Defnet Land & Inv. Co. v. State ex rel. Herman

• Decision Date: 22 February 1971
• Docket Number: CA-CIV,No. 1,1
• Citation: Defnet Land & Inv. Co. v. State ex rel. Herman, 480 P.2d 1013, 14 Ariz.App. 96 (Ariz. App. 1971)
• Parties: DEFNET LAND & INVESTMENT CO., an Arizona corporation, et al., Appellants, v. STATE of Arizona ex rel. Justin HERMAN, Director, Arizona Highway Department, Appellee. 1271.
• Court: Arizona Court of Appeals

Page 1013

480 P.2d 1013

14 Ariz.App. 96

DEFNET LAND & INVESTMENT CO., an Arizona corporation, et al., Appellants, v. STATE of Arizona ex rel. Justin HERMAN, Director, Arizona Highway Department, Appellee.

No. 1 CA-CIV 1271.

Court of Appeals of Arizona, Division 1.

Feb. 22, 1971.

Rehearing Denied March 24, 1971.

Review Denied April 20, 1971.

Hughes, Hughes & Conlan, by John C. Hughes, Phoenix, for appellants.

Gary K. Nelson, Atty. Gen., by H. K. Mangum, Sp. Asst. Atty. Gen., Flagstaff, for appellee.

HOWARD, Judge.

The first trial in this action resulted in a reversal by the Arizona Supreme Court. Defnet Land & Investment Co. v. State ex rel. Herman, 103 Ariz. 388, 442 P.2d 835 (1968). This is an appeal from the retrial and presents the following questions: (1) Did the evidence show a special benefit? (2) Did the State's expert appraiser lay a sufficient foundation for its evidence as to special benefits? (3) Is evidence of a special benefit admissible without such issue being pled or raised in pretrial procedures?

This condemnation grew out of the conversion of U.S. 66 to U.S. Interstate 40 between Williams and Flagstaff, Arizona. The appellants shall hereinafter be referred to as the defendants and the appellee as the plaintiff or the State. Defendants' property before the taking consisted of a single tract of 120.75 acres without improvements. 1,980 feet of tract fronted on Highway 66. The State took 13.10 acres from the north end of the tract, severing one parcel of .90 acre from the remaining acres. The new highway, Interstate 40, is a controlled access highway. About 200 feet to the west of defendants' property an interchange was constructed. The south tract had access to Interstate 40 only by means of the interchange and a county road leading to it, whereas, as stated before, it had direct access from 1,980 feet of frontage on Highway 66.

The jury returned a verdict assessing damages for the taking in the sum of $13,015.00 and severance damages in the sum of $14,310.00 against which was set off special benefits in the sum of $10,000.00.

Defendants appeal from the judgment entered on the jury verdict and an order denying defendants' motion for a judgment N.O.V. and/or for a new trial.

Plaintiff's appraiser valued the total property in the before situation in the sum of $88,617.00. He valued the take in the sum of $12,314.00, testified to severance damages in the sum of $1.00 and special benefits in the sum of $15,321.00.

Defendants' expert witness testified to the take in the sum of $25,400.00, severance damages in the sum of $41,572.00 and no special benefits.

EVIDENCE OF SPECIAL BENEFITS

It is defendants' position that no special benefits can arise as a result of proximity to an interchange on a controlled access highway.

While the briefs were being prepared in this case, this court decided the case of Taylor v. State ex rel. Herman, 12 Ariz.App. 27, 467 P.2d 251 (1970). In that case we stated what types of benefits could be offset against severance damages and defined general and special benefits. We also held that proximity to an interchange can result in a special benefit. We further ruled that land, which by reason of its proximity to a no access highway interchange, is enhanced in value because its highest and best use, assuming the completion of the public improvement, is immediately favorably changed or its potential for favorable change in use appears by reasonable probability to be imminent, is specially benefited.

The plaintiff's appraiser testified in the case Sub judice that 16.84 acres of land, which previously had a highest and best use for investment purposes, in the after situation had a highest and best use for commercial purposes and a consequential increase in value because of its proximity to the interchange.

Although acknowledging the existence of the case of Taylor v. State, supra, defendants argue that the interchange does nothing more than direct traffic to their property and that such traffic, being merely an incident of streets and highways, cannot be considered as an element of benefits to the property. They therefore claim that it is incorrect to include the movement of the traffic on the highway as an element of special benefit. In support of this proposition defendants cite the following cases: State ex rel. State Highway Commission v. Parker, 387 S.W.2d 505 (Mo.1965); State ex rel. State Highway Commission v. Vorhof-Duenke Co., 366 S.W.2d 329 (Mo.1963); Farrell v. State Highway Board, 123 Vt. 453, 194 A.2d 410 (1963); Howe v. State Highway Board, 123 Vt. 278, 187 A.2d 342 (1963); Filger v. State Highway Commission, 355 S.W.2d 425 (Mo.App.1962); Demers v. City of Montpelier, 120 Vt. 380, 141 A.2d 676 (1958). Defendants state that the foregoing cases stand for the proposition that proximity to the interchange does not Necessarily create special benefits. We agree with defendants' contention but do not agree that these cases stand for the proposition that proximity to an interchange Cannot cause special benefits. In the case of Demers v. City of Montpelier, supra, there was no interchange involved but rather the lengthening of a street. The court in that case held that what we termed 'the local or neighborhood benefit' in our case of Taylor v. State, supra, is not a special benefit. The conclusion of the court in Demers that it is not a special benefit is the same as our conclusion in Taylor v. State, supra.

Filger v. State Highway Commission, supra, did not involve an interchange in the controlled access highway but rather involved an intersection of two highways which intersection had been gradually widened and improved over the years. The issue of special benefits was not at all involved, the only issue being whether the creation of traffic islands was a valid and noncompensable exercise of the police power.

In State v. Parker, supra, the landowner's property, which was already being used for business purposes, was the first unfenced property off the interchange. The expert witness testified to special benefits based on the fact that the traffic would be 'funnelled' right by the property. The court held that such 'funneling of traffic' would not create special benefits. In other words, the court held that a mere increase in traffic without anything else, does not create a special benefit. With this proposition we agree.

The situation in Howe v. State Highway Board, supra, is similar to the Parker case.

In Farrell v. State Highway Board, supra, the court said the evidence was that all landowners within one-half to three-quarters of a mile radius of the interchange enjoyed the same benefits of access to the highway. The court rightly held this to be a non-offsetable local or neighborhood benefit.

The case of State v. Vorhof-Duenke, supra, rather than supporting the position of the defendants, supports the position of the plaintiff in that it recognizes that a special benefit can result from the construction of an interchange if there is an enhancement in the value of adjacent land by making it available for newer or better uses.

Defendants' next contention is that since an interchange, as a matter of law, is an unreasonable denial of access and results in diminution of value, there cannot possibly be any special benefit resulting from proximity to an interchange. The basic premise of defendants' contention has been refuted in State ex rel. Herman v. Schaffer, 105 Ariz. 478, 467 P.2d 66 (1970), wherein the court held, in limited access situations, that owners of land do not have a right of Direct ingress and egress to and from a controlled access thoroughfare.

Defendants further contend that there cannot be any special benefit since it is conceivable that some time in the future the State might exercise its right to change the flow of traffic and divert it away from defendants' property. We find this contention to be without merit. Special benefits to be deducted from severance damages must be assessed as of the time of the taking of the property, and the mere possibility that the benefits might subsequently be terminated by the condemnor does not preclude the deduction of the benefit although it may properly be considered in determining its present value. People ex rel. Department of Public Works v. Bond, 231 Cal.App.2d 435, 41 Cal.Rptr. 900 (1964); People ex rel. Department of Public Works v. Edgar, 219 Cal.App.2d 381, 32 Cal.Rptr. 892 (1963); People v. Thomas, 108 Cal.App.2d 832, 239 P.2d 914 (1952); 13 A.L.R.3d 1142. The fact that a property owner obtains no vested right in a benefit does not prevent such benefit from having a monetary value if it qualifies under the definition of special benefits. People v. Edgar, supra; People v. Thomas, supra, see also Los Angeles County Flood Control District v. McNulty, 59 Cal.2d 333, 29 Cal.Rptr. 13, 379 P.2d 493 (1963).

FAILURE TO RAISE SPECIAL BENEFITS IN THE PLEADINGS OR AT PRETRIAL

Defendants contend that failure of the State to allege special benefits in its complaint precluded it from introducing evidence on the subject at the trial. Two jurisdictions, Nebraska and Texas require the condemnor to plead special benefits before it can introduce the same at trial. Tarrant County Water Control & Improvement District No. 1 v. Hubbard, 426 S.W.2d 330 (Tex.Civ.App.1968); Haley v State, 406 S.W.2d 477 (Tex.Civ.App.1966); Tuttle v. State, 381 S.W.2d 330 (Tex.Civ.App.1964); Frank v. State Department of Roads, 177 Neb. 488, 129 N.W.2d 522 (1964); In re Platte Valley Public Power and Irrigation District, 159 Neb. 609, 68 N.W.2d 200 (1955). Other cases hold that it is not necessary for the condemnor to allege special benefits in its complaint. State By and Through State Highway Comm. v. Bailey, 212 Or. 261, 319 P.2d 906 (1957); Smith v. City of Greenville, 229 S.C. 252, 92 S.E.2d 639 (1956); cf. Rourke v. Holmes State Railway Co., 177 S.W. 1102 (Mo.App.1915).

A.R.S. § 12--1117 sets forth the allegations...