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02/19/74 MEMPHIS HOUSING AUTHORITY v. PEABODY GARAGE COMPANY
SUPREME COURT OF TENNESSEE

MEMPHIS HOUSING AUTHORITY
v.
PEABODY GARAGE COMPANY



[3]    505 S.W.2d 719

[4]    February 19, 1974

        1974.TN.40 <http://www.versuslaw.com> [5]    APPELLATE judges:

[6]    McCANLESS, Justice wrote the opinion.

[7]    DYER, C.J., CHATTIN, J., and LEECH, Special Justice, concur.

[8]    DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE MCCANLESS

[9]    The Memphis Housing Authority condemned the respondent's property as part of the Beale Street Urban Renewal Project. Possession was granted to the petitioner on July 12, 1970, after it deposited the sum of $146,500.00 with the clerk of the court. This case involves the admissibility of evidence of a comparable sale of similar property for purposes of aiding the jury in determining whether the respondent Peabody Garage Company was adequately compensated.

The property taken by the petitioner under its power of eminent domain is located at the southwest corner of Church Street and Gayoso Avenue in downtown Memphis. At the trial in the Circuit Court of Shelby County, Division I, petitioner's appraisers valued the property at $145,000.00 and $146,500.00. Respondent's appraisers testified to values of $256,785.00 and $277,065.00. The owner, C. H. Alberding, values the property at $320,000.00. The jury returned a verdict of $175,000.00.

At the trial, respondent sought to introduce into evidence certain sales of other property in the area to be used by the jury for purposes of comparison. Among these "comparables" was the so-called Hull-Dobbs property, which had been sold to the Sheraton-Peabody Hotel for $500,000.00. The two parcels of property are remarkably similar in terms of size, improvements, use, location, and time of purchase. The Hull-Dobbs parcel is 26,229 square feet in size, compared to the 27,706.5 square feet of the subject property. The Hull-Dobbs property is improved with an obsolete two story building, the Peabody Garage property with an obsolete one story building. Both buildings are used for automobile parking, the properties are located across Gayoso Avenue from each other, and both are zoned C-4. The Hull-Dobbs sale was made in August, 1966, and the respondent's property was condemned in August, 1970.

The trial Judge excluded testimony of the Hull-Dobbs sale on the ground that it was an expansion sale that would mislead the jury in trying to determine the fair market value of respondent's property.

The Court of Appeals, in a unanimous opinion written by Judge Nearn, reversed and remanded for a new trial. We granted certiorari.

The record shows that C. H. Alberding, owner of the subject property, owned and operated the Peabody Hotel Company from 1954 until 1965. During that period, he tried repeatedly to acquire the adjacent property, owned by Hull-Dobbs Realty Company, for use as a motor court or additional parking. Alberding was not successful in his attempts to make that purchase and in December, 1965, his hotel was sold at foreclosure to the Memphis-Sheraton Corporation. The Peabody Hotel then became the Sheraton-Peabody Hotel. Alberding retained ownership of the Peabody Garage, however, and rented it to the Sheraton-Peabody Hotel for $27,000.00 a year for use as parking space for the hotel. The Hull-Dobbs property lies between the Peabody Garage and the hotel, and it is in the same block as the hotel. About six months after the foreclosure sale, the owner of the Hull-Dobbs parcel approached Mr. Martin McNeil, manager of the Sheraton-Peabody Hotel, and offered his property for sale at $600,000.00. Mr. McNeil said he transmitted the offer to his superiors, and that the purchase was eventually made for $500,000.00 in August, 1966.

This Court has long held that evidence of sales of similar property is admissible for valuation purposes in condemnation cases. Lewisburg & N.R.Co. v. Hinds et al., 134 Tenn. 293, 183 S.W. 985 [1915]. As we observed above the Hull-Dobbs and Peabody Garage properties were similar in size, location, use, zoning, improvements, and time of sales. Even though they were alike, however, the comparable sale should not be admitted if the buyer had been compelled to make the purchase. In such a case, the sale would not be useful as a guide to open market value and would tend to mislead the jury. Railroad v. Hinds, supra.

We find no element of compulsion in this case that would make the Hull-Dobbs sale anything other than an open market sale. The factual situation in the case of Railroad v. Hinds, supra, is typical of the kind of compulsion on the parties which would mislead the jury. In that case, Chief Justice Neil wrote:

"While it was not, strictly speaking, a forced sale, yet it does appear that Cooper and wife, who had previously bought the land from one Littleton, after having paid for it one-fourth in cash and the balance on time, had failed to make two payments; had suffered the filing of a bill against them to foreclose the lien; had effected a compromise through which they had reconveyed the land to Littleton, taking back an option to buy within two years thereafter; had sold their option to one Cornish; had found that the latter was unable to make his payments in execution of the option; and had been compelled to retake the latter, and it appears that they had but little means. So it appears that unless they could sell their option to another, they would lose everything they had paid into the land.. . . (It) cannot be said that, considering the previous history of the transaction, Cooper and wife were in a position to stand out against the offer made to them by Fort."

In this case, however, Memphis-Sheraton was under no such compulsion to buy the Hull-Dobbs property that it would be forced to accept an artificially inflated price. Testimony at the trial showed that it was the seller, not the buyer, who was anxious to consummate the sale. According to the record, Mr. Hull had moved his business to another location and was anxious to get his estate in order. His original asking price was $750,000.00; he made an offer to the Sheraton of $600,000.00; the final sale price was $500,000.00. The manager of the Sheraton-Peabody Hotel, Mr. McNeil, testified that no Discussion of expanding the hotel facilities to include the Hull-Dobbs building had arisen until Mr. Hull made his voluntary offer. Even then, the hotel did not need the property. It had ample parking space at the Peabody Garage, which it was leasing; and had the lease expired, testimony by Mr. McNeil showed that ample parking existed elsewhere in the immediate vicinity to accommodate guests of the hotel. Mr. McNeil testified that the only specific plans Sheraton had for the Peabody Hotel was a two million dollar interior renovation program.

"Q. I will ask you again, Mr. McNeil, at the time you were negotiating with Mr. Hull in the Summer of '66, did sheraton have any plans for development of the Hull-Dobbs property if it was purchased?

"A. No, there were no plans developed for this.

"Q. Did you, as the local Manager, feel that it was, that you were under compulsion to buy this property to provide for parking, in view of the other ...


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