United States of America v. 300 Units of Rentable Housing, located on approximately 57.81 acres of Eielson Air Force Base et al

Filing 81

Order

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA

UNITED STATES OF AMERICA,
Plaintiff,
vs.

Case No. 4:06-cv-0023-RRB

300 UNITS OF RENTABLE HOUSING,
located on approximately 57.81
acres of Eielson Air Force
Base, fairbanks, Alaska, and
POLAR STAR ALASKA HOUSING
CORPORATION,

ORDER REGARDING
PENDING MOTIONS

Defendants.

I.

INTRODUCTION
Before the Court are the United States ("Government") and

Polar Star Alaska Housing Corporation ("Polar Star"), respectively
Plaintiff and Defendant in this eminent domain proceeding.

The

property at issue consists of 300 units of military family housing
located on Eielson Air Force Base near Fairbanks, Alaska.
The following motions are pending before the Court:

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4:06-CV-0023-RRB

(1) Polar Star’s Motion in Limine to Establish January 6,
2007, as Expiration Date of Ground Lease at Docket 43, and the
Government’s

Cross-Motion

to

Establish

January

6,

2008,

as

Expiration Date of the Land Lease at Docket 47;
(2) The Government’s Motion Opposing Appointment of a
Land Commission for the Determination of Just Compensation at
Docket 49);
(3) The Government’s Motion for Preliminary Determination
to Establish the Validity of the Housing Lease’s Renewal at Docket
55, and Polar Star’s Motion in Limine to Bar Evidence of Project
Lease Extension at Docket 57; and
(4) Polar Star’s Motion for Partial Judgment on the
Pleadings at Docket 58.
II.

BACKGROUND
In April 1984, the United States Air Force issued a

“Request for Proposal” to privately develop 300 units of military
family housing for lease back to the Government.1

Under the

Request for Proposal, the winning bidder would enter into an
“Agreement to Lease”2 and a 23-year “Ground Lease”3 of 57.81 acres
of land from the Government

1

Docket 43, Ex. A.

2

See id., Ex. B.

3

See id., Ex. D.

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to the developer for nominal rent of

$1.4

The first three years of the Ground Lease would allow for

construction of the units, sidewalks, and roads (“Improvements”).5
Upon completion of the construction, the Developer would execute a
20-year lease of the units to the Government (“Project Lease”).6
The Ground Lease and the Project Lease would expire on
the same date, twenty-three years after the execution of the Ground
Lease.7

Upon termination of the Ground Lease, the Government had

the option of either releasing or purchasing the Improvements.

If

the Government choose neither option, the developer would be
responsible to remove and relocate the Improvements.

If, however,

the developer left the Improvements in place after termination of
the Ground Lease, the Government could declare them to be property
of the Government without payment of additional compensation.8
The Request for Proposal included drafts of the Agreement
to Lease, the Ground Lease, and the Project Lease which were
prepared by the Government and which contained blanks for the
commencement and expiration dates.

The exact beginning and ending

4

See id., Exs. E, D.

5

See id., Ex. C at 2, ¶ 5.

6

See id., Ex. A.

7

Docket 47 at 5-6, & Ex. G.

8

See Docket 43, Ex. D, ¶ 20.

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4:06-CV-0023-RRB

dates of the 23-year term would not be added until the bid was
awarded and the contracts were executed.
Ben Lomond, Inc. (“Lomond”) was the successful bidder.
On January 7, 1985, Lomond and the Government signed the Agreement
to Lease,9 and the Ground Lease.10

Although the form provided for

the Ground Lease contained multiple references to a term of 23
years, the parties filled in the blanks on the form to state that
the Ground Lease extended for a period “beginning 7 January, 1985,
and ending 6 January, 2007.”11
At some point after signing the Agreement to Lease and
the Ground Lease, Lomond determined that construction could be
completed in two years or less, rather than the three years allowed
during the first three years of the Ground Lease.12

In November

1985, the parties amended the Agreement to Lease and the Ground
Lease to reduce the allowable construction period to 21 months and
to authorize phased occupancy of units upon completion.13

On

November 22, 1985, the Government and Lomond executed an Interim

9

Id., Ex. B.

10

Id., Ex. D.

11

Id. at 1.

12

Id., Ex. C at 2, ¶ 5.

13

Id. at 4, & Ex. E; Docket 47 at 6, & Ex. H.

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Occupancy Lease to enable the Government to lease the housing units
as the units were completed.14
Construction was certified as complete on July 21, 1986,
eighteen months after execution of the Agreement to Lease and
Ground Lease.15

On August 6, 1986, Lomond and the Government

executed the Project Lease, formally leasing all 300 housing units
to the Government “for a period of twenty (20) years commencing on
6 August, 1986 and terminating on 5 August, 2006,”16 after which the
Government had the right to renew for subsequent annual periods.17
Lomond owned and operated the 300 housing units through
1994, when it failed to pay taxes owed to the Fairbanks North Star
Borough.

Lomond contested the Fairbanks North Star Borough’s tax

assessment at Board of Equalization hearings and in Alaska state
court.18

The resulting litigation lasted several years and reached

the Alaska Supreme Court twice.19

Although the litigation dealt

mostly with other provisions of the Leases, when the various courts

14

Docket 47 at 6, & Ex. J.

15

Docket 43, Ex. F.

16

Id., Ex. G.

17

Docket 47 at 6-7, & Ex. B.

18

See id., Exs. L, N, O, P & Q.

19

See Lomond v. Fairbanks N. Star Borough Bd. of
Equalization, 760 P.2d 508 (Alaska 1988) (“Lomond I”); Lomond v.
Fairbanks N. Star Borough Bd. of Equalization, 860 P.2d 1248, 1252
(Alaska 1993) (“Lomond II”).
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were required to determine the duration of the Ground Lease, the
courts concluded its term was 23 years, even after acknowledging
the inconsistent dates.20
Lomond’s

failure

to

pay

taxes

also

triggered

a

foreclosure provision in its financing obligations to Aetna Life
Insurance Co. (“Aetna”).
interest in the Project.
project to Polar Star.

Aetna in turn foreclosed on Lomond’s
In 1995, Aetna sold its interest in the

Following the foreclosure sale, Polar Star

became assignee of Lomond’s original interest in the Agreement to
Lease and the Ground Lease, as well as owner of the 300 housing
units and the lessor pursuant to the Project Lease.
In 2004, Polar Star and the Government began to discuss
what would happen to the housing units upon termination of the
Project

Lease

and

Ground

Lease.

The

Government

requested

Congressional authorization and an appropriation of $18 million for
the acquisition.

In January 2006, Congress gave authorization to

acquire Polar Star’s entire interest at the expiration of the
Project Lease and appropriated $17.9 million for that purpose.
Congress required that the purchase be at fair market value and
that a notice and economic analysis be sent to Congress if the Air
Force decided to move forward with the acquisition.

20

Docket 47, Ex. L at 5, 11 n.1 (“The lease term is
throughout the agreement stated to be 23 years. However, the dates
recited, January 7, 1985 to January 6, 2007, cover only 22
years.”).
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In March 2006, the parties focused their discussions on
the Government’s acquisition of the housing units pursuant to the
Agreement to Lease, the Project Lease, and the Congressional
authorization.

Both parties commissioned appraisals.

Throughout

the negotiation process, however, the Government informed Polar
Star not to assume that the Government would purchase the units,
and asked what plans Polar Star had made to remove the units.21
Despite months of dialogue, the parties were ultimately unable to
agree on a purchase price.

Polar Star asserted that the appraised

purchase value of the units was $26,000,000.

The Government, on

the other hand, believed that the fair market value was $4,500,000.
On May 18, 2006, the Government informed Polar Star by
letter that it intended to renew the Project Lease for a one-year
term, effective August 5, 2006, through August 5, 2007, pursuant to
the option in Article V of the Project Lease.22

Article V required

the parties to renegotiate the rent for the renewal term.23

The

parties failed, however, to reach an agreement on the amount of
rent for the renewal term, as required by Article V.

Despite its

belief that it effectively renewed the Project Lease for a full
year, the Government vacated the units by December 28, 2006, in
order to allow Polar Star extra time to remove the units.
21

See Docket 47 at 10, & Ex. T.

22

See Docket 56, Ex. C.

23

Id., Ex. A.

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Between

October 2006 and January 2007, the Government advised Polar Star in
writing that it could begin removal of the units immediately.24
Because the parties were unable to reach an agreement on
the amount of rent for an extended term of the Project Lease, the
Government decided to “condemn a continuation of the Project Lease
to coincide with the remaining term of the [Ground] Lease,” leaving
it to this Court to determine appropriate compensation.25

On July

28, 2006, the Government filed the present eminent domain action to
take the 300 housing units for a period of five months, from August
6, 2006 through January 6, 2007.26

Both the Complaint and the

Declaration of Taking filed in this suit described the taking as “a
leasehold of 300 units of rentable housing, sidewalks, roads, and
other appurtenances, commencing on August 6, 2006, and ending on
January 6, 2007,” pursuant to the Project Lease.27
According

to

the

Government,

the

purpose

of

this

condemnation action is “to provide the Air Force with a means of
clearing title to the first five months of the one-year extension
of the [Project] Lease; obtain legal rulings as to the amount of
rent owned under the extension; and if necessary, provide the Air

24

Docket 47, Exs. Y, Z, & AA.

25

Docket 43 at 7, & Ex. I.

26

Docket 1-1.

27

Id.; Docket 4-1; Docket 43 at 7.

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4:06-CV-0023-RRB

Force a period of time in which it could relocate military families
housed in the [housing units].”28
III. DISCUSSION
A.

The Ground Lease Terminates on January 6, 2008
The Ground Lease contains inconsistent duration terms on

its face: “for a term of twenty-three (23) years, beginning 7
January, 1985, and ending 6 January, 2007 . . . .”29

While calling

for 23 years, the specified date range is only for 22 years.

How

the error (only recently discovered by the parties) should be
interpreted is a matter of dispute.30
Polar Star argues that the parties deliberately set 6
January, 2007, as the termination date, effectively shortening the
Ground Lease to 22 years, and that this shorter duration reflects
the construction which Lomond completed in less than the allotted
three-year construction period.31

For support, Polar Star points

to principles of contract interpretation.

For example, Polar Star

argues, specific (“6 January, 2007”), rather than general terms
(“23 years”), and typewritten (“6 January, 2007”), rather than preprinted (“23 years”) terms should control, and that the contract

28

Docket 47 at 11.

29

Docket 43, Ex. D at 1.

30

See Dockets 43, 47, 52, & 64.

31

Docket 43 at 8.

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4:06-CV-0023-RRB

should

be

construed

against

the

drafting

party

(i.e.,

the

Government).32
Polar Star also points to the course of dealing between
the parties. In correspondence between the parties, the Government
has referred to January 6, 2007, as the termination date.
environmental

baseline

survey

commissioned

by

the

An

Government

referenced January 6, 2007, as the termination date of the Ground
Lease.

It appears that the Government has never, prior to this

lawsuit, stated that the Ground Lease would terminate in 2008.
Individuals involved in drafting and signing the Ground Lease
believed that it would terminate on January 6, 2007.33
The Government argues that the parties intended the
Ground Lease to run for 23 years, and that a plain reading of the
documents shows that “6 January, 2007” is a scrivener’s error which
should be reformed to read: “6 January, 2008.”34

The Government

also argues that although the parties did not recognize the
discrepancy

until

represented

to

the

this

lawsuit,

courts

(in

the
prior

parties

have

litigation),

repeatedly
the

taxing

authorities, and potential financiers, that the term was for 23
years.35
32

Id. at 11-13.

33

Id. at 13-18.

34

Docket 47 at 13-14, 20-22.

35

Id. at 22-23.

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4:06-CV-0023-RRB

The Court concludes that the Ground Lease terminates on
January 6, 2008, a full 23 years from its execution.

The 23-year

term appears throughout the Ground Lease and is referenced in
subsequent modifications.

In contrast, the date of January 6,

2007, only appears once in the Ground Lease,36 and nowhere in any
of the modifications.
Further, the Request for Proposal called for a 23-year
lease, with blanks to be filled in by the parties for the start and
end dates of the 23-year period.

Although Polar Star argues that

the discovery that Lomond could complete the construction in
shortened time reduced the lease to 22 years,37 this argument is not
supported by the Lease itself which continued to contain multiple
references to the 23-year period, even in subsequent modifications.
If insertion of the expiration date of “6 January, 2007” really
evidenced the parties’ intent to shorten the construction term to
two years, then the parties should/would have crossed out the
inconsistent 23-year term.

That they did not is strong evidence

that the parties intended a 23-year lease and that the “6 January,
2007" term was an error.
Finally, without deciding whether collateral estoppel
applies, the Court also notes that when reviewing the Ground Lease
in relation to other issues, the Alaska Supreme Court twice reached
36

Docket 43, Ex. D at 1.

37

Id. at 18.

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4:06-CV-0023-RRB

the same conclusion that the Ground Lease had a 23-year lease
term,38 both times after the Superior Court explicitly acknowledged
the conflicting dates.39
The Court therefore GRANTS the Government’s Motion to
Establish January 6, 2008, as the Expiration Date of the Ground
Lease at Docket 52, DENIES Polar Star’s Motion in Limine to
Establish January 6, 2007, as the Expiration Date of the Ground
Lease at Docket 43, and reforms the Ground Lease to reflect
January 6, 2008, as the correct expiration date.
B.

Judicial Discretion to Appointment a Land Commission
In its Answer, Polar Star requests a trial on the amount

of just compensation by a Land Commission appointed by the Court.40
The parties dispute whether just compensation should be determined
by the Court or by a Land Commission.41
Rule 71.1(h) of the Federal Rules of Civil Procedure
states that in an eminent domain action: “. . . the court tries all
issues, including compensation, except when compensation must be
determined: (A) by any tribunal specially constituted by a federal
statute to determine compensation, or (B) if there is no such

38

See Lomond I, 760 P.2d at 509 n.1; Lomond II, 860 P.2d at

39

See Docket 47, Ex. L at 5 n.1.

40

Docket 17 at 8, ¶ 28.

41

See Dockets 49, 62, 75.

1252.

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tribunal, by a jury when a party demands one within the time to
answer or within any additional time the court sets, unless the
court appoints a commission.”42

The Rule further explains that

“[i]f a party has demanded a jury, the court may instead appoint a
three-person commission to determine compensation because of the
character, location, or quantity of the property to be condemned or
for other just reasons.”43
Polar Star argues that the Court should exercise its
discretion

to

appoint

a

Land

Commission

because

the

just

compensation determination will require inspection and valuation of
300

units

in

over

100

buildings,

plus

physical

improvements

including roads, sidewalks, interiors, exteriors, and maintenance
buildings.44

In

addition

to

the

numerous

buildings

and

improvements, Polar Star argues that fractional interests, severed
damages, the cost of removal, and complicated comparisons between
Polar Star’s property and other properties make the determination
of just compensation so complex as to warrant referral to a highly-

42

Effective December 1, 2007, the former Rule 71A was redesignated Rule 71.1(h). The Advisory Committee Notes explain that
the purpose of this change was “to make [the rule] more easily
understood” and that “[t]hese changes are intended to be stylistic
only.”
43

Rule 71.1(h)(2)(A).
Cf. Fed. R. Civ. P. Rule 71A(h)
(pre-Dec. 1, 2007, rule) (verbatim, except for final clause:
“. . . or for other reasons in the interest of justice.”).
44

Docket 62 at 6-7.

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skilled Land Commission.45

Polar Star reasons that “[i]t makes no

sense to take this Court away from its other duties to devote the
days required to inspect each of the 300 units of military housing
and ancillary improvements being taken in this case.”46
The Government argues that this is not the type of case
typically referred to a Land Commission and that no exceptional
circumstances warranting the appointment of a land commission are
present.47 According to the Government, “[a] land commission is not
justified when a government land acquisition project involves only
one case in which there is only one owner, a relatively small
parcel, the property is not subject to varied uses, and the
property is located within a reasonable distance from the federal
courthouse.”48

“Therefore, the Court is the proper adjudicator of

all issues, including just compensation.”49
The Government also argues that Rule 71.1(h) allows
appointment of a Land Commission only where one or both parties
have demanded a jury trial and that since both parties have waived
the right to a jury trial, appointment of a Land Commission is

45

Id. at 8-10.

46

Id. at 7.

47

Docket 50 at 6-8.

48

Id. at 7.

49

Id. at 13.

ORDER RE PENDING MOTIONS - 14
4:06-CV-0023-RRB

inappropriate.50

This, however, only addresses what happens “if a

party has demanded a jury,” and says nothing about whether the
Court has discretion to appoint a Land Commission where neither
party has made a jury demand.
Ultimately,

the

decision

whether

to

Commission is a matter of judicial discretion.

appoint

a

Land

Under the facts

hereof, the Court concludes that, utilizing the respective parties’
experts, it can most expeditiously address the valuation issues
without a Land Commission.

Therefore, the Government’s Motion at

Docket 49 Opposing Appointment of a Land Commission is GRANTED.
C.

The Project Lease Was Renewed By The Government
On August 6, 1986, the Government executed the Project

Lease with Lomond, Polar Star’s predecessor-in-interest, for a term
of twenty years commencing on August 6, 1986, and ending on August
5, 2006.

Article V of the Project Lease gave the Government a

renewal option and a right of first refusal to purchase the units
upon expiration of the Project Lease.

The parties dispute whether

the Government effectively renewed the Project Lease.51
Article V reads in pertinent part:
Upon expiration of the twenty (20) year lease
term, this Lease may be renewed for subsequent
annual periods at the Lessee’s option.
The
rent for such subsequent periods must be

50

Id. at 4.

51

See Dockets 55, 56, 57, 73, 75, 77, & 79.

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4:06-CV-0023-RRB

renegotiated based upon the remaining equity
investment . . . . The statement of intent of
the Lessee to renew the Lease must be mailed
to the Lessor no later than sixty (60) days
prior to the expiration date of the lease
term.52
There is no dispute that the Government timely mailed its
statement of intent to renew on May 18, 2006, more than 60 days
prior to the expiration of the lease term.53

This requirement,

which depended only on the Government’s actions, was met.

The

Government argues that it properly exercised the option, therefore,
because the only undetermined term was the amount of rent for the
renewal period and that where the renewal rent is left for future
determination by arbitration or appraisal, the renewal right is
enforceable.54
Polar

Star

argues,

however,

that

the

Government’s

statement of intent to renew was not valid because the parties did
not successfully renegotiate rent.55

According to Polar Star, the

option to extend the Project Lease was not effective because the
price term was not definite and the methodology provided to
determine the price was not followed.56

52

Docket 56, Ex. A, Art. V.

53

See Docket 56 at 5-6 & Exs. C, F; Docket 71 at 5.

54

Docket 56 at 8-12.

55

See Dockets 71 & 73.

56

Docket 57 at 8-12.

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The provision that “rent for such subsequent periods must
be renegotiated based upon the remaining equity investment”57

does

not preclude renewal under the circumstances, for the parties have
proven to be completely unable to negotiate or agree on any of
these matters.

To require the Government to obtain agreement on

this significantly disputed item before it could renew the lease
would be unreasonable.
The Government’s Motion for Preliminary Determination to
Establish the Validity of the Housing Lease’s Renewal Motion at
Docket 55 is therefore GRANTED and Polar Star’s Motion in Limine to
Bar Evidence of Project Lease Extension at Docket 57 is DENIED.
D.

Polar Star’s Motion For Judgment On The Pleadings
The parties dispute whether the Government’s condemnation

of an extension of the Project Lease includes Polar Star’s Project
Lease obligations, such as maintenance and providing insurance.58
Because the Court finds that the Government’s exercise of
the renewal option was effective, the Project Lease was extended
for an annual term beginning on August 5, 2006, and extending
through August 5, 2007. The renewal period encompasses and extends
beyond

the

five-month

leasehold

interest

regarding

which

the

Government sought to quiet title, or alternatively, condemn. Polar

57

Docket 56, Ex. A at 5.

58

See Dockets 58, 71, & 76.

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Star’s Motion for Partial Judgment on the Pleadings at Docket 58 is
therefore DENIED as moot.
IV.

CONCLUSION
For the aforesaid reasons,
Polar Star’s Motion in Limine to Establish January 6,

2007 as Expiration Date of Ground Lease at Docket 43 is DENIED.
The Government’s Cross-Motion to Establish January 6,
2008 as Expiration Date of the Land Lease at Docket 47 is GRANTED.
The Government’s Motion Opposing Appointment of a Land
Commission for the Determination of Just Compensation at Docket 49
is GRANTED.
The Government’s Motion for Preliminary Determination to
Establish the Validity of the Housing Lease’s Renewal at Docket 55
is GRANTED.
Polar Star’s Motion in Limine to Bar Evidence of Project
Lease Extension at Docket 57 is DENIED.
Polar Star’s Motion for Partial Judgment on the Pleadings
at Docket 58 is DENIED as moot.
IT IS SO ORDERED.
ENTERED this 18th day of December, 2007.
S/RALPH R. BEISTLINE
UNITED STATES DISTRICT JUDGE

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