B-148209, JUL. 26, 1962

B-148209: Jul 26, 1962

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MILLER: FURTHER REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 3. CERTAIN QUESTIONABLE PROCEDURES ALLEGED TO HAVE BEEN EMPLOYED BY OFFICIALS OF THE FARMERS HOME ADMINISTRATION STATE OFFICE. YOU STATE THAT THERE SEEMS TO HAVE BEEN SOME COLLUSION BETWEEN MR. 727 WERE IRREGULAR. THAT THE PROPERTY SHOULD HAVE BEEN SOLD ON MR. THAT THE PROPERTY DID NOT INCLUDE SOME VALUABLE TIMBER LAND WHICH MISS DOVE HAD BEEN LED TO BELIEVE WAS PART OF THE TRACT. THAT A CITIZEN OF THE UNITED STATES SHOULD NOT BE FORCED BY HIS GOVERNMENT TO HONOR A CONTRACT THAT WAS ARRIVED AT BY A VERY DEVIOUS AND UNORTHODOX METHOD. WAS ACQUIRED BY THE GOVERNMENT FOR $10. DOVE WHICH WAS PAID BY THE GOVERNMENT. DOVE THAT HE WOULD HAVE TO CHECK ON HOW HE COULD PURCHASE THE PROPERTY WITH THE CHIEF OF PROGRAM OPERATIONS AT THE STATE OFFICE AND THE TRUSTEE HANDLING THE FORECLOSURE SALE.

B-148209, JUL. 26, 1962

TO MR. JOHN G. MILLER:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 3, 1962, PROTESTING ON BEHALF OF MISS IVA G. DOVE AND HER BROTHER, LORY L. DOVE, CERTAIN QUESTIONABLE PROCEDURES ALLEGED TO HAVE BEEN EMPLOYED BY OFFICIALS OF THE FARMERS HOME ADMINISTRATION STATE OFFICE, RICHMOND, VIRGINIA, INCIDENT TO THE SALE OF "THE ROBY MAY FARM" TO MISS DOVE.

SPECIFICALLY, YOU STATE THAT THERE SEEMS TO HAVE BEEN SOME COLLUSION BETWEEN MR. SCHAFFNER, THE ONLY OTHER BIDDER, AND THE FHA RICHMOND OFFICE; THAT THE METHODS USED IN REACHING THE ULTIMATE FIGURE OF $18,727 WERE IRREGULAR; THAT THE PROPERTY SHOULD HAVE BEEN SOLD ON MR. DOVE'S BID OF $13,680 SUBMITTED ON JULY 14, 1961; THAT THE PROPERTY DID NOT INCLUDE SOME VALUABLE TIMBER LAND WHICH MISS DOVE HAD BEEN LED TO BELIEVE WAS PART OF THE TRACT; AND THAT A CITIZEN OF THE UNITED STATES SHOULD NOT BE FORCED BY HIS GOVERNMENT TO HONOR A CONTRACT THAT WAS ARRIVED AT BY A VERY DEVIOUS AND UNORTHODOX METHOD.

EXAMINATION OF THE COMPLETE FHA RECORD IN THE MATTER SHOWS THAT THIS FARM, DESCRIBED AS CONTAINING 335 ACRES AND IMPROVEMENTS THEREON, WAS ACQUIRED BY THE GOVERNMENT FOR $10,000 AT A FORECLOSURE SALE HELD ON NOVEMBER 8, 1960, SUBJECT TO A PRIOR LIEN IN THE AMOUNT OF $2,891.44 HELD BY LORY L. DOVE WHICH WAS PAID BY THE GOVERNMENT; THAT MR. DOVE ATTENDED THE ACTION AND STARTED THE BIDDING BUT DID NOT BID SERIOUSLY FOR THE PROPERTY IN COMPETITION WITH THE FHA BECAUSE, HE SAYS, HE HAD BEEN LED TO BELIEVE BY THE FHA COUNTY SUPERVISOR THAT HE COULD ACQUIRE THE FARM FROM THE GOVERNMENT INVENTORY BY PAYING THE AMOUNT OF THE GOVERNMENT'S INVESTMENT IN THE FARM. THE COUNTY SUPERVISOR STATES THAT PRIOR TO THE FORECLOSURE SALE HE ADVISED MR. DOVE THAT HE WOULD HAVE TO CHECK ON HOW HE COULD PURCHASE THE PROPERTY WITH THE CHIEF OF PROGRAM OPERATIONS AT THE STATE OFFICE AND THE TRUSTEE HANDLING THE FORECLOSURE SALE. THE CHIEF OF PROGRAM OPERATIONS STATES THAT HE ADVISED MR. DOVE THAT HE SHOULD BID ON THE FARM AT THE AUCTION, AND THAT HE (CHIEF OF PROGRAM OPERATIONS) EXPLAINED TO MR. DOVE THAT HE HAD BEEN AUTHORIZED BY THE STATE DIRECTOR TO BID $10,000 FOR THE PROPERTY.

UNDER THE PROVISIONS OF 7 U.S.C 1025 AND 1017 SUCH PROPERTY MAY BE SOLD AT PUBLIC OR PRIVATE SALE TO ANY INDIVIDUAL OR CORPORATION AT THE BEST PRICE OBTAINABLE AFTER PUBLIC NOTICE WITHOUT REGARD TO THE LAWS GOVERNING THE DISPOSITION OF SURPLUS PROPERTY OF THE UNITED STATES.

ON MAY 31, 1961, SEALED BIDS, TO BE OPENED ON JUNE 19, 1961, WERE INVITED AND BY LETTERS DATED MAY 24, 1961, MR. DOVE AND MR. W. H. SCHAFFNER, THE STEPFATHER OF MR. ROBY MAY, THE FORMER OWNER, WERE INFORMED OF THE PROPOSED SALE. MR. DOVE'S BID OF $11,607 AND MR. SCHAFFNER'S BID OF $12,000 WERE THE ONLY BIDS RECEIVED AND BOTH BIDS WERE REJECTED BECAUSE THEY DID NOT EQUAL THE FHA INVESTMENT OF $12,891.44 IN THE PROPERTY, PLUS ADVERTISING COSTS. AFTER REJECTING THE BIDS THE STATE DIRECTOR ADVISED MESSRS. DOVE AND SCHAFFNER, THE ONLY PARTIES INTERESTED IN THE PROPERTY, THAT THE PROPERTY WOULD BE DISPOSED OF BY NEGOTIATED SALE AND THAT THE NEGOTIATIONS WOULD CONTINUE UNTIL ONE PARTY DECLINED TO OFFER AN AMOUNT IN EXCESS OF THE HIGHEST AMOUNT OFFERED BY THE OTHER. THE RECORD SHOWS THAT BETWEEN JUNE 19 AND AUGUST 28, 1961, THE FHA ATTEMPTED TO NEGOTIATE A SALE OF THE PROPERTY TO MESSRS. DOVE AND SCHAFFNER; THAT DURING THIS PERIOD THE STATE OFFICE SET ,DEADLINE" DATES FOR THE RECEIPT OF BIDS, WHICH WERE NOT ENFORCED, AND CONTINUED TO NEGOTIATE WITH THE PROSPECTIVE PURCHASERS AFTER ADVISING EACH BIDDER AT DIFFERENT TIMES THAT HIS NEXT BID WOULD BE THE FINAL BID; THAT IN SOME INSTANCES, THE BID PRICES WERE MADE KNOWN TO THE OTHER PARTY AND IN OTHER INSTANCES THEY WERE NOT; THAT AT VARIOUS TIMES EACH PARTY BELIEVED HE WAS HIGH BIDDER AND THAT THE OTHER PARTY WOULD NOT BE PERMITTED TO MAKE A FURTHER OFFER, BUT THAT IN EACH INSTANCE COMPLAINT BY THE OTHER RESULTED IN HIS BEING ALLOWED TO SUBMIT ANOTHER OFFER UNTIL BY LETTERS OF JULY 28 BOTH BIDDERS WERE ADVISED THAT NONE OF THE PRIOR OFFERS WOULD BE ACCEPTED. DURING THIS PERIOD THE BIDS WERE STARTED AT $12,507 BY MR. DOVE AND WENT TO A HIGH BID OF $15,056 SUBMITTED BY MR. SCHAFFNER.

WITH RESPECT TO MR. DOVE'S BID OF $13,680 ON JULY 14 WHICH YOU SUGGEST SHOULD HAVE BEEN ACCEPTED, THE RECORD SHOWS THAT BY TELEGRAM DATED JULY 11 THE ACTING DEPUTY ADMINISTRATOR HAD WIRED THE STATE DIRECTOR TO ACCEPT MR. DOVE'S BID OF $13,007 SUBMITTED IN AN UNDATED LETTER RECEIVED IN THE STATE OFFICE ON JULY 5, BUT THAT, IN THE MEANTIME, ON JULY 10 THE STATE DIRECTOR HAD WIRED MR. SCHAFFNER TO ADVISE HIM BY TEN O-CLOCK THE FOLLOWING DAY IF HE WAS INTERESTED IN SUBMITTING ANOTHER BID ON THE PROPERTY. BY LETTER DATED JULY 10, MR. SCHAFFNER REPLIED THAT HE HAD BEEN OUT OF TOWN ON THAT DAY; THAT THE TELEGRAPH OFFICE INFORMED HIS SECRETARY OF THE CONTENTS OF THE STATE DIRECTOR'S TELEGRAM OF JULY 10; THAT SINCE MR. DOVE HAD BEEN GRANTED EIGHT DAYS TO SUBMIT HIS FINAL OFFER HE SHOULD BE ACCORDED THE SAME PRIVILEGE; AND THAT HE DESIRED CONFIRMATION OF THIS PRIVILEGE. THE CIRCUMSTANCES, THE STATE DIRECTOR CONCLUDED IN ORDER TO BE FAIR THAT MR. SCHAFFNER SHOULD BE ACCORDED ANOTHER CHANCE TO SUBMIT A FINAL OFFER. ON JULY 11, 1961, THE STATE DIRECTOR TELEPHONED MR. SCHAFFNER AND GAVE HIM UNTIL JULY 14 TO SUBMIT HIS FINAL OFFER. BY LETTER DATED JULY 13 MR. SCHAFFNER SUBMITTED A FINAL OFFER OF $13,675; AND AN UNSIGNED LETTER, ORIGINALLY DATED JULY 15 BUT OVERSTRUCK JULY 14, WAS RECEIVED IN THE STATE OFFICE WHEREIN IT WAS STATED THAT "MY FINAL OFFER ON THE ROBY MAY PROPERTY IS $13,680.' PRESUMABLY, THIS WAS THE BID SUBMITTED BY MR. DOVE WHICH YOU STATE IN FAIRNESS SHOULD HAVE BEEN ACCEPTED.

THE RECORD FURTHER SHOWS THAT THEREAFTER ON JULY 14, 1961, MR. SCHAFFNER WAS ADVISED THAT A HIGH BID OF $13,680 HAD BEEN RECEIVED; THAT BY LETTER DATED JULY 17 HE SUBMITTED ANOTHER OFFER OF $14,135; THAT ON THE SAME DAY THE ACTING STATE DIRECTOR ADVISED BOTH BIDDERS THAT THERE HAD BEEN SOME CONFUSION AS THE RESULT OF DIFFERENT TIMES OF MAIL DELIVERY AND TELEGRAMS; THAT IN AN EFFORT TO BE FAIR THE BIDDERS WERE ADVISED THAT IN ORDER FOR EACH ONE TO HAVE EXACTLY THE SAME OPPORTUNITY FOR NEGOTIATIONS OFFERS WOULD BE RECEIVED AT THE STATE OFFICE THROUGH FRIDAY JULY 21, 1961, AT 4:30 P.M., E.D.T. AND THAT ONLY WRITTEN SIGNED OFFERS WOULD BE CONSIDERED. BY LETTER DATED JULY 19 MR. SCHAFFNER SUBMITTED A "FINAL" OFFER OF $15,065, AND BY LETTER DATED JULY 21 MR. DOVE SUBMITTED AN OFFER OF $14,680, BUT AT THE SAME TIME STATED, IN EFFECT, THAT THIS BID WAS BEING SUBMITTED UNDER PROTEST SINCE HIS BID OF JULY 14 WAS THE HIGHEST NEGOTIATED BID. AFTER CONFERRING WITH OFFICIALS AT FHA HEADQUARTERS IN WASHINGTON, THE STATE DIRECTOR IN IDENTICAL LETTERS TO THE TWO BIDDERS DATED JULY 28 BRIEFLY REVIEWED THE PREVIOUS ATTEMPTS TO DISPOSE OF THE PROPERTY AND STATED THAT THE EXCHANGE OF CORRESPONDENCE AND OTHER COMMUNICATIONS HAD PROVED UNSATISFACTORY IN CONSUMMATING A NEGOTIATED AGREEMENT; THAT CONSEQUENTLY THE GOVERNMENT WOULD NOT ACCEPT ANY OFFER THERETOFORE RECEIVED; THAT IN LIEU THEREOF A MEETING BETWEEN THE INTERESTED PARTIES WOULD BE HELD IN HIS OFFICE AT 10 A.M. ON AUGUST 11, 1961, AT WHICH TIME THE BIDDERS WOULD MAKE THEIR OFFERS VERBALLY IN THE PRESENCE OF EACH OTHER; THAT SUCH OFFERS WOULD BE CONTINUED UNTIL THE HIGH OFFER HAD BEEN ESTABLISHED AT WHICH TIME THE HIGH BIDDER WOULD REDUCE HIS OFFER TO WRITING AND DEPOSIT AT LEAST FIVE PERCENT OF THE AMOUNT OF HIS BID; THAT THE PARTIES WOULD BE ADVISED AT THE MEETING IF AN ACCEPTABLE OFFER HAD BEEN MADE OR WHETHER IT WOULD BE NECESSARY TO READVERTISE THE PROPERTY; AND THAT UNLESS HE RECEIVED WRITTEN REPLIES INDICATING THAT EACH PARTY WOULD PARTICIPATE IN SUCH A MEETING THE PROPERTY WOULD BE ADVERTISED FOR SALE ON THE BASIS OF SEALED BIDS. BY LETTER DATED AUGUST 2, 1961, MR. SCHAFFNER REPLIED THAT HE WAS NOT TOO ENTHUSIASTIC ABOUT THE PROPOSED PLAN BUT WOULD GO ALONG IF MR. DOVE AGREED. MR. DOVE DID NOT REPLY. ACCORDINGLY, BY LETTER DATED AUGUST 14, 1961, THE STATE DIRECTOR NOTIFIED BOTH PARTIES THAT THE PROPERTY WOULD BE READVERTISED BY PUBLIC NOTICE AND THAT BIDS WOULD BE OPENED AT THE STATE OFFICE AT 10 A.M., DAYLIGHT SAVING TIME, AUGUST 28, 1961.

THE RECORD SHOWS THAT PRIOR TO THE BID OPENING DATE MR. DOVE HAD A DISCUSSION WITH MR. SCHAFFNER CONCERNING THE LATTER'S NEXT BID; THAT, SINCE MR. DOVE CALCULATED THAT MR. SCHAFFNER WOULD BID HIGH HE ARRANGED WITH HIS SISTER, IVA G. DOVE,"TO BACK HIM UP BECAUSE THE BIDDING WAS GOING TO GO PRETTY HIGH; " THAT MISS DOVE INFORMED THE INVESTIGATOR THAT WHILE SHE HAD NOT INSPECTED THE PROPERTY SHE AGREED WITH HER BROTHER'S PROPOSAL SINCE SHE TRUSTED HIS JUDGMENT; AND THAT MR. DOVE STATED THAT IN ORDER TO SHOW GOOD FAITH AND TO GIVE HIS SISTER CREDIT FOR THE USE OF SOME OF HER MONEY, A SEALED BID IN THE AMOUNT OF $18,727 WAS SUBMITTED IN HER NAME. SINCE THE ONLY OTHER BID SUBMITTED WAS THAT OF MR. SCHAFFNER, IN THE AMOUNT OF $12,875, THE STATE DIRECTOR BY LETTER DATED AUGUST 28, 1961, NOTIFIED MISS DOVE OF THE ACCEPTANCE OF HER BID IN THE AMOUNT OF $18,727.

IT APPEARS THAT MISS DOVE HAS FAILED TO COMPLETE THE SALE ARRANGEMENTS AS REQUESTED BY FHA; THAT BY LETTER DATED JANUARY 9, 1962, TO THAT AGENCY SHE ADMITTED SHE MADE A MISTAKE IN SUBMITTING A BID FOR $18,727 AND STATED THAT THEREFORE SHE WAS FORCED TO FORFEIT HER DEPOSIT OF $940 BUT THAT IF FHA WOULD ACCEPT $13,000 THROUGH THE FHA 5-YEAR PAYMENT PLAN SHE WOULD SIGN A CONTRACT FOR THIS AMOUNT, EXCLUSIVE OF THE $940 DEPOSIT. IN REPLY OF JANUARY 19, 1962, MISS DOVE WAS ADVISED THAT THE FHA HAD NO AUTHORITY TO MODIFY THE CONTRACT.

THE STATE OFFICE OFFICIALS HAVE READILY ADMITTED THAT THE UNSUCCESSFUL NEGOTIATIONS PRECEDING THE FORMAL ADVERTISEMENT OF THE PROPERTY WHICH RESULTED IN THE SALE OF THE PROPERTY TO MISS DOVE ON AUGUST 28, 1961, WERE POORLY HANDLED BECAUSE OF THE FAILURE TO OBSERVE THE FIXED CLOSING DATES. ALSO, IT HAS BEEN READILY ADMITTED THAT THESE NEGOTIATIONS WERE INDECISIVE AND CONFUSING TO BOTH BIDDERS. THE SALE AS FINALLY CONSUMMATED FOLLOWING THE FORMAL ADVERTISEMENT FOR BIDS TO BE OPENED ON AUGUST 28, 1961, HOWEVER, WAS CONDUCTED IN A REGULAR MANNER UNDER ESTABLISHED PROCEDURE WITH THE INTERESTED PARTIES FULLY CHARGEABLE WITH NOTICE OF THE CONDITION OF THE FARM AND ITS VALUE. IN SUCH CIRCUMSTANCES, UPON ACCEPTANCE OF MISS DOVE'S BID ON AUGUST 28, 1961, A VALID AND SUBSISTING CONTRACT CAME INTO EXISTENCE WHICH NO OFFICER OF THE GOVERNMENT HAS AUTHORITY TO SURRENDER GRATUITOUSLY. SEE UNITED STATES V. AMERICAN SALES CORPORATION, 27 F.2D 389, AFFIRMED 32 F.2D 141, CERTIORARI DENIED, 280 U.S. 574; PACIFIC HARDWARE AND STEEL COMPANY V. UNITED STATES, 49 CT.CL. 327, 335; 14 COMP. GEN. 897, 900; 22 ID. 260.

AS TO YOUR STATEMENT, IN EFFECT, THAT MR. DOVE OR HIS SISTER WOULD BE AVAILABLE FOR A CONFERENCE WITH A VIEW TO ARRIVING AT A MORE EQUITABLE SOLUTION YOU MAY BE ADVISED THAT EQUITY DOES NOT RELIEVE PARTIES FROM THEIR CONTRACTUAL OBLIGATIONS OR REFUSE TO ENFORCE THEIR CONTRACTS BECAUSE IT SUBSEQUENTLY MAY DEVELOP THAT THEY ARE HARSH, OPPRESSIVE, OR UNREASONABLE. APART FROM THAT, THE AUTHORITY OF OUR OFFICE UNDER SECTION 236, REVISED STATUTES, AS AMENDED BY SECTION 305 OF THE BUDGET AND ACCOUNTING ACT OF 1921, 42 STAT. 20, DOES NOT EXTEND TO MATTERS BASED SOLEY ON EQUITABLE OR MORAL OBLIGATIONS OR CONSIDERATIONS.

CONCERNING THE STATEMENT IN YOUR LETTER TO THE EFFECT THAT MISS DOVE AFTER BEING INFORMED OF THE AWARD VISITED THE SITE AND FOUND THAT THE PROPERTY DID NOT INCLUDE SOME VALUABLE ADJOINING TIMBER LAND WHICH SHE WAS LED TO BELIEVE WAS PART OF THE TRACT, THE INVESTIGATOR HAS REPORTED AS FOLLOWS:

"INSOFAR AS MISS DOVE WAS CONCERNED, THIS STATEMENT MAY HAVE BEEN TRUE; HOWEVER, MR. DOVE STATED THAT HE WAS AND IS THOROUGHLY FAMILIAR WITH THE ROBY MAY FARM AND THAT HE FREQUENTLY VISITS THE PROPERTY. FURTHER, IT SHOULD BE NOTED THAT THE ONLY ACCESS ROAD TO THE DOVE PROPERTY IS THROUGH THE ROBY MAY FARM. IT SHOULD BE AGAIN NOTED THAT IN HIS LETTER TO MR. WADDELL (STATE DIRECTOR) DATED OCTOBER 31, 1961, MISS DOVE'S ATTORNEY PLACES MUCH OF THE BLAME FOR THE FALSE INFORMATION CONCERNING THE VALUE OF THE FARM ON LORY L. DOVE. MR. DOVE, IN THE PRESENCE OF HIS SISTER, ADMITTED THAT IN HIS DESIRE TO GET THE PROPERTY HE "LOST HIS HEAD" AND SUBMITTED A BID FOR $18,727. COMPLETE DESCRIPTIONS OF THE PROPERTY WERE ATTACHED TO THE INVITATIONS FOR BIDS (FIRST AND SECOND). THERE WERE NO INDICATIONS THAT THE PROPERTY WAS MISREPRESENTED BY FHA.'

THE INVESTIGATOR HAS FURTHER REPORTED THAT DURING HIS INTERVIEW WITH MR. DOVE AND HIS SISTER MR. DOVE'S ONLY EXPLANATION FOR BIDDING $18,727 FOR THE FARM WAS THAT "I REALLY WANTED THE PROPERTY AND I WAS STUPID AND DUMB FOR GOING THAT HIGH.'

WITH RESPECT TO YOUR STATEMENT TO THE EFFECT THAT THE PROPERTY SHOULD HAVE BEEN SOLD TO MR. DOVE ON THE BASIS OF HIS BID OF JULY 14, 1961, IT HAS BEEN PREVIOUSLY POINTED OUT THAT THIS WAS AN UNSIGNED BID. THEREFORE, IT WAS NOT PROPERLY FOR CONSIDERATION IN ANY EVENT. FURTHERMORE, EVEN IF IT HAD BEEN SIGNED BY MR. DOVE, SINCE THE DISPOSAL WAS BEING ATTEMPTED BY NEGOTIATION, THERE WOULD HAVE BEEN NO REQUIREMENT ON THE STATE DIRECTOR TO ACCEPT MR. DOVE'S BID, PARTICULARLY IN THE LIGHT OF THE CONFUSED STATE AND UNCERTAINTY OF THE BIDDING PREVAILING AT THAT TIME. IN THIS REGARD, OUR OFFICE HAS CONSISTENTLY HELD THAT IN THE CASE OF NEGOTIATED SALES WHERE THE RULES OF FORMALLY ADVERTISED COMPETITIVE BIDDING ARE NOT FOR APPLICATION IT IS THE DUTY OF CONTRACTING OFFICIALS TO CONDUCT THE NEGOTIATION TO THE BEST ADVANTAGE OF THE GOVERNMENT AND TO PLACE THE CONTRACT WITH THE COMPANY OR INDIVIDUAL MAKING THE BEST FINAL PROPOSAL. 37 COMP. GEN. 855; 38 COMP. GEN. 416.

CONSEQUENTLY, SINCE THE RECORD BEFORE OUR OFFICE DOES NOT INDICATE ANY ILLEGALITY OR ABSENCE OF GOOD FAITH ON THE PART OF FHA IN CONSUMMATING THIS SALE AND SINCE IT APPEARS THAT BID UPON WHICH THE AWARD WAS MADE WAS SUBMITTED WITH FULL KNOWLEDGE OF THE CONDITIONS AND AFTER MR. DOVE HAD OBTAINED AN APPRAISAL OF THE PROPERTY BY A REPRESENTATIVE OF THE BANK, WE FIND NO BASIS FOR RELIEVING MISS DOVE FROM HER OBLIGATION UNDER HER CONTRACT.