November 22, 2011

Appeal of                                                                    

WINONA RESTORATION PARTNERS LLC                                 
d/b/a THE VILLAGE AT WINONA                                        

LEASE AGREEMENT                                                                                            

PSBCA No. 6398

APPEARANCE FOR APPELLANT:         
Brent L. Wilcoxson

APPEARANCE FOR RESPONDENT:     
Jacqui De Laet Skoglund, Esq.

OPINION OF THE BOARD

Appellant, Winona Restoration Partners LLC, leased a post office to Respondent, United States Postal Service.  The drinking fountain in the facility failed, and after Appellant denied responsibility for its repair, Respondent replaced it.  The contracting officer issued a final decision notifying Appellant that the cost of the replacement would be deducted from Appellant’s rent, and Appellant appealed.

At the joint request of the parties, the appeal is being decided on the record without an oral hearing in accordance with 39 C.F.R. §955.12.  Appellant elected application of the Board’s Small Claims (Expedited) procedures, 39 C.F.R. §955.13.  Both entitlement and quantum will be addressed.

FINDINGS OF FACT

1.  The Winona Lake, Indiana Main Post Office was constructed in 1957, and Respondent has occupied it as tenant continuously since December 1, 1957 (Joint Stipulation of Non-Contested Facts, paragraphs (“Stip.”) 3, 4).

2.  Appellant became the owner of the property and Respondent’s lessor on or about October 7, 1996 (Stip. 5).

3.  On September 22, 1999, the parties entered into a lease for the premises for ten years, beginning December 1, 1999.  The lease contained an option available to Respondent for an additional five years, which Respondent has exercised, continuing the lease through November 30, 2014. (Stip. 1, 2; Appeal File, tabs (“AF”) 1, 2).

4.  The lease requires Appellant to furnish, among other features, a water system, and refers to General Condition A.24 for definitions (AF 1 (p. 2), Lease Clause 5). General Condition A.24, Lessor Obligations, provides,

The Lessor’s obligations regarding the services to be provided are further defined as

* * *

i. If water system is furnished – Lessor must furnish a water system in good working order with separate water meter.

(AF 1 (p. 12), General Condition A.24 i; Stip. 8).

5.  The lease contains a “Maintenance Rider, Lessor Responsibility” clause which provides, 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.

(AF 1 (p. 18); Stip. 6, 7).

6.  The Maintenance Rider requires Respondent to notify Appellant of the need for maintenance or repair that is Appellant’s responsibility under the lease.  If Appellant fails to perform its required maintenance or repair, the lease grants Respondent “the right to perform the work by contract or otherwise and withhold the cost thereof (which may include administrative cost and/or interest) from payments due or to become due under” the lease. (AF 1 (p. 18)).

7.  On or about June 10, 2010, the only water fountain in the post office failed.  The fountain no longer provided cooled water or an adequate flow of water, and it leaked.  Respondent’s employees turned off the water supply to the fountain.  (AF 3, 4, 9).

8.  The water fountain was refrigerated, plumbed into the building’s water system (water line and drain line), and connected to the building’s electrical system (Declaration of J. Deturk (“Deturk Decl.”) ¶5; Declaration of B. Wilcoxson).  It was installed prior to the parties’ execution of the lease (Stip. 13), and had been in place and operational since at least 1966 (Deturk Decl. ¶¶5, 6). 

9.  By letter of August 3, 2010, Respondent notified Appellant of the need for repair of the water fountain.  The letter stated Respondent’s view that the lease required Appellant to repair the water fountain and set a deadline of August 31, 2010, for completion of the repairs. The letter further advised that if Appellant failed to make the repairs, the lease authorized Respondent to do so and recover the costs of the repairs plus administrative costs and interest from rent.  (AF 4).

10.  Appellant responded, through counsel, denying responsibility for repair of the water fountain (AF 5).

11.  In an August 30, 2010 letter, Respondent repeated its interpretation of the lease as requiring Appellant to repair the water fountain (AF 6) and on September 14, 2010, notified Appellant that Respondent intended to perform the work necessary to repair the water fountain and that the costs of the work plus administrative costs and interest would be recovered from Appellant’s rent. (AF 6, 7).

12.  Respondent engaged a plumbing contractor who inspected the water fountain, noted that the compressor no longer worked, and recommended that the water fountain be replaced.  The contractor installed a new replacement refrigerated water fountain and connected it to the existing plumbing and electrical systems.  (AF 8, 9).

13.  The plumbing contractor’s bill reflected a price for materials of $1,034.25 (new water fountain ($1,015.80) and piping and fittings); $393.75 for 5.25 labor hours; and $65 for a trip charge (Standard Commercial Service Charge).  Respondent paid the total bill of $1,493.  (AF 8, 9, 10; Stip. 11).

14.  On November 5, 2010, the contracting officer demanded that Appellant pay $1,508.98 for replacement of the water fountain.  To the plumbing contractor’s price of $1,493, the contracting officer added administrative costs of $15.98 reflecting one-half hour spent by the postal employee arranging for the work to be done by the plumbing contractor (AF 11, 12; Stip. 14).

15.  By final decision of December 6, 2010, the contracting officer stated Respondent’s intention to withhold $1,512.91 from Appellant’s rent.  That amount included an interest charge of $3.93.  (AF 13; Stip. 15, 16).

16.  On December 11, 2010, Appellant appealed the final decision to the contracting officer, requesting that the Board’s Small Claims (Expedited) procedure apply (AF 14). The contracting officer sent the appeal to the Board on July 22, 2011, at which time it was docketed.

DECISION

Appellant argues that it should be granted judgment in its favor because Respondent failed to send Appellant’s Notice of Appeal to the Board promptly.  As a result, Appellant’s request for an expedited resolution of the appeal was thwarted.  The Rules of Practice applicable to Board proceedings provide,

Upon receipt of a notice of appeal in any form, the contracting officer shall indicate thereon the date of mailing (or date of receipt, if otherwise conveyed) and within 10 days shall forward said notice of appeal to the Board, and shall include a copy of the contracting officer’s final decision if one has been issued.

39 C.F.R. §955.4.  In this case, the contracting officer, through counsel, sent Appellant’s appeal to the Board about seven months after he received it.  Respondent has not offered any explanation for the contracting officer’s lack of diligence.

We do not condone Respondent’s failure to comply with applicable regulations and by doing so denying Appellant’s opportunity authorized under the Contract Disputes Act to obtain a speedy decision on its appeal. However, under the circumstances of this appeal, we discern no prejudice to presentation of Appellant’s case once the matter was brought before the Board.  Accordingly, we do not find that Respondent’s conduct, though improper and unexplained, warrants granting the appeal.

Respondent argues that the water fountain was part of the demised premises, was furnished by the lessor, and, therefore, was within Appellant’s duty under the lease to maintain the premises in good repair and tenantable condition.  Appellant argues that since General Condition A.24 only specifies that the lessor must furnish a water system in good working order with a separate water meter and does not mention any equipment or fixtures, the lessor was not obligated under the lease to provide a water fountain.  Appellant continues that as it was not required to “furnish” the water fountain under the lease, it had no duty to repair or replace it once it failed.

Appellant’s interpretation is unreasonable and is rejected. “Further defining” in clause A.24 of the lease the lessor’s obligation to provide a water system by requiring that the water system be in good working order and have a separate meter (Finding 4) does not describe or limit the features that such a water system must have. The lease’s identification of items within the scope of Appellant’s repair responsibility under the Maintenance Rider as “equipment, fixtures, and appurtenances” is broad enough to include the water fountain at issue.

Appellant argues that the water fountain was not furnished by the lessor under the lease.  If it were, however, Appellant is responsible for its repair.  See Brush Creek Partners, PSBCA No. 5372, 08-2 BCA ¶ 33,957.  In that case, evidence before the Board included plans related to the original construction of the building that indicated the lessor/builder was to install the water fountain.  Here, Respondent has not presented drawings relating to the original construction of the Winona Lake Post Office in 1957.  However, Respondent demonstrated that the water fountain had long been in the office, was the only drinking fountain in the office, and was connected to the plumbing and electrical systems.  Moreover, it was in place when Appellant and Respondent entered into the September 22, 1999 lease for the premises.  (Findings 7, 8).

These circumstances are sufficient to establish prima facie that the water fountain was provided by a lessor.  Appellant has not disproved this fact.  Appellant offered the statement of one of its employees familiar with construction in the area who states that the company that he believes built the Winona Lake Post Office was notoriously penurious and never would have willingly provided a drinking fountain.  This assumes that the builder of the post office was free to dictate the features to be included in the building as opposed to complying with specifications established by the Post Office Department.  We give this speculation no weight.

Appellant points out that the water fountain was not working for a period of time before it was replaced and Respondent’s employees suffered no apparent ill effects from the lack of the water fountain, and that water was available from faucets elsewhere in the post office.  While true, these facts have no bearing on Appellant’s responsibility under the Maintenance Rider to maintain and repair/replace as necessary the lessor-furnished water fountain that was present and functioning at the time the lease was executed.  While alternative water supplies were available, Respondent is entitled under the lease to a drinking water supply that is the functional equivalent of that present in the post office at the time the lease commenced.

Therefore, we conclude that it was Appellant’s responsibility under the Maintenance Rider to furnish Respondent a functioning water fountain.  When it failed to do so, Respondent was entitled to repair or, if needed, replace the water fountain and to charge against rent the reasonable costs incurred. See Nationwide Postal Management, PSBCA No. 3938, 99-1 BCA ¶ 30,126.

Respondent demonstrated it incurred costs of $1,493 for replacement of the fountain.  Appellant does not challenge the reasonableness of that charge for removal of the old and installation of a new, replacement, refrigerated water fountain except to note that the work was done by an out-of-town contractor.  However, the contractor’s bill does not include a mileage or travel charge, and Appellant has not questioned the bill itself. We conclude that the costs were reasonable.  See Abcon Associates, Inc., PSBCA No. 5291, 09-1 BCA ¶ 34,100; Jereld Michael, PSBCA No. 4779, 04‑1 BCA ¶ 32,497 at 160,766.

Appellant contends, however, that drinking water could have been provided at a lower cost by installing a chilled water dispenser utilizing refillable bottles that Respondent’s employees could refill in the post office sinks.  This is not equivalent to the water fountain installed and would require significantly more effort and cost to Respondent to provide drinking water.  The lower cost of providing such a water dispenser is not relevant to the reasonableness of the costs Respondent incurred to install the replacement water fountain.

Additionally, the cost of one-half hour of Respondent’s official’s time in arranging for replacement of the water fountain was reasonable and reasonably incurred and is therefore recoverable under the terms of the lease.  Respondent has not demonstrated the basis for its interest calculation, and that part of its claim is not recoverable.  Accordingly, Respondent is entitled to recover $1,508.98 from Appellant.

Except that Respondent may not recover interest on its claim, the appeal is denied.

Norman D. Menegat
Administrative Judge
Board Member