State ex rel. Department of Highways v. Wood Preserving Service, Inc.

302 So. 2d 655, 1974 La. App. LEXIS 4486
CourtLouisiana Court of Appeal
DecidedOctober 30, 1974
DocketNo. 4599
StatusPublished
Cited by1 cases

This text of 302 So. 2d 655 (State ex rel. Department of Highways v. Wood Preserving Service, Inc.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State ex rel. Department of Highways v. Wood Preserving Service, Inc., 302 So. 2d 655, 1974 La. App. LEXIS 4486 (La. Ct. App. 1974).

Opinions

CULPEPPER, Judge.

Under LSA-R.S. 48:441 et seq., the State expropriated a portion of defendant’s land on which was located a wood preserving plant. Plaintiff deposited $44,278 in compensation for the land and improvements taken and for severance damages to the remaining land and wood-treating plant. The district judge awarded defendant $142,362, less the deposit. Plaintiff appealed.

The only issues on appeal concern the award of $9,473 for the portion of the plant buildings and equipment taken and $74,441 for severance damages to the portion of the plant buildings and equipment remaining after the taking. There is no dispute as to the value of the land taken or severance damages to the remaining land.

The plant was constructed in 1955 on 11.048 acres of land. It was used to treat raw wood products with chemical preservatives. Until 1957, the plant operation was supervised by Alvin C. Morgan, the president of Wood Preserving Service, Inc. However, due to his other business ventures, it became impossible for him to personally manage the plant. He testified that the closing of the plant was also due to the lack of available management personnel in the area.

In 1959, defendant entered a lease-purchase agreement for the sale of its plant to Gulf Wood Preserving Corporation. The rent of $15,000 was to be paid in five annual installments. Gulf also executed a promissory note in favor of defendant on November 1, 1959, in the amount of $60,000 payable in four annual installments.

[657]*657After an unsuccessful attempt to operate the plant, Gulf retroceded the plant to defendant in return for the surrender of its promissory note. On November 1, 1961, the lease was also canceled. The plant has not been operated since 1961.

On February 23, 1971, plaintiff took S.27 acres of defendant’s property for highway construction. The evidence clearly establishes that the plant had not been used for any purpose for at least eight years prior to the taking.

It was stipulated that: (1) There were two tracts remaining after the taking — the east tract containing 1.5 acres and the west tract containing 4.3 acres; (2) the value of the land taken is $38,048; (3) severance damage to the remaining 4.3-acre tract is $20,400; and (4) there is no severance damage to the remaining 1.5-acre tract. The principal issue concerns severance damages to the plant, which could not be operated on the small remaining land.

Mr. Normand Terry, defendant’s expert appraiser, testified as to the value of the plant immediately prior to the taking and its value immediately after the taking. He used the “value in use” concept or “reproduction cost less depreciation” method to determine its market value prior to the taking. After the taking, the plant was sold to Mr. Mackey Davis in June, 1972 for $25,000 and moved by him to Hatties-burg, Mississippi. Mr. Terry used the purchase price paid by Mr. Davis as the value of the plant after the taking.

It is well settled in our jurisprudence that the measure of severance damages is the difference between the value of the remaining property before and after the taking, State v. Mason, 254 La. 1035, 229 So.2d 89, 93 (1969); State v. M. G. Realty Company, Inc., 276 So.2d 918, 922 (La.App. 3rd Cir. 1973). Using this method of calculation, Mr. Terry found the severance damage to the plant to be $74,441.

Mr. Terry had never appraised secondhand equipment of a wood preserving plant. His decision to value the plant according to the “value in use” concept was based upon Kinard’s (William N. Kinard, Jr.) “Industrial Real Estate.” He relied heavily upon the following excerpt from Kinard’s book which outlines the factors to be considered by the appraiser before he desires to employ the “value in use” concept:

“Now the problem becomes complicated when the property in question is not properly exchanged in any identifiable market, nor does it fall into the rental category where sufficient rental data exists to constitute a basis for analysis resulting in a market value estimate. Value-in-use compensations can generally be justified when (1) the property is fulfilling identifiable economic demands for services provided, or which it houses, (2) the property improvements have a reasonable remaining economic life expectancy, (3) there is responsible ownership and constant competent management, (4) the diversion of the property to an alternate use will not be economically feasible, and (5) continuation of present use is assumed. When a preponderance of factors above appear, then it is appropriate that the appraiser, carefully qualifying his findings, issue an opinion of value-in-use. It is obvious that the cost approach must be relied on in such situations, but all measures of economic contribution of the real estate to the total going concern’s situation are considered relevant.” William N. Kin-ard, Jr. “Industrial Real Estate,” 2d Ed. page 418, footnote.

Mr. Terry admitted that the plant lacked competent management. However, he concluded that: (1) there is a readily identifiable economic demand for the services of this plant in southwest Louisiana, (2) the equipment has a reasonable, remaining economic life expectancy, (3) it will not be economically feasible to change the plant’s use, and (4) the economic use of the property was feasible.

[658]*658Under cross-examination, Mr. Terry testified that the criterion which assumes continued use means only that the plant need be capable of operating and does not mean that it has to be actually in use at the time of the taking. However, he admitted that Kinard’s theory of “value in use” is based principally on the factor that the land and improvements are presently being used as a gomg business. He attempts to explain the absence of this factor in the present case by saying that the failure to meet the “continued use” criterion by itself would not prevent the application of the “value in use” concept if a preponderance of the other five factors were established.

Mr. Francis Seale testified for the plaintiff as an expert in the operation and management of wood-treating plants. Although he did not qualify as an expert appraiser, his 28 years’ experience in the management of such operations clearly shows that he is particularly qualified to testify on the economic problems encountered in the industry in the area in question.

He testified that it would not be economically feasible to operate this plant in Lake Charles. This plant was the only one producing Penta treated wood products in the Lake Charles area. His testimony reflects that his plant in Hammond was not successful in its attempt to sell Penta products in the Lake Charles area because no one would purchase large enough quantities. In his opinion, the undeveloped market in the area would not generate the necessary volume to permit an economically feasible operation.

Mr. Seale also had experience purchasing second-hand equipment for wood-treating plants. He testified that “reproduction costs less depreciation” was not important to him when purchasing used equipment. The important factors to him were: (1) the adaptability of the equipment to his operations, (2) the condition of the equipment, and (3) the distance the equipment had to be transported to his plant. After his examination of the condition of the equipment in Hattiesburg and the remains of the plant in Lake Charles, he stated that he would offer $15,000 to the owner for the equipment in place at Lake Charles.

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Related

State ex rel. Department of Highways v. Wood Preserving Service, Inc.
305 So. 2d 542 (Supreme Court of Louisiana, 1975)

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Bluebook (online)
302 So. 2d 655, 1974 La. App. LEXIS 4486, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-ex-rel-department-of-highways-v-wood-preserving-service-inc-lactapp-1974.