Land Clearance for Redevelopment Authority of Kansas City v. Ridge, WD

• Decision Date: 10 October 1989
• Docket Number: No. WD,WD
• Parties: LAND CLEARANCE FOR REDEVELOPMENT AUTHORITY OF KANSAS CITY, Missouri, Appellant, v. Frank S. RIDGE, et al., Boone County National Bank, et al., Respondents. 41475.
• Court: Missouri Court of Appeals

Page 104

781 S.W.2d 104

LAND CLEARANCE FOR REDEVELOPMENT AUTHORITY OF KANSAS CITY Missouri, Appellant, v. Frank S. RIDGE, et al., Boone County National Bank, et al Respondents.

No. WD 41475.

Missouri Court of Appeals,

Western District.

Oct. 10, 1989.

Motion for Rehearing and/or Transfer to Supreme Court

Denied Nov. 28, 1989.

Application to Transfer Denied Jan. 10, 1990.

Leland H. Corley, Overland Park, for appellant, Land Clearance Authority.

Alvin D. Shapiro, Kansas City, for respondent, Boone County Nat. Bank.

Before SHANGLER, P.J., and TURNAGE and KENNEDY, JJ.

KENNEDY, Judge.

Land Clearance for Redevelopment Authority of Kansas City, Missouri, filed a petition to condemn for redevelopment purposes respondents' "leased fee interest" in a parcel of ground in downtown Kansas City known as the Lakenan Tract, owned by respondents in various undivided interests. The tract underlies the building most recently occupied in part by Dillard's Department Store, before that occupied by Macy's and earlier yet by John Taylor Dry Goods Company. Respondents' fee in the land is subject to a ground lease originally entered into by John Taylor Dry Goods Company in 1947, which by mesne assignments has come to rest in Real Properties Holding, Inc. Real Properties Holding, Inc., is a mere nominee, holding the leasehold interest for the benefit of M-Downtown Properties Company. M-Downtown has been chosen as redeveloper of the property including the Lakenan Tract, and it is for the benefit of M-Downtown that the condemnation proceeding has been initiated.

The sole question in the case is whether the condemning authority before it filed its eminent domain proceeding had made a reasonable good-faith attempt to secure the property by negotiated treaty with respondents. Respondents claimed it had not made a reasonable offer for the property sought to be condemned, and that the trial court was therefore without jurisdiction of the eminent domain proceeding. Section 523.010, RSMo 1986, requires the condemning authority to allege and show that "such [condemning authority] and the owners cannot agree upon the proper compensation to be paid". This showing is jurisdictional. State ex rel. Weatherby Advertising Co., Inc. v. Conley, 527 S.W.2d 334, 336 (Mo. banc 1975); State ex rel. Missouri Highway and Transportation Commission v. Black, 702 S.W.2d 525 (Mo.App.1985); City of Cape Girardeau v. Robertson, 615 S.W.2d 526, 530 (Mo.App.1981); State ex rel. State Highway Commission v. Pinkley, 474 S.W.2d 46, 48-9 (Mo.App.1971). Respondents filed a motion to dismiss for want of jurisdiction.

The trial court held an evidentiary hearing on the motion to dismiss, and ruled that the condemning authority's offer of $190,000 for respondents' leased fee interest was unreasonably and unrealistically low. The trial court therefore dismissed the eminent domain proceeding, and Land Clearance has appealed.

We hold that the $190,000 offer was a reasonable offer for respondents' leased fee interest in the Lakenan Tract, and that the trial court erroneously ruled that it was without jurisdiction to proceed with the eminent domain proceeding.

The only valuation witness on the hearing on the motion to dismiss was Kevin K. Nunnink, a real estate appraiser of unchallenged credentials. He testified that he had appraised the respondents' leased fee interest at the request of Land Clearance and had fixed its value at $190,000. He had arrived at that valuation by the following method: He had computed the present value of the rentals to be paid in the future. The rentals to be received by respondents are $17,500 per year through the year 2012, then $20,000 per year until 2026 when the lease with its optional extensions will expire. The present value of this stream of income he computed to be $145,000. To this figure he added the value of the landlord's reversionary interest, computed as follows: The present value of 5062-foot tract is $110 per square foot. Inflation would increase its value to $508 per square foot in 2026. The present value of the 2026 value (discounted by an 11% yield rate) would be $45,000. The sum of the present value of the income stream ($145,000) and the present value of the reversion ($45,000) is $190,000. This formula for the appraisal of a leased fee is accepted as sound. Alamo Land & Cattle Co., Inc. v. Arizona, 424 U.S. 295, 303, 96 S.Ct. 910, 916, 47 L.Ed.2d 1 (1976); State ex rel. State Highway Commission v. Samborski, 463 S.W.2d 896, 901-02 (Mo.1971); State by and through State Public Works Board v. Whitlow, 243 Cal.App.2d 490, 52 Cal.Rptr. 336, 340-41 (1966); Department of Public Works & Buildings v. Metropolitan Life Insurance Co., 42 Ill.App.2d 378, 192 N.E.2d 607, 611-12 (1963).

None of Nunnink's assumptions, his computations or his methodology is challenged by respondents. Respondents argued to the trial court, and argue here, that Land Clearance's offer should have been, at a minimum, the present value of the tract as determined by Nunnink, or $556,820. In other words, the offer should have been for the present value of the combined interests of the landowner respondents and the holder of the leasehold interest--even though the condemning authority already owns the leasehold interest by assignment and does not need to acquire it by eminent domain. Respondents recognize that this would involve bringing the owner of the leasehold interest into the lawsuit as a party, and that there would then be a proceeding for the apportionment of...