United States v. Westinghouse Electric & Manufacturing Co.

339 U.S. 261, 70 S. Ct. 644, 94 L. Ed. 2d 816, 94 L. Ed. 816, 1950 U.S. LEXIS 2107

• Court: Supreme Court of the United States
• Decided: April 17, 1950
• Docket: 26
• Status: Published

Opinions

Mr. Justice Frankfurter

delivered the opinion of the Court.

On February 18, 1943, the United States filed a petition in the United States District Court for the District of Massachusetts to condemn certain land and buildings in Springfield, Massachusetts, for use by the Army for a term initially ending June 30, 1943, with a right to renew for additional yearly periods during the existing national emergency, at the election of the Secretary of War.¹ On the same day the District Court authorized the United States to take immediate possession. The respondent, Westinghouse Electric and Manufacturing Company, was lessee of a portion of the condemned property, using it as a warehouse, under a lease dated January 19, 1942, for a term expiring on October 31, 1944. Respondent, in order to comply with the District Court’s order of immediate possession, incurred expenses for the removal of its personal property. Subsequently, the Secretary of War exercised his right of renewal and extended the Government’s occupancy for two additional yearly periods ending on June 30, 1945. Thus, although the occupancy taken by the United States was initially for a period less than the remainder of respondent’s term, the renewals eventually exhausted respondent’s leasehold.

At the time of the initial taking as well as upon each yearly extension, sums were deposited into the District Court as estimated just compensation. It was stipulated that these sums represented the fair market value of the bare, unheated warehouse space taken, leaving open the question whether, as a matter of law, the removal costs incurred by the respondent were to be taken into account in computing just compensation for what was condemned. It was further stipulated that the removal expenses were both reasonable and necessary, and that, taking such removal costs into account, the market rental value of the premises was $25,600 greater on a sublease given by respondent to a temporary occupier than as bare unheated warehouse space.

The District Court ruled that removal expenses should be included in the measure of just compensation, and awarded to respondent the stipulated amount. 71 F. Supp. 1001. The Court of Appeals affirmed, Chief Judge Magruder dissenting. 170 F. 2d 752. The disagreement was due not to differences of independent views but to conflicting meanings drawn from the decisions of this Court in United States v. General Motors Corp., 323 U. S. 373, and United States v. Petty Motor Co., 327 U. S. 372. The need for clarification led us to bring the case here. 336 U. S. 950.

The General Motors and Petty Motor cases concerned themselves with the situation in which the Government does not take the whole of a man’s interest but desires merely temporary occupancy of premises under lease. General Motors held that when such occupancy is for a period less than an outstanding term, removal costs may be considered in the award of “just compensation” to the temporarily ejected tenant — not as an independent item of damage, but as bearing on the rental value such premises would have on a voluntary sublease by a long-term tenant to a temporary occupier.²

In this holding of what is just, within the requirements of the Fifth Amendment, the Court was scrupulously careful not to depart from the settled rule against allowance for “consequential losses” in federal condemnation proceedings. 323 U. S. at 379 et seq. When there is an entire taking of a condemnee’s property, whether that property represents the interest in a leasehold or a fee, the expenses of removal or of relocation are not to be included in valuing what is taken. That rule was found inapplicable to the new situation presented by the General Motors case — inapplicable, that is, where what was to be valued was “a right of temporary occupancy of a building equipped for the condemnee’s business, filled with his commodities, and presumably to be reoccupied and used, as before, to the end of the lease term on the termination of the Government’s use.” 323 U. S. at 380.

Petty Motor made clear that the taking of the whole of a tenant’s lease does not fall within the General Motors doctrine. The reason for the distinction between the two situations was made explicit in Petty Motor:

“There is a fundamental difference between the taking of a part of a lease and the taking of the whole lease. That difference is that the lessee must return to the leasehold at the end of the Government’s use or at least the responsibility for the period of the lease which is not taken rests upon the lessee. This was brought out in the General Motors decision. Because of that continuing obligation in all takings of temporary occupancy of leaseholds, the value of the rights of the lessees which are taken may be affected by evidence of the cost of temporary removal.” 327 U. S. at 379-80.

While it is true that in both the General Motors and Petty Motor cases the Government had retained an option to vary the duration of its occupancy — in the former case it could extend, and in the latter it could shorten— the legal significance of such an option with respect to removal costs was not squarely in issue. It is now. Where the Government initially takes an occupancy for less than the outstanding term of a lease but then exercises its renewal option so as to exhaust the entire lease, shall this be treated merely as a temporary occupancy during part of an outstanding lease and thus within the General Motors doctrine, or as a taking of the whole lease and hence within Petty Motor?³

Here, as in General Motors, the Government initially took over only part of an outstanding lease. But here the Secretary of War in fact continued the Army’s occupancy of the premises beyond the expiration of Westinghouse’s lease. Judged by the event, therefore, this case was unlike General Motors in that what the Government took was the whole of the lease. It was thus like Petty Motor. The formal difference between this case and Petty Motor was that in this case the Government began with an occupancy shorter than the outstanding lease with a contingent reservation for its extension, while in Petty Motor there was a contingent reservation to shorten an occupancy that nominally exhausted the lease.

To make a distinction between taking a part of a lease with notice that the period of occupancy may be extended for the rest of the leasehold, and formally taking a whole leasehold with the right to occupy only a portion of it and throw up the rest, is to make the constitutional requirement for just compensation turn on a wholly barren formality. It is barren because a taking of a contingent occupancy by the Government could be cast in either form by those in charge of its condemnation proceedings without the slightest difference to the Government’s interest. The reason for condemnation for a period shorter than a tenant’s outstanding term with notice that extensions may absorb the balance of the term (i. e., the form in this case), or for condemnation formally for the whole of an unexpired leasehold with notice that the Government’s occupancy may be terminated before the outstanding term has expired (i. e., the form in Petty Motor), is precisely the same. It is a recognition of the contingencies which may determine the duration of the emergency during which the Government seeks temporary occupancy of leased premises. And so it takes a flexible term, casting the burden of the contingency upon the ousted tenant.

Under either type of condemnation the United States may in fact move out before the ousted leaseholder’s term has expired, thus imposing upon him the duty to return to the premises or make some other burdensome adjustment. In that event, he is placed in precisely the same boat as was the General Motors Corporation, and the cost of removal is therefore admissible in evidence “as bearing on the market rental value of the temporary occupancy taken.” 323 U. S. at 383. Contrariwise, under either type of condemnation the Government may continue its occupancy throughout the tenant’s term. In that event, the situation is governed by Petty Motor and removal costs may not be taken into account. The final severance of a lessee’s occupancy as against a temporary interruption of an outstanding leasehold, even though not definitively fixed at the outset, is a difference in degree wide enough to justify a difference in result.

The test of the outcome — is the Government merely a temporary occupier of an unexpired leasehold or has it absorbed the term of the lease? — has actuality behind it. Until events have made it clear, we cannot know whether the tenant will have to move back into his leased premises or make some other adjustment, and thus we cannot know whether the reason for the General Motors doctrine operates.

Condemnation for indefinite periods of occupancy was a practical response to the uncertainties of the Government’s needs in wartime. Law has sufficient flexibility to accommodate itself to these uncertainties by making what is a relatively minor item await the event. To do so does not keep the litigation open longer than it has to be kept open, because the total award for the Government’s occupancy cannot be determined until its duration is known. The usual rule for ascertaining value at the time of taking is not disrespected if one item is made a function of the future because only then can it be known whether that item forms a part of what has been “taken.” The alternative is to require a forecast of the possibility that the tenant will have to move back into the premises. The factors on which such a forecast must be based are too contingent, too unique for guidance by experience, to permit rational assessment. This is a situation where the law should express “a judgment from experience as against a judgment from speculation.” Tanner v. Little, 240 U. S. 369, 386. Or, as it was put by Mr. Justice Cardozo for the Court in a relevant situation: “Experience is then available to correct uncertain prophecy. Here is a book of wisdom that courts may not neglect. We find no rule of law that sets a clasp upon its pages, and forbids us to look within.” Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U. S. 689, 698.

An award based on removal costs will of course be delayed until it is known whether the Government’s occupancy has exhausted the tenant’s leasehold. But this presents no real administrative difficulties. That the essential facts here became known before the time for judicial determination hardly makes this case atypical. Even in the cases where the event is still open, the cost of moving out, insofar as it is to be reflected in just compensation, may be treated as a segregated item. Thus, its amount may be ascertained at an early stage of the judicial proceedings, but the judgment made conditional upon the outcome of the Government’s occupancy. And rental payments due from the Government need not be postponed. So long as the duration of the Government’s occupancy is undetermined, the District Court must necessarily retain the case for the periodic determination and payment of rental compensation. This is so in the absence of any problem arising out of removal costs. No unfairness or embarrassment to the displaced tenant is thus involved by leaving liability based on removal to await the event.

In the case before us, it was known at the time of trial in the District Court that respondent’s term had been exhausted by the Government’s occupancy. Accordingly, the judgment is reversed insofar as it awards $25,600 to respondent.

Reversed.

Mr. Justice Douglas took no part in the consideration or decision of this case.

1 The petition was filed under § 201 of Title II of the Second War Powers Act of 1942, 56 Stat. 176, 177, 50 U. S. C. App. § 632. This section authorized certain officials “to acquire by condemnation, any real property, temporary use thereof, or other interest therein,” for purposes related to the war. Plainly it conferred power to condemn interests in realty normally purchased by private persons, including, of course, options to renew.

2 This holding in the General Motors ease was the Court’s determination, without any congressional action, of what constituted “just compensation” under the Fifth Amendment.

3 Problems relating to the valuation of renewal options are not before us on this record. It need hardly be said that provision for renewal does not necessitate the same rental for the renewed period as for the initial period. Whether a rental for each renewed period was initially fixed in this case is not disclosed by the stipulated facts.