B-175716, JUL 5, 1972

B-175716, JUL 5, 1972

CIVILIAN EMPLOYEE - CHANGE OF STATION - PURCHASE OF RESIDENCE - REIMBURSEMENT CONCERNING THE PROPRIETY OF PAYMENT TO WILLIAM H. O'NEAL, JR., OF COSTS INCURRED IN CONNECTION WITH THE PURCHASE OF A RESIDENCE INCIDENT TO AN OFFICIAL TRANSFER AS AN EMPLOYEE OF THE BUREAU OF OUTDOOR RECREATION, DEPARTMENT OF THE INTERIOR. (1) UNDER SECTION 4.2C OF OMB CIRCULAR NO. A-56, THE AMOUNT PAID TO MR. O'NEAL'S ATTORNEY FOR DRAWING UP THE MORTGAGE AND OTHER LEGAL DOCUMENTS IS PROPERLY REIMBURSABLE. (2) SINCE THE COST OF TITLE INSURANCE WAS PREVIOUSLY ALLOWED, THE TITLE OPINION MUST BE CONSIDERED ADVISORY AND IS NOT REIMBURSABLE. (3) THE COST OF AN "OWNER'S TITLE POLICY" IS NOT ESSENTIAL TO CONSUMMATION OF THE REAL ESTATE TRANSACTION AND REIMBURSEMENT IS SPECIFICALLY PRECLUDED BY SECTION 4.2D. (4) REIMBURSEMENT OF THE MORTGAGE TITLE INSURANCE SHOULD BE BASED ON THE AMOUNT OF THE MORTGAGE SINCE THE LENDER'S INTEREST IN THE PROPERTY IS LIMITED TO THAT AMOUNT.

TO MRS. OPAL A. SHELTON:

WE REFER TO YOUR LETTER OF APRIL 13, 1972, WITH ENCLOSURES, IN WHICH YOU REQUEST AN ADVANCE DECISION AS TO WHETHER MR. WILLIAM H. O'NEAL, JR., A FORMER EMPLOYEE OF THE BUREAU OF OUTDOOR RECREATION, DEPARTMENT OF THE INTERIOR, IS ENTITLED TO REIMBURSEMENT IN THE AMOUNT OF $429.15 REPRESENTING COSTS INCURRED BY HIM INCIDENT TO THE PURCHASE OF A RESIDENCE IN CHERRY HILL, NEW JERSEY, IN CONNECTION WITH A TRANSFER OF PERMANENT DUTY STATION FROM WASHINGTON, D.C., TO PHILADELPHIA, PENNSYLVANIA. MR. O'NEAL ENTERED ON DUTY IN PHILADELPHIA ON SEPTEMBER 6, 1970, AND THE SETTLEMENT DATE FOR THE PURCHASE WAS AUGUST 5, 1971.

MR. O'NEAL'S RECLAIM VOUCHER IS IN THE AMOUNT OF $529.15, OF WHICH THE AMOUNTS OF $70 FOR A SURVEY CHARGE AND $30 FOR A RECORDING FEE HAVE LEGAL FEES AND $29.15 FOR THE COST OF AN "OWNER'S TITLE POLICY." OF THE $400 IN LEGAL FEES, $150 WAS PAID TO THE LAW FIRM OF FIELD AND CLARKE, WHICH REPRESENTED THE LENDING INSTRUCTION AND $250 WAS PAID TO THE LAW FIRM OF MORGAN, LEWIS & BOCKIUS, APPARENTLY RETAINED BY MR. O'NEAL. IN ACCORDANCE WITH THE FOREGOING, YOU HAVE ASKED THE FOLLOWING QUESTIONS:

"QUESTION NO. 1.

"IS THE $150.00 CLAIMED, OR ANY PART THEREOF, ALLOWABLE FOR PROFESSIONAL SERVICES RENDERED BY FIELD AND CLARKE?

"QUESTION NO. 2.

"IS THE $250.00 CLAIMED, OR ANY PART THEREOF ALLOWABLE FOR PROFESSIONAL SERVICES RENDERED BY MORGAN, LEWIS AND BOCKIUS? MR. O'NEAL WAS REIMBURSED ON ORIGINAL CLAIM FOR TITLE EXAMINATION AND TITLE INSURANCE.

"QUESTION NO. 3.

"IS THE AMOUNT PREVIOUSLY ALLOWED FOR TITLE INSURANCE COMPUTED CORRECTLY? THE EMPLOYEE CONTENDS THE BASE SHOULD BE COMPUTED ON THE PURCHASE PRICE, WHEREAS, IT WAS COMPUTED ON THE BASIS OF THE MORTGAGE AMOUNT."

REGARDING QUESTIONS NOS. 1 AND 2, THE CONTROLLING REGULATION, OFFICE OF MANAGEMENT AND BUDGET (OMB) CIRCULAR NO. A-56, REVISED JUNE 26, 1969, SECTION 4.2C, PROVIDES AS FOLLOWS:

"C. LEGAL AND RELATED COSTS. TO THE EXTENT SUCH COSTS HAVE NOT BEEN INCLUDED IN BROKERS' OR SIMILAR SERVICES FOR WHICH REIMBURSEMENT IS CLAIMED UNDER OTHER CATEGORIES, THE FOLLOWING EXPENSES ARE REIMBURSABLE WITH RESPECT TO THE SALE AND PURCHASE OF RESIDENCES IF THEY ARE CUSTOMARILY PAID BY THE SELLER OF A RESIDENCE AT THE OLD OFFICIAL STATION OR IF CUSTOMARILY PAID BY THE PURCHASER OF A RESIDENCE AT THE NEW OFFICIAL STATION, TO THE EXTENT THEY DO NOT EXCEED AMOUNTS CUSTOMARILY CHARGED IN THE LOCALITY OF THE RESIDENCE; COSTS OF (1) SEARCHING TITLE, PREPARING ABSTRACT, AND LEGAL FEES FOR A TITLE OPINION, OR (2) WHERE CUSTOMARILY FURNISHED BY THE SELLER, THE COST OF A TITLE INSURANCE POLICY; COSTS OF PREPARING CONVEYANCES, OTHER INSTRUMENTS, AND CONTRACTS; RELATED NOTARY FEES AND RECORDING FEES; COSTS OF MAKING SURVEYS, PREPARING DRAWINGS OR PLATS WHEN REQUIRED FOR LEGAL OR FINANCING PURPOSES; AND SIMILAR EXPENSES. COSTS OF LITIGATION ARE NOT REIMBURSABLE."

THE $150 FEE PAID TO THE LAW FIRM OF FIELD AND CLARKE, AS INDICATED BY THE RECORD, WAS THE ATTORNEY'S FEE FOR DRAWING UP THE MORTGAGE AND MORTGAGE NOTE AND OTHER LEGAL DOCUMENTS INVOLVED IN THE SETTLEMENT. IT IS INDICATED THAT A REQUIREMENT FOR OBTAINING THE LOAN WAS THAT FIELD AND CLARKE PREPARE THE DOCUMENTS FOR THE LENDING INSTITUTION WITH THE COSTS THEREOF TO BE BORNE BY THE PURCHASER. SINCE COSTS OF PREPARING CONVEYANCES, OTHER INSTRUMENTS, AND CONTRACTS, ARE SPECIFICALLY INCLUDED AS REIMBURSABLE EXPENSES UNDER SECTION 4.2C, MR. O'NEAL MAY BE REIMBURSED FOR THE $150 PAID TO FIELD AND CLARKE.

AS TO THE $250 PAID TO MORGAN, LEWIS, & BOCKIUS, THE ORIGINAL FEE BILL RENDERED BY THAT FIRM INDICATES THAT THEY -

"*** ARRANGED FOR AND OBTAINED A TITLE REPORT, REVIEWED TITLE REPORT, AGREEMENT OF SALE, ALL LOAN DOCUMENTS AND RENDERED A LEGAL OPINION WITH RESPECT THERETO; ARRANGED FOR AND OBTAINED SETTLEMENT; REPRESENTED CLIENTS AT SETTLEMENT; AND IN ALL THE FOREGOING CONFERRED AND COUNSELLED EXTENSIVELY WITH CLIENTS."

ALSO, BY LETTER DATED JANUARY 21, 1972, FROM ROBERT L. ARCHIE, JR., THE ATTORNEY AT MORGAN, LEWIS & BOCKIUS WHO HANDLED MR. O'NEAL'S ACCOUNT, IT IS STATED:

"4. THE $250 PAID TO MORGAN, LEWIS & BOCKIUS WAS FOR PROFESSIONAL SERVICES RENDERED IN REVIEWING THE TITLE REPORT AS TO POSSIBLE LIENS AND ENCUMBRANCES. WITHOUT THIS OPINION MR. O'NEAL WOULD BE PLACED IN THE POSITION OF DETERMINING EXACTLY WHAT WAS A MARKETABLE TITLE AND AN AVERAGE LAYMAN DOES NOT POSSESS THOSE SKILLS."

IT IS APPARENT FROM THE FOREGOING THAT THE ABOVE SERVICES WERE ADVISORY AND FOR THE SOLE BENEFIT OF THE PURCHASER. THEY WERE NOT REQUIRED FOR PURPOSES OF OBTAINING FINANCING OF THE RESIDENCE. THE RECORD SHOWS THAT MR. O'NEAL WAS ALLOWED $292.35 FOR TITLE INSURANCE WHICH HE WAS REQUIRED TO PAY. THUS, HE WOULD NOT IN ANY EVENT BE ENTITLED TO REIMBURSEMENT FOR A TITLE OPINION SINCE TITLE INSURANCE IS IN LIEU OF A TITLE OPINION. SEE B-161459, OCTOBER 21, 1970, COPY ENCLOSED.

THE $29.15 FOR THE "OWNER'S TITLE POLICY" WAS PROPERLY DISALLOWED AND THAT EXPENSE MAY NOT BE REIMBURSED DESPITE THE FACT THAT IT IS A TYPICAL EXPENSE IN THE AREA AND RECOMMENDED FOR ANY HOME BUYER. WE HAVE HELD THAT THE COST OF SUCH A POLICY IS TO BE REGARDED AS A PERSONAL EXPENSE TO THE EMPLOYEE-PURCHASER, INCURRED AT HIS ELECTION AND NOT NECESSARILY ESSENTIAL TO CONSUMMATION OF THE REAL ESTATE TRANSACTION. REIMBURSEMENT OF THIS ITEM WOULD BE SPECIFICALLY PRECLUDED BY SECTION 4.2D OF OMB CIRCULAR NO. A -56.

AS TO QUESTION NO. 3, SECTION 4.2D PROVIDES THAT "THE COST OF A MORTGAGE TITLE POLICY PAID FOR BY THE EMPLOYEE ON A RESIDENCE PURCHASED BY HIM IS REIMBURSABLE." THE PURPOSE OF SUCH INSURANCE IS FOR THE PROTECTION OF THE LENDER AND UNDER THE CUSTOM OF THE AREA THE PURCHASER MUST PAY SUCH COSTS IN ORDER TO SECURE FINANCING. HOWEVER, THE LENDER'S INTEREST IN THE PROPERTY IS LIMITED TO THE AMOUNT OF THE MORTGAGE ON THE PROPERTY AND, THEREFORE, THE COST OF THE INSURANCE FOR REIMBURSEMENT IS PROPERLY COMPUTED ONLY ON THE AMOUNT OF THE MORTGAGE. WE HAVE BEEN INFORMALLY ADVISED BY THE SOUTH JERSEY REALTY ABSTRACT COMPANY THAT THE INSURANCE COST CHARGED TO MR. O'NEAL IN THIS CASE WAS BASED ON THE PURCHASE PRICE BECAUSE IT INCLUDED BOTH AN OWNER'S TITLE POLICY AS WELL AS THE MORTGAGE TITLE POLICY AND, HAD THE INSURANCE BEEN FOR ONLY A MORTGAGE TITLE POLICY, THE $5 PER THOUSAND RATE OF THE POLICY WOULD HAVE BEEN BASED ON ONLY THE MORTGAGE AMOUNT. THE AMOUNT PREVIOUSLY ALLOWED, $292.35, WAS THEREFORE CORRECT.

THE VOUCHER, WITH SUPPORTING PAPERS, IS RETURNED HEREWITH AND MAY, IN ACCORDANCE WITH THE FOREGOING, BE CERTIFIED FOR PAYMENT IN THE AMOUNT OF $150.