July 13, 1993
Appeal of
RYON REALTY COMPANY
Under Lease Agreement
PSBCA No. 3263
APPEARANCE FOR APPELLANT:
Iles Cooper, Esq.
APPEARANCE FOR RESPONDENT:
Daniel M. Curts, Esq.
OPINION OF THE BOARD
Appellant, Ryon Realty Company, has appealed from the Contracting Officer's denial of its claim for interest and penalties which it became obligated to pay because of late payment of real estate taxes on a post office leased to Respondent, United States Postal Service. At the request of the parties, this appeal is being decided on the record in accordance with 39 C.F.R. § 955.12.
FINDINGS OF FACT
1. On November 27, 1968, Richard B. and Marcia F. Ryon entered into a lease agreement under which they leased to the United States Post Office Department, Respondent's predecessor, a building in Pottsville, Pennsylvania, for the period November 1, 1968, through October 31, 1988. The lease also contained options for six additional five-year periods, the first of which has been exercised by Respondent. In 1980 the original lessors executed a power of attorney authorizing Appellant to receive the rental payments for the Pottsville facility. (Appeal File Tab (AF) 1; Complaint, Exhibits B, C).
2. Clause 17 of the lease agreement, entitled "Tax Clause Rider," contained the following language relevant to this appeal:
"17.(a) The lessor shall present to the Government the general real estate tax bills of each taxing authority for taxes due and payable on the land and buildings hereby demised when said taxes apply to any year or part thereof within the term of this lease. Presentation of said tax bills shall be made in the manner and to the office shown in subparagraph (d) hereof to permit payment of said taxes in the manner set out herein before any fine, penalty, interest or cost may be added thereto for the non‑payment thereof and in time to obtain any discount allowed by the taxing authority. After the presentation of said tax bills, the Government shall pay to the lessor, as additional rent due hereunder, the net amount of said taxes by check made payable to the lessor and the taxing authority issuing said tax bill. The lessor shall thereafter promptly indorse said check and deliver the same to said taxing authority.
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(d) The lessor shall furnish the Government tax bills and copies of all notices which may affect the valuation of said land and buildings for general real estate tax purposes or which may affect the levy or assessment of general real estate taxes thereon. Such notices and tax bills shall be delivered or mailed within three days from the receipt thereof by the lessor to....
(e) In the event the lessor fails to present to the Government the general real estate tax bills within three days from the receipt thereof by lessor and such failure results in the addition of any fine, penalty, interest or cost to the amount of tax or the loss of any discount which would have been allowed by the taxing authority for prompt payment of tax, the lessor will be responsible and liable for payment of such fine, penalty, interest, cost or the amount of lost discount and the Government will be liable only for payment of the net taxes less such discount as would have been allowed for prompt payment." (AF 1 (emphasis added)).
3. In March 1990, Appellant was notified by the taxing authority that it was delinquent in paying its 1989 taxes on the Pottsville facility. In January 1991, Appellant was sent a reminder letter by the taxing authority. In June 1991, Appellant received a letter notifying it of an impending tax sale of the property. (AF 9-12; Affidavit of Sara Daley)[1]
4. By letter dated July 11, 1991, Appellant advised Respondent's Facilities Service Center in Philadelphia, Pennsylvania that the 1989 tax payment had not been made for the Pottsville facility (AF 2). There is no evidence in the record of any earlier notification by Appellant. Enclosed with Appellant's July 11, 1991, letter was a copy of a letter dated July 19, 1989, which Appellant identified as the letter used to send Respondent the 1989 tax bill for the Pottsville facility. There is no evidence that the July 19, 1989, letter or the 1989 tax bill had previously been received by Respondent. The letterhead stationery used for the letter dated July 19, 1989, was substantially different from the stationery used by Appellant for all letters transmitting 1989 tax bills for Appellant's other postal facilities.[2] Appellant had not used the letterhead on which the July 19, 1989, letter was typed for correspondence with Respondent's Facilities Service Center since 1983. In addition, the amount of the tax bill was typed at the bottom of the July 19, 1989, letter but did not appear on any of the other transmittal letters. (AF 13 (Declaration of Elmira A. Smith, Exhibits A-G)).
5. On July 29, 1991, Appellant paid the taxes and, by letter dated August 14, 1991, sought reimbursement from Respondent. The amount paid by Appellant was $25,773.70, consisting of $20,952.10 in taxes, $2,671.39 in interest, a $2,095.21 penalty, and $55.00 in costs. (AF 4).
6. After receiving confirmation that the taxes had been paid, Respondent authorized repayment to Appellant. The payment authorized, however, was in the amount of $20,533.06, which represented only the amount of the taxes, less 2 percent, and excluded any reimbursement of the amounts paid by Appellant for interest, penalty, and costs. (AF 3, 4).
7. By letter dated February 25, 1992, Appellant requested that it be reimbursed for the interest and penalty it had paid, alleging that it had forwarded the tax bill to Respondent as required by the lease. The amount sought was $4,821.60. (AF 5).
8. In a decision dated March 20, 1992, the Contracting Officer denied Appellant's request for reimbursement, stating that a review of the file failed to show that the tax bill had been received (AF 6).
DECISION
In its Complaint,[3] Appellant asserts that Respondent breached the lease agreement between the parties by failing to pay, in a timely manner, the taxes assessed against the Pottsville, Pennsylvania, post office. Appellant contends that it forwarded the 1989 tax bill to Respondent as required by the terms of the lease, but that Respondent did not pay the bill. Appellant contends it was forced to pay the tax bill in 1991, after being threatened with a tax sale of the property, and that it incurred expenses for interest, penalties, and costs which should be reimbursed by Respondent.
Respondent argues the tax bill was not presented by Appellant, as required by the express terms of the lease. Respondent, relying on cases addressing contract acceptance, Dick v. United States, 113 Ct. Cl. 94, 100, 82 F. Supp. 326 (1949); Rhode Island Tool. Co. v. United States, 130 Ct. Cl. 698, 128 F. Supp. 417 (1955), argues Appellant must prove Respondent received the tax bill in order to prevail and that the evidence does not support such a finding.
Respondent further argues that the evidence does not show Appellant even sent the tax bill to Respondent. Respondent relies on the differences between the stationery on which the letter dated July 19, 1989, which purportedly transmitted the Pottsville bill to Respondent, was typed and other letters used by Appellant to forward tax bills for other facilities (see finding 4) to argue, in effect, that the July 19, 1989, letter was not actually used as claimed by Appellant.
Finally, Respondent argues that the procedures set out in the clause should have given Appellant ample and early notice that the taxes had not been paid. Respondent argues that Appellant could not simply ignore the fact that it had not received a check from Respondent in order to pay the taxes, while taking no action to determine what had happened. In addition, Respondent notes that Appellant received two notices from the taxing authority prior to the tax sale notice, but failed to notify Respondent of the problem until the last notice was received.
Under the "Tax Clause Rider" of the lease agreement, the lessor [Appellant] is obligated to "present" real estate tax bills to the Postal Service. The clause further provides that the bills are to be "delivered or mailed" by the lessor to a particular Postal Service office. The Postal Service is then obligated to send Appellant a check made out to Appellant and the taxing authority which Appellant is to use to pay the taxes. Under the clause, Appellant is responsible for any "fine, penalty, interest, cost or lost discount" caused by its failure to comply with the requirements. By implication, Respondent is responsible for any "fine, penalty, interest, cost or lost discount" caused by its failure to comply with its responsibilities under the clause.
Contrary to Respondent's argument, Appellant is not required to prove that Respondent received the tax bill. Subparagraph (a) of the Tax Clause Rider, drafted by Respondent, requires the lessor to "present" the tax bill to the Postal Service in the manner set out in subparagraph (d) of the clause. The latter paragraph requires the tax bill to be "delivered or mailed" to a particular Postal Service office. The lessor may prove that it complied with this contract provision by showing that it deposited the tax bill in the mail, with postage paid, and addressed to the appropriate office. Cf. Singleton Contracting Co., IBCA No. 1770-1-84, 86-2 BCA ¶ 18,800 (Language in solicitation that "A written award ... mailed (or otherwise furnished) to the ... offeror ... shall ... result in a binding contract," makes award effective when notice is placed in the mail, not when received); accord Computer Wholesale Corp., GSBCA Nos. 4217, 4218, 76-1 BCA ¶ 11,859; NYTEK Electronics, ASBCA No. 20019, 75-1 BCA ¶ 11,299; Imco Precision Products, Inc., ASBCA No. 17572, 73-2 BCA ¶ 10,250.
Having examined the evidence of record, however, we conclude that Appellant has not met its burden of proving by a preponderance of the evidence that it actually delivered or mailed the tax bill to Respondent, as required by the lease. Appellant submitted the affidavit of Sara Daley to the effect that she prepared the July 19, 1989, letter on or about that date and that she believed that the real estate tax bill had been placed in the mail on or about the same date. However, Respondent has submitted evidence which calls into serious question Appellant's assertion that the letter dated July 19, 1989, was actually used to transmit the tax bill. The evidence shows that the July 19, 1989, letter for the Pottsville facility was typed on letterhead which had not been used in correspondence with Respondent for the previous six years. Further, the letterhead used on the July 19, 1989, letter differed from that used for eight other letters transmitting tax bills for Appellant's other facilities, which letters were dated between June 30, 1989, and August 4, 1989, and included a second letter dated July 19, 1989, but for a different facility. All of the other letters, including the second July 19, 1989, letter, used identical stationery, but stationery which differed from the questioned letter. Further, contrary to the procedure used on all of the other letters, the amount of the tax bill was typed on the questioned letter. These unexplained inconsistencies create doubt that the tax bill was in fact transmitted to Respondent on or about July 19, 1989.
Further, the fact that Appellant waited until 1991 before notifying Respondent of the missed 1989 payment appears inconsistent with actions which would be expected from a lessor which had forwarded the tax bill in the usual course of business and was expecting a check from its lessee. Appellant's explanation for the nearly two-year lag -- that it was concerned it might have lost the check sent by Respondent and wanted to avoid the possibility of double billing (see Daley affidavit) -- is difficult to credit, but, in any event does not aid Appellant in persuading us that it presented the Pottsville tax bill as required by the lease.
Accordingly, we conclude that Appellant has failed to establish that it is entitled to the interest, penalties, and costs it is claiming. The appeal is denied.
David I. Brochstein
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
James D. Finn, Jr.
Administrative Judge
Vice Chairman
[2] Columbus,
NJ; and Auburn, Bethel, Cressona, Leesport, Minersville, Port Carbon, and
Wiconisco, PA.
[3] Appellant
did not file a brief.