This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-1159

 

In the Matter of:  Snake River PL-566 Project

 

Filed March 28, 2006

Affirmed in part, reversed in part, and remanded

Collins, Judge*

 

Marshall County District Court

File No. CX-01-284

 

Eric A. Bartsch, DeAnne M. Hilgers, Lindquist & Vennum, P.L.L.P., 4200 IDS Center, 80 South Eighth Street, Minneapolis, MN  55402 (for appellants)

 

Gerald W. Von Korff, Rinke-Noonan, 1015 West St. Germain Street, Suite 300, P.O. Box 1497, St. Cloud, MN  56302 (for respondent)

 

            Considered and decided by Minge, Presiding Judge; Randall, Judge; and Collins, Judge.

U N P U B L I S H E D   O P I N I O N

COLLINS, Judge

            In this eminent domain proceeding, appellants argue that the district court erred by (1) dismissing their claim for severance damages and (2) failing to adjudicate their claim for rescission of assessed benefits.  For lack of evidence of compensable severance damages, we affirm dismissal of that claim.  But because neither the dismissal of the claim for severance damages, nor the agreement settling just compensation for the direct taking, resolves appellants’ claim for rescission of benefits, we reverse and remand for resolution of that claim.

FACTS

In 2001, respondent Middle River-Snake River Watershed District (Watershed District) condemned certain lands to construct a flood-control reservoir and supporting infrastructure as part of Project PL-566.  Appellants Loren and Deborah Zutz (the Zutzes) owned 160 acres and leased more than 400 acres of the condemned lands.  Loren and his brother, Ron Zutz, worked these lands as part of their approximately 6,000-acre farm operation.  Of the non-contiguous 6,000 acres, the Zutzes and Ron owned approximately 1,300 acres and leased the rest. 

            The Zutzes appealed the order establishing the project to the district court, alleging that the Watershed District failed to compensate them for severance damages to the remainder lands in addition to the fair market value of their interests in the lands taken.  The Zutzes further asserted that the Watershed District improvidently assessed benefits, based on anticipated savings of flood insurance premiums, to their homestead in Warren.  A jury trial was scheduled for April 18, 2005. 

On January 19, 2005, the Zutzes proposed a settlement agreement whereby the Watershed District would pay them $687,674 for the taking of their fee simple and leasehold interests, and severance damages to the remainder lands.  The Watershed District countered by offering the Zutzes $131,000 as just compensation for their fee simple and leasehold interests in the lands taken, expressly rejecting the claim for severance damages.  The Zutzes conditionally accepted the offer, “[p]roviding that the [Watershed District] agrees that these settlements in no way compromise [the Zutzes’] claim . . . for severance damages.”  The Watershed District responded that its $131,000 offer was intended to settle the entirety of the Zutzes’ claims and that the Watershed District would not agree to settle the fee simple and leasehold interests and reserve the issue of severance damages for trial.  The record of the negotiations is silent as to the Zutzes’ claim that the Watershed District overstated the benefits the project conferred to the Zutzes’ homestead in Warren.

            Following a pre-trial conference on March 22, 2005, at which arguments were heard on the parties’ motions in limine, the district court (1) dismissed the Zutzes’ claim for severance damages; (2) determined that the parties had settled on the amount representing just compensation for the Zutzes’ fee simple and leasehold interests in the lands directly taken; and (3) concluded that the “settlement resolve[d] the case in its entirety,” in light of the dismissal of the claim for severance damages.  Judgment was entered accordingly and this appeal follows.      

D E C I S I O N

Both the state and federal constitutions require that just compensation be paid to a landowner whose property is taken by eminent domain.  U.S. Const. amend. V; Minn. Const. art. 1, § 13.  The Minnesota constitution provides broader protection for landowners than the federal constitution, and “the clear intent of Minnesota law is to fully compensate its citizens for losses related to property rights incurred because of state actions.”  State by Humphrey v. Strom, 493 N.W.2d 554, 558 (Minn. 1992).

Whether there has been a taking is a question of law vested in the district court.   Hous. & Redev. Auth. of St. Paul v. Lambrecht, 663 N.W.2d 541, 548 (Minn. 2003).  If the district court determines that an interest has been taken, the parties then present evidence of the loss of that interest to a jury for a determination of the amount of compensation due.  Id.  This court reviews questions of law de novo and need not give deference to a district court’s decision on a purely legal issue.  Modrow v. JP Foodservice, Inc., 656 N.W.2d 389, 393 (Minn. 2003). 

When only part of a landowner’s property is taken, the landowner is entitled to compensation for “severance damages,” defined as the diminution in value of the land remaining.  Strom, 493 N.W.2d at 558­–59.  In such case, severance damages, if any, are measured by the “before and after” rule: “the difference in market value of the land before the taking and the market value of the remaining land after the taking.”  County of Anoka v. Blaine Bldg. Corp., 566 N.W.2d 331, 334 (Minn. 1997) (citation omitted). In assessing the fair market value, “any competent evidence may be considered if it legitimately bears upon the market value.”  Strom, 493 N.W.2d at 559 (quotation omitted).  But the damages “must arise from changes in the land actually taken, and not merely from the impact of the construction project as a whole.”  Blaine Bldg. Corp., 566 N.W.2d at 334.

A landowner is entitled to severance damages for the diminution in value of noncontiguous tracts of land “provided that the use to which the tracts are applied is so connected, that the taking from one in fact damages the other.”  Minn. Stat. § 117.086, subd. 1 (2004).  The district court must determine “whether, as a matter of law, the landowner has suffered a taking of, or damage to, noncontiguous tracts by reason of the eminent domain.”  Id., subd. 3.

The Zutzes claim severance damages for the diminution in value of their interests in the remaining noncontiguous tracts of farmland.  They argue that the district court erred by not allowing them to present evidence of the diminution in value and by dismissing their claim for severance damages.  The district court held that the Zutzes must show actual damage to the value of the land and that they have a compensable interest in that land.  It determined that the Zutzes’ claim for severance damages failed as a matter of law because there was no evidence of compensable damages to the remaining noncontiguous tracts as a result of the taking.    

The Zutzes offer no evidence that the severance damages they claim “arise from changes in the land actually taken.”  See Blaine Bldg. Corp., 566 N.W.2d at 334.  Rather, their theory is based on evidence that the remaining farmland yields a greater profit when it is part of a larger assemblage of parcels.  This greater profit results from the increased efficiency of their farming operation.  But this evidence does not show that the fair market values of the remaining tracts are less after than before the taking.  Fair market value is the price that would be paid for the property “by a buyer who is willing, but not required to buy, to an owner who is willing, but is not required to sell.”  Strom, 493 N.W.2d at 558 n.3 (quotation omitted).  The Zutzes’ analysis focuses on the economic loss due to their overcapitalization in the after-situation and presumes that the hypothetical willing buyer has a farm operation of similar size to theirs.  On this issue we conclude, as a matter of law, that the Zutzes failed to show that they have “suffered a taking of, or damage to, noncontiguous tracts by reason of the eminent domain,” as required by Minn. Stat. § 117.086, subd. 3, and that the district court did not err by dismissing the Zutzes’ claim for severance damages.

The Watershed District argues by notice of review that the district court erred by concluding that the Zutzes accepted the district’s settlement offer for the direct taking of the fee and leasehold interests.  But the Watershed District notes that its cross-appeal need not be considered if we affirm the dismissal of the Zutzes’ claim for severance damages.  Because we conclude that the district court did not err by dismissing the Zutzes’ claim for severance damages, the cross-appeal is effectively rendered moot.  The parties’ settlement of just compensation for the direct taking of the Zutzes’ fee and leasehold interests is binding.

            Finally, the Zutzes argue that the district court erred by concluding that dismissal of the claim for severance damages resolved all of the claims between the parties.  In the order establishing Project PL-566, the Watershed District determined that the project conferred benefits to the Zutzes because they would no longer be required to purchase flood insurance for their homestead in Warren.  The Zutzes appealed to the district court, in part, to secure rescission of the benefits assessment, and related taxes, claiming that the Watershed District overstated benefits because their homestead is not within the flood plain. 

The parties’ settlement communications do not mention this claim, nor do they contemplate its resolution.  And nothing in the district court’s findings and conclusions addresses this issue. Although not always required, findings of fact “are necessary to permit meaningful appellate review; failure to make adequate findings will result in remand.”  Nat’l Union Fire Ins. Co. v. Evenson, 439 N.W.2d 394, 398 (Minn. App. 1989), review denied (Minn. July 12, 1989).  The record before us is not developed as to the Zutzes’ claim that the Watershed District overstated the benefits to their homestead conferred by Project PL-566; the district court made no relevant findings; and, thus, we are unable to review and resolve the issue.  Cf. Bettes v. Fuel-Scott, 415 N.W.2d 409, 411–12 (Minn. App. 1987) (reversing because district court made no findings and remanding for further development of the record).  We therefore reverse the district court’s ruling that all claims have been resolved and remand for such further proceedings as the district court requires for resolution of the Zutzes’ claim for rescission of the benefits assessment, and related taxes, conferred by Project PL-566 to their homestead in Warren.

            Affirmed in part, reversed in part, and remanded.