Minneapolis-St. Paul M. A. C. v. Hedberg-Freidheim Co.
| Decision Date | 14 May 1948 |
| Docket Number | No. 34644.,34644. |
| Citation | 226 Minn. 282,32 N.W.2d 569 |
| Parties | MINNEAPOLIS-ST. PAUL METROPOLITAN AIRPORTS COMMISSION v. HEDBERG-FREIDHEIM CO. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Hennepin County; Albert H. Enersen, Judge.
Eminent domain proceeding by the Minneapolis-Saint Paul Metropolitan Airports Commission against the Hedberg-Freidheim Company to condemn a leasehold of land and a hangar thereon belonging to condemnee. Verdict for condemnee and condemnor appeals.
Reversed and new trial granted.
Oppenheimer, Hodgson, Brown, Donnelly & Baer, of St. Paul, for appellant.
O. A. Brecke and E. T. Chesnut, both of Minneapolis, for respondent.
After a verdict for $22,000 for the taking by petitioner in condemnation proceedings of a leasehold of land on which there was a hangar belonging to the lessee, petitioner appeals.
We shall discuss only two of the numerous questions raised on the appeal, because decision with respect to them requires a reversal and because the others are not likely to arise on a new trial. These are:
(1) Whether, in condemnation proceedings under the power of eminent domain for taking a leasehold interest in land on which there is a building belonging to the lessee, the valuation for purposes of determining the amount to be awarded the owner of the leasehold should be made of the leasehold and the building as a unit, or whether it should be the sum of the values of the leasehold and the building considered separately; and,
(2) Whether a tripartite contract between the lessor (to whose rights the condemnor succeeded), the lessee, and a third party contemplating purchasing the lessee's interest under the lease which provided for a formula for determining the value of the leasehold and building as a unit was admissible as bearing on the question of value.
Petitioner is the operator of Wold-Chamberlain Field airport. The fee belongs to the city of Minneapolis and was under the jurisdiction of the city's park board. The city leased a lot at the airport to respondent, which has erected a hangar thereon. Petitioner has succeeded to the city's rights as lessor under the lease.
This proceeding was brought by petitioner under M.S.A. § 360.107, subds. 2 and 3, to acquire by right of eminent domain the lessee's right and interest under the lease, the hangar, lean-to, and certain personal property in those buildings. On the appeal we are concerned only with the amount to be awarded the lessee and the manner of determining it.
The lease, executed in 1940, was for a term of ten years. A rental of $100 per month, subject to change by the lessor, was reserved. There were provisions prohibiting the lessee from subletting and assigning without the lessor's written consent; agreeing that buildings and structures placed on the land by the lessee should not become "part of the realty"; permitting the lessee to remove at the expiration of the lease the hangar thereon; requiring the lessee, if it removed the hangar, to restore the land on which it stood to as good condition as it was when the lessee entered thereon; and if the lessee did not so remove the hangar the lessor was to get title to it automatically.
At the time of the award by the commissioners the lease had about four years to run, and the lessee's hangar, lean-to, and certain personal property therein were on the leased land.
At the trial, respondent offered evidence to show the separate values of the leasehold and of the hangar. While it is not clear, and perhaps makes no difference here, we assume that the personal property was included as fixtures in the buildings mentioned. There was evidence on behalf of respondent that the value of the leasehold based on net rental ranged between $17,900 and $50,000. The latter figure was based upon a capitalization of yearly income and represented the value of the property in fee, and not of the lessee's leasehold interest, which had only four years to run. The testimony concerning the value of the hangar ranged from $15,000 to about $64,000. Petitioner offered testimony to show that the value of the leasehold and buildings thereon as a unit was somewhere between about $6,800 and $9,500. After pointing out that there was a taking of both the leasehold and the hangar, the court, over petitioner's objection, instructed the jury:
During the trial the court excluded, upon respondent's objection, a tripartite contract between the park board as lessor (petitioner has succeeded to lessor's rights), respondent as lessee, and George Bringhurst as purchaser of the hangar from the lessee under conditional sales contract, by the terms of which lessor consented to a sublease to Bringhurst until he acquired full title to the hangar and afterward to an assignment of the lease to him, and in consideration thereof the parties agreed not only as to Bringhurst, but also as to "the owners of said lease," that the formula for valuing the leased premises if the lessor acquired them by condemnation or by voluntary sale should be (1) no allowance for unexpired portion of the lease, good will, going concern, and additions to the hangar; (2) a valuation of the hangar as of June 8, 1941, of $15,000, which was to be depreciated annually for three years at $2,000 per year and thereafter at $1,500 per year for the balance of the term (the lease then had nine years to run and consequently according to the formula at the time of the taking the depreciated value of the lessee's interest in the property was only $6,000); and (3) the owner of the lease was to have the right to remove the hangar as salvage. Bringhurst defaulted, and his rights as purchaser under the conditional sales contract were terminated. Subsequently, on July 21, 1941, lessor and respondent, as lessee, entered into a contract by the terms of which it was agreed that another tract of land should be substituted for the one described in the original lease; that the lessee should move its hangar thereon; and that, except as therein modified, the original lease should be in full force and effect and be applicable to the land substituted for that described in the original lease. The reason for the court's ruling out the contract does not appear.
Petitioner argues that the exclusion of the contract was prejudicial, because, according to the contractual valuation formula, the property at the time of the award had a value of $6,000 plus the value of the salvage, which it contended was either just about equal to or less than the cost of removing it. Petitioner produced as valuation witnesses two experienced engineers, Arndt Duval and Harold S. Chapin, and the representative of a wrecking and dismantling company, James A. Strand, all of whom were familiar with values in cases of this kind. Duval testified that the value of the salvage would be about equal to the cost of dismantling. Chapin and Strand testified that the latter would exceed the former by $2,530 and $3,000 respectively. Respondent's witness, Kermit O. Johnson, testified that the steelwork could be disconnected by unscrewing some bolts and nuts and when removed would be worth $15,884; but according to his testimony he left out of account the cost of dismantling, which was necessary before the steelwork could be taken down, and which, as has been pointed out,...
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