Opinion ID: 2342905
Heading Depth: 1
Heading Rank: 3

Heading: Admission of Kashani Opinion of Value During 2005 Tax Appeal

Text: KC Mall advances four arguments in support of its contention that the district judge erroneously admitted evidence of Kashani's opinion of value during the 2005 tax appeal: (1) Kashani filed the tax appeal for the specific purpose of enforcing the 10-year tax abatement, which means his opinion in the tax proceeding does not qualify as a previous inconsistent statement; (2) Kashani did not testify to value on direct examination and could not be impeached with his tax appeal opinion; (3) the appraisers used by KC Mall in this case were not involved in the 2005 tax appeal and were not subject to the rule permitting admission of prior inconsistent statements; and (4) the tax appeal was limited to four component parts of the subject property and thus admission of the Kashani values for those components violated the unit rule. The essence of the Unified Government's response to all of these arguments can be stated succinctly: This issue is controlled by our decision in Sealpak, 279 Kan. at 799, 112 P.3d 125, which reconciled earlier competing rules and requires us to uphold the district court. In Sealpak, property owner Sealpak Company, Inc., was subject to a 2002 taking. Sealpak's owner was Donald Smith. Condemnor City of Wichita wanted to admit evidence of a 2000 tax appeal Smith filed on behalf of the company, in which he opined that the property was worth $150,000. The district court excluded the evidence, ruling that evidence of tax assessments was inadmissible at trial and that necessary evidence of the difference in value between 2000 and 2002 was lacking. During the city's proffer, Smith had testified that the county's valuation for the property had been $150,000 for several years leading up to 2000. In 2000, the county raised the appraised value for the property to $185,560. Smith's appeal form indicated that the Value [was] over market value. Smith also testified that he believed the tax value should remain at $150,000 because of flooding the City had caused. At trial, Smith took the position that the property was worth $1,102,729. 279 Kan. at 800-01, 112 P.3d 125. This court first recited the general principles that a landowner is competent to testify to the value of his or her property and that his or her opinion is relevant to the issue of value. 279 Kan. at 802, 112 P.3d 125. In addition, out-of-court statements made by the owner which are inconsistent with his or her valuation position at trial are relevant and can be admissible as admissions against him or her. 279 Kan. at 802, 112 P.3d 125 (citing 5 Nichols on Eminent Domain § 18.12[1] [3d ed. 2003]; K.S.A. 2004 Supp. 60-460[g] [admissions by parties]; Le Roy & W. Ry. Co. v. Butts, 40 Kan. 159, 19 P. 625 [1888]). We also recognized, however, that `assessed valuation of property for tax purposes is not admissible to establish the value of the property.' 279 Kan. at 803, 112 P.3d 125 (quoting Mettee v. Urban Renewal Agency, 213 Kan. 787, 789, 518 P.2d 555 [1974]). Part of the underlying rationale for this rule was that a tax valuation is prepared by a third party unavailable for cross-examination. Love v. Common School District, 192 Kan. 780, Syl. ¶ 1, 391 P.2d 152 (1964). An exception to this rule was identified in Avery v. City of Lyons, 181 Kan. 670, 673, 314 P.2d 307 (1957), which held that tax assessment documents were admissible in an eminent domain action because the value of the property was directly at issue and the documents had been signed and filed by one of the property owners. We decided in Sealpak: `[A]n owner's valuation of his own property, or a valuation in which he has participated, for tax purposes, is usually held admissible in proceedings other than tax proceedings where the value of the property is in issue, in most instances on the ground that the owner's valuation constitutes an admission against interest, where he seeks to establish a higher value for a purpose other than taxation.' 279 Kan. at 805, 112 P.3d 125 (quoting Avery v. City of Lyons, 181 Kan. 670, 674, 314 P.2d 307 [1957] [citing 39 A.L.R.2d 209, p. 230]). `Statements made by or attributable to the owner which are inconsistent with his valuation position at trial are admissible as admissions. They are thus considered exceptions to the hearsay rule of exclusion, and may be introduced by the condemning authority as substantive evidence of value. . . . . `Statements of the owner, which may become admissions ... [include] . . . . `(6) a statement made to the tax assessor that his property is not as valuable as the assessment.' (Emphasis added.) 279 Kan. at 805, 112 P.3d 125 (quoting 5 Nichols on Eminent Domain § 18.12[1] [3d ed. 2003]). We specifically rejected a simplistic rule of exclusion from Mettee v. Urban Renewal Agency, 213 Kan. 787, 518 P.2d 555 (1974), or Love v. Common School District, 192 Kan. 780, 391 P.2d 152 (1964), to the facts of Sealpak, in which the valuations at issue were not made by third parties unavailable for cross-examination. 279 Kan. at 805, 112 P.3d 125. We also recognized that, because an owner's prior statement related to a tax appeal could come into evidence as an admission against interest, the owner would have the right in an eminent domain action to offer an explanation for the value he or she placed on the property in a tax proceeding. 279 Kan. at 807, 112 P.3d 125. Most of the particulars of this case are not meaningfully distinguishable from those before us in Sealpak. Like Smith for Sealpak, Kashani is the representative of his company, KC Mall. His statements on behalf of KC Mall in the tax appeal, like Smith's on behalf of Sealpak, were attributable to the company. They were not statements of a third-party taxing authority, and Kashani was available at trial of this eminent domain proceeding for explanation and cross-examination. We also note that there is a further fact in this case not present in Sealpak, and it favors admission of Kashani's representations during the tax appeal: the taxing authority and the condemning authority are one and the same, the Unified Government. This fact ameliorates any concern over surprise or confusion that may arise when the taxing and condemning authorities are two different governmental bodies. Compare Mettee, 213 Kan. at 788-89, 518 P.2d 555. Sealpak also tells us that a landowner's admissions against interest are admissible as substantive evidence in the eminent domain proceeding, regardless of whether the landowner testifies live about value. Sealpak, 279 Kan. at 805, 112 P.3d 125. Nichols on Eminent Domain supports this proposition: Statements made by or attributable to the owner which are inconsistent with his valuation position at trial are admissible as admissions. They are thus considered exceptions to the hearsay rule of exclusion, and may be introduced by the condemning authority as substantive evidence of value. . . . . As with any nonjudicial admission, an admission against interest by the owner is not conclusive but, rather, constitutes substantive evidence of value. This being the case, the owner is free to introduce evidence in explanation of the circumstances attending the admission or its adoption. In addition to serving as substantive evidence of value, the owner's admissions may be tendered for impeachment purposes should the owner testify on the issue of valuation. 5 Nichols on Eminent Domain § 18.12[1], pp. 18-75, 18-87 (3d ed. 2009). The Kansas hearsay statute is likewise in harmony: Evidence of a statement which is made other than by a witness while testifying at the hearing, offered to prove the truth of the matter stated, is hearsay evidence and inadmissible except: (g) Admissions of parties. As against a party, a statement by the person who is the party to the action in the person's individual or representative capacity and, if the latter, who was acting in such representative capacity in making the statement. K.S.A. 60-460(g). Our discussion of Sealpak demonstrates its foreclosure of the first three of KC Mall's four arguments. Specifically, KC Mall's first argument that the tax appeal was filed only to enforce the 10-year tax freezegoes to the weight of the evidence, not its admissibility. It is merely Kashani's explanation for why he filed the tax appeal, and he was afforded the opportunity to explain his rationale to the jury. This is all that Sealpak requires. Sealpak, 279 Kan. at 807, 112 P.3d 125. KC Mall's second and third arguments are in conflict with Sealpak 's recognition that Kashani's statements in the tax appeal were admissible as substantive evidence as well as impeachment. See 279 Kan. at 805, 112 P.3d 125. It was not necessary that Kashani personally take a position on value at the eminent domain trial. It would have been enough that the landowner sponsored testimony of a valuation expert with an opinion different from that expressed by Kashani in the 2005 tax appeal. The tax appeal evidence was relevant toboth material to and probative ofthe fair market value of the subject property. See State v. Magallanez, 290 Kan. 906, 920-21, 235 P.3d 460 (2010) (materiality concerns whether fact to be proved has legitimate and effective bearing on decision of case; probativeness concerns whether offered evidence has any tendency in reason to prove disputed material fact). For these reasons, we hold that the 2005 tax appeal evidence was admissible for purposes of impeachment as well as substantive evidence. Beyond Sealpak, we also must reject KC Mall's fourth argument that admission of the evidence of Kashani's position on four parcels in the tax appeal violated the unit rule. The rule requires that the total value of condemned real estate be determined and limits consideration of the value of buildings and improvements to the extent they enhance the value of the land taken. Creason v. Unified Government of Wyandotte County, 272 Kan. 482, 485-86, 33 P.3d 850 (2001) (citing Ellis v. City of Kansas City, 225 Kan. 168, 171, 589 P.2d 552 [1979]). It stands in contrast to a summation method of appraisal, rejected in Kansas, under which contributing items of real estate and improvements are added up for a total value. Creason, 272 Kan. at 486, 33 P.3d 850 (citing City of Manhattan v. Kent, 228 Kan. 513, 518, 618 P.2d 1180 [1980]). In other words, an award of compensation must reflect the value of the property as a whole. There is an important distinction between the measure of value and the evidence admissible to prove it. The award of just compensation cannot assign separate values to component parts of the property. In other words, one value cannot be given to the land, another value to the water rights, and another [value] to the mineral rights. However, to demonstrate how the value of the property as a whole is enhanced by a natural asset, evidence can be introduced of its separate value. (Emphasis added.) Creason, 272 Kan. at 490, 33 P.3d 850. Here, the four parcels that were the subject of the 2005 tax appeal include the main mall structure, the former Dillard's building, the former Franklin Bank building, and the former Brotherhood Bank building. At trial, the Unified Government specifically reviewed the individual values Kashani assigned each of the four parcels subject to the tax appeal. And Kashani acknowledged those values added up to $2.65 million. While it may superficially appear that the Unified Government added up the Kashani-assigned values of separate parcels to arrive at a total value, that total was not the fair market value of the subject property for which the Unified Government advocated. The range for fair market value that it encouraged was the $3.7 million to $5 million supported by its two appraisal experts, Marx and Nunnick. The Unified Government merely used the $2.65 million total of Kashani's tax appeal values to cast doubt on Kashani's assertion at trial that the whole of the subject property was worth $30 to $35 million. This use of the $2.65 million did not violate the unit rule. For all of the reasons discussed above, we reject KC Mall's appellate challenge to Judge Sieve's admission of evidence regarding Kashani's valuations from the 2005 tax appeal. Kashani's statements were admissible as both substantive and impeachment evidence because they qualified as admissions against interest of his company, KC Mall.