United States v. Certain Property, Borough of Manhattan

• Decision Date: 25 August 1967
• Docket Number: Docket 30832.,No. 194,194
• Citation: 388 F.2d 596
• Parties: UNITED STATES of America, Petitioner-Plaintiff-Appellant, v. CERTAIN PROPERTY LOCATED IN the BOROUGH OF MANHATTAN, CITY, COUNTY AND STATE OF NEW YORK, and 193 Realty Corp. et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

388 F.2d 596 (1967)

UNITED STATES of America, Petitioner-Plaintiff-Appellant, v. CERTAIN PROPERTY LOCATED IN the BOROUGH OF MANHATTAN, CITY, COUNTY AND STATE OF NEW YORK, and 193 Realty Corp. et al., Defendants-Appellees.

No. 194, Docket 30832.

United States Court of Appeals Second Circuit.

Argued November 22, 1966.

Decided August 25, 1967.

On Rehearing January 24, 1968.

Edwin L. Weisl, Jr., Asst. Atty. Gen. (Harry T. Dolan, Sp. Asst. to the Atty. Gen., Brooklyn, N. Y., Roger P. Marquis and Edmund B. Clark, Attys., Dept. of Justice, Washington, D. C., on the brief), for plaintiff-appellant.

George Bergen, New York City (Skinner & Bermant, Leddy & Raber, New York City, on the brief), for appellee Alto-Craft Wood Products Corp.

Leon Liner, Goldwater & Flynn, New York City, for appellee Treitel-Gratz Co., Inc.

Arthur D. Goldstein, Samuel Goldstein & Sons, New York City, for appellees, Jacob Daitchburg and George Deutsch.

Donald S. Goldberg, New York City (Albert Kreindler, New York City, on the brief), for appellees Pardini-Bertoli Fine Furniture, Inc., and others.

Before WATERMAN, MOORE and HAYS, Circuit Judges.

On Rehearing In Banc January 24, 1968.

WATERMAN, Circuit Judge:

This is an appeal by the United States from a September 30, 1965 judgment of the United States District Court for the Southern District of New York entered upon an unreported memorandum opinion of July 1, 1965 confirming awards made by commissioners in favor of thirteen tenants of buildings situated on land condemned for use as a United States Post Office site. The awards were for the value of trade fixtures claimed by the tenants to be compensable under the rules laid down by the district court in its reported opinion, 225 F.Supp. 498 (SDNY 1963, 1964), concerning these premises.

The condemnation complaint was filed on July 26, 1962; and an amended complaint and declaration of taking were filed on September 30, 1963 specifying that the interest to be taken was "an estate in fee simple to said land together with the improvements thereon and appurtenances thereto, including all estates and interests therein, excepting, however, tenants' removable trade fixtures." The issue of just compensation was determined by three commissioners appointed under the provisions of Fed. R.Civ.P. 71A(h) who made their report granting awards as to both the fee and the tenants' interests, including the tenants' fixtures. The district court confirmed the awards of the commission stating that the commissioners' conclusions "on the fixture claims are in accordance with the law as determined in the two opinions of the Second Circuit in United States v. Certain Property, etc., 306 F.2d 439 and 344 F.2d 142." The Government appeals from these awards to the tenants. It also appealed in a related case, United States v. Certain Property, 374 F.2d 138 (2 Cir. 1967) from awards to the fee owners.

The appellee tenants are business concerns who occupied premises in buildings on the condemned land under leases granted to them by the freeholders. The leases were all short term leases without renewal options; seven had expired prior to the date of taking, September 30, 1963, four expired within six months after the taking, and the remaining two expired 19 months after the taking.

The issue before us concerns the payment of compensation to these tenants for their fixtures. The district court found the fixtures involved to be "removable trade fixtures" and compensable under the standards we set forth in United States v. Certain Property, 306 F.2d 439 (2 Cir. 1962),¹ followed by us in 344 F.2d 142 (2 Cir. 1965). We agree with this conclusion. The Government contends, however, that the court below erred in requiring it to pay compensation for fixtures despite the provision in the declaration of taking which excepted "tenants' removable trade fixtures" from the taking. We agree with the trial court that the tenants must be compensated for their fixtures despite the Government's attempt to exclude them from the taking, but we do not base this conclusion on the "subjacent support" theory advanced by the learned trial judge.² The Government cannot deny compensation for fixtures by simply writing an exception into the declaration of taking excluding from compensation property which is in fact taken. See United States v. General Motors Corp., 323 U.S. 373, 65 S.Ct. 357, 89 L.Ed. 311 (1945).

Having decided that the fixtures here involved are compensable, we reach the question of the measure of compensation to be used. The court below confirmed the awards of compensation that had been made by the commissioners. The commissioners arrived at compensation allowances by starting with the "new value" of the fixtures; from that valuation depreciation on a twenty year straight line basis was first deducted and then, from that remainder, there was deducted "what a willing buyer would pay a willing seller" for the fixtures after their removal "and after allowing for the cost of disassembly and reassembly."

The Government's principal objection to this method of valuation is that the depreciation of the fixtures over twenty years is unrealistic; tenants with shortterm leases have no assurance that they can remain in their respective premises and enjoy the use of the fixtures there for twenty years or remove them after tenancy expiration for use elsewhere.

We agree with the Government's contention. Unless otherwise agreed between him and his landlord a tenant has no assurance that he will be able to derive any value from this class of fixtures beyond the period of his lease, and he should be required to depreciate these fixtures completely over the term of the lease regardless of their normal period of usefulness. See United States v. Certain Property, 344 F.2d 142, 145 (2 Cir. 1965). It is true that holdover tenants may in some instances continue to enjoy their occupancy of premises for long periods of time without the protection of a lease, but this does not mean that they have a legally protected interest in remaining and making use of the fixtures. In the absence of some legally enforceable assurance that they will be able to remain on their rented premises, we cannot assume that the tenants would be able to derive any value from their fixtures beyond the expiration of their leases and therefore there is no basis for giving compensation to any tenant beyond his lease expiration date. Indeed, in this case there is evidence that even if the Government had not proceeded to condemn, the tenants would not have been able to stay because the owners of the fee were advancing their plans to convert the property to another use at the time of condemnation. See United States v. Certain Property, 374 F.2d 138 (2 Cir. 1967).

The claims of the appellees are remanded to the district court for redetermination, the court to have in mind the extent and character of each petitioner's leasehold interest in the condemned real estate at the time of condemnation.

MOORE, Circuit Judge (concurring):

I concur in so much of the majority opinion as concludes that the tenants are entitled to "just compensation" for their "removable trade fixtures" (so found by the District Court). Being uncertain, however, as to the majority's views with respect to value, I wish to state separately my opinion concerning the applicable law. Judge Dimock correctly interpreted the phrase "removable trade fixtures" to mean those fixtures which could be removed without much damage to the realty to which they were affixed, but not without damage to themselves. Hence, the fixtures had one value to the tenants while attached to the realty and a lesser value when removed from the premises. Clearly, the difference between these two values is the amount the Government must pay as compensation for the fixtures. In calculating the value of the fixtures to the tenants while attached to the realty, the commissioners started with the new value of the fixtures and deducted accrued depreciation assuming useful lives for the fixtures of 20 years. The majority, on the other hand, state that they "cannot assume that the tenants would be able to derive any value from their fixtures beyond the expiration of their leases" and this in the face of the fact that seven tenants had been deriving just such value during their continued occupancy at the time of condemnation even though their leases had expired some time before. Had the government not taken this property, there was no reason to assume that the landlord would have evicted each tenant on a month-to-month basis at the end of the month or at the expiration of a lease. The tenants were pursuing their small businesses on the property, using for this purpose their trade fixtures. To the tenants, the fixtures had value for as long (not exceeding their actual useful lives) as the tenants could reasonably have expected to remain on the premises either under an existing lease, as hold-over tenants, or under a new lease. This value the Government should pay for if the words "just compensation" are to have any realistic meaning.

One more point should be stressed which I do not find clearly explained in the majority opinion. Under Judge Dimock's decision, the tenants were allowed to remove their trade fixtures, as they had a right to do at any time under New York law, and were to be compensated for the difference between the value of their fixtures in place on the condemned premises and the value of the fixtures once detached and removed. Under the majority decision, the Government must "condemn" the fixtures and thus, presumably, assume title to them. So construed, the result would be that the tenants would lose not only the value of their fixtures attached to the condemned premises, but also their right to remove the fixtures when they vacated the premises. I assume that the District Court will instruct the commissioners on remand to compensate the tenants at least for the value of their...