Saturday, October 11, 2014

Sometimes Trial Courts Really Get It Wrong; Or, That’s Why We Have Appellate Courts

I am now comfortably settled into my new professional home and, with the onset of fall, the appellate courts are back in the business of providing me with blog fodder – also known, more formally, as issuing written decisions in furtherance of their constitutional and statutory obligations to decide cases.  So, let’s get to it with a decision that has me wondering how the trial court could have possibly reached the decision it did.

The subject of today’s post comes to us courtesy of the Massachusetts Appeals Court in the form of Rodman v. Commonwealth, No. 12-P-223, an eminent domain case decided last week.  In Rodman, the Commonwealth’s Department of Highways took by eminent domain a portion of the plaintiffs’ land in 2001 in order to complete an elevated vehicle/pedestrian ramp extending from the large complex then being constructed across U.S. Route 1.  At the time of the taking, a portion of the property had been used for many years as a temporary parking lot, but the remainder was undeveloped.  Dissatisfied with the amount of the Commonwealth’s pro tanto award, the plaintiffs filed suit seeking more, but were ultimately awarded less.

The appeal centered on the Superior Court’s exclusion of evidence offered by the plaintiffs on the issue of fair market value, which consisted of plans for the potential development of the property for hotel, manufacturing, and warehouse uses.  Two of the Commonwealth’s arguments, accepted by the Superior Court, were that:  (1) since the property was essentially vacant and there were no pre-taking plans to develop it, the property had to be valued consistently with comparable sales of similar, large undeveloped parcels; and (2) the potential hotel, manufacturing, and warehouse uses were not permitted as of right in the applicable zoning district. 

In its decision, the Appeals Court provided a nice synopsis of Massachusetts law regarding the determination of fair market value in eminent domain cases.  The court noted that fair market value is based on “the highest price that a hypothetical arm’s-length willing buyer would pay to a hypothetical willing seller in a free and open market, based on the highest and best use of the property.”  It then followed up by pointing out that the concept of “highest and best use” is not limited to consideration of the then-current use, but also takes into account “potential uses [] that a reasonable buyer would consider significant in deciding how much to pay.”1

Having established that the concept of fair market valuation is based on a hypothetical transaction giving due regard to potential uses that could reasonably be made of the property, it should come as no surprise that the Appeal Court rejected the Superior Court’s analysis – or what I will call the “of course you should ignore the construction of the gigantic, half-billion dollar stadium across the street” method of valuation. Indeed, the court had little trouble concluding that a reasonable buyer interested in purchasing property across the street from Gillette Stadium would have explored the property’s development potential in determining how much to pay for it, particularly where that the zoning district’s stated goal was to “allow[] flexibility in facilitating economic development of the ‘Route One corridor.’”

The court had only slightly more difficulty dispatching the notion that only uses allowed as of right in the zone could be considered. The court stated that the hotel, manufacturing, and warehouse uses contemplated the by the plaintiffs were allowed in the zone by special permit and that there was testimony in the record to the effect that a request for such a permit would likely be granted since no waivers or other zoning relief would be necessary. The court further noted that a reasonable buyer would account for the uncertainty of obtaining such a permit by discounting for what it called “futurity and likelihood” in determining the amount it is willing to pay and that the jury could account for this in arriving at a valuation.

Frankly, given the state of Massachusetts law regarding “fair market value” and “highest and best use,” I don’t see how the Appeals Court could have done anything other than vacate the Superior Court’s decision, which effectively prevented any consideration of the property’s development potential on the question of its value. So, my friends, Rodman is as good an example as any why we have (and need) appellate courts; it will be interesting to see how it all plays out on remand.


1 Maine law appears to be in accord.  See Curtis v. Maine State Highway Comm’n, 160 Me. 262, 266-68, 203 A.2d 451, 453-54 (1964).

No comments:

Post a Comment