Westdale Northwest Center, Lp v. United States

CORRECTED

In the United States Court of Federal Claims
No. 16-113C
Filed: July 9, 2021
FOR PUBLICATION

WESTDALE NORTHWEST CENTER,
LP,

Plaintiff,

v.

UNITED STATES,

Defendant.

Jennifer A. Gehrt, Barbee & Gehrt, LLP, Dallas, TX, for the plaintiff.

Michael D. Austin and Mariana Acevedo, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, Washington, D.C., Helen Kerns, General Services Administration, of
counsel, for the defendant.

TRIAL OPINION

HERTLING, Judge

The parties in this contract dispute seek review of a property-tax provision in a lease for
office space. The plaintiff, Westdale Northwest Center, LP (“Westdale”), leases office space at
an office building it owns in San Antonio, Texas, to the defendant, the United States, acting
through the General Services Administration (“GSA”). The subject lease was negotiated and
signed by GSA and a previous owner of the building, Griffin Partners, Inc. (“Griffin Partners”),
from which Westdale subsequently acquired the building.

Several years into the lease, following a GSA audit, a disagreement arose regarding the
proper interpretation of a lease clause related to annual real-estate taxes. The original
contracting parties established a fixed tax base for the building. This tax base was incorporated
into a formula to be reflected in the lease to ensure that for each annual payment of the owner’s
real-estate taxes GSA would only pay taxes proportional to the share of the building it occupied.
The formula was intended to adjust GSA’s payment to the lessor depending on whether the
building’s real-estate taxes that year exceeded or fell below the established tax base. The parties
to this litigation agree that the tax base written into the lease—$133,045—does not accomplish
the parties’ goal.

The parties disagree as to the implications of the incorrect figure. Westdale petitions this
Court to enforce the contract as written because the plain language of the tax-adjustment clause
is unambiguous. The defendant asserts the defense of mutual mistake in contract formation,
arguing that the former lessor and GSA were incorrect in their belief that the tax -adjustment
clause as written would accomplish the goal of ensuring that GSA pays only its proportional
share of the building’s real-estate taxes each year. The defendant seeks reformation of the
contract to accomplish the original intent of the parties.

The Court held a three-day trial from January 25 to January 27, 2021, to take testimony
regarding the understanding and intent of the former lessor and GSA at the time of contract
formation.

Based on the testimony and evidence before it, the Court determines that the tax-
adjustment clause as written was the product of a mutual mistake by GSA and the former lessor.
The Court finds that contract reformation is the appropriate remedy. Accordingly, the Court
reforms the lease to reflect the parties’ agreed-upon methodology for calculating the tax base for
the purposes of determining GSA’s yearly real-estate tax payment owed to Westdale under the
terms of the lease.

I. FACTS1

The Court sets forth findings of fact as required by Rule 52(a)(1) of the Rules of the
Court of Federal Claims (“RCFC”). In making its factual findings, the Court relies on the
testimony elicited at trial and the documentary evidence submitted by the parties. The Court
heard testimony from six witnesses. The plaintiff called three witnesses: Mr. Jeff Allen,
executive vice president for Westdale, the current lessor; Ms. Rhonda Thompson, the director of
commercial-asset management and leasing for Westdale; and Ms. Kelli Williamson, a
commercial financial analyst for Westdale. The defendant called Ms. Kelly Winn, the real-estate
broker for GSA. Both parties called Mr. Lee Moreland, executive vice president in charge of
asset management for the former lessor, Griffin Partners, and Ms. Tracy Harter, the GSA
contracting officer for the lease at issue. In addition to testimony, the Court considered the
parties’ Joint Stipulation of Facts, the five exhibits submitted by the plaintiff, the four exhibits
from the defendant, and the 80 joint exhibits in evidence. The Court found all witnesses to be
credible.

A. The 2004 Lease Between GSA and SAOP

The property at issue is an office building known as Northwest Center, located at 7550 IH
10 West in San Antonio, Texas (“building” or “property”). (Jt. Stip. ¶ 3.) On June 3, 2004, GSA
agreed to a lease (“2004 lease”) with SAOP Northwest Center, L.P. (“SAOP”) to secure office

1 In its factfinding, the Court cites the parties’ Joint Stipulation of Facts (“Jt. Stip.”) (ECF
114), the transcript of testimony elicited during trial (“Tr.”) (ECF 131-133), and the plaintiff’s
(“PX”), defendant’s (“DX”), and joint (“JX”) exhibits admitted into evidence at trial. Citations
to exhibits are to the appropriate abbreviation followed by the exhibit and page number or
paragraph number: (e.g., DX 1 at 2; Jt. Stip. ¶ 7).

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space. (Id.; JX 39.) At that time, SAOP owned the Northwest Center. (Tr. 128 (Moreland).)
SAOP was a single-asset entity of Griffin Partners, a commercial real-estate investment and
management company. 2 (Id.; Tr. 44-46 (Allen).) The space leased by GSA under the 2004
Lease served as offices for the Administrative Office of the United States Courts in San Antonio.
(JX 39 at 3.)

GSA issued a Solicitation for Offers (“SFO”) as part of its acquisition of office space.
The 2004 lease incorporated all terms and conditions of GSA’s SFO. (JX 39 at 2.) Section 3.4
of the SFO was titled “Tax Adjustment (Sep 2000).” (Id. at 14.) Paragraph B of section 3.4
initially provided as part of the printed form: “Base year taxes as referred to in this paragraph are
1) the real estate taxes for the first 12-month period coincident with full assessment or 2) may be
an amount negotiated by the parties that reflects an agreed upon base for a fully assessed value of
the property.” (Id.)

The printed phrase “coincident with full assessment or” was struck out of paragraph B by
hand and initialed by two representatives. (Id.) That phrase was replaced by new text typed
above paragraph B. (Id.) As amended, paragraph B provided: “Base year taxes as referred to in
this paragraph are 1) the real estate taxes for the 12-month period 1998, which were $413,020.00
or $1.71 per rentable square foot 2) may be an amount negotiated by the parties that reflects an
agreed upon base for a fully assessed value of the property.” (Id. (emphasis added).) Thus, the
lessor and GSA selected a prior tax year to serve as the real-estate tax base and deviated from the
original text of the SFO. The $413,020 in real-estate taxes assessed against the property in 1998
was lower than the $525,153.66 in taxes assessed against the property in 2004, the year the
parties agreed to the lease.3 (JX 78 at 2.)

B. The 2009 Solicitation for Offers, Response, and Attachments

Due to the pending expiration of the 2004 lease, GSA issued SFO 8TX3135 on August
19, 2009, seeking office space “for Federal Public Defender and Administrative Office of the
United States Courts in San Antonio, Texas.” (JX 1B at 1.) The SFO identified a ten-year lease
term with “five (5) years firm term.” (Id. at 5.) The SFO permitted GSA to terminate the lease
in whole or in part with written notice after the fifth year. (Id.) The SFO required offerors to
submit offers by December 31, 2009, (id.), though the deadline was extended to January 15,
2010, (JX 1D).

2 The Court at times refers to SAOP and Griffin Partners interchangeably as “owners” of the
building, although only SAOP held legal title to the building. No significance is intended by the
choice of terminology.
3 For the purposes of this litigation, there are no disputes regarding the payment of real-estate
taxes under the 2004 lease. Information pertaining to the 2004 lease is included to contextualize
the tax-adjustment clause of the parties’ 2010 lease at issue in this case.

3
 SAOP submitted an offer in response to the SFO on January 15, 2010. (Jt. Stip. ¶ 5.)
Pursuant to paragraph 3.0 of the 2009 SFO, SAOP submitted its bid package to Ms. Kelly Winn,
a broker with Studley, Inc. and the authorized real-estate broker for GSA, and Ms. Daphne
Hadley, the GSA contracting officer for the lease. (DX 4 at 15.)

Paragraph 3.4 of the SFO required each offeror to submit to the contracting officer, as
part of its offer, seven different forms. (JX 1B at 15-16.) These forms included GSA Form 1364
(“Proposal to Lease Space”) and GSA Form 1217 (“Lessor’s Annual Cost Statement”). (Id.)

1. GSA Form 1364: Proposal to Lease Space

As part of SAOP’s offer, it submitted GSA Form 1364. (DX 2.)4 The SFO specified that
both pages of GSA Form 1364 had to be completed and specifically noted that offerors should
indicate the total lease rate per square foot, “clearly itemizing . . . the total building shell rental.”
(JX 1B at 15.) The SFO further noted that “[t]his building shell rental rate shall include, but not
limited to [sic], property financing (exclusive of Tenant Improvements), insurance, taxes,
management, profit, etc., for the building.” (Id. (emphasis added).)

On SAOP’s submitted Form 1364, it described the property as a 25-year-old building of
241,404 rentable square feet (“rsf”). (DX 2 at 1.) Line 16 of Form 1364 was titled “SHELL
RENT (including current real estate taxes. Refer to Line 28 on GSA Form 1217).” (Id.) SAOP
identified the shell rent on line 16 as $14.32, the amortized cost per rentable square foot. (Id.)
On line 27 of the form, SAOP identified the “current year taxes” as “2009” and wrote
“$691,942.” (Id. at 2.) SAOP checked a box indicating that the 2009 taxes were “based on the
fully assessed value.” (Id.)

2. GSA Form 1217: Lessor’s Annual Cost Statement

SAOP also submitted GSA Form 1217 (“Lessor’s Annual Cost Statement”) with its offer,
as required by the SFO. (DX 1; JX 1B at 15-16.) Form 1217 was divided into two main
sections. Section I, comprised of Lines 5 through 27, referred to the “Estimated Annual Cost of
Services & Utilities Furnished by Lessor as Part of Rental Consideration.” (DX 1 at 1-2.)
Section II, which included lines 28 through 33, referred to the “Estimated Annual Cost of
Ownership Exclusive of Capital Charges.” (Id. at 2.) For each section, column (a) represented
costs for the entire building, and column (b) represented costs pertaining to the area leased by

4 The version of DX 2 the defendant initially provided was dated January 12, 2010. Because
the exhibit omitted a portion of the page likely due to a photocopying error, the Court permitted
the defendant to re-submit DX 2. The defendant submitted a new version of DX 2, but the
revised version was dated March 22, 2010, and includes minor deviations from the prior version
of DX 2 and handwritten notations apparently due to “clarifications with the offeror.” (DX 2 at 1
(revised).) The new DX 2 lists, for example, a larger percent of government occupancy. Ms.
Winn testified that the handwritten additions to DX 2 (revised) reflect her negotiations with the
lessor. (Tr. 424 (Winn).) The Court admitted the revised DX 2 into evidence. (Id. at 425.)

4
GSA. (Id. at 1.) At the time SAOP submitted Form 1217, its bid proposed that GSA lease an
area of 43,119 rsf. (Id.) Line 28 of Form 1217 was titled “REAL ESTATE TAXES.” (Id. at 2.)
On line 28, in column (a), SAOP listed the lessor’s annual cost for real estate taxes as $726,629.
(Id.) On line 28(b), which referred specifically to the area leased by the government, SAOP
identified the real-estate taxes as $129,788.19. 5 (Id.) Line 28 of Form 1217 thus provided the
following information:

SECTION II - ESTIMATED ANNUAL COST OF OWNERSHIP EXCLUSIVE OF CAPITAL
CHARGES

LESSOR’S ANNUAL COST FOR:

ENTIRE BUILDING (a) GOV’T-LEASED AREA (b)

28. REAL ESTATE TAXES $ 726,629 $ 129,788.19

(Id. (reformatting for clarity; column (c) omitted).)

C. Original Lease

GSA awarded the 2010 lease (“original lease”) to SAOP. (Jt. Stip. ¶ 6.) On October 19,
2010, SAOP and GSA agreed to U.S. Government Lease for Real Property No. GS-07B-16737.
(Id.) The lease between the parties was a standard government form lease that was prepared by
GSA. (JX 1B at 13.) SAOP drafted no part of the lease. (Tr. 134 (Moreland).)

Under the original lease, GSA occupied 44,201 rsf of office and related space in the
building. (Jt. Stip. ¶ 6.) For months 1 through 60 of the lease term, the annual rent was
$1,087,786.61, at the rate of $90,648.88 per month. (Id. ¶ 7.) For months 61 through 120, the
annual rent was $1,060,824.00, at the rate of $88,402.00 per month. (Id.) At the outset of the
original lease, GSA occupied 18.309894 percent of the building. (Id. ¶ 8.) The original lease
permitted GSA to “terminate this lease in whole or in part at any time on or after the fifth (5 th)
year by giving at least 120 days’ notice in writing to the Lessor.” (JX 1A at 2.)

1. Incorporated Documents and Integration

Paragraph 7 of the original lease specified that the lease incorporated five documents: (1)
the SFO, including two amendments; (2) GSA Form 3517, entitled “General Clauses”; (3) GSA
Form 3518, entitled “Representations and Certifications”; (4) “Exhibit A—Base Plan”; and (5)

5At the time SAOP submitted Form 1217 in January 2010, SAOP estimated GSA’s building
occupancy to be 43,119 rsf. SAOP and GSA later agreed to a slightly larger leased area of
44,201 rsf. (DX 1 at 2; JX 1A.) The estimated real-estate taxes on Form 1217 were thus
calculated using a smaller square-footage of occupancy than is reflected in the final lease.

5
“Exhibit B—Legal Description.” (Id.) The original lease did not specify that it incorporated any
other documents. (See JX 1A.)

The General Clauses form, incorporated into the original lease, included General Clause
552.270-27, an integration clause:

This Lease, upon execution, contains the entire agreement of the
parties and no prior written or oral agreement, express or implied,
shall be admissible to contradict the provisions of the Lease.

(JX 1E at 5.) The original lease was therefore a fully integrated agreement.

Between execution of the original lease in 2010 and July 2013, GSA and SAOP executed
12 supplemental lease agreements amending the lease. (Jt. Stip. ¶ 10.)

2. Tax-Adjustment Provisions

The original lease contained provisions intended to determine the amount of property tax
GSA would pay relative to its occupancy in the building. Paragraph 15 of the original lease
provided in full:

In accordance with the SFO Paragraph 4.2 entitled “Tax
Adjustment,” this lease is subject to real estate tax adjustment. The
base amount is established as $133,045.00. The percentage of
occupancy is 18.309894%.

(JX 1A at 3.)6 Paragraph 15 is the “tax-adjustment clause” primarily at issue in this dispute.

The SFO, which was incorporated into and referenced in paragraph 15 of the original
lease, provided definitions and specific instructions for calculating the tax base. Paragraph 4.2 of
the SFO identified the paragraph’s purpose:

4.2 Tax Adjustment (AUG 2008)
A. Purpose:
This paragraph provides for adjustment in the rent (“Tax
Adjustment”) to account for increases or decreases in Real Estate
Taxes for the Property after the establishment of the Real Estate Tax

6 The figure $133,045 differs slightly from the $129,788.19 listed in GSA Form 1217. This
difference is due to an increase in the amount of rentable square feet GSA leased. (See Tr. 437-
39 (Winn).) When SAOP submitted Form 1217, it proposed a rentable area of 4 3,119 rsf. The
parties later agreed that GSA would lease slightly more space, and the final agreement reflected
in the lease was 44,201 rsf, a difference of 1,082 square feet. (Id.; JX 1A.)

6
 Base, as those terms are defined herein. Tax Adjustments shall be
calculated in accordance with this Clause.

(JX 1B at 19.)

Paragraph 4.2 also identified definitions relevant to tax adjustment:

B. Definitions:
The following definitions apply to the use of capitalized terms
within this paragraph: . . . .
2. “Real Estate Taxes” are those taxes that are levied upon the
owners of real property by a Taxing Authority (as hereinafter
defined) of a State or local Government on an ad valorem basis . . . .
5. “Tax Abatement” is an authorized reduction in the Lessor’s
liability for Real Estate Taxes below that determined by applying
the generally applicable Real Estate Tax rate to the Fully Assessed
(as hereinafter defined) valuation of the Property.
6. “Unadjusted Real Estate Taxes” are the full amount of Real Estate
Taxes that would be assessed for the Property for one full Tax Year
without regard to the Lessor’s entitlement to any Tax Abatements
(except if such Tax Abatement came into effect after the date of
award of the Lease) . . . .
9. “Percentage of Occupancy” refers to that portion of the Property
exclusively occupied or used by the Government pursuant to the
Lease. For buildings, the Percentage of Occupancy is determined
by calculating the ratio of the rentable square feet occupied by the
Government pursuant to the Lease to the total rentable square feet
in the building . . . .

(Id. at 19-20.)

Clause 7 of paragraph 4.2, defining “Real Estate Tax Base,” identified the methodology
for selecting a real-estate tax base:

7. “Real Estate Tax Base” is the Unadjusted Real Estate Taxes for
the first full Tax Year following the commencement of the Lease
term. If the Real Estate Taxes for that Tax Year are not based upon
a Full Assessment of the Property, then the Real Estate Tax Base
shall be the Unadjusted Real Estate Taxes for the Property for the
first full Tax Year for which the Real Estate Taxes are based upon a
Full Assessment. Such first full Tax Year may be hereinafter
referred to as the “Tax Base Year.” Alternatively, the Real Estate
Tax Base may be an amount negotiated by the parties that reflects
an agreed upon base for a Fully Assessed value of the property.
7
(Id. at 20 (emphasis added).) Clause 7 thus established that the real-estate tax base would be the
unadjusted real-estate taxes assessed for the first year following commencement of the lease or,
alternatively, would be based on an amount the parties negotiated.

Part C of paragraph 4.2 explained that property taxes would be adjusted to ensure GSA
pays only its proportional share of taxes:

C. Adjustment for Changes in Real Estate Taxes:

1. After the Property is Fully Assessed, the Government shall pay
its share of any increases and shall receive its share of any decreases
in the Real Estate Taxes for the Property, such share of increases or
decreases to be referred to herein as “Tax Adjustment.”

(Id.)

Paragraph 4.2C(1) further specified the methodology for calculating GSA’s proportionate
tax payment:

The amount of the Tax Adjustment shall be determined by
multiplying the Government’s Percentage of Occupancy by the
difference between the current year Unadjusted Real Estate Taxes
and the Real Estate Tax Base, less the portion of such difference not
paid due to a Tax Abatement (except if a Tax Abatement comes into
effect after the date of award of the Lease). If a Tax Abatement
comes into effect after the date of award of the Lease, the amount of
the Tax Adjustment shall be determined by multiplying the
Government’s Percentage of Occupancy by the difference between
the current year Unadjusted Real Estate Taxes and the Real Estate
Tax Base.

(Id.) Paragraph 4.2 was a “standard section” in GSA leases. (Tr. 433 (Winn).)

Pursuant to the lease, GSA would pay this tax adjustment “in a single annual lump sum
payment to the Lessor,” and if the adjustment “results in a credit owed to the Government, the
Government may elect to receive payment in the form of a rental credit or lump sum payment.”
(Id.)

The overall effect of the real-estate tax provisions was to (1) establish a default and
alternative method for selecting the tax base; (2) ensure GSA pays only its share of the building’s
real-estate taxes based on the percentage of the building it occupies; and (3) identify the
appropriate formula to effectuate the tax adjustment.

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 D. Negotiation of the Tax Base

1. Relevant Tax History

The Northwest Center is in Bexar County, Texas, which assesses the real-estate taxes on
the building. (Tr. 49 (Allen); JX 79.) Property taxes for a given tax year are payable by January
31 of the following year. (Tr. 32 (Allen).) For the 2009 tax year, the year immediately
preceding negotiation of the original lease, SAOP was assessed $691,942 in unadjusted real-
estate taxes.7 (DX 2 at 1.) For the 2010 tax year, SAOP ultimately paid Bexar County a total of
$573,292.86 in real-estate taxes. (JX 66 at 4; JX 67.) For the 2011 tax year, SAOP paid a total
of $527,585.91 in real-estate taxes. (JX 66 at 4; JX 67.) For the 2012 tax year, the first year of
taxes after the start of the original lease, SAOP paid $541,020.95 in real-estate taxes. (JX 78 at
2.)

2. Lessor’s Understanding of the Tax Base

Griffin Partners, the asset- and property-management company that owned SAOP,
authorized Mr. Lee Moreland, its senior vice president for asset management, to “sign and
negotiate on behalf of Griffin Partners/SAOP Northwest Center, LP” the original lease. (JX 33.)
Mr. Moreland was “the point person in terms of negotiations on behalf of the building owner”
and negotiated with GSA the terms of original lease. (Tr. 130 (Moreland).)

Mr. Moreland submitted Forms 1364 and 1217, as required by the SFO, on behalf of
SAOP in January 2010. (Id. at 176, 180.) His employees prepared the forms under his
supervision, and he approved them. (Id. at 181.) Mr. Moreland’s initials appear on each page of
SAOP’s bid package, including GSA Forms 1364 and 1217, as required, and he signed the last
page of both forms. (DX4; DX 1 at 2; DX 2 at 2.)

Mr. Moreland described GSA Form 1217 as “an estimate that was requested of the
annual costs of the building.” (Tr. 184.) He testified that line 28(a) on Form 1217, which listed
the figure $726,629, constituted the “estimated real estate tax expense for the building.” (Id. at
185.) Regarding the origin of the $726,629 figure on line 28(a) of Form 1217, Mr. Moreland
testified that it came from one of two places: “It would either have been . . . the budget . . . the
year in which [Form 1217] was submitted, which was in January of 2010, or it was based on the
year end, December 31, 2009.” (Id. at 186.)

Mr. Moreland explained that his “assumption for the reason” he listed the estimated
figure of $726,629 in line 28(a) of Form 1217 “was that it was to establish the estimated
[expenses] for the building as part of the offer.” (Id.) Mr. Moreland testified that he did not
intend for the estimated costs listed on Form 1217 to be reflected in the lease, stating that it
“would not have been my intent with the submission of this package.” (Id.) He stated that his
only intent with the submission of Form 1217 was to “provide the then current estimate of

7 The unadjusted real-estate taxes are often challenged, and the final real-estate taxes paid on
the building do not reflect the initial, unadjusted assessment, as will become evident below.

9
operating expenses for the building,” for the purpose of “completing the SFO as requested by the
GSA.” (Id.) The $726,629 figure of Form 1217 “represents an estimate of what [he] thought
that the county would send [SAOP] as a tax bill,” though “subject to the protest procedures for
assessed values.” (Id. at 188.)

Mr. Moreland neither agreed to nor negotiated a $726,629 or $133,045 tax base during
his discussions with GSA leading to the original lease. (Id. at 138, 205.) He testified that the
$133,045 figure in paragraph 15 was wrong. (Id. at 189.) He agreed that the figure “was a
mistake,” noting that “the $133,045 was not in keeping with my assumption for setting the base
year.” (Id. at 199.) Ultimately, when asked whether he would “have recommended to SAOP
that it adopt a $726,629 . . . real estate tax base for the new lease,” Mr. Moreland testified “no.”
(Id. at 146.)

Instead, he intended “to have the tax base be the actual taxes for the year in which the
lease commenced.” (Id. at 139.) He testified that he maintained his intention to use the first-year
taxes as the tax base throughout the course of negotiations with GSA. (Id.) Given that the lease
term began in January 2012, Mr. Moreland testified that he would have intended to use the actual
taxes paid in tax year 2012, subject to any subsequent reduction by Bexar County, as the tax base
for paragraph 15 of the lease. (Id. at 205-06, 209-10.)

3. GSA’s Understanding of the Tax Base

Ms. Kelly Winn, a real-estate broker for Studley, Inc., served as GSA’s representative
and broker for the procurement that led to the original lease. (Tr. 415 (Winn).) Ms. Winn had
extensive experience with public-sector leases. (Id. at 408.) She testified as to the government’s
intent in formulating the tax-adjustment clause.

Ms. Winn explained that in public-sector leasing, the lessor and the government negotiate
using the government’s form. (Id. at 410.) As set forth in paragraph 3.4 of the SFO, offerors
were required to submit GSA Forms 1217 and 1364 with their offer in response to the SFO. (Id.
at 422-23.) Ms. Winn explained that the “building shell rental rate” referenced in paragraph
3.4(A)(2)(c) of the SFO is comprised of two components. “One is outlined in Section 1.11 of the
solicitation for offers, it’s the physical components of the space. And then the second
component is a monetary component that is taken from another form, 1217, which includes real
estate taxes . . . .” (Id. at 423.) Ms. Winn confirmed that Forms 1217 and 1364 “are not attached
to the lease. These documents make up the business terms for the lease.” (Id. at 426.) Forms
1217 and 1364 are “the base for the business points of the lease that’s negotiated.” (Id. at 431.)

Ms. Winn explained that line 28 of GSA Form 1217 depicted the lessor’s annual
operating costs for real-estate taxes. She noted that column (a), which showed a figure of
$726,629, represented “the real estate taxes for the entire building,” and that column (b), listing
the figure $129,788.19, referred to “the proportionate share of the real estate taxes for the
government.” (Id. at 429.) She further explained that “the real estate taxes would have matched
up with a real estate tax statement from Bexar County. So . . . it would be either an estimate
based on what they had received from the county or it would be the actual just depending on

10
when it was submitted.” (Id.) In this case, Ms. Winn identified the figures at line 28 as the
estimated costs. (Id.)

GSA maintains that it already pays real-estate taxes as part of its shell rent. (Id. at 423.)
Ms. Winn explained that the shell rental rate “does include the real estate taxes for the building.”
(Id.) The formula referenced in paragraph 15 of the lease is intended to adjust the proportional
amount GSA pays when taxes assessed against the building are either more or less than the
established tax base. (Id. at 434.) Ms. Winn explained that essentially, “the tax base is a
reference point pursuant to which the taxes are adjusted.” (Id.) The tax-adjustment provision
seeks to modify what GSA has already paid in its shell rent, and GSA’s annual tax payment
“could go up, [or] could go down” beyond what had already been paid in the shell rent
depending on whether the yearly assessment by the county falls above or below the established
tax base. (Id.)

Regarding the establishment of a real-estate tax base, Ms. Winn testified that, for all GSA
leases, there generally are “two ways that the real estate base could be determined. It can be
determined based on after the first year of occupancy, when the government has taken possession
of the space, or it can be a determined amount based on -- if I’m a tenant in the building, what
the current real estate taxes are.” (Id. at 435.) For the tax base at issue in this case, she
explained: “In this lease, it was a determined amount because we were currently a tenant in the
building. So there was a basis for understanding what the real estate taxes were.” (Id.)

Ms. Winn identified the $726,629 figure from line 28 of GSA Form 1217 as the correct
determined amount for the building. Id. at 436. When asked whether $133,045 was the tax base
as determined and used in paragraph 4.2, she testified “no . . . it should be the real estate taxes
for the entire building, $726,629.” (Id. at 440.) She did not know how the $133,045 figure
ended up in paragraph 15 of the lease. (Id. at 442.) She testified, as did Mr. Moreland, that the
$133,045 number “is a mistake.” (Id. at 439.)

Ms. Harter, the GSA contracting officer, testified at trial that the proper formula for
calculating GSA’s proportional share of property taxes is to “take the tax assessment for that
year, subtract the tax or the base that’s already in our shell rent, and then you take that figure and
multiply it by our percentage occupancy, and that is . . . the government’s obligation.” (Tr. 355
(Harter).) She also explained that the tax base of paragraph 15 was incorrect: “it should have
been, instead of the $133,045, in paragraph 15, it should have been the $726,629, because that is
the base tax amount for the premises, for the entire building.” (Id. at 357.)

E. Tax Payment under Original Lease Between SAOP and GSA

The first tax year after the original lease commenced was tax year 2012. For tax year
2012, SAOP paid $541,020.95 in property taxes to Bexar County for the entire building. (JX 78
at 2.)

Because the real-estate tax base in paragraph 15 of the lease was written as $133,045 and
the taxes assessed exceeded $133,045, SAOP determined that it required additional payment
from GSA. In a letter dated January 29, 2013, SAOP notified GSA that it was responsible for an

11
additional $37,348.98, representing one-half of the government’s pro rata share of the 2012
taxes. (JX 40 at 6.)

Ms. Harter approved payment of SAOP’s bill for a further contribution by GSA to cover
the building’s 2012 property tax. (JX 41; Tr. 339 (Harter).) She testified that SAOP submitted
to GSA with its payment request a worksheet, tax statement, and proof of payment that GSA
used to complete an independent tax escalation analysis worksheet. (Tr. at 340.) Ms. Harter
relied on this worksheet to approve payment of SAOP’s tax bill and testified that she did not
consult the lease to approve the request. (Id. at 339-40.) GSA therefore issued to SAOP a
payment of $37,348.16, representing GSA’s portion of a “split payment,” on March 1, 2013.8
(JX 41.)

F. Westdale’s Purchase of the Northwest Center

Westdale purchased the Northwest Center from SAOP in 2013. Prior to closing on the
purchase, on March 24, 2013, Ms. Harter sent Westdale a letter on behalf of GSA pertaining to
the lease. The letter confirmed that “1. Lease GS-07B-16737 is currently in full force and effect.
2. No rental has been paid in advance under the leases. 3. No notices of default have been issued
by the Contracting Officer.” (JX 35 at 1.) The letter based its statements “on a reasonably
diligent review of the Contracting Officer’s lease files as of the date of issuance of this letter.”
(Id.)

In addition to the letter from GSA, SAOP provided to Westdale, at the time of closing on
May 21, 2013, a partial seller-estoppel certificate related to its lease of space to GSA. (JX 36.)
The estoppel certificate confirmed that pursuant to the Agreement of Purchase and Sale of March
5, 2013, between Westdale and SAOP, “the owner of the Property and the landlord’s interest in
the Lease [SAOP], intends to sell, transfer, assign and convey such Property, and the landlord’s
interest in all tenant leases with respect to such property.” (Id. at 1.) The estoppel certificate
also confirmed that “Tenant is currently obligated to pay fixed or base rent under the Lease in the
annual amount of $1,046,237.67” in monthly installments. (Id.) It established that there were
“no concession, bonuses, free months’ rental, rebates or other matters affecting the rental for
Tenant which Tenant has not received” and that “[t]o the best of Seller’s knowledge, there are no
events or conditions existing which, with or without notice or the lapse of time, or both, could
constitute a monetary or other default of the landlord or tenant under the Lease . . . .” (Id.)

Mr. Allen, Westdale’s executive vice president, negotiated the purchase of Northwest
Center and completed the due diligence. (Tr. at 35 (Allen).) He testified that he relied on GSA’s
representation that its lease was in full force and effect. (Id. at 40.) He maintained that the
government’s estoppel certificate is “critical” because the new lessor had not “had any
relationship with the tenants” prior to purchase. (Id.) He received similar representations from
the seller, Griffin Partners. (Id. at 41; JX 36.) Mr. Allen had been involved with prior

8 The difference between SAOP’s request of $37,348.98 and GSA’s payment of $37,348.16
reflects a rounding issue that the plaintiff does not dispute.

12
acquisitions from Griffin Partners in Houston. (Tr. 34-35.) He noted that the seller’s estoppel
certificate serves to confirm that there are “no outstanding issues that a buyer would need to be
aware [of].” (Id. at 38.)

Because the contracting parties to the original lease, SAOP and GSA, were unaware of
the alleged mistake in paragraph 15, Westdale did not know prior to the purchase that there was
any mistake written into the terms of the lease. (Id. at 53.) The amount of GSA’s rental
payments aligned with the market rate for office space in San Antonio. (Tr. 140-41 (Moreland).)

Mr. Allen explained that Westdale’s intention in buying the Northwest Center related to
potential rental income from tenants in the building. In buying an office building, Mr. Allen
testified, the buyer is “buying an income stream. . . . [B]asically how our industry values the
building is based on the income stream that you anticipate receiving over typically a three to
five-year period, or longer in our case.” (Tr. 36 (Allen).) He explained that GSA’s occupancy
“represented 20 percent of the building. There’s no way we were buying the building that didn’t
include this rental stream. No way, no how.” (Id. at 98-99.)

Mr. Allen testified that the government’s reading of the lease as intending other than a
$133,045 tax base “reduces the rental rate [Westdale] otherwise anticipated receiving.” (Id. at
77.) The withholding of rent payments by GSA to account for the mistake in the tax base
reflected in the original lease creates “a reduction in the cash flow that we anticipated. You
know, we bought a number of leases in place, the GSA lease was one of many leases that we
bought at this property, and we have not received the income that we projected based on the clear
reading of the lease that we anticipated to receive.” (Id. at 77-78.) Therefore, Mr. Allen
maintained that Westdale is not receiving the benefit of its bargain under the lease that it
assumed with the government “based on [Westdale’s] clear reading of the lease document.” (Id.
at 77.)

On May 21, 2013, by a special warranty deed executed by SAOP, Westdale took title to
the real property and improvements. (Jt. Stip. ¶ 12.) All lease files for each tenant in the
building were transferred to Westdale at the time of purchase. (Tr. 135 (Moreland).)

After closing on the property, Westdale, SAOP, and GSA entered into Lease Agreement
No. 13, effective July 16, 2013. (JX 14; Jt. Stip. ¶ 13.) This agreement memorialized
Westdale’s assumption of all obligations and liabilities of SAOP under the original lease, as
amended, and Westdale became the lessor for the remainder of the term of the original lease:

Westdale Northwest Center, LP, Lessor, hereby assumes all the
incomplete obligations of Lease GS-07B-16737 as amended, and
agrees to perform same in accordance with the terms, conditions,
and provisions thereof from and after July 16, 2013. Lessor further
assumes all obligations and liabilities of and all claims and demands
arising under Lease GS-07B-16737 against [SAOP] and ratifies and
confirms all actions heretofore taken by [SAOP] with respect to the
contract with the same force and effect as if the actions had been
taken by [Westdale]. Nothing contained herein shall be construed
13
 as releasing [SAOP] from [SAOP’s] obligations under the terms of
the lease.

(JX 14 at 1.)

Paragraph 6 of Lease Agreement No. 13 discharged any further payment obligation by
GSA to SAOP:

Notwithstanding the foregoing, all payments heretofore made by the
Government to [SAOP] and all other actions hereto taken by the
Government pursuant to its obligations under the contract shall be
deemed to have discharged the Government’s obligations under the
contract to the extent of the amounts so paid or reimbursed or such
actions taken.

(Id.)

G. Contract Performance Under Lease Between Westdale and GSA

1. Tax Year 2013

On July 5, 2014, Westdale sent GSA a letter pertaining to taxes owed for tax year 2013.
Westdale notified GSA that it owed $86,446.84, representing GSA’s pro rata share in excess of
the established real-estate tax base of the 2013 real-estate taxes assessed against the building.
(Jt. Stip. ¶ 15.) Westdale submitted with its letter a worksheet, tax statement, and proof of
payment. In response to Westdale’s letter, Ms. Harter’s supervisor at GSA, Mr. Ed Perez,
approved payment of the 2013 real-estate taxes as determined by the tax-adjustment clause of the
lease. (JX 43; Tr. 340-41 (Harter).) GSA paid the sum of $86,446.34, a difference of $.50 from
Westdale’s request that the parties do not dispute. (JX 43.)

2. Government Audit

On November 4, 2014, GSA provided notice to Westdale by letter that GSA had
conducted an audit of the lease and the rental payments it had made. (JX 58.) GSA’s “review of
the lease and rental payments revealed that [Westdale had] been overpaid in the amount of
$79,027.78.” (Id. at 1.) The letter notified Westdale that the overpayment would be deducted
from shell rent payments for two months until repaid in full. (Id.)

GSA’s audit pertained to tax-adjustment payments due under the lease for 2012 and from
January 1 to May 20, 2013. (Jt. Stip. ¶ 16.) A “rate sheet” used in the audit, titled “Yearly
Stepped Rent Levelizer” was attached to GSA’s November 4 letter and included a handwritten
notation at the top providing that this document was “not part of their lease.” (JX 58 at 7.)

GSA’s November 4, 2014 letter was the first indication Westdale received that GSA
believed it had overpaid property taxes under the lease, including when the Northwest Center
had been under SAOP’s ownership. (Tr. 61 (Allen).) On November 5, 2014, Westdale
responded via letter to GSA’s claims and contended that GSA had been correctly invoiced
14
according to the tax adjustment provision in the lease. (JX 59.) Westdale explained that
“according to Paragraph 15 of the lease, the base amount is $133,045.00 with a percentage of
occupancy of 18.309894% . . . . Based on the attached invoices, it is the Landlord’s opinion that
it has correctly invoiced the Government per the terms of the lease.” (Id.)

By letter dated November 7, 2014, GSA notified Westdale that its audit also concluded
that Westdale had been overpaid in the amount of $13,630.21 for property taxes due from May
21 to December 31, 2013. (Jt. Stip. ¶ 18.)

On January 16, 2015, GSA issued a letter to Griffin Partners, the former asset
management company, demanding the return of $79,027.78, asserting an erroneous overpayment
made under the terms of the original lease. GSA deducted this amount from payments of rent
and other charges due to Westdale. (Jt. Stip. ¶ 19.)

3. Occupancy Increase

On February 16, 2015, Westdale and GSA executed Lease Amendment No. 17, effective
retroactively from December 18, 2014, documenting GSA’s acceptance of 3,417 additional rsf of
recently constructed expansion space. (Jt. Stip. ¶ 20; JX 18 at 1.) The new space increased the
space GSA occupied to 47,618 rsf or 19.725357 percent of the building. (Jt. Stip. ¶ 21; JX 18 at
1.) For the purposes of this dispute, GSA’s occupancy remains 19.725357 percent to date. 9 (Jt.
Stip. ¶ 21.)

Paragraph D of Lease Amendment No. 17 provided that “Paragraph 1 5 of the Lease is
hereby amended as follows. . . . 15. In accordance with the SFO Paragraph 4.2 entitled ‘Tax
Adjustment,’ this lease is subject to real estate tax adjustment. The base amount is established as
$133,045.00. The percentage of occupancy is 19.725357% [47,618 RSF/241,405 RSF].” (JX 18
at 2 (brackets in original).) Ms. Harter testified that the retention of the figure $133,045 in
paragraph D of Lease Amendment No. 17 was another mistake. (Tr. 390 (Harter).)

4. 2014 Tax Year

On March 31, 2015, Westdale notified GSA via email that GSA was responsible for
paying its pro rata share of the 2014 real-estate taxes assessed against the property above the
established base-year amount. (Jt. Stip. ¶ 22.) Westdale invoiced GSA $105,341.85. (Id.) On
June 27, 2015, GSA notified Westdale that GSA had overpaid its share of 2014 real estate taxes
by $27,391.00. GSA notified Westdale of its intention to deduct th at amount from future rental

9 GSA later increased its occupancy to 23.277479 percent of the building through Lease
Amendment No. 19, effective March 1, 2017, but the additional space leased by GSA is subject
to its own separate property-tax base. (Jt. Stip. ¶ 21; JX 20.) Paragraph 5 of the lease
amendment provides: “The Base Cost of Services for the expansion area in 2017 is established at
$8.30 per rental sq. ft. The Tax Base for the Expansion Area is included in the shell rent and
shall be the taxes for 2017.” (JX 20 at 3.) The newly occupied space thus used the first year of
taxes under the lease amendment for the tax base.

15
payments. (Id. at ¶ 23.) In August 2015, GSA withheld $27,391.00 from its rent payment. (Id.
at ¶ 24.)

On August 28, 2015, Ms. Harter sent Westdale a letter on behalf of GSA in response to
Westdale’s claim, explaining the erroneous tax base:

I have conducted a thorough examination of the lease and tax audit
documents, along with the Lessor’s Annual Cost Statement which
was submitted with the Lessor’s offer for the succeeding lease, and
tax records for the building. In doing so, I have determined the lease
language itself does not correctly represent the intention of the
established real estate tax base as it relates to real estate adjustments.
Paragraph 15 of the SF2 and Lease Amendment (LA) No. 17 do
state the base amount is established as $133,045.00 which I believe
is intended to be the tax base for the Government occupied
percentage of the building only, not the entire building.

(JX 26 at 4 (emphasis in original).) Due to a subsequent reduction by Bexar County of
Westdale’s total property-tax obligations, Westdale received a refund of $56,145.16, reducing
the amount Westdale claims is due for 2014 taxes to $95,061.73. (Jt. Stip. ¶ 24.)

Ms. Harter attached Lease Amendment No. 18 to her August 2015 letter “to clarify the
intention of the $133,045.00 tax base.” (JX 26 at 5, 11.) Lease Amendment No. 18 sought to
replace the tax base of $133,045 written into paragraph 15 of the lease with $726,629. (Id.)
Westdale did not sign Lease Amendment No. 18.

5. Subsequent Tax Years10

For the 2015 tax year, Westdale invoiced GSA for $130,672.02, representing GSA’s
proportional share of real-estate taxes. (Jt. Stip. ¶ 25; JX 47.) GSA prepared a tax escalation
worksheet and determined it owed $23,870.61. (JX 49.) It paid the sum of $23,870.61, leaving
$106,801.41 of the amount Westdale had invoiced. (Jt. Stip. ¶ 25.) Westdale later received a
reduction in real-estate taxes owed to Bexar County, resulting in a refund to Westdale of
$59,647.11 for the 2015 tax year. (Id.) This reduction decreased the total 2015 taxes allegedly
owed by GSA from $130,672.02 to $118,906.41 and decreases the amount Westdale alleges to
be still due from GSA from $106,801.41 to $95,035.80.

For the 2016 tax year, Westdale invoiced GSA for $127,913.93. (Id. ¶ 28; JX 51.) Of
the total amount invoiced, GSA paid $21,112.52, leaving $106,801.41 as an alleged remaining
balance. (Jt. Stip. ¶ 28; JX 52; JX 53.) Due to a subsequent tax reduction by Bexar County,

10 The Court has reached slightly different mathematical calculations in determining the
amounts the plaintiff alleges to be due from GSA. These discrepancies are a matter of a few
cents. For the purposes of this opinion, the Court adopts the amount due as allege d by the
plaintiff and as is reflected in the parties’ joint stipulation of facts.

16
Westdale received a $30,991.27 refund on its 2016 taxes. This reduction decreased the total
2016 taxes allegedly due from GSA from $127,913.13 to $121,800.78 and decreases the amount
Westdale alleges to be still due from GSA from $106,801.41 to $100,688.26. (Jt. Stip. ¶ 28.)

For the 2017 tax year, Westdale invoiced GSA for $133,365.35. (JX 54 at 3.) GSA paid
$26,563.96 of that total, leaving $106,801.39 that Westdale alleges is still due. (Jt. Stip. ¶ 30; JX
54A; JX 54B.) Westdale again received a refund of its 2017 taxes, decreasing the taxes allegedly
due from GSA from $133,365.35 to $127,808.93, and decreasing the amount Westdale now
alleges to be still due from GSA from $106,801.41 to $101,244.97.

For the 2018 tax year, Westdale invoiced GSA for $132,988.83. (Jt. Stip. ¶ 32.) GSA
paid $54,861.85, leaving $78,126.78 alleged to be due to Westdale. (Id.) A subsequent
reduction by Bexar County to the assessed value of the building resulted in a refund of
$21,564.46 of the taxes Westdale paid for the 2018 tax year. (Id.) This reduction decreases the
total 2018 taxes allegedly due from GSA from $132,988.83 to $128,735.17 and decreases the
amount Westdale alleges to be still due from GSA from $78,126.78 to $73,873.32.

For the 2019 tax year, Westdale invoiced GSA for $129,990.55. (Jt. Stip. ¶ 34.) GSA
paid the sum of $22,581.42 and was due a credit in the amount of $607.74 relating to its
expansion space on the ninth floor of the building, leaving the sum of $107,409.13 alleged to be
due to Westdale. (Id.) A subsequent reduction by Bexar County to the assessed value of the
building resulted in a refund of $27,014.34 of the taxes Westdale paid for the 2019 tax year.
(Id.) This reduction decreases the 2019 taxes allegedly due from GSA from $129,990.55 to
$124,661.88 and decreases the amount Westdale now alleges to be still due from GSA from
$107,409.13 to $101,472.72.

For the 2020 tax year, Westdale was assessed $788,235.87 in property taxes by Bexar
County. (JX 80.)

In sum, Westdale asserts that its damages are based on the alleged unpaid taxes:

Tax Year Westdale Billed GSA GSA Paid Allegedly Due to Westdale (Adjusted)

2014 $ 105,341.85 $0 $ 95,061.73

2015 130,672.02 23,870.61 95,035.80

2016 127,913.93 21,112.52 100,688.26

2017 133,365.35 26,563.96 101,244.97

2018 132,988.83 54,861.85 73,873.32

2019 129,990.55 23,189.16 101,472.72

UNPAID TAXES: $567,376.80

(ECF 139 at 28.)
17
 H. Certified Claims

Westdale has presented four claims to Ms. Harter, GSA’s contracting officer, for
payment of sums it views as due under the plain text of the lease. 11 (Jt. Stip. ¶¶ 27-38.)

On July 10, 2015, Westdale presented its first certified claim to Ms. Harter for
$197,828.56, representing rent and tax adjustments allegedy due to date. (Id. ¶ 26.) Westdale
requested a final decision. (Id.) On October 27, 2015, Ms. Harter issued a final decision
denying Westdale’s claim. 12 (Id. at ¶ 27.)

On December 20, 2017, Westdale presented a second certified claim to the contracting
officer. (Id. ¶ 31.) Westdale sought declaratory relief related to construction and breach of the
lease and equitable adjustment. Westdale requested a final decision. The contracting officer
denied Westdale’s second certified claim in a final decision on February 8, 2018. (Id. ¶ 33.)

On October 22, 2019, Westdale presented its third certified claim for sums it alleges are
due under the terms of the lease for tax years 2014 through 2018. (Id. ¶ 35.) The contracting
officer issued a final decision on November 14, 2019, denying the third certified claim. (Id. ¶
36.)

On November 17, 2020, Westdale presented its fourth certified claim to the contracting
officer for sums it views as due for tax year 2019. (Id. ¶ 37.) On November 23, 2020, the
contracting officer denied the fourth certified claim in a final decision. (Id. ¶ 38.)

11 In its second certified claim presented to the contracting officer, Westdale sought
enforcement of the lease as written or, “[i]n the alternative, an equitable adjustment or
reformation of paragraph 15 of the Lease to reflect that the real estate tax base for real estate
taxes is the actual real estate taxes paid for tax year 2012 on the ‘Property.’” (JX 27 at 4.)
Westdale’s second, third, and fourth certified claims before the contracting officer also
incorporated by reference the complaint in this lawsuit and included the complaint as an
attachment. Like the certified claims, the complaint sought, in the alternative, reformation of
paragraph 15 of the lease. (JX 27 at 1; JX 29 at 1; JX 31 at 1.) The plaintiff thus raised the issue
of reformation in its claims before the contracting officer and requested and received a final
decision on these claims. See M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323,
1327-29 (Fed. Cir. 2010) (premising the Court of Federal Claims’ jurisdiction over a CDA case
on whether the claim was timely, provided notice of the basis and amount of the claim, and was
subject to a contracting officer’s final decision).
12 Although the contracting officer denied the majority of Westdale’s claim, GSA determined
it did owe Westdale $28.42 based on its audit of its rental payments under the lease. (JX 26 at
1.)

18
 I. Procedural History

The plaintiff filed a five-count complaint on January 27, 2016.13 (ECF 1.) The defendant
filed a motion to dismiss in lieu of an answer on May 4, 2016. (ECF 9.) The defendant’s initial
motion to dismiss was denied on January 11, 2017. (ECF 28.) The parties then attempted
alternative dispute resolution, but that proved unfruitful. After the completion of discovery, the
defendant moved for summary judgment and the plaintiff cross-moved for partial summary
judgment. Those motions were denied on May 1, 2019. In rejecting both parties’ motions,
Senior Judge Smith found that “genuine issues of material fact remain regarding the intent of the
parties at the time of contracting.” (ECF 62.) The case was transferred to the undersigned in
June 2019. With leave of the Court, the plaintiff thereafter filed an amended four-count
complaint. (ECF 70.) Count IV of the plaintiff’s first amended complaint realleged a claim for
reformation in the event a mutual mistake was found. (Id. ¶ 53.) The defendant’s answer to the
first amended complaint raised mutual mistake as an affirmative defense. (ECF 77.)

The Court held a three-day trial in this case in Washington, DC, from January 25 through
January 27, 2021. 14 The parties filed post-trial briefs and submitted proposed findings of fact
and conclusions of law. The Court heard closing argument on April 30, 2021.

II. JURISDICTION

The Tucker Act grants the Court of Federal Claims jurisdiction “to render judgment upon
any claim against the United States founded either upon the Constitution, or any Act of Congress
or any regulation of an executive department, or upon any express or implied contract with the
United States, or for liquidated or unliquidated damages in cases not sounding in tort.”
28 U.S.C. § 1491(a)(1). This court thus has jurisdiction over claims for breach of contract
founded upon an express contract with the United States. Hercules Inc. v. United States,
516 U.S. 417, 422 (1996) (noting that the Tucker Act confers upon this court jurisdiction to hear
cases founded upon express contracts with the United States).

Count V of the plaintiff’s complaint is pleaded in the alternative. Under Count V, the
13

plaintiff alleged that if the court were to determine that the tax-adjustment clause “is the result of
a mutual mistake or scrivener’s error, [Westdale] seeks an equitable adjustment or reformation of
the lease to replace the $133,045.00 amount with the actual tax base as evidence [sic] by the
amount of tax assessed for 2012.” (ECF 1 ¶ 39.) The defendant also raised a claim of mutual
mistake in its motion for summary judgment in response to Count V. (ECF 55 at 1 n.1.)

At the start of the trial, the Court denied the plaintiff’s motion in limine seeking a finding
14

that the lease provisions at issue are unambiguous and the exclusion of any evidence related to
mutual mistake or the Anti-Deficiency Act. (ECF 124.) The Court permitted the exclusion of
information pertaining to the parties’ efforts at alternative dispute resolution. (Id.) The Court
denied the plaintiff’s motion to strike the testimony of Ms. Kelly Winn. (ECF 125.)

19
 The Tucker Act also grants this court jurisdiction over claims arising under section
7104(b)(1) of the Contract Disputes Act (“CDA”), 41 U.S.C. § 7100 et seq. 28 U.S.C.
§ 1491(a)(2). The CDA provides this court with jurisdiction over contract disputes. 41 U.S.C.
§ 7104(b)(1) (“[A] contractor may bring an action directly on the claim in the United States
Court of Federal Claims, notwithstanding any contract provision, regulation, or rule of law to the
contrary.”); § 7101(7) (“The term ‘contractor’ means a party to a Federal Government contract
other than the Federal Government.”).15

Although the CDA expressly provides that contracts for “the procurement of . . . real
property in being” fall outside its applicability, the “act of entering into a lease” does not fall
within that exclusion. CanPro Inv. Ltd. v. United States, 120 Fed. Cl. 17, 21 (2015) (citing
Forman v. United States, 767 F.2d 875, 879 (Fed. Cir. 1985)). The CDA therefore provides this
court with jurisdiction over disputes related to leaseholds. 16 Id. (citing Forman, 767 F.2d at
879). The court’s “authority to adjudicate CDA leasehold disputes encompasses the authority to
grant nonmonetary relief in appropriate circumstances.” Id.

To present a claim under the CDA, a contractor must satisfy two requirements. First, the
contractor must present a timely written claim to the contracting officer for a decision. 41 U.S.C.
§ 7103(a); Alliant Techsystems, Inc. v. United States, 178 F.3d 1260, 1264-65 (Fed. Cir. 1999)
(noting additionally that the contractor must “specifically assert entitlement to the relief
sought”). Second, the contracting officer must issue a final decision. Id. at 1267.

The lease at issue in this case specifically provides that it is subject to the CDA. (JX 1E
at 19.) The claims pertain to a newly created leasehold interest, and the plaintiff has satisfied the
two CDA requirements. Westdale presented four certified written claims to the contracting
officer and all four were denied by the contracting officer in final decisions. Accordingly, the
Court has jurisdiction over Westdale’s claims under the Tucker Act and the CDA.

15 The Court’s power to reform a contract extends to cases arising under the CDA. See, e.g.,
Roseburg Lumber Co. v. Madigan, 978 F.2d 660, 665 (Fed. Cir. 1992) (considering reformation
in a case governed by the CDA); Lakeshore Eng’g Servs., Inc. v. United States, 110 Fed. Cl. 230
(2013), aff’d, 748 F.3d 1341 (Fed. Cir. 2014) (same).
16 The Federal Circuit has distinguished between leaseholds that are newly created and those
acquired by other means, noting that only newly created leaseholds fall within the CDA’s
purview. Forman, 767 F.2d at 879 (“‘Acquisition of’ a lease is not the same thing as ‘entering
into’ a lease. . . . A leasehold does not exist until a lease is entered into, and by entering into a
lease the Government does not acquire a pre-existing interest in the land; it establishes a new
one. Thus, the . . . language excluding contracts to procure ‘real property in being’ fails to apply
to newly-created lease agreements, and they fall within the purview of that statute and of the
corresponding provisions of the Contract Disputes Act.”).

20
III. DISCUSSION17

The Court is tasked with interpreting the tax-adjustment provision of the lease. “Leases
are normally considered within the realm of contracts.” Forman, 767 F.2d at 879 n.4. The lease
is thus subject to general principles of contract interpretation as equally applicable to the federal
government as they are to a private party. Mobil Oil Expl. & Producing Se., Inc. v. United
States, 530 U.S. 604, 607 (2000) (“‘When the United States enters into contract relations, its
rights and duties therein are governed generally by the law applicable to contracts between
private individuals.’” (quoting United States v. Winstar Corp., 518 U.S. 839, 895 (1996)
(plurality opinion)). While “federal law, rather than state law, governs the interpretation of
leases with the United States government,” when federal law is not dispositive “courts should
look to ‘general property and contract law principles as they are embodied in state law
pronouncements.’” See California Oregon Broad., Inc. v. United States, 74 Fed. Cl. 394, 399
(citing Prudential Ins. Co. of Am. v. United States, 801 F.2d 1295, 1298 (Fed. Cir. 1986) and
quoting Ginsburg v. Austin, 968 F.2d 1198, 1200 (Fed. Cir. 1992)).

The interpretation of a contract is a matter of law. Ragard v. United States, 439 F.3d
1378, 1380 (Fed. Cir. 2006), cert. denied, 549 U.S. 819 (2006). A court begins its legal analysis
with the contract’s text, first examining “the plain meaning of its express terms.” Barron
Bancshares, Inc. v. United States, 366 F.3d 1360, 1375 (Fed. Cir. 2004) (citing Textron Def. Sys.
v. Widnall, 143 F.3d 1465, 1468 (Fed. Cir. 1998)).

Two doctrines of interpretation guide the Court’s initial analysis. First, under the “plain
meaning” rule, “[i]f the terms of a contract are clear and unambiguous, they must be given their
plain meaning—extrinsic evidence is inadmissible to interpret them.” Id. (citing McAbee
Constr., Inc. v. United States, 97 F.3d 1431, 1435 (Fed. Cir. 1996)). A contract provision is
ambiguous only “if susceptible to more than one reasonable meaning.” Id. at 1375-76 (citing
Edward R. Marden Corp. v. United States, 803 F.2d 701, 705 (Fed. Cir. 1986)). Second, under
the parol evidence rule, if the parties have adopted a written text as an expression of their final
understanding of the agreement between them, a court may not consider extrinsic evidence to
add or otherwise modify the terms of the written agreement. Id. at 1375.

Under these doctrines, if a court finds a contract to be unambiguous, the plain meaning
and parol evidence rules bar consideration of evidence outside the four corners of the contract
and require the Court to enforce the contract as written. See Coast Fed. Bank, FSB v. United
States, 323 F.3d 1035, 1040-41 (Fed. Cir. 2003) (en banc) (“When the contractual language is
unambiguous on its face, our inquiry ends and the plain language of the [a]greement controls.”).

If a contract’s terms are ambiguous, a court is afforded latitude in interpreting the
contract and may consider extrinsic evidence to assist in understanding and interpreting the
agreement. See TEG-Paradigm Env’t, Inc. v. United States, 465 F.3d 1329, 1338 (Fed. Cir.

The Court’s discussion includes further findings of fact as well as legal conclusions based
17

on the facts as found.

21
2006) (“When a provision in a contract is susceptible to more than one reasonable interpretation,
it is ambiguous, and we may then resort to extrinsic evidence to resolve the ambiguity .” (internal
citation omitted)).

Additionally, the parol evidence rule may be overcome by evidence of “‘fraud, duress,
mutual mistake, or something of the kind.’” Nicholson v. United States, 29 Fed. Cl. 180, 193
(1993) (quoting Williston & Lord, A Treatise on the Law of Contracts § 631 (3d ed. 1961)). In
these circumstances, courts may find that even an unambiguous contract will not be enforced as
written. A finding of unilateral or mutual mistake, for example, permits a court to consider
evidence outside the text of the parties’ agreement.

Accordingly, the Court first considers whether the terms of paragraph 15 of the lease are
ambiguous. Finding that the terms are unambiguous, the Court next determines whether the
parties committed a mutual mistake in drafting the lease and, if so, whether reformation of the
lease to conform to the intent of the original contracting parties is appropriate.

A. Ambiguity

The Court begins its analysis by considering whether the tax-adjustment provision in
paragraph 15 of the lease is ambiguous.

1. Parties’ Arguments

Westdale argues that “none of the provisions in the Lease relating to real estate tax
adjustment are ambiguous.” (ECF 139 at 31.) The plain text of the lease establishes in
paragraph 15 a tax base of $133,045. (JX 1A at 3.) That figure is not ambiguous—the lease
establishes a specific tax base, and the number $133,045 is subject to but a single interpretation.
The government was tasked with preparing a lease that incorporated the agreement of the parties
and drafted the original lease. (JX 1B at 13.) Westdale argues that, based on the plain text of the
lease, the Court should find the lease to be unambiguous and, under the parol evidence rule,
should exclude all evidence outside the four corners of the lease and the documents it
incorporates.

GSA argues that the lease must be reformed because the terms are ambiguous. It argues
that the law of the case establishes ambiguity. In denying the parties’ cross-motions for
summary judgment, Senior Judge Smith held that “genuine issues of fact remain regarding the
intent of the parties at the time of contracting.” (ECF 62.) According to the defendant, this
earlier conclusion establishes that the lease is ambiguous. The defendant also cites two general
principles of contract interpretation to argue that the lease is ambiguous.

First, the defendant points to the law of patent ambiguity. “‘[A] contract is subject to a
patent ambiguity if it contains facially inconsistent provisions that would place a reasonable
contractor on notice and prompt the contractor to rectify the inconsistency by inquiring of the
appropriate parties.’” Input/Output Tech., Inc. v. United States, 44 Fed. Cl. 65, 72 (1997)
(quoting Nielsen-Gillingham Builders, J.V. v. United States, 43 Fed. Cl. 5, 11 (1999)). “When a
federal government contract contains a patent ambiguity[,] that is, one which is so plain o r

22
glaring that it is unreasonable for a contractor not to discover and inquire about it, the patent
ambiguity doctrine imposes a duty on the contractor to inquire about the true meaning of the
ambiguity before submitting a bid [, and] a failure to do so results in the ambiguity being
construed against the contractor.” 13 A.L.R. Fed. 2d 261 (2006). The defendant thus argues that
the Court should construe the lease against Griffin Partners and, by extension, Westdale, for
failure to discover the patent ambiguity.

Second, the defendant raises the issue of latent ambiguity. A contract may be considered
latently ambiguous if it is “‘reasonably susceptible of more than one interpretation.’” Hills
Materials Co. v. Rice, 982 F.2d 514, 516 (Fed. Cir. 1992) (quoting Edward R. Marden Corp.,
803 F.2d at 705). “An ambiguity exists where the terms of the contract ‘could suggest more than
one meaning when viewed objectively by a reasonably intelligent person who has examined the
context of the entire integrated agreement and who is cognizant of the customs, practice, usages
and terminology as generally understood in the particular trade or business.”’ Law Debenture
Trust Co. of New York v. Maverick Tube Corp., 595 F.3d 458, 466 (2d Cir. 2009) (quoting Int’l
Multifoods Corp. v. Com. Union Ins. Co., 309 F.3d 76, 83 (2d Cir. 2002)).

2. The Lease is Unambiguous

Paragraph 15 of the lease is unambiguous as written. The law of the case does not
establish ambiguity in the lease. In denying the parties’ cross-motions for summary judgment,
Senior Judge Smith entered a short order in which he noted that “genuine issues of material fact
remain regarding the intent of the parties at the time of contracting.” (ECF 62.) That order
includes no findings about the merits of the case or the ambiguity of the lease’s tax-adjustment
provision. The law of the case doctrine “comes into play only with respect to issues previously
determined.” Quern v. Jordan, 440 U.S. 332, 347 n.18 (1979) (citation omitted). While Senior
Judge Smith’s finding may be read to suggest that the court would entertain testimony outside
the four corners of the lease to determine the parties’ intent, the defendant reads too much into
the order denying summary judgment. Indeed, implicit in the denial of summary judgment is the
need for additional evidence to ascertain whether the parties had committed a mutual mistake,
which is an exception to the parol evidence rule that does not require the contract to be
ambiguous. No explicit finding of ambiguity was made in this case, and the Court therefore
rejects the defendant’s argument that the law of the case precludes a finding that the lease is
unambiguous.

The tax base is not the subject of patent ambiguity. The defendant’s effort to shift blame
to the plaintiff through the patent-ambiguity doctrine fails in the face of at least three errors the
defendant itself made.

First, GSA drafted the lease incorrectly by including an erroneous tax base. If the Court
were to find the contract ambiguous, the duty would remain with GSA, as the drafter, to have
included an accurate tax base in paragraph 15. See HPI/GSA 3C, LLC v. Perry, 364 F.3d 1327,
1334 (Fed. Cir. 2004) (“The general rule is contra proferentem, which requires ambiguities in a
document to be resolved against the drafter.” (citing Hills Materials Co., 982 F.2d at 516)). In
this case, a properly drafted paragraph 15 would have reflected either a negotiated amount or the
actual real-estate taxes paid by the lessor for the first tax year after the commencement of the
23
lease. (JX 1B at 19.) While the plaintiff did not notice the incorrect tax base before executing
the lease, SAOP is less blame-worthy for its careless proofreading than GSA, as the drafter. The
plaintiff itself, of course, was not involved in the drafting of the lease and can bear no
responsibility for the erroneously drafted provision.

Second, GSA paid both SAOP in 2012 and Westdale in 2013 according to the terms of
the lease as written. (JX 41 & 43.) GSA had the opportunity to discover the alleged patent
ambiguity in calculating its yearly tax payment to the lessor, but it did not for at least the first
two years of the lease.

Third, GSA increased its percentage of occupancy in the building yet failed to adjust
paragraph 15 of the lease to correct the tax base, repeating its error in Lease Amendment No. 17.
(JX 18; Tr. 390 (Harter).)

These three instances in which GSA did not discover the alleged ambiguity show that the
erroneous term in the lease was not so “glaring” or obvious that the lessor should have caught it;
GSA itself failed to do so on at least three occasions. The Court will not fault the lessor for the
error GSA made in multiple instances that could have been caught through accurate drafting and
careful proofreading.

The defendant’s argument that the lease is latently ambiguous is also without merit. The
figure $133,045 written into paragraph 15 of the lease is not “reasonably susceptible of more
than one interpretation.” Hill Materials, 982 F.2d at 516. The figure itself requires no
interpretation; it establishes a clear tax base and is incorporated into a formula for adjusting
GSA’s yearly real-estate tax payment beyond what is already paid in the shell rent. The parties
do not dispute the proper methodology for calculating the annual tax payment. What is in
dispute is solely the tax base, and that number, though evidently wrong, may be interpreted in
only one manner.

The Court finds that paragraph 15 of the lease, setting a tax base for purposes of adjusting
GSA’s yearly real-estate tax payment, is unambiguous. In most instances, “[i]f the terms of a
contract are clear and unambiguous, they must be given their plain meaning—extrinsic evidence
is inadmissible to interpret them.” Barron Bancshares, 366 F.3d at 1375; 11 Williston on
Contracts § 33:42 (4th ed. 2021) (“If there is no ambiguity in the agreement itself, the answer
must be found from the terms of the instrument alone.”).

Any further inquiry into the parties’ intent would therefore normally be barred by the
finding that the contract is unambiguous. In this instance, however, GSA has raised the issue of
mutual mistake. If a party seeks reformation based on an alleged mistake, the parol evidence
rule does not apply. 11 Williston on Contracts § 33:2 (4th ed. 2021). Under this exception, the
Court may consider extrinsic evidence even when faced with a binding, unambiguous written
contract to correct the parties’ mistake. Id.

The Court next considers whether the $133,045 tax base written into paragraph 15 of the
lease was the product of a mutual mistake by the parties.

24
 B. Mutual Mistake 18

Rather than alleging a unilateral mistake, the defendant seeks reformation of the lease due
to mutual mistake. (ECF 137 at 20.) The Court considers first whether the facts of this case
support a finding of mutual mistake. Finding that the erroneous tax base written into paragraph
15 of the lease is the product of mutual mistake, the Court then considers whether reformation
for mutual mistake is an appropriate remedy.

1. Evidence of Mistake

The Restatement (Second) of Contracts § 155, titled “When Mistake of Both Parties as to
Written Expression Justifies Reformation,” explains when a court may reform a contract due to
mutual mistake:

Where a writing that evidences or embodies an agreement in whole
or in part fails to express the agreement because of a mistake of both
parties as to the contents or effect of the writing, the court may at
the request of a party reform the writing to express the agreement,
except to the extent that rights of third parties such as good faith
purchasers for value will be unfairly affected.

Restatement (Second) of Contracts § 155. Several requirements arise from the decisions
reflected by the Restatement’s summary of the rule governing mutual mistake.

First, as is obvious, the parties must have committed a mistake. Here, multiple witnesses
testified at trial that the $133,045 figure written into paragraph 15 of the lease was a mistake.
(See Tr. 189 (Moreland), 357 (Harter), & 439 (Winn).) The evidence establishes that the tax
base set forth in the lease was not a figure either contracting party intended.

Second, for the court to reform an instrument due to mutual mistake, the parties must
have reached an agreement on the issue for which reformation is sought that was not reflected in
the final written document. “[R]eformation is available when the parties, having reached an
agreement and having then attempted to reduce it to writing, fail to express it correctly in the
writing. . . . For the rule stated in this Section to be invoked, therefore, there must have been
some agreement between the parties prior to the writing.” Restatement (Second) of Contracts
§ 155 cmt. a. Prior agreement is central to a finding of mutual mistake: “‘[reformation] is a
remedy the purpose of which is to make a mistaken writing conform to antecedent expressions
on which the parties agreed.’” Atlas Corp. v. United States, 895 F.2d 745, 750 (Fed. Cir. 1990),
cert. denied, 498 U.S. 811 (1990) (quoting 3 Corbin on Contracts § 614 at 723 (1960)). Because
of this requirement of prior agreement, reformation is available only when the party seeking the
reformation can show that the non-moving party “would have agreed to the contract if worded in

18 The plaintiff argues that any relief pursuant to the doctrine of unilateral mistake is
unavailable to GSA. Because the defendant has not claimed a unilateral mistake, the Court does
not consider the question of unilateral mistake.

25
accordance with the [moving party’s] intention.” Fraass Surgical Mfg. Co., Inc. v. United
States, 571 F.2d 34, 37 (Ct. Cl. 1978).

The parties in this case came to an agreement prior to signing the lease regarding the
methodology for adjusting the yearly real-estate taxes to be paid by GSA. The parties agreed
that GSA would pay a portion of its real-estate taxes in its monthly shell rent. The parties also
agreed to adjust GSA’s real-estate tax payments based on whether the amount the lessor paid in
real-estate taxes in any given year fell above or below an established tax base. Most importantly,
the parties agreed that the tax base would be one of two numbers. Paragraph 4.2 of the SFO,
referenced in paragraph 15 of the lease, defined the “Real Estate Tax Base” as “the Unadjusted
Real Estate Taxes for the first full Tax Year following the commencement of the Lease term,” or
“[a]lternatively, the Real Estate Tax Base may be an amount negotiated by the parties that
reflects an agreed upon base for a Fully Assessed value of the property.” (JX 1B at 19.) Thus,
paragraph 4.2 established a tax base of either an amount negotiated by the parties or the
unadjusted real-estate taxes paid by the lessor for the entire building for the tax year in which the
lease began (“first-year taxes”).

The methodology described in paragraph 4.2 of the SFO demonstrates that the parties
agreed on how to compute a tax base even if not on the precise tax base itself; in essence, the
parties reached a shared understanding on the methodology behind selecting a tax base and
narrowed the range of possible tax bases to two discrete options. The parties’ agreement to use
either a negotiated amount or the first-year taxes was not, however, reflected in the lease,
because the figure $133,045 does not correspond to either agreed-upon source for the tax base.
The parties mistakenly failed to write into paragraph 15 a tax base that conformed to their chosen
methodology.

Ultimately, a court looks to the “objective circumstances surrounding execution of the
contract,” not subjective intent, to ascertain whether the parties held a belief not in accord with
the facts. 27 Williston on Contracts § 70.13 (4th ed.). Regardless of each party’s subjective
intent, the parties in this case established objective criteria for establishing the tax base, but the
criteria were not used in writing the tax base into the lease. The parties were thus mutually
mistaken in each of their respective beliefs that the lease they signed—containing a $133,045 tax
base—would accomplish their shared goal of ensuring GSA pays only its proportional share of
the building’s real-estate taxes.

2. Good-Faith Purchaser

Westdale argues that the lease cannot be reformed against a good-faith purchaser for
value. It argues that “there was no evidence at trial that Westdale was anything other than a
good faith purchaser for value, with no notice of any ‘mistake’ affecting the consid erations to be
paid under the Lease,” and that “[t]he reformation the Government requests” is thus “not
available against Westdale.” (ECF 138 at 18.)

A good-faith (or “bona fide”) purchaser “is one who purchases legal title to property in
good faith for valuable consideration, without notice of any other claim of interest in the
property.” Rhone Poulenc Agro, S.A. v. DeKalb Genetics Corp., 284 F.3d 1323, 1329 (Fed. Cir.
26
2002) (citations omitted), cert denied sub nom. Monsanto Co. v. Bayer CropScience, S.A.,
593 U.S. 957 (2003); see also Boon v. Chiles, 35 U.S. (10 Pet.) 177, 210 (1836) (explaining that
an innocent purchaser “has put himself in peril by purchasing a title, and paying a valuable
consideration, without notice of any defect in it, or adverse claim to it”).

Westdale meets the definition of a good-faith purchaser for value. Westdale purchased
Northwest Center in 2013 by special warranty deed. Jt. Stip. ¶ 12. Westdale’s purchase included
the leases in the building. Id. ¶ 13. Westdale bought the building intending to obtain an income-
stream from the commercial-office leases in place and was unaware of any dispute over the real-
estate tax base or the impact of an erroneous tax base on the income-stream it had purchased. Tr.
36, 53, 98-99 (Allen). Indeed, as noted above, at the time Westdale acquired the Northwest
Center, not even GSA was aware of the error in paragraph 15 of the lease, so there was no
current dispute of which Westdale could have been aware. Westdale therefore took title to the
Northwest Center as a good-faith purchaser without notice of any defect in the lease.

The law limits a court’s ability to reform a contract due to mutual mistake: a contract may
be reformed for mutual mistake “except to the extent that rights of third parties such as good
faith purchasers for value will be unfairly affected.” Restatement (Second) of Contracts § 155.
Comment f to the Restatement elaborates that “[t]he claim of a mistaken party to reformation,
being equitable in its origin, is subject to the rights of good faith purchasers for value and other
third parties who have similarly relied on the finality of a consensual transaction in which they
have acquired an interest in property.” Id. at cmt. f. The protection of the good-faith-purchaser
doctrine extends not only to the purchase of property but to a purchaser who is assigned leases as
part of its purchase. See Nash Finch Co. v. Rubloff Hastings, LLC, 341 F.3d 846, 850 (8th Cir.
2003) (refusing to reform a lease against a good-faith purchaser despite the mutual mistake of the
original parties to the lease because the purchaser “was unaware of the mistake contained in the
leases and was therefore a bona-fide purchaser of the leasehold interest”).

The rights of a good-faith purchaser for value are often the concern of state property
law.19 In this case, the Northwest Center is in Texas. Texas law establishes that while “‘[e]quity
will grant relief by way of reformation if the circumstances otherwise warrant an exercise of its
power,’” there is no entitlement “‘to equitable relief against a bona fide purchaser . . . and [the
party seeking reformation] has the burden of showing that [the alleged bona-fide purchaser] does
not enjoy that status.’” Newport Oil Co. v. Lamb, 352 S.W.2d 861, 863 (Tex. App. 1962)
(quoting Miles v. Martin, 321 S.W.2d 62, 67 (Tex. 1959)). Texas law requires that the good-

19 While federal law governs the interpretation of leases with the federal government, courts
may also consider state law for general property- and contract-law principles. See California
Oregon Broad., Inc., 74 Fed. Cl. at 399 (noting that while “federal law, rather than state law,
governs the interpretation of leases with the United States government,” when federal law is not
dispositive “courts should look to ‘general property and contract law principles as they are
embodied in state law pronouncements’” (citing Prudential Ins. Co. of Am. v. United States,
801 F.2d 1295, 1298 (Fed. Cir. 1986) and quoting Ginsburg v. Austin, 968 F.2d 1198, 1200 (Fed.
Cir. 1992))).

27
faith purchaser receive a warranty deed, as opposed to an instrument such as a quitclaim deed,
and that the purchaser lack notice of the mutual mistake prior to purchase to avoid reformation of
the contract. See Miles, 321 S.W.2d at 68-69. Other jurisdictions impose similar notice
requirements on good-faith purchasers to avoid reformation. See, e.g., United States v. LaRosa,
765 F.2d 693, 697 (7th Cir. 1985) (citing Boon v. Chiles, 35 U.S. (10 Pet.) at 210) (“The courts
have held that if a purchaser has actual notice of particular facts which are sufficient to put a
reasonably prudent person on duty of inquiry, then the purchaser will be charged with the
knowledge that such inquiry, reasonably prosecuted, would have revealed.”).

Although Westdale meets the definition of a good-faith purchaser, the Court finds that
Westdale’s status as a good-faith purchaser does not preclude reformation in this case. The
good-faith purchaser exception applies only insofar as the rights of a purchaser are “unfairly
affected.” Restatement (Second) of Contracts § 155. While Westdale’s anticipated income-
stream would be reduced were the Court to establish a tax base greater than $133,045, the
reduction in income alone is not ipso facto unfair. Westdale would, as the government argues,
receive a windfall if GSA paid more than its proportional share of the building’s taxes because
its shell rent was calculated using the estimate of $726,629 for the real-estate taxes. To reform
the contract to establish a more reasonable tax base certainly will adversely affect Westdale’s
income under the lease, but the Court’s efforts to arrive at an equitable outcome should not
impose an unfair or undue burden on either party. A failure to reform the lease would impose
undue hardship on the defendant, and Westdale has not presented sufficient evidence for the
Court to conclude that any reformation of the lease would be so unfair as to bar such relief
entirely.

Because the Court has concluded that a mutual mistake occurred and that the good -faith
purchaser doctrine does not bar reformation so long as the Court’s intended reformation does not
unduly burden the plaintiff, the Court next considers whether and how the lease may be reformed
due to mutual mistake.

3. Reformation for Mutual Mistake

Contract reformation due to mutual mistake is a matter of equity.20 “The purpose of
proving a mistake is to correct what has become an erroneous situation. Equity will act to bring

20 The plaintiff in its briefing makes an “unclean hands” argument, asserting that the
government has “unclean hands” in (1) using the lessor’s real-estate tax estimate on GSA Form
1217 in paragraph 15 without disclosing that the estimate would become the tax base; (2) failing
to read the lease before certifying to Westdale that the lease was in full force and effect and
approving payment; (3) failing to issue a final decision before withholding rent payments; and
(4) failing to conduct appropriate due diligence in denying Westdale’s certified claims. (ECF
138 at 19-21.)

28
an erroneous writing into conformity with the true agreement. The equitable maxim —equity
regards that as done which ought to be done—deals generously to correct mistakes.”
27 Williston on Contracts § 70:17 (4th ed. 2021).

This court’s general equitable power is traditionally quite limited. See, e.g., Nicholson,
29 Fed. Cl. at 185 (“This Court . . . does not have general equitable jurisdiction in matters of
contracts.” (emphasis in original)). Reformation for mutual mistake is an exception to this
general limitation. The Federal Circuit has established that this court may reform a contract for
mutual mistake. See, e.g., Am. Emps. Ins. Co. v. United States, 812 F.2d 700, 705 (Fed. Cir.
1987) (“Reformation is . . . available as an equitable remedy when the parties to a contract have
made a mutual mistake of fact.” (citation omitted)).

In National Australia Bank, the Federal Circuit explained the relevant four-part test for
reforming a contract due to mutual mistake:

Reformation of a written agreement on the ground of mutual mistake
is an extraordinary remedy, and is available only upon presentation
of satisfactory proof of four elements:
(1) the parties to the contract were mistaken in their belief regarding
a fact;
(2) that mistaken belief constituted a basic assumption underlying
the contract;
(3) the mistake had a material effect on the bargain; and
(4) the contract did not put the risk of the mistake on the party
seeking reformation.

Nat. Australia Bank v. United States, 452 F.3d 1321, 1330 (Fed. Cir. 2006) (citing Atlas,
895 F.2d at 750); accord Bank of Guam v. United States, 578 F.3d 1318 (Fed. Cir. 2009) (setting
out same four-part test), cert. denied, 561 U.S. 1006 (2010); Lakeshore Eng’g Servs., Inc. v.
United States, 110 Fed. Cl. 230 (2013), aff’d, 748 F.3d 1341 (Fed. Cir. 2014) (same).

The equitable doctrine of “unclean hands” prevents reformation in favor of a party that has
acted improperly, i.e., with “unclean hands.” In this case, however, the doctrine would not
impose a bar on the Court’s use of its equitable power to reform the lease. A finding of “unclean
hands” requires unconscionable conduct, and “a plaintiff is required to show that the defendant
has engaged in particularly egregious conduct which would change the equities significantly in
plaintiff’s favor.” Sedarevic v. Advanced Med. Optics, Inc., 532 F.3d 1352, 1361 (Fed. Cir.
2008) (internal quotation omitted). The plaintiff has not made such a showing here. GSA may
have been inept in failing to exercise care in drafting the lease and in issuing erroneous payments
according to its terms, but the lease reflects a mistake, not a knowing or reckless effort by GSA
to injure any party.

29
 The standard of review for assessing whether reformation is appropriate is clear and
convincing evidence. Nat. Australia Bank, 452 F.3d at 1329. “[R]eformation will not be
granted, unless the proof of mistake be ‘of the clearest and most satisfactory character.’”
Philippine Sugar Ests. Dev. Co. v. Gov’t of Philippine Islands, 247 U.S. 385, 391 (1918)
(quoting Snell v. Atlantic Fire & Marine Ins. Co., 98 U.S. 85, 89 (1878)). “Reformation of a
written contract is an ‘extraordinary remedy.’ . . . It is generally only available on a showing by
clear and convincing evidence that the intent of the parties is not expressed by the written
instrument, which is to say that the parties both made the same mistake of fact.” Woodies
Holdings, L.L.C. v. United States, 143 Fed. Cl. 485, 496 (2019) (quoting Nat. Australia Bank,
452 F.3d at 1329).

The mutual mistake made by the parties satisfies the four factors of the test in National
Australia Bank. Regarding the first prong, GSA and Griffin Partners “were mistaken in their
belief” that they were signing an agreement with a tax base that would accurately adjust GSA’s
yearly tax payment to ensure GSA pays only its proportional share of the building’s real-estate
taxes. Nat. Australia Bank, 452 F.3d at 1329. Regarding the second prong, that mistaken belief
regarding the tax base “constituted a basic assumption underlying the contract.” Id. Third, the
mistaken figure of $133,045 in paragraph 15 “had a material effect on the bargain.” Id. The tax
base of $133,045 written into the lease is significantly lower than what the lessor pays in annual
real-estate taxes for the building, yet GSA pays real-estate taxes as part of its shell rent based on
a tax estimate of $726,629. The difference between the two figures results in substantially
higher payments to the lessor by GSA than either party intended.

The fourth factor requires that the “contract did not put the risk of the mistake on the
party seeking reformation.” Nat. Australia Bank, 452 F.3d at 1329; see also Roseburg Lumber
Co., 978 F.2d at 668-69. The Court finds that GSA satisfies this factor, as well. “A party bears
the risk of mistake when 1) the risk is allocated to it by agreement of the parties; 2) it is aware, at
the time the contract is made, that it has only limited knowledge with respect to the facts to
which the mistake relates, but treats its limited knowledge as sufficient; or 3) the risk is allocated
to it by the court on the ground that it is reasonable in the circumstances to do so.” Northrop
Grumman Corp. v. United States, 47 Fed. Cl. 20, 55 (2000).

The lease between SAOP and GSA did not place the risk of mistake on GSA. No
agreement between the parties allocating the risk of a mistake to GSA is reflected in the text of
the lease. Additionally, GSA had substantial knowledge of the lease’s contents and cannot be
said to have “limited knowledge” with respect to the relevant facts: the lease was a form lease of
which SFO Paragraph 4.2 was a standard provision, and GSA drafted its terms. GSA did not
enter its negotiations with Griffin Partners with such limited knowledge of the facts that its
ignorance merits imputing some of the risk to the defendant. GSA’s agents knew the terms of
the lease and had familiarity with the tax-adjustment clause but mistakenly included an incorrect
tax base in paragraph 15 when it drafted the lease.

As set forth by the test in Northrop Grumman, a court may also allocate risk “on the
ground that it is reasonable in the circumstances to do so.” Id. The Court finds that this case
does not present such circumstances. Courts have been inclined to allocate risk in a handful of
specific scenarios. For example, a court may allocate risk to a contractor when a fixed-price
30
contract is involved. See id. at 55-56 (citing cases noting that “fixed-price contracts shift the risk
to the contractor”). Similarly, a court may find a land-sale contract allocates risk to a buyer
when the property is sold “as is.” See, e.g., Knieper v. United States, 38 Fed. Cl. 128, 140 (1997)
(citing Morris v. United States, 33 Fed. Cl. 733 (1995)).

The doctrine of contra proferentem may also present an instance in which a court may
allocate risk to the drafter of a contract. 21 Yet contra proferentem does not apply to the case
before the Court. First, the rule “is applied only where there is a genuine ambiguity and where,
after examining the entire contract, the relation of the parties and the circumstances under which
they executed the contract, the ambiguity remains unresolved.” Gardiner, Kamya & Assocs,
P.C. v. Jackson, 467 F.3d 1348, 1352 (Fed. Cir. 2006) (internal quotation omitted). The Court
has already found the tax-adjustment clause of the lease to be unambiguous. Second, the rule is
intended to serve as a last resort and is inapplicable if “the intention of the parties . . . otherwise
appears.” Id. (citation omitted). Here, paragraph 4.2 provides evidence of the parties’ intent to
use either a negotiated amount or the first-year taxes as the tax base; there is no need to construe
the lease against GSA as a last-resort.

Finally, GSA’s failure to draft the lease correctly or to proofread it with care does not
necessarily present appropriate circumstances under which the Court would allocate risk to GSA.
See Fraass Surgical, 571 F.2d at 37-38 (noting that “failure to read a contract before signing it
does not necessarily foreclose reformation”). Indeed, Griffin Partners also failed to read the
lease and catch the mistake in paragraph 15.

There are no explicit agreements allocating the risk of a mistake to GSA and no other
grounds that would make it reasonable for the Court to find that the risk of mistake remained
with GSA. GSA has satisfied the four-part test for seeking reformation of an agreement due to
mutual mistake according to National Australia Bank.

Because the Court has found that the parties made a mutual mistake in establish ing an
erroneous tax base in paragraph 15 of the lease, and because the four-part test for reformation in
National Australia Bank is met under the facts of this case, reformation of the lease is the
appropriate and equitable remedy.

C. Court’s Reformation

The Court must determine an appropriate tax base to insert into paragraph 15 of the lease
to replace the $133,045 tax base that was the product of mutual mistake between the original
contracting parties. Reformation serves to remedy “mistakes in expression, as in the case of . . .
the inclusion of a term not agreed upon or the incorrect reduction of a term to writing.” Gen.
Dynamics Corp. v. United States, 47 Fed. Cl. 514, 529 (2000) (citing E. Allan Farnsworth,
Contracts, Sec. 7.5 at 468 (1982)). “‘The purpose and function of the reformation of a contract is

21 Contra proferentem is a doctrine of interpretation that “requires ambiguities in a contract
to be resolved against the drafter.” HPI/GSA 3C, LLC, 364 F.3d at 1334.

31
to make it reflect the true agreement of the parties on which there was a meeting of the minds.’”
Atlas, 895 F.2d at 750 (quoting Am. President Lines v. United States, 821 F.2d 1571, 1582 (Fed.
Cir. 1987)).

The parties dispute the appropriate reformation. The defendant asserts that the “figure in
paragraph 15, $133,045, should have been $726,629.” (ECF 137 at 22, citing Tr. 440 (Winn).)
The defendant therefore argues that “this Court should reform paragraph 15’s real estate tax base
to reflect $726,629. No other reformation is needed. Such a reformation accomplishes the intent
of the parties.” (Id. at 22-23.) Westdale disputes that reformation is warranted, arguing that the
lease is unambiguous and asserting the good-faith-purchaser defense to reformation. In the event
that the Court concludes that reformation is appropriate, however, Westdale argues that “the
Lease itself establishes the tax base as the first lease year (i.e., the real estate tax es due for either
the 2012 tax year or for the period of January 11, 2012 - January 10, 2013).” (ECF 138 at 22.)
Westdale also argues that because it was not privy to the original lease and did not negotiate or
draft the lease’s terms, it would be prejudiced if the tax base were reformed to $726,629. The
defendant responds that it already pays real-estate taxes pursuant to the $726,629 tax estimate for
the building derived from GSA Form 1217 and that the $541,020.95 figure Westdale proposes
“would fail to fairly adjust the amount of taxes GSA pays annually.” (ECF 137 at 23.)

The Court finds that the most equitable result would be to reform paragraph 15 of the
lease to substitute for the erroneous tax base in paragraph 15 of the lease a tax base that ref lects
the agreement the parties actually came to: if the lease did not reflect a negotiated amount for the
tax base, then the tax base would be the amount of real-estate taxes levied for the first tax year
after the lease began.

Paragraph 4.2 of the SFO, referenced in paragraph 15 of the lease, defined the “Real
Estate Tax Base” as “the Unadjusted Real Estate Taxes for the first full Tax Year following the
commencement of the Lease term,” or “[a]lternatively, the Real Estate Tax Base may be an
amount negotiated by the parties that reflects an agreed upon base for a Fully Assessed value of
the property.” (JX 1B at 19.)

The evidence establishes that the parties did not negotiate a specific real-estate tax base.
Mr. Moreland agreed with the statement that he “didn’t negotiate [the $133,045 figure]” and that
the figure “was just . . . in the document that GSA provided.” (Tr. 138, 205 (Moreland).) Ms.
Winn’s testimony did not contradict Mr. Moreland’s assertion, which stands uncontradicted.
(See Tr. 402-51 (Winn).) The Court finds Mr. Moreland’s uncontradicted testimony regarding
the lack of negotiation to be credible and consistent with the evidence.

Paragraph 4.2 of the SFO, which the defendant itself prepared and included as a term in
the lease, instructs that if the parties do not negotiate the tax base, the default rule is that the real-
estate tax base will be the unadjusted first-year taxes following the commencement of the lease
term. In this case, the first tax year after the commencement of the lease on January 11, 2012,
was tax year 2012. Bexar County assessed SAOP $541,020.95 in 2012. (JX 78.) The plaintiff’s
argument that the first-year taxes should form the real-estate tax base is premised upon a
methodology to which both GSA and the former lessor agreed and is based on the default tax
base established by the lease should the parties not negotiate a different tax base.
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 In considering whether Westdale’s rights would be unfairly affected by the Court’s
chosen reformation, the Court notes the relevant burden on each party.

The injury to GSA from the adoption of a tax base of $541,020.95 is the imposition of
covering more than its share of the building’s real-estate taxes. The Court recognizes that
establishing a tax base below $726,629, the f igure used to calculate the portion of real-estate
taxes the government pays as part of its shell rent, imposes on the defendant the responsibility to
pay more than its pro rata share of real-estate taxes on the building. If Griffin Partners had not
sold the building to Westdale and had it remained the owner and current lessor, the Court would
not hesitate to rule for the government and reform the contract to reflect a tax base of $726,629.
As between the original contracting parties, using the $726,629 f igure as the tax base produces
the most equitable outcome to ensure GSA pays only its pro rata share of the building’s annual
real-estate taxes. That result would also reflect that both GSA and Griffin Partners were each in
a position to have been able to discover and avoid the mistake in the lease at the time they agreed
to its terms.

That is not the case before the Court. Griffin Partners sold the building and its leases to
Westdale, which acquired the GSA lease without knowledge of any defects or mista kes in that
document. Westdale purchased the building with the understanding that it would receive a
particular income-stream. Due to the mutual mistake made by the original contracting parties,
Westdale is not receiving the full benefit of the bargain f rom its purchase, despite reliance on
estoppel certificates received from both GSA and SAOP and knowledge that GSA had initially
paid real-estate taxes according to the express terms of paragraph 15 of the lease. As between
GSA and Westdale, only GSA had the opportunity to catch and fix the error before Westdale, an
innocent third party, purchased the property in reliance on the income-stream the building
generated. To reform the contract to reflect the $726,629 estimate used to calculate GSA’s shell
rent would unduly burden Westdale, an innocent third-party, good-faith purchaser. In contrast,
the harm of reforming the contract to reflect the $541,020.95 figure is less onerous on the
plaintiff and reduces the windfall Westdale would receive if GSA paid according to the express
terms of the lease.

Reformation “‘is a remedy the purpose of which is to make a mistaken writing conform
to antecedent expressions on which the parties agreed.’” Atlas Corp., 895 F.2d at 750 (quoting 3
Corbin on Contracts § 614 at 723 (1960)). This prior-agreement element requires that the party
seeking reformation show that the non-moving party “would have agreed to the contract if
worded in accordance with the [moving party’s] intention.” Fraass Surgical Mfg., 571 F.2d at
37. The Court cannot speculate as to what Westdale would have agreed to had it been in the
shoes of Griffin Partners at the time of contracting. Westdale may well have assented to the use
of either a negotiated amount or the first-year taxes, which were the standard criteria included in
GSA’s form SFO. Regardless, the parties agree that the lease itself provides for tax adjustment
and that “the Government shall pay its share of any increases and shall receive its share of any
decreases in the Real Estate Taxes for the Property.” Jt. Stip. ¶ 9. Westdale has thus
acknowledged that under the lease GSA is meant to pay only its pro rata share of the real-estate
taxes. Adhering to the methodology established by paragraph 4.2 reflects the intent of Mr.
Moreland, the agent of SAOP who negotiated the original lease, to establish the first-year taxes
as the tax base. Reformation is thus in line with the aim that Westdale already accepted. The
33
Court’s reformation of the lease to reflect the $541,020.95 figure also aligns with the reformation
Westdale itself proposed if the Court found reformation warranted.

Accordingly, the Court reforms the contract to substitute a tax base of $541,020.95 for
the tax base of $133,045 written into paragraph 15 of the lease. The reformed tax base is
calculated based on the real-estate taxes for the first year of the lease, as the original contracting
parties agreed to in their incorporation of paragraph 4.2 of the SFO into the lease. No other
reformation is needed to remedy the mutual mistake of an erroneous tax base or to produce an
equitable result.

IV. CONCLUSION

The issue in this case involves a single figure: a real-estate tax base written into a lease as
“$133,045.” Although the figure itself is not on its face ambiguous, several witnesses testified
that the tax base as written is a mistake. The Court finds that this mistake was mutual, made by
both GSA and the former lessor. The Court finds reformation of the lease to be necessary due to
mutual mistake and reforms the lease to reflect a tax base of $541,020.95, the taxes assessed for
the building for the first year after the lease began. This reformed tax base acknowledges the
prior agreement between the original contracting parties to use either a negotiated tax base or the
first-year taxes, and also acknowledges the aim of the tax-adjustment clause, which was to
ensure GSA pays only its proportional share of the building’s real-estate taxes. It also
accommodates Westdale’s status as a good-faith purchaser for value.

Paragraph 15 of the lease between GSA and Westdale, reflected at JX 1A at 3, is
REFORMED to substitute a tax base of $541,020.95 for the incorrect figure of $133,045. 22

The Court will issue a separate order in accordance with this memorandum opinion to
establish a schedule for further proceedings.

s/ Richard A. Hertling
Richard A. Hertling
Judge

As noted above, the Court has detected minor inaccuracies in the plaintiff’s calculation of
22

the amount allegedly due from GSA. Due to these deviations from the Court’s own calculations,
the Court in a separate order directs the parties to confer and propose to the Court the correct
amount of damages due to the plaintiff under the newly supplied tax base.

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