COMMONWEALTH OF KENTUCKY, TRANSPORTATION CABINET; DEPARTMENT OF HIGHWAYS v. SWAN FORK COAL COMPANY, A PARTNERSHIP CONSISTING OF THE FOLLOWING: IRA DAVID SANDERS, JOHN RASNICK, JACK SYKES, DAVID RASNICK, FRANK JUSTICE, GARY ROYALTY, JAMES McGHEE, M. LYNN PARRISH, and THURMAN BARKER; NEALY COAL COMPANY; AUBREY HALL; HERSHEL GIBSON AND ARLENE GIBSON, HIS WIFE; MARCUS COLLIER AND AMANDA COLLIER, HIS WIFE; HENRY COLLIER AND RUBY COLLIER, HIS WIFE; DELORES ADAMS, SINGLE
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RENDERED: April 16, 1999; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1997-CA-002629-MR
COMMONWEALTH OF KENTUCKY,
TRANSPORTATION CABINET;
DEPARTMENT OF HIGHWAYS
v.
APPELLANT
APPEAL FROM LETCHER CIRCUIT COURT
HONORABLE EDDY COLEMAN, SPECIAL JUDGE
ACTION NO. 92-CI-000139
SWAN FORK COAL COMPANY, A
PARTNERSHIP CONSISTING OF THE
FOLLOWING: IRA DAVID SANDERS,
JOHN RASNICK, JACK SYKES,
DAVID RASNICK, FRANK JUSTICE,
GARY ROYALTY, JAMES McGHEE,
M. LYNN PARRISH, and THURMAN
BARKER; NEALY COAL COMPANY;
AUBREY HALL; HERSHEL GIBSON
AND ARLENE GIBSON, HIS WIFE;
MARCUS COLLIER AND AMANDA
COLLIER, HIS WIFE; HENRY COLLIER
AND RUBY COLLIER, HIS WIFE;
DELORES ADAMS, SINGLE
APPELLEES
AND:
NO. 1997-CA-002632-MR
COMMONWEALTH OF KENTUCKY,
TRANSPORTATION CABINET,
DEPARTMENT OF HIGHWAYS
V.
APPELLANT
APPEAL FROM LETCHER CIRCUIT COURT
HONORABLE EDDY COLEMAN, SPECIAL JUDGE
ACTION NO. 93-CI-00326
SWAN FORK COAL COMPANY, A
PARTNERSHIP CONSISTING OF THE
FOLLOWING PERSONS: IRA DAVID
SANDERS; JOHN RASNICK; JACK
SYKES; DAVID RASNICK; FRANK
JUSTICE; GARY ROYALTY; JAMES
MCGHEE; M. LYNN PARRISH; AND
THURMAN BARKER
APPELLEES
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE:
BUCKINGHAM, MCANULTY, AND MILLER, JUDGES.
MILLER, JUDGE: The Commonwealth of Kentucky, Transportation
Cabinet, Department of Highways (the Cabinet) brings these
appeals from orders and judgments entered by the Letcher Circuit
Court on July 9, 1997.
We reverse and remand in both appeals.
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APPEAL NO. 1997-CA-002629-MR
This is a condemnation case wherein the Cabinet sought
to condemn property owned by the appellees in Letcher County
incident to the improvement of Highway 23 between Jenkins,
Kentucky, and Pike County.
The tract condemned was a 25.79
parcel from a larger boundary of 85.76 acres of mostly steep,
hillside woodland.
The property contained two sediment basins,
which had been used incident to strip mining.
Proceedings were
prosecuted pursuant to the “Eminent Domain Act of Kentucky.”
Rev. Stat. (KRS) 416.540 - .670.
Ky.
The appellees owned only the
surface estate of the property to be condemned.
The mineral
estate had theretofore been severed.
The Cabinet dealt
separately with the minerals owners.
The commissioners,
appointed pursuant to KRS 416.580, appraised the taking at
$15,500.00.
There is but a single issue in this appeal: whether
the surface owners could offer into evidence as a measure of the
value of their land per ton royalties that might be paid incident
to mining the mineral estate.1
The trial court was of the
opinion that such evidence was competent and, perforce, allowed
the witnesses for the appellees to affix a value of the condemned
property based upon proposed tonnage royalty.
The Cabinet
contends that the circuit court erred inasmuch as this has
amounted to an impermissible “price tag” evaluation of property
condemned.
The Cabinet and appellees/landowners each produced an
1
Notwithstanding the surface owner does not own the mineral
estate, he often receives payment for surface use and/or damage
incident to mining. Payment is usually relative to the tonnage
of coal removed.
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appraisal witness.
Dixon Nunnery, witness for the Cabinet, fixed
the before value of the condemned surface at $68,500.00 and the
after value at $30,000.00, for a difference of $38,500.00.
The
appellees/landowners' appraisal witness, Arthur Jackson, used two
approaches, each of which was predicated upon the value of the
anticipated royalties.
He described one of his evaluation
approaches as “the income approach.”
Using that approach, he
testified the before value was $325,000.00, the after value
$30,000.00, for a difference of $295,000.00.
Using what he
termed “a market approach,” Jackson fixed the before value at
$260,000.00, the after value at $30,000.00, for a difference of
$230,000.00.
Considering the evaluations of the Cabinet and the
landowners, the jury determined the before value at $280,000.00
and the after value at $30,000.00, for a difference of
$250,000.00, which constituted its award.
We are of the opinion that the jury's award is
excessive and that the jury was misled by evidence of per-tonnage
royalties.
We deem such evidence inappropriate.
Indeed,
evidence of per-tonnage royalty is no more than a “price-tag”
evaluation, which is condemned in this Commonwealth.
See
Commonwealth, Department of Highways v. Morgan, Ky., 426 S.W.2d
452 (1968), and Gulf Interstate Gas Company v. Garvin, Ky., 303
S.W.2d 260 (1957).
In disputed condemnation cases, the jury
shall make a determination as to the property's highest and best
use.
See Commonwealth, Department of Highways v. Riley, Ky., 402
S.W.2d 840 (1966).
Once done, the only triable issue is the
difference between the fair market value immediately before and
immediately after the taking.
See Witbeck v. Big Rivers Rural
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Electric Cooperative Corporation, Ky., 412 S.W.2d 265 (1967).
Fair market value is, of course, the price property would bring
in an arm's length transaction between a willing buyer and a
willing seller.
See Commonwealth, Department of Highways v.
Darch, Ky., 374 S.W.2d 490 (1964).
It is not the value of the
property based upon the sum of “price tag” evaluations.
Of
course, all relevant factors should be considered tending to
establish the value of the land, but no price should be placed
upon an individual factor.
See Commonwealth, Department of
Highways v. Sherrod, Ky., 367 S.W.2d 844 (1963).
We reverse and remand on this appeal.
APPEAL NO. 1997-CA-002632-MR
This appeal involves the taking of 33.96 acres of the
surface estate from a larger boundary of land located in the same
area as the property condemned in Appeal No. 1997-CA-002629-MR.
Valuations were based upon the same premises as in Appeal No.
1997-CA-002629-MR.
Again, per-tonnage royalties were introduced
as evidence concerning surface estate value, and the same jury-as in Appeal No. 1997-CA-002629-MR--fixed the before value at
$798,000.00 and the after value at $115,400.00, for a difference
of $682,600.00.
For the same reasons as stated in the foregoing
appeal, we likewise reverse and remand this matter.
We further note that it was error to admit evidence
that, prior to condemnation, appellees had incurred expenses to
prepare the land for development.
See Commonwealth, Department
of Highways v. Holloman, Ky., 390 S.W.2d 666 (1965).
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For the foregoing reasons, the judgments in both
appeals are reversed, and these causes are remanded for
proceedings consistent with this opinion.
ALL CONCUR.
BRIEFS AND ORAL ARGUMENT
FOR APPELLANT:
BRIEF FOR APPELLEES:
Herman W. Lester
Pikeville, KY
Phillip K. Wicker
Shepherdsville, KY
ORAL ARGUMENT FOR APPELLEES:
James W. Craft II
Whitesburg, KY
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