
    UNITED STATES RUBBER COMPANY v. THE UNITED STATES
    [No. 50406.
    Decided April 2, 1958]
    
      
      Mr. Myron Kalish for the plaintiff. Messrs. Arthur, Dry <& Dole were on the brief.
    
      Mr. Edward L. Metzler, with whom was Mr. Assistant Attorney General George Cochran Doub, for the defendant.
   Opinion

per curiam:

This case involves a claim for unemployment compensation taxes paid to the State of North Carolina as a contract cost in the performance of a cost-plus-fixed-fee Government contract. Plaintiff further seeks a declaratory judgment as to other excess taxes not yet accrued.

The commissioner was directed to make findings of fact and to recommend legal conclusions in the light of the findings of fact under the Rules of this court.

Pursuant to such reference, the commissioner has submitted his findings of fact and conclusion of law.

The court, after having considered the evidence, the briefs and argument of counsel, adopts the findings and opinion of Commissioner C. Murray Bernhardt with minor changes which are printed below.

Plaintiff is therefore entitled to recover, and judgment is entered to that effect. The amount of recovery will be determined pursuant to Rule 38 (c).

It is so ordered.

OPINION OE THE COMMISSIONER

The plaintiff seeks to recover as a contract cost the unemployment compensation taxes which it paid to the State of North Carolina for the years 1944,1945,1946,1948, and 1949, and a declaratory judgment as to other excess taxes not yet accrued, to the extent those taxes exceeded the amounts it would have paid had it not been for the performance of a cost-plus-fixed-fee Government contract in that State during World War II. The difference will be referred to as “excess taxes.” Federal Cartridge Corporation v. United States, 111 C. Cls. 372 (1948), which established a precedent in this area, was followed by a series of decisions by the Appeal Board, Office of Contract Settlement, laying down useful but not controlling guides in the same field under factual and statutory variations. The court has had more recent occasion to consider the general subject in Houdaille Indus tries, Inc. v. United States, 138 C. Cls. 301. This opinion relates only to the separated issue of liability.

For some years prior to World War II the plaintiff engaged in business in the State of North Carolina to the extent of maintaining a small sales office with about ten employees. In November 1942, plaintiff entered into a cost-plus-fixed-fee Navy contract numbered NOrd-3102 covering the operation of a Government-owned shell loading plant in North Carolina. The contract was terminated for the Navy’s convenience on August 14, 1945, subsequently postponed to November 4, 1945, to permit winding up activities, and the parties entered into a termination settlement agreement on March 7, 1947, containing several exceptions to the general release, including the following:

(ii) Claims by the Contractor against the Government which are based upon responsibility of the Contractor to third parties and which involve costs reimbursable under the Contract, but which are not now known to the Contractor.

The quoted provision is referred to hereafter as the “unknown claims” clause.

On August 25, 1948, the plaintiff filed a claim for reimbursement of the excess taxes sought here with the Navy Bureau of Ordnance. No findings having been made on the claim, the plaintiff on August 22,1949, filed an appeal with the Appeal Board, Office of Contract Settlement. During the pendency of that proceeding the Navy filed its findings belatedly on March 20, 1950, it having been stipulated with the Board’s approval that the tardy findings be accepted nunc fro tune. On August 17, 1951, after a hearing, the Board rejected the claim (United States Rubber Company v. Navy, 5 App. Bd. OCS No. 324, page 166), whereupon the present suit was filed.

Beginning in 1936, all employers of a specified class in North Carolina, including plaintiff, were subject to the North Carolina Unemployment Compensation Law, later retitled the Employment Security Law (volume 2 c, Gen. Stat. North Carolina, ch. 96, 1950 recomp.) and were required to pay unemployment compensation taxes to the State Employment Security Commission at a flat rate of 2.7 percent of taxable payrolls (i. e., that part of each employee’s annual wages not exceeding $3,000). By amendment, commencing with calendar year 1943, a graduated merit rate of tax contributions was promulgated, ranging from .27 percent to 2.7 percent of the employer’s taxable payrolls, entitlement to a merit rate depending on the previous employment experience of the particular employer in accordance with a prescribed statutory formula. The State maintained a separate reserve account for each employer, made up of the total contributions by the employer excepting a small percentage credited to a statewide pooled account, less unemployment benefits paid to that employer’s discharged employees.

The statutory computation date for determination of the employer’s tax rate for each year was June 30 (changed as of 1946 to July 31) of the year preceding the calendar year to which the tax rate was applicable. In order to qualify for a merit rate (i. e., a rate lower than the 2.7 percent maximum) for a particular calendar year the employer was required to have, as of the computation date governing that year, a reserve account balance of (1) at least five times the largest amount of benefits paid in any one of the three fiscal years preceding the computation date, and (2) at least 2.5 percent of the employer’s total taxable payrolls for the same three-year period. The tax rate for each employer meeting those tests was then calculated by taking the percentage ratio borne by the reserve account balance to the total payroll for the stated three-year period, and determining from a table set forth in the law the appropriate tax rate. The tax rate fluctuated within permissible extremes conversely with the percentage ratio.

In North Carolina the unemployment compensation taxes were paid on an employer basis, not on a plant basis. During the period of plaintiff’s performance of contract NOrd-3102 its tax rate was computed on the total of its concurrent commercial and war contract payrolls, and credits and debits to its reserve account were also derived from those combined sources. The taxes assessed against the NOrd-3102 payroll were reimbursed plaintiff as contract costs, while plaintiff bore the taxes assessed against its own private payroll. Plaintiff’s rates of tax for the years 1944 through 1954, computed upon its combined commercial and war contract payrolls, and the yates which it would have paid had it not been for its performance of contract NOrd-3102, are shown in the following schedule which also shows the amount of excess taxes presently claimed for the years 1944,1945,1946, 1948, and 1949:

The principal issues thus presented are (1) whether the release provisions of the final settlement agreement bar plaintiff’s recovery and (2), if not, whether the excess taxes claimed are reimbursable costs under contract NOrd-3102.

It is plaintiff’s contention that, as of March 6, 1947, the excess taxes were “unknown claims” within the meaning of that exception to the release, and hence not barred. The subject divides itself into the excess taxes for 1944,1945, and 1946 on the one hand, and those for subsequent years on the other. As to the earlier years, if facts were available but not properly assimilated by plaintiff at the time of the termination agreement, plaintiff’s failure to comprehend their significance in terms of recoverable expense does not of itself except them from the force of the release. The test is not the state of plaintiff’s knowledge, but the availability of information which, properly digested, could reasonably be expected to acquaint plaintiff with the existence of a reimbursable cost. At the time of the termination agreement there was information available to plaintiff from data within its possession from which it could compute for each year through 1946 the separate payrolls, tax rates, and taxes for both its commercial operations and its operations under contract NOrd-3102. The plaintiff’s failure through inadvertence to recognize the significance of the data does not extricate it from the release. The novelty of the statute and the obscurity of the claim at the time explain but do not extenuate the lapse. It is apparent from a review of the various cases of this type considered by the Appeal Board, Office of Contract Settlement, that several other holders of terminated CPFF war contracts entered into final settlement agreements prior to March 6, 1947, and specifically reserved claims for comparable excess taxes. Plaintiff itself had a similar claim arising under a war contract in the State of Illinois (United States Rubber Company v. Army, 5 App. Bd. OCS No. 313, page 87), in which it appears that as early as 1945 plaintiff was aware of its right to reimbursement for excess taxes brought about by operation of a war risk amendment to the Unemployment Compensation Law of that State which, while not identical with the present situation, resembles it sufficiently to have alerted plaintiff here as to its rights under contract NOrd-3102.

While its constructive knowledge bars plaintiff from recovery of excess taxes paid in 1944, 1945, and 1946, it does not necessarily have the same effect as to excess taxes for 1948 and 1949. From the information contained in finding 26 and footnotes thereto, defendant correctly concludes that, as of March 6,1947, plaintiff had every reason to know that the swelling deficit in its combined reserve account was the direct consequence of its war contract experience, and to anticipate that the effects would prevent it from entitlement to a merit rate for some years to come, unless events which were unreasonable to expect in its commercial future in North Carolina would suddenly wipe out the debit balance and create a credit balance large enough to meet the substantial requirements imposed by the State law for a merit rate. But the excess taxes plaintiff claims for 1948 and 1949 would not have arisen had not the plaintiff’s segregated commercial experience, divorced from the effects of its war contract, produced a situation governing those years meeting the requirements for a merit rate. Unless, therefore, plaintiff could have predicted on March 6, 1947, that its commercial operations, independent of its war contract operations, would have produced a merit rate in 1948 and 1949, it would have lacked knowledge of one of the two essential prerequisites to excess taxes. Since calculation of the tax rate under the controlling statute required the knowledge of such variable factors as payrolls and benefits paid to discharged employees, both of which in themselves were the products of fluctuating economic conditions and business opportunities, plaintiff’s power of prophecy on March 6, 1947, was inadequate to foretell whether or when its segregated commercial activities would entitle it to a merit rate. Accordingly, the excess taxes for 1948 and 1949 were within the “unknown claims” exception to the release and not barred on that account. This determination coincides with the prior ruling of the Appeal Board, Office of Contract Settlement (United States Rubber Company v. Navy, 5 App. Bd. OCS No. 324, page 166), and is consistent with comparable rulings in Hercules Powder Company v. Army, 5 App. Bd. OCS No. 342, page 24, National Gypsum Company v. Army, 5 App. Bd. OCS No. 337, page 43, and Stewart-Warner Corporation v. Army, 5 App. Bd. OCS No. 358, page 60. It also finds support in Houdaille Industries, Inc. v. United States, supra. The fact that a “state experience factor” was present in the laws of the States of Virginia and Illinois, respectively, which applied in the Hercules and Stewart-Warner cases, and is not present in the North Carolina law controlling the present case, does not make those cases distinguishable.

In superfluous support of the conclusion that the excess taxes for years subsequent to the termination agreement were “unknown claims” excepted from the release, at the time of the negotiations preceding the termination agreement the parties were familiar with and relied on an official memorandum adopted by the War and Navy Departments, set forth in finding 29, which, in interpreting the unknown claims, clause, stated that a claim by a third party would not be considered as “now known to the contractor” where it had not been asserted against the contractor up to the time of the settlement agreement. The excess taxes for 1948 and 1949 were not only unasserted by the State of North Carolina up to the time of the settlement agreement, but they were no more known or anticipated at that time by the State than they were by plaintiff.

The next significant issue is whether contract NOrd-3102 made such excess taxes reimbursable. The Federal Cartridge decision, supra, and all of the relevant decisions by the Appeal Board, Office of Contract Settlement, except that rejecting the instant'claim, involved the construction of cost-plus-fixed-fee contracts let by the Army, while the present case arises under a Navy contract. In each Army contract, so far as the reported opinions reveal, the cost provisions were closely similar to one another and, as a common denominator, afforded rather comprehensive coverage of all costs attributable to contract performance. In contrast, the provisions of the plaintiff’s Navy contract are widely dissimilar to the Army contract language and afford little opportunity of direct comparison. As a general rule a lenient standard of cost allowance is followed in cost-plus-fixed-fee contracts. The contract in Federal Cartridge Corporation v. United States, supra, was said by the court to intend that “the contractor should be reimbursed for every sort of expense or liability incurred as a result of the carrying out of the contract,” with exceptions not applicable here, and that “Plaintiff was merely running the plant for the Government ; the Government was paying all the expenses and paying the plaintiff a fee for running the plant for it.” Willis-ton goes so far as to say that—

* * * It may be agreed [in cost-plus-fixed-fee contracts] that the cost of this, that, or another thing will not be considered to be a part of the cost of the work. Any provision reciting such an agreement must be specific. All costs not so specifically excluded constitute the cost of the work whether they are specifically mentioned in the contract or not. * * *. (Williston on Contracts, 1945 ed. vol. 9, sec. 46.)

It is not necessary to subscribe to such prodigality to pass upon the present case, but in matters of cost allowance in cost-plus-fixed-fee contracts the authorities generally reflect a less exacting attitude than that applied to contracts let on competitive bids.

Plaintiff relies principally on the following provisions of its contract:

Federal, State and Local Taxes. — If the contractor shall pay, directly or indirectly, through inclusion in the price of materials purchased or otherwise, any sales tax, duty, excise tax, use tax, occupational tax, gross receipts tax, or any other similar tax, license fee or charge applicable to the supplies covered by this contract, * * * which tax, license fee or charge must be borne by the contractor because of a specific contractual obligation or by operation of law, the Government shall reimburse the contractor for such payment as an element of cost hereunder; * * *.
* * * * *
9. The Government shall pay or reimburse to the Contractor the costs and expenses during or with respect to any period in which said plant shall be partially or wholly closed down or operations therein shall be partially or wholly suspended, incurred by the Contractor in connection with carrying into effect said closing or suspension * * *.

In addition, plaintiff relies on the following excerpts from a publication entitled “Explanation of Principles for Determination of Costs under Government Contracts, War Department-Navy Department”, published in 1942 (hereinafter referred to as “Explanation of Principles”), which was incorporated by reference into the contract:

4. The total cost under a contract is the sum of all costs incurred by the contractor incident to and necessary for the performance of the contract and properly chargeable thereto. * * *
£ * * * :}:
OTHER INDIRECT SHOP COSTS
29. Other indirect shop costs include miscellaneous factory expenses not directly attributable to the contract but necessary and incidental to services, operations, plant, equipment or facilities involved in the performance of the contract, such as:
(e) Employer’s payments to unemployment, old age, and social security funds, not elsewhere included. $$$$*$
ADMINISTRATION AND DISTRIBUTION EXPENSES
39. This title comprehends all expenses other than those included under “Manufacturing costs” and “Other contract performance costs.” These other expenses are incurred m connection with the general administration of the contractor’s business and the distribution of the contractor’s products, a ratable part of which, by reference to all the pertinent facts and circumstances, may reasonably be held to constitute proper items ox cost incident to and necessary for the performance of the contract. * * *
ADMINISTRATION AND GENERAL CORPORATE EXPENSES
40. The expenses here contemplated are those related to the general management of the business and, subject to the limitations elsewhere herein described and to the appropriateness of the apportionment used, comprise items of the following nature:
(a) * * * (3) all incidental employer’s payments for unemployment, old age and social security Federal and State funds. * * *
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(h) State and local taxes (other than income taxes) not elsewhere included.

Neither the contract provision entitled “Federal, State and Local Taxes”, nor paragraph 9 of the compensation provisions, both quoted above, specifically or by intendment seem to apply to unemployment compensation taxes paid by the contractor either during or after contract termination. The former was indistinctly designed to relate only to taxes and charges of an enumerated type paid by the contractor on materials or supplies used in contract performance. The latter would require a labored interpretation to accommodate the excess taxes here sought, although it offers some latitude in reimbursing the contractor for costs “incurred by the contractor in connection with carrying into effect” a partial or complete closing down or suspension of plant activities. Since other cost provisions refer specifically to Social Security taxes as items of reimbursable cost, as will be seen, they must govern the issue in preference to non-specific provisions requiring distortion to fit particular situations.

The Appeal Board, Office of Contract Settlement, rejected plaintiff’s claim solely on the basis that it did not meet one of the asserted prerequisites under paragraph 4 of the Explanation of Principles, namely, that the expense to be reimbursable must be “properly chargeable” to contract performance. It pointedly avoided passing on whether the excess taxes were “incident to and necessary for the performance of the contract” within the language of that paragraph. Plaintiff’s contention was rejected that if a particular cost is incident to and necessary for contract performance, it necessarily must be properly chargeable to the contract because, instead of being a separate test, the requirement that a cost be properly chargeable to the contract is merely the conclusion to be drawn from the fact of the expense being incidental and necessary to contract performance. The Board held that an expense could be both incident to and necessary for contract performance and yet not properly chargeable to the contract, giving as illustration that where a tool is bought for contract performance, it is both incident to and necessary for contract performance, but that part of its total cost represented by its us.eful post-contract life in the contractor’s hands is not properly chargeable to the contract. This is, of course, correct as it applies to a tool, but the unemployment compensation taxes paid by plaintiff are not comparable. Instead of deriving a post-contract benefit from the credits and debits to its reserve account by reason of its war contract, the plaintiff suffered a substantial detriment which was not realized for several years. Defendant’s interpretation of paragraph 4 of Explanation of Principles making the term “properly chargeable” an independent criterion of reimbursability may be appropriate to the ordinary situation, but does not apply here.

Moreover, paragraph 29 (e) of the Explanation of Principles makes reimbursable as a manufacturing cost the employer’s payments to unemployment compensation funds “not elsewhere included” even though they may not be “directly attributable to the contract but necessary and incidental to * * * performance of the contract”, without any requirement that the expense be properly chargeable. And again paragraphs 39 and 40 of the Explanation of Principles make reimbursable as an administration expense the contractor’s payment of “State and local taxes (other than income taxes) not elsewhere included” if they “are incurred in connection with the general administration of the contractor’s business” and are “incident to and necessary for the performance of the contract.” Neither of these paragraphs employs the “properly chargeable” language used in paragraph 4, thus providing a situation for application of the general rule of contract interpretation that the specific will prevail over the general.

If, then, the excess taxes need not have been properly chargeable, from an accounting standpoint, to performance of the contract in order to be reimbursable, were they incident to and necessary for performance, which they must be in order to qualify? The term “necessary for” as used here would appear to embrace and include the term “incident to”, for it is difficult to conceive that an expense necessary for contract performance is not by the same token incident thereto. It cannot be questioned that performance of the contract necessitated the hiring of adequate personnel, that payment of tax contributions on their taxable wages was necessitated by the laws of the State, and that contract termination made necessary the discharge of employees and produced the consequential effect on plaintiff’s reserve account giving rise to a condition depriving plaintiff of the lower tax rates in 1948 and-1949 that it otherwise would have enjoyed. The causal effect of the contract in producing, through successive stages, the result complained of cannot be denied and is not diluted by the intervention of time. The payment of excess taxes was a derivative necessity, one which resulted as a direct consequence of having taken action which was necessary to perform the contract. Defendant contends vigorously that the excess taxes were the direct consequence of and were levied on plaintiff’s private payrolls in 1948 and 1949, and thus were not applicable to contract performance. Of course, plaintiff could have avoided all post-war taxes in North Carolina by the simple expedient of complete withdrawal from commercial operations in the State after termination of its war contract, but it would be unwarranted to construe the contract to prescribe such abstention as a penalty for its performance. Precisely this argument was advanced and rejected in Certain-Teed Products Corporation v. Army, 4 App. Bd. OCS No. 317, where plaintiff recovered excess taxes arising subsequent to contract termination.

There are left certain miscellaneous problems raised by defendant. In its answer defendant pleads the statute of limitations and plaintiff’s failure to exhaust administrative remedies. Since defendant’s brief is silent as to these defenses their abandonment is presumed, so they shall not be treated here except to say they are without merit. Defendant also contends that the excess taxes paid by plaintiff in 1948 and 1949 were the result of its sharply increased commercial payroll caused by its acquisition in 1946 of two operating concerns in North Carolina (footnote 2 to schedule in finding 21). In observing earlier that contract NOrd-3102 not even impliedly can be construed to warrant as a further penalty for its performance plaintiff’s complete withdrawal from all commercial activities in North Carolina after termination of the war contract, if it wanted to avoid the impact of excess taxes, this was intended to apply to plaintiff’s post-war operations no matter their size and no matter whether the growth was attributable to acquisition of other going enterprises or normal internal expansion.

Plaintiff’s petition demands judgment for $352,298.24, with interest, representing the total impairment of its reserve account attributable to contract NOrd-3102 (difference between total contributions to the account derived from taxable payrolls under the contract and benefits paid to discharged employees thereunder). Plaintiff concedes that its loss through 1954 in excess taxes paid is $53,493.93, of which $10,938.95 for the years 1944,1945, and 1946 is barred by the release provision of the final settlement agreement. The remaining $42,554.98 paid in 1948 and 1949 is a reimbursable cost, together with interest thereon at 2y2 percent from the date each disbursement of excess taxes was made for the years 1948 and 1949 (cf. Houdaille Industries, Inc. v. United States, supra, and Certain-Teed Products Corporation v. Army, 4 App. Bd. OCS No. 317, pages 157, 163, 164). Plaintiff also seeks a declaratory judgment that it will be entitled to recover any excess taxes accruing in future years where they are traceable to operations under contract NOrd-3102. Arithmetically the effects of the war contract will not be exhausted until the merit rates earned by plaintiff subsequent to 1954, computed on its segregated commercial activities throughout, amount to $298,833.46 ($352,327.39 less $53,493.93), unless a change in the Employment Security Law occurs. Even if the request for a declaratory judgment were properly pleaded it could not be granted, for this court has no jurisdiction to entertain suits for declaratory judgments. Twin Cities Properties v. United States, 81 C. Cls. 655.

BINDINGS OP PACT

1. This report relates only to the separated issue of liability. Plaintiff is now and was at all times material to this action a corporation organized and existing under the laws of the State of New Jersey, having a principal place of business at 1230 Avenue of the Americas, New York City, N. Y.

2. Prior to June 1942, and at all times herein mentioned, plaintiff was engaged in the business of manufacturing and selling rubber and chemical products. As part of this business the plaintiff, for some years prior to 1942, operated a branch office in the city of Charlotte, State of North Carolina, and maintained at that location a group of about ten employees for the purpose of sale of merchandise of its own manufacture. Its total taxable payrolls in the fiscal years ending in June of 1940 through 1942 were $106,672, $83,633, and $70,876, respectively.

3. At no time prior to June 1942, or since that date, did plaintiff, as part of its normal business activity, conduct any building construction or munitions manufacturing businesses in the State of North Carolina, or elsewhere.

4. As of Jime 1,1942, plaintiff entered into a certain contract with the defendant, known, described, and hereinafter referred to as NOrd (F) 1075. Said contract provided for the erection and equipment of a facility for the manufacture of 40 mm. ammunition for the United States Navy, to be owned by the defendant, in the vicinity of Charlotte, North Carolina. Plaintiff does not rely on this contract as a basis for its claim herein.

5. Under date of November 24,1942, plaintiff entered into another contract in writing with defendant through the Navy Department, Bureau of Supplies and Accounts. This contract was originally known and described as contract NXso-LL 12898, but was subsequently renumbered and is hereinafter referred to as NOrd-3102. After November 24, 1942, said contract was amended and supplemented with respect to the amounts involved. The amendments did not vary the contract in any way material to the present issues.

6. Under contract NOrd-3102 plaintiff agreed, on a cost-plus-fixed-fee basis, to operate the above ordnance facility owned by the Navy Department for the unloading and assembling of 40 nun. ammunition for the United States Navy, at an estimated cost of $30,900,000, plus a fixed fee of $1,512,000. As later amended the contract was based on an estimated cost of $62,306,575.58 with a fixed fee of $3,797,-193.17. Under said contract, as amended, plaintiff received a fee of $3,291,386.92, more or less, on stated costs of approximately $38,500,000. The fee was approximately 8.57 percent of the stated costs.

7. Contract NOrd-3102 provides:

article 1. Scope of this Contract. — The contractor shall furnish and deliver all of the supplies or services described in Schedule A attached hereto for the consideration stated in Schedule A, in strict accordance with the specifications, schedules and drawings attached to or designated in Schedule A, all of which are made a part hereof. Deliveries and payment of the contract price shall be made as stated in Schedule A. The rights and obligations of the parties hereto shall be subject to the provisions contained in Article 1 to 11 of this contract, inclusive, as well as the provisions of Schedule A. -In the event of any inconsistency between the provisions of the said Articles and the provisions of Schedule A, the latter shall be deemed to control to the extent of such inconsistency.
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Compensation, (a) The Government shall pay to the Contractor the Allowable Cost as defined in paragraph ibl below plus the fixed fee elsewhere herein provided, (b) Allowable Cost shall constitute the cost incurred by the Contractor in the performance of this contract in accordance with “Explanation of Principles for Determination of Costs under Government Contracts War Department — Navy Department” printed by the United States Government Printing Office, April 1942, * * *.
3. The Government shall pay or reimburse to the Contractor the amount of extra compensation to employees, discontinuance wages (when required by the policy or practice generally followed by the Contractor in its business) vacation allowances, payments during leaves of absence and charges under welfare and other employee relations plans, maintained by the Contractor, all insofar as the same are consistent with the general employee relations policies and practices existing throughout the contractor’s organization, or are incurred pursuant to agreement as a result of collective bargaining with the representatives of employees, provided, however, that all payments under this paragraph 3 are to be subject to such rules, regulations and directives of general application as are or may be made or promulgated by the Secretary of the Navy.
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4. The Government shall pay or reimburse to the Contractor all its expenses incident to the payment of wages and salaries, including, but not limited to, the cost of disbursing cash, and of providing necessary guards, cashiers and paymasters; and, if payments to employees are made by check, facilities for cashing checks will be provided without expense to employees, and the Contractor shall be paid or reimbursed with the cost thereof by the Government.
TERMINATION.
$ * $ $ ‡
(c) After termination of this contract in the manner provided in this article, the Government shall pay to the contractor within a reasonable time after such termination the following:
(1) The Allowable Cost determined in accordance with the provisions set forth in the Section of this schedule entitled “Compensation” of the work performed under this contract prior to the effective date of termination or under the terms of the Notice of Termination, together with the proportion of the fixed fee which such cost bears to the total estimated cost of performance of this contract;
(2) Any reasonable expense incidental to termination under paragraph (b) hereof of orders or subcontracts;
(3) The reasonable cost of the preservation and protection of property as required under paragraph (b) hereof;
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Federal, State and Local Taxes. — If the contractor shall pay, directly or indirectly, through inclusion in the price of materials purchased or otherwise, any sales tax, duty, excise tax, use tax, occupational tax, gross receipts tax, or any other similar tax, license fee or charge applicable to the supplies covered by this contract, or other materials used in the manufacture thereof, or levied or imposed upon the importation, production, processing, manufacture or sale of such supplies or materials or upon gross receipts therefrom, which tax, license fee or charge must' be borne by the contractor because of a specific contractual obligation or by operation of law, the Government shall reimburse the contractor for such payment as an element of cost hereunder; provided however, that all invoices or vouchers submitted shall show separately the amount of such taxes, license fees or charges included therein; and provided further, that the contractor shall take such steps as may be requested by the Government to cause such taxes, license fees or charges to be paid under protest to preserve and to cause to be assigned to the Government any and all rights to the refund of such taxes, license fees or charges and to furnish to the Government all assistance and cooperation deemed necessary by the Government in any litigation or proceeding for the recovery of such taxes, license fees and charges, and provided further, that nothing contained herein shall be construed as requiring the Government to reimburse the contractor for any Federal or State income or excess profits taxes or surtaxes.
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9. The Government shall pay or reimburse to the Contractor the costs and expenses during or with respect to any period in which said plant shall be partially or wholly closed down or operations therein shall be partially or wholly suspended, incurred by the Contractor in connection with carrying into effect said closing or suspension and any subsequent resumption of said operations and for or in connection with the protection, repairing and maintenance of said plant and for or in connection with the retention or employment of such employees as shall be employed or continued in employment for purposes of providing such protection, repairing and maintenance or in the expectation of resumption of operations or otherwise, provided, however, that the general program to be followed during such period, after the expiration of a reasonable time, not more than ten days from the commencement thereof, shall first be approved by the contracting officer.
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11. The Government shall pay to the Contractor, for each calendar month, or proportionately for a part of any calendar month, the sum of nine thousand nine hundred and thirty-one dollars ($9,981.00) commencing as of 1 September, 1942, and continuing through June 30, 1944, the said sum to be paid as complete reimbursement to the Contractor of its home office administrative expenses incurred in, or allocable to the cost of the performance of this contract and to be paid whether or not the performance of this contract or operation of the said plant shall at any time be suspended or curtailed. * * * ‡ ‡ $
* * * Acceptance by the Contractor of any reduction in the amount shown on any said interim or final statement or of any amount of reimbursement less than the full amount of Allowable Cost provided by this agreement, whether or not there shall be a dispute of any nature as to the amount of reimbursement owing to the Contractor, shall not be deemed to constitute an account stated, an accord and satisfaction or a waiver by the Contractor of its rights to full reimbursement hereunder of the Allowable Cost, unless the Contractor shall expressly agree in writing that its acceptance of any such reduction or reimbursement less than the full amount of Allowable Cost shall have such effect.
(c) Fee: (a) Within five days after the fifteenth day and within five days after the last day of each calendar month, the Government will pay to the Contractor the fixed fee specified in Items 1 through 15 of Schedule A for each operation, to which the respective fee is applicable, performed by the Contractor and accepted by the Government during the period from the first to the fifteenth days, both inclusive, of said calendar month or the period from the sixteenth to the last day, both inclusive, of said calendar month as the case may be.
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Inswrcmoe — Liability to Third Persons (a) The contractor shall procure and thereafter maintain workmen’s compensation, employer’s liability, and bodily injury liability insurance, with respect to work done under this contract, and such other liability insurance with respect to work done under this contract as the Department may from time to time require or approve. All such insurance shall be in such form, in such amounts, for such periods of time, and with such insurers, as the Department may from time to time require or approve.
(b) The contractor shall be reimbursed (1) for the cost of such insurance of the character described in paragraph (a) of this Article as may be required or approved by the Department, * * *.
(c) The contractor shall give the Department or_its representative immediate notice of any suit or action filed, or any claim made, against the contractor arising out of the performance of this contract, the cost and expense of which is reimbursable to the contractor under the provisions of this contract, and the risk of which is then uninsured or in which the amount claimed exceeds the amount of insurance coverage. The contractor shall furnish immediately to the Department copies of all pertinent paper received by the contractor. If the amount of the liability claimed exceeds the amount of insurance coverage, the contractor shall authorize representatives of the Government to collaborate with counsel for the insurance carrier, if any, in settling or defending such claim. If the liability is not insured, the contractor shall, if required by the Department, authorize representatives of the Government to settle or defend any such claim and to represent the contractor in or take charge of any litigation in connection therewith. *****
ARTICLE 11. Definitions. — (a) The term “head of the department” as used herein shall mean the head or any assistant head of the executive department involved, and the term “his duly authorized representative” shall mean any person authorized to act for him other than the contracting officer.
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8. The Explanation of Principles for Determination of Costs Under Government Contracts, War Department— Navy Department, incorporated by reference into contract NOrd-3102, provided:

4. The total cost under a contract is the sum of all costs incurred by the contractor incident to and necessary for the performance of the contract and properly chargeable thereto. * * *
6. Description in more detail of the components of the above-mentioned items of cost is given in the ensuing pages. This description is intended to.be informative upon the nature of the items falling under each heading and the accounting treatment to be accorded to them. All conceivable items can.not be mentioned specifically, and the description furnished is indicative and not inclusive, that is to say, omission of mention is to be in no way restrictive upon the Government in determining the costs of a contract. If an item of cost is not specifically mentioned under admissible costs it is not to be thereby automatically excluded and conversely, if an item of cost is not listed under inadmissible costs or described as one subject to limitation, it does not therefore follow that such item is acknowledged to be admissible. * * *.
ijs # >}e *
DIRECT LABOR
12. Direct labor cost consists of the wages paid for labor performed on and properly chargeable directly to the article manufactured. * * *
13. Direct labor may also include compensation insurance and old age benefit and social security taxes pertaining to such employment. (See pars.-47 and 54 (1).)
*****
OTHER INDIRECT SHOP COSTS
29. Other indirect shop costs include miscellaneous factory expenses not directly attributable to the contract but necessary and incidental to services, operations, plant, equipment or facilities involved in the performance of the contract, such as:
(e) Employer’s payments to unemployment, old age, and social security funds, not elsewhere included.
$ $ $ ‡ $
ADMINISTRATION AND DISTRIBUTION EXPENSES
39. This title comprehends all expenses other than those included under “Manufacturing costs” and “Other contract performance costs.” These other expenses are incurred in connection with the general administration of the contractor’s business and the distribution of the contractor’s products, a ratable part of which, by reference to all the pertinent facts and circumstances, may reasonably be held to constitute proper items of cost incident to and necessary for the performance of the contract. As to what may constitute a proper ratable part, the comments in the ensuing pages should be taken into consideration.
ADMINISTRATION AND GENERAL CORPORATE EXPENSES
40. The expenses here contemplated are those related to the general management of the business and, subject to the limitations elsewhere herein described and to the appropriateness of the apportionment used, comprise items of the following nature:
(a) Compensation for personal services, including (1) salaries of corporate officers, executives and department heads, (2) salaries and wages of administrative clerical employees and of office service employees, and (3) all incidental employer’s payments for unemployment, old age and social security Federal and State funds. As to limitations on salaries and compensation of officers and employees, see paragraph 45.
* :¡í # * *
(h) State and local taxes (other than income taxes) not elsewhere included.
í¡¡ -i* '!■ *1*
LIMITATIONS ‘ON ADMISSIBLE COSTS
43. Certain items of admissible costs described in the outline of the items of cost previously given are subject to limitations, precise rules for which cannot be stated. Judgment and interpretation in the light of all the pertinent facts and circumstances in each case will govern the application and extent of these limitations. The principles upon which they are based are discussed in the following paragraphs.
‡ $ $ $ $
INADMISSIBLE COSTS
54. Among the items which are not admissible for the purpose of computing the cost of performing a Government contract, the following may be named: *****
(1) Provisions in reserve accounts for contingencies, repairs, compensation insurance (except as provided with respect to self-insurance, see par. 47).
*****

9. Plaintiff faithfully performed contract NOrd-3102 and did all things incident to and necessary for the performance of the agreement.

10. Effective August 14,1945, the performance of contract NOrd-3102 was terminated for the convenience of the Government by letter notice. This notice was subsequently amended to permit the performance of certain services by plaintiff until November 4, 1945, when the operation of the Charlotte ordnance plant was to be transferred to defendant. At the peak of operations under the contract plaintiff employed 10,000 to 11,000 employees at the plant. Between then and August 14, 1945, about 5,000 employees were discharged and about 90 percent of the remaining employees were discharged immediately thereafter, until eventually the entire working force was discharged.

11. Under date of March 6, 1947, plaintiff and defendant entered into a Termination Settlement Agreement, whereby defendant paid plaintiff $178,854.35, and which provided as follows:

ARTICLE 4. * * *
* * * *
(c) Upon payment of said sum, as aforesaid, all rights and liabilities of the parties under the Contract and under the Act, insofar as it pertains to the Contract, shall cease forthwith and be forever released except as specifically stated in Exhibit “A” and except the following unless otherwise specifically stated in Exhibit “A”: ❖ * ❖ * ❖
(ii) Claims by the Contractor against the Government which are based upon responsibility of the Contractor to third parties and which involve costs reimbursable under the Contract, but which are not now known to the Contractor.
* * * :]< *
ARTICLE 5. * * *
(b) Even though neither the existence nor the amount of any claim referred to in subparagraph (ii) of Article 4 may now be known to the Contractor, reimbursement for payments made by the Contractor in discharge of any such claim shall include, along with wages and salaries otherwise reimbursable, all additional amounts determined (either by approval of the Contracting Officer or by litigation as hereinafter provided) to be due and payable for overtime compensation and allowances under local, state or Federal laws in connection with such wages and salaries.

12. Effective December 16,1936, the State of North Carolina promulgated an “Unemployment Compensation Law”, later renamed tbe “Employment Security Law”, -which provided, in part, by section 7b (3), that the rate of contributions on wages payable by employers with respect to employment should be 2.7 percent with respect to employment during the calendar year 1938 and each year thereafter. The State of North Carolina amended the Employment Security Law in 1939 to establish merit rates, as hereafter explained, and in 1941 amended the law to limit contributions to wages of $3,000 or less and to continue 2.7 percent as the standard and maximum rate of contribution for the calendar year 1941 and thereafter.

13. Chapter I of the Public Laws of the State of North Carolina, Extra Session, 1936, required the State Unemployment Compensation Commission to make a study for the purpose of setting up a merit rating system and/or a reserve account system. Chapter 27, Public Laws, Regular Session, 1939, of the State of North Carolina, amended the Employment Security Law so as to create separate reserve accounts for each employer starting January 1, 1939, with variations downward from the standard rate of contributions and with credits up to 75 percent where the reserve accounts met specified requirements. Chapter 108 of the Public Laws of the State of North Carolina, Session of 1941, further revised the prior rate base and provided:

(4) Variations from the standard rate of contributions shall be determined in accordance with the following requirements:
(A) If, as of any computation date, the Commissioner finds that: Compensation has been payable from an employer’s account throughout the year preceding the computation date; and the balance of such account amounts to not less than five times the largest amount of compensation paid from such account within any one of the three years preceding such date; and the balance of such account as of the computation date amounts to not less than two and one-half percentum of that part of the payroll or payrolls in the three years preceding such date by which contributions were measured; and such contributions were payable to such account with respect to the three years preceding the computation date, contribution rates for the calendar year following such computation date shall be determined pursuant to paragraph (B) of this subsection. The term “year” as used in this section (except when preceded by the word “calendar”) means the twelve month period ending on June 30th of any calendar year.
(B) If, as of any computation date, the cumulative total of all an employer’s contributions which were paid and credited to his “reserve account” before such computation date exceeds the cumulative total benefits which were chargeable to his “reserve account” and were paid before such computation date; and if such excess of contributions over benefits paid and chargeable to such account exceeds that percentage of his wages by which contributions were measured, during the thirty-six consecutive calendar month period preceding such computation date, which percentage is shown in Column 1 of the table below, and does not exceed the percentage opposite thereto in Column 2 of the table below, his contribution rate in the ensuing calendar year shall be equal to that percentum of the wages for employment, paid by him during such ensuing year, which is shown in Column 3 of the table below. Of the payments so made, there shall be credited to the “partially pooled account” the percentage shown opposite thereto in Column 4 of the table below, and there shall be credited to the “reserve account” of the employer that percentage of the wages for employment, paid by him during such calendar year, which is shown opposite thereto in Column 5 of the table below:
(C) The computation date for any contribution rates shall be July first of the calendar year with respect to which such rates are effective.

In the years 1945, 1947, and 1949 amendments were made to the quoted provisions of the Employment Security Law, including changes in rates of contribution, in the percentages of contributions credited to the pool account, and a change in the computation date to August 1 instead of July 1, but for the purpose of determining the issue of liability the provisions as quoted suffice requirements.

The first year in which a North Carolina employer could qualify for a merit rate pursuant to the 1939 and 1941 amendments to the Employment Security Law was the calendar year 1943, that is on January 1, 1943.

14. At all times hereunder plaintiff, and consequently the State of North Carolina, consolidated and treated as one the employment experience of the plaintiff, both as regards its ordinary operations in the State of North Carolina and its war-plant activities pursuant to contract NOrd-3102 at the Charlotte shell loading plant, and at all times hereunder the unemployment compensation tax rate of the plaintiff has been computed on the basis of a combination of its normal non-warwork employment experience with that at the Charlotte shell loading plant.

15. The reserve account of the plaintiff under the North Carolina Employment Security Law was a reserve account made up of contributions based on the wages of, and used for paying benefits under said law to, both non-warwork employees and to employees engaged by the plaintiff in connection with its performance of contract NOrd-3102.

16. All statements of charges against such reserve account furnished to plaintiff by the Unemployment Compensation Commission of North Carolina were furnished to it on a consolidated basis, i. e., charges having their inception in the operation of the war plant pursuant to contract NOrd-3102 and other operations of the plaintiff in North Carolina being reported in one report.

17. The computation of annual rates of tax furnished by the State of North Carolina to the plaintiff herein at all times pertinent to the claim herein was furnished on a consolidated basis; the payroll information, benefits paid, and reserve account balances stated therein combining the data of both the war plant operation pursuant to contract NOrd-3102 and other non-war plant activities of the plaintiff in the State of North Carolina.

18. The plaintiff in 1942 paid unemployment compensation taxes to the State of North Carolina at the rate of 2.7 percent of its total taxable payroll, including the payroll of the Charlotte shell loading plant, and was reimbursed by the defendant for that portion of the tax paid which represented taxes paid on wages of personnel employed at that location.

19. For the purpose of determining separately the issue of liability only, the parties stipulated that, in each of the calendar years 1943 to 1954, inclusive, plaintiff was required to pay unemployment taxes to the State of North Carolina at the maximum rate prescribed by the law of that State. In each of the years 1943, 1944, and 1945, plaintiff was reimbursed by the defendant for that portion of the tax paid which represented taxes paid from wages of personnel employed pursuant to contract NOrd-3102 at the Charlotte munitions plant.

20. For the purpose of determining the issue of liability only, the parties stipulated that differences in the tax rate (that is, between the rate computed solely on the basis of plaintiff’s own commercial employment and payroll expenses in the State of North Carolina, exclusive of its war plant operations, and the rate actually paid, including its war plant operations) for the years 1943 through 1954, and the amounts claimed were as follows:

21.The following consolidated schedule covering the period from July 1,1939, through July 31,1954, conveniently depicts on an anual basis the credits and debits to plaintiff’s unemployment compensation reserve account in the State of North Carolina and the fiscal year end balances, deficits balances being shown in parentheses. As column headings indicate, this information is presented in both segregated (i. e., plaintiffs commercial operations and NOrd-3102 operations separately) and combined forms, so that the effect of plaintiff’s operations under NOrd-3102 on its entitlement to a merit rate for a given year under the North Carolina law can be determined by application of the statutory formula in finding 13 to the arithmetical factors shown in the schedule.

22. Application of the statutory formula of the Employment Security Law set forth in finding 13 to the foregoing schedule results in the plaintiff being obligated to pay the maximum rate of 2.7 percent in the calendar year 1955, since its combined reserve account on the computation date, August 1, 1954, was minus $204,535.72, or $495,693.52 less than $291,157.80 (five times $58,231.56, the largest benefits paid in any one of the three years preceding the said computation date). For the same reason, plaintiff presumably has been or will be required to pay the maximum rate of 2.7 percent in 1956 and 1957 unless its combined reserve account on the computation dates for those years, August 1, 1955, and August 1,1956, respectively, is at least $217,142.70 on the earlier date and at least $212,933.50 on the later date (five times $43,428.54 and $42,586.71, respectively). Information is not available in the record as to the credits and debits to the combined reserve account for periods subsequent to July 31,1954, so the predictions for the years 1956 and 1957 are predicated upon probabilities as of the last data received prior to the closing of evidence. The factors controlling entitlement to a merit rate are too variable to determine whether or when plaintiff will next earn a merit rate based upon its commercial activities in the State.

23. At the time of the Termination Settlement Agreement executed March 6,1947 (finding 11), there was information available to plaintiff from data within its possession that from the commencement of contract NOrd-3102 in 1942 through July 31,1946, there had been paid by plaintiff a total of $882,932.76 in unemployment insurance taxes on payrolls

of the Charlotte shell loading plant, of which $794,639.30 had been credited to plaintiff’s “reserve account” and the $88,293.27 balance credited to the pooled reserve. At that time there was also information available to plaintiff from data within its possession as to the amount of the unemployment benefits chargeable and charged to its reserve account by the State of North Carolina because of payments to former employees of the Charlotte shell loading plant through January 31, 1947. In addition, at that time there was information available to plaintiff from data within its possession from which it could have been computed that benefits paid to terminated shell loading plant employees had exceeded the amount of contributions paid by plaintiff into the contractor’s reserve fund on behalf of such employees by approximately $136,000, and that its reserve account as of February 17, 1947, was reduced to a debit balance of $48,510.97.

24. Plaintiff was at all material times familiar with the North Carolina Employment Security Law. At all material times there was currently available to plaintiff information within its possession from which it could compute the amount of its current payrolls, unemployment tax rate, and taxes both as to its commercial operations and as to its operations under contract NOrd-3102, the latter being necessarily segregated for purposes of reimbursement under contract NOrd-3102. Each quarter plaintiff, as required by law, reported its quarterly contributions to the State Commission. The State Commission advised plaintiff prior to the start of 1944 and of each calendar year of the tax rate applicable thereto, and issued quarterly statements which revealed the unemployment benefits paid and the names and claims of the employee recipients. The purported unemployment tax rate for commercial operations of 1.39 percent for 1944 and .27 percent for both 1945 and 1946, and the purported claims for $319.59, $2,990.78, and $7,628.58 now asserted for the calendar years 1944, 1945, and 1946, respectively, could have been computed and the claims presented to defendant prior to the execution of the aforesaid Termination Settlement Agreement on March 6, 1947.

25. Despite the availability to plaintiff on March 6, 1947, of the data set forth in findings 23 and 24, plaintiff, through oversight and failure to appreciate the significance of such data, did not compute or attempt to compute the separate tax rates it would have paid or would be obliged to pay the State of North Carolina for the years 1944 through 1947 solely on its commercial operations in the State exclusive of NOrd-3102. The Unemployment Compensation Commission of North Carolina had sent plaintiff a notice, dated December 17, 1946, advising it that its tax rate for 1947, which was based upon all its operations in the State during the preceding years and its combined reserve balance on the preceding computation date, would be the maximum 2.7 percent, and that as of the computation date there was a deficit balance of $14,024.68 in plaintiff’s reserve account. Prior to March 6,1947, plaintiff’s accounting records showed that, while its separate commercial operations had created a surplus in its reserve account computed without reference to operations under NOrd-3102, its tax rate for 1947 computed solely on its commercial operations exclusive of NOrd-3102 would have been the maximum 2.7 percent (schedule in finding 20).

26. As of March 6,1947, plaintiff did not know and could not predict with certainty what its combined or segregated tax rates for 1948 and subsequent years would be, since all of the factors considered in establishing the tax rates for those years were not as yet in existence. However, the rapidly increasing deficit at that time in plaintiff’s combined reserve account, due almost entirely to the mass layoffs attending the termination of contract NOrd-3102, made the prospect of a merit rate on a combined basis predictably remote for several years, absent a drastic increase in contribution credits and decrease in benefit debits to the combined reserve account.

27. Following tlie termination of contract NOrd-3102, plaintiff under the date of May 31,1946, submitted its settlement proposal to defendant. Plaintiff’s accounting records for contract NOrd-3102, upon which its settlement proposal was based, did not carry the excess unemployment compensation taxes in dispute as a reimbursable cost or claim against defendant resulting from contract performance, nor did they set up a reserve account to cover such excess taxes to be paid in the future.

28. At conferences between the parties on plaintiff’s settlement proposal prior to the settlement agreement of March 6, 1947, no mention by either side was made of a possible claim arising out of excess unemployment compensaition taxes which plaintiff might have to pay to the State over and above what it would have to pay had it not performed under NOrd-3102, and the possibility did not occur to plaintiff’s representatives either as to the past or the future. Plaintiff’s settlement proposal and conferences held thereon between the parties eventually led to the signing of the Termination Settlement Agreement quoted from in finding 11.

29. Prior to the signing of the Termination Settlement Agreement referred to in finding 11, the parties discussed the so-called “unknown claims clause” appearing in the said agreement as paragraph (c) (ii) of Article 4. In connection with the unknown claims clause the parties were, at the time, familiar with and relied on the following memorandum adopted by the War and Navy Departments designed to interpret the unknown claims clause under the Joint Termination Regulations issued pursuant to the Contract Settlement Act of 1944:

1. It has come to the attention of this office that substantial doubt exists in the minds of some contractors with regard to the meaning of the third exception in Article 4 (c) of the CPFF Settlement Agreement (JTB 983.1). This exception reserves the right of the contractor to reimbursement for claims of third parties, as follows: “ (3) Claims by the Contractor against the Government which are based upon responsibility of the Contractor to third parties and which involve costs reimbursable under the Contract, but which are not now known to the Contractor”.
2. Accordingly, you are advised that it is the position of the War and Navy Departments that a claim will not be considered as “now known to the contractor” within the meaning of this provision where such claim against the Government is based upon a claim of a third party against the contractor and where (a) the claim of the third party arose in connection with performance of the contract as distinguished from its termination and (b) the claim of the third party has not been asserted against the contractor up to the time of the settlement agreement. This interpretation is not intended to indicate the only cases which may properly be considered as falling within the exception, but merely to indicate that at least under the circumstances stated the claim will not be considered as “known to the contractor” at the time of settlement.

30. As of July 31, 1954, plaintiff had a reserve account deficit balance of $204,535.72 with the North Carolina Unemployment Compensation Commission, instead of a credit balance of $147,791.50 which it would have had exclusive of performance of contract NOrd-3102. The difference of $352,327.22 equals the difference between total contributions paid into the reserve account on behalf of employees under contract NOrd-3102, and the total benefits paid to such persons.

31. Upon discovery of its oversight plaintiff, on August 25, 1948, filed claim for reimbursement with the Bureau of Ordnance, Navy Department. On August 22,1949, no findings having been issued, plaintiff filed an appeal with the Appeal Board, Office of Contract Settlement. On March 20, 1950, the Bureau of Ordnance, Navy Department, filed its adverse findings out of time, it being stipulated by the parties that the findings would be considered as being filed mmo fro tuno as of a date prior to the appeal. On August 17,1951, after a hearing, the Appeal Board, Office of Contract Settlement, affirmed the findings of the Department of the Navy “insofar as they deny appellant’s claim”. In its opinion the Board held (1) that plaintiff’s excess taxes claimed for the years 1944, 1945, and 1946 were not recoverable because plaintiff should have known of them at the time of the March 6, 1947, settlement agreement, (2) that the unknown claims clause, in the settlement agreement would include claims for excess taxes in 1948 and 1949, but (3) claims for 1948 and 1949 were not reimbursable because they were not “properly chargeable” to NOrd-3102 as that term is employed in paragraph 4 of the Explanation of Principles for Determination of Costs under Government Contracts, incorporated into the contract by reference. Thereafter the instant suit was filed on November 13,1951.

CONCLUSION OK 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 the plaintiff is entitled to recover in accordance with the opinion and judgment will be entered to that effect. The amount of recovery will be determined pursuant to Rule 38 (c) of the Rules of this court.

In accordance with the opinion of the court and on a stipulation by the parties showing the amount due thereunder, it was ordered on November 14,1958, that judgment for the plaintiff be entered for $52,481.07. 
      
       At the expense of the Government.
     
      
       For example, total taxable wages paid to July 81, 1947, the statutory computation date for the 1948 tax rate, were not known as of March 6, 1947. Dehits to the combined reserve account for benefits to be paid to the computation date were similarly not known.
     
      
       The deficit grew from $14,024.68 on July 31, 1946, to $48,510.97 on February 17, 1947 (the last official advice had by plaintiff prior to March 6, 1947), and to $228,677.38 on July 81, 1947, substantially all of which resulted from benefit payments of $812,133.38 and $302,280.39 during the years ending July 81, 1946 and 1947, respectively (including benefit payments of $109,718.03 from August 1, 1946 to January 31, 1947), to employees laid off under the NOrd-3102 termination program, as plaintiff then knew. Application of the statutory formula to the taxable payroll data set forth in finding 21 for the fiscal years ending in 1944, 1945, and 1946, indicates that, as of March 6, 1947, plaintiff could have known that a combined reserve account of $754,648.98 on July 31, 1946, would have been required to earn a merit rate in 1947; that a reserve account on July 31, 1947, of $443,329.98 plus 2.5 percent of total taxable wages for the year then ending would be required to earn a merit rate in 1948; and that a reserve account on July 31, 1948, of $75,461.34, plus 2.5 percent of total taxable wages for the fiscal years ending in 1947 and 1948, would be required to earn a merit rate in 1949, provided the reserve account in each case was at the same time at least five times the largest amount of benefits paid in any one of three years prior to the particular computation date.
     