Revocor Corp. v. Commonwealth Transportation Commissioner

Present: Carrico, C.J., Compton, 1 Lacy, Hassell, Keenan,
Koontz, and Kinser, JJ.
REVOCOR CORPORATION
OPINION BY JUSTICE LEROY R. HASSELL, SR.
v. Record No. 990830 March 3, 2000
COMMONWEALTH TRANSPORTATION
COMMISSIONER OF VIRGINIA
FROM THE CIRCUIT COURT OF YORK COUNTY
J. Warren Stephens, Judge Designate
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
1
Justice Compton participated in the hearing and decision
of this case prior to the effective date of his retirement on
February 2, 2000.
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. 2 The remainder
2
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
2
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."
or endanger the construction, operation or maintenance of
[VNG's] facilities."
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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
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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.
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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
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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
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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
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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
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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.
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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
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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.
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