B-160256, OCT. 18, 1968

B-160256, OCT. 18, 1968

TO HILBORNE AND CO.:

YOUR LETTER OF JULY 23, 1968, REQUESTS RECONSIDERATION BY OUR OFFICE OF OUR DECISION B-160256, JANUARY 5, 1967, WHICH SUSTAINED THE DISALLOWANCE BY THE UNITED STATES DEPARTMENT OF STATE OF A CLAIM BY DR. J. F. LOPEZ, SINGAPORE, FOR REFUND OF AN AMOUNT ORIGINALLY PAID TO THE AMERICAN CONSULATE GENERAL IN SINGAPORE AS A BID DEPOSIT ON PROPERTY ADVERTISED FOR SALE AND SUBSEQUENTLY SOLD BY THE UNITED STATES GOVERNMENT TO THE NEW ZEALAND GOVERNMENT.

THE CONSULATE GENERAL ISSUED AN INVITATION ON MARCH 19, 1964, SOLICITING BIDS FOR THE PURCHASE OF REAL ESTATE LOCATED AT 13 NASSIM ROAD, SINGAPORE, WHICH BIDDERS WERE INVITED TO INSPECT PRIOR TO 10 A.M., APRIL 20, 1964, THE CLOSING TIME FOR SUBMISSION OF BIDS. THE INVITATION INCLUDED THE FOLLOWING PERTINENT PROVISIONS:

"3) ALL OFFERS ARE TO BE MADE IN WRITING, IN ORIGINAL AND TWO COPIES, AND SHALL BE ACCOMPANIED BY A CERTIFIED CHECK PAYABLE TO THE TREASURER OF THE UNITED STATES IN AN AMOUNT EQUAL TO 5 PERCENT OF THE TOTAL OFFER. THIS EARNEST MONEY WILL BE RETURNED TO THE OFFEROR IF THE OFFER IS NOT ACCEPTED, BUT, IF ACCEPTED, THE EARNEST MONEY SHALL EITHER CONSTITUTE PARTIAL PAYMENT OF THE PURCHASE PRICE OR SHALL BE FORFEITED IF PAYMENT DUE UNDER ANY ACCEPTED OFFER IS NOT PAID ON DATE OF EXECUTION OF THE CONTRACT OF SALE.

"4) NO OFFER WILL BE ACCEPTED UNTIL FIRST APPROVED BY THE UNITED STATES DEPARTMENT OF STATE.

"5) UPON ACCEPTANCE OF AN OFFER AND THE EXECUTION OF A CONTRACT OF SALE WITH PAYMENT IN FULL OF THE PURCHASE PRICE, THE UNITED STATES GOVERNMENT WILL DELIVER TO THE PURCHASER A QUITCLAIM DEED IN ACCORDANCE WITH THE TERMS OF THE CONTRACT OF SALE. THE QUITCLAIM DEED WILL CONVEY THE UNITED STATES GOVERNMENT'S INTEREST IN THE PROPERTY BUT SHALL NOT CONTAIN COVENANTS OF WARRANTY OF TITLE. ALL LOCAL, REGISTRATION AND FISCAL FEES, COMMISSIONS AND TRANSACTION TAXES, IF ANY, SHALL BE FOR THE ACCOUNT OF THE PURCHASER. ALL OFFERS SHALL CONTINUE IRREVOCABLY IN FORCE FOR SIXTY DAYS FROM THE CUT-OFF DATE APRIL 20, 1964 FOR THE SUBMISSION OF OFFERS.

"6) WHEN AN OFFER HAS BEEN AUTHORIZED TO BE ACCEPTED BY THE UNITED STATES DEPARTMENT OF STATE, A DRAFT SALES AGREEMENT SHALL BE PREPARED BY THE CONSULATE GENERAL AND SIGNED BY THE PROSPECTIVE VENDEE AND SUBMITTED TO THE UNITED STATES DEPARTMENT OF STATE FOR APPROVAL BEFORE IT IS SIGNED ON BEHALF OF THE UNITED STATES GOVERNMENT.'

DOCTOR LOPEZ SUBMITTED THE HIGH BID OF $320,000 (MALAYSIAN CURRENCY), WHICH WAS ACCOMPANIED BY A DEPOSIT IN THE AMOUNT OF $16,000. THE BID WAS ACCEPTED BY THE UNITED STATES GOVERNMENT IN MAY 1964 WITH SETTLEMENT SCHEDULED FOR THE END OF JULY 1964. SOMETIME PRIOR TO JULY 31, 1964, DOCTOR LOPEZ REQUESTED POSTPONEMENT OF SETTLEMENT ON THE BASIS THAT THE INDONESIAN CONFRONTATION OF MALAYSIA IN THE FIRST HALF OF 1964 HAD PREVENTED DOCTOR LOPEZ FROM ACQUIRING SUFFICIENT FUNDS TO CONCLUDE THE PURCHASE. IN SEPTEMBER 1964, DOCTOR LOPEZ REQUESTED THAT HE BE PERMITTED TO WITHDRAW FROM THE TRANSACTION AND BE REFUNDED HIS BID DEPOSIT. AFTER CONFERRING WITH THE DEPARTMENT OF STATE, THE CONSULATE GENERAL ADVISED DOCTOR LOPEZ THAT DEFAULT WOULD NECESSITATE FORFEITURE OF HIS DEPOSIT. ACCORDINGLY, DOCTOR LOPEZ REQUESTED A SIX-MONTH EXTENSION OF THE PERIOD OF SETTLEMENT, AND THE DEPARTMENT GRANTED APPROVAL OF THE EXTENSION EFFECTIVE OCTOBER 15, 1964.

UNDER DATE OF DECEMBER 3, 1964, AN OPTION AGREEMENT WAS EXECUTED BY DOCTOR LOPEZ AND THE AMERICAN CONSUL, ACTING FOR THE UNITED STATES GOVERNMENT, WHEREBY DOCTOR LOPEZ WAS GRANTED AN OPTION TO PURCHASE THE PROPERTY FOR THE SAME PRICE AS HIS BID. PERTINENT PROVISIONS OF THE OPTION AGREEMENT READ AS FOLLOWS:

"WHEREAS YOU HAVE TENDERED A BID TO THE AMERICAN CONSULATE GENERAL, SINGAPORE, TO PURCHASE THE ABOVE PROPERTY BELONGING TO THE UNITED STATES OF AMERICA AT A PRICE OF DOLLARS THREE HUNDRED AND TWENTY THOUSAND ($320,000/-) AND HAVE PAID THE SUM OF DOLLARS SIXTEEN THOUSAND ($16,000/-) UNDER AND IN ACCORDANCE WITH THE TERMS OF THE INVITATION TO BID ISSUED BY THE AMERICAN CONSULATE GENERAL.

"AND WHEREAS THE AMERICAN CONSULATE GENERAL HAS ACCEPTED YOUR BID AND YOU ARE REQUIRED UNDER THE INVITATION TO BID TO EXECUTE A CONTRACT FOR SALE.

"AND WHEREAS IN THE EVENTS THAT HAVE HAPPENED YOU ARE NOT DESIROUS OF ENTERING INTO A CONTRACT FOR SALE AT THE PRESENT TIME BUT ARE DESIROUS OF TAKING AN OPTION TO PURCHASE THE PROPERTY ON THE TERMS AND CONDITIONS HEREIN STATED.

"AND WHEREAS THE AMERICAN CONSULATE GENERAL ON BEHALF OF THE UNITED STATES OF AMERICA IN CONSIDERATION OF THE SUM OF DOLLAR ONE ($1/-) NOW PAID TO THE CONSULATE GENERAL AND THE AFORESAID SUM OF DOLLARS SIXTEEN THOUSAND ($16,000/-) BEING TREATED AS OPTION MONEYS HAS AGREED TO GRANT AND HEREBY GRANTS TO YOU AN OPTION TO PURCHASE THE ABOVE PROPERTY AT THE PRICE OF DOLLARS THREE HUNDRED AND TWENTY THOUSAND (320,000/-) ON THE TERMS SET OUT BELOW:--- "/1) THE OPTION SHALL BE EXERCISED BY NOTICE IN WRITING TO THE AMERICAN CONSULATE GENERAL OR TO THEIR SOLICITORS MESSRS. DREW AND NAPIER, CHARTERED BANK CHAMBERS, SINGAPORE, ON OR BEFORE THE 15TH DAY OF MARCH 1965 AT 4 P.M. FAILING WHICH THE OPTION SHALL EXPIRE AND ALL OPTION MONEYS SHALL BELONG ABSOLUTELY TO THE VENDOR PROVIDED ALWAYS THAT IN THE EVENT OF THE OPTION BEING EXERCISED IN ACCORDANCE WITH THE TERMS HEREOF THE OPTION MONEYS WILL BE TREATED AS A DEPOSIT TOWARDS PAYMENT OF THE PURCHASE ICE.'

AS YOU ARE AWARE, DOCTOR LOPEZ DID NOT EXERCISE THE OPTION BY MARCH 15, 1965, BUT SOUGHT ON APRIL 14, 1965, TO OBTAIN A FURTHER EXTENSION OF THE SETTLEMENT DATE ON THE BASIS THAT HE EXPECTED TO COMPLETE A SALE OF THE PROPERTY TO THE NEW ZEALAND GOVERNMENT. THE REQUEST WAS DENIED, THE OPTION HAVING EXPIRED ON MARCH 15, AND THE OPTION MONEYS WERE RETAINED BY THE UNITED STATES. SUBSEQUENTLY, THE NEW ZEALAND GOVERNMENT PURCHASED THE PROPERTY DIRECTLY FROM THE UNITED STATES GOVERNMENT FOR A PRICE OF $335,000.

IN HIS CLAIM, DOCTOR LOPEZ ASSERTED THAT HE HAD A MORAL AND EQUITABLE RIGHT TO THE RETURN OF THE MONEY WHICH HAD BEEN TENDERED WITH HIS BID SINCE HE HAD ENGENDERED THE INTEREST OF THE NEW ZEALAND GOVERNMENT IN THE PROPERTY AND SINCE THE UNITED STATES GOVERNMENT HAD REALIZED FROM THE SALE, IN ADDITION TO THE $16,000 DEPOSIT, $15,000 MORE THAN DOCTOR LOPEZ'S BID PRICE OF $320,000. AS WAS INDICATED ON PAGES 4 AND 5 OF OUR DECISION, HOWEVER, WE CONSIDERED THAT THE MATTER WAS FOR RESOLUTION UNDER THE TERMS OF THE OPTION AGREEMENT, AND ABSENT ANY EXCEPTION TO THE FORFEITURE PROVISIONS THEREOF WE CONCLUDED THAT TITLE TO THE MONEY VESTED IN THE UNITED STATES.

IN YOUR LETTER OF JULY 23 YOU MAKE NO REFERENCE TO THE EFFECT OF THE OPTION AGREEMENT; RATHER, YOU URGE THAT DOCTOR LOPEZ IS ENTITLED TO REFUND OF THE AMOUNT ORIGINALLY SUBMITTED AS A BID DEPOSIT SOLELY ON THE BASIS THAT WITHOUT EXECUTION OF A CONTRACT OF SALE, AFTER THE UNITED STATES ACCEPTED THE BID, AS CONTEMPLATED BY THE INVITATION, THERE WAS NO BINDING AGREEMENT WHICH WOULD JUSTIFY FORFEITURE OF THE BID DEPOSIT UNDER THE APPLICABLE LAW. IN THIS CONNECTION, YOU STATE THAT THE LAW OF SINGAPORE IS IDENTICAL TO THE LAW OF ENGLAND, AND YOU QUOTE EXCERPTS FROM AN OPINION WHICH YOU STATE YOU SOLICITED FROM A MEMBER OF THE BAR OF ENGLAND.

YOUR ADVISER'S OPINION CITES THE RULE FOLLOWED IN ENGLAND IN CASES IN WHICH A MORE FORMAL DOCUMENT FOR THE SALE OF LAND IS TO BE EXECUTED FOLLOWING A PRELIMINARY AGREEMENT; I.E., IT IS A QUESTION OF CONSTRUCTION WHETHER SUCH STIPULATION AMOUNTS TO A CONDITION OR TERM OF THE BARGAIN, IN WHICH CASE THERE IS NO CONTRACT UNTIL THE FORMAL DOCUMENT IS EXECUTED, OR WHETHER IT CONSTITUTES A MERE EXPRESSION OF THE DESIRE OF THE PARTIES AS TO THE MANNER IN WHICH THE TRANSACTION ALREADY AGREED TO WILL IN FACT GO THROUGH, IN WHICH CASE THERE IS A BINDING CONTRACT AND REFERENCE TO A MORE FORMAL DOCUMENT MAY BE IGNORED.

REFERRING SPECIFICALLY TO PARAGRAPHS 5 AND 6 OF THE INVITATION, YOUR ADVISER COMMENTS THAT THE EXECUTION OF A CONTRACT OF SALE WAS A CONDITION OF THE TRANSACTION BUT NO COPY OF SUCH CONTRACT WAS ATTACHED TO THE INVITATION NOR DID THE INVITATION INCLUDE AN ACCURATE DESCRIPTION OF THE PROPERTY AND THE DIMENSIONS THEREOF, AS APPEAR IN THE OPTION AGREEMENT. FURTHER, IT IS ASSERTED THAT THE DEPARTMENT OF STATE MIGHT WELL HAVE REFUSED TO APPROVE THE DRAFT SALES AGREEMENT, AND WITHOUT AGREEMENT BETWEEN THE PARTIES AS TO THE TERMS THEREOF THERE COULD BE NO BINDING CONTRACT. IN ADDITION, IT IS URGED THAT THE REFERENCE IN THE OPTION AGREEMENT TO DOCTOR LOPEZ'S NOT BEING DESIROUS OF ENTERING INTO A CONTRACT FOR SALE AND THE ABSENCE OF ANY ATTEMPT IN THAT INSTRUMENT TO RELEASE DOCTOR LOPEZ FROM ANY "ALLEGEDLY EXISTING BINDING CONTRACT" IS INDICATIVE THAT NO SUCH BINDING CONTRACT THEN EXISTED. FINALLY, YOUR ADVISER PROPOSES THAT SINCE THE FORFEITURE WAS CONTINGENT UPON REFUSAL TO PAY THE PURCHASE MONEY, WHICH WAS NOT DUE UNTIL AFTER ACCEPTANCE OF THE BID AND EXECUTION OF THE CONTRACT OF SALE, ABSENT EXECUTION OF SUCH CONTRACT NO PAYMENT COULD BECOME DUE THEREUNDER AND NO GROUNDS FOR FORFEITURE COULD ARISE.

IN THE LIGHT OF SUCH OPINION, YOU SUGGEST THAT THE MATTER BE SUBMITTED TO AN ENGLISH QUEEN'S COUNSEL OF OUR CHOOSING AND THAT IN THE EVENT AN OPINION FAVORABLE TO DOCTOR LOPEZ IS RENDERED, REFUND BE MADE TO DOCTOR LOPEZ OF THE AMOUNT CLAIMED LESS THE COST OF SUCH OPINION. FURTHER, IN A LETTER DATED MAY 2, 1968, ADDRESSED TO THE UNITED STATES AMBASSADOR IN SINGAPORE, A COPY OF WHICH WAS ENCLOSED WITH YOUR LETTER OF JULY 23, DOCTOR LOPEZ URGES AS AN ADDITIONAL GROUND FOR RETURN OF THE MONEY IN QUESTION THAT THE OPTION WAS GRANTED AT AN INFLATED PRICE SINCE THE USUAL PRICE OF SUCH AN OPTION WAS ONLY $1.

REFERENCE TO HALSBURY'S LAWS OF ENGLAND, VOLUME 34, PART 1, SECTION 3, SUBSECTION (1), PARAGRAPH 345, REVEALS THAT AN OPTION TO PURCHASE LAND IS IN EFFECT AN OFFER, IRREVOCABLE OR REVOCABLE ONLY ON NOTICE MADE BY THE GRANTOR OF THE OPTION, TO SELL THE LAND TO THE GRANTEE, WHICH THE GRANTEE IS ENTITLED TO CONVERT INTO A CONCLUDED CONTRACT OF PURCHASE ON GIVING THE PRESCRIBED NOTICE AND OTHERWISE COMPLYING WITH THE CONDITIONS ON WHICH THE OPTION IS MADE EXERCISABLE IN ANY PARTICULAR CASE, AND THAT AN OPTION TO PURCHASE CREATES AN INTEREST IN THE LAND AND SUBJECT TO THE RULE AGAINST PERPETUITIES MAY BE PHRASED SO AS TO BIND THE SUCCESSOR IN TITLE OF THE LANDLORD. THERE IS NO INDICATION OF ANY STATUTORY LIMITATION ON THE AMOUNT OF MONEY WHICH MAY BE PAID FOR AN OPTION.

DOCTOR LOPEZ DID NOT INSTITUTE ANY ACTION CONTESTING THE DENIAL BY THE UNITED STATES GOVERNMENT IN SEPTEMBER 1964 OF HIS REQUEST FOR THE RETURN OF HIS BID DEPOSIT, BUT AGREED TO A SIX-MONTH EXTENSION OF THE SETTLEMENT DATE AND PROCEEDED TO BECOME PARTY TO AN OPTION AGREEMENT IN DECEMBER 1964 WHEREBY THE BID DEPOSIT BECAME OPTION MONEYS, I.E., PART OF THE PRICE PAID FOR THE OPTION TO PURCHASE THE PROPERTY, WHICH, THOUGH CREDITABLE TOWARDS THE PURCHASE PRICE UPON EXERCISE OF THE OPTION, BECAME THE ABSOLUTE PROPERTY OF THE UNITED STATES GOVERNMENT UPON DOCTOR LOPEZ'S FAILURE TO TIMELY EXERCISE THE OPTION. ACCORDINGLY, ANY OPINION THAT MIGHT NOW BE OBTAINED, EVEN FROM A COURT OF COMPETENT JURISDICTION, ON THE RIGHTS OF THE PARTIES PRIOR TO THE EXECUTION OF THE OPTION AGREEMENT WOULD BE PURELY ACADEMIC, THE MATTER BEING FOR RESOLUTION UNDER THE OPTION AGREEMENT WHICH CREATED ENTIRELY NEW RIGHTS AND OBLIGATIONS SUPERSEDING THOSE CREATED BY THE BID AND ACCEPTANCE. THEREFORE, ASIDE FROM THE FACT THAT THE USE OF ANY PORTION OF THE MONEYS IN QUESTION TO PAY FOR SUCH AN OPINION IS QUESTIONABLE, SINCE THE RESPONSIBILITY FOR THE EXPENSE OF PURSUING HIS CLAIM RESTS ON DOCTOR LOPEZ, WE MUST DECLINE TO ADOPT YOUR SUGGESTION REGARDING SOLICITATION OF AN OPINION FROM AN ENGLISH QUEEN'S COUNSEL.

AS TO THE PRICE WHICH WAS PAID FOR THE OPTION, IT OUR VIEW THAT BARRING ANY STATUTORY LIMITATION ON THE AMOUNT PAYABLE FOR A PURCHASE OPTION IN SINGAPORE, THE MERE POSSIBILITY THAT THE USUAL FEE THEREFOR MIGHT HAVE BEEN MUCH LESS THAN THE AMOUNT IN QUESTION DOES NOT RENDER THE OPTION INVALID OR CREATE ANY ENTITLEMENT TO REFUND OF THE OPTION MONEYS.

IN THE CIRCUMSTANCES, WE MUST ADHERE TO THE CONCLUSION IN OUR DECISION OF JANUARY 5, 1967, THAT DISALLOWANCE OF DOCTOR LOPEZ'S CLAIM BY THE DEPARTMENT OF STATE WAS LEGALLY PROPER.