W. Va. Dep't of Transp., Div. of Highways v. CDS Family Trust, LLC

• Decision Date: 14 November 2017
• Docket Number: No. 16-1163,16-1163
• Citation: 807 S.E.2d 780
• Court: West Virginia Supreme Court
• Parties: WEST VIRGINIA DEPARTMENT OF TRANSPORTATION, DIVISION OF HIGHWAYS, a Public Corporation, Petitioner Below, Petitioner v. CDS FAMILY TRUST, LLC, a Delaware Limited Liability Company, Respondent Below, Respondent

807 S.E.2d 780

WEST VIRGINIA DEPARTMENT OF TRANSPORTATION, DIVISION OF HIGHWAYS, a Public Corporation, Petitioner Below, Petitioner

v.CDS FAMILY TRUST, LLC, a Delaware Limited Liability Company, Respondent Below, Respondent

No. 16-1163

Supreme Court of Appeals of West Virginia.

Submitted: October 31, 2017

Filed: November 14, 2017

Leah R. Chappell, Adams, Fisher & Chappell, PLLC, Ripley, West Virginia, Attorney for the Petitioner

Christopher B. Power, Mychal S. Schulz, Babst, Calland, Clements and Zomnir, P.C., Charleston, West Virginia, Attorneys for the Respondent

Davis, Justice:

In this appeal, we are asked to rule upon the admissibility of expert testimony valuing wetland property for the purpose of just compensation in a condemnation proceeding where the highest and best use of the wetlands was determined to be the development of a wetlands mitigation bank. We conclude that, because the expert testimony at issue provided a value that was improperly based upon the market price of mitigation credits that could be developed from the land, as opposed to the fair market value of the land itself in a voluntary transaction between a willing and knowledgeable buyer and seller, the testimony was inadmissible. Accordingly, we reverse this case and remand for a new trial consistent with this opinion.

I.FACTUAL AND PROCEDURAL HISTORY

Respondents in this appeal, the CDS Family Trust, LLC ("CDS"), owned the surface interests of approximately 772 acres of land in Tucker County West Virginia. On November 30, 2011, the West Virginia Department of Transportation, Division of Highways ("DOH"), filed in the Circuit Court of Tucker County a petition seeking condemnation of 123.51 acres of the surface tract owned by CDS ("the Take Property"). DOH sought the land to use it for permittee-managed environmental mitigation incident to DOH's construction of Appalachian Corridor H.¹ In addition, DOH requested a jury trial to determine the amount of just compensation due the owner of the condemned acreage.

Accordingly, wetlands mitigation is at the core of this case. With respect to wetlands mitigation, it has been explained that

the Army Corps of Engineers requires permits to be obtained before construction in certain areas designated as wetlands. If the construction will damage the wetlands, then the builder must mitigate that damage by creating new wetlands elsewhere or by restoring, enhancing, or preserving existing wetlands. "On-site" mitigation occurs when a builder uses part of his own property near the proposed construction to mitigate wetlands damage. "Off-site" mitigation, on the other hand, "is located someplace other than the property where the permit allows you to fill the wetlands." ... [W]etlands mitigation banks are areas where large amounts of wetlands can be restored relatively cheaply, thereby generating a reserve of "mitigation credits" that can be sold to builders needing wetlands permits for other projects.

Department of Transp. v. Southeast Timberlands, Inc ., 263 Ga. App. 805, 807, 589 S.E.2d 575, 579 (2003).² As noted above, DOH condemned the Take Property to use it for its own wetlands mitigation. CDS similarly determined, through its experts, that the highest and best use of the land was as a wetlands mitigation bank;³ therefore, CDS sought to have it valued primarily as such.⁴

By order entered March 20, 2012, the circuit court received a preliminary deposit from DOH equal to DOH's estimate of just compensation owed to CDS, which was $149,800. By that same order, the circuit court vested defeasible title to the property to DOH. Thus, March 20, 2012, was treated as the "date of take."

Prior to trial, CDS disclosed reports from three expert witnesses who would testify in support of its contention that just compensation for the condemned real property and damage to the remainder of the CDS property amounted to $4,775,000. DOH, on the other hand, retained an expert who opined that just compensation for the Take Property was $285,000, with no damage to the residue. According to the DOH expert, the highest and best use of the Take Property was for natural resource development (i.e ., mining)⁵ and recreation (i.e. , hunting and fishing).

DOH filed a motion in limine to exclude the testimony of CDS's expert witnesses, arguing that the reports submitted by the experts failed to conform to any recognized methods or techniques necessary to produce a credible appraisal report. CDS filed a response, and, following a pretrial conference, the court entered its pretrial order on June 21, 2016, that, inter alia , summarily denied DOH's motion.

A three-day jury trial to determine just compensation was held from June 21-23, 2016. The jury heard the evidence presented and rendered its verdict awarding CDS $1,963,972 as just compensation for the Take Property and $1,495,000 as just compensation for damages to the residue property. Thus, the jury's total award was $3,458,972. The circuit court deducted the amount DOH previously had deposited with the court and entered judgment in the amount of $3,309,172.

DOH filed a motion for a new trial, which the circuit court denied by order entered November 15, 2016. This appeal followed.

II.STANDARD OF REVIEW

A circuit court's ruling denying a party's motion for a new trial is reviewed under the following standard:

Although the ruling of a trial court in granting or denying a motion for a new trial is entitled to great respect and weight, the trial court's ruling will be reversed on appeal when it is clear that the trial court has acted under some misapprehension of the law or the evidence.

Syl. pt. 4, Sanders v. Georgia-Pacific Corp ., 159 W. Va. 621, 225 S.E.2d 218 (1976). Accordingly,

[t]his Court reviews the rulings of the circuit court concerning a new trial and its conclusion as to the existence of reversible error under an abuse of discretion standard, and we review the circuit court's underlying factual findings under a clearly erroneous standard. Questions of law are subject to a de novo review.

Syl. pt. 1, Burke-Parsons-Bowlby Corp. v. Rice , 230 W. Va. 105, 736 S.E.2d 338 (2012). To the extent that DOH herein appeals evidentiary rulings made by the circuit court, we additionally are mindful that "[t]he action of a trial court in admitting or excluding evidence in the exercise of its discretion will not be disturbed by the appellate court unless it appears that such action amounts to an abuse of discretion." Syl. pt. 10, State v. Huffman , 141 W. Va. 55, 87 S.E.2d 541 (1955), overruled on other grounds by State ex rel. R.L. v. Bedell , 192 W. Va. 435, 452 S.E.2d 893 (1994). See also Syl. pt. 4, State v. Rodoussakis , 204 W. Va. 58, 511 S.E.2d 469 (1998) ("A trial court's evidentiary rulings, as well as its application of the Rules of Evidence, are subject to review under an abuse of discretion standard."). In view of the foregoing standards, we will address the dispositive issues raised in this appeal. We will add additional standards for our review where relevant.

III.DISCUSSION

DOH raises several errors asserting that the circuit court erred by admitting the testimony of CDS expert witnesses Douglas Wise, Robert Sokolove, and Justin Reel, pertaining to the value of the Take Property.⁶ At the heart of the issues raised by DOH is the method used by the CDS experts to value the Take Property. Because we find error in the manner in which the Take Property was valued by the CDS experts, we reverse and remand this case for a new trial. Thus, our resolution of this matter does not necessitate a thorough discussion of each of the issues expressly raised by DOH.⁷ Instead, we address only the admissibility of the expert testimony related to the highest and best use of the Take Property and its fair market value.

A. Highest and Best Use

This Court has recognized that "[t]he measure of just compensation to be awarded to one whose interest in real estate is taken for a public use in a condemnation proceeding is the fair market value of the property at the time of the taking." Syl. pt. 1, West Virginia Dep't of Transp., Div. of Highways v. Western Pocahontas Props., L.P. , 236 W. Va. 50, 777 S.E.2d 619 (2015), cert. denied sub nom. Beacon Res., Inc. v. W. Virginia Dep't of Transp., Div. of Highways , ––– U.S. ––––, 136 S.Ct. 1453, 194 L.Ed.2d 551 (2016). However,

[a]n important consideration in estimating fair market value is determining the "highest and best use" of the property. In determining a fair value, the landowner "is not limited to the use actually being made of the land at the time of the taking but is entitled to consideration of its value for any purpose for which it is then reasonably available in the immediate future."

Gomez v. Kanawha Cty. Comm'n , 237 W. Va. 451, 462-63, 787 S.E.2d 904, 915-16 (2016) (quoting Department of Highways v. Berwind Land Co. , 167 W. Va. 726, 733, 280 S.E.2d 609, 614 (1981) (footnotes omitted)). See also Wood v. Wyoming Cty. Court , 100 W. Va. 29, 31, 129 S.E. 747, 747 (1925) ("The land owner ... is entitled to compensation for the land taken based on the most valuable use to which the property is adapted."); Syl. pt. 9, Baltimore & Ohio R.R. Co. v. Bonafield's Heirs , 79 W. Va. 287, 90 S.E. 868 (1916) ("In proving its value the land-owners are not limited to the use which they are then actually making of the land taken, but are entitled to have the jury consider its value for any purpose for which it is then reasonably available."); Syl. pt. 3, Norfolk & W. Ry. Co. v. Davis , 58 W. Va. 620, 52 S.E. 724 (1906) ("As to the value of the property taken, the proper inquiry is, what is the value of the property for the most advantageous uses to which it may be applied?"); Menis E. Ketchum, West Virginia Pattern Jury Instructions for Civil Cases , § 1204 (2016).

In a case very similar to the case sub judice , the Court of Appeals of Georgia addressed this very issue. See Dep't of Transp. v. Southeast Timberlands, Inc. , 263 Ga. App. 805, 589 S.E.2d 575. In Southeast...