Opinion
CIVIL ACTION NO. 02-10980-GAO.
August 27, 2007
ORDER
This is an eminent domain action in which the plaintiff, pursuant to statutory authority, condemned permanent and temporary easements over property owned by the defendant, Jack R. Pearl, in order to complete construction of an underground gas pipeline. The issue of just compensation was tried before Judge William G. Young of this Court, sitting with an advisory jury. The advisory jury decided that the amount of just compensation the defendant was entitled to as a result of the takings was $28,000. Judge Young entered an Order for Judgment in that amount, but the order did not contain any specific findings as required by Federal Rule of Civil Procedure 52(a). It was apparently Judge Young's intention to give the parties prompt notice of the outcome and to provide the Rule 52 findings later. Before he could issue the findings, however, it came to his attention for the first time that his recusal was required under 28 U.S.C. § 455(b)(4). He promptly recused himself, and the case was randomly reassigned to me.
The plaintiff has moved pursuant to Federal Rule of Civil Procedure 63 for me, as the substitute judge, to complete the proceedings in the case. I GRANT that motion (dkt. no. 53). In accordance with Rule 63, I certify that I have familiarized myself with the trial record. Specifically, I certify that I have read the transcript of the testimony before Judge Young, as well as the exhibits admitted in evidence and the parties' legal memoranda. While Rule 63 permits me to reopen the evidence or recall witnesses who previously testified, I conclude that, given the nature of the case and the evidence produced in the trial, neither course is necessary nor appropriate.
I make the following findings of fact and conclusions of law:
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The Parties and the Property
Maritimes Northeast Pipeline, L.L.C. ("Maritimes") is a natural gas company as defined by § 2(6) of the Natural Gas Act, 15 U.S.C. § 717a(6), and is a limited liability company organized and existing under the laws of the State of Delaware with its principal place of business in Boston, Massachusetts. Pearl is the owner of record of land (the "Pearl Property") located off Barker Road in Boxford, Massachusetts that is approximately 97.25 acres, more or less. On December 21, 2001, the Federal Energy Regulatory Commission ("FERC") issued a Certificate of Public Convenience and Necessity that authorized Maritimes to, among other things, construct, operate, and maintain a natural gas pipeline and related facilities that will be used to transport natural gas in interstate commerce along a route that extends from Methuen, Massachusetts to Salem, Massachusetts. In order to construct the Pipeline Project, Maritimes needed to acquire both a permanent and a temporary easement on the Pearl Property. Unable to purchase the easements from Pearl, Maritimes instituted this condemnation action to take the easements by the power of eminent domain. Pursuant to an Order issued July 25, 2002, the Court allowed Maritimes to enter the property to install the pipeline.
The Pearl Property is more fully described in a deed recorded in the Essex County (S.D.) Registry of Deeds, Book 16897, Page 148.
The Pearl Property consists of unimproved land located on Barker Road in the Town of Boxford, Massachusetts. Barker Road is a dirt road. All of the other abutting land lying along the same road is undeveloped and vacant. The property is basically a rectangular lot consisting of 97.25 acres, lying within a residential zoning district. Large areas of the property are wetlands that substantially restrict the parcel's utility. The New England Power Company ("NEPCO") has an easement across the property for electric power transmission lines that is approximately 3320 feet in length and 200 feet wide. The NEPCO easement bisects the property on a north-south axis.
Though Barker Road is a public way, it has never been paved and has not been otherwise improved. It appeared to the real estate appraiser hired by Maritimes that the Town had ceased to maintain the road.
Although Pearl is nominally the defendant, as the landowner he has the burden of proving just compensation or the diminution in value of the property caused by the taking. See, e.g., United States v. 33.5 Acres of Land, 789 F.2d 1396, 1400 (9th Cir. 1986); United States v. 125.07 Acres of Land, 753 F. Supp. 1034, 1037 (D. Mass. 1991). Massachusetts law of eminent domain governs the substantive issue of just compensation and how just compensation is determined in a condemnation action commenced under the Natural Gas Act. See, e.g., Portland Natural Gas Transmission Sys. v. 19.2 Acres of Land, 195 F. Supp. 2d 314, 319-20 (D. Mass. 2002); Algonquin Gas Transmission Co. v. 60 Acres of Land, 855 F. Supp. 449, 453 (D. Mass. 1994). Just compensation is the amount of money required to put a landowner in the same position as if the property had not been taken. Overcompensation is as unjust to the condemnor as undercompensation is to the property owner. See, e.g., United States v. 69.1 Acres of Land, 942 F.2d 290, 292 (4th Cir. 1991). In determining just compensation in a case involving an easement, the issue is the value of the property rights that the owner has lost; not the value of what the taker has gained.See Boston Chamber of Commerce v. City of Boston, 217 U.S. 189, 195 (1910).
It was stipulated by the parties that:
• As of July 25, 2002, the Pearl Property was vacant except for trees, vegetation, power lines and was encumbered by an easement for electrical utility power lines and related facilities owned by NEPCO. • The fair market value of the Pearl Property prior to the takings by Maritimes was $943,000. • The value of the trees removed in the form of timber from the Pearl Property by Maritimes during construction was $5000. The permanent easement of the Pearl Property in which the pipeline was installed is approximately 3.95 acres. Approximately 1.85 acres of Maritimes' permanent easement are located within the existing NEPCO easement. Approximately 3.00 acres of Maritimes' permanent easement are located in wetlands.Maritimes also took a temporary workspace easement that was approximately 2.78 acres and a temporary access road easement that was approximately 0.99 acres. The temporary workspace and access road easements were taken for two years. Approximately 0.06 acres of Maritimes' 2.78-acre temporary easement was located within the NEPCO easement. The entire 0.99 acres of the temporary access road was located within the NEPCO easement.
Determining Just Compensation
"Generally, there are two elements involved in calculating the condemnee's award for the taking of an easement by eminent domain. First, the value of the servitude must be assessed. Second, it must be determined if there are severance damages to the remainder." 4 Nichols on Eminent Domain § 12D.01[2][d], at 12D-17. Massachusetts courts have described this calculation in two different ways. The most common expression is the "before and after" rule, in which the landowner is entitled to the difference "between that value of the . . .land immediately before the taking and its value immediately after." Kane v. Town of Hudson, 389 N.E.2d 737, 740 (Mass.App.Ct. 1979). The other approach is the "value of the take plus damages" rule, which provides that the landowner should be awarded the fair market value of the land taken and "any damage accruing to the remainder of the land not taken caused by the taking. . . ." Nichols v. Commonwealth, 121 N.E.2d 56, 58 (Mass. 1954). "Fair market value is determined on the basis of the highest and best use to which property could reasonably be put." Douglas Envtl. Assoc. v. Dep't of Envtl. Prot., 706 N.E.2d 620, 623 (Mass. 1999) (citing Mass. Gen. Laws ch. 79, § 12; Skyline Homes, Inc. v. Commonwealth, 290 N.E.2d 160 (Mass. 1972)).
R. Mario Leslie, a real estate appraiser who is a Member of the Appraisal Institute, testified as an expert witness on behalf of Maritimes. His appraisal report was received in evidence as Exhibit 9. Because the Pearl Property has extensive wetlands and the only access is by way of a Barker Road, a dirt road, Leslie's opinion was that the highest and best use of the Pearl Property before and after the taking was for conservation land or open space. He also opined that Maritimes' permanent easement did not affect the utility of the Pearl Property and did not reduce the value of the Pearl Property on a strict before and after basis. Leslie testified that the fair market value of the Pearl Property, before accounting for the NEPCO easement, and before Maritimes' taking was $943,000 or $10,890 per acre. Leslie acknowledged, however, that Maritimes' easement took certain rights from Pearl and those rights had value.
The parties stipulated that the value was $943,000.
In general, a landowner may use the land encumbered by a permanent easement as long as such use does not reasonably interfere with easement holder's rights. An easement is a non-possessory property right to use the land of another for a definite purpose. Brown v. Sneider, 400 N.E.2d 1322, 1324 (Mass.App.Ct. 1980). Under Massachusetts law, "the scope of the condemnor's use of the easement [is] limited to the extent reasonably necessary for the purpose served by the taking, so that the landowner's right to use the easement area is as great as possible while remaining reasonably consistent with the purpose of the taking." Gen. Hosp. Corp. v. Mass. Bay Transp. Auth., 672 N.E.2d 521, 525 (Mass. 1996); see also W. Mass. Elec. Co. v. Sambo's of Mass. Inc., 398 N.E.2d 729, 731 (Mass.App.Ct. 1979). An easement holder such as Maritimes has no authority to restrict the use of the land outside of the permanent easement unless such use would materially interfere with rights granted by the easement — here, Maritimes' ability to operate and maintain the pipeline. W. Mass. Elec. Co., 398 N.E.2d at 731 (reciting the rule as "an owner [of property encumbered by an easement] may use the land for all purposes which are not inconsistent with the easement . . . or which do not materially interfere with its use") (citations omitted). Thus, where "the condemnor takes an easement, the owner retains title to the land in fee and has the right to make any use of it that does not interfere with the public use." Gen. Hosp., 672 N.E.2d at 525. Moreover, "[w]hen an easement is taken that does not require the exclusive occupation of the surface, such as the right to lay and maintain . . . subterranean pipes over or through private land, the owner is not entitled to recover the entire market value of the land subjected to the easement." 4 Nichols on Eminent Domain § 12D.01[2][c], at 12D-16.
As noted above, Maritimes took approximately 3.95 acres for a permanent easement on Pearl's property. The portion of Maritimes' permanent easement outside of the NEPCO easement occupied approximately 2.1 acres. Leslie computed the fee value of that portion of the land to be $22,869 (2.1 acres x $10,890 per acre). He estimated that Maritimes took 60% of the rights in those 2.1 acres. Hence, Leslie concluded that Maritimes' permanent easement diminished the value of those 2.1 acres by $13,721 (2.1 acres x $10,890 per acre x 60%).
Leslie estimated that the NEPCO easement had diminished the value of the land it occupies on the Pearl Property by 70%. Thus, the per acre value of the Pearl Property within the NEPCO easement was only $3267 per acre ($10,890 per acre x 30%). Prior to Maritimes' taking, the value of the 1.85 acres of Maritimes' permanent easement lying within the NEPCO easement was $6044. Leslie opined that Maritimes took 50% of the remaining rights that Pearl had in those 1.85 acres. Therefore the 1.85 acres of Maritimes' permanent easement located within the NEPCO easement reduced the value of the Pearl Property by $3022 (1.85 acres x $3267 per acre x 50%). Consequently, Leslie concluded that Maritimes' 3.95 acre permanent easement diminished the value of the Pearl Property by $16,743 ($3022 + $13,721), which Leslie rounded to $16,700.
Because a temporary easement does not affect the fee simple interest, the general measure of compensation for the taking of a temporary construction or workspace easement is the rental value of the property taken. See Kimball Laundry Co. v. United States, 338 U.S. 1, 6-7 (1949); Heydt v. United States, 38 Fed. Cl. 286, 305 (Fed.Cl. 1997). The only evidence bearing on the amount of just compensation for the temporary easements was presented by Maritimes. Since there were no comparable rental properties that could be considered, Leslie determined the rental value of the temporary easements by synthesizing an equity capitalization rate of return. His opinion was that an appropriate capitalization rate would be 9.78% and used this rate to determine a fair rental value for the temporary easements for the two years they existed. He thus opined that the fair market rent for the 2.78 acre temporary workspace easement was approximately $5615 and for the temporary access road easement was $633.
Severance Damages
When only part of a parcel of land is taken, as in the case of easements, "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. This statute does not relieve claimants in condemnation proceedings from the burden of proving that the taking actually has caused "injury" to the "part not taken." The damage to the remainder, or part not taken, is often referred to as severance damage. United States v. 91.90 Acres of Land, 586 F.2d 79, 86 (8th Cir. 1978). "'Severance damages' are compensable only if the landowner incurs a direct loss reflected in the marketplace that results from the taking. . . . the landowner must demonstrate that the taking caused the severance damages." United States v. 760,807 Acres of Land, 731 F.2d 1443, 1448 (9th Cir. 1984) (citations omitted); see also Moore v. United States, 54 Fed. Cl. 747, 753 (Fed.Cl. 2002) ("[T]he court can only award severance damages if there is some reliable proof that the physical intrusions, concerns, and annoyances have actually translated into loss in market value."); United States v. 122.63 Acres of Land, 526 F. Supp. 539, 542 (D. Mass 1981) (declining to award any severance damages for the taking of an easement when there was no proof of such damages); Miller v. United States, 620 F.2d 812, 828 (Ct.Cl. 1980) (requiring the landowner to show loss in the remainder's market value to receive severance damages). In this case, however, Pearl did not introduce any evidence with respect to the diminution in the value of the area occupied by Maritimes' permanent easement. In Leslie's opinion, there was no evidence of severance damage to, or diminution in the value of, the area outside of the permanent easement on the Pearl Property.
Summary
In conclusion, though Pearl bore the burden of demonstrating the damage to his property due to Maritimes' easements, he did not offer any evidence showing that the permanent easement had diminished the value of the Property and did not offer any evidence of the rent that was owed for the temporary easements. I find, based on the only relevant evidence in the record, from Maritimes' expert, that the amount of just compensation owed to Pearl for the permanent and temporary easements was $22,991 ($16,743 + $5615 + $633), which may be rounded to $23,000. That is the same amount suggested by the advisory jury. The reason seems obvious: no competing value was offered.
The total amount of just compensation owed to Pearl when the agreed value of the timber ($5,000) is included is $28,000.
Interest
Finally, with regard to interest, because Massachusetts law of eminent domain governs compensation issues in an eminent domain action, interest on any judgment awarding just compensation must be computed in accordance with Massachusetts law. Massachusetts General Laws ch. 79, § 37 establishes the interest rate on damages and judgments in a condemnation action. Section 37 provides that:
A landowner who claims that the interest rate set by § 37 is not constitutionally adequate has the burden of proving at trial what higher rate of interest should be used. See Claff v. Mass. Bay Transp. Auth., 808 N.E.2d 238, 241 (Mass. 2004). Pearl did not introduce any such evidence.
Where the period for which prejudgment interest is owed is not more than one year, such interest shall be calculated at an annual rate equal to the weekly average one-year constant maturity treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date on which the right to damages under this chapter vested. Where the period for which prejudgment interest is owed is more than one year, such interest for the first year shall be calculated in accordance with the preceding sentence, and such interest for each additional year shall be calculated on the principal amount due at an annual rate equal to the weekly average one-year constant maturity treasury yield, as published by the board of governors of the Federal Reserve System, for the calendar week preceding the beginning of each additional year.
In this case, the date on which the right to damages vested is July 25, 2002, the date the Order entered granting Maritimes permission to go upon the Pearl Property to install the pipeline. The $28,000 award of just compensation owed to Pearl will be the principal upon which the pre-judgment interest will be calculated. The following chart summarizes the pre-judgment interest calculation. Year Interest Rate Interest Amount Total Amount TOTAL
7/25/2002 — 1.97% $551.60 $28,551.60 7/24/2003 (published 07/19/2002) 7/25/2003 — 1.10% $308.00 $28,859.60 7/24/2004 (published 07/18/2003) 7/25/2004 — 2.12% $593.60 $29,453.20 7/24/2005 (published 07/23/2004) 7/25/2005 — 3.68% $1,030.40 $30,483.60 7/24/2006 (published 07/22/2005) 7/25/2006 — 5.22% $1,461.60 $31,945.20 7/24/2007 (published 07/21/2006) 7/25/2007 — 4.99% $130.15 $32,075.35 8/27/2007 (published 07/20/2007) $4,075.35 $32,075.35 Thus, pre-judgment interest is $4075.35 and the final award, combining just compensation and pre-judgment interest, totals $32,075.35.It is SO ORDERED.