B-174588, MAY 17, 1972

B-174588, MAY 17, 1972

GENERAL GOVERNMENT - LEASE AGREEMENT - RIGHT OF RECISSION - REIMBURSEMENT OF LEASEHOLD EXPENSES DECISION DISALLOWING THE CLAIM OF KEYDATA CORPORATION FOR REIMBURSEMENT OF CERTAIN LEASEHOLD EXPENSES INCIDENT TO THE GENERAL SERVICES ADMINISTRATION'S RECISSION OF A LEASE AGREEMENT WITH THE TRUSTEES OF THE WYMAN STREET TRUST FOR OFFICE SPACE. THE AGENCY RECORD INDICATES THAT GSA NEVER AGREED TO EXTEND THE DATE OF KEYDATA'S OCCUPANCY. IN ANY EVENT, CLAIMANT CONTENDS THAT THE GOVERNMENT HAS NO RIGHT TO RESCIND THE LEASE BECAUSE UNDER MASSACHUSETTS LAW A LANDLORD IS NOT LIABLE FOR ANY WRONGFUL HOLDING OVER BY AN OLD TENANT. SNIDER V. DEBAN, 144 N.E. 69 (1924). HOWEVER, THE INSTANT CASE IS GOVERNED BY FEDERAL RATHER THAN STATE LAW, SINCE THE GOVERNMENT CAN ONLY ACQUIRE PROPERTY THROUGH A CONSTITUTIONAL EXERCISE OF POWER. UNITED STATES V. COUNTY OF ALLEGHENY, 322 U.S. 174 (1943). IT IS THE OPINION OF THE COMP. GEN. THAT A LESSOR'S FAILURE TO PERFORM JUSTIFIES THE LESSEE IN RESCINDING THE AGREEMENT. BROWER MANGET CO. V. EDMONSON, 68 S.E. 543 (1910). ACCORDINGLY, THE GOVERNMENT'S LIABILITY FOR TENANT IMPROVEMENTS TO EITHER THE TRUSTEES OR KEYDATA WAS EXTINGUISHED WHEN CLAIMANT UNJUSTIFIABLY REFUSED TO VACATE THE PREMISES, AND THE CLAIM MUST BE DENIED.

TO GUGGENHEIMER & UNTERMYER:

WE REFER TO YOUR LETTER OF NOVEMBER 18, 1971, AND SUBSEQUENT CORRESPONDENCE, IN WHICH YOU REQUESTED THAT THIS OFFICE REVIEW AND SETTLE THE CLAIM OF YOUR CLIENT, THE KEYDATA CORPORATION (KEYDATA), AGAINST THE UNITED STATES (GENERAL SERVICES ADMINISTRATION (GSA)). GSA FURNISHED US WITH A FULL REPORT AND AN EXPRESSION OF THEIR VIEWS IN A LETTER DATED FEBRUARY 8, 1972, WITH ENCLOSURES. PURSUANT TO YOUR INFORMAL REQUEST, WE PROVIDED YOU WITH A COPY OF GSA'S REPORT TO US. BY LETTER DATED MARCH 8, 1972, YOU FURNISHED US WITH YOUR REBUTTAL REPORT.

IN OCTOBER 1964, KEYDATA ENTERED INTO A LEASE WITH THE TRUSTEES OF THE WYMAN STREET TRUST (TRUSTEES) FOR OFFICE SPACE AT 575 TECHNOLOGY SQUARE, CAMBRIDGE, MASSACHUSETTS. THIS LEASE WAS AMENDED FROM TIME TO TIME, THE LAST SUCH AMENDMENT, AND - ACCORDING TO YOUR LETTER - THE ONLY ONE PERTINENT TO THIS MATTER, HAVING BEEN ENTERED INTO ON MARCH 11, 1968. THIS AMENDMENT PROVIDED THAT THE LEASE WOULD TERMINATE ON MARCH 17, 1968, AS TO 5,980 SQUARE FEET ON THE FIRST FLOOR AND 2,344 SQUARE FEET ON THE THIRD FLOOR. THE AMENDMENT ALSO PROVIDED THAT:

"2. THE LEASE SHALL TERMINATE ON SEPTEMBER 30, 1968 AS TO THE REMAINING 2,093 SQUARE FEET AND THE REMAINING FIVE PARKING SPACES, UNLESS LESSEE AND THE UNITED STATES OF AMERICA (THE 'GOVERNMENT') AGREE UPON AN OTHER DATE NOT EARLIER THAN AUGUST 1, 1968 NOR LATER THAN JANUARY 1, 1969 AND LESSOR IS FURNISHED NOT LESS THAN FIFTEEN (15) DAYS PRIOR WRITTEN NOTICE OF SUCH AGREEMENT, IN WHICH EVENT THE LEASE SHALL TERMINATE ON SUCH DATE SO AGREED UPON AND THE ADDITION TO THE SPACE REFERRED TO IN PARAGRAPH 3 BELOW LEASED TO THE GOVERNMENT SHALL BE EFFECTIVE ON THE DAY FOLLOWING SUCH DATE."

THIS AMENDMENT, WHICH WAS TO BECOME EFFECTIVE SIMULTANEOUSLY WITH AN AMENDMENT TO A LEASE BETWEEN THE TRUSTEES AND THE GOVERNMENT, FURTHER PROVIDED THAT:

"4. LESSOR AGREES TO PAY LESSEE, UPON RECEIPT THEREOF FROM THE GOVERNMENT, THE SUM OF $20,000.00, REPRESENTING A REIMBURSEMENT TO LESSEE FOR CERTAIN LEASEHOLD IMPROVEMENTS PAID FOR BY LESSEE, AND THE SUM OF $39,000.00 FOR A TWENTY-FIVE (25) TON AIR CONDITIONING UNIT WITH ASSOCIATED DUCT WORK, PIPING AND ELECTRICAL WORK, LOCATED IN SAID 2,093 SQUARE FEET ON THE FIRST FLOOR, AND SHOWN ON DRAWING SKH-1, DATED APRIL 8, 1966, ENTITLED 'KEY DATA CORPORATION, 575 TECHNOLOGY SQUARE', ATTACHED HERETO AND MADE A PART HEREOF. LESSOR SHALL NOT BE OBLIGATED TO MAKE EITHER OF SUCH PAYMENTS UNLESS AND UNTIL LESSOR RECEIVES SUCH SUMS FROM THE GOVERNMENT, NOR SHALL LESSOR BE LIABLE TO LESSEE IN ANY EVENT WHATSOEVER SHOULD THE GOVERNMENT FAIL TO DELIVER SUCH SUMS TO LESSOR."

THE UNITED STATES, ACTING THROUGH THE GENERAL SERVICES ADMINISTRATION, ENTERED INTO A LEASE NUMBERED GS-01BPRA)-448, ON SEPTEMBER 16, 1964, WITH THE TRUSTEES WHEREBY THE GOVERNMENT LEASED 105,339 SQUARE FEET OF SPACE IN THE BUILDING AT 575 TECHNOLOGY SQUARE. ON AUGUST 2, 1967, THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA), FOR WHOSE USE THE BUILDING WAS LEASED, REQUESTED AND JUSTIFIED AN ADDITIONAL 10,417 SQUARE FEET OF SPACE IN THE SUBJECT PREMISES. THIS SPACE WAS THEN OCCUPIED BY CHARLES W. ADAMS ASSOCIATES, NOW KEYDATA. ORIGINALLY, THIS SPACE WAS TO BE VACATED BY KEYDATA AND SUBLET FOR USE BY NASA. APPROVAL WAS GRANTED BY THE TRUSTEES FOR SUCH SUBLEASE. HOWEVER, BECAUSE OF RESTRICTIVE PROVISIONS IN THE KEYDATA LEASE, THE SUBLEASE BETWEEN IT AND THE GOVERNMENT WAS NEVER EXECUTED; INSTEAD THE GOVERNMENT AGREED WITH THE TRUSTEES TO AMEND ITS LEASE (I.E., THE LEASE BETWEEN THE TRUSTEES AND THE GOVERNMENT) TO PROVIDE FOR THE ADDITIONAL 10,417 SQUARE FEET WITH THE LESSOR (TRUSTEES) TO CONCURRENTLY TERMINATE THEIR LEASE WITH KEYDATA PURSUANT TO THE ABOVE MENTIONED AMENDMENT TO THEIR LEASE. THEREAFTER, AMENDMENT NO. 7 TO THE GOVERNMENT LEASE WAS PREPARED AND EXECUTED BY THE TRUSTEES AND THE GOVERNMENT. THAT AMENDMENT, WHICH WAS EFFECTIVE ON MARCH 11, 1968, PROVIDES, IN PERTINENT PART:

"(1) EFFECTIVE AS NOTED BELOW THE GOVERNMENT HEREBY LEASES 10,417 SQUARE FEET OF NET USABLE GENERAL OFFICE AND COMPUTER ROOM SPACE MORE SPECIFICALLY AS OUTLINED IN RED ON PLANS IDENTIFIED AS EXHIBITS 'A' AND 'B', COPIES OF WHICH ARE ATTACHED HERETO AND MADE A PART HEREOF:

"5980 SQ. FT. ON FIRST FLOOR (OFFICE) EFFECTIVE 3/18/68

"2344 SQ. FT. ON THIRD FLOOR (OFFICE) EFFECTIVE 3/18/68

"2093 SQ. FT. ON FIRST FLOOR (COMPUTER AREAS) EFFECTIVE 10/1/68*

*UNLESS THE GOVERNMENT AND CHARLES W. ADAMS ASSOCIATES, INC. ('ADAMS') LESSEE OF SUCH SPACE AS OF THE DATE HEREOF, BY NOT LESS THAN FIFTEEN (15) DAYS PRIOR WRITTEN NOTICE ADVISE LESSOR OF AN OTHER DATE, WHICH SHALL BE NOT EARLIER THAN AUGUST 1, 1968 NOR LATER THAN JANUARY 1, 1969, AS THE GOVERNMENT AND ADAMS AGREE UPON, IN WHICH EVENT SUCH DATE SHALL BE THE EFFECTIVE DATE OF THE ADDITION OF SAID 2,093 SQUARE FEET TO THE LEASED PREMISES.

"(5) EFFECTIVE OCTOBER 1, 1968 AND UPON RECEIPT OF AN INVOICE FROM THE LESSOR THE GOVERNMENT SHALL PAY AN ADDITIONAL LUMP SUM PAYMENT OF $39,000 FOR TENANT IMPROVEMENTS IDENTIFIED AS FOLLOWS:

"AIR CONDITIONING EQUIPMENT IN COMPUTER ROOMS INCLUDING ELECTRICAL WIRING AND CABLES*

"DRAPERIES IN ALL AREAS

"THE ABOVE TENANT IMPROVEMENTS SHALL BECOME THE PROPERTY OF THE GOVERNMENT AND OTHERWISE SUBJECT TO THE PROVISIONS OF PARAGRAPH 8 OF THE BASIC LEASE."

IN A LETTER DATED AUGUST 7, 1968, KEYDATA WROTE GSA THAT IT WOULD VACATE THE MAIN COMPUTER ROOM NO LATER THAN JANUARY 1, 1969, IN COMPLIANCE WITH THE LEASE AGREEMENTS, BUT REQUESTED TO BE ADVISED AS TO WHETHER IT COULD CONTINUE TO RENT THE SMALL TELEPHONE ROOM AFTER JANUARY 1, 1969. THE LETTER INDICATED THAT KEYDATA'S PLAN WAS TO VACATE THE MAIN COMPUTER ROOM BY DECEMBER 1, 1968, BUT THAT A CONTINUATION OF THE NEW ENGLAND TELEPHONE STRIKE MIGHT FORCE A MODIFICATION IN ITS PLANS. IN A REPLY DATED SEPTEMBER 30, 1968, TO KEYDATA'S LETTER, THE GOVERNMENT ADVISED THAT IT COULD NOT AGREE TO AN EXTENSION OF KEYDATA'S OCCUPANCY OF ANY PART OF THE PREMISES BEYOND JANUARY 1, 1969.

KEYDATA STATES THAT IT BECAME CLEAR THAT KEYDATA, DUE TO A STRIKE OF SOUTHERN NEW ENGLAND TELEPHONE COMPANY AND OTHER UNAVOIDABLE DELAYS, WOULD NOT BE ABLE TO VACATE THE PREMISES BY JANUARY 1, 1969. KEYDATA STATES THAT AFTER SEVERAL CONVERSATIONS WITH GSA REPRESENTATIVES, GSA AGREED, WITHOUT OBJECTION, TO ALLOW THIS HOLDING OVER. BY A PHONE CALL ON DECEMBER 30, 1968, CONFIRMED IN A LETTER DATED DECEMBER 31, 1968, KEYDATA NOTIFIED GSA THAT THE SUBJECT PREMISES WOULD BE READY FOR OCCUPANCY ON JANUARY 11, 1969. GSA CONVEYED THIS INFORMATION TO NASA WHICH ON DECEMBER 31, 1968, NOTIFIED GSA THAT THIS SCHEDULE WAS NOT ACCEPTABLE AND THAT THE SPACE WAS NO LONGER DESIRED FOR THEIR OCCUPANCY. ACCORDINGLY, IN LETTERS DATED JANUARY 2, 1969, GSA NOTIFIED BOTH KEYDATA AND THE LESSOR THAT THE SPACE COVERED BY AMENDMENT NO. 7 WOULD NO LONGER BE REQUIRED BY THE GOVERNMENT AND THAT THE PROVISIONS OF THAT LEASE AMENDMENT AS THEY PERTAINED TO THE COMPUTER SPACE WERE TO BE CANCELLED ACCORDINGLY.

YOU STATE THAT ON DECEMBER 30, 1968, THE GSA OFFICIAL WITH WHOM KEYDATA WAS DEALING ORALLY AGREED TO AN EXTENSION OF THE KEYDATA DEPARTURE DATE UNTIL JANUARY 10, 1969. YOU STATE THAT "KEYDATA WAS ALLOWED TO RELY ON REPRESENTATIONS THAT IT NEED NOT WORRY ABOUT HOLDING OVER FOR A SHORT TIME PAST JANUARY 1, 1969, ALLOWED TO RELY UNTIL EVERYONE MUST HAVE KNOWN IT WOULD HAVE BEEN PHYSICALLY IMPOSSIBLE FOR THEM TO BE OUT BY JANUARY 1, 1969."

YOU FURTHER STATE ON BEHALF OF YOUR CLIENT:

"AS TO THE LAW, IT IS BEYOND PERADVENTURE THAT A PROSPECTIVE TENANT IN A FACT SETTING SUCH AS THE ONE UNDER DISCUSSION HERE, HAS NO RIGHT TO CANCEL OR RESCIND ITS LEASE WHERE IT FINDS A HOLD OVER TENANT. SHOULD THE NEW TENANT FIND A HOLD OVER TENANT ON HIS PROPERTY, THE APPROPRIATE REMEDY IN MASSACHUSETTS AND THE PREVAILING RULE THROUGHOUT THE COUNTRY IS AN ACTION FOR DAMAGES. THOSE DAMAGES WOULD BE THE NATURAL AND FORESEEABLE DAMAGES ACCRUED AS A RESULT OF KEYDATA'S WRONGFUL HOLDING OVER. IT MIGHT AMOUNT TO THE VALUE OF THE USE OF THE PREMISES FOR THE PERIOD (10 DAYS) OR THERE MIGHT BE SPECIAL DAMAGES WHICH WERE ACTUALLY SUSTAINED AS A RESULT OF THE HOLDING OVER. SEE C.J.S. SECS 315(A). THE MASSACHUSETTS RULE IS STATED SUCCINCTLY IN SNIDER VS. DEBAN, 249 MASS. 59, 144 N.E. 69 (1924). THAT CASE HOLDS THAT IN THE ABSENCE OF EXPRESS PROVISIONS IN THE LEASE WHICH PROVIDE OTHERWISE, THE LANDLORD IS UNDER NO OBLIGATION TO DELIVER POSSESSION OF THE PREMISES WHEN STILL OCCUPIED BY A HOLD OVER TENANT. THE LANDLORD IS NOT LIABLE UNDER THE LEASE FOR ANY WRONGFUL HOLDING OVER BY THE OLD TENANT AND THE NEW TENANT HAS NO RIGHT TO RESCIND. THE ONLY VALID APPROACH FOR THE GOVERNMENT TO HAVE TAKEN WAS FOR IT TO HAVE ASSERTED A CLAIM FOR DAMAGES BY AN ACTION TO EVICT THE HOLD OVER TENANT. THERE WAS NO BASIS IN LAW OR FACT FOR RECISSION."

WITH REGARD TO YOUR CONTENTION THAT THE GSA OFFICIAL WITH WHOM YOU WERE DEALING ORALLY AGREED TO AN EXTENSION OF THE KEYDATA DEPARTURE DATE UNTIL JANUARY 10, 1969, GSA STATES THAT WHILE IT HAD SEVERAL TELEPHONE CONVERSATIONS WITH KEYDATA RELATIVE TO ITS VACATION OF THE PREMISES, IT NEVER AGREED TO EXTEND THE DATE OF OCCUPANCY PAST JANUARY 1, 1969. THE CONTRACTING OFFICER INVOLVED STATES WITH REGARD TO THESE TELEPHONE CONVERSATIONS THAT "IN EACH INSTANCE THEY WERE ADVISED THAT AS SOON AS WE WERE PRESENTED WITH THE FIRM SCHEDULE OF THEIR MOVE WE WOULD CONTACT NASA FOR THEIR COMMENTS IN THE MATTER." GSA ALSO POINTS OUT THAT WHILE KEYDATA STATES THAT A TELEPHONE STRIKE OF THE NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY MADE IT IMPOSSIBLE FOR THEM TO VACATE THE TELEPHONE ROOM IN AN AREA ADJACENT TO THE PROPOSED LEASED PREMISES, SUCH SPACE WAS NOT INCLUDED IN THE PREMISES TO BE LEASED PURSUANT TO AMENDMENT NO. 7. GSA STATES THAT THE STRIKE HAD ABSOLUTELY NOTHING TO DO WITH THE RELATIONSHIP BETWEEN THE LESSOR AND THE GOVERNMENT, OR THE PROPOSED METHOD OF REIMBURSING KEYDATA FOR ITS LEASEHOLD IMPROVEMENTS.

WITH RESPECT TO THE FACTUAL DIFFERENCES IN THE ACCOUNTS GIVEN BY KEYDATA AND BY GSA, THE ABOVE-MENTIONED LETTER OF SEPTEMBER 13, 1968, TENDS TO SUPPORT GSA'S POSITION THAT IT NEVER AGREED TO EXTEND THE DATE OF OCCUPANCY. ALSO, WE HAVE SOME DOUBT THAT THE CONTRACTING OFFICER HAS THE AUTHORITY TO MODIFY ORALLY A CONTRACT DEALING WITH AN INTEREST IN REAL PROPERTY. IN ANY EVENT, WE ARE NOT EQUIPPED TO RESOLVE THE FACTUAL DISPUTE EXISTING IN THE CIRCUMSTANCES. WE ARE, THEREFORE, REQUIRED TO BASE OUR DETERMINATION ON THE FACTS AS REPORTED BY THE AGENCY, I.E., THAT IT NEVER AGREED TO EXTENDING THE DATE OF OCCUPANCY.

WITH REGARD TO YOUR CONTENTION THAT THE GOVERNMENT HAD NO RIGHT TO RESCIND THE LEASE, THE MASSACHUSETTS RULE, AS STATED IN THE CASE OF SNIDER V. DEBAN, 144 N.E. 69 (1924), IS TO THE EFFECT THAT THE LANDLORD IS NOT LIABLE UNDER A LEASE FOR ANY WRONGFUL HOLDING OVER BY AN OLD TENANT AND THAT THE NEW TENANT (IN THE INSTANT CASE THE UNITED STATES) HAS NO RIGHT TO RESCIND THE LEASE. HOWEVER, IT SHOULD BE NOTED THAT WHERE THE UNITED STATES IS PERFORMING ESSENTIAL GOVERNMENTAL FUNCTIONS EMPOWERED BY THE CONSTITUTION, FEDERAL LAW, AND NOT STATE LAW, GOVERNS. THUS, AS THE UNITED STATES SUPREME COURT SAID IN UNITED STATES V. COUNTY OF ALLEGHENY, 322 U.S. 174 AT 182, 88 L. ED. 1209 AT 1217 (1943):

"EVERY ACQUISITION, HOLDING OR DISPOSITION OF PROPERTY BY THE FEDERAL GOVERNMENT DEPENDS UPON THE PROPER EXERCISE OF A CONSTITUTIONAL GRANT OF POWER. ***

"PROCUREMENT POLICIES SO SETTLED UNDER FEDERAL AUTHORITY MAY NOT BE DEFEATED OR LIMITED BY STATE LAW. THE PURPOSE OF THE SUPREMACY CLAUSE WAS TO AVOID THE INTRODUCTION OF DISPARITIES, CONFUSIONS AND CONFLICTS WHICH WOULD FOLLOW IF THE GOVERNMENT'S GENERAL AUTHORITY WERE SUBJECT TO LOCAL CONTROLS. THE VALIDITY AND CONSTRUCTION OF CONTRACTS THROUGH WHICH THE UNITED STATES IS EXERCISING ITS CONSTITUTIONAL FUNCTIONS, THE CONSEQUENCES ON THE RIGHTS AND OBLIGATIONS OF THE PARTIES, THE TITLES OR LIENS WHICH THEY CREATE OR PERMIT, ALL PRESENT QUESTIONS OF FEDERAL LAW NOT CONTROLLED BY THE LAW OF ANY STATE. (CITATIONS OMITTED.)"

SUCH A RULE IS NECESSARY BECAUSE, AS STATED IN CLEAR FIELD TRUST COMPANY V. U.S., 318 U.S. 363 AT 367, 87 L. ED. 838 AT 842 (1943), THE APPLICATION OF STATE LAW IN EACH INDIVIDUAL CASE "WOULD SUBJECT THE RIGHTS AND DUTIES OF THE UNITED STATES TO EXCEPTIONAL UNCERTAINTY. IT WOULD LEAD TO GREAT DIVERSITY IN RESULTS BY MAKING IDENTICAL TRANSACTIONS SUBJECT TO THE VAGARIES OF THE LAWS OF THE SEVERAL STATES. THE DESIRABILITY OF A UNIFORM RULE IS PLAIN." SEE ALSO SANDS V. UNITED STATES, 198 F. SUPP. 880 AT 882 (1960), AFFIRMED 295 F. 2D 481.

IN OUR VIEW, THE BETTER RULE IN LANDLORD-TENANT CASES IS THAT THE FAILURE OR REFUSAL OF THE LESSOR TO PERFORM HIS DUTY OF PUTTING THE LESSEE IN POSSESSION OF THE DEMISED PREMISES JUSTIFIES THE LESSEE IN RESCINDING OR REPUDIATING THE LEASE. THUS, THE COURT IN BROWER-MANGET COMPANY V. EDMONSON, 68 S.E. 453 (1910), STATED AT PAGE 454: " *** THE AMERICAN COURTS GENERALLY HOLD THAT IT IS THE DUTY OF THE LESSEE TO TAKE POSSESSION OF THE LEASED PREMISES WHEN THE LEASE BEGINS, AND IF POSSESSION IS WRONGFULLY WITHHELD THE LESSEE MAY REPUDIATE THE CONTRACT, AND THE LESSOR CANNOT RECOVER RENT, AS THE DATE FIXED FOR POSSESSION IS OF THE ESSENCE OF THE CONTRACT OF LEASE. GEAR, LANDLORD & TENANT, SEC 163."

SEE ALSO, 70 ALR 151, 155; LALEKOS V. MANSET, 47 A. 2D 617 AT 620 (1946); AND BAXLEY V. DAVENPORT, 44 S.E. 2D 388 AT 390 (1947). CF., LORIA'S GARAGE, INC. V. SMITH, 139 A. 2D 430 (1958) AND BARFIELD V. DAMON, 245 P. 2D 1032 (1952) HOLDING THAT THE LANDLORD HAS AN AFFIRMATIVE DUTY TO DELIVER POSSESSION TO HIS TENANTS. MOREOVER, UNDER ALL THE FACTS AND CIRCUMSTANCES IT IS OUR OPINION THAT THE GOVERNMENT WAS ENTITLED TO REPUDIATE AND RESCIND THE PERTINENT LEASE PROVISIONS WITHOUT FIRST MAKING DEMAND OF THE LESSOR FOR THE PREMISES (I.E., THE COMPUTER SPACE). ACCORDINGLY, IT IS OUR VIEW THAT WHEN THE UNITED STATES LEARNED OF KEYDATA'S FAILURE TO VACATE THE PREMISES BY DECEMBER 31, 1968, AS REQUIRED BY THE LEASE, AND THE LESSOR'S RESULTANT INABILITY TO DELIVER THE PREMISES ON JANUARY 1, 1969, THE GOVERNMENT WAS ENTITLED TO RESCIND THE APPLICABLE PORTIONS OF AMENDMENT NO. 7 OF ITS LEASE WITH THE LESSOR (TRUSTEES) WITHOUT LIABILITY FOR DAMAGES.

THE PAYMENT BY THE GOVERNMENT OF $39,000 TO THE TRUSTEES FOR THE 25 TON AIR CONDITIONING UNIT WITH ASSOCIATED DUCT WORK, PIPEING AND ELECTRICAL WORK, AND THE DRAPES WHICH WERE LOCATED IN THE 2,093 SQUARE FEET ON THE FIRST FLOOR, IS INEXTRICABLY TIED IN WITH THE LEASE OF THE 2,093 SQUARE FEET. WHEN THE GOVERNMENT RIGHTFULLY RESCINDED THE PROVISIONS OF THE LEASE AMENDMENT COVERING THE COMPUTER SPACE (THE 2,093 SQUARE FEET ON THE FIRST FLOOR), ITS LIABILITY TO PAY THE LESSOR FOR THE TENANT IMPROVEMENTS INVOLVED WAS EXTINGUISHED. IN OTHER WORDS, WE CANNOT HOLD IN THE INSTANT CASE THAT THE UNITED STATES IS LIABLE TO THE TRUSTEES OR KEYDATA FOR REIMBURSEMENT OF A LEASEHOLD IMPROVEMENT, WHERE THE LEASEHOLD WAS NEVER ACQUIRED BY THE UNITED STATES DUE TO THE FAILURE OF THE CLAIMANT TO VACATE THE PREMISES PURSUANT TO ITS LEASE AGREEMENT WITH THE TRUSTEES. THIS IS ESPECIALLY TRUE SINCE THE GOVERNMENT DID NOT IN ANY WAY ACQUIRE OWNERSHIP OF OR TITLE TO THE TENANT IMPROVEMENTS INVOLVED.

INSOFAR AS CONCERNS THE COURT ORDERED ASSIGNMENT TO KEYDATA OF ANY RIGHTS THE TRUSTEES MIGHT HAVE UNDER THE LEASE TO THE $39,000, KEYDATA AS THE ASSIGNEE WOULD HAVE NO GREATER RIGHTS AGAINST THE GOVERNMENT THAN ITS ASSIGNOR, THE TRUSTEES, EVEN IF SUCH ASSIGNMENT WERE VALID AGAINST THE UNITED STATES. HENCE, IF THE GOVERNMENT IS NOT LIABLE TO THE TRUSTEES FOR THE $39,000, IT WOULD NOT BE LIABLE TO KEYDATA AS ASSIGNEE OF THE TRUSTEES.

IN LIGHT OF THE FOREGOING, KEYDATA'S CLAIM FOR $39,000 FOR THE TENANT IMPROVEMENTS IN QUESTION, IS HEREBY DENIED.