Opinion ID: 2007897
Heading Depth: 1
Heading Rank: 10

Heading: analysis

Text: The measure of damages for the taking of an easement is the difference between the reasonable market value of the property before and after the taking of the easement. In re Petition of Omaha Pub. Power Dist., 268 Neb. 43, 680 N.W.2d 128 (2004). Damages for the taking of a permanent easement and a temporary construction easement are measured as of the date of taking. See Langenheim v. City of Seward, 200 Neb. 740, 265 N.W.2d 446 (1978). The date for determining valuation and damages in eminent domain proceedings is the date the condemnor files its petition in condemnation in the county court. See Platte Valley Public Power & Irr. Dist. v. Armstrong, 159 Neb. 609, 68 N.W.2d 200 (1955). The basis for Liberty's evidence concerning its measure of damages was Broekemeier's testimony that prior to the condemnation, Liberty had 68 lots sold and that after the condemnation, it lost 50 sales. MUD claims that the district court erred in allowing such evidence because it was irrelevant to the proper measure of damages. It claims that the record contains numerous instances where the court allowed evidence regarding the market value of the property which was not computable as of October 2, 2002, the date MUD filed its petition for condemnation. MUD argues that Okoruwa's testimony lacked sufficient foundation because it relied upon Broekemeier's assertion that he lost 50 presales after the condemnation. It argues that the loss of sales was irrelevant and that the district court abused its discretion in allowing this testimony. MUD also asserts that the district court erred by admitting evidence of damages to the lots not affected by the easements. Liberty claimed that the sale of lots in the entire subdivision was adversely affected due to the installation of the water mains. Okoruwa testified regarding damages to lots adjacent to the lots with easements. Okoruwa stated that the before value of the lots directly adjacent to the lots with the permanent easements was $657,000 and that their value after the taking was $89,000. He calculated the damages related to the difference in market value before and after the taking of lots adjacent to the easements at $568,000. This was despite the fact that five of these lots (Lots 2, 12, 15, 16, and 29) had been sold for full value at the time of the proceedings and none of the easements touched these lots. It is fundamental that the plaintiff's burden to prove the nature and amount of its damages cannot be sustained by evidence which is speculative and conjectural. Clearwater Corp. v. City of Lincoln, 202 Neb. 796, 277 N.W.2d 236 (1979). There are three generally accepted approaches used for the purpose of valuing real property in eminent domain cases: (1) the market data approach, or comparable sales method, which establishes value on the basis of recent comparable sales of similar properties; (2) the income, or capitalization of income, approach, which establishes value on the basis of what the property is producing or is capable of producing in income; and (3) the replacement or reproduction cost method, which establishes value upon what it would cost to acquire the land and erect equivalent structures, reduced by depreciation. Each of these approaches is but a method of analyzing data to arrive at the fair market value of the real property as a whole. Walkenhorst v. State, 253 Neb. 986, 991, 573 N.W.2d 474, 480(1998). For the testimony of an expert or lay witness to be admissible on the question of market value of real estate, the witness must be familiar with the property in question and the state of the market. Id. Okoruwa purported to testify to the before and after values of lots subject to the easements using the market data and comparable sales methods. However, the record reflects that his testimony did not meet the necessary foundational requirements concerning the effect that the easements had on the value of the lots. Okoruwa testified that the installation of the water mains vastly affected the market values of the lots. He stated he obtained that information from Broekemeier and [f]rom research. Broekemeier told Okoruwa that 50 sales were lost as soon as purchasers became aware of the water mains and that Liberty had sold only 31 lots in the 4 years since the taking. Okoruwa attributed the failure of the sales to the easements. Okoruwa did not set forth the method or research he used to determine the value of the lots subject to the taking. His basis for determining that the highest and best use of the lots had changed from residential to recreational was because Broekemeier had lost presales. Because Broekemeier could not sell these lots, Okoruwa concluded that the lost sales were caused by the easements. When asked how he estimated the damage, Okoruwa said that if there was a low market for residential lots, the highest and best use changed. Because there was a low market for these lots, he stated the use of the lots changed from residential to recreational or open space. His foundation for this opinion was Broekemeier's claim that he had lost some 50 contracts. There was no evidence that Okoruwa had researched any comparable properties subject to similar easements or conducted any market data analysis of the highest and best use of similar properties. Moreover, Okoruwa did not testify that he had confirmed with any of the alleged prepurchasers that the contracts were actually lost due to the easements. On cross-examination, Okoruwa admitted that he did not find comparable sales with aqueducts on them and that he did not rely on any studies or publications relating to water mains to determine Liberty's damages. He concluded that the lots adjacent to the lots with easements changed in value from residential to recreational. Therefore, he valued all of these lots as recreational. He had no comparable sales for this change in valuation. Okoruwa also concluded that because of the temporary construction easements, Broekemeier could not sell all the lots for at least I year. Okoruwa relied on this fact to determine the damage from the temporary easements. Since the lots could not be sold for at least 1 year, he computed a reasonable rate of return on the property at 15 percent. He applied this computation to the entire subdivision. Over MUD's objection, the district court permitted Okoruwa to testify that the rental value of the property before the temporary easements was $2,159,000 and the value after was $1,877,000a difference of $282,000. When real property is temporarily taken by eminent domain, the value of compensation is determined by one of several methods: (1) ascertaining the value of the property for the period it is held by the condemnor, (2) ascertaining the difference in the value of the property before and after the taking, or (3) looking at the fair market rental value of the property during the time it was taken. 4 Julius L. Sackman, Nichols on Eminent Domain § 12E.01[1] (rev. 3d ed. 2007), citing David Schultz, The Price is Right! Property Valuation for Temporary Takings, 22 Hamline L.Rev. 281 (1998). Okoruwa concluded that because of the temporary construction easement. Liberty could not sell those lots and that those lots could not be marketed for at least 1 year. He proceeded to determine what he opined as the appropriate rental rate for those lots because they could not be sold. He concluded that a reasonable rate of return of 15 percent applied to the value of all the lots that could not be sold, which was basically the whole subdivision. Over MUD's objection, Okoruwa stated: The value before was $2,159,000, and the value after, $1,877,000, and the difference [$]282,000. This was [t]he damage to the subdivision for taking out the whole subdivision from the market for at least one year. The evidence was undisputed that the temporary construction easements were located on only the 19 lots that were subject to the permanent easements. However, applying a rate of return for the whole subdivision was the equivalent of claiming the whole subdivision was part of the temporary easement, which, in fact, involved only 1.654 acres. The valuation of permanent easements is a difficult task, and the valuation of temporary easements is even more difficult. See 9 Patrick J. Rohan & Melvin A. Reskin, Nichols on Eminent Domain § G32.08[1][a] (rev. 3d ed. 2007). In the case at bar, Okoruwa attempted to value the temporary easements in terms of a rate of return for the entire property based upon rental value of the property before and after the temporary easements. In effect, he opined that the damages for the temporary taking of 19 lots for the temporary construction easements was $282,000. We conclude that it was error for the district court to allow such testimony. On direct examination, Okoruwa was asked to calculate the total of all damages about which he had testified. He opined that the total damages were $2,418,000. This was despite the fact that the damages he testified to on direct examination totaled only $1,948,000. Over MUD's objection as to proper and sufficient foundation, Okoruwa stated that this amount should be awarded to Liberty to compensate it for the takings. Generally, evidence as to the sale of comparable property is admissible as evidence of market value, provided there is adequate foundation to show the evidence is material and relevant. Wear v. State of Nebraska, 215 Neb. 69, 337 N.W.2d 708 (1983), citing Clearwater Corp. v. City of Lincoln, 202 Neb. 796, 277 N.W.2d 236 (1979). The foundation evidence should show the time of the sale, the similarity or dissimilarity of market conditions, the circumstances surrounding the sale, and other relevant factors affecting the market conditions at the time. Id. Whether properties, the subject of other sales, are sufficiently similar to the property condemned to have some bearing on the value under consideration, and to be of aid to the jury, must necessarily rest largely in the sound discretion of the trial court. Wear v. State of Nebraska, supra , citing Langfeld v. Department of Roads, 213 Neb. 15, 328 N.W.2d 452 (1982). Okoruwa's opinions lacked sufficient foundation, and the district court abused its discretion in admitting Okoruwa's testimony. Except for Lot 1, which had an additional 50-foot easement, the permanent easements were 20 to 25 feet in width on each lot and totaled 1.486 acres. The temporary construction easements on each lot was 20 to 30 feet in width and totaled an additional 1.654 acres. Okoruwa's conclusion that the easements changed the highest and best use of the property from residential to recreational was without sufficient foundation. His testimony as to Liberty's damages was therefore speculative and conjectural.