Appeal of

J. LEONARD SPODEK d/b/a
ALABAMA POSTAL HOLDINGS

LEASE AGREEMENT
(Hartford, AL Post Office)
PSBCA Nos. 4124 & 4127

APPEARANCE FOR APPELLANT:
Kerry Pyle Rubin, Esq.

APPEARANCE FOR RESPONDENT:
Gary Shapiro, Esq.

OPINION OF THE BOARD

            In each of these appeals, Respondent, United States Postal Service, demanded that Appellant, J. Leonard Spodek, d/b/a Alabama Postal Holdings,^[1] perform repairs at the Hartford, Alabama Post Office that it leased from Appellant.  Appellant failed to perform the repairs, and Respondent did so and charged the cost of the repairs against rents otherwise due Appellant.  Appellant appealed the final decisions of the contracting officer asserting Respondent’s claims.  At Appellant’s request, these appeals were consolidated (Board’s Order of June 12, 1998).

            At Appellant’s request, an oral hearing was scheduled, even though Respondent preferred that the appeals be submitted on the record and intended to submit its evidence in written form.  However, Appellant failed to comply with the Board’s orders regarding pre-hearing exchange of exhibits and witness lists and other preparations for the hearing, and the Board deemed Appellant to have waived a hearing.^[2]  The appeals were submitted on the record, and both parties submitted briefs.  Both entitlement and quantum are at issue (See Board’s January 20, 1999 Order).

FINDINGS OF FACT

            1.  On April 7, 1967, Respondent entered into a lease for the premises used as the Hartford, Alabama Post Office (“1967 lease”).  The term of the lease was from February 23, 1967, to February 22, 1977, followed by four five-year options exercisable by Respondent.  (Appeal File in PSBCA No. 4124, Tab (“AF”) 14).

            2.  The lease required the lessor to maintain the demised premises in good repair and tenantable condition (AF 14, Clause 7; Appeal File for PSBCA No. 4127, Tab (“4127AF”) 34).

            3.  Appellant acquired the Hartford property on February 23, 1987, and succeeded to the rights and responsibilities of the lessor under the lease (AF 12; 4127AF 31).

            4.  Through exercise of all of the available options, the term of the lease was extended to February 22, 1997 (Declaration of Marcus Nielsen dated June 14, 1999 (“Nielsen Decl.”) ¶ 4).

            5.  Before the 1967 lease expired, there were a number of items of deferred maintenance at the post office that needed attention:  (1) The roof leaked and needed to be replaced and a number of ceiling tiles damaged by leakage from the roof also required replacement (4127AF 22, 23, 25, 28, 30; Nielsen Decl. ¶ 18); (2) The back door and the double glass doors at the entrance to the customer lobby did not operate properly (4127AF 12, 22, 25, 28, 29); (3) The inside of the post office needed to be repainted due to water damage from the leaking roof, and the exterior also needed to be repainted (4127AF 25, 26, 28); (4) The water heater was inoperable, so there was no hot water in the building (4127AF 25, 26).  Respondent had notified Appellant of all of these conditions by July 30, 1996 (Admissions in PSBCA No. 4127 (“4127 Admission”) 8^[3]).

            6.  In a letter dated July 30, 1996, the contracting officer directed Appellant to repair or replace the roof and repair damage inside the building due to the leaks, paint all previously-painted interior and exterior surfaces, clean exterior masonry and wood surfaces to remove stains caused by roof leaks, repair or replace the double mail vestibule doors and repair the water heater.  The contracting officer advised that if Appellant did not provide evidence within ten days that he was accomplishing the work, Respondent would contract for the work and charge the cost to the rent otherwise due Appellant.  (4127AF 24).

            7.  Also during the summer of 1996, Appellant and the contracting officer negotiated a new ten-year lease for the premises to commence February 23, 1997.  During telephone negotiations which took place between the contracting officer and Appellant, they agreed on the rent for the premises and that “[o]ther terms of the lease will be as previously negotiated on other leases.”  (AF 11; 4127AF 20; Nielsen Decl. ¶ 5).

            8.  Respondent prepared lease documents using its standard forms and sent them to Appellant for signature on August 16, 1996.  The cover letter from the contracting officer concluded, “Upon receipt of the unchanged executed documents, I will execute them on behalf of the Postal Service and return one original copy to you.”  (AF 10; 4127AF 19).

            9.  Under the Maintenance Rider of the new lease, Respondent was assuming certain maintenance responsibilities for the first time.  It became 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.”  Under the 1997 lease, Appellant was responsible for roof and structural repairs and for damage resulting from a failure of a building element for which he was responsible.  If Appellant failed to make repairs for which he was responsible, the lease provided that Respondent could do so and charge the cost of the repairs against rents otherwise due Appellant under the lease.  (AF 9, Maintenance Rider (REMAINU (Jan. 1995))).

            10.  The lease documents supplied by the contracting officer for Appellant’s signature included the following paragraph “a” to the Maintenance Rider:

“If the Postal Service is assuming maintenance responsibility for the demised premises for the first time, the lessor must correct all maintenance deficiencies and obtain a written certification from a professional HVAC firm that the heating, ventilating and air conditioning systems have been maintained and are in proper working condition.  The Lessor will remain responsible until all deferred maintenance work has been completed to the satisfaction of the Postal Service and Postal Service is in receipt of and accepts the aforementioned written certification.”  (AF 9).

            11.  Before returning the executed lease documents to the contracting officer, Appellant conspicuously lined out the above paragraph “a” of the Maintenance Rider and wrote “deleted” in the margin next to the clause.  Appellant made a number of other handwritten changes to the lease form he signed and returned.  (4127AF 18).  The parties had never discussed deletion of clause “a” of the Maintenance Rider (Nielsen Decl. ¶ 6).

            12.  Without reading the lease, the contracting officer signed it on September 5, 1996, as submitted by Appellant with paragraph “a” of the Maintenance Rider deleted (4127AF 18; Nielsen Decl. ¶ 13).  He returned a copy of the executed lease and a Memorandum of Lease for recording to Appellant (AF 9; 4127AF 18).  The contracting officer intended that Appellant would be required to complete outstanding deferred maintenance items before Respondent became responsible for maintenance under the new lease (Nielsen Decl. ¶ 7).

            13.  Also on September 5, 1996, the contracting officer sent a copy of the executed lease to the manager of administrative services for Respondent’s Alabama District, who was responsible for post office maintenance (4127AF 18).  On September 30, 1996, the manager of administrative services wrote to the contracting officer alerting him to the deletion of paragraph “a” of the Maintenance Rider.  He advised the contracting officer that in view of that deletion, certain repairs must be done before his district could assume responsibility for the maintenance as the new lease provided.  He identified those necessary repairs as replacement of the roof, painting the interior, replacing ceiling tiles, resurfacing the parking lot and replacing the water heater.  (4127AF 17; Nielsen Decl. ¶¶ 14, 15).

            14.  On about September 9, 1996, the contracting officer asked local officials to survey the post office to see what deferred maintenance remained undone (4127AF 8; Nielsen Decl. ¶ 16).  Based on that survey, by letter dated October 22, 1996, the contracting officer notified Appellant of deferred maintenance items that must be corrected by Appellant before Respondent assumed maintenance responsibility for the facility under the new lease on February 23, 1997:  replace the roof, repair all damage inside the building due to the roof leaks, including ceiling tile and painting, paint all previously-painted interior and exterior surfaces, clean exterior masonry and wood surfaces to remove stains caused by roof leaks, repair or replace the mail vestibule doors and repair damaged asphalt paving in the parking and maneuvering areas.  The contracting officer cautioned that if Appellant did not provide a copy of a signed contract for the work within ten days, Respondent would contract for the repairs and charge the cost plus Respondent’s administrative costs against Appellant’s rent.  (4127AF 16; Nielsen Decl. ¶ 17).

            15.  By letter dated April 28, 1997, the contracting officer acknowledged that Appellant had replaced the roof.  However, Appellant had not repaired the other deficiencies identified in the contracting officer’s letter of October 22, 1996 (Finding 14) and had not corrected the problems with the glass doors at the entrance to the post office.  The contracting officer advised that unless Appellant provided a copy of a signed contract for the work within ten days, Respondent would contract for the work and charge the cost to Appellant’s rent.  (4127AF 13).

            16.  By letter of April 28, 1997, responding to the postmaster’s request that Appellant fix the front doors, Appellant advised of his view that maintenance at the post office was now the responsibility of Respondent, pointing out that paragraph “a” had been deleted from the Maintenance Rider before it was executed (4127AF 12).  The contracting officer wrote to Appellant on May 20, 1997, expressing his disagreement with Appellant’s view that repair of the front doors was not Appellant’s responsibility, the contracting officer contending that the doors had needed repair at the time the new lease went into effect and that their repair was Appellant’s responsibility (4127AF 11).

            17.  On May 23, 1997, Respondent issued a $26,240.99 work order against an indefinite quantity construction (“IQC”) contract for asphalt paving repair, high pressure cleaning of the building, replacing vestibule doors, replacing ceiling tiles and painting interior and exterior (4127AF 6, 7, 8, 9, 10).  The IQC contract had been competitively procured (Nielsen Decl. ¶ 27; Declaration of Kent Holbrook ("Holbrook Decl.") ¶ 9).

            18.  By letter dated June 9, 1997, Appellant stated his willingness to repair damage resulting from the roof leaks but asserted that he was not responsible under the lease for any of the other repairs (4127AF 5).

            19.  Respondent completed the work and paid its contractor on or about August 25, 1997 (4127AF 3).  The cost of the work included $4,612.23 for one half of the total cost of painting the interior.  Only the first of the two coats of paint applied under the IQC contract was required because of water staining from the roof leaks, so Respondent accepted responsibility for a second coat.  The cost of repairs included $656.80 to replace ceiling tiles that were damaged and stained from the roof leaks.  These costs were reasonable  (Holbrook Decl. ¶¶ 6, 10, 11; 4127 Admission 17).

            20.  By final decision dated August 26, 1997, the contracting officer asserted a claim against Appellant in the amount of $26,240 for the cost of repairs, administrative fees of $400 plus interest at the rate of 7.3% (Respondent’s then cost of money) (4127AF 2; Nielsen Decl. ¶¶ 30, 31).  All of these costs were incurred and were reasonable in amount (Nielsen Decl. ¶ 30; 4127AF 3, 6, 8, 9, 10, 15; 4127 Admission 18).

            21.  Appellant’s timely appeal (4127AF 1) was docketed as PSBCA No. 4127.

            22.  The new lease required Appellant to furnish heating and air conditioning equipment, “as presently installed,” in good working order (AF 9, Lease Clause 6 (RELEASE (Jan. 1995), General Condition A.24.n (RETERMS (Jan. 1995))).

            23.  Although there had been some history of problems with the air conditioning, at the time the new lease commenced the HVAC system was in good working order (4127AF 27).  However, on July 22, 1997, a plastic pan used to collect condensate melted, allowing water to run into the control board and compressor, causing them to fail (AF 5).

            24.  After due notice to Appellant of the need for repairs and Appellant’s failure to perform them, Respondent did so (AF 3, 4, 5; Holbrook Decl. ¶ 13); Admission in PSBCA No. 4124 (“4124 Admission”) 13).

            25.  In a final decision dated September 7, 1997, the contracting officer asserted a claim against Appellant for its costs associated with the repairs to the air conditioning system (AF 2; Nielsen Decl. ¶¶ 34, 35, 36; 4124 Admission 17).

            26.  Appellant’s timely appeal (AF 1) was docketed as PSBCA No. 4124.

DECISION

            In PSBCA No. 4124, Appellant argues that under the 1997 lease, he was responsible for providing an air conditioning system in good working condition at the beginning of the lease but that Respondent accepted responsibility for repair of the air conditioning equipment if it failed during the term of the lease.  Under circum-stances virtually identical to these and a lease with identical language, we have found Appellant’s argument to be correct.  See J. Leonard Spodek d/b/a Colorado  Postal Holdings, PSBCA No. 4128, 00-1 BCA ¶ 30,675; see also, Mary Lou Bloom
and Kenneth D. Bloom, PSBCA No. 4053, 98-1 BCA ¶ 29,352.^[4]  Respondent has offered no grounds for distinguishing this authority.  In short, the 1997 lease requires Appellant to provide an air conditioning system in good working order at the inception of the lease (Finding 22).  The lease does not specifically make continued maintenance of the air conditioning system the responsibility of Appellant and, thus, such obligation falls to Respondent under its residual responsibility to maintain the premises (Findings 9, 22).  See Id.  Accordingly, the appeal of PSBCA No. 4124 is sustained.

            In PSBCA No. 4127, Respondent argues that Appellant’s breach of his responsibilities under the 1967 lease entitles Respondent to recover its cost of performing the repairs.  It reasons that the repairs were needed prior to expiration of the 1967 lease; they were Appellant’s responsibility under the 1967 lease; and before expiration of the 1967 lease Appellant refused Respondent's demand that he perform them (Findings 5, 6, 14).  The Board has found that Respondent has a common law right as tenant to perform repairs that are the lessor’s responsibility when the lessor fails to do so and to withhold the reasonable cost of the repairs from the rent.  E.g. Real Properties MLP Limited Partnership, PSBCA No. 3453, 95-2 BCA ¶ 27,829.  However, Respondent asks us to extend that remedy to a tenant who no longer occupies the premises pursuant to the lease in question.  It has offered no rationale or authority for such an extension, and we are aware of none.  While there may be some remedy available after expiration of the lease for a tenant who has been damaged by a lessor’s failure to perform an obligation under the expired lease, we are not persuaded that authorizing the tenant to perform repairs would be among them.  Respondent has not identified any particular damage it suffered by reason of Appellant’s failure to perform the repairs in question during the term of the 1967 lease.

            Therefore, we must look to the 1997 lease to see if it provides the remedy Respondent seeks.  Appellant concedes responsibility for replacement of the roof, which he performed, and for repair of damage to the post office resulting from roof leaks.  This concession correctly recognizes Appellant’s responsibilities under both leases (Findings 2, 9), and the Board concludes that Appellant is responsible for the reasonable cost of repairing damage stemming from roof leaks.

            Appellant argues that the maintenance clause of the 1997 lease places responsibility for the remainder of the repairs on Respondent.  Respondent argues that Appellant remained responsible for pre-existing deferred maintenance, because his attempt to omit paragraph “a” of the Maintenance Rider was ineffective.

            Respondent seeks to avoid being bound by the 1997 lease the contracting officer signed by arguing that his signature was obtained by Appellant’s fraudulent representation that the returned lease was not changed.  However, there is no evidence of such representation, and it would have been a simple matter for the contracting officer or a member of his staff to confirm that the lease agreed with Respondent’s intentions by looking through the document.  Any failure by Appellant to specifically point out the changes he made does not excuse Respondent’s failure to read the lease.  See Kenneth F. Zarrilli, PSBCA No. 3148, 1994 PSBCA LEXIS 16 (June 30, 1994).

            Respondent also raises Appellant’s alleged fraud as a reason why parol evidence should be accepted to determine the meaning of the lease.  However, the parol evidence Respondent proposes does not change the outcome on this issue.  At most, Respondent can establish by parol evidence that the contracting officer did not intend to agree to the lease with paragraph “a” of the Maintenance Rider deleted.  Appellant’s conspicuous deletion of the clause plainly indicates that his intention was otherwise.  This unmistakable expression of Appellant’s contrary intention precludes any finding of mutual mistake that could form the basis for reformation.  See Kenneth F. Zarrilli, PSBCA No. 3148, 1994 PSBCA LEXIS 16 (June 30, 1994).

            The contracting officer had a duty to read the contract before signing, and his failure to do so does not relieve Respondent from being bound to the terms of the 1997 lease, a lease which does not include paragraph “a” of the Maintenance Rider.^[5]  See Richardson Camera Co. v. United States, 199 Ct. Cl. 657, 666, 467 F.2d 491, 496 (1972); Kenneth F. Zarrilli, PSBCA No. 3148, 1994 PSBCA LEXIS 16 (June 30, 1994); Marine Design Technologies, Inc., ASBCA No. 39391, 94-1 BCA ¶ 26,355 at 131,095; Fiesta Leasing and Sales, Inc., ASBCA No. 29311, 86-3 BCA ¶ 19,045 at 96,188.

            Under the 1997 lease, Appellant remained liable only for the roof repairs and for repair of water damage caused by failure of the roof.  Appellant eventually replaced the roof, but Respondent was entitled to perform and charge Appellant for the repairs necessitated by the roof leaks.  Those were for interior painting in the amount of $4,612.23 and for replacement of water-damaged ceiling tiles in the amount of $656.80 (Finding 18).^[6]  Respondent may recover the sum of those costs, $5,269.03.  Under the circumstances of these appeals, we allow Respondent administrative costs in the amount of $80, which is that portion of its administrative costs in the same proportion that its recoverable costs bear to the amount of the claim it asserted against Appellant.^[7]  Respondent may recover interest at the rate of 7.3% on the amount of its recovery from the date of the expenditure until it collected the amount allowed above.

            Except as to recovery of the amount of $5,349.03 plus interest allowed Respondent in PSBCA No. 4127, the appeals are sustained.  Appellant is entitled to the return of amounts withheld from rents in excess of the amount allowed Respondent plus Contract Disputes Act interest on such amounts from the date of his claims until repaid.

Norman D. Menegat
Administrative Judge
Board Member

I concur:
James A. Cohen
Administrative Judge
Chairman

I concur:
David I. Brochstein
Administrative Judge
Vice Chairman

[1] These appeals were originally docketed as appeals of Nationwide Postal Management.  However, the premises are owned by J. Leonard Spodek d/b/a Alabama Postal Holdings (Appeal File for PSBCA No. 4124, Tab (“AF”) 12; Appeal File for PSBCA No. 4127, Tab (“4127AF”) 31), and J. Leonard Spodek is the lessor identified in the lease at issue (4127AF 18).  Accordingly, the caption for these appeals is changed to J. Leonard Spodek d/b/a Alabama Postal Holdings.

[2] See Board Orders of September 9, 1999, July 13, 1999, and June 18, 1999.

[3] For Appellant’s failure to reply to Respondent’s discovery despite repeated orders of the Board directing him to do so, the factual propositions in Respondent’s Requests for Admissions were deemed admitted.  See Board’s Orders of July 10, 1998, June 12, 1998, March 5, 1998 (4124), February 26, 1998 (4127), December 24, 1997 (4124), December 23, 1997 (4127).  Respondent submitted the Requests into the record.

[4] Respondent argues that the air conditioning system was not in good working order at the inception of the 1997 lease, but the evidence in the record does not support that contention.  No mention was made of any problems with the air conditioning in the facility manager’s listing of maintenance items needing attention before he accepted responsibility (Finding 13), in the September/October 1996 survey of deferred maintenance at the post office (Finding 14) or in the contracting officer’s April 28, 1997 letter regarding deferred maintenance (Finding 15).

[5]   Respondent argues in PSBCA No. 4124 that Appellant remained responsible for the air conditioning system because he never provided the certification required by paragraph “a” of the Maintenance Rider that the HVAC system was in proper working condition.  However, this argument fails as we have found that paragraph “a” of the Maintenance Rider was not a part of the 1997 lease.

[6] In its correspondence, Respondent identified the exterior painting as necessary to remedy exterior staining due to roof leaks (Findings 6, 14).  However, the evidence does not establish a connection between roof leaks and exterior staining.

[7] This is reached by multiplying its administrative costs of $400 by 20% ($5,269.03 divided by $26,240.99).