Arkansas State Highway Commission v. Cash

• Court: Arkansas Court of Appeals
• Writing for the Court: PILKINTON; WRIGHT
• Citation: Arkansas State Highway Commission v. Cash, 590 S.W.2d 676, 267 Ark. 758 (Ark. App. 1979)
• Decision Date: 14 November 1979
• Docket Number: No. CA,CA
• Parties: ARKANSAS STATE HIGHWAY COMMISSION Appellant, v. M. F. CASH and Josephine Cash Appellees. 79-148.

Page 676

590 S.W.2d 676

267 Ark. 758

ARKANSAS STATE HIGHWAY COMMISSION Appellant, v. M. F. CASH and Josephine Cash Appellees.

No. CA 79-148.

Court of Appeals of Arkansas.

Nov. 14, 1979.

Rehearing Denied Dec. 19, 1979.

Released for Publication by the Court of Appeals Dec. 19, 1979.

Christopher O. Parker, Little Rock, for appellant.

Pinson & Reeves, Harrison, for appellees.

PILKINTON, Judge.

This is a highway condemnation case. M. F. Cash and wife were the owners of two parcels of land adjacent to Highway 62/65 north of Harrison, Arkansas. The first parcel was a triangular shape containing .20 acre fronting for approximately 190.9 feet on the highway. Of this parcel the Arkansas Highway Commission condemned and acquired .12 acre in fee simple, which is designated as Tract 52, leaving a residual of .08 acre. The second parcel was an irregular shaped piece of land containing .18 acre, with 229 feet of frontage on the same highway. Of this second parcel, the commission acquired .16 acre, designated as Tract 69, leaving a residual of .02 acre.

Mr. and Mrs. Cash own numerous billboards, some erected on their own land, and some located on property they lease from third parties. The two parcels involved in this case were purchased by them as locations upon which to erect billboards. At the time of taking, there were two billboards, containing three faces, located on Tract 52. There were two billboards, also containing three faces, located on Tract 69. In addition, there was a small building on Tract 69 which Mr. Cash rented. Both tracts were income producing.

Appellee Cash, as owner, and Mr. Gene Lair, a real estate appraiser, each valued Tracts 52 and 69 by capitalizing a "net" income figure which was derived from money produced from each piece of property. Mr. Cash estimated just compensation for the taking of Tract 52 to be $11,000.00 and estimated just compensation for the taking of Tract 69 to be $18,000.00. Mr. Lair estimated just compensation for the taking of Tract 52 to be $9,100.00 and estimated just compensation for the taking of Tract 69 to be $16,600.00.

Mr. Robert Palmer, a real estate appraiser, called by the commission, valued both tracts prior to condemnation by using the comparable sales approach as well as capitalizing the rent payable under billboard leases from other sign companies at other locations. He estimated just compensation for Tract 52 to be $1,900.00 and just compensation for Tract 69 to be $4,700.00. The issue, as to each tract, was submitted to the jury under proper instructions. The jury returned a verdict of $5,500.00 as just compensation for Tract 52, and $10,000.00 as just compensation for Tract 69. The commission has appealed from the judgment entered on these verdicts. The case has been assigned to the Arkansas Court of Appeals pursuant to Rule 29(3).

I.

Appellant first argues that the trial court admitted, over the objection of the commission, evidence of the gross income derivable from the sale of advertising space on the billboard located on the subject property. We agree that the admission of testimony regarding business income or profits, and use of that income to compute market value in an eminent domain action, is reversible error. Hot Spring County v. Bowman, 229 Ark. 790, 318 S.W.2d 603 (1958). However, we do not understand from this record that the trial judge admitted such evidence. It is well settled that capitalization of income is a recognized method of arriving at the fair market value of real estate used to produce rental income in determining just compensation in eminent domain cases. Housing Authority of the City of Little Rock v. Rochelle, 249 Ark. 524, 459 S.W.2d 794. The Arkansas Supreme Court has also held evidence of rental value to be admissible as a factor to be considered in determining just compensation. Desha v. Independence County Bridge District No. 1, 176 Ark. 253, 3 S.W.2d 969. See also Housing Authority of the City of Little Rock v. Rochelle, supra.

As we view the record, the rule that evidence of profits derived from a business located on the land is not admissible as a basis for computing the market value of such property in condemnation proceedings is not applicable to the situation under consideration. The commission fails to distinguish between income from the property and income from a business conducted upon the property. This distinction furnishes the criterion for the applicability of the rule. NLR Urban Renewal v. Van Bibber, 252 Ark. 1248 at 1254, 483 S.W.2d 223 (1972). Here we are dealing with net income from the property, something that would be the prime consideration of any prospective purchaser of income producing land. The evidence does not support the commission's contention that the income in this case is of the type derived from a business located on the land. We find no merit in the first point urged by appellant for reversal.

II.

Appellant next urges that the trial court erred in failing to strike the testimony of Gene Lair, an appraiser for the land owner. The claim is that Mr. Lair valued the property by capitalizing the income of a business conducted thereon. We do not so understand the evidence. Mr. Lair was qualified as an expert in real estate appraisals. He stated his opinion as to the just compensation for each tract involved. As a qualified expert, Mr. Lair needed only to have stated his bare opinion. Ark. Highway Commission v. Hartsfield, 248 Ark. 821, 454 S.W.2d 82 (1970). However, as appellant points out, the testimony of such a witness should be struck if it is shown to lack a sound and reasonable basis. Ark.-Mo. Power Co. v. Sain, 262 Ark. 326, 556 S.W.2d 441 (1977). In the case before us, we cannot say Mr. Lair's testimony lacked a sound and reasonable basis. He valued both tracts by capitalizing a "net" income figure derived from money produced from each piece of the property involved. He stated that the subject property was being used for the rental of sign locations and, in the case of Tract 69, also the rental of a commercial building. Mr. Lair said he considered such purposes to be the highest and best use...