State ex rel. Miller v. Filler

• Decision Date: 21 March 1991
• Docket Number: Nos. CV-90-0320-S,No. 1378,CV-90-0319-SA,No. 1036,1036,1378,s. CV-90-0320-S
• Citation: 168 Ariz. 147,812 P.2d 620
• Parties: STATE of Arizona, ex rel. Charles L. MILLER, Director, Department of Transportation, Petitioner, v. Honorable Charles A. FILLER, Judge of the Superior Court of Maricopa County, Arizona, Respondent. TITLE USA (formerly U.S. Life Title Company of Arizona), an Arizona corporation, as Trustee under Trust; Paloma Corporation; Hunt-Stephens Investments; Paul A. Hope, as Trustee of the William Herbert Hunt Trust Estate; A. Paul Stephens, Sr.; A. Paul Stephens, Jr.; Elizabeth Jane Stephens; Skunk Creek Properties, Inc.; Arrowhead Plaza Partners; Lawyers Title of Arizona, as Trustee of Trust; Circle K Corporation; Southwest Savings; First Interstate Bank; Security Pacific Bank; Doris F. White; and Estate of E. Brooke White, Real Parties in Interest. TITLE USA (formerly U.S. Life Title Company of Arizona), an Arizona corporation, as Trustee under Trust; Paloma Corporation; Hunt-Stephens Investments; Paul A. Hope, as Trustee of the William Herbert Hunt Trust Estate; A. Paul Stephens, Sr.; A. Paul Stephens, Jr.; Elizabeth Jane Stephens; Skunk Creek Properties, Inc.; Arrowhead Plaza Partners; Lawyers Title of Arizona, as Trustee of Trust; Circle K Corporation; Southwest Savings; First Interstate Bank; Security Pacific Bank; Doris F. White; and Estate of E. Brooke White, Petitioners, v. Honorable Charles A. FILLER, Judge of the Superior Court of Maricopa County, Arizona, Respondent. STATE of Arizona, ex rel. Charles L. MILLER, Director, Department of Transportation, Real Party in Interest.
• Court: Arizona Supreme Court

Page 620

812 P.2d 620

168 Ariz. 147

STATE of Arizona, ex rel. Charles L. MILLER, Director, Department of Transportation, Petitioner, v. Honorable Charles A. FILLER, Judge of the Superior Court of Maricopa County, Arizona, Respondent.

TITLE USA (formerly U.S. Life Title Company of Arizona), an Arizona corporation, as Trustee under Trust No. 1036; Paloma Corporation; Hunt-Stephens Investments; Paul A. Hope, as Trustee of the William Herbert Hunt Trust Estate; A. Paul Stephens, Sr.; A. Paul Stephens, Jr.; Elizabeth Jane Stephens; Skunk Creek Properties, Inc.; Arrowhead Plaza Partners; Lawyers Title of Arizona, as Trustee of Trust No. 1378; Circle K Corporation; Southwest Savings; First Interstate Bank; Security Pacific Bank; Doris F. White; and Estate of E. Brooke White, Real Parties in Interest.

TITLE USA (formerly U.S. Life Title Company of Arizona), an Arizona corporation, as Trustee under Trust No. 1036; Paloma Corporation; Hunt-Stephens Investments; Paul A. Hope, as Trustee of the William Herbert Hunt Trust Estate; A. Paul Stephens, Sr.; A. Paul Stephens, Jr.; Elizabeth Jane Stephens; Skunk Creek Properties, Inc.; Arrowhead Plaza Partners; Lawyers Title of Arizona, as Trustee of Trust No. 1378; Circle K Corporation; Southwest Savings; First Interstate Bank; Security Pacific Bank; Doris F. White; and Estate of E. Brooke White, Petitioners, v. Honorable Charles A. FILLER, Judge of the Superior Court of Maricopa County, Arizona, Respondent.

STATE of Arizona, ex rel. Charles L. MILLER, Director, Department of Transportation, Real Party in Interest.

Nos. CV-90-0320-SA, CV-90-0319-SA.

Supreme Court of Arizona, In Banc.

March 21, 1991.

Reconsideration Denied May 21, 1991.

[168 Ariz. 148] Robert K. Corbin, Atty. Gen. by James R. Redpath, Joe Acosta, Jr., Laurie Woodall, Phoenix, for the State.

Sacks, Tierney, Kasen & Kerrick, P.A. by Robert V. Kerrick, Jean W. Rice, Leslie A. McCarthy, Phoenix, for Title USA, et al.

OPINION

CORCORAN, Justice.

In this consolidation of two special action petitions, we address whether the trier of fact in a condemnation proceeding may consider the effect of construction delay on a property's market value when determining severance damages and special benefits. This issue arises in connection with eminent domain proceedings initiated for construction of the Outer Loop Freeway in the Phoenix area. Charles L. Miller, Director of the Arizona Department of Transportation (DOT), filed a special action petition against the respondent judge and several condemnees, asserting that the trial court had improperly ruled that a jury in a condemnation case may consider evidence of construction delay in measuring special benefits to property partially taken to accommodate the freeway. Title USA and other condemnees (collectively, Title USA) also filed a special action petition, arguing in contrast that the trial court's ruling was incorrect because it prohibited the jury from also considering construction delay for purposes of severance damages.

DOT's exercise of eminent domain against the condemnees in these proceedings is the largest in Arizona history and will result in at least 9 separate condemnation trials in which construction delay may be at issue. Therefore, pursuant to Ariz.Const. art. 6, §§ 5(1) and 5(3), and rule 7(c), Arizona Rules of Procedure for Special Actions, we accept jurisdiction of both petitions to resolve this question.

Facts and Procedural History

The condemnation proceeding from which these special actions arise is the first in a series of trials concerning property taken to facilitate construction of the northwest section of the Outer Loop Freeway. This action involves the partial taking of two commercially-zoned parcels of land owned by Title USA and located within the Arrowhead Ranch development in Glendale.

At issue is the proper method for measuring just compensation for Title USA. Before trial, DOT moved to prevent Title USA from introducing evidence that delay in constructing the freeway would diminish the market value of its remaining property. DOT argued that any "after" valuation of the property must assume that the freeway was completed and fully operational immediately after the taking. In response, Title USA argued that, although proximity to a freeway interchange might eventually benefit the remaining property, the market value after the taking actually decreased because the portion of the freeway adjacent to the land would not operate at maximum capacity for approximately 6 to 9 years after the date of the property's valuation.

The trial court denied DOT's motion in limine and ruled that Title USA's appraisers could testify regarding the effects of delay on both severance damages and special benefits. DOT filed a special action petition with the court of appeals challenging the trial court's ruling, but the appellate court refused to stay the trial pending disposition of the special action request.

After opening arguments, the trial court sua sponte reversed its ruling on DOT's motion and prohibited any testimony concerning construction delay. In response to Title USA's request for reconsideration, the trial court amended its ruling to allow Title USA to cross-examine DOT's appraisers concerning the effect of construction delay on special benefits, but prohibiting the introduction of evidence concerning the effect of construction delay on severance damages. The trial court then granted a mistrial because of the prejudicial effects to the parties of its reversal on the construction delay issue, and it continued the condemnation proceeding to allow the court of appeals to rule on DOT's special action request. The court of appeals, however, declined jurisdiction. Both Title USA and DOT then submitted special action petitions to this court.

Discussion

I. Just Compensation

The Arizona Constitution prohibits the taking of private property without just compensation to the owner. Ariz.Const. art. 2, § 17. "Just compensation" implies the full monetary equivalent of the loss sustained by the owner whose land the government has taken or damaged. See United States v. Miller, 317 U.S. 369, 373, 63 S.Ct. 276, 279, 87 L.Ed. 336 (1943) (decided under the fifth amendment to the United States Constitution, which provides: "nor shall private property be taken for public use, without just compensation"); see also 3 J. Sackman, Nichols' The Law of Eminent Domain § 8.6, at 8-119 (rev. 3d ed.1990) (hereafter Nichols ). The purpose of just compensation is to place the property owner in the position he or she would have occupied had no taking occurred. See Defnet Land & Inv. Co. v. State ex rel. Herman [I], 103 Ariz. 388, 389-90, 442 P.2d 835, 836-37 (1968); see also Miller, 317 U.S. at 373, 63 S.Ct. at 279-80; Olson v. United States, 292 U.S. 246, 255, 54 S.Ct. 704, 708, 78 L.Ed. 1236 (1934).

In determining just compensation in a partial taking case, Arizona courts consider (1) the market value of the property actually taken by the condemnation and (2) the diminution in the remaining property's market value caused by the taking. See Suffield v. State, 92 Ariz. 152, 156, 375 P.2d 263, 266 (1962); see generally Note, Eminent Domain: Admissibility of Planned Uses for Condemnation Valuation, 25 Ariz.L.Rev. 761 (1983). This formula is codified by A.R.S. § 12-1122(A). ¹ Severance damages, the second element in the just compensation formula, are offset by any special benefits the remaining property receives because of the proposed improvement, see A.R.S. § 12-1122(A)(3), and are measured by the difference between the fair market value of the remaining property before and after the taking. See Haney v. City of Tucson, 13 Ariz.App. 296, 297, 475 P.2d 955, 956 (1970). "Fair market value" is the highest price the property will bring if offered for sale on the open market, allowing for reasonable time to find a purchaser knowing all uses and purposes to which the property is adapted and for which it is capable. Mandl v. City of Phoenix, 41 Ariz. 351, 354, 18 P.2d 271, 272 (1933).

In this case, therefore, the State must compensate Title USA not only for the land taken to accommodate the freeway, but also for the corresponding reduction in the value of the remaining commercially-zoned property. The date of valuation is the date of summons, February 13, 1987, see A.R.S. § 12-1123(A), and in determining severance damages, we measure the property's "before" value by its fair market value on that date. The parties disagree, however, on the proper method for measuring the remaining property's "after" value.

II. A.R.S. § 12-1122 and Construction Delay

In its petition, DOT asserts that § 12-1122(A) requires the jury to measure both severance damages and special benefits by applying the fiction that the freeway was completed and fully operational immediately following the taking. In other words, DOT argues that the statute's reference to damages caused by "construction of the improvement in the manner proposed by the plaintiff" indicates that severance damages and special benefits reflect only the impact of the completed project on the remaining property's fair market value, not unavoidable incidental factors such as extended construction delay. Accordingly, under DOT's analysis, Title USA may not introduce evidence of the effects of construction delay on the market value of its remaining property.

DOT relies on language in Defnet Land & Inv. Co. v. State ex rel. Herman [II], which states that a parcel's "after" value is "the value of the remainder after the strip of land is taken off and after the construction of the improvements." 14 Ariz.App. 96, 102, 480 P.2d 1013, 1019 (1971) (emphasis added); see also Mastick v. State, 118 Ariz. 366, 370, 576 P.2d 1366, 1370 (App.1978) (damages "measured by the difference between the value of the remainder before and after the taking and construction") (emphasis added). DOT also claims that People by Department of Public Works v. Schultz...