Opinion ID: 2402175
Heading Depth: 2
Heading Rank: 2

Heading: Value Enhancement

Text: The parties apparently agree, on appeal at least, that the scope-of-the-project rule does not apply to the facts presented in this case, but disagree over the necessary consequence of that conclusion. The plaintiff argues that, irrespective of the applicability of the scope-of-the-project rule, the trial justice committed reversible error by ignoring the effect of the state's announcement that Fidelity planned to relocate part of its operations to the corporate park in Smithfield. The plaintiff contends that the enhanced market value of the subject parcel attributable to that announcement, which plaintiff ascribes to the two newspaper articles published in December 1995, should have been reflected in Mr. Conti's condemnation award as a proper measure of fair compensation. The EDC responds that, as a matter of law, Mr. Conti cannot benefit from an enhancement in market value based merely on newspaper articles that did not constitute a government announcement of the project; rather, the only government action here was the filing of the condemnation proceedings, at which point it was proper to determine the scope of the project. In the alternative, the EDC asserts that, assuming arguendo that the law permitted the inclusion of such an enhancement in calculating market value, plaintiff failed to establish its existence at trial through competent evidence, i.e., similarly situated and comparable sales that reflected an increment in market value because of the Fidelity Project. The marked terminological confusion at trial surrounding the scope-of-the-project rule persuades us to begin our analysis by briefly surveying the general principles involved in this case, out of which principles we first may isolate, and then ultimately dispose of, the applicability of the scope-of-the-project rule. We then address whether, or to what extent, the subject parcel may, under law, benefit from the enhancement that Mr. Conti alleges. Article 1, section 16, of the Rhode Island Constitution provides that [p]rivate property shall not be taken for public uses, without just compensation. This Court has referred to this textually embedded constitutional restriction, which presupposes the state's power to take private property in the first instance, as the safeguard in our State constitution of property rights in condemnation proceedings. Joslin Manufacturing Co. v. Clarke, 41 R.I. 350, 357, 103 A. 935, 937 (1918). Parallel language in the Fifth Amendment to the United States Constitution also prohibits state actors, by operation of the Due Process Clause of the Fourteenth Amendment, Kelo v. City of New London, Connecticut, ___ U.S. ___, ___, 125 S.Ct. 2655, 2672, 162 L.Ed.2d 439 (2005) (O'Connor, J., concurring), from taking private property for the public use unless accompanied by just compensation. Because our focus in the present case concerns only the just compensation component of the aforementioned constitutional provisions, we proceed to examine the requirements of that safeguard alone. [7] Cf. Rhode Island Economic Development Corp. v. The Parking Co., L.P., 892 A.2d 87, 95 (R.I.2006) (holding that, of the two issues that are pertinent in eminent domain cases, the issue of public use was appealable, but the issue of just compensation was not before the Court). Because just compensation is the only textual standard against which the federal and state constitutions require a condemnation award to be measured, see United States v. Commodities Trading Corp., 339 U.S. 121, 123, 70 S.Ct. 547, 94 L.Ed. 707 (1950), this Court has adopted a series of working rules to determine in practice what that ephemeral standard requires. For instance, we have held that the measure of the constitutionally required `just compensation' due a property owner whose land 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). With reference to an authoritative treatise on the subject, we have defined fair market value as the amount of money which a purchaser willing but not obliged to buy the property would pay to an owner willing but not obliged to sell it   . Id. (quoting 4 Nichols, The Law of Eminent Domain § 12-2[1], at 12-71 to 81 (rev.3d ed. Sackman 1978)). As a corollary to our definition, we have determined that fair market value should be calculated on the basis of the most advantageous and valuable use of the property, sometimes referred to as its highest and best use. Ocean Road Partners v. State, 612 A.2d 1107, 1110 (R.I.1992). Further defining the contours of our working rule, we have adopted the comparable-sales method as the preferred methodology in which to calculate fair market value, e.g., Capital Properties, Inc. v. State, 636 A.2d 319, 321 (R.I.1994), and we have indicated that the date of the taking is the proper time to perform that calculation. E.g., Serzen, 692 A.2d at 673. This Court, nevertheless, assigns no talismanic significance to fair market value itself beyond its use as a tool in ascertaining just compensation. See, e.g., Warwick Musical Theatre, Inc. v. State, 525 A.2d 905, 910 (R.I.1987) (holding that it was not an abuse of discretion for a trial justice to consider evidence beyond comparable-sales data when the fair market value calculated from that data failed to achieve just compensation). In this regard, we have accentuated in our case law the fundamental proposition that just compensation is the court's ultimate objective. J.W.A. Realty, Inc., 121 R.I. at 381, 399 A.2d at 483. Thus, our conventional working rules bow, as they must, to the ultimate objective that one who challenges the adequacy of a condemnation award should not receive a measure of compensation that in any way exceeds, or falls short of, just compensation. See, e.g., Corrado v. Providence Redevelopment Agency, 117 R.I. 647, 657, 370 A.2d 226, 231 (1977); Nasco, Inc. v. Director of Public Works, 116 R.I. 712, 721, 360 A.2d 871, 876 (1976). Similar refinement to the concept of fair market value was responsible for the genesis of the scope-of-the-project rule, a precept much belabored in this case, in United States v. Miller, 317 U.S. 369, 376-77, 63 S.Ct. 276, 87 L.Ed. 336 (1943). Miller involved the condemnation of the respondents' land in connection with a government project involving the relocation of railroad right-of-ways. Id. at 370-71, 63 S.Ct. 276. During trial, the respondents sought to elicit opinion testimony concerning the fair market value of the land taken as of December 1938. Id. at 372, 63 S.Ct. 276. Government counsel objected to the form of the question, arguing that the respondents were not entitled to any increment in value that may have occurred as a result of the government's earlier commitment to the project, which involved condemning lands adjacent to the respondents' property. Id. Sustaining the government counsel's objection, the trial court directed that the question be reframed to call for the market value of the land at the time of the taking, but excluding any increase in value accruing between August 1937, when Congress authorized the project, and December 1938, when the government condemned the respondents' lands. Id. Upon appeal, the Supreme Court began by framing the central issue before it: whether an owner should benefit from an increment in value added to the subject parcel by the action of the government in previously condemning adjacent lands. Miller, 317 U.S. at 375, 63 S.Ct. 276. In addressing the issue, the Supreme Court noted, strict adherence to the criterion of market value may involve inclusion of elements which, though they affect such value, must in fairness be eliminated in a condemnation case. Id. Such was the case before the Supreme Court in Miller, the holding of which we quote at length: If a distinct tract is condemned    other land in the neighborhood may increase in market value due to the proximity of the public improvement erected on the land taken. Should the Government, at a later date, determine to take these other lands, it must pay their market value as enhanced by this factor of proximity. If, however, the public project from the beginning included the taking of certain tracts but only one of them is taken in the first instance, the owner of the other tracts should not be allowed an increased value for his lands which are ultimately to be taken any more than the owner of the tract first condemned is entitled to be allowed an increased market value because adjacent lands not immediately taken increased in value due to the projected improvement. The question then is whether the respondents' lands were probably within the scope of the project from the time the Government was committed to it. If they were not, but were merely adjacent lands, the subsequent enlargement of the project to include them ought not to deprive the respondents of the value added in the meantime by the proximity of the improvement. If, on the other hand, they were, the Government ought not to pay any increase in value arising from the known fact that the lands probably would be condemned. The owners ought not to gain by speculating on probable increase in value due to the Government's activities. Id. at 376-77, 63 S.Ct. 276. Applying these principles to the facts before it, the Supreme Court determined that the government was committed to the project in August 1937, when it had obtained final and definite authorization from Congress. Miller, 317 U.S. at 377, 63 S.Ct. 276. At that time, the respondents' lands were only one of several probable routes for the relocation of the railroad right-of-way, causing any possible increase in value to their lands to be merely speculative. Id. Consequently, the Supreme Court held that the trial court properly instructed the jury that the respondents could not profit from the condemnation's eventuality, in 1938, under compulsion of just compensation. See id. at 377-79, 63 S.Ct. 276. Perceiving no error in the trial court's instructions, the Supreme Court affirmed the compensation award that excluded any increment in value derived from the respondents' beneficial proximity to lands previously condemned. See id. at 372-73, 382, 63 S.Ct. 276. The circumstances surrounding the condemnation in the present case, however, simply do not equate with those inherent in Miller and its progeny. It appears to us that scope-of-the-project-rule cases often involve drawn out governmental projects, piecemeal takings separated by noticeable gaps in time, and some evidence that, in the interim, the market values of neighboring properties increased because of the projects. See United States v. 320.0 Acres of Land More or Less in Monroe, Florida, 605 F.2d 762, 781-93 (5th Cir. 1979) (providing a thorough history of the federal jurisprudence addressing the scope-of-the-project rule); see also, e.g., United States v. Reynolds, 397 U.S. 14, 14 n. 1, 17-18, 90 S.Ct. 803, 25 L.Ed.2d 12 (1970) (reaffirming the holding annunciated in Miller in similar circumstances); Miller, 317 U.S. at 370-72, 63 S.Ct. 276; Fuller, 120 R.I. at 833-39, 391 A.2d at 103-06 (adopting and applying the holdings of Miller and Reynolds in a condemnation dispute involving a lengthy government project in which adjacent lands were condemned at different times and evidence that the government project enhanced the value of the surrounding property). The disposition of the present case calls for discourse addressing a related but more fundamental rule of law. We look to the observation of an authoritative treatise for guidance: [t]he general rule is that any enhancement in value that is brought about in anticipation of, and by reason of, a proposed improvement, is to be excluded in determining the market value of the land. 4 Nichols on Eminent Domain § 12B.17[1] at 12B-202 (3d ed. Julius L. Sackman 2005) (citing Shoemaker v. United States, 147 U.S. 282, 13 S.Ct. 361, 37 L.Ed. 170 (1893); Kerr v. South Park Commissioners, 117 U.S. 379, 6 S.Ct. 801, 29 L.Ed. 924 (1886)). We adopted this general rule in Rhode Island Hospital Trust Co. v. Providence County Court House Commission, 52 R.I. 186, 189, 159 A. 642, 643 (1932), a case that involved a taking by eminent domain of certain land needed for the construction of the building in which this Court now sits. Id. at 187, 159 A. 642. There, the petitioners argued that the trial justice should not have excluded testimony indicating that the market value of their properties increased as soon as the General Assembly authorized the condemnation of those properties. Id. at 189, 159 A. at 643. This Court affirmed the Superior Court's ruling, holding that the petitioners could not benefit from the fact that the land was known to be within the area designated for condemnation and was certain to be taken. Id.; see also J.W.A. Realty, Inc., 121 R.I. at 382 n. 5, 399 A.2d at 483 n. 5 (noting, with citation to Rhode Island Hospital Trust Co., that the general rule, quoted supra, applies in Rhode Island); Fuller, 120 R.I. at 840, 391 A.2d at 107 (declining to consider the question, separate from the primary scope-of-the-project-rule issue, of whether the value of the petitioner's property was enhanced by the condemnation of adjacent lands under the auspices of the project because the owner is not entitled to benefit from the known fact that her property probably would be condemned). The rule articulated in Rhode Island Hospital Trust Co., however, does not detract from the long-standing principle that fair market value, calculated at the time of the taking, is generally the proper measure of just compensation. We deduce this principle from the teachings of In re Condemnation of Certain Land for a New State House, 19 R.I. 382, 33 A. 523 (1896) ( New State House ). There, a board of statehouse commissioners (the board) who were responsible for selecting and acquiring land for the construction of a new statehouse, condemned certain properties adjacent to land that the board already purchased for the project. Id. at 382-83, 33 A. at 523. Separately-appointed commissioners awarded the condemnees damages that reflected a heightened market value created by their proximity to the development, and the board then appealed to this Court. Id. at 383-84, 33 A. at 523. The board contended that the rule of appraisal is that the owner is not entitled to the increased value of the land occasioned by the proposed improvement. Id. at 385, 33 A. at 524. We disagreed with the board's argument as too broadly stated, id., and held that the public disclosure that the board had purchased land for the new statehouse enhanced the market value of adjacent properties before the takings commenced: The fact of the location of the new state house had thus become publicly known, by the purchase by the State of this tract, prior to the filing of the [condemnation] certificate by the [board], and the consequent enhancement in value due to the proposed improvement had already accrued to the adjacent land before the certificate was filed. Id. at 386, 33 A. at 524. Consequently, we refused to order a new trial at the request of the board and let the appraisal of the commissioners stand. Id. at 386-87, 33 A. at 524. In the case under review, the terminology of the trial justice's findings supports the conclusion that the trial justice applied the scope-of-the-project rule to the facts in the present case. The trial justice's preliminary findings provided that the acquisition of the subject property was at all times within the Scope of the Fidelity Project as outlined and announced by the defendant EDC. Nevertheless, with reference to the EDC's condemnation petition and attached resolutions, the trial justice used May 28, 1996, the date of the actual condemnation, as the operative date for determining just compensation. Thus, the date upon which he determined that the EDC became committed to the project, thereby delineating the scope of the project, and the date of the taking itself were one and the same. Citing this Court's adoption, in Fuller, of the scope-of-the-project rule, the trial justice then concluded that Mr. Andolfo's primary opinion concerning enhanced market value ($600,000) and the subject parcel's highest and best use (medical office facility) was not relevant, probative, or material. The appropriate inquiry, however, was not whether Mr. Conti's property fell within the scope of the project as of the date of condemnation. The question in this case, rather, should have been whether the subject property increased in value from the time that the real estate market became aware of Fidelity's relocation to Smithfield until the time said parcel was known to be within the area designated for condemnation and was certain to be taken. Rhode Island Hospital Trust Co., 52 R.I. at 189, 159 A. at 643; see also 4 Nichols on Eminent Domain § 12B.17[2] at 12B-215. If so, any such increase in value is properly compensable pursuant to New State House, 19 R.I. at 386, 33 A. at 524. However, any enhanced value occurring after the date that the property was known to be slated for condemnation is not a proper component of just compensation. See Rhode Island Hospital Trust Co., 52 R.I. at 189, 159 A. at 643. Although the Superior Court decision may not have stated accurately the applicable principles of value enhancement, we are not convinced that the decision should be reversed. Nor do we need to question the trial justice's determination that May 28, 1996 was the appropriate triggering date for his fair market value analysis. [8] Assuming without deciding that the market adequately was aware of the details of the Fidelity Project as early as December 1995, plaintiff nevertheless failed to satisfy his burden of proving, through competent evidence, the existence of any enhancement in the value of his property that could be attributed to such awareness. The plaintiff's failure in this regard is reflected in the trial justice's subsequent findings. As a result of his preliminary findings concerning value enhancement, the trial justice looked to Mr. Andolfo's alternate opinion when he testified that, absent an enhancement in value caused by the Fidelity Project, the subject parcel's highest and best use would be as a general professional office building, and would, in that instance, carry a market value of $427,000. The trial justice then proceeded to evaluate the witnesses' respective comparables and competing conclusions. In doing so, the trial justice made several findings that independently supported the court's determination ultimately to embrace Mr. Vincent's opinion and to reject Mr. Andolfo's. Because we base our holding in this regard on the independent and subsequent findings of the trial justice concerning the assessment of the witnesses' comparables, we proceed to analyze those findings, and, as a matter of course, plaintiff's assignment of error to them.