IN RE CONDEMNATION BY PA TURNPIKE COM'N

• Decision Date: 18 January 2000
• Citation: 745 A.2d 66
• Parties: In re CONDEMNATION BY THE PENNSYLVANIA TURNPIKE COMMISSION OF 1.169 ACRES IN FEE SIMPLE, IN BIG BEAVER BOROUGH, BEAVER COUNTY, Commonwealth of Pennsylvania, for the Beaver Valley Expressway Project. Lorraine Murray, Formerly Lorraine Denes v. Pennsylvania Turnpike Commission, Appellant.
• Court: Pennsylvania Commonwealth Court

745 A.2d 66

In re CONDEMNATION BY THE PENNSYLVANIA TURNPIKE COMMISSION OF 1.169 ACRES IN FEE SIMPLE, IN BIG BEAVER BOROUGH, BEAVER COUNTY, Commonwealth of Pennsylvania, for the Beaver Valley Expressway Project.

Lorraine Murray, Formerly Lorraine Denes v. Pennsylvania Turnpike Commission, Appellant.

Commonwealth Court of Pennsylvania.

Argued November 4, 1999.

Decided January 18, 2000.

Samuel P. Kamin, Pittsburgh, for appellant.

Michael J. Boyle, Pittsburgh, for appellee.

Before FRIEDMAN, J., LEADBETTER, J., and RODGERS, Senior Judge.

FRIEDMAN, Judge.

The Pennsylvania Turnpike Commission (Condemnor) appeals from an order of the Court of Common Pleas of Beaver County (trial court) denying Condemnor's motion for post-trial relief which sought judgment notwithstanding the verdict and a new trial.

Lorraine Murray, formerly Lorraine Denes,¹ (Condemnee) owned and operated a vehicle repair and salvage shop (the business) in a one-story garage located on 1.169 acres of land (together with the business, the premises) in Beaver County. Condemnee held both a salvor's authorization and a state inspection license (together, Licenses) from the Commonwealth. In addition, Condemnee had a contract with Condemnor (Contract), which gave Condemnee the exclusive right to tow abandoned and disabled vehicles on a 30-mile stretch on the Pennsylvania Turnpike.

On January 18, 1990, acting under the Eminent Domain Code of 1964² (Code), Condemnor filed its declaration of taking against the premises, and possession was surrendered on June 13, 1990. In response to a petition presented by Condemnor, the trial court appointed a Board of View (Viewers) to assess the damages in the condemnation. Initially, the Viewers concluded that damages should not be measured under the Assembled Economic Unit Doctrine (AEUD) because "all or most of the machinery, equipment and inventory were removable without significant injury and that as an economic unit they could be relocated and the business continued at a location which was available within a reasonable distance from the condemned premises."³ (R.R. at 41a.) The Viewers further concluded that the fair market value of the premises before the taking was $110,000 and that the condemnation constituted a total taking.⁴ (R.R. at 41a.) Both parties appealed to the trial court.⁵

One of the principal objections that Condemnee made to the Viewers' report was to the Viewers' refusal to apply the AEUD in reaching its just compensation award. Upon request of both parties, the trial court bifurcated the case, directing that the issue of the applicability of the AEUD be tried preliminarily by the court and the issue of damages be tried subsequently before the jury. After a two-day bench trial, the trial court filed an opinion and entered an order, dated July 8, 1994, directing that the measure of damages be based upon the application of the AEUD. (R.R. at 43a—59a.) Condemnor appealed and this court reversed in an unreported decision. Pennsylvania Turnpike Commission v. Denes, 663 A.2d 900 (No. 2704 C.D.1994, filed August 9, 1995); (R.R. at 60a—72a.) The Supreme Court reversed this court, thereby reinstating the order of the trial court directing that the issue of damages be based upon application of the AEUD. Denes v. Pennsylvania Turnpike Commission, 547 Pa. 152, 689 A.2d 219 (1997).

At the jury trial on the issue of damages, Condemnee presented the testimony of Charles Patterson, a licensed real estate broker, who testified that the highest and best use of the premises was to continue to use it as a commercial vehicle repair and salvage shop. (R.R. at 378a, 387a.) Patterson opined that the fair market value of the premises was $188,000. In arriving at this figure, Patterson valued the land under three appraisal methods—the cost approach, the market approach and the income approach—primarily relying upon the income approach. (R.R. at 388-92a.) Over objection, Patterson testified about the Licenses and Contract held by Condemnee and opined that they enhanced the value of the premises by $105,000. (R.R. at 386a.) Patterson also testified that the fair market value of the fixtures attached to the property was $7,600. (R.R. at 285a.) Thus, Patterson concluded that the total fair market value of the premises was $300,600. (R.R. at 385a, 398-99a.)

Condemnor presented the testimony of Francis Chiappetta, a certified real estate appraiser. Like Patterson, Chiappetta stated that the highest and best reasonable use of the premises was to continue to use it as a commercial vehicle repair and salvage shop. (R.R. at 624a.) However, Chiappetta opined that upon an inspection of the premises, considering the Licenses and Contract held by Condemnee, the fair market value of the premises was $100,836.⁶ (R.R. at 623a.) After hearing the evidence presented, the jury awarded Condemnee $230,000 as just compensation.⁷ Both parties filed post-trial motions, and, on February 3, 1999, the trial court filed an opinion and issued an order denying Condemnee's motion for a new trial and Condemnor's motion for a new trial and judgment notwithstanding the verdict. (R.R. at 266a-81a.) Only Condemnor has appealed from that order.

On appeal,⁸ Condemnor argues it is entitled to a new trial because the trial court erred by allowing Condemnee's expert to testify that the Licenses and Contract held by Condemnee enhanced the value of the premises by $105,000. We agree.

The Code provides for just compensation for the taking, injury or destruction of property. Section 601 of the Code, 26 P.S. § 1-601. Just compensation is measured as the difference between the fair market value of the condemnee's entire property interest immediately before the condemnation, as unaffected thereby, and the fair market value of the property interest remaining immediately after the condemnation, as affected thereby. Section 602 of the Code, 26 P.S. § 1-602. Fair market value is the price which would be agreed to by a willing and informed seller and buyer, taking into consideration, inter alia, the present use of the property and the highest and best reasonably available use. Section 603 of the Code, 26 P.S. § 1-603. It is a basic principle of condemnation litigation that a condemnee may introduce evidence of particular items lost through the condemnation. Boring v. Metropolitan Edison Co., 435 Pa. 513, 257 A.2d 565 (1969); Werner v. Department of Highways, 432 Pa. 280, 247 A.2d 444 (1968). Equally clear, however, is that a condemnee may not assign a specific value to those lost items. Werner.

In Werner, our supreme court held that, in determining just compensation for the taking of property subject to a lease giving the leasee the right to remove sand and gravel underlying the property, it was proper for the condmenee's expert to testify as to the amount of sand and gravel underlying the property. The court reasoned that, in determining fair market value, the jury must place itself in the position of a purchaser and that such a purchaser would certainly consider the amount of sand and gravel beneath the surface of the premises in arriving at a purchase price. The court recognized, however, that the expert should not multiply that amount by a dollar figure, such as market price or a royalty payment, to arrive at a specific value for the sand and gravel. The court elaborated:

We are not quarreling with the time-honored rule that the jury may not multiply the number of tons by some dollar figure in order to value the minerals separately. This is error for two reasons. First, the minerals may not be valued separately apart from the remainder of the tract. Second, it is impossible to determine how much a ton of sand and gravel will be worth until it has been removed from the earth and processed for market. All we are saying is that a tract of land containing 500 tons of sand and gravel is much more valuable than a tract of land with five tons and the jury has the right to know more than that there is a sand and gravel deposit of unkown quantity below the surface.

Werner, 432 Pa. at 286-87, 247 A.2d at 448.

In the present case, Patterson testified that the fair market value of the premises before the taking was $188,000 and that the Licenses and Contract "enhanced" the fair market value of the premises by an additional $105,000. (R.R. at 386a.) In arriving at that figure, Patterson stated that the business generated an annual gross income for Condemnee between $291,000 and $345,000 a year over the five years prior to the taking.⁹ (R.R. at 398a.) Patterson then described how he used those figures to arrive at his opinion on the fair market value of the Licenses and Contract:

I decided that the business itself could have an economic life of 15 years and someone could reasonably expect to earn $300,000 a year in gross income running the business as it was being currently run, with the licenses that were attached to the property. And that breaks down to about $25,000 a month in gross income. And if I take the same 15 year period that I have the license value, $105,000, that is about $7,000 a year or $600 a month and I felt that someone would be willing to pay about $600 a month to have the right to, if they were a good entrepreneur, to generate $25,000 a month in income.

(R.R. at 398a.) As indicated in Werner, this testimony was improper for two reasons. First, Patterson clearly assigned a value to the Licenses and Contract held by Condemnee separate and apart from the remainder of the premises. Second, in assigning that separate value, Patterson determined the worth of the Licenses and Contract from the gross income of the business for the five year period prior to the taking. However, it is well settled that income flow evidence is inadmissible in determining the just compensation for property subject to condemnation. Morgan Signs, Inc. v. Department of Transportation, 723 A.2d 1096 (Pa.Cmwlth.), appeal denied, — Pa. —, 742 A.2d 173, 1999 WL 631680 (No. 248...