Opinion ID: 1698690
Heading Depth: 1
Heading Rank: 8

Heading: Comparables

Text: Just as both experts' disagree as to the highest and best use of the property, they also disagree as to which comparables should be used in valuing the servitudes. The specific formulas of valuation developed by the courts are all designed to assure that the condemnee is compensated to the full extent of his loss. These formulas are all means to this end; there is no artificial formula by which alone such compensation may be determined. Specific formulas of valuationsuch as willing buyer-willing seller, per-acre or per-lot, front-foot or average-value, income-capitalization, replacement-cost, or othershould be used to effectuate this end, not to defeat it. State, Dept. of Highways v. Terrace Land Co., 298 So.2d 859 (La.1974); State, Department of Highways v. Crow, 286 So.2d 353 (La.1973); State, Department of Highways v. Blair, 285 So.3d 212 (La.1973); State, Department of Highways v. Hoyt, 284 So.2d 763 (La.1973). As such, we must examine the formulas and consider which approach is reasonably calculated to insure that property owners receive just compensation in expropriation proceedings. There are three generally accepted appraisal techniques: (1) the market approach; (2) the cost approach; and (3) the income approach. See generally Uniform Standards of Professional Appraisal Practice (1998 Edition), The Appraisal of Real Estate, (10th Ed.) Under the market approach, the appraiser considers the market value estimate which is predicated upon prices paid in actual market transactions and current listings, i.e. comparable sales. The cost approach method requires the appraiser to derive the value the property by estimating the replacement or reproduction cost of the improvements; deducting therefrom the estimated depreciation; and then adding the market value of the land, if any. Finally, in utilizing the income approach, the appraiser uses an appraisal technique in which the anticipated net income is processed to indicate the capital amount of the investment which produces the net income. The jurisprudence has generally held that the market approach, or the use of comparable sales in the vicinity of the land sought to be expropriated, is the primary tool of analysis of fair market value because it is, in most cases, likely to produce more accurate results. State, Dept. of Highways v. Crow, 286 So.2d 353, 356 (La.1973); Iberia Parish v. Cook, 238 La. 697, 116 So.2d 491, 495 (1959); State, Dept. of Transp. and Dev. v. Winn, 463 So.2d 648, 651 (La.App. 4th Cir.1984) (In cases of expropriation, the more reliable and approved method for determining the fair market value of the property taken is to consider comparable sales, adjusting them to compensate for their relative bad and good features with regard to the expropriated property.). Evans testified that the traditional approach for valuing property is to use market value comparables. He explained that comparable sales of tracts of land are reduced to a value per acre and then prorated to the square footage of the strip of land affected by the right of way to reflect the value of the property. In calculating the amount the landowner is entitled to receive the prorated, per acre amount is depreciated by eighty percent (80%) for each subsequent servitude imposed on the affected tract of land. Evans researched the comparable land sales and listing of properties in the surrounding parishes of the areas in questions. He considered only those properties which possessed similar characteristics and land uses. Evans method explored size of the land, the zoning restrictions, topography, and the highest and best use. [10] Utilizing the comparables, Evans concluded that the Hills were entitled to $17,172 as just compensation for the addition of three pipelines. [11] Conversely, Russell testified that a true and accurate valuation method is to use pipeline servitude comparables. Noting that the amounts of compensation paid to landowners by pipeline companies on the open market are consistently superior to the amounts yielded by the traditional parent tract/acreage, eighty percent (80%) depreciation approach, Russell sought to research the amounts that the pipeline companies paid the landowners for the servitudes. The empirical data submitted by Russell included copies of executed Grant of Right of Way(s). A review of these documents reveals that many of the transactions indicate that the pipeline companies paid amounts such as ten dollars ($10) or one hundred dollars ($100) plus other valuable consideration for the servitudes. [12] Russell's approach considered these values and converted the values to amounts per rods the pipeline company paid for the servitude. Under Russell's approach the contemplated value of the land is based on the comparable of other pipeline servitudes purchased by pipeline companies. Russell conducted studies and created a data base which list the amount paid by the companies. However, speculation remains as to the exact amount paid for the servitudes. The comparables relied on by Russell leave many unanswered questions such as what was the other valuable consideration paid to the landowners. Moreover, the comparables which contain exact dollar amounts fail to reference any extrinsic factors which may need to be considered such as whether the servitude was heavily bargained for or whether the contemplated servitude was the first or last servitude in a pipeline project. Because there are so many extrinsic factors which are considered when pipeline companies make offers, it is germane to our focus that we review only data which is not inflated or containing other factors which are not verifiable. We have thoroughly studied the appraisals and testimony of both experts and conclude that Evans' appraisal technique is the most reliable and persuasive as to the value of all the subject tracts. He logically adjusted each comparable for size, time, topography and shape and use; whereas the landowners' expert did not. Thus, we conclude that the court of appeal erred in relying on the method utilized by Russell.