Court: Court of Appeals of Arkansas; November 16, 2011; Arkansas; State Appellate Court
In this eminent-domain case, Delta Regional Airport Authority appeals a jury's compensation award of $150,000 to J.T. Jarrett Sons for their leasehold interest and challenges the circuit court's order granting attorney's fees to landowners Grover Gunn, III; Michael Scott Gunn; and Edgar Lindsey Gunn. Delta, a public corporation aiming to construct a regional airport, sought to acquire 209 acres from the Gunns, leading to the eminent-domain action filed on January 21, 2009, after failed negotiations. Delta deposited $505,000 with the circuit court and took possession of the property. The Gunns counterclaimed for breach of contract, while Jarrett sought damages or the right to continue farming until the lease's end, along with a cross-claim against the Gunns for a right of first refusal.
During pre-trial proceedings, Delta attempted to exclude evidence of Jarrett's anticipated lost profits, which the circuit court denied regarding rental payments, citing that such evidence was close to lost profits but not definitive of fair market value. At trial, the jury found for Delta on the Gunns' contract claim, awarding them $580,000, while Jarrett received $150,000 for the leasehold interest. Post-trial, the Gunns requested attorney’s fees under Ark. Code Ann. 18-15-605(b), arguing their total compensation exceeded Delta's deposit by over 20 percent. Delta contended no statutory basis existed for such fees, claiming the statute only applied to specific municipal corporations.
On December 22, 2010, the circuit court awarded the Gunns $43,334.38 in attorney's fees and $2,322.15 in costs, a 30 percent reduction from their request, without citing specific authority. Jarrett's motion for fees was denied due to lack of authority. Delta subsequently filed appeals regarding both the jury's verdict favoring Jarrett and the attorney's fees awarded to the Gunns. The court affirmed the jury's compensation award for the Gunns but reversed the decision on attorney's fees.
Delta asserts two main points: (1) the circuit court incorrectly denied its directed verdict motion, and (2) Jarrett’s evidence regarding anticipated lost profits was inadmissible. In assessing leasehold value, damages should reflect the difference between the lease's fair market value and the agreed rent, as established in several Arkansas Supreme Court cases. Rental value should not be based on potential tenant profits but rather on actual rental value determined through evidence. However, an exception exists for agricultural properties, where profits derived from the land's use can be included. The court found no error in admitting Jarrett’s crop value evidence, as profits stemmed from the land itself. The standard for reviewing the directed verdict denial is whether sufficient evidence supports the jury's verdict, which should be viewed favorably for the prevailing party. The evidence, including calculations by Jarrett’s accountant, indicated that the fair market value of Jarrett's lease likely surpassed the remaining rent obligations, with a total estimated loss of $202,669 over seven years. Ronnie Jarrett also valued the remaining lease at $250,000, supporting the jury's conclusion. The court affirmed that substantial evidence backed the jury’s verdict.
Jarrett provided supporting evidence for the property's fair rental value, highlighting its above-average cotton yield of 2.5 to 3 bales per acre and pointing out that Delta's appraiser underestimated soybean yields. Consequently, the circuit court rightly denied Delta's motion for a directed verdict. Delta contested the award of attorney's fees to the Gunns, arguing that no statutory authority existed for such an award. The Gunns countered with Arkansas Code Annotated section 18-15-605(b), which permits attorney's fees under specific conditions. Typically, attorney's fees in Arkansas are only awarded when authorized by statute, as established in Harris v. City of Fort Smith. However, the court determined that the circuit court erred in awarding fees to the Gunns because section 18-15-605(b) was not applicable to their case. The court emphasized that statutory interpretation involves using the ordinary meaning of terms, and when a statute is clear, it should be understood accordingly. Eminent-domain statutes favor landowners. Section 18-15-605(b) refers specifically to municipal corporations or water-supplying corporations, as clarified by its relationship to section 18-15-601(a). The Gunns' interpretation of section 18-15-605(b) as applicable to all corporations was deemed overly broad, aligning with the narrower reading supported by precedent in Flowers v. Norman Oaks Constr. Co. The Gunns argued against this interpretation based on a previous supreme court ruling in Carter I, but the court maintained its position on the specific applicability of the statute.
The Supreme Court concluded that the requirements of subchapter 4 are subject to the conditions of subchapter 6, as stated in the case 364 Ark. 109-10, 216 S.W.3d 600. The city contended that section 18-15-605(b) applied solely to corporations and water associations, excluding municipal corporations. This argument was rejected, with the court noting that "municipal corporations" has been included in the statute since its enactment in 1895. The court's interpretation was reinforced by a recent decision in Lois Marie Combs Revocable Trust v. City of Russellville, which clarified that section 18-15-605(b) necessitates that the condemning authority must utilize eminent domain specifically for expanding water-supply facilities. In contrast, Delta sought to construct an airport, not to expand water facilities. The Gunns argued that Delta's eminent domain authority aligned with procedures for railroads, suggesting legislative intent to allow attorney’s fees in such cases. However, the court indicated that if this were the case, section 18-15-605(b) would have been placed in the relevant subchapter for railroad-related eminent domain, not with water supply entities. The court affirmed in part and reversed in part, with judges Gladwin and Hoofman concurring. The circuit court had granted partial summary judgment favoring the Gunns. Delta claimed it operated as a regional airport authority under Ark. Code Ann. 14-362-101 to -129, which allows the use of eminent domain in a manner similar to railroads, as stated in sections 14-358-101, 14-358-102, and 14-360-102, with procedural guidelines outlined in Ark. Code Ann. 18-15-1201 to -1207.
