National Railroad Passenger Corp. v. Certain Temporary Easements Above the Railroad Right of Way

United States Court of Appeals
For the First Circuit

No. 03-1248

NATIONAL RAILROAD PASSENGER CORPORATION,

Plaintiff, Appellant,

v.

CERTAIN TEMPORARY EASEMENTS ABOVE THE RAILROAD RIGHT OF WAY
IN PROVIDENCE, RHODE ISLAND; CAPITAL PROPERTIES, INC.,

Defendants, Appellees.

No. 03-1249

NATIONAL RAILROAD PASSENGER CORPORATION,

Plaintiff, Appellant,

v.

CERTAIN PERMANENT EASEMENTS ABOVE THE RAILROAD RIGHT OF WAY AND
26,859 SQUARE FEET, BOTH IN PROVIDENCE, RHODE ISLAND;
CAPITAL PROPERTIES, INC.,

Defendants, Appellees.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

(Hon. Ronald R. Lagueux, U.S. District Judge)

Before

Boudin, Chief Circuit Judge,
Selya, Circuit Judge,
and Stahl, Senior Circuit Judge.
 Eric W. Wodlinger, with whom Johanna W. Schneider and Choate,
Hall & Stewart, were on brief for appellant.

Gerald J. Petros, with whom Charles D. Blackman and Hinckley
Allen & Snyder, were on brief for appellees.

January 28, 2004
 STAHL, Senior Circuit Judge. Plaintiff-appellant

National Railroad Passenger Corporation (Amtrak) appeals from just

compensation awards by the district court in connection with the

condemnation of two parcels of land in Providence, Rhode Island

formerly owned by defendant-appellee Capital Properties, Inc.

(CPI). In addition to challenging the monetary awards, Amtrak

contends that the district court erred by allowing CPI to call

Amtrak's retained expert appraiser and examine him as a hostile

witness during CPI's case-in-chief. Finding no merit in any of

appellants' arguments, we affirm the district court's awards.

I. BACKGROUND

In 1979, the State of Rhode Island and City of Providence

adopted the Capital Center Plan, a major effort to redevelop the

city's central business district. One of the primary aims of the

Plan was for Amtrak, which owned and operated a railroad station in

Providence, to relocate the mainline railroad tracks serving the

city, thereby enabling a considerable expansion of downtown

Providence with the creation of several parcels of waterfront

property. A large tract of land encompassing the mainline railroad

tracks and adjacent properties was designated as "Parcel 6" in the

Plan. Parcel 6 contains three subparcels: Parcels 6A, 6B, and 6C.

This appeal concerns the damages awarded to CPI following Amtrak's

condemnation of 6B and 6C pursuant to its eminent domain power.

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 Parcel 6B is the railroad corridor that runs northerly

from the Providence Railroad Station to the Smith Street overpass.

It consists of approximately 81,575 square feet or somewhat less

than two acres. In order to facilitate the Capital Center Plan, it

was necessary for Amtrak and other property owners to make certain

transfers with respect to 6B. In 1978, Providence and Worcester

Company ("P&W"), CPI's predecessor in interest, conveyed what is

now Parcel 6B to Amtrak. In the same deed, P&W acquired air rights

beginning at a horizontal plane thirty feet above the top of the

highest rail of the then-existing rail tracks, as well as

subsurface rights in 6B to lay foundations and erect support

systems so that P&W could build structures above the tracks. In

1987, Amtrak granted CPI, now having succeeded P&W through merger,

further air rights above the railroad tracks in 6B--this time

beginning at nineteen feet and three inches above the railroad

tracks--in addition to subsurface rights similar to those conveyed

in the 1978 deed (collectively, the "Air Rights"). At the same

time, in an effort to further clarify its remaining interest in 6B,

Amtrak reserved unto itself the railroad right of way in 6B so that

it could reconstruct and relocate its tracks consistent with the

overall development of the Capital Center Plan.

Parcel 6C, which consists of approximately 26,947 square

feet, is an adjacent strip of land to the railroad right of way and

lies between Parcel 6B and Gaspee Street. Parcel 6A, also adjacent

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to the railroad right of way, lies between 6B and the Moshassuck

River. By far the largest of the three subparcels, it covers

approximately 276,037 square feet or almost six and a half acres.

By a deed dated July 2, 1990, CPI acquired both 6A and 6C from the

Rhode Island Port Authority and Economic Development Corporation

(EDC).

Both condemnation actions emanated from a prior action

for trespass and ejectment brought by CPI against Amtrak seeking

the removal of structures erected by Amtrak along the railroad

corridor that encroached into the granted Air Rights and Parcel 6C.

During the pendency of the trespass action, Amtrak erected poles

required for its high-speed rail service through the railroad

corridor. In April 1999, CPI amended its complaint demanding that

Amtrak lower or remove the poles entirely and eliminate other

encroaching structures. CPI moved for a preliminary injunction in

June 1999. On July 19, 1999, shortly before the preliminary

injunction hearing, Amtrak condemned "certain temporary easements"

in the Air Rights for a period of three years, thereby mooting

CPI's pending motion for ejectment. Amtrak also deposited $335,000

into the Registry of the court as its estimate of the fair market

value of the temporary taking of the Air Rights. CPI answered

Amtrak's complaint for the temporary taking and also claimed

severance damages to Parcel 6C.

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 On May 3, 2001, near the end of the temporary taking

period, Amtrak permanently condemned both the Air Rights and Parcel

6C, depositing an additional $923,000 into the Registry of the

court as its initial estimate of the fair market value of the

permanent taking.

On Amtrak's motion, the district court consolidated the

two condemnation actions and then conducted a bench trial over a

six-day period in November 2002. At trial, both Amtrak and CPI

presented evidence of the fair market value of the temporary and

permanent takings through expert testimony. Amtrak relied on

William Coyle, an expert appraiser, while CPI relied on both Coyle

and Mark Bates, another appraiser. Coyle and Bates agreed that the

highest and best use of 6C and the Air Rights was for mixed

residential, office, and support retail purposes. They also agreed

that 6C would only be developed in conjunction with 6B, a

conclusion that followed from the Capital Center Design and

Development Regulations which provided that "Parcel 6 shall not be

developed unless Parcel 6B is developed." Capital Center

Commission (CCC) Regulations, § 5.6.9 (as amended Dec. 14, 1989).

Finally, the two experts agreed as to the fee values of both

parcels.

The district court concluded that (1) the value of the

temporary taking of the Air Rights was $399,381; (2) CPI suffered

severance damages to 6C in the amount of $60,000 during the

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temporary taking; (3) the fair market value of the permanent taking

of the Air Rights as of May 3, 2001 was $1,435,685; and (4) the

fair market value of 6C as of May 3, 2001 was $741,043.

II. DISCUSSION

We review a district court's determination of just

compensation for clear error. See Portland Natural Gas

Transmission Sys. v. 19.2 Acres of Land, 318 F.3d 279, 281 (1st

Cir. 2003). "Determining the value of real estate is not a

science, and the decision of a lower tribunal is ordinarily not

disturbed unless it is 'grossly inadequate or excessive.'" Id.

(quoting 5 Sackman, Nichols on Eminent Domain, §§ 17.1940, 23.01

(3d ed. 2001)).

As the claimant in an eminent domain case, CPI had the

burden of proof before the district court to establish that its

estimate of fair market value of the property was accurate. United

States v. 174.12 Acres of Land, More or Less, in Pierce County,

State of Wash., 671 F.2d 313, 314 (9th Cir. 1982). Fair market

value is based on the highest and best use of the property taken by

eminent domain, see United States v. 125.07 Acres of Land, More or

Less, Situated in Towns of Truro and Wellfleet, Barnstable County,

Commonwealth of Mass., 667 F.2d 243, 249 (1st Cir. 1981), and is

determined as of the time of the taking. United States v. Dow, 357

U.S. 17, 23 (1958). The term "highest and best use" corresponds to

"[t]he highest and most profitable use for which the property is

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adaptable and needed or likely to be needed in the reasonably near

future . . . to the full extent that the prospect of demand for

such use affects the market value while the property is privately

held." Olson v. United States, 292 U.S. 246, 255 (1934); 125.07

Acres of Land, 667 F.2d at 249.

Amtrak's appeal boils down to two contentions: (1) that

restrictions placed on 6C by the July 2, 1990, deed as well as

local regulations render legally impermissible the "highest and

best use" adopted by the district court for 6C and the Air Rights;

and (2) that past problems with developing the properties render

the adopted "highest and best use" economically infeasible.

Because neither argument has merit, we find no clear error in the

district court's awards.

A. Parcel 6C

Both experts testified that the highest and best use of

6C was for apartments, offices, or retail, and that there would be

demand for these uses in the future. In addition, Alex Krieger, a

Harvard professor of urban planning called by Amtrak as an expert

testified that based on his experience with the Capital Center

Commission, he agreed that this was the best and highest use for

the property. Based on this agreed-upon highest and best use for

6C, the district court awarded damages for the permanent taking of

6C and severance damages to 6C during the temporary taking of 6B.

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 Amtrak contends that because of use restrictions imposed

by the EDC in the deed to CPI, 6C had no permissible use until

2017. The deed contains a restrictive covenant which provides that

the parcel "may be used only for, or in connection with, the

construction and operation of a parking garage containing not less

than 700 parking spaces, all or a portion of which will be located

over all or a portion of the Railroad Corridor . . . ." In

addition, Amtrak points to Capital Center Commission regulations

governing the parcels, which specifically forbid the construction

of a parking garage on 6C, see CCC Regulations, § 5.6.2, and

establish that "Parcel 6C shall not be developed unless Parcel 6B

is developed." Id. at § 5.6.9. Hence, Amtrak argues, the parcel

has no permissible use and that any damages awarded with respect to

6C were erroneous.

The July 2, 1990, deed from the Rhode Island EDC

envisions two distinct development alternatives for Parcels 6B and

6C:

[N]otwithstanding anything to the contrary in
this paragraph, if Grantee (a) shall construct
an alternate parking garage containing no less
than 700 spaces on Parcel 6, as shown on the
Capital Center Plan . . . ., and (b) shall use
the Premises in conjunction with the Air
Rights, Grantee shall have the right to use
the premises for any other lawful use or
purpose.

CPI either could have developed 6B and 6C together as a parking

facility or could have developed them together "for any lawful use"

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so long as it provided seven hundred parking spaces on Parcel 6A.

Amtrak's rejoinder that CPI failed to prove that it had actual

plans to build the parking lot on 6A is irrelevant. See 125.07

Acres of Land, 667 F.2d at 249 (landowner's subjective intended use

is irrelevant to "highest and best use" determination; moreover,

just compensation includes "any additional market value [the

property] may command because of the prospects for developing it to

the 'highest and best use' for which it is suitable"). It does not

matter whether CPI had blueprints ready or otherwise knew how it

intended to develop 6C and the Air Rights. Nor did the "highest

and best use" adopted by the district court amount to "mere

speculation," Tenn. Gas Pipeline Co. v. 104 Acres of Land More or

Less, in Providence County of State of R.I., 780 F. Supp. 82, 86

(D.R.I. 1991), as experts for both parties agreed that a mixed use

development on the parcels was reasonably definite in the future.

Moreover, Amtrak's own appraisal of 6C does not reduce

the value of 6C on account of the restrictive covenant contained in

the 1990 deed. Coyle mentions the deed restriction in neither of

his reports and never figured the restriction into his calculations

of fair market value. As Amtrak's own expert, he apparently felt

that the restriction had no meaningful impact on 6C's value, which

is consistent with eminent domain principles. See 4 Sackman,

Nichols on Eminent Domain, § 12C.02 at 12C-57 (where condemnation

proceedings are in rem, a just compensation award is based on the

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value of the unrestricted fee). Instead, the record amply shows

that both experts anticipated a coordinated development involving

6A, 6B, and 6C with a parking garage being built on 6A.

Amtrak also points to the Capital Center Commission

regulations, which specifically forbid the construction of a

parking garage on 6C. See CCC Regulations, § 5.6.2. They argue

that in tandem with the deed, the lot is then reduced to no

permissible use. See Ocean Rd. Partners v. State, 670 A.2d 246,

250 (R.I. 1996) (a trial judge may consider the value of a property

for a use not permitted by existing land regulations only when a

claimant has met its burden of demonstrating it is reasonably

probable that the proscribed use will be allowed in the near

future); Palazzi v. State, 319 A.2d 658, 661-62 (R.I. 1974) (same).

Amtrak claims that CPI failed to demonstrate a reasonable

probability that the Capital Center Commission will liberalize its

regulations governing the use of 6C.

Amtrak's reliance on these regulations again misses the

fact that the deed allows 6B and 6C to be developed together "for

any lawful use" so long as seven hundred parking spaces are

provided on 6A. Indeed, the Capital Center Commission regulations

list parking as among 6A's "preferred uses." CCC Regulations, §

5.6.2.

Amtrak also challenges whether CPI's purported highest

and best use for the parcel was economically feasible.

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Specifically, Amtrak contends that attempts at building a parking

garage on 6C have been prohibitively expensive and that the

"highest and best use" adopted by the district court would run into

the same problem. Even if in the past it was not feasible to build

a parking garage either on 6B or 6C, this fact, as the district

court stated, is a "red herring" having nothing to do with

determining the value of the parcels. Indeed, Coyle concluded that

constructing a parking garage on 6C or 6B would not be financially

feasible. That is exactly why he did not rely on Amtrak's cost

estimate of building a parking garage on 6C. Instead, he appraised

the value of 6C and the Air Rights based on the feasibility of

building apartments, offices, and retail operations sometime in the

future if 6A was developed for parking.

As both experts agreed that 6C could only be developed in

tandem with 6B, the district court's finding of severance damages

to 6C during the period of the temporary taking of the Air Rights

is also well supported by the record. A property owner is entitled

to recover severance damages for any damage to adjacent properties

caused by a taking. See Baetjer v. United States, 143 F.2d 391,

395 (1st Cir. 1944); United States v. 125.07 Acres of Land, More or

Less, Situated in Towns of Truro and Wellfleet, Barnstable County,

Com. of Mass., 753 F. Supp. 1034, 1048 (D. Mass. 1991). With

regard to these severance damages, Amtrak's contentions that 6C

could not be legally developed for any use before 2017 and that any

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development was economically infeasible are again unavailing for

the same reasons set out supra.

Besides missing the mark with its arguments as to the

legality and economic feasibility of what the district court

concluded to be the highest and best use of 6C, Amtrak did not

offer any evidence of its own suggesting that the highest and best

use was anything other than what both experts continually stated.

Hence, we find no clear error in the district court's awards to CPI

(1) of the fair market fee value of 6C as of May 3, 2001 and (2) of

severance damages to 6C during the temporary taking of the Air

Rights.

B. The Air Rights

At trial, CPI agreed with Coyle's appraisal of the three-

year temporary taking of the Air Rights. The district court took

Coyle's appraisal but adjusted upward by ten percent to account for

a ten percent discount in Coyle's calculation that Coyle himself

could not explain. As for the highest and best use of the Air

Rights, Coyle concluded that such use was for apartments and office

structures. Coyle maintained this conclusion in two separate

reports.

In challenging the district court's awards for the

temporary and permanent takings of the Air Rights, Amtrak repeats

its arguments that because of use restrictions imposed by CPI's

deed and Capital Center Commission regulations, 6C had no

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permissible use until 2017 and that therefore 6C could not be

incorporated into a unified development with 6B. Amtrak claims

that the district court's damage awards for the Air Rights were

erroneous because they were premised on 6B's joint development with

6C. Just as it argued in its challenge to the district court's

award for 6C, Amtrak also claims that CPI's purported highest and

best use for the Air Rights is economically infeasible. For the

reasons set out supra, we find these arguments meritless. The

district court did not clearly err in its awards to CPI (1) of the

fair market value of the temporary taking of the Air Rights and (2)

of the fair market value of the permanent taking of Air Rights as

of May 3, 2001.

C. Order of Witnesses

Decisions regarding the mode and order of witness

questioning lie within the district court's broad discretion, see

Fed. R. Evid. 611(a); Elgabri v. Lekas, 964 F.2d 1255, 1260 (1st

Cir. 1992), but such decisions that result in "undue prejudice to

the appellant's case" merit reversal. Loinaz v. EG & G, Inc., 910

F.2d 1, 6 (1st Cir. 1990).

Over Amtrak's objection, the district court allowed CPI

to call Coyle, Amtrak's retained expert appraiser, during CPI's

case-in-chief, and to examine him as a hostile witness. Amtrak

argues that this ruling constituted an abuse of discretion in that

it permitted CPI to evade its burden of proof with respect to the

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fair market value of the taking of the Air Rights, and hence

materially prejudiced Amtrak in the presentation of its case.

Amtrak relies on Suarez Matos v. Ashford Presbyterian

Cmty. Hosp., 4 F.3d 47 (1st Cir. 1993), in arguing that the

district court should not have allowed CPI to call Coyle during its

case-in-chief. Suarez, however, deals with the propriety of asking

leading questions and cannot be read to bar a party from calling an

adversary's expert witness and treating him as hostile once the

witness is "affirmatively viewable as hostile." Id. at 50. CPI

did not begin its examination of Coyle by asking leading questions,

but instead started with a routine direct examination of Coyle.

Not until it appeared that Coyle was "affirmatively viewable as

hostile" did CPI begin asking leading questions. Indeed, Amtrak

did not raise objections to CPI's questioning of Coyle until CPI

started asking leading questions midway through the examination.

Moreover, CPI listed Coyle as a witness in its pretrial memorandum.

We find that the district court did not abuse its discretion in

allowing CPI to call Coyle during its case-in-chief.

Accordingly, we affirm. Costs are awarded to Capital

Properties, Inc.

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