In this federal condemnation case the .government had taken under the Second War Powers Act of 1942, 50 U.S.C.A. Appendix § 631 et seq., and on June 17, 1944 occupied, 8286 square feet of space on the 8th floor of the Paca-Pratt Building *738 (heretofore known as ■ the Sonneborn Building) in the City of Baltimore, for office use by the Baltimore Cargo Port of Embarkation. The term for which the space was originally taken was for a term of years ending June 30, 1945, which, however, by notice duly given and filed in this proceeding with deposit of agreed upon rental, has now been extended until June 30, 1946. At the time the government took possession of the office space it was under lease from the owner, The Paca-Pratt Realty Corporation, to Lee Cohen and Harry Gray, co-partners trading as Hy Grade Fur Company, by a written lease dated April 30, 1943 for one year commencing on the 1st day of May 1943, and ending on the 30th day of April 1944, “or until the stipulated term shall as hereinafter provided sooner cease or be terminated or be renewed or continued, at the annual rental of $3237.60”. The lease provided that in the absence of sixty days written notice prior to expiration, it should be renewed for the further term of a year upon the same conditions as to rental and otherwise. Under date of February 29, 1944 the landlord undertook to give the sixty day notice of termination to the tenant but the letter mailed at the office of the landlord in New York City was not received by the tenant until several days later, and therefore was not a timely notice for termination; in consequence of which the lease was automatically renewed to terminate April 30, 1945.
On July 12, 1944 the former tenants ot the space, the Hy Grade Fur Company, filed a claim, and an amendment thereto on June 19, 1945, for just compensation. The United States has filed a motion to strike the claim on the ground that the tenant is not entitled to any compensation for the taking in the circumstances of the case. At the trial of this issue the parties waived a jury and the case was heard upon the evidence submitted. The pertinent and controlling facts found from the evidence can be briefly stated.
The Sonneborn (now Paca-Pratt) Building is situated in the business district of Baltimore City. It was originally occupied and used for the manufacture of clothing, but more recently, after a change of ownership, it has been rented to various tenants for manufacturing and other purposes.
The Hy Grade Fur Company, now a partnership, successor to a corporation of the same name, had been a tenant of the condemned office space for about fifteen years under successive leases.' It used the premises for the manufacture of comparatively inexpensive fur coats. It had equipped the space with machinery and other trade tools and fixtures appropriate for the business. By reason of the government’s taking possession it was obliged to remove its fixtures on very short notice, and to temporarily relocate for a few months in another building nearby, and then to again remove to another more permanent location. It has filed an itemized claim for expenses of removal of its fixtures to these new locations and the cost of adapting machinery to the new location, and similar expenses in the amount of $4459.88, with a separate and additional claim in the amount of $4500 for damages based on interference with and diminution of business by reason of the necessary relocations. It has offered evidence tending to support most of the items of its claim. It is, however, not necessary to determine the exact amount of damages sustained. Under no aspect of the case could the claim for damages to the business be allowed. A number’ of separate items for moving expenses and kindred items would also have to be disallowed even if the claimants were entitled to some recovery; but the testimony is convincing that the claimants undoubtedly sustained substantial actual consequential damages in the amount of several thousand dollars due to expenses of moving and readaptation of machinery necessitated by change in location and inaccessibility of the kind of electric power current previously used in the Paca-Pratt Building.
The lease was on a long printed form, the 14th Article of which reads as follows: “Fourteenth: It is mutually convenanted and agreed that if the whole or any part of the premises shall be required, taken or condemned by any competent authority for any public or quasi-public use or purpose, then in any such event this lease and the term and any renewal and all rights and liabilities of the parties, each to the other, thereafter accruing, shall cease and expire and become null and void from and after the date when such possession shall be required or title be vested, without apportionment to Tenant of the award or other compensation, if any, by reason of such requisition, taking or condemnation; but nothing herein contained shall deprive Tenant of the right, if any, to receive from *739 the requisitioning or condemning authority award for compensation or loss of or damage to any of Tenant’s tangible property or business, provided the same is not in diminution of the award or compensation payable to Landlord; and Tenant shall make payment of all rent and other charges accrued and pro-rated to the date of such requisition, taking or condemnation.”
The basic rental rate for space in the Paca-Pratt Building has been 40 cents per square foot. An agreement has been made between the government and the building owner that the rental to be paid by the government during its temporary occupation of the space condemned, shall be at the rate of 50 cents per square foot per year, but with reduction to 45 cents per square foot to July 1, 1948, if the government occupies the property that long, in consequence of certain improvements to an elevator made at government expense. The rental paid by the claimants was at the rate of about 40 cents per square foot. It is contended by the government that the increased rental agreed to be paid by it is in consideration for additional services to be performed by the landlord particularly in that the office space will be occupied by many more employes than those heretofore serving the claimants. This reason for the increased rental is disputed by the claimants as a matter of fact. It is unnecessary to decide the point in this case.
My conclusion is that the claimants are not entitled to recover, principally by reason of the fourteenth article of the lease quoted above.
Opinion
Counsel for the claimants relies on the recently decided case of United States v. General Motors Corporation,
In the instant case the original taking by the government extended for a period beyond the term of the claimants’ lease. For this reason counsel for the government contends that the case is not ruled by the General Motors case. Counsel for the claimants, however, points out that his clients had occupied the space as tenants for fifteen years in the past and had every reasonable expectation of continuation of the lease from year to year thereafter. And in this connection reference is made to a very recent decision in the 10th Circuit in United States v. Petty Motor Co.,
I do not find it necessary in this particular case to rule upon the issue of law, whether or not the General Motors case is applicable to the instant case, because I have reached the conclusion that the tenant claimants are not entitled to recover here by reason of the 14th Article of the lease.
Prior to the present World War the government’s condemnation of private property for public use was almost invariably exercised by the taking of the whole fee interest in the property. And in a long line of cases, as pointed out in the General Motors case,
It is clear enough, therefore, that the claimants in this case are entitled to compensation only for any interest in the subject condemned which they may have possessed at the time of the taking by the government. More specifically, if the claimants’ lease expired on the day the government took possession, then the claimants had no interest in the property taken by the government. And this seems to be very clearly and expressly the effect of the 14th Article of the lease. It provided that in event of condemnation of the leased premises, “then in any such event this lease and the term and any renewal and all rights and liabilities of the parties, each to the other, thereafter accruing, shall cease and expire and become null and void from and after the date when such possession shall be required or title be vested, without apportionment to Tenant of the award or the compensation, if any, by reason of such requisition, taking or condemnation.” The further qualifying provision of the Article, that nevertheless the tenant should have the right to receive from the condemning authority compensation for damage to the tenant's tangible property or business, is not here applicable because there was no such direct damage to the tenants’ fixtures by the government. By the 16th Article of the lease the tenant agreed to remove his fixtures and property upon the termination of the lease. It is true that the claimants offered evidence tending to show business losses but these would not have been recoverable against the government even under the General Motors case.
Clauses similar to the 14th Article of the lease in this case are commonly referred to as “full condemnation clauses”. Such provisions are frequently inserted in long formal leases although I think they have *741 heretofore not been generally customary in leases of Baltimore City property. The question of the legal effect of the condemnation clause on the right of a tenant to recover against the condemning authority has been considered and decided in a number of comparatively recent federal condemnation cases and also in older state court decisions. Necessarily each case depends upon the wording of the particular provision in the lease as applied to the facts of the case. Where the wording of the clause is similar to that in the instant case the courts have very uniformly held that the dispossessed tenant is not entitled to recover against the condemning authority. It is doubtless true that the condemnation clause is inserted primarily for the benefit of the landlord and to preclude any diminution of the condemnation award to him by the participation of the tenant in the benefits of the award. But it is equally clear that if by the proper construction of the clause the interest of the tenant is ended and determined by the fact of condemnation, then the tenant has no com-pensable interest in the property condemned.
In United States v. Improved Premises, D.C.S.D.N.Y.,
In United States v. Four Parcels of Land, D.C.S.D.N.Y.,
It may also be noted that in the above referred to case of United States v. Petty Motor Co., it is stated in the opinion of the court that a five-year lease to one of the tenants making claim for compensation contained a condemnation clause which terminated the lease if the premises were condemned; but the clause is not quoted in full. Apparently the tenant was nevertheless permitted to recover although it does not definitely appear from the opinion whether the clause was relied upon by the government, and there seems to have been no discussion of the point in the opinion.
Counsel for the claimants have submitted an extended and well expressed argument against the applicability and force of the condemnation clause in the lease. The contentions are (1) that properly construed the clause applies only between the landlord and tenant and therefore does not bar the claim against the government; (2) that even if the clause were otherwise applicable, it applies only where the government takes the fee interest of the landlord and does not apply where, as here, the government has taken only a temporary occupancy and (3) that in this case there was really no condemnation at all, because after the original taking by the government the landlord agreed with the government as to the amount of the award to it by entering into an agreement for a new rental. I do not think any of these contentions are tenable in view of the plain wording of the condemnation .clause in this case; but I will comment on them briefly.
As to the proper construction of the condemnation clause, emphasis is sought to be placed on the wording “and all rights and liabilities of the parties each to the other, thereafter accruing, shall cease and expire and become null and void”; and also upon the concluding proviso which preserves the tenant’s rights “if any” to compensation for loss or damage to the tenant’s tangible property or business. (Italics supplied.) But this contention ignores other wording which is here applicable. Reading the clause as a whole it is entirely clear that four things are definitely provided in the event of condemnation. They are (1) the lease expires; (2) the rights of the parties inter sese for the future thereupon terminate; (3) the tenant is not to be entitled to any apportionment of the award to be made by reason of the condemnation except that (4) if the condemning authority damages the tenant’s tangible property or business the latter shall not be deprived of the right, if any, to receive compensation for such loss or damage, provided the same is not in diminution of the award or compensation payable to the landlord.
It is argued that the words of the clause “each to the other” in some way limits or modifies the phrase which provides that the lease expires. But the context shows clearly enough that the one clause does not modify the other but is in addition to the other. The meaning is that in the event of condemnation (l) the lease expires and (2) the rights and liabilities of the parties “each to the other” thereafter accruing also expire and become null and void. -
True it is that if the tenant has a legal right to recover against the condemning authority for loss or damage to his tangible property or business (in which of course the landlord is not interested) then the tenant is not deprived of that right by the condemning clause. But this proviso is not applicable under the facts of this case. By another clause of the lease, upon its termination the tenant was required to remove its property and in fact did so in this case. The government did not in any way damage or interfere with the tenant’s fixtures; nor was there any proof in the case of direct damage to any of the tenant’s tangible property other than what possibly may be inferred from the necessity for twice removing to new locations; and as to this there was no evidence of specific damage to the fixtures. As has already been pointed out, under no aspect of the case could the tenant recover for business losses consequential upon the enforced removal.
It is also argued that the government is only an
incidental
beneficiary of the condemnation clause, and should not be allowed to take advantage of it. This contention is not new. It was advanced and rejected- in some of the older cases. The short answer given is that as the lease expires by its own provision when condemnation occurs, the lessee has no property interest taken by the government, and therefore has- no provable damage. In re Third
*743
St. Improvement in City of St. Paul,
No authority is cited in support of the contention that the condemnation clause applies only when the government takes the leasehold fee interest. It is argued in support of the contention that the parties must have so intended because condemnation clauses of this general purport have been customary in long formal leases for many years in the past, while it has not been the customary practice for the condemning authority prior to the Second War Powers Act of 1942 to condemn temporary occupancy only. I find nothing in the context or wording of the condemnation clause to limit its applicability to condemnation of the landlord’s fee interest. In the instant case the premises leased consisted not of an entire building but only of space on one floor of a large building in which there were numerous tenants. The wording includes the event of the taking of the “whole or any part” of the premises. It is true that in most of the reported cases the condemning authority has apparently taken the landlord’s entire fee interest. But see Goodyear Shoe Machinery Co. v. Boston Terminal Co., 1900,
And in United States v. Improved Premises, etc., D.C.N.Y.,
Finally, it is argued that there was in fact no real condemnation at all in this case and therefore the clause is inapplicable. The facts are that on June 14, 1944 the government filed its petition in the usual form in this case for the condemnation of the office space “for a term of years ending June 30, 1945, extendible for yearly periods thereafter during the existing national emergency”. The petition referred to several Acts of Congress (including the Second War Powers Act of March 27, 1942), which authorized the acquisition of land for military or other war purposes, and also authorized the Secretary of War to acquire on behalf of the United States by condemnation such tracts or parcels of land in the State of Maryland as may be necessary in his discretion, for use of the Baltimore Cargo Port of Embarkation in the City of Baltimore ; and alleged that the necessary money was available therefor. The petition further recited that the Secretary of War had determined to acquire 8286 square feet of space on the 8th floor of the Paca-Pratt Building for use in connection with the Baltimore Cargo Port of Embarkation by condemnation under judicial process; and that under the Second War Powers Act the United States was authorized to take immediate possession of the said property and the Secretary of War had requested that an order be obtained for immediate possession. The parties defendant named in the petition were the Paca-Pratt Realty Corporation (the landlord), F. Leonard Maas, its resident manager, and Hy Grade Fur Company, the claimants in this case. On the petition the court passed an order that the premises should be surrendered to the United States on June 17, 1944. After notice the several defendants answered. On July 13, 1944 the Paca-Pratt Realty Corporation answered and prayed “that it be given judgment against the United States for such sum as shall be found just and reasonable compensation for the taking of space in the Paca-Pratt Building sought to be condemned in this proceeding”. On July 12, 1944 the present claimants answered making claim for just compensation and filed with their answer a copy of their lease of the premises. Quite *744 some time thereafter it appears from the evidence in the case that the government and the Paca-Pratt Realty Corporation, the landlord, agreed upon the award of compensation to be made. On May 29, 1945 written notice was filed in the case by counsel for the United States giving notice to the Paca-Pratt. Realty Corporation and others that the Secretary of War had exercised the election to extend the term described in the original petition for condemnation from June 30, 1945 to June 30, 1946; and on June 14, 1945 the government deposited in court $3873.74 in payment of the estimated award for the taking of the floor space.
The claimants’ contention is that under these facts there has been no condemnation in fact and therefore the clause is not applicable. It is true that there seems to have been no formal judgment award in the case in favor of the landlord. But it is also clear that the amount of the award to which the landlord was entitled has been agreed upon and either paid or deposited in court. But however that may be, the operative effect of the condemnation clause is not limited to a situation in which there has been a formal condemnation award. The clause reads that if the premises shall "be required, token or condemned", then in such event the lease expires “from and after the date when such possession shall be required or title be vested, without apportionment to tenant of the award or other compensation, if any, by reason of such requisition, taking or condemnation.” (Italics supplied.) The recital of the record procedure shows clearly that the premises were required and possession thereof was taken under an order of court passed on the formal petition for condemnation. Thus it is clear that the event expressly contemplated by the clause did occur.
There is perhaps a suggestion implicit in the argument that the whole procedure was collusive between the landlord and the government for the purpose of dispossessing the tenant without liability either to the landlord or the government. But as this contention is not clearly and expressly made, and the evidence is not sufficient to warrant such a conclusion, it seems unnecessary to discuss it.
The argument is also made that it was the condemnation, rather than the clause in the lease, that was the real cause of the damage to the tenants; that is, that the condemnation preceded the coming into play of the provision of the lease; and therefore the damage was done by the condemnation before the lease was caused to expire by the provision in the lease. But this contention is clearly untenable under the wording of the clause. See also In re Third St. Improvement in City of St. Paul,
Finally it may be observed that it is expressly clear from the condemnation clause that the tenant was not entitled to any apportionment of the condemnation award. And in this connection it is to be borne in mind that in these condemnation cases the government has the right to have the award made as one entire sum to cover just compensation
to
all interests taken in the proceeding although for convenience in practice, either in the inquisition to be found by the jury or by the subsequent proceedings, the amount of the award may be distributed among those respectively entitled thereto. Meadows v. United States, 4 Cir.,
I conclude, therefore, as a matter of law that the claimants in this case are not entitled to any compensation and their claim must be dismissed. Counsel may present the appropriate order in due course.
