United States v. Westinghouse Electric & Mfg. Co.

MAGRUDER, Chief Judge

(dissenting).

The teaching of United States v. General Motors Corp., 1945, 323 U.S. 373, 65 S.Ct. 357, 89 L.Ed. 311, 156 A.L.R. 390, and United States v. Petty Motor Co., 1946, 327 U.S. 372, 66 S.Ct. 596, 90 L.Ed. 729, may perhaps not be entirely clear. But it seems to me that the logical inference from those decisions points to the opposite conclusion from that arrived at in the opinion of the court in the case at bar.

Where the United States takes the entire fee in condemnation proceedings, the settled rule as to just compensation for the interest taken is stated in the General Motors Corp. case as follows, 323 U.S. at *757pages 379, 380, 65 S.Ct. at page 360, 89 L.Ed. 311, 156 A.L.R. 390:

“The sovereign ordinarily takes the fee. The rule in such a case is that compensation for that interest does not include future loss of profits, the expense of moving removable fixtures and personal property from the premises, the loss of good-will which inheres in the location of the land, or other like consequential losses which would ensue the sale of the property to someone other than the sovereign. No •doubt all these elements would be considered by an owner in determining whether, and at what price, to sell. No doubt, therefore, if the owner is to be made whole for the loss consequent on the sovereign’s seizure of his property, these elements should properly be considered. But the courts have generally held that they are not to be reckoned as part of the compensation for the fee taken by the Government. We are not to be taken as departing from the rule they have laid down, which we think sound.”

Likewise, where the taking is of a term -for years which completely extinguishes an existing leasehold interest, it is error to admit evidence by the tenant of his costs of moving and reinstallation of equipment on the issue as to the amount of compensation payable to him. United States v. Petty Motor Co., supra. In such a case the measure of compensation is the value of the use and occupancy of the leasehold for the remainder of the tenant’s term, less the amount of the rent which the tenant •agreed to pay for such use and occupancy. 327 U.S. 372, at page 381, 66 S.Ct. 596, 90 L.Ed. 729.

An exceptional situation is ■ presented where the Government takes a term for years for a period less than the unexpired •portion of an existing leasehold. As to the .appropriateness here of receiving evidence of the tenant’s removal expenses, the tenant in its brief in the General Motors Corp. -case urged upon the Supreme Court this •equitable consideration: “As the situation in this case actually stands, however, the ■condemnation for the temporary use of only one year means that, instead of moving out ■once and for all, in 1942 rather than six years later, respondent is obliged, by force of its obligation for the balance of the lease term, to move back again in order to reoccupy the property upon termination of the Government’s temporary use, and then move out again several years later by reason of the expiration of the lease.” That this seems definitely to have been the moving consideration in the General Motors Corp. decision appears from the explanation of that case in United States v. Petty Motor Co., 327 U.S. 372, at pages 379, 380, 66 S.Ct. 596, 90 L.Ed. 729.

In the present case the United States filed a single petition for condemnation describing the interest to be acquired as a term for years ending June 30, 1943, said term being renewable upon notice for additional yearly periods during the existing national emergency at the election of the Secretary of War. Of necessity, in such a condemnation proceeding, the final determination of the just compensation must abide the event, because until it is known whether and to what extent the Government’s option to renew is to be exercised, the extent of the ultimate taking under the condemnation petition cannot be known. Here, before the court below entered the judgment now under review, the United States by exercise of its option of renewal had extended the term of the taking beyond the remaining period of Westinghouse’s lease. It thus conclusively appeared that Westinghouse would not have the burden of moving out during the period of the Government’s temporary occupancy and then moving back for the balance of the term of its' leasehold — which, as we have seen, was the important factor in the General Motors Corp. case. Therefore it seems to me that, at the time the district court gave judgment here, the case stood just as if the Government had originally taken a term for a period expiring June -30, 1945, which was longer than the unexpired portion of Westinghouse’s lease. United States v. Petty Motor Co., supra, is authority for the point that in such a case evidence of the tenant’s removal costs is inadmissible on the issue of the value of the tenant’s leasehold interest extinguished by the taking.

In the General Motors Corp. case, the original petition for condemnation was for *758a term of a year only. The case was tried on this basis in the district court, and evidence of the tenant’s removal expenses was excluded. The case was argued in the circuit court of appeals and in the Supreme Court on the same basis, and both appellate courts held that the trial court was in error in excluding -evidence of removal costs. The case therefore had to go back for a new trial. It is true, as both appellate courts noted, that after the district court had entered judgment on the verdict it allowed the Government to amend its petition for condemnation so as -to -add an option of renewal for additional yearly periods at the election of the Secretary of War. But it does not appear from the record, in the General Motors Corp. case whether the Government ever exercised its option to extend the term beyond the one year originally taken. For all we know, it never did; and if that is what -happened, then the district court upon the retrial would have been obliged to receive evidence of the tenant’s costs of removal as directed by the Supreme Court. But if, after the remand, it should have appeared that the Government -had exercised its option of renewal and was still in possession, I suppose the issue of compensation to General Motors would have stood in abeyance until it was determined whether the United States was going to stay in possession beyond the remaining portion of General Motors’ lease. And if the fact was at the time of the retrial that the -taking by the United States had completely extinguished the leasehold interest of General Motors, then the decision in United States v. General Motors Corp,, supra, as to admissibility of evidence of removal costs, was no longer controlling, for it was directed to quite a different situation. Cf. Rutledge, J., concurring, in United States v. Petty Motor Co., supra.

One further consideration is puzzling to me. Where -the United States condemns a term for a period less than the unexpired portion of an existing leasehold, the decision in the General Motors Corp. case does not say that the tenant is entitled to removal expenses as án independent item of damage, but only that evidence of such removal expenses is admissible “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.” 323 U.S. at page 383, 65 S.Ct. at page 362, 89 L.Ed 311, 156 A.L.R. 390. How much this factor might affect such market value is somewhat conjectural, but presumably it would be taken into account by an expert appraisal. When the United States takes, not a fixed term merely, but a term of a year with the option of renewal for successive annual terms, the tenant cannot know at the time of the original taking whether the condemnation proceeding will ultimately extinguish the whole of his unexpired leasehold, or whether he will be faced with the situation of the tenant in the General Motors Corp., case, namely, the taking of only a portion of the leasehold interest,, putting the tenant to the necessity of moving out during the temporary period of Government occupancy and moving back for the remaining period of the leasehold after the Government has relinquished possession. Therefore, it might be suggested that, in the case at bar, the matter should'be looked at as of the time of the original taking; that the chance of having to move back would be a factor bearing on the rental which a willing sublessor and a willing sub-lessee would agree upon for a sublease of' this indefinite duration; and hence that evidence of removal costs should be admissible on the issue of just 'compensation, for the interest-taken, regardless of whether the Government,1 by successive renewals,, ultimately extinguishes the whole interest of the tenant. But this suggestion runs counter to what was actually done in United States v. Petty Motor Co., supra. In that case the Government’s petition for condemnation was for a term of years expiring June 30, 1945, reserving to the Government the right of election to surrender possession on June 30, 1943, or June 30, 1944, upon giving sixty days’ written notice. At the time of the taking, Petty Motor Company held a lease on the premises expiring October 31, 1943, with an option for an-additional year. At the time of -the original’ taking, therefore, the tenant could not know whether the Government was going to occupy the premises for the fitll unexpired period of the tenant’s lease, or whether tile-*759Government by exercise of its surrender option was going to relinquish possession while a portion of the tenant’s leasehold was still unexpired. It does not appear what the Government ultimately did in that respect. Nevertheless, the Supreme Court held that it was error for the trial court to receive evidence of the tenant’s costs of moving and reinstallation of equipment on the issue of the value of the interest taken.

I think it is fair to say that neither my brethren nor I have complete confidence that we have drawn the correct inferences from the General Motors Corp. and Petty Motor Co. cases in aid of the contrary conclusions we have reached in our respective opinions. For that reason, it would not be unwelcome if the Supreme Court found an early occasion to review the whole matter.