No. 12988 

IN THE 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 

Corpora tion ; RONALD C . WHITE ; VENETA WHITE ; 

GLYNOEU J. WHITE, as Statutory Trustees 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 in the district court, Park County. 

Hy-Grade Auto Court, is a dissolved Montana corporation 

holding fee title to service station property in Gardiner, 

Montana. The stockholders and successors to wrade are Veneta 

White, Ronald C. White (her son) and Glynora White (his wife) , 

they will be collectively referred to herein as "Owner". Ralph 

E. Moore, Inc. leases the service station property from the 

Owner, and has leased it for many years. This corporation will 

be referred to as "Lessee". There is a sublessee who actually 

runs the service station, but he is not a party to this action. 

The Montana Department of Highways, (State), filed this 

condemnation action in the process of upgrading U. S. Highway 89 

and the bridge crossing the Yellowstone River in Gardiner. 

The subject property is known as the Northgate Texaco 

station and is the prime service station site in Gardiner. The 

property is located on the "swing corner", meaning it has good 

visability in all directions and good access. The highway forks 

at the station, one fork going to Jardine, Montana, and the other 

crossing the Yellowstone bridge, and leading to the North Entrance 

of Yellowstone National Park. Virtually all visitors to the Park, 

entering and leaving at Gardiner, pass the site of the station. 

The station pumped over twice as much gas as any other station in 

Gardiner. 

After the taking, the land left available 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 and 
and its predecessor in interest). The lease in effect at the 

time of this action was dated February 1, 1968,and provided 

for a ten year primary term with two additional five year renewal terms. At the time of trial, the lease had 14 years to 

run. 

Lessee also operates 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 State requested a bifurcated 

trial, that is, in the State's view, the jury would first decide 

the total value of the property taken (as though owned by one person), subsequently receiving evidence as to the 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, all during one deliberation. 

At trial defendants' expert witnesses testified to the 

total value of the property, ranging in their 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 this verdict: 

"We the Jury, duly impanelled, reach our verdict 

in the 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 to both Defendants (total of the 

above Two (2) figures, the sum of $100,000 
"Out of the total compensation awarded to both 

Defendants, as above stated, we further break 

the award down between the Defendants, as follows: 

"1. To Defendant, Ralph E. Moore, Inc., as Lessee, 

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 are presented by the State for review: 

1. In an eminent domain action, what is the proper procedure to be followed at trial to conform 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 to determine the 

value of the property being taken? 

3. In an eminent domain action, does the interest on 

the judgment run from the date of the preliminary order of condemnation or from the date possession of the property to condemnor 

is granted by the court? 

We consider the third issue first. Section 93-9913, 

R.C.M. 1947, provides: 

" * * * If an order be made letting the plaintiff 

into possession * * * the full amount finally 

awarded shall draw lawful interest from the date 

on which the property owner surrenders possession 

of the property in accordance with the terms of 

such order. * * *" 

The order and judgment of October 4, 1974, set interest 

from June 19, 1973, the date of the preliminary order of condemnation. This date is clearly erroneous, as the State did not take 

actual possession of the property until early 1974. The order, 

signed by Judge Shanstrom, granting the State possession of the 
property was dated February 11, 1974. 

We direst the district court to correct 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 this Court 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) or more estates or 

divided interests in property sought to be condemned, the plaintiff is entitled to have the 

amount of the award, for said property first 

determined, as hereinbefore stated, as between 

plaintiff and all defendants claiming any interests therein; thereafter in the same proceeding 

the respective rights of each of such defendants 

in and to the award shall be determined by the 

commissioners, under supervision and instruction 

of the court, and the award apportioned accordingly." 

This provision is made applicable to jury trials on appeals from 

a condemnation commissioners' ruling by section 93-9915, R.C.M. 

1947. 

The State suggests California case law for 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 at hand. This Court 

has long held that where a statute is similar to one in a sister 

state, we will give consideration to the construction placed on 

that statute by the courts of the sister state; but such construction is not binding upon this Court. Cahill-Mooney Const. 

Co. v. Ayres, 140 Mont. 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 14 years the 

courts of Montana have construed the statutory provision to mean 

the award of all the parties must be determined before any apportionment is made among the parties. This procedure, used in the instant 
case, was applied by the court and jury, without reversal or 

modification, in these cases: State Highway Comm'n v. McGaffick, 

144 Mont. 76, 394 P.2d 174; State Highway Comm'n v. City Service 

Co., 142 Mont. 559, 563, 385 P.2d 604; State Highway Comm'n v. 

Crow, 142 Mont. 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 first deciding the total value of the property 

being taken; then, in a separate proceeding, the jury, 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 will not overturn the developed Montana rule unless prejudice 

is shown by the parties. 

The procedural requirements of section 93-9912(5), R.C.M. 

1947, have been liberally implemented, as in City Service Co., 

where the jury did not first decide 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 in valuation due 

solely to a distribution in title. To send this 

case back for a new trial simply because the jury 

did not first express the damage in one 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 State does not show prejudice due to the procedure 

used in the district court. 

The jury was properly admonished t o f i r s t ascertain the 

entire award as though the property were owned by one person, 

then to apportion this sum among the parties. This Court has 

repeatedly indicated that it "will presume that the jury, in 

reaching its verdict, followed the instructions that were given 

to it by the trial judge." Staggers v. U.S.F. & G. Co., 159 

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

The State argues evidence as to the value of the leasehold estate must not be introduced prior to ascertaining a value 

for the property, under the undivided fee rule, therefore a 

bifurcated trial must occur to exclude such evidence from the 

consideration of the jury in arriving at the total value of the 

property as though owned by one person. The jury was instructed 

in the undivided fee rule, which governs this case, but the rule 

does not prevent introduction of evidence as to the value of 

the whole. The rationale for admitting such evidence prior to 

the determination of total value, is well stated by the California 

court in People 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 in eminent domain 

is normally satisfied by the payment by the condemnor 

to the condemnee of the market value of the property 

taken. This market value is the highest price 

which the property would bring, if exposed for sale 

in the open market by a willing seller to a willing 

buyer with both parties to the transaction being 

fully informed of all the uses and purposes to 

which the property is reasonably adaptable and 

available. * * * to arrive at this value one must 

take into consideration all those things upon which 
such parties, dealing with each other in the open 

market, would reasonably rely. * * * For this 

purpose the property, together with all of its compensable attributes, must be valued as the condemnor finds it, including without limitation thereby, 

the state of its title, and in this case, the * * * 

leasehold. * * * We say this because this very 

valuable leasehold is one of the things which such 

a buyer and seller would consider in the open market in fixing the price at which the ownership of 

the property would be transferred. To say that the 

existence of such a lease should be ignored by 

resorting to the legal fiction and legal pretense 

of a single owner is to ignore the realities of the 

market place. If compensation is to be just and 

if the property owner is to be made whole for the 

involuntary loss of his property to the state, this 

cannot be permitted to happen." 

As Mr. Justice Holmes said in Boston 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 to compute the value of the property 

being taken. 

The State alleges the Lessee's source of income principally 

came from selling products to the person actually conducting 

business on the property as the sublessee. The evidence indicates 

otherwise. The Lessee realized income due to its control of the 

property under the lease and control of the flow of products to 

the station operator pursuant to the sublease. The Lessee also 

received rental based on the gallons of gasoline sold at the 

station. Without the lease, the Lessee could not have controlled 

the flow of gasoline, tires, batteries and accessories to the 

station. If the relationship of the Lessee to the station operator 

was: merely as a supplier, the operator could go elsewhere for 

products, if he did not wish to deal exclusively with Lessee. 

In this case, the Lessee had the right to terminate 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 this property. 
The use of the capitalized income approach to valuation 

is appropriate in this instance. At trial, the alternative methods 

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 in State Highway Comm'n v. Bennett, 162 Mont. 

386, 390, 513 P.2d 5: 

"It has been generally held that the best method of 

arriving at market value is recent sales of comparable property. * * * But where there are no comparable sales, evidence based upon revenue and valuation based in part thereon is competent and admissible. " 

When the income capitalization method entails less conjecture and uncertainty than alternative methods, 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 district court in permitting valuation by this method. 

We find section 93-9912(5), R.C.M. 1947, does not require 

a bifurcated trial in eminent domain proceedings. The income 

capitalization method 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 to the 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 as directed in this opinion. . 

Chief Justice 
We concur: 

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Justices