No. 49977 | Ct. Cl. | Nov 30, 1954
delivered the opinion of the court:
This action was instituted to recover (1) increased rentals as a result of an alleged breach of a lease between plaintiff and the Government wherein the Government allegedly assigned the occupation of a building to the Veterans’ Administration in violation of the terms of the lease and (2) the cost to plaintiff of restoring the premises to the condition in which they existed at the time the United States took possession of the same under its lease.
The facts briefly are as follows: The Elks Temple building in Portland, Oregon, is of steel-frame construction, with concrete floors and terra cotta facing. The building was constructed at a cost of $1,250,000 on land valued at $200,000, and was completed not later than 1924. It contains a basement, five full floors, a mezzanine floor, two elevator shafts with four elevators and three principal stairways. The basement area included within the lease contains the elevator shafts and a small lobby, three stairways, corridor space, a gymnasium, handball court, tile swimming pool, a locker room, a dressing room, and some service and storage space. The basement otherwise contains about six large and three small storage rooms, and a room originally designed for use as a barbershop.
The first floor, excluding the store areas not part of the leased premises, contains a main lobby, elevator lobby and shafts, and the stair halls and stairways.
In addition to lobby, corridor, elevator and stairway space, the upper floors provide a number of large rooms and other facilities. The billiard room, lounge, card room, office, ladies
The building has a large air conditioning plant, but no heating plant. Steam for the heating of the building is obtained from a commercial supplier.
The building was occupied by the Elks Lodge until about 1934 when the Pacific Mutual Life Insurance Company acquired it by mortgage foreclosure. The building remained vacant until March 18, 1938, when 54,348 square feet of it was leased to the Works Progress Administration
Following termination of the Work Projects Administration occupancy, the building remained vacant until a lease was entered into between the Pacific Mutual Life Insurance
The term of the lease was for the period beginning December 1,1942 and ending June 30,1943, renewable from year to year at the option of the Government by written notice to the lessor at least 30 days before the lease or any renewal thereof would otherwise expire; provided that the term would not be extended beyond six months after the existing emergency and in no event beyond June 30,2041. The Government reserved the right to cancel the lease or any renewal thereof upon 30 days’ written notice.
The lease was duly renewed for the fiscal year commencing July 1, 1943, and by supplemental agreement dated January 6, 1944, the lease was extended to June 30, 1945, and from year to year thereafter without notice, with other provisions of the lease remaining unchanged. The Government’s occupancy lasted through June 30, 1948. The lease, as extended, is hereinafter referred to as the 1942 lease.
The 1942 lease was prepared on a standard printed form which contained the provision in article 2 that the leased premises were “to be used exclusively for the following purposes:”. To this there were added the typewritten words “Military purposes.” The instructions were part of the printed lease form, and instruction number 3 provides:
3. The premises shall be fully described, and, in case of rooms, the floor and room number of each room given. The language inserted at the end of article 2 of the lease should specify only the general nature of the use, that is, “office quarters,” “storage space,” etc.
At the time of the execution of the 1942 lease, both the lessor and the lessee knew that the premises were to be used as an induction center in the military conscription program of the Government.
Article 8 of the 1942 lease (in printed form except that the last sentence and the word “twenty” in the next to the last sentence were typewritten) provides:
*119 8. The Government shall have the right, during the existence of this lease, to make alterations, attach fixtures, and erect additions, structures, or signs, in or upon the premises hereby leased (provided such alterations, additions, structures, or signs shall not be detrimental to or inconsistent with the rights granted to other tenants on the property or in the building in which said premises are located); which fixtures, additions or structures so placed in or upon or attached to the said premises shall be and remain the property of the Government and may be removed therefrom by the Government prior to the termination of this lease, and the Government, if required by the Lessor, shall, before the expiration of this lease or renewal thereof, restore the premises to the same condition as that existing at the time of entering upon the same under this lease, reasonable and ordinary wear and tear and damages by the elements or by circumstances over which the Government has no control, excepted: Provided, however, that if the Lessor requires such restoration, the Lessor shall give written notice thereof to the Government twenty days before the termination of the lease. Such notice shall be directed to the Finance Officer, U. S. Engineer Office, Portland District, Portland, Oregon.
The provisions of article 9 of the printed form of the lease, relating to maintenance of the property, were deleted, and a typewritten rider attached, as follows:
9. The maintenance and repair of the leased premises shall be in general governed as follows:
a. Lessor shall maintain and keep in good repair the roof, outside walls, foundations, sidewalks and drainage of the leased premises below the street floor.
b. The elevators shall be inspected at intervals as required by ordinance or law at the Lessor’s expense. Mechanical defects and damage caused by obsolescence or fair wear and tear shall be an obligation of the Lessor. Repairs and damage caused by improper or negligent operation shall be maintained and serviced by the Government.
c. The swimming pool in the basement of the leased premises shall be boarded over at Government expense.
d. Repairs to interior walls, floors and ceilings when same becomes necessary through structural defects, through fair wear and tear or through circumstances beyond control of the Government shall be an obligation*120 of the Lessor. All other maintenance and servicing shall be at the Government’s expense.
e. Lessor shall take care of all damage, breakage and repairs to doors and outside windows when such is occasioned through fair wear and tear or by circumstances beyond the Government’s control.
f. Heating and plumbing shall be serviced and maintained by the Lessor when obsolescence, fair wear and tear or circumstances beyond control of the Government are primarily responsible for the servicing of same. Maintenance and services from all other causes shall be an obligation of the Government.
g. The interior wiring is taken over by the Government “as is” and shall be serviced and maintained by the Government.
The 1942 lease provided that a joint survey be made of the leased space. Such a survey was made by representatives of the lessor and the lessee. The report of the survey was executed by the representatives of both parties December 1, 1942. It is attached to the lease as Exhibit B.
On December 12,1945, the Pacific Mutual Life Insurance Company conveyed the Elks Temple building to the plaintiff and at the same time assigned to the plaintiff all its interest in the 1942 lease, including rents accrued or accruing. Rental payments thereafter were made to the plaintiff. The leased space was occupied and used as a recruiting and induction center until July 15,1947. During that time space not required for office purposes was used by other units of the United States and from about 1946 the rehabilitation and education units of the Veterans’ Administration occupied approximately 27,000 square feet of space. Effective July 15, 1947, the entire leased space was transferred from the Department of the Army to the Veterans’ Administration. The plaintiff was immediately advised of the transfer and requested to submit invoices for rent to the Regional Office of the Veterans’ Administration in Portland. There was no substantial change in the use of the building by the Veterans’ Administration from the use by the War Department. Considerable correspondence followed in which the plaintiff contended that the use of the leased space by the Veterans’ Administration violated the provision of the lease saying that the space was to be used for military purposes and
The plaintiff thereafter submitted invoices at the lease rate of $1,500 per month with the statement that payment at that rate would not prejudice its claim for an increased rental subsequent to July 15, 1947. Rent at the rate of $1,500 per month was paid in full through June 30,1948.
In a further effort to collect an increased rental the plaintiff on January 26,1948, submitted a claim to the Comptroller General for rental at the rate of $5,000 per month less payments received of $1,500 per month. By settlement certificate dated December 17, 1948, the plaintiff was advised by the Comptroller General in part as follows:
Your claim for an additional allowance of $24,250 appears to be based upon the allegation that the War Department lease was for military purposes only and that the terms of the lease were violated by that department upon transfer of the premises to the Veterans Administration and that this department became a tenant at the will or sufferance of the lessor.
An examination of the contract discloses that the premises involved are fully and specifically described in Article 2 of the contract and that the language inserted at the end of the Article specified only the general nature of the use of the premises and is descriptive and not restrictive in nature. Accordingly the Government acted within its rights, under Article 4 of the contract, in transferring the lease to the Veterans Administration.
I therefore certify that no balance is found due you from the United States.
The principal alteration in the building made by the Army was the removal of a partition between rooms 528 and 530 to provide an X-ray laboratory. False walls were installed in these rooms to support heavy lead sheets for protection against X-ray operations. Room 526 was used as a developing room and its walls were partially leaded; 2 x 4 standards were installed in various areas of the building to support
By letter of April 29, 1948, the defendant gave plaintiff notice of termination of the lease effective June 15, 1948. The building was vacated and surrendered to the plaintiff June 30, 1948, and rent at the rate of $1,500 per month was paid in full to that date. By letter of May 19, 1948, the plaintiff again advised the defendant that restoration of the leased premises was required in accordance with section 8 of the 1942 lease.
During the period June 21 to 25,1948, a joint survey of the condition of the leased space was made by representatives of the plaintiff and of the defendant and a report of the survey signed by these representatives is dated July 15,1948. This report is hereinafter referred to as the “termination survey” and stated, concerning the general condition of the building:
Generally speaking, the entire building is in need of considerable redecoration and repair. With the exception of those spaces and rooms specifically mentioned hereafter, sidewalls and ceilings on all floors and in all stairwells are in need of repainting.
i|: * * * *
Occupancy of the building during the past 8 to 10 years has been by various Government agencies who have provided nominal maintenance to the property to the extent of their respective lease requirements. There is evidence of neglect and lack of maintenance on the part of the lessor throughout the building as indicated by the haphazard storage of equipment in the rooms in the basement, the rotting out of sidewall skylight screening, minor cracks in the uncovered floors, and the deteriorated condition of the floor covering (linoleum) in certain rooms on floors two and three.
In addition the terminal survey report contains a detailed description of conditions throughout the building.
About the first of August 1948, the Veterans’ Administration detailed a crew of men to clean up and repair the leased space. The crew consisted of a maintenance supervisor, two carpenters and a helper, two to four laborers and a crew of electricians. This crew was engaged in the building approximately 11 days.
Carpentry-$3,079.35
Bathroom floor & wall tile & accessories_ 2,238.20
Cleaning building & windows_ 1,210.00
Painting-17,158.92
Moor covering_ 8, 986.94
Plumbing & plumbing fixtures_ 6,850.00
Electrical wort_ 3, 660.00
Plastering_ 2,431.54
45,614.95
Supervision @ 10 percent_ 4,561.50
Total- 50,176.45
The foregoing estimates were to put the building in good condition and were not limited to damages beyond ordinary wear and tear occurring during the Government’s occupancy under the 1942 lease.
8. Comparison of the subject inspection report with the recording of condition of the building as made by the Army Engineers at the time the Army occupied the building and further comparison with the report of settlement between the Government and Pacific Mutual Insurance at the termination of occupancy by the Works Progress Administration reveals some duplication. Comparison of the three reports was made jointly by Mr. H. F. Nelson and the writer. The duplicated and continuing conditions existing since the time of the other two inspections (Army and WPA) have been noted on the Beal Estate Division file copy of the current report by check marks. Those items checked in red were also covered in the WPA report and no liability therefore should be charged against the VA. Those items checked in blue were also covered in the report of inspection of the Army Engineers and the VA should not be held liable for these items either.
The defendant did not accept the estimate of $50,176.45 and thereafter a conference was held between representatives of the plaintiff and the defendant to discuss the restoration. No agreement was reached either as to items of damage for which the Government was responsible or the cost of repairing any particular item. A new list was prepared containing a much smaller number of items and the firm of Ward & Greene on behalf of the plaintiff made an estimate of the cost of repairing these items which totaled $7,409.05. This estimate was submitted to the defendant. The defendant never made an estimate similar to the $50,176.05 estimate of Ward & Greene. An estimate including only the items on the smaller list was made by B. G. Lampe of the Construction
The plaintiff and its predecessor performed no maintenance and upkeep of the interior of the building for normal wear and tear. During Army occupancy, periodic inspections were made and floors cleaned and washed monthly. These inspections were not continued after Veterans’ Administration occupancy. The Veterans’ Administration performed ordinary cleaning but did not wax the floors.
During 1940 the defendant painted the hallways and the rooms on the fifth floor and the fourth floor mezzanine and also painted stairways and lobby walls and one of the elevator shafts. Inlaid linoleum was placed in all mezzanine floor rooms used for office space and in several of the rooms on the fifth floor. These floors had previously been bare concrete. The defendant’s maintenance engineer performed ordinary repairs to the plumbing, wiring, ventilating and other similar work in the building. He did not replace broken wall fixtures or perform work requiring special trades.
Much of the maintenance work performed by the defendant during the 1942 lease was necessary by reason of ordinary wear and tear over a long period of time before and during the lease. Much of the leased area was in better condition upon release by the Government than when it was first occupied under the 1942 lease. The joint terminal survey expressly stated that the various Government agencies “have provided nominal maintenance to the property to the extent of their respective lease requirements.”
The Elks Temple building was not suited for use as a general office building as it could not be reasonably subdivided to accommodate various tenancies. The only lease experience prior to the 1942 lease was the 1938 Works Progress Administration lease, which was superseded by a new lease in 1940. The plaintiff purchased the. property in 1945 for the price of $250,000 which was about the value of the land alone if unimproved. Neither the original cost nor
There was a substantial increase in occupancy and demand for premium class office space in Portland between 1942 and 1947, but there was no increase in demand during this period for the type of office space provided by the Elks Temple building. The fair rental value of the leased space for office use during 1947 and 1948, based upon comparable rental for office space in ten other Portland buildings of a similar class, was $18,000 per year or $1,500 per month.
The highest and best use of the Elks Temple building in 1947 and 1948 was for a social club. About March 1, 1949, the plaintiff leased the building, less store space, to the newly organized Cosmopolitan Club. This club was allowed three months’ free rent to permit renovation. The lease provided for payment to the plaintiff of a rental of seven percent of the gross receipts with the provision that, if the amount realized after the first year should not exceed $35,000 per year, the lease would become subject to cancellation by the lessor. The Cosmopolitan Club occupied the building until about July 1951 when it went into receivership. It had paid cash rentals totaling $15,822 and expended approximately $37,147.56 for improvements in the building. During 1947 and 1948 there was no building in Portland being occupied for club purposes on a rental basis. There is no satisfactory evidence that prior to 1949 there was in existence any social organization willing and able to lease the Elks Temple building for club purposes. The fair rental value of the leased space for club purposes from July 15,1947, to June 30,1948, did not exceed the rental reserved in the 1942 lease of $1,500 per month.
The questions presented are: (1) whether the transfer of the leased space in the Elks Temple building to the Veterans’ Administration was in violation of the terms of the lease providing that the space should be used for military purposes; (2) if the use of the leased space by the Veterans’ Administration was in violation of the terms of the lease providing that the space should be used for military purposes, did such use effect a termination of the lease; (3) the
The lease provided that the leased space was “to be used exclusively for the following purposes (see instruction No. 3) : Military purposes.”
The premises shall be fully described, and, in case of rooms, the floor and room number of each room given. The language inserted at the end of article 2 of the lease should specify only the general nature of the use, that is, “office quarters,” “storage space,” etc.
Plaintiff urges that the use by the Veterans’ Administration constituted a breach of the lease and gave the owner right of reentry. Defendant says the provisions of the lease are sufficient to show that the use of the words “Military purposes” was intended to describe the use to be made of the premises and not to be restrictive. Furthermore, defendant says the use of the leased space by the Veterans’ Administration was for military purposes. The latter seems to us to be more logical than the contention of plaintiff. Instruction No. 3 states the words were to “specify the general nature of the use.” The words used were very general and supplied general information whereby a proper rental could be determined. Obviously, were the premises to be used for purposes which would cause destruction of the building or greater normal wear and tear, the rent would be much higher. The evidence here shows that the use made by the Veterans’ Administration was not substantially different from the use by the Department of the Army. A use for “Military purposes” conceivably might have been much more detrimental to the building than the use received either at the hands of the Army or of the Veterans’ Administration. Thus it seems to us the construction of the term “Military purposes” by the Comptroller General in denying plaintiff’s claim was correct. The term “Military purposes” as used in the lease was “descriptive and not restrictive in nature.”
Therefore, we believe that the use of the building by the Veterans’ Administration did not violate or breach the terms of the lease between plaintiff and the Department of the Army.
Assuming that the use of the leased space by the Veterans’ Administration was a violation of the terms of the lease, it is highly doubtful that such use would effect a termination and give the owner right of reentry.
The law recognizes three types of restrictions upon the use of property. They are (1) a special limitation, (2) a condition, and (3) a covenant. The plaintiff makes no claim that the 1942 lease created a special limitation. It does appear that plaintiff claims the lease created a condition. Under a condition, a right of entry is created by the occurrence of some event, but the estate is not terminated unless that right is exercised. Plaintiff never exercised the right of entry.
As stated supra the words “Military purposes” were descriptive and at most created a covenant. The general rule is that the breach by the lessee of the covenants or stipula
We have found the value of the use of the leased space from June 15,1947 to June 30,1948 (the period of occupancy by the Veterans’ Administration), to be $1,500 per month. The use by the Veterans’ Administration was not more detrimental to the building and of substantially the same nature as the use by the Department of the Army. Even assuming there was a breach of the covenant, plaintiff has not shown any damages resulting from such breach.
The next question we are called upon to decide is the cost of restoration in excess of ordinary wear and tear. The defendant admits that plaintiff should be compensated by reason of the failure of the Government to make restoration in excess of ordinary wear and tear.
In its petition plaintiff claims damages in lieu of restoration in the amount of $50,176.45. This amount has been reduced in plaintiff’s brief to $44,233.51. Defendant says the amount should be $3,675.
Plaintiff relies upon an estimate of the cost of repairs to the building prepared by the firm of Ward & Greene. The estimate submitted by War d & Greene was to put the building in good condition and was not limited to damages beyond ordinary wear and tear. Section 8 of the 1942 lease requires restoration “reasonable and ordinary wear and tear and damages by the elements or by circumstances over which the Government has no control excepted.” Section 9 makes repairs necessary through fair wear and tear or through circumstances beyond the control of the Government an obligation of the lessor. Clearly the Government is not liable for ordinary wear and tear occurring during its occupancy of the premises. Furthermore, the terminal survey report executed by both the plaintiff and the defendant expressly
At a later date plaintiff and defendant entered into a discussion with a view of determining the items for which the Government was responsible. A new list was prepared and Ward & Greene made a new estimate of the cost of repairing the items on this list. Their estimate totaled $7,409.05, and included ten percent for supervision. Mr. B. G. Lampe of the Construction Division, Veterans’ Administration, made an estimate of the same list of items and his estimate totaled $3,675.
Ward & Greene were general contractors in the area and B. G. Lampe was a professional estimator in the employ of a large contractor. In this instance the firm of Ward & Greene was in the employ of the plaintiff and B. G. Lampe was in the employ of the Veterans’ Administration.
We believe the last list submitted to plaintiff on which Ward & Greene made an estimate of $7,409.05 and B. G. Lampe made an estimate of $3,675, was a fair representation of the damages to the building in excess of “reasonable and ordinary wear and tear,” under section 8 of the 1942 lease. We are aware that ordinarily plaintiff’s evidence would tend to be high and defendant’s witness would be apt to shade his testimony in favor of the defendant. Believing the estimate of $7,409.05 to be high and the estimate of $3,675 to be low, we know of no better method than that of applying the jury technique and “splitting the difference.” This would leave us a figure of $5,542.05, which we believe to be the fair and reasonable cost of restoration of the building under the 1942 lease.
We conclude, therefore, that the transfer of the leased space in the Elks Temple building to the Veterans’ Administration was not in violation of the terms of the 1942 lease.
It is so ordered.
FINDINGS OF FACT
The court, having considered the evidence, the report of Commissioner Boald A. Hogenson, and the briefs and argument of counsel, makes findings of fact as follows:
1. The plaintiff is an Oregon corporation with its principal office at Portland, Oregon.
2. Under date of November 18, 1942, the Pacific Mutual Life Insurance Company, as lessor, entered into Lease No. W-3460-eng-640, with the United States of America, as lessee, acting by and through a contracting officer, Major Bay T. Marsh, Corps of Engineers, United States Army. The leased premises consisted of the Elks Temple building, 614 S. W. 11th Avenue, Portland, Oregon, excepting therefrom the store space on the first floor and related areas in the basement. The leased space amounted to 66,894 square feet, and the rental provided was $18,000 per year, payable at $1,500 per month.
The term was for the period beginning December 1, 1942, and ending June 30, 1943, renewable from year to year at the option of the Government by written notice to the lessor at least thirty days before the lease or any renewal thereof would otherwise expire; provided that the term would not be extended beyond six months after the existing emergency and in no event beyond June 30,2041. The Government reserved the right to cancel the lease or any renewal thereof upon thirty days written notice.
The lease was duly renewed for the fiscal year commencing July 1,1943, and by supplemental agreement dated January 6, 1944, the lease was extended to June 30, 1945, and from year to year thereafter without notice, with the other provisions of the lease remaining unchanged.
The Government occupancy lasted through June 30,1948. The lease, as extended, is hereinafter referred to as the 1942 lease.
The first floor, excluding the store areas not part of the leased premises, contains a main lobby, elevator lobby and shafts, and the stair halls and stairways.
In addition to lobby, corridor, elevator and stairway space, the upper floors provide a number of large rooms and other facilities. The billiard room, lounge, card room, office, ladies room, and writing room are located on the second floor. The third floor has the ballroom, coat rooms, kitchen and banquet hall. The lodge room occupies about two-thirds of the fourth floor, with its ceiling height equivalent to about two floors. The other one-third of the fourth floor provides service space and other club room facilities. The mezzanine floor extends along the lodge room between the fourth and fifth floors. There are 51 bedrooms with toilet and shower facilities, 41 of which are on the fifth floor, and the rest on the mezzanine.
The building has a large air conditioning plant, but no heating plant. Steam for the heating of the building is obtained from a commercial supplier.
The building was constructed at a cost of $1,250,000 on land valued at $200,000.
4. The 1942 lease was prepared on a standard printed form which contained the provision in article 2 that the leased premises were “to be used exclusively for the following purposes (see instruction No. 3)To this there were added the typewritten words “Military purposes.” The instruc
3. The premises shall be fully described, and, in case of rooms, the floor and room number of each room given. The language inserted at the end of article 2 of the lease should specify only the general nature of the use, that is, “office quarters,” “storage space,” etc.
At the time of the execution of the 1942 lease, both the lessor and the lessee knew that the premises were to be used as an induction center in the military conscription program of the Government.
It was provided in article 4 of the lease, as follows:
4. The Government shall not assign this lease in any event, and shall not sublet the demised premises except to a desirable tenant, and for a similar purpose, and will not permit the use of said premises by anyone other than the Government, such sublessee, and the agents and servants of the Government, or of such sublessee.
5.Article 8 of the 1942 lease (in printed form except that the last sentence and the word “twenty” in the next to the last sentence were typewritten) provides:
8. The Government shall have the right, during the existence of this lease, to make alterations, attach fixtures, and erect additions, structures, or signs, in or upon the premises hereby leased (provided such alterations, additions, structures, or signs shall not be detrimental to or inconsistent with the rights granted to other tenants on the property or in the building in which said premises are located); which fixtures, additions, or structures so placed in or upon or attached to the said premises shall be and remain the property of the Government and may be removed therefrom by the Government prior to the termination of this lease, and the Government, if required by the Lessor, shall, before the expiration of this lease or renewal thereof, restore the premises to the same condition as that existing at the time of entering upon the same under this lease, reasonable and ordinary wear and tear and damages by the elements or by circumstances over which the Government has no control, excepted: Provided, however, that if the Lessor requires such restoration, the Lessor shall give written notice thereof to the Government*134 twenty days before the termination of the lease. Such notice shall be directed to the Finance Officer, U. S. Engineer Office, Portland District, Portland, Oregon.
6. The provisions of article 9 of the printed form of the lease, relating to maintenance of the property, were deleted, and a typewritten rider attached, as follows:
9. The maintenance and repair of the leased premises shall be in general governed as follows:
a. Lessor shall maintain and keep in good repair the roof, outside walls, foundations, sidewalks and drainage of the leased premises below the street floor.
b. The elevators shall be inspected at intervals as required by ordinance or law at the Lessor’s expense. Mechanical defects and damage caused by obsolescence or fair wear and tear shall be an obligation of the Lessor. Repairs and damage caused by improper or negligent operation shall be maintained and serviced by the Government.
c. The swimming pool in the basement of the leased premises shall be boarded over at Government expense.
d. Repairs to interior walls, floors and ceilings when same becomes necessary through structural defects, through fair wear and tear or through circumstances beyond control of the Government shall be an obligation of the Lessor. All other maintenance and servicing shall be at the Government’s expense.
e. Lessor shall take care of all damage, breakage and repairs to doors and outside windows when such is occasioned through fair wear and tear or by circumstances beyond the Government’s control.
i. Heating and plumbing shall be serviced and maintained by the Lessor when obsolescence, fair wear and tear or circumstances beyond control of the Government are primarily responsible for the servicing of same. Maintenance and services from all other causes shall be an obligation of the Government.
g. The interior wiring is taken over by the Government “as is” and shall be serviced and maintained by the Government.
7. At the time of the execution of the 1942 lease, a joint survey of the condition of the leased space was made by representatives of the lessor and the lessee and a report thereof was executed by representatives of both parties December 1,1942. The report was attached to the lease as
8. By warranty deed dated December 12,1945, the Pacific Mutual Life Insurance Company conveyed the Elks Temple building and the land on which it is located to the plaintiff for a consideration of $250,000.
At the same time Pacific Mutual assigned in writing all of its right, title and interest in and to the 1942 lease to the plaintiff. The assignment covered rents accrued or to accrue, was made subject to all the terms and conditions of the lease, and authorized and directed the defendant to pay all rents to the plaintiff.
The plaintiff promptly notified the defendant of the conveyance and assignment, and rental payments were thereafter made to the plaintiff.
9. The leased space was occupied and used by the defendant as an Army recruiting and induction center and for other purposes until July 15, 1947. During the war years the inductions averaged approximately 4,000 men a month.
About April 25, 1945, the defendant’s Intransit Depot No. 9 of the Pacific Overseas Air Technical Command vacated the second and third floors, leaving vacant approximately 27,000 square feet of space. About a year later these areas were occupied by the Rehabilitation and Education units of the Veterans Administration.
Effective July 15,1947, the entire leased spaced was transferred from the Department of the Army to the Veterans Administration. The plaintiff was immediately advised of this transfer and was asked to submit rental invoices thereafter to the Regional Office of the Veterans Administration in Portland, and that reference be made to VAllb(RE)-69 assigned to the lease by that office for administrative purposes.
10. By letter dated September 23, 1947, the plaintiff, through its attorney, advised the Veterans Administration as follows:
I have been informed that the lease, “for military purposes”, upon the premises known as the Elks Building, S. W. 11th Avenue & Alder Street — Portland, Oregon, formerly held by the United States with Royce, Inc.,*136 has been cancelled effective July 15, 1947, and that the Veterans' Administration is responsible for the rental after that date.
The purpose of this letter is to advise you that Royce, Inc., is willing that you retain possession of the portion of the Building now occupied, at a monthly rental of $3,500.00. Statement covering rental for three months, from July 15, 1947 to October 15, 1947, is enclosed. If the Veterans' Administration desires a lease upon this property, Royce, Inc., will be glad to enter negotiations towards that end. However, if preferable it is willing that the tenancy remain on a monthly basis until you retain other quarters.
By letter dated September 25, 1947, the plaintiff wrote the Veterans Administration, in part:
You are hereby notified that since the lease held by the United States of America for these premises, specifically states that it is to be used for "military purposes", we consider that this transfer and use by the Veterans Administration constitutes violation of the terms of the lease, and, therefore, we shall consider it cancelled as of July 15, 1947.
About the same time the plaintiff also notified the U. S. Army Engineers in writing that it considered the lease cancelled effective July 15, 1947, and requested restoration of the premises pursuant to article 8 of the lease.
By letter dated October 21, 1947, the Chief, Real Estate Division, Regional Office, Veterans Administration, advised the plaintiff in part as follows:
This transfer of the custody and jurisdiction over this space under lease to the Government of the United States was made pursuant to rulings of the War Assets Administration, Office of the Chief, U. S. Engineers and Central Office, Veterans Administration, Washington, D. 0. In view of these rulings, this office is not permitted to entertain a request for revision of the lease which would not be to the benefit of the Government.
In view of the nbove, if it is the desire of your company to continue this matter, it is suggested that you direct a claim letter to the Comptroller General, General Accounting Office, Washington, D. C., setting forth in full the circumstances surrounding the initial negotiations and your present basis for claim.
Each of the invoices submitted by the plaintiff for rent at the lease rate contained a reservation that the payment of rent at that rate would be received without prejudice to the plaintiff’s claim for increased rental for the period subsequent to July 15, 1947.
12. The plaintiff continued its efforts to obtain an increase in rentals by correspondence with the Veterans Administration and the Comptroller General, and was advised that in order to obtain a decision of the Comptroller General it would be necessary to make a claim for a specific period and rate, which could be transmitted through the Veterans Administration.
On January 26,1948, plaintiff submitted a claim for rental at $5,000 a month from July 15, 1947, to January 31, 1948, less payments received at $1,500 a month under the 1942 lease. By settlement certificate dated December 17, 1948, the plaintiff was advised by the Comptroller General in part as follows:
Your claim for an additional allowance of $24,250.00 appears to be based upon the allegation that the War Department lease was for military purposes only and that the terms of the lease were violated by that department upon transfer of the premises to the Veterans Administration and that this department became a tenant at the will or sufferance of the lessor.
An examination of the contract discloses that the premises involved are fully and specifically described in Article 2 of the contract and that the language inserted at the end of the Article specifies only the general nature of the use of the premises and is descriptive and not restrictive in nature. Accordingly the Government acted within its rights, under Article 4 of the contract, in transferring the lease to the Veterans Administration.
I therefore certify that no balance is found due you from the United States.
The principal alteration made by the Army was the removal of a partition between rooms 528 and 530 on the fifth floor to provide for an X-ray laboratory. False walls were installed in these rooms which were employed to support heavy lead sheets for protection against X-ray operations. Eoom 526, immediately adjacent to 528, was employed as a developing room and its walls were partially leaded. Two by four standards were installed in various areas of the building to support suspended fluorescent lighting fixtures. Temporary plywood partitions were installed in the cloak room on the second floor and in the banquet room on the third floor.
Commencing in the latter part of 1946, during the occupancy of the building by the War Department, certain areas were occupied by the Veterans Administration. After July 15, 1947, the entire leased area was occupied by the Vocational, Eehabilitation, Finance, Personnel and Medical divisions of the Veterans Administration, for office use and medical examinations.
There was no substantial change in the use of the building by the Veterans Administration from that employed by the War Department.
14. The Elks Temple building was not suited for use as a general office building as it could not be reasonably subdivided to accommodate various tenancies.
It was owned and used as club facilities by the local Elks organization until December 1933. On January 6,1934, the Pacific Mutual Life Insurance Company acquired it by mortgage foreclosure. It remained vacant until March 18, 1938, when it was leased to the Work Projects Administration at $900 per month. The WPA obtained a new lease effective July 1, 1940, and remained in possession and paid the same rental until August 15, 1941. There was no other rental experience for the building prior to the 1942 lease.
The plaintiff purchased the building and the land in December 1945 for the price of $250,000, which was about the value of the land alone, if unimproved. Neither the original cost nor the market value of the premises is a fair basis for determination of its rental value.
There was a substantial increase in occupancy and demand for premium class office space in Portland between 1942 and 1947, but there was no increase in demand during this period for the type of office space provided in the Elks Temple building.
The fair and reasonable rental value of the leased premises in issue, for office use during 1947 and 1948, based upon comparable rental for office space in ten other Portland buildings of a similar class, was $18,000 a year or $1,500 a month.
15. The highest and best use of the Elks Temple building in 1947 and 1948 was for a club organization.
About March 1, 1949, the plaintiff entered into a lease of the building to the newly organized Cosmopolitan Club of Portland. The club was allowed three months of free rental to permit renovation to suit its purposes. The lease provided for payment to the plaintiff of 7 percent of the gross receipts, and that should the amount realized for the second year of operations not equal or exceed $35,000, the lease would become subject to cancellation by the lessor. The Cosmopolitan Club occupied the premises until about July 1951 when it went into receivership. During its occupancy the club paid the plaintiff cash rentals totaling $15,822, and expended approximately $37,147.56 for improvements in the building.
There is some evidence in this case that there was a rising demand in 1947 and 1948 for membership in social clubs at Portland, Oregon, and that existing clubs had waiting lists of applicants. There was no building at Portland being occupied for club purposes on a rental basis. All existing
16. Pursuant to the provisions of the 1942 lease, the defendant, by letter dated April 29, 1948, gave notice to the plaintiff of termination of the lease effective June 15, 1948. The building was vacated and surrendered by the defendant June 30, 1948.
By letters of May 19, 1948, to the Branch office of the Veterans Administration at Seattle, and the office of the Division Engineer, Corps of Engineers, at Portland, the plaintiff notified the defendant to restore the premises as provided in article 8 of the 1942 lease.
17. During the period from June 21 to 25, 1948, a joint survey of the condition of the leased space was made by 3 representatives of the plaintiff and 2 representatives of the defendant. The report of this survey is dated July 15, 1948, and was signed by A. L. Schneider for plaintiff and B. F. Grahn for the defendant. It is referred to hereinafter as the “terminal survey”. This report stated concerning the general condition of the building:
Generally speaking, the entire building is in need of considerable redecoration and repair. With the exception of those spaces and rooms specifically mentioned hereinafter, sidewalls and ceiling on all floors and in all stairwells are in need of repainting.
* * ❖ * *
Occupancy of the building during the past eight to ten years has been by various Government agencies who have provided nominal maintenance to the property to the extent of their respective lease requirements. There is evidence of neglect and lack of maintenance on the part of the lessor throughout the building as indicated by the haphazard storage of equipment in the rooms in the basement, the rotting out of sidewalk skylight screening, minor cracks in the uncovered floors, and the deteriorated condition of the floor covering (linoleum) in certain rooms on Floors Two and Three.
18. About the beginning of August 1948, the Veterans Administration employed a crew of men to clean up and repair the building for return to the owners. This crew consisted of the maintenance supervisor, 2 carpenters and a helper, 2 to 4 laborers and a separate crew of electricians. They were engaged approximately 11 full days in the building.
All temporary installations, including partitions, lighting fixtures and frame supports for fluorescent lighting fixtures, lead sheeting in the X-ray and finishing rooms and false walls supporting the same, were removed. The partitions were self-supporting, but the 2 by 4 standards supporting lighting fixtures were toenailed into the floor with finishing nails to prevent shifting. The nail holes resulting from the removal of these standards were not filled. Holes in the plaster and other damages resulting from the removal of the temporary installations were repaired. After the removal of temporary installations the entire building was cleaned. The defendant did not restore the partition between rooms 528 and 530, which had been removed for an X-ray laboratory. No repair was made of the damages requiring the services of special trades, such as installation of ceramic tile and plumbing fixtures, nor were painting and window washing done.
19. Various work projects were operated in the building during the WPA occupancy which began March 1938 and terminated August 1941. The WPA lease covered 54,348 square feet of the building, or most of the premises involved in the 1942 lease. The main lodge room on the fourth floor was used for a sewing project. Heavy power machines and tables were used, and they gouged holes through the linotile floor covering. Three full-length strips of this flooring, each about three feet wide, were removed entirely, so that some of the machines rested directly upon the cement floor. No floors were repaired by the WPA. Much of the other damage was not repaired.
The building was not restored by the Pacific Mutual prior to the 1942 lease. Neither the floor covering nor damaged fixtures, such as plumbing fixtures, cup holders and towel
20. On March 15, 1948, Pacific Mutual submitted a claim to the WPA for damages in the amount of $9,412.37, supported by affidavits and a list of items claimed. The details of the claim covered individual items from one room or area to another, with some miscellaneous matters.
By settlement certificate dated March 24,1944, the Comptroller General awarded the claimant $4,717.35 for damages to the building under the WPA occupancy, including the claim in full of $1,675 for the linotile flooring in the main lodge room. The claim is summarized in the following table under the principal classification of items, with the amounts allowed by the Comptroller General:
Description oí items Damages claimed Awarded by GAO
Patching walls-$1,457. 50 $315. 00
Molding and panels_ 56. 00 14.00
Linotile and floor covering_ 3,361.02 1, 675.00
Finishing floor, handball room_ 228.00 50.00
Finishing floor, ball room_ 110.00 50.00
Lockers and locker equipment_ 307.50 300.50
Locker and interior door keys_ 348.30 348.30
Replace counter, men’s coat room_ 120.00 120.00
Toilet and other fixtures_ 384. 00 289. 00
Marble bar, tile walls and floors_ 277.00 214.00
Doors_ 346.00 162. 50
Electric fixtures, shades, etc_ 1,915.05 796. 55
Coat hooks and racks_ 235.00 233.50
Plumbing and radiators_ 74.50 68.50
Other items_ 192.50 80. 50
Totals_ 9,412.37 4,717.35
21. E. L. Greene and E. D. Ward, who participated with A. L. Schneider in the joint terminal survey as plaintiff’s representatives, operated as general contractors under the title of Ward & Greene. On September 23, 1948, Ward & Greene submitted estimates of $50,176.45 to the plaintiff for restoring the leased premises. Ward & Greene prepared the estimate for carpentry work, including the sanding and finishing of hardwood floors, and other estimates for specialized trades were prepared by their subcontractors.
Carpentry_$3,079.35
Bathroom floor & wall tile & accessories- 2,238.20
Cleaning building & windows_ 1,210.00
Painting_17,158.92
Floor covering_ 8,986.94
Plumbing & plumbing fixtures_ 6,850.00
Electrical work_ 3,660.00
Plastering_ 2,431.54
45,614.95
Supervision @ 10 percent_ 4,661.60
Total_ 50,176.45
It is reasonable to conclude that the foregoing estimates were to put the building in good condition, and were not limited to damages beyond ordinary wear and tear, occurring during the Government occupancy under the 1942 lease.
22. The joint terminal survey reported the condition of the leased space in the building as of the date of the inspection June 21-25,1948. This report stated in part:
No attempt has been made in this inspection to fix the responsibility for damages or extent of restoration on either party participating in the survey of inspection nor to fix the responsibility upon previous tenants.
B. F. Grahn of the Beal Estate Division, Veterans Administration, who participated in the terminal survey, submitted an office memorandum of his comparison of the terminal survey with the condition report made at the beginning of the 1942 lease and the items of damages appearing in the claim of Pacific Mutual against the WPA. This memorandum is dated July 19, 1948, and stated in part:
3. Comparison of the subject inspection report with the recording of condition of the building as made by the Army Engineers at the time the Army occupied the building and further comparison with the report of settlement between the Government and Pacific Mutual Insurance at the termination of occupancy by the Works Progress Administration reveals some duplication. Comparison of the three reports was made jointly by Mr. H. F. Nelson and the writer. The duplicated and continuing conditions existing since the time of the*144 other two inspections (Army and WPA) have been noted on the Beal Estate Division file copy of the current report by check marks. Those items checked in red were also covered in the WPA report and no liability therefore should be charged against the VA. Those items checked in blue were also covered in the report of inspection of the Army Engineers and the VA should not be held liable for these items either.
23. Thereafter representatives of the plaintiff and the defendant engaged in a discussion with a view to a determination of the items of damages that resulted from the occupancy of the building by Government agencies under the 1942 lease. The defendant’s representatives prepared an itemized list of damages for which they considered the Government would be responsible under the 1942 lease, and submitted this list to the plaintiff. No agreement was reached upon the items for which the Government was responsible under its 1942 lease.
The plaintiff took the list and obtained an estimate by Ward & Greene of the cost of restoring the damages listed. Ward and Greene estimated costs in a lump sum for each item and added 10 percent of estimated costs as the contractor’s fee, totaling $7,409.05.
By letter of November 10, 1948, the plaintiff submitted this estimate to the defendant, and stated as follows:
Enclosed find detailed cost of repairs to our Building located at 11th and Alder, as per our understanding.
You will note there has been no allowance made for loss of time during repair or figure given for painting due to plaster damage. I would appreciate your consideration and estimate of the amount you feel we should be allowed for these items.
24. A similar list of items of damages was submitted by the Veterans Administration to its Construction Division for a cost estimate. After a further survey of the building, B. G. Lampe of that division submitted such an estimate dated December 2,1948, in the total sum of $3,675, including 15 percent overhead and 10 percent profit.
The defendant’s estimate was submitted to the plaintiff by letter dated December 15,1948, which stated in part:
*145 In conference it was determined which items of alteration or damage were chargeable to the Government for occupancy under Lease No. W-3460-eng. 640, assigned Veterans Administration Lease No. VAllb(RE)-69. Based on this itemization, the contracting firm of Ward and Greene prepared an estimate of cost of restoration dated November 9, 1948, which was submitted to this office.
Pursuant to established procedures, this division referred the matter of cost restoration to the Construction Division. The Estimator made a final inspection, and an estimate was prepared, a copy of which is furnished herewith. It is noted that the Estimator’s computations do not take into consideration certain improvements made to the building by the Government.
*****
If your company agrees with the attached estimate, it it requested that this office be so advised and a supplemental agreement embodying these figures will be prepared on which settlement can be made.
25. The plaintiff did not acknowledge the defendant’s letter of December 15, 1948, and no further negotiations were undertaken between the parties with respect to the damages.
The plaintiff submitted no formal claim for restoration damages under the lease.
26. The plaintiff and Pacific Mutual performed no maintenance and upkeep of the inside of the building for normal wear and tear during the period of the 1942 lease.
During the occupancy by War Department agencies the Post Engineer assigned a group of men for a five-day general clean up at the end of each month. This work included waxing and polishing of the floors throughout the building.
The office of the Division Engineer also made regular inspections of the building, in accordance with Army Regulations for leased premises, for safety, service and maintenance of the space occupied.
The periodic inspections and monthly general cleaning were not continued by the War Department after the leased premises were taken over by the Veterans Administration. The Veterans Administration performed ordinary cleaning of its office space but did not continue special cleaning and waxing of the floors.
The Corps of Engineers also placed inlaid linoleum in all of the mezzanine floor rooms used as office space, and in several rooms on the fifth floor. These floors had previously been bare concrete.
The defendant’s maintenance engineer performed ordinary repairs to the plumbing, lighting, ventilating and other similar work in the building. He did not replace broken wall fixtures or perform similar work requiring a specialized trade.
28. Much of the maintenance work performed by the defendant during the period of the 1942 lease was necessary by reason of ordinary wear and tear over a long period of time before and during the lease. Much of the leased area was in better condition upon release by the Government than when it was first occupied under the 1942 lease.
The fair and reasonable cost in 1948 of repairing the damages, exceeding reasonable and ordinary wear and tear, which occurred during the defendant’s occupancy of the Elks Temple building under the 1942 lease, and which were not repaired by the defendant, was $5,542.05.
CONCLUSION 0J? LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes that as a matter of law the plaintiff is entitled to recover, and it is therefore adjudged and ordered that it recover of and from the United States the sum of five thousand five hundred forty-two dollars and five cents ($5,542.05).
The Works Progress Administration was established by Executive Order No. 7034, dated May 16, 1935. The name of the Works Progress Administration was changed to the Work Projects Administration, on July 1, 1939, by Reorganization Plan No. 1.
The words “Military purposes” were typewritten on a standard printed form of lease.