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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