Court Opinion

ID: 9791720
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:16:42.303445+00
Date Added: 2024-06-11T07:37:38.132676
License: Public Domain

Fontron, J.,
dissenting: It is no easy task to dissent from one of Justice Schroeder’s massive, comprehensive and persuasive opinions. Nonetheless I feel compelled to make the effort because of the error which I believe inhered in the trial proceedings and resulted in a trial less than fair to the state.
It is obvious from an examination of the record that the land*308owners, from the time of pretrial conference through final argument, proposed to establish the market value of the condemned land on the basis of a loss to them of some thirty-five prospective lots, twenty of which they valued at $2900 each and the remaining fifteen, at about $3500 per lot. It is likewise apparent that the condemnees, the Lees, sought to prove the prospective lot values by showing what lots sold for in firmly established subdivisions scattered throughout the city of Manhattan.
This method of procedure is clearly indicated by extensive colloquies between court and counsel prior to trial resulting in a ruling set forth in a pretrial order filed March 10, 1969, that ‘lot sales of platted land would be allowed to be admitted into evidence to establish market value of unplatted lots.” This ruling was reiterated in a supplemental pretrial order that “lot sales should be admitted.” This persistent ruling was made over strenuous objection by the state, whose opposition thereto never abated. Any inference which might be gained from reading the court’s opinion, that the state had acquiesced in this method of establishing the value of unimproved land, would be wholly unjustified.
The general rule, upheld in an overwhelming number of jurisdictions, is set forth in 4 Nichols on Eminent Domain, 3d Ed., § 12.3142 [1]:
“. . . It is well settled that if land is so situated that it is actually available for building purposes, its value for such purposes may be considered, even if it is used as a farm or is covered with brush and boulders. The measure of compensation is not, however, the aggregate of the prices of the lots into which the tract could be best divided, since the expense of cleaning off and improving the land, laying out streets, dividing it into lots, advertising and selling the same, and holding it and paying taxes and interest until all the lots are disposed of cannot be ignored and is too uncertain and conjectural to be computed. In any event, if evidence is offered as to developed value consideration must be given to the cost of developing that value. . . .”
This general principle is similarly stated in 26 A. L. R. 3d, Condemnation — Possible Subdivisions, § 4, pp. 794-796.
In Kansas such has been the rule from an early date. (K. C. & T. Rly. Co. v. Splitlog, 45 Kan. 68, 25 Pac. 202; K. C. & T. Rly. Co. v. Vickroy, 46 Kan. 248, 26 Pac. 698.) In both of these cases the condemned land was unimproved and the trial court admitted evidence of the value of nearby lots, some of which, in the Vickroy case, even adjoined the tract taken. The essence of the decision in Splitlog, which was quoted with approval in Vickroy, was phrased in the following words:
*309“In cases like this, where damages are limited to the value of the land appropriated, the proper inquiry is, What was the market value of such land, for any present use, in the condition in which it was immediately prior to its condemnation by the company? Witnesses testifying as to the value of such land may consider any use to which the ground may be presently put, in forming their opinions as to its value; and its surroundings may be shown to the jury — its nearness to, or distance from, a town, village, or city, or other improvements that tend to affect its value; but the jury are to value the land as a whole, in the condition in which it was when taken. They have nothing to do with its subdivision into lots or blocks. They may consider its location, and the effect its location has upon its value as a whole; but the evidence as to how many lots it would make, and what they would sell for after the subdivision, is wholly improper. . . .” (pp. 72, 73.)
The impact of the Splitlog decision on the law of eminent domain in this state cannot easily be shrugged aside with the comment that the case contains features which are distinguishable from those here.
Time will not permit extended discussion of the many authorities supporting the rule heretofore quoted from Nichols on Eminent Domain, supra. A couple of recent examples will have to suffice.
The facts before the Supreme Court of Colorado in Dept. of Highways v. Schulhoff, 167 Colo. 72, 445 P. 2d 402, were strikingly similar to those in the present action. The land taken for highway purposes in the Colorado case consisted of a strip of slightly more than three-fourths of an acre lying along the highway. Admittedly, the highest and best use of the tract was for subdivision into residential building sites. At the trial, the landowners’ appraisers were permitted to arrive at their opinion of the fair market value of the undivided tract by hypothetically carving it up into residential building sites, estimating the value of each site, and then adding the estimated values together.
This method of computing value was held to be erroneous, and in reversing the case, the court had this to say:
“It is proper to show that a particular tract of land is suitable and available for subdivision into lots and is valuable for that purpose. It is not proper, however, to show the number and value of lots as separated parcels in an imaginary subdivision thereof. Stated differently, it is improper for the jury to consider an undeveloped tract of land as though a subdivision thereon is an accomplished fact. Such undeveloped property may not be valued on a per lot basis, the cost factor clearly being too speculative.
“. . . Valuation must be based on what a willing purchaser will pay for the whole at the time of the taking and not what a number of purchasers *310might be induced to pay in the future for the land in smaller parcels. (Citing cases.)” (pp. 77, 79.)
At a later stage of its opinion the Colorado court, in discussing the admissibility of testimony concerning prices paid for similar building sites, quoted with approval the following language found in State Roads Commission v. Wood, 207 Md. 369, 114 A. 2d 636:
“. . . The vice in comparing subdivided land and unsubdivided land lies in the fact that the comparison is between a wholesale and a retail price for the price of the platted lots includes the expense of subdividing and the promotional and sales costs of moving the individual lots. . . .” (p. 81.)
The Schulhoff case was followed in Board of County Com'rs v. Vail Associates, Ltd.,_Colo._, 468 P. 2d 842.
In Highway Commission v. Conrad, 263 N. C. 394, 139 S. E. 2d 553, 12 A. L. R. 3d 1055, the North Carolina Supreme Court sustained a ruling entered by the trial court that a designated number of lots multiplied by a price per lot was not the proper basis for determining the value of undeveloped land suitable for subdividing. In the course of its opinion the court stated:
“. . . The fair market value of undeveloped land immediately before condemnation is not a speculative value based on an imaginary subdivision and sales in lots to many purchasers. It is the fair market value of the land as a whole in its then state according to the purpose or purposes to which it is best adapted and in accordance to its best and highest capabilities. It is not proper for a jury to consider an undeveloped tract of land as though a subdivision thereon is an accomplished fact. Such undeveloped property may not be valued on a per lot basis. (Citing cases.)” (p. 397.)
The rule laid down in this case was later given approval in State Highway Commission v. Reeves, 8 N. C. App. 47, 173 S. E. 2d 494.
An objective perusal of the present record will disclose that the landowners’ witnesses, in placing a value on the tracts taken, violated the rule just discussed. One of the owners, H. Alan Lee, who appeared as his own first witness, stated on cross examination that he based his testimony strictly on lot sales.
Other witnesses testifying for the Lees took the same approach. Mr. Lashbrook, head of the Kansas State University department of journalism, and with appraisal experience, testified he arrived at his figure of compensable damage by determining the sale prices of lots in other subdivisions, some of the lots having been sold over a period of three or four years. Mr. Lundin, who owned an undeveloped tract adjoining the Lee property, stated he examined lot sales in other subdivisions and applied the value of those lots to *311the tracts taken. The Lees’ last witness, Mr. Haley, a Lawrence real estate broker dealing principally in commercial and high-rise apartment properties, likewise examined lot sales and applied lot prices to the tracts.
I am frank to acknowledge that the modern tendency in jurisdictions which, like Kansas, have approved the development approach as an acceptable basis for determining market value, is to admit evidence of the developed value of a tract which was condemned as raw land. The existence of this trend is tacitly recognized in the final sentence of the rule heretofore quoted from 4 Nichols on Eminent Domain, 3d Ed., supra. That sentence, which begins on page 177, will bear repeating:
“. . . In any event, if evidence is offered as to developed value consideration must be given to the cost of developing that value. . . .” (Emphasis supplied.)
Cases which give voice to the modem drift are collated in the 1970 Supplement to Volume 4 of Nichols on Eminent Domain, 3d Ed., pp. 80-84.
It is precisely in this area of development costs that the greatest prejudice has occurred. As I read the testimony of landowners’ witnesses they have ignored certain basic costs inhering in the development and sale of subdivision lots. For example, H. Alan Lee, after first stating that he based his testimony strictly on lot sales, was permitted by the court to rehabilitate himself as a witness. He thereafter testified that in addition to his land cost all that he would have involved in the sale of each lot would be engineering and abstracting fees of $100. This is hardly rehabilitation! Lee entirely omitted from his computation of costs major factors necessarily involved in the development and sale of subdivision properties. Among the costs of development which any prudent investor would take into account, and which I would have assumed every qualified appraiser would concede to be valid, are the time lag involved, interest on investment, sales expense, taxes, and similar discount factors. (See State v. Tedesco, 4 Utah 2d 248, 291 P. 2d 1028.)
Testimony of the other witnesses who appeared on behalf of the Lees was infected with the same fatal infirmity. The only item of possible cost mentioned by Lundin, over and above the $100 per lot figure to which Mr. Lee referred, was a $1000 per lot expense of putting in streets. Haley would infer development costs of only *312$100 per lot, while Lashbrook apparently considered that no development costs were involved.
When the two Lee tracts were condemned they were both raw land. Although preliminary sketches of proposed subdivisions had been drawn some years before, and a proposed plat of the east tract was offered for filing shortly before the condemnation, basically nothing had been done in the way of subdivision development. The tracts were not in the city limits on . the date of taking; the Lundin tract was undeveloped; and another tract nearby, owned by the Lees, was not yet platted. While the potentiality of development was present, the finished product was not imminent. On oral argument we were informed that on the date of trial, more than nine months after the taking, development had not even started.
There is a significant difference between the value of land potentially avaiable for subdivision purposes and the value of that same land after it has been fully developed into lots which are ready to market and are available for present sale. Far less expense is involved in selling forty-five lots in bulk to one ready and willing buyer, than in selling those same lots piecemeal to multiple buyers.
In speaking on this subject, the Ohio court, in In Re Appropriation, 15 Ohio App. 2d 131, 239 N. E. 2d 110, had this to say:
“. . . Except in the event of a rare and highly promoted auction sale taking place in a single day, a subdivision is ordinarily sold to a multiplicity of buyers over a period of years. This factor of time must be considered, to arrive at the fair market value on the single day of taking.” (pp. 135, 136.)
Mr. Lashbrook testified that in one of the additions he used in obtaining lot prices, the lots were sold over a period of three or four years. The value today of an unplatted lot which may not be ready for sale, or for which no market may exist for some years, cannot rationally be equated with yesterday’s sale price of the finished product.
The problem is put in clear perspective by the testimony of Richard Kessler and David Craig, both of whom testified for the state. Much of their evidence is detailed in the majority opinion, including a tabulation prepared by Kessler demonstrating the cost factors he considered essential in using the development approach. I need dwell on their testimony no longer than to say that both witnesses emhasized the importance of basic factors which must be taken into account in a fair application of the development approach, and which Lees’ witnesses obviously omitted.
*313The general principle seems well expressed in State v. Tedesco, supra;
“A condemnee is not entitled to realize a profit on his property. It must go to the condemnor for its fair market value, as is, irrespective of any claimed value based on an aggregate of values of individual lots in a subdivision which one hopes to sell at a future time to individuals rather than to an individual. The test is not what the lots will bring when and if 62 willing buyers come along, but what the tract, as a unit, and as is, platted or not, and in whatever state of completion, will bring from a willing buyer of the whole tract. . . .” (p. 251.)
As a practical matter, I realize that the development approach in determining market values is a standard method employed by many professional appraisers. This court has acknowledged it as an acceptable tool to use in conducting appraisals. I doubt however, that the legislature in enacting K. S. A. 26-513 (a), which relates to just compensation, ever contemplated that the market value of a piece of raw land taken in eminent domain proceedings should be established by (1) dividing it into hypothetical lots, (2) determining the value of each hypothetical lot by securing the sale price of lots in established subdivisions and (3) multiplying the number of hypothetical lots by a lot value so ascertained. There is no Kansas statute of which I am aware either in our Code of Civil Procedure, our Code of Evidence, or our Eminent Domain Act which would countenance that method of computing compensable value.
True, K. S. A. 60-407 provides that all relevant evidence is admissible unless otherwise provided by statute. The key word in this provision is “relevant.” This statute does not extend an open invitation to irrelevance. Despite some of the language appearing in City of Bonner Springs v. Coleman, 206 Kan. 689, 481 P. 2d 950 and Morgan v. City of Overland Park, 207 Kan. 188, 483 P. 2d 1079, trial courts have a duty to limit the admission of evidence to that which is pertinent. This obligation extends, in my judgment, to the testimony of expert witnesses as well as others, and when expert testimony is based on irrelevant factors, or fails to consider relevant factors, the court should exclude it.
The prejudice which I believe resulted from the admission of evidence relating to sales of developed lots was compounded by the rejection of evidence as to the purchase price of the condemned land. The general rule is that evidence of such character is admissible where the sale was made in good faith, was voluntary *314and was not too far removed in point of time or place. (5 Nichols on Eminent Domain, 3d Ed., § 21.2) Since this court’s opinion was handed down in City of Wichita v. Jennings, 199 Kan. 621, 433 P. 2d 351, I am confident the same rule would apply in Kansas. (See, also, Humphries v. State Highway Commission, 201 Kan. 544, 442 P. 2d 475.
It is conceded that to be admissible, the purchase price of the property taken must be relevant in point of time and distance, and that its admissibility on the ground of relevancy lies within the sound discretion of the trial court. Under ordinary conditions, I think it could scarcely be said that an abuse of discretion was shown here.
Under the peculiar circumstances of this case, however, where evidence of sales of comparable tracts was slight, and where the trial court permitted evidence to go to the jury of prior sales of lots in established subdivisions, I entertain the belief that the exclusion of the purchase price was most probably prejudicial. The sale of the subject property was not remote in time, the physical condition of the tracts remained unchanged, and while there may have been changes in economic conditions during the intervening two and one-half years, this could well have been shown on cross examination. As this court observed in City of Wichita v. Jennings, supra, “most of such factors go more to the weight to be given the testimony than its admissibility.” (p. 625.)
For the reasons given, I respectfully dissent.
Fatzer and Kaul, JJ., join in the foregoing dissent.