B-49738, JULY 2, 1945, 25 COMP. GEN. 1

B-49738: Jul 2, 1945

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

FORMAL CONDEMNATION PROCEEDINGS FOR THE TAKING OF TEMPORARY USE OF PREMISES OCCUPIED BY TENANTS HAVING VESTED RIGHTS OF REOCCUPANCY AFTER TERMINATION OF THE GOVERNMENT'S USE ARE NOT REQUIRED AS A CONDITION PRECEDENT TO ADMINISTRATIVE EXECUTION OF AGREEMENTS OR LEASES PROVIDING FOR PAYMENT TO TENANTS OF AMOUNTS REPRESENTING THE FAIR MARKET VALUE OF THE TERM REQUIRED BY THE GOVERNMENT. THE ATTORNEY GENERAL IS REQUESTED TO INSTITUTE CONDEMNATION PROCEEDINGS UNDER THE SECOND WAR POWERS ACT TO ACQUIRE A TERM FOR YEARS TERMINATING ON THE LAST DAY OF THE FISCAL YEAR DURING WHICH THE PROCEEDING IS INSTITUTED. LEASES ARE NEGOTIATED FOR THE SAME TERM WITH THE PARTIES IN INTEREST AND THE PROCEEDINGS ARE DISMISSED.

B-49738, JULY 2, 1945, 25 COMP. GEN. 1

PROPERTY - PRIVATE - LEASES OR AGREEMENTS IN SETTLEMENT OF CONDEMNATION PROCEEDINGS FOR TAKING OF TEMPORARY USE LEASES OR AGREEMENTS IN SETTLEMENT OF CONDEMNATION PROCEEDINGS FOR THE TAKING OF TEMPORARY USE OF PREMISES OCCUPIED BY TENANTS HAVING VESTED RIGHTS OF REOCCUPANCY AFTER TERMINATION OF THE GOVERNMENT'S USE MAY BE ADMINISTRATIVELY EXECUTED AT THE FAIR RENTAL VALUE OF THE INTEREST REQUIRED, TAKING INTO CONSIDERATION ITEMS OF CONSEQUENTIAL DAMAGE--- MOVING EXPENSES, ETC.--- PROVABLE UNDER THE PRINCIPLES OF "JUST COMPENSATION" LAID DOWN BY THE SUPREME COURT OF THE UNITED STATES IN UNITED STATES V. GENERAL MOTORS CORPORATION, 323 U.S. 373, BUT THE LEASE OR AGREEMENT SHOULD NOT INCLUDE A SPECIFIC PROVISION FOR THE PAYMENT OF A FIXED SUM REPRESENTING SUCH ITEMS OF PROVABLE DAMAGE. IN CONNECTION WITH THE ADMINISTRATIVE SETTLEMENT OF CONDEMNATION PROCEEDINGS FOR THE TAKING OR TEMPORARY USE OF PREMISES OCCUPIED BY TENANTS HAVING VESTED RIGHTS OF REOCCUPANCY AFTER TERMINATION OF THE GOVERNMENT'S USE, AGREEMENTS MAY BE ENTERED INTO WITH THE TENANTS FOR THE RELEASE OF THEIR RIGHT OF REOCCUPANCY AND A LEASE EXECUTED WITH THE LANDLORD; BUT, FOLLOWING THE PRINCIPLES OF "JUST COMPENSATION" LAID DOWN BY THE SUPREME COURT OF THE UNITED STATES IN UNITED STATES V. GENERAL MOTORS CORPORATION, 323 U.S. 373, THE AMOUNT PAYABLE FOR SUCH A RELEASE MAY NOT BE FIXED AS THE EXACT EQUIVALENT OF REASONABLE MOVING EXPENSES, SUCH EXPENSES BEING FOR CONSIDERATION ONLY AS BEARING ON THE MARKET VALUE OF THE INTEREST TAKEN. FORMAL CONDEMNATION PROCEEDINGS FOR THE TAKING OF TEMPORARY USE OF PREMISES OCCUPIED BY TENANTS HAVING VESTED RIGHTS OF REOCCUPANCY AFTER TERMINATION OF THE GOVERNMENT'S USE ARE NOT REQUIRED AS A CONDITION PRECEDENT TO ADMINISTRATIVE EXECUTION OF AGREEMENTS OR LEASES PROVIDING FOR PAYMENT TO TENANTS OF AMOUNTS REPRESENTING THE FAIR MARKET VALUE OF THE TERM REQUIRED BY THE GOVERNMENT--- REASONABLE MOVING EXPENSES CONSIDERED--- TO WHICH THEY WOULD BE ENTITLED UNDER OR IN SETTLEMENT OF SUCH CONDEMNATION PROCEEDINGS.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE NAVY, JULY 2, 1945:

THERE HAS BEEN RECEIVED A LETTER DATED MAY 9, 1945, REFERENCE ND12/N1- 13 F-5-3/RAG:MS C5-57-SF-4, FROM THE HEAD, REAL ESTATE DIVISION, BUREAU OF YARDS AND DOCKS, NAVY DEPARTMENT, AS FOLLOWS:

IN MANY INSTANCES IN WHICH THE NAVY DEPARTMENT DESIRES IMMEDIATE BUT NOT PERMANENT POSSESSION OF REAL ESTATE FOR THE PROSECUTION OF THE WAR, THE ATTORNEY GENERAL IS REQUESTED TO INSTITUTE CONDEMNATION PROCEEDINGS UNDER THE SECOND WAR POWERS ACT TO ACQUIRE A TERM FOR YEARS TERMINATING ON THE LAST DAY OF THE FISCAL YEAR DURING WHICH THE PROCEEDING IS INSTITUTED. THEREAFTER, IF POSSIBLE, LEASES ARE NEGOTIATED FOR THE SAME TERM WITH THE PARTIES IN INTEREST AND THE PROCEEDINGS ARE DISMISSED. THE EXPERIENCE OF THIS DEPARTMENT HAS BEEN THAT NEARLY ALL SUCH CASES ARE SETTLED IN THIS MANNER.

PAYMENT FOR THE USE OF THE PROPERTY IS BASED UPON THE FAIR RENTAL VALUE. HOWEVER, THE CASE OF THE UNITED STATES V. GENERAL MOTORS CORPORATION (323 U.S. 373, 65 S.1CT. 357) HAS PRESENTED SEVERAL PROBLEMS WHICH AFFECT NEGOTIATIONS FOR LEASES BOTH IN SETTLEMENT OF CONDEMNATION PROCEEDINGS AND ON A VOLUNTARY BASIS WHERE NO CONDEMNATION PROCEEDINGS HAVE BEEN INSTITUTED. IN THAT CASE IT WAS HELD THAT WHERE THE TERM TAKEN IS OF A SHORTER DURATION THAN AN EXISTING LEASE COVERING ALL OR A PORTION OF THE PREMISES TAKEN, THE TENANT IS ENTITLED TO PRESENT AS PART OF THE EVIDENCE ESTABLISHING THE FAIR MARKET VALUE OF THE ESTATE TAKEN,"THE REASONABLE COST OF MOVING OUT THE PROPERTY STORED AND PREPARING THE SPACE FOR OCCUPANCY BY THE SUBTENANT. THAT COST WOULD INCLUDE LABOR, MATERIALS, AND TRANSPORTATION. AND IT MIGHT ALSO INCLUDE THE STORAGE OF GOODS AGAINST THEIR SALE OR THE COST OF THEIR RETURN TO THE LEASED PREMISES.'

THE CASE OF THE " UNITED STATES V. CERTAIN SPACE IN BUILDING KNOWN AS MARSHALL SQUARE BUILDING, LOCATED AT NO. 1182 MARKET STREET, IN THE CITY AND COUNTY OF SAN FRANCISCO, STATE OF CALIFORNIA, ORPHEUM BUILDING CORPORATION, ET AL., " CIVIL NO. 24142-S, INSTITUTED IN THE DISTRICT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA AT THE REQUEST OF THE NAVY DEPARTMENT, IS A TYPICAL EXAMPLE OF THE TYPE OF CASE WITH WHICH THIS LETTER IS CONCERNED. THE PETITION IN CONDEMNATION IN THAT CASE, FILED DECEMBER 21, 1944, STATES THAT THE ESTATE SOUGHT IS "A TERM OF YEARS ENDING JUNE 30, 1945.' TENANT X HAS A LEASE ON CERTAIN ROOMS EXPIRING JUNE 30, 1946. TENANT HAS A LEASE ON CERTAIN ROOMS EXPIRING JUNE 30, 1945, WITH AN OPTION TO RENEW FROM YEAR TO YEAR UNTIL JUNE 30, 1950. TENANT Z HAS A LEASE ON CERTAIN ROOMS EXPIRING JUNE 30, 1950, WITH THE RIGHT TO CANCEL ON JUNE 30 OF ANY YEAR. WHETHER THE PREMISES WILL BE NEEDED BY THE GOVERNMENT SUBSEQUENT TO JUNE 30, 1945 WAS NOT KNOWN AT THE TIME THE PROCEEDINGS WERE FILED AND WILL NOT BE KNOWN UNTIL SHORTLY BEFORE THE TERM EXPIRES. MEANWHILE, THE TENANTS ARE INSISTING ON AND ARE ENTITLED TO SETTLEMENT OR ADJUDICATION OF THEIR INTERESTS ON THE BASIS OF THE PETITION IN CONDEMNATION AS IT NOW STANDS.

THE SUPREME COURT IN THE GENERAL MOTORS CASE ALLOWED PROOF OF MOVING EXPENSES ON THE BASIS THAT THE PREMISES OF THE TENANT ARE "PRESUMABLY TO BE REOCCUPIED AND USED, AS BEFORE, TO THE END OF THE LEASE TERM ON THE TERMINATION OF THE GOVERNMENT'S USE.' THIS ASSUMPTION WAS MADE EVEN THOUGH, IN FACT, THE TENANT MAY FIND IT TO HIS ADVANTAGE NOT TO REOCCUPY THE PREMISES. HE MAY LATER SUBLEASE TO ANOTHER TENANT OR BY CONSENT OF THE OWNER TERMINATE HIS LEASE. NEVERTHELESS, HE IS ALLOWED TO PROVE MOVING EXPENSES. TENANT X IS CLEARLY IN THIS POSITION. THIS DEPARTMENT IS OF THE OPINION THAT TENANTS Y AND Z FOR THE SAME REASON, ARE ENTITLED TO PROVE MOVING EXPENSES. THE FILING OF THE PROCEEDING DOES NOT PREVENT Y FROM EXERCISING HIS OPTION TO EXTEND THE TERM AND DOES NOT COMPEL Z TO CANCEL HIS. TO ASSUME THAT Y AND Z WILL REFUSE TO RENEW AND CANCEL, RESPECTIVELY, IS AS ARBITRARY AND UNFAIR AS TO ASSUME THAT TENANT X AND THE TENANT IN THE GENERAL MOTORS CASE WILL NOT REOCCUPY THE PREMISES. SINCE THE SUPREME COURT REFUSED TO MAKE SUCH AN ASSUMPTION IN THE GENERAL MOTORS CASE, BUT MADE INSTEAD THE OPPOSITE ASSUMPTION, THIS DEPARTMENT BELIEVES THAT THE GOVERNMENT IN DEALING WITH TENANTS SUCH AS Y AND Z IS ENTITLED TO ASSUME THAT, WHATEVER THE ADVISABILITY OF THE MOVES, TENANT Y WILL RENEW HIS LEASE AND TENANT Z WILL NOT CANCEL HIS. IN OTHER WORDS, IT IS BELIEVED THAT THE GOVERNMENT HAS NO RIGHT TO FORCE THE TENANT TO TAKE ONE OF THE TWO ALTERNATIVES HE HAS. CONSEQUENTLY, IT IS BELIEVED THAT TENANTS Y AND Z WOULD BE ENTITLED TO MOVING EXPENSES. THIS CONCLUSION IS SUPPORTED BY THE CASE OF UNITED STATES V. PETTY MOTOR CO. ET AL. (147 F. (2D) 912,) WHERE TENANTS WITH LESS SUBSTANTIAL PROPERTY INTERESTS WERE ALLOWED TO PROVE MOVING EXPENSES.

ALTHOUGH THE COURT IN THE GENERAL MOTORS DECISION HOLDS THAT MOVING EXPENSES, ETC., CONSTITUTE EVIDENCE OF THE FAIR RENTAL VALUE OF THE PROPERTY, A SUBLEASE NEGOTIATED BY THE GOVERNMENT WITH A TENANT IN SETTLEMENT OF THE CONDEMNATION PROCEEDING WOULD NORMALLY PROVIDE A RIGHT FOR THE GOVERNMENT TO RENEW THE TERM OF SUCH LEASE FROM YEAR TO YEAR, AND IT IS APPARENT THAT AS TO MOVING EXPENSES THE TENANT WILL HAVE RECEIVED JUST COMPENSATION WHEN SUCH EXPENSES HAVE ONCE BEEN PAID, AND THEY SHOULD NOT BE INCLUDED IN THE RENTAL FOR ANY RENEWAL TERM. ALTHOUGH IT WOULD BE POSSIBLE TO INCLUDE THE MOVING EXPENSES IN THE RENTAL VALUE FOR THE ORIGINAL TERM AND PROVIDE FOR RENEWAL AT THE FAIR RENTAL VALUE WITHOUT MOVING EXPENSES, A MORE ACCURATE METHOD WOULD BE TO PROVIDE FOR PAYMENT OF THE ACTUAL FAIR RENTAL VALUE DURING THE ORIGINAL TERM AND ANY RENEWAL, AND TO MAKE SEPARATE PROVISION FOR THE PAYMENT OF A FIXED SUM REPRESENTING MOVING EXPENSES AT THE BEGINNING OF THE TERM.

THE FIRST QUESTION IS, THEREFORE, WHETHER THIS DEPARTMENT IN SETTLEMENT OF SUCH PROCEEDING MAY OBTAIN LEASES WITH TENANTS SUCH AS X, Y, AND Z AT THE FAIR RENTAL VALUE WITH SPECIFIC PROVISIONS IN THE LEASES FOR THE PAYMENT OF A FIXED SUM REPRESENTING THE ELEMENTS OF DAMAGE PROVABLE UNDER THE GENERAL MOTORS DECISION?

FREQUENTLY A TENANT IN THE POSITION OF TENANT X, Y OR Z, BEING FORCED TO MOVE FROM THE PREMISES, PREFERS TO HAVE HIS ENTIRE LEASE CANCELLED, WITH THE CONSENT OF THE LANDLORD. THIS WORKS TO THE ADVANTAGE OF THE GOVERNMENT IN THAT THE GOVERNMENT MAY MAKE ONE LEASE WITH THE OWNER WITH A RIGHT OF RENEWAL WHICH MIGHT EXTEND BEYOND THE TERM OF THE SUBLEASE. ALSO AVOIDS THE NECESSITY OF MAKING AND CONTINUING SUBLEASES WITH SEVERAL TENANTS, AND IT AVOIDS A POSSIBLE OBLIGATION ON THE GOVERNMENT TO PAY FOR THE STORAGE OF TENANT'S PROPERTY AND THE COST OF RETURNING THE PROPERTY TO THE PREMISES. HOWEVER, THE TENANT WILL NOT CONSENT TO CANCELLATION OF HIS LEASE IF IT MEANS THAT HE WILL NOT RECEIVE MOVING EXPENSES.

THE SECOND QUESTION IS, THEREFORE, WHETHER AGREEMENTS MAY BE MADE WITH TENANTS SUCH AS X, Y, AND Z WHEREBY A FIXED SUM REPRESENTING THE REASONABLE EXPENSE OF MOVING FROM THE PREMISES WILL BE PAID BY THE GOVERNMENT FOR OBTAINING A RELEASE OF THEIR INTERESTS IN THE PREMISES?

THE THIRD QUESTION IS WHETHER OR NOT SIMILAR AGREEMENTS MAY BE ENTERED INTO IN THE NEGOTIATION OF A LEASE WITHOUT RESORT TO CONDEMNATION PROCEEDINGS WHEN THE CIRCUMSTANCES ARE SUCH THAT A TENANT WOULD BE ENTITLED TO THE PAYMENT OF MOVING EXPENSES IF A CONDEMNATION PROCEEDING WERE INSTITUTED AND WHERE IT APPEARS THAT SUCH AGREEMENTS WOULD SAVE THE EXPENSES AND INCONVENIENCE OF INSTITUTING A PROCEEDING?

BEFORE CONSIDERING THE THREE SPECIFIC QUESTIONS POSED IN THE ABOVE LETTER, IT WOULD APPEAR NECESSARY TO DECIDE WHETHER ANY DISTINCTION IS REQUIRED TO BE MADE WITH RESPECT TO THE RIGHTS OF TENANTS X, Y, AND Z IN APPLYING THE PRINCIPLES OF THE GENERAL MOTORS CASE. IT IS UNDERSTOOD THAT TENANT X HAS A LEASE ON CERTAIN PREMISES EXPIRING ONE YEAR AFTER THE TERMINATION OF THE TERM SPECIFIED IN THE CONDEMNATION PETITION FILED BY THE GOVERNMENT; THAT TENANT Y HAS A LEASE WHICH, THOUGH DUE TO EXPIRE COINCIDENT WITH THE TERM SPECIFIED IN THE CONDEMNATION PETITION, IS RENEWABLE FROM YEAR TO YEAR THEREAFTER FOR 5 YEARS; AND THAT TENANT Z HAS A LEASE WHICH, THOUGH NOT DUE TO EXPIRE FOR 5 YEARS, MAY BE CANCELLED AT THE END OF ANY YEAR. ALSO, IT IS UNDERSTOOD THAT IT WAS NOT KNOWN AT THE TIME CONDEMNATION PROCEEDINGS WERE INSTITUTED WHETHER THE GOVERNMENT WOULD REQUIRE THE USE OF THE PREMISES BEYOND THE TERM SPECIFIED.

THE SUPREME COURT DESCRIBED THE PROBLEM IN THE GENERAL MOTORS CASE AS INVOLVING THE ASCERTAINMENT OF THE JUST COMPENSATION REQUIRED BY THE FIFTH AMENDMENT OF THE CONSTITUTION WHERE ,TEMPORARY OCCUPANCY OF A PORTION OF A LEASED BUILDING IS TAKEN FROM A TENANT WHO HOLDS UNDER A LONG TERM LEASE.' AND IN FURTHER DESCRIBING SUCH PROBLEM, THE COURT STATED--- AFTER DECLARING THAT THE DECISION SHOULD NOT BE INTERPRETED AS A DEPARTURE FROM THE WELL-ESTABLISHED RULE THAT JUST COMPENSATION IN CASES WHERE THE FEE IS TAKEN DOES NOT INCLUDE FUTURE LOSS OF PROFITS, THE EXPENSE OF MOVING REMOVABLE FIXTURES AND PERSONAL PROPERTY FROM THE PREMISES, AND OTHER SIMILAR CONSEQUENTIAL LOSSES:

THE QUESTION POSED IN THIS CASE IS, SHALL A DIFFERENT MEASURE OF COMPENSATION APPLY WHERE THAT WHICH IS TAKEN IS 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? * *

THE PETTY MOTOR COMPANY CASE, CITED IN THE ABOVE LETTER, INVOLVED THE QUESTION OF WHETHER THE TRIAL COURT CORRECTLY ADMITTED EVIDENCE, ON BEHALF OF SEVERAL TENANTS OF A BUILDING IN WHICH THE GOVERNMENT HAD TAKEN A LEASEHOLD INTEREST, OF THE COSTS OF MOVING OUT OF THE BUILDING, REMODELING THE NEW PREMISES, REINSTALLING THEIR EQUIPMENT, AND THE INCREASED RENTS THEY WERE REQUIRED TO PAY. THE COURT, IN AFFIRMING THE TRIAL COURT'S RULING, REFERRED TO THE GENERAL MOTORS CASE AND SAID:

* * * THE DIFFERENCE IN THE GENERAL MOTORS CASE AND THE PRESENT CASE IS THAT IN THE GENERAL MOTORS CASE THE GOVERNMENT WAS CARVING OUT OF A LONG- TERM LEASE OWNED BY GENERAL MOTORS A LEASE FOR A SHORT TERM; WHEREAS, IN THIS CASE THE LEASE ACQUIRED BY THE GOVERNMENT WAS FOR A TERM EXTENDING BEYOND THE EXPIRATION OF THE LEASE OWNED BY EACH OF THE TENANTS, WITH THE EXCEPTION OF THE LEASE OWNED BY THE INDEPENDENT PNEUMATIC TOOL COMPANY, AND POSSIBLY WITH THE EXCEPTION OF THE LEASE OWNED BY THE PETTY MOTOR COMPANY.

* * * THE BASIC PRINCIPLES ANNOUNCED IN THE GENERAL MOTORS CASE ARE NOT CONFINED TO THE NARROW FACTS INVOLVED THEREIN. WE ARE CONVINCED THAT THE PRINCIPLES ANNOUNCED THEREIN ARE CONTROLLING UNDER THE FACTS AS PRESENTED HERE. OTHERWISE, THE GOVERNMENT WOULD IN THIS CASE CONVERT THE FIFTH AMENDMENT FROM A GUARANTEE OF JUST COMPENSATION INTO AN INSTRUMENT OF CONFISCATION.

THE SOUNDNESS OF THE DECISION IN THE PETTY MOTOR COMPANY CASE MIGHT BE OPEN TO SOME QUESTION. THE GENERAL MOTORS DECISION WAS CONFINED SPECIFICALLY TO THE SITUATION WHERE THE GOVERNMENT DOES NOT TAKE THE ENTIRE INTEREST WHICH A TENANT HAS IN THE PREMISES BUT "BY THE FORM OF ITS PROCEEDINGS CHOPS IT INTO BITS, OF WHICH IT TAKES ONLY WHAT IT WANTS, HOWEVER FEW OR MINUTE, AND LEAVES HIM HOLDING THE REMAINDER, WHICH MAY THEN BE ALTOGETHER USELESS TO HIM, REFUSING TO PAY MORE THAN THE ,MARKET RENTAL VALUE" FOR THE USE OF THE CHIPS SO CUT OFF.' AND NOT ONLY WAS THE SAID DECISION SO CONFINED ON THE FACTS, BUT THE REASONING BY WHICH THE COURT ARRIVED AT ITS CONCLUSION APPEARS TO TURN ON THE CIRCUMSTANCE THAT ONLY A PORTION OF THE TENANT'S LEASEHOLD INTEREST WAS TAKEN BY THE GOVERNMENT. WHERE THE GOVERNMENT TAKES THE TENANT'S ENTIRE INTEREST, AS IN THE PETTY MOTOR COMPANY CASE, IT MAY BE THAT THE SAME RULE AS TO CONSEQUENTIAL DAMAGES SHOULD APPLY AS IN THE CASE OF THE TAKING OF A FEE.

HOWEVER, RELIANCE NEED NOT BE PLACED ON THE PETTY MOTOR COMPANY CASE IN DECIDING THE POINT HERE IN ISSUE, SINCE IT APPEARS THAT EACH OF THE TENANTS X, Y, AND Z HAS A VESTED RIGHT TO REOCCUPY THE PREMISES AFTER THE TERMINATION OF THE GOVERNMENT'S TERM. IT WOULD SEEM IMMATERIAL WHETHER SUCH RIGHT IS INCIDENT TO THE LEASE TERM ITSELF OR WHETHER IT IS INCIDENT TO A RIGHT OF RENEWAL GRANTED UNDER SUCH LEASE. MOREOVER, ALTHOUGH THERE MIGHT BE SOME DOUBT WHETHER A TENANT WHOSE RIGHT TO REOCCUPY THE PREMISES TAKEN IS LIMITED TO A COMPARATIVELY SHORT PERIOD OF TIME, ACTUALLY WILL EXERCISE SUCH RIGHT--- UNLESS HE IS ABLE, IN THE MEANTIME, TO OBTAIN ASSURANCE OF A LONGER TERM OF OCCUPANCY--- I WOULD NOT BE INCLINED TO REQUIRE THAT A DISTINCTION BE MADE WITH RESPECT TO SUCH TENANTS FOR THE PURPOSES HERE INVOLVED. IN OTHER WORDS, TENANTS IN THE CLASSES OF X, Y, AND Z MAY BE CONSIDERED AND TREATED ALIKE IN THE EXECUTION OF OTHERWISE PROPER LEASES AND AGREEMENTS DESIGNED TO SECURE FOR THE GOVERNMENT POSSESSION OF NECESSARY PREMISES. THE FIRST QUESTION POSED IN THE ABOVE LETTER IS WHETHER THE NAVY DEPARTMENT PROPERLY MAY SETTLE CONDEMNATION PROCEEDINGS BY THE EXECUTION OF LEASES WITH TENANTS SUCH AS X, Y, AND Z AT THE FAIR RENTAL VALUE FOR THE TERM AND INCLUDE THEREIN SPECIFIC PROVISIONS FOR THE PAYMENT OF A FIXED SUM REPRESENTING ELEMENTS OF DAMAGE PROVABLE UNDER THE GENERAL MOTORS DECISION. IN THIS CONNECTION, IT IS SIGNIFICANT TO NOTE THAT IN THAT DECISION THE SUPREME COURT STATED THAT CERTAIN ITEMS COULD BE PROVED "NOT AS INDEPENDENT ITEMS OF DAMAGE BUT TO AID IN THE DETERMINATION WHAT WOULD BE THE USUAL--- THE MARKET--- PRICE WHICH WOULD BE ASKED AND PAID FOR SUCH TEMPORARY OCCUPANCY OF THE BUILDING THEN IN USE UNDER A LONG-TERM LEASE.' OF COURSE, IT MAY BE THAT THIS BASIS FOR ADMITTING EVIDENCE OF SUCH DAMAGE WILL PROVE MORE THEORETICAL THAN PRACTICAL SINCE IT SEEMS PROBABLE THAT A JURY MERELY WILL INCORPORATE INTO ITS VERDICT A LIQUIDATED SUM COVERING SUCH DAMAGE. HOWEVER, WHERE SETTLEMENT OF CONDEMNATION PROCEEDINGS IS UNDERTAKEN ADMINISTRATIVELY, IT WOULD SEEM THAT THE PRINCIPLES LAID DOWN BY THE SUPREME COURT SHOULD BE ADHERED TO AS CLOSELY AS POSSIBLE AND THAT REASONABLE MOVING EXPENSES, ETC., SHOULD BE CONSIDERED ONLY AS BEARING ON THE MARKET VALUE OF THE INTEREST TAKEN. FOR THAT REASON, THE PROPOSAL TO INCLUDE IN LEASES EXECUTED IN SETTLEMENT OF CONDEMNATION PROCEEDINGS, SPECIFIC PROVISIONS FOR THE PAYMENT OF A FIXED SUM REPRESENTING THE ELEMENTS OF DAMAGE PROVABLE UNDER THE GENERAL MOTORS DECISION, WOULD APPEAR OBJECTIONABLE.

THE SECOND QUESTION INVOLVES WHAT IS, IN EFFECT, A PROPOSAL TO PURCHASE FROM TENANTS THEIR RIGHT TO REOCCUPY THE PREMISES AFTER USE BY THE GOVERNMENT AND TO PAY FOR SUCH RIGHT A FIXED SUM REPRESENTING THE REASONABLE COST OF MOVING FROM THE PREMISES. IN SUCH CASES A LEASE COVERING THE ABOVE PREMISES WOULD BE EXECUTED WITH THE OWNER OF THE BUILDING AND WOULD PROVIDE FOR THE PAYMENT OF A FAIR RENTAL RATE FOR THE TERM SPECIFIED IN SUCH LEASE. THE SAME PRINCIPLE CONTROLS THE ANSWER TO THIS QUESTION AS IN THE CASE OF THE FIRST QUESTION. THAT IS TO SAY, REASONABLE MOVING EXPENSES, BEING FOR CONSIDERATION ONLY AS AFFECTING THE VALUE OF THE PROPERTY RIGHT TAKEN, DO NOT NECESSARILY CONSTITUTE THE EXACT EQUIVALENT OF WHAT THE TENANT'S RIGHT TO REOCCUPY IS WORTH. CONSEQUENTLY, ALTHOUGH THERE WOULD APPEAR TO BE NO OBJECTION TO THE EXECUTION OF SEPARATE AGREEMENTS WITH THE TENANTS WHEREBY RELEASES OF THEIR INTERESTS IN THE PREMISES WOULD BE OBTAINED, THE AMOUNTS PAYABLE THEREFOR SHOULD BE FIXED IN ACCORDANCE WITH THE PRINCIPLES ABOVE STATED.

THE THIRD AND FINAL QUESTION IS ANSWERED IN THE AFFIRMATIVE, THERE APPEARING NO LOGICAL REASON FOR REQUIRING THE INSTITUTION OF FORMAL CONDEMNATION PROCEEDINGS AS A CONDITION PRECEDENT TO THE EXECUTION OF AGREEMENTS OR LEASES PROVIDING FOR PAYMENT TO TENANTS OF AMOUNTS TO WHICH THEY WOULD BE ENTITLED UNDER, OR IN THE SETTLEMENT OF, SUCH CONDEMNATION PROCEEDINGS.