differences often require diverse results. This must be so, if we are to accord to various provisions of fundamental law their natural effect in the circumstances disclosed. So to do is not to make subtle or technical distinctions or to deal in legal refinements. Here we are bound to respect the relevant constitutional provision with respect to the exclusive power of Congress over federal lands. As Congress may, if it find the national interest so requires, override the state milk law of Pennsylvania as respects purchases for the Army, so it may, if not inimical to the same interest subject its purchasing officers on Moffett Field to the restrictions of the milk law of California. Until it speaks we should enforce the limits of power imposed by the provisions of the fundamental law.

The judgment is reversed and the cause remanded for further proceedings not inconsistent with this opinion.

Reversed.

NOTE

Accord, Surplus Trading Co. v. Cook, 281 U.S. 647 (1930) (state tried to tax personal property of a private corporation which was situated on land over which the United States had exclusive jurisdiction).

HOWARD v. COMMISSIONERS

344 U.S. 624 (1952)

MR. JUSTICE MINTON delivered the opinion of the Court. Two questions are presented by this appeal: (1) The validity of the annexation by the City of Louisville, Kentucky, of certain federally owned land on which a Naval Ordnance Plant is located; and (2) The validity of the Louisville occupational tax or license fee ordinance as applied to employees of this Ordnance Plant.

By condemnation proceedings filed in 1940, the United States acquired the land on which the Ordnance Plant is located, with the consent of the Legislature of Kentucky given in a general statute. In 1941, the Secretary of the Navy on behalf of the United States accepted exclusive jurisdiction over the area, and the Governor of Kentucky acknowledged this acceptance. By ordinances enacted in 1947 and 1950, the City annexed certain territory, including the Ordnance Plant tract. The annexation was not challenged by the United States. After the annexation, the City started to collect from employees of the plant a license tax for the privilege of working in the city, measured by one percent of all salaries, wages and commissions earned in the city.

The appellants, employees of the Ordnance Plant, sued in the Jefferson Circuit Court of Kentucky on behalf of themselves and others similarly situated for a declaratory judgment that the Ordnance Plant is not within the City and therefore the employees are not sub

ject to the tax levied on them by the City, and for an injunction restraining the collection of the tax. The appellees filed a special and a general demurrer which were overruled by the court. The appellees having refused to plead further, the court granted judgment in favor of the appellants on the pleadings, holding that the appellants were not subject to the tax because the area occupied by the United States could not be annexed by the City since it ceased to be a part of the Commonwealth of Kentucky when exclusive jurisdiction over it was acquired by the United States. Enforcement of the taxing ordinance was enjoined. The Court of Appeals of Kentucky reversed, 248 S. W. 2d 340, the Circuit Court accordingly entered judgment for the appellees, and the Court of Appeals affirmed, 249 S. W. 2d 816. We noted probable jurisdiction.

The appellants first contend that the City could not annex this federal area because it had ceased to be a part of Kentucky when the United States assumed exclusive jurisdiction over it. With this we do not agree. When the United States, with the consent of Kentucky, acquired the property upon which the Ordnance Plant is located, the property did not cease to be a part of Kentucky. The geographical structure of Kentucky remained the same. In rearranging the structural divisions of the Commonwealth, in accordance with state law, the area became a part of the City of Louisville, just as it remained a part of the County of Jefferson and the Commonwealth of Kentucky. A state may conform its municipal structures to its own plan, so long as the state does not interfere with the exercise of jurisdiction within the federal area by the United States. Kentucky's consent to this acquisition gave the United States power to exercise exclusive jurisdiction within the area. A change of municipal boundaries did not interefere in the least with the jurisdiction of the United States within the area or with its use or disposition of the property. The fiction of a state within a state can have no validity to prevent the state from exercising its power over the federal area within its boundaries, so long as there is no interference with the jurisdiction asserted by the Federal Government. The sovereign rights in this dual relationship are not antagonistic. Accommodation and cooperation are their aim. It is friction, not fiction, to which we must give heed.

This question has been before other state courts, and the right to annex has been upheld. Wichita Falls v. Bowen, 143 Tex. 45, 52, 182 S.W. 2d 695, 699; County of Norfolk v. Portsmouth, 186 Va. 1032, 1047, 45 S.E. 2d 136, 142-143. We agree with these cases and hold that Louisville was free to annex the Ordnance Plant area. Even though the Ordnance Plant is within the boundaries of the City of Louisville pursuant to the annexation, exclusive jurisdiction over the area still remains with the United States, except as modi

fied by statute. U.S. Const., Art. I, § 8, cl. 17; Surplus Trading Co. v. Cook, 281 U.S. 647, 652. Within this jurisdiction, the right to tax income paid to employees of the Government who worked at the Ordnance Plant was granted by 4 U.S.C. §§ 105-110, known as the Buck Act.

Thus the right is specifically granted to the City of Louisville as a taxing authority of Kentucky to levy and collect a tax measured by the income or earnings of any party "receiving income from transactions occurring or services performed in such area *** to the same extent and with the same effect as though such area was not a Federal area." In other words, Kentucky was free to tax earnings just as if the Federal Government were not there.

But the appellants next argue that the Court of Appeals erred in holding that the City's occupational tax or license fee was an "income tax" within the meaning of the Buck Act, though holding that this tax or fee was not an income tax under the Constitution of Kentucky.

Was this tax an "income tax" within the meaning of the Buck Act? In a prior case, Kentucky had held this tax was not an "income tax" within the meaning of the Constitution of Kentucky but was a tax upon the privilege of working within the City of Louisville. Louisville v. Sebree, 308 Ky. 420, 429-431, 214 S. W. 2d 248, 253–254. But the right to tax earnings within the area was not given Kentucky in accordance with the Kentucky law as to what is an income tax. The grant was given within the definition of the Buck Act, and this was for any tax measured by net income, gross income, or gross receipts. In the instant case, the Kentucky Court of Appeals correctly stated that the question was whether the tax was an income tax within the meaning of the federal law. We hold that the tax authorized by this ordinance was an income tax within the meaning of the Buck Act. The City, it is conceded, can levy such a tax within its boundaries outside the federal area. By virtue of the Buck Act, the tax can be levied and collected within the federal area, just as if it were not a federal area.

Since the area is within the boundaries of the City of Louisville, and this tax is an income tax within the meaning of the Buck Act, the tax is valid. The judgment is

Affirmed.

CHAPTER VII

BASIC PROCUREMENT POLICIES

Section 1. ASSIGNMENT OF GOVERNMENT CONTRACTS

MCPHAIL v. UNITED STATES

181 F. Supp. 251 (Ct. Cl. 1960)

WHITAKER, Judge.

Plaintiffs sue for damages, including out-of-pocket expenses and loss of profits, which they say resulted from defendant's refusal to allow plaintiffs to perform a contract duly entered into between the parties. The Government defends, first, on the ground that there was no valid contract between it and the plaintiffs; and, second, that even if there was a valid contract, the contract was annulled pursuant to 41 U.S.C.A. § 151 when plaintiffs transferred an interest therein to another party.

The alleged contract in suit was to furnish meals to Mexican laborers who were brought into this country by the Farm Placement Service of the Department of Labor. Under this program, Mexican farm workers were used to supplement domestic labor where shortages were known to exist. On entering the United States the laborers were sent to reception centers operated by the defendant's agent at Hidalgo, Texas, Eagle Pass, Texas, El Paso, Texas, Nogales, Arizona, and El Centro, California, where they were quartered overnight and furnished one to three meals before going to the farms where they were to be employed.

On May 11, 1955, pursuant to this program, the Department of Labor issued an invitation for bids to furnish all the meals required at one or more of the five reception centers for the fiscal year 1956. The invitation was a complete document which embraced not only the invitation, but the bid and the award to be executed and the terms and provisions of the contract to be entered into.

Plaintiffs McPhail and Montoya obtained an invitation and submitted a bid under the name of plaintiff McPhail prior to the open

1 Section 15 of Title 41 U.S.C.A. provides, in pertinent part, as follows: "No contract or order, or any interest therein, shall be transferred by the party to whom such contract or order is given to any other party, and in such transfer shall cause the annulment of the contract or order transferred, so far as the United States are concerned."

ing date specified in the invitation. For the most part, the bid substantially complied with all the requirements stated in the invitation.

[The plaintiff was informed by the contracting agency that its low bid had been accepted, subject to the furnishing of a perfcrmance bond. The bond was furnished, but a dispute arose over the responsiveness of the bid. It was alleged by the Government that the plaintiff had been permitted to modify the bid after opening by explaining an ambiguous provision and that the acceptance was unauthorized. This argument was rejected by the court.]

We are inclined to think that a valid contract was consummated, but we do not decide that question because, assuming that there was a valid contract, we think it was annulled by the agreement entered into between plaintiffs and Manuel B. Toledo.

Upon receipt of the telegram from defendant's agent accepting their bid, plaintiffs immediately attempted to secure financial assistance from various sources without success, but on June 9 or 10, 1955, they met with one Manuel B. Toledo, who had had considerable previous experience in feeding Mexican laborers. Mr. Toledo promised to assist in financing plaintiffs to the extent of accommodating them with his signature on a note of $12,000 to the First National Bank of Albuquerque. In return for this assistance, plaintiffs and Toledo entered into a contract, designated as a "Management Agreement." The pertinent parts of this agreement are set out in Finding

19.

Under this contract, plaintiffs employed Toledo "to operate and manage" the feeding centers and all business related thereto resulting from the contract with the United States. Toledo was given the power to purchase and sell all property connected with the business; to sign, accept, and endorse all notes, drafts and bills; to sue, collect, compromise and settle all claims; and in general to do all things which he (Toledo) "may consider useful or necessary" in the operation of the business. To carry out this transfer of powers to Toledo, plaintiffs appointed him "their true and lawful attorney *** to execute in and under their name any and all instruments of whatever nature [Toledo] may deem useful or necessary for the business."

The agreement further provided that all monies received under the contract with the United States should be paid into a bank account under Toledo's complete control. No money would be paid to plaintiffs until such time as Toledo saw fit. The agreement contemplated that ultimately the profits would be divided in half, 50 percent to plaintiffs, and the remainder to Toledo.

The defendant says that this so-called "Management Agreement" was a transfer of an interest in the Government's contract which re