B-126598, AUG. 22, 1956

B-126598, AUG. 22, 1956

TO MR. DUNCAN MILLER:

REFERENCE IS MADE TO YOUR LETTER OF JULY 28, 1956, REQUESTING RECONSIDERATION OF OUR DECISION DATED MAY 24, 1956, WHICH SUSTAINED THE SETTLEMENT OF NOVEMBER 23, 1955, IN WHICH THE LIQUIDATION OF YOUR INDEBTEDNESS UNDER OIL AND GAS LEASE NO. EVANSTON 022091 (WYOMING), DATED JUNE 1, 1947, WAS ACCOMPLISHED BY APPLICATION OF FUNDS OTHERWISE DUE YOU AS A REFUND UNDER REJECTED APPLICATION FOR LEASE NO. NEVADA 029474.

THE FACTS AND CIRCUMSTANCES REGARDING THE NONPAYMENT OF THE FOURTH YEAR'S RENTAL UNDER THE EVANSTON LEASE ARE SET FORTH IN THE SETTLEMENT AND NEED NOT BE REPEATED HERE. YOU INDICATE THAT THE ADMINISTRATIVE OFFICE WAS REQUIRED TO SERVE YOU A SECOND NOTICE OF YOUR RENTAL DELINQUENCY BY REGISTERED MAIL, INCLUDING INFORMATION TO THE EFFECT THAT FAILURE TO COMPLY WITH THAT NOTICE WITHIN 30 DAYS FROM ITS RECEIPT WOULD RESULT IN THE CANCELLATION OF THE LEASE.

AS STATED IN THE PRIOR DECISION, THE INDEBTEDNESS COVERED RENTAL FOR THE PERIOD FOR THE FOURTH YEAR BEGINNING JUNE 1, 1950, AND BECAME DUE AND PAYABLE IN ADVANCE ON MARCH 1, 1950. THE REPORTS DISCLOSE THAT YOU WERE GIVEN THE CUSTOMARY COURTESY NOTICE ON JANUARY 30, 1950. HOWEVER, ASIDE FROM THE FACT THAT YOU FAILED TO MAKE THE ADVANCE PAYMENT DUE ON MARCH 1, 1950, YOUR NOTICE OF RELINQUISHMENT OF THE EVANSTON RELEASE WAS NOT RECEIVED IN THE ADMINISTRATIVE OFFICE UNTIL JUNE 23, 1950, OR SUBSEQUENT TO THE RENTAL DUE DATE AS PROVIDED IN THE LEASE, AND SUBSEQUENT TO THE BEGINNING OF THE RENTAL PERIOD. YOUR NOTICE OF RELINQUISHMENT WAS ACCEPTED AND THE LEASE CANCELED AS OF THE DATE OF ITS RECEIPT. YOU THUS BECAME LIABLE FOR THE FOURTH YEAR'S RENTAL PURSUANT TO THE PROVISIONS OF SECTION 2 (A) OF THE PERTINENT LEASE. IT FOLLOWS THAT YOUR VOLUNTARY RELINQUISHMENT OF THE LEASE REMOVED ANY NECESSITY FOR GIVING YOU THE "SECOND NOTICE" REFERRED TO IN YOUR LETTER OF JULY 28, 1956. SINCE THE REPORTS FURTHER SHOW THAT THE ACREAGE COVERED BY THE LEASE IN QUESTION WAS NOT RELEASED DURING THE FOURTH YEAR'S RENTAL TERM YOU BECAME INDEBTED IN THE AMOUNT OF $350 UNDER THE LEASE TERMS.

YOU PROTEST APPLICATION OF ANY PORTION OF THE AMOUNT ADVANCED BY YOU AS RENTAL UNDER THE NEVADA LEASE ON THE BASIS THAT THIS AMOUNT WAS DEPOSITED FOR A SPECIFIC PURPOSE AND SINCE IT WAS NOT USED FOR SAID PURPOSE THE AMOUNT SHOULD HAVE BEEN RETURNED AS PROVIDED UNDER SECTION 4 OF SPECIAL INSTRUCTIONS OF THE LEASE FORM. YOU STATE THAT "SUCH MONEY COULD BE IN NO SENSE OF THE WORD A CLAIM.' IN OTHER WORDS, YOU ASSUME THE POSITION THAT THE PAYMENT ADVANCED UNDER THE SUBSEQUENTLY REJECTED LEASE WAS MADE FOR A "PARTICULAR PURPOSE" AND PRESUMABLY WAS IN THE NATURE OF A TRUST ACCOUNT SO THAT IT WAS NOT AVAILABLE FOR OFFSET OF ANY CLAIM, AND COULD NOT BE USED FOR ANY PURPOSE OTHER THAN AS CONTEMPLATED BY THE PARTIES UNDER THE LEASE.

IN SITUATIONS SUCH AS HERE, A MERE DEBTOR AND CREDITOR RELATIONSHIP IS CREATED WHICH IS NOT IN THE NATURE OF A TRUST OR FIDUCIARY RELATIONSHIP. IT IS ONLY BY SOME SPECIAL AGREEMENT WHERE THE SPECIFIC INTENTION AND UNDERSTANDING OF THE PARTIES IS THAT TITLE TO THE FUNDS ADVANCED WAS TO REMAIN IN THE DEPOSITOR THAT A TRUST RELATIONSHIP COMES INTO BEING. CF. KERSHAW V. KIMBLE, 65 F. 2D 563, AND SANTEE TIMBER CORPORATION V. ELLIOT, 70 F. 2D 179. THE FACT THAT THE LEASE DEPOSIT WAS MADE FOR THE PURPOSE AND ON ACCOUNT OF THE PAYMENT TO THE GOVERNMENT FOR LEASED PROPERTY INDICATES THAT TITLE TO THE AMOUNT ADVANCED VESTED IN THE GOVERNMENT. THERE WAS NO UNDERSTANDING OR ARRANGEMENT REQUIRING THE ADMINISTRATIVE OFFICIALS TO KEEP SUCH ACCOUNT SEGREGATED AND SEPARATE FROM OTHER FUNDS, AND THERE WAS NO PROVISION MADE FOR THE RETURN OF THE IDENTICAL MONEY ADVANCED.

THE RELATIONSHIP BETWEEN YOU AND THE GOVERNMENT IN THE STATED TRANSACTIONS WAS NO MORE THAN THAT OF ORDINARY DEBTOR AND CREDITOR. SUCH CASES THE RIGHT OF SETOFF IS INHERENT IN THE UNITED STATES, AND HAS ITS BASIS IN THE COMMON-LAW RIGHT OF EVERY CREDITOR TO APPLY MONEYS OF HIS DEBTOR IN HIS HANDS TO THE EXTINGUISHMENT OF CLAIMS DUE HIM FROM THE DEBTOR. IN ADDITION TO THE CASE CITED IN THE PRIOR DECISION, SEE TREDWELL V. UNITED STATES, 266 F. 350, CERTIORARI DENIED 253 U.S. 496; AND BARRY V. UNITED STATES, 229 U.S. 47.