B-166268, MAR. 27, 1969

B-166268: Mar 27, 1969

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CHORPENNING WAS REQUIRED TO DEPOSIT $600 AS EARNEST MONEY. THE PURCHASE AGREEMENT PROVIDED AS FOLLOWS: "THIS DEAL IS ACCEPTED BY SELLERS SUBJECT TO WRITTEN NOTICE TO PURCHASERS HEREIN BY MIDNIGHT JULY 14. THAT THE PREVIOUS EARNEST MONEY IS NO LONGER VALID.'. YOU EXPLAIN THAT THE ABOVE-QUOTED PROVISION WAS IN RECOGNITION OF A LOCAL PRACTICE OF ACCEPTING OFFERS TO PURCHASE REAL ESTATE IN A SERIES FROM MORE THAN ONE PROSPECTIVE PURCHASER AND FINALLY GRANTING THE SALE TO THE FIRST PERSON WHO COULD MEET THE FINANCING AND OTHER REQUIREMENTS OF THE CONTRACT. CHORPENNING WAS ADVISED BY HIS AGENT THAT THE ONE APPLICANT AHEAD OF HIM IN THE SERIES COULD NOT QUALIFY FOR A MORTGAGE LOAN AND THAT. CHORPENNING RELIED UPON SUCH STATEMENT AND CONTINUED TO BELIEVE THAT THE PROPERTY WOULD BE AVAILABLE FOR HIS PURCHASE UNTIL LATE IN JULY 1967 (SUBSEQUENT TO JULY 14) WHEN HIS EARNEST MONEY WAS REFUNDED TO HIM WITH THE ADVICE THAT THE PROPERTY HAD BEEN SOLD TO THE OTHER APPLICANT.

B-166268, MAR. 27, 1969

TO KEITH L. SEEGMILLER, ESQUIRE:

THIS REFERS TO YOUR LETTER OF JANUARY 6, 1969, WITH ENCLOSURES, WRITTEN ON BEHALF OF MR. DALE W. CHORPENNING, AN EMPLOYEE OF THE INTERNAL REVENUE SERVICE, REQUESTING REVIEW OF OUR OFFICE SETTLEMENT DATED NOVEMBER 22, 1968, WHICH DISALLOWED THE CLAIM OF MR. CHORPENNING FOR REIMBURSEMENT OF CERTAIN EXPENSES INCURRED BY HIM IN CONNECTION WITH THE PURCHASE OF A RESIDENCE AT HIS NEW OFFICIAL STATION.

THE RECORD SHOWS THAT MR. CHORPENNING REPORTED FOR DUTY AT SEATTLE, WASHINGTON, HIS NEW OFFICIAL STATION, ON AUGUST 1, 1966. ON JUNE 30, 1967, HE SIGNED A CONTRACT FOR THE PURCHASE OF A NEW HOUSE. IN CONNECTION THEREWITH MR. CHORPENNING WAS REQUIRED TO DEPOSIT $600 AS EARNEST MONEY. THE PURCHASE AGREEMENT PROVIDED AS FOLLOWS:

"THIS DEAL IS ACCEPTED BY SELLERS SUBJECT TO WRITTEN NOTICE TO PURCHASERS HEREIN BY MIDNIGHT JULY 14, 1967, THAT THE PREVIOUS EARNEST MONEY IS NO LONGER VALID.'

YOU EXPLAIN THAT THE ABOVE-QUOTED PROVISION WAS IN RECOGNITION OF A LOCAL PRACTICE OF ACCEPTING OFFERS TO PURCHASE REAL ESTATE IN A SERIES FROM MORE THAN ONE PROSPECTIVE PURCHASER AND FINALLY GRANTING THE SALE TO THE FIRST PERSON WHO COULD MEET THE FINANCING AND OTHER REQUIREMENTS OF THE CONTRACT. IN THAT REGARD, HOWEVER, MR. CHORPENNING WAS ADVISED BY HIS AGENT THAT THE ONE APPLICANT AHEAD OF HIM IN THE SERIES COULD NOT QUALIFY FOR A MORTGAGE LOAN AND THAT, THEREFORE, THE PROPERTY WOULD BE AVAILABLE FOR PURCHASE BY MR. CHORPENNING. YOU SAY THAT MR. CHORPENNING RELIED UPON SUCH STATEMENT AND CONTINUED TO BELIEVE THAT THE PROPERTY WOULD BE AVAILABLE FOR HIS PURCHASE UNTIL LATE IN JULY 1967 (SUBSEQUENT TO JULY 14) WHEN HIS EARNEST MONEY WAS REFUNDED TO HIM WITH THE ADVICE THAT THE PROPERTY HAD BEEN SOLD TO THE OTHER APPLICANT.

ON JULY 27, 1967, MR. CHORPENNING SIGNED A CONTRACT TO PURCHASE A DIFFERENT HOUSE. THAT TRANSACTION WAS CLOSED ON NOVEMBER 17, 1967.

MR. CHORPENNING'S CLAIM FOR REIMBURSEMENT OF THE EXPENSES INCURRED IN CONNECTION WITH SUCH PURCHASE WAS DISALLOWED BY THE CLAIMS DIVISION OF OUR OFFICE UNDER THE PROVISIONS OF SECTION 4.1D OF BUREAU OF THE BUDGET CIRCULAR NO. A-56 WHICH AUTHORIZES REIMBURSEMENT OF OTHERWISE ALLOWABLE EXPENSES PROVIDED:

"THE SETTLEMENT DATES FOR THE SALE AND PURCHASE OR LEASE TERMINATION TRANSACTIONS FOR WHICH REIMBURSEMENT IS REQUESTED ARE NOT LATER THAN ONE YEAR AFTER THE DATE ON WHICH THE EMPLOYEE REPORTED FOR DUTY AT THE NEW OFFICIAL STATION, EXCEPT THAT AN APPROPRIATE EXTENSION OF TIME MAY BE AUTHORIZED BY THE HEAD OF THE DEPARTMENT OR HIS DESIGNEE WHEN SETTLEMENT IS NECESSARILY DELAYED BECAUSE OF LITIGATION.'

YOU BELIEVE THAT ON THE BASIS OF THE FACTS AND CIRCUMSTANCES SET FORTH ABOVE MR. CHORPENNING'S CASE MAY BE VIEWED AS FALLING WITHIN THE EXCEPTION TO THE 1-YEAR LIMITATION PRESCRIBED IN SECTION 4.1D ABOVE. IN THAT REGARD YOU POINT OUT THAT WHILE ACTUALLY NO LITIGATION WAS INVOLVED IN THIS CASE THERE, NEVERTHELESS, EXISTED CLEAR GROUNDS UPON WHICH LITIGATION MIGHT HAVE BEEN INSTITUTED BY MR. CHORPENNING. ADDITIONALLY, YOU STATE:

"* * * IT WOULD SEEM THAT THE PURPOSE OF THE EXCEPTION IN THE REGULATION CLEARLY ENCOMPASSES THE SITUATION HERE PRESENTED AND TO SERVE THAT PURPOSE THE WORD -LITIGATION- OUGHT NOT TO BE RESTRICTED LITERALLY TO REQUIRE ACTUAL INSTITUTION OF LEGAL PROCEEDINGS. RATHER, IT SHOULD BE CONSTRUED TO INCLUDE A LEGITIMATELY LITIGIOUS SITUATION WHICH WAS SETTLED WITHOUT ACTUAL INSTITUTION OF SUIT IN COURT, WHEN, AS HERE, THAT SITUATION DELAYED THE SETTLEMENT DATE.'

WE CONSISTENTLY HAVE HELD THAT THE TERM "LITIGATION" AS USED IN SECTION 4.1D OF CIRCULAR NO. A-56 IS TO BE ACCORDED ITS USUALLY ACCEPTED MEANING, I.E., ACTION BEFORE A COURT. IN A PREVIOUS CASE BEFORE THIS OFFICE THE CLAIMANT PRESENTED AN ARGUMENT SIMILAR TO THE VIEWS EXPRESSED BY YOU CONCERNING LITIGIOUS SITUATIONS. IN THAT CASE THE CLAIMANT ALSO POSSESSED SUFFICIENT GROUNDS FOR INSTITUTING LITIGATION BUT NO SUCH ACTION OCCURRED IN FACT. WE HELD THEREIN THAT THE FACTS DID NOT FALL WITHIN THE EXCEPTION REGARDING LITIGATION. B 164902, AUGUST 9, 1968, COPY HEREWITH. WE FIND NO BASIS FOR REACHING A DIFFERENT CONCLUSION IN THIS CASE. IN YOUR LETTER YOU ALSO PRESENT THE FOLLOWING VIEW:

"IT MAY BE SIGNIFICANT THAT THE REGULATION DOESN-T, BY ITS EXACT TERMS, REQUIRE SETTLEMENT IN FACT WITHIN THE ONE YEAR PERIOD. RATHER, IT SPECIFIES THAT THE -SETTLEMENT DATES' BE WITHIN ONE YEAR. IT IS AT LEAST REASONABLY INFERRABLE THAT THE IMPORTANT FACTOR WAS INTENDED TO BE THE GOOD FAITH ENTERING INTO A PURCHASE CONTRACT WITH -SETTLEMENT DATES' FALLING WITHIN THE PRESCRIBED YEAR, EVEN THOUGH SOME CAUSE, IN GOOD FAITH NOT FORSEEN, MAY DELAY ACTUAL SETTLEMENT BEYOND THE YEAR.'

WE CANNOT ACCEPT THE VIEW THAT APPLICATION OF THE 1-YEAR LIMITATION PERIOD PRESCRIBED IN SECTION 4.1D WAS INTENDED TO BE DEPENDENT UPON A FINDING OF GOOD FAITH. WE FIND NO BASIS FOR CONSTRUING THE TERM "SETTLEMENT DATE" AS MEANING OTHER THAN THE ACTUAL DATE ON WHICH THE PURCHASE OR SALE OF A RESIDENCE IS FINALLY SETTLED.

WHILE WE RECOGNIZE THAT THE PURCHASE OF MR. CHORPENNING'S HOUSE WAS DELAYED BECAUSE OF REASONS BEYOND HIS CONTROL, OUR OFFICE MAY NOT BY DECISION ENLARGE THE SCOPE OF THE REGULATIONS BY CREATING ADDITIONAL EXCEPTIONS TO THE 1-YEAR LIMITATION. THEREFORE, THE DISALLOWANCE OF MR. CHORPENNING'S CLAIM MUST BE AND HEREBY IS SUSTAINED.