Court Opinion

ID: 9931011
Source: CourtListenerOpinion
Date Created: 2024-02-08 03:02:08.193973+00
Date Added: 2024-06-11T12:18:25.650690
License: Public Domain

SUPERIOR COURT
                                 OF THE
                           STATE OF DELAWARE

                                                       Sussex County Courthouse
MARK H. CONNER                                               1 The Circle, Suite 2
JUDGE                                                      Georgetown, DE 19947

                                         February 6, 2024

Richard A. Forsten, Esq.                               Bradley S. Eaby, Esq.
Pamela J. Scott, Esq.                                  Deputy Attorney General
Saul Ewing LLP                                         Department of Justice
1201 Market Street Suite 2300                          800 South Bay Road
Wilmington, DE 19801                                   Dover, Delaware 19901
Attorney for Defendant Stafford Street                 Attorney for Plaintiff
Capital, LLC.                                          DelDOT.

John W. Paradee, Esq.
Baird Mandalas Brockstedt & Federico
LLC
6 South State Street
Dover, DE 19901
Attorney for Defendant PITB, LLC

            RE: DelDOT v. PITB, LLC et. al.
                   C.A. No. S21C-07-016 MHC

                         Submitted: December 29, 2023
                           Decided: February 06, 2024
Dear Counsel,

       Before the Court is PITB, LLC’s (“PITB”) and Stafford Street Capital, LLC’s

(“Stafford Street”) motion for instructions. After reviewing the party’s briefings on

the issues and conducting substantial research on both mandatory and persuasive

authority, I have reached the following conclusions. First, Delaware Court’s must

follow the Unit Rule (also referred to as the Undivided Fee Rule) when determining

the fair market value of a property comprised of multiple interests or estates in a

condemnation action.        Second, income generated from billboards is business

income, not rental income, and therefore not compensable in a condemnation action.

       To keep Delaware highway projects eligible for federal funding our General

Assembly bound itself in 1971 to the Federal Uniform Relocation Assistance and

Real Property Acquisition Policies Act of 1970 (“Uniform Act”).1 The Uniform

Act’s regulations “set[] forth the requirements for real property acquisition

appraisals for Federal and federally-assisted programs.”2 The regulation specifies

that “[a]ppraisals are to be prepared according to these requirements, which are

1
  126th General Assembly, 58 Del. Laws, c. 413, SB 626. “WHEREAS, the Federal Uniform
Relocation Assistance and Real Property Acquisition Act of 1970 establishes a new and different
program of relocation assistance and uniform real property acquisition policy; and …
WHEREAS, continued eligibility of the State of Delaware for various types of Federal Aid is
made contingent open compliance with the terms and provisions of the Uniform Relocation
Assistance and Real Property Acquisition Act of 1970.”
2
  49 C.F.R. § 24.103(a).
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intended to be consistent with the Uniform Standards of Professional Appraisal

Practice (USPAP).”3

       The USPAP dictates:

             When analyzing the assemblage of the various estates or
       component parts of a property, an appraiser must analyze the effect on
       the value, if any, of the assemblage. An appraiser must refrain from
       valuing the whole solely by adding together the undivided values of the
       various estates or components.4

       DelDOT “may have appraisal requirements that supplement USPAP

requirements, including, to the extent appropriate, the Uniform Appraisal Standards

for Federal Land Acquisitions (UASFLA).”5 The UASFLA states:

             There are several aspects of the unit rule that are important for
       appraisers to understand in developing appraisals under these
       Standards. The unit rule requires valuing property rather than by the
       sum of the values of the various interests into which it has been carved-
       such as lessor and lessees, or life tenant, and the holder of the
       remainder. This requirement holds true in circumstances where the
       physical components of the property are held under different ownership
       such as the surface estate, mineral rights, water rights or timber. Even
       when the physical components of the property are under the same
       ownership, it is improper to separately value the various components
       improvements, minerals, standing timber, crops and land and add them
       up. The procedure results in an improper summation or cumulative
       appraisal, which is inconsistent with both federal appraisal standards
       and USPAP.6

3
  Id.
4
   Uniform Standards of Professional Appraisal Practice, 2020-2021 Edition, Standards Rule 1-
4(e).
5
   49 C.F.R. § 24.103(a).
6
   Uniform Appraisal Standards for Federal Land Acquisitions, 6th Ed., §1.2.7.3.2,
p. 16.
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       Under Delaware Law, “…the intention of the legislature should be

controlling… it is the duty of the Court to consider the particular language of the

statute, the subject matter, the purpose for which the statute was enacted and its

importance, the relation of that provision to the general object intended to be secured

by the act and the consequences of contrary construction.”7 Our General Assembly

decided via legislative action that eligibility for federal highway project funding was

worth being bound to the aforementioned federal regulations. As such it was the

General Assembly’s intent that condemnation actions in Delaware must comply with

the Uniform Act and consequently the Unit Rule when determining the fair market

value of properties in such actions.

       As for the issue of billboard income, the Court acknowledges that jurisdictions

such as Arkansas, Virginia, North Carolina, and others have found that billboard

income is compensable rental income in condemnation actions. However, other

jurisdictions (disregarded by counsel for Stafford Street in their initial briefings)

have found billboard revenue to be non-compensable business income in

condemnation actions.

       The jurisdictions, discovered by Plaintiff’s counsel and the Court include, but

are not limited to, Indiana (“…a billboard can be relocated to another appropriate

7
  City of Dover v. Cartanza, 541 A.2d 580, 583 (Del. Super. Ct. 1988). (citing State ex rel Stabler
v. Whittington, 290 A.2d 659, 661 (Del. Super. Ct. 1972)).
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location and continue to produce the same or similar income.”),8 Connecticut

(“[b]illboards can be removed from the condemned property and placed on another

site, and the income they generate from the advertising placed on them can also be

replicated on another site.”),9 Kansas (“[b]ut location alone, no matter how unique,

does not create revenue.”),10 Pennsylvania (“…Outdoor could obtain a lease of

comparable location for the same amount of rent, construct its billboards at that

location, with the award for the replacement value of the billboards and realize an

identical income flow.”),11 Texas (“…appraisal based on billboard advertising

income impermissibly compensates for business profits.”),12 and several others.13

For the reasons set forth below Delaware joins these jurisdictions.

       When assessing the fair market value of a property in condemnation actions

Delaware Courts have adopted a modern liberal approach allowing “proof of value

by any techniques or methods which are generally considered acceptable in the

financial community….”14 These techniques and methods “cannot be employed in

8
  State v. Bishop, 800 N.E.2d 918, 926 (Ind. 2003).
9
  Comm'r of Transp. v. Rocky Mountain, LLC, 894 A.2d 259, 284 (Conn. 2006).
10
   City of Wichita v. Denton, 294 P.3d 207, 221 (Kan. 2013).
11
   In re Urban Redevelopment Auth. of Pittsburgh, Allegheny Cnty., 272 A.2d 163, 165 (Pa.
1970).
12
   State v. Cent. Expressway Sign Associates, 302 S.W.3d 866, 872 (Tex. 2009).
13
   Although not an exhaustive list other jurisdictions include Kentucky (City of Newport Mun.
Hous. Comm'n v. Turner Advert., Inc., 334 S.W.2d 767 (Ky. 1960)), Ohio (Wray v. Stvartak, 700
N.E.2d 347 (Ohio Ct. App. 1997)), Louisiana (State Dep't of Transp. & Dev. v. Chachere, 574
So. 2d 1306 (La. Ct. App.), writ denied, 580 So. 2d 667 (La. 1991)), and Missouri (State ex rel.
Missouri Highway & Transp. Comm'n v. Quiko, 923 S.W.2d 489 (Mo. Ct. App. 1996)).
14
   State v. Roseann H. Harkins Revocable Tr. Dated October 26, 1994, 732 A.2d 246, 250-251
(Del. Super. Ct. 1997) (citing Weinberger v. UOP, Inc., 457 A2d 701, 713 (Del. 1983)).
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a speculative manner.”15 It is well settled Delaware law that “in determining

constitutional ‘just compensation’, the owner is not entitled to recover compensation

for a destruction of a business being conducted on the land taken.”16 This Court has

clarified that even under our modern liberal approach Delaware law precludes

recovery for business lost income.17

       Well aware that lost business income is not compensable, learned counsel for

Stafford Street argues that they rent billboard space and therefore the income

generated from their billboard is compensable rental income as opposed to non-

compensable business income. To support this, they contend that a billboard is akin

to that of an apartment, office building, or shopping center in that it generates

revenue by collecting rent. However, unlike occupiable fixtures to real property

such as apartments, office buildings, and shopping centers, “a billboard is not

permanent improvement to the property in that it can be easily removed at minimal

cost.”18 This principal of Delaware law is demonstrated in the case at hand by

Stafford’s removal of the billboard from their interest on the condemned property.

       In Delaware condemnation actions, “the owner is not entitled to the

compensation for the taking or even destruction of the business, because the business

15
   Roseann H. Harkins Revocable Tr. Dated October 26, 1994, 732 A.2d. 246, 251 (Del. Super.
Ct. 1997).
16
   State ex rel. Sec'y of Dep't of Highways & Transp. v. Davis Concrete of Delaware, Inc., 355
A.2d 883, 886 (Del. 1976).
17
   State v. Catawba Associates, 2005 WL 481390, at *3 (Del. Super. Ct.).
18
   Voshell v. Bd. of Adjustment of Kent Cnty., 1995 WL 656802, at *3 (Del. Super. Ct.).
                                               6
is entirely distinct from the market value of the land upon which it is conducted….”19

Accordingly, the income generated from moveable personal property, such as

billboards, is distinct from the land upon which they sit and therefore not

compensable under our system of condemnation. This is distinguishable from

occupiable fixtures to real property such as office buildings, shopping centers, and

apartments who’s fixture to the realty is such that its rental income is not distinct

from the value of the land itself. In other words, business income is not compensable

in condemnation actions because of the moveable nature of a business and

billboards, like businesses, are moveable.

       It may seem obvious that the location of a billboard is pivotal to its income

generating potential, however, the location of any business is pivotal to its potential

to generate income. In Davis Concrete the Delaware Supreme Court did not permit

recovery based on loss of business despite defendant’s business being operated at an

“ideal location.”20 These results may seem harsh, but our Supreme Court has

acknowledged “the rule excluding loss of a business as an element of constitutional

‘just compensation’ often works great hardship.”21        Taking into account such

hardships, to ensure constitutional just compensation the Court entitles the

presentation of evidence of:

19
   Catawba Associates, 2005 WL 481390, at *2.
20
   Davis Concrete of Delaware, Inc., 355 A.2d 883, n.3.
21
   Id. at 886.
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       …not only the general and naturally adapted uses of the property, but
       also any special value due to its adaptability for a particular special use,
       and proof of fair market value permits proof of all valid elements of
       value, including such facts as the owner would properly and naturally
       use to influence a prospective purchaser.
              Accordingly, although the value of a business conducted upon
       the real property condemned may not be considered a separate and
       independent element of damage to be added to the value of the real
       property taken, it may be considered as a factor bearing upon the fair
       market value of the realty. Thus, the special value of land, owing to its
       adaptability for use in a particular business, is an element which the
       owner of the land is entitled to have considered in the determination of
       the amount to be paid as just compensation for the taking of the land.
       In particular, the existence of a going business on the land may be
       considered as indicative of the highest economic use to which the land
       may be put. But the emphasis must not be on the loss of the business
       Per se; it must be on the impact of its existence as a use which tends to
       enhance the market value of the land.22

       This approach is in line with other states who have ruled that income

generated from billboards is non-compensable business income. 23

       In conclusion, in Delaware parties must comply with the Unit Rule as it

appears in the relevant federal regulations when assessing the fair market value of a

property that is an assemblage comprised of multiple ownership interests or estates,

as is the matter at hand. Further, parties may use any approach that is non-speculative

and generally accepted in the financial community to determine the fair market value

of the condemned property but may not present evidence of loss of income from the

22
  Davis Concrete of Delaware, Inc., 355 A.2d 883, 887 (internal citations omitted).
23
  Cent. Expressway Sign Associates, 302 S.W.3d 866, 874. “…[T]he trial court should not allow
evidence of valuation based on advertising income. General estimates of what the property
would sell for considering its possible use as a billboard site are acceptable.”
                                              8
business of operating a billboard on the property. The parties are further instructed

to return to case scheduling to establish a new trial date.

                                        Sincerely,

                                        /s/ Mark H. Conner

                                        Mark H. Conner
                                        Judge

cc: Prothonotary

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