Realty Associates v. United States, 582-52.

• Decision Date: 06 March 1956
• Docket Number: No. 582-52.,582-52.
• Citation: 134 Ct. Cl. 167,138 F. Supp. 875
• Parties: REALTY ASSOCIATES, Inc., a corporation, v. The UNITED STATES.
• Court: U.S. Claims Court

138 F. Supp. 875

134 Ct. Cl. 167

REALTY ASSOCIATES, Inc., a corporation, v. The UNITED STATES.

No. 582-52.

United States Court of Claims.

March 6, 1956.

Russell Morton Brown, Washington, D. C., for plaintiff. Robert T. Murphy, Washington, D. C., was on the briefs.

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

JONES, Chief Judge.

Plaintiff seeks to recover the cost of restoring certain property which had been leased to the Government by the plaintiff's predecessor in title. The lease covered several buildings and 12.3 acres of ground.

Some of the buildings in question were constructed in 1886 and others in 1901. They were built originally, and prior to 1934 had been used solely, for the cotton milling industry. Gradually over the years this industry migrated toward the cotton-producing area. This movement was accentuated by the depression.

The buildings became idle in 1934 and the textile machinery was removed. The buildings remained idle until the Government rented them in 1943.

In December 1942 the then owner sold all the buildings and approximately 50 acres of ground to Edward A. McNulty for the sum of $65,000.

Early in 1943 the defendant began condemnation proceedings but at the instance of the owner accepted a lease contract by the terms of which the defendant contracted to pay the owner an annual rental of $25,000.

Pursuant to permission granted by the terms of the lease the Government spent more than $558,000 in modernizing, building approaches, improving, adding one new building, and building access roads.

On February 28, 1946, McNulty sold the buildings and 12.3 acres of the land to the plaintiff for $307,500.

The defendant paid the annual rental until January 31, 1947, when the lease was terminated.

At the time of the trial the plaintiff was leasing the premises to various tenants for an annual rental of $150,000.

It is almost a rags-to-riches story.

But, says the plaintiff, since the lease contract stipulates that the defendant was obligated to restore the premises to the same condition that existed at the beginning of the lease, and that, having failed to do so, plaintiff is entitled to recover the cost of such restoration.

The defendant contends that the plaintiff suffered no damage because the value of the property at the time it relinquished possession to the plaintiff was greater than that which existed at the time of the original lease by reason of the substantial improvements which had been made to the property as a whole during the defendant's tenancy. It also contends that the cost of restoration, in the facts of this case, is not the true measure of damages.

Since the termination of the Government's lease the plaintiff has leased portions of the premises to a number of different tenants engaged in various light industries such as weaving, dyeing, bleaching, paper manufacturing, and steel fabricating. Other portions of the premises have been leased for storage. The premises are now 100 percent rented and produce a gross return of $150,000 per annum in their present unrestored condition. All in all, the property has been made much more valuable by the defendant's alterations. It would be a financial tragedy for plaintiff if the premises were actually restored to their 1943 condition.

The plaintiff contends that all that is irrelevant, that defendant cannot set off improvements in order to escape its obligation to restore.

Ordinarily this is true. Generally speaking the cost of restoring is the measure of damages, taking into consideration the age of the installations and ordinary wear and tear.

But this is not a suit for specific performance. It is a suit for breach of contract. Plaintiff is entitled to whatever damages were caused by the failure to restore. Crystal Concrete Corp. v. Town of Braintree, 309 Mass. 463, 35 N.E.2d 672, 675. If the defendant had restored the premises to the ancient, inaccessible and largely unusable condition that existed in May 1943 no one would have been more unhappy than plaintiff.

The instant case is distinguishable from the Atlantic Coast Line Railroad Co. case, Atlantic Coast Line R. Co. v. United States, 129 Ct.Cl. 137, on which plaintiff relies. In that case the defendant had left concrete building foundations and concrete slabs on the premises which actually lessened the value of the land. The defendant in effect conceded the actual damage to the land by virtue of the rubbish and foundations that were left thereon but sought to offset this damage by a claim that the value of the improvements in the way of the filling and building up of the land equalled the impairment in value by the failure of the defendant to otherwise restore the land, and that in this way the condition of the lease had been satisfied. All that the Atlantic Coast Line case holds is that the value of other improvements cannot be used to offset actual damage to the property which was caused by the defendant's breach in its failure to remove the concrete foundations, slabs, and other obstructions left on the property.

In the case at bar nothing that defendant did in improving the premises actually damaged the property. Everything it did increased the value of the property.

Conceding that according to the Atlantic Coast Line case the more than one-half million dollars of improvements placed upon the property by the defendant could not as such be offset against any damage which the defendant's acts may have occasioned the property, this does not relieve plaintiff in a suit for breach of contract from showing that he actually suffered damage by virtue of the breach.

If this were a suit for specific performance, the plaintiff might well compel the defendant to actually restore the property to the status and condition which prevailed in May 1943, upon the performance of which the property would again become practically useless. I am sure the plaintiff would not have thought of instituting such a suit because it is inconceivable that it would have wanted the property restored to its previous condition which had produced years of idleness. In the light of the entire record it is difficult to believe that plaintiff in good faith wanted any of the items restored.

To hold that in spite of the vast increase in the value of the property and the lack of damage caused by any action of the defendant, the plaintiff nevertheless is entitled to recover in addition to the mythical cost of restoring the property is inconceivable. To hold that the technical wording of the lease would justify an award of $220,000, or anything like that amount in damages which are practically nonexistent, runs counter to every tenet of justice and fair play which we have known from our youth up.

Plaintiff takes a simple technical wording of a lease, carries it along the road to a pure legalism, and from there on to an absurdity. Somewhere along the way the spirit of the law is lost, falls into a dreamless sleep, and lies in an unmarked spot.

The property had been completely idle for nine years because of its special character, its age, the shift in the textile industry, the inaccessibility of the property, and its not then being in form suitable for other uses.

The various actions taken by the defendant in improving and modernizing the property, making it accessible and fitting it into the current needs of the locality, together with the exercise of imagination and business acumen of the plaintiff, have transformed the property from a state of idleness into a prosperous holding which is producing regular and substantial income.

We cannot see where plaintiff...