December 28, 1999
Appeal of
NATIONWIDE POSTAL MANAGEMENT
LEASE AGREEMENT
(Colony, KS Post Office)
PSBCA No. 4080
APPEARANCE FOR APPELLANT:
J. Leonard Spodek
123 Grove Avenue, Suite 222
Cedarhurst, NY 11516-2302
APPEARANCE FOR RESPONDENT:
Gary Shapiro, Esq.
Salt Lake City Office
448 E 6400 South, Suite 450
Salt Lake City, UT 84107-7591
OPINION OF THE BOARD
Appellant, J. Leonard Spodek, has appealed from a contracting officer's final decision withholding $13,697.32 from rent for the Colony, Kansas Main Post Office otherwise due Appellant under a lease agreement with Respondent, United States Postal Service. The amount withheld represented the costs incurred by Respondent to replace the roof of the post office. The appeal is being decided on the record in accordance with 39 C.F.R. §955.12.
FINDINGS OF FACT
1. In 1992, Appellant leased a one-story building and the surrounding property in Colony, Kansas to Respondent for use as the Main Post Office (Colony MPO). The lease was for a five-year term ending on July 8, 1997, at an annual rent of $5,268.00, and included a five-year renewal option, exercisable by Respondent, at an annual rent of $5,928.00. Respondent exercised its renewal option in 1997, making the lease expiration date July 8, 2002. (Appeal File, Tab ("AF") 1, 2).
2. The lease contained a Maintenance Rider which required Appellant to "maintain the demised premises, including the building and any and all equipment, fixtures, and appurtenances, … in good repair and tenantable condition." (AF 1).
3. The Maintenance Rider also provided that when a repair was needed, Respondent must give written notice to the lessor (Appellant), with a copy to the lessor's mortgagee (provided the lessor had furnished the mortgagee's name and address), specifying a reasonable time for the completion of the work. If Appellant failed to make the necessary repairs within the specified time period, "the Postal Service shall have the right to perform the work by contract or otherwise and withhold the cost thereof (which may include administrative cost and/or interest) from payments due or to become due under this lease." (AF 1).
4. On September 23, 1994, the postmaster of the Colony MPO sent Appellant a letter informing him that the roof was leaking and would "need to be looked after soon." Appellant received the letter on September 28, 1994, but took no action in response thereto. (AF 26, 28).
5. The roof leaks progressively worsened over the next two years, interfering with mail operations and posing a safety hazard. As of September 16, 1996, the roof of the Colony MPO continued to leak and the contracting officer was so advised. On that day the contracting officer telephoned Appellant and notified him that the roof was leaking and that immediate action was necessary. On September 17, 1996, the contracting officer sent Appellant a written notice giving him ten days to provide the contracting officer with a copy of a signed contract for the roofing work, and thirty days to complete the work. The notice warned Appellant that Respondent would hire a third-party contractor if Appellant did not meet the specified deadlines, and that the cost of the third-party contract and administrative charges would be deducted from the rent. Appellant received the notice on September 24, 1996. In August 1992, Appellant had provided Respondent with the name and address of the mortgagee, but the contracting officer did not send the mortgagee a copy of the written notice. (AF 22, 23, 28(¶4), 30(¶8); Complaint, Exhibit E).
6. Appellant never requested an extension of either the ten-day or the thirty-day time periods specified in the contracting officer's September 17, 1996 notice. The time periods specified for Appellant's action in the letter were commercially reasonable under the circumstances and were routinely met by other lessors for the same type of work (AF 29(¶3), 30(¶5)).
7. On October 7, 1996, at the request of Wayne Luedke, a building contractor in Colony, Boren's Roofing provided an estimate, offering to install two plies of "Tamko Tam-Ply IV, with moppings of hot asphalt in between each layer [and on the top surface]" at the Colony post office for a price of $1,530. That estimate included a four-year warranty on labor and materials, but did not include removal of the existing roof. At the time Boren's Roofing submitted the estimate, its owner did not know Mr. Luedke was working on Appellant's behalf. Because of previous business dealings between Boren's Roofing and Appellant, Boren's would not have provided an estimate had it known that the Colony MPO was owned by Appellant. (AF 9, 19, 23, 27).
8. On October 15 or 16, 1996, Appellant, without specifically identifying himself, called Boren's Roofing and sought to authorize Boren's to perform the roof work on the Colony MPO for which it had provided the estimate to Mr. Luedke. When the individual at Boren’s Roofing discovered that it was Appellant calling, she told him that Boren's Roofing would not perform the work for him under any circumstances and that any offer to do so was withdrawn. (AF 27).
9. On October 18, 1996, Appellant called Boren's Roofing and said he would send them a check for the roof repair (AF 23, 29).
10. As of October 24, 1996, Boren's Roofing had not received a check from Appellant. Respondent's project manager, having learned of Appellant's attempts to hire Boren's, called Boren's on October 23 and 24, 1996, and was told that the company still had not received a check from Appellant. (AF 23).
11. On October 25, 1996, Respondent issued a work order in the amount of $14,061.73 to Weathercraft Company of Grand Island to remove the existing roof and insulation and install a new, single layer, E.P.D.M. roof and insulation. The contracting officer informed Appellant of the award by a faxed letter of that date. Weathercraft was an indefinite quantity construction contractor to Respondent. Its contract had been awarded following a competitive process, and the contract contained pre-established prices for different types of work. Weathercraft's prices were reasonable in amount for the work it contracted to perform (AF 20, 21, 29, 30).
12. On October 28, 1996, Appellant mailed a check (dated October 18, 1996) in the amount of $1,530.00 to Boren's Roofing. On the same day Appellant sent the contracting officer a letter stating that he (Appellant) had awarded a contract to replace the roof to Boren's Roofing "on or about October 18, 1996." Upon receipt of the letter the Postal Service project manager spoke with Boren's Roofing and confirmed again that there was no contract between it and Appellant. (AF 15, 18, 29).
13. On October 29, 1996, Appellant sent the contracting officer a letter containing what Appellant represented was the "accepted contract" for the re-roofing of the Colony MPO. The purported contract was a copy of the $1,530 job estimate that Boren's Roofing submitted to Mr. Luedke on October 7, 1996 (Finding 7). Neither Appellant's name nor signature appeared on the job estimate. Appellant's letter was not received by the contracting officer until November 5, 1996. (AF 16).
14. At a later date, not clear from the record, Boren's Roofing received Appellant's check, but returned it to him (AF 27).
15. Weathercraft completed the roof installation no later than November 15, 1996. On that date the roofing manufacturer issued a ten-year warranty, agreeing to fix any leaks that occurred during that period. On or about that date, the contracting officer issued a revision to the work order, apparently to reflect actual quantities of the various work order items, and reduced the price of the work order by $714.41 to $13,347.32. A number of minor deficiencies were discovered during an inspection by Respondent's representative on December 5, 1996, and were corrected by Weathercraft at no additional cost. Final payment to Weathercraft was authorized on February 11, 1997. (AF 10, 13, 14, 21, 29, 31).
16. In a final decision dated February 12, 1997, the contracting officer informed Appellant that the roof replacement for the Colony MPO had been completed and that he owed the Postal Service $13,697.32 ($13,347.32 for the repairs, plus $350 for administrative costs). The final decision stated that if payment was not received by February 25, 1997, an additional administrative fee of $200.00 would be added, and the total would be withheld from rent over a period of 33 months. Further, interest would be assessed at 7.3 percent per annum, the Postal Service's cost of money at the time the final decision was issued. (AF 11, 30). Appellant filed a timely appeal (AF 4).
17. By letter dated February 25, 1997, Appellant offered to reimburse Respondent in the amount of $1,530.00, provided the warrantees associated with the Boren's and Weathercraft roofs were similar (AF 9).
18. Respondent incurred well in excess of $350.00 in administrative costs, representing the time expended by the Colony postmaster, the Postal Service project manager, Postal Service real estate office personnel, and the contracting officer on this project from the time Appellant failed to perform until final payment to Weathercraft. (AF 30).
DECISION
Respondent argues that it has demonstrated the three elements that it argues are necessary for it to prevail: That the roof replacement was needed; that the replacement was Appellant's responsibility under the lease and that Appellant breached the lease by failing to make the repair; and that the cost incurred in accomplishing the repair was reasonable.
Appellant primarily takes the position[1] that Respondent improperly proceeded to have the roof replaced by Weathercraft, at a cost of $13,347.32, even though Respondent's project manager was aware that Appellant already had a contract for $1,530.00 to do roof work on the building. Appellant contends that having notified the "parties" and sent full payment to Boren's Roofing, he had a contract with Boren's to perform the roofing work. Appellant also contends he was in "constant telephone contact" with the contracting officer and informed him of the contract with Boren's. Appellant also argues that the ten-day deadline established by the contracting officer for Appellant to present a signed contract was unreasonable. Finally, Appellant notes the fact that Respondent failed to comply with the lease requirement that Respondent notify the mortgagee at the same time it notified Appellant of the need for repair work.
The record demonstrates that repairs to the Colony MPO roof were needed. Further, under the lease such repairs were Appellant's responsibility, and we agree with Respondent that Appellant failed to fulfill his obligation to make the repairs. Under those circumstances and under the provisions of the lease, Respondent was entitled to have necessary repairs performed and to charge the reasonable cost of those repairs against rental payments otherwise due under the lease. We do not accept Appellant's argument that he had a contract for the roof repairs and that Respondent proceeded in the face of, and with knowledge of, that contract. In fact, Appellant never had a contract with Boren's Roofing (or any other roofer) for the repair of the Colony MPO roof. The record shows that the offer made by Boren's Roofing to perform the roofing work was made to Wayne Luedke and not to Appellant. In fact, Boren's would not have made any offer to Mr. Luedke had it known that he was actually working on Appellant's behalf. Therefore, Appellant's purported acceptance was ineffective to create a contract between Boren's and him. See, RESTATEMENT (SECOND) OF CONTRACTS §§29, 52 (1981)("The manifested intention of the offeror determines the person or persons in whom is created a power of acceptance." "An offer can be accepted only by a person whom it invites to furnish the consideration.").
We also do not accept Appellant's contentions with regard to the time allowed him to respond to the contracting officer's notice and with regard to the contracting officer's failure to send a copy of the notification to Appellant's mortgagee. As to the time established for Appellant's response, the record shows that the ten-day and thirty-day periods were commercially reasonable (Finding 6), and Appellant has not shown that he could not have responded within those limits. As to the contracting officer's failure to send a notice to the mortgagee, we have previously held that to rely on such a failure, Appellant must show that the lack of notice resulted in damage or prejudice to him. See M.R. Kaplan, et al., PSBCA Nos. 1147, 1298, 1303, 1310, 88-3 BCA ¶ 20,827 at 105,314. Appellant has neither alleged nor shown that he was damaged in any way by the lack of notice to the mortgagee.
The final issue to be addressed is the amount which Respondent may recover from Appellant's rent for Appellant's breach of his obligations under the lease. While Respondent is entitled to recover breach damages, it is required to mitigate the damages charged to Appellant. Appellant argues, in effect, that the roof could have been repaired for $1,530.00, the amount of the Boren's proposal, and that Respondent, by contracting for a much more expensive solution, has failed in its duty to mitigate Appellant's damages.
While the price paid to Weathercraft for executing the repair method Respondent selected was reasonable (Finding 11), the record also contains an apparently good-faith, contemporaneous offer from an experienced roofing contractor (Boren's)[2] to repair the roof using a different, significantly less expensive method (Finding 7). This raises the question of whether Respondent has demonstrated that the more expensive method it selected was actually necessary, see J. Leonard Spodek d/b/a Nationwide Postal Management, PSBCA Nos. 3833, 3941, 97-2 BCA ¶ 29,273 at 145,645; Real Properties MLP Limited Partnership, PSBCA No. 3453, 95-2 BCA ¶27,829 at 138,756, in order to achieve a "safe, dry interior" for the Colony Post Office, which is what Respondent was entitled to under this lease. See M.R. Kaplan, et al., PSBCA Nos. 1147, 1298, 1303, 1310, 88-3 BCA ¶ 20,827 at 105,320; see also, J. Leonard Spodek d/b/a Nationwide Postal Management, PSBCA No. 3710, 96-2 BCA ¶ 28,457, recon. den. 96-2 BCA ¶ 28,608; Massapequa Partners Limited Partnership, PSBCA No. 3817, 97-2 BCA ¶ 29,058.
The only evidence in the record regarding the need to use the repair method selected by Respondent is a single statement by the owner/manager of Weathercraft that "The roofing work performed at the Colony KS Post Office was necessary to make the roof water-tight." Neither that statement nor any other evidence directly challenges the adequacy of any less expensive method, including that proposed by Boren's.
Accordingly, while Respondent has shown that Appellant failed to honor his lease obligations and while Respondent may, therefore, recover damages, its damages are limited to $1,530.00, the price offered by Boren's to repair the roof. In addition, Respondent may recover the $350.00 in administrative fees it assessed against Appellant. However, inasmuch as Appellant offered to pay what we now hold was due, Respondent may not recover the additional administrative fees it assessed for Appellant's failure to make payment by the required date.
The appeal is sustained to the extent that Respondent's recovery is limited as indicated above, 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] Because of Appellant's repeated failure to comply with discovery orders issued by the Board, by Order dated June 25, 1998, Appellant was precluded from offering any further evidence in connection with this appeal. The Board established dates for the submittal of briefs, but Appellant failed to submit either a brief or reply brief by the required dates. Appellant's position has been gleaned from his Complaint and from other documents in the record.
[2] Boren's had been in business since 1954 (AF 27).