206 F.2d 289
UNITED STATESv.HIRSCH et al.
No. 276.
Docket 22703.
United States Court of Appeals Second Circuit.
Argued June 1, 1953.
Decided July 13, 1953.

This condemnation proceeding was commenced on March 5, 1951, to acquire all right, title and interest adverse to the United States in the Chance-Vought aircraft plant in Stratford, Connecticut, which was owned 81% by the United States and 19% by United Aircraft Company. The plant had been used during World War II for the manufacture of airplanes. It having been determined that the plant was no longer required for military purposes, it was offered for sale, and on November 1, 1950 the United States, United Aircraft and the defendant Hirsch executed a contract of sale to Hirsch at a price of $2,010,000. The contract provided for a deposit of $50,000 and an additional payment of $352,000 to be made within sixty days, with the balance of $1,608,000 to be secured by a twenty-year mortgage with quarterly payments and interest at 4%. Hirsch paid the $50,000. Under a supplementary agreement, Hirsch was granted the right to extend the settlement date for an additional sixty days by the further payment of $35,000 which amount was applied to the purchase price. Accordingly, the time for settlement was extended to March 1, 1951. In the latter part of February 1951, Hirsch was advised that his interest in the plant would be condemned unless he agreed to modify the conditions of his contract to provide for accelerated payment. He refused to modify the contract, and thereupon, The General Services Administration, acting on behalf of the United States Air Force, requested condemnation of the property. Petition in condemnation was filed March 5, 1951, and $467,000 was deposited as estimated just compensation. Of this amount, $85,000 was earmarked for Hirsch as the return of his payments, and $382,000 for United Aircraft as the amount which it would have received if the sale to Hirsch had been consummated.
The district judge appointed a committee of three retired judges of the State of Connecticut to try and determine the amount of just compensation. It was agreed that, as Hirsch had been refunded $85,000 which he had paid under the contract, just compensation to him would be measured by the amount, if any, by which the fair market value on March 5, 1951, exceeded the contract price of $2,010,000. The Committee having heard the evidence, found the fair market value of the property on that date to be $3,100,000. The report of the Committee reads as follows:
"The undersigned, having been appointed by order of the court, Smith, J., on July 2, 1951, a committee to view the property involved in this proceeding, to hear the evidence and ascertain the value thereof, and to report their doings to the court, met at New Haven, on December 13, 1951, and, having been duly sworn, proceeded to Stratford and, with counsel for the parties, viewed the premises; and thereafter the committee heard all the evidence submitted to them by the parties at the County Court House in New Haven, on January 8, 9, 10, 15, 16, 17, 22, 23, 24, 29, 30 and 31, 1952, and the committee, having considered the evidence and claims of counsel, met at the State Library Building in Hartford, on May 28, 1952, for conference, and there and then reached the conclusions stated in this Report, respectfully submitted to the Court.
"1. On March 5, 1951, this court duly entered judgment condemning said certain lands in the town of Stratford, Connecticut, for the United States of America, which lands are particularly described in a schedule attached to said judgment, as amended by an order of said court made on August 23, 1951, to which schedule and amendment reference is hereby made.
"2. Previous to 1948, the lands in question with the buildings thereon had been occupied by the Chance Vought Plant of the United Aircraft Corporation for the manufacture of airplanes, but during that year it was decided to move the plant to Texas and on or about July 1, 1949, that removal was completed and the plant became vacant.
"3. At that time, and thereafter, there were upon the land thirty-five or more buildings, with a total of about 1,500,000 square feet of closed-in space. The plant was located in Stratford, a town adjacent to the city of Bridgeport, in a highly industrial area. The nearest railroad freight station was about a mile away. Across a highway from the plant was an airfield. The property was located on the Housatonic River, near its mouth, and while there were no facilities for shipping to come directly to it, a ship channel in the River could be made available by dredging.
"4. The plant had originally been established by the United Aircraft Corporation, but, in aid of the military effort of the government in the Second World War, the government had financed the construction of additional buildings and structures; at the time the property was vacated by the Chance Vought Division, the government owned 81 per cent and the United Aircraft 19 per cent; and on September 19, 1949, the government and the United Aircraft entered into an agreement for the sale of the property.
"5. Thereafter efforts were made to find a purchaser of the property; the government advertised for bids, and a few were received. On the final opening of bids on October 30, 1950, it was found that Robert Hirsch of Bridgeport, Connecticut, was the high bidder, and, while his bid was rejected for formal defects, a contract of sale was, on November 1, 1950, entered into with him by the government.
"6. Under that contract the purchase price was set at $2,010,000; $50,000 was to be paid at once; $352,000 was to be paid later in cash; and the balance was to be secured by a mortgage on the property to the amount of $1,608,000, to run for the period of 20 years, payable in equal quarter-annual instalments, with interest on deferred payments at the rate of 4 per cent. The conveyance of the property to Hirsch was to be subject to the National Security clause.1
"7. In a supplemental agreement, Hirsch was given an option to extend the time provided in the contract for making the second cash payment to 120 days from November 1, 1950, upon the payment of certain sums; and it was further provided that, unless requested by Hirsch, the deed of the property would not be tendered prior to 60 days from November 1, 1950.
"8. Hirsch made the original cash payment of $50,000, two further payments due as a condition of extensions given him under the supplement to the contract amounting in the aggregate to $35,000, and at a subsequent date tendered the balance of the sums due as cash payments, which tender was refused by the government. The government conceded at the hearing that he had done everything incumbent upon him to do under the contract and its supplement. No deed of the property to him was, however, ever executed nor did he execute the mortgage required under the terms of the agreement.
"9. On January 17, 1951, Hirsch entered into an agreement with the Avco Manufacturing Company of New York, in which, after a recital of the agreement for the purchase of the property as stated in paragraphs 6 and 7 above and an agreement by Hirsch to complete his obligation under it, he granted the Avco company an option to lease the plant for a two year period commencing March 1, 1951, or on such later day as the Avco company should be given possession, with a provision that it might renew the lease for a three year period thereafter on a notice of at least 120 days, with the right in the company to cancel the lease during this three year period upon a 90 day notice. The lease provided a rental of $725,000 per annum, payable quarterly. Hirsch agreed to pay the taxes on the property, with a provision that, should they be increased, Hirsch would pay the increased amount for the two-year period of the lease and for one year of any extension which might be granted, while Avco would pay the increase for any further period it might occupy the premises; and Hirsch agreed to bear the cost of insuring the plant against loss by fire to the amount of its appraisal for insurance purposes. The parties were to negotiate in good faith with respect to all other conditions of the lease.
"10. On January 29, 1951, the Avco company exercised the option for a two year period beginning on March 1, 1951, but with the understanding that, in view of large expenditures to be made by the government, the formal lease would have to be submitted before signature `to the authorities at Wright Field.'2 Negotiations as to the terms of the lease were thereafter carried on, but no formal lease had been executed at the time of the taking of the property by the government.
"11. The Avco company was to engage in the performance of a prime contract with the air force for the manufacture of radial engines for airplanes under license from the Wright Aeronautical Corporation; and it also hoped to get a sub-contract from the General Electric Company to manufacture major components for jet engines. On or before January 31, 1951, the Avco company had received commitments from the government that it would order the engines and that the company might proceed with its facilities of manufacture, purchase of tools, etc. The articles to be manufactured were needed by the government, and there was little prospect that the government would act under the National Security clause at least during the continuance of the lease. About February 15, 1951, some personnel of the Avco company moved into the plant and began to prepare it for use in carrying out these contracts.
"12. Prospective purchasers of the property on the date of the taking by the government would have assumed that the lease to the Avco company would be consummated, that the company would occupy the plant at the agreed rental for two years from March 1, 1951, and would in all probability continue to do so at least for the three years permitted renewal.
"13. The fair market value of the premises condemned on March 5, 1951, was $3,100,000."
Over objections by the government to the report, the district judge confirmed the finding as to valuation, and accordingly entered judgment awarding to Hirsch $1,090,000 with interest from March 5, 1951.3 From this judgment the government appeals.
After filing its notice of appeal, the government filed a motion for the deposit in court of $1,090,000. The motion recited that it was made because the government "desires to forestall the further accumulation of interest on the principal amount of the deficiency," pending the review and final adjudication of the rights of the parties; it also recited that the deposit should not be construed as a waiver of the government's rights to obtain review of the judgment and to recover any funds disbursed in excess of such amount as may ultimately be determined to be just compensation. This motion was granted by an ex parte order filed February 17, 1953. Defendant Hirsch then filed a motion, asserting that there was no authority for the deposit and praying that the order on the motion for deposit be vacated. An order denying Hirsch's motion was filed March 26, 1953. Hirsch appeals from the orders of February 17 and March 26, 1953.
J. Edward Williams, Acting Asst. Atty. Gen., Adrian W. Maher, U. S. Atty., New Haven, Conn., Harry T. Dolan, Sp. Asst. to the U. S. Atty., Brooklyn, N. Y., and Roger P. Marquis and John C. Harrington, Department of justice, Washington, D. C., for the United States of America.
Frederick H. Wiggin, John E. Ecklund and Catherine J. Tilson, New Haven, Conn. (Wiggin & Dana, New Haven, Conn.), for Hirsch.
Before SWAN, Chief Judge, and AUGUSTUS N. HAND and FRANK, Circuit Judges.
FRANK, Circuit Judge.

I. The Government's Appeal:

1
1. Hirsch was permitted to testify, before the Committee, over objections by the government, about statements made by United States government officials bearing on the value of the property. Whether, as the government contends, this testimony was hearsay — because the statements were ultra vires — we need not consider. For there was sufficient other competent evidence on this matter to sustain the Committee's finding of value, and as there is no indication that the Committee gave any weight whatever to the alleged hearsay, we conclude that they ignored it.


2
2. The government argues that the Committee erred in finding that prospective purchasers would have assumed that the two-year lease would be consummated and would in all probability be renewed for an additional three years. A majority of the court holds as follows: (a) This finding was not "clearly erroneous."4 (b) Moreover, the Committee's Report states that the Committee had viewed the premises and, "having considered the evidence," had made this finding: "The fair market value of the premises * * * was $3,100,000." The Committee heard oral testimony of experts which amply justifies this finding. Therefore it matters not that the Committee also heard the evidence concerning the lease, even supposing, arguendo, that the Committee could not reasonably infer from that particular evidence the value fixed by the Committee. The price in the contract with Hirsch was some evidence of value, but not conclusive; the Committee could properly conclude that by this contract Hirsch got a bargain in price.5


3
The writer of this opinion dissents for this reason: He thinks it would not have been at all reasonable for purchasers to assume that the lease would, in all probability, be renewed for three years. Were it not clear that the Committee gave weight to this assumption, he would hold that presumably the Committee had ignored it, and had relied solely on the oral expert testimony. But the Committee's Report is so worded as to suggest that the Committee did largely rely on that assumption. Accordingly, the writer would remand with directions that the case be again referred to the Committee to determine what valuation it will reach without regard to that assumption.

II. Hirsch's Appeal:

4
1. Hirsch argues that the deposit was not in accord with the Declaration-of-Taking Act, 40 U.S.C.A. § 258a.6 We agree, since the deposit was made after judgment. But we consider that contention of no significance. For we have here the ordinary case where, without recourse to a statute, a judgment-debtor tenders, by a deposit in court, with leave of the court, for the benefit of the judgment-creditor, all or part of the amount due under the judgment, at the same time appealing. The deposit, whether or not the judgment-creditor draws it down, is deemed payment pro tanto. If a judgment is reversed on appeal, the judgment-debtor becomes entitled to restitution of money he paid on the judgment; he has that right whether or not he asserted that he had when he paid the money. See Restatement of Restitution § 74.


5
2. Hirsch contends, however, that the deposit here was not an effective tender because it was neither "required by law" nor "permitted by statute" within the meaning of Fed.Rules Civ.Proc. rule 71A(j), 28 U.S.C.A.7 We think a reading of that Rule shows that it did not intend to apply to anything except a deposit before judgment and that therefore it had no application here.


6
3. Hirsch also urges that the deposit was ineffective because it was a tender of the principal of the judgment, leaving the accrued interest unpaid. But, as we think the trial judge indicated in his opinion on Hirsch's motion, the deposit applied first to such accrued interest, and the balance went to pay a part of the principal. Interest on that part of the principal ceased to accrue from the date of the deposit.


7
4. Finally, Hirsch argues that, for the following reasons, the deposit did not serve as an effective tender because it was coupled with an explicit reservation of a right to restitution, if the government should win on appeal from the judgment:8 "An owner in the position of Hirsch runs undue risk if he withdraws a deposit of $1,090,000, in the teeth of the government's claim that he is not entitled to a penny of it, with the obligation of returning it with 6% interest. No investment of the money which might yield 6% will be both safe from depreciation of principal and at all times available for liquidation on short notice. This is one of the reasons why Hirsch has not and cannot move for withdrawal of the deposit. The other is that if he should make a withdrawal and invest the money in any but property `similar or related in service or use' (Sec. 112(F) (3) (B), I.R.C. [26 U.S.C.A. § 112(f) (3) (B)]) to that in litigation, he will be subjected to a heavy penalty in income taxes, since the full amount of the award would be capital gain. To avoid such taxation Hirsch must invest in such `similar' property within the limited time fixed by law (Sec. 112(F) (3) (B) (i), I.R.C.) namely, within `one year after the close of the first taxable year in which any part of the gain * * * is realized. * * *' Such a tax could amount to 26% of the award. It would be unreasonable to suggest that he might buy similar property, and be ready to liquidate it at any time to satisfy a judgment with 6% interest." We see no merit in those arguments. Many a judgment-creditor to whom a tender is made by his judgment-debtor faces a similar perplexity if the debtor appeals. The chief cause of the perplexity lies in the Revenue Code. Perhaps Congress can be induced to remove the difficulty by amending the Code. The courts lack power to do so.


8
Affirmed on the government's appeal and on Hirsch's appeal.



Notes:


1
 Under this clause, there could be made no alterations which would prevent restoration of the plant within a period of 120 days to a suitable condition for the manufacture of air-frames; also during a period of 20 years the property could be repossessed by the government for defense purposes upon 15 days' notice, in which event the rental to be paid by the government would be conclusively determined by the Secretary of Defense


2
 The Committee here refers to the Air Force authorities


3
 Subject to tax lien running to the Town of Stratford, Connecticut


4
 In taking into account the way a purchaser would be influenced as to value by the facts concerning the lease, the Committee did not base its valuation on loss of potential profits


5
 In oral argument on this appeal, government counsel conceded that, aside from the evidence as to the lease, the record evidence is such that, had the Committee said nothing about the lease, the appeal would have been frivolous


6
 So far as pertinent, it reads as follows: "In any proceeding * * * under the authority of the United States for the acquisition of any land * * * the petitioner may file in the cause, with the petition or at any time before judgment, a declaration of taking signed by the authority empowered by law to acquire the lands * * *. Said declaration of taking shall contain or have annexed thereto * * *. (5) A statement of the sum of money estimated by said acquiring authority to be just compensation for the land taken. Upon the filing said declaration of taking and of the deposit in the court * * * of the amount of the estimated compensation stated in said declaration, title * * * shall vest in the United States of America * * * the * * * judgment shall include, as part of the just compensation awarded, interest at the rate of 6 per centum * * * on the amount finally awarded as the value of the property as of the date of taking, from said date to the date of payment; but interest shall not be allowed on so much thereof as shall have been paid into the court. * * *"


7
 This Rule reads as follows: "The plaintiff shall deposit with the court any money required by law as a condition to the exercise of the power of eminent domain; and, although not so required, may make a deposit when permitted by statute. In such cases the court and attorneys shall expedite the proceedings for the distribution of the money so deposited and for the ascertainment and payment of just compensation. If the compensation finally awarded to any defendant exceeds the amount which has been paid to him on distribution of the deposit, the court shall enter judgment against the plaintiff and in favor of that defendant for the deficiency. If the compensation finally awarded to any defendant is less than the amount which has been paid to him, the court shall enter judgment against him and in favor of the plaintiff for the over-payment."


8
 What follows is quoted from his brief


