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Maricopa County v. Shell Oil Co.

Supreme Court of Arizona

July 10, 1958

COUNTY OF MARICOPA, a body politic, Appellant,
SHELL OIL COMPANY, a corporation, Appellee.

Page 1006

[84 Ariz. 326] Lewis, Roca, Scoville & Beauchamp and Walter Cheifetz, Phoenix, for appellant.

Fennemore, Craig, Allen & McClennen, Phoenix, for appellee.

JOHNSON, Justice.

This was an action in condemnation instituted by the County of Maricopa, appellant, pursuant to § 27-901, A.C.A. 1939. [*] In 1948 appellee, Shell Oil Company, leased a parcel of land located at the southeast corner of the intersection of East Thomas Road and 24th Street, Maricopa County, Arizona. The lease was for a base term of fifteen years from June 1, 1948, and for an additional five-year term. The lease rental was a flat $150 per month for the first five years, and thereafter $150 per month, plus one cent per gallon for any gallons up to 10,000 delivered during the month in excess of 15,000. The leased parcel was rectangular in shape, and consisted of 127 feet of frontage on East Thomas Road and 100 feet of frontage on 24th Street. The Shell Oil Company erected a 100 feet by 100 feet service station on the parcel and in so doing did not utilize the east 27 feet of the parcel. The station had two pump islands, one on the Thomas Road side and one on the 24th Street side. The station's lighting system included lights perched on three tall poles located respectively at the northeast, northwest and southwest corners of the station.

The Shell Oil Company subleased the station to a tenant who operated it from July of 1952 until October of 1953. The tenant paid a rental of $150 per month and later $175 per month. During the latter part of October, 1953, the station was subleased to another tenant who since that time has operated the station. The second subtenant paid Shell Oil Company $185 per month rent.

On February 19, 1954, the condemnation action was initiated to obtain additional right-of-way with which to widen East Thomas Road. A right-of-way over the

Page 1007

north seven feet of the service station property was obtained.

Prior to the trial a stipulation was entered into whereby it was agreed that the value of the seven-foot strip sought to be condemned was the sum of $2,100 apportioned as damages for the land taken by awarding to the Shell Oil Company the sum of $1168.65 and by awarding to the owner of the fee the sum of $931.35. The owner [84 Ariz. 327] of the fee claimed no severance damages, and the only issue before the trial court for determination was the amount, if any, to be awarded to the Shell Oil Company for severance or consequential damages to its leasehold estate.

The trial court awarded the Shell Oil Company severance damages in the sum of $10,000. The County of Maricopa has perfected this appeal, and makes the following assignments of error: (1) that the severance damages in the sum of $10,000 is excessive, contrary to the evidence, and contrary to the law; and (2) that the trial court in fixing severance damages failed to adopt the measure of damages which gives the lowest figure.

Appellee had the burden of proof in establishing the severance or consequential damages sustained to its leasehold estate as a result of the partial taking of the land. Town of Williams v. Perrin, 70 Ariz. 157, 217 P.2d 918. In Pima County v. De Concini, 79 Ariz. 154, 285 P.2d 609, we laid down the rule that when only a part of the property is taken, the measure of severance damages is the difference between the market value of the property not taken, before and after the taking.

In State ex rel. Morrison v. Carlson, 83 Ariz. 363, 321 P.2d 1025, 1027, we recognized the difficulty of measuring damages where a portion of a leasehold estate is taken in condemnation:

'* * * It is well recognized that leases commonly are not assignable without the consent of the landlord, and are infrequently sold, and vary so much in length of term, rent reserved and other particulars, as well as in the character of the property, that it is impossible to apply the customary test of market value to a leasehold interest. United States v. Petty Motor Co., supra [327 U.S. 372, 66 S.Ct. 596, 90 L.Ed. 729]; 4 Nichols on Eminent Domain, § 12.42(3), p. 179.'

Appellee, in proof of the severance damages, relies on the testimony of a qualified real estate appraiser who testified the fair market value of the leasehold before the condemnation was $41,550 and the fair market value thereof after the taking was $28,112 or a differential of $13,440. The witness's opinion as to the value before the taking was determined by multiplying the average monthly gallonage of $18,363 gallons for the three-year period prior to condemnation by the rental value of $.02 per gallon which produced the product of $367.26, which he rounded out to $365 as the rental value per month. This figure was then multiplied by 12 which produced $4,280 (the correct product was $4,380 which the witness corrected on cross-examination) as the annual rental value. He then multiplied $4280 by 9.4, being the present worth factor, at 6% for fourteen years and three months, the term of the lease, which produced[84 Ariz. 328] $41,550. The witness arrived at the fair market value of the leasehold after the taking by applying an estimated 30% judgment factor to the value of $41,588. His testimony in connection with the 30% judgment factor was as follows:

'Q. You mentioned an item of 30% or a factor of 30%; will you explain what you meant by that? A. The 30% is a judgment factor, you just don't reach up and pull something out of the air. We did try to verify it and use judgment on it. It is predicated on several factors, No. 1, immediately after the pole was moved, which was before condemnation by four months--no, by six months--the gallonage of the station dropped about 17 or 18%, ...

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