Security Life and Accident Insurance Co. v. United States

• Decision Date: 11 April 1966
• Docket Number: No. 21287.,21287.
• Parties: SECURITY LIFE AND ACCIDENT INSURANCE COMPANY, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

357 F.2d 145 (1966)

SECURITY LIFE AND ACCIDENT INSURANCE COMPANY, Appellant, v. UNITED STATES of America, Appellee.

No. 21287.

United States Court of Appeals Fifth Circuit.

February 25, 1966.

Rehearing Denied April 11, 1966.

W. Bruce White, William M. Acker, Jr., Birmingham, Ala., Jack Crenshaw, Montgomery, Ala., for appellant.

Ramsey Clark, Asst. Atty. Gen., Roger P. Marquis, Grace Powers Monaco, Elizabeth Dudley, Attys., Dept. of Justice, Washington, D. C., for appellee.

Before JONES and BELL, Circuit Judges, and HUNTER, District Judge.

JONES, Circuit Judge:

The appellant, Security Life and Accident Insurance Company, was the owner of an office building in the City of Montgomery, Alabama. It was first leased to the United States in 1946. In 1957, a new lease agreement was executed on behalf of the United States by General Services Administration, generally called G.S.A., for the use of the Veterans Administration, which is usually referred to as V.A. The lease was for a five year term ending June 30, 1962, at an annual rental of $179,000. The lease gave to the lessee an option¹ to renew from year to year for an additional five years at the same rental upon giving notice.

Upon the expiration of the lease the V.A. remained in possession. On July 6, 1962, Security Life wrote G.S.A. advising that it was electing to treat the holding over as a renewal of the lease.² On July 30, 1962, the United States filed a complaint in eminent domain and a declaration of taking for the purpose of acquiring the right to use the property³ for a term commencing July 1, 1962⁴ and ending December 31, 1962, with the Government obtaining options to extend the use and occupancy for further periods.

Security Life answered and alleged, among other things, negotiations for a new lease and its demand for a restoration of the premises to the original condition at the time of the lease.⁵ In its answer, as a Fourth Defense, Security Life set forth its letter of July 6, 1962,⁶ and asserted that G.S.A. made no reply to the letter but continued to occupy the premises after the expiration of the lease. It was claimed by Security Life in its answer that, by the holding over after the expiration of the term and the election of Security Life, the United States became a tenant under the lease terms for a five year period or, in the alternative, for a one year period. Security Life prayed that its Fourth Defense might be treated both as an absolute defense to the complaint and also as a cross-claim. The United States, in a pleading styled Answer to Cross-Claim, admitted the negotiations for a new lease, the demand of Security Life for a restoration of the property, and that Security Life wrote the letter and that it did not reply. An amendment to this pleading was filed which attempted to restrict it so that it would be effective only as admissions on the issue of the Government's right to take and nothing more.

At the time of the filing of this amendment, the Government also filed a motion to strike the answer of Security Life insofar as it purported to state a cross-claim. The motion was granted. To make certain that its admissions still stood, the Government filed a further amendment reincorporating its admissions of the facts alleged in the Fourth Defense asserted by Security Life in its answer. The district court entered an order which recited that it was the court's opinion that the issue raised by the answer of Security Life, of the right of the United States to condemn the property described in the declaration of taking, was a question of law to be decided by the court, and this issue was set for a hearing. The question being, as the court saw it, a question of law, no testimony was taken at the hearing and the questions determined by the court were decided solely on the pleadings. The court, by its order, held that the objections of Security Life to the right of the United States to condemn the property described in the declaration of taking should be overruled and denied. The court's order resolved the question of the right to condemn a lease interest. It determined that the question of public necessity for a taking of property by eminent domain was not for judicial determination in the ordinary case. The order recites that the only issue remaining was one of just compensation. Shortly after the entry of this order, a pretrial order was entered and in it is the recital that the sole issue for trial was the amount of just compensation for the estate taken. The pretrial order preserved to Security Life its objections to the taking. The cause was tried, a verdict returned, an order for a new trial, unless a remittitur be filed, was entered, a new trial was had, a smaller verdict was returned and judgment entered upon it, with this appeal following.⁷

The question as to whether the United States was a tenant holding over and subject to the liabilities of such a tenant, was not mentioned in any of the orders of the district court, although squarely presented by the answer of Security Life. Perhaps it was disposed of in the court's order overruling the defenses referred to as objections. If the United States became a holdover tenant then it was in rightful possession for a term in excess of that sought to be condemned and the eminent domain action would not lie.

It is a general rule in the law of landlord and tenant that where a tenant for a year or other definite term holds over after the term and the landlord elects to hold the tenant for another term, the tenant is bound thereby. The law implies an agreement on the part of the tenant. 32 Am.Jur. 789, Landlord and Tenant, § 935; 1 Tiffany, Real Property, 3rd Ed. 281, § 175. It is true, as the Government stresses, that the contracts of the United States are governed by the laws of the United States. Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838; Royal Indemnity Co. v. United States, 313 U.S. 289, 61 S.Ct. 995, 85 L.Ed. 1361. It is customary, where Congress has not adopted a different standard, to apply to the construction of Government contracts the principles of general contract law. Priebe & Sons v. United States, 332 U.S. 407, 68 S.Ct. 123, 92 L.Ed. 32. Such contracts are construed as contracts between private parties. S. R. A. v. State of Minnesota, 327 U.S. 558, 66 S.Ct. 749, 90 L.Ed. 851. The general proposition that the United States may be liable on implied contracts is well settled. 91 C.J.S. United States, § 89, p. 170; 54 Am.Jur. 576, United States § 66. The rule that obligations which would be implied against citizens under the same circumstances will be implied against the United States is applicable to the law dealing with landlord and tenant. United States v. Bostwick, 94 U.S. 53, 24 L.Ed. 65. The property which was the subject matter of the lease and is the subject matter of this litigation is in Alabama and it is proper that we look to the laws of that state for a statement of governing principles. It was held in 1846 that where a tenant in possession under a lease continues in possession after the expiration of the term, the law implies a renewal of the lease on the same terms. Harkins v. Pope, 10 Ala. 493. The same principle was stated and applied in 1963, McIntyre v. Coker, 274 Ala. 457, 150 So.2d 220. Between the two cases cited are a number of others to the same effect. The rule, well established when Blackstone wrote, was stated in one of the early Alabama cases in this language:

"The principle is too well established for further controversy, that, when a tenant for years holds over after the expiration of his term, the law will imply an agreement to hold, or continue the lease, for another year, upon the terms and conditions of the prior lease. It is the duty of the tenant, so soon as the period of his tenancy expires, to peaceably surrender the possession of the demised premises to his landlord, and if he neglects or refuses to do so, the landlord may treat him either as a trespasser, or as a tenant, according as his own option may dictate." Wolffe v. Wolff & Bro., 69 Ala. 549, 44 Am. Rep. 526.

The Government contends that it is not bound as a holdover tenant and to support this contention it points to Goodyear Tire & Rubber Company v. United States, 276 U.S. 287, 48 S.Ct. 306, 72 L.Ed. 575. This case, as we read the opinion, is not...