BRAC Shipyard Facility Repairs

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

DisasterFEMA-1193-DR
ApplicantGuam Economic Development Authority
Appeal TypeSecond
PA ID#000-00000
PW ID#N/A
Date Signed1999-01-14T05:00:00
Citation: Second Appeal; Guam Ecomonic Development Authority; FEMA-1193-DR-GU

Cross Reference: No DSR; Legal Responsibility; BRAC; Other Federal Agency

Summary: In 1997, Supertyphoon Paka resulted in an estimated $4,000,000 of damages to the Ship Repair Facility (SRF) at the US Naval Air Station (NAS) located in Tiyan, Guam. Prior to the disaster, the former NAS was under the Base Realignment and Closure program. As part of base closure activities, the Navy and the Government of Guam (GovGuam), through the Guam Economic Development Authority (GEDA), entered into an interim lease agreement for the SRF. Provisions of the lease specified that GEDA was legally responsible for repairs and maintenance of the SRF exclusive of acts of God. The interim lease also allowed GEDA to sublease the facility to XenoTechnix. Following the disaster, FEMA determined that GEDA was not legally responsible for the disaster-related repairs at the SRF and no DSRs were approved for these repairs. On February 23, 1998, in response to a GovGuam inquiry regarding eligibility of the SRF repairs, FEMA stated that the interim SRF lease established that GEDA was responsible for debris removal and utility repairs and not responsible for repairs necessary from an act of God. In response to another GovGuam inquiry regarding the eligibility of the SRF repairs (considered a first appeal), FEMA determined that the appeal contained a new issue, the sublease between GEDA and XenoTechnic and legal responsibility for the repairs. FEMA reiterated that provisions of the interim lease established that GovGuam was not responsible for repairs of damages resulting from an act of God. Regarding the sublease, FEMA determined that, although the sublease contained a provision requiring GEDA to repair damages following fire or other casualty, the sublease did not supercede the primary lease and did not create any legal responsibility for the damages. In this appeal, the applicant contends that the interim lease establishes that it is responsible for the disaster-related repairs and that FEMA misapplied Section 13.1 of the lease to infer that catastrophic repairs (rather than routine maintenance) were excluded. The applicant contends that the sublease also establishes that GEDA is legally responsible for the damages.

Issues:
  1. Pursuant to the interim lease, is GEDA legally responsible for the disaster-related repairs of the SRF facilities?
  2. Pursuant to the sublease lease, is GEDA legally responsible for the disaster-related repairs of the SRF facilities?
  3. Do any of the provisions of the sublease supercede the primary lease?
Findings:
  1. No. The interim lease establishes that GEDA is not legally responsible for the disaster-related repairs.
  2. No. The sublease establishes that GEDA could terminate the lease at its sole discretion and is not legally mandated to perform the disaster-related repairs.
  3. No. The primary lease establishes that, "Should a conflict arise between the provisions of this lease (primary) and provisions of a sublease, the provisions of this lease shall take precedence." (Section 6.3)
Rationale: Pursuant to 44 CFR 206.223

Appeal Letter

January 14, 1999

Mr. John J. Whitt
Director
Recovery Coordination Office
P.O. Box 2950
Agana, Guam 96932

Dear Mr. Whitt:

This is in response to your letter dated June 23, 1998, to the Federal Emergency Management Agency (FEMA) forwarding a second appeal under FEMA-1193-DR-GU, on behalf of the Government of Guam and the Guam Economic Development Authority. The applicant is requesting funding for repairs to the former US Navy Ship Repair Facility (SRF).

In 1997 Supertyphoon Paka resulted in damage to the SRF located at the Naval Air Station (NAS) in Tiyan, Guam. Prior to the disaster, NAS was in various stages of release under the Base Realignment and Closure program. The interim lease and sublease of the SRF associated with closure activities provide that the applicant is not legally responsible for the disaster-related repairs. As further explained in the enclosed analysis, the second appeal is denied.

Please inform the applicant of my determination. In accordance with the appeal procedure governing appeal decisions made on or after May 8, 1998, my decision constitutes the final decision on this matter. The current appeal procedure was published as a final rule in the Federal Register on April 8, 1998. It amends 44 CFR 206.206.

Sincerely,
/S/
Lacy E. Suiter
Executive Associate Director
Response and Recovery Directorate

Enclosure

cc: Martha Z. Whetstone
Regional Director
FEMA Region IX

Appeal Analysis

BACKGROUND

In 1997, Supertyphoon Paka struck the Territory of Guam resulting in significant damage to the former United States Naval Air Station (NAS) located at Tiyan, Guam. Damages to the NAS Ship Repair Facility (SRF) have been estimated to be over $4,000,000. Prior to the disaster, the NAS was in various stages of release under the Base Realignment and Closure program, which included lease agreements with various departments and agencies of the Government of Guam (GovGuam). As part of base closure activities, the Navy and GovGuam (through the Guam Economic Development Authority (GEDA)) entered into an interim lease agreement for the SRF. The interim lease established legal responsibilities for activities such as repair and maintenance of the facilities prior to final turnover and specified that GEDA was legally responsible for routine repairs and maintenance of the facilities (exclusive of acts of God). The lease allowed GEDA to sublease the facility to XenoTechnix. Following the disaster, FEMA obligated over $68,000,000 for repair of Guam's other damaged facilities and infrastructure. However, FEMA determined that GEDA was not legally responsible for the disaster-related repairs at the SRF and no Damage Survey Reports were approved for these repairs.

First Eligibility Inquiry

On February 23, 1998, FEMA responded to a GovGuam inquiry regarding eligibility of repairs at various NAS facilities. Regarding the SRF repairs, FEMA determined that the primary interim lease for the SRF stated that GEDA was responsible for debris removal, utility repairs and routine repairs. However, this lease also provided that GEDA was not responsible for repairs necessary from an act of God, that GovGuam could elect to terminate the lease if damage rendered the facility unusable, and that the applicant was legally responsible for insurance to cover the demolition of any destroyed facilities. FEMA determined that the lease provisions, including the provision requiring insurance, demonstrated that it is the Navy's discretion to effect repairs of major damages to the SRF. As such, the repairs were not the legal responsibility of the applicant and were not eligible for funding.

First Appeal

On March 30, 1998, FEMA responded to another GovGuam inquiry regarding the eligibility of the SRF repairs (considered a first appeal). FEMA determined that the appeal contained two salient issues; the interim lease and legal responsibility for damages resulting from an act of God and a new issue, the applicant's sublease with XenoTechnic and legal responsibility for the damages resulting from an act of God. Regarding the interim lease, FEMA reiterated its earlier decision and stated that this lease established that GovGuam was not responsible for damages resulting from an act of God. Regarding the sublease and legal responsibility for the disaster-related repairs, FEMA determined that the intent of the sublease was to provide the Navy with an understanding of the tenant's activities. Although the Navy approved the sublease, the provisions of the sublease did not modify or supercede the interim lease. FEMA determined that the sublease did not create any legal responsibility for GovGuam for repairs necessary from an act of God and denied the appeal.

Second Appeal

In this appeal, the applicant contends that the interim lease establishes that GEDA was legally responsible for the facility repairs and that FEMA misapplied Section 13.1 of this lease to infer that repairs necessary from an act of God were excluded from GEDA's legal responsibility. The applicant also contends that Section 17 of the sublease places legal responsibility of the typhoon damages with GEDA. The final issue raised by the applicant is that Section 17 provides the sublessee with a cause of action against the applicant if it fails to make the disaster-related repairs. The appeal was apparently supported by a February 9, 1998, letter from Rear Admiral Janczak (US Navy). The letter stated that repairs were the responsibility of the Navy's lessee, GEDA. However, the letter cannot supercede the terms of the lease, which clearly exempts GEDA for acts of God. Instead we believe the statement was only meant to emphasize that the Navy was not going to repair the SRF as was stated in the following sentence. The letter also states that the repairs performed to-date by the Navy meet the minimum standards and that the Navy would expend no further funds for repairs of the SRF.

DISCUSSION

Interim Primary Lease

The applicant raises several issues in this appeal, including legal responsibility for the SRF repairs pursuant to the interim lease between GEDA and the Navy. Specifically, the applicant contends that FEMA misapplied Section 13.1.1 of the interim lease, which the applicant contends does not apply to or exclude it from legal responsibility for the repairs, but does exclude GEDA from the legal responsibility for routine maintenance of a facility destroyed by an act of God. The applicant asserts that routine maintenance of a facility destroyed by an act of God is a moot issue, to which no party would agree. Review of the lease indicates that GEDA did agree to this lease provision. If, as the applicant contends, this section of the lease establishes that GEDA was not legally responsible for routine maintenance of a destroyed facility and this provision is moot, it is not clear why the provision was agreed to and included in the lease. Clearly the provision was included to ensure the applicant, as lessee, was not legally responsible for catastrophic damages. The language of the interim lease supports this contention and provides clarification of Section 13.

Regarding Section 13, several provisions of the lease state that the interim lease was to serve the public interest of Guam. Particularly the opening provision of the lease, which states, ". to facilitate local economic adjustment efforts pending final disposition of the real and personal property." Facilitating economic efforts is supported by other sections of the interim lease, which discuss the financial relationships between the parties. Specifically, Section 3.1 which provides that in lieu of cash for rent of the facilities, GEDA was required to provide the protection and maintenance of the facilities, pursuant to the referenced Section 13. Section 13 provides a laundry list of specific repairs for which GEDA was legally responsible. These items constitute normal or routine repair and maintenance requirements, such as weeding and grass cutting and explicitly define the applicant's legal responsibility for routine repairs. The "degree" of non-routine maintenance to be provided by GEDA was discussed in Section 13.1.1. This section specifically precludes GEDA from the responsibility of maintenance measures resulting from extraordinary natural occurrences, from pre-existing conditions, and from acts of God. Cumulatively, the exclusions of this section clearly establish that legal responsibility was not placed on GEDA for repairs in the event of a catastrophic event. Ensuring that GEDA, as lessee, was not legally responsible for catastrophic repairs is completely in keeping with the opening provisions of the interim lease, to aid or facilitate local economic adjustment. To be eligible for disaster assistance, an item of work must be the legal responsibility of the eligible applicant, pursuant to Title 44 of the Code of Federal Regulations (CFR), section 206.223 (a)(3). Based upon review, we find that the repairs are not the legal responsibility of the applicant and find no reason within the interim lease to overturn the decision of the first appeal.

Sublease

Regarding the sublease, the applicant contends FEMA's determination that GEDA is not seublease) is without merit. Review of these leases raise three sub-issues: GEDA's legal responsibility for the repairs pursuant to the sublease, the precedence of the sublease over the interim lease, and a cause of action for the repairs against the applicant.

Regarding the first sub-issue, Section 17 of the sublease states that in the event of damages resulting from a casualty, the landlord (GEDA) shall undertake the repairs with diligence. This suggests that GEDA is legally responsible for the repairs. However, this section allows that if the damages are too extensive or not economically feasible, the landlord may terminate the sublease at its sole discretion. Similar to the relationships of the primary lease, the language of this section of the sublease ensures that a legal responsibility was not placed on the sublessee (XenoTechnic) for facility repairs in the event of a catastrophic event. Further, by including a provision in Section 17 to allow GEDA to terminate the lease at "its sole discretion," the lease also protects GEDA (as landlord) from the legal responsibility of lease-mandated repair of catastrophic damages.

Regarding the second sub-issue, precedence of the primary lease over the sublease, the arguments of the applicant are somewhat conflicting. Page four of the applicant's appeal states, "These and other provisions of the sublease agreement create additional rights and obligations for GEDA which are not granted or required under the Interim lease agreement." Page five of the same letter states, "The sublease agreement does not impose any additional obligations on the US Navy or create any additional rights for GEDA." Notwithstanding this discrepancy, Section 17 of the sublease clearly and implicitly defines the relationship between the primary and sublease and the relationship between the Navy, GEDA and the sublessee. This section states, "No sublease shall relieve GEDA of any of its obligations hereunder." Section 6.3 states that should a conflict arise between the provisions of this lease (interim) and provisions of a sublease, the provisions of this lease (interim) shall take precedence. This language is clear and straightforward and establishes that the sublease ensures that all legal obligations of the interim lease are held in effect, does not supercede the primary interim lease, and does not establish additional legal obligations for GEDA for the disaster-related repairs to the SRF. Based upon review, we find that the primary lease establishes that disaster-related repairs are not the legal responsibility of the eligible applicant.

Regarding the cause of action, the applicant states that Section 17 provides XenoTechnix, as subleesee with a cause of action against GEDA, as landlord, if GEDA fails to repair the facilities destroyed by a disaster. This is not relevant to FEMA's eligibility determination and has no bearing on the legal responsibility for the repairs. Further, as stated above the applicant has the authority to terminate the sublease based on the extent of the damages. Therefore, we find that this section does not demonstrate that the applicant is legally responsible for the disaster-related repairs and pursuant to 44 CFR 206.223 (a)(3), we find that the repairs are not eligible for funding.

CONCLUSION

The interim lease states that routine maintenance and repairs are the legal responsibility of the applicant. However, per lease exclusions for repairs resulting from catastrophic events (acts of God), the applicant is not legally responsible for the disaster-related repairs to the SRF. Similarly, legal responsibility for the repairs is not established through the sublease, which has a provision to allow GEDA to terminate the lease at "its sole discretion," if the repairs are not feasible. Therefore, the sublease does not create any legal responsibility for the disaster-related repairs. As such, we find no reason to reverse the Disaster Recover Manager's
decision in the first appeal and the second appeal is denied.
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