WPI 151.05 Business Income—Profits

Use this instruction when it is necessary to limit consideration of evidence on income or profits from a business conducted on the condemned premises. Use the bracketed material when there is proof with respect to the business conducted on the premises. The bracketed portion should not be given when use of evidence on income or profits may legally be considered on issues other than the use of the premises.

WPI 151.05 was approved in City of Renton v. Scott Pac. Terminal, Inc., 9 Wn.App. 364, 512 P.2d 1137 (1973).

General rule. Generally, evidence of income or profits from a business conducted on the premises is not allowed to establish value. The character and volume of business conducted on the premises may be admissible on the question of uses to which the property is adaptable. City of Renton v. Scott Pac. Terminal, Inc., 9 Wn.App. 364; State v. McDonald, 98 Wn.2d 521, 531–32, 656 P.2d 1043 (1983).

It may be error to give this instruction when there is no dispute about the highest and best use of the property. State v. Obie Outdoor Advertising, Inc., 9 Wn.App. 943, 948–49, 516 P.2d 233 (1973).

Material deposits. Compensation for lands containing minerals, gravels, or similar deposits is generally based on the market value of the land. Multiplying the volume of material by its value per yard in place is improper unless these calculations are used to explain and support estimates of the value of the land. State v. Mottman Mercantile Co., 51 Wn.2d 722, 321 P.2d 912 (1958); State v. Wandermere Co., 89 Wn.App. 369, 382–83, 949 P.2d 392 (1997); State v. Hobart, 5 Wn.App. 469, 487 P.2d 635 (1971). A cautionary instruction limiting the jury's consideration of these calculations need not be given if the evidence includes other measures of compensation for the land. State v. Wandermere Co., 89 Wn.App. at 383. Yardage values need to be supported with evidence of market demand and any other factors affecting value. State v. Rowley, 74 Wn.2d 328, 444 P.2d 695 (1968); State v. Larson, 54 Wn.2d 86, 338 P.2d 135 (1959).

Multiplication of volume and yardage price was allowed when a leasehold interest was involved, the materials had been severed, and a market existed for the materials in their present condition. Smithrock Quarry, Inc. v. State, 60 Wn.2d 387, 374 P.2d 168 (1962).

Exceptions to general rule. In some cases, the nature of the business done on the land may be so closely related to the land itself that the nature and amount of business and the income therefrom may be admissible as bearing directly upon value of the land. Such cases will usually involve the income method of valuation. Giving this instruction without modification in these cases might be error. See, e.g., State v. Mottman Mercantile Co., 51 Wn.2d 722; Seattle & M.R. Co. v. Roeder, 30 Wash. 244, 252, 70 P. 498 (1902).

The general rule may be different for special purpose properties. See City of Tacoma v. Tacoma Light & Water Co., 17 Wash. 458, 50 P. 55 (1897), overruled in part on other grounds in Parkhurst v. Elliott, 103 Wash. 89, 92, 173 P. 731 (1918); see discussion on special purpose properties in the Comment to WPI 150.05 (Measure of Compensation—Total Taking).