Primetime v. City of Albuquerque

Decision Date13 June 2007
Docket NumberNo. 25,616.,25,616.
Citation2007 NMCA 129,168 P.3d 1087
PartiesPRIMETIME HOSPITALITY, INC., Plaintiff-Appellee, v. The CITY OF ALBUQUERQUE, Defendant-Appellant.
CourtCourt of Appeals of New Mexico

McCary, Wilson & Pryor, Dennis M. McCary, Sutin, Thayer & Browne, Kerry Kiernan, Albuquerque, NM, for Appellee.

City of Albuquerque, Robert M. White, City Attorney, Mark Hirsch, Deputy City Attorney, Robert Waldman, Assistant City Attorney, Peter Auh, Assistant City Attorney, Albuquerque, NM, for Appellant.

OPINION

BUSTAMANTE, Judge.

{1} This inverse condemnation case presents an issue of first impression in New Mexico: What is the proper measure of damages for a temporary, but total, physical taking of a commercial property in the early stages of construction? Following a bench trial the district court awarded Plaintiff Primetime Hospitality, Inc. (Primetime), $456,242 for lost profits and $153,518.45 for excess construction costs, plus interest and costs against the City of Albuquerque (City). The City appeals contending that the district court erred in awarding consequential damages to Primetime. The City also argues that the court improperly awarded Primetime costs. In its cross-appeal, Primetime argues that the district court erred in denying its request for attorney fees. We reverse in part and affirm in part as to the appeal and remand for further proceedings on the City's appeal. We affirm the denial of attorney fees in the cross-appeal.

FACTS

{2} Primetime is experienced in the business of developing, owning, and operating hotels. In early 2000 Primetime started planning for a hotel near the airport in southeast Albuquerque. Prior to starting construction, Primetime entered into a franchise arrangement with Hilton Inns, Inc. that imposed a substantial liquidated damages provision if the facility was not completed. Primetime also arranged construction financing and hired a contractor.

{3} Within two months of the start of construction, Primetime's contractor struck and ruptured an encroaching City main waterline. At about the same time, Primetime discovered another encroaching domestic waterline. The waterlines had to be physically relocated by the City. The district court found that the relocation process delayed construction for a 102-day period. The district court also found that as a direct result of the construction interruption, another 40-day delay occurred due to winter weather.

{4} Primetime filed its complaint for damages before construction was complete asserting causes of action for inverse condemnation and trespass. The trespass claim was dismissed with Primetime's approval. Primetime moved for summary judgment on the issue of liability, and the parties eventually entered into a "Stipulated Partial Summary Judgment Order on Liability" in which the City stipulated to liability for inverse condemnation. The stipulated order specifically reserved all issues relating to the proper measure of damages and attorney fees.

{5} The parties then filed cross motions for summary judgment as to the elements of damages Primetime could pursue at trial. Primetime argued, as it does here, that it was entitled to a full measure of separate consequential damages covering (1) physical damage to the property from water discharge; (2) clean-up, re-excavation, and all additional construction costs caused by the delay; (3) the reasonable fair market value of the loss of use of the property; and (4) the net lost profits the hotel would have generated had there been no delay. The City argued that Primetime was limited to a traditional "before and after" measure of damages with no separate provision for any consequential damages. The district court granted Primetime's motion for summary judgment specifically with respect to lost profits, ruling that they were a "proper element of damages."

{6} The parties' approach did not change through trial as evidenced by their written closing arguments and proposed findings of fact and conclusions of law. The district court awarded damages for lost profits and additional construction costs in the exact amount Primetime requested. The lost profit calculation was based on a 142-day delay in opening the hotel. The additional construction cost figure included a number of items, some connected directly to repairing water damage, but the vast majority connected to the delay of construction. The excess construction costs include:

                Excess Construction Costs
                      Admin. Time                              5,000
                      Buttress Wall                        76,856.94
                      Hussein Salary (PD 266.66)           37,864.14
                      Mayan Construction                   23,196.77
                      LSC Landscaping                       1,465.50
                      Cartesian                               507.04
                      Custom Grading                        5,400.00
                      Vineyard                                502.61
                      Builders Risk (7.67/day)              1,089.14
                      Pat Richardson (88.90 PD)             1,236.64
                      Fence                                   400.00
                      Total                               153,518.45
                

{7} The City does not question the district court's finding that the additional construction costs were incurred as a direct result of the encroaching waterlines. Nor does the City dispute the accuracy or reasonableness of the additional costs or lost profit figures. Rather, the City limits its challenge to the legal question of whether any of them are permissible in inverse condemnation actions.

{8} In support of the lost profits award, the district court found as a fact that Primetime's expert "demonstrated that a before and after appraisal methodology would not be appropriate to measure the lost profits suffered by [Primetime]." The district court concluded as a matter of law that "[w]hen reliable proof of damage and its amount is presented by a methodology other than a before and after appraisal, such proof is admissible on the damage issue."

JUST COMPENSATION FOR A TEMPORARY TAKING

{9} The City's power of eminent domain is limited by the constitutional requirement that the property owners be paid "just compensation." See N.M. Const. art. II, § 20 (stating that "[p]rivate property shall not be taken or damaged for public use without just compensation"); City of Sunland Park v. Santa Teresa Servs. Co., 2003-NMCA-106, ¶ 43, 134 N.M. 243, 75 P.3d 843 (recognizing that "[t]he primary condition to the exercise of eminent domain is the constitutional requirement to pay just compensation"). The statutory provision carrying out this constitutional mandate in the context of inverse condemnation, NMSA 1978, § 42A-1-29(A) (1983), states:

A. A person authorized to exercise the right of eminent domain who has taken or damaged or who may take or damage any property for public use without making just compensation . . . is liable to the condemnee, or any subsequent grantee thereof, for the value thereof or the damage thereto at the time the property is or was taken or damaged. . . .

The City argues that the district court applied a constitutionally and statutorily improper measure of damages. This is a question of law that we review de novo. See Lorentzen v. Smith, 2000-NMCA-067, ¶ 6, 129 N.M. 278, 5 P.3d 1082.

{10} New Mexico's constitution mandates just compensation when property is taken or damaged but does not say how to measure it in any particular circumstance. Similarly, our Eminent Domain Code contemplates just compensation but provides little guidance as to its measurement. For example, NMSA 1978, § 42A-1-24(A) (2001) simply provides that "actual value" as of the date a petition of condemnation is filed shall constitute just compensation. The Code is more specific in describing the measure of damages to remainders in partial taking cases. NMSA 1978, § 42A-1-26 (1981) (describing the measure of damages to remainder properties as the "difference between the fair market value of the entire property immediately before the taking and the fair market value of the property remaining immediately after the taking"). But the Code does not address in any way how to measure damages for a temporary taking-physical or regulatory.

{11} Before entering into our discussion of the law of damages for temporary taking, both within this state and without, we believe it prudent to emphasize the unique circumstances with which we are confronted. The case could be viewed as a temporary invasion incidental to negligence by the City in the placement and mapping of its water lines. We need not decide or even examine in detail whether the case could have been brought as a tort action. The parties stipulated to the dismissal of the trespass claim, Primetime never sought compensation under the Tort Claims Act, and the City stipulated to liability for inverse condemnation. Thus, we decide the case on the basis that it was presented both below and to us-as a proper case for inverse condemnation in which we need only decide the proper measure of damages.

{12} This Court has addressed damages for a temporary regulatory taking in one case. In PDR Development Corp. v. City of Santa Fe, 120 N.M. 224, 900 P.2d 973 (Ct. App.1995), the trial court determined that a zoning ordinance had been unlawfully applied to PDR's existing property, but then refused to grant damages in the form of lost profits. Id. at 226-27, 900 P.2d at 975-76. We affirmed the trial court's refusal to grant lost profits damages and enunciated a measure of damages tied to the "market rate of return on the difference in the fair market value of the property without the restriction and the fair market value of the property with the restriction for that period of time during which the restriction was in place." Id. at 226, 900 P.2d at 975. The City relied heavily on this aspect of PDR in its briefing before us.

{13} Taken at face value, application of this measure would seem to provide a ready answer to this case. As the...

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