Opinion ID: 2570894
Heading Depth: 2
Heading Rank: 1

Heading: Valuation of part taken

Text: ¶ 9 The court of appeals erred in concluding that prior Arizona cases limit the Buchanan principle to only two methods of evaluationthe part taken as a separate unit or as part of the whole. Wilson, 197 Ariz. at 460 ¶ 15, 4 P.3d at 1003 ¶ 15. In Arizona State Land Department v. State ex rel. Herman , one of the cases on which the court of appeals relied, the Highway Department condemned a narrow strip of land approximately sixteen miles long, a total of 109.43 acres of both state trust and privately owned land, for widening of State Highway 40. 113 Ariz. 125, 127, 547 P.2d 479, 481 (1976). Babbitt Ranches, Inc., owned the private land and leased the trust land from the State Land Department. The Babbitt ranch settled with the Highway Department, and the issue of the Land Department's damages was tried without a jury. ¶ 10 The Land Department argued that its parcels should be valued in separate units, thus fixing the land's value at $80 per acre. The trial judge rejected this approach and adopted the Highway Department's argument that the value of the 109.43-acre parcel taken must be established pro rata as part of the entire 101,000-acre Babbitt ranch. The judge therefore fixed the value of the land at the $25 per acre figure ascribed to the entire ranch as a single unit. We reversed and remanded, commenting that if the property taken is capable of independent use, it must be valued separately and not as part of the whole. Id. at 128-29, 547 P.2d at 482-83. ¶ 11 The facts of that case gave us no reason to advert to the situation presented here. We merely held that the trust lands, checkerboarded over a right-of-way crossing sixteen sections, had independent value from the entire 101,000-acre ranch and should be valued separately under A.R.S. § 12-1122(A)(1), [2] which requires that if the parcel taken consists of different parcels, the value of each parcel [must be determined] separately. In large part, this was because the federal allotments and state grazing leases were made in 640-acre squares. Id. at 129, 547 P.2d at 483. In reaching that result, we commented that if the part taken is capable of being considered a separate and economic unit, its market value must be considered without resort to the value of any tract from which it is severed. Id. at 128, 547 P.2d at 482. But neither Arizona State Land Department nor any of the cases it cites held that the tract from which it is severed refers only to the entire parcel as it existed before the taking. ¶ 12 In the present case, the court of appeals believed Arizona State Land Department implied that property in a partial-taking case routinely is valued either by the `whole parcel' or the `separate unit' method. Wilson, 197 Ariz. at 460 ¶ 15, 4 P.3d at 1003 ¶ 15. The application of such a routine method may well be proper as a factual matter in most cases, but it is not a legal principle. We described the so-called routine situation in Buchanan, stating: In partial taking cases, generally the land taken is valued as part of the whole tract and not as if it stood alone. Ordinarily this method of valuation gives the part takenparticularly where it is a narrow strip condemned for highwaywidening purposesa greater value. The rule protects the condemnee by assuring a just reward, because in many cases the part taken would be useless and valueless if considered alone. 154 Ariz. at 162, 741 P.2d at 295 (citations omitted). ¶ 13 However, the converse is also true: when the units of property are actually worth more when valued independently, the landowner should have the benefit of that greater, more realistic market-based value. Emphasizing the role of the market in valuation, we held in Buchanan that when the part taken has a separate and independent economic use and could therefore command a higher value as a separate entity, this value must be considered without resort to the value of any tract from which it was severed. Id. at 162-63, 741 P.2d at 295-96. This statement referred only to the monetary value of the part actually taken and not to any tract larger than the taking but smaller than the whole parcel. Nowhere in Buchanan, however, did we restrict an expert from ascribing different values before the taking to different units of the parcel, as White did in the present case. To do so, when the market supports different uses and resulting differing valuations, would undermine the very rationale on which Buchanan rests: the protection of the landowner's interest in receiving just compensation based on the highest and best use of the property. See also Defnet, 103 Ariz. at 390, 442 P.2d at 837. Thus, we have never limited such a method of valuation to just the part taken and the remainder. [3] ¶ 14 To exclude White's appraisal would be inconsistent with the longstanding principle that valuation should not be applied mechanistically in eminent domain cases. See Maricopa County v. Barkley, 168 Ariz. 234, 240, 812 P.2d 1052, 1058 (App.1990) (Just compensation has never been reduced to a single formula; rather than a general formula, various ways of valuing property are appropriate depending on the circumstances.); Selective Resources v. Superior Court, 145 Ariz. 151, 154, 700 P.2d 849, 852 (App.1984) ([T]he concept of just compensation should not be reduced to a formula applicable in all situations.); Moschetti v. City of Tucson, 9 Ariz.App. 108, 112-13, 449 P.2d 945, 949-50 (1969) (One primary objective in a condemnation proceeding is to bring the values of the real-world marketplace into the courtroom.), overruled on other grounds by City of Tucson v. Rickles, 15 Ariz.App. 244, 488 P.2d 180 (1971). ¶ 15 As we have seen, the cases do not support a rigid rule that the property taken should have been valued either as a separate unit or as part of the whole parcel but not as part of a hypothetical parcel within the whole parcel. Wilson, 197 Ariz. at 461 ¶¶ 17, 16, 4 P.3d at 1004 ¶¶ 17, 16. The independent value rule exists to protect the landowner from being compensated for the most valuable part of his property by averaging the market price for the most valuable with that of the least valuable land. The obverse of that rule is that when the part taken has no independent value before the taking, it must be valued based on the average of the whole parcel because the part taken, having no independent use, would be valueless. People v. Silveira, 236 Cal.App.2d 604, 46 Cal.Rptr. 260, 272 (1965) (citing 4 NICHOLS ON EMINENT DOMAIN § 14.231). ¶ 16 Thus, when the evidence provides an adequate foundation by common sense and market data showing different highest and best uses, we see no reason why it is improper to consider a large tract of property as if, in the before condition, it were divisible into separate hypothetical entities. See 4A NICHOLS ON EMINENT DOMAIN § 14.02, at 14-34 (3d ed. rev.1999). Unlike the strip-taking/street-widening cases on which the court of appeals relied, the subject property could clearly be so divisible. The jury concluded that a 5-acre intersection corner, which could probably be rezoned for different and higher use than the rest of the tract, would have a different and higher value than the remainder of the property. Once that is accepted, the owner is entitled to that higher value when the property is taken, whether the taking is of all or only a part of the more valuable portion. The owner must be compensated for the entire damage, which, of course, includes the value of what was taken and the lessening in value of what remains. The result should be the same, no matter what the methodology. As has been stated in the leading text in the field: Much of the confusion in eminent domain litigation has arisen from attempting to apply methods of valuation appropriate in one case to another in which the facts are materially different. The only principle applicable [in] all cases is that of fair and just compensation for the land taken and to that end each case must be viewed in the light of its own facts. Id. at 14-41 (quoting City of Richardson v. Smith, 494 S.W.2d 933, 940 (Tex.Civ.App.1973)). The Wilsons could have developed their 5-acre corner lot without a concurrent development of the remaining 23.24 acres. There is no logical reason to prejudice them for owning more than the most valuable portion taken. Had the City condemned the full 5-acre portion, White could have testified to the value of that parcel. We do not believe that the Wilsons' ownership of more than 5 acres would require a different result. The same logic applies here, where the economic effect of the City's actions was to deny the Wilsons the highest and best use of that 5-acre corner lot. Given the facts of this case, we conclude that White's testimony was admissible and the verdict was supported.