How should a plaintiff prove damages from a taking based on a development plan that is currently barred by statute?

The defendant water authority took property by eminent domain from the plaintiff energy company to build a sewer relief system. Market value was paid based on anticipated industrial uses. The property was zoned for industrial use, and was in a Designated Port Area that could be used only for water dependent industrial purposes by regulation, and could be removed from that status only by act of the Legislature. At the time of taking, the plaintiff had no plans to use the property for residential purposes.

At trial, the plaintiff presented evidence that a hypothetical residential development would be substantially more lucrative than the industrial use for which they had been paid, and that the zoning and regulatory impediments could potentially be overcome. The jury awarded damages based on the value of a residential development. The defendant appealed, and the SJC granted direct appellate review.

The defendant argues that there was insufficient evidence that the regulatory or zoning obstacles to residential development could be overcome, where the plaintiffs offered no evidence that they had taken any steps whatsoever to accomplish those changes or that the changes had been considered by any governing body; that questions of what development would currently be allowed by regulation were improperly submitted to the jury instead of decided by the judge; and that the jury was not competent to predict what the Legislature might eventually allow. The plaintiff argues that the question of whether a regulation is likely to change is relevant to valuation, and may be submitted to the jury on an offer of sufficient proof, citing Skyline Homes Inc. v. Commonwealth, 362 Mass. 684 (1972).

It is difficult to evaluate the parties’ arguments without access to the record. However, it is disconcerting to see value paid for taking of a property based on a development plan that was not only hypothetical, but which was barred by rules that the defendant had shown no intent to challenge.