195 F.2d 698 (3rd Cir. 1952), 10494, R.F.C. v. Martin Dennis Co.

Docket Nº:10494.
Citation:195 F.2d 698
Case Date:March 27, 1952
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

Page 698

195 F.2d 698 (3rd Cir. 1952)




No. 10494.

United States Court of Appeals, Third Circuit.

March 27, 1952

Argued Nov. 21, 1951.

Page 699

Charles E. Kenworthey, Pittsburgh, Pa. (William M. Robinson, Joseph G. Robinson, Walter T. McGough, Pittsburgh, Pa., William v. Osborne, Jr., Newark, New Jersey, Harold U. Daniels, Cleveland, Ohio, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., Pitney, Hardin & Ward, Newark, N.J., on the brief), for appellant.

Charles R. L. Hemmersley, New York City (Harold E. Jacobsen, A. Glaser, New York City, on the brief), for respondent.

Before BIGGS, Chief Judge, and McLAUGHLIN and HASTIE, Circuit Judges.

McLAUGHLIN, Circuit Judge.

Reconstruction Finance Corporation (RFC), as the statutory successor of Defense Plant Corporation, recovered a judgment for rent against The Martin Dennis Company from which the latter appeals.

In August, 1944, appellant was producing sodium bichromate in its Kearny, New Jersey plant. At that time it entered into an agreement with Defense Plant Corporation (Plancor) whereby it was to construct additional facilities with Defense Plant supplying the funds. The real estate involved, a portion of appellant's Kearny property, was leased by it to Defense Plant which was to have title to the buildings erected and to the property, various machinery, etc., acquired. Defense Plant in turn leased the new facilities, including an option to purchase, to appellant. The rental was fixed at $15.98 for each short ton of sodium bichromate manufactured or furnished by appellant in whole or in part at its Kearny plant. The lease provided ' * * * that the date of commencement of rental shall be the date of installation, as determined by RFC, of the Machinery to be provided hereunder or, in any event, not later than the sixtieth (60th) day from the date

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of commencement of operation of any of the Machinery to be provided hereunder.' It was subject to termination by the parties on ten days notice in the event substantial use of the facilities by The Martin Dennis Company to furnish sodium bichromate for the war effort was no longer required.

By the latter part of August 1945 the new facilities were approximately eighty per cent completed. During that month the war with Japan came to an end, in the sense that actual hostilities ceased. Because of this, on August 28th, appellee ordered all engineering and construction work on the plant stopped immediately. Thereafter the War Production Board advised appellee that the Dennis plant was no longer required to produce materials in short supply because of military or civilian demands and recommended that appellee make appropriate disposition of the plant. Appellant was promptly and properly notified and instructed accordingly. On September 12, 1945 appellant requested appellee to complete the plant and lease it to appellant on a long term basis. Walter L. Pope, an attorney in the Defense Plant Section of appellee, replied to that letter saying he had discussed the matter with R. G. Rhett, Chief of appellee's Office of Surplus Property. He enclosed a suggested form of proposal dictated by Rhett. This called for a five year lease at eight per cent a year of the reproduction cost of land, buildings, and other improvements as determined by appellee and twelve per cent of the installed cost to appellee of machinery and equipment. The rent was to be paid monthly in advance. No date for the commencement of the rent was stated. If appellee accepted it was to complete the project, the over-all cost including funds previously authorized not to exceed $1, 046, 589.

On September 18, 1945 appellant sent Pope a signed duplicate of an offer to lease as suggested by Rhett saying in its forwarding letter, 'In this connection and in confirmation of our telephone conversation, it is our understanding that no rental shall become due until the project is completed and turned over to us in operating conditions.' Pope answered this on September 20, 1945, saying, 'This is in reply to your letter of September 18, in which you state that it is your understanding that no rental shall become due until the project is completed and turned over to you in operating condition. That is likewise my understanding.' On September 21, 1945 the Board of Directors of appellee approved Rhett's recommendation of tentative approval of the proposal for a peacetime lease and on November 21, 1945 gave final approval of such proposal advising appellant to prepare and submit a lease agreement to Washington for approval. Rhett wrote appellant on December 20, 1945 advising of final approval of the form of the lease by appellee's directors and stating that the lease could not be executed until the facilities had been completed and the property declared surplus. He said that both parties were making every effort to complete the facilities as soon as possible and stated in conclusion, 'In the meantime you have our permission to occupy the premises and continue operation and utilization thereof pending the execution of the Lease Agreement.'

Appellee was succeeded by War Assets Administration on March 25, 1946 as the Government's agency for the disposal of surplus property. On...

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