496 F.2d 864 | Ct. Cl. | 1974
This case comes before the court on defendant’s motion, filed February 26, 1974, requesting that the court adopt the recommended decision of Trial Judge Thomas J. Lydon, filed January 18, 1974, pursuant to Buie 134(h), as the basis for its judgment in this case since plaintiff has failed to file a notice of intention to except thereto and the time for so filing pursuant to the Buies of the court has expired. Upon consideration thereof, without oral argument, since the court agrees with the said decision, as hereinafter set forth,
Plaintiff seeks to recover damages in the form of just compensation for an alleged taking by defendant, acting through the Corps of Engineers, Department of the Army, of his property on or about June 25, 1965. Plaintiff claims he is entitled to recover the value of a sand and gravel tipple (which he estimates to be $55,000), the labor costs which would be incurred in installing a new tipple in another location (which he estimates would be $85,000), and the value of his leasehold interest (which he estimates tobe $15,000).
The basic question presented in this case is whether there was a taking by defendant of plaintiff’s property entitling him to a just compensation award. Subsidiary questions to which the parties have directed their briefs are whether the tipple is to be considered a part of the realty, as claimed by plaintiff, or personalty, the position advanced by defendant, and whether plaintiff’s leasehold interest was a viable property right possessing value on or about June 25, 1965. For reasons which follow, it is concluded there was no com-pensable taking by defendant of plaintiff’s property.
In 1957, plaintiff was President of Mid-West Sand and Gravel Co., Inc. (Mid-West) which had its main office in Boonville, Indiana. For purposes of this litigation plaintiff and Mid-West will be considered one and the same. On November 23, 1957, plaintiff, as lessee, entered into a special purpose “Sand And Gravel Lease”, subsequently reassigned to Mid-West, with Marion D. Vanada and his wife, Lillian E. Vanada, lessors, whereby plaintiff was given the right to conduct a sand and gravel business on property, known as tract 114, owned by the lessors. Under this lease plaintiff had the right to dredge and pump sand and gravel from the Ohio River and to process the sand and gravel by means of a tipple located on the riverbank on tract 114 for commercial sale. At or about the same time that he entered into the lease, plaintiff purchased from the lessors the sand and gravel tipple consisting at the time of three hoppers or bins, which was then located on tract 114 — having been moved there from an upstream location at a prior time.
ifc ^ íj:
(1) * * *
(h) Lessee shall have the right to remove all of his personal property and improvements made by him on said real estate at the end of the term of this lease.
(2) Lessors agree to permit the Lessee to use a reasonable portion of their land on the river bank [refers to tract 114] for hoppers [the tipple] or other equipment necessary for Lessee’s operation * * *.
('3) Lessee agrees to carry on the work of pumping sand and gravel in a diligent manner. Lessee’s failure to pump sand and gravel for a continuous period of six (6) ■months or more shall constitute an abandonment and termination of this lease, unless the river conditions, strikes, or other unavoidable circumstances in some way prevent the Lessee from conducting a normal operation.
# if: * ‡ Jfc
The lease also allowed plaintiff to use a plot of land [known as tract 111] owned by the lessors for storage of sand and gravel, as well as use of a scales office building and maintenance shop located thereon.
It is important to understand that plaintiff’s lease was a special purpose lease and only empowered him to conduct a sand and gravel business on the lessor’s property. Plaintiff’s sole purpose in obtaining the lease and purchasing the tipple was to engage in the business of producing and selling sand and gravel, dredged from the Ohio River. He was not allowed to farm the land or engage in any other activity thereon.
The Corps of Engineers issued the permit, pursuant to the Eivers and Harbors Act of 1899, 33 U.S.C. § 401, et seq., and it allowed the holder to conduct sand and gravel dredging operations for commercial purposes on the Ohio Eiver at the Scuffletown Bar. Attached to the permit was a drawing showing the proposed dredging operations. The drawing noted the “Proposed Location of Pump, Pipe Line, 3 Hopper For Storage and Screening” and schematically depicted the tipple on the riverbank and the 8-inch pipe leading from the dredge barge in the river to the tipple on the bank. The permit reserved the right of defendant to revoke it at any time in the interests of navigation and provided that no claim shall be made against defendant on account of revocation nor shall defendant incur any expenses as a result of revocation of the permit.
Plaintiff spent most of 1958 in preparation for the conduct of his sand and gravel business. He made considerable improvements to the tipple, e.g., he added five additional hoppers or bins to the tipple in 1958, and in 1962 he made additional improvements to the tipple in order to increase production, e.g., he added a gravel screw and installed a new-type pump. The record does not indicate the initial purchase price of the tipple, the costs of improvements thereto, nor any depreciation data bearing thereon.
The purpose of the tipple was to size and separate sand and gravel. Sand and gravel was dredged from the Ohio River and pumped through an 8-inch pipeline into the tipple where it was processed by means of conveyors, screens, vibrator, scrubbers and washers and separated into the various hoppers or bins as sand or gravel. Chutes located at the bottom of the hoppers permitted trucks beneath the hoppers to be loaded with the final product for delivery to storage bins for commercial sale. Dredging operations were conducted from a steel barge located out in the river anywhere from 100 to 125 feet from the water’s edge. The pipe through which the dredged sand and gravel was pumped rested on pontoons from the barge until land was reached at which point it rested on supports until the pipe reached the tipple.
In December 1964, the tipple consisted of eight steel hoppers or bins and assorted electrical and other equipment necessary for its operation. The tipple sat on steel beam legs which were either embedded in concrete footings or bolted to steel plates embedded in concrete footings. The steel beam legs individually supported the various component parts of the tipple which were welded together to form a cohesive water-tight structure. The tipple itself was not designed to be a monolithic structure. Instead, elements were added and/ or welded to the tipple as the need arose. The hoppers were from 8 to 12 feet off the ground in order to enable trucks to be driven beneath them to be loaded. Two hoppers had concrete floors beneath them in order to better support the larger
The tipple operation was shut down- during the winter months because of high water and/or ice conditions. Generally, tipple operations ceased in November and started up again the following May. Plaintiff discontinued tipple operations in mid-December 1964 because of adverse weather conditions. Plaintiff’s tipple operation production increased over the years from a low of 2,243 tons of sand and gravel in 1958 to a high of 113,616 tons in 1964. The record indicates that the tipple’s 1964 operations were profitable.
Like most tipples, plaintiff’s tipple had the capability of being moved if market or other conditions so dictated. In sand and gravel, coal, and quarry operations, tipples similar to plaintiff’s were frequently moved from one location to another.
On March 29, 1965, the Secretary of the Army revoked plaintiff’s permit to conduct sand and gravel dredging operations in the Ohio River because of construction of the New-burgh Locks and Dam, a project to improve navigation on the Ohio River. Plaintiff was directed to remove from the Ohio River the equipment used in his dredging operations not later than July 1,1965. It is conceded that revocation of the permit was accomplished in a legal and authorized manner. Following revocation of the permit on March 29, 1965, plaintiff’s sand and gravel business on tract 114 was effectively terminated. Revocation of the permit rendered plaintiff’s tipple useless as long as it remained on tract 114. Further, revocation of the permit frustrated the sole purpose of the lease of November 23,1957, under which plaintiff conducted his sand and gravel operations. Under the terms of the lease, set out, supra, “failure to pump sand and gravel for a continuous period of six (6 ) months or more shall constitute an abandonment and termination of this lease * * Since plaintiff stopped pumping in mid-December 1964, revocation of the
Subsequent to March 29, 1965, plaintiff made no effort to remove his tipple from tract 114. The record clearly establishes that plaintiff voluntarily chose not to move his tipple because he believed it would not be worthwhile, cost-wise, to do so. The tipple was considered an “eye sore” on the riverbank by the Corps of Engineers in August 1967, because of its deteriorated condition, and its removal was subsequently effected by the Corps by means of competitive bidding. The Corps reasonably concluded, in this regard, that the tipple had been abandoned on the riverbank.
The land on which the tipple was located (tract 114), as well as surrounding lands (e.g., tracts 108, 110), were considered necessary by the Corps of Engineers for enhancing navigation and commerce along the Ohio River, a navigable river, in connection with the construction of the Newburgh Locks and Dam. Defendant, attendant to this project, condemned, informal proceedings, on June 25, 1965, tracts 108 and 110 inter alia, and appropriate compensation was subsequently awarded to all parties affected thereby. Tract 114 was included by the Corps of Engineers in the land area which was felt to be necessary in connection with the above-mentioned navigational project, but the Corps of Engineers concluded that this tract was below the ordinary high-water line (OHWL) (which it determined to be 362.6 m.s.l. for this area) and thus belonged to the Federal Government under the doctrine of navigational servitude.
Plaintiff contends that the tipple site on tract 114 was above the ordinary high-water mark
I.
Plaintiff claims that because the sand and gravel tipple was annexed to the land it must be considered real property.
The common law rule, supra, was not without exceptions. One exception, almost equal to the rule itself, concerned trade fixtures annexed to realty by a lessee. Under this exception, based on principles of public policy and a desire to encourage trade and manufacturing, a trade fixture annexed to realty and belonging to a lessee is generally regarded as personalty. Van Ness v. Pacard, 27 U.S. (2 Pet.) 137, 143 (1829); Anderson-Tully v. United States, 189 F. 2d 192, 196 (5th Cir.1951); see also New Castle Theater Co. v. Ward, 57 Ind. App. 473, 104 N.E. 526, 528 (1914); Gordon v. Miller, 28 Ind. App. 612, 615-18, 63 N.E. 774, 776 (1902). In Wiggins Ferry Co. v. O & M Ry., 142 U.S. 396, 416 (1892), the Supreme Court in holding a trade fixture annexed to realty by a lessee to be personalty observed: “* * * Indeed, it is difficult to conceive that any fixture, however solid, permanent and closely attached to the realty, placed there for the mere purposes of trade, may not be removed at the end of the term * *
While a trade fixture is most often considered personalty, the intention of the party annexing the fixture to have it so treated might be found to be otherwise. Intention, in this regard, is to be gleaned from the totality of the circumstances, e.g., the relationship of the parties, the nature and purpose of the item annexed, and the method of annexation. See Annot., 77 A.L.R. 1400 (1932). Plaintiff recognizes that one of the criteria used by courts in determining whether a fixture is realty or personalty is the “intention of the party making the annexation to make the article a permanent accession to the freehold.” Binkley v. Forkner, 117 Ind. 176, 19 N.E. 753, 754 (1889).
There is no affirmative evidence that plaintiff intended the tipple to be part of the realty. The evidence that is available shows rather clearly that the tipple was considered personalty by plaintiff. First plaintiff’s relationship with the owner of the realty was that of lessee. The lease under which plaintiff conducted his business operations, which centered on the tipple, clearly contemplated the right of removal of the tipple at its termination. While the lease was for a period of 20 years with an option to renew for an additional period of 5 years, provisions in the lease also made it subject to termination within a 6-month period if certain conditions existed. The
Plaintiff cites a number of cases wherein courts have held certain fixtures to be part of the realty. Each of these cases turned on their own facts and provide little guidance here.
Plaintiff could have moved his tipple at any time after the permit was revoked. Plaintiff decided that movement of the tipple to another location would be too expensive. In United States v. Sixty-Two Parcels of Land, 24 F. Supp. 882 (D. Del. 1938) a claim that the government took cottages of lessees when it condemned certain land was rejected when the lessees failed to remove said cottages within an 18-month period although free to do so during this period. The fact that one of the lessees had no money to effect removal of the cottages did not support a taking claim or a right to compensation for the cottages. Here, plaintiff’s economic decision not to move the tipple likewise provides no basis for compensation. Plaintiff made no effort to sell the tipple for salvage
Under the circumstances of this case, it seems reasonable to conclude, as did the Corps of Engineers, that plaintiff abandoned the tipple on the riverbank. Plaintiff had no intention of removing the tipple and its deteriorated condition in 1967, having been inoperative and uncared for since at least late 1965, with its vital parts removed therefrom, bespeaks intent by the owner (plaintiff) to abandon it and leave removal and attendant expense of the carcass to someone else. Intent to abandon property may be inferred from the facts of a case. Baglin v. Cusenier Co., 221 U.S. 580, 597-98 (1911). Such an inference is warranted herein, based on plaintiff’s refusal to remove the tipple and his allowing it to deteriorate to an “eye sore” on the riverbank. Indeed, it has been held that if a lessee does not remove fixtures at the termination of his lease, he is presumed to have abandoned them. Hedderich v. Smith, 103 Ind. 203, 2 N.E. 315, 316 (1885); Glaser v. North’s, 201 Or. 118, 266 P. 2d 680, 682 (1954). With the revocation of the operating permit in March 1965, the purpose of the lease was frustrated and it is reasonable to conclude it was considered terminated by the parties thereto. There certainly was no intent, as indicated earlier, on the part of the Corps of Engineers to take the tipple. Plaintiff made no effort to remove the tipple and the record contains no evidence that any government act, directly or by reasonable inference, prevented plaintiff from removing the tipple. The circumstances indicate an intent by
II.
It is established that a leasehold interest is property, the taking of which entitles the leaseholder to just compensation for the value thereof. Pewee Coal Co. v. United States, 142 Ct. Cl. 796, 801, 161 F. Supp. 952, 955 (1958), cert. denied, 359 U.S. 912 (1959). As was the case with respect to the tipple claim, it is not necessary to determine the question of whether plaintiff’s leasehold interest involved land above the ordinary high-water mark because no recovery would be due plaintiff in any event.
Generally, the measure of a lessee’s compensation for the taking of his leasehold interest in eminent domain situations is the fair market value of the unexpired term of the lease less the rent which the lessee would have to pay. United States v. Petty Motor Co., 327 U.S. 372, 381 (1946); R. S. Howard Co. v. United States, 81 Ct. Cl. 646, 654 (1935); United States v. 70.39 Acres of Land, 164 F. Supp. 451, 473 (S.D. Calif. 1958); see Annot., 3 A.L.R. 2d 286, 290-96 (1949). In this case, the sole purpose of plaintiff’s lease was to enable him to conduct his sand and gravel business on the bank of the Ohio River. When the Corps of Engineers revoked the permit to engage in this business on the river, the purpose and vitality of the lease was frustrated and impaired. The record indicates quite clearly that after revocation of the permit on March 29, 1965, the lease had no significant market value to plaintiff or to anyone else.
Under the lease, the parties could terminate the lease when there was no production by the tipple for a 6-month period. The tipple shut down in December 1964. On March 29, 1965, the permit to conduct sand and gravel operations was revoked. On June 25, 1965, formal condemnation proceedings were instituted relative to tracts 108, 110 and 111 and the government exercised possession over tract 114. Accordingly, on June 25, 1965, the tipple had been inoperative for 6 months. While there is no affirmative evidence that the lease was formally terminated, the circumstances in the record raises a presumption that the parties to the lease so viewed the situation. There is no evidence that plaintiff paid any rent for the year 1965 and the absence of such a payment supports an inference that no such rent payment was due because no lease agreement existed. Generally, when leased land is taken, the lessee’s obligation to pay rent is discharged. See 4 Nichols, Eminent Domain, § 12.42 [1], at 492. Thus, plaintiff here incurred no damages in the way of continued rental payment obligation. If no lease agreement existed on
III.
Still another reason serves to preclude recovery by plaintiff for the value of the tipple and the leasehold interest. The permit to dredge and remove sand and gravel from the Ohio Eiver created the value in the leasehold and the tipple which plaintiff now seeks to recover. It is established that one is not entitled to recover elements of value that the government created or that it might have destroyed under exercise of government authority other than power of eminent domain. United States v. Fuller, 409 U.S. 488, 491-92, 494 (1973). There is no question but that defendant had a paramount right to revoke the permit with complete immunity from damage claims resulting therefrom. United States v. Chandler-Dunbar Co., 229 U.S. 53, 68 (1913); Miami Beach Jockey Club v. Dern, 86 F. 2d 135 (D.C. Cir. 1936), cert. denied, 299 U.S. 556; see also Schoeffel v. United States, 193 Ct. Cl. 923, 936 (1971). When plaintiff’s permit to remove sand and gravel from the Ohio Eiver was revoked by the Corps of Engineers, his business operations ceased. With this revocation, the tipple’s purpose at the site was at an end and plaintiff had to decide whether to move the tipple to another location, sell the tipple for salvage or otherwise, or abandon the tipple where it was. Accordingly, it was not defendant’s possession of the land that rendered the tipple useless, but defendant’s absolute right to revoke the permit that enabled the tipple to process sand and gravel removed from the river. Damages that are not the consequence of a taking cannot be recovered. In Kelley’s Creek & N.W.R. v. United States, 100 Ct. Cl. 396, 406 (1944) the court denied recovery for a coal tipple which had been rendered useless not by the taking of the land but
CONCLUSION OF LAW
Upon the findings of fact and the foregoing opinion, which are adopted by the court and made a part of the judgment herein, the court concludes as a matter of law that plaintiff is not entitled to recover, and the petition is dismissed.
Whereas the court adopts the trial judge’s separate findings of fact, which are set forth in his report filed January 18, 1974, they are not printed herein since such facts as are necessary to the decision are contained in his opinion.
See United States v. Kansas City Ins. Co. 339 U.S. 799, 804-08 (1950).
The parties at trial and in their briefs devoted much attention to the question of whether the tipple site was above or below the ordinary high-water mark. It is a most troublesome question and the record in this case does not provide that degree of positive evidence on which one could resolve the question with complete assurance that a correct decision had been reached. Fortunately, the case can be disposed of on other grounds. It is conceded that defendant possessed tract 114, including the tipple site, on and after June 25, 1965. It is not necessary to determine whether that possession was obtained by Inverse condemnation or navigational servitude, since plaintiff would not be entitled to recover in any event.
Wilfong Poultry Farms v. United States, 202 Ct. Cl. 616, 619, n. 2, 480 F. 2d 1326-27 n. 2 (1973), defined inverse condemnation as “a legal label for effective expropriation of private property, the sovereign acting indirectly without benefit of formal eminent domain proceedings In condemnation; thus, sovereign acts incompatible with an owner’s present enjoyment of his property rights.”
It is interesting to note that as far as is known no taking claim has been advanced by the owners of tract 114, Marion D. and Lillian Vanada.
There is no evidence defendant intended to take the tipple on June 25, 1965, or at any reasonable period of time thereafter and no act of the defendant has been cited or is present in this record from which one could Imply or reasonably infer such intent. Absent such an intent, there can be no taking. J. J. Henry Co. v. United States, 188 Ct. Cl. 39, 46, 411 F. 2d 1246, 1249 (1969) ; Biggs Rental Co. v. United States, 173 Ct. Cl. 789, 796, 353 F. 2d 1013, 1017 (1965), cert. denied, 384 U.S. 927 (1966).
If this is so then plaintiff as a lessee may not be the proper party entitled to direct compensation. The lessor, not a party herein, may have greater rights under the circumstances. See e.g. The City of New York v. Cypress Ave. Holding Corp., 293 N.Y.S. 223 (1st Dept.), aff’d mem., 274 N.Y. 581, 10 N.E.2d 561 (1937).
An item is generally regarded as a trade fixture if annexed to realty for the purpose of aiding one in possession thereof, especially a lessee, in the conduct of a business for profit. Bank of Shelbyville v. Hartford, 268 Ky. 135, 104 S.W. 2d 217, 218-19 (1937).
Generally, whether a fixture is deemed realty or personalty turns on the circumstances of each case with certain criteria utilized by courts to assist them in reaching a determination. See 36A C.J.S. Fixtures, § 1, pp. 590-92 and § 38 — Trade Fixtures, pp. 691-94; see also Annot., 90 A.L.R. 159, (1934) (fixtures annexed by owner of realty), and Annot., 3 A.L.R. 2d 286 (1949) (fixtures annexed by lessee) relative to eminent domain proceedings. The trend of modern decisions generally favors the more liberal construction of holding fixtures to be personalty. See 36A C.J.S. Fixtures, supra at 592-93.
Interestingly, the Supreme Court in this case cited with approval a lower court holding that stone piers built by a lessee railroad and firmly embedded in earth were personalty and did not become part of the realty. Accordingly, the fact that the steel legs which supported the tipple were embedded in or bolted to concrete footings is not a sufficient reason, under the circumstances, to treat the tipple as realty. See McFarlane v. Foley, 27 Ind. App. 484, 486, 60 N.E. 357, 358 (1901) ; see also Block v. Talge, 221 Ind. 658, 661, 51 N.E. 2d 81, 82 (1943).
The lease, fairly construed, recognized the fact that operations might be terminated when It provided that the lease might be terminated If there were no operations for a 6-month period.
Removal of the tipple In sections does not affect Its character as personalty. See Andrews v. Williams, 115 Colo. 478, 173 P. 2d 882, 884 (1946). In Potomac Electric Power Co. v. United States, 85 F. 2d 243, 248 (C.A.D.C., 1936) cert. denied, 299 U.S. 565 (1936) three pieces of heavy machinery, one of which was a 35-ton generator set which rested on a concrete foundation specially built for It, were considered personalty since used In the business and not considered improvements to the real estate. Even ponderous and firmly attached Items may retain their character as personalty If such is the intent of the parties, Nadien v. Bazata, 303 Mass. 496, 22 N.E. 2d 1, 2 (1939). Ac
Only one case cited by plaintiff in his initial brief involves a lessee, Pause v. Atlanta, 98 Ga. 92, 26 S.E. 489 (1896) and it concerned primarily the right of a lessee operating a restaurant to recover damages to a leasehold interest inflicted by a municipality. There was no discussion of whether fixtures were to be treated as realty or personalty. Apropos the Pause case, see Matz v. Miami Club Restaurant, 127 S.W. 2d 738 (Mo. 1939) wherein restaurant items (bar, booths, soda fountain, etc.) were considered trade fixtures under a lease and thus personalty. The annotation relied on by plaintiff (90 A.L.R. 159-62) has little application to the taking of a leasehold interest. A more pertinent annotation, as far as this case is concerned, is Annot., 3 A.L.R. 2d 286, et seq., which deals with the question of the rights of lessees to recover for loss of fixtures and leasehold interests in eminent domain situations.
When the tipple was removed in 1969, it cost the successful bidder about $2,000 to move it. In order to remove it from the riverbank, the Corps of Engineers made it part of a package deal in a bid invitation involving removal of other items located on previously condemned lands. The successful bid was $450. The successful bidder allocated $275 to the tipple, and subsequently, at a salvage sale, realized $3,700 from sale of six of the tipple’s bins.
The tipple had been sitting Idle since December 1964. Over several feet of silt bad accumulated around and beneath the tipple such that one would have to stoop quite low to walk underneath the tipple whereas In December 1964, trucks were driven underneath the tipple to be loaded from the bins.
It has been suggested that a lease Is often viewed as within that class of property not commonly bought and sold and consequently the value to the owner might be taken as the best and only available test of market value. See Polasky, The Condemnation of Leasehold Interests, 48 Va. L. Rev. 477, 519 (1962) ; see also Kimball Laundry Co. v. United States, 338 U.S. 1, 6 (1949). As was indicated, the revocation of the permit rendered the special purpose lease valueless as far as plaintiff was concerned.
Plaintiff -would not be entitled to recover tbe estimated cost of installing a new tipple at another location even if a taking were found to have taken place since such costs would constitute consequential damages and, as such, would not be compensable as part of just compensation. Kimball Laundry Co. v. United States, 338 U.S. 1, 11-12 (1949) ; United States v. General Motors Corp., 323 U.S. 373, 379 (1945). Even if this were not so, reproduction costs would not be an appropriate valuation method in this case where another valuation basis was available. Schoeffel v. United States, 193 Ct. Cl. 923, 936 (1971) ; Bishop v. United States, 164 Ct. Cl. 717, 723 (1964).