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United States v. 396 Corp.

decided: March 18, 1959.


Author: Gibson

Before CLARK, Chief Judge, MOORE, Circuit Judge, and GIBSON, District Judge.

GIBSON, District Judge.

This is a condemnation action in which the District Court for the Southern District of New York was called upon to fix the rent that the United States should pay for its occupancy of premises, known as 111 East 16th Street, Borough of Manhattan, New York City, for two yearly periods. The first period began July 1, 1956 and ended June 30, 1957. The second period, which the parties stipulated should be considered at the same time that the first period was considered, commenced July 1, 1957 and ended June 30, 1958. The Government now uses this space as office quarters for the Army Engineers within this area and as offices of the Air Force Procurement Service and two or three minor branches of the Army.

This suit, which was instituted on June 16, 1953, is a continuation of a similar proceeding by the Government covering the five year preceding period. Aside from the matter of date, the terms of the taking are identical.

"The interest to be acquired in the property is the use and occupancy of the property hereinafter described for a term of years commencing July 1, 1953 and ending June 30, 1954, extendible for yearly periods thereafter until June 30, 1958, at the election of the United States, notice of which election shall be filed in the proceeding at any time prior to the end of the term taken or subsequent extensions thereof, together with the right of removal within a reasonable time after the expiration of the term of any and all improvements or structures placed therein by or for the United States during the term of its occupancy, and any and all improvements, additions or structures which were owned and/or installed by the Government pursuant to the terms and conditions of Government Lease Contract No. W-30-082-eng-5980 with Consolidated Edison Company of New York, Inc., a New York corporation, subject, however, to existing easements for public utilities and for pipe lines."

The building in question was erected in 1909 and is of loft-type. Part of the history of the building as found by the District Court, is as follows:

For five or six years of the depression period following 1929, the building was unoccupied. At some time, not clearly revealed, Metropolitan Life Insurance Company, through foreclosure, acquired title to the real estate. In 1937, that organization leased the same to Consolidated Edison Company for a period of five years. In 1940, the lease was extended for an additional five year term, expiring on September 30, 1947.

The annual rental was $60,000. In addition, the tenant was required to pay all operating and maintenance expenses, both interior and exterior, together with insurance, taxes and assessments. This tenant, during its occupancy, is said to have installed improvements, costing about $360,000. Under the terms of the lease, these improvements were to remain upon the property.

On June 1, 1945, the United States sub-leased the property from Consolidated Edison Company. It agreed to discharge all obligations assumed by its lessor, and to pay an annual rental of $126,000; and, also, to reimburse its lessor to the extent of $58,000 for removable office partitions.

In, or about that year, respondent (appellant) purchased the premises from Metropolitan Life Insurance Company. The consideration was $1,000,000; the cash payment $200,000. The balance was secured by a purchase money mortgage of $800,000 with a term of fifteen years. The mortgage has since been reduced to $700,000 and this sum now carries an interest rate of 5%.

By stipulation of the parties, the yearly rental value of the property for the period September 30, 1947, through June 30, 1953, was set by the Court at $145,335. Thereafter, again pursuant to a written stipulation of the parties, the Court fixed the annual rental for the period July 1, 1953 through June 30, 1955, at $215,000 per annum (86 cents per square foot). On May 15, 1956, the Court, once more acting upon a written stipulation of the parties, set the annual rental value at $215,000 covering the period July 1, 1955 through June 30, 1956.

As previously stated, this action involves the fair rental value for the ensuing two years. At the trial, the testimony as to fair rental value ranged from $205,000 to some $375,000 per annum. Testimony at the trial estimated the fair rental rate at anywhere from 82 cents per square foot to $1.50 per square foot.

The award of the District Court was on the basis of 90 cents per square foot. This results in an amount of $225,000 per annum, or $10,000 more per year than the annual fair value as stipulated by the parties in 1956. An appropriate judgment was entered from which appellant filed a notice of appeal.

The Trial Court's order provided that if the United States did not notify the appellant by January 1, 1958, whether it would continue its tenancy beyond June 30, 1958, the Court would consider the question whether to increase the award because of uncertainty. The United States gave such notice dated December 23, 1957. Shortly thereafter, the appellant's counsel called someone connected with General Services Administration and asked to what period this extension covered. He did not contact the Government's attorney. Not receiving a definite answer from his contact, the appellant's counsel applied to this Court for a remand to the Trial Court for further hearing.Upon appellant's application and without prejudice to the pending appeal, this Court, by order dated March 6, 1958, remanded the record on appeal in this case to the District Court "pending the determination by that Court pursuant to the order and judgment of the District Court, entered the 22nd day of July 1957." The appellant then filed a motion in the ...

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