Highest and best use in an easement condemnation dispute.
At the time of the condemnation, Marriott possessed two small sand and gravel mining permits on a 10-acre portion of the property, though Marriott had applied for a large mining permit. In the application, Marriott provided plans to mine 145 acres of the property in two phases, and the permitting agency indicated that the proposed permit would be approved.
To support his proposed just compensation, Marriott provided evidence of the market value of the land under the transmission line. That evidence included lost value due to interference with potential mining on the property, which he believed should be included in his award of just compensation.
RMP disagreed with Marriott's proposed damages. It asserted that damages should be based solely on uses to which the property could have been put at the time of the condemnation. Due to various preexisting encumbrances on the property, creating legal barriers to Marriott's proposed mining development, RMP believed the plans were speculative and therefore should not be included in determining Marriott's award.
The preexisting encumbrances included a canal that bisected the property, a fifty-foot-wide easement with an electric transmission line, and a thirty-foot-wide easement that contained a natural gas pipeline. Marriott did not have a unilateral right to relocate the utility lines, and relocation would involve formal procedures, including the proposal of alternate routes and payment of fees. Marriott's claim of damages for lost value depended on the relocation of these existing utility lines.
Before the parties had concluded fact discovery, and before expert discovery had begun, RMP filed two motions to exclude evidence from the jury. The first motion asked the trial court to exclude evidence of losses that depended on Marriott's ability to relocate the utility lines, arguing that the hypothetical relocation of the utility lines cannot be a factor in determining the amount of reasonable compensation to which Marriott was entitled. The second motion asked the court to exclude evidence of losses that depended on Marriott's ability to obtain authorization to mine areas where mining was not permitted at the time of the condemnation. The trial court granted the motions to exclude, citing its obligation to "act as a gatekeeper to screen irrelevant evidence from the jury." Marriott appealed.
Damages are determined by comparing the market value of the portion of the property not taken with its market value before the taking. That calculation is based on the highest and best use to which the land could have been put at that time. To that end, the jury must consider all factors that a prudent and willing buyer and seller would consider, including any potential development that could be performed on the property. Totally conjectural or speculative potential uses may be excluded as evidence. To show feasibility, a landowner must establish physical, legal, and economic feasibility.
On appeal, Marriott argued that the court erred in ruling, before the close of fact and expert discovery, that he could not establish the legal feasibility of potential mining that depended on relocating the utility lines or receipt of a permit. The court held that the uncertainty regarding these matters created a legal feasibility issue, but the trial court should not have determined the outcome before discovery had commenced.
A qualified expert might have testified to the probability, under the circumstances, that requests to relocate the utility lines would have been granted. Likewise, an expert could have testified as to the likelihood that Marriott would obtain the proper permits. Marriott was entitled to present such evidence to the court. Because he was denied that opportunity, the court of appeals ruled that the trial court erred in ruling Marriott could not establish the legal feasibility of mining that depended on relocating the utility lines or on receiving the large mining permits. The matter was remanded to the trial court for further proceedings.
Rocky Mountain Power Inc. v. Marriott
Court of Appeals of Utah
November 29, 2018
2018 UT App. 221
Benjamin A. Blair, JD, is a partner in the Indianapolis office of the international law firm of Faegre Baker Daniels LLP, where his practice focuses on state and local tax litigation for clients across the United States. A frequent speaker and author on taxation and valuation issues, Blair holds a juris doctor from the Indiana University Maurer School of Law, where he also serves as an adjunct professor. Contact: benjamin.blair@FaegreBD.com
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|Title Annotation:||Recent Court Decisions on Real Estate and Valuation|
|Author:||Blair, Benjamin A.|
|Date:||Mar 22, 2019|
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