September 11, 2020

CARLOS VALDES AND DULCE VALDES v. UNITED STATES POSTAL SERVICE

PSBCA No. 6761

APPEARANCE FOR APPELLANT
Robert M. Hustead, Esq.

APPEARANCE FOR RESPONDENT
Margaret E. Harper, Esq.
United States Postal Service Law Department

OPINION OF THE BOARD

The Postal Service leased a building used as the Post Office in Chokoloskee, Florida, from Carlos and Dulce Valdes.  In September 2017, the building was severely damaged by Hurricane Irma.  Mr. and Mrs. Valdes did not promptly repair the building, so the Postal Service paid a contractor to complete the repairs.  The Postal Service claims entitlement to $89,352.39 for costs it incurred to fix the building and manage the repair project. 
At the parties’ joint request, this case is being decided on the written record.¹  Only entitlement is before us.
Having reviewed the parties’ submissions, we rule that the Postal Service is entitled to the damages it claims minus a few reductions for particular repairs.  The matter is remanded to the parties for further consideration of the damages in light of this decision.

FINDINGS OF FACT

Agreement to Lease

1. The Postal Service has been leasing the Chokoloskee Post Office building for almost 40 years.  For reasons explained below, to determine which party is responsible for the repairs made in 2017, we need to explain the history of that building and the origins of the current lease.    
2. In 1982, the Postal Service began discussing the possibility of leasing a building in Chokoloskee, Florida, to be used as a post office with Appellant’s predecessors in interest, Jaqueline Hargrove and the Estate of Laura B. Duncan together they are referred to as the “Hargrove” party.  The building, however, needed to be renovated before the Postal Service would take possession.  The Postal Service and Hargrove therefore executed an Agreement to Leasein July 1982.  They agreed that the Postal Service would begin paying $4,500 a month in rent for 10 years with additional option periods at increasing rates from the first day of the month after the Postal Service accepted the completed building and “any contemplated improvements, additions, repairs or remodeling.”  RAF 1
3. The Postal Service’s transmittal letter with the Agreement to Lease included the following underneath the signature: 

NOTE TO POSTMASTER:  Please be available when postal facility is appraised for assessment purposes to advise [the] taxing official [that the] facility will contain certain Government-owned fixtures not to be included as taxable real property nor should they be considered in the valuation levy or assessment of general real estate taxes.
The letter did not, however, identify the “Government-owned fixtures” RAF 44 at 547, and neither party has provided information explaining what fixtures, if any, were exempt from local taxes or should be considered trade fixtures. 

4. The preprinted Agreement to Lease form had two options for Paragraph 2.  The first option, Paragraph 2a, has a handwritten line through the paragraph and is hand stamped “DELETED” twice.  The deleted paragraph provides:  “The property to be leased is located at : Insert legal description including street address and number large blank for description and which property will contain areas and spaces, improvements and appurtenances furnished and provided in accordance with Postal Service Drawing(s) No(s). . . .”  RAF 1 at 1.
5. The second option, Paragraph 2b, was completed by the parties.  It provided:  “[t]he property to be leased is located at [legal description of the location in the subdivision using longitude and latitude] upon which is or will be located a one story concrete block building known as Main Post Office and which property contains areas and spaces, improvements and appurtenances as shown on attached Drawing(s) No(s). _____________ dated _____________, which said drawings are made part of this agreement by references thereto . . . .”RAF 1 at 1.
6. In addition, the Agreement to Lease provided that “[r]ental payments will begin upon completion of modifications and acceptance of work by the U.S. Postal Service.”  RAF 1 at 2, 9.
7. The Agreement to Lease also provided that improvements to the property would be contracted and paid for by the Postal Service RAF 1 at 2, ¶ 13.²
8. The Postal Service’s lease negotiator drafted a report in July 1982 summarizing negotiations.  He wrote: 

Mrs. Hargrove is very interested in renting her building to the Postal Service and has kept it vacant hoping we would rent it from her.  The original building was built in the mid 1960’s [sic].  We are proposing to rent an addition to the original structure which was built in late 1974.  Improvements will be handled by contracting to a third party because the owner does not have the finances to contract herself.
Valdes First AF Supp. at 13

9. In 1983 and 1984, the building was improved and modified pursuant to plans and specifications provided by the Postal Service.  The parties have referred to these improvements as the “buildout.”  The Florida Contracting Corporation completed the work as a subcontractor to the H.L. Koh Company.  Valdes Second AF Supp. at 2-57; RAF 50 at 554. 
10. The buildout was memorialized in three modifications to the Agreement to Lease RAF 2, 3, 4.
11. First Modification.  In May 1983, Hargrove and the Postal Service both signed a bilateral modification describing the renovation and buildout project.  The Postal Service’s cover letter to the modification provided:

Enclosed is an accepted copy of PS Form 7401-A, Modification of Agreement to Lease, which constitutes your Notice to Proceed.  The agreement provides that you [Jacqueline Hargrove] will renovate the existing facility in accordance with the plans and specifications within 210 days from acceptance of this agreement.
Mr. E. Phillip McCormick is the construction manager for this project.  Please notify Mr. McCormick prior to pouring the footings.
Payment will be made in accordance with Paragraph 4 [of the modification] in the amount of $70,254.
RAF 2 at 27 emphasis added; see also RAF 45 at 548

12. Paragraph 2 of this modification provided:  “The Agreement to Lease, and the drawings and/or specifications which are a part thereof, are modified as follows:  . . . .  Renovations in accordance with Specifications and Drawings 1 through 13 dated Sept. 82 which are made a part of this agreement by reference hereto.”  RAF 45 at 548; Valdes First AF Supp. at 2-12.  There were 125 pages of detailed plans and specifications attached to the modification. RAF 2 at 29-154.
13. Paragraph 3 of this modification required Hargrove to complete the work described in Paragraph 2 to the satisfaction of the Postal Service RAF 45 at 548. 
14. Paragraph 4 then provided for the payment of $70,254 by the Postal Service to Hargrove for the work described in Paragraph 2 RAF 45 at 548.
15.  Second and Third Modifications.  In December 1983 and February 1984, the parties signed two more modifications to the Agreement to Lease.  These modifications provided for the addition of a mail storage room and the removal and relocation of lockboxes. RAF 3, 4.
16. The record does not show a transfer of title from Hargrove to the Postal Service of any of these improvements or work associated with the buildout.
17. Air conditioning was not part of the original building or included in the original buildout De Rossi Decl. ¶¶ 9, 10.

1984 Lease and Later Hargrove Renewals

18. On February 9, 1984, Hargrove and the Postal Service entered into a lease the 1984 Lease expressly incorporating the Agreement to Lease and all its prior amendments and modifications RAF 6 at 164, 171.
19. The buildout project was completed in May 1984, and the Postal Service accepted the demised premises for beneficial use RAF 5.
20. The 1984 Lease was thereafter renewed three times with Hargrove:  in July 1992, June 1997, and November 2001 RAF 8, 9, 10.

Sale to the Valdeses and First Valdes Lease 2003 and 2004

21. Mr. and Mrs. Valdes bought the building housing the Chokoloskee Post Office in October 2003 RAF 11, 12.
22. In February and March 2004, Mr. and Mrs. Valdes and the prior owner completed documents assigning the Postal Service’s lease to Mr. and Mrs. Valdes.  Those documents confirmed the transfer of the title to Mr. and Mrs. Valdes and bound them to perform “each and every term, covenant, and condition” of the Postal Service’s lease.  RAF 13 at 184; RAF 14 at 185.
23. The Postal Service exercised a lease renewal option with Mr. and Mrs. Valdes in February 2007.  The legal description of the property stayed the same as it had since the 1982 Agreement to Lease and the 1984 Lease. RAF 15.

Second Valdes Lease 2013

24. In November 2013, Mr. and Mrs. Valdes entered into a second lease with the Postal Service.  The lease term ran from February 1, 2014, through January 31, 2016.  The legal description of the property remained unchanged.  Compare RAF 1 at 1 with RAF 16 at 203.
25. Under the Second Valdes Lease, the Postal Service agreed to install and maintain a central air conditioning system in the Post Office RAF 16 at 189, ¶ 5.  The Second Valdes Lease also provided that the Valdeses were not responsible for furnishing air conditioning equipment under the lease RAF 16 at 197, ¶ 2. 

Third Valdes Lease 2015

26. In January 2015, the parties signed a third lease, with a term running from February 1, 2016, through January 31, 2021.  The legal description of the Chokoloskee Post Office read the same as the prior lease.  The third Valdes lease is “the lease” for purposes of this litigation. RAF 19.
27. The lease included a Maintenance Rider describing the parties’ maintenance obligations.  This clause provided:

1.       The Postal Service shall maintain the demised premises including repair and replacement of items, if necessary, except for those items specifically made the responsibility of the Landlord in Paragraph 3 below.  The responsibility of the Postal Service as stated herein will be fulfilled at such time and in such manner as the Postal Service considers necessary to keep the demised premises in proper condition.

2.       The term “demised premises” as used in this rider includes the premises described in the Lease, the improvements and appurtenances to such premises and all equipment and fixtures furnished, or to be furnished, by the Landlord under the Lease.

3.       During the continuance of the Lease, the Landlord is responsible for maintenance of, repairs to, and, if necessary, replacement of:

a.        All common or joint use interior and exterior areas and common or joint use equipment and systems that may be included as part of this lease.

b.        All structural elements, including but not limited to:  the foundation; column supports; bearing walls; floors, not including floor covering.

c.        All parts of the roof system including, but not limited to:  the roof covering; flashing and insulation; roof beams, joists, and deck; soffit and fascia; and gutters and downspouts.  The Landlord will be responsible for regular cleaning of gutters and down spouts connected to the outer edge i.e., the eaves area of the roof; Landlord will be responsible for regular cleaning of any other gutters, downspouts, trough, scuppers, roof drains, etc. . . .

f.        Damage from fire or other casualties, unless such casualties were caused by the negligence of employees or agents of the Postal Service.

4.       If the demised premises or any portion thereof are damaged or destroyed by fire or other casualty, Acts of God, or are otherwise determined by the Postal Service to be unfit for use and occupancy, or whenever there is a need for maintenance, repair, or replacement which is the Landlord’s obligation under this Maintenance Rider, the Postal Service will require the Landlord to rebuild or repair the premises as necessary to restore them to tenantable condition to the satisfaction of the Postal Service.  The Postal Service will, except in emergencies, provide the Landlord with written notice stating a reasonable time period for completion of all necessary repairs. The Postal Service, acting through the Contracting Officer, may proportionately abate the rent for any period the premises, or any part thereof, are determined by the Postal Service to have been rendered untenantable, or unfit for use and occupancy, by reason of such condition.
If the Landlord . . . fails to prosecute the work with such diligence as will ensure its completion within the time specified in the notice (or any extension thereof as may be granted at the sole discretion of the Postal Service), or fails to complete the work within said time, the Postal Service shall have the right to perform the work by contract or otherwise, and withhold the cost plus any administrative cost and/or interest, from rental payments due or to become due under this Lease.
RAF 19 at 208-09, emphasis added
Hurricane Irma Hits the Post Office

28. On September 10, 2017, Hurricane Irma struck Florida and severely damaged the Chokoloskee Post Office RAF 21; Provost Decl. ¶ 2; Gomez Decl. ¶ 2. ³
29. By letter dated September 14, 2017, the Postal Service informed Mr. and Mrs. Valdes that there was “flood damage, no electricity and roof damage” caused by Hurricane Irma and that rent was being stopped effective September 9, 2017.⁴  Mr. and Mrs. Valdes received the letter no later than September 25, 2017. RAF 21; Provost Decl. ¶ 2.
30. Notwithstanding this letter, the Postal Service continued to use the location for limited Postal Service operations.  The Postal Service parked a mobile post office in the parking lot and used the demised premises for receiving and distributing mail.  It also had a temporary storage trailer on site to store the Postal Service’s personal property such as tables and office supplies. RAF 27 at 286-302; RAF 28 at 303-09.
31. On September 25, 2017, the Postal Service sent another letter to Mr. and Mrs. Valdes titled “LANDLORD MAINTENANCE – NOTIFICATION OF UNTENANTABLE CONDITION AND REQUIRED MAINTENANCE”   Provost Decl. ¶ 4; RAF 25 emphasis in original.  The letter was sent by both Certified Mail and First Class Mail RAF 23.⁵ 
32. In this letter, the Postal Service explained that the repair work should be completed within 45 to 60 days and that if Mr. and Mrs. Valdes could not complete the work in that time they should contact the Postal Service’s Lease Management Specialist RAF 23.
33. On October 10, 2017, the Postal Service sent a third letter to Mr. and Mrs. Valdes titled Notification of Emergency Repair.  The letter has the subject:  LESSOR MAINTENANCE – NOTIFICATION OF EMERGENCY REPAIR upper case and bold emphasis in original letter.  The letter explained that emergency repairs were needed, that the Postal Service intended to undertake the repairs, and that Mr. and Mrs. Valdes were liable for the repair cost, which would be recouped from rent.  The letter also asked Mr. and Mrs. Valdes to contact the Postal Service.  Mr. and Mrs. Valdes received this letter sometime between October 10 and October 17, 2017.⁶  Provost Decl. ¶ 5 and Attachment A to Declaration; RAF 26.
34. Mr. and Mrs. Valdes owned and personally operated a restaurant immediately adjacent to the Post Office.  The restaurant and Post Office are part of a single structure and share a common wall.  A photograph taken by Mr. and Mrs. Valdes shortly after Hurricane Irma hit shows exterior damage to the building and a telephone pole leaning dangerously over the Post Office side of the building.  Provost Decl. ¶ 6; Valdes’ Response to USPS’ First Request for Production, Item 2; Appellant’s Response to Second Set of Interrogatories No. 4.
35. On October 17, 2017, Mrs. Valdes called the Postal Service’s Lease Management Specialist and left a voicemail complaining that the Postal Service had placed construction trash in front of their restaurant Provost Decl. ¶ 6; RAF 20 at 213; RAF 27 at 289-90; RAF 28 at 303.
36. The Postal Service’s Lease Management Specialist called Mrs. Valdes back and explained that the Postal Service was taking over the major repairs to the Post Office.  He also confirmed that Mrs. Valdes had received the Postal Service’s September 14 letter.  Mrs. Valdes explained that she and her husband were repairing their restaurant and home, both of which had been damaged by Hurricane Irma.  Provost Decl. ¶ 6.

Damage to Post Office

37. Shortly after Hurricane Irma hit, the contracting officer sent a Postal Service contractor, Weston Solutions, Inc. Weston, to survey the damage and write a report.  Weston determined that the Post Office had been severely damaged by flooding and high winds.  Russell Decl. ¶ 2; RAF 21, 22.
38. Weston’s September 17, 2017 report provided 20 numbered findings.  Eight of those findings are relevant to this dispute:

13. The facility was impacted throughout by flooding and water intrusion.  Standing water and mud/debris was present throughout the building.

14. Flooding affected all contents below the high water mark throughout the building, including interior walls, furniture, retail products, and the safe.  Porous products not directly impacted by the flooding may be impacted by the high humidity and temperatures in the building.
15. A high-water mark is present approximately 20 inches above the floor.
16. Visible mold growth was observed on walls and doors.
17. There is no electrical power at the facility.
18. Any electronic equipment such as computers, power strips, and cables below the high water mark are likely damaged.
19. City water is available but a “Boil Your Water” notice is in effect.  A septic system is present, but the operational status is unknown.
20. Relative humidity inside the building was very high due to the loss of power and climate control, and the presence of standing water.
RAF 22, citations to photographs omitted.

39. Weston also made 11 recommendations to return the building to a tenantable condition.  Generally, these recommendations included turning off the electricity, removing the utility pole, dewatering the building, and removing and replacing the effected portions of the building. RAF 22.  Weston estimated that it would cost $75,297.60 to return the Post Office to tenantable condition RAF 22, Attachment D, Rough Order of Magnitude Cost Estimate.
40. The Postal Service sent a copy of the Weston report to Mr. and Mrs. Valdes with the September 25, 2017 LANDLORD MAINTENANCE – NOTIFICATION OF UNTENANTABLE CONDITION AND REQUIRED MAINTENANCE letter RAF 23; Provost Decl. ¶ 4.
41. The Postal Service also assigned an in-house architect to review the report.  She toured the Post Office in mid-October 2017 to confirm Weston’s damage assessment.  She confirmed that flooding reached 21 inches above the floor and that there was visible mold growth a month after Hurricane Irma hit.  She reviewed Weston’s report and recommended that the Postal Service proceed with the work because Mr. and Mrs. Valdes were not taking steps to repair the Post Office. Russell Decl. ¶ 5; De Rossi Decl. 2, 7.
42. The following damaged areas were part of the original buildout:

a. service lobby, damage to which is shown in RAF 27 at 295-296;
b. box lobby and retail area, damage to which is shown in RAF 27 at 297-301;
c. workroom, damage to which is shown in RAF 27 at 291-295, 297-299;
d. restroom, damage to which is shown in RAF 27 at 294; and
e. open loading platform and exterior storage see RAF 27 at 289-290.
Valdes First Supp. AF at 2-11; De Rossi Decl. ¶ 9 and Attachment A; RAF 2, 5; RAF 46 at 549; RAF 48 at 551.

43. The Postal Service’s architect confirmed that repairs were needed in the following areas, all of which were part of the initial buildout.  These repairs included:

a. Exterior walls consisted of concrete masonry walls finished with drywall, for a total area of 1,107 sq.ft. See Floor Plan, Elevations, Sections and Details & Schedules on Sheet 2, which is at Valdes' First Supplement to Appeal File.

b. Interior walls consisted of 2x4 wood framing with type "X" drywall and R-11 insulation at workroom, toilet, service lobby and box lobby, for a total area of 491 sq.ft. See Floor Plan, Section Band Finish Schedule on Sheet 2, at Valdes' First Supplement to Appeal File, and Sections 06101, 07901, 09250, 09900, RAF 2 at 30, 75-78, 91-94, 110-113, 116-122.
c. Acoustical ceiling over box lobby, service lobby, work room and restroom, for a total area of 1,181 sq.ft., with ceiling grid installed using wall tracks anchored to exterior perimeter walls and hanger wires from roof structure. See Finish Schedule on Sheet 2, at Valdes' First Supplement to Appeal File.
d. VCT flooring and vinyl baseboards at workroom and restroom, for a total area of 706 sq.ft., See Finish Schedule on Sheet 2 Valdes' First Supplement to Appeal File and Section 09650 of specifications RAF 2 at 114-115.
e. PO boxes, See Floor Plan on Sheet 2, and Details on Sheets 8-10 at
Valdes' First Supplement to Appeal File.
f. Service counter, See Floor Plan on Sheet 2, and Details on Sheets 5 and 7, Valdes' First Supplement to Appeal File.
g. 4 interior doors 1 aluminum/glass, 3 wood and 3 exterior doors 1 aluminum/glass, 2 hollow metal, See Floor Plan and Door Schedule on Sheet 2, Details on Sheet 11, Valdes' First Supplement to Appeal File, and Division 8 of Specifications, See RAF 2 at 95-109.
h. Signage, See Valdes' First Supplement to Appeal File, Details on Sheet 4.
Valdes First AF Supp. at 2-11; De Rossi Decl. ¶ 10 and Attachment A.
Repair of the Post Office

44. Other than shoveling some sediment from the parking lot and walkways, Mr. and Mrs. Valdes did no cleanup or repair work at the Post Office in the aftermath of Hurricane Irma Appellant’s Response to Interrogatories No. 7.
45. On October 4 and 5, 2017, the Postal Service began discussions with Epic Construction Inc. Epic⁷ about the possibility of it repairing the Chokoloskee Post Office and the possible scope of work.  RAF 24 at 271-72; RAF 25; De Rossi Decl.  2-3. The Postal Service had not yet determined whether it would complete the repairs itself or wait for Mr. and Mrs. Valdes to complete the repairs De Rossi Decl. ¶ 4.
46. On October 4, 2017, the Postal Service and Epic tentatively identified the scope of work for the repairs which included:

a. Repairing the VCT flooring after checking for asbestos;
b. Removing and replacing the drywall and repainting the walls;
c. Demolishing the damaged parts of the building;
d. Removing and replacing the individual post office boxes as needed;
e. Having an electrician check the wiring once the building is dewatered and replacing any electrical work as needed;
f. Completing any additional exterior cleanup which is needed;
g. Demolishing and replacing the service counter and writing desk; and
h. Removing and replacing the ceiling tiles as needed.
RAF 25 at 274, this list is a paraphrase of the email from Epic to Postal Service. ⁸

47. On October 10, 2017, the Postal Service determined that it would have Epic proceed with the repairs because Mr. and Mrs. Valdes had still not responded to the Postal Service’s September 14 and September 25, 2017 letters De Rossi Decl.  4, 5; Russell Decl. ¶ 4; RAF 24 at 269; RAF 41.  On the same day, the Postal Service also sent Mr. and Mrs. Valdes a letter explaining that it was undertaking the repairs and that the costs would be recouped from the rent RAF 26.
48. On October 11, 2017, the Postal Service issued a notice to proceed to Epic.  The notice included the scope of repairs listed in Epic’s October 4, 2017 email and a not to exceed price of $100,000. RAF 24 at 267-68; RAF 25.  The contract was ultimately finalized in the amount of $87,702.39 on April 5, 2018 RAF 37, 38.
49. On October 13, 2017, the Postal Service’s architect met with Epic’s program manager and confirmed the scope of work.  By this time, the Post Office had remained unoccupied and no repairs had been made by Mr. and Mrs. Valdes to prevent further deterioration of the Post Office from standing water and humidity.  The interior walls were still damp and moldy.  The ceiling was bowed and had mold.  De Rossi Decl. ¶ 6; RAF 25 at 275; RAF 27 at 301-02.
50. Epic completed the work and returned the Post Office to tenantable condition on November 20, 2017 RAF 27-34; Russell Decl. ¶ 6.
51. The Scope of Work in the final contract between the Postal Service and Epic included the following specific work items:

a. Perform initial survey and provide pictures and summary of findings.
b. Perform demo of water damaged drywall and other finishes and furnishings.
c. Provide fans and air scrubbers for “drying out” of facility. Sanitize all surfaces with antimicrobial solution.
d. Replace existing flex duct for all contaminated ductwork. In workroom area and restroom install RFP paneling to 4ft above floor finish.
e. Replace all drywall, finish and paint.
f. Check/repair all power outlets impacted/submerged by storm water.
g. Demo and replace all VCT flooring and vinyl base (includes waxing).
h. Provide and install new USPS specified service counter and writing desks as per plans.
i. Replace damaged window pane.
j. Demo and install new ceiling tiles throughout.
k. Install new Cat 6 network jack triplex from router/hub to service counter.
l. Disassemble all PO boxes, sanitize and reinstall.
m. Provide exterior cleanup of debris in parking lot front and side.

RAF 38 at 459.⁹

52. The Postal Service’s architect responsible for monitoring Epic’s work and confirming that it met the Postal Service’s standards spent 30 hours at $55 per hour for a total administrative cost of $1,650 RAF 40, 41.

The Postal Service’s Claim

53. By contracting officer’s final decision dated October 2, 2018, the Postal Service claimed $87,702.39 for work performed by Epic and $1,650 for the architect’s time.  The total claimed cost was $89,352.39.  The contracting officer claimed that Mr. and Mrs. Valdes were liable for the damage caused by Hurricane Irma and that they did not complete the repairs. RAF 41. 
54. Mr. and Mrs. Valdes filed a timely appeal of the contracting officer’s final decision with this Board Notice of Appeal dated January 3, 2019.

DECISION

The parties agree that the Chokoloskee Post Office was damaged in 2017 by Hurricane Irma, a qualifying casualty or Act of God under Paragraph 4 of the Maintenance Rider.  Furthermore, the parties do not dispute that extensive repairs needed to be done in Hurricane Irma’s aftermath, or that except for minor items described below, most of the repair work involved the improvements built in 1983 as part of the buildout.
The parties disagree, however, over responsibility for repairs to the buildout.  The Postal Service contends that the buildout is part of the “demised premises,” and thus Mr. and Mrs. Valdes, as the landlords, are responsible for the repairs under Paragraph 4 of the Maintenance Rider.  For their part, Mr. and Mrs. Valdes, assert that the buildout was not part of the demised premises.  Instead, they argue that the buildout became the Postal Service’s property in 1983, and has been its property ever since.  Because the buildout is not, and never has been, part of the demised premises, Mr. and Mrs. Valdes ask the Board to relieve them of responsibility for repairing what they consider to be Postal Service property. 
To decide whether the buildout was part of the demised premises, we must go back to the facts and circumstances of 1982–83, analyze the language of the Agreement to Lease and its amendments, and then, finally, examine the language of the Valdes’s leases.  In doing so, we will treat the lease as a contract.  See, e.g., Gene Peters, PSBCA No. 999, 83-1 BCA ¶ 16,183, citing Arlington Alliance Ltd. v. United States, 685 F.2d 1353, 1359 Ct. Cl. 1982.  Contract interpretation begins with the plain language of the written agreement.  McHugh v. DLT Solutions, Inc., 618 F.3d 1375, 1380 Fed. Cir. 2010.  When the contractual language is unambiguous on its face, our inquiry ends and the plain language of the Agreement controls.  Coast Fed. Bank, FSB v. United States, 323 F.3d 1035, 1040-41 Fed. Cir. 2003 en banc; see also Valley Realty Co., PSBCA No. 5344, 07-1 BCA ¶ 33,566. 
The Agreement to Lease described the premises as including the completed building and any contemplated improvements, additions, repairs, or remodeling.  The Agreement to Lease was then modified three times to specifically address contemplated improvements, additions, repairs and remodeling, which became the 1983–84 buildout.  In particular, the 1984 Lease, entered into by the parties after the buildout was complete, described the leased property as including any amendments of [sic] modifications thereto.
Mr. and Mrs. Valdes agreed to include the buildout in the legal description of the property when, in 2004, they took over the 1984 Lease.  The First Valdes Lease confirms transfer of title to said premises, and assumes, approves, and adopts the [1984] Lease effective 02/09/1984 and [the Landlord] agrees to be bound by, and undertakes to perform, each and every term, covenant, and condition contained in the Lease.  The Second Valdes Lease in 2013 included the same legal description of the property as the First Valdes Lease.  The parties did not exclude the buildout.  However, the parties specifically excluded the air conditioner, which had been added by the Postal Service.  In 2015, the parties entered into the Third Valdes Lease, which again included the same legal description of the demised premises as the prior lease. 
Based on this history and the clear language of the referenced documents, we hold that the demised premisescovered by the Lease included the buildout.  In other words, the parties agreed that: 1 the Agreement to Lease contemplated the forthcoming buildout work; 2 the 1984 Lease included the buildout as part of the demised premises; and 3 the buildout continued to be included in the legal description of the demised premises in the Valdes leases, including the lease in effect when Hurricane Irma damaged the Post Office in 2017.
We next turn to the language of the Lease’s Maintenance Rider.  See Valley Realty Co., 07-1 BCA ¶ 33,566.  The Postal Service cites Paragraph 4 of the Maintenance Rider which provides: 
If the demised premises or any portion thereof are damaged or destroyed by fire or other casualty, Acts of God, of a public enemy, riot or insurrection, vandalism, or are otherwise determined by the Postal Service to be unfit for use and occupancy, or whenever there is a need for maintenance, repair, or replacement which is the Landlord’s obligation under this Maintenance Rider, the Postal Service will require the Landlord to rebuild or repair the premises as necessary to restore them to tenantable condition to the satisfaction of the Postal Service.
As noted above, the parties do not dispute that Hurricane Irma was a casualty or Act of God.  Case law supports that position.  See Lenry, Inc. v. United States, 297 F.2d 550, 551 Ct. Cl. 1962 a hurricane is an Act of God in its legal sense; Trataros Constr., Inc. v. Gen. Serv. Admin., GSBCA No. 15081, 01-1 BCA ¶ 31,310 A hurricane is an Act of God.¹⁰  And the parties do not dispute that the building was unfit for use because of flooding and mold.  Therefore, under the paragraph 4 of the Maintenance Rider, Mr. and Mrs. Valdes were required to rebuild or repair the premises.
When Mr. and Mrs. Valdes failed to do so, the Postal Service notified them, as required by the Maintenance Rider, about their obligation to make the required repairs.  The Postal Service also provided a copy of the Weston report.  Mr. and Mrs. Valdes, however, failed to respond.
The plain language of the Maintenance Rider provides that “[i]f the Landlord fails to prosecute the work the Postal Service shall have the right to perform the work by contract or otherwise, and withhold the cost plus any administrative cost and/or interest, from rental payments due or to become due under this Lease.  Because Mr. and Mrs. Valdes failed to perform any repair work, the Postal Service hired a contractor to complete the repairs.  The Postal Service then withheld rent and claimed the amount of the repairs plus administrative costs.
The Postal Service’s actions were in compliance with the plain language of the lease.  Thus, the Postal Service has met its initial burden of proving entitlement to the claimed costs.
Mr. and Mrs. Valdes’s Arguments
In response, Mr. and Mrs. Valdes argue that the Postal Service is not entitled to the claimed costs because: 1 the work performed by Epic was the Postal Service’s responsibility under the lease’s maintenance rider, 2 the buildout was a trade fixture, and thus Postal Service property not covered by the maintenance clause, 3 certain specific items of claimed costs are not recoverable, 4 the lease created an illegal insurance contract, thereby negating the Postal Service’s claim, and 5 the claimed costs are too high.  We address each of these arguments in turn.

1. Was the work done by the Postal Service in 2017 repairs or maintenance?

Mr. and Mrs. Valdes argue that the work done by the Postal Service is maintenance required by Paragraph 1 of the Lease’s Maintenance Rider, which provides that “[t]he Postal Service shall maintain the demised premises including repair and replacement of items, if necessary, except those items made the responsibility of the Landlord in Paragraph 3 below . In other words, according to Mr. and Mrs. Valdes, the Postal Service is liable for the work performed after Hurricane Irma because it was maintenance work under Paragraph 1, not repairs under Paragraphs 3 or 4.
However, Paragraph 4 provides that the Landlord is liable for casualty damage or Acts of God, which as we discussed above, includes hurricanes.  Mr. and Mrs. Valdes’s argument only works if Paragraph 4 did not exist.  But it does exist.  When interpreting the contract, the document must be considered as a whole and interpreted so as to harmonize and give reasonable meaning to all of its parts. An interpretation that gives meaning to all parts of the contract is to be preferred over one that leaves a portion of the contract useless, inexplicable, void, or superfluous.  NVT Tech., Inc. v. United States, 370 F.3d 1153, 1159 Fed. Cir. 2004 internal citations omitted; see also Cook Mail Carriers, Inc. v. United States Postal Service, PSBCA Nos. 6583, 6584, 17-1 BCA ¶ 36,692.  We will not ignore the fourth paragraph of the Maintenance Rider clause. Thus, this argument is not persuasive.

2. Is the 1983 Buildout A Trade Fixture, and therefore Postal Service property?

Mr. and Mrs. Valdes argue that the buildout work is not part of the demised premises because the Postal Service took ownership and responsibility for that work by its actions in 1983–84.  Specifically, Mr. and Mrs. Valdes rely on the fact that the Postal Service 1 wrote the specifications for the buildout work, 2 contracted directly for that work, 3 paid the construction contractor directly, 4 monitored the construction of the buildout work, and 5 had approval authority over the construction.
We do not believe that these factors have any relevance to our decision about the ownership of, and ultimate responsibility for, repairing the buildout work.  Even if all the Valdes’s allegations set out in the preceding paragraph are true, they do not overcome the plain language in the lease documents describing the demised premises as including the buildout.  Simply put, those factors are not sufficient to overcome the language in the lease documents and did not transfer ownership of the buildout to the Postal Service.
And this same analysis is sufficient to defeat the Valdes’s argument that the buildout was a trade fixture.  Regardless of whether the buildout could possibly be considered trade fixtures, the plain language of the lease document again overrides this argument.  There is simply no evidence to support a conclusion that buildout should be treated as trade fixtures rather than as part of the demised premises.

3. Is the Postal Service entitled to specific costs?

Mr. and Mrs. Valdes argue that the Postal Service is not entitled to each of the twenty repair costs it incurred after Hurricane Irma.  They provide a line-by-line response to the claim, arguing that the Postal Service is not entitled to recover the full amounts claimed.  We address each item below and conclude that the Postal Service is entitled to collect for the majority of the items.
Allowed Costs
Mr. and Mrs. Valdes argue that they are not responsible for certain work that was done to plan for the repairs and then actually clean and prepare the building site for the repairs.  They cite the costs of the (a) initial Weston survey and preconstruction meeting, (b) removal of building contents, (c) exterior cleanup, (d) cleaning mud and debris, (e) providing air scrubbers and sanitizers, (f) demolition of drywall, (g) demolition and repair of the VCT flooring, (h) demolition and repair of the ceiling, (i) checking all submerged power outlets and lighting, (j) using a dumpster for debris, (k) miscellaneous building materials such as caulk and fasteners (excluding lightbulbs),  (l) project management and administration, (m) project coordination, and (n) overhead, profit, bonding and insurance. 
Having reviewed each of these costs and the arguments raised by Mr. and Mrs. Valdes, we conclude that these costs are allowable because they were necessary and reasonable for the repair work.  More specifically, a survey of the damage and plan to fix the damage were needed to start repairing the Post Office.  Debris needed to be cleared from the inside and outside of the Post Office.  Demolition of the damaged floor, walls, and ceiling was needed before a new floor, walls, and ceiling could be installed.  A dumpster was needed to hold the debris.  After the building was flooded, it was reasonable to have an electrician check the electrical outlets and lighting.  During the repairs, miscellaneous building materials such as fasteners and caulk were needed.  All these costs were incurred to make the building tenantable and are thus allowed.  To the extent that Mr. and Mrs. Valdes argue that the Postal Service is not entitled to collect these costs because it owned the improvements, we have already determined that the improvements were part of the demised premises owned by Mr. and Mrs. Valdes, and thus this argument is not persuasive.
Mr. and Mrs. Valdes make several additional arguments related to these items which we now address.  Mr. and Mrs. Valdes also argue that the ceiling was not damaged because it was not included in the September 17, 2017 Weston survey addressing the rough order of magnitude of repairs.  They argue that none of the photographs included in the appeal file by the Postal Service show damage to either the ceiling or roof.  We disagree for two reasons.  First, the photographs in the record show that the ceiling was damaged.  Second, the Postal Service’s architect explained that because the building was not promptly dewatered, mold began to spread in the hot, humid conditions, making ceiling replacement necessary because of moisture damage.  We are persuaded by the photographs and the credible architect’s testimony that the repairs were necessary.
Next Mr. and Mrs. Valdes argue that the Postal Service is not entitled to project management and administration, project coordination, overhead, profit, bonding, and insurance expenses.  Mr. and Mrs. Valdes read the Maintenance Rider to allow these costs only for non-emergency repairs and only if the Postal Service provided notice of the need to repair and the landlord failed to make the repairs.  Mr. and Mrs. Valdes believe that the Postal Service is not, however, entitled to these expenses if it performed emergency repairs without giving notice to the landlord. 
By letter dated September 14, 2017, the Postal Service advised Mr. and Mrs. Valdes that there was “flood damage, no electricity and roof damage.”  Mr. and Mrs. Valdes received the letter no later than September 25, 2017. 
Next, the Postal Service sent two copies of a second letter, dated September 25, 2017, to Mr. and Mrs. Valdes at the address they provided in the lease for contacting them.  One copy was sent by Certified Mail and one copy was sent by First Class Mail.  In bold and upper case at the top of the letter are the words: LANDLORD MAINTENANCE – NOTIFICATION OF UNTENANTABLE CONDITION AND REQUIRED MAINTENANCE.  Attached to the letter was a copy of the damage survey done by Weston. 
In their brief, Mr. and Mrs. Valdes argue, without factual support, that they never received the letter.  They did not file affidavits or declarations saying that they never received the September 25, 2017 letter.  On the other hand, a Postal Service employee filed a declaration stating that he mailed the letter.  We find the affidavit credible, which leads us to presume that the Valdeses received the letter.  The rule is well settled that if a letter properly directed is proved to have been either put into the post office or delivered to the postman, it is presumed, from the known course of business in the post-office department, that it reached its destination at the regular time, and was received by the person to whom it was addressed.  Rios v. Nicholson, 490 F.3d 928, 930-31 Fed. Cir. 2007 quoting Rosenthal v. Walker, 111 U.S. 185, 193 (1884).  This presumption is further supported by the fact that Mr. and Mrs. Valdes received letters from the Postal Service dated September 14 and October 10, 2017, sent to the same address.
The Postal Service sent a third letter to Mr. and Mrs. Valdes on October 10, 2017, with the subject LESSOR MAINTENANCE – NOTIFICATION OF EMERGENCY REPAIR.  That letter again notified the Valdeses of their responsibilities for the repairs under the lease.  Mr. and Mrs. Valdes received this letter sometime between October 10 and 17, 2017 the latter date being when the Postal Service received the Return Receipt card confirming delivery.  Mr. and Mrs. Valdes did not respond to this letter. 
Finally, Mr. and Mrs. Valdes had actual notice of the Postal Service’s position about the repair work.  In a discovery response, they admitted that they knew of the damage caused by Hurricane Irma.  They also admitted that during this time period they were repairing their restaurant immediately adjacent to the Post Office.  Mrs. Valdes also left a voicemail with the Postal Service’s Lease Management Specialist complaining about construction trash being placed in front of the restaurant.  In a subsequent call with the Lease Management Specialist, Mrs. Valdes confirmed that she received the September 10, 2017 letter.
Taken together, these facts lead to the conclusion that the Valdeses knew about the damage to the Post Office almost immediately after Hurricane Irma hit.  They also knew that the Postal Service was asserting that they were responsible to repair the damage.  And they also knew that, because of their failure to promptly take action to make the repairs, the Postal Service intended to proceed with the repairs through the services of a Postal Service contractor and charge those repairs to them.  We conclude that Mr. and Mrs. Valdes received proper notice under the terms of the lease.  Because the Valdeses received proper notice under the lease, their arguments about costs for management, administration, project coordination, overhead, profit, bonds and insurance must fail.  The Postal Service therefore properly included these costs in its claim.¹¹
Unallowed Costs
The Postal Service included costs in its claim which are unallowable.
First, the Postal Service claimed reimbursement for building temporary service counters after Hurricane Irma.  The temporary counters were not part of the initial buildout, and the Postal Service has not shown that Mr. and Mrs. Valdes are liable for the temporary structure.  We agree with Mr. and Mrs. Valdes that the Postal Service is not entitled to recover for the temporary counters.
Second, the Postal Service claimed costs for installing category 6 data jacks for telecommunications and data.  The category 6 data jacks were not part of the buildout, and the Postal Service concedes that it is not entitled to this repair.  Based on this information, the Postal Service is not entitled to collect for this claimed cost.
Third, the Postal Service claimed costs for checking the operation of the air conditioning and replacing flexible ductwork.  The air conditioning and ductwork were not part of the buildout.  Additionally, in the Second Valdes Lease, the parties agreed that the Landlord is not responsible for furnishing air conditioning equipment.  In its Reply Brief, the Postal Service concedes that it is not entitled to recover for this particular cost.  Based on the parties’ agreement in the Second Valdes Lease, we agree that Mr. and Mrs. Valdes are not liable for air conditioning and flexible ductwork costs.
Fourth, the Postal Service claimed costs for waxing the floors.  The Postal Service relies on a conclusory statement by its architect that waxing the floors was a necessary repair activity.  We are not persuaded.  The Postal Service has not shown that waxing the floors is a necessary repair instead of a maintenance item; therefore, we conclude that Mr. and Mrs. Valdes are not liable for the costs associated with waxing the floors.
Finally, the Postal Service is not entitled to the cost of light bulbs, which are a routine maintenance item.
Withholding Rent
The Postal Service stopped paying rent effective September 9, 2017, and restarted rent on November 14, 2017.  Photographs in the record show that the Postal Service parked a mobile post office vehicle on the property during this period and conducted postal operations in the parking lot.  The Postal Service also stored its personal property in a storage trailer during repairs to the Post Office on the demised premises.  We are not persuaded that the Postal Service was entitled to stop paying rent while it was still using the premises for postal operations and property storage.
We are persuaded, however, that the Postal Service was not required to pay the full amount of the rent when it was unable to use the building itself.  On remand, the parties should consider the value of the building in comparison to the land in trying to reach an agreement on the amount of rent that should have been paid while the repairs were being made.

4. Is the claim based on an illegal insurance contract?

Mr. and Mrs. Valdes argue that the Postal Service’s position would create an illegal insurance contract.  They assert that the Postal Service’s decision to collect for the hurricane damage amounts to an effort to collect under an insurance contract, but that under applicable Florida law neither party was legally authorized to enter into an insurance contract as part of the lease agreement.  But as we have already decided, the Postal Service did not own the buildout.  Rather, the buildout was owned by the Valdeses, and it was part of the demised premises.  There is therefore no reason to treat the Postal Service’s claim as an insurance claim.  The Postal Service is merely seeking to enforce the terms of the lease.  Mr. and Mrs. Valdes’s reliance on Florida insurance law is therefore misplaced.

5. Are the repair costs too high and what is the proper value of the claim?

Finally, Mr. and Mrs. Valdes allege that the repair costs are too high because the Postal Service awarded an emergency, no-bid contract i.e., a sole source contract.  Because the parties agreed that we would only address entitlement, we defer ruling on this argument.¹²  We also defer ruling on whether the Postal Service’s claim should be reduced for depreciation.¹³

ORDER

We deny the appeal except as discussed above.  The appeal is remanded to the parties to negotiate damages.  If the parties are unable to negotiate a settlement as to damages, they may ask the Board to reinstate the appeal for the purpose of ruling on quantum.

Peter F. Pontzer
Administrative Judge
Board Member

I concur

Alan R. Caramella
Administrative Judge
Acting Chariman

I concur

Diane  M. Mego
Adminstrative Judge
Board Member