B-121478, OCT 27, 1954

B-121478, OCT 27, 1954

PRECIS-UNAVAILABLE

EDMUND F. MANSURE, GENERAL SERVICES ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 16, 1954, WITH ENCLOSURES, SUBMITTING FOR DECISION THE QUESTION WHETHER PARAGRAPH 7 OF LEASE NO. G3- 10B-160 (FORMERLY I-3L-119), DATED OCTOBER 29, 1948, CONFERS ON THE GOVERNMENT THE RIGHT TO RENEW SAID LEASE FOR A FIVE-YEAR TERM BEGINNING ON JULY 1, 1954, UNDER THE SAME TERMS AND CONDITIONS AS THE ORIGINAL LEASE. SAID PARAGRAPH 7 PROVIDES, AS FOLLOWS:

"THE GOVERNMENT SHALL PAY THE LESSOR FOR THE PREMISES RENT AT THE FOLLOWING RATE: $31,500 PER ANNUM. THE LESSOR AGREES TO RENT AT THE OPTION OF THE LESSEE, THESE PREMISES AT THE RATE NOT EXCEEDING THE PRESENT ANNUAL RENTAL LESS 10% DURING THE YEARS JULY 1, 1954 TO JUNE 30, 1959."

BY LETTER OF MAY 27, 1954, THE PUBLIC BUILDINGS SERVICE AT SEATTLE, WASHINGTON, NOTIFIED THE CRUM-MCKINNON BUILDING COMPANY (SUCCESSOR TO THE ORIGINAL LESSORS) OF ITS INTENTION TO RENEW THE LEASE FOR THE TERM BEGINNING JULY 1, 1954. IN REPLY OF JUNE 7, 1954, THE LESSOR STATED THAT THE REQUESTED RENEWAL WOULD BE ACCEPTABLE SUBJECT TO PERTINENT MODIFICATIONS, AS FOLLOWS:

"1. THE RENEWAL CALLS FOR A FIVE YEAR RENEWAL AT A 10% REDUCTION IN RENT OR TWENTY-EIGHT THOUSAND THREE HUNDRED FIFTY AND NO/100 DOLLARS ($28,350.00) PER ANNUM. WE DO NOT CARE TO RENEW THE LEASE ON A YEARLY BASIS.

"2. IN THE RENEWAL CLAUSE WE DO NOT FURNISH UTILITIES, JANITOR SERVICES OR JANITOR'S SUPPLIES AS HAS BEEN FURNISHED UNDER OUR PRESENT LEASE. HOWEVER, IF YOU WISH US TO CONTINUE FURNISHING THESE ITEMS WE WILL DO SO AT A YEARLY RATE OF $9,150.00 WHICH WAS OUR COST FOR FURNISHING SAME FOR THE PAST YEAR. THE MONTHLY RENTAL, PLUS UTILITIES AND JANITOR SERVICES WOULD BE $3,125.00 PER MONTH. IN THE EVENT YOU FURNISH THESE SERVICES THE MONTHLY RENTAL WILL BE $2,362.50. EITHER WAY WILL BE ACCEPTABLE TO US."

NOTWITHSTANDING SUCH MODIFICATIONS, THE PUBLIC BUILDINGS SERVICE, BY TELETYPE OF JUNE 30, 1954, COMMITTED THE GOVERNMENT TO RENT THE BUILDING FOR AN ADDITIONAL FIVE-YEAR TERM BEGINNING JULY 1, 1954, SUBJECT TO ALL THE TERMS AND CONDITIONS OF THE ORIGINAL LEASE. SUCH ACTION WAS BASED ON AN OPINION OF MAY 21, 1954, OF THE REGIONAL COUNSEL WHO IN EFFECT CONCLUDED THAT UNDER THE PROVISIONS OF THE SECOND SENTENCE OF PARAGRAPH 7, THE GOVERNMENT ACQUIRED THE RIGHT TO RENEW FOR A FURTHER FIVE-YEAR TERM UPON THE SAME TERMS AND CONDITIONS AS THE ORIGINAL LEASE. THE CONCLUSION APPEARS TO BE BASED ON LETTER OF OCTOBER 28, 1948 (ONE DAY PRIOR TO EXECUTION OF THE LEASE) FROM THE LESSOR'S PREDECESSORS, WHICH LETTER APPARENTLY ACCOMPANIED THEIR BID OF THE SAME DATE. THE LETTER STATES THAT THE BIDDERS WOULD FURNISH THE SPECIAL SERVICES THEREIN SET FORTH AND THAT THEY WOULD HAVE THE BUILDING READY FOR OCCUPANCY WITHIN SIX MONTHS FROM THE SIGNING OF THE LEASE. THE LETTER CONCLUDES:

"WE WILL DO ALL THE ABOVE IN EXCHANGE FOR AN ANNUAL RENTAL ON A FIVE YEAR NON-REVOCABLE LEASE OF $31,500. WE WILL ALSO ENTER INTO AN OPTION FOR RENEWAL OF THE LEASE FOR FIVE ADDITIONAL YEARS WITH A TEN PERCENT REDUCTION IN RENTAL."

THE LESSOR IN EFFECT CONTENDS THAT THE LETTER OF OCTOBER 28, 1948, IS NOT CONTROLLING; THAT THE LEASE ALONE FIXES THE OBLIGATIONS OF THE PARTIES; THAT THE DELETION OF PARAGRAPH 5 OF THE LEASE FORM WHICH WOULD HAVE SPECIFICALLY PROVIDED FOR A RENEWAL OF THE LEASE UPON THE TERMS AND CONDITIONS STATED THEREIN INDICATES THAT THE PARTIES NEVER INTENDED THAT THE FIVE-YEAR OPTION IN PARAGRAPH 7 WAS INTENDED TO OPERATE AS A RENEWAL OPTION UPON THE SAME TERMS AND CONDITIONS OF THE ORIGINAL LEASE; THAT THE RENEWAL RIGHT GRANTED THE GOVERNMENT UNDER PARAGRAPH 7 MERELY OBLIGATES IT TO FURNISH THE BARE BUILDING EXCLUSIVE OF THE SPECIAL SERVICES LISTED IN PARAGRAPH 6; AND THAT THE DECISION IN THE FRAZER CASE OF AUGUST 29, 1952, B-106578, TO YOU, IS CONTROLLING.

IT HAS BEEN HELD THAT WHERE A COVENANT FOR RENEWAL IS GENERAL AND DOES NOT STATE THE TERMS OF THE RENEWAL LEASE, THE NEW LEASE IS TO BE UPON THE SAME GENERAL TERMS AS THE OLD LEASE. CUMMINGS V. RYTTING, 207 P. 2D 804. 32 AM. JUR., LANDLORD AND TENANT SECTION 959. ALSO, IT HAS BEEN HELD THAT IN CONSTRUING A LEASE RELATING TO RENEWALS THE USUAL RULES OF INTERPRETATION OF WRITINGS APPLY AND IF THERE IS ANY UNCERTAINTY THE TENANT IS FAVORED RATHER THAN THE LANDLORD BECAUSE THE LATTER, HAVING THE POWER TO STIPULATE IN HIS OWN FAVOR, HAS FAILED TO DO SO AND, ALSO, ON THE PRINCIPLE THAT EVERY MAN'S GRANT IS TO BE TAKEN MOST STRONGLY AGAINST HIMSELF. JAMISON V. LINDBLOM, 110 N.S. 2D 9.

IT IS TRUE THAT IN THE INSTANT CASE AS IN THE FRASER CASE PARAGRAPH 5 WAS DELETED. THAT PARAGRAPH WOULD HAVE AUTHORIZED RENEWAL BY THE GOVERNMENT FROM YEAR TO YEAR UPON THE TERMS AND CONDITIONS SPECIFIED IN THE ORIGINAL LEASE. HOWEVER, ANY INFERENCE WHICH MIGHT BE DRAWN FROM THE DELETION OF PARAGRAPH 5 IN THE INSTANT CASE IS NULLIFIED BY THE ORIGINAL LESSOR'S LETTER OF OCTOBER 28, 1948, AS WELL AS THE SPECIFICATIONS. THESE TWO FACTORS DISTINGUISH THE PRESENT CASE FROM THE FRASER CASE. THE SPECIFICATIONS ATTACHED TO THE INVITATION FOR BIDS DATED OCTOBER 25, 1948, WHICH BECAME PART OF THE LEASE BY REFERENCE, REQUIRED THE PROSPECTIVE LESSOR TO FURNISH THE SPECIAL SERVICES LISTED THEREIN. FURTHER, THE SPECIFICATIONS PROVIDED THAT THE CONTRACT WOULD BE SUBJECT TO ANNUAL RENEWAL AT THE OPTION OF THE GOVERNMENT FOR FOUR YEARS AFTER THE ORIGINAL TERM. AS IS APPARENT FROM THE LETTER OF OCTOBER 28, 1948, YOUR PREDECESSORS DID NOT DESIRE TO RENEW THE LEASE ON AN ANNUAL BASIS. INSTEAD THEY OFFERED A RENEWAL OPTION FOR A FIVE-YEAR NONREVOCABLE TERM AT A TEN PERCENT REDUCTION IN RENTAL INCLUDING SPECIAL SERVICES AND THE LEASE WAS ENTERED INTO ON THAT BASIS.

UNDER SUCH CIRCUMSTANCES AND HAVING REGARD TO THE RULE STATED IN THE CUMMINGS CASE, THE TELETYPE OF JUNE 30, 1954, OBLIGATED THE LESSOR FOR AN ADDITIONAL FIVE-YEAR TERM BEGINNING JULY 1, 1954, UNDER THE SAME TERMS AND CONDITIONS AS THE ORIGINAL LEASE (INCLUDING THE SPECIAL SERVICES SPECIFIED IN PARAGRAPH 6), EXCEPT FOR A REDUCTION OF TEN PERCENT IN THE ANNUAL RENTAL RATE OF $31,500. ACCORDINGLY, THERE IS NO LEGAL BASIS FOR PAYING THE LESSOR $9,150 PER ANNUM FOR THE TERM BEGINNING JULY 1, 1954, FOR THE SPECIAL SERVICES LISTED IN PARAGRAPH 6 OF THE LEASE.

AS REQUESTED THE ENCLOSURES FORWARDED WITH YOUR LETTER ARE RETURNED.