Lehigh Clay Products, Ltd. v. Iowa Dept. of Transp., 92-1313
| Court | United States State Supreme Court of Iowa |
| Writing for the Court | Considered by McGIVERIN; TERNUS |
| Citation | 512 N.W.2d 541 |
| Parties | 129 Oil & Gas Rep. 450 LEHIGH CLAY PRODUCTS, LTD., Appellant, v. IOWA DEPARTMENT OF TRANSPORTATION, Appellee. |
| Docket Number | No. 92-1313,92-1313 |
| Decision Date | 23 February 1994 |
Robert G. Allbee, Michael J. Eason of Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, P.C., and Robert C. Bridges and George H. Frampton of Bridges & Frampton, Des Moines, for appellant.
Bonnie J. Campbell, Atty. Gen., David A. Ferree, Sp. Asst. Atty. Gen., and Mark Hunacek and Kerry Anderson, Asst. Attys. Gen., for appellee.
Considered by McGIVERIN, C.J., and LARSON, CARTER, SNELL, and TERNUS, JJ.
This case arises out of the condemnation of land by the Iowa Department of Transportation (DOT). A jury awarded appellant, Lehigh Clay Products, Ltd., damages of $350,000 in compensation for the taking of its leasehold interest in the land condemned. The district court granted the DOT's motion for new trial and denied its motion for judgment notwithstanding the verdict. We reverse the grant of a new trial and affirm the denial of judgment notwithstanding the verdict.
In 1987 Lehigh purchased a mineral leasehold of approximately eighty-eight acres of land from W.S. Dickey Clay Manufacturing Company. W.S. Dickey had obtained the lease of mineral rights from the owner of the property, Kalo Lands, in 1978. Under the terms of the lease, Lehigh had the right to remove clay from the site, known as the Kalo property. Lehigh was obligated to pay Kalo Lands a royalty of 35 cents per ton of clay removed and $1000 in advance royalties each year.
As part of the same transaction, Lehigh also purchased a manufacturing plant, an adjacent clay pit, and real estate known as the Vincent property on which minable clay was also located. Lehigh had done extensive sampling and testing of the shale (clay) deposits on the Kalo and Vincent properties. The Kalo property contained sandy shale and the Vincent property had a plastic shale. Lehigh had determined that a mix of these clays was excellent for the production of structural clay products. Lehigh planned to mix the clay from the Kalo property with the clay from the Vincent property to produce a superior clay product. Before doing so, however, it had decided to exhaust the clay available at the plant. Lehigh estimated that this supply would last for two or three years.
In 1989, the DOT condemned a portion of the Kalo property including the eighty-eight-acre tract of minable clay. At this time Lehigh had not yet removed clay from the Kalo or Vincent properties other than for testing purposes. Lehigh had a credit of $12,000 for advance royalties paid by Lehigh and W.S. Dickey to Kalo Lands under the terms of the lease.
At trial two experts testified regarding the value of Lehigh's leasehold interest in the Kalo property. Lehigh's expert, Joel Frazier, stated that he valued the leasehold at $371,780. The DOT's expert, David Vols, testified that the leasehold's value was zero. The owners of Lehigh, Richard Mills and Don McHose, also testified at trial regarding the value of the leasehold, stating opinions that it was worth $400,000 and $390,000 respectively. In addition, evidence was presented at trial that the Iowa Business Development Credit Corporation had made a loan of $315,000 to Lehigh taking the lease as security. All witnesses agreed that the leasehold had no value after the condemnation.
The district court denied the DOT's motions for directed verdict made at the close of Lehigh's case and again after all the evidence had been presented. The jury found Lehigh's damages to be $350,000.
The DOT filed a motion for judgment notwithstanding the verdict, claiming that there was no substantial evidence of damage to Lehigh's leasehold interest as a result of the condemnation. The DOT also filed a motion for new trial on the basis that the verdict did not render substantial justice between the parties. The district court denied the motion for judgment notwithstanding the verdict and sustained the motion for new trial.
In ruling on the motion for judgment notwithstanding the verdict, the court held that there was substantial evidence to support the jury's verdict. The trial court specifically rejected challenges to the opinions on value expressed by the owners of Lehigh and to the competency of Lehigh's expert witness, Frazier, to testify on the value of the lease.
The DOT based its motion for new trial on several grounds. The court initially rejected the alleged errors urged by the DOT as a basis for setting aside the verdict. Nevertheless, the court concluded that the DOT was entitled to a new trial because the verdict did not effectuate substantial justice.
Four reasons were given by the court in support of its conclusion that the verdict failed to do substantial justice. They were (1) testimony of the relationship between the Vincent and Kalo properties likely prejudiced the jury; (2) the DOT's numerous objections likely prejudiced the jury; (3) the propensity of the DOT's expert witness to anxiety attacks and his lack of testimonial experience diminished his persuasiveness; and (4) Frazier's opinion was "highly suspect" because his opinion of the value of the leasehold ($371,780) exceeded the net value of the clay ($268,040) by more than $100,000 and because he based the value of clay in the ground on comparable sales in California and Kansas.
Lehigh now appeals from this ruling. The DOT cross-appeals from the court's failure to direct a verdict in its favor or grant it judgment notwithstanding the verdict.
Lehigh argues that the trial court abused its discretion in granting a new trial because the court merely substituted its judgment for that of the jury. Iowa has long recognized the trial court's inherent power to grant a new trial where the verdict fails to administer substantial justice. Thompson v. Rozeboom, 272 N.W.2d 444, 447 (Iowa 1978); see Bottineau Land & Loan Co. v. Hintze, 150 Iowa 646, 648-49, 125 N.W. 842, 843 (1910). The trial court is not limited to the grounds for granting a new trial specified in Iowa Rule of Civil Procedure 244. Coleman v. Brower Constr. Co., 254 Iowa 724, 730, 119 N.W.2d 256, 259 (1963). Nevertheless, there must be a reason apparent from the record to justify the court's exercise of its power. Lappe v. Blocker, 220 N.W.2d 570, 572 (Iowa 1974); Northrup v. Miles Homes, Inc., 204 N.W.2d 850, 861 (Iowa 1973).
Because the motion for new trial here was granted pursuant to the court's inherent authority, our review of the district court's ruling is for abuse of discretion. Kiner v. Reliance Ins. Co., 463 N.W.2d 9, 13 (Iowa 1990); see Iowa R.App.P. 14(f)(3). To show an abuse of discretion, Lehigh must demonstrate that the court exercised its discretion "on grounds clearly untenable or to an extent clearly unreasonable." Kiner, 463 N.W.2d at 13. Moreover, we are slower to interfere with the grant of a new trial than with its denial. Iowa R.App.P. 14(f)(4). However, when the evidence amply supports the verdict, a trial court abuses its discretion by granting a new trial on the ground that it would have reached a different result. Lappe, 220 N.W.2d at 573; Northrup, 204 N.W.2d at 861.
After examining the factors discussed by the district court in its order, we find that they do not, standing alone or in any combination, justify the grant of a new trial. We first address the trial court's skepticism of Frazier's testimony as that appears to be a significant basis for the court's decision to grant a new trial.
A. Frazier's testimony. The court was troubled by the inherent inconsistencies it believed existed in Frazier's testimony. The court observed that Frazier thought the lease had a value of $371,780, a figure more than $100,000 in excess of the net amount Lehigh could have arguably obtained through sales of the clay, $268,040. Lehigh correctly points out that the district court made a significant arithmetical error in its calculation that the maximum amount the clay would bring in sales was $268,040.
The corrected calculation follows. The erroneous figures of the trial court are shown in parentheses.
Thus, Frazier's estimate of the value of the lease exceeds the value of the clay by only $4000, not $100,000.
We question whether the trial court would have granted a new trial had its calculations not been erroneous. Although Frazier's estimate of the leasehold's value still exceeds the value of the clay, we believe it was the magnitude of the difference, under the trial court's computation, which prompted it to find Frazier's opinion "highly suspect." Consequently, the incorrectly perceived disparity between the value of the lease and the value of the clay is an untenable ground for granting a new trial.
Furthermore, Frazier's testimony is not deprived of credibility simply because the amount potentially realizable from sales of the clay was less than Frazier's valuation of the lease. A brief discussion of the method for valuing a leasehold of mineral rights will show the basis for our conclusion.
The owner of an interest in condemned land is entitled to receive the difference between the value of his interest before and after the taking. Nedrow v. Michigan-Wisconsin Pipe Line Co., 245 Iowa 763, 768-69, 61 N.W.2d 687, 690 (1953). Usually value is measured by the price the property will command in the market. Comstock v. Iowa State Highway...
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