Court Opinion

ID: 9791799
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:18:17.403962+00
Date Added: 2024-06-11T07:37:38.642652
License: Public Domain

UDALL, Vice Chief Justice
(dissenting).
I dissent from the ruling of the majority with regard to their treatment of the Hollis-Schwarz lease.
The State assigns as error the trial court’s refusal to grant its request fo'- an “advance ruling prohibiting any reference to a lease without its materiality and relevancy being first established * * This is followed by an assignment that the trial court erred “in admitting into evidence plaintiffs’ exhibits * * * No. 14 (Hollis-Schwarz Lease).” The two can be considered together and I turn my attention to a discussion of the lease, its lack of materiality, and the error of the trial court in admitting it into evidence.
On March 22, 1957, appellees granted to W. M. and Margaret S. Schwarz a ninety-nine (99) year lease on 7.89 acres of land subject to the dispute in this case. By the terms of the lease the lessees were to pay rental of $50 per month during the first year. During the next three years rent was to be paid at the rate of $200 per month. After that period it was to he raised to $225 per month for the next six years and then to be raised to $450 per month for the remainder of the term of the lease. This lease was not recorded.
The testimony shows that the rental was paid for only ten months (rather than one year) after which the lease was terminated by mutual consent of the contracting parties. In Mr. Schwarz’ own words “it was a dead issue” from that time and the higher rentals never were paid. Consequently the lease had earned only $500 for the lessors during a ten-month period.
On August 12, 1959, the State began to work on elevating the grade of the road adjacent to the leased property. This was more than 18 months after the premature termination of the lease by the parties. At the time the lease was terminated and up until the time construction began there was nothing on the ground to apprise the property owners of the change in road elevation or that they would be affected by any alterations on the highway. Upon appellee Frank E. Hollis being asked by his counsel:
“Q What information at the time the lease was terminated did both you and Mr. Schwarz have as to what the State was going to do concerning the construction of the highway in front of your property?
he replied:
*208“A The right of way department had talked about it, and it was my understanding that they were going to raise the roadbed, and at that time they couldn’t give me any definite figures but we felt it was going to be raised considerably because they informed us to that effect.” [Emphasis supplied.)1
Beyond this there was no reason given for the termination of the valid and enforceable lease entered into by these reputable parties. Thus the evidence shows that the lease was made worthless by the acts of the parties themselves and for reasons known to them alone and not because of the elevation of the roadbed by the State. Had the lessors chosen to do so they could have held the lessees to the full term of the lease and realized its full value.
The majority opinion states “If the property is rented for the use to which it is best adapted, the actual rent received * * forms one of the best tests of value and * * * rent actually received at a time reasonably near the time of taking should be admitted.” (Emphasis supplied.) They quote from the case of Kelchner v. Kansas City, 86 Kan. 762, 121 P. 915 (1912) in which the court permitted evidence of “rentals received” in determining market value. The fallacy in the application, of these principles to the situation before us lies in the fact that the only rents ever received were in the sum of $50 per month for only 10 months and no rents were being received at the time of the alleged taking and none had been for 18 months prior thereto. The authorities cited by the majority, County of Maricopa v. Shell Oil Co., 84 Ariz. 325, 327 P.2d 1005 (1958); People ex rel. Department of Public Works v. Dunn, 46 Cal.2d 639, 297 P.2d 964 (1956); and Kelchner v. Kansas City, supra, are not in point because they deal with leases in full force and effect at the time of the taking. But even if the trial court concluded that rents received several months prior to the taking were rents received “at a time reasonably near the time of taking”, the rents received in this case were only nominal and the admission of the lease into evidence was misleading to the jury and prejudicial to the rights of the State.
*209It seems very significant that at the time of valuation of the property and the time construction on the highway was begun and finished the lease had long since been terminated. The evidence shows that it was not the rent actually received upon which the appraisers determined market value but rather the lease which would have had an ultimate rental value of $450 per month only after the expiration of ten years time from the date the lease was entered into. Such rentals were not received nor never would have been received because the parties had terminated the lease.
The majority cited the case In re South Twelfth Street, 217 Pa. 362, 66 A. 568 (1907) for the proposition that the valuation of the property should have been made as of the time notice of the taking occurred. That case has no application here. Therein the landowner was given actual official notice for a period of 40 years that a street would be built across his land when occasion for the opening of the projected street arose. Here, no official notice of any kind was ever given to the landowners or to the lessees of any action the Highway Department intended to take.
The Hollis-Schwarz lease was admitted into evidence for the purpose of showing the “highest and best use” of the property and was relied upon heavily by each appraiser. The only mention made in the instrument of any use to which land could be put was a negative restriction preventing the lessees from using the leased premises for a motion picture theater. Beyond this there was no use mentioned; and as evidence of a “highest and best use” for rental purposes it was totally incompetent.
The very most the lease could have done was to show speculative value to the property — that is, to show possible future commercial or rental use. It should never have been admitted to show what the owner intended to do with it. In County of Los Angeles v. Bean, 176 Cal.App.2d 521, 1 Cal. Rptr. 464, 468 (1959) it was said:
“Appellant insists that he should have been entitled to show what he intended to do with the property (namely to produce oil therefrom). A proper objection was sustained. It is settled that the use intended by the owner does not enhance the market value of property (cases cited). Actual market value is the measure, and not its value in use to the owner (cases cited).”
See also Redwood City Elementary School District v. Gregoire, 128 Cal.App.2d 766, 276 P.2d 78 (1954).
In Redondo Beach School District of Los Angeles County v. Flodine, 153 Cal.App.2d 437, 314 P.2d 581, 586 (1957) the court said:
“Coming to appellant’s next contention apparently appellant intended to subdivide a part of the property in some way or other and ultimately to subdivide all of it, but the usual rule in *210eminent domain proceedings is that a proposed plan for the development of the property proposed to be taken is not material on the issue of market value.”
Then in People v. La Macchia, 41 Cal.2d 738, 264 P.2d 15 (1953) the California Supreme Court upheld an instruction to a jury which read:
“ * * * ‘Whatever purpose the Defendants had in connection with the future use of the property, can add nothing to its market value. The fact that this purpose is defeated by condemnation, however much a disappointment, is not a matter of compensation. * * * Value in use is not to be considered by you as determining the market value of the property. A plan which Defendants may or may not have had for the improvement of the property adds nothing to the market value.’ ” 2
Not only should the Hollis-Schwarz lease itself have been withheld from evidence hut it has been repeatedly held that expert opinion evidence based on sheer speculation is not competent. Board of Regents of University, etc. v. Cannon, 86 Ariz. 176, 342 P.2d 207 (1959); State of Washington v. United States, 9 Cir., 214 F.2d 33 (1954). In the case at bar each one of the appraisers who testified as to market value of the Hollis property relied heavily upon the Hollis-Schwarz lease which was no longer operative. To have permitted the appraisers to testify to possible intended uses was error.
The prejudice to appellant by permitting reference to the terminated lease is clearly evident. Edwin Husted testifying on behalf of appellees stated the market value before construction on the road to have been $91,-200.3 In arriving at this figure he treated the Hollis-Schwarz lease as though it were in existence at the time of his valuation:
“Q And in arriving at your opinion of the fair market value before the taking did you take that lease into consideration ?
“A Yes.
* * * * * *
“Q Then you treated the lease — my ■ understanding is that you treated the lease as if it was in existence at the time of valuation?
*211“A As if it were in existence?
“Q Yes.
“A Is this before or after?
“Q You stated that you used it in your consideration both in the before and after situations.
“A Yes.
“Q Now, were you informed that this lease was in default in May 1958?
“A I was not.
“Q And were you advised that the lease was mutally rescinded as of that date?
"A I don’t recall.”
Husted valued the property after the raising of the grade of the road to be $5,750. The difference between these two figures was $85,450, the exact amount awarded appellees by the jury.4 The largest portion of his $91,200 evaluation was on the 7.89 acres for which the lease had been granted. He valued that portion at $79,200.5 To have considered the lease was prejudicial error of the most fundamental nature.
For the reasons above stated the judgment should be reversed and the cause remanded for a new trial.

. The appellees’ source for information that “they informed us to that effect” is the grossest type of hearsay. The word “they” is nondescriptive and indicates rumor rather than factual information. That they did not rely on this information is evident from the statement of their attorney:
“We next take the position that the date of valuation is not August 12th (1959) because that was the date work was actually begun, and there was nothing out there on the ground to apprise the property owner at that particular time what the finished property was going to look like. * * * the only thing the property owner could do was wait and see what happened * *

. 4 Nichols, Eminent Domain, § 12-312, cited by the majority of the court, states in subsection 2:
“A valuation based upon an estimate of the potential income which might be realized from a utilization by the owner of the property in a manner of which it is capable but of which he has not yet availed himself, has been generally rejected on the ground that such income is too uncertain and conjectural to be acceptable.”

. This was the highest appraisal outside of Hollis’s own estimate. The next highest was $74,400 by Mrs. Oakes.

. The record shows an error in mathematics of $1,000. ($84,450 instead of $85,450).

. I note that Husted’s figures were calculated at $40 a front foot for 1980 front feet. Hollis himself admitted that only 1680 front feet had been usable before the road work was done and that he did not expect compensation for the additional 300 feet.