Brady v. War Contracts Price Adjustment Board

John B. Brady, Petitioner, v. War Contracts Price Adjustment Board, Respondent Brady v. War Contracts Price Adjustment Board Docket No. 140-R United States Tax Court 11 T.C. 280; 1948 U.S. Tax Ct. LEXIS 92; September 15, 1948, Promulgated *92 The Secretary of the Navy commenced on September 7, 1943, renegotiation of petitioner's war contracts for the year ended December 31, 1943. The renegotiation so commenced was uncompleted and pending when the Renegotiation Act of 1943 was passed on February 25, 1944. That act created the War Contracts Price Adjustment Board, with exclusive authority to renegotiate for all fiscal years ending after June 30, 1943. The determination of excessive profits by the Board on December 20, 1944, concluded the renegotiation. Petitioner contends that such determination was not made within one year following the commencement of the renegotiation proceedings and that, therefore, his liability for excessive profits was discharged under the provisions of section 403 (c) (3) of the Renegotiation Act of 1943. Held, that commencement of renegotiation proceedings under the Renegotiation Act of 1942 as to fiscal years ending after June 30, 1943, ceased to be such commencement for such years upon the passage of the Renegotiation Act of 1943 and did not constitute the beginning date of the year within which renegotiation was required to be concluded under the provisions of the 1943 Act. William M. Rice, Esq., and John L. Grabber, Esq., for the petitioner. William T. Becker, Esq., for the respondent. Hill, Judge. HILL *281 The sole question for our determination is whether the renegotiation of petitioner's contracts was completed within one year following the commencement of the renegotiation proceeding as required by section 403 (c) (3) of the Revenue Act of 1943, hereinafter referred to as the Renegotiation Act of 1943. The facts are in part stipulated, and such facts are so found. Other facts hereinafter set forth are found from the testimony and exhibits admitted at the hearing. FINDINGS OF FACT. The petitioner resides in Chevy Chase, Maryland. He is a consulting engineer and lawyer, with offices in Washington, D. C. The petitioner, on and prior to September 7, 1943, had been active in the development of*94 automatic printing telegraphic devices for approximately twenty years. Certain contracts relative to these devices, to the extent of amounts received or accrued thereunder during the year ended December 31, 1943, are involved in this proceeding. On September 7, 1943, the Under Secretary of the Navy, under authority delegated to him by the Secretary of the Navy in accordance with the Renegotiation Act of 1942, sent petitioner a letter by registered mail requesting certain information as a basis of renegotiation with respect to the years ended December 31, 1942 and 1943, and notifying the petitioner to attend a conference to be held in the Navy Building on September 17, 1943. The petitioner furnished the requested data on or before October 1, 1943. The data so furnished as to the last three months of 1943 were estimates. The amount of receipts so estimated was $ 6,068.88. The amount of the actual receipts of such last three months of 1943, to wit, $ 4,062.28, was furnished March 8, 1944. Pursuant to the letter of September 7, 1943, conferences were held between renegotiating officials and petitioner on the following dates: [1944] Sept. 17 Feb. 17 Oct. 1 Feb. 25 Oct. 6 Mar. 3 Oct. 14 Mar. 8 Nov. 12 Mar. 11 Dec. 17 Mar. 13 Mar. 28 Apr. 13 *95 The Renegotiation Act of 1943 was enacted February 25, 1944, and created the War Contracts Price Adjustment Board, hereinafter sometimes referred to as the Board, with jurisdiction to renegotiate war *282 contracts for years ending after June 30, 1943. By a regulation promulgated February 26, 1944, the Board delegated to the secretaries of various departments certain specified powers, functions, and duties conferred upon the Board by the Renegotiation Act of 1943. By virtue of this delegation of authority the Secretary of the Navy was authorized on behalf of the Board to renegotiate petitioner's contracts. On May 1, 1944, the Under Secretary of the Navy sent by registered mail the following letter to the petitioner: OFFICE OF THE UNDER SECRETARY OF THE NAVY Services and Sales Renegotiation Section Washington 25, D. C. REGISTERED MAIL In Reply Refer To: No. W 389 1 May 1944. Mr. John B. Brady, 701 Colorado Building, 14th & G Sts., NW. Washington, D. C. Dear Sir: Price Adjustment Boards and Sections have been established for the conduct of statutory proceedings for the renegotiation of contracts and subcontracts. Renegotiation with respect to fiscal years ended on *96 or before June 30, 1943 is controlled by the Renegotiation Act of 1942 as amended by the retroactive provisions of the Renegotiation Act of 1943. Renegotiation with respect to fiscal years ended after June 30, 1943 is controlled by the Renegotiation Act of 1943. Copies of both Acts are enclosed herewith. This Section has been established to handle Renegotiation Proceedings involving sales engineers, brokers, agents and dealers of certain types. The matter of conducting your statutory Renegotiation Proceedings has been assigned to this Office. Unless the amount of your income during your latest completed fiscal year was less than the statutory minimum as defined by Subsection (c) (6) of the Act, you are required to furnish the information called for by the enclosed "Standard Form of Contractor's Report (for Agents, Brokers and Sales Engineers)", and the "Standard Form of Supplemental Report (for Agents, Brokers and Sales Engineers)". The reports to be made on the enclosed forms are requested pursuant to the statutory power to obtain information deemed necessary under the Act. Your filing of the "Standard Form of Contractor's Report (for Agents, Brokers, and Sales Engineers)" in *97 satisfactory form will be deemed a compliance with the mandatory provisions of subsection (c) (5) (A) of the 1943 Act requiring a financial statement to be filed. Both the Contractor's Report and Supplemental Report are to be filed with this Office, in duplicate, within thirty days of the date of this letter. The fiscal year covered by the reports should be the same fiscal period as was used for income tax purposes. Very truly yours, [Signed] Morton J. Stone. Morton J. Stone, Lt. Comdr., USNR Vice Chief *283 Enclosures: Standard Form of Contractor's Report and Supplementary Report (For Agents Brokers and Sales Engineers) Instructions for Preparation of Reports Copies of Renegotiation Acts of 1942 and 1943 Note: The information called for in the 1943 report forms may already have been submitted in your case. Please note paragraph 7 of Instructions -- No Duplication Is Necessary; However, in the event you have already submitted such information, you should make reference to that fact in the enclosed report, then sign and return it to address on attached letterhead. This communication is not intended to affect or interrupt your correspondence or pending negotiations*98 with a Regional Office, all of which should be continued with such office. Under date of May 29, 1944, petitioner's attorney replied to the foregoing letter as follows: Office of the Under Secretary of the Navy, Services and Sales Renegotiation Section, Washington 25, D. C. Attention: Lt. Comdr. Morton J. Stone Re: File W 389 -- John B. Brady Gentlemen: Your letter of 1 May 1944 written under file W 389 is believed to be a duplication of your request of September 2, 1943. I mean by this that under my interpretation of the said letter it seeks data supplementary to that submitted in the course of the recently closed renegotiation of Mr. Brady's contracts or subcontracts. This renegotiation was inclusive of both fiscal years, to wit, 1942 and 1943, and all figures pertinent to Mr. Brady's income in those years have been submitted. However, should you on examination of the record of that renegotiation proceeding deem it deficient in any respect, please so inform me and whatever further showing Mr. Brady is required to make will be made promptly. On May 8, 1944, petitioner attended a conference with the renegotiating officials. On October 9, 1944, the Under Secretary of*99 the Navy sent by registered mail to petitioner the following letter: As you know, Mr. Jacob E. Davis and I have already reviewed the proposed determination of excessive profits for your fiscal year ended December 31, 1943 in the amount of $ 20,000.00 and as we previously indicated, such determination is, in our opinion, fair and equitable. You have stated, however, that you would not agree to same. Before proceeding with the issuance of a unilateral order it is our practice to give Contractors a final opportunity to present any further contentions which they deem material. Accordingly, please consider this as notice of a conference with respect to your renegotiation for 1943 to be held at 11 A. M., Friday, October 13, 1944 at our offices, 2146 "C" Street, N. W., Washington, D. C. In the event you feel that no useful purpose would be served by your attendance at this conference, kindly advise us accordingly. In response to the foregoing letter petitioner attended the conference referred to therein. *284 On October 20, 1944, there issued from the Office of the Under Secretary of the Navy, under authority delegated by the War Contracts Price Adjustment Board, a unilateral determination*100 with respect to petitioner's 1943 excessive profits, and on December 20, 1944, the War Contracts Price Adjustment Board issued its unilateral determination of excessive profits with respect to petitioner's 1943 income in the amount of $ 20,000. It is stipulated that, if the renegotiation of petitioner's contracts is not barred under the provision of section 403 (c) (3) of the Renegotiation Act of 1943, the Court should enter its order finding that petitioner's excessive profits for the calendar year 1943 is $ 20,000, before adjustment for taxes, as found by the War Contracts Price Adjustment Board. OPINION. It is stipulated, and we agree, that, in compliance with the Renegotiation Act of 1942, renegotiation was commenced on September 7, 1943, by the Secretary of the Navy of petitioner's renegotiable business for the year 1943. Under section 403 (c) (1) of the 1942 Act it was not necessary to await the end of the year renegotiated before commencing renegotiation thereof. That section provides: Whenever, in the opinion of the Secretary of a Department, the profits realized or likely to be realized from any contract with such Department, or from any subcontract thereunder whether*101 or not made by the contractor, may be excessive, the Secretary is authorized and directed to require the contractor or subcontractor to renegotiate the contract price. * * * [Emphasis supplied.] The comparable part of section 403 (c) (1) of the 1943 Act provides: Whenever, in the opinion of the Board, the amounts received or accrued under contracts with the Departments and subcontracts may reflect excessive profits, the Board shall give to the contractor or subcontractor, as the case may be, reasonable notice of the time and place of a conference to be held with respect thereto. The mailing of such notice by registered mail to the contractor or subcontractor shall constitute the commencement of the renegotiation proceeding. * * * [Emphasis supplied.] It appears from the language above quoted from the 1943 Act that renegotiation under that act is based on actual receipts received or accrued during the period covering renegotiation. Hence, the commencement of renegotiation for 1943 prior to the end of such year would, under the 1943 Act, be premature. This is true for the reason that only upon the close of business at the end of the year could the amounts received or accrued*102 be ascertained. The Renegotiation Act of 1942 provided no time limit within which to conclude renegotiation after its commencement. But section *285 403 (c) (3) of the Renegotiation Act of 1943 1 prescribes such time limit of one year, and it also prescribes the time limit for the commencement of renegotiation. *103 Petitioner takes the position that renegotiation for the year 1943 was commenced on September 7, 1943, for the purposes of the Renegotiation Act of 1943 and that, since the renegotiation was not concluded until the Board made its determination of excessive profits on December 20, 1944, his liability for excessive profits was discharged by the running of the statute of limitations as provided in section 403 (c) (3) of the 1943 Act. Petitioner further contends that there was no commencement of renegotiation for the year 1943 other than that of September 7, 1943, pursuant to which respondent could have made its determination of excessive profits. We do not agree with either of such contentions of petitioner. Section 403 (c) (1) of the 1942 Act vested jurisdiction to renegotiate war contracts in the secretaries of certain departments. Section 403 (c) (1) of the 1943 Act, however, deprived such secretaries of such jurisdiction as to all fiscal years ending after June 30, 1943, and vested it in the War Contracts Price Adjustment Board, and, although that act did not become law until February 25, 1944, it was made applicable to all contracts and subcontracts involving any fiscal year ending*104 after June 30, 1943. Renegotiation of the subject matter here involved was commenced on September 7, 1943, under the Renegotiation Act of 1942. The renegotiation so commenced was timely under the 1942 Act and was pending and uncompleted when the Renegotiation Act of 1943 was passed. While the Renegotiation Act of 1943 is an amendment of the 1942 Act, it, in fact, as to all fiscal years ending after June 30, 1943, sets up a complete scheme of renegotiation and prescribes completely the procedure to accomplish it without including or incorporating therein *286 any of the provisions of the Renegotiation Act of 1942. The latter act, as to all such fiscal years, was, therefore, superseded and, by implication, repealed by the 1943 Act. The latter act contained no saving provision as to pending renegotiation proceedings for such years initiated under the 1942 Act. Therefore, such proceedings terminated upon the enactment of the 1943 Act. The Act of 1943 is the law applicable to the renegotiation of the subject matter here involved, to the exclusion of all proceedings had in respect thereof under the 1942 Act. In ,*105 the Supreme Court stated: It is equally well settled that if a law conferring jurisdiction is repealed without any reservation as to pending cases, all such cases fall with the law. See also 14 Am. Jur. § 172, 15 C. J. 825; ; and ; affd., . It follows that the commencement of renegotiation of September 7, 1943, under the 1942 Act for the year ending December 1, 1943, did not survive as such commencement the termination of the applicability of that act to the subject matter here. Under the Renegotiation Act of 1943 the War Contracts Price Adjustment Board had exclusive jurisdiction to renegotiate the contracts here involved, including the exclusive power to initiate the renegotiation. Section 403 (c) (1). Since the Board was not created until the Renegotiation Act of 1943 became law on February 25, 1944, there could not have been, prior to such date, any commencement of renegotiation for the purpose of the limitation upon completion thereof fixed by section 403 (c) (3) of the 1943 Act. The limitations*106 therein prescribed are (1) the limitation of time within which the Board shall commence renegotiation and (2) the limitation of time within which the Board shall conclude the renegotiation after it has been commenced. Petitioner argues that, if it is determined that the letter of September 7, 1943, did not commence renegotiation proceedings under the Act of 1943, respondent must show that there was a commencement in accordance with the provisions of the Renegotiation Act of 1943. Pertinent to consideration of this question is the letter from the Office of the Under Secretary of the Navy to petitioner under date of May 1, 1944, which is set forth in our findings of fact. That letter was sent by registered mail and, in short, advises petitioner that the renegotiation of his contracts is to be conducted under the terms of the Renegotiation Act of 1943 and instructs him as to what information and data respecting his renegotiable business are required to be furnished. Since it was obvious that under the renegotiation proceedings conducted prior to the enactment of the 1943 Act practically all, if *287 not all, of the information and data so required had been furnished and was in*107 possession of the renegotiating officials, a note was attached to the letter advising petitioner to make reference to such fact in his report and also advising him that no duplication of information and data was necessary. In our findings of fact is set forth a letter sent by registered mail from the Secretary of the Navy as the delegatee of the Board to the petitioner under date of October 9, 1944, advising petitioner that on the basis of information and data relative to his renegotiable business for the year 1943 the renegotiating officials had reached the tentative conclusion that petitioner's excessive profits for the year indicated amounted to $ 20,000. This letter further notified petitioner that, before entering a unilateral order determining the amount of excessive profits, he would be accorded the opportunity of a conference at 11 a. m., Friday, October 13, 1944, at a designated place in Washington, D. C., at which he might present any further contentions which he might deem material to the question of his renegotiation. The petitioner attended such conference. In our opinion this letter, sent by registered mail, for the first time notifying petitioner of a conference, constituted*108 commencement of renegotiation of petitioner's business under the 1943 Act. Obviously it would be futile and an unnecessary waste of time and effort to require petitioner to resubmit the data and information which he had previously submitted relative to his business operations as a basis for renegotiation. The fact that renegotiating officials and petitioner availed themselves of such data in the renegotiation under the 1943 Act did not deprive the letter of October 9, 1944, above referred to, of its function as the commencement of renegotiation under that act. On October 20, 1944, the delegatee of the Board made his unilateral determination of the amount of excessive profits with respect to petitioner's renegotiable business. On December 20, 1944, the Board notified petitioner by registered mail of its unilateral determination of his excessive profits in the amount of $ 20,000, before adjustment for taxes. We therefore hold that petitioner's liability for excessive profits, before adjustment for taxes, is $ 20,000 and that such liability was not discharged under the limitation provisions of section 403 (c) (3) of the Renegotiation Act of 1943. Cf. .*109 An order will be entered in accordance herewith. Footnotes 1. (3) No proceeding to determine the amount of excessive profits shall be commenced more than one year after the close of the fiscal year in which such excessive profits were received or accrued, or more than one year after the statement required under paragraph (5) is filed with the Board, whichever is the later, and if such proceeding is not so commenced, then upon the expiration of one year following the close of such fiscal year, or one year following the date upon which such statement is so filed, whichever is the later, all liabilities of the contractor or subcontractor for excessive profits received or accrued during such fiscal year shall thereupon be discharged. If an agreement or order determining the amount of excessive profits is not made within one year following the commencement of the renegotiation proceeding, then upon the expiration of such one year all liabilities of the contractor or subcontractor for excessive profits with respect to which such proceeding was commenced shall thereupon be discharged, except that (A) if an order is made within such one year by the Secretary (or an officer or agency designated by the Secretary) pursuant to a delegation of authority under subsection (d) (4), such one-year limitation shall not apply to review of such order by the Board, and (B) such one-year period may be extended by mutual agreement.↩