Brief for the United States in Opposition — New York Mail & Newspaper Transportation Co. v. United States (No. 573)

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No. 573

In the Supreme Gourt of the Wnited States

OcTOBER TERM, 1957

New York Marz aND NEWSPAPER TRANSPORTATION

COMPANY, PETITIONER

THE UNITED STATES

} -

ON ‘uns FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF CLAIMS

BRIEF FOR THE UNITED STATES IN OPPOSITION

J. LEE RANEIN,

Soticitor General,

GEORGE CCCHRAN DOUB,

Assistant Attorney General,

MORTON HOLLANDER,

HOWARD E. SHAPIRO,

2 Attorneys,

LP —s_- Department-of Justice, Washington 25, D.C.

INDEX

- Pere

I oa CG aca eis ome veen we bec o kek

Jurisdiction —__. : ape AD eg rapig Ake” ae oR el EE l

Question presented =. ___. Nae v ae ae 2

eens SOU cc ko oo ke ow tuwnsn ant genes 2

UII id beg ot a rn = ee pera 4

SECS Pa arn Re SE are eg 9

Conclusion... _—. SA 5 sO cy a Pere A ‘ 16

P| ee Ste ene Pema Sgr Ce TR es Oe 17

CLPATIONS |.

6 uses:

Baltimore and Ohio RR. Covv. ia ‘nited States, 261 U.S

oe a Se ae : Siento eG 9

Tnterocean Oil C o. Vv. United States, 270 U.S. 65__.. q

Schneider v. United States, 19 Ct. 4 |: ee sf)

United States v. Nilieott, 223 U.S. 524. ae ike we (

United States v. Speed, 8 Wall. 77... 15

Statutes:

Act of April 2 21, 1902, 32 Stat. 107_. piace ees 13.14

R.S. sabe, un ECE.... eee te me

31 Stat. 258. ee aS APR en eee 13

39 U. S.C 71946 ed.) 423... ah ee eet as ceed »-« 2,49, 13

39 U.S.C. (1952 ed.) Sees. 423a, 42: sb, and 428¢ (Act

of “bee 27, 1950, 64 Stat.1118).._- 22.2202. 3,6, 11.

Miscellaneous:

a er 13

33 Cong. Rec. 4678... ..-.._-.-.. ; me 13

33 Cong. Rec. 6240, 6246 -.._.-...-0..-----.-.. -- 13

35 Cong. Rec. 3928...--. --.---. yon ieaceceecae.-- 13694

06 Oou. Reo. 13674... ........- 9... 6

96 Cong. Rec. 14665. Ene a a inden eee 12

H. Rept. 12! 56,.57th Cae., 186 See san ............ 13

H. Rept. 3144, 8'st Cong., 2d Sess__-__. 22. ee 6, 12

Sen. Doc. 279, 57th Cong., Ist Sess... 202 13

Sen. Rept. No. 2560, 8ist Cong., 2d Sess... - _ =... 12

447908—57——1 (1)

In the Supreme Court of the Gnited States

OcroBeR TERM, 1957

No. 573

New York Matt ANd NEWSPAPER ‘TRANSPORTATION

COMPANY, PETITIONER fr *

°o 3

THe Unrrep STAtes

©,

ON PETITION FOR A’ WRIT OF CERTIORARI TO THE UNTEED

STATES COURT OF CLAIMS

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINION BELOW

-- The,opinion @f the Court of Claims (Pet. App. la-

46a) is not yet reported. The court's findings of fact

and conclusion of law are printed in the Appendix,

tnfra, pp. 17-44.

_ JURISDICTION

Final judgment in the Court of Claims was entered

on July: 31, 1957. (Pet. 8a). The petition Rar a writ

of certiorari was filed on October 24, 1957. The juris-

diction of this Court is invoked under 28

1255 (1). ’

: . ower . -

Petitioner's -brief cites 28 U.S. C. 1254 (1). We assume

this to be an inadvertent: error.

{1)

' QUESTION PRESENTED

W hether the court below: properly ruled (1) that

petitioner’s contract with the Government for pneu-

matic tube transportation of United States mail im

New York City was invalidgbecause its tgyms had not

been publicly advertised and (2) that petitioner ac-

cordingly is not entitled to an award of anticipated

profits and other damages under that contract.

STATUTES INVOLVED

, 39 U. S.C. (1946 ed.) 423:

Transmission by pneumatic tubes;* contracts;

expert commission; report.

——$——

—————

The Postmaster General may enter iito con--

tracts not exceeding in the aggregate $1,388,759

for the transmission of mail by pneumatic tubes

or other similar devices for a period not exceed-

ing ten years, after public advertisement once

a week for-a period of six consecutive weeks in

not less than five newspapers, one of which

shall be publishéd in each city where the servy-

ice is to be performed. Contracts for this

service shall be subject to the provisions of the

postal laws and regulations relating to the let-

ting of mail contracts, except, as hereip other-

wise provided, and no advertisement shall issue

until after a careful investigation shall have

been made as to the needs and practicability i

such service and until a favorable report,

writing, shall have been subniitted to the Soak

master General by a commission of not less

than three expert postal officials, to be named

by him; nor shall such advertisement issue un-

til in the judgment of tls Postmaster General.

the nee ‘ds of the Postal Service are such as to

justify the expenditure involved. Advertise-

ments shall, state in general terms only the re-

quirements of the service and in form best

calculated to mvite competitive bidding.

2a 39 U. S. C. (1952 ed.) 423a-423e. (Act of

mee mber 27, 1950, 64 State 1118):

See, 423a . Transmission hy prtcumatie tubes;

term of contracts,

The Postmaster General may enter into eon-

tracts, for terms not exceeding ten vears, for

the transmission of mail by pneumatic tubes

or other mechanical devices,

See, dA23b. Saag; conditions voverning contract

letting. : wee

Conizacts for the transmission of mail by

pheumate tubes or other mechanical devices

shall be subject té the provisions of laws re-

lating to the letting of mail contracts, except

as otherwise provided in sections 423a-4236¢ of

this title. Advertisements shall state in gen-

eral terms only the requirements of the service

and shall be in the form best calenlated to in-

vite competitive bidding. The Postmaster Gen-

eral may reject any and all bids. No contract

shall be awarded except to the lowest responsi-

ble bidder tendering full and sufficient gunran-

ties ‘to the satisfaction of the Postmaster

General of his ability to perform satisfactory

service, |

Sec. 423¢. Same; erpenditures for New York

City.

In the city of New York, including the

Borough of Brooklyn the annual rate of ex-

penditure for the transmission of mail by pnen-

mafie tubes shall not exe “eed $15,500 per mile

per annum of double line pneumatie-tube facil-

ities for a period of ten years, after which

time the annual rate of expenditures per mile

shall not exceed $12,000. This rate shall be

inclusive ‘of maintenance expenses but shall he

exclusive of all operating expenses.

STATEMENT

Petitioner owned the only pneumatic tube system

for transportation, of the mails in New York City. It

brought this suit in the Court of Claims to recover lost

profits and other alleged damages on its ten-year con-

tract to «carry the mails which was disavowed as in-

valid by the United States.

The sole business of petitioner, a subsidiary of the

Lamson Corporation ot Deiaware, had been the leasing

of its pneumatic tubes te carry the United States mails

- between twenty-two post offices in New York City.

The pneumatic tube system was started in TS97: peti-

tioner became its owner in 1932. (App. cafra, p.

17.)

The Postmaster General was authorized to contract

for the use of pneumatic tube systems by specifie stat-

utes which set forth the manner in which such con-

tracts were to be let and the maximum rates he was

authorized to pay. Since petitioner was the owner |

of the only tube system in New York City, it was the

sole bidder to supply sueh servive in thet area. Its

contracts with the Umited States varied in form and

content. (App., fra, p. 17.)

Shortly after entering the latest such contract, for

the period ending December 31, 1950, the Postmaster

General, as requived by the s Statrfe then in effect (39

UL S.C. (1946 ed.) 423),/appointed a committee of

three postal experts to report on the need and prae-

ticability -f continuing the use of the pneumatic tube

system in New York after December 31, 1950. In a

report submitted March 10, 1950, this committee rec-_

ommended that an advertisement should be issued

for pneumatic tube service in New York City under

a five- or ten-year lease starting January 1, 1951,

(App., infra, p. 19.)

Pursuant to this recommendation, the Post Office

Department published an “Advertisement. Inviting

Proposals for Furnishing a Tube System on a Lease

_or Rental Basis fer Use in the Transmissien of Mails

by Pneumatic Tubes or. other Similar Devices at

— New York, New York."* Petitioner responded to this

advertisement on May 26, 1950, by submitting a pro-

posed contract. (App., tufra, pp. 21, 24.)

its proposed contract, however, varied in many ma-

terial ways from the advertisement. For example,

the proposal omitted provisions called for in the ad-

vertisement permitting the Postmaster General to can-

cel the contract in the public mterest or for Violation

of the postal laws; for failure by the contractor to

relocate the tube lines and equipment because of re-

modeling of the terminal stations: and for failure of

Congress to appropriate funds for the system. (App.,

infra, p. 25.)

In addition, instead of offering a contract for rental

of the system at a fixed rate per annum, as stated in

the advertisement, petitioner submitted a formula un-

der which the annual rent would vary directly with

its fixed and variable costs. And under petitioner’s

proposal, the cest of an impending conversion of the

: 6

system from D. C. to A. C. current was te be paid

by the United States to petitioner with 3 percent in-

terest, instead of being borne by the contractor as

ealled for in the advertisement. (App., cifra, pp.

25-26.)

On December 7, 1950, pursuant to a request from an

Assistant Postmaster General, petitioner submitted an |

amended proposal containing the same variations as

its original proposal, except that the proposed rent

now included the cost of converting the system from

D.C. to A. CG. Under this new formula, the minimum

rent per mile of the tube “system ($14,111.80) was

more than two thousand dollars over the statutory

limit of $12,000 per mile. (App., caffra, pp. 26-27.)

Meanwhile, the Postmaster General, on August 25,

1950, requested Congress to raise the $12,000 limit

for New York City to 815,500, and te enact inte

positive law provisions contained in various appro-

priation acts which governed contracts for pneumatic

tube systems, TH. Rep.3144, 81st Cong., 2d Sess., p. 2.

A bill implementing this request Was introduced in

——

the Senate on August 28, 1950 (96 Cong. Ree. 13574),

and became iaw on December 27, 1950 (64 Stat. 1118).

(App., infra, p. 27.) : J

No new advertisement was issued after the Act of

December 27, 1950. Instead, on December 29, 1950,

officials of the Post Office Department signed a con-

tract which closely followed petitioner's proposals of

May 26 and Decembey 7, 1950, and which, accordingly,

varied in many material ways from the advertisement

of April 24, 1950. (App., infra, p. 28.)

Subsequent to their veport of March 10, 1950,

recommending continued use of the pneumatic tube

system, the committee of postal experts restudied

the matter in the light of expansions in the postal

truck service, and reductions in daily deliveries and

colleetions of mail which became effeetive in 1950,

As a result of this restudy, they made supplementary

reports in May and June of 1950 recommending that

the tube service be Giscontinued. (App., infra, pp.

20-21.) The necessity for using the tubes was exam-

ined again in 1953, and during December of that year

a test was conducted to determine whether trueks

could) handle the mail being transported by tube.

This experiment demonstrated that, with the addition

of only two additional trucks, the tube system could

be discontinued at an annual saving to the United

States of $772,935.18. (App., ixfra, p. 30.)

On December 29, 1953, the Postmaster General

advised petitioner that the Government considered

the purported contract of December 29, 1950, to be

invalid, and if it were valid, that it was cancelled in

the public interest (App. p. 30). Petitioner

responded on January 7, 1954, that uniess the Notice

of Cancellation was rescinded by January 22, 1954,

it would treat the contract as breached. The notice

Was not rescinded, and on January 23, 1954, petitioner

notitied the Post Office Department that it regarded

the contract as terminated for breach by the Govern-

ment. (App., infra, p. 31.) |

At the .time the contract Was disavowed by the

Government, the undepreciated balance of plaintiff's

depreciable assets was $109,494.08 on an original in-

vestment of four million dollars in the tube system.

“447908—-37——-2

» This balance was written off as worthless on April

30, 1954, and the tube system was dismaniled. Peti-

fioner has engaged in no other business sinee the

termination of the contract. CApp.. cefra, p. 32.)

On April 15, 1954, petitioner sued the United States

in the Court of Claims, claiming damages of two

million dotlars. In an opinion by Mr. Justice Reed

(sitting by designation), the Court of Claims held

that the purported eontract was a nullity because it

did not comply with the advertising requirements of

the statutes governing contracts for transmission of

mail by pneumatic tuhes, inasmuch as the terms of

the contract as executed jwere materially different

from the terms of the publid advertisement.

The court therefore denied petitioner's claim. for

lost profits through 1960 (totalling $852,008.88) ; the

excess of its 1958) over 1952) variable costs ($12

285.16); New York City special franchise taxes for

1954-55 ($26,700) ; and the cost of removing its equip-

ment from Government- owned stations ($25,650).

The court held, however, that petitiener was en-

titled to be restored to the position it occupied before

the purported coatract, and awarded it damages as

follows (App., infra, p. 44):

Tnreimbursed cost of power conversion equipment. ___-~_- S141, 564.47

Cost of new set of carriers__ es yey PS Se ee ee 27. Gol. 52

Payment of Pecember 1955 expenses_........-. 2 ee 27. G0. 94

Expenses of January, 1954__ _._..2-_-_- 6,241. 69

New York City special franchise caxes for the seccind halt of

the 13-4 tax year... .. Pete 12, 792. 18

I licens ysewematwa ances Ta

Judges Littleton and Madden eins nted from the

denial by the court of anticipated profits and other

damages under the contract.

ARGUMENT

The court below held that the specialized statute -

governing petitioner's purported contract to rent

the Government a pneumatic tube system (64 Stat.

T118) continued the requirement of prior pneumatic

tube statutes that contracts for such service be let

only after prdlic advertisement (see 39 UL S.C. (1946

ed.) 423, 429). Since the purported contract upon

Which petitioner brought suit varied materially from

the advertisement setting forth the general terms

upon which it should have been let, the agreement

was held to be invalid and unenforceable against the

United States. Nevertheless, petitioner has been

awarded £16, 110.80 to restore It to Its. position prior

to the disavewal of the contract. This sum Is almost.

twice the wndepreciated value of its assets, which

were worthless without a contract te the Post Office

Department (App. dafra, p. 32).

The settled rule that the United States is not hound

by contractual or other commitments of an agent

Which are nof within his authority is not challenged

by petitioner here. Tuteroecan Oil Co. vy. United

States, 270 UL S. 65; Baltimore and Ohio R. R. Ca. vy

United States, 261 U.S. 592. Nor does petitioner

deny that.a Government contract. the terms of which

are required to be publicly advertised, would be wn-

anthorized and hence invalid and wot binding on the

United States uf it had been awarded without) such

prior advertising. el nited States v. Ellicott, 223 U.S.

924, 543; Schneider vy. United States, 19 Ct. Cls. 547.

Finally, petitioner does not challenge the fact that the

'* Petitioner also retains the sums paid it under the contract

saa December 31, 1952. (Tet. App. Sa.)

terms of the contract upon which its present suit 1s

based were not publicl? advertised.

Petitioner nevertheless seeks to upset the invalida-

tion of its contract by the court below by contendig

that no public advertising was required by the con-

trolling statute with respect to the terms of this

particular contract... Thus, the issue here is a narrow

one, turning on an interpretation of — technical

postal statutes governing a unique category of postal

service, We submit that the interpretation of the

pnéumatie tube statute ‘adopted by the Court of

Claims was clearly in accord with the intention of

Congress that all pneumatic tube contracts be adver-

tised, and, moreover, that the issue is so restricted

in scope as to be inappropriate for review by: this

Court. : =

A. Petitioner's arguinent that no public advertising

Was required is based almost exclusively on two ex-

ceptions in the general advertising statute (R. OS.

3709. 41 UL S. C25). These exceptions make unneces-

sary public advertising: (1) where public exigencies

demand immediate delivery; or (2) where it is cer--

tified that there is but one possible bidder. The short

vere

Hat

and conclusive answer to petitioner’ s argument:

that the general statute and its two exceptions do “a

2 At the time the contract was made, however, the parties

understood advertising to be a requirement. The contract of

December 29, 1950, recites that petitioner's amended proposal

was accepted “after proper advertisement dated April 24, 1950

jwyiting proposals for the transmission of mails by pneumatic

tubes upon a lease or rental basis (Route S0T0L1-A) * * *"

(Exhibit A annexed to the petition in the Court of Claims).

apply here. For, as the opinion below points out, the

advertising requirement here involved arises from

the explicit terms of the pneumatic tube statutes (Pet.

App. 5a):

We think that the variations, previously listed

here, between the invitation, plaintiff's pro-

posals, and) the contract actually signed, dem-

onstrate that the April advertisement couid

not be treated as a compliarice with the essen-

tial provisions of 39 UL S.C. (1946 ed.) §§ 423

and 429, set out on p. 2, supra. Those sections

remained the governing law as to advertis-

ing of postal requirements. Neither the Act

of 1948, 62 Stat. 1163, nor of 1950, 64 Stat.

111s, made any change. After the 1950 Att the

statutory requirements for advertisements were

the same as before its passace. The 1950 Act,

S2, as theretofore, made the newly authorized

eontract “subject to the provisions of laws

relating to the letting ef mail contracts.”

Kven petitioner reeegnizes this, as it must. It

argues that the Court of Claims’ holding “that the

pneumatic tube statute, under which petitioner's con-

tract was executed, itself required advertising should

be rejected.” (Pet. p. 8.) This, of course, is the real

issue which petitioner is urging this Court te review,

The application of R.S. 3709, the general advertising

statute and its exceptions, is never reached because

the pneumatic tube statute specifically requires ad-

vertising in the circumstances: of petitioner’s pur-

ported contract. This conclusion, apparent from the

face of the statute, is fully supported by the legisla-

tive history of the Act of December 27, 1950, and oi

the prior statutes governing pneumatic ‘tube service

which it consolidated.

(a) On August 25, 1950, Postmaster General Don-

aldson sent to the Congress legislation to clarify and

enact into positive law the provisions of the various

appropriation aets governing pneumatic tube service,

At that time, contracts for pneumatic tube service

were in effect in oly two cities--New York (with

petitioner) and Boston.’ Sen. Rept. No, 2500, 8ist

Cong., 2d Sess. p. 2; H. Rept. 3144, 8ist Cong., 2d

Sess. p. 2.

The bill was reported in the Senate as “designed to

clarify and consolidate the provisions of existing

law * * *.7° Sen. Rept. No. 2500, 81st Cong., 2d

Sess. In the Senate, the sponsor of the bill confessed

‘that since it was a very technical subject, about which

I knew very little, the only advice to follow would be

that of the Postmaster General * * *." 96 Cong. Ree.

14665. There was no debate in the House, although

the House report noted that the statutory limit at

New York was being raised to finance conversion of

existing pneumatie tube equipment from D. C. to

A. C. current. H. Rept. 3144, Sist Cong., 2d Sess.

The bill thus passed:did no more than to raise the

statutory limit for tube €rvice in New York City

from $12,000 to $15,500, and ta eliminate the $17,000

limit which was in effect elsewhere. Otherwise, the

legislation Was simply a reenactment of the pneumatic

tube provisions contained in prior appropriation acts.

*The Post Office Department advises us that inter-Post Office

pneumatic tube service has been abandoned at Boston, and is

no longer in use anywhere in the postal service.

Section 2 of the Act expressly referred to the adver-

tising requirement.

(b) These advertising provisions had their origin in.

the Post Office appropriation for 1903 (Act of April

21, 1902, 32 Stat. 107, 114) which authorized the Post-

master General to make contracts for pneumatic tube

service “after public advertisement once a week for a

period of six consecutive weeks * * *,”’ (39 U.S. C.

(1946 ed.) 423.) This careful language was Con-

gress’ reaction to disclosures on the tloor of the House:

of irregularities and contlicts of interest in connection

with contracts for pneumatic ‘tube service at New

York City in the late 90's... 33 Cong. Ree. 4669. The

House first refused Yo appropriate any funds for

pneumatic tube service (33 Cong. Ree. 4678), but

later concurred with the Senate in appropriating

sufficient funds to finance the contracts then in foree.

33 Cong. Rec, 6240, 6246. At the same time, funds

were appropriated for an impartial investigation of

the need for such service. 31 Stat. 258. A committee

of citizens, appointed to conduct this investigation,

recommended continuance of the*gervice. The Post

Office Department then submitted a Dill to Congress

which it said protected installation of pneumatic tube

service from ‘needless or careless expenditure, and

no suspicion of seandal can possibly attach to it.’

Sen. Doc. 279, 57th Cong., Ist Sess. This bill was

reported favorably in the House, H. Rept. 1256,

oith Cong, Ist Sess., and was ‘subsequently ineorpo-

rated into the postat appropriation bill for 1908. 35

‘There is no suggestion of impropriety or unfair dealing in

connection with petitioner's contract. (Pet. App. 7a.)

Cong. Ree. 5928. [ts rigid advertising provisions be-

came a requirement peculinr to the special laws gov-

erning contracts by the Post Office Department for

> pneumatic tube service.

The 1902 Act amounted to a direction by Congress -

that contracts for pneumatic tube service be written

as Ina glass bowl. The terms of every proposed Gon-

tract for pneumatic tube service were do be publicly

revealed by advertisement to prevent even a ‘suspi-

cion of scandal.” Petitioner's purported contract was

written in disregard of these requirements, and so was

properly invalidated. i

Petitioner's real argument is hot with the Court of

Claims’ decision but with the wisdom of the poliey of

Congress which that decision implemented. Petitioner

wishes this Court to review its case because it was the

only possible bidder for the contract mm issue; it con-

tends that an advertising requirement im these ¢ireum-

stantes Was unnecessary. But Congress was certainly

aware that the physical and economic nature of pneu-

matie tube systems, built solely for transniissian 6! the

mails between Post Offices, necessarily fimited bids for

service over existing systems to their owners. No one

else was equipped to bid. Yet it directed, despite this

obvious fact, that all pneumatie tube contracts be let

hy advertising. Unlike R. S. 3709, the pneumatie tube

statute recognizes no exceptions. This was the policy

‘\

om fs

Congress reiterated in Section 2 ef the Act wider

Which petitioner’s contract was issned.

2. Petitioner, asserting that the court below substi-

tuted its judement as to the existence of a *pubhe

exigency” for that.of the Posmaster General, Urges

that the decision below is in contlict with United

Stutes ve Speed?8 Wall. 77, 83. But this argument is

pointless, since the pneumatic tube statute Govs not

recognize a “public exigeney” exception. The statute

In Speed, on the other hand, expressly authorized the

offeer charged with procuring the supplies invelved

to dispense. with advertising in his ciscretion if cir-

ulustanees demnnided it.

° ’ . . ~- . . . . P . .

* To escape the priov wdvertising requirements ‘of the pneumatic

tube statute, petitioner urees that it be rend as if it ae

the exceptions co the General Advertising Statutes, RLS. con

‘ . . 4 . . . e

In davai es tdi: VAG tl offers av curious oroeunieny, I: COl-

! . ; awl

fens that ¢ ONLress ehactss statutes expressly requiring adver-

tising for Spe Wie ranite of: Aree Ss even tiveouerty Nt. Ss, bg (iy

already dees this, Under this views the speciiic wavertising: re-

qurements are superfluous legislation, We cannot agree that

speetfic cadvertising reciutrements doltberately written into a

statute with the backeround of tle pneumatic tube statute are

mere surplusege. As petitioner points ont, when Coneress

Wishes fo elbtaate all advertisine requirements it SaVvs so. Sim:

diariy, we suit that when Congress Wishes to require advertis-

Ing under conditions ocker than those set forth in Ro S. 3709. if

specifically legishites to this effect. This is precisely what it did

in the statute involved here. To the extent that the speertie

danguage of the pneumatic tube statate is inconsistent with the

general exceptions of Ro S. 38709, the pneumatie tube statute

prevatls,

16 :

, CONCLUSION

For the foregoing reasons, it is respectfully sub-

mitted that the petition for. certiorari should be

“odenied. : ) :

. J. LEE Rankiy, ‘

; eee! Solicitor General,

GrorGe Cocuran Dovs,

sig Assistant Attorney General. »

~~ Morton HOLLANDER,

How arp ‘E, Sv apiro,

Attorneys.

‘

ao!

APPENDIX

FINDINGS OF FACT

The durt, having considered the evidence, the report of

Commissioner Marion T. Bennett, and the briefs and argu-

ment of coufisel, makes findings of fact as follows:

1. Plaintiff, New York Mail and Newspaper Transporta-

tion Company, is a corporation chartered by the State of

New York and is a subsidiary of Lamson Corporation of

Deiaware. Sy Pace

2. From 1932 to 1954 plaintiff was the owner of an inte-

grated system for the transportation of the United States

mails in New York City. This was its sole business. under-

taking. The system consisted of dispatching and receiving -

stations located in 22 post offices (11 leased and 11 Govern-

ment-owned), in New York City, and underground pneu-

matie tubes which corinected the several post offices. This

system was first established about asi and has been added

to, from time to time, since then. ExXcept for a short interval

in 1901 and 1902 and for a fowr-year intérval in 1918-1922,

the system has, since its original establishment, been used

continuously tor the transportation of the United: States

mails, pursuant to a series of contracts covering varying

periods of time between the owners of the system and the

United States. The system was not in operation during the

periods mentioned because of adverse reports upon it by

the Postmaster General and failure of Congress to appropri-

ate funds for its use. Since 1932 all contracts pertaining to

the use of the system have been bet ween the plaintiff, as owner

of the system, and the defendant. Each of these latter con-

tracts was executed on behalf of the defendant by its then

Postmaster General or Acting Postmaster General or an

Assistant Postmaster General.

Since 1988 there had been tliscussions and negotiations

between plaintiff-and the Post Office Department concerning

* _new contracts. Plaintiff had heen the only bidder since 1932

and was the only company in New York which had the

facilities which would have enabled it to make a bid.

(17)

3. The contracts which plaintiff apd defendant had prior

to 185s provided that plamtil would pay all expenses, in-

cluding the wages and salaries of employees and the cost of

electric power for the operation of the pneumatic tube system,

while defendant paid for the service rendered at agreed

rates per mile of tube. In 1937 and early 1958 plaintiff sought

a change in this arrangement, desiring, among other things,

that defendant lease the system. The Postmaster General

rejected plaintitP’s bids as unacceptable i in form, not respon

sive to the advertisement, nor in accordance with the appli-

cable appropriation. A temporary cfntract was negotiated

for the term March 1, 1938, to June 30, 1938, under which

defendant leased the system and paid ail operating costs

exclusive of maintenance and station change expenses. It was

also provided that the Postmaster General might annul, can-

cel or terminate the contract whenever in his opinion public

interest required it. This provision was continued in con-

tracts hetween iTie parties until June 30, 1948. Defendant’s

advertisement inviting proposals for the period subsequent

to July 1, 1938, was in the alternative. It invited) proposals

on (1) route 507011, contemplating the furnishing of service

to defendant on the basis previously used. and (2) route

SOTOLI-A on a lease or rental basis. Under the contract.

beginning July 1, 1938, and succeeding contracts until De-

cember 31, 1950, the defendant operated plaintiff's tube sys-

tem with its own employ ees and assumed the electric power

costs with plaintiff bearing the expenses of repair, mainte-

nance, plants and carriers. The series of contracts covering

the periods, including the new arrangement on which plain-

tiff was sole bidder, were as follow: es

July 1, 1938, to June 50, 1940,

July 1, 1940, to June 30, 1041. extended to June 30, 1942.

July 1, 1942, to June 30, 1947, extended for two 6-

months’ periods to Tune: 0, 1948.

July 1, 1948, to June 30, 1949, extended to Dec. 31,1949.

Jan. 1, 1950, to Dee. 31, 1950.

None of the foregoing contracts between plaintiff and de-

fendant had exactiy the same terms and conditions as in the

applicable inv cation for bids.

4. The law relating to contracts for the transmission of

mail in effect on April 24, 1959, when defendant advertised

for proposals for furnishing a pneumatic tube system on a

itt a i |

lease or rental bas's, was in part as follows [Title 39 U.S.C.

§ 423 (1946 Ed. Supp. IID) |:

73 dusmission by pred matic é ube 8. contracts; expert com-

MISSION f TC Port.

‘The Postmaster General may enter into contracts not

exceeding in the aggregate $1,388,759 for the transmis-

sion of mail by pneumatic tubes or other similar devices

for a period not exceeding ten years, after public adver-

tisement once a week fora period of six consecutive

weeks. in not less than five newspapers, ene of which

shall be published in each city where the service is to be

performed. Contracts for this service shall be subject

Ls nap: oro y postal laws and regulations re-

lating to the tetttwe_of mail contracts, except as herein

otherwise provided, and jio-advertisement shall issue

until after a careful investigation shall Tave been made

as to the needs avd practicability of such service and

until a favorable report, in writing, shall have been sub-

mitted to the Postmaster General by a commission of

not less than three expert postal officials, to be named by

him; nor shall such advertisement issue until in the

judgment of the Postinaster General the needs of the

Postal Service are such as to justify the expenditure

involved. Advertisements shal] state in general terms

only the requirements of the service and in form best

caleulated to invite competitive bidding.

The Postmaster General was giyen the right to reject any

and all bids, and no cont racts could be awarded except to the

lowest. responsible bidder tendering full and sufficient

guaranties. 7

5. Pursuant to the statute quoted above, the Postmaster

General, by order 42425, dated January 25, 1950, appointed

a committee of three expert postal officials for the purpose of

investigating the need and practicability of continuing be-

yond December 31, 1950, the use of pneumatic tubes for

handling mail in New York and Brooklyn under a new

rontract.

6. On March 10, 1950, the committee submitted a report

to the Postmaster General. The report discussed the service

being rendered, made comparisons of the speed and cost of

transmission by pneumatic tubes with surface transportation

in motor vehicles and came to nine conclusions, which in

summary were that the pneumatic tube service was a valu-

able auxiliary transportation medium supplementing the

motor vehicle service and shonld be continued. It was

recommended that the service between Brooklyn and New

2t)

York City should be Gnantiow ed when the lines were re:

moved from Brooklyn Bridge in connection with repairs

then under way, but that an advertisement should be issued

for pneumatic tube service in New York City for a lease of

five or ten years from January 1, 1951, stipulating that the

bidder should make any required conversion of equipment

from direct to alternating current.

7. At the same time the committee on tube service was

making its investigation, a group of Post Office inspectors

was making an independent survey of the motor vehicle serv-

ice of the department in New York City. It had always

been necessary to maintain vehicle service roughly parallel-

ing the route of the pneumatic tube system in order to trans-

port mail which was too bulky for tube transmission or

which had to be transported during hours each day when

the tubes were ‘not in operation. In 1917 motor: vehicles

were substituted for the horse and wagon for the purposes

described. In 1950 the condition of the mail trucks, and

truck service generally, was in bad condition and inefficient.

Some of the trucks were 1917 models. It had been necessary

to supplement the department’s vehicles with hired trucks.

As a result of the survey, several hundred new trucks were

added to the motor ffeet and the number of motor vehicle

circuits was increased from 26 to 40. The old motor equip-

ment was sold as Junk.

8 After approval was given in April 1950 for the inerease

in truck circuits, the Assistant Postmaster General, on April

21, 1950, directed that further study be given to the desir-

ability of continuing the pneuinatic tube system in light of

tne committee's statement in its March 10 report that new

motor vehicle circuits might be uble to absorb a large per-

centage of the mail being transported by the tubes. Plans

for such circuits were in formative stages iv March and had

not been presented for departmental consideration,

In April 1950 the trhck circuits were not only increased

but a departmental directive was issued ordering reduction

in the number of mail and parcel post deliveries, discontinu-

ance of night mail collections from street letter and chute

boxes and thé closing of service windows of the post offices

each day at 6: 00 p.m. |

9. In light of the two developments described in the find-

ing above, the committee submitted a supplemental report on-

May 15, 1950. This report stated that the revised and re-

duced postal service would decrease the utility of the tube

operation, and the new truck cirenits, if supplemented by

15 more trucks, would provide the service which in the

Mareh report was estimated as equivalent to the tube service.

The supplemental report estimated that the total annual cost

of operating the additional trucks would be $510.336.19 as

compared with an annual cost of $790,070.82 to maintain the

pneumatic tube service, or an annual saving of $280,634.63.

In light of these conclusions the report recommended that

pneumatic tube service be discontinued “if in conformity

with present policy.”

10. A second supplemental report was made on June 6,

1950, by the tube committee. This report showed that the

Post’ Office Department regularly employed 138 persons to

operate the tube system. By various tests the committee

concluded that. 77 mail handlers could take care of the mail

being carried by the tubes for a net saving of 61 employees.

Taking into account this saving in personnel, the committee

revised its cost analysis of the competing systems and showed

that as against on annual cost of $790,970.82 for the opera-

tion of the tube system, the additional motor vehicle service

to supplant the tubes would cost only SAL FG68.59, oe ting

thereby an ectimate:l net annual saving of $4002.25 in-

stead of the $280,634.63 shown by its May 15 report. The

committee renewed its recommendation thet the pneumatic

tube service be discontinued, pointing out that these fina-

ings gave further emphasis to its May ft recommendations.

il. In the meantime, in the Hight of the recommendation

contained in the March 10, 1950, committee report, the Post

Office Department. had published en April 24, 1950, an

“Advertisement Inviting Proposals for Furnishing a Tube

System on a Lease or Rental Basis for Use in the Tranis-

mission of Mails by Pneumatic Tubes or other Similar De-

vices_at New York, New York.” The Acting Assistant

Postmaster General sent a memorandum to the lostmasier

General on May 18, 1950, attaching the reports of the tube

committee dated March 10 and May 15, 1950, This memo-

randum reviewed the situation and concluded that changed

2E%:

conditions ‘since the initial report of Merch 10 now made

discontinuance of the tube system desirable in the interests

of economical administration. A second memorandum from

the Assistant Postmaster General was sent to the Postmaster

General on June 7, 1950, setting forth the conclusion reached

by the tube committee as described in finding 10.. This

memorandum raised to $452,909.37 the estimated savings per

ennem if the tube system would be discontinued when the

current contract expired on December 31, 1950.

12. The advertisement-of April 24, 1950, above refe.re a to.

invited proposals until May 31, 1950, “for furnishing a

pneumatic tube system on one 5O7O11—A, on a lease or

ental basis, for use in the transmission.of the mails in the

£3: ‘ough of Manhattan in the City of New York, New York,

for a period of five years or ten years, beginning January 1,

- 1951, in accordance with the conditions specified in the

instructions to bidders.” ~

Among other things, the instructions to bidders described

the mail handling points to be embraced on the tube system

anu specified what the Post Office Department and the con;

tractor would furnish. It was stated that the e7:.tractor

wonld be required to rehove the system at his own expense

at the expiration of the tQrm or the termination of the con-

tract, if requested to do\so by the Postmaster General.

Further, that upon discontinuance of the service at any point

the contractor would have to restore the premises to the

condition in which they were received, ordinary wear and

tear excepted, if requested to de so by the Postmaster

General.

Paragraph 4 of the advertisement provided that the desig-

nated points on the route were to be connected by the shortest

practicable route with double lines of pneumatic tubes not

less than 8 inches in diameter at the expense of the con-

tractor, notwithstanding the designation and/or location of

the stations might be changed during the contract term.

Paragraph 6 (d) provided that the contractor should make

repairs to the premises connected with the tube system result-

ing from damage occasioned by tke installat#on of the tubes,

power plants, receiving and dispatching apparatus, ma-

chipery, equipment and devices.

‘

- &*

The cancellation provisions ap yearing in the instrnetions

to bidders were as follows: ,

&. The Postmaster General may annul, cancel, termi-

nate and end, any contract that may be entered into

under this advertisement—

(a) For repeated failure of the tube system to operate

du. to matters within the contro] of the contractor, —

(bh) For repeated failure on the part of the contractor

to make necessary repairs to the tube system promptly.

for efficient operafion on January 1, 1951. ss

(d) For violation of the postatlaws.

(e) For refusal to discharge any persons connected

with the maintenance and repair of the tube system when

requested to do so by the Postmaster General.

(f) For failure of contractor to change the location

of the tube lines, and receiving and dispatching appara-

‘us made necessary by reason of the remodeling or re-

building of the quarters in which the tube terminals

are located ; or by reason of the failure of the contractor

to have all points embraced on the route as outlined in

paragraph 4 of this advertisement, connected with the

tube system, as more specifically provided for in said

paragraph 4, :

(g) For failure of the Congress to ap} ropriate funds

for the operation of the system.

(h) Whenever the contractor shall become a member

of Congress.

(i) Whenever, in the discretion of the Postmaster

General, the public interest may require.

Tf the Electric Utility Company, which is the supplier

of the electricity for the tube system, changes the elec-

tricity provided from direct current to alternating cur-

rent, the contract may be cancelled without further lia-

bility on the part of the Government by the Postmaster

General unless the contractor at his own expense has

adapted the power plants, motors, and equipment of

said system for the use of alternating current prior to

such change.

The contract shall be ween without additional

compensation to the contractor, in; the event of the pur-

chase of the pneumatic tube systenk by the United States.

- Annulment, cancellation, termi vation or.ending for

any of the causes recited above shafl not impair the right

of the Postmaster General to claim damages from tie

contractor or his surety, and such damages may, for the

purpose of set-off or counter-claim in the settlement of

any claim of said contractor or jts surety against the

dl 4

: 24

United States, whether arising under this contract or

otherwise, be assessed and liguidated by the General Ac-

counting Office ef the United States.

13. The plaintiff submitted to the Post Office Department,

on May 26, 1950, a form of proposed contract by way of

bid, the terms and conditions of which varied in many

ways from the advertisement to which it was a response.

Plaintifi’s covering letter which accompanied the bid bond

and proposed contract stated in part:

As per our custom in the past and as per our telephone

notification to you, our proposal is submitted in the

form of a contract using as its base the existing contract

between the parties w ith deletions, additions and modi-

fications fo meet the new proposed ien year contractual

relationship which has been discussed between us. Con-

ditions and requirements in your advertisement not

specifically included In our pre posal ure indended to be

excluded from our proposal

14. The lengthy and detailed proposed rental contract

submitted by plaintiff on May 26, 1950, offered to provide a

tube system of double lines connecting the 22 postal points

described im defendant’s advertisement. ‘The proposal pro-

vided that the contractor would maintain the pneumatic

tubes and equipment and appurtenant machinery, including

power plants, and that, except as otherwise provided, the

Ixbor and power necessary for operation of the tubes and

the handling of mails thereby should be furnished by de-

fendant. ‘Vhe contractor was not to be under any obligation

to change th location, arrangement, or character * ae

equipment, including power pianis, as ihe sane tig

at the commencement of the lease. It was proposed that

the contractor would at his own expense remtWve the tubes,

power plants, and all apparatus from leased Post Office

premises at the expiration of the term or at the termination

of the contract or ai the termination of the lease where no

relocation of a station was involved, if requested to do so.

by the Postmaster General. No express provision relating

to repair oceasioned by installation or removal ofstabes and

machinery was included. :

15. The proposal of May 26, 1950, contained provisions

permitting the Postmaster General to annul, cancel or ter-

minate the contract for repeated failure of the tube system

to operate, failure of the contractor to make necessary repairs

promptly, failure to have it in condition for eflicrent opera-

tion by January 1, lol, ora reasonable time thereafter,

including failure to install equipment when required to

convert AC current to DC current, and refusal of the con-

tractor to discharge any person working in connection with

the operation of the tube system when requested to do so

by the Postmaster General, as well as the standard prohibi-

tion clause against a Men ber of Congress having a contract

with the United States. The cont ract could also be cancelled

“f the defendant bought the tube\system. By reference to

the cancellation provisions contained in defendant's adver-

tisement and instructions to bidders set forth in finding 12, it

will be seen that plaintiff's proposal of May 26, 1950, omitted

the following deseribed provisions set forth in that finding:

(ad), (f), Ci. and (i). With reference toa provision in the

‘advertisement which would have placed upan the contractor

the expense of conversion of all equipment from DC to AC,

plaintiffs proposal did contemplate the purchase and instal

lation of conversion equipment by plaint ff but contained a

clause which required defendant to reimburse it over a 10-year

period for the full cost thereof plus three pereent interest.

Defendant's advertisement also contained a penaliy. provi-

sio which the Postmaster General could invoke against the

contractor for unsatisfactory services for causes within the

contractor's control. Plaintiff's proposal omitted such a

provision. s

Plaintiff's proposal also omitted the term of the advertise-

went by which the General Accounting Office was to be

authorized to assess arid liquidate defendant's damage claims

in the event of claims by the bidder arising from a termi-

nation of the contract pursuant to its terms.

16. Defendant’s advertisement provided that proposals

submitted thereunder should specify the rate per annum for

tiie rental of the tube system. Plaintiff's proposal, in re-

sponse thereto, provided for a computation of the rental to

be paid annually for the leased property to permit the piain-

tiff to realize substantially the sum of $144,000 a year, cover-

ing allowance for depreciation, interest and return on

investment, in addition to the contractor's costs properly

chargeable against the lgised property. No fixed rate per

mile for rental was specified. The costs of maintaining the

tube system were set out in two schedules entitled Constant

Costs and Variable Costs. Fach year’s rental was to Consist

of the $144,000 plus a fixed xmount to cgv@ constant costs

plus the actual amount of the preceding yaar's variable costs.

Accordingly. the rental was to vary annuall¥ as the preceding

year’s variable costs increased or decreased.

17, One paragraph of plaintiff's proposal in response to

defendant's advertisement provided in part as follows:

Seventh: It is agreed that it is the intent of the parties

hereto that this contract shall not be deemed to be subject

to the several acts of Congress relating to Post Offges

and Post Roads now existing or hereafter made, or to

rules or regulations of the Post Office Department now

existing or hereafter made, except as such acts, rules

or regulations are specifically applicable to the leasing

of the property hereunder by the contractor or to the

service to be performed by the contractor hereunder.

It is further specifically agreed that this contract is not

and shall not be subject to extension or renewal under

any act of Congress now existing or hereafter made, or

any rule or regulation of the Post Office Department or

any other agency of fhe Government now existing or

hereafter made, and yao the term of this contract shall

expire in any event at/midnight December 31, 1960. It

is further specifically agreed that this contract is not <

and shall not be subject to renegotiation or any other ad-

justment of the terms or amount or method of calcula-

tion of payments under any act of Congress now exist-

ing or hereafter made or any rule or regulation of the

Post Office Department or any other agency of the Gov-

ernynent now existing or hereafter made.

18. The Assistant Postmaster General wrote to plaintiff's

president on November 21, 1950, stating in part:

is more or less on the basis of a “cost-plus” contract and

> ae *,e . .) . ** & o

this would require additional legislation, pre-

pore for our perusal a tentative contract. to include an

“escalator” or “Adjustment” clause, and submit it to us.

19. Pursuant to the foregoing suggestion, plaintiff, on De-

cember 7, 1950, submitted sn amended proposal, also in con-

tract form. Substantially, it was the same as the proposal of

May 26, 1950, except that a new section entitled Variable

Costs was attached and paragraph 3 of the May proposal was

changed to provide that the defendant should pay plaint’ if

an annual calendar year rental for the leased property in the

sum of $352,932.08 or such other sum as due under the varia-

ble costs section of the amended proposal. The sum of

$352,912.08 was the amount of $14,111.80 per mile of double

lines of tubes for the 25.0083 miles of such tubes in plaintiff's

system. |

20. Representatives of plaintiff and defendant had a con-

ference late in December 1950 in an attentpt to reach an

agreement en the terms of a contract. Among other things

discussed was the matter of whether or not a hew contract

should include a prov ision giving the Postmaster General the

right to cancel it in the public interest at |is discretion,

The advertisement and instructions to bidders had contained

such a proviso. Plaintiff had left it out of its proposals.

Some of plaintiff’s recent prior contracts had included it and

others had not. Plaintitf felt that such a provision in a

contract made it unilateral in the sense that the contractor

would be bound for a fixed term and the Government would

not be bound. » Also, plaintiff was concerned by the fact that,

under its ‘proposals, expenses for corversion to permit the

use of alternating current required the outlay of considerabie

sums of money to be paid to it by defendant over a peyiod

of years and plaintiff wanted to remove uncertainty about

the repayment.

21. In 1950 the Consolidated Edison Company of New

York, Ine., which had supplied direct current for operation

of the tube system, notified the Post Office Department it

would discontinue the supply on December 51, 1950, unless

it received assurance before that time that arrangements

would be made to convert the tube system to the use of alter-

nating current, Such conversion costs were estimated to be

from $125,000 to $350,000. Plaintiff ins sisted that for it td

bear this expense it would have to receive a rental in excess

of the statutory limit of $12,000 per mile sufficient to amor-

tize the cost of the conversion equipment over the term of

the contract. Hence, the figures set forth in finding 19 which

are in excess of such statutory limit. Defendant was agree-

able to a change in the statute and on December 27, 1950,

Public Law 889 (81st Congress, 2nd Session) was approved,

authorizing in New York a mesimum annual rate of $15,500

per mile for ten years, after which the maximum was to

revert to $12,900 per mile. This law repealed all previous

laws in conflict with it and specified some of them. The

statute required that contracts for the transmission of mail

by pneumatic tubes should be subject to the provisions of

laws relating to the letting of mail contracts but said nothing

about postal regulations. The statute provided also that

advertisements should state in general terms only the require-

ments of the service and be in a form best calculated to invite

competitive bidding. No contract was to be let except to the

lowest. responsible bidder able to guarantee satisfactory

performance.

Congress was aware of the fact that this plaintiff was the

owner of the only tube system operating in the city of New

York and that the necessity for legislation raising the author-

ized rate of pay per mile from the then statutory rate of

$12,000 was because plaintiff could not absorb the expense

of making the conversion to alternating current, pay operat-

ing and maintenance expenses and obtain a fair profit on

capital outlay at the existing statutory rate of pay.

22> The plaintiff was the only bidder. After the Act of

December 27, 1950 was passed, no new advertisement or

invitation for bids was issued by the Post Office Department.

On December 29, 1950, representatives of the plaintiff and

defendant signed a document entitled, “Contract for the

Rental of Pneumatic Tubes on Route 507011-A at Now

York, New York.” This document followed closely the

proposals made by plaintiff on May 26 and December 7, 1950,

in answer to defendant's advertisement of April 24, 1950,

and as described in prior findings. The provisions under

which the Postmaster General could cancel the contre.ct were

as proposed by plaintiff except that plaintiff’: proposal as

set forth in finding 17 was deleted and the following

substituted :

Seventh: This contract shall be subject to all the con-

ditions imposed by any provision of law which is by

its terms applicable hereto and to the following sections

of the Vostal Lawsand Regulations of 1948:. 97.31-

97.33; 97.37-97.45, and 98.8, but the Postmaster General

shall have no right without the ecnsent of the contractor

”

to extend or renew this contract beyond midnight De-

cember 31, 1960.

None of the foregoing designated sections in paragraph

numbered Seventh permits termination in the public interest.

The defendant, however, alleges that Section 97.67 of the

Postal Laws and Regulations, Edition of 1948, was in force

and effect on December 29, 1950. This section which Was not

mentioned in the document dated December 29, 1950, states

in part:

(b) The Postmaster General may discentinue or cur-

-tail the service on any mail route in whole or in part in

order to place on the route superior service or whenever

the pubhe interest in his a aa shall require. such

discontinuance or curtailment for any other cause. The

contractor shall be allowed as full indemnity one month’s

extra pay on the amount of service dispensed with and

a pro-rata compensation for the amount of service re-

tuined and continued.

23. Ths contract of December 29, 1950, approved as to

form and legality by the Solicitor for the Post Office Depart-

ment and signed by the Postmaster General, provided for

payment of fixed sums of money by the defendant as an an-

nual calendar year rental for the leased property, plus vari-

able sums depending on whether certain variable costs of

plaintiff increased or decreased, with an annual ceiling of

$387,628.65. Payments were to be calculated on an annual

basis and paid monthly. Further, the contractor, relying

upon the document as a binding contract for ten years, com-

mitted itself to expend a sum estimated at $350,000 for conver-

sion to vliernating current, the sum to be amortized over the

ten-year term of the contract and the ultimate cost thereof to

be borne by defendant at three percent interest. Provisions

of the contract are more fully described in subsequent findings

dealing with damages. ; .

24. On January 29, 1953, plaintiff and defendant executed

a written instrument which amended the one of December

29, 1950, with relation to hours of operation of the tube

system and provided that, “All other provisions of the con-

tract of December 29, 1950, shall remain in full force and

effect.” "

25. On May 28, 1953, a postal inspector’s report was sub-

30)

mitted to the Post Office Department containing findings -

with respect to the pneumatic tube operation. ‘The report

advised that in event of discontinuance of the tube system,

and the use of trucks instead, the Department would save

annually a minimum of $7 72,935.18" The Postmaster Gen-

eral decided to institute a pilot test by closing down the tubes

and lasing the motor vehicle ‘service for transportation of all

mail. Plaintitf was notifiéd on November 30, 1953, by letter,

that the tube -ervice in New York City would be closed for a

period of one wecd, effective December 1, 153. The avail-

able capacity of the existing motor vehicle service was used

with the addition o only two trucks at an added cost. per day

of $61.26. During the test period the mail was handled to

the satisfaction of the postal officials. Plaintiff was in-

forined by letter dated December 7, 1953, that the tube service

would remain closed until further notice. Plaintiff had no

notices other than those here described relative to the shut-

down and was not afforded any hearmy thereon,

26. On December 29,1955, defendant sent to plaintiff a

letter, signed by the Vostmasier General, reading as follows:

Reference is made to the transportation of mail

the pneumatic tube system operated by you in New Y: otk

City. ‘

This is to advise you that the Government, in the pub.

lie interest and for the general welfare, cunsidere the

purported contract, dated December 29, 1950, between

the Government, on the one hand, and the New York

Mail and’ Newspaper Transportation Company, as a

principal, and Lamson Corporation of Daunte and

Lamson Corporation, as sureties, on the other hand, to

be null and void and of no force and effect. The pur-

ported contract if valid is hereby cancelled in the public

interest. The Government. wil] make no further use of

the tube system and will not meke further payments

under the purported contract.

» You are also advised the Government is in need of the

space occupied by the company’s power plants, receiving

and dispatching apparatus, equipment, and devices on

leased and Government-owned premises. These must

be removed from Government-owned or Government-

leased prem*ses as secon as practicable. Arrangements

for necessary aecess to the various postal fac ilities for

the removal of the artieles mentioned shonld be made

with the pestmaster at New York.

~ 31

27. On January 7, 1954, plaintiff sent defendant a letter

setting forth plaintiff’s position that defendant by its letter

of Decembef 29, 1953, had breached the contract. of December

29,1950. The letter advised that if plaintiff had not received

notice from defendant by Janudry 22, 1954, rescinding the

Postmaster General's actiba, plaintiff would declare the con-

tract terminated for breach by the defendant and ‘would

proceed to seek damages therefor. Plaintiff set forth as its

reasons for delaying termination until January 22, 1954,

that once plaintiff had released its employees plaintiff would

not be able to provide service under the contract promptly

if resumption of service was desired by the defendant, and,

further, that once plaintiff's property’ was removed from

— defendant’s premises it would net be able to reestablish the

tube system except by the expenditure of much time and

money. |

28. The defendant took no action to rescind as suggested

by plainti® and on January 23, 1954, plaintiff wrote to de-

fendant declaring the contract of December 29, 1950, termi-

nated for breach by defendant. There 1s no issue'in the case °

over whether or not plaintiff had fully performed its obliga-

tions under the contract, as amended, from December 29, 1950,

to its cancellation. At the time of termination and prior

‘thereto, plaintiff was ready, willing and able to perform. its »

obligations under the contract. It is found, further, that the

action of the Postmaster General was based on substantial

evidence which is not challenged by the pleadings in this case

as being fraudulent, arbitrary or capricious.

29. For the months from January 1, 1951, through Novem-

ber 1953, the defend.nt paid to plaintiff, under the contract of

December 29, 1950, the sum of $1,027,753.72. The payments

made for 1951 total $352,912.08, the exact amount called for

by the contract. Payments for 1952 reflect changes after

March of that year, at which time plaintiff made its report

to the Post Office Department setting forth its charges for

the preceding calendar year as provided for under the vari-

able costs section of the contract. The payments made in

1953 reflect, for the period from July through November, a

dispute between the partes coxcerning the allowance of a

certain $7,200 item and the final payment of that item upon

the dispute being resolved in favor of the plaintiff.

32 ; 2

30. In 1938 the principal amount of plaintiff's indebted-

ness was nearly $3,000,000 and at the time of the execution of

the contf¥act of December 29, 1950, was in excess of $2,000, 000,

No reduction has been made in the principal amount since

February 20, 1950.°-The annual interest on the debt was

$91,655. BL i in 1951 and 195% and $91,906.62 in 1952. Assuming ,

payment of such interest annually the plaintiff wouid have

shown a deficit in each of those three years. Plaintiff had

been operating at a loss for many years prior to 1950 and-its

accumulated deficit in 1950 was $2,921,952.42. This deficit

was $2,982,180.91 by 1953. On the date of'the terminhition .

of the tube service by defendant on December 31, 1953, the

undepreciated balance of plaintiff's depreciable assets was

_ $109,494.08 on-an original investment in the tube system of

_ approximately $4,000,000. On April 30, 1954, thig unde-

preciated balance was written off as worthless ‘and the

operating equipment of the tube system thereafter dis-

mantled. Plaintiff is not now engaged in any business activi-

tigs and has not been since the discontinuance of its servi

by defendant.

/ CLAIMS FOR DAMAGES

Plaintiff is claiming damages for breach of contract by

defendant as follows:

(«) The unreimbursed principal of plaintiff's expendi-

tures for power conversion equipment, with interest at three

percent per annum. * ‘

(b) The cost to plaintiff on the cancellation and termi-

nation of contracts and arrangements for the purchase of a

set of new carriers for use in the pneumatic tube system in

the fall of 1954.

(e) The amount which became dhe to plaintiff under the

terms of the contract for the month of December 1953.

(4) Tho expenses incurred by plaintiff in January 1954

for wages, salarigs and other normal expenses, all being

reimbursable cosis under the contract.

— (e) The anticipated net profit te plaintiff under the con-

tract for the years 1954 through 1960. | : |

(f} The excess of plaintiff's 1953 variable costs under the

contract over its 102 variable costs under the contract.

tae 33

(x) The amount of the New York City special franchise

tax which became due and payable on April 1, 1954,

(h) The amount, if any, of the New York City special

franchise cax for the tax year Ju@y 4, 154 to June 30, 1955,

par g ecu becomes legally oblig: ated to pay.

(i) The cost to plaintiff of removal of plaintiff's property

from Government-owned post offices in New York City.

UNREIMBURSED COST OF POWER CONVERSION PQUIPMENT

31. The contract provided in paragraph 2 (a) under che

section headed Variable Costs, on page 9, as follows:

The contractor in reliance upon this contract and the

term of the contract is committing itself to expend a

sum now estimated ai-$350,000 to acquire and install

equipment to convert alternating current to direct cur-

rent [sic]. for the operation of ‘the tube system. It is

+ understood and agreed that Schedule A shall contain an

item which shall represent the annual payment required

for even amortization over the 10-year. term of this

contract of such cost when finally determined with

interest at 3% per annum * * *

The contract provided wi der the section headed Variable

Costs, on pages 10 and 11, for reim> ursement to plaintiff

of its costs to acquire and imstall said equipment to convert

the current in event of the termination of the contract by

plaintiff under various circumstances.

32. During 1951 and 1952, plaintiff expended the sum of

$214,870.15 to acquire and install equipment to convert direct

current to alternating current for the operation cf the tube

system, and reported its charges to the Post Office Depart-

ment, as required by the contract. The charges for this

-work were fair and reasonable, and following the audit by

the Post Office Department of the books and records of the

plaintiff for the years 1951 and £952, defendant accepted

- said sum of $214,870.13 as the cost of such power conversion

equipment for the purpose of calculating the monthly pay-

ments to be made by the defendant to the plaintiff under the

contract in reimbursement of such cost,

33. Defendant, pursuant to the terms of the contract, dur-

ing the vears 1951, 1952 and 1953, reimbursed the plaintiff

on account of such expenditures in the sum of $84,301.50,

consisting of $73,305.66 as principal and’ $10,995.84 as in-

terest. Such reimbursement psyments were included in the

monthly payments made by the defendant to the plaintiff

under the contract. No other payments in connection with

said expenditures have been made by defendant to plaintiff.

. 34. The difference between the plaintiff's total expendi-

tures for such equipment, in the sum of $214,870.13, and the

amount of $73,505.66 heretofore reimbursed by defendant to

plaintiff on account of the principal of such expenditures,

which difference is the amount claimed by plaintiff from

defendant as the unpaid principal balance of the cost of such

p*eonversion equipment, is the sum of $141,564.47.

The contract provided for payment of interest on unpaid

balances of the power conversion equipment cost, at the rate

of three percent per annum which remaine | unpaid from

December 1, 1953. There is no issue in this case as to the

ownership or cost of removal of this equipment.

COST OF SET OF NEW CARRIERS

35. The contract provided in paragraph 2 (a) under the

section headed Variable Costs, on pages 9 and 10, as follows:

* * * Tt is further understood and agreed that the

contractor in preparation. for adequate kom bogs aad

this contract from time to time will contract or effange

for the purchase of sets of new carriers and that such

contracting or arrangement must be made at a con-

siderable length of time before the carriers can be de-

livered and put into use.

The contract provided under the section headed Variable

Costs, on pages 10 and ii, for reimbursement to plaintiff of

its costs concerning new sets of carriers in the event of the

termination of the contract under various circumstances,

36. During 1953 plaintiff contracted and arranged for the

purchase of a set of new carriers for use in the pneumatic

tube system in the fall of 1934. At the time the purchase

order was placed for this set of new carriers it was expected

that such set would be put into use in the tube system in the

fall of 1954.

7. Plaintiff senpeided work on the set of new carriers

eniaih ly after defendant notified plaintiff on December 7,

1953, that the pneumatic tubes would continue to be shut

_—

down until further notice. Following the plaintiff’s letter

to defendant of January 23, 1954, in which plaintiff an-~

nounced that it was terminating the contract because of

breach*by the defendant. plaintiff promptly cancelled the

contracts fer the manufacture of a set of new carriers as to

any uncompleted portion thereof.

38 The total adjusted cost to plaintiff on such cancella-

tion and termination of its contracts and arrangements for

the purchase of such set of new carriers is the sum of

$30,290.56. 3

The major part of these costs to plaintiff were charges by

Lamson Corporation, with whom the order for the manu-

facture of the set of new carriers was placed. Lamson Cor-

poration and plaintiff are affiliated corporations, both being

subsidiaries of Lamson Corporation of Deiaware. It had

been the custom of plaintiff for a period of years to Lave the

carrier shells manufactured. by- Lamson Corporation, In

the termination charges of Lamson Corporation to the

plaintiff no profit was included.

29. The above termination charges of Lamson Corporation

to plaintiff on account of cancellation of the purchase order

for the set of new carriers in the amount of $30,290.56 in-

cluded the sum of $2,739.04 representing inventory of Lam-

son Corporation in existence prior to thegreceipt of the

purchase order from plaintiff in June 1953; Although the

record establishes that $1,233.86 of this pre-existing inven-

tory figure of $2,759.04 would have been expended in the

production of the contract for the set of new carriers if that

contract had been completed, the record does not show that

the inventory represented by that $1,233.86 was either pur-

chased for the contract which was terminated or could not

have been used on other work of Lamson Corperation. Ac-

cordingly, plaintiff's claim for the new carriers is excessive

by the amount of $2,739.04 representing preexisting inven-

tory and that amount should be deducted from the $30,290.56

leaving a net balance of cost totaling $27,551.52 which is

reasonable and no Pept which has been paid by defendant.

PAYMENT FOR DECEMBER 1953 EXPENSES

40, As set forth in the contract, the defendant was obli-

gated to pay plaintiff monthly amounts calculated in aceord-

ance with the terms of the aren The amount which

became due to plaintt* for the month of December 1963,

excluding any amount representing reimbursement of prin-

cipal cost of conversion equipment or interest thereon, was

the sum of $27,960.94, no part of which has been paid by

defendant to plaintiff.

EXPENSES OF JANUARY 1954

41. Follewing receipt of the letter from the Postmaster

General on December 30, 1953, plaintiff maintained itself in

a position of readiness to resume service if the defendant

desired service resumed. Upon giving its notice of termina-

tion to the defendant by its letter of January 23, 1954,

plaintiff thereupon released its employees as rapidly as

possible. Wages and salaries paid by plaintiff to its em-

ployees for services in January 1954 and other normal ex-

penses. incurred in January 1954 aggregate the sum of

$8,241.69. Such expenses were reiribursable costs under the

contract. However, $2,000 included in this item represen

the 1953-1954 Special Franchise Tax allocable to January

1954. The assessment for the second half of the fiscal year

1955-1954 is ineluced in finding 47 herein. Accordingly, the

expense for January 1954, paid by plaintiff, is $6,241.69.

ANTICIPATED NET PROFITS OF PLAINTIFF FOR 1954-1960

42, Under that part of the coniract of December 29, 1950,

entiiled Variable Costs, it is stated in part.

* * * Tt is, accordingly, agreed that the compensation

to be paid ihe contractor for its services hereunder, and

as renial for the leased property shall be for the calendar

year 1951, the sum of $352,912.08 and shall be for each

succeeding year the sum of $163,972.31, and in addition

te said sum in each succeeding year the amount of the

contractor’s costs for the preceding calendar year of

those items listed on Schedule A, anmexed hereto and

made a part hereof. but in no event shall the total com-

pensation payable for any calendar year exceed the sum

of $387,628.65. * * *

The Schedule A referred té above included various taxes

and operating expenses, salaries, pensions, maintenance and

repair, patterns, jigs, fixtures and ‘amortization of the cost

of power conversion equipment. The sum of $352,912.08

~ 37

quoted above included an estimated amount to cover the 1951

Schedule A costs. In 1952 the sum of $350,691.69 paid to

plaintiff included the exact amount of its Schedule A 1951

costs and the $163,972.31. In 1953 plaintiff received pay-

ment in the sum of $324,149.95 at a rate which would reim-

burse it for its 1952 costs with the qualifications stated in

finding 46. Nothing was paid to represent the 12th month

of 1953 during which time contract operations were sus-

pended by defendant’s nctice to plaintiff. Plaintiff's claim

for that month is set forth in finding 40.

Vbe ceiling amount set in the contract is the product of

the number of miles of the tube systeni, i. e., 25.0083 times

$15,500, the ceiling rate of expenditure for the transmission

of mail éstablished by act of December 27, 1950, referred

to in finding 21.

43. Out of the sum of $163,972.31 prov ided in the oentract

as the fixed sum plaintiff was to receive for each year (plus

variable costs) the plaintiff was to meet its other expenses

of carrying on its business and realize its profits. Plaintiff's

theory for computing its net, profits is to deduct from

$163,972.31 its constant costs each year, actual or estimated,

which are not costs such as included in Schedule A to the

contract. Plaintiff's claim for the years 1954 thorough 1960

is as follows:

Ee ee Se Sas Rane IAS SEN $126, 301. 59

For each of the years 1955-60__...............-------- 139, 241. 59

For the aggregate of these 7 years_....-.--_.---------- 971, 751. 13

‘44. The constant costs which plaintiff would deduct as

illustrated above are not defined or referred to in the con-

ract. As used by plaintiff they include, among other things,

such general expenses as life and health insurance, supplies,

travel, professional services, directors’ fees, postage, and, as

operating expenses, clerical and stenographic salaries, rent,

depreciation of machinery, telephone, and supplies. Plain-

tiff’s claimed actual constant costs for 1949 were $19,972.31.

In 1950 they were $25,050.67; 1951, $23,396.83; 1952, $27,-

984.01; 1953, $27,626.10. The estimate of such costs for 1954

is $27,670.72 and for 1955 and subsequent years to 1960,

inclusive, $24,730.72 for each such year.

Interest on indebtedness reported in finding 30 was not

included as a refundable expense under variable costs, nor

as a constant cost under contract operations.

45. The plaintiff prepared estimates of its variable costs

for the years 1954 to 1959 for classifications of expense similar

to those tabulated in Schedule A of its contract. Such

costs would have been recovered had the vontract run its full

course through 1960. If we assume that plaintiff's constant

costs, which were chargeable against its coustant allowance

under the contract for the determination of its contract in-

come, would follow substantially the same ratios-of varia-

tions as its variable costs, then a fair and reasonable

determination of plaintiff’s anticipated contract profits for

the calendar years 1954 through 1960 is $952,008.88. The

following tabulation reflects the basis for this determination :

j | Constant costs and con- | Income

| Variable costs exclusive tract allowances from

Years | of smnortization contract

1 charges operations

| Costs Allowances

(#) Actual resuits of opera-

tions:

1951_. $15y, 247. 16 $23, 396. 83 $163, 972.31 | $140, 575. 48

1952_. a 171, 559. 30 27, 984. 01 168, 972. 3% 135, 988. 30

aa 183, 844. 47 27, 628. 10 163, 972. 31 136, 346. 21

Pid he Sica a sca ae 414, 650, 98 79. 006. 94 491, 916. 93 412, 909. 99

ee ene 171, 550.31 100% 26, 335. 65 168, 972. 31 137, 636, 66

{b) Projected operations

for succeeding years

based upon estimates

as follows:(*) f

_ ,,, SSR ae 189,244.47 i07.17% | ®, 223.92 163,972.31 | 1235, 748.39

1054 176, 818.60 103. 07% 27, 144.15 163, 972. 31 136, 828. 16

1955 _. 173,747.10 101, 2% 26, 672. 75 163, 972. 31 137, 299. 56

SS Se 178, 847.10 104, 25% | 27, 454. 55 163, 972. 31 126, 417. 76

DON utah anon scdnnbee 182, 866.10 306. 60% 28, 073. 80 163, 972. 31 135, 898. 51

1958 | 186,755.10 108. 86% | 28, 668. 99 163, 972. 31 135, 303. 32

Ws kcckedabyeusnse ues 192,554.10 112.249 | 29,559.13 163, 972. 31 134, 413. 18

Totals...............| 1,278, 482. 87 | 195, 797. 29 | 1, 147, 806.17 | 952, 008, 88

(*) The recoverable variable costs for 1954 are represdiited by the actual variable costs for

1953, other amounts are esti:mates which would be receverable the succeeding year, none of:

which would exceed the maximum permissible under the contract.

EXCESS OF 1953 OVER 1952 VARIABLE COSTS

46. In finding 42 it is noied that plaintiff received from

defendant under the contract for 1953 the sum of $324,149.95

for eleven months of that year. The contract allowance

for December 1953 is reported in finding 40, other than |

amortization charges in connection with the electrical con-

version which is allowed in full for the unamortized portion

thereof in finding 34. The payments and the amount. re-

ported herein for 1953 were based in part upon the variable

expenses incurred by plaintiff for 1952 and represent the

recoup'uent in full for such expense. Plaintiif’s variable

expenses for 1953, which would have been recouved in ful!

in 1954 were some $12,285.16 in excess of its 1952 variable

expense. Plaintiff claims this difference of $12,285.16 as a

separate item of recovery.

The contract provided that, except for the first year of

operations thereunder, the recoupment of variable expenses

for any current year would be recovered in payments during

the following year. Thus, the actual expense for variables .

during the last year of operations under the contract would

never be recovered. The variable expenses paid during the

first year of or eration under this contract (1951) were based

upon estimated sums which included an ailowance of $40,250

representing an estimated sum for the amortization of the

power conversion costs. The actual amortization taken by

plaintiff in its 1951 variable costs was only $18,494.60.

Thereafter the amortization was at the rate of $22,983.41

annually. The calendar year 1953 was the last year of con-

tract operations. There is therefore no basis for allowing

recovery of any of plaintiff’s 1953 variable costs. However,

plaintiff's 1953 variable costs actually incurred in that year

have been included in the estimates projected over the follow-

ing years for the purpose of determining plaintiff's antici-

pated profits for those years.

NEW YORK CITY SPECIAL FRANCHISE TAYES

47.. Plaintiff is obligated to pay to ihe city of New York a

tax payment due on April 1, 1954, being the Second half of

the special franchise tax levied on plaintiff’s pneumatic tube

system for the tax year July 1, 1953, to June 30, 1954. The

item “Special Franchise ‘l'axes—Manhattan” is one of the

items of variable cost under Schedule A of the con-

tract. This tax bill due and payavle on April 1, 1954, was

such a special franchise tay. Had. the contract continued

during its term, such tax payment due on April 1, 1954, in

the sum of $12,792.18 would have been included as a variable |

cost for the year 1954 and plaintiff would have been entitled

to he reimbursed therefor under the contract.

% zero be

‘tube system resulting from the termination of the contract.

40)

48. The State Equalization Board of New York assessed

the value for special franchise tax purposes of plaintiff's,

pneumatic tube system which is the subject of the contract,

for the tax year July 1, 1954, to June 30, 1955, in the sum

of $712,000. Plaintiff duly protested the assessment in a

proceeding, before the Supreme Court of the State of New

_Yerk, Albgny County, New York, on May 18, 1955, request-

ivg that = assessed valuation be reduced from $712,000

use of the worthlessness of plaintiff's pneumatic

No decision in the case has been announced by the court.

The city of New York has levied a special franchise tax /

based upon the assessed valuation of $712,000 for the

year July 1, 1954, to June 30, 1955, in tle amount of $26,700,

payable one-half (or $13,350) on October 1, 1954, and one-

half (or $13,350) on April 1, 1955. Plaintiff has not paid

any part of this tax. If it is determined by the Supreme

Court of the State of New York that for the tax year July 1,

1954, to June 30, 1955, plaintiff’s pneumatic tube system had

a value for purposes of special franchise tax, plaintiff will

be obligated to pay the tax based upon such assessed valu-

ation. Any such tax so payable by plaintiff will be one of

the items of variable cost under Schedule A of the contract

under the heading “Special Franchise Taxes-—Manhattan.”

Had the contract continued during its term, any special

franchise tax payments due on October 1, 1954, and on

April 1, 1955, for the tax year July 1, 1954, to June 09, 1955,

would have been included as items of variable cost for the

years 1954 and 1955, respectively, and plaintiff would have

been entitled to be reimbursed therefor under the contract.

REMOVAL OF EQUIPMENT FROM GOVERNMENT-OWNED STATIONS

49. The contract of December 29, 1950, contained the fol-

lowing agreement:

Fourth: That the contractor will at his expense re-

move the tubes, power plants, receiving and dispatehing

apparatus, equipment and devices from leased Post

Office premises, at the expiration of the term, or, except

as otherwise herein provided, at the termination of the

contract, or at. the termination of the lease of any such

leased premises where no relocation of the station is

involved, if requested to do so by the Postmaster General.

, a |

: 4 41

| 60. At the time of the cancellation of the contract on De-

cember 29, 1953, by defendant, half of the post offices in which

plaintiff's dispatching and receiving equipment, power plants

avd other property used with the pneumatic tube system

were located, were in buildings owned by the defendant and

the rest-were in buildings owned by others and leased by

defendant. The defendant insisted that piaintiff remove

its-equipment from all postal premises both leased and Gov-

@rnment-owned. “The defendant advised plaintiff that if it

did not take the action suggested the Government would dis-

pose of the equipment and cred‘t the proceeds, if any, against

the cost of removal.

51. The plaintiff advised defendant by letter on March 17,

1954, that the defendant had no right to require that. plaintiff

pay fer the cost of removal from Government-owned prem-

ises or to dispose of plaintiff’s equipment. Under protest,

however, it advised defendant that arrangements would be

made to remove the equipment from both Government-owned

and teased post office preiaises and would include the cost of

removal from Government-owned premises as a part of its

claim against defendant. That claim. here presented, is for

$25,650.

52. Plaintiff sought purchasers and entered into a contract

with a salvage company on March 24, 1954, for the purchase

of all of plaintiff's equipment in both Government-owned

and Government-leased post office premises for the price of

$60,000. The contract also provided that the plaintiff should

pay to the salvage company the sum of $25,650 as the cost

of remoyal of equipment from Government-owned premises.

This was the best offer made to plaintiff and was reasonable.

All of the property was removed by August 1954.

53. No action has been taken on plaintiff's claim by Con-

gress, by any department of the United States, or, in ‘any

judicial proceeding, other than appears in these findings.

No person other than the plaintiff is the owner or is inter-

ested in this claim. No assignment or transfer of this claim

or any part thereof or interest in it has been made.

DEFENDANT'S FIRST COUNTERCLAIM

54. Defendant contends that the contract of December 29,

1950, was made “pursuant to discussions and negotiations,

rather than pursuant to public advertisement as required

by law with the result that the public competition in the

letting of mail contracts contemplated by law was suppressed

and defeated, and said purported contract was executed con-

trary to law, and is void and of no force and effect.” De-

fendant claims that money paid by defendant during the

periud from January ‘1, 1950, to November 30, 1953, was

illegally paid under an invalid contract and was greatly 1 in

excess of the fair and reasonable value of the services ren-

dered by plaintiff and that defendant is entitled to recover

from plaintiff the total amount so paid less such sum as plain-

tiff might prove to be the fair and reasonable value of such

services,

It is found that the year 1950 is not properly in question

under: the counterclaim because it was prior to the effective

date of the contract in dispute. The total sum paid te plain-

tiff by defendant for 1951, 1952 and 1953 is $1,027,753.72.

The reasonable value of plaintiff's services during these

three years was not less than the sum paid.

® DEFENDANT'S SECOND COUNTERCLAIM

55. Defendant asserts that plaintiff was under obligation.

to remove its equipment from defendant’s premises and to

restore and repair damages caused thereto by installation

and removal of such equipment. Defendant pleads that the

reasonahle cost to defendant to repair the buildings properly

is approximately $28,600. There was no provision in the

contract of December 29, 1950, relating to the repair or

‘restoration of any premises in which plaintiff had installed

its tubes and equipment, and the only provisions concerning

the obligation of plaintiff to remove its property from post

oflice premises at the termination of a contract related to

removal from leased premises, with no mention of Govern-

ment-owned premises. Some of the contracts between plain-

tiff and defendant prior to July 1, 1948, included provisions

requiring plaintiff, at the request of the Postniaster General,

to remove its property at the termination of the contract

and to restore the premises to their condition existing before

such alterations as were made for installation.

43°

56. The tubes forming a part of plaintiff's pneumatic tube

system passea through various floors, ceilings, partitions

and walls of the post office stations which they connected.

Tubes were sometimes suspended from the ceiling by pipe

hangers while receiving and dispatching apparatus was se-

cured to the floor. Power units were mounted on concrete

foundations imbedded in the basement floors of the post

oflices or were set into depressions made in the floors for that

purpose. Certain steel trap doors, floor plating and con-

crete foundations, which had no apparent use except in con-

nection with plaintiff's equipment, were not removed. Holes

were not repaired in any wey except that some were covered

by steel plates. Holes were left in floors, partiticns and ceil-

ings and fireproofing in various buildings was damaged in”

removal of hangers used to support the tubes.

57. The defendant offered proof that the reasonable cost

of repairing leased post office premises would be $39,685.

It estimates the cost of reasonable repairs to Government-

owned buildings at $1,295. Plaintiff denies liability for

these repairs under the contract but offered evidence that

their total cost, if allowable to defendant, as a vaatter of law,

should not exceed $16,616. All of the foregoing figures in-

clude, reasonable allowances for profit and overhead. In

addition, defendant’s figures include 15 percent for draw- _

ings, specifications and supervision which would be required

x by the defendant but not by a private contractor for this

type of job. A reasonable allowance for the repairs in

question would be $20,000, if allowable as a matter of law.

58. Because of the nature of the equipment and the manner

of its installation, it would have been impossible to remove

it without some damage to the premises. None of the dam-

ages to the premises resulting from the removal of plaintiff's

equipment has been shown to be the result of any failure on

plaintiff's part to use ordinary care in doing such removal

work, |

oon MARY

59. The various items of plaintiff's ciaim for damages and

the amount, if : any, found to be recoverable en each item, are

summarized as follows:

Item of claim

(a) Unreimbursed cost of power conversion equip

(%) Gost oF new set Gf CUPiRers. ..n.nc nce ic.

(d) Expenses of January, 1954..._..-.-.....-_-._--

(e) Anticipated net profits for 1$54—-1960___..._____--

(f) Excess of 1953 over 1952 variable costs__..__.-=.--

(g) New York City special franchise taxes for the

second half of the 1953-1954 tax year____-_-__--

(h) New York City special franchise taxes for 1954-

Amour?

Recoverable

$141, 564. 47

27, 551. 52

27, 960. 94

6, 241. 69

12, 792. 18

SI MN I ct nesiats eeciccetedadchacees eeciacgeneeh dcaoaeechinkis oes 0

(i) Removal of equipment from Government-owned

I ear de eter einen i eens 0

ia cccierestisticitinmnarintetininicapeiiadiniiaiiiniontiitiiatiaiapinlip 216, 110. 80

CONCLUSION OF LAW

Upon the foregoing findings of fact, which are made a

part of the judgment herein, the court concludes as a matter

of law that plaintiff is entitled to recover, and it is therefore

adjudged and ordered that plaintiff recover of and. from the

United States two hundred sixteen thousand one hundred

ten dollars and eighty cents ($216,110.80).

It is further concluded that the defendant is not entitled

to recover on its counterclaims, and the counterclaims are

therefore dismissed.

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.