A-69514, MARCH 18, 1936, 15 COMP. GEN. 816

A-69514: Mar 18, 1936

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A CONTRACTOR FOR THE PROCURING OF OPTIONS ON REAL ESTATE IS NOT ENTITLED TO PAYMENTS FOR PRELIMINARY WORK PERFORMED. NO EQUITABLE CONSIDERATIONS JUSTIFYING PAYMENT OR LIABILITY AS OF A CONTRACT IMPLIED IN FACT WHERE NO BENEFITS HAVE BEEN CONFERRED UPON THE UNITED STATES. A COUNTERPART THEREOF IS TRANSMITTED TO YOU HEREWITH. (2) BY CONDEMNATION WHERE AN OPTION SATISFACTORY TO THE GOVERNMENT FOR THE PARCEL CONDEMNED WAS SECURED BY THE CONTRACTOR AND THE AWARD FOR THE TAKING OF SUCH PARCEL DOES NOT EXCEED THE OPTION PRICE THEREFOR. (3) BY CONDEMNATION WHERE THE CONTRACTOR SHALL HAVE NEGOTIATED A SETTLEMENT OF THE AMOUNT OF THE AWARD FOR THE TAKING OF SUCH PARCEL SATISFACTORY TO THE GOVERNMENT.

A-69514, MARCH 18, 1936, 15 COMP. GEN. 816

CONTRACTS - IMPOSSIBILITY OF PERFORMANCE - ACQUISITION OF LAND FOR HOUSING AND SLUM CLEARANCE PROJECT THE UNITED STATES HAVING ABANDONED THE LOW-COST HOUSING AND SLUM CLEARANCE PROJECT IN THE DISTRICT OF COLUMBIA DUE TO THE FACT THAT THE COURT HELD THE CONDEMNATION OF LAND FOR THE PROJECT UNCONSTITUTIONAL, A CONTRACTOR FOR THE PROCURING OF OPTIONS ON REAL ESTATE IS NOT ENTITLED TO PAYMENTS FOR PRELIMINARY WORK PERFORMED, THERE BEING NO CONTRACTS IMPLIED IN LAW AGAINST THE UNITED STATES, AND NO EQUITABLE CONSIDERATIONS JUSTIFYING PAYMENT OR LIABILITY AS OF A CONTRACT IMPLIED IN FACT WHERE NO BENEFITS HAVE BEEN CONFERRED UPON THE UNITED STATES.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR, FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS, MARCH 18, 1936:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF DECEMBER 30, 1935, AS FOLLOWS:

IN CONNECTION WITH THE LOW-COST HOUSING AND SLUM CLEARANCE PROJECT DESIGNATED AS WAR COLLEGE PROJECT NO. H-1704, WASHINGTON, D.C., ON JANUARY 15, 1935, I ENTERED INTO A CONTRACT WITH EDWARD C. KNOUSE, 1427 EYE STREET, NW., WASHINGTON, D.C., FOR THE PROCURING OF OPTIONS ON THE REAL ESTATE WITHIN THE AREA SELECTED FOR THE PROJECT SITE. A COUNTERPART THEREOF IS TRANSMITTED TO YOU HEREWITH.

PARAGRAPH 2 OF THE CONTRACT PROVIDES THAT IF THE CONTRACTOR SHALL OBTAIN OPTIONS OR SETTLEMENTS SATISFACTORY TO THE GOVERNMENT ON AT LEAST 60 PERCENT OF THE NUMBER OF PARCELS IN THE AREA, HE SHALL BE ENTITLED TO RECEIVE AS COMPENSATION FOR HIS SERVICES A SUM EQUAL TO 2 PERCENT OF THE APPRAISED VALUE OF EACH PARCEL ACQUIRED BY THE GOVERNMENT IN ANY OF THE FOLLOWING WAYS:

(1) BY PURCHASE UNDER OPTIONS SECURED BY THE CONTRACTOR AND ACCEPTED BY THE GOVERNMENT; (2) BY CONDEMNATION WHERE AN OPTION SATISFACTORY TO THE GOVERNMENT FOR THE PARCEL CONDEMNED WAS SECURED BY THE CONTRACTOR AND THE AWARD FOR THE TAKING OF SUCH PARCEL DOES NOT EXCEED THE OPTION PRICE THEREFOR; (3) BY CONDEMNATION WHERE THE CONTRACTOR SHALL HAVE NEGOTIATED A SETTLEMENT OF THE AMOUNT OF THE AWARD FOR THE TAKING OF SUCH PARCEL SATISFACTORY TO THE GOVERNMENT.

YOU WILL NOTE THAT PAYMENT TO THE CONTRACTOR IS MADE CONTINGENT UPON THE ACQUISITION BY THE GOVERNMENT OF THE SEVERAL PARCELS. THE TOTAL AMOUNT OF ALL COMPENSATION TO BE PAID TO THE CONTRACTOR WAS NOT TO EXCEED $12,000.

PARAGRAPH 9 OF THE CONTRACT GIVES TO THE GOVERNMENT THE RIGHT, IN ITS DISCRETION, TO TERMINATE THE CONTRACT AT ANY TIME, IRRESPECTIVE OF ANY DEFAULT BY THE CONTRACTOR. THIS PARAGRAPH READS AS FOLLOWS:

"9. CANCELLATION OF CONTRACT.--- IN ADDITION TO THE RIGHT OF THE GOVERNMENT SET FORTH IN PARAGRAPH 8 (TERMINATION FOR BREACH) HEREOF, AND IRRESPECTIVE OF ANY DEFAULT BY THE UNDERSIGNED HEREUNDER, THE GOVERNMENT MAY AT ANY TIME IN ITS DISCRETION, BY PRIOR WRITTEN NOTICE TO THE UNDERSIGNED, TERMINATE ALL OR ANY PART OF THE UNDERSIGNED'S EMPLOYMENT HEREUNDER AND/OR CANCEL THIS CONTRACT IN WHOLE OR IN PART WITHOUT LIABILITY FOR ANY SERVICES PERFORMED HEREUNDER, EXCEPT TO PAY TO THE UNDERSIGNED THE PERCENTAGES SET FORTH IN PARAGRAPH 2 OF THE APPRAISED VALUE OF ALL PARCELS OF LAND THERETOFORE OR THEREAFTER ACQUIRED BY THE GOVERNMENT, IN PURSUANCE OF THE ABOVE-MENTIONED PROJECT, EITHER BY PURCHASE BY THE EXERCISE OF OPTIONS SATISFACTORY TO THE GOVERNMENT THERETOFORE PROCURED BY THE UNDERSIGNED OR BY CONDEMNATION UNDER SETTLEMENTS SATISFACTORY TO THE GOVERNMENT THERETOFORE NEGOTIATED BY THE UNDERSIGNED, AND EXCEPT TO REIMBURSE THE UNDERSIGNED AS PROVIDED IN PARAGRAPH 5 HEREOF.'

PARAGRAPH 5 OF THE CONTRACT PROVIDES FOR REIMBURSING THE CONTRACTOR FOR MONEY ADVANCED IN OBTAINING OPTIONS, THE CONSIDERATION FOR EACH VALID OPTION BEING FIXED AT ONE DOLLAR.

THE NUMBER OF PARCELS EMBRACED IN THIS PROJECT IS 240. TWELVE PARCELS WERE WITHDRAWN FROM NEGOTIATION LEAVING 228 PARCELS TO BE NEGOTIATED FOR BY MR. KNOUSE. OPTIONS, ACCEPTABLE TO THE GOVERNMENT, WERE OBTAINED BY THE CONTRACTOR ON 219 PARCELS. APPROVED SETTLEMENTS WERE NEGOTIATED BY MR. KNOUSE WITH THE OWNERS OF 9 PARCELS WHILE THE CONDEMNATION PROCEEDINGS, REFERRED TO BELOW, WERE PENDING.

WHILE MR. KNOUSE WAS ENGAGED IN SECURING OPTIONS, THE ATTORNEY GENERAL, AT THE REQUEST OF THE HOUSING DIVISION, INSTITUTED PROCEEDINGS IN THE SUPREME COURT OF THE DISTRICT OF COLUMBIA TO CONDEMN THE ENTIRE AREA.

SEVERAL OWNERS OF PROPERTY WITHIN THE AREA FILED DEMURRERS TO THE GOVERNMENT'S PETITION AND THESE DEMURRERS WERE SUSTAINED BY MR. JUSTICE LETTS. HE SAID:

"I HAVE CONCLUDED THAT THE USE FOR WHICH THESE LANDS ARE SOUGHT TO BE CONDEMNED IS NOT A PUBLIC USE; THAT CONGRESS DID NOT ATTEMPT TO LEGISLATE FOR THE DISTRICT OF COLUMBIA, HAVING IN MIND LOCAL CONDITIONS; THAT CONGRESS DID NOT ESTABLISH A PUBLIC POLICY BASED ON INFORMATION RESPECTING CONDITIONS LOCAL TO THE DISTRICT OF COLUMBIA; THAT CONGRESS DID NOT LEGISLATE IN THE EXERCISE OF ITS POLICE POWER OVER THE DISTRICT OF COLUMBIA; THAT CONGRESS DID NOT LEGISLATE IN THE EXERCISE OF ITS POLICE POWER OVER THE DISTRICT OF COLUMBIA; THAT THE UNITED STATES IS WITHOUT CONSTITUTIONAL AUTHORITY TO CONDEMN THESE PRIVATELY OWNED LANDS FOR THE USE AND PURPOSE INDICATED; ACCORDINGLY THE SEVERAL DEMURRERS ARE SUSTAINED.'

IN VIEW OF THE DECISION OF MR. JUSTICE LETTS, IT BECAME IMPOSSIBLE IN THE OPINION OF THE HOUSING DIVISION TO PROCEED WITH THE PROJECT, AND IT WAS ABANDONED.

MR. KNOUSE HAS STATED THAT IN ORDER TO PROCURE THE OPTIONS, AS REQUIRED BY HIS CONTRACT, HE ORGANIZED HIS OFFICE FOR THIS PURPOSE, AND FOR A PERIOD OF NINE MONTHS HE AND HIS OFFICE FORCE WERE CONTINUOUSLY ENGAGED ON THE WORK. AND FOR SIX MONTHS HIS PERSONAL SERVICES, DAY AND EVENING, WERE DEVOTED EXCLUSIVELY TO CONFERENCES AND ADJUSTMENTS REQUIRED AS THE NEGOTIATOR OF THE OPTIONS.

MR. KNOUSE ESTIMATES THAT THE EXPENSE INCURRED BY HIM IN MAINTAINING HIS OFFICE DURING THIS PERIOD FOR THE PURPOSE OF PROCURING THE OPTIONS WAS $900. THIS SUM INCLUDES THE USE OF AN AUTOMOBILE, TELEPHONE CALLS, AND TRIPS OUT OF TOWN REQUIRED IN THE PERFORMANCE OF HIS DUTIES. HE VALUES HIS PERSONAL SERVICES AT $500 A MONTH.

THE PROVISIONS OF THE CONTRACT, UNDER DISCUSSION, AND THE FACTS HEREIN STATED, PRESENT A SITUATION WHERE PERFORMANCE ON THE PART OF THE GOVERNMENT BECAME EXCUSABLY IMPOSSIBLE BECAUSE OF THE DECISION AND ORDER OF THE SUPREME COURT OF THE DISTRICT OF COLUMBIA DISMISSING THE CONDEMNATION PROCEEDING.

MR. KNOUSE ON HIS PART OBTAINED OPTIONS ON 219 PARCELS IN THE AREA OF THE PROJECT, SATISFACTORY TO THE GOVERNMENT, OR MORE THAN 60 PERCENT OF THE NUMBER OF PARCELS IN THE AREA, AND HE OBTAINED SETTLEMENTS SATISFACTORY TO THE GOVERNMENT ON 9 PARCELS. UNDER PARAGRAPH 2 OF THE CONTRACT, MR. KNOUSE WOULD HAVE RECEIVED 2 PERCENT OF THE APPRAISED VALUE OF EACH PARCEL IF THE GOVERNMENT HAD ACQUIRED THE PARCELS OPTIONED. THE APPRAISED VALUE OF THE 219 PARCELS WAS $398,210. THE APPRAISED VALUE OF THE 9 PARCELS SATISFACTORILY SETTLED WAS $28,371. MR. KNOUSE'S COMPENSATION WOULD HAVE BEEN $8,531.60. HE HAS SUBSTANTIALLY PERFORMED HIS PART OF THE CONTRACT WITHOUT RECEIVING ANY COMPENSATION.

MR. WILLISTON, IN HIS WORK ON CONTRACTS, DISCUSSES THE QUESTION OF THE RIGHT TO RECOVER THE VALUE OF PERFORMANCE UNDER A CONTRACT WHEN COUNTER PERFORMANCE BECOMES IMPOSSIBLE. HE SAYS:

"IF PERFORMANCE ON ONE SIDE OR THE OTHER OF A CONTRACT BECOMES EXCUSABLY IMPOSSIBLE WHILE THE TRANSACTION IS STILL WHOLLY EXECUTORY ON BOTH SIDES, NOT ONLY IS THE CONTRACT DISCHARGED BUT NEITHER PARTY IS SUBJECT TO FURTHER OBLIGATION OF ANY KIND. BUT WHERE THE PARTY EXCUSED BY IMPOSSIBILITY HAS PARTLY PERFORMED THE CONTRACT ON HIS SIDE BEFORE THE IMPOSSIBILITY ARISES, OR WHERE THE OTHER PARTY HAS PARTLY OR WHOLLY PERFORMED WITHOUT RECEIVING COMPENSATION, JUSTICE REQUIRES THE IMPOSITION OF A QUASI-CONTRACTUAL OBLIGATION ON THE PARTY RECEIVING SUCH PERFORMANCE TO PAY ITS FAIR VALUE. NO FUNDAMENTAL DISTINCTION IN PRINCIPAL CAN BE DRAWN BETWEEN THESE TWO CASES. IT SHOULD MAKE NO DIFFERENCE WHETHER THE PARTY SEEKING QUASI-CONTRACTUAL RELIEF IS THE ONE WHO HAS FAILED, BECAUSE OF IMPOSSIBILITY, TO FULFILL HIS CONTRACT OR WHETHER IT IS THE OTHER PARTY WHO HAS RENDERED PERFORMANCE. IN BOTH CASES PERFORMANCE OF THE CONTRACT HAS BEEN STOPPED MIDWAY WITHOUT FAULT ON EITHER SIDE. ALSO, IT SHOULD BE IMMATERIAL AT WHAT STAGE OF PERFORMANCE IMPOSSIBILITY SUPERVENES. THE PLAINTIFF MAY HAVE PERFORMED IN FULL OR ONLY IN PART.' (WILLISTON ON CONTRACTS, SEC. 1972, P. 3351.)

IN VIEW OF THE FACT THAT MR. KNOUSE PERFORMED HIS PART OF THE CONTRACT AND PERFORMANCE BY THE GOVERNMENT ON ITS PART BECAME IMPOSSIBLE, DUE TO THE DECISION OF THE SUPREME COURT OF THE DISTRICT OF COLUMBIA, WILL YOU PLEASE ADVISE ME WHETHER YOUR OFFICE WILL APPROVE OF A PAYMENT TO MR. KNOUSE BASED ON THE FAIR VALUE OF THE SERVICES ACTUALLY RENDERED AND DISBURSEMENTS ACTUALLY MADE BY HIM. OF COURSE, COMPETENT EVIDENCE TO SUBSTANTIATE ANY OR ALL ITEMS OF MR. KNOUSE'S CLAIM WOULD BE OBTAINED BY THE HOUSING DIVISION, AND IN NO EVENT WOULD PAYMENT EXCEED THE SUM OF $5,400 WHICH MR. KNOUSE HAS INDICATED HE WOULD ACCEPT.

THE REPORTED HOLDING OF THE SUPREME COURT OF THE DISTRICT OF COLUMBIA THAT TITLE II OF THE NATIONAL INDUSTRIAL RECOVERY ACT OF JUNE 16, 1933, 48 STAT. 200 ET SEQ., WAS UNCONSTITUTIONAL INSOFAR AS ITS PURPORTED TO AUTHORIZE THE FEDERAL GOVERNMENT TO TAKE LAND BY THE POWER OF EMINENT DOMAIN AND CONSTRUCT THE PROPOSED LOW-COST HOUSING PROJECT IN THE DISTRICT OF COLUMBIA AND THE APPARENT ADMINISTRATIVE ACCEPTANCE OF SUCH DECISION AS CORRECT THROUGH THE ABANDONMENT OF FURTHER ATTEMPTS TO CONSTRUCT THE PROJECT HAVE RESULTED IN ITS BECOMING IMPOSSIBLE FOR THE UNITED STATES TO DO SO. IT IS NOT TO BE OVERLOOKED THAT THIS CONTRACT WITH EDWARD C. KNOUSE, CONSISTING OF HIS PROPOSAL DATED JANUARY 4, 1935, AND ACCEPTANCE THEREOF DATED JANUARY 15, 1935, IS SUBSEQUENT IN POINT OF TIME TO THE DECISION DATED JANUARY 4, 1935, 9 FED.SUPP. 137, OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF KENTUCKY IN THE LOUISVILLE HOUSING CASE, WHICH WAS AFFIRMED BY THE CIRCUIT COURT OF APPEALS OF THE SIXTH CIRCUIT IN 78 FED./2D) 684. THAT IS TO SAY, MR. KNOUSE WAS PRESUMABLY AS FAMILIAR WITH THE POSSIBLE LEGAL OBSTACLES TO COMPLETION OF THE PROJECT AT THE TIME THE CONTRACT WAS ENTERED INTO AS WERE THE OFFICIALS OF THE UNITED STATES, AND IT IS APPARENTLY ADMITTED THAT HIS EFFORTS IN OBTAINING OPTIONS ON LAND FOR THE SITE OF THE LOW-COST HOUSING PROJECT IN THE DISTRICT OF COLUMBIA HAVE CONFERRED NO BENEFITS ON THE UNITED STATES FOR THE REASON THAT NONE OF THE OPTIONS WAS ACCEPTED AND EXERCISED BY THE UNITED STATES AND THE PROJECT HAS BEEN ABANDONED.

THERE CAN BE NO CONTRACT IMPLIED IN FACT FOR THE UNITED STATES TO PAY THE REASONABLE VALUE OF ANY BENEFITS CONFERRED ON IT FOR THE REASON THAT NO BENEFITS WERE CONFERRED UNDER THIS CONTRACT AND THAT NO CONTRACT MAY BE IMPLIED IN LAW AGAINST THE UNITED STATES IS SETTLED IN UNITED STATES V. MINNESOTA MUTUAL INVESTMENT CO., 271 U.S. 212, WHEREIN IT WAS SAID:

AN IMPLIED CONTRACT IN ORDER TO GIVE THE COURT OF CLAIMS OR A DISTRICT COURT UNDER THE TUCKER ACT JURISDICTION TO GIVE JUDGMENT AGAINST THE GOVERNMENT MUST BE ONE IMPLIED IN FACT AND NOT ONE BASED MERELY ON EQUITABLE CONSIDERATIONS AND IMPLIED IN LAW.

THE CONTRACT APPEARS NOT TO HAVE BEEN CANCELED, BUT EVEN IF SO THE CANCELATION WAS NOT BY REASON OF ANY CLAUSE STATED IN PARAGRAPH 9 OF THE CONTRACT, QUOTED IN YOUR LETTER, OR BY REASON OF ANY OTHER STIPULATION CONTAINED IN THE CONTRACT, BUT WAS APPARENTLY DUE TO THE FACT THAT THE COURT HELD THE CONDEMNATION OF LAND FOR THIS PROJECT WAS UNCONSTITUTIONAL AND THE PROPER ADMINISTRATIVE OFFICIALS OF THE UNITED STATES HAVE DETERMINED TO GO NO FURTHER IN AN ATTEMPT TO CONSTRUCT THIS LOW-COST HOUSING PROJECT.

THERE IS THUS NO LEGAL LIABILITY ON THE UNITED STATES TO MAKE ANY PAYMENTS UNDER THE CONTRACT--- ASIDE FROM REIMBURSEMENT FOR ANY CONSIDERATION PAYMENTS WHICH MAY HAVE BEEN ADVANCED UNDER THE PROVISIONS OF PARAGRAPH 5--- FOR SUCH PRELIMINARY WORK AS MAY HAVE BEEN PERFORMED BY MR. KNOUSE AND WHICH DID NOT RESULT IN ANY BENEFITS TO THE UNITED STATES, AND THERE ARE NO EQUITABLE CONSIDERATIONS WHICH WOULD JUSTIFY THIS OFFICE IN TAKING ACTION IN THIS MATTER FOR THE REASON THAT NO BENEFITS WERE CONFERRED UPON THE GOVERNMENT BY REASON OF HIS WORK UNDER THE CONTRACT.