Pinewood Manor, Inc. v. Agency of Transportation

PINEWOOD_MANOR_V_AGENCY_TRANSP.94-108; 164 Vt 312; 668 A.2d 653

[Opinion Filed 08-Sep-1995]

[Motion for Reargument Denied 30-Oct-1995]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 No. 94-108


Pinewood Manor, Inc.                              Supreme Court

                                                  On Appeal from
    v.                                            Chittenden Superior Court

Vermont Agency of Transportation                  May Term, 1995


Matthew I. Katz, J.

       Paul D. Jarvis and Richard R. Goldsborough of Jarvis and Kaplan,
  Burlington, for plaintiff-appellant

       Jeffrey L. Amestoy, Attorney General, and Scott A. Whitted, Assistant
  Attorney General, Montpelier, for defendant-appellee


PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


       JOHNSON, J.   Plaintiff Pinewood Manor, Inc. [Pinewood], appeals a
  decision from the Chittenden Superior Court in a condemnation proceeding. 
  Pinewood contends that the trial court erred in its findings regarding: (1)
  the value of the condemned land, (2) appropriate business losses, (3)
  adequate severance damages, and (4) the interest on the judgment.  The
  State cross-appeals the trial court's decision to award business losses. 
  We reverse on the issue of business loss and revise the interest award to
  include that accrued from December 10, 1993 to February 15, 1994.  In all
  other respects, we affirm.

       Pinewood has developed the residential area known as Pinewood Manor,
  situated on the northerly side of Vermont Route 117, into residential
  subdivision lots since the early 1960s.  In addition to subdividing the
  land and providing the infrastructure, it normally constructs the houses on
  the individual lots sold.

       Effective February 16, 1990, the Chittenden County Circumferential
  Highway District condemned land owned by Pinewood within its development. 
  The condemnation covers 8.93

 

  acres, including ten lots in Section F of Pinewood's overall
  development.  At the time of the taking, Pinewood had already obtained the
  required subdivision permits and plotted out the lots. Though Pinewood had
  not yet completely finished the infrastructure, it had begun to install
  some of the required roads and utilities.

       The trial court found that the lots should be valued at $30,000 each
  for a total of $300,000.  It rejected Pinewood's contention that the lots
  were worth $65,000 because they were not ready to be sold on the open
  market on the date of the taking.  The court noted that Pinewood had not
  cleared the lots of trees, paved the roads, or brought sewer, water and
  electricity to each site.

       In addition, the court held the State liable to Pinewood for business
  losses and severance damages in the amount of $150,000 and $26,500
  respectively.  The court reasoned that business losses were due to Pinewood
  because its practice was to develop the land and then sell it with a
  contract for the construction of a house.  Therefore, the court considered
  Pinewood a fixed and established business that extended beyond mere land
  development.  To find business loss, the court used historical profits from
  the Pinewood Manor development to calculate an average expected profit of
  $15,000 per house.  The court multiplied this average profit by the ten
  lots taken to reach an ultimate award of $150,000.  No contracts for
  construction of the houses on the ten condemned lots had actually been
  entered into.

       To limit the number of condemned lots to ten, the trial court
  acknowledged that Pinewood would have to create three new lots from
  portions of the remainder.  The reconfigured lots' proximity to the
  highway, however, reduced their value by ten percent.  Therefore, the court
  ordered the State to compensate Pinewood $17,500 for the reasonable cost of
  repermitting and $9000 for the reduced value of the lots.

       Pinewood's appeal focuses on several of the trial court's rulings on
  damages.

 


                                     I.

       In a property condemnation proceeding, a land owner can recover for
  (1) the value of the most reasonable use of the property or right in the
  property, (2) the value of the business on the property, and (3) the direct
  and proximate decrease in the value of the remaining property or right in
  the property and the business on the property.  19 V.S.A. Sec. 501(2).  The
  value of the most reasonable use of the property is the market value of the
  land's highest and best use as of the date of the condemnation.  Raymond v.
  Chittenden County Highway, 158 Vt. 100, 103-4, 604 A.2d 1281, 1284 (1992). 
  This requirement presents the trial court with a factual issue that is "at
  best a matter of opinion."  Green Mountain Marble Co. v. State Highway Bd.,
  130 Vt. 455, 464, 296 A.2d 198, 204 (1972).  We will not set aside a trial
  court's land value findings unless, taking the evidence in the light most
  favorable to the prevailing party and excluding the effects of modifying
  evidence, those findings are clearly erroneous.  Id. at 457, 296 A.2d  at
  200.

       First, plaintiff contends that the trial court clearly erred in
  failing to accept what it terms the estimated "retail value" of the land,
  or the value that plaintiff expected to place on the lots if condemnation
  had not occurred and its development plans had proceeded.   Plaintiff's
  expert valued each lot at $65,000, citing a comparable development, Lang
  Farm, which sold lots for that price.  The trial court, in its discretion,
  rejected $65,000 per lot as too high, noting that Lang Farm "enjoyed more
  utilities" than Pinewood and could be sold to purchasers for immediate
  construction.  See Green Mountain Marble Co., 130 Vt. at 464, 296 A.2d  at
  204 (noting that opinion testimony is "not of controlling effect," and that
  "an expert's opinion is of no greater probative value than the soundness of
  his reasons").  Plaintiff was entitled to the value of the land on the date
  of taking, not what it expected to receive when the land was cleared and
  the infrastructure completed.

       Second, plaintiff claims that a uniform $30,000 per lot award proves
  that the trial court failed to differentiate among the various lots
  according to the extent of the improvements on

 

  each.  We find that differentiation to be unnecessary.  Both experts
  expressed their land valuation on a uniform lot basis.  To reach the
  ultimate per lot figure, the court explained that it increased the State's
  estimate to reflect Pinewood's preparation for construction as of the date
  of taking.  Since the court considered the improvement stage of the lots in
  its compensation decision, we find no error in this finding.

       Finally, plaintiff contends that the court erroneously calculated the
  number of condemned lots.  Prior to the condemnation, Pinewood indisputably
  possessed eighteen permitted lots.  After the taking, Pinewood asserts that
  it retained only seven permitted lots, thereby losing eleven in total.  The
  State's appraiser, however, testified that by combining portions of the
  remainder into three building lots, Pinewood would lose only ten lots.  As
  a general rule, mitigation applies to condemnation proceedings.  4A J.
  Sackman, Nichols on Eminent Domain Sec. 14A.04[1] (rev. 3d ed. 1994).  The
  court agreed with the State's position that Pinewood, as an experienced
  developer, could salvage the remaining portions to reduce its loss. 
  Acknowledging that the reconfigured lots would require repermitting, the
  court included the reasonable cost for permitting among the severance
  damages.  The evidence supports the trial court's conclusion; we find no
  error.

                                     II.

       Next, we direct our attention to business loss.  Though many states
  view injury to or destruction of a business upon lands taken by eminent
  domain as too uncertain, remote and speculative to be compensable,
  Pennsylvania v. State Highway Bd., 122 Vt. 290, 292, 170 A.2d 630, 632
  (1961), Vermont specifically identifies business loss as a reimbursable
  item of damage in a condemnation proceeding.  19 V.S.A. Sec. 501(2). 
  Business loss is not unlimited, however, and this Court has adopted
  standards to minimize uncertainty and speculation.

       First, we require the property owner to have a "`fixed and established
  business.'" Raymond, 158 Vt. at 105, 604 A.2d  at 1284 (quoting Sharp v.
  Transportation Bd., 141 Vt. 480, 486, 451 A.2d 1074, 1076 (1982)). 
  Characteristics of a fixed and established business include

  

  current use, current accessibility, and an identifiable market for the
  business's products. See Green Mountain Marble Co., 130 Vt. at 462, 296 A.2d  at 203 (finding that no business existed based on lack of current use,
  inaccessibility, and absence of market demand).  Mere plans, however, rest
  on conjecture and therefore do not rise to the level of a fixed and
  established business for the purpose of business loss compensation. See
  Raymond, 158 Vt. at 105, 604 A.2d  at 1284 (holding preliminary development
  plans for subdivision not sufficient to constitute a fixed and established
  business developing land).  Here, Pinewood had a fixed and established
  business selling lots and constructing homes.  In particular, Pinewood's
  continuous development of the Pinewood Manor residential area since the
  early 1960s and the strong market for its lots and custom homes support
  this conclusion.

       But Pinewood still had to demonstrate that the land award did not
  already compensate it for business losses.  Sharp, 141 Vt. at 486, 451 A.2d 
  at 1076.  In Sharp, we adopted a method of computing business loss.  Id. at
  487, 451 A.2d  at 1077.  The trial court takes the value of the business on
  the condemned land as a whole, and from that number, subtracts the value of
  the land's highest and best use.  The remainder, if any, represents the
  property owner's business loss which has not "necessarily been compensated"
  in the valuation of the land.  In re Appeal of Condemnation Award to 89-2
  Realty, 152 Vt. 426, 429, 566 A.2d 979, 981 (1989). A property owner may
  not recover for business loss beyond the extent of that remainder.  Sharp,
  141 Vt. at 488, 451 A.2d 1077.

       The property owner may offer evidence of the value of the business in
  a number of ways. Since no one single method of valuation is appropriate
  for all circumstances, we see no reason to dictate the specific manner of
  appraisal.  Rather, we recognize the trial court's duty to evaluate the
  appropriateness of the appraisal approach offered through expert testimony. 
  New England Power Co. v. Town of Barnet, 134 Vt. 498, 505, 367 A.2d 1363,
  1368 (1976).  The factors enumerated in Sharp, however, should receive
  consideration:

  

         (a) the contribution made by the land to the business, (b) the
         personal property used by the business, (c) the going concern value
         of the business, (d) the increased value derived from the fact that
         tangible assets are combined in a single unit and are already
         functioning in the marketplace, and (e) where appropriate,
         goodwill.

  Sharp, 141 Vt. at 491, 451 A.2d  at 1079.

       None of the considerations outlined above include lost profits, which
  was the basis of the trial court's decision below.  We decline to include
  lost profits among the elements of the business loss equation for two
  reasons.  First, in this context, lost profits depend on speculation and
  conjecture.  None of the houses on which the trial court awarded lost
  profits were even under contract.  If they had been, the contracts would
  have been an asset of the corporation, capable of specific valuation, that
  was lost as a result of the condemnation.  The lost profit would have been
  reflected in the valuation of the business before and after condemnation.
  Instead, Pinewood's profits were merely speculative.  The trial court seems
  to have recognized the speculative nature of granting the property owner
  the retail value of the land before the land was prepared for retail sale. 
  Likewise, the court should have recognized that the profits that Pinewood
  someday hoped to realize for houses that it had neither sold nor built did
  not represent the value of the business thereon at the date of taking.

       The second reason we reject lost profits as an appropriate measure of
  damages in this case is that it may result in duplicate compensation.  The
  court estimated the lost profits based on the prior profitability of the
  corporation.   Prior profitability already influences the business loss
  calculation because it affects the value of the business as a going concern
  and the value of its goodwill.  Because Pinewood has already received the
  fair market value of the lots, the only extra compensation to which it
  might be entitled would come from these more negligible factors that are
  included in the valuation of the business as a whole.(FN1)

 

       The burden of proof on business loss rests with the property owner. 
  Gibson Estate v. State Highway Bd., 128 Vt. 47, 51, 258 A.2d 810, 812-13
  (1969).  Pinewood failed to submit evidence on the value of the business on
  the condemned land as a whole.  It offered evidence only of lost profits,
  which could not carry its burden on this issue.

                                    III.

       Pinewood also appeals two elements of the severance damage award.  In
  a condemnation proceeding, the State must compensate the land owner for
  severance damages -- the remainder's direct and proximate decrease in
  value, including the business thereon.  19 V.S.A. Sec. 501(2). The
  difference between the market value of the remaining property immediately
  before and after the taking properly measures this decrease.  Condemnation
  Award to 89-2 Realty, 152 Vt. at 431, 566 A.2d  at 982.  These findings
  stand unless clearly erroneous.  V.R.C.P. 52(a); see Jarvis v. Gillespie,
  155 Vt. 633, 637, 587 A.2d 981, 984 (1991) (holding findings not clearly
  erroneous if any reasonable and credible evidence to support them).

       Pinewood first challenges the trial court's decision to base the
  severance damage award on the State's expert appraiser's estimate. 
  Pinewood claims it will have to lower the price of

 

  five lots by $15,000 each once the State builds the circumferential
  highway.  The State introduced contrary evidence suggesting that only three
  lots would lose value, in the amount of ten percent each, due to their
  proximity to the highway.  The trial court was persuaded by the State's
  position.  As the judge of the credibility of witnesses, In re Nash, 158
  Vt. 458, 462, 614 A.2d 367, 369 (1991), the trial court must often choose
  among various expert opinions.  We find that the trial court did not abuse
  its discretion in placing greater weight on the testimony of the State's
  expert.

       Next, Pinewood asserts that the trial court committed reversible error
  in failing to provide compensation for a building lot on which Pinewood
  constructed a second access road. Prior to the land condemnation, Pinewood
  had planned to use neighboring land for the second access to its
  development.  Pinewood had not acquired an easement or any other legal
  right to use the neighboring land.  When the State simultaneously took that
  land and Pinewood's property, Pinewood had to use one of its own lots for
  the second access.  The court, in noting that the State's condemnation of
  Pinewood's land did not directly cause the loss of the lot used for the
  second access, correctly concluded that the State was not liable.  See
  LaGue v. Vermont Highway Bd., 128 Vt. 212, 215, 260 A.2d 387, 389 (1969)
  (holding State not liable for inchoate rights of access over property
  condemned before easements established).

                                    IV.

       Finally, Pinewood requests that the interest on the judgment be
  recalculated through the date of satisfaction.  The State prepared a draft
  Judgment Order, pursuant to V.R.C.P. 58, which mistakenly limited interest
  to December 10, 1993, even though judgment was not entered until January
  24, 1994.  Pinewood, therefore, seeks the prejudgment interest for the
  period between December 10, 1993 and the date of the judgment entry.  The
  State, however, contends that Pinewood waived its right to appeal this
  issue because it did not file "any objections to the judgment proposed
  within five days of service upon them."  V.R.C.P. 58.  We disagree.  By

 

  filing a V.R.C.P. 59(e) motion to amend, Pinewood sufficiently
  apprised the trial court of its claim of error, and adequately preserved
  the issue for our review.

       Liquidated or readily ascertainable damages include prejudgment
  interest as a matter of right.  P.F. Jurgs & Co. v. O'Brien, 160 Vt. 294,
  304, 629 A.2d 325, 331 (1993); V.R.C.P. 54(a).  Rule 54(a) entitles
  Pinewood to "all interest accrued on that amount up to and including the
  date of entry of judgment." V.R.C.P. 54(a).  Therefore, Pinewood may
  recover for prejudgment interest up to January 24, 1994.

       Furthermore, under Vermont law, a party may recover postjudgment
  interest for the period between the date of entry and satisfaction. 
  V.R.C.P. 69, V.R.A.P. 37.  A motion to amend automatically stays a
  judgment.  See Reporter's Notes, V.R.C.P. 59 (noting that under Rule 62(a)
  judgment automatically stayed during extension of time for appeal);
  V.R.C.P. 62(a). In situations, as here, where execution is stayed and
  judgment is affirmed, interest "shall be payable from the date the judgment
  was entered."  See V.R.A.P. 37; Reporter's Notes, V.R.A.P. 37 (stating
  first sentence of rule consistent with 12 V.S.A. Sec. 2431, now superseded);
  In Re Waterhouse, 125 Vt. 202, 203, 212 A.2d 696, 697 (1965) (relying on 12
  V.S.A. Sec. 2431 to conclude that V.R.A.P. 37 applies when execution stayed).

       Since the State paid the judgment award on February 15, 1994,
  including interest up to December 10, 1993, it owes Pinewood the interest
  in total on the judgment, absent business loss, which accrued between
  December 10, 1993 and February 15, 1994.

       Business loss award reversed; interest award revised to include that
  accrued from December 10, 1993 to February 15, 1994; remaining issues
  affirmed. Cause remanded for recomputation of award and entry of judgment.

                               FOR THE COURT:


                               _______________________________________
                               Associate Justice


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                                  Footnotes

FN1.    Although we have examined the practices of other jurisdictions
  on recovery of business losses and lost profits, the decisions do not aid
  our analysis.  We found that several jurisdictions allow compensation for
  the loss of the going concern value or goodwill in certain instances, but
  do not provide for lost profits.  See Cal. Civ. Proc. Code Sec. 1263.510
  (West 1982) (adopting Sec. 1016 of Uniform Eminent Domain Code); Wyo. Stat.
  Sec. 1-26-713 (1988) (adopting Sec. 1016 of Uniform Eminent Domain Code);
  City of Detroit v. Michael's Prescriptions, 373 N.W.2d 219, 224-25 (Mich.
  Ct. App. 1985) (stating recovery allowable where business derives success
  from location not easily duplicated or where relocation foreclosed for
  reasons relating to entire condemnation); City of Minneapolis v. Schutt,
  256 N.W.2d 260, 261-62 (Minn. 1977) (holding that compensation for goodwill
  or going concern value only awarded where interest holder able to show
  going concern value will be destroyed, or business cannot relocate as
  practical matter).
       Those jurisdictions that do recognize lost profits as a compensable
  element of business loss damage limit such awards to particular
  circumstances not relevant here.  See State v. Hammer, 550 P.2d 820, 823
  (Ala. 1976) (holding temporary loss of profits during relocation
  recoverable); Metropolitan Atlanta Rapid Transit Auth. v. Ply-Marts, Inc.,
  241 S.E.2d 599, 601-2 (Ga. Ct. App. 1978) (requiring condemnee to prove
  condemned property has some unique or peculiar relationship to business and
  to mitigate damages before loss of profits considered); Department of
  Transp. & Dev. v. Exxon Corp., 430 So. 2d 1191, 1195 (La. Ct. App. 1983)
  (holding lessee operating gas station entitled to lost profits for duration
  of lease).