Title: STATE EX REL DEPT OF HWYS v HY-

State: montana

Issuer: Montana Supreme Court

Document:

No. 12988 I N T H E SUPREME C O U R T O F T H E STATE O F M O N T A N A 1975 T H E STATE O F M O N T A N A , ACTING BY AND T H R O U G H T H E DEPARTMENT O F H I G H W A Y S O F T H E STATE OF M O N T A N A , P l a i n t i f f s a d Appellants, HY -GRADE A U T O COURT, a Dissolved Montana Corpora t i o n ; R O N A L D C . WHITE ; V E N E T A WHITE ; G L Y N O E U J. WHITE, a s S t a t u t o r y Trustees of t h e Hygrade Auto Court, a Dissolved Montana Corporation ; E U T J P H E. MOORE, INC. , Defendants and Respondents. Appeal from: District Court of t h e Sixth J u d i c i a l D i s t r i c t , Honorable W. W. Lessley, Judge presiding. Counsel of Record: For Appellants : Daniel J, Sullivan argued and James D r i s c o l l argued, Helena, Montana For Respondents: Holter, Heath and Kirwan, Bozeman, Montana Robert M. Holter argued, Bozeman, Montana Berger, Anderson, S i n c l a i r & Murphy, B i l l i n g s , Montana Richard FJ. Anderson argued, B i l l i n g s , Montana Yardley and Yardley, Livingston, Montana Dan Yardley appeared, Livingston, Montana Huppert and Swindlehurst, Livingston, Montana Arnold Huppert Jr. appeared, Livingston, Montana Submitted: December 8, 1975 Decided : y?; i'7!r,c , F i l e d : t -4 : , ' - 7 f ; M r . Chief J u s t i c e James T. Harrison delivered t h e Opinion of t h e Court. This is an appeal from a condemnation jury v e r d i c t and judgment entered i n t h e d i s t r i c t c o u r t , Park County. Hy-Grade Auto Court, i s a dissolved Montana corporation holding f e e t i t l e t o s e r v i c e s t a t i o n property i n Gardiner, Montana. The stockholders and successors t o w r a d e a r e Veneta White, Ronald C. White (her son) and Glynora White ( h i s wife) , they w i l l be c o l l e c t i v e l y r e f e r r e d t o herein as "Owner". Ralph E. Moore, Inc. leases t h e s e r v i c e s t a t i o n property from t h e Owner, and has leased it f o r many years. This corporation w i l l be r e f e r r e d t o as "Lessee". There is a sublessee who a c t u a l l y runs t h e s e r v i c e s t a t i o n , but he i s not a p a r t y t o t h i s action. The Montana Department of Highways, ( S t a t e ) , f i l e d t h i s condemnation a c t i o n i n t h e process of upgrading U. S. Highway 89 and t h e bridge crossing t h e Yellowstone River i n Gardiner. The subject property is known a s t h e Northgate Texaco s t a t i o n and is t h e prime s e r v i c e s t a t i o n site i n Gardiner. The property is located on t h e "swing corner", meaning it has good v i s a b i l i t y i n a l l d i r e c t i o n s and good access. The highway f o r k s a t t h e s t a t i o n , one fork going t o Jardine, Montana, and t h e o t h e r crossing t h e Yellowstone bridge, and leading t o t h e North Entrance of Yellowstone National Park. V i r t u a l l y a l l v i s i t o r s t o t h e Park, entering and leaving a t Gardiner, pass t h e site of t h e s t a t i o n . The s t a t i o n pumped over t w i c e a s much gas as any o t h e r s t a t i o n i n Gardiner. After t h e taking, t h e land l e f t a v a i l a b l e t o t h e Owner would not be s u f f i c i e n t nor s u i t a b l e f o r a s e r v i c e s t a t i o n site. A l l improvements on t h e property were taken by t h e S t a t e , e i t h e r as right-of-way, o r f o r t h e construction easement. Lessee had leased t h e property from t h e Owner s i n c e 1964, i n f a c t , since it was b u i l t i n 1948 (under t h e present owner and and i t s predecessor i n i n t e r e s t ) . The lease i n e f f e c t a t t h e time of t h i s a c t i o n was dated February 1, 1968,and provided f o r a t e n year primary t e r m with two a d d i t i o n a l f i v e year re- newal t e r m s . A t t h e time of t r i a l , t h e l e a s e had 1 4 y e a r s t o run. Lessee a l s o o p e r a t e s as a d i s t r i b u t o r f o r Texaco. It s e r v i c e s Northgate Texaco and e i g h t o t h e r Texaco s e r v i c e s t a t i o n s i n t h e Livingston-Gardiner a r e a . P r i o r t o t h e jury t r i a l , t h e S t a t e requested a b i f u r c a t e d t r i a l , t h a t is, i n t h e S t a t e ' s view, t h e jury would f i r s t decide t h e t o t a l value of t h e property taken ( a s though owned by one per- s o n ) , subsequently receiving evidence as t o t h e value of each i n t e r e s t i n t h e whole; deciding t h i s question i n a s e p a r a t e d e l - i b e r a t i o n . The d i s t r i c t c o u r t conducted a s i n g l e t r i a l , permitted t h e introduction of evidence on t h e t o t a l value of t h e property, and t h e values of t h e two i n t e r e s t s . The jury was i n s t r u c t e d t o a r r i v e a t a t o t a l value f i r s t , and then apportion t h a t award be- tween Owner and Lessee, a l l during one d e l i b e r a t i o n . A t t r i a l defendants' e x p e r t witnesses t e s t i f i e d t o t h e t o t a l value of t h e property, ranging i n t h e i r e s t i m a t e s from a high of $135,000 (an estimate by t h e Lessee) t o a low of $100,000 (an estimate by a Texaco land a p p r a i s e r ) . The two a p p r a i s e r s t e s t i f y i n g f o r t h e S t a t e gave estimated values of $41,200 and The jury returned t h i s v e r d i c t : "We t h e J u r y , d u l y impanelled, reach our v e r d i c t i n t h e above-entitled Cause, as follows: "1. For t h e value of t h e land and buildings a c t u a l l y taken, t h e sum of $100,000 "2. For t h e damage t o t h e land remaining a f t e r construction, t h e sum of $ " 3 . Total owing t o both Defendants ( t o t a l of t h e above Two (2) f i g u r e s , t h e sum of $100,000 "Out of t h e t o t a l compensation awarded t o both Defendants, as above s t a t e d , w e f u r t h e r break t h e award down between t h e Defendants, a s follows: "1. To Defendant, Ralph E. Moore, Inc., a s Lessee, t h e sum of $ 50,000 "2. To Defendant, Hy-Grade Auto Court t h e sum of $ 50,000" Judgment w a s entered on t h e v e r d i c t October 4 , 1974. The judgment allowed i n t e r e s t , t o Owner and Lessee, from t h e d a t e of t h e preliminary o r d e r of condemnation, June 19, 1973. The S t a t e appeals from t h e jury v e r d i c t and judgment. Three i s s u e s a r e presented by t h e S t a t e f o r review: 1. I n an eminent domain a c t i o n , what i s t h e proper pro- cedure t o be followed a t t r i a l t o conform t o t h e s t a t u t o r y re- quirements of s e c t i o n 93-9912(5), R.C.M. 1947? 2. Whether both t h e l e s s o r and t h e lessee of t h e property being condemned are e n t i t l e d t o introduce t h e i r r e s p e c t i v e income f i g u r e s a s foundation f o r t h e income approach t o determine t h e value of t h e property being taken? 3 . I n an eminent domain a c t i o n , does t h e i n t e r e s t on t h e judgment run from t h e d a t e of t h e preliminary o r d e r of con- demnation o r from t h e d a t e possession of t h e property t o condemnor i s granted by t h e c o u r t ? W e consider t h e t h i r d i s s u e f i r s t . Section 93-9913, R.C.M. 1947, provides: " * * * I f an order be made l e t t i n g t h e p l a i n t i f f i n t o possession * * * t h e f u l l amount f i n a l l y awarded s h a l l draw lawful i n t e r e s t from t h e d a t e on which t h e property owner surrenders possession of t h e property i n accordance with t h e terms of such order. * * *" The order and judgment of October 4 , 1974, set i n t e r e s t from June 19, 1973, t h e d a t e of t h e preliminary order of condem- nation. This d a t e i s c l e a r l y erroneous, a s t h e S t a t e d i d not t a k e a c t u a l possession of t h e property u n t i l e a r l y 1974. The o r d e r , signed by Judge Shanstrom, granting t h e S t a t e possession of t h e property was dated February 11, 1974. W e d i r e s t t h e d i s t r i c t c o u r t t o c o r r e c t t h e order and judgment of October 4 , 1974, t o i n d i c a t e i n t e r e s t on t h e award running from February 11, 1974 pursuant t o s e c t i o n 93-9913, R.C.M. 1947. The S t a t e a s k s t h i s Court t o i n t e r p r e t t h e procedural requirements f o r eminent domain proceedings as s e t f o r t h i n s e c t i o n 93-9912 ( 5 ) , R.C.M. 1947 : "5. Where t h e r e a r e two (2) o r more e s t a t e s o r divided i n t e r e s t s i n property sought t o be con- demned, t h e p l a i n t i f f i s e n t i t l e d t o have t h e amount of t h e award, f o r s a i d property f i r s t determined, as hereinbefore s t a t e d , a s between p l a i n t i f f and a l l defendants claiming any i n t e r - e s t s t h e r e i n ; t h e r e a f t e r i n t h e same proceeding t h e r e s p e c t i v e r i g h t s of each of such defendants i n and t o t h e award s h a l l be determined by t h e commissioners, under supervision and i n s t r u c t i o n of t h e c o u r t , and t h e award apportioned accordingly." This provision is made a p p l i c a b l e t o jury trials on appeals from a condemnation commissioners' r u l i n g by s e c t i o n 93-9915, R.C.M. 1947. The S t a t e suggests C a l i f o r n i a case l a w f o r c o n s t r u c t i o n of t h e Montana s t a t u t o r y provision. C a l i f o r n i a Code of C i v i l Procedure 81246.1 is similar t o s e c t i o n 93-9912(5), R.C.M. 1947, with any d i f f e r e n c e s i r r e l e v a n t t o t h e i s s u e a t hand. This Court has long held t h a t where a s t a t u t e i s s i m i l a r t o one i n a sister s t a t e , w e w i l l g i v e consideration t o t h e c o n s t r u c t i o n placed on t h a t s t a t u t e by t h e c o u r t s of t h e sister state; but such con- s t r u c t i o n is not binding upon t h i s Court. Cahill-Mooney Const. Co. v. Ayres, 1 4 0 Mont. 464, 373 P.2d 703. Section 93-9912(5), R.C.M. 1947, was enacted, i n i t s p r e s e n t form, by Chap. 234, Laws of 1961. For 1 4 y e a r s t h e c o u r t s of Montana have construed t h e s t a t u t o r y provision t o mean t h e award of a l l t h e p a r t i e s must be determined before any apportion- ment is made among t h e p a r t i e s . This procedure, used i n t h e i n s t a n t c a s e , was applied by t h e c o u r t and jury, without r e v e r s a l o r modification, i n t h e s e cases: S t a t e Highway Comm'n v. McGaffick, 1 4 4 Mont. 76, 394 P.2d 174; S t a t e Highway Comm'n v. C i t y Service Co., 142 Mont. 559, 563, 385 P.2d 604; S t a t e Highway Comm'n v . Crow, 1 4 2 Mont. 270, 384 P.2d 273; S t a t e Highway Comm'n v. Keneally, 142 Mont. 256, 384 P.2d 770. A l l of t h e s e cases concerned valu- a t i o n of leasehold e s t a t e s , and a l l concerned s e r v i c e s t a t i o n l e a s e s , except Crow. C a l i f o r n i a c o u r t s have construed t h a t s t a t e ' s equivalent of s e c t i o n 93-9912(5), R.C.M. 1947, as r e q u i r i n g a b i f u r c a t e d t r i a l with t h e jury f i r s t deciding t h e t o t a l value of t h e property being taken; then, i n a s e p a r a t e proceeding, t h e jury, o r a second jury, apportioning t h e award among t h e p a r t i e s . People v. Lynbar, Inc., 62 Cal.Rptr. 320, 326, 253 Cal.App.2d 870; Redevelopment Agency of C i t y of Fresno v. Penzner, 87 Cal.Rptr. 183, 8 Cal.App.3d 417. O n t h e o t h e r hand, C a l i f o r n i a c o u r t s recognize t h e s t a t u t o r y provision is e n t i r e l y "procedural and nonsubstantive." People v. Lynbar , Inc . , supra. The Montana procedural r u l e has developed, through 1 4 y e a r s of usage, d i f f e r e n t from t h a t developed by C a l i f o r n i a c o u r t s . W e w i l l not overturn t h e developed Montana r u l e unless p r e j u d i c e is shown by t h e p a r t i e s . The procedural requirements of s e c t i o n 93-9912(5), R.C.M. 1947, have been l i b e r a l l y implemented, a s i n C i t y Service Co., where t h e jury d i d n o t f i r s t decide t h e whole compensation due before apportioning t h e award. I n C i t y Service Co. t h e Court s t a t e d : " * * * W e t h i n k it i s c l e a r t h a t t h e awards given by t h e jury (even though l i s t e d s e p a r a t e l y , and, thus, e r r o r according t o t h e S t a t e ) w e r e n o t ex- c e s s i v e , a r e supported by s u b s t a n t i a l evidence, and do not r e f l e c t an i n c r e a s e i n v a l u a t i o n due s o l e l y t o a d i s t r i b u t i o n i n t i t l e . To send t h i s c a s e back f o r a new t r i a l simply because t h e jury d i d not f i r s t express t h e damage i n one sum would be t h e height of shortsightedness and an u t t e r waste of t i m e . " I n t h e i n s t a n t case, t h e jury d i d determine a t o t a l award, t h e r e a f t e r apportioning t h e award among t h e p a r t i e s . The award w a s supported by t h e evidence and does not appear exces- sive. The S t a t e does not show prejudice due t o t h e procedure used i n t h e d i s t r i c t court. The jury w a s properly admonished t o f i r s t a s c e r t a i n t h e e n t i r e award a s though t h e property w e r e owned by one person, then t o apportion t h i s sum among t h e p a r t i e s . This Court has repeatedly indicated t h a t it " w i l l presume t h a t t h e jury, i n reaching i t s v e r d i c t , followed t h e i n s t r u c t i o n s t h a t w e r e given t o it by t h e t r i a l judge." Staggers v. U.S.F. & G. Co., 159 Mont. 254, 259, 496 P.2d 1161; Welsh v. Roehm, 125 Mont. 517, The S t a t e argues evidence a s t o t h e value of t h e lease- hold e s t a t e must not be introduced p r i o r t o a s c e r t a i n i n g a value f o r t h e property, under t h e undivided f e e r u l e , t h e r e f o r e a bifurcated t r i a l must occur t o exclude such evidence from t h e consideration of t h e jury i n a r r i v i n g a t t h e t o t a l value of t h e property a s though owned by one person. The jury w a s i n s t r u c t e d i n t h e undivided f e e r u l e , which governs t h i s case, but t h e r u l e does not prevent introduction of evidence as t o t h e value of t h e whole. The r a t i o n a l e f o r admitting such evidence p r i o r t o t h e determination of t o t a l value, i s w e l l s t a t e d by t h e California c o u r t i n People v. Lynbar, Inc., 62 Cal.Rptr. 320, 328: "In t h i s state, as i s generally t r u e elsewhere, t h e c o n s t i t u t i o n a l requirement of j u s t compen- s a t i o n f o r t h e taking of property i n eminent domain i s normally s a t i s f i e d by t h e payment by t h e condemnor t o t h e condemnee of t h e market value of t h e property taken. This market value i s t h e highest p r i c e which t h e property would bring, i f exposed f o r sale i n t h e open market by a w i l l i n g seller t o a w i l l i n g buyer with both p a r t i e s t o t h e t r a n s a c t i o n being f u l l y informed of a l l t h e uses and purposes t o which t h e property i s reasonably adaptable and available. * * * t o a r r i v e a t t h i s value one must take i n t o consideration a l l those things upon which such p a r t i e s , dealing with each o t h e r i n t h e open market, would reasonably r e l y . * * * For t h i s purpose t h e property, together with a l l of its com- pensable a t t r i b u t e s , must be valued as t h e condem- nor f i n d s it, including without l i m i t a t i o n thereby, t h e s t a t e of its t i t l e , and i n t h i s case, t h e * * * leasehold. * * * W e say t h i s because t h i s very valuable leasehold i s one of t h e t h i n g s which such a buyer and s e l l e r would consider i n t h e open m a r - k e t i n f i x i n g t h e p r i c e a t which t h e ownership of t h e property would be t r a n s f e r r e d . To say t h a t t h e existence of such a lease should be ignored by r e s o r t i n g t o t h e l e g a l f i c t i o n and l e g a l pretense of a s i n g l e owner is t o ignore t h e r e a l i t i e s of t h e market place. I f compensation i s t o be j u s t and i f t h e property owner i s t o be made whole f o r t h e involuntary l o s s of h i s property t o t h e s t a t e , t h i s cannot be permitted t o happen." A s M r . J u s t i c e Holmes s a i d i n Boston Chamber of Commerce v. Boston, 217 U.S. 189, 3 0 S.Ct. 459, 54 L.Ed. 725, 727: " * * * And t h e question is, What has t h e owner l o s t ? not, What has t h e t a k e r gained?" I n i t s second i s s u e , t h e S t a t e questions t h e use of t h e income c a p i t a l i z a t i o n method t o compute t h e value of t h e property being taken. The S t a t e a l l e g e s t h e Lessee's source of income p r i n c i p a l l y came from s e l l i n g products t o t h e person a c t u a l l y conducting business on t h e property a s t h e sublessee. The evidence i n d i c a t e s otherwise. The Lessee r e a l i z e d income due t o i t s c o n t r o l of t h e property under t h e l e a s e and c o n t r o l of t h e flow of products t o t h e s t a t i o n operator pursuant t o t h e sublease. The Lessee a l s o received r e n t a l based on t h e gallons of gasoline sold a t t h e s t a t i o n . Without t h e l e a s e , t h e Lessee could not have c o n t r o l l e d t h e flow of gasoline, tires, b a t t e r i e s and accessories t o t h e s t a t i o n . I f t h e r e l a t i o n s h i p of t h e Lessee t o t h e s t a t i o n operator was: merely a s a s u p p l i e r , t h e operator could go elsewhere f o r products, i f he d i d n o t wish t o deal exclusively with Lessee. I n t h i s case, t h e Lessee had t h e r i g h t t o terminate t h e sublease, i f t h e operator sold any products not approved and/or supplied by Lessee. This p r o f i t a b l e l e g a l r i g h t w a s terminated by t h e taking of t h i s property. The u s e of t h e c a p i t a l i z e d income approach t o v a l u a t i o n i s a p p r o p r i a t e i n t h i s instance. A t t r i a l , t h e a l t e r n a t i v e methods of v a l u a t i o n were discussed. Reproduction c o s t was r e j e c t e d by a l l a p p r a i s e r s a s inapplicable. The comparable sales approach was questioned when t h e S t a t e could n o t p r e s e n t t r u l y comparable r e c e n t s a l e s . A s s t a t e d i n S t a t e Highway Comm'n v. Bennett, 162 Mont. 386, 390, 513 P.2d 5: "It has been g e n e r a l l y held t h a t t h e b e s t method of a r r i v i n g a t market value i s r e c e n t sales of compar- a b l e property. * * * But where t h e r e a r e no compar- a b l e s a l e s , evidence based upon revenue and valu- a t i o n based i n p a r t thereon i s competent and admis- s i b l e . " When t h e income c a p i t a l i z a t i o n method e n t a i l s less con- j e c t u r e and u n c e r t a i n t y than a l t e r n a t i v e methods, it i s t h e a p p r o p r i a t e v a l u a t i o n method, with appropriateness n e c e s s a r i l y hinging on t h e f a c t s of t h e c a s e being t r i e d . S t a t e Department of Highways v. Olsen, Mont . , 531 P.2d 1330, 32 St.Rep. 110. I n t h e i n s t a n t case, t h e income c a p i t a l i z a t i o n approach proved p r e f e r a b l e , r e s u l t i n g i n an award which was reasonable i n l i g h t of t h e record. There was no e r r o r on t h e p a r t of t h e d i s - t r i c t c o u r t i n permitting v a l u a t i o n by t h i s method. W e f i n d s e c t i o n 93-9912(5), R.C.M. 1947, does n o t r e q u i r e a b i f u r c a t e d t r i a l i n eminent domain proceedings. The income c a p i t a l i z a t i o n method of v a l u a t i o n is permissible i n a proceeding such as t h i s , when it provides f o r t h e least conjecture and un- c e r t a i n t y . I n t e r e s t on condemnation awards runs from t h e d a t e of t h e o r d e r of possession of t h e property t o t h e S t a t e . The order and judgment of t h e d i s t r i c t c o u r t is affirmed, with t h e exception of t h e provision f o r i n t e r e s t on t h e award, which s h a l l be changed a s d i r e c t e d i n t h i s opinion. . Chief J u s t i c e W e concur: ................................ J u s t i c e s