Pennsylvania Gas & Water Co. v. Pennsylvania Turnpike Commission

• Decision Date: 28 November 1967
• Citation: 428 Pa. 74,236 A.2d 112
• Parties: PENNSYLVANIA GAS AND WATER COMPANY, Appellant, v. PENNSYLVANIA TURNPIKE COMMISSION.
• Court: Pennsylvania Supreme Court

Page 112

236 A.2d 112

428 Pa. 74

PENNSYLVANIA GAS AND WATER COMPANY, Appellant, v. PENNSYLVANIA TURNPIKE COMMISSION.

Supreme Court of Pennsylvania.

Nov. 28, 1967.

Rehearing Denied Dec. 29, 1967.

Joseph E. Gallagher, Scranton, for appellant.

John A. Morano, Scranton, for appellee.

Before BELL, C.J., and MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.

OPINION OF THE COURT

ROBERTS, Justice.

The first question raised by this appeal is whether the plaintiff-appellant, the Pennsylvania Gas and Water Company, may show that the highest and best use for its condemned property is as a site for the construction of a reservoir, even though at the time of the condemnation no physical improvements had been made on the property. Finding as a matter of fact that the use of appellant's property as a reservoir was mere speculation and hence not provable as the highest and best use, see Rothman v. Commonwealth, 406 Pa. 376, 178 A.2d 605 (1962); Spring City Gaslight Co. v. Pennsylvania Schuylkill Valley R.R. Co., 167 Pa. 6, 31 A. 368 (1895), the trial judge rejected much of the proffered evidence by which appellant sought to show 1) that the property was physically for a reservoir site; 2) that the appellant was going to construct a reservoir thereon; and 3) that there was a great need in the community for additional water supply.

Following an award of $72,000 (based upon the valuation of appellant's land for recreational and residential purposes), both the water company and the turnpike commission filed exceptions, all of which were subsequently dismissed by the Court of Common Pleas of Lackawanna County. ¹ Judgment was entered on the award as made by the trial judge, and this appeal followed.

Since before the turn of the century, appellant water company, and its predecessors in title, have owned several contiguous tracts of land totaling about 275 acres in South Abington Township, Lackawanna County. It is conceded by all concerned that this property was acquired with an eye toward the eventual construction of a reservoir, although it has remained unimproved for over 50 years. ² Nevertheless, the appellant's witnesses did testify that as a matter of sound industry practice water companies frequently hold potential reservoir sites for periods of time as long as this so that future water needs may be adequately met. This is especially true in the present case since the water company's property is naturally suitable for a reservoir site given the presence of several creeks which intersect on the lower portion of the tract.

On June 8, 1954, pursuant to the provisions of the Pennsylvania Turnpike Northeastern Extension Act of September 27, 1951, P.L. 1430, 36 P.S. § 600.8(a), the Pennsylvania Turnpike Commission condemned 15 acres from the appellant's tract. The condemned portion was precisely that part of the tract needed for the erection of a dam, without which the reservoir could not be constructed. As a result, the tract, in its present condition, is useless for reservoir purposes.

It is well settled in Pennsylvania that condemnation damages need not be based upon the use currently being made of the condemnee's property if in fact its highest and best use is shown to be for some other, more valuable purpose. ³ Gilleland v. New York State Natural Gas Corp., 399 Pa. 181, 159 A.2d 673 (1960); Erie City v. Public Service Comm., 278 Pa. 512, 123 A. 471 (1924); Stone v. Delaware, Lackawanna & Western Railroad Co., 257 Pa. 456, 460, 101 A. 813, 814 (1917); Savings & Trust Co. of Indiana v. Pennsylvania Railroad Co., 229 Pa. 484, 488, 78 A. 1039, 1040 (1911). However, there is at least one substantial limitation on this principle. Even if a piece of land is Physically suited for a particular purpose, it must also appear that such use is not based upon mere speculation. Sgarlat Estate v. Commonwealth, 398 Pa. 406, 158 A.2d 541, cert. denied, 364 U.S. 817, 81 S.Ct. 49, 5 L.Ed.2d 48 (1960); Laureldale Cemetery Co. v. Reading Co., 303 Pa. 315, 154 A. 372 (1931); Marine Coal Co. v. Pittsburgh McKeesport & Youghiogheny Railroad Co., 246 Pa. 478, 485, 92 A. 688, 690 (1914).

The real problem here arises from the difficulties involved in ascertaining the precise meaning of the terms 'speculative use' and 'mere speculation.' Both the lower court and the appellee have assumed that a use is speculative whenever the condemnee has made no physical change in his property pointing toward such a use. However, our case law indicates that such is not the rule. See Gilleland, Erie City, and Stone, supra. Nor is it true that to escape the label of 'speculative,' the condemnee must show that there are plans to convert the property to the desired use immediately or in the very near future. As this Court said in North Shore Railroad Co. v. Pennsylvania Co., 251 Pa. 445, 449, 96 A. 990, 992 (1916):

'The true rule is that any use for which the property is capable may be considered, and if the land has an adaptability for the purposes for which it is taken, the owner may have this considered in the estimate as well as any other use for which it is capable.'

Moreover, in Marine Coal, supra, it was said 246 Pa. at page 486, 92 A. at 690--691:

'Clearly it (the condemned land) is of insignificant value for agricultural purposes, and there is neither a wharf, a factory, or a sawmill on it, and there may never be. But if its adaptability to these purposes or any one of them give it a present value, the owner is entitled to that value, though in fact no one now proposes to use it for any of these purposes.'

Finally, were it necessary for the condemnee to show that the land was actually being Used for the purpose upon which he seeks to base condemnation damages, a suggestion frequently advanced below, there would be nothing left at all of the highest and best use principle; it would become merged with the current use. ⁴

A careful study of cases involving the concept of speculative use reveals that the term is given a much more technical and restricted definition than that advanced below. Uses have been termed speculative, and hence not provable as the highest and best use, only in those instances where the condemnee sought a measure of damages that was in essence based on anticipated Profits from a use not yet being made of the property. For example, in Laureldale Cemetery Co. v. Reading Co., 303 Pa. 315, 154 A. 372 (1931), relied upon both by the appellee and the court below, the plaintiff cemetery company unsuccessfully tried to show that its condemned land was being held for use as burial plots and that the measure of damages should be based upon the profits plaintiff could have earned from the sale of these plots. ⁵ This loss of profits measure is clearly distinguishable from the present case. In Laureldale the unimproved lots, qua lots, were worth no more simply because the plaintiff had the business acumen needed to operate a cemetery thereon. However, appellant water company has never claimed that its property should be valued on the basis of profits made from the operation of a reservoir. Nor has it claimed that its land should be valued as though a reservoir already existed on the tract. Instead it claims simply that the land itself is worth more than the $72,000 awarded below because it is physically suitable for a reservoir and because such a project is needed in the area.

This second argument, viz., the need for a reservoir, apparently underlies much of the confusion below regarding the speculative use problem. For even though the valuation of appellant's property as a reservoir does not fail on the basis of its being a speculative use, nevertheless, in order to establish a reservoir as the highest and best use, the water company must show that a reservoir is needed in the area. A. D. Graham & Co., Inc. v. Pennsylvania Turnpike Comm., 347 Pa. 622, 33 A.2d 22 (1943). On its face this hurdle may appear somewhat similar to the speculative use issue, insofar as both bear ultimately on the financial success or failure of the suggested venture. Procedurally, however, they are quite different. If in fact it is determined that the condemnee is trying to prove anticipated profits, the court may quite properly exclude such testimony. However, since the condemnee Must show that some demand exists in the area for the use sought to be established, far from excluding testimony on this issue as was done below, ⁶ the court is under a duty to admit it. Clearly one owning a flat strip in Death Valley may show that the property is physically suited for a race track or a parking lot. But, without proof of need for such a structure In that area, it would be folly to hold that such is the highest and best use.

There are then two requirements, and only two, for proving highest and best use. First, the condemnee must show the physical adaptability of the land to such a use, and second it must be demonstrated that this use is needed in the area. This second test, however, does not require that the condemnee himself convert the land to its highest and best use. See, e.g., Wadsworth v. Manufacturers' Water Co., 256 Pa. 106, 100 A. 577 (1917); Brown v. Forest Water Co., 213 Pa. 440, 62 A. 1078 (1906); Gearhart v. Clear Spring Water Co., 202 Pa. 292, 51 A. 891 (1902). Unlike the water company here, in each of these cases the original land owner never intended to construct a reservoir. In fact, were it not for the condemnation there would probably never have been a reservoir at that spot. Nevertheless, in each case the landowner was permitted to show that the highest and best use for the property was as a reservoir site. ⁷ Of course, even if the need is present, if the land At the time of the condemnation is not yet physically suited for the claimed best use, the condemnee will not prevail. For example, in Bitting v. Philadelphia Suburban Water Co., 73 Montg.Co.Law Rep. 235 (Pa.1956), the condemnee-farmer could not establish a reservoir as the...