Air Terminal Services, Inc. v. The United States , 330 F.2d 974 ( 1964 )

DURFEE, Judge.

Plaintiff, a corporation engaged in the operation of concessions at various airports, entered into a contract on October 6,1957 with defendant, by which plaintiff was granted a concession to operate an automobile parking business at the Washington National Airport. This airport was operated by defendant through its agency, the Civil Aeronautics Administration.

Plaintiff brought this suit to recover damages alleging that defendant breached the contract by installing, without plaintiff’s consent, a number of parking meters on streets of the airport; thereby breaching an implied warranty not to substantially alter the pre-existing factual basis under which plaintiff entered into the contract.

Defendant’s Invitation to Bid stated in part:

“ * •» * ipim government will furnish to the concessionaire the ground space known as Areas 1, 6, 7, 8 and Official, as shown on Exhibit No. 1 attached to the Form of Agreement.”

Exhibit No. 1 was a map of the airport showing, among other things, the specific location of the numbered and described parking areas, and also the location of certain employee parking areas. At this time Areas 1, 6, 7 and 8 were the only parking places (other than 62 metered spaces) that were available to the general public for the parking of automobiles.

The aforesaid invitation was accompanied by a “Data Sheet,” a copy of the proposed agreement, and a form upon which to submit proposals. The Data Sheet read as follows:

Plaintiff commenced operation of the parking lots on October 6, 1957 under a type of operation approved by defendant. The parking time of each automobile was stamped on tickets, and the parking fees computed by an attendant when the automobile left the parking lot, based on the length of parking time.

Since at least 1952, defendant’s representatives had given periodic consideration to various plans for reconstruction of the street areas and traffic circle in front of the Terminal Building at the Airport. Increasing traffic congestion and illegal parking in this area were a serious problem. Also, the airport authorities were of the opinion that there was a critical need for additional public parking spaces in this area to accommodate the short-term parker whose business in the Terminal Building required him to be there only a few minutes. At the time of its bid, plaintiff was not made aware of these plans.

Final plans for reconstruction of the aforesaid areas were completed, and approved in the spring of 1958. Construction began in July, and was completed in October of the same year. The changes thus made were substantial. The traffic circle and the traffic island partially surrounding it were both reduced in size considerably; two adjacent triangular-shaped islands were also cut to a much smaller size; and the median strip on Smith Boulevard was removed. The primary reason for these changes was to provide greater street width for loading and unloading purposes and to expedite a safe flow of traffic in this congested area. In this respect, the changes were successful and resulted in an improved flow of traffic, which also required additional short-term public parking space under the control of parking meters in the area adjacent to the Terminal Building. To this end, defendant provided 101 additional metei'ed parking spaces around the traffic circle and along Smith Boulevard to the vicinity of the entrance to the public parking lots. A number of considerations influenced defendant’s representatives in deciding to install this large number of new parking meters in the terminal area. Although an absolute prohibition against any parking in the area would have furthered the primary objective of improving the flow of moving traffic, the C.A.A. representatives felt that some short-term parking spaces near the terminal were essential to properly handle traffic in that area. Free parking under the control of signs containing a time limitation is considerably more difficult to enforce than parking by meters, which provides police with a simple visual indication of violations, and hence results in a desirable rapid turnover and efficient use of available spaces. In addition to their primary regulatory functions, parking meters have the desirable advantage of producing substantial revenues to the Governmental owner. For these reasons, in October 1958, defendant installed 101 additional parking meters on the traffic circle and Smith Boulevard, as above described. Then in February 1959, defendant removed seven meters at the traffic circle and installed 28 new metered parking spaces on the street in front of the recently completed North Terminal Building which is directly across the street from the rear, or eastern boundary, of plaintiff’s Lot No. 1. Thus, during these periods, a new total of 122 new metered parking spaces were added by defendant.

The record shows that thereafter on June 15, 1959, plaintiff’s attorney wrote and advised the Federal Aviation Agency of its intention to file suit because of the installation of the additional meters by the Government. By reply dated July 17, 1959 the F.A.A. furnished additional operating data, and also denied that by virtue of the contract, plaintiff became the sole parking concessionaire at the airport. Plaintiff filed its petition here on October 9,1959 for breach of contract, but continued to operate through September 1960 for the full three-year period of the contract.

During the first six months of the contract period, plaintiff suffered a net loss in each month ranging from a low in October 1957 of $1,311 to a high in February 1958 of $6,846. The five months beginning with April 1958 showed a net profit. However, in September 1958 plaintiff again suffered a net loss, although in a relatively small amount. For the succeeding 18 months, plaintiff suffered a net loss in each month; the total loss for the period averaged about $4,100 per month. During the last six months of the contract, plaintiff had net profits in three of the months and net losses in the remaining three, all being in relatively small amounts except for a net profit of $4,125 in the last full month of the contract.

Plaintiff’s revenues from long-term parking (over 25 cents parking fee), with some variations, increased from $222,972.94 in its first year of operation, to $275,616.77 for the third and last year. Plaintiff’s short-term parking (25 cent fee) revenue rose quite steadily during the first year of operation from $7,281.25 in October 1957 to $13,836.75 in August, and $9,127.50 in September 1958. From the time that defendant began to install its additional parking meters in October 1958, plaintiff’s revenues from short-term parking, which had previously shown an upward trend, began a sharp decline from which they never recovered. The short-term revenues fell from a total of $111,609.75 for the first year to $44,-257.00 for the second year, and $36,-533.25 for the third year.

The only significant change in conditions at the airport which bore directly on short-term parking was the installation of the 122 new parking meters in October 1958 and February 1959. Although there were other adverse factors, this installation of new meters by defendant was the primary and proximate cause of the sharp decrease in plaintiff’s short-term parking revenue.

Plaintiff’s action is based upon a claim of breach of an implied warranty that defendant would not unilaterally hinder or make more burdensome plaintiff’s performance of its parking concession contract with defendant. When defendant in 1957 furnished its “Data Sheet” to plaintiff with information as to existing operations of the parking concessions, including gross income therefrom, plaintiff contends that it had a right to rely upon an implied warranty that the basic factual data and the competitive position of the parking concessionaire would remain reasonably constant throughout the three-year period, and that defendant would not unilaterally alter this preexisting factual basis.

We do not adopt this interpretation of the circumstances under which this contract was made. The contract did not expressly or implicitly warrant what plaintiff contends. Plaintiff knew when it bid that there were already 32 competitive parking meters in the street adjoining the Terminal Building and free employee parking at the airport. Despite the fact that plaintiff had a number of other exclusive contract concessions at the airport, it never asked for an exclusive concession for the parking lots. Defendant never intended to grant one, and none was included in the contract.

Plaintiff’s bid was prepared by one of its executives, C. J. Sabatino, who had previously and successfully prepared bids for parking concessions for plaintiff at several other airports. In addition to his expertise in analysis of airport parking concessions, Sabatino was generally familiar with the layout of the Washington National Airport and its parking areas. He knew that about 30 competitive public parking meters had been previously installed by defendant near the Terminal Building, in addition to employee parking space.

The regulations of the Civil Aeronautics Administration published in the Federal Register, provided that the Director of the Airport could designate areas on streets and roadways for limited parking, and could control these parking spaces by meters. By statute, the public is charged with knowledge of these regulations, and in view of plaintiff’s extensive experience in airport parking concessions prior to entering into its Washington Airport contract, it had at least constructive knowledge thereof. Plaintiff had no reason to assume that the Airport Director would not exercise his authority under these regulations to enlarge the streets and to provide additional limited parking space with metered control in the additional areas thus provided. Such an implied condition or warranty cannot be read into this contract.

Plaintiff entered into this contract with full knowledge that defendant was already competing with the parking lot concession with 32 Government parking meters on the streets and circle adjoining the Terminal Building, and with an employee parking space. Although the Government had previously contemplated changing and enlarging the street and traffic rotary areas, including the addition of limited parking thereon with meter control, as well as the potential need for more public parking areas at the airport, and had prepared studies and plans accordingly, it does not appear that any definite decision had been made at the date of contract. The Government did not desire to restrict any possible future parking developments. Perhaps the Government should have divulged its future intentions of expansion of its own competitive parking meter operation when it asked for bids, but its failure in this respect cannot be charged as bad faith or fraud. Even though plaintiff depended largely upon the data furnished by defendant in making its own expert analysis, it had no right to assume that the Government would not make changes which would alter or enlarge the existing competitive situation.

The Government did not establish new parking lots in competition with plaintiff’s concession space after making the contract. It expanded its existing operation by installing the new meters along the streets and roadways in the area where it had already installed and operated 32 meters.

In Bateson-Stolte, Inc. v. United States, Ct.Cl., 1962, 305 F.2d 386, this court considered the circumstances under which implied provisions not to hinder performance would be assumed as part of a contract. Where the evidence showed that defendant would not have expressly agreed to such a provision in the contract, the court said, 305 F.2d at 389:

“ * * -x- Since defendant would never have expressly agreed to such a provision, it cannot be successfully contended that defendant impliedly agreed to it.”

In the present case, the record establishes that in view of its future plans, the Government would not have agreed to any provision in the contract which would have prevented its contemplated expansion of the streets and circle, and control of parking thereon by parking meters, and no such provision can be implied. The record also establishes that the Government, prior to the contract, had decided not to give the concessionaire any exclusive franchise.

In the case of McGuire d/b/a Goose Hill Lodge v. United States, Ct.Cl., 1962, 305 F.2d 449, plaintiff had a- Federal concession to run a hunting lodge in a wild-life refuge area. Plaintiff contended that, after making the contract, the •Government reduced the hunting season for geese, thereby making the refuge area less attractive for hunters; and breaching an implied condition of its contract not to hinder or render performance of the contract more difficult. The court held that there was no such implied warranty or agreement; that hunters generally were awai-e of the power of the State and Federal Government to regulate the hunting season for geese in the interests of conservation.

Any implied agreement or warranty by the Government not to materially alter the existing competitive situation would have the clear effect of preventing any further control of parking by the Government through the use of additional parking meters in additional street and traffic circle space adjoining the Terminal Building. This regulatory authority had been expressly delegated to the Federal Aviation Agency by express published regulation. Although parking meters produce substantial revenue, their primary function for the Government is to control parking through rapid turnover and most efficient use of available space in congested traffic areas. In the words of our decision in the Goose Hill Lodge case, supra, “[i]t is difficult to visualize responsible officials who are charged with any phase of conservation signing a contract which could by any possible construction mean what plaintiffs insist this contract means.” It is equally difficult for us to now envision the C.A.A. signing a parking concession contract which by implication would prevent the Government from changing its own existing parking operation.

We therefore find that there was no implied condition in plaintiff’s concession contract that the competitive situation, as it existed at the time of making the contract, would not be altered by defendant or that it would remain substantially undisturbed for the term of the contract.

Accordingly, we conclude that there was no breach of the contract by defendant’s installation of the 122 new metered parking spaces after the date of the contract.

Defendant also contends that the installation of the additional parking meters after the making of the contract in October 1957, and their subsequent operation by defendant during the period of the contract, was a sovereign act for which the United States is not liable in contract.

The primary purpose of the Government in the new installation was the regulation of short-term parking in a congested traffic area adjoining, or close to, the Airport Terminal Building, as part of a plan of enlargement of facilities for regulation and control of the increasing traffic in this specific area.

The traffic regulations were prescribed by the Administrator of the Civil Aeronautics Administration through authority pursuant to an Act of Congress, 54 Stat. 687, § 2, 7 D.C.Code § 1302.

The Administrator accordingly adapted regulations governing operation and parking of automobiles, including the following :

“Parking, (a) No person shall park any motor vehicle on the airport in excess of the time limit prescribed by the airport director for the particular parking area. ******

“(c) No person shall park a-motor vehicle in a metered parking space without depositing in the parking meter controlling such parking space the required sum of money for the length of time stated on such meter, * * [14 C.F.R. § 570.27.]

The meters plaintiff .here complained of had a notice thereon stating:

“Police regulation. Insert coin. One hour limit. One dime thirty minutes, two dimes sixty minutes. Use dimes only. Meter parking enforced at all times including nights, Sundays and holidays.” [Steiner, Tr. 655.]

Criminal penalties were also particularly prescribed for the violation of these regulations [14 C.F.R. § 570.131]:

“Penalties, (a) Any person who knowingly and willfully violates any rule or regulation prescribed in this part, on any order or instruction issued by the airport director authorized herein, shall be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $500, or imprisoned not more than six months, or both.”

The Commissioner has found that:

“The record shows that, with the relatively small police force at the Airport, it was exceedingly difficult to enforce parking regulations without the assistance of parking meters. (Fdg. 16.)

The Trial Commissioner further found that in addition to their primary regulatory functions, parking meters have the desirable advantage of producing substantial revenues to the Governmental owner. However, this additional financial benefit does not change the primary function of parking meters in public regulation of traffic and parking.

In Wah Chang Corp. v. United States, 282 F.2d 728, 151 Ct.Cl. 41 (1960), plaintiff contended that the condemnation of a pier leased and required by plaintiff for its operations was a breach of an implied condition of its contract with the Government that neither party would do anything to prevent, hinder or delay the performance of the other. The court said, 282 F.2d at 734, 151 Ct.Cl. at p. 50:

“Within the rule that prevention of performance by the other party constitutes a. breach of contract •there has been carved out the exception or qualification ‘that the United States as contractor cannot be held liable directly or indirectly for the public acts of the United States as a sovereign.’ Jones v. United States, 1865, 1 Ct.Cl. 383, 385.”

This doctrine had received the approval of the Supreme Court in Horowitz v. United States, 267 U.S. 458, 45 S.Ct. 344, 69 L.Ed. 736 (1925).

Traffic regulations have been specifically held by this court to be sovereign acts for which the United States is not liable in contract. Hallman v. United States, 68 F.Supp. 204, 107 Ct.Cl. 555 (1946).

The use of meters to regulate parking and to collect a fee therefor is designed to diminish the vice of overtime parking and consequently speed up traffic, and has been held to be a police power function of traffic regulation on the public streets. Automobile Club of Missouri v. St. Louis, 334 S.W.2d 355, 83 A.L.R.2d 612 (Mo. 1960); Kimmel v. City of Spokane, 7 Wash.2d 372, 109 P.2d 1069 (1941).¹

A parking meter has been defined as a clock set on a post which measures the time of parking and provides mechanical assistance in the enforcement of the parking limitation. Cassidy v. City of Waterbury, 130 Conn. 237, 33 A.2d 142 (1943).

We conclude that the regulation of traffic and parking by defendant through the use of parking meters at the Washington National Airport was primarily a public- and general act of sovereignty performed for the public good within the meaning of the Horowitz ease, supra, and was not arbitrary and unreasonable so as to remove it from the category of sovereign acts which do not constitute breaches of implied terms in the contracts of the United States. Wah Chang Corp. supra, and cases therein cited.

Plaintiff is not entitled to recover, and therefore its petition is dismissed.

Defendant has asserted a counterclaim. Under the contract plaintiff agreed to pay a specified per centum of gross receipts in excess of the guaranteed minimum. Plaintiff was required to furnish a certified statement to defendant of all of its gross receipts each month. The basis of the counterclaim is the assertion by defendant, on information and belief, that plaintiff received parking fees in excess of the amounts reported as gross receipts, the amount of which was unknown to defendant. Plaintiff denied this in its reply to the counterclaim, and asserted that it had correctly reported its gross receipts.

The Trial Commissioner has found that if defendant is entitled to recover on its counterclaim, the amount reasonably allowable is $9,565.88. Neither party has excepted to this finding, and plaintiff in the conclusion of its brief, asserts that it is entitled to a judgment in the total amount of its claim “less the set-off of defendant’s counterclaim ($9,565.88).” Defendant makes no reference to the counterclaim in its brief. We conclude that defendant is entitled to recover on its counterclaim in the sum of $9,565.88. Judgment is entered for defendant in this amount.

1 . Other cases in point are: Bloomington v. Wirrick, 381 Ill. 347, 45 N.E.2d 852 (1942) cert. denied 319 U.S. 756, 63 S.Ct. 1175, 87 L.Ed. 1709; Bowers v. Muskegon, 305 Mich. 676, 9 N.W.2d 889 (1943); Boswell v. Mitchell, 56 N.M. 201, 242 P.2d 493 (1952); Wm. Laubach & Sons v. Easton, 347 Pa. 542, 32 A.2d 881 (1943).