United States v. Certain Parcels of Land

• Decision Date: 03 May 1955
• Docket Number: No. 13204.,13204.
• Citation: 131 F. Supp. 65
• Parties: UNITED STATES of America, Plaintiff, v. CERTAIN PARCELS OF LAND, etc.; Outer Harbor Dock & Wharf Company; Goodyear Tire & Rubber Company, Inc.; City of Los Angeles et al., Defendants.
• Court: U.S. District Court — Southern District of California

131 F. Supp. 65

UNITED STATES of America, Plaintiff, v. CERTAIN PARCELS OF LAND, etc.; Outer Harbor Dock & Wharf Company; Goodyear Tire & Rubber Company, Inc.; City of Los Angeles et al., Defendants.

No. 13204.

United States District Court S. D. California, Central Division.

May 3, 1955.

Laughlin E. Waters, U. S. Atty., Joseph F. McPherson, Sp. Asst. to Atty. Gen., Richard A. Levine, Asst. U. S. Atty., Los Angeles, Cal., for plaintiff

L. A. Gibbons, Jerry H. Powell, Douglas C. Gregg, A. Andrew Hauk, Sheldon C. Houts, Los Angeles, Cal., for defendant Outer Harbor Dock & Wharf Co. O'Melveny & Myers, Paul Fussell, Pierce Works, William W. Alsup, Bennett W. Priest, Los Angeles, Cal., for defendant Goodyear Tire & Rubber Co.

Roger Arnebergh, City Atty., Arthur W. Nordstrom, Asst. City Atty., Los Angeles, Cal., for defendant City of Los Angeles.

MATHES, District Judge.

This is an action by the United States to condemn a leasehold in several parcels of land located at Los Angeles harbor. See United States v. Land, D.C.S.D.Cal. 1954, 15 F.R.D. 224. Jurisdiction is invoked under 28 U.S.C. § 1358. See Id. § 1345. The ultimate question to be decided is whether the Government is bound to pay compensation for certain improvements affixed to the land being condemned.

The Navy Department constructed the improvements in question — consisting of warehouses, railroad trackage, underground utilities, and earth fill — while using the land for a Naval Supply Depot under the terms of two World War II subleases, now expired, which had been negotiated with defendant Outer Harbor Dock & Wharf Company. The Government contends that these improvements remain the property of the United States, for which no compensation need be paid.

The problems of law involved are such as to require a recital in some detail of the facts as disclosed by the evidence adduced upon the separate trial of the issue as to ownership. Fed.Rules Civ. Proc. rules 71A(a) and 42(b), 28 U.S. C.A.

Since 1912, defendant Outer Harbor has been lessee of the condemned land, originally under a lease from the city of San Pedro and, since annexation, from the city of Los Angeles. The present lease expires on February 13, 1956.

By two separate subleases — the first executed October 1, 1943 for a term expiring June 30, 1944; and the second executed July 15, 1944 for a term expiring June 30, 1945 — Outer Harbor subleased this same land to the Navy Department. The first sublease covered three of the parcels; the second sublease covered two of the remaining parcels. Each sublease was by its terms renewable; and each was renewed from time to time until 1950, under certain conditions not here relevant.

Both subleases provided that: "The Government shall have the right, during the existence of this lease, to * * * erect * * * structures * * * in or upon the premises hereby leased * * *; which structures so * * * attached to the said premises shall be and remain the property of the Government and may be removed therefrom by the Government prior to the termination of this lease, and the Government, if required by the Lessor, shall, before the expiration of this lease or renewal thereof, restore the premises to the same condition as that existing at the time of entering upon the same under this lease * * *."

Thus, in short, the Government reserved its property right in the additions made to the premises; it retained the right to remove these improvements prior to termination of the subleases; and it agreed on demand to restore the premises before expiration of the subleases.

By letter of October 27, 1949, the Navy notified Outer Harbor that both subleases would be terminated "during the first half of the calendar year 1950", and called Outer Harbor's attention to the restoration obligation.

On November 23, 1949, Outer Harbor answered, stating that it desired restoration of the demised premises, but that it would waive restoration upon payment of $175,000. On June 5, 1950, Outer Harbor again advised the Navy by letter that it would require restoration. On June 16, 1950, the Navy gave Outer Harbor written notice of termination of the earlier sublease as of June 30, 1950, leaving the removal problem to "be taken up with you by the Commandant." The later sublease expired by its own terms on June 30, 1950.

On June 23, 1950, Outer Harbor notified the Navy by letter that it desired the buildings and structures removed upon termination of the subleases, but offered to negotiate the matter. By letter dated July 6, 1950, the Navy accepted Outer Harbor's demand for restoration.

While all this correspondence was taking place representatives of the Navy and of Outer Harbor carried on certain significant oral negotiations. Mr. Mead and, to a lesser extent, Mr. Muench represented the Navy, while a Mr. Tilley represented Outer Harbor.

The chain of command and of authority among the Navy's representatives ran from Admiral Jelley (Chief of the Bureau of Yards and Docks in Washington) to Captain Johnson (the District Public Works Officer of the Eleventh Naval District at San Diego) to Mr. Muench (Director of Property Administration at San Diego) to Mr. Mead (Manager of the Real Estate Branch at Los Angeles).

On June 23, 1950, two days before the Navy surrendered possession of the premises to Outer Harbor, Messrs. Mead and Tilley discussed the possibility of transfer of ownership of the buildings by the Navy to Outer Harbor to satisfy the Government's restoration obligation. Because Tilley then pressed for prompt action on formal transfer of ownership of the structures, Mead realized that the arrangement would have to be consummated quickly if at all. He also knew that in transferring ownership of the buildings and in paying $175,000 to Outer Harbor for a waiver of the right to require restoration of the premises, the Navy would be freed of the substantial cost of removal of the buildings, set by the Government's estimate at $288,000 — $113,000 in excess of the proposed payment to Outer Harbor.

On July 11, 1950, Tilley informed Mead by telephone that Outer Harbor would reduce its demand from $175,000 to $155,000 provided a firm commitment be made by the Navy within a week. Transfer of ownership of the buildings was of course an integral part of this offer. Mead promptly informed Muench of the reduced offer, and on the same day Muench requested the Bureau of Yards and Docks for "authority to inform lessor of Government's acceptance."

Admiral Jelley, the Chief of the Bureau, replied on July 21, 1950: "Authority given to accept offer of settlement of Outer Harbor Dock and Wharf to be conditioned upon release of all obligations and claims including any claim of the Harbor Department as prime lessor."

On July 24, 1950, Muench informed Mead, who in turn informed Tilley, of this grant of authority. Tilley then drew up a letter, setting forth Outer Harbor's reduced offer, and dated it back to July 10, 1950, following which he and Mead went to confer with Muench in San Diego, to consummate the transaction. There, in Tilley's presence, Muench dictated a letter reciting the authority to accept the $155,000 offer and authorizing Outer Harbor to take immediate possession of the premises; and Captain Johnson then signed it on behalf of the Navy.

The understanding thus reached at this San Diego meeting was that from that time on, the buildings belonged to Outer Harbor. It was considered by the negotiating parties that the transaction was completed as far as could be done locally.

The parties also understood, however, that in order to secure payment of the $155,000, written agreements supplemental to the subleases would have to be prepared and sent to Washington. When returned, these supplemental agreements would serve as a basis on which a voucher could be issued and the money paid.

On the following day, July 25, 1950, in execution of this arrangement, the Navy delivered possession to Outer Harbor of all the leased premises including the warehouses.

Further evidence of the authority of the Navy's local representative was given on July 28, 1950, when the Bureau of Yards and Docks in Washington wrote to Outer Harbor that the District Public Works Officer (Captain Johnson) had been authorized "to effect settlement of this matter the claims arising out of the Government's occupancy under the two subleases on terms and conditions mutually agreeable to the Government and your Company."

On September 1, 1950, Mead sent to Outer Harbor the proposed supplemental agreements, which set forth the cash consideration of $155,000 agreed on, and a recital of the transfer to Outer Harbor of ownership of the warehouses. Outer Harbor thereupon signed the documents and returned them to Mead.

Following the transfer back of possession of the premises on July 25, 1950, Outer Harbor expended approximately $50,000 to alter and repair the warehouses in order to make them conform to the City's building code. Outer Harbor additionally spent approximately $10,000 in advertising and to compensate real estate brokers for finding a tenant for the warehouses. On September 15, 1950, Outer Harbor leased four of the warehouses to defendant Goodyear Tire and Rubber Company for a period of five years at a monthly rental of $7,624.49.

On September 26, 1950, the Harbor Department sent a letter to Mead stating that "The Government is not obligated to the City in any manner in connection with its use of the subject premises * * *."

On November 15, 1950, Mead sent the supplemental agreements back to Outer Harbor, so that the corporate seal, which had been omitted at the time of execution, could be affixed. After affixing the seal and conforming the termination date to that of the original lease agreement with the City, Outer Harbor again returned the completed documents to Mead.

On November 27, 1950, Muench sent the supplemental agreements, as finally executed by Outer Harbor, to the Chief of the Bureau of Yards and Docks ...