__________________________________________ MOTION FOR SUMMARY RELIEF GRANTED IN PART: November 25, 1997 ___________________________________________ GSBCA 14200 WOODBRIDGE CONSTRUCTION CORP., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Michael P. Darrow of Hillman, Brown & Darrow, P.A., Annapolis, MD, counsel for Appellant. Scarlett D. Grose, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges BORWICK, NEILL, and DeGRAFF. DeGRAFF, Board Judge. The General Services Administration (GSA) entered into a lease with Woodbridge Construction Corporation (Woodbridge) for the use of space in Anne Arundel County, Maryland. The parties disagree as to whether GSA is responsible for reimbursing Woodbridge for a front foot benefit assessment charge imposed by the county to recover the cost of constructing water and sewer lines. GSA filed a motion for summary relief, which we grant, in part. Facts On March 14, 1977, GSA entered into lease number GS-03-B- 70043 with Woodbridge for a laboratory building and storage facility in Annapolis, Maryland. Exhibit 1 at 1.[foot #] 1 Section C of the lease explained that the landlord was to provide services, utilities, and maintenance. Services included lighting and uninterrupted power service, heating and ventilation, air conditioning, plumbing and sewage disposal service, and elevator service. Exhibit 1 at 55-56. As for utilities, section C of the lease explained that the landlord would provide all nonmeterable utilities, and that GSA would pay meterable utility charges for heat, electricity, gas, and water. Section C also spelled out the maintenance responsibilities of the landlord. The landlord was responsible for maintaining plumbing and sewer facilities, including hot and cold water lines, waste lines, and sewer lines. Exhibit 1 at 56-57. The solicitation for offers contained a form that offerors could complete to list their estimated annual cost of services and utilities. The services (including system repair and maintenance) and utilities listed on the form are the same as those listed in section C of the lease: electrical service, including lighting and power, heating, air conditioning, plumbing (including water for all purposes and sewage charges), and elevator service. Exhibit 1 at 66. Paragraph 6 of the lease provided that the landlord was responsible for all maintenance, repair, and replacement of all major systems, including but not limited to the heating, air conditioning, plumbing, electrical, and mechanical systems. Exhibit 1 at 2. In addition, according to paragraph 6i, GSA was responsible for paying for all meterable utilities, such as gas, electricity, oil, and water. The lease said that Woodbridge would provide well water until such time (sic) the facility is connected to city supplied water, and that GSA would pay Woodbridge for well water. Woodbridge was to be responsible for making the connection to city supplied water. Exhibit 1 at 3. Paragraph 13 of the lease contained a tax escalation clause which provided that, every three years, the rent rate would be adjusted to provide for increases or decreases in general real estate taxes. The clause also provided that Woodbridge was to send GSA copies of notices which might affect the valuation of the leased premises so that GSA could contest the valuation for general real estate taxes. Exhibit 1 at 41. Paragraph 14 of the lease contained an operating costs escalation clause which provided that, every three years, the rent rate would be adjusted to provide for increases or decreases in the Lessor s cost of furnishing, (i.e. state specifically such as janitorial and cleaning services, etc. . . .) as further defined in Section C of this solicitation. The ----------- FOOTNOTE BEGINS --------- [foot #] 1 All exhibits are part of the appeal file submitted by the parties. ----------- FOOTNOTE ENDS ----------- operating costs per net usable square foot for these services (and utilities) shall be determined through negotiations with the successful offeror prior to commitment to determine the initial base cost from which future adjustments shall be made. Exhibit 1 at 41-42. In accordance with paragraph 6i of the lease, GSA reimbursed Woodbridge for water service from the commencement of the Government's occupancy of the leased premises through April 30, 1986. The parties stipulate that, when they entered into the lease, there was no public sewer service available to the leased property, and that the property was connected to a septic system. Therefore, GSA did not pay for sewer service. Exhibit 2 at 30, 36, 37; Memorandum of Conference (Nov. 6, 1997). In November 1986, a GSA employee met with several Woodbridge representatives and employees of the Environmental Protection Agency (EPA), the agency that occupied the leased premises, to discuss problems with the premises. The GSA employee was a lease inspector and not a contracting officer. Exhibit 17. Woodbridge supplied the Board with an undated, unsigned document that is purportedly a record of the meeting, which took place on November 13, 1986. This document states, EPA Headquarters will be funding (sic) for any front footage assessments under a least (sic) amendment with GSA. The document does not say who made this statement, and says nothing more about the subject of front foot benefit assessment charges. Exhibit 10. The GSA employee who attended the meeting signed a declaration stating that she did not represent that GSA would pay any front foot assessments, and that she was unaware of the assessments until early 1997. Exhibit 17. In Anne Arundel County, Maryland, where the leased property is located, the county installs water and sewer lines in a street when a majority of the property owners make a request for the lines. The county recovers the cost of constructing water and sewer lines by imposing a fee upon property owners whose property abuts the county right of way where the water and sewer lines are installed. The county bases the fee upon the average width of the property and the cost per foot as determined by the county, and assesses the fee whether the property is improved or unimproved. Anne Arundel County considers this fee, called a front foot benefit assessment, as payment for the benefit that accrues to the parcel of property that is or can be connected to the county water and sewer system. The county assesses property owners in equal annual installments for thirty years. Exhibit 19 at 1-2; Anne Arundel County Code, art. 27, tit. 4. In April 1988, the parties entered into SLA 14. This agreement deletes paragraph 14 of the lease, which was the operating costs escalation clause. SLA 14 added a new operating costs escalation clause which provided that, every three years, adjustments would be made to pay for changes in costs for maintenance attributable to occupancy. SLA 14 established an operating cost base and stated that the rent adjustment would be based upon a cost of living index. Exhibit 2 at 39-41. On January 10, 1990, the Anne Arundel County Department of Health notified Woodbridge that the septic system serving the leased premises had to be replaced. Exhibit 4. In SLA 17, dated December 10, 1991, GSA and Woodbridge amended the lease in order to provide for the installation and maintenance of a sewer connection. According to the amendment, Woodbridge would perform the work necessary to install a sewer connection with a private shopping mall which had access to city sewer lines, and GSA would pay for the work. Exhibits 2 at 51; 18 at 1. Water and sewer lines serving the leased premises were installed by the county, and property owners could connect to those lines in March 1993. The county first issued a front foot benefit assessment charge for the lines beginning in January 1994. Exhibits 19 at 1-2; 100. On May 2, 1995, GSA representatives met with Woodbridge representatives to discuss maintenance of the building. Exhibits 18, 102, 103, 104. According to Woodbridge s representatives, GSA s position was that, if it assumed responsibility for maintenance, it would be entitled to a reduction in the rent. Woodbridge s representatives also say that, at this meeting, the parties resolved their differences regarding three issues: amounts paid by Woodbridge for maintenance, unpaid real estate taxes, and issues related to fixing the amount of rent to eliminate the lease s cost of living increases. Exhibits 102, 103, 104. The cost of living increase provision was contained in the operating cost escalation clause. Exhibit 2 at 40-41. The GSA contracting officer says that, at this meeting, no one from GSA promised Woodbridge that GSA would pay for front foot assessments for the leased property. Exhibit 18. Woodbridge's employees say that the contracting officer's statement is not accurate. Exhibits 102, 103, 104. On May 8, 1995, Woodbridge wrote to GSA concerning the leased premises. Woodbridge s representative said, As we agreed, I have enclosed copies of the E.P.A. Facility tax bills for the years 1989 thru (sic) 1995. I have also enclosed the additional assessment bills with regards to Front Foot for the years 1994 and 1995. The assessment bills that Woodbridge submitted to GSA are separate from the tax bills, which assess a tax based upon the value of Woodbridge's property. Woodbridge s letter asks GSA to adjust the amount of rent based upon tax escalations, and to include increases in property taxes and the front foot benefit assessment in the rent. Exhibit 100. On August 7, 1995, the parties agreed to SLA 20, which amended the lease effective October 1, 1995. SLA 20 deleted the operating costs escalation clause and stated that GSA would assume responsibility for performing all maintenance at the leased facility. SLA 20 also established a new annual rental rate. Exhibit 2 at 114-15. Woodbridge says that the issue of front foot benefit assessments was resolved before SLA 20 was executed and so was not included in the agreement. Exhibits 102, 103, 104. According to Woodbridge, GSA s contracting officer said that GSA would pay the front foot benefit assessment charges when the building was connected to county water. Exhibits 102, 103, 104. In 1996, GSA paid to furnish and install a line from the county water line to the leased premises. Exhibits 8, 9. In February 1996, the building was connected to the county water line. Exhibit 19 at 2. GSA paid Woodbridge for well water used from August 1994 through October 1995. Exhibit 7. On January 20, 1997, Woodbridge submitted a claim to the GSA contracting officer for front foot assessment charges for 1994 ($10,756.86), 1995 ($10,650.36), and 1996 ($10,650.36). Woodbridge also claimed that GSA should pay the interest that Anne Arundel County charged Woodbridge for the 1995 and 1996 payments. Exhibit 11. In fact, the amount that Woodbridge claimed for 1994 includes interest of $106.50, making the charge for 1994 the same as for 1995 and 1996 -- $10,650.36. Exhibit 100. GSA denied the claim on March 17, 1997. Exhibit 15 at 10. This appeal followed. As of September 1997, the leased property was not connected directly to the county sewer line. It continued to utilize the sewer line that is connected to the mall. Exhibits 18 at 1; 19 at 2. Discussion Trying to ascertain why Woodbridge believes that it is entitled to recover the front foot benefit assessment charges has not been an easy task. In its claim, Woodbridge does not explain why it believes that GSA should pay the charges. Exhibit 11. In the notice of appeal that it filed with the Board, Woodbridge said that EPA represented that it would pay the front foot benefit assessment charges, and Woodbridge referred us to the unsigned November 13, 1986 meeting minutes as proof of EPA s representations. Woodbridge said that it hooked up to public utilities at the request and suggestion of the EPA and this resulted in the front foot benefit assessment being charged. Exhibit 14. In its opposition to GSA s motion for summary relief, Woodbridge says, The Minutes of the facilities meeting dated November 13, 1986, are not the basis for the claim. Woodbridge goes on to say, Rather, the parties agreed on May 2, 1995, that the front foot assessment bills would be paid. Woodbridge says that GSA s contracting officer said that GSA would pay the front foot benefit assessment charges in exchange for a deletion of the operating costs escalations as contained in the original Lease. Woodbridge also says the hook up occurred because GSA promised that if Woodbridge assumed the expense of connecting to the sewer system, GSA would pay for the front foot benefit assessment charges. Appellant s Responsive Memorandum at 3-4. In its response to GSA s statement of uncontested facts, Woodbridge says that before August 7, 1995, either the tax escalation clause or the operating costs escalation clause in the lease required GSA to pay the front foot benefit assessment charge. After August 7, 1995, says Woodbridge, SLA 20 required GSA to pay the front foot benefit assessment charge in exchange for GSA no longer having to pay operating cost escalations. Appellant s Response to Respondent s Statement of Uncontested Facts at 3. In the declarations submitted by Woodbridge in response to GSA s supplemental statement of uncontested facts, Woodbridge says that the issue of front foot benefit assessments was resolved before SLA 20 was executed and so was not included in that agreement. At some unspecified time, says Woodbridge, GSA s contracting officer said that GSA would pay the front foot benefit assessment charges when the building was connected to county water. Exhibits 102, 103, 104. In summary, Woodbridge no longer contends that either SLA 20 or representations by EPA entitle it to relief. Woodbridge's position is that it is entitled to recover the front foot benefit assessment from GSA based upon the tax escalation clause, the operating cost escalation clause, or an oral agreement between Woodbridge and the GSA contracting officer. Summary relief Summary relief is appropriate when, based upon uncontested material facts, a party is entitled to relief as a matter of law. When a motion for summary relief is made and is supported by affidavits, declarations, or appeal file exhibits, the party opposing the motion must state the precise nature of its disagreement with the moving party's version of the facts, give its own version of the facts, establish that there is a genuine issue of material fact, and provide affidavits, declarations, or appeal file exhibits to support its position. Rule 108(g). In reviewing GSA's motion for summary relief and the parties' related submissions, we found that the exhibits to which they referred contained some facts that were useful in understanding the events that led up to the present dispute, although the parties did not refer to all of those facts in their submissions. In addition, some of the facts that the parties referred to in their submissions were not included in their statements of uncontested facts and genuine issues. We drafted findings of fact based upon the assertions made by the parties in their submissions, provided that the assertions were supported and not contradicted by the evidence contained in the record. We sent our draft findings of fact to the parties and asked them either to point out errors in the draft findings or to stipulate to the findings. The parties stipulated to the findings of fact set out above. GSA is not entitled to summary relief from the part of Woodbridge's claim that is based upon an oral agreement. GSA is entitled to summary relief from the part of the claim that is based upon the tax and the operating cost escalation clauses. Oral agreement GSA is not entitled to summary relief from the part of Woodbridge's claim that is based upon an oral agreement, because there is a genuine issue as to a material fact. In its opposition to GSA's motion for summary relief, Woodbridge for the first time asserted that the GSA contracting officer promised to pay for the front foot benefit assessment charges during a meeting held on May 2, 1995. In response, the GSA contracting officer stated in a declaration that he did not promise to pay for the front foot benefit assessment charges during the May 2, 1995 meeting. After seeing the contracting officer s declaration, Woodbridge's employees submitted declarations disputing the contracting officer's statement and saying that the contracting officer did, in fact, promise to pay for the front foot benefit assessment charges. The opposing statements that the parties submitted in support of their positions create a genuine issue as to a material fact. In addition, GSA has not presented any argument as to why it would be entitled to relief as a matter of law, even if there were no material facts in dispute. Tax escalation clause In Maryland, it is clear that the construction of water and sewer facilities conveys a benefit to adjacent property, and assessments can be made to defray the construction of such facilities. Washington Suburban Sanitary Commission v. Evans, 490 A.2d 749 (Md. Ct. Spec. App.), cert. denied, 497 A.2d 819 (Md. 1985). Benefit assessment charges are not the same as general real estate taxes. Taxes are levied annually, while a benefit charge is levied one time. Taxes continue indefinitely, while a benefit charge is paid for a fixed number of years. Annual installments due for property taxes fluctuate depending upon the tax rate and the value of the property, while installments due for assessments remain fixed. Taxes are used for the benefits of government that all citizens receive, while assessments are used, in part, for the benefit of the person whose land abuts the improvement that is financed with the assessment. Williams v. Anne Arundel County, 638 A.2d 74 (Md. 1994); Manor Real Estate Co. v. Jos. A. Zamoiski Co., 246 A.2d 240 (Md. 1968); Gould v. City Council of Baltimore, 59 Md. 378 (1883); Anne Arundel County Code, art. 27, tit. 4. In McDaniel Brothers Construction Co., GSBCA 6973, et al., 84-2 BCA 17,497, we stated that the "distinction between general real estate taxes and special assessments carries over into lease law." 84-2 BCA at 87,151. As we explained there: The rule is that a lease provision that requires the lessee to assume the burden of taxes may not be generally read to require the tenant to also assume the burden of special assessments. See Crestview Bowl, Inc. v. Womer Construction Co., 592 P.2d 74, 80 (Kan. 1979); Thompson v. First National Bank, 321 So.2d 466, 467-69 (Fla. Dist. Ct. App. 1975). The reason for this rule in the common law of leases relates to the dual nature of a lease as both a conveyance and a contract. The rationale of this rule is that the lessor, as the owner of the reversion, should bear the burden of improvements which benefit the premises, rather than the leasehold. 1 M. Friedman, Friedman on Leases, 5.201, at 97-98 (2d ed. 1983); 3 G. Thompson, Thompson on Real Property, 1161, at 589 (J. S. Grimes repl. 1980). The exceptions to this rule further illustrate its rationale. The first exception is leases whose term is perpetual. There the burden of special assessments falls upon the lessee because the lessee is, for all intents and purposes, the sole beneficiary of the improvements. Thompson, 321 So.2d at 468. The second exception is those cases where it may be demonstrated that the lease term exceeds the estimated useful life of the improvements, and this exception is also premised on the conclusion that the lessee will receive all of the benefits of those improvements. Efros v. Russo, 177 A.2d 565, 568 (N.J. Super. Ct. App. Div. 1962). 84-2 BCA at 87,151. There is no evidence in our record to establish that either of the exceptions noted in McDaniel applies to our case. The tax escalation clause in the parties' lease requires GSA to increase the rent that it pays if "general real estate taxes" increase. General real estate taxes are based upon the value of the property. Reading the contract plainly, it does not require GSA to increase its rent payments based upon front foot benefit assessment charges because those charges are not general real estate taxes. Woodbridge does not explain how the language of the contract is unclear, and does not advance any interpretation of the contract that would support its position that the tax escalation clause obligates GSA to pay the front foot benefit assessment charges. There is no evidence that a plain reading of the contract vitiates the parties' original bargain. Nothing in the lease provided that GSA would pay for capital improvements that would benefit the leased property, and the assessment was not a substitute for any obligation that GSA originally agreed to assume. GSA is entitled to summary relief from the part of Woodbridge's claim that is based upon the tax escalation clause. The clause required GSA to increase its rent payments if the general real estate taxes on the leased property increased. Front foot benefit assessment charges are not general real estate taxes, and so the clause does not entitle Woodbridge to any increase in rent. Operating costs escalation clause The operating costs escalation clause that was a part of the parties' lease as originally written required GSA to increase the amount of rent that it paid based upon increases in Woodbridge's service and utility costs. The precise operation of the clause is uncertain because the parties did not complete paragraph 14 of the lease to state specifically which service and utility costs would have to increase in order to trigger the operating costs escalation clause. The lack of clarity of the original clause is irrelevant because in 1988, six years before the front foot benefit assessment charge was imposed, the original operating costs escalation clause was deleted and a new clause was added that made quite a departure from the original clause. Instead of looking at Woodbridge's actual service and utility costs and adjusting the rent based upon changes in those costs, the new clause established a base amount for operating costs and provided that the base amount would be adjusted to account for changes in a cost of living index. The clause does not provide for any other means of escalating the amount of operating costs paid by GSA. Woodbridge does not point to any ambiguity in the operating costs escalation clause that was added to the lease in 1988, and we see none. Escalations were to be made to a base amount of operating costs due to increases in a cost of living index. Increases in actual service and utility costs were irrelevant to the operation of the clause. Even if the front foot benefit assessment charge could properly be categorized as an increase in a service or utility cost, which is doubtful, such an increase had no bearing upon the operation of the 1988 operating costs escalation clause. That clause, plainly read, does not provide for escalating the amount of operating costs paid by GSA due to the imposition of any charge, such as a front foot benefit assessment. Even if the 1988 operating costs escalation clause were ambiguous, it would not be logical to read the clause as providing for an escalation in GSA's rent due to a front foot benefit assessment charge. The only way to use the clause to escalate the amount of rent paid by GSA would be to add the front foot benefit assessment charge to the base amount of operating costs. If the base amount were changed by adding the front foot benefit assessment charge, then the amount that GSA would pay for the charge would be escalated each year in accordance with increases in a cost of living index. It would make no sense to escalate the amount that GSA would pay for the front foot benefit assessment charge, because the amount of the charge was constant for thirty years. It would not be reasonable to read the 1988 operating costs escalation clause as requiring the escalation of a cost that would not fluctuate. The operating cost escalation clause was deleted from the lease on August 7, 1995, when GSA agreed to assume responsibility for all maintenance at the leased facility. As a result, after that date, there is no clause which supports Woodbridge s argument. GSA is entitled to summary relief from the part of Woodbridge's claim that is based upon the operating costs escalation clause. The original clause was deleted before the county imposed the front foot benefit assessment charge. The 1988 clause, which is unambiguous, provides for escalating a base amount of operating costs according to increases in a cost of living index, and not according to increases in actual charges. After August 7, 1995, the lease contained no operating costs escalation clause. Decision GSA's motion for summary relief is GRANTED IN PART. All that remains before us is Woodbridge's claim that GSA is responsible for paying the front foot benefit assessment charge based upon an oral agreement between Woodbridge and GSA's contracting officer. -------------------- MARTHA H. DeGRAFF Board Judge We concur: -------------------- -------------------- ANTHONY S. BORWICK EDWIN B. NEILL Board Judge Board Judge