Arkansas State Highway Comm'n v. Barker

ARKANSAS STATE HIGHWAY COMMISSION v. 
Roland A. BARKER, Jr., and Barbara Barker,
and Union State Bank, Mortgagee

96-227                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered October 28, 1996


1.   Eminent domain -- recognized formulas for measuring just
     compensation -- measure of damages in partial-taking cases. --
     A landowner who has his land condemned is entitled to just
     compensation; however, this does not mean that a landowner is
     entitled to be unjustly enriched at the expense of the public
     purse; there are three recognized formulas for measuring just
     compensation in partial-taking cases:  (1) the value of the
     part taken; (2) the value of the part taken plus the damages
     to the remainder; and (3) the before- and after-value rule;
     the difference between the market value of the whole tract
     before the taking and the market value of that part which
     remains after the taking, less any enhancement peculiar to the
     lands, has long been the measure of damages in partial-taking
     cases.

2.   Eminent domain -- error to allow deduction for drive
     installation and maintenance in reaching after-taking value --
     case reversed and remanded for new trial. -- Where, in his
     appraisal report, a witness used three comparable sales to
     determine after-taking value, but from each of the three
     comparable sales he deducted $10,300 for installation and
     maintenance of a circular driveway in order to reach the
     after-taking value, the trial court erred in allowing evidence
     of the driveway cost to be introduced; the case was reversed
     and remanded for a new trial.  

3.   Eminent domain -- evidence of appraisal of nearby tract
     admitted at trial -- sale made by condemnor not considered a
     voluntary transaction -- admission was in error. -- Appellees'
     cross-examination concerning an appraisal of a nearby tract
     was erroneously allowed into evidence where the tract had not
     been used by either party as a comparable sale and thus was
     not relevant and where the appraisal was prepared for the
     condemnation offer on the other tract; offers to buy are not
     competent evidence of the market value; a sale made by a
     condemnor is not deemed a voluntary transaction; sales to one
     having the right of eminent domain do not ordinarily fall in
     the category of voluntary sales in the ordinary course of
     business and, consequently, are not fair criteria of value for
     purposes of comparable sales in determining the just
     compensation due in eminent-domain actions. 


4.   Eminent domain -- measure of damages in partial-taking cases -
     - order of remittitur inappropriate. -- The measure of damages
     in partial-taking cases is the difference between the market
     value of the whole tract before the taking and the market
     value of that part which remains after the taking, less any
     enhancements peculiar to the lands; appellant's request for
     instructions for remittitur in the amount of its appraisal and
     the amount of its deposit was declined, and, instead, the
     court ordered a new trial; the appropriate amount of damages
     was still of such question that an order of remittitur was not
     appropriate. 


     Appeal from Union Circuit Court; David F. Guthrie, Judge;
reversed and remanded.
     Robert L. Wilson, Chief Counsel and Barbara A. Griffin, Staff
Attorney, for appellant.
     Ronald L. Griggs, for appellees.

     Robert H. Dudley, Justice.  
     In January 1994, the Arkansas State Highway Commission
condemned .47 acre in fee, along with the access routes, belonging
to Roland and Barbara Barker and Union State Bank, mortgagee, in
order to widen Highway 167 to three lanes south of El Dorado.  The
condemned land was a part of a 10.16-acre tract purchased by the
Barkers in 1992 for $20,000.  A little over seven acres of the
tract were timberland and not suitable for industrial or commercial
use, and three acres were suitable for commercial or industrial
use.  The .47 acre condemned is in the three acres that are
suitable for commercial or industrial use.  Before the taking, the
Barkers constructed a metal building in the northeast corner of the
three acres.  The .47 acre is between the metal building and the
highway.  At the time of the taking, the Commission deposited with
the court the amount it estimated to be just compensation, $1,450. 
The Barkers denied that $1,450 was just compensation and asked for
adequate compensation.  Ultimately, a jury returned a verdict for
$15,100.  The Commission appeals.  We reverse and remand for a new
trial.
     The Commission timely filed a motion in limine asking the
court to prohibit, among other things, the introduction of evidence
proving the cost to cure damages to the residual property, if the
cost was in excess of the decrease in the market value of the
property taken and if the cost constituted a substantial betterment
to the property.  In its motion the Commission specifically alleged
that the Barkers' appraisal report contained two estimates, one for
$6,800 and one for $7,875, which when averaged was $7,300, for
installation of a circular drive on the residual tract.  An
additional $3,000 was added for maintenance of the circular
driveway, which brought the total betterments to $10,300.  The
Commission pointed out that, before the taking, the tract had
sixteen feet of unpaved driveways that provided access to the
highway and that the Commission's construction plans, filed with
the court, required it to replace the unpaved driveways with two
forty-foot asphalt driveways.  Finally, the Commission alleged that
if the utility of the residual property was diminished by the
taking, that loss constituted the element of damage, and not the
cost of a circular driveway, which was a betterment and which cost
far more than the loss to the remaining property, especially when
the Commission intended to replace sixteen-feet-wide unpaved
driveways with forty-feet paved driveways.  On appeal, the
Commission contends that the trial court erred in allowing evidence
of the $10,300 loss to be introduced.  The Barkers do not contend
that evidence of the cost to cure damages was admissible, but
rather they respond that the Commission is "simply mistaken that
testimony was offered as costs to cure damages which constitute a
betterment on the residual property."  We hold the trial court
erred in allowing the evidence.
     A landowner who has his land condemned is entitled to just
compensation.  City of El Dorado v. Scruggs, 113 Ark. 239, 168 S.W. 846 (1914).  However, this does not mean that a landowner is
entitled to be unjustly enriched at the expense of the public
purse.  See United States v. 158.24 Acres of Land, 696 F.2d 559,
564 (8th Cir. 1982).  There are three recognized formulas for
measuring just compensation in partial-taking cases:  (1) the value
of the part taken; (2) the value of the part taken plus the damages
to the remainder; (3) the before- and after-value rule.  Young v.
Arkansas State Highway Comm'n, 242 Ark. 812, 415 S.W.2d 575 (1967); 
see also Arkansas State Highway Comm'n v. Jones, 256 Ark. 40, 505 S.W.2d 210 (1974).  In Young, we wrote that "the difference between
the market value of the whole tract before the taking, and the
market value of that part which remains after the taking, less any
enhancement peculiar to the lands" has long been the measure of
damages in partial-taking cases.  242 Ark. at 814, 415 S.W.2d  at
576-77.   
     In the present case, the Barkers' real-estate-appraisal
witness, Peter Emig, testified that the .47 acre taken did not have
a "single highest and best use," but rather "that which was a part
of the taking had a commercial/industrial type use because of
elevation and proximity to the highway."  Emig testified that he
used three approaches in determining the before-taking value: the
cost approach; the market approach; and the income approach.  He
testified that, in this case, the market approach was the best
indicator of value.  Using the market approach, he determined that
the before-taking value was $105,000.  He also testified that the
market approach was the best indicator of value after the taking,
and that value was $89,900, leaving a difference of $15,100.  The
trial court allowed his appraisal report in evidence.  In his
report, the witness used three comparable sales to determine after-
taking value, but from each of the three comparable sales he
deducted "$10,300 for the drive installation and maintenance." 
Thus, Emig deducted the $10,300 cost and maintenance of the
circular drive in order to reach the after-taking value.  Because
of this error, we reverse and remand for a new trial.  
     We now address the remaining points of appeal that will likely
arise upon retrial.  The Barkers, in cross-examination of a
Commission employee, asked about an appraisal of a nearby tract. 
The Commission objected because the tract had not been used by
either party as a comparable sale, and thus it was not relevant. 
The Commission additionally objected because the appraisal was
prepared for the Commission's condemnation offer on the other
tract, and offers to buy are not competent evidence of the market
value.  The trial court erroneously overruled the objections.  The
appraisal of the nearby tract, prepared by a witness not present at
trial, was prepared for determination of the amount to be deposited
by the Commission for the taking of the other tract.  Even if the
court deposit made by a condemnor might be considered a "sale," a
point we do not decide, a sale made by a condemnor is not deemed a
voluntary transaction.  "[S]ales to one having the right of eminent
domain do not ordinarily fall in the category of voluntary sales in
the ordinary course of business and, consequently, are not fair
criteria of value for purposes of comparable sales in determining
the just compensation due in eminent domain actions."  Arkansas
State Highway Comm'n v. First Pyramid Life Ins. Co., 265 Ark. 417,
424, 579 S.W.2d 587, 591, reh'g denied (1979).  In Yonts v. Public
Service Co. of Arkansas, 179 Ark. 695, 17 S.W.2d 886 (1929), we
explained:
     "What the party condemning has paid for other property is
     incompetent.  Such sales are not a fair criterion of the
     value, for the reason that they are in the nature of a
     compromise.  They are affected by an element which does
     not enter into similar transactions made in the ordinary
     course of business.  The one party may force a sale at
     such a price as may be fixed by the tribunal appointed by
     law.  In most cases the same party must have the
     particular property, even if it costs more than its true
     value.  The fear of one party or the other to take the
     risk of legal proceedings ordinarily results in the one
     party paying more or the other taking less than is
     considered to be the fair market value of the property. 
     For these reasons, such sales do not seem to be competent
     evidence of the value in any case, whether in a
     proceeding by the same condemning party, or other cases." 
     Lewis on Eminent Domain (3 Ed.) vol. 2,  667.
Id. at 698-99, 17 S.W.2d  at 887.   
     The Commission also contends that the trial court erred in not
striking Roland Barker's testimony about value of the tract
condemned because he failed to state any reasonable ground for his
opinion.  Upon retrial, Barker may be able to state better grounds
for his opinion, since he has lived in the area for fifty years and
since he and his wife recently purchased the tract involved. 
Because the same proof may not develop upon retrial, we do not
address the argument.  Missouri Pac. R.R. Co. v. Arkansas Sheriff's
Boys' Ranch, 280 Ark. 53, 655 S.W.2d 389 (1983). 
     The Commission asks us to reverse this case with instructions
for remittitur to the amount of $1,450, the amount of its appraisal
and the amount of its deposit.  We decline to order remittitur and
instead order a new trial.  We have examined both the landowners'
and the Commission's proof of values and have concluded that the
appropriate amount of damages is still of such question that an
order of remittitur is not appropriate.  One factor causing a
question is that the Commission's proof determined the values as of
the date of taking, January 1994, but the landowners' appraiser
valued the property as of April 14, 1995, over fifteen months after
the taking.  The measure of damages in partial-taking cases is the
difference between the market value of the whole tract before the
taking and the market value of that part which remains after the
taking, less any enhancements peculiar to the lands.  Young v.
Arkansas State Highway Comm'n, 242 Ark. 812, 415 S.W.2d 575 (1967). 
Here, the testimony showed that a $10,000 concrete slab was poured
on the landowners' three-acre commercial land in the intervening
fifteen months and that the landowners' proof took that expenditure
into consideration.  We do not know if there were other such
enhancements or betterments and thus are unable to determine an
appropriate amount of remittitur.  
     Reversed and remanded.
     Newbern and Corbin, JJ., dissent.


           David Newbern, Associate Justice, dissents.
     The point on which the majority opinion bases reversal of the
jury's verdict and the Trial Court's judgment is the inclusion in
Mr. Emig's appraisal of the $10,300 figure relating to the need for
a circular driveway on the Barkers' property.  
     According to Mr. Emig's appraisal report and his testimony, he
settled on the market value approach to evaluation of the Barkers'
property before and after the taking.  A part of the loss of market
value, he testified, is loss in utility of the property.  
     Mr. Emig figured the after-taking value of the Barkers' land
on the basis of comparable sales.  To the value of the land taken,
he added value for other land that would remain in the Barkers'
tract as well as for improvements on the tract.  He subtracted the
$10,300, which amounted to the cost and maintenance of a circular
drive.
     Mr. Emig's testimony indicated that, prior to the taking,
trucks had been able to enter the property and unload large items
using fork lifts at the business entrance but that after the taking
they would no longer be able to do so.  The circular drive would be
needed to permit that use to continue.  Although he used the cost
approach to determine that aspect of the reduction in the
property's market value, I see nothing exceptionable about it.
     The fact that the Highway Department planned to widen the
sixteen-foot-wide gravel-covered culvert entrances to the property
to forty-foot ones covered with asphalt was not shown to affect the
problem of the reduction in utility, which Mr. Emig said would
occur as a result of the taking of the land right at the front of
the Barkers' business.  I would affirm the judgment based on the
jury's verdict.
     I respectfully dissent.
     Corbin, J., joins.