Opinion ID: 2374258
Heading Depth: 2
Heading Rank: 2

Heading: Valuation Evidence

Text: A trial court has broad discretion over the admissibility of evidence. E-470 Pub. Highway Auth. v. 455 Co., 3 P.3d 18, 23 (Colo.2000). Accordingly, we review a trial court ruling on the admissibility of evidence for an abuse of discretion. Id. In general, all relevant evidence is admissible, CRE 402, and the Colorado Rules of Evidence strongly favor admission of material evidence, Palizzi v. City of Brighton, 228 P.3d 957, 962 (Colo.2010). CRE 103 and C.R.C.P. 61 allow reversal for erroneous exclusion of evidence only if the exclusion affected a substantial right of a party. CRE 103; C.R.C.P. 61; Banek v. Thomas, 733 P.2d 1171, 1178-79 (Colo.1987) (finding reversible error in civil battery case against arresting officers where the trial court's exclusion of evidence of plaintiff's conviction for resisting the arrest left the jury with the impression [] he did nothing to warrant the use of any force). An error affects a substantial right only if it can be said with fair assurance that the error substantially influenced the outcome of the case or impaired the basic fairness of the trial itself. Banek, 733 P.2d at 1178. If an error does not affect a party's substantial right, it must be deemed harmless and is not grounds for reversal. CRE 103; C.R.C.P. 61.
Article II, section 15 of the Colorado Constitution provides that [p]rivate property shall not be taken or damaged, for public or private use, without just compensation. Awards of just compensation are determined by a jury or a board of commissioners, Colo. Const. art. II, § 15, and are governed by sections 38-1-114 and -115, C.R.S. (2010). For a partial taking, just compensation includes the present fair market value of the property taken and damages to the residue of the property, less any special benefits that result from the taking. See § 38-1-114(1)(2); La Plata Elec. Ass'n, Inc. v. Cummins, 728 P.2d 696, 698 (Colo.1986). The market value of the property taken is the price at which the property would sell, where the seller desires but is not obligated to sell the property and where the buyer desires but is under no necessity to purchase it. Bd. of County Comm'rs v. Noble, 117 Colo. 77, 80, 184 P.2d 142, 143 (1947). Colorado's jury instruction regarding the value of condemned property defines market value as the fair, actual, cash market value of the property. It is the price the property could have been sold for on the open market under the usual and ordinary circumstances, that is, under those circumstances where the owner was willing to sell and the purchaser was willing to buy, but neither was under an obligation to do so. CJI-Civ. 4th 36:3. Parties to a condemnation action may retain an appraiser to appraise the market value of the property to be condemned according to recognized appraisal practices consistent with the law. § 38-1-121(1), C.R.S. (2010). The evidentiary rules applicable to a trial for an award of just compensation are expansive, and all evidence relevant to the determination of market value of the condemned property is admissible. Palizzi, 228 P.3d at 961. The fact finder may consider any competent evidence affecting the present fair market value of the land which a prospective seller or buyer would consider. Id. at 962. Some valuation evidence may be entitled to lesser weight but is still admissible and properly presented to the fact finder. See id. at 964-65. The fact finder may consider evidence of market value based on three established real estate appraisal methods: the comparable sales method, which considers recent sales of comparable properties; the cost of construction method, which estimates value based on the cost of reproducing or replacing a particular improvement; and the income method, which considers the property's earning power. Denver Urban Renewal Auth. v. Berglund-Cherne Co., 193 Colo. 562, 565, 568 P.2d 478, 480 (1977); Appraisal Institute, The Appraisal of Real Estate 130 (13th ed. 2008). Although the facts in any particular valuation case may make one method more appropriate than others, each of the three methods is intended to assist the fact finder in estimating the market value of the property taken. Berglund-Cherne, 193 Colo. at 565-66, 568 P.2d at 480-81. Accordingly, we have held that evidence based on any of the three appraisal methods generally is admissible: No purpose is served by limiting testimony to one approach or to the most appropriate method of attaining an opinion as to value. Recognition should be given to all relevant factors which tend to provide a means for arriving at a fair evaluation. The trier of fact has the duty to weigh the opinion and judge the credibility of an expert witness on value to determine which of the three approaches is most indicative of the actual market value of the property to be condemned. Id. at 566-67, 568 P.2d at 481 (finding admissible the value of economic rent as evidence of income derived from the property). However, we also determined in Berglund-Cherne that the comparable sales method generally provides the best evidence of value. Id. at 565, 568 P.2d at 480. Arguably at odds with our determination in Berglund-Cherne that evidence based on any of the three appraisal methods generally is admissibleis Colorado case law holding that evidence of repair or replacement costs is admissible only where it aids in determination of market value. Dandrea v. Bd. of County Comm'rs, 144 Colo. 343, 349, 356 P.2d 893, 896 (1960); Colo. Mountain Props., Inc. v. Heineman, 860 P.2d 1388, 1392 (Colo. App.1993); see also Scurvin Ditch Co. v. Roberts, 58 Colo. 533, 534, 146 P. 233, 234 (1915). According to the Appraisal Institute, the cost of construction approach generally is applicable to new or relatively new improvements because cost and market value are usually more closely related when properties are new. The Appraisal of Real Estate at 382.
Condemnees assert that the trial court erred in excluding their expert's testimony regarding the contributory value of the driveway improvement, based on the cost of construction appraisal method. Condemnees would have valued the easement at one-third of the contributory value that the driveway improvement added to the raw land, or one-third of the cost of constructing the driveway. The trial court determined that the cost of constructing the driveway was not relevant to the jury's determination of the market value of the non-exclusive access easement over the existing driveway. The trial court reasoned that the cost of constructing an improvement does not assist the fact finder in determining the market value of an easement granting an additional user authority to utilize that improvement, particularly where the improvement was constructed prior to the condemnees' ownership of the property. In other words, the trial court found too tenuous the link between the cost of constructing the driveway, as if it never existed, the existing driveway's contributory value to Condemnees' property, and the market value of a non-exclusive access easement over the existing driveway. Our evidentiary rules for property valuation in condemnation cases are expansive: the fact finder may consider any competent evidence affecting the market value of the condemned property which a prospective seller or buyer would consider. Palizzi, 228 P.3d at 961-62. Despite what might be a tenuous link between the cost of constructing the driveway and the value of the non-exclusive access easement over the existing driveway, it is possible that a prospective buyer or seller of the easement might factor into its market value the cost of constructing the driveway. Accordingly, the trial court should have admitted the cost of construction valuation evidence. See id. Admitting such evidence accords with our precedent that valuation evidence need not be limited to the most appropriate of the three established appraisal methods and that the trier of fact is charged with determining which of the three approaches is most indicative of actual market value in a particular case. See Berglund-Cherne, 193 Colo. at 566-67, 568 P.2d at 481. Therefore, the tenuous link between the cost of constructing an improvement and the market value of a non-exclusive easement to use that existing improvement would affect the weight of the evidence, not its admissibility. See Palizzi, 228 P.3d at 964-65. Our inquiry does not stop with the determination that the trial court should have admitted the cost of construction valuation evidence. Because the trial court has broad discretion to determine the admissibility of evidence, we may only reverse if we can say with fair assurance that the trial court's exclusion of that evidence substantially influenced the outcome of the case or impaired the basic fairness of the trial itself. E-470, 3 P.3d at 23; Banek, 733 P.2d at 1178; CRE 103; C.R.C.P. 61. We cannot say with fair assurance that the trial court's error substantially influenced the jury's determination of easement value or impaired the basic fairness of the trial, so we do not reverse. The trial court found that the cost of constructing a replacement driveway would not aid in determining the market value of the non-exclusive access easement over the existing driveway. The trial court's reasoning is supported by the proposition that evidence of replacement costs is admissible only where it aids in determination of market value. See Dandrea, 144 Colo. at 349, 356 P.2d at 896; Heineman, 860 P.2d at 1392; Scurvin Ditch, 58 Colo. at 534, 146 P. at 234. Generally, valuation evidence based on the cost of construction appraisal method is important in determining the market value of new or relatively new improvements. See The Appraisal of Real Estate at 382. Where, as here, the improvement is decades old, the cost of construction approach should only be used given adequate data to measure depreciation. Id. The testimony excluded at trial was to be based on an appraisal report prepared by the Blys' expert witness. That report contains no mention of depreciation data and instead finds Ms. Story should compensate the Blys for one-third the cost of a new road, unadjusted for depreciation. See Petitioner's Exhibit A to Motion in Limine to Exclude or Strike Respondents' Expert Witness' [sic] Testimony and Appraisal and to Exclude Prejudicial Testimony. Both parties presented valuation evidence based on the comparable sales method: Condemnees' appraiser valued the easement at $7,857, and Condemnor's appraiser valued it at $1,215. The jury weighed this evidence and ultimately valued the easement at $3,300. The trial court admitted Condemnees' valuation evidence based on the comparable sales method, and the jury valued the easement based on that evidence. In general, the comparable sales method provides the best evidence of value, and the cost of construction method is only helpful in determining the market value of older improvements where adequate depreciation data is available. Berglund-Cherne, 193 Colo. at 565, 568 P.2d at 480; The Appraisal of Real Estate at 382. We cannot say with fair assurance that excluding the cost of construction evidence substantially influenced the jury's valuation of Ms. Story's easement or impaired the basic fairness of the trial. Banek, 733 P.2d at 1178. We conclude that the trial court's evidentiary ruling excluding valuation evidence based on the cost of construction appraisal method was not an abuse of discretion.