B-34851, JUNE 17, 1943, 22 COMP. GEN. 1112

B-34851, JUNE 17, 1943, 22 COMP. GEN. 1112

ADVANCE PAYMENT PROHIBITION AND RENTAL, ETC., LIMITATIONS AS APPLYING TO REQUISITIONED PROPERTY THE PROVISIONS IN SECTION 322 OF THE ECONOMY ACT, AS AMENDED, THAT RENTALS OF LEASED PREMISES SHALL NOT EXCEED 15 PERCENT OF THE FAIR MARKET VALUE THEREOF, AND THAT ALTERATIONS, IMPROVEMENTS AND REPAIRS OF SUCH PREMISES SHALL NOT EXCEED 25 PERCENT OF THE FIRST YEAR'S RENTAL, ARE NOT APPLICABLE IN CASES WHERE THE USE OF THE PROPERTY IS ACQUIRED BY THE GOVERNMENT THROUGH CONDEMNATION PROCEEDINGS UNDER AUTHORITY OF SECTION 201 OF THE SECOND WAR POWERS ACT, 1942. RENTAL PAYMENTS REQUIRED UNDER A CONDEMNATION AWARD IN CONNECTION WITH THE USE OF PROPERTY REQUISITIONED BY THE GOVERNMENT UNDER AUTHORITY OF SECTION 201 OF THE SECOND WAR POWERS ACT, 1942, MAY, IN VIEW OF THE ADVANCE PAYMENT PROHIBITION OF SECTION 3648, REVISED STATUTES, BE MADE IN ADVANCE ONLY TO THE EXTENT NECESSARY TO SATISFY THE AWARD FOR THE INTERESTS CONDEMNED.

COMPTROLLER GENERAL WARREN TO THE LIAISON OFFICER FOR EMERGENCY MANAGEMENT, JUNE 17, 1943:

I HAVE YOUR LETTER OF MAY 29, 1943, AS FOLLOWS:

SECTION 2 OF TITLE II OF THE SECOND WAR POWERS ACT, 1942, APPROVED MARCH 27, 1942, PROVIDES IN PART:

"THE SECRETARY OF WAR, THE SECRETARY OF THE NAVY, OR ANY OTHER OFFICER, BOARD, COMMISSION, OR GOVERNMENTAL CORPORATION AUTHORIZED BY THE PRESIDENT, MAY ACQUIRE BY PURCHASE, DONATION, OR OTHER MEANS OF TRANSFER, OR MAY CAUSE PROCEEDINGS TO BE INSTITUTED IN ANY COURT HAVING JURISDICTION OF SUCH PROCEEDINGS, TO ACQUIRE BY CONDEMNATION, ANY REAL PROPERTY, TEMPORARY USE THEREOF, OR OTHER INTEREST THEREIN, TOGETHER WITH ANY PERSONAL PROPERTY LOCATED THEREON OR USED THEREWITH, THAT SHALL BE DEEMED NECESSARY, FOR MILITARY, NAVAL, OR OTHER WAR PURPOSES, SUCH PROCEEDINGS TO BE IN ACCORDANCE WITH THE ACT OF AUGUST 1, 1888 (25 STAT. 357), OR ANY OTHER APPLICABLE FEDERAL STATUTE, AND MAY DISPOSE OF SUCH PROPERTY OR INTEREST THEREIN BY SALE, LEASE, OR OTHERWISE, IN ACCORDANCE WITH SECTION 1 (B) OF THE ACT OF JULY 2, 1940 (54 STAT. 712). UPON OR AFTER THE FILING OF THE CONDEMNATION PETITION, IMMEDIATE POSSESSION MAY BE TAKEN AND THE PROPERTY MAY BE OCCUPIED, USED, AND IMPROVED FOR THE PURPOSES OF THIS ACT, NOTWITHSTANDING ANY OTHER LAW * * *.'

PURSUANT TO THE AUTHORITY VESTED IN THE PRESIDENT BY THIS ACT, EXECUTIVE ORDER 9211, DATED AUGUST 1, 1942, WAS ISSUED. THIS EXECUTIVE ORDER READS AS FOLLOWS:

"BY VIRTUE OF AND PURSUANT TO THE AUTHORITY VESTED IN ME BY TITLE II OF THE SECOND WAR POWERS ACT, 1942, APPROVED MARCH 27, 1942 ( PUBLIC LAW 507, 77TH CONGRESS), THE DIVISION OF CENTRAL ADMINISTRATIVE SERVICES IN THE OFFICE FOR EMERGENCY MANAGEMENT, EXECUTIVE OFFICE OF THE PRESIDENT, IS HEREBY AUTHORIZED TO EXERCISE THE AUTHORITY CONTAINED IN THE SAID TITLE II OF THE SECOND WAR POWERS ACT, 1942, TO ACQUIRE, USE, OR DISPOSE OF ANY LEASEHOLD IN REAL PROPERTY, TOGETHER WITH ANY PERSONAL PROPERTY LOCATED THEREON, OR USED THEREWITH, THAT THE DIVISION OF CENTRAL ADMINISTRATIVE SERVICES WITH THE APPROVAL OF THE LIAISON OFFICER FOR EMERGENCY MANAGEMENT, SHALL DEEM NECESSARY FOR WAR PURPOSES.'

UNDER THE AUTHORITY VESTED IN THIS OFFICE BY THIS EXECUTIVE ORDER, THE DIVISION OF CENTRAL ADMINISTRATIVE SERVICES IN ACQUIRING QUARTERS FOR THE CONSTITUENT AGENCIES WHICH IT IS SERVICING HAS FOUND IT NECESSARY FROM TIME TO TIME TO PROCEED IN CONDEMNATION IN ORDER TO GAIN IMMEDIATE OCCUPANCY OF THE QUARTERS SOUGHT TO BE ACQUIRED.

WHILE, NORMALLY, IMMEDIATE OCCUPANCY IS GRANTED BY COURT ORDER, THE CONDEMNATION AWARD IS DEFERRED FOR A CONSIDERABLE LENGTH OF TIME. IN MANY CASES WHEN THE CONDEMNATION AWARD IS GRANTED, AN APPEAL IS TAKEN BY THE GOVERNMENT WHICH NECESSITATES A FURTHER DELAY. THE DELAY IN THE CONDEMNATION AWARD HAS CAUSED SEVERAL ACUTE ADMINISTRATIVE PROBLEMS. UNDER SECTION 322 OF THE ECONOMY ACT OF JUNE 30, 1932, THE GOVERNMENTAL AGENCIES ARE LIMITED IN REPAIRS, ALTERATIONS, AND IMPROVEMENTS. IN SOME INSTANCES IT IS IMPRACTICABLE TO DEFER THE REPAIRS, ALTERATIONS, AND IMPROVEMENTS UNTIL THE AWARD IS MADE SINCE THE PREMISES CANNOT BE USED IN THE CONDITION IN WHICH THEY ARE OBTAINED.

THERE IS ALSO FOR CONSIDERATION THE FACT THAT THE CONDEMNATION AWARD MAY, IN SOME CASES EXCEED THE FIFTEEN PERCENT RENTAL LIMITATION CONTAINED IN SECTION 322 OF THE ECONOMY ACT. FURTHER, SINCE THE CONDEMNATION AWARD COVERS COMPENSATION FOR THE ENTIRE ESTATE WHICH IS ACQUIRED UNDER THE CONDEMNATION PROCEEDINGS, IT GENERALLY COVERS ADVANCE PAYMENT FOR RENT WHICH IS NORMALLY PROHIBITED UNDER THE PROVISIONS OF REVISED STATUTE 3648.

ACCORDINGLY, WE WOULD APPRECIATE YOUR REPLIES TO THE FOLLOWING QUERIES:

(1) WHERE THE CONDEMNATION AWARD IS IN EXCESS OF FIFTEEN PERCENT OF THE FAIR MARKET VALUE OF THE PREMISES ACQUIRED, IS THE RESTRICTION CONTAINED IN SECTION 322 OF THE ECONOMY ACT SUPERSEDED BY THE COURT AWARD, (2) WHERE THE CONDEMNATION AWARD REQUIRES ADVANCE PAYMENT FOR RENTAL, DOES SUCH AN AWARD SUPERSEDE THE PROVISIONS OF REVISED STATUTES 3648, AND (3) WHERE THE CONDEMNATION AWARD IS DEFERRED AND IT IS IMPERATIVE THAT REPAIRS, ALTERATIONS, AND IMPROVEMENTS BE MADE TO MAKE THE PREMISES SUITABLE FOR OCCUPANCY, MAY SUCH REPAIRS, ALTERATIONS, AND IMPROVEMENTS BE MADE WITHOUT REGARD TO THE RESTRICTIONS OF THE ECONOMY ACT? IF THE ANSWER TO QUESTION THREE IS IN THE AFFIRMATIVE, WHAT ARE THE LIMITATIONS, IF ANY, FOR SUCH EXPENDITURES?

IN RESPECT TO THE FIRST QUESTION, THIS OFFICE IS OF THE OPINION THAT WHERE SPACE IS ACQUIRED BY CONDEMNATION THAT THE RESTRICTION IN SECTION 322 OF THE ECONOMY ACT IS NOT FOR APPLICATION. THIS CONCLUSION IS PREDICATED ON THE PREMISE THAT A CONDEMNATION AWARD IS A JUDICIAL DETERMINATION OF ,JUST COMPENSATION" WITHIN THE PURVIEW OF THE "JUST COMPENSATION CLAUSE" OF THE FIFTH AMENDMENT TO THE CONSTITUTION OF THE UNITED STATES. SINCE THE DETERMINATION OF WHAT CONSTITUTES "JUST COMPENSATION" IS A JUDICIAL MATTER UNDER WHICH CONGRESS IS NOT EMPOWERED TO LEGISLATE, IT WOULD APPEAR THAT THE APPLICATION OF THE RESTRICTION IN THE ECONOMY ACT, TO SPACE ACQUIRED THROUGH CONDEMNATION PROCEEDINGS, WOULD CONSTITUTE A LEGISLATIVE LIMITATION UNDER A JUDICIAL DETERMINATION OF "JUST COMPENSATION.' MOREOVER WE FEEL THAT THE PROVISIONS OF SECTION 322 OF THE ECONOMY ACT WAS INTENDED TO APPLY ONLY UNDER NORMAL LEASING PROCEDURE.

SINCE SEVERAL CASES INVOLVING THESE QUESTIONS ARE PENDING IN THIS OFFICE, WE WOULD APPRECIATE AN EARLY REPLY.

SECTION 322 OF THE ECONOMY ACT OF JUNE 30, 1932, 47 STAT. 412, PROVIDES AS FOLLOWS:

HEREAFTER NO APPROPRIATION SHALL BE OBLIGATED OR EXPENDED FOR THE RENT OF ANY BUILDING OR PART OF A BUILDING TO BE OCCUPIED FOR GOVERNMENT PURPOSES AT A RENTAL IN EXCESS OF THE PER ANNUM RATE OF 15 PERCENTUM OF THE FAIR MARKET VALUE OF THE RENTED PREMISES AT DATE OF THE LEASE UNDER WHICH THE PREMISES ARE TO BE OCCUPIED BY THE GOVERNMENT NOR FOR ALTERATIONS, IMPROVEMENTS, AND REPAIRS OF THE RENTED PREMISES IN EXCESS OF 25 PERCENTUM OF THE AMOUNT OF THE RENT FOR THE FIRST YEAR OF THE RENTAL TERM, OR FOR THE RENTAL TERM IF LESS THAN ONE YEAR: PROVIDED, THAT, THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO LEASES HERETOFORE MADE, EXCEPT WHEN RENEWALS THEREOF ARE MADE HEREAFTER, NOR TO LEASES OF PREMISES IN FOREIGN COUNTRIES FOR THE FOREIGN SERVICES OF THE UNITED STATES.

SAID SECTION WAS AMENDED BY THE ACT OF MARCH 3, 1933, 47 STAT. 1517, RESTRICTING APPLICATION OF ITS PROVISIONS "AS APPLICABLE TO RENTALS" TO LEASES "WHERE THE RENTAL TO BE PAID SHALL EXCEED $2,000 PER ANNUM.' SEE, ALSO, THE ACT OF APRIL 28, 1942, 56 STAT. 247, PUBLIC LAW 530, SUSPENDING THE APPLICATION OF SECTION 322 DURING THE PRESENT EMERGENCY UNDER CERTAIN CONDITIONS AND LIMITATIONS.

GENERALLY, THE WORD "PROPERTY" AS USED IN THE FIFTH AMENDMENT OF THE CONSTITUTION INCLUDES NOT ONLY THE FEE, BUT ALSO LIFE ESTATES, TERMS FOR YEARS, TENANCIES FROM YEAR TO YEAR, AND SUBTENANCIES. STUBBS V. UNITED STATES, 21 F.1SUPP. 1007; CALLISON V. WABASH RY. CO., 275 S.W. 965; DUCKETT AND CO. V. UNITED STATES, 266 U.S. 149; KOHL ET AL. V. UNITED STATES, 91 U.S. 367; WM. WRIGLEY JR., CO. V. UNITED STATES, 75 C.1CLS. 569; CLARK V. UNITED STATES, 67 C.1CLS. 337; UNITED STATES V. FOUR PARCELS OF LAND, 20 F.1SUPP. 306; MILLS V. SAMUELS, 118 N.E. 861; BOTELER V. PHILADELPHIA AND READING TERMINAL R. CO., 30 ATL. 303. EVER SINCE THE DECISIONS OF THE SUPREME COURT OF THE UNITED STATES IN THE CASES DUCKETT AND CO. V. UNITED STATES, SUPRA, AND PHELPS V. UNITED STATES, 274 U.S. 341, IT HAS BEEN SETTLED LAW THAT THE USE OF PROPERTY CAN BE TAKEN AS WELL AS THE TITLE TO PROPERTY. HOWEVER, IT HAS BEEN HELD THAT WHERE THE LEASE CONTAINS AN "EMINENT DOMAIN" CLAUSE PROVIDING THAT IN THE EVENT OF TAKING THE LEASE SHALL TERMINATE, THE LESSEE HAS NO PROPERTY RIGHT TO COMPENSATION UPON A TAKING. UNITED STATES V. INLOTS, 26 FED. CASES 490; P. L. ANDREWS V. UNITED STATES, 86 C.1CLS. 282.

WITH RESPECT TO OTHER POSSESSORY ESTATES OF LESSER DIGNITY, SUCH AS TENANCIES AT WILL OR AT SUFFERANCE OR OF LICENSEES HOLDING UNDER LICENSES REVOCABLE AT WILL, IT HAS BEEN HELD THAT SUCH ESTATES ARE NOT PROPERTY AND THAT THE HOLDERS ARE NOT ENTITLED TO COMPENSATION UNDER THE FIFTH AMENDMENT. HANNA V. COUNTY OF HAMPDEN, 145 N.E. 258; TATE V. STATE HIGHWAY COMMISSION, 49 S.W. (2D) 282. SHAABER V. CITY OF READING, 24 ALT. 692; UNITED STATES V. CHANDLER-DUNBAR WATER POWER ., 229 U.S. 53, 71. SEE ALSO, POTOMAC ELECTRIC POWER CO. V. UNITED STATES, 85 F. (2D) 243, 248, CERTIORARI DENIED, 299 U.S. 565, CHARLES L. BARNES V. UNITED STATES, 46 C.1CLS.

WHILE LEASEHOLDS ARE NOT OFTEN BOUGHT AND SOLD BY THEMSELVES, IT APPEARS THAT IN SOME CASES THE PRACTICE HAS BEEN IN MEASURING THE DAMAGES OF THE LESSEE TO SUBTRACT FROM THE MARKET VALUE OF THE UNEXPIRED PORTION OF HIS TERM THE AMOUNT OF RENT HE WOULD OTHERWISE HAVE HAD TO PAY AND THE ACTUAL EXPENSES OF OPERATION WHICH HE HAS BEEN SAVED. PHELPS V. UNITED STATES, 81 C.1CLS. 646; THERMAL SYNDICATE, LTD. V. UNITED STATES, ID. 446; WM. WRIGLEY, JR., CO. V. UNITED STATES, SUPRA; PRINCE LINE LTD. V. UNITED STATES, 283 F. 535, APP. DISM. 263 U.S. 727. AND, IT HAS BEEN HELD THAT IF THE LESSEE'S OBLIGATION IS SUCH THAT HE CONTINUES TO PAY RENT TO THE LESSOR, HE IS ALSO ENTITLED TO RECOVER THE AMOUNT OF SUCH OBLIGATION. PHELPS V. UNITED STATES, SUPRA; SEE ALSO, JOHNSON V. UNITED STATES, 2 C.1CLS. 391, 415. IN ANY EVENT, THE GOVERNMENT CANNOT TAKE PRIVATE PROPERTY WITHOUT JUST COMPENSATION, AND IT HAS BEEN HELD THAT JUST COMPENSATION IS MEASURED BY THE MARKET VALUE OF THE PROPERTY TAKEN BUT THAT IT DOES NOT INCLUDE CONSEQUENTIAL DAMAGES, 22 COMP. GEN. 877; WM. WRIGLEY, JR., CO. V. UNITED STATES AND PRINCE LINE LIMITED V. UNITED STATES, SUPRA; GERSHON BROS. CO. V. UNITED STATES, 284 F. 849.

THE RIGHT TO COMPENSATION IS A CONSTITUTIONAL RIGHT WHICH MAY NOT BE LIMITED OR MODIFIED BY ANY STATUTORY RESTRICTION; AND WHILE AS INDICATED ABOVE JUST COMPENSATION IS BASED ON THE FAIR VALUE OF THE LEASE OR USE REQUISITIONED AT THE TIME OF TAKING, SUCH COMPENSATION MAY NOT BE RESTRICTED TO A PAYMENT BY THE UNITED STATES OF 15 PERCENT OF THE FAIR VALUE OR THE FAIR MARKET VALUE. ACTS OF CONGRESS ARE TO BE CONSTRUED AND APPLIED IN HARMONY WITH AND NOT TO THWART THE PURPOSE OF THE CONSTITUTION. PHELPS V. UNITED STATES, SUPRA. MOREOVER, THE LANGUAGE OF SECTION 2 OF THE ACT OF JULY 2, 1917, AS AMENDED BY THE ACT OF MARCH 27, 1942, QUOTED IN YOUR LETTER, NEGATIVES THE IDEA IT WAS INTENDED TO BE SUBJECT TO THE RESTRICTIONS OF SECTION 322 OF THE ECONOMY ACT. AS THE RENT AUTHORIZED UNDER THE ECONOMY ACT AND THE MEASURE OF COMPENSATION TO BE PAID THE TENANT OF A LEASEHOLD OR FOR A USE TAKEN BY THE GOVERNMENT ARE DETERMINED BY DIFFERENT FACTORS IT MAY BE, AS STATED IN YOUR LETTER, THAT IN SOME CASES THE CONDEMNATION AWARD WILL EXCEED THE 15 PERCENT RENTAL LIMITATION OF SECTION 322 OF THE ECONOMY ACT. SAID ACT IS FOR APPLICATION IN CASES WHERE THE LEASE IS ENTERED INTO ON A VOLUNTARY BASIS AS DISTINGUISHED FROM AN OCCUPANCY RESULTING FROM AN INVOLUNTARY TAKING AS AUTHORIZED UNDER SECTION 201, TITLE II, SECOND WAR POWERS ACT, 1942, 56 STAT. 177, QUOTED IN PART IN YOUR LETTER. AS STATED IN BENEDICT V. UNITED STATES, 271 F. 715, 719, AFFIRMED ( C.C.A.) 280 F. 76---

A REQUISITION, LIKE A TAKING BY EMINENT DOMAIN, IS NOT A TAKING UNDER AGREEMENT. ACQUIESCENCE, ON THE PART OF A LOYAL CITIZEN TO THE TAKING OF HIS PROPERTY BY THE SOVEREIGN IS NOT THE EQUIVALENT OF THE MAKING OF A CONTRACT, OR THE ENTERING INTO AN AGREEMENT, IN THE LEGAL SENSE OF THAT TERM, FOR THE OBTAINING OF THE PROPERTY IN QUESTION. A REQUISITION IS A ONE-SIDED EXERCISE OF AUTHORITY, WHICH DEPENDS EITHER UPON FORCE OR THE ACQUIESCENCE AND LOYALTY OF THE OWNER OF THE PROPERTY REQUISITIONED, IN ORDER TO ACCOMPLISH THE TAKING. WHETHER PROTEST BE ENTERED OR NOT, THE OBLIGATION TO REPAY IS THE SAME.

ACCORDINGLY, AS SECTION 322 OF THE ECONOMY ACT DOES NOT APPEAR FOR APPLICATION IN THE CASES REFERRED TO IN YOUR LETTER, QUESTION 1 IS ANSWERED IN THE AFFIRMATIVE.

IN ANSWER TO QUESTION 2, IT MAY BE SAID THAT AS THE AWARD IS SUBSTITUTED FOR THE INTEREST CONDEMNED, SUCH PAYMENTS WOULD APPEAR TO BE PERMISSIBLE ONLY TO THE EXTENT NECESSARY TO SATISFY THE AWARD. COMPARE 22 COMP. GEN. 862.

WITH RESPECT TO QUESTION 3, FOR THE SAME REASONS AS INDICATED ABOVE UNDER THE ANSWER TO QUESTION 1, THE 25 PERCENT LIMITATION ON ALTERATIONS, IMPROVEMENTS AND REPAIRS AS CONTAINED IN THE ECONOMY ACT WOULD BE INAPPLICABLE IN THE CASE OF PROPERTY THE USE OF WHICH IS ACQUIRED BY CONDEMNATION PROCEEDINGS. ACCORDINGLY, IN THE SITUATION REFERRED TO, THE MAKING OF ALTERATIONS, IMPROVEMENTS AND REPAIRS WOULD BE GOVERNED BY SOUND ADMINISTRATIVE DISCRETION, HAVING REGARD TO THE TERM OF OCCUPANCY AND THE PURPOSE OR PURPOSES FOR WHICH THE PREMISES ARE TO BE OCCUPIED. IN SUCH SITUATIONS IT IS THE DUTY OF THE ADMINISTRATIVE OFFICERS TO PROTECT TO THE FULLEST EXTENT THE INTERESTS OF THE UNITED STATES.