MAY 5, 1922, 1 COMP. GEN. 625

MAY 5, 1922, 1 COMP. GEN. 625

LEASE - RENT AFTER EXERCISE OF OPTION TO PURCHASE IN EVERY OPTION TO PURCHASE GIVEN THE GOVERNMENT IN A LEASE OF REAL ESTATE THERE IS A PROVISION IMPLIED BY LAW TO THE EFFECT THAT IF THE OPTION IS EXERCISED PAYMENT WILL NOT BE MADE UNTIL AFTER THE ATTORNEY GENERAL SHALL HAVE MADE A REPORT AS TO THE VALIDITY OF THE TITLE. THE OPTION IS EXERCISED WHEN THE GOVERNMENT'S DECISION TO EXERCISE IT HAS BEEN COMMUNICATED TO THE OWNERS, AND NO RENT IS PAYABLE THEREAFTER, NOTWITHSTANDING THE FACT THAT THE PURCHASE PRICE IS NOT PAID UNTIL SUCH TIME THEREAFTER AS NECESSARY FOR THE EXAMINATION OF THE TITLE BY THE ATTORNEY GENERAL AND FOR THE EFFECTING OF PAYMENT IN THE USUAL WAY.

DECISION BY COMPTROLLER GENERAL MCCARL, MAY 5, 1922:

THE CHIEF OF THE TREASURY DEPARTMENT DIVISION OF THE GENERAL ACCOUNTING OFFICE HAS SUBMITTED FOR CONSIDERATION A MEMORANDUM DECISION TO THE EFFECT THAT WHEN PROPERTY IS OCCUPIED BY THE GOVERNMENT UNDER A LEASE IN WHICH THE GOVERNMENT IS GIVEN THE OPTION TO PURCHASE THE PROPERTY AT A PRICE STIPULATED THEREIN AND SAID OPTION IS EXERCISED BY THE GOVERNMENT AND THE OWNER SIGNIFIES ASSENT TO SUCH EXERCISE, THE RELATION OF LANDLORD AND TENANT IS THEREBY TERMINATED AND RENT IS NOT PAYABLE FOR ANY PERIOD THEREAFTER.

THE QUESTION ARISES IN CONNECTION WITH THE CLAIM OF HENRY H. CUMMING, ET AL., TRUSTEES FOR THE LENWOOD HOTEL PROPERTY, AND MISS SARAH G. STOKES, FOR RENT OF PROPERTY OCCUPIED BY THE UNITED STATES PUBLIC HEALTH SERVICE AT AUGUSTA, GA., FOR THE PERIOD FROM AUGUST 12, 1921, WHEN THE EXERCISE OF AN OPTION TO PURCHASE WAS ASSENTED TO BY THE LESSOR, TO DECEMBER 28, 1921, WHEN THE PURCHASE PRICE OF THE PROPERTY WAS PAID.

THE ATTORNEY FOR CLAIMANT HAS SUBMITTED A VERY COMPREHENSIVE BRIEF IN WHICH THE VALIDITY OF THE CLAIM IS SOUGHT TO BE ESTABLISHED UPON THE LEGAL PROPOSITIONS (1) THAT WHEN THERE IS AN OPTION TO PURCHASE WITH NO STIPULATION AS TO TIME OF PAYMENT THE LEGAL PRESUMPTION IS THAT THE SALE IS TO BE FOR CASH, AND (2) THAT IN EXERCISING AN OPTION TO PURCHASE FOR CASH IT IS NECESSARY THAT THE FULL AMOUNT OF THE PURCHASE PRICE BE TENDERED IN ORDER TO MAKE THE EXERCISE EFFECTIVE.

THE CORRECTNESS OF THESE TWO PROPOSITIONS AS APPLICABLE TO PRIVATE INDIVIDUALS WOULD APPEAR TO BE ESTABLISHED BY ADJUDICATED CASES IN THE STATE OF GEORGIA AND ELSEWHERE, BUT THE SITUATION IS DIFFERENT WITH REFERENCE TO PURCHASES BY THE UNITED STATES.

SECTION 355, REVISED STATUTES, PROVIDES:

NO PUBLIC MONEY SHALL BE EXPENDED UPON ANY SITE OR LAND PURCHASED BY THE UNITED STATES FOR THE PURPOSES OF ERECTING THEREON ANY ARMORY, ARSENAL, FORT, FORTIFICATION, NAVY-YARD, CUSTOM-HOUSE, LIGHT-HOUSE, OR OTHER PUBLIC BUILDING, OF ANY KIND WHATEVER, UNTIL THE WRITTEN OPINION OF THE ATTORNEY- GENERAL SHALL BE HAD IN FAVOR OF THE VALIDITY OF THE TITLE, NOR UNTIL THE CONSENT OF THE LEGISLATURE OF THE STATE IN WHICH THE LAND OR SITE MAY BE, TO SUCH PURCHASE, HAS BEEN GIVEN. THE DISTRICT ATTORNEYS OF THE UNITED STATES, UPON THE APPLICATION OF THE ATTORNEY-GENERAL, SHALL FURNISH ANY ASSISTANCE OR INFORMATION IN THEIR POWER IN RELATION TO THE TITLES OF THE PUBLIC PROPERTY LYING WITHIN THEIR RESPECTIVE DISTRICTS. AND THE SECRETARIES OF THE DEPARTMENTS, UPON THE APPLICATION OF THE ATTORNEY- GENERAL, SHALL PROCURE ANY ADDITIONAL EVIDENCE OF TITLE WHICH HE MAY DEEM NECESSARY, AND WHICH MAY NOT BE IN THE POSSESSION OF THE OFFICERS OF THE GOVERNMENT, AND THE EXPENSE OF PROCURING IT SHALL BE PAID OUT OF THE APPROPRIATIONS MADE FOR THE CONTINGENCIES OF THE DEPARTMENTS RESPECTIVELY.

THE PROVISIONS OF THIS SECTION ARE APPLICABLE TO ALL LAND PURCHASED BY THE UNITED STATES FOR WHATEVER PURPOSE. 28 OP.ATTY.GEN., 413. AND SAID PROVISIONS BECOME A PART OF EVERY CONTRACT FOR THE PURCHASE OF LAND BY THE GOVERNMENT. 9 OP.ATTY.GEN., 100. IT MUST BE PRESUMED THAT IN ALL CASES SOME TIME WILL BE REQUIRED IN WHICH TO MAKE THE NECESSARY EXAMINATION AS TO VALIDITY OF TITLE AND THAT NECESSARILY THERE WILL BE SOME DELAY IN PAYMENT OF THE PURCHASE PRICE. IT HAS BEEN HELD THAT DELAY BY THE ATTORNEY GENERAL IN PASSING ON TITLE IS NO GROUND FOR DAMAGES UNLESS THE DELAY WAS CONTUMACIOUS OR UNREASONABLE AND INDUCED BY THE GOVERNMENT. MERCHANTS EXCHANGE COMPANY V. UNITED STATES, 1 C.CLS., 332. IT MUST BE HELD, THEREFORE, THAT WHEN THE UNITED STATES LEASES LAND WITH AN OPTION TO PURCHASE, IT IS WITH THE DISTINCT UNDERSTANDING THAT UPON THE EXERCISE OF THE OPTION PAYMENT OF THE PURCHASE PRICE WILL NOT BE MADE UNTIL AFTER THE TITLE HAS BEEN EXAMINED AND APPROVED BY THE ATTORNEY GENERAL AS REQUIRED BY LAW, AND THAT THE UNITED STATES WILL NOT BE LIABLE FOR RENT OR OTHER DAMAGES FOR SUCH PERIOD AFTER DATE OF EXERCISE OF THE OPTION AS MAY BE NECESSARY TO ENABLE THE EFFECTING OF PAYMENT IN THE USUAL WAY AFTER THE ATTORNEY GENERAL HAS EXAMINED AND REPORTED UPON THE TITLE. THE LETTER OF AUGUST 9, 1921, NOTIFYING THE OWNERS OF THE GOVERNMENT'S EXERCISE OF THE OPTION AND ACCEPTANCE OF THE TERMS OF PURCHASE AS SET FORTH IN THE LEASE CONTAINED A PARAGRAPH READING AS FOLLOWS:

THIS ACCEPTANCE IS SUBJECT TO THE REQUIREMENTS SET FORTH IN THE ATTACHED PRINTED "CONDITIONS" AND THE "SPECIFICATIONS FOR VENDOR'S SURVEY," WHICH ARE HEREBY MADE A PART HEREOF.

PARAGRAPH 9 OF THE PRINTED CONDITIONS REFERRED TO CONTAINED THE FOLLOWING INSTRUCTIONS WITH REFERENCE TO TIME OF PAYMENT:

THE ATTORNEY GENERAL HAS BEEN REQUESTED TO GIVE THE UNITED STATES ATTORNEY FOR THE DISTRICT IN WHICH THE SELECTED SITE IS SITUATED SUCH INSTRUCTIONS AS MAY BE NECESSARY TO PROCURE THE CONVEYANCE OF SAID LAND TO THE UNITED STATES, AND SAID VENDOR SHOULD PROMPTLY APPLY TO THE UNITED STATES ATTORNEY FOR DIRECTIONS AS TO THE PAPERS TO BE FURNISHED AND NOTIFY THE TREASURY DEPARTMENT WHEN ALL OF THE UNITED STATES ATTORNEY'S REQUIREMENTS HAVE BEEN COMPLIED WITH. ALL TITLE PAPERS (ABSTRACTS, DEEDS, ETC., PER PARAGRAPHS 1, 3, 4, AND 7 ABOVE) MUST BE DELIVERED TO THE UNITED STATES ATTORNEY FIRST, BUT THE SURVEY (PER PARAGRAPH 2 ABOVE) MUST BE FORWARDED BY THE VENDOR TO THE SUPERVISING ARCHITECT OF THE TREASURY DEPARTMENT. WHEN THE SURVEY HAS BEEN MADE SATISFACTORILY, A PRINT THEREOF WILL BE FORWARDED BY THE TREASURY DEPARTMENT TO THE UNITED STATES ATTORNEY FOR HIS USE IN CONNECTION WITH THE EXAMINATION OF THE TITLE TO THE LAND.

WHEN THE TITLE PAPERS ARE RECEIVED AT THIS DEPARTMENT WITH THE ATTORNEY GENERAL'S FAVORABLE OPINION AS TO THE VALIDITY OF THE TITLE TO THE WHOLE OF SAID SITE, AND WHEN ALL THE CONDITIONS OF THIS ACCEPTANCE HAVE BEEN SATISFACTORILY COMPLIED WITH, OR ACCEPTABLE SECURITY GIVEN FOR SUCH COMPLIANCE WITH RESPECT TO ANY MINOR ITEM THE PERFORMANCE OF WHICH IT MAY BE MUTUALLY AGREED SHALL BE POSTPONED, THIS DEPARTMENT WILL PROMPTLY TAKE UP THE PAYMENT OF THE PURCHASE MONEY, AS PROVIDED IN THE LETTER (OR ANY MODIFICATION THEREOF) ACCEPTING THE PROPOSAL FOR THE SALE OF THE LAND.

CLAIMANTS EXPRESSLY AND SPECIFICALLY ASSENTED TO ALL THE TERMS AND CONDITIONS OF THE LETTER OF AUGUST 9, 1921.

THAT THE GOVERNMENT DID NOT CAUSE ANY UNREASONABLE DELAY IN THE CASE HERE INVOLVED IS EVIDENCED BY THE REPORT MADE BY THE SECRETARY OF THE TREASURY TO THIS OFFICE UNDER DATE OF APRIL 3, 1922, AS FOLLOWS:

THE OPTION TO PURCHASE THE LENWOOD AND STOKES PROPERTIES WAS EXERCISED BY DEPARTMENT LETTER OF AUGUST 9, 1921, ADDRESSED TO MR. HENRY CUMMING, AGENT. THE "ASSENT" COPY OF SAID LETTER OF ACCEPTANCE, WITH MR. CUMMING'S ASSENT INDORSED THEREON, AND THE ASSENT OF MISS STOKES ON A SEPARATE PAPER, IS INCLOSED.

THE QUESTION OF TITLE WAS SUBMITTED TO THE ATTORNEY GENERAL ON THE DAY THE OPTION WAS EXERCISED, I.E., AUGUST 9, 1921. THE ATTORNEY GENERAL'S ORIGINAL OPINION ON THE LENWOOD PROPERTIES IS DATED DECEMBER 5, 1921, AND ON THE STOKES PROPERTIES DECEMBER 13, 1921. THESE OPINIONS WERE FOLLOWED BY SUPPLEMENTARY OPINIONS OF DECEMBER 12 AND 20, 1921, RELATIVE TO AFFIDAVITS OF POSSESSION REQUIRED BY THE ORIGINAL OPINIONS. ALL THESE OPINIONS WERE RECEIVED AT THIS DEPARTMENT ON THE DAY FOLLOWING THE RESPECTIVE DATES.

WHILE AWAITING THE SUPPLEMENTARY OPINIONS OF THE ATTORNEY GENERAL THE QUESTION OF PAYMENT OF RENT FOR THE PERIOD AFTER OPTIONS WERE EXERCISED WAS BROUGHT TO YOUR ATTENTION BY LETTER DATED DECEMBER 17, WHICH FORMED THE SUBJECT OF YOUR REPLY OF DECEMBER 20, RECEIVED IN THE OFFICE OF THE SUPERVISING ARCHITECT ON THE FOLLOWING DAY. THE SITE ACCOUNT THEREUPON WAS TRANSMITTED ON THE SAME DAY TO THE GENERAL ACCOUNTING OFFICE, AND WARRANTS IN PAYMENT ISSUED DECEMBER 23, WHICH WERE MAILED ON THAT DATE TO THE UNITED STATES ATTORNEY AT SAVANNAH WITH FINAL INSTRUCTIONS FOR COMPLETING THE TRANSACTION, WHICH WAS CLOSED DECEMBER 28, 1921, ON WHICH DATE THE EXECUTED DEEDS WERE FORMALLY DELIVERED AND ACCEPTED, AS STATED IN THE UNITED STATES ATTORNEY'S FINAL REPORT MADE ON THE SAME DAY.

THE STOKES DEED WAS EXECUTED NOVEMBER 22, AND THE LENWOOD DEED NOVEMBER 29, BEFORE SUBMITTING THEM TO THE ATTORNEY GENERAL FOR PRELIMINARY EXAMINATION IN CONNECTION WITH PASSING ON THE TITLE. IT IS THE CUSTOM TO SUBMIT DRAFT DEEDS IN SUCH CASES, UNEXECUTED. THE EXECUTION OF THE DEEDS IN THE PRESENT CASE BEFORE THE TITLE WAS APPROVED, OR EVEN SUBMITTED FOR APPROVAL, WAS APPARENTLY ON THE PROPONENTS' OWN MOTION, AND HAD NO EFFECT WHATEVER ON THE PROGRESS OF THE MATTER.

BETWEEN THE DATE THE OPTION TO PURCHASE WAS EXERCISED AND THE DATE THE WHOLE MATTER WAS CLOSED THERE WAS NO DELAY ATTRIBUTABLE TO THIS DEPARTMENT, WHICH TOOK EACH STEP AS PROMPTLY AS CONDITION WOULD PERMIT. LETTER OF NOVEMBER 18, 1921, FROM THE UNITED STATES ATTORNEY IN CHARGE OF THE CASE TO THE DEPARTMENT OF JUSTICE (COPY INCLOSED) MENTIONS DELAYS BY THE VENDORS IN SUBMITTING EVIDENCE OF TITLE, AND ALSO SOME DELAY CAUSED BY PRESSURE OF WORK IN HIS OWN OFFICE. HIS REPORT ON THE LENWOOD PARCEL WAS SUBMITTED UNDER DATE OF NOVEMBER 27, AND REACHED THE DEPARTMENT OF JUSTICE NOVEMBER 29. AS PREVIOUSLY INDICATED, THE ATTORNEY GENERAL'S OPINION ON THE SAID PARCEL WAS DATED DECEMBER 5, 1921.

IT THUS APPEARS THAT THE GOVERNMENT EXERCISED ITS OPTION TO PURCHASE IN ACCORDANCE WITH THE TERMS OF THE LEASE IN WHICH THE OPTION WAS GIVEN; THAT THE OWNERS ACCEPTED THE TERMS AND CONDITIONS OF THE PURCHASE; AND THAT THE GOVERNMENT COMPLIED WITH SAID TERMS AND CONDITIONS. THEREFORE, UNDER THE RULE ANNOUNCED IN 24 CYC., 1023, AND SUPPORTED BY KNERR V. BRADLEY, 105 .ST., 190; WADE V. SO. PENN. OIL COMPANY, 45 W.VA., 380; SMITH V. GIBSON, 25 NEBR., 511; AND BEHR V. HURWITZ (N.J.CH.), 105 A., 486, IT MUST BE HELD THAT THE RELATION OF LANDLORD AND TENANT CEASED ON AUGUST 12, 1921, WHEN THE GOVERNMENT'S INTENTION TO EXERCISE THE OPTION WAS COMMUNICATED TO THE OWNERS AND ASSENTED TO BY THEM, AND THAT RENT IS NOT PAYABLE FOR ANY TIME THEREAFTER. SEE 26 COMP. DEC., 928.