### No. 12988 INTHE SUPREME COURT OF THE STATE OF MONTANA 1975

THE STATE OF MONTANA, ACTING BY AND 

### THROUGH THE DEPARTMENT OF 

### HIGHWAYS OF 

### THE STATE OF 

### MONTANA, Plaintiffs ad

### Appellants,



### HY-GRADE 

### AUTO COURT, a Dissolved Montana Corporation

### ;RONALD C

# .WHITE

### ;VENETA WHITE

### ; GLYNOEU J. 

### WHITE, as StatutoryTrustees of the Hygrade Auto Court, 

### a Dissolved Montana Corporation

### ;EUTJPH 

### E. MOORE, 

### INC.

# , Defendants and Respondents.

Appeal from: District Court of the Sixth Judicial District, Honorable W. 

### W. Lessley, Judge presiding. Counsel of Record: For Appellants: 

### Daniel J, 

### Sullivan argued and James Driscoll argued,

Helena, Montana For Respondents: Holter, Heath and Kirwan, Bozeman, Montana Robert 

### M. Holter argued, Bozeman, Montana Berger, Anderson, Sinclair& 

### Murphy, Billings,

Montana Richard FJ. 

### Anderson argued, Billings, 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

, 

### Filed: t -4 :,'-7f ;Mr. 

### Chief Justice James T. 

### Harrison delivered the Opinion of the Court. This is 

### an appeal from a condemnation jury verdict and judgment entered inthe district court, Park County. Hy-Grade Auto Court, is

### a dissolved Montana corporation holding fee 

### title to service stationproperty inGardiner, Montana. The stockholders and successors towradeareVeneta White, Ronald C. 

### White (her son) and Glynora White (hiswife)

## , they 

### willbe collectively referred toherein as "Owner". Ralph E. 

### Moore, Inc. leases the service stationproperty from the Owner, and has leased it 

### formany years. This corporation 

### will be referred toas 

### "Lessee". There is 

### a sublessee who actually

runs the service station, but he isnot a party tothisaction. The Montana Department of Highways, (State), filed this condemnation action inthe process of upgrading U. 

### S. Highway 89 and the bridge crossing the Yellowstone River inGardiner. The subject property is

### known asthe Northgate Texaco stationand is 

### the prime service station site inGardiner. The property is 

### located on the "swing corner", meaning it 

### has good visability inalldirections and good 

### access. The highway forks atthe station, one fork going toJardine, Montana, and the other crossing the Yellowstone bridge, and leading tothe North Entrance of Yellowstone National Park. Virtually all

### visitors tothe Park, entering and leaving atGardiner, pass the siteof the station. The stationpumped over 

### twice asmuch gas as any other station in Gardiner. After the taking, the land leftavailable to 

### the Owner would not be sufficient nor suitable for a service station site. All

### improvements on the property were taken by the State, either

as 

### right-of-way, or for the construction easement. Lessee had leased the property from the Owner since 1964, in fact, since it 

### was built in 1948 (under the present owner andand 

### its predecessor in interest). The 

### lease ineffect 

### atthe time of this action was dated February 

### 1, 1968,and provided for a ten year primary 

### termwith two additional five year 

### renewal 

### terms. Atthe time of 

### trial, the lease had 

### 14years to

run. Lessee alsooperates 

### as a distributor for Texaco. It services Northgate Texaco and eight other Texaco service stations in the Livingston-Gardiner area. Prior to the jury trial, the Staterequested a bifurcated trial, that 

### is, in the State's view, the jury would firstdecide the total value of the property taken (asthough owned by one person), subsequently receiving evidence 

### as tothe value of each interest in the whole; deciding this question in

### a separate deliberation. The district court conducted 

### a single 

### trial, permitted the introduction of evidence on the total value of the property, and the values of the two interests. The jury was instructed to arrive at

### a total value first, and then apportion that award between Owner and Lessee, allduring one deliberation. Attrialdefendants' expert witnesses testified tothe total value of the property, ranging intheir estimates from a high of $135,000 (an 

### estimate by the Lessee) to a low of $100,000 (an estimate by a Texaco land appraiser). The two appraisers testifying for the State gave estimated values of $41,200 and

The jury returned thisverdict: "We the Jury, duly impanelled, reach our verdict inthe above-entitled Cause, as follows: "1. For the value of the land and buildings actually taken, the sum of $100,000 "2. For the damage to the land remaining after construction, the sum of $ "3. Total owing toboth Defendants (totalof the above Two (2) figures, the sum of $100,000"Out of the total compensation awarded toboth Defendants, 

### as above stated, 

### we further break the award down between the Defendants, as follows: "1. To Defendant, Ralph E. Moore, Inc., asLessee, the sum of $ 50,000 

### "2. To Defendant, Hy-Grade Auto Court the sum of $ 50,000" Judgment 

### was entered on the verdict October 

### 4, 1974. The judgment allowed interest, to Owner and Lessee, from the date of the preliminary order of condemnation, June 19, 1973. The State appeals from the jury verdict and judgment. Three issues arepresented by the State for review: 

### 1. In an eminent domain action, what 

### isthe proper procedure tobe followed at

### trial toconform to the statutory

### requirements of section 93-9912(5), R.C.M. 1947? 2. Whether both the lessor and the 

### lessee of the property being condemned are entitled to introduce their respective income figures as foundation for the income approach todetermine the value of the property being taken? 

### 3. In an eminent domain action, does the interest on thejudgment run from the date of the preliminary order of condemnation or from the datepossession of the property tocondemnor is granted by the court? Weconsider the third issue first. Section 93-9913, R.C.M. 1947, provides: 

### " 

## * 

# * * If an order be made letting the plaintiff intopossession

## * * * the full amount finally awarded shall draw lawful interest from the date on which the property owner surrenders possession of the property inaccordance with the terms of such order. 

## * * 

## *" The order and judgment of October 4, 1974, 

### set interest from June 19, 1973, the dateof the preliminary order of condemnation. This date is clearly erroneous, as the Statedid not take actual possession of the property until early 1974. The order, signed by Judge Shanstrom, granting the Statepossession of theproperty was dated February 

### 11, 1974. Wedirest the district court tocorrect the order and judgment of October 4, 1974, to indicate interest on the award running from February 

### 11, 1974 pursuant to section 93-9913, R.C.M. 1947. The State asks thisCourt to interpret the procedural requirements for eminent domain proceedings 

### as set forth in section 93-9912 (5), R.C.M. 1947: "5. Where there are two (2) ormore estates or divided interests inproperty sought tobe condemned, the plaintiff 

### is entitled tohave the amount of the award, for said property first determined, 

### as hereinbefore stated, asbetween plaintiff and 

### alldefendants claiming any interests therein; thereafter in the 

### same proceeding the respective rights of each of such defendants inand to the award shall be determined by the commissioners, under supervision and instruction of the court, and the award apportioned accordingly." This provision 

### ismade applicable tojury 

### trials on appeals from

a condemnation commissioners' ruling by section 93-9915, R.C.M. 1947. The State suggests California 

### case 

### lawfor construction of the Montana statutory provision. California Code of Civil Procedure 81246.1 

### is 

### similar to section 93-9912(5), R.C.M. 1947, with any differences irrelevant to the issue 

### athand. This Court has long held that where 

### a statute 

### is similar toone in a 

### sister state, 

### we willgive consideration to the construction placed on that statuteby the courts of the 

### sister state; but such construction 

### is not binding upon this Court. Cahill-Mooney Const. Co. v. Ayres, 140Mont. 464, 373 P.2d 703. Section 93-9912(5), R.C.M. 1947, was enacted, in 

### its present form, by Chap. 234, Laws of 1961. For 14years the courts of Montana have construed the statutory provision tomean the award of allthe partiesmust be determined before any apportionment 

### ismade among the parties. This procedure, used in the instantcase, was applied by the court and jury, without reversal or modification, in these cases: State Highway Comm'n v. McGaffick, 144Mont. 76, 394 P.2d 174; State Highway Comm'n v. City Service Co., 142 Mont. 559, 563, 385 P.2d 604; StateHighway Comm'n v. Crow, 142Mont. 270, 384 P.2d 273; State Highway Comm'n v. Keneally, 142 Mont. 256, 384 P.2d 770. All of these 

### cases concerned valuation of leasehold estates, and all concerned service station leases, except Crow. California courts have construed that state's equivalent of section 93-9912(5), R.C.M. 1947, 

### as requiring 

### a bifurcated 

### trial with the jury firstdeciding the total value of the property being taken; then, in a separate proceeding, thejury, or 

### a second jury, apportioning the award among the parties. People v. Lynbar, Inc., 62 Cal.Rptr. 320, 326, 253 Cal.App.2d 870; Redevelopment Agency of City of Fresno v. Penzner, 87 Cal.Rptr. 183, 8 Cal.App.3d 417. On the other hand, California courts recognize the statutory provision 

### is entirely "procedural and nonsubstantive." People v. Lynbar

## , Inc

# ., supra. The Montana procedural rule has developed, through 14 years of usage, different from that developed by California courts. We 

### willnot overturn the developed Montana ruleunless prejudice 

### is shown by the parties. The procedural requirements of section 93-9912(5), R.C.M. 1947, have been liberally implemented, as inCity Service Co., where the jury did not firstdecide the whole compensation due before apportioning the award. In City Service Co. the Court stated: 

### " 

## * * * We think it 

### is clear that the awards given by the jury (even though listed separately, and, thus, error according to the State) 

### were not excessive, are supported by substantial evidence, and do not reflect an increase invaluation due solely to a distribution in title. To send this case back for a new trial simply because the jury did not firstexpress the damage inone sum would be the height of shortsightedness and an utter 

### waste of 

### time."

### In the instant case, the jury did determine a total award, thereafter apportioning the award among the parties. The award 

### was supported by the evidence and does not appear excessive. The Statedoes not show prejudice due tothe procedure used in the district court. The jury 

### was properly admonished t o f i r s tascertain the entireaward as though the property 

### were owned by one person, then toapportion this sum among the parties. This Court has repeatedly indicated that it 

### "will presume thatthe jury, in reaching its

### verdict, followed the instructions that 

### were given to it 

### by the trialjudge." Staggersv. U.S.F. & G. 

### Co., 159 Mont. 254, 259, 496 P.2d 1161; Welsh v. Roehm, 125Mont. 517,

The Stateargues evidence as tothe value of the leasehold estatemust not be introduced prior toascertaining a 

### value for theproperty, under theundivided feerule, therefore a bifurcated trialmust occur toexclude such evidence from the consideration of the jury inarriving 

### atthe total value of the property asthough owned by one person. The jury 

### was instructed inthe undivided fee rule, which governs thiscase, but the rule does not prevent introduction of evidence as tothevalue of the whole. The rationale for admitting such evidence prior to the determination of totalvalue, iswell 

### stated by the California court inPeople 

### v. Lynbar, Inc., 62 Cal.Rptr. 320, 328: "In this state, 

### as is

### generally true elsewhere, the constitutional requirement of just compensation for the taking of property ineminent domain is 

### normally satisfied by the payment by the condemnor tothe condemnee of themarket value of the property taken. This market value is 

### the highest price which the property would bring, if exposed for sale 

### inthe open market by a willing seller 

### to a 

### willing buyer with both parties to the transaction being fully informed of allthe uses and purposes to which the property is

### reasonably adaptable and available. 

## * * * toarrive atthisvalue one must take into consideration allthose things upon which

### such parties, dealing with each other in the open market, would reasonably rely. 

## * * * For this purpose the property, together with allof its 

### compensable attributes, must be valued 

### as the condemnor finds it, 

### including without limitation thereby, the stateof its title, 

### and in thiscase, the

## * * * leasehold. 

## * * * We 

### say this because thisvery valuable leasehold is

### one of the thingswhich such a buyer and sellerwould consider inthe open 

### market infixing the price atwhich the ownership of the property would be 

### transferred. To say that the existence of such a lease should be ignored by resorting tothe legal fiction and legalpretense of a single owner 

### is toignore therealities of the market place. If compensation is 

### tobe just and if theproperty owner is

### tobe made whole for the involuntary loss of hisproperty to the state, this cannot be permitted tohappen." AsMr. 

### Justice Holmes said inBoston Chamber of Commerce

v. Boston, 217 U.S. 189, 30 

### S.Ct. 

### 459, 54 L.Ed. 725, 727: 

### " 

## * * * And the question is, 

### What has the owner lost? not, What has the taker gained?" In its 

### second issue, the State questions the use of the income capitalization method tocompute the value of the property being taken. The State alleges the Lessee's source of income principally

came from sellingproducts to the person actually conducting business on theproperty asthe sublessee. The evidence indicates otherwise. The Lessee 

### realized income due toits 

### control of the property under the lease and control of the flow of products to the stationoperator pursuant tothe sublease. The Lessee also received rental based on the gallons of gasoline sold atthe station. Without the lease, the Lessee 

### could not have controlled the flow of gasoline, 

### tires, batteries and accessories tothe station. If the relationship of the Lessee tothe stationoperator

was: merely asa supplier, the operator could go elsewhere for products, if he did not wish todeal exclusivelywith Lessee. 

### In this case, 

### the Lessee 

### had theright toterminate the sublease, if the operator sold any products not approved and/or supplied by Lessee. This profitable legal right 

### was terminated by the taking of thisproperty.The use of the capitalized income approach tovaluation 

### is appropriate in this instance. At

### trial, the alternativemethods of valuation were discussed. Reproduction cost was rejected by 

### all appraisers as inapplicable. The comparable 

### sales approach

was questioned when the State could not present truly comparable recent sales. As stated inState Highway Comm'n v. Bennett, 162 Mont. 386, 390, 513 P.2d 5: "Ithas been generally held that the best method of arriving atmarket value 

### is recent 

### sales of comparableproperty. 

## * * * But where there are no comparable sales, evidence based upon revenue and valuationbased inpart thereon 

### is competent and admissible.

### " When the income capitalization method entails 

### less conjecture and uncertainty than alternativemethods, 

### it is the appropriate valuation method, with appropriateness necessarily hinging on the facts of the case being tried. State Department of Highways v. Olsen, Mont

# . , 531 P.2d 1330, 32 St.Rep. 110. In the instant case, the income capitalization approach proved preferable, resulting in an award which was reasonable in light of the record. There was no error on the part of the districtcourt inpermitting valuation by thismethod. We find section 93-9912(5), R.C.M. 1947, does not require

a bifurcated trial in eminent domain proceedings. The income capitalizationmethod of valuation 

### is permissible in

### a proceeding such 

### as this, when 

### it provides for the 

### least conjecture and uncertainty. Interest on condemnation awards runs from the date of the order of possession of the property tothe State. The order and judgment of the district court 

### is affirmed, with the exception of the provision for interest on the award, which shall be changed asdirected 

### inthis opinion. 

## .

Chief JusticeWe

### concur:



# ................................ Justices