
    ELMER WESLEY DUHAME, ALSO KNOWN AS E. W. DUHAME, DOING BUSINESS AS E. W. DUHAME CONSTRUCTION COMPANY, FISHER CONTRACTING CO., A CORPORATION, TIFFANY CONSTRUCTION COMPANY, A CO-PARTNERSHIP COMPOSED OF ALGERNON EUGENE TIFFANY AND HERBERT CHASSEE TIFFANY, AND ARIZONA SAND & ROCK COMPANY, A CORPORATION, v. THE UNITED STATES
    [No. 516-52.
    Decided December 6, 1955]
    
      
      Mr. John D. Anson for the plaintiffs. Mr. Fro. L. Murphey was on the briefs.
    
      Mr. Lino A. Graglia, with whom was Mr. Assistant Attorney General Wcurren E. Bu/rger, for the defendant.
   MaddeN, Judge,

delivered the opinion of the court:

This suit, as originally filed, included seven causes of action and four plaintiffs. On the Government’s motion, four of the seven causes of action were dismissed on March 2, 1954. Duhame v. United States, 127 C. Cls. 679. The present proceeding relates to the three remaining causes of action, which are the second, fourth, and sixth causes of action of the complaint, and in which the plaintiffs are, respectively, Elmer Wesley Duhame, doing business under the name of E. W. Duhame Construction Company, Fisher Contracting Co., and Tiffany Construction Company.

All of the plaintiffs performed construction contracts with the United States in the State of Arizona during the period 1941-1943. After they had completed their contracts and settled with the Government, the State of Arizona required them to pay certain taxes on the proceeds of these contracts. The plaintiffs were surprised and disappointed by the imposition of these taxes, for, although they were imposed pursuant to a statute enacted in 1935, the plaintiffs had been led, by the conduct and official statements of the state taxing authorities, to believe that the statute was not applicable to contractors who constructed facilities for the United States. Prior to August 15,1941, the Arizona State Tax Commission had never attempted to apply the statute to such contracts and on that date the Commission issued a regulation explicitly exempting from the tax contracts with the United States. On April 15, 1943, the Commission rescinded its regulation of August 15,1941, and, for the first time, imposed retroactively a tax of one percent, on the gross proceeds of construction contracts with the United States, including the contracts of these plaintiffs. Before the Commission gave notice of this change, the plaintiffs Duhame and Fisher had settled with the Government, executing general releases of all claims related to their contracts.

The contract of the plaintiff Duhame was a lump-sum' contract, and the Government would not be liable for any expense which he incurred in performing it, unless the contract provided that the Government should be so liable. Duhame points to the following provision of the contract:

37. PeRmits. (1) A contractor shall not be required to obtain building or other permits or licenses.

This provision would seem to apply to the various building permits or licenses that are customarily required by states or municipalities in connection with construction. Whether Duhame was required to obtain such permits or licenses does not appear, and this case is not based upon any claim concerning them. Section 73-1312 of the Arizona Excise Kevenue Act provides that any person having gross proceeds of sale upon which a privilege tax is imposed must, in order to engage in or continue in business, obtain a privilege license and pay one dollar for it. Duhame urges that this provision, in connection with the contract provision quoted above, resulted in a promise by the Government to pay the privilege tax if he was subjected to it.

.We see little merit in Duhame’s contention. He is not suing for the one dollar which he paid for the license, but for the privilege taxes which he was obliged to pay on the gross proceeds of his contract. The idea that when the Government said in the contract that the contractor would not be required to obtain building or other licenses or permits, it intended to guarantee that if he was subjected to a State tax, not otherwise mentioned in the contract, in connection with which tax he would have to pay a dollar for a license, the Government would pay both the dollar and the tax, seems to us to involve a non sequitwr. Duhame was subjected to a surprising expense, but his contract did not provide for reimbursement by the Government.

Both the Fisher and Tiffany contracts provided expressly that if Federal, State, or local taxes were imposed after the date of the opening of bids, the contract price would be adjusted to take account of the change. Under this provision these plaintiffs were entitled to have the Government reimburse them for the privilege taxes imposed by the State. But, the Government says, the plaintiff Fisher lost its right to reimbursement by the execution, on November 15,1942, of a general final payment release of all claims against the Government arising out of the contract. In Harrison Engineering and Construction Corp. v. United States, 107 C. Cls. 205, we considered the same problem and concluded that a release did not,, where both parties were in ignorance of an additional item of indebtedness, and had no intention to pay or accept less than was justly due, cancel the unknown item. The Government asks us to overrule the Harrison decision, but, upon reconsideration, we are content with it.

As to both Fisher and Tiffany, the Government asserts that their causes of action are barred by the statute of limitations. It says that the Government’s liability arose when the tax was “imposed or changed” which was on April 15, 1943, when the Arizona State Tax Commission changed its regulation and gave notice that it would impose the tax on persons such as these plaintiffs. If, the Government says, the cause of action did not accrue on April 15, 1943, it did accrue on April 10, 1946, as to Fisher, and in September 1946 as to Tiffany, those being the times when the State of Arizona actually assessed the taxes against these plaintiffs. The petition was not filed until October 16,1952, more than six years after all these dates.

The plaintiffs say that according to the contract, three things had to happen before they could have sued the Government, (1) the tax must have been “imposed or changed”; (2) the plaintiffs must have paid the tax; and (3) the Government must have refused reimbursement by refusing to adjust the contract price on payment vouchers. They say that Fisher did not pay the tax until April 1947 and Tiffany did not pay its tax until some time after March 13, 1947. The Comptroller General did not refuse reimbursement to Fisher until January-15,1951, nor to Tiffany until some time in March 1947 or thereafter. All of these times were less than six years before the petition was filed.

It may be true that the plaintiffs could not have successfully sued the Government for these taxes without first having paid them and presented vouchers for reimbursement. But it cannot be true that one who has a claim against another which he can perfect and make actionable by acts within his own power can keep the claim alive indefinitely by merely refraining from doing those acts. Here, at least upon the assessment of the taxes against these plaintiffs, they could have paid them and presented their vouchers for reimbursement, to which it seems they were entitled. If reimbursement had been refused, or the Comptroller General had not acted within a reasonable time, they could have sued. But they could not toll the statute of limitations merely by refraining from doing what was completely within their own power to do. See Dawnic Steamship Corp. v. United States, 90 C. Cls. 537, 578.

The claims of the plaintiffs Fisher and Tiffany are barred •by the statute of limitations. The petition will be dismissed in its entirety.

It is so ordered.

Laramoee, Judge; Whitaker, Judge; LittletoN, Judge; and Jokes, Chief Judge, concur.

FINDINGS OE FACT

The court, having considered the evidence, the report of Commissioner Boald A. Hogenson, and the briefs and arguments of counsel, makes findings of fact as follows:

SECOND CAUSE OF ACTION

1. Plaintiff Elmer Wesley Duhame, also known as E. W. Duhame, was at all times mentioned in the petition, and now is, a resident of the State of Arizona, doing business under the name of E. W. Duhame Construction Company, with his principal place of business at Phoenix, Arizona, and engaged in the general contracting business.

2. On September 10, 1941, plaintiff Duhame entered into a written contract, No. WA429-2031-X, with the defendant by and through the Federal Works Agency Division of Defense Housing, for the construction of a defense housing project at Luke Field, Arizona, for the total sum of $237,990. The contract was prepared by the defendant and contained the following provision:

37. Permits. (1) A contractor shall not be required to obtain building or other permits or Licenses.

3. On the date each contract mentioned in these findings was entered into, the State of Arizona had enacted an excise revenue act known as the Arizona Excise Kevenue Act of 1935 as amended, which act as amended contained provisions as follows:

Sec. 73-1303:
From and after the effective date of this act, there is hereby levied and shall be collected by the tax commission for the purpose of raising money_annual privilege taxes measured by the amount or volume of business done by the persons on account of their business activities and in the amounts to be determined by the application of rates against values, gross proceeds of sales, or gross income, as the case may be, in accordance with the following schedule: * * *
$ $ $ $ $
(d) At an amount equal to two per cent of the gross proceeds of sales or gross income from the business upon every person engaging or continuing within this State in the following businesses:
1. Selling any tangible personal property whatsoever at retail, except bonds and stock.
* * # # *
(h) At an amount equal to one per cent of the gross proceeds or gross income from the business, upon every person engaged or continuing in the business of contracting. Payments made by the contractor for labor employed in construction, improvements or repairs shall not be subject to the tax herein imposed.
Sec. 73-1307:
A person engaged in any business in which sales are made on which the same rate does not apply, or in two (2) or more businesses with respect to which the rate to be applied is not the same, shall make separate returns of the gross proceeds of sales or the gross income of each business separately classified.
Sec. 73-1308:
The taxes herein levied shall not be construed to apply to transactions in interstate commerce which, under the Constitution of the United States, the State of Arizona is prohibited from taxing or upon any sales made to the United States Government, its departments or agencies nor to businesses or transactions exempted from taxation under the Constitution of the United States or the Constitution of the State of Arizona.
Sec. 73-1312:
LioeNSes. (a) Every person having a gross proceeds of sales or gross income upon which a privilege tax is imposed by this article, desiring to engage or continue in business, shall make application to the commission for a privilege license . . . and no such person shall engage or continue in business until he shall obtain such license.
jJ: * * * *
(c) The privilege license prescribed herein shall be non-transferable and shall be displayed in the applicant’s place of business.
(d) A person engaged in or conducting a business in two (2) or more locations, shall procure a license for each of such locations.
(e) Any person who violates any provision of this section shall be guilty of a misdemeanor and upon conviction fined, for each offense, not less than ten dollars ($10.00) or imprisoned for not less than ten (10) days.

The foregoing quoted provisions of the Arizona Excise Revenue Act may be found in the Arizona Laws of 1935 Chapter 77, Amended Laws 1937, Chapter 2, and A. C. A. 1939.

4. Prior to the time each contract mentioned in these findings was entered into, the Attorney General of the State of Arizona had, on January 6,1939, rendered an opinion to the Arizona State Tax Commission reading as follows:

I have before me your letter of December 20, 1938, requesting an opinion from this office as to whether or not Charles J. Dorfman, a contractor engaged in the construction of an addition to the Veterans’ Hospital at Whipple is subject to the tax imposed by Chapter 77, Laws of the Regular Session 1935 as amended.
After studying the statement of facts furnished us by you, and applying the law as laid down in Atkinson v. State Tax Commission 42 P. (2d) 7, Atkinson v. State Tax Commission, 81 L. Ed. 1346 and Sollitt v. State of Virginia, 91 A. L. R. 774, it is the opinion of this office that Charles J. Dorfman is not taxable under the excise revenue act.

5. At all times pertinent in this case prior to August 15, 1941, there was no regulation, procedure, policy, or practice of the Arizona State Tax Commission under the said Arizona Excise Eevenue Act of 1935, as amended, for the imposition of any tax thereunder upon any contractor furnishing labor, services, or materials for or to the United States.

6. On August 15,1941, the Arizona State Tax Commission adopted a rule, regulation and order reading as follows:

Defense Contracts With the Federal Government Exempt From Sales Tax August 15,1941
All so-called “Defense Contracts” for the furnishing of materials or service to the Federal Government, for which payment is made directly by the Federal Government, shall be exempt from sales tax.
Such exemption not applying to contracts or purchases in which the Federal Government participates in part only, and payment is made by some other agency.
This rescinds all previous regulations pertaining to national defense contracts: with the Federal Government.

Shortly thereafter the said Commission mailed a notice of the adoption thereof to each of the plaintiffs.

7. On April 15, 1943, the Arizona State Tax Commission rescinded its rule, regulation and order of August 15, 1941, exempting war contracts for services to the United States, and did, for the first time, impose retroactively upon contractors engaged in performing war construction contracts for the United States, a privilege tax in an amount equal to one percent (1%) of the gross proceeds from such contracts. Each plaintiff first received notice, of the Commission’s action in this respect on or about April 24,1943.

8. In September 1946, the. Arizona State Tax Commission assessed plaintiff Duhame with a one percent gross proceeds (privilege) tax on materials and services furnished by plaintiff under his contract with the defendant in the amount of $1,276.84. On October 15, 1946, plaintiff mailed his check drawn on the First National Bank of Arizona in the sum of $1,276.84 to the Arizona State Tax Commission, stating that the payment was tinder protest. The check was deposited by the State Treasurer of the State of Arizona in the Valley National Bank and endorsed by the Valley National Bank on October 17,1946. The proceeds from the check were placed by the Arizona State Tax Commission in a protest fund until the protest was finally determined December 5, 1947, when they were placed in the general funds of the State of Arizona.

9. At the time the Duhame contract was entered into, plaintiff Duhame was led to believe, and believed that the State Tax Commission of Arizona did not intend to and could not impose any such privilege taxes on work or materials furnished on his war construction contract with and for the direct benefit of the United States. The parties stipulated that if Mr. Duhame were called, he would testify that by reason of the provisions of paragraph 37 of the contract, plaintiff was led to believe, and thereafter understood and believed that if any such privilege tax was levied or assessed against plaintiff, and plaintiff was required to and did pay such tax to the State of Arizona, the defendant would reimburse him for the tax so paid.

10. On or about June 20, 1950, plaintiff Duhame filed a verified claim for reimbursement of such taxes with the Comptroller General through the United States District Engineer, War Department at Los Angeles, California, being Claim No. Z347431 in the General Accounting Office. On June 14,1951, the Comptroller General disallowed this claim and stated as reasons for disallowance that the contract contained no provision for price adjustment as a result of change in Federal, State or local taxes, and that the plaintiff Duhame had released all claims under the contract. A photostatic copy of the decision is in evidence as Exhibit A.

11. On April 1,1942, the plaintiff Duhame executed a general, final payment release on all claims arising out of the contract. A photostatic copy of the release is in evidence as Exhibit B. At the time of the execution thereof, plaintiff Duhame had no knowledge that the Arizona State Tax Commission would rescind its rule, regulation and order of August 15,1941, and impose or assess any taxes upon him by reason of the services or materials furnished under the contract, or that the Commission could or would require plaintiff to pay the assessed sum of $1,276.84.

12. After October 18,1946, plaintiff Duhame filed an action in the Superior Court of the State of Arizona, in and for the County of Maricopa, entitled, E. W. Duhame v. The State Tax Commission of the State of Arizona, a body politic and corporate, et al. By this action, Duhame challenged the right of the Commission to impose and assess the tax and its right to rescind its rule, regulation and order of August 15, 1941. On appeal, the Supreme Court of the State of Arizona by its decision dated March 12, 1947, upheld the action and right of the Commission to impose and collect the tax, and on April 14, 1947, on rehearing, reaffirmed its decision, 65 Ariz. 268, 179 P. 2d 252.

13. No part of this tax paid by plaintiff Duhame to the State of Arizona has been repaid by the defendant.

EOURTH CAUSE OE ACTION

14. At all times mentioned in the petition, plaintiff Fisher Contracting Co. has been, and now is, an Arizona corporation engaged in the general contracting business with its principal place of business at Phoenix, Arizona.

15. On or about May 27,1941, the Fisher Contracting Co. entered into a written contract, No. W509-Eng-1481, with the War Department for the installation of a lighting system at the Winslow Airport, Winslow, Arizona. The contract was prepared by the War Department and contained the following provision:

Adjustment of Contract Price by Keason of Change in Federal, State, and Local Taxes. The contract price will be considered to include all federal, state and local taxes imposed prior to the date of opening bids and applicable to the undertaking. If any privilege, sales, gross receipt, or other tax (exclusive of taxes on net income or undistributed profits) applicable to the undertaking and payable directly by the contractor, is imposed or changed after the date of opening bids by federal or state enactment, then the contract price will be increased or decreased accordingly, and any amount due or chargeable against the contractor as a result thereof will be adjusted on payment vouchers as separate items.

16. On April 10,1946, the Arizona State Tax Commission assessed gross proceeds (privilege) taxes against Fisher Contracting Co. upon materials and services furnished under the contract, in the amount of $277.51. On or about April 8, 1947, this plaintiff paid the tax so assessed against it.

17. At the time the contract was entered into, plaintiff Fisher Contracting Co. had no knowledge that the Arizona State Tax Commission intended to, could or would, adopt any rule, regulation or order imposing or assessing any such tax upon it by reason of labor and materials furnished under the contract, or that the Commission could or would require that this plaintiff pay the tax so assessed. At that time, this plaintiff was led to believe, and did believe, that the State of Arizona did not intend to and could not impose any such tax on materials and services furnished under the contract for the direct benefit of the United States. By reason of the language of the contract (hereinbefore set forth in finding 15) this plaintiff believed and was led to believe, that if any such privilege tax was levied or assessed, and this plaintiff was required to and did pay such tax to the State of Arizona, the defendant would reimburse it for the tax so paid.

18. On May 16, 1950, Fisher Contracting Co. filed a verified claim for reimbursement of these taxes with the Comptroller General through the United States District Engineer, War Department, at Los Angeles, California, being Claim No. Z381401 (1) in the General Accounting Office. On January 15,1951, the Comptroller General disallowed this claim for the reason that the contract was executed prior to the August 15, 1941 rule, regulation and order of the Arizona State Tax Commission. A photostatic copy of this decision is in evidence as Exhibit C.

19. No part of this tax paid by Fisher Contracting Co. to the State of Arizona has been repaid by the defendant.

20. On November 15,1942, the plaintiff executed a general final payment release of all claims arising out of the contract. A photostatic copy of this release is in evidence as Exhibit D.

21. At the time of the execution of the release, Fisher Contracting Co. had no knowledge that the Arizona State Tax Commission would rescind its rule, regulation and order of August 15, 1941, and impose or assess any such taxes upon this plaintiff by reason of the services or of materials furnished under the contract, or that the Commission could or would require this plaintiff to pay the assessed sum of $277.51.

SIXTH CAUSE OE ACTION

22. At all times herein mentioned, plaintiff Tiffany Construction Company has been, and now is, a co-partnership composed of Algernon Eugene Tiffany, also known as A. E. Tiffany, and Herbert Chassee Tiffany, engaged in the general contracting business in the State of Arizona.

23. On April 9, 1941, and on June 20, 1941, Tiffany Construction Company entered into two written contracts with the War Department for the construction by this plaintiff of various buildings, structures and improvements at Ajo Municipal Airport in the State of Arizona. The contract numbers are W509-Eng-1398 and W509-Eng-1490. Each of the contracts was prepared by the War Department and contained the following provision:

Adjustment of Contract Price by Reason of Change in Federal, State, and Local Taxes. The contract price will be considered to include all federal, state, and local taxes imposed prior to the date of opening bids and applicable to the undertaking. If any privilege, sales, gross receipts, or other tax (exclusive of taxes on net income or undistributed profits) applicable to the undertaking and payable directly by the contractor, is imposed or changed after the date of opening bids by federal or state enactment, then the contract price will be increased or decreased accordingly, and any amount due or chargeable against the contractor as a result thereof will be adjusted on payment vouchers' as separate items.

24. On April 9, 1941, and June 20, 1941, the dates this plaintiff entered into the written contracts, the provisions of the Arizona Excise Revenue Act of 1935 as amended were as quoted in finding 3.

In September 1946, the Arizona State Tax Commission assessed Tiffany Construction Company with gross proceeds (privilege) taxes' upon materials and services furnished by plaintiff under Contract No. W509-Eng-1398 in the sum of $260.03, and under Contract No. W509-Eng-1490 in the sum of $556.24. Between March 13,1947 and November 30,1950, this plaintiff paid the taxes in the amount of $816.27.

25. No part of the taxes so paid by Tiffany Construction Company to the State of Arizona has been repaid by the defendant.

CONCLUSION OF LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes that as a matter of law plaintiffs are not entitled to recover, and their petition is therefore dismissed. 
      
       As to the application of the statute of limitations to certificates of deposit, see 23 ALR 7 ; 128 ALR 157. As to its application to promissory notes payable on demand see 44 ALR 397.
     