Court Opinion

ID: 8913869
Source: CourtListenerOpinion
Date Created: 2022-11-27 04:10:59.808315+00
Date Added: 2024-06-11T17:08:47.307164
License: Public Domain

MOORE, Circuit Judge
(dissenting):
I dissent.
Important agencies of government, the Internal Revenue Service (IRS) and the General Services Administration (GSA) are involved. The IRS has occupied, pursuant to a lease executed in 1962 between GSA and Bedford, the owner of the building, a 21 story building known as 120 Church Street in lower New York City. In my opinion the majority bases its decision on an extraordinary principle saying that: “Moreover, in the setting of the present case, we [the Court of Appeals] have ample power to construct rules of federal common law that may vary from the principles of general contract law”. At 1310. The “rules” which the majority would construct would be the elimination of the centuries-old fundamental essential of a valid agreement, namely, that before a valid contract comes into existence, there must be a “meeting of the minds” of the parties. Despite this conceded deficiency, the majority would foist upon Bedford a lease to which as the district court found (and these findings were not reversed or held to be clearly erroneous) “Bedford clearly did not intend to be bound until outstanding items had been resolved” and that “Bedford’s intent not to be bound and its belief that terms would be renegotiated after an award was made were manifested to the government”. 497 F.Supp. at 863. Nevertheless, the majority concludes that “as a matter of federal law and regardless of the status of the bargain under general contract law [footnote omitted], we hold that Bedford’s extension of its offer empowered GSA to accept that offer, and that GSA’s delivery of the award on October 30, 1978, created a valid contract”. At 1310. This conclusion is followed by the rejection of an equally time-honored principle of contract law by We reach this conclusion even though GSA may have known that Bedford believed that its offer was not binding and that further negotiations would follow the ■award”. At 1310. The majority “assume the correctness of the district court’s explicit findings that ‘Bedford clearly did not intend to be bound [by its offer] until the outstanding items had been resolved’ and that ‘Bedford’s intent not to be bound and its belief that terms would be renegotiated after an award was made were manifested to the Government, 491 F.Supp. at 863.’ ” The opinion accepts “as a matter of general contract law, the proposition that negotiations cannot form a contract if one party to them indicates to the other his intention not to be bound until some later time”. At 1308. However, it pushes aside this fundamental contract principle, saying: “Bed-ford, however, was not an ordinary commercial landlord; it sought its rents from public funds”, At 1309, and holding “that the negotiations formed a contract”. At 1308. If the negotiations formed a contract, this conclusion cannot be reconciled with the opinion’s assertion that “GSA’s delivery of the award letter on October 30, 1978, created a valid contract”. At 1310. The offer which GSA was purporting to accept was the offer in Bedford’s August 15, 1977 proposal, as amended. This offer was followed by some fifteen months of fruitless negotiations. The district court found that “It is also clear that the Government and Bedford did not reach an agreement on a number of material terms”. In my opinion the court’s finding that “there was no meeting of the minds as to a number of essential items” is sufficient to justify its conclusion that “no contract was made”. saying:
The majority acknowledges the district court’s reliance upon “the parties’ inability to agree on the rent to be paid during the renovations, the area to be leased, and the rate of overtime services. . . . [I]n the court’s view, the existence of these disputed terms rendered the proposed lease substantially indefinite and therefore void”. At *13201310. The majority, however, belittles the importance of these unresolved terms, saying:
“We disagree. Neither the terms themselves nor the asserted disagreements concerning them were so significant as to preclude enforcement of the parties’ bargain. * * * Even if the parties have left some terms of their agreement indefinite, a court may enforce the agreement if it has means of giving content to the indefinite terms ... or if these terms are not material to the bargain. . . . ” (citations omitted). At 1310.
The majority disposes of the area problem by saying that there was to be “a mutual field measurement after delivery of the space and that any disagreement would be resolved through administrative proceedings”, that “[Tjhese modes of resolving the dispute were eminently practicable, and the district court should have remitted the parties to them.” (At 1310) (citations omitted). Furthermore, “the total area in dispute — about 5% of the leased space — was relatively insignificant . . . and not so great as to preclude enforcement of the agreement”. (At 1310-11).
As to' overtime rates, the opinion says that they were “susceptible of resolution [and] a relatively small part of the bargain”. Furthermore, “the court could have reviewed this prior course of dealing, as well as standard practice in the industry, to set a reasonable rate”. (At 1311).
The majority states that a lease was presented to Congress for its approval and approved by it. The fallacy of this fact assumption is established by the exhibits in the record. The GSA letter of June 8, 1978 to the Senate Committee on Environment and Public Works, reads: “In accordance with Section 7 of the Public Buildings Act of 1959, as amended, there is submitted for consideration by the Committee a prospectus which proposes a succeeding lease for space presently occupied at 120 Church Street, New York, New York”. Exh. 118. No lease was submitted; only the offer and prospectus. That a “succeeding lease” was proposed and contemplated is clear. Under the heading “LEASE PROSPECTUS — 120 CHURCH STREET, LOWER MANHATTAN, NEW YORK CITY:” there is stated “GSA proposes such a lease, for a firm term of 10 years, at an annual cost of $2,902,160 or $8.32 per sq. ft. including services and utilities”. That the prospectus was to authorize negotiations is equally clear: “The proposal for negotiating a 10 year succeeding lease is actually an alternative to exercising the 5-year option that GSA already has”. Exh. 119.
The Senate Committee approved the 120 Church Street prospectus under date of August 16, 1978. Exh. 120. An accompanying report appears in the Congressional Record of the Senate in which it is stated: “The lessor [Bedford] will not undertake the needed work unless a new lease is negotiated”. A. 1040.
During the year (1977-1978), extensive, but fruitless negotiations took place as revealed in the 4,175 pages of the record. They covered a wide variety of subjects, including the area to be occupied and the rental to be paid during phases of renovations. As the district court found, however, no meeting of the minds occurred. Nevertheless, and apparently to comply with its understanding of the lease requirement, GSA undertook to prepare, under date of December 13, 1978, on the required GSA Standard Form 2, a document entitled “U.S. GOVERNMENT LEASE FOR RENTAL PROPERTY”. A rider attached thereto specified certain square foot rental rates.
The proposed lease was to be subject to “All terms, conditions and obligations set forth in Solicitation for Offers M.NY-76-560 dated June 28,1977 (Amendments No. 1 dated July 13,1977 and No. 2 dated July 26, 1977) thereto; the Lessor’s offer dated August 15, 1977, as amended by letters dated September 6, 1977, November 1, 10, 15, 17, 18 and 28, 1977, December 8, 1977, January 31,1978, and February 1, 1978; the Government’s acceptance letter dated October 30, *13211978; the Rider attached to the Lease”. (A.851).
The presentation by GSA for the first time of the required lease brought immediate response from Bedford. On December 15, 1978, Bedford replied: “The lease as prepared by the General Services Administration is completely unacceptable to ownership. The provisions contained in the lease do not reflect, nor are they consistent with the solicitation and award”. Exh. 40.
That a written lease was contemplated rather than a correspondence-formed agreement is evident from the requirement that “The successful offeror will be required to execute a U.S. Government lease for real property, as prescribed in the code of Federal regulations, 41 C.F.R. 1-16.6”. (A. 856). The instructions specified that there be added “[p]rior to execution of the lease additional appropriate paragraphs ... including all schedules and attachments as well as other provisions agreed upon”. The offer of August 15, 1977 could not possibly have embodied the terms discussed or agreed upon in the negotiations, the terms of which were constantly changing. Furthermore, the negotiations contemplated had not even taken place at that time. The disparity in the rental figures in the letter of October 30, 1978 and the proposed lease is further indicative of a lack of any meeting of the minds on this essential element. Therefore, the majority’s assumption that the letter of October 30,1978 was sufficient to create a valid and enforceable lease is contrary, in my opinion, to the facts and time-honored principles of contract law.
The remand, in effect, calls upon the district court to write a lease for the parties. It says: “On remand, the district court must adjudicate the government’s claim for damages under the lease”. Since the trial court has held that there is no valid lease it will have to create one despite its holding that there has been no meeting of the minds. This is made obvious by the direction that the court “should give content to the terms of the lease concerning the area to be demised and the rate for overtime services”. At 1317. Since the district court has already held that there has been no meeting of the minds on these two items, it will have to substitute its “mind” for that of the parties and direct them as to how their minds should function.1
As to occupancy: IRS has maintained its New York headquarters in the building for almost twenty years. Despite the majority’s recognition that the government should not be disturbed in possession, the majority, in effect, tells the government “to make its election either to vacate the premises or to condemn some interest in them”. At 1318. The opinion does give recognition to the retention of possession by the government “provided that it pays just compensation, as determined by the district court having jurisdiction of the action to the property owner”. At 1318. The district court has taken testimony as to fair compensation and has fixed a price. I would also affirm its conclusions as to the Bowery mortgage.
As I foresee the future with Cassandra-like foreboding, a lease will have to be written for the parties by federal courts. I believe this possibility can be avoided by adhering to the requirement that there be a meeting of the minds at the outset. I would affirm the district court.

. The drafting of a lease is further complicated for the trial court by the majority’s statement that “We think that Bedford must be held to the terms of its November 1977 proposal, and that the agreement was therefore definite”. At 1311.