Canada West, Ltd. v. City of Atlanta, 67285

• Decision Date: 02 February 1984
• Docket Number: No. 67285,67285
• Citation: 315 S.E.2d 442,169 Ga.App. 907
• Parties: CANADA WEST, LTD. et al. v. CITY OF ATLANTA et al.
• Court: Georgia Court of Appeals

Page 442

315 S.E.2d 442

169 Ga.App. 907

CANADA WEST, LTD. et al. v. CITY OF ATLANTA et al.

No. 67285.

Court of Appeals of Georgia.

Feb. 2, 1984.

Rehearing Denied Feb. 22, 1984.

Certiorari Denied April 6, 1984.

Robert D. McCallum, Jr., Atlanta, for appellants.

Thomas A. Bowman, Charles N. Pursley, Jr., W. Stell Huie, Atlanta, for appellees.

BIRDSONG, Judge.

Condemnation. Canada West is the owner of an apartment complex in the city of Atlanta. Canada West purchased the apartment complex in 1979 with the express intent of converting the apartments to condominiums. At the time of the purchase, Canada West was aware of the proposed presence of an adjacent MARTA station and plans for construction of the rail line to run either on one side or the other of the complex or possibly through the complex. One month after the closing of the purchase, MARTA determined to run its rail line through the center of the apartment complex. Nevertheless, Canada West continued to complete all the preliminary work necessary for a legal conversion of the apartments to condominiums prior to the commencement of the extension of the rail line into the apartment grounds. Canada West entered into contracts with a number of potential purchasers for the apartments prior to conversion to condominiums. The decision was made by Canada West to withdraw all offers for sales because of the visual impact of the rail line construction and the financially depressing effect thereof on the proposed sales of the apartment units to be converted. All sales were withdrawn and delayed until after the completion of the MARTA line through the complex.

On July 22, 1981, the city of Atlanta, on behalf of MARTA, filed for condemnation for an easement and right of way through the middle of the apartment grounds with the underground tracks running directly under one of the several buildings utilized as an apartment building. The various property interests taken included a permanent easement for a tunnel to be used for the operation of the MARTA trains; a fee simple title to the one apartment building containing 36 two-bedroom apartments including a three-month easement for the purpose of demolishing and removing the building; and six temporary construction easements, consisting of two for an 18-month period and four for a period of six months each. It was undisputed that the highest and best use for the remaining 144 apartment units would be as condominiums.

Pursuant to the declaration of taking, the city initially deposited the sum of $953,800 as just and adequate compensation for the permanent and temporary takings. Following a successful appeal to a Special Master by Canada West, the city deposited an additional $371,200 for a total award of $1,325,000. Canada West, still being dissatisfied with the compensation, sought and obtained a jury trial. After a multiple day jury trial, the jury returned a verdict in the amount of $1,045,151.50. The trial court entered its judgment on that verdict and ordered Canada West to refund an excess sum of $276,519.70 to the city. Canada West filed this appeal enumerating 13 alleged errors, some of which are interrelated. Held:

1. In its first enumeration of error, Canada West urges the trial court erred in refusing to let Canada West establish by evidence or argue to the jury its existing below the market financing of its mortgages and the impact that refinancing by a putative purchaser would have on consequential damages. By offer of proof, Canada West showed it had first, second and third mortgages at 10% or less and that prevailing mortgage interest rates at the time of the condemnation were at about 20%. Canada West also showed that it had the unusual clause in its mortgages that allowed the mortgagee to accelerate the mortgages should the apartments be condemned and further that it was highly unlikely that the mortgagee would allow a purchaser to assume the loans at the lower interest rates but would seek either the prevailing rate at the time of the purchase or some higher rate than that prescribed in the existing mortgages. In contravention, the city of Atlanta showed that as of the time of the trial, the mortgagee had not invoked its power of accelerating the mortgages and that no actual sale of the property was in process inasmuch as Canada West had withdrawn all offers for sale.

In substance then, Canada West argues that the potential loss of favorable financing caused it consequential damage either directly or indirectly because the ultimate sale of the property would have to be refinanced at a rate in excess of the interest rate on the existing mortgages. We experience much difficulty with this argument. How could the jury know with any reasonable degree of probability the rate of interest existing at the time of a future sale? Would it be greater or less, and if so, by how much? When would Canada West elect to make its sale or, alternatively, when would the mortgagee exercise its right to accelerate Canada West's mortgages? We conclude the trial court correctly excluded the evidence related to the potential loss of favorable financing. At best the evidence lay within the realm of remote and speculative damages, evidence which is not admissible in a condemnation action. See DeKalb County v. United Family Life Ins. Co., 235 Ga. 417, 421, 219 S.E.2d 707; Dept. of Transp. v. Kendricks, 148 Ga.App. 242, 246, 250 S.E.2d 854; Venable v. State Hwy. Dept., 138 Ga.App. 788, 789(3), 227 S.E.2d 509. Furthermore, we conclude that evidence of a favorable financing arrangement should not be the basis for arriving at a just and adequate compensation in the absence of a loss actually suffered as a direct result of a condemnatory taking. Generally, just and adequate compensation is the fair market value of the condemned property at the time of taking. State Hwy. Dept. v. Thomas, 106 Ga.App. 849, 852-854(5), 128 S.E.2d 520. Where only a part of the land is taken, the owner is also entitled to recover consequential damages for any reduction in the fair market value of the land remaining, including enhanced value because of the uniqueness of the land itself. Id.; Wright v. MARTA, 248 Ga. 372, 283 S.E.2d 466. Just and adequate compensation for consequential damage thus must be based upon the value of the remaining property and not upon the problematical utilization or loss of a financing agreement which happens to be related to the land. See in this regard, DeKalb County v. United Family Life Ins. Co., supra, 235 Ga. pp. 420-421, 219 S.E.2d 707. We find no merit in this enumeration.

2. In its charge to the jury, the trial court charged in legally correct language the law on just and adequate compensation pertaining to lost profits. Canada West asserts error in this charge, complaining that the charge required the jury to find an existing business which was either destroyed or substantially and demonstrably damaged. It maintained that there was no business separate and apart from the land itself and thus such a charge prejudicially confused the jury.

We disagree. Canada West maintained throughout the trial that it had purchased the apartment complex for the sole purpose of converting it to condominiums. It intended to expend substantial sums of money to modify and upgrade the individual apartments. Thus, Canada West engaged in the business of apartment conversion and sought to make its profits from the difference in the lower cost of apartment purchase--renovation and the higher selling price of the individual condominium units. As such Canada West was engaged in a business which was frustrated by the condemnation. Though its business endeavors were derailed, the withdrawal from the conversion and sale business was a matter of timing by Canada West, for it made clear that the conversions and sales would recommence as soon as MARTA completed its work in the apartment enclave. Even though Canada West maintained it sought damages only for the lessened enhancement of its property, which enhancement would have occurred when the property was evaluated as condominiums rather than as apartments, the trial court charged fully both on "actual value" and lost profits, thus covering the evidence in all its relevant aspects. As we view the charge of the court, the jury could have returned just compensation either on the theory of lost profits, on the theory of actual value, or on a combination of the two theories. Either theory would work to the advantage of Canada West. The charge given was clear, concise and correct, and Canada West has not shown any prejudice in the charge. Error to be reversible must be harmful. First Nat. Bank of Chattanooga v. American Sugar Refining Co., 120 Ga. 717(1), 48 S.E. 326; Burger Chef Systems v. Newton, 126 Ga.App. 636, 639, 191 S.E.2d 479.

3. Canada West urges error in the exclusion of evidence that it lost approximately $98,000 in rents during the construction period. The city objected to the evidence on the ground that damages caused by and during the construction period are not compensable damages. Canada West contends on appeal that such damages might affect the after value of the property and thus guidance of those damages was admissible as a matter going to consequential damages. However, Canada West's questioning of its expert was phrased so as clearly to seek lost rentals because of and during the construction period. The expert even stated that the loss of income would not be permanent or continue after the construction was completed. It clearly is the law of this state that damages caused by the construction process of a public project upon private property effected by...