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United States v. General Motors Corp.

Supreme Court of the United States · 1945 · Civil Procedure

Civil ProcedurePropertyEminent DomainJust CompensationLeaseholdsFifth Amendmentjust compensationeminent domain

Facts

Respondent held a twenty-year lease on a warehouse in Chicago that it had fitted for storing and distributing automobile parts. In 1942 the United States condemned temporary use of the remaining portion of the warehouse still occupied by respondent for a term ending June 30, 1943, and respondent removed its goods and dismantled bins and fixtures so the government could take possession. At trial, the government offered expert testimony on the fair rental value of the space, while respondent also sought to prove costs caused by removal of contents and losses from destruction of bins and fixed equipment. The trial court excluded those additional proofs and the jury awarded a lump sum based roughly on annual square-foot rental value alone.

Issue

When the government condemns temporary occupancy of part of a long-term tenant's leased building, is just compensation limited to the long-term rental value of empty floor space? May the reasonable costs of removing property and preparing the space be considered in valuing the temporary occupancy, and must the government separately compensate for fixtures and permanent equipment destroyed or depreciated by the taking?

Rule

The Fifth Amendment requires compensation for the value of the property interest actually taken. In a temporary taking of part of a leasehold, the proper measure is the market rental value of the temporary occupancy as it would be valued in a lease from the long-term tenant to the temporary occupier, not simply the long-term rental of bare space. Reasonable removal and preparation costs may be admitted, not as independent consequential damages, but as evidence bearing on that market value; fixtures and permanent equipment destroyed, damaged, or depreciated by the taking are separate property interests for which additional compensation must be paid.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Riverton Medical Supply holds a 15-year lease on a distribution building in Cleveland and uses the interior with custom shelving and active inventory. The federal government condemns eight months of occupancy of one wing for emergency operations and orders the wing delivered empty. At trial, the judge says compensation will be limited to the ordinary annual rent for comparable vacant warehouse space.

What is the strongest objection to the judge's ruling?

Explanation. The majority held that when the government temporarily condemns part of a tenant's leasehold, just compensation is the value of the property interest actually taken: the temporary occupancy carved out of the long-term tenancy. That interest is not properly valued solely by ordinary rent for bare vacant space. Instead, the factfinder must determine what the market rental value would be for that unusual short-term occupancy as if leased by the long-term tenant to the temporary occupier. The Court did not adopt a rule awarding all business losses, nor did it say rent owed to the landlord is always the measure.