B-80731, MAY 8, 1950, 29 COMP. GEN. 445

B-80731, MAY 8, 1950, 29 COMP. GEN. 445

LEASES - PUBLIC PROPERTY - PREVENTION OF FLOOD DAMAGES - REIMBURSEMENT OF EXPENSES A PROVISION IN A LETTER OF INTENT THAT THE LESSEE OF A GOVERNMENT OWNED PLANT PAY ALL MAINTENANCE COSTS WOULD NOT OBLIGATE THE LESSEE TO REPAIR OR REBUILD THE PLANT IN THE EVENT OF ITS DAMAGE OR DESTRUCTION, SO THAT WORK DONE BY THE LESSEE PRIOR TO THE EXECUTION OF A FORMAL CONTRACT IN PREVENTING SERIOUS DAMAGE TO THE PLANT DURING AN UNPRECEDENTED FLOOD MAY BE VIEWED AS HAVING BEEN PERFORMED FOR THE BENEFIT OF THE GOVERNMENT AND THE LESSEE MAY BE REIMBURSED THE EXPENSES SO INCURRED.

COMPTROLLER GENERAL WARREN TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, MAY 8, 1950:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 1, 1950, WITH ENCLOSURES, REQUESTING A DECISION AS TO WHETHER THIS OFFICE WOULD BE REQUIRED TO OBJECT TO REIMBURSEMENT TO THE REYNOLDS METALS COMPANY OF $224,755.03, REPRESENTING THE AMOUNT TENTATIVELY APPROVED FOR PAYMENT ON THE COMPANY'S CLAIM FOR $439,947.98 AS REIMBURSEMENT FOR EXPENDITURES MADE BY THE CLAIMANT IN PROTECTING THE TROUTDALE ALUMINUM REDUCTION PLANT, TROUTDALE, OREGON, KNOWN AS PLANCOR 226-0, FROM DAMAGE AND DESTRUCTION DURING THE UNPRECEDENTED FLOOD CONDITIONS ON THE COLUMBIA RIVER DURING MAY AND JUNE 1948.

IT APPEARS FROM THE FACTS AS REPORTED IN YOUR LETTER THAT ON APRIL 10, 1946, PLANCOR 226-0--- ACQUIRED BY THE GOVERNMENT AT A COST OF $19,079,902 FOR PRODUCING ALUMINUM METAL AND CARBON ELECTRODES AND OPERATED DURING WORLD WAR II BY THE ALUMINUM COMPANY OF AMERICA UNDER AGREEMENT WITH THE DEFENSE PLANTS CORPORATION--- WAS DECLARED SURPLUS TO THE WAR ASSETS ADMINISTRATION (FUNCTIONS TRANSFERRED TO GENERAL SERVICES ADMINISTRATION BY SECTION 105 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, PUBLIC LAW 152, APPROVED JUNE 30, 1949, 63 STAT. 381), PURSUANT TO THE SURPLUS PROPERTY ACT OF 1944, AS AMENDED. IT FURTHER APPEARS THAT BY LETTER OF INTENT DATED JUNE 13, 1946, ACCEPTED ON JUNE 18, 1946, PLANCOR 226-0 WAS LEASED TO THE REYNOLDS METALS COMPANY FOR A TERM OF FIVE YEARS BEGINNING NOVEMBER 3, 1946, AT A RENTAL PAYABLE ON A GRADUATED SCALE BEGINNING WITH $529,100 FOR THE FIRST YEAR AND INCREASING TO $1,058,300 FOR THE FIFTH AND SUBSEQUENT YEARS, WITH RENEWAL OPTION FOR TWO ADDITIONAL YEARS TOGETHER WITH AN OPTION TO PURCHASE. THE LETTER OF INTENT RECITES THAT ON MAY 23, 1946, THE WAR ASSETS ADMINISTRATION CONDITIONALLY APPROVED THE LEASING OF SUBJECT PLANT TO THE CLAIMANT UPON THE CONDITIONS THEREIN SET FORTH. PARTICULARLY IT RECITES THAT---

THE LESSEE WILL PAY ALL TAXES AND MAINTENANCE COSTS ON THE PLANT LEASED, CARRY INSURANCE SATISFACTORY TO THE GOVERNMENT, FURNISH ALL WORKING CAPITAL AND ASSUME ALL LOSSES THAT MAY ARISE FROM THE OPERATION OF THE PLANT.

THE CONCLUDING PARAGRAPH OF THE LETTER OF INTENT PROVIDES THAT---

UPON ACCEPTANCE OF THE PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSED LEASE, AS HEREIN CONTAINED, BY A DULY AUTHORIZED OFFICER OF YOUR COMPANY, YOU ARE AUTHORIZED TO ENTER UPON THE PREMISES IMMEDIATELY FOR THE PURPOSES HEREIN SET FORTH.

AS INDICATED ABOVE, THE LETTER OF INTENT WAS ACCEPTED BY THE CLAIMANT ON JUNE 18, 1946. THE FORMAL LEASE, WHICH YOU STATE WAS EXECUTED ON OR ABOUT JUNE 25, 1948, OR AFTER THE FLOOD, RECITES THAT IT WAS ENTERED INTO AS OF NOVEMBER 3, 1946--- WHICH DATE YOU FURTHER STATE WAS THE DATE WHEN THE PLANT WAS PUT IN OPERATING CONDITION, ETC., IN ACCORDANCE WITH THE AFOREMENTIONED LETTER OF INTENT.

PARAGRAPH 8 OF THE LEASE PROVIDES THAT THE LESSEE SHALL USE REASONABLE CARE IN THE OCCUPATION, USE, AND OPERATION OF THE LEASED PREMISES AND SHALL AT ALL TIMES DURING THE TERM OF THE LEASE KEEP AND MAINTAIN THE SAME IN AS GOOD CONDITION AS AT THE BEGINNING OF THE TERM, ORDINARY WEAR AND TEAR, ACTS OF GOD, AND RISKS INSURED AGAINST, EXCEPTED.

THE CLAIM IS BASED ON THREE INVOICES IN THE AMOUNTS OF $291,290.34, $14,748.62 AND $133,909.02, RESPECTIVELY, REPRESENTING EXPENDITURES MADE BY THE CLAIMANT FOR MATERIALS AND LABOR IN BUILDING UP DIKES TO PROTECT THE PLANT AND EQUIPMENT FROM THE FLOOD WATER OF THE COLUMBIA RIVER AND EXPENSES INCURRED IN CONNECTION WITH SHUTTING DOWN POT LINES; RESTARTING THE PLANT AFTER THE FLOOD HAD RECEDED; AND AN ITEM OF $62,998.17 INCLUDED IN THE INVOICE FIRST ABOVE REFERRED TO FOR RENT PAID BY THE CLAIMANT ON THE PLANT DURING THE PERIOD OF SHUTDOWN.

IT APPEARS TO BE THE VIEW OF YOUR ADMINISTRATION THAT THE MEASURES TAKEN BY THE CLAIMANT TO PROTECT THE PLANT WERE IN EXCESS OF ITS LEGAL OBLIGATION; THAT THE LESSEE'S RESPONSIBILITY FOR REASONABLE CARE AND USE OF THE PREMISES DID NOT DISCHARGE THE WAR ASSETS ADMINISTRATOR FROM HIS OBLIGATION TO PROVIDE NECESSARY CARE AND PROTECTION BEYOND THAT WHICH THE LESSEE WAS OBLIGATED TO FURNISH. IN THAT CONNECTION YOU STATE THAT THE LEASE WAS DELIVERED TO THE CLAIMANT TOGETHER WITH A LETTER DATED JUNE 30, 1948, SETTING FORTH THE UNDERSTANDING THAT THE LANGUAGE OF THE LEASE EXCEPTING "ACTS OF GOD" FROM THE LEGAL OBLIGATION OF THE LESSEE WOULD NOT BE CONSTRUED AS IMPOSING ANY LEGAL OBLIGATION ON THE GOVERNMENT FOR REIMBURSEMENT OF THE INVOLVED EXPENDITURES. ALSO YOU STATE THAT THE AFORESAID LETTER CONTAINED A FURTHER STATEMENT TO THE EFFECT THAT NOTWITHSTANDING SUCH CONSTRUCTION THE ADMINISTRATION WOULD CONSIDER SUCH EXPENSES AND DECIDE WHICH OF THEM, IF ANY, THE ADMINISTRATION COULD AND SHOULD EQUITABLY BEAR. IT APPEARS TO BE THE VIEW OF YOUR ADMINISTRATION THAT THE AFORESAID LETTER OF JUNE 30, 1948, BECAME A PART OF THE CONTRACTUAL RELATIONS AND THAT IT PROVIDES A BASIS FOR REIMBURSING THE CLAIMANT FOR AN EQUITABLE SHARE OF THE EXPENSES INCURRED BY IT.

CONCERNING THE CIRCUMSTANCES UNDER WHICH THE WORK WAS PERFORMED BY THE CLAIMANT, YOU STATE THAT THE OFFICIALS OF THE WAR ASSETS ADMINISTRATION WERE AWARE OF THE DANGER TO THE PLANT AT THE TIME OF THE FLOOD; THAT THEY WERE KEPT ADVISED OF THE PRECAUTIONARY MEASURES BEING TAKEN BY THE CLAIMANT AND WERE NOTIFIED BY SAID CLAIMANT THAT IT WAS MAKING THE EXPENDITURES WITH THE INTENTION OF BEING REIMBURSED THEREFOR. HOWEVER, YOU FURTHER STATE THAT THE REPRESENTATIVES OF THE WAR ASSETS ADMINISTRATION WHO APPROVED THE WORK HAD NO AUTHORITY TO INCUR CONTRACTUAL OBLIGATIONS ON THE PART OF THE ADMINISTRATIVE OFFICE. IN THE CIRCUMSTANCES AND SINCE IT APPEARS THAT THE ADMINISTRATIVE OFFICIALS ACTED DURING AN EMERGENCY WHICH THREATENED DESTRUCTION OF THE PLANT, YOU STATE THAT ON JUNE 3, 1949, YOU--- ACTING IN THE CAPACITY OF WAR ASSETS ADMINISTRATOR--- RATIFIED THE ACTS OF THE ADMINISTRATIVE OFFICIALS WHO ACQUIESCED IN THE PERFORMANCE OF THE WORK AND APPROVED REIMBURSEMENT TO THE CLAIMANT IN THE AMOUNT OF $224,755.03, SUBJECT TO AUDIT, WHICH AMOUNT COMPRISES $148,657.64, REPRESENTING COSTS IN CONNECTION WITH WORK ON THE DIKES, AND $76,097.39, REPRESENTING ONE-THIRD OF THE COST INCURRED IN SHUTTING THEM AND STARTING THE PLANT.

IT WOULD APPEAR, AT THE OUTSET, THAT THE PROPRIETY OF PAYMENT OF THE AMOUNTS CLAIMED--- AT LEAST TO THE EXTENT OF THE WORK ALLEGED TO HAVE BEEN DONE TO SAFEGUARD PROPERTY OF THE UNITED STATES--- IS SUBJECT, IN THE FIRST INSTANCE, TO A DETERMINATION OF THE LIABILITY OF THE REYNOLDS METALS COMPANY UNDER ITS LEASE TO PROTECT THE PLANT INVOLVED FROM DAMAGE OR DESTRUCTION FROM THE FLOOD, OR IN THE EVENT OF ITS DAMAGE OR DESTRUCTION FROM THE FLOOD, OR IN THE EVENT OF ITS DAMAGE OR DESTRUCTION FROM SUCH CAUSE, TO REPAIR OR REBUILD SAID PLANT.

IT APPEARS TO BE WELL SETTLED THAT IN THE ABSENCE OF AN EXPRESS COVENANT A LESSEE IS NOT OBLIGATED TO REPAIR OR REBUILD LEASED PREMISES DAMAGED OR DESTROYED BY THE ELEMENTS. WILLISTON ON CONTRACTS (1938), SECTIONS 1946 TO 1948 AND 1967; GREENBERG V. SUN SHIPBUILDING COMPANY, 121 A. 63. HOWEVER, COVENANTS TO "REPAIR" GENERALLY HAVE BEEN HELD TO CARRY AN OBLIGATION TO REBUILD IN THE EVENT OF DESTRUCTION OF PREMISES. TIFFANY, LANDLORD AND TENANT, VOL. 1, PAGE 761, P. 116 (D); CHAMBERS V. NORTH RIVER LINE, 102 S.E. 198. AND SUCH RULE HAS BEEN APPLIED IN SOME INSTANCES IN THE CASE OF COVENANTS TO "MAINTAIN" PREMISES. STATE V. CHICAGO M. AND ST. P. RAILWAY COMPANY, 159 N.W. 919; LOUISVILLE AND N.R. CO. V. U.S. IRON COMPANY, 101 S.W. 414. BUT THE DECISIONS ON THAT POINT ARE NOT UNIFORM. CF. MILLS V. UNITED STATES, 52 C.1CLS. 452; POLLARD V. SHAAFER, SUPERIOR COURT OF PENNSYLVANIA, 1 L.ED. 104; BOSTWICK'S CASE, 94 U.S. 53; FERGUSON V. ROCKFORD, 79 A. 177; KADDERLY V. MULTNOMAH COUNTY COURT, 52 P. 515. THE CONTROLLING FACTOR IN ALL SUCH CASES APPEARS TO BE THE INTENTION OF THE PARTIES AS SHOWN BY THE PROVISIONS OF THE LEASE.

WHILE, IN THE PRESENT CASE, THE LETTER OF INTENT UNDER WHICH THE PLANT WAS BEING OPERATED AT THE TIME OF THE FLOOD PROVIDED THAT THE LESSEE WOULD PAY "ALL TAXES AND MAINTENANCE COSTS ON THE PLANT LEASED," SUCH PROVISION, CONSTRUED IN THE LIGHT OF THE INTENT OF THE PARTIES AS DISCLOSED BY THE RECORD, REASONABLY MAY NOT BE VIEWED AS CONSTITUTING A GENERAL COVENANT TO REPAIR WHICH WOULD HAVE OBLIGATED THE LESSEE TO REPAIR OR REBUILD THE PLANT HAD IT BEEN DAMAGED OR DESTROYED AS A RESULT OF THE FLOOD. ACCORDINGLY, AND SINCE THE EVIDENCE OF RECORD SHOWS CONCLUSIVELY THAT THE WORK DONE BY THE LESSEE PREVENTED THE DESTRUCTION OF, OR AT LEAST SERIOUS DAMAGE TO, THE PLANT AND THUS RESULTED IN A CLEAR BENEFIT TO THE UNITED STATES, THIS OFFICE WOULD NOT BE REQUIRED TO OBJECT TO THE OTHERWISE PROPER PAYMENT TO THE LESSEE OF THE AMOUNT OF $148,657.64, ADMINISTRATIVELY DETERMINED TO REPRESENT THE COSTS INCURRED BY THE LESSEE IN THAT REGARD.

HOWEVER, SERIOUS DOUBT WOULD APPEAR TO EXIST AS TO THE PROPRIETY OF THE PAYMENT TO THE LESSEE OF THE AMOUNT OF $76,097.39, REPRESENTING A PART OF THE COST INCURRED IN SHUTTING DOWN AND RESTARTING THE PLANT AS A RESULT OF THE FLOOD. WHILE, AS INDICATED IN YOUR LETTER, THE TERMS OF THE ORIGINAL LEASE PROVIDED FOR THE PAYMENT BY THE GOVERNMENT OF A PART OF THE COST INCURRED IN CONNECTION WITH STARTING OPERATIONS, SUCH PROVISION, PERTAINING CLEARLY TO THE STARTING OPERATIONS INVOLVED IN FIRST PUTTING THE PLANT IN OPERATING CONDITION, MAY NOT BE VIEWED AS OBLIGATING THE GOVERNMENT TO SHARE IN ANY SUCH COST INCURRED IN ANY SUBSEQUENT SHUTTING DOWN OF THE PLANT. SUCH COSTS WOULD SEEM NECESSARILY TO BE THE RESPONSIBILITY OF THE LESSEE TO THE SAME EXTENT AS IF THE SHUT-DOWN HAD RESULTED FROM LACK OF ORDERS OR HAD BEEN CAUSED BY A STRIKE, A FAILURE OF SUPPLY, OR ANY OTHER REASON NOT ATTRIBUTABLE TO THE GOVERNMENT. THERE IS NOTHING CONTAINED IN THE LETTER OF INTENT, THE FORMAL LEASE AGREEMENT, OR THE REFERRED-TO LETTER OF JUNE 30, 1948, WHICH WOULD PLACE THE OBLIGATION FOR ITEMS OF THIS NATURE UPON THE GOVERNMENT AND, IN THE ABSENCE THEREOF, THIS OFFICE WOULD NOT BE WARRANTED IN APPROVING ANY PAYMENT THEREFOR TO THE LESSEE. THERE HAVE NOT BEEN OVERLOOKED, IN THIS CONNECTION, THE PROVISIONS OF PARAGRAPH 204 (F) OF PUBLIC LAW 152, JUNE 30, 1949, 63 STAT. 389, CITED IN YOUR LETTER, WHICH PROVIDE, IN CONNECTION WITH SURPLUS PROPERTY,"WHERE SUCH DISPOSITION HAS BEEN BY LEASE * * * THE ADMINISTRATOR SHALL ADMINISTER AND MANAGE SUCH * * * LEASE * * * AND MAY ENFORCE, ADJUST, AND SETTLE ANY RIGHT OF THE GOVERNMENT WITH RESPECT THERETO IN SUCH MANNER AND UPON SUCH TERMS AS HE DEEMS IN THE BEST INTERESTS OF THE GOVERNMENT.' HOWEVER, SUCH PROVISION IS NOT VIEWED AS AUTHORIZING A PAYMENT OF THE NATURE HERE CONCERNED WHICH CLEARLY DOES NOT INVOLVE A RIGHT OF THE GOVERNMENT UNDER THE LEASE AGREEMENT IN QUESTION.

BASED UPON THE FOREGOING, YOU ARE ADVISED THAT THIS OFFICE WOULD NOT OBJECT TO THE PAYMENT TO THE REYNOLDS METALS COMPANY OF THE AMOUNT OF $148,657.64, ADMINISTRATIVELY DETERMINED--- SUBJECT TO AUDIT--- TO REPRESENT COSTS INCURRED BY SAID COMPANY IN CONNECTION WITH THE PROTECTION OF THE PLANT INVOLVED BUT WOULD FEEL REQUIRED TO OBJECT TO THE PAYMENT TO THE COMPANY OF ANY AMOUNT REPRESENTING COSTS INCURRED IN THE SHUTTING DOWN AND RESTARTING OF THE PLANT.