Valley Realty Co. v. United States
| Decision Date | 20 December 2010 |
| Docket Number | No. 10-256C,10-256C |
| Parties | VALLEY REALTY COMPANY, Plaintiff, v. UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Cross-Motions for Summary Judgment; Breach of Contract; Ambiguity; Contra Proferentem
Lawrence M. Magdovitz, II, Law Offices of Lawrence Magdovitz, Cordova, Tennessee, for the plaintiff.
Jeffrey A. Regner, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for the defendant. With him were Bryant G. Snee, Deputy Director, Jeanne E. Davidson, Director, Commercial Litigation Branch, and Tony West, Assistant Attorney General, Civil Division.
The issue presented by this case concerns which party should be held responsible for the cost of repairs required to be made to the sewerage system in a leased, United States Post Office facility in Birchwood, Tennessee. The facility is owned by plaintiff, Valley Realty Company (Valley Realty), the Lessor, and was leased by the United States Postal Service (the Postal Service), the Lessee. The original lease term of ten years began June 1, 1983, and ended May 31, 1993. Thereafter, the Lease was extended by the parties in five year increments. The current Lease extension between Valley Realty and the Postal Service runs from June 1, 2008 to May 31, 2013. The base lease term and cumulative five year extensions will total thirty years in 2013 atthe end of the current extension. Sewerage1 at the post office facility is accomplished not through a public waste system, which is unavailable at the site, but through an attached septic tank system.
In late December 2008, the Postal Service discovered roots growing into the main sewer line. On January 15, 2009, the Postal Service sent a letter to Valley Realty identifying the problem as "Roots growing in drain field caused septic problems (RotoRooter took care of back-up...)." The January 15, 2009 letter also requested that plaintiff make the necessary repairs to the system. The letter stated: "Should you fail to complete the work, the Postal Service has the legal right to contract for the work and the cost, plus any administrative fee and appropriate interest, will be reimbursed by you or deducted from your rent."
Valley Realty declined to make the repairs. Plaintiff's counsel responded to the Postal Service's letter by email on February 19, 2009:
No repairs were made to the sewerage system by either party during the first nine months of 2009. On approximately August 3, 2009, the Postal Service discovered water leaking from the toilets in the facility when the toilets were flushed. The Postal Service called Roto-Rooter, which concluded that the septic tank did not require cleaning, but that the main sewerage line was emptying into the ground instead of into the septic tank. The toilets no longer accepted waste.
In an August 5, 2009 letter to plaintiff, the Postal Service contracting officer recounted the Postal Service's earlier, January 15, 2009 letter to plaintiff concerning roots growing into the main sewer line, and also the August 3, 2009 notification, that "[w]ater gushes out of the toilet when flushed...." The contracting officer described theproblem as an "emergency because of health or safety issues requiring immediate attention." The August 5, 2009 letter continued: "In accordance with Paragraphs 6 & 25 of the Lease, the lessor is responsible to provide sewerage service to the building and is responsible for such until a public system becomes available and the lessor provides hookup to same." (emphasis in original).
On September 10, 2009, the Postal Service sent plaintiff a follow-up letter reciting the history of the problem and indicating that, since plaintiff had not completed the required repairs, the Postal Service would do so, would seek reimbursement from plaintiff for the cost of the work, plus any administrative costs and interest, and that a rent deduction will be taken from the rent due under the terms of the Lease.
The Postal Service retained Prime Contractors, Inc. (PCI) to make the repairs. PCI determined that the sewer line between the building and the septic tank was broken at the inlet baffle of the septic tank, creating a sink hole which allowed the waste to enter the soil area and allowed soil to enter the septic tank. PCI's invoice, dated October 5, 2009, stated:
Sewer line Repairs:
• Investigated water gushing when toilets are flushed: Discovered that the sewer line between the building and septic is broken at the inlet baffle of the septic tank, creating a sink hole allowing the waste to enter the soil area and soil entering the septic tank:
We need to perform the following work:
• Remove the septic tank lid and pump tank:
• Clean & replace inlet & out let [sic] baffles for proper operation:
• Saw cut approximately 10' x 2' of existing asphalt surface, excavate existing sewer line and replace approximately 10' of 4" sewer line and properly connect to existing septic inlet baffle:
• Install proper cleanouts on inlet and outlet sewer lines:
• Rod out field lines at outlet baffle:
• Back fill excavated area with compacted stone and dirt:
• Asphalt Pave over the excavated area disturbed by above noted work:
• Additional Work: Replace (2) Septic Tank Concrete Lids:
The Postal Service computed the sewerage system repair costs at $5,388.67. The direct cost of the repair by PCI was $5,318.67. Project manager administrative costs were calculated at $70.00 (2 hours at $35.00 per hour). Plaintiff has waived "any argument that the cost was not reasonable and necessary."
In a December 8, 2009 letter to plaintiff, the Postal Service stated that the work was completed on October 5, 2009, and that if reimbursement in the amount of $5,388.67 was not received by January 7, 2010, that amount would be deducted fromfuture rent payments to the Lessor. Plaintiff responded on December 18, 2009, stating: Plaintiff followed this with a letter, dated January 22, 2010, reiterating its position that the Maintenance Rider, Attachment "A" to the Lease states that plaintiff "is only responsible for providing the septic system at the outset of the lease not for repairs made to the septic system." Plaintiff's letter concluded that if the Postal Service nevertheless takes a rental deduction for the repairs, plaintiff will file a lawsuit in the United States Court of Federal Claims.
The Postal Service contracting officer issued a final decision on the matter on February 5, 2010. The contracting officer's decision recounted the history of the sewer problem: that roots were discovered "growing into the lines of the septic system," and that the "sewer line had disengaged from the tank causing the sewage to empty on the ground." The contracting officer continued by citing to paragraph 6 of the Lease (PS Form 7449), which states that the plaintiff, as Lessor, shall provide "water and sewerage service (if public systems are not available), all as described in the General Conditions, PS Form 7400-A." (emphasis by contracting officer). The contracting officer's final decision concluded that, although plaintiff was responsible for providing sewerage service and was given ample notice and opportunity to complete the required repairs to the sewerage system, plaintiff had failed to make the necessary repairs. The contracting officer's final decision indicated that $5,388.67 would be withheld from rent due plaintiff in monthly installments between April 1, 2010 and September 1, 2010. Plaintiff also was apprised of its appeal rights. Thereafter, plaintiff filed this lawsuit in the Court of Federal Claims.
The parties have stipulated to the material facts and have filed cross-motions for summary judgment, each seeking affirmance of its own interpretation of the words in the Lease. The parties jointly characterize the issue for the court as follows:
Which party is responsible under the lease agreement for the $5,318.67 paid by the Postal Service and the $70 in administrative cost incurred by the Postal Service, for the repairs to the septic system at the property?
Rule 56 of the Rules of the Court of Federal Claims (RCFC) is patterned on Rule 56 of the Federal Rules of Civil Procedure (Fed. R. Civ. P.) and is similar, both in language and effect. Both rules provide that summary judgment should be granted "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." RCFC 56(c)(1) (2010); Fed. R. Civ. P. 56(c)(2) (2010); see also Alabama v. North Carolina, 130 S. Ct. 2295, 2308 (2010); Hunt v. Cromartie, 526 U.S. 541, 549 (1999); Nebraska v. Wyoming, 507 U.S. 584, 590 (1993); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986); Adickes v. S. H. Kress & Co., 398 U.S. 144, 157 (1970); Consol. Coal Co. v. United States, 615 F.3d 1378, 1380 (Fed. Cir.), reh'g and reh'g en banc denied (Fed. Cir. 2010); 1st Home Liquidating Trust v. United States, 581 F.3d 1350, 1355 (Fed. Cir. 2009); Arko...
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