B-48811, MAY 21, 1945, 24 COMP. GEN. 838

B-48811: May 21, 1945

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1945: REFERENCE IS MADE TO LETTER DATED MARCH 29. AS FOLLOWS: THERE IS HEREINAFTER PRESENTED A MATTER WITH REQUEST FOR YOUR DECISION FOR FUTURE GUIDANCE. THE PERIOD COVERED BY THE LEASE WAS "FOR THE TERM BEGINNING NOVEMBER 11. THE LEASE WAS CANCELLED AS OF FEBRUARY 10. 1943 WAS PREPARED AND PAID BY THE FINANCE OFFICER IN THE AMOUNT OF $10. THE RENTAL WAS CALCULATED AS FOLLOWS: 11/11/42 THRU 11/30/42-20/30 X 1/12 OF $42. WHICH WAS RESPONSIBLE FOR THE PAYMENT. BROUGHT OUT IN THE FOLLOWING COMPARISON THE DISCREPANCY WHICH WOULD HAVE RESULTED HAD THE LEASE EXPIRED JANUARY 10. 1943 AND INDICATED THAT AN EXCESS PAYMENT WOULD BE INVOLVED IF THE METHOD OF COMPUTATION EMPLOYED BY THE GENERAL ACCOUNTING OFFICE WERE USED. 11/11/42 THRU 11/30/42-20/30 X 1/12 OF $42.

B-48811, MAY 21, 1945, 24 COMP. GEN. 838

LEASES - MONTHLY INSTALLMENT PAYMENTS OF ANNUAL RENT - COMPUTATION, ETC. UNDER A LEASE THE TERM OF WHICH BEGINS ON A CERTAIN DAY OTHER THAN THE FIRST OF THE MONTH AND WHICH PROVIDES FOR PAYMENT OF RENT AT THE END OF EACH "CALENDAR MONTH," AT A STIPULATED ANNUAL RATE, THE MONTHLY RENT INSTALLMENTS BECOME DUE AND PAYABLE ON THE DAY OF EACH MONTH NUMERICALLY CORRESPONDING TO THE DAY THE TERM BEGAN, LESS ONE, AND THE AMOUNT OF EACH SUCH INSTALLMENT SHOULD BE ONE-TWELFTH OF THE ANNUAL RATE, REGARDLESS OF THE NUMBER OF DAYS IN ANY CALENDAR MONTH.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, MAY 21, 1945:

REFERENCE IS MADE TO LETTER DATED MARCH 29, 1945, FROM THE UNDER SECRETARY OF WAR, AS FOLLOWS:

THERE IS HEREINAFTER PRESENTED A MATTER WITH REQUEST FOR YOUR DECISION FOR FUTURE GUIDANCE, INVOLVING A LEASE STIPULATING AN ANNUAL RATE AND PROVIDING FOR PAYMENTS AT THE END OF EACH MONTH. THE RENTAL AGREEMENT BETWEEN THE BERNARR MACFADDEN FOUNDATION, INCORPORATED, AND THE WAR DEPARTMENT BEARING NO. W 2287 ENG 2863 DATED JANUARY 20, 1943 PROVIDES FOR RENTAL AT AN ANNUAL RATE OF $42,000.00, PAYMENTS TO BE MADE AT THE END OF EACH CALENDAR MONTH. THE PERIOD COVERED BY THE LEASE WAS "FOR THE TERM BEGINNING NOVEMBER 11, 1942 AND ENDING JUNE 30, 1943.' THE LEASE WAS CANCELLED AS OF FEBRUARY 10, 1943. ONE PAYMENT VOUCHER FOR THE PERIOD NOVEMBER 11, 1942 THROUGH FEBRUARY 10, 1943 WAS PREPARED AND PAID BY THE FINANCE OFFICER IN THE AMOUNT OF $10,583.33.

THE RENTAL WAS CALCULATED AS FOLLOWS: 11/11/42 THRU 11/30/42-20/30 X 1/12 OF $42,000.00---------- $2,333.33 12/1/42 THRU 1/30/43-2 MONTHS AT $3,500.00----------------- 7,000.00 2/1/43 THRU 2/10/43-10/28 X 1/12 OF $42,000.00------------- 1,250.00

$ 10,583.33

THE GENERAL ACCOUNTING OFFICE HAS TAKEN EXCEPTION TO THE VOUCHER AND REQUESTED REFUND FROM THE CONTRACTOR IN THE AMOUNT OF $83.33 CONSTITUTING AN OVERPAYMENT COMPUTED ON THE FOLLOWING BASIS:

11/11/42 THRU 2/10/43-3 MONTHS AT $42,000.00----------- $10,500.00

THE FIELD SERVICE CONCERNED, WHICH WAS RESPONSIBLE FOR THE PAYMENT, BROUGHT OUT IN THE FOLLOWING COMPARISON THE DISCREPANCY WHICH WOULD HAVE RESULTED HAD THE LEASE EXPIRED JANUARY 10, 1943 INSTEAD OF FEBRUARY 10, 1943 AND INDICATED THAT AN EXCESS PAYMENT WOULD BE INVOLVED IF THE METHOD OF COMPUTATION EMPLOYED BY THE GENERAL ACCOUNTING OFFICE WERE USED.

11/11/42 THRU 11/30/42-20/30 X 1/12 OF $42,000.00------ $ 2,333.33

12/1/42 THRU 12/31/42-1 MONTH AT----------------------- 3,500.00

1/1/43 THRU 1/10/43-10/31 X 1/12 OF $42.000.00--------- 1,129.00

6,962.33

CALCULATION BY GENERAL ACCOUNTING OFFICE METHOD:

11/11/42 THRU 1/10/43-2 MONTHS AT $42,000.00 PER ANNUM- 7,000.00

THIS DEPARTMENT IS OF THE OPINION THAT THE ONLY FAIR AND EQUITABLE WAY TO COMPUTE RENTALS BASED ON AN ANNUAL RATE WITH PROVISION FOR PAYMENTS TO BE MADE MONTHLY AT THE END OF EACH MONTH IS TO APPORTION THE ANNUAL RATE EQUALLY SO THAT EACH PAYMENT MADE WILL REPRESENT THE EXACT NUMBER OF DAYS OF USE OR OCCUPANCY. THIS METHOD WILL RESULT IN EXACT COMPUTATIONS FOR BOTH PARTIES REGARDLESS OF THE PERIOD OF RENTAL OR THE NUMBER OF DAYS IN A MONTH. ANY OTHER METHOD WOULD APPEAR TO RESULT IN AN ERRONEOUS PAYMENT OF THE ANNUAL RATE WHERE THE ENTIRE PERIOD OF RENTAL VARIES FROM AN EXACT YEARLY PERIOD, BEING IN FAVOR OF ONE PARTY IF THE FRACTIONAL MONTH OCCURS IN A SHORTER MONTH AND IN FAVOR OF THE OTHER PARTY IF IT OCCURS IN A LONGER MONTH.

ON THE OTHER HAND, BY USING THE BASIS OF AS MANY THREE HUNDRED AND SIXTY FIFTHS OF THE ANNUAL RATE AS THERE ARE DAYS IN THE PAYMENT PERIOD INVOLVED, WHETHER IT IS FOR A FULL MONTH OR A FRACTIONAL MONTH, NO EXCESS PAYMENT WOULD ACCRUE IN FAVOR OF EITHER PARTY. ON THIS BASIS THE END OF EACH CALENDAR MONTH WOULD BE 1/365TH OF $42,000.00, OR $115.07 PER DAY MULTIPLIED BY THE TOTAL NUMBER OF DAYS IN THE MONTH, OR PERIOD, FOR WHICH PAYMENT IS MADE. IN ACCORDANCE WITH THIS THEORY IT APPEARS THAT THE AMOUNT WHICH SHOULD HAVE BEEN PAID FOR THE PERIOD NOVEMBER 11, 1942 TO FEBRUARY 10, 1943 WOULD HAVE AMOUNTED TO $10,576.44 (92 DAYS X $115.07). ACCEPTING THIS BASIS OF COMPUTATION THIS DEPARTMENT BELIEVES THE AMOUNT OVERPAID AND PROPERLY FOR COLLECTION FROM THE PAYEE IS $6.89.

THE LEASE REFERRED TO IN THE LETTER COVERS THE RENTAL OF CERTAIN DESCRIBED PREMISES AND CONTAINS PROVISIONS, SO FAR AS IS PERTINENT TO THE QUESTION INVOLVED, AS FOLLOWS:

3. TO HAVE AND TO HOLD THE SAID PREMISES TOGETHER WITH THEIR APPURTENANCES FOR THE TERM BEGINNING NOVEMBER 11, 1942 AND ENDING JUNE 30, 1943. * * * * *

7. THE GOVERNMENT SHALL PAY TO THE LESSOR FOR THE PREMISES RENT AT THE FOLLOWING RATE:

FORTY-TWO THOUSAND DOLLARS AND 100/00 ($42,000.00) PER ANNUM PAYMENT SHALL BE MADE AT THE END OF EACH CALENDAR MONTH BY THE FINANCE OFFICER, UNITED STATES ARMY, 449 WEST PEACHTREE STREET, ATLANTA, GEORGIA. * * * *

15. THIS LEASE OF ANY RENEWAL THEREOF MAY BE CANCELLED BY THE GOVERNMENT UPON GIVING THE LESSOR THIRTY (30) DAYS ADVANCE WRITTEN NOTICE OF ITS INTENTION SO TO DO, SAID NOTICE TO BE VALID FROM THE DATE OF SERVICE OF SUCH NOTICE, WHETHER IT BE AT THE BEGINNING OR AT ANY TIME DURING ANY RENTAL MONTH.

16. ANY NOTICE REQUIRED OR PERMITTED TO BE GIVEN PURSUANT TO THIS LEASE SHALL BE IN WRITING SIGNED BY THE DULY AUTHORIZED REPRESENTATIVES OF THE PARTIES HERETO * * *.

A COPY OF A WRITTEN NOTICE OF CANCELLATION HAS NOT BEEN SUBMITTED FOR ATTACHMENT TO THE LEASE ON FILE IN THIS OFFICE. HOWEVER, THERE IS ON FILE A RELEASE EXECUTED FEBRUARY 10, 1943, WHEREIN IT IS STATED THAT POSSESSION OF PROPERTY UNDER THE LEASE WAS REDELIVERED TO THE LESSOR JANUARY 10, 1943, AND THAT SAID LEASE WAS BEING CANCELLED AS OF FEBRUARY 10, 1943. IS STATED FURTHER IN SAID RELEASE THAT THE UNITED STATES IS RELEASED AND FOREVER DISCHARGED FROM ALL OBLIGATIONS "EXCEPT FOR PAYMENT OF RENTAL THROUGH FEB. 10, 1943.'

THE VOUCHER ON WHICH WAS MADE THE PAYMENT OF $10,583.33, AS REFERRED TO IN THE LETTER, IS NO. 378131 OF THE APRIL, 1943, ACCOUNT OF COLONEL F. RICHARDS, FINANCE DEPARTMENT, UNITED STATES ARMY. CREDIT FOR $83.33 WAS WITHHELD IN THE AUDIT FOR THE STATED REASON THAT RENTAL FROM NOVEMBER 11, 1942, TO FEBRUARY 10, 1943, OR A PERIOD OF THREE CALENDAR MONTHS AT THE RATE OF $42,500 PER ANNUM, AMOUNTS TO BUT $10,500.

PARAGRAPH 7 OF THE LEASE PROVIDES THAT "PAYMENT SHALL BE MADE AT THE END OF EACH CALENDAR NTH.' PARAGRAPH 15 PROVIDES FOR CANCELLATION BY THE GOVERNMENT UPON WRITTEN NOTICE, AND PROVIDES FURTHER THAT SAID NOTICES SHOULD BE VALID FROM DATE OF SERVICE "WHETHER IT BE AT THE BEGINNING OR AT ANY TIME DURING ANY RENTAL MONTH.' WHILE THE RENTAL IS STATED AT A RATE PER ANNUM, THE LESSOR WAS ENTITLED TO AND THE GOVERNMENT WAS OBLIGATED TO MAKE RENTAL PAYMENTS AT INTERVALS OF A CALENDAR MONTH, OTHERWISE REFERRED TO IN PARAGRAPH 15 AS A "RENTAL MONTH.'

WHERE A LEASE BEGINS ON A CERTAIN DAY OTHER THAN THE FIRST OF THE MONTH AND PROVIDES FOR QUARTERLY OR MONTHLY RENT, THE QUARTERLY OR MONTHLY DAYS ARE FIXED BY THE DATE OF THE BEGINNING OF THE TERM AND NOT BY THE USUAL QUARTER DAYS OR BY THE FIRST DAY OF A PARTICULAR MONTH. 36 C.J. 362. THE FOREGOING RULE IS APPLICABLE IN THE ABSENCE OF AN EXPRESS AGREEMENT BETWEEN THE PARTIES TO THE CONTRARY. CF. 24 COMP. GEN. 307. WHILE THE TERM "CALENDAR MONTH" IS SOMETIMES USED IN THE SENSE OF A MONTH AS ADJUSTED AND DELIMITED BY THE CALENDAR, THE TERM ORDINARILY IS REGARDED AS DENOTING A PERIOD OF TIME TERMINATING WITH THE DAY OF THE SUCCEEDING MONTH NUMERICALLY CORRESPONDING TO THE DAY OF ITS BEGINNING, LESS ONE. 24 COMP. GEN. 307, 310, AND CITED DECISIONS. SEE, ALSO, 62 C.J. 970, 971; WORDS AND PHRASES, PERMANENT EDITION, VOL. 6, P. 10.

IN THIS INSTANCE, THE TERM OF THE LEASE BEGAN ON NOVEMBER 11, 1942. HENCE, THE MONTHLY RENTAL PAYMENTS AS PROVIDED FOR UNDER PARAGRAPH 7 OF THE LEASE BECAME DUE AND PAYABLE ON THE TENTH OF EACH MONTH THEREAFTER UNTIL THE EFFECTIVE DATE OF THE CANCELLATION, FEBRUARY 10, 1943. IN THE ABSENCE OF ANY PROVISION IN THE LEASE TO THE CONTRARY, IT IS REASONABLE TO PRESUME THAT THE PARTIES INTENDED THAT THE MONTHLY RENTAL PAYMENTS SHOULD BE EQUAL AND, THEREFORE, ON THE BASIS OF AN ANNUAL RENTAL OF $42,000, AS STIPULATED UNDER PARAGRAPH 7 OF THE LEASE, THE LESSOR WAS ENTITLED TO, AND THE GOVERNMENT WAS OBLIGATED TO PAY, $3,500 FOR EACH CALENDAR MONTH DURING THE PERIOD THE LEASE WAS IN EFFECT, REGARDLESS OF THE NUMBER OF DAYS IN ANY CALENDAR MONTH. IF THE LEASE HAD NOT BEEN CANCELLED, THE LAST FULL CALENDAR MONTH WOULD HAVE ENDED WITH JUNE 10, 1943, AND THERE WOULD HAVE BEEN DUE ON THE FINAL PAYMENT FOR JUNE 11 TO 30, INCLUSIVE, TWENTY- THIRTIETHS OF $3,500 OR $2,333.33. CF. 10 COMP. GEN. 540, AND 22 COMP. GEN. 599.

CONSEQUENTLY, IT SEEMS APPARENT FROM THE PROVISIONS OF THE LEASE THAT THE PARTIES CONTEMPLATED THAT PAYMENT UNDER THE LEASE SHOULD BE MADE ON THE BASIS OF A "RENTAL MONTH"--- TO WHICH REFERENCE IS MADE IN PARAGRAPH 15 OF THE LEASE--- AND, THEREFORE, AS THE PREMISES APPEAR TO HAVE BEEN OCCUPIED FOR THREE MONTHS PAYMENT OF RENTAL IN EXCESS OF $10,500 WAS NOT AUTHORIZED. HENCE, THE AUDIT ACTION ON THE VOUCHER WAS PROPER AND IS SUSTAINED. WITH RESPECT TO THE SUGGESTION IN THE LAST TWO PARAGRAPHS OF LETTER OF MARCH 29, 1945, QUOTED ABOVE, RELATIVE TO COMPUTING RENTALS BASED ON ANNUAL RATES WITH PROVISION FOR MONTHLY PAYMENTS AT THE END OF EACH MONTH, IT IS THE ESTABLISHED RULE IN THE UNITED STATES THAT THE WORD "MONTH" WHEN USED WITHOUT QUALIFICATION, MEANS A CALENDAR MONTH AND IS COMPUTED NOT BY COUNTING DAYS, BUT BY LOOKING AT THE CALENDAR, AND RUNS FROM A GIVEN DAY IN ONE MONTH TO A DAY OF THE CORRESPONDING NUMBER IN THE NEXT MONTH. 28 CYC. 312. HENCE, AS THE LEASE DOES NOT PROVIDE FOR PAYMENT ON A DAILY BASIS THERE IS NO LEGAL REASON FOR COMPUTING THE RENT ON THAT BASIS. IN THIS CONNECTION IT MAY BE ADDED THAT 92 DAYS' RENT AT $115.07 AS COMPUTED IN THE LETTER EQUALS $10,586.44, INSTEAD OF $10,576.44 WHICH WOULD RESULT IN AN UNDERPAYMENT OF $3.11 AND NOT AN OVERPAYMENT OF $6.89, AS INDICATED.