State by Humphrey v. Strom

• Decision Date: 18 December 1992
• Docket Number: C7-91-1870,Nos. C4-91-1941,s. C4-91-1941
• Citation: 493 N.W.2d 554
• Parties: STATE of Minnesota, by Hubert H. HUMPHREY, III, Appellant, v. Donald O. STROM, et al., and Mildred L. Sponsel, et al., Parcel 40: Woodbridge Plaza, a Limited Partnership, Respondents.
• Court: Minnesota Supreme Court

Page 554

493 N.W.2d 554

STATE of Minnesota, by Hubert H. HUMPHREY, III, Appellant, v. Donald O. STROM, et al., and Mildred L. Sponsel, et al.,

Parcel 40: Woodbridge Plaza, a Limited

Partnership, Respondents.

Nos. C4-91-1941, C7-91-1870.

Supreme Court of Minnesota.

Dec. 18, 1992.

Syllabus by the Court

1. In a partial-taking condemnation action, evidence of construction-related interferences is admissible, not as a separate item of damages, but as a factor to be considered by the finder of fact in determining the diminution in market value of the remaining property.

2. In a partial-taking condemnation action, to the extent that loss of visibility to the public traveling on a redesigned highway results from changes in the property taken from the owner, evidence of the loss is admissible, not as a separate item of damages, but as a factor to be considered by the finder of fact in determining the diminution in market value of the remaining property.

Hubert H. Humphrey, III, Atty. Gen., Sherry A. Enzler, Sp. Asst. Atty. Gen., Donald Mueting, Asst. Atty. Gen., St. Paul, for appellant.

Richard J. Gunn, Bradley J. Gunn, Minneapolis, for respondent.

Carla Heyl, St. Paul, amicus curiae for League of Minnesota Cities.

Heard, considered, and decided by the court en banc.

WAHL, Justice.

The questions certified in this appeal ask us to determine whether evidence of construction-related interferences and loss of visibility may be taken into account to the extent they affect the market value of the In October 1986, the State of Minnesota began eminent domain proceedings pursuant to Minn.Stat. § 117.042 (1986) to acquire property necessary for the construction and conversion of Highway 12 to a federal interstate highway, I-394. The condemnation included a partial taking from an office site owned by respondent Woodbridge Plaza, a Limited Partnership ("Woodbridge"), located on the south side of old Highway 12 in Minnetonka.

                property in determining just compensation in an eminent domain proceeding.   We answer both questions in the affirmative
                

On December 31, 1986, the court granted the state's petition to acquire 13,700 square feet of Woodbridge's property in fee and 4,371 square feet as a four-year temporary construction easement and ordered the taking and the vesting of title in the state on February 4, 1987. All of the property acquired from Woodbridge was used for construction of the appurtenant frontage road system. Construction of this portion of the project began in April 1987 and was completed in July 1990.

Court-appointed commissioners filed an award of damages, based on evidence presented at hearings, in the amount of $707,873 for the partial taking. Of this amount $114,688 is for the land taken, $593,185 is for damage to the remainder. Both parties appealed the award to the district court for a jury trial. The state claims the award is excessive and that the damages do not exceed $227,000. Woodbridge claims the award is inadequate, that damages exceed $3 million.

Prior to trial both parties moved for partial summary judgment to obtain expedited judicial review of whether construction-related interferences and loss of visibility may be taken into account to the extent they affect the market value of the property in determining just compensation. The district court granted Woodbridge's motion to allow the jury to consider evidence of both construction-related interferences and loss of visibility, not as separate items of damage, but to the extent they may bear on the market value of the property after the taking.

The state petitioned the court of appeals for discretionary review of the district court's order. In addition, the district court certified two questions concerning the admissibility of evidence of construction-related damages and damages involving loss of visibility as important and doubtful under Minn.R.Civ.App.P. 103.3(h). The court of appeals consolidated the appeals and granted discretionary review. This Court granted accelerated review pursuant to Minn.R.Civ.App.P. 118.

Woodbridge is the fee owner of what was originally a 3.75 acre tract abutting the frontage road that was part of the old Highway 12 right-of-way. The area is zoned for commercial or business use and the tract is improved by a three-story, well-maintained, quality office building. The building was built in 1981-1982, is of sound construction, and contains 36,035 square feet of net rentable area. The property is attractively landscaped and improved with a 180 space asphalt parking lot.

Old Highway 12 is one of the major routes connecting downtown Minneapolis with the western suburbs. It is being converted into a "limited access" highway designated as Interstate-394 (I-394). The full project involves the reconstruction of eleven miles of highway and the reconstruction and relocation of both the north and south frontage roads. The construction of the highway and the frontage roads are occurring simultaneously and are jointly funded by federal-state highway funding. The plan now calls for the frontage roads to be turned over to local units of government for operation and maintenance when construction is completed in June 1993.

The construction-related problems visited upon the Woodbridge property are typical of the problems being experienced by other commercial properties located along the length of the reconstruction. For instance, access to many of the commercial enterprises in the area has been seriously disrupted. The location of the access to the Woodbridge property changed many times during the period of construction. The route was often circuitous and inconvenient During the construction period, the occupancy level of the building dropped dramatically, from 91.6% in 1987 to 56.7% in 1988. The occupancy rate remains low--65% in 1990. The net rental rate also dropped--from $10.59 per square foot in 1987 to $7.90 per square foot in 1988. The rental rate in 1990 was $4.48 per square foot. For the purpose of this pre-trial appeal, we assume that the construction-related interferences caused a temporary reduction in rental income.

although it was never completely eliminated.

In addition, the project has permanently impaired the view and visibility of much of the remaining property. Before construction, the Woodbridge property and its landscaped grounds were fully visible to passing motorists on old Highway 12. Old Highway 12 (I-394) has now been lowered two to six feet in front of the property while the south frontage road has been elevated nine to twenty-one feet. As a result, the visibility of the property to passing motorists on I-394 has been substantially reduced. However, visibility from the south frontage road has not been affected. For the purpose of this pre-trial appeal only, the parties agree and we assume that the reduction of visibility caused a reduction in the income stream generated by the use of the remaining property, that is also reflected in lower occupancy rates and rental income.

The two questions certified by the district court are these:

1. In a partial taking condemnation action, is evidence of construction-related interferences admissible, not as a separate item of damages, but as a factor to be considered by the finder of fact in determining the diminution in market value of the remaining property?

2. In a partial taking condemnation action, is evidence of loss of visibility to the public traveling on a redesigned highway admissible, not as a separate item of damages, but as a factor to be considered by the finder of fact in determining the diminution in market value of the remaining property.

The certified questions raise the issue of the extent to which the district court may limit evidence that may be considered by a jury in determining the fair market value of a remainder. When a taking of private property by the state occurs, both the state and the federal constitutions require that just compensation be paid. ¹ Minn. Cons. art. 1, § 13 provides: "Private property shall not be taken, destroyed or damaged for public use without just compensation therefor, first paid or secured." This language is broader than the language of the federal constitution: "[N]or shall private property be taken for public use, without just compensation." U.S. Const. amend. V. In addition, Minn.Stat. § 117.025, subd. 1 (1986) defines "taking and all words and phrases of like import" to include "every interference, under the right of eminent domain, with the possession, enjoyment, or value of private property." Thus, the clear intent of Minnesota law is to fully compensate its citizens for losses related to property rights incurred because of state actions. ²

Minnesota has followed the "before and after" rule to determine the measure of just compensation for a partial taking. According to this rule, the measure of damages is the difference between the fair market value of the entire piece of property immediately before the taking and the fair market value of the remainder of the property after the taking. ³ State v. Casey To determine the value of property taken in an eminent domain proceeding, the general rule is that " '[s]ubject to the caveat that such proof must be competent, relevant and material, evidence of any matter with [sic] would influence a prospective purchaser and seller in fixing the price at which a sale of the property could be consummated may be considered.' " City of St. Paul v. Rein Recreation, Inc., 298 N.W.2d 46, 50 (Minn.1980) (quoting 5 P. Nichols, The Law of Eminent Domain § 18.11 (3d ed. rev. 1979)).

                263 Minn. 47, 50, 115 N.W.2d 749, 752 (1962).   See also State v. Pahl, 254 Minn. 349, 356, 95 N.W.2d 85, 90 (1959);  City of Chisago City v. Holt, 360 N.W.2d 390, 392 (Minn.Ct.App.1985).  "To determine the fair market value of property in a condemnation proceeding '[a]ny competent evidence may be considered if it legitimately bears upon the market value.' "  Ramsey County v.

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