Consolidated Ice Co. v. Pennsylvania Railroad ( 1909 )

Opinion by

Mr. Justice Mestrezat,

By a lease dated April 1, 1891, Mary E. Schenley let to the executors of James Rees, deceased, an irregular shaped lot of ground fronting on Duquesne Way in the city of Pittsburg for the term of twenty years, for the annual rent of $1,250 for the first ten years, and $2,150 for the second ten years. The taxes and assessments on the premises were payable by the lessees, and they had the privilege of removing improvements erected by them at the termination of the lease. The interest of the lessees in the premises subsequently became vested in the Consolidated Ice Company, the plaintiff in this action.

At the date of the lease, there was upon the lot a two-story brick building occupying the whole premises, open in the interior and with a sort of gallery around and skylights above. The building had been used previously as a boiler works. The ice company erected a frame building on the premises, within and disconnected from the surrounding walls of the brick building, and in 1890 installed in the building all the machinery necessary to equip an ice manufacturing plant. It had a rated capacity of 155 tons of ice every twenty-four hours, and the product was disposéd of in the district adjacent to the plant. The Pennsylvania Railroad Company, the defendant, having acquired the fee in the lot, filed its bond which was approved by the court, and on March 11,1905, began condemnation proceedings to acquire the interest of the ice company in the premises. Before entry on the premises, the defendant, on May 24, 1905, notified the ice company to remove its improvements from the premises, but on June 5, 1905, the ice company advised the counsel for the defendant company that it would not remove any of the machinery and fixtures and that the defendant might dispose of the same as it saw fit. The defendant company thereupon, after advertising in the newspapers of the city of Pittsburg and seeking to find a bidder, sold the machinery and fixtures to a contractor for $2,800 for which the defendant is willing to account to the plaintiff.

The trial of the cause in the court below resulted in a verdict and judgment for $117,687 in favor of the plaintiff company, and the defendant has taken this appeal. The assignments of error raise substantially but one question, and that is as to the correctness of the court's rulings on the measure of damages. The learned judge of the court below instructed the jury that the leasehold which was the subject of the condemnation proceedings was the land, the buildings and the fixtures constituting the ice plant, and that the loss sustained by the plaintiff company was the market value of its leasehold interest.

The defendant company alleges that the court erred in its rulings as to the elements of damage represented by the value of the machinery and fixtures in place, and by the removal or wreckage value thereof. The defendant concedes that the measure of damages in case of an ordinary leasehold is the amount that anyone would pay for the unexpired term over and above the rent and other charges; and that where the leasehold is improved with heavy fixtures and machinery, as here, the use value of the fixtures and improvements to the tenant for the balance of the term is also an element to be considered in ascertaining the value of the leasehold. The defendant company denies the right of the plaintiff company to recover the value of the machinery and fixtures in place, and contends that their only element of value was the use the plaintiff company could make of them until the term expired and their removal took place. The defendant further contends that the plaintiff company had abandoned its machinery and fixtures after it had notice and opportunity to remove them, and that the most it was entitled to receive for them was what the defendant company had sold them for.

The plaintiff was entitled to recover in this proceeding' the value of its leasehold interest, including the use of the improvements it placed on the demised premises, for the unexpired six years of the term. Of course, this does not include estimated profits of future trade or business, or other supposed consequential .injury: Pennsylvania Railroad Co. v. Eby, 107 Pa. 166. The plaintiff company was paying as a rental for the premises 12,150 per annum and the taxes on the property, but this rental did not include compensation for the ice plant. As between the lessor and lessee, the leasehold was simply the lot and the structure thereon at the time the premises were let. The rental paid the landlord was compensation for the use of that property. Subsequently to the letting, the lessee constructed its ice plant with the express reservation in the lease of the right, but without the obligation, to remove it at the* expiration of the term. Therefore, in estimating the damages • sustained by the plaintiff company, the jury should consider not only what the leasehold proper was worth over and above the rental and other charges paid by the lessee, but the value of the leasehold as improved by the ice plant. In other words, the loss resulting to the plaintiff company is the difference between the value of the leasehold, as improved by the ice plant, for the unexpired term, and the rental and other charges payable by the lessee. This, as is apparent, would include the use of the fixtures and machinery by the tenant as well as the use of the demised premises for the residue of the term. The value of the leasehold proper for the unexpired term would be what the premises would be worth for any purpose for which they could reasonably be used over and above the rental and other charges payable by the lessee. To this must be added the use value of the machinery and fixtures until the expiration of the lease. These are not substantive elements of damage but are for the consideration of the jury in estimating the plaintiff company's loss by being deprived of the residue of the term. Clearly the plaintiff was not entitled to have considered in ascertaining the value of the leasehold or to recover as an element of damage the value of the machinery in place at the time of the institution of the condemnation proceedings. By the terms of the lease, the plaintiff company had the right, at the expiration of the term, to remove the machinery and fixtures placed on the premises by the lessee. They belonged to the plaintiff and were subject to its control and disposition, and if they had any value and the company so desired, it could have removed them when the lease was determined by the action of the defendant. The filing and approving of the bond did not prevent this. It did not deprive the plaintiff of the ownership of or the right to remove the property, and the defendant company disclaimed any intention to appropriate it and gave notice and an opportunity to the plaintiff to remove it from the Schenley premises. The appropriation by the defendant determined the lease, but it did not take the fixtures and machinery placed upon the demised premises by the lessee. Hence, it was error to allow the jury to consider the valuation placed by the witnesses on the fixtures and machinery in place as an element of value in estimating the loss sustained by the plaintiff by the appropriation of its lease.

The filing of the bond by the railroad company was not, as we have seen, an appropriation of the improvements by the company imposing liability for their market value. The title to the property was still in the plaintiff, and having received notice and an opportunity to remove it, the plaintiff company should have severed and disposed of it. However, as the defendant sold the fixtures and machinery and received the proceeds of the sale, it should account to the plaintiff for their value. It concedes its liability to the extent of the amount received. In determining the value, the jury should consider the fact that the plaintiff had the right to sever and remove the property, and that the cost or expense thereof should not be placed upon the defendant. The failure to exercise the right of removal and disposition of the property by the plaintiff required the defendant to dispose of it, and it is responsible to the plaintiff company only for the amount it received from the sale of the property after having made a proper and bona fide effort to dispose of it to the best advantage. The defendant alleges that it in good faith attempted to realize the best price for the property by advertising and making other efforts to secure purchasers. If the jury should find this to be true, then the amount which it received for the property would be the value of it for which the defendant would have to account to the plaintiff. If, on the other hand, the jury should be convinced by the evidence that the action of the defendant company was not such as to obtain for the property its fair market value, then the jury must find under the evidence what the value of the property was at the time the leased premises were appropriated by the company.

So far as the matters complained of in the assignments of error are in conflict with this opinion, the assignments are sustained, and the judgment is reversed with a venire facias de novo.