February 25, 1998
Appeal
of
AFV
ENTERPRISES, INC.
Under
Lease Agreement
PSBCA
Nos. 2691 & 3316
APPEARANCE
FOR APPELLANT:
James
H.K. Bruner, Esq.
APPEARANCE
FOR RESPONDENT:
Margaret
E. Harper, Esq.
OPINION OF THE BOARD ON MOTION
FOR SUMMARY JUDGMENT, OR TO STRIKE PORTIONS OF THE COMPLAINT
Appellant, AFV
Enterprises, Inc., has appealed from the default termination of its contract to
build and lease to Respondent, United States Postal Service, a post office in
Slingerlands, New York, and the denial of its claim for specific performance of
the parties' agreement or for monetary damages arising out of the same
transaction. Respondent has filed a
motion seeking summary judgment in its favor with regard to certain elements of
the Complaint.
FINDINGS
OF FACT
For the purpose of
deciding the motion for summary judgment, we make the following findings of
fact.
1. By letter dated March 15, 1988, Respondent's
contracting officer purported to accept an offer from Appellant to construct
and lease to Respondent a building to be built on property owned by
Appellant. The "Agreement to
Lease" ("Agreement") between the parties recited that the
building would be built on property located at:
"The Easterly most . . . portion of lands . . . located
on the South side of Kenwood Avenue by the red light of Kenwood Avenue and New
Scotland Road intersection. The
[property] shall include a driveway 28' [feet] in width from Kenwood Avenue. .
. ."
In the March 15, 1988
letter, the contracting officer stated that acceptance was "contingent
upon" Appellant's revision of the site plan to include a curb cut on
Kenwood Avenue, delete a curb cut on "Carroll Place," and make the
building visible from Kenwood Avenue.
The letter also stated that the acceptance was contingent on final clearance
by "SHPO" [State Historic Preservation Officer]. (Appellant's Appeal File Tab (AAF) J, N, T).
2. The Agreement required that the building be
completed within 300 days after acceptance of the offer and specified that the
building was to be constructed in accordance with drawings identified as
"86-NYR-4067" (AAF J). January
9, 1989, was 300 days after the date of the March 15, 1988 letter.
3. Paragraph 5 ("Termination for Default -
Damages for Delay - Time Extensions") of the General Provisions to the
Agreement provided, in part,
"(a) If
[Appellant] refuses or fails to prosecute the work with such diligence as will
insure its completion within the time specified in this contract, or any
extension thereof, or fails to complete said work within such time,
[Respondent] may, by written notice to [Appellant], terminate his right to
proceed with the work. . . .
(b) [Appellant's] right to proceed shall not be so
terminated . . . if:
(1)The delay in the completion of the work arises from
unforeseeable causes beyond the control and without the fault or negligence of
[Appellant], including but not restricted to . . . acts of Government in either
its sovereign or contractual capacity, . . . or delays of subcontractors or
suppliers arising from unforeseeable causes beyond the control and without the
fault or negligence of both [Appellant] and such subcontractors or suppliers .
. . ." (AAF J).
4. Under paragraph 15(a) ("Licenses,
Permits, Safety, Indemnification") of the General Conditions, Appellant
was,
". . . responsible for obtaining any necessary licenses
and permits required for privately owned buildings, and for complying with any
applicable Federal, State, and municipal laws, codes and regulations, in
connection with the performance of the work. . . ." (AAF J).
Paragraph 3(g) of the
Agreement required Appellant to obtain any necessary permits within 90 days
after acceptance of the Agreement, unless the period was extended by the
contracting officer (Respondent's Appeal File Tab (RAF) 1).
5. The parties to the Agreement held a
preconstruction meeting on March 29, 1988.
At that meeting, which was attended by Respondent's Real Estate
Specialist, the parties agreed that they would change the location of the
building on the site primarily because of difficulties involving vehicle
access. The parties agreed that the
revised site arrangement would be sketched by Appellant's architect[1]
and sent to Respondent's operations office for approval. (Respondent's Supplemental Appeal File Tab
(RSAF) 2, 3).
6. The current record does not indicate whether
Respondent formally approved the revised site plan. However, the plan, as revised by Appellant's
surveyor, was discussed at a meeting of the surveyor and representatives of
Respondent's operations office on August 9, 1988, at which time Respondent's
representatives agreed that the plan represented the "best possible
usage" of the site. (RAF 13). The site plan was first formally presented to
the Town of Bethlehem[2]
Planning Board by Appellant's surveyor on August 22, 1988 (RAF 14).
7. During the Fall of 1988, Appellant, its
surveyor, and Respondent's personnel continued their efforts to provide
information required by the Planning Board and participated in one public
hearing concerning the project. The
Planning Board's primary difficulty with approving the site was traffic
problems related to the location of driveways, although other aspects of the
proposed site arrangement also were concerns.
(RAF 15-18, 20‑24).
8. As of March 1989, Appellant had not yet
obtained the permits necessary to allow it to proceed with the project. By letter dated March 9, 1989, the
contracting officer noted that 300 days had passed as of January 9, 1989,
and directed Appellant to "show cause" why it should not be declared
in default of its obligation under the Agreement. (RAF 28).
9. Appellant replied to the show cause notice in
a letter from its attorney dated March 10, 1989. In that letter, Appellant attributed the
delays to three primary causes -- the change in location of the building on the
site (as discussed at the preconstruction meeting), delays by Appellant's
surveyor in making some submittals to the Planning Board, and the
"exhaustiveness" of the Planning Board review process. In the letter, Appellant alleged that the
question of extending the completion date of the contract because of the need
to get the revised site arrangement approved by the Planning Board had been
discussed by the parties' representatives, and that Respondent's
representatives had indicated that any such extension would be discussed after
there was an indication that the Planning Board would approve the new location.
Appellant also stated that it had accommodated the concerns of the Planning
Board in its latest proposal and expected approval of the plan at one of the
Planning Board's upcoming meetings -- on April 4, April 18, May 2, and
May 16. (RAF 29).
10. The site plan was not brought up for approval
at any of the above Planning Board meetings.
(Respondent's Motion for Summary Judgment, Exhibit (REx) 5).
11. By letter dated July 9, 1989, the contracting
officer terminated the contract for default for Appellant's failure to complete
the work by January 9, 1989. Appellant
filed a timely appeal, which was docketed as PSBCA No. 2691.[3] (RAF 31, 32).
12. On April 7, 1992, Appellant filed a claim
with the contracting officer seeking specific performance of the Agreement or,
in the alternative, damages for improper termination. The alternative damages sought by Appellant
consisted of lost rent for the basic lease term of ten years in the amount of
$893,760; lost rent for the twenty years of option periods (four terms of five
years each) in the total amount of $2,652,498; and costs incurred by Appellant
in connection with the Agreement in the total amount of $23,400.[4] In a decision dated June 25, 1992, the
contracting officer denied Appellant's claim, and the appeal from that denial
was docketed as PSBCA No. 3316.
(Notice of Appeal, PSBCA No. 3316; Complaint, filed November 12,
1992).[5]
DECISION
Summary
judgment may be granted only if no genuine issues of material fact exist and
the moving party is entitled to judgment as a matter of law. Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986); Mingus
Constructors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987); Rood
Trucking Co., Inc., PSBCA Nos. 3121, 3132, 93-2 BCA ¶ 25,564; On
Time Postal Services, Inc., PSBCA No. 2528, 90-2 BCA ¶ 22,698. Doubts concerning factual issues must be
resolved in favor of the nonmoving party.
United States v. Diebold, 369 U.S. 654, 655 (1962); Vienna/Vienna,
PSBCA Nos. 2505, 2816, 92-3 BCA ¶ 25,042.
Respondent
argues that Appellant failed to meet the completion date under the Agreement to
Lease and was not entitled to an extension of time. In particular, Respondent argues that none of
the reasons cited by Appellant in its letter of March 10, 1989 (Finding
9), constituted an excusable delay.
Respondent contends that it did not request that the building be moved
to a different location on the site, but that the move was the result of a
suggestion by Appellant's surveyor.
Further, Respondent contends that the move, even if determined to be its
responsibility, should have caused a delay of no longer than two weeks.
In
the alternative, Respondent argues that it could have terminated the Agreement
for Appellant's failure to pursue the work with such diligence as to ensure
that the work would be completed on time.
Appellant
makes two principal arguments that it contends should lead to the denial of
Respondent's summary judgment motion with respect to the propriety of the
default termination. Appellant argues
first that it was delayed because of the requirement that the site plan be
revised to make the building visible from Kenwood
Avenue, a requirement
it argues was imposed by Respondent and which led directly to the change in
building location and Appellant's subsequent inability to obtain the necessary
permits from the town. Appellant also
argues that the schedule against which delays are measured is uncertain because
the fact that the site plan revision was made a contingency in Respondent's
acceptance may have prevented the Agreement from even coming into effect until
August 1988, when the site plan was finally revised.
Appellant's
second major argument is that even if there was a basis for terminating the
Agreement at one time, Respondent lost the right to terminate because it failed
to exercise that right promptly.
Appellant argues that it relied on that failure and continued, with Respondent's
knowledge, in its efforts to secure Town approval of the project. Appellant argues further that Respondent,
having lost its right to terminate, failed to reestablish a reasonable
completion date so as to revive its right to terminate for default.
Having
considered the record and arguments of the parties, we conclude that there
exist genuine questions of material fact with regard to the circumstances
surrounding the change in location of the building on the site and the effects
of that change on Appellant's ability and obligation to prosecute the project
within the time allowed by the Agreement.
The record indicates that the change in location was discussed at the
preconstruction meeting after award of the Agreement and that Appellant agreed
to work on moving the building to another location on the site. The
record does not allow
us to determine whether Respondent directed such a change or whether Appellant
initiated the change, or to determine what the effect of the change was on
Appellant's ability to complete the project within the required schedule,
regardless of which party initiated it.
Similarly, there are insufficient facts to address whether Respondent
waived any performance schedule by its conduct.
Finally, Respondent's "contingent" acceptance of Appellant's
proposal raises the question, which cannot be resolved from the existing
record, of when the Agreement actually came into effect so as to begin the
running of the 300-day construction period.
Accordingly,
Respondent's motion for summary judgment with respect to the propriety of the
default termination is denied.
As
to Appellant's affirmative claim, Respondent argues that it is entitled to
judgment as a matter of law on Appellant's claim for specific performance of
the Agreement because such relief is in the nature of injunctive relief, which
is beyond the Board's authority to order.
Respondent
is correct. As a matter of law, specific
performance is not available to Appellant as a remedy in a Board
proceeding. Mr. and Mrs. Edward R.
Ester, PSBCA No. 1559, 87‑2 BCA ¶ 19,719; See also James
A. Crosby, PSBCA No. 3673, 95-2 BCA ¶ 27,754. Accordingly, Respondent's motion is granted
with respect to that portion of the appeal.
However,
we do not agree that Respondent is entitled to summary judgment on the issue of
the recoverability of rent lost during the base and option terms of the
Agreement. With respect to the base term, Respondent
argues only that Appellant would most likely not have generated any profits,
given that it was a new business venture whose principals had little or no
experience in commercial construction.
However, we agree with Appellant that the mere fact that Appellant was a
new venture, with inexperienced principals, does not by itself support a
factual finding that Appellant would not have earned a profit on the base term
and, therefore, does not lead to the conclusion that Appellant may not recover
damages.
The
situation is similar with respect to the loss of profits during the option
periods. Respondent correctly points out
that the options were exercisable at the sole discretion of the Postal
Service. Based on this, Respondent
argues that any loss of profits from the option periods would be particularly
speculative and uncertain -- i.e., not within the contemplation of the
parties at the time the Agreement was entered into. The factual determination as to whether such
damages were within the contemplation of the parties may turn on evidence of
the expectations of the parties when the Agreement was entered into, with
respect to the likelihood of the Postal Service exercising its options. The current record contains no evidence on
this point from either side. While
making the necessary factual showing may be more difficult for Appellant with
respect to the option periods, Appellant will be given the opportunity to do
so. Accordingly, this portion of
Respondent's motion is denied.
Respondent's
motion for summary judgment is granted with respect to Appellant's demand for
specific performance, but is otherwise 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's surveyor
was the person who actually performed the work of revising the site plan.
[2] The Hamlet of Slingerlands
is within the Town of Bethlehem, New York.
[3] In December 1989, at
Appellant's request, this appeal was dismissed without prejudice pursuant to 39
C.F.R. §955.31. The appeal was restored
to the Board's active docket in October 1991.
[4] Contractor: $1,900;
Surveyor: $5,000; Legal Fees: $16,500.
[5] Neither the claim
nor the contracting officer's decision is in the record.