B-126256, DECEMBER 21, 1955, 35 COMP. GEN. 363

B-126256, DECEMBER 21, 1955, 35 COMP. GEN. 363

SALES - FEDERAL HOUSING PROJECTS - MISTAKES - CORRECTION - WITHDRAWAL A HIGH BIDDER WHO, PRIOR TO AWARD, ALLEGES THAT THE AMOUNT OFFERED FOR THE PURCHASE OF A GOVERNMENT HOUSING PROJECT INCLUDED A SUM FOR NECESSARY REPAIRS WHICH SHOULD HAVE BEEN DEDUCTED INSTEAD OF ADDED TO THE VALUE OF THE PROPERTY MAY, ON THE BASIS OF EVIDENCE ESTABLISHING THE ERROR AND THE INTENDED BID PRICE, HAVE THE BID CORRECTED. A BID FOR THE PURCHASE OF A FEDERAL HOUSING PROJECT WHICH WAS OFFERED FOR SALE WITH AN EXPRESS DISCLAIMER OF WARRANTY THAT THE PROPERTY COMPLIES WITH LOCAL BUILDING, ZONING, OR SIMILAR CITY LAWS MAY NOT BE WITHDRAWN ON THE PRESENT RECORD WHICH INDICATES OPPOSITION BY CITY TO THE TRANSFER TO A PRIVATE PURCHASER, BUT DOES NOT ESTABLISH THAT ACTION OF THE CITY WILL PREVENT THE ANTICIPATED USE OF THE PROPERTY BY THE PURCHASER.

TO THE ADMINISTRATOR, HOUSING AND HOME FINANCE AGENCY, DECEMBER 21, 1955:

REFERENCE IS MADE TO LETTER DATED NOVEMBER 29, 1955, WITH ENCLOSURES, FROM THE DIRECTOR, NEW YORK FIELD OFFICE, PUBLIC HOUSING ADMINISTRATION, REQUESTING A DECISION AS TO THE ACTION THAT SHOULD BE TAKEN WITH RESPECT TO AN ERROR ALLEGED BY WILLIAM H. COHEN TO HAVE BEEN MADE IN HIS BID FOR THE PURCHASE OF THE STONEYBROOK GARDENS PROJECT (CONN-6061), STRATFORD, CONN.

BIDS WERE REQUESTED, TO BE PUBLICLY OPENED ON OCTOBER 31, 1955, FOR THE PURCHASE OF CERTAIN LAND AND BUILDINGS COMPRISING THE PROJECT KNOWN AS STONEYBROOK GARDENS (CONN-6061), STRATFORD, CONN. THE INVITATION REQUIRED BIDDERS TO QUOTE A LUMP-SUM PRICE FOR THE ENTIRE PROJECT. BIDDERS COULD OFFER ALL CASH OR CASH AND TERMS, THE GOVERNMENT OFFERING TO TAKE A PURCHASE MONEY MORTGAGE OF NOT MORE THAN 85 PERCENT OF THE BID PRICE, WITH INTEREST AT 5 PERCENT PER ANNUM, TO BE AMORTIZED OVER A PERIOD NOT EXCEEDING 20 YEARS.

WHILE THE RECORD DISCLOSES THAT THE BUILDINGS APPARENTLY DO NOT COMPLY WITH THE ZONING AND BUILDING CODES OF THE TOWN OF STRATFORD, THE TERMS OF THE SALES OFFERING DO NOT REPRESENT THAT THE BUILDINGS DO COMPLY WITH THE ZONING OR BUILDING CODES OR OTHER SIMILAR LAWS OR REGULATIONS OF THE TOWN OF STRATFORD, SUCH COMPLIANCE BEING EXPRESSLY EXCEPTED FROM THE "MARKETABLE" TITLE OFFERED.

IN RESPONSE TO THE INVITATION, WILLIAM H. COHEN SUBMITTED A BID IN THE AMOUNT OF $1,727,789. THE BID WAS ACCOMPANIED BY THE REQUIRED BID DEPOSIT OF 5 PERCENT OF THE BID PRICE. THE SECOND-HIGHEST BID WAS $1,105,678 AND THE NEXT FOUR HIGHEST BIDS RANGED FROM $925,400 TO $901,288.32. IT IS STATED IN THE LETTER THAT THE FULL MARKET VALUE OF THE PROJECT WAS ESTABLISHED AS $1,200,000 AS REQUIRED BY SECTION 4 OF THE LANHAM ACT (42 U.S.C.A. 1524), AND THAT THE PROJECT WAS TENDERED FOR THAT AMOUNT TO ANY COOPERATIVE OR MUTUAL ASSOCIATION OF TENANTS AS REQUIRED BY SECTION 607 (C) OF THE LANHAM ACT, BUT WITHOUT SUCCESS.

BY TELEGRAMS DATED NOVEMBER 2, 1955, RECEIVED PRIOR TO FORMAL ACCEPTANCE OF HIS BID, MR. COHEN ALLEGED THAT AN ERROR HAD BEEN MADE IN HIS BID AND REQUESTED PERMISSION TO CORRECT THE BID OR TO WITHDRAW IT WITHOUT SACRIFICING HIS BID DEPOSIT. THEREAFTER, THERE WERE SUBMITTED AFFIDAVITS AND OTHER EVIDENCE IN SUPPORT OF THE ALLEGED ERROR.

IT IS AVERRED THAT IN ORDER TO DETERMINE THE AMOUNT TO BID AN APPRAISAL WAS MADE OF THE PROJECT. IN THE APPRAISAL THE BUILDINGS WERE VALUED AT $1,291,493 BASED ON LEGAL OCCUPANCY, THE LAND WAS VALUED AT $236,000, AND IT WAS ESTIMATED THAT THE COST OF REPAIRS TO MAKE THE BUILDINGS CONFORM TO THE REQUIREMENTS OF THE TOWN OF STRATFORD WOULD BE $200,000. IT IS FURTHER AVERRED THAT THE COST OF THE REPAIRS WAS ADDED TO THE ESTIMATED VALUE OF THE LAND AND BUILDINGS TO ARRIVE AT THE BID TOTAL OF $1,727,493, WHEREAS THE $200,000 SHOULD HAVE BEEN DEDUCTED, TO RESULT IN A PROPER BID OF $1,327,493.

THESE FIGURES AND COMPUTATIONS ARE SUPPORTED BY AFFIDAVITS AND A PHOTOSTATIC COPY OF THE BIDDER'S WORKSHEETS, BEARING THE DATE "10/14/55" AND STATED TO BE THE ORIGINALS.

THE RECORD THUS ESTABLISHES THAT THE ESTIMATOR MADE AN ERROR IN ADDING THE $200,000, REPRESENTING THE COST OF NECESSARY ALTERATIONS, RATHER THAN DEDUCTING SUCH AMOUNT FROM THE ESTIMATED VALUE OF THE LAND AND BUILDINGS. FURTHERMORE, THE EVIDENCE ESTABLISHES THAT, EXCEPT FOR THE ERROR, THE BID WOULD HAVE BEEN $400,000 LESS OR $1,327,789, WHICH IS STILL $225,000 HIGHER THAN THE NEXT-HIGHEST BID AND $125,000 HIGHER THAN GOVERNMENT'S APPRAISED VALUE.

ACCORDINGLY, SINCE ERROR WAS ALLEGED PRIOR TO AWARD AND EVIDENCE WAS SUBMITTED ESTABLISHING THE ERROR AND THE INTENDED BID PRICE, THE BID OF WILLIAM H. COHEN MAY BE CONSIDERED AS $1,327,789 AND ACCEPTANCE MADE ON THAT BASIS, IF OTHERWISE PROPER.

THE BIDDER ALSO CONTENDS THAT HE HAS A RIGHT TO WITHDRAW THE BID ENTIRELY, DUE TO A MUTUAL MISTAKE ON THE PART OF BOTH THE BIDDER AND THE GOVERNMENT OR A MISUNDERSTANDING INDUCED BY MATERIAL MISREPRESENTATIONS OF THE REPRESENTATIVES OF THE GOVERNMENT. THE BASIS FOR THIS CONTENTION IS THAT THE GOVERNMENT INDICATED THAT WHAT WAS TO BE SOLD WAS A 400 DWELLING- UNIT HOUSING DEVELOPMENT THAT WOULD BE FEASIBLY USABLE AS SUCH IN PRIVATE HANDS AND THAT THE BIDDER WAS LED TO BELIEVE, WHEN HE SUBMITTED HIS BID, THAT HE WOULD BE PURCHASING PROPERTY USABLE IN HIS HANDS AS A 400 DWELLING -UNIT HOUSING DEVELOPMENT. ALTHOUGH IT WAS KNOWN THAT CERTAIN EXPENDITURES WOULD BE REQUIRED TO BRING THE PROPERTY INTO COMPLIANCE WITH THE BUILDING CODE OF THE TOWN OF STRATFORD, THERE WAS NO INDICATION THAT THE BIDDER WOULD NOT HAVE A REASONABLE TIME IN WHICH TO MAKE THE NECESSARY REPAIRS OR THAT THERE WERE VIOLATIONS OF THE ZONING CODE WHICH WOULD NOT BE WAIVED BY THE TOWN AND COULD NOT BE REMOVED WITHOUT SUBSTANTIALLY CHANGING THE NATURE OF THE PROJECT.

ALTHOUGH THE RECORD INDICATES THAT THE TOWN OF STRATFORD HAS TAKEN A STRONG POSITION AGAINST THE TRANSFER OF THE PROPERTY TO ANY PRIVATE PURCHASER, IT IS NOT KNOWN AT THIS TIME TO WHAT EXTENT THE TOWN CAN LEGALLY PREVENT THE ANTICIPATED USE OF THE PROPERTY BY THE PURCHASER.

SCHEDULE "A" ATTACHED TO THE GENERAL CONDITIONS OF SALE AND INCORPORATED INTO THE BID, PROVIDES THAT:

IN ACCORDANCE WITH THE GENERAL CONDITIONS OF SALE, THE PROPERTY WILL BE CONVEYED TO THE PURCHASER BY QUITCLAIM DEED, UNDER AND SUBJECT TO THE FOLLOWING:

2. ANY AND ALL APPLICABLE BUILDING, FIRE, HEALTH, ZONING OR OTHER SIMILAR LAWS OR REGULATIONS OF THE TOWN OF STRATFORD, THE STATE OF CONNECTICUT, OR ANY OTHER PUBLIC BODY HAVING JURISDICTION OVER THE PROPERTY, THE SELLER MAKING NO REPRESENTATION OR WARRANTY THAT THE PROPERTY OR ANY PART THEREOF CONFORMS TO OR MEETS THE REQUIREMENTS OF SAID LAWS OR REGULATIONS OR ANY OF THEM.

THE ABOVE-QUOTED PROVISION, AS WELL AS OTHERS, SPECIFICALLY DISCLAIMS ANY REPRESENTATION BY THE GOVERNMENT THAT THE PROPERTY COMPLIES WITH THE BUILDING OR ZONING CODES OR OTHER SIMILAR LAWS AND REGULATIONS OF THE TOWN OF STRATFORD. THUS, EVEN IF THE TOWN OF STRATFORD SHOULD REQUIRE THAT THE PROPERTY BE MADE TO COMPLY WITH ALL PRESENT LAWS AND REGULATIONS OF THE TOWN, IT CANNOT BE DETERMINED ON THE BASIS OF THE FACTS OF RECORD OR AT THIS TIME WHETHER THE ACTION BY THE TOWN WOULD BE A SUFFICIENT BASIS TO WARRANT RELIEVING THE BIDDER FROM LIABILITY UNDER ITS BID. ACCORDINGLY, WE DO NOT BELIEVE THAT THE BIDDER HAS ANY PRESENT RIGHT TO WITHDRAW HIS BID ON THIS BASIS.

THE FOLDER SUBMITTED BY THE BIDDER'S COUNSEL, FORWARDED WITH THE LETTER OF NOVEMBER 29, 1955, IS TRANSMITTED HEREWITH, AS REQUESTED.