Present: Carrico, C.J., Compton, Stephenson, Lacy, Hassell, and
Keenan, JJ., and Cochran, Retired Justice
WAMMCO, INC.
v. Record No. 950752 OPINION BY JUSTICE BARBARA MILANO KEENAN
January 12, 1996
COMMONWEALTH TRANSPORTATION
COMMISSIONER OF VIRGINIA
FROM THE CIRCUIT COURT OF THE CITY OF CHESAPEAKE
William L. Forbes, Judge
In this appeal from a judgment in a highway condemnation
proceeding, we decide whether the trial court properly excluded
evidence of adjustment costs as an element of damage to the
residue of the property.
I. Proceedings
The Commonwealth Transportation Commissioner (the
Commissioner) made a bona fide, but ineffectual, effort to
purchase a 17.65-acre tract of land in the City of Chesapeake for
construction of a portion of Interstate Highway 664 (I-664).
This tract was a part of a larger tract containing 314 acres.
In 1989, the Commissioner recorded a certificate of take
pursuant to Code § 33.1-122 for the 17.65-acre tract, followed by
a petition in condemnation in 1990 asking the trial court to
appoint commissioners to determine just compensation due the
landowner as a result of the taking. When the certificate of
take and the petition were filed, the property was owned by New
Boone Farm Associates. In February 1993, WAMMCO, Inc. (Wammco)
acquired the property and was granted leave to intervene in the
proceedings.
At the condemnation trial, Wammco sought $362,496 for the
17.65 acres taken and $2,414,042 for damage to the residue.
During trial, the court excluded Wammco's proffered evidence of
adjustment costs allegedly necessary to develop the property as a
result of the take.
The condemnation commissioners returned a report valuing the
land taken at $356,165 and damage to the residue at $68,740.
Wammco filed exceptions to the commissioners' report and
requested a new trial based on the exclusion of its proffered
evidence. The trial court denied Wammco's request and entered an
order confirming the commissioners' report.
II. Admitted Evidence
The following evidence was presented to the commissioners.
Prior to the construction of I-664, the 314 acre parcel (the
property) was bisected by Gum Road, a country road which was then
a segment of the only continuous north-south route through the
Western Branch area of Chesapeake. When I-664 was constructed
through the property, Gum Road was cut in half. Since Gum Road
was not provided access to I-664, a cul-de-sac was created on
each end of the road next to the highway.
The portion of the 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 re-zoned for residential development
four days later. The parties agree that the highest and best use
of the eastern portion is for residential development.
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Walton Peter Burkhimer, Jr., a civil engineer, testified
that, prior to the taking, Gum Road provided sufficient access to
the property to support development in accordance with its
highest and best use. However, when Gum Road was severed by the
taking, access to the property was so severely restricted that
the western portion is now unsuitable for industrial use.
D.L. McKnight, a real estate appraiser, likewise testified
that, since Gum Road was severed by the taking, the western
portion of the property can no longer be developed without the
acquisition of additional land for road access. In McKnight's
opinion, this inadequate road access to the property has caused
the highest and best use of the western portion to be reduced
from industrial to "assemblage." 1
McKnight stated that this change from industrial to
"assemblage" use has diminished the value of the residue by
$1,029,722. This figure was based on his opinion that the
western portion of the property has been devalued in the amount
of $6,166 per acre as a result of the take.
III. Proffered Evidence
The Commissioner made a motion in limine to exclude any
evidence of adjustment costs allegedly necessitated by the take.
1
McKnight explained that so-called "assemblage" use means
that additional land must be acquired in order to develop the
property.
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Wammco proffered the following testimony regarding these costs.
Burkhimer stated that, as a result of the take, both on-site
and off-site improvements will have to be made in order to
develop the property in accordance with its highest and best use.
Burkhimer testified that additional land and right of ways will
have to be acquired, and that the off-site road network to the
residue will have to be improved, in order to provide sufficient
road access to develop the western portion of the property for
industrial use. He also stated that, as a result of the taking,
an additional road will have to be built off the property site in
order for the eastern portion of the residue to be developed in
accordance with Wammco's post-take plan.
Burkhimer further testified that, in order to connect with
these off-site improvements, Wammco will have to construct, on-
site, new roads and sanitary sewer service improvements that
would have been unnecessary prior to the taking. According to
Burkhimer, the total cost of on-site improvements necessary for
development of the residue is approximately $1,236,000. He
specifically excluded from these calculations the on-site
development costs that would have existed without the
construction of I-664.
Wammco also proffered additional evidence from McKnight
that, based on the increased development costs of $1,236,000, he
made an additional downward adjustment in the value of property
in the amount of $1,384,320. Combining this figure with the
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$1,029,722 figure he gave earlier for the present loss of
industrial use of the western portion of the residue, McKnight
placed the total damage to the residue at $2,414,042. The trial
court excluded the proffered evidence of adjustment costs,
including three exhibits offered by Wammco. 2 The court stated,
"It's too speculative . . . there is no plan, no proposed
improvement." 3
IV. Issue on Appeal
On appeal, Wammco argues that the trial court erred in
excluding the proffered testimony and exhibits. Wammco contends
that it was entitled to have the commissioners consider the costs
necessary to adjust the property to its changed condition, as
well as the reasonable potential use of the property at the time
of the taking. Citing Lynch v. Commonwealth Transp. Comm'r, 247
Va. 388, 391, 442 S.E.2d 388, 390 (1994), Wammco asserts that
every present or future circumstance affecting the value of the
residue at the time of the taking is admissible evidence.
2
Exhibit 1 depicted a street and lot configuration for
development of the property "without I-664." Exhibit 2 showed
road improvements and a proposed lot layout for development "with
I-664." Exhibit 3 listed the net cost increases for developing
the property after the construction of I-664.
3
In its ruling, the trial court did not state that Wammco
was required to present a recorded subdivision plat or plan.
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In response, the Commissioner argues that Wammco's evidence
of increased development costs is speculative and inadmissible,
because Wammco's ability to develop the property is contingent on
future events beyond Wammco's control, namely, an upgrading of
the road network in the vicinity of Gum Road. We agree with the
Commissioner. 4
Initially, we review the principles governing the
determination of damages to the residue of property taken in a
condemnation case. In Lynch, we stated that
[t]he test of damage 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.
Id. at 391, 442 S.E.2d at 390; see also Appalachian Elec. Power
Co. v. Gorman, 191 Va. 344, 353, 61 S.E.2d 33, 37-38 (1950).
Adjustment costs, also commonly referred to as increased
development costs, are those costs necessary to adjust the
property to the changed conditions caused by the taking.
4
At trial, the Commissioner argued, among other things, that
the proffered evidence was speculative because, in order to
develop the property, Wammco would "have to get approval from the
City to do all sorts of things." This objection adequately
preserved the argument which the Commissioner advances here
regarding the speculative nature of the proffered evidence.
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Dressler v. City of Covington, 208 Va. 520, 522, 158 S.E.2d 660,
662 (1968). Adjustment costs are relevant to determining any
diminution in the market value of the residue as a result of the
taking. Id. "However, such cost[s] [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 remains the
difference in value before and immediately after the taking, less
any enhancement resulting from the taking. State Highway &
Transp. Comm'r v. Parr, 217 Va. 522, 524, 230 S.E.2d 253, 255
(1976).
Like any other evidence of damage to the residue, evidence
of adjustment costs is inadmissible if it is based on remote or
speculative factors. See Lynch, 247 Va. at 393, 442 S.E.2d at
391. As we stated in State Highway & Transp. Comm'r v. Lanier
Farm, 233 Va. 506, 357 S.E.2d 531, (1987), "[i]t is the present
actual value of the land with all its adaptations to general and
special uses, and not its prospective, or speculative, or
possible value based upon future expenditures and improvements
that is to be considered." Id. at 510, 357 S.E.2d at 533,
(quoting Richmond & P.R. Co. v. Seaboard, &c., Co., 103 Va. 399,
407, 49 S.E. 512, 515 (1905)). The facts of the present case
illustrate this principle.
We will assume, without deciding, that Wammco's property
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could have been developed before the taking in accordance with
its highest and best use. We also note, as stated above, that
the adjustment costs proffered by Wammco reflect only the cost of
on-site roads and sewer service improvements necessitated by the
take to develop the property to its highest and best use.
Nevertheless, the evidence shows that development of the
residue is contingent on the improvement of off-site roads in the
vicinity of the residue and the acquisition of property of others
to provide access to the site. With regard to the western
portion of the property, Burkhimer stated that "you'd essentially
have to acquire a lot and then buy one more lot, and then you've
got to acquire land across [an] intervening parcel, over which
there is no right of way, so as to be able to get access or a
right of access." McKnight also testified that development of
the western portion of the property would require acquisition of
the property of others and, thus, that the property presently is
unsuited for immediate industrial development.
Concerning the eastern portion of the property, Burkhimer
testified that Wammco's post-take plan requires a collector or
minor arterial street following "the old railroad right of way
out to Taylor Road . . . to be built in order for the east side
to be developed." The record shows that the construction of such
a collector road would entail off-site improvements.
From the above testimony, Wammco's evidence shows that
development of the property is contingent on future acts beyond
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Wammco's control which are remote and speculative. If these acts
or other acts necessary for an alternative plan of access are not
accomplished, the property cannot be developed in accordance with
Wammco's post-take plan and the on-site improvements will not be
required. Thus, as a matter of law, the evidence of these
on-site adjustment costs is speculative and inadmissible.
We disagree with Wammco's contention that our decisions in
Lynch and Gorman require a different result. In these cases, the
landowner's ability to develop the residue was not contingent on
off-site improvements that were within the control of others. In
Lynch, the evidence showed that the development potential of the
property had been reduced solely because of impact of the take on
the size and topography of the residue. 247 Va. at 394, 442
S.E.2d at 391.
Likewise, in Gorman, the landowners' ability to develop the
residue was not dependent on contingencies beyond their control.
There, the evidence of diminished value to the residue consisted
of testimony that the lots which could be placed on the residue
were of lesser value than the lots planned for the property
immediately prior to the take. 191 Va. at 348, 61 S.E.2d at 35.
We also find no merit in Wammco's contention that, if it is
not able to produce evidence of its increased development costs,
Wammco is left without any compensation for the impairment of its
ability to develop the property. Wammco presented evidence of
its impaired ability to develop the western portion of the
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property. As stated above, McKnight testified without objection
that the value of the residue had diminished by $1,029,722
because the western portion of the property was suited only for
"assemblage" use after the take. Thus, the commissioners were
allowed to consider the direct effect on the value of the residue
resulting from Wammco's inability to develop this portion of the
property.
Finally, we note that Wammco did not attempt to offer
similar evidence with regard to the eastern portion of the
property. Although the evidence before the commissioners did not
show that off-site property would have to be acquired to develop
the eastern portion, it did show that Wammco's ability to develop
this portion of the property under its post-take plan was
contingent on the construction of off-site road improvements
beyond Wammco's control. 5 Thus, this limitation on development
was a factor relevant to the value of the residue immediately
after the take.
For these reasons, we will affirm the trial court's judgment
confirming the commissioners' report.
5
We note, however, that Wammco can develop the eastern
portion without off-site improvements if it redesigns its post-
take plan to include fewer lots. Burkhimer testified that the
additional access would be required only if the parcel is
developed into 100 or more lots.
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Affirmed.
JUSTICE STEPHENSON, with whom CHIEF JUSTICE CARRICO and RETIRED
JUSTICE COCHRAN join, dissenting.
I respectfully dissent. I think, based upon our holdings in
Lynch v. Commonwealth Transportation Comm'r, 247 Va. 388, 442
S.E.2d 388 (1994), Appalachian Power Co. v. Anderson, 212 Va.
705, 187 S.E.2d 148 (1972), and Appalachian Elec., Etc., Co. v.
Gorman, 191 Va. 344, 61 S.E.2d 33 (1950), the trial court erred
in excluding the proffered evidence. I do not think this
evidence, taken as a whole, was speculative. Instead, the
proffered evidence, consisting of both oral testimony and
physical exhibits, presented "a real and present potential use in
the light of existing conditions and circumstances," demonstrated
"the adaptability and suitability of the property for its highest
and best use," and illustrated "the impact of the taking on the
remaining property." Lynch, 247 Va. at 393, 442 S.E.2d at 391.
I also think that the majority, in deciding the case, has
relied upon objections raised for the first time on appeal. The
sole objection at trial, and the basis for the trial court's
ruling, was that the evidence was speculative because there was
no recorded subdivision plat or plan. On appeal, however, the
Commissioner has abandoned that ground and raises numerous
objections to the proffered evidence, none of which were raised
at trial. Clearly, this violates our rule that objections will
not be considered on appeal unless they are "stated with
reasonable certainty at the time of the ruling." Rule 5:25.
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Accordingly, I would reverse the trial court's judgment and
remand the case for a new trial.
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