Burden of Proof, Range of Testimony and Appellate Review in Condemnation Proceedings – Michigan Real Property Review, Winter, 1991, Volume 18, No. 4 – by Alan T. Ackerman and Gregory A. Buss
General verdicts remain the normal mode of jury determination in Michigan. What is generally requested is an amount of damages after the finding of a cause of action.
BURDEN OF PROOF: DAMAGES – JUST
COMPENSATION
In eminent domain proceedings, once there is a determination that the government is acquiring the property for a public purpose, the issue of fault no longer exists. For this reason, there is a specific jury instruction stating that both parties are absent of fault. See SJ12d 90.04. Additionally, because of the lack of fault, there is no burden of proof on any issue except for those specifically requiring a statutory burden. Michigan Standard Jury Instruction (SJ12d) 90.03 recommends that no instruction on general burden of proof be given in condemnation cases. The comments to SJ12d 90.03 state that “there is strictly speaking no general burden of proof applicable to all issues in all condemnation proceedings” (SJ12d 90.03, page 14-13) and it is specifically indicated that neither party has the burden of proof on the general issue of damages. The comment further indicates that a burden of proof instruction is appropriate where: (1) benefits to the remainder are claimed by the condemnor or (2) a total taking is claimed by the property owner. The imposition of the burden of proof on the condemnor when enhancement in the value of the remainder of a parcel is claimed is established by MCLA 213.73(4). SJ12d 90.18 provides that the burden of proof shall be on the owner when there is a claim that the practical value or utility of the remainder of a parcel has been destroyed. It is the opinion of the authors that the holding in the case of City of Detroit v Hamtramack Community Federal Credit Union, 146 Mich App 155, 379 NW2d 405 (1985) will result in the elimination of the burden of proof on the owner in cases involving the claimed destruction of the practical value or utility of the remainder of the property. In cases involving business interruption damages or just compensation for the value of a going concern there is not presently any definitive authority for the giving of a burden of proof instruction.
Prior to the SJ12d 90.03 determination that there is no burden of proof instruction to be given in condemnation cases, instructions were frequently convoluted and confused to the point of being nonsensical.
RANGE OF TESTIMONY
In the general personal injury case, a jury can find that the damages are less than those claimed even if the defendant does not provide an expert determining the amount of damages. The jury may use its own common sense to ascertain the correct amount of damage so long as within the evidence submitted. See SJ12d 2.04, 3.02.
In a condemnation case, the jury is effectively provided a general damage question and special question by being instructed that it must be within the range of the testimony “as to a particular item of damage”. SJ12d 90.23 states:
In reaching a verdict, you must keep within the range of the testimony submitted. You may accept the lowest figure submitted as to a particular item of damage, the highest figure submitted, or a figure somewhere between the highest and lowest. You may not go below the lowest figure or above the highest figure submitted.
In this case, the lowest valuation placed in evidence for the property is $_____ and the highest valuation is $_____. Any award between those two figures would be a proper jury verdict; any award which is not between those two figures would not be a valid jury verdict.
The Note On Use to SJ12d 90.23 provides that the second paragraph of the instruction is appropriate only in a total taking case without the issues contemplated by SJ12d 90.12 Partial Taking; 90.14 Date of Valuation: Early Date of Taking; 90.18 Total Taking (destruction of practical value or utility); 90.19 Benefits; 90.21 Compensable Business Property: Measure of Compensation, or other damage claims. Where those issues are involved, it is provided that the second paragraph of the instruction may require modification.
SJ12d 90.23 requires the range of the testimony to be not higher than the highest estimate of just compensation nor lower than the lowest estimate of just compensation on any item. If a jury award is within the range of the testimony, it will not be reversed by an appellate court barring specific reversible errors of law. State Highway Commission v Great Lakes Express Co., 50 Mich App 170, 213 NW2d 239 (1973); State Highway Commissioner v Miller, 5 Mich App 591, 147 NW2d 424 (1967); City of Fenton v Lutz, 73 Mich App 117, 250 NW2d 579 (1977).
The range of testimony as to damages may be complicated by the specific type of damages claimed. Where appropriate, Michigan case law recognizes various elements of compensation including: value of fixtures, machinery, equipment, inventory and related assets, Algonac v Robbins, 69 Mich App 409, 245 NW2d 68 (1976); City of Fenton v Lutz 73 Mich App 117, 250 NW2d 579 (1977) and State Highway Commission v Miller, 5 Mich App 591, 147 NW2d (1967); value of or cost of moving inventory, Robbins, supra; business interruption damages, Detroit v Michaels Prescriptions, 143 Mich App 808, 373 NW2d 219 (285) and Detroit v Hamtramack Community Federal Credit Union, 146 Mich App 155, 379 NW2d 405 (1985); and destruction of going concern value, Michael’s Prescriptions, supra, and Dep’t of Transportation v Campbell, 175 Mich App 629, 438 NW2d 267 (1988). If the agency has considered all of the elements of compensation in establishing the amount which the agency believes to be just compensation and accordingly has made the statutorily required good faith offer to the owner the range of testimony may be subject to substantial parameters. When dealing with such items as (1) business interruption damages or (2) destruction of a going concern, the appraisal and valuation techniques utilized by the condemning authority and property owner may be complicated and extensive – resulting in substantial variation as to the determination of each party regarding just compensation. This is particularly true in connection with property on which a business or going concern is located. In such cases the parties may utilize various sophisticated appraisal techniques in determining the highest and best use for the property. The techniques include the discounting of income streams, capitalization of net operating income, determination of net earnings multiples and in some cases income regression analysis. The use of these techniques may result in a wide range of testimony as to the highest and best use of the property and the just compensation to be paid.
Business Interruption
The business interruption claim is clearly the issue of the future in condemnation proceedings. The appellate courts will be required to determine whether the damage to be paid to a business owner shall equal the amount of the owner’s claim or zero when the government takes the position that there are no business interruption damages. The issue will focus on whether the jury will be permitted to apply the same standards that apply in other damage actions or will be limited under SJ12d 90.23 to awarding the owner that amount established solely by owner testimony.
A likely result is that Michigan appellate courts will determine that the damage issues underlying a business interruption claim are no different than those in a contract or tort action. This will be based upon the premise that the jury is the finder of fact and can make a rational business interruption finding without the offer of the 11 range” as provided by SJ12d 90.23. It must be recognized that this does not protect the property owner from a condemnor that recognizes that there has been interruption damage but simply makes a claim that nothing has occurred and starts with number zero instead of what the government recognizes as the correct amount of damage in an analysis which is not introduced at trial. At the same time, a reasonable condemning authority may have its counsel admit to certain elements of the owner’s claim.
The likelihood is that business interruption damages may not be considered as within the ambit of the normal SJ12d 90.23 limitation of a judgment to a range, but would be addressed in the same context as in contract actions. This is supported by comparing condemnation instruction SJ12d 90.05 with the general rule of damages in a breach of contract action. SJ12d 90.05 provides in part that: “Just compensation is the amount of money which will put the person whose property has been taken in as good of position as the person would have been in had the taking not occurred.” In cases involving damages arising from a breach of contract our courts have consistently held that the remedy for breach of contract is to “. .. put the plaintiff in as good a position as he would have been in had the defendant kept his contract.” Goodwin v Coe Pontiac,62 Mich App 405, 233 NW2d 598 (1975), citing 5 Williston, Contracts, Section 1338, page 3763. The application of this principle is further exemplified by comparison of SJ12nd 90.05 to the commonly utilized tort law personal injury instruction, SJ12nd 50.01, wherein it is provided that “. . . it is your duty to determine the amount of money which reasonably, fairly and adequately compensates (him/her) for each of the elements of damage .
Destruction of a Going Concern
A different application of SJ12d 90.23 would likely apply in situations where the condemnor does not make an offer for the value of a going concern. This is because the going concern would have a specific valuation amount and generally would not be subject to the uncertainty of a claim of loss being offered as part of a business interruption component. There is ample Michigan precedent that limits the award to the range of testimony when applied to real estate, City of Detroit v Barak, 50 Mich App 164 (1973), as well as going concern value, City of Detroit v Hospital Drugs Company, 176 Mich App, 634 (1988), app den 432 Mich 896 (1989). It would appear a more rational approach for a condemning authority to offer its own going concern value when difficulty in relocation is raised as part of an owner’s claim.
APPELLATE REVIEW
Prior Constitutions
Appellate review prior to the 1963 Constitution was simply a determination of whether there was a basis on which to find enough evidence to support the conclusion of the factfinder. If such basis existed, there would be no reversal except for “palpable error, ” In re Civic Center,335 Mich. 528, 56 NW.2d 375 (1953); In re Grand Haven Highway, 357 Mich. 20, 97 NW.2d 748 (1959).
Under the 1908 Constitution the jury was not bound by the testimony of the witness alone but also was allowed to exercise its own judgment, based on testimony and from knowledge gained from a view of the premises. In re Grand Haven Highway, supra.
Errors would cause reversal only if it was “apparent that the verdict was materially affected by them.” In re Public Highway in Elba, 236 Mich. 282, 210 NW. 297 (1926), citing City of Detroit v Hartwick, 204 Mich. 635, 171 N.W. 405 (1919).
Although prior constitutions provided that the tribunal was the finder of both fact and law, the arbiters were considered to be subject to supervisory control. Where awards were clearly inadequate or excessive, the appellate courts would reverse. In re State Highway Commissioner, 249 Mich. 530, 539, 229 NW. 500 (1930). Under the 1908 Constitution courts provided minimal review: “. . . this court [cannot] set up a formula or dictate the method which must be followed by the jury in its determination of value.” In re Widening of Michigan Avenue, 298 Mich. 614, 620, 300 NW. 877 (1941). The 1908 Constitution and many of the pre-Act 87 statutes provided for court-appointed commissioners in the just compensation determination. The determination of the commissioners was subject to attack not normally available in a jury proceeding. For example, the commissioners could be challenged as to the method by which the value was derived and as to whether proper evidence was presented in determining the value of just compensation. Reversal of the findings of a jury based upon juror affidavits occurs very rarely. However, the standard for impeaching the verdict of the commissioners was broader; “the commissioners are not like a common-law jury, and their own affidavits may be used to impeach their finding, or show that they proceeded upon a wrong principle in the ascertainment of damages.” In re State Highway Commissioner, 255 Mich. 50, 237 NW. 43 (1931), citing Marquette, etc., R. Co. v Houghton Probate Judge, 53 Mich. 217, 222,18 NW. 788 (1884).
1963 Constitution
The 1963 Constitution provides that the verdict reached need only be within the range of the valuation testimony introduced at trial. State Highway Commissioner v Schultz, 370 Mich 78 (1963). All that is necessary is that there be a proper foundation for the introduction of the valuation testimony. City of Detroit v Colbert, 146 Mich App 168 (1986) and City of Detroit v Chap, 142 Mich App 675, 370 NW2d 323 (1985).
Eminent domain changed from an inquest to a normal civil proceeding in a court of record under Supreme Court Rule 37, promulgated in 1961. The Supreme Court Rule requiring that compensation be determined in proceedings in a court of record was continued in GCR, 1963, 516.5.
As the Michigan Court Rules of 1985 were promulgated after enactment of Act 87 of 1980, the Supreme Court recognized the effect of Act 87. GCR, 1963, 516.5 regarding condemnation cases was therefore not incorporated in the Michigan Court Rules. The commentary note to the Michigan Court Rules states that “former GCR 1963,516.5, regarding condemnation proceedings, is omitted.” Under MCLA 213 62 (1); MSA 8.265 (12) (1), jury procedure in condemnation cases is governed by the same rules as are other civil actions. See Comment to MCR 2.516.
