Utah Court of Appeals Affirms $2.3 Million Award of Severance Damages And Clarifies The Law Regarding What Is Required To Demonstrate Severance Damages

On February 8, 2018, the Utah Court of Appeals in UDOT v. Target Corporation, et al., confirmed a jury’s award of $2.3 million dollars in severance damages arising from the loss of visibility and access to commercial property in American Fork, Utah.  In 2009, UDOT decided to commence two construction projects that required, among other things, the expansion of I-15 and construction of a new freeway interchange in American Fork.  To facilitate construction of the interchange, UDOT condemned two small parcels of land in fee as well as a perpetual slope easement.  During trial, the property owners argued that the interchange significantly decreased visibility into their property and that the takings also caused them to lose a heavily used “right out exit.”  The property owner’s appraiser testified that the reduced visibility and loss of the “right out exit” resulted in a $2.3 million in severance.  The jury agreed with the property owners and awarded them $2.3 million in severance damages and $87,910 in just compensation for the parcels taken in fee and for the perpetual slope easement.

On appeal, UDOT argued that the property owners had not presented sufficient evidence of a necessary causal link between the taking of their property and their claimed severance damages resulting from the loss of visibility due to the new interchange.  In rejecting this argument, the Utah Court of Appeals explained that “[t]here are two methods by which a landowner can demonstrate the requisite causal link.  First, if the visibility issues stem from a ‘structure’ that is built upon the part of the property that was taken, causation is presumed.  Second, if the visibility issues stem from a ‘structure’ that was not built on the part of the property that was taken, causation is not presumed, and the property owner is entitled to severance damages only if it can demonstrate that ‘the use of the condemned property is essential to the completion of the project as a whole.’”  Both on appeal and before the district court, the property owners argued that they were entitled to a presumption of causation because a slope supporting a retaining wall for the new interchange was located on the condemned property.  Agreeing with the property owners, the Court of Appeals announced four important holdings, which clarify Utah law.  First, “to be considered to have presumptively caused severance damages,” a structure “does not have to be entirely constructed on land taken from the claimant.”  Second, the Court determined that the relevant “structure” for purposes of the severance damages analysis was the new interchange, rather than the interchange’s individual component parts.  Third, although only “one extremely small part . . . of the [i]nterchange was built on land taken,” the Court held that the property owners were “entitled to recover severance damages caused by loss or visibility resulting from construction of the entire [i]nterchange.”  (Emphasis added).  Fourth, because the interchange was at least partially constructed on the condemned property, the Court of Appeals held that it was not necessary for the property owners “to prove that the taken parcels were ‘essential’ to the Projects as a whole.”

With respect to the severance damages awarded for the lost exit, UDOT suggested on appeal that the property owners did not present sufficient evidence of damages during trial because their appraiser did not separately assess the severance damages caused by the loss of visibility and the loss of the exit.  In rejecting this argument, the Court of Appeals held that “there is no requirement . . . that Claimants must present their severance damages on a line-item basis, including a discrete value for, specifically, damages suffered by virtue of the loss of the right-out exit.”  Rather, “Claimants are free to present their severance damages evidence in a more general way, by presenting to the factfinder evidence of what the property was worth prior to the taking, and what it is worth after the taking.”  The Court noted, however, that “in some cases and under some factual circumstances, appraisers would be able to itemize and individually value the various factors that compromise the total diminution in value” and that “[w]here this is possible, and where appraisers are comfortable making this attempt, claimants may wish to consider presenting such evidence, since stating diminution in value only in general terms carries some risk.”

It is currently unclear whether UDOT will seek certiorari from the Utah Supreme Court to appeal the Court of Appeal’s opinion.  The full text of the Court of Appeal’s opinion can be found here:  http://www.utcourts.gov/opinions/appopin/UDOT%20v.%20Target%20Corporation20180208_20160122_24.pdf.