252 P.3d 341
Or. Ct. App.2011Background
- City of Bend condemned Juniper Utility for public use to determine just compensation for the utility plant value.
- Trial court used cost approach (original cost less depreciation) as the basis for value, rejecting income approach as controlling.
- The city argued for income approach; the utility defendants urged cost approach, arguing CIAC and regulatory structure affect value.
- Trial court valued plant at $3,297,859 plus separate values for water rights, easements, and real property; severance damages awarded for an effluent pipe (stranded) and for Mountain High golf course were disputed.
- Cross-appeal contends about post-judgment interest on verdict; court reverses severance damages related to the stranded pipe and Mountain High, and remands for reassessment; overall judgment affirmed except for remanded severance issues and attorney fees to be reconsidered on remand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether cost approach may be used to determine fair market value. | City argues cost approach improper as law, should be ceiling. | Utility defendants argue cost approach appropriate for special-use property. | Cost approach permissible as factual component; no fixed legal prohibition. |
| Whether income approach must govern valuation for a public utility. | City contends income approach yields value; plant worth zero due to CIAC. | Defendants say income approach underregards nonregulated buyers and CIAC. | Income approach not required; mix of methods permissible. |
| Whether severance damages for the stranded effluent pipe were proper. | Severance damages due to loss of remaining property value. | Pipe not owned by Juniper; severance damages misapplied. | Reversed; severance damages for stranded pipe improper. |
| Whether severance damages for Mountain High golf course were proper under Tunison/Replacement doctrine. | Replacement cost approach justified by substitute facility doctrine. | Tunison/restore-cost rule controls; evidence insufficient for replacement-cost damages. | Remand to assess severance damages as diminution in fair market value of the golf course; replacement-cost approach not controlling. |
Key Cases Cited
- Lundberg v. Dept. of Rev., 312 Or. 568 (Or. 1992) (defines fair market value and the condemnation framework in Oregon)
- Brooks Resources Corp. v. Dept. of Rev., 286 Or. 499 (Or. 1979) (recognizes three valuation approaches; outcome depends on factual record)
- Highway Comm. v. Superbilt Mfg. Co., 204 Or. 393 (Or. 1955) (discusses when replacement/cost considerations may apply in eminent domain)
- Bd. of Higher Ed. v. 1st Meth., Ashland, 6 Or.App. 492 (Or. App. 1971) (explains substitute facility and cost-reproduction considerations in special-use property)
- Tunison v. Multnomah County, 251 Or. 602 (Or. 1968) (sets rule for when replacement costs may be used for severance damages)