Consumers Ice Company v. United States

• Decision Date: 16 March 1973
• Docket Number: No. 815-71.,815-71.
• Citation: 475 F.2d 1161
• Parties: CONSUMERS ICE COMPANY, a California corporation v. The UNITED STATES.
• Court: U.S. Claims Court

475 F.2d 1161 (1973)

CONSUMERS ICE COMPANY, a California corporation v. The UNITED STATES.

No. 815-71.

United States Court of Claims.

March 16, 1973.

Douglas B. Martin, Jr., San Francisco, Cal., attorney of record for plaintiff.

Herman L. Fussell, Washington, D.C., with whom was Asst. Atty. Gen. Kent Frizzell, for defendant.

Before COWEN, Chief Judge, DURFEE, Senior Judge, and DAVIS, SKELTON, NICHOLS, KUNZIG, and BENNETT, Judges.

ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT

BENNETT, Judge:

The uncontested facts of this case present the court with the problem of interpreting, on cross-motions for summary judgment, the language in a written lease in which the plaintiff, Consumers Ice Company, is the lessor and the defendant, the United States, is the lessee. For reasons to be stated, the court grants the plaintiff's motion for summary judgment on the issue of liability alone and remands the case, pursuant to Rule 131(c), to the Trial Division for further proceedings on the issue of damages. The defendant's cross-motion for summary judgment is denied.

Before addressing the merits of this case, it must be noted that the named plaintiff, Consumers Ice Company, a California corporation, was dissolved on April 18, 1972, after commencement of suit in this court. All assets, including this claim, were distributed to the shareholders who, in turn, have conveyed them to Texas International Company, a Delaware corporation. Our Rule 61(a) provides that every action shall be prosecuted in the name of the real party in interest and Rule 61(b) says that the capacity to sue shall be determined by the law of plaintiff's domicile. Counsel appear to be agreed that the shareholders should now be substituted as plaintiffs, having received their interest by operation of law and that, according to California law, the shareholders can continue the suit. Plaintiff concedes that Texas International Company cannot be substituted as plaintiff without consent of the United States because of the Assignment of Claims Act, 31 U.S.C. § 203 (1970). On the latter point, defendant has been silent. There are various exceptions to this Act by operation of law. Webster Factors, Inc. v. United States, 436 F.2d 425, 429, 193 Ct.Cl. 892, 900-901 (1971). Among these exceptions is one stating that claims are not barred by successor corporations where their rights are gained by consolidation or merger with the original claimant corporation, all of whose assets and liabilities are transferred to it. Seaboard Air Line Ry. v. United States, 256 U.S. 655, 41 S.Ct. 611, 65 L.Ed. 1149 (1921). From the papers now before the court, this appears to be the situation here. The purposes of the Act, often stated, to prevent fraud, to avoid multiple litigation, and to protect the defenses the United States may have against the assignor by way of setoff and counterclaim, would not appear to be violated by substitution of Texas International Company as plaintiff and the real party in interest. However, it is not necessary to decide this issue now, as between the shareholders and Texas International Company.¹ They may resort to the procedures afforded by Rule 66(c) and move accordingly, the issue to be resolved at the Trial Division level in the proceedings connected with determination of damages. In the interim, for convenience of reference and historical reasons, plaintiff will continue to be referred to as Consumers Ice Company.

The lease in question² was executed on October 29, 1954, between the Consumers Ice Company and the Army Corps of Engineers for a parcel of land located in San Mateo County, California. The land covered by the original lease is 8.55 acres near the center of a larger undeveloped tract of approximately 1100 acres owned by the plaintiff. The Army wished to use the property as part of the anti-aircraft facilities protecting the San Francisco Bay area with the Nike-Hercules missile. A radar installation was constructed on the land covered by the lease, which installation is still in operation.

The lease required the Government to pay a nominal rent of one dollar per year, which is all the defendant paid for the use of this property up to 1969 when the plaintiff stopped accepting the checks. The apparent motivation on the part of the plaintiff for entering into this agreement was the fact that the Government had been prepared to condemn the property in 1954 and the plaintiff felt that a lease at a dollar per year was preferable to the loss of the fee interest in the property at that time.

The focus of the problem in this case is the interpretation to be given clause No. 3 of the lease, which reads as follows:

3. To have and to hold the said premises for the term beginning July 1, 1954, through June 30, 1955, provided that unless and until the Government shall give notice of termination in accordance with provision 6 hereof, this lease shall remain in force thereafter from year to year without further notice; provided further that adequate appropriations are available from year to year for the payment of rentals and provided further that this lease shall in no event extend beyond June 30, 1964, or as long as required for Anti-aircraft purposes. Emphasis added.

The problem comes in determining how long the parties intended this lease to run. The plaintiff served notice on the Government in a letter dated May 22, 1969, to vacate the property covered by the lease before July 1, 1969. The defendant responded by a letter dated June 9, 1969, in which it asserted its right under the lease to continue to occupy the premises. Each party interprets the emphasized passage, supra, in a different way, which requires this court to sort out the various interpretations and come up with the reading that is most reasonable under the total circumstances involved.

The plaintiff contends the lease expired no later than June 30, 1964. Thereafter, the Government was a mere tenant at will who could stay only as long as the lessor did not voice objection by giving a 30-day notice to vacate. Thus, the Government occupied the premises from July 1, 1964 through June 30, 1969, as a tenant at will and has stayed in possession of the property after that time against the will of the plaintiff for which the plaintiff now seeks a reasonable rental value from June 30, 1969 until the date of judgment. The Government's interpretation of the lease emphasizes the language "or as long as required for Anti-aircraft purposes." It feels the lease is still in full force and effect and will continue to be so until it is determined by the appropriate military authorities that the property is no longer needed for the anti-aircraft defenses of the San Francisco Bay area.

Clearly, the interpretations given the identical language by the two parties are entirely at odds. The language of clause No. 3 of the lease is certainly not a model of legal drafting, and as a result, the court finds itself in the position of determining, if possible, which of the two competing alternative phrases "this lease shall in no event extend beyond June 30, 1964" or "or as long as required for Anti-aircraft purposes" controls the duration of the lease. In attempting to explain this ambiguity, the two parties have each pointed to the language in several supplemental agreements which were executed following the lease itself.

Each of the supplemental agreements concerned further additions to the leased property or rights-of-way and licenses appurtenant thereto. None of the subsequent agreements specifically attempts to modify the intended duration of the lease although several paraphrase clause No. 3 in the lease while referring to it. In so doing, they neither add to, nor subtract from, the already sufficiently confusing language in the lease itself, and will not be detailed further. The Government, however, does place heavy emphasis on a letter written February 5, 1964, approximately 5 months before the date plaintiff contends the lease terminated. In pertinent parts, this letter reads:

In accordance with paragraph No. 3 of the subject lease, this is to advise you that the Government has a continuing need for the premises described in said lease for anti-aircraft purposes for an indefinite period.

The plaintiff did not respond to this letter, which the defendant asserts serves to indicate the plaintiff believed the lease was to run until the Government no longer had a need for the property for anti-aircraft purposes. The court does not feel it can draw such a telling conclusion concerning the plaintiff's belief of the content of this lease from its mere silence. It is just as likely that the plaintiff still viewed the lease as terminable on June 30, 1964, but since it had no objections to the defendant's continued occupancy for the immediate future, it simply did not respond to the letter of February 5, 1964. In short, none of the supplemental documents executed by these parties provides any assistance in determining what the legal interpretation of this lease should be.

While it might be like placing the cart before the horse to discuss the matter at this point since no analysis has as yet been made of the possible interpretations this lease might be given, it should be noted that the pertinent language contained in clause No. 3 of the lease was typed into a standard form Government lease, and was apparently the product of negotiations between the parties in 1954. As a result, the contra proferentem rule³ has no application to these facts. Kaiser Aluminum & Chem. Corp. v. United States, 342 F.2d 317, 181 Ct.Cl. 902 (1967); Tulelake Irrigation Dist. v. United States, 342 F.2d 447, 169 Ct.Cl. 782 (1965). It seems likewise clear that since the contract language was the product of negotiation, neither party may be called to task for failing to seek clarification of what seems to be language that is ambiguous on its face. The duty described in Blount Bros....