' Affairs to make

necessary payments directly to the serviceman,

these payments being intended for reimburse-

ment to the educational institution for the

cost of tuition, fees, books, and supplies.

The educational institution is not permitted

to make charges of the servicemen in

excess of established and customary

charges for similar circumstanced non-

veterans. On the other hand, the program

contemplates that participating educa-

tional institutions will be able to recoup

the full, reasonable costs entailed in

providing predischarge education or train-

ing. Although it is recognized that some

institutions may not generally charge

tuition or fees for regular courses, it

seems unreasonable that such institutions

would be expected to provide speWial pro-

grams, such as PREP, without charging

enrolled students appropriately." (Emphasis

supplied.)

In the enactment of Public Law 92-540, effective

October 24, 1972, the Congress amended Section

1696(b) to grant the Administrator, where there was

no same program, the authority to "establish appro-

priate rates for tuition and fees designed to allow

reimbursement for reasonable costs for the education

and training institution." (Emphasis supplied.)

With these basic provisions of law in mind, it is

our view, with respect to your first question,

that unused general program funds and contingency

fund balances are subject to refund to the Veterans

Administration in the same manner as excess profits/

surplus accrued after the effective date of a "fixed

rate" after October 24, 1972, the effective date of

Public Law 92-540 cited above. we do believe, how-

ever, that a reasonable and fair interpretation

should be applied in determining close-out costs as

schools discontinue their programs.

Concerning excess profits/surplus accrued after

October 24, 1972, in the operation of programs for

which there was a “fixed rate," any such moneys

should be refunded to the Veterans Administration.

The cost determination leading to fixed rates was

applied after that time to newly established programs

or to a request for an increase in a rate which had

previously been accepted as a "same program."

(There were approximately 200 schools which offered

PREP programs.) It is our view that the law all

along has provided for reimbursement of costs.

However, we also believe that the intent of the law

is clear -- no profit, no loss.

The reimbursement feature of*the law and control as

to its application has been provided in Program

Guide 21-1, Change 197 (Section M-37 dated August

13, 1973), Change 198 (Section M-42 dated September

7, 1973), and Change 208 dated October 31, 1974) (sic)

(copies enclosed). The efforts of the Veterans

Administration to protect the school against the con-

tingency of unknown, but allowable expenses, was

covered by Paragraph 13 of Change 208--a 5 percent

contingency allowance when surplus funds from a past

period were used as an offset in the rate established

for a later period.

We believe that program funds and resources used for

non-PREP purposes should be disallowed to the extent

that they affected surplus/profit that accrued after

the date of a "fixed rate," which could be as early

as October 24, 1972, the date of enactment of Public

Law 92-540.

Unused PREP resources on hand after program termina-

tion, i.e., books, supplies, vehicles, typewriters,

audio-visual systems, and other equipment, represent

a surplus in the same manner as excess profits.

Because of limited opportunity for use, we would

have no objection to such disposition as the General

Accounting Office finds appropriate.

We hope that our views on the points you have raised

in your letter will be helpful to you in your surveys

of PREP schools.

(40666)

Sincerely yours,

/s/ GUY H,. McMICHAEL

GUY H. McMICHAEL III

General Counsel

94 7

APPENDIX F

§ 2303. Applicability of chapter tracts for its installation or alteration.

Aug. 10, 1956, c. 1041, 70A Stat. 128; July 29, 1958,

(a) This chapter applies to the purchase, and

contract to purchase, by any of the following agen- Pub.L. 85-568, Title r1z, 6 301(b), 72 Stat. 432.

cies, for its use or otherwise, of all property named

in subsection (b), and all services, for which pay-

ment is to be made from appropriated funds:

(1) The Department of the Army.

(2) The Department of the Navy.

(3) The Department of the Air Force.

(4) The Coast Guard.

(5) The National Aeronautics and

Space Administration.

(b) This chapter does not cover land. It

covers all other property including--

(1) public works;

(2) buildings;

(3) facilities;

(4) vessels;

(5) floating equipment;

(6) aircraft; ]

(7) parts;

(8) accessories;

(9) equipment; and

(10) mechine tools.

to the procurement of property apply also to con-

ees

So ESOT SN TH

THE SUPREME COURT OF WASHINGTON

ROGER R. RUTCOSKY, ET AL,

Respondents,

Ts NO. 44716

HAROLD L. TRACY, ET AL, ORDER DENYING

PETITION FOR RECONSIDERATION

Appellants.

The Court having decided by a vote of eight to

one that the appellant's petition for reconsideration

should be denied,

It is ordered that the petition be and it hereby is

denied.

Dated this 9th day of June, 1978.

Chief tea at all

89 Wn.2d 606

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.