State, Dept. of Highways and Public Works by City of Memphis v. Texaco, Inc.

• Decision Date: 20 December 1961
• Citation: 49 Tenn.App. 278,354 S.W.2d 792
• Parties: STATE of Tennessee, DEPARTMENT OF HIGHWAYS AND PUBLIC WORKS, by CITY OF MEMPHIS, Plaintiff in Error, v. TEXACO, INC., Defendant in Error. 49 Tenn.App. 278, 354 S.W.2d 792
• Court: Tennessee Court of Appeals

Page 792

354 S.W.2d 792

STATE of Tennessee, DEPARTMENT OF HIGHWAYS AND PUBLIC WORKS by CITY OF MEMPHIS, Plaintiff in Error, v. TEXACO, INC., Defendant in Error.

49 Tenn.App. 278, 354 S.W.2d 792

Court of Appeals of Tennessee, Western Section at Jackson.

Dec. 20, 1961 Certiorari Denied by Supreme Court March 7, 1962.

[49 TENNAPP 279] James M. Manire and Frank B. Gianotti, Jr., Memphis, for plaintiff in error.

Leo Bearman, Sr., and Leo Bearman, Jr., Memphis, for defendant in error.

BEJACH, Judge.

This cause involves a condemnation suit filed by the State of Tennessee, acting by and through the City of Memphis, for highway purposes, under the provisions of Chapter 216, Public Acts of 1959. This appeal is with reference to the leasehold of Texaco, Inc. in property located at the intersection of U. S. Highway 70 and White Station Road in Shelby County, Tennessee. As originally filed, Bernard L. Cohn, Jr. and his wife, Louise Halle Cohn, as owners of the fee simple interest in said property, were made parties defendant along with The Texas Company, lessee, and Albert Stewart Thomas and Jesse Collins Thomas, as sublessees thereof. The Texas Company is now known as Texaco, Inc.

Under the provisions of Chapter 216, Public Acts of 1959, the State of Tennessee paid into court the total sum of $64,150, of which it allotted $61,750 as compensation for the ownership of the fee simple interest, and $1,200 each to the lessee of the property and the sublessee for their respective interests in said property. Bernard [49 TENNAPP 280] L. Cohn, Jr. and wife and the sublessees accepted the sums allocated to them for their respective interests and have withdrawn said sums from the Registry of the Court. Consent orders have been entered divesting their respective titles and closing the case as to them. The Texas Company, or Texaco, Inc., as it is now called, refused, however, to accept the $1,200 allotted to it as compensation for its leasehold, and demanded a jury to try the issue of fair value of its leasehold. The value of the leasehold interest of Texaco, Inc. thus came to be the sole question tried to a jury in the lower court and the sole question involved on this appeal. The jury returned a verdict of $8,941, consisting of $6,956 fixed as the value of the lease, and $1,985 awarded for the expense of removing, transporting and installing equipment of Texaco, Inc. The $1,200 allocated as the value of the leasehold interest of Texaco, Inc. had been withdrawn pursuant to an order of court which provided that 'same shall be credited on any verdict in excess of that sum awarded to Texaco, Inc.', and that if the verdict should be less than $1,200, a judgment might be entered against Texaco, Inc. for the excess withdrawn. After a motion for a new trial had been overruled, the State perfected its appeal in the nature of a writ of error to this Court. The parties will be referred to as the State and Texaco, Inc., or called appellant and appellee.

It is the contention of counsel for the State, as set out in their brief filed in this cause, that the total value of the fee simple title to the property here involved is $62,950, consisting of the amounts awarded to the owner of the fee simple title and the sublessee; and that the leasehold interest of Texaco, Inc. has no value, because the condemnation proceeding relieved it of the obligation[49 TENNAPP 281] to pay in rent more for the unexpired portion of the leasehold than same is worth. The record discloses that the leasehold in question was originally for a period of ten years, of which approximately three years and eleven months were unexpired, and that it provided for options of renewal which entitled the lessee to two additional periods of five years each. The monthly rental which Texaco, Inc. was obligated to pay was $350.00, and at the time the property was condemned Texaco, Inc. was receiving as rental from the sublessees the sum of $25.00 per month, plus 1 1/4 cents per gallon of gasoline pumped. It is the contention of appellant that the average volume of gasoline pumped during the entire time that the lease had been in effect was less than 20,000 gallons per month, that this average had declined in 1959 and in 1960, and that the rental paid by the sublessee to the lessee was, therefore, less than the rental paid by the lessee. Applying the general principle that, 'profits' cannot be shown in condemnation cases, the trial court refused to permit the State to bring out these facts. This ruling is complained of by one of appellant's assignments of error.

In this Court, the State, as appellant, has filed three assignments of error.

Assignment I complains because the trial judge overruled a motion for a directed verdict. Assignment II complains of the refusal of the trial court to grant a request for special instruction to the jury; and Assignment III complains of the refusal of the trial judge to admit evidence showing the rental received by Texaco, Inc. from its sublessees, and the alleged limited productivity of Texaco, Inc.'s sublease.

[49 TENNAPP 282] We will discuss these assignments of error in the order named.

The State's contention that a directed verdict in its favor should have been granted is based on the claim that the only testimony of value of the unincumbered fee was that offered on behalf of the State which placed that value at $62,950. It is the State's contention that proof of the value of the lease had no relation to the value of the fee simple interest which had been absorbed by the owner of the fee and the owner of the sublease, and consequently that its motion for a directed verdict should have been granted. We cannot agree with this contention of the State, because the record discloses some evidence showing a higher valuation of the unincumbered fee than that offered on behalf of the State.

From the testimony of Texaco, Inc.'s witness, Payson Moreland, as brought out on cross examination by Mr. Manire, we quote as follows:

'Q. I would like to know this--If you will, tell me, Mr. Moreland, What are the elements of value that go in your appraisal?

'A. Into a leasehold?

'Q. A leasehold.

A. Well, there are many ways of approaching a leasehold interest, and the quickest simplest one generally is to determine, first, the market value of the unimcumbered fee. I mean that's usually the basic, the first approach. You can weigh it with other approaches to value, if you wish.

[49 TENNAPP 283] 'Q. You didn't follow that system, did you?

'A. Yes, sir; I did.

'Q. I thought you said you didn't appraise the unimcumbered fee, if I understood you correctly a while ago. Believe me, I'm not trying to argue with you. I might have misunderstood you.

'A. I want it understood that my man here started an appraisal and got a lot of information for me before I got here. I also conferred with a member of the Appraisal Institute here in Memphis, and we agreed and reached an estimate of the market value of that property which, incidentally, was some $7,000 or $8,000 higher than that reached by the appraisers for the State. However, we used the figure that----

'MR. MANIRE: I am going to have to ask that that be stricken as being unresponsive.

'THE COURT: All right, I think the Court will have to sustain that and strike that.'

From the cross examination of witness John Stephen Fineran, by Mr. Manire, we quote as follows:

'Q. Now, let me ask you this. What elements do you consider in arriving at your valuation of this leasehold?

'A. The principal thing you have to consider is the present day value of the land.

'Q. The value of the land is one. What else?

'A. Another thing would be the cost of the improvement or the depreciated value of the improvement.

[49 TENNAPP 284] 'Q. Do you know what they are?

'A. Roughly, I estimated the value of the land if it was available today.

'Q. I am talking about improvements.

'A. If the land was available it would sell for $50,000, and the value of the improvements would be in the neighborhood of $25,000, and the cost of the station originally was around between $25 and $27,000.

'Q. The depreciated value of the improvements, would you tell me what that is?

'A. As of June 1960, I would say in the neighborhood of $25,000.

'Q. That is the depreciated value.

'A. Yes, sir.

'Q. We have the value of the land and the depreciated value of the improvements, and you have given me those, what else?

'A. These are the two principal things.'

It appears that the testimony first quoted above was stricken by the trial judge, but the second quotation remains in the record. We think it alone constitutes sufficient justification for overruling of the State's motion for a directed verdict. Assignment of Error I is, accordingly, overruled.

Assignment of Error II complains of the refusal of the trial judge to grant the following special instructions submitted:

[49 TENNAPP 285] 'Gentlemen of the jury I instruct you that the compensation which must be paid by the condemnor, which is the State of Tennessee in this case, for the property condemned, cannot be increased because of the existence of a lease for years outstanding and unexpired at the time of the condemnation, and that the aggregate compensation awarded the owner and the lessee cannot exceed the value of the unincumbered fee.'

We think the State was entitled to this instruction. After careful reading of the trial judge's charge, we find nothing therein which even remotely approaches this instruction. On authority of Mason v. City of Nashville, 155 Tenn. 256, 291 S.W. 1074; City of Nashville v. Mason, 11 Tenn.App. 344, and the very recent case of Moulton v. George, Tenn., 348 S.W.2d 129, we think the State was entitled to have the value of the leasehold considered as an integral part of the total value of the unincumbered tract of land; and that the refusal of the trial judge to grant this instruction, or otherwise cover same in his general charge, was prejudicial to the State's case.

In Mason v. City...