Gerhard A. GILBERT et ux. and Gilbert of Arizona, Inc., a corporation, Appellants,
STATE of Arizona ex rel. Robert MORRISON, Attorney General, Appellee.
[85 Ariz. 323] Lawrence E. Holladay, Tucson, for appellants.
Robert Morrison, Atty. Gen., Ronald M. Bond and Charles L. Hardy, Asst. Attys. Gen., for appellee.
This is an appeal by defendant-appellants, Genhard Gilbert, et ux., and Gilbert
of Arizona, Inc., a corporation, from a judgment of condemnation entered in favor of the State of Arizona, plaintiff-appellee, wherein the defendants were denied any damages for improvements as a result of the taking for highway purposes of a part of certain realty of which they were the lessees. The parties will hereafter be referred to either by name or as they appeared in the lower court, i. e., plaintiff and defendants.
On March 10, 1952, John H. Hunts and Millie M. Hunts, his wife, gave a written option agreement to defendant Gerhard Gilbert for a triangular tract of unimproved land, located near the old railroad overpass on the Tucson-Casa Grande Highway. The option was thereafter exercised by Gilbert and the option agreement thereby became the lease between the parties. The lease was for a period of five years, with the right or renewal for a similar term, at an agreed rental of $50 per month. The agreement recites that:
'Purpose for which lessee will use property is * * * for a lumberyard and building materials business, all connected business and for residence for operator.'
During the period between November 1, 1952 (date option exercised) and April 10, 1953, defendant Gilbert improved the condemned premises by grading, installing sewer lines, water lines and electricity, and by erecting five buildings thereon for use in his lumber and trading business.
On April 10, 1953, defendant Gerhard Gilbert sold and conveyed the improvements on the condemned premises, together with the stock of lumber and building materials thereon, to his codefendant, Gilbert of Arizona, Inc., and at the same time sublet the demised premises to said corporation of which he was the president and principal stockholder.
On October 8, 1955, the State of Arizona, at the relation of the attorney general, filed a complaint in condemnation to obtain a right-of-way for highway purposes over 1.23 acres of the triangular tract embraced within the area covered by the Gilbert lease. The State named as defendants both Mr. [85 Ariz. 324] Gilbert and his corporation, as well as Millie M. Potter (formerly Millie M. Hunts). It seems that John M. Hunts had died in the interim, and his widow--who had remarried--was the sole owner of the fee to the premises in question. Apparently the State experienced no difficulty in reaching agreement with Mrs. Potter as to the value of her interest as by stipulation a judgment was entered in her favor for $10,000 with interest. Mrs. Potter claimed no interest in, nor was she paid for, the improvements placed by defendants on the condemned premises.
It was stipulated the State had the right to take the real property in question, and that the taking actually occurred on October 8, 1955--this being the date summons was issued. Under the statute, A.R.S. Subsection A of Section 12-1123, values are to be computed and fixed as of the date of summons. The only contested issue, therefore, was what amount, if any, should be allowed to the Gilberts for their interest as lessees. The case was tried to the court sitting without a jury. The court found the lease of defendants terminated on October 10, 1955, and hence it held that no interest was taken from them by the State of Arizona in this condemnation proceeding. Judgment was that defendants take nothing by their claims. This appeal followed.
In this action to condemn 'real property' for highway purposes it becomes necessary to determine at the outset the nature of the interest held by defendants in the improvements on the real property sought to be condemned. Are the improvements placed thereon by said defendants, as between them and the State of Arizona, to be considered as 'personalty' or as accessions to the realty within the meaning of the law?
The evidence is undisputed that defendants erected five frame buildings on the property in question, and such action was contemplated by the parties when the
lease was entered into. Two of these structures--the office and residence--were substantial buildings resting on concrete slab foundations. The other three smaller buildings were affixed to the realty and rested on concrete or wooden blocks. Undoubtedly all of these permanent structures were affixed to the land and hence as an abstract matter of law were not 'personalty' but were in the nature of 'real estate'. The State ...