Appeal of

BRUSH CREEK PARTNERS

PSBCA No. 5372

LEASE AGREEMENT

APPEARANCE FOR APPELLANT:
J. Leonard Spodek
Brush Creek Partners

APPEARANCE FOR RESPONDENT:
Patrice R. Dickey, Esq.
Memphis Law Office
United States Postal Service

OPINION OF THE BOARD

            Appellant, Brush Creek Partners, has appealed from a contracting officer’s decision assessing it for the cost of repairs at the Dodson, Louisiana Post Office, which it leased to Respondent, United States Postal Service.  This appeal is being decided on the record, without a hearing, under 39 C.F.R. § 955.12.  Only entitlement is at issue in this proceeding (Order of June 6, 2007).

FINDINGS OF FACT

            1.  In 2000, Appellant’s predecessor[1] and Respondent entered into a new lease for the facility in Dodson, Louisiana that housed the Dodson Main Post Office.  The term of the lease was from March 8, 2001, through March 7, 2006.  The lease contained one five-year option, which has been exercised by Respondent.  (Appeal File, Tab (AF) R, S).

            2.  A Post Office Department “tentative drawing,” dated March 3, 1965, for the “New Leased Facility” in Dodson indicated that an electric water cooler was to be provided as part of the plumbing requirements.[2]  That drawing also provided:

“EQUIPMENT NOTES:  Service counter, under-counter units, mail drop unit, lock boxes, and dedication plaque are to be furnished and installed by the Post Office Department.”

A number of the above items, but not the water cooler, were also depicted on the drawing with a legend indicating “by P.O.D.”  (AF T).

            3.  The lease contained a “Maintenance Rider, Lessor Responsibility” clause which provided, in relevant part:

“The Lessor shall … maintain the demised premises, including the building and any and all equipment, fixtures, and appurtenances, whether severable or non-severable, furnished by the Lessor under this Lease, in good repair and tenantable condition ….”  [emphasis added].

The lease also provided that if, after reasonable notice by Respondent, the lessor failed to perform repairs that were its responsibility, Respondent had the right to have such repairs performed and to withhold the cost of such repairs (plus administrative costs and interest) from payments otherwise due the lessor under the lease.  (AF S).

            4.  By letter dated March 8, 2006, Respondent’s Real Estate Specialist informed Appellant that it was required to repair or replace the drinking fountain at the facility because it had begun to leak and had to be turned off.  The Specialist gave Appellant until March 24, 2006, to accomplish the work.  (AF P).

            5.  Appellant’s agent replied to the Real Estate Specialist by email on March 23, 2006.  The agent stated that Appellant’s policy was to repair only those drinking fountains that it had furnished under a lease, and he indicated that Appellant “did not find that the water fountain was furnished by the landlord” in this instance.  Therefore, Appellant declined to repair the fountain.  In a follow-up email to the contracting officer, the agent took the position that it was the Postal Service’s burden to show that the fountain was originally furnished by the lessor.  (AF M, O).

            6.  In a March 29, 2006 email to the contracting officer, Appellant’s agent stated that he understood that Respondent had received a bid for approximately $1,760 to replace the fountain.  The agent stated that that sum was approximately $1,000 in excess of what he considered a reasonable amount for the replacement.   At about that time, Appellant had secured a quote from a local contractor in Jonesboro, Louisiana, approximately 12 miles from Dodson, to replace the water fountain for $900.  (AF L; Appellant’s Additional Evidence).

            7.  Respondent had the work performed through a Postal Service contractor responsible for arranging to have repair work performed at certain Postal Service facilities.  That contractor maintained a list of prequalified subcontractors in various geographical areas.  In this instance, the subcontractor selected to perform the work was in Shreveport, Louisiana, approximately 108 miles from Dodson.  The subcontractor’s technician made two round trips to Dodson – the first to investigate the problem and the second to install the replacement fountain.  Respondent was charged for five hours of technician time for the first trip, eight hours of technician time for the second trip, and mileage for the two round trips, in addition to the cost of material.  Respondent paid a total of $1,767 for the fountain replacement.  (Rybicki Declaration; AF N).

            8.  By letter dated July 12, 2006, the contracting officer informed Appellant that the replacement had been accomplished and requested that Appellant reimburse Respondent in the amount of $1,767.  The contracting officer warned that if payment was not received by August 11, 2006, the amount of the repairs, plus administrative fees and interest, would be deducted from future rental payments.  (AF K).

            9.  In an August 10, 2006 letter to the contracting officer, Appellant restated its objections to Respondent’s demand that it pay for the fountain replacement.  In a September 13, 2006 response, the contracting officer reiterated his conclusion that Appellant was responsible for the repair under the lease terms.  Thereafter, on or about September 18, 2006, the contracting officer and Appellant’s agent discussed the matter by telephone.  In a letter recounting the conversation, Appellant’s agent indicated that the contracting officer had mentioned that he had obtained a copy of the preliminary plans for the building and that those plans included a water cooler.  The agent then indicated that if that were the case, he agreed that the lessor would be responsible for maintenance and, if necessary, replacement of the water cooler.  He also expressed regret that this information had not been provided in a time frame that would have allowed Appellant to do the replacement.  He then expressed Appellant’s willingness to reimburse Respondent for the reasonable cost of having the fountain repaired or replaced.  (AF F, G, J).

            10.  In a final decision dated December 28, 2006, the contracting officer stated that Respondent would prepare a rental deduction, effective February 1, 2007, to recover the full $1,767 (at a rate of $294.50 per month).  Appellant filed a timely appeal.  (AF B, C).

DECISION

            Respondent, which has the burden of proof in this appeal, argues that the water fountain was part of the leased premises at the time the 2001 lease was entered into and was also part of the premises when the property was originally leased to Respondent (in approximately 1965).  Respondent then cites the language in the 2001 lease requiring Appellant to keep the premises in good repair and tenantable condition, and argues that this required Appellant to repair or replace the fountain when it began to leak.

            Appellant does not question the need to replace the fountain, but takes issue with Respondent’s use of an out-of-town contractor to perform the work, arguing that Appellant had informed Respondent of the availability of a lower cost alternative well before the fountain was replaced.  Appellant also questions whether Respondent has shown that the water fountain was furnished by the lessor.  With regard to the 1965 drawing, Appellant argues that the drawing includes both lessor-furnished and Post-Office-Department-furnished items without distinguishing between the two categories, thereby making the fact that the fountain was depicted on the drawing not dispositive of the issue.

            The issue before the Board is whether the water fountain in question was “furnished by the lessor,” thereby invoking Appellant’s obligation to repair or replace it under Appellant’s general obligation to maintain the premises “in good repair and tenantable condition.”  E.g., M. R. Kaplan, et al., PSBCA Nos. 1147, 1298, 1303, 1310, 88-3 BCA ¶ 20,827; Carlos N. and Betty Lou Taylor (Taylor Investments), PSBCA No. 1675, 88-1 BCA ¶ 20,483; Paoli Plaza Investment Corp., PSBCA Nos. 3711, 4057, 98-1 BCA ¶ 29,445.

            The record is sufficient to demonstrate that the water fountain was provided at the time the building was originally constructed and leased to the Post Office Department.  Absent any evidence to the contrary, the 1965 drawing, although “tentative” is sufficient to persuade us that a water cooler was to be included in the facility when it was built.  Further, contrary to Appellant’s argument, the drawing did specifically identify the items that were to be provided by the Post Office Department rather than by the lessor, and such items did not include the water fountain.  (See Finding 2).  Therefore, we conclude that the water fountain in question here was “furnished by the lessor” and subject to the lessor’s obligation to maintain or replace it, as necessary.

            Since Appellant was responsible for replacing the water fountain, its refusal to do so entitled Respondent to invoke the lease provisions allowing it to have the work done and to recover the cost from Appellant. 

Accordingly, the appeal is denied with respect to the issue of entitlement and remanded to the parties for the negotiation of quantum.[3]16

David I. Brochstein
Administrative Judge
Vice Chairman

I concur:                                                                      I concur:
William A. Campbell                                                 Norman D. Menegat
Administrative Judge                                                Administrative Judge
Chairman                                                                   Board Member

[1]   Appellant acquired the property in August 2005 (Appeal File Tab (AF) Q).

[2]   Respondent was then the Post Office Department (“P.O.D.”) – see P.L. 91-375, 84 Stat. 719 (1970).

[3]   With regard to quantum – i.e., the amount Respondent may recover from Appellant - we note that it was Respondent’s obligation to take reasonable measures to mitigate its damages.  E.g., Nationwide Postal Management, PSBCA No. 4080, 00-1 BCA ¶ 30,848, recon. den. sub nom. J. Leonard Spodek, 01-1 BCA ¶ 31,163; Bowman’s Transport Co., PSBCA Nos. 1088, 1089, 1092, 84-1 BCA ¶ 17,217 at 85,730.  In negotiating quantum, among the factors the parties should consider are the circumstances of the award of the contract to Respondent’s repair contractor, and whether Respondent received reasonable notice of, or should reasonably have determined the existence of, a less expensive source for the repair. See, e.g., Nationwide Postal Management, PSBCA No. 4080, supra; Real Properties MLP Limited Partnership, PSBCA No. 3453, 95-2 BCA ¶ 27,829 at 138,756; M. R. Kaplan, et al., PSBCA Nos.  1147, 1298, 1303, 1310, 88-3 BCA ¶ 20,827 at 105,318.