Dedeaux Utility Company, Inc. v. City of Gulfport
| Docket Number: | 2005-CA-00102-SCT | |
| Supreme Court: | Opinion Link Opinion Date: 09-28-2006 Opinion Author: Waller, P.J. Holding: ON DIRECT AND CROSS-APPEAL: REVERSED AND REMANDE |
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| Additional Case Information: |
Topic: Eminent domain - Condemnation of utility system - Contributions in aid of construction - Section 77-3-43(2) - Expert testimony - M.R.E.702 - Appraisals - Highest and best use - Equal protection - Evidence of settlement - Venue - Interest - Section 75-17-1(1) - Section 75-17-7 - Section 11-27-19 Judge(s) Concurring: SMITH, C.J., COBB, P.J., DIAZ, CARLSON AND RANDOLPH, JJ. Non Participating Judge(s): DICKINSON, J. Dissenting Author : EASLEY, J. Concurs in Result Only: GRAVES, J. Procedural History: Jury Trial Nature of the Case: CIVIL - EMINENT DOMAIN |
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| Trial Court: |
Date of Trial Judgment: 12-13-2004 Appealed from: Harrison County Special Court of Eminent Domain Judge: T. Larry Wilson Disposition: Jury returned a verdict for $3,634,757.00 & a judgment was entered in accordance with the verdict Case Number: D2401-96-01102 |
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| Note: | NATURE OF THE CASE: EMINENT DOMAIN | |
| Party Name: | Attorney Name: | |||
| Appellant: | DEDEAUX UTILITY COMPANY, INC. |
JAMES H. HERRING, J. REILLY MORSE |
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| Appellee: | THE CITY OF GULFPORT, MISSISSIPPI, A MUNICIPAL CORPORATION | GARY WHITE |
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| Topic: | Eminent domain - Condemnation of utility system - Contributions in aid of construction - Section 77-3-43(2) - Expert testimony - M.R.E.702 - Appraisals - Highest and best use - Equal protection - Evidence of settlement - Venue - Interest - Section 75-17-1(1) - Section 75-17-7 - Section 11-27-19 |
| Summary of the Facts: | Dedeaux Utility Company is the holder of certificates of public convenience and necessity for certain water and sewer services in Harrison County. Eight years after the City of Gulfport filed a petition for condemnation against Dedeaux, the matter went to trial in the Harrison County Special Court of Eminent Domain before a jury. Dedeaux’s expert valued the utility plant at $9,025,500, and Gulfport’s expert valued the utility plant at $2,140,000. The jury returned a verdict for $3,634,757. Dedeaux appeals, and Gulfport cross-appeals. |
| Summary of Opinion Analysis: | Issue 1: Contributions in aid of construction Approximately 50% of Dedeaux’s physical assets were contributed to Dedeaux by land developers, called “contributions in aid of construction.” Dedeaux never paid any consideration for the contributed assets. Section 77-3-43(2) provides that the rate base shall not include property donated to such utility without any consideration nor shall operating expenses include depreciation of such donated property. Therefore, the rate of return fixed by the Public Service Commission excludes consideration of the value of contributed property. Gulfport’s only expert witness who testified as to Dedeaux’s value testified that he based his valuation on the revenue being generated by the entire system, including contributed property and purchased property, but, since he also testified that he used data from the Public Service Commission as his sole source of information, his calculations did not take into consideration contributed property because the Public Service Commission does not consider contributed property. Dedeaux argues that, since some of its valuable assets were excluded in the Public Service Commission rate decisions, any appraisal based on Public Service Commission data would be too low. Several courts from other states have decided that data from state regulatory agencies are not reliable as proof of value of utility systems for eminent domain purposes. M.R.E.702 provides that expert testimony is admissible if the testimony will assist the trier of fact; the witness is qualified as an expert; the testimony is based upon sufficient facts or data; the testimony is the product of reliable principles and methods; and the witness has applied the principles and methods reliably to the facts of the case. Here, the expert’s testimony was not based on sufficient facts and data and was therefore unreliable. Therefore, the trial court erred in admitting that testimony. Issue 2: Appraisals Dedeaux argues that the court erred in excluding the testimony of its expert who had appraised only four parcels of land which were part of the plant. Improvements such as the installation of a water tower had been made to the parcels, but the expert appraised only the value of the land without improvements. In determining the before value of the utility business so damaged, every element of the plan or system which was reasonably required for the operation thereof and which entered into and remained a part thereof should be taken into account. The value of the utility as a going concern is obtained by taking a comprehensive view of each and all of the elements of property, tangible and intangible, and considering them as inseparable parts of the business entity. Therefore, the value of the land upon which the utility plant was constructed should be considered as just one of the factors in determining just compensation and the court erred in excluding this testimony. Issue 3: Highest and best use Dedeaux argues that Gulfport’s evidence of highest and best use was unreliable because it assumed that the plant’s highest and best use was as a regulated utility and the plant’s highest and best use was as a non-regulated utility because it would not be under the control of the Public Service Commission. If reliable evidence shows that regulation diminishes the value of a utility, the jury should consider an opinion that the utility’s highest and best use would be as a non-regulated utility. The determination of the utility’s highest and best use should be based on expert testimony offered under M.R.E. 702. Issue 4: Equal protection Dedeaux argues that its right to equal protection of the laws was violated because, while Gulfport settled its eminent domain claims against Orange Grove, a utility which was similarly situated, it did not offer Dedeaux similar terms. The trial court never ruled on the equal protection claim. An appellate court cannot review a matter which was not ruled upon by the trial court. Issue 5: Evidence of settlement The trial court ruled that any probative value of evidence of the Orange Grove settlement would be outweighed by its prejudicial nature. Amounts paid in settlement of eminent domain claims are not admissible to prove just compensation. Issue 6: Venue On cross-appeal, Gulfport argues that it was error for the trial judge to grant Dedeaux’s motion for change of venue. Gulfport raises this claim for the first time on appeal; therefore it is procedurally barred. Issue 7: Interest The trial court ordered that Gulfport pay Dedeaux eight percent per annum compounded interest on the amount of the award from the date of filing of the complaint until the date of entry of the judgment along with simple interest of eight percent per annum after the entry of the judgment. This order was based upon an interpretation of sections 75-17-1 & -7. Because the eminent domain statutory scheme has a specific provision for interest on eminent domain judgments, sections 75-17-1(1) and 75-17-7 do not apply to eminent domain judgments. Section 11-27-19 provides that any judgment finally entered in payment for property to be taken shall provide legal interest on the award of the jury from the date of the filing of the complaint until payment is actually made. “Legal interest” is not compounded, but is, rather, simple interest. Furthermore, there is no distinction between pre-judgment interest and post-judgment interest. Therefore, the trial court erred when it compounded the interest and when it made a distinction between pre-judgment interest and post-judgment interest. |
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