A-8052, JANUARY 23, 1926, 5 COMP. GEN. 522

A-8052: Jan 23, 1926

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WHICH PURPORTED TO COVER A PERIOD BEYOND THE END OF THE FISCAL YEAR FOR WHICH THE APPROPRIATION WAS MADE. MINOR REPAIRS AT THE TERMINATION OF THE LEASE FALL WITHIN THE EXCEPTION AND THE GOVERNMENT IS NOT LIABLE FOR THE COST THEREOF. THERE IS ALSO CLAIMED THE FULL RENT AT THE STIPULATED RATE FOR THE REMAINDER OF THE FISCAL YEAR 1926. 982 IN ADDITION TO THE RENT IS CLAIMED AS ALLEGED DAMAGES TO THE PREMISES. THE ANNUAL BASIC RENT WAS FIXED IN ARTICLE 2. UNDER ARTICLE 3 THE LESSOR WAS REQUIRED TO MAKE CERTAIN REPAIRS TO EXISTING IMPROVEMENTS AND TO CONSTRUCT CERTAIN ADDITIONAL IMPROVEMENTS UPON THE LEASED PREMISES. WHEN THE ADDITIONAL IMPROVEMENTS AND BUILDINGS ARE COMPLETED TO THE SATISFACTION OF THE LESSEE AND ARE READY AND ACCEPTED FOR OCCUPANCY BY THE LESSEE.

A-8052, JANUARY 23, 1926, 5 COMP. GEN. 522

LEASES - TERMINATION - REPAIRS A LEASE EXECUTED UNDER AUTHORITY OF AN ANNUAL APPROPRIATION, AND WHICH PURPORTED TO COVER A PERIOD BEYOND THE END OF THE FISCAL YEAR FOR WHICH THE APPROPRIATION WAS MADE, MUST BE CONSTRUED TO BE A LEASE FOR SAID FISCAL YEAR ONLY, WITH AN OPTION IN THE GOVERNMENT TO RENEW FROM YEAR TO YEAR TO THE END OF THE STATED TERM. UNDER A LEASE ENTERED INTO BY THE VETERANS' BUREAU FOR OCCUPANCY OF PREMISES AS A VOCATIONAL TRAINING SCHOOL, WHICH PROVIDED FOR THE RETURN OF THE PREMISES AT EXPIRATION OF THE LEASE IN LIKE GOOD ORDER AND CONDITION AS WHEN RECEIVED,"DEPRECIATION, USE, ORDINARY WEAR AND TEAR" EXCEPTED, NECESSARY REPAPERING, PAINTING, RESURFACING FLOORS, AND MINOR REPAIRS AT THE TERMINATION OF THE LEASE FALL WITHIN THE EXCEPTION AND THE GOVERNMENT IS NOT LIABLE FOR THE COST THEREOF.

DECISION BY COMPTROLLER GENERAL MCCARL, JANUARY 23, 1926:

JOHN T. WILSON HAS REQUESTED REVIEW OF SETTLEMENT 0107567, DATED DECEMBER 10, 1925, DISALLOWING HIS CLAIM FOR $3,038.25 AS RENT ALLEGED TO BE DUE FOR THE MONTHS OF JULY, AUGUST, AND SEPTEMBER, 1925, UNDER LEASE DATED JULY 5, 1922, COVERING PREMISES AT SAN ANTONIO, TEX., WHICH HAD BEEN LEASED FOR USE BY THE UNITED STATES VETERANS' BUREAU AS A VOCATIONAL TRAINING SCHOOL.

IN ADDITION TO SAID CLAIM, DISALLOWED AS INDICATED, THERE HAS BEEN FORWARDED BY THE VETERANS' BUREAU TO THIS OFFICE FOR SETTLEMENT CLAIM IN THE AMOUNT OF $1,012.75 AS RENT OF THE SAME PREMISES FOR OCTOBER, 1925, AND THERE IS ALSO CLAIMED THE FULL RENT AT THE STIPULATED RATE FOR THE REMAINDER OF THE FISCAL YEAR 1926. THE AMOUNT OF $1,982 IN ADDITION TO THE RENT IS CLAIMED AS ALLEGED DAMAGES TO THE PREMISES.

THE TERMS OF ARTICLE 1 OF THE LEASE, DATED JULY 5, 1922, PURPORTED TO LEASE THE PREMISES IN QUESTION TO THE UNITED STATES VETERANS' BUREAU "FOR THE TERM BEGINNING JULY 5, 1922, AND ENDING WITH JUNE 30, 1926," AT THE ANNUAL RENTAL AND SUBJECT TO CERTAIN CONDITIONS SPECIFIED IN THE LEASE. THE ANNUAL BASIC RENT WAS FIXED IN ARTICLE 2, AS FOLLOWS:

$12,018.00 FROM JULY 5, 1922, TO JUNE 30, 1923; $12,153.00 FROM JULY 1, 1923, TO JUNE 30, 1924; $12,153.00 FROM JULY 1, 1924, TO JUNE 30, 1925; $12,153.00 FROM JULY 1, 1925, TO JUNE 30, 1926.

UNDER ARTICLE 3 THE LESSOR WAS REQUIRED TO MAKE CERTAIN REPAIRS TO EXISTING IMPROVEMENTS AND TO CONSTRUCT CERTAIN ADDITIONAL IMPROVEMENTS UPON THE LEASED PREMISES, RELATIVE TO WHICH ARTICLE 4 PROVIDED:

IN ADDITION TO THE RENTAL SET OUT IN ARTICLE 2, ABOVE, WHEN THE ADDITIONAL IMPROVEMENTS AND BUILDINGS ARE COMPLETED TO THE SATISFACTION OF THE LESSEE AND ARE READY AND ACCEPTED FOR OCCUPANCY BY THE LESSEE, SAID LESSEE SHALL PAY THE LESSOR FOR THE USE AND OCCUPANCY OF SAID DEMISED PREMISES, THE FOLLOWING ADDITIONAL RENTAL:

$36,000 PER ANNUM FROM THE DATE THE PREMISES ARE READY FOR OCCUPANCY UNTIL JUNE 30, 1923; AND

$29,000 PER ANNUM FOR THE FISCAL YEAR ENDING JUNE 30, 1924. THE RENT TO BE PAID IN EQUAL MONTHLY INSTALLMENTS IN ARREARS CONTINGENT UPON THE AVAILABILITY OF APPROPRIATIONS BY CONGRESS FROM WHICH SUCH RENT MAY BE PAID.

ARTICLE 9 PROVIDES AS FOLLOWS:

THAT UPON THE EXPIRATION OF THIS LEASE, SAID LESSEE WILL RETURN THE DEMISED PREMISES IN LIKE GOOD ORDER AND CONDITION AS WHEN RECEIVED, INCLUDING THE ADDITIONAL IMPROVEMENTS PLACED THEREON BY THE LESSOR, DEPRECIATION, USE, ORDINARY WEAR AND TEAR, FIRES AND OTHER UNAVOIDABLE CASUALTIES EXCEPTED.

UNDER DATE OF JUNE 25, 1923, THE VETERANS' BUREAU NOTIFIED THE LESSOR THAT IT HAD DECIDED TO RENEW SAID LEASE FOR THE TERM BEGINNING JULY 1, 1923, AND ENDING JUNE 30, 1924, AND REQUESTED THE LESSOR TO ACKNOWLEDGE AND ACCEPT SAID NOTICE OF RENEWAL. IN REPLY, THE LESSOR, IN LETTER DATED JULY 7, 1923, RETURNED THE NOTICE WITH A STATEMENT AS FOLLOWS:

IN VIEW OF THE FACT THAT THIS LEASE COVERS A PERIOD OF FOUR YEARS FROM JULY 5, 1922, I DEEM IT ENTIRELY UNNECESSARY TO SIGN A RENEWAL LEASE, AND, FURTHER, I DO NOT CARE TO CURTAIL THIS LEASE TO JUNE 30TH, 1924, BELIEVING THAT THE TIME ITEM OF THE ORIGINAL LEASE WAS OVERLOOKED WHEN THIS EXTENSION AGREEMENT WAS WRITTEN. I AM RETURNING SAME WITHOUT BEING EXECUTED.

THE VETERANS' BUREAU CONTINUED TO PAY RENT FOR THE PREMISES UNDER THE TERMS OF THE LEASE UNTIL JUNE 30, 1925, WHEN THE TENANCY WAS TERMINATED AND THE PREMISES FINALLY VACATED, NOTICE OF INTENTION TO VACATE HAVING BEEN SERVED ON THE LESSOR JUNE 13, 1925.

CLAIMANT ALLEGES THAT DURING THE NEGOTIATIONS PRELIMINARY TO THE EXECUTION OF THE LEASE IT WAS UNDERSTOOD BETWEEN THE LESSOR AND THE REPRESENTATIVES OF THE GOVERNMENT THAT BECAUSE OF THE LARGE AMOUNT OF CASH NECESSARY TO BE ADVANCED BY THE LESSOR TO TAKE UP CERTAIN CLAIMS AND LIENS AGAINST THE PROPERTY AND FOR IMPROVEMENTS ON SAID PROPERTY, THAT HE WAS UNWILLING TO UNDERTAKE THE PROPOSITION UNLESS HE COULD BE ASSURED THAT A LEASE WOULD BE SECURED FOR THE FULL PERIOD OF FOUR YEARS, AS IT WOULD REQUIRE RENTS FOR THAT PERIOD OF TIME TO MAKE HIM WHOLE AND GIVE HIM A REASONABLE RETURN FOR HIS INVESTMENT, AND THAT THE REPRESENTATIVE OF THE GOVERNMENT ASSURED THE LESSOR THAT UNLESS THERE SHOULD BE A CHANGE OF ADMINISTRATION THE CONTRACT WOULD BE CARRIED OUT FOR FOUR YEARS. HE ALSO STATES THAT HIS PROPOSAL TO THE GOVERNMENT WAS TO MAKE THE STIPULATED REPAIRS AND IMPROVEMENTS AND LEASE THE PROPERTY TO THE GOVERNMENT FOR FOUR YEARS FOR THE SUM OF $107,612. THE LEASE WAS EXECUTED ON THAT BASIS BUT, IN THE INTEREST OF THE CLAIMANT, THE ADDITIONAL AMOUNT TO COVER THE COST OF IMPROVEMENTS WAS PAID DURING THE FIRST TWO YEARS INSTEAD OF BEING PRO RATED OVER THE FOUR-YEAR PERIOD.

IT IS FURTHER ALLEGED THAT THE LESSOR EXPENDED APPROXIMATELY $20,000 TO CLEAR THE TITLE TO THE PROPERTY AND APPROXIMATELY $80,000 IN THE IMPROVEMENTS, AND THAT THE CHARACTER OF THE IMPROVEMENTS IS SUCH THAT THEY ARE OF NO PERMANENT VALUE TO SAID PROPERTY BUT RATHER A DETRIMENT BECAUSE BUILT FOR A SPECIFIC PURPOSE AND NOT SUITABLE FOR OTHER PURPOSES.

THE EXTENT OF THE LESSOR'S OBLIGATIONS WITH RESPECT TO REPAIRS AND IMPROVEMENTS AND THE COMPENSATION TO BE PAID THEREFOR WERE CLEARLY AND DEFINITELY FIXED UNDER THE LEASE AGREEMENT. THEREFORE, IN SO FAR AS HIS LEGAL RIGHTS UNDER SAID LEASE AGREEMENT ARE CONCERNED, IT IS IMMATERIAL WHAT HIS OUTLAY WITH RESPECT TO THE PROPERTY MAY HAVE BEEN AND WHETHER HE EXPENDED MORE OR LESS THAN THE PREVIOUSLY ESTIMATED COST OF THE REPAIRS AND IMPROVEMENTS OR MORE OR LESS THAN THE AMOUNT STIPULATED IN THE LEASE AGREEMENT AS HIS COMPENSATION THEREFOR. THE ENTIRE AMOUNT PROVIDED IN THE LEASE AGREEMENT TO COVER THE IMPROVEMENTS WAS INCLUDED IN THE INCREASED RENT FOR THE PERIOD PRIOR TO JULY 1, 1924, AND PAYMENT IN STRICT ACCORDANCE WITH THE TERMS OF SAID AGREEMENT WAS MADE FOR SAID PERIOD; ALSO, THE NORMAL RENT WAS PAID FOR ONE YEAR THEREAFTER. IN OTHER WORDS, THE GOVERNMENT HAS PAID UNDER THE LEASE AND RENEWALS THEREOF AN AGGREGATE OF $95,324 FOR THE PERIOD FROM JULY 5, 1922, TO JUNE 30, 1925, AND THE PRESENT CLAIM COVERS RENT AT THE NORMAL RATE OF $12,153 PER ANNUM FOR THE FISCAL YEAR BEGINNING JULY 1, 1925, WHICH WAS SUBSEQUENT TO THE DATE THE PREMISES WERE FINALLY VACATED BY THE GOVERNMENT AND SURRENDERED TO CLAIMANT.

WITH REFERENCE TO THIS CLAIM FOR RENT FOR THE FISCAL YEAR 1926, DURING WHICH THE GOVERNMENT DID NOT OCCUPY, USE, OR DERIVE ANY BENEFIT FROM THE PREMISES, IT APPEARS THAT AT THE TIME THE LEASE AGREEMENT OF JULY 5, 1922, WAS ENTERED INTO THERE WAS NO STATUTE SPECIFICALLY AUTHORIZING THE DIRECTOR OF THE VETERANS' BUREAU TO ENTER INTO A LEASE AGREEMENT ON BEHALF OF THE GOVERNMENT FOR A PERIOD OF FOUR YEARS. THE ONLY STATUTORY AUTHORITY THEN EXISTING FOR THE LEASING OF PROPERTY FOR THE PURPOSE FOR WHICH THIS PROPERTY WAS LEASED WAS THE PROVISION MADE IN THE ANNUAL APPROPRIATION ACT OF JUNE 15, 1922, 42 STAT. 649, AS FOLLOWS:

VOCATIONAL REHABILITATION: FOR CARRYING OUT THE PROVISIONS OF THE ACT ENTITLED "AN ACT TO PROVIDE FOR THE VOCATIONAL REHABILITATION AND RETURN TO CIVIL EMPLOYMENT OF DISABLED PERSONS DISCHARGED FROM THE MILITARY OR NAVAL FORCES OF THE UNITED STATES, AND FOR OTHER PURPOSES," APPROVED JUNE 27, 1918, AS AMENDED, $146,409,188.80; * * * PROVIDED FURTHER, THAT NO PART OF THE FOREGOING APPROPRIATION SHALL BE EXPENDED FOR CONSTRUCTION WORK EXCEPT NECESSARY REPAIRS.

IN VIEW OF THE PROVISO SPECIFICALLY PROHIBITING THE USE OF THIS APPROPRIATION FOR CONSTRUCTION WORK, EXCEPT NECESSARY REPAIRS, THERE IS AT LEAST A DOUBT AS TO THE LEGALITY OF THE PAYMENTS MADE TO CLAIMANT IN CONSIDERATION OF THE IMPROVEMENTS MADE BY HIM. HOWEVER, CONSIDERATION OF THAT QUESTION IS NOT NECESSARY TO A DETERMINATION OF THE PRESENT CLAIM AND NEED NOT BE DECIDED AT THIS TIME.

IT HAS BEEN HELD CONSISTENTLY BY THE ACCOUNTING OFFICERS AND THE COURTS THAT A LEASE EXECUTED UNDER AUTHORITY OF AN ANNUAL APPROPRIATION, AND WHICH PURPORTS TO COVER A PERIOD BEYOND THE END OF THE FISCAL YEAR FOR WHICH THE APPROPRIATION IS MADE, AS IN THIS CASE, MUST BE CONSTRUED TO BE A LEASE FOR SAID FISCAL YEAR ONLY, WITH AN OPTION IN THE GOVERNMENT TO RENEW FROM YEAR TO YEAR TO THE END OF THE STATED TERM. CHASE V. UNITED STATES, 155 U.S. 489; MCCOLLUM V. UNITED STATES, 17 CT.CLS. 92; SMOOT V. UNITED STATES, 38 CT.CLS. 418; ABBOTT V. UNITED STATES, 66 FED.REP. 448; UNITED STATES V. DOULLUT, 213 FED.REP. 729; 1 COMP. GEN. 10; 4 COMP. GEN. 694; 5 COMP. GEN. 355.

AS THE GOVERNMENT DID NOT EXERCISE ITS OPTION TO RENEW IN THIS CASE FOR THE FISCAL YEAR 1926, THERE IS NO LEGAL OBLIGATION ON THE GOVERNMENT TO PAY RENT ON THE PREMISES FOR ANY PERIOD SUBSEQUENT TO JUNE 30, 1925. ACCORDINGLY THE ENTIRE CLAIM FOR RENT MUST BE AND IS DISALLOWED.

THE CLAIM OF $1,982 FOR ALLEGED DAMAGE BY THE GOVERNMENT TO THE PROPERTY DURING OCCUPANCY UNDER THE LEASE, IS BASED ON AN ESTIMATE MADE IN A STATEMENT SWORN TO UNDER DATE OF NOVEMBER 20, 1925, BY WILLIAM BROWN, REPRESENTED AS A "CONTRACTOR," CONTAINING THE FOLLOWING ITEMS:

TABLE CLUBHOUSE:

REPAPERING, PAINTING, AND REPAIRING HEARTHS ---- $1,015.00

REPAIRING AND RESURFACING FLOORS --------------- 358.00

REPAIRING BROKEN WINDOWS, DOORS AND SCREENS ---- 90.00

---------- $1,463.00 REST ROOM:

REPAPERING AND PAINTING INTERIOR --------------- 270.00

REPAIRING AND RESURFACING FLOORS --------------- 204.00

REPAIRING BROKEN WINDOWS AND SCREENS ----------- 45.00

---------- 519.00

TOTAL ---------------------------------------------------- 1,982.00

THE VERY NATURE OF THESE REPAIRS NEGATIVES THE CONTENTION THAT THE DAMAGE NECESSITATING SAID REPAIRS RESULTED FROM CAUSES OTHER THAN THOSE SPECIFICALLY MENTIONED IN ARTICLE 9 OF THE LEASE, HEREINBEFORE QUOTED, AND FOR WHICH THE GOVERNMENT ASSUMED NO RESPONSIBILITY UNDER THE LEASE. IT IS BUT REASONABLE TO ASSUME THAT REPAIRS OF THE CHARACTER AND TO THE EXTENT COVERED BY THIS CLAIM WOULD RESULT FROM "DEPRECIATION, USE," AND "ORDINARY WEAR AND TEAR" DURING A PERIOD OF THREE YEARS' OCCUPANCY AS A VOCATIONAL TRAINING SCHOOL FOR FORMER ENLISTED MEN OF THE MILITARY OR NAVAL FORCES. THE SAME PREMISES HAD BEEN OCCUPIED BY THE GOVERNMENT FOR THE SAME PURPOSE UNDER LEASE FROM A FORMER OWNER FOR MORE THAN A YEAR PRIOR TO THE DATE OF CLAIMANT'S LEASE; THEREFORE CLAIMANT HAD AMPLE OPPORTUNITY TO KNOW THE RESULT TO BE EXPECTED OF USE, WEAR, AND TEAR UNDER SUCH OCCUPANCY, WHEN HE EXECUTED THE LEASE WHICH SPECIFICALLY RELIEVED THE GOVERNMENT OF RESPONSIBILITY FOR DAMAGES RESULTING FROM SUCH CAUSES. ACCORDINGLY, THERE APPEARS NO LEGAL BASIS FOR THE CLAIM FOR DAMAGES.

WITH REFERENCE TO THE REPRESENTATIONS AND ARGUMENTS SUBMITTED BY CLAIMANT AS TO THE MERITS OF HIS CLAIM AS A WHOLE FROM A MORAL OR EQUITABLE--- AS DISTINGUISHED FROM A PURELY LEGAL--- STANDPOINT, IT MAY BE STATED THAT CLAIMS BASED ON MORAL AND EQUITABLE GROUNDS ONLY, MAY NOT BE ALLOWED AND CERTIFIED BY THIS OFFICE FOR PAYMENT UNDER EXISTING LAW. WHILE SUCH CLAIMS MAY BE PROPER FOR PRESENTATION TO AND CONSIDERATION BY THE CONGRESS THEY ARE FOR PAYMENT ONLY AFTER FUNDS HAVE BEEN SPECIFICALLY MADE AVAILABLE THEREFOR.

THE RECORD IN THIS OFFICE DISCLOSES CERTAIN FACTS WHICH WOULD APPEAR TO BE FOR CONSIDERATION IN CONNECTION WITH ANY DETERMINATION AS TO THE MERITS OF THE CLAIM FROM AN EQUITABLE STANDPOINT. AMONG SUCH FACTS MAY BE MENTIONED THE FOLLOWING:

1. THE ESTIMATED COST OF THE REPAIRS WHICH THE LESSOR MADE AS REQUIRED UNDER ARTICLE 3 (A) OF THE LEASE WAS $11,588.89.

2. THE ESTIMATED COST OF NEW BUILDINGS CONSTRUCTED UNDER ARTICLE 3 (B) WAS $67,300, MAKING THE TOTAL ESTIMATED COST OF THE REPAIRS AND IMPROVEMENTS UNDER ARTICLE 3 OF THE LEASE $78,888.89.

3. THE ESTIMATED VALUE OF THE PROPERTY, INCLUDING LAND COVERED BY THE LEASE, PRIOR TO THE MAKING OF SUCH REPAIRS AND IMPROVEMENTS WAS $65,025, BUT IT APPEARS THAT SAID PROPERTY COST THE LESSOR LESS THAN ONE-HALF OF THAT AMOUNT, AND THE RENT RECEIVED THEREON (EXCLUSIVE OF THE INCREASED AMOUNT PAID ON ACCOUNT OF IMPROVEMENTS) WAS $12,153 A YEAR FOR THREE YEARS, OR APPROXIMATELY 19 PERCENT A YEAR ON THE APPRAISED VALUATION AND NEARLY 40 PERCENT A YEAR ON THE INVESTMENT.

4. THE GOVERNMENT HAS PAID CLAIMANT UNDER THE LEASE $95,324 AS RENT FOR THE THREE YEARS OF ITS OCCUPANCY, WHICH AMOUNT IS APPROXIMATELY 70 PERCENT OF HIS ENTIRE INVESTMENT--- ASSUMING THAT SAID INVESTMENT, INCLUDING AMOUNT EXPENDED BY HIM FOR REPAIRS AND IMPROVEMENTS, WAS, AS WOULD APPEAR FROM HIS OWN ALLEGATIONS, NOT MORE THAN $130,000.

UPON REVIEW, SETTLEMENT 0107567 IS SUSTAINED, AND THE CLAIM FOR RENT FOR THE REMAINDER OF THE FISCAL YEAR 1926 AND FOR DAMAGES TO THE PREMISES BY THE UNITED STATES IS DISALLOWED.