252 P.3d 341
Or. Ct. App.2011Background
- City of Bend condemned Juniper Utility Company for public use after utility failed to meet service needs and PUC rate-regulation reduced returns.
- Trial court valued the utility plant using a cost approach, starting from original cost less depreciation, plus separate values for water rights, easements, and real property.
- Defendants contended there were no market sales; city urged income approach as best, asserting value near zero due to regulated income.
- Trial court held cost approach appropriate, noting CIAC contributions were not included in rate base yet still valuable, and awarded severance damages for related properties.
- The city and defendants cross-appealed on several points, including severance damages, post-judgment interest, and attorney fees.
- Appellate court affirmed most valuation aspects, reversed severance damages for stranded effluent pipe and Mountain High golf course, and remanded for reconsideration; cross-appeal on post-judgment interest also remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper valuation method for fair market value | City argues cost approach is improper; income approach should govern. | Utility Defendants contend cost approach is permissible and appropriate for special-use property. | Cost approach permissible; not precluded as sole method. |
| Severance damages for stranded effluent pipe | N/A | Trial court erred by assigning severance damages to Juniper for the stranded pipe. | Reverse; severance damages for stranded pipe to be reconsidered. |
| Severance damages for Mountain High golf course | Severance damages should reflect replacement cost using a substitute facility. | Tunison rule governs; restoration vs depreciation balance should determine severance damages. | Reverse; remand to determine severance damages based on diminution in fair market value, per Tunison. |
| Post-judgment interest and attorney fees on remand | OR 82.010 treatment of post-judgment interest on prejudgment interest should apply. | Judgment in condemnation is a money judgment; interest rules apply accordingly. | Remand to reconsider post-judgment interest and related attorney fees. |
| Value of blanket easements | Blanket easements could add value; trial court erred in excluding them from value. | Developers typically convey easements for no charge; no independent value added. | Affirmed trial court’s finding; blanket easements lacked independent value. |
Key Cases Cited
- Lundberg v. Dept. of Rev., 312 Or. 568 (1992) (defining fair market value in condemnation as amount for sale between willing buyer and seller)
- Brooks Resources Corp. v. Dep’t of Rev., 286 Or. 499 (1979) (valuation approaches depend on record; trier of fact determines best method)
- Highway Comm. v. Superbilt Mfg. Co., 204 Or. 393 (1955) (recognizes use of replacement cost in special circumstances; market tests may be lacking)
- Bd. of Higher Ed. v. 1st Meth., Ashland, 6 Or.App. 492 (1971) (substitute facility/cost approach considerations in special cases)
- Tunison v. Multnomah County, 251 Or. 602 (1968) (restoration cost vs depreciation when calculating severance damages)
- Dade County v. General Waterworks Corp., 267 So. 2d 633 (1972) (income vs replacement costs in valuation for condemnation context)
- United States v. 50 Acres of Land, 469 U.S. 24 (1984) (substitute facility doctrine limitations in federal takings)