Opinion
Nos. H-234, J-126.
November 3, 1930.
Separate suits by the Mohawk Condensed Milk Company and by the Colorado Condensed Milk Company against the United States.
Judgment for plaintiffs.
These two cases involve the same question and were heard together. No. H-234 was instituted to recover $8,491.54, overpayment of income and profits tax for the year 1918, with interest, and No. J-126 was instituted to recover $427.71, interest on an overpayment of income and profits tax for 1917, with interest.
The overpayment and the interest were allowed and approved for payment by the Commissioner of Internal Revenue, but payment was withheld by the Comptroller General upon the ground that plaintiffs were indebted to the United States by reason of excessive payments by the United States under contracts with the plaintiffs to furnish condensed and evaporated milk to the Army, Navy, and Marine Corps.
In the case of the Mohawk Condensed Milk Company, No. H-234, the Comptroller General applied the amount of $8,491.54 against the overpayment of tax and interest allowed by the Commissioner of $9,416.28 and paid the difference of $924.74 to plaintiff. In this case the defendant filed counterclaim for the amount of $8,491.54.
In the case of the Colorado Condensed Milk Company, No. J-126, the defendant has filed counterclaim for $2,824.15 with interest, less the interest of $427.71 on an overpayment of tax, alleged to represent the amount paid to plaintiff by the United States in excess of the amount to which it was entitled under its milk contract.
Special Findings of Fact.1. The Mohawk Condensed Milk Company, hereinafter referred to as the Mohawk Company, is a New York corporation and the Colorado Condensed Milk Company, hereinafter referred to as the Colorado Company, is a Colorado corporation. During the calendar year 1918 substantially all of the outstanding capital stock of the Colorado Company was owned by the Mohawk Company.
2. The Colorado Company filed its income and profits tax return for 1917. It was finally determined that plaintiff had overpaid its tax for 1917 in the amount of $12,163.17, and this amount was refunded to plaintiff by Treasury check on January 27, 1923. Thereafter, February 16, 1927, the Commissioner of Internal Revenue authorized the disbursing clerk of the Treasury Department to pay this company interest of $427.71 on said overpayment.
3. The Mohawk Company duly filed an income and profits tax return for 1918. Upon final determination the Commissioner of Internal Revenue held that this plaintiff had overpaid its tax for this year in the amount of $6,946.76, and that it was entitled to interest thereon of $2,469.52, totaling $9,416.28. The Commissioner duly authorized and instructed the disbursing clerk of the Treasury Department to pay these amounts.
There is no question in these cases as to the correctness of the overpayments and the amounts of interest above set forth.
Before payment was made by the Treasury Department, the Comptroller General of the United States withheld payment upon the ground that these companies were indebted to the United States in certain amounts for overpayments made by the government on canned milk under certain contracts.
4. On May 12, 1926, the Comptroller General advised the Mohawk Company, as follows:
"Your claim for refund of income tax erroneously or illegally collected for the year 1918, as shown by Sched. IT-R-17349, Cert. of Overassessment No. 449400:
Refund ........................ $6,946 76 Interest ...................... 2,469 52 _________ Total ..................... $9,416 28
— has been settled and the sum of $9,416.28 has been allowed per above certificate number, payable from the appropriation 27422, `Refunding taxes illegally collected, 1927, and prior years.' Two warrants to issue —
"One to the Treasurer of the United States for $8,491.54. * * *
"This action is taken in order to make a refund of indebtedness to the United States in the sum of $8,491.54, as shown by Cert. No. U.S. 304-W.
"One to Mohawk Condensed Milk Co. for $924.71."
In the certificate of the Comptroller General, U.S. 304-W, above referred to, addressed to plaintiff under date of June 2, 1924, the Comptroller General stated as follows:
"The claim of the United States for overpayments made on canned milk under cost-plus agreement (Nov. 1, 1917, to Dec. 31, 1918), as follows:
72,188 cases evap. milk sold Army ........................... $386,477 98 Costs ................ $354,198 98 Profit allowed, @ 42¢ per case ............ 30,318 96 __________ 384,517 94 __________ Amount due the United States .............. $1,960 04 3,000 cases condensed milk sold Army ........................... $23,940 00 Costs ................ $18,681 00 Profit allowed, @ 59¢ per case ............ 1,770 00 _________ 20,451 00 __________ Amount due the United States .............. 3,489 00 2,500 cases evap. milk sold Marine Corps .......................... $16,125 00 Costs ................ $12,032 50 Profit allowed, @ 42¢ per case ............ 1,050 00 _________ 13,082 50 __________ Amount due the United States ............... 3,042 50 _________ Total amount due the United States ......... $8,491 54
— has (have) been settled and the sum of eight thousand four hundred and ninety-one dollars and fifty-four cents has been found due the United States per above certificate number. The amount due should be remitted to this office promptly by check, draft, or money order payable to the United States."
The Mohawk Company refused to agree to what the Comptroller General had done.
5. July 23, 1927, the Comptroller General of the United States advised the Colorado Company as follows:
"The claim of the United States for overpayments made on canned milk under cost-plus agreement (Nov. 1, 1917, to Dec. 31, 1918), as follows:
31,732 cases evaporated milk sold Army ..... $166,307 41 Costs ......................... $150,155 82 Profit allowed, @ 42¢ per cas 13,327 44 __________ 163,483 26 ___________ Amount due the United States ............ $ 2,824 15 Less: Set-off for interest on taxes erroneously collected as shown by Internal Revenue Schedule No. IT-I-22027, approved February 16, 1927, by certified number 0155953, dated June 6, 1927 ................................... 427 71 ___________ Net amount due the United States ........ $ 2,396 44
— has (have) been settled and the sum of two thousand three hundred ninety-six dollars and forty-four cents has been found due the United States, per above certificate number. The amount due should be remitted to this office August 23, 1927, by check, draft, or money order payable to the `United States.'"
The Colorado Company refused to agree to what the Comptroller General had done. These statements of the Comptroller did not include all of the milk furnished to the military services hereinbefore mentioned.
6. September 7, 1917, the United States Food Administrator invited the manufacturers of milk to hold a conference with a view of making suggestions as to fixing prices during the war, and a conference was held in Washington September 26, 1917, of manufacturers of evaporated and condensed milk. At this conference plaintiffs were present or represented. On a roll call vote taken, the manufacturers were unanimously in favor of voluntary regulation. It was moved that 30 cents per case on evaporated milk and 40 cents per case on condensed milk would be a fair and reasonable profit to recommend to the Food Administration, and by a standing vote the industries represented at the meeting unanimously recommended these figures.
A circular, No. 272, United States Food Administration, public information division, stated in part, as follows:
"Manufacturers of canned milk representing ninety-five per cent of the entire industry in the United States in conference with the United States Food Administration today agreed voluntarily and unanimously to submit their business to the supervision of the Food Administration during the period of the war, and to take no war profits but to make the profit on their goods sold to the public the same as on goods to the Army and Navy.
"Since the first of May they have been furnishing supplies to the Army and Navy at a price and on a basis of profit determined by the Federal Trade Commission. This they obligated themselves in their conferences to-day to continue throughout the war, and further they agreed to supply the commission for relief in Belgium and the American Red Cross at the same prices as that made to the Government.
"The canned-milk men expressed their willingness to cooperate with the Food Administration by limiting the price to the public so as not to return to the industry a greater profit than was received before the war. During that period, they declared a profit of 30¢ a case on evaporated milk, and 40¢ a case on condensed milk was considered fair. In meeting the greatly increased demand on account of needs created by the war, the manufacturers said they had found difficulties in the increased price of fresh milk and the high cost of tin plate. These have forced the increased prices for their product during the last 18 months. The only way in which they as manufacturers can limit the cost of their commodity to the public, they declared, is through the limitation of profits, since they can not control the cost of the raw materials upon which they depend."
December 2, 1918, the milk manufacturers' war committee wrote the food purchase board of the United States Food Administration in part as follows:
"* * * In view of the fact that the entire agreement between the milk manufacturers' war committee and the Army, Navy, and Marine Corps has not heretofore been reduced to writing in a single document, the committee sets forth the following as its understanding of the agreement, as it has existed in the past, and as it shall continue for the above-designated period, with the exception of two slight modifications which will be noted hereafter.
"1. It is the understanding of the committee that the Army, Navy, and Marine Corps shall purchase their requirements as nearly as may be from month to month, proper allowance being made for such reserves as it may be necessary to carry regularly against future needs. * * *
"8. The milk manufacturers agree that profit made on sales to the Army, Navy, and Marine Corps as an average for the period in question shall not be more than 42¢ per case on evaporated milk and 59¢ per case on condensed milk, calculated on the basis of Federal Trade Commission cost accounting as set forth in the pamphlet issued by the Federal Trade Commission under date of July, 1917, entitled `Uniform contracts for cost accounting, definitions, and methods.'
"The 42¢ per c/s profit on evaporated milk and 59¢ per case profit on condensed milk represents the same margin of profit as a net profit of 30¢ per case on evaporated milk and 40¢ per case on condensed milk, the higher figures being reached by agreement with the Army, Navy, and Marine Corps to meet the Federal Trade Commission basis of accounting, which does not take into account certain items of cost which are regularly borne by the industry.
"At the close of the period during which supplies may be purchased on this basis, following January 1st, 1919, investigation of the costs by the respective companies shall be made by the Federal Trade Commission or some other agency agreed upon by the buyers and manufacturers. In the event that any manufacturer has made, during the period, an average of more than 42¢ per case on evaporated milk and 59¢ per case on condensed milk the excess above such margin of profit shall be refunded by the respective manufacturers to the Army, Navy, or Marine Corps, respectively. In the event a manufacturer has made less than 42¢ per case profit on evaporated and 59¢ per case on condensed milk, neither the Army, Navy, nor Marine Corps shall be obligated to make any additional payments."
On the facts set forth in this finding is based the agreement under which the plaintiffs furnished the United States military services mentioned with condensed and evaporated milk.
Under this agreement the sales to the Army, Navy, and Marine Corps were to be considered collectively in ascertaining whether the manufacturer had made during the sale an average profit of more or less than 42 cents per case on evaporated milk and 59 cents per case on condensed milk.
7. During the period November 1, 1917, to December 31, 1918, the Mohawk Company sold and delivered to the United States the following quantities of evaporated and condensed milk:
===================================================== Delivered to — | Cases | Amount paid | | plaintiff ---------------------------|--------|---------------- War Department, evaporated | 72,188 | $386,477 98 War Department, condensed | 3,000 | 23,940 00 Navy Department (Marine | | Corps) evaporated ....... | 2,500 | 16,125 00 Navy Department | | (Navy), evaporated ...... | 21,134 | 102,801 80 --------------------------------------------------------
During the period November 1, 1917, to December 31, 1918, the Colorado Company sold and delivered to the United States the following quantities of evaporated milk:
=============================================== Delivered to — | Cases | Amount | | received ------------------------|--------|------------- War Department ........ | 31,732 | $166,307 41 Navy Department ....... | 7,000 | 31,594 00 -----------------------------------------------
8. An examination of the books of plaintiffs was made by a representative of the Federal Trade Commission. No competent proof was offered by the defendant as to the basis upon which this examination was made, or as to the correctness thereof, and no competent proof was offered as to the correctness of the figures used by the Comptroller General in his advice to the plaintiffs, or as to the basis upon which they were arrived at.
Robert N. Anderson, of Washington, D.C. (Chester A. Gwinn and Humphreys Day, all of Washington, D.C., on the brief), for plaintiffs.
P.M. Cox, of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen. (Charles F. Kincheloe, of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, and WILLIAMS, Judges.
These two cases were instituted to recover amounts growing out of overpayments of tax for 1917 and 1918, about which there is no controversy. The controversy in both cases is the same, and is whether plaintiffs are indebted to the United States for overpayments made to them for evaporated and condensed milk sold and delivered to the defendant for its military forces during the period November 1, 1917, to December 31, 1918.
The defendant filed a counterclaim in each case. Under these counterclaims it is the contention of the defendant that, under the agreement set forth in the findings, a profit of not more than 42 cents per case on evaporated and 59 cents per case on condensed milk was to be computed on sales to the Army, Navy, and Marine Corps separately; that the plaintiffs were overpaid in the amounts set forth in the notices mailed to them by the Comptroller General.
Plaintiffs deny these claims of the defendant.
There is no competent proof by the defendant to support the allegations of the counterclaims. The notices from the Comptroller General to the plaintiffs do not prove the correctness of the figures therein used. It appears that the Comptroller General's office obtained the figures shown in his notices from some one in the Federal Trade Commission, but there is no competent proof as to who compiled these figures or how they were arrived at. For the purpose of showing how the Comptroller General arrived at his figures the defendant offered in evidence certain sheets of paper containing certain totals and summaries which the Comptroller General certified that he had received from the Federal Trade Commission. No one who had anything to do with the preparation of these figures was called to testify as to their correctness or how they were arrived at. The defendant claims that these documents represented an audit on the basis of the Federal Trade Commission cost accounting, as set forth in a pamphlet issued by the Federal Trade Commission, of July, 1917, entitled "Uniform Contracts for Cost Accounting, Definitions and Method." There is no competent proof of this. This court will not accept certified copies as proof of facts as to the correctness of figures contained in documents certified by an official of the government who has received such documents from some other official, department, or commission. Certification of documents proves only the document itself, and permits its introduction in evidence without further proof of identification, but such certification does not establish as a fact the correctness of the statements or figures therein contained. When there is as here a controversy concerning the correctness of the contents of such documents, such contents must be proved by the party relying thereon the same as other facts We cannot accept the sheets certified by the Comptroller General as proof of their contents or of the correctness of his determination.
Inasmuch as we have no competent evidence to establish the correctness of the figures for which the defendant contends, we cannot allow any portion of the counterclaim even if the theory of the defendant that the sales of evaporated and condensed milk to the departments of the military services were to be considered separately in arriving at the profit to be paid. While we are of the opinion that the contract was one for the sale of evaporated and condensed milk to the government and that, under its terms, the sales to the Army, Navy, and Marine Corps were to be considered collectively in ascertaining whether the manufacturers had made during the period an average profit of more or less than 42 cents per case on the evaporated milk and 59 cents per case on the condensed milk, Libby, McNeill Libby v. United States, 65 Ct. Cl. 64, we need not discuss this feature, in view of the lack of competent proof by the defendant to support its counterclaims on its theory.
Judgment will therefore be entered in favor of the Mohawk Condensed Milk Company for $8,491.54, with interest at 6 per cent. from December 14, 1925, until paid. Act of March 3, 1875, 18 Stat. 481, section 227, USCA title 31.
Judgment will also be entered in favor of the Colorado Condensed Milk Company for $427.71, with interest at 6 per cent. from February 16, 1927, until paid. Act of March 3, 1875, 18 Stat. 481, section 227, USCA title 31, supra.
WHALEY, Judge, did not hear this case and took no part in the decision thereof.