Case Name: MACO WAREHOUSE COMPANY CALIFORNIA, A PAETNEESHIP v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1959-01-14
Citations: 144 Ct. Cl. 538
Docket Number: Cong. No. 2-56
Parties: MACO WAREHOUSE COMPANY CALIFORNIA, A PAETNEESHIP v. THE UNITED STATES
Judges: McLattghxiN, District Judge, sitting by designation; Whitaker, Judge; and Jokes, Chief Judge, concur.
Reporter: United States Court of Claims Reports
Volume: 144
Pages: 538–573

Head Matter:
MACO WAREHOUSE COMPANY CALIFORNIA, A PAETNEESHIP v. THE UNITED STATES
Cong. No. 2-56.
Decided January 14, 1959
Mr. Lawrence Edwards for the plaintiff. Mr. Warren Atherton was on the briefs.
Mr. Herbert Pittle, with whom was Mr. Assistant Attorney General Perry W. Morton, for the defendant.

Opinion:
Madden, Judge,
delivered the opinion of the court:
The House of Eepresentatives, having before it a bill, H. E. 7176, "for the relief of the Maco Warehouse Company," adopted, on March 6, 1956, House Eesolution 406, 84th Con gress, 1st Session, referring the bill to this court for its action pursuant to sections 1492 and 2509 of the Judicial Code, 28 U. S. C. 1492 and 2509. The plaintiff filed its petition in this court pursuant to the cited sections of the Code, seeking to recover the net profits which it claims it would have realized from the operation of a Government-owned warehouse if the Government had not terminated its lease of the warehouse, and the cost of certain installations and improvements made by the plaintiff and left in the premises at the request of and inuring to the benefit of the Government.
On May 29,1950, the Department of the Army invited bids for the lease of two Government-owned warehouse buildings containing 358,000 square feet of storage space located at the Stockton, California, Sub-Depot of Benicia Arsenal. The Sub-Depot had been declared surplus by the Army, and was, by statute, 61 Stat. 774, and Army Regulation 100-62, as supplemented, made available for leasing, with the Corps of Engineers being the Government's, agency in making the proposed lease. The invitation for bids had attached to it a copy of the form of the lease which the successful bidder would be required to sign. The invitation stated that the lease would be for the period June 20,1950, to June 19,1951. The attached lease form included a provision that the lease was "revocable at: will by the Secretary of the Army."
The plaintiff was the high bidder. A formal draft of the lease was given to the plaintiff for signature. Before signing, two of the members of the plaintiff partnership went to. see the Chief of the Management and Disposal Branch of the Beal Estate Division, Corps of Engineers, in San Francisco. They said that the revocability provision in the proposed lease would interfere with their intended use of the property as a warehouse. They were told that the provision was required by statute, Act of August 5, 1947, 61 Stat. 774, and could not be eliminated. But they were told that there was in effect a regulation of the Department of the Army stating that such leases would not be revoked except for military needs which were not foreseen at the time the leases were executed.
The plaintiff executed the lease. It was executed by an official acting 'for the Secretary on June 23, 1950, and the plaintiff took possession on or about that date. The term of the lease was, as the invitation for bids had stated, the one year period from June 20,1950, to June 19,1951. The rental was $64,708 per annum.
The plaintiff used the property as a commercial warehouse. Business was good and at the end of four months 90 percent of the available space had been rented to customers and the remaining space was rapidly filling up.
In the meantime, on June 25, a few days after the signing of the lease, hostilities broke out in Korea. Almost immediately military equipment and material were shipped out of warehouses in the Stockton area to Korea, in great quantities. Other great quantities of such material were being procured by the Army and shipped to an Army storage depot, named Sharpe General Depot, near the plaintiff's leased property.
The Quartermaster General of the Army, in view of greatly increased Army procurement, was endeavoring to obtain additional warehouse space almost anywhere in the United States. On July 26,1950, he requested the Chief of Staff of the Army to transfer the Stockton Sub-Depot to the jurisdiction of the Sharpe General Depot. He pointed out military reasons why an immediate increase in storage space was necessary in the area of the Port of San Francisco. The details of his justification for his request are stated in our finding 16.
The requested transfer of jurisdiction over the Stockton Sub-Depot was made on August 24, 1950. On August 25, 1950, an official of the Office of the Quartermaster General requested the Assistant Chief of Staff to terminate the plaintiff's lease for military necessity. The Assistant Chief of Staff on September 8,1950, wrote to the Quartermaster General calling attention to the fact that the cancellation of the plaintiff's lease would result in strong protests by the lessees and by local civil and political organizations. He urged that the Quartermaster General review the total requirements, availability and utilization of warehouse space which was already under his control in the San Francisco-Stockton area in order to determine whether or not they would be sufficient to meet military requirements until the date of expiration of plaintiff's lease in 1951. The Assistant Chief of Staff was of the opinion that more adequate support was needed to justify the proposed cancellation. A review of the situation was made by the Quartermaster General. The record does not indicate upon what information that office ultimately acted, but on October 10,1950, the Quartermaster General again recommended to the Assistant Chief of Staff that the plaintiff's lease be cancelled, and on October 10,1950', the Assistant Chief of Staff accordingly directed the Chief of Engineers to terminate the plaintiff's lease on the Stockton Sub-Depot. On November 1, 1950, formal notice of revocation of its lease was delivered to the plaintiff, giving the plaintiff 45 days within which to vacate the premises. This notice was informally extended to February 1, 1951.
The plaintiff began, about November 7,1950, to vacate the premises. As the plaintiff vacated space, the Army filled it with military goods. By February 1,1951, the plaintiff had vacated practically all the space. As we have said, there was, in all, some 358,000 square feet of space in the property. The Army stored goods occupying 243,000 square feet of this space, as rapidly as the goods could be transferred from a Navy warehouse which the Army was obliged to vacate. It appears that the rest of the space in the Stockton Sub-Depot was not filled by June 19,1951, the date when the plaintiff's lease would have expired.
The [Resolution of the House of [Representatives, referring this case to this court, requests the court to inform the House as to the nature and character of the demand, legal or equitable, which the plantiff may have against the United States.
The plaintiff does not have a legal claim against the United States. The plain provision in the lease, the presence of which in the lease was required by an Act of Congress, that the lease was revocable at the will of the Secretary of War, made the Secretary's revocation entirely lawful. Hingham Management Corp. v. United States, 143 C. Cls. 763. Army Regulations SR. 210-15-1 which provided in general that a lease contract of this sort should not be terminated by the Army except for military requirements not foreseeable at the time of the execution of the lease (finding 6), was, in our opinion, merely a declaration of policy to be followed wherever possible. We do not believe that the spirit of this regulation was violated in the instant case inasmuch as the record establishes the fact that military requirements arose after the execution of the lease which were not foreseeable at the time of its execution.
In justification of its position that equitably it is entitled to relief, the plaintiff points to the following facts: that the bulk of the storage in the leased premises consisted of processed food supplies needed by the military; that a portion of the storage was actually utilized by an instrumentality of the Government, i. e., the Commodity Credit Corporation, for the storage of edible dried beans, a commodity usually needed by the Army; that it was questionable that the use of the leased premises for the transfer and storage of supplies from the Naval Annex was of greater military importance than the maintenance of storage space for the food supplies already stored in the warehouse; that there is no showing that any of the goods transferred from the Navy warehouse to the plaintiff's warehouse were ever actually shipped for military use to Korea; that the Quartermaster Department had at its disposal other adequate facilities at the Mira Loma Depot which remained empty; that Colonel Domain of the Office of the Quartermaster General never actually furnished any support for his position that Mira Loma was not a feasible location for storage; and that the Quartermaster General erred in not utilizing the vacant area of available warehouse space at the Stockton Naval Annex which remained available during the entire period involved in this suit.
Assuming that the above facts relied on by the plaintiff are substantially established by the record, they represent facts which under the circumstances of this case, were ascertainable more by hindsight than by foresight. The Quartermaster Department could no more accurately predict the precise extent of its need for storage facilities during the early days of the Korean conflict than the Department of Defense could predict the course of events in that conflict. Under all the circumstances, it seems clear that if the Army erred in deciding that it required plaintiff's facilities prior to the expiration of the lease, it erred on the side of caution. The outbreak of hostilities in Korea, coming so soon after the consummation of the plaintiff's lease, was a misfortune and a disappointment to the plaintiff. The officials of the Army used their honest judgment as to the country's military needs for storage space close to the port of San Francisco. They did not hastily or inconsiderately terminate the plaintiff's lease. After termination, they allowed the plaintiff to make an orderly removal of the goods stored in the premises, filling up most of the space with military goods as the plaintiff removed the civilian goods. There was no reason why, having expressly reserved the right of revocation, the Army should seek out other storage space at inconvenient locations and at added expense. Military needs were given priority, and were legally and equitably entitled to such priority.
Congressional provision for equitable relief in a case such as this is designed to protect the citizen against loss through arbitrary although lawful actions on the part of the Government. We cannot say that the Army acted arbitrarily in this case where its only error was to be deficient in the gift of prophecy. We are accordingly of the opinion that plaintiff has neither a legal nor an equitable claim against the United States in connection with the termination of its lease.
In addition to its claim, legal or equitable, for loss of profits caused by the termination of its lease, plaintiff asserted in its petition a claim in the amount of $4,750.50 for the cost of labor and material required in making repairs, improvements and alterations to the facilities and for the cost of installing certain electrical facilities.
Paragraph 18 of the lease required the plaintiff to procure and maintain fire and extended coverage insurance on the leased premises to the full insurable value thereof. In order to reduce the cost of the insurance it was necessary for plaintiff to demolish two lean-tos which were attached to the tw;o principal buildings. The lean-tos were in bad condition and constituted a fire hazard. The plaintiff was advised by the post engineer that his office had no funds available for the removal of the lean-tos. The plaintiff proceeded to demolish the lean-tos and at the time the insurance policies were delivered, plaintiff's representative informed the District Engineer's office that it had been necessary to tear the lean-tos down in order to get the required insurance coverage. Although plaintiff did not obtain the formal approval or consent of the Department of the Army before removing the lean-tos, no objection was made at the time of removal or thereafter by the representatives of the Department (finding 9).
In addition to removal of the lean-tos, plaintiff had to make certain other repairs to the leased facilities in order to render them usable for operation as warehouses. This work involved reconditioning the sidings and doors, patching the roofs and installing new glass in the skylight and the cost to the plaintiff was approximately $2,234.21. In addition, because the Ordnance Department in vacating the premises prior to plaintiff's lease, had removed all of the electrical wiring and transformers, it was necessary for the plaintiff to employ an electrical contractor to install new transformers, conduits and wiring for lighting the buildings. Sometime after November 1, 1950, while the plaintiff was engaged in evacuating its goods from the warehouse so that the Army could move in its supplies, one of the plaintiff's partners discussed the installation of the electrical equipment with the post engineer of Sharpe General Depot. The post engineer asked the plaintiff to leave the electrical facilities in the building and he stated that the Army would approve a work order to reimburse the plaintiff for the cost thereof. The record shows that the plaintiff had expended $1,549.01 for the installation of the electrical equipment. It submitted a claim to the Army in the total amount of $4,750.50, which included not only the installation of the electrical equipment but also the cost of labor and material expended in removing the two lean-tos and in making the other repairs to the building mentioned above.
On March 19,1951, after plaintiff had vacated the premises, the executive officer of Sharpe General Depot forwarded the above claim of the plaintiff to the District Engineer in San Francisco with a statement that although the plaintiff had not been directed nor given permission to make the repairs and improvements covered by the claim, it was considered that the work done by the plaintiff was of benefit to the Government. The letter went on to state that Sharpe General Depot had no funds available for the reimbursement of these expenses. In the course of subsequent investigations in connection with this claim for reimbursement,, the Army determined that the plaintiff had not been authorized by the District Engineer to make any of the repairs, additions, or improvements to the leased premises and the claim was accordingly denied.
Paragraph 3 of the lease provided that the lessee had inspected the premises, knew the condition thereof, and that the lease was made without any warranty of condition of the premises and without any obligation on the part of the Government to make repairs or alterations. The Government contends that in the light of this provision in the lease all of the alterations and repairs were made for the convenience of the lessee who acquired no legal or equitable right to reimbursement from the lessor. For some reason not clear from the record, the plaintiff has elected to abandon this claim as such and to treat it as merged in its overall claim of $225,000 representing financial losses sustained because of revocation of the lease. These repair expenses incurred by the plaintiff had nothing to do with the revocation of the lease and the question as to whose obligation they were would have existed had the lease been allowed to run its full term. H. B. 7176 provides that the Secretary of the Treasury is authorized and directed to pay to the plaintiff $229,750.50 in full settlement of all claims of the plaintiff against the United States on account of the cancellation of the lease and also on account of alterations and repairs required to be made to the leased premises. House Eesolution 406.referred the bill to this court for findings of fact and conclusions revealing the nature and character of the claims covered by the House Bill as legal or equitable against the United States. The Trial Commissioner has made findings with respect to the plaintiff's claims involving the expense of alteration and repairs and despite the apparent abandonment of this claim by the plaintiff, we feel obligated to make findings and to state our conclusions with respect to the character of those claims.
With respect to the claim for the expense of demolishing the lean-tos, we are of the opinion that this does not represent either a legal or an equitable claim against the United States. Although the lease required the plaintiff to procure and main tain fire and extended coverage insurance on the leased property to tbe full insurable value thereof, the removal of the lean-tos was not essential to the procurement of such insurance but was done rather to reduce the cost of the insurance. Plaintiff certainly has no legal claim against the Government for reimbursement of such expense and since it is doubtful that the Government secured any benefit from the demolition of the lean-tos, we are also of the opinion that the plaintiff has no equitable claim to reimbursement for this item.
With respect to the reconditioning of the siding and doors, the patching of the roof and the installing of new glass in the skylight, the plaintiff was required by paragraph 3 of the lease to bear the expense of any repairs and alterations which it considered necessary and, under that paragraph of the lease, the plaintiff in a sense leased the property "as is". We are of the opinion that the Government was under no legal obligation imposed by the lease to reimburse the plaintiff for such repairs and no one acting under authority from the Government indicated to the plaintiff at the time it made such repairs that it would be reimbursed for the expense thereof. On the other hand, at the time of the revocation of the lease, the executive officer of Sharpe General Depot was of the opinion that the repairs in question had improved the facilities and were of benefit to the Government. Accordingly, we recommend to Congress that plaintiff be reimbursed for this item, as an equitable claim against the United States, in the amount of $2,234.21.
' Plaintiff did not obtain permission to install the electrical equipment in the warehouses, but, at the time of the revocation of the lease a responsible official of the Government requested the plaintiff to leave thé equipment in the buildings and he stated that the Army would approve a work order to reimburse plaintiff for the cost of such equipment which was, of course, essential to the Army's operation of the facilities as warehouses. If that official had actually issued a work order approving reimbursement of the plaintiff for the cost of installing the electrical equipment, we would be inclined to hold that the plaintiff had a legal claim for such reimbursement despite the fact that the contract provided that the plaintiff would be liable for the cost of any repairs to the facilities. Branch Banking & Trust Co., et al. v. United States, 120 C. Cls. 72, at pages 86 ff. In that case the court noted that a Government official authorized to make a contract for the United States has the implied authority thereafter to modify the provisions of that contract where it is clearly in the interest of the Government to do so, citing Goltra v. United States, 119 C. Cls. 217; 37 Op. Att. Gen. 254; United States v. Corliss Steam-Engine Co., 91 U. S. 321 and Satterlee V. United States, 30 C. Cls. 31. Here, however, no such formal modification of the lease was issued and, accordingly, we cannot say that the plaintiff has established a legal claim for the amounts expended in installing the electrical equipment. We are of the opinion, however, that plaintiff has established an equitable claim for reimbursement of the $1,549.01 expended in making such installations which were of great benefit to the Government and the cost of which was recommended for payment by responsible Government officials. Accordingly, we recommend to Congress that this amount be paid to plaintiff as an equitable claim against the United States.
The Government has filed a counterclaim in the total amount of $8,724.08. Of this amount $2,127.36 represents rental for the period from October 20, 1950, to October 31, 1950, and was certified by Certificate No. US 80227, dated December 10, 1953, by the Comptroller General as due and owing the United States for unpaid rental under the lease. The balance of the counterclaim in the amount of $6,596.72 represents rental claimed by the Government to be due it on account of plaintiff's occupancy of diminishing portions of the premises for the period from November 1, 1950, to February 1, 1951, during which time the plaintiff was engaged in evacuating the facilities.
The revocation of the lease was effective November 1,1950, and it provided that the plaintiff was obligated to pay rent up to that date. Plaintiff has paid the Government all rental due under the lease up to October 19, 1950. It concedes that it is indebted to the United States in the sum of $2,127.36 for the period from October 20 to October 31, 1950.
The balance of the counterclaim in the amount of $6,596.72 represents rental from the period November 1, 1950, to February 1,1951. Under the terms of the revocation plaintiff was given 45 days within which to vacate the premises. This period was extended informally to February 1, 1951. By February 1, 1951, plaintiff had completely moved out of the leased facilities. The District Engineer sought the advice of the Division Engineer as to whether a claim should be asserted against the plaintiff for rental from November 1, 1950, to February 1, 1951, while plaintiff was engaged in evacuating the premises. On December 14, 1951, the Division Engineer stated that he did not consider the Government entitled to payment of rent for any period subsequent to October 31 in view of the provisions contained in paragraph 20 of the plaintiff's lease and the informal extensions of time beyond the 45 days within which to evacuate granted by the commanding officer. Paragraph 20 of the lease provided that if the lease should be revoked, the lessee should vacate the premises within such times as the Secretary of the Army might designate (findings 8 and 37). In view of the instructions not to bill plaintiff for rent after October 31, 1950, the District Engineer revised the billing against the plaintiff by eliminating the claim for rent during the period from November 1, 1950, to February 1, 1951, and the only claim transmitted to the Comptroller General for unpaid rent was the claim in the amount of $2,127.36. No certificate of indebtedness has been issued with respect to the claim for rent during the period subsequent to October 31, 1950, and the defendant is not entitled to recover on this item of its counterclaim. Defendant is entitled to recover on the first item of the counterclaim if the court has jurisdiction to render judgment on the counterclaim.
We are of the opinion that under the circumstances of this case we do have such jurisdiction. Section 2508 of Title 28 covering this court's jurisdiction over counterclaims or set-offs, provides that upon the trial of any suit in the Court of Claims in which a counterclaim is set up by the United States against a plaintiff making claim against the United States, the court shall hear and determine such counterclaim, and if it determines that the plaintiff is indebted to the United States, it shall render judgment to that effect. Section 1492 of Title 28, one of the sections under which H. E. 7176 was referred to this court, provides that the court shall have jurisdiction to report to either house of Congress on any bill referred to the court and to render judgment "if the claim against the United States represented by the referred bill is one over which the court has jurisdiction under other Acts of Congress." (Italics supplied.) Section 2509 of Title 28, the other provision of the Judicial Code under which H. E. 1116 was referred to the court, provides for a report to Congress as to whether the demand is a legal or equitable claim or a gratuity and the amount legally or equitably due from the United States to the claimant. The claims set forth in plaintiff's petition are claims for damages for breach of a contract of lease and as such are claims over which this court has jurisdiction, 28 U. S. C. 1491. The fact that the plaintiff has not established a legal right to recover on those claims does not mean that the court lacks jurisdiction of the claims asserted in the petition. The claims are not barred by the statute of limitations or by laches, and the record indicates no facts bearing on the plaintiff's failure to resort to the established legal remedy or bringing suit in this court under 28 U. S. C. 1491 except the obvious difficulty of establishing a right to recover in such suit.
In view of the fact that the claims represented'by the referred bill are claims over which this court has jurisdiction, the court will render judgment dismissing the plaintiff's petition. 28 U. S. C. 1492. Pursuant to 28 U. S. C. 2509, we recommend to the Congress that there is equitably due the plaintiff the sum of $8,873.22 for the repairs it made to the warehouses and for the electrical equipment installed by it therein. The defendant is entitled to recover $2,127.36 on its counterclaim and judgment will be entered to that effect.
This opinion and the findings of fact, together with the conclusions therein, will be certified to Congress pursuant to House Eesolution 406, 84th Cong., 1st Session.
It is so ordered.
McLattghxiN, District Judge, sitting by designation; Whitaker, Judge; and Jokes, Chief Judge, concur.
Laramore, Judge, took no part in the consideration and decision of this case.
FINDINGS OF FACT
The court, having considered the evidence, the report of Trial Commissioner, Wilson Cowen, and the briefs and argument of counsel, makes findings of fact as follows:
1. Plaintiff's petition was filed pursuant to House Resolution 406, 84th Congress, First Session, which was adopted on March 6, 1956, and provides as follows:
Resolved, That the bill (H. R. 7176) entitled "A bill for the relief of the Maco Warehouse Company", together with all accompanying papers, is hereby referred to the United States Court of Claims pursuant to sections 1492 and 2509 of title 28, United States Code; and said court shall proceed expeditiously with the same in accordance with the provisions of said sections and report to the House, at the earliest practicable date, giving such findings of fact and conclusions thereon as shall be sufficient to inform the Congress of the nature and character of the demand, as a claim legal or equitable, against the United States, and the amount, if any, legally or equitably due from the United States to the claimant.
H. R. 7176 provides in part as follows:
Be it enacted by the Senate and Rouse of Representatives of the United States of America in Congress assembled, That the Secretary of the Treasury is authorized and directed to pay, out of any money in the Treasury not otherwise appropriated, to the Maco Ware-Plouse Company, Stockton, California, the sum of $229,750.50. The payment of such sum shall be in full settlement of all claims of the said company against the United States on account of the cancellation by the United States, prior to the expiration date, of the lease contract numbered DA (s) 04-203-eng-211, dated June 23, 1950, and on account of alterations and repairs required to be made to the leased premises in order to obtain certain insurance thereon in compliance with such lease contract, and for which the said company has not been reimbursed :
2. Plaintiff, Maco Warehouse Company, is a partnership composed of Jack Colberg, W. F. Cook, and Edmond J. Mahony, Jr., all of whom are residents of Stockton, San Joaquin County, California.
3. On May 29, 1950, the Department of the Army invited written bids for the leasing of approximately 14.5 acres of Government-owned land and improvements consisting of two warehouse buildings containing 358,000 square feet and a loading platform at the Stockton, California, Sub-Depot of the Benicia Arsenal. During World War II, the sub-depot had been used for the storage of ordnance and was under the control of the Army Ordnance Department until June 1950. After the war ended, the sub-depot was declared surplus to the then needs of the Army and was made available for leasing to private interests through the Corps of Engineers in accordance with the Act of August 5,1947, and pertinent Army regulations.
4. The written invitation for bids issued by the District Engineer in San Francisco, California, stated that the successful bidder would be required to enter into a lease with the United States on the form attached to the invitation and that the lease would be for a term of one year beginning June 20, 1950, and ending June 19, 1951. The printed form of lease attached to the invitation stated that the lease was "revocable at will by the Secretary of the Army."
5. Three bids were received in response to the invitation, and when the bids were opened it was found that plaintiff was the highest bidder. Plaintiff's bid was accepted and a formal draft of the lease on the form attached to the invitation was given to plaintiff for execution.
6. Before the lease was signed by plaintiff, two of the partners, Edmond J. Mahony, Jr. and Jack Colberg, called upon B. U. Downie, Chief of the Management and Disposal Branch of the Beal Estate Division of the Corps of Engineers in San Francisco. Mr. Downie, who also held the title of Attorney Advisor in the District Engineer's office, had prepared the invitation for bids. The two partners pointed out that the invitation stated that the leased property was to be used as a warehouse and stated that it was useful for no other purpose. They objected to the provision reserving to the Secretary of the Army the right to terminate the lease at will on the ground that this provision would interfere with their proposed warehousing operation and requested that the objectionable language be eliminated. Mr. Downie advised the two partners that the provision in question was required bylaw (the Act of August 5,1947) and could not be eliminated because other bidders would then be in a position to object that the terms of the lease were modified after written bids had been submitted. At the same time, Mr. Downie informed the partners that there was in effect an Army regulation, stating that such leases would not be revoked except for military needs which were not foreseen at the time the leases were executed. The regulation to which Mr. Downie referred was Department of Army Regulation SR 210-15-1, which was issued September 6,1949, and was in full force and effect during the time material to this action. It set forth the policies, procedures, and responsibilities, with respect to real estate owned by the United States and under the control of the Department of the Army, and specifically provided in part as follows:
(2) Approval. — Responsibility for determination of availability of installations for use for nonmilitary purposes is delineated as follows:

(b) Installations in incentive status. — When an installation is in inactive status and no change of status is proposed within the foreseeable future, but real estate comprising the installation is not for the time required for military purposes or its concurrent use for nonmilitary purposes will not interfere with the inactive status of the installation, the report of availability will be submitted by the installation commander or other authorized representative of the using service, through command channels to the chief of the using service for determination of availability for use for nonmilitary purposes. When the grant of an easement is involved, recommendations will be submitted through the chief ot the using service to the Director of Logistics for determination of availability. _
_ Determinations of availability for use for nonmilitary purposes shall be concise as to the conditions of use, especially so far as they affect continuing or potential military requirements, and, in general, shall be firm commitments on which the Chief of Engineers and prospective grantees may reasonably rely and will not be impaired or withdrawn except for military requirements not foreseeable at the time the determination was made, in which event the Chief of Engineers will be promptly notified. Determinations of availability, together with reports of availability, will be forwarded by the chief of the using service or the Director of Logistics, as the case may be, to the Chief of Engineers for appropriate action in accordance with AN 100-62.
7. After hearing Mr. Downie's statement of the policy applicable to such leased property and in reliance thereon, the three individuals composing the partnership executed the lease on June 16, 1950. Since the lease called for a rental in excess of $25,000 per annum, the District Engineer had no authority to sign it, and it was forwarded to the Secretary of the Army. On June 23, 1950, the lease was execute*! by an officer acting for the Secretary of the Army, and plaintiff went into possession of the premises on or about that date.
8. The lease was for a term of one year beginning June 20, 1950, and ending June 19, 1951, and stated that it was "revocable at will by the Secretary of the Army."
The stipulated rental was $64,708 per annum, payable monthly in advance.
The lease, which is in evidence as defendant's exhibit 6-A and is made a part hereof, contained, among others, provisions which may be summarized as follows:
Paragraph 3 stated that the lessee had inspected the premises, knew the condition thereof, and that the lease was made without any warranty of condition or obligation by the Government to make repairs or alterations;
paragraph 4 provided that the lessee would, at all times, protect and maintain the premises in good order and condition at its expense;
paragraph 5 forbade the lessee to assign the lease or to sublet any part of the leased premises without the written permission of the District Engineer;
paragraph 15 gave the lessee the right to terminate the lease at any time after giving 10 days' written notice to the Secretary of the Army.
With respect to revocation, the lease provided in paragraph 20 as follows:
20. That, on or before the date of expiration of this lease, or its termination by the lessee, the lessee shall vacate the demised premises, remove the property of the lessee therefrom, and restore the premises to as good order and condition as tbat existing npon tbe date of commencement of tlie term of this lease, damages beyond the control of the lessee and due to fair wear and tear excepted. If, however, this lease is revoked, the lessee shall vacate the premises, remove said property therefrom, and restore the premises to the condition aforesaid within such times as the Secretary of the Army may designate. In either event, if the lessee shall fail or neglect to remove said property and so restore the premises, then, at the option of the Secretary of the Army, said property shall either become the property of the United States without compensation therefor, or the Secretary of the Army may cause it to be removed and the premises to be restored at the expense of the lessee, and no claim for damages against the United States or its officers or agents shall be created by or made on account of such removal and restoration work.
9. Paragraph 18 of the lease contract required the plaintiff as lessee to procure and maintain fire and extended coverage insurance on the leased property to the full insurable value thereof. In order to reduce the cost of the insurance, plaintiff demolished two lean-tos that were attached to the two principal buildings, since the lean-tos were in bad condition and constituted a fire hazard. Before removing the lean-tos, plaintiff took the matter up with the post engineer, who stated that his office had no funds available for removing the lean-tos. Plaintiff did not obtain the approval or consent of the Department of the Army before removing the lean-tos, but at the time the policies were delivered, Mr. Mahony informed Mr. Downie of the District Engineer's office that it was necessary for plaintiff to tear down the lean-tos in order to get the required insurance coverage. No objection was made at the time or thereafter by the defendant to the tearing down of the lean-tos.
10. As stated, plaintiff went into possession of the leased premises about June 23,1950, and proceeded to operate them as a commercial warehouse under the name of Maco Warehouse Company. Plaintiff acquired the mechanical equipment needed for moving goods into and out of the warehouse and assembled a staff of warehousemen, clerks, and other personnel needed to carry on the business. The leased facilities were within 500 yards of the Port of Stockton and were accessible by both, truck and rail. Stockton is located in an area where large quantities of fruits and vegetables are canned and at the time plaintiff began operations, there was a shortage of commercial warehouse space in the area. In addition to a regularly employed sales manager, one of the partners devoted a considerable portion of his time in soliciting deposits in the warehouse. Plaintiff had no difficulty in obtaining depositors for warehouse space. At the end of the first four months of operation, 90 percent of the available facilities were occupied and the remaining space was filling up as rapidly as customers' goods could be unloaded and stored.
11. When soliciting warehousing business from potential depositors, neither the partners nor the sales manager informed prospective customers that plaintiff's lease of the buildings was subject to revocation at will by the Secretary of the Army, nor did they advise such prospective customers of the provisions of the Army regulation referred to in finding 6.
12. In most instances, arrangements for the rental of space in the plaintiff's warehouse were made by a telephone conversation, which was later confirmed by an informal memorandum signed by one of the partners. However, on August 15, 1950, plaintiff entered into a written lease contract with the California Packing Company, under the terms of which plaintiff leased to that company 37,200 square feet of space in one of the buildings for a term of five months and continuing thereafter on a month-to-month basis. The California Packing Company was permitted to place one of its employees in the warehouse to supervise the movement of goods into and out of the space leased by it. In most instances, plaintiff issued negotiable warehouse receipts to its customers, but in the case of the California Packing Company, nonnegotiable receipts were issued. The sub-lease entered into between plaintiff and the California Packing Company was not approved by the District Engineer as required by paragraph 5 of the lease contract between plaintiff and the Government. There is no evidence that the defendant revoked plaintiff's lease because of the sublease to the California Packing Company.
13. At the time the lease was entered into with plaintiff, the Department of the Army had an installation known as Sharpe General Depot under the jurisdiction of the Quartermaster Department. Sharpe General Depot was located at Lathrop, California, about eight miles from the City of Stockton and was under the command of Colonel D. S. McConnaughy. Prior to June 25, 1950, about 35,000 square feet of vacant warehouse space was available at the depot at Lathrop. In addition, there was a Quartermaster Depot at Tracy, California, located about 20 miles south of Stockton, where the Quartermaster Corps had 319,000 square feet of vacant storage space.
At the time stated above, there was also a Quartermastei Depot at Mira Loma, California, near Los Angeles. At this depot, which was not under the jurisdiction of the commanding officer of Sharpe General Depot, there was available 786,000 square feet of vacant storage space on or about July 25,1950.
14. In 1945, the Stockton Naval Annex was constructed at the Port of Stockton. It is located approximately one-half mile from the sub-depot that was leased to plaintiff. The naval annex contained 38 warehouse units having a total storage area of 4,500,000 square feet. Prior to the time the lease with plaintiff was made, 480,000 square feet of the covered warehouse space in the naval annex had been temporarily assigned to the Quartermaster Department for the storage of tents, rations, clothing, and other supplies.
15. On June 25, 1950, the North Korean Army invaded. South Korea, and by July 5,1950, thousands of tons of military equipment and material were being shipped by Sharpe General Depot to Japan and Korea. Colonel McConnaughy was notified that a large quantity of newly procured military supplies was on the way to Sharpe General Depot. As a result of the situation in Korea, and the actual and anticipated needs of the Quartermaster General, a shortage of warehouse space was created throughout the United States. The Department of the Army was endeavoring to rent additional space wherever.it could be found. Before the North Koreans crossed the 38th Parallel, the Department of the Army had planned to dispose of the facilities that had been leased to plaintiff by outright sale or transfer, but after June 25,1950, these plans were suspended.
16. On July 26,1950, the Quartermaster General, by memorandum to the Assistant Chief of Staff, requested that the Stockton Sub-depot be transferred to the jurisdiction of the Sharpe General Depot. His memorandum read in pertinent part as follows:
1. Increased troop deployments to the Pacific area and active military operations in that area, require an immediate increase in storage space used to actively support the San Francisco Port. However, recent re-allocations of 200,000 sq. ft. of covered space at the Sharpe General Depot from Quartermaster to the Transportation Corps, and an indication by the Navy Department that formal request will be made to return to the Navy 480,000 sq. ft. of covered space now occupied by Quartermaster stocks at the Stockton Navy Depot Annex forces assignment of an active storage and issue mission to the Mira Loma QM Depot and the transfer of stocks now at the Navy Annex to that depot or the acquisition of additional space for these purposes.
2. Space in the former Stockton Subdepot, Benecia [sic] Arsenal, is available and necessary for an active storage and issue mission and for the storage of QM supplies now stored in the Stockton Navy Depot Annex. Advantages of reactivating this installation are as follows:
a. It is adjacent to the Navy Annex. Cost of transferring stocks would be approximately $30,000. Shipment of these stocks to Mira Loma Quartermaster Depot would cost approximately $700,000.
b. More economical and expeditious supply of the San Francisco Port would be effected. Excessive transportation costs of shipping subsistence from the major area of production (San Joaquin and Sacramento valleys) to the Mira Loma depot and backhauling therefrom would be avoided.
c. The open area at the installation is required by the Engineers as a consolidating area for heavy equipment prior to oversea shipment. Deep water shipping facilities are available to this installation.
d. The installation can be administered easily by the Commanding Officer, QMSO and Engineer Supply Officer of the Sharpe General Depot.
e. Centralization of active storage and issue operations at the Sharpe General Depot will permit, for the pres ent, the holding of operations at the Mira Loma QM Depot in status quo during suspension of inactivation. *
5. It is requested that the former Stockton Subdepot, Benecia [sic] Arsenal, be designated as a dispersed warehouse area of the Sharpe General Depot and that the space therein be allocated to meet the requirements of the Quartermaster and Engineer Supply Sections of that depot.
*
17. By disposition form dated August 3, 1950, Colonel C. Bomain, Chief of the Field Service Division of the Office of the Quartermaster General, informed the Assistant Chief of Staff as follows:
1. Reference is made to Disposition Form from this office, dated 25 July 1950, subject as above, and to conference held 3 August 1950 between Colonel DeWitt Thompson of your office and Lt. Colonel John D. Hickey of this office. The following additional justification is furnished for the acquisition of the Stockton Sub-Depot of Benicia.
2. The following is the status of the net vacant space in the Westem Depots:
Mira Loma Quartermaster Depot_ 786,000 sq. ft.
Tracy (Location of Sharpe General
Depot)_ 319,000 sq.ft.
*Lathrop (Location of Sharpe General
Depot)_ 35,000 sq. ft.
Auburn General Depot- 256,000 sq. ft.
Total_ 1,396,000 sq.ft.
*200,000 square feet have been deducted for use by the Transportation Corps.
3. It is not feasible at this time for Mira Loma to assume an active mission and it is to be used to store household effects and other items to be placed in dead storage. Therefore, the vacant space at this depot must be deducted and this leaves a remainder of 610,000 square feet.
4. The following space assignments must be made to take care of additional missions:
a. Ten million C and 5-1 Rations will be stored at Auburn and Sharpe. This amounts to 300,000 net square feet of space.
b. Two million Assault Rations are to be stored. A total of 30,000 square feet of net storage space is required.
c. Two million Ration Assembly Kits, Supplement First Aid and Supplement Hospital, are to be stored. A total of 30,000 square feet of storage space is required.
d. Camps opening up will require 100,000 net square feet of space to store their supplies.
e. There are 353,000 net square feet of space being used at the Naval Supply Annex. The Navy has indicated they will have to recapture this space. They have ceased performing materials handling and labor services. The Quartermaster Corps cannot maintain adequate control over its stocks stored at the Naval Annex under the conditions set forth in the foregoing. Inasmuch as it will be necessary to furnish supervisors, materials handling equipment operators, ancf labor every time stocks are to be moved, it is much more desirable to have these stocks located at an installation nearby under the control of the Depot Commander.
f. 100,000 square feet of vacant space at both Auburn and Sharpe is required to maintain a normal operation.
5. From the above, it is considered that there will be a shortage of 403,000 net square feet of space and, even if Quartermaster is not forced out of the Naval Supply Annex, additional space will be required to handle the supply mission of the Sharpe General Depot.
18. On August 15, 1950, the Assistant Chief of Staff advised the Quartermaster General that action had been taken to transfer the Stockton Sub-depot to the Quartermaster Department and requested that the Quartermaster General submit recommendations covering the removal of all Quartermaster supplies from the naval annex by December 31, 1950, and for a re-allocation of warehouse space at the Sharpe General Depot.
19. By Department of Army General Order No. 28 dated August 24, 1950, the Stockton Sub-depot was transferred to the control of the Quartermaster General and redesignated as part of Sharpe General Depot, effective September 1,1950.
20. On August 25, 1950, Colonel Domain of the Office of the Quartermaster General requested the Assistant Chief of Staff to take action at the earliest possible date to terminate plaintiff's lease on the Stockton Sub-depot because of the military necessity which had been outlined in previous communications to the Assistant Chief of Staff.
In reply to the above-described request, the Assistant Chief of Staff advised the Quartermaster General on September 8, 1950, as follows:
1. A lease for parts of the Stockton Ordnance Sub-depot has been effected with private interests for the period 20 June 1950 to 19 June 1951 at an annual rental of $64,708.00. The lease covers 14% acres, buildings T-962 and T-964 (warehouses, totaling about 372,000 gross square feet) and loading platform T-963. Joint use of trackage is also covered. Remaining facilities available for use by the Department of the Army consist, generally, of two sheds containing a total of approximately 372,000 gross square feet, hardstanding areas, shop, and administration buildings.
2. While it is realized that a more effective operation would be obtained if the entire facility were immediately available for storage operations, it must be borne in mind that cancellation of this lease will undoubtedly result in strong protests from the lessees, as well as local civil and political organizations. In this event, the Department of the Army must be able to defend such cancellation.
3. Accordingly, it is suggested that TQMG review the total requirements, availability, and utilization of space now under his control in the San Francisco-Stockton Area, which can be considered for the use intended for the Stockton Subdepot, to determine whether or not the military supply requirements can be met with these facilities, at least until the existing Stockton lease expires.
4. If, after such a review, it is determined that cancellation of the lease is essential to the accomplishment of the QM supply responsibility, this office will consider a properly supported request for such action.
Although the record is not entirely clear on the matter, it appears that the two sheds containing 372,000 square feet of storage, as referred to above, were the lean-tos that plaintiff demolished in order to reduce the cost of insurance on the buildings.
In September 1950, the Quartermaster General sought additional information from the western depots and reviewed the requirements for storage space in the Stockton area, but the record does not show what information was submitted to and used by him in making the review.
On September 27, 1950, Colonel Romain replied by a memorandum to the Assistant Chief of Staff, stating that the Army's requirements for space in the Stockton area were the same as had been previously described, that all of the space was committed to meet the Quartermaster General's requirements before plaintiff's lease expired, and that the greater portion of receipts from new procurement' was scheduled to arrive at Sharpe General Depot before December 81,1950. Accordingly, he again recommended that plaintiff's lease be cancelled as soon as possible.
On October 10,1950, the Assistant Chief of Staff directed the Chief of Engineers to take action to terminate plaintiff's lease on the Stockton Sub-depot, and a copy of this memorandum was sent to the Division Engineer in Oakland, California, on October 16, 1950.
21. Within two or three days after the conflict in Korea began, plaintiff learned that the Army was sending men and shipping large quantities of military supplies to Korea. At that time, one of the partners telephoned Mr. Downie to inquire about the status of plaintiff's lease and was informed that the District Engineer's office had received no information that the lease would be terminated and that it was in good order.
On July 18, 1950, a news story appeared in the Stockton Record to the effect that the Army had suspended its plans for the surplus disposal of the Stockton Sub-depot, pending a determination of the Army's requirements. Reference was made to plaintiff's lease but nothing was said about the cancellation thereof.
On August 17, 1950, an article quoting Colonel McCon-naughy appeared in the Stockton Record. The article stated that the Stockton Sub-depot would be transferred to Colonel McConnaughy's jurisdiction on September 1, 1950, for operation as a storage area and that Sharpe General Depot was required to release the space it had been assigned in the naval annex by December 31, 1950. It was further stated that the action taken by the Army was due to the situation in Korea and that some of the Quartermaster supplies stored in the naval annex would be transferred to the Sub-depot.
Again on August 30, 1950, there was a news story in the Stockton Record, quoting a statement from Colonel McCon-naughy to the effect that the Stockton Sub-depot would be transferred to his command on September 1, 1950; that he had no information as to when the Army would take posses sion of the facilities leased to plaintiff and that any information as to the status of plaintiff's lease would have to be obtained from the District Engineer in San Francisco.
The above-described news stories created considerable agitation among plaintiff's customers and were a source of worry and confusion to the plaintiff. As a result, several members of the firm with representatives of some of the customers conferred with both Colonel McConnaughy and Mr. Downie about the status of plaintiff's lease shortly after each of the stories appeared. Prior to August 17,1950, Colonel McCon-naughy informed plaintiff that he had no knowledge concerning the Army's plans with respect to the premises occupied by plaintiff. By August 17, 1950, when the second news story was published, Colonel McConnaughy had learned of the order through which jurisdiction over the Stockton Sub-depot was to be transferred to his command on September 1, 1950. He so advised plaintiff's representatives, but stated that he had no information regarding the cancellation of the lease contract and referred them to the District Engineer for information regarding the lease. Subsequently, when he learned that the Quartermaster Department would have to vacate the storage space in the naval annex and that the Sharpe General Depot would receive a considerable quantity of newly procured supplies by December 31, 1950, Colonel McConnaughy made a number of telephone calls to his superiors in Washington, D. C., in an effort to ascertain when plaintiff's lease would be revoked. During the latter part of August 1950, he made a trip to Washington, D. C., where he inquired about the matter but received no definite information regarding the revocation of the lease.
On each of the occasions when the partners called on Mr. Downie in San Francisco between July 18 and August 30, 1950, he told them that he had received no information indicating that their lease was to be revoked and that it was in good order. He repeated a statement made at the time the lease was entered into to the effect that it was the policy of the Army to cancel such leases only when such action was dictated by military necessity and pointed out that the determination as to the existence of a military necessity was not made in his office but through the Office of the Secretary of the Army.
At the times the above-described statements were made by Colonel McConnaughy and Mr. Downie, no decision to revoke plaintiff's lease had been made. As stated in finding 20, it was not until October 10,1950, that the Chief of Engineers was directed to take action to terminate the lease.
22. On October 16,1950, the Chief of Engineers directed the Division Engineer for the South Pacific Division to accomplish the revocation of plaintiff's lease as soon as possible, and on October 22, 1950, the District Engineer in San Francisco received a telegram, stating that plaintiff's lease was to be cancelled on November 1, 1950. Within two or three days thereafter, Mr. Downie conferred with Colonel McConnaughy regarding the termination of the lease, and about October 24, 1950, Mr. Downie also informed plaintiff that the lease would be revoked on November 1,1950.
23. On October 26, 1950, a conference was held between representatives of the District Engineer, representatives of plaintiff, and officers of the Sharpe General Depot. At that time, plaintiff's representatives stated that 90 days would be required for removal of the commodities stored in the warehouse and that they would need until March 31,1951, to clear two of the bays of the warehouse containing 30,000 square feet of storage space.
24. On October 27, 1950, Colonel McConnaughy was directed by the Department of the Army to remove the Quartermaster supplies stored in the Naval Annex by not later than December 31,1950. During the latter part of October 1950, representatives of the District Engineer and officers of the Sharpe General Depot determined that a period of 45 days after notice of revocation of the lease was given was a reasonable time to allow plaintiff for the removal of customers' goods stored in the warehouse.
25. On November 1, 1950, the District Engineer at San Francisco received a telegram which authorized him to deliver a formal notice of revocation of the lease. On the same date, he signed the notice and it was delivered to plaintiff. The notice read as follows:
TAKE NOTICE THAT:
The lease granted to you on the 23d day of June 1950 on property of the United States at Stockton Sub-Depot of Benicia Arsenal for a term of one year beginning 20 June 1950 and ending 19 June 1951, No. DA (s)-04-203eng-211, is hereby revoked, effective 1 November 1950. In accordance with Condition No. 20 of said lease, you are hereby notified to remove your property from said premises within 45 days after the date of receipt of this notice.
The revocation of this lease does not release you from the obligation to pay any rental due the United States thereunder.
DATED this 1st day of November 1950.
By authority of the Secretary of the Army.
The informal authority which had been granted to the District Engineer to revoke the lease was confirmed in writing on November 7,1950.
26. On October 24, 1950, when plaintiff was notified that the lease would be cancelled as of November 1,1950, the management of plaintiff began to devote full time to the task of vacating the premises within the 45-day period specified. Between November 1 and November 10,1950, 75,600 square feet of space was cleared, and as soon as this space was released, the Army began moving in the supplies that had been stored in the naval annex. Additional space was evacuated by plaintiff from time to time thereafter, and by February 1, 1951, all but a small quantity of the goods stored by plaintiff's customers had been removed from the warehouse. The small quantity left on hand was due to the fact that the owners thereof refused to remove the goods or provide other places to which plaintiff could remove them.
27. It took about eight weeks for the Army to transfer the Quartermaster supplies from the naval annex to the Stockton Sub-depot. The movement was accomplished by four Army trucks and supplemented one day a week by two Navy trucks. A total of 80,000 tons of material was moved. About 35 percent of it was tentage, and the remainder consisted of trenching tools, helmets, helmet liners, insecticides, and a small quantity of clothing and rations. In the naval annex, the supplies that were moved had occupied 241,863 square feet, but approximately 243,000 square feet of storage space was required for storing tbe same articles in the Stockton Sub-depot. The additional space was used, because Army regulations at Sharpe General Depot did not permit the material to be stacked as high as at the naval annex.
28. The evidence does not show the extent to which the Quartermaster Department utilized the vacant space in the four western depots referred to in finding-17 during the period from June 20, 1950 to June 19, 1951, the term of plaintiff's lease.
Approximately 200,000 square feet of space in the Mira Loma Quartermaster Depot was occupied by household furniture, transferred to that depot from the Sharpe General Depot at Lathrop, California.
Although it would have been possible for the Army to store the goods transferred from the naval annex to the Stockton - Sub-depot at Mira Loma, it would not have been economically feasible to do so. Mira Loma was located at a remote distance from shipping facilities and any of the supplies which were later shipped to Korea would have had to be transported back to the Port of Stockton for shipment abroad.
The record does not reflect to what extent the Navy later utilized the 480,000 square feet of space that had been assigned in the naval annex to the Quartermaster Corps up to December 31, 1950. At or about the time plaintiff's lease was revoked, there were large areas of vacant space in the naval annex.
Aside from the material moved from the naval annex, there is no evidence that the Army stored any other goods or supplies in the Stockton Sub-depot during the period between November' 1,1950 and June 19,1951.
29. The information contained in the memorandum which the Quartermaster General sent the Assistant Chief of Staff on July 26, 1950, regarding the Army's need for the Stockton Sub-depot (finding 16), was based in part on reports made by Army officers at Sharpe General Depot and other western depots, and in part on the Quartermaster General's knowledge of the new procurement that was planned and his judgment as to the additional storage space that would be needed for supplying American troops in Korea.
30. In bis memorandum of July 26, 1950, tbe Quartermaster General stated tbat the cost of moving the supplies from the naval annex to the Stockton Sub-depot would be $30,000, whereas the cost of shipping the same stocks to Mira Loma would be $700,000. In 1950, the commercial truck lines in California would have charged nine cents per hundredweight for transporting the supplies from the naval annex to the Stockton Sub-depot and fifty-eight cents per hundredweight for moving the same stocks to Mira Loma. Therefore, had commercial transportation been used, the additional cost of the movement to Mira Loma would have been $294,000.
31. Although the evidence shows that the Quartermaster General's statement in July 1950 of the additional storage space that would be needed by the Sharpe General Depot in the Stockton area was in excess of actual needs in the period from November 1,1950 to June 19,1951, it has not been shown that the determination that a military necessity existed for the Army's use of the Stockton Sub-depot was made arbitrarily, capriciously, or without regard to the information available to the Army officials who participated in the decision. That determination and the decision to revoke plaintiff's lease were made by the Assistant Chief of Staff and the Secretary of the Army, rather than by Colonel McConnaughy or other officers of the Sharpe General Depot. However, after August 17, 1950, when he learned that the Stockton Sub-depot would be placed under his command, that the space in the naval annex would have to be vacated by December 31,1950, and that a large quantity of additional material would be sent to Sharpe General Depot, Colonel McConnaughy requested that action be taken to revoke plaintiff's lease as soon as possible.
32. In a warehouse business of the type operated by plaintiff on the leased premises, it is customary for the warehouseman to allot space to customers on an annual basis, the customer having the right to move goods in and out during the year. When plaintiff first started soliciting business after the lease was signed, plaintiff made commitments of warehouse space to customers for a full year. During the period between July 18, 1950, when the first of the news stories regarding the Army's reactivation of the Stockton Sub-depot was published, and October 24,1950, when plaintiff was notified that the lease would be revoked, the uncertainty regarding the status of plaintiff's lease created such dissatisfaction among plaintiff's customers that two of the partners were obliged to devote most of their time in conferring with Colonel McConnaughy and Mr. Downie, and in reassuring plaintiff's customers that the warehouse would continue to do business. Despite the confusion and uncertainty, plaintiff was able to fill its warehouse to about 90 percent of capacity, and its business was not adversely affected, except in the case of one customer, the California Packing Company. Sometime in July, that company had agreed to utilize 120,000 square feet of storage space in the warehouse but after the adverse publicity appeared, the packing company reduced its commitment to 37,000 square feet, and on August 15,1950, entered into a written sub-lease with plaintiff for that amount of storage space. As a result of this situation, about 83,000 square feet of storage space was vacant in the warehouse for a period of about one month. After the uncertainty regarding the status of plaintiff's lease arose during the latter part of July 1950, most of the goods stored by customers were placed in the warehouse on a week-to-week or month-to-month basis instead of on the annual basis that is customary in commercial warehouses.
33. An audit of plaintiff's books shows that as of December 31,1950, plaintiff's profit from the business amounted to $9,949.30, and that as of March 31, 1951, its income had exceeded operating expenses by $3,887.50. These figures do not include an item of $14,480, which is not reflected by plaintiff's books and records and which consists of plaintiff's estimate of the expense of liquidating the business after November 1, 1950. The estimated liquidation expenses include accounting fees, travel expenses incurred in presenting plaintiff's claims, and the salaries of the partners during the time they worked on the liquidation of the business and assisted in the preparation of the claims presented to defendant. Also, the statement of income and expense does not include an item of $4,750, which plaintiff expended for repairs and improvements to the leased property.
34. When plaintiff entered into possession of the leased premises, it had to make certain repairs in order to render the buildings usable for operation as warehouses. The repair work involved reconditioning of the sidings and doors, patching the roof, and installing new glass in the skylights. In addition, when the Ordnance Department vacated the premises, all of the electrical wiring and transformers were removed, and it was necessary for plaintiff to employ an electrical contractor to install transformers, conduits, and wiring for lighting the buildings. Sometime after November 1, 1950, while plaintiff was engaged in evacuating stored goods from the warehouse so that the Army could move its supplies in, the post engineer of Sharpe General Depot had a discussion with one of the partners regarding the electrical equipment installed by plaintiff. He requested that these electrical facilities be left in the building and stated that the Army would approve a work order to reimburse plaintiff for the cost thereof. On March 4, 1951, plaintiff submitted to the Army a claim in the sum of $4,750.50 for the cost of labor and material expended on the repairs to the building and the installation of the electrical facilities. An itemized statement attached to the claim showed that plaintiff had expended $1,549.01 for the installation of the electrical equipment and that the remainder of the claim was for the cost of labor and material expended in removing the two lean-tos and in making various repairs to the buildings. Exclusive of the cost of removing the two lean-tos, plaintiff incurred an expenditure of $2,234.21 on repairs and reconditioning of the sidings, the doors, the skylights, and the roof.
On March 19,1951, the Executive officer of Sharpe General Depot forwarded the claim to the District Engineer in San Francisco with a statement that while plaintiff had not been directed or been given permission to make the repairs and improvements, it was considered that the work was of benefit to the Government. His letter stated that Sharpe General Depot had no funds for the reimbursement of these expenses. In the course of its investigation, the Army determined that plaintiff had not been authorized by the District Engineer to make any repairs, additions, or improvements to the leased premises, and the claim was denied. As previously stated, the lease contract provided that the lessee had inspected the premises before the lease was entered into and that the premises were leased without any warranty by the Government as to the condition of the premises or any obligation on its part to make alterations or repairs.
It is plaintiff's position in this action that the claim of $4,750 is included in its claim of $225,000, which is covered in the next finding.
35. During the year 1951, plaintiff submitted to the Department of the Army a claim in the sum of $225,000 for financial losses alleged to have been sustained by it because of the revocation of the lease. The claim was forwarded to the Comptroller General, who by settlement certificate dated February 13,1952, stated that there was no balance due from the United States to plaintiff.
In this action plaintiff has waived all claims asserted in its petition, except its claim of $225,000, which is the net profit it says would have been realized had the lease not been revoked but had remained in effect for the full term beginning June 20, 1950 and ending June 19,1951. As already stated, the amount of plaintiff's income and operating expenses from June 20, 1950 to December 31, 1950 and to March 31, 1951, have been established by an audit of plaintiff's books. Plaintiff arrived at the amount of the claim by projecting these established income and expense figures to J une 20, 1951. In that manner, plaintiff calculated that its total income for a year's operation of the warehouse under the lease contract would have amounted to $449,000 and that its expenses would have been $205,178.28, leaving a net profit of $243,821.72. In order to allow for errors in over-estimating income and under-estimating expenses, plaintiff has reduced the total claim to $225,000.
Defendant's Counterclaim
36. Plaintiff has paid the Government all rental due under the lease beginning with the date it entered into possession of the premises and until October 19, 1950. It has not paid the rent due for the remainder of that month and concedes that it is indebted to the United States in the sum of $2,127.36, the rental for the period October 20 to October 31, 1950.
On December 10, 1953, the Comptroller General issued a Certificate of Indebtedness against Edmond J. Mahony, Jr., Jack Colberg, and William F. Cook, the three members of the plaintiff partnership, in the amount of $2,127.36 for the above-described rental.
37. The defendant is also asserting a counterclaim against plaintiff in the amount of $6,596.72, as rental claimed to be due for plaintiff's occupancy of portions of the premises for the period from November 1,1950 to February 1,1951, during which time plaintiff was engaged in evacuating the leased premises.
The two warehouses leased to plaintiff contained approximately 358,000 square feet of covered space. After plaintiff received notice that the lease would be revoked as of November 1,1950, plaintiff vacated and released space in the buildings as follows:
Area (Sq.Ft.) Date Released,
39,600_ 1 Nov. 50
36,000_10 Nov. 50
39,600_20 Nov. 50
39,600_27 Nov. 50
36,000_ 8 Dee. 50
36,000__:_15 Dee. 50
36,000_22 Dec. 50
36,000_ 31. Jan. 51
36,000_31 Jan. 51
The remaining space, consisting of one section in one building where the plaintiff had maintained its office, was released about February 1,1951.
On August 1,1951, the District Engineer at San Francisco sent plaintiff two bills for unpaid rental claimed to be due the Government. The first bill was for the $2,127.36 rental from October 20 to November 1, 1950. The second bill was in the amount of $6,596.72, which covered the rental claimed for plaintiff's occupancy of portions of the warehouse during the period from November 1, 1950 to February 1, 1951. Plaintiff declined to pay both bills.
In December 1951, the District Engineer sought advice from the Division Engineer as to whether a claim should be asserted against plaintiff for the rental of $6,596.72 referred to above. On December 14, 1951, the Division Engineer replied as follows:
1. It is not considered that the Government is entitled to payment of rent for the period subsequent to 31 October 1950 until the warehouses were vacated, in view of the provisions contained in paragraph 20 of lease DA(s)-04-203-eng-211, and informal extensions of time granted by the Commanding Officer.
In view of the instructions received from the Division Engineer, the District Engineer revised the billing against plaintiff by eliminating the claim for rental in the period from November 1, 1950 to February 1, 1951. On September 8, 1952, the Chief of Engineers forwarded to the Chief of Finance, Department of the Army, for transmission to the Comptroller General, a claim in the amount of $2,127.36 against plaintiff for the unpaid rental from October 20 through October 31, 1950. The claim for the $6,596.72 now asserted to be due in defendant's counterclaim was not sent to the Comptroller General, and he has issued no certificate of indebtedness with respect thereto.
CONCLUSION OE LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is not entitled to recover, and its petition is therefore dismissed. It is further concluded that the defendant is entitled to recover on its counterclaim against plaintiff and it is therefore adjudged and ordered that the defendant recover of and from the plaintiff the sum of two thousand one hundred twenty-seven dollars and thirty-six cents ($2,127.36) on its counterclaim.