State By and Through Dept. of Highways v. Olsen, 12794
| Decision Date | 12 March 1975 |
| Docket Number | No. 12794,12794 |
| Citation | 531 P.2d 1330,32 St.Rep. 110,166 Mont. 139 |
| Parties | The STATE of Montana, acting By and Through the DEPARTMENT OF HIGHWAYS of the State of Montana, Plaintiff and Appellant, v. Arthur J. OLSEN et al., Defendants and Respondents. |
| Court | Montana Supreme Court |
Daniel J. Sullivan (argued), Helena, for plaintiff and appellant.
Koch & McKenna, Thomas P. Koch (argued), Hamilton, Boone, Karlberg & Haddon, William T. Boone (argued), Missoula, for defendants and respondents.
William John Carl (argued), Butte, amicus curiae.
These appeals arise from a condemnation action brought by the State Department of Highways in the district court, Ravalli County. Defendants, Orion and Esther Health, the landowners, appeal from the district court's refusal to award them their alleged 'expenses of litigation'. The State cross-appeals from the judgment awarding $68,000 as just compensation for the taking.
Heaths owned and operated a 'mom and pop' grocery store in Florence, Montana. The store, with living quarters attached, is situated on a lot fronting on U. S. Highway 93. State Department of Highways' plan for improving that highway involved widening of its right-of-way, necessitating a taking of part of the lot owned by the Heaths. The State offered the owners $3,460 for the 31 1/2 foot strip fronting on the highway, which offer was refused. Following the refusal, the State filed this condemnation action in June, 1972.
The landowners admitted the necessity of the taking, but disputed the extent of the taking and the amount of just compensation offered by the State. A jury trial was held in January 1974, for a determination of these issues. During the course of trial, the State admitted that it had erred in its previous determination of the extent of the taking. It conceded the strip to be condemned included the sanitary facilities of the lot and that the taking would destroy the utility of the store and attached residence.
As a result of this new position, the State's appraiser testified the value of the taking, using the 'market data' valuation method, was $39,033. The landowners' appraiser, using a 'capitalization of income' method, valued the taking at $86,500. The landowners did not testify as to the value of the taking.
The jury returned a unanimous verdict of $68,000, and judgment was entered thereon. The landowners then moved for an award of the 'necessary costs of litigation' under the provisions of section 93-9921.1, R.C.M.1947. The amounts requested were:
(a) Court fees $18.00
(b) Appraiser's fee $2,300.00
(c) Architect's fee $100.00
(d) Engineer's fee $532.50
(e) Sanitarian's fee $200.00
(f) Attorney's fees $16,150.00
The State moved to retax costs: the motions were jointly heard, evidence was received, and the court entered an order denying all of the costs except the $18 court fees.
The landowners appeal that order and the State cross-appeals from the judgment. Considered together, the issues raised are:
(1) Is a 'capitalization of income' valuation appropriate on these facts?
(2) If so, was that method properly applied to the facts presented?
(3) Are defendants entitled to recovery of 'necessary costs of litigation' under the provisions of section 93-9921.1, R.C.M.1947?
The first two issues are raised by the State, while the landowners present the third for consideration. Amicus curiae also briefed and argued the third issue.
The State's first argument is essentially that income capitalization should not be used to value damage to business property. While admitting that method is appropriate in cases involving agricultural or rental property, it argues that business property should not be similarly valued because the income it produces depends more on the skill of the owner-operator than on the productivity of the property.
The use of income capitalization in eminent domain valuations is not new in Montana. The admissibility of income evidence was recognized in State v. Peterson, 134 Mont. 52, 328 P.2d 617, although capitalization of that income was not discussed. However, Peterson was cited in State Highway Comm'n v. Heltborg, 140 Mont. 196, 369 P.2d 521, for the proposition that income can be used in determination of market value. Heltborg affirmed an award based on capitalization of income derived from agricultural property.
Caveats were attached to the use of this method in State Highway Comm'n v. Bare, 141 Mont. 288, 301, 377 P.2d 357, 363, where we said:
In Bare we reversed the district court because the foundation for the use of the method involved an unacceptable amount of uncertainty and speculation. A similar result was reached in State Highway Commission v. Palin, 160 Mont. 486, 503 P.2d 524, for the same reasons.
Our most recent encounter with the method, apart from the instant case, was State Highway Comm'n v. Bennett, 162 Mont. 386, 513 P.2d 5, 8, where we approved the use of the method in a condemnation involving rental cabins and a service station. Bennett, and others heretofore cited, gives Montana a different rule from that urged by the State and suggested by 5 Nichols on Eminent Domain § 19.3.
Income capitalization is an appropriate valuation method in cases where it entails liss conjecture and uncertainty than alternative methods. Its applicability is determined less by the type of property taken than by a comparison of the relative certainty resulting from the use of the various methods. While some types of property may lend themselves to a particular method, the appropriateness of any given method must necessarily hinge on the facts of the case being tried.
The alternative methods of valuation were presented to the jury in the instant case. The landowners' appraiser discussed three: market data, reproduction cost, and income capitalization. He rejected the first two as inapplicable here, and valued the taking at $86,500 by using the income capitalization method. The State's appraiser also discussed the same three methods, rejecting the last two, and valuing the taking at $39,033 by applying the market data method.
Each of the experts pointed out the flaws he felt to be inherent in the other's approach. Each was rigorously cross-examined by opposing counsel. No suggestion was made that the witnesses were unqualified to express an opinion. The dispute went solely to the applicability of the methods proposed.
Under these facts we find Bennett to be controlling. Dealing with a similar problem there, we said:
The foregoing discussion responds to both issues raised by the State. The use of the income capitalization method clearly was permissible under the authorities cited. The concern over the proper application of this method goes to the weight of the expert's testimony, not to its admissibility. Bennett, supra. Our review of the record here finds substantial evidence supporting the verdict and judgment. Accordingly, the judgment of the district court is affirmed.
The final problem presented concerns the district court's denial of the landowners' alleged 'necessary costs of litigation'. The principal challenge concerns the applicability of section 93-9921.1, R.C.M.1947, to an action pending when that statute became effective.
The State's complaint was filed in June 1972. At that time, awardable costs were determined under section 93-9921, R.C.M.1947, which provided:
'Costs may be allowed or not, and, if allowed, may be apportioned between the parties on the same or adverse sides, in the discretion of the court.'
The costs provided by that statute did not include expert witness or attorney fees. State Highway Comm'n v. Heltborg, 140 Mont. 196, 369 P.2d 521; Tomten v. Thomas, 125 Mont. 159, 232 P.2d 723, 26 A.L.R.2d 1285.
While this action was pending, section 93-9921 was repealed and section 93-9921.1, R.C.M.1947, was substituted. It provides, in pertinent part:
'* * * In the event of litigation, and when the private property owner prevails, by receiving an award in excess of the final offer of the condemnor, the court shall award necessary expenses of litigation to the condemnee.'
The title of the 1973 legislative act indicates section 93-9921.1 was designed to implement Articel II, Section 29 of the 1972 Montana Constitution. Chapter 453, Laws of 1973.
The new statute and the new constitution went into effect during the time this suit was pending. The language of the new provision is clearly broader than the former law, and 'necessary costs of litigation' includes expert witness and attorney fees. The Constitutional...
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