Huntington Urban Renewal Authority v. Commercial Adjunct Co.

• Decision Date: 28 March 1978
• Docket Number: No. 13793,13793
• Citation: 161 W.Va. 360,242 S.E.2d 562
• Court: West Virginia Supreme Court
• Parties: HUNTINGTON URBAN RENEWAL AUTHORITY v. COMMERCIAL ADJUNCT CO., a corp.

Page 562

242 S.E.2d 562

161 W.Va. 360

HUNTINGTON URBAN RENEWAL AUTHORITY v. COMMERCIAL ADJUNCT CO., a corp.

No. 13793.

Supreme Court of Appeals of West Virginia.

March 28, 1978.

Syllabus by the Court

Any decrease, not of a general character, in the fair market value of real property prior to the date of valuation, caused by the public improvement for which such property is acquired, or by the likelihood that the property will be acquired for such improvement, other than that due to physical deterioration within the reasonable control of the owner, should be disregarded in any determination of the just compensation to be awarded the property owner for the property.

Greene, Ketchum & Mills, Menis E. Ketchum, Huntington, for plaintiff.

Jenkins & Fenstermaker, Norman K. Fenstermaker, Huntington, for defendant.

NEELY, Justice:

The Huntington Urban Renewal Authority brought this action in the Circuit Court of Cabell County to condemn certain of Commercial Adjunct Co.'s property located in Huntington. Commercial Adjunct contends in this appeal that the jury hearing the case did not award just compensation for the land condemned; no other aspect of the condemnation proceeding is challenged. We agree that the property owner was not justly compensated and reverse the judgment of the circuit court entered upon the jury's verdict.

The record shows that on March 19, 1969, the Huntington City Council approved an urban renewal plan for an area in Huntington designated as Downtown Project Area No. 1. Following the city council action, the Urban Renewal Authority determined on September 11, 1970 that it was necessary to acquire Commercial Adjunct's property located in the Downtown Project Area. This property had been developed as a parking lot in 1963 and continued to be used for parking during the entire time the Urban Renewal Authority was working on the downtown project.

While its plans to acquire Commercial Adjunct's parking lot were pending, the Urban Renewal Authority proceeded to acquire large tracts of land throughout the project area. Commercial buildings stood on some of this land, and many were either demolished or allowed to stand vacant until they could be converted to a different use. This displacement of businesses from the project area reduced parking demand and caused parking lot revenues to decline, according to the testimony of Commercial Adjunct's expert witnesses. Also, some of the land acquired by the Urban Renewal Authority was developed into parking lots or parking garages which competed with Commercial Adjunct's lot. The adverse effect of this competition on Commercial Adjunct's parking lot revenues was particularly pronounced because of the reduced demand for parking in the project area. Commercial Adjunct was effectively squeezed on two sides by the Urban Renewal Authority, which first reduced the parking demand and then entered into competition for the few remaining parking customers. It is clear that the Urban Renewal Authority's actions were especially detrimental to Commercial Adjunct in this instance and went far beyond the ordinary disruptions that businesses and citizens have come to accept from public works improvement projects.

The parking lot revenues became a crucial issue in this case because of their close link with fair market value calculations. Appraisers for both parties testified at trial that the revenue which a piece of property generates directly affects its fair market value under the "income approach" to property appraisal. Also, common sense and logic suggest that a property's revenue-generating capacity indirectly affects fair market value calculations under the "market data approach" or "cost approach." It appears, therefore, that regardless of the method of appraisal employed, a commercial property's fair market value will decline in proportion to any decline in the property's revenue-generating capacity, assuming as we may on the basis of the record before us, that there are no other significant factors affecting the property's value. The question is thus presented in this case whether the trial court should have instructed the jury to disregard any decline in the value of Commercial Adjunct's parking lot for which the jury could hold the Urban Renewal Authority solely and directly responsible.

I

The trial court ruled that the date of taking for purposes of valuing the condemned property was July 14 and 15, 1975, the date of the trial. This was essentially a correct ruling according to the law of West Virginia. State Road Comm. v. Ferguson, 148 W.Va. 742, 137 S.E.2d 206 (1964); Buckhannon R. Co. v. Great Scott Coal, 75 W.Va. 423, 83 S.E. 1031 (1914). ¹

Commercial Adjunct contends that in a complex case like this one, using the date of the taking as the sole reference point for establishing the condemned property's value may lead to an unjust result. In view of the especially detrimental impact the Urban Renewal Authority's actions had on the value of its parking lot, Commercial Adjunct argues persuasively that there must be some adjustment either in the valuation process itself or in the date set for valuation. Without such an adjustment, the condemning authority would receive an undeserved windfall and public policy would be poorly served by the establishment of a financial incentive for government to make special efforts to undermine the value of property it intends to condemn.

The question in this case is a novel one for this jurisdiction, but there is law relating to the converse situation, namely, how to account for any increase in property values due to the public improvement for which the property is taken. A classic statement of the law in this regard is found in Guyandot Valley R'y Co. v. Buskirk, 57 W.Va. 417, at 425, 50 S.E. 521 at 524 (1905), which is concerned with the advent of a railroad:

It must be perfectly manifest that, in every case of a projected railroad, there is an appreciation in values of real estate all along the proposed line before any condemnation proceedings are instituted, and, since the market value at or near the date of the institution of such proceeding is the measure of compensation, the enhancement due to the prospect of the construction of the railroad must have entered into the market value of the land, and the land owner obtains it, because he takes the market value at that time, not at a date prior to the announcement of the intent to construct the road.

It is unnecessary, however, to rely for this upon mere argument from a rule of practice as a premise. Direct authority of high character for the proposition that the land owner is entitled to general benefits arising from the prospective construction of the work for which the land is appropriated is at hand.

This statement of the law was affirmed in the more recent case of Strouds Creek & M. R. Co. v. Herold, 131 W.Va. 45 at 56, 45 S.E.2d 513 at 521 (1947):

The market value of his (the landowner's) land, that taken and the residue as well, as it was immediately before the taking, is increased by the amount of the general benefits which accrue to it and he receives the increase as an element of its market value which, for the land taken, he must be paid without any deduction for benefits.

It seems clear, then, that a landowner is entitled to some monetary benefit when the prospect of a public improvement increases the value of the land which is taken for the public improvement. The benefit is, however, limited to so much of the increased land value as is conferred by the "general benefits" of the prospective public improvement. Strouds Creek, at 59, 45 S.E.2d at 522, provides a good working definition of the term "general benefits":

Generally it may be said that advantages of a general character which accrue to the landowner in common with other landowners in the same community from the improvement are general benefits. Improvement of a road or a street, improved facilities for travel or transportation of the public, accessibility of telephone lines, and availability of water for irrigation purposes are mentioned as examples of general benefits.

Having examined the rules stated above, we are left to determine how they might aid us in deciding the case at hand. We might say that if a landowner is entitled to benefit from the increase in land values caused by a prospective public improvement, then he should not be heard to complain when the prospective improvement causes his property to decline in value. This would be a logical, although not necessarily reasonable, extrapolation from existing rules. Fortunately, we...