Stephens Production Company v. Reuel S. Holland, Lewel Holland and Franklin Holland

NOT DESIGNATED FOR PUBLICATION

ARKANSAS COURT OF APPEALS

JUDGE KAREN R. BAKER

DIVISION I

STEPHENS PRODUCTION CO., A DIVISION OF STEPHENS GROUP, INC.,

AN ARKANSAS CORP.

APPELLANT

v.

REUEL S. HOLLAND, LEWEL HOLLAND and FRANKLIN HOLLAND

APPELLEES

CA02-792

MARCH 19, 2003

APPEAL FROM THE SEBASTIAN COUNTY CIRCUIT COURT

[E2000-224-G-11]

HONORABLE JAMES R. MARSCHEWSKI CIRCUIT JUDGE

AFFIRMED

Appellant, Stephens Production Company (Stephens), appeals a decision by a jury in Sebastian County Circuit Court awarding appellees, Reuel S. Holland, Lewel Holland, and Franklin Holland, damages in the amount of $23,500. Appellant has two arguments on appeal. First, appellant argues that "appellees, plaintiffs below, failed to present legally adequate proof of an unreasonable use of their property by appellant or of legally recoverable damages from the alleged unreasonable use." Second, appellant argues that "controlling legal precedent precludes jury speculation based on appellees' insufficient proof." We affirm.

On February 21, 1973, Sherman Adams, the then owner of the mineral interests in the approximately thirty acres at issue in this case, entered into a written oil and gas lease with appellant Stephens. On December 17, 1973, appellees obtained title to the surface interest in the subject land.

It is undisputed that appellants had a lease on the property at issue giving them the right to place agas pipeline on the property.

On or around March 4, 2000, appellees received a letter from Don Seals informing them that Stephens was planning to begin construction on a pipeline across appellees' property the next week. Included with the letter was a survey showing the planned location of the pipeline. At trial, Mr. Reuel Holland testified that he was dissatisfied with the planned location of the pipeline because it went through the center of his property. When the construction crew arrived on his property, he expressed his dislike for the location of the pipeline to the construction crew. One of the men on the crew called Mr. Seals and let Mr. Holland speak with him. Mr. Holland expressed to Mr. Seals that the location of the pipeline was damaging to his property and that the pipeline would be less damaging along the back side of his property. Mr. Holland testified that Mr. Seals' response was that "I had no input in the location of the line and, if I didn't like it, that was too bad." Mr. Holland testified that the crew members were "extra rude to [him]" when they arrived.

Mr. Holland also testified as to the extent of the damage done to his property with the pipeline placed through the center of the property. The property at issue is in the Greenwood School area, has Sebastian County Water, is on a paved county road and a highway, and is smooth enough to develop, with only a slight dip. He stated that "I feel the highest and best use would be to use our land for residences. I think real estate developers are potential buyers of our property." With the property's potential in mind, he requested that the pipeline be placed along the fence line. Placement along the fence line would have required approximately the same footage, and he believed it would be less damaging to his property. Mr. Holland asserts that his property was damaged because homes could not be built over the pipeline. The gas lines are marked with yellow "warning" flags and stakes. He specifically testified that due to the placement of the pipelinethrough the center of his property, the value of his property had decreased by $40,000.1

Mr. Richard Bryant, a local real estate broker who had developed property with pipelines, also testified that the highest and best use for the Hollands' property would be to sell it to a developer, who would divide it into small acreage. Considering the highest and best use without the pipeline, he valued the property at $3,500 an acre or a total of $101,500. He estimated the damage to the property with the pipeline through the center of the property was $29,000, less the approximate $4,000 of damage that would have occurred had the pipeline been placed as he requested. His opinion was based on thirty years experience as a real estate broker, his experience doing appraisals, and his experience in developing property with pipelines. He used comparable property in the area in his valuation of the property after the pipeline was placed, and he testified that he considered the perception that people have a phobia where pipelines are concerned. He specifically stated that, "It would be difficult to develop this property with a pipeline on it because the public has a phobia about pipelines. They just don't want pipelines. Customers that I would try to sell the property to would not want it with the pipeline on it at all."

Don Seals from Stephens also testified at trial. He confirmed speaking by telephone with Mr. Holland on the day the construction crew was to begin construction on Hollands' property, but he disputed that Mr. Holland asked him to place the pipeline across the back of the property. He also testified that the pipeline was placed across the center of the property because there was an existing, above-ground, electrical line there and that putting the pipeline along the electrical line would cause the least damage to the property by keeping all of the utility lines together.

At the conclusion of the appellees' case, Stephens made a motion for a directed verdict asserting that the appellees had failed to meet their burden of proof in that Mr. Holland and Mr. Bryant had testified that a part of their opinion regarding damages included damage based upon the mere fact that there was a pipeline on this property, and that element was not separated from damage from an unreasonable placement. The motion was denied. At the close of the appellant's case, Stephens renewed its motion, and it was again denied. The jury awarded $23,500 in damages to the Hollands. Stephens filed a motion for judgment notwithstanding the verdict, which was denied. From that denial, comes this appeal.

Our standard of review as set forth in Wal-Mart Stores, Inc. v. Lee, 348 Ark. 707, 719, 74 S.W.3d 634, 643-44 (2002), is as follows:

In reviewing the denial of a motion for judgment notwithstanding the verdict, we will reverse only if there is no substantial evidence to support the jury's verdict and the moving party is entitled to judgment as a matter of law. Conagra, Inc. v. Strother, 340 Ark. 672, 13 S.W.3d 150 (2000); Dodson v. Dicker, 306 Ark. 108, 812 S.W.2d 97 (1991). Substantial evidence is that which goes beyond suspicion or conjecture and is sufficient to compel a conclusion one way or the other. City of Caddo Valley v. George, 340 Ark. 203, 9 S.W.3d 481. It is not the appellate court's place to try issues of fact; rather, this court simply reviews the record for substantial evidence to support the jury's verdict.

Id. In reviewing the sufficiency of the evidence as being substantial on appellate review, we consider the evidence that is most favorable to the appellee. Wal-Mart Stores, Inc. v. Dolph, 308 Ark. 439, 825 S.W.2d 810 (1992). Circumstantial evidence may meet the substantial-evidence test. Id. In the present case, Stephens argues that there was no direct proof by the Hollands as to the unreasonableness of the placement of the pipeline. Stephens asserts that the only testimony provided at trial by the Hollands was the testimony as to damages, of which an inseverable portion was based on the public's phobia against pipelines on their property. In Carroll Elec. Coop. Corp. v. Benson, 319 Ark. 68, 889 S.W.2d 756, (1994), the court stated:

In Carroll [Elec. Coop. Corp. v. Benson, 312 Ark. 183, 848 S.W.2d 413 (1993)], we found `Carroll Electric was within its rights to extend this electric line across the west side of the Bensons' property to service the Cox property.' However, immediately following that conclusion, it was written:

Although Carroll Electric is entitled to extend its power lines pursuant to the existing 1962 easement, this right-of-way easement entitles both the grantee and the grantor to a convenient, reasonable, and accessible way. Fulcher v. Dierks Lumber & Coal Co., 164 Ark. 261, 261 S.W. 645 (1924). The location of the undefined right-of-way must be reasonable to both the dominant and servient estates, considering the condition of the place, the purposes for which it was intended, and the acts of the grantee. Id. Further, the owner of the servient estate has the right to delimit the easement. Id.

Id at 71-72; 889 S.W.2d at 758.

While the owner of the servient estate has the right to limit the location of an easement, where he fails to do so it may be selected by the grantee so long as his selection is a reasonable one taking into consideration the interest and convenience of both estates. Howard v. Cramlet, 56 Ark. App. 171, 939 S.W.2d 858 (1997) (quoting Hatfield v. Arkansas Western Gas Co., 5 Ark. App. 26, 28-29, 632 S.W.2d 238, 240 (1982)). In Arkansas Valley Elec. Coop. Corp. v. Brinks, 240 Ark. 381, 400 S.W.2d 278 (1966), our supreme court stated:

In the case of Fulcher v. Dierks Lumber & Coal Co., 164 Ark. 261 (p. 271), 261 S.W. 645, there appears a statement which is applicable in this case: `Where such right-of-way is reserved or expressly granted and not defined, the owner of the servient estate, in the first instance, has the right to delimit it, and, in the event of his failure to do so, it may be selected by the grantee of the easement; but, in either case, the location must be a reasonable one, taking into consideration the interest and convenience of both the dominant and servient estates.'

Id at 382-83, 400 S.W.2d at 279.

This statement is also applicable in the case at hand. Appellees provided adequate evidence that the location of the pipeline was unreasonable. In doing so, Mr. Holland testified that placement of the pipeline across the center of his property caused unnecessary harm to the value of his property. Mr. Holland testified that he had previous experience in buying and selling land in thearea and that he also had experience in owning properties with pipelines. He testified that he often dealt with pipeline companies in regard to the location of the pipelines on his other properties. He concluded that the particular location of the pipeline on his property was unreasonable because it decreased the value of his property by a much greater amount than if the pipeline had been located on the back of the property as he requested. Specifically, Mr. Holland assessed his damages at $40,000 with the pipeline in the current location and $3,500 if the pipeline had been put along the back of the property. In support of his request to place the pipeline along the back of the property, he testified that it was impossible to build houses over the pipeline. The property was best suited for sale to a developer, and it was impossible to build houses over the pipeline running through the center of the property. Although roads could be built over the lines, the property's value decreased drastically. Also, yellow warning flags and stakes are placed around the pipeline, which would serve as a deterrent to buyers. Mr. Holland testified that placing the pipeline across the back of the property, which was less suitable for development, would not increase the footage of pipe, and nothing prevented Stephens from placing the pipeline across the back of the property in Mr. Holland's desired location.

In addition, Mr. Bryant's testimony supported the finding that the pipeline was in an unreasonable location. Mr. Bryant testified that the property was best suited for residential development because it had access to South Sebastian County Water, it was relatively smooth land, and it was located in the Greenwood School District. He testified that based on his experience in real estate sales, appraisals, and comparisons to comparable lands, the land at issue would have been worth $101,500 with the pipeline across the back of the property, less the $3,500 for devaluation of the property with the pipeline in the most reasonable place. However, with the pipeline across the center of the property, the value was $72,500. Mr. Bryant concluded that placing the pipeline acrossthe center of the property caused unnecessary devaluation of the Hollands' property.

In Ark. Valley Elec. Coop. Corp. v. Brinks, supra, our supreme court found an unreasonable placement of a utility easement on the center of Brinks' property. The court stated:

. . .even if there was no meeting of the minds here as to a definite location of the right-of-way, the trial court would have been justified in placing it on the north side. This is true because the undisputed evidence shows appellees' damages would be greater if the right-of-way ran through or near the middle of their property. Their land lies on the north side of Clarksville with part of it within the city limits on College Avenue. Also, it is ready for development, being available to water, gas, electricity, and sewer. There is no showing that appellant will be seriously damaged if the line is on the north side.

Id. at 383, 400 S.W.2d at 279-80. As in Brinks, in the present case, the evidence supported the jury's conclusion that the pipeline placement through the center of the Hollands' land was unreasonable. The basic test or guiding principle that should govern the selection of a route in a transmission-line case is whether the route proposed will best serve the public interest and result in the least amount of private harm. Harness v. Public Service Commission, 60 Ark. App. 265, 962 S.W.2d 374 (1998) (quoting In re Arkansas Power and Light Co., 118 P.U.R. 4th 156 (1990)). No more property of a private individual, and no greater interest therein, can be condemned and set apart for public use than is absolutely necessary. Id. Thus, we find that substantial evidence supports the trial court's finding that the pipeline location was unreasonable.

Stephens' argument that the public's phobia against pipelines being an improper element to consider is also without merit. Stephens' cites no convincing legal authority for this argument. Nevertheless, we find that the public's phobia against pipelines was not an improper element to be considered by the jury in determining the market value of the Hollands' property.

In an eminent domain case, every element that can fairly enter into the question of market value and which a business man of ordinary prudence would consider before purchasing the property should be considered by the jury in arriving at the value of the property. Arkansas State HighwayComm'n v. First Pyramid Life Ins., 269 Ark. 278, 602 S.W.2d 609 (1980). Moreover, in First Pyramid, the court stated that for the purpose of determining the value of property taken in an eminent domain proceeding, it is proper to allow the introduction of evidence tending to show the highest and best use of the property, independent of, and prior to, testimony as to value of lands taken. Evidence is relevant and admissible if it tends to show that the cost of making the property available for use other than that to which it was devoted is consistent with profitability. Id. The latitude allowed the parties in bringing out collateral or cumulative facts to support value estimates made by witnesses is left largely to the discretion of the presiding judge. Id. While it is true that there are certain impermissible factors, such as business income or goodwill from a business, that must be separated from the market value of the property, see Arkansas State Highway Comm'n v. Frisby, 329 Ark. 506, 951 S.W.2d 305 (1997); Arkansas State Highway Comm'n v. Wallace, 247 Ark. 157, 444 S.W.2d 685 (1969), appellees' testimony in this case was based on relevant facts in determining value. Although, Mr. Bryant acknowledged the public's general phobia concerning pipelines, he based his opinion as to damages on the direct effect caused by the pipeline's placement across the center of the property.

Appellant also argues that the trial court erred in allowing Mr. Bryant to testify as an expert in this case. We disagree. Rule 702 of the Arkansas Rules of Evidence provides that, "If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise." Whether a witness may give expert testimony rests largely within the sound discretion of the trial court, and that determination will not be reversed absent an abuse of discretion. Jackson v. Buchman, 338 Ark. 467, 996 S.W.2d 30 (1999) (citing New Prospect Drilling Co. v. First Commercial Trust Co., 332Ark. 466, 966 S.W.2d 233 (1998)). More specifically, testimony as to fair market value of real property is not limited to sales of comparable property, but may be determined from the opinions of witnesses having knowledge of the subject and whose business or experience entitles their opinion to weight. Arkansas Power & Light Co. v. Melkovitz, 11 Ark. App. 90, 668 S.W.2d 37 (1984) (citing Arkansas. State Hwy. Comm'n v. Ormond, 247 Ark. 867, 448 S.W.2d 354 (1969)). Based upon his knowledge and experience both as a real estate broker and as an appraiser, his continuing education, and his experience in developing, Mr. Bryant was entitled to give an opinion as to what effect the location of the pipeline would have on the salability of this property. Any weakness in his testimony goes to the weight of the evidence or credibility of the witness and not to the admissibility of the testimony. Arkansas Power & Light Co. v. Melkovitz, supra. Thus, the there was no abuse of discretion on the part of the trial judge in allowing Mr. Bryant's testimony.

Based on the foregoing, we hold that the trial court's decision was supported by substantial evidence, and we affirm.

Crabtree and Roaf, JJ., agree.

1 This estimate incorporates the $3,500 reduction that would have occurred with reasonable placement.