B-135742, MAY 9, 1958

B-135742: May 9, 1958

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WITHIN SUCH REASONABLE TIME AS IS PRESCRIBED BY THE DIVISION ENGINEER. W-09-026-ENG-7011 WAS AMENDED BY SUPPLEMENTAL AGREEMENT NO. 2 TO INCLUDE THE PARENT CORPORATION. FOR THAT REASON IT WAS ADMINISTRATIVELY DECIDED NOT TO SHUT THE PLANT DOWN FOR THE MAKING OF ANY MAINTENANCE AND RESTORATION REPAIRS. WHICH WAS ACCOMPLISHED THROUGH LEASE NO. IT WAS AGREED BETWEEN THE DISTRICT ENGINEER. THE GOVERNMENT AGREES TO RELEASE AND DOES HEREBY RELEASE YOU FROM ANY AND ALL LIABILITY AND CLAIMS WHICH THE GOVERNMENT NOW HAS OR EVER WILL HAVE BY REASON OF ANY MATTER. THE SAID CORPORATION WAS ENTITLED. IT WAS NOT UNTIL MAY 24. NO SUCH COMPLAINTS WERE FILED DURING THAT PERIOD. WAS SOLVAY ADVISED OF ANY NEGOTIATIONS BETWEEN THE GOVERNMENT AND ALGONQUIN-MISSOURI WITH RESPECT TO DEFECTS IN OR RESTORATION OF THE LEASED PREMISES.

B-135742, MAY 9, 1958

TO THE SECRETARY OF THE ARMY:

BY LETTER DATED APRIL 1, 1958, REFERENCE 150 ENGLT/LU REDSTONE ARSENAL, ALABAMA, THE CHIEF OF ENGINEERS REQUESTED A DECISION AS TO THE LIABILITY, IF ANY, OF THE SOLVAY PROCESS DIVISION, ALLIED CHEMICAL AND DYE CORPORATION, FOR CERTAIN COSTS, AMOUNTING TO $38,508.30, REPORTEDLY INCURRED IN THE REHABILITATION AND RESTORATION OF A CHLORINE AND CAUSTIC SODA PLANT AT HUNTSVILLE, ALABAMA, AFTER THE EXPIRATION OF LEASEHOLD AGREEMENT NO. W-09-026-ENG-7011, DATED SEPTEMBER 4, 1946, AS AMENDED.

THE SAID LEASE COVERED THE RENTAL OF CERTAIN CHEMICAL FACILITIES AT THE HUNTSVILLE ARSENAL FOR THE FIVE-YEAR PERIOD DECEMBER 14, 1946, TO DECEMBER 14, 1951. AMONG OTHER THINGS, THE CONTRACT OBLIGATED THE LESSEE, AT ITS OWN EXPENSE, TO REPAIR, RESTORE AND CONDITION THE PREMISES FOR THE EFFICIENT PRODUCTION OF CHLORINE AND CAUSTIC SODA. UNDER ARTICLES 13 AND 20 OF THE LEASE, THE LESSEE FURTHER AGREED:

"13. THAT THE LEASED PREMISES SHALL AT ALL TIMES BE MAINTAINED IN GOOD OPERATING CONDITION BY AND AT THE EXPENSE OF THE LESSEE; THAT THE LESSEE SHALL KEEP THE LEASED PREMISES IN AS GOOD ORDER AND CONDITION AS THAT EXISTING UPON THE DATE OF COMMENCEMENT OF THIS LEASE.'

"20. THAT UPON THE EXPIRATION OR OTHER TERMINATION OF THIS LEASE, * * * THE LESSEE SHALL AT ITS COST, WITHIN SUCH REASONABLE TIME AS IS PRESCRIBED BY THE DIVISION ENGINEER, RESTORE THE LEASED PREMISES TO AS GOOD ORDER AND CONDITION AS THAT EXISTING UPON THE DATE OF THE COMMENCEMENT OF THE TERM OF THIS LEASE, ORDINARY WEAR AND TEAR EXCEPTED, AND UPON COMPLETION OF THE WORK REQUIRED THEREBY SHALL IMMEDIATELY AND PEACEABLY YIELD THE SAME TO THE GOVERNMENT IN SAID CONDITIONS.'

DUE TO THE MERGER ON NOVEMBER 1, 1947, OF THE SOLVAY PROCESS COMPANY WITH ITS PARENT ORGANIZATION, THE ALLIED CHEMICAL AND DYE CORPORATION, LEASE NO. W-09-026-ENG-7011 WAS AMENDED BY SUPPLEMENTAL AGREEMENT NO. 2 TO INCLUDE THE PARENT CORPORATION, AND TO CHANGE THE NAME OF THE LESSEE TO THE SOLVAY PROCESS DIVISION, ALLIED CHEMICAL AND DYE CORPORATION.

IT APPEARS THAT THE KOREAN CONFLICT BROKE OUT PRIOR TO EXPIRATION OF SOLVAY'S LEASE ON DECEMBER 14, 1951, THEREBY CREATING A TREMENDOUS DEMAND FOR CHLORINE AND CAUSTIC SODA. FOR THAT REASON IT WAS ADMINISTRATIVELY DECIDED NOT TO SHUT THE PLANT DOWN FOR THE MAKING OF ANY MAINTENANCE AND RESTORATION REPAIRS, BUT RATHER, TO LEASE THE PREMISES IMMEDIATELY, COMMENCING ON DECEMBER 15, 1951, TO THE ALGONQUIN-MISSOURI CHEMICAL CORPORATION, WHICH WAS ACCOMPLISHED THROUGH LEASE NO. DA (S) 01-076-ENG- 180, EXECUTED ON SEPTEMBER 6, 1951. HOWEVER, BY AN INSTRUMENT DATED DECEMBER 14, 1951, REPRESENTING THE TERMINATION DATE OF SOLVAY'S LEASE NO. W-09-026-ENG-7011, AS AMENDED, IT WAS AGREED BETWEEN THE DISTRICT ENGINEER, MOBILE, ALABAMA, AND THE SOLVAY PROCESS DIVISION THAT:

"FOR AND IN CONSIDERATION OF YOUR DELIVERING TO THE GOVERNMENT IN OPERATION AS OF 12:00 O-CLOCK MIDNIGHT 14 DECEMBER 1951, THE PREMISES LEASED TO YOU BY THE REFERENCED LEASES, THE GOVERNMENT AGREES TO RELEASE AND DOES HEREBY RELEASE YOU FROM ANY AND ALL LIABILITY AND CLAIMS WHICH THE GOVERNMENT NOW HAS OR EVER WILL HAVE BY REASON OF ANY MATTER, CAUSE, OR THING WHATSOEVER, KNOWN OR UNKNOWN, ARISING OUT OF YOUR OBLIGATIONS UNDER THE LEASES WITH RESPECT TO OPERATION, MAINTENANCE AND RESTORATION, PROVIDED, HOWEVER, THAT YOU SHALL BE LIABLE, AND BY THE ACCEPTANCE OF THIS RELEASE HEREBY BECOME LIABLE, FOR ALL COST OCCASIONED FROM YOUR FAILURE TO PERFORM YOUR OBLIGATION TO MAINTAIN AND RESTORE UP TO AND INCLUDING 14 DECEMBER 1951, YOUR LIABILITY NOT TO EXCEED THE SUM OF $50,000.00; AND PROVIDED FURTHER THAT THE NECESSITY FOR THE MAINTENANCE AND RESTORATION RESULTING FROM YOUR FAILURE TO SO MAINTAIN AND RESTORE DURING THE TERM OF SAID LEASES SHALL BE DISCOVERED OR DETERMINED ON OR BEFORE 12:00 O-CLOCK MIDNIGHT 13 JANUARY 1952; * * *"

UNDER THE TERMS OF ALGONQUIN'S SUPERSEDING LEASE NO. DA (S) 01-076 ENG- 180, THE SAID CORPORATION WAS ENTITLED, UPON NOTICE TO THE DISTRICT ENGINEER WITHIN 30 DAYS FROM DECEMBER 15, 1951, OR BY JANUARY 14, 1952, TO BE REIMBURSED FOR THE COST OF SPECIFIC ITEMS OF REHABILITATION FOUND NECESSARY TO PLACE THE LEASED PREMISES IN AS GOOD CONDITION AS THAT EXISTING UPON THE DATE OF COMMENCEMENT OF THE SOLVAY LEASE, ORDINARY WEAR AND TEAR EXCEPTED. BY LETTER DATED FEBRUARY 6, 1952, THE ALGONQUIN- MISSOURI CHEMICAL CORPORATION ADVISED THE DISTRICT ENGINEER THAT IT HAD COMPILED A COMPLETE LISTING OF THE REHABILITATION COSTS INCURRED BY IT DURING THE PERIOD DECEMBER 15, 1951, TO JANUARY 15, 1952, AND THAT IT WOULD FILE SUCH LIST FOR THE DISTRICT ENGINEER'S APPROVAL. ACCORDINGLY, WITH A LETTER DATED FEBRUARY 18, 1952, ALGONQUIN FORWARDED A LIST OF REHABILITATION COSTS AGGREGATING $48,064.57. ON OCTOBER 27, 1952, THE ATTORNEYS FOR THE ALGONQUIN COMPANY FILED WITH THE DISTRICT ENGINEER ANOTHER REVISED AND DETAILED STATEMENT OF REHABILITATION COSTS PURPORTEDLY INCURRED DURING THE 30 DAY PERIOD FOLLOWING EXPIRATION OF THE SOLVAY LEASE.

DESPITE ALGONQUIN'S FAILURE TO COMPLY WITH THE 30-DAY NOTIFICATION REQUIREMENT ESTABLISHED BY ITS LEASE, THE DISTRICT ENGINEER OFFICE NEGOTIATED WITH IT AS TO DETAILS OF THE AMOUNTS CLAIMED FOR NEARLY A YEAR BEFORE FINALLY REJECTING THE CLAIM, AND THE ARMED SERVICES BOARD OF CONTRACT APPEALS, BY DECISION DATED MARCH 24, 1954, HELD THAT THE 30-DAY REQUIREMENT HAD THEREFORE BEEN WAIVED AND AUTHORIZED REIMBURSEMENT OF REHABILITATION COSTS AMOUNTING TO $38,508.30, UNDER THE PRINCIPLE OF EQUITABLE ESTOPPEL.

IN THE MEANTIME, NO NOTICE OF ANY KIND HAD BEEN GIVEN TO SOLVAY OF THE ALLEGED COSTS OF REHABILITATION, AND IT WAS NOT UNTIL MAY 24, 1954, OR NEARLY TWO AND A HALF YEARS AFTER EXPIRATION OF SOLVAY'S ORIGINAL LEASE, THAT THE DISTRICT ENGINEER MADE FORMAL DEMAND UPON THE SOLVAY PROCESS DIVISION FOR REIMBURSEMENT OF THE AFORESAID COSTS, THEN DETERMINED TO AMOUNT TO $38,508.30. THE SOLVAY COMPANY HAS DISCLAIMED LIABILITY FOR SUCH COSTS ON THE GROUNDS (1) THAT THE GOVERNMENT DELAYED ITS NOTIFICATION OF THE INCURMENT OF SUCH COSTS FROM DECEMBER 14, 1951, UNTIL MAY 24, 1954, OR FOR AN UNREASONABLE LENGTH OF TIME; (2) THAT FOR 30 DAYS AFTER EXPIRATION OF ITS LEASE IT MAINTAINED A TECHNICALLY TRAINED EMPLOYEE AT THE HUNTSVILLE ARSENAL FOR THE EXPRESS PURPOSE OF RECEIVING COMPLAINTS ON THE CONDITION OF THE PREMISES, AND TO ACT IN CONJUNCTION WITH ARMY PERSONNEL IN THE CONDUCT OF A JOINT TERMINAL SURVEY, BUT NO SUCH COMPLAINTS WERE FILED DURING THAT PERIOD; (3) THAT AT NO TIME PRIOR TO MAY 24, 1954, WAS SOLVAY ADVISED OF ANY NEGOTIATIONS BETWEEN THE GOVERNMENT AND ALGONQUIN-MISSOURI WITH RESPECT TO DEFECTS IN OR RESTORATION OF THE LEASED PREMISES, AND THUS IT WAS DEPRIVED OF THE OPPORTUNITY TO PARTICIPATE THEREIN; (4) THAT WITHOUT COMPLETELY SHUTTING DOWN THE PLANT AT OR NEAR THE EXPIRATION OF ITS LEASE, IT WAS IMPOSSIBLE TO ADMEASURE THE EXTENT TO WHICH IT HAD FULFILLED ITS MAINTENANCE OBLIGATIONS; (5) THAT IN CONSIDERATION FOR KEEPING THE PLANT IN FULL OPERATION DURING THE ENTIRE PERIOD OF ITS LEASE, THE GOVERNMENT RELEASED IT OF ITS OBLIGATION TOWARDS MAINTENANCE AND RESTORATION, EXCEPT, OF COURSE, FOR THE DEFECTS "DISCOVERED OR DETERMINED" ON OR BEFORE THE MIDNIGHT OF JANUARY 14, 1952, ORDINARY WEAR AND TEAR EXCEPTED; AND (6) THAT SOLVAY DID IN FACT COMPLETELY DISCHARGE ITS MAINTENANCE OBLIGATIONS UNDER ITS LEASE AND TURNED THE FACILITIES OVER TO THE GOVERNMENT IN BETTER CONDITION THAN THAT IN WHICH THEY WERE ORIGINALLY LEASED TO IT.

IN SUPPORT OF THIS LATTER CONTENTION, SOLVAY HAS FURNISHED COPIES OF ITS MAINTENANCE EXPENSE ACCOUNTS SHOWING THAT IT EXPENDED IN EXCESS OF $113,000 FOR MAINTENANCE OF THE PREMISES AFTER SEPTEMBER 1, 1951, OR AFTER IT BECAME AWARE THAT ITS LEASE WOULD NOT BE RENEWED, WHICH AMOUNT WAS ROUGHLY THE EQUIVALENT OF ANY 3 1/2 MONTH MAINTENANCE EXPENDITURE MADE DURING THE PERIOD OF THE LEASE.

NOT ONLY DOES IT APPEAR THAT SOLVAY'S CONTENTIONS ARE, FOR THE MOST PART, MERITORIOUS, BUT NOWHERE IN THE RECORD IS THERE ANY DEFINITE DETERMINATION OF THE DIFFERENCES BETWEEN THE ACTUAL CONDITION OF THE PREMISES WHEN THEY WERE SURRENDERED TO THE NEW LESSEE AND AT THE COMMENCEMENT OF THE SOLVAY LEASE, NOR DOES THE RECORD SHOW JUST WHAT WOULD HAVE COMPRISED "ORDINARY WEAR AND TEAR" ON THE PREMISES, WITHIN THE MEANING OF THE EXCEPTION RECITED IN PARAGRAPH 20 OF THE ORIGINAL LEASE.

CONSIDERING THE FACT THAT ALGONQUIN'S RESTORATION FIGURES WERE MATERIALLY REVISED BETWEEN THE DATE OF ITS ORIGINAL STATEMENT OF FEBRUARY 6, 1952, AND MAY 24, 1954, WHEN SOLVAY WAS FURNISHED THE FINAL RESTORATION COST STATEMENT FOR THE REDUCED AMOUNT OF $38,508.30, AND THE FACT THAT NO NOTICE WAS GIVEN TO SOLVAY OF THE DISCOVERY OR DETERMINATION OF ANY DEFICIENCIES PRIOR TO JANUARY 14, 1952, AND NO DEMAND OF ANY KIND WAS MADE UPON SOLVAY FOR REPAIRS FOR A PERIOD APPROXIMATING TWO YEARS AND A HALF SUBSEQUENT TO EXPIRATION OF ITS LEASE, WE ARE CONSTRAINED TO HOLD THAT NO ENFORCEABLE LIABILITY EXISTS UPON THE PART OF SOLVAY PROCESS DIVISION, OR ITS PARENT CORPORATION, WITH RESPECT TO THE RESTORATION COSTS SOUGHT TO BE CHARGED TO IT. ..END :