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December 30, 1957


The opinion of the court was delivered by: Legge, Justice.

December 30, 1957.

Appellant, acting for himself and the other devisees of the estate of W.B. Farr, owners of a lot with a store building thereon at the intersection of two state highways, leased to respondent the building and part of the lot adjacent thereto. The State Highway Department, desiring to widen one of these highways, condemned the major portion of the leased lot, including the part on which the store building was located. Appellant and his co-owners, and respondent as lessee, were made parties to the condemnation proceeding; appellant and respondent attended it; and the board of condemnation awarded to appellant and his co-owners $6,000.00 and to respondent $2,000.00, "for any and all damages" sustained by them respectively. Appellant noted an appeal, but later abandoned it; and the awards before mentioned were accepted by the respective condemnees.

The lease was in writing, for a term of two years commencing November 1, 1953, and ending October 31, 1955. It provided for rental of $50.00 per month, and specified that the leased property was for use as a retail store for the sale of general merchandise, gasoline and oil. There was no provision for renewal or extension.

Notice of the condemnation was dated February 25, 1955, and the award was dated March 15, 1955. It appears undisputed that in the latter part of March, 1955, respondent was told by counsel for the highway department to vacate the store building by May 1, 1955; that respondent thereafter paid the April rent, notified appellant that he was going to vacate, proceeded to sell out his stock of goods and to dispose of his store equipment; and that he did vacate on April 30, 1955.

The highway department having no use for the building, but requiring its removal, appellant proposed to respondent that he (appellant) would move it to another location some two or three hundred feet distant, and that respondent continue to lease it there. This proposal respondent declined.

The defendant, answering: admitted the allegation concerning the written lease and concerning the condemnation of the area on which the store building had stood; alleged that the condemnation proceeding had terminated the lease, and that the plaintiff had, in that proceeding, been fully compensated for all damages sustained by him by reason of the taking; and generally denied the remaining allegations of the complaint.

Appeal is from the order of the trial court directing a verdict for the defendant, the exceptions charging that the trial judge erred: (a) in holding that the condemnation terminated the lease; and (b) in excluding appellant's testimony as to an oral agreement between the parties for extension of the term of the written lease.

The claim made in the complaint for $1,000.00 as "one-half of the award" to respondent need not be considered. Appellant's exceptions do not challenge the judgment of the lower court so far as it relates to that claim. The primary question for our determination is: Did the condemnation terminate respondent's tenancy, as was held by the trial judge? If so, it follows that respondent's liability for rent for the remainder of the term was also terminated thereby.

Orgel, in his Valuation Under The Law Of Eminent Domain (2d Ed., Vol. 1, Sec. 121), discussing apportionment of award in condemnation between lessor and lessee as affected by the question of how far the condemnation terminates their respective rights and obligations, says:

"This question has given the courts more trouble than any other problem of apportionment. Most frequently it takes the form of the question whether or not the lessee is still bound to pay the reserved rent during the unexpired term of the lease, even after the premises have been condemned. If this obligation continues, the principle of indemnity requires that he be paid a portion of the award sufficient to compensate him for his continuing liability. If it ceases, he need not be compensated for this item, but he may still have a claim for the difference between the rental value of the premises and the rent reserved.

"It would pass beyond the bounds of a treatise on valuation to discuss the various and sometimes conflicting rulings of the courts on this question. The holding may be determined by common-law doctrine, by statute law, or by the explicit or implicit terms of the lease. At common-law the prevailing rule, when the entire premises have been condemned or where they are rendered untenantable by the taking of a part, is that the lessee's obligation to pay rents ceases."

Corrigan v. Chicago, 1893, 144 Ill. 537, 33 N.E. 746, 747, 21 L.R.A. 212, cited in the briefs of both parties here, was a proceeding in which the City of Chicago, for the purpose of widening a street, had condemned certain leased premises; and the controversy was concerned with the distribution of the sum found to be just compensation between the landowners and their lessees. To quote from the opinion:

"We think that, while the condemnation proceeding may not amount to a technical eviction, where the entire tract of land or lot is taken the effect is to abrogate the relation of landlord and tenant. By virtue of such proceeding, whatever title the tenant has in the land passes to the state or corporation in whose behalf the right of eminent domain is exercised, and precisely the same is true of the landlord's estate or interest; and the effect is an absolute extinguishment of the right and title of both in, or control over, the subject of the demise. It is, in effect, eviction by ...

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