Sholom, Inc. v. State Roads Commission

• Decision Date: 15 May 1967
• Docket Number: No. 239,239
• Citation: 229 A.2d 576,246 Md. 688
• Parties: SHOLOM, INC. v. STATE ROADS COMMISSION of Maryland et al.
• Court: Maryland Court of Appeals

Page 688

246 Md. 688

229 A.2d 576

SHOLOM, INC. v. STATE ROADS COMMISSION of Maryland et al.

No. 239.

Court of Appeals of Maryland.

May 15, 1967.

Frank P. Flury, Riverdale (Flury & McLaughlin, Riverdale, on the brief), for appellant.

Charles J. Sullivan, Jr., Sp. Atty., College Park (Francis B. Burch, Atty. Gen., Joseph D. Buscher, Sp. Asst. Atty. Gen., and Carl H. Lehmann, Jr., Sp. Atty., Baltimore, on the brief), for appellee State Roads Commission.

William H. McCullough, Mt. Rainier (McCullough & Pace, Mt. Rainier, on the brief), for appellees Estate of Harry Armstrong and others.

Before HAMMOND, C. J., and HORNEY, MARBURY, BARNES and McWILLIAMS, JJ.

McWILLIAMS, Judge.

In this condemnation proceeding the appellee (Commission) seeks to acquire the leasehold interest of the appellant (Sholom) in property belonging to appellee (Armstrong) lying at the intersection of Central Avenue and Capital Beltway in Prince George's County. The trial judge held that because Sholom had not exercised options to extend its lease for two additional five year terms, its compensable interest must be restricted to the residue (16 months) of the first 5 year term. Sholom also had an option to buy during the first 5 year term. Because it had not exercised its option the trial judge refused to allow Sholom's testimony as to the value of the land. Availing themselves of the provisions of Maryland Rule 826 g the parties have filed a statement of the case in lieu of pleadings and evidence. The relevant facts, as gleaned from that statement, are as follows:

The entire tract, zoned for commercial purposes, was divided by Brightseat Road (Old County Road) and enjoyed frontage on both sides of Brightseat Road and on the north side of Central Avenue. The taking by the Commission consists of the two crosshatched parcels (Parcel No. 1 and Parcel No. 2) and the 'easement area' shown on the plat made a part of this opinion.

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

'The * * * (area) on the east corner of Brightseat Road was improved by a building housing a combination tavern, package liquor store and grocery store. The * * * (area) on the west corner of Brightseat Road was unimproved, and used for additional parking. The building faced Central Avenue and had two entrances, both fronting on Central Avenue. There was parking space for cars all along the front of the building on Central Avenue, and along the side of the building on the east side of Brightseat Road.'

'The taking of the strip on Central Avenue resulted in a complete denial of access to the property from Central Avenue.

'The Commission also relocated Brightseat Road further west, so that it intersects Central Avenue west of the Armstrong property. The only way in which the property can be reached now, after the taking by the Commission, is from a point on the relocated Brightseat Road * * * about eighty-five (85) feet back from the intersection with Central Avenue. It is now necessary to cross from new Brightseat Road over a drainage pipe onto the property and drive south towards Central Avenue in order to reach the building.

'There is no parking in front of the building along Central Avenue due to a 6 foot high chain link fence which was installed in front of the building by the Commission at distances varying from 3 to 6 feet from the building. Before the taking, cars could turn directly from Central Avenue onto the parking area in front of the building * * *. Cars using Brightseat Road could have either parked alongside the building on Brightseat Road, or pulled in front of the building on Central Avenue.'

'The lease of the * * * (entire tract) and (the) building from Armstrong to Sholom was for 5 years from March 22, 1959 to March 22, 1964 at $150.00 per month.

'There was also in the lease, two additional 5-year options given to Sholom, which provided that Sholom could lease from March 1964 to March 1969 at $275.00 per month, and from March 1969 to March 1974 at $400.00 per month.'

'The lease also gave Sholom an option to purchase the property during the first 5 year lease term; for $65,000.00 and specified the terms of purchase.

'There was no provision in the lease abating or reducing Sholom's rent in the event of condemnation damage to its leasehold interest.'

The Commission offered testimony that the highest, best and most profitable use of the property, both before and after the taking, was for commercial purposes, and that Sholom had no compensable leasehold interest.

'Sholom entered the property under the lease in March 1959 and paid the rent * * * during the first 5-year term. The actual date of taking by the Commission was on November 21, 1962. Sholom notified Armstrong that it was exercising its option to purchase the property during the first 5 years of the lease, before the Commission started construction on the property. Mr. Schrier, president of Sholom, and manager of the premises, testified that Sholom did not complete the exercise of its option to purchase after they realized what the denial of access * * * (along Central Avenue) would do to the value of the property; and he testified that Sholom would have exercised the option to buy but for the taking.

'Schrier also testified that Sholom did not exercise its option to renew the lease for another 5 years in March of 1964 because the denial of access hurt the business. He testified that but for the denial of access * * *, Sholom would have exercised its option to renew the lease.

'Sholom did continue to stay in the property, and pay rent to Armstrong after the end of the first term in March of 1964, and was still a tenant at the time of the trial in May, 1966, on a month-to-month basis.

'The Court refused to permit Sholom's appraiser, William T. Bowers, from giving his opinion as to the fair market value before, and after, the taking by the Commission, of the 2nd and 3rd 5-year leasehold options. It was the position of the Court that Sholom had not exercised the options to lease the 2nd and 3rd terms and therefore did not have a compensable interest as to them. Sholom proffered their appraiser's testimony that damage to the leasehold interest for the 2nd and 3rd 5-year terms at present discounted values would be $32,396.

'The Court refused to permit Schrier to testify as to his opinion of the fair market value of the property, because Sholom had not exercised its option to buy the property. Likewise, the Court refused to permit Sholom's appraiser, Bowers, from giving his opinion as to the before and after taking values of the option to buy, because Sholom did not exercise the option to buy. Sholom proffered their appraiser's testimony that damages to the option to buy was $43,000.

'The jury awarded $34,000 as total condemnation damages to the defendants, of which $30,500 was to the lessor, Armstrong, and $3,500 was to the lessee Sholom. The lessee has appealed from the judgment; both as to the amount of the total award and as to the manner in which the award was apportioned between the lessor and lessee.'

The parties agree and it is settled law that the interest of a lessee in land, in most instances, is compensable. Whether, in reckoning the amount of its compensation, the quantum of Sholom's interest must be limited to 5 years or extended to the full 15 years is the question to be resolved. In 29A C.J.S. Eminent Domain § 143, at 617, it is said:

'Generally, the lessee is entitled to the value of an option of renewal in addition to the value of the unexpired term of the lease. So, if there is a covenant for renewal of the term, and such covenant at the rent reserved will add to the value of the tenant's interest, such value should be allowed in addition to the present value of the term, but a mere expectation of such renewal of the lease will give no claim to compensation. There is no certain and exact rule for measuring damages where an option to renew a lease is impaired or diminished in value due to a condemnor taking a portion of a leasehold estate, since in each case variable factors must be taken into consideration by the court.'

To the same effect see 1 Orgel On Valuation Under Eminent Domain, § 121 at 525, n. 88; United States v. Petty Motor Co., 327 U.S. 372, 380-381, 66 S.Ct. 596, 90 L.Ed. 729 (1946). While the question has not been presented, except obliquely, to this Court, there are some indications of a leaning in the direction of the general rule as stated in C.J.S., supra. In Mayor, etc. of City of Baltimore v. Rice, 73 Md. 307, 311-313, 21 A. 181, 182 (1891), Rice was the lessee of a brickyard belonging to the heirs of Charles Carroll. Although his term was for a year only it had always been renewed and the owners' agent testified he would have continued to renew it. Rice had made expensive improvements to the freehold and there was testimony his interest was worth $4,000. The Court said:

'In this State no man's property can be taken for public use before he is paid the value of it. The evidence tended to show that Rice's brick-yard, though held by a precarious tenure, had a large market value.'

'It, however, is not in all respects technically accurate in describing Rice's interest as a tenancy from year to year. The jury had a right to consider the probability of a renewal of Rice's term, because the evidence tended to show that this circumstance increased its market value.' (Emphasis supplied.)

In Veirs v. State Roads Commission, 217 Md. 545, 554, 143 A.2d 617 (1958), Chief Judge Brune, for the Court, said:

'We think that the instruction limiting the extent of Veirs' recovery to a period less than that of the unexpired portion of his lease was erroneous, because it assumes that the cancellation of the lease of itself resulted in an assignment to the Godfreys of Veirs' interest in the award for the period after the date of cancellation. This, we think, does not necessarily follow, and therefore the judgment should be reversed.'

Although the parties...