Title: City of Virginia Beach v. Oakes

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  All the Justices 
 
CITY OF VIRGINIA BEACH 
OPINION BY JUSTICE LEROY R. HASSELL, SR. 
v.  Record No. 011613 
April 19, 2002 
 
SUSAN OAKES, ADMINISTRATRIX OF THE 
ESTATE OF PAULINE BELCHER, ET AL. 
 
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH 
Edward W. Hanson, Jr., Judge 
 
 
In this appeal of a judgment entered in favor of 
landowners in a condemnation proceeding, we consider whether 
the landowners' evidence of damage to the residue was 
speculative. 
I. 
 
The City of Virginia Beach (the City) filed its petition 
in condemnation against Susan Oakes, guardian ad litem for 
Pauline M. Belcher.  During the proceedings, the original 
landowner died, and Susan Oakes, administrator of the estate 
of Pauline Belcher, and Belcher's successors in interest were 
made parties to the proceeding.  These parties will be 
referred to as the landowners. 
 
The City initiated the condemnation proceeding to acquire 
real property and easements for the purpose of constructing 
road and utility improvements to Oceana Boulevard.  The City 
and the landowners agreed that the value of the land taken was 
$60,000, which included the fee simple value of the land used 
for a drainage easement even though the City only acquired an 
easement on that land. 
II. 
 
Apparently, the circuit court sustained the City's motion 
to proceed without commissioners because of the landowners' 
failure to designate commissioners.  The following evidence 
was adduced at a bench trial. 
 
Belcher owned approximately 24 acres of land, and with 
the exception of a house, the land was unimproved.  The land 
enjoyed a B-2 business zoning classification on about two 
acres of the property adjacent to Oceana Boulevard.  The 
remaining 22 acres of the property had an "R-5D Residential" 
zoning classification. 
 
The City acquired about 195 feet of frontage property 
adjacent to Oceana Boulevard as part of the taking, leaving 
the landowners with 148 feet of frontage property.  The City 
also acquired the permanent drainage easement noted above 
which is located on the front of the landowners' parcel.  The 
City used this drainage easement to create a detention pond.  
The detention pond is unusual because it collects "storm water 
runoff" accumulated from 3,400 linear feet of ditches along 
Oceana Boulevard, which is a four-lane highway. 
 
James C. Cahoon, III, a senior environmental scientist 
who qualified as an expert witness, testified that typical 
 
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"storm water runoff" from a roadway contains pollutants such 
as lead, mercury, oil, and grease.  The detention pond is 
designed to filter these pollutants and clean the water, 
thereby preventing pollutants from entering or leaving the 
City's storm water system and affecting the state waters.  The 
City is responsible for the maintenance of the detention pond. 
 
Thomas L. Stokes, Jr., an environmental scientist and 
consultant who testified on behalf of the landowners, stated 
that a landowner must be aware of any contamination on his 
property, including contamination in a detention pond.  Stokes 
also testified that in the future, the property might become 
contaminated from conventional "highway runoff" and that the 
detention pond is "designed to collect and retain pollutants 
into it and to cause infiltration to the maximum extent 
possible into the landowners' land."  Stokes stated that 206 
accidental spills of pollutants have been reported in the 
vicinity of the landowners' property since 1992.  He testified 
that a landowner "would want to monitor" a detention pond and 
detect pollutants that could affect the land.  The cost of 
monitoring the detention pond in this case would be 
approximately $4,000 annually.  Stokes stated, however, that a 
landowner does not have an affirmative obligation to monitor a 
detention pond. 
 
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Gerald A. Porterfield, a land planner and landscaper, 
qualified as an expert witness and testified on behalf of the 
landowners.  He testified that the use of the landowners' 
property is restricted by a perpetual easement over the 
property for military and naval purposes for use in connection 
with the Oceana Naval Air Station in Virginia Beach.  This 
easement affects the air rights above the property and limits 
the activities that can be performed upon the property. 
 
Porterfield testified that only light industrial uses 
such as "warehousing, wholesaling, [and] distribution . . . 
uses" may be conducted on the property.  He stated that before 
the City's taking, the best use of the property was the 
construction of an office warehouse on the front acreage and 
the construction and operation of "a self-storage, mini-
storage" facility on the "bulk of the [rear] property."  When 
asked to describe "in more detail the development [he] 
envision[ed] would be suitable for that property," Porterfield 
responded:  "Well, it is pretty straightforward.  Create a 
couple of buildings, create a bay of parking parallel to 
Oceana Boulevard with the necessary landscaping in there, of 
course, and create some shell buildings that literally front 
on Oceana Boulevard, with like overhead door access to the 
rear.  And you can do a couple of buildings like that back to 
 
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a certain point, and then you change it either to multi-
storage or self-storage." 
 
Even though Porterfield conceded that the development he 
envisioned would require a change in the property's zoning 
classification, he opined that the City "would look highly 
favorably upon" rezoning the property to accommodate its best 
use.  Porterfield also testified that as a result of the 
taking, the office space that he had envisioned would have to 
be 14,000 square feet smaller than an office warehouse that 
could have been constructed before the taking.  He attributed 
the smaller office space to the location and size of the 
detention pond.  The landowners also presented other expert 
witnesses who testified that the highest and best use of the 
residue would be the construction of an office building and 
"warehouse-type" space. 
 
Dennis W. Gruelle, a real estate appraiser, qualified as 
an expert witness who testified on behalf of the landowners.  
He also opined that before the taking, the best use of the 
property was for light industrial use, "more specifically sort 
of a small office warehouse facility in the front of the 
property and mini-warehouse in the rear of the property."  He 
stated that the taking damaged the residue because prior to 
the taking the property "had about 343 feet of frontage along 
Oceana Boulevard.  The acquisition and the location of the 
 
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[detention] pond took approximately 59 percent of that 
frontage, almost 195 feet, and took out an area in the front, 
the portion of the property that has exposure along Oceana 
Boulevard."  He also opined that the detention pond had a 
negative impact upon the value of the residue. 
 
Gruelle stated: 
"The total impact in my estimate is $120,000.  And 
it is broken down basically a couple of different 
ways.  As I discussed, the impact with brokers in 
the market, and many of them had very negative 
perceptions of this property . . . when there was 
. . . a drainage pond.  But it is a new concept to 
the extent that there aren't many examples in the 
market that you can [c]ite. 
 
"In fact, many brokers were unaware of an 
incident where a pond was put on a property in 
easement form.  So to try to direct a [comparison] 
to directly illustrate that impact, it was difficult 
to do.  But the brokers in most cases just would 
talk about percentage of damages being anywhere from 
10 to 15 percent, some of them much higher, some of 
them wouldn't even – said they couldn't sell the 
property.  But that 10 to 15 percent impact did seem 
to be a fairly consistent number against the 
remaining property." 
 
 
Gruelle testified that his damage estimate of $120,000 
was based upon $65,000, which included contingencies and 
"monitoring costs" associated with the detention pond and 
$55,000 in lost rents.  Gruelle included lost rents in his 
damage estimate because the size of the office building that 
Porterfield envisioned could have been constructed before the 
taking would have to be reduced about 64 percent in building 
size, resulting in a difference of about $55,000 in potential 
 
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lost rents.  Gruelle stated that his damage estimate of 
$120,000 to the residue was supported by "the test of market 
impact and the test of market perception based on [his] 
discussions with the brokers and developers and people that 
[he] discussed this with, again, looking at that percentage.  
These were the component parts that could relate to that 
percentage indicating the overall damage impact of 
[$]120,000."  
 
The City argued in the circuit court that the landowners' 
evidence of damages was speculative.  The circuit court 
disagreed with the City and in a written letter opinion, which 
was made a part of the court's final order, the court accepted 
Gruelle's conclusion that the damage to the residue was 
$120,000.  The City appeals. 
III. 
 
The City argues that the circuit court erred "by 
admitting evidence of, and finding damage based on 
. . . development plans, and expert opinions based on those 
plans, even though the plans did not take all current 
circumstances into consideration and depended upon future 
approvals, which were out of the landowners' control."  
Continuing, the City contends that the landowners' damages 
were speculative because they were based in part upon future 
rents of a "hypothetical building."  Also, the City asserts 
 
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that certain damages that the circuit court included in its 
award were remote and speculative.  Included in the damage 
award were a $25,000 reserve account for future prospective 
environmental damage caused by the detention pond and $40,000 
for monitoring for early detection of such prospective 
environmental damage. 
 
Responding, the landowners contend that the evidence of 
damages was not speculative and that they presented evidence 
of the highest and best use of the residue affected by the 
taking.  The landowners also argue that the circuit court 
properly considered the negative impact of the detention pond 
upon the property and that the evidence of damages caused by 
this negative impact was not speculative.  We disagree with 
the landowners. 
 
The principles that we apply in our resolution of this 
appeal are well established. 
 
"In every eminent domain case involving a 
partial taking, the measure of damages to the 
residue of the property not taken is the difference 
in the fair market value of the residue immediately 
before and immediately after the taking.  In 
ascertaining such damages, both present and future 
circumstances which actually affect the value of the 
property at the time of taking may be considered, 
but remote and speculative damages may not be 
allowed.  Colonial Pipeline v. Lohman, 207 Va. 775, 
781, 152 S.E.2d 34, 39 (1967); Ryan v. Davis, 201 
Va. 79, 82, 109 S.E.2d 409, 412 (1959); Appalachian 
Elec. Etc., Co. v. Gorman, 191 Va. 344, 353, 61 
S.E.2d 33, 37 (1950)." 
 
 
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East Tennessee Natural Gas Co. v. Riner, 239 Va. 94, 100, 387 
S.E.2d 476, 479 (1990); accord Wammco, Inc. v. Commonwealth 
Transp. Comm'r, 251 Va. 132, 137, 465 S.E.2d 584, 586 (1996); 
Chappell v. Virginia Electric and Power Co., 250 Va. 169, 172, 
458 S.E.2d 282, 284 (1995); Town of Rocky Mount v. Hudson, 244 
Va. 271, 273, 421 S.E.2d 407, 408 (1992); State Hwy. & Transp. 
Comm'r v. Lanier Farm, Inc., 233 Va. 506, 510-11, 357 S.E.2d 
531, 533-34 (1987). 
 
We have repeatedly emphasized that a landowner whose 
property is affected by a partial taking may not recover 
damages to the residue if such damages are remote or 
speculative.  Id.; accord Revocor Corp. v. Commonwealth 
Transp. Comm'r, 259 Va. 389, 394, 526 S.E.2d 4, 7-8 (2000); 
Lynch v. Commonwealth Transp. Comm'r, 247 Va. 388, 391, 442 
S.E.2d 388, 389-90 (1994).  For example, we held in Tidewater 
Railway Co. v. Cowan, 106 Va. 817, 822, 56 S.E. 819, 820 
(1907), that damages to the residue resulting from a partial 
taking are those that flow directly from the taking and not 
damages that are merely speculative. 
 
Applying these principles, we hold that the landowners' 
evidence of damages to the residue was speculative and remote.  
The office building that Porterfield "envisioned" could have 
been constructed upon the land before the taking was the 
product of pure speculation, as were the lost profits caused 
 
9
by a decrease in the rents because of a reduction in the size 
of this hypothetical building.*  This hypothetical building 
could not have been constructed unless and until the City 
approved zoning changes to the property.  Additionally, prior 
to construction of this hypothetical building, the City would 
have been required to approve a sewage treatment system and a 
site plan. 
 
We recognize that the landowners' appraiser, Gruelle, 
testified that the residue was damaged by 11 percent of the 
value of the property, which also totals $120,000, the amount 
of the circuit court's award.  However, this opinion was 
speculative because it was, in part, based upon the existence 
of the hypothetical building and rents that would accrue from 
that building. 
 
We also hold that the circuit court should not have 
considered, in its award of damages to the residue, evidence 
that pollution spills might occur and contaminate the residue 
due to a potential failure of the detention pond.  Jeffrey 
Hammaker, who testified on behalf of the landowners, conceded 
that contamination of the residue would only be caused by acts 
of negligence or criminal activity.  Not only was this 
evidence of possible contamination speculative, but we have 
                     
* We also observe that the City paid the landowners the 
full value for the land where the hypothetical office building 
 
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consistently held that the "eminent domain provisions in the 
Virginia Constitution have no application to tortious or 
unlawful conduct, whether by contractors engaged in 
constructing public improvements, Ryan v. Davis, 201 Va. 79, 
83, 109 S.E.2d 409, 413 (1959), governmental agents, Eriksen 
v. Anderson, 195 Va. 655, 657-59, 79 S.E.2d 597, 598-600 
(1954), or third parties who are strangers to the condemnation 
proceedings, Highway Commissioner v. Crockett, 203 Va. 796, 
801, 127 S.E.2d 354, 358 (1962)."  Lanier Farm, 233 Va. at 
511, 357 S.E.2d at 534. 
 
We agree with the landowners that they are entitled to 
recover appropriate damages "flowing directly from the 
taking," id., and that the circuit court must consider the 
highest and best use of the property.  However, these 
principles do not relieve the landowners of their burden to 
prove damage to the residue with evidence that is neither 
speculative nor remote. 
 
Contrary to the landowners' assertion, our decision in 
Revocor does not support their contention that they presented 
appropriate evidence of damage to the residue.  In Revocor, we 
considered whether a circuit court properly excluded evidence 
of adjustment costs as a factor to be considered by the 
commissioners in determining damage to the residue of the 
                                                                
would have been located. 
 
11
property.  The landowner in Revocor presented testimony that 
as a result of the taking, the costs of developing a 
residential parcel had increased because of the necessity to 
construct a road through a marshy portion of the property with 
undesirable topography.  259 Va. at 391-92, 526 S.E.2d at 6-7.  
We pointed out that in determining the diminution of the 
market value of the residue or damages thereto, a court should 
consider the expense made necessary by reason of the 
improvement in adjusting the property to the changed 
conditions caused by the taking.  Id. at 394, 526 S.E.2d at 8.  
Unlike the landowner in Revocor, the landowners in this case 
do not seek damages for increased development costs.  Rather, 
the landowners in this case seek to recover speculative rents 
for a building that one of their expert witnesses had 
"envisioned" might have been constructed on the residue even 
though the expert witness concedes that the building could not 
be constructed without a change in the property's zoning 
classification and certain approvals from the City. 
 
We recognize, as the landowners in this case properly 
observe, that in Pruner v. State Highway Commissioner, 173 Va. 
307, 310, 4 S.E.2d 393, 394 (1939), we held that in a 
condemnation proceeding, the trier of fact "charged with 
determining the value of land which is being taken by eminent 
domain [must] consider all uses to which it may be reasonably 
 
12
adapted and to award compensation upon the basis of its most 
advantageous and valuable use, having regard to the existing 
business demands of the community or such as may be reasonably 
expected in the immediate future."  However, the landowners 
neglect to mention that we also stated in Pruner that 
"[p]urely imaginative or speculative value should not be 
considered."  Id. at 311, 4 S.E.2d at 394.  In this case, the 
landowners' purported damages to the residue, consisting of 
lost rents from an "envisioned" building, possible future 
contamination of a detention pond due to negligent or criminal 
acts, and the cost of monitoring such pond, are speculative 
and cannot be recovered. 
 
In view of our holdings, we need not consider the 
litigants' remaining contentions.  Accordingly, we will 
reverse the judgment of the circuit court, and we remand the 
case for further proceedings consistent with this opinion. 
Reversed and remanded. 
 
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