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REVOCOR CORP. v. COMMONWEALTH TRANSPORTATION COMMISSIONER OF VIRGINIA



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REVOCOR CORP.

v.

COMMONWEALTH
TRANSPORTATION COMMISSIONER OF VIRGINIA


March 3, 2000

Record No. 990830

REVOCOR CORPORATION

v.

COMMONWEALTH TRANSPORTATION COMMISSIONER OF
VIRGINIA

FROM THE CIRCUIT COURT OF YORK COUNTY

J. Warren Stephens, Judge Designate

OPINION BY JUSTICE LEROY R. HASSELL, SR.


In this appeal from a judgment entered in a
condemnation proceeding, we consider whether the circuit court
properly excluded evidence of adjustment costs as a factor to be
considered by the commissioners when determining damage to the
residue of the property.

The Commonwealth Transportation Commissioner
(the Commissioner) made a bona fide, but ineffectual, effort to
purchase approximately 8.55 acres of land in York County that was
necessary for the construction, reconstruction, alteration,
maintenance, and repair of Interstate Highway 64. This land was
part of two parcels owned by Revocor Corporation: Parcel 023,
which consisted of .4 of an acre and Parcel 003, which consisted
of 55.5 acres.

At a condemnation trial, Revocor sought
$484,725 for the value of the property taken and $453,826 for the
damage to the residue. The circuit court excluded Revocor’s
evidence of adjustment costs allegedly necessary to develop the
property as a result of the taking. The condemnation
commissioners returned a report valuing the land taken at
$403,000 and damage to the residue at $37,500. Revocor filed
exceptions to the commissioners’ report and requested a new
trial. The circuit court denied Revocor’s request and entered an
order confirming the commissioners’ report. Revocor appeals.

The approximately 56-acre parcel is near the
intersection of Interstate 64 and Route 143. The property is
zoned for commercial use, and the litigants agree that at the
time of the taking, the highest and best use of the property was
for commercial development.

Revocor’s property consisted of land situated
at several elevations ranging from highland to marsh. Before the
taking, the eastern portion of the property, which was at a high
elevation, was encumbered by several easements, including a
Virginia Natural Gas (VNG) pipeline easement.
[1] The remainder of Revocor’s
property, which was considered the most desirable portion of the
land for commercial development purposes, included a 12-acre
lake.

In 1989, Revocor submitted a site plan for
development of the land to York County. At that time, the
property enjoyed a zoning classification which permitted
residential uses, and Revocor sought to develop the property for
residential purposes. The site plan for development, which was
approved by the County, contained a proposed road for the
property. The road was never constructed, and in 1995, the zoning
classification of the property was changed from multi-family
residential to limited business.

The Commissioner made a motion in limine to
exclude evidence of damage to Revocor’s property allegedly
resulting from the relocation of a road shown on the 1989 plat
for residential development. The circuit court ruled that the
exhibit of the preliminary unrecorded plat could not be used or
referred to during the trial. The Commissioner made another
motion in limine to exclude evidence regarding "the alleged
cost of relocating the roadway as a cost of adjusting the
remaining property as a result of the take" because the
evidence would be "speculative," "irrelevant and
immaterial." The circuit court granted the motion stating
that it "[was] not going to permit any consideration of
relocation of any road because there is no road on the property
at the time of the take."

Revocor sought to introduce at trial the
testimony of Fred Watkins, a licensed professional engineer.
According to Revocor’s proffer, Watkins was retained to assess
the impact of the taking upon Revocor’s remaining property and
upon the property’s potential use and development. Watkins opined
that "development potential of the residue was dramatically
reduced by the taking, and that it will be very expensive to
adjust the residue to the new conditions caused by the taking.
The changed configuration and topography of the residual parcel
seriously impede its use and development."

Watkins would have also testified as follows.
"The access into Revocor’s property from the public road
remains the same after the take as it was before the take.
However, once into the interior of the property, the topography
and configuration of the post-take parcel are such that the
interior roadway serving the highland along the lake is now
required to pass through a steep marshy area south and east of
the lake. Prior to the take, the interior roadbed was able to
utilize the topography so as to maximize the use of the land, and
minimize the effect of the steep and marshy area. The effect of
the taking renders the development of the residual parcel, and
the utilization of land otherwise available, much more difficult
and expensive. It also substantially reduces the proportional
amount of usable land in the residual parcel, because of the
necessity to construct retaining walls in some areas."

Watkins stated that it was his "opinion
that in addition to the reduction in usable land in the residual
parcel, the cost of developing the residual parcel has increased
by $377,130.68 (exclusive of engineering costs) solely because of
the necessity to relocate the interior roadway through the marshy
portion of the property which has steep side slopes. This
increased expense includes bringing in additional fill material,
and the construction of retaining walls, neither of which were
necessary prior to the taking."

Even though the circuit court refused to permit
Watkins to testify, the court permitted Revocor’s appraiser,
Howard Clayton, to testify that before the taking, Revocor’s land
enjoyed a "favorable topography." Clayton stated that
access to the most desirable portion of the property for
development purposes after the taking would be "a mountain
of a problem" because the terrain that would have to be
traversed by a road "is wet and in a bowl." Clayton
also testified that in arriving at his conclusions, he consulted
with Watkins. Clayton opined that the total value of the taking
was $484,725 and that the damage to the residue was $453,826.

Henry G. Warren, Jr., an appraiser employed by
the Virginia Department of Transportation, testified that the
value of the taking was $355,884, and there was no damage to the
residue. John C. Harry, a real estate appraiser who also
testified on behalf of the Commissioner, testified that the
taking was valued at $370,000 and that there was no damage to the
residue.

Revocor argues that the circuit court erred in
refusing to permit Watkins’ proffered testimony that as a result
of the taking, the configuration and topography of the land was
dramatically changed and that such changes seriously impeded the
use and development of the land which in turn reduced the amount
of usable land in the residue. Continuing, Revocor asserts that
Watkins would have testified that prior to the taking, Revocor
easily could have gained access to its interior lakefront
property along the eastern portion of the property without
violating the VNG easement. Watkins would have explained the
physical difficulties that Revocor would encounter in creating a
road through the steep and marshy area which was necessitated as
a result of the taking.

Responding, the Commissioner argues that
Watkins’ testimony was speculative evidence that was inadmissible
in an eminent domain trial. The Commissioner asserts that
"the costs allegedly necessitated to relocate a road if
[Revocor] develops its property in the future are remote and
speculative and that the [circuit] court properly excluded the
engineer’s testimony concerning those costs."

In Lynch v. Commonwealth Transp.
Comm’r
, 247 Va. 388, 391, 442 S.E.2d 388, 389-90 (1994), we
discussed well-established principles governing the taking of
property in a condemnation proceeding:

"The measure of compensation for the
property taken is the fair market value of the property at the
time of the taking. In determining fair market value,
consideration is given to the property’s adaptability and
suitability for any legitimate purpose in light of conditions and
circumstances that exist at the time of the take or that
reasonably may be expected in the near future. The test of
damages to the land remaining after the taking is the difference
in the residue’s value immediately before and immediately after
the taking. In determining such damages, consideration may be
given to every circumstance, present or future, that affects the
residue’s value at the time of the take. Remote or speculative
advantages and disadvantages, however, are not to be
considered."

Accord Wammco, Inc. v. Commonwealth
Transp. Comm’r
, 251 Va. 132, 137, 465 S.E.2d 584, 586 (1996);
Appalachian Elec. Power Co. v. Gorman, 191 Va. 344,
353, 61 S.E.2d 33, 37-38 (1950).

We stated in Dressler v. City of
Covington
, 208 Va. 520, 522, 158 S.E.2d 660, 662 (1968), that
it "is well settled that in determining the diminution of
the market value of the land not taken or the damages thereto, it
is proper to consider the expense made necessary by reason of the
improvement in adjusting the property to the changed conditions
brought about by the taking." Such increased development
costs, commonly referred to as adjustment costs, are necessary to
adjust the property to the changed conditions caused by the
taking. Adjustment costs are relevant when determining any
diminution in the market value of the residue as a result of the
taking. Id. Such costs, however, are "not the measure
of damages and cannot be recovered specifically. In other words,
evidence of the actual cost of necessary improvements is
admissible as a factor of evaluation, though not as a measure of
damages." Id. The measure of damages to the residue
is the difference in the value before and immediately after the
taking, less any enhancement that resulted from the taking. Wammco,
251 Va. at 137, 465 S.E.2d at 587; State Highway & Transp.
Comm’r
v. Parr, 217 Va. 522, 524, 230 S.E.2d 253, 255
(1976). Additionally, evidence of adjustment costs is
inadmissible if such costs are based upon remote or speculative
factors. Lynch, 247 Va. at 391, 442 S.E.2d at 390.

In Wammco, we considered whether a
circuit court properly excluded evidence of adjustment costs as a
factor of evaluation when ascertaining the damage to the residue
of certain property. There, the Commonwealth Transportation
Commissioner filed a petition in condemnation and requested that
the circuit court appoint commissioners to determine just
compensation due to a landowner as a result of a taking. The
Commissioner had taken 17.6 acres of land in the City of
Chesapeake for the construction of a portion of Interstate
Highway 664. This tract of land was part of a larger tract
consisting of 314 acres. Before construction of the interstate,
the 314-acre parcel was bisected by Gum Road, a road which was
then a segment of the only continuous north-south route through
the Western Branch area of Chesapeake. Wammco, 251 Va. at
134, 465 S.E.2d at 584-85.

When the interstate was constructed through the
property, Gum Road was severed in half. A cul-de-sac was created
at the end of Gum Road next to the highway, eliminating any
access to the interstate. That portion of the landowner’s
property west of Gum Road was zoned for industrial use at the
time of the taking. The portion of the property east of Gum Road
was zoned for agricultural use at the time of the taking, but was
later rezoned for residential development. Id. at 134-35,
465 S.E.2d at 585.

The parties agreed that the highest and best
use of the eastern portion of the property was for residential
development. The portion of the property west of Gum Road enjoyed
an industrial zoning classification at the time of the taking. A
civil engineer testified that before the taking, Gum Road
provided sufficient access to the property to support development
in accordance with its highest and best use. However, when the
road was severed by the taking, access to the property was so
severely restricted that the western portion was rendered
unsuitable for industrial use. Id. at 135, 465 S.E.2d at
585.

Before trial, the transportation commissioner
made a motion in limine to exclude any evidence of adjustment
costs allegedly necessitated by the taking because such testimony
would have been speculative. The landowner had made a proffer
that as a result of the taking, both on-site and off-site
improvements would be necessary to develop the property in
accordance with its highest and best use, that additional land
and rights-of-way would have to be acquired, and that the
off-site road network to the residue would have to be improved in
order to provide sufficient road access to develop the western
portion of the property for industrial use. Additionally, the
landowner presented evidence that an additional road would have
to be built off the property in order for the eastern portion of
the residue to be developed in accordance with the landowner’s
post-taking development plans. Id. at 135-36, 465 S.E.2d
at 585-86.

We held that the circuit court properly
excluded the landowner’s proffered evidence because the
development of the residue was contingent upon the improvement of
off-site roads in the vicinity of the residue and the acquisition
of property owned by others. We also noted that the landowner’s
evidence showed that the development of the property was
contingent upon future acts beyond the landowner’s control which
were remote and speculative. Id. at 138, 465 S.E.2d at
587.

Here, unlike the landowner in Wammco who
was unable to develop its property unless it acquired the
adjacent properties of others, Revocor, according to its proffer,
would have been able to construct a road through the steep and
marshy areas of its residue provided it was able to do so in
accordance with the terms of the VNG easement. Also, unlike the
property owner in Wammco, Revocor’s ability to relocate a
road was not predicated upon speculative factors such as the
acquisition of rights-of-way from others. We hold that in
determining the damage to the residue, Revocor was entitled to
present as a factor of evaluation the actual costs of relocation
of a road to the more desirable portions of its property.
Therefore, the circuit court erred in excluding the proffered
evidence.

The Commissioner argues that even if the
circuit court erred in excluding the proffered evidence, such
error was harmless because Clayton testified that he had
consulted with an engineer and that this consultation led him to
conclude that after the taking, Revocor would be required to
construct a road in a less favorable location. We disagree.

Clayton’s testimony simply failed to encompass
the facts and opinions that were contained in Watkins’ proffered
testimony. Furthermore, Clayton, unlike Watkins who is a licensed
professional engineer, could not render opinions about the
construction of retaining walls and additional fill materials
that might be necessary to relocate the roadway through the
marshy portion of Revocor’s property.

Accordingly, we will reverse the judgment of
the circuit court and remand this proceeding for a new trial.

Reversed and remanded.

 

FOOTNOTES:

[1] Pursuant to the terms of the
easement, Revocor, its successors and assigns, "may use the
permanent right of way for any purpose not inconsistent with the
rights hereby acquired including, but not limited to the right to
construct, operate and maintain passways, roads, streets,
railroad tracks, telephone, electric or other utility
lines . . . across the permanent right of way, in
such manner that the angle between the center line thereof and
the center line of the permanent right of way shall be not less
than forty-five (45) degrees, provided that such use does not
interfere with or endanger the construction, operation or
maintenance of [VNG's] facilities."

 

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