United States v. CERTAIN PROPERTY, ETC.

• Decision Date: 02 April 1965
• Docket Number: Docket 29042.,No. 245,245
• Citation: 344 F.2d 142
• Parties: UNITED STATES of America, Petitioner-Plaintiff-Appellant-Appellee, v. CERTAIN PROPERTY LOCATED IN the BOROUGH OF MANHATTAN, CITY, COUNTY AND STATE OF NEW YORK, and 540 Pearl Street, a Partnership, et al., Defendants, and Lafayette Nut Product, Inc., et al., Defendants-Appellants-Appellees, and Bill Allen's Restaurant, Inc., et al., Defendants-Appellees, and Boylan's Tavern, Inc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

344 F.2d 142 (1965)

UNITED STATES of America, Petitioner-Plaintiff-Appellant-Appellee, v. CERTAIN PROPERTY LOCATED IN the BOROUGH OF MANHATTAN, CITY, COUNTY AND STATE OF NEW YORK, and 540 Pearl Street, a Partnership, et al., Defendants, and Lafayette Nut Product, Inc., et al., Defendants-Appellants-Appellees, and Bill Allen's Restaurant, Inc., et al., Defendants-Appellees, and Boylan's Tavern, Inc., Defendant-Appellant.

No. 245, Docket 29042.

United States Court of Appeals Second Circuit.

Argued January 19, 1965.

Decided April 2, 1965.

Roger P. Marquis, Washington, D. C. (Ramsey Clark, Asst. Atty. Gen., Harry T. Dolan, Sp. Asst. to the Atty. Gen., Brooklyn, N. Y., Edmund B. Clark, Washington, D. C.), for the United States.

Herbert Monte Levy, New York City (Romano & Schenker, New York City), for Loder Appeal Press, Inc., Sadye G. Krasner and Morris Greenberg d/b/a Standard Tag Co., Jack M. Press, d/b/a Beacon Type Service, Frank L. Palumbo, Joseph L. Minore, Leo P. Marx, Moses Oelbaum, and John K. Walker, d/b/a Johnnie Walker Press.

Bernard L. Bermant, New York City (Skinner & Bermant, Leddy & Raber, New York City; Carl J. Moskowitz, New York City, of counsel), for Il Progresso Italo-Americano Publishing Co., Inc., Pearl Street Restaurant, Inc., Boylan's Tavern, Inc., and Universal Brush Corp.

Joseph Z. Goldstein, New York City (Nathan L. and Joseph Z. Goldstein, New York City; Harvey Tropp, New York City, of counsel), for Lafayette Nut Product, Inc. (Chock-Full O'Nuts Corp.).

Arthur D. Goldstein, New York City (Samuel Goldstein & Sons, Herbert Monte Levy, New York City, of counsel), for Samuel Lakow & Sons, Inc. and District Council No. 37, American Federation of State, County and Municipal Employees.

Herman G. Blumenthal, New York City, submitted brief for Josaldo Restaurant, Inc.

Ira I. Gluckstein, New York City, submitted brief for Royal Office Supply Corp. and Consolidated Loose Leaf, Inc.

Before MOORE, FRIENDLY and MARSHALL, Circuit Judges.

FRIENDLY, Circuit Judge:

Hearings conducted by Judge Dimock in the District Court for the Southern District of New York pursuant to our decision after a trial before Judge Knox, 306 F.2d 439 (2 Cir. 1962), have resulted in an additional award of $3,276. to Il Progresso Italo-Americano Publishing Co., a fee owner, and of awards of $119,647.46 to eighteen tenants for fixtures constituting real property belonging to them. The United States appeals from all the awards. Il Progresso and four tenants, Pearl St. Restaurant, Inc., Lafayette Nut Product, Inc. Loder Appeal Press, Inc. and Standard Tag Co., appeal from awards that they consider inadequate; Boylan's Tavern, Inc., a tenant which was denied any award, likewise appeals; the other fourteen tenants are satisfied. We affirm on the United States' appeal, direct an award to Boylan's Tavern, and modify and affirm on the appeals of Il Progresso, Pearl St. Restaurant and Lafayette Nut Product, Inc., and affirm on the appeals of Loder Appeal Press, Inc. and Standard Tag Co.

I. The Government's Appeal

Most of the points raised by the United States were argued, both initially and on petition for rehearing, on the former appeal, before a panel consisting of Chief Judge Lumbard, Judge Kaufman and the writer. We could rest on our previous opinion both because it is the law of the case, see Zdanok v. Glidden Co., 327 F.2d 944 (2 Cir.), cert. denied, 377 U.S. 934, 84 S.Ct. 1338, 12 L.Ed.2d 298 (1964), and because we are satisfied with it. But the vigor of the Government's attack, its apparent inability to understand what we decided, and the importance of the issues prompt us to make another attempt to specify our points of agreement and disagreement with its position.

(1) The Government insists that it is under no obligation to pay for trade fixtures at all. Its first proposition is that in condemnation it need pay only for what it has "taken," regardless of what other losses the taking may cause. Harsh as the proposition sounds, and whatever qualifications it may require, see United States v. Grizzard, 219 U.S. 180, 31 S.Ct. 162, 55 L.Ed. 165 (1911); United States v. General Motors Corp., 323 U.S. 373, 382-384, 65 S.Ct. 357, 89 L.Ed. 311 (1945); United States v. Petty Motor Co., 327 U.S. 372, 379, 66 S.Ct. 596, 90 L.Ed. 729 (1946); Kimball Laundry Co. v. United States, 338 U.S. 1, 14-15, 69 S.Ct. 1434, 93 L.Ed. 1765 (1949), we accept it for the purposes of this case. United States ex rel. T. V. A. v. Powelson, 319 U.S. 266, 281, 63 S.Ct. 1047, 87 L.Ed. 1390 (1943). Next, says the Government, the question what the United States takes when it files a declaration of taking of real property is a question as to which federal courts may make an independent determination, free from any requirement, Erie R. R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), to follow state law. We fully agree. Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943). Where we break off from the Government is at its third proposition — that the interest in nationwide uniformity of federal condemnation makes it imperative for federal courts to use this freedom to ignore state property law in determining what the United States takes when it takes "real estate."

Our disagreement rests both on reason and on authority. The Clearfield opinion itself noted, "In our choice of the applicable federal rule we have occasionally selected state law." 318 U.S. at 367, 63 S.Ct. at 575. When there is no substantial evidence of Congressional intent, the decision of a federal court whether to fashion a set of distinctively federal principles or to follow state rules must turn, in large measure, on the relative importance of nationwide uniformity and of uniform treatment of similarly situated persons in the same state. See Professor Mishkin's perceptive article, The Variousness of "Federal Law": Competence and Discretion in the Choice of National and State Rules for Decisions, 105 U.Pa.L.Rev. 797, 810-32 (1957). Here the convenience to federal takers and Government lawyers in having the same writ run on both sides of the Hudson is of slight significance as compared to the need for New York business men planning to invest in trade fixtures to know that what is real property on Broadway if the city or state condemns it, will be no less real property if taken instead by the federal government. Apart from other considerations mentioned in our previous opinion, 306 F.2d at 444, it would be shocking if tenants, who had invested sums, large in their eyes, in trade fixtures, under leases which, as their lawyers would properly advise, entitled them to compensation on a taking of real estate by the City or State of New York should find themselves wholly uncompensated in a federal condemnation; a tenant's reasonable expectation that he will realize the value of such fixtures, either through use during the term of his lease or through an award in the event of a premature termination by eminent domain, ought not be defeated in this rather rare event. It is not a sufficient answer that leases could contain special provisions whereby landlords would assign portions of their awards in the contingency of a federal condemnation. Small business men such as the claimants here do not consult condemnation specialists when they make leases, and ought not have to do so. Compare United States v. Brosnan, 363 U.S. 237, 242, 80 S.Ct. 1108, 4 L.Ed.2d 1192 (1960). Moreover, as will be seen, on the Government's view the effect of such a provision would be to require the fixtures to be paid for, in largest part, not by it but by the fee owner.

In our previous opinion we cited decisions of three other circuits as holding that a federal court will normally apply state concepts of real property in determining what comes within a federal taking. United States v. Becktold Co., 129 F.2d 473 (8 Cir. 1942); United States v. 19.86 Acres of Land, 141 F.2d 344, 151 A.L.R. 1423 (7 Cir. 1944); Carmichall v. United States, 273 F.2d 392 (5 Cir. 1960). The authority of these cases is in no way vitiated by later ones in two of these circuits, State of Nebraska v. United States, 164 F.2d 866 (8 Cir. 1947), cert. denied, 334 U.S. 815, 68 S.Ct. 1070, 92 L.Ed. 1745 (1948), and United States v. Certain Interests in Property in Champaign County, 271 F.2d 379 (7 Cir. 1959), cert. denied, 362 U.S. 974, 80 S.Ct. 1058, 4 L.Ed.2d 1010 (1960). The Nebraska case rejected a contention that in condemning land leased for the support of schools, the United States must pay the full value of an unencumbered fee in addition to that of the leaseholds; the Champaign case upheld the right of the United States to condemn a leasehold subject to a mortgage rather than free from it, when doing the latter would give the lessee a windfall in the shape of the difference between the 6% interest paid by the Government from the date of the taking and the 4% payable to the mortgagee. In both instances, peculiarities of state law would have produced indefensible windfalls. As the court said in the Nebraska case, "the term `property' * * * normally will be given the same content as in state law * * * This does not mean, however, that every local idiosyncrasy or artificiality in a state's concepts, or the incidents thereof, necessarily will be accepted." 164 F.2d at 868. The New York rule, which we discuss shortly, can hardly be so classified. Bumpus v. United States, 325 F.2d 264 (10 Cir. 1963), and United States v. Pinson, 331 F.2d 759 (5 Cir. 1964), may be somewhat more helpful to the Government, but apparently in neither case did the parties urge relevant state decisions upon the court, being content to have the issue settled on general principles.

Moreover, in pressing its argument in favor of "federal" law, the Government assumes much too readily that we would not independently arrive at New York's rule that fixtures that cannot be removed without loss of all or most of their value...