June 28, 1994
Appeal of
HOWARD NETTLETON
Under Contract to Lease
PSBCA No. 3454
APPEARANCE FOR APPELLANT:
Andrea Conklin, Esq.
APPEARANCE FOR RESPONDENT:
Harold E. Durham, Esq.
OPINION OF THE BOARD ON MOTION TO DISMISS FOR LACK OF JURISDICTION OR IN THE ALTERNATIVE FOR SUMMARY JUDGMENT
Appellant, Howard Nettleton, negotiated with representatives of the United States Postal Service, Respondent, regarding his construction of a building for lease to Respondent and the subsequent addition to the building of certain improvements desired by Respondent. No formal lease was ever executed by the parties. Respondent denied Appellant's claims for the rent he expected under the lease and for the cost of making the postal improvements, and Appellant has appealed. In this motion, Respondent contends the Board is without jurisdiction to consider Appellant's claims because there was no contract between the parties. Additionally, Respondent argues that even if the Board has jurisdiction, Respondent is entitled to summary judgment because there are no genuine issues of material fact and Appellant may not recover as a matter of law.
The parties have submitted evidence and briefs in support of their positions. For purposes of deciding this motion, we make the following findings of fact.
FINDINGS OF FACT
1. In 1990, Respondent advertised for offers to lease it space of 3500 to 4000 square feet in an existing building in Yelm, Washington. The advertisement listed Gaylen R. Gransbury, Real Estate Specialist, Sr., in Respondent's Facilities Service Center in Kent, Washington, as the person to contact (Appeal File Tab ("AF") 12).
2. Appellant offered a building he owned (AF 11), but the advertisement did not result in a lease, and Respondent canceled the project in 1991 (AF 10).
3. The internal postal document dated May 10, 1991, cancelling the project bears a hand-written note: "May be building available March 1992 that would be just perfect for carrier operation. See me before any new activity is started on this project. GRG" (AF 10).
4. In early 1992, Appellant contacted Mr. Gransbury about leasing a building Appellant would build in the Yelm area. They discussed the cost range and the requirements for a Postal Service carrier annex. (Affidavit of Howard Nettleton ("Nettleton") ¶ 2).
5. On February 28, 1992, Appellant sent Mr. Gransbury a sketch of a proposed building layout (AF 8; Nettleton ¶ 2).
6. On March 12, 1992, the Manager of the Real Estate Branch in the Facilities Service Center issued a Real Estate Project Assignment Order for a project in Yelm. The assignment documents bear the typewritten name of another real estate representative as the person responsible for the project, but, by hand-written changes, Mr. Gransbury's name was entered. The assigned task was described as follows: "Lease existing place [space?] to provide a carrier annex for Yelm WA. 3,500-4,000 sf on a joint use site." (AF 9).
7. In March 1992, Mr. Gransbury called Appellant and approved the layout of the proposed building. Mr. Gransbury told Appellant that as soon as the foundation was poured, the building would be an existing building and then could be leased by Respondent (Nettleton ¶ 3; Affidavit of Andrea Conklin, pages ("Conklin") 8-9 (Gransbury)[1]).
8. Based on Mr. Gransbury's approval, Appellant began construction in March, 1992, and completed the prefabricated, metal building by the end of April, 1992 (Nettleton ¶¶ 2, 3). During construction, Appellant and Mr. Gransbury discussed changes needed by Respondent (Nettleton ¶ 3).
9. In May, 1992, Mr. Gransbury and other postal officials inspected the building. Mr. Gransbury told Appellant that certain improvements specified by Respondent must be made to the building before the Postal Service would sign a written lease. Mr. Gransbury assured Appellant that once the improvements were made, Respondent would execute a lease and that Appellant would be paid for the improvements over the lease period. (Nettleton ¶¶ 5, 7; Conklin 3-4 (Overfield)).
10. On June 2, 1992, Appellant received from Mr. Gransbury by facsimile transmission the Yelm Carrier Annex Requirements, a list of 17 specific improvements to be made to the building (Nettleton ¶ 6; Conklin 5-6 (Overfield); AF 7, 13). Based on Mr. Gransbury's previous assurances that Appellant would be paid for the lease improvements, Appellant completed construction of the improvements by August 1, 1992 (Nettleton ¶¶ 7-10).
11. On June 19, 1992, Appellant sent Mr. Gransbury a letter by facsimile transmission describing the components of the proposed rent for the space and some terms of Appellant's standard lease form (AF 6).
12. No written lease or written contract for the improvements was ever executed by the parties.
13. During the times relevant to this appeal, Mr. Gransbury had contracting authority up to $250,000 for "leasing" actions. Mr. Gransbury's authority, according to the letter of delegation, was "subject to the limitations and conditions set forth in the Procurement Manual and the Design and Construction Handbook, and all other instructions and regulations relating to Facilities contracting." (AF 16).
14. On February 3, 1993, Appellant submitted a claim to Respondent for the cost of the improvements Appellant completed in order to comply with specific postal requirements and his lost rentals commencing August, 1992 (AF 5).
15. Respondent denied the claim, and Appellant filed this appeal (AF 2‑4).
16. In Respondent's Procurement Manual ("PM"), incorporated by reference at 39 C.F.R. Part 601, the term "lease" is defined as a written agreement for occupancy of space (PM 11.4.1.a), while the definitions of "construction" and "contract" do not mention any requirement that construction may be accomplished or contracts entered into only through written contracts (PM 11.5.1.a, 1.6.2.e).
17. Respondent's Handbook RE-1, Realty Acquisition and Management, describes documents to be used for leasing transactions and, at Section 310, points out that contracting officers may enter into other types of lease agreements if in the best interest of the Postal Service. It requires that contracting officers seek the advice and assistance of field counsel in preparing contract documents that diverge from the standard lease terms. Mr. Gransbury did not obtain advice and assistance from field counsel regarding use of nonstandard contract provisions (Declaration of Doris Godinez-Phillips, dated December 23, 1993).
DECISION
Respondent has filed a motion to dismiss the appeal for lack of jurisdiction or, in the alternative, for summary judgment. Respondent contends that the parties did not enter into a written or oral contract for the lease of Appellant's premises or for construction of the additional improvements specified by Respondent and that no implied-in-fact contract came into existence. Respondent also contends that it is not estopped to deny the existence of a contract between the parties. Finally, Respondent argues that because there is no contract, express or implied, the Board does not have jurisdiction over Appellant's claims, and the appeal must be dismissed.
In his reply, Appellant has abandoned his claim for lost rentals. He continues to urge that a contract, either an oral express contract or a contract implied-in-fact, existed under which Respondent promised to pay for the specific improvements to Appellant's premises described in the Yelm Carrier Annex Requirements Mr. Gransbury sent Appellant. Appellant contends he completed those improvements in reliance on Mr. Gransbury's assurances that Appellant would be paid for them, and that Respondent is estopped to deny that it agreed to pay for them.
In order for Appellant to establish the existence of either an oral express contract or an implied-in-fact contract obligating Respondent to pay for the improvements, he must show a meeting of the minds, consideration, and actual authority of Mr. Gransbury to bind Respondent. See H.F. Allen Orchards v. United States, 749 F.2d 1571, 1575 (Fed. Cir. 1984) cert. denied 474 U.S. 818 (1985); Penn-Ohio Steel Corp. v. United States, 354 F.2d 254, 267-69 (Ct. Cl. 1965); Edward K. Dilworth, ADA Contractors, Inc., PSBCA No. 1248, 84-1 BCA ¶ 17,050; OAO Corp. v. United States, 17 Cl. Ct. 91, 100 (1989).
Respondent argues that there was no meeting of the minds regarding payment for the improvements because the parties anticipated that Appellant would be paid for the improvements through the lease and because there was no intent to contract for the improvements independent of the lease. "Whether a legally enforceable contract has been formed by a meeting of the minds depends upon the totality of the factual circumstances." Texas Instruments Inc. v. United States, 922 F.2d 810, 815 (Fed. Cir. 1990) reh. granted in part, opinion modified March 19, 1991; see Narva Harris Constr. Corp. v. United States, 574 F.2d 508, 511 (Ct. Cl. 1978). Viewed in the light most favorable to Appellant, as they must be when the Board addresses Respondent's motion for summary judgment, Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Adickes v. S. H. Kress & Co., 398 U.S. 144, 157 (1970); Hotel Systems, Inc., PSBCA Nos. 3253-3258, 93-3 BCA ¶ 25,922, the facts and reasonable inferences therefrom establish that there is at least a genuine issue of material fact whether Appellant and Mr. Gransbury reached an agreement that Respondent would pay for the improvements only if a formal lease were executed. See OAO Corp. v. United States, 17 Cl. Ct. at 100; Essex Electro Engineers, Inc., ASBCA Nos. 30118, 30119, 88-1 BCA ¶ 20,440 at 103,367; Comsat General Corp., DOT CAB No. 1226, 83-2 BCA ¶ 16,870. Appellant understood Respondent's commitment to pay for the improvements described in the seventeen-item Yelm Carrier Annex Requirements[2] to be an immediate promise, conditioned only on his completion of the improvements, even though the formal lease was to provide the vehicle for payment. He would not have performed the improvements had he thought otherwise. Respondent has offered no evidence of Mr. Gransbury's intention or understanding.
That no lease was entered into and that the parties contemplated that the lease document would provide for payment for the improvements does not preclude a finding of a meeting of the minds if the parties intended that the lease would only memorialize the agreement previously reached. Russell Corp. v. United States, 537 F.2d 474, 482 (Ct. Cl. 1976) cert. denied 429 U.S. 1073 (1977); Penn-Ohio Steel Corp. v. United States, 354 F.2d at 266-67 citing United States v. Purcell Envelope Co., 249 U.S. 313, 319, 39 S.Ct. 309, 63 L.Ed. 620 (1919); Essex Electro Engineers, Inc., supra at 103,368. Additionally, the absence of an express agreement on the price for the improvements does not necessarily establish as a matter of law that there was no meeting of the minds. See Cities Services Gas Co. v. United States, 500 F.2d 448, 452 (Ct. Cl. 1974); ABC Health Care, VABCA No. 3462, 93-2 BCA ¶ 25,672 at 127,712; Comsat General Corp., supra at 83,901; Western States Constr. Co., ASBCA No 16003, 72-2 BCA ¶ 9508 at 44,302; Uniform Commercial Code § 2-305.
Respondent contends Mr. Gransbury lacked authority to enter into an agreement to pay for the improvements. Absent such authority, Respondent argues it is not bound by any commitments he might have made, relying on Federal Crop Insurance Corporation v. Merrill, 332 U.S. 380, 384 (1947). First, Respondent argues that postal regulations require that all leases be in writing, and that Mr. Gransbury had no authority to enter into an agreement that was not in writing. Absent statutory or regulatory mandates, there is no requirement that postal contracts be in writing. See United States v. Purcell Envelope Co., 249 U.S. at 319; Penn-Ohio Steel Corp. v. United States, 354 F.2d at 269; Essex Electro Engineers, Inc., supra. Respondent has not demonstrated that as a matter of law an agreement to pay for improvements to a potential landlord's property must be in writing. See OAO Corp. v. United States, 17 Cl. Ct. at 100; Comsat General Corp., supra. In its definition of "contract" or description of "construction" the Postal Service Procurement Manual does not establish a requirement for written agreements.
Additionally, Respondent argues that the agreement Appellant contends the parties reached would deviate from Respondent's established leasing practices and that Mr. Gransbury's failure to adhere to the requirements of section 310 of the Real Estate Acquisition and Management Handbook and obtain field counsel's advice and assistance negated Mr. Gransbury's authority to obligate Respondent to pay for the improvements. However, there is no evidence the Handbook is a published regulation of the Postal Service or that Appellant was aware of this internal limitation on Mr. Gransbury's authority, and, therefore, at least on the record available, we will not deem Appellant to be bound by this limitation. See Texas Instruments Inc. v. United States, 922 F.2d at 815; A-1 Garbage Disposal & Trash Service, ASBCA No. 30623, 89-1 BCA ¶ 21,323 at 107,525; Robert B. Joy, PSBCA Nos. 938, 979, 1981 WL 7678, September 30, 1981; Edward LaRocca, PSBCA No. 908, 1981 WL 7667, April 24, 1981.[3]
Finally, Respondent argues that Mr. Gransbury's contracting authority was limited to "leasing" actions. Therefore, according to Respondent, he would have had no authority to enter into a contract for improvements to Appellant's building, which Respondent contends would be a construction contract. Respondent has not identified any provision in postal regulations or elsewhere that defines "leasing" as the term is used in Mr. Gransbury's delegation of authority necessarily to exclude authority to contract for construction related to the lease of real property. Moreover, postal procurement regulations suggest a contracting officer in Mr. Gransbury's position is authorized to contract, at least under certain circumstances, for construction improvements to be performed by the owner of property leased or to be leased to the Postal Service. See Procurement Manual 11.4.2.d.1 and .3; Realty Acquisition and Management Handbook, sections 311.2, 366 h, 384.2, 734.81, 734.82, 735.2; Handbook RE-14, Design and Construction Handbook, Procedure 01.05 ("When direct contracting authority is delegated for real estate leasing actions, the sum of initial improvements and rents during the base term must not exceed prescribed limitations . . . ").
On the record before us, we cannot find as a matter of law that Mr. Gransbury had no authority to contract for improvements to Appellant's building. Therefore, summary judgment is not appropriate. See Edward K. Dilworth, ADA Contractors, Inc., supra; Comsat General Corp., supra at 83,904.[4]
In its motion to dismiss, Respondent contends that the Board is without jurisdiction to consider Appellant's appeal because no contract subject to the Contract Disputes Act came into existence. The Board has jurisdiction over disputes arising from oral express contracts and implied-in-fact contracts and, consequently, authority to determine if such contracts were formed under the circumstances of this appeal. 41 U.S.C. §§ 602 (a), 607 (d); Choe-Kelly, Inc., ASBCA No. 43481, 92-2 BCA ¶ 24,910; Erwin Melvie, PSBCA No. 1744, 87-3 BCA ¶ 20,158; Edward K. Dilworth, ADA Contractors, Inc., supra. As discussed above, there remain factual and legal disputes regarding whether a contract for the improvements came into existence, and that part of Appellant's claim is not subject to dismissal at this stage of the proceedings. See Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987); Hotel Systems, Inc., supra.
Appellant is no longer pursuing a claim for lost rentals, and that claim is, therefore, dismissed with prejudice. To that extent, Respondent's motion to dismiss is granted, and is otherwise denied. The motion for summary judgment is denied.
Norman D. Menegat
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
James D. Finn, Jr.
Administrative Judge
Vice Chairman
[1] Ms. Conklin's affidavit includes substantial excerpts from depositions of Mr. Gransbury and Mark Overfield, Respondent's manager of field maintenance operations for the area including Yelm. Citations to the page reference in Ms. Conklin's affidavit will be followed by the name of the deponent whose testimony she recites.
[2] Respondent has not contended that the list did not state clearly the requirements or that Appellant did not perform them.
[3] The language in Mr. Gransbury's delegation subjecting his authority to the limitations and conditions of "all other instructions and regulations relating to Facilities contracting" (Finding 13) is too vague to place on Appellant the burden of ascertaining limits on Mr. Gransbury's authority included in unpublished postal regulations.
[4] Because of the disposition of the motion, there is no need to address the parties' arguments regarding whether Respondent is estopped to deny liability for the cost of the improvements to meet the Yelm Carrier Annex Requirements. Although Appellant is not barred from asserting estoppel against Respondent, Burnside-Ott Aviation Training Center, Inc. v. United States, 985 F.2d 1574, 1581 (Fed. Cir. 1993), further development of the pertinent facts would be necessary before that argument could be addressed. See Thiokol Corp. Strategic Operations, ASBCA No. 45348, 93-3 BCA ¶ 26,180; American Federal Contractors, PSBCA No. 1424, 86-2 BCA ¶ 18,891; Comsat General Corp., supra at 83,905.