GRANTED IN PART: January 11, 1993 GSBCA 11793-SBA OLYMPIC SALES, INC., Appellant, v. SMALL BUSINESS ADMINISTRATION, Respondent. Sal Sanpere, President of Olympic Sales, Inc., St. Croix, U.S. Virgin Islands, appearing for Appellant. Robb N. Wong, Office of General Law, Small Business Administration, Washington, DC, counsel for Respondent. Before Board Judges PARKER, NEILL, and BORWICK. PARKER, Board Judge. In late 1989, the Small Business Administration (SBA), respondent, sent employees to St. Croix, U.S. Virgin Islands, to survey the damage that Hurricane Hugo wrought upon the island's businesses. To aid in surveying, respondent rented cars and trucks for several months from Olympic Sales, Inc., appellant, but two of the rented cars were destroyed while in respondent's custody. Appellant has filed a claim with respondent to recover their replacement value, and respondent has increased its offer since appellant appealed respondent's decision to the Board. However, $4412 remains in dispute. For the reasons stated below, we grant in part this appeal. Findings of Fact 1. On October 23, 1989, respondent entered into an agreement with appellant, Contract No. 31307, to rent a 1988 Isuzu I-Mark, listing two employees as drivers. Appeal File Supplement, Exhibit 27. On December 31, 1989, one of the listed drivers parked and locked the car near an airport, but it was missing the next day. Id., Exhibit 19. After the employee reported the theft, the police found the car in a lagoon on January 1, 1990. Appellant's Reply to Agency's Submission on the Record, Exhibit 7. Appellant arranged to have the car towed out of the pit. Appeal File Supplement, Exhibit 6. 2. Mr. Luis Pena, a mechanic, said that the car was "in excellent condition, except for the fact that it had incurred water damage" when the hurricane struck. Appeal File Supplement, Exhibit 7. Mr. Tony Pryce, who towed the car out of the lagoon, stated that "the vehicle was not dented and all the glass for the same were intact and not broken," even after the mishap. Id., Exhibit 6. Mr. Jack Klein, sales manager of Antilles Automotive, St. Croix's only General Motors dealership, estimated that the I- Mark was worth about $8,750 as of December 31, 1988. Id., Exhibit 22. 3. On October 18, 1989, respondent entered into a separate agreement with appellant, Contract No. 37283, to rent a 1989 Chevrolet Celebrity, again listing two drivers. On December 20, 1989, the car was totalled in a collision, although respondent's employee was not at fault. Appellant's Reply to Agency's Submission on the Record, Exhibit 7. The lowest repair estimate for the car was $11,157. Corrected Agency Submission on the Record, Exhibit 3 at 2. 4. Respondent's employee who drove the car stated that it "was in excellent physical and mechanical condition," before the collision, with only "some minor paint scratches on its top." Appeal File Supplement, Exhibit 5. Mr. Edwin Morales, one of appellant's current employees, likewise has written that "even though some of our [Olympic's] vehicles were damaged by Hurricane Hugo these two cars were unharmed and in excellent condition." Id., Exhibit 4. Mr. Klein of Antilles Automotive has stated that, as of December 1989, "this vehicle still would have been worth $12,000." Id., Exhibit 22. Mr. Klein added that as of August 31, 1992, he was offering a 1989 Celebrity with 16,000 miles on it for sale at $11,000. Id. 5. In contrast to these testimonials, Mr. Jack Koulbanis, who worked for respondent on St. Croix during the Hugo cleanup, has stated that "all the cars I saw had suffered some degree of damage from Hugo, just as the whole island had." Corrected Agency Submission on the Record, Exhibit 1 at 1. Likewise, the SBA official who selected appellant as a rental agency said that the cars "had very obviously been through the Hurricane," had broken wipers and windshields, and otherwise were "pieced together." Id., Exhibit 2 at 1. He said that the Chevy Celebrity "had few areas not dented and poor tires," and, when asked about the I-Mark, said that "none of these vehicles were new." Id. 6. After appellant's president described the car damages to Federal Emergency Management Agency (FEMA) officials in St. Croix, they gave him a Standard Form 95, "Claim for Damage, Injury or Death," for use in Federal Tort Claims Act suits. Appeal File Supplement, Exhibit 1 at 2. Appellant filed this form with FEMA on March 15, 1990, which forwarded it to respondent on April 11, 1990. Corrected Agency Submission on the Record, Exhibit 3 at 1. However, since fault of the drivers was not at issue, respondent deemed the claim to be a contract dispute rather than a tort. Id. 7. To calculate the sum owed to appellant, respondent reviewed car advertisements appearing in St. Croix newspapers and estimates from local appraisers. Appeal File, Exhibit 5. Respondent also used the National Automotive Dealers Association (NADA) "Blue Book," December 1990 Eastern Edition, in its calculations, selecting the figure shown in the "trade-in value" column, rather than the higher "retail" or lower "loan" value. Corrected Agency Submission on the Record at 5. As a partial settlement, respondent paid appellant a total of $12,850 for the cars, which is the sum of $8,325 for the Chevrolet Celebrity and $4,525 for the Isuzu I-Mark. Appeal File Supplement, Exhibit 2. Dissatisfied, appellant presented a claim to the contracting officer for an additional $6,955 to cover the cars' full replacement value. The contracting officer denied the claim on January 10, 1992. Id., Exhibit 3. Appellant appealed that denial to the Board on September 21, 1992. In this petition, appellant added a claim for interest running from the date of loss plus litigation expenses. Corrected Agency Submission on the Record, Exhibit 4. 8. As to the Chevy Celebrity, respondent has offered to increase its offer by $1440, which includes an increase of $125 in the "base" price offer, because the car had a six-cylinders and an AM/FM stereo. Corrected Agency Submission on the Record at 5. Based on discussion with NADA officials, respondent also is willing to add $603 for customs entry, $310 for road tax, and $402 for gross receipts tax, a new total of $9,765. Id. at 4. 9. Respondent also has raised its offer for the I-Mark by a total of $1103, which includes an increase of $550 in the "base" price, because the car was equipped with automatic transmission and an AM/FM stereo, plus $354 for customs entry, $213 for road license, and $236 for gross receipts tax. Corrected Agency Submission on the Record at 5. NADA officials said that these extra expenses were peculiar to the Virgin Islands, although NADA also said that it included licensing and freight in its "Blue Book" estimate. Id. at 5. Respondent's total increase in its offer is $2543. 10. Appellant's president, who has sold cars since 1965 in Florida and St. Croix, testified that several features of the U.S. Virgin Islands' market raise the prices of automobiles, namely: a) Only 15,000 people live in the St. Croix area b) The island is 1,200 from the mainland U.S. c) Only one dealer sells the complete General Motors line of cars d) Overall low volume of new car sales compared to mainland e) Overall higher cost of living in St. Croix. Appellant's Final Brief at 7 (Oct. 23, 1992). 11. At appellant's request, Mr. Wilfredo Cuesta, an appraiser for Island National Insurance Company, provided this estimate for the value of the 1989 Chevrolet Celebrity, using the average retail value listed in the December 1989 Eastern Edition of the NADA Blue Book: Basic value: $9,825 AM/FM radio: $ 125 Ocean freight: $ 600 Road Tax, 2,819 lb. $ 310 Gross receipts tax $ 402 Low mileage (12,678) $ 250 License plate $ 56 Total cash value $11,668 Appeal File Supplement, Exhibit 21. He provided this estimate of the value of the Isuzu I-Mark: Basic value: $5,350 Automatic transmission: $ 475 AM/FM stereo $ 75 U.S. Customs entry $ 354 Road tax (1,937 lb.) $ 213 Gross receipts tax $ 236 Ocean freight $ 300 Total cash value $7,012 Id. 12. Since appearing at the hearing on October 7, 1992, appellant has asked the Board to award it $2001.78 in expenses, including the cost of its travel to Washington, D.C. and the price of Mr. Cuesta's appraisal of the cars. Appellant's Final Brief at 9; Appeal File Supplement, Exhibits 29-31. Discussion In this appeal, the parties agree that appellant is entitled to be reimbursed for the damage to its automobiles; we are asked to decide only the proper amount to be paid. As discussed below, we find that appellant is entitled to some, but not all, of the requested amount. Appellant contends that respondent owes it replacement value, rather than fair market value, due to the unique nature of the automotive market in the Virgin Islands. However, the common law rule, even in the exceptionally tight markets of the 1940s, is that the "measure of damages for the conversion or destruction of a chattel is the market value at the time and place of its conversion or destruction." Guido v. Hudson Transit Lines, Inc., 178 F.2d 740, 742 (3d Cir. 1950) (citation omitted); Russell v. United States, 113 F.Supp. 353, 356 (M.D. Pa. 1953) (fair market value is actual value of property immediately prior to the injury). We find it proper to award appellant the value of the cars at the time of the accident, rather than the amount appellant would pay to buy new, replacement cars. Since we are estimating the value of used cars, we find it appropriate that both respondent's and appellant's appraisers used the NADA "Blue Book." Findings 7, 11. In deciding which figure from the "Blue Book" to use, we give some credence to respondent's description of the car as damaged, Finding 5, plus the affidavit of appellant's witness, stating that the I-Mark was "in excellent condition, except for the fact that it had incurred water damage," Finding 2, although we discount somewhat the statement that these two vehicles out of the entire fleet, which suffered hurricane damage, were unharmed and in "excellent" condition, Finding 4. We commend respondent for offering to pay the additional taxes on the cars, which we will assume reflects the parties' agreement that these costs are unique to the Virgin Islands, or properly included in the market value. However, we disagree with respondent's use of the Blue Book's trade-in value column (a wholesale-type value), rather than its retail value column, to calculate the base fair market value of the cars. Findings 7, 11. As noted in Tuckahoe Woman's Club v. City of Richmond, 199 Va. 734, 101 S.E.2d 571 (1958), the fair market value is the price which property will bring when offered by one desiring, but not obligated, to sell it, to one who desires, but is not obligated, to buy it. The situation described in Tuckahoe is one of a retail sale of a used car, not the trade-in of one as a partial payment on a new car. We also find that respondent did not give sufficient weight to factors making the Virgin Islands' automotive market exceptionally tight. Applying the values that appellant provided, Finding 11, we find that respondent underestimated the base value of the Chevy Celebrity by $1500 and the I-Mark by $500, for a total of $2000. Since the Restatement also provides that the "fair market value" depends on the place of market,[foot #] 1 we ----------- FOOTNOTE BEGINS --------- [foot #] 1 c. Place of market. If there is no market at the place where a chattel is (continued...) ----------- FOOTNOTE ENDS ----------- will add ocean freight, a charge unique to the "time and place of the conversion or destruction," to increase the Celebrity price by $600 and the I-Mark price by $300. Thus, to respondent's offered increase of $2543, we add $2000 to the base value and $900 for ocean freight, for a total increase of $5443. We take no action regarding appellant's request for litigation fees and expenses since the matter has never been the subject of a contracting officer's decision. 41 U.S.C. 605(a) (1988). Decision This appeal is GRANTED IN PART. Respondent is to pay $5443, plus applicable interest running from March 15, 1990. 41 U.S.C. 611 (1988). _________________________ ROBERT W. PARKER Board Judge We concur: ----------- FOOTNOTE BEGINS --------- [foot #] 1 (...continued) destroyed or converted, t h e c o s t o f transportation to or from the nearest market is added to or subtracted from the value in the market in order to measure the pecuniary loss suffered by the injured person. Thus, if the property was raised or manufactured elsewhere for sale at the market and it was destroyed at its place of origin, the cost of transportation to the market is deducted. If, however, the article has been transported from a distant market for the owner's own use or for sale at the place where it was taken or destroyed, the cost of _____________ transportation is added. ________________________ Restatement (Second) of Torts, 911, comment c (1977) (emphasis added). ----------- FOOTNOTE ENDS ----------- _________________________ _________________________ EDWIN B. NEILL ANTHONY S. BORWICK Board Judge Board Judge