May 19, 2017

JHCH PROPERTIES # 2, LLP v. UNITED STATES POSTAL SERVICE

PSBCA Nos. 6628, 6629 and 6630

APPEARANCE FOR APPELLANT
Jeffrey L. Hilst

APPEARANCE FOR RESPONDENT
Joseph B. Fray, Esq.
United States Postal Service Law Department

OPINION OF THE BOARD

JHCH Properties # 2, LLP (JHCH) leased three properties in Pennsylvania to the Postal Service: one in West Hickory, one in West Springfield, and one in Guys Mills.  After JHCH failed to respond to the Postal Service’s requests for repairs at all three properties, the Postal Service had the repairs made by contractors.  The Postal Service now seeks to recover the repair costs from JHCH. 
At the request of the parties, the Board decides both entitlement and quantum in these appeals, and does so on the written record.  We grant the West Hickory appeal and deny the West Springfield and Guys Mills appeals.

FINDINGS OF FACT

   West Hickory Main Post Office, PSBCA No. 6628

1. JHCH¹ and the Postal Service entered into a lease agreement for the West Hickory Main Post Office in December 2003 (6628 AF 1 at 4–6).  The current term of the lease ends in 2022 (6628 AF 1 at 3).  The West Hickory Main Post Office property includes a parking lot (6628 AF 1 at 4–6). 
2. The Maintenance Rider—Lessor Responsibility section of the lease provides, in part:
   a. The Lessor shall, . . . except for damage resulting from the negligence of Postal Service agents or employees, 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.
   .      .      .      .
   h. Whenever there is a need for maintenance or repair which is the Lessor’s obligation under this Maintenance Rider or for restoration of the premises or any part thereof to a state of good repair and tenantable condition, the Postal Service shall give the Lessor written notice thereof, specifying a time for completion of the work which is reasonable and commensurate with the nature of the work required. . . .  If the Lessor . . . fails to complete the work within said time, the Postal Service shall have 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.
   (6628 AF 1 at 18). 
3. When the parties signed the lease in 2003, an unpaved trench filled with sand and gravel extended across the parking lot to an adjacent grassy area (6628 App. Statement;² 6628 App. Exh. 2).
4. In early 2009, the Postal Service asked JHCH to “cover the trench.”  By the fall of 2009, a contractor hired by JHCH had excavated the trench, installed prefabricated floor drains reinforced with rebar, installed concrete around the ditch and drain areas, and covered the trench with plastic grating.  (6628 App. Statement; 6628 App. Exhs. 3–5).
5. By 2015, however, “screws and grates” had fallen off the trench (6628 AF 2; 6628 App. Exhs. 8–9).  This condition presented a hazard to cars and pedestrians (6628 AF 2).
6. By letter dated May 8, 2015, the Postal Service notified JHCH of this situation and directed it to perform the necessary repairs by June 8, 2015.  If the repairs were not completed by that date, the Postal Service warned JHCH that it would exercise its rights under the Maintenance Rider by contracting for the repairs and deducting the costs from the rent owed to JHCH.  (6628 AF 2).  JHCH did not respond or perform the work (6628 AF 3).
7. When the repairs had still not been made by September 2015, the Postal Service told JHCH that it would have a contractor complete the work (6628 AF 3).
8. In October 2015, the Postal Service’s contractor repaired the trench drain and grating (6628 AF 6).  The Postal Service incurred $8,269.85 in repair and associated administrative costs (6628 AF 7). 
9. In February 2016, the Postal Service notified JHCH that the repairs were complete.  The Postal Service told JHCH that the repair costs would be deducted from future rent payments if JHCH did not reimburse the Postal Service.  (6628 AF 5). 
10. In a March 29, 2016 final decision, the Postal Service informed JHCH that it would deduct $826.99 a month from rent payments to collect the repair costs (6628 AF 5).  The record does not include any information on whether the Postal Service took these deductions.
11. On April 11, 2016, JHCH appealed the final decision, and the appeal was docketed as PSBCA No. 6628.
    
    West Springfield Main Post Office, PSBCA No. 6629
12. JHCH and the Postal Service entered into a lease agreement for the West Springfield Main Post Office in June 2006 (6629 AF 1 at 3–6).  The current term of the lease ends in 2019 (6629 AF 1 at 2).  The West Springfield Main Post Office includes a loading dock (6629 AF 1 at 5).
13. The Maintenance Rider—[Lessor] Responsibility section of the lease provides, in part:
    1.         The [Lessor] shall, . . . except for damage resulting from the act or negligence of Postal Service agents or employees, 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, during the continuance of the Lease.  [Lessor’s] duties include repair and replacement as necessary.
    .      .      .      .
    10.       . . . whenever there is a need for maintenance, repair, or replacement which is the [Lessor’s] obligation under this Maintenance Rider, the Postal Service shall require the[Lessor] to rebuild or repair the premises as necessary to restore them to tenantable condition to the satisfaction of the Postal Service.  The Postal Service, will, except in emergencies, provide the [Lessor] with written notice stating a reasonable time period for the completion of all necessary repairs. . . .  The Postal Service, acting through the Contracting Officer, may proportionately abate the rent for any period the premises, or any part thereof, are determined by the Postal Service to have been rendered untenantable, or unfit for use and occupancy, by reason of such condition.
    If the [Lessor] . . . fails to complete the work within said time, the Postal Service shall have the right to perform the work (by contract or otherwise), and withhold the cost plus any administrative cost and/or interest, from rental payments due or to become due under this Lease.
    (6629 AF 1 at 10–11). 
14. JHCH Properties prepared to sell the West Springfield property in the fall of 2008 to a closely related company, JHCH Properties # 2.³  During those preparations, JHCH inspected the property and observed a large gap where two pieces of concrete fit together on the side of the loading dock.  (6629 App. Statement;⁴ 6629 App. Exh. 9⁵).
15. JHCH then asked the Postal Service to produce a Tenant Estoppel Certificate.  In a letter dated September 16, 2008, the Postal Service made several representations “[i]n lieu of a Tenant Estoppel Certificate.”  The Postal Service stated: That, to the best of [the Postal Service’s] knowledge, as of the date of this letter, there are no known unperformed obligations on the part of [the lessor] to [the Postal Service].  No maintenance inspection has been performed at this facility in response to your request for this estoppel; there may or may not be maintenance obligations under the lease.
    .      .      .      .
    It is to be understood that the foregoing statements are not intended to preclude the Postal Service from requiring [the lessor] to correct or complete any items of non-compliance with the contract terms that may be subsequently discovered.
    The information furnished in this letter is true to the best of my knowledge and is not intended to induce reliance on your part as to the accuracy of the information.  I expressly disclaim any responsibility for the accuracy of this information.
    Further, you are advised that the Postal Service waives no rights under the lease against the present lessor for any past, present or future breaches of the lease . .
    (6629 App. Exh. 1).
16. In April 2015, there were potholes and a large crack in the loading dock area that needed to be repaired (6629 AF 2). 
17. By letter dated April 14, 2015, the Postal Service notified JHCH of this situation and directed it to perform the necessary repairs by May 14, 2015.  If the repairs were not completed by that date, the Postal Service warned JHCH that it would exercise its rights under the Maintenance Rider by contracting for the repairs and deducting the cost from the rent owed to JHCH.  (6629 AF 2).  JHCH did not respond or perform the work (6629 AF 3).
18. When the repairs had still not been made by July 2015, the Postal Service told JHCH that it would have a contractor perform the work (6629 AF 3).
19. In September 2015, the Postal Service’s contractor repaired the loading dock area (6629 AF 5).  The Postal Service incurred $2,394.98 in repair and associated administrative costs (6629 AF 7).  JHCH stipulated that these costs were reasonable (Order and Memorandum of Telephone Conference, January 11, 2017).
20. In February 2016, the Postal Service notified JHCH that the repairs were complete.  The Postal Service told JHCH that the repair costs would be deducted from future rent payments if JHCH did not reimburse the Postal Service.  (6629 AF 4).
21. In a March 29, 2016 final decision, the Postal Service informed JHCH that it would deduct $798.33 a month from the rent to collect the repair costs (6629 AF 5).  The record does not include any information on whether the Postal Service took these deductions.
22. On April 11, 2016, JHCH appealed the final decision, and the appeal was docketed as PSBCA No. 6629.
    
    Guys Mills Main Post Office, PSBCA No. 6630
23. JHCH and the Postal Service entered into a lease agreement for the Guys Mills Main Post Office in June 2007 (6630 AF 1 at 6–8).  The current term of the lease ends in 2022 (6630 AF 1 at 4).  The Guys Mills Main Post Office includes a dock ramp and a sidewalk (6630 AF 1 at 6–8). 
24. The Maintenance Rider—Lessor Responsibility section of the lease provides, in part: 
    a.         The Lessor shall, . . . except for damage resulting from the negligence of Postal Service agents or employees, 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.
    .      .      .      .
    h.         Whenever there is a need for maintenance or repair which is the Lessor’s obligation under this Maintenance Rider or for restoration of the premises or any part thereof to a state of good repair and tenantable condition, the Postal Service shall give the Lessors written notice thereof, specifying a time for completion of the work which is reasonable and commensurate with the nature of the work required. . . .  If the Lessor . . . fails to complete the work within said time, the Postal Service shall have 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.
    (6630 AF 1 at 21).
25. JHCH Properties prepared to sell the Guys Mills property in the fall of 2008 to a closely related company, JHCH Properties # 2.⁶ During those preparations, JHCH inspected the property and observed deterioration of the concrete on the dock ramp and sidewalk.  (6630 App. Statement;⁷ 6630 App. Exhs. 2–3).
26. JHCH then asked the Postal Service to produce a Tenant Estoppel Certificate.  In a letter dated September 16, 2008, the Postal Service made several representations “[i]n lieu of a Tenant Estoppel Certificate.”  The Postal Service stated:
    That to the best of [the Postal Service’s] knowledge, as of the date of this letter, there are no known unperformed obligations on the part of [the lessor] to [the Postal Service].  No maintenance inspection has been performed at this facility in response to your request for this estoppel; there may or may not be maintenance obligations under the lease.
    .      .      .      .
    It is to be understood that the foregoing statements are not intended to preclude the Postal Service from requiring [the lessor] to correct or complete any items of non-compliance with the contract terms that may be subsequently discovered.
    The information furnished in this letter is true to the best of my knowledge and is not intended to induce reliance on your part as to the accuracy of the information.  I expressly disclaim any responsibility for the accuracy of this information.
    Further, you are advised that the Postal Service waives no rights under the lease against the present lessor for any past, present or future breaches of the lease. . . .
    (6630 App. Exh. 1).
27. In June 2015, the dock ramp and sidewalk were crumbling and needed to be repaired.  This condition presented a safety hazard to Postal Service employees.  (6630 AF 2).
28. By letter dated June 8, 2015, the Postal Service notified JHCH of this situation and directed it to perform the necessary repairs by July 8, 2015.  If the repairs were not completed by that date, the Postal Service warned JHCH that it would exercise its rights under the Maintenance Rider by contracting for the repairs and deducting the cost of the work from the rent owed to JHCH.  (6630 AF 2).  JHCH did not respond or perform the work (6630 AF 3).
29. When the repairs had still not been made by July 2015, the Postal Service told JHCH that it would have a contractor complete the work (6630 AF 3).  
30. In September 2015, the Postal Service’s contractor repaired the sidewalk and dock ramp (6630 AF 6).  The Postal Service incurred $5,266.88 in repair and associated administrative costs (6630 AF 7).  JHCH stipulated that these costs were reasonable (Order and Memorandum of Telephone Conference, January 11, 2017).     
31. In February 2016, the Postal Service notified JHCH that the repairs were complete.  The Postal Service told JHCH that the repair costs would be deducted from future rent payments if JHCH did not reimburse the Postal Service.  (6630 AF 4).
32. In an April 6, 2016 final decision, the Postal Service informed JHCH that it would deduct $1,053.38 a month from the rent to collect the repair costs (6630 AF 5).  The record does not include any information on whether the Postal Service actually took those deductions.
33. On April 11, 2016, JHCH appealed the final decision and the appeal was docketed as PSBCA No. 6630. 

DECISION

In all three appeals, the Postal Service ordered JHCH to make repairs that the Postal Service believed were JHCH’s responsibility under the Maintenance Rider.  When JHCH failed to do so, the Postal Service hired contractors to make the repairs, and now the Postal Service seeks to recover its costs from rent payments otherwise due under the leases. 
In order to deduct repair costs from rent payments, the Postal Service must show that (1) the repairs were needed, (2) JHCH breached the lease by failing to make the repairs, and (3) the Postal Service’s cost of performing the work was reasonable.  See J. Leonard Spodek, d/b/a Nationwide Postal Mgmt., PSBCA No. 3833, 97-2 BCA ¶ 29,273 (citing Real Props. MLP Ltd. P’ship, PSBCA No. 3453, 95-2 BCA ¶ 27,829 at 138,756).  As to the first element of proof, JHCH does not dispute that the repairs were needed at all three properties.  As to the second element, in PSBCA No. 6628 only, JHCH asserts that the repairs were not its responsibility under the Maintenance Rider.  As to the third element, JHCH challenges the reasonableness of the repair costs in PSBCA No. 6628, but it admits that they were reasonable in the other appeals.
In all three appeals, JHCH also argues that it is excused from its obligation to make repairs under the Maintenance Rider for two reasons: (1) the Postal Service caused the damage to the facilities by applying too much salt during snow removal, and (2) the Postal Service is estopped from recovering the repair costs because of the purported estoppel letters written in September 2008.  These arguments amount to affirmative defenses for which JHCH has the burden of proof.  See United Pac. Ins. Co. v. Roche, 401 F.3d 1362, 1366 (Fed. Cir. 2005)(holding that a contractor has the burden to prove equitable estoppel); Mary Lou Bloom and Kenneth D. Bloom, PSBCA No. 4053, 98-1 BCA ¶ 29,352 at 145,935–36 (holding that contractor has the burden to prove that negligence caused damage to the property).

West Hickory Main Post Office, PSBCA No. 6628
The Maintenance Rider requires JHCH to maintain the property it leased to the Postal Service in 2003 “in good repair and tenantable condition” (Finding 2).  This entitles the Postal Service to ordinary maintenance and repairs, but not to improvements to the original condition of the leased property.  See, e.g., Estate of George J. Rutman, PSBCA Nos. 3705, 3697, 97-2 BCA ¶ 29,115 at 144,877–78 (Postal Service entitled to repaved parking lot, but only to original specifications; Postal Service not entitled to two replaced and relocated light fixtures when the lease provided for only one); Camden Securities Co., PSBCA Nos. 1266, 1325, 86-1 BCA ¶ 18,519 at 93,008 (Postal Service entitled to repaved parking lot except for the installation of speed bumps, which were improvements).  If improvements are made, the lessor is not responsible for their repair or maintenance.  See Louis B. Fine Family, LLC, PSBCA No. 5307, 06-2 BCA ¶ 33,327 at 165,275–76 (holding that the Postal Service could be responsible to maintain equipment it added to the air conditioning system during renovations); Greater Eastern Holding Co., PSBCA No. 1128, 84-3 BCA ¶ 17,636 at 87,893 (holding the Postal Service, not the lessor, responsible for repair of the part of the roofing system improved by the Postal Service).  
In this appeal, JHCH argues that the 2015 repairs to the trench drainage system were “outside of [its] maintenance responsibilities” because the drainage system was not installed until 2009, and the trench had been unpaved for 40 years before that.  Although not well articulated, JHCH has sufficiently asserted its belief that the work done in 2009 constituted an improvement rather than a repair, which would relieve it of its obligation to maintain or repair the drainage system in 2015.  This argument calls into question whether the Postal Service has met its initial burden to prove that the 2015 repairs were required under the Maintenance Rider. 
This question has proved difficult to decide because the evidence and arguments focused on the Postal Service’s allegedly negligent use of salt and the purported estoppel letters.  Those issues are important in deciding the other two appeals, but not necessarily this one.  Here, we must examine the parties’ responsibilities for the work done in 2009 and decide what effect, if any, that work had on their obligations in 2015.  We also must closely examine the parties’ respective burdens of proof.
As part of its burden, the Postal Service must prove that JHCH had an obligation to perform the 2009 work under the Maintenance Rider.  See J. Leonard Spodek, PSBCA No. 4326, 00-2 BCA ¶ 31,034 at 153,257 (holding that after the Postal Service shows that repairs are necessary, it must also prove that the lessor breached the lease by failing to make the repairs).  This proof is necessary because if the 2009 work was not a repair, but rather an improvement, then JHCH was not obligated to repair the drainage system in 2015.  See Fine, 06-2 BCA ¶ 33,327 at 165,275–76; Greater Eastern Holding, 84-3 BCA ¶ 17,636 at 87,893.
To meet that burden, the Postal Service must do something more than merely point to the Maintenance Rider and assert, without further explanation, that the drainage system installed in 2009 was a repair.  See Brush Creek Partners, PSBCA No. 5372, 08-2 BCA ¶ 33,957 (holding that the Postal Service proved that a water fountain was part of the demised premises by producing evidence other than just the language of a repair clause).  The Postal Service cannot shift its burden of proof so easily.  A maintenance clause in a lease should not be read to require a lessor to perform all maintenance at a property under lease with the Postal Service.  Rather, the lessor’s maintenance responsibilities are limited in scope and will vary depending on the language in the maintenance clause and the specific circumstances of the work.  See Edward R. Ester and Lorraine Ester, PSBCA No. 1559, 88-2 BCA ¶ 20,573 at 104,000.   
Applying that burden here, the Postal Service must produce evidence establishing that, under the specific facts of this appeal, the Maintenance Rider required JHCH to perform the work it alleges was a repair.  See Brush Creek, 08-2 BCA ¶ 33,957 (requiring the Postal Service to prove that a water fountain was “furnished by the lessor” before it could recover repair costs).  When a lessor alleges that work it performed was an improvement rather than a repair, the Postal Service has the burden of persuasion to show that the work “was reasonable and necessary to effect the needed correction.”  N.J. Hastetter, PSBCA No. 2160, 89-1 BCA ¶ 21,295 at 107,389.  In similar circumstances, we have consistently placed the burden on the Postal Service to show that repairs were necessary.  See The Heller Group, PSBCA No. 4605, 02-1 BCA ¶ 31,734; Spodek, 97-2 BCA ¶ 29,273; Rutman, PSBCA No. 3705, 97-2 BCA ¶ 29,115; Real Props. MLP, PSBCA No. 3453, 95-2 BCA ¶ 27,829; but cf. Camden Securities, 86-1 BCA ¶ 18,519 (holding that when lessor, through a monetary claim, seeks recovery of its costs to perform work, it must show that the work was an improvement rather than a repair).
The dissent suggests that our analysis interposes an implied exception to the general allocation of responsibility to the lessor for all repairs, and that such an implied exception is an affirmative defense for which JHCH has the burden of proof.  Thus, according to the dissent, if JHCH wants to argue that the 2009 work was an improvement and not a repair, it has the burden of proof for its affirmative defense.⁸
In the context of this appeal, which involves a Postal Service claim, an affirmative defense would be based on an assumption that the Postal Service has met all three of the required elements of its claim as described in Spodek, 97-2 BCA ¶ 29,273, but would seek to avoid liability by proving facts extrinsic to those required elements.  See Zivkovic v. S. California Edison Co., 302 F.3d 1080, 1088 (9th Cir. 2002).  A negative defense, on the other hand, would be a direct attack on the required elements of the Postal Service’s claim.  See Emmons v. S. Pac. Transp. Co., 701 F.2d 1112, 1118 (5th Cir. 1983); Hubbell v. World Kitchen LLC, 688 F. Supp. 2d 401, 422–23 (W.D. Pa. 2010).  Under this standard, JHCH’s argument in this appeal is a negative defense because it seeks to negate an essential element of the Postal Service’s claim.  Stated differently, it rebuts the essential element of the Postal Service’s argument that the 2015 work was required by the Maintenance Rider. 
The dissent neither cites any case law supporting its position that JHCH has the burden of proving the 2009 work was an improvement, nor explains why our precedent established in cases likes Hastetter does not refute this argument at every turn.  Simply put, we have consistently held that before the Postal Service can deduct money from rent payments for repairs, it must, as part of its burden of proof, prove that the work underlying the dispute was not an improvement.  We have never treated a lessor’s argument to that effect as an affirmative defense.
Here, given the state of the record, we cannot determine whether the work done in 2009 was a repair or an improvement.  We simply do not know if that work was necessary to keep the property in “good repair and tenantable condition”—the standard set out in the Maintenance Rider.⁹  The complaint suggests that the work may have been done to alleviate a problem with standing water, but there is no real evidence proving that was the case.  The dissent suggests that we should take this mention of standing water in the complaint as a judicial admission and use that fact against JHCH, but we decline to do so on these facts.  The Postal Service itself never mentions standing water as a problem, and, in fact, it denied this allegation in its answer for lack of information sufficient to form a responsive pleading.  The Postal Service’s brief does not mention standing water or drainage problems, but instead suggests that the 2009 work was done to alleviate a tripping hazard.¹⁰  Given these conflicting accounts—none of which are supported with credible evidence—in the interest of justice, we choose not to construe either of these pleadings (or the brief) against the parties, and we will not use them as a basis for a judicial admission.  See FED. R. CIV. P. 8(e); Acciona Windpower N. Am., LLC v. City of W. Branch, Iowa, 847 F.3d 963, 968 (8th Cir. 2017) (holding that a judicial admission must be deliberate, clear, and unambiguous and rejecting a request to convert a carelessly worded stipulation into a judicial admission).
The dissent also asserts that there is no evidence showing that the Postal Service ordered the work JHCH performed in 2009.  This argument presumes that JHCH has the burden to prove that the 2009 work was done in response to a specific request from the Postal Service for that exact work.  This argument, once again, misconstrues our precedent regarding the parties’ respective burdens.  JHCH does not have the burden of proof; the Postal Service does, and it must prove all the elements of its case.  While we do agree that the record does not explain well, if at all, what happened in 2009 leading up to the work performed by JHCH, we do not agree on the consequences of that lack of evidence.  We would use the lack of evidence against the Postal Service, the party with the burden of proof.  The dissent would use it against the party that does not have the burden of proof.
Having held that the Postal Service has not proved that the work done in 2009 was a repair rather than an improvement, we hold that JHCH was not responsible for repairing or maintaining the drainage system in 2015.  As we have previously explained, a lessor is not required to repair and maintain improvements, even though it otherwise has general repair obligations under the terms of a lease.  See Fine, 06-2 BCA
¶ 33,327 at 165,275–76; Greater Eastern Holding Co., 84-3 BCA ¶ 17,636 at 87,893.
Regardless of any contractual obligation, JHCH, without objection, did install the drainage system in the parking lot as requested by the Postal Service in 2009.  We do not conclude, however, that JHCH waived its right to argue that the work was, nonetheless, not required by the Maintenance Rider.  A party does not waive such a right unless the other party changed its position in reliance on the supposed waiver, to that other party’s detriment.  See M.E.S., Inc., PSBCA No. 4553, 01-2 BCA ¶ 31,580 at 155,998.  Here, there is no evidence that the Postal Service took one position on its rights under the Maintenance Rider before JHCH installed the drainage system, and then took a different position in reliance on JHCH’s performance.  Therefore, JHCH did not waive its right to object to any obligation to perform the 2009 work.
We also reject the dissent’s suggestion that JHCH’s actions in 2009 represent a contemporaneous admission of its obligation under the Maintenance Rider.  Given the lack of any other evidence that JHCH’s 2009 installation of the drainage system was merely a repair, we cannot conclude that its failure to object to performing the work in 2009 makes it more likely than not that the work was a repair.
Accordingly, we agree with JHCH that the lease terms did not obligate it to install the drainage system in 2009, and thus it never became obligated to make the repairs in 2015.¹¹  The Postal Service is not entitled to deduct the cost of the repairs that JHCH made in 2015 from rent payments.  If the Postal Service has taken any deductions for these costs, it must return them.

West Springfield Main Post Office, PSBCA No. 6629
The loading dock area at West Springfield was part of the demised premises (Finding 12), the repairs were necessary (Finding 16), and JHCH does not argue that the repairs were improvements.  JHCH is therefore responsible for the repairs under the Maintenance Rider unless it can prove its affirmative defenses.  See Spodek, 97-2 BCA ¶ 29,273. 
In order to determine whether the Maintenance Rider’s exception for damage resulting from an act or negligence of the Postal Service applies (Finding 13, ¶ 1), we must first determine the cause of the damage.  See Bloom, 98-1 BCA ¶ 29,352 at 145,935–36.  To support its assertion that the Postal Service caused the damage to the loading dock area, JHCH relies solely on an email signed by one of its employees alleging that the damage was caused by the Postal Service’s use of salt to melt snow.  The email further asserts that salt “eats into any tiny cracks and runs over the edge eating up the block wall support.”  There is no indication, however, of this employee’s title or of his expertise, if any, on the effects of salt on concrete.  (App. Exh. 3).¹² JHCH cannot meet its burden of proof with such unsworn statements by a lay witness with no established relevant experience or qualifications.  See Bloom, 98-1 BCA ¶ 29,352 at 145,936 (holding that sworn statements of this same type did not suffice for Appellant to meet its burden of proof).  Because there is no evidence in the record establishing that the Postal Service caused the damage,¹³ JHCH has not proved that the Maintenance Rider’s negligence exception applies.
As for JHCH’s second affirmative defense, a party claiming estoppel must prove that (1) the other party engaged in misleading conduct—which may include statements and actions as well as silence and inaction—that led it to reasonably infer that certain rights would not be asserted against it; (2) it relied on the misleading conduct; and (3) it was materially prejudiced by its reliance on the delayed assertion of such rights.  See Mabus v. General Dynamics C4 Sys., Inc., 633 F.3d 1356, 1359 (Fed. Cir. 2011).  Where a party claims estoppel against the government, that party must also prove that the government engaged in affirmative misconduct.  See United Pac. Ins., 401 F.3d at 1366 (Fed. Cir. 2005). 
Here, it was unreasonable for JHCH to infer from the Postal Service’s September 16, 2008 letter that the Postal Service had denied the need for repairs.  On the contrary, the Postal Service specifically acknowledged the possibility that there might be maintenance obligations under the lease.  Indeed, the Postal Service warned JHCH that it had not performed a maintenance inspection and might require JHCH to correct any subsequently discovered conditions that did not comply with the lease (Finding 15).  JHCH may have misunderstood the meaning of the letter, but that misunderstanding was not the result of any action by the Postal Service.  The Postal Service made every effort in its letter to clarify that it made no promises about the property and specifically stated that the letter was provided “in lieu of a Tenant Estoppel Certificate” (Finding 15).  Because JHCH cannot establish that the Postal Service engaged in either misleading conduct or affirmative misconduct, it is not necessary to consider the other elements of equitable estoppel.
In summary, the Postal Service has shown that the loading dock area repairs were needed and that JHCH breached the lease when it failed to perform them.  JHCH has not shown that the Postal Service negligently used salt or that it is estopped from asserting a monetary claim for the repair costs.  As stipulated by JHCH, the repair costs were reasonable (Finding 19), and the Postal Service is entitled to recover them.

Guys Mills Main Post Office, PSBCA No. 6630
The dock ramp and sidewalk at issue here were part of the demised premises (Finding 23), the repairs were necessary (Finding 27), and JHCH does not argue that the repairs were improvements.  JHCH is therefore responsible for the repairs under the Maintenance Rider unless it can prove its affirmative defenses.  See Spodek, 97-2 BCA ¶ 29,273.
The only document even remotely explaining the cause of the damage to the dock ramp and sidewalk is the same email from a JHCH employee discussed in PSBCA No. 6629.  For the same reasons discussed above, we do not give that email any weight, and it is insufficient to prove that the repairs were not required by the Maintenance Rider.¹⁴ 
We turn next to JHCH’s equitable estoppel defense.  The Postal Service issued JHCH the same letter as it did in the West Springfield appeal, with the same warning that it might require JHCH to correct any subsequently discovered conditions that did not comply with the terms of the lease.  For the reasons already analyzed in the West Springfield appeal, JHCH cannot prove that the Postal Service engaged in misleading conduct or affirmative misconduct.  Therefore, JHCH cannot establish the elements of equitable estoppel.
In summary, the Postal Service has shown that the ramp and sidewalk repairs were needed and that JHCH breached the lease when it failed to perform them.  JHCH has not shown that the Postal Service negligently used salt or that it is estopped from asserting a monetary claim for the repair costs.  As stipulated by JHCH, the repair costs were reasonable (Finding 30), and the Postal Service is entitled to recover them.

CONCLUSION

We grant PSBCA No. 6628.  If the Postal Service has deducted any money from rent payments for repairs at West Hickory, it must return that money to JHCH.
We deny PSBCA Nos. 6629 and 6630.  The Postal Service is entitled to $2,394.98 for the cost of repairing the West Springfield Main Post Office’s loading dock area and $5,266.88 for the cost of repairing the Guys Mills Main Post Office’s dock ramp and sidewalk.

Alan R. Caramella
Administrative Judge
Vice Chairman

I concur:
Peter F. Pontzer
Administrative Judge
Board Member

Opinion by Judge Shapiro, concurring in part and dissenting in part:

I concur with the decisions in PSBCA Nos. 6629 and 6630.  However, unlike the majority, I would deny the appeal in PSBCA No. 6628, and rule in favor of the Postal Service.  I dissent to that extent.
The West Hickory Main Post Office lease expressly allocates responsibility to the lessor to maintain the premises in good repair and tenantable condition, except for damage resulting from the negligence of Postal Service agents or employees (Finding 2).  The lease therefore creates a general obligation on the lessor to repair, and replace if necessary, equipment and building elements.  See J. Leonard Spodek d/b/a Colo. Postal Holdings, PSBCA No. 4128, 00-1 BCA ¶ 30,675 at 151,502.
The parties agree that repair of the trench was necessary in 2015 to maintain the premises in good repair and tenantable condition (Finding 5), and the responsibility to pay for that repair is the issue to be decided by the Board.  The majority has interposed an implied exception to reverse the lease’s express allocation of maintenance responsibility.  This implied exception, in my view, amounts to an affirmative defense that JHCH has not even alleged much less proved.
The majority should have focused on whether the Postal Service bore and satisfied a burden to show that the 2015 work disputed in this case was a repair as opposed to an improvement.  However, despite that focus of the precedent on which the majority primarily relies, the nature of the 2015 trench work is not the basis of the majority’s decision.  Rather, the majority focuses on whether the 2009 trench work was an improvement.  Indeed, the majority reverses the maintenance obligation that the lease expressly allocates despite not even concluding that either the 2009 or 2015 trench work was an improvement.  Instead, the majority’s decision, that the Postal Service is responsible for the 2015 trench work, is based on the Postal Service not having proved that the 2009 trench work was not an improvement.  I believe that the majority is mistaken in its understanding and application of the law in this regard.
I would find that the Postal Service satisfied its burden of proof by demonstrating that the trench needed repair in 2015 within the meaning of the Maintenance Rider—Lessor Responsibility section of the lease, and that JHCH refused to perform that repair.  I believe that the majority misinterprets the standard it attributes to Spodek, d/b/a Nationwide Postal Mgmt., 97-2 BCA ¶ 29,273.  While I agree that the Postal Service must show that (1) the repairs were needed, (2) the lessor breached the lease by failing to make the repairs, and (3) the Postal Service’s cost of performing the work was reasonable, I believe that the majority misapplies the second element.  That element requires that the Postal Service show, which it has, that the lessor is responsible under the lease for repairs of the type at issue, and did not make those repairs following proper notice.  Since the Postal Service has proved that prima facie case, a contention that the lessor’s continuing repair obligation is excused because the trench was improved years earlier by a Postal Service requirement (which Appellant does not expressly allege) would amount to an affirmative defense.  As the majority infers that JHCH has raised that contention, JHCH must bear the burden of proving it, see fn. 8, and has failed to do so.¹⁵
In addition to concluding that Appellant bears the burden of proving this affirmative defense, I would conclude that the 2009 trench work was a repair, not an improvement.  The trench remained in the same location, and it served precisely the same function, in the same manner as before, restoring the parking lot to the same good repair and tenantable condition that existed before the 2009 trench repair became necessary.  I see no support in the record for the majority’s apparent belief that the 2009 trench work involved more than merely maintaining the premises in good repair and tenantable condition.  Rather, I glean from the porous record that the 2009 trench work maintained the status quo and addressed standing water in the parking lot, which the lessor was required to ameliorate.  Both parties to this lease seemingly agreed at the time, having treated the 2009 trench work as a repair within the lessor’s maintenance responsibility, not as an improvement.  The parties’ contemporaneous interpretation of their respective lease obligations, prior to any dispute, supports my conclusion in this case.
Even were I to conclude that the 2009 trench work was an improvement to the premises, the record does not show that the Postal Service required that improvement (which then might suffice to shift responsibility to the Postal Service to maintain that improvement in 2015).  The parties poorly developed the record on this issue.  Indeed, the record of this case, submitted without a hearing, includes only two references to the Postal Service’s request for trench work in 2009.¹⁶
First, in Appellant’s April 11, 2016 Notice of Appeal (which the Board deemed as its complaint), JHCH offered a judicial admission stating that it “installed the drainage system in September of 2009 to help drain away standing water in the parking area at the request of the USPS.”  Second, in a November 9, 2016 letter to the Board, captioned “Appellant’s evidence,” JHCH stated that “the trench had been open for over 40 years at the time the USPS asked landlord to cover the trench.  Appellant probably should have fought doing the work in the fall of 2009 but failed to do so.”¹⁷
Taken together, I can conclude only that the Postal Service “requested” or “asked” Appellant to “cover the trench” in 2009.  I fail to see how a request to cover the trench can equate to the Postal Service having required installation of an improvement on the premises sufficient to reverse the lease’s express allocation of maintenance responsibility to the lessor.  Unlike the majority, I prefer to assess these references in the record, which do not appear to be in dispute by the parties, rather than ignore them in favor of reliance on mistaken burden of proof standards.
I therefore respectfully dissent in PSBCA No. 6628.¹⁸

I concur in part and dissent in part:
Gary E. Shapiro
Administrative Judge
Chairman