Niki D' Atri Enterprises, Inc. v. Com. of PA, DOT ( 2023 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Niki D’ Atri Enterprises, Inc., a :
Pennsylvania Corporation doing :
business as Crows Run Recycling :
(Tenant) :
:
v. :
:
Commonwealth of Pennsylvania, :
Department of Transportation, : No. 257 C.D. 2022
Appellant : Argued: February 7, 2023
BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE MARY HANNAH LEAVITT, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE FIZZANO CANNON FILED: March 17, 2023
The Commonwealth of Pennsylvania, Department of Transportation
(DOT) appeals from an order of the Court of Common Pleas of Beaver County (trial
court) dated February 25, 2022. The trial court denied DOT’s post-trial motion for
a new trial in an eminent domain matter in which the jury awarded $3,189,677 in
damages to Niki D’ Atri Enterprises, Inc., a Pennsylvania corporation doing business
as Crows Run Recycling (Crows Run), for the value in place of salvage yard
inventory. DOT contends that the jury was improperly allowed to consider lost
profits in its award. Upon review, we affirm the trial court’s order.
I. Background
In April 2016, DOT filed a declaration of taking in order to effect a
condemnation of real property in connection with a state road upgrade project.
Crows Run operated a salvage yard as a tenant on the affected real property, which
its principal, Niki D’ Atri (D’ Atri), owned personally. See Reproduced Record
(RR) at 10a. DOT concedes the salvage yard business was not relocated. See DOT
Br. at 12. Therefore, Section 902(b)(1) of the Eminent Domain Code, 1 26 Pa.C.S.
§ 902(b)(1), requires DOT to pay the value in place of Crows Run’s inventory,
machinery, and equipment.
D’ Atri testified at a hearing before a board of viewers that the fair
market value of the inventory was $10,374,874.61 and the market value of the
machinery and equipment was $487,045.00. RR at 11a & 18a. By contrast, Charles
Dixon (Dixon), a certified appraiser testifying as DOT’s expert witness, opined that
the inventory’s value in place was $215,875.00 and the value of the machinery and
equipment was $292,935.00. Id. at 14a. The board of viewers awarded a total of
$600,000.00 for the inventory, machinery, and equipment. Id. at 22a.
Crows Run appealed to the trial court, which held a jury trial in October
2021. D’ Atri renewed his assertion of value of the inventory and presented an
itemization of his asserted valuation of each recoverable part on each of 1,187
disabled vehicles in the salvage yard. RR at 308a-16a & 541a-6578a. DOT objected
to D’ Atri’s evidence on the basis that it included lost profits, but the trial court
overruled the objection. Id. at 315a-16a. The trial court also denied DOT’s proposed
jury instruction seeking to preclude consideration of lost profits in calculating the
inventory’s value. Id. at 30a & 372a-73a.
1
26 Pa.C.S. §§ 101-1106.
2
The jury awarded $3,189,677.00 for the inventory and $389,990.50 for
the machinery and equipment. RR at 188a. The trial court denied DOT’s post-trial
motion and affirmed the jury’s verdict. DOT then appealed to this Court. On appeal,
DOT challenges only the valuation of the inventory.
II. Issue
DOT acknowledges that Crows Run was entitled to recover the original
costs or replacement costs of the disabled vehicles and any parts that had been
removed from those vehicles and readied for sale. However, DOT posits that the
method used by D’ Atri to calculate the inventory value included a markup and, as
such, included lost profits. DOT asserts that the trial court committed reversible
error by admitting evidence of Crows Run’s lost profits, contrary to Section
902(b)(1) of the Eminent Domain Code and related relocation assistance regulations,
as well as by refusing to provide a jury instruction forbidding an award of lost
profits.2
2
Regarding challenges to evidentiary rulings, our Supreme Court has explained:
[E]videntiary rulings are within the sound discretion of trial courts
. . . . Accordingly, when a party adverse to a trial court’s evidentiary
ruling seeks appellate review of that determination, that party carries
a heavy burden to demonstrate that the trial court abused its
discretion . . . . An appellant cannot meet this burden by simply
persuading an appellate court that it may have reached a different
conclusion [from] that reached by the trial court; rather, to overcome
this heavy burden, the appellant must demonstrate that the trial court
actually abused its discretionary power.
Regarding the “abuse of discretion standard” of review, this Court
has explained that the term “discretion” imports the exercise of
judgment, wisdom and skill so as to reach a dispassionate
conclusion, within the framework of the law, and is not exercised
for the purpose of giving effect to the will of the [trial] judge . . . .
3
III. Discussion
Section 902(b)(1)(i) of the Eminent Domain Code provides:
A displaced person who is displaced from a place of
business or from a farm operation shall be entitled, in
addition to any payment received under subsection (a), to
damages for dislocation of business or farm operation as
follows:
(1) Damages equal to the value in place of the
personal property which:
(i) is not moved because of the
discontinuance of the business or farm
operation or the unavailability of a
comparable site for relocation . . . .
26 Pa.C.S. § 902(b)(1)(i). A related regulation provides the following pertinent
definitions:
Original cost of personal property to the displaced
person—The amount paid by the displaced person for the
Absent an abuse of that discretion, an appellate court should not
disturb a trial court’s discretionary ruling . . . . An appellate court
will not find an abuse of discretion based on a mere error of
judgment, but rather . . . where the [trial] court has reached a
conclusion which overrides or misapplies the law, or where the
judgment exercised is manifestly unreasonable, or the result of
partiality, prejudice, bias or ill-will.
Commonwealth v. Distefano, 265 A.3d 290, 297-98 (Pa. 2021) (internal quotation marks and
citations omitted).
Regarding challenges to jury instructions, “a trial judge has wide latitude in his or her
choice of language when charging a jury, provided always that the court fully and adequately
conveys the applicable law.” Hall v. Jackson, 788 A.2d 390, 399 (Pa. 2001) (quoting Wilson v.
Anderson, 616 A.2d 34, 36 (Pa. Super. 1992) (additional quotation marks omitted)). This Court’s
review of a trial court’s jury instructions is limited to determining whether the trial court abused
its discretion or committed an error of law; even if the trial court erred in its jury instructions, we
will not award a new trial “unless the jury charge in its entirety was unclear, inadequate, or tended
to mislead or confuse the jury.” Hall, 788 A.2d at 399 (quoting Fragale v. Brigham, 741 A.2d
788, 790 (Pa. Super. 1999) (additional quotation marks omitted)).
4
personal property, as indicated in his business records. In
the event of personal property which was obtained without
cost or for which there are no records, the replacement cost
of equivalent property at the time of sale shall be used.
....
Replacement cost of equivalent property at the time of
sale—The current market cost, including delivery and
installation costs, of similar personal property, considering
such factors as physical and economic depreciation and
functional obsolescence.
....
Value in place of personal property—The value the
personal property would have, installed in real property
housing a going business, considering such factors as
original cost, delivery and installation costs, physical and
economic depreciation and functional obsolescence.
37 Pa. Code § 151.1.
A. Replacement Cost and Profit
DOT’s first assertion of error relates to the evidence Crows Run offered
at trial concerning its damages. Crows Run asserts that replacement cost is the
proper valuation of its inventory. To support its claim, Crows Run relies largely on
Pikur Enterprises, Inc. v. Department of Transportation, 641 A.2d 11 (Pa. Cmwlth.
1994). In Pikur, a property owner was in the business of servicing corporate
automobile fleets. In the course of providing those services, Pikur accumulated an
inventory of automobile parts that it removed from the corporate vehicles; thus, that
inventory was acquired at no cost. Id. at 12. When DOT exercised its eminent
domain powers for a road project, Pikur could not relocate its business and sought
payment for the value of its inventory. Id. at 14. DOT argued that Pikur could not
recover more than the original cost of the inventory, which was zero; but the
5
common pleas court allowed evidence of replacement cost, and this Court affirmed.3
Id. Here, based on Pikur, Crows Run argues that the cost of the vehicles is not
reflective of the value in place of the numerous saleable parts in each vehicle.
There is no dispute that Crows Run is entitled to the value in place of
its personal property, including its parts inventory. See 26 Pa.C.S. § 902(b)(1). As
set forth above, the “value in place” is determined “considering such factors as
original cost, delivery and installation costs, physical and economic depreciation and
functional obsolescence.” 37 Pa. Code § 151.1. Further, “[i]n the event of personal
property which was obtained without cost or for which there are no records, the
replacement cost of equivalent property at the time of sale shall be used.” Id.Pikur is not directly on point because, there, the inventory had no cost.
Here, the cost of Crows Run’s parts inventory was subsumed in the purchase price
of each vehicle; it was not zero. Thus, the parts inventory here was not “obtained
without cost.” 37 Pa. Code § 151.1.
However, D’ Atri testified he did not have records documenting the
purchase price of each vehicle in his inventory and did not know the specific price
he paid for each. RR at 319a-21a. If the jury credited that testimony, then the parts
inventory constituted personal property “for which there are no records.” 37 Pa.
Code § 151.1. That would allow Crows Run to recover replacement costs of the
inventory. Id.3
This Court also discerned no abuse of discretion in the common pleas court’s exclusion
of Pikur’s tax returns, which DOT sought to offer as evidence of the salvage value of inventory
items acquired without cost; we concluded that the nominal salvage value shown in the tax returns
was not probative because it was “not reflective of actual value in place as defined in the
regulations . . . .” Pikur Enters., Inc. v. Dep’t of Transp., 641 A.2d 11, 14 (Pa. Cmwlth. 1994).
However, the Court did not hold that lost profits could be included in actual value. See id.6
Nonetheless, assuming that Crows Run was entitled to recover
replacement cost, most of its evidence at trial related to calculating replacement costs
in terms of its resale prices for individual parts. Despite D’ Atri’s insistence to the
contrary, those calculations clearly included profit. For example, Crows Run sought
to recover $6,500 as replacement cost of the parts in a Chevrolet Cavalier it
purchased for $1,000 plus $200 in transport costs; on cross-examination regarding
his calculation of replacement cost, D’ Atri testified as follows:
Q. So for a vehicle like that, you have 1,200 bucks in
it; right?
A. Um-hum.
Q. And, now that tells me, tell me if I’m correct, that if
someone had come into your shop and bought that vehicle
for 1,200 bucks, you would have broke [sic] even?
A. Bought the vehicle for 1,200?
Q. For 1,200. Your objective was to make money on
the vehicle, of course?
A. Yes.
Q. But I’m saying, you could have sold that vehicle for
$1,200 and not lost money? You just wouldn’t have made
any money?
A. Wouldn’t have made any money.
Q. Okay. So, so when you sell it to []DOT or you
charge []DOT $6,500 and change, you’re selling it to
[]DOT at, if my math is correct, 5,2- [sic] or $5,300 above
what you could have sold it for and what you could have
broke [sic] even with?
A. Well, so the $5,000 profit on that particular car, the
Cavalier we’re talking about, I was going through my parts
inventory and putting the fair market value in place to
those parts. So the number that I came up with on that
Cavalier that equaled 6,000 wasn’t a profit of, it wasn’t
7
intended for a profit. Those were actual, my costs if I had
to replace them.
Q. Now, the, what you were using were your sales
figures from the year before. So what you did is you, and
again, these are questions. You took, basically on paper
you cannibalized the car and added up what you could
have sold the parts for?
A. Added up what I could sell the parts for, yes.
RR at 320a (emphasis added). Indeed, in a sidebar conference out of the jury’s
hearing, counsel for Crows Run argued, in support of allowing replacement cost
evidence based on selling price, “Say[] I sold this property for X number of dollars,
which includes profit as does any business, and I’m utilizing comparable sales in this
case, and that’s exactly what’s happened here.” RR at 315a-16a (emphasis added).
A “profit” is,
most commonly, the gross proceeds of a business
transaction, less the costs of the transaction; i.e., net
proceeds. Excess of revenues over expenses for a
transaction; sometimes used synonymously with net
income for the period. Gain realized from business or
investment over and above expenditures. Profit means
accession of good, valuable results, useful consequences,
avail, gain, as in office of profit, excess of returns over
expenditures, or excess of income over expenditure.
Del. Cnty. v. First Union Corp., 929 A.2d 1258, 1263 n.14 (Pa. Cmwlth. 2007)
(quoting Black’s Law Dictionary 1090 (5th ed. 1979) (quotation marks omitted)).
As discussed above, Crows Run’s evidence of replacement cost was mainly based
on its retail selling prices. D’ Atri, as the principal of Crows Run, conceded that he
bought the vehicles to sell the parts and make a profit. RR at 321a. Therefore, those
prices undeniably included an “accession of good, valuable results, useful
consequences, avail, gain, . . . excess of returns over expenditures, or excess of
8
income over expenditure.” Del. Cnty., 929 A.2d at 1263 n.14 (quoting Black’s Law
Dictionary). We agree with DOT that Crows Run’s retail selling prices included an
unspecified amount of profit.
In opposing the position of Crows Run, DOT relies on Cox v.
Philadelphia, Harrisburg & Pittsburg4 Railroad Company, 64 A. 729 (Pa. 1906). In
Cox, a railroad took by eminent domain part of a piece of farm property that was
used for raising ducks. In valuing the land taken, the owner argued that the reduction
in size of the property reduced by 2,000 the number of ducks he could raise,
contending that he was entitled to 25 years of profits lost on 2,000 ducks per year.
Id. at 731. Our Supreme Court concluded that the testimony of the plaintiff’s
witnesses “clearly showed that their valuation of the property for [duck farm]
purposes rested upon a[n] erroneous basis, the profits which the plaintiff would
realize out of the business conducted upon the land.” Id. at 730. The Court cited as
long-settled law the principle “which prohibits the landowner from having the profits
of his business considered by the jury in determining the value of the property . . . ,”
observing that “[w]e have so often said . . . that the profits of business could not be
recovered in condemnation proceedings that it seems like a waste of time to cite the
decisions.” Id. (internal citation and quotation marks omitted).
Although Cox is not factually on point, we agree with DOT that lost
profits may not be included in calculating replacement cost. Thus, we conclude that
4
In 1891, the United States Board on Geographic Names (Board) decided to standardize
geographic names, including dropping the final “h” from any name ending in “burgh.”
https://www.mentalfloss.com/article/52943/how-pittsburgh-got-its-h-back-and-7-other-geographic-
naming-oddities (last visited Mar. 16, 2023). Pittsburgh, however, had been named by General
John Forbes, whose Scottish background was the reason for the spelling; to the city’s residents,
“[t]o edit the spelling to the German ‘burg’ was akin to editing the city’s founding.” Id. In 1911,
the city finally prevailed on the Board to return to the original spelling. Id. The cited case, as its
date indicates, was decided during the period before the city regained the “h” in its name.
9
D’ Atri’s evidence asserting a total replacement cost of $10,374,874.61 in inventory
was improper to the extent that figure was based on retail sales prices, which
necessarily included profit.
B. Requested Jury Instruction Regarding Profit
DOT’s second assertion of error relates to the trial court’s charge to the
jury. DOT requested that the trial court’s jury instructions include Pennsylvania
Standard Civil Jury instruction 22.100, which provides:
For business condemnees, the value of lost profits as a
result of a taking must not be considered as a separate item
of damage in measuring just compensation for the
condemnee.
A qualified valuation expert may, however, consider the
loss of income to a business only to the extent that it is
relevant to determining the effect of the condemnation on
the real estate.
Pa. SSJI (Civ) 22.100; RR at 30a. The trial court declined to give that instruction,
reasoning that the evidence had not included lost profits, but only replacement costs.
RR at 373a. Instead, the trial court then gave the following valuation instruction:
Just compensation is the difference between the fair
market value of the property in question immediately
before the government took the property and as unaffected
by the taking and the fair market value of the property
remaining immediately after the taking and as it was
affected by it.
Those are the damages you have to assess here. There is
no dispute that damages occurred. It will be up to you to
decide what that damage is based upon the evidence.
And that brings us to what we call the fair market value.
The fair market value is the price that would be agreed to
by a willing and informed seller and buyer . . . .
10
Id. at 397a. DOT maintains that the trial court erred by refusing to instruct the jury
that it could not award lost profits.
In determining whether the trial court erred in its jury instructions, we
must consider the jury charge as a whole, in light of the evidence presented. Volponi
v. Bristol, 551 A.2d 657, 660 (Pa. Cmwlth. 1988) (citation omitted). Here, D’ Atri
insisted in his testimony that he was not seeking to recover lost profits, merely
replacement costs. RR at 320a & 322a. In light of D’ Atri’s repeated statements
that Crows Run was not asking to recover its lost profits, the trial court, in its
discretion, declined to instruct the jury not to award them. However, the jury
instruction the trial court actually gave spoke in terms of the price a willing buyer
would pay a willing seller, which could well include a profit to the seller. Thus, the
trial court’s instruction could have misled and confused the jury. We therefore
conclude that, considering the jury charge as a whole, the trial court erred by refusing
to instruct the jury not to award lost profits.
C. Request for a New Trial
As discussed in Section A above, we conclude that the trial court erred
by allowing replacement cost evidence that necessarily included profits, and then
declining to give a jury instruction precluding an award of lost profits. However,
our analysis does not end there. Errors by the trial court do not automatically entitle
the moving party to a new trial. This Court has explained:
A party requesting a new trial must demonstrate in what
way trial error caused an incorrect result . . . . Determining
whether the moving party is entitled to a new trial involves
a two-step process . . . . First, we must decide whether one
or more mistakes occurred at trial and, if so, whether the
mistake is a sufficient basis for granting a new trial . . . .
11
The moving party must demonstrate more than harmless
error; the mistake will be a sufficient basis for granting a
new trial where the party demonstrates prejudice resulting
from the mistake . . . .
Zenak v. Police Ath. League of Phila., 132 A.3d 541, 553 (Pa. Cmwlth. 2016)
(quoting Dep’t of Gen. Servs. v. U.S. Min. Prods. Co., 927 A.2d 717, 723 (Pa.
Cmwlth. 2007), aff’d, 956 A.2d 967 (Pa. 2008) (internal quotation marks omitted)).
Thus, DOT, as the party seeking a new trial, had the burden of demonstrating
prejudice arising from the trial court’s errors in admitting valuation evidence that
implicitly included profits and then refusing to instruct the jury not to award such
profits as damages.
Crows Run asserted that its inventory had a total value of
$10,374,874.61, RR at 11a, which, as discussed above, included an unspecified
amount of profit. DOT’s valuation expert opined that the vehicles had only scrap
value, totaling $139,000, and that the entire inventory had a value of $215,875.00.
Id. at 14a, 380a & 383a. The jury awarded $3,189,677. See id. at 188a. Clearly,
the jury was not fully persuaded either by Crows Run’s evidence concerning
replacement costs or DOT’s evidence of scrap value.
At trial, D’ Atri testified concerning the approximate purchase prices
of the vehicles he bought in order to acquire his parts inventory. He stated that prices
varied from $300 to as much as $8,000 but were typically in the range of $1,000 to
$3,000. RR at 319a & 321a. He also testified to additional costs of about $200 per
vehicle for transporting purchased vehicles and preparing them for storage, plus
labor costs associated with pulling and cleaning the loose parts that were in the
inventory. RR at 320a-21a. The jury’s award of $3,189,677 amounted to about
$2,687 for each of the 1187 vehicles, well within the price range D’ Atri testified
12
was the average purchase price he paid for vehicles, even without separating out the
extra costs of transportation and labor.
Thus, the jury’s award appears to be consistent with the evidence of
average vehicle cost. As such, it does not indicate inclusion of profits. We conclude
that DOT has not met its burden of showing prejudice resulting from the trial court’s
error. Thus, no new trial is merited.
IV. Conclusion
Based on the foregoing discussion, we conclude that the trial court’s
errors in allowing evidence of prices including profit and then failing to instruct the
jury not to award lost profits were harmless. Accordingly, the trial court’s order is
affirmed.
__________________________________
CHRISTINE FIZZANO CANNON, Judge
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IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Niki D’ Atri Enterprises, Inc., a :
Pennsylvania Corporation doing :
business as Crows Run Recycling :
(Tenant) :
:
v. :
:
Commonwealth of Pennsylvania, :
Department of Transportation, : No. 257 C.D. 2022
Appellant :
ORDER
AND NOW, this 17th day of March, 2023, the order of the Court of
Common Pleas of Beaver County dated February 25, 2022, is AFFIRMED.
__________________________________
CHRISTINE FIZZANO CANNON, Judge