B-172093, JUN 15, 1971

B-172093, JUN 15, 1971

CONTRACTS - MODIFICATION - INTENT OF PARTIES ADVISING THAT THE CONTRACT BETWEEN THE U.S. AND ROBERT R. WRIGHT WHEREIN THE LATTER AGREED TO CONVEY TO THE U.S. A PARCEL OF LAND ON WHICH A NEW POST OFFICE WOULD BE BUILT IN RETURN FOR THE OLD POST OFFICE BUILDING, POSSESSION AND CONVEYANCE OF WHICH WAS DEFERRED UNTIL THE NEW FACILITY WAS READY, MAY BE REFORMED TO REFLECT THE ACTUAL INTENT OF THE PARTIES AT THE TIME OF AGREEMENT. IT WAS THE MUTUAL BELIEF OF THE PARTIES THAT CONSTRUCTION OF THE NEW FACILITY WOULD PROCEED WITHOUT DELAY AND THAT THE NEW BUILDING WOULD BE COMPLETED BY DECEMBER, 1970. BECAUSE OF REVISED REQUIREMENTS AND REDESIGN PROBLEMS THE CONSTRUCTION WILL NOT BE COMPLETED BEFORE DECEMBER, 1973. THEREFORE, THE CONTRACT MAY BE REFORMED TO ALLOW CONVEYANCE OF THE OLD POST OFFICE TO MR. WRIGHT IN CONSIDERATION OF HIS LEASING BACK THE PROPERTY TO THE GOVERNMENT FOR FAIR RENTAL VALUE.

TO MR. KUNZIG:

BY LETTER DATED MARCH 4, 1971, YOUR GENERAL COUNSEL REQUESTED THIS OFFICE TO APPROVE REFORMATION OF AN AGREEMENT AND DEED DATED MARCH 15, 1967, BETWEEN THE UNITED STATES AND ROBERT R. WRIGHT, ET AL. THE BASIS FOR THE REQUEST IS THAT THE CONTRACT AND DEED DID NOT EXPRESS THE ACTUAL INTENTION OF THE PARTIES BECAUSE OF A MUTUAL MISTAKE OF FACT.

IT IS REPORTED THAT DURING 1966 THE REGIONAL ADMINISTRATOR OF YOUR AGENCY WAS AUTHORIZED TO SELECT A SITE FOR A PROPOSED NEW POST OFFICE AND FEDERAL OFFICE BUILDING IN HOUMA, LOUISIANA, WHICH SITE COULD BE ACQUIRED IN WHOLE OR IN PART BY EXCHANGE.

PART OF THE SITE SELECTED WAS OWNED BY MR. WRIGHT WHO, AFTER CERTAIN PRELIMINARY NEGOTIATIONS, OFFERED TO CONVEY HIS INTEREST IN THE PROPERTY AND PAY TO THE GOVERNMENT $9,000 IN EXCHANGE FOR THE EXISTING HOUMA POST OFFICE BUILDING. THE OFFER WAS MADE ON GSA FORM 1226, AND THE FOLLOWING WAS PROVIDED IN AN ATTACHMENT THERETO:

"IT BEING UNDERSTOOD AND AGREED THAT THE CONVEYANCE BY THE UNITED STATES OF AMERICA TO THE VENDOR SHALL TAKE PLACE WHEN THE NEW POST OFFICE AND FEDERAL OFFICE BUILDING, WHICH IS TO BE CONSTRUCTED PARTIALLY ON LAND TO BE CONVEYED BY VENDOR TO THE UNITED STATES OF AMERICA, HAS BEEN COMPLETED AND THE GOVERNMENT HAS VACATED THE PRESENT POST OFFICE BUILDING SITUATED ON THE LAND TO BE CONVEYED BY THE UNITED STATES OF AMERICA TO THE VENDOR."

WHILE THE ESTIMATED MARKET VALUE OF MR. WRIGHT'S PROPERTY TOTALLED $90,675, AS OPPOSED TO THE EVALUATED PRICE OF $133,000 FOR THE OLD POST OFFICE, SINCE IT WAS ESTIMATED THAT POSSESSION AND CONVEYANCE OF THE POST OFFICE WOULD BE DEFERRED FOR 27 MONTHS (THE TIME ESTIMATED TO CONSTRUCT THE NEW POSTAL FACILITY), THE VALUE OF THE EXISTING POST OFFICE WAS DISCOUNTED AT THE RATE OF 6-1/4 PERCENT TO $116,000. THIS SPREAD, CONSIDERING ALL FACTORS, WAS CONSIDERED REASONABLE AND THE GOVERNMENT ACCEPTED MR. WRIGHT'S OFFER ON AUGUST 19, 1966, BY EXECUTING FORM 1226.

PRIOR TO CLOSING, AND BY LETTER OF JANUARY 19, 1967, MR. WRIGHT'S ATTORNEY PROPOSED THE FOLLOWING AMENDMENTS PERTINENT TO OUR DISCUSSION HERE:

"2. THE PURCHASE AGREEMENT AND DEED ALSO STATE THAT THE CONVEYANCE BY THE UNITED STATES OF AMERICA TO OUR CLIENTS SHALL NOT TAKE PLACE UNTIL THE NEW POST OFFICE AND FEDERAL OFFICE BUILDING HAS BEEN COMPLETED AND THE PRESENT SITE VACATED. THERE IS NO TIME LIMIT FIXED FOR SAID CONVEYANCE. OUR CLIENTS REQUEST A MODIFICATION OF THIS CLAUSE, ALSO, SO THAT A MAXIMUM PERIOD OF THREE YEARS FOR OCCUPANCY BY THE GOVERNMENT WILL BE STATED. SHOULD THE GOVERNMENT OCCUPY THE PRESENT SITE BEYOND SAID DATE, THEN A MONTHLY RENTAL SHOULD BE PAID ON A DETERMINED BASIS. THIS MODIFICATION IS ALSO NECESSARY TO ENABLE OUR CLIENTS TO BORROW FUNDS TO PURCHASE THE SAADI PROPERTY.

"3. OUR CLIENTS FURTHER BELIEVE THAT THE GOVERNMENT SHOULD OBLIGATE ITSELF TO PROPERLY MAINTAIN THE BUILDING ON THE PRESENT SITE UNTIL IT TRANSFERS TITLE THERETO, AND IF ANY LOSS OR DAMAGE OCCURS TO THE BUILDING FROM 'FIRE OR ACTS OF GOD OR ANY OTHER CAUSE PRIOR TO THE VESTING OF TITLE TO SAID PROPERTY,' SAID LOSS OR DAMAGE SHALL BE BORNE BY THE GOVERNMENT."

FOLLOWING A TELEPHONE DISCUSSION BETWEEN GSA'S REGIONAL COUNSEL AND THE ATTORNEY FOR MR. WRIGHT ON JANUARY 27, 1967, YOUR REGIONAL COUNSEL WROTE TO THE ATTORNEY ON THE SAME DATE:

"AS DISCUSSED WITH YOU, THE CONVEYANCE BY THE GOVERNMENT AT THE TIME OF THE CONVEYANCE BY MR. AND MRS. WRIGHT, IN MY OPINION, WILL CONVEY AN INSURABLE INTEREST AND WILL ENABLE THEM, IF THEY SO DESIRE, TO OBTAIN INSURANCE ON THE BUILDING. WHILE I DO NOT THINK IT IS APPROPRIATE THAT SUCH A PROVISION BE PLACED IN THE PROPOSED DEED, AS THE GOVERNMENT WILL BE USING THE OLD POST OFFICE BUILDING UNTIL THE NEW ONE IS COMPLETED, THE GOVERNMENT WILL, OF COURSE, MAINTAIN AND REPAIR THE BUILDING AS NEEDED."

FOLLOWING OTHER COMMUNIQUES BETWEEN COUNSEL FOR BOTH PARTIES AMENDMENT NO. 1 WAS PREPARED, WHEREIN, AMONG OTHER THINGS, MR. WRIGHT AGREED TO PAY TO THE GOVERNMENT THE SUM OF $10,500 INSTEAD OF $9,000 PREVIOUSLY OFFERED. NOWHERE IN THE AMENDMENT WAS THERE A PROVISION OR ESTIMATE FOR A CALENDAR DATE ON WHICH THE NEW BUILDING WOULD BE COMPLETED, NOR ANY AGREEMENT FOR THE PAYMENT OF RENT IN THE EVENT POSSESSION WAS NOT DELIVERED WITHIN A REASONABLE TIME. THE REVISED CONTRACT AND DEED WAS OF THE SAME EFFECT, PROVIDING IN PART:

"IT BEING FURTHER UNDERSTOOD AND AGREED BY AND BETWEEN THE VENDORS AND THE UNITED STATES OF AMERICA THAT THE CONVEYANCE BY THE UNITED STATES OF AMERICA TO THE VENDORS SHALL NOT TAKE PLACE UNTIL THE NEW POST OFFICE AND FEDERAL OFFICE BUILDING, WHICH IS TO BE CONSTRUCTED PARTIALLY ON LAND CONVEYED HEREBY BY VENDORS TO THE UNITED STATES OF AMERICA, HAS BEEN COMPLETED AND THE UNITED STATES OF AMERICA HAS VACATED THE PRESENT POST OFFICE BUILDING SITUATED ON THE LAND TO BE CONVEYED BY THE UNITED STATES OF AMERICA TO VENDORS."

BECAUSE OF REVISED REQUIREMENTS FROM THE POST OFFICE DEPARTMENT AND REDESIGN PROBLEMS, IT IS REPORTED THAT THE MOST OPTIMISTIC DATE FOR COMPLETION IS NOW DECEMBER 1973, AT WHICH TIME THE ESTIMATED FAIR MARKET VALUE OF THE OLD POST OFFICE BUILDING WILL BE $82,750.

WHILE THE RECORD DOES NOT REVEAL WHY ITEMS 2 AND 3 OF THE REQUESTED MODIFICATIONS WERE NOT MADE A PART OF THE AGREEMENT AS EXECUTED, THERE IS LITTLE DOUBT THAT IT WAS THE MUTUAL BELIEF OF THE PARTIES THAT CONSTRUCTION OF THE NEW FACILITY WOULD PROCEED WITHOUT UNDUE DELAY; THAT THE NEW BUILDING WOULD BE COMPLETED NOT LATER THAN DECEMBER 1970; AND THAT CONVEYANCE OF TITLE TO THE OLD POST OFFICE BUILDING WOULD BE ACCOMPLISHED ABOUT THAT TIME. IN THE CIRCUMSTANCES WE BELIEVE THERE IS FOR APPLICATION THE ESTABLISHED RULE OF CONTRACT CONSTRUCTION THAT WHERE, BY REASON OF MUTUAL MISTAKE, A CONTRACT AS REDUCED TO WRITING DOES NOT REFLECT THE ACTUAL INTENTION OF THE PARTIES, THE WRITTEN INSTRUMENT MAY BE REFORMED IF IT CAN BE ESTABLISHED WHAT THE AGREEMENT ACTUALLY WAS. 39 COMP. GEN. 363, 365 (1959). YOUR OFFICE RECOGNIZES THIS PRINCIPLE AND SUGGESTS THAT IF AN AGREEMENT CANNOT BE ACCOMPLISHED BY THE PARTIES, MR. WRIGHT MAY WELL SEEK LEGAL RELIEF BASED ON (1) THE LAPSE OF A REASONABLE TIME FOR THE GOVERNMENT TO PERFORM AND ITS FAILURE TO CONVEY, (2) AND A CONTENTION THAT THE TIME OF CONVEYANCE PROVISION IN THE CONTRACT AND DEED IS A POTESTATIVE CONDITION WHICH IS VOIDABLE UNDER THE LOUISIANA CIVIL CODE. YOUR GENERAL COUNSEL THEREFORE SUGGESTS:

"TO CORRECT THIS SITUATION IN ACCORD WITH THE OBVIOUS EQUITY IN THE CASE AND THE INTENT OF THE PARTIES AT THE TIME OF CONTRACTING, I RECOMMEND THAT GSA BE AUTHORIZED TO ADJUST THE AGREEMENT AND CONVEY THE OLD POST OFFICE TO MR. WRIGHT IN CONSIDERATION FOR HIS LEASING BACK THE PROPERTY TO THE GOVERNMENT FOR THE FAIR RENTAL VALUE AS DETERMINED BY THE ADMINISTRATOR OF GENERAL SERVICES FOR SO LONG AS REQUIRED BY THE GOVERNMENT WITH TERMINATION TO BE AT THE ELECTION OF THE GOVERNMENT ON 30 DAYS' NOTICE. THE ASSURANCE THAT THE PROPERTY WOULD BE LEASED TO THE GOVERNMENT IN LIEU OF PRIVATE INDIVIDUALS FOR SO LONG AS NEEDED WOULD BE THE CONSIDERATION FLOWING TO THE GOVERNMENT."

SINCE THE TIME LIMIT ORIGINALLY INTENDED TO BE FIXED FOR CONVEYANCE BY THE GOVERNMENT HAS RIPENED AND THE NEW POSTAL FACILITY STILL HAS NOT BEEN COMPLETED, MR. WRIGHT WOULD IN OUR VIEW BE CURRENTLY ENTITLED TO SOME FORM OF RELIEF UNDER EITHER THEORY OF RECOVERY. CONSEQUENTLY, SINCE THE PARTIES CAN DO FOR THEMSELVES WHAT A COURT WOULD COMPEL THEM TO DO, YOU ARE ADVISED THAT THE AGREEMENT AND DEED OF MARCH 15, 1967, MAY BE REFORMED TO REFLECT THE ACTUAL INTENT OF THE PARTIES AT THAT TIME, AND THE SUGGESTED MODIFICATION IS AUTHORIZED, TAKING INTO ACCOUNT THE CIRCUMSTANCES AS THEY PRESENTLY EXIST.

THE ENCLOSURES FURNISHED WITH THE LETTER OF MARCH 4, 1971, ARE RETURNED.