Dodge Street Building Corporation v. United States

• Decision Date: 19 February 1965
• Docket Number: No. 325-61.,325-61.
• Citation: 341 F.2d 641
• Parties: DODGE STREET BUILDING CORPORATION, a Nebraska corporation, v. The UNITED STATES.
• Court: U.S. Claims Court

341 F.2d 641 (1965)

DODGE STREET BUILDING CORPORATION, a Nebraska corporation, v. The UNITED STATES.

No. 325-61.

United States Court of Claims.

February 19, 1965.

Lyle E. Strom, Omaha, Neb., for plaintiff, James J. Fitzgerald, Jr., Omaha, Neb., of counsel.

Herbert Pittle, Washington, D. C., with whom was Asst. Atty. Gen. Ramsey Clark, Washington, D. C., for defendant.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS and COLLINS, Judges.

COWEN, Chief Judge.

In 1924 Elks Lodge No. 1817 (then known as Lodge No. 39) of Omaha, Nebraska, erected an 8-story, concrete and brick structure at 18th and Dodge Street in Omaha. The building was constructed in a manner to facilitate various uses by the lodge. The seventh and eighth floors were combined for use as a ballroom and club; the fourth, fifth, and sixth floors were designed for and devoted to hotel use, having a total of 105 rooms — 35 on each floor. Each room on these floors contained a private lavatory and toilet. Twelve of the rooms on each floor had full private baths. For the remaining 23 rooms on each of these floors there was one common shower room, consisting of four shower stalls. The administrative offices of the lodge and some clubrooms occupied the third floor. The first floor has been rented to various store-type operations, including a restaurant, a bar, a bowling alley, and some small retail shops. Since 1950 the Omaha Chamber of Commerce has leased the entire second floor.

In 1950 the lodge, which to that time had been the owner and operator of the building, organized the Dodge Street Corporation, plaintiff herein, to take over that ownership and operation. All of the plaintiff's outstanding stock is held by the lodge.

Early in 1953 defendant leased the fourth, fifth, and sixth floors from plaintiff for use by an agency of defendant as office space. In order to so use these floors defendant made extensive additions, alterations, and repairs. The changes included removal, addition and/or alteration of partitions, floors, walls, ceilings, doors, windows, hardware, millwork, plumbing, electrical wiring, light fixtures, switches, outlets, and electrical panels. All three floors were painted and the bedroom-type lighting fixtures were replaced by large ceiling fluorescent fixtures. Carpeting was replaced by asphalt tile. The shower rooms were converted to restrooms for men and women by removing the old plumbing fixtures and installing new plumbing equipment. The outmoded electrical power supply and systems were transformed to a system that was adequate for either hotel or office use. In performing this work, the defendant expended a total of $101,946.69.

A condition survey made jointly by representatives of both parties prior to defendant's conversion showed that the paper on the walls of the hotel rooms was in poor to good condition and that the walls of the bathroom, janitor's closets, and supply closets were in poor condition. The carpets on the floor were in fair condition and the ceiling of the rooms in good condition. The doors were found to be in good condition but the wood sash windows were loose. The plumbing fixtures were cracked and the enamel worn. In general, the woodwork was in fair condition while the halls, stairways, and elevators were in good condition.

Included in the lease, which provided for an annual rental of $67,000, was a clause obligating the defendant upon termination of the lease to restore the premises to the condition existing at the beginning of the lease, except for ordinary wear and tear and damages by the elements or circumstances beyond the Government's control. A special proviso limited the restoration to partitions, plumbing and electrical wiring at the places indicated on drawings of the floor plans attached to the lease as exhibits.

By supplemental agreement of August 1953, the restoration provisions of paragraph 8 of the original lease were modified as follows:

"The Lessor agrees that should the Government make changes in or additions to the premises by construction and installing for its use general toilet room facilities for and located on the 4th, 5th and 6th floors, that the Government, at the termination of this lease, will not be required to restore that part of the demised premises used for said general toilet room facilities, provided the Government elects not to remove said general toilet room facilities at or before the expiration of this lease so that said general toilet room facilities will remain as provided and installed and shall become the property of the Lessor when this lease is terminated. The Lessor, in consideration for the Government not removing said general toilet room facilities, further agrees not to require the Government to restore any plumbing from wherever removed, if any, on the 4th, 5th and 6th floors, provided further, that the word "plumbing" as used in paragraph 8 and herein is defined to mean and include all water and sewage pipes, toilet room, bath room and shower room fixtures and installations, partitions and floorings presently installed in, and used in conjunction with and comprising the toilet rooms, bath rooms and shower rooms. The provisions of this paragraph are notwithstanding the provisions of paragrah 8."

Defendant occupied the leased space until October 15, 1960, at which time it vacated the premises pursuant to earlier written notice to the plaintiff. Prior to that date, and after defendant had given its notice to terminate, plaintiff had requested that the defendant restore the premises in accordance with the lease and the supplements thereto. After an exchange of letters and some negotiating, plaintiff furnished defendant with an itemized bill of $120,560 as its claimed restoration costs. Defendant replied that it would not restore the premises, since its appraisal had shown that the market value of the property in its condition at the termination of the lease exceeded the value of the property if restored in accordance with the covenants of the lease as supplemented.

After a denial of its claim by the General Services Administration on June 30, 1960, plaintiff brought this suit for breach of the restoration clause in the 1953 lease, as amended by the supplemental agreement. Plaintiff now claims that defendant's share of the cost of the restoration is $121,326.

The Trial Commissioner correctly found that, as a result of the amendment of the lease contract, the Government's obligation to restore the premises was limited to the partitions (excluding those around the former bathrooms) and the electrical wiring on the fourth, fifth, and sixth floors. After considering the conflicting evidence on the question, the Commissioner determined that the fair and reasonable cost of making such restoration was $47,243. The cost of restoration is not,...