W. Va. Dept. of Transportation v. Western Pocahontas Properties

No. 14-0381 - West Virginia Department of Transportation, Division of Highways v.
Western Pocahontas Properties, L.P.; WPP, LLC; and Beacon Resources, Inc.
FILED
June 17, 2015
RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
LOUGHRY, Justice, dissenting:
In this case, the majority has decided to treat the State like a child, scolding it
for not adequately preparing for trial and then allowing it to have a “do over.” Despite the
fact that the new points of law set forth in the majority opinion do not support a finding that
the trial judge erred by refusing to give the State’s proposed jury instruction, the majority
nonetheless reaches that conclusion and remands this case for a new trial. In doing so, the
majority provides unprecedented, detailed guidance for the retrial of this matter in an
undisguised effort to ensure that the State is not slapped with another twenty-four million
dollar verdict. Because it is clear that the trial court did not commit reversible error by
refusing to give an obviously erroneous instruction and because this Court should not be
dispensing legal advice to parties, I dissent from the majority’s decision in this case.1
1
As discussed in the majority opinion, the State also asserted in this appeal that the
trial court committed reversible error by excluding its expert’s testimony concerning sales
of comparable mining properties. I agree with the majority’s finding that the trial court
properly excluded this testimony because the record clearly shows that the expert’s opinion
was not relevant or reliable. I dissent because of the majority’s ultimate decision to set aside
the verdict and remand this case for a new trial based upon an unsupported and erroneous
conclusion that the trial court erred by refusing to give the State’s proposed jury instruction.
1
The proceedings below focused primarily upon the fair market value of
Beacon’s interest in the subject property, i.e., its right to extract and sell the coal, which was
thwarted as a result of the State’s decision to take the land for the construction of Corridor
H. When the State initiated this condemnation proceeding, Beacon was actively surface
mining the property. As a result of the State’s taking, Beacon was forced to cease its mining
operations and go out of business. During the trial, the State, relying upon cases from 1885
and 1919,2 proposed that the following instruction be given to the jury:
You are instructed that in determining whether the
residue of the property is damaged or injured, you may consider
damage to the land, but you may not consider any lost profit or
damage or injury to any business thereon, because such damages
depend on contingencies too uncertain and speculative to be
allowed. (emphasis supplied)
The trial court found the instruction would apply if the business being operated on the
property could be relocated, as would be the case with a gas station, factory, or store.
However, because the property at issue–the coal–and its location constituted the business,
the trial court determined that Beacon was entitled to the value of the property taken,
“measured by the dollar amount for which [it] could sell it.” Whitney Benefits, Inc. v. United
States, 18 Cl. Ct. 394, 409 (1989). Accordingly, the trial court refused to give the proposed
jury instruction.
2
See Gauley & Eastern R. Co. v. Conley, 84 W.Va. 489, 100 S.E. 290 (1919);
Shenandoah Valley R. Co. v. Shepherd, 26 W.Va. 672 (1885).
2
While the general rule in the law of eminent domain has been that business
profits are not an indicator of the value of land because the success of the business depends
on the skill of the operator and the efficiency of the operation, “courts [now] recognize an
exception to this rule when the profits proceed directly out of the land condemned, thereby
contributing to its intrinsic value, as opposed to a business being conducted on the land.” 8
Nichols on Emminent Domain § G-14F.03 (3rd ed. 2015). For example, in State Highway
Commission v. Jones, 363 N.E.2d 1018 (Ind. Ct. App. 1977), the State brought an action to
condemn approximately twenty-six acres of quarry land to build a highway. After the jury
returned a verdict of nearly half a million dollars, awarding damages to both the owner
landlords and the tenants operating the quarry business on the land, the State appealed
asserting, inter alia, that the trial court had erred by excluding its instruction that would have
directed the jury not to consider “business profits or volume as evidence of the value of the
land or any interest thereon.” Id. at 1026. Finding that the trial court rightfully excluded the
instruction, the appellate court explained:
Plaintiff’s Tendered Instruction No. 1 is incorrect in that it
instructs the jury not to consider business profits as an element
which contributes to the value of the land. However, as it was
pointed out above, where income is produced by the sale of
minerals or other soil materials which are an intrinsic part of the
land, then the capitalization of business profits may be proper.
Therefore those profits may be considered by the jury to the
extent that they reflect upon the value of the land at the time of
the taking.
3
Id.3
In an unnecessarily long and convoluted analysis, the majority eventually
recognizes this exception to the general rule, stating that where property being condemned
was generating income, such as when minerals are being extracted, that “income may be
considered in a condemnation proceeding[.]” Maj. Op. at 20. Accordingly, the majority
holds in syllabus point two of the opinion that “the amount of raw profit lost from a business
operated either on the condemned real estate or its residue may not be the sole basis to
establish just compensation.” (emphasis added). By using the word “sole,” the majority
recognizes that profits may be considered in determining the amount of an award of just
compensation. In fact, the majority further holds in syllabus point three that “an expert
witness’s assessment of the income stream that real property produces may be relied upon
to support a fair market valuation of an interest in real estate.”
Although the majority clearly acknowledges that lost profit may be considered
in determining the fair market value of condemned property when the profit is derived
directly out of the land itself, it nonetheless finds the trial court committed reversible error
3
See also Whitney Benefits, 18 Ct. Cl. at 409 (explaining that value of coal reserves can
only be measured by its ability to produce income); Foster v. United States, 2 Cl.Ct. 426,
448-49 (1983) (recognizing an operator’s interest is separate right to produce and sell
minerals which is measured by estimate of what can be earned by exercise of that right).
4
by refusing to give the State’s proposed instruction that would have directed the jury to “not
consider any lost profit.” The majority reasons that the instruction should have been given
because Beacon’s owner, Jason Svonavec, testified he believed that the fair market value of
Beacon’s lease which allowed it to extract and sell the coal, was eighty-four million dollars.
Mr. Svonavec testified that he arrived at this figure by calculating how much profit Beacon
would have earned had it been able to extract and sell all of the mineable coal. The majority
concludes that because Mr. Svonavec’s opinion was only based on lost profit, the instruction
would have alerted the jury that it could not consider lost profit alone in making its just
compensation determination. Slip Op. at 40. The fallacy in the majority’s reasoning is two­
fold.
First, this Court has “long recognized the admissibility of a landowner’s
opinion concerning the value of his land.” West Virginia Dept. of Highways v. Sickles, 161
W.Va. 409, 411, 242 S.E.2d 567, 570 (1978), overruled on other grounds by West Virginia
Dept. of Highways v. Brumfield, 170 W.Va. 677, 295 S.E.2d 917 (1982). While the majority
pays lip service to this basic principle of eminent domain law, it concludes that Mr.
Svonavec’s opinion was somehow improper because it was based only upon his lost business
profit. Considering the fact that Beacon’s only interest in the subject property was its right
to mine and sell the coal by virtue of its coal lease, I am uncertain as to what the majority
thinks Mr. Svonavec should have used as the basis for his opinion concerning the value of
5
Beacon’s interest in the property. Undoubtedly, from Mr. Svonvec’s perspective, forcing
Beacon to halt its mining operation caused Beacon to lose eighty-four millions dollars, the
value of the coal Beacon would have been able to extract and sell. In that regard, Mr.
Svonavec’s calculation was based on Beacon’s existing contract to sell the coal it was mining
at the date of the taking. Thus, there was no speculation involved in his valuation. For the
majority to conclude that Mr. Svonavec’s opinion as to the value of Beacon’s interest in the
property was “grossly inflated” and therefore improper is absurd.
Secondly, by focusing only upon Mr. Svonavec’s testimony and opinion as to
the value of the subject property, the majority conveniently overlooks the fact that Beacon’s
expert, Douglas C. Wise, a certified general real estate appraiser, used the lost profit in
calculating and arriving at his opinion regarding the fair market value of the property.4 Had
the jury been given the instruction proposed by the State, it would have been directed to
ignore not only Mr. Svonavec’s opinion, but that of Mr. Wise as well. Such a result would
be contrary to the new law created in syllabus point three of the majority opinion, which
allows lost profit to be considered when the income capitalization approach is used to
calculate the fair market value.
4
Using the income capitalization approach to valuation, Mr. Wise opined that the fair
market value of Beacon’s leasehold interest in the subject property was $48,088,000.00.
Obviously, the jury did not find the opinion of Mr. Wise or that of Mr. Svonavec persuasive
as the amount of the verdict was substantially less.
6
It is clear the majority decided to grant a new trial in this matter because it
believes the State was ill-prepared and should have done a better job to “protect[] millions
of dollars in the public fisc.” Maj. Op. at 43. Characterizing the trial as “an appalling train
wreck,” the majority proceeds to point out multiple errors made by counsel for the State and
give direction with regard to the proper course of action upon the retrial of this matter. Id.
While I will agree that the record evidences a lack of preparation on the part of the State, it
is not this Court’s place to instruct counsel regarding the best way to present a case to the
jury. As we recently explained:
It is a deeply rooted and fundamental law that “this Court
is not authorized to issue advisory opinions[.]” State ex rel. City
of Charleston v. Coghill, 156 W.Va. 877, 891, 207 S.E.2d 113,
122 (1973) (Haden, J., dissenting). In this regard, we observed
in Harshbarger v. Gainer, 184 W.Va. 656, 659, 403 S.E.2d 399,
402 (1991), that “[s]ince President Washington, in 1793, sought
and was refused legal advice from the Justices of the United
States Supreme Court, courts-state and federal-have
continuously maintained that they will not give ‘advisory
opinions.’” Moreover, in United Fuel Gas Co. v. Public Service
Commission, 73 W.Va. 571, 578, 80 S.E. 931, 934 (1914), we
noted that “[b]y the plain terms of the Constitution appellate
jurisdiction is limited to controversies arising in judicial
proceedings[.]” This Court further addressed the issue of
advisory opinions in Mainella v. Board of Trustees of
Policemen’s Pension or Relief Fund of City of Fairmont, 126
W.Va. 183, 185-86, 27 S.E.2d 486, 487-88 (1943), as follows:
Courts are not constituted for the purpose of
making advisory decrees or resolving academic
disputes. The pleadings and evidence must
present a claim of legal right asserted by one party
and denied by the other before jurisdiction of a
suit may be taken.
7
State ex rel. Morrisey v. West Virginia Office of Disciplinary Counsel, 234 W.Va. 238,
—,764 S.E.2d 769, 777 (2014).
Like the majority, I was decidely unimpressed with the manner in which the
State presented its case at trial. However, I simply do not believe that the assigned errors
warranted giving the State a second bite at the apple. In fact, I would not be surprised if,
upon retrial, a new jury, properly instructed on the role of lost profit, awards Beacon just
compensation in an amount substantially greater than the verdict that is the subject of this
appeal.
For the reasons set forth above, I respectfully dissent from the majority’s
decision in this case.
8