United States v. CERTAIN PROPERTY, ETC.

• Decision Date: 05 July 1962
• Docket Number: Docket 27187.,No. 312,312
• Citation: 306 F.2d 439
• Parties: UNITED STATES of America, Petitioner-Plaintiff-Appellee-Appellant, v. CERTAIN PROPERTY LOCATED IN the BOROUGH OF MANHATTAN, CITY, COUNTY AND STATE OF NEW YORK and 540 Pearl Street, a partnership, et al., Defendants, and Il Progresso Italo-Americano Publishing Co., Inc., Defendant-Appellant-Appellee, and Raymond E. Ryan and George H. Fankuchen, 546 Pearl Street Corp., Pearl Street Restaurant, Inc., Boylan's Tavern, Inc., Universal Brush Corp., Royal Office Supply Corp., Consolidated Loose Leaf, Inc., District Council No. 37, American Federation of State, County and Municipal Employees AFL-CIO, Samuel Lakow & Sons, Josaldo Restaurant, Inc., Bill Allen's Restaurant, Inc., Lafayette Nut Product, Inc., Civic Square Foods, Inc., Defendants-Appellants, and Portchester Realty Corp., 540 Pearl Street, a partnership, Edward R. Finch, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

306 F.2d 439 (1962)

UNITED STATES of America, Petitioner-Plaintiff-Appellee-Appellant, v. CERTAIN PROPERTY LOCATED IN the BOROUGH OF MANHATTAN, CITY, COUNTY AND STATE OF NEW YORK and 540 Pearl Street, a partnership, et al., Defendants, and Il Progresso Italo-Americano Publishing Co., Inc., Defendant-Appellant-Appellee, and Raymond E. Ryan and George H. Fankuchen, 546 Pearl Street Corp., Pearl Street Restaurant, Inc., Boylan's Tavern, Inc., Universal Brush Corp., Royal Office Supply Corp., Consolidated Loose Leaf, Inc., District Council No. 37, American Federation of State, County and Municipal Employees AFL-CIO, Samuel Lakow & Sons, Josaldo Restaurant, Inc., Bill Allen's Restaurant, Inc., Lafayette Nut Product, Inc., Civic Square Foods, Inc., Defendants-Appellants, and Portchester Realty Corp., 540 Pearl Street, a partnership, Edward R. Finch, et al., Defendants-Appellees.

No. 312, Docket 27187.

United States Court of Appeals Second Circuit.

Argued April 10, 1962.

Decided July 5, 1962.

As Modified July 13, 1962.

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Edmund B. Clark, Bethesda, Md. (Harry T. Dolan, Brooklyn, N. Y., Ramsey Clark, Asst. Atty. Gen., Roger P. Marquis, Washington, D. C., on brief), for United States of America.

Bernard L. Bermant, New York City (Carl J. Moskowitz, Skinner & Bermant, Leddy & Raber, New York City, on brief), for defendants-appellants 546 Pearl Street Corp., Pearl Street Restaurant, Inc., Boylan's Tavern, Inc., Universal Brush Corp., and Il Progresso Italo-Americano Publishing Co., Inc.

Ira I. Gluckstein, New York City, for defendants-appellants Royal Office Supply Corp. and Consolidated Loose Leaf, Inc.

Herbert Monte Levy, New York City (Arthur D. Goldstein, Samuel Goldstein & Sons, New York City, on brief), for defendant-appellant District Council No. 37, American Federation of State, County and Municipal Employees AFL-CIO.

Arthur D. Goldstein, New York City (Herbert Monte Levy, Samuel Goldstein & Sons, New York City, on brief), for defendant-appellant Samuel Lakow & Sons.

Herman G. Blumenthal, New York City (Herman G. Blumenthal and Abraham Schatzman, New York City, on brief), for defendant-appellant Josaldo Restaurant, Inc.

Philip A. Paulson, New York City, on brief, for defendant-appellant Bill Allen's Restaurant, Inc.

Nathan L. Goldstein, New York City (Nathan L. and Joseph Z. Goldstein, New York City, on brief), for defendant-appellant Lafayette Nut Product, Inc.

Arnold Fieldman (of Fieldman & Breslaver), Brooklyn (Samuel K. Beier, New York City, on brief), for defendant-appellant Civic Square Foods, Inc.

John H. Finn, Sincerbeaux & Shrewsbury, New York City, on brief for defendants-appellants, Raymond E. Ryan and George H. Fankuchen.

Matthew J. Tackella, New York City (Loretta A. Conway, Lamb & Lamb, New York City, on brief), for defendants-appellees Portchester Realty Corp. and 540 Pearl Street, a partnership.

George R. Hinckley, New York City (Finch & Schaefler, New York City, on brief), for defendants-appellees Edward R. Finch, et al.

Before LUMBARD, Chief Judge, and FRIENDLY and KAUFMAN, Circuit Judges.

FRIENDLY, Circuit Judge.

Wishing to build a Customs Court and Federal Office Building in Foley Square, the United States began an action in the Southern District of New York to condemn an area bounded generally by Worth Street, Lafayette Street, Duane Street, and a line about 175 feet east of and parallel with Broadway. A declaration of taking, dividing the property into 20 damage parcels, was filed on February 1, 1960; along with it, the Government deposited in court $2,613,501, estimated as just compensation. On May 9, 1960, Judge Knox granted the Government's motion for an order of possession, decreeing that the United States would be entitled to take over the property "on May 1, 1961 or on such earlier dates as any part of said property shall be vacated by the existing tenants or former owner-occupants."

Judge Knox's order did not establish the terms upon which those in possession could retain it until the May 1, 1961 deadline; to fix these the Government entered into leases with most, although not all, of the occupants. The leases were on a basic mimeographed form, for a term stated as beginning February 1, 1960 and ending April 30, 1961; quite clearly they were not signed until after Judge Knox's order of May 9.¹ Two provisions require mention because they were later to be relied on by the Government as working a waiver of the claims for fixtures asserted by many of the appellants.² Paragraph 16, set out in the margin,³ was a complete release of the United States from all claims arising from the condemnation. The Government deleted this for anyone who sought its excision; all but three of the present appellants did.⁴ However, the Government would not consent to the removal of paragraph 11,⁵ and it argued, successfully in the District Court, that this alone sufficed to destroy any claim for fixtures its tenant would otherwise have had.

Prior to trial the owners of parcels 1, 4, and 5 settled with the Government; the claim for parcel 20, consisting of the land comprising the beds of Pearl and Elk Streets, was not adjudicated with the others. Trial, by Senior Judge Knox without a jury, took about 30 court days, spread over three months, in late 1960; in addition, myriad motions were heard before and after the trial. The contesting fee owners were awarded $2,265,875; the claims of twenty-seven tenants for fixture awards were denied. The appellants here are three fee owners and eleven tenants; nine other tenants' appeals were dismissed by this Court as untimely; the remaining seven did not appeal. Our disagreement with certain portions of the decision, in considerable part because of our now taking a view of New York law different from that expressed in an earlier opinion, is not to be deemed as detracting from our high regard for the public service rendered by Judge Knox in discharging this onerous task.

1. The Respective Roles of Federal and State Law

Many of the controversies before us hinge on what the Government "took." The Government contends that "Determination of what is taken in federal condemnation proceedings and the ascertainment of compensation therefor are governed by principles of federal law," and that New York property law concepts are therefore irrelevant. It relies on such unquestionable propositions as that the United States' power of condemnation "can neither be enlarged nor diminished by a State. Nor can any State prescribe the manner in which it must be exercised," Kohl v. United States, 91 U.S. 367, 374, 23 L.Ed. 449 (1876), and that "* * where essential interests of the Federal Government are concerned, federal law rules unless Congress chooses to make state laws applicable," United States v. 93.970 Acres of Land, 360 U.S. 328, 332-333, 79 S.Ct. 1193, 1196, 3 L.Ed.2d 1275 (1959). Acceptance of all this and of the corollary that Federal law governs the principles whereby "just compensation" is determined in a Federal condemnation still does not establish the conclusion the Government draws from them.

The declaration of taking relies on various statutes, of which the Act of August 1, 1888, 25 Stat. 357, as amended, 40 U.S.C.A. § 257, is sufficient and typical. That section provides that whenever an officer of the Government is authorized "to procure real estate for the erection of a public building or for other public uses he may acquire the same for the United States by condemnation * * *." By the declaration the United States took "The land, including all buildings and improvements thereon, all appurtenances thereto, and all interests therein * * *" Although the Government took only "real estate," it "took" whatever was real estate.

We see no basis for doubting that Congress meant that a Federal court, in determining what such a taking embraced, should look to the law of the state where the property is located. Although the Government urges us to look to "Federal law" to determine what the taking included, it does not tell us where to find this — no corpus of Federal law on this subject exists and 1962 seems rather late to start developing one, especially for so limited a function. Even the celebrated opinion, now rejected, upholding the power of Federal courts to disregard state decisional law in certain areas, recognized that state law should be looked to as regards "rights and titles to things having a permanent locality, such as the rights and titles to real estate, and other matters immovable and intra-territorial in their nature," Swift v. Tyson, 16 Pet. 1, 18, 41 U.S. 1, 18, 10 L.Ed. 865 (1842). Although the principle announced in Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), would not deprive Congress of constitutional power to create a separate "Federal law" as to what constitutes real property for Federal condemnation, see Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943), the practical considerations for referring to state law for that purpose are over-whelming. All states have bodies of law as to what is real and what is personal property, which they require for a variety of transactions. Persons dealing in land within a state must conduct themselves in the light of state law, which will inevitably govern most of their relations; it would be inconvenient in the last degree if they had also to take cognizance of a Federal property law that would apply only in the rather rare event of a Federal condemnation. Hence we hold that Congress meant us to refer to New York law to determine what the United States acquired when it "took" what it did here, United States v. Becktold Co., 129 F.2d 473 (8 Cir., 1942); United States v. 19.86 Acres of Land, 141 F.2d 344, 151 A.L.R. 1423 (7 Cir., 1944); Carmichall v. United States, 273 F.2d 392 (5 Cir., 1960).

None of this gainsays that, subject to the overriding requirements of the Fifth...