BNUMBER: B-253202.3
DATE: May 15, 1996
TITLE: Deborah L. Childress--Reconsideration
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Matter of:Deborah L. Childress--Reconsideration
File: B-253202.3
Date:May 15, 1996
DIGEST
Prior decision holding that a relocation service contractor's fee for
purchasing a transferring employee's residence may not be paid is
affirmed on reconsideration. Relocation service contracts entered
into pursuant to 5 U.S.C. sec. 5724c (1994) are subject to the
limitations and restrictions found in 5 U.S.C. sec. 5724a and in Chapter
302 of the Federal Travel Regulation. Under these provisions,
residence sales expenses may be reimbursed only if the transferring
employee's residence is the one from which the employee regularly
commuted to the old official station. Since the residence purchased
by the contractor here does not qualify as the employee's commuting
residence at her old station, the agency lacks authority to pay the
contractor, even though its agent had authorized the contractor to
provide the service. See Office of Personnel Management v. Richmond,
496 U.S. 414 (1990).
DECISION
By letter of November 9, 1995, PHH Homequity Corporation (PHH), a
relocation services contractor for the Federal Aviation Administration
(FAA), asks us to reconsider our decision of March 9, 1995
(B-253202.2), denying its claim of $82,834.50.
The claim covers PHH's contract fee for its purchase and resale of
Mrs. Deborah L. (Phelps) Childress's residence in Corona, California,
in connection with her transfer from the United States Customs Service
at Tucson, Arizona, to the FAA, in San Pedro, California. Since Mrs.
Childress's residence in Corona, California, was not located at her
old official station in Tucson, Arizona, we denied PHH's claim, even
though the agency's representative had authorized PHH to provide the
service. We affirm our prior decision.
BACKGROUND
PHH was awarded contract No. DTFA01-89-D-00027, by FAA for relocation
services effective March 1, 1989, for a term of 12 months with three
12-month option periods. The contract was a requirements-type
contract calling for PHH to provide, among other relocation services,
guaranteed home sale services. In return, PHH received a fee based on
the home appraisal value and on the period of time for which the home
was in inventory prior to resale. The home sale services involved
here occurred in late 1992.
Deborah L. Phelps was employed by the Customs Service during 1992,
stationed at Davis-Monthan Air Force Base, Tucson, Arizona. On July
16, 1992, Ms. Phelps, who was then engaged to marry Mr. Richard
Childress, leased her residence in Tucson, starting in August. On
July 28, 1992, she vacated that residence and shipped her household
goods to the residence of Mr. Childress in Corona, California,
approximately 425 miles away. On August 7, she married Richard
Childress.
On August 23, Mrs. Childress began a temporary duty assignment for the
Customs Service at March Air Force Base, which is near Corona, and
where she remained until September 26. During this period, she
received a job offer from FAA for employment in San Pedro, California,
which she accepted, and she reported for duty on October 5.
The FAA issued travel orders to her authorizing permanent
change-of-station travel for herself, her husband, and stepson, from
Corona to San Pedro, including real estate transaction expenses. Mrs.
Childress requested the use of relocation services, listing her home
in Corona, California, as her address in the requesting documents. On
October 9, 1992, the FAA relocation services coordinator (RSC), the
official responsible for determining eligibility of FAA employees for
relocation services, authorized PHH to negotiate its purchase of the
house owned by Mr. Childress in Corona.
On November 18, 1992, PHH contracted to purchase the Corona residence
for $161,000, and closed the transaction on November 24, 1992. PHH
sold the house on August 9, 1993, for $149,500 and submitted fee
invoices totaling $82,832.50, consisting of a 10 percent fee of
$16,100, plus $66,734.50, as an additional fee provided by the
contract of 41.45 percent of the sales price, for 264 days during
which period the house did not sell.
Thereafter, the FAA discovered that the Corona residence was not the
residence from which Mrs. Childress had commuted to her old duty
station in Tucson, Arizona. Based on that finding, the FAA's Regional
Accounting Manager concluded that there was no authority to pay real
estate expenses and, therefore, no authority to pay PHH's fee.
However, the FAA Director of Accounting argued that PHH had acted in
good faith and should be paid. The matter was submitted to us for
resolution.
In our decision of March 9, 1995, we concluded as follows:
"Although PHH Homequity seeks payment under the terms of a
contract, we believe the reasoning of Richmond [Office of
Personnel Management v. Richmond, 496 U.S. 414 (1990)] applies
equally to its claim. The contract between the agency and PHH
homequity was entered into pursuant to the authority granted by 5
U.S.C. sec. 5724c and subject to the restrictions in section 5724a
and in chapter 302, Part 12, of the FTR. Under these provisions,
the FAA is only authorized to use its funds to pay real estate
expenses for the sale of an employee's residence at the
employee's old station. The agency lacks authority to use its
funds to pay real estate expenses for the sale of an ineligible
residence or to arrange with a relocation service contractor for
the purchase and sale of an ineligible residence."
RECONSIDERATION REQUEST
PHH, through its counsel, offers several alternative legal arguments.
It argues that: (1) the RSC had lawful discretion to make a
determination that Mrs. Childress's Corona residence was eligible for
relocation services, which determination bound the FAA whether or not
the RSC erred in determining Mrs. Childress's eligibility; (2) even
assuming that the ordering of home sale services for Mrs. Childress
was unauthorized, the order should not be deemed a nullity because it
was neither plainly nor palpably illegal; (3) the RSC's failure to
determine Mrs. Childress's eligibility prior to placing an order is a
breach of the contract or, alternatively, a constructive contract
change; and (4) at a minimum, PHH is entitled to relief under the
doctrine of quantum meruit. A discussion of each of these arguments
follows below.
With respect to its first argument, PHH maintains that once the RSC
determined eligibility, rightly or not, issued a service order, and
the contractor performed, it became entitled to payment. PHH cites
Twin Pipeline Company v. Harding Glass Co., 283 U.S. 353, 356-357
(1931), for the principle that contract agreements should be
invalidated on grounds of public policy only in cases plainly within
the reasons on which that doctrine rests. PHH argues that there is no
public policy against enforcement of its contract in view of the
language of 5 U.S.C. sec. 5724c, which broadly authorizes the
discretionary use of agency funds to pay for services rendered under
relocation services contracts.
PHH further argues that our reliance on Richmond in reaching our
conclusion is misplaced. That case involved a claim by a retired
government employee who received erroneous advice from a government
employee concerning disability benefits. The Supreme Court held that
the government is not estopped from denying benefits based on
erroneous advice given by its agents because otherwise the
Appropriation Clause of the U.S. Constitution could be rendered a
nullity. In PHH's view, its claim bears no resemblance to Richmond,
since it is based on a contract rather than on a statutory
entitlement.
The 1931 Supreme Court case cited by PHH (Twin Pipeline Company) is
not relevant to this situation. The Court there dealt with the
attempt of a manufacturing company to avoid the consequences of a
contract with a public utility on the ground that the contract
violated State public policy against monopolies. The Court rejected
the argument, stating that it will not invalidate a contract on
grounds of public policy unless the impropriety is convincingly shown,
which it found not to be the case. The question at issue here is not
one of public policy versus contract rights, but whether the
government is bound to pay for a service erroneously authorized by its
agent under a contract.
The short response to PHH's argument concerning the RSC's discretion
to authorize home sale services for Mrs. Childress's Corona residence
is that he had no discretion to do so. Section 5724a of title 5,
United States Code, provides that under such regulations as the
President may prescribe, appropriations or other funds available to
the agency for administrative expenses are available for the
reimbursement of all or part of the expenses of an employee for whom
the government pays expenses of travel and transportation under
section 5724(a) of this title, including "expenses of the sale of the
residence . . . of the employee at the old station. . . ."
Section 5724c provides:
"Under such regulations as the President may prescribe, each
agency is authorized to enter into contracts to provide
relocation services to agencies and employees for the purpose of
carrying out the provisions of this subchapter. Such services
include arranging for the purchase of a transferred employee's
residence."
The regulations implementing these statutory provisions are found in
Chapter 302, Part 12, of the Federal Travel Regulation (FTR).[1] As
stated in our prior decision, FTR sec. 302-1.4(k) and 302-6.1(b) require
that, in order for an employee to be reimbursed residence sales
expenses, the residence must be the one from which the employee
regularly commuted to and from the old official station. See Roger W.
Montague, B-251211, Feb. 4, 1993. The performance of temporary duty
away from the official station does not effect a change of station
during the pendency of the temporary duty assignment. John E. Wright,
64 Comp. Gen. 268, 271-272 (1985). Therefore, since Mrs. Childress
never regularly commuted from her residence in Corona to her official
permanent duty station in Tucson, the Corona residence did not qualify
as her residence at her old official station.
As PHH asserts, the Federal Circuit Court of Appeals has distinguished
Richmond from a claim based on a contract. That court held that the
government generally is legally responsible for the mistaken contract
actions of its contracting officials when they are acting within the
scope of their authority and not contrary to an express limitation of
law. Burnside-Ott Aviation Training Center v. United States, 985 F.2d
1574 (Fed. Cir. 1993).[2] However, the court recognized in
Burnside-Ott that an agency is not authorized to pay a contract claim
contrary to statutory appropriations, even if its contracting officer
agreed to the payment. Id. at 1581.
That is the situation involved here. An agency's authority to use its
appropriation to provide home relocation services to a transferring
employee is limited to services for the employee's residence at the
old station. See 5 U.S.C. sec. 5724a(a)(4)(A) and FTR sec. 302-12.6(b)(2).
Mrs. Childress's Corona residence did not qualify for relocation
services under the statutory and regulatory criteria. Therefore, the
agency's appropriation may not be used for the purpose of providing
home sales services for that residence.
Alternatively, PHH argues that it should be paid in accordance with
the rule that a contractor who commits no wrongdoing, but who
unwittingly performs under an unauthorized order, can still enforce
the order if it is neither plainly nor palpably illegal. PHH cites
John Reiner & Co. v. United States, 325 F.2d 438 (Ct. Cl. 1963), cert.
denied, 377 U.S. 931 (1964) and Trilon Educational Corp. v. United
States, 578 F.2d 1356 (1978), as well as other court cases and GAO
decisions in support.
PHH argues that the rule applies here because it acted in good faith,
did not contribute to the mistake in ordering the services, and had no
notice that the FAA was not following procedures when it ordered the
services for Mrs. Childress. It argues that the order was not plainly
or palpably illegal.
The rule cited by PHH applies to the situation where it has been
determined that an erroneous award has been made. Rather than declare
the erroneously-awarded contract void, the contractor would be allowed
to recover its costs of performance under a termination for
convenience, unless the illegality involved is plain and palpable.
See 52 Comp. Gen. 214 (1972). This rule has no application where, as
here, the action is outside the bounds of the agency's contract
authority. A contractor who enters into an arrangement with an agent
of the government bears the risk that the agent is acting outside the
limitation of his authority, even if both the agent and the contractor
were unaware of the limitation. See CACI, Inc., v. Stone, 990 F.2d
1233 (1993). Since the RSC had no authority to approve relocation
services for Mrs. Childress's Corona residence, the FAA is not legally
bound by that action.
PHH next argues that, even if the order for Mrs. Childress's
relocation services is unenforceable, the agency, by issuing such an
order, breached the contract or, alternatively, constructively changed
the terms of the contract, entitling PHH to an equitable adjustment.
This contention is not for our consideration. Whether the RSC's
failure to determine Mrs. Childress's eligibility prior to authorizing
the service gives rise to a breach of the contract or to a
constructive change of the contract are claims that must be submitted
to the contracting officer for decision, pursuant to the provisions of
41 U.S.C. sec. 605 (1994).
Finally, PHH argues that, at a minimum, it is entitled to relief under
the doctrine of quantum meruit. It cites Prestex, Inc. v. United
States, 320 F.2d 367, 373 (Ct. Cl. 1963) in support. There, the
government was held liable for the value of what it had received from
the contractor before the contract was invalidated. The quantum
meruit doctrine is not applicable here. Since the FAA had no
statutory or regulatory authority to pay the expenses of selling Mrs.
Childress's Corona residence, it received no benefit from PHH's
services in connection with that residence.
CONCLUSION
PHH's good faith in performing the service approved by the RSC is not
in question. It is clear, however, that the service was unauthorized
and that the RSC exceeded his authority when he approved that service.
Under the Supreme Court holding in Richmond, the government is not
legally bound by the erroneous actions of its agents when such actions
obligate the government to pay money out contrary to the clear
direction of a statute. Although the Federal Circuit Court of Appeals
has distinguished Richmond from a claim based on the provisions of a
contract, it has recognized that the Supreme Court holding does apply
to a contract claim of entitlement contrary to a statutory
appropriation. Based on the existing precedent, we affirm our prior
decision.
/s/Robert P. Murphy
for Comptroller General
of the United States
1. 41 C.F.R. sec. 302-12.1 to 302-12.7 (1995).
2. The contractor in Burnside-Ott sought an equitable adjustment
because of having been required by the Department of Labor to pay an
additional amount to employees due to their reclassification to a
higher classification. The contractor contended that the contracting
agency had been responsible for the misclassification and that its
contract price should be increased accordingly. The Claims Court
ruled against the contractor, concluding that, as a matter of law,
even if government contracting officials had been responsible for the
misclassification, the Richmond holding bars the application of
equitable estoppel against the government for monetary claims. The
Federal Circuit Court reversed the lower court on the basis that the
contractor's claim was based upon its contract and was not
automatically barred as a matter of law.