December 7, 1998
Appeal of
JOHNSON INVESTORS LIMITED PARTNERSHIP
HH GROUP INC.
LEASE AGREEMENT
PSBCA No. 4049
APPEARANCE FOR APPELLANT:
Alvin S. Nathanson, Esq.
Nathanson & Goldberg
Two Oliver Street, Eighth Floor
Boston, MA 02109-4901
APPEARANCE FOR RESPONDENT:
Larry Donnell Blanchard, Esq.
Atlanta Office
United States Postal Service
3980 DeKalb Technology Parkway
Suite 840
Atlanta, GA 30340-2778
OPINION OF THE BOARD
Appellant, Johnson Investors Ltd., has appealed the decision of the contracting officer denying its claim for $800 in legal fees associated with a tax reimbursement under the lease agreement between Appellant and Respondent, United States Postal Service. The parties have elected to submit their case on the record in accordance with 39 C.F.R. §955.12.
FINDINGS OF FACT
1. On June 14, 1968, Respondent[1] entered into a lease with Appellant's predecessor-in-interest for certain property in Hollywood, Florida. The initial term of the lease was for fifteen years, with 5 five-year lease term options exercisable by Respondent. Respondent subsequently exercised the first three five-year options in 1983, 1988, and 1993. (Appeal File Tab (AF) 4).
2. The lease contained a Tax Clause Rider which, in paragraph (a) provided as follows:
"(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." (AF 4).
3. Title to the leased property was transferred to Appellant on October 31, 1994 (AF 5).
4. By letter dated November 5, 1996, Appellant submitted to Respondent its 1996 Broward County, Florida, real estate tax bill, in the amount of $15,412.32 (which included a 4% rebate if paid before November 30, 1996). This tax bill included $1,640.42 which was identified on the bill as "Non-Ad Valorem Assessments" (AF 3).
5. Respondent reimbursed Appellant for $13,837.52, but did not pay the $1,640.42 assessed as "Non-Ad Valorem Assessments" (AF 3).
6. By letter dated November 25, 1996, Appellant, aided by its attorney, submitted a claim for the unpaid $1,640.42 in non-ad valorem taxes, " . . . with interest thereon, consistent with the Contract Disputes Act of 1978" (AF 6).
7. By letter dated December 12, 1996, Appellant stated that it had "now incurred attorney's fees in the amount of $800 to review [the unpaid non-ad valorem taxes] and provide the necessary support," and amended its claim to include those fees (AF 1, 6).
8. By final decision dated January 2, 1997, the contracting officer authorized reimbursement of the $1,640.42, plus interest, claimed by Appellant, but denied Appellant's claim for $800.00 in attorney fees (AF 2).
DECISION
Appellant argues that Respondent breached the lease by failing to make prompt payment of the non-ad valorem assessment portion of the Broward County real estate taxes and that it incurred $800.00 in attorney fees as a consequence of Respondent's breach. Respondent, in turn, argues that legal fees incurred in preparing and presenting a claim are not recoverable.
Respondent is correct. Legal fees incurred incidental to a claim presented to the contracting officer, and not incidental to the performance of the work, are not allowable. See Singer Co., Librascope Division v. United States, 568 F.2d 695 (Ct. Cl. 1977); see also, Sarkaisian Brothers, Inc., PSBCA No. 421, 78-1 BCA ¶ 13,125.
It is clear from the record in this appeal that Appellant submitted a Contract Disputes Act claim for the unpaid non-ad valorem taxes on November 25, 1996 (see Finding of Fact No. (FOF) 6). Appellant incurred legal fees in drafting this claim and amended its claim on December 12, 1996, to include the legal fees incurred (FOF 7). Under these circumstances, the legal fees are not recoverable since the fees were incurred incidental to presenting a claim rather than performance of the work.
Appellant attempts to avoid this prohibition by couching its claim as a cost incurred as a result of Respondent's alleged breach, suggesting that, at least in part, the fees were incurred seeking advice as to how to avoid having a lien placed on the property for failure to pay the full tax amount. That argument, however, is not supported by any evidence in the record, i.e., there is no probative evidence that that was the purpose of the legal services received by Appellant.
Appellant has failed to submit any evidence in this record submission that legal fees, in any amount, were provided for any reason other than pursuing its claim.
Accordingly, this appeal is denied.
William K. Mahn
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Vice Chairman