B-127772, FEB. 11, 1957

B-127772, FEB. 11, 1957

TO THE SECRETARY OF AGRICULTURE:

IN LETTER OF DECEMBER 31, 1956, THE ASSISTANT SECRETARY OF AGRICULTURE RAISES AN ADDITIONAL QUESTION CONCERNING THE SUBJECT MATTER OF OUR DECISION OF AUGUST 2, 1956, B-127772. THAT DECISION HELD THAT THE SUM OF $241,533 BEING HELD IN DEPOSIT FUND ACCOUNT, SYMBOL 12X6875 (11) SUSPENSE, FOREST SERVICE, SHOULD BE PAID TO THE AZTEC LAND AND CATTLE COMPANY, LTD. THE LETTER OF DECEMBER 31 RAISES A QUESTION AS TO WHETHER CERTAIN ADMINISTRATIVE EXPENSES SHOULD BE WITHHELD FROM THAT SUM WHEN IT IS PAID TO THE AZTEC LAND AND CATTLE COMPANY, LTD.

THE FACTS OF THE MATTER HERE INVOLVED ARE SET OUT IN DETAIL IN OUR DECISION OF AUGUST 2, 1956, AND NEED NOT BE REPEATED HERE. BRIEFLY, THE ABOVE SUM REPRESENTS THE INCOME FROM CERTAIN RAILROAD LAND GRANT LANDS WHICH HAD BEEN ADMINISTERED BY THE FOREST SERVICE AS NATIONAL FORESTLANDS. THESE LANDS WERE CLAIMED BY THE AZTEC LAND AND CATTLE COMPANY, LTD., UNDER AN 1886 CONTRACT WITH THE RAILROAD TO WHICH THE LAND HAD BEEN GRANTED, BUT THE CLAIM WAS CONTESTED BY THE GOVERNMENT. AFTER A CONSIDERABLE PERIOD OF TIME THE CONTROVERSY WAS SETTLED BY THE COURTS IN FAVOR OF THE AZTEC LAND AND CATTLE COMPANY, LTD., AND PATENTS FOR THE LAND WERE ISSUED TO THAT COMPANY. DURING THE COURSE OF THE CONTROVERSY AN INFORMAL UNDERSTANDING WAS REACHED BETWEEN THE FOREST SERVICE AND AZTEC LAND AND CATTLE COMPANY, LTD., WHEREUNDER THE FOREST SERVICE CONTINUED TO ADMINISTER THE LAND, BUT PLACED THE INCOME THEREFROM IN SPECIAL DEPOSIT SUSPENSE, PENDING FINAL SETTLEMENT OF THE CONTROVERSY OVER TITLE TO THE LANDS. THE INFORMAL UNDERSTANDING DID NOT SPECIFY THE ULTIMATE DISPOSITION OF THE FUNDS AND, SUBSEQUENT TO THE COURT DECISION IN FAVOR OF AZTEC, THE MATTER WAS PRESENTED TO US, RESULTING IN OUR DECISION OF AUGUST 2, 1956, B-127772. ADMINISTRATIVE EXPENSES WERE NOT MENTIONED IN THE ORIGINAL PRESENTATION; HENCE, THEY WERE NOT CONSIDERED IN OUR DECISION OF AUGUST 2, BUT THE LETTER OF DECEMBER 31 STATES THAT, WHILE SEPARATE ACCOUNTS TO DETERMINE THE EXACT COST OF ADMINISTERING THESE LANDS HAD NOT BEEN MAINTAINED, THE ESTIMATED COST OF ADMINISTRATION FROM THE DATE OF THE INFORMAL UNDERSTANDING TO THE DATES THE PATENTS WERE ISSUED WERE AS FOLLOWS:

TABLE

GRAZING ADMINISTRATION $ 2,336.70

TIMBER SALE ADMINISTRATION 14,831.02

FIRE PROTECTION 19,628.25

SPECIAL LAND USE ADMINISTRATION (NEGLIGIBLE)

$36,795.97

OUR DECISION OF AUGUST 2 WAS PREMISED UPON NUMEROUS COURT DECISIONS, CITED AND DISCUSSED THEREIN, HOLDING IN EFFECT THAT WHERE THE RIGHT TO A PATENT ON LAND EXISTS, THE PARTY ENTITLED THERETO HOLDS THE FULL EQUITABLE TITLE TO THE LAND WITH ALL THE BENEFITS, IMMUNITIES, AND BURDENS OF OWNERSHIP FROM THE DATE THE LAST PREREQUISITE FOR THE PATENT IS MET, WITH THE GOVERNMENT HOLDING THE MERE NAKED LEGAL TITLE IN TRUST UNTIL THE PATENT IS ISSUED, AND THAT THE PATENT, WHEN ISSUED, RELATES BACK TO THE INCEPTION OF THE RIGHTS OF THE PATENTEE. IN VIEW OF THE ULTIMATE COURT DECISION IN FAVOR OF AZTEC IN THE CONTROVERSY BETWEEN THAT COMPANY AND THE GOVERNMENT OVER TITLE TO THE LAND, AZTEC WAS THE EQUITABLE OWNER OF THE LAND DURING THE PERIOD COVERED BY THE INFORMAL UNDERSTANDING. SINCE THE RIGHT TO THE INCOME FROM THE LAND OBVIOUSLY IS ONE OF THE BENEFITS OF OWNERSHIP THEREOF, WE RULED THAT THE AZTEC LAND AND CATTLE COMPANY, LTD. WAS ENTITLED TO THE SUM BEING HELD IN THE SUSPENSE ACCOUNT. HOWEVER, IT IS EQUALLY OBVIOUS THAT THE COST OF ADMINISTERING LAND IS ONE OF THE BURDENS OF OWNERSHIP THEREOF AND, SINCE AZTEC WAS THE EQUITABLE OWNER OF THE LAND DURING THE PERIOD INVOLVED, THAT COMPANY IS PROPERLY CHARGEABLE WITH REASONABLE ADMINISTRATIVE COSTS INCURRED DURING THAT PERIOD.

ACCORDINGLY, IN THE EVENT THAT THE ESTIMATED COST OF ADMINISTRATION PRESENTED IN THE LETTER OF DECEMBER 31 MAY BE CONSIDERED REASONABLE AND MAY BE SUBSTANTIATED IF AZTEC SHOULD QUESTION THE AMOUNT THEREOF, SUCH COST MAY BE WITHHELD WHEN THE $241,533 INCOME FROM THE LAND IS PAID TO THE AZTEC LAND AND CATTLE COMPANY, LTD. ..END :