State v. Nelson
| Citation | 296 N.E.2d 908,156 Ind.App. 399 |
| Decision Date | 13 June 1973 |
| Docket Number | No. 572A247,572A247 |
| Court | Indiana Appellate Court |
| Parties | STATE of Indiana, Appellant, v. Robert H. NELSON et al., Appellees. |
Theodore L. Sendak, Atty. Gen., A. Frank Gleaves, III, Deputy Atty. Gen., for appellant.
David Richey, Parr, Richey, Obremskey, Pedersen & Morton, Russell Richardson, Stewart & Richardson, Lebanon, for appellees.
This appeal arises from an award of damages in a condemnation action brought by the State. A jury trial resulted in verdicts of $140,000 for appellees Nelson (land owners), $18,000 for appellee Atlantic-Richfield Company, and $5,000 for appellee Milburn Watts.
State appeals only those awards granted Atlantic-Richfield and Watts.
Issues presented for review are:
(1) Did the trial court err in overruling the State's objections to testimony concerning the value of certain leases?
(2) Did the trial court err in allowing the question of damages for injury to leasehold interests to go to the jury?
(3) Did the trial court err in allowing evidence concerning the value of fixtures which were removed from the property?
(4) Did the trial court err in refusing to give State's tendered instruction No. 9, regarding the measure of damages?
This litigation began in 1958 when the State filed its complaint for appropriation of certain real estate in Boone County, owned by the Nelsons. A portion of the appropriated premises had been leased as a service station site to Atlantic-Richfield Company. The station was sub-leased to and operated by appellee Watts. The Nelson--Atlantic-Richfield lease provided for a rental of one and one-half cents per gallon of gasoline, with a $250.00 minimum and $750.00 maximum per month. The term of the lease was ten years, with a ten year renewal option. Evidence showed there was six years remaining on the first term.
At trial, appellees presented evidence as to the value of the business immediately preceding the taking, together with opinion testimony as to he value of the leasehold interests of Atlantic-Richfield and Watts. The State objected to the lack of proper foundation for this testimony and this appeal is based in part upon the overruling of its objections by the court.
Three of the issues raised by appellant revolve around the proper measure of damages to be applied when a leasehold interest is condemned.
The State contends that there was no proper foundation established to support the opinion evidence of appellees' witnesses, particularly complaining that the opinions were based on a capitalization of net profits. State argues that the proper method of valuing a leasehold interest is to take 'the difference between the contract rent and the fair rental value, if any, capitalized for the unexpired term of the lease and discounted by the factor of present worth.' For this proposition the State cites: Matter of City of New York (1907), 120 App.Div. 700, 105 N.Y.S. 779; Clarkston v. Skidmore (1871), 46 N.Y. 297; Matter of City of New York (1951), 278 App.Div. 813, 104 N.Y.S.2d 554.
In the most recent of the above cases, the court held:
'Where property held under an unexpired lease is taken by eminent domain, the question of whether a loss has been suffered by the lessee depends on whether the rental value of the leasehold estate exceeds the rent reserved for the balance of the term.' (Citing cases.)
(Our emphasis.)
State further relies upon the following language from State v. Heslar (1971), Ind., 274 N.E.2d 261, decided since the trial of the case at bar:
'Generally, the measure of damages where a leasehold interest is taken under eminent domain is the fair market value of the unexpired term of the lease over and above the rent stipulated to be paid.' (274 N.E.2d at p. 263, citing numerous authorities from other jurisdictions.)
We have no quarrel with the above statement. The same rule appears at 3 A.L.R.2d 290.
It is significant, however, that in Heslar there was no leasehold interest involved in the tract taken. However, the court discussed a lease which the landowner held on adjacent property also used in the conduct of its business.
The case at bar is further distinguishable from Heslar in that the original lease was for a period of ten years with the right of renewal for an additional ten years. In Heslar, the lease provided that the owners could sell the real estate and cancel the lease upon six months notice to the lessee. The court said:
'An estate in land which could be cancelled at any time does not seem to be an interest which would have a compensable value in a condemnation suit.'
We therefore hold that the Heslar case is not controlling in the case at bar.
The State further maintains that the testimony of Devon Robinson indicated that he capitalized net profits in arriving at his opinion of the fair market value of the leasehold interests. Appellees contend that Robinson carefully avoided the subject of profits in his testimony and that the terms 'profits' and 'net profits' were interjected by counsel for the State upon cross-examination. This situation was alluded to by the trial court as follows:
'THE COURT (intervening) Well, I'll reserve ruling on this and I think that the State has invited an error into this case and I want that in the record * * *'
It was not error to admit evidence of profits in the case at bar. Although it is generally conceded that profits are not recoverable as an element of damage in an eminent domain proceeding, testimony as to profits from a business is properly admitted where the value of a leasehold interest must be separately determined.
In City of Evansville v. Bartlett et al. (1962), 243 Ind. 464, 186...
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State v. Williams, 2--572A5
...and the court was considering the effect of the leased condemned land upon adjacent leased property. (See also State v. Nelson (1973, Ind.Ct.App., 1st Dist.) 296 N.E.2d 908. Glendenning concerned the determination of the actual size of the tract that was damaged by the taking of a portion o......
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J.J. Newberry Co. v. City of East Chicago for and on Behalf of Dept. of Redevelopment
...permit the valuation of leasehold interests by the capitalization of income method under appropriate circumstances. State v. Nelson (1973), 156 Ind.App. 399, 296 N.E.2d 908. As was observed in State Highway Commission v. Jones (1977), 173 Ind.App. 243, 363 N.E.2d 1018, "It follows that sinc......
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