Triangle, Inc. v. State

¶1OPINION

¶2This is an appeal from an eminent domain action. The principal issue raised is whether a lessee of real property is entitled to compensation for the state’s elimination of direct access from the property to an abutting highway. Other issues raised on appeal include the proper measure of compensation for a lessee whose property is partially condemned when the lessee holds options to renew its lease, and the proper measure for attorney’s fees, costs and prejudgment interest in eminent domain actions.

¶3As part of a project to widen and upgrade the Steese Highway in Fairbanks, Alaska, the state filed a complaint to condemn .079 acres of land abutting the highway, as well as any and all rights of direct access from the land to the highway. J & B, Inc., owner of the land, had leased its property to Triangle, Inc., appellant in this action.1 In November of 1974, the state filed a Declaration of Taking and deposited $950.00 as just compensation for the land. J & B, Inc. entered into a Stipulation of Settlement with the state and, thus, the trial of this action concerned only Triangle’s interests in the property.

¶4Upon motion for partial summary judgment by the state, the superior court ruled that Triangle was not entitled to any compensation for the elimination of its direct access to the Steese Highway. After a jury trial, the court entered judgment for Triangle in the sum of $1,679.21 as compensation for the taking of the .079 acres.2 Triangle was awarded partial attorney’s fees and costs, as well as pre-judgment interest at the rate of six percent per annum.

¶5On appeal, Triangle seeks to establish its right to compensation for the elimination of its direct access to the Steese Highway. The property it leases from J & B, Ine. is bounded on one side by the Steese Highway and on the other by Farmer’s Loop Road. Before the state’s project, Steese Highway was undivided. A driveway located on the property and used since 1962 provided direct access to both the highway and Farmer’s Loop Road. Farmer’s Loop Road connected with the highway approximately two-tenths of a mile south of the property.

¶6*967After the project was completed, the Steese Highway was a divided, controlled-access highway. Farmer’s Loop Road ended in a cul-de-sac where it had previously intersected the highway. In lieu of that intersection, a connector road between Farmer’s Loop Road and the highway was constructed three-tenths of a mile north of the property. Thus, to travel from the Steese Highway to Triangle’s business, customers must now enter the new connector road, proceed west two-tenths of a mile, turn left onto Famer’s Loop Road and proceed south three-tenths of a mile and then turn into Triangle’s driveway. The net increase in travel distance to the highway is approximately one-half of a mile.

¶7I.

¶8ELIMINATION OF DIRECT ACCESS

¶9The first issue we address is whether the increased and circuitous route from Triangle’s property to the Steese Highway resulting from the state’s project is so unreasonable as to constitute a taking or damaging of Triangle’s property rights for which compensation must be paid.3 All jurisdictions recognize that an owner of abutting land has a right of access to and from a public street or highway.4 In Alaska, this incident of ownership is limited to a “right of reasonable access.” B&G Meats, Inc. v. State, 601 P.2d 252, 254 (Alaska 1979) (emphasis added). This rule is in accord with that adopted by a majority of jurisdictions. Annot., 42 A.L.R.3d 13, 30-48 (1972) (“Abutting Owner’s Right to Damages for Limitation of Access Caused by Conversion of Conventional Road into Limited Access Highway”).

¶10In B&G Meats, we set forth the principles controlling a claim of taking caused- by a change in access to streets or highways:

“No hard and fast rule can be stated, but courts must weigh the relative interests of the public and the individual and strike a just balance so that government will not be unduly restricted in its function for the public safety, while at the same time, give due effect to the policy of eminent domain to insure the individual against an unreasonable loss occasioned by the exercise of the police power. The question depends upon the particular facts of the case. Obviously, if there is a total blocking of access, the restriction would be unreasonable and the abutter entitled to compensation. Where, however, the restriction does not substantially interfere with the abutter’s ingress and egress or where ‘frontage’ or ‘outer roadways’ reasonably provide access the abut-ter is not entitled to compensation. While an abutter has the right of access to the public highway system, it does not follow that he has a direct-access right to the main traveled portion thereof; circuity of travel, so long as it is not unreasonable, is non-compensable. Likewise, loss of business occasioned by the diversion of traffic is non-compensable.”

¶11601 P.2d at 254, quoting Bay v. State Highway Commission, 196 Kan. 13, 410 P.2d 278, 288-89 (1966) (concurring opinion of Fatzer, J.) (citations omitted) (emphasis in original).

¶12The state and Triangle refer us to a multitude of decisions from other jurisdictions,5 but none add to this rule or persuade us that it requires alteration. In accordance with our opinion in B&G Meats, we hold that Triangle never possessed a right of direct access to the Steese Highway; its only right was to reasonable access. Thus, our focus is limited to the narrow issue of whether the superior court erred when it decided that Triangle’s remaining access is, as a matter of law, reasonable.

¶13Triangle urges that the reasonableness of the remaining access is a question of *968fact for the jury and thus the superior court erred in granting summary judgment on the issue. Although there is a jurisdictional split on this issue,6 we have implicitly decided in previous opinions that, it is for the trial court to determine whether the case before it presents a compensable claim for loss of access or merely a claim for traffic diversion, which is non-compensable. See B&G Meats, Inc. v. State, 601 P.2d 252 (Alaska 1979); Alsop v. State, 586 P.2d 1236 (Alaska 1978); Wernberg v. State, 516 P.2d 1191 (Alaska 1973). In the first two of these cases, we affirmed determinations by the superior court that, as a matter of law, the property owners had not presented com-pensable claims for loss of access. B&G Meats, 601 P.2d at 255; Alsop v. State, 586 P.2d at 1240-41. In Wernberg v. State, 516 P.2d at 1201, we decided, as a matter of law, that the owner had stated a valid claim for relief.

¶14It is only when a trial court concludes that the landowner has presented a valid claim that the case is submitted to the jury for a determination of the extent of the taking and the amount of compensation that must be paid by the state. E. g., People v. Becker, 262 Cal.App.2d 634, 69 Cal.Rptr. 110, 113 (1968); People v. Presley, 239 Cal.App.2d 309, 48 Cal.Rptr. 672, 674 (1966); People v. Ricciardi, 23 Cal.3d 390, 144 P.2d 799, 805 (1943); State ex rel. Department of Highways v. Linnecke, 86 Nev. 257, 468 P.2d 8, 10 (1970); Stefan Auto Body v. State Highway Commission, 21 Wis.2d 363, 124 N.W.2d 319, 321-22 (1963). See Wernberg v. State, 516 P.2d 1911 (Alaska 1973).

¶15The dissent to this opinion proposes that an abutting landowner whose property is partially taken should be permitted to claim damages for loss of access even though the remaining access is not unreasonably circuitous. Our opinion in Alsop v. State, 586 P.2d 1236 (Alaska 1978) did not avert to the reasonable access limitation on the right to recover damages and it therefore is not persuasive authority for the proposition that such a limitation only applies when an owner has suffered a partial physical taking of his land. In accordance with the majority of those who have considered the matter,7 we reject the dissent’s proposition because we believe that it would, as the Colorado Supreme Court stated, “create serious problems of fairness to landowners similarly situated.” State Department of Highways v. Davis, 626 P.2d 661, 665 (Colo.1981). If Triangle had a neighbor who also lost direct access to the highway because of the state’s project, but this loss occurred without any physical taking of land, the dissent’s proposal would permit compensation for Triangle but not for the neighbor, even though both suffered the same loss and both were left with the same reasonable, alternate access to the highway. In State ex rel. State Highway Commission v. Danfelser, 72 N.M. 361, 384 P.2d 241 (1963), cert. denied, 375 U.S. 969, 84 S.Ct. 487, 11 L.Ed.2d 416 (1964), the Supreme Court of New Mexico addressed this situation, stating:

[I]f the right of access is a property right, its loss will be just as severe and should be compensable, whether a portion of the condemnee’s land is taken or not. . . .

We take the position that abutters (the defendants in this case) have a right of access to the public roads system but it does not necessarily follow that they have a right of direct access to the main-traveled portions thereof. Circuity of travel, as long as it is not unreasonable, and any supposed loss in land value by reason of the diversion of express traffic, are non-compensable.

¶16348 P.2d at 244, 246.

¶17We conclude that the superior court did not err in granting partial sum*969mary judgment for the state because we agree that the access remaining to Triangle after the state’s improvements to the Steese Highway is reasonable. The additional distance of one-half of a mile that potential customers must travel to gain access to Triangle’s business establishment is not so unreasonable as to constitute a taking.8 As we stated in B&G Meats,

A distinction must be made between loss of access and loss of traffic flow. The latter is not a part of the owner’s [or lessee’s] interest in his property. Restrictions which merely result in a diversion of traffic away from the property are thus not compensable.

¶18601 P.2d at 254-55 (footnote omitted). We do not hold, or intend to imply, that an owner’s or lessee’s access to public roads must be totally blocked before the loss of access is compensable; we only hold that under the facts of this case the remaining access was sufficiently reasonable to avoid any need for payment of compensation.9

¶19II.

¶20OPTIONS TO RENEW

¶21We next consider Triangle’s argument that the superior court erred when it informed the jury that, for purposes of determining Triangle’s share of compensation for the state’s taking of the .079 acres, only 11.4 years remained of Triangle’s leasehold. The original lease was for a term of five years, which ended in 1970. J & B, Inc. had given Triangle an option for five renewals, the first of which was for a period of fifteen years. Triangle had exercised the option, and at the time of the state’s taking, 11.4 years remained of the fifteen-year period. The other four renewals were for periods of ten years each.

¶22Triangle argues that these renewal periods should be included in its leasehold so that, when determining its share of compensation for the taking, a 51.4 year leasehold should be used. Assuming Triangle is correct, under the particular facts of this case, the court’s error was harmless. The jury determined that the value of the .079 acres taken was $2,099.01. The jury then decided that Triangle was entitled to $1,679.21 or 80% of the $2,099.01. Triangle’s claim is that, but for the court’s ruling that Triangle’s interest is limited to 11.4 years, the jury may have awarded Triangle a greater share of the $2,099.01.

¶23At trial, an appraiser testifying for Triangle stated that if the leasehold were computed to be for a period of 51.4 years, J & B, Inc.’s share of the compensation should be 19% of the value of the taken property. Triangle’s share would then be 81%. The appraiser further testified that if the lease were computed to continue for only 11.4 years, J & B, Inc.’s share should be 54%. Thus, under the instruction given, Triangle should have been awarded only 46%. The jury, however, awarded Triangle 80% of the $2,099.01.

¶24Even if we held that Triangle’s share should have been computed on the basis of a 51.4 year leasehold, by Triangle’s own evidence it should only have been awarded 81% of the $2,099.01. The one percent difference between this and the 80% it was awarded by the jury is de minimis.10

¶25*970III.

¶26ATTORNEY’S FEES

¶27We now turn to Triangle’s argument that the superior court erred when failing to award it full attorney’s fees and costs. Triangle requested attorney’s fees in the sum of $22,404.00 and costs in the sum of $10,-069.70. It was awarded $9,000.00 for attorney’s fees and $452.82 for costs, plus the costs of Triangle’s first appraisal, when that sum is finally determined.

¶28Because Triangle obtained an award of $1,679.21, which exceeds by more than ten percent the $950.00 deposited by the state for its taking, an award of attorney’s fees is mandated by Civil Rule 72(k)(2).11 When considering the issue of attorney’s fees, the superior court commented that “if there is a reduction from actual attorney’s fees . . . it’s incumbent upon the court to state the reasons for it.” We agree with this. Unfortunately, the superior court failed to carry through on its good intentions and we cannot now determine why it awarded less than full attorney’s fees.

¶29We therefore find it necessary to remand this action for a reconsideration of attorney’s fees and costs. We do note, however, that only those fees “necessarily incurred” in defending the eminent domain action should be awarded to Triangle. State v. Alaska Continental Development Corp., 630 P.2d 977, 993 (Alaska 1980). Furthermore, while full attorney’s fees are the norm under Civil Rule 72(k), such fees must be reasonable. See Moseley v. Beirne, 626 P.2d 580, 581 (Alaska 1981); Ferdinand v. City of Fairbanks, 599 P.2d 122, 126 n.12 (Alaska 1979). Thus, any attorney’s fees or costs incurred by Triangle that were not necessary for it to obtain just compensation or that exceeded reasonable fees and costs need not be awarded by the superior court. If, upon remand, the superior court determines that full attorney’s fees and costs are not warranted, it must articulate its reasons for so ruling.

¶30IV.

¶31INTEREST

¶32The last issue we consider is Triangle’s argument that the superior court erred when awarding it pre-judgment interest at the rate of six percent, rather than eight percent, per annum. Triangle urges that the conflict between the various statutes controlling the rate of interest be resolved so that the interest rate of eight percent is applied in this case. While AS 09.55.330 requires the payment of “lawful interest” in eminent domain actions in which a declaration of taking was filed,12 and AS 45.45.-010 provided that the lawful interest rate in the state was eight percent at the time this case was decided (it is now 10.5 percent),13*971AS 09.55.440 specifically states that interest at the rate of six percent is to be paid in eminent domain actions.14

¶33We addressed the issue raised by Triangle in State v. Alaska Continental Development Corp., 630 P.2d 977, 995-996 (Alaska 1980). We observed the discrepancies between the above-noted statutes, but concluded that AS 09.55.440 “unambiguously provides that . . . interest awarded under a declaration of taking proceeding .. . will equal six percent before and after judgment is entered.” Id. at 995. Thus, the superior court did not err in this case when it limited the rate of pre-judgment interest to six percent as required by AS 09.55.440. Once again, however, we call to the legislature’s attention the conflict between these statutes, in the hope that it will soon be resolved.

¶34AFFIRMED in part, REMANDED in part for further proceedings consistent with this opinion.

¶35CONNOR, J., dissents in part.