Board of Contract Appeals

                 General Services Administration

                      Washington, D.C. 20405



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                        September 20, 2001

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                         GSBCA 15647-RELO





                 In the Matter of DANIEL E. BROWN





     Daniel E. Brown, Forest Hill, MD, Claimant.



     Ray E. York, Chief, Travel Systems Division, Defense Finance and Accounting

Service, Indianapolis, IN, appearing for Department of Defense.



DeGRAFF, Board Judge.



     An employee who entered into a binding contract to sell his residence incident to a

permanent change of station must be reimbursed for allowable real estate sales expenses even

though the agency canceled the transfer before the sale closed.



                            Background



     On June 2, 1999, the Department of Defense (DoD) sent Daniel E. Brown a

memorandum stating that he was being transferred from his permanent duty station in Illinois

to a new permanent duty station in Oklahoma.  DoD provided Mr. Brown with written travel

orders dated June 17, confirming the transfer.  The travel orders stated that Mr. Brown could

utilize a relocation services company to sell his residence in Iowa, in lieu of incurring

reimbursable real estate sales expenses.  As a result of the transfer, Mr. Brown listed his

house in Iowa for sale, found a buyer, and entered into a contract to sell the house.  The

contract provided that if Mr. Brown did not complete the sale, he would be liable for return

of the purchaser's earnest money deposit, the full real estate brokerage commission, all

completed inspections, attorney's fees, abstract and title examination fees, appraisal fees and

credit reports, any additional expenses that the purchaser incurred related to the property, and

all damages incurred by the purchaser due to Mr. Brown's failure to complete the sale.



     On July 8, after Mr. Brown entered into the contract to sell his house, DoD amended

Mr. Brown's travel orders to authorize him to incur reimbursable real estate sales expenses. 

On July 30, DoD told Mr. Brown by telephone that he was being transferred to Germany,

instead of Oklahoma.  On August 2, DoD sent Mr. Brown a memorandum stating that his

transfer to Oklahoma was canceled, and that he was being transferred to Germany.  On

August 5, DoD provided Mr. Brown with written travel orders, confirming the transfer from

Illinois to Germany.  Mr. Brown's contract to sell his house required him to close the sale on

August 20, which he did. 



     When Mr. Brown completed his tour of duty in Germany in November 2000, DoD

transferred him to Maryland.  In February 2001, Mr. Brown asked to be reimbursed for the

expenses he incurred when he sold his house in Iowa in August 1999.  



     The Defense Finance and Accounting Service forwarded the claim to us for an

advance decision.  Rule 501, 48 CFR 6105.1 (2000).  



                            Discussion



     DoD transferred Mr. Brown twice.  DoD canceled the first transfer, to Oklahoma, so

that it could effect the second transfer, to Germany.  DoD could not have reimbursed

Mr. Brown for his real estate sales expenses if he had incurred those expenses incident to his

transfer to Germany.  Because, however, Mr. Brown incurred his expenses incident to his

transfer to Oklahoma, DoD must reimburse his expenses as allowed by applicable

regulations.  



     If Mr. Brown had sold his house in Iowa incident to his transfer from Illinois to

Germany, he would not be entitled to be reimbursed for his real estate sales expenses.  This

is so because when an agency transfers an employee from a duty station within the United

States to a duty station outside the United States, the relevant statute provides that the agency

can reimburse the employee for the expenses of selling a house at the old duty station only

if the sale occurs after the employee receives official notification that he will not return to

that duty station.  5 U.S.C.   5724a(d)(2), (3) (Supp. V 1999).  Mr. Brown, however, did not

sell his house incident to his transfer to Germany.  He listed the house for sale, found a buyer,

and entered into a contract for sale before he learned of his transfer to Germany.  



     Mr. Brown sold his house in Iowa incident to his transfer from Illinois to Oklahoma. 

When an agency transfers an employee in the interest of the Government between two duty

stations located within the United States, the relevant statute provides that the agency must

reimburse the employee for the real estate sales expenses that the employee is required to

pay.  5 U.S.C.   5724a(d)(1).  If DoD had completed Mr. Brown's transfer to Oklahoma, the

statute would clearly call for DoD to reimburse him for his real estate sales expenses.  Also,

if Mr. Brown had incurred his sales expenses before DoD canceled his transfer, the statute

would have obligated DoD to reimburse him for his real estate sales expenses as if the

transfer had been completed.  Michael J. Halpin, GSBCA 14509-RELO, 98-1 BCA   29,730

(where employee in good faith and in anticipation of transfer incurs expenses before agency

cancels transfer and transfer is canceled due to circumstances beyond employee's control,

agency must reimburse employee as if the transfer had been completed).  



     The question presented by Mr. Brown's claim is whether DoD is bound by the statute

to reimburse him for his real estate sales expenses, even though he incurred those expenses

after DoD canceled his transfer to Oklahoma.  The General Accounting Office (GAO), which

resolved relocation claims until mid-1996, decided that an employee who entered into a

binding real estate sales contract before a transfer was canceled was entitled to be reimbursed

as if the transfer had been completed.  Maj. J.F. Suszyski, B-177130 (Feb. 2, 1973).  We

reach the same conclusion regarding Mr. Brown.  The statute provides that an agency will

reimburse a transferred employee for real estate sales expenses that the employee is required

to pay, and the moment that an employee enters into a binding real estate sales contract, the

employee is required either to incur the expenses necessary to fulfill the contractual

obligation or to pay the price for breaking the contract.  Thus, we conclude that if an

employee enters into a real estate sales contract in good faith and in anticipation of a transfer,

if the transfer is subsequently canceled due to circumstances beyond the employee's control,

and if the employee is later required to incur real estate sales expenses in order to close the

sale, the agency must reimburse the employee for those expenses as if the transfer had been

completed.  [Foot # 1 ] 



     

****************** Footnote Begin **********

[Foot # 1 ]         If an employee can cancel a contract by paying a nominal penalty, the

result might very well be different. See Warren L. Shipp, 59 Comp. Gen. 502 (1980)

(employee obligated to avoid unnecessary expenses). 

****************** Footnote End ************



DoD must reimburse Mr. Brown for his allowable real estate sales expenses.  DoD's

cancellation of the transfer was beyond Mr. Brown's control.  Mr. Brown, in good faith and

in anticipation of his transfer to Oklahoma, entered into a binding contract to sell his house

in Iowa, and he was required to pay real estate sales expenses in order to close that sale. 

DoD should reimburse Mr. Brown in accordance with the applicable regulations, as if his

transfer had been completed.



                                   __________________________________

                                   MARTHA H. DeGRAFF

                                   Board Judge