text:
    NEWBURG AREA COUNCIL, INC., et al., Plaintiffs-Appellants, v. BOARD OF EDUCATION OF JEFFERSON COUNTY, KENTUCKY, et al., Defendants-Appellees. John L. HAYCRAFT et al., Plaintiffs-Appellants, v. BOARD OF EDUCATION OF LOUISVILLE, KENTUCKY, et al., Defendants-Appellees.
    Nos. 73-1403, 73-1408.
    United States Court of Appeals, Sixth Circuit.
    Dec. 11, 1974.
    Certiorari Denied April 21, 1975.
    See 95 S.Ct. 1658.
    John G. O’Mara, Thomas L. Hogan, Louisville, Ky., Robert Sedler, Lexington, Ky., Thomas L. Hogan, Louisville, Ky., for plaintiffs-appellants in No. 73-1403.
    John A. Fulton, William A. Blodgett, Jr., Will Fulton, E. Preston Young, J. Donald Dinning, James W. Stites, Jr., Stites, McElwain & Fowler, Louisville, Ky., for defendants-appellees in No. 73-1403.
    Darryl T. Owens, Charles J. Lunderman, Jr., Louisville, Ky., Robert A. Sedler, Lexington, Ky., John G. O’Mara, Thomas Hogan, Louisville, Ky., for plaintiffs-appellants in No. 73 — 1408.
    Henry A. Triplett, E. Preston Young, J. Donald Dinning, James W. Stites, Jr., John A. Fulton, William A. Blodgett, Jr., Louisville, Ky., for defendants-appellees in No. 73-1408.
    Before PHILLIPS, Chief Judge, and McCREE and MILLER, Circuit Judges.
   PER CURIAM.

These consolidated school desegregation cases were originally before this Court in Newburg Area Council, Inc., et al., v. Board of Education of Jefferson County, Kentucky, et al., and John L. Haycraft et al. v. Board of Education of Louisville, Kentucky, et al., 489 F.2d 925 (6th Cir. 1973), in which it was held:

(1) That neither the Independent Louisville School District nor the Jefferson County School District was a unitary system, both operating dual school systems from which all vestiges of state-imposed segregation had not been eliminated; and (2) That all vestiges of state-imposed segregation must be eliminated within each school district in the county, state-created school district lines to impose no barrier in accomplishing such purpose.

The judgment of the district court, dismissing the action as to the Louisville and Jefferson County school districts, was reversed and the actions were remanded for further proceedings, with the statement that to accomplish the elimination of remaining vestiges of de jure segregation, “we do not require the use of any particular method nor approve in advance the use of any particular device.”

The petitions of the defendant School Boards for certiorari were granted and on July 25, 1974, the Supreme Court entered the following order:

The petitions for writs of certiorari are granted. The judgments are vacated and the cases are remanded to the United States Court of Appeals for the Sixth Circuit for further consideration in light of Milliken v. Bradley, 418 U.S. 717, 94 S.Ct. 3112, 41 L.Ed.2d 1069 (1974). Mr. Justice Douglas, Mr. Justice Brennan, Mr. Justice White and Mr. Justice Marshall would grant certiorari and without briefing or oral argument affirm the judgments.

By this Court’s order of August 8, 1974, the parties were directed to file supplemental briefs addressed to all questions applicable to the reconsideration by this Court of its prior opinion and ruling of December 28, 1973. Thereafter, extensive briefs were filed by the parties and the actions were set down for hearing on oral argument on October 14, 1974.

After full reconsideration, pursuant to the order of remand of the Supreme Court and its ruling in Milliken as to inter-district remedies, we are of the opinion that our prior ruling was correct and that it should be and it is hereby reaffirmed.

At the outset, we construe the Supreme Court’s opinion in Bradley v. Milliken, 418 U.S. 717, 94 S.Ct. 3112, 41 L.Ed.2d 1069, 1974, and its order of remand in the present cases, as in no way requiring a reconsideration of our prior opinion insofar as it held that both the Louisville and Jefferson County school districts were operating dual school systems from which all vestiges of state-imposed segregation had not been eliminated as required by law.

Therefore, in this opinion, we address ourselves only to our prior holding that the district judge in approving or formulating a plan of desegregation for Jefferson County, Kentucky, would have the power to require that state-created school district lines could be disregarded. On this issue, we find that there are material and controlling distinctions between the facts of the present cases and the facts before the Supreme Court in Milliken, in which the court held that state-created district lines could not be disregarded in devising an appropriate desegregation plan for the City of Detroit only:

(1) A vital distinction between Milliken and the present cases is that in the former there was no evidence that the outlying school districts had committed acts of de jure segregation or that they were operating dual school systems. Exactly the opposite is true here since both the Louisville and Jefferson County School Districts have been expressly found by this Court to have failed to eliminate all vestiges of state-imposed segregation. Consequently, as contrasted with the outlying Michigan districts, they are guilty of maintaining dual school systems.

(2) In Milliken, the metropolitan remedy would have involved some 53 school districts spreading over three counties, while the present cases involve only two and possibly three districts in a single county. Hence, the inter-district remedy in this case would not be likely extensively to disrupt and alter the structure of public education in Kentucky, or even in Jefferson County, nor require the creation of a vast new super school district, as may have resulted from the broad metropolitan remedy considered in Mil-liken.

(3) In Kentucky, the county is established as the basic educational unit of the state [Ky.Rev.Stat. § 160.010], and the state legislature has referred to the boundaries of school districts as “artificially drawn school district lines.” Ky. Rev.Stat. § 160.048(1). Statutes of this character were not in effect in Michigan and consequently were not considered by the Supreme Court in Milliken.

(4) In Milliken, the Supreme Court expressed some concern because of the serious administrative problems which could arise in Michigan if the Court should decree an inter-district remedy entailing the consolidation of a large number of separate school districts. In Kentucky, however, if the district court should find that a formal consolidation or merger of districts was required to effectuate an effective desegregation plan for the county as a whole, such administrative problems would to a large extent be obviated since the merger or consolidation in that state could be effectuated under the express provisions of a Kentucky statute. This statute authorizes the reconsolidation of school districts within a single county even without the consent of the county school board. Ky.Rev.Stat. § 160.041.

(5) A crucial difference between the present cases and Milliken is that school district lines in Kentucky have been ignored in the past for the purpose of aiding and implementing continued segregation. Such disregarding of school district lines continues to have an effect on racial imbalance in the county’s schools, particularly in the location of Atherton High School in the county and away from the core city of Louisville. For example, in pre-Brown days black high school students in the Jefferson County school district were sent to the black Central High School located in the Louisville school district. This was done because the county had no black high school, and it was done on a tuition basis paid by the county. While this action by itself might be insufficient to invoke the equitable power of the court, see 418 U.S. 717, 94 S.Ct. 3112, there are other instances in the present case of disregarding school district lines. Atherton High School is an example. Atherton is a high school belonging to the Louisville school district, but it was and is located outside the boundaries of that district and within the territory of the Jefferson County school district. Students from both school districts have been permitted to attend the school. Further, while in Milliken only two of 52 potentially affected school districts were involved in crossing district lines, the present cases involve at least two of the three school districts, and by far the two largest districts, located in the geographical boundaries of Jefferson County. Thus, in the present cases the disregarding of school district lines in a single county in Kentucky cannot be characterized as a mere isolated instance, as was the case in Mil-liken with respect to the Carver-Detroit high school situation.

(6) The Louisville school district is an independent school district established in accordance with the requirements of Ky. Rev.Stat. § 160.020, which provides for independent school districts within a single county. It is located within the City of Louisville, but its boundaries are not coterminous with the political boundaries of that city since the boundaries of an independent school district in Kentucky do not expand with the boundaries of the city in which it is embraced. As pointed out in our prior opinion, approximately 10,000 children, mostly white, live between the outer boundaries of the Louisville school district and the boundaries of the City of Louisville. Such a large number of white students who are resident within the City of Louisville, but are required to attend county schools administered by the Jefferson County school district, materially aggravates the difficulties in disestablishing the dual city school system.

We conclude in view of these factors that the school district lines in Jefferson County, Kentucky, have been crossed for the purpose and with the actual effect of segregating school children among the public schools of the county on the basis of race.

We are not confronted here with the problem in Milliken in which the remedy approved by the Court of Appeals was broader than the constitutional violation. Rather, the situation presented is that of two districts in the same county of the state being equally guilty in failing to eliminate all vestiges of segregation mandated by the same Kentucky statute. Before its repeal sometime after the ruling in Brown I, Sec. 158.020 of the Ky. Rev. Statutes provided:

(1) Each board of education shall maintain separate schools for the white and colored children residing in its district.
(2) No person shall operate or maintain any college, school or institution where persons of both the white and colored races are received as pupils.
(3) No instructor shall teach in any college, school or institution where persons of both the white and colored races are received as pupils.
(4) No white person shall attend any college, school or institution where colored persons are received as pupils or receive instruction.
(5) No colored person shall attend any college, school or institution where white persons are received as pupils or receive instruction. * * *

In Wright v. Council of the City of Emporia, 407 U.S. 451, 92 S.Ct. 2196, 33 L.Ed.2d 51 (1972), and in United States v. Scotland Neck Board of Education, 407 U.S. 484, 92 S.Ct. 2214, 33 L.Ed.2d 75 (1972), the Supreme Court refused to permit the establishment of separate school districts within a single county, even though authorized by state law, where it was found that this would impede the process of dismantling a segregated school system. By analogy no justification appears for permitting the city and county school districts in Jefferson County to remain completely autonomous if the effect is to impede the process of desegregating the schools of the county as a whole.

Accordingly, after full reconsideration as directed by the Supreme Court, our opinion of December 28, 1973, is hereby reinstated with the modifications (1) that the district court shall join the Anchorage School District as a party defendant if deemed necessary to provide an adequate remedy; (2) that the effectiveness of any order entered by the district court on remand which may provide for an inter-district remedy shall be postponed until all appeals in connection with such order have been exhausted or, in the event no appeals are taken, until the time for such appeals has expired; and (3) that in no event shall any further plan of desegregation ordered by the district court take effect before the beginning of the 1975-76 academic year.

      . The third district in the present cases is the Anchorage School District, a very small district operating only one elementary school and located in the southeast portion of Jefferson County. The plaintiffs in the Haycraft case sought to join this district and its superintendent as parties defendants. When the district court ruled in a pre-trial order that it did not have the power to cross school district lines, it dismissed the proceedings against the Anchorage District and its superintendent. Since no appeal was taken from this order, it was argued on behalf of the Anchorage School District that the court was without authority to direct the district judge to reinstate the case as to Anchorage. Nevertheless, we remain of the view that the district court in passing upon any plan for desegregating the schools of Jefferson County may, on its own motion, if deemed to be required, join any necessary party in order to accomplish complete relief. If, on remand, the district court should be of the opinion that the Anchorage School District should be made a party defendant, he may appropriately have the district so joined under conditions which will afford it a full opportunity to be heard with respect to any finding or order affecting its interests.


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    UNITED STATES of America, Appellee, v. Earl MILES, Appellant.
    No. 74-1363.
    United States Court of Appeals, Fourth Circuit.
    Submitted Sept. 9, 1974. ■
    Decided Jan. 28, 1975.
    George Beall, U. S. Atty., and Andrew Radding, Asst. U. S. Atty., on brief for appellee.
    Walter W. Stout, III, Richmond, Va., on brief for appellant.
    Before HAYNSWORTH, Chief Judge, BOREMAN, Senior Circuit Judge, and WIDENER, Circuit Judge.
   PER CURIAM.

Earl Miles was convicted by a jury of distribution and possession of heroin in violation of 21 U.S.C. § 841(a)(1). He was sentenced to ten years imprisonment with an additional five years probation. Miles’ defense at trial was that he had been entrapped. The sole issue he raises before this court is that the trial judge’s instructions concerning his entrapment defense were improper. The government has filed a motion for summary affirmance and Miles seeks summary reversal. For reasons hereinafter stated, we conclude that the appeal must be dismissed for lack of jurisdiction.

Miles was sentenced on November 5, 1973. His first indication to the court that he wished to appeal his conviction was by a letter dated December 22, 1973. Rule 4(b) of the Federal Rules of Appellate Procedure provides that in direct criminal appeals, “the notice of appeal by a defendant shall be filed in the district court within 10 days after the entry of judgment or order appealed from.” Upon a showing of excusable neglect, the district court may extend this time limit for an additional 30 days. Since Miles’ notice of appeal was filed 47 days after sentence was pronounced upon him, he failed to comply with Rule ' 4(b).

It is well settled that compliance with Rule 4(b) is “mandatory and jurisdictional.” United States v. Robinson, 361 U.S. 220, 80 S.Ct. 282, 4 L.Ed.2d 259 (1960); United States v. Mathews, 462 F.2d 182 (3rd Cir. 1972). This court is specifically precluded from enlarging the time otherwise permitted for filing a notice of appeal. F.R.A.P. § 26(b). Nor does this case contain unique facts which alone excuse noncompliance with the rule. E. g. Fallen v. United States, 378 U.S. 139, 84 S.Ct. 1689, 12 L.Ed.2d 760 (1964).

Accordingly, the appeal is dismissed for lack of jurisdiction.


author: PER CURIAM:

text:
    Pat A. SCARTH, Petitioner-Appellant, v. Colonel Albert J. GERACI et al., Respondents-Appellees.
    No. 74-3666
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    April 3, 1975.
    John T. Montford, Lubbock, Tex., for petitioner-appellant.
    Frank D. McCown, U. S. Atty., Fort Worth, Tex., Robert B. Wilson, Asst. U. S. Atty., Lubbock, Tex., for respondentsappellees.
    Before BROWN, Chief Judge, and GODBOLD and GEE, Circuit Judges.

       Rule 18, 5th Cir., See Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 5th Cir., 1970, 431 F.2d 409, Part I.

   PER CURIAM:

The opinion of the District Court reported at 382 F.Supp. 876 (1974), is correct. It is

Affirmed.


text:
    Cecil TINER, Petitioner-Appellant, v. STATE OF ALABAMA, Respondent-Appellee.
    No. 74-3835
    Summary Calendar.*
    United States Court of Appeals, Fifth Circuit.
    April 3, 1975.
    Emily Gassenheimer, Montgomery, Ala. (Court appointed), for petitioner-appellant.
    William J. Baxley, Atty. Gen., David W. Clark, Asst. Atty. Gen., Montgomery, Ala., for respondent-appellee.
    Before THORNBERRY, MORGAN and RONEY, Circuit Judges.
   PER CURIAM:

The summary judgment rendered below is vacated and this cause remanded for a hearing to determine whether the appellant deliberately bypassed his state remedies. Should the district court find that appellant did not deliberately bypass such remedies, the constitutional questions presented by the appellant’s petition for habeas corpus warrant a full hearing on the merits.


text:
    L. E. CREEL, III, as Trustee in Bankruptcy of Diversa, Inc., Bankrupt, Plaintiff-Appellant, v. BIRMINGHAM TRUST NATIONAL BANK et al., Defendants-Appellees.
    No. 74-2061.
    United States Court of Appeals, Fifth Circuit.
    April 2, 1975.
    Wilbur G. Silberman, Robert H. Loeb, Birmingham, Ala., Vernon 0. Teofan, A. L. Vickers, Dallas, Tex., for plaintiff-appellant.

      Hobart A. McWhorter, Jr., Birmingham, Ala., for Birmingham Trust Natl. Bk.
    James C. Wilson, Jr., Morris K. Sirote, Edward M. Friend, Jr., Birmingham, Ala., for M. W. Mudd.
    Before GOLDBERG and RONEY, Circuit Judges, and GROOMS, District Judge.
   PER CURIAM:

After a careful consideration of the briefs, the record, and the oral argument of counsel in this case, we conclude that the judgment of the district court should be affirmed on the basis of that court’s opinion below, 383 F.Supp. 871.

Affirmed.


author: EUGENE A. WRIGHT, Circuit Judge:

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. SILVER BAY LOCAL UNION NO. 962, INTERNATIONAL BROTHERHOOD OF PULP, SULPHITE AND PAPER MILL WORKERS, AFL-CIO, Respondent.
    No. 73-1037.
    United States Court of Appeals, Ninth Circuit.
    Feb. 4, 1975.
    Rehearing and Rehearing En Banc Denied March 28, 1975.
    Stanley Zirkin (argued), N.L.R.B., Washington, D. C., for petitioner.
    Lawrence R. Schwerin (argued), Donaldson, Hafer, Cassidy & Price, Seattle, Wash., for respondent.
    Before KOELSCH, CARTER and WRIGHT, Circuit Judges.
   OPINION

EUGENE A. WRIGHT, Circuit Judge:

Our opinion of May 22, 1974, vacated that portion of the Board’s order which awarded back pay to a supervisor and remanded to the Board for further proceedings. NLRB v. Silver Bay Local Union No. 962, 498 F.2d 26 (9th Cir. 1974). We said, quoting from NLRB v. International Union of Operating Engineers, Local 925, 460 F.2d 589, at 605 (5th Cir.):

“If the ruling was inadvertent, the matter will stop there. If the Board is still of the opinion that [Niesen is entitled to back pay], the facts which distinguish this case from the Board’s prior decisions should be articulated. If this case represents a change in Board policy, the new policy should be explicated. Only then can this court properly consider respondents’ contention that the Board has exceeded its statutory authority.”

498 F.2d at 29.

By its Supplemental Decision and Order of December 9, 1974 [215 NLRB 79], the Board has explained its policy and the basis of its determination and has reaffirmed its earlier order of August 7, 1972.

We adopt and approve the Board’s decision and direct that it be enforced in full.


author: SKELTON, Judge.

text:
    KFOX, INC. v. The UNITED STATES.
    No. 151-71.
    United States Court of Claims.
    Feb. 19, 1975.

      M. Carr Ferguson, Jr., New York City, attorney of record for plaintiff. Charles T. Mederrick and Wachtell, Lipton, Rosen & Katz, New York City, of counsel.
    Laurence J. Whalen, Washington, D. C., with whom was Asst. Atty. Gen., Scott P. Crampton, for defendant. Gilbert E. Andrews, Jr., Washington, D. C., of counsel.
    Before COWEN, Chief Judge, and SKELTON and BENNETT, Judges.
   SKELTON, Judge.

OPINION

This> case is a suit for a refund of income tax paid pursuant to a finding of tax deficiency by the Internal Revenue Service plus appropriate interest thereon. The period of time involved includes the fiscal year ending November 30, 1963, the taxable period December 1, 1963, through December 31, 1963, and the calendar years 1964, 1965, and 1966. The primary issue in the case deals with the proper allocation of the purchase price of an operating radio station among specific acquired assets.

The plaintiff, KFOX, Inc., formerly IIlinois-California Broadcasting Company, Inc., was incorporated under Illinois laws for the purpose of acquiring and operating a Long Beach, California, radio station, KFOX and KFOX-FM (hereinafter referred to as the Old KFOX). Throughout most of its early years and before it was acquired by the plaintiff, Old KFOX operated under a general market format with a limited orientation towards black audiences. During this period the station recorded substantial losses of revenue aggregating over $200,-000. In 1957 the original KFOX management tried unsuccessfully to interest the Sonderling Broadcasting Corporation into purchasing the station; Sonderling Broadcasting whose shareholders incorporated the plaintiff was headed by Egmont Sonderling, principal officer of the plaintiff in this suit. When Sonderling expressed disinterest, KFOX and KFOX-FM were subsequently sold in December 1957 to the Bing Crosby enterprises. In early 1959 KFOX was again up for sale as the Crosby group attempted to convince James Blackburn and Company, a national brokerage concern dealing with the communications media, to list the station for sale at $900,000. Blackburn refused because it deemed the selling price to be excessive in view of KFOX’s meager annual revenues of $250,000 and yearly operation at a deficit.

At about this time, KXLA, a Pasadena, California, radio station, was undergoing a change in management as well as format. KXLA was long the pioneer of Country and Western (hereinafter “C & W”) programming in the Los Angeles area, operating profitably with a small but intensely loyal audience. The radio station’s commercial success was due in large part to the popularity of its air personalities, three of whom included Carl (Deacon) Moore, Tom Brennan, and Charlie Williams. When these disc jockeys at KXLA became aware of the impending change of format to “rock and roll” music they began to look for an alternative radio station that could use their particular talents. Frank Simon, Sales Manager for KXLA, approached KFOX and attempted to interest it into switching over to a C & W programming format and taking on all three of KXLA’s air personalities in addition to himself. Because a radio station’s audience is more loyal to the particular disc jockey personality and station programming than to the station’s call letters, Simon argued that a complete takeover of the three C & W radio entertainers would result in a total transplant to KFOX of KXLA’s audience as well as the sponsors that the disc jockeys were personally able to attract. Due to KFOX’s poor financial situation, the Crosby interests were receptive to the plan, hiring Moore, Williams, and Brennan, but, as a result of negotiation difficulties, not Simon.

The new disc jockeys and their C & W format proved to be a commercial success as KFOX’s profitability steadily rose until the operating revenues had increased from $250,000 in 1959 to almost $500,000 in 1961. The Crosby interests, still wishing to sell KFOX for approximately $900,000, continued to remain in touch with Blackburn and Company as well as the plaintiff through Sonderling. Following receipt of an offer passed through Blackburn, Sonderling began to seriously consider the purchase of the station. Although at first Sonderling sought to acquire KFOX’s stock and utilize the station’s accumulated net operating losses for its tax advantage, this proved to be impossible and so Sonderling began to negotiate for a straight purchase of KFOX assets. A price of $1,000,000 was tentatively agreed to by both parties for such assets. As a result of adjustments made to account for certain liabilities and revenues assumed by the plaintiff, although not calculated until his actual control and ownership began, the ultimate cash purchase price was eventually set at $878,666.

As a condition to final agreement, Sonderling had two stipulations. First, he requested of the Old KFOX management that the station manager, Murillo Schofield, and the four Country and Western air personalities (the three KXLA C & W announcers plus Biff Collie who was hired later) then comprising the heart of KFOX’s format be required to sign individual personal service contracts, containing, among other matters, a covenant not to compete. Sonderling apparently felt that these five individuals played a critical part in KFOX’s turnabout from running a deficit before 1961 to a profitable operation at the time of the sale. Second, he demanded a renegotiation of the lease of the AM transmitter site. Under the old lease which had 16 years to run, the station was charged a monthly rent of $250 for the first three years and $300 for the remaining life of the lease plus the excess of one percent of KFOX’s operating revenues over those fixed amounts.

Sonderling’s two demands were met by the Old KFOX management. On August 30, 1961, the four Country and Western performers not previously under contract were signed to two year service contracts, renewable once at the option of the station and subject to an anticompetition clause forbidding the talent from working within 100 miles of Long Beach. Schofield was similarly signed to a contract with KFOX. In addition to the contracts, the Old KFOX negotiated the transmitter site lease replacing the percentage of revenue provision of the original rental agreement with a flat $350 rental. The new lease contained one provision not included in the old one, a clause permitting the lessor to relocate the transmitter at his own expense to any acceptable site within a one mile radius.

Having met the stipulations, a firm sales contract was signed between the Old KFOX and plaintiff on September 21, 1961, contingent only on FCC approval of the transfer of KFOX’s broadcasting license to the new owners. Due to the need for FCC approval, the plaintiff did not begin to assume control and operation of the KFOX stations until December 1, 1961.

Shortly after December 1961, Colin Selph, sales representative of Blackburn was asked by plaintiff to allocate the final purchase price of $878,666 among the various assets obtained from the Old KFOX stations. In a letter of January 11, 1962, Selph set forth the following suggested allocation:

Country and Western music
artists contracts ................ $250,000.00
Station Manager's Contract ......... 150,000.00
Contracts with advertisers .......... 26,500.00
Net current assets ................ 25,000.00
Office supplies.................... 2,500.00
Furniture fixtures and leasehold improve-
ments — Studio and Transmitter sites 43,500.00 Radio Towers, Radio Transmitters, and associated equipment at transmitter site ....................... 70,000.00
Studio Equipment — AM and FM...... 41,200.00
FM Towers and related equipment at
Studio site .................... 40,000.00
Tools, tubes and other technical replacement parts and material .... 4,000.00
Record library ................... 30,000.00
Commercial continuity files ......... 6,500.00
Promotion material ............... 3,500.00
Automobiles ...................... 4,700.00
Transmitter site lease ............. 50,000.00
Studio and Office lease ............ 35,500.00
Good will and licenses ............ 95,766.96
$878,666.96

The allocation of the purchase price as estimated by Selph of Blackburn and Company was adopted by plaintiff in its tax returns in question here as the tax basis for purposes of computing income tax deductions for depreciation of its tangible assets and amortization of its intangibles. On audit by the Internal Revenue Service certain portions of the basis values employed by the plaintiff for amortization and depreciation were deemed inappropriate and disallowed. Those assets whose values were questioned and adjusted are as follows:

Tax Tax Basis Basis.Per As Adjust-Asset Return ed by IRS
Station Manager's Contract . .. $150,000 $40,909
Performers' Contracts ....... 250,000 68,182
Transmitter Site Lease....... 50,000 2,540
Studio and Office Lease ...... 35,500 6,000
AM Towers and Transmitter . .. 70,000 15,050
FM Towers arid Equipment .... 40,000 8,600
Record Library ............. 30,000 15,000
Goodwill and FCC License..... 95,766 564,985

As may be noted from the table, the IRS increased the amount of the purchase price allocated to goodwill and the FCC license by the same amount that it reduced the various tangible and intangible assets. Thus, while plaintiff claimed that only $95,766 or 10.9 percent of the total purchase price was paid for goodwill, the IRS determined that $564,985 or 64.4 percent had to be allocated to this non-depreciable asset.

As a result of the redetermination of the tax basis for each of the questioned assets, the IRS assessed the following deficiencies:

Tax and Deficiency Tax Period Interest
FY ending 11/30/63 ............. $94,762.25
12/1/63-12/31/63 ............... 8,291.05
1964 ........................... 88,209.07
1965 ........................... 53,093.46
1966 ........................... 10,349.01
$254,704.84

These deficiencies were paid by the plaintiff and a claim for refund timely filed. When this claim was not acted upon by the.IRS within six months, the plaintiff commenced an action in this court. The case was heard by our Trial Judges Willi and Fletcher and on February 19, 1974, an opinion was filed by Judge Willi upholding the reallocation of the purchase price as made by the IRS as to all assets but one, the trial judge increasing the value assigned by the defendant to the AM transmitter, i. e., raising the tax basis from the IRS’s $15,-050 to $18,300. This case is before us now under Rule 143 on plaintiff’s exceptions to the trial judge’s findings of fact and conclusions of law.

In both tax deficiency and tax refund cases, there is a strong presumption that the assessment of taxes owed as determined by the Commissioner of Internal Revenue is correct. Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 78 L.Ed. 212 (1933); Stubbs, Overbeck & Assoc. v. United States, 445 F.2d 1142, 1148 (5th Cir. 1971); Young & Rubicam, Inc. v. United States, 410 F.2d 1233, 1244, 187 Ct.Cl. 635, 655 (1969); Commissioner v. Riss, 374 F.2d 161 (8th Cir. 1967). In order to overcome this presumption on appeal the burden is on the taxpayer to offer substantial evidence as to the wrongfulness of the Commissioner’s determination. Commissioner v. Riss, supra at 166. Once the taxpayer has met this burden the presumption disappears and the court must resolve the question upon the basis of all of the evidence before it. Helvering v. Taylor, 293 U.S. 507, 55 S.Ct. 287, 79 L.Ed. 623 (1935); Stubbs, Overbeck & Assoc., supra; Commissioner v. Riss, supra. Thus the court in Commissioner v. Riss states:

The presumption of correctness rule is usually dispositive of a case in situations where the taxpayer offers no substantial evidence to overcome the presumption created by the Commissioner’s determination. However, when the taxpayer has offered substantial evidence to support his position, the presumption disappears. The fact issue must then be resolved by the Tax Court upon the basis of the evidence before it. * * * [374 F.2d at 166.]

Similarly, in Stubbs, Overbeck & Assoc., supra, the court noted:

* * * [0]nce the presumption [of correctness] is overcome by the plaintiff’s evidence, it disappears and is no longer in the case. When this occurs, the court is required to base its decision on the preponderance of all of the credible evidence in the case. * * *
[445 F.2d at 1148.]

The question before us in this case is therefore whether the taxpayer has presented substantial evidence to overcome the presumption of regularity and correctness in the IRS’s valuation of the plaintiff’s assets for depreciation and amortization purposes. To the extent the plaintiff has met his burden of proof as to any asset improperly valued, the IRS’s presumption of correctness falls away and we can place a value on the asset based on all of the evidence obtained at trial before our trial judge.

Allocation by the Parties

The first contention made by the plaintiff is that the parties to the sale of KFOX agreed to make a specific allocation of the purchase price among the various assets of the station. The plaintiff maintains that since the ultimate cash price of the station was not to be determined until after the FCC approved the transfer of the license at which time the various contemplated adjustments to the $1,000,000 price would be made, the agreed upon allocation was to be deferred until then. Because the allocation made by Blackburn and Company was allegedly pursuant to the agreement among the parties, the plaintiff argues that the IRS and this court should be bound by its terms and the plaintiff’s resulting deductions therefore be accepted.

When two parties to the sale of assets explicitly allocate the aggregate purchase price to the various assets being sold, the valuation they put on each asset will usually be accepted for tax purposes so long as the parties have opposing tax positions and have acted without collusion of fraud and the allocation is not so disproportionate as to be unreasonable. Davee v. United States, 195 Ct.Cl. 184, 444 F.2d 557 (1971); Republic Steel Corp. v. United States, 94 Ct.Cl. 476, 40 F.Supp. 1017 (1941); Annabelle Candy Co. v. Commissioner, 314 F.2d 1 (9th Cir. 1962); Ullman v. Commissioner, 264 F.2d 305 (2d Cir. 1959). To the extent, therefore, that the parties agreed to allocate and in fact did allocate the aggregate price over all of the assets we would be constrained to follow that allocation as the basis to be applied in depreciating those assets. In the instant case, however,-based on the ambiguous and somewhat conflicting testimony given before the trial judge, we do not believe the plaintiff sustained the burden of proof necessary to overcome the IRS’s determination that there was no mutual agreement to allocate the aggregate purchase price of KFOX and KFOX-FM.

As proof of its allegation that both parties agreed to make such an allocation, plaintiff points to the Bill of Sale which was attached to the Purchase Agreement and designated Attachment A (Plaintiff’s Exhibit 22), and which states:

It is mutually agreed that the total purchase price was decided by adding the agreed upon purchase price of the items or categories herein set forth * * *

Following this is a listing of assets which directly match the assets appraised by Blackburn in January 1962, and which was used by the plaintiff in its tax returns. Although the Bill of Sale states that the aggregate purchase price was the sum total of the values placed on each of the assets, in fact the assets were not evaluated until January 1962, four months after the Sales Agreement was signed and one month after the sale was actually consummated. Beyond this, clause 2 of the Sales Agreement appears to contradict the Bill of Sale:

PURCHASE PRICE
2. The purchase price of the property, assets and rights so acquired, to be paid by Buyer to Seller shall be one million dollars ($1,000,000), minus the unpaid balances as of the Closing Date on Items (a), (b) and (c) below:
* * * * * *

The adjustments to the lump sum contract price referred to in clauses 2(a), (b) and (c) represent certain assumed liabilities and revenues calculated at the closing date. While it cannot be said that the mere fact that an allocation was deferred implies that no agreement was present, Annabelle Candy Co., supra, 314 F.2d at 7, the fact that a lump sum price was clearly agreed upon long before an allocation was made would seem to indicate that the specific values of the individual assets were irrelevant to a consummated contract of sale. Based on the explicit language of the Sales Agreement and the attached Bill of Sale, it appears that no substantial evidence of an agreement to allocate was shown.

Nor does the testimony of Sonderling or Selph, the appraiser and now president of Blackburn and Company provide the kind of evidence needed to counter the presumption in favor of the IRS’s determination on this particular issue. Mr. Selph testifiéd at one point as to how an allocation was agreed upon:

Q. Sometime after the agreement was executed, then, Mr. Selph, were you requested by the parties to prepare such an appraisal?
A. Yes, sir.
Q. You said it was typical for the seller to request such an appraisal.
Do you recall whether there was a joint request in this case?
A. I think there was a joint request, as I remember.
Q. Did either the buyer or the seller ask you to weight your appraisal in favor of certain assets?
A. No, they didn’t, and we wouldn’t have, if they had asked.
Q. What were your instructions in connection with the preparation of the appraisal?
A. To evaluate the assets that were being purchased. [Tr. at 307-OS.]

However, in later testimony he stated:

Q. What interest do you think the seller might have in such allocation?
A. The seller wouldn’t have much interest in these allocations from the standpoint of, you know, “The king is dead, long live the buyer.”
I don’t think they [the seller] were interested in getting any appraisal of assets. [Emphasis supplied.]

[Tr. at 347.]

Sonderling, plaintiff’s president, similarly testified as to an alleged agreement to allocate the purchase price:

Q. Did you and Mr. Grillo agree to have a valuation of the various assets prepared by Mr. Blackburn for allocation of the purchase price?
A. Yes, upon request of accountants and at suggestion of counsel it was necessary to have a bill of sale setting forth the assets which we were buying and in order to make appropriate allocations, James Blackburn and Company was requested to make an appraisal.
[Tr. at 446.]

However, in response to questions by the trial judge, Sonderling casts doubt on whether the allocation was either made pursuant to an agreement or for the sake of setting an aggregate price as alleged:

THE COMMISSIONER: Now, this appraisal that you were going to have these people make was after you had struck your essential bargain and with the seller?
THE WITNESS: Yes, your Honor.
THE COMMISSIONER: The appraisal wasn’t made for the purpose of putting a price on the overall transaction on which you all were going to trade?
THE WITNESS: No.
[Tr. at 447.]

In light of this contradictory testimony and the Bill of Sale as written, we do not feel that the plaintiff presented substantial evidence ' sufficient to overcome the presumption of correctness of the IRS’s initial determination, and, therefore, we sustain both the trial judge and the IRS in their finding that the plaintiff had made no agreement with the seller to allocate the purchase price among KFOX’s assets as correct. For this reason we hold that values assigned to the enumerated assets by Blackburn were made at the plaintiff’s urging, not as part of the original agreement, and, therefore, are not dispositive of the issue of what tax basis should be assigned to each of the depreciated assets.

Despite the fact that we have found that the Blackburn appraisal is not binding per se on the IRS or this court, we must point out that such finding alone does not dispose of this case. Rather, we are now free to determine whether the plaintiff has presented substantial evidence showing the incorrectness of the IRS’s valuation of each individual asset and if it has made such a showing, we must decide, based on all of the evidence before us, what a correct tax basis of each item should be.

Those assets which were readjusted by the IRS and which remain at issue in this refund suit, once the allocation agreement is removed, include certain tangible assets, the transmitter site lease, the four C & W talent contracts, the station manager’s contract and goodwill.

Tangle Assets

The tangible assets which were reevaluated are:

Readjusted
Tax Basis Basis by Net Increase Asset Per Return IRS or Decrease
Radio Towers at
Transmitter.....$70,000 $15,050 $54,950
FM Towers....... 40,000 8,600 31,400
Record Library____ 30,000 15,000 15,000
Studio & Office
Lease ......... 35,500 6,000 29,500

As discussed earlier, the tax basis claimed by the plaintiff in its income tax returns on those assets is based completely on the allocation of the purchase price as made by Blackburn and Company in January of 1961. The only factual basis upon which these allocations were made is provided by the testimony of Colin Selph, the former appraiser for Blackburn.

As to the FM radio transmitter tower and the studio and office lease, Selph testified that his appraisal was based on replacement costs. No indication, however, is given in his testimony to shed light on how he determined what those replacement costs were. We are thus faced with Selph’s bare assertion that the tower was worth $40,000 and the lease $35,500. In addition to Selph, the plaintiff also presented the testimony of Raymond Rohrer, a consulting radio engineer. Rohrer’s testimony was limited to the placing of a $5,000 value on one piece of transmitting equipment. With •this single exception, neither Rohrer nor Selph has presented much probative evidence to support the plaintiff’s allocation of the purchase price to these particular assets.

Opposed to the evidence placed in the record by the plaintiff is the detailed and fairly explicit testimony of defense witness Leon King, a valuation engineer with the Internal Revenue Service, and the appraisal report prepared by Richard Russell, real estate appraiser. Unlike that of the plaintiff, the record clearly shows the source of the government’s evaluation of these assets.

Upon a detailed review of the evidence presented by the plaintiff to show the rationale for its valuation of the FM transmitter tower and the studio and office lease, we are of the view that plaintiff failed to meet the high burden of proof necessary to overcome the presumption of correctness of the Commissioner of Internal Revenue. We find this conclusion even more strikingly necessary where we consider all of the evidence in the record including the extensive and highly probative evidence of the government. For this reason we hold that the assessment of back taxes placed on the deductions taken for the office lease and the FM transmitter tower be sustained.

Similarly, we also find that the plaintiff failed to show by the presentation of substantial evidence that the Commissioner was wrong when he reduced the tax basis on the record inventory from $30,000 to $15,000. Selph in his testimony on this issue stated that he “spot-examined” the library and that it “was represented to contain” between 27,000 and 30,000 transcriptions. Since each physical record contains up to ten songs or transcriptions, the number of records in the library was admittedly far fewer than the number of transcriptions. Selph then proceeded to estimate that each transcription was worth about one dollar. [Tr. 327 — 29.] When this is compared to the uncontroverted evidence of King stating that the number of records, as opposed to songs, was closer to 9,000, and that a radio station could get many of those records either free as a promotion or at reduced prices from a distributor, the value of the collection seems to be far less than that established in the Blackburn appraisal. [Tr. 609 — 15.] We therefore find that the plaintiff failed in his requisite burden of proof and that the presumption of correctness of the IRS must stand.

A somewhat different situation exists with respect to the AM transmitter and associated equipment. Although, as was the case with the studio lease and FM towers discussed above, the plaintiff at trial gave no basis or source for the replacement value of $70,000 he assigned to this particular asset, the government, through the highly detailed testimony of Leon King [Tr. 601-03], indicates that the value of the AM transmitter should have been $18,300 rather than $15,050 determined by the IRS. In this way we feel that although the plaintiff, alone, has not provided sufficient evidence to meet his burden of proof, in combination with the evidence introduced by the defendant, substantial evidence of the invalidity of the IRS’s determination is present and its presumption of correctness must disappear. Based on all of the evidence before us, especially the highly probative testimony of the government’s witness, we find in accord with the trial judge that the AM transmitter and related equipment must be assessed a tax basis of $18,300 rather than the $15,050 assigned by the IRS.

Transmitter Site Lease

Prior to the purchase of the Old KFOX station by the plaintiff, the Old KFOX owned a lease for the AM transmitter site. The site of this lease was particularly valuable to KFOX because due to its low elevation and close proximity to Alamitas Bay, the particular transmitter provided an unusually strong non-directional signal. The terms of the lease called for, in addition to a flat rent, one percent of the gross revenues in excess of $30,000 per month. As plaintiff viewed the situation, this lease could potentially become a great financial burden to the station in the face of what was hoped to be a continued upswing in its profitability. For this reason, as we discussed earlier, plaintiff made a renegotiation of the lease a prerequisite to the consummation of the purchase agreement.

The Old KFOX station succeeded in changing the lease to what Sonderling considered more favorable terms. In addition to the extension of the lease from the 16 years that remained to a full 20 years, the rental was made a flat $350.00 a month. However, because the particular tract of land on which the site was located had great potential value in residential development, the lessor demanded that the new lease provide that the lessor could at his own expense relocate the transmitter to any site within a one mile radius which was “equally suitable for lessee’s purposes.”

In allocating $50,000 to the transmitter lease, Selph of Blackburn and Company apparently took into consideration both the substantial financial savings to be gained by the new lease’s terms as well as the particularly favorable location of the site itself. As Trial Judge Willi noted, the- savings in rent due to the elimination of the gross revenue percentage override was quite substantial. Looking to the plaintiff’s gross receipts for only the five years here in question as evidenced in its tax returns [Pltf. Exhs. 23-28], plaintiff’s rental costs for the transmitter site would have been $38,579 under the old lease, nearly $17,-200 more than it actually cost under the new flat rental lease. Plaintiff apparently maintains that the rental savings measured over the lifetime of the contract would equal or exceed the $50,000 tax basis allocated by Blackburn and claimed by plaintiff on its tax returns.

As a general proposition a lease may be valued for tax purposes based on the favorable location of the property, and, in addition, any potential income as well as savings attributable to the lease may be capitalized. John C. Dalton, Jr., 21 CCH Tax Ct. Mem. 435 (1962); William Penn Hotel Co., 23 B.T.A. 566 (1931); Werner & Werner Clothing & Furnishing Goods Co., 9 B.T.A. 69 (1927). See also, 10 Mertens, Law of Federal Income Taxation, §§ 59.-48, 59.50 (1970). Plaintiff must nevertheless show by substantial evidence that the Commissioner of Internal Revenue was incorrect in his readjustment of the lease’s value from the $50,000 claimed by Blackburn and adopted by the plaintiff to $2,540. This we feel the plaintiff failed to do. As described in considerable detail in the government’s appraisal report, prepared by an expert real estate appraiser, [Def. Exh. 7], the government maintains that the highest and best use of this particular tract was as residential development property similar to that which surrounded the site. Based on this use the government’s expert, as backed up by the report, testified that the lease should rent for $387 per month rather than the $350 paid. Capitalizing this $37 a month savings over the remaining life of the new lease yields a total of $1,130 rather than the $50,000 claimed. Moreover, since the particular site was, as a result of its watery location, ideally suitable for a nondirectional transmitter and since any move made pursuant to the lease’s alternative site option might result in a less efficient or even reduced coverage pattern [Tr. 475], the value of the new lease having this option is certainly questionable and its tax basis must suitably reflect this. In the light of the facts as presented at trial and heretofore discussed, we believe the assessment made by the Commissioner of Internal Revenue must stand, inasmuch as the plaintiff failed in meeting his burden of proof.

Goodwill and the Five Service Contracts

In addition to the lease for the transmitter site, Sonderling viewed the four Country and Western stars and the station manager as indispensable assets of KFOX and without their continued service would not have considered the purchase of the radio station. These C & W disc jockeys were seen by Sonderling to be at the heart of KFPX’s change of fiscal fortune from running a monthly deficit to making a profit. To insure their continued association with the station, Sonderling insisted that the Old KFOX management place the individuals under contract, committing them to render service with the station and, most importantly, prohibiting their working for any other radio station in the Los Angeles area for the duration of the contract.

As urged by Sonderling, Old KFOX negotiated and executed contracts with the five individuals previously not working under any service contract. The four talent contracts were to last two years, each with an option of renewal by the station for an additional three year term. (Deacon Moore’s renewal period was later reduced to two years.) Similarly Schofield, the station manager, was signed to a two year contract with a two year renewal option. As specifically requested by Sonderling, each of these contracts also contained an appropriate non-competition clause:

* * * In consideration of this agreement, the artist agrees not to work, appear, or permit his voice to be heard on any radio station within a 100 mile radius of the Long Beach area during the term of this agreement or any extension, and the same may be enforced by injunctive proceedings.

The validity of the high value that Sonderling placed on these C & W disc jockeys was first demonstrated by the wholesale transplant of the loyal audience and sponsors of the successful KXLA to KFOX when the three original KXLA stars moved to KFOX in 1959. With the change of format to C & W music and with the popularity of its former KXLA disc jockeys, KFOX’s revenues evidenced a dramatic and steady increase in the years from 1959 to 1961. That the increase in revenue was due to the C & W air talents is seen by the influx of new sponsors previously associated with KXLA and apparently brought to KFOX by the three disc jockeys that changed stations. As a result, therefore, of the three KXLA stars, advertising revenues of an incremental nature was brought to KFOX.

During the five years in question in the present suit the plaintiff maintains that Deacon Moore personally accounted for substantial advertising revenues. Thus an analysis of KFOX’s advertising reveals that Moore generated the following income for the station:

Year: Revenues
1962 ........................... $82,300
1963 ........................... 75,600
1964 ........................... 66,900
1965 ........................... 50,300
1966 ........................... 38,900
CPItf. Exh. 10.3

These advertising revenues represent sponsors that specifically requested to buy segments of time on Moore’s show, many of whom Moore developed personally or came with Moore from KXLA.

Similarly, Biff Collie, the only C & W air artist who did not come to KFOX from KXLA, was a highly successful announcer, gaining a substantial listening audience at KFOX since he joined in 1959. Combined with Collie were the remaining two C & W announcers, Charlie Williams and Tom Brennan. These three popular announcers along with Moore were thus viewed by Sonderling as the primary factors in KFOX’s new profitability.

In addition to the incremental revenues that arose as a result of the presence of these C & W disc jockeys, both Sonderling and Blackburn put value on the non-competition clause of the new contracts. Because at this time there was a dearth of recognized C & W air personalities on the West Coast, and because Sonderling knew that there were a number of radio stations that were interested in hiring the four principal KFOX air personalities, the clause forbidding these personalities from performing in the Long Beach area during the existence of their contract had tangible and measurable value. In fact, shortly after plaintiff completed the purchase, Sonderling was approached by a competing radio station seeking to purchase the services of KFOX’s announcers. While it is Hornbook law that one cannot obtain specific performance on a personal service contract, Restatement of Contracts § 379 (1932), it is equally clear that injunctive relief may be had for the enforcement of a covenant not to compete as found in these five contracts, so long as that clause is considered reasonable in duration and scope. 5 A. Corbin, Contracts § 1209 (1964).

The record is also clear as to plaintiff’s view of Schofield’s value to KFOX. At the time of the purchase of KFOX, Schofield had developed an intimate working knowledge of C & W format radio stations and in addition, maintained a close contact with the national advertising agencies serving the Los Angeles area. As a result of his wide expertise, Schofield acted in several different capacities while working at KFOX, serving as station manager, sales manager, program director, and general manager. At trial, Sonderling testified to Schofield’s value:

* * * [Mr. Schofield performed] the jobs of general manager, sales manager, salesman, and program director, he was an invaluable and thoroughly unique personality and in order to be able to operate this station at the budget that we thought it should be operated under, we could not have done so had we not had Mr. Schofield. [Tr. 441-42.]

The record produced by the plaintiff shows that in addition to the subjective value to the station, Schofield saved KFOX substantial money in salary as a result of the multiplicity of jobs that he handled. Thus, if KFOX had to hire a separate person for each position they would have had to pay at a minimum $122,000 in salaries, and perhaps as much as $187,000 [Pltf. Exhs. 5, 20 — Tr. 28, 143, 203, 441], whereas in his first year of employment with KFOX, Schofield, doing the work of four, was paid $32,000 thereby saving the station at least $90,-000 in salary.

As a result of the incremental sponsors and revenues brought to KFOX by the C & W announcers, Schofield’s value to the station, and the covenant not to compete, Blackburn made the following allocation of plaintiff’s purchase price:

Artists
Deacon Moore ........................ $130,000
Biff Collie ........................... 70,000
Charlie Williams ....................... 40,000
Tom Brennan ......................... 10,000
$250,000
Station Manager
Dick Schofield ........................ $150,000

Plaintiff adopted these figures as his tax basis in the returns here in question, deducting in each year a figure representing the amortization of these assets over the useful life of the contracts. The Internal Revenue Service denied this allocation completely, holding that these contracts were intangible assets that were inseparable from the concept of “goodwill” and as such were non-deductible. The amount of the purchase price which the plaintiff allocated to these contracts was assigned to “goodwill and licenses” which after audit had a value of $564,985 or almost 64.4 percent of the overall purchase price.

At trial, while the plaintiff presented evidence on the value of the five contracts, the defendant put on no rebuttal evidence, instead relied on its legal theory that the personal service contracts as intangible assets were inseverable from goodwill and therefore not deductible. The legal issues that are before us at this point are first, whether the artists’ contracts are severable from the general concept of goodwill; second, whether these contracts, even if severable, are amortizable; and third, whether the plaintiff has presented substantial evidence to overturn the IRS’s presumption of correctness.

As we have heretofore seen, the disc jockeys’ and station manager’s contracts are certainly intangible assets having significant value. The question is whether their value is one which is separate from all of the other intangibles including goodwill. Case law indicates that a business’ intangible value is divisible into its identifiable constituent elements for tax purposes. Parmelee Transp. Co. v. United States, 351 F.2d 619, 625, 173 Ct.Cl. 139, 148 (1965); Indiana Broadcasting Corp., 41 T.C. 793, 807 (1964), rev’d on other grounds, 350 F.2d 580 (7th Cir. 1965), cert. denied, 382 U.S. 1027, 86 S.Ct. 645, 15 L.Ed.2d 539 (1966); Strauss v. United States, 199 F.Supp. 845 (W.D.La.1961). Thus, these contracts can certainly be divided from the other intangible assets of KFOX so long as they are distinct and identifiable. However, whether they are so intertwined with the concept of goodwill as to be considered inseparable depends on the particular definition of goodwill that is used. Thus, if goodwill is defined to mean the intangible value of a going concern which is associated with the reasonable expectancy that old customers will return to the concern (or as in the instant case continue to listen to the same station) without any contractual compulsion, Commissioner v. Seaboard Finance Co., 367 F.2d 646, 649 (9th Cir. 1966), then it must be treated as a unitary concept and a deduction on any part of it will be disallowed. See Treas.Reg. § 1.167(a)-3. On the other hand, where “goodwill” is used as a catchall term for all of a going business’ intangible assets that are associated with its profitability it is clearly divisible into its component parts. See Meredith Broadcasting Co. v. United States, 405 F.2d 1214, 1224-25, 186 Ct.Cl. 1, 18-20 (1968). Parmelee Transp. Co. v. United States, supra.

In Parmelee, although the Internal Revenue Service allocated the value of an informal transportation arrangement to “goodwill” we, despite denying a deduction for the loss of that arrangement for other reasons, clearly held that this goodwill was divisible into its identifiable parts. “While we agree that the arrangements were a part of the general goodwill or intangible value of the transfer business, * * * we reject the notion that goodwill is indivisible.” [351 F.2d at 625, 173 Ct.Cl. at 148.] Goodwill was therefore considered to have its less restricted meaning.

Similarly, in Meredith Broadcasting Co., supra, we held that the value of a network affiliation contract was a separate and determinable intangible asset divisible from goodwill. In that case, the question before us was the proper allocation of that portion of the overall purchase price of an operating station that was due to a network affiliation contract, for the sake of determining what loss deduction would be permitted. To reach the proper allocation we first had to contend with the defense that these contracts were indivisible from all of the remaining intangibles and goodwill. Since the contracts were of significant and identifiable value, we found that they could be severed from goodwill, where goodwill was defined in its more general scope:

* * * [T]he identity of a particular business arrangement or contract * * * is not lost and * * * the aggregate intangible value of a going business is composed of separate intangible assets which may be separately identified, valued and treated for federal tax purposes, regardless of what terminology may be employed. * * [405 F.2d at 1225, 186 Ct.Cl. at 20.]

In this way we permitted plaintiff to allocate part of the purchase price of a broadcasting station to a network contract to establish a cost basis for tax purposes. Cf. Roy H. Park Broadcasting, Inc., 56 T.C. 784 (1971); Indiana Broadcasting Corp., supra.

In the instant case the plaintiff has presented clear evidence showing that the five personal service contracts had significant and measurable value independent of their direct contribution to the value of plaintiff’s goodwill and its FCC broadcasting licenses. These contracts were necessary assets for the continued profitability of the station. They provided nothing to KFOX’s institutional goodwill inasmuch as radio or television audiences are not loyal to a particular station so much as an individual star or format. See Meredith Broadcasting Co. v. United States, supra, 405 F.2d at 1216, 186 Ct.Cl. at 5. Should these stars move to another station, the audience in all likelihood would move also.

* * * We agree that there is little, if any, goodwill between station and audience since, as has been demonstrated, viewers are concerned with the quality of programs rather than with the particular call letters or management of a station. * * * [Roy H. Park Broadcasting, Inc., 56 T.C. 784, 813 (1971)]

We therefore hold that such service contracts, as are found here, may be divisible from “goodwill” and other intangibles and be treated separately for tax purposes.

Notwithstanding our holding that these contracts are independent assets severable from that of the station’s goodwill, it must still be shown that they are amortizable or depreciable. In general, the cost of an intangible asset which can be shown to have a limited useful life is recoverable through a depreciation allowance over that asset’s lifetime. Treas.Reg. § 1.167(a)-3 (1969). With respect to such intangible assets as contracts, the reasonable useful lifetime is its stated term. Triangle Publications, Inc., 54 T.C. 138, 147 (1970); David Hoffman, 48 T.C. 176 (1967). The existence of renewal options makes the useful life of the contract no less definite. Bonwit Teller & Co. v. Commissioner, 53 F.2d 381 (2d Cir. 1931), cert. denied, 284 U.S. 690, 52 S.Ct. 266, 76 L.Ed. 582 (1932); Birmingham News Co. v. Patterson, 224 F.Supp. 670 (N.D.Ala.1963), aff’d 345 F.2d 531 (5th Cir. 1965). However, as in any other intangible asset, a depreciation deduction is not allowed where the contract has no definite useful life, such as the case of network affiliation contracts subject to revocation on 90 days notice. Commissioner v. Indiana Broadcasting Corp., 350 F.2d 580 (7th Cir. 1965), cert. denied, 382 U.S. 1027, 86 S.Ct. 645, 15 L.Ed.2d 539 (1966); Westinghouse Broadcasting Co. v. Commissioner, 309 F.2d 279 (3d Cir. 1962), cert. denied, 372 U.S. 935, 83 S.Ct. 881, 9 L.Ed.2d 766 (1963).

Beyond the general rule that contracts having a definable lifetime may be depreciated, the Internal Revenue Service has recognized that the cost of personal service contracts may likewise be subject to a depreciation allowance, and in some cases its useful life may include renewal options. ^Rev.Rul. 137, 1971 — 1 Cum.Bull. 104; Rev.Rul. 379, 1967-2 Cum.Bull. 127. Cf. Commissioner v. Pittsburgh Athletic Co., 72 F.2d 883 (3d Cir. 1934). In Pittsburgh Athletic Co., supra, the court permitted the depreciation of an athletic contract although it limited the useful life to the one year of the contract without considering the reserve clause or renewal option that was part of it. This doctrine was expanded by the IRS in its Rev.Rul. 137, supra, in which the Service permitted the cost of a baseball player contract to be capitalized over the useful life which included both the one year term of the contract as well as the additional terms represented by the contract’s renewal or “reserve” provision. The cost of the contract was defined to mean the amount paid or incurred on purchasing the contract plus any bonuses paid to obtain the signing. Taking into consideration the “reserve” clause in determining the useful life of a personal service contract was again reconfirmed by the IRS in its Rev.Rul. 137, supra, dealing specifically with a football player’s contract.

Looking at the particular facts of the instant case we see no reason why the contracts of the C & W announcers and the station manager should be dealt with in a manner different from that of athletic contracts. In both cases the contracts represent independent and uniquely valuable assets to the taxpayer, ensuring through their non-competition clauses that the individuals under contract will not use their skills with any competing organization. To KFOX, as to the professional ball teams, the performers and their contracts are at the heart of the profitability of the taxpayer. Similarly, just as the renewal options of the athlete’s contracts are to be considered in determining the useful life of the contract, so too should the single renewal option of the five contracts in question here be included in evaluating the useful life over which the costs of the assets will be capitalized. Therefore, we believe these service contracts are amortizable over the contract life which i.s measured by the contract terms plus the single renewal option.

We have noted that the plaintiff’s four talent contracts and the station manager’s contract are severable from the goodwill of KFOX, and, that as in other personal service contracts, no tax policy prevents their being amortized. It must yet be seen whether the plaintiff has presented substantial evidence to overcome the presumption of validity of the Commissioner of Internal Revenue’s denial of a deduction.

As discussed earlier, the record in this case is replete with testimony and exhibits presented by the plaintiff tending to show that these contracts were worth the $250,000 and the $150,000 allocated to them as a tax basis. On the other hand, the government presented no evidence in opposition to that of the plaintiff but rather relied on their legal position that the contracts were inseverable from goodwill and as such were non-deductible. In the light of the evidence contained in the record and the invalidity of the government’s legal position, it is apparent that the plaintiff has presented substantial evidence sufficient to pierce the presumption in favor of the IRS and cause it to disappear. With the defendant’s presumption of correctness no longer before us, we are free to decide this issue based on all of the evidence presented in the record. Inasmuch as there is nothing in the record to contradict the plaintiff’s allocation of the purchase price to the five personal service contracts, we are constrained to sustain its position. In addition, to the extent that the plaintiff’s allocation of its purchase price to these contracts is increased, the allocation made by the trial judge and the IRS to goodwill must be decreased accordingly.

We, therefore, hold that the four C & W disc jockey contracts should be assigned a total tax basis of $250,000 and that the station manager’s contract should be assigned a tax basis of $150,-000. Plaintiff is therefore entitled to a refund for each of the periods in suit of so much tax and related deficiency interest as is attributable to an increase in depreciable basis of the five contracts as described above and as determined in further proceedings pursuant to Rule 131(c)(2). We also hold that the assessment of the Internal Revenue Service as to all of the remaining assets with the exception of the AM transmitting facility is approved and so much of plaintiff’s claim for refund as is attributable to those reallocated assets is denied. Further, we hold that the tax basis for the AM transmitter facility should be increased from $15,000 to $18,300, as determined by the trial judge, and plaintiff be given such refund and interest as is attributable to this increase in depreciable basis.

CONCLUSION OF LAW

Upon the foregoing opinion, containing the necessary findings of fact which are made a part of the judgment herein, the court concludes as a matter of law that plaintiff is entitled to recover a tax refund for the depreciation of the five personal service contracts and the AM transmitter and judgment is entered to that effect. On all other matters we conclude that plaintiff is not entitled to recover and that portion of the petition is dismissed. The amount of recovery is reserved for further proceedings under Rule 131(c)(2).

       We are indebted to Trial Judge George Willi for his opinion, which has been very helpful although, in part, we reach a different result, and for his findings of fact which, with some modifications, and to the extent necessary, have been incorporated in the body of this opinion.

      . In its assessment of taxes owed, the IRS permitted a depreciation deduction of $68,182 on the artists’ contracts and $40,909 on the station manager’s contract. These deductions were permitted by the IRS only because the relevant statute of limitations had passed and not because it recognized that these assets had some depreciable value independent of goodwill.


author: PER CURIAM: WILLI, Trial Judge:

text:
    VICTORY CONSTRUCTION CO., INC., and Paul Krummel (a joint venture) v. The UNITED STATES.
    No. 8-73.
    United States Court of Claims.
    Feb. 19, 1975.

      Richard W. Miller, Kansas City, Mo., for plaintiff. George T. O’Laughlin, Kansas City, Mo., attorney of record. William E. Simmons, Windsor, Mo., of counsel.
    Ray Goddard, Washington, D. C., with whom was Asst. Atty. Gen. Carla A. Hills, for defendant.
    Before DURFEE, Senior Judge, and SKELTON and KASHIWA, Judges.
   PER CURIAM:

This case comes before the court on defendant’s request, filed June 12, 1974, for review by the court of the recommended decision filed April 12, 1974, by Trial Judge George Willi pursuant to Rule 166(c) on plaintiff’s motion and defendant’s cross-motion for summary judgment. Upon consideration thereof, together with the opposition thereto, and the briefs and oral argument of counsel, since the court agrees with the trial judge’s recommended decision, as hereinafter set forth, it hereby affirms and adopts the same as the basis for its judgment in this case. Therefore, defendant’s request for review and motion for summary judgment are denied, plaintiff’s motion for summary judgment is granted and judgment is entered for plaintiff in the sum of $81,784.23.

OPINION OF TRIAL JUDGE

WILLI, Trial Judge:

On August 6, 1965 the Army Corps of Engineers awarded plaintiff, two general contractors associated in a joint venture, a $465,395.80 contract for modification of certain existing flood control structures along the west bank of the Mississippi River at St. Louis, Missouri. The job included the refurbishing and alteration of storm sewers comprising a part of the control complex. That work, for which the contract provided by reference to estimated quantities of individual items, each with its own unit price, was performed by a subcontractor, Western Waterproofing Co., Inc. In the course of performance the Government ordered increases in the estimated quantities of five categories of the subcontract work. Western did its job so diligently and efficiently that in thirty days it not only completed the work for which the contract allotted 270 days’ performance time, but finished all of the Government-ordered increases as well.

The present suit is brought on behalf of Western Waterproofing to reverse a decision of the Corps of Engineers Board of Contract Appeals (the Board) upholding the contracting officer’s determination as to the amount of compensation due Western for the additional work that it performed at the Government’s behest. 69-2 BCA 117920.

The issue presented by the parties’ cross-motions for summary judgment is the extent to which that decision merits the finality accorded by the interaction of the standard Disputes clause of the contract and the applicable criteria of the Wunderlich Act, 68 Stat. 81, 41 U.S.C. §§ 321-322 (1970).

In addition to a conventional Changes article, the subject contract included among its Special Provisions a clause required by the Armed Services Procurement Regulations in all “ * * * contracts containing estimated quantity items when the Contracting Officer has reserved the right to vary the estimated quantity during the performance of the work to accommodate actual conditions encountered” as follows:

SP-6. VARIATIONS IN ESTIMATED QUANTITIES (JAN 1965).— Where the quantity of a pay item in this contract is an estimated quantity and where the actual quantity of such pay item varies more than fifteen (15%) percent above or below the estimated quantity stated in this contract, as it may hereafter be modified, an equitable adjustment in the contract unit price shall be made upon demand of either party. If the quantity variation is such as to cause an increase in the time necessary for completion, the Contracting Officer shall, upon receipt of a written request for an extension of time within ten (10) days from the beginning of such delay, or within such further period of time which may be granted by the Contracting Officer prior to the date of final settlement of the contract, ascertain the facts and make such adjustment for extending the completion date as in his judgment the findings justify. If the parties fail to agree upon an equitable adjustment in the contract price or time the dispute shall be determined as provided in the clause of this contract entitled “Disputes.”

The quantity overrun that invoked the procedure defined by paragraph 6 of the Special Provisions occurred with respect to the five items of sewer alteration work identified below by contract Item Number, Estimated Quantity, Actual Quantity, Excess (in units) of Actual Quantity over 115 percent of Estimated Quantity, Unit Price Estimated by the Government Prior to Bidding, Unit Price per Award, and Unit Price Allowed by the Contracting Officer for Equitable Adjustment purposes.

Item No. Est. Quan. Actual Unit Quantity Above 115% of Estimate Govt. Est. Unit Price Unit Price Per Award Unit Price on Excess Per Equit. Adj.

17 9 ea. 11 .65 ea. $101.45 $1,085.70 $324.30

18 300 lin.ft. 394.71 49.71 Mn. ft. $66.30 '' $92.40 $27.62

19 15 sack 94.70 77.44 sacks $269.30 $856.90 $256.15

20 90 sack 116.83 13.33 sacks $327.35 $561.85 $167.94

21 15 sack 62.37 43.12 sacks ««ga on <roe:£. fi7

On April 15, 1966, after Western’s sewer work had been completed and the precise extent of additional work became known, the contracting officer wrote the plaintiff a letter detailing the overrun items and quantities and making the following statements with respect to them:

Examination of your unit prices for the above-listed items reveals these prices are in excess of amounts considered equitable for the work. Therefore,, in accordance with the provisions of paragraph SP-6 of the contract specifications, you are hereby notified that equitable downward adjustments in unit prices for the excess quantity of these items are deemed warranted.

It is requested that you furnish a proposal reflecting such reductions. Said reductions shall apply only to the quantity in excess of 115 percent of the estimated contract quantity of each respective item. Your proposal shall be broken down into labor, plant and material costs and should be in sufficient detail to permit prompt evaluation.

* * * * * *

In determining the adjusted unit price for each of the items involved in the overrun, the contracting officer adhered to the approach indicated by his opening observations and directives. He evidently conceived the quantity variance clause, in an overrun situation, as not only entitling the Government to insist on an equitable adjustment of contract price for units in excess of 115 percent of those specified in the contract but also as limiting the price payable on such excess units to that which the contractor could affirmatively justify on the basis of his actual cost experience in performing the basic contract requirements for the same items. In short, he placed on the contractor the burden of proving the price to which it was entitled for the overrun units. In net effect, he treated the excess portion of the work as though it had been performed under a retroactive type of fixed-price redeterminable contract. 32 C.F.R. §§ 3.404 — 1, 3.404-6 (1969).

Although Western Waterproofing insisted to the contracting officer that a proper interpretation of the applicable ASPR provision expressly prohibited a reduction of contract unit price in the circumstances presented and further contended that the contract unit prices, as applied to the overrun quantities, were equitable in any event, it nonetheless complied punctually with his demand for its cost records. By a letter of August 7, 1967 the contracting officer informed the plaintiff that he rejected Western’s arguments in support of its request for payment at contract unit prices on the overrun quantities. He added:

I will now proceed to prepare a rea- ' sonable cost estimate based on actual Corps of Engineers field records and other information available covering the entire operation, including overhead, but exclusive of mobilization and demobilization. This total cost will be prorated among the overrun items to determine an estimated actual cost per unit of each item. This estimated actual cost per unit plus an equitable profit factor will thus become the new unit price for the quantities in excess of 115 percent of the estimated contract quantities.
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It was the above method that the contracting officer employed to arrive at the equitable adjustment that is the subject of the present suit.

Since separate records had hot been maintained on the work in excess of 115 percent of contract quantities, it was impossible to determine the actual cost of performing that excess, either in the aggregate or for any of the individual categories of work involved. The records were adequate, however, to enable the parties to agree on the total direct cost of performing the entire portion of the contract work represented by the five items on which overruns were experienced. To that base figure the contracting officer added allowances for overhead and profit, for both Western and its prime, the plaintiff, and thereby arrived at a total aggregate price for the five items in their entirety. He then, and still over objection, apportioned the total price figure among the five types of work in accordance with the proportion that the Government’s prebid estimate of unit price for each bore to their sum. Finally, he developed a unit price within each category by simply dividing the total number of units involved into the aggregate price apportioned to the category. Without conceding the overall propriety of this procedure, Western protested that the apportionment of lump-sum price among the five categories of work should at least be based on actual contract unit prices rather than on a prebid estimate that had proved to be drastically wide of the mark. The contracting officer agreed to that revision and on August 8, 1968 unilaterally issued a change order allowing $35,328.63 as compensation for the units of work performed in excess of 115 percent of the quantities specified by the contract. Had that excess been compensated at contract unit prices, plaintiff would have received $117,112.86 — $81,784.23 more than allowed by the contracting officer. It is that differential for which the present suit is brought.

In resisting the contracting officer’s demands for a downward revision of contract price for the excess work, plaintiff’s primary reliance was on its interpretation of the ASPR provision that had superseded the one in force at the time that the subject contract was entered into — 32 C.F.R. § 7.603.27 (1967), previously reproduced herein.

In 1968 the Regulations were amended to require inclusion of the following clause “in [all] contracts containing estimated quantity items”:

VARIATIONS IN ESTIMATED QUANTITIES (APRIL 1968)
Where the quantity of a pay item in this contract is an estimated quantity and where the actual quantity of such pay item varies more than fifteen percent (15%) above or below the estimated quantity stated in this contract, an equitable adjustment in the contract price shall be made upon demand of either party. The equitable adjustment shall be based upon any increase or decrease in costs due solely to the variation above one hundred fifteen percent (115%) or below eighty-five percent (85%) of the estimated quantity. If the quantity variation is such as to cause an increase in the time necessary for completion, the Contracting Officer shall, upon receipt of a written request for an extension of time within ten (10) days from the beginning of such delay, or within such further period of time which may be granted by the Contracting Officer prior to the date of final settlement of the contract ascertain the facts and make such adjustment for extending the completion date as in his judgment the findings justify. [Emphasis added.]

Plaintiff contended that in unambiguous terms the above provision specifically limited an equitable adjustment reducing the contract price on excess units to cost economies realized by the contractor solely on account of the volume increase represented by the additional quantities involved. In its situation, the plaintiff urged, there had been no realization of unit cost economies by reason of the increased volume of work.

By a letter of June 6, 1968 the contracting officer formally rejected the contention of plaintiff’s attorney, Mr. Miller, outlined above. In pertinent part, the letter stated:

Reference is made to our meeting on 29 May 1968 concerning price adjustment for the overrun quantities in excess of 115% of contract items 17 through 21 under subject contract.
As agreed at the conclusion of said meeting, I have explored * * * Mr. Richard W. Miller’s interpretation of the recently revised wording of the clause entitled “Variations In Estimated Quantities” which appears in Revision No. 27 of the Armed Services Procurement Regulation, 15 April 1968. * * *
The cover sheet of the ASPR Revision No. 27 clearly explains that the revised wording is merely to make more explicit that only the quantities which exceed 115% or less than 85%, of the estimated quantities are subject to adjustment under the clause. The revised wording adds no more to the intent of the clause than was always there. Accordingly, I cannot agree with Mr. Miller’s interpretation. [Emphasis added.]
I have determined that $431.98 can be added to the allowable overhead as representing the interest heretofore excluded from overhead pool. This will raise the settlement figure to $35,-308.22. A contract modification will be prepared as soon as practicable to provide for this amount and will be submitted to you for acceptance.

Two things are apparent from the foregoing. First, that in the view of the contracting officer the 1968 ASPR revision of the earlier provision, because of which the quantity variance clause was included in the subject contract, was intended to clarify, not to alter the meaning of the provision in force when the contract was entered into. Second, he felt that, as clarified, the ASPR provision authorized an approach to the pricing of overrun quantities by reference not to a demonstrated differential between the cost of performing the overrun work and the estimated quantities of the same type work, but to an average cost of the entire work.

On October 29, 1968 the contracting officer issued his final decision rejecting plaintiff’s exceptions to the equitable adjustment ' effected by his unilateral change order of the prior August 8.

Plaintiff timely appealed this decision and elected to proceed before the Board by way of a conference-type hearing in respect to which the evidentiary record was augmented solely by the addition, with the Government’s affirmative acquiescence, of an affidavit by the vice president of Western Waterproofing who participated in the preparation of its bid to the plaintiff. 69-2 BCA at 36,836. While reversal of the Board’s affirmance of the contracting officer is required on broader and more fundamental grounds, it should be noted that its treatment of the affidavit was seemingly incongruous in any case.

The affiant flatly declared that in assessing the work requirements for the job he concluded that there would be a quantity overrun in those items on which overruns actually occurred; that the extent of the actual overruns did not exceed that anticipated by him; and that the projected costs and unit prices bid by Western were predicated on the gross volume of work anticipated by him, viz., the contract quantities plus the anticipated overruns.

Though the Board received the affidavit into a record that by its account of the facts included no countervailing evidence whatever on the matters recited, it denied it evidentiary status by simply characterizing it as an unsupported allegation rather than admissible and probative proof. Thus, in the course of approving the adequacy of the contracting officer’s equitable adjustment the Board observed (69-2 BCA at 36,836):

* * * the Government’s right to demand an equitable adjustment could [not] be defeated by the subcontractor’s allegation that its prices to the prime were predicated on factors or quantities different from those contained in the contract. However, such an allegation, if proven, might affect the amount of the equitable adjustment determined in response to either party’s demand. [Emphasis added.]

In the circumstances of this case the affidavit was certainly not just an unsupported averment offered in the nature of an amended pleading. It was proffered and apparently received as evidence, relevant by the Board’s own acknowledgment, that at least tended to prove the proposition that the Board expressly conceded “might affect the amount of the equitable adjustment”. There is not the slightest indication that the Board discounted the affidavit either because it found its factual purport to be inherently unbelievable or because it deemed that probative purport overcome by countervailing proof elsewhere in the record. The Government’s effort on brief to invoke the latter thesis to justify the Board’s action is totally unsupported by the Board’s own words.

Of far more basic concern, however, is the fact that the Board shared the contracting officer’s mistaken understanding of the effect of the variance clause when an overrun occurred. Thus, after observing that: “As written, the clause appears to contemplate a complete repricing of those contract items which vary from the estimated quantities by more than 15%”, the Board proceeded to evaluate the contracting officer’s price determination from the standpoint of whether the contractor had shown an incurrence of costs greater than those reflected in the determination. Satisfied that such a showing had not been made, the Board approved the determination and further observed, in conclusion (69-2 BCA at 36,837):

We have also analyzed the basis on which the Contracting Officer has determined the amount of the equitable adjustment and find the over-all adjustment, both in time and money, constitutes an equitable adjustment which places the contractor in as favorable position as he would have been, absent any overruns in the item quantities.

First, there is the incidence of the burden of persuasion. Both the contracting officer and the Board clearly imposed on the contractor the burden of affirmatively establishing the price to which it was entitled on the overrun quantities. Quite apart from questions going to the essentials of the pricing standard imposed by the relevant ASPR provision, it is clear in any event that as the proponent of the equitable adjustment, it was the Government, not the contractor, on whom devolved the burden of proving the extent of any downward departure from the unit prices established by the contract for the items comprising the excess work. Nager Electric Co. v. United States, 442 F.2d 936, 946, 194 Ct.Cl. 835, 853 (1971). The Board erred if, as its decision seems to indicate, it agreed with the contracting officer that it was up to the contractor to affirmatively justify the amount that it sought rather than up to the Government to prove why the amount paid should be less than that called for by the contract’s unit prices.

Second, and more important, is the related question of the precise nature of the price readjustment standard on which the burden of proof is to operate in order to produce a proper end-result in the particular circumstances presented by this case.

As earlier noted, the contracting officer read the subject contract’s quantity variance clause as calling for the repricing of excess quantities on the basis of the contractor’s average actual cost of providing the entire quantities (both base and excess) of each of the items involved in the excess, plus an allowance for a “reasonable” profit thereon. It will be recalled that in rejecting the contractor’s contention that the variance clause, as illuminated by the 1968 ASPR provision supplementing that in force at the inception of the contract, only authorized a deviation from contract unit prices to reflect differences in performance cost attributable to volume differential, the contracting officer stated that an examination of the history attending promulgation of the 1968 ASPR supplement had convinced him that: “The revised wording adds no more to the intent of the clause than was always there.” The Board apparently agreed with the contracting officer’s construction, for it stated (69 — 2 BCA at 36,836 — 37):

As written, the clause appears to contemplate a complete repricing of those contract items which vary from the estimated quantities by more than 15%. A review of the history of the clause and its subsequent revision by ASPR Revision 27, dated 15 April 1968, clarifies the intent. * * *
[Emphasis added.]

4

Neither party in the present proceeding has shed any further, much less different light on the intended meaning of the ASPR provision, as supplemented, and independent research has failed to unearth any indication contrary to the construction placed on it by the contracting officer and the Board. Presumably the “history” referenced by the Board is that earlier noted by the contracting officer. Accordingly, for purposes of this decision, the language of the 1968 revision is accepted as a clarification of the meaning intended by the predecessor provision in force when the subject contract, with its quantity variance clause, was entered into. Viewing the 1968 ASPR provision as a clarification rather than a change, its subsequent effective date detracts not at all from its relevance to an interpretation of the antecedent clause in the subject contract. Cf. Bethlehem Steel Corp. v. United States, 423 F.2d 300, 191 Ct.Cl. 141 (1970); Hills Transportation Co. v. United States, 492 F.2d 1394, 204 Ct.Cl. 51 (1974).

In unqualified terms, the 1968 clarifying ASPR provision, supra, declares that “The equitable adjustment shall be based upon any increase or decrease in costs due solely to the variation above one hundred fifteen percent (115%) or below eighty-five percent (85%) of the estimated quantity.” It is difficult to imagine definitive language that would more clearly convey an absolute limitation on the metes and bounds of inquiry in the determination of a departure from contract unit prices in the pricing of work outside the parameters of permissible variance. The language is fully as explicit in specifying the basis for any recasting of prices as it is in mathematically defining the volumetric prerequisite to any adjustment at all. Distinctly, the proponent of an adjustment is told that it will b.e confined in amount to such cost differentials as are directly attributable to a volume deviation greater than 15 percent from stated contract quantities. Applied in relevant context, an Armed Services Procurement Regulation has statutory status. G. L. Christian & Associates v. United States, 312 F.2d 418, 160 Ct.Cl. 1, cert. denied, 375 U.S. 954, 84 S.Ct. 444, 11 L.Ed.2d 314 (1963); Winston Bros. Co. v. United States, 458 F.2d 49, 198 Ct.Cl. 37 (1972). It is consequently appropriate, in the absence of exceptional circumstances not present here, to accord the language of such a regulation, just as a statute, its ordinary, everyday meaning. Malat v. Riddell, 383 U.S. 569, 571-72, 86 S.Ct. 1030, 16 L.Ed.2d 102 (1966). See also Hotpoint Co. v. United States, 117 F.Supp. 572, 574, 127 Ct.Cl. 402, 406, cert. denied, 348 U.S. 820, 75 S.Ct. 32, 99 L.Ed. 647 (1954). When this is done it is simply not reasonably possible to conclude, as did the Board, that the implementary quantity variance clause of the subject contract “ * * * contemplate^] a complete repricing of those contract items which vary from the estimated quantities by more than 15%. ” Where, as here, the contract language (construed in harmony with the seminal ASPR) undertakes to specify the mode of adjustment, its command must be followed. Rice v. United States, 428 F.2d 1311, 1314, 192 Ct.Cl. 903, 908-09 (1970).

On brief the Government attempts to justify the expansive construction embraced by the contracting officer and the Board as necessary to the discouragement of so-called “unbalanced bids” by contractors. Such a bid, it is explained, is one in which the contractor allocates a disproportionate share of indirect costs and anticipated profit to the unit prices bid for those items on which he anticipates an overrun; the object being to reap overgenerous profits should the anticipated overruns materialize. While in the abstract this suggestion has considerable logical appeal, the difficulty with its application to the present controversy is that, in addition to the contradictory purport of the language employed in the governing regulation, there is not a shred of evidence in the record manifesting its involvement in any event. The burden of the argument is therefore more appropriately directed to those officials charged with responsibility for formulating procurement policy and effectuating it by adoption of appropriate contract language and regulations. Should those officials conclude that neutralization of the vice of unbalanced bids can best be accomplished by the de novo repricing of excess or short-fall procurement under an estimated quantity contract, they can readily adopt language to that end. Pacific Architects & Engineers Inc. v. United States, 491 F.2d 734, 203 Ct.Cl. 499 (1974). To date, this has apparently not been done. For this court, in the name of “interpretation”, to undertake the implementation of a totally unarticulated procurement policy, however worthy, would amount to an impermissible overreaching of its legitimate role.

To secure a reduction in contract unit price for those quantities in excess of 115 percent of estimate, the Government was required in this instance to demonstrate by a preponderance of the evidence that the reduction sought represented a “decrease in costs due solely to the variation above 115% * * * of the estimated quantity”. To say nothing of a preponderance, the present record contains no evidence whatever indicating the realization of cost economies attributable to excess volume. Plaintiff is therefore entitled to recover on behalf of its subcontractor, Western Waterproofing.

CONCLUSION

For the reasons given, defendant’s motion for summary judgment is denied, plaintiff’s motion for summary judgment is granted, and judgment entered for plaintiff in the amount of $81,784.23.

      . 32 C.F.R. § 7.603-27 (1967).

      . The Board record discloses, however, that at one time Western Waterproofing offered to accept a 15 percent discount of contract unit price on the excess units in order to terminate the entire controversy. The contracting officer rejected that compromise proposal.

      . 32 C.F.R. § 7.603-27 (1969).

      . Maxwell Dynamometer Co. v. United States, 386 F.2d 855, 870, 181 Ct.Cl. 607, 631 (1967).

      . 69-2 BCA at 38,836.

      . The 12-day enlargement of performance time is inconsequential since, as previously noted, Western completed the entire job in one-ninth of the time originally allotted.

      . G. L. Christian & Associates v. United States, 312 F.2d 418, 424, 160 Ct.Cl. 1, 11-12, cert. denied, 375 U.S. 954, 84 S.Ct. 444, 11 L.Ed.2d 314 (1963); Winston Bros. Co. v. United States, 458 F.2d 49, 52, 198 Ct.Cl. 37, 44 (1972). Moreover, in the instant case both parties freely concede the governance of the ASPR provision in the application and interpretation of the quantity variance clause.