United States Court of Appeals
For the First Circuit
No. 02-1369
PORTLAND NATURAL GAS TRANSMISSION SYSTEM;
MARITIMES & NORTHEAST PIPELINE, L.L.C.,
Plaintiffs, Appellants,
v.
19.2 ACRES OF LAND, MORE OR LESS, IN HAVERHILL, MA;
11.36 ACRES OF LAND, MORE OR LESS, IN HAVERHILL, MA;
9.92 ACRES OF LAND, MORE OR LESS, IN HAVERHILL, MA;
WBC EXTRUSION PRODUCTS, INC.;
FLEET BANK OF MASSACHUSETTS, N.A.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
Before
Boudin, Chief Judge,
Torruella, Circuit Judge,
and Cyr, Senior Circuit Judge.
James T. Finnigan, with whom Rich May, PC was on brief, for
appellants.
James D. Masterman, with whom Richard D. Vetstein and
Masterman, Culbert & Tully, LLP were on brief, for appellee WBC
Extrusion Products, Inc.
January 31, 2003
TORRUELLA, Circuit Judge. The Fifth Amendment permits
the federal government to take personal property for public use,
but requires payment of "just compensation." Plaintiffs-
appellants, Portland Natural Gas Transmission System and Maritimes
& Northeast Pipeline, L.L.C. ("the Pipeline Companies"), took by
eminent domain temporary and permanent easements on land in
Haverhill, Massachusetts owned by defendant-appellee, WBC Extrusion
Products, Inc. ("WBC"), to construct, operate and maintain a
pipeline as permitted by the Natural Gas Act, 15 U.S.C. § 717f(h).
A bench trial was held in the United States District Court for the
District of Massachusetts to determine the amount of compensation
due. The court determined that WBC was entitled to $152,677 plus
interest. The Pipeline Companies appeal, claiming that the amount
is not justified by the evidence produced at trial. We affirm.
I. Background
The facts of this dispute are detailed in the district
court's opinion, Portland Natural Gas Transmission Sys. v. 19.2
Acres of Land, 195 F. Supp. 2d 314, 316-19 (D. Mass. 2002), and we
repeat only those necessary to our decision. At the time of the
taking, WBC owned two parcels totaling approximately seventy-six
acres. Parcel 1 was divided into eight lots to be used for an
industrial park; Parcel 2 was a non-buildable vacant lot. WBC
occupied Lot 7 in Parcel 1, and the other seven were empty and for
sale. The permanent gas pipeline easement is fifty feet wide and
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runs through Lots 1 and 8 on Parcel 1 and through Parcel 2,
encumbering approximately 2.37 acres total. The temporary easement
ran along a similar path, reaching approximately 2.10 acres total.
II. Standard of Review
We review the district court's findings of facts,
including the amount of compensation due, for clear error. Fed. R.
Civ. P. 52(a); S. Nat. Gas Co. v. Land, Cullman County, 197 F.3d
1368, 1372 (11th Cir. 1999) ("This court reviews the district
court's determination of just compensation for clear error.");
Puerto Rico Ports Auth. v. M/V Manhattan Prince, 897 F.2d 1, 3 (1st
Cir. 1990). Our job is not to weigh the evidence anew, but simply
to determine whether the decision reached by the trial court is
"plausible in light of the record viewed in its entirety."
Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985). The
fact that the ruling was substantially based on physical or
documentary evidence, rather than credibility determinations, does
not alter our deferential analysis. Id. Any rulings of law are
subject to de novo review. United States v. Mass. Water Res.
Auth., 256 F.3d 36, 47 (1st Cir. 2001).
As this case is fact intensive, we note that the
appellant has a difficult task of overcoming the trial court's
findings. Determining the value of real estate is not a science,
and the decision of a lower tribunal is ordinarily not disturbed
unless "grossly inadequate or excessive." 4A Julius L. Sackman,
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Nichols on Eminent Domain § 17.1[4], 23.01 (rev. 3d ed. 2001)
(hereinafter Nichols on Eminent Domain).
III. Discussion
The land taken by the Pipeline Companies is in
Massachusetts, and the district court applied Massachusetts law to
determine the just compensation to which WBC was entitled. As the
parties do not contest this choice of law and there is no
indication that it makes any difference as to any of the contested
issues, we accept this premise without necessarily endorsing it.1
Under Massachusetts law, just compensation is defined as
the value [of the land] before the recording
of the order of taking, and in case only part
of a parcel of land is taken there shall be
included damages for all injury to the part
not taken caused by the taking or by the
public improvement for which the taking is
made.
Mass. Gen. Laws ch. 79, § 12 (2002). Therefore, although the
easement did not abrogate all of WBC's bundle of rights, WBC is
entitled to compensation for the decrease in value of the land
1
The federal eminent domain statute involved here provides that
"[t]he practice and procedure in any action or proceeding for
[eminent domain] in the district court of the United States shall
conform as nearly as may be with the practice and procedure in
similar action or proceeding in the courts of the State where the
property is situated." 15 U.S.C. § 717f(h). Perhaps surprisingly,
several circuits have read the phrase "practice and procedure" to
encompass state substantive law as well as formal practice. See,
e.g., Columbia Gas Transmission Corp. v. Exclusive Natural Gas
Storage Easement, 962 F.2d 1192, 1194-99 (6th Cir. 1992). For the
reasons indicated, we need not pursue this interesting subject in
the present case.
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encumbered by the easement as well as the decrease in value of the
other land on the lots, or the "remaining land." In addition, WBC
is entitled to compensation for the temporary easement, or the two
years when the Pipeline Companies were using part of WBC's land for
construction of the pipeline. The compensation awards for these
three areas -- the encumbered land, the remaining land, and the
land temporarily taken -- are the subject of this appeal.
A. Encumbered and Remaining Land
In 1998, the Pipeline Companies promulgated "Requirements
for Construction On or Near Company Facilities" (the
"Requirements") to protect their pipelines from encroachment and
disturbance caused by construction activity on or near the
easement. WBC claimed that the easement together with the
Requirements rendered the permanent easement area worthless.2 The
Pipeline Companies' expert testified that the encumbered land was
still useful and retained fifty percent of its value. The district
court found that the Requirements diminished the value of the
encumbered land beyond the Pipeline Companies' suggestion of fifty
percent. The court found that "a potential buyer who has read [the
Requirements] would be likely to fear a substantial degree of
infringement on the land encumbered by a permanent easement," and
2
The district court's determinations that the highest and best
use of Lots 1 and 8 is industrial use, and the highest and best use
of Parcel 2 is open land, as well as its determination of the per
acre value of the land, are not challenged.
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determined that the encumbered land was reduced in value by
seventy-five percent. Portland Natural Gas, 195 F. Supp. 2d at
324. The court also determined that the Requirements reduced the
value of the remaining land by ten percent because "[a] reasonable
buyer, after reading the [Requirements], would almost certainly
anticipate that building in the vicinity of the easement areas of
Lots 1 and 8 would involve extra administrative 'hassle,' and
possible extra construction expenditures." Id. at 324. The
Pipeline Companies argue that the diminution of the encumbered land
is only fifty percent and that there is no diminution of the
remaining land. The Pipeline Companies claim that (1) the damages
theory employed by the district court was not litigated and
therefore constituted unfair surprise, and (2) there was no
evidence that the Requirements diminished the value of the
encumbered or remaining land.
1. Unfair Surprise
The Pipeline Companies claim that the effect of the
Requirements on the value of the land was not litigated and was not
considered an issue by the Pipeline Companies, and that they were
therefore unfairly surprised and prejudiced when the district court
awarded damages based on the Requirements. Appellants assert that
the unfair surprise necessitates a new trial and that the district
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court lacked authority to enter judgment on the issue because it
had not been squarely litigated.3
The record indicates that the parties addressed the
Requirements issue in their motions and papers before the court.
WBC stated that the Requirements diminished the value of the land
in question, while appellants emphasized that the effect of the
Requirements can only be determined on a case by case basis. A
motion in limine discussed and included the Requirements.
The Requirements issue also consumed extensive time at
trial. In his opening statement, WBC's counsel stated that the
Requirements would be discovered by a reasonably prudent buyer, and
that the "nub of the dispute" was what that buyer would do when
faced with the Requirements. The Requirements were introduced into
evidence without objection and outlined by Franklin Gessner, a
witness for appellants. The Pipeline Companies' expert, Steven
Foster, had not been provided with the Requirements before making
his estimation of damages, and stated that his figures might have
been different had he considered the Requirements. The judge
directly asked Foster several questions about a possible diminution
associated with the increased construction costs and the hassle of
dealing with the Pipeline Companies due to the Requirements.
3
We note, without reaching the issue, that appellants' failure to
ask for a continuance may be fatal to their claim of unfair
surprise. See United States v. Díaz-Villafañe, 874 F.2d 43, 47
(1st Cir. 1989) (suggesting that unfair surprise may usually be
cured by a request for a continuance).
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Foster responded that "on a rational level . . . there would be
[diminution]," although stating that he did not have market data to
verify the judge's intuition. Finally, during appellants' closing
argument, the judge stated that "the ordinary and reasonable person
reading [the Requirements] would read them and say: I've got to
worry about them." With the plethora of evidence to the contrary,
the Pipeline Companies' argument that they were prejudicially
surprised when the court determined diminution in value based on
the effect of the Requirements must fail.
2. Impact of the Requirements
Under Massachusetts law, WBC is entitled to recover for
all incidental effects of the public improvement that impair the
value of its land. Roman Catholic Bishop v. Commonwealth, 392 N.E.
2d 829, 831 (Mass. 1979). This includes not only the lost value of
the encumbered land, but any "damages to the remainder that are to
be reasonably anticipated from use of the property for the purpose
for which the condemnation is made." Nichols on Eminent Domain
§ 14A.06[3]. Eminent domain is a concept of equity and fairness,
and the law attempts to make the landowner whole. Id. at
14.02[1][a].
The district court found the encumbered land to be
diminished by seventy-five percent, based in part on the effect of
the Requirements. The court also determined that the Requirements
reduced the value of the remaining land on Lots 1 and 8 by ten
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percent. This was based on the court's view that "[p]otential
buyers may reasonably fear that the presence of underground
pipelines on their property may make commercial construction more
costly and inconvenient on the adjacent land." Portland Natural
Gas Transmission Sys., 195 F. Supp. 2d at 325. Appellants claim
that there was no basis for determining by what precise amount or
percentage the Requirements adversely affected the value of the
land.
The trier of fact is "authorized to determine damages in
an amount to which no expert testified by rejecting the precise
amounts to which each expert testified." Nichols on Eminent Domain
§ 17.1; see also Loschi v. Mass. Port Auth., 282 N.E.2d 418, 419-20
(Mass. 1972) (upholding a jury verdict in excess of expert
testimony because fact-finder could also consider photographs and
other witness testimony). The judge was entitled to reject the
experts' valuation and to use her independent judgment to determine
value. Piemonte v. New Boston Garden Corp., 387 N.E.2d 1145, 1152
(Mass. 1979). The court considered the Requirements themselves,
photographs, and expert and lay testimony in determining that the
value of the Requirements had a negative impact on the value of the
land. Its decision as to the extent of the resulting diminution in
value was not clearly erroneous.
A reading of the Requirements supports the court's
determination that the Requirements would decrease the price a
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reasonable buyer was willing to pay for the land. The Requirements
provide that the encumbered land may not be used for structure,
storage, or trees. Further, a landowner must submit proposed plans
to the Pipeline Companies for authorization before beginning any
work on or near the easement. Approval is also required for many
other uses that would commonly be undertaken on a vacant industrial
lot, including grade reduction, movement of heavy equipment across
the easement, installation of electrical cables, power lines, and
telephone lines, and blasting and excavation. Finally, the
Pipeline Companies "reserve[] the right to set forth additional
requirements if deemed necessary."
The Pipeline Companies assert that the Requirements do
not impact the land's value because prospective buyers may choose
to use the land in a way that conforms with the Requirements. We
find the existence of such a buyer doubtful given the breadth of
the Requirements and appellants' discretion to modify them as it
wishes. In addition, prospective owners would have to deal with
the added burden of obtaining approval from the easement holder
before undertaking any work on the vacant lot. The inference that
the Requirements impact the property's value is common sense: if a
similarly-situated industrial lot exists that is free from the
pipeline easement and the Requirements that go along with it, a
potential buyer will likely forego the WBC lot in favor of the
unencumbered lot. Therefore, WBC must lower its price to attract
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buyers. This is a logical consideration, and the fact that no
expert spelled out this exact argument does not mean the judge
could not arrive at it on her own.
The court heard conflicting evidence regarding the extent
of the impact of the easement and Requirements on the land. The
Pipeline Companies' expert testified based on "experience and
judgment" that the encumbered land was reduced in value by fifty
percent, although he admitted that there is no standard in the
industry for determining diminution and that he had heard of
different valuations in other cases, ranging from forty to seventy-
five percent. This expert, however, did not have the benefit of
the Requirements when making his estimate, as they were not
provided to him by the Pipeline Companies. A witness for WBC
stated that he believed the Requirements negatively impacted the
land. Witnesses also debated what administrative burden the
Requirements would place on a landowner.
In light of all the evidence, the district court, acting
as fact-finder, "made its determination[] based on its reasonable
assessment of the conflicting evidence before it." Northeast
Drilling, Inc. v. Inner Space Servs., Inc., 243 F.3d 25, 34 (1st
Cir. 2001). The court's determination was not clearly erroneous.
B. Temporary Easement
WBC's expert opined that the temporary easement
effectively delayed the sale of, and any development on, the lots
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for the full two-year period. He testified that developers had
verified this hypothesis, stating that so long as unencumbered lots
were available, buyers would go elsewhere. The Pipeline Companies
urged the court to simply award the rental value for those sections
of each lot taken temporarily. The court did so but also awarded
six months rental value for all of Lots 1 and 8. The Pipeline
Companies challenge this additional award.
Compensation for a temporary taking is generally
determined by "(1) ascertaining the value of the property for the
period it is held by the condemnor; (2) ascertaining the difference
in the value of the property before and after the taking; or (3)
looking at the fair market rental value of the property during the
time it was taken." Nichols on Eminent Domain § 12E.01[1].
We find the district court's determination a reasonable
ascertainment of the value of the property taken. The court heard
testimony that prospective buyers desire to begin construction
within twelve months, and the court found that construction on
WBC's land generally would begin within eighteen months of
purchase. Because the Pipeline Companies required access to a
portion of the land, development likely could not begin until the
end of the temporary easement. Thus, a potential buyer would wait
until six months after the temporary taking had begun before
purchasing the property, or would adjust his offer to reflect this
waiting time.
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IV. Conclusion
We affirm the decision of the district court determining
just compensation. Costs are granted to appellee.
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