Pinewood Manor, Inc. v. Vermont Agency of Transp.

• Decision Date: 08 September 1995
• Docket Number: No. 94-108,94-108
• Citation: 164 Vt. 312,668 A.2d 653
• Parties: PINEWOOD MANOR, INC. v. VERMONT AGENCY OF TRANSPORTATION.
• Court: Vermont Supreme Court

Page 653

668 A.2d 653

164 Vt. 312

PINEWOOD MANOR, INC. v. VERMONT AGENCY OF TRANSPORTATION.

No. 94-108.

Supreme Court of Vermont.

Sept. 8, 1995.

Reargument Denied Oct. 30, 1995.

Paul D. Jarvis and Richard R. Goldsborough of Jarvis and Kaplan, Burlington, for plaintiff-appellant.

Jeffrey L. Amestoy, Attorney General, and Scott A. Whitted, Assistant Attorney General, Montpelier, for defendant-appellee.

Before ALLEN, C.J., and GIBSON, DOOLEY, MORSE and JOHNSON, JJ.

JOHNSON, Justice.

Plaintiff Pinewood Manor, Inc. [Pinewood], appeals a decision from the Chittenden Superior Court in a condemnation proceeding. Pinewood contends that the trial court erred in its findings regarding: (1) the value of the condemned land, (2) appropriate business losses, (3) adequate severance damages, and (4) the interest on the judgment. The State cross-appeals the trial court's decision to award business losses. We reverse on the issue of business loss and revise the interest award to include that accrued from December 10, 1993 to February 15, 1994. In all other respects, we affirm.

Pinewood has developed the residential area known as Pinewood Manor, situated on the northerly side of Vermont Route 117, into residential subdivision lots since the early 1960s. In addition to subdividing the land and providing the infrastructure, it normally constructs the houses on the individual lots sold.

Effective February 16, 1990, the Chittenden County Circumferential Highway District condemned land owned by Pinewood within its development. The condemnation covers 8.93 acres, including ten lots in Section F of Pinewood's overall development. At the time of the taking, Pinewood had already obtained the required subdivision permits and plotted out the lots. Though Pinewood had not yet completely finished the infrastructure, it had begun to install some of the required roads and utilities.

The trial court found that the lots should be valued at $30,000 each for a total of $300,000. It rejected Pinewood's contention that the lots were worth $65,000 because they were not ready to be sold on the open market on the date of the taking. The court noted that Pinewood had not cleared the lots of trees, paved the roads, or brought sewer, water and electricity to each site.

In addition, the court held the State liable to Pinewood for business losses and severance damages in the amount of $150,000 and $26,500 respectively. The court reasoned that business losses were due to Pinewood because its practice was to develop the land and then sell it with a contract for the construction of a house. Therefore, the court considered Pinewood a fixed and established business that extended beyond mere land development. To find business loss, the court used historical profits from the Pinewood Manor development to calculate an average expected profit of $15,000 per house. The court multiplied this average profit by the ten lots taken to reach an ultimate award of $150,000. No contracts for construction of the houses on the ten condemned lots had actually been entered into.

To limit the number of condemned lots to ten, the trial court acknowledged that Pinewood would have to create three new lots from portions of the remainder. The reconfigured lots' proximity to the highway, however, reduced their value by ten percent. Therefore, the court ordered the State to compensate Pinewood $17,500 for the reasonable cost of repermitting and $9000 for the reduced value of the lots.

Pinewood's appeal focuses on several of the trial court's rulings on damages.

I.

In a property condemnation proceeding, a land owner can recover for (1) the value of the most reasonable use of the property or right in the property, (2) the value of the business on the property, and (3) the direct and proximate decrease in the value of the remaining property or right in the property and the business on the property. 19 V.S.A. § 501(2). The value of the most reasonable use of the property is the market value of the land's highest and best use as of the date of the condemnation. Raymond v. Chittenden County Circumferential Highway, 158 Vt. 100, 103-04, 604 A.2d 1281, 1284 (1992). This requirement presents the trial court with a factual issue that is "at best a matter of opinion." Green Mountain Marble Co. v. State Highway Bd., 130 Vt. 455, 464, 296 A.2d 198, 204 (1972). We will not set aside a trial court's land value findings unless, taking the evidence in the light most favorable to the prevailing party and excluding the effects of modifying evidence, those findings are clearly erroneous. Id. at 457, 296 A.2d at 200.

First, plaintiff contends that the trial court clearly erred in failing to accept what it terms the estimated "retail value" of the land, or the value that plaintiff expected to place on the lots if condemnation had not occurred and its development plans had proceeded. Plaintiff's expert valued each lot at $65,000, citing a comparable development, Lang Farm, which sold lots for that price. The trial court, in its discretion, rejected $65,000 per lot as too high, noting that Lang Farm "enjoyed more utilities" than Pinewood and could be sold to purchasers for immediate construction. See Green Mountain Marble Co., 130 Vt. at 464, 296 A.2d at 204 (noting that opinion testimony is "not of controlling effect," and that "an expert's opinion is of no greater probative value than the soundness of his reasons"). Plaintiff was entitled to the value of the land on the date of taking, not what it expected to receive when the land was cleared and the infrastructure completed.

Second, plaintiff claims that a uniform $30,000 per lot award proves that the trial court failed to differentiate among the various lots according to the extent of the improvements on each. We find that differentiation to be unnecessary. Both experts expressed their land valuation on a uniform lot basis. To reach the ultimate per lot figure, the court explained that it increased the State's estimate to reflect Pinewood's preparation for construction as of the date of taking. Since the court considered the improvement stage of the lots in its compensation decision, we find no error in this finding.

Finally, plaintiff contends that the court erroneously calculated the number of condemned lots. Prior to the condemnation, Pinewood indisputably possessed eighteen permitted lots. After the taking, Pinewood asserts that it retained only seven permitted lots, thereby losing eleven in total. The State's appraiser, however, testified that by combining portions of the remainder into three building lots, Pinewood would lose only ten lots. As a general rule, mitigation applies to condemnation proceedings. 4A J. Sackman, Nichols on Eminent Domain § 14A.04 (rev.3d ed. 1994). The court agreed with the State's position that Pinewood, as an experienced developer, could salvage the remaining portions to reduce its loss. Acknowledging that the reconfigured lots would require repermitting, the court included the reasonable cost for permitting among the severance damages. The evidence supports the trial court's conclusion; we find no error.

II.

Next, we direct our attention to business loss. Though many states view injury to or destruction of a business upon lands taken by eminent domain as too uncertain, remote and speculative to be compensable, Penna v. State Highway Bd., 122 Vt. 290, 292, 170 A.2d 630, 632 (1961), Vermont specifically identifies business loss as a reimbursable item of damage in a condemnation proceeding. 19 V.S.A. § 501(2). Business loss is not unlimited, however, and this Court has adopted standards to minimize uncertainty and speculation.

First, we require the property owner to have a " 'fixed and established business.' " Raymond, 158 Vt. at 105, 604 A.2d at 1284 (quoting Sharp v. Transportation Bd., 141 Vt. 480, 486, 451 A.2d 1074, 1076 (1982)). Characteristics of a fixed and established business include current use, current accessibility, and an identifiable market for the business's products. See Green Mountain Marble Co., 130 Vt. at 462, 296 A.2d at 203 (finding that no business existed based on lack of current use, inaccessibility, and absence of market demand). Mere plans, however, rest on conjecture and therefore do not rise to the level of a fixed and established business for the purpose of business loss compensation. See Raymond, 158 Vt. at 105, 604 A.2d at 1284 (holding preliminary development plans for subdivision not sufficient to constitute a fixed and established business developing land). Here, Pinewood had a fixed and established business selling lots and constructing homes. In particular, Pinewood's continuous development of the Pinewood Manor residential area since the early 1960s and the strong market for its lots and custom homes support this conclusion.

But Pinewood still had to demonstrate that the land award did not already compensate it for business losses. Sharp, 141 Vt. at 486, 451 A.2d at 1076. In Sharp, we adopted a method of computing business loss. Id. at 487, 451 A.2d at 1077. The trial court takes the value of the business on the condemned land as a whole, and from that number, subtracts the value of the land's highest and best use. The remainder, if any, represents the property owner's business loss which has not "necessarily been compensated" in the valuation of the land. In re Condemnation Award to 89-2 Realty, 152 Vt. 426, 429, 566 A.2d 979, 981 (1989). A property owner may not recover for business loss beyond the extent of that remainder. Sharp, 141 Vt. at 488, 451 A.2d at 1077.

The property owner may offer evidence of the value of the business in a number of ways. Since no one single method of valuation is appropriate for all circumstances, we see no reason to dictate the specific manner of appraisal. Rather, we recognize the trial court's duty to evaluate the appropriateness of the appraisal approach offered through expert testimony. New England Power Co. v. Town of...