No. 92-158
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
CITY OF BILLINGS,
a Montana municipal corporation,
Plaintiff, Counterdefendant and Respondent,
JEAN HUNT; HELEN KELLER; MAX H. HEFFNER: ELEANOR
M. HEFFNER; C.M. HEFFNER, JR.; AMELIA 0 HEFFNER;
.
INTERNAL REVENUE SERVICE; UNITED STATES OF AMERICA
and DEPARTMENT OF REVENUE STATE OF MONTANA,
Defendants,
DENNIS J. RUE CO., INC., a/k/a DENNIS J. RUE, INC. ;
ANGIE JUROVICH, THOMAS L. FERGUSON, TRUSTEE; GARY
KAINU; PATRICIA I. KAINU; EDWARD S. MARTYR, a/k/a
E.S. MARTYR; BETTY MARTYR; ABBY FERGUSON, TRUSTEE;
DONALD L. FERGUSON; THOMAS L. FERGUSON; JOHN EDWARD
FERGUSON: KELLIE ANN FERGUSON; MYRNA A. CLARK; THE
ABBY FERGUSON TRUST; THE ABBY FERGUSON IRREVOCABLE
TRUST; UNIVEST, INC.; and ROBERT P. LIVENGOOD,
Defendants, Counterclaimants and Appellants.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable G. Todd Baugh, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Mark D. Parker, Parker Law Firm, Billings, Montana
For Respondent:
Kenneth D. Peterson, Peterson & Schofield, Billings,
Montana
Submitted: December 15, 1992
-rn
i- L O 2 5 1993 Decided: February 25, 1993
Justice Fred J. Weber delivered the Opinion of the Court.
This is an appeal from an order of the Thirteenth Judicial
District Court, Yellowstone County, refusing to award interest to
appellants under 5 70-30-302(2), MCA, pursuant to a condemnation
proceeding taking vacant, undeveloped land. We reverse.
Appellants present the following issues for review:
1. Did the District Court err in refusing to award interest
under 5 70-30-302, MCA, when the City of Billings condemned vacant,
undeveloped land?
2. Did the District Court err in awarding out-of-state
witness travel expenses?
The appellants are the contract purchasers of real property
legally described as Certificate of Survey 1805 consisting of
12.216 acres in Yellowstone County, Montana. The subject land is
located on the VimsM south of Highway 318 at the southeast end of
Logan International Airport in Billings, Montana. The parties
stipulated that the highest and best use of the land was for
professional offices.
In 1986, the City of Billings (City) offered to purchase all
12.216 acres of Certificate of Survey 1805 for $293,200. The
landowners rejected the City's offer. On September 17, 1987, the
City began condemnation proceedings under its power of eminent
domain and served summonses on defendants in September 1987.
On February 29, 1988, the City moved for a preliminary
condemnation order which was subsequently issued by the District
Court on May 4, 1988. In August 1989, after a condemnation
Commissioner~s Hearing as required by 5 70-30-301, MCA, the
Condemnation Commissioners reported that the current fair market
value of the property was $320,500. After a trial in February 1992
on the issue of fair market value, a jury found that the fair
market value as of September 21, 1987 was $200,000.
The jury's award did not include interest prior to the
judgment date. Although appellants had requested a jury
instruction which would have included interest from the date of
summons as part of the condemnation award, the verdict form used at
the trial did not include interest and the District Court did not
instruct the jury to include interest. Appellants seasonably
objected to the jury instruction, thereby preserving that question
for appeal.
I.
Did the District Court err in refusing to award interest under
S 70-30-302(2), MCA, when the City of Billings condemned vacant,
undeveloped land?
The Fifth Amendment to the United States Constitution
prohibits governmental entities from taking private property for
public use under the power of eminent domain without paying Ifjust
compensation." Similarly, Article 11, Section 29 of the Montana
Constitution prohibits the taking or damaging of private property
for public use "without just compensation to the full extent of the
loss having been first made to or paid into court for the owner."
"Just compensationw may include interest. Interest has been
regarded as a substitute for computing appreciation of land value
between the time of taking and the date of payment. See United
States v. 156.81 Acres of Land (9th Cir. l982), 671 F.2d 336, 339,
cert. denied, 459 U.S. 1086, 103 S.Ct. 569, 74 L.Ed.2d 931 (1982).
Section 70-30-302, MCA, provides:
Assessing compensation -- date and measure -- interest. (I)
For the purpose of assessing compensation, the right thereto
shall be deemed to have accrued at the date of the service of
the summons, and its current fair market value as of that date
shall be the measure of compensation for all property to be
actually taken and the basis of depreciation in the current
fair market value of property not actually taken but
injuriously affected. ...
(2) If an order be made letting the plaintiff into
possession, as provided in 70-30-311, the full amount finally
awarded shall draw interest at the rate of 10% per annum from
the date of the service of the summons to the earlier of the
following dates:
(a) the date on which the right to appeal to the Montana
supreme court expires or, if appeal is filed, to the date of
final decision by the supreme court; or
(b) the date on which the property owner withdraws from
court the full amount finally awarded.
(5) No improvements put upon the property subsequent to
the date of the service of summons shall be included in the
assessment of compensation or depreciation in current fair
market value, nor shall the same be used as the basis of
computing such compensation or depreciation.
Under 5 70-30-302(2), MCA, if the City had been let into
possession of the property, interest would have been awarded from
the date of service of summons. Here, the District Court's
Judgment putting the City in possession was dated March 10, 1992.
The appellants received no interest from the date of summons in
September 1987 to March 10, 1992.
The subject land is vacant and unimproved with its primary
value prior to condemnation as investment property. Appellants1
plan to develop the land for professional office buildings was
foreclosed in September 1987 when they were served with summonses
in this proceeding. Although appellants could have improved the
land, § 70-30-302(5), MCA, would have prevented them from receiving
compensation for any improvements to the land after the date of
summons. While 5 70-30-302, MCA, does deprive the owner of
compensation for improvements added to the land, the land can still
be used for other purposes such as growing of crops, recreation, or
parking, should that be the source of income.
It is the general rule that a taking does not occur until: (1)
legal title vests in the condemnor, (2) the condemnor enters into
actual possession, or (3) the condemnor takes constructive
possession either by causing damage to property or by depriving the
owner of full beneficial use of his land. Stewart & Grindle, Inc.
v. State (Alaska 1974), 524 P.2d 1242. The Alaska court noted in
that case that Alaska's statutory scheme deprived the owner of both
investment potential and the possibility of future development the
moment a condemnation action commences. Stewart & Grindle, Inc.,
524 P.2d at 1247. Section 70-30-302, MCA, essentially identical to
the Alaska statute, does the same thing.
The owner, however, remains responsible for expenses
incidental to legal ownership. State v. Nordstrom (N.J. 1969), 253
A.2d 163. This includes mortgage payments, tort liability and the
like. For example, 5 70-30-314, MCA, specifically postpones the
condemnor's responsibility for noxious weed control. In Montana,
not all incidents of ownership remain with the owner; property
taxes become the responsibility of the condemnor. Section 70-30-
315, MCA. In Stewart & Grindle, Inc., 524 P.2d at 1247, the Alaska
court reasoned:
...If as a matter of constitutional law the property owner
is entitled to interest from the moment the State takes legal
possession, he should, afoniori, receive interest where he has
been deprived of all the economic advantages of legal
ownership but is relieved of none of the liabilities.
In Nordstrom, a case which allowed interest from the date the
proceeding began, the court declined to set forth a firm rule and
stated its desire to proceed on a case-by-case basis when dealing
with unimproved property. Nordstrom, 253 A.2d at 165. The Alaska
court rejected this approach because it could not conceive of an
instance in which owners of unimproved property would not be
entitled to interest from the date of the suit (with appropriate
set-offs for rents and profits). Stewart & Grindle, Inc., 524 P.2d
at 1249, n.24.
We disagree with the Alaska court's assessment that interest
should be paid from the date of service of summons in all cases
where vacant and unimproved land is held for investment with a view
toward ultimate development. Like the Nordstrom court, we conclude
that it is advisable to proceed on a case-by-case basis in
considering the awarding of interest on condemnations.
In Manke v. Airport Authority of Washoe County (Nev. 1985),
710 P.2d 80, the Nevada Supreme Court reversed a district court
order refusing to award interest to owners of vacant and unimproved
land located near an airport and held for investment. The Nevada
statute, like those in Alaska and Montana, foreclosed development
of the condemned property after the date of the service of summons.
The facts in the case before us are strikingly similar to those in
Manke, where the respondentlsobjective in condemning appellants1
property was to create a clear zone surrounding the airport.
Significantly, the court said
Our holding that a taking occurred in this case on the
date of the service of summons is buttressed by the fact that
the burden placed upon appellants by the service of summons
directly corresponds to a benefit conferred upon respondent.
. .
. Because development of appellant's property was frozen
on the date of the service of summons, respondentlsobjective
in condemning appellants1 property was accomplished on that
date. (Citations omitted)
Manke, 710 P.2d at 82.
The same is true here. Appellants1 could not develop the
property after the date of summons; the City of Billings achieved
its objective on the date of summons. We agree with the reasoning
in Manke and Nordstrom, which held that where owners of vacant and
unimproved land are deprived of a31 economically viable use of
their property, a taking occurs at the inception of the eminent
domain proceedings. See also United States v. 156.81 Acres of Land
671 F.2d at 340 (condemnation order that denied the landowners any
economically viable use of their land w a s a taking as of the date
the condemnation began and interest was appropriate in such
circumstances).
In Nordstrom, the court stated that rents, profits and
beneficial use are to be applied in abatement and that interest
should not run on monies deposited with the court. Nordstrom, 253
A.2d at 167. We adopt the following statement from Nordstrom:
The awarding of interest does not lend itself to rigid
guidelines, but rather is best considered on a case-by-case
basis in order to determine compensation which is lljust.la
One
of the critical variables in every case is the use to which
the land is being put by the condemnees. There would be good
cause to abate interest if the condemnees were left
undisturbed in their enjoyment of the property by the
condemnation proceeding, or if they continue to receive
undiminished rents and profits from the use of the land up to
the time the State takes possession. On the other hand, where
the condemnation proceedings restrict the profitable use or
enjoyment of the property, interest ordinarily should be
allowed.
Nordstrom, 253 A.2d at 165-66.
Our standard of review for a district court's conclusions of
law is whether they are correct. Steer, Inc. v. Dept. of Revenue
(lggO), 245 Mont. 470, 803 P.2d 601. We conclude that the
landowners in this case were deprived of all economically viable
use of their vacant and unimproved property. As a result we
conclude that the court erred in refusing to award interest.
We hold that the landowners in this case were deprived of all
economically viable use of their vacant, unimproved property and
that they are entitled to interest from the date of service of
summons.
Did the District Court err in awarding out-of-state witness
travel expenses?
The District Court awarded $436.50 for travel costs for Verl
Brady. Appellants contend that this amount was improperly awarded
because the City did not request travel for Verl Brady outside the
state of Montana and because the law provides that costs are not
allowable for travel outside the state. Appellants rely on
Chilcott v. Rea (1916), 52 Mont. 134, 155 P. 1114; and Bullard v.
Zimmerman (1930), 88 Mont. 271, 292 P. 730. Both Chilcott and
Bullard held that mileage costs for witnesses were limited to
expenses for travel within the state of Montana. The statute
providing for allowable costs has remained unchanged since the
dates of those decisions, except for its heading. Section 25-10-
201, MCA, provides in pertinent part:
Costs generally allowable. A party to whom costs are awarded
in an action is entitled to include in his bill of costs his
necessary disbursements, as follows:
(1) the legal fees of witnesses, including mileage, or
referees and other officers ...
As noted, Chilcott and Bullard allowed mileage expense to
travel within the state of Montana. In referring to prior
interpretations of 5 25-10-201, MCA, the District Court concluded
that 5 26-2-501(b), MCA, allowed mileage past the state line.
Section 26-2-501(b) provides in pertinent part:
(b) for mileage in traveling to the place of trial or hearing,
each way, for each mile, a mileage allowance as provided in 2-
18-503.
Nothing in 26-2-501(b) provides for recovery of mileage
costs for travel outside the state of Montana. We conclude that
the District Court incorrectly applied the law in its calculation
of costs.
We hold the District Court erred in awarding out-of-state
witness travel expenses.
We reverse and remand the case to the District Court with
instructions to modify its judgment of condemnation to include
interest from the date of service of summonses and to reconsider
its award of costs consistent with this opinion.
\
Justices
February 25, 1993
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
I
Mark D. Parker
' Parker Law Firm
P.O. Box 7212
Billings, MT 59103-7212
Lorraine D. Gallinger
Assistant U.S. Attorney
P.O. Box 1478
Billings, MT 59103
Dale F. Galles, Esq.
Galles & Gunderson
P.O. Box 926
Biltings, MT 59103
Bruce McGinnis, Legal Counsel
Dept. of Revenue
Mitchell Bldg.
Helena, MT 59620
Kenneth D. Peterson
Peterson & Schofield
2906 Third Ave. No.
Billing!, MT 5910;
Hon
L
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA