Summary
In State Roads Com. of Md. v. Novosel, 203 Md. 619, 102 A.2d 563 (1954), the State complained relative to an appraisal which the State said should have been excluded because it was based upon business profits.
Summary of this case from Board of Education v. HughesOpinion
[No. 71, October Term, 1953.]
Decided February 10, 1954.
CONDEMNATION — of Interest in Land — Business Occupying — Consideration Given to Productive Capacity — for Jury. In the condemnation of an interest in land, the law avoids the capitalization of profits derived from a business occupying such land, for that which is being taken, and for which compensation is due, is the land, and not the business. Business profits are no sure test of land value, for they depend not only on location but on other factors; the same location may be fruitful of profit to one and not so to another. This does not mean, however, that in determining the value of the land, no consideration is to be given to its productive capacity which, in certain circumstances, has an important bearing on value. The precise weight to be accorded to this factor is a matter of judgment on which experts may differ, and of this the jury is the final judge. pp. 623-624
CONDEMNATION — of Lessee's Interest in Land — Evidence of Business Profits Admissible. In a condemnation suit brought by the State Roads Commission to acquire a strip of land, wherein separate awards were made to the lessees of the property, who conducted a business thereon, and to the owners of the reversionary interest, the trial court properly refused to exclude appraisals made by an expert appraiser testifying on behalf of the lessees on the ground that the appraisals were based upon business profits, where the appraiser, although he did inquire into the productivity of the premises, and particularly into the question of business profits, did not confine himself to profits. It was entirely proper and legally admissible for the tenant to show the increase in rental value after the date of the lease and to claim compensation for the increase over the rental fixed in the lease. pp. 623-625
CONDEMNATION — Jury's Function in Proceeding. The jury's function, in a condemnation case, is to determine whether the emphasis sought to be given the facts in any of the testimony is correct, and they need not follow the judgment of any witness as to the weight to be given to a particular factor in arriving at a valuation. p. 625
CONDEMNATION — of Leasehold and Reversionary Interests in Land — Damages — Expert's Opinion as to, Properly Admitted. Where, on appeal by the State Roads Commission, the condemning authority, from separate awards made in a condemnation suit to the lessees of the property and to the owners of the reversionary interest, it was not shown that the aggregate of the awards for the taking was in excess of the difference between the value before and after the taking, the trial court properly refused to exclude an expert's testimony relating to damages on the ground that it was not based upon the difference between the total fair market value of the entire property before the taking and the total fair market value of the part of the property remaining in the appellees after the taking. The fact that the expert's testimony was concerned more particularly with the value of the lessees' interest, for whom he was called as an expert, was not a proper ground for excluding the testimony. pp. 625-626
CONDEMNATION — of Leasehold and Reversionary Interests in Land — Appraisals Exceeding Total Amount Allowable under One Owner — No Evidence of. Where the State Roads Commission, the condemning authority, contended on appeal from separate awards made in a condemnation suit to the lessees of the property and to the owners of the reversionary interest, that the appellees' appraisals were made on the assumption that damages to the leasehold plus damages to the reversion could legally exceed the total damages that would be allowable for the same property if held under one ownership, there was no need for this Court, on appeal, to consider whether, in this type of case, the total of the awards could so exceed the total damages allowable under one ownership, since there was nothing in the record to support appellants' contention. p. 626
EVIDENCE — Real Estate Expert — Opinion of, on Cost of Excavating Earth, Admissible. In a condemnation proceeding, a real estate expert, whose qualifications were conceded, in discussing the comparability of sales of land in the immediate neighborhood of the property to be condemned, was properly permitted to give an opinion as to the cost of excavating earth and how much should be allowed for excavation necessary to make the land remaining after taking available for use. As a real estate expert it was perfectly competent for him to recognize what appeared to him to be a possible defect in the property and, after informing himself by inquiry as to the cost of remedying this condition, to make suitable allowance in computing the value of the property. An expert may be one who is trained in assembling and evaluating information in allied fields in which he lacks the same first-hand knowledge that he possesses in his own specialty. pp. 626-627
CONDEMNATION — of Leasehold and Reversionary Interests in Land — Statement by Court Concerning Loss of Right to Operate Business. In a condemnation proceeding, in which separate awards were made to the lessees of the property, who conducted a business thereon, and to the owners of the reversionary interest, it was not error for the court to state in the jury's presence that the condemnation of the property meant that the proprietor of the business lost his right to operate, where the court made it clear throughout the trial that the jury was to allow only for the value of the respective interests in the real estate and not for the loss of the business. p. 627
J.E.B.
Decided February 10, 1954.
Appeal from the Circuit Court for Anne Arundel County (MICHAELSON, J.).
Petition by Russell H. McCain, Chairman, Avery W. Hall and David M. Nichols, constituting the State Roads Commission of Maryland, to acquire by condemnation a strip of land owned by John Novosel and Bella Novosel, his wife, mortgaged to the County Trust Company of Maryland and leased to Herman O. Collier and Matilda M. Collier, his wife. From a judgment entered upon a jury's award of $8,500 to the lessees of the property and $22,000 to the owners of the reversionary interest, the Commission appeals.
Judgment affirmed.
The cause was argued before SOBELOFF, C.J., and DELAPLAINE, COLLINS and HENDERSON, JJ.
Andrew W. Starratt, Jr., Special Attorney, with whom were Edward D.E. Rollins, Attorney General, Joseph D. Buscher, Special Assistant Attorney General, and James C. Morton, Jr., Special Attorney, on the brief, for the appellant.
Walter C. Mylander, Jr., with whom were Henry A. Mylander and Marshall A. Binder on the brief, for the owners of the reversionary interest.
Louis M. Strauss, with whom was John H. Hopkins, IV, on the brief, for the lessees.
In a condemnation suit brought by the State Roads Commission to acquire a strip of land to widen the Revell Highway, the jury, after viewing the site and hearing testimony, made its inquisition and awarded the lessees of the property, Collier and wife, $8500, and the owners of the reversionary interest, Novosel and wife, $22,000. From judgment entered upon the jury's award, this appeal was taken by the Commission.
The area involved contains about .369 acres and was occupied and used by the Colliers as a restaurant and package liquor store on the north side of the Revel Highway about two miles west of the Chesapeake Bay Bridge. The lease of the property, made in 1947, was for a ten-year period with a renewal privilege of ten years at a rental of $140 per month. It ante-dated the construction of the bridge; indeed, when the property was leased it was not certain that the bridge would actually come into being. The Revell Highway, now a modern dual highway linking the bridge with main traffic arteries to Baltimore and the South, was then only a single lane road. Favored by the volume of traffic from the bridge, from the subsequently established State Park nearby, and from recently constructed homes in neighboring real estate developments, the restaurant and liquor business increased in volume ten-fold and prospered. Coupled with these factors was the protection afforded by the zoning law which largely shielded this non-conforming use from competition.
The central question raised by this appeal is how and to what extent these circumstances may fairly be reflected in measuring damages for the taking.
I.
The State's chief complaint is against the appraisals made by the appellee Collier and his expert appraiser, Charles M. Bandiere. It is contended that these appraisals should have been excluded, as they were based upon business profits. The appellant concedes that it is proper to consider profits in computing damages from the taking of business property, but urges that profits should not be permitted to be the sole or principal consideration.
In the condemnation of an interest in land the law is careful to avoid the capitalization of profits derived from a business occupying such land; for that which is being taken and for which compensation is due is the land, and not the business. Business profits, it is well recognized, are no sure test of land value for they depend not only on location but on other factors; the same location may be fruitful of profit to one and not so to another. This does not mean, however, that in determining the value of the land no consideration is to be given to its productive capacity which, in such circumstances as are present in this case, has an important bearing on value. 4 Nichols on Eminent Domain (3rd Ed.), Sec. 12. 3121 [1]; 5 Nichols, Sec. 19.3 [1], and [4]; 1 Orgel on Valuation under Eminent Domain (2nd Ed.), Sec. 164.
As a practical matter, a prospective purchaser would hardly fail to consider whether or not the business conducted on the premises had proved profitable, for this would be a measure of the desirability of the location, if not to him then to other purchasers. The precise weight to be accorded to this factor is a matter of judgment on which experts may differ, and of this the jury is the final judge. In this case we find that Mr. Bandiere did inquire into the productivity of the premises, and particularly into the question of business profits, although in his testimony he was not permitted to give the figures. He did not, however, confine himself to profits for he testified, "I have made several visits to the property and measured the value of that type of business to the location with respect to vehicular traffic, the type of highway, the fact that the highway is a connecting link and is what has now become an eastern costal highway from Maine to Florida; I have considered the income of the lease; I have studied volumes of business, profits therefrom; I have studied the processes through which you evaluate leases and arrive at conclusions."
With the increasing vogue of leases of business property reserving rentals computed on a percentage of the volume of business transacted by the tenant, it would be artificial and illusory to reject an expert opinion of rental value that takes into account the volume of business which experience has shown a particular piece of property is capable of producing; and, of course, the resulting profits may be, if anything, even more pertinent to the question of value. We find no basis for the objection either to the testimony of the expert, or to that of the owner who as such, irrespective of other qualifications, is permitted to give his estimate of the value of his holdings. Bailey v. Ford, 151 Md. 664; Pennsylvania Threshermen Farmers Mutual Casualty Ins. Co. v. Messenger, 181 Md. 295, 302; Jackson v. Linthicum, 192 Md. 272, 276; 3 Wigmore on Evidence (3rd Ed.), Sec. 716.
It was entirely correct and legally admissible for the tenant to show the increase in rental value since the date of the lease and to claim compensation for the increase over the rental fixed in the lease.
II.
The appellant further objects that the Court should have excluded the expert's testimony relating to damages because his estimate, it is said, was not based upon the difference between the total fair market value of the entire property before the taking and the total fair market value of the part of the property remaining in the defendants after the taking. See Realty Improvement Co. v. Consolidated Gas Electric Light Power Co., 156 Md. 581, 588; Pumphrey v. State Roads Comm., 175 Md. 498, 505; Johnson v. Consolidated Gas, Electric Light Power Co. of Baltimore, 187 Md. 454, 469-470. It is not shown that the aggregate of the awards for the taking made to the owner and the tenant was in excess of the difference between the value before and after the taking. Mr. Bandiere's testimony was concerned more particularly with the value of the lessee's interest, for he was called as an expert for the tenant. Others had testified as to the aggregate damage for which the State was liable and to the problem of apportionment of the total award between landlord and tenant.
Parties and their witnesses quite naturally stress the factors which seem to them to support their contentions. The jury's function is to determine whether the emphasis sought to be given the facts in any of the testimony is correct, and they need not follow any witness' judgment as to the weight to be given to a particular factor in arriving at a valuation. Indeed, in the instant case the jury seems to have exercised an independent and discriminating judgment, for in valuing the tenants' interest at $8500 they declined to follow exclusively the judgment of any single one of the witnesses, whose valuations ranged from a low of $2,000 to a high of $54,348.
III.
We find nothing in the record to support the appellant's contention that the appellees' appraisals were made on the assumption that damages to the leasehold plus damages to the reversion could legally exceed the total damages that would be allowable for the same property if held under one ownership. Under these circumstances we need not concern ourselves with the question whether this is the type of case where the total of the awards to the owner and the tenant could properly be permitted to exceed the amount that the property would be worth in the hands of a single owner. Cf. Gluck v. Mayor and City Council of Baltimore, 81 Md. 315, 321; Mayor and City Council of Baltimore v. Latrobe, 101 Md. 621; Mayor and City Council of Baltimore v. Gamse, 132 Md. 290, 293.
IV.
Marion Cox, whose qualifications as a real estate expert are conceded by the appellant, in discussing the comparability of sales of land in the immediate neighborhood, was permitted to give an opinion as to the cost of excavating earth and how much should be allowed for excavation necessary to make the land remaining after taking available for use. The appellant insists that as Mr. Cox was not shown to have expert knowledge as to the cost of excavating land he should not have been permitted to testify to this. We see no ground for complaint on this score. As a real estate expert it was perfectly competent for him to recognize what appeared to him to be a possible defect in the property and, after informing himself by inquiry as to the cost of remedying this condition, to make suitable allowance in computing the value of the property. An expert may be one who is trained in assembling and evaluating information in allied fields in which he lacks the same first-hand knowledge that he possesses in his own specialty. All that Mr. Cox did falls well within his area of expertness, and it would have been in order for the State to challenge his figures and, if it could, to offset them by opposing testimony.
V.
The appellant also asserts that it was error for the Court to state in the jury's presence that the condemnation of the property meant that the proprietor of the business lost his right to operate. We do not see how this statement of an obvious fact could have prejudiced the jury against the appellant, especially as throughout the trial the Judge made it clear that the jury was to allow only for the value of the respective interests in the real estate and not for the loss of the business. Indeed, at the outset of the trial the parties themselves in terms stipulated: "It is hereby stipulated that the taking of a portion of the property of the defendant Novosel herein constituted a taking of substantially all that portion of the property covered by the lease, dated June 30, 1947, * * * to Herman O. Collier and wife and that the legal effect thereof is the termination of the said lease as of the time of the said taking, and that said lease is cancelled as of said taking."
Finding no error, the judgment will be affirmed.
Judgment affirmed with costs.