December 17, 1996
Appeal of
SHIRLEY A. LOAR
LEASE AGREEMENT
PSBCA No. 3896
APPEARANCE FOR APPELLANT:
Stephen B. Graham, Esq.
APPEARANCE FOR RESPONDENT:
David F. Wightman, Esq.
OPINION OF THE BOARD
Appellant, Shirley Loar, leases property to Respondent, United States Postal Service, under a lease that requires Respondent to pay the general real estate taxes against the property upon Appellant’s presentation of the tax bills to Respondent. Because the real estate taxes for 1990 through 1992 were not paid on time, the local taxing authority imposed penalties and assessed interest against Appellant. Appellant filed a claim against Respondent for the penalties and interest, but Respondent refused to pay them. Appellant has appealed that refusal to pay.
This appeal was submitted on the record without an oral hearing. Despite being provided with an opportunity to file additional evidence and briefs, neither party did so. The decision is based on the appeal file and the pleadings.
FINDINGS OF FACT
1. By lease dated January 31, 1986, Appellant leased a building to Respondent for use as the Conway Post Office in Emmet County, Michigan. The base term of the lease was from July 1, 1985, through June 20, 1995, followed by four five-year options. (Appeal File, Tab (“AF”) 4).
2. The lease contained a Zero Tax Clause Rider that provided, in part:
“(a) The lessor shall present to the Postal Service 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 Postal Service 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.
* * *
(e) In the event the lessor fails to present to the Postal Service 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 Postal Service will be liable only for payment of the net taxes less such discount as would have been allowed for prompt payment.”
Subparagraph (d) of the Rider required that the “tax bills shall be delivered or mailed within three days from the receipt thereof by the lessor to” Respondent’s Field Real Estate and Building Office in Chicago. (AF 4).
3. The general real estate taxes on the premises became due and payable to the taxing authority on December 1 of each year. For tax payments after February 15, a 1% penalty was imposed, and if unpaid, the taxes became delinquent on March 1, and additional fees and interest would be due. (AF 6, 8, 9).
4. Within three days after receiving the tax bills for each of the years in question, Appellant mailed them to Respondent’s Chicago Field Real Estate and Building Office at the address given in the Zero Tax Clause Rider (Sworn Complaint ¶¶ 4-6). However, Respondent did not receive the tax bills, and the general real estate taxes on the premises for 1990, 1991, and 1992 were not paid on time (AF 7).
5. On October 22, 1992, Appellant advised Respondent that the real estate taxes for 1989 through 1991 had not been paid. On October 26, 1992, Respondent replied that it had issued a check for the 1989 taxes, but that it had never received the tax bills for 1990 and 1991. Respondent urged Appellant to submit the 1990 and 1991 tax bills so that it could issue a check for their payment. (AF 7).
6. On or about July 8, 1993, Appellant’s congressman provided Respondent a record of unpaid taxes prepared by the Emmet County Treasurer showing the unpaid real estate taxes, fees and interest on the property for 1990, 1991 and 1992. On about July 22, 1993, Respondent issued a check for payment of the base general real estate taxes for 1990, 1991 and 1992, but did not pay any of the late fees or interest charges, which at that time totaled $2,115.96. (AF 7). The interest and penalties have been paid by Appellant. (AF 3; Sworn Complaint ¶ 8).
7. In July 1994, Appellant asserted a claim against Respondent for $15,254.44, allegedly for penalties and interest related to the late payment of the real estate taxes for 1990 through 1992 (AF 3).
8. In an October 12, 1994 final decision, the contracting officer denied Appellant’s claim for payment of the interest and penalties. Appellant timely appealed that denial. (AF 1, 2).
DECISION
Appellant argues that she sent the tax bills to Respondent, and Respondent failed to make a timely payment, thus causing her to incur the penalties and interest on the late payments for the tax years 1990, 1991 and 1992. She claims that Respondent is, therefore, liable for the interest and penalties.
Respondent argues that the tax bills were never presented to Respondent as required in the Zero Tax Clause Rider, and that, therefore, Appellant is liable for the interest and penalties.
Under the lease’s Zero Tax Clause Rider (Finding 2), Respondent’s receipt of the tax bills is not necessary to trigger its obligation under the clause. All Appellant was required to do to establish Respondent’s duty to issue a check for the general real estate taxes was to mail the tax bills to the proper address within three days after she received them. See Ryon Realty Co., PSBCA No. 3263, 93-3 BCA ¶ 26,235 at 130,532. She did so (Finding 4),[1] and Respondent thus became responsible for the timely issuance of the check. By implication under the Zero Tax Clause Rider, Respondent is responsible for any fine, penalty or interest caused by its failure to comply with its responsibilities under the clause. Id.
However, Respondent’s liability for late penalties and interest for its failure to issue the check is not unlimited in duration. Appellant had a duty to mitigate damages, which required her to notify Respondent once she became aware that Respondent was exposing itself to ever-increasing penalties and interest by its failure to issue the tax payment check within a reasonable time after Appellant’s submission of the tax bill. See Seaway Shipping Lines, PSBCA No. 2840, 91-2 BCA ¶ 23,731.
The record of this appeal does not reflect when, after she sent in each of the tax bills, Appellant became aware that there was a problem in Respondent’s tax payment scheme under the lease. Therefore, it is not possible to pinpoint exactly when Appellant’s duty to apprise Respondent of nonpayment arose. However, applying a jury verdict approach, we conclude that at least by February 15, the date identified on the tax
bill as the starting point for the 1% penalty (Finding 3), Appellant should have been aware of a possible problem and brought the delay to Respondent’s attention. Respondent then would have had an opportunity to avoid late penalties by issuing the check. Using as a gauge the time it took Respondent to process the payment after Appellant’s congressman provided sufficient information regarding the amount of taxes (Finding 6), we conclude that a check would have been issued within a month after Appellant advised Respondent of the delay. Therefore, Respondent is liable for any interest, penalties or costs attributable to the period of December 1, 1989,[2] through March 15, 1990.
For 1991 and 1992, however, Appellant should have been more vigilant regarding Respondent’s failure to issue a check within a reasonable time after she submitted the tax bills. Knowing of the problem with the previous year’s (or two years’ for the 1992 tax bill) tax payment, Appellant had a duty to raise with Respondent promptly its failure to issue a tax payment check after her submission of the tax bills. Alerting Respondent within 45 days after she mailed the tax bill would have been reasonable. Since Appellant received the tax bill from the taxing authority no later than December 1 (Footnote 2), such notification by mid-January at the latest would have allowed payment of the real estate taxes before February 15 and avoidance of any penalties or interest. Therefore, Respondent is not liable for any penalties, interest and costs associated with the late 1991 and 1992 payments. See Seaway Shipping Lines, PSBCA No. 2840, 91-2 BCA ¶ 23,731.
The appeal is granted in part. Appellant may recover interest, penalties and fees on the 1990 real estate taxes attributable to the period up to March 15, 1990. Appellant’s claim is otherwise denied. Calculation of the exact amount due Appellant is remanded to the parties.
Norman D. Menegat
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Vice Chairman
[1] Our finding that Appellant timely mailed the tax bills is based on Appellant’s complaint in which she stated that she had mailed each of the tax bills in question to the address set forth in the Zero Tax Clause Rider of the lease within three days after receipt, just as the lease requires. While generally, allegations in a pleading are not sufficient to establish disputed facts, see Conquest Constr., Inc., PSBCA No. 2637, 90‑2 BCA ¶ 22,702, Appellant swore before a notary that the statements in her complaint were true. Therefore, Appellant’s complaint is also her sworn statement that has evidentiary weight. Cf. Twigg Corp., NASA BCA No. 57-1091, 92-2 BCA ¶ 25,011. Furthermore, Respondent has not offered any evidence to dispute Appellant’s statement that she promptly mailed the tax bills.
[2] As the real estate taxes became payable on December 1 (Finding 3), the tax bill itself most likely was sent to Appellant some time before that date. This leads to the conclusion that Appellant most likely sent the tax bill to Respondent no later than December 1, i.e., within three days after she received it.