B-182535, JAN 16, 1975

B-182535: Jan 16, 1975

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EMPLOYEE WHO SOLD RESIDENCE AND 38 ACRES OF LAND ON WHICH RESIDENCE WAS LOCATED AND WAS ALLOWED BY ADMINISTRATIVE AGENCY 50 PERCENT OF REIMBURSABLE EXPENSES OF SALE ON BASIS OF HIS OWN UNSUPPORTED VALUATION OF THE RESIDENCE AND LAND RELATED TO ITS SITE. IS ENTITLED TO SUBMIT NEW EVIDENCE TO ADMINISTRATIVE AGENCY CONSISTING OF ZONING ORDINANCES AND EXPERT OPINION BY REALTORS SHOWING PROPER VALUATION OF LAND WHICH REASONABLY RELATED TO THE RESIDENCE SITE AND ADMINISTRATIVE AGENCY MAY RECONSIDER CLAIM IN LIGHT OF PERTINENT REGULATIONS AND GUIDELINES IN B-182203. WAS TRANSFERRED FROM THE U.S. 200.00 TITLE INSURANCE POLICY 265.50 LEGAL FEES 125.00 REVENUE STAMPS 70.00 HE WAS ALLOWED $25 OF THE LEGAL FEES.

B-182535, JAN 16, 1975

EMPLOYEE WHO SOLD RESIDENCE AND 38 ACRES OF LAND ON WHICH RESIDENCE WAS LOCATED AND WAS ALLOWED BY ADMINISTRATIVE AGENCY 50 PERCENT OF REIMBURSABLE EXPENSES OF SALE ON BASIS OF HIS OWN UNSUPPORTED VALUATION OF THE RESIDENCE AND LAND RELATED TO ITS SITE, BUT WHO LATER CHALLENGED SUCH VALUATION, IS ENTITLED TO SUBMIT NEW EVIDENCE TO ADMINISTRATIVE AGENCY CONSISTING OF ZONING ORDINANCES AND EXPERT OPINION BY REALTORS SHOWING PROPER VALUATION OF LAND WHICH REASONABLY RELATED TO THE RESIDENCE SITE AND ADMINISTRATIVE AGENCY MAY RECONSIDER CLAIM IN LIGHT OF PERTINENT REGULATIONS AND GUIDELINES IN B-182203, JANUARY 16, 1975.

JOHN A. MANO - PRO RATA REIMBURSEMENT OF REAL ESTATE EXPENSES:

THIS MATTER ARISES FROM A REQUEST FOR RECONSIDERATION OF SETTLEMENT CERTIFICATE NO. Z-2546386, ISSUED BY OUR TRANSPORTATION AND CLAIMS DIVISION (TCD) ON SEPTEMBER 23, 1974, WHICH DISALLOWED MR. JOHN A. MANO'S RECLAIM FOR FURTHER REIMBURSEMENT OF REAL ESTATE EXPENSES INCURRED INCIDENT TO A TRANSFER OF OFFICIAL DUTY STATION.

MR. MANO, AN EMPLOYEE OF THE DEFENSE SUPPLY AGENCY (DSA), WAS TRANSFERRED FROM THE U.S. ARMY MUNITIONS COMMAND, JOLIET, ILLINOIS, TO THE DEFENSE CONTRACT ADMINISTRATION SERVICES DISTRICT, VAN NUYS, CALIFORNIA, UNDER THE AUTHORITY OF TRAVEL ORDER NO. 10,469, ISSUED JUNE 18, 1973. INCIDENT TO THIS TRANSFER, MR. MANO SOLD PROPERTY AT HIS OLD DUTY STATION WHICH CONSISTED OF A 38 ACRE TRACT OF LAND CONTAINING A DWELLING HOUSE WITH AN ATTACHED GARAGE, AN UNATTACHED DOUBLE STALL GARAGE, A CHICKEN COOP, A BARN, AND A SMALL STORAGE BUILDING FOR A TOTAL SALES PRICE OF $70,000. FROM THAT SALE HE CLAIMED REIMBURSEMENT FOR THE FOLLOWING EXPENSES:

REAL ESTATE COMMISSION (6 PERCENT OF $70,000) $4,200.00

TITLE INSURANCE POLICY 265.50

LEGAL FEES 125.00

REVENUE STAMPS 70.00

HE WAS ALLOWED $25 OF THE LEGAL FEES, THE CUSTOMARY COST OF PREPARING A DEED AND STATE REVENUE STATEMENT, WITH THE REMAINDER DISALLOWED BECAUSE THE BILL WAS NOT ITEMIZED. FOR EACH OF THE OTHER ITEMS HE WAS ALLOWED 50 PERCENT OF THE AMOUNT CLAIMED ON THE GROUND THAT THE VALUE OF THE RESIDENCE AND RELATED PROPERTY CONSTITUTED ONE-HALF OF THE TOTAL SALES PRICE. BY VOUCHER NUMBER 407453, JANUARY 25, 1974, HE WAS REIMBURSED $2,517 DETERMINED ADMINISTRATIVELY AS PROPER FOR REAL ESTATE EXPENSES WHICH INCLUDED $2,292.75 FOR EXPENSES INCIDENT TO THE SALE OF HIS RESIDENCE.

THE VALUE DETERMINATION WAS BASED UPON A MEMORANDUM OF A TELEPHONE CONVERSATION BETWEEN MR. MANO AND MR. JOHN A. ROCK, AN ATTORNEY-ADVISOR WITH DSA. DURING THAT CONVERSATION, MR. MANO GAVE A DESCRIPTION OF THE HOUSE AND ESTIMATED THAT ALL OF THE OUT-BUILDINGS WERE WITHIN ABOUT 200 FEET OF THE HOUSE. THE MEMORANDUM ALSO INDICATES THAT MR. MANO PROVIDED THE FOLLOWING INFORMATION:

"THE ESTIMATED VALUE OF THE HOUSE IS THOUGHT TO BE $30,000.00 TO $35,000.00. APPROXIMATELY ONE ACRE OF LAND IS IN TIMBER. 1-1 1/2 ACRES COMPRISE THE YARD SURROUNDING THE RESIDENCE. THE BALANCE OF THE ACREAGE IS UNDER CULTIVATION. THE LAND IS ESTIMATED TO BE WORTH $800.00 TO $1,000.00 PER ACRE."

FROM THE ABOVE INFORMATION, A VALUE OF $35,000 WAS PLACED UPON THE HOUSE AND SURROUNDING "YARD."

IN A MEMORANDUM DATED FEBRUARY 4, 1974, MR. MANO QUESTIONS SEVERAL POINTS IN MR. ROCK'S MEMORANDUM. INITIALLY HE INDICATES THAT THE ONLY LIMITATION ON REIMBURSEMENT OF WHICH HE WAS AWARE WAS THE OVERALL LIMIT OF $5,000 OR 10 PERCENT OF THE ACTUAL SALES PRICE, WHICHEVER WAS LESS. MR. MANO CONTENDS THAT ALL OF THE DISTANCES AND VALUES IN MR. ROCK'S MEMO WERE ROUGH ESTIMATES WHICH HE GAVE ONLY AFTER BEING PRESSED BY MR. ROCK. STATED, WITH REGARD TO CULTIVATION OF PORTIONS OF THE LAND, THAT 4 ACRES HAD BEEN CULTIVATED THREE TIMES; 22 ACRES HAD BEEN CULTIVATED TWICE; AND 12 ACRES NEVER HAD BEEN CULTIVATED. HE ALSO STATED THAT UNDER THE APPLICABLE ZONING LAWS, THE SMALLEST LOT THAT COULD BE SEPARATED FROM AN EXISTING PARCEL WOULD BE 5 ACRES, BUT HE DID NOT INCLUDE A COPY OF THAT ZONING ORDINANCE NOR ANY STATEMENTS FROM APPRAISERS OR OTHER REAL ESTATE EXPERTS AS TO THE VALUE OF THE LAND AND THE RESIDENCE. WE NOTE THAT THE CONTRACT OF SALE FOR THE PROPERTY INVOLVED CONTAINED A CLAUSE GRANTING THE PURCHASER THE OWNER'S SHARE OF THE CROP WHICH WAS APPARENTLY IN THE GROUND AT THAT TIME. THIS INDICATES THAT AT THE TIME OF THE SALE AT LEAST PART OF MR. MANO'S LAND WAS UNDER CULTIVATION.

THE GOVERNING STATUTORY REGULATION IS FEDERAL TRAVEL REGULATIONS (FPMR 101-7) PARA. 2-6.1F (MAY 1973). THIS WAS FURTHER IMPLEMENTED BY 2 JOINT TRAVEL REGULATIONS PARA. C8350-1 (CHANGE 91, MAY 1, 1973) WHICH PROVIDES IN PERTINENT PART:

"GENERAL. AN EMPLOYEE WILL BE ENTITLED TO REIMBURSEMENT FOR EXPENSES REQUIRED TO BE PAID BY HIM IN CONNECTION WITH THE SALE OF HIS RESIDENCE AT HIS OLD DUTY STATION; *** AFTER HE HAS SIGNED THE REQUIRED TRANSPORTATION AGREEMENT AND PROVIDED THAT:

5. THE EXPENSES FOR WHICH REIMBURSEMENT IS CLAIMED WERE PAID BY THE EMPLOYEE (IF ANY EXPENSES WERE SHARED BY PERSONS OTHER THAN THE EMPLOYEE, REIMBURSEMENT IS LIMITED TO THE PORTION ACTUALLY PAID BY THE EMPLOYEE; OR IF THE RESIDENCE IS A DUPLEX OR OTHER TYPE OF MULTIPLE OCCUPANCY DWELLING WHICH IS OCCUPIED ONLY PARTIALLY BY THE EMPLOYEE, OR WHENEVER THE EMPLOYEE SHARES RESPONSIBILITY FOR A LEASED PROPERTY, SUCH AS A SHARED APARTMENT ARRANGEMENT, EXPENSES WILL BE REIMBURSED ON A PRO RATA BASIS; AND THE EMPLOYEE WILL ALSO BE LIMITED TO PRO RATA REIMBURSEMENT WHEN HE SELLS OR PURCHASES LAND IN EXCESS OF THAT WHICH REASONABLY RELATED TO THE RESIDENCE SITE);"

THIS TYPE OF SITUATION WAS FIRST CONSIDERED BY OUR OFFICE IN B 163187, FEBRUARY 19, 1968 (AT THAT TIME THE UNDERSCORED LANGUAGE IN THE ABOVE QUOTATION HAD NOT YET BEEN MADE PART OF THE REGULATIONS). EVEN THEN WE HELD THAT THERE SHOULD BE A PRORATION OF EXPENSES WHERE A PORTION OF THE PROPERTY INVOLVED WAS INCOME-PRODUCING PROPERTY. SINCE THEN WE HAVE HAD OCCASION TO CONSIDER THIS TYPE OF SITUATION AGAIN AND TO PROVIDE SOME GUIDELINES FOR THE ADMINISTRATIVE AGENCIES FACED WITH SIMILAR PROBLEMS.

AFTER RECEIPT OF HIS REIMBURSEMENT WHICH WAS FOUND PROPERLY DUE BY THE ADMINISTRATIVE AGENCY AND THE DISALLOWANCE OF A PORTION OF HIS CLAIM, MR. MANO FILED A RECLAIM VOUCHER ON FEBRUARY 11, 1974, IN THE AMOUNT OF $2,267.75, REPRESENTING THE ITEMS DISALLOWED BY DSA EXCEPT THE LEGAL FEE. THE VOUCHER WAS SUBMITTED TO OUR TCD AS A DOUBTFUL CLAIM. IN REVIEWING THE MATTER TCD FOUND THAT THERE WAS NO EVIDENCE IN THE RECORD TO SHOW THAT THE AGENCY'S DETERMINATION WAS UNREASONABLE AND BY SETTLEMENT CERTIFICATE OF SEPTEMBER 23, 1974, DISALLOWED THE FULL AMOUNT ON THE RECLAIM VOUCHER OF FEBRUARY 11, 1974.

UPON REVIEW WE FIND THAT CASES SIMILAR TO THE INSTANT CASE WHICH INVOLVE A DETERMINATION OF HOW MUCH OF THE LAND COULD REASONABLY BE RELATED TO THE RESIDENCE SITE ARE BEST RESOLVED AT THE ADMINISTRATIVE AGENCY LEVEL IN ACCORDANCE WITH THE GUIDELINES IN OUR DECISION B-182203 OF TODAY.

APPLYING THESE GUIDELINES TO THE INSTANT CASE, WE FURTHER FIND THAT THE BROKERAGE FEE AS CLAIMED BY MR. MANO IS SUBJECT TO A PRO RATA DETERMINATION SINCE IT IS A DERIVATIVE FEE BASED ON A PERCENTAGE OF THE TOTAL SALE PRICE OF THE PROPERTY. HOWEVER, EVEN THOUGH THE INFORMATION ON WHICH THE ADMINISTRATIVE DETERMINATION WAS BASED WAS SUPPLIED BY MR. MANO, IT IS OUR VIEW THAT THE INFORMALITY IN OBTAINING IT LEAVES ROOM FOR ABUSIVE AND ARBITRARY DETERMINATIONS. THEREFORE, WE BELIEVE THAT THE VALUATION OF PROPERTY WHICH FORMS THE BASIS FOR REIMBURSEMENT OF ALLOWANCES SHOULD NEVER BE BASED ON GUESSWORK, BUT SHOULD BE BASED ON INDEPENDENT AND EXPERT OPINION.

IN THE INSTANT CASE, WE HOLD THAT IN ACCORDANCE WITH THE GUIDELINES IN DECISION B-182203 OF TODAY, MR. MANO IS ENTITLED TO SUBMIT TO THE ADMINISTRATIVE AGENCY EVIDENCE IN THE FORM OF ZONING ORDINANCES AND EXPERT OPINION BY REALTORS IN THE LOCALITY AS TO THE VALUE OF THE HOUSE AND THAT PORTION OF THE LAND AND OUTBUILDINGS WHICH REASONABLY RELATE TO THE RESIDENCE SITE. THAT VALUE SHOULD THEN BE PRORATED TO THE VALUE OF THE ENTIRE PROPERTY AS DETERMINED BY THE SALE PRICE. BASED ON SUCH VALUATION, THE AGENCY MAY PROCEED TO ALLOW ANY AMOUNT FOUND DUE MR. MANO OR IT MAY TAKE COLLECTION ACTION IF IT IS DETERMINED THAT THE 50 50 VALUATION PREVIOUSLY ARRIVED AT RESULTED IN OVERPAYMENTS TO MR. MANO.

THE RECLAIM VOUCHER IS RETURNED HEREWITH FOR FURTHER PROCESSING IN ACCORDANCE WITH THE ABOVE.