No. 92-158 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1993 

CITY OF BILLINGS, 

a Montana municipal corporation, 

Plaintiff, Counterdefendant and Respondent, 

JEAN HUNT; HELEN KELLER; MAX H. HEFFNER: ELEANOR 

M. HEFFNER; C.M. HEFFNER, JR.; AMELIA 0. HEFFNER; 

INTERNAL REVENUE SERVICE; UNITED STATES OF AMERICA 

and DEPARTMENT OF REVENUE STATE OF MONTANA, 

Defendants, 

DENNIS J. RUE CO., INC., a/k/a DENNIS J. RUE, INC. ; 

ANGIE JUROVICH, THOMAS L. FERGUSON, TRUSTEE; GARY 

KAINU; PATRICIA I. KAINU; EDWARD S. MARTYR, a/k/a 

E.S. MARTYR; BETTY MARTYR; ABBY FERGUSON, TRUSTEE; 

DONALD L. FERGUSON; THOMAS L. FERGUSON; JOHN EDWARD 

FERGUSON: KELLIE ANN FERGUSON; MYRNA A. CLARK; THE 

ABBY FERGUSON TRUST; THE ABBY FERGUSON IRREVOCABLE 

TRUST; UNIVEST, INC.; and ROBERT P. LIVENGOOD, 

Defendants, Counterclaimants and Appellants. 

APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone, 

The Honorable G. Todd Baugh, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Mark D. Parker, Parker Law Firm, Billings, Montana 

For Respondent: 

Kenneth D. Peterson, Peterson & Schofield, Billings, 

Montana 

Submitted: December 15, 1992 

-rn i- LO 2 5 1993 Decided: February 25, 1993 

Submitted: December 15, 1992 
Justice Fred J. Weber delivered the Opinion of the Court. 

This is an appeal from an order of the Thirteenth Judicial 

District Court, Yellowstone County, refusing to award interest to 

appellants under 5 70-30-302(2), MCA, pursuant to a condemnation 

proceeding taking vacant, undeveloped land. We reverse. 

Appellants present the following issues for review: 

1. Did the District Court err in refusing to award interest 

under 5 70-30-302, MCA, when the City of Billings condemned vacant, 

undeveloped land? 

2. Did the District Court err in awarding out-of-state 

witness travel expenses? 

The appellants are the contract purchasers of real property 

legally described as Certificate of Survey 1805 consisting of 

12.216 acres in Yellowstone County, Montana. The subject land is 

located on the VimsM south of Highway 318 at the southeast end of 

Logan International Airport in Billings, Montana. The parties 

stipulated that the highest and best use of the land was for 

professional offices. 

In 1986, the City of Billings (City) offered to purchase all 

12.216 acres of Certificate of Survey 1805 for $293,200. The 

landowners rejected the City's offer. On September 17, 1987, the 

City began condemnation proceedings under its power of eminent 

domain and served summonses on defendants in September 1987. 

On February 29, 1988, the City moved for a preliminary 

condemnation order which was subsequently issued by the District 
Court on May 4, 1988. In August 1989, after a condemnation 

Commissioner~s Hearing as required by 5 70-30-301, MCA, the 

Condemnation Commissioners reported that the current fair market 

value of the property was $320,500. After a trial in February 1992 

on the issue of fair market value, a jury found that the fair 

market value as of September 21, 1987 was $200,000. 

The jury's award did not include interest prior to the 

judgment date. Although appellants had requested a jury 

instruction which would have included interest from the date of 

summons as part of the condemnation award, the verdict form used at 

the trial did not include interest and the District Court did not 

instruct the jury to include interest. Appellants seasonably 

objected to the jury instruction, thereby preserving that question 

for appeal. 

I. 

Did the District Court err in refusing to award interest under 

S 70-30-302(2), MCA, when the City of Billings condemned vacant, 

undeveloped land? 

The Fifth Amendment to the United States Constitution 

prohibits governmental entities from taking private property for 

public use under the power of eminent domain without paying Ifjust 

compensation." Similarly, Article 11, Section 29 of the Montana 

Constitution prohibits the taking or damaging of private property 

for public use "without just compensation to the full extent of the 

loss having been first made to or paid into court for the owner." 
"Just compensationw may include interest. Interest has been 

regarded as a substitute for computing appreciation of land value 

between the time of taking and the date of payment. See United 

States v. 156.81 Acres of Land (9th Cir. l982), 671 F.2d 336, 339, 

cert. denied, 459 U.S. 1086, 103 S.Ct. 569, 74 L.Ed.2d 931 (1982). 

Section 70-30-302, MCA, provides: 

Assessing compensation -- date and measure -- interest. (I) 

For the purpose of assessing compensation, the right thereto 

shall be deemed to have accrued at the date of the service of 

the summons, and its current fair market value as of that date 

shall be the measure of compensation for all property to be 

actually taken and the basis of depreciation in the current 

fair market value of property not actually taken but 

injuriously affected. . . . 

(2) If an order be made letting the plaintiff into 

possession, as provided in 70-30-311, the full amount finally 

awarded shall draw interest at the rate of 10% per annum from 

the date of the service of the summons to the earlier of the 

following dates: 

(a) the date on which the right to appeal to the Montana 

supreme court expires or, if appeal is filed, to the date of 

final decision by the supreme court; or 

(b) the date on which the property owner withdraws from 

court the full amount finally awarded. 

(5) No improvements put upon the property subsequent to 

the date of the service of summons shall be included in the 

assessment of compensation or depreciation in current fair 

market value, nor shall the same be used as the basis of 

computing such compensation or depreciation. 

Under 5 70-30-302(2), MCA, if the City had been let into 

possession of the property, interest would have been awarded from 

the date of service of summons. Here, the District Court's 

Judgment putting the City in possession was dated March 10, 1992. 

The appellants received no interest from the date of summons in 
September 1987 to March 10, 1992. 

The subject land is vacant and unimproved with its primary 

value prior to condemnation as investment property. Appellants1 

plan to develop the land for professional office buildings was 

foreclosed in September 1987 when they were served with summonses 

in this proceeding. Although appellants could have improved the 

land, § 70-30-302 (5), MCA, would have prevented them from receiving 

compensation for any improvements to the land after the date of 

summons. While 5 70-30-302, MCA, does deprive the owner of 

compensation for improvements added to the land, the land can still 

be used for other purposes such as growing of crops, recreation, or 

parking, should that be the source of income. 

It is the general rule that a taking does not occur until: (1) 

legal title vests in the condemnor, (2) the condemnor enters into 

actual possession, or (3) the condemnor takes constructive 

possession either by causing damage to property or by depriving the 

owner of full beneficial use of his land. Stewart & Grindle, Inc. 

v. State (Alaska 1974), 524 P.2d 1242. The Alaska court noted in 

that case that Alaska's statutory scheme deprived the owner of both 

investment potential and the possibility of future development the 

moment a condemnation action commences. Stewart & Grindle, Inc., 

524 P.2d at 1247. Section 70-30-302, MCA, essentially identical to 

the Alaska statute, does the same thing. 

The owner, however, remains responsible for expenses 

incidental to legal ownership. State v. Nordstrom (N.J. 1969), 253 
A.2d 163. This includes mortgage payments, tort liability and the 

like. For example, 5 70-30-314, MCA, specifically postpones the 

condemnor's responsibility for noxious weed control. In Montana, 

not all incidents of ownership remain with the owner; property 

taxes become the responsibility of the condemnor. Section 70-30- 

315, MCA. In Stewart & Grindle, Inc., 524 P.2d at 1247, the Alaska 

court reasoned: 

. . . If as a matter of constitutional law the property owner 

is entitled to interest from the moment the State takes legal 

possession, he should, afoniori, receive interest where he has 

been deprived of all the economic advantages of legal 

ownership but is relieved of none of the liabilities. 

In Nordstrom, a case which allowed interest from the date the 

proceeding began, the court declined to set forth a firm rule and 

stated its desire to proceed on a case-by-case basis when dealing 

with unimproved property. Nordstrom, 253 A.2d at 165. The Alaska 

court rejected this approach because it could not conceive of an 

instance in which owners of unimproved property would not be 

entitled to interest from the date of the suit (with appropriate 

set-offs for rents and profits). Stewart & Grindle, Inc., 524 P.2d 

at 1249, n.24. 

We disagree with the Alaska court's assessment that interest 

should be paid from the date of service of summons in all cases 

where vacant and unimproved land is held for investment with a view 

toward ultimate development. Like the Nordstrom court, we conclude 

that it is advisable to proceed on a case-by-case basis in 

considering the awarding of interest on condemnations. 
In Manke v. Airport Authority of Washoe County (Nev. 1985) , 

710 P.2d 80, the Nevada Supreme Court reversed a district court 

order refusing to award interest to owners of vacant and unimproved 

land located near an airport and held for investment. The Nevada 

statute, like those in Alaska and Montana, foreclosed development 

of the condemned property after the date of the service of summons. 

The facts in the case before us are strikingly similar to those in 

Manke, where the respondentls objective in condemning appellants1 

property was to create a clear zone surrounding the airport. 

Significantly, the court said 

Our holding that a taking occurred in this case on the 

date of the service of summons is buttressed by the fact that 

the burden placed upon appellants by the service of summons 

directly corresponds to a benefit conferred upon respondent. . . . Because development of appellant's property was frozen 

on the date of the service of summons, respondentls objective 

in condemning appellants1 property was accomplished on that 

date. (Citations omitted) 

Manke, 710 P.2d at 82. 

The same is true here. Appellants1 could not develop the 

property after the date of summons; the City of Billings achieved 

its objective on the date of summons. We agree with the reasoning 

in Manke and Nordstrom, which held that where owners of vacant and 

unimproved land are deprived of a31 economically viable use of 

their property, a taking occurs at the inception of the eminent 

domain proceedings. See also United States v. 156.81 Acres of Land 

671 F.2d at 340 (condemnation order that denied the landowners any 

economically viable use of their land was a taking as of the date 

the condemnation began and interest was appropriate in such 
circumstances). 

In Nordstrom, the court stated that rents, profits and 

beneficial use are to be applied in abatement and that interest 

should not run on monies deposited with the court. Nordstrom, 253 

A.2d at 167. We adopt the following statement from Nordstrom: 

The awarding of interest does not lend itself to rigid 

guidelines, but rather is best considered on a case-by-case 

basis in order to determine compensation which is lljust.la One 

of the critical variables in every case is the use to which 

the land is being put by the condemnees. There would be good 

cause to abate interest if the condemnees were left 

undisturbed in their enjoyment of the property by the 

condemnation proceeding, or if they continue to receive 

undiminished rents and profits from the use of the land up to 

the time the State takes possession. On the other hand, where 

the condemnation proceedings restrict the profitable use or 

enjoyment of the property, interest ordinarily should be 

allowed. 

Nordstrom, 253 A.2d at 165-66. 

Our standard of review for a district court's conclusions of 

law is whether they are correct. Steer, Inc. v. Dept. of Revenue 

(lggO), 245 Mont. 470, 803 P.2d 601. We conclude that the 

landowners in this case were deprived of all economically viable 

use of their vacant and unimproved property. As a result we 

conclude that the court erred in refusing to award interest. 

We hold that the landowners in this case were deprived of all 

economically viable use of their vacant, unimproved property and 

that they are entitled to interest from the date of service of 

summons. 

Did the District Court err in awarding out-of-state witness 
travel expenses? 

The District Court awarded $436.50 for travel costs for Verl 

Brady. Appellants contend that this amount was improperly awarded 

because the City did not request travel for Verl Brady outside the 

state of Montana and because the law provides that costs are not 

allowable for travel outside the state. Appellants rely on 

Chilcott v. Rea (1916), 52 Mont. 134, 155 P. 1114; and Bullard v. 

Zimmerman (1930), 88 Mont. 271, 292 P. 730. Both Chilcott and 

Bullard held that mileage costs for witnesses were limited to 

expenses for travel within the state of Montana. The statute 

providing for allowable costs has remained unchanged since the 

dates of those decisions, except for its heading. Section 25-10- 

201, MCA, provides in pertinent part: 

Costs generally allowable. A party to whom costs are awarded 

in an action is entitled to include in his bill of costs his 

necessary disbursements, as follows: 

(1) the legal fees of witnesses, including mileage, or 

referees and other officers . . . 

As noted, Chilcott and Bullard allowed mileage expense to 

travel within the state of Montana. In referring to prior 

interpretations of 5 25-10-201, MCA, the District Court concluded 

that 5 26-2-501(b), MCA, allowed mileage past the state line. 

Section 26-2-501(b) provides in pertinent part: 

(b) for mileage in traveling to the place of trial or hearing, 

each way, for each mile, a mileage allowance as provided in 2- 

18-503. 

Nothing in 26-2-501(b) provides for recovery of mileage 

costs for travel outside the state of Montana. We conclude that 
the District Court incorrectly applied the law in its calculation 

of costs. 

We hold the District Court erred in awarding out-of-state 

witness travel expenses. 

We reverse and remand the case to the District Court with 

instructions to modify its judgment of condemnation to include 

interest from the date of service of summonses and to reconsider 

its award of costs consistent with this opinion. 

\ 

Justices 
February 25, 1993 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the following 

named: 

I Mark D. Parker 

' Parker Law Firm 

P.O. Box 7212 

Billings, MT 59103-7212 

Lorraine D. Gallinger 

Assistant U.S. Attorney 

P.O. Box 1478 

Billings, MT 59103 

Dale F. Galles, Esq. 

Galles & Gunderson 

P.O. Box 926 

Biltings, MT 59103 

Bruce McGinnis, Legal Counsel 

Dept. of Revenue 

Mitchell Bldg. 

Helena, MT 59620 

Kenneth D. Peterson 

Peterson & Schofield 

2906 Third Ave. No. 

Billing!, MT 5910; 

Hon L 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA