Court Opinion

ID: 9455910
Source: CourtListenerOpinion
Date Created: 2023-08-04 19:36:59.279087+00
Date Added: 2024-06-11T17:34:47.073196
License: Public Domain

ALDRICH, Chief Judge
(dissenting).
I agree that Schiavone must pay for the premises unaffected by the lease, and that if he did not pay full value, he received an illegal rebate. However, I cannot agree that he was “required * * to pay at least $700,000 for the property,” a figure which included the improvements, or with the corresponding concept that he should be considered to have “paid” other than what the railroad received. In my view, his payment was $479,000, and his obligation was to pay the railroad for what he equitably owned, namely, the wramproved premises, plus the accrued rent.
If this were an ordinary lease, at an annual dollar rental of, as the court assumes, a fair amount, the fair purchase price at any moment would be the then market value of the property acquired. The rent already accrued would have been paid; the future rent would not have been earned. Although more complicated to compute, I believe the same principle applies here. Accordingly, I disregard Schiavone’s obligation to furnish a future annual amount of freight, not because its value was not proved, but because it was irrelevant. The sole question revolves around Schiavone’s initial investment of $300,000, which the *237court would call prepaid rent. It was rent, in my opinion, only to the extent that it would increase the value of what was to be received by the lessor. Beyond that it was an expense of the lessee’s business, of which he retained the full benefit when he acquired the ownership of the property, and in which the lessor never had any interest.
Let us assume that the improvements originally increased the market value of the unimproved premises by the full $300,000, but that the structure would depreciate, and the market value correspondingly decrease, at the rate of $10,000 a year. The lessor’s eventual receipt, on this basis, would be a $200,-000 benefit, due in ten years. This amount is the rent. When the lease was terminated after, let us assume, three years, the net increase in market value was $270,000; in my opinion, an irrelevant figure. The accrued rent that the lessor had earned was three-tenths of $200,000, or $60,000. Even that was not due for another seven years, and must be discounted in return for early payment. I would reach the same result whatever the amount the improvements originally added to the market value of the property. The question is, what would they add to its value when the lessor was due to receive it.
In my view, what the railroad here should receive should be the value of the demised, that is to say, the unimproved, premises, plus the accrued rent thereon, to wit, the earned proportion of the railroad’s ultimate additional receipt, appropriately discounted. To the extent that the railroad received less than this, it afforded the shipper-purchaser a rebate. To the extent that the property was salable for more than this, it was because of the improvements in which the railroad had earned no interest. The court’s computation culminating in footnote 4 should be no cause for concern. Because of what the improvements had cost him Schiavone’s resale would not show a profit.