Thayer-West Point Hotel Co. v. United States, 45874.

• Decision Date: 04 March 1946
• Docket Number: No. 45874.,45874.
• Citation: 106 Ct. Cl. 60,64 F. Supp. 565
• Parties: THAYER-WEST POINT HOTEL CO. v. UNITED STATES.
• Court: U.S. Claims Court

64 F. Supp. 565

106 Ct. Cl. 60

THAYER-WEST POINT HOTEL CO. v. UNITED STATES.

No. 45874.

Court of Claims.

March 4, 1946.

Ernest J. Ellenwood, of New York City (John S. Shedden and Ellenwood & Shedden, all on the brief), for plaintiff.

Donald B. MacGuineas, of Washington, D. C., and John F. Sonnett, Asst. Atty. Gen., for defendant.

Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.

WHALEY, Chief Justice.

Plaintiff, The Thayer-West Point Hotel Company, brings this suit against the defendant under the provision in a lease for just compensation to the lessee, or its assigns, for the construction of a hotel, its appurtenances and equipments, on the United States Military Reservation at West Point, State of New York.

The lease was entered into pursuant to an Act of Congress approved March 30, 1920, 41 Stat. 538, 548, reading as follows:

"That the Secretary of War is hereby authorized to lease land on the United States Military Reservation at West Point, for a term of not exceeding fifty years, to any corporation, company, or individual, upon which to erect a hotel, and all other necessary buildings in connection therewith, in accordance with plans and specifications submitted to and recommended by the Superintendent of the Military Academy, and approved by the Secretary of War. Said lease shall contain such conditions, terms, reservations and covenants, as may be agreed upon and shall also provide for just compensation to the lessees for the construction of said hotel, appurtenances, and equipments, to be paid to said lessees at the termination of said lease."

The plaintiff lays claim to "the total cost for the construction of the hotel, including appurtenances and equipment, together with all expenses properly attributable thereto," in the sum of approximately $1,932,000.

Pursuant to the Act of March 30, 1920, the Secretary of War leased to Herbert Williams October 17, 1924, a tract of land within the military reservation, consonant with the expressed purpose of the Act. Certain provisions of this lease have a more or less direct bearing upon the claim here made by the plaintiff.

The lessee covenanted to build upon the reservation a hotel substantially in accordance with Government plans, and to keep it open continuously except at specially permitted times, title to the hotel to be in the lessee until termination of the lease when it should pass forthwith to the Government. Upon failure of the lessee to observe the covenants of the lease, the Secretary of War might annul the lease, and, as the lease worded it, "thereupon just compensation shall be made to the party of the second part lessee, or his assigns, for the construction of said hotel, appurtenances and equipments."

The lessee was not given free rein as to return on his investment. The lease provided that the lessee "shall, from time to time, establish standard rates for rooms and meals in said hotel, which rates shall be subject to the approval of the Superintendent of the Military Academy for the time being, and the following persons shall be entitled to a discount from said rates of twenty-five percent (25%) upon production of a card signed by the Adjutant of the Post or such other officer as may be designated by the Superintendent representing the bearer to be entitled thereto as follows:

"(a) The Board of Visitors to the United States Military Academy and officers of the United States Government making tours of inspection at the Post.

"(b) Parents and guardians of cadets.

"(c) Officers of the United States Army on duty at the Post and their dependents when other quarters are not available.

"(d) Officers and their dependents not under War department orders for such duty, but officially connected with athletic teams as coaches or trainers. There shall be no discrimination in the quality of service, meals or otherwise, against these classes as compared with other guests.

"The total number of rooms in said hotel which shall be subject to such discount shall not at any one time exceed one hundred rooms."

As finally constructed, the hotel had approximately 225 guest rooms.

The lessee, being the party of the second part, further covenanted as follows:

"That the party of the second part will keep said premises, the hotel, appurtenances and equipments in good repair at all times and that, at the expiration of said term or upon cancellation or annulment of the lease as herein provided, he will quit and surrender said property in as good state and condition as reasonable wear and tear thereof will permit; * * *."

Herbert Williams, being permitted to do so by the terms of the lease, formed a corporation, The Thayer-West Point Hotel Corporation, and on March 24, 1925, assigned the lease thereto. This corporation constructed the hotel.

The corporation issued first mortgage bonds in the principal sum of $1,000,000 secured by a trust deed to the American Trust Company and Charles H. Trismen, as trustees, conveying the lease and prospective building in trust. Proceeds of the bond issue were used to finance construction of the hotel. A second trust mortgage was entered into by the corporation on or about April 1, 1927, with the American Trust Company, covering the same properties, in the principal amount of $500,000.

The corporation operated the hotel for a time but in August of 1927 went into bankruptcy. The property, however, was not administered by the trustee in bankruptcy due to foreclosure proceedings instituted by the trustees, American Trust Company and Charles H. Trismen, wherein judgment was rendered and a sale decreed.

A committee was formed, representing certain of the bondholders, which bid in the property at the foreclosure sale, at $25,000, and a deficiency judgment was entered against the defaulting corporation in the sum of $1,235,067.67.

The bondholders' committee formed a new corporation, The Thayer-West Point Hotel Company, the plaintiff herein, according to a plan by which the committee assigned to the plaintiff its purchased rights and equipment, and the plaintiff issued income bonds and common stock. The bondholders of the original corporation, participating in the plan, exchanged their bonds at $100 face value of surrendered bonds to $50 face value of the new bonds, receiving in addition shares of common stock in proportion to the amount of bonds surrendered.

The holders of the first mortgage bonds of the original corporation who did not join in the plan of reorganization, holding $120,000 face value, received their proportionate distributive share of the proceeds of the $25,000 paid at the foreclosure sale.

Out of the original bond issue of $1,000,000 by the old corporation, bonds to the extent of $879,400 face value were surrendered in return for $439,700 face value of the new bonds and 8,794 shares of no-par value common stock.

These new bonds and the common stock are now outstanding.

In addition the plaintiff on December 27, 1930, issued its bond in the sum of $125,000, secured by first mortgage on the hotel property and leasehold, which is now outstanding in the principal amount of $115,000 with unpaid interest at six percent per annum from January 1, 1942.

In December of 1930, the referee in the foreclosure proceedings, the trustee in bankruptcy, the trustees of the first mortgage and of the second mortgage of the...