The Vault

January 2000
Coburn Dewees Berry

When a public agency in Tennessee acquires private property or an interest in private property through condemnation proceedings, the owner is entitled to compensation as a result of the taking. Both the United States Constitution and the Tennessee Constitution require payment of "just compensation." In addition, the Tennessee eminent domain statutes allow recovery of damages incidental to the taking.

"Just Compensation" and Fair Market Value

The constitutionally mandated "just compensation" portion of a condemnation award is expressed in the case law as the fair market value of the property or interest taken, i.e., what a willing buyer would pay a willing seller in an arm's length transaction. When the property is leased, the jury must assess the value of the fee owner's and lessee's interests separately, but the sum of the two values cannot exceed the fair market value of the unencumbered fee. See Moulton v. George , 208 Tenn. 586, 348 S.W. 2d 129 (1961). In determining what constitutes fair market value, the jury must consider "all capabilities of the property and all the legitimate uses for which it is available and reasonably adapted." Love v. Smith, 566 S.W. 2d 876, 878 (Tenn. 1978). The purpose for which the land is being used at the time of the taking and the purpose for which it is most valuable may each be considered, but neither is determinative. Id. To ensure that the jury does not give disproportionate weight to any single measure of value, an expert witness may only testify to the overall value of the land or interest taken and then explain the various factors used to arrive at that figure. The witness may not testify that the property is worth X dollars for one use, Y dollars for another use, and Z dollars for a third use – the witness's estimate of value must be an aggregate figure that takes all uses into account. See State v. Parkes, 557 S.W. 2d 504 (Tenn. App. 1977); Davidson County Bd. of Education v. First American National Bank, Trustee, 202 Tenn. 9, 301 S.W. 2d 905 (Tenn. 1957). Determining just compensation is especially problematic when the owner claims a value peculiar to it that would not be reflected by the usual standards of valuation. In Southern Railway Co. v. City of Memphis, 126 Tenn. 267, 148 S.W. 662 (1912), the court stated that "if the property is in actual use by the owner in such way that it possesses a peculiar value to him which would be sacrificed if placed upon the general market, he is entitled to this value, and just compensation requires that he shall be paid for it." 126 Tenn. at 297, 148 S.W. at 669. While this language would appear to authorize compensation based solely on this particular measure of value, subsequent cases have refused to go quite that far in their holdings (although none has expressly overruled Southern Railway). The prevailing interpretation requires only that the jury consider the value peculiar to the owner in reaching its verdict. See State v. Brevard, 545 S.W. 2d 431 (Tenn. App. 1976).

Incidental Damages

General Tennessee Provisions. T.C.A. § 29-16-114 and T.C.A. § 29-17-810 provide the primary statutory authority for incidental damages. Under these statutes, incidental damages include diminution in value of the residue of the owner's property, less any incidental benefits occasioned by the taking. See Lewisburg & N.R. Co. v. Hinds, 134 Tenn. 293, 183 S.W. 985 (1916); Knoxville Housing Authority v. Bush, 56 Tenn. App. 464, 408 S.W. 2d 407 (1966). In addition, T.C.A.§ 29-16-114(a) provides that whenever the acquisition of property requires the removal of furniture, household belongings, machinery, or stock in trade of any person in rightful possession of the property, "the reasonable expense of the removal shall be considered in assessing incidental damages." "Reasonable expense" is defined to include "the cost of any necessary disconnection, dismantling, or disassembling, the loading and drayage to another location not more than fifty (50) miles distant, and the reassembling, reconnecting and installing on such new location." The case law indicates that these costs may not exceed the total cost of buying and installing similar articles at the new location. See Memphis Housing Authority v. Memphis Steam Laundry-Cleaner, Inc., 225 Tenn. 46, 463 S.W. 2d 677 (1971). Finally, T.C.A. § 29-16-114(c) allows compensation for recording costs, mortgage prepayment penalties, and property taxes attributable to the period after title passes to the acquiring agency. The Uniform Relocation Assistance Act. T.C.A. § 29-16-114 and T.C.A. § 29-17-810 are supplemented by the Uniform Relocation Assistance Act of 1972, T.C.A. §§ 13-11-101 et seq., which enables a "displaced person" to recover certain moving and related expenses. "Displaced person" is defined generally as any person (including a partnership, corporation, or association) who moves from the real property or moves its personal property from the real property as a result of the acquisition of the real property by a state agency or a local agency receiving state or federal assistance. T.C.A. §13-11-103(3). Upon application by a displaced person, the agency must pay such person for the following things:

1. Actual reasonable expenses in moving a family, farm, or business;
   
2. Actual direct losses of tangible personal property as a result of moving or discontinuing a business or farm, but not exceeding an amount equal to the reasonable expenses that would have been required to relocate such property;
   
3. Actual reasonable expenses in searching for a replacement business or farm; and
   
4. Actual expenses up to $10,000 necessary to reestablish a farm, nonprofit organization, or "small" business at the new site.

In the alternative, the displaced person may recover a fixed amount determined pursuant to criteria established by the governor or the governor's designee. The Act also provides for certain additional payments to displaced homeowners and residential tenants. TCA §§ 1311106 and 1311107. Note:

* E. Griffith and O. Stokes, Eminent Domain in Tennessee (Rev. Ed. 1979) was the main resource for the foregoing summary.