Court Opinion

ID: 4119131
Source: CourtListenerOpinion
Date Created: 2017-01-27 16:06:37.594774+00
Date Added: 2024-06-11T09:36:52.255916
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF KANSAS

                                            No. 113,732

                              DOUG GARBER CONSTRUCTION, INC.,
                                        Appellant,

                                                  v.

           MICHAEL S. KING, in his Capacity as SECRETARY OF TRANSPORTATION
                                for the STATE OF KANSAS,
                                         Appellee.

                                 SYLLABUS BY THE COURT

1.
        A district court has broad discretion to admit or reject evidence in an eminent
domain proceeding, including evidence of fair market value.

2.
        The enhancement or depression of real property value due to the project for which
condemnation is sought is excluded in determining fair market value.

3.
        In an eminent domain action, a property owner may testify about the fair market
value of the property based on his or her familiarity with the property, but the opinion
will be excluded if based on legally improper considerations.

        Appeal from Douglas District Court; ROBERT W. FAIRCHILD, judge. Opinion filed January 27,
2017. Affirmed.

        David J. Berkowitz, of Berkowitz Law Office, of Lawrence, argued the cause and was on the brief
for appellant.

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        Paul G. Schepers, of Orrick & Erskine, L.L.P., of Overland Park, argued the cause, and Timothy
P. Orrick and Caroline Gurney, of the same firm, were with him on the brief for appellee.

The opinion of the court was delivered by

        STEGALL, J.: The Secretary of Transportation (Secretary) condemned a property
in Lawrence to facilitate construction of the South Lawrence Trafficway (SLT). At trial,
the jury awarded the property owner, Doug Garber Construction, Inc. (Garber), $112,000
as compensation for the taking. Garber appeals directly to this court pursuant to K.S.A.
2015 Supp. 26-504. Garber claims the district court erred by issuing two orders in limine
that excluded certain valuation testimony. Finding no error, we affirm.

                          FACTUAL AND PROCEDURAL BACKGROUND

        This case arose from an eminent domain proceeding in Douglas County. Garber
owned property located at 3501 O'Connell Road in Lawrence, Kansas (Property). The
Property was a half-acre plot containing one residence that Garber previously leased to
tenants. The Secretary initiated an eminent domain proceeding to acquire the Property for
the relocation of 31st Street as part of its construction of the SLT. The SLT project was
designed to move existing state highway K-10 onto a new alignment that would begin at
the junction between U.S. 59 and K-10 and reconnect with existing K-10 in east
Lawrence.

        Since the SLT cuts through the Baker Wetlands, the Kansas Department of
Transportation (KDOT) was required to construct replacement wetlands as mitigation.
Part of the mitigation plan was to relocate certain roads, including 31st Street, and
convert the vacated land back to wetlands. The relocation of 31st Street required KDOT
to condemn the Property.

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       The record does not clearly define the relationship between KDOT and the City of
Lawrence in the relocation of 31st Street to facilitate the SLT. KDOT's engineer testified
at trial that the 31st Street relocation project was done by the City of Lawrence through
KDOT's Bureau of Local Projects. The two entities coordinated on the 31st Street project
and agreed to let both projects to the same contractor at the same time. The district court
found that 31st Street was being relocated as a direct result of the SLT.

       The Secretary initiated an eminent domain proceeding to acquire the Property. The
court-appointed appraiser awarded Garber $105,000 for the fair market value of the
Property. Garber appealed to the district court, disputing the amount of compensation.
Before trial, the Secretary filed a motion in limine to exclude testimony from Garber's
proposed expert, Richard Caplan, an independent real estate advisor, and Garber's
President, Bernice Garber. The district court's exclusion of the testimony of these two
witnesses is at issue before us.

       Richard Caplan prepared a "Highest and Best Use Study" for the Property.
According to the report, the new 31st Street was designed to serve the extension of the
SLT and create a new entry into Lawrence from the east. Construction of the SLT and
31st Street would put the Property at a major intersection. Thus, the Property's proximity
to the SLT would increase traffic and create "a range of land use opportunities that the
site could reasonably be expected to be developed, thereby significantly enhancing the
value of the property." The report estimated that the taking caused a loss of between
$1,795,600 to $3,352,825 in future commercial development.

       The district court granted the Secretary's motion to exclude Caplan's report and
valuation testimony because they violated the Project Influence Rule. The Project
Influence Rule provides:

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       "Enhancement or depression of value due to anticipated improvements by a project for
       which condemnation is sought is excluded in determining fair market value. However, a
       loss in value caused by an unrelated project may be considered in determining fair market
       value of the property taken. The party asserting that two or more projects should be
       considered as one for valuation purposes has the burden of proof." Hudson v. City of
       Shawnee, 246 Kan. 395, Syl. ¶ 12, 790 P.2d 933 (1990).

       The district court found it impossible to separate the Property's newfound prime
location from the SLT project. It reasoned,

       "There is no language in Caplan's report about the valuation existing independent of the
       new roadways and SLT. The Secretary correctly identifies that 'enhancement or
       depressing of value due to anticipated improvements by the project for which the
       condemnation is sought is excluded in determining fair market value.' . . . Plaintiff would
       have the court believe the development of a new 'gateway' entrance into Lawrence
       adjacent to the Subject Property is a separate project from the development of the SLT.
       However, Plaintiff provides no evidence that this is the case, and the court on its own
       sees no logical way to separate the new roadway and the connecting SLT. The new
       entrance is only being created because of the SLT, as the court understands the project.

               "It is clear that the SLT and associated development cannot be used to increase
       the fair market value of the Subject Property. Further, any testimony from Caplan would
       confuse and mislead the fact-finder at trial. For this reason, the court grants the
       Secretary's motion in limine prohibiting Caplan's report or associated testimony on his
       valuation because it inappropriately considers the influence of the very project that fueled
       the taking in this case."

       Bernice Garber, as owner of the Property, planned to testify that the Property's fair
market value was either $40 million or $347 million. The $40 million figure calculation
was based on a comparable sales method. However, Ms. Garber likened the half-acre
Property to miles of highway in Illinois and Indiana that were sold for billions of dollars.
The district court found there was no logical connection between the property interests

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Ms. Garber compared and excluded this portion of her testimony. The $347 million value
was based on Ms. Garber's plan to create a privately run "Garber Golden Gateway" on the
Property that would play music and charge cars a toll for entering Lawrence. The district
court excluded the testimony because it would confuse and mislead the jury and was
based on business profits, which are noncompensable losses in a condemnation action.
City of Wichita v. Denton, 296 Kan. 244, 263, 294 P.3d 207 (2013).

       The case proceeded to trial, and the jury determined the value of the Property was
$112,000. Garber appealed, contending that the district court erred by excluding Caplan's
entire testimony and limiting Ms. Garber's testimony.

                                                ANALYSIS

       At issue in this case is the district court's grant of two orders in limine to exclude
valuation opinion testimony. The purpose of an order in limine is to ensure a fair and
impartial trial for all parties by excluding inadmissible evidence, prejudicial statements,
and improper questions from trial. Denton, 296 Kan. at 255-56. A trial court should grant
an order in limine when it finds two factors are present:

       "'(1) The material or evidence in question will be inadmissible at a trial; and (2) The
       pretrial ruling is justified as opposed to a ruling during trial because the mere offer or
       mention of the evidence during trial may cause unfair prejudice, confuse the issues, or
       mislead the jury; the consideration of the issue during the trial might unduly interrupt and
       delay the trial and inconvenience the jury; or a ruling in advance of trial may limit issues
       and save the parties time, effort, and cost in trial preparation.'" Manhattan Ice & Cold
       Storage v. City of Manhattan, 294 Kan. 60, 69, 274 P.3d 609 (2012) (quoting State v.
       Shadden, 290 Kan. 803, 816, 235 P.3d 436 [2010]).

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       Garber does not claim the district court's ruling was premature, only that it was
wrong. Therefore, the issues before us are narrowed to the district court's decision to
exclude the evidence.

       The right to take private property for public use is inherent in the State but limited
by state and federal law. Denton, 296 Kan. at 252. The Fifth Amendment to the United
States Constitution mandates that private property shall not be taken for public use
without just compensation. K.S.A. 26-513 codifies the Fifth Amendment and provides
methods for determining compensation due. Denton, 296 Kan. at 252. When, as here, an
appraiser's award is appealed in an eminent domain action, the only issue to be
determined will be the compensation required by K.S.A. 26-513. Miller v. Preisser, 295
Kan. 356, 364-65, 284 P.3d 290 (2012); see K.S.A. 2015 Supp. 26-508.

       K.S.A. 26-513(b) provides that if, as here, the entire tract of land is taken, "the
measure of compensation is the fair market value of the property or interest at the time of
the taking." Fair market value is defined as "the amount in terms of money that a well
informed buyer is justified in paying and a well informed seller is justified in accepting
for property in an open and competitive market, assuming that the parties are acting
without undue compulsion." K.S.A. 26-513(e). Fair market value must be determined by
"use of the comparable sales, cost or capitalization of income appraisal methods or any
combination of such methods." K.S.A. 26-513(e). However, a property owner may also
testify about fair market value based on familiarity with his or her property and values in
the neighborhood. In re Acquisition of Property by Eminent Domain, 299 Kan. 37, 50,
320 P.3d 955 (2014).

       A district court has broad discretion to admit or reject evidence—including
evidence of fair market value—in an eminent domain proceeding. See Preisser, 295 Kan.
at 363; City of Wichita v. Eisenring, 269 Kan. 767, 773, 7 P.3d 1248 (2000). Evidence in
an eminent domain proceeding consists mostly of witness opinions because "the

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valuation of real estate is largely a subjective matter and cannot be definitely determined
by the application of any exact principle of science." Eisenring, 269 Kan. at 774. A
district court is responsible for defining the extent of compensable rights, "and if it is
established that value testimony was based on noncompensable items or the credibility of
the testimony is otherwise destroyed the testimony should be stricken in response to a
proper motion." Morgan v. City of Overland Park, 207 Kan. 188, 190, 483 P.2d 1079
(1971).

       The questions here are whether the district court erroneously excluded (1) Caplan's
entire expert testimony because it violated the Project Influence Rule and (2) part of
Garber's lay testimony because her fair market value estimate was based on a
comparative sales method that lacked probative value.

The district court properly excluded Caplan's expert testimony.

       First, Garber argues the district court erroneously granted an order in limine
excluding Caplan's report and testimony regarding his fair market value calculation. The
parties agree that the Project Influence Rule is controlling. The Project Influence Rule
excludes certain factors from the fair market value calculation in an eminent domain
proceeding. Generally stated, the "enhancement or depressing of value due to anticipated
improvements by the project for which condemnation is sought is excluded in
determining fair market value." Hudson, 246 Kan. at 406. The rule can fairly be
understood as an interpretation of the plain meaning of—and legislative intent inherent
in—K.S.A. 26-513(b), that the fair market value of the property must be measured "at the
time of the taking." See Kansas City Power & Light Co. v. Strong, 302 Kan. 712, 725,
356 P.3d 1064 (2015) ("Where [statutory] language is plain and unambiguous, it is
determinative of legislative intent."). In other words, the statute dictates that fair market
value must be calculated before the project improvements for which condemnation is
sought are made.

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       A district court's exclusion of expert or lay opinion testimony is reviewed for
abuse of discretion. See In re Eminent Domain, 299 Kan. at 44. A district court abuses its
discretion if no reasonable person would adopt the district court's view, the decision was
based on an error of law, or the decision was based upon an error of fact. Strong,
302 Kan. at 729. Thus, "even under the deferential abuse of discretion standard of review,
an appellate court has unlimited review of legal conclusions upon which a district court's
discretionary decision is based." Preisser, 295 Kan. at 364.

       Here, Garber does not contest that the Project Influence Rule applies as a matter of
law but argues the district court's application of the rule was premised on an erroneous
factual finding—that the two projects should be considered as one. The Secretary had the
burden to show that the SLT and the 31st Street project should be treated as one project
for valuation purposes. Hudson, 246 Kan. at 406 ("The party asserting that two or more
projects should be considered as one for valuation purposes has the burden of proving the
projects are related."). The lower court made a factual finding that the projects should be
considered as one for valuation purposes, saying: "[T]he court on its own sees no logical
way to separate the new roadway and the connecting SLT. The new entrance is only
being created because of the SLT." (Emphasis added.) In other words, but for the SLT,
the 31st Street Project would never have been contemplated, let alone completed. As a
general matter, appellate courts will not reweigh the evidence and will not disturb a lower
court's factual findings when they are supported by substantial competent evidence. See,
e.g., Garvey Elevators, Inc. v. Kansas Human Rights Comm'n, 265 Kan. 484, 492, 961
P.2d 696 (1998).

       Here, we conclude the lower court's factual finding that the 31st Street project was
contingent upon the SLT—and thus the two must be treated as one for valuation
purposes—was both supported by the evidence and correct as a matter of law.

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       Garber claims the testimony of KDOT's engineer demonstrates that the 31st Street
improvement was a City of Lawrence Project separate from KDOT's construction of the
SLT. However, the record shows only that the KDOT engineer testified at trial—long
after the district court chose to exclude Caplan's valuation testimony. If anything, the
engineer's trial testimony supported the district court's findings. For example, the
engineer testified, "[W]ith the South Lawrence Trafficway project we relocated a portion
of 31st Street."

       Garber, as the party asserting prejudicial error, "has the burden of designating a
record that affirmatively shows the error." State v. Sisson, 302 Kan. 123, 128, 351 P.3d
1235 (2015). But the only relevant evidence appearing in the record on appeal available
to the district court at the time the orders in limine were entered—Caplan's report—
provides sufficient evidence by itself to support the district court's factual determination
that the two projects should be treated as one. The report consistently treats the
"completion of the South Lawrence Trafficway and 31st Street at O'Connell Road" as a
unified project that would catalyze commercial development. Indeed, the report defines
the relationship between 31st Street and the SLT at the outset: "The Garber Parcel, in
part, accommodates the new 31st Street being built to serve the extension of the South
Lawrence Trafficway (State Highway K-10) and as a major artery in southern Lawrence
and a new entry into Lawrence from the east." (Emphasis added.) Ultimately, the report
concludes:

       "If the Garber Parcel had remained under private ownership, the site would have
       reasonably been developed for a commercial development at a strategic entrance to the
       city upon completion of 31st Street and opening of the South Lawrence Trafficway.
       Because of the prime location of the parcel, it is projected that there would have been an
       average of 22,700 vehicles per day passing the site that would have enhanced the
       viability of the development." (Emphasis added.)

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       Thus, the report was premised on the fact that the new 31st Street was "built to
serve the extension of the South Lawrence Trafficway" and would become a new entry
into Lawrence from the east. According to Caplan's report, the relocation of 31st Street
was contingent on construction of the SLT.

       Furthermore, Caplan's report based its fair market value calculation on new land
use opportunities that would arise after the SLT was constructed and 31st Street served as
a new gateway to Lawrence. Thus, the district court could reasonably determine that the
two projects should be considered as one for valuation purposes. We conclude the district
court did not abuse its discretion when it determined that Caplan's testimony violated the
Project Influence Rule.

The district court properly excluded Garber's lay testimony.

       Second, Garber argues the district court erred in excluding Ms. Garber's testimony.
In an eminent domain action, a property owner who does not qualify as an expert may
testify about the fair market value of the property based on familiarity with his or her
property and values in the neighborhood. In re Eminent Domain, 299 Kan. at 50. But, a
property owner's opinion about fair market value will be excluded if based on legally
improper considerations, such as an unrecognized appraisal method. 299 Kan. at 47-48.

       Ms. Garber's $40 million valuation estimate was, in theory, premised on a
permissible comparable sales approach. See K.S.A 26-513(e); Mooney v. City of
Overland Park, 283 Kan. 617, 622, 153 P.3d 1252 (2007) ("Under the market or sales
approach, the appraiser looks at sales of comparable properties in the area to arrive at a
total value of the improved property."). However, Ms. Garber's approach did not, in fact,
evaluate comparative property—she instead compared her half-acre plot to miles of
highway in Illinois and Indiana that had been sold for billions of dollars. When asked

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how she utilized these sales to calculate the total valuation, Ms. Garber responded, "I
think I just divided it up by foot, by the number of feet."

       Moreover, Ms. Garber estimated the "Garber Golden Gateway" would generate
over $22 million in business income in one year by charging a $2 gate fee to 31,100 cars
passing through per day. Subtracting operating expenses and applying an 8%
capitalization rate, Ms. Garber concluded the Property was worth a total of $347 million
in future profits. Even if we ignored the speculative character of Ms. Garber's envisioned
"Golden Gateway" to Lawrence, and even if a private citizen could lawfully collect tolls
from drivers on a public roadway, such testimony is inadmissible to establish property
valuation. "It has long been the rule in this state that the profits from a business
conducted on a particular piece of property are not compensable losses in a condemnation
action." Denton, 296 Kan. at 262.

       The district court did not abuse its discretion.

       Affirmed.

       BILES, J., not participating.

       DAVID A. RICKE, District Judge, assigned.1

1
 REPORTER'S NOTE: District Judge Ricke was appointed to hear case No. 113,732
vice Justice Biles under the authority vested in the Supreme Court by art. 3, § 6(f) of the
Kansas Constitution.

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