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This same author speaks of fixtures in the following manner:
Thus the term "fixture" has broad inclusiveness. It is always used as an object which began as a chattel; that is, as “personalty.” Thus, the term "fixture” connotes erstwhile chattels, the benefits of which is disputed between two or more persons, one or more of whom have interests in the land
on which the chattel is located (sec. 651, pp. 51-52). And it has been said:
* * * While there are differences of opinion as to the precise
dence Fixtures, sec. 2, pp. 713, 714). As a general rule, irremovable fixtures and structures attached to the soil are taken when the fee title is taken, and their value must be considered in determining just compensation (United States v. Seagren, 50 F. 2d 333 (C.A. D.C., 1931)); (United States v. City of New York, 165 F. 2d 526 (C.A. 2, 1948)); (II Nichols, Eminent Domain (3d ed. 1950), sec. 5.81(1), et seq.).
Considerable difficulty has been encountered in recent years concerning the extent to which State law is controlling in the determination of what constitutes property or “real estate” in a Federal condemnation proceeding. The Supreme Court has said:
* * * Though the meaning of "property” as used in subsection 25 of the act (TVA Act) and in the fifth amendment is a Federal question, it will normally obtain its content by reference to local law (United States ex rel. TVA v.
Powelson, 319 U.S. 266, 279 (1943)). In State of Nebraska v. United States (164 F. 2d 866, 867 (C.A. 8, 1917)), the United States condemned State school lands held in trust by the
tate for its common school system which were subject to longterm leases. The State sought to have the Nebraska rule relating to the condemnation of such lands applied, which provided that when title to such lands were condemned the condemnor must pay the State the full fee value of the property and that the property rights of the lessee must be evaluated separately and paid for by the condemnor beyond the value of the fee. In rejecting the State's claim the Court said (p. 867):
But these considerations and concepts are not controlling in this proceeding. What constitutes property and what is just compensation for it in a condemnation by the United States are not questions of State law but of Federal law. (United States v. Miller, 317 U.S. 369, 379, 380, 63 S. Ct. 276, 283, 87 L. Ed. 336, 147 A.L.R. 55.) Of course, the term "property" in such a situation normally will be given the same content as in State law. (United States v. Powelson, 319 U.S. 266, 279, 63 S. Ct. 1047, 1054, 87 L. Ed. 1390; and also cf.
United States v. Petty Motor Co., 327 U.S. 327, 380, 381, 66 S. Ct. 596, 601, 90 L. Ed. 729.) This does not mean, however, that every local idiosyncrasy or artificiality in a State's concepts, or the incidents thereof, necessarily will be accepted. Thus, the United States could hardly be expected to recognize for condemnation purposes any such local artificiality in property concept as that a leasehold is not in any sense à dilution of fee rights but in point of law and regardless of fact adds
body and value to the property. The application of State law to the improvement and fixture problem, particularly with respect to such articles as trade fixtures, is a highly contested point today in Federal eminent domain law. The Government's position in the recent case of United States v. Certain Property, Etc. (306 F. 2d 439 (C.A. 2, 1962)) was that when land is condemned in fee by the United States trade fixtures which can be removed without substantial injury thereto or to the real estate remain personalty and are not appropriated, and the determination of what is taken in Federal condemnation proceedings and the ascertainment of compensation therefor are governed by principles of Federal lawnot State law. The case involved a taking of fee title to property by the General Services Administration, which has not been authorized to pay moving costs. The taking affected numerous leasehold interests and improvements and fixtures of many types. The second circuit speaking through Judge Friendly rejected the Government's contention that Federal law was applicable.
We see no basis for doubting that Congress meant that a Federal court, in determining what such a taking embraced, should look to the law of the State where the property is located. Although the Government urges us to look to "Federal law” to determine what the taking included, it does not tell us where to find this—no corpus of Federal law on this subject exists and 1962 seems rather late to start developing one, especially for so limited a function. Even the celebrated opinion, now rejected, upholding the power of Federal courts to disregard State decisional law in certain areas, recognized that State law should be looked to as regards "rights and titles to things having a permanent locality, such as the rights and titles to real estate, and other matters immovable and intraterritorial in their nature (Swift v. Tyson, 16 Pet. 1, 18, 41 U.S. 1, 18, 10 L. Ed. 865 (1842)). Although the principle announced in Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), would not deprive Congress of constitutional power to create a separate "Federal law” as to what constitutes real property for Federal condemnation, see Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S. Ct. 573, 87 L. Ed. 838 (1943).
None of this gainsays that, subject to the overriding require-
purposes, or that such a body of law could define real prop-
445). Since the trial court denied compensation for many items belonging to a tenant which New York considers realty when a lease is ended, the case was remanded to determine which items are fixtures that are “distinctly realty” (p. 451). Among other things Judge Friendly said:
** * the machinery and related installations possessed a
* * * *
* Some fixtures, even though annexed by the tenant are "distinctively realty" and therefore become the property of the landlord; others which are removable without material injury to the freehold remain the property of the tenant even though they are classified as “realty” because they are severely damaged or lose substantially all their value on severance (p. 450).
*** Asphalt cemented to the floor by the tenant belongs to the owner. But "sectional movable and interchangeable partitions," specially adapted to the building but removable without injury to it are "realty" belonging to the tenant * * *
(p. 450). Also, the trial court was admonished to value the fixtures "at their sound values as used equipment in place. Estimates of reproduction cost less depreciation are admissible but not conclusive.” The court also said:
*** The court should not be concerned that valuation on this basis may produce a figure larger than what might be paid for the building, with all fixtures in place, by a single purchaser who might not be interested in many of them; each owner, landlord, or tenant, is entitled to the value of
what the Government took from him (p. 453). The "sound value” approach to value is in conflict with decisions in two other circuits for ascertaining just compensation for leasehold interests United States v. 1.357 Acres of Land, 308 F. 2d 200 (C.A. 7, 1962); United States v. 425,031 Square Feet of Land, 187 F. 2d 798 (C.A. 3, 1951)).
In the latter case it was pointed out that, when only a leasehold is taken, the measure of compensation is solely "the value of the use and occupany.” With respect to a claim comparable to the New York case, the court said:
Appellants contend that the value of their trade fixtures and equipment, which could not be removed from the building, are compensable not as a part of, but in addition to the
value of the right of occupancy, and that the district judge
sound value of the fixtures. In this ruling, we see no error. The New York Certain Property, Etc. case is again on appeal by the Government to the second circuit, with two of the main points being (1) that the "sound value” of a lessee's trade fixtures cannot be awarded separately and in addition to the award for the market value of the entire fee simple estate, including the buildings and appurtenances; and (2) that Federal and not State law governs the determination of whether trade fixtures of tenants are taken, and whether they should be valued separately from the building in which they are located, in a Federal condemnation proceeding to condemn fee title to real property.
The foregoing discussion makes it quite clear that there is presently no uniform rule in Federal condemnation law as to whether certain types of improvements and fixtures constitute realty or personality when the Government acquires only “real estate.” The constant presence of the possible application of State law means that until the Supreme Court speaks or Congress provides appropriate legislation, this problem will be handled on a case-by-case basis in a variety of ways.
K. ACQUISITION BY FORMAL CONDEMNATION PROCEEDINGS ACCOMPANIED
BY INVERSE CONDEMNATION OF OTHER INTERESTS
The power of administrative and executive agencies to determine what lands and what interests in real property should be acquired may work unintended and harsh consequences in several other situations.
For example, where the Government condemns only the right to clear obstructions near an airfield, while at the same time the flight of aircraft to and from the airfield constitutes the taking of an avigation easement, the property owner cannot obtain compensation for the taking of the avigation easement in the condemnation proceeding, but he must bring a separate action under the Tucker Act. This means additional expense for the owner and possibly undue delay in the payment of compensation for the taking.
*** But in a condemnation proceeding courts cannot compel the United States to take and pay for an estate not described in the declaration of taking (United States v.
Brondum, 272 F.2d 642, 647-646 (C.A.5, 1959)). In this connection see also: (United States v. 9 Acres of Land, 100 F. Supp. 378 (E.D. La. 1951) affirmed sub nom.; Oyster Shell Products Corp. v. United States, 197 F. 2d 1022 (C.A. 5, 1952) certiorari denied, 344 U.S. 885; United States v. Merchants Matrix Cut Syndicate, 219 F.2d 90 (C.A. 7, 1955)).
The cases cited in the previous paragraph are authority for the proposition that where the Government in a flood control project condemns property less than is actually needed, and subsequently waters invade other portions of an owner's land, he cannot come into the condemnation action to obtain compensation for the taking of the land not described in the condemnation proceeding but must bring a separate action under the Tucker Act.
L. THE MAYME RILEY PROBLEM
There has been a great deal of public discussion of the Mayme Riley court decision and much concern for the hardship to the property owner in that case.
The property involved was acquired for a renewal project in the District of Columbia. Mrs. Riley had purchased the property in 1951 for approximately $9,950, with $300 being given as a downpayment and three notes for the balance secured by a first trust of $2,946.58, a second trust of $3,906.18, and a third trust of $2,799.24, with monthly payments of principal and interest at $72. Mrs. Riley invested an additional $887 in improvements to the property, making her total cost about $10,800. When the property was acquired by the Government in June 1954 she owed $8,902. A jury awarded $7,000 as compensation in March 1955, or some $3,800 less than the price of the property in 1951, plus improvements. The third trust holder sued and obtained a deficiency judgment against Mrs. Riley for approximately $1,900.
Several years later, apparently in an effort to eliminate further litigation, the amount of compensation was increased by $850, pursuant to a stipulation between the United States, Mrs. Riley, and the third trust holder, with the latter agreeing to release his claim under the deficiency judgment (Riley v. District of Columbia Redevelop. Land Agency, 246 F. 2d 641 (C.A.D.C. 1957)).
The case demonstrates that, under present law, the owner of such property may actually receive no money payment; he may lose his investment and all benefits from his effort to accumulate an equity in the property; and he may even be left with a large debt. On the other hand, certain noteholders may benefit appreciably from the condemnation, and in some instances obtain a windfall.. The Government's acquisition of the real property may permit some to receive immediate payments exceeding the fair market value of their notes, out of the proceeds of a condemnation award, and to obtain deficiency judgments, in separate proceedings, for any unpaid balance on the notes. But for the Government's acquisition, many noteholders would have been subjected to the usual risks of a speculative investment, and possibly could look forward to monthly payments in installments of $10 per $1,000 of debt, or less, over a period of years.
It is significant to observe in this connection that there is a very active market in these mortgage and trust notes, and that the discounts on sale are very large. In the Washington area, second trust notesin sales of property involving small downpayments of $300, $400, or $500—are bought and sold frequently at 60 percent or less of the total obligation, and third trust notes may sell for 30 percent or less.
There have been a number of proposals for the development of some kind of a "wholesale-retail" approach to market value in these kinds of cases; i.e., so as to give the property owner a fair "credit” market value, rather than the fair "cash” market value of the real property.
Proponents of such an approach overlook the fact, that even if a "retail” or “credit” concept of value were adopted, the results often would be to give the second or third trust noteholder, who already may have received a windfall, an even greater windfall; i.e., full payment of his note regardless of its actual market value; and that