B-144329, NOVEMBER 21, 1960, 40 COMP. GEN. 309

B-144329: Nov 21, 1960

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AFTER THE PURCHASERS UNDER THE ORIGINAL SALES CONTRACTS WHICH GAVE THE GOVERNMENT A FORFEITURE RIGHT WERE UNABLE TO COMPLETE PAYMENT WITHIN THE SHORT PERIODS OF TIME AND THE GOVERNMENT DETERMINED THAT INVOCATION OF FORFEITURE AND FORECLOSURE WOULD RESULT IN GREATER LOSS TO THE GOVERNMENT. MAY BE REGARDED AS BEING SUPPORTED BY VALID CONSIDERATION FOR THE GOVERNMENT'S WAIVER OF THE RIGHT OF FORFEITURE SINCE NEITHER PARTY TO THE CONTRACTS WAS UNDER ANY LEGAL OBLIGATION BEYOND THE TIME FORFEITURE TOOK EFFECT. NO OBJECTION TO THE LONG-TERM AGREEMENTS WILL BE MADE. WAS ESTABLISHED UNDER THE ACT OF SEPTEMBER 2. THE GLEN CANYON UNIT OF THE COLORADO RIVER STORAGE PROJECT IS LOCATED IN THE AREA. THE WIDEST POSSIBLE RANGE IN COMMERCIAL FACILITIES FOR EMPLOYEES OF BOTH THE CONTRACTOR AND THE BUREAU OF RECLAMATION WAS DESIRED.

B-144329, NOVEMBER 21, 1960, 40 COMP. GEN. 309

CONTRACTS - MODIFICATION - RELEASE OF VESTED RIGHT - CONSIDERATION AGREEMENTS BY THE PURCHASERS OF COMMERCIAL AND INDUSTRIAL LOTS SOLD BY THE GOVERNMENT UNDER AUTHORITY IN THE NAVAJO LAND EXCHANGE ACT OF SEPTEMBER 2, 1958, 72 STAT. 1686, TO MAKE PAYMENT AT REGULAR INTERVALS OVER A PROLONGED PERIOD ON THE OUTSTANDING BALANCE OF THEIR LAND PURCHASERS PRICE, TOGETHER WITH INTEREST ON SUCH BALANCE, AFTER THE PURCHASERS UNDER THE ORIGINAL SALES CONTRACTS WHICH GAVE THE GOVERNMENT A FORFEITURE RIGHT WERE UNABLE TO COMPLETE PAYMENT WITHIN THE SHORT PERIODS OF TIME AND THE GOVERNMENT DETERMINED THAT INVOCATION OF FORFEITURE AND FORECLOSURE WOULD RESULT IN GREATER LOSS TO THE GOVERNMENT, MAY BE REGARDED AS BEING SUPPORTED BY VALID CONSIDERATION FOR THE GOVERNMENT'S WAIVER OF THE RIGHT OF FORFEITURE SINCE NEITHER PARTY TO THE CONTRACTS WAS UNDER ANY LEGAL OBLIGATION BEYOND THE TIME FORFEITURE TOOK EFFECT; THEREFORE, NO OBJECTION TO THE LONG-TERM AGREEMENTS WILL BE MADE.

TO THE SECRETARY OF THE INTERIOR, NOVEMBER 21, 1960:

BY LETTER OF OCTOBER 25, 1960, THE ADMINISTRATIVE ASSISTANT SECRETARY REQUESTED OUR OPINION TO WHETHER FIVE LAPSED AGREEMENTS FOR THE PURCHASE OF LAND AT PAGE, ARIZONA, FROM THE UNITED STATES COULD BE REINSTATED NOTWITHSTANDING THAT THE PURCHASERS HAD FAILED TO COMPLY WITH CERTAIN CONDITIONS THEREBY FORFEITING TO THE GOVERNMENT PAYMENTS THEY HAD MADE UNDER THE AGREEMENTS. FROM THE ASSISTANT SECRETARY'S LETTER, THE FACTS OF THE MATTER MAY BE SUMMARIZED AS FOLLOWS:

THE TOWNSITE OF PAGE, ARIZONA, WAS ESTABLISHED UNDER THE ACT OF SEPTEMBER 2, 1958, 72 STAT. 1686, PROVIDING FOR THE EXCHANGE OF LANDS BETWEEN THE UNITED STATES AND THE NAVAJO TRIBE. UPON COMPLETION OF SUBDIVISION AND ZONING, RESIDENTIAL, COMMERCIAL AND INDUSTRIAL PROPERTIES BECAME AVAILABLE FOR SALE TO PRIVATE PARTIES WHO MIGHT WISH TO ESTABLISH IN THE MUNICIPAL AREA. THE GLEN CANYON UNIT OF THE COLORADO RIVER STORAGE PROJECT IS LOCATED IN THE AREA; AND WITH THE COMMENCEMENT OF CONSTRUCTION WORK ON THE GLEN CANYON DAM, THE WIDEST POSSIBLE RANGE IN COMMERCIAL FACILITIES FOR EMPLOYEES OF BOTH THE CONTRACTOR AND THE BUREAU OF RECLAMATION WAS DESIRED. TO FACILITATE RAPID DEVELOPMENT, COMMERCIAL AND INDUSTRIAL LOTS WERE FIRST LEASED TO THOSE WHO EVIDENCED A BONA FIDE INTENTION OF ESTABLISHING BUSINESS OF THE TOWN OF PAGE AND LATER OFFERED FOR SALE. A CONDITION OF SALE, THE PURCHASERS WERE REQUIRED TO COMPLETE NECESSARY ARRANGEMENTS FOR FINANCING CONSTRUCTION OF PERMANENT BUILDINGS AND TO MAKE PAYMENT OF THE UNPAID BALANCE OF THE PURCHASE PRICE WITHIN 120 DAYS. THE CONTRACTS OF SALE FURTHER PROVIDED THAT UPON THE BUYER'S FAILURE TO MEET THESE AND OTHER CONDITIONS, THE CONTRACT WAS TO TERMINATE AND THE DOWN PAYMENT MADE WAS TO BE DEEMED RENTAL FOR THE PREMISES AND LIQUIDATED DAMAGES PAID TO THE UNITED STATES. BECAUSE IT DEVELOPED THAT THERE WAS NEITHER A LARGE POTENTIAL MARKET FOR THE LOTS NOR ADEQUATE SOURCES OF CREDIT AVAILABLE TO MANY WHO HAD PURCHASED AND WERE MAKING BONA FIDE EFFORTS TO COMPLY WITH THE CONTRACT REQUIREMENTS, ARRANGEMENTS WERE MADE TO EXTEND THE 120-DAY TIME LIMIT TO 240 DAYS. THESE ARRANGEMENTS WERE MADE ON THE CONSIDERATION THAT LOSS OF ANY BUSINESS ENTERPRISES IN PAGE WOULD ADVERSELY AFFECT THE ORDERLY PROGRESS OF PROJECT CONSTRUCTION TO THE DETRIMENT OF UNITED STATES INTERESTS.

DURING THE EXTENSION PERIOD CERTAIN OF THE PURCHASERS WHO HAD PREVIOUSLY USED ALL THEIR AVAILABLE PERSONAL CAPITAL AND EXTENDED THEIR PERSONAL SOURCES OF CREDIT TO THE LIMIT TO FINANCE THE CONSTRUCTION OF THEIR BUSINESS ESTABLISHMENTS FOUND THAT THEY WERE STILL UNABLE TO SECURE THE NECESSARY ADDITIONAL FINANCING TO COMPLETE PAYMENT ON THE PROPERTY INVOLVED. IN THESE CIRCUMSTANCES, RATHER THAN BE FACED WITH THE DETRIMENTAL LOSS TO THE GOVERNMENT MUNICIPALITY OF THE BUSINESS ENTERPRISES INVOLVED, OR BE CONFRONTED WITH THE PROBABLE INABILITY TO DISPOSE OF REPOSSESSED PROPERTY DUE TO THE EXTREMELY LIMITED MARKET, IT WAS DETERMINED THAT UNDER THE AUTHORITY OF THE NAVAJO EXCHANGE ACT OF SEPTEMBER 2, 1958, ABOVE, ADOPTION OF A 5-YEAR PAYMENT PLAN, FOR LIMITED APPLICATION TO INSTANCES SUCH AS THOSE AFORE CITED, WOULD BE IN THE BEST INTEREST OF THE UNITED STATES.

THOSE BUSINESSMEN AFFECTED BY THE ABOVE-DESCRIBED CIRCUMSTANCES WERE CONTACTED AND UNANIMOUSLY AGREED THAT THE 5-YEAR PERIOD CONTEMPLATED WOULD SUFFICE FOR PAYMENT AT REGULAR INTERVALS OF THE OUTSTANDING BALANCE, TOGETHER WITH INTEREST ON THE UNPAID BALANCE, AND THEY INDICATED THEIR WILLINGNESS TO ENTER INTO FORMAL CONTRACTS TO THAT EFFECT AS SOON AS SUCH COULD BE OFFERED THEM. ALTHOUGH EVERY EFFORT WAS MADE TO EXPEDITE COMPLETION OF THE NECESSARY TIME PAYMENT CONTRACT DOCUMENTS, UNFORESEEN DELAYS WERE EXPERIENCED WHICH RESULTED IN THE EXPIRATION OF FIVE PURCHASE AGREEMENTS BEFORE THE TIME PAYMENT DOCUMENTS COULD BE PROVIDED FOR EXECUTION. THE SALES THUS INVOLVED AMOUNT OF A TOTAL OF $66,687.50 ON WHICH $6,668.76 HAS THUS FAR BEEN PAID TO THE UNITED STATES.

THE ASSISTANT SECRETARY STATES THAT ALTHOUGH THE FORFEITURE PROVISION CONTAINED IN THE FIVE SALE DOCUMENTS BECAME OPERABLE IN THE ABOVE- DISCUSSED CIRCUMSTANCES, IT IS THE OPINION OF YOUR DEPARTMENT THAT IT WOULD NOT BE IN THE BEST INTEREST OF THE UNITED STATES TO INVOKE SAME. ADDS THAT ON THE CONTRARY, DUE TO THE LIMITED MARKET FOR SALE OF PROPERTIES IN PAGE, IT IS EXTREMELY DOUBTFUL THAT ANY REPOSSESSED PROPERTIES COULD BE DISPOSED OF WITHOUT INCURRING CONSIDERABLE DIRECT AND INDIRECT FINANCIAL LOSS TO THE GOVERNMENT AND THAT THE UNITED STATES WOULD BE FACED WITH THE ADDED COST OF READVERTISEMENT FOR SALE AND INCREASED SALE ADMINISTRATION COSTS, AS WELL AS COST OF MAINTAINING THE PROPERTIES DURING THE POSSIBILITY PROLONGED PERIOD PRECEDING RESALE, ASSUMING RESALE WERE EVEN POSSIBLE. HE ADDS FURTHER THAT THERE WOULD UNQUESTIONABLY BE A DECREASE IN THE RATE AND EFFICIENCY OF PROJECT CONSTRUCTION AS ESSENTIAL COMMERCIAL FACILITIES BECAME UNAVAILABLE TO RESIDENT EMPLOYEES IN PAGE, AND THEY MOVED ELSEWHERE RATHER THAN SUFFER THE RESULTANT INCONVENIENCE. IN THESE CIRCUMSTANCES THE ASSISTANT SECRETARY CONCLUDES THAT THE $6,668 IN PAYMENTS THUS FAR MADE ON SAID PURCHASE AGREEMENTS WOULD NOT, IF FORFEITED, COMPENSATE FOR THE TOTAL LOSS THE GOVERNMENT WOULD PROBABLY INCUR IF FORECLOSURE AND THE ACTIONS PREPARATORY TO RESALE WERE TO BECOME NECESSARY; THAT BY REINSTATING THE SALE AGREEMENTS THE UNITED STATES WILL BE ASSURED OF THE DISPOSITION OF THE PROPERTY AND RECEIPT OF THE $60,019 OUTSTANDING BALANCE PLUS SUCH INTEREST AS WILL ACCRUE OVER THE REPAYMENT PERIOD WITHOUT ADDITIONAL DISPROPORTIONATE COST TO THE GOVERNMENT.

THE SOLE QUESTION TO BE ANSWERED IS WHETHER IN THE ATTENDANT CIRCUMSTANCES YOU MAY IGNORE THE GOVERNMENT'S VESTED RIGHT TO FORFEITURE OF THE DOWN PAYMENTS MADE BY THE FIVE PURCHASERS WHOSE CONTRACTS TERMINATED BY VIRTUE OF THEIR NOT HAVING FULFILLED THE STIPULATED CONDITIONS WITHIN THE TIME ALLOWED.

THE RULE IS WELL ESTABLISHED THAT NO OFFICER OR AGENT OF THE GOVERNMENT HAS AUTHORITY TO GIVE AWAY THE MONEY OR PROPERTY OF THE UNITED STATES EITHER DIRECTLY OR BY THE RELEASE OF VESTED CONTRACTUAL RIGHTS, WITHOUT ADEQUATE LEGAL CONSIDERATION. BAUSCH AND LOMB OPTICAL COMPANY V. UNITED STATES, 78 CT. CL. 584, 607, CERTIORARI DENIED 292 U.S. 645. THIS RULE IS GROUNDED IN SOUND PUBLIC POLICY AND IS NOT TO BE WEAKENED. PACIFIC HARDWARE AND STEEL COMPANY V. UNITED STATES, 49 CT. CL. 327, 335. HOWEVER, AN INSPECTION OF THE FACTS IN THE MATTER WILL REVEAL THAT WAIVER OF THE FORFEITURE PROVISIONS IS NOT IN DEROGATION OF THE ESTABLISHED RULE REQUIRING CONSIDERATION FOR THE RELEASE OF A VESTED CONTRACTUAL RIGHT. "CONSIDERATION" IN THE LEGAL SENSE OF THE WORD IS SOME RIGHT, INTEREST, BENEFIT, OR ADVANTAGE CONFERRED ON THE PROMISOR TO WHICH HE IS OTHERWISE NOT LAWFULLY ENTITLED, OR ANY DETRIMENT, PREJUDICE, LOSS, OR DISADVANTAGE SUFFERED OR UNDERTAKEN BY THE PROMISEE OTHER THAN SUCH AS HE IS AT THE TIME OF CONSENT LAWFULLY BOUND TO SUFFER. CUNEO PRESS, INC. V. CLAYBURN CORPORATION, 90 F.2D 233. SINCE NEITHER PARTY TO THE CONTRACTS INVOLVED WAS UNDER ANY LEGAL DUTY BEYOND THE POINT IN TIME AT WHICH THE FORFEITURE PROVISIONS TOOK EFFECT, IT IS CLEAR THAT AGREEMENT BY THE PURCHASERS TO MAKE PAYMENT AT REGULAR INTERVALS ON THE OUTSTANDING BALANCE OF THEIR LAND PURCHASE PRICE TOGETHER WITH INTEREST ON THE UNPAID BALANCE CONSTITUTES "CONSIDERATION" FOR THE GOVERNMENT'S WAIVER OF THE RIGHT TO FORFEITURE. AND THERE IS NO QUESTION BUT THAT EXECUTION OF SUCH AN AGREEMENT IS WITHIN YOUR AUTHORITY UNDER SECTION 2 (A) OF THE ACT, 72 STAT. 1688,"TO DISPOSE OF LOTS * * * UNDER SUCH TERMS AND CONDITIONS AS (YOU DETERMINE) TO BE APPROPRIATE * * *.' THAT THE ORIGINAL AGREEMENTS TECHNICALLY TERMINATED IS NOT MATERIAL BECAUSE BY REINSTATEMENT THEY BECOME NEW AGREEMENTS.

ACCORDINGLY, WE WOULD NOT BE REQUIRED TO OBJECT TO YOUR REINSTATEMENT OF THE FIVE LAPSED AGREEMENTS AS PROPOSED.