Morley v. Jackson Redevelopment Authority, s. 90-CA-985

• Decision Date: 10 February 1994
• Docket Number: Nos. 90-CA-985,90-CA-526,s. 90-CA-985
• Citation: 632 So.2d 1284
• Parties: E. Dean MORLEY and Margaret M. Laurence v. JACKSON REDEVELOPMENT AUTHORITY. STANDARD LIFE INSURANCE COMPANY v. JACKSON REDEVELOPMENT AUTHORITY, E. Dean Morley and Margaret M. Laurence.
• Court: Mississippi Supreme Court

Page 1284

632 So.2d 1284

E. Dean MORLEY and Margaret M. Laurence v. JACKSON REDEVELOPMENT AUTHORITY.

STANDARD LIFE INSURANCE COMPANY v. JACKSON REDEVELOPMENT AUTHORITY, E. Dean Morley and Margaret

M. Laurence.

Nos. 90-CA-985, 90-CA-526.

Supreme Court of Mississippi.

Feb. 10, 1994.

Michael B. Wallace, Phelps Dunbar, Crane D. Kipp, Shell Buford Bufkin Callicutt & Perry, Jackson, for appellant in No. 90-CA-0985.

J. Brad Pigott, Maxey Pigott Wann & Begley, Zachary Taylor, Watkins Ludlam & Stennis, Terryl K. Rushing, Alston Rutherford Tardy & Van Slyke, Michael S. Allred, Allred & Donaldson, Jackson, for appellee in No. 90-CA-0985.

Michael S. Allred, Allred & Donaldson, Terryl K. Rushing, Alston Rutherford Tardy & Van, Stephen M. Maloney, Allred & Donaldson, Jackson, for appellant in No. 90-CA-0526.

J. Brad Pigott, Maxey Pigott Wann & Begley, Zachary Taylor, Watkins Ludlam & Stennis, Michael B. Wallace, Phelps Dunbar, Dana E. Kelly, Phelps Dunbar, Crane D. Kipp, Shell Buford Bufkin Callicutt & Perry, Jackson, for appellee in No. 90-CA-0526.

En Banc.

SULLIVAN, Justice, for the Court:

The Jackson Redevelopment Authority (JRA) filed this suit to acquire Morley and Laurence's (owners) property on October 23, 1989, in Hinds County Special Court of Eminent Domain. The owners removed the action to the United States District Court for the Southern District of Mississippi, Jackson Division, and filed an answer on December 20, 1989. The District Court remanded to the state court for failure of complete diversity of citizenship among the parties. Standard Life Insurance Company was also joined as a party to the suit, as it claimed an interest in a restrictive covenant on the property. The trial court held that Standard Life had no compensable interest in the property and granted summary judgment against it, but granted Standard Life leave to appeal. The trial court also granted summary judgment for JRA on the question of public use and necessity. After discovery and a number of pretrial motions and hearings on those motions, the case went to trial on April 17, 1990. The jury awarded the owners $500,000 and the owners have appealed, presenting the following issues for discussion by the Court:

I. THE JRA LACKED LEGAL AUTHORITY TO TAKE THE KING EDWARD BY EMINENT DOMAIN;

II. THE SPECIAL COURT IMPROPERLY DENIED THE OWNERS A CONTINUANCE AND IMPOSED IMPROPER CONDITIONS WHEN IT LATER POSTPONED THE TRIAL;

III. THE COURT ERRED BY EXCLUDING ALL REFERENCE TO THE DAVIS APPRAISAL AND THE PROPERTY TAX APPRAISAL, WHILE ADMITTING DESCRIPTIONS OF THE CONTENT OF THE COHEN APPRAISAL;

IV. THE COURT ERRED IN PERMITTING JRA SELECTIVELY TO INTRODUCE EVIDENCE OF STATEMENTS AND CONDUCT CONCERNING THE CONDITION OR VALUE OF THE KING EDWARD, WHILE REFUSING TO PERMIT THE OWNERS TO REBUT SUCH EVIDENCE THROUGH DIRECT TESTIMONY OR THROUGH INTRODUCTION OF EVIDENCE OF SUCH STATEMENTS AND CONDUCT BY JRA AND ITS PRINCIPAL, THE CITY OF JACKSON; and,

V. IF STANDARD LIFE OWNS A VALUABLE INTEREST IN THE KING EDWARD, THEN A REMAND FOR A NEW TRIAL AS TO ALL PARTIES IS NECESSARY.

Standard Life also appealed from the lower court's grant of the JRA's motion for summary judgment, and presents the following issue for discussion:

I. WHETHER A RESTRICTIVE COVENANT IS PROPERTY INTEREST FOR WHICH THE CONDEMNING AUTHORITY MUST PAY IN EMINENT DOMAIN AND, IF SO, WHAT IS THE PROPER MEASURE OF COMPENSATION?

FACTS

The owners purchased the King Edward Hotel property from Standard Life Insurance Company in 1981 for $450,000. The owners had been involved in a number of real estate investments over the years and had a special interest in purchasing historical properties such as the King Edward.

The King Edward Hotel was built in 1923 on a lot of 69,159 square feet in downtown Jackson bounded by West Capitol, Mill and Pearl Streets. The property actually consists of three separate structures. The main hotel tower has 12 floors containing approximately 224,040 square feet of space. Adjacent to the hotel tower is a convention center containing approximately 7,842 square feet and a three-story parking garage which once housed an automobile dealership. The King Edward is on the National Register of Historic Places due to its excellent architectural design and the fact that for many years it served as the center of social and political activity in Jackson.

The King Edward today is a blight on the Jackson skyline. Last occupied in 1967, the building now is home only to a group of pigeons that enter through the numerous broken windows and mark the hotel with great mounds of disease-carrying excrement. Almost all of the witnesses at the trial agreed that the main tower was structurally sound. An expert engineer called by JRA created the most doubt on the soundness of the structure by testifying that two of the 1300 to 1400 steel columns in the building had been exposed and begun to corrode. He stated that tests would have to be made on more of the columns in order to determine the extent of possible corrosion in other parts of the building frame. The owners' expert architect, however, thought that the only reason those columns were deteriorating was the fact that the roof over both of them had holes in it, allowing moisture to seep into those columns. It was generally agreed also that any renovation of the hotel would require "gutting" the entire building, which meant removing all of the finishing material in the hotel and using only the existing structural frame and the facade of the building. Further measures necessary for a renovation were the addition of another stairwell to meet current building codes, removal of asbestos, and removal of the large accumulations of pigeon droppings.

In 1987, JRA's redevelopment plan was amended so that it specifically authorized JRA to acquire fee simple title to the King Edward property. The amendment specifically provided that the acquisition was, "in order to encourage repair and rehabilitation of buildings located within" the area. Under the amendment, JRA hired appraiser T.E. Tate to do an appraisal of the property. Tate's appraisal stated that the market value of the property was $375,500, and JRA extended an offer to the owners on September 1, 1988, in that amount. On October 11, 1988, this offer was rejected. JRA hired another appraiser, James Davis, who found the market value of the property to be $865,000. Subsequently, JRA entered a resolution stating that it had, "determined that just compensation for the acquisition of unencumbered fee simple title to the property is $865,000." By letter dated July 28, 1989, JRA extended another offer to the owners to purchase the property for that amount. This offer was also rejected by the owners, and on October 18, 1989, JRA filed the present suit.

In his deposition of March 4 and 16, 1990, the Director of JRA testified that JRA had not engaged any marketing consultants, economists or real estate brokers in evaluating the future prospects of the King Edward should JRA acquire the property. He admitted that JRA had no plans to rehabilitate, market, keep secure or abate nuisances on the property. The purpose of the acquisition, according to him, was to remove a slum and blighted condition from the city. He could be no more specific about the use to which the property would be put than to say that it would probably be office space. He also related that he had previously talked with several inquirers about acquisition of the property and referred them to the owners.

Bill Cooke, an engineer with Cooke, Douglas and Farr in Jackson, testified that the cost of gutting the hotel would be approximately $696,000, excluding the costs of removing the asbestos and pigeon droppings. Demolition costs for the garage, according to Cooke, would be $207,000. JRA's expert appraiser, T.E. Tate, testified to estimates he had received from the Virginia Wrecking Company of $210,000 for asbestos removal, $117,884 for removal of the pigeon droppings and $186,000 to demolish the parking garage. The total costs to prepare the building for renovation, according to Tate's figures, would be approximately $1,024,598.

The parties came close on their figures of what it would take to recreate the shell of the hotel as it would stand after being "gutted." Cooke testified that the costs for that would be $4,594,483, while Richard Rauh, the owners' architect gave a figure of $4,083,317. Cooke testified that after gutting, $19,259,000 would create a like-new office building in the King Edward shell. Rauh did not give a corresponding figure, but did testify that to build a new building with the same area as the King Edward, the cost would be $11,401,600. To renovate the King Edward, Cooke estimated that the cost would be $80 per square foot, compared to the cost to build a new downtown office building, One Jackson Place, of $67 per square foot. However, on the cross-examination of JRA's appraiser, Mr. Tate, he admitted that the cost to renovate the King Edward would only be $64 per square foot after consideration of the 20% federal tax credit the owners would be entitled to for renovation of a building on the National Register of Historic Places.

The sole issue to be decided at an eminent domain proceeding is market value, and like most eminent domain proceedings, this one turned out to be a battle of appraisers. JRA's appraiser, Mr. Tate, arrived at a value of $375,500 for the entire property. Tate stated that of the cost, income and market approaches to valuation, the market approach gave the best prospects for valuation of this property. The income approach provided little insight, since the property was vacant and the cost approach proved inappropriate to him because of the difficulty of figuring depreciation on a building as old as the King Edward. Therefore, he found the market approach to be the most helpful. Tate then began with the premise that the King Edward could be best valued as if the land were vacant....