State ex rel. Ordway v. Buchanan

• Decision Date: 23 July 1987
• Docket Number: No. CV-86-0228-PR,CV-86-0228-PR
• Citation: 741 P.2d 292,154 Ariz. 159
• Parties: STATE of Arizona, ex rel. W.A. ORDWAY, Director, Department of Transportation, Plaintiff/Appellant, v. Walter D. BUCHANAN, a divorced man, as his sole and separate property; Marybeth Buchanan, as her sole and separate property; and Yuma County Treasurer, Defendants/Appellees.
• Court: Arizona Supreme Court

Page 292

741 P.2d 292

154 Ariz. 159

STATE of Arizona, ex rel. W.A. ORDWAY, Director, Department of Transportation, Plaintiff/Appellant, v. Walter D. BUCHANAN, a divorced man, as his sole and separate property; Marybeth Buchanan, as her sole and separate property; and Yuma County Treasurer, Defendants/Appellees.

No. CV-86-0228-PR.

Supreme Court of Arizona, In Banc.

July 23, 1987.

Reconsideration Denied Sept. 15, 1987.

Robert K. Corbin, Atty. Gen. by James R. Redpath, Janis M. Haug, Asst. Attys. Gen., Phoenix, for plaintiff/appellant.

Westover, Choules & Shadle by Wade Noble, Yuma, for defendants/appellees.

HOLOHAN, Justice.

The Court of Appeals, Division One, affirmed a judgment awarding defendant Walter Buchanan $110,000 for property taken and $37,500 for severance damages in a condemnation action filed by the State. State of Arizona ex rel. Ordway v. Buchanan, 154 Ariz. 155, 741 P.2d 288 (App.1986). We granted the State's petition for review to address four issues:

1) Did the Court of Appeals err in affirming the trial court's decision to allow the jury to consider evidence valuing the part taken as a separate and distinct unit?

2) Did the Court of Appeals err in affirming the trial court's award of severance damages?

3) Did the Court of Appeals err in rejecting the State's argument that the landowners improperly included noncompensable elements in their testimony regarding valuation and damages?

4) Did the Court of Appeals err in affirming the amount of the answer fee paid by defendants/appellees in the award of costs?

FACTS

The property taken by the State in this action is an 80' X 330' portion of a five-acre rectangular parcel fronting on 32nd Street (U.S. Highway 80) in Yuma, Arizona. Before the taking the five-acre parcel was flat, undeveloped acreage, physically homogenous throughout, which fronted to the north on 32nd Street, the only means of access to the property. The property was vacant and unused, with no turnouts from the street. To the east was a car dealership and to the west was a K-Mart Store. There were no improvements to the south of the property and no access from that direction.

The parties differed sharply in their approach to valuing the land taken. Buchanan and his expert appraiser testified that the condemned land was capable of being developed and used as an independent unit; thus, Buchanan's evidence of value consisted of sales of land comparable to the size of the parcel actually taken. Buchanan's expert estimated that the value of the land taken was $5 per square foot ($132,070), which also included severance damages. Buchanan estimated the separate value of the land taken as $6 per square foot ($158,484), and he testified that the remaining land had decreased in value from $4 to $3.50 per square foot as a result of the taking, so that approximately $75,000 in severance damages also was due.

In contrast, the State's expert appraiser testified that the land taken was not "a The jury awarded Buchanan $110,000 for the land taken and $37,500 as severance damages. The State filed a timely appeal, contending that the property owner's method of valuation was improper and that there was no competent evidence of severance damage. The Court of Appeals disagreed with the State's position, found the evidence presented at trial competent, and affirmed the judgment of the trial court.

                [154 Ariz. 162] usable parcel as a separate entity."   He assessed the value by considering comparable sales of similar five-acre parcels and applied a value to the part taken as part of the larger parcel.  He arrived at a value of $79,200 for the land actually taken.  Finding no reduction in the value of the property remaining after the taking, he found no severance damages
                

ANALYSIS

The Arizona Constitution provides that private property cannot be taken or damaged for public use unless just compensation is paid to the owner. Ariz. Const. art. 2, § 17. The legislature has determined that just compensation entails three calculations:

1. The value of the property sought to be condemned....

2. If the property sought to be condemned constitutes only a part of a larger 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.

3. How much the portion not sought to be condemned and each estate or interest therein will be benefited separately, if at all, by construction of the improvement proposed by plaintiff [but only up to the amount of severance damages assessed]....

A.R.S. § 12-1122(A)(1)-(3).

I. Valuation of Land Taken

The first issue raised by the State concerns the proper method to arrive at the value of the condemned property. The State claims that the trial court should not have allowed the jury to consider evidence valuing the land taken as a separate and distinct unit because the evidence submitted at trial did not support a determination that the part taken had a separate economic use apart from the remainder.

The value of land taken by eminent domain in Arizona is to be determined by the market value of the property: by what a willing buyer would pay for the property and what a willing seller would take. Defnet Land & Investment Co. v. State ex rel. Herman, 103 Ariz. 388, 389, 442 P.2d 835, 836 (1968). In determining the market value, the court must consider the highest and best use of the land. See State ex rel. Morrison v. Jay Six Cattle Co., 88 Ariz. 97, 102, 353 P.2d 185, 188 (1960); County of Maricopa v. Paysnoe, 83 Ariz. 236, 239, 319 P.2d 995, 997 (1957).

In partial taking cases, generally the land taken is valued as part of the whole tract and not as if it stood alone. E.g., 4A NICHOLS, THE LAW OF EMINENT DOMAIN § 14.06, at 14-133 (3d ed. 1985). Accord Deer Valley Indust. Park Dev. and Lease Co. v. State ex rel. Herman, 5 Ariz.App. 150, 155, 424 P.2d 192, 197 (1967). Ordinarily this method of valuation gives the part taken--particularly where it is a narrow strip condemned for highway-widening purposes--a greater value. 4A NICHOLS § 14.06, at 14-146. The rule protects the condemnee by assuring a just award, because in many cases the part taken would be useless and valueless if considered alone. People ex rel. Dep't of Public Works v. Silveira, 236 Cal.App.2d 604, 619, 46 Cal.Rptr. 260, 272 (1965). See also Arizona State Land Dep't v. State ex rel. Herman, 113 Ariz. 125, 128, 547 P.2d 479, 482 (1976) (condemned land had no market value standing alone because it was not capable of economic use due to its unusual or irregular size).

However, valuing the part taken as part of the whole is not the exclusive method of valuation in partial taking cases. If the property taken has a market value as a separate and independent economic use and Where the property taken is not of a size and shape which renders it independently usable, it cannot be valued on the basis of the amount that a willing buyer would pay a willing seller for the land taken, for by definition there could not be a willing buyer and seller of unusable land. The land must be valued as a part of a larger whole.... Where, however, the property condemned is of a size and shape that renders it independently usable, it is appropriate to determine what a willing buyer would pay a willing seller for the parcel taken.

[154 Ariz. 163] could therefore command a higher value as a separate entity, this value must be considered without resort to the value of any tract from which it was severed. Arizona State Land Dep't, 113 Ariz. at 128, 547 P.2d at 482; 4A NICHOLS, § 14.06, at 14-150. The issue can be defined in terms of value in the real estate market:

People ex rel. Dep't of Pub. Works v. Corporation of President of Church of Jesus Christ of Latter-Day Saints, 13 Cal.App.3d 371, 379, 91 Cal.Rptr. 532, 537 (1970).

In summary, the determination of whether the land taken should be valued separately or as part of the whole is based on a determination of the highest and best use of the land. Where the part taken has a market value based on a separate economic use and commands a higher value as a separate entity than as a part of a larger tract, such value has been allowed. E.g., 4A NICHOLS § 14.26, at 14-660. See also Department of Public Works & Bldgs. v. Oberlaender, 92 Ill.App.2d 174, 184, 235 N.E.2d 3, 9 (1968); aff'd, 42 Ill.2d 410, 247 N.E.2d 888 (1969). Conversely, the highest and best use of the part taken may be so related to its use with the entire property that the value of the part taken is dependent upon the value of the entire tract. Id.

The State apparently is arguing that the land cannot be valued as a separate and independent economic unit unless the part taken exhibits physical features that distinguish it in value from the remainder. This position is not supported by case law. In order for the land to be valued as a separate unit, the law requires only that the parcel taken be of a size and shape that is capable of a separate and independent use in the market. Arizona State Land Dep't, 113 Ariz. at 128, 547 P.2d at 482. The land taken may have other physical characteristics that add to its value in relationship to the remainder (i.e., land taken is more level, less marshy, etc.), but these characteristics are irrelevant in the initial determination of whether the land taken should be valued separately because it is of a size and shape that is readily marketable.

Whether to value the land taken as a separate entity or in relationship to the whole tract is a question of fact to be determined by the jury after hearing competent testimony. Territory of Hawaii v. Adelmeyer, 45 Haw. 144, 159, 363 P.2d 979, 986 (1961). Cf. 4A NICHOLS § 14.26, at 14-649 (question of whether parcels should be considered as one tract in eminent domain proceeding ordinarily is factual question for jury). "[E]ach party is entitled to present his theory of...