Appeal of

J. LEONARD SPODEK
NATIONWIDE POSTAL MANAGEMENT

LEASE AGREEMENT
(Riverside Branch-Chicago, IL
PSBCA No. 4265

APPEARANCE FOR APPELLANT:
J. Leonard Spodek

APPEARANCE FOR RESPONDENT:
Gary Shapiro, Esq.

OPINION OF THE BOARD

            Appellant, J. Leonard Spodek d/b/a/ Nationwide Postal Management, has appealed the contracting officer’s failure to issue a final decision on Appellant’s claim for one month’s rent and other monies under a lease agreement between Appellant and Respondent, United States Postal Service.  A hearing was held in Chicago, Illinois.

FINDINGS OF FACT

            1.  In 1993, Appellant agreed to lease a facility in Chicago, IL, to Respondent, to be used as the Chicago Riverdale Post Office.  The lease term ran from July 1, 1993, to June 30, 1998.  (Stipulation No. 2; Appeal File Tab (AF) 25).

            2.  In accordance with the lease’s Tax Rider-Zero Tax clause, Respondent agreed to reimburse Appellant for real estate taxes paid by Appellant on the leased facility during the term of the lease (AF 25).

            3.  On April 10, 1997, Appellant met with the contracting officer at the leased facility for the purpose of entering into a mutual termination agreement.  As of this date, the facility was completely vacated of personnel and furnishings, with the exception of a small table and a telephone.  (Transcript pages (Tr.) 27, 28, 40, 85, 86, 142).

            4.  During this meeting, the parties entered into a mutual termination agreement in which they agreed that the lease would terminate on April 30, 1997.  The parties further agreed that the Postal Service would waive all rights of leasehold interest and the Appellant would waive any and all claims.  Respondent further agreed to pay the pro-rata real estate taxes for 1997 from January 1, 1997, to April 30, 1997, and make a one-time payment of $2,750 to Appellant.  (Tr. 36, 37; Stipulation No. 3; AF 24).

            5.  At the conclusion of the meeting, Appellant requested that Respondent retain the keys to the facility.  Respondent agreed and informed Appellant that the keys would be available at Respondent’s newly constructed Riverdale Post Office.  (Tr. 61, 62).

            6.  By letter dated April 30, 1997, Respondent notified Appellant that the building had been emptied of postal equipment and that the keys were available to Appellant or his broker at the new post office (AF 21).  Also, in a telephone conversation on or about that date, Appellant was advised that the keys were available (Tr. 90).

            7.  By letter dated May 15, 1997, Appellant provided Respondent with authorization for his broker to pick up the keys to the facility.  Appellant’s representative thereafter picked up the keys on May 22, 1997.  (Tr. 90; AF 20).

            8.  On May 27, 1997, Appellant began contesting the 1997 real estate tax assessment for the Riverdale facility.  As a result, he realized a real estate tax reduction of $6,604 for 1997.  Appellant’s cost to realize the tax reduction was $1,320.80.  (AF 8; Joint Exhibit 1, 4).

            9.  On June 20, 1997, Appellant sent a letter to the contracting officer requesting payment of the lump sum payment of $2,750 specified in the Mutual Termination Agreement.  Appellant also claimed in this letter that he did not receive the keys to the facility until May 22, 1997, and accordingly, that the Mutual Termination Agreement should be changed to reflect May 22, 1997, as the termination date (instead of April 30, 1997).  Appellant, therefore, claimed rent and taxes through May 22, 1997, instead of April 30, 1997.  Appellant included with this letter a copy of the Mutual Termination Agreement on which he had lined out the Agreement’s April 30, 1997 date of termination and, without initialing the change, had written in “May 22, 1997” as the date of termination.  (AF 16).

           10.  By letter dated May 26, 1998, Appellant submitted a claim to Respondent’s successor contracting officer for May 1997 rent, as well as five months of tax reimbursement and 5/12 of Appellant’s cost to obtain a tax reduction on the property.  Included with this letter was a copy of the Mutual Termination Agreement Appellant had altered (see Finding of Fact No. 9 above).  Appellant did not indicate in his transmittal of the claim that the Agreement had been altered from its original content.  (Tr. 92, 96, 97, 101; AF 8).

           11.  The successor contracting officer did not issue a final decision or otherwise address the claim because he considered the alterations to amount to fraud (Tr. 150, 151).

           12.  Real estate taxes for the Riverdale facility for 1997, after the reduction, were $7,503.58.  Prorated real estate taxes from January through April 1997 were $2,501.20.  (Stipulation No. 7).

           13.  On August 3, 1998, Appellant filed an appeal of the contracting officer’s deemed denial of his May 26, 1998 claim (AF 4).

DECISION

Contentions of the Parties

           Appellant argues that Respondent has wrongfully refused to reimburse Appellant for any of the real estate taxes he paid in 1997.  In addition, Appellant argues that Respondent’s failure to return the keys before May 22, 1997, entitles Appellant to recover both rent and real estate taxes, not only through April 30 (as provided in the Mutual Termination Agreement), but also for the month of May.  Appellant also argues that he is entitled to receive 50% of the tax savings he achieved because Respondent agreed, in a different lease, to share such tax savings Appellant obtained^[1].  Finally, Appellant argues that he did not intend to defraud Respondent by altering the Mutual Termination Agreement but, instead, intended to indicate that Appellant believed Respondent failed to vacate the facility until May 22, 1997.

           Respondent argues that Appellant waived “any and all claims “ in the Mutual Termination Agreement, and that, accordingly, the claims in these appeals are barred by accord and satisfaction.   Respondent next argues that it vacated the leased premises by April 30, 1997, the date agreed to in the agreement and that, therefore, no rent or real estate taxes are owed to Appellant for the month of May.  In the alternative, Respondent argues that this portion of Appellant’s claim is barred by res judicata since Appellant allegedly raised this claim in an earlier appeal (PSBCA No. 4120) that was dismissed with prejudice.  Respondent next argues that Appellant’s claim for a portion of the tax reduction he realized on the property must be denied since nothing in the lease required Respondent to make such a payment and also because the claim was not submitted to the contracting officer.  Finally, Respondent argues that Appellant is barred from recovering on his claim because it is tainted by fraud.

Fraud

           The overarching issue in this appeal is Respondent’s allegation that Appellant’s claim is tainted by fraud.  In this regard, Respondent has not alleged that there is any action pending or imminent in any other tribunal concerning these allegations.  Nevertheless, Respondent asks the Board to conclude that Respondent is under no obligation to reimburse Appellant for real estate taxes it admittedly owes to Appellant.

           A claim will not be dismissed or suspended merely on the basis of an allegation by Respondent of fraudulent conduct by Appellant.  See American Construction Services, Inc., DOT BCA No. 2993, 97-1 BCA ¶ 28,641; DEL Manufacturing Co., Inc., ASBCA No.43801, 46252, 94-3 BCA ¶ 27,239.  The issues of the rights and obligations of the parties to the lease herein and the determination of whether fraud exists are two separate matters.  This Board is authorized to determine whether Respondent breached the Mutual Termination Agreement by refusing to reimburse the real estate taxes paid by Appellant during the period of Respondent’s occupancy of the facility.  Respondent is free, thereafter, to raise the issue of fraud in the proper forum.  See Meisel Rohrbau, ASBCA No. 35566, 90-1 BCA ¶ 22,424; M&M Services, Inc., ASBCA No. 28712, 84-2 BCA ¶ 17,405. 

Real Estate Taxes

           In accordance with the Tax Rider-Zero Tax clause of the lease between the parties, Respondent was obligated to reimburse Appellant for the amount of real estate taxes he paid on the facility during the term of the lease (FOF 2).  Respondent agreed to reimburse Appellant for the pro-rata share of real estate taxes paid by Appellant for the period January 1 to April 30, 1997, and these taxes amounted to $2,501.20 (FOF 4, 12).  Accordingly, Respondent owes Appellant this amount, plus Contract Disputes Act interest.

           We see no basis, however, for Appellant’s claim that Respondent is obligated to reimburse Appellant for a portion of his costs incurred in obtaining a reduction in taxes owed for 1997 or to split the amount of the reduction with Appellant.  Nothing in the lease between the parties or the Mutual Termination Agreement provides for such a recovery.

May 1997 Rent and Real Estate Taxes

           Moreover, there is no basis for Appellant’s claim that Respondent owes real estate taxes or rent for the month of May 1997.  Respondent vacated the facility by April 30, 1997, as agreed in the Mutual Termination Agreement and timely informed Appellant of that fact (Finding of Fact No. (FOF) 6).  Appellant was aware, as early as April 10, 1997, that the keys to the facility would be available at the new post office (FOF 5).  Thus, Appellant’s failure to pick up the keys until May 22, 1997 cannot be attributed to Respondent^[2].

           Having so found, there is no reason to address Respondent’s argument that this portion of Appellant’s claim is barred by res judicata.

Conclusion

           Appellant is entitled to recover $2,501.20, plus Contract Disputes Act interest, representing Respondent’s pro-rata share of real estate taxes for the period January 1 to April 30, 1997.  This appeal is otherwise 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]   In his claim submission, Appellant initially sought 5/12 of his costs to obtain the tax reduction (See Finding of Fact No. 10).  However, during the course of litigating this appeal Appellant changed the nature and amount of this claim to now seek 50% of the tax savings achieved (see Appellant’s Main Brief).

[2]   Assuming arguendo that Respondent, after completely vacating the facility, held the keys until May 22, 1997 without notifying Appellant of their availability, this alone would not constitute a holdover tenancy.  See T.W. Cole, PSBCA No. 3076, 92-3 BCA ¶ 25,091.