Interstate Finance Corp. v. Iowa City

• Decision Date: 07 March 1967
• Docket Number: No. 52364,52364
• Citation: 149 N.W.2d 308,260 Iowa 270
• Parties: INTERSTATE FINANCE CORPORATION, a Corporation, Appellee, v. IOWA CITY, Appellant.
• Court: Iowa Supreme Court

Page 308

149 N.W.2d 308

260 Iowa 270

INTERSTATE FINANCE CORPORATION, a Corporation, Appellee, v. IOWA CITY, Appellant.

No. 52364.

Supreme Court of Iowa.

March 7, 1967.

Jay H. Honohan, City Atty., and William L. Meardon, Iowa City, for appellant.

Leff, Leff & Leff, Iowa City, for appellee.

MOORE, Justice.

This is a proceeding in eminent domain. In connection with a parking lot project the City of Iowa City on April 28, 1964 started condemnation of plaintiff's leasehold interest in certain described property at 212 South Dubuque Street in Iowa City. Plaintiff was conducting a general finance business at that location. Its office occupied approximately 1100 square feet of ground floor space under a three-year lease which provided a rental of $200 per month with an option to renew for an additional three-year period upon the same terms and conditions. Plaintiff had occupied the space approximately six months before condemnation.

Plaintiff took possession of the premises as improved by the former tenant, Federal Discount Corporation. It paid $1500 for the improvements and also relieved Federal of further liability on its lease.

The improvements, which had been installed at Federal's expense, consisted of wall paneling, ceiling tile, recessed diffused lights, a custom-built counter, vinyl tile flooring, interview booths, built-in shelves and toilet facilities.

When plaintiff vacated the premises after condemnation they removed only the business equipment such as desks, typewriters, adding machines, office supplies and an exterior advertising sign. Norman Robert Smith, plaintiff's treasurer, testified there was a sixty-day period between vacation and occupancy of new quarters as suitable space was not immediately available. He stated it was not economically feasible to remove the interior stalls, shelving, counter, paneling, ceiling, light fixtures or floor tile.

The city was dissatisfied with the award made by the sheriff's jury and gave notice of appeal. Under the provisions of Code section 472.21 the condemnee, Interstate Finance Corporation, was compelled and did file, as plaintiff, this action in the district court. The district court jury awarded plaintiff $8000 for its leasehold and defendant has appealed. We affirm.

No claim is made of any irregularity in the condemnation proceedings. Defendant concedes plaintiff is entitled to reasonable compensation for its leasehold taken under condemnation. Article I, section 18, Constitution of Iowa; R & R Welding Supply Co. v. City of Des Moines, 256 Iowa 973, 976, 129 N.W.2d 666, 668, and citations. Defendant, however, contends the trial court erred and has assigned five errors.

I. Defendant's first assignment is the trial court erred in refusing to strike the testimony of plaintiff's witnesses Smith, Berven and Beeler. The city argues each based his opinion on a specific amount for removal costs and damage to business.

Smith after relating his experience negotiating many leases and his extended investigation of leaseholds in Iowa City opined the fair and reasonable value of plaintiff's leasehold interest on the date of condemnation was $12,500. On cross-examination he testified he considered the lease an advantageous lease and worth at least $100 per month more than required by its terms. He estimated the loss for the remaining 66 months at $6600. He considered and allowed $800 for moving expense and estimated the depreciation value of the improvements, other than the sign, at $5000.

Smith's testimony on cross-examination includes: 'Sir, it's an entire package. It's really difficult to say x-number of dollars. You take all these things into consideration. And you ask if I placed a value. Yes, I did. But the overall is what you arrive at.

'Q. Now I will ask you to state whether or not, in arriving at your value here of $12,500.00, you considered business interruption or damage to your business? A. Not as far as any actual dollar value is concerned. It's all a part of value of this location at time of condemnation.'

Homer Berven, an experienced appraiser who had testified in several prior cases, after relating his study of this leasehold interest as compared with others in Iowa City, opined the fair and reasonable market value of plaintiff's leasehold interest on the date of condemnation was $13,000. He testified in arriving at his opinion he took into consideration the location, the fact plaintiff had a going business, loss of betterments and improvements, loss of income from a change of location, it was a ground floor location in the downtown district, the likelihood of increase of rent for comparable space, time required in finding a new location, moving expenses and changing letterheads.

On cross-examination Berven testified he estimated $800 for moving expense, $6600 difference in rent, $5000 for loss of improvements and $600 per miscellaneous items.

Byron D. Beeler, an experienced appraiser, after stating his qualifications and his research made regarding this particular leasehold interest, opined the fair market value of plaintiff's leasehold interest at the time of condemnation was between $12,500 and $14,000. On cross-examination he testified the economic value of plaintiff's lease amounted to between $150 and $175 per month for 66 months. He estimated $2600 for moving expense, window lettering, printing new supplies and damage to business by reason of loss of business while waiting to get into a new location. He allowed nothing for betterments as he considered the premises as improved and stated under his approach such an allowance would be making an award of damages twice for the same items. Beeler testified various elements enter into the overall value of plaintiff's leasehold.

After cross-examination defendant moved to strike the opinions given by Smith, Berven and Beeler on the ground they included specific amounts for removal costs and damage to business.

If ground for excluding testimony first appears on cross-examination a motion to strike is proper and prejudicial error may be avoided by striking the testimony. Neddermeyer v. Crawford County, 190 Iowa 883, 889, 175 N.W. 339, 342; Wicks v. Iowa State Highway Comm., 254 Iowa 998, 1008, 119 N.W.2d 781, 787.

The trial court overruled defendant's motions to strike and announced the questions raised would be covered by the instructions. Our review of the instructions leads us to the conclusion the trial court carefully submitted the proper measure of damages and eliminated any consideration of any item as a separate dollar and cent allowance.

The measure of damages for a leasehold interest taken under eminent domain is declared generally to be the fair market value of the leasehold or unexpired term of the lease. 27 Am.Jur.2d, Eminent Domain, section 352. We have held the measure of damages for a leasehold interest taken under eminent domain is the market value of the unexpired term of the lease over and above the rent stipulated to be paid. Des Moines Wet Wash Laundry v. City of Des Moines, 197 Iowa 1082, 1085, 198 N.W. 486, 488, 34 A.L.R. 1517; Korf v. Fleming, 239 Iowa 501, 517, 32 N.W.2d 85, 94, 3 A.L.R.2d 270; Estelle v. Iowa State Highway Comm., 254 Iowa 1238, 1243, 119 N.W.2d 900, 903.

In our Des Moines Wet Wash case we discuss at length the difficulty of fixing the value of leaseholds and hold the various elements involved therein vary as to the facts in each case.

In Korf v. Fleming, supra, at page 518, 239 Iowa, page 95, 32 N.W.2d, we quote this from Des Moines Wet Wash Laundry v. Des Moines, supra, 197 Iowa 1082, 1089, 198 N.W. 486, 489, 34 A.L.R. 1517: 'Ordinarily, market value is the criterion, but in certain cases it is not the true standard by which to determine the value. * * * This is particularly true as applied to a leasehold. Value must be determined by a consideration of the uses to which the property is adapted. All circumstances naturally affecting this value are open to consideration.' And from the same pages of our Des Moines Wet Wash case, in Estelle at page 1245, 254 Iowa, page 905, 119 N.W.2d, we quote this: 'It is impossible to specify all of the elements that enter into such a problem. In fact all of them cannot be anticipated and many of them are developed in the course of the litigation consequent upon the exercise of the right of eminent domain. They will vary with the character of the property affected and the uses to which the property is applied.'

In the above cited cases we recognize a variety of elements of loss, expense and inconvenience may be considered by the jury, not as substantive elements of...