Court Opinion

ID: 9787366
Source: CourtListenerOpinion
Date Created: 2023-08-31 00:15:16.16465+00
Date Added: 2024-06-11T07:36:55.242960
License: Public Domain

Gibbons, J.,
with whom Shearing, J.,
agrees, concurring in part and dissenting in part:
While I agree with the majority that damages for lost profits resulting from the condemnor’s unreasonable delay in bringing the action to trial are compensable, I respectfully dissent from the conclusion that the undivided-fee rule is the only proper means of determining just compensation.
*344The United States Constitution declares that no private property shall “be taken for public use, without just compensation.”1 The Constitution of the State of Nevada similarly provides that “[private property shall not be taken for public use without just compensation having been first made.”2 Both have their origins in James Madison’s proposed twelve amendments to the United States Constitution presented at the first session of Congress.3 Madison’s proposed amendment stated that “[n]o person shall... be obliged to relinquish his property, where it may be necessary for public use, without a just compensation.’ ’4
The majority takes no issue with the fundamental principles stated above. Our divergence begins and ends solely on the issue of how just compensation is determined. While the undivided-fee rule is constitutional in most instances, I believe fairness dictates the “aggregate-of-interests” rule be used to determine just compensation when more than one estate is being condemned.
The majority cites several federal and state cases concluding the undivided-fee mle properly compensated the parties involved.51 agree that in most cases, the undivided-fee mle is constitutionally permissible because it produces the same valuation as would the aggregate-of-interests mle. The majority ignores, however, the premise that in unusual circumstances, the undivided-fee mle must be set aside to prevent an unfair and distorted result in favor of the condemnor.
In defense of the undivided-fee rule, the majority implies that commentators suggest the aggregate-of-interests rule “is based upon faulty valuation techniques.”6 The composition of the “commentators” consists of one sixteen-year-old law review article.7 The majority does not cite a far more recent article concluding the undivided-fee rule is “conceptually flawed” in cases like the one now before the court.8 Further, the article indicates the undivided-fee rule makes “little sense in some applications.”9
The majority’s contention notwithstanding, fair market value is “not the sole measure” of just compensation.10 “Market value *345may, or may not, amount to just compensation.”11 This court has previously stated that ‘ ‘ ‘ [i]t is difficult to imagine an unjust compensation; but the word “just” is used evidently to intensify the meaning of the word “compensation;” to convey . . . that the [compensation] shall be real, substantial, full, ample; and no legislature can diminish by one jot the rotund expression of the constitution.’ ”12 Despite these words, in most condemnation proceedings the “ ‘most probable price’ ” is the measure for compensation.13 Value is determined “as if the government project that resulted in the taking was neither contemplated nor carried out.”14
In addition to market value, “the court or jury [may] consider ] other elements that can fairly enter into the question of value and which an ordinarily prudent business man would consider before forming judgment in making a purchase.”15 One such consideration is ‘ ‘the rental value of the property condemned, as well as the actual rent which the property produces, because such elements of value are material in the determination of ‘just compensation for the land taken.’ ”16
“Law is not a science, but is essentially empirical.”17 We must compensate an owner for the loss of property taken from him.18 In unusual circumstances, this requires using the aggregate-of-interests formula to adequately reimburse an owner for the taking. In Boston Chamber of Commerce v. Boston, the United States Supreme Court rejected the undivided-fee rule precisely because it overlooks scenarios such as the instant case.19 Apparently, the majority finds this unpersuasive.
*346As United States Supreme Court Justice Oliver Wendell Holmes stated, “[The Constitution] does not require a parcel of land to be valued as an unencumbered whole when it is not held as an unencumbered whole.”20 Perhaps more importantly, Justice Holmes stated that the Constitution “deals with persons, not with tracts of land. And the question is what has the owner lost, not what has the taker gained.”21 Finally, Justice Holmes points out that the Constitution “merely requires that an owner of property taken should be paid for what is taken from him.”22 In short, the Constitution mandates that a private property owner be placed in as good a position after a taking as if the property had not been taken.23
California appellate courts, relying on identical statutes, have supported both methods of valuation.24 The California Court of Appeal, in County of Los Angeles v. American Savings & Loan Ass’n, discusses a hypothetical identical to the instant case.25 The court theorizes that when using the undivided-fee rule, the sum of all the individual interests will equal what the value of the property would be with only one interest,26 but notes that the assumption is not always true. Under the aggregate-of-interests rule, however, “the condemnor pays to the owner of each individual interest its fair market value regardless of whether the total payment is more or less than the value of the fee if it had been owned by one person.’ ’27
The aggregate-of-interests rule is therefore sometimes criticized as “giving the condemnor a windfall.”28 For example, a windfall occurs when a developer purchases several separate parcels that, when combined, result in land worth far more than the sum paid for the individual parcels.29 The court in American Savings & Loan Ass’n explains, “[T]his frequently happens in the open market.”30 I agree; however, in this case we are not dealing with an “open market” transaction. This is a taking, and just compensation should be paid to all the interested parties.
*347While the fairness of either rule may be debated, the majority insinuates I ignore or mistakenly construe NRS 37.115. The majority contends the language of the statute effectively codifies the undivided-fee rule. I disagree with that interpretation.
NRS 37.115 states: “Where there are two or more estates or divided interests [in] property sought to be condemned, the plaintiff is entitled to have the amount of the award for such property first determined as between plaintiff and all defendants claiming any interest therein. The respective rights of such defendants in and to such award shall be determined by the court, jury, or master in a later and separate hearing in the same proceeding and the amount apportioned by order accordingly.’ ’ This terminology is consistent with the idea of determining the interests of all parties, not just one. For example, the statute may be fairly applied for condemnation proceedings if there were two or more tenants in common who share fee ownership. The tenants in common would be entitled to divide the net proceeds based upon their fee ownership percentages. This is not the case, however, when there are separate estates such as leasehold interests or a life estate together with fee ownership. Thus, as in the American Savings & Loan Ass’n hypothetical, the aggregate value of the separate estates exceeds the fair market value of the fee interest valued by itself. Therefore, to withstand constitutional muster and award just compensation, the fee and leasehold estates must be appraised separately and their values aggregated. The interpretation of NRS 37.115 by the majority fails to provide for just compensation. I interpret NRS 37.115 to be a procedural rule.
Furthermore, the majority places much emphasis on the language of NRS 37.009(6), which states in part: “ ‘Value’ means the most probable price which a property would bring in a competitive and open market under the conditions of a fair sale.” The statute continues, however, with the condition that “[t]he buyer and seller are typically motivated.”31
“Typically motivated” sellers are not those whose land is taken away by eminent domain. We do not have before us a willing seller. It is difficult for me to envision a normal transaction in which the seller is forced to sell his or her interest in the land whether he or she likes it or not. This key distinction prevents a forced sale from being a “fair sale.”32
The majority confuses valuation with allocation. Under NRS 37.115, the district court conducts two hearings. At the first hearing, valuation is determined. The undivided-fee rule or the aggregate-of-interests rule may be used to determine the value of the property. The district judge, or the jury, considers expert tes*348timony and evidence as to the value of the condemned property. After valuation, the condemnor is excused from the second proceeding, as no issue remains regarding the amount to be paid for the property. At the second hearing, however, additional evidence is heard regarding how the funds should be allocated.
Apparently, the majority assumes whatever determination of value made during the first hearing binds the court to that allocation at the second hearing. I disagree with that reasoning. The first hearing is solely to determine value, regardless of the method of valuation. The second hearing exists to allow the court, or the jury, to consider evidence as to how the entire sum should be allocated. The aggregate-of-interests rule does not interfere with the second hearing. To the contrary, the rule ensures the amount to be allocated is sufficient to compensate all interests justly.
We must remain true to the fundamental principles of the United States and Nevada Constitutions. “ ‘[T]he law . . . must jealously guard the rights of individual owners.’ ’ ’33 We should not forget John Locke’s principle that “governments were instituted to protect every person’s property against the depredations of his neighbor.’ ’34 It is unjust to take an individual property owner’s land and refuse to properly compensate him for his loss. Respectfully, I would affirm the decision of the district court and allow the aggregate-of-interests rule to determine just compensation when more than one estate is being condemned.

 U.S. Const. amend. V.

 Nev. Const. art. 1, § 8, cl. 6.

 1 Annals of Cong. 451-52 (Joseph Gales ed., 1789), available at http: //memory, loe. gov/ammem/amlaw/lwac. html.

 Id.

 See majority opinion ante notes 13 and 28.

 See majority opinion ante p. 339.

 See majority opinion ante note 30.

 Gideon Kramer, What to Do Until the Bulldozers Come? Precondemnation Planning for Landowners, 27 Real Est. L.J. 47, 72 (1998).

 Id.

 Urban Renewal Agcy. v. Iacometti, 79 Nev. 113, 128 n.10, 379 P.2d 466, 473 n.10 (1963).

 Id.

 Id. (quoting Virginia and Truckee R. R. Co. v. Henry, 8 Nev. 165, 171-72 (1873)).

 County of Clark v. Buckwalter, 115 Nev. 58, 61, 974 P.2d 1162, 1164 (1999) (quoting NRS 37.009(6)).

 City of Sparks v. Armstrong, 103 Nev. 619, 622, 748 P.2d 7, 9 (1987) (citing County of Clark v. Alper, 100 Nev. 382, 390, 685 P.2d 943, 948 (1984)).

 State v. Shaddock, 75 Nev. 392, 398, 344 P.2d 191, 194 (1959) (citing In re Bainbridge-Unadilla Part 1, State Highway, 5 N.Y.S.2d 988 (Chenango County Ct. 1938)).

 Id. at 398, 344 P.2d at 194 (quoting Welch v. Tennessee Valley Authority, 108 F.2d 95 (6th Cir. 1939)).

 Oliver Wendell Holmes, Codes, and the Arrangement of the Law, 5 Am. L. Rev. 1 (1870), reprinted in 44 Harv. L. Rev. 725, 728 (1931).

 See Boston Chamber of Commerce v. Boston, 217 U.S. 189, 195 (1910); People v. Lynbar, Inc., 62 Cal. Rptr. 320, 327 (Ct. App. 1967); Iacometti, 79 Nev. at 128 n.10, 379 P.2d at 473 n.10; Virginia and Truckee R. R. Co., 8 Nev. at 171-72.

 Boston Chamber of Commerce, 217 U.S. at 195.

 Id.

 Id.

 Id.

 Lynbar, Inc., 62 Cal. Rptr. at 327.

 County of Los Angeles v. American Savings & Loan Ass’n, 102 Cal. Rptr. 439, 443 (Ct. App. 1972) (citing Mike Talley, Note, The Undivided Fee Rule in California, 20 Hastings L.J. 717, 721 (1969)).

 Id. at 442-43.

 Id. at 442.

 Id.

 Id. at 443.

 Id.

 Id.

 NRS 37.009(6)(b).

 NRS 37.009(6).

 Iacometti, 79 Nev. at 128 n.10, 379 P.2d at 473 n.10 (quoting Virginia and Truckee R. R. Co., 8 Nev. at 171).

 Southwestern Ill. Development Auth. v. NCE, 710 N.E.2d 896, 901 (Ill. App. Ct. 1999) (citing William B. Stoebuck, A General Theory of Eminent Domain, 47 Wash. L. Rev. 553, 595 (1972) (discussing Locke’s principles of eminent domain)).