PSBCA Nos. 3697 & 3705
October 11, 1996
Appeal of
THE ESTATE OF GEORGE J. RUTMAN
Under Lease Agreement
PSBCA Nos. 3697 & 3705
APPEARANCE OF APPELLANT:
Ruth S. Marcott, Esq.
APPEARANCE FOR RESPONDENT:
Julie A. Holvik, Esq.
OPINION OF THE BOARD
Appellant, Estate of George J. Rutman,[1] has appealed two final decisions of the contracting officer assessing against Appellant (lessor) the costs associated with certain repairs at the Owatonna Minnesota Post Office, which Respondent, United States Postal Service leased from Appellant. A hearing was held at the request of the parties in St. Paul, Minnesota.[2] Only entitlement is at issue.
FINDINGS OF FACT
1. In August 1962, using POD Form 1449 (June 1958 edition), Appellant’s predecessor-in-interest leased the property in dispute in these appeals to Respondent[3] for use as a post office in Owatonna, Minnesota. The facility was constructed by Appellant’s predecessor-in-interest specifically for use as a post office in accordance with plans and specifications supplied by Respondent. (Appeal File No. 3697, Tab (AF 3697) 2a(1)(2)).
2. The initial term of the lease was for twenty years (July 1, 1962, through June 30, 1982) at an annual rental of $47,500. The lease also contained options exercisable by Respondent consisting of one ten-year option and four five-year options, all at ever-decreasing annual rental charges. (AF 3697, 2a(1)).
3. The lease contained the following relevant provisions:
“10(c). If any building or any part of it on the leased property becomes unfit for use for the purposes leased, the lessor shall put the same in a satisfactory condition, as determined by the [Postal Service], for the purpose leased. If the lessor does not do so with reasonable diligence, the [Postal Service] in its discretion may cancel the lease . . .”
* * *
“15. IN ADDITION TO ANY OTHER REMEDY AFFORDED THE GOVERNMENT BY THIS LEASE, THE GOVERNMENT SHALL HAVE THE RIGHT:
* * *
(b) to make repairs to, or reconstruct the building covered by this lease in the event the Lessor refuses or neglects to make repairs to or reconstruct the building covered by this lease when the Lessor is required to do so by this lease, and to do the same for the account of the Lessor, and to obtain reimbursement from the Lessor for the cost thereof.”
* * *
“16. Lessor shall, unless herein specified to the contrary, assume sole responsibility for the condition, maintenance and management of the demised premises, including improvements thereto, and any and all equipment, fixtures and appurtenances, furnished and to be furnished by the Lessor in good repair and tenantable condition. As used in this paragraph, the term “repair” includes repairs of every character, exterior and interior, structural and nonstructural, ordinary as well as extraordinary, foreseen as well as unforeseen, alterations, changes, placements and renewals, except in case of damage arising from the act or negligence of the Government’s agents or employees. The Lessor shall, in addition, repaint or redecorate the building interior as required but not less than two coats every five years . . . ” (Id.).
4. Appellant purchased the property and assumed the lease in 1981. (Transcript of Hearing, pages (Tr.) 136, 138).
5. These appeals arise from two contracting officer’s final decisions issued in connection with work performed at the Owatonna Post Office. Specifically, under PSBCA No. 3697, Respondent assessed $29, 256.79 for repaving and lighting work. In PSBCA No. 3705, Respondent assessed $20,350.00 for painting work. (AF 3697, 1a; AF 3705, 1a).
PSBCA No. 3697
REPAVING, CURBING AND REPLACING
SECURITY LIGHTS IN PARKING LOTS
REPAVING AND CURBING
6. The Owatonna Post Office had three parking lots. The north lot was used for customer parking. The south lot abutted the loading dock and was used for postal deliveries and distribution as well as employee parking. The east lot was used for employee parking. (Tr. 20, 21).
7. As early as 1986, Respondent began advising Appellant that the south parking lot was in need of repair or resurfacing. Respondent’s letter to Appellant noted that the parking lot’s uneven surface caused mail carts to tip over, requiring the carriers to resequence their mail. (Supplemental Appeal File Tab (SAF) 4).
8. By 1991, sub-grade failures had developed in the south parking lot leading to cracked pavement, numerous potholes and a deteriorated pavement condition sometimes described as an “alligator” surface. (AF 3697, 4a; Tr. 52).
9. The east parking lot contained extensive cracking, alligator type distress, and depressions. (AF 3697, 4a).
10. The presence of potholes and cracking in the south parking lot resulted in mail carriers having difficulty loading mail in their vehicles and requiring resequencing of the mail. (Tr. 15).
11. By 1993, the deterioration of the pavement in the south parking lot was so extensive that the base was gone and simply patching it would no longer work. The expected life of an asphalt paved parking lot in Minnesota is twenty years. By 1993, at the time of the repaving project, the Owatonna Post Office parking lots were approximately 32 years old. (AF 3697, 2 (a)(1), 4a; SAF 5; Tr. 20-28, 50, 51, 71; Weise Deposition pages (Dep.) 20, 25, 27-35).
12. The curbs in the south parking lot were “tipped back,” i.e., physically tipped over. This condition usually occurs when the curbs are struck by automobiles or by snow plows during winter snow removal. Snow removal was the responsibility of the Postal Service. (Tr.188-190; Dep. 44).
13. Respondent made repeated attempts to have Appellant repair the parking lots. Letters were sent on January 28, 1993, and March 10, 1993, advising Appellant of the need for numerous repairs, including the need to repair the parking areas and the security lights in the parking lots. Appellant was further advised that because of certain statutory wage payment requirements imposed on the United State Postal Service, in all likelihood it would be less expensive for Appellant to have the work done than if it were left to Respondent. (AF 3697, 3(u) (v)).
14. In a letter dated June 23, 1993, Respondent again advised Appellant of the cracks and holes in the parking lots and provided Appellant with a copy of plans and specifications that Respondent intended to use to accomplish the necessary repairs.[4] Respondent followed this up on August 2, 1993, by providing Appellant with a contract proposal package for repaving and replacing the curbs in the parking lots. (AF 3697, 3(k) (o)).
15. By letter dated September 8, 1993, Respondent advised Appellant that it had awarded a contract for the “necessary repairs” to the parking lots. This letter further stated that, based on discussions with Appellant, the contract’s requirements were revised to delete any improvements in the repaving contract (as opposed to repairs), with the exception of an upgrade for a 30-foot wide truck lane, the cost of which would not be charged to Appellant. (AF 3697 3(h); SAF 1).
16. The repaving contract was awarded to Crane Creek Asphalt, Inc., on September 8, 1993.[5] The contract required placement of a 1.5 inch bituminous wearing course on the east parking lot ($1,800), excavation and backfill with 8-inch base and 3-inch bituminous overlay in the south parking lot (exclusive of the 30-footwide truck lane) ($16,858),[6] removal and replacement of bulkhead curbs ($4,360), and construction of the truck lane ($11,291), for a total price of $34,309. (SAF 1).
17. Appellant responded on the same date (September 8, 1993), by facsimile, with an offer to promptly fill the potholes in the south parking lot (at a cost of $700) and a disavowal of any liability for the cost of the third party repaving contract in excess of $700.00. (AF 3697 3(f), (g)).
SECURITY LIGHTS
18. The original 1962 specifications for the Owatonna Post Office called for a single exterior lighting fixture described as “400 watt, color corrected mercury vapor flood lighting fixture complete with ballast and pole . . .” Maintenance of exterior lighting was the lessor’s responsibility. (AF 3697, 2a; SAF 4).
19. By 1993, however, the south parking lot had two light poles and fixtures. An additional two poles and fixtures had also apparently been in place at one point in time but were then missing from the south parking lot. In addition, there were problems with lights burning out in the fixtures on the building above the loading dock as well as problems with the two light fixtures remaining in the south parking lot. (SAF 3; Tr. 29). The Owatonna Postmaster informed Appellant of problems with the light fixture above the loading dock, but never informed Appellant of any problems with the light fixtures in the south parking lot. (Tr. 155)
20. In November 1993, Respondent’s contract with Crane Creek Asphalt, Inc., was modified to require the removal of two existing light fixtures and poles and the installation of two 400 watt sodium light fixtures in the parking lot, and the relocation and replacement of wiring which was damaged during excavation for the repaving work. (SAF 1).
21. The sodium vapor light fixtures installed by Crane Creek were both more cost efficient and more effective at lighting the parking lot than the fixtures they replaced. (Tr. 31).
22. In a final decision dated July 12, 1994, the contracting officer found Appellant to be liable to Respondent in the amount of $29,256.79 for the cost of repaving, curb replacement, installation of security lights and administrative costs. Liability in this amount was determined as follows:
East parking lot overlay coat $ 1,800.00
Curb replacement $ 4,360.00
South parking lot repairs
(exclusive of truck lane) $ 16,858.00
Security lighting $ 2,655.00
A&E fees[7] $ 3,583.79
Total $ 29,256.79
(AF 3697 1, 3(c)).
PSBCA No. 3705
REPAINTING THE POST OFFICE INTERIOR
23. In a letter dated August 26, 1983, the Owatonna Postmaster informed Appellant “ the interior of the building needs painting per the lease.” (SAF 4).
24. In a 1987 letter, the Owatonna Postmaster informed Appellant that it was Appellant’s responsibility to “repaint as required but not less than two coats every five years. Not only was this painting required, but it had not received two coats in the last five years.” (SAF 4).
25. In a 1991 letter, a Postal Service Real Estate Specialist requested that Appellant perform the “regular repainting of the facility which is past due.” (SAF 4).
26. On January 28, 1993, Respondent wrote to Appellant regarding maintenance items which were outstanding since July 1991. Included in the list was the requirement to repaint the interior of the entire facility. (AF 3705, 3(m)).
27. On March 10, 1993, Respondent once again informed Appellant of the outstanding maintenance items, including the need for repainting. This letter further stated unless Appellant advised Respondent within 5 days of receipt of its planned course of action for repairs, Respondent would proceed to contract with a third party to have the work accomplished. (AF 3705, 3(l)).
28. In 1993, the interior of the Owatonna Post Office had faded walls, as well as stains caused by leaking ceilings. With the exception of periodic spot painting, Appellant had not painted the interior of the facility, in its entirety, at any time during the prior nine years (at least as far back as 1984). (Tr. 110, 114).
29. On March 19, 1993, Appellant met with the Owatonna Postmaster to discuss the items in need of repair. As a result of this visit Appellant acknowledged that “[t]wo wall surfaces require attention in the workroom and will be addressed by the painting contractor.” (AF 3705 3(k)).
30. Thereafter, Appellant arranged to have the men’s room and the break room painted. At approximately this same time, Postal Service employees painted the postmaster’s and the supervisor’s offices at Postal Service expense. The costs associated with the painting performed by Postal Service workers were not charged to Appellant. (Tr. 17-19).
31. On August 6, 1993, Respondent once again wrote to Appellant to request that he repaint the interior of the entire facility. Appellant was informed that Respondent would not accept a “touch up or spot painting job.” (AF 3705 3(h)).
32. After one further similar letter on January 19, 1994, by letter dated January 24, 1994, Respondent forwarded to Appellant a third party contract proposal for the interior painting work. (AF 3705 (f), (g)).
33. The third party painting contract was competitively awarded on February 22, 1994, in the amount of $18,800.00.[8] The contract required surface preparation and repainting (with two coats of paint) the interior of a specified number of rooms in the post office. The total scope of work, however, did not include those rooms painted earlier by Appellant’s painting contractor or those painted by Postal Service workers. (AF 3705, 2(a)(1)(3), 3(e)(f); Tr. 112, 115).).
34. The third party painting contract was subsequently modified to include rooms omitted from the original scope of work which were discovered during the preconstruction conference with the painting contractor. The contract price was increased to $20,350.00. (Tr. 115; AF 3705, 2(a)(3)).
35. On August 17, 1994, the contracting officer issued a final decision finding that Appellant was required to reimburse Respondent the full cost of the painting contract ($20,350.00). (AF 3705, 1(a)).
DECISION
PSBCA No.3697
The questions to be decided in this appeal are whether Respondent acted within its rights and in accordance with the terms of the lease between the parties in contracting for, and assessing the costs against Appellant for, parking lot repaving, curb replacement, security lighting replacement and, finally, the preparation of plans and specifications for this work.
The subject lease is quite clear in the obligations it imposes on Appellant to manage and maintain the premises. Paragraph 16 imposes on Appellant the obligation to insure that the premises remain “in good repair and tenantable condition.” The only exception to Appellant’s obligation is in the case of damage arising from the act or negligence of the Government’s agents or employees. (Finding of Fact No. (FOF 3).
REPAVING THE SOUTH AND EAST PARKING LOTS
Appellant argues that the repaving of the south and east parking lots by Respondent were improvements rather than repairs. Appellant believes that a “hard,” “driveable” surface is all Appellant is required to provide under the lease and that its offer to fill potholes should have been sufficient. Appellant further argues that the damage to the parking lots was caused by Respondent using trucks which were heavier than those originally contemplated by the parties at the time of entering into the lease in 1962. Appellant also argues that Respondent failed to give it adequate notice of its plans to enter into a third party repaving contract.
Respondent argues that it was Appellant’s obligation to maintain the parking lots in good repair. When Appellant neglected this obligation, Respondent asserts that it had the right to correct the situation and require reimbursement from Appellant.
The actual physical condition of the parking lots in 1993 is not really in dispute. Numerous potholes were present as well as substantial cracking and “alligatoring.” (FOF 9, 10). By 1993, the condition of the south parking lot had deteriorated to the point where it required complete removal of the existing pavement followed by repaving. The condition of the east parking lot was such that it required reconstruction or an overlay of bituminous pavement. By 1993, the Owatonna parking lots had already exceeded their twenty-year useful life by twelve years. (FOF 8, 9, 11).
We disagree with Appellant’s argument that as long as a “hard”, “driveable” surface existed in the parking lots, it had met its obligation. The original lease specified a 4-inch base with a 2-inch asphalt pavement for the parking lots. (FOF 16). Such a surface would be flat and smooth and would not contain extensive cracking or “alligatoring.” This uneven surface interfered with the operation of the postal facility. (FOF 10). Appellant’s only offer was to fill the existing potholes. (FOF 17). Filling potholes would not address the cracking or “alligatoring.” The parking lots had long since outlived their useful life. Some form of substantial reconstruction or repair was necessary. Placing the 1.5 inch overlay on the east parking lot was a reasonable repair in light of its condition. Removal and replacement of the pavement in the south parking lot was necessary in light of the deterioration to the base as well as the extensive potholing and cracking on that surface. (FOF 11).
Beginning as early as 1986, Respondent began advising Appellant that the condition of the south parking lot had deteriorated and was in need of repair. (FOF 7). Appellant offered to fill in existing potholes at the last minute (FOF 17), but it made no effort to carry out more extensive repairs notwithstanding Respondent’s repeated warning that it would award a contract for repaving if Appellant failed to do so. (FOF 13-15). Under these circumstances, Respondent was justified in awarding its own contract for paving repairs.
Appellant’s argument that the damage to the parking lots was caused by Respondent using trucks which were heavier than those originally contemplated by the parties at the time of entering into the lease is likewise rejected. Appellant offered no proof as to what was in the contemplation of the parties at the time of entering into the lease,[9] and only its own subjective opinion that Postal Service trucks currently in use at the Owatonna Post Office were heavier than those used in the past. Because of the insufficiency of this evidence, we need not address whether, if proven, use of heavier vehicles would come within the exception to Appellant’s obligation to maintain the premises.
Respondent is entitled to recover the reasonable cost of repaving the south and east parking lots. However, Respondent’s repair specifications for the south parking lot substantially exceeded the original specifications. The repair specifications called for an 8-inch base with a 3-inch bituminous overlay instead of the 4-inch base with 2-inch overlay originally specified. (FOF 16). Therefore, Respondent’s recovery from Appellant for repaving the south parking lot must be limited to the amount which would have been incurred in repaving the south parking lot in accordance with the original specifications.[10] We leave it to the parties to negotiate the amount of the recovery.
REPLACEMENT OF CURBS
Appellant argues that the need to repair the curbs in the south parking lot was caused solely by the acts or negligence of Respondent’s agents and employees. Respondent made no specific argument on this issue.
Included in Respondent’s third party repaving contract with Crane Creek, Inc., for the south parking lot, was the requirement to replace the curbs around the parking lot. These curbs were physically knocked back from their anchoring on the pavement. Tipping of curbs occurs when they are struck by vehicles or snow plows. (FOF 12). The south parking lot was used by postal employees for parking as well as mail distribution. (FOF 6). Snow removal was the responsibility of the Postal Service. (FOF 12).
The only evidence in the record on this issue supports a finding that the curbs were damaged through the acts or negligence of Postal Service agents or employees. Therefore, Respondent may not recover from Appellant its costs in replacing the damaged curbs.
SECURITY LIGHTS
Added as a modification to the third party paving contract was the requirement to replace and relocate certain wiring damaged during removal of the south parking lot pavement, and to replace two mercury vapor security lights with new sodium vapor lights. (FOF 20). Respondent argues that the lease requires Appellant to furnish and maintain lighting fixtures. The parking lot light fixtures were not working satisfactorily and were replaced by Respondent because Appellant failed to undertake that responsibility itself. Therefore, Respondent believes Appellant should bear the cost of installing the new light poles and fixtures. With respect to the damaged wiring, Respondent argues that the damage to the wiring and necessity for relocating the wiring were reasonably foreseeable results of Appellant’s breach of its responsibility to perform its own repairs of the light fixtures and the paving repairs.
Appellant posits three arguments with respect to this issue. First, Appellant argues that it was not reasonable or necessary to replace the two light poles and fixtures. Appellant further argues that the replacement of wiring damaged by the repaving contractor as well as replacement of two light poles and fixtures has not been shown by Respondent to be the responsibility of Appellant. Finally, Appellant argues that Respondent failed to give it any notice of Respondent’s intent to replace the light fixtures.
Respondent’s attempt to charge Appellant the cost of this modification suffers from a failure of proof. The evidence establishes that, under the original lease specifications, Appellant was responsible for furnishing a single light fixture in the south parking lot. (FOF 18). The evidence also establishes that at the time of this dispute there were two light poles and fixtures in the south parking lot. (FOF 19). Although Respondent was apparently having problems with one of the light fixtures in the parking lot, it did not inform Appellant of any such problems prior to entering into the modification to obtain two new fixtures for the parking lot. (FOF 19). Respondent offers no explanation for why it believes replacement of the missing light poles was Appellant’s responsibility. Simply stated, nothing in the record supports charging Appellant the cost of replacing missing light poles and fixtures with upgraded sodium vapor light fixtures when there already existed in the parking lot more light fixtures than were originally specified for the facility.
Likewise, relocating and replacing wiring damaged by a contractor engaged by Respondent should not be charged to Appellant. This requirement arose solely because of the acts or negligence of Respondent’s agents or employees. Therefore, Respondent may not recover from Appellant the cost of replacing the two light fixtures in the south parking lot, or the cost to replace and relocate the damaged wiring.
ADMINISTRATIVE COSTS
The final issue under this appeal is whether Appellant has any responsibility to share in the administrative or “A&E” costs Respondent incurred in preparing the solicitation and awarding the paving contract to Crane Creek, Inc. (FOF 14). In its final decision, Respondent charged Appellant with 67% of the cost of the A&E’s efforts in drawing up plans and specifications for the repaving contract. No distinction should be made between the costs involved in the work performed by Crane Creek, Inc., and the costs incurred by Respondent in awarding that contract. Respondent is entitled to recover all its costs that are the foreseeable, direct, natural and proximate result of Appellant’s failure to honor its lease obligations and keep the premises in good repair, including reasonable A&E fees. M.R. Kaplan, et. al., PSBCA Nos. 1147, 1298, 1303, 1310, 88-3 BCA ¶20,827, at 105,319. Accordingly, Respondent is entitled to recover those A&E costs which may be apportioned to the costs it may recover for repaving the east and south parking lots.
In summary, Respondent is entitled to recover those costs attributable to repaving the south lot in accordance with the original specifications, the cost attributable to overlaying the east lot with a 1.5 inch bituminous coating and the A&E costs arising from these efforts. Respondent is not entitled to recover the costs associated with curb replacement, replacement of security lights or replacing and relocating the wiring damaged during performance of the repaving contract.
The appeal is sustained to the extent indicated and is otherwise denied.
PSBCA No. 3705
The issue presented in this appeal is whether Respondent acted properly in assessing against Appellant its costs for repainting the interior of the Owatonna Post Office.
Respondent argues that Appellant’s responsibilities under the lease with respect to painting are clear and unambiguous. Appellant is required to paint the interior of the entire facility with two coats of paint at least once every five years. Respondent further argues that this has consistently been its interpretation of the painting requirement and that it did nothing to waive the requirement.
Appellant argues that the parties interpreted the painting requirement as being only on an “as required” basis and that the course of conduct between the parties supports this interpretation.
Appellant’s arguments are not supported by the record. The lease requirement imposed on Appellant (lessor) on this subject is clear and unambiguous. Paragraph 16 of the lease states, “The Lessor shall, in addition, repaint or redecorate the building interior as required but not less than two coats every five years . . .” (FOF 3).
Appellant did not comply with the requirement to repaint the interior “not less than two coats every five years.” The evidence establishes that Appellant had not painted the interior of the entire facility at least as far back as 1984. (FOF 28). This failure was not caused by Respondent neglecting to request Appellant to perform the required painting. As far back as 1983, only two years after Appellant acquired the facility, Respondent requested that Appellant paint the building interior “per the lease.” (FOF 23). Again in 1987, Respondent reminded Appellant of its responsibility to paint the entire interior at least once every five years. (FOF 24). In 1991, Respondent requested Appellant to perform the “regular repainting of the facility which is past due.” On January 28, March 10, and August 6, 1993, Respondent made similar requests of Appellant. (FOF 25-27, 31). Similar demands were made on January 19 and January 24, 1994. (FOF 32). These letters all alerted Appellant that the interior walls were stained and the paint was faded. Finally, on February 22, 1994, Respondent unilaterally arranged to have the interior repainted. (FOF 33). Appellant’s failure over the years to comply with this requirement, despite the repeated entreaties of Respondent’s representatives, does not amount to evidence of an interpretation of this lease provision that would overcome the clear language of the lease.
Based on these facts, Respondent acted well within its rights under paragraphs 15 and 16 of the lease in unilaterally acting to arrange for the required painting and obtaining reimbursement from Appellant for the cost thereof.
Accordingly, this appeal is denied. Respondent is entitled to recover from Appellant the reasonable cost of having the facility’s interior repainted.
CONCLUSION
In summary, PSBCA No. 3697 is sustained to the extent indicated and is otherwise denied. PSBCA No. 3705 is denied.
William K. Mahn
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Vice Chairman
[1] Appellant herein refers to either George Rutman or The Estate of George Rutman.
[2] The hearing was conducted by Administrative Judge Finn who has since retired and is therefore not available to participate in the decision in this appeal.
[3] 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.
[4] Respondent contracted with Inspec in the amount of $5,348.94, for the preparations of plans and specifications as well as construction oversight, for the parking lot repairs. (Tr. 67; AF 3697, 3(c)).
[5] Proposals were solicited from two contractors, but only Crane Creek responded with a proposal. (SAF 1).
[6] The original 1961 specifications for the south parking lot called for a 4-inch base with a 2-inch overlay of bituminous pavement as compared with the requirement for an 8-inch base with a 3 inch bituminous overlay in the Crane Creek contract. However, by not assessing any costs against Appellant for removal and repaving of the 30-foot by 159 foot truck lane, Respondent determined that the total cost for removal and replacement of the asphalt pavement in the south parking lot was $3,964.00 less than if the original 4 inch base with 2-inch bituminous overlay was duplicated ($16,772.00 vice $20,736.00). (Tr. 60-63; See also, Respondent’s Exhibit 1).
[7] A&E fees in the amount of $3,583.79 were determined by apportioning Appellant’s share to be paid of the Crane Creek repaving contract (67%) against the total cost of having an A&E prepare the specifications and plans for that contract ($5,348.94). (AF 3697 3(c)).
[8] The Postal Service solicited bids from three painting contractors, received two bids and awarded the contract to the low bidder. (Tr. 115).
[9] In fact, Appellant was not even an original party to the lease, having assumed the lease in 1981. (FOF 4).
[10] We note in this regard that Respondent has already attempted to do this, in part, by not assessing against Appellant any charges for repaving the truck lane section of the south parking lot. (FOF 16).