Appeal of

J. LEONARD SPODEK
NATIONWIDE POSTAL MANAGEMENT

LEASE AGREEMENT
PSBCA No. 5231

APPEARANCE FOR APPELLANT:
J. Leonard Spodek
Nationwide Postal Management

APPEARANCE FOR RESPONDENT:
Carrie M. Branson, Esq.
St. Louis Law Office
United States Postal Service

OPINION OF THE BOARD

            Appellant, J. Leonard Spodek, has appealed from a contracting officer’s final decision denying his claim for the reimbursement of real estate taxes paid in connection with his lease of the Emerson, Nebraska Main Post Office to Respondent, United States Postal Service.  The appeal is being decided on the record, in accordance with 39 C.F.R. §955.12.  Only entitlement is at issue in this proceeding.

FINDINGS OF FACT

            1.  In May 2000, the parties entered into a lease for the Emerson, Nebraska Main Post Office for the term beginning October 1, 1998, and ending September 30, 2003 (Appeal File Tab (AF) 1a).

            2.  Included in the lease was a provision entitled, “Tax Rider, Reimbursement of Paid Taxes.”  Through that provision, Appellant agreed to pay all taxes on the premises, and Respondent agreed to

“(c) … reimburse Lessor for paid Real Property Taxes … only under the following terms:

1.  Lessor may submit not more than one request for reimbursement in any calendar year … and reimbursement will be made not more than one time annually by the Postal Service.

*     *     *

7.  Lessor must provide copies of the front and back of the complete tax bill issued by the taxing authority, along with satisfactory proof of payment.  Satisfactory proof of payment shall be (i) a receipt for payment shown on the face of the tax bill, (ii) a copy of the front and back of the canceled payment check …, or (iv) other documentation satisfactory to the Postal Service.

8.  Incomplete or improper requests for reimbursement will be returned to Lessor without payment.

9.  The Postal Service is not required to reimburse paid taxes unless the request for reimbursement is made within 18 months after the close of the tax year.  (AF 1a)(Emphasis in original)

            3.  By letter dated July 7, 2003, and addressed to Respondent’s Facilities Contract Technician, Appellant requested reimbursement of real estate taxes paid on the Emerson facility.  The letter requested reimbursement in the amount of $2,361.81, but did not specify which tax year or years the request covered.  Attachments to the letter related only to real property taxes paid to Dakota County for the 2002 tax year - in the amount of $1,100.24.  Appellant faxed the letter on July 7, 2003, but it was not received by Respondent.  Appellant again faxed the letter to Respondent on November 20, 2003.  (AF 3; Appellant’s Supplemental Evidence, item 1 (Affidavit of Isaac Richter); Respondent’s Supplemental Exhibit (Resp. Exh.) E (Declaration of Lillian Davilla)).

            4.  In response, by letter dated December 2, 2003, the contract technician advised Appellant that payment in the amount of $1,100.24 had been authorized, and that the payment should be received within 30 days (AF 4).

            5.  By letter dated December 10, 2003, Appellant acknowledged receipt of the December 2 letter, and asked Respondent’s contract technician why only $1,100.24 [of the $2,361.81 requested (Finding 3)] had been authorized for payment (AF 5).

            6.  The contract technician responded by letter dated December 16, 2003, and, in relevant part, stated that although she noticed that the total requested was $2,361.81, she only authorized reimbursement for $1,100.24 since that was the amount on the only tax statement and receipt that Appellant had provided (AF 6).

            7.  By letter dated March 17, 2004, Appellant provided a copy of a receipt showing that Appellant had paid the real estate taxes for the 2001 tax year by check on March 4, 2003.  The receipt indicated that the 2001 tax-year taxes had been due on January 1, 2002, that the first-half payment became delinquent on May 1, 2002, and that the second-half payment became delinquent on September 1, 2002.  The amount of the payment, excluding interest and other fees due to the delinquency, was $1,085.12, and Appellant requested reimbursement of that amount.  (Resp. Exh. A).

            8.  In response, by letter dated April 28, 2004, the contract technician, citing paragraph c.9 of the Tax Rider, declined to authorize the reimbursement of the 2001 taxes because the request had been made more than 18 months after the close of the tax year (AF 8).

            9.  By letter dated July 2, 2004, addressed to the contract technician, Appellant asked her to reconsider her denial of the reimbursement.  In the letter, Appellant stated that although the 2001 tax year ended on December 31, payments were allowed until October of 2002, and explained that Appellant normally waited until the end of that year to request reimbursement – when both halves of the taxes would have been paid – because Respondent only issued reimbursements once per year.  Appellant further stated that in this instance the payment was made late, not having been made until March 2003, and alleged that no receipts had been received for the payment in time to request reimbursement within the 18-month period allowed.  (Resp. Exh. B).

            10.  By letter dated August 12, 2004, the contract technician indicated that she had considered Appellant’s July 2, 2004 letter, but declined to reverse the position she had taken in her April 28, 2004 letter denying reimbursement (AF 11).

            11.  In a letter dated September 7, 2004, the contracting officer, referring to a conversation of that date with Appellant, also declined to authorize the reimbursement.  The contracting officer stated that the provision at issue was in all Postal Service leases which contained the tax reimbursement rider.  He indicated that if he were to make an exception for Appellant’s facility in Emerson, he would be expected to make similar exceptions for Appellant’s other facilities and for the facilities of other lessors.  He expressed concern that such a situation would become unmanageable and give rise to the concern that the contract provision was being interpreted differently by different contracting officers.  He also expressed the opinion that in the thousands of Postal Service leases, consistency and fairness were important considerations.  (AF 12).

            12.  In an email message dated October 13, 2004, Appellant asked the contracting officer to consider the request for reimbursement of the 2001 real estate taxes for Emerson to be a claim under the provisions of the contract (Resp. Exh. C).

            13.  The contracting officer denied the claim in a final decision dated October 25, 2004.  Appellant filed a timely appeal.  (AF 14, 15).

DECISION

            Appellant argues that the term “close of the tax year” used in the contract provision should be interpreted to mean the latest date on which taxes for a given year can be paid and still be considered timely.  In this case, Appellant contends that the close of the 2001 tax year would not be December 31, 2001, but would be September 1, 2002 (see Finding 7).  Under this interpretation, Appellant’s submittal dated July 7, 2003, whether received in July or November of 2003, would be within the 18-month period for submitting requests for reimbursement.

            Respondent argues that the language of the lease is clear and unambiguous with regard to Respondent’s obligation to reimburse Appellant for the real property taxes, and that Appellant failed to request reimbursement within 18 months after the close of the tax year as required by the lease provision.

            In response, Appellant argues that the term “close of the tax year” used in the lease was not unambiguous, as argued by Respondent, in that various taxing jurisdictions define their tax years differently and a tax year does not necessarily coincide with the calendar year for which it is labeled.  Appellant argues that the common denominator for all these jurisdictions is that there is a date after which the books are closed and taxes are delinquent, and that this date should be considered the close of the tax year.^[1]

            While Appellant is correct in arguing that various taxing jurisdictions define their tax years differently,^[2] that does not make the “close of the tax year” language used in the lease before us ambiguous.  The property which is the subject of the lease is located only in the state of Nebraska.  The Tax Rider (Finding 2) provides for the reimbursement of real property taxes, which taxes are imposed pursuant to the laws of Nebraska.  Therefore, we conclude that there is no ambiguity and that the parties intended that the laws of Nebraska govern the meaning of the questioned language. 

            Under Nebraska law, a tax year is completed once taxes on a property are levied against, and become a lien on, the property.  See Jaksha v. Nebraska et al., 241 Neb. 106, 128; 486 N.W.2d 858, 872-73 (Neb. 1992); Natural Gas Pipeline Co. v. State Bd. of Equalization & Assessment, 237 Neb. 357, 367; 466 N.W.2d 461, 468 (Neb. 1991).  Under § 77-203 of the Nebraska Revised Statutes, property taxes levied by any county “shall be due and payable on December 31 next following the date of levy ….  Commencing on that date taxes on real property shall be a first lien on the property taxed until paid or extinguished as provided by law….”  Thus, the taxes levied by Dakota County against Appellant’s property in 2001 became due and payable and a lien against the property on December 31, 2001.  That date, therefore, also represented the completion or close of the tax year.  For this reason, we do not accept Appellant’s argument that the tax year did not close until September 1, 2002, when the second half of the 2001 real estate taxes became delinquent.  Accordingly, inasmuch as Appellant’s first attempt to seek reimbursement for the 2001 taxes was no earlier than July 7, 2003 (Finding 3), Appellant failed to request reimbursement within 18 months after the close of the tax year.^[3]

            Appellant also argues that even if his request was untimely, the Board should consider that the purpose of the tax rider was to provide lessors with reimbursement of paid taxes, that the Postal Service entered into the lease intending to provide such reimbursement, and that providing reimbursement even for an untimely request presents the Postal Service with no additional hardship.  Respondent contends that the absence of hardship does not provide a basis for requiring Respondent to honor a late reimbursement request.

            The question raised by this argument is whether the contracting officer exercised his discretion reasonably when he decided to refuse the reimbursement request.  While lack of prejudice, or hardship, to Respondent may be a consideration in determining whether the contracting officer’s exercise of discretion was reasonable, it is not the sole determinant.  See, e.g., Eggers & Higgins v. United States, 185 Ct. Cl. 765, 785; Hotel Systems, PSBCA Nos. 3253-3258, 93-3 BCA ¶ 25,922.

            The contracting officer’s expressed reason for declining to make an exception and authorize the reimbursement in this instance was his desire to ensure “consistency and fairness” in the orderly administration of the many Postal Service leases that contain the Tax Reimbursement clause (Finding 11).  Under the facts of this appeal, we are not persuaded that the contracting officer acted unreasonably in refusing to reimburse Appellant.

            There has been no showing that Appellant’s failure to request reimbursement in a timely manner was due to any circumstances beyond his control.  Instead, either by design or neglect, Appellant failed to pay the 2001 taxes until March 4, 2003, more than six months after the second half payment had become delinquent and more than 14 months after the close of the 2001 tax year.  In his July 2, 2004 letter, Appellant alleged that because of the late tax payment he did not receive the necessary receipt until it was too late to make the reimbursement request on time (Finding 9).  Appellant has offered no evidence to support that allegation, other than the letter itself.  Further, Appellant has not shown that he could not have relied on alternate proof of payment, as allowed by the tax clause (Finding 2), and made his reimbursement request in a timely manner.  Given Respondent’s understandable desire for the orderly and consistent administration of the many leases containing this tax clause and the absence of any excusable grounds for Appellant’s late submission of his reimbursement request, Appellant has not shown that the contracting officer abused his discretion in denying reimbursement.

            Accordingly, the appeal is denied.

David I. Brochstein
Administrative Judge
Vice Chairman

I concur:

James A. Cohen
Administrative Judge
Chairman

I concur:

Norman D. Menegat
Administrative Judge
Board Member

[1]  Appellant filed a reply to Respondent’s reply brief.  However, such filing, objected to by Respondent, was not permitted by the Board’s scheduling Order and has not been considered.

[2]  E.g., Title 30-A, Maine Revised Statutes Annotated, §5222.18 (“’Tax Year’ means the period of time beginning on April 1^st and ending on the succeeding March 31^st”); Title 47, District of Columbia Code, §47-802(7) (“The term ‘tax year’ means the period beginning October 1^st each year and ending September 30^th each succeeding year”); N.J. Admin. Code tit. 18:15, § 1.1 (“’Tax year’ means the calendar year in which the local property tax is due and payable.”).

[3]  Accordingly, we need not determine whether Appellant’s first request was made on July 7, 2003, or November 20, 2003; or whether the first request, when made, actually constituted a request for reimbursement of the 2001 taxes (see Finding 3).