Opinion
No. 98-1700.
Opinion filed April 30, 1999.
Appeal from the Circuit Court for Seminole County, O. H. Eaton, Jr., Judge.
Robert A. McMillan, County Attorney, and Henry M. Brown, Assistant County Attorney, Sanford, for Appellant/Cross-Appellee.
Mark R. Leavitt and Kurt Garber of Wilson, Leavitt Small, P.A., and Kimberly A. Ashby of Akerman, Senterfitt Eidson, P.A., Orlando, for Appellees/Cross-Appellants.
Seminole County appeals the final judgment entered by the trial court in this eminent domain proceeding challenging the award of business damages to tenants of the property owner. Upon review, we hold that the trial court erroneously permitted the tenants to present expert testimony as to future business damages beyond the termination of their leases and the loss of value of personal property. Accordingly, we reverse the final judgment as it pertains to business damages and remand this matter for further proceedings related thereto.
Cumberland Farms (Cumberland) owned a 101,387 square foot parcel of real property located at the corner of Airport Boulevard and Sanford Avenue. Cumberland operated a convenience store and gas station on this property and leased adjoining commercial space to two tenants. Cumberland's tenants were The Hancock Company (Hancock) and Mohammed Deis d/b/a Napoli's Pizza Italian Restaurant (Mr. Deis). Hancock operated a plumbing business and Mr. Deis operated an Italian restaurant. Hancock's original lease expired in December 1994, but allowed for a two-year extension ending in December 1996. Mr. Deis' lease expired June 1992, but he continued to lease the space on a monthly basis.
In February 1994, Seminole County filed a petition in eminent domain seeking to condemn private property for the widening of Sanford Avenue and the construction of improved drainage facilities. On April 19, 1994, the trial court entered an order of taking condemning 8,158 square feet of Cumberland's property in fee simple and a small area for a temporary construction easement. The property taken was a strip of land adjacent to Airport Boulevard and Sanford Avenue. As a result of the taking, Cumberland lost twelve parking spaces in front of and beside the convenience store, an air pump station, landscaping, light poles, and signs. Neither the building nor the parking spaces in front of the rental spaces were directly affected by the taking.
Two years later, in May 1996, Cumberland informed Hancock and Mr. Deis that their leases would not be renewed and instructed Mr. Deis to vacate the premises by June 1996 and Hancock to vacate by July 1996. Cumberland thereafter demolished the building and constructed a larger convenience store with more gas pumps on the property. The new facility did not include any rental space.
In their answer to the County's eminent domain petition, Cumberland, Hancock, and Mr. Deis claimed, among other things, that they were entitled to recover business damages pursuant to section 73.071(3)(b), Florida Statutes (1993). In August 1997, the County served an offer of judgment offering Hancock $15,000 in business damages, and Mr. Deis $5,000 in business damages. Hancock and Mr. Deis were unable to reach a settlement with the County, and their claims for damages proceeded to trial. After deliberations, the jury entered a verdict awarding Mr. Deis $85,000 and Hancock $60,000 in business damages. The trial court entered a final judgment in accordance with this verdict.
Before trial, the County filed a motion in limine seeking to limit the evidence of the tenants' business damages to "the term and option periods of the Leases of the Tenants . . . and excluding business damage and business valuation evidence beyond the term and option periods of the respective Leases." The trial court summarily denied the motion. At trial, Hancock and Mr. Deis presented expert testimony that they had suffered business damages of $82,627 and $104,745, respectively. The expert testified that he calculated the business damages based on the "past history of the [lease] renewals to try to make a determination how long those business[es] would be staying at that site." In reaching his conclusion, the expert relied on a letter sent by Cumberland to Mr. Deis stating: "[h]ad it not been for the eminent domain we fully expected that you could have continued to be a valued tenant for the indefinite future." The expert testified that he calculated the business damages caused by the condemnation by assuming that Hancock and Mr. Deis would continue as tenants "for an indefinite future as reflected in the letter from Cumberland Farms." The County moved to strike this testimony, but the motion was summarily denied.
The County's first claim on appeal is that the trial court erred in allowing Hancock and Mr. Deis to submit expert testimony that they sustained business damages after the date their existing leases were terminated. The County argues that tenants are entitled to recover only those business damages which are sustained during their right of possession and therefore tenants may not recover business damages for any period of time after the landlord terminates their right of possession. We agree.
Section 73.071(3)(b), Florida Statutes (1993), authorizes a trial court to award business damages in an eminent domain proceeding:
73.071 Jury trial; compensation; severance damages. —
(3) The jury shall determine solely the amount of compensation to be paid, which compensation shall include:
* * *
(b) Where less than the entire property is sought to be appropriated, any damages to the remainder caused by the taking, including, when the action is by the Department of Transportation, county, municipality, board, district or other public body for the condemnation of a right-of-way, and the effect of the taking of the property involved may damage or destroy an established business of more than 5 years' standing, owned by the party whose lands are being so taken, located upon adjoining lands owned or held by such party, the probable damages to such business which the denial of the use of the property so taken may reasonably cause; any person claiming the right to recover such special damages shall set forth in his or her written defenses the nature and extent of such damages.
The business damages contemplated by this statute are "in the nature of lost profits attributable to the reduced profit-making capacity of the business caused by a taking of a portion of the realty or improvements thereon." LeSuer v. State Road Dep't, 231 So.2d 265, 268 (Fla. 1st DCA 1970).Accord Department of Transportation, State of Florida v. Rogers, 705 So.2d 584, 587 (Fla. 5th DCA 1997). The purpose of awarding business damages in an eminent domain proceeding is to mitigate the hardship suffered by a business when the taking of only a portion of property reduces the value associated with the location of the business. See Tampa-Hillsborough County Expressway Auth. v. K.E. Morris Alignment Service, Inc., 444 So.2d 926, 929 (Fla. 1983). Ordinarily, the recovery of business damages is sought by the property owner whose right of possession of the property is unlimited in time, but a tenant is also entitled to recover business damages in the amount totaling the tenant's leasehold interest in the property. See Sallas v. State Road Dep't, 220 So.2d 378, 380 (Fla. 1st DCA 1969).
In Sallas, the state road department condemned a 10-foot-wide strip of land where Sallas operated a gas station.Id. at 379. Sallas had subleased the property from an oil company who had leased the property from the owners.Id. Sallas' sublease was for one year, renewable annually for additional one-year terms, and either party could terminate the lease at the end of any renewal period.Id. The jury awarded Sallas nothing for business damages. Id. On appeal, the first district reversed, holding that Sallas was entitled to recover business damages for the one-year renewal period, explaining:
The term of the sublease under which appellant operates his business being on a year-to-year basis subject to termination by either party at the end of any renewal period necessarily restricts the extent of future business damages to which appellant might be entitled to a period not exceeding one year.
Id. at 379-80. We adopt this reasoning and hold that a tenant is entitled to recover business damages under section 73.071(3)(b), but such damages are limited by the duration of the leasehold interest existing in favor of the tenant at the time of the entry of the order of taking.
Hancock and Mr. Deis cite Almota Farmers Elevator Warehouse Co. v. U.S., 409 U.S. 470 (1973), for the proposition that in an eminent domain case the jury is entitled to consider business damages sustained by a tenant beyond the length of the lease if the landlord intended to renew the lease. However, the rule announced in Almota does not support this proposition. The Almota court addressed the valuation of improvements made by a lessee on the condemned property, not the valuation of a tenant's business damages.Id. at 473. The court in Almota carefully distinguished this rule from the holding in United States v. Petty Motor Co., 327 U.S. 372 (1946). In Petty Motor, the court held that the valuation of a tenant's damages caused by a partial taking is limited to the remainder of the lease term. Id. In Almota, the court noted that "[u]nlike Petty Motor, there is no question here of creating a legally cognizable value where none existed, or of compensating a mere incorporeal expectation." 409 U.S. at 473. Moreover, unlike Almota and Petty Motor, "[t]he right to business damages under section 73.071(3)(b), Florida Statutes (1995), in a condemnation proceeding is a matter of legislative grace, not a constitutional imperative . . . [and] must be strictly construed in favor of the state." Trinity Temple Church etc. v. Orange County, 681 So.2d 765, 766 (Fla. 5th DCA 1996), rev. denied, 689 So.2d 1073 (Fla. 1997).
In the instant case, it is undisputed that Hancock and Mr. Deis operated their businesses on the property for more than five years prior to the condemnation and that they are entitled to assert a claim of business damages. See § 73.071, Fla. Stat. (1993). However, pursuant to the terms of his lease, Mr. Deis' business damages are limited to the one-month period when he was entitled to remain in possession after the April 1994 order of taking. Hancock's business damages are similarly limited. Under the provisions of its lease, Hancock was entitled to retain possession through December 1996, but Cumberland terminated the lease effective July 31, 1996. Therefore, Hancock's business damages are limited to the period of time between the date of the order of taking and July 31, 1996. By allowing the jury to consider business damages beyond the expiration of the tenants' leases, the trial court improperly permitted the jury to award the tenants damages in excess of the value of their leasehold interest injured by the taking.See Sallas, 220 So.2d at 380.
The County next argues that the trial court erred in permitting the tenants to present expert testimony in support of their claim for business damages representing the value lost when they sold their personal business property at an auction after they were directed by Cumberland to vacate the property. In a related claim on cross-appeal, Hancock and Mr. Deis argue that if this court concludes that the trial court erred in admitting such evidence, we must remand the case so that the trial court may award them damages to cover their moving expenses.
Over the County's objection, the tenants' expert testified that they sold their personal business property at auction for an amount less than its actual value because they were forced to vacate the leased premises once the eminent domain proceeding commenced. The expert testified that Hancock lost $58,000 when it sold its personal business property and inventory including, for example, nuts, bolts, flashlights, and screwdrivers. The expert also testified that Mr. Deis lost $53,000 as a result of selling items such as an exhaust hood, shelving, and kitchen appliances. This expert testimony was erroneously admitted.
The experts' testimony was entirely irrelevant to the facts at issue because there was no showing made by Hancock or Mr. Deis that the County's eminent domain action forced them to vacate their premises. It was Cumberland's decision to terminate the leases that required Hancock and Mr. Deis to sell their personal business property at a loss and to vacate the premises. For the same reason, we reject the claim that Hancock and Mr. Deis are entitled to a recover the moving expenses incurred when they vacated the premises. In a partial taking case a tenant is entitled to recover moving costs if the tenant is required to move its possessions off the property or to move them from one part of the property to another as a result of the taking.See Pensacola Scrap Processors, Inc. v. State Road Dep't, 188 So.2d 38, 41 (Fla. 1st DCA), cert. denied, 192 So.2d 494 (Fla. 1966); see also State Road Dep't v. Myers, 211 So.2d 33, 34 (Fla. 1st DCA 1968). Here, Hancock and Mr. Deis did not present any evidence they were required to move their business property as a result of the County's taking.
In summary, we reverse the final judgment to the extent it awards business damages to Hancock and Mr. Deis, and remand this matter to the trial court for further proceedings consistent with this opinion. We affirm the final judgment in all other respects.
The County also argues the trial court erred in admitting the testimony of the tenants' expert witnesses because their fee was contingent upon the outcome of the trial. However, the County failed to offer the fee agreements into evidence and the trial court summarily denied the motion without ruling on whether the expert witnesses had agreed to be paid only if a verdict was entered in the tenants' favor. Based upon the status of the instant record, we cannot properly address the County's claim of error because we are unable to determine whether the experts had in fact agreed to be paid on a contingency basis. See McGurn v. Scott, 596 So.2d 1042, 1043 (Fla. 1992) (holding that an appellate court may not address an issue that has not been ruled upon by the trial court). In any event, it is not necessary for us to rule on this issue in light of our holding that the trial court improperly admitted expert testimony regarding the tenants' business damages.
AFFIRMED in part; REVERSED in part; and REMANDED.
SHARP, W. and THOMPSON, JJ., concur.