Opinion
C.A. No. 98C-10-043-THG.
Submitted: December 29, 2003.
Decided: March 25, 2004.
Mark F. Dunkle, Esquire, attorney for Plaintiff.
Joseph C. Raskauskas, Esquire, attorney for defendant, ECR Properties, Inc.
MEMORANDUM OPINION
Pending before the Court in this condemnation action is a motion in limine which the State of Delaware ("the State") has filed regarding the admissibility of an expert's appraisal and testimony which ECR Properties, Inc. ("defendant") plans to submit at trial. This is my decision on the matter.
The State brought this condemnation action in connection with the widening of Route 26 in Bethany Beach, Delaware. The State acquired, by order of possession, approximately 1,866 square feet of defendant's property located on Route 26 in the development known as Bethany West.
There is much history involved with this piece of property. However, most of it need not be set forth in order to resolve the issue at hand I set forth below only the pertinent facts.
The property at issue originally was known as Lots 1 and 2, Block 15, Section 2 of Bethany West, Bethany Beach, Delaware. In 1985, defendant consolidated Lots 1 and 2 into the presently configured Lot 2. I refer to the consolidated lots as "the Property".
Currently on the Property is a building which originally was built to be used as a model home. The 1968 permit for the building described the use to which the building would be put as "dwelling, single-family". However, defendant has used the building as an office and other entities have used it for commercial purposes. The building's commercial use is a valid non-conforming use with regard to the Bethany Beach Zoning Code.East Coast Resorts, Inc. v. The Board of Adjustment of the Town of Bethany Beach, Del. Super., C.A. No. 91A-10-002, Lee, J. (June 17, 1993), aff'd, Del. Supr., No. 245, 1993, Walsh, J. (February 3, 1994).
On June 1, 1995, the declaration of covenants, conditions and restrictions ("Restrictions") regarding Bethany West were amended. The pertinent provisions are set forth below.
The original restrictions were filed in 1968. The portions of the 1995 Restrictions which are pertinent to this litigation are identical to the 1968 Restrictions. However, since the 1995 Restrictions are what control this case, no need exists to set forth the 1968 Restrictions.
WHEREAS, EAST COAST RESORTS, INC., a Delaware Corporation, (hereinafter referred to as ECR) was the developer of a subdivision known as Bethany West and declarants of certain Declarations of Restrictions affecting that subdivision (hereinafter referred to as "Subdivision"); and
WHEREAS, ECR incorporated the Association on December 28, 1967, . . .; and
WHEREAS, the members of the Association are the fee simple owners of real property comprising and described as lots in the development known as Bethany West, Section . . . 2, . . .
* * *
WHEREAS, the Association and its members, in order to meet their purposes and to provide for the preservation of the values and amenities in Bethany West and for the maintenance of the recreational facilities located therein, desire to amend the Declarations, the covenants, restrictions, easements, charges and liens (hereinafter referred collectively as the "Restrictions") as hereinafter set forth, by substitution in full, for the benefit of the property and each owner thereof; and
WHEREAS, the Association and its members desire that these Restrictions shall run with, burden, and bind the property; . . .
* * *
NOW, THEREFORE, the Association and its members hereby declare that all of said lots in each and every section and the common lands as well are held and shall be held, conveyed, hypothecated, or encumbered, leased, rented, used, occupied, and improved subject to the Restrictions hereinafter set forth, all of which are declared and agreed to be in furtherance of a plan for the existence, improvement and sale of said lots and are established and agree [sic] upon for the purpose of enhancing and protecting the value, desirability and attractiveness of the property described in the plats and of the subdivision as a whole; excepting specifically from the restriction requiring residential use of the following parcels titled to the Association: * * * [lots which do not include the property at the center of this dispute.] [Emphasis added.]
ARTICLE I
DURATION AND AMENDMENTS
A. It is declared that it is the intent of the Association and its members that these Restrictions expressly supersede all prior Restrictions and/or Restrictive Covenants and Reservations, with all Amendments thereto covering prior Section . . . Two (2) . . . of Bethany West.
B. The following Restrictions shall run with the land, and the title thereto as conveyed, and shall be binding on all persons claiming hereunder, as well as their respective heirs, successors, and assigns, as the case may be, in perpetuity. . . .
* * *
ARTICLE II
MUTUALITY OF BENEFIT AND OBLIGATION
The Restrictions and agreements set forth herein are made for the mutual and reciprocal benefit of each and every lot owner and are intended to create mutual, equitable servitudes upon each of said lots in favor of each and all of the other lots therein; to create reciprocal rights between the respective owners of all of said lots; to create a privity of contract and estate between the grantees of said lots, their heirs, successors and assigns, and shall, as to the owner of each such lot, his heirs, successors or assigns, operate as covenants running with the land for the benefit of each and all other lots in Bethany West and their respective owners.
ARTICLE III
EXCLUSIVE AND RESIDENTIAL USE AND IMPROVEMENTS
No lot shall be used except for residential purposes. No structures shall be erected, placed or permitted to remain on any lot other than one (1) detached, single family residence dwelling, . . . [Emphasis added.]
* * *
ARTICLE X
REMEDIES
A. The Association or any party to whose benefit these Restrictions inure may proceed at law or in equity to prevent the occurrence, continuation or violation of any of these Restrictions and the court in any such action may award the successful party reasonable expenses in prosecuting such action, including attorneys' fees.
B. The remedies hereby specified are cumulative, and this specification of them shall not be taken to preclude an aggrieved party's resort to any other remedy at law, in equity, or under any statute. Delay or failure on the part of an aggrieved party to invoke an available remedy with respect to any present or future violation of these Restrictions shall not be held a waiver by that party to any right available to him/her/it upon recurrence or continuation of said violation or the occurrence of a different violation.
ARTICLE XI
GRANTEE'S ACCEPTANCE
A. The grantee of any Lot subject to the coverage of this Declaration, by acceptance of a deed conveying title thereto, or the execution of a contract for the purchase thereof, whether from the original Declarant, the original Covenants and the Association, under the original restrictive covenants or a subsequent owner of such Lot, shall accept such deed or contract upon and subject to each and all of these Restrictions and the agreements herein contained, and also to the jurisdiction, rights and powers of the original Declarant, the original Covenants and the Association, and by such acceptance shall for himself, his heirs, personal representatives, successors and assigns, covenant, consent, and agree to and with the original Declarant, the original Covenants and the Association and to and with the grantees and subsequent owners of each of the Lots within the Subdivision to keep, observe, comply with and perform said Restrictions and agreement.
As noted earlier, the State took a portion of the Property when widening Route 26. Before the taking, the Property was 16,243.524± square feet; after the taking, it was 14,377.759± square feet. The parties agreed that compensation for the amount of land taken and site improvements totaled $14,910.00. They dispute, however, the amount of damages to the remaining property.
The main focus of the parties' arguments is on whether the portion of the Restrictions allowing only for single-family residential use applies to the Property. Defendant has contended for many years that, despite the clear language in the rest of the Restrictions stating that the Restrictions encumber the Property, the implication in Article XI, labeled "Grantee's Acceptance", is that the Restrictions do not apply to the Property until defendant out conveys it. Although there never has been any legal ruling so interpreting the Restrictions, defendant further contends that res judicata prevents a revisiting of the issue. Defendant's final argument is an attack on the State's standing to argue the Restrictions do not apply to the Property.
Defendant contends that since the Restrictions do not apply to the Property, it may construct multi-family townhouses on the Property. Defendant's appraiser accepts this contention as a fact and uses it as the basis for his opinion of damages to the remaining Property. The appraiser opines as follows. Before the condemnation, there was sufficient square footage on the Property to allow for the construction of three townhouses in accordance with the Bethany Beach Zoning Code. After the reduction in square footage due to the condemnation, defendant could construct only two townhouses in accordance with the Zoning Code. Due to this loss, the damage to the remaining property is $30,000.00.
The State argues that since defendant's expert's opinion is based upon a faulty premise, the entire opinion fails. If the State's position is accepted, then there is no loss to defendant because the ability to subdivide the Property into two single-family residential lots is the same after the condemnation as before. The State's alternative argument is that defendant's ability, if it existed, to construct multi-family townhouses is a value peculiarly personal to the owner, and being so, cannot be considered to be a part of the market value.
It is this latter argument which the Court pursues. Although I am not convinced that the Restrictions do not apply to the Property until defendant out conveys it, I do not have to decide that issue. Instead, I will assume that the Restrictions do not apply to the Property as long as defendant owns it. What is pertinent to this decision is the undisputed fact that once defendant sells the Property, then the Restrictions apply and the Property is limited to single-family residential use.
The established rule for the valuation in a partial taking case is the difference between the market value of the parcel of land as a whole immediately before and unaffected by the taking and the market value of the remainder of the property which is not being taken immediately after and as affected by the taking.Acierno v. State, 643 A.2d 1328, 1334 (Del. 1994); Board of Education of Claymont Special School District v. 13 Acres of Land in Brandywine Hundred, 131 A.2d 180, 182 (Del.Super. 1957). Market value is "the price which would be agreed upon by a willing seller and a willing buyer under ordinary circumstances and with no compulsion to either buy or sell." State ex rel. State Highway Department v. J.H. Wilkerson Son, Inc., 280 A.2d 700, 701 (Del. 1971). Accord 0.744 of an Acre of Land v. State, 251 A.2d 341, 342 (Del. 1969); Board of Education of Claymont Special School District v. 13 Acres of Land in Brandywine Hundred, 131 A.2d at 183. As further explained inBoard of Education of Claymont Special School District v. 13 Acres of Land in Brandywine Hundred, 131 A.2d at 183:
Market value means the fair value of the property as between one who wants to purchase and one who wants to sell. It is not what could be obtained for the property under peculiar circumstances, when a greater than fair price could be obtained. It is not a speculative value nor a value obtained from the necessities of either the buyer or the seller. Market value is simply what the property would bring at a fair sale when one party wants to sell and the other wants to buy.
The Court further stated: "[M]arket value must ordinarily be determined by a consideration of the uses for which the land is adapted and for which it is available." Id. In determining market value, the highest and best use of the property is considered. Id.
In this case, market value of the Property would not take into account defendant's ability, assuming it exists, to build multi-family townhouses because the Restrictions, which clearly apply to a buyer, would prohibit the buyer from constructing multi-family townhouses. No willing buyer would pay a value for the Property which was based upon the use of the Property for multi-family townhouses. A buyer in the open market would base the Property's value on its use for single-family residences.
Defendant might argue that this result is unfair because it prevents it from obtaining damages for the Property which take into account its best and most valuable use. The Court discerns no unfairness here because it does not understand how defendant, even if it constructed multi-family townhouses, ever could sell such. The Restrictions will apply to any subsequent buyers, and the single-family use restriction conflicts with a multi-family townhouse use. In actuality, defendant's use of the Property for multi-family use is purely theoretical. In any case, the standards and measures applied here are recognized as proper for the purpose of reaching a compensatory amount which is just and fair both to the owner of the taken property and the public represented by the condemning authority. Id. at 182. There have been other situations where landowners have not been able recognize all the value to which they felt they were entitled in a condemnation situation due to a strict application of the law.Ableman v. State ex rel Sec., Dept. of Hwys. And Transp., 297 A.2d 380, 383 (Del. 1972); State ex rel. State Highway Department v. J.H. Wilkerson Son, Inc., 280 A.2d at 702. That is because the law and market value do not allow for consideration of a value peculiarly personal to the owner, as is the case here. See Board of Education of Claymont Special School District v. 13 Acres of Land in Brandywine Hundred, 131 A.2d at 184.
Defendant's expert's appraisal of the Property's value is based on the premise that the best use of the Property is for multi-family townhouses. For the reasons set forth above, that premise is flawed; accordingly, the appraisal and testimony are not admissible. The Court grants the State's motion in limine.
IT IS SO ORDERED.