A-13215, MARCH 18, 1926, 5 COMP. GEN. 731

A-13215, MARCH 18, 1926, 5 COMP. GEN. 731

LEASES - RESTORATION OF PREMISES A COVENANT IN A LEASE AGREEMENT TO SURRENDER A BUILDING IN THE SAME CONDITION AS IT WAS AT THE TIME OF THE EXECUTION OF THE LEASE, NATURAL WEAR AND TEAR EXCEPTED, IS NOT EQUIVALENT TO A COVENANT TO RESTORE, AND DOES NOT REQUIRE THE UNITED STATES TO MAKE GOOD ANY DEPRECIATION DUE TO NATURAL WEAR AND TEAR INCIDENT TO THE USE FOR WHICH THE PREMISES WERE LEASED.

DECISION BY COMPTROLLER GENERAL MCCARL, MARCH 18, 1926:

REVIEW HAS BEEN REQUESTED OF SETTLEMENT NO. M-15162-V, DATED SEPTEMBER 30, 1925, WHEREIN CREDIT WAS DISALLOWED IN THE ACCOUNTS OF CAREY DAWSON, SPECIAL DISBURSING AGENT, UNITED STATES VETERANS' BUREAU, FOR THE SUM OF $330 PAID BY HIM ON VOUCHER 5611, APRIL, 1925, TO THE CLEVELAND LIFE INSURANCE CO. UNDER LEASE DATED MAY 10, 1922.

IT APPEARS THAT ON MAY 10, 1922, A LEASE WAS MADE AND ENTERED INTO BY AND BETWEEN THE CLEVELAND LIFE INSURANCE CO. AND THE UNITED STATES, WHEREBY THE FORMER LEASED TO THE LATTER CERTAIN PREMISES LOCATED IN THE CITY OF EVANSVILLE, IND., FOR THE TERM BEGINNING JULY 1, 1922, AND ENDING JUNE 30, 1923, FOR THE SUM OF $4,409.45, PAYABLE IN EQUAL MONTHLY INSTALLMENTS IN ARREARS. THE LESSOR COVENANTED AND AGREED TO FURNISH TO THE LESSEE FREE OF COST, HEAT, WATER, LIGHT, ELEVATOR, AND JANITOR SERVICE, TOILET AND ITS SUPPLIES, AND AT ITS OWN EXPENSE TO MAKE ALL NECESSARY REPAIRS TO SAID PREMISES DURING THE LIFE OF THE LEASE AND TO MAKE NO STRUCTURAL CHANGES WITHOUT OBTAINING THE WRITTEN CONSENT OF THE LESSEE. ARTICLES 6, 7, AND 8 OF THE LEASE PROVIDED THAT:

ARTICLE 6. THAT AS PART OF THE CONSIDERATION OF THIS AGREEMENT, AND AS PART OF THE RENTAL AGREED TO BE PAID, THE LESSEE SHALL, AFTER THE EFFECTIVE DATE OF THIS LEASE, MAKE AT ITS OWN EXPENSE ALL ALTERATIONS NECESSARY TO FIT THE PREMISES FOR USE AND OCCUPANCY BY THE SAID LESSEE, AND AS MAY BE REQUIRED FROM TIME TO TIME DURING THE LIFE OF THIS AGREEMENT OR ANY RENEWAL THEREOF, TO MAKE MORE EFFICIENT THE WORK AND OPERATION OF THE UNITED STATES VETERANS' BUREAU: PROVIDED, HOWEVER, THAT THE CONSENT IN WRITING OF THE LESSOR SHALL HAVE BEEN OBTAINED PRIOR TO THE UNDERTAKING OF THE ACTUAL WORK OF SUCH ALTERATION. IT IS AGREED BY THE PARTIES HERETO THAT THE LESSEE MAY INSTALL, AT ITS OWN EXPENSE, SPECIAL FIXTURES AND EQUIPMENT AS MAY BE REQUIRED BY THE UNITED STATES VETERANS' BUREAU, SUCH SPECIAL FIXTURES AND EQUIPMENT TO BE FURNISHED AT THE EXPENSE OF THE SAID LESSEE. IT IS FURTHER AGREED THAT THE LESSEE MAY PARTITION THE CORRIDOR AT THE NECESSARY POINT TO PROVIDE WAITING ROOM FACILITIES ON THE FOURTH FLOOR.

ARTICLE 7. THAT UPON THE EXPIRATION OF THIS INSTRUMENT SAID LESSEE WILL RETURN THE DEMISED PREMISES IN LIKE GOOD ORDER AND CONDITION AS WHEN RECEIVED, DEPRECIATION, USE, ORDINARY WEAR AND TEAR, FIRES, AND OTHER UNAVOIDABLE CASUALTIES EXCEPTED; IT BEING UNDERSTOOD AND AGREED, HOWEVER, THAT THE LESSEE SHALL NOT BE LIABLE FOR RENTAL AS PROVIDED IN ARTICLE 2 HEREOF DURING THE TIME REQUIRED TO EFFECT SUCH RESTORATION, IF ANY, AFTER VACATION OF SAID PREMISES BY SAID LESSEE.

ARTICLE 8. THAT ALL FIXTURES, EQUIPMENT, AND IMPROVEMENTS FIXED TO, OR ERECTED, OR PLACED IN OR UPON THE SAID PREMISES BY THE LESSEE, OR AT ITS EXPENSE, SHALL BE AND REMAIN THE EXCLUSIVE PROPERTY OF THE LESSEE.

THE LEASE ALSO CONTAINED THE USUAL WARRANTIES AS TO QUIET ENJOYMENT.

PAYMENT WAS MADE OF THE STIPULATED RENT AND THE PREMISES SURRENDERED TO THE LESSOR AT THE EXPIRATION OF THE TERM. IT APPEARS, HOWEVER, THAT DURING THE OCCUPATION BY THE VETERANS' BUREAU, UNDER THE PROVISIONS OF ARTICLE 6 OF THE LEASE, THERE HAD BEEN INSTALLED CERTAIN ESSENTIAL EQUIPMENT CUSTOMARILY USED IN LIKE UNITS OF THE BUREAU AND THAT THESE FACTORS OF SPECIAL EQUIPMENT IN THEIR INSTALLATION, REQUIRED SPECIAL WIRING AND PREPARATION OF WALLS AS IN THE CASE OF X RAY EQUIPMENT, IN PLUMBING IN CONNECTION WITH HYDROTHERAPY, AND LUMBER FOR SHELVING, THE FOLLOWING EXPENDITURES BEING MADE BY THE BUREAU:

TABLE PLUMBING MATERIAL ------------------------------------------- $73.00 LUMBER ------------------------------------------------------ 80.73 SHEET LEAD -------------------------------------------------- 77.00 ELECTRIC WIRING AND APPLIANCES ------------------------------ 30.40

$261.13

THE REMOVAL OF THE SPECIAL EQUIPMENT (X-RAY, HYDROTHERAPY, ETC.), WAS READILY ACCOMPLISHED BUT AFTER SUCH REMOVAL THERE REMAINED IN PLACE IN THE BUILDING, SHELVING, ELECTRICAL WIRING, PLUMBING, ETC., WHICH HAD BEEN INSTALLED AS ESSENTIAL ADJUNCTS TO THE SPECIAL EQUIPMENT.

THE LESSOR AGREED TO REMOVE THIS WIRING, SHELVING, PLUMBING, ETC., AND TO "PROPERLY RESTORE" THE PREMISES FOR THE SUM OF $330 AND THE SALVAGED MATERIAL, THE SUM TO BE PAID INCLUDING LABOR, COST OF REMOVING PARTITIONS, WIRING, PLUMBING, ETC., AND RESTORING, WALLS, CEILINGS AND FLOORS INCIDENT TO SUCH REMOVAL, TOGETHER WITH THE REPAIR OF ANY EXTRAORDINARY DAMAGE DONE TO THE PREMISES. THE OFFER OF THE LESSOR WAS ACCEPTED BY DIRECTION OF THE DIRECTOR OF THE VETERANS' BUREAU, AND PAYMENT OF THE SUM OF $330 MADE ON VOUCHER 5611, APRIL, 1925, ACCOUNTS OF CAREY DAWSON, SPECIAL DISBURSING AGENT, UNITED STATES VETERANS' BUREAU. WHEN THE ACCOUNTS OF THE SPECIAL DISBURSING AGENT WERE AUDITED, CREDIT FOR THE PAYMENT WAS DISALLOWED ON THE GROUND THAT THE DAMAGES PAID FOR, CAME WITHIN THE MEANING OF THE TERM "USE, ORDINARY WEAR AND TEAR" AS PROVIDED IN ARTICLE 7 OF THE LEASE, AND IT IS THIS ACTION THAT IS REQUESTED TO BE REVIEWED.

IT APPEARS THAT THE WORK FOR WHICH THE PAYMENT IN QUESTION WAS MADE CONSISTED OF THE FOLLOWING ITEMS: REMOVING EQUIPMENT AND FIXTURES INSTALLED BY THE VETERANS' BUREAU; REPLASTERING WHERE THE PLASTERING WAS OFF; PAINTING WALLS AND FLOORS; REPAPERING; PLACING IN ORIGINAL POSITION FIXTURES BELONGING TO THE LESSOR WHICH HAD BEEN REMOVED BY THE UNITED STATES.

THE QUESTION AS TO THE LEGALITY OF THE PAYMENT IS DEPENDENT UPON WHETHER OR NOT THE EXPENSE OF SUCH WORK WAS COVERED BY ARTICLE 7 OF THE LEASE.

THE RIGHTS OF PARTIES IN THE RELATIONSHIP OF LANDLORD AND TENANT ARE GOVERNED BY THE LAW OF THE PLACE WHERE THE DEMISED PREMISES ARE SITUATED. 35 CORPUS JURIS, 957. IN THE INSTANT CASE, THE LEASED PREMISES WERE LOCATED IN THE STATE OF INDIANA AND THE LIABILITY OF A LESSEE UNDER A COVENANT IN A LEASE TO RETURN OR SURRENDER THE LEASED PREMISES IN THE SAME CONDITION AS WHEN LEASED WAS CONSIDERED IN A DECISION OF THE APPELLATE COURT OF INDIANA RENDERED ON APRIL 4, 1923, IN THE CASE OF BURDICK TIRE AND RUBBER COMPANY V. HEYLMAN, ET AL., 138 N.E. 777. IN THAT CASE, THE LESSEE AGREED, AT ITS OWN EXPENSE, TO FURNISH A HEATING SYSTEM AND MAKE OTHER IMPROVEMENTS, BUT NOT TO THE INJURY OR WEAKENING OF THE WALLS OF THE BUILDING, AND AT THE EXPIRATION OF THE TERM TO SURRENDER THE PREMISES IN AS GOOD CONDITION AS WHEN LEASED, NATURAL WEAR AND TEAR EXCEPTED. UPON SURRENDER IT WAS FOUND THAT THE LESSEE HAD CUT HOLES IN THE BASEMENT AND IN THE WALLS AND FLOORS AND HAD REMOVED PART OF THE BASEMENT FLOOR AND PART OF THE CEILING IN ORDER TO INSTALL THE HEATING PLANT AND FIT THE BUILDING FOR THE USE FOR WHICH IT WAS LEASED AND THAT THE BUILDING HAD NOT BEEN RESTORED TO ITS ORIGINAL CONDITION. SUIT WAS BROUGHT AGAINST THE LESSEE FOR THE ESTIMATED COST OF RESTORING THE BUILDING TO ITS ORIGINAL CONDITION, BASED UPON THE COVENANT IN THE LEASE PROVIDING FOR THE SURRENDER OF THE PREMISES IN AS GOOD CONDITION AS WHEN LEASED, AND THE LESSEE WAS HELD NOT LIABLE FOR SUCH COST.

IN RENDERING ITS OPINION THE COURT SAID:

IT WILL BE OBSERVED THAT THERE IS NO COVENANT TO REPAIR OR RESTORE THE BUILDING. THE COVENANT TO SURRENDER THE BUILDING IN THE SAME CONDITION AS IT WAS AT THE TIME OF THE EXECUTION OF THE LEASE, NATURAL WEAR AND TEAR EXCEPTED, IS NOT EQUIVALENT TO A COVENANT TO RESTORE. WAINSCOTT V. SILVERS, 13 IND. 497. IN FACT THE COVENANT TO SURRENDER THE BUILDING AT THE EXPIRATION OF THE LEASE "IN AS GOOD CONDITION AS AT PRESENT, WEAR AND TEAR EXCEPTED," IS BUT AN EXPRESSION OF AN OBLIGATION ON THE PART OF THE APPELLANT (THE LESSEE) WHICH THE LAW WOULD HAVE IMPLIED IF IT HAD BEEN OMITTED FROM THE LEASE.

IT IS THE LAW IN THIS STATE THAT A PROVISION IN A LEASE THAT THE TENANT WILL SURRENDER THE PREMISES AT THE EXPIRATION OF THE TERM IN AS GOOD CONDITION AS WHEN LEASED DOES NOT REQUIRE THE TENANT TO MAKE GOOD THE DEPRECIATION DUE TO SUCH WEAR AND TEAR AS IS INCIDENT TO THE USE FOR WHICH THE PREMISES WERE LEASED.

IN THE INSTANT CASE, THE LESSOR WAS AWARE OF THE USE TO WHICH THE BUILDING WAS TO BE PUT AND EXPRESSLY AGREED THAT THE GOVERNMENT COULD MAKE ALL ALTERATIONS NECESSARY, AS THEY MIGHT BE REQUIRED, TO MAKE MORE EFFICIENT THE WORK AND OPERATION OF THE VETERANS' BUREAU.

THE CASE, THEREFORE, COMES WITHIN THE RULE LAID DOWN BY THE APPELLATE COURT OF INDIANA IN THE ABOVE-CITED CASE, AND THERE WAS NO OBLIGATION ON THE PART OF THE UNITED STATES TO BEAR THE COST OF THE WORK DONE BY THE LESSOR AFTER THE SURRENDER OF THE BUILDING. 4 COMP. GEN. 211.