No. 14-0381 - West Virginia Department of Transportation, Division of Highways v.
Western Pocahontas Properties, L.P.; WPP, LLC; and Beacon Resources, Inc.

                                                                               FILED
                                                                             June 17, 2015

                                                                         RORY L. PERRY II, CLERK

                                                                       SUPREME COURT OF APPEALS

                                                                           OF WEST VIRGINIA

LOUGHRY, Justice, dissenting:

              In this case, the majority has decided to treat the State like a child, scolding it

for not adequately preparing for trial and then allowing it to have a “do over.” Despite the

fact that the new points of law set forth in the majority opinion do not support a finding that

the trial judge erred by refusing to give the State’s proposed jury instruction, the majority

nonetheless reaches that conclusion and remands this case for a new trial. In doing so, the

majority provides unprecedented, detailed guidance for the retrial of this matter in an

undisguised effort to ensure that the State is not slapped with another twenty-four million

dollar verdict. Because it is clear that the trial court did not commit reversible error by

refusing to give an obviously erroneous instruction and because this Court should not be

dispensing legal advice to parties, I dissent from the majority’s decision in this case.1




       1
         As discussed in the majority opinion, the State also asserted in this appeal that the
trial court committed reversible error by excluding its expert’s testimony concerning sales
of comparable mining properties. I agree with the majority’s finding that the trial court
properly excluded this testimony because the record clearly shows that the expert’s opinion
was not relevant or reliable. I dissent because of the majority’s ultimate decision to set aside
the verdict and remand this case for a new trial based upon an unsupported and erroneous
conclusion that the trial court erred by refusing to give the State’s proposed jury instruction.


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               The proceedings below focused primarily upon the fair market value of

Beacon’s interest in the subject property, i.e., its right to extract and sell the coal, which was

thwarted as a result of the State’s decision to take the land for the construction of Corridor

H. When the State initiated this condemnation proceeding, Beacon was actively surface

mining the property. As a result of the State’s taking, Beacon was forced to cease its mining

operations and go out of business. During the trial, the State, relying upon cases from 1885

and 1919,2 proposed that the following instruction be given to the jury:

                      You are instructed that in determining whether the
               residue of the property is damaged or injured, you may consider
               damage to the land, but you may not consider any lost profit or
               damage or injury to any business thereon, because such damages
               depend on contingencies too uncertain and speculative to be
               allowed. (emphasis supplied)

The trial court found the instruction would apply if the business being operated on the

property could be relocated, as would be the case with a gas station, factory, or store.

However, because the property at issue–the coal–and its location constituted the business,

the trial court determined that Beacon was entitled to the value of the property taken,

“measured by the dollar amount for which [it] could sell it.” Whitney Benefits, Inc. v. United

States, 18 Cl. Ct. 394, 409 (1989). Accordingly, the trial court refused to give the proposed

jury instruction.




       2
      See Gauley & Eastern R. Co. v. Conley, 84 W.Va. 489, 100 S.E. 290 (1919);
Shenandoah Valley R. Co. v. Shepherd, 26 W.Va. 672 (1885).

                                                2

               While the general rule in the law of eminent domain has been that business

profits are not an indicator of the value of land because the success of the business depends

on the skill of the operator and the efficiency of the operation, “courts [now] recognize an

exception to this rule when the profits proceed directly out of the land condemned, thereby

contributing to its intrinsic value, as opposed to a business being conducted on the land.” 8

Nichols on Emminent Domain § G-14F.03 (3rd ed. 2015). For example, in State Highway

Commission v. Jones, 363 N.E.2d 1018 (Ind. Ct. App. 1977), the State brought an action to

condemn approximately twenty-six acres of quarry land to build a highway. After the jury

returned a verdict of nearly half a million dollars, awarding damages to both the owner

landlords and the tenants operating the quarry business on the land, the State appealed

asserting, inter alia, that the trial court had erred by excluding its instruction that would have

directed the jury not to consider “business profits or volume as evidence of the value of the

land or any interest thereon.” Id. at 1026. Finding that the trial court rightfully excluded the

instruction, the appellate court explained:

               Plaintiff’s Tendered Instruction No. 1 is incorrect in that it
               instructs the jury not to consider business profits as an element
               which contributes to the value of the land. However, as it was
               pointed out above, where income is produced by the sale of
               minerals or other soil materials which are an intrinsic part of the
               land, then the capitalization of business profits may be proper.
               Therefore those profits may be considered by the jury to the
               extent that they reflect upon the value of the land at the time of
               the taking.




                                                3

Id.3



              In an unnecessarily long and convoluted analysis, the majority eventually

recognizes this exception to the general rule, stating that where property being condemned

was generating income, such as when minerals are being extracted, that “income may be

considered in a condemnation proceeding[.]” Maj. Op. at 20. Accordingly, the majority

holds in syllabus point two of the opinion that “the amount of raw profit lost from a business

operated either on the condemned real estate or its residue may not be the sole basis to

establish just compensation.” (emphasis added). By using the word “sole,” the majority

recognizes that profits may be considered in determining the amount of an award of just

compensation. In fact, the majority further holds in syllabus point three that “an expert

witness’s assessment of the income stream that real property produces may be relied upon

to support a fair market valuation of an interest in real estate.”



              Although the majority clearly acknowledges that lost profit may be considered

in determining the fair market value of condemned property when the profit is derived

directly out of the land itself, it nonetheless finds the trial court committed reversible error



       3
       See also Whitney Benefits, 18 Ct.Cl. at 409 (explaining that value of coal reserves can
only be measured by its ability to produce income); Foster v. United States, 2 Cl.Ct. 426,
448-49 (1983) (recognizing an operator’s interest is separate right to produce and sell
minerals which is measured by estimate of what can be earned by exercise of that right).

                                               4

by refusing to give the State’s proposed instruction that would have directed the jury to “not

consider any lost profit.” The majority reasons that the instruction should have been given

because Beacon’s owner, Jason Svonavec, testified he believed that the fair market value of

Beacon’s lease which allowed it to extract and sell the coal, was eighty-four million dollars.

Mr. Svonavec testified that he arrived at this figure by calculating how much profit Beacon

would have earned had it been able to extract and sell all of the mineable coal. The majority

concludes that because Mr. Svonavec’s opinion was only based on lost profit, the instruction

would have alerted the jury that it could not consider lost profit alone in making its just

compensation determination. Slip Op. at 40. The fallacy in the majority’s reasoning is two­

fold.



              First, this Court has “long recognized the admissibility of a landowner’s

opinion concerning the value of his land.” West Virginia Dept. of Highways v. Sickles, 161

W.Va. 409, 411, 242 S.E.2d 567, 570 (1978), overruled on other grounds by West Virginia

Dept. of Highways v. Brumfield, 170 W.Va. 677, 295 S.E.2d 917 (1982). While the majority

pays lip service to this basic principle of eminent domain law, it concludes that Mr.

Svonavec’s opinion was somehow improper because it was based only upon his lost business

profit. Considering the fact that Beacon’s only interest in the subject property was its right

to mine and sell the coal by virtue of its coal lease, I am uncertain as to what the majority

thinks Mr. Svonavec should have used as the basis for his opinion concerning the value of


                                              5

Beacon’s interest in the property. Undoubtedly, from Mr. Svonvec’s perspective, forcing

Beacon to halt its mining operation caused Beacon to lose eighty-four millions dollars, the

value of the coal Beacon would have been able to extract and sell. In that regard, Mr.

Svonavec’s calculation was based on Beacon’s existing contract to sell the coal it was mining

at the date of the taking. Thus, there was no speculation involved in his valuation. For the

majority to conclude that Mr. Svonavec’s opinion as to the value of Beacon’s interest in the

property was “grossly inflated” and therefore improper is absurd.



              Secondly, by focusing only upon Mr. Svonavec’s testimony and opinion as to

the value of the subject property, the majority conveniently overlooks the fact that Beacon’s

expert, Douglas C. Wise, a certified general real estate appraiser, used the lost profit in

calculating and arriving at his opinion regarding the fair market value of the property.4 Had

the jury been given the instruction proposed by the State, it would have been directed to

ignore not only Mr. Svonavec’s opinion, but that of Mr. Wise as well. Such a result would

be contrary to the new law created in syllabus point three of the majority opinion, which

allows lost profit to be considered when the income capitalization approach is used to

calculate the fair market value.



       4
        Using the income capitalization approach to valuation, Mr. Wise opined that the fair
market value of Beacon’s leasehold interest in the subject property was $48,088,000.00.
Obviously, the jury did not find the opinion of Mr. Wise or that of Mr. Svonavec persuasive
as the amount of the verdict was substantially less.

                                             6

              It is clear the majority decided to grant a new trial in this matter because it

believes the State was ill-prepared and should have done a better job to “protect[] millions

of dollars in the public fisc.” Maj. Op. at 43. Characterizing the trial as “an appalling train

wreck,” the majority proceeds to point out multiple errors made by counsel for the State and

give direction with regard to the proper course of action upon the retrial of this matter. Id.

While I will agree that the record evidences a lack of preparation on the part of the State, it

is not this Court’s place to instruct counsel regarding the best way to present a case to the

jury. As we recently explained:

                      It is a deeply rooted and fundamental law that “this Court
              is not authorized to issue advisory opinions[.]” State ex rel. City
              of Charleston v. Coghill, 156 W.Va. 877, 891, 207 S.E.2d 113,
              122 (1973) (Haden, J., dissenting). In this regard, we observed
              in Harshbarger v. Gainer, 184 W.Va. 656, 659, 403 S.E.2d 399,
              402 (1991), that “[s]ince President Washington, in 1793, sought
              and was refused legal advice from the Justices of the United
              States Supreme Court, courts-state and federal-have
              continuously maintained that they will not give ‘advisory
              opinions.’” Moreover, in United Fuel Gas Co. v. Public Service
              Commission, 73 W.Va. 571, 578, 80 S.E. 931, 934 (1914), we
              noted that “[b]y the plain terms of the Constitution appellate
              jurisdiction is limited to controversies arising in judicial
              proceedings[.]” This Court further addressed the issue of
              advisory opinions in Mainella v. Board of Trustees of
              Policemen’s Pension or Relief Fund of City of Fairmont, 126
              W.Va. 183, 185-86, 27 S.E.2d 486, 487-88 (1943), as follows:

                     Courts are not constituted for the purpose of
                     making advisory decrees or resolving academic
                     disputes. The pleadings and evidence must
                     present a claim of legal right asserted by one party
                     and denied by the other before jurisdiction of a
                     suit may be taken.

                                              7

State ex rel. Morrisey v. West Virginia Office of Disciplinary Counsel, 234 W.Va. 238,

—,764 S.E.2d 769, 777 (2014).



              Like the majority, I was decidely unimpressed with the manner in which the

State presented its case at trial. However, I simply do not believe that the assigned errors

warranted giving the State a second bite at the apple. In fact, I would not be surprised if,

upon retrial, a new jury, properly instructed on the role of lost profit, awards Beacon just

compensation in an amount substantially greater than the verdict that is the subject of this

appeal.



              For the reasons set forth above, I respectfully dissent from the majority’s

decision in this case.




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