author: GADBOIS, District Judge.

text:
    TADMS, INC., Plaintiff, v. CONSOLIDATED FREIGHTWAYS, Defendants. TADMS, INC., Plaintiff, v. WATKINS MOTOR LINES, INC., Defendant. TADMS, INC., Plaintiff, v. PACIFIC INTERMOUNTAIN EXPRESS CO., Ryder Truck Lines, Inc., Defendants.
    Nos. 83-2879 BG (Bx), 83-4008 RG (Bx) and CD-84-1250 BG (Bx).
    United States District Court, C.D. California.
    Aug. 16, 1985.

      Marken, Parsons & Anderson, Los Ange-les, Cal., for plaintiff TADMS, Inc.
    Christopher Ashworth, Scott J. Tepper, Garfield, Tepper & Ashworth, A Professional Corp., Los Angeles, Cal., for defendant Watkins Motor Lines, Inc.
    Robert W. Hancock, Russell & Hancock, Los Angeles, Cal., for defendant Ryder/P.I.E. Nationwide, Inc.
   MEMORANDUM

GADBOIS, District Judge.

This court, having read and considered the stipulated set of facts and all written material offered by the parties in support of their positions in this case, and having heard and considered the oral arguments of the parties in support of their positions, orders that judgment be entered in favor of the defendants and that the plaintiff take nothing.

BACKGROUND:

This case comprises three consolidated cases that were submitted for consideration and decision by this court on a stipulated statement of facts. This stipulation of facts, with a few important additions, is set forth below virtually verbatim:

INTRODUCTORY FACTS

This case involves the interpretation of a single item contained in the tariffs of the defendant carriers. The issue in the case is whether or not a tariff printing error has resulted in plaintiff's right to a lower freight charge for certain transportation services. If the plaintiff is correct, then it is entitled to the amounts prayed for in the complaints. If the plaintiff is not correct, it is entitled to nothing. In simple words this is an all or nothing case.

The following facts are established:

1. At all times relevant hereto, defendant, Consolidated Freightways (hereinafter “CF”), was and is a motor common carrier and at all times was acting within the scope of the authority issued to it by the Interstate Commerce Commission (“ICC”).

2. At all times relevant hereto, defendant, Watkins Motor Lines, Inc. (hereinafter “Watkins”), was and is a motor common carrier and at all times was acting within the scope of the authority issued to it by the ICC.

3. At all times relevant hereto, Pacific Intermountain Express Co. (“PIE”) and Ryder Truck Lines, Inc. (“Ryder”), were motor common carriers and at all times were acting within the scope of the authority issued to them by the ICC. On or about June 11, 1983, PIE and Ryder were merged, and the surviving corporation and the successor in interest to the rights and the liabilities of PIE and Ryder is defendant Ryder/PIE Nationwide Inc. (“Ryder/PIE”), a motor common carrier operating within the scope of authority issued to it by the ICC.

4. At all times relevant hereto, defendants, CF, Watkins, and Ryder/PIE were authorized to transport commodities in interstate commerce described in Item No. 84260 of the National Motor Freight Classification which are described as follows:

“Games and toys N.O.I.”

5. At all times relevant hereto, defendants CF, Watkins, and Ryder/PIE were participating carriers in the following tariff publications:

a. National Motor Freight Classification 100 Series, Item No. 84260;
b. Tariff I.C.C. RMB 226-A, published by Rocky Mountain Motor Tariff Bureau, Inc.;
c. Tariff I.C.C. RMB 120 series, published by Rocky Mountain Motor Tariff Bureau, Inc.

6. The shipments which are the subject matter of this action originated at the following points:

a. Whamo Mfg. — San Gabriel, California;
b. Revelle, Inc. — Venice, California;
c. Placo Products Company — Torrance, California;
d. Tomy Corporation — Carson, California.

7. San Gabriel, Venice, Torrance and Carson, California, are western territory points listed in Tariff I.C.C., RMB 120.

8. Tariff I.C.C., RMB 120 assigns group number w800 to western territory points in, inter alia, San Gabriel, Venice, Torrance and Carson, California.

9. The destinations for the shipments which are the subject matter of this action are eastern territory points listed in Tariff I.C.C., RMB 120.

10. Eastern territory points which are the subject matter of this action are assigned group numbers from 2000 through 8854. There were no shipments to eastern groups 8855 through 9675. The western and eastern geographical groups which are of concern to this litigation are as set forth in RMB 120, Item No. 201 as follows:

rules
GROUP COVERAGE — APPLICATION OF
(1) Opposite each point named in either Section 3 or Section 4 of this tariff a group number is provided. Rates or charges named in this tariff or named in tariffs made subject to this tariff are shown as applicable either from and to specifically named points, or from and to group numbers. Where the latter is the case, the group numbers referred to are those shown in Section 3 or 4 of this tariff.
(2) Group numbers used for points in Western Territory named in Section 3 of this tariff are numbers W100 thru W998. The states in which such group numbers are used are indicated below:
Western Groups States in Which Used Western Groups States in Which Used W100 thru W199 Montana Wyoming W600 thru W698 Arizona ' Utah Colorado Wyoming
W200 thru W398 British Idaho Nevada Columbia Oregon
California Washington W700 thru W798 Arizona
W400 thru W598 Idaho Oregon W800 thru W899 California Nevada Montana Utah
(3) Group numbers used for points in Eastern Territory named in Section 4 of this tariff are numbers 2000 thru 9699. The states in which such group numbers are used are indicated below:
Eastern Groups States in Which Used Eastern Groups States in Which Used
2000 thru 2099 Colorado Wyoming 7500 thru 7899 Connecticut New Hampshire
Nebraska Delaware New Jersey
District of New York
2100 thru 2199 Nebraska Wyoming Columbia Pennsylvania
Kentucky Rhode Island
2200 thru 2299 Colorado Nebraska Maine Vermont
Kansas Maryland Virginia Massach. West Virginia
2300 thru 2699 Kansas Nebraska
2700 thru 2999 Iowa Missouri 8000 thru 8199 Florida S. Carolina
Kansas Nebraska Georgia Tennessee
N. Carolina Virginia
3000 thru 3499 Iowa N. Dakota Minnesota S. Dakota 8200 thru 8399 Alabama N. Carolina
Nebraska Florida Tennessee
3500 thru 3599 Minnesota Wisconsin Georgia Kentucky Virginia
3600 thru 3699 Michigan (Upper) Wisconsin 8400 thru 8799 Alabama Louisiana Florida Mississippi Georgia Tennessee
4000 thru 4899 Illinois Minnesota Kentucky Iowa Missouri Wisconsin
8800 thru 8854 Kentucky Mississippi
5000 thru 5099 Illinois Louisiana Tennessee
5200 thru 5899 Illinois Wisconsin 8855 thru 8999 Arkansas Mississippi Indiana Louisiana Tennessee
6000 thru 6299 Indiana Kentucky 9000 thru 9299 Arkansas Oklahoma Louisiana Texas
6300 thru 6899 Indiana Michigan 9300 thru 9675 Oklahoma Texas Kentucky Ohio
7000 thru 7399 Kentucky Pennsylvania New York Ohio West Virginia

11. Tariff I.C.C., RMB 226-A, Item No. 3925 provides rates for games or toys N.O.I. between the points which are the subject matter of this action. As of March 16, 1980 (prior to the tariff printing error), the portions of Item No. 3925 which are of concern here were set forth as follows:

Focusing on the eastern group Nos. 8855 through 9675, on May 10,1980 (again, prior to the printing error), groups 8855 through 9675 appeared in the tariff as follows:

That publication error persisted until July 6, 1981, at which time the section again read as follows:

12. The rates applied by defendants and paid by the shippers are found in Item 3925.

13. The shipments which are the subject matter of this action originated at western group W800 and were destined to points and places in eastern groups 2000 through 8854. There were no shipments to eastern groups 8855 through 9675.

On December 20,1980 through a publishing error, the material formerly denom-mated “8855 through 9675” appeared as follows:

14. Rocky Mountain Tariff Bureau issued revised tariff pages on Item No. 3925 of I.C.C. RMB 226-A which contained a publication error. [See paragraph 11 hereof.]

15. During the time of the shipments the tariff page containing the publication error was in effect.

16. The publication error set out rates for the shipments which are lower than the rate applied and the charges collected by CF, Watkins and Ryder/PIE.

17. The right to recover for overcharges on the shipments has been assigned to the plaintiff, TADMS, Inc.

18. The publication errors, if found to apply, would result in lower rates and charges. In such a case, the plaintiff would be entitled to a refund in the amount alleged in the complaints on file herein. ANALYSIS:

I. THE LEGAL STATUS OF TARIFFS.

It is well settled that a tariff has the force of law and that a shipper and a carrier are bound by its terms and cannot vary those terms. Lowden v. SimondsShields-Lonsdale Grain Co., 306 U.S. 516, 520, 59 S.Ct. 612, 614, 83 L.Ed. 953 (1939); Farley Terminal Co. v. Atchison, Topeka and Santa Fe Railway, 522 F.2d 1095, 1098 (9th Cir.1975); accord Blanchette v. Hub City Terminals, Inc., 683 F.2d 1008, 1009 (7th Cir.1981). This is a strict rule. As the United States Supreme Court noted in an early decision:

Deviation from [the fixed rate] ... is not permitted upon any pretext. Shippers ... are charged with notice of it, and they, as well as the carrier, must abide by it____ Ignorance or misquotation of rates is not an excuse for paying or charging either less or more than the rate filed. This rule is undeniably strict and it obviously may work hardship in some cases, but it embodies the policy which has been adopted by Congress.

Louisville & Nashville Railroad v. Maxwell, 237 U.S. 94, 97, 35 S.Ct. 494, 495, 59 L.Ed. 853 (1915).

The published tariff must be followed even if a shipper was quoted a different price by a carrier, Maxwell, 237 U.S. at 97, 35 S.Ct. at 495; Illinois Central Gulf Railroad v. Golden Triangle Wholesale Gas Co., 586 F.2d 588, 592 (5th Cir. 1978), or even if there exists a contract providing for shipment at a different rate or price. Texas & Pacific Railway v. Mugg & Dryden, 202 U.S. 242, 245, 26 S.Ct. 628, 630, 50 L.Ed. 1011 (1906); Illinois Central Gulf Railroad, 586 F.2d at 592. Individual hardship is not a defense to the application of published tariffs. New York Central & Hudson River Railroad v. York & Whitney Co., 256 U.S. 406, 41 S.Ct. 509, 65 L.Ed. 1016 (1921); Illinois Central Gulf Railroad, 586 F.2d at 592. Finally, equitable considerations cannot justify departure from published tariffs. Chicago & North Western Railroad v. Union Packing Co., 514 F.2d 30, 32 (8th Cir.1975); Illinois Central Gulf Railroad, 586 F.2d at 592.

II. MISTAKES AND CLERICAL ERRORS IN PUBLISHED TARIFFS.

Relevant here is the rule that a mistake in the publication of a tariff rate, even a plain clerical error, does not justify or permit departure from a published tariff, even though shippers had full knowledge of the mistake and took advantage of it. In an early decision, Lamb-Fish Lumber Co. v. Yazoo & Mississippi Valley Railroad Co., 42 I.C.C. 470 (1916), the ICC concluded that a publication error does not justify departure from the published rates, even though the shippers had full knowledge of the error and took advantage of it. And in a later decision, Pittsburgh Plate Glass Co. v. Baltimore And Ohio Railroad, 305 I.C.C. 479 (1958), the ICC stated:

Other than the error in publication, no evidence was offered to show that the assailed rate was inapplicable. The tariff in effect when the shipment moved was binding upon the carrier and shipper alike and an error in the publication of a rate therein affords no legal ground for a departure from the tariff provisions.

Id. at 480.

Courts likewise have found that a publication error does not justify departure from a published tariff. Neither the Supreme Court nor the United States Court of Appeals for the Ninth Circuit has addressed directly this issue. However, in Davis v. Portland Seed Co., 264 U.S. 403, 44 S.Ct. 380, 68 L.Ed. 762 (1924), the Supreme Court, discussing in dicta the “imperative requirements concerning publication of rates and subsequent observance of them,” cited the ICC’s decision in Lamb-Fish Lumber with apparent approval, stating: “The Commission holds, for example, that although the schedule contains a plain clerical error, nevertheless no other charge may be demanded and the shipper may recover any excess.” Id. at 424, 44 S.Ct. at 384 (citing Lamb-Fish Lumber).

Although, as noted, the Supreme Court’s comment in Davis was dictum, lower federal courts have held that a publication error does not justify departure from a published tariff. In Armour & Co. v. Atchison, Topeka & Santa Fe Railway, 254 F.2d 719 (7th Cir.1958), a clerical error resulted in the publication of a tariff rate that was improperly low. A shipper, aware of this error, initially paid the higher rate but later sued the carrier for reimbursement on the ground that the published rate, although erroneous, nevertheless was the legal rate and was binding on the parties. In affirming a judgment for the plaintiff shipper, the Seventh Circuit concluded: “A mistake in the publication of a rate in a tariff schedule is no justification for a departure from the published tariff.” Id. at 723-24. In reaching this conclusion, the Seventh Circuit relied heavily upon the ICC’s decision in Lamb-Fish Lumber discussed above. Id. at 724.

Similarly, in Beaument, Sour Lake & Western Railway v. Magnolia Provision Co., 26 F.2d 72 (5th Cir.1928), a carrier mistakenly published a tariff rate of twenty-three cents per hundredweight but it continued to charge shippers seventy cents per hundredweight, which was the rate it had intended to publish. The shippers sued to recover the difference between the erroneously low, published rate and the proper but higher rate they were charged. In affirming a judgment for the shippers, the Fifth Circuit relied upon Lamb-Fish Lumber for the proposition that “proof of error in the publication of rates does not justify a departure from the published rates, even though shippers have full knowledge that the rates were published by mistake.” Id. at 73; see National Van Lines v. United States, 355 F.2d 326, 331 (7th Cir.1966) (“Inadvertent mistake provides no excuse for a deviation” from a published tariff.).

Federal district courts that have confronted the issue have reached the same conclusion as the Fifth and Seventh Circuits, holding that a publication error does not justify departure from a published tariff. See, e.g., United States v. Seatrain Lines, Inc., 370 F.Supp. 483, 484 (S.D.N.Y. 1973) (the published “rate must be charged and paid regardless of seemingly innocent justifications for departure such as mistake, inadvertence or contrary intention of the parties”); United States v. Pan American Mail Line, Inc., 359 F.Supp. 728 (S.D. N.Y.1972) (same).

III. AMBIGUITY IN PUBLISHED TARIFFS.

The foregoing discussion makes clear that a mistake or a clerical error in a published tariff does not justify or permit departure from that published rate. A court is obligated to enforce the published rate between carriers and shippers regardless of the equities and hardships involved. Quite a different situation is presented, however, when a tariff is not totally wrong but merely is ambiguous. See National Van Lines, 355 F.2d at 332 (Noting that the “inadvertent omission” of a brief note in a tariff “does not ipso facto change the meaning of the tariffs. At most, it creates an ambiguity or uncertainty.”) When a tariff is ambiguous a court may interpret it unless the doctrine of primary jurisdiction applies. United States v. Western Pacific Railroad, 352 U.S. 59, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956). Under the primary jurisdiction doctrine, a claim relating to an ambiguous tariff must be pursued at the ICC before resort to a judicial remedy if the words in dispute “are used in a peculiar or technical sense” or if resolution of the dispute depends on a factual inquiry into technical matters within the ICC’s domain of expertise. Id. at 63-70, 77 S.Ct. at 164— 68. In order to interpret ambiguous tar-, iffs falling outside the primary jurisdiction doctrine, the courts have developed well-recognized rules of construction.

The threshold question of whether or not a tariff is ambiguous is a question of law. See Western Transportation Co. v. Wilson and Co., 682 F.2d 1227,1230 (7th Cir.1982); National Van Lines, 355 F.2d at 332. If the court determines that the tariff is ambiguous, the interpretation and construction of that tariff also ordinarily presents a question of law for the court. United States v. Western Pacific Railroad, 352 U.S. 59, 66, 77 S.Ct. 161, 166, 1 L.Ed.2d 126 (1956); Union Pacific Railroad v. Ore-Ida Potato Products, 252 F.2d 505, 507 n. 5 (9th Cir.1958).

An ambiguous tariff should be construed according to general principles of contract law. Western Transportation Co., 682 F.2d at 1231; Penn Central Co. v. General Mills, Inc., 439 F.2d 1338 at 1340 (8th Cir.1971). In interpreting an ambiguous tariff, its words and symbols should be construed in the sense in which they generally are used. Coca Cola Co. v. Atchison, Topeka & Santa Fe Railway, 608 F.2d 213 at 220 (5th Cir.1979); Penn Central Co., 439 F.2d at 1340-41.

A tariff generally is strictly construed against the carrier because the carrier drafted it, and consequently any ambiguity or doubt is resolved in favor of the shipper. Coca Cola Co., 608 F.2d at 221; Penn Central Co., 439 F.2d at 1341.

A tariff, however, should be interpreted to avoid unjust, absurd, or improbable results. Glickfeld v. Howard Van Lines, 213 F.2d 723, 726-27 (9th Cir.1954); accord Coca Cola Co., 608 F.2d at 221; Penn Central Co., 439 F.2d at 1341. In this regard, “a strict construction of a tariff against a carrier is not justified where such a construction ignores a permissible and reasonable construction which conforms to the intentions of the framers of the tariff, avoids possible violations of the law, and accords with the practical application given by shippers and carriers alike.” Penn Central Co., 439 F.2d at 1341; Coca Cola Co., 608 F.2d at 221.

Furthermore, in interpreting an ambiguous tariff, a court must consider the tariff as a whole, not just a particular provision. Western Transportation Co., 682 F.2d at 1230; Southern Pacific Transportation Co. v. United States, 596 F.2d 461, 464, 219 Ct.Cl. 540 (1979); Southern Pacific Co. v. Lothrop, 15 F.2d 486, 487 (9th Cir.1926). Finally, a court should avoid interpreting a tariff in a manner that would nullify specific or substantial tariff provisions. Lothrop, 15 F.2d at 487; accord Southern Pacific Transportation Co., 596 F.2d at 464-65.

IV. THE CASE AT HAND.

The tariff at issue in the case at hand defines shipping rates for the shipment of certain games and toys from a particular geographic region in the western United States labeled western group W800 to numerous destinations in the eastern United States. The shipping destinations in the eastern United States are assigned group numbers from 2000 through 9675. The shipping rate per pound from western group W800 varies depending on what assigned group the particular destination falls in. The differences among these shipping rates presumably reflect different distances and different costs per mile for a given shipment.

From December 20, 1980 to July 6, 1981, the tariff at issue contained a publication error. One particular provision in that tariff should have stated the shipping rate from western group W800 to destinations in eastern groups “8855 thru 9675.” Instead, the publication printed a reference to destinations in eastern groups “855 thru 9675.” The error was a missing numeral “8.” A glance at that tariff, however, which consists of a single page, reveals two relevant facts: (1) there is no eastern group 855. As the defendants correctly point out, this is a nonexistent geographical region encompassing nonexistent destinations. In fact, as noted earlier, eastern groups begin with eastern group 2000; and (2) all the other provisions of that tariff provide the shipping rates from western group W800 to destinations in eastern groups 2000 through 8854.

The case at hand involves shipments from western group W800 to eastern groups other than eastern groups 8855 through 9675. If the provision containing the publication error during the period in question applies to all shipments covered by the tariff from western group W800 to all destinations in eastern groups 2000 through 9675 (which includes all eastern groups), the plaintiff should have been charged lower shipping rates than it was charged and thus is entitled to a refund. Naturally, the plaintiff argues that this is the proper interpretation of the tariff. It contends that the tariff clearly provides that the provision in question applies to all shipments from western group W800 to eastern groups 855 through 9675 and that the publication error cannot justify any other interpretation of the tariff. In support of its argument, the plaintiff relies on the line of cases discussed above that holds that a publication error does not justify departure from a published tariff.

The defendants, not surprisingly, disagree with the plaintiff's interpretation of the tariff. They concede, as they must, that the particular provision in question did contain a publication error. They contend, however, that the publication error created an ambiguity. They argue that in resolving this ambiguity, this court should consider the tariff as a whole and that when the tariff is viewed in its entirety the interpretation proffered by the plaintiff is unjust, absurd, and improbable. For reasons discussed below, this court agrees with the defendants as to the proper interpretation of the tariff in question.

Before proceeding, this court notes that it is competent to resolve this dispute because the doctrine of primary jurisdiction, which requires preliminary resolution of certain disputes by the ICC, is inapplicable to the case at hand. This doctrine does not apply because this dispute involves neither words nor symbols used in a peculiar or technical sense nor a factual inquiry into technical matters within the ICC’s domain of expertise. Rather, this dispute involves a publication error that is understood easily by laymen.

Now, turning to resolution of this dispute, the first issue confronted is whether this tariff is ambiguous. The publication error made the tariff ambiguous for two reasons. First, the provision containing the error appeared to state the shipping rates from western group W800 to eastern groups 855 through 9675. In fact, the lowest numbered eastern group is eastern group 2000. Thus, the meaning of this particular provision clearly is ambiguous. Second, the page upon which the publication error appeared provided the shipping rates from western group W800 to all eastern groups, which includes eastern groups 2000 through 9675. The other tariff provisions on this tariff page would conflict with the provision containing the error if that provision is interpreted to define the shipping rates to all eastern groups. Thus, the meaning of the tariff as a whole is ambiguous.

Plaintiff relied on cases that hold that publication errors in published tariffs do not justify departure from the published rates. Because the tariff is ambiguous, this line of cases is irrelevant here. That line of cases is relevant only when the tariff (whether correct or erroneous) is are-ambiguous. See Western Transportation Co., 682 F.2d at 1231 (“If [a tariff] is ambiguous, it should be construed like any other contract. But if it is unambiguous, the parties are bound by its terms and the aids to construction are irrelevant.”); Na tional Van Lines, 355 F.2d at 332 (if an “inadvertent omission” in a tariff creates “an ambiguity or uncertainty ... the traditional rules of construction of written instruments are controlling in arriving at the proper application of the tariffs”). The cases relevant to resolving the matter before this court are those cases discussed above that define the general rules of construction for interpreting ambiguous contracts. In short, this court must apply these rules of construction to the ease at hand.

Application of these rules of construction to the case at hand leaves no doubt that this case must be resolved in favor of the defendant carriers. The plaintiffs interpretation of the tariff would produce unjust and absurd results. Viewing the tariff as a whole, it is clear that any reasonable shipper — and probably any unreasonable and gullible shipper as well — should have been aware of the mistake in the particular provision in question and should have been aware that the correct shipping rates were stated on the same tariff page. Accepting the plaintiffs interpretation of this tariff would require this court to conclude that the shipping rates from western group W800 to all eastern groups were stated in the one particular tariff provision in question. The plaintiffs interpretation of the tariff also would require this court to ignore the fact that although the lowest numbered eastern group is eastern group 2000, the particular provision in question appeared to state shipping rates to eastern groups beginning with eastern group 855, which is a nonexistent geographic region. Finally, the plaintiffs interpretation of the tariff in question would require this court to ignore all other provisions of the tariff except the particular ambiguous provision and would render the other provisions nugatory and superfluous.

Thus, this court holds that the proper interpretation of the tariff in question is that the shipping rates from western group W800 to eastern groups 2000 through 8854 are correctly provided for in all the provisions of the tariff other than the provision containing the error. Whether the tariff provision containing the error is nugatory or whether it provides the shipping rates from western group W800 to eastern groups 8855 through 9675 is irrelevant because this case does not involve any shipments to eastern groups 8855 through 9675. The mistake in that particular provision has no effect on the other provisions of this tariff and that is all that is important. Judgment for the defendants will be entered accordingly. Counsel for Consolidated Freightways, Watkins, and Ryder/PIE will work together in preparing and serving a form of judgment.


source: Caselaw Access Project

author: KRENZLER, District Judge.

license: Public Domain

text:
    WESTERN RESERVE ACADEMY, Plaintiff, v. UNITED STATES of America, Defendant.
    No. C83-3838A.
    United States District Court, N.D. Ohio, E.D.
    Aug. 19, 1985.

      Gilbert V. Kelling, Jr., Wright, Tolliver & Guthals, P.C., Billings, Mont., John T. Mulligan, Steven L. Gardner, McDonald, Hopkins & Hardy Co., L.P.A., Cleveland, Ohio, for plaintiff.
    John M. Siegel, Asst. U.S. Atty., Cleveland, Ohio, David P. Monson, Tax Div., Peter A. Sklarew, Trial Attys., Tax Div., U.S. Dept, of Justice, Washington, D.C., for defendant.
   MEMORANDUM OF OPINION AND ORDER

KRENZLER, District Judge.

The plaintiff Western Reserve Academy (Western Reserve) commenced this action on September 26, 1983 seeking to recover withholding and Federal Insurance Contributions Act (FICA) taxes assessed to and paid by Western Reserve in its employer capacity in 1982 on funds distributed to faculty employees in 1976 and 1977 for use in defraying college tuition expenses incurred by their children. The United States of America answered on November 28, 1983 denying that any taxes were wrongfully assessed and collected from Western Reserve. Jurisdiction in this matter is based upon 28 U.S.C. § 1346(a)(1).

Pending before the Court are cross-motions for summary judgment filed by the parties on October 15, 1984. The issue before the Court is whether cash tuition assistance awards paid to Western Reserve faculty members for use in defraying the undergraduate college expenses of their children constitute compensation for which Western Reserve is required to pay withholding and FICA taxes. This is not an action to determine faculty members’ individual income tax liability for tuition awards made to their children.

Western Reserve first contends that the tuition assistance awards are scholarships exempt from any income taxation. Western Reserve further argues that even if the awards constitute taxable income to the faculty members, the awards still are not “wages” subject to the income tax withholding and FICA tax provisions of the Internal Revenue Code. The Court concludes that the awards were taxable income to the faculty members in 1976 and 1977 but that the awards were not “wages” subject to withholding and FICA tax in those years.

The undisputed facts in this case are as follows.

Plaintiff Western Reserve is a four-year residential college-preparatory school. As an educational organization it is exempt under § 501(c)(3) of the Internal Revenue Code from federal income tax but has waived its exemption from taxes imposed under FICA.

In 1958 Western Reserve sought a contribution from the Leonard C. Hanna Charitable Trust (Hanna Trust) to establish a program to enable Western Reserve to make tuition assistance awards to faculty members to aid them in defraying the college tuition expenses of their children. The purpose of the program was to enable Western Reserve to effectively compete with other independent secondary schools for quality teachers by assisting the faculty in meeting the undergraduate college tuition of their children.

Between 1958 and 1963, the trustees of the Hanna Trust made cash gifts to Western Reserve totalling $175,000 to establish the Hanna Education Fund (Hanna Fund). The principal and income of the Hanna Fund have been used by Western Reserve’s Board solely for the tuition award program.

To apply for the tuition assistance awards, the faculty members themselves must provide Western Reserve officials with information as to: (1) the name of the college or university in which their child is enrolled; (2) the child’s major course of study; and (3) the child’s anticipated date of graduation.

The tuition assistance awards granted from the Hanna Fund are not based on the merit or scholarship ability of the faculty member’s child, the family’s financial need, or any other competitive criteria. Once faculty members terminate employment with Western Reserve, they cannot apply for an award for their children for the following academic year. No faculty member’s application for a tuition assistance award has ever been denied. The cash distributions of the awards are made payable directly to the parent faculty member.

During the calendar years 1976 and 1977 Western Reserve distributed tuition assistance awards to faculty member Frank H. Longstreth from the Hanna Fund. The awards were made to defray the college tuition expenses of Mr. Longstreth’s four children.

In this period, Western Reserve did not withhold income and FICA taxes with respect to any tuition assistance awards distributed to the faculty from the Hanna Fund.

On March 17, 1982 the Internal Revenue Service (IRS) assessed withholding and FICA tax deficiencies against Western Reserve for the first quarter of 1977 in the amount of $1,511.28 based upon its determination that the tuition assistance awards distributed from the Hanna Fund to faculty members were wages subject to withholding and FICA taxes. On April 2, 1982 Western Reserve paid $250.00 in withholding and FICA taxes attributable to one faculty member, Frank Longstreth, for the calendar quarter ending March 31, 1977. Western Reserve filed a claim for refund for that quarter for the $250.00. On May 26, 1983 the IRS disallowed the claim for refund. Subsequently, Western Reserve commenced this action.

The initial issue in this action is whether the Hanna Fund awards are income to the faculty members whose children receive the awards. Income is defined in the Internal Revenue Code, 26 U.S.C. § 61, in pertinent part as:

SEC. 61. GROSS INCOME DEFINED.

(a) General Definition. — Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:
(I) Compensation for services, including fees, commissions, and similar items;

If the tuition awards are compensation for the services rendered to Western Reserve by the faculty members, then they constitute income to those faculty members. If so, it is immaterial that the awards were not received for the personal benefit of the faculty members because the first principle of income taxation is that income must be taxed to the person who earns it. United States v. Basye, 410 U.S. 441, 449, 93 S.Ct. 1080, 1085, 35 L.Ed.2d 412 (1973).

Some courts have dealt with the issue of whether an employer’s payment of the educational expenses of an employee’s child constitutes taxable income to the employee. These cases arose in the corporate context and these cases involved educational benefit trusts (EBT) established and funded by the employer to provide funds for the college expenses incurred by the children of key employees. These courts held that the amounts distributed from an EBT constituted taxable income to the employees because the payments were attributable to the employees’ employment relationship rather than on any competitive criteria, c.f. Armantrout v. Commissioner, 570 F.2d 210 (7th Cir.1978), aff’g. 67 T.C. 996 (1977); Saunders v. Commissioner, 720 F.2d 871 (5th Cir.1983); Grant-Jacoby, Inc. v. Commissioner, 73 T.C. 700 (1980).

The Armantrout decision premised its holding in part on 26 U.S.C. § 83 which defines the person to whom income is allocated when, in connection with the performance of services, property is transferred to someone other than to the person for whom the services are performed. Ar-mantrout, 67 T.C. at 1003. Section 83 provides in pertinent part:

SEC. 83. PROPERTY TRANSFERRED IN CONNECTION WITH PERFORMANCE OF SERVICES.
(a) General Rules — If, in connection with the performance of services, property is transferred to any person other than the person for whom such services are performed, the excess of—
(1) the fair market value of such property (determined without regard to any restriction other than a restriction which by its terms will never lapse) at the first time the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, over
(2) the amount (if any) paid for such property,
shall be included in the gross income of the person who performed such services in the first taxable year in which the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable. The preceding sentence shall not apply if such person sells or otherwise disposes of such property in an arm’s length transaction before his rights in such property become transferable or not subject to a substantial risk of forfeiture.

All of the above-mentioned decisions also analyzed the economic realities behind the employer’s payment of the educational expenses of an employee’s children rather than the labels placed on the payment. The courts held the payments to be income to the parent-employees because the payments were, in fact, part of a compensation package to the employee rather than based upon any competitive criteria of the employee’s children. In Armantrout and Grant-Jacoby, these compensation packages were designed to attract and retain valuable employees.

Plaintiff nevertheless contends that the tuition assistance awards in this action are scholarships and therefore are not income for tax purposes. Plaintiff urges the Court to conclude that colleges and private secondary schools which provide tuition assistance awards are made within the setting of educational institutions, the awards are not a disguised method of compensation to faculty members, even though the awards are not granted on any competitive critera. Plaintiff bases this argument on the regulation, 26 C.F.R. § 1.117-3, promulgated administratively by the IRS to define “scholarship.”

Scholarships are exempt from gross income. The Internal Revenue Code, 26 U.S.C. § 117 provides in pertinent part:

(a) General rule. — In the case of an individual, gross income does not include—
(1) any amount received—
(A) as a scholarship at an educational organization ...

The Code does not define “scholarship” but the regulations promulgated by the IRS applicable to § 117 in 26 C.F.R. § 1.117-3 defines a scholarship as follows: § 1.117-3 Definitions.

(a) Scholarship. A scholarship generally means an amount paid or allowed to, or for the benefit of, a student, whether an undergraduate or a graduate, to aid such individual in pursuing his studies. The term includes the value of contributed services and accommodations (see paragraph (d) of this section) and the amount of tuition, matriculation, and other fees which are furnished or remitted to a student to aid him in pursuing his studies. The term also includes any amount received in the nature of a family allowance as a part of a scholarship. However, the term does not include any amount provided by an individual to aid a relative, friend, or other individual in pursuing his studies where the grantor is motivated by family or philanthropic considerations. If an educational institution maintains or participates in a plan whereby the tuition of a child of a faculty member of such institution is remitted by any other participating educational institution attended by such child, the amount of the tuition so remitted shall be considered to be an amount received as a scholarship, (emphasis added).

The emphasized portion of the above-quoted regulation specifically includes as scholarships any amounts for tuition remitted for children of faculty members at educational institutions which participate in a tuition remittance plan. A tuition remittance plan as described in this regulation is, in essence, a reciprocal plan whereby the children of faculty of the schools participating in the plan have their tuition cancelled when attending any other educational institution in the plan other than the institution at which their parent is a faculty member. The regulation considers any amount of tuition remitted for children of faculty under such a reciprocal plan to be a scholarship.

Western Reserve argues that its tuition assistance plan, involving the Hanna Fund is sufficiently similar to the tuition remittance plans described in 26 C.F.R. § 1.117-3 to qualify as scholarships under that regulation. The Court concludes that the tuition assistance awards are not scholarships for the following reasons.

The Internal Revenue Service, by assessing FICA and withholding tax deficiencies against Western Reserve, based upon the tuition assistance awards, did not interpret Reg. § 117-3 to include employer tuition assistance awards as scholarships. When faced with construction of an administrative regulation, courts must show great deference to the interpretation given the regulation by the administrative agency charged with the administration of a statute. Udall v. Tallman, 380 U.S. 1, 16-17, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965). The ultimate criterion in construing administrative regulations is the administrative interpretation which becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation. Id.

The Court concludes that the administrative interpretation of Reg. § 1.117-3 that tuition assistance awards are not the same as tuition remittance scholarships, is not plainly erroneous or inconsistent with the regulation. Because the tuition assistance awards at issue in this action are actual cash awards made by the employer of the recipients’ faculty member-parents, they differ significantly from the tuition remittance programs. The Court therefore defers to the IRS interpretation that the tuition assistance awards are not tuition remittance scholarships based upon Reg. § 1.117-3.

Likewise, the Court finds no other basis for concluding that the tuition assistance awards in this action constitute scholarships.

The Supreme Court approved the general definition of scholarship in Reg. § 1.117-3 as comporting with the ordinary understanding of scholarships as “relatively disinterested, no strings educational grants with no requirement of any substantial quid pro quo from the reeipicients.” Bin-gler v. Johnson, 394 U.S. 741, 751, 89 S.Ct. 1439, 1445, 22 L.Ed.2d 695 (1969).

Similarly, in defining what is not a scholarship 26 C.F.R. § 1.117-4(c) recognizes that amounts paid to or on behalf of an individual as compensation for past, present or future services which enable the individual to pursue studies are not considered scholarships. Reg. § 1.117-4(c) provides in pertinent part:

§ 1.117-4 Items not considered as scholarships or fellowship grants.
The following payments or allowances shall not be considered to be amounts received as a scholarship or a fellowship grant for the purpose of section 117:
(c) Amounts paid as compensation for services or primarily for the benefit of the grantor. (1) Except as provided in paragraph (a) of § 1.117-2, any amount paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research, if such amount represents either compensation for past, present, or future employment services or represents payment for services which are subject to the direction or supervision of the grantor.
(2) Any amount paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research primarily for the benefit of the grantor. However, amounts paid or allowed to, or on behalf of, an individual to enable him to pursue studies of research are considered to be amounts received as a scholarship or fellowship grant for the purpose of section 117 if the primary purpose of the studies or research is to further the education and training of the recipient in his individual capacity and the amount provided by the grantor for such purpose does not represent compensation or payment for the services described in subparagraph (1) of this paragraph.

The Bingler decision, 394 U.S. at 757-58, 89 S.Ct. at 1448-49, upheld this portion of § 1.117-4 which excepts from the definition of scholarship any amount paid as compensation for services or primarily for the benefit of the grantor. The Court stated:

The thrust of [§ 1.117-4(c) ] is that bargained-for payments, given only as a “quo” in return for the “quid” of services rendered — whether past, present or future — should not be excludable from income as “scholarship” funds. 394 U.S. at 757-58 [89 S.Ct. at 1448-49.]

The Court concludes that the tuition assistance awards at issue in this action are not scholarships to the faculty member-parents. No criteria for granting the awards is used other than factors relating to the parents’ employment at Western Reserve. The stated purpose of the awards is to aid Western Reserve to effectively compete with other independent secondary schools for quality teachers by assisting them in meeting the undergraduate tuition needs of their children. Application for the awards is made by the faculty member-parent and payment is made directly to that parent. Eligibility to apply for the awards stops when faculty members’ employment with Western Reserve terminates. Although the form of the awards appears to be a grant of money to aid the children of the faculty members, the substance, and economic reality of the awards is to provide extra compensation to the faculty members in order to obtain and keep a quality teaching staff.

The Court is mindful of the difficulty in maintaining quality education in light of the traditionally lower salaries of educators. However, it is not the province of the Court or the Internal Revenue Service to allow special tax advantages to educators over the remainder of the work force absent some directive from Congress. The Internal Revenue Code provides no such mandate allowing compensation to faculty members in the form of tuition assistance awards to be exempt from income. The Court therefore concludes that the tuition assistance awards in this action are not scholarships but are income to the faculty members whose children receive the awards.

The second issue in this action is whether this income to the faculty member Frank Longstreth constituted “wages” subject to the withholding and FICA tax provisions of the Internal Revenue Code.

For purposes of FICA, 26 U.S.C. § 3121 defines wages as follows:

(a) Wages. — For purposes of this chapter, the term “wages” means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash; * * *. (Emphasis added.)

Wages are defined for purposes of withholding tax in 26 U.S.C. § 3401 as:

(a) Wages. — For purposes of this chapter, the term “wages” means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash; * * *. (Emphasis added.)

The Supreme Court has construed these two definitions as having the same meaning for both the income tax withholding and FICA tax provisions, c.f. Rowan v. United States, 452 U.S. 247,101 S.Ct. 2288, 68 L.Ed.2d 814 (1981).

The Supreme Court, in Central Illinois Public Service Company v. United States, 435 U.S. 21, 98 S.Ct. 917, 55 L.Ed.2d 82 (1978), concluded that wages cannot always be equated with income for withholding tax purposes. The Central Illinois Court held that even though the noon lunch reimbursements at issue in that action might constitute taxable income to the employees, the reimbursements were not subject to income tax withholding by the employer. Id. The Court based its holding on the fact that because the employer is in a secondary position as to liability for the income tax of the employee, the employer’s obligation to withhold tax should be precise and not speculative. Id. at 31-32, 98 S.Ct. at 922-23. The Court put emphasis on the lack of judicial decisions tax regulations or tax rulings which would place the employer on notice of the income tax consequences of lunch reimbursements. Id. at 32, 98 S.Ct. at 923.

The undisputed evidence in this action indicates that Western Reserve was notified in 1972 by the National Association of Independent Schools (NAIS), of which it is a member, that the Internal Revenue Service had reversed its long-standing position that neither tuition scholarships nor tuition remission for children of faculty members were income to the faculty members. The NAIS correspondence to Western Reserve two and one-half months later notified Western Reserve that the taxability of scholarship programs similar to the Hanna Fund had been challenged by Revenue Agents but were resolved in favor of the educational institutions by the National office of the IRS.

In 1976 the Internal Revenue Service served notice in the Federal Register, Vol. 41, No. 212 of proposed changes in the regulations in which the definition of “scholarship” as related to § 117 of the Internal Revenue Code was altered. The proposed change provided that if an educational institution participates in a plan where the tuition of a child of an employee is remitted, paid or reimbursed by the institution, that amount is considered as compensation to the employee unless the employee can establish that the program is not compensatory in nature.

Within weeks after issuance of the proposed regulations, the IRS withdrew the regulations. .This event was communicated to Western Reserve by NAIS.

Based upon this undisputed evidence the Court finds that the liability of the Hanna Fund payments was speculative and imprecise in 1976 and 1977 when the awards at issue in this action were made. Therefore, under the rationale of Central Illinois, the Court concludes that the tuition assistance awards made to the children of Frank Longstreth during 1976 and 1977, although income, do not constitute wages subject to the FICA and withholding tax provisions. The Court grants plaintiff’s motion for summary judgment and denies the defendant’s motion for summary judgment. Accordingly, the Court will enter judgment for plaintiff in this action for $250.00 with interest as provided by law.

IT IS SO ORDERED.

      . Plaintiff did not file a motion for summary judgment but instead filed a brief in support of the motion for summary judgment on October 15, 1984. The Court construes the October 15 brief as a motion for summary judgment.

      . Under the Internal Revenue Code, 26 U.S.C. § 3401 et seq., employees are required to withhold tax from wages paid to employees as a means of collecting tax at the source of the income. The employer determines the amount of tax to be withheld from administratively prescribed tax tables. Under 26 U.S.C. § 3403 the employer is liable for the payment of the tax required to be withheld.

      . For purposes of old-age, survivors, and disability insurance of employees receiving wages, an employer is required under the Federal Insurance Contributions Act (FICA) 26 U.S.C. § 3101 et seq. to make two payments on behalf of the employee. Under §§ 3101 and 3102 the employer must deduct a statutorily mandated percentage of an employee’s wages as a FICA tax. Under § 3102(b), the employer is liable for the payment of any FICA required to be deducted from an employee’s wages. Second, under § 3111 the employer must pay a FICA excise tax equal to a statutorily mandated percentage of an employee’s wages.

      . All four children received awards in 1976.-One child received an award in 1977.

      . Although the issue need not be determined in this action, the Court questions whether there is any Congressional mandate which would allow the promulgation of a regulation which defines tuition remittances programs as scholarships.