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United States v. Merchants Matrix Cut Syndicate Inc.


: January 17, 1955.


Author: Finnegan

Before FINNEGAN, LINDLEY and SWAIM, Circuit Judges.

FINNEGAN, Circuit Judge.

Condemnation proceedings*fn1 involving leasehold interests, are here reviewed under the Government's notice of appeal, and three such notices filed by Clark-Congress Corporation. After judgment was entered, January 29, 1953, on jury verdicts of compensation for taking by eminent domain, the Government moved for a new trial and, in the alternative, for judgment notwithstanding verdicts under Rule 50(b), Fed.R.Civ.Proc., 28 U.S.C.A. Clark-Congress, on the other hand, seeks reversal of a final judgment entered January 26, 1953 against it on two cross-claims and a counterclaim, prosecuted by its three co-defendants. Under these latter three notices of appeal, findings of fact and conclusions of law made by the trial judge, on this aspect of the case, are brought up for our examination.

Prior to any proceedings, now under scrutiny, Clark-Congress acquired five ground leases*fn2 of land in Chicago, Illinois, on which the Rand McNally Building is situated. Initially, Merchants Matrix Cut Syndicate, Inc., and Intertype Corporation were tenants of the Rand McNally Company for terms hereinafter itemized. Their two leases were assigned June 30, 1949 by that Company to Clark-Congress which, itself, executed other leases with Advertising Checking Bureau, Inc., and Merchants, as follows:

Area Period Perio d

Square Lease Commenc- Lease Co mmenc-

Defendant Floor feet Dated ing Ending Dated in g Ending

Merchants 8th 10,000 May 19, June 16, Aug. 31,

1949 1949 1953

Room 844 Apr. 27, May 1, Aug.


1951 1951 1953

Ad vert- 8th 20,000 Feb. 10, May 1, Apr.


ising: 1950 1950 19 55

Inter- 10th 10,500 Nov. 19, Jan. 1, Dec. 31,

type: 1948 1949 1958

By its agreement dated June 22, 1951, Clark-Congress, leased the entire Rand McNally Building to the United States of America, commencing January 1, 1952, and ending December 31, 1956, subject to extension and earlier termination.Clause 25 of that lease contains, inter alia, this wording: "This lease has been entered into by the parties in lieu of condemnation proceedings or an award therein, the Government having indicated that it was considering condemnation proceedings to acquire the rights herein granted to the Government."

At this juncture it is pertinent to parenthetically note that Rule 71A, and the amendment to Rule 81(a), Federal Rules of Civil Procedure, 28 U.S.C.A. became effective August 1, 1951, 341 U.S. 959, 962.

Under its declaration*fn3 of taking, filed December 12, 1951, coupled with a complaint in condemnation, the Government, pursuant to the request of the Administrator of General Services Administration, sought to acquire the right to use*fn4 and occupy space in the Rand McNally Building for the housing of federal agencies outside the District of Columbia. Merchants Matrix Cut Syndicate, The Advertising Checking Bureau, Illinois corporations, and Intertype Corporation, a New York corporation, each occupying various areas of the space involved were made parties defendant along with their lessor, Clark-Congress Corporation.*fn5

By exercising its sovereign power, Kohl v. United States, 1875, 91 U.S. 367 23 L. Ed. 449, of eminent domain, the Government acquired a quantum of interest described in its declaration and complaint, as being: "... the right to use and occupy for a term of years commencing January 1, 1952, and ending December 31, 1956, extendible for an additional five-year term at the election of the United States, notice of which election shall be filed in the proceeding at least thirty (30) days prior to the end of the term thereby taken, together with the right to remove within a reasonable time after the expiration of the term or extension thereof any and all improvements and structures placed therein by or for the United States."

After the government moved for an order directing delivery of possession, defendants Merchants and Advertising each filed answers containing cross-claims against their landlord, co-defendant, Clark-Congress; Intertype also answered, but counterclaimed against that co-defendant landlord.

Since appeals numbered 11018, 11019 and 11020 contain a core issue common to all three, stemming from an interpretation of Rule 71A, Fed.R.Civ.Proc., 28 U.S.C.A. § 2072, we will consider that problem first.

The trial court denied motions to strike the cross-claims and counterclaims interposed by the Government and Clark-Congress Corporation, their challenges to these pleadings being bottomed on a theory of non-conformity with subdivision (e) of Rule 71A. Subsequently, Clark-Congress answered both cross-claims and counterclaim and, after a trial on the merits the judgment already mentioned was entered against Clark-Congress. Without a specific interdiction in Rule 71A against cross-claims or counterclaims we must decide if such pleadings may be presented, and claims asserted against co-party defendant Clark-Congress, in this condemnation case.

Rule 71A adopted pursuant to the Supreme Court's order,*fn6 dated April 30, 1951, 341 U.S. 962, abrogated paragraph (7) of Rule 81(a),*fn7 Federal Rules Civ. Proc., 28 U.S.C.A. "The Rules of Civil Procedure for the United States District Courts govern the procedure for the condemnation of real and personal property under the power of eminent domain," by the explicit terms of subparagraph (a) in Rule 71A, "except as otherwise provided in this rule." Its contents are focused upon procedural steps and simplified pleadings, without any mention of either counterclaim or cross-claim.

This is a rule built upon an area formerly wanting in uniformity (Report of the Advisory Committee on Federal Rules of Civil Procedure Recommending Amendments, 5 F.R.D. 339, 357) and for which no specific provision had been promulgated in the first set*fn8 of Rules of Civil Procedure, effective September 16, 1938, 28 U.S.C.A. following § 723c.

On June 10, 1947, the Advisory Committee, appointed by the Supreme Court, reported 7 F.R.D. 503 a preliminary draft of a proposed rule to govern condemnation cases. In their explanatory discussion (ibid, 514) this Committee noted that: "* * * Rule 71A will supply a uniform procedure to be used in all cases of condemnation suits invoking the national power of eminent domain and will supplant those statutes prescribing a different procedure, except where otherwise expressly so stated in the rule. Rule 71A is not intended to and does not supersede the Act of February 26, 1931, c. 307, §§ 1-5 (46 Stat. 1421), 40 U.S.C. §§ 258a-258e, which is a supplementary condemnation statute, permissive in its nature and designed to permit the prompt acquisition of title by the United States pending the condemnation proceedings upon a deposit into court."

Simply as indicative of their approach and perspective, we quote several passages from the Advisory Committee's commentary on Rule 71A, contained in their Report and transmitted with that Rule by Chief Justice Vinson to Congress:

"The purpose of Rule 71A is to provide a uniform procedure for condemnation in the federal district courts, including the District of Columbia. To achieve this purpose Rule 71A prescribes such specialized procedure as is required by condemnation proceedings, otherwise it utilizes the general framework of the Federal Rules where specific detail is unnecessary. The adoption of Rule 71A, of course, renders paragraph (7) of Rule 81(a) unnecessary, * * *." 11 F.R.D. 213, 238, 239.

"Since the general standards of pleading are stated in other rules, paragraph (2) [Rule 71A] prescribes only the necessary detail for condemnation proceedings * * *." Id., 11 F.R.D. 240.

"* * * Departing from the scheme of Rule 12, subdivision (e) [Rule 71A] requires all defenses and objections to be presented in an answer and does not authorize a preliminary motion. There is little need for the latter in condemnation proceedings. The general standard of pleading is governed by other rules, particularly Rule 8, and this subdivision (e) merely prescribes what matters the answer should set forth. * * *" Id., 11 F.R.D. 241.

"* * * A condemnation action is a proceeding in rem. Commencement of the action as against a defendant by virtue of his joinder pursuant to subdivision (c)(2) is the point of cut off * * *." Id., 11 F.R.D. 242.

Plainly, Rule 71A simply blueprints uniform procedure*fn9 to be followed for this specific class of case. We are asked to approve adversary litigation among these co-defendants because Rule 71A(a) orders the applicability of "The Rules of Civil Procedure" and Rule 13,*fn10 thereof, authorizes counterclaims and crossclaims. In its amicus curiae brief, the Government*fn11 attaches much significance to this sentence: "No other pleading or motion asserting any additional defense or objection shall be allowed", appearing in paragraph (e) of Rule 71A. 341 U.S. 959, 966. That sentence comes from the portion of Rule 71A treating with defendant's appearance or answer. If a defendant, in a condemnation proceeding has nay "objection or defense to the taking of his property" he must set up such matters in his answer. Merchants, Advertising and Intertype tacked their respective cross-claims and counterclaim to individual answers containing defensive allegations and statements of objections. But we think their asserted claims against Clark-Congress must be viewed and tested independently of any other associated pleadings they filed. For if these three claims are out of place in this condemnation case their status is neither improved nor strengthened by mere incorporation in answers. We are aware of a historical antipathy toward mixing different kinds of actions in one proceeding. Our current view is incompatible with those expressed in United States v. 76.15 Acres of Land, More or Less, etc., D.C.N.D.Cal.1952, 103 F.Supp. 478, where cross-claims were rejected in an action for condemnation, because the California court thought the difference between a proceeding in rem and one in personam warranted such a ruling. But we think that solution rests upon an issue stated with deceptive conceptual simplicity.*fn12

We have no precise authoritative indication that the Supreme Court, exercising its rule-making power, wished to countenance a determination of such claims, as are now before us, in eminent domain cases, unless it be said that the solution lies in the introductory paragraph (a) to Rule 71A. Cross-claims against co-defendants are so rare in condemnation cases we doubt if such matters were even considered in preparing Rule 71A. Yet, we are confronted with an express direction, in paragraph (a), seemingly giving full play to other Rules of Civil Procedure, "except as otherwise provided" in Rule 71A. Silence of this latter Rule makes it necessary to examine Rule 13 under which Merchants, Advertising and Intertype seek shelter.

At the threshold we record our further awareness that Rule 13 would prevent circuity of actions and multiplicity of suits, indeed these were among the prime reasons stimulating its adoption; practicality, however, is the true taproot of Rule 13. We are cited to Collier v. Harvey, 10 Cir., 1949, 179 F.2d 664, where Chief Judge Phillips discussed the broad sweep of Rule 13(g), but not in relation to Rule 71A. Moore v. N.Y. Cotton Exchange, 1926, 270 U.S. 593, 46 S. Ct. 367, 70 L. Ed. 750, is also brought to our attention for an interpretation of "transaction" announced by the Supreme Court upon examination of former Equity Rule 30, from which Rule 13 was derived. Close scrutiny of facts and circumstances involved in various other opinions relied on by Merchants, Advertising and Intertype show they each fail to bridge the gap between Rule 13 and Rule 71A, especially since Rule 71A was adopted subsequent to the promulgation of Rule 13. Descriptions of attributes and inherent characteristics of Rule 13 furnish little aid in determining if a trial judge hearing eminent domain proceedings has jurisdiction to dispose of co-defendants' cross and counterclaims. Only by inserting a judicial rubric in Rule 71A could we interpret it as containing some lurking prohibition against invoking Rule 13. We read that Rule as it is written.*fn13 Empirical judgment inclines us away from letting Rule 13 become operative in these proceedings, but we refrain from invading the rule-maker's province or from fashioning policy.

By resolving contentions raised against applying Rule 13 to condemnation cases we come to the contents of these three claims and evidence introduced in support of them.Merchants, Intertype and Advertising postulate theories of conspiracy among and between, the Government, General Services Administration and Clark-Congress, as an apparatus for the condemnor to prematurely terminate those three tenancies derived from Clark-Congress, lessor. Cohesive substance for this plot, they allege, is supplied by the June 1951 lease between Clark-Congress and the Government, despite a clause, therein reciting that this lease was in lieu of condemnation. In short, these three claimants are unable to envisage consensual transactions in connection with condemnation proceedings. See: U.S. v. Certain Parcels of Land, etc., 1953, 345 U.S. 344, 348, 73 S. Ct. 693, 97 L. Ed. 1061; See also: U.S. v. Carmack, 1946, 329 U.S. 230, 243, 67 S. Ct. 252, 91 L. Ed. 209. But all titles to, and interests in, lands are held subject to the sovereign power of eminent domain. Goodyear Shoe Machinery v. Boston Terminal Co., 1900, 176 Mass. 115, 57 N.E. 214. Certainly, the Government's need for quarters shaped itself in obedience to currents other than those flowing from a plot with Clark-Congress. Indeed, these claimants do not go so far behind this taking, by urging a conspiracy to activate the Government power of eminent domain. What they describe equates to an arrangement whereby Clark-Congress leased their spaces, in the Rand-McNally Building, to the Government, so that when the sovereign thus became a cotenant, with them, it could embark on "a course of harassment, pressure and threats" looking toward compelling these three tenants to abandon or surrender possession. Relying on that pattern, sketched in their pleadings, each claimant urges breaches and violations of covenants of quiet enjoyment and peaceable possession because Clark-Congress, allegedly, ratified, sanctioned and acquiesced now beside the mark, since a declaration with instituting this condemnation case. Regardless of how it is articulated each such pleading reverts to, and each is bottomed, on, claiming damages because these three tenants had to find quarters elsewhere, and move. Whether the ultimate theory of recovery against Clark-Congress is conveniently blurred in the pleadings or evidence is bnow beside themark, since a declaration of taking was filed and processed. Merchants, Intertype and Clark-Congress were entitled to just compensation*fn14 and no more under U.S.Const. Amend. V. See: United States v. General Motors Corp., 1945, 323 U.S. 373, 382, 65 S. Ct. 357, 89 L. Ed. 311. Their interests were acquired by and to the extent of that declaration of taking. 46 Stat. § 1421, 40 U.S.C.A. §§ 257, 258a et seq. Consequently their attempts to isolate some fragment of the total acquisition process carries compensation beyond the bounds delineated in the Fifth Amendment. Governmental taking of private property for public use requires payment of just compensation to Merchants, Intertype and ordinarily to Advertising,*fn15 but these three tenants cannot improve on the amount of compensation by taking damages from their landlord.*fn16 It would be a strange index of the compensatory redress for the acquisition of private property through eminent domain proceedings to allow these three tenants recovery from their landlord for moving, packing and other expenses.

Their landlord, Clark-Congress, moved for a new trial pursuant to Rule 59, Fed.R.Civ.Proc., 28 U.S.C.A. and by appropriate motion under Rule 52(b), Fed.R.Civ.Proc. 28 U.S.C.A., sought to have the trial judge amend his findings of fact; at the same time stating objections to the recorded findings. Both motions were overruled. While the challenged findings are detailed, they are estranged from significant items of evidence disclosed by this record. Of course, we are not now retrying issues of fact nor trenching upon the province allotted a trier of facts below. But we do think that the findings, inter alia, which exhibit computations of damages predicated upon the "cost of moving out" of the premises in question, flow from errors of law impairing the three judgments against Clark-Congress. Moving expenses are so inextricably woven into the termination of these leases upon the taking of the Government [U.S. v. Advertising Checking Bureau, 7 Cir., 1953, 204 F.2d 770, 772] that they cannot be recovered indirectly, or on the side.

Various elements itemized by the trial judge in his findings of "actual damage," and underlying the three judgments he entered against Clark-Congress, bear striking resemblance to those which the respondent in United States v. General Motors Corp., 1945, 323 U.S. 373, 376, 65 S. Ct. 357, 89 L. Ed. 311, offered to prove on the issue of compensation from the Government. But such costs were not there tendered in support of a claim against a co-defendant landlord in Clark-Congress' position here. Moreover, only Intertype's lease, by its terms, extends beyond December 31, 1956; leases of Merchants and Advertising would have expired prior to that date. At this juncture we might well recall the Government pleading stating that its interest, acquired through condemnation was to be "* * * extendible for an additional five-year term * * *", after December 31, 1956.

Speaking for the majority in United States v. Westinghouse Elec. & Mfg. Co., 1950, 339 U.S. 261, 263-264, 70 S. Ct. 644, 646, 94 L. Ed. 816, Mr. Justice Frankfurter carefully delimited the holding of United States v. General Motors Corp., 1945, 323 U.S. 373, 65 S. Ct. 357, 89 L. Ed. 311, and stated, inter alia:

"When there is an entire taking of a condemnee's property, whether that property represents the interest in a leasehold or a fee, the expenses of removal or of relocation are not to be included in valuing what is taken. That rule was found inapplicable to the new situation presented by the General Motors case - inapplicable, that is, where what was to be valued was 'a right of temporary occupancy of a building equipped for the condemnee's business, filled with his commodities, and presumably to be reoccupied and used, as before, to the end of the lease term on the termination of the Government's use' * * *.

"Petty Motor (U.S. v. Petty Motor Co., 1946, 327 U.S. 372, 66 S. Ct. 596, 90 L. Ed. 729) made clear that the taking of the whole of a tenant's lease does not fall within the General Motors doctrine * * *".

Mirrored against these enunciations of basic principles, there emerges strong implications that Merchants, Intertype and Advertising were attempting to recover from Clark-Congress for items not compensable by the sovereign. Advertising was precluded from governmental compensation for the reasons we discussed in United States v. Advertising Checking Bureau, Inc., 7 Cir., 1953, 204 F.2d 770. And, Intertype argues (its brief, 46), as we just said, that such costs were not included in its award. Of course, Intertype's reasoning may explain why it pursues Clark-Congress, but that is hardly legalistic support for such cross-claim. Furthermore, as between Intertype and the Government, "An award based on removal costs will of course be delayed until it is known whether the Government's occupancy has exhausted the tenant's leasehold." United States v. Westinghouse Elec. & Mfg. Co., 1950, 339 U.S. 261, 268, 70 S. Ct. 644, 648, 94 L. Ed. 816.

All too frequently, profit seeking motives creep into condemnation cases. This observation, no doubt, will be distasteful to those who envisage the public treasury as fair game in such proceedings. Though competitive existence in our society may stimulate such desires, just compensation, only, remains the yardstick in eminent domain proceedings. Kimball Laundry Co. v. United States, 1949, 338 U.S. 1, 69 S. Ct. 1434, 93 L. Ed. 1765, 7 A.L.R.2d 1280. When the Treasurer disburses compensation in obedience to an order of award, based on condemnation proceedings, public dollars stand in lieu of land, premises or interests, so acquired, and thereafter devoted to public use. "The Constitution and the statutes", Mr. Justice Reed noted, delivering the majority opinion in United States v. Petty Motor Co., 1946, 327 U.S. 372, 377, 66 S. Ct. 596, 599, 90 L. Ed. 729, "do not define the meaning of just compensation. But it has come to be recognized that just compensation is the value of the interest taken."

A recital of various other pieces and portions of evidence disclosed by this record, is unnecessary to this opinion because we think United States v. Petty Motor Co., 1946, 327 U.S. 372, 66 S. Ct. 596, 90 L. Ed. 729; United States v. General Motors Corp., 1945, 323 U.S. 373, 65 S. Ct. 357, 89 L. Ed. 311; United States v. Westinghouse, 1950, 339 U.S. 261, 70 S. Ct. 644, 94 L. Ed. 816, contain the law applicable to, and determinative of, the major points raised by the Government's appeal in case number 11017. We think those three cited cases are the benchmarks by which the trial court should be guided on this remand.

Since condemnation juries are impaneled only for deciding compensation they commence deliberations in a positive awarding-state-of-mind. An especially delicate equilibrium, acutely sensitive to factors influencing the quantum of award, is present throughout such trials. Perhaps we are underscoring the obvious, but it is our opinion that the jurors critical and difficult function, here, should not be further complicated by blurred and insufficient instructions or by improper arguments. [See e.g.: United States v. Miller, 1943, 317 U.S. 369, 381, 63 S. Ct. 276, 87 L. Ed. 336; Ramming Real Estate Co. v. United States, 8 Cir., 1941, 122 F.2d 892] concerning and pointing up deposits made by the Government pursuant to statute.

The judgments in case number 11017, are reversed and remanded to the District Court for a new trial and proceedings consistent with the views expressed in this opinion.

Each judgment entered on the respective cross-claims of Merchants Matrix Cut Syndicate, Inc., and Advertising Checking Bureau, Inc., and on the counterclaim of Intertype Corporation, being appeals numbered 11018, 11019 and 11020, is hereby reversed and remanded to the District Court with directions to sustain*fn17 the three motions of Clark-Congress Corporation to strike each cross-claim and the said counterclaim.

Reversed and remanded with directions.

SWAIM, Circuit Judge.

I concur in the result.

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