State ex rel. Nevada Dept. of Transp. v. Las Vegas Bldg. Materials, Inc.

• Decision Date: 21 September 1988
• Docket Number: No. 18176,18176
• Citation: 104 Nev. 479,761 P.2d 843
• Parties: The STATE of Nevada, ex rel. NEVADA DEPARTMENT OF TRANSPORTATION, Appellant, v. LAS VEGAS BUILDING MATERIALS, INC., a Nevada corporation, Respondent.
• Court: Nevada Supreme Court

Page 843

761 P.2d 843

104 Nev. 479

The STATE of Nevada, ex rel. NEVADA DEPARTMENT OF TRANSPORTATION, Appellant, v. LAS VEGAS BUILDING MATERIALS, INC., a Nevada corporation, Respondent.

No. 18176.

Supreme Court of Nevada.

Sept. 21, 1988.

Brian McKay, Atty. Gen., and James J. Rankl, Deputy Atty. Gen., Carson City, for appellant.

Kermitt L. Waters, Las Vegas, for respondent.

OPINION

PER CURIAM:

The Facts

On January 15, 1986, appellant Nevada Department of Transportation filed a condemnation action against respondent Las Vegas Building Materials, Inc. (LVBM) to acquire property necessary to the construction of Interstate 95. The subject of the eminent domain action was 41.65 acres of land and an easement affecting 3.21 acres for the relocation of utilities. The condemned property was part of a larger parcel owned by LVBM, a corporation engaged in common mining operations and a sand and gravel processing and sales business.

The parties stipulated that the larger parcel potentially affected by the condemnation consisted of 336.93 acres, and that January 16, 1986, was the date of valuation. Prior to trial, the State filed a motion in limine seeking to limit LVBM's presentation of valuation evidence. Specifically, the motion focused on the issue of the highest and best use of the subject property and the impropriety of adding to the market value of the land the value of the mineral reserves (i.e., gravel). However, counsel for LVBM informed the court that LVBM was considering the gravel as one of many factors in valuing the property and that its experts would "restrict their testimony to the effect that the presence of the gravel has on market value." Accordingly, the court denied the State's motion.

During its case in chief, LVBM introduced engineering and appraisal testimony critical of the drainage aspects of the proposed highway project. The engineer, Charles Brechler, testified that the placement of the flat bottom ditch and drainage structure was inconsistent with good engineering practice. Specifically, Brechler testified that the proposed drainage structure would (1) silt up and cause an eight to ten acre ponding of water on LVBM's land west of the freeway land, (2) result in ponding of water to a depth of 2 1/2 feet at all times in the concrete box of the drainage structure, and (3) cause three to four acres of ponding on LVBM's property on the east side of the freeway.

The State sought to rebut Brechler's flood damage testimony by introducing evidence concerning the City of Henderson's proposed comprehensive flood control plan. However, ruling that the evidence was a speculative source of special benefits, the trial court granted LVBM's motion in limine, thereby precluding the State "from bringing in anything regarding the flood control by the City of Henderson...."

The larger parcel was originally criss-crossed by strips of land, owned in fee by the City of Henderson, which were encumbered by utility easements and the federal government's underground water easement within the Pitman lateral. LVBM submitted evidence that on October 5, 1966, it obtained a ninety-nine year option from the City of Henderson to purchase the land under these easements at a price of $400 per acre (purchases to be at minimum one acre increments and to remain subject to the utility easements). The State introduced evidence that the City of Henderson, by resolution dated July 1, 1986, transferred to the State the land which was the subject of LVBM's option to purchase.

The trial concluded with a jury verdict and subsequent judgment in the amount of $2,574,000. ¹ The judgment provided that interest on the judgment would apply from January 16, 1986, to March 25, 1986, and thereafter until paid. Subsequent State motions to alter or amend the judgment upon the verdict, and for a new trial, were denied. In appealing the judgment, the State claims the trial court erred in (1) allowing LVBM to make a double valuation of the land by separately valuing the minerals and adding that value to the market value of the land, (2) preventing the State from presenting evidence of the City of Henderson's proposed flood control plan, (3) allowing LVBM to be compensated for an unexercised option to purchase land, and (4) granting LVBM interest on the judgment prior to the date of occupancy.

Discussion

Evidence Concerning Valuation of the Land

The parties do not dispute the law applicable to this issue. In a condemnation action the existence of mineral deposits in or on land is an element to be considered in determining the land's value. Nevertheless, where the property is not taken for the purpose of obtaining the minerals or as an ongoing business it is improper to appraise the mineral deposits separately and add the mineral value to the value of the land. See, e.g., United States v. 91.90 Acres of Land, 586 F.2d 79, 87 (8th Cir.1978); 4 J. Sackman, Nichols' The Law of Eminent Domain § 13.22, at 13-126, 127 (1985). That is, separate valuation of the minerals apart from the land results in a double valuation and involves speculation.

In the instant case, the State contends that LVBM made a double valuation of the land by separately valuing the minerals and then adding that value to the market value of the land. LVBM claims both its appraisers testified as to the market value of the property--giving consideration to the presence of the aggregates--and thus did not include a double valuation as the State suggests. Our review of the record leads us to conclude that LVBM is correct.

One of LVBM's appraisers testified that the fair market value of the subject parcels, as determined by the comparable sales approach, ranged between $25,000 to $30,000 per acre; using a similar approach, the other appraiser set the value at $20,000 to $30,000 per acre. However, both appraisers testified that, because of the mineral deposits, they valued the property in excess of the value determined by the comparable sales approach. As a result, the State argues that the minerals were separately valued from the land, resulting in an improper double valuation. Although the argument has appeal on its face, it is flawed.

The State in effect suggests that both appraisers first determined the market value of the property and then added the value of the gravel. However, the appraisers took the position that there were no comparable sales to the subject property because of the presence of the minerals. That is, the "comparable" sales figures dealt with similar lands excepting the presence of minerals. Thus, both appraisers added what they concluded was the value of the minerals in order to determine the market value of the subject land. ² Contrary to the State's claim, this is not a double valuation.

Evidence of Henderson's Proposed Flood Control Plan

LVBM's engineer testified that construction of the freeway in accordance with the plans presented by the State would result in a severe flooding problem for the remainder of LVBM's property. In response, the State sought to put into evidence proposed plans of the City of Henderson involving the City's own flood control program in the area. The State argues that the trial court erred in denying the presentation of this evidence. We disagree.

NRS 37.110 in pertinent part provides:

The ... jury ... must ascertain and assess

....

2. If the property sought to be condemned constitutes only a part of a large parcel, the damages which will accrue to the portion not sought to be condemned, by reason of its severance from the portion sought to be condemned, and the construction of the improvement in the manner proposed by the plaintiff.

....

4. Separately, how much the portion not sought to be condemned, and each estate or interest therein, will be benefited, if at all, by the construction of the improvement proposed by the plaintiff; and if the benefit shall be equal to the damages assessed, under subsection 2 of this section, the owner of the parcel shall be allowed no compensation except the value of the portion taken; but if the benefit shall be less than the damages so assessed, the former shall be deducted from the latter, and the remainder shall be the only damages allowed in addition to the value of portion taken (emphasis added).

The statutory scheme provides that the condemnor must pay for damages to the remaining land caused by the condemnor's improvement; the condemnor may also offset any special benefits which are caused by the condemnor's improvements. However, the statute does not permit the State to offset damages via special benefits which may accrue to the property as a result of a separate planned project by a third party.

In construing a similar provision to NRS 37.110, the court in People ex rel. Dept. of Public Works v. Simon Newman Co., 37 Cal.App.3d 398, 112 Cal.Rptr. 298 (1974), noted:

Code of Civil Procedure section 1248 authorizes severance damages (subd. 2) and benefits (subd. 3) to be assessed for "the construction of the improvement" in the manner proposed by the condemnor. That section does not authorize the offsetting of damages and benefits between distinct and separate projects of improvement simply because the condemning agency has, for its own convenience, joined such separate projects in one action.

Id. at 408, 112 Cal.Rptr. 298. This result seems especially appropriate in the present case involving Henderson's proposed plans. For example, part of Henderson's flood control plan is contingent upon acquiring a right-of-way on LVBM's land to construct a drainage canal; the canal would link existing water courses and allegedly resolve the flooding problem. However, the practical dilemma presented to LVBM is that it would have no remedy against the State in the event Henderson failed to complete its project ³ or in the event the project failed to cure the flooding problem. Because the proposed flood control plan was a speculative source of benefits from a third party, the trial...