Foley Bros. Dry Goods Co. v. Settegast

• Decision Date: 26 October 1939
• Docket Number: No. 10860.,10860.
• Citation: 133 S.W.2d 228
• Parties: FOLEY BROS. DRY GOODS CO. v. SETTEGAST et al.
• Court: Texas Court of Appeals

133 S.W.2d 228

FOLEY BROS. DRY GOODS CO. v. SETTEGAST et al.

No. 10860.

Court of Civil Appeals of Texas. Galveston.

October 26, 1939.

Rehearing Denied November 23, 1939.

Appeal from District Court, Harris County; Roy F. Campbell, Judge.

Action by the Foley Brothers Dry Goods Company against J. J. Settegast and others to fix the fair and reasonable market value of certain lots as of July 1, 1932, for the purpose of determining the rental to be paid by plainiff under a lease. From the judgment, plaintiff appeals.

Affirmed.

Maurice Epstein, of Houston (Wm. A. Vinson and Fred R. Switzer, both of Houston, on motion for rehearing only), for appellant.

John H. Crooker and Fulbright, Crooker & Freeman, all of Houston (John H. Crooker and Kraft W. Eidman, both of Houston, of counsel), for appellees.

MONTEITH, Chief Justice.

This is an appeal in an action brought by appellant, Foley Bros. Dry Goods Company, against appellees, J. J. Settegast et al., to fix the fair and reasonable market value, as of July 1, 1932, exclusive of the value of improvements, of Lots 11 and 12, Block 45, in the City of Houston, Texas, for the purpose of determining the rental to be paid by the appellant for said two lots for the five-year period beginning July 1, 1932, and ending June 30, 1937, under the terms of a certain lease contract entered into between appellant and J. J. Settegast and K. M. R. Settegast, both deceased, on December 20, 1920, for the lease of said two lots for a period of 99 years. Appellees are the heirs or legal representatives of the said J. J. and K. M. R. Settegast.

Under the terms of said contract lessee agreed to pay to lessors in cash an amount of rent equal to 6% per annum net on the value of said premises, to be determined under the terms of the contract. For the purpose of the lease it was agreed that the value of said premises at the beginning of the term of the lease was $300,000, of which $60,000 was the agreed value of the improvements then on said premises, and $240,000 was the agreed value of the land. It was agreed that there should be a revaluation of the land at the end of the first ten-year period of said lease on July 1, 1932, and an additional revaluation of the land at the end of each succeeding five-year period; that the revaluation should be by appraisers, one appointed by each party, who should, as of July 1, 1932, determine and fix a fair and reasonable market value of the land, exclusive of the value of improvements, for a period of five years, beginning July 1, 1932, and that the rent for said property for said five-year period should be a sum equivalent to 6% per annum net to the lessors on said $60,000 agreed value of the improvements, plus the then appraised value of the land; it was agreed that if the appraisers appointed to fix the value of said land failed to fix the value thereof, that then the Judge of the United States District Court should become a third appraiser, and that if the two appraisers selected for any period and the United States District Judge did not fix the value of said land, that then its value for the then ensuing period should be fixed by a court of competent jurisdiction.

Appellant alleged that prior to July 1, 1932, the respective parties in compliance with the requirements of said contract had appointed their respective appraisers, but that the appraisers being unable to agree and the Federal Judge having refused to act as umpire of said contract, plaintiff had instituted a suit in equity asking the district court of Harris County to fix the fair and reasonable market value of said land, exclusive of the value of improvements, so that the rental for the five-year period beginning July 1, 1932, might be determined; it alleged that the value of said two lots did not exceed $40,000.

Appellees answered by general and special demurrers and exceptions and general denial. They admitted the execution of said contract and alleged the value of the lots in question on July 1, 1932, to have been not less than $340,000.

The cause was tried before a jury, who, in answer to one special issue submitted, found that the fair and reasonable market value of said two lots, exclusive of any improvements thereon, as of July 1, 1932, for the ensuing five-year period, was $175,000. The trial court entered judgment in accordance with the jury's finding.

The two lots in question are what is known as key lots. They extend 250 feet through Block No. 45 of the City of Houston. Lot No. 11 fronts 50 feet on Preston Avenue, and Lot No. 12 fronts 50 feet on Prairie Avenue. Each lot is 125 feet in depth. Appellant owns a lot fronting on Main Street and running back to said two key lots and has under long term lease other property in the same block adjoining said Lots Nos. 11 and 12, not affected by said lease contract, on which it has erected a nine-story building.

On July 1, 1932, appellant was conducting a single mercantile establishment in said building under the name of Foley Bros. Dry Goods Company. It had leased certain space therein, located in some instances partly on said key lots and partly on adjoining property, to firms and individuals who were engaged in conducting departments therein as a part of appellant's business and under its name.

The primary issue made by the pleadings in this action was the fair and reasonable market value of said two lots, exclusive of the improvements thereon, as of July 1, 1932, for the ensuing five-year period. The controlling question to be determined in this appeal is whether or not the court permitted the proper elements to be taken into consideration by the jury in ascertaining the value of said property under the terms of said contract.

Appellant assigns error in the action of the court in permitting appellees, over its objections, to introduce testimony in reference to the nature and character of the improvements on said two lots during said five-year period and as to the nature of appellant's use of said improvements, including testimony as to the gross receipts of moneys received by appellant during said five-year period from said leased departments using space in said building, as not being proper elements to be taken into consideration in ascertaining the value of said property.

While the court permitted appellees to fully develop the facts in reference to the improvements on said property and the uses made thereof, including the gross rentals received by appellant during said five-year period from the leased departments using portions of said two lots, we think that the rights of appellant were amply protected by the instructions given by the court as to its consideration.

Special Issue No. 1 reads: "What do you find from a preponderance of the evidence was the fair and reasonable market value, as that term has hereinbefore been defined to you, as of July 1, 1932, for the period of five years from July 1, 1932, to June 30, 1937, of lots 11 and 12 in block 45 exclusive of the value of any improvements thereon."

In connection therewith the court gave the following instruction: "Certain evidence has been admitted before you concerning certain leases made by Foley Brothers to certain portions of the building now upon the lots in question. In this connection you are instructed that insofar as the consideration paid by the lessees under such leases is concerned, you may not consider the portions of such consideration that represented special services rendered by Foley Brothers to such lessees, nor the value of the use of such space as was conferred upon it by its conjunction with other lots than those in question."

The courts of this state have uniformly held that in proving the market value of real property it is permissible to not only show the use to which the property in question is devoted, and the uses to which it is adapted, Boyer & Lucas v. St. Louis S. F. & T. Ry. Co., 97 Tex. 107, 76 S.W. 441, but our courts have held that it is permissible to show all such matters as suitability and adaptability, surroundings, conditions before and after, and all circumstances which tend to increase or diminish the present market value. State v. Carpenter, Tex.Com.App., 89 S.W.2d 194.

This rule is upheld in the case of Sullivan v. Missouri K. & T. Ry. Co., 29 Tex. Civ.App. 429, 68 S.W. 745, 746. In its opinion the court said: "Value is not to be estimated solely from the use made of the land at the time of the seizure, but the use to which it is adapted may be properly taken into account in determining what would justly compensate the owner of the land seized, since the use to which the property is adapted may exert an important influence upon its market value. The estimate of value should be based on the use which men of ordinary prudence and sagacity would make of the land. Future contingent value cannot be considered, and yet it is not improper to consider the surroundings of the property, and the probability that a use may reasonably be made of it more profitable than that to which the owner has devoted it. * * *"

The rule established by the Texas courts is supported by the great weight of authority from other jurisdictions.

In the case of King v. Minneapolis Union Ry. Co., 32 Minn. 224, 20 N.W. 135, 136, by the Supreme Court of Minnesota, which also involved a lease of certain premises for a period of 99 years and in which the terms of rental were 7% per annum on the appraised value of the land, exclusive of improvements, and the payment of all taxes and assessments, and in which a new valuation of the land was to be made each five years, which furnished the basis of the rental for the five years following, the court in its opinion said: "We think it may be stated as elementary that a person is entitled to the fair value of his property for any use to which it is adapted and for which it is available, and for which it may be sold. He is entitled to the value of his property for any use to which it may be applied, and...