J.W.A. Realty, Inc. v. City of Cranston

• Court: Rhode Island Supreme Court
• Writing for the Court: DORIS
• Citation: J.W.A. Realty, Inc. v. City of Cranston, 399 A.2d 479, 121 R.I. 374 (R.I. 1979)
• Decision Date: 21 March 1979
• Docket Number: No. 77-84-A,77-84-A
• Parties: J.W.A. REALTY, INC., et al. v. CITY OF CRANSTON. ppeal.

Page 479

399 A.2d 479

121 R.I. 374

J.W.A. REALTY, INC., et al. v. CITY OF CRANSTON.

No. 77-84-Appeal.

Supreme Court of Rhode Island.

March 21, 1979.

[121 R.I. 385] Selya & Iannuccillo, Bruce M. Selya, Robert A. Goldberg, Charleson & Brill, Frederic A. Charleson, Providence, for petitioners.

Strauss, Factor, Chernick & Hillman, P. C., William C. Hillman, Providence, for respondent.

OPINION

DORIS, Justice.

This is a petition for assessment of damages resulting from the condemnation by the city of Cranston of a certain parcel of land owned by the petitioners ¹ on Aqueduct Road in said city. The petition is brought pursuant to G.L.1956 (1968 Reenactment) §§ 24-1-1 to 11 and P.L.1967, ch. 140. The case was heard by a Superior Court justice sitting without a jury who assessed damages at $240,000, plus interest according to law; and judgment in accordance with that assessment was subsequently entered. The respondent has appealed, claiming that the award is excessive.

The petitioners' land was condemned by the city of Cranston, exercising its power of eminent domain, on July 27, 1971. The evidence adduced at trial was in the main uncontradicted. The record indicates that in early 1968, title to the land in question was held by J.W.A. Realty, Inc., a corporation owned and controlled by William Artesani. The land was situated in an area zoned "B-2" multi-family residential. Artesani approached Franklin W. Simon, a successful real estate developer, concerning the possibility of the latter purchasing the land for $150,000. Simon, after viewing the land and being favorably impressed, retained an architect and began preliminary discussions with the Federal Housing Administration (FHA) for sponsorship of a housing development. Artesani and Simon entered into an agreement which provided that the land would be sold for $84,000 to a partnership in which Artesani and Simon would be equal partners. The partnership would develop the land for apartment purposes for the mutual benefit of Artesani and Simon. Under the agreement Artesani was to be responsible for all of the preconstruction expenses while Simon would do the necessary work. This transaction, however, was never fully consummated.

Substantial work to develop 108 apartment units on the land was performed by Simon and the engineers, architects, and surveyors that he hired. In August 1969, a formal application for feasibility was submitted to the FHA under the provisions of section 221(d)(2), (4) of the National Housing Act. This application was rejected. In July 1970, a revised application under section 236 of the Act was submitted, and the following month a feasibility commitment was granted by the FHA. Expenses for legal and accounting work were incurred, and funds for the project were formally reserved by the FHA. New England Merchants National Bank agreed to furnish construction financing.

During the interim, because of the delay, effort, and expense involved, Artesani had a change of heart and attempted to annul the partnership by means of litigation against Simon. The litigation was settled by an agreement under the terms of which J.W.A. Realty would liquidate and convey the property to Artesani and his wife Jeanette, who in turn would sell the property to Robhar, Inc. (a corporation owned and controlled by Simon) for $91,500. ² Additionally, Simon would incur all of the expenses connected with the project and would grant a general release of his claim for money damages.

In the meantime Simon remained hard at work on the project. An application for conditional commitment was filed with the FHA and the conditional commitment, providing for a mortgage on the project in excess of $2,000,000, was granted on March 5, 1971. Further test borings were conducted, a general contractor was retained, bids went out to subcontractors, and site preparation commenced. Final working papers, finished plans, and complete specifications were prepared. The FHA conditional commitment and the federal government's reservation of both contract funds and rent subsidy funds were extended through October 1971. An application for a firm FHA commitment was filed in April 1971. In August 1971, when petitioners applied to the city for a building permit, they discovered for the first time that the land had been taken by condemnation on July 27, 1971. Because of the condemnation the allocation of funds was subsequently canceled by the FHA.

At trial on the question of compensation due petitioners, Simon testified that conditional commitment is tantamount to final commitment and was salable for an amount between $4,000 and $5,000 per unit. He stated that but for the condemnation the development would have begun in the fall of 1971. He further testified that the expenses incurred to prepare the development exceeded $100,000. ³

Herbert Y. Mason, a duly qualified real estate expert testifying for petitioners, stated that the underlying value ⁴ of the land on the date of condemnation was $168,000 based on 112 units at $1,500 per unit. He stated that this figure was arrived at by employing an "income approach," based, however, on five comparable properties. Mr. Mason then testified that Simon's developmental work had substantially increased the property's value over and above the underlying value, but he was unable to state a specific figure.

Martin J. Coleman, a duly qualified real estate expert called by petitioners, testified that the fair market value of the property was $240,000, of which $170,000 represented the underlying value of the land and $70,000 represented the value that the land was enhanced as a result of the efforts of Artesani and Simon. Coleman stated that this "enhancement value" was something above and beyond the basic value of the land itself.

Walter A. DePrete, a duly qualified Cranston real estate appraiser, testified for respondent. He stated that using the comparable sales method of valuation, but employing different properties from those used by Mason and Coleman in their appraisals, he valued the property at $82,000, based upon 114 units at $720 each. He then stated that considering the effect of the Freshwater Wetlands Act on the property he reduced the value by 10% And arrived at a final value of $74,000.

The trial justice found that conditional commitment by the FHA is tantamount to near consummation of the transaction; that conditional commitments are salable; and that except for the condemnation, construction of a large and potentially profitable apartment development would have commenced in the fall of 1971. These findings are entitled to great weight and will not be disturbed unless the trial justice has misconceived or overlooked material evidence or is clearly wrong. See Caldarone v. State, 98 R.I. 7, 13, 199 A.2d 303, 306-07 (1964). Furthermore, the trial justice accepted the testimony of Mr. Mason that the borings, design plans, surveying, financial arrangements, and the other site preparation work rendered the property unique and not subject to the comparable sales approach Except in regard to its underlying value. Accordingly, he awarded petitioners $240,000, specifically stating that $170,000 represented the underlying value and $70,000 the enhanced value.

The respondent contends that the trial justice erred by admitting testimony concerning the fair market value of the property that relied upon factors other than the comparable sales method. The respondent asserts that just compensation for property taken by eminent domain is its fair market value as evidenced by prices paid at or about the time of the taking for substantially similar and comparable properties at voluntary sales in the open market. See Manning v. Redevelopment Agency, 103 R.I. 371, 374, 238 A.2d 378, 380 (1968). The respondent places particular emphasis upon our statement in Lataille v. Housing Authority, 109 R.I. 75, 79, 280 A.2d 98, 100 (1971), that the availability of evidence of comparable sales of similar lands operates to exclude from evidence testimony based upon other methods for determining fair market value. The ruling of the trial justice, admitting evidence based upon the enhancement value method as an aid in determining fair market value, is the primary basis of respondent's appeal.

In this jurisdiction the measure of the constitutionally required "just compensation" due a property owner whose land has been taken by eminent domain is the fair market value of the property. One authority has noted that:

"By 'fair market value' is meant the amount of money which a purchaser willing but not obliged to buy the property would pay to an owner willing but not obliged to sell it, taking into consideration all uses for which the land was suited and might in reason be applied." 4 Nichols, The Law of Eminent Domain § 12.2(1), at 12-71 to 81 (rev. 3d ed. Sackman 1978).

It is equally well settled that prices paid in the open market at or about the time of the taking for substantially similar and comparable properties, when available and when proper adjustments can be made for minor differences between the properties, are the best evidence of the fair market value of the property. Thomas B. Gray, Inc. v. Providence Redevelopment Agency, 114 R.I. 370, 373, 333 A.2d 143, 145 (1975); Manning v. Redevelopment Agency, 103 R.I. at 374, 238 A.2d at 380. Except in unusual cases involving peculiar circumstances, the availability of that kind of evidence precludes evidence of fair market value computed by other methods. See Lataille v. Housing Authority, 109 R.I. at 79-80, 280 A.2d at 100. This general rule, rather than depending upon any fundamental principle of the law of evidence, is designed to expedite the orderly administration of justice in eminent domain proceedings. See 4 Nichols, § 12.311(3), at 12-158 to 159.

While the preferred method of determining the fair market value is the comparable sales approach, it is within the discretion of the trial justice to depart from...