B-150274, NOV. 20, 1962

B-150274, NOV. 20, 1962

TO THE SECRETARY OF THE INTERIOR:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 13, 1962, WITH ENCLOSURES, REQUESTING OUR CONSIDERATION OF PROPOSED TYPES OF AMENDMENTS TO CONTRACTS ENTERED INTO ON OR BEFORE OCTOBER 12, 1962, BY THE BUREAU OF LAND MANAGEMENT FOR THE SALE OF TIMBER ON GOVERNMENT FOREST LANDS IN WEST COAST AREAS. ON THAT DATE A STORM OF HURRICANE FORCE KNOCKED DOWN AN ESTIMATED 5 BILLION BOARD FEET OF TIMBER ON THE PUBLIC AND PRIVATE FOREST LANDS SITUATED IN THE STATES OF CALIFORNIA, OREGON AND WASHINGTON, AND A POSSIBILITY EXISTS THAT SCATTERED SMALL GROUPS OF TREES AS YET UNDISCOVERED MAY RAISE THIS DAMAGE FIGURE TO 10 BILLION BOARD FEET. THE GREATEST PORTION OF THE DAMAGE SUSTAINED ON LANDS UNDER THE JURISDICTION OF THE DEPARTMENT OCCURRED IN WESTERN OREGON ON OREGON AND CALIFORNIA GRANT LANDS, THE REVESTED COOS BAY WAGON ROAD GRANT LANDS AND THE PUBLIC DOMAIN. IT IS ESTIMATED THAT 1 BILLION 57 MILLION BOARD FEET OF TIMBER, MOST OF WHICH IS SALVABLE, HAVE BEEN BLOWN DOWN ON THESE LANDS.

YOUR LETTER SETS FORTH THAT IT HAS BEEN ADMINISTRATIVELY DETERMINED THAT SALVAGE OPERATIONS MUST BE CONCLUDED BEFORE JUNE 30, 1964, AND THAT AN ATTEMPT SHOULD BE MADE TO PREVENT THE SALVAGED TIMBER FROM BEING DUMPED ON THE MARKET WITHOUT REFERENCE TO THE VOLUME OF STANDING TIMBER SOLD OR TO BE SOLD UNDER YOUR DEPARTMENT'S SUSTAINED YIELD PROGRAM. IT IS CONTEMPLATED THAT SALES OF GREEN TIMBER WILL BE PROGRAMMED AT A REDUCED RATE AND CORRELATED TO THE DEPARTMENT'S PLANS FOR SALVAGE AND DISPOSAL OF THE WINDTHROWN TIMBER. YOU REFER TO VARIOUS ACTIONS WHICH WILL BE TAKEN INCLUDING NECESSARY WAIVERS OF DEPARTMENTAL REGULATIONS TO ACCOMPLISH THE DESIRED RESULTS. YOU ALSO PROPOSE TO EXTEND THE PERFORMANCE PERIODS OF EXISTING TIMBER SALE CONTRACTS AND TO NEGOTIATE ADJUSTMENTS OF THE LUMP- SUM CONTRACT PRICES TO REFLECT THE LOSSES FROM WIND DAMAGE TO THE STANDING TIMBER ORIGINALLY SOLD.

OUR OPINION HAS BEEN REQUESTED AS TO THE PROPRIETY OF MAKING CONTRACT AMENDMENTS OF THIS NATURE, CONSIDERING IT IS A GENERAL RULE THAT, WITHOUT A COMPENSATING BENEFIT TO THE UNITED STATES, AGENTS AND OFFICERS OF THE UNITED STATES HAVE NO AUTHORITY TO DISPOSE OF THE MONEY OR PROPERTY OF THE UNITED STATES, TO MODIFY EXISTING CONTRACTS, OR TO SURRENDER OR WAIVE CONTRACT RIGHTS THAT HAVE VESTED IN THE GOVERNMENT.

THE STANDARD PRINTED FORM OF CONTRACT WHICH WAS USED BY THE BUREAU OF LAND MANAGEMENT PRIOR TO AUGUST 1962 IN NEGOTIATING SUBSTANTIALLY ALL OF THE TIMBER SALE AGREEMENTS IN QUESTION PROVIDES UNDER SECTION 3A THAT:

"* * * THE PURCHASER SHALL BE LIABLE FOR THE TOTAL PURCHASE PRICE, INCLUDING ANY ADJUSTMENT WHICH MAY BE MADE AS A RESULT OF REAPPRAISAL WHEN AN EXTENSION OF TIME IS GRANTED, EVEN THOUGH THE QUANTITY OF TIMBER ACTUALLY CUT OR REMOVED OR DESIGNATED FOR TAKING IS MORE OR LESS THAN THE ESTIMATED VOLUME OR QUANTITY SHOWN ABOVE.'

THE STANDARD FORM ALSO CONTAINS THE FOLLOWING PERTINENT PROVISIONS:

"SECTION 8. PASSAGE OF TITLE AND RISK OF LOSS. TITLE TO THE TIMBER SOLD UNDER THIS CONTRACT SHALL REMAIN IN THE GOVERNMENT AND SHALL NOT PASS TO THE PURCHASER UNTIL SUCH TIMBER HAS BEEN PAID FOR AND CUT. RISK OF LOSS SHALL BE BORNE BY THE PARTY HOLDING TITLE TO THE TIMBER AT THE TIME OF THE LOSS EXCEPT THAT NOTHING HEREIN SHALL BE CONSTRUED TO RELIEVE EITHER PARTY FROM LIABILITY FOR ANY BREACH OF CONTRACT OR ANY WRONGFUL OR NEGLIGENT ACT.

"SECTION 9. EXTENSION OF TIME AND REAPPRAISAL. IF THE PURCHASER SHOWS THAT HIS DELAY IN CUTTING WAS DUE TO UNFORESEEABLE CAUSES BEYOND HIS CONTROL AND WITHOUT HIS FAULT OR NEGLIGENCE, THE AUTHORIZED OFFICER MAY GRANT AN EXTENSION OF TIME, NOT TO EXCEED ONE YEAR, UPON WRITTEN REQUEST OF THE PURCHASER. SUCH WRITTEN REQUEST MUST BE RECEIVED BY THE AUTHORIZED OFFICER NOT LATER THAN THIRTY (30) DAYS PRIOR TO THE EXPIRATION OF THE TIME FOR CUTTING BUT NOT EARLIER THAN NINETY (90) DAYS PRIOR THERETO. AN EXTENSION OF TIME IS GRANTED AS PROVIDED IN THIS SECTION, EACH SPECIES OF TIMBER REMAINING ON THE CONTRACT AREA, TITLE TO WHICH HAS NOT PASSED TO THE PURCHASER, SHALL BE REAPPRAISED BY THE AUTHORIZED OFFICER. DETERMINING THE REAPPRAISED PRICES THE AUTHORIZED OFFICER SHALL USE THE BUREAU OF LAND MANAGEMENT PRESCRIBED PROCEDURES FOR APPRAISING TIMBER. SUCH REAPPRAISED PRICES SHALL BECOME THE NEW UNIT PRICES FOR THE PURPOSES OF COMPUTING THE REAPPRAISED TOTAL PURCHASE PRICE, EXCEPT THAT THE NEW UNIT PRICES SHALL NOT BE LESS THAN THE UNIT PRICES THAT WERE IN EFFECT DURING THE ORIGINAL TIME FOR CUTTING OR PREVIOUS EXTENSION. THE REAPPRAISED TOTAL PURCHASE PRICE MUST BE PAID IN ADVANCE AS A CONDITION OF GRANTING AN EXTENSION.'

THE PURPOSE OF EXTENDING THE CONTRACT PERFORMANCE TIME IN CERTAIN CASES WOULD BE TO PERMIT PURCHASERS TO SHIFT THEIR OPERATIONS FROM HARVESTING GREEN TIMBER TO SALVAGING BLOWN DOWN AND DAMAGED TIMBER WITHOUT ASSUMING AN EXTRA RISK OF HAVING TO PAY ADDITIONAL AMOUNTS FOR TIMBER REMOVED FROM THE CONTRACT SALE AREAS AFTER THE EXPIRATION OF THE ORIGINAL CONTRACT PERFORMANCE PERIODS, AND TO PAY SUCH AMOUNTS IN ADVANCE AS A CONDITION TO THE GRANTING OF EXTENSIONS OF PERFORMANCE TIME. NO REAPPRAISALS WOULD BE MADE PURSUANT TO THE PROVISION OF SECTION 9 OF THE CONTRACTS, AT LEAST INSOFAR AS THE INITIAL CONTRACT PERFORMANCE TIME EXTENSIONS ARE CONCERNED, AND THE BALANCE OF THE MONIES DUE UNDER THE CONTRACTS WOULD BE PAYABLE IN INSTALLMENTS OVER THE EXTENDED CONTRACT PERFORMANCE PERIODS.

WITH RESPECT TO THE PROPOSAL TO AMEND SOME OF THE CONTRACTS TO PROVIDE EQUITABLE PRICE ADJUSTMENTS WHERE MATERIAL QUANTITIES OF UNCUT TIMBER COVERED BY THE CONTRACTS SUFFERED DAMAGE AND LOSS OF VALUE FROM THE STORM, YOU SUGGEST THAT THE PROVISIONS OF THE CONTRACTS ARE AMBIGUOUS IN THAT, WHILE SECTION 8 STATES THAT RISK OF LOSS SHALL BE BORNE BY THE PARTY HOLDING TITLE TO THE TIMBER AT THE TIME OF THE LOSS, THE ABOVE-QUOTED LANGUAGE OF SECTION 3A HAS BEEN CONSTRUED BY THE COURTS AS REQUIRING PAYMENT OF THE LUMP SUM SPECIFIED EVEN THOUGH THE TIMBER IN THE CONTRACT AREA MAY BE AS MUCH AS 20 PERCENT LESS THAN THE AMOUNT SET FORTH IN THE GOVERNMENT'S VOLUME ESTIMATE. THERE IS CITED IN THAT CONNECTION THE CASE OF RUSSELL AND PUGH LUMBER CO. V. UNITED STATES, COURT OF CLAIMS NO. 322- 59, DECIDED JUNE 7, 1961.

WE DO NOT BELIEVE THAT THE LOSSES HERE INVOLVED PROPERLY MAY BE CONSIDERED OF THE SAME CATEGORY AS THOSE INVOLVED IN THE RUSSELL AND PUGH LUMBER COMPANY CASE OR IN THE DECISION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON, CITED BY THE COURT OF CLAIMS. IN BOTH CASES IT APPEARS THAT THE CLAIMS OF THE PURCHASERS WERE BASED SOLELY ON ALLEGED SHORTAGES BETWEEN LOG-SCALE YIELDS AND THE GOVERNMENT'S VOLUME ESTIMATES, WITHOUT REFERENCE TO DAMAGES SUFFERED BY THE TIMBER IN THE SALE AREAS AFTER THE TIMBER SALE AGREEMENTS HAD BEEN ENTERED INTO.

SECTION 8 OF THE CONTRACTS APPEARS TO HAVE BEEN DESIGNED AS AN ADDED INDUCEMENT TO PROSPECTIVE PURCHASERS TO QUOTE THE HIGHEST POSSIBLE PRICES FOR THE TIMBER OFFERED FOR SALE AND IT IS OBVIOUS THAT PROSPECTIVE PURCHASERS WOULD BE INCLINED TO REDUCE THEIR BID PRICES IF THE GOVERNMENT WOULD NOT ASSUME THE RISK OF LOSS IN STANDING TIMBER DUE TO UNFORESEEABLE CAUSES SUCH AS A WIND STORM OF HURRICANE VELOCITY. NOR DO WE PERCEIVE ANY REAL INCONSISTENCY BETWEEN THE PROVISIONS OF SECTION 8 AND SECTION 3A OF THE TIMBER SALE AGREEMENTS. IN ANY EVENT,WE WOULD FIND IT NECESSARY TO APPLY IN FAVOR OF THE CONTRACTORS THE FUNDAMENTAL RULES THAT DOUBTFUL WORDS IN A CONTRACT MUST BE CONSTRUED MOST STRONGLY AGAINST THE PARTY WHO USED THEM, THAT THE INTENTION OF THE PARTIES SHOULD BE ASCERTAINED FROM AN EXAMINATION OF THE ENTIRE CONTRACT AND THAT THE STATEMENT OF ONE THING--- AGREEMENT ON "RISK OF LOSS" IN THIS CASE--- IS THE EXCLUSION OF OTHERS NOT MENTIONED IN THE CONTRACT.

IT IS TRUE THAT THE GOVERNMENT WOULD BE WAIVING CERTAIN CONTRACTUAL RIGHTS IF IT AMENDED SOME OF THE CONTRACTS TO PROVIDE FOR ADDITIONAL PERFORMANCE TIME WITHOUT REGARD TO THE PROVISIONS OF SECTION 9 OF THE CONTRACTS. HOWEVER, THE GOVERNMENT WOULD UNDOUBTEDLY BE RECEIVING VALUABLE CONSIDERATION FOR THE TIME EXTENSIONS WHICH WILL BE GRANTED IN VIEW OF THE EXPRESSED DESIRABILITY OF HAVING THE WINDTHROWN TIMBER REMOVED FROM THE CONTRACT SALE AREAS AS EXPEDITIOUSLY AS POSSIBLE. FURTHERMORE, IT APPEARS THAT TIME EXTENSIONS MAY PROPERLY BE GRANTED UNDER MOST OF THE CONTRACTS IN ACCORDANCE WITH THE BASIC PRINCIPLE OF GOVERNMENT CONTRACT LAW THAT AN OFFICER AUTHORIZED TO MAKE A CONTRACT FOR THE GOVERNMENT HAS THE IMPLIED AUTHORITY TO MODIFY THE PROVISIONS OF THAT CONTRACT WHERE IT IS CLEARLY IN THE BEST INTERESTS OF THE UNITED STATES TO DO SO. SEE BRANCH BANKING AND TRUST CO., ET AL. V. UNITED STATES, 120 CT.CL. 72, CERTIORARI DENIED 342 U.S. 893; AND EZRA B. WHITMAN, ET AL. V. UNITED STATES, 124 CT.CL. 464.

ACCORDINGLY, WE WOULD NOT OBJECT TO THE EXECUTION OF CONTRACT AMENDMENTS OF THE TYPES PROPOSED TO BE MADE BY YOUR DEPARTMENT IN THE MATTER.

AT PAGE 3 OF YOUR LETTER IT IS STATED THAT THE PROPOSED PRICE ADJUSTMENTS WILL TAKE THE FORM OF CREDITS AGAINST THE ORIGINAL PURCHASE PRICES OF (1) THE CONTRACT VALUE OF ALL TOTALLY DESTROYED TIMBER, (2)THE DECREASE IN VALUE OF THE SALVABLE DOWN AND DESTROYED TIMBER, AND (3) THE INCREASE IN COSTS OF OPERATIONS ATTRIBUTABLE TO THE SALVAGE AND REMOVAL OF SUCH TIMBER. AT A CONFERENCE HELD IN OUR OFFICE ON NOVEMBER 14, 1962, YOUR REPRESENTATIVES REQUESTED THAT OUR DECISION TO YOU INCLUDE COMMENTS ON THE ABOVE-STATED PROPOSAL TO CONSIDER THESE FACTORS IN ARRIVING AT APPROPRIATE CONTRACT PRICE ADJUSTMENTS.

IN VIEW OF SECTION 8 OF THE STANDARD PROVISIONS OF THE CONTRACTS, WHICH PLACES THE RISK OF LOSS UPON THE PARTY HOLDING TITLE TO THE TIMBER AT THE TIME OF THE LOSS (THE GOVERNMENT IN THIS CASE), WE SEE NO REASON FOR OBJECTING TO PRICE ADJUSTMENTS IN THE FORM OF CREDITS AGAINST THE ORIGINAL PURCHASE PRICES UNDER THE FORMULA WHICH YOU PROPOSE.