[00:00:00] Speaker 00:
OK, our next case is Johnson & Vestals Limited Ownership versus United States Postmaster General 22-1075.

[00:00:09] Speaker 00:
Mr. Nathanson, you have reserved three minutes of your time for rebuttal time, correct?

[00:00:16] Speaker 00:
Yes, Your Honor.

[00:00:17] Speaker 04:
Thank you, Your Honors.

[00:00:18] Speaker 00:
May it please the Court.

[00:00:18] Speaker 00:
Counselor, you may proceed.

[00:00:19] Speaker 04:
Thank you, Your Honor.

[00:00:20] Speaker 04:
May it please the Court.

[00:00:21] Speaker 04:
My name is Alvin Nathanson.

[00:00:23] Speaker 04:
I represent the less saw under this lease dispute with the Postal Service.

[00:00:30] Speaker 04:
I'm not going to tell you about the rules of construction of a lease that goes way back in my days, my first year of law school, many, many, many years ago, but in any event, the intent is the key.

[00:00:45] Speaker 04:
What was the intent of the parties?

[00:00:48] Speaker 04:
Just a little bit of background.

[00:00:49] Speaker 04:
When you look at this lease, this lease, first of all, was drafted by the postal service.

[00:00:57] Speaker 04:
No question about that.

[00:00:59] Speaker 04:
This lease was also the latest in a series of leases going back to 1968 when the facility was on the first on the lease with the Postal Service.

[00:01:15] Speaker 04:
This lease is what we in the real estate business call a triple net lease.

[00:01:23] Speaker 04:
If you look at the provisions of the lease,

[00:01:26] Speaker 04:
You will see that all expenses, whether repair, maintenance, or replacement, except for a few minor ones which are not clickable here, belong to the postal service.

[00:01:44] Speaker 04:
You will also see in this lease that the premises were taken in an as-is condition.

[00:01:53] Speaker 04:
In other words,

[00:01:54] Speaker 04:
The landlord's only duties and responsibilities were those limited in the so-called maintenance rider, which were, again, inapplicable here.

[00:02:06] Speaker 01:
In your view, when the Postal Service took on this lease, they're responsible for all the costs that aren't specifically allocated to you under the lease.

[00:02:16] Speaker 04:
Absolutely correct.

[00:02:16] Speaker 01:
And what clause says that?

[00:02:20] Speaker 04:
The clauses are as follows.

[00:02:22] Speaker 04:
In the maintenance provider, the way the postal service works is they have a general lease and they have general conditions, which I'll talk about in a minute with that code provision that they're relying on.

[00:02:37] Speaker 04:
Then they have specific addendums or specific provisions.

[00:02:43] Speaker 04:
They have what we call a maintenance rider.

[00:02:47] Speaker 04:
This is specific to this particular unit or facility.

[00:02:52] Speaker 04:
And they also have a utilities rider.

[00:02:55] Speaker 04:
They also have a tax rider, but I don't want to deal with that yet.

[00:02:59] Speaker 04:
Let's look at the maintenance rider.

[00:03:01] Speaker 04:
The maintenance rider is, again, a special rider, which would override any general conditions or any other general language in the lease.

[00:03:11] Speaker 04:
If you look at the maintenance rider, you will see in specifically that it talks about in the very first sentence, it says,

[00:03:22] Speaker 04:
that the postal service shall maintain the demise premises, including repair and replacement of same if necessary.

[00:03:34] Speaker 04:
That's pretty clear.

[00:03:35] Speaker 00:
And then what it does is... Would that cover capital improvements to the property that's required by a local ordinance?

[00:03:43] Speaker 04:
Yes, absolutely.

[00:03:45] Speaker 04:
And the reason I say that, and you have to read this and we'll wait with the utility one.

[00:03:51] Speaker 04:
You see, in the maintenance right, what they do is they say, generally, it's our baby.

[00:03:57] Speaker 04:
In other words, the postal service has to repair and maintain, and they have to replace.

[00:04:05] Speaker 04:
And to me, the word replace is very simple.

[00:04:07] Speaker 04:
I mean, replace.

[00:04:09] Speaker 04:
If necessary, they do not define what the word if necessary is.

[00:04:14] Speaker 04:
You'll see the board on the link below indicated that the word if necessary means only if it exists.

[00:04:20] Speaker 01:
So you're relying on basically on the repair portion of the maintenance clause.

[00:04:26] Speaker 01:
No.

[00:04:27] Speaker 01:
I'm sorry, I misspoke, the replace portion.

[00:04:30] Speaker 04:
Yes, there's two clauses, the maintenance and utility.

[00:04:34] Speaker 01:
But we're talking about the maintenance stuff first.

[00:04:36] Speaker 01:
We can turn to the other one next.

[00:04:37] Speaker 01:
But what is the change from septic to sewer replacing?

[00:04:45] Speaker 01:
Isn't it a separate upgrade?

[00:04:48] Speaker 04:
It's a replacement of a system.

[00:04:50] Speaker 01:
It's a replacement of... Well, how is going from septic to sewer a replacement?

[00:04:58] Speaker 01:
Sure, if the septic system failed and they had to put in a new septic system, that's replacing the septic system.

[00:05:06] Speaker 01:
correct you see if they have sewer and it failed and they had to upgrade or replace it that's replacing it but how is switching from one to another within the plain meaning of replacement of that service because you look again if i i'm jumping ahead to the utilities cause i think it's more specific what what

[00:05:26] Speaker 01:
The utilities clause.

[00:05:29] Speaker 01:
I've got the maintenance clause up.

[00:05:30] Speaker 01:
What part of the JA is the utilities clause on?

[00:05:33] Speaker 01:
This is the next page.

[00:05:34] Speaker 04:
Let's look at the utilities clause again, specifically.

[00:05:39] Speaker 04:
And what it does is.

[00:05:41] Speaker 01:
No, no, no.

[00:05:42] Speaker 01:
Can you point it?

[00:05:42] Speaker 01:
I need to see the language.

[00:05:44] Speaker 01:
Where in the JA are we?

[00:05:45] Speaker 01:
Is it 51?

[00:05:47] Speaker 04:
If you look at the utilities clause attached to my brief, it's appendix number 83.

[00:05:52] Speaker 04:
83?

[00:05:52] Speaker 01:
Yeah.

[00:05:53] Speaker 04:
Yes, Your Honor.

[00:06:00] Speaker 04:
Okay.

[00:06:02] Speaker 04:
All right.

[00:06:02] Speaker 04:
This is again a specific clause.

[00:06:04] Speaker 04:
All right.

[00:06:05] Speaker 04:
And what it does is it lists the utilities.

[00:06:09] Speaker 04:
And as you can see on the second page, the word sewer is a utility.

[00:06:16] Speaker 04:
That's a utility.

[00:06:18] Speaker 04:
Hold on a minute.

[00:06:19] Speaker 01:
It says sewer is not applicable.

[00:06:21] Speaker 04:
That's correct.

[00:06:23] Speaker 04:
That means it's not applicable to the landlord's duty to maintain it.

[00:06:31] Speaker 04:
because if you look at the other ones you see what within the other class that just mean there is no sewer no it says it's if you look at what they did in all the other clauses one through four five and six you see uh... of five uh... up to yes five uh... i don't understand how you're reading this because all these other ones either have something that you pay for or that the postal office pays for pursuer

[00:07:01] Speaker 01:
neither of you paying for it because there is no sewer.

[00:07:05] Speaker 04:
Well, a sewer system is a system.

[00:07:09] Speaker 01:
There was no sewer system, though.

[00:07:10] Speaker 04:
There was a sewer system.

[00:07:11] Speaker 04:
There had to be a sewer system.

[00:07:13] Speaker 01:
Are you saying septic and sewer are the same thing?

[00:07:17] Speaker 04:
Absolutely.

[00:07:18] Speaker 01:
But they're not.

[00:07:19] Speaker 04:
Well, I disagree that they are.

[00:07:21] Speaker 01:
Basically, they don't operate the same way.

[00:07:23] Speaker 04:
They serve the same function.

[00:07:26] Speaker 04:
They may operate differently, but they serve the same function.

[00:07:30] Speaker 01:
And the postal service... Yes, but the problem with your... Even if I accept that, the problem with it is, on the utilities rider, it specifically lays out for each of these who's responsible.

[00:07:43] Speaker 01:
And for sewer, it doesn't say either of you are responsible.

[00:07:46] Speaker 01:
It says not applicable.

[00:07:48] Speaker 01:
So even if we agree that sewer and septic are the same thing, this doesn't help you because it doesn't place the burden on the postal service.

[00:07:56] Speaker 01:
It says not applicable.

[00:07:58] Speaker 04:
Can I make a suggestion?

[00:07:59] Speaker 04:
Let's look at the bottom

[00:08:00] Speaker 04:
of that particular utility rider.

[00:08:05] Speaker 04:
It says, and it's kind of small print, it says, the Postal Service acknowledges and agrees that in addition to the above listed systems and equipment, any and all other systems and equipment, any and all, serving the premises are furnished in their as is condition.

[00:08:29] Speaker 04:
As of the date of this lease, here's the key language.

[00:08:33] Speaker 04:
Landlord is not responsible for any maintenance, repair, or replacement of any systems or equipment.

[00:08:45] Speaker 01:
But this is a catchall for things that are not covered by this list.

[00:08:48] Speaker 01:
And this list already covers sewer and says neither of you are responsible because there is no sewer.

[00:08:54] Speaker 01:
This is a very contextual reading you're giving this.

[00:08:57] Speaker 01:
What I gather from this thing you read is it may have put the responsibility for the septic system, which is not separately described on the Postal Service, but any sewer system it specifically excludes as not applicable.

[00:09:13] Speaker 04:
But then again, how do you justify the language I just read?

[00:09:18] Speaker 04:
It says any and all systems.

[00:09:22] Speaker 04:
Any and all.

[00:09:23] Speaker 01:
Well, because the first part of that system says, in addition to the above listed services, it's talking about things that aren't listed.

[00:09:31] Speaker 04:
Again, look at the last sentence, Judge.

[00:09:35] Speaker 04:
It says, landlord is not responsible for any maintenance, comma, repair or replacement of any systems or equipment.

[00:09:46] Speaker 01:
Oh, but that's just getting back to whether changing from septic to sewer is

[00:09:52] Speaker 01:
maintenance repair or placement it's clearly not maintenance because there was no subsets that sewer system at all right it's clearly not repair correct it's it'd be your view is because you go from one type of waste disposal system to another that that's a replacement but i think that's a pretty stretch of the word replacement it's a completely new system that's it's a completely new systems of the so that i was i was not responsible for any system

[00:10:21] Speaker 01:
Okay, I think I have your argument.

[00:10:24] Speaker 04:
The problem here is that the Postal Service defined replacement in a very weird, strange way.

[00:10:32] Speaker 04:
Their definition was, replacement means only if it existed at the time of the signing of the lease.

[00:10:40] Speaker 01:
Isn't that what replacement... I mean, the common definition of replacement is, it is replacing something.

[00:10:48] Speaker 01:
It is not something entirely new.

[00:10:51] Speaker 01:
I agree, but they didn't decide that.

[00:10:53] Speaker 01:
Their decision was it had to.

[00:10:55] Speaker 01:
No, I think that's exactly their decision.

[00:10:57] Speaker 01:
The sewer system is not replacing anything.

[00:11:01] Speaker 01:
They're not replacing the sewer system.

[00:11:03] Speaker 01:
They're adding a new system that wasn't in existence.

[00:11:07] Speaker 04:
Again, you're using the word system.

[00:11:09] Speaker 04:
See, it's a sewer system.

[00:11:10] Speaker 01:
No, no, no, no.

[00:11:10] Speaker 01:
I understand the difference here.

[00:11:12] Speaker 01:
I disagree with you, and I don't.

[00:11:15] Speaker 01:
I think that the board probably got this right, because I think there's a difference between a septic and a sewer system.

[00:11:21] Speaker 01:
I understand your argument.

[00:11:24] Speaker 04:
Serves the same purpose.

[00:11:26] Speaker 04:
And if it's ambiguous, we win.

[00:11:31] Speaker 04:
Because they were the drafter of the lease.

[00:11:33] Speaker 04:
They should have said it.

[00:11:35] Speaker 04:
How is anybody supposed to look at this and say that, well, you know, replacement means something that only existed at the time of the signing of the lease.

[00:11:47] Speaker 04:
They defy anybody.

[00:11:48] Speaker 04:
Look at that lease.

[00:11:49] Speaker 00:
and find any language that says that you're you're you're doing that that when the switches made from septic to uh... running sure that it was merely replacing one system for another correct that's the only problem that we have here what why

[00:12:08] Speaker 00:
Why does the lease then, under item 6, and I'm looking at appendix 84, why does it say sewers is not applicable?

[00:12:19] Speaker 04:
I have no idea, personally.

[00:12:21] Speaker 00:
I think that... Why does it say not applicable if the sewer and the septic tank serve the same system?

[00:12:30] Speaker 00:
I mean, the same function, as you say.

[00:12:32] Speaker 00:
They do.

[00:12:33] Speaker 00:
So, and because of that, you're saying that there's this sewer system.

[00:12:38] Speaker 00:
at play here.

[00:12:39] Speaker 00:
But it's not applicable.

[00:12:42] Speaker 00:
The lease takes that off the table.

[00:12:46] Speaker 04:
See, the problem is, and I said it initially, it's a triple net lease.

[00:12:52] Speaker 04:
Landlord is only responsible for some very minor.

[00:12:56] Speaker 01:
Oh, I get it.

[00:12:56] Speaker 01:
You're arguing that the general purpose in what you all intended was this high level.

[00:13:00] Speaker 01:
But the problem is you have to find support in the actual clauses of the lease.

[00:13:06] Speaker 01:
And when you have a clause that says, sewer is not applicable, when you signed it, that suggests that there was no sewer service, which was, in fact, true.

[00:13:15] Speaker 01:
There was no sewer service, right?

[00:13:17] Speaker 01:
There was a septic system, which is a completely different kind of waste disposal system.

[00:13:22] Speaker 04:
well then let's get back to the language again land load is not responsible any maintenance or any replacement that's a very general clause that you're not addressing why it says sewer not applicable above frankly if i read this correctly the word any means all systems any and all of the same synonymous words and any system would be whether it existed or not existed

[00:13:51] Speaker 03:
But at the time the lease was signed, there wasn't a sewer system.

[00:13:56] Speaker 03:
Well, I think there was.

[00:13:59] Speaker 03:
So any and all in the portion you are reading has to refer to things that were in existence as of the time the lease was signed, correct?

[00:14:10] Speaker 04:
No, not necessarily.

[00:14:12] Speaker 03:
You mean all meaning anything that might ever happen at any time?

[00:14:17] Speaker 04:
They should have said that, Judge.

[00:14:18] Speaker 01:
Do you think a sewer system and a septic system are the same thing?

[00:14:22] Speaker 04:
They serve the same purpose.

[00:14:23] Speaker 01:
No, are they the same thing?

[00:14:25] Speaker 01:
Yes, in a different way.

[00:14:26] Speaker 01:
In the commercial real estate world or in the regular real estate world?

[00:14:29] Speaker 04:
Yes, they are.

[00:14:30] Speaker 01:
They very much know the difference between sewer and septic.

[00:14:33] Speaker 04:
Well, it's a different function in the sense of how sewerage is disposed of.

[00:14:40] Speaker 04:
But it's a sewer system.

[00:14:42] Speaker 04:
It's a sewer tax.

[00:14:44] Speaker 04:
This was a sewer tax.

[00:14:46] Speaker 01:
When you have a septic system, you don't have a septic tax necessarily.

[00:14:50] Speaker 01:
It's controlled by the property owner.

[00:14:52] Speaker 01:
Sewer is usually just controlled by some municipality.

[00:14:56] Speaker 01:
That's why they're completely different systems and completely different ways of operating waste disposal.

[00:15:02] Speaker 04:
Where does it say that in the lease?

[00:15:05] Speaker 01:
It's a sewer, not applicable.

[00:15:07] Speaker 04:
But again, how do you justify that with the language that says, any system is not our responsibility?

[00:15:15] Speaker 01:
Well, the septic system wasn't your responsibility, because there was a septic system.

[00:15:19] Speaker 04:
Well, where does it say that, again, that that system?

[00:15:23] Speaker 01:
It's OK.

[00:15:23] Speaker 01:
I'm not going to sit here and argue with you.

[00:15:25] Speaker 01:
I have your argument.

[00:15:26] Speaker 01:
You might want to save your rebuttal time.

[00:15:30] Speaker 04:
Well, again.

[00:15:32] Speaker 04:
I think that, you know, if there's any ambiguity here, it's clearly, clearly on the part of the Postal Service.

[00:15:40] Speaker 04:
No.

[00:15:40] Speaker 04:
All right.

[00:15:42] Speaker 04:
Thank you, Your Honor.

[00:15:43] Speaker 04:
Yes, sir.

[00:15:44] Speaker 02:
Pleasure to come back here.

[00:15:47] Speaker 02:
Mr. Kerr.

[00:15:48] Speaker 02:
Thank you.

[00:15:48] Speaker 02:
May it please the Court, David Kerr on behalf of the United States Postmaster General.

[00:15:52] Speaker 02:
The sewer system is a completely new system, as you've just been discussing with the opposing council.

[00:15:58] Speaker 02:
And it's also a system required by a local ordinance.

[00:16:02] Speaker 02:
And therefore the applicable lease provision is on at JA 44 applicable codes and ordinances that states that the landlord as part of rental consideration agrees to comply with all codes and ordinances applicable to the ownership and operation of the building in which the rented space is situated.

[00:16:22] Speaker 02:
That is the provision that requires Johnson Investors to hook up its building

[00:16:26] Speaker 02:
to the local sewer system, which is consistent with the general rule that when there's a capital improvement made necessary by local ordinance, that's the landlord or the building's owner's responsibility and less specifically stated otherwise in the lease.

[00:16:41] Speaker 02:
And this lease doesn't state that anywhere.

[00:16:44] Speaker 02:
And on the maintenance issue, the maintenance clause for those reasons does not apply, but also the maintenance clause refers specifically to equipment

[00:16:55] Speaker 02:
an improvement furnished by the landlord.

[00:16:57] Speaker 02:
And up until now, this sewer connection has not yet been furnished by the landlord.

[00:17:02] Speaker 02:
So if there are no further questions from the court, we believe this lease permission is over.

[00:17:08] Speaker 02:
Thank you.

[00:17:11] Speaker 04:
Okay, very quick.

[00:17:11] Speaker 04:
First of all... You've got two minutes, Mr. Mayles.

[00:17:14] Speaker 04:
Thank you, Judge.

[00:17:14] Speaker 04:
I'll be very quick.

[00:17:16] Speaker 04:
Okay.

[00:17:16] Speaker 04:
There's nothing that says furnished by the landlord.

[00:17:19] Speaker 04:
That does not appear in the lease.

[00:17:21] Speaker 04:
The code

[00:17:22] Speaker 04:
provision that he's talking about is a general condition it's a two sentence provision that says landlord first sentence complies with the code and ordinances then there's the antecedent rule that I cited in my brief that says that uh... you know about payment who pays the for the permit and related work the second sentence is of that particular provision is

[00:17:48] Speaker 04:
what happens if the postal service does it if they do the work they have to pay for the permit they have to pay for related work and then they added the word and associated costs again the problem with the code and ordinance provision is a general condition that is in a form condition form that they attach to leases and I again maintain back that the

[00:18:16] Speaker 04:
septic system is a sewer system and a sewer system is their response.

[00:18:22] Speaker 04:
It's no different than any other system in the building, whether it's a heating system, air conditioning system, if it breaks,

[00:18:30] Speaker 04:
Now, who's responsible for it?

[00:18:32] Speaker 04:
The Postal Service.

[00:18:34] Speaker 04:
What difference does it make is just because the city has now decided for public safety and health reasons to convert, as they are doing all in Florida, convert to a septic system.

[00:18:46] Speaker 04:
If they have to replace any other system for any other reason, why should the septic system have been excluded?

[00:18:54] Speaker 04:
Illogical, especially under a triple net lease.

[00:18:56] Speaker 04:
Thank you, Your Honor.

[00:18:58] Speaker 00:
We thank you, Mr. Nicholson.

[00:18:59] Speaker 00:
That concludes today's arguments.

[00:19:01] Speaker 00:
This court is now in recess.