That's not the most elegant of headlines, but to those of you interested in the valuation of equipment and machinery in eminent domain cases, you'll like this post.
[Update: more from our Michigal Owner's Counsel colleague Alan Ackerman at the National Eminent Domain Blog, and from the Rocky Mountain Appellate Blog.]
Thanks to our Owners Counsel of America colleague Anthony Della Pelle for alerting us to the recent opinion of the Virginia Supreme Court about "fixtures" in Taco Bell of America, Inc. v. Commonwealth Transp. Comm'r, No.10-92465 (June 9, 2011).
In eminent domain cases, "fixtures" are generally considered to be part of the property taken, and thus compensable. The issue in the case was whether the trial court should have allowed the jury to make the determination that a restaurant's equipment were fixtures, or whether the equipment was personal property and thus noncompensable. The Virginia DOT condemned a Taco Bell in Fairfax (sorry you two Yelp reviewers, welcome to the world of eminent domain), and argued that the value of "approximately 42 pieces of equipment used in the restaurant as part of Taco Bell's business" were not part of the property condemned because they could be moved and were not "fixtures." See page 3 of the slip opinion for a list, which includes ovens, freezers, cash registers, pans, and "a neon Taco Bell sign."
At trial, the DOT's appraisal witness testified that he considered these items to be personal property because Taco Bell could have removed them prior to the demolition. However, Taco Bell's appraiser testified they were fixtures because Taco Bell "used the fixtures in its restaurant business prior to the take but had no use of them after the take," and thus left them when the restaurant was partially demolished. Apparently, Taco Bell does not use "used" equipment, and could not use the items elsewhere. The trial court concluded the items were Taco Bell's personal property, and that its decision to leave them in place was a "business decision," and withheld the issue from jury consideration.
The Virginia Supreme Court reversed, applying the existing three-part test for what is a "fixture."
(1) Annexation of the chattel to the realty, actual or constructive; (2) Its adaptation to the use or purpose to which that part of the realty to which it is connected is appropriated; and (3) The intention of the owner of the chattel to make it a permanent addition to the freehold.
Slip op. at 6 (quoting Danville Holding Corp. v. Clement, 16 S.E.2d 345, 349 (Va. 1941)).
The court concluded that whether the items are moveable is not the test, but whether they are "adapted to and used for the purpose to which the property is devoted." Slip op. at 8. Because Taco Bell's items were used in its restaurant, and there was evidence that it intended to use them only for the life of a single restaurant, the trial court should have let the jury make the determination whether they were compensable items.
This case is worth noting because although the Supreme Court essentially agreed with the trial court that the decision to leave the items in place was a "business decision" by Taco Bell, the Supreme Court disagreed about the consequences of the business decision. The trial court concluded that meant Taco Bell was walking away from the value of the equipment since it could have taken the items with it. The Supreme Court clarified that the owner's business decision about how it used the items is the key to whether the items are fixtures. We can move a lot of things. We move churches. We move houses. So its not simply whether the items can be moved. It's whether the owner used items in place before the taking, and whether it had any use of them afterwards, that matters.
More on the case here, including some thoughts of our Virginia Owners Counsel colleague, Joe Waldo.
Taco Bell of America, Inc. v. Commonwealth Trans. Comm'r of Virginia, No. 10-92465 (Va. June 9, 2011)
