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27;
<br />
<br />April 12, 1927
<br />
<br /> On motion of Mr~. Stewart, the recommendation
<br />$9~9.00 almowed To compromise the suit, the court,costs to be referred to
<br />and by the following vote:
<br /> Ayes-- Brooks, Dunford, ~upi~, Mayo, Cast,
<br /> Stewart, White,
<br />
<br /> The following communication was read from the Oit r Attorney:
<br />
<br />concurred in and an appropriation of
<br /> the Finance Committe$,
<br />
<br />HonorableOity 0oun01l, "Ports~
<br />Portsmouth, Virginia.
<br />
<br />Gentlemen:--
<br />
<br />~outh, Va., Apriz ?, ±92?.
<br />
<br /> I desire to. call to your attention the o tcome of the suits instituted by the
<br />United States of America against the City of Portsmoutl and as this matter has extended over
<br />a long period cf time I wilz review briefly~the detail~ of the controversy.
<br />
<br /> Under date of October 15, 19lEi the city entered into a contrac~ with the .United
<br />States for the improvement of the water works system then owned by the Portsmouth, Berkley and
<br />Suffolk Water Company, and which the city was acquiring under a contract providing for am
<br />appraisal and a~bitration. Article .~ of this contract wi~h t~e United States reads as foliows:
<br />
<br />~The City shall pay semi-a~nual£y to the Govern-
<br />ment interest at the rams of five (5%) per cent
<br />per annum on the cost of said additions as said
<br />cost shall be paid by the Government, provided
<br />always that the amount of said interest shall
<br />not exceed at the time of any interest payment
<br />and for the period covered by said payment,
<br />one-half of the increase in gross revenue above
<br />the presortS gross revenue for a like period, f~om
<br />the present water works system; and provided
<br />further that should the interest for sai~
<br />period at 5% per annum exceed one-half of
<br />said increase in the gross revenue .for said
<br />period, then the amount to be paid to the
<br />Government by the Oity for said periodzshall
<br />be limited to one,half of the said increase
<br />in the gross_revenue for said period. To
<br />simplify the operation of this contract and
<br />to avoid the-complications involved in frequent
<br />audits, it is further mutually agreed that for
<br />thepurpose of this contract the presen~ gross
<br />revenue from said' water works system shall be
<br />taken t~ be at the rate of $32~,000 per annum.,
<br />
<br /> After the City asquired the water works system on January 1, 1919, it was as-
<br />certained that the annual revenue of the plant was in excess of $324,000, Shortly after ~
<br />was elected City Attorney, I think in the fall of 1921, General J. P. Jervey, the then Oiiy
<br />N~ager, h~d correspondence with the War Department concerning the payment of interest on this
<br />contract. He requested that the contract be changed and .the ~true revenue be made the b~sis
<br />of the.interest payment~s. After much correspondence mud following an opinion of ~tSe Judge
<br />Advocate General of the Army holdi that a contract coul
<br /> ~ , : ng . d not be modified unless it be in
<br />the interest of the~United ~tates, this request was denied. During this ~ime the United
<br />States had an audi~ made of the backs of.the Water Department to ascertain the revenue of the
<br />plant. While the correspondence was being had and after General Jerve~ had requested the
<br />War Department to furnish him with a statement of the interest claimed on the expemditures
<br />made ~s.and when the same were made and before an answer was received to this letter a suit
<br />was instituted against the Git~ in the District Cou~t of the Uhited States at Norfolk, to
<br />recover $177,73~.56 alleged !interest due from November 15, l~lS, ta July l~ l~3. This suit
<br />was institu~e~ in October t~3. _ ·
<br />
<br />No aotlon, however,
<br />1925, another suit was in
<br />Periods from July l,
<br />made of the additions
<br />paid on the amount o~ the
<br />
<br /> After the ~stitution of~his suit General Jervey, Mt. Davis, Capt. Jun. ~. Hap-
<br />per,,and myself appe~ared before Assistant Attorney General Wells at Washington and urged upon
<br />him a settlement of ~he matter, alleging a mutual mistake of~act in the co~tract. Assistant
<br />General~ Wells orderea~ tha~. ~ new. ~ud~t~ be made of the books ~f the Wats. r Works plant, wit_
<br />a view of ascertaining the ~oTaal. revenue of the plant as of the. date of the contract, and
<br />directed that the matter ~hen be brought ~o him with all the f~ots in the case. The auditor
<br />appeared and went over th~ books and ~arrmed hie audit ~November l~, 1924, and as we under-
<br />steed ascertained the trme ~ross revenue of the plant at the date of the contract t~ be
<br />$358,616.20. On th~ basis~of $35E,616.20 it~wa~ found that the City o~ed~the ~nit~d-States
<br />the sum of $5~,362. i8. This amount was promptly paid through the District Attorney at Norfolk.
<br /> in Washingtom towards perfecting a settlement and on July
<br /> in the same court for the recovery of $31,505.85 for the
<br /> November 1%, 1924. In the meantime an appraisement had been
<br /> the Government and a new contract entered into and interemtt
<br /> from July 2, 192~.
<br />
<br /> General Jervey then employed M~. Edward S. Bailey, an ~ttorney in Washington,
<br />to handle the matter in that Oity. Through his efforts several conferences were had with the
<br />Department of Justice. A~ this time the Government was claiming $1~2,207.51 to be the amount
<br />of interest due, which le~s~$58,362.18 paid left $83,8~5.33 claimed. Assistant Attorney General
<br />Palmento agreed on a oompro~se of this amount at 50~p~o~ded the same was accepted by the
<br />War Department.
<br />
<br /> ?he matter was then sent to the War .Denartment at which plmce we appeared
<br />several times, both before the Secret~ry of War Davis a~d Judge Advocate General Null. Senator
<br />Claude A. Swanson ~noeared with ~r~l J~v~v~ w~. r~ ~ ~o~ o+ +~ ~^~ ......... ~
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<br />Sp. e
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