Present: All the Justices
CITY OF VIRGINIA BEACH
OPINION BY JUSTICE LEROY R. HASSELL, SR.
v. Record No. 011613 April 19, 2002
SUSAN OAKES, ADMINISTRATRIX OF THE
ESTATE OF PAULINE BELCHER, ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH
Edward W. Hanson, Jr., Judge
In this appeal of a judgment entered in favor of
landowners in a condemnation proceeding, we consider whether
the landowners' evidence of damage to the residue was
speculative.
I.
The City of Virginia Beach (the City) filed its petition
in condemnation against Susan Oakes, guardian ad litem for
Pauline M. Belcher. During the proceedings, the original
landowner died, and Susan Oakes, administrator of the estate
of Pauline Belcher, and Belcher's successors in interest were
made parties to the proceeding. These parties will be
referred to as the landowners.
The City initiated the condemnation proceeding to acquire
real property and easements for the purpose of constructing
road and utility improvements to Oceana Boulevard. The City
and the landowners agreed that the value of the land taken was
$60,000, which included the fee simple value of the land used
for a drainage easement even though the City only acquired an
easement on that land.
II.
Apparently, the circuit court sustained the City's motion
to proceed without commissioners because of the landowners'
failure to designate commissioners. The following evidence
was adduced at a bench trial.
Belcher owned approximately 24 acres of land, and with
the exception of a house, the land was unimproved. The land
enjoyed a B-2 business zoning classification on about two
acres of the property adjacent to Oceana Boulevard. The
remaining 22 acres of the property had an "R-5D Residential"
zoning classification.
The City acquired about 195 feet of frontage property
adjacent to Oceana Boulevard as part of the taking, leaving
the landowners with 148 feet of frontage property. The City
also acquired the permanent drainage easement noted above
which is located on the front of the landowners' parcel. The
City used this drainage easement to create a detention pond.
The detention pond is unusual because it collects "storm water
runoff" accumulated from 3,400 linear feet of ditches along
Oceana Boulevard, which is a four-lane highway.
James C. Cahoon, III, a senior environmental scientist
who qualified as an expert witness, testified that typical
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"storm water runoff" from a roadway contains pollutants such
as lead, mercury, oil, and grease. The detention pond is
designed to filter these pollutants and clean the water,
thereby preventing pollutants from entering or leaving the
City's storm water system and affecting the state waters. The
City is responsible for the maintenance of the detention pond.
Thomas L. Stokes, Jr., an environmental scientist and
consultant who testified on behalf of the landowners, stated
that a landowner must be aware of any contamination on his
property, including contamination in a detention pond. Stokes
also testified that in the future, the property might become
contaminated from conventional "highway runoff" and that the
detention pond is "designed to collect and retain pollutants
into it and to cause infiltration to the maximum extent
possible into the landowners' land." Stokes stated that 206
accidental spills of pollutants have been reported in the
vicinity of the landowners' property since 1992. He testified
that a landowner "would want to monitor" a detention pond and
detect pollutants that could affect the land. The cost of
monitoring the detention pond in this case would be
approximately $4,000 annually. Stokes stated, however, that a
landowner does not have an affirmative obligation to monitor a
detention pond.
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Gerald A. Porterfield, a land planner and landscaper,
qualified as an expert witness and testified on behalf of the
landowners. He testified that the use of the landowners'
property is restricted by a perpetual easement over the
property for military and naval purposes for use in connection
with the Oceana Naval Air Station in Virginia Beach. This
easement affects the air rights above the property and limits
the activities that can be performed upon the property.
Porterfield testified that only light industrial uses
such as "warehousing, wholesaling, [and] distribution . . .
uses" may be conducted on the property. He stated that before
the City's taking, the best use of the property was the
construction of an office warehouse on the front acreage and
the construction and operation of "a self-storage, mini-
storage" facility on the "bulk of the [rear] property." When
asked to describe "in more detail the development [he]
envision[ed] would be suitable for that property," Porterfield
responded: "Well, it is pretty straightforward. Create a
couple of buildings, create a bay of parking parallel to
Oceana Boulevard with the necessary landscaping in there, of
course, and create some shell buildings that literally front
on Oceana Boulevard, with like overhead door access to the
rear. And you can do a couple of buildings like that back to
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a certain point, and then you change it either to multi-
storage or self-storage."
Even though Porterfield conceded that the development he
envisioned would require a change in the property's zoning
classification, he opined that the City "would look highly
favorably upon" rezoning the property to accommodate its best
use. Porterfield also testified that as a result of the
taking, the office space that he had envisioned would have to
be 14,000 square feet smaller than an office warehouse that
could have been constructed before the taking. He attributed
the smaller office space to the location and size of the
detention pond. The landowners also presented other expert
witnesses who testified that the highest and best use of the
residue would be the construction of an office building and
"warehouse-type" space.
Dennis W. Gruelle, a real estate appraiser, qualified as
an expert witness who testified on behalf of the landowners.
He also opined that before the taking, the best use of the
property was for light industrial use, "more specifically sort
of a small office warehouse facility in the front of the
property and mini-warehouse in the rear of the property." He
stated that the taking damaged the residue because prior to
the taking the property "had about 343 feet of frontage along
Oceana Boulevard. The acquisition and the location of the
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[detention] pond took approximately 59 percent of that
frontage, almost 195 feet, and took out an area in the front,
the portion of the property that has exposure along Oceana
Boulevard." He also opined that the detention pond had a
negative impact upon the value of the residue.
Gruelle stated:
"The total impact in my estimate is $120,000. And
it is broken down basically a couple of different
ways. As I discussed, the impact with brokers in
the market, and many of them had very negative
perceptions of this property . . . when there was
. . . a drainage pond. But it is a new concept to
the extent that there aren't many examples in the
market that you can [c]ite.
"In fact, many brokers were unaware of an
incident where a pond was put on a property in
easement form. So to try to direct a [comparison]
to directly illustrate that impact, it was difficult
to do. But the brokers in most cases just would
talk about percentage of damages being anywhere from
10 to 15 percent, some of them much higher, some of
them wouldn't even – said they couldn't sell the
property. But that 10 to 15 percent impact did seem
to be a fairly consistent number against the
remaining property."
Gruelle testified that his damage estimate of $120,000
was based upon $65,000, which included contingencies and
"monitoring costs" associated with the detention pond and
$55,000 in lost rents. Gruelle included lost rents in his
damage estimate because the size of the office building that
Porterfield envisioned could have been constructed before the
taking would have to be reduced about 64 percent in building
size, resulting in a difference of about $55,000 in potential
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lost rents. Gruelle stated that his damage estimate of
$120,000 to the residue was supported by "the test of market
impact and the test of market perception based on [his]
discussions with the brokers and developers and people that
[he] discussed this with, again, looking at that percentage.
These were the component parts that could relate to that
percentage indicating the overall damage impact of
[$]120,000."
The City argued in the circuit court that the landowners'
evidence of damages was speculative. The circuit court
disagreed with the City and in a written letter opinion, which
was made a part of the court's final order, the court accepted
Gruelle's conclusion that the damage to the residue was
$120,000. The City appeals.
III.
The City argues that the circuit court erred "by
admitting evidence of, and finding damage based on
. . . development plans, and expert opinions based on those
plans, even though the plans did not take all current
circumstances into consideration and depended upon future
approvals, which were out of the landowners' control."
Continuing, the City contends that the landowners' damages
were speculative because they were based in part upon future
rents of a "hypothetical building." Also, the City asserts
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that certain damages that the circuit court included in its
award were remote and speculative. Included in the damage
award were a $25,000 reserve account for future prospective
environmental damage caused by the detention pond and $40,000
for monitoring for early detection of such prospective
environmental damage.
Responding, the landowners contend that the evidence of
damages was not speculative and that they presented evidence
of the highest and best use of the residue affected by the
taking. The landowners also argue that the circuit court
properly considered the negative impact of the detention pond
upon the property and that the evidence of damages caused by
this negative impact was not speculative. We disagree with
the landowners.
The principles that we apply in our resolution of this
appeal are well established.
"In every eminent domain case involving a
partial taking, the measure of damages to the
residue of the property not taken is the difference
in the fair market value of the residue immediately
before and immediately after the taking. In
ascertaining such damages, both present and future
circumstances which actually affect the value of the
property at the time of taking may be considered,
but remote and speculative damages may not be
allowed. Colonial Pipeline v. Lohman, 207 Va. 775,
781, 152 S.E.2d 34, 39 (1967); Ryan v. Davis, 201
Va. 79, 82, 109 S.E.2d 409, 412 (1959); Appalachian
Elec. Etc., Co. v. Gorman, 191 Va. 344, 353, 61
S.E.2d 33, 37 (1950)."
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East Tennessee Natural Gas Co. v. Riner, 239 Va. 94, 100, 387
S.E.2d 476, 479 (1990); accord Wammco, Inc. v. Commonwealth
Transp. Comm'r, 251 Va. 132, 137, 465 S.E.2d 584, 586 (1996);
Chappell v. Virginia Electric and Power Co., 250 Va. 169, 172,
458 S.E.2d 282, 284 (1995); Town of Rocky Mount v. Hudson, 244
Va. 271, 273, 421 S.E.2d 407, 408 (1992); State Hwy. & Transp.
Comm'r v. Lanier Farm, Inc., 233 Va. 506, 510-11, 357 S.E.2d
531, 533-34 (1987).
We have repeatedly emphasized that a landowner whose
property is affected by a partial taking may not recover
damages to the residue if such damages are remote or
speculative. Id.; accord Revocor Corp. v. Commonwealth
Transp. Comm'r, 259 Va. 389, 394, 526 S.E.2d 4, 7-8 (2000);
Lynch v. Commonwealth Transp. Comm'r, 247 Va. 388, 391, 442
S.E.2d 388, 389-90 (1994). For example, we held in Tidewater
Railway Co. v. Cowan, 106 Va. 817, 822, 56 S.E. 819, 820
(1907), that damages to the residue resulting from a partial
taking are those that flow directly from the taking and not
damages that are merely speculative.
Applying these principles, we hold that the landowners'
evidence of damages to the residue was speculative and remote.
The office building that Porterfield "envisioned" could have
been constructed upon the land before the taking was the
product of pure speculation, as were the lost profits caused
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by a decrease in the rents because of a reduction in the size
of this hypothetical building. * This hypothetical building
could not have been constructed unless and until the City
approved zoning changes to the property. Additionally, prior
to construction of this hypothetical building, the City would
have been required to approve a sewage treatment system and a
site plan.
We recognize that the landowners' appraiser, Gruelle,
testified that the residue was damaged by 11 percent of the
value of the property, which also totals $120,000, the amount
of the circuit court's award. However, this opinion was
speculative because it was, in part, based upon the existence
of the hypothetical building and rents that would accrue from
that building.
We also hold that the circuit court should not have
considered, in its award of damages to the residue, evidence
that pollution spills might occur and contaminate the residue
due to a potential failure of the detention pond. Jeffrey
Hammaker, who testified on behalf of the landowners, conceded
that contamination of the residue would only be caused by acts
of negligence or criminal activity. Not only was this
evidence of possible contamination speculative, but we have
*
We also observe that the City paid the landowners the
full value for the land where the hypothetical office building
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consistently held that the "eminent domain provisions in the
Virginia Constitution have no application to tortious or
unlawful conduct, whether by contractors engaged in
constructing public improvements, Ryan v. Davis, 201 Va. 79,
83, 109 S.E.2d 409, 413 (1959), governmental agents, Eriksen
v. Anderson, 195 Va. 655, 657-59, 79 S.E.2d 597, 598-600
(1954), or third parties who are strangers to the condemnation
proceedings, Highway Commissioner v. Crockett, 203 Va. 796,
801, 127 S.E.2d 354, 358 (1962)." Lanier Farm, 233 Va. at
511, 357 S.E.2d at 534.
We agree with the landowners that they are entitled to
recover appropriate damages "flowing directly from the
taking," id., and that the circuit court must consider the
highest and best use of the property. However, these
principles do not relieve the landowners of their burden to
prove damage to the residue with evidence that is neither
speculative nor remote.
Contrary to the landowners' assertion, our decision in
Revocor does not support their contention that they presented
appropriate evidence of damage to the residue. In Revocor, we
considered whether a circuit court properly excluded evidence
of adjustment costs as a factor to be considered by the
commissioners in determining damage to the residue of the
would have been located.
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property. The landowner in Revocor presented testimony that
as a result of the taking, the costs of developing a
residential parcel had increased because of the necessity to
construct a road through a marshy portion of the property with
undesirable topography. 259 Va. at 391-92, 526 S.E.2d at 6-7.
We pointed out that in determining the diminution of the
market value of the residue or damages thereto, a court should
consider the expense made necessary by reason of the
improvement in adjusting the property to the changed
conditions caused by the taking. Id. at 394, 526 S.E.2d at 8.
Unlike the landowner in Revocor, the landowners in this case
do not seek damages for increased development costs. Rather,
the landowners in this case seek to recover speculative rents
for a building that one of their expert witnesses had
"envisioned" might have been constructed on the residue even
though the expert witness concedes that the building could not
be constructed without a change in the property's zoning
classification and certain approvals from the City.
We recognize, as the landowners in this case properly
observe, that in Pruner v. State Highway Commissioner, 173 Va.
307, 310, 4 S.E.2d 393, 394 (1939), we held that in a
condemnation proceeding, the trier of fact "charged with
determining the value of land which is being taken by eminent
domain [must] consider all uses to which it may be reasonably
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adapted and to award compensation upon the basis of its most
advantageous and valuable use, having regard to the existing
business demands of the community or such as may be reasonably
expected in the immediate future." However, the landowners
neglect to mention that we also stated in Pruner that
"[p]urely imaginative or speculative value should not be
considered." Id. at 311, 4 S.E.2d at 394. In this case, the
landowners' purported damages to the residue, consisting of
lost rents from an "envisioned" building, possible future
contamination of a detention pond due to negligent or criminal
acts, and the cost of monitoring such pond, are speculative
and cannot be recovered.
In view of our holdings, we need not consider the
litigants' remaining contentions. Accordingly, we will
reverse the judgment of the circuit court, and we remand the
case for further proceedings consistent with this opinion.
Reversed and remanded.
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