May 13, 2005

Appeals of

SIERRA CONSTRUCTION, INC.

LEASE AGREEMENT

PSBCA Nos. 4950, 4951, 5006 and 5007

 

APPEARANCE FOR APPELLANT:

Steven L. Tiedemann, Esq.

 

APPEARANCE FOR RESPONDENT:

Patrice R. Dickey, Esq.

 

OPINION OF THE BOARD

Appellant, Sierra Construction, Inc., filed claims for certain unexpected costs it allegedly incurred in connection with the construction phases of two construction/lease contracts with Respondent, United States Postal Service.  The contracting officer denied the claims, and Appellant appealed.  By agreement of the parties, this Opinion addresses only whether releases executed by Appellant’s president were binding on Appellant, and the Board will not reach the merits of the claims at this time.  The appeals were consolidated for submission of evidence and decision on the release issues, and are, at the election of the parties, decided on the record in accordance with 39 C.F.R. §955.12.  The following Findings of Fact are made solely for deciding the enforceability of the releases. 

 FINDINGS OF FACT

1.  On April 12, 1999, Respondent issued a solicitation seeking offers to enter into a new-construction-lease contract (“NCL”).  Under this contract, the successful offeror would construct a post office and related improvements on a site in Gore, Virginia (the “Gore Post Office”) and lease the facility to the Postal Service for twenty years.  (Appeal File, PSBCA Nos. 4950, 5006, Tabs (“AF (Gore)”) 5, 13, 15).

2.  Also on April 12, 1999, Respondent issued a solicitation seeking offers to enter into an NCL under which the successful offeror would purchase a site controlled by the Postal Service in Linden, Virginia, construct a post office and related improvements on that site (the “Linden Post Office”) and lease the facility to the Postal Service for twenty years (Appeal File, PSBCA Nos. 4951, 5007, Tab (“AF (Linden)”) 25). 

3.  Appellant was the successful offeror on each of the solicitations, and on November 29, 1999, Respondent awarded Appellant the contracts for construction and lease of the Gore and Linden Post Offices (AF (Gore) 12, 13; AF (Linden) 21, 24).

4.  Appellant, Sierra Construction, Inc., had been started by David Sutherland in 1997, and he was originally the company’s president (Deposition of David Sutherland, p. (“Sutherland Depo.”) 11).  However, when Lawrence Basalyga joined the company the next year, Mr. Sutherland designated him as president to provide a person with authority to deal directly with customers on day-to-day on-site project management issues, and Mr. Sutherland became the vice president/CEO of the corporation (Sutherland Depo. 12).

5.  Mr. Basalyga played an active role in the two post office projects.  He signed the leases and amendments on Appellant's behalf and signed or was the addressee of much of the correspondence between Appellant and Respondent (AF (Gore) 4, 5, 7-13, AF (Linden) 8, 11, 16, 17, 19, 21, 24; Sutherland Depo. 12, 27).  He was authorized to bind the corporation, and he did not need the concurrence of the vice president/CEO to sign contract documents on the corporation’s behalf (Sutherland Depo. 7-8).  (Deposition of Robert K. McNiece, pp. (“McNiece Depo.”) 20-21, 31; Sutherland Depo. 7, 19-21, 27).

6.  Respondent accepted the Gore Post Office on November 23, 2001, commencing the rental payments under the contract (AF (Gore) 3; McNiece Depo. 16, 18-19; Declaration of Lawrence M. Basalyga (“Basalyga Decl.”), ¶ 2; see Declaration of Robert K. McNiece (“McNiece Decl.”), ¶ 10).  

7.  Respondent accepted the Linden Post Office on March 12, 2002.  Rent began earlier, on February 21, 2002, because Respondent had been using part of the building since then.  (AF (Linden) 4; McNiece Decl. ¶ 7; see AF (Linden) 5, 6; Basalyga Decl. ¶ 2 and Exhibit 2).  

8.  On April 14, 2002, Mr. Sutherland submitted to the contracting officer a consolidated request for contract modifications to both leases.  Appellant sought adjustments, in unspecified amounts, because of asserted substantial cost overruns on both projects.  In the request, Appellant described several problem areas for discussion and possible compensation for each facility.  On July 3, 2002, the contracting officer denied the request as to each post office as being submitted too late.  He did not address the merits of any issue raised in Appellant’s April 14th letter.  (AF (Gore) 2 and AF (Linden) 2; McNiece Depo. 27 and Exhibit A; AF (Linden) 1).  

9.  In the spring or summer of 2002, Mr. Sutherland submitted certain close-out documentation for the Gore and Linden projects.  Because he intended to submit formal claims to cover Appellant’s substantial cost overruns on both projects, Mr. Sutherland intentionally omitted from both packages releases that would have waived Appellant’s claims.  (Sutherland Depo. 21, 30‑31; see McNiece Depo. 31-32; McNiece Decl. ¶ 8).

10.  In the summer of 2002, Respondent’s project manager encountered Mr. Basalyga at a construction project that is not in issue here.  Upon being informed that Appellant was planning to file claims under both of the contracts, the project manager asked whether or not a release had been submitted for the Linden project.  Mr. Basalyga thereupon called the company office and was informed that, because of the anticipated claims, Mr. Sutherland had chosen not to include releases in the Gore and Linden close-out packages when he submitted them.  This information was shared with the project manager.  (McNiece Decl. ¶ 8).

11.  Following the above exchange, Respondent’s project manager asked Mr. Basalyga, on several occasions, on the telephone and in person at various project meetings, whether releases would be provided for the Gore and Linden projects (McNiece Decl. ¶ 9; see McNiece Depo. 31-32; and Basalyga Decl.).  

12.  In early August 2002, Mr. Basalyga decided to leave Appellant and began negotiating his departure with Mr. Sutherland.  Respondent’s project manager knew in early August that Appellant’s president intended to leave the company soon and was negotiating the terms of his departure with Mr. Sutherland.  (Sutherland Depo. 9‑10, 14-15; McNiece Depo. 21-22, 41-42).

13.  Eventually, after deciding to leave Appellant, Mr. Basalyga informed Respondent’s project manager that he would sign the releases (McNiece Decl. ¶ 9).  Mr. Sutherland was not informed by Mr. Basalyga or by Respondent that Respondent was obtaining releases from Appellant’s departing president (McNiece Depo. 31; Sutherland Depo. 6).

14.  On August 26, Respondent’s project manager drafted releases for both projects and emailed the releases to Appellant’s president at his personal email account within a day or two thereafter (McNiece Decl. ¶ 10; McNiece Depo. 32-33, 40-41).

            15.  The releases were entitled Contractor’s Release for New Construction Leases, and included headings identifying them to the Gore Post Office and the Linden Post Office.  The Linden release recited that the date of acceptance of that facility was March 12, 2002, and the Gore release recited a November 23, 2001 acceptance date for that facility.  (AF (Gore) 3; AF (Linden) 3).

16.  Sometime between August 28 and September 3, 2002, Appellant’s president signed the Gore and Linden release forms, taking no exception to the releases of Appellant’s claims.  Each document purported to release and discharge Respondent “from all liabilities, obligations, claims, and demands whatsoever, regardless of whether such claims have been asserted or could have been asserted under or arising from the said contract.”  Mr. Basalyga dated the Linden release March 23, 2002, and the Gore release November 30, 2001.  (McNiece Decl. ¶¶ 10, 10 (a);[1] Basalyga Decl. ¶ 2). 

17.  Each release form, as drafted by Respondent’s project manager, included a Certificate at the bottom that was intended to reflect Appellant’s corporate certification that the signer of the release was authorized by the corporation to do so.  In completing the release Certificates, Mr. Basalyga entered his printed name and position as the signer.  For the corporate official attesting to his authority, Mr. Basalyga typed in the name and title of the company office assistant and signed the certification with a signature purporting to be that of the office assistant, but did so without informing her or receiving her authorization.  (AF (Gore) 3; AF (Linden) 3; Basalyga Decl. ¶ 3; Affidavit of Arlene Mann).

18.  Respondent’s project manager received the signed Gore and Linden releases by mail within a week or so of sending them to Appellant’s president.  When he noticed that the president had not dated the releases with the date actually signed, the project manager immediately called him.  Mr. Basalyga explained that he had entered the earlier dates, nearer the dates the post offices were accepted, because that is when he thought the releases should have been executed by Appellant (See Findings 6, 7).  That explanation satisfied the project manager, and he accepted and signed both releases for Respondent.  (McNiece Decl. ¶ 10; McNiece Depo. 29-30, 33-34, 39, 42-44).

19.  On September 10, 2002, less than two weeks after executing the releases, Appellant’s president sold back his ownership interest in Appellant and relinquished his position (McNiece Depo. 41-42; Sutherland Depo. 10; Exhibit 1 to Basalyga Decl.).

20.  On October 1, 2002, Appellant filed appeals of the contracting officer’s July 3, 2002 denials of its April 2002 request for adjustment (see Finding 8).  The appeals were docketed by the Board as PSBCA Nos. 4950 (Gore lease) and 4951 (Linden lease).

21.  On February 18, 2003, while action on the above appeals was suspended by the Board, Appellant submitted certified monetary claims under the Gore and Linden leases, seeking additional compensation under both contracts on the same bases described in its earlier consolidated request for contract modification (AF (Gore) 16; AF (Linden) 26).  

22.  In final decisions dated March 6, 2003, the contracting officer denied Appellant’s certified claims on the merits, addressing each claimed basis for relief. [2]  In supplementary decisions on March 13, 2003, he denied the claims on the additional ground that they were barred by the Gore and Linden releases.  (AF (Gore) 17; AF (Linden) 27).  The decisions were appealed by Appellant, docketed as PSBCA Nos. 5006 and 5007, respectively, and consolidated with PSBCA Nos. 4950 and 4951 for determination of the merits of Respondent’s release defenses.

DECISION

Respondent solicited and obtained Appellant’s president’s execution of documents purporting to waive Appellant’s claims related to the Gore and Linden Post Office projects.  Respondent argues that Appellant thereby waived its claims.  Appellant disputes the authority of its former president to execute the releases and contends that they are not binding on Appellant.

Appellant argues that Respondent may not rely on the releases signed by Mr. Basalyga because it has failed to demonstrate Mr. Basalyga’s actual authority to execute the releases by producing a corporate resolution of Appellant authorizing such execution.  However, Appellant has not shown any requirement, in the articles of incorporation or elsewhere, that a corporate resolution would have been necessary to authorize the company president to execute routine contract documents associated with the closeout of the projects.  See Apemco, Inc., ASBCA No. 9952, 65-2 BCA ¶ 5131.  Additionally, throughout the course of the projects, Appellant’s president was authorized to act for Appellant in contract matters without any need for separate corporate action or Mr. Sutherland’s concurrence (Findings 4, 5).  See Mobility Systems and Equipment Co., DOTBCA No. 2776, 95-2 BCA ¶ 27,685; Apemco, Inc., ASBCA No. 9952, 65-2 BCA ¶ 5131.

Appellant suggests that as Mr. Basalyga’s departure from the company neared, his actual authority to bind the company dwindled.  However, Mr. Basalyga remained the company’s president, and if Appellant did not wish Mr. Basalyga to have the authority inherent in that position and consistent with the past manifestations of that authority throughout the projects, it was incumbent upon Appellant to limit that authority and advise Respondent of such limitations.  See Mobility Systems and Equipment Co., DOTBCA No. 2776, 95-2 BCA ¶ 27,685 at 138,028.  There is no evidence that Appellant took any steps to remove Mr. Basalyga as company president or limit his authority to act for the company in matters related to the Gore and Linden leases, and we find that he had actual authority to bind Appellant to the releases.[3]

Appellant argues that the releases were tainted by fraud and that they should, therefore, not be binding on Appellant.  Appellant points to Mr. Basalyga’s falsification of the office assistant’s signature on the releases and his execution of the releases just before leaving the company as evidence of his fraudulent conduct.  While fraud by the other party may prevent a release from binding the defrauded party, see J. G. Watts Constr. Co. v. United States, 161 Ct. Cl. 801, 807 (1963) citing Michael Rose Productions v. Loew’s Inc., 143 F. Supp. 606, 607 (S.D.N.Y. 1956), Appellant has not shown that Mr. Basalyga’s falsification of the office assistant’s signature on the Certificate was known to Respondent’s officials or that any improper actions on Mr. Basalyga’s part can be attributed to Respondent.  As noted above, there is also no evidence that any such certification would have been necessary for Appellant’s president to have exercised the authority inherent in his position.

The Board has considered and rejected all grounds raised by Appellant for finding that it is not bound by the releases signed by Mr. Basalyga.  Thus, based on the record and arguments presented, we conclude that the releases at issue here were binding on Appellant.  See J. G. Watts Constr. Co. v. United States, 161 Ct. Cl. 801, 807 (1963); Kenneth and Vernell Chadwell, PSBCA No. 3587, 95-1 BCA ¶ 27,319; L. W. Charlebois, Inc., PSBCA No. 315, 77-1 BCA ¶ 12,432.

                                                                                    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]  The declaration contains two paragraphs numbered 10.  The Board has marked the second such paragraph as 10 (a). 

[2]  The certified claims themselves are not in the record, but from the contracting officer’s item-by-item response to the claims it is apparent that the certified claims addressed substantially the same issues raised in Appellant’s earlier consolidated request for a contract adjustment (Finding 8).

[3] In view of this conclusion, we need not address the parties’ arguments relating to whether Mr. Basalyga had apparent authority to execute the releases on Appellant’s behalf.