B-121922, MAY 23, 1955

B-121922: May 23, 1955

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MANSURE: REFERENCE IS MADE TO YOUR LETTER OF APRIL 5. THE CLAIMANT DISPUTES THE ACCURACY OF THE CONCLUSIONS OF THE INDEPENDENT APPRAISERS EMPLOYED BY THE GOVERNMENT AS TO THE FAIR MARKET VALUE OF THE PREMISES HERE INVOLVED AND ASSERTS THAT THE PROPER COMPARISON IS BETWEEN THE CURRENT MARKET VALUE OF THE PREMISES IN THEIR PRESENT CONDITION. THIS IS PRECISELY THE COMPARISON MADE BY THE APPRAISERS. SINCE THE CURRENT MARKET VALUE OF THE BUILDING IN ITS PRESENT CONDITION IS GREATER THAN OR EQUAL TO THIS CONSTRUCTIVE MARKET VALUE OF THE BUILDING IF RESTORED. THE POINT IS OF COURSE NOT MATERIAL. IF THE DIMINUTION OF VALUE RULE AS SET OUT IN THE CASES HEREINAFTER DISCUSSED IS APPLICABLE. THE ISSUE IS CLEARLY MATERIAL IN DETERMINING TO WHAT EXTENT THE VALUE OF THE PROPERTY HAS BEEN DIMINISHED.

B-121922, MAY 23, 1955

PRECIS-UNAVAILABLE

EDMUND F. MANSURE:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 5, 1955, TRANSMITTING, AT THE REQUEST OF ATTORNEYS FOR RADIO SHACK CORPORATION OF BOSTON, THEIR REQUEST FOR RECONSIDERATION OF OUR DECISION OF DECEMBER 16, 1954, B 121922.

THE CORPORATION SUBMITS WITH ITS REQUEST A MEMORANDUM BY WHICH IT TAKES ISSUE WITH THE GOVERNMENT'S ESTIMATES OF RESTORATION COSTS AND OF COMPARATIVE VALUES, AND ATTEMPTS TO SHOW THAT THE AUTHORITIES RELIED ON IN THE ABOVE DECISION, AND IN 28 COMP. GEN. 206, DO NOT SUPPORT THE CONCLUSIONS OF LAW THEREIN REACHED.

THE CLAIMANT DISPUTES THE ACCURACY OF THE CONCLUSIONS OF THE INDEPENDENT APPRAISERS EMPLOYED BY THE GOVERNMENT AS TO THE FAIR MARKET VALUE OF THE PREMISES HERE INVOLVED AND ASSERTS THAT THE PROPER COMPARISON IS BETWEEN THE CURRENT MARKET VALUE OF THE PREMISES IN THEIR PRESENT CONDITION, AND THEIR CURRENT MARKET VALUE IF RESTORED IN ACCORDANCE WITH THE LEASE. THIS IS PRECISELY THE COMPARISON MADE BY THE APPRAISERS, EACH OF WHOM STATED HIS OPINION OF THE FAIR MARKET VALUE OF THE PROPERTY, AS OF JUNE 30, 1954, (1) IN ITS EXISTING CONDITION, AND (2) IN ITS CONDITION AS OF 1946, PRIOR TO THE GOVERNMENT'S OCCUPANCY. ONE ESTIMATED THE PRESENT VALUE AT $50,000 ON EITHER BASIS, WHILE THE OTHER ESTIMATED THAT IT WOULD BE $2,000 LESS IN ITS 1946 CONDITION. SINCE THE CURRENT MARKET VALUE OF THE BUILDING IN ITS PRESENT CONDITION IS GREATER THAN OR EQUAL TO THIS CONSTRUCTIVE MARKET VALUE OF THE BUILDING IF RESTORED, WE MUST CONCLUDE THAT THERE HAS BEEN NO DIMINUTION IN VALUE. THE CLAIMANT DISPUTES THIS CONCLUSION, BUT HAS SUBMITTED NO EVIDENCE TO SUPPORT ANY OTHER.

THE CLAIMANT ALSO QUESTIONS THE MATERIALITY OF THE QUESTION AS TO WHETHER RESTORATION OF THE BUILDING FOR USE AS A BANK IN THE INSTANT CASE WOULD BE A REASONABLE, PRACTICAL OR ECONOMICAL METHOD OF DEALING WITH THE PROPERTY. IF THE CLAIMANT'S ARGUMENT AS TO THE PROPER MEASURES OF DAMAGES BE ACCEPTED, THE POINT IS OF COURSE NOT MATERIAL. HOWEVER, IF THE DIMINUTION OF VALUE RULE AS SET OUT IN THE CASES HEREINAFTER DISCUSSED IS APPLICABLE, THE ISSUE IS CLEARLY MATERIAL IN DETERMINING TO WHAT EXTENT THE VALUE OF THE PROPERTY HAS BEEN DIMINISHED. MOREOVER, WE DO NOT SHARE THE APPARENT OPINION OF THE CLAIMANT'S ATTORNEYS THAT THE FACT THAT CLAIMANT'S PRINCIPAL STOCKHOLDERS ARE ALSO PRINCIPAL STOCKHOLDERS OF A BANK AND THAT BANKS IN BOSTON INCREASINGLY ARE ESTABLISHING DOWNTOWN BRANCHES TENDS TO SHOW THAT RESTORATION WOULD BE A REASONABLE, PRACTICAL OR ECONOMICAL METHOD OF DEALING WITH THE PROPERTY. THEY AT ANY RATE HAVE FAILED EVEN TO SUGGEST THAT THE PROPERTY WOULD HAVE ANY GREATER VALUE, EITHER FOR RENT OR FOR SALE, AS A BANKING HOUSE THAN IT WOULD FOR ANY OTHER PURPOSE FOR WHICH IT IS NOW USABLE.

WITH REGARD TO THE DAMAGE CLAIMED FOR LOSS OF RENT SUBSEQUENT TO THE TERMINATION OF THE LEASE, THE BURDEN WOULD BE UPON THE CLAIMANT - WHETHER IT IS ENTITLED TO RECOVER THE COST OF RESTORATION OR MERELY SUCH DIMINUTION IN VALUE AS IT MAY PROVE - TO ESTABLISH THAT IT MADE REASONABLE EFFORTS TO MINIMIZE THIS LOSS BY ATTEMPTING TO OBTAIN A TENANT. AS TO THIS IT HAS MADE NO SHOWING, AND THE MERE ALLEGATION THAT CLAIMANT'S PRINCIPAL STOCKHOLDERS ARE ALSO PRINCIPAL STOCKHOLDERS OF A BANK AND THAT BANKS IN BOSTON INCREASINGLY ARE ESTABLISHING DOWNTOWN BRANCHES IS NO EVIDENCE EITHER OF EFFORTS TO LEASE THE PROPERTY AS IT IS OR OF INABILITY TO LEASE BECAUSE OF THE NONRESTORATION OF THE PREMISES.

TURNING TO THE LEGAL ISSUE, THE CLAIMANT SEEKS TO DISTINGUISH THE CASE OF CRYSTAL CONCRETE CO. V. TOWN OF BRAINTREE, 309 MASS. 463, 35 N.E. 2D 672, ON THE BASIS THAT THE PLAINTIFF IN THAT CASE SOUGHT RECOVERY FOR THE CONVERSION OF SAND AND GRAVEL AND ALSO FOR THE COST OF FILLING MATERIAL TO TAKE THE PLACE OF THAT REMOVED, WHICH IN EFFECT WAS AN ATTEMPT TO RECOVER TWICE, AND ON THE FURTHER BASIS THAT WHEN ONE LEASES LAND FOR THE REMOVAL OF SAND AND GRAVEL, HE EXPECTS TO BE LEFT WITH A HOLE IN THE GROUND, BUT THAT WHEN ONE LEASES A BANK, HE SHOULD NOT HAVE TO PUT UP WITH SOME OTHER KIND OF BUILDING.

WE ARE UNABLE TO AGREE WITH CLAIMANT'S INTERPRETATION. THE FACT IS THAT, ALTHOUGH THE TOWN HAD LEASED THE PREMISES FOR THE PURPOSE OF REMOVING SAND AND GRAVEL, THE LEASE CONTAINED AN EXPRESS COVENANT PRESCRIBING THE GRADED CONDITION IN WHICH THE PROPERTY SHOULD BE LEFT. THE TOWN NOT ONLY EXCAVATED SO MUCH MATERIAL AS TO MAKE IT IMPOSSIBLE TO LEAVE THE TWO PERCENT GRADE WHICH THE CONTRACT REQUIRED, BUT IT ALSO FAILED TO DO ANY GRADING AT ALL. THE LESSOR ASKED DAMAGES TO COVER THE COST OF DOING PRECISELY WHAT THE CONTRACT REQUIRED THE TOWN TO DO, WHICH NECESSARILY WOULD ENTAIL THE USE OF FILLING MATERIAL. THUS, IN SAYING THAT THE LESSOR COULD NOT RECOVER FOR CONVERSION OF THE MATERIAL AND AT THE SAME TIME RECOVER FOR THE VALUE OF NEW FILLING, THE COURT CLEARLY WAS NOT, AS CLAIMANT'S ATTORNEYS SUGGEST, MAKING AN OBSERVATION "ENOUGH TO DISPOSE OF THE CASE," BUT MERELY WAS POINTING OUT THE ILLOGIC OF THE LESSOR'S DEMAND FOR THE COSTS OF RESTORING THE PREMISES TO THE CONDITION IN WHICH THE CONTRACT REQUIRED THEM TO BE LEFT. THE COURT SPECIFICALLY REJECTED SUCH DEMAND, AND AFFIRMATIVELY DECIDED THAT THE PROPER MEASURE OF DAMAGES WAS THE DIMINUTION IN THE FAIR MARKET VALUE OF THE LEASED PREMISES WHICH RESULTED FROM THE DEFENDANT'S CONDUCT. THE OPINION SHOWS THAT IT DID SO, NOT BECAUSE THE PLAINTIFF WAS SEEKING TO RECOVER TWICE OR BECAUSE THE DIGGING OF SAND AND GRAVEL COULD BE EXPECTED TO LEAVE "A HOLE IN THE GROUND," BUT BECAUSE THE ACTUAL RESTORATION OF THE PROPERTY COULD HAVE INCREASED ITS VALUE ONLY NOMINALLY, AND EXPENDITURE OF LARGE AMOUNTS FOR SUCH A PURPOSE WOULD NOT BE A REASONABLE, PRACTICAL OR ECONOMICAL METHOD OF DEALING WITH IT.

WE THEREFORE CONCLUDE THAT BOTH THE RESULT AND THE RATIONALE THE CRYSTAL CONCRETE CASE SERVE TO MODIFY THE RULE ENUNCIATED BY THE EARLIER MASSACHUSETTS DECISION IN WATRISS V. FIRST NATIONAL BANK OF CAMBRIDGE, 130 MASS. 343, TO REQUIRE THE APPLICATION OF THE DIMINUTION IN VALUE RULE AS THE MEASURE OF DAMAGES WHERE ACTUAL RESTORATION, EITHER OF LAND OR OF IMPROVEMENTS, WOULD NOT BE A REASONABLE, PRACTICAL OR ECONOMICAL MEANS OF DEALING WITH THE PROPERTY, OR WHERE THE ACTUAL COST OF SUCH RESTORATION WOULD BE GREATLY IN EXCESS OF SUCH DIMINUTION.

IT WOULD SERVE NO USEFUL PURPOSE TO ATTEMPT AN EXHAUSTIVE ANALYSIS OF ALL THE CASES CITED IN THE DECISION OF DECEMBER 16, 1954, WHICH THE MEMORANDUM ON BEHALF OF THE CLAIMANT SEEKS TO DISTINGUISH. CONCEDEDLY, THOSE CASES INVOLVE FACTS AND OBLIGATIONS DIFFERING IN VARIOUS WAYS FROM THOSE PRESENT IN THIS CLAIM. HOWEVER, THEY ALL ARE CONCERNED WITH THE DETERMINATION OF THE PROPER MEASURE OF DAMAGES FOR INJURIES TO REAL PROPERTY, AND THEY ALL SUPPORT THE PROPOSITION THAT THE DIMINUTION IN MARKET VALUE OF THE PROPERTY IS A PROPER BASIS FOR THE EVALUATION OF SUCH DAMAGES, WHETHER THE INJURY RESULTED FROM A TORTIOUS TRESPASS OR FROM A BREACH OF A COVENANT OR OTHER CONTRACTUAL OBLIGATION BY AN AUTHORIZED OCCUPANT.

THE THREE FEDERAL CASES CITED BY THE CLAIMANT'S ATTORNEYS FALL FAR SHORT OF ESTABLISHING THE PROPOSITION THAT THE COST OF RESTORATION IS THE TRUE MEASURE OF DAMAGES REGARDLESS OF THE RELATION OF SUCH COST TO THE VALUE OF THE PROPERTY. IN THE JEWELL CASE, 13 FED. CAS. NO. 7302, THE OPINION MOST EXPLICTLY STATES: "THE QUESTION SIMPLY IS, HOW MUCH IS THE BUILDING INJURED BY THE ALTERATIONS?" (MADE BY THE TENANT), AND THE COST OF RESTORING THE BUILDING TO ITS FORMER CONDITION WAS HELD TO BE, NOT THE MEASURE OF DAMAGES, BUT MERELY PERTINENT EVIDENCE TO BE CONSIDERED, ALONG WITH EXPERT OPINIONS OF VALUE, IN DETERMINING THE AMOUNT OF THE INJURY. THE DECISION IN GARRETT V. UNITED STATES, 68 C. CLS. 452, MUST BE READ IN THE LIGHT OF THE COURT'S FINDINGS, ONE OF WHICH WAS THAT THE AMOUNTS ALLOWED "WERE REASONABLE EXPENDITURES FOR THE REMOVAL OF THE BRICK AND CONCRETE *** AND NO PART OF THE SAID $2,715.00 WAS EXPENDED TO DO MORE THAN RESTORE THE SAID PROPERTY TO SAID LIKE GOOD ORDER AND CONDITION, AND SUCH REMOVAL WAS NECESSARY IN ORDER THAT PLAINTIFF MIGHT MAKE APPROPRIATE USE OF HIS PROPERTY." IT IS CLEAR FROM THIS THAT THE COURT GAVE DUE CONSIDERATION TO THE REASONABLENESS OF THE RESTORATION, THE VERY ISSUE WHICH CLAIMANT'S COUNSEL SAY IS NOT MATERIAL. SCHROTH V. UNITED STATES, 74 C. CLS. 396; INVOLVED PRIMARILY THE REPLACEMENT OF FURNITURE AND FURNISHINGS WHICH HAD BEEN DESTROYED OR SERIOUSLY DAMAGED BY USE, AND THE EXPRESSIONS IN THE OPINION AS TO THE OBLIGATION OF THE GOVERNMENT TO RETURN THE PROPERTY AS A HOTEL RATHER THAN A HOSPITAL HAD LITTLE RELEVANCY TO ANY ISSUE ACTUALLY PRESENTED. OF THE TOTAL REPLACEMENT COSTS OF SOME $56,000, ONLY ONE ITEM, OF $3,193.85, HAD ANY RELATION TO ALTERATIONS MADE BY THE GOVERNMENT, AND THAT ONLY TO THE EXTENT THAT IT INCLUDED REPAIRS TO WALLS AND CEILINGS DAMAGED BY THE REMOVAL OF PARTITIONS INSTALLED BY THE GOVERNMENT. EVEN THERE THE COURT COMMENTED ON THE DIFFICULTY OF DETERMINING THE PROPER AMOUNT TO BE AWARDED, REMARKING PARTICULARLY ON THE ABSENCE OF ANY ESTIMATES OF COMPARATIVE VALUE OF THE PROPERTY WHEN TAKEN AND WHEN VACATED.

THE ONLY CONCLUSION THAT CAN PROPERLY BE DRAWN FROM THESE CASES IS THAT THE COURTS ARE CONCERNED IN THE LAST ANALYSIS WITH DETERMINING AS ACCURATELY AS POSSIBLE THE AMOUNT BY WHICH THE PROPERTY OF A LESSOR HAS BEEN DAMAGED BY THE FAILURE OF A TENANT TO PERFORM HIS COVENANTS, AND THAT THE COST OF RESTORATION OF THE PROPERTY IS MERELY ONE EVIDENTIARY FACTOR TO BE TAKEN INTO CONSIDERATION.

THE FOREGOING ANALYSES OF THE CASES INVOLVED SEEM ADEQUATE TO REFUTE THE CLAIMANT'S CRITICISMS AS TO THE VALIDITY OF OUR CONCLUSION THAT THE PROPER MEASURE OF DAMAGES TO BE APPLIED TO ITS CLAIM IS THE DIMINUTION IN FAIR MARKET VALUE, IF ANY, RESULTING FROM THE GOVERNMENT'S FAILURE TO RESTORE THE BUILDING FOR USE AS A BANK. IT IS CONCEDED THAT MANY OF THE OLDER CASES ON THIS ISSUE HELD THAT THE MEASURE OF DAMAGES FOR BREACH OF A COVENANT TO RESTORE IS THE REASONABLE COST OF RESTORATION. THERE ARE NEVERTHELESS CASES EQUALLY APPLICABLE IN WHICH THE COURTS HAVE APPLIED THE DIMINUTION OF VALUE RULE WE HAVE DETERMINED TO BE APPLICABLE. WE ARE NOT REQUIRED, FOR THE PURPOSE OF CONSIDERING THE INSTANT CLAIM, TO DETERMINE WHETHER THESE MORE RECENT CASES REPRESENT AN EMERGENT PATTERN IN JUDICIAL ATTITUDES. IT NEED ONLY BE CONCLUDED THAT THEY CAST SUBSTANTIAL DOUBT UPON THE APPLICABILITY OF THE RULE APPLIED IN THE OLDER CASES. IT HAS LONG BEEN ESTABLISHED THAT IT IS THE RIGHT AND DUTY OF THE ACCOUNTING OFFICERS OF THE GOVERNMENT TO REJECT CLAIMS AS TO THE VALIDITY OF WHICH THEY ARE IN DOUBT, AND THAT IT IS THE BURDEN OF A CLAIMANT TO CLEARLY ESTABLISH THE LEGAL LIABILITY OF THE UNITED STATES AND HIS RIGHT TO PAYMENT. LONGWILL V. UNITED STATES, 17 C. CLS. 288; CHARLES V. UNITED STATES, 19 C. CLS. 316; 18 COMP. GEN. 907; 23 ID. 907 AND 31 ID. 340.

IN THE LIGHT OF THE FACTS OF RECORD AND THE LEGAL AUTHORITIES REFERRED TO WE ARE UNABLE TO CONCLUDE THAT THE INSTANT CLAIMANT HAS CLEARLY ESTABLISHED A LEGAL RIGHT TO PAYMENT OF HIS CLAIM. THE DECISION OF DECEMBER 16, 1954, IS THEREFORE AFFIRMED.