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UNITED STATES v. 53 1/4 ACRES OF LAND

October 21, 1948

UNITED STATES
v.
53 1/4 ACRES OF LAND, MORE OR LESS, IN BOROUGH OF BROOKLYN, KINGS COUNTY, New York, et al.



The opinion of the court was delivered by: ABRUZZO

On April 1, 1941, the Government filed a declaration of taking condemning a large parcel of real estate with buildings and appurtenances thereon situated in what was known as Wallabout Market, Brooklyn, New York. At that time, the Government deposited the sum of $ 4,000,000 in the Registry of this Court as the estimated just compensation to be paid for the property so condemned. On May 11, 1945, pursuant to an amendment of the declaration of taking, the Government deposited an additional sum of $ 261,230 and, on June 3, 1948, it deposited the sum of $ 1,660,687.48. A total sum of $ 5,921,917.48, therefore, was deposited at various times. The last deposit represents the deficiency of $ 1,126,586 required to be paid for the property condemned, and the Government claims and contends that the balance of $ 534,101.48 represents estimated deficiency interest, and that $ 549,245.89 is the total deficiency interest required to be paid on all of the awards made in this so-called Wallabout proceeding. The interest has been computed at the rate of 6 per cent per annum and is broken up according to the petitioner-plaintiff's contention as follows: Interest on a deficiency of $ 1,387,816 from April 1, 1941, to May 10, 1945, and interest on a deficiency of $ 1,126,586 from May 11, 1945, to June 2, 1948, inclusive. Summarizing the Government's action, it is its contention that any interest to be awarded in this proceeding must be based upon the moneys deposited by the Government and the dates they were so deposited, and based upon this conclusion the sum of $ 549,245.89 is the amount of interest it owes on all the awards made in this proceeding, and that it is the Court's function and duty to break up and allocate the exact sum due on each award. The Government has not sought to categorically itemize the interest on each award, but has made the deposit of interest to be awarded to the claimants as a collective group, making it necessary for each of the persons to whom an award was made to make an application for the interest they claim to be entitled to, and then it will devolve upon the Court the duty to apportion this interest. The Government did not file a brief to aid the Court in making its determination on the conflicting and vexatious question, especially in view of the large amount involved.

Although this case has been on appeal before the Circuit Court of Appeals in various phases, in order to determine this complex question of interest, it might not be amiss to throw a little light on the historical background of the proceedings. The various phases and circumstances growing out of this condemnation are exceptional to say the least, and I have been unable to find a condemnation proceeding, either state or federal, that is comparable. The law to be applied must necessarily be gleaned from various decisions made in condemnation proceedings which act as a guidepost to a great extent.

History

 The City of New York was the owner of all of the land and land under water taken in the proceeding. It was also the owner of bulkheads, piers, platforms, sheds, some individual buildings, streets, and market ways with various improvements. As owner of this land the City of New York entered into term leases with various tenants for the occupation of portions of the land. Pursuant to these leases, buildings were erected and occupied by these lessees. The leases contained provisions of renewal at stated intervals with ownership of the buildings reverting to the City in the event of forfeiture of any of the leases. Many of these lessees appeared in this proceeding, filed claims, and awards were made representing the market value of their structures, and awards were also made representing the market value of the unexpired terms of their leaseholds. During the pendency of these proceedings a great many lessees made settlements directly with the Government. These were approved by order of the Court and paid. We are not concerned at this time with claims so settled.

 As to the claims not adjusted, a great many lessees made application to this Court for withdrawal from the fund on deposit for the estimated market value of their interests, and various orders permitting partial payment to these claimants were made. In order to withdraw these moneys, motions by the various claimants had to be made. To a great extent the Court had to rely upon the affidavits submitted in support of these claims and the assistance of the Government's counsel in order to determine the amounts which should be released.

 Many claims were filed for trade fixtures located in the structures. Some of the fixture claims were settled directly by the Government, and to others awards were made amounting to a substantial sum which now have to be paid. If this were not enough to complicate matters, some of the lessees and sublessees appeared in the proceeding requesting compensation for trade fixtures installed by them and used in connection with the operation of their business. To some of these sublessees awards were made which now have to be paid.

 The Brooklyn Eastern District Terminal operated a freight terminal and maintained a float bridge, float bridge protector rack, dock approaches, and tracks with necessary railroad structures, which it claimed was by virtue of a franchise with the City of New York. The City of New York claimed the Brooklyn Eastern District Terminal operated by virtue of a license and that it was not entitled to compensation. The Government contended that if the Brooklyn Eastern District Terminal was entitled to any award it would have to be carved out of the award made to the City. As a result of an appeal to the Circuit Court an award was made to it of $ 127,325 for the intangible rights which it owned under agreements with the City to be deducted from the City's award, and the sum of $ 51,424 chargeable against the Government for the unamortized value of its improvements. 2 Cir., 139 F.2d 1007, certiorari denied City of New York v. Brooklyn Eastern District Terminal, 322 U.S. 747, 64 S. Ct. 1758, 88 L. Ed. 1579; United States v. City of New York, 2 Cir., 165 F.2d 526, 1 A.L.R.2d 870.

 The Kings County Refrigerating Company had a franchise from the City to supply refrigeration to the occupants of Wallabout Market, and it obtained an award of $ 7,500 for the value of the unexpired term of its lease, chargeable to the City's award, and the sum of $ 300 chargeable to the Government for the value of its brine line.

 The Pennsylvania Railroad and the New York Central Railroad obtained awards for refunds of prepaid rents which they had paid to the City of New York for a period extending beyond the date of vesting title in the Government as follows: The Pennsylvania Railroad $ 1,666 and the New York Central $ 2,274.70 payable out of the award made to the City.

 With respect to the interest which must be awarded to the City of New York, the following facts are pertinent: On July 8, 1941, the City of New York made a motion for an order permitting it to withdraw the sum of $ 3,000,000 out of the deposit of $ 4,000,000 made on April 1, 1941, as partial payment on account of compensation to be ultimately awarded. On July 18, 1941, the motion was granted to the extent of $ 2,500,000 and was paid to the City on that date. The delay in making this motion on the part of the City until July is not pertinent, suffice to say that the City of New York could have made this motion immediately after April 1, 1941, but the record indicates that it did not.

 The Court was in no position, as it will appear from the facts to be related, to estimate to any certain degree whether the amount of $ 3,000,000 should have been released to the City. The payment of $ 2,500,000 was arrived at as a result of a conference between the Court, the attorney for the Government, and the attorney for the City. The $ 500,000 was retained as security to cover contingencies which might subsequently arise in the proceeding. It is evident from the brief history which I have outlined that many contingencies might have arisen, and the Government sought to protect itself from an overpayment if any award was ultimately made for less than the amount requested. The Court was normally and naturally concerned with this phase of the proceeding.

 After the Commission had fixed the various awards and this Court confirmed the report of the Commissioners, an appeal was taken to the Circuit Court of Appeals. As a result of an opinion rendered in the case by the Circuit Court, the Government and the City came to an amicable adjustment of their differences and, on June 8, 1948, a stipulation was entered into wherein it was provided that the City was entitled to receive the sum of $ 4,008,687 as the value of all its rights in the market, exclusive of any interest to which the City might be entitled, and from this sum the City of New York was required to pay awards for certain subordinate interests.

 Respective Claims

 The City of New York now contends that the Government's position with respect to the interest which it deposited and the way it arrived at the amounts due is erroneous, and that it is in fact entitled to receive interest at the rate of 6 per cent per annum on the total $ 4,008,687 from April 1, 1941, the date of vesting of title in the Government, to July 18, 1941, the date when it was allowed to withdraw $ 2,500,000, and interest on the balance of $ 1,508,687 from July 18, 1941, to the date of actual payment of the award. It is also claimed that awards for fixtures and all the other awards must bear interest at 6 per cent from the date of vesting of title, and that the claimants who withdrew certain amounts of money and then received awards for more than the amount withdrawn are entitled to full interest from the date of vesting of title on the unpaid balance. Curiously, the City ...


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