B-15955, APRIL 23, 1941, 20 COMP. GEN. 671

B-15955, APRIL 23, 1941, 20 COMP. GEN. 671

REAL ESTATE - OPTIONS - COMMISSIONS PAYMENT OF FEES FOR THE SECURING OF OPTIONS ON REAL ESTATE TO BE ACQUIRED BY THE GOVERNMENT MAY NOT BE MADE, EITHER FOR OPTIONS ACCEPTED OR NOT ACCEPTED, UNDER A CONTRACT WHICH CONTAINS A PROVISION REQUIRING AS PART OF THE CONSIDERATION FOR SUCH PAYMENT THE PERFORMANCE OF CERTAIN OTHER SERVICES WHICH THE CONTRACTOR WAS NOT CALLED UPON TO PERFORM BECAUSE OF THE ABANDONMENT OF THE PROJECT BY THE GOVERNMENT.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, APRIL 23, 1941:

I HAVE YOUR LETTER OF APRIL 1, 1941, AS FOLLOWS:

THERE IS INCLOSED A PHOTOSTAT COPY OF CONTRACT DATED NOVEMBER 10, 1940, ENTERED INTO BETWEEN THE UNITED STATES GOVERNMENT AND THE REALTY BOND AND MORTGAGE COMPANY OF BATTLE CREEK, MICHIGAN, IN CONNECTION WITH THE ACQUISITION OF LANDS ON CALHOUN COUNTY, MICHIGAN, BY THE UNITED STATES GOVERNMENT FOR THE FORT CUSTER EXPANSION.

UNDER THE TERMS OF THIS CONTRACT, FOR SERVICES RENDERED, THE REALTY COMPANY AND ROBERT W. KEITH ARE TO RECEIVE A COMMISSION OF 5 PERCENT OF THE GROSS SALES PRICE PAID FOR LANDS BEING ACQUIRED FOR THE FORT CUSTER EXPANSION. A NUMBER OF OPTIONS WERE OBTAINED BY THE REALTY COMPANY AND SUBMITTED TO THIS DEPARTMENT FOR APPROVAL. TWO OF THE OPTIONS WERE ACCEPTED ON BEHALF OF THE UNITED STATES GOVERNMENT AND IT WAS THEN ASCERTAINED THAT SUFFICIENT FUNDS WERE NOT AVAILABLE WITH WHICH TO PURCHASE ALL THE LANDS COVERED IN THE OPTIONS SUBMITTED BY THE REALTY COMPANY AND, THEREFORE, THE BALANCE OF THESE OPTIONS WERE NOT ACCEPTED.

YOUR OPINION IS REQUESTED AS TO WHETHER THE UNITED STATES GOVERNMENT UNDER THE TERMS OF THE INCLOSED CONTRACT IS OBLIGATED TO PAY THE REALTY COMPANY A 5 PERCENT COMMISSION OF THE SALES PRICE FOR THE LANDS COVERED IN THE OPTIONS SUBMITTED BY THE REALTY COMPANY WHICH WERE NOT ACCEPTED.

UNDER THE CONTRACT--- WHICH WAS ENTERED INTO WITH THE REALTY BOND AND MORTGAGE CO. AND ROBERT W. KEITH AND NOT WITH THE FORMER ALONE AS INDICATED IN THE FIRST PARAGRAPH OF YOUR LETTER--- THE CONTRACTORS UNDERTOOK TO USE THEIR BEST EFFORTS TO ACQUIRE WRITTEN OPTIONS TO PURCHASE 1,000 ACRES, MORE OF LESS, OF LANDS WITHIN AN AREA THEREIN REFERRED TO AND UPON THE CONDITIONS THEREIN SET FORTH. PARAGRAPH 4 OF THE CONTRACT PROVIDED THAT THE OPTIONS SHOULD BE TAKEN IN THE NAME OF THE REALTY COMPANY OR OF SUCH PERSON OR CORPORATION AS THE GOVERNMENT MIGHT FROM TIME TO TIME NOMINATE, AND THAT WHEN TAKEN IN THE NAME OF THE REALTY COMPANY, THE LATTER SHOULD HOLD THEM AS TRUSTEE FOR THE GOVERNMENT AND, WHEN REQUIRED, PROMPTLY ASSIGN AND DELIVER THEM TO THE GOVERNMENT. IN ADDITION TO SERVICES IN OBTAINING OPTIONS, THE CONTRACTORS AGREED TO PERFORM OTHER SERVICES SPECIFIED IN PARAGRAPH 5, AS FOLLOWS:

THE REALTY COMPANY SHALL ATTEND TO ALL OF THE ADMINISTRATIVE DETAILS OF THE CLOSING UNDER THE OPTIONS, AND THE ACQUIREMENT OF DEEDS. IN ALL CASES WHERE THE GOVERNMENT HAS ELECTED TO TAKE UP OPTIONS, IMMEDIATELY UPON SUCH ELECTION, THE REALTY COMPANY SHALL CAUSE ABSTRACTS AND/OR CONTINUATIONS OF ABSTRACTS, AS THE CASE MAY BE, TO BE PREPARED BY AN APPROVED TITLE COMPANY OR COMPANIES FOR THE REAL ESTATE COVERED BY SUCH OPTION OR OPTIONS, AT THE EXPENSE OF THE SELLER, TOGETHER WITH COPY OR COPIES OF DEEDS PROPOSED TO BE DELIVERED UPON CLOSING. THE ABSTRACTS OF TITLE TO BE PREPARED IN ACCORDANCE WITH THE EXISTING REGULATIONS OF THE GOVERNMENT.

PARAGRAPH 7 OF THE CONTRACT, RELATING TO COMPENSATION TO THE CONTRACTORS, PROVIDES:

FOR ALL SERVICES HEREUNDER, THE REALTY COMPANY AND ROBERT W. KEITH, SHALL BE PAID THE OLLOWING:

(A) A COMMISSION OF FIVE PERCENT (5 PERCENT) OF THE GROSS SALES PRICE PAID FOR THE LANDS, PROVIDED, HOWEVER:

(1) THAT SUCH COMMISSION SHALL BE PAID ONLY WHERE THE OPTION OBTAINED BY THE REALTY COMPANY AND ROBERT W. KEITH IS TAKEN UP BY THE GOVERNMENT, BUT BY THE ACCEPTANCE OF THIS PROPOSAL YOU AGREE TO ACCEPT ALL OPTIONS OBTAINED, PROVIDED THAT THE PRICE AND CONDITION OF SUCH OPTION OR OPTIONS ARE REASONABLE AND SATISFACTORY TO THE GOVERNMENT, AND

(2) THAT THE GOVERNMENT SHALL BE UNDER NO OBLIGATION WITH RESPECT TO SAID COMMISSION IF IT IS PROVIDED BY THE TERMS OF THE OPTION OBTAINED BY THE REALTY COMPANY THAT SUCH COMMISSION IS TO BE PAID BY THE SELLER.

IT THUS APPEARS THAT THE STIPULATED COMMISSION WAS TO BE PAID ON THE GROSS SALES PRICE PAID FOR THE LANDS, BUT WITH THE FURTHER PROVISION THAT THE COMMISSION SHOULD BE PAID ONLY WHERE THE OPTION OBTAINED BY THE CONTRACTORS WAS TAKEN UP BY THE GOVERNMENT, THE GOVERNMENT AGREEING, HOWEVER, AS BETWEEN THE CONTRACTORS AND ITSELF, TO ACCEPT ALL OPTIONS OBTAINED, PROVIDED THE PRICE AND CONDITIONS THEREOF WERE REASONABLE AND SATISFACTORY TO THE GOVERNMENT.

IT APPEARS THAT IN THE PRESENT MATTER THE CONTRACTORS PERFORMED SERVICES TO THE EXTENT OF OBTAINING OPTIONS WHICH, HOWEVER, WERE NOT ACCEPTED BY THE GOVERNMENT DUE TO ITS ABANDONMENT OF THE PROJECT. HOWEVER, THAT PER SE, IS INSUFFICIENT FOR ALLOWANCE OF THE FULL CONTRACT FEE, FOR PARAGRAPH 5 OF THE CONTRACT EXPRESSLY REQUIRED OTHER SERVICES OF THE CONTRACTOR WHICH, PRESUMABLY, IN VIEW OF THE FACTS REPORTED IN YOUR LETTER, THE CONTRACTORS WERE NOT CALLED UPON TO PERFORM AND DID NOT PERFORM. THE SERVICES CALLED FOR BY THAT PARAGRAPH OF THE CONTRACT RELATED TO VARIOUS DETAILS IN CONNECTION WITH THE CLOSING OF ANY TRANSACTION FOR THE PURCHASE OF ANY LANDS THAT MIGHT HAVE BEEN ACQUIRED UNDER AN OPTION AND WERE NOT INCONSIDERABLE AND BY THE TERMS OF PARAGRAPH 7 OF THE CONTRACT WERE A PART OF THE CONSIDERATION FOR THE COMMISSION PROVIDED IN THE MATTER.

IT IS A GENERAL RULE THAT WHERE THE SERVICES PERFORMED DID NOT CONSTITUTE ALL THE SERVICES CALLED FOR BY A CONTRACT, A CONTRACTOR MAY NOT RECOVER THE CONTRACT PRICE AS FOR A PERFORMANCE, BUT IS RESTRICTED TO AN ACTION FOR DAMAGES. SEE 12 C.J.S. BROKERS, PARAGRAPH 102.

IN VIEW OF THE FOREGOING, THERE APPEARS NO BASIS FOR THE PAYMENT OF THE COMMISSION ON THE OPTIONS NOT ACCEPTED, NOR, FOR SIMILAR REASONS, IS THERE ANY BASIS, ON THE PRESENT RECORD, FOR PAYMENT OF THE COMMISSION ON THE TWO ACCEPTED OPTIONS.