B-214, JULY 13, 1939, 19 COMP. GEN. 48

B-214: Jul 13, 1939

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LAND SALES - PRICE REDUCTION - SUBSEQUENTLY DISCOVERED DEFICIENCIES - GOVERNMENT OFFICERS' CONTRACT MODIFICATION AUTHORITY GOVERNMENT OFFICERS ARE NOT AUTHORIZED TO MODIFY THE TERMS OF A CONTRACT BY A SUPPLEMENTAL OR SUBSTITUTE AGREEMENT IF SUCH MODIFICATION IS PREJUDICIAL TO THE INTEREST OF THE UNITED STATES. WHERE IT IS SUBSEQUENTLY DISCOVERED. THAT THE AVERAGE ANNUAL RAINFALL IS GREATER THAN ORIGINALLY BELIEVED AND THAT THE DRAINAGE FACILITIES ARE THEREFORE INADEQUATE AND THE LAND NOT AS PRODUCTIVE AS ANTICIPATED. INFORMATION RELATIVE TO RAINFALL FOR PREVIOUS YEARS WAS AS READILY ACCESSIBLE TO ALL PARTIES AT THE TIME THE APPRAISAL OF THE PROPERTY WAS MADE AS AT A LATER TIME. THERE IS NO EVIDENCE OR ALLEGATION THAT THERE WAS ANY FRAUD.

B-214, JULY 13, 1939, 19 COMP. GEN. 48

LAND SALES - PRICE REDUCTION - SUBSEQUENTLY DISCOVERED DEFICIENCIES - GOVERNMENT OFFICERS' CONTRACT MODIFICATION AUTHORITY GOVERNMENT OFFICERS ARE NOT AUTHORIZED TO MODIFY THE TERMS OF A CONTRACT BY A SUPPLEMENTAL OR SUBSTITUTE AGREEMENT IF SUCH MODIFICATION IS PREJUDICIAL TO THE INTEREST OF THE UNITED STATES, NOR TO GIVE AWAY THE MONEY, PROPERTY OR ANY CLAIM OF THE GOVERNMENT. WHERE IT IS SUBSEQUENTLY DISCOVERED, IN CONNECTION WITH THE SALE OF A TRACT OF LAND TO A RURAL REHABILITATION CLIENT, THAT THE AVERAGE ANNUAL RAINFALL IS GREATER THAN ORIGINALLY BELIEVED AND THAT THE DRAINAGE FACILITIES ARE THEREFORE INADEQUATE AND THE LAND NOT AS PRODUCTIVE AS ANTICIPATED, AND INFORMATION RELATIVE TO RAINFALL FOR PREVIOUS YEARS WAS AS READILY ACCESSIBLE TO ALL PARTIES AT THE TIME THE APPRAISAL OF THE PROPERTY WAS MADE AS AT A LATER TIME, AND THERE IS NO EVIDENCE OR ALLEGATION THAT THERE WAS ANY FRAUD, MISREPRESENTATION, DECEIT, OR CONCEALMENT OF MATERIAL FACTS ON THE PART OF REPRESENTATIVES OF THE GOVERNMENT, UPON WHICH THE PURCHASER RELIED, OR ANY SUCH GROSS ERROR OF JUDGMENT AS TO IMPUTE AN INTENT TO DEFRAUD, THERE IS NO LEGAL AUTHORITY IN ANY GOVERNMENT OFFICER TO REDUCE THE PURCHASE PRICE TO COMPENSATE FOR THE SUBSEQUENTLY ALLEGED PRODUCTIVITY DEFICIENCY.

COMPTROLLER GENERAL BROWN TO THE SECRETARY OF AGRICULTURE, JULY 13, 1939:

YOUR LETTER OF MAY 3, 1939, IS AS FOLLOWS:

REFERENCE IS MADE TO DECISION OF YOUR OFFICE DATED JANUARY 30, 1939, B- 214, CONCERNING THE OBLIGATION TO THE GOVERNMENT OF ONE ELMER LATTA, A CLIENT OF THE FARM SECURITY ADMINISTRATION OF THIS DEPARTMENT. THE DECISION STATED, IN PART, THAT "ON THE PRESENT RECORD, THERE IS NO AUTHORITY FOR ADJUSTMENT OF THE PURCHASE PRICE UNDER THE CONTRACT AS PROPOSED IN THIS OR OTHER SIMILAR ES.'

THE FARM SECURITY ADMINISTRATION HAS SUBMITTED ADDITIONAL FACTS IN CONNECTION WITH THIS MATTER AND REQUESTS THAT, IN VIEW OF THESE FACTS, THE MATTER BE FORWARDED FOR YOUR CONSIDERATION.

AS INDICATED IN MY LETTER OF DECEMBER 21, 1938, MR. LATTA OCCUPIES UNIT NO. 100 ON THE THIEF RIVER FALLS PROJECT UNDER A PURCHASE CONTRACT; NO. A- 2-FSA 95. THE PURCHASE PRICE FOR THIS UNIT WAS FIXED IN THE CONTRACT AT $6,700. THIS PRICE WAS AGREED UPON BETWEEN THE FARM SECURITY ADMINISTRATION AND MR. LATTA AFTER AN APPRAISAL OF THE FARM IN QUESTION, AND UPON THE UNDERSTANDING THAT THE UNIT WAS IN GOOD ORDER AND CONDITION AND CAPABLE OF SUCCESSFUL AGRICULTURAL OPERATIONS, IT BEING CONTEMPLATED THAT BY SUCH OPERATION MR. LATTA WOULD BE REHABILITATED AND WOULD BE ABLE TO LIQUIDATE HIS OBLIGATION TO THE GOVERNMENT. THE ADMINISTRATIVE INVESTIGATION INDICATES THAT AT THE TIME OF THE APPRAISAL, THE RAINFALL AND WEATHER CONDITIONS IN THE VICINITY OF THE PROJECT WERE NOT NORMAL, AND THAT THE TRUE DRAINAGE SITUATION, INVOLVING THE PARTICULAR TERRITORY, COULD NOT BE PROPERLY EVALUATED. THERE WAS TAKEN INTO CONSIDERATION THE YEARLY RAINFALL FOR THE YEARS 1933, 1934, 1935, AMD 1936, WHICH WAS APPROXIMATELY 15 INCHES. A LATER STUDY HAS SHOWN, HOWEVER, THAT THE AVERAGE RAINFALL FOR THE TERRITORY IS APPROXIMATELY 20 INCHES, AND A STUDY MADE BY THE NORTHWEST SCHOOL AND EXPERIMENT STATION OF THE UNIVERSITY OF MINNESOTA AT CROOKSTON, MINNESOTA, INDICATES THAT THE AVERAGE PRECIPITATION FOR 35 YEARS FROM 1900 TO 1935 WAS 19.76 INCHES. THE YEARLY RAINFALL IN THIS VICINITY FOR THE YEAR 1937, ACCORDING TO THE RECORDS OF THE ROSSEAU COUNTY WEATHER STATION, WHICH IS IMMEDIATELY NORTH AND ADJACENT TO THE PROJECT WAS 22.56 INCHES, AND IN THE YEAR 1938 WAS 17.42 INCHES. THE DRAINAGE FACILITIES ON THE PROPERTY INVOLVED ARE ENTIRELY INADEQUATE TO CARE FOR THIS AMOUNT OF RAINFALL, AND ONLY A SMALL PORTION OF THE PROPERTY MAY, THEREFORE, BE CULTIVATED. THE FARM SECURITY ADMINISTRATION HAS DETERMINED THAT HAD THIS FACT BEEN KNOWN AT THE TIME THE ORIGINAL CONTRACT WAS ENTERED INTO, THE SALE PRICE WOULD HAVE BEEN FIXED AT THE SUM OF $4,000, WHICH REPRESENTS THE FAIR MARKET VALUE OF THE PROPERTY.

MR. LATTA IS A RURAL REHABILITATION CLIENT OF THE FARM SECURITY ADMINISTRATION, THAT IS, A FARMER OF EXTREMELY LOW INCOME WHOM THE FARM SECURITY ADMINISTRATION IS ATTEMPTING TO REHABILITATE. THE PRODUCTIVE CAPACITY OF THE TRACT OCCUPIED BY MR. LATTA IS SUCH THAT IT IS THE OPINION OF THE ADMINISTRATIVE OFFICIALS OF THE FARM SECURITY ADMINISTRATION THAT MR. LATTA WILL BE UNABLE TO MAKE THE REQUISITE PAYMENTS IN THE EVENT THAT THE PURCHASE PRICE CANNOT BE REDUCED AS ADMINISTRATIVELY DESIRED. INDICATED, IF THE FACTS CONCERNING THE AVERAGE RAINFALL AND THE INADEQUACY OF THE DRAINAGE FACILITIES HAD BEEN KNOWN AT THE TIME THE CONTRACT WAS ENTERED INO, THE SALE PRICE WOULD HAVE BEEN FIXED AT $4,000 RATHER THAN AT $6,700.

ON THE BASIS OF THE ADDITIONAL FACTS SET FORTH HEREIN AND THE ADMINISTRATIVE DETERMINATIONS MADE IN CONNECTION WITH THIS MATTER, YOUR OPINION IS RESPECTFULLY REQUESTED AS TO WHETHER OBJECTION NEED BE RAISED TO THE PROPOSED ADJUSTMENT IN THE SALE PRICE OF THE ABOVE DESCRIBED TRACT. A SIMILAR DRAINAGE PROBLEM EXISTS WITH RESPECT TO SEVERAL OTHER UNITS AT THIS PROJECT. YOU ARE REQUESTED, THEREFORE, TO ADVISE WHETHER SUCH OTHER CASES MAY BE HANDLED SIMILARLY, BUT DIRECTLY, BY THE FARM SECURITY ADMINISTRATION, PROVIDED THAT A COMPLETE ADMINISTRATIVE REPORT, TOGETHER WITH EACH MODIFIED AGREEMENT, IS FILED WITH THE GENERAL ACCOUNTING OFFICE.

YOUR LETTER OF DECEMBER 21, 1938, WAS TO THE EFFECT THAT AFTER THE LEASE AND PURCHASE CONTRACT IN QUESTION HAD BEEN EXECUTED AND MR. LATTA HAD ENTERED INTO POSSESSION AND OPERATION OF THE LAND, IT WAS DISCOVERED THAT THE DRAINAGE WAS SO POOR AS TO PERMIT CULTIVATION ON ONLY A SMALL PORTION OF THE PROPERTY, AND THAT HAD THAT FACT BEEN KNOWN AT THE TIME THE ORIGINAL CONTRACT WAS ENTERED INTO THE SALES PRICE WOULD HAVE BEEN FIXED AT $4,000 RATHER THAN $6,700 AS THE FAIR MARKET VALUE OF THE PROPERTY. YOUR PRESENT SUBMISSION EXPLAINS THAT AT THE TIME OF APPRAISAL THERE WAS TAKEN INTO CONSIDERATION THE AVERAGE RAINFALL FOR THE YEARS 1933, 1934, 1935, AND 1936, SAID TO BE APPROXIMATELY 15 INCHES, WHILE A LATER SURVEY INDICATED THAT THE AVERAGE ANNUAL RAINFALL FOR THE TERRITORY IS APPROXIMATELY 20 INCHES; THAT A STUDY BY THE NORTHWEST SCHOOL AND EXPERIMENT STATION OF THE UNIVERSITY OF MINNESOTA INDICATES THE AVERAGE YEARLY PRECIPITATION FROM 1900 TO 1935 WAS 19.78 INCHES; THAT THE RAINFALL IN THE VICINITY WAS 22.58 INCHES IN 1937 AND 17.42 INCHES IN 1938, AND THAT THE DRAINAGE FACILITIES ON THE PROPERTY ARE INADEQUATE TO CARE FOR THAT AMOUNT OF RAINFALL, SO THAT ONLY A SMALL PORTION OF THE PROPERTY MAY BE CULTIVATED.

IT IS APPARENT THAT YOUR LETTER OF MAY 3, SUPRA, IS BY WAY OF AMPLIFICATION OF AND NOT ADDITION TO THE SUBMISSION UPON WHICH THE DECISION OF THIS OFFICE OF JANUARY 30, 1939, WAS BASED AND THAT, ASIDE FROM THE FIGURES COVERING THE APPROXIMATE ANNUAL RAINFALL OVER A PERIOD OF YEARS, NO NEW FACTS ARE ADDUCED WHICH WERE NOT BEFORE THIS OFFICE WHEN THAT DECISION TO YOU WAS RENDERED.

IT WOULD APPEAR THAT THE FIGURES RELATIVE TO THE RAINFALL FOR PREVIOUS YEARS WERE AS READILY ACCESSIBLE UPON INQUIRY AT THE TIME THE APPRAISAL OF THE PROPERTY WAS MADE AS AT A LATER TIME, AND THAT THEY WERE EQUALLY ACCESSIBLE TO MR. LATTA AS TO THOSE WHO MADE APPRISAL OF THE PROPERTY, HAD HE SEEN FIT TO MAKE INQUIRY, OR HAD CONSIDERED SUCH DATA OF VITAL IMPORT IN THE TRANSACTION. WHETHER MR. LATTA MADE ANY SUCH INQUIRY, OR WHETHER HE PARTICIPATED IN ANY WAY IN THE ORIGINAL APPRAISAL OF THE PROPERTY IS NOT SHOWN, BUT IT IS PREVALUATION PRIOR TO ENTERING INTO THE CONTRACT. THERE IS NO EVIDENCE AND NO ALLEGATION THAT THERE WAS ANY FRAUD, MISREPRESENTATION, DECEIT, OR CONCEALMENT OF MATERIAL FACTS ON THE PART OF REPRESENTATIVES OF THE GOVERNMENT, UPON WHICH LATTA RELIED, OR ANY SUCH GROSS ERROR OF NOTHING IN THE RECORD TO INDICATE THAT THE PARTIES DID NOT DEAL AT ARM'S LENGTH IN THE WHOLE TRANSACTION, AND A MERE ERROR IN JUDGMENT OR MR. LATTA, OR BOTH, WOULD NOT BE SUFFICIENT TO VITIATE THE MISREPRESENTATION, FRAUD, DECEIT, OR CONCEALMENT OF MATERIAL FACTS BY WHICH MR. LATTA WAS MISLED TO HIS PREJUDICE.

THE FACT THAT IT WAS SUBSEQUENTLY DISCOVERED BY ONE OR BOTH OF THE PARTIES THAT THE AVERAGE ANNUAL RAINFALL IS GREATER THAN ORIGINALLY BELIEVED, THAT THE DRAINAGE FACILITIES ARE INADEQUATE, OR THAT THE LAND, FOR THESE OR OTHER CAUSES, IS NOT AS PRODUCTIVE AS ANTICIPATED, AFFORDS NO LEGAL GROUND FOR THE ACTION PROPOSED BY THE FARM SECURITY ADMINISTRATION. IT IS WELL ESTABLISHED THAT THE MERE FACT THAT THE PECUNIARY RESULT WHICH A CONTRACT HAS PRODUCED HAS NOT COME UP TO THE EXPECTATIONS OF ONE OR BOTH OF THE PARTIES IS NOT SUFFICIENT TO VARY THE TERMS OF THE WRITTEN CONTRACT. AS SAID BY THE COURT IN SIMPSON V. UNITED STATES, 172, U.S. 372, 379:

* * * THE RULE BY WHICH PARTIES TO A WRITTEN CONTRACT ARE BOUND BY ITS TERMS, AND WHICH HOLDS THAT THEY CANNOT BE HEARD TO VARY BY PAROL ITS EXPRESS AND UNAMBIGUOUS STIPULATIONS, OR IMPAIR THE OBLIGATIONS WHICH THE CONTRACT ENGENDERS BY REFERENCE TO THE NEGOTIATIONS WHICH PRECEDED THE MAKING OF THE CONTRACT, OR BY URGING THAT THE PECUNIARY RESULT WHICH THE CONTRACT HAS PRODUCED HAS NOT COME UP TO THE EXPECTATIONS OF ONE OR BOTH OF THE PARTIES, IS TOO ELEMENTARY TO REQUIRE ANYTHING BUT STATEMENT. * *

IT IS EQUALLY WELL SETTLED THAT OFFICERS OF THE GOVERNMENT ARE NOT AUTHORIZED TO MODIFY THE TERMS OF A CONTRACT BY A SUPPLEMENTAL OR SUBSTITUTE AGREEMENT IF SUCH MODIFICATION IS PREJUDICIAL TO THE INTERESTS OF THE UNITED STATES, AND THAT NO OFFICIAL OF THE GOVERNMENT IS AUTHORIZED TO GIVE AWAY THE MONEY, PROPERTY, OR ANY CLAIM OF THE GOVERNMENT. IT WAS SAID BY THE COURT IN PACIFIC HARDWARE AND STEEL COMPANY V. UNITED STATES, 49 CT.CLS. 327, 334:

IT IS UNQUESTIONABLY TRUE THAT AN OFFICIAL OF THE GOVERNMENT IS NOT AUTHORIZED TO GIVE AWAY OR REMIT A CLAIM DUE THE GOVERNMENT. THIS RULE IS GROUNDED IN A SOUND PUBLIC POLICY AND IS NOT TO BE WEAKENED. * * *

ALSO, SEE BAUSCH AND LOMB OPTICAL COMPANY V. UNITED STATES, 78 CT.CLS. 584, 607.

AS THE CASE STANDS, MR. LATTA AND OTHERS WHO, YOU SAY, ARE SIMILARLY SITUATED, ARE IN POSSESSION OF REAL ESTATE PURCHASED FROM THE GOVERNMENT UNDER LEASE AND PURCHASE AGREEMENTS ENTERED INTO IN GOOD FAITH BY THE PARTIES THERETO, AND ARE INDEBTED TO THE GOVERNMENT IN THE AMOUNT COVERING THEIR RESPECTIVE UNDERTAKINGS. WHAT THE FARM SECURITY ADMINISTRATION PROPOSES IS TO REDUCE THE AMOUNTS OF THEIR SEVERAL DEBTS TO THE UNITED STATES, THUS MODIFYING THE CONTRACTS TO THE PREJUDICE OF THE UNITED STATES FOR THE REASON THAT THE PECUNIARY RESULT OF THEIR UNDERTAKINGS HAS NOT COME UP TO THEIR EXPECTATIONS AND THUS, IN EFFECT, GIVING AWAY OR REMITTING CLAIMS OR DEBTS DUE THE GOVERNMENT, WHICH WOULD BE IN CONTRAVENTION OF WELL-ESTABLISHED PRINCIPLES OF LAW.

ACCORDINGLY, YOU ARE INFORMED THAT THERE WOULD APPEAR TO BE NO LEGAL AUTHORITY FOR THE ACTION PROPOSED BY THE FARM SECURITY ADMINISTRATION TO REDUCE THE PURCHASE PRICE OF THE PROPERTY UNDER MR. LATTA'S PURCHASE AGREEMENT AND OTHERS SIMILAR IN FACT, AND THE DECISION OF JANUARY 30, 1939, MUST BE AND IS AFFIRMED.