Easements in Nevada: Impairment of Access

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August 20, 2018
Author: Stanley Parry
Organization: Ballard Spahr LLP


1. Compensation for change of access:

There is a recent case that speaks to the standard. ASAP Storage, Inc. v. Sparks, 123 Nev. 639, 173 P.3d 734 (2008). “Physical appropriation exists when the government seizes or occupies private property or outs owners from their private property.” Id. “A physical appropriation by ouster occurs when the government substantially interferes with an owner’s right of access to his or her property.” Thus, the standard is a showing of substantial interference with the property.

The Nevada Supreme Court also speaks to the standard in the following cases:

A. Culley v. City of Elko, 101 Nev. 838, 711 P.2d 864 (1985). “The success of such a claim depends upon the property owner’s ability to demonstrate substantial impairment of access.” Citing State ex rel. Dep’t Hwys. v. Linneck, 86 Nev. 257, 468 P.2d 8 (1970). “[T]he court must determine whether substantial impairment of access has been established as a matter of law in inverse condemnation cases.” Citing Lied v. Clark County, 94 Nev. 275, 579 P.2d 171 (1978); Linnecke. “The district court determination whether substantial impairment of access has been established as a matter of law must be based upon the evidence presented at trial.”

B. Argier v. Nevada Power Company, 114 Nev. 137, 952 P.2d 1390 (1998). “When the government interferes with a person’s possession of his/her property, the owner loses an interest in that property.” Id., at 114 Nev. at 140, 952 P.2d at 1392.

C. Blumenstein v. City of Long Beach, 143 Cal.App.2d 264 (Cal.Ct.App. 1956). This case was cited approvingly in ASAP, it involved a change of a highway that impaired the access to the property. The court noted that the “property right assertedly damaged is respondent’s easement of access from his property to the abutting highway and to the free and continuous se thereof. This right of ingress and egress attaches to the lot and is a right of property as fully as the lot itself, rather than a mere interest possessed by the public in general in the use of public roads.” “An act of the municipality for the benefit of the public that substantially impairs such easement is damage to the lot itself within the meaning of [the state constitution].”

Tellingly, though, the court did state that damages resulting from “mere diversion of traffic or inconvenience resulting from circuity of travel in reaching the subject property are not compensable.” It appears that there must be a diminution of market value to the property. The keystone case is probably Schwartz v. State of Nev., 111 Nev. 998, 900 P.2d 939 (1995).

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“An abutting owner of a public highway has a special right of easement in a public road for access purposes. This is a property right of easement which cannot be damaged or taken from the owner without due compensation.”

“If he has free and convenient access to his property and his means of egress and ingress are not substantially interfered with, he has no cause for complaint.”

“The determination of whether such substantial impairment has been established must be reached as a matter of law. The extent of such impairment must be fixed as a matter of fact.”

“We held further that damages are to be calculated based on the difference in market value ‘before and after’ the impairment.”

“The construction of a frontage road providing an alternative means of ingress and egress is a factor mitigating damages.”

“As previously noted, a property owner abutting a public highway has a special right of easement in a public road for access purposes, which is a property right of the class protected by NRS 37.110(3) [the section on severance damages]. Such a property right may not be substantially impaired without the payment of damages to the affected property owner.”

Schwarz is based on an earlier Nevada Supreme Court case that set the precedent for these types of actions. In Dep’t. of Highways v. Linnecke, 86 Nev. 468 P.2d 8 (1970) the court recognized the right to obtain severance damages for harmful changes to one’s access to the public highway. “An abutting property owner of a public highway has a special right of easement in a public road for access purposes. This is a property right of easement that cannot be damaged or taken from the owner without due compensation.” Id., 86 Nev. at 260, 468 P.2d at 9, (citing People ex rel. Department of Public Works v. Murray, 172 Cal.App.2d 133, 342 P.2d 485, 488 (Cal. Ct. App. 1959)).

Further, “[A]n owner is not entitled to access to his land at all points in the boundary to it and the highway, although entire access to his property cannot be cut off. If he has free and convenient access to his property and his means of egress and ingress are not substantially interfered with, he has no cause for complaint.” Id., 86 Nev. at 260, 468 P.2d at 10. “The determination of whether substantial impairment has been established must be reached as a matter of law. The extent of such impairment must be fixed as a matter of fact.” Id. 2. Statutes addressing severance and damage to a business

The following Nevada Revised Statutes address severance damages and damage to a business as a result of a partial taking.

NRS 37.110 Ascertainment and assessment of damages. The court, jury, commissioners or master must hear such legal testimony as may be offered by any of the parties to the proceedings, and thereupon must ascertain and assess:

  1. The value of the property sought to be condemned and all improvements thereon pertaining to the realty, and of each and every separate estate or interest therein; if it consists of different parcels, the value of each parcel and of each estate or interest therein shall be separately assessed.
  2. If the property sought to be condemned constitutes only a part of a large parcel, the damages which will accrue to the portion not sought to be condemned, by reason of its severance from the portion sought to be condemned, and the construction of the improvement in the manner proposed by the plaintiff.
  3. If the property, though no part thereof is taken, will be damaged by the construction of the proposed improvement, the amount of such damages.
  4. Separately, how much the portion not sought to be condemned, and each estate or interest therein, will be benefited, if at all, by the construction of the improvement proposed by the plaintiff; and if the benefit shall be equal to the damages assessed, under subsection 2 of this section, the owner of the parcel shall be allowed no compensation except the value of the portion taken; but if the benefit shall be less than the damages so assessed, the former shall be deducted from the latter, and the remainder shall be the only damages allowed in addition to the value of the portion taken.
  5. If the property sought to be condemned be for a railroad, the cost of good and sufficient fences along the line of such railroad between such railroad and other adjoining lands of the defendant; and the costs of cattle guards where fences may cross the line of such railroads. As far as practicable, compensation must be assessed for each source of damages separately. [1911 CPA § 674; RL § 5616; NCL § 9163]

NRS 37.111 Additional compensation for loss of goodwill.

1. In addition to any amount of compensation determined pursuant to NRS 37.110, the owner of a business conducted on property that is acquired pursuant to this chapter must be compensated for loss of goodwill if:

(a) The condemnation causes the business to be dissolved and the business cannot be relocated for reasons beyond the control of the owner, including, without limitation, the unavailability of a new franchise or when the value of the business is inextricably tied to the unique location of the property being condemned; and

(b) The owner of the business has a property interest in the property acquired pursuant to this chapter.

2. As used in this section, “goodwill” means the component of value attributed to the reputation, loyal customer base, ability to attract new customers and location of a business. The term does not include the loss of anticipated profits or loss of business opportunity. (Added to NRS by 2005, 1787)

NRS 37.112 Valuation of property subject to condemnation as result of public work or project.

1. Except as otherwise provided in subsection 2, if the property is subject to condemnation as a result of a public work or public improvement, any decrease or increase in the fair market value of the property before the date of valuation which is caused by:
(a) The public work or public improvement for which the property is acquired; or
(b) The likelihood that the property would be acquired for such a purpose, must be disregarded when assessing the value of the property pursuant to NRS 37.110.

2. Any decrease or increase in the fair market value of the property before the date of valuation resulting from physical deterioration within the reasonable control of the owner is not required to be disregarded pursuant to subsection 1. (Added to NRS by 1993, 525)

NRS 37.115 Distribution of award among joint defendants by separate proceeding.

Where there are two or more estates or divided interests property sought to be condemned, the plaintiff is entitled to have the amount of the award for such property first determined as between plaintiff and all defendants claiming any interest therein. The respective rights of such defendants in and to such award shall be determined by the court, jury, or master in a later and separate hearing in the same proceeding and the amount apportioned by order accordingly. (Added to NRS by 1965, 997; A 1967, 815)

NRS 37.120 Assessment of compensation and damages: Date of valuation; exception; just compensation.

  1. To assess compensation and damages as provided in NRS 37.110, the date of the first service of the summons is the date of valuation, except that, if the action is not tried within 2 years after the date of the first service of the summons, and the court makes a written finding that the delay is caused primarily by the plaintiff or is caused by congestion or backlog in the calendar of the court, the date of valuation is the date of the actual commencement of the trial. If a new trial is ordered by a court, the date of valuation used in the new trial must be the date of valuation used in the original trial.
  2. No improvements put upon the property after the date of the service of the summons may be included in the assessment of compensation or damages, regardless of the date of valuation.
  3. In all actions in eminent domain, the court shall award just compensation to the owner of the property that is being taken. Just compensation is that sum of money necessary to place the property owner in the same position monetarily as if the property had never been taken, excluding any governmental offsets except special benefits. Special benefits may only offset severance damages and may not offset the value for the property. Just compensation for the property taken by the exercise of eminent domain must include, without limitation, interest computed pursuant to NRS 37.175 and reasonable costs and expenses, except attorney’s fees, incurred by the owner of the property that is the subject of the action.
  4. As used in this section, “primarily” means the greater amount, quantity or quality of acts of the plaintiff or the defendant or, if there is more than one defendant, the total delay caused by all the defendants, that would cause the date of the trial to be continued past 2 years after the date of the first service of the summons. [1911 CPA § 675; RL § 5617; NCL § 9164]—(NRS A 1965, 686; 1991, 1641; 1993, 526; 1999, 3533; 2007, 336)

3. Summary of recent Condemnation Cases

The following cases address Just Compensation and the matter in which Just Compensation is determined including severance damage calculation, interest calculation, pre-condemnation damages, attorney’s fees, the impact of preexisting dedication requirements of a governmental entity and zoning requirements, ;

V and S Railway, LLC v. White Pine County and City of Ely, 211 P.3d 879, 125 Nev. Adv. Rep. 23 (July 16, 2009)

Issue:
Whether the district court properly concluded that NRS 334.030 was triggered by the Los Angeles Department of Water and Power designating a railroad as surplus governmental property, preventing V and S Railway, LLC from condemning the railroad pursuant to NRS 37.230.

Holding: No, according to the plain language of NRS 334.030, the statute is triggered when governmental entities take steps demonstrating their intent to enter into a contract for the purchase and sale of surplus governmental property. Once NRS 334.030 is triggered, no other action may interfere with the surplus property action.

Moldon v. County of Clark, 188 P.3d 76, 124 Nev. Adv. Rep. 49 (July 24, 2008)
Issue:
Whether the placement of the interest of condemnation deposits into the local government’s general fund for public benefit constitutes a taking under the Fifth and Fourteenth Amendments.

Holding: Yes, because condemnation deposits constitute private property to the extent that a party is entitled to the condemnation deposit, the party is likewise entitled to the interest earned on that deposit. Thus, any statute allowing local governments to keep interest earned on funds deposited with the court is unconstitutional, as applied to condemnation deposits that are ultimately awarded to a private party.

Buzz Stew, LLC v. City of North Las Vegas, 181 P.3d 670, 124 Nev. Adv. Rep. 21 (April 17, 2008)

Issue:
Whether a landowner, who no longer owns the land, may assert a claim for precondemnation damages that arise when an intent to condemn a parcel of land is announced and then the condemning authority unreasonably delays before commencing an eminent domain action.

Holding: Yes, a landowner may bring a claim for precondemnation damages based on allegations that the condemning authority acted improperly in announcing that it intended to condemn the landowner’s property. Further, the just compensation should be paid to the person who was the owner at the time of the taking. This claim for precondemnation damages may be asserted independent from those resulting from the taking of the property.

Analysis: To state a claim for precondemnation damages, the landowner must first allege ‘facts showing an official action by the [would be] condemnor amounting to an announcement of intent to condemn. The pivotal issue . . . is whether the public agency’s activities have gone beyond the planning stage to reach the ‘acquiring state.’ The acquiring state occurs ‘when condemnation has taken place, steps have been taken to commence eminent domain proceedings, or there has been an official action or expression of intent to condemn.’ The landowner must show that the public agency acted improperly following the agency’s announcement of its intent to condemn by unreasonably delaying (or extraordinarily delaying) an eminent domain action or oppressive conduct following an announcement of intent to condemn which results in a decrease in the market value of the property. What qualifies as an extraordinary delay or oppressive conduct is for the fact-finder to determine.

HSU v. County of Clark, 123 Nev. 625, 173 P.3d 724 (2007)

Issue: Are there equitable exceptions to the law of the case doctrine precluding the district court’s dismissal of the case based on the recent holding in Sisolak?

Holding: Yes, equitable considerations justify a departure from the doctrine that the principles set forth in a first appeal are the law of the case on all subsequent proceedings. Specifically, when the Nevada Supreme Court issues an intervening decision that constitutes a change in controlling law, courts may depart from the decided law of the case and apply the new rule of law. Accordingly, pursuant to Sisolak, the transition zone height restrictions enacted by the County allowing aircraft to fly through the airspace at altitudes lower than 500 feet constitutes a per se regulatory taking, and the landowners were not required to apply for a variance or otherwise exhaust their administrative remedies prior to bringing suit. However, evidence related to potential variances, although irrelevant for determining whether a taking occurred, is pertinent in determining the amount of just compensation due.

Nevadans for the Protection of Property Rights, Inc. v.Heller, 122 Nev. 894, 141 P.3d 1235 (2006)

Issue: Whether the People’s Initiative to Stop the Taking of Our Land (PISTOL) violates NRS 295.009 which places a single subject restriction on initiative petitions.

Holding: NRS 295.009 is constitutional. Further, sections 1 and 8 of PISTOL violate the one subject requirement of NRS 295.009 as they do not pertain to the primary subject of eminent domain. Thus, the Court struck the sections due to the severability clause in PISTOL. Additionally, sections 3, 9 and 10 of the initiative violate the requirement that an initiative must propose policy and not direct admininstrative details. Accordingly, sections 3, 9 and 10 were likewise stricken.

McCarran International Airport and Clark County v. Sisolak, 122 Nev. 645, 137 P.3d 1110 (2006)

Issues: Does a landowner have a valid property interest in the airspace above his land? Whether the government inversely condemned Sisolak’s property by a per se regulatory taking?

Holding: Yes, a landowner has an interest in at least some of the airspace above his or her land. Thus, the landowners own the usable airspace above their property up to 500 feet, subject to intrusion by lawful air flight.

Yes, the ordinances at issue constituted a permanent and physical invasion of Sisolak’s property and was sufficient to establish a taking.

Valley Electric Association v. Overfield, 121 Nev. 7, 106 P3d 1198 (2005)

Issue: Whether the district courts can award landowners attorneys’ fees in eminent domain actions under NRS 18.010.

Holding: The language of NRS 37.140 and NRS 37.180 which authorize attorneys’ fees in actions involving the construction of railroad facilities and when the condemnor abandons the proceedings does not prohibit fee awards under other statutory authority. Thus, NRS 18.010 may be applied in condemnation actions where recoveries of just compensation are limited in amount.

City of North Las Vegas v. Robinson, 122 Nev. 527, 134 P.3d 705 (2006)

Issue: Whether the district court erred by instructing the jury to focus solely on the condemned portion of land when determining its highest and best use rather than determining the value of the portion in relation to the value of the whole property.

Holding: Yes, the district court erred. A court may not admit evidence of a land-use restriction that diminishes the value of a condemned portion of a larger parcel by focusing only on the limited uses to which the condemned portion could be put under the restriction, without reference to the highest and best use of the whole parcel. Thus, although a fact-finder may consider certain zoning restrictions permitting viable economic uses of the property because those zoning restrictions may limit the property’s highest and best use and the trier of fact may also consider the effect that future zoning or variances may have on the condemned property’s highest and best use when there is evidence that a prudent purchaser would conclude that he or she would likely obtain a zoning change; evidence of such land-use restrictions is not always proper. The Court rejected the holding in Contra Costa County v. Lone Tree Investments, a California case, that held when there is a reasonable probability that the public agency would require dedication of the take as a condition of development, the take should be value based on the use that can be made of the property in its undeveloped state.

Department of Transportation v. Cowan, 120 Nev. 851, 103 P.3d 1 (2004)

Issue: Whether under the undivided fee rule a lessee may be compensated for business loss?

Holding: Yes, under certain exceptional circumstances a business owner may be compensated over and above the value of the real property. For example, when condemnation of the real property results in the business being destroyed. Thus, if the lease’s value is inextricably tied to the unique location of the real estate that is condemned, the undivided-fee rule does not adequately compensate the lessee for what was taken. Business good will is the appropriate measure of damages. There is no single method to value goodwill. The method will depend on the circumstances in each case, and more importantly, on the type of business being valued. Generally, no compensation is awarded for anticipated profits at the location taken by condemnation. Further, lost business opportunity is not a compensable item for condemnation unless specific statutes or constitutional provisions require such compensation.

City of Las Vegas v. Bustos, 119 Nev. 360, 75 P.3d 351 (2003)

Issue: Whether the trial court erred in considering the effect of future rezoning or variances on the highest and best use of the condemned property when determining its value.

Holding: No, the district court did not error. The trier of fact may consider the effect of future rezoning or variances on the highest and best use of the condemned property when determining its value.

Analysis:
The landowner is entitled to just compensation for the government’s taking of private property and has the burden of establishing the value of land so taken. Just compensation is determined by the property’s market value ‘by reference to the highest and best use for which the land is available and for which it is plainly adaptable. However, such use must be reasonably probable. In general, the trier of fact may consider zoning restrictions permitting a viable economic use of the property in determining the property’s value. In fact, the district court should give ‘due consideration . . . to those zoning ordinances that would be taking into account by a prudent and willing buyer.’

NRS 37.112(1) provides that any decrease or increase in the fair market value of the property before the date of valuation which is caused by the public work or public improvement for which the property is acquired, or the likelihood that the property would be acquired for such a purpose must be disregarded when assessing the value of the property pursuant to NRS 37.110. Substantial evidence supported that a reasonable and prudent buyer would conclude that he or she could likely obtain a zoning change, given the character of the neighborhood, the high volume of traffic on Alta Drive, and the surrounding properties.

County of Clark v. Sun State Properties, Ltd., 119 Nev. 329, 72 P.3d 954 (2003)

Issue: Whether the district court erred in rejecting the undivided-fee rule, which required the district court to first determine the value of the property as a whole, and in a subsequent hearing, to apportion the award among the various interests.

Holding: Yes, the district court erred because pursuant to NRS 37.115 the eminent domain statutes codified the undivided-fee rule, which requires the court to first determine the value of the property as a whole, and in a subsequent hearing, to apportion the award among the various interests.

Additionally, the condemnee may recover damages for lost profits when the condemnee has demonstrated that the condemnor caused unreasonable delay in bringing the action to trial.

Analysis:
The determination of market value includes the consideration of any elements that fairly enter into the question of value which a reasonable businessman would consider when purchasing. In determining the fair market value when there are various interests in the condemned property, NRS 37.115 provides for a bifurcated proceeding:

Where there are two or more estates or divided interests in property sought to be condemned, the plaintiff is entitled to have the amount of the award for such property first determined as between plaintiff and all defendants claiming any interest therein.

The undivided-fee rule provides that condemned property is first valued as though it was unencumbered, and in a subsequent hearing, the total award is apportioned among the various interests.

The reasoning behind the rule is:

The duty of the public to make payment for the property which it has taken is not affected by the nature of the title or by the diversity of interests in the property. The public pays what the land is worth, and the amount so paid is to be divided among the various claimants, according to the nature of their respective estates.

Under the undivided-fee rule, the condemnor has no interest in the apportionment hearing because it has met its obligation when it pays the court the total award. Furthermore, the undivided-fee rule provides that ‘the division of a fee into separate interests cannot increase the amount of compensation that the condemnor has to pay for the taking of the fee.’

NRS 37.115 codified the undivided-fee rule. The plain language of the statute provides that in the first hearing, the just compensation is to be determined between the condemnor and all the condemnees. We note that in this first hearing, the existence of the encumbrance on the property, i.e., the lease, is relevant in valuing the property as a whole.

If the action is not tried within 2 years after the date of the first service of the summons, and the court makes a written finding that the delay is caused primarily by the plaintiff or is caused by congestion or backlog in the calendar of the court, the date of valuation is the date of the actual commencement of the trial.

Primarily is defined as the greater amount, quantity or quality of acts of the plaintiff or the defendant or, if there is more than one defendant, the total delay caused by all the defendants, that would cause the date of the trial to be continued past 2 years after the date of the first service of the summons.

In addition to the benefit of the inflated value pursuant to NRS 37.120(1), the condemnee is entitled to prejudgment interest from the date of the taking because the condemnee ‘has still been deprived of the use of the proceeds that should have been paid at the time of the taking.’

Where a condemnor ‘acts unreasonably in issuing precondemnation statements, either by excessively delaying eminent domain action or by other oppressive conduct, our constitutional concern over property rights requires that the owner be compensated. When the condemnee meets the evidentiary burden, ‘the condemnee must be compensated for loss of income due to precondemnation action or publicity.’

If, after filing an action, the condemnor unreasonably delays in bringing the action to trial within two years, then it would appear consonant with our concerns shown in Barsy that the condemnee receiver damages for lost profits caused by such delay. Although NRS 37.120(1) prescribes that the government must bear the burden of the inflated value when the action has not been brought to trial within two years, it only requires a finding that the condemnor primarily caused the delay. Using our reasoning in Barsy, we hold that the condemnee must meet the more stringent standard set forth in Barsy when there is a claim for lost-profits damages resulting from the litigation delay. Thus, the condemnee must demonstrate that the condemnor caused unreasonable delay in bringing the action to trial by purposely and in bad faith pursuing an unconscionable dilatory course of action during litigation.

City of Las Vegas Downtown Redevelopment Agency v. Moldon, 117 Nev. 816, 34 P.3d 553 (2001)

Issue: Did the district court error by granting the landowner’s motion to dismiss by concluding that the redevelopment plan for the Downtown Las Vegas Redevelopment Area had to be amended to include a project for redevelopment that included vacating portions of four public streets and relocating a public park.

Holding: Yes, the dismissal was in error. The redevelopment plan did not need to be amended.

Formal amendment of a redevelopment plan would be mandated for material deviations from or changes to a redevelopment plan; but formal amendment would be unnecessary for an administrative interpretation of the plan or a filling in of details. The filling-in of redevelopment ‘details’ outside the amendment process is limited by the language of the redevelopment plan. The vacation of the four streets and the relocation of the park do not constitute a material deviation from or change to the plan.

Analysis:

When a redevelopment plan’s involvement is apparent from the government’s eminent domain complaint, a landowner’s failure to raise in a responsive pleading the issue of the need for plan amendment may constitute waiver. Likewise, when the eminent domain complaint involves land within an area covered by a redevelopment plan and the complaint is accompanied or followed by a motion for occupancy, failure to raise the issue of the need for plan amendment in opposition to the motion may also constitute a waiver. But, the agency made no showing that the tardy opposition worked to the agency’s detriment.

NRS 279.608 provides that: If at any time after the adoption of a tentative or redevelopment plan for a project area by the legislative body, it becomes necessary or desirable to amend or modify such plan, the legislative body may amend such plan upon the recommendation of the agency. An amendment or modification may include the addition of one or more areas to any redevelopment area.

A redevelopment agency should not be saddled with the burden of amending a redevelopment pan to include every new redevelopment project or change to a redevelopment project, without regard to the nature of the project or the change. At the very least, inappreciable or intangible new redevelopment projects or changes to existing projects should not require amendment of a redevelopment plan. On the other hand, redevelopment outside the bounds of the applicable redevelopment plan, without public input through the amendment process, would be intolerable. The acceptable middle ground between the two extremes is a ‘materiality’ test, read in conjunction with the Paris rule.


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