Boston Edison Co. v. Mass. Water Res. Auth..

• Decision Date: 19 May 2011
• Docket Number: SJC–10714.
• Parties: BOSTON EDISON COMPANYv.MASSACHUSETTS WATER RESOURCES AUTHORITY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

459 Mass. 724

947 N.E.2d 544

BOSTON EDISON COMPANY

v.MASSACHUSETTS WATER RESOURCES AUTHORITY.

SJC–10714.

Supreme Judicial Court of Massachusetts, Norfolk.

Argued Nov. 2, 2010.Decided May 19, 2011.

Mark S. Bourbeau, Boston (Jeffery A. Tocchio with him) for the plaintiff.Diane C. Tillotson (Joseph L. Bierwirth with her), Boston, for the defendant.Present: IRELAND, C.J., SPINA, COWIN, GANTS, & DUFFLY, JJ.¹GANTS, J.

Boston Edison Company (Boston Edison) brought this action under G.L. c. 79, § 12, to recover damages caused by four eminent domain takings by the Massachusetts Water Resources Authority (MWRA) on property known as the Fore River Station (site) in the town of Weymouth and city of Quincy. After a lengthy trial, the jury answered special questions and awarded damages of $8,100,000 for takings on the north parcel of the property (which lies north of Route 3A) and $2,900,000 for takings on the south parcel (which lies south of Route 3A). The parties cross-appealed from the judgment, and we granted the MWRA's application for direct appellate review.

Background. The site on the banks of the Fore River comprises 78.1 acres of land divided by Route 3A, all zoned for industrial use; there are 20.2 acres on the north parcel and 57.9 acres on the south parcel. In the 1920's, Boston Edison built a coal-fired electrical plant on the south parcel, that it converted to oil in the 1960's; it built oil storage facilities on the north parcel. Although Boston Edison decommissioned this plant in the late 1970's, it continued to run two turbines intermittently to cope with peak demand and maintained on the south parcel a “switch house” that transmitted power from the electrical grid into Quincy.

Under the deregulation of the energy industry accomplished by the electric utility industry restructuring act, St.1997, c. 164, which became effective on November 25, 1997 (see Shea v. Boston Edison Co., 431 Mass. 251, 252–258, 727 N.E.2d 41 [2000] [discussion of Act] ), Boston Edison could own either electrical generating facilities or transmission facilities, but not both. Boston Edison chose to retain its transmission facilities and sell its generating facilities. On December 10, 1997, as part of a broader agreement to sell its generation facilities, Boston Edison entered into a purchase and sale agreement with Sithe Edgar LLC (Sithe) to sell the site, retaining a large easement on the south parcel that included the switch house. ²

Schedule 3.10 of the agreement acknowledged that discussions had taken place with the MWRA over several years regarding the potential taking by eminent domain of a portion of the site for construction of a sewage pumping station and tunnel as part of the Braintree–Weymouth Sewer Relief Facilities Project (sewage project). The agreement noted that no formal taking had yet occurred, and no schedule for completion of the discussions had been established.

In April, 1998, prior to the closing, representatives of MWRA, Boston Edison, and Sithe met to discuss the anticipated takings for the MWRA's sewage project and Sithe's plans to construct a power plant on the site. All agreed that the site could accommodate both projects but that the sequencing and staging of construction, as well as the location of the structures, needed to be resolved. After a Sithe representative declared that Sithe could not place the new power plant on the south parcel because of the size and orientation of the site, a Boston Edison representative suggested that Boston Edison could move its switch house to a different location to enable Sithe to build on the south parcel. Under the closing agreement between Boston Edison and Sithe entered into on May 15, 1998, and a supplementary agreement entered into on October 29, 1999, Boston Edison agreed to transfer to Sithe much of the easement it had retained in the south parcel, including the part of the easement that contained the switch house, and to relocate the switch house to the smaller easement it retained on the south parcel. Sithe agreed to assign to Boston Edison its rights against the MWRA regarding the eminent domain takings on the site.³

MWRA's first order of taking, recorded on August 13, 1999, included an area of land in fee for a pumping station, a permanent drainage easement, two permanent subsurface and access easements, and three temporary easements to provide access to workers, machinery, and materials, and storage for construction materials and equipment, most of which were on the north parcel. A second and third order of taking recorded on February 20, 2001, and April 10, 2003, included permanent and temporary easements connected to the sewage project on the south parcel. Because of construction delays, the MWRA recorded a fourth order of taking on June 24, 2003, to extend by nine months the temporary access and storage easements on the north parcel specified in the first order of taking, which were originally set to expire on June 30, 2003.

At trial, Boston Edison contended that the highest and best use of the north parcel was as a mixed-use residential development that would include residential condominium units, a commuter boat terminal, a public marina, and a public waterfront park. Based on that highest and best use, its experts opined that the fair market value of the property interests taken on the north parcel was $11,400,000. The MWRA argued that it was not reasonably probable that the north parcel could be used for such a residential development because it was zoned for industrial use at the time of the first taking on August 13, 1999, and there was no reasonable probability that it would be rezoned for residential development.

In addition, the MWRA argued that, apart from the zoning restriction, the north parcel consisted of filled tidelands within a designated port area (DPA), as defined in 301 Code Mass. Regs. § 25.02 (1994), and a developer could not obtain a license from the Department of Environmental Protection (DEP) for the proposed residential project because it was within a DPA. The MWRA moved in limine before trial to bar all evidence and expert testimony regarding the proposed residential development, but the motion was denied. In answer to special questions, the jury found that it was “reasonably probable that the [n]orth [p]arcel could be rezoned for residential development notwithstanding that the property was zoned for industrial use as of August 13, 1999,” and that it was “reasonably probable that the [n]orth [p]arcel could be developed for residential use notwithstanding that the property consisted of filled tidelands within a[DPA] as of August 13, 1999.” The jury awarded Boston Edison $8,100,000 as damages arising from the takings on the north parcel.

As to the south parcel, Boston Edison argued that the takings and the sewage project caused the relocation of the switch house. Boston Edison maintained that it agreed to transfer to Sithe a substantial share of its retained easement and relocate its switch house because, based on the MWRA's plans for the taking in April, 1998, Sithe would otherwise have been unable to build its power plant on the site. This would have jeopardized not only the sale of the site but the sale of Boston Edison's other generating facilities to Sithe. Boston Edison, therefore, contended that the costs of relocating the switch house should be included as damages arising from the takings, and claimed damages in the amount of $11,820,000. Of this sum, $1,800,562 were direct damages arising from the takings on the south parcel, and $10,019,438 were damages arising from the relocation. The MWRA argued that the takings did not cause the relocation of the switch house, because its initial plans for the takings on the south parcel changed before the actual takings, in part to accommodate Sithe's construction of the power plant and Boston Edison's relocation of its switching facility. As a result of this change in plans, none of its permanent easements came close to the switch house, and none of its temporary easements touched it.

The judge instructed the jury that they may award damages “associated with the demolition and rebuilding of the switch house” if the jury found “that the switch house was relocated in anticipation of a taking actually made or the public project for which the taking was made” (emphasis added). In answer to a special question, the jury found that neither the takings nor the sewage project caused Boston Edison to relocate the switch house. The jury awarded $2,900,000 in damages for the takings on the south parcel.

After trial, Boston Edison moved under Mass. R. Civ. P. 59(e), 365 Mass. 827 (1974), that interest be awarded on the entire judgment from August 13, 1999, the date of recording of the first order of taking. Boston Edison also moved that damages bear interest at the “prudent investor” rate of fifteen per cent per annum rather than the statutory rate established in G.L. c. 79, § 37, because the statutory rate fell below the constitutional minimum, or, alternatively, that damages bear interest at a rate of 5.23 per cent for the first year after August 13, 1999, and at a rate of 6.17 per cent for each subsequent year. The judge denied the motion, and awarded the rate of interest established in G.L. c. 79, § 37, commencing on the date of recording of each order of taking. Because the jury awarded damages for each parcel rather than each taking, the judge apportioned the damages among the four takings, and calculated the interest based on that apportionment.⁴

The MWRA moved for judgment notwithstanding the verdict and for a new trial or, in the alternative, for remittitur. The judge denied the motion. After oral argument of the appeal, we directed the judge to provide us with a statement explaining his reasons for denying the remittitur as to the damage award regarding the south parcel and identifying the relevant evidence on which he relied. We also noted that the...