United States v. Westinghouse Electric & Mfg. Co., 4353.

• Decision Date: 23 November 1948
• Docket Number: No. 4353.,4353.
• Citation: 170 F.2d 752
• Parties: UNITED STATES v. WESTINGHOUSE ELECTRIC & MFG. CO.
• Court: U.S. Court of Appeals — First Circuit

170 F.2d 752 (1948)

UNITED STATES v. WESTINGHOUSE ELECTRIC & MFG. CO.

No. 4353.

United States Court of Appeals First Circuit.

November 23, 1948.

John F. Cotter, Atty., Department of Justice, of Washington, D. C. (A. Devitt Vanech, Asst. Atty. Gen., and William T. McCarthy, U. S. Atty., of Boston, Mass., on the brief), for appellant.

Milton J. Donovan, of Springfield, Mass., for appellee.

Before MAGRUDER, Chief Judge and GOODRICH and WOODBURY, Circuit judges.

WOODBURY, Circuit Judge.

This is an appeal by the United States from so much of a final judgment entered in proceedings brought for the condemnation of the temporary use and occupancy of a parcel of land with the buildings thereon as awarded removal costs in the stipulated amount of $25,600 to Westinghouse Electric and Manufacturing Company, the lessee of a portion of the premises condemned. The question presented here was not directly considered by the Supreme Court in either United States v. General Motors Corp., 323 U.S. 373, 65 S.Ct. 357, 89 L.Ed. 311, 156 A.L.R. 390, or in United States v. Petty Motor Co., 327 U.S. 372, 66 S.Ct. 596, 90 L.Ed. 729. It is whether costs of removal may properly be considered as elements of a lessee's damage when the United States condemns the use and occupancy of leased premises for an original period less than the remainder of the lessee's term but with options to extend, and then exercises those options to prolong its use and occupancy beyond the lessee's term. The facts which give rise to this question have been stipulated.

On February 18, 1943, the United States filed a petition in the court below under the Second War Powers Act of March 27, 1942, 56 Stat. 176, 177, 50 U.S.C.A.Appendix, § 631 et seq., and other statutes, for the condemnation of certain warehouse property in Springfield, Massachusetts, part of which was occupied at the time by the Westinghouse Electric and Manufacturing Company under a lease expiring on October 30, 1944. The petition for condemnation recited "That the interest to be acquired is a term for years ending June 30, 1943, subject to existing easements * * *, said term being renewable for additional yearly periods during the existing national emergency at the election of the Secretary of War, which election shall be signified by the giving of notice at any time prior to the expiration of the term hereby taken or subsequent extensions thereof." The United States was granted immediate possession of the premises and Westinghouse moved to another location. The parties have stipulated that Westinghouse "in so doing incurred certain costs and expenses of removal of its personal property aggregating the sum of Twenty Five Thousand, Six Hundred and 00/100 Dollars ($25,600.00) which it is agreed represents the full and complete claim for compensation of said lessee against the United States of America on behalf of, or arising under the lease of the Westinghouse Electric Corporation." It is further stipulated that had the parties proceeded to trial witnesses for Westinghouse would testify that the above amount was actually expended by it "for the cost and expenses of labor, material, and transportation in moving its property from the location in question to a new location", and that the expense incurred was necessary, fair and reasonable "for such removal."

On May 1, 1943, the Secretary of War exercised the right to renew the term of the taking to June 30, 1944, and on May 25, 1944, he exercised the right to renew the term to June 30, 1945, thereby extending the Government's occupation eight months beyond the expiration date of the Westinghouse lease. The United States deposited estimated just compensation for the original taking and for each extension thereof in the gross amount of $121,045.78. It is stipulated that this amount "represents the fair market rental value of the bare unheated warehouse space taken and, if upon the facts and evidence agreed, if admissible, Westinghouse Electric Corporation is entitled to recover for the loss of its right to occupy under its lease as a matter of law, then a finding should be entered determining the just compensation to be in the sum of One Hundred Forty-Six Thousand, Six Hundred Forty-Five and 78/100 Dollars ($146,645.78), inclusive of interest, and an order be entered disbursing the sum of Twenty-Five Thousand, Six Hundred and 00/100 Dollars ($25,600.00) to Westinghouse Electric Corporation, and the sum of One Hundred Twenty-One Thousand, Forty-Five and 78/100 Dollars ($121,045.78), being the total amount of the deposits," to Westinghouse's lessor, the owner in fee.

It is further stipulated that no "factual matters" other than those agreed upon remain to be determined and that "the sole issue of law" which they present is whether Westinghouse is "entitled to recover from the United States of America the sum of Twenty-Five Thousand, Six Hundred and 00/100 Dollars ($25,600.00) as the value of its occupancy under the lease upon the foregoing facts and evidence?" The District Court, considering the General Motors Corp. case supra, controlling, entered judgment for Westinghouse in accordance with the stipulation and the United States thereupon took this appeal.

In the General Motors Corp. case the question considered by both the Circuit Court of Appeals¹ and the Supreme Court was whether the District Court had erred in excluding evidence of a lessee's costs of removal at the trial by jury of the issue of the amount of the lessee's just compensation in a condemnation case wherein the use condemned was for a period of one year and no more out of a lease having approximately six more years to run. Both courts answered this question in the affirmative, holding that under the circumstances presented actual, necessary and unreasonable costs of removal might be proved by a lessee, not as independent items of damage, but as elements to be considered in determining the amount of the just compensation required by the Fifth Amendment, i. e. the price which would be willingly asked and paid for the temporary interest which the Government had condemned.

In reaching this result the Supreme Court was careful to point out that it approved, and was not to be taken as departing from, the general rule that consequential losses are 323 U.S. 373, 65 S.Ct. 360 "not to be reckoned as part of the compensation" due an owner when the fee is taken. It said the question posed in the case before it was "shall a different measure of compensation apply where that which is taken is a right of temporary occupancy of a building equipped for the condemnee's business, filled with his commodities, and presumably to be reoccupied and used, as before, to the end of the lease term on the termination of the Government's use?" Id. 323 U.S. at pages 379, 380, 65 S.Ct. at page 360, 89 L.Ed. 311, 156 A.L.R. 390.

In answering this question in the affirmative the Supreme Court first pointed out that whenever the Government takes an owner's property "that is, the fee, the lease, whatever he may own, terminating altogether his interest, under the established law it must pay him for what is taken, not more; and he must stand whatever indirect or remote injuries are properly comprehended within the meaning of `consequential damage' as that conception has been defined in such cases." But the court goes on to say that "It is altogether another matter when the Government does not take his entire interest, but by the form of its proceeding chops it into bits, of which it takes only what it wants, however few or minute, and leaves him holding the remainder, which may then be altogether useless to him, refusing to pay more than the `market rental value' for the use of the chips so cut off. This is neither the `taking' nor the `just compensation' the Fifth Amendment contemplates. The value of such an occupancy is to be ascertained, not by treating what is taken as an empty warehouse to be leased for a long term, but what would be the market rental value of such a building on a lease by the long-term tenant to the temporary occupier. The case should be retried on this principle." Id. 323 U.S. at page 382, 65 S.Ct. at page 361, 89 L.Ed. 311, 156 A.L.R. 390. Following this the court says that "Some of the elements which would certainly and directly affect the market price agreed upon by a tenant and a sublessee in such an extraordinary and unusual transaction would be the reasonable cost of moving out the property stored and preparing the space for occupancy by the subtenant," and consequently the court reaches its conclusion that "Such items may be proved, not as independent items of damage but to aid in the determination of what would be the usual — the market — price which would be asked and paid for such temporary occupancy of the building then in use under a long term lease."

From the foregoing it seems evident that the Supreme Court based its conclusion in the General Motors Corp. case primarily, if not entirely, upon the fact that since the use condemned by the Government was for a period of only one year out of an unexpired lease of approximately six years, the ousted tenant was under the obligation of returning to, or at least was responsible for the rent for, the leased premises for the balance of the term of the lease remaining after the termination of the Government's use.

But in the General Motors Corp. case both the Circuit Court of Appeals and the Supreme Court adverted in footnotes to the fact that subsequent to the entry of the judgment appealed from, the District Court on the Government's motion had opened the judgment and allowed the Government to amend its petition for condemnation to enlarge the interest taken by making the original term for years expiring on a given date "renewable for additional yearly periods thereafter * * * at the election of the Secretary of War" on the giving of a specified notice of intent to renew, and then had entered a new judgment in the amount of the...