B-4481, AUGUST 17, 1939, 19 COMP. GEN. 222

B-4481, AUGUST 17, 1939, 19 COMP. GEN. 222

LEASES - HOLDING OVER, AND CONVEYANCE OF LAND TO LESSEE - RENT PAYABLE, AND EFFECTIVE DATE OF THE DEED A SO-CALLED LEASE ENTERED INTO LONG AFTER THE END OF THE PERIOD PURPORTED TO BE COVERED THEREBY CANNOT BE VIEWED AS IMPOSING ON THE GOVERNMENT AN OBLIGATION GREATER THAN OTHERWISE EXISTED, AND AS THERE EXISTED A LEASE COVERING THE SAME PROPERTY AND PURPOSES FOR A PERIOD IMMEDIATELY PRIOR TO THE PERIOD OF THE SO-CALLED LEASE AND AS THE GENERAL RULE IS THAT IF A TENANT HOLDS OVER AFTER THE EXPIRATION OF HIS LEASE WITH THE EXPRESS OR IMPLIED CONSENT OF THE LANDLORD, BUT WITHOUT ANY NEW AGREEMENT, THE LAW IMPLIES A CONTINUANCE OF THE TENANCY UPON THE SAME TERMS AS IN THE ORIGINAL AGREEMENT, PAYMENTS FOR THE PERIOD SUBSEQUENT TO THE ORIGINAL LEASE ARE FOR COMPUTATION ON THE BASIS OF THE ORIGINAL AND NOT THE SO- CALLED SUBSEQUENTLY EXECUTED LEASE. AS IT IS WELL SETTLED THAT WHEN LAND IS HELD BY THE UNITED STATES UNDER A LEASE AND TITLE THERETO IS ACQUIRED BY THE UNITED STATES, THE GOVERNMENT IS NOT LIABLE FOR THE PAYMENT OF ANY RENT WHICH DID NOT BECOME DUE AND PAYABLE PRIOR TO THE EFFECTIVE DATE OF THE DEED CONVEYING TITLE TO THE UNITED STATES, NO RENT IS PAYABLE FOR ANY PART OF THE MONTH OF THE EFFECTIVE DATE OF THE DEED WHERE THE RENTAL UNDER THE LEASE WAS PAYABLE MONTHLY IN ARREARS AND THE LEASE DOES NOT PROVIDE FOR THE APPORTIONMENT OF RENT AND THE DATE OF THE DEED IS A DATE PRIOR TO THE END OF THE MONTH. IT IS ESSENTIAL TO THE VALIDITY OF A DEED AS CONVEYING THE TITLE THAT THERE BE A DELIVERY OF THE DEED AND AN ACCEPTANCE OF THE INSTRUMENT BY THE GRANTEE. WHERE IN CONNECTION WITH THE EXCHANGE OF PRIVATELY OWNED LANDS FOR THE BENEFIT OF THE INDIANS UNDER AUTHORITY OF THE ACT OF MARCH 3, 1921, 41 STAT. 1239, THE DEED OF CONVEYANCE IS CONSIDERED AS A PART OF THE APPLICATION AND NOT AS A CONVEYANCE UNTIL THERE IS ADMINISTRATIVE APPROVAL OF THE CONTEMPLATED EXCHANGE, THE RULE THAT WHEN LAND IS HELD BY THE UNITED STATES UNDER A LEASE AND TITLE THERETO IS ACQUIRED BY THE UNITED STATES, THE GOVERNMENT IS NOT LIABLE FOR THE PAYMENT OF ANY RENT WHICH DID NOT BECOME DUE AND PAYABLE PRIOR TO THE EFFECTIVE DATE OF THE DEED CONVEYING TITLE TO THE UNITED STATES, IS APPLICABLE ONLY AS OF THE DATE OF FINAL APPROVAL OF THE EXCHANGE.

COMPTROLLER GENERAL BROWN TO THE SECRETARY OF THE INTERIOR, AUGUST 17, 1939:

THERE HAS BEEN CONSIDERED YOUR LETTER OF JUNE 19, 1939, AS FOLLOWS:

REFERENCE IS MADE TO AN EXCEPTION TAKEN BY THE AUDIT DIVISION OF THE GENERAL ACCOUNTING OFFICE TO VOUCHER NO. 5, IN THE JULY 1935 ACCOUNTS OF IVAN F. ALBERS, FORMER SPECIAL DISBURSING AGENT FOR THE NAVAJO AGENCY, WITHHOLDING CREDIT FOR $1,410.95 PAID TO THE SANTA FE PACIFIC RAILROAD COMPANY. THE VOUCHER COVERS RENTAL ON 56,437.92 ACRES OF LAND USED BY THE NAVAJO INDIANS FOR THE GRAZING OF LIVESTOCK DURING THE PERIOD JULY 1, 1933 TO JUNE 30, 1934.

IN SUPPORT OF THE EXCEPTION, THE AUDIT DIVISION OF THE GENERAL ACCOUNTING OFFICE CITES 14 COMP. DEC. 312 AND 26 COMP. DEC. 928, HOLDING THAT WHERE THE UNITED STATES IS IN POSSESSION OF LAND UNDER A LEASE AND AT THE EXPIRATION THEREOF PURCHASES THE LAND, AND A DEED IS EXECUTED TO THE UNITED STATES THEREFOR, THE RELATION OF THE PARTIES IS THEREUPON CHANGED FROM LANDLORD AND TENANT TO THAT OF VENDOR AND VENDEE, AND NO IMPLIED CONTRACT TO PAY RENT FOR USE AND OCCUPANCY OF LAND DURING THE TIME BETWEEN THE EXECUTION OF THE DEED AND THE FINAL CONSUMMATION OF THE PURCHASE CAN ARISE.

THIS DEPARTMENT SERIOUSLY QUESTIONS WHETHER THE DECISIONS CITED ARE CONTROLLING ON THE FACTS IN THE INSTANT CASE.

THE LAND HAD BEEN LEASED BY THE UNITED STATES FOR THE USE OF THE NAVAJO INDIANS FOR A NUMBER OF YEARS PRIOR TO THE FISCAL YEAR 1934. UNDER A LAND CONSOLIDATION PROGRAM, ESTABLISHED FOR THE BENEFIT OF THE SAID INDIANS, ARRANGEMENTS WERE MADE WHEREBY THE SANTA FE PACIFIC RAILROAD COMPANY PROPOSED TO RELINQUISH THE LAND TO THE UNITED STATES FOR THE BENEFIT OF THE INDIANS AND TAKE IN LIEU THEREOF OTHER PUBLIC LANDS SITUATED OUTSIDE OF THE AREA TO BE CONSOLIDATED FOR THE INDIANS. AUTHORITY FOR THE EXCHANGE THUS PROPOSED WAS CONTAINED IN THE INDIAN APPROPRIATION ACT OF MARCH 3, 1921 (41 STAT. 1225-1239) AS FOLLOWS:

"THE SECRETARY OF THE INTERIOR IS HEREBY AUTHORIZED IN HIS DISCRETION, UNDER RULES AND REGULATIONS TO BE PRESCRIBED BY HIM, TO ACCEPT RECONVEYANCES TO THE GOVERNMENT OF PRIVATELY OWNED AND STATE SCHOOL LANDS, AND RELINQUISHMENTS OF VALID HOMESTEAD ENTRIES OR OTHER FILINGS, INCLUDING INDIAN ALLOTMENT SELECTIONS, WITHIN ANY TOWNSHIP OF THE PUBLIC DOMAIN IN SAN JUAN, MCKINLEY, AND VALENCIA COUNTIES, NEW MEXICO, AND TO PERMIT LIEU SELECTIONS BY THOSE SURRENDERING THEIR RIGHTS SO THAT THE HOLDINGS OF ANY CLAIMANT WITHIN ANY TOWNSHIP WHEREIN SUCH RECONVEYANCES OR RELINQUISHMENTS ARE MADE MAY BE CONSOLIDATED AND HELD IN SOLID AREA, PROVIDED, THAT THE TITLE OR CLAIM OF ANY PERSON WHO REFUSES TO RECONVEY TO THE GOVERNMENT SHALL NOT BE HEREBY AFFECTED.'

REGULATIONS WERE ISSUED BY THIS DEPARTMENT ON SEPTEMBER 19, 1922 (49 L.D. 281), AND AMENDED MARCH 6, 1930 (53 I.D. 54), GOVERNING THE EXCHANGES AUTHORIZED BY THE FOREGOING PROVISION. THE REGULATIONS REQUIRED AMONG OTHER THINGS THAT (49 L.D. 284):

"THERE SHOULD ALSO ACCOMPANY THE APPLICATION A WARRANTY DEED DULY EXECUTED ACCORDING TO THE LAWS OF NEW MEXICO BY THE PROPONENT CONVEYING TO THE UNITED STATES THE LAND TO BE GIVEN IN EXCHANGE, BUT SUCH DEED NEED NOT BE RECORDED. AN ABSTRACT OF TITLE BROUGHT DOWN TO SHOW GOOD TITLE IN THE PROPONENT, FREE FROM ALL INCUMBRANCES, MUST ALSO BE FILED. SUCH ABSTRACT OF TITLE MUST BE AUTHENTICATED BY AN ABSTRACTOR OR ABSTRACT COMPANY AS PROVIDED BY GENERAL LAND OFFICE CIRCULAR NO. 726 OF OCTOBER 13, 1920 (UNPUBLISHED). IF THE EXCHANGE IS AUTHORIZED THE DEED WILL BE RETURNED FOR RECORDING AND THE ABSTRACT TO BE BROUGHT DOWN TO SHOW SUCH RECORDATION, WHEREUPON PATENT WILL BE ISSUED IN THE REGULAR ORDER OF BUSINESS.'

THE SANTA FE PACIFIC RAILROAD COMPANY FILED ITS EXCHANGE APPLICATION OFFERING THE ABOVE-MENTIONED 56,437.92 ACRES OF LAND FOR CERTAIN OTHER PUBLIC LANDS. THERE WAS ALSO FILED BY THE COMPANY A DEED, ACKNOWLEDGED FEBRUARY 14, 1933, COVERING THE OFFERED LAND. NO FORMAL LEASES WERE ENTERED INTO WITH THE RAILROAD COMPANY FOR THE PERIOD BEGINNING JULY 1, 1933, BECAUSE OF THE FACT THAT THIS EXCHANGE APPLICATION WAS PENDING AND IT WAS EXPECTED THAT THE EXCHANGE WOULD PROCEED RAPIDLY TO COMPLETION. THE MANY PROBLEMS ENCOUNTERED AND THE NECESSARY ROUTINE INCIDENT TO THE EXCHANGE OF THIS LARGE AREA OF LAND OCCASIONED MORE DELAY THAN WAS AT FIRST ANTICIPATED. THE EXCHANGE WAS FINALLY APPROVED MAY 25, 1935.

HERE, IT IS TRUE, THE RAILROAD COMPANY HAD EXECUTED A DEED COVERING LANDS PROPOSED EVENTUALLY TO BE CONVEYED TO THE UNITED STATES. THAT DEED, HOWEVER, WAS NOT REGARDED BY EITHER OF THE PARTIES TO THE EXCHANGE AS OPERATIVE TO EFFECT A CONVEYANCE OF THE LAND AT THAT TIME. IT WAS A DEED EXECUTED PURSUANT TO THE REGULATIONS AND SUBMITTED WITH THE EXCHANGE APPLICATION, TOGETHER WITH THE ABSTRACT OF TITLE, FOR EXAMINATION HERE TO DETERMINE THE SUFFICIENCY OF TITLE TO THE LANDS OFFERED, SOLELY AS A PRELIMINARY STEP IN A DETERMINATION BY THIS DEPARTMENT OF WHETHER IT WOULD BE POSSIBLE, UNDER THE LAW FINALLY TO APPROVE THE EXCHANGE. BEFORE SUCH A DETERMINATION COULD BE MADE IT WAS NECESSARY TO EXAMINE THE LANDS TO ASCERTAIN WHETHER THE OFFERED AND SELECTED LANDS WERE OF APPROXIMATELY EQUAL VALUE. IT WAS NECESSARY TO DETERMINE WHETHER THERE WERE MINERAL DEPOSITS IN EITHER THE OFFERED OR SELECTED LANDS WHICH SHOULD BE TAKEN INTO CONSIDERATION IN ARRIVING AT THE VALUES. IT WAS NECESSARY TO EXAMINE THE PUBLIC LAND RECORDS TO DETERMINE WHETHER THE SELECTED LANDS WERE IN FACT AVAILABLE FOR SELECTION. IT WAS NECESSARY TO DETERMINE WHETHER THE EXCHANGE WOULD IN FACT ACCOMPLISH A CONSOLIDATION OF LANDS WITHIN THE PURVIEW OF THE LAW AUTHORIZING THE EXCHANGE. ALL OF THESE MATTERS, INCLUDING THE SUBMISSION OF THE DEED AND ABSTRACT FOR EXAMINATION, WERE PRELIMINARY TO THE APPROVAL OF THE EXCHANGE AND NECESSARILY CONSUMED TIME.

IT WAS NOT THE INTENTION THAT THE SANTA FE PACIFIC RAILROAD COMPANY SHOULD BE DEPRIVED OF THE USE OF THIS OFFERED LAND OR OF THE INCOME THEREFROM DURING THE TIME THAT THESE PRELIMINARY MATTERS WERE UNDER CONSIDERATION. THE LANDS WERE REQUIRED FOR THE GRAZING OF LIVESTOCK OF THE NAVAJO INDIANS AND IT WAS THE INTENTION THAT PAYMENT BE MADE FOR THE USE OF THE LANDS UNTIL SUCH TIME AS THE EXCHANGE MIGHT BE APPROVED. PAYMENT OF RENTALS WAS CONTINUED IN ACCORDANCE WITH THE UNDERSTANDING OF THE PARTIES. IN CONFIRMATION OF THAT UNDERSTANDING FORMAL CONTRACTS HAVE NOW BEEN EXECUTED BY THE RAILROAD COMPANY AND THE SUPERINTENDENT OF THE NAVAJO AGENCY COVERING THE PERIOD OF TIME IN QUESTION. A COPY OF THE CONTRACT COVERING THE PERIOD JULY 1, 1933, TO JUNE 30, 1934, IS ENCLOSED.

THE EXCHANGE WAS FINALLY APPROVED BY THIS DEPARTMENT MAY 25, 1935, AND THEREAFTER ON JUNE 10, 1935, THE DEED TO THE UNITED STATES WAS RECORDED. WITH CERTAIN MINOR EXCEPTIONS THE CASE THEN PROCEEDED TO COMPLETION IN DUE COURSE AND PATENTS WERE ISSUED BY THE UNITED STATES FOR THE SELECTED LANDS.

IN VIEW OF THE FACT THAT THE DEED EXECUTED BY THE SANTA FE PACIFIC RAILROAD COMPANY ON FEBRUARY 14, 1933, WAS NOT, IN THIS CASE, REGARDED AS A CONVEYANCE OF THE LAND UNTIL THE DATE OF APPROVAL OF THE EXCHANGE, AND IN VIEW OF THE CLEAR INTENT THAT RENTAL BE PAID FOR THE USE OF THE LANDS BY THE NAVAJO INDIANS PRIOR TO THE DATE OF APPROVAL OF THE EXCHANGE, I RESPECTFULLY RECOMMEND THAT THE EXCEPTION BE REMOVED.

THERE IS TRANSMITTED FOR SETTLEMENT IN CONNECTION WITH THE FOREGOING MATTER A VOUCHER IN THE SUM OF $1,928.80 IN FAVOR OF THE SANTA FE PACIFIC RAILROAD COMPANY, COVERING RENTAL ON CERTAIN LANDS LEASED TO THE UNITED STATES OF AMERICA UNDER CONTRACT NO. 1-49-IND-2857 FOR THE MONTHS OF SEPTEMBER, OCTOBER, NOVEMBER, AND DECEMBER 1938. IF YOUR DECISION SUSTAINS THE DISALLOWANCE OF THE AUDIT DIVISION, IT IS REQUESTED THAT THE SUM OF $1,410.95 BE DEDUCTED FROM THE SETTLEMENT OF THE ENCLOSED VOUCHER.

THE COPY OF THE LEASE TRANSMITTED WITH YOUR LETTER PURPORTING TO COVER THE PERIOD FROM JULY 1, 1933, TO JUNE 30, 1934, SHOWS THAT THE SO CALLED LEASE WAS ENTERED INTO ON NOVEMBER 23, 1938, OR MORE THAN 4 YEARS AFTER THE END OF THE PERIOD PURPORTED TO BE COVERED THEREBY. HENCE THE SO- CALLED LEASE CANNOT BE VIEWED AS IMPOSING ON THE GOVERNMENT AN OBLIGATION GREATER THAN OTHERWISE EXISTED. HOWEVER, THERE IS ON FILE IN THIS OFFICE A LEASE, NUMBERED I-64-IND-1425, ENTERED INTO ON JULY 1, 1932, BETWEEN THE UNITED STATES BY THE SUPERINTENDENT, SOUTHERN NAVAJO AGENCY, AND THE SANTA FE PACIFIC RAILROAD COMPANY, COVERING 261,652.33 ACRES OF LAND IN APACHE AND MCKINLEY COUNTIES (INCLUDING THE 56,437.92 ACRES COVERED BY THE SO CALLED LEASE DATED NOVEMBER 23, 1938),"FOR GRAZING PURPOSES ONLY; USED BY NAVAJO INDIANS FOR THEIR SHEEP" FOR THE TERM BEGINNING JULY 1, 1932, AND ENDING JUNE 30, 1933 (WITHOUT RENEWAL OPTION), AT AN ANNUAL RENTAL OF $0.25 PER ACRE.

THE GENERAL RULE IS THAT IF A TENANT HOLDS OVER AFTER THE EXPIRATION OF HIS LEASE WITH THE EXPRESS OR IMPLIED CONSENT OF THE LANDLORD, BUT WITHOUT ANY NEW AGREEMENT, THE LAW IMPLIES A CONTINUANCE OF THE TENANCY UPON THE SAME TERMS AND SUBJECT TO THE SAME COVENANTS AS IN THE ORIGINAL AGREEMENT. SEE 7 COMP. GEN. 191.

ALSO, IT IS WELL SETTLED THAT WHEN LAND IS HELD BY THE UNITED STATES UNDER A LEASE AND TITLE THERETO IS ACQUIRED BY THE UNITED STATES, THE GOVERNMENT IS NOT LIABLE FOR THE PAYMENT OF ANY RENT WHICH DID NOT BECOME DUE AND PAYABLE PRIOR TO THE EFFECTIVE DATE OF THE DEED CONVEYING THE TITLE TO THE UNITED STATES. 4 COMP. GEN. 622; 9 ID. 259; CUMMING ET AL. V. UNITED STATES, 57 CT.1CLS. 551; 58 ID. 651.

HOWEVER, IT IS ESSENTIAL TO THE VALIDITY OF A DEED AS CONVEYING THE TITLE THAT THERE BE A DELIVERY OF THE DEED AND AN ACCEPTANCE OF THE INSTRUMENT BY THE GRANTEE. 18 C.J. 196 AND ID. 212. AS STATED IN THE LETTER OF JUNE 19, 1939, IN THE PRESENT CASE THE DELIVERY OF THE DEED WAS NOT REGARDED BY EITHER OF THE PARTIES AS CONVEYING TITLE AT THE TIME OF DELIVERY AND THE DEED WAS NOT ACCEPTED BY THE REPRESENTATIVES OF THE GOVERNMENT AS A CONVEYANCE UNTIL THERE WAS AN ADMINISTRATIVE DETERMINATION THAT THE EXCHANGE "IS AUTHORIZED.' HENCE, THE DEED DID NOT BECOME EFFECTIVE AS A CONVEYANCE OF TITLE IN THIS CASE SO AS TO TERMINATE THE RELATION OF LANDLORD AND TENANT UNTIL THE EXCHANGE WAS FINALLY APPROVED ON MAY 25, 1935.

UNDER THE TERMS OF THE LEASE I-64-IND-1425, RENTAL WAS PAYABLE MONTHLY IN ARREARS AND, ACCORDINGLY, THE RAILROAD COMPANY IS ENTITLED TO RENTAL TO AND INCLUDING THE PERIOD ENDING APRIL 30, 1935. THE RENT FOR THE PERIOD FROM MAY 1, TO MAY 25, 1935, IS NOT AUTHORIZED SINCE THE LEASE DOES NOT PROVIDE FOR THE APPORTIONMENT OF RENT IN THE EVENT OF TERMINATION BETWEEN RENT DAYS. SEE CUMMING ET AL. V. UNITED STATES, 57 CT.1CLS. 551.

IN VIEW OF THE FOREGOING CREDIT WILL BE ALLOWED FOR THE PAYMENT OF $1,410.95 MADE ON VOUCHER NO. 5 COVERING THE PERIOD FROM JULY 1, 1933, TO JUNE 30, 1934, BUT THERE WAS AN OVERPAYMENT OF $95.99 ON VOUCHER NO. 2334, COVERING THE PERIOD FROM JULY 1, 1934, TO DATE OF TERMINATION OF THE TENANCY, WHICH AMOUNT WILL BE DEDUCTED FROM THE AMOUNT OTHERWISE FOUND DUE ON THE VOUCHER TRANSMITTED WITH YOUR LETTER AND WHICH IS BEING RETAINED FOR DIRECT SETTLEMENT BY THIS OFFICE. THE NECESSARY ADJUSTMENTS WILL BE EFFECTED IN THE ACCOUNTS OF THE PAYING OFFICER AND THE APPROPRIATIONS INVOLVED WHEN THE SETTLEMENT IS MADE.