B-137787, APR. 30, 1964

B-137787, APR. 30, 1964

TO HARRIET ROSS, ESQUIRE:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 12, 1964, FORWARDING A CLAIM FOR REFUND OF $40,000 PAID AS ADVANCE RENTALS BY COLORADO RIVER ENTERPRISES, INC., TO THE DEPARTMENT OF INTERIOR UNDER CONTRACT 14-20 650- 445, A LEASE FOR THE DEVELOPMENT OF UNASSIGNED LANDS ON THE COLORADO RIVER INDIAN RESERVATION.

YOU STATE THAT THERE WAS TO BE MADE A PART OF THE LEASE CONTRACT ON AUGUST 13, 1957, LETTER WHICH YOU QUOTE AS FOLLOWS:

" "MY DEAR MR. COMMISSIONER:

" "ATTACHED HERETO IS A CERTIFIED CHECK IN THE AMOUNT OF $40,000.00 AS PROVIDED FOR BY THE CONTRACT WHICH IS CONDITIONED ON THE FOLLOWING PROVISIONS:

" "1. THAT THE SAID $40,000.00 SHALL BE RETURNED WITHIN (90) NINETY DAYS TO THE LESSEE SHOULD THE USES OF THE WATER PROVIDED FOR BY THE LEASE CONTRACT BE LIMITED BY OPERATION OF LAW, DECREES OR ORDER OF COURT.

" "RESPECTFULLY SUBMITTED,

COLORADO RIVER ENTERPRISES, INC.

BY: S. W. BARTON, PRESIDENT" " YOU STATE FURTHER:

"THE DEPARTMENT OF THE INTERIOR FORFEITED THE FORTY THOUSAND DOLLARS ($40,000.00) BOND SO POSTED AND IT IS HEREBY CLAIMED TO HAVE BEEN A WRONG FORFEITURE. IT WAS WRONGFUL BECAUSE THE CONDITION PROVIDED FOR IN THE ABOVE QUOTED LETTER COULD NOT BE MET. IT COULD NOT BE MET BECAUSE A DISPUTE AROSE BETWEEN THE STATE OF CALIFORNIA AND THE STATE OF ARIZONA OVER THE USE OF THE COLORADO RIVER. THE DISPUTE BETWEEN SAID STATES WAS NOT RESOLVED UNTIL THIS VERY MONTH OF MARCH, 1964. THE FAILURE OF THE DEPARTMENT OF THE INTERIOR TO MEET THE CONDITIONS SO IMPOSED BY THE SAID LETTER OF S. W. BARTON MATERIALLY AFFECTED THE LEASE AND MADE IT A NULLITY BECAUSE THE USE OF THE WATER WAS VITAL TO THE OPERATION OF THE LEASE. WITHOUT THE WATER THE LEASE WAS OF NO USE TO COLORADO RIVER ENTERPRISES, INC. ADDITIONALLY, THE DISPUTE ARISING TO THE WATER AFFECTED THE SPEED WITH WHICH THE FIVE MILLION DOLLARS ($5,000,000.00) CASH BOND COULD BE PRODUCED BY THE LESSEE WITHIN 24 HOURS OF THE TIME FOR THE DESIGNATED POSTING OF SAID BOND, THE DEPARTMENT OF THE INTERIOR WAS NOTIFIED THAT IT HAD BEEN OBTAINED. THE FORTY THOUSAND DOLLARS ($40,000.00) BOND WAS FORFEITED REGARDLESS OF THAT NOTIFICATION AND SAID FORFEITURE WAS WRONGFUL IN THAT RESPECT AS WELL.'

THE CLAIM YOU ASSERT PREVIOUSLY WAS CONSIDERED BY OUR OFFICE AND WAS DISALLOWED BY DECISION OF JUNE 16, 1959, COPY ENCLOSED. THE RELEVENT FACTS OF THE MATTER ARE SET FORTH IN THAT DECISION AND WILL NOT BE RESTATED HERE.

THE COPY OF THE CONTRACT WHICH OUR OFFICE HAS ON FILE IN CONNECTION WITH THE PREVIOUS CLAIM WAS FURNISHED TO US BY THE DEPARTMENT OF INTERIOR. THE COPY DOES NOT HAVE ANY ATTACHMENT TO IT SIMILAR TO THE LETTER YOU REFER TO NOR IS THERE CONTAINED THEREIN ANY REFERENCE TO SUCH A LETTER. AS A MATTER OF FACT, WHILE THE LETTER YOU QUOTE FROM REFERS TO A CERTIFIED CHECK BEING ATTACHED, INFORMATION IN OUR FILE INDICATES THAT THE $40,000 PAYMENT ON AUGUST 13, 1957, WAS MADE BY A PERSONAL CHECK DRAWN BY MR. BARTON ON THE FIRST NATIONAL BANK OF BLYTHEVILLE, ARKANSAS, AND THAT THE CHECK WAS RETURNED SUBSEQUENTLY BY THE BANK WITHOUT PAYMENT. THIS, OF COURSE, SHOWS THAT A CERTIFIED CHECK WAS NOT, IN FACT, PRESENTED IN PAYMENT. SINCE MR. BARTON APPARENTLY DID NOT PRESENT A CERTIFIED CHECK TO THE DEPARTMENT OF INTERIOR, IT WOULD SEEM TO FOLLOW THAT HE DID NOT FURNISH THE LETTER EITHER. MOREOVER, AN EXAMINATION OF THE COPY OF THE CONTRACT WHICH WE HAVE ON HAND REVEALS PROVISIONS WHICH ARE AT VARIANCE WITH THE CONDITION WHICH THE AUGUST 13 LETTER WOULD IMPOSE. OUR REFERENCE IS TO ARTICLE 5 WHICH PROVIDES:

"B. WATER SUPPLY: THE WATER SUPPLY WILL BE THAT OF THE COLORADO RIVER IRRIGATION PROJECT, DIVERTED AT HEADGATE ROCK DAM. INASMUCH AS NO PREVIOUS DETERMINATION HAS EVER BEEN MADE AS TO THE QUANTITY OF WATER AVAILABLE FOR USE ON SAID RESERVATION, THE PROPOSED USES OF WATER ARE SUBJECT TO PRIOR USES OF AND ON THE COLORADO RIVER INDIAN RESERVATION AND ANY LIMITATIONS OF USE IMPOSED BY OPERATION OF LAW, DECREES OR ORDERS OF COURT. THE LESSOR PROVIDES NO ASSURANCES OF THE ADEQUACY OF WATER SUPPLY AND ASSUMES NO LIABILITY FOR INADEQUACY OF WATER RIGHTS. SUCH WATER MAY BE DELIVERED TO THE PARCELS OF LAND INCLUDED IN THIS CONTRACT FROM THE EXISTING DISTRIBUTION SYSTEM OR FROM NEWLY CONSTRUCTED LATERALS.

"B-1.FAILURE OF WATER SUPPLY: IF AT ANY TIME DURING THE TERM OF THIS LEASE, AN ADEQUATE WATER SUPPLY CANNOT BE DIVERTED OR DELIVERED FOR USE BY LESSEE ON LANDS DEVELOPED ON PARCEL "A," THE LESSEE SHALL BE RELIEVED OF ALL OBLIGATION TO CONTINUE THE FURTHER DEVELOPMENT AND PLACING IN CULTIVATION OF ADDITIONAL LAND DESCRIBED IN PARCEL "AA.' IN THE EVENT OF SUCH FAILURE OF ADEQUATE WATER SUPPLY, AS SHALL BE ADJUSTED TO $7.00 PER ACRE PER YEAR, COMPUTED ON THE NUMBER OF ACRES FOR WHICH AN ADEQUATE SUPPLY OF WATER MAY BE DIVERTED AND DELIVERED FOR USE BY THE LESSEE ON SAID LEASED PREMISES.'

IN ANY EVENT, INFORMATION IN OUR FILE SHOWS THAT THE CANCELLATION OF THE LEASE AND THE FORFEITURE OF THE $40,000 (WHICH THE LESSEE EVENTUALLY PAID ON SEPTEMBER 26, 1957, THROUGH THREE CASHIER'S CHECKS TOTALING THAT AMOUNT) FOLLOWED LEASE CONDITIONS WHICH MAKE YOUR PRESENT CLAIM UNTIMELY. IN THAT CONNECTION, ARTICLE 16D PROVIDED THAT FAILURE OF THE LESSEE TO FURNISH A $5,000,000 PERFORMANCE BOND ORA DEPOSIT OF CASH OR NEGOTIABLE UNITED STATES TREASURY BONDS OR OTHER NEGOTIABLE TREASURY OBLIGATIONS IN THAT AMOUNT WITHIN 30 DAYS OF THE AUGUST 13, 1957, EXECUTIVE DATE OF THE LEASE WOULD BE DEEMED A VIOLATION OF THE LEASE SUBJECTING IT TO CANCELLATION IN ACCORDANCE WITH ARTICLE 27 AND FORFEITURE OF ADVANCE RENTALS AS LIQUIDATED DAMAGES. ARTICLE 27 PROVIDED FOR LEASE FORFEITURE IN ACCORDANCE WITH 25 CFR 171. THAT REGULATION, AT PARAGRAPH 171.22, STATED:

"* * * THE FAILURE OF A LESSEE OR PERMITTEE WITHIN THE PRESCRIBED TIME TO FURNISH SATISFACTORY REASONS WHY THE LEASE OR PERMIT SHOULD NOT BE CANCELED SHALL RESULT IN THE CANCELLATION OF THE INSTRUMENT. * * *"

WHILE YOU STATE THAT, WITHIN 24 HOURS OF THE TIME DESIGNATED FOR POSTING THE $5,000,000 BOND, THE DEPARTMENT OF INTERIOR WAS NOTIFIED THAT IT HAD BEEN OBTAINED, THE CONTRACT DESIGNATES THE TIME FOR FURNISHING THE BOND TO BE WITHIN 30 DAYS OF AUGUST 13, 1957, AND THE RECORD SHOWS THAT ALMOST SEVEN MONTHS AFTER THE LEASE LIMITATION PERIOD FOR DELIVERY OF THE BOND, THE LESSEE STILL HAD NOT FURNISHED THE BOND SO THAT ON APRIL 8, 1958, A NOTICE WAS ISSUED TO THE LESSEE PROVIDING IT WITH TIME UNTIL MAY 7, 1958, TO SHOW CAUSE WHY THE LEASE SHOULD NOT BE CANCELED FOR FAILURE TO SUPPLY THE BOND. OUR FILE DOES NOT REVEAL WHAT WAS INCLUDED IN THE SHOWING MADE ON BEHALF OF THE LESSEE, BUT WHATEVER REASONS WERE OFFERED FOR NOT CANCELING THE LEASE, THEY WERE DETERMINED NOT TO BE ADEQUATE AS EVIDENCED BY A LETTER OF MAY 13, 1958, TO THE LESSEE ADVISING:

"THE SHOWING WHICH HAS BEEN MADE ON BEHALF OF THE LESSEE, IN RESPONSE TO THE NOTICE TO SHOW CAUSE, HAS BEEN CONSIDERED AND HAS BEEN DETERMINED TO BE INSUFFICIENT. * * *"

THE LETTER THEN ADVISED THE LESSEE THAT AS A RESULT OF SUCH DETERMINATION, EFFECTIVE MAY 13, 1958, THE LEASE WAS CANCELED AND THE $40,000 WAS RETAINED AS LIQUIDATED DAMAGES.

THE HEARING IN 1958 WAS THE PROPER PLACE TO RAISE THE DEFENSES WHICH YOU RAISE NOW. IF THEY WERE PRESENTED AT THAT TIME, THEN APPARENTLY THEY WERE CONSIDERED. IF THEY WERE NOT PRESENTED THEN AND ARE PRESENTED NOW FOR THE FIRST TIME, THEN THEY ARE TOO LATE. AS INDICATED ABOVE, THE REGULATION, INCORPORATED BY REFERENCE IN THE LEASE, PROVIDED THAT THE FAILURE OF THE LESSEE ,WITHIN THE PRESCRIBED TIME" TO FURNISH SATISFACTORY REASONS WHY THE LEASE SHOULD NOT BE CANCELED WOULD RESULT IN CANCELLATION OF THE LEASE AND THE CONTRACT ITSELF PROVIDED FOR FORFEITURE OF THE $40,000 IN THAT EVENT.

UNDER THESE CIRCUMSTANCES WE HAVE NO ALTERNATIVE BUT TO DENY THE CLAIM.