JUNE 27, 1922, 1 COMP. GEN. 752

JUNE 27, 1922, 1 COMP. GEN. 752

LEASE - PAYMENT OF RENT UNDER, AFTER EXERCISE OF OPTION TO PURCHASE WHEN PROPERTY IS HELD UNDER A LEASE WITH AN OPTION TO PURCHASE AND THE LESSEE NOTIFIES THE LESSOR OF ITS DECISION TO EXERCISE THE OPTION AND TENDERS SETTLEMENT IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT UNDER WHICH THE OPTION WAS GRANTED, SUCH NOTICE OF DECISION AND TENDER OF SETTLEMENT TERMINATE THE RELATION OF LANDLORD AND TENANT SO FAR AS LIABILITY FOR RENT IS CONCERNED, AND THEREAFTER DURING THE PERIOD BETWEEN SUCH NOTICE AND THE FINAL CONSUMMATION OF THE TRANSACTION THE OCCUPANCY IS BY VIRTUE OF THE PURCHASE AGREEMENT WITHOUT RENT. IF THE LESSEE UNDER A LEASE WITH AN OPTION TO PURCHASE IS THE UNITED STATES THE TERMS OF THE AGREEMENT ARE THAT THE PURCHASE PRICE WILL NOT BE PAID UNTIL AFTER CERTAIN REQUIREMENTS OF LAW HAVE BEEN COMPLIED WITH AND A NOTICE THAT THE OPTION HAS BEEN EXERCISED BY THE GOVERNMENT CARRIES WITH IT A TENDER OF SETTLEMENT IN ACCORDANCE WITH SAID TERMS.

DECISION BY COMPTROLLER GENERAL MCCARL, JUNE 27, 1922:

HENRY H. CUMMING ET AL., TRUSTEES OF THE LENWOOD HOTEL PROPERTY AT AUGUSTA, GA., AND SARAH G. STOKES, APPLIED MAY 16, 1922, FOR A REVISION OF SETTLEMENT NO. T-90645, DATED MAY 12, 1922, TREASURY DEPARTMENT DIVISION OF THIS OFFICE, IN WHICH WAS DISALLOWED THEIR CLAIMS AGGREGATING $13,772.08 AS RENT FOR PROPERTY OCCUPIED BY THE UNITED STATES PUBLIC HEALTH SERVICE FOR THE PERIOD FROM AUGUST 12, 1921, WHEN CLAIMANTS RECEIVED NOTICE THAT AN OPTION TO PURCHASE THE PROPERTY HAD BEEN EXERCISED BY THE UNITED STATES, TO DECEMBER 28, 1921, WHEN THE PURCHASE PRICE WAS PAID.

THE MATERIAL FACTS IN THE CASE ARE AS FOLLOWS:

IN JANUARY, 1920, THE PROPERTY IN QUESTION WAS LEASED BY THE UNITED STATES FROM THE CLAIMANTS FOR USE BY THE UNITED STATES PUBLIC HEALTH SERVICE AT A STIPULATED RENTAL WITH AN OPTION IN THE UNITED STATES TO PURCHASE THE PROPERTY AT A PRICE FIXED IN THE LEASE AGREEMENT, SAID OPTION TO BE EXERCISED AT ANY TIME DURING THE LIFE OF THE LEASE OR ANY RENEWAL THEREOF. WHILE THE PROPERTY WAS STILL BEING OCCUPIED BY THE UNITED STATES PUBLIC HEALTH SERVICE UNDER THE LEASE THE ASSISTANT SECRETARY OF THE TREASURY HAVING JURISDICTION OF THE MATTER ADDRESSED THE AGENT WHO HAD EXECUTED THE LEASE ON BEHALF OF THE OWNERS A LETTER DATED AUGUST 9, 1921, READING AS FOLLOWS:

PURSUANT TO EXISTING LEGISLATION AUTHORIZING THE SECRETARY OF THE TREASURY TO PROVIDE ADDITIONAL HOSPITAL FACILITIES FOR PERSONS WHO SERVED IN THE WORLD WAR AND ARE NOW OR HEREAFTER MAY BE PATIENTS OF THE BUREAU OF WAR RISK INSURANCE OR OF THE FEDERAL BOARD FOR VOCATIONAL EDUCATION, THIS DEPARTMENT, IN VIEW OF THE RECOMMENDATION OF ITS CONSULTANTS ON HOSPITALIZATION, HEREBY EXERCISES THE OPTION GIVEN BY YOU TO THE UNITED STATES TO PURCHASE, AT ANY TIME DURING THE LIFE OF A CERTAIN LEASE AGREEMENT DATED JANUARY 17, 1920, OR ANY RENEWAL THEREOF, THE PROPERTY IN AUGUSTA, RICHMOND COUNTY, GEORGIA, KNOWN AS THE LENWOOD HOTEL PROPERTY, CONTAINING THE HOTEL BUILDINGS AND TWENTY ACRES OF LAND, MORE OR LESS, AND ALSO A PARCEL OF LAND, ADJACENT AND CONTIGUOUS THERETO, CONTAINING 159.93 ACRES, MORE OR LESS, THE PROPERTY OF MISS SARAH G. STOKES, OF AUGUSTA, GEORGIA, AS PER PLAT MADE BY GEORGE W. SUMMERS, SEPTEMBER, 1917, INCLUDING ALL LANDS, BUILDINGS, IMPROVEMENTS, FIXED EQUIPMENT (INCLUDING TELEPHONE WIRING AND INSTRUMENTS INSIDE THE SWITCHBOARD), AND MACHINERY, FOR THE SUM OF $379,800.00, LESS A PRO RATED SUM ON THE BASIS OF $10,000.00 PER ANNUM OUT OF THE RENT PAID BY THE UNITED STATES DURING THE TERM OF THE ABOVE CITED LEASE AGREEMENT, OR ANY RENEWAL THEREOF (IN TOTAL AMOUNT NOT TO EXCEED $364,000.00), IN ACCORDANCE WITH THE TERMS OF THE OPTION AS SET FORTH IN DEPARTMENT LETTER OF JANUARY 17, 1920, ACCEPTING YOUR PROPOSAL TO LEASE SAID PREMISES TO THE UNITED STATES ON THE TERMS AND CONDITIONS THEREIN STATED, WHICH TERMS AND CONDITIONS WERE FORMALLY AGREED TO BY YOU UNDER THE SAME DATE AS AUTHORIZED AGENT OF THE OWNERS OF THE LENWOOD HOTEL PROPERTY AND OF MISS SARAH G. STOKES. PRINTED "CONDITIONS" AND THE "SPECIFICATIONS FOR VENDOR'S SURVEY," WHICH ARE HEREBY MADE A PART HEREOF.

ATTENTION IS INVITED TO THE PROVISIONS OF SECTION 7 OF THE EMERGENCY REVENUE ACT APPROVED OCTOBER 3, 1917, REQUIRING CONVEYANCES, ETC., TO BE DULY STAMPED BY THE GRANTOR.

PLEASE ENDORSE UPON THE ACCOMPANYING COPY OF THIS COMMUNICATION IN THE SPACE PROVIDED THEREFOR YOUR UNQUALIFIED ASSENT TO ALL OF THE TERMS AND CONDITIONS HEREINABOVE MENTIONED AND PROMPTLY MAIL SUCH ASSENT TO THIS DEPARTMENT.

ALSO ATTACH TO SUCH ASSENT A CERTIFIED COPY OF YOUR AUTHORITY TO TRANSFER THE LAND TO BE ACQUIRED.

SAID LETTER WAS RETURNED TO THE TREASURY DEPARTMENT BEARING AN INDORSEMENT DATED AUGUST 13, 1921, AS FOLLOWS:

WE HEREBY ASSENT TO ALL THE TERMS AND CONDITIONS OF THE FOREGOING COMMUNICATION.

(SIGNED)HENRY H. CUMMING,

AUTHORIZED AGENT OF THE OWNERS OF THE

LENWOOD HOTEL PROPERTY AND MISS SARAH G. STOKES.

THE PRINTED "CONDITIONS" WHICH WERE EXPRESSLY MADE A PART OF THE LETTER OF AUGUST 9, 1921, TO WHICH CLAIMANTS ASSENTED, CONTAINED THE FOLLOWING PROVISIONS RELATIVE TO TIME OF PAYMENT OF THE PURCHASE PRICE:

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.

THE STOKES DEED WAS EXECUTED NOVEMBER 22, 1921, AND THE LENWOOD DEED NOVEMBER 29, 1921, AND THE PURCHASE PRICE WAS RECEIVED AND ACCEPTED BY CLAIMANTS DECEMBER 28, 1921, TREASURY WARRANTS IN PAYMENT HAVING BEEN ISSUED AND MAILED DECEMBER 23, 1921.

THERE WAS NO FAULT OR UNREASONABLE DELAY ON THE PART OF THE GOVERNMENT IN THIS CASE, AND THAT THE PROCEDURE AND TIME OF PAYMENT WERE IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT AS SET FORTH IN THE LETTER OF AUGUST 9, 1921, AND WITH THE PROVISIONS OF SECTION 355, REVISED STATUTES, WHICH FORM A PART OF EVERY CONTRACT FOR THE PURCHASE OF LAND BY THE UNITED STATES, IS SHOWN BY THE REPORT MADE BY THE SECRETARY OF THE TREASURY UNDER DATE OF APRIL 3, 1922, AND QUOTED IN MY DECISION OF MAY 5, 1922, 1 COMP. GEN., 625, WITH REFERENCE TO THE MATTER NOW UNDER CONSIDERATION.

AS HEREINBEFORE INDICATED THE LAND INVOLVED IN THIS CASE WAS ORIGINALLY OCCUPIED BY THE UNITED STATES UNDER A LEASE WITH A SPECIFIC OPTION TO PURCHASE; THE OPTION TO PURCHASE WAS EXERCISED IN ACCORDANCE WITH TERMS AND CONDITIONS OF THE ORIGINAL AGREEMENT IN WHICH IT WAS GIVEN; THE DEEDS HAVE BEEN EXECUTED AND DELIVERED; AND THE PURCHASE PRICE HAS BEEN PAID AND ACCEPTED. THE ENTIRE TRANSACTION WAS FULLY CONSUMMATED AS ORIGINALLY CONTEMPLATED, AND THE ONLY QUESTION NOW INVOLVED IS WHETHER THE UNITED STATES IS LIABLE FOR RENT AT THE RATE FIXED UNDER THE ORIGINAL AGREEMENT DURING THE PERIOD WHICH NECESSARILY ELAPSED BETWEEN THE DATE CLAIMANTS RECEIVED THE NOTICE THAT THE GOVERNMENT HAD EXERCISED THE OPTION AND THE DATE THE PURCHASE PRICE WAS PAID.

IT IS CONTENDED ON BEHALF OF THE CLAIMANTS THAT THE OPTION TO PURCHASE COULD BE EXERCISED ONLY BY TENDER OF THE PURCHASE PRICE; THAT THE RELATION OF LANDLORD AND TENANT AS CREATED UNDER THE ORIGINAL LEASE CONTINUED UNTIL THE PURCHASE PRICE WAS PAID, AND THAT THE GOVERNMENT IS LIABLE FOR THE RENT AT THE RATE RESERVED IN THE LEASE UP TO DECEMBER 28, 1921, WHEN THE PURCHASE PRICE WAS PAID. IN SUPPORT OF THESE CONTENTIONS THE ATTORNEYS FOR CLAIMANTS HAVE SUBMITTED BRIEFS AND ORAL ARGUMENTS IN WHICH NUMEROUS COURT DECISIONS ARE CITED. AN EXAMINATION OF SAID AUTHORITIES, HOWEVER, DISCLOSES THAT NONE OF THE CASES RELIED UPON EXACTLY PARALLELS THE CASE HERE PRESENTED. IN NONE OF THEM IS THERE INVOLVED THE QUESTION OF THE LIABILITY OF THE GOVERNMENT FOR RENT BETWEEN THE DATE OF EXERCISING AN OPTION TO PURCHASE AND THE DATE OF ACTUAL PAYMENT OF THE PURCHASE PRICE, WHEREAS THAT IS THE ONLY QUESTION HERE INVOLVED.

IN THIS CASE THE RIGHT TO PURCHASE WAS RESERVED IN THE INSTRUMENT WHICH CREATED THE TENANCY. IT WAS PART OF THE LEASE AGREEMENT THAT THE UNITED STATES COULD EXERCISE THE OPTION TO PURCHASE AT ANY TIME DURING THE LIFE OF SAID AGREEMENT, AND NEITHER BY EXPRESS STIPULATION NOR BY IMPLICATION WAS THERE ANY CONDITION OR REQUIREMENT THAT A TENDER OF THE PURCHASE PRICE WAS NECESSARY TO AN EXERCISE OF THE OPTION. ON THE CONTRARY, A TENDER OF THE PURCHASE PRICE AT THE TIME OF EXERCISING THE OPTION COULD NOT HAVE BEEN MADE UNDER THE LAWS GOVERNING PAYMENT FOR LAND PURCHASED BY THE UNITED STATES. NOT ONLY MUST THE REQUIREMENTS OF THESE LAWS BE READ INTO THE AGREEMENT WHICH GAVE THE RIGHT TO EXERCISE THE OPTION, BUT WHEN THE OPTION WAS EXERCISED CLAIMANTS EXPRESSLY ASSENTED TO THE TERMS OF PAYMENT.

I UNDERSTAND FROM THE BRIEFS AND ARGUMENTS SUBMITTED THAT THE ATTORNEYS FOR CLAIMANTS ADMIT THAT WHEN PROPERTY IS HELD UNDER A LEASE WITH AN OPTION TO PURCHASE AND THE LESSEE NOTIFIES THE LESSOR OF ITS DECISION TO EXERCISE THE OPTION AND TENDERS SETTLEMENT IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT UNDER WHICH THE OPTION WAS GRANTED, SUCH NOTICE OF DECISION AND TENDER OF SETTLEMENT TERMINATES THE RELATION OF LANDLORD AND TENANT SO FAR AS PAYMENT OF RENT IS CONCERNED AND THAT THEREAFTER DURING THE PERIOD BETWEEN SUCH NOTICE AND THE FINAL CONSUMMATION OF THE TRANSACTION THE OCCUPANCY IS BY VIRTUE OF THE PURCHASE AGREEMENT WITHOUT RENT, THE RELATION BEING CHANGED TO THAT OF VENDOR AND PURCHASER. THERE WOULD APPEAR TO BE NO DOUBT THAT SUCH IS THE LAW.

AN OPTION IS AN UNACCEPTED OFFER TO SELL UPON AGREED TERMS. AND WHEN THE PARTY TO WHOM THE OPTION IS GIVEN NOTIFIES THE PARTY WHO GAVE IT THAT THE OFFER IS ACCEPTED, THE OPTION IS EXERCISED.

IN THIS CASE THE GOVERNMENT, IMMEDIATELY UPON EXERCISING THE OPTION, PROCEEDED TO EFFECT PAYMENT IN THE MANNER CONTEMPLATED IN THE ORIGINAL AGREEMENT AND ASSENTED TO BY CLAIMANTS AT THE TIME THE OPTION WAS EXERCISED. SUCH ACTION WAS EQUIVALENT TO A TENDER OF SETTLEMENT, OR, IN OTHER WORDS, TO A FULL COMPLIANCE BY THE GOVERNMENT WITH ALL OF THE CONDITIONS AND REQUIREMENTS NECESSARY TO CHANGE THE RELATION FROM THAT OF THE CONDITIONS AND REQUIREMENTS NECESSARY TO CHANGE THE RELATION FROM THAT OF LANDLORD AND TENANT TO THAT OF VENDOR AND PURCHASER. THERE WAS NO FAULT OR UNREASONABLE DELAY ON THE PART OF THE UNITED STATES, THE NECESSARY APPROPRIATION HAD BEEN MADE AND FUNDS WERE AVAILABLE FOR THE PAYMENT AS SOON AS THE REQUIREMENTS AS TO TITLE COULD BE COMPLIED WITH, AND IN ACCORDANCE WITH THE UNIFORM PRACTICE IN THE PURCHASE BY THE GOVERNMENT OF LAND HELD UNDER A LEASE WITH AN OPTION TO PURCHASE IT MUST BE HELD THAT PAYMENT OF RENT BETWEEN THE DATE OF EXERCISING THE OPTION TO PURCHASE AND THE DATE OF PAYMENT OF THE PURCHASE PRICE IS NOT AUTHORIZED. SEE MY DECISION OF MAY 5, 1922, 1 COMP. GEN., 625.

UPON A REVIEW OF THE MATTER NO DIFFERENCES ARE FOUND AND THE SETTLEMENT OF MAY 12, 1922, IS SUSTAINED.