Petition for Writ of Certiorari — City of Detroit v. Murray Corp.

Supreme Court brief1955

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OCTOBER TERM, 1955

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CITY OF DETROIT,

a Michigan Municipal Corporation, and

COUNTY OF WAYNE,

a Michigan Constitutional Body Corporate,

Petitioners and Defendants,

vs.

THE MURRAY CORPORATION OF AMERICA,

a Delaware Corporation,

Respondent and Plaintiff

and

THE UNITED STATES OF AMERICA, Intervenor

—

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE

SIXTH — IT

APPENDIX

a re

CITY OF DETROIT, a Michigan

Municipal Corporation,

By PAUL T. DWYER,

Its Corporation Counsel, and

JAMES H. LEE,

Assistant Corporation Counsel,

and

COUNTY OF WAYNE, a Michigan

Constitutional Body Corporate,

By GERALD K. O'BRIEN,

Prosecuting Attorney, and

ALBERT E. CHAMPNEY,

Of Counsel,

Petitioners and Defendants.

SUBJECT INDEX

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Statutes, Federal Regulations, ete..............

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Reasons for Allowance of Writ...................

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CITATIONS OF AUTHORITIES

Carter v. Carter Coal Co., 298 U.S. 238............

mat porte Qubrim, SET UW. G. Benn cs cc ccccaccnnspaces

Railroad Retirement Board v. Alton R. Co., 295 U.S.

BOD wusaihiechinkedsaewishhukshiedaegyeavkes

Rickert Rice Mills v. Fontenot, 297 U.S. 110........

United States v. Bankers Trust Co., 294 U.S. 240...

United States v. United Mine Workers, 330 U. 8. 258

Youngstown Co. v. Sawyer, 343 U. S. 579. ..........

ST ry SOT Ce RL EF eR SN TTR ER RSE a

Supreme Court of the United States

OCTOBER TERM, 1955

CITY OF DETROIT,

a Michigan Municipal Corporation, and

COUNTY OF WAYNE,

a Michigan Constitutional Body Corporate,

Petitioners and Defendants,

vs.

THE MURRAY CORPORATION OF AMERICA,

a Delaware Corporation,

Respondent and Plaintiff

and

THE UNITED STATES OF AMERICA, Intervenor

a Se

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE

SIXTH CIRCUIT

and

APPENDIX

—— >

To the Honorable the Chief Justice and the Associate Jus-

tices of the Supreme Court of the United States:

Come now the City of Detroit, a Michigan municipal cor-

poration, and County of Wayne, a Michigan Constitutional

Body Corporate, petitioners and defendants in the above

entitled consolidated action and hereby move the Court

to grant its writ of certiorari based on the following:

CUR 34 Ga QL OI PONIES EELS OI NE LN EPS LO OE HN

This application for writ of certiorari is filed to obtain

relief at the hands of the Supreme Court from determina-

tion of Hon. Thomas P. Thornton, District Judge, for the

_ Eastern District of Michigan, in the above entitled con-

solidated action, wherein the United States is an interven-

ing party, a copy of the opinion being hereto appended

(20a), which is not yet reported in the Federal Reports.*

GROUNDS ON WHICH JURISDICTION IS INVOKED

(i) On June 29, 1955, pursuant to said opinion, an

Order granting motion of the plaintiff for summary judg-

ment was signed and entered. On the same date also signed

and entered were:

(a) A judgment for plaintiff against defendant,

City of Detroit, in the first half of 1952 tax case for

$33,857.48, plus the sum of $4,876.49, as interest, with

interest thereon at the rate of five percent per annum

from date of entry thereof.

(b) A judgment for plaintiff against defendant,

City of Detroit, in the second half case for $33,857.48,

plus the sum of $4,157.02, as interest, with interest

theeron at the rate of five percent per annum from

date of entry thereof.

*For compliance with Rule 21 (1), the original files containing all

proceedings, depositions and exhibits in these cases have been transmitted

to the Clerk of this Court in lieu of a transcript of record, pursuant to an

order to that effect entered Sept. 14, 1955 by Hon. Chase C. Simons, Chief

United States Circuit Judge, Sixth Circuit.

County of Wayne, for $12,572.66, plus the sum of

$1,543.64, us interest, with interest thereon at the rate

of five percent per annum from date of entry thereof.

(ii) That within the time provided by Court Rule,

Notices of Appeal were filed by the respective defendants

and entered on July 27, 1955, in each of said cases, to the

Court of Appeals for the Sixth Cireuit. That upon the

filing of Supersedeas Bond in each of said cases as re-

quired by Court Rule, Orders Staying Proceedings were

duly signed and entered by Hon. Arthur A. Koscinski, Dis-

trict Judge, for and in the absence of Hon. Thomas P.

Thornton.

Thereupon by stipulation of the respective parties,

Orders for Consolidation of the several actions for presen-

tation and hearing of appeals taken by said defendants

were signed and entered on July 29, 1955. On the same

day, also on stipulation, an Order for extending the time

for filing record on appeal and docketing appeal to and in-

cluding Sept. 30, 1955 was signed and entered.

On Sept. 8, 1955, steps to file the record on appeal and

docket the Appeal in the United States Court of Appeals

for the Sixth Circuit were jointly taken by the respective

defendants and the required fee paid.

(iii) See. 1254 of the 1948 Revised Judicial Code (Title

28 U.S. C. A. $1254) confers on the Supreme Court juris-

diction to review the judgments in question in this con-

solidated appeal by writ of certiorari:

**(1254) Cases in the Courts of appeal may be

reviewed by the Supreme Court by the following

methods:

A aitaraceteseinictcelelndeiilaani ie ESIC SSR SII URAL NRE

(1) By writ of certiorari granted upon the peti-

tion of any party to any civil or criminal case, before

or after rendition of judgment or decree;’’

Sec. 2101 of said Code as amended May 24, 1949 ¢ 139

$106, 63 Stat. 104 (Title 82 U. S. C. A. §2101) provides:

**(e) Any other appeal or any writ of certiorari

intended to bring any judgment or decree in a civil

action, suit or proceeding before the Supreme Court

for review shall be taken or applied for within

ninety days after the entry of such judgment or

decree. A justice of the Supreme Court, for good

cause shown, may extend the time for applying for

a writ of certiorari for a period not exceeding sixty

days.’’

; **(e) An application to the Supreme Court for a

writ of certiorari to review a case before judgment

has been rendered in the court of appeals may be

made at any time before judgment.”’

QUESTIONS PRESENTED FOR REVIEW

The plaintiff in this action is a Delaware corporation

with its principal office in the City of Detroit, Wayne

County, Michigan. On Court Order, leave was given to

the United States to intervene in the case on Feb. 4, 1954.

However, no relief was awarded it by the District Court’s

judgments.

The defendants are City of Detroit, a municipal corpora-

tion, and County of Wayne, a Michigan constitutional

body corporate, from whom plaintiff corporation seeks

refund of 1952 city and county personal property taxes

levied under State law and paid by it under protest on

these alleged grounds:

(i) That the Detroit Board of Assessors included

property of the United States Government in its assess-

ment of personal property of plaintiff corporation in

the City of Detroit for 1952;

(ii) That said property claimed to be improperly

assessed was exempt from taxation by the City of De-

troit by virtue of the Constitution and laws of the

United States and by virtue of the Constitution and

laws of the State of Michigan.

(iii) That the entire tax levied thereon by the City

of Detroit for the year 1952 was illegal and void be-

cause of such error in assesment of the personal prop-

erty of plaintiff corporation.

These contentions stem from the imposition of an assess-

ment for the purpose of collecting a non-discriminatory

ad valorem tax on personal property acquired and being

processed by an independent contractor (plaintiff corpo-

ration) in the City of Detroit under a sub-contract for

eventual delivery to prime contractors and by the latter

to the United States Air Force under separate prime con-

tracts.

The broad question raised by plaintiff corporation and

the Government is whether the taxes in question were based

on assessment of property owned by the United States

Government on Jan. 1, 1952, being the assessment date

prescribed by Michigan law.

More specifically defendants submit the following as

questions presented for review:

(i) Whether inclusion of partial payment and

transfer of title clauses used in such contracts were in

conformance with or in violation of federal statutes.

—_ TEA ne nt i i ir a se : ee ; CPST ae

(ii) Whether inclusion of partial payment and

transfer of title clauses would operate to defeat an ad

valorem tax on personal property in the hands of an

independent sub-contractor.

(iii) Whether the partial payment and passage of

title clauses were included in the subcontract for any

other reason than financial security for partial pay-

ments?

(iv) Whether statutory authority existed for the

Government contracting officers themselves or by dele-

gation for the prime contractor to include in the sub-

contracts the provisions for partial payments and for

passage of title from the sub-contractor to the Govern-

ment.

(v) Whether plaintiff corporation is the real party

in interest as required by Rule 17(a) of the Federal

Rules of Civil Procedure.

(vi) Whether the District Court Judge failed to

take into account and give due weight to all the stipu-

lated and undisputed facts (which show a course of

conduct and dealing with the property in question in-

consistent with the claim of absolute title in the Gov-

ernment).

(vii) Whether the District Court Judge gave to de-

fendants all the favorable inferences to which they

were entitled from the undisputed facts submitted on

plaintiff’s motion for summary judgment.

(viii) Whether the subject assessed property is

entitled to exemption from a non-discriminatory ad

valorem local property tax even if title is held to

have passed to the Government by virtue of the ques-

tioned contract provisions?

EL RAE ES ETL LL OS INGE ORES A IY GE At EE SSE AAT nS aR De ee —

STATUTORY PROVISIONS INVOLVED

Statutory provisions connected with the issues are re-

ferred to below. Being too lengthy to set forth here in

full, the pertinent text appears in the appendix attached

hereto beginning at p. 7a.

Armed Procurement Act of 1947, Public Law of

80th Congress, 41 U. S. C. A. See. 151 et seq.

R. S. 3648, 31 U. S. C. A. 529

34 U.S. C. A. Sec. 582

41 U.S. C. A. See. 255

50 U.S. C. See. 611 App.

See. 211.1 C. L. Mich. 1948

See. 440.26 C. L. Mich. 1948

See. 566.137 C. L. Mich. 1948

STATEMENT OF FACTS IN THE CASE

The matter here presented involves an appeal from a con-

solidated action* by plaintiff to recover personal property

ad valorem taxes levied by defendants based on a common

assessment as of Jan. 1, 1952 upon personal property in

plaintiff’s possession in its plant at Detroit, Michigan, pro-

cured and being processed for parts and components of air-

eraft and aircraft engines to be delivered to Kaiser Manu-

facturing Company and to Curtiss-Wright Corporation re-

spectively. The latter were prime contractors with the

*Action No. 12108 was filed Sept. 9, 1952 to recover the first half of

the City of Detroit 1952 taxes; Action No. 12482 was filed Feb. 11, 1953

to recover the second half of the City of Detroit 1952 taxes; Action No.

12483 was filed Feb. 1, 1953 to recover the 1952 County of Wayne taxes.

Se ee ae

United States Air Force and were engaged in the manu-

facture of airplanes for the United States Air Force.*

Subsequent to the execution of the respective letter sub-

contracts, the prime letter contracts were amended to pro-

vide for inclusion and made applicable to such sub-con-

tracts the language providing for partial payments prior

to delivery on work in progress substantially as found in

APR 5-407.2 (1) which is too lengthy to cite here and may

be found in the appendix attached hereto (p. 1a).

Requests were made by plaintiff to the respective prime

contractors and payments were thereafter received from

Kaiser in the aggregate amount of $163,949.20 on Oct.

12, 1951, seven months following execution of its letter

subcontract and from Wright in the amount of $510,827.67

on Dee. 31, 1951 eight months following execution of its

letter subcontract. These payments were subsequently

used by prime contractors as a basis for their own respec-

tive requests for partial payments from the Government.

*Plaintiff’s sub-contract with Kaiser consisted of a letter of intent

executed March 23, 1951 for the manufacture of certain parts and sub-

assemblies therein specified, amended Aug. 15, 1951 and again on Oct. 4,

1951, under Kaiser’s letter Prime Contract No. AF 33(038)-18481 with

the United States Government entered into Dec. 20, 1950 and subse-

quently amended.

Plaintiff's other sub-contract with Wright was likewise a letter of

intent executed April 19, 1951 for the manufacture of certain parts and

subassemblies therein specified, amended on May 24, 1951, under Wright's

Prime Contract No. AF 33(038)-181382 with the United States Govern-

ment entered into Dec. 12, 1950 and subsequently amended.

The letter prime contract between Wright and the latter referred to

a so-called Basic Agreement No. 1 and made it a part of the contract

between them. Superseding definitive sub-contracts and prime contracts

were not agreed upon nor made effective until after the assessment date

here in question.

The Government inspection of goods and checking of

plaintiff’s procedures was carried on to effect a clear-

ance for the prime contractor under its prime contract.

Otherwise the Air Force had no direct supervision over

plaintiff sub-contractor with respect to its costs.

According to the letter contracts involved here, the only

reimbursement to plaintiff during the period to Jan. 1,

1952 was for its costs to the extent set forth. No profit

was provided for until prices would be agreed upon in a

definitive contract, the first prices being retroactive to the

beginning of performance under the letter sub-contract.

Plaintiff included the amount of the 1952 taxes, here

sought to be recovered, as an element of burden in comput-

ing costs submitted for forward price redetermination and

retrospectively as to goods completed and delivered prior

to the date of the first price redetermination. In the same

way the prime contractors included the redetermined prices

(which involved negotiating on all cost items of which

taxes was but one of many) to the extent paid as part of

their costs submitted to the United States Air Force

(Stipulation II (5)). (See also Deposition Record pp.

101-117).

In this connection we quote from p. 108 of said deposition

of Mark I. Sammon, Assistant Treasurer of plaintiff :

**We have collected—I can’t say we have collected

all of it (1952 taxes) and I can’t say we haven’t. As

it would enter the inventory if the inventory were

completely liquidated, yes. If the inventory as it is

were not completely liquidated, I don’t know what

portion would he left.’’

POS CNET

No supplies or subassemblies (end products made by

plaintiff) had been completed, inspected or delivered to

either of the prime contractors by plaintiff under said

letter subcontracts prior to Jan. 1, 1952 and all materials,

supplies and such uncompleted items as were on hand

on assessment day were subjected to the assessment being

chailenged.

Such assessed property was identifiable prior to Jan. 1,

1952 by tagging, labeling or by segregation, all according

to such letter sub-contract by number and description.

Also it was segregated from other personal property owned

and used by plaintiff in connection with its automotive

and other operations.

Plaintiff’s aircraft operations were separated from its

automotive and other operations and under the supervi-

sion of a separate division manager and supervisory staff.

The agreed upon dollar valuation of personal property

so assessed on Jan. 1, 1952 is $2,043,670.00. The claim

of plaintiff against defendant City is in the sum of $67,-

714.96 and against defendant County in the sum of $12,-

572.66, exclusive of interest from the date same was paid

under protest prior to commencement of the several actions

herein.

On March 11, 1954, the consolidated action was heard and

submitted before Hon. Thomas P. Thornton, District

Judge, on plaintiff’s motion for summary judgment filed

Jan. 6, 1954.

Between these two dates depositions were taken at de-

fendants’ request, records of plaintiff Murray were ex-

amined and stipulations were prepared, executed and filed

to the end that the matter could be submitted to the Court

upon undisputed facts for his determination as a matter

of law based upon the pleadings, stipulations, depositions

and exhibits.

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LLG LDL LOL BEVIN PIU EE Ny OLNEY RLF EER DN RITE OR IE ARCO PAO NE 2 WN IN =

ety a) RIPHTASY Sle te Cth.

Defendants’ Exhibit 3 consisted of a portion of the de-

fendant City’s personal property assessment roll, the line

applicable to the subject property containing the notation

“subject to prior rights of Federal Government.”’

WHAT THIS CASE DOES NOT INVOLVE

1. Tools already owned and furnished by the United

States Government to plaintiff under a separate facility

contract were not assessed and therefore are not involved..

2. Tools completed by plaintiff under the sub-contracts

prior to Jan. 1, 1952 were not assessed and are not a sub-

ject of this suit.

3. The tax involved here is not a privilege or specific

tax but an ad valorem non-discriminatory property tax.

4. The tax does not include any assessment against real

estate.

5. No claim is made that the tax imposed a lien on the

subject property in conflict with any prior rights of the

Government.

The matter does not involve the judgment of a State

Court.

BASIS FOR ORIGINAL FEDERAL JURISDICTION

Jurisdiction in the District Court is invoked by plaintiff

on 28 United States Code, Sections 1331 and 1332 respec-

tively.

(a) The controversy arises under the Constitution and

laws of the United States and the amount involved

PEL ENN ENE REEL IN FL NY AREER MANNY INR ER SEH ATONE NER ERIN OEE sv cg

exceeds the sum of $3,000.00, exclusive of interest

and costs.

(b) The controversy is between citizens of different

States and the amount involved exceeds the statu-

tory minimum.

ARGUMENT

Reasons for Allowance of Writ

1. As already indicated, the action was determined in

the District Court on plaintiff’s motion for summary judg-

ment. All parties cooperated in an attempt to present

the case on undisputed facts in the form of depositions,

stipulations and exhibits which together with the pleadings

would permit a determination as a matter of law. There

are therefore no questions of fact for this Court to consider.

All that was reserved by the respective parties in con-

nection with the stipulations was the right to argue the

weight or materiality or interpretation of the agreed facts.

2. While this consolidated action involves only $67,-

714.96 claimed of defendant City and $12,572.66 claimed

of defendant County, for the year 1952, plaintiff has simi-

lar actions pending for 1953 and 1954 in the District Court.

Likewise three other local taxpayers represented by

counsel for plaintiff herein have a total of 15 cases pending

in said Court, and 7 other local taxpayers have a total of

19 cases involving the same or similar issues now pending

in the Wayne County Circuit Court awaiting trial.

3. It is respectfully submitted that the District Court

erred in dealing with the issues presented by this action

AE EGE ERE EI PE ILE NE SE EE —

and the fundamental constitutional questions involved, with

the result that the Court’s construction of the Armed Serv-

ices Procurement Act of 1947 conflicts with operation of

state tax laws upon which defendants rely for their prin-

cipal revenue. These issues are of vital importance to the

Government and to the defendants here, as it is also to

a number of other State, county and local taxing units from

coast to coast in which similar government contracts have

been placed. Public interest, national and local, requires

that this Court take jurisdiction and authoritatively re-

solve them by reversing the judgments of the District

Court.

4. The present situation is seriously confused both as

to authority for contracting policies of the Defense Depart-

ment of the Nation on the one hand and the taxing proce-

dures and fiscal policies of defendants locally on the other.

Contracts continue to be let with ih« controversial provi-

sions here in issue and assessments have been and are

currently being made by defendant City’s Assessors to

meet the cost of providing necessary local services, fol-

lowed by protests from the taxpayers affected by such

assessments. It is for the additional reason that these ques-

tions are likely to recur that petitioners seek review by this

Court of the judgments rendered against them before

hearing and determination by the Court of Appeals.

5. The predicament of plaintiff and other taxpayers in

a like situation is not to be overlooked. Uncertain of its

rights under its sub-contracts entered into for production

of subassemblies for a prime contractor and its obligations

to pay local ad valorem taxes on personal property ac-

quired and being processed, plaintiff has no choice other

than to pay the taxes under protest and commence separate

suits for their refund in each of the years such taxes are

levied during the life of the sub-contract.

Bes NISRA REPT IES OMT ORE DELS IEG FTA S IR PE EL LLG EE EN PR IN, I

MANA RSICe e Iw sy =e

6. It is inescapable that the large number of cases

pending on the docket of the District Court as well as sev-

eral brought by other local taxpayers awaiting trial in the

Wayne County Cireuit Court would be expedited by prompt

settlement by this Court of the important constitutional

questions involved in this case.

SUMMARY

This matter manifests characteristics of others* in which

this Court has seen fit to exercise its discretionary au-

thority to issue a writ of certiorari prior to hearing and

decision by the Court of Appeals. The circumstances re-

cited above demonstrate the following compelling reasons

to grant certiorari and permit briefs on the merits and oral

argument:

1. No serious or difficult questions of fact involved;

2. Pendency of large number of similar actions;

3. Presents important constitutional issues, substan-

tial in nature;

4. Early settlement is needed of questioned official

procedures both on the part of the Government and

local communities ;

5. Taxpayers are entitled to end of confusion.

*This Court, having found such considerations to exist, has granted

the writ before judgment in a number of cases in which the identical

procedure was followed, e. g., United States v. Bankers Trust Co., 294

U. S. 240; Railroad Retirement Board v. Alton R. Co., 295 U. S. 380;

Rickert Rice Mills v. Fontenot, 297 U. S. 110; Carter v. Carter Coal Co.,

298 U. S. 238; Ex parte Quirin, 317 U. S. 1; United States v. United

Mine Workers, 330 U. S. 258; Youngstown Co. v. Sawyer, 343 U. S. 579.

oS, Paes EAN AREER YE al ELS BIE LN PL LETHE MOET LOM INES Ga egy yan cay ss on

EARLY HEARING

An early determination of the ultimate questions pre-

sented by this case is of extreme importance to the plain-

tiff taxpayer, to the Defense Department of the United

States and to the county and city made defendants (peti-

tioners) herein. In addition to the foregoing considera-

tions, there is the pressing practical problem affecting

defendants city and county, that substantial amounts of

tax revenues are involved in these and the other cases now

awaiting trial. Interest is accruing on such taxes paid

under protest thereon at the rate of upwards of $10,000.00

a month, prompting the request that this Court fix an early

date for hearing on the merits following the receipt of the

record and briefs—in the event the foregoing petition is

favorably considered.

— BAGELS MEN RE NEGRO LER ELS REED ISON IRA Rt NES RIN

CONCLUSION

For the reasons stated it is respectfully prayed:

That this petition for writ of certiorari to the United

States Court of Appeals for the Sixth Circuit be granted

by this Honorabie Court to the end that this cause may be

reviewed and determined by this Court;

That the matter be set down for early hearing;

That an Order should be issued to preserve the rights

of the parties and stay proceedings in the Court of Ap-

peals, Sixth Cireuit, pending final decision by this Court.

Respectfully submitted,

CITY OF DETROIT,

a Michigan Municipal Corporation

By PAUL T. DWYER,

its Corporation Counsel, and

BERT R. SOGGE,

VANCE G. INGALLS,

JULIUS C. PLISKOW,

JAMES H. LEE,

Assistants Corporation Counsel.

COUNTY OF WAYNE,

a Michigan Constitutional Body

Corporate,

By GERALD K. O’BRIEN,

Prosecuting Attorney and

HOBART TAYLOR, JR.,

PHILIP A. McHUGH,

THOMAS J. FOLEY, Jr.,

Assistants Prosecuting Attorney

and

ALBERT E. CHAMPNEY,

Of Counsel.

September 15, 1955.

os na POAT Aa INT ER ALI, OWT PDAS TAS ESET BEEN ENS PE IT TT LY nee

Procurement Regulations la

APPENDIX

Procurement Regulations

5-407.2. Partial Payments.—(1) When payments are

not to exceed 75 percent of the cost of the property—In

those cases where it is contemplated that partial payments

in an amount not to exceed 75 percent of the cost to the

contractor of the property will be made, the contract will

contain the following article:

Partial payments.—Partial payments, which are

hereby defined as payments prior to delivery, on work

in progress for the Government under this contract,

may be made upon the following terms and conditions.

(a) The Contracting Officer may, from time to time,

authorize partial payments to the Contractor upon

property acquired or produced by it for the perform-

ance of this contract: Provided, that such partial pay-

ments shall not exceed 75 per cent of the cost to the

Contractor of the property upon which payment is

made, which cost shall be determined from evidence

submitted by the Contractor and which must be such

as is satisfactory to the Contracting Officer: Provided

further, that in no event shall the total of unliquidated

partial payments (see (c) below) and of unliquidated

advance payments, if any, made under this contract,

exceed 80 percent of the total contract price of supplies

still to be delivered.

(b) Upon the making of any partial payment under

| this contract, title to all parts, materials, inventories,

work in process and non durable tools theretofore ac-

quired or produced by the Contractor for the perform-

ance of this contract, and properly chargeable thereto

2a Procurement Regulations

under sound accounting practice, shall forthwith vest

in the Government; and title to all like property there-

after acquired or produced by the Contractor for the

performance of this contract and properly chargeable

thereto as aforesaid shall vest in the Government forth-

with upon said acquisition or production: Provided,

that nothing herein shall deprive the Contractor of

any further partial or final payments due or to become

due hereunder; or relieve the Contractor of the Gov-

ernment of any of their respective rights or obliga-

tions under this contract.

(ec) In making payment for the supplies furnished

hereunder, there shall be deducted from the contract

price therefor a proportionate amount of the partial

payments theretofore made to the Contractor, under

the authority herein contained.

(d) It is recognized that property (including, with-

out limitation completed supplies, spare parts, draw-

ings, information, partially completed supplies, work

in process, materials, fabricated parts and other things

called for herein) title to which is or may hereafter

become vested in the Government pursuant to this

Article will from time to time be used by or put in

care, custody or possession of the Contractor in connec-

tion with the performance of this contract. The Con-

tractor, either before or after receipt of notice of ter-

mination at the option of the Government, may acquire

or dispose of property to which title is vested in the

Government under this Article, upon terms approved

by the Contracting Officer, provided, that after receipt

of notice of termination, any such property that is a

part of termination inventory may be acquired or dis-

posed of only in accordance with the provisions of the

termination article of this contract and applicable laws

PRETRIAL RET EP ARIE I BOE IE MEER IDS ERY RS RR RON RIEL ORLY ORS IIT LRN GD FET Se RT Ne Pe aL TD —

Procurement Regulations 3a

and regulations. The agreed price (in case of acquisi-

tion by the contractor) or the proceeds received by the

contractor (in case of any other disposition), shall, to

the extent that such price and proceeds do not exceed

the unliquidated balance of partial payments here-

under, be paid or credited to the Government as the

Contracting Officer shall direct; and such unliquidated

balance shall be reduced accordingly. Current produc-

tion scrap may be sold by the Contractor without ap-

proval of the Contracting Officer but the proceeds

will be applied as provided in this paragraph (d), pro-

vided that any such scrap which is a part of termina-

tion inventory may be sold only in accordance with

the provisions of the termination article of this con-

tract and applicable laws-and regulations. Upon liqui-

dation of all partial payments hereunder or upon com-

pletion of deliveries called for by this contract, title

to all property (or the proceeds thereof) which has

not been delivered to and accepted by the Government

under this contract or which has not been incorporated

in supplies delivered to and accepted by the Govern-

ment under this contract and to which title has vested

in the Government under this Article shall vest in the

Contractor.

(e) The article of this contract captioned ‘‘Liabil-

ity for Government-furnished Property’? and any

other provision of this contract defining liability for

Government—furnished property shall be inapplicable

to property to which the Government shall have ac-

quired title solely by virtue of the provisions of this

Article. The provisions of this Article shall not re-

lieve the Contractor from risk of loss or destruction

of or damage to property to which title vests in the

Government under the provisions hereof.

“Si DEVEL AR ANNE Ps EN GT RIT ERE CU NEEL Se ALTA ITA RPE LON ER I Me Reseed

rect

NRE EEE TF AY I

Procurement Regulations

(f) If this contract (as heretofore or hereafter

supplemented or amended) contains provision for Ad-

vance Payments, and in addition if at the time any par-

tial payment is to be made to the Contractor under the

provisions of this partial payments article any un-

liquidated balance of advance payments is outstanding,

then notwithstanding any other provision of the Ad-

vance Payments Article of this contract the net

amount, after appropriate deduction for liquidation of

the advance payment, of such partial payment shall

be deposited in the special bank account or accounts

maintained as required by the provisions of the Ad-

vance Payments Article, and shall thereafter be with-

drawn only pursuant to such provisions.

(2) When payments are not to exceed 90 percent of di-

labor and material costs.—In those cases where it is

contemplated that partial payments in an amount not to

exceed 90 percent of the direct labor and material costs

to the contractor will be made, the contract will contain the

following article:

Partial payments.—Partial payments, which are

hereby defined as payments prior to delivery, on work

in progress for the Government under this contract,

may be made upon the following terms and conditions.

(a) The Contracting Officer may, from time to time,

authorize partial payments to the Contractor upon

property acquired or produced by it for the perform-

ance of this contract: Provided, that such partial pay-

ments shall not exceed 90 percent of the direct labor

and direct material costs to the Contractor of the

property upon which payment is made, which costs

shall be determined from evidence submitted by the

Contractor and which must be such as is satisfactory

ois \ "ahic Site sei a Dees SENET rere iN Se A 5.5 NO Ea a RED APM Q OR ats RM

Procurement Regulations 5a

to the Contracting Officer: Provided further, that in

no event shall the total of unliquidated partial pay-

ments (see (c) below) and of unliquidated advance

payments, if any, made under this contract, exceed 80

percent of the contract price of supplies still to be

delivered.

(b) Upon the making of any partial payment under

this contract, title to all parts, materials, inventories,

work in process and non-durable tools theretofore ac-

quired or produced by the Contractor for the perform-

ance of this contract, and properly chargeable thereto

under sound accounting practice, shall forthwith vest

in the Government; and title to all like property there-

after acquired or produced by the Contractor for the

performance of this contract and properly chargeable

thereto as aforesaid shall vest in the Government forth-

with upon said acquisition or production: Provided,

that nothing herein shall deprive the Contractor of any

further partial or final payments due or to become

due hereunder; or relieve the Contractor or the Gov-

ernment of any of their respective rights or obligations

under this contract.

hereunder, there shall be deducted from the contract

price therefor a proportionate amount of the partial

payments theretofore made to the Contractor, under

the authority herein contained.

(d) Itis recognized that property (including, with-

out limitation, completed supplies, spare parts, draw-

ings, information, partially completed supplies, work

in process, materials, fabricated parts and other things

called for herein) title to which is or may hereafter

become vested in the Government pursuant to this

=) Pl eek ca ae, eal

tes ft

wah tile tit Rh stan Gilt ns

shan

Rll baie

Dede teeneati tate nite stteicnnn~/4

Procurement Regulations

Article will from time to time be used by or put in

the care, custody or possesion of the Contractor in con-

nection with performance of this contract. The Con-

tractor, either before or after receipt of notice of ter-

mination at the option of the Government, may ac-

quire or dispose of property to which title is vested in

the Government under this Article, upon terms ap-

proved by the Contracting Officer, provided, that, after

receipt of notice of termination, any such property that

is a part of termination inventory may be acquired or

disposed of only in accordance with the provisions of

the termination article of this contract and applicable

laws and regulations. The agreed price (in case of

acquisition by the contractor) or the proceeds received

by the Contractor (in case of any other disposition),

shall, to the extent that such price and proceeds do not

exceed the unliquidated balance of partial payments

hereunder, be paid or credited to the Government as

the Contracting Officer shall direct; and such unliqui-

dated balance shall be reduced accordingly. Current

production scrap may be sold by the Contractor with-

out approval of the Contracting Officer but the pro-

ceeds will be applied as provided in this paragraph

(d), provided that any such scrap which is a part of

termination inventory may be sold only in accordance

with the provisions of the termination article of this

contract and applicable laws and regulations. Upon

liquidation of all partial payments hereunder or upon

completion of deliveries called for by this contract, title

to all property (or the proceeds thereof) which has

not been delivered to and accepted by the Government

under this contract or which has not been incorporated

in supplies delivered to and accepted by the Govern-

ment under this contract and to which title has vested

in the Government under this Article, shall vest in the

Contractor.

wail

41 U.S.C. A. 151 7a

(e) The article of this contract captioned ‘‘Liabil-

ity for Government—furnished Property’? and any

other provision of this contract defining liability for

Government-furnished property shall be inapplicable

to property to which the Government shall have ac-

quired title solely by virtue of the provisions of this

Article. The provisions of this Article shall not re-

lieve the Contractor from risk of loss or destruction

of or damage to property to which title vests in the

Government under the provisions hereof.

(f) If this contract (as heretofore or hereafter sup-

plemented or amended) contains provision for Advance

Payments, and in addition if at the time any partial

payment is to be made to the Contractor under the pro-

visions of this partial payments article any unliqui-

dated balance of advance payments is outstanding,

then notwithstanding any other provision of the Ad-

vance Payments Article of this contract the net amount,

after appropriate deduction for liquidation of the ad-

vance payment, of such partial payment shall be de-

posited in the special bank account or accounts main-

tained as required by the provisions of the Advance

Payments Article, and shall thereafter be withdrawn

only pursuant to such provisions.

41 U. S.C. A. 151 (Feb. 19, 1948, c. 65, §2, 62 Stat. 21)

$151. PURCHASES AND CONTRACTS FOR SUP-

PLIES AND SERVICES—(a) APPLICABILITY

TO ALL ARMED SERVICES

The provisions of this chapter shall be made applicable

to all purchases and contracts for supplies or services

made by the Department of the Army, the Department of

the Navy, the Department of the Air Force, the United

%e> > a a i a ee

8a ~ 41U0.8.C. A. 151

States Coast Guard, and National Advisory Committee for

Aeronautics (each being hereinafter called the agency),

for the use of any such agency or otherwise, and to be paid

for from appropriated funds.

(b) It is the declared policy of the Congress that a fair

proportion of the total purchases and contracts for sup-

plies and services for the Government shall be placed with

small business concerns. Whenever it is proposed to make

a contract or purchase in excess of $10,000 by negotiation

and without advertising, pursuant to the authority of para-

graph (7) or (8) of this section, suitable advance publicity,

as determined by the agency head with due regard to the

type of supplies involved and other relevant considerations,

shall be given for a period of at least fifteen days, wherever

practicable, as determined by the agency head.

ices shall be made by advertising, as provided in section

152 of this title, except that such purchases and contracts

may be negotiated by the agency head without advertising

if--

(1) determined to be necessary in the public inter-

est during the period of a national emergency de-

clared by the President or by the Congress;

(2) the public exigency will not admit of the delay

incident to advertising;

(3) the aggregate amount involved does not exceed

$1,000;

(4) for personal or professional services;

(5) for any service to be rendered by any university,

college, or other educational institution;

My ee Dao eR ee a ee ee AER Be A ae ge | ee A ROE ase at ahs ates Oe rhe ta it el ly t

41 U. S.C. A, 151 9a

(6) the supplies or services are to be procured and

used outside the limits of the United States and its

possessions ;

(7) for medicines or medical supplies;

(8) for supplies purchased for authorized resale;

(9) for perishable subsistence supplies;

(10) for supplies or services for which it is imprac-

ticable to secure competition;

(11) the agency head determines that the purchase

or contract is for experimental, developmental, or re-

search work, or for the manufacture or furnishing of

supplies for experimentation, development, research,

or test: Provided, That beginning six months after the

effective date of this chapter and at the end of each

six-month period thereafter, there shall be furnished

to the Congress a report setting forth the name of each

contractor with whom a contract has been entered into

pursuant to this subsection since the date of the last

such report, the amount of the contract, and, with due

consideration given to the national security, a descrip-

tion of the work required to be performed thereunder;

(12) for supplies or services as to which the agency

head determines that the character, ingredients, or

components thereof are such that the purchase or con-

tract should not be publicly disclosed;

(13) for equipment which the agency head deter-

mines to be technical equipment, and as to which he

determines that the procurement thereof without ad-

vertising is necessary in order to assure standardiza-

tion of equipment and interchangeability of parts and

that such standardization and interchangeability is

necessary in the public interest;

_ RRIF EL SEV EL RE OME RET RE EE TE I AE LIC. ERO EE RE A ERE

ET SONOS SR REN FNC RIES CE PSY PEERS TOM

(14) for supplies of a technical or specialized na-

ture requiring a substantial initial investment or an

extended period of preparation for manufacture, as

determined by the agency head, when he determines

that advertising and competitive bidding may require

duplication of investment or preparation already made,

or will unduly delay procurement of such supplies;

10a 41 U. S.C. A. 151

(15) for supplies or services as to which the agency

head determines that the bid prices after advertising

therefor are not reasonable or have not been indepen-

dently arrived at in open competition: Provided, That

no negotiated purchase or contract may be entered

into under this paragraph after the rejection of all

bids received unless (A) notification of the intention

to negotiate and reasonable opportunity to negotiate

shall have been given by the agency head to each re-

sponsible bidder, (B) the negotiated price is lower

than the lowest rejected bid price of a responsible

bidder, as determined by the agency head, and (C)

such negotiated price is the lowest negotiated price

offered by any responsible supplier;

(16) the agency head determines that it is in the

interest of the national defense that any plant, mine,

or facility or any producer, manufacturer, or other

supplier be made or kept available for furnishing sup-

plies or services in the event of a national emergency,

or that the interest either of industrial mobilization in

case of such an emergency, or of the national defense

in maintaining active engineering, research and de-

velopment are otherwise subserved: Provided, That

beginning six months after the effective date of this

chapter and at the end of each six-month period there-

after, there shall be furnished to the Congress a report

setting forth the name of each contractor with whom a

SA SEO ENS Saree _—

41 U.S.C. A. 152 lla

contract has been entered into pursuant to this subsec-

tion since the date of the last such repor., the amount

of the contract, and, with due consideration given to

the national security, a description of the work re-

quired to be performed thereunder; or

(17) otherwise authorized by law.

(d) If in the opinion of the agency head bids received

after advertising evidence any violation of the anti-trust

laws he shall refer such bids to the Attorney General for

appropriate action.

(e) This section shall not be construed to (A) author-

ize the erection, repair, or furnishing of any public build-

ing or public improvement, but such authorization shall be

required in the same manner as heretofore, or (B) permit

any contract for the construction or repair of buildings,

roads, sidewalks, sewers, mains, or similar items to be

negotiated without advertising as required by section 152

of this title, unless such contract is to be performed outside

the continental United States or unless negotiation of such

contract is authorized by the provisions of paragraphs (1)-

(3), (10)-(12), or (15) of subsection (¢) of this section.

41 U.S. C. A. 152 (Feb. 19, 1948, c. 65, §3, 62 Stat. 22)

§152. ADVERTISEMENTS FOR BIDS; TIME; OPEN-

ING OF BIDS; AWARD OR REJECTION OF

BIDS

Whenever advertising is required—

(a) The advertisement for bids shall be a sufficient time

previous to the purchase or contract, and specifications

and invitations for bids shall permit such full and free

competition as is consistent with the procurement of types

12a 41 U. S.C. A. 153

of suppplies and services necessary to meet the require-

ments of the agency concerned.

(b) All bids shall be publicly opened at the time and

place stated in the advertisement. Award shall be made

with reasonable promptness by written notice to that re-

sponsible bidder whose bid, conforming to the invitation

for bids, will be most advantageous to the Government,

price and other factors considered: Provided, That all bids

may be rejected when the agency head determines that it

is in the public interest so to do.

41 U.S. C. A. 153 (Feb. 19, 1948, c. 65, §4, 62 Stat. 23;

Oct. 31, 1951, c. 652, 65 Stat. 700)

§153. TYPES OF CONTRACTS—(a) DISCRETION OF

AGENCY HEAD: WARRANTY CLAUSE

Except as provided in subsection (b) of this section,

contracts negotiated pursuant to section 151 (c) of this title

may be of any type which in the opinion of the agency head

will promote the best interests of the Government. Every

contract negotiated pursuant to section 151 (c) of this title

shall contain a suitable warranty, as determined by the

agency head, by the contractor that no person or selling

agency has been employed or retained to solicit or secure

such contract upon an agreement or understanding for a

commission, percentage, brokerage or contingent fee, ex-

cepting bona fide employees or bona fide established com-

mercial or selling agencies maintained by the contractor for

the purpose of securing business, for the breach or viola-

tion of which warranty the Government shall have the right

to annul such contract without liability or in its diseretion

to deduct from the contract price or consideration the full

amount of such commission, percentage, brokerage, or con-

tingent fee.

ODES LTE PENCE MERLE SEM ERST ! IT OLAS SIT EN RIOR LR RIC

41 U. S.C. A. 153 13a

(b) The cost-plus-a-percentage-of-cost system of con-

tracting shall not be used, and in the case of a cost-plus-a-

fixed-fee contract the fee shall not exceed 10 per centum of

the estimated cost of the contract, exclusive of the fee, as

determined by the agency head at the time of entering into

such contract (except that a fee not in excess of 15 per

centum of such estimated cost is authorized in any such

contract for experimental developmental, or research work

and that a fee inclusive of the contractor’s costs and not in

excess of 6 per centum of the estimated cost, exclusive of

fees, as determined by the agency head at the time of enter-

ing into the contract, of the project to which such fee is

applicable is authorized in contracts for architectural or

engineering services relating to any public works or utility

project). Neither a cost nor a cost-plus-a-fixed fee contract

nor an incentive-type contract shall be used unless the

agency head determines that such method of contracting is

likely to be less costly than other methods or that it is im-

practical to secure supplies or services of the kind or

quality required without the use of a cost or cost-plus-a-

fixed-fee contract or an incentive-type contract. All cost

and cost-plus-a-fixed-fee contracts shall provide for advance

notification by the contractor to the procuring agency of

any subcontract thereunder on a cost-plus-a-fixed-fee basis

and of any fixed price subcontract or purchase order which

exceeds in dollar amount either $25,000 or 5 per centum of

the total estimated cost of the prime contract; and a procur-

ing agency, through any authorized representative thereof,

shall have the right to inspect the plans and to audit the

books and records of any prime contractor or subcontractor

engaged in the performance of a cost or cost-plus-a-fixed-fee

contract.

suant to authority contained in this chapter shall include

a clause to the effect that the Comptroller General of the

en ESET LE EEE BES RSH CEI BSAA E CARE Ty RO

14a 41 U.S.C. A. 154

United States or any of his duly authorized representatives

shall until the expiration of three years after final pay-

ment have access to and the right to examine any directly

pertinent books, documents, papers, and records of the con-

tractor or any of his subcontractors engaged in the per-

formance of and involving transactions related to such

contracts or subcontracts.

41 U.S. C. A. 154 (Feb. 19, 1948, c. 65, §5, 62 Stat. 24)

§154. ADVANCE PAYMENTS UNDER NEGOTIATED

CONTRACTS; TERMS

(a) The agency head may make advance payments

under negotiated contracts heretofore or hereafter exe-

cuted in any amount not exceeding the contract price upon

such terms as the parties shall agree: Provided, That ad-

vance payments shall be made only upon adequate security

and if the agency head determines that provision for such

advance payments is in the public interest or in the inter-

est of the national defense and is necessary and appro-

priate in order to procure required supplies or services

under the contract.

(b) The terms governing advance payments may in-

clude as security provision for, and upon inclusion of such

provision there shall thereby be created, a lien in favor of

the Government, paramount to all other liens, upon the

supplies contracted for, upon the credit balance in any

special account in which such payments may be deposited

and upon such of the material and other property acquired

for performance of the contract as the parties shall agree.

SEB OE IRE ML ELEN, IL OR OGG ELEY LEE IEE EAN IE ELA REG GARY _—

—

41 U. S.C. A. 255—31 U. 8. C. A. 529 lda

41 U.S. C. A. 255 (June 30, 1949, c. 288, Title III, §305,

63 Stat. 396)

§255. ADVANCE PAYMENTS ON NEGOTIATED

CONTRACTS; GOVERNING TERMS

(a) The agency head may make advance payments

under negotiated contracts heretofore or hereafter exe-

cuted in any amount not exceeding the contract price upon

such terms as the parties shall agree: Provided, That ad-

vance payments shall be made only upon adequate security

and if the agency head determines that provision for such

advance payments is in the public interest or in the inter-

est of the national defense and is necessary and appro-

priate in order to procure required supplies or services

under the contract.

(b) The terms governing advance payments may in-

clude as security provision for, and upon inclusion of such

provision there shall thereby be created, a lien in favor of

the Government, paramount to all other liens, upon the

supplies contracted for, upon the credit balance in any

special account in which such payments may be deposited

and upon such of the material and other property acquired

for performance of the contract as the parties shall agree.

31 U.S. C. A. 529; R. S. §3648; Aug. 2, 1946, c. 744,

60 Stat. 809

§529. ADVANCES OF PUBLIC MONEYS; PROHIBI-

TION AGAINST

No advance of public money shall be made in any case

unless authorized by the appropriation concerned or other

law. And in all cases of contracts for the performance

of any service, or the delivery of articles of any descrip-

LEY PE SLE ELEY PRED TINE PIE I IOC ELE NII IIE ELE LTE LLL ELLIE SEIT EP REAL SLES AEE Ra

l6a 34 U, 8. C. A. 582

tion, for the use of the United States, payment shall not

exceed the value of the service rendered, or of the articles

delivered previously to such payment. It shall, however,

be lawful, under the special direction of the President, to

make such advances to the disbursing officers of the Gov-

ernment as may be necessary to the faithful and prompt

discharge of their respective duties, and to the fulfillment

of the public engagements. The President may also direct

such advances as he may deem necessary and proper, to

persons in the military and naval service employed on

distant stations, where the discharge of the pay and emolu-

ments to which they may be entitled cannot be regularly

effected.

34 U.S. C. A. 582 (Aug. 22, 1911, c. 42, 37 Stat. 32)

§582. PARTIAL PAYMENTS DURING WORK.

The Secretary of the Navy is authorized, in his discre-

tion, to make partial payments from time to time during

the progress of the work under all contracts made under

the Navy Department for public purposes, but not in ex-

cess of the value of work already done; and the contracts

made shall provide for a lien in favor of the Government,

which lien is made paramount to all other liens, upon the

articles or thing contracted for on account of all payments

so made: Provided, That partial payments shall not be

made under such contracts except where stipulated for,

and then only in accordance with contract provisions.

50 U. S.C. A. 611 17a

50 U. S. C. A. 611 (Dec. 18, 1941, c. 593, Title II, §201, 55 Stat.

839; Jan. 12, 1951, c. 1230, §1, 64 Stat. 1257)

§611. WAR CONTRACTS EXEMPT FROM CERTAIN

RESTRICTIONS UPON AUTHORIZATION BY

PRESIDENT

The President may authorize any department or agency

of the Government exercising functions in connection with

the national defense, in accordance with regulations pre-

scribed by the President for the protection of the interests

of the Government, to enter into contracts and into amend-

ments or modifications of contracts heretofore or hereafter

made and to make advance, progress and other payments

thereon, without regard to the provisions of law relating

to the making, performance, amendment, or modification

of contracts whenever he deems such action would facilitate

the prosecution of the war: Provided, That nothing herein

shall be construed to authorize the use of the cost-plus-a-

percentage-of-cost system of contracting; Provided fur-

ther, That nothing herein shall be construed to authorize

‘any contracts in violation of existing law relating to limi-

tation of profits: Provided further, That all acts under

the authority of this section shall be made a matter of pub-

lie record under regulations prescribed by the President

and when deemed by him not to be incompatible with the

public interest: Provided further, That all contracts en-

tered into, amended, or modified pursuant to authority con-

tained in this section shall include a clause to the effect

that the Comptroller General of the United States or any

of his duly authorized representatives shall have access

to and the right to examine any pertinent books, documents,

papers, and records of the contractor or any of his sub-

contractors engaged in the performance of and involving

transactions related to such contracts or subcontracts.

a OPE TIAN FETS POMERAT LRA RI ' Mea PRN

18a Compiled Laws of Michigan 1948

211.1 Compiled Laws Michigan 1948; M. S. A. 7.1

See. 1. That all property, real and personal, within the

jurisdiction of this state, not expressly exempted, shall be

subject to taxation.

440.26 Compiled Laws Michigan 1948; M. S. A. 19.266

See. 26. Creditors’ rights against sold goods in seller’s

possession. Where a person having sold goods continues

in the possession of the goods, or of negotiable documents

of title to the goods and such retention of possession is

fraudulent in fact or is deemed fraudulent under any rule

of law, a creditor or creditors of the seller may treat the

sale as void.

566.137 Compiled Laws Michigan 1948; M. S. A. 26.926

See. 7. Every sale made by a vendor, of goods and chat-

tels in his possession, or under his control, unless the same

be accompanied by an immediate delivery, and be followed

by an actual and continued change of possession of the

things sold, shall be presumed to be fraudulent and void,

as against the creditors of the vendor, or subsequent pur-

chasers in good faith, and shall be conclusive evidence of

fraud, unless it shall be made to appear, on the part of the

persons claiming under such sale or assignment, that the

same was made in good faith, and without any intent to de-

fraud such creditors or purchasers: Provided, however,

That such presumption shall not arise in case a bill of sale

of the goods and chattels conveyed, or a true copy thereof,

shall be filed in the office of the register of deeds of the

county in which the goods or chattels are located and also

where the vendor resides except, in case such vendor is a

non-resident of the state, in which case, such bill of sale or

brats one cles FELLING DIE NG RBA EME BTL ERTS SS ICUS PP RAS DEY AIT

Compiled Laws of Michigan 1948 19a

true copy thereof shall be filed in the office of the register

of deeds of the county in which the goods or chattels are

located; and unless either the vendor or purchaser named

in such bill of sale, or some person having knowledge of the

facts, shall before the filing of the same, make and annex

thereto, an affidavit setting forth that the same was given

in good faith and not for the purpose of security or for

defrauding creditors of the vendor or subsequent pur-

chasers: Provided, however, That in case of motor vehicles

and other property, the registration of title to which is

otherwise expressly provided for by statute, such presump-

tion shall not arise if such statutory requirements are com-

plied with. No officer shall receive such instrument or file

same in his office until such affidavit is made and annexed

thereto: Provided, however, That where the original in-

strument bears such affidavit annexed thereto it shall he

sufficient that a copy of such instrument offered for filing

also bears a copy of such affidavit. Every person who shall

knowingly make any false statement in any such affidavit

upon conviction thereof shall be deemed guilty of the crime

of perjury: Provided, That in case the vendor is a corpora-

tion engaged in transporting passengers or freight over

fixed routes or conveying electricity or gas or telephonic or

telegraphic communication it shall be sufficient compliance

with the requirements of this act to file such bill of sale or

copy thereof with the register of deeds of each county

through which the lines or property of the vendor passes.

Copies of such bill of sale may with like effect be filed

in the office of the register of deeds of the county to which

such goods or chattels or any portion thereof may be re-

moved. This provision shall not be construed as altering

or affecting the foregoing requirements as to the office or

offices in which such bill of sale or copy thereof shal] be

filed.

oes a: se de ee

is EE tae MLL OEE ACE NM stg

20a Opinion of the District Judge

OPINION

of Hon. Thomas P. Thornton, United States District Judge

(June 23, 1955)

The Murray Corporation, plaintiff herein, brings this

action to recover ad valorem personal property taxes as-

sessed by the City of Detroit, County of Wayne, upon

personal property in the possession of the Murray Cor-

poration, said taxes having been paid by the plaintiff

under protest. The amount assessed by the City was

$67,714.96, and that by the County was $12,572.66. The

United States of America was permitted to intervene be-

cause of the fact that it claimed ownership of the personal

property on which the assessments were made. The per-

sonal property so taxed was in the possession of the

plaintiff under letter subcontracts, under prime letter con-

tracts, for the manufacture of parts and components for

aireraft for the United States Air Force for defense pur-

poses.

The plaintiff has moved for summary judgment in its

favor, and at the hearing of this motion it was agreed

among the parties that there was no genuine issue of any

material fact, and that a summary judgment in favor of

the plaintiff, or in favor of the defendants would be in

order.

The Court is not unmindful of the effects of its deci-

sion in this matter. The Court has been advised that

there are many actions in this geographical area that have

been commenced, or are about to be commenced, involving

the issue which we are here called upon to resolve, and

that the aggregate of taxes involved may well be in the

neighborhood of two million dollars.

The parties to this suit have presented oral arguments

followed by the submission of successive briefs totesiing

eA TD CET I A IDE EL

Opinion of the District Judge 2la

seven in number. As previously stated, the factual picture

here presented is undisputed—not so, however, as to its

legal significance. The plaintiff is a letter subcontractor

of the Kaiser Manufacturing Corporation to which a letter

prime contract between the United States Government and

the Kaiser-Fraser Corporation was assigned by mutual

consent. The letter subcontract between the Kaiser Manu-

facturing Corporation and the plaintiff covered the manu-

faeture of specified parts and assemblies required under

the prime contract for the United States Air Force for

nationa! defense. This letter subcontract and its amend-

ments were approved by a Contracting Officer of the

United States Air Force in accordance with the require-

ments of the letter prime contract. Included in the letter

subcontract, by amendment, was the Partial Payment

Clause which is the nub of this controversy. The follow-

ing is the text of said cause:

‘11. Partial payments—Partial payments, which

are hereby defined as payments prior to delivery, on

work in progress for the Government under this

contract, may be made upon the following terms and

conditions.

‘*(a) The Contracting Officer may, from time

to time authorize partial payments to The Murray

Corporation of America (hereinafter called ‘the

Contractor’) upon property acquired or produced

by it for the performance of this contract: Pro-

vided, that such partial payments shall not exceed

90 percent of the cost to the Contractor of the

property upon which payment is made, which cost

shall be determined from evidence submitted by the

Contractor and which must be such as is satisfac-

tory to the Contracting Officer; Provided further,

that in no event shall the total of unliquidated par-

tia! payments (see (c) below) and of unliquidated

partial payments, if any, made under this contract,

— Te AE NN NY RE EES FLITE NDS eS US Ee NS SRS CORRE

22a

Opinion of the District Judge

exceed 80 percent of the contract price of supplies

still to be delivered.

**(b) Upon the making of any partial payment

under this contract, title to all parts, materials,

inventories, work in process and non-durable tools

theretofore acquired or produced by the Contractor

for the performance of this contract, and properly

chargeable hereto under sound accounting practice,

shall forthwith vest in the Government; and title

to all like property thereafter acquired or produced

by the Contractor for the performance of this con-

tract and properly chargeable thereto as aforesaid

shall vest in the Government forthwith upon said

acquisition or production; Provided, that nothing

herein shall deprive the Contractor of any further

partial or final payments due or to become due

hereunder; or relieve the Contractor, Kaiser-Frazer

Corporation, or the Government of any of their re-

spective’ rights or obligations under this contract.

‘*(e) In making payment for the supplies fur-

nished hereunder, there shall be deducted from the

contract price therefor a proportionate amount of

the partial payments theretofore made to the Con-

tractor, under the authority herein contained.

‘*(d) It is recognized that property (including,

without limitation, completed supplies, spare parts,

drawings, information, partially completed sup-

plies, work in process, materials, fabricated parts

and other things called for herein) title to which

is or may hereafter become vested in the Govern-

ment pursuant to this Article will from time to

time be used by or put in the care, custody or pos-

session of the Contractor in connection with the

performance of this contract. The Contractor,

either before or after receipt of notice of termina-

tion at the option of the Government, may acquire

or dispose of property to which title is vested in

the Government under this Article, upon terms ap-

proved by the Contracting Officer, provided, that,

PE Per ae ge ube Ren eh

ee ee iia ot ates) er PEPE eT Tee Bac aii be Ba at

Opinion of the District Judge 23a

after receipt of notice of termination, any such

property that is a part of termination inventory

may be acquired or disposed of only in accordance

with the provisions of the termination article of

this contract and applicable laws and regulations.

The agreed price (in case of acquisition by the

contractor) or the proceeds received by the Con-

tractor (in case of any other disposition), shall, to

the extent that such price and proceeds do not ex-

ceed the unliquidated balance of partial payments

hereunder, be paid or credited to the Government

as the Contracting Officer shall direct; and such

unliquidated balance shall be reduced accordingly.

Current production scrap may be sold by the Con-

tractor without approval of the Contracting Officer

but the proceeds will be applied as provided in this

paragraph (d), provided that any such scrap which

is a part of termination inventory may be sold only

in accordance with the provisions of the termina-

tion article of this contract and applicable laws and

regulations. Upon liquidation of all partial pay-

ments hereunder or upon completion of deliveries

called for by this contract, title to all property (or

the proceeds thereof) which has not been delivered

to and accepted by the Government under this con-

tract or which has not been incorporated in supplies

delivered to and accepted by the Government under

this contract and to which title has vested in the

jovernment under this Article shall vest in the

Contractor.

**(e) The article of this contract captioned

‘Liability for Government-furnished Property’ and

any other provision of this contract defining lia-

bility for Government-furnished property shall be

inapplicable to property to which the Government

shall have acquired title solely by virtue of the

provisions of this Article. The provisions of this

Article shall not relieve the Contractor from risk

of loss or destruction of or damage to property to

which title vests in the Government under the pro-

visions hereof.

24a Opinion of the District Judge

‘*(f) If this contract (as heretofore or here-

after supplemented or amended) contains provision

for Advance Payments, and in addition if at the

time any partial payment is to be made to the Con-

tractor under the provisions of this partial pay-

ments article any unliquidated balance of advance

payments is outstanding, then notwithstanding any

other provision of the Advance Payments Article

of this contract the net amount, after appropriate

deduction for liquidation of the advance payment,

of such partial payment shall be deposited in the

special bank account or accounts maintained as re-

quired by the provisions of the Advance Payments

Article, and shall thereafter be withdrawn only pur-

suant to such provisions.”’

The plaintiff herein was a letter subcontractor also of

the Wright Aeronautical Corporation, later merged with

Curtiss-Wright Corporation, and the same situation pre-

vailed in its relationship to Curtiss-Wright as did with re-

spect to its relationship to the Kaiser Manufacturing Cor-

poration insofar as pertains to the issues with which we

are here concerned—the terms of the Partial Payment

Clause and approval of their inclusion in the letter sub-

contracts by the Contracting Officer of the United States

Air Force.

The assessment date here in question was January 1,

1952. During the calendar year 1951 the plaintiff made

formal written requests at various intervais, and in vary-

ing amounts for payments to it by its two contractors—

Kaiser Manufacturing Corporation and Curtiss-Wright

Corporation—in accordance with the Partial Payment

Clauses contained in the respective letter subcontracts.

Said requests were audited and approved by a Contract-

ing Officer of the United States Air Force. On October

12, 1951, partial payment in the amount of $163,949.20,

TIT IT LEENA AR, ELA RIE OI TINS LER TIT IONE TET

Opinion of the District Judge 25a

representing the aggregate amount of the requests, was

made by the Kaiser Manufacturing Corporation to plain-

tiff, and on December 31, 1951, a payment of $510,827.67

was similarly made by Curtiss-Wright to plaintiff.

The position of the plaintiff is that it has paid taxes

which were unlawfully assessed to it, and that the assess-

ment is illegal and void. Plaintiff contends:

I. The tax assessed is an ad valorem tax assessed upon

the property and not a privelege tax assessed against the

taxpayer.

Il. Property owned by the Federal Government is im-

mune from local aed valorem property tax.

Ili. The question of title under procurement contracts

entered into pursuant to Federal Procurement statutes

and constitutional authority presents a Federal question

for determiaation by Federal courts under Federal law

exclusively, and is in nowise subject to, or controlled by

the law of any state.

IV. Partial payment clauses vesting title in the Fed-

eral Goverrment were fully authorized and effective.

V. Under the partial payment clauses title to the prop-

erty here in question was vested in the United States

Government on assessment day, January 1, 1952. This

was absolute title——not bare lien or security title.

VI. Equitable arguments advanced by defendants, City

of Detroit and County of Wayne, have been fully and

completely rejected by the Supreme Court of the United

States.

VII. Murray is the real party in interest and the

proper party to bring this action.

RSET UEP TARE Etre gaa PUES? 2 , APPAR

26a Opinion of the District Judge

VIII. There is nothing in the conduct of the parties

inconsistent with the vesting of absolute title, or which

could divest the United States Government of such title.

IX. The taxes were not paid voluntarily, but under

protest.

The United States contends that the assessment was

based on property of the United States and was constitu-

ionally invalid. It reasons that the ownership of the

property was vested in the United States when the assess-

ment was made, said ownership having vested at the time

of the making of partial payments in accordance with the

Partial Payment Clause, which was fully authorized. It

also devotes some of its argument to the proposition that

the Murray Corporation is the real party in interest.

In direct opposition to the contentions of the plaintiff

and to those of the United States, the position of the

City of Detroit is that:

I. The partial payment and transfer of title clause

was not authorized, nor was it in conformance with the

Federal statutes.

II. The inclusion of the above clause would not defeat

an ad valorem tax on personal property in the hands

of an independent subcontractor acquired in the course

of carrying out provisions of a subcontract for defense

production.

III. The course of action and dealing with the prop-

erty was inconsistent with the vesting of absolute title;

the Government, therefore, was given only a lien or title

for security purposes, leaving plaintiff with an equitable

title in said personal property which was still subject to

an ad valorem property tax.

Opinion of the District Judge 27a

The position of the County of Wayne is aligned with

that of the City of Detroit. It contends that the Murray

Corporation is not the real party in interest. It also con-

tends that the Contracting Officer had no authority to au-

thorize the prime contractor to include the Partial Pay-

ment Clause or to include the provision for the passage

of title from the subcontractor to the Government in the

contracts between the prime and the subcontractors. Both

the City and the County stand firm in their conviction as

to the validity of the tax in question,

It is the County of Wayne which urges so strongly the

proposition that plaintiff here is in non-compliance with

Rule 17 (a) F. R. C. P. The City fails to raise this point,

which may or may not be significant. In any event the

theory of the County is that the plaintiff has recovered

the major portion of the taxes paid by passing it on to

the prime contractor, and that plaintiff therefore has sus-

tained no loss and, as a result, has no right to bring this

action. The theory of the plaintiff is that the person hav-

ing the right sought te be enforced, by substantive law,

is the real party in ircerest, and that it is the law of the

State which determines what is the substantive law. Under

Michigan law (M. S. A. 7.97) it is the person paying a tax

such as this who may sue for refund. There is no claim

made by the County that the plaintiff assigned its claim

for the tax refund. It merely claims that because the

amount of such tax was included as an item of plaintiff’s

cost in billing the prime contractor that plaintiff has de-

prived itself of the right to sue for refund. The cases to

this effect cited by the County are inapposite. The Court

is constrained to conclude that the argument of the County

on this issue is specious.

The next point for discussion has to do with the validity

of the inclusion of the Partial Payment Clause in the let-

ee PS LEMPE ATEN

28a Opinion of the District Judge

ter subcontracts. Both County and City contend that the

authority for such procedure was lacking. Before making

any comment upon the merit of this point, it occurs to the |

Court that there is some doubt concerning the propriety

of a collateral attack by a city and a county upon the

validity of a provision in a contract existing between par-

ties to such contract when neither city nor county is it-

self party to said contract, and when the overall picture

is as it is here. Such an issue may well be one that this

Court should decline to resolve. None of the parties to the

prime contract, or to the subeontract, contests the au-

thority of the United States to include the Partial Payment

Clause. It may well be that such authority might be

properly questioned in a direct proceeding by the proper

parties. Be that as it may, we are persuaded that the

Partial Payment Clause herein is not invalid for want

of authority, or for non-conformance with Federal stat-

utes.

The point at issue most strongly debated, and having

the greatest merit, is the effect of the Partial Payment

Clause. There is no disagreement on the proposition that

local government may not tax property owned by the

Federal Government. Whether the personal property here

assessed was owned hy the Federal Government in the

sense that it could not be taxed at a local level is the

issue. A reading of the Partial Payment Clause leaves

no doubt that, upon the making of a partial payment,

title to parts, materials, etce., acquired for the performance

of the contract vests in the United States Government as

does title to all property subsequently acquired for the

performance of the contract.

It is the position of the City of Detroit that the trans-

fer of title upon the making of partial payment is effec-

tive to create a lien, that the title of the United States to

CF Fo Ee Se Ree PEATE IM CE RN aOR

Opinion of the District Judge 29a

the property in question is security title only, and that

plaintiff still remains the beneficial owner. The City cites

numerous eases which it claims support this contention.

In many, analogy is drawn to an equitable mortgage situa-

tion where, although title be transferred, said title is

merely for security purposes, and is treated by the Courts

as such. The City cites 9. R. A. Inc. v. Minnesota, 327

U. S. 558 (1945) as authority for the proposition that

despite the transfer of legal title here, the plaintiff still

retained beneficial interest subject to taxation by the

state. It is not perceived that the holding in this case

supports the City’s position. If the reasoning there used

and quoted in the brief of the City be applied here, the

argument of the City must fail. In that case the United

States had contracted to sell land. The State sought to

tax the realty at a time when the United States still held

legal title. The Court held that it might do so—that the

contract for the purchase of the land transferred the

equity to the vendee and that the vendor, United States,

retained only a legal title as security. The Court also

went on to state that the ‘‘possibility of repossession by

the United States is not enough to block a tax sale in

which the paramount rights of the United States are pro-

tected.”? S. R. A. Inc. v. Minnesota, swpra, 566. In the

instant case the United States is the vendee of the as-

sessed property. It has contracted with the prime con-

tractor for the manufacture of aircraft sub-assemblies for

delivery to it, for use by it, to be paid for by it, and to be

fully and completely owned by it in every sense of the

word ownership. It is submitted that title held for secur-

ity purposes is a title that is intended to be relinquished,

and whose forward look is transfer to a vendee, or re-

transfer to a mortgagor. Such title is temporary in

nature, and it is so regarded by the parties. The City

30a Opinion of the District Judge

offers numerous arguments—all very creditable and well

presented—to the effect that, although bare legal title

passed to the United States, the equitable title remained

in the plaintiff. The brief of the City devotes some time

to a so-called ‘‘course of conduct and dealing with the

property in question inconsistent with the claim of abso-

lute title in the Government.’’ In its printed brief, at

page 50, the City lists ten ‘‘salient facts’’ as illustrative

of the inconsistent course of conduct. In view of the

type of sub-contract here involved, the scope of the opera-

tion, the practical exigencies existent, these ten ‘‘salient

facts’’ are not persuasive when balanced against what is

viewed to be an overriding consideration.

A type of contract whose ultimate purpose is specifica-

tion manufacturing for a purchaser under which title is

to pass before delivery, but after partial payment, appears

to this Court to be a far ery from any customary lien or

security situation. There is no contention here that the

United States is at any time to re-transfer title to the

manufactured product(s) back to the plaintiff once the

plaintiff has performed the necessary conditions. There

is no mere lien here which the United States might fore-

close. Might it be legally said that if the plaintiff failed

to complete the manufacturing that the United States

could not take possession of the property in question and

assign it to another manufacturer for completion?

It was intended by the parties that plaintiff was to

manufacture certain sub-assemblies according to specifica-

tion which would become the property of the purchaser,

United States. The fact of future delivery is not deter-

minative of ownership. The fact of contractual agree-

ment is—such agreement stipulating the time for passage

of title. Why should plain, unambiguous language be dis-

torted so as to convert a legal title holder to a lienor be-

Pe ee ee A Ne toe era ee i Di RT

Opinion of the District Judge Bla

cause persons not party to the contract contend that title

passed prematurely? If a lien situation is to be construed,

it could only be in favor of the plaintiff as to labor and

materials not paid for (without considering for the mo-

ment the legality of a lien on Government property).

In summing up, it appears that the position of the de-

fendants here, in order to be maintained, requires a forced

construction of the contracts involved, whereas a natural

construction does violence to no legal or equitable con-

cepts. It is therefore concluded that summary judgment

should be entered for the plaintiffs, and an order may be

presented accordingly.

Dated at Detroit, Michigan, this 23rd day of June,

A. D. 1955.

THOMAS P. THORNTON (signed),

United States District Judge.

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.