B-160256, JAN. 5, 1967

B-160256, JAN. 5, 1967

TO D. G. IRONSIDE, ESQUIRE:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 27, 1966 (DGI/ML/839/SIC), ON BEHALF OF DOCTOR J. F. LOPEZ, SINGAPORE, RELATIVE TO HIS CLAIM FOR REFUND OF A DEPOSIT PAID INCIDENT TO THE SUBMISSION BY DOCTOR LOPEZ OF A BID FOR THE PURCHASE OF CERTAIN PROPERTY ADVERTISED FOR SALE BY THE UNITED STATES IN SINGAPORE.

THE RECORD INDICATES THAT ON MARCH 19, 1964, THE UNITED STATES CONSULATE GENERAL IN SINGAPORE ISSUED AN INVITATION SOLICITING BIDS FOR THE PURCHASE OF REAL ESTATE OWNED BY THE UNITED STATES GOVERNMENT AT 13 NASSIM ROAD, SINGAPORE. THE INVITATION INCLUDED THE FOLLOWING PERTINENT PROVISION:

"ALL OFFERS ARE TO BE MADE IN WRITING, IN ORIGINAL AND TWO COPIES, AND SHALL BE ACCOMPANIED BY A CERTIFIED CHECK PAYABLE TO THE TREASURER OF THE UNITED STATES IN AN AMOUNT EQUAL TO 5 PERCENT OF THE TOTAL OFFER. THIS EARNEST MONEY WILL BE RETURNED TO THE OFFEROR IF THE OFFER IS NOT ACCEPTED, BUT, IF ACCEPTED, THE EARNEST MONEY SHALL EITHER CONSTITUTE PARTIAL PAYMENT OF THE PURCHASE PRICE OR SHALL BE FORFEITED IF PAYMENT DUE UNDER ANY ACCEPTED OFFER IS NOT PAID ON DATE OF EXECUTION OF THE CONTRACT OF SALE.'

THE HIGH BID RECEIVED BY THE CONSULATE GENERAL WAS ONE FROM DOCTOR LOPEZ, QUOTING A PRICE OF $320,000 (MALAYAN CURRENCY) AND ACCOMPANIED BY A CHECK FOR $16,000 (MALAYAN CURRENCY), REPRESENTING THE REQUIRED EARNEST MONEY DEPOSIT. DOCTOR LOPEZ WAS SUBSEQUENTLY NOTIFIED THAT HE WAS THE SUCCESSFUL BIDDER, AND STEPS WERE TAKEN BY THE CONSULATE GENERAL TO DRAFT A CONTRACT OF SALE.

IN A REPORT FURNISHED TO OUR OFFICE BY THE UNITED STATES DEPARTMENT OF STATE, IT IS STATED THAT SOMETIME BEFORE SEPTEMBER 10, 1964, WHILE THE CONTRACT OF SALE WAS IN THE PROCESS OF BEING DRAFTED, DOCTOR LOPEZ COMMUNICATED WITH THE CONSULATE GENERAL AND REQUESTED THAT HE BE PERMITTED TO WITHDRAW HIS BID DUE TO THE FACT THAT THE INDONESIAN CONFRONTATION OF MALAYSIA AND RIOTS IN SINGAPORE HAD DEPRESSED THE VALUE OF HIS ASSETS AS WELL AS THE VALUE OF THE PROPERTY ON WHICH HIS BID WAS SUBMITTED. IT IS FURTHER STATED THAT WHILE THE CONSULATE GENERAL INFORMED DOCTOR LOPEZ THAT A DEFAULT ON HIS CONTRACT WOULD RESULT IN A FORFEITURE OF HIS DEPOSIT UNDER THE TERMS OF THE INVITATION FOR BIDS, EFFORTS WERE MADE BY THE CONSULATE GENERAL TO LOCATE ANOTHER PURCHASER AMONG THE OTHER BIDDERS; HOWEVER, SUCH EFFORTS PROVED FRUITLESS.

IN A LETTER DATED SEPTEMBER 28, 1964, TO THE CONSULATE GENERAL, DOCTOR LOPEZ REQUESTED RECONSIDERATION OF HIS CLAIM FOR RETURN OF HIS DEPOSIT OR, IN LIEU THEREOF, THAT AN ADDITIONAL SIX MONTHS BE ALLOWED FOR COMPLETION OF THE SALE. ON DECEMBER 3, 1964, FOLLOWING APPROVAL BY THE DEPARTMENT OF STATE OF A SIX-MONTH EXTENSION EFFECTIVE OCTOBER 15, 1964, OF THE PERIOD FOR COMPLETING THE SALE, THERE WAS EXECUTED BY THE CONSULATE GENERAL AND BY DOCTOR LOPEZ A MEMORANDUM OF AGREEMENT WHEREBY THE DEPOSIT PAID WITH DOCTOR LOPEZ'S BID WAS TO BE REGARDED AS OPTION MONEY AND DOCTOR LOPEZ WAS GRANTED AN OPTION TO PURCHASE THE PROPERTY. UNDER THE TERMS OF THE AGREEMENT, DOCTOR LOPEZ WAS ALLOWED A PERIOD OF FIVE MONTHS EXPIRING MARCH 15, 1965, IN WHICH TO EXERCISE THE OPTION IN WRITING AND ONE ADDITIONAL MONTH TO COMPLETE THE SALE. IN THE EVENT DOCTOR LOPEZ FAILED TO TIMELY EXERCISE THE OPTION, THE OPTION MONEY WAS TO BE ABSOLUTELY FORFEITED TO THE UNITED STATES.

SOMETIME PRIOR TO MARCH 12, 1965, DOCTOR LOPEZ REQUESTED THE CONSULATE GENERAL TO GRANT HIM A FURTHER EXTENSION OF ONE MONTH TO COMPLETE THE SALE, BUT THE REQUEST WAS DENIED BY THE CONSULATE GENERAL WITH THE CONCURRENCE OF THE DEPARTMENT OF STATE. ACCORDINGLY, UPON THE FAILURE OF DOCTOR LOPEZ TO EXERCISE THE OPTION BY MARCH 15, 1965, THE OPTION EXPIRED AND THE DEPOSIT WAS FORFEITED. SUBSEQUENTLY, AT A DATE NOT REFLECTED IN THE ADMINISTRATIVE REPORT, THE NEW ZEALAND GOVERNMENT PURCHASED THE PROPERTY FROM THE UNITED STATES FOR $335,000 (MALAYAN CURRENCY).

THE DEPARTMENT OF STATE HAS CONSIDERED TWO SEPARATE REQUESTS FROM DOCTOR LOPEZ FOR REFUND OF THE DEPOSIT, BUT RELIEF HAS BEEN DENIED UNDER THE FORFEITURE PROVISIONS IN THE INVITATION FOR BIDS AND THE OPTION AGREEMENT, AND IN ACCORDANCE WITH THE RULE THAT NO AGENT OF THE UNITED STATES MAY GIVE AWAY FUNDS OR PROPERTY ONCE RIGHT OR TITLE HAS VESTED IN THE UNITED STATES. THE DEPARTMENT HAS SUGGESTED TO DOCTOR LOPEZ, HOWEVER, THAT HE PETITION OUR OFFICE TO RECOMMEND THE CLAIM TO THE CONGRESS OF THE UNITED STATES FOR FAVORABLE CONSIDERATION UNDER THE ACT OF APRIL 10, 1928, 31 U.S.C. 236, SOMETIMES CALLED THE MERITORIOUS CLAIMS ACT. IT HAS ALSO BEEN SUGGESTED THAT IF DOCTOR LOPEZ IS OF THE OPINION THAT HE IS ENTITLED TO RELIEF UNDER THE LAWS OF SINGAPORE, CITATIONS BE FURNISHED TO ANY APPLICABLE STATUTES AND COURT CASES.

IN YOUR LETTER OF SEPTEMBER 27, YOU POINT TO THE FACT THAT IN ADDITION TO RETAINING THE DEPOSIT OF $16,000 (MALAYAN CURRENCY) PAID BY DOCTOR LOPEZ, THE UNITED STATES HAS GAINED $15,000 (MALAYAN CURRENCY) BY REASON OF THE INCREASED PRICE AT WHICH DOCTOR LOPEZ INDUCED THE NEW ZEALAND GOVERNMENT TO PURCHASE THE PROPERTY IN QUESTION. FURTHER, YOU URGE THAT, HAD THE OFFICERS AT THE UNITED STATES CONSULATE IN SINGAPORE WITH WHOM DOCTOR LOPEZ ORIGINALLY DEALT REMAINED IN OFFICE AT THE TIME HE REQUESTED THE SECOND EXTENSION TO COMPLETE THE SALE, THE MATTER WOULD HAVE BEEN RESOLVED IN DOCTOR LOPEZ'S FAVOR AND HE WOULD HAVE BEEN ENABLED TO PRESERVE HIS DEPOSIT AND TO REALIZE A PROFIT FROM THE SALE OF THE PROPERTY TO THE NEW ZEALAND GOVERNMENT. ACCORDINGLY, YOU CONTEND THAT DOCTOR LOPEZ HAS, AT LEAST, MORE THAN A MORAL AND EQUITABLE RIGHT TO REFUND OF HIS DEPOSIT, AND THEREFORE HIS CLAIM IS FAIR, PROPER AND REASONABLE AND DESERVING OF THE CONSIDERATION OF THE CONGRESS.

WE HAVE HELD THAT UNDER A CONTRACT FOR THE PURCHASE OF REAL ESTATE FROM THE UNITED STATES GOVERNMENT, WHICH PROVIDES THAT IN THE EVENT OF DEFAULT THE PURCHASER SHALL BE RESPONSIBLE FOR ANY COST, EXPENSE, OR LOSS RESULTING FROM SUCH DEFAULT, THE DEFAULTING PURCHASER IS NOT ENTITLED, ABSENT SPECIFIC AUTHORITY IN THE CONTRACT, TO REFUND OF ANY PORTION OF THE DOWN PAYMENT ON THE PROPERTY EVEN THOUGH THE PROPERTY IS RESOLD FOR A HIGHER PRICE THAN THE PRICE WHICH THE PURCHASER HAD AGREED TO PAY AND THERE IS A GAIN, RATHER THAN A LOSS, TO THE GOVERNMENT. 8 COMP. GEN. 592 (1929). IN REACHING OUR CONCLUSION, WE QUOTED FROM HANSBROUGH V. PECK, 5 WALLACE 497, 506, THE WELL SETTLED RULE:

"THAT THE PARTY WHO HAS ADVANCED MONEY, OR DONE AN ACT IN PART PERFORMANCE OF THE AGREEMENT, AND THEN STOPS SHORT AND REFUSES TO PROCEED TO ITS ULTIMATE CONCLUSION, THE OTHER PARTY BEING READY AND WILLING TO PROCEED AND FULFILL ALL HIS STIPULATIONS ACCORDING TO THE CONTRACT, WILL NOT BE PERMITTED TO RECOVER BACK WHAT HAS THUS BEEN ADVANCED OR DONE.'

FURTHER, IN A SITUATION IN WHICH A PURCHASER OF SURPLUS WAR SUPPLIES PLEADED ENTITLEMENT TO REFUND OF HIS BID DEPOSIT ON THE BASIS THAT HIS FAILURE TO PAY TO THE UNITED STATES THE BALANCE OF THE PURCHASE PRICE WAS NOT OCCASIONED BY A REFUSAL ON HIS PART BUT TO HIS INABILITY TO SECURE SUFFICIENT FUNDS WITHOUT FORCING OTHERS INTO BANKRUPTCY, WE DENIED RELIEF STATING:

"THE PURCHASER VOLUNTARILY SUBMITTED HIS PROPOSAL AND MADE THE DEPOSIT * * *. HE SHOULD HAVE KNOWN AT THE TIME WHETHER HE HAD OR COULD GET THE AVAILABLE FUNDS TO CONSUMMATE THE TRANSACTION AND IT IS IMMATERIAL THAT THE GOVERNMENT MAY HAVE LATER SOLD THE MATERIAL FOR MORE THAN HE HAD AGREED TO PAY. THE CONTRACT WAS OF HIS OWN MAKING AND THIS OFFICE CAN NOT RELIEVE HIM FROM THE CONSEQUENCES THEREOF BY REPORTING THE MATTER TO THE CONGRESS WITH RECOMMENDATION THAT AN APPROPRIATION BE MADE IN SUFFICIENT SUM TO REFUND THE DEPOSIT.' (A 40140, JANUARY 9, 1933.)

IN ADDITION, IN LINE WITH THE WELL SETTLED RULES THAT THE PARTIES TO AN EXECUTORY CONTRACT, BEFORE A BREACH OCCURS, MAY RESCIND THE CONTRACT BY MUTUAL ASSENT AND THAT IN SUCH EVENT ANY CONSIDERATION THERETOFORE RECEIVED BY ONE OF THE PARTIES MUST BE RETURNED IN ORDER TO PLACE THE PARTIES IN STATUS QUO, WE HAVE HELD THAT THERE WOULD BE NO LEGAL OBJECTION TO THE RESCISSION OF A CONTRACT FOR THE SALE OF SURPLUS UNITED STATES GOVERNMENT PROPERTY AND REFUND OF THE EARNEST MONEY DEPOSIT PRIOR TO THE TIME SPECIFIED FOR PERFORMANCE PURSUANT TO AN ADMINISTRATIVE DETERMINATION THAT SUCH ACTION IS IN THE BEST INTEREST OF THE UNITED STATES. WE HAVE STIPULATED, HOWEVER, THAT ONCE THERE HAS BEEN A DEFAULT AND THE GOVERNMENT HAS EXERCISED ITS RIGHT TO RETAIN THE EARNEST MONEY DEPOSIT, THERE IS NO LEGAL BASIS FOR REFUND OF ANY PART OF THE DEPOSIT REGARDLESS OF WHETHER THE GOVERNMENT HAS SUFFERED ANY DAMAGES BY REASON OF THE DEFAULT. COMP. GEN. 775 (1947).

PURSUANT TO SUCH DECISIONS, COPIES OF WHICH ARE ENCLOSED, THE DEPARTMENT OF STATE COULD HAVE AGREED, PRIOR TO OCTOBER 15, 1964, THE DATE ON WHICH DOCTOR LOPEZ ORIGINALLY WAS OBLIGATED TO COMPLETE THE SALE, TO RESCIND THE PURCHASE AGREEMENT AND THEREBY REFUND TO DOCTOR LOPEZ HIS EARNEST MONEY DEPOSIT. HOWEVER, THE DEPARTMENT, IN THE EXERCISE OF ITS DISCRETION, ELECTED INSTEAD TO GRANT TO DOCTOR LOPEZ A SIX-MONTH EXTENSION OF THE PERIOD FOR CONSUMMATION OF THE SALE. THE CLAIM, THEREFORE, IS FOR RESOLUTION IN ACCORDANCE WITH THE TERMS OF THE OPTION AGREEMENT GRANTING SUCH EXTENSION.

UNDER THE PROVISIONS OF THE OPTION AGREEMENT, DOCTOR LOPEZ WAS REQUIRED TO EXERCISE THE OPTION NO LATER THAN MARCH 15, 1965, THE PENALTY FOR DEFAULT BEING FORFEITURE OF THE DEPOSIT. THERE WAS NO PROVISION IN THE AGREEMENT FOR ANY EXCEPTION TO SUCH REQUIREMENT. ACCORDINGLY, WHEN DOCTOR LOPEZ FAILED TO TIMELY EXERCISE THE OPTION, TITLE TO THE DEPOSIT VESTED IN THE UNITED STATES.

IN SUCH CIRCUMSTANCES, IT IS OUR VIEW THAT, ABSENT ANY AUTHORITY UNDER THE LAWS OF SINGAPORE OR JUDICIAL PRECEDENT FOR REFUNDING THE DEPOSIT IN QUESTION, THERE IS NO LEGAL BASIS FOR SUCH REFUND, AND THEREFORE THE ACTION OF THE DEPARTMENT OF STATE IN DISALLOWING DOCTOR LOPEZ'S CLAIM WAS LEGALLY PROPER.

NOR DO WE CONSIDER THAT THE EQUITIES IN THE CASE ARE SUFFICIENT TO WARRANT A BASIS FOR REFUND OF THE DEPOSIT. WHILE DOCTOR LOPEZ MIGHT HAVE SINCERELY BELIEVED THAT HE WOULD HAVE BEEN GRANTED A SECOND EXTENSION IF THE ORIGINAL CONSULATE OFFICIALS HAD BEEN IN OFFICE AT THE TIME HIS OPTION EXPIRED, THE RECORD DOES NOT SUPPORT SUCH VIEW, THERE BEING NO INDICATION THAT ANY PROMISES OF ANY ADDITIONAL EXTENSIONS WERE MADE TO DOCTOR LOPEZ. FURTHER, ANY ACTION BY SUCH OFFICIALS WOULD HAVE BEEN SUBJECT TO REVIEW AT A HIGHER LEVEL WITHIN THE DEPARTMENT OF STATE IN WASHINGTON, D.C., AND THE DEPARTMENT DECLINED APPROVAL OF THE REQUEST FOR THE SECOND EXTENSION AFTER REVIEW OF THE MATTER.

CONCERNING THE CONTENTION THAT THE NEW ZEALAND GOVERNMENT BECAME INTERESTED IN THE PURCHASE THROUGH DOCTOR LOPEZ'S EFFORTS AND THEREFORE THE ULTIMATE SALE TO SUCH GOVERNMENT WAS LIKEWISE ATTRIBUTABLE TO SUCH EFFORTS, THE FACT REMAINS THAT DOCTOR LOPEZ ACTED ONLY FOR HIMSELF AND THE NEW ZEALAND GOVERNMENT WAS NOT COMMITTED TO PURCHASE THE PROPERTY AT THE TIME THE OPTION EXPIRED. HAD IT BEEN SO COMMITTED, IT WOULD APPEAR THAT DOCTOR LOPEZ WOULD HAVE TIMELY EXERCISED THE OPTION. FURTHER, WHILE THE SALE WAS EFFECTED WITHOUT FURTHER ADVERTISEMENT, THERE IS NO REASON TO CONCLUDE THAT HAD THE PROPERTY BEEN READVERTISED FOR SALE THE NEW ZEALAND GOVERNMENT WOULD NOT HAVE RESPONDED TO THE INVITATION AND SUBMITTED A BID IN AN AMOUNT AT LEAST EQUAL TO THE NEGOTIATED SALE PRICE.

IN THE CIRCUMSTANCES, WE FIND NO ELEMENTS OF LEGAL LIABILITY OR EQUITY SUCH AS WOULD WARRANT REPORTING OF THE MATTER BY OUR OFFICE TO THE CONGRESS UNDER THE ACT OF APRIL 10, 1928, SUPRA, WITH RECOMMENDATION THAT AN APPROPRIATION BE MADE FOR PAYMENT. ACCORDINGLY, YOUR REQUEST FOR SUCH ACTION MUST BE DENIED.