Case Name: PODUNK REALTY, INC. v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1967-12-15
Citations: 181 Ct. Cl. 1125
Docket Number: No. 410-64
Parties: PODUNK REALTY, INC. v. THE UNITED STATES
Judges: Before Cowen, Chief Judge, Laramoee, Dtireee, Davis, Collins, Skelton, and Nichols, Judges.
Reporter: United States Court of Claims Reports
Volume: 181
Pages: 1125–1140

Head Matter:
388 F. 2d 688
PODUNK REALTY, INC. v. THE UNITED STATES
[No. 410-64.
Decided December 15, 1967]
Albert E. Greene, attorney of record, for plaintiff.
■ Bay Goddard, with whom was Assistant Attorney General Edwin L. Weisl,Jr., for defendant.
Before Cowen, Chief Judge, Laramoee, Dtireee, Davis, Collins, Skelton, and Nichols, Judges.

Opinion:
PeR ChRIAm :
This case was referred to Trial Commissioner Mastín G. White with directions to make findings of fact and recommendation for conclusions of law. The commissioner has done so in an opinion and report filed on March 15, 1967. Exceptions to the commissioner's findings and recommended conclusion of law were filed by plaintiff and the case has been submitted to the court on oral argument of counsel and the briefs of the parties. Since the court agrees with the commissioner's findings, opinion, and recommended conclusion of law, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case. Plaintiff is, therefore, not entitled to recover and the petition is dismissed.
Opinion of Commissioner
White, Commissioner:
In this case, the plaintiff sues for $55,960 because the defendant allegedly breached a lease agreement that was entered into on March 26, 1962 between the plaintiff's predecessor in interest, Green Manor Construction Company, Inc. (referred to hereafter in the opinion as "Green Manor") and the defendant.
It is my opinion that the plaintiff is not entitled to recover.
The lease agreement in question was numbered GS-02B-8978, and it was entered into between Green Manor as lessor and the defendant as lessee. In the lease agreement, Green Manor leased to the defendant "A two story and basement building containing approximately forty thousand (40,000) gross square feet of floor area to be constructed as hereinafter set forth on a plot located at 599 Delaware Avenue in Buffalo, New York As indicated in this quotation, there actually was no building on the lot at 599 Delaware Avenue when the lease was entered into, and it was part of the agree ment that Green Manor as lessor would construct such a building and make it available for use and occupancy 'by the defendant as lessee. The lease was for a primary term of 10 years beginning on or about February 1, 1963 (whenever the building was ready for use and occupancy by the defendant) , and the defendant was granted an option to renew the lease for two additional periods of 5 years each.
On its side, the defendant as lessee under lease No. GS-02B-8978 agreed to pay the lessor rental at the rate of $116,952 per annum during the primary 10-year term of the lease and at the rate of $114,700 per annum during any extension of the lease.
Green Manor (or the plaintiff as Green Manor's successor in interest on and after July 24,1962) constructed on the site at 599 Delaware Avenue in Buffalo, New York, and made available to the defendant for its use and occupancy, a building which the defendant accepted as meeting the requirements specified in lease No. GS-02B-8978. The defendant, in turn, has apparently performed its obligation under the lease by paying the annual rental pi-ovided for in the lease. Thus, it appears on the surface that, as of the present time, both parties have met the respective obligations imposed upon them by the lease, and that there is no basis for the assertion of a breach-of-contract claim against the defendant.
The evidence in the record indicates, however, that it cost the lessor more to construct the leased building than was anticipated at the time when lease No. GS-02B-8978 was entered into; and the problem before the court is to determine whether the defendant is somehow legally liable for the extra cost.
As previously indicated, lease No. GS-02B-8978 provided that the lessor would construct on the site at 599 Delaware Avenue, and would make available to the defendant for use and occupancy, a "two story and basement building containing approximately forty thousand (40,000) gross square feet of floor area The lease further provided that the building would "substantially" conform to certain schematic drawings which the defendant had previously furnished to the lessor and which indicated that the defendant desired for the use of the Food and Drug Administration a building which, would contain approximately 40,000 square feet of floor area, divided among: (1) a basement floor, providing as the principal facilities a rather large garage and parking area, a supply room, a service room, a receiving, and shipping room, refrigeration rooms, and rooms for the storage of inspectors' equipment, samples, and volatile solvents; (2) a first floor, providing as the principal facilities a large office for clerical personnel, a large office for inspectors, individual offices for the director, assistant director, and other officials, an interview room, a room for hearings and conferences, a women's locker room, a men's locker room, and rooms for clerical supplies and inspectors' supplies; (3) a second floor, providing as the principal facilities a library and a number of laboratories; and (4) a penthouse, providing space for stills and a storage tank.
In addition, the lease provided that the lessor would prepare "complete working construction drawings and specifications, which shall include, among other things a site plan showing the orientation of the building on the site and related ground improvements in conformity with Buffalo City ordinances based on the scope of the work as outlined in the [schematic] drawings that the lessor would submit two copies of the working construction drawings "to the Government for review and approval"; and that the lessor would "make such changes to said working construction drawings, recommended by the Government, without additional cost to the Government, provided such changes are within the scope of the work referred to in [tire schematic] drawings
On April 2,1962, the lessor submitted to the defendant, for review in accordance with the provisions of the lease, four alternative sets of drawings, designated as schemes AA, AAA, B, and BB, for the building to be constructed at the 599 Delaware Avenue site. All of these drawings were disapproved by the defendant on April 10,1962.
Schemes AA, AAA, and BB were disapproved by the defendant because they indicated that where the building fronted on Delaware Avenue, the bottom or so-called basement floor (containing the garage and parking area, among other facilities) would be at approximately the same level as Delaware Avenue, the so-called first floor (containing the offices) would be the second story of the building from the ground level at Delaware Avenue, and the so-called second floor would be the third story from the ground level at Delaware Avenue. The defendant took the position that schemes AA, AAA, and BB would provide a 3-story building rather than a 2-story-and-basement building, as called for in the lease agreement. In this connection, it should be mentioned that the topography of the lot at 599 Delaware Avenue was such that the surface of the ground sloped upward in the direction away from Delaware Avenue, so that, under schemes AA, AAA, and BB, the bottom or basement story would have been below the ground level on the opposite side of the building from Delaware Avenue; and the building, when viewed from the rear, would not have appeared to be a 3-story building.
Scheme B was disapproved by the defendant because, although this scheme called for the bottom or so-called basement floor to be at a depth of about 10 feet below the ground level on the Delaware Avenue side and for the so-called first floor (containing the offices) to be readily accessible from Delaware Avenue, it would be necessary for automobiles using the ramp from Delaware Avenue down to the entrance of the garage and parking area on the bottom or basement floor to make two very sharp turns in negotiating this distance.
Following the disapproval by the defendant of the lessor's drawings that comprised schemes AA, AAA, B, and BB, the lessor prepared another set of drawings for the proposed construction of the building at 599 Delaware Avenue. These drawings were designated as scheme A.
In order to meet the defendant's conception of a 2-story- and-basement building — i.e., a building where the so-called first floor, containing the offices, would be at approximately the same level as Delaware Avenue on that side of the building and thus readily accessible from Delaware Avenue — the lessor provided in scheme A for the placement of the bottom or so-called basement floor at a depth of about 12% feet below the ground level on the Delaware Avenue side of the building. The ramp leading from Delaware Avenue down to the entrance of the garage and parking area on the bottom or basement floor was designed so as to avoid sharp turns.
The drawings that comprised the lessor's scheme A were submitted to and approved by the defendant; a building was constructed by the lessor at 599 Delaware Avenue in accordance with such drawings; and the building was accepted by the defendant, as lessee, for use and occupancy under lease No. GS-02B-89Y8.
The plaintiff contends—and the evidence in the record indicates—that the defendant's action in disapproving the lessor's schemes AA, AAA, B, and BB for the building at 599 Delaware Avenue increased the cost to the lessor of constructing the building.
The plaintiff concedes that the lessor was required under the lease agreement to submit working construction drawings to the defendant for review and approval, and was further required to make, without additional cost to the defendant, such changes in the working construction drawings as might be recommended by the defendant. However, the plaintiff points out that the defendant's authority to recommend changes was limited, in that such changes had to be "within the scope of the work" provided for in the lease, and that the lease provided for the construction by the lessor of a "two story and basement building" to be made available to the lessee. The plaintiff further points out that the lease agreement provided that the building would be oriented on the site at 599 Delaware Avenue "in conformity with Buffalo City ordinances"; and that the Buffalo building code during the period 1961-1962 defined "basement" as a story of a building which was more than 12 inches, but not more than one-half the height of the story, below the highest level of the adjoining street, and defined "cellar" as a story of a building which was more than one-half the height of the story below the highest level of the adjoining street. The plaintiff then proceeds to argue that when the defendant insisted that the so-called first floor of the building be placed at approximately the ground level on the Delaware Avenue side, thus requiring that the bottom or so-called basement story be more than one-half the height of the story below the level of the ground, this necessitated the con struction of a 2-story-and-cellar building rather than a 2-story-and-basement building, and, therefore, was outside "the scope of the work" envisioned by lease agreement No. GS-0213-8978.
In connection with the plaintiff's argument, it is interesting to note that the lessor itself proposed, in its alternative scheme B, to construct a building of the type which the plaintiff now characterizes as a 2-story-and-cellar building, and the lessor in scheme B referred to the bottom floor as the "basement." This was a tacit recognition by the lessor that the parties, when they entered into lease agreement No. GS-02B-8978, were using the word "basement" in its usual and ordinary meaning among members of the modern construction industry, i.e., a story of a building which is one-half the height of the story, or more, below the level of the ground. The term "cellar" is not commonly used in the modern construction industry.
It was obviously the purpose of lease No. GS-02B-8978, in providing that the building should be oriented upon the site at 599 Delaware Avenue "in conformity with Buffalo City ordinances," to make sure that the arrangement of the building would not violate any ordinances of the city; and there is no evidence in the record to indicate that the building, as finally constructed, failed to comply in any respect with the ordinances of the city. It is a reasonable inference that, from the standpoint of the city ordinances, it was immaterial whether the bottom or so-called basement story of the building at 599 Delaware Avenue was more than one-half, or less than one-half, or precisely one-half, the height of the story below the ground level. The archaic definitions of "basement" and "cellar" in the Buffalo building code seemingly had no bearing on the lawfulness of the building which the lessor constructed at 599 Delaware Avenue, and there is nothing in the record to indicate that the parties intended to contract in the light of such definitions.
It appears that when the defendant, as lessee, disapproved schemes AA, AAA, B, and BB, the defendant was exercising a discretionary power which was expressly vested in the defendant by lease No. GS-02B-8978, and that the defendant did not require of the lessor anything which was outside "the scope of the work" envisioned by the lease.
Since the evidence in the record fails to show any breach by the defendant of lease No. GS-02B-8978, it necessarily follows that the plaintiff is not entitled to recover, and that the petition should be dismissed.
ColliNS, Judge, took no part in the decision of this case.
FINDINGS of Fact
1. The plaintiff, Podunk Eealty, Inc., is a corporation organized under the laws of the State of Connecticut, having its principal place of business at 685 Parker Street, Manchester, Connecticut.
2. The plaintiff is a subsidiary of Green Manor Construction Co., Inc. (hereinafter referred to as "Green Manor"), a corporation organized under the laws of the State of Connecticut, having its principal place of business at 685 Parker Street, Manchester, Connecticut.
3. On February 3, 1961, the defendant issued Invitation for Bids No. 2 PEA-674, soliciting bids for the leasing to the Government of a building to be constructed for office and laboratory use by the Food and Drug Administration in accordance with specifications and schematic drawings contained in the invitation.
4. The building was to be located on a site at 827 Delaware Avenue, Buffalo, New York, being the southeast corner of Delaware Avenue and Barker Street. The topography of the site at 827 Delaware Avenue was such that the surface of the ground sloped downward in the direction away from Delaware Avenue.
5. The successful bidder was required to purchase the site for the sum of $200,000 by exercising the Government's assignable purchase option for the property.
6. On April 3, 1961, bids were formally opened. Eight bids were received, among which was one from Green Manor.
7. Green Manor offered to construct the building at an estimated cost of $900,000, exclusive of land costs, and lease the structure to the Government at a monthly rental of $9,771, or $117,252 per year, for the first 10 years and $9,282 per month, or $111,384 per year, during the two 5-year renewal periods.
8. On May 22, 1961, the defendant advised all bidders, including Green Manor, that all bids in response to Invitation for Bids No. 2 PEA-674 were rejected.
9. The bidders were advised that it had been determined to be in the best interest of the Government to negotiate for this proposed building, and Green Manor was invited to participate in this negotiation.
10. On June 28,1961, negotiated offers were received from six bidders, among which was an offer from Green Manor. Included in Green Manor's offer was a set of plans and drawings, consisting of 9 sheets, including a site plan showing orientation of the building to the site and related ground improvements.
11. The defendant made contacts with all bidders and arranged further meetings to discuss the possibility of negotiating a lower price. The meeting with Green Manor was held on September 26,1961.
12. On September 28, 1961, the defendant advised all bidders by telegram that negotiations were concluded and that final offers must be received no later than September 29, 1961.
13. Green Manor submitted a bid by telephone on September 29, 1961, and confirmed the bid by a telegram dated October 2,1961.
14. On October 25, 1961, Green Manor, as a result of its being the lowest bidder, was awarded a letter agreement on IFB No. 2 PEA-674 by the defendant for the construction and leasing of a building on a site designated as 827 Delaware Avenue in the City of Buffalo, State of New York.
15. The terms of the letter agreement provided for the construction of a 2-story-and-basement building containing 40,000 gross square feet at the site known as 827 Delaware Avenue, Buffalo, New York; and further provided that Green Manor assumed the defendant's rights and obligations by accepting an assignment of an option to purchase such site.
16. On December 11, 1961, Green Manor's architects submitted seven drawings relative to the proposed construction.
17. Green Manor did not exercise the option to purchase the property located at 827 Delaware Avenue because the zoning laws of the City of Buffalo prohibited the construction of the proposed 2-story-and-basement building at that location, and Green Manor was unable to obtain the necessary zoning permit.
18. The option to purchase the property at 827 Delaware Avenue expired.
19. In view of the continuing need for the building, the defendant undertook to locate and secure another site. Green Manor also undertook to locate and secure another site.
20. On January 10, 1962, Green Manor advised the Government that many problems had prevented it from exercising the purchase option on the 827 Delaware Avenue site, and requested that the Government negotiate only with Green Manor in the event the facility was to be built under a lease-ownership arrangement at another site.
21. On January 17, 1962, the defendant advised Green Manor that after the selection of an alternate site, a determination would be made as to the proper manner in which to proceed further concerning the selection of a contractor.
22. On February 27, 1962, the defendant obtained an option to purchase the property at 599 Delaware Avenue, Buffalo, New York. The topography of the site at 599 Delaware Avenue was such that the surface of the ground sloped upward in the direction away from Delaware Avenue.
23. The option referred to in finding 22 was assigned to Green Manor by the defendant and was subsequently exercised by Green Manor so as to make it the owner of the premises.
24. (a) On March 26, 1962, the defendant (as lessee) entered into a lease agreement with Green Manor (as lessor). The lease was numbered GS-02B-8978. Under it, Green Manor leased to the defendant:
A two story and basement building containing approximately forty thousand (40,000) gross square feet of floor area to be constructed as hereinafter set forth on a plot located at 599 Delaware Avenue in Buffalo, New York, to be used exclusively for office, laboratories, storage, motor vehicle garage, parking and related uses.
(b) The lease was for a primary term described as "the term beginning on or about February 1, 1963, and ending with date measured ten (10) years from date premises are ready for Government use and occupancy."
(c) The lease further provided that it might, at the option of the defendant, be renewed for two additional periods of five years each.
(d) The lease provided that the defendant would pay Green Manor rental at the rate of $116,952 per annum during the primary 10-year term of the lease, and at the rate of $114,TOO per annum during any extension of the lease.
25. Paragraph 20 of lease agreement No. GS-02B-8978 provided in part as follows:
Prior to the beginning of the term of this lease the Lessor shall provide all labor and material required to construct a first class, airconditioned, basement and two story building of sound and substantial construction, substantially conforming to specifications entitled Part II, Part III, Exhibits "A" and "B", and schematic drawings marked A-l through A-5, E-l through E-4, M-l through M-2 and LF-1 through LF-7 all contained in Invitation For Bids No. 2PEA-674, dated February 3, 1961, except as the same may be explained or modified by the following: (a) matters referred to as described in Paragraphs ID, 1H, 5 and 6 of Lessor's letter dated June 28, 1961; (b) Addendum to Description of Construction and Materials dated July 20, 1961 of Pederson and Tilney, architects; (c) Lessor's letter dated July 24, 1961 and (d) Lessor's letter dated August 2, 1961 copies of which are attached hereto and made a part hereof. Lessor shall prepare complete working construction drawings and specifications, which shall include, among other things a site plan showing the orientation of the building on the site and related ground improvements in conformity with Buffalo City ordinances based on the scope of the work as outlined in the above referred to drawings, specifications and letters and shall forward two (2) copies to the Government for review and approval, not later than seven (7) days after the date of this lease. Lessor shall make such changes to said working construction drawings, recommended by the Government, without additional cost to the Government, provided such changes are within the scope of the work referred to in above drawings, specifications and letters.
26. The new lease agreement made no provision for inclusion of the drawings originally furnished for the 827 Delaware Avenue site. Further, the new lease agreement contained a provision whereby the defendant was released from any and all liability, suits, demands, actions, and all causes of action which have arisen or may arise as a result of or relating to the letter-agreement dated October 25, 1961 between the parties for the construction and leasing of the building at 827 Delaware Avenue.
27. (a) Invitation for Bids No. 2 PRA-674, dated February 3, 1961, was incorporated into the new lease agreement. The invitation for bids contained a number of schematic drawings showing the performance needs of the defendant. The schematic drawings were what might be called program drawings indicating the general needs of the Government, without necessarily indicating that a particular room was to be located in a particular place.
(b) The schematic drawings which accompanied and were part of Invitation for Bids No. 2 PRA-674 indicated that the defendant desired a building for the use of the Food and Drug Administration which would contain: (1) a basement floor, providing as the principal facilities a rather large garage and parking area, a supply room, a service room, a receiving and shipping room, refrigeration rooms, and rooms for the storage of inspectors' equipment, samples, and volatile solvents; (2) a first floor, providing as the principal facilities a large clerical office, a large inspectors' office, individual offices for the director, assistant director, and other officials, an interview room, a room for hearings and conferences, a women's locker room, a men's locker room, and rooms for clerical supplies and inspectors' supplies; (3) a second floor, providing as the principal facilities a library and a number of laboratories; and (4) a penthouse, providing space for stills and a storage tank.
(c) Paragraph 1 of subsection B (entitled "Special Requirements") of section I of part II of Invitation for Bids No. 2 PRA-674 provided as follows:
1. Material, workmanship, and architectural design shall be satisfactory to GSA.
28. (a) On April 2, 1962, Green Manor submitted drawings for the proposed building construction at the new site. These new plans contained orientation drawings designated as schemes AA, AAA, B, and BB, showing several different proposals for the orientation of the building to the new site.
(b) All'the drawings referred to in paragraph (a) of this finding, designated as schemes AA, AAA, B, and BB, were disapproved by the defendant on April 10,1962.
(c) Schemes AA, AAA, and BB were disapproved by the defendant because they indicated that where the building fronted on Delaware Avenue, the bottom or so-called basement floor (containing the garage and parking area and the other facilities mentioned in finding 27 (b) (1)) would be at approximately the same level as Delaware Avenue, and the so-called first floor (containing the offices) would be the second story of the building from the street level at Delaware Avenue. It was the defendant's position that these schemes would provide a 8-story building rather than a 2-story-and-basement building, as called for in the lease agreement. The nature of the topography of the lot at 599 Delaware Avenue was such that if 'the building had been constructed in accordance with scheme AA or scheme AAA or scheme BB, the bottom or basement story of the building would have been below the ground level on the side opposite from Delaware Avenue.
(d) Scheme B was disapproved by the defendant because, although this scheme called for the bottom floor to be at a depth of about 10 feet below the ground level on the Delaware Avenue side and for the so-called first floor (containing the offices) to be readily accessible from Delaware Avenue, it would be necessary for automobiles using the ramp from Delaware Avenue down to the entrance of the garage and parking area on the bottom floor to make two very sharp turns in negotiating this distance. The bottom floor in scheme B was denominated the "Basement."
29. (a) Following the disapproval by the defendant of the drawings referred to in finding 28, Green Manor prepared another set of drawings for the proposed construction of the building at 599 Delaware Avenue. These drawings were designated as scheme A.
(b) In order to meet the defendant's conception of a 2-story-and-basement building—i.e., a building where the so-called first floor, containing the facilities referred to in finding 27 (b) (2), would be at approximately the same level as Delaware Avenue on that side of the building—Green Manor provided in scheme A for the placement of the bottom or so-called basement floor at a depth about 12% feet below the ground level on the Delaware Avenue side of the building. The ramp leading from Delaware Avenue to the entrance of the garage and parking area on the bottom or basement floor was designed so as to avoid sharp turns.
(c) The drawings that comprised scheme A were submitted to and approved by the defendant.
30. A building was constructed at 599 Delaware Avenue in accordance with the drawings that comprised scheme A. Upon completion of the building, the defendant entered into occupancy of the building under lease agreement No. GS-02B-8978. It is inferred, from the absence of any allegations to the contrary, that there has been no default by the defendant in the payment of the rental provided for in the lease agreement.
31. On or about July 24,1962, Green Manor assigned and transferred to the plaintiff all its rights, title, and interest in lease agreement No. GS-02B-8978, which assignment was consented to by the defendant on July 27,1962.
32. (a) On or about January 18, 1963, the plaintiff filed with the contracting officer a claim in the amount of $55,960, allegedly representing the extra cost incurred in constructing the building at 599 Delaware Avenue as a result of the defendant's action in disapproving the drawings (schemes A A, AAA, B, and BB) which Green Manor submitted to the defendant on April 2,1962.
(b) On August 12, 1963, the plaintiff's claim was denied by the contracting officer.
(c) The plaintiff exhausted its administrative remedies before seeking relief from this court.
33. It is reasonable to infer from the evidence in the record: (1) that the cost of constructing 'the building at 599 Delaware Avenue was greater than the cost which Green Manor anticipated at the time when it entered into lease agreement No. GS-02B-8978 with the defendant, although the evidence does not show the extent of the difference between the anticipated cost and the actual cost; and (2) that the cost of constructing the building at 599 Delaware Avenue in accordance with scheme A was greater than the cost of constructing the building in accordance with any of the schemes (AA, AAA, B, or BB) which Green Manor submitted to the defendant on April 2, 1962 would have been, although the evidence in the record is not sufficient to permit accurate findings to be made regarding the differentials between the actual cost under scheme A and what the respective costs would have been under the several other schemes.
34. (a) During the period 1961-1962, the building code promulgated by the City of Buffalo, New York, defined "basement" as a story of a building which was more than 12 inches, but not more than one-half the height of the story, below the highest level of the adjoining street; and it defined "cellar" as a story of a building which was more than one-half the height of the story below the highest level of the adjoining street.
(b) In the modern terminology of the construction industry, a "basement" is a story of a building which is one-half the height of the story, or more, below the level of the ground. The term "cellar" is not commonly used in the modem construction industry.
35. The evidence in the record does not show that the building, as constructed at 599 Delaware Avenue, failed to conform in any respect to the ordinances of the City of Buffalo.
CONCLUSION OE LAW
Upon the foregoing findings of fact and opinion, which are adopted by the court and made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is not entitled to recover, and the petition is dismissed.
The opinion, findings of fact, and recommended conclusion of law are submitted under the order of reference and Rule 57(a).