Case Name: Commonwealth of Pennsylvania, Department of Transportation, Appellant v. Michael C. DiFurio, Appellee; Michael C. DiFurio and Exxon Company, U.S.A. v. Commonwealth of Pennsylvania, Department of Transportation. Exxon Company, U.S.A., Appellant
Court: Commonwealth Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1989-03-17
Citations: 124 Pa. Commw. 273
Docket Number: Appeals Nos. 2443 C.D. 1987 and 131 C.D. 1988
Parties: Commonwealth of Pennsylvania, Department of Transportation, Appellant v. Michael C. DiFurio, Appellee. Michael C. DiFurio and Exxon Company, U.S.A. v. Commonwealth of Pennsylvania, Department of Transportation. Exxon Company, U.S.A., Appellant.
Judges: before Judges DOYLE and COLINS, and Senior Judge BARBIERI, sitting as a panel of three.
Reporter: Pennsylvania Commonwealth Court Reports
Volume: 124
Pages: 273–291

Head Matter:
555 A.2d 1379
Commonwealth of Pennsylvania, Department of Transportation, Appellant v. Michael C. DiFurio, Appellee. Michael C. DiFurio and Exxon Company, U.S.A. v. Commonwealth of Pennsylvania, Department of Transportation. Exxon Company, U.S.A., Appellant.
Argued December 16, 1988,
before Judges DOYLE and COLINS, and Senior Judge BARBIERI, sitting as a panel of three.
William J. Cressler, Assistant Counsel, with him, Spencer A. Manthorpe, Assistant Chief Counsel, and John L. Heaton, Chief Counsel, for appellant, Department of Transportation.
Richard C. Biedrzycki, Of Counsel: Phillips and Phelan, for appellant, Exxon Company, U.S.A.
George D. Harwood, with him, Murray S. Eckell, Of Counsel: Eckell, Sparks, Levy, Auerbach, Monte & Moses, for appellee, Michael C. DiFurio.
March 17, 1989:

Opinion:
Opinion by
Senior Judge Barbieri,
The Department of Transportation (DOT) and Exxon Company, U.S.A. (Exxon) appeal the order of the Court of Common Pleas of Delaware County dismissing their preliminary objections to a petition for the appointment of a board of viewers filed by Michael DiFurio (Appellee) alleging a defacto taking of his leasehold interest pursuant to Section 502(e) of the Eminent Domain Code (Code), Act of June 22, 1964, P.L. 84, as amended, 26 P.S. §1-502(e). We affirm.
Appellee operated the Rolling Green Exxon Service Station under a lease from Exxon located at the corner of Springfield and Sproul Roads in Broomall, Pennsylvania. Appellee's leasehold interest was situated in the path of Legislative Route 1010, popularly known as the Blue Route, pursuant to a plan of development first recorded in 1969. In March of 1985, Appellee was notified that the frequently delayed construction of the Blue Route was set to resume. A plan authorizing the condemnation of Appellee's property for a section of the Blue Route was filed on August 9, 1985. Appraisal activity for the section of the highway in question began during June of 1986.
On August 1, 1986, Exxon and DOT notified Appellee that "the Blue Route was coming through" and that his leasehold would be terminated in the near future. A DOT relocation advisor was appointed on this date and a DOT right of way agent visited Appellee's service station on August 14, 1986. DOT sent Appellee a ninety day letter asserting that the right of way would be cleared by December of 1986. DOT did not formally condemn the property in December of'1986, but instead sent Appellee another ninety day letter, followed by a thirty day letter. Appellee continued to operate his service station until DOT filed a formal declaration of taking condemning the entire property on April 14, 1987.
On August 28, 1986, Appellee filed this instant petition for an appointment of a board of viewers asserting that DOT's pre-condemnation proceedings coupled with twenty-five years of publicity concerning the path of the Blue Route had deprived Appellee of the use and enjoyment of his tenancy and substantially undermined and interfered with his business. Appellee's petition was amended on November 14, 1986, and Exxon was added as an unwilling petitioner.
Both DOT and Exxon filed preliminary objections to Appellee's petition. DOT asserted that since Appellee remained in possession and continued to operate his service station right up until the date of the formal taking on April 14, 1987, no de facto taking occurred. Exxon joined in DOT's argument and also contended that Appellee had no compensable right to damages because paragraph thirteen of Appellee's lease with Exxon contained a termination on condemnation clause that assigned all Appellee's rights on condemnation to Exxon. The trial court concluded that a de facto taking had occurred and that the terms of the lease did not bar Appellee from recovering damages to his leasehold interest. We will consider these issues seriatim.
I. De Facto Taking
Under review is the period of time from August 1, 1986 until April 14, 1987, when Appellee's service station designated for formal condemnation, and indeed formally condemned on the latter date, experienced a decline in business allegedly due to pre-condemnation activity and publicity. Generally, the adverse interim consequences caused to a property by the prospect of condemnation will not constitute a defacto taking unless the owner can show "exceptional circumstances" which substantially deprive him of the use and enjoyment of the property and such deprivation is the immediate consequence of the condemnor's power. Conroy-Prugh Glass Co. v. Commonwealth, 456 Pa. 384, 321 A.2d 598 (1974); In Re: Filbert Limited Partnership Appeal, 64 Pa. Commonwealth Ct. 605, 441 A.2d 1345 (1982).
Appellee's evidence in support of his petition was exhaustively summarized by the trial court. The onward march of the Blue Route after twenty-five years of infighting had been extensively publicized by the press. On March 4, 1987, an article appeared in the local newspaper which publicized the impending "demolition" of Appellee's service station. Neighbors and loyal customers could see with their own eyes the trail of condemnations leading up to Appellee's station and a number of them declined to have Appellee fix their cars because they did not know how long Appellee would be in business.
It is to be noted that DOT did not help the situation by repeatedly issuing Appellee notices of imminent condemnation and then postponing the date of formal taking. This left Appellee in limbo as to exactly when the condemnation ax would fall. On September 4, 1986, DOT's relocation advisor visited Appellee's premises and began speaking to Appellee's employees without his knowledge regarding the imminence of condemnation. Afterwards, six out of twelve of Appellee's full time employees quit, including Appellee's station manager. Appellee had difficulty hiring new employees with the prospect of condemnation hanging over his head at some unspecified date. Appellee suffered from not being able to order gasoline or service products on a long term bulk quantity basis because he could not verify how long his service station would be in existence.
Appellee lost two of his five commercial accounts and his gasoline sales and repair business significantly declined after August of 1986. The trial court's decision not to permit DOT to introduce evidence of a decline in gasoline sales of other service stations in the area is within its discretion. Appellee was able to specifically tie the decline in his business to the prospect of imminent condemnation.
DOT did not formally condemn Appellee's property until nine months and three successive postponements after DOT's first ninety day notice of condemnation letter dated August 1, 1986 was sent. The trial court analogized Appellee's plight to a property owner "just waiting for the wrecking ball of societal improvement, at the hands of the Commonwealth, while the recipient of the blow trying to operate a sinking business despite having no idea of the time the wrecking ball will strike." DiFurio v. Department of Transportation (No. 86-11560, filed December 24, 1987), slip. op. at 14.
The trial court's conclusion that the combination of factors in this case constitutes "exceptional circumstances" is supported by substantial evidence. See Department of Transportation v. Lawton, 50 Pa. Commonwealth Ct. 144, 412 A.2d 214 (1980): DOT's argument based on Department of Transportation v. Steppler, 114 Pa. Commonwealth Ct. 300, 542 A.2d 175 (1988) and Gamma Swim Club, Inc. v. Department of Transportation, 95 Pa. Commonwealth Ct. 167, 505 A.2d 342 (1986) that as a matter of law a decline in business revenues is insufficient to constitute a de facto taking as long as the business can cover its expenses is misplaced.
In both Steppler and Gamma Swim Club the petitioners owned the property in question. It is true that a decline in the value of real estate or rental income to the owner of real estate does not by itself constitute a defacto taking as long as the remaining real estate remains usable and has value. Appellee owns no real estate. Appellee is being compensated solely for the taking of a leasehold interest whose only value is the business income it produces. Loss of business income destroys the value of Appellee's leasehold. A substantial loss deprives Appellee of the use and enjoyment of the leasehold. Conroy-Prugh. If DOT's actions "take" a substantial portion of the income, it takes a portion of the leasehold interest. DOT's argument goes to the issue of damages, not to whether a taking has occurred.
II. Termination on Condemnation Clause
Since we affirm the trial court in determining that a defacto taking occurred, we now inquire into whether or not Appellee has waived his right to compensation by the terms of paragraph thirteen of his lease with Exxon which provides as follows:
13. CONDEMNATION. If the entire premises shall be taken by condemnation or sold to the condemning authority under threat thereof, this lease shall terminate on the date of such taking or sale. If a part only of the premises shall so be taken or sold, and the balance of the premises is not suitable for the operation of a retail drive-in automobile service station, either party may terminate this lease at any time within forty-five (45) days following such taking or sale without liability to the other party therefor. Any and all payments made for or arising from any such taking or for damages to the premises resulting therefrom shall belong and be payable solely to Exxon, except as otherwise provided by law. (Emphasis added.)
The trial court held that clauses causing termination of the lessee's interest on condemnation are to be construed strictly against the lessor, Hawk Sales Co., Inc. v. Department of Transportation, 38 Pa. Commonwealth Ct. 535, 394 A.2d 657 (1978), and that the language of the lease assigning payments for a taking of the premises, related only to the actual physical property in question and not to Appellee's intangible leasehold interest.
However, in Scholls Appeal, 292 Pa. 262, 141 A. 44 (1928), the Supreme Court held a similar termination on condemnatioft clause stating that the lease shall terminate as of the date title vested in condemnor barred a subtenant for recovering for the loss of his leasehold interest. Exxon contends this holding has been followed in other jurisdictions and cites Jersey City Redevelopment Agency v. Exxon Corp., 208 N.J. Superior Ct. 53, 504 A.2d 1207 (1986) and Henson v. Department of Transportation, 160 Ga. App. 521, 287 S.E.2d 299 (1982) as persuasive authority. We believe that the key to this case lies in the actions of the parties after the de facto taking occurred.
In Scholl's Appeal, both parties agreed that the lease in question expired on the date of condemnation. Scholl's Appeal, 292 Pa. at 266, 141 A. at 45. This did not happen in the present case. The de facto taking occurred in August OÍT986. After this date Exxon made no attempt to terminate the lease or evict Appellee from its property. Appellee continued to pay rent to Exxon and operate its business right up to the date of the de jure taking on April 14, 1987. In fact, the rental amount was increased in September of 1986 from $1,350.00 per month to $1,890-.00 per month. Exxon continued accepting this rent until it finally terminated Appellee's lease on May 27, 1987, one month after the de jure taking. Exxon thus makes the unique argument that it is entitled to collect both lessee's rent and lessee's damages for taking of its leasehold interest during the period lessee was paying rent.
Whether Exxon can collect such a double recovery depends on the status of Appellee during the period between the de facto taking and the de jure taking. A lease is in the nature of a contract and is controlled by principles of contract law. Pugh v. Holmes, 486 Pa. 272, 405 A.2d 897 (1979). Paragraph thirteen of Appellee's lease provides that the lease terminates on condemnation and we hold that condemnation occurred in August of 1986. Therefore, Appellee's written lease terminated under its own terms in August of 1986. See Vincent v. Redevelopment Authority of Washington County, 87 Pa. Commonwealth Ct. 470, 487 A.2d 1024 (1985). If Appellee remained on the property after this date and continued paying rent to lessor which was accepted, it can only have been as a tenant at will.
A tenancy at will is a leasehold interest which may be created by a tenant remaining on the property after his lease terminates with the consent of his landlord for an uncertain term which may be terminated by either party. In Re Wilsons Estate, 349 Pa. 646, 37 A.2d 709 (1944); Lasher v. Redevelopment Authority of Allegheny County, 211 Pa. Superior Ct. 408, 236 A.2d 831 (1967). This is precisely the situation Appellee was in after his written lease terminated hy operation of law. Appellee remained on the property paying rent to Exxon on a month by month basis while waiting for the condemnation ax to fall at some uncertain future date.
In Hawk Sales Co., Inc. v. Department of Transportation at 38 Pa. Commonwealth Ct. 535, 544, 394 A.2d 657, 662 (1978), we held that as long as the leasehold continued to exist after the condemnation date, lessee is entitled to an apportionment of damages. In the present case, Exxon argues that Appellee's written lease terminated upon de facto condemnation while continuing to accept rent for eight months thereafter. The rent Exxon accepted after termination of the written lease proves Appellee's leasehold continued to exist as a tenancy at will and entitles Appellee to recovery. The order of the trial court is affirmed.
Order
Now, March 17, 1989, the orders of the Court of Common Pleas of Delaware County at No. 86-11560, dated September 29, 1987 and December 18, 1987, are hereby affirmed.