Court Opinion

ID: 774379
Source: CourtListenerOpinion
Date Created: 2012-04-18 11:49:25+00
Date Added: 2024-06-11T17:56:18.012939
License: Public Domain

259 F.3d 1377 (Fed. Cir. 2001)
THE MORELAND CORPORATION, Appellant,v.Anthony J. Principi, SECRETARY OF VETERANS AFFAIRS, Appellee.
00-1523
United States Court of Appeals for the Federal Circuit
DECIDED: AUGUST 7, 2001

Appealed from: The  Department  of Veterans Affairs Board of Contract  Appeals George F. Vogt, Jr., Herrig & Vogt, LLP, of Rancho Cordova, California, argued for appellant. Of counsel was Hazel M. Bergtholdt.
Gary Dernelle, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for appellee. With him on the brief were David M. Cohen, Director; and Kathryn A. Bleecker, Assistant Director. Of counsel were Carrie Sutherland, Attorney, Department of Justice; and Millicent M. Gompertz, Attorney, Department of Veterans Affairs, Office of General Counsel, of Washington, DC.
Before MICHEL, Circuit Judge, FRIEDMAN, Senior Circuit Judge, and CLEVENGER, Circuit Judge.
FRIEDMAN, Senior Circuit Judge.

1
This appeal challenges a decision of the Department of Veterans Affairs  Board of Contract Appeals (Board) denying a contractor's claim for  additional rental for the space it leased to the government that exceeded  the maximum space for which the lease provided the government would pay.  We affirm.

2
* The basic facts are undisputed. In December 1994, the Department of  Veterans Affairs solicited offers to provide leased space for an ambulatory  care center. Section 1.1 of the Solicitation stated that the government was  "interested in leasing 148,260 net usable square feet" (square feet) and  that "[o]ffer[]s must be within the square footage range . . . and comply  with Schedule D, Architectural Layout Drawings, showing circulation and  adjacencies." The Solicitation further specified that the "space . . .  should be on no more than three contiguous floors" and "may be provided by  new construction or modification of existing space." The lease was to be  for fifteen years with a five year renewal option. Section 10.1 of the  Solicitation stated that "[o]ral instructions are not binding." After a pre-bid conference, Section 1.1 of the Solicitation was amended to  provide a range from "a minimum of 148,000 to a maximum of 148,260 net  usable square feet." Solicitation No. 084B-001-94, Amendment No. 2. The  amendment stated that

3
VA will not pay for more space in excess of the maximum amount solicited.

4
The Solicitation also provided in paragraph 3.14, captioned "Changes," that  "the Contracting Officer may make changes within the scope of the lease by  a written order pursuant to the Changes clause set forth in paragraph 17 of  GSA Form 3517" and indicated that a copy of that form was attached to the  solicitation. Similarly, the lease incorporated by reference GSA Form 3517,  and included General Clause 33.552.270-21 - "Changes" which stated:

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(a) The Contracting Officer may at any time, by written order, make changes within the general scope of this lease in any one or more of the following:

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(1) Specifications (including drawings and designs);

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(2) Work or services; or

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(3) Facilities or space layout. . . .

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(d) Absent such written change order, the Government shall not be liable to Lessor under this clause.

10
The appellant The Moreland Corporation (Moreland) submitted a proposal to  provide a newly constructed, two-story office building with 148,260 net  usable square feet. The government entered into a lease with Moreland  covering such building "containing approximately 148,260 net usable square  feet of space . . . to be constructed in accordance with specifications set  forth in [the] Solicitation . . . and addenda thereto." The lease was for  fifteen years at an annual rental of $2,139,391.80. The lease provided that

11
payment will not be made for delivered space which is in excess of 148,260 [net usable square feet] (emphasis in original).

12
The design and layout of the building, which were required to meet the  specifications of the Solicitation and its schedules, were left to  Moreland, which was required to and did submit three successive sets of  working design drawings for Departmental approval. As the construction  proceeded, various changes were made in the design and structure. The  contracting officer issued a large number of written change orders, for  which the government paid Moreland.

13
The completed building contains 165,110 net usable square feet. When the  government refused to pay rent for the space that exceeds 148,260 square  feet, Moreland asked the contracting officer that "the lease be amended to  include the additional 16,698 square feet for the initial term and option  period of the lease." After the contracting officer denied that request,  Moreland appealed to the Board which, in a lengthy opinion, granted the  government's motion for summary judgment and denied Moreland's claim for a  $4,650,814 increase in rental payments for the additional space. Moreland  Corp., VABCA No. 5409 & 5410, 00-1 BCA ¶ 30,640 (Nov. 3, 1999) (Board  decision).

14
The Board held that the lease provision stating that "payment will not be  made for delivered space which is in excess" of the maximum amount  solicited was "express and unambiguous." Board decision, slip op. at 44.  The Board noted that during Moreland's construction of the building, the  government issued "206 bilateral supplemental lease agreements in which  [the government] paid Moreland an additional $1.6 million for change orders  and granted time extensions totaling 71 days. These agreements involved  various architectural, electrical and material changes (fixtures and  equipment). None of these change orders involved adding space to the  building." Board decision, slip op. at 36.

15
The Board rejected Moreland's "contention that it was impossible to  maintain the layout and adjacencies of Schedule D and the room sizes of  Schedule C with the 148,260 [net usable square feet] maximum set by the  Government." Board decision, slip op. at 47 (internal quotation marks  omitted). The Board pointed out that Moreland raised this claim of  impossibility not during the design phase, prior to construction of the  building, but in its appeal. Board decision, slip op. at 47. The Board  noted that "[a]s designer of the building, Moreland was in the best  position to know whether it was impossible to comply with the Lease  requirements. Notification during the design process prior to construction  would have allowed [the government] to consider its options, including  recission, modification of its requirements, or amendment of the Lease to  acquire more space." Board decision, slip op. at 50.

II

16
A. The lease unambiguously and explicitly stated that the government would  not pay for more than 148,260 net usable square feet. In its initial  solicitation the government stated that it was "interested in leasing  148,260 net usable square feet." The amendment to the Solicitation pointed  out that the government "will not pay for more space in excess of the  maximum amount solicited." The lease stated:

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payment will not be made for delivered space which is in excess of 148,260 [net usable square feet] (emphasis in original).

18
By underlining the words, the lease emphasized and called attention to  their critical importance.

19
The foregoing limitation on payment under the lease was part of paragraph  12, which stated:

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Annual rental payments under this lease shall be computed by multiplying the net usable square feet (nusf) contained in the leased premises, as mutually measured by the Government and the Lessor by $14.43, the per nusf cost contained in the Lessor's offer. In the event that the nusf provided by the Lessor and accepted by the Government is other than 148,260 nusf, such nusf figure shall be multiplied by $14.43 to arrive at the annual rental rate; however, payment will not be made for delivered space which is in excess of 148,260 nusf. Should the rental then vary from that stated in Article 3 of the lease, the revised rental rate will be established by amendment to this lease.

21
Moreland contends that this provision of the lease "specifically states  that MORELAND is to be compensated for all net usable square footage  provided." The language upon which Moreland relies - if the square footage  "is other than 148,260," then that other amount "shall be multiplied by  $14.43 to arrive at the annual rental rate" - is immediately followed, as  part of the same sentence, by "however" and then the 148,260 foot payment  limitation.

22
The "however" clause modifies and qualifies what immediately precedes it.  What the entire sentence unambiguously states is that if the number of  square feet is other than 148,260, the government will pay only for the  actual footage it receives but in any event not in excess of 148,260. For  example, if Moreland were to provide 147,900 square feet, the government  would pay only for the latter number and not for 148,260. The last sentence  quoted above, providing for amendment of the lease to reflect "the revised  rental rate," covers that situation. This entire provision is unambiguous  and cannot properly be read as obligating the government to pay for more  than 148,260 square feet.

23
B. Under the lease only the contracting officer could change the lease's  provisions and any such changes would have to be written.

24
Section 10.1 of the Solicitation specified that "[o]ral  instructions are not binding." The lease stated that "the  Contracting Officer may make changes within the scope of the  lease by a written order pursuant to the Changes clause." The  Changes clause provided that "[t]he Contracting Officer may at  any time, by written order, make changes . . . in . . . (1)  Specifications (including drawings and designs); (2) Work or  services; or (3) Facilities or space layout. . . . Absent such  written change order, the Government shall not be liable to  Lessor under this clause." Moreland does not, and cannot, cite  any written change order of the contracting officer that  increased the amount of leased space under the contract, even  though he issued more than 200 bilateral change orders to the  lease.

25
Moreland contends, however, that the contracting officer's  approval of Moreland's third set of design drawings constituted  an agreement to pay for the additional space provided. The  argument apparently is that because construction of the building  in accordance with those drawings would provide more than 148,260  square feet, the contracting officer necessarily approved and  agreed to pay for the excess when he approved the drawings.

26
Such a vague and conjectural analysis is insufficient to modify  the unequivocal contractual provision that "payment will not be  made for delivered space which is in excess of 148,260" square  feet. Indeed, the contracting officer's letter approving the  drawings itself undermines Moreland's contention. The letter  stated that the Department had "made every effort to insure that  your 100% working drawings comply with the requirements of the  lease contract. However, you are still responsible for all errors  and omissions."

27
This court rejected a similar attempt to avoid a contractual  limitation on the amount the government would pay on the basis of  alleged oral statements that it would pay more in City of Oxnard  v. United States, 851 F.2d 344 (Fed. Cir. 1988). That case  involved contracts between Oxnard and the Department of the Navy  under which the city agreed to connect naval installations to its  sewage and water treatment facilities, and the Navy to pay  portions of the construction cost of the projects, which were  "not to exceed" stated amounts. Id. at 345-46. The total  construction costs, however, exceeded the estimated amount.

28
When the Navy refused to pay more than the "not to exceed" amount  specified in the contract, Oxnard challenged the government's  refusal in this court. It contended that "persons representing  the Navy told them that `not to exceed' clauses were always  included in Navy contracts, but that the Navy would pay its fair  share and when the project was finished the Navy would request  any necessary additional funds." Id. at 346.

29
This court upheld the Navy's refusal to pay the additional  amounts. It explained:

30
While the Navy does not dispute that the Connection Charges set in the contracts were calculated as a percentage of the total estimated costs, the final contracts do not obligate the Navy to pay a percentage of the total costs. Instead, the contracts state a specific dollar amount, and a specific 10% contingency, totaling a not-to-exceed dollar amount. The Navy emphasizes that this contingency of 10% above the estimated costs shows the contractual intent and mutual understanding that the Navy had limited its obligation to contribute to cost overruns. We conclude, as did the Board, that this plain reading of the contract is more reasonable than Oxnard's position that the not- to-exceed prices were only "funding control devices".

31
The contracts are not inherently ambiguous, and are not reasonably susceptible of an interpretation that is at odds with their text.

32
Id. at 347-48.

33
This court's reasoning in Oxnard is equally applicable to the  present case. Here, as there, the "plain reading of the contract"  shows that the parties limited the government's monetary  obligation (here to pay rent) to a specified amount (here rent on  148,260 square feet), and that these unambiguous contractual  limitations could not be avoided by the government's alleged  verbal statements that it would pay more.

34
C. Moreland also invokes the doctrine of impossibility of  performance. It argues that the Department's space and  configuration requirements set forth in the solicitation and its  schedules could not be met by a structure that contained only  148,260 square feet. The doctrine might excuse Moreland's failure  to comply with any obligation it may have had under the contract  not to exceed the 148,260 square feet limitation. See United  States v. Winstar Corp., 518 U.S. 839, 904 (1996) (noting that  the "doctrine of impossibility imposes . . . requirements before  a party may avoid liability for breach."); Restatement (Second)  of Contracts § 266(1) ("Where, at the time the contract is made,  a party's performance under it is impractical without his fault  . . . no duty to render performance arises."). It is difficult to  see, however, how the doctrine could require the government to  pay for more space than the maximum amount for which the contract  stated it would pay.

35
In any event, the argument is unpersuasive. Since Moreland  designed the building and its layout, it was in the best position  to know whether its proposal satisfied the contract's space  limitations, or whether it was impossible to do so based upon the  stated requirements. As the Board noted in properly rejecting  this contention, Moreland did not raise the impossibility claim  until the appeal, long after the construction had been completed.  As it stated, "[i]f it were impossible to meet the Government's  requirements within 148,260 nusf, this impossibility would have  been discovered during the design phase rather than after the  building was constructed." Board decision, slip op. at 49. The  Board pointed out: "Notification during the design process prior  to construction would have allowed [the Department] to consider  its options, including recission, modification of its  requirements, or amendment of the Lease to acquire more space."  Board decision, slip op. at 50.

36
Moreland cannot justify its failure timely to raise the  impossibility claim on the ground that, because the Department  had approved the final design plans, Moreland justifiably assumed  that a structure constructed in accordance with those plans would  contain no more than 148,260 square feet. It was Moreland's  responsibility to provide leasable space in accordance with the  contract.

37
As we view the case, therefore, any disputed issues of fact,  which Moreland contends precluded summary judgment by the Board,  were not "material" issues because their resolution was  unnecessary to decide the case. Summary judgment for the  government accordingly was proper.

CONCLUSION

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The decision of the General Services Administration Board of Contracts  Appeals is

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AFFIRMED.