New Kent County v. Worley Aviation, Inc., 970236

• Decision Date: 09 January 1998
• Docket Number: No. 970236,970236
• Citation: 255 Va. 186,496 S.E.2d 70
• Court: Virginia Supreme Court
• Parties: NEW KENT COUNTY v. WORLEY AVIATION, INC. Record

Page 70

496 S.E.2d 70

255 Va. 186

NEW KENT COUNTY v. WORLEY AVIATION, INC.

Record No. 970236.

Supreme Court of Virginia.

Jan. 9, 1998.

Steven S. Biss (James E. Cornwell, Jr., County Attorney; Daniel A. Gecker; Maloney, Barr & Huennekens; on briefs), Richmond, for appellant.

Henry M. Massie, Jr., (Jonathan T. Blank; McGuire, Woods, Battle & Boothe, on brief), Richmond, for appellee.

Present: All the Justices.

KINSER, Justice.

In this appeal, we first consider the jurisdictional requirements under Code §§ 15.1-550 and 15.1-552 for an appeal from an action of a county board of supervisors to the circuit court. Next, we address whether a lessee of land owned by a county is entitled, under the terms of the lease, to recover the fair market value of a capital improvement on the leased premises. Because we find that the lessee satisfied the jurisdictional requirements and constructed a capital improvement pursuant to a capital improvements plan approved by the board of supervisors, we will affirm the circuit court's judgment in favor of the lessee.

I.

In accordance with a Lease Agreement dated January 24, 1985, New Kent County (the County) leased the New Kent County Airport to Worley Aviation, Inc., (Worley) for an initial term of ten years, with a right to renew the lease for an additional ten-year term under certain conditions. The lease provisions at issue in this appeal provided a mechanism by which Worley could construct a capital improvement on the airport premises and later recover the fair market value of the improvement if the County did not renew the lease for an additional term. Specifically, we are concerned with portions of Sections VI and VII of the lease. In addition to establishing the initial ten-year term of the lease, commencing on January 1, 1985, and ending on December 31, 1994, the relevant portion of Section VII includes the following provisions:

A. If by December 31, 1989, 1) Lessee submits to Lessor a capital improvements plan for the construction of aviation related facilities on the airport property which plan shall specify the size, type and estimated costs of improvements shown thereon together with a committment [sic] by Lessee to begin construction of such improvements if the plan is approved, and 2) such plan or a variation of the same acceptable to both parties is approved by the Board of Supervisors of New Kent County, and 3) Lessee actually completes construction on the improvements shown in the plan, then Lessee shall have the right to extend the term of this lease until December 31, 2004, provided a written request for such renewal is submitted to Lessor not less than six (6) months nor more than nine (9) months before the end of the initial ten (10) year term. Notwithstanding a written request for extension from Lessee, Lessor reserves the right to terminate this agreement at the end of the initial ten (10) year term provided the provisions of Section VI paragraph D are complied with. Lessor shall provide written notice of any such termination to Lessee at least six (6) months prior to the end of the term.

Section VI(D), referenced in Section VII, and Section VI(E) contain the following terms:

D. If Lessor is found in breach of this agreement or exercises its right to terminate this lease at the end of the first ten (10) year term and if Lessee has constructed capital improvements on the premises pursuant to an approved capital improvements plan as set out in Section VII paragraph A, then Lessor shall pay to Lessee the fair market value of such improvements at the time of such breach or termination.

E. If lessee fails to exercise a right to renew this lease for an additional ten (10) year term or in the event this lease is terminated because of Lessee's failure to perform or for any other reason other than breach of this agreement by Lessor, then Lessee shall receive no compensation for any improvements constructed by Lessee and Lessee shall have no right to remove such improvements.

In the event Lessee fails to construct improvements in accordance with the provisions of Section VII paragraph A and Lessor exercises its right to terminate under Section VII paragraph B, then Lessee shall receive no compensation for any improvements constructed by Lessee and Lessee shall have no right to remove such improvements except as set out in Section VII, paragraph C.

In a July 8, 1986, letter, Worley submitted to the County "a capital improvement plan for the construction of aviation related facility in accordance with Section VII of our Lease Agreement." The proposed capital improvement consisted of a new maintenance aircraft hangar along with an office and terminal building. Worley requested approval of the capital improvement plan ¹ by the Board of Supervisors of New Kent County (the Board) and also a renewal of its lease to December 31, 2004, in accordance with Section VII(A), provided the capital improvements were completed.

The County's attorney provided copies of Worley's July 8, 1986, letter and plan to the members of the Board. Worley's request for approval was placed on the Board's agenda for its October 20, 1986, meeting:

ITEM 5--REPORT; REVIEW OF SITE AND CONSTRUCTION PLANS FOR NEW KENT AIRPORT TERMINAL BUILDING AND MAINTENANCE HANGER [sic]--The Board will review plans submitted by Mr. A.C. Worley, New Kent Airport Manager, for construction of a 64' X 80' aircraft maintenance hangar along with a 60' X 24' terminal building. The airport lease agreement requires Board approval of all airport capital improvement projects undertaken by the airport operator--Worley Aviation, Inc.

After discussion of the plan and a presentation by Worley, the Board approved, as stated in its minutes, "the plans for the new terminal building." ²

Subsequent to the meeting, the County's attorney advised Worley, in a letter dated October 22, 1986, that the Board had approved "the site and construction plans for the new terminal and hangar building.... These plans were approved by the Board in accordance with Section IV-A of the airport lease agreement." ³ Accordingly, Worley obtained a building permit and proceeded with construction. The building inspector issued a certificate of occupancy on January 4, 1988.

However, part of the present dispute concerns whether the construction was in accordance with the approved drawings because Worley included an apartment area in the building. Those drawings are no longer available, but the building inspector stated that part of his inspection was to ensure compliance with the approved plans.

Several months before the end of the initial ten-year term of the lease, the Board advised Worley that it did not intend to renew the lease for an additional term. The County relied on its right to terminate the lease at the end of the first ten years provided it complied with Section VI(D) of the Lease Agreement. Subsequently, the County's attorney advised Worley that the Board would be contacting it to invoke the appraisal procedure set forth in Section VI(C). ⁴ Eventually, the County and Worley selected J. Parks Rountrey (Rountrey) as the appraiser for the purpose of establishing the value of the capital improvement on the airport premises. Rountrey described the improvement as a maintenance hangar, office/public building, equipment (fixtures), and site improvements. He opined that the fair market value of the improvement was $480,000 as of December 21, 1994.

Despite the agreement to use Rountrey, a dispute arose between Worley and the County. In a letter dated October 18, 1994, the County's new attorney advised Worley for the first time that the County questioned Worley's claim for the fair market value of the capital improvement on the airport premises. The basis for the dispute was the absence of a reference in the minutes of the October 20, 1986, meeting to the specific section of the Lease Agreement under which the Board approved the capital improvement. Worley then presented its claim to the Board in three separate letters, the last of which included Rountrey's appraisal. But at its January 9, 1995, meeting, the Board denied Worley's capital improvement claim along with other claims unrelated to this appeal. ⁵

After the Board's denial, Worley commenced an appeal to the circuit court. According to Worley, it first served a written notice of appeal on the clerk of the Board on February 3, 1995, and posted an appeal bond. Worley then filed its motion for judgment in the circuit court. In its grounds of defense, the County denied that Worley served its written notice of appeal on the clerk of the Board and posted its bond, ⁶ but the County never brought this issue for hearing before the circuit court. ⁷

After ruling on the County's demurrer and motion for partial summary judgment, the circuit court conducted a bench trial. At the trial, the attorney who represented the County at the October 20, 1986, Board meeting testified that he did not recall that the Board approved any capital improvements plan but "simply the plans for the one facility." However, the attorney admitted that the Board approved Worley's plans as submitted. Likewise, a member of the Board testified that the Board approved only the plans for the terminal building and not a capital improvements plan. ⁸ Worley, however, testified that it would not have invested its money if the Board's approval had not been pursuant to Section VII(A) of the Lease Agreement.

On November 6, 1996, the circuit court entered a final order in which it found that "Worley constructed certain capital improvements on the demised premises; that the capital improvements were part of a capital improvements plan properly approved by the Board of Supervisors and constructed; and that the fair market value of such improvements was $480,000 at the date of termination of the lease." We awarded the County an appeal.

II.

In the County's first assignment of error, it asserts that Worley did not satisfy the...