Opinion ID: 1436844
Heading Depth: 1
Heading Rank: 4

Heading: Entrepreneurial Profit

Text: Ocean Road Partners claimed on appeal that the partnership was denied just compensation by virtue of the trial justice's deduction of the entrepreneurial profit from his valuation of the Black Point property. The partnership argued that because Ocean Road Partners itself was intending to develop the property, just compensation must include an anticipated profit. Ocean Road Partners further argued that the Constitutional mandate is not fair market value and when a calculation of fair market value under a particular factual situation fails to compensate the owner for the value of its property rights and interests, it does not satisfy the Constitutional mandate of just compensation. Notwithstanding Ocean Road Partners' assertion to the contrary, it is well settled law in Rhode Island that the measure of compensation due to a landowner whose property has been taken by eminent domain is the fair-market value of the property. J.W.A. Realty, Inc. v. City of Cranston, 121 R.I. 374, 380, 399 A.2d 479, 482 (1979). In support of its argument that it is entitled to the entrepreneurial profit, Ocean Road Partners cites a Louisiana case, State Through Department of Highways v. Terrace Land Co., 298 So.2d 859 (La. 1974). In that case the Louisiana Supreme Court held that an owner-developer whose land had been taken by the state was entitled to recover the retail value of each lot, reduced by development costs but not reduced by the entrepreneurial profit. Terrace Land is distinguishable from the instant matter, however, because the owner-developer in that case had recorded the subdivision of the property, developed lots and streets, and installed drainage, water, gas, and sewer lines. Moreover, at the time of the taking, approximately seventy lots had been sold and homes had been constructed thereon. Therefore, the Terrace Land Co. court held that where an owner-developer owns land forming part of a subdivision actually developed and in the process of being sold as individual lots, and where a portion of the tract destined for that use but not actually yet developed is taken, the owner-developer is entitled to receive just and adequate compensation for the tract taken on the basis of the retail value of the lots to individual purchasers    rather than artificially limited to a value based upon a hypothetical sale as a single-tract unit to another developer. (Emphasis added.) 298 So.2d at 863. See City & County of Honolulu v. Bonded Investment Co., Ltd., 54 Haw. 385, 507 P.2d 1084 (1973) (where two parcels were condemned and the development of one parcel had begun, financing had been secured, plans for construction had been drawn, and all units were under contract for sale  but where the second parcel was undeveloped and no units had been sold  court held that it would be mere speculation to allow damages for lost profits for the second parcel). The facts of the instant matter do not require us either to adopt or to reject the holding of the Louisiana court in Terrace Land because Ocean Road Partners had made no improvements to the Black Point property by the time the state took the property by eminent domain. In fact, the subdivision from which Ocean Road Partners expected to derive profits was created in anticipation of trial and not in anticipation of actual development of the property. Therefore, even under the holding in Terrace Land, Ocean Road Partners would not be entitled to be compensated for the anticipated entrepreneurial profit. Hence, the trial justice did not err in deducting said profit from the award of just compensation.