The United States condemned certain premises for use by the Army
for a term initially ending June 30, 1943, with an option to renew
for additional periods during the existing national emergency.
Respondent was lessee of a portion of the premises for a term
expiring October 31, 1944, and incurred expenses for the removal of
its personal property. Subsequently, the Government extended its
occupancy for two additional yearly periods ending June 30,
1945.
Held: although the occupancy taken by the United States
was initially for a period less than the remainder of respondent's
term, respondent's removal expenses are not relevant in determining
just compensation, since respondent's term had been exhausted by
the Government's occupancy. Pp.
339 U. S.
262-268.
(a) When there is an entire taking of a condemnee's property, be
it a leasehold or a fee, the expenses of removal or relocation are
not to be included in valuing what is taken. P.
339 U. S.
264.
(b) Where the Government initially takes an occupancy for less
than the outstanding term of a lease, but later exercises a renewal
option so as to exhaust the entire lease, this should be treated as
a taking of the whole lease. Pp.
339 U. S.
265-268.
(c) Where the Government initially takes an occupancy for less
than the outstanding term of a lease with an option for extension,
an award based on removal costs should be delayed until it is known
whether the Government's occupancy has exhausted the tenant's
leasehold. P.
339 U.S.
268.
170 F.2d 752, reversed.
The District Court awarded respondent compensation for the
expense of removing personal property from leased premises
condemned by the Government. 71 F. Supp. 1001. The Court of Appeals
affirmed. 170 F.2d 752. This Court granted certiorari. 336 U.S.
950.
Reversed, p.
339
U.S. 268.
Page 339 U. S. 262
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.
[
Footnote 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
Page 339 U. S. 263
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
Page 339 U. S. 264
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. [
Footnote
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
323 U. S. 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
323 U. S.
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
Page 339 U. S. 265
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
327 U. S.
379-380.
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? [
Footnote
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
Page 339 U. S. 266
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
323 U. S. 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
Page 339 U. S. 267
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 whether the law should
express "a judgment from experience as against a judgment from
speculation."
Tanner v. Little, 240 U.
S. 369,
240 U. S. 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
Page 339 U. S. 268
Refining Co. v. Jenkins Petroleum Process Co.,
289 U. S. 689,
289 U. S.
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 embarassment 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.
[
Footnote 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.
[
Footnote 2]
This holding in the
General Motors case was the Court's
determination, without any congressional action, of what
constituted "just compensation" under the Fifth Amendment.
[
Footnote 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.
MR. JUSTICE JACKSON, dissenting.
Difficulties in resolving the controversy over removal costs are
caused by a condemnation policy under which the Government, in
taking temporary use of property,
Page 339 U. S. 269
also condemns an option to renew or shorten the period of use.
While we have decided cases in which questions concerning options
were raised,
United States v. General Motors Corp.,
323 U. S. 373;
United States v. Petty Motors Co., 327 U.
S. 372, I think that the Court has not fully faced up to
the implications of the optioning policy.
Valuation problems of the past have been simple contrasted to
those the new policy imposes upon courts. Condemnation, in the
main, was of title to physical properties, and the problem of just
compensation was one of ascertaining the equivalent in money at the
date of appropriation -- a date that had already arrived. The
courts were dealing with a single point of time, and with facts and
conditions which were at least in experience, not prophecy.
In recent years, the Government embarked upon a new type of
condemnation. [
Footnote 2/1] It
does not take title to the property and put into the pockets of the
owners the current money equivalent. Instead, it keeps the owners'
capital tied to their investments, and pays them only an estimated
value of its future use. This requires courts to predict values
over a period of time.
Valuing time is the essence of much business, and of most
speculation. All options, futures, insurance contracts, leases,
investments, deferred deliveries and commitments involve an
appraisal of time. And though it takes us into the realm of pure
conjecture, it may be possible, however unsatisfactorily, to fix
values for rights of future occupancy if the period of the
occupancy can be known.
The Government, however, has adopted the policy of expropriating
for a "flexible term" by condemning a right
Page 339 U. S. 270
to shorten or to extend the use from time to time as may please
it. This type of condemnation denies courts even a defined time
period to evaluate, and it is small wonder that the Court concludes
this leaves the factors too contingent and unique "to permit
rational assessment." This raises the question whether Congress
ever authorized a type of expropriation that cannot be rationally
compensated.
The statute upon which the taking in this case rests -- one of
the broadest of its kind ever enacted by Congress -- authorizes
various officers
". . . to acquire by condemnation, any real property, temporary
use thereof, or other interests therein, together with any personal
property located thereon or used therewith, that shall be deemed
necessary, for military, naval, or other war purposes. . . ."
56 Stat. 177. Its legislative history provides no explanation of
the language which authorizes taking "any real property, temporary
use thereof or other interest therein," [
Footnote 2/2] nor does it offer any reason for its
inclusion. [
Footnote 2/3] But
Congress had no apparent expectation
Page 339 U. S. 271
that it would authorize condemnations for unstated periods of
time. [
Footnote 2/4] The announced
purpose of the legislation was to increase the number of federal
officials authorized to institute condemnation proceedings, to
authorize the possession and use of property prior to the
completion of condemnation proceedings, and to eliminate
uncertainties regarding the taking in the same proceeding of
personalty located upon or used along with the real property being
condemned. [
Footnote 2/5] And
though authority for condemning less than a fee had existed
theretofore, the whole question of taking temporary uses was in
some doubt. [
Footnote 2/6]
It is plain that Congress contemplated only such takings as were
necessary. We should give this a broad construction; we may even go
so far as to say that the necessity for a taking is a political or
policy question not usually subject to judicial review. But the
statute implies some foundation in necessity, and nothing can
be
Page 339 U. S. 272
less necessary than condemnation of an option to take property
or its possession.
The United States needs no such option, for its inherent
condemnation power, by its very nature, is a perpetual option to
take at any time any property it needs. The effect of condemning an
option to take at some future time is to increase the element of
uncertainty and speculation in the liquidation of an award.
Furthermore, such purpose is wholly one-sided. If, let us say, the
price level should fall, the Government, even though it wants the
property, is not bound to keep it on the option terms. That is the
essence of option. But it may abandon the option and take the
property under a new declaration, thereby getting a new valuation
in the light of the lower price level. If, however, prices go up,
the Government can use its condemned option to keep the owner from
enjoying the rising value of his property as other owners may do.
The taking of a term with an option to lengthen is therefore no
more than a hedge against inflation.
This same one-sidedness inheres in the policy of taking a term
with an option to shorten. Specific authority exists for Government
officials to dispose of surplus properties taken for war purposes;
[
Footnote 2/7] indeed, such
authority is contained in the very statute under consideration.
[
Footnote 2/8] Various officials
are given power to "lease, sell, or otherwise dispose of" any
properties taken by condemnation which become surplus or
unnecessary. And so, if the Government condemned for a term with an
option to shorten, and then determined that the property so taken
was no longer necessary, it would sell, lease, or otherwise dispose
of the remainder of the term at the then current market price. This
it would certainly do if the price level had risen. But if prices
had fallen, it could avoid the loss of trading
Page 339 U. S. 273
on the open market by exercising the option to shorten, cut down
the term, and put on the owner the burden of salvaging its surplus
property. The taking of a term with an option to shorten is
therefore no more than a hedge against deflation.
It seems unlikely that Congress intended to authorize such
speculative transactions as result from an option to increase or
decrease the time period. If we change the terms of the taking so
that the time is known but the space is indefinite, the hazard to
the Government becomes quickly apparent; if we had a declaration
taking such part of a property as from time to time the Government
would want, we would have to compensate on the basis that the
taking was of the maximum within its terms. Such indefinite takings
invite excessive awards, for the speculation involved is
involuntary with the claimant, and its outcome controlled by, and
hedged in the interest of, the Government.
Cf. United States v.
Certain Parcels of Land, etc., 55 F.
Supp. 257, 265.
The Court gives up the effort to value what is taken and
determines to postpone determination of compensation to await the
event. This expedient recognizes, but does not fairly solve, the
problem engendered by this type of condemnation. If there is a
present taking, the property owner is entitled to pocket his
compensation. It seems hardly fair that the owner, dispossessed for
a time which he cannot learn, must wait indefinitely to be paid
anything except bare rental, regardless of the other expense he may
be put to. How can the owner know whether to sell his removable
property, store it, or perhaps to liquidate his business, or seek a
new location, without knowing the length of time for which the
Government is taking his premises? The property owner cannot await
the happening of the event to make these essential business
judgments. To let the Government take an option and pay for it only
if it decides to exercise it is to give
Page 339 U. S. 274
the Government a "heads I win, tails you lose" position in a
gamble the property owner has not willingly joined. [
Footnote 2/9]
I think we should hold the effort to condemn options to be a
nullity for want of congressional authorization and determine
claims for just compensation on the basis of the fixed term
specified in the declaration. If the Government, upon expiration of
the fixed term, desires
Page 339 U. S. 275
to continue in possession, it may file a new declaration of
taking and have the value of that term fixed in the light of
conditions that then prevail. If it abandons the property before
the fixed term expires, it has surplus property on its hands to
dispose of as it may choose. These are not, of course, very
satisfactory results, but they would come nearer obeying the
constitutional mandate of "just compensation" than the delayed
decision course adopted by the Court.
[
Footnote 2/1]
See Just, Condemnation Procedure During World War II,
12 Geo.Wash.L.Rev. 286; Dolan, Present Day Court Practice in
Condemnation Suits, 31 Va.L.Rev. 9.
[
Footnote 2/2]
E.g., cf. S.Rep. No.989, 77th Cong., 2d Sess. 4 (1942).
(The bill covers interests in real property, including easements
and other rights appurtenant thereto.) Hearings before Committee on
the Judiciary on S. 2208, 77th Cong., 2d Sess. 15 (1942). (It would
enable the acquisition of leaseholds or of any other property.)
[
Footnote 2/3]
Title II of the Second War Powers Act, 56 Stat. 177, 50
U.S.C.Appendix, § 632, the statute here involved, was amendatory to
the Act of July 2, 1917 (40 Stat. 241), To Authorize Condemnation
Proceedings of Lands for Military Purposes. As originally
introduced, the 1917 Act contained authorization for only the
condemnation of "any land, . . . or right pertaining thereto." 55
Cong.Rec. 3632 (1917). But upon the unexplained recommendation of
the then Secretary of War, the words "temporary use thereof or
other interest therein" were inserted after the word "land."
See H.R.Rep. No.83, 65th Cong., 1st Sess. (1917); 55
Cong.Rec. 3991, 4130-4131, 4263 (1917). These words were carried
over by the amendatory Act without comment.
See generally Senate Committee Print, Statements in
Executive Session on S. 2208, 77th Cong., 2d Sess. 6-7, 13-16;
S.Rep. No.989, 77th Cong., 2d Sess. 4 (1942); Hearings before the
House Committee on the Judiciary on S. 2208, 77th Cong., 2d Sess.
10, 15-23 (1942); H.R.Rep. No.1765, 77th Cong., 2d Sess. 6 (1942);
88 Cong.Rec. 1639-1641, 1644-1645, 1647-1650, 1653-1656.
[
Footnote 2/4]
See, e.g., testimony of Attorney General Biddle in
Hearings before the House Committee on the Judiciary on S. 2208,
339
U.S. 261fn2/2|>n. 2,
supra at 19:
"Mr. HANCOCK of New York. Is it possible under a condemnation
Act to acquire a temporary use?"
"Mr. BIDDLE. Yes, sir."
"Mr. HANCOCK of New York. In that case, the title would revert
back to the original owner after the temporary use."
"Mr. BIDDLE. Yes."
"Mr. HANCOCK of New York. But you can acquire property by a
lease?"
"Mr. BIDDLE. Yes. You can condemn it for a
certain length of
time."
(Emphasis added.)
See also materials cited in nn.
339
U.S. 261fn2/2|>2,
339
U.S. 261fn2/6|>3,
supra, and
339
U.S. 261fn2/6|>5,
339
U.S. 261fn2/6|>6,
infra.
[
Footnote 2/5]
E.g., Committee Print,
339
U.S. 261fn2/3|>n. 3,
supra at 6; S.Rep. No.989,
339
U.S. 261fn2/3|>n. 3,
supra at 4; Hearings,
339
U.S. 261fn2/3|>n. 3,
supra at 10, 15-23; H.R.Rep.
No.1765,
339
U.S. 261fn2/3|>n. 3,
supra at 6.
[
Footnote 2/6]
See 88 Cong.Rec. 1644-45, 1647-48, 1653.
See
also 339
U.S. 261fn2/4|>n. 4,
supra.
[
Footnote 2/7]
E.g., 54 Stat. 712, 50 U.S.C.Appendix, § 1171(b).
[
Footnote 2/8]
54 Stat. 713; 56 Stat. 177.
And see 88 Cong.Rec.
1648.
[
Footnote 2/9]
It is unnecessary, if Congress has not authorized such
condemnations, to rely on any constitutional doubts concerning
them. But we should note that a local scheme not too unlike the
Government's condemnation policies has been successfully challenged
on constitutional grounds in at least one jurisdiction. The General
City Law of New York provides that city planning boards may file
master plans providing for the development of the city, and, "for
the purpose of preserving the integrity of such official map," no
permits, as a general matter, will issue for building in the bed of
any street or highway laid out on the map, and this despite the
fact that the map may at all times be modified and the proposed
construction may never be carried out. N.Y. General City Law
(McKinney, Consol.Laws of N.Y., Supp. 1949) §§ 26-39. This law
empowers a municipality to restrict the use of private property
which it may at some future time decide to take.
See Matter of
the City of New York, 196 N.Y. 255, 259, 89 N.E. 814, 815-816.
It grants, in effect, a form of restrictive option. And although it
was drafted with an eye to avoiding the pitfalls which brought
invalidation upon an earlier similar scheme,
see Forster v.
Scott, 136 N.Y. 577, 32 N.E. 976, it has already been
subjected to a preliminary constitutional skirmish.
See Platt
v. City of New York, 196 Misc. 360, 92 N.Y.S.2d 138,
rev'd
on other grounds, 276 App.Div. 873, 93 N.Y.S.2d 738. And other
courts have indicated that, where a right is so vague that a
judicial determination cannot be made of just compensation for its
taking, the right to expropriate fails,
see Albright v. Sussex
County Lake and Park Comm'n, 71 N.J.L. 303, 307-308, 57 A.
398, 400-401, and that certain personal rights are not subject to
condemnation.
Hamilton, Glendale & Cincinnati Traction Co.
v. Parrish, 67 Ohio St. 181, 192-193, 65 N.E. 1011, 1014.
These cases do not govern us, but they indicate that we are on the
very fringes of unconstitutionality, and might well indulge in an
interpretation of the statute which will keep us clearly out of
it.