Warwick Musical Theatre, Inc. v. State

• Decision Date: 20 May 1987
• Docket Number: No. 85-170-A,85-170-A
• Citation: 525 A.2d 905
• Parties: WARWICK MUSICAL THEATRE, INC. v. STATE of Rhode Island. ppeal.
• Court: Rhode Island Supreme Court

Page 905

525 A.2d 905

WARWICK MUSICAL THEATRE, INC. v. STATE of Rhode Island.

No. 85-170-Appeal.

Supreme Court of Rhode Island.

May 20, 1987.

Edward P. Manning, Albert W. West, Providence, Charles Butterfield, Jr., Warwick, for plaintiff.

Louis M. Cioci, Johnston, Francis J. Pickett, East Providence, for defendant.

OPINION

SHEA, Justice.

This case involves cross-appeals from a Superior Court judgment following a nonjury trial for the assessment of damages resulting from a partial taking by condemnation. We affirm.

Warwick Musical Theatre (the theater) filed a petition against the state for assessment of damages sustained by the theater. The partial taking consisted of a strip of land approximately 40 feet in depth fronting on Quaker Lane in Warwick, Rhode Island, and running the entire length of the theater's property. The parcel taken consisted of 17,647 square feet of land, improved by asphalt pavement and two fences, fronting on Quaker Lane. In addition, the state took two easements contiguous to both the theater's remaining land and to each other. One was a permanent easement encompassing 911 square feet to allow for aerial telephone and electrical wiring. The other was a 6,567-squarefoot temporary easement that would allow state personnel access to the theater's land to restore and improve the theater's property. The state built a sidewalk in front of the theater and installed a stone retaining wall with ramps to provide for ingress into and egress from the theater property. The theater was paid $74,080, which would be deducted from any award made by the court.

The theater and the state each produced one expert witness. Both experts began their appraisal by dividing the property into three theoretical zones measured by their distance from Quaker Lane. The theater's expert employed a "before and after" valuation method to determine damages to the theater property. The before-and-after calculation determines the difference between the value of the entire tract before the taking and the value of the entire tract after the taking. The difference equals the amount of compensation. 7A Nichols, The Law of Eminent Domain § 12.02 [a] (rev. 3d ed. 1985). The state's expert determined damages through the use of the "market data" or comparable-sales method. A brief description of each valuation approach will be helpful to our analysis of the case.

The theater's expert concluded that the area consisting of the first 200 feet in depth by the entire width of the property along the highway was the most valuable and used three comparable sales to determine its value. In this valuation he included his specific evaluation of the improvements located on this first parcel, namely, the fences and the asphalt. The next two zones, the second 200 feet in depth and the remainder of the parcel, were similarly evaluated at lesser amounts per square foot. Adding the values of all three zones he testified that the value of the theater property prior to the taking, excluding buildings, was $611,600.

Next, the theater's expert assigned a figure to the additional incremental value provided to the entire parcel by the improvements that consisted of a theater-in-the-round with accessory structures and a racquetball-club building. He determined that the improvements were special-purpose buildings and testified that because he could not find comparable sales figures, he had computed replacement cost less depreciation, utilizing the actual construction costs submitted by the theater's accountant. He consulted Boeckh's tables to arrive at a measure of inflation or deflation in the construction industry and then determined the value of the building after depreciation. The expert determined that the total value of the land and buildings prior to the taking was $2,216,600.

In determining the value of the land and buildings after the taking, the theater's expert ignored the temporary easement as insignificant compared to the overall importance of the taking. He combined the permanent easement with the taking of the fee, however, because it is located on the Quaker Lane side of the retaining wall and could not be utilized by the theater for any useful purpose. Each depth zone was devalued carrying lower per-acre values because of the loss of frontage resulting from the taking. He testified that both the theater and the racquetball facility also suffered devaluation because of the loss of frontage. Specifically, the expert noted that prior to the taking the entire frontage was at highway level and could all be utilized but that after the taking, because of the change in grade and the need now to use ramps to enter and exit the property, patrons' ability to maneuver their vehicles was limited. Vehicles entering the property could not move to the right or left until they moved beyond the ramp. In the case of the theater, there was no longer room for cars to drive up to the box office without blocking the entrance lane from the ramp. The racquetball building was now high above the highway because of the change in grade, thereby decreasing its value. In conclusion, the theater's expert determined that the value of the property after the taking was $1,810,300, amounting to a total loss to the theater of $406,300 as a result of the condemnation.

The state's expert agreed that the highest and best use of the premises was its present use as a theater and racquetball facility and utilized the "whole value to whole value" method to determine the fair-market value of the parcel actually taken from the entire tract. He further stated that he used the comparable-sales method to determine the value of the land only. He "found no buildings being taken, and therefore, there was no practical application for the cost approach." For this reason, the state's expert did not consider severance damages since there was no taking of any part of the improvements. His total valuation therefore included only loss to the land itself. He then described his depth analysis of value, utilizing comparable sales, three of which were the same comparable sales as were used by the theater's expert, and made adjustments to the comparable-sales figures to determine what he considered to be the fair-market value per square foot of the subject land. Like the theater's expert, the state's expert found the first 200 feet in depth fronting on Quaker Lane to be prime commercial property, with values per square foot decreasing relative to their distances from Quaker Lane. In his attempt to determine the value of the third-depth zone, furthest removed from the highway, however, the expert used comparables that were, by his own description, "back land." The comparables employed had no frontage, were undeveloped and were each served by a small roadway or right of way. No adjustment was made to these parcels and consequently the rear acreage of the subject property received a valuation of $0.14 per square foot as opposed to the $0.95-per-square-foot valuation reached by the theater's expert. The state's expert then determined an average value per square foot of the entire parcel rather than incorporate the different rates assigned to each zone. Adding values for the land comprising the permanent and temporary easement and allowing for the cost of the fences and asphalt contained on the property taken in fee, the state's expert determined total damages to the theater to be $32,113 notwithstanding the fact that the state had already awarded the sum of $74,080 to the theater as compensation for the taking.

Although the trial justice recognized as acceptable the method of valuation employed by the state's expert, he did not accept his selection of comparable sales. Instead, he accepted the values assigned to the unimproved land by the theater's expert and employed that expert's use of the before-and-after rule to determine damage to the property as a result of the condemnation. The trial justice determined the property to be a one-use tract, utilized for commercial purposes. He reasoned therefore that the part taken did not have a different-use value from the remaining part of the tract. Consequently, rather than add the incremental values of each zone as was done by the theater's expert, the trial justice arrived at a uniform price throughout the entire tract by averaging the values attributed to each zone as was done by the state's expert. He then applied the percentages of depreciation employed by the theater's expert, finding total damages to the unimproved tract of $129,500. The trial justice determined the values of the taking of the permanent aerial easement and of the temporary easement to be negligible.

The trial justice rejected the testimony of the state's expert that there was no severance damage to the land not taken. He found both the theater building and the racquetball building to be special-purpose facilities, thereby justifying the theater expert's method of valuing the improvements through a cost-of-production-minus-depreciation analysis. He found, however, no severance damage to the racquetball building. Rather, he found that patrons of the racquetball facility would easily adjust to the change in parking or traffic patterns. On the other hand, the trial justice accepted the severance damages assigned to the theater building by the theater's expert, reasoning that providing parking for that facility is of a different nature and character than for the racquetball building. He found that the ability of the owners of the theater to handle the traffic density, patterns, and time restrictions incidental to its operation was made more difficult by the taking of a sizable portion of the front parking area. The trial justice concluded that the theater sustained a total damage to its property, including improvements, as a result of the condemnation of $219,000. Subtracting the amount of $74,500 already paid by the state, he determined a balance due to the theater of...