GAY STREET CORPORATION OF BALTIMORE v. United States

• Decision Date: 11 January 1955
• Docket Number: Congressional No. 3-52.
• Citation: 127 F. Supp. 585,130 Ct. Cl. 341
• Parties: GAY STREET CORPORATION OF BALTIMORE, MARYLAND, v. The UNITED STATES.
• Court: U.S. Claims Court

127 F. Supp. 585

130 Ct. Cl. 341

GAY STREET CORPORATION OF BALTIMORE, MARYLAND, v. The UNITED STATES.

Congressional No. 3-52.

United States Court of Claims.

January 11, 1955.

Frank Kaufman, Baltimore, Md., for plaintiff. Marx Leva, Washington, D. C., Frank & Oppenheimer, Baltimore, Md., and Fowler, Leva Hawes & Symington, Washington, D. C., were on the briefs.

Herbert Pittle, Washington, D. C., with whom was Perry W. Morton, Asst. Atty. Gen., for defendant.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN and LARAMORE, Judges.

LARAMORE, Judge.

This is a congressional reference case referred to the Court of Claims by House Resolution 566, 82d Congress, 2d session, with instructions to proceed in accordance with sections 1492 and 2509 of Title 28 of the United States Code.

Pursuant to the aforementioned reference the plaintiff has filed its petition in this court seeking to recover damages for failure by the defendant to perform its obligation under a lease of an office building.

Plaintiff is a corporation organized and existing under the laws of the State of Maryland. It is the owner of a six-story building located at 112-114 South Gay Street, Baltimore, Maryland. This building was purchased by the plaintiff in July 1946. It had been used as an office building for many years by its previous owners.

In the summer of 1946, the War Assets Administration, an agency of the United States Government, negotiated with plaintiff for a lease of the building for a period of 21 months beginning October 1, 1946, to June 30, 1948, inclusive, at a monthly rental of $3,750, provided that plaintiff, prior to execution and commencement of the lease, would make a number of specific alterations to the building, at plaintiff's sole cost and expense, so that the premises would be suitable to the needs and desires of the War Assets Administration. Plaintiff made the requested alterations at a cost of $5,505.38. That sum represented the "fair and reasonable cost" of making such alterations.

On October 1, 1946, plaintiff, acting through Henry L. Frank & Company, Inc., a Maryland corporation, its agent, and the defendant, executed a lease containing the foregoing provisions. Pursuant to paragraph 3 of the lease, defendant had the right to occupy the premises to and including June 30, 1951. Pursuant to paragraph 12 of the lease, defendant had the right to terminate the lease on June 30, 1948, or at the end of any fiscal year thereafter by giving plaintiff at least 120 days' prior written notice. The lease did not contain any express provision for termination before June 30, 1948.

By letter of May 14, 1947, the War Assets Administration notified Henry L. Frank & Company, Inc., that it would vacate the building in question on June 30, 1947, because consolidation of its activities made the building in excess of its office space requirements. By letter dated June 2, 1947, the War Assets Administration again notified Henry L. Frank & Company, Inc., that it would quit the premises on June 30, 1947. In that letter the War Assets Administration pointed out that in view of the fact that the United States Government operates on a fiscal year basis and the further fact that funds of the United States Government cannot be obligated for a period extending beyond each fiscal year, the War Assets Administration was serving its notice of termination to be effective on June 30, 1947. No appropriation was available for continuing the lease beyond June 30, 1947.

On June 12, 1947, Henry L. Frank & Company, Inc., notified the War Assets Administration that under the terms of paragraph 12 of the lease the Government had no right to terminate the lease prior to June 30, 1948.

On June 30, 1947, the War Assets Administration vacated the premises and the plaintiff protested this action.

On July 3, 1947, the War Assets Administration acknowledged receipt of the aforementioned letter of June 12, 1947, from Henry L. Frank & Company, Inc. In that letter the War Assets Administration stated, in part:

"The action of this office in surrendering this lease was based on the provisions of Sections 3732 and 3679 of the Revised Statutes 41 U.S.C.A. § 11, 31 U.S.C.A. § 665 and the holdings of the court in the cases of Smoot v. U. S., 38 Ct.Cl. 418; Leiter v. U. S., 271 U.S. 204, 46 S.Ct. 477, 70 L.Ed. 906; and Goodyear Tire and Rubber Company v. U. S., 276 U.S. 287, 48 S.Ct. 306, 72 L.Ed. 575."

By letter of July 26, 1947, Henry L. Frank & Company, Inc., made demand upon War Assets Administration for payment of rent in accordance with the terms of the lease. This demand was rejected by the War Assets Administration by a letter addressed to Henry L. Frank & Company, Inc., dated July 28, 1947.

After the War Assets Administration vacated the premises on June 30, 1947, Henry L. Frank & Company, Inc., as agent for plaintiff, made efforts to mitigate the damages suffered by the plaintiff as a result of the loss of rental income for the year July 1, 1947, to June 30, 1948, inclusive. In the first nine months after the premises were so vacated, plaintiff caused more than 20 separate advertisements to be inserted in local newspapers in Baltimore, Maryland, in an effort to rent or sell the premises. In addition, Henry L. Frank & Company, Inc., acting on behalf of the plaintiff, advised other real estate agents in Baltimore of the availability of the property for rental or purchase, and showed and discussed the premises to and with all interested parties including principals and real estate agents. Despite these efforts, neither plaintiff nor its agent received any offer to rent or purchase the premises until 1950. As a result, the premises were vacant during the year July 1, 1947, to June 30, 1948, inclusive.

If defendant had not vacated the premises, and had paid rent as required by the terms of the lease, plaintiff would have received rental income for the period July 1, 1947, to June 30, 1948, in the amount of $45,000. However, since plaintiff would have incurred expenses for operating the building in accordance with the terms of the lease during said period, its net rental income would have been $45,000 less the amount of its operating expenses. The fair and reasonable estimated cost of such operations for the period July 1, 1947, to June 30, 1948, inclusive, is $12,479.43.

After the claim was referred to this court by the House of Representatives, the plaintiff filed its petition in which it alleged the facts substantially as outlined above and requested that the court enter judgment in its favor for $35,666.50 and interest, or make a report to Congress "confirming the legal and/or moral basis of its claim against the United States in the amount of $35,666.50, and interest. In its brief the plaintiff requests "net damages" of $32,520.57.

The answer filed by the Government admits generally the factual allegations regarding the contract and subsequent transactions, but denies that the plaintiff is entitled to judgment and further denies that the plaintiff is entitled to a report to Congress confirming its claim against the United States.

The questions presented are: (1) whether the United States was obligated for a term extending beyond the fiscal year in which the lease was executed, in the absence of express congressional authorization and in the absence of an available appropriation; (2) if the United States was not legally obligated for the entire term, does the plaintiff have an equitable claim against the United States for the action of its officers in negotiating and executing a contract which was beyond the scope of their authority; and (3) if the plaintiff has a claim, either legal or equitable, is it entitled to interest.

When the lease was executed the War Assets Administration was an administrative branch of the Executive Department, Act of October 3, 1944, 58 Stat. 765, 50 U.S.C.A.Appendix, § 1611 et seq. United States v. Shofner Iron & Steel Works, 9 Cir., 168 F.2d 286. Congress did not authorize it to make leases for a period of more than one year. Therefore, when the lease was executed, the officer of the War Assets Administration who executed it on behalf of the United States did not have any authority to obligate the credit of the United States for a period of time in excess of the then fiscal year, which ended June 30, 1947. This fact is not disputed and is admitted by plaintiff in paragraph 15 of its petition wherein it is alleged:

"It is true that Sections 3679 and 3732 of the Revised Statutes of the United States provide that no agency of the United States Government may obligate itself beyond a current fiscal year without specific congressional authorization. Leiter v. U. S., 1926, 271 U.S. 204, 46 S.Ct. 477, 70 L.Ed. 906; Goodyear Tire and Rubber Company v. U. S., 1928, 276 U.S. 287, 48 S.Ct. 306, 72 L.Ed. 575; and Smoot v. U. S., 1903, 38 Ct.Cl. 418, all hold that there is no basis for prosecuting in the Court of Claims a claim which has arisen by virtue of an `ultra vires' act committed by a Government agency. Therefore, it would appear that plaintiff has no remedy open to it in any court of law or in equity which will enable it to recover its damages or

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