Appeal of
NATIONAL CONSTRUCTION COMPANY
Under Lease Agreement
PSBCA No. 3616

APPEARANCE FOR APPELLANT:
William J. Rizzo

APPEARANCE FOR RESPONDENT:
Mark T. Corbly, Esq.

OPINION OF THE BOARD

            Appellant, National Construction Company, has appealed the denial of its claim for reimbursement of costs it incurred in removing and replacing an underground oil storage tank at the Livermore Falls, Maine Post Office, which is leased by Respondent, United States Postal Service, from Appellant.  At the election of the parties, this appeal is being decided on the record without an oral hearing in accordance with 39 C.F.R. §955.12.  Only entitlement is at issue.

FINDINGS OF FACT

            1.  On April 20, 1962, the parties[1] entered into an "Agreement to Lease" under which Appellant was to construct a building to be leased to the Government for use as the Livermore Falls, Maine Post Office.  The building was to be constructed in accordance with drawings specified in the agreement, which included a requirement to install a 1,500-gallon underground tank for the storage of fuel for the heating system.[2]  The agreement also provided that upon completion Appellant would lease the building to Respondent for a period consisting of a fixed term of ten years followed by four five-year options, for a potential total lease term of thirty years.  (Appeal File Tab (AF) 1).

            2.  The lease contemplated by the Agreement to Lease was executed by the parties in August 1963 and covered the base period May 1, 1963, through April 30, 1973, plus the four five-year options.  The lease required Appellant to furnish a heating system with specified temperature capabilities.  Under the lease, Appellant (as lessor) agreed to:

"...maintain the demised premises, including the building and any and all equipment, fixtures, and appurtenances ... furnished by the Lessor under this lease in good repair and tenantable condition, except in case of damage arising from the act or the negligence of the Government's agents or employees...."  (AF 2).

Respondent exercised the four lease options, the last of which expired on April 30, 1993.

            3.  In 1985 and 1987 (with amendments in 1989) the State of Maine enacted statutes that required the registration of underground oil storage tanks, and prohibited the operation of any unregistered tank after May 1, 1986.  Further, the statutes set a schedule for the "abandonment" of registered underground tanks not meeting certain construction requirements.[3]  In relevant part, the statute set a date of October 1, 1989, for the abandonment of tanks more than 15 years old and located in "sensitive geological" areas; and October 1, 1991, for the abandonment of tanks more than 25 years old, wherever located.  (38 M.R.S.A. §§563, 563-A).  The statute provided that facilities taken out of service were to be properly abandoned (and removed -- with exceptions not relevant here) by the "owner or operator of the facility."  (38 M.R.S.A. §566-A).  The underground oil storage tank at issue in this appeal was installed in 1963, and was 26 years old in 1989 and 28 years old in 1991 (AF 6).  Therefore, under the statute, the deadline for "abandoning" the tank was, at the latest, October 1, 1991, which was during the term of the final option period of the original lease.

            4.  On or about December 4, 1986, the tank was registered as required by the statute, based on information provided to the state by Respondent's  Officer-in-Charge at the Livermore Falls Post Office.  Appellant was recorded as the owner of the facility and Respondent was recorded as its operator.  Although requested as part of the registration process, information concerning the date of installation of the tank apparently was not provided.  (AF 3, 4).

            5.  In 1992, prior to the expiration of the old lease, the parties conducted negotiations for a new lease for the facility.  One of the primary topics discussed, both orally and in writing, during the course of negotiations was responsibility for replacement of the underground storage tank.  The parties exchanged several versions of language proposed for insertion in the new lease, with each party apparently intending to include language making the other responsible for the cost of removal and replacement.  However, the record does not reflect that any express agreement was reached during the course of negotiations that one or the other would be responsible for the replacement cost.  (AF 12, 13, 14; Declaration of Terry W. Brooks).

            6.  The lease ultimately agreed to was for a fixed term of five years (with no options) beginning May 1, 1993.  Under the lease, Appellant agreed to furnish a heating system.  Clause A.25 ("Lessor Obligations") of the lease general provisions read, in relevant part, as follows:

"c.  If heating system is furnished - Lessor must furnish heating system in good working order and, if maintained by Lessor, will be maintained in accordance with the Maintenance Rider attached hereto."  (AF 15).

            7.  The "Maintenance Rider - USPS Responsibility (Partial)" included in the lease contained, in part, the following provisions:

"b.  The term 'demised premises' ... includes ... all equipment ... furnished ... by the lessor under this lease."

c.  The Postal Service is responsible for ordinary repairs to, and maintenance of the demised premises except for those repairs that are specifically made the responsibility of the lessor in this lease....

d.  The lessor is responsible for:

(1) Repairs to all common or joint use areas ....

(2)  All repairs to structural elements and all parts of the roof system ....

(3)  Repairs resulting from Acts of God or of a public enemy.

(4)  Repairs resulting from defects in building construction or installation of equipment ....

(5)  Repairs resulting from fire or other casualties ....

(6)  Any ordinary repairs by the Postal Service which were made necessary by the failure of any element for which the lessor is responsible.

***

h.  the USPS will pay for the cost of removing the underground oil storage tank(s), if it (the USPS) causes said tank(s) to be removed. Additionally, the USPS will pay for purchase of and the installation of an above ground storage tank(s) capable of providing adequate capacity for one month's use during the winter months."[4]  (Id.)

            8.  Clause A.23 ("Applicable Codes and Ordinances") of the general provisions read as follows:

"The lessor, as part of the rental consideration, agrees to comply with all codes and ordinances applicable to the ownership and operation of the building in which the rented space is situated and to obtain all necessary permits and related items at no cost to the Postal Service."  (Id.).

            9.  In a June 16, 1993 letter to Appellant, shortly after the new lease term began, the Contracting Officer noted that the underground storage tank was required by 38 M.R.S.A. §563-A to be removed.  Further, the Contracting Officer stated that since the requirement for removal arose from the state statute, the language of paragraph h of the Maintenance Rider was inapplicable and Appellant was responsible for having the work performed at its expense.  (AF 17).

            10.  After several exchanges of correspondence through which Appellant expressed its disagreement with the position taken by the Contracting Officer, Appellant had the removal and replacement[5] work performed under protest.  By letter dated November 10, 1993, Appellant demanded payment in the amount of $8,043.00 for removal of the tank and for "[t]ime spent by this office."  By letter dated November 17, 1993, the Contracting Officer issued a final decision concluding that Appellant's claim included the costs of both removing and replacing the storage tank,  concluding that both activities were Appellant's responsibility under the 1993 lease, and denying Appellant's claim in its entirety.  (AF 18-28).  Appellant filed a timely appeal with this Board.

DECISION

            Appellant argues[6] primarily that during negotiations over the new lease, it was made clear to Respondent's representative that Appellant considered Respondent liable for the costs of removing and replacing the tank because, according to Appellant, Respondent would have been liable for the costs under the terms of the original, 1963 lease.  Appellant contends that Respondent understood that to be Appellant's position during the course of the negotiations.[7]

            Respondent argues that the cost of tank removal would have been Appellant's responsibility under the 1963 lease and remained so under the terms of the 1993 lease.  Respondent relies on the language of both the maintenance rider and the "Applicable Codes and Ordinances" clause in the 1993 lease.  Finally, Respondent argues that the language of the 1993 lease was unambiguous and that, accordingly, the parol evidence rule prohibits the consideration of evidence of negotiations or discussions that preceded the execution of the lease.

            From the fact that the parties engaged in substantial discussions on the topic of tank removal and replacement and included relevant language in the 1993 lease, we conclude that they intended to rely on the provisions of that lease rather than on the language of the 1963 lease.  Having considered the evidence and arguments, we conclude that Appellant is liable for the costs of removing the tank under the terms of the 1993 lease and that it may not recover those costs from Respondent.  However, we conclude that Respondent is liable for the cost of installing the new tank.  We rely primarily on the language of the specially drawn provisions of paragraph "h" of the maintenance rider.  Under the plain meaning of that language Respondent would be liable for the costs of removal only if it "caused" the tank to be removed.  Under the facts of this appeal the "cause" of the tank removal was the state statute mandating that tanks not meeting certain requirements be "abandoned" (and removed) by certain specified deadlines.  We cannot agree that a demand or request on Respondent's part that the tank be removed in conformity with the statute can be read to be the "cause" of the tank removal under the lease language.  We also conclude that the second sentence of the special provision is to be read to impose liability on Respondent under any circumstances for the costs of installing a new tank.

            Appellant argues that it made its position clear during negotiations that it believed Respondent was liable for the costs of replacement.  Appellant also suggests that Respondent concurred in that position.  However, the language agreed to by the parties does not lend itself to that interpretation.  Moreover, the history of the negotiations between the parties, to the extent it might be considered by the Board as an aid to interpreting the agreed-to language, United Contract Services, Inc., ASBCA No. 27855, 86-3 BCA ¶ 19,247; Nab-Lord Associates, PSBCA No. 398, 80-1 BCA ¶ 14,346, is inconclusive on the point argued by Appellant.  From the record, as we stated in Finding 5, we cannot conclude that the parties ever reached an express agreement as to which would be responsible for the tank removal and replacement.  Rather, each was attempting to insert language making the other responsible.  Further, Appellant has not shown that Respondent understood but failed to object to Appellant's position that the language would place the responsibility for tank removal/replacement on the Postal Service.  See, e.g., Midwest Transit, Inc., PSBCA No. 1504, 87-3 BCA ¶ 20,079 (Government bound by contractor's interpretation of contract language where Contracting Officer knew before award of contractor's misinterpretation of contract language, but failed to object).  Under these circumstances, we rely only on the language finally included in the lease and, as we have stated, we conclude that such language leaves Appellant liable for removal and Respondent responsible for replacement.

            Accordingly, the appeal is sustained in part and denied in part.  The matter is remanded to the parties for calculation of the amount due.

David I. Brochstein
Administrative Judge
Board Member

I concur:
James A. Cohen
Administrative Judge
Chairman

I concur:
James D. Finn, Jr.
Administrative Judge
Vice Chairman

[1]  Respondent was then the Post Office Department.  Pursuant to the Postal Reorganization Act, P.L. 91-375, 84 Stat. 719 (1970), all the functions, powers, and duties of the Post Office Department were transferred to the United States Postal Service and the Post Office Department was abolished.

[2]  The drawing that apparently required the installation of the tank is not in the record.  However, Respondent has included in its proposed findings of fact a finding that the contract drawings required installation of the tank and Appellant has not taken issue with that proposed finding.

[3]  Those tanks not constructed of fiberglass, cathodically protected steel or "other noncorrosive material approved by the [Commissioner of Environmental Protection]."

[4]  Subparagraph h was a typed provision added to the preprinted Maintenance Rider.  The other provisions quoted were part of the preprinted form.

[5]  A new fuel storage tank was installed inside the post office.

 [6]  Although Appellant did not file a brief, it presented its arguments in its letter of February 28, 1994, (treated as its Complaint) and in its "Answer to Declaration of Terry Brooks."  Since the answer to the declaration was unsworn, it was not considered as evidence, but has been considered as argument.

[7]  Appellant also submitted copies of numerous Postal Service directives and general correspondence on the topic of removal and replacement of underground storage tanks without making specific arguments based on those documents.  Those publications have not been considered, except as general background, since none of them appears to express an intent on the part of the Postal Service to be liable for removal and replacement costs where a lease or other agreement would otherwise make another party responsible.