Court Opinion

ID: 1079968
Source: CourtListenerOpinion
Date Created: 2013-10-09 20:36:44.166755+00
Date Added: 2024-06-11T15:44:50.937409
License: Public Domain

GEORGE STINSON, ED D. LEWIS, and )
GELSCO OF TENNESSEE, INC.,       )
                                 )          Davidson Circuit
      Plaintiffs/Appellees,      )          No. 94C-4001
                                 )
VS.                              )
                                 )          Appeal No.
138 FIFTH AVENUE SOUTH, INC.,    )          01A01-9702-CV-00060
138 FIFTH AVENUE SOUTH           )
ASSOCIATES, L.P., ALBERT DEL
FAVERO, JR., and METROPOLITAN )
DEVELOPMENT and HOUSING
                                 )

                                 )
                                                          FILED
AUTHORITY,                       )
                                                           January 14, 1998
                                 )
      Defendants/Appellants.     )
                                                         Cecil W. Crowson
                                                        Appellate Court Clerk
                  IN THE COURT OF APPEALS OF TENNESSEE
                       MIDDLE SECTION AT NASHVILLE

           APPEAL FROM CIRCUIT COURT OF DAVIDSON COUNTY
                     AT NASHVILLE, TENNESSEE

                 HONORABLE HAMILTON V. GAYDEN, JUDGE

STEVE NORTH, #3921
1215 Gallatin Pike, South
Madison, TN 37115
ATTORNEY FOR PLAINTIFFS/APPELLEES

Clark H. Tidwell, #2280                     GEORGE B. BARRETT, #2672
LASSITER, TIDWELL & HILDEBRAND              217 Second Avenue North
213 Fifth Avenue, North                     Nashville, TN 37201
Nashville, TN 37219                         For: Defendant/Appellant, MDHA
ATTORNEY FOR DEFENDANTS,
138 Fifth Avenue South, Inc.
138 Fifth Avenue South Associates, L.P.,
Albert Del Favero, Jr.

                        MODIFIED AND REMANDED.

                                  HENRY F. TODD
                                  PRESIDING JUDGE, MIDDLE SECTION

CONCUR IN SEPARATE OPINION:

BEN H. CANTRELL, JUDGE
WILLIAM C. KOCH, JR., JUDGE
GEORGE STINSON, ED D. LEWIS, and )
GELSCO OF TENNESSEE, INC.,       )
                                 )                       Davidson Circuit
      Plaintiffs/Appellees,      )                       No. 94C-4001
                                 )
VS.                              )
                                 )                       Appeal No.
138 FIFTH AVENUE SOUTH, INC.,    )                       01A01-9702-CV-00060
138 FIFTH AVENUE SOUTH           )
ASSOCIATES, L.P., ALBERT DEL     )
FAVERO, JR., and METROPOLITAN )
DEVELOPMENT and HOUSING          )
AUTHORITY,                       )
                                 )
      Defendants/Appellants.     )

                                       OPINION

           The captioned defendants, Metropolitan Development and Housing Authority (hereafter

MDHA, or “the Authority”), has obtained the permission of the Trial Court and this Court for

this interlocutory appeal from rulings of the Trial Court relating to the rights and liabilities of the

parties.

           The Authority is an agency of the Metropolitan Government of Nashville and Davidson

County, Tennessee, with power of eminent domain. The Authority was authorized to exercise

its powers to acquire title to land in the vicinity of the Nashville Arena, including a tract known

as 138 Fifth Avenue South owned by the defendant, 138 Fifth Avenue South, L.P. a limited

partnership of which the defendant, 138 Fifth Avenue South, Inc., was the general partner. At

all material times, the defendant Albert Del Favero, Jr., was the duly authorized agent of the

owners.

           On December 1, 1992, Albert Del Favero, Jr., acting for the owners, leased the subject

property to the plaintiffs, George D. Stinson and Edward D. Lewis, for a period of two years with

options for two successive renewals of five years each. Lessees were obligated to carry out

                                                 -2-
extensive repairs to the improvements on the property. The lease contained the following

provision:

                       17)     If a portion or all of said premises shall be
               taken by any public authority under the power of eminent
               domain, then the term of this lease shall cease on the part so
               taken from the day the possession of that part shall be
               acquired for any public purpose and the rent shall be paid up
               to that day, and the rent thereafter shall be adjusted in
               proportion of the rental value of the premises taken vs. the
               unimproved land (the parking areas). If the parties are unable
               to agree on the reduction, each shall appoint one arbitrator,
               who together shall appoint a third arbitrator, and the decision
               of any two of the said arbitrators shall be final. All damages
               awarded for such taking shall belong to and be the property of
               the Lessor, whether such damages shall be awarded as
               compensation for diminution in value to the leasehold or to
               the fee of the property herein leased; provided, however, that
               the lessor shall not be entitled to any portion of the award
               made to the lessees for loss of business, moving expenses, or
               for any trade fixtures located thereon. (Emphasis supplied)

       On December 28, 1992, the plaintiffs, Stinson and Lewis, assigned their interest in the

lease to the plaintiff Gelsco, Inc.. The lessees and their assignee are hereafter designated

collectively as the plaintiffs. Said sublease contained the following provision:

                       33.     If a portion or all of said premises shall be
               taken by any public authority under the power of eminent
               domain, then the term of this Lease shall cease on the part so
               taken from the day the possession of that part shall be
               acquired for any public purpose and the rent shall be paid up
               to that day, and the rent thereafter shall be adjusted in
               proportion of the rental value of the premises taken versus the
               rental of the remaining premises.

       On May 9, 1994, Albert Del Favero, acting for the owners/lessors, executed a deed to the

Authority conveying the subject property with the usual covenants and warranties.

       On May 9, 1994, plaintiffs filed the present suit against all of the captioned defendants

stating the following claims:

       18.     Damages for breach of the lease.

       19.     Interpretation of Paragraph 17 of the December 1, 1992 lease.

                                              -3-
       21.     Reformation of the same lease.

       22.     Damages for unjust enrichment.

       23.     Compensation under T.C.A. § 2529-16-123 the Inverse Compensation Law.

       24.     Compensation under the theory of constructive trust.

       In response to a motion to enjoin the lessors from disposing of their assets, the lessors

filed the affidavit of Bob Howard, agent of the Authority, which read in part as follows:

                        MDHA has the power of eminent domain and if the
               landowner had refused to sell, the property would have been
               condemned. This was a total as opposed to a partial taking.
               The $1,250,000 represents payment for the fee simple interest
               in the property. The identity of the landowner is determined
               by a title search.
                                            ----
                        The $1,250,000 which MDHA paid to Fifth Avenue
               Associates was for the land and improvements. It did not
               include compensation for loss of business, moving expenses,
               or personal property used in the operation of the business of
               the tenant. MDHA does not pay for loss of business. MDHA
               will pay the tenant in possession for moving personal property
               used in the operation of the tenant’s business.

       One of the defendants, Albert Del Favero, Jr., filed an affidavit containing the following

excerpts:

                        We entered into the Lease and Agreement with
               George W. Stinson and Ed D. Lewis in December of 1992.
               We required the tenants to spend a total of $150,000 in
               improvements and repairs and because of this we agreed to
               lower fixed monthly rental payments as opposed to a
               percentage lease. At the same time we agreed to correct
               existing environmental problems at the expense of the lessor.
               We are not able to recover this expenditure except to the
               extent our cleanup efforts affected the city’s offer to acquire
               the property.
                                             ----
                        After the city contacted us about taking our property,
               our attorney and I met with the lessees and their attorney in an
               effort to reach a compromise after they threatened to prevent
               us from being paid for our property by the city. It is my
               understanding that if the city filed a condemnation petition
               against us, the city would deposit what it thought the property
               was worth with the clerk, and the lessees’ attorney assured us
               that he could keep our money tied up a long time in court.
                                             ----
                        In fact, we had several face to face meetings with one
               or more of the lessees and their attorneys. We were being

                                             -4-
       asked to disregard Paragraph 17 of the Lease and Agreement
       and divide the condemnation award with the lessees so that
       they could get their money back. We were accused of being
       greedy because Paragraph 17 favored the lessors over the
       lessees. We had no idea what the city was going to pay us
       and we left the negotiating table.
                                    ----
               The city offered and we accepted $1,250,000 for our
       land and improvements based upon two MAI appraisals. We
       notified our attorney and he so informed lessees’ counsel.
       Thereafter this lawsuit was filed.
                                    ----
               We have not received payment from the city for loss
       of business profits, moving expenses, or compensation for
       trade fixtures, but only for our fee simple title.

One of the plaintiffs filed an affidavit containing the following excerpts:

               2.     Throughout all of the negotiations for the lease
       of this property, eminent domain was never mentioned, nor
       was there ever any suggestion on the part of Lessors or their
       agents of the possibility that the property would be taken by
       eminent domain. In the negotiation of the terms and
       conditions of the lease eminent domain was never discussed
       or mentioned. The lease was drafted by agents of the Lessors
       and neither before, during or after the execution of the lease
       was any mention made of the provisions regarding eminent
       domain.

               3.     After the execution of the Lease, my partner
       and I have complied in full and in a timely manner with every
       condition and term of the lease. The lease required that we
       spend One Hundred Fifty Thousand Dollars ($150,000.00) in
       improvements on the building within the first ten months of
       the lease. In fact, we spent Seven Hundred Fifty Thousand
       Dollars ($750,000.00) in improvements.

                7.     After it was learned that the City intended to
       acquire the property for the Nashville Arena Project, the
       appraisers for the City asked to inspect the property. On
       February 15, 1994, my attorney and I met with Albert Del
       Favero, Jr. and his attorney, Clark Tidwell along with the
       appraisers from the City at the subject property.
                                     ----
                The appraisers asked for construction plans and a list
       of all of the improvements that had been made and indicated
       that the City intended to employ a general contractor to give
       them an estimate on replacement costs. Prior to divulging any
       of that information, a private meeting involving myself and
       my attorney and Mr. Del Favero and his attorney was held.
       At that meeting it was pointed out that the cooperation of the
       Lessees could greatly enhance the appraisals of the property
       but that there was no reason for the Lessees to cooperate if the
       landlord was going to take the position that the Lessees were
       not entitled to share in the award.

                                     -5-
                                           ----
              Although no final agreement was reached as to the actual
              apportionment, Lessees proceeded to furnish to the appraisers
              and the City a complete set of construction plans, photographs
              of the property and a complete list of the improvements that
              were made.

                     8.      In addition, copies of the lease and sub-lease
              as well as details of a sub-lease on the parking lot were
              furnished to the appraisers and the City.

       On June 13, 1994, the Authority notified plaintiffs to vacate the premises within 90 days.

       Plaintiffs amended to sue the Authority in inverse condemnation.

       On November 30, 1994, the case was transferred from the Chancery Court to the Circuit

Court which had jurisdiction of inverse condemnation cases.

       On October 7, 1996, the parties filed the following Stipulation:

                     As evidenced by signature of counsel for Plaintiffs and
              counsel for MDHA it is stipulated as follows:

                      1.      Attached hereto are the following documents:

                              (1)   a claim for moving expenses in the
                              amount of $767,033.00 by Plaintiffs and an
                              approval by MDHA of $57,137.37.

                              (2) An agreement between Plaintiffs and
                              MDHA which is self-explanatory.

                      2.      It is stipulated that MDHA has paid a total of
              $57,137.37 to Plaintiffs without prejudice to Plaintiffs’ claim
              that it is entitled to more than that amount for moving
              expenses and without prejudice to any of the other claims
              made in this lawsuit.

                                                (Signature)
                                              Steve North #3921
                                              Attorney for Plaintiffs
                                              1215 Gallatin Pike, South
                                              Madison, TN 37115
                                              (615) 860-7644

                                                (Signature)
                                              George E. Barrett

                                    -6-
                                     Attorney for MDHA
                                     217 Second Avenue, North
                                     Nashville, TN 37201

On November 18, 1996, the Circuit Judge filed the following memorandum:

               This case is before the Court upon motions to dismiss
       filed by both defendants, 138 Fifth Avenue South, Inc. et.al.
       (hereinafter Fifth Avenue), and Metropolitan Development
       Housing Authority (hereinafter MDA). The Court will treat
       both motions as Rule 56 motions for summary judgment as
       there are matters considered by the Court beyond the
       pleadings.

       FACTS

               Plaintiffs, Stinson and Lewis, entered into a 12-year
       lease with defendant Fifth Avenue on December 1, 1992, for
       the lease of the property subject to this lawsuit. Stinson and
       Lewis subsequently assigned the lease to a corporate
       sublessee, Gelsco; however, Stinson and Lewis are the
       principals in the corporate sublessee and plaintiffs are thus
       collectively referred to as plaintiffs. The lessor was also an
       assignee of the defendant Del Favero and will be identified
       as one entity, Fifth Avenue.

               The lease and the subsequent sublease contained the
       same language relative to the value and disposition of the
       leasehold interest in the event of condemnation. Identical
       language in each document provided that the portion of the
       funds representing the value of the leasehold interest would
       go to the lessors/fee owners in the event of condemnation.

               On April 21, 1994, the MDHA purchased the subject
       property in its entirety by warranty deed from the lessor/fee
       owner, Fifth Avenue. No condemnation suit filed. The
       purchase price for the property, $1.25 million, was based on
       the value of the fee and the improvements. See affidavit of
       Robert Howard, MDHA.

               None of the $1.25 million paid to the lessors/fee
       owners for the fee and improvements represented the value
       of the leasehold interest of the lessees, Stinson and Lewis.
       Thus nothing was paid by MDHA to the lessor/fee owners
       that purported to represent an evaluation of the value of the
       leasehold interest. See affidavit of Robert Howard, MDHA.

               Later, the plaintiffs accepted the approximate sum of
       $55,000 for moving expenses, reserving the right to
       additional compensation for moving expenses, if any.

               The plaintiffs filed an inverse condemnation against
       MDA claiming a right to compensation for their leasehold
       interest, reformation of the lease (and sublease), equitable

                                    -7-
estoppel, loss of profits, value of nonremovable trade
fixtures and additional incidental expenses for moving.

        This lawsuit was filed in Chancery Court and
transferred to the Circuit Court by Chancellor Robert Brandt.
Chancellor Brandt ruled that paragraph 17 of the lease and
sublease that apparently gives to the lessors/fee owners the
entire funds representing the value of the leasehold interest
in the event of condemnation is ambiguous.

RULING

       The Court grants the motion of the Fifth Avenue for
summary judgment and denies the motion of MDHA in part,
but grants the motion for summary judgment by MDHA in
other particulars.

DEFENDANT MDHA

        The court denies the motion of MDHA for a
summary judgment as to plaintiffs’ right to be justly
compensated for a property right, specifically the value of the
plaintiffs’ leasehold interest and fair moving expenses, if
any. Otherwise, the physical taking would amount to a
taking without the exercise of an original eminent domain
proceeding, and the concomitant denial for plaintiffs’
constitutional right not to have their property taken without
just compensation. State v. Gee, 565 S.W.2d 498 (Tenn.
App. 1977); Shelby County v. Barden,527.

        The court grants the motion for a summary judgment
in all of the other legal and factual issues: Reformation,
estoppel (except as stated in narrow exception herein), the
loss of business profits, unjust enrichment and the value of
nonmovable trade fixtures.

        Implicit in this ruling is the Court’s conclusion that
the sale of the property by the lessor to MDHA was not an
exercise of an eminent domain and therefore paragraph 17 of
the lease (and sublease) is not relevant. And the lease is
silent as to the division of the proceeds in the event of a sale
as opposed to an eminent domain proceeding. See State v.
Gee. In addition, even if the sale of the property by the
landowners to MDHA was a proper exercise of eminent
domain, the sale evaluation did not include the value of the
leasehold interest, which is different from the value of the
improvements. See Metropolitan Government of Nashville
and Davidson County, Tenn. v. Schatten-Cypress Co., 530
S.W.2d 277 (1975).

         The Court, however, grants the motion of MDHA as
to the issue of loss of business profits, value of fixtures and
the value of improvements, if any, except to the extent loss
of business profits, value of fixtures and/or the value of
improvements are to be considered in a recognized
evaluation method of the value of the leasehold interest that

                              -8-
        was destroyed. Accord: Lamar Advertising of Tenn. v. City
        of Knoxville, 1995 Tenn. App. Lexis (Ct. App. 1995); Lamar
        Advertising of Tenn. v. Metropolitan MDHA, 803 S.W.2nd
        686 (1993); Metropolitan Government of Nashville and
        Davidson County, Tenn. v. Schatten-Cypress Co., supra.

                Also, the Court overrules the motion to dismiss the
        amended complaint on the grounds of lack of standing of the
        plaintiffs and nonpayment of state taxes.

        DEFENDANT FIFTH AVENUE

                 The Court grants the motion as to Fifth Avenue in
        totality.

                None of the funds received by the defendant Fifth
        Avenue represented an evaluation for the leasehold interest.
        The affidavit of Ben Howard, MDA, in reference to the
        interest purchased by MDA from Fifth Avenue, et.al., reads
        as follows, “The $1.25 million which MDA paid to Fifth
        Avenue Associates was for land and improvements...” Thus,
        MDA did not purchase the leasehold interest from the lessor,
        or lessee; nor was the leasehold interest evaluated for the
        purpose of determining the purchase price. Therefore, the
        ambiguity, if any, surrounding Paragraph 17 of the lease is
        not relevant for two reasons: (1) There was no
        condemnation; (2) There was no evaluation of the leasehold
        interest in arriving at the final purchase price for the land and
        improvements.

The judgment of the Trial Court concludes as follows:

              1.      That the Motion to Dismiss or for Summary
       Judgment of Fifth Avenue is granted and that the case be and
       hereby is dismissed as to Defendants Fifth Avenue.

               2.      That the Motion of MDHA to dismiss the
       Amended Complaint on the grounds of lack of standing of the
       Plaintiffs and non-payment of state taxes is overruled.

               3.     The Motion of MDHA for Summary Judgment
       or to dismiss the cause of action for taking the property and
       property rights of Plaintiffs and for the fair market value of
       the Plaintiffs’ leasehold interest and reasonable moving
       expenses is denied.

               4.      The Motions of MDHA with regard to loss of
       business profits, value of fixtures and the value of
       improvements is granted except to the extent that loss of
       business profits, value of fixtures and improvements are to be
       considered in a recognized evaluation method of the value of
       the leasehold interest that was taken.

                                        -9-
       The Trial Court overruled the motion of the Authority to alter or amend, but ruled:

                        The Court is of the opinion that a determination of the
               following issues by interlocutory appeal prior to trial would
               prevent needless, expensive and duplicative litigation; and the
               Court finds pursuant to Rule 9 of the Rules of Appellate
               Procedure that the following issues should be resolved by
               interlocutory appeal before this case proceeds further, and
               they are: (1) whether the sale under threat of eminent domain
               constitutes a “taking under the power of eminent domain”; (2)
               whether the “condemnation clause” in the lease between Fifth
               Avenue and Plaintiffs is enforceable and, when property
               interpreted, amounts to a termination of the Plaintiffs’
               leasehold interest by an evaluation of the improvements to the
               fee as distinguished from an evaluation of the leasehold
               interest; and (3) whether Fifth Avenue should remain a party
               in order to indemnify MDHA on the basis of the agreement
               between MDHA and Fifth Avenue, since Fifth Avenue may
               suffer irreparable harm by being bound by the results of a trial
               without having had the opportunity to participate.

                       For all of these reasons, the Court overrules MDHA’s
               Motion to Alter or Amend, but grants to MDHA an
               interlocutory appeal.

       This Court approved the interlocutory appeal on the questions stated in the last quoted

order of the Trial Court.

       The Authority has presented to this Court the following issues for review:

                       I.     Is there a genuine issue of material fact relating
               to the construction, validity, enforceability, applicability, or
               conscionability of the so-called “condemnation clause”
               involved in the lease in this case?

                        II.    Did MDHA take from the plaintiffs an interest
               in real estate without due process or just compensation?

                       III.   Did the Trial Court err in dismissing the
               lessors and limiting the issue at trial to the value of the
               leasehold interest and moving expenses?

       The Authority first relies upon an interlocutory ruling in Chancery Court prior to the

transfer of the case to Circuit Court. Under the procedure above narrated, the ruling of the

Chancery Court was superseded by the subsequent ruling of the Circuit Court, and it is the last

ruling of the Circuit Court which is before this Court for review.

                                               -10-
       Paragraph 17, of the lease, quoted above, provided:

                       If a portion or all of said premises shall be taken by
               any public authority under the power of eminent domain - -
               the term of the lease shall expire - - -. All damages for said
               taking shall belong to and be the property of the lessor, - - -
               however, - - - the lessor shall not be entitled to any portion of
               the award made to the lessee for loss of business, moving
               expenses, or for any trade fixtures located thereon.

       Interpretation of a written argument is not a matter of fact, but a matter of law for

decision by the Court, as to which appellate review is de novo without a presumption of

correctness, and the instrument must be interpreted and enforced as written according to its plain

terms. Rainey v. Stansel, Tenn. App. 1992, 836 S.W.2d 117; Park Place Center Enterprises,

Inc., v. Park Place Mall Associates, Tenn. 1992, 836 S.W.2d 113; Estate of Haynes v. Braden,

Tenn. 1992, 835 S.W.2d 19.

       This Court has determined as a matter of law that the quoted words of the contract “shall

be taken by any public authority under the power of eminent domain” means “taken by any

public authority by the exercise of the power of eminent domain in the manner provided by law”

and said words do not mean by the threat of the exercise of such power.

       The power of eminent domain and the power of condemnation are synonymous. State

v. Harr, 24 Tenn. App. 298, 143 S.W.2d 893 (1940).

       T.C.A. Title 29, Chapter 17, Part 4, provides for the exercise of the power of eminent

domain by housing authorities. § 29-17-401 provides for procedure of taking, beginning with

the filing with the clerk of the appropriate court, a petition and a formal “declaration of taking”

including:

       1.      An adequate description of the property to be taken.

       2.      The estate or interest in said property being taken, and

       3.      A statement of the estimated amount of just compensation for the taking.

                                               -11-
       Nothing is found in the present record to indicate that any part of the above required

procedure has taken place.

       Section 29-17-403 provides that, upon deposit of the estimated just compensation with

the court, title shall vest in the Authority which shall be entitled to an order of possession.

Section 29-17-404 provides that the owner may withdraw the deposit of estimated just

compensation from the clerk of the court and litigate the amount of just amount of compensation

in excess of the amount deposited. Nothing is found in the record to indicate that this procedure

occurred.

       On the contrary, the record shows without dispute that, by threat of condemnation the

Authority induced the defendant, Del Favero to execute a deed to the Authority conveying the

land with the usual covenants and warranties of title and right to convey. This was not the

exercise of the power of eminent domain in the manner provided by law. This record indicates

that actual possession was obtained by the Authority from the lessees by the issuance of a writ

of detainer from the Court of General Sessions, and not in the Circuit Court which has

jurisdiction of eminent domain proceedings.

       The Authority cites Scott v. McReynolds, 36 Tenn. App. 289, 255 S.W.2d 401 (1952)

which was a dissolution of a partnership and not a lease/eminent domain case. It is clearly

distinguishable upon the facts and applicable law.

       The Authority cites Dobbs v. Guenther, Tenn. App. 270, 846 S.W.2d 270, which was a

complaint for fraud and declaration of rights, and is distinguishable on the facts and law.

       The Authority argues that plaintiff’s alternate claim of inverse condemnation is an

admission that a condemnation took place. Alternative pleading may not be used as an

admission. Worley v. Weigals, Inc., Tenn. 1996, 919 S.W.2d 589.

                                              -12-
       T.C.A. § 29-16-123 reads as follows:

                       Action initiated by owner - (a) If, however, such
               person or company has actually taken possession of such land,
               occupying it for the purposes of internal improvement, the
               owner of such land may petition for a jury of inquest, in
               which case the same proceedings may be had, as near as may
               be, as hereinbefore provided; or he may sue for damages in
               the ordinary way, in which case the jury shall lay off the land
               by metes and bounds and assess the damages, as upon the trial
               of an appeal from the return of a jury of inquest.

       The evidence in this record shows that plaintiffs were dispossessed by the Authority’s

general sessions possessory action, thereby satisfying the requirement of Haase v. City of

Memphis, 149 Tenn. 235, 239 S.W. 545 (1923).

       Under the facts of this case, the rights of the dispossessed owner of an interest in the land

are alternative. Johnson v. Roane County, 212 Tenn. 433, 370 S.W.2d 496 (1963); East Tenn.

and WNCRR v. Gouge, 30 Tenn. App. 40, 203 S.W.2d 170 (1947).

       The foregoing supports the right of the plaintiffs to recover under the theory of inverse

condemnation. Nevertheless, defendants/lessors insist that lessors execution of the deed to the

Authority under threat of condemnation must be considered a “taking.” The Authority argues

that, if the lessors argument is correct, then the amount paid to the lessors for the deed must be

divided between the lessors and the lessee in accordance with State ex rel Commissioner of

Transportation v. Teasley, Tenn. App. 1995, 913 S.W.2d 175. The cited authority involved a

billboard lease, and the decision was controlled by 42 USC § 4652, the Uniform Relocation Act

of 1972, T.C.A. § 13-11-101, and by the determination by the Trial Court of the credibility of

witnesses.

       In State ex rel Department of Transportation v. Gee, Tenn. App. 1977, 565 S.W.2d 498,

the lease provided that, if less than 25 feet was condemned, the rent would not be reduced, but

lessors and lessees would share in the award; and that, if more than 25 feet were taken the rent

would be reduced by agreement. It appears that there was no provision for sharing the award if

                                               -13-
the taking was more than 25 feet. Only six feet were taken, so there was no reduction of rent but

there was a sharing of the award. This Court held:

                       In the absence of any express provision by the parties,
               Tennessee law requires an apportionment of the award
               according to the value of the respective interests of lessor and
               lessee in the property taken. See Shelby County v. Barden,
               527 S.W.2d 124 (Tenn. 1975); Mason v. City of Nashville,
               155 Tenn. 256, 291 S.W. 1074 (1927).
                                             ----
                       In Tennessee, condemned land is to be valued as one
               estate and a fair market value fixed for the taken property as
               a whole before apportionment of that amount is made among
               the various interests in the property. Moulton v. George, 208
Tenn. 586, 348 S.W.2d 129 (1961); State v. Texaco, Inc., 49
Tenn. App. 278, 354 S.W.2d 792 (1961). Apportionment
               between lessor and lessee is accomplished by determining the
               value of the latter’s interest in the taken property, which in
               turn is calculated by determining the fair rental value of that
               property for the unexpired term of the lease and subtracting
               the rent that would actually have been paid for it by the lessee
               during that term.
                                             ----
               In other words, the total fair market value of the taken
               property is apportioned by first determining the lessee’s
               interest, which is the fair market value of the leasehold on that
               property minus rent actually called for under the lease, with
               the remainder of the property’s fair market value going to the
               lessor. Incidental damages to each interest are also allowed,
               but are not an issue in the instant case.
                                             ----
                       On remand, the trial court should retry only the issue
               of exactly how the award is to be apportioned between the
               Gees and Madison, both of whom are entitled to share in it
               according to their interests.

       Regardless of whether a “taking” occurred, plaintiffs are entitled to fair compensation for

their losses as a result of the events narrated above.

       Nevertheless, the Authority argues that no consideration should be given to the sums

spent by the lessees in the improvement of the property, because said improvements became

“fixtures”, i.e., a part of the land. Under the facts of the present case, this Court cannot agree.

Even though the improvements were affixed to the realty, they were installed for use during a

long term lease, and the value of the lease to the lessees was thereby enhanced. Thus, under

State v. Gee, supra, the lessees interest in the property will be ascertained by fixing the value of

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the occupancy of the improved premises for the term of the lease and deducting therefrom the

agreed rental.

       The Authority insists that, if it is to be burdened with payment to the lessees of the value

of their leasehold, it (the Authority) is entitled to claim indemnity or contribution from the

lessors pursuant to the warranty and covenants of the deed. This Court agrees with this

insistence. TRCP Rule 19.01, Citizens R. Est. & Loan Co., Inc. v. Mtn. States Div. Corp., Tenn.

App. 1981, 633 S.W.2d 763.

       The final clause of Paragraph 17 of the lease is:

                        [T]he lessor shall not be entitled to any portion of the
                 award made to the lessees for loss of business, moving
                 expenses or for any trade fixture located thereon.

       Only those chattels are fixtures which are so attached to the freehold that, from the

intention of the parties and the uses to which they are to be put, are presumed to be permanently

annexed, or removal of which would cause serious harm to the freehold. Harry J. Welchel Co.

v. King, Tenn. 1980, 610 S.W.2d 710.

       The uncontroverted evidence in this record shows that both parties, lessors and lessees

made substantial improvements to the freehold as agreed in the lease. It is clear from the lease

that, in event of taking by eminent domain, the lessees would not be deprived of the value of

occupancy for the remainder of the lease minus the rental due under the lease for the remainder

of its term. This interpretation of the intent of the parties preserves the right of the lessors to

realize upon the enhancement of the value of the property resulting from the improvements

performed by them and the residual value of the improvements made by lessees at the end of the

term of the lease.

       The lessees have filed the following issues for review:

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       I.      Is there a genuine issue of material fact relating to the
       construction, validity, enforceability, applicability, or conscionability
       of the so-called “condemnation clause” involved in the lease in this
       case?

       II.    Did MDHA take from the plaintiffs an interest in real estate
       without due process or just compensation?

       III.    Did the Trial Court err in dismissing the lessors and limiting
       the issue at trial to the value of the leasehold interest and moving
       expenses?

       The issues just stated have been discussed and decided, or are rendered moot by the

preceding portions of this opinion.

       The judgment of the Trial Court is modified to find that plaintiffs are entitled to recover

from the Authority the fair value of their leasehold interest to be determined in a further

evidentiary hearing in accordance with the pronouncements of State ex rel v. Gee, Tenn. App.

1977, 565 S.W.2d 498, and to permit the Authority to implead the lessors to enforce its rights

against them under their deed. Any judgment in favor of the lessees should include prejudgment

interest from the date of their eviction. Any judgment in favor of the Authority should include

prejudgment interest from the date of the payment to lessors of the consideration for their deed.

Costs of this appeal are taxed against the lessors. The cause is remanded to the Trial Court for

further proceedings in conformity with this opinion.

                           MODIFIED AND REMANDED.

                                               HENRY F. TODD
                                               PRESIDING JUDGE, MIDDLE SECTION

CONCUR IN SEPARATE OPINION:

BEN H. CANTRELL, JUDGE
WILLIAM C. KOCH, JR., JUDGE

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