Court Opinion

ID: 9569387
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:13:22.945148+00
Date Added: 2024-06-11T11:55:30.308016
License: Public Domain

ON REHEARING
*422Richard A. Franzke, Portland, argued the cause for respondent Fisch-Or, Inc., on rehearing. With him on the brief were Manley B. Strayer and Cleveland C. Cory, Portland.
Before Perry, Presiding Justice, and Sloan, * O’Connell, Goodwin, Denecke, Holman and Lusk, Justices.
HOLMAN, J.
The only question considered by the court on rehearing is whether hearsay evidence of the sale price of comparable property, given in testimony by an expert, is admissible in a condemnation proceeding as independent substantive evidence of the value of the property being condemned. The jury was instructed that they could so consider it. The trial judge came to the conclusion that the instruction was erroneous and prejudicial and therefore granted a new trial. This is a matter of first impression in this state.
For many years there has been a split of authority in the United States on the question whether evidence of the sale of comparable property is admissible even when proved by primary evidence. See 5 Nichols, Eminent Domain, §21.3 (Rev 3d ed 1962). Those courts following what is known as the Pennsylvania rule hold that it is not. Those following the Massachusetts rule hold that it is. While the authorities at one time may have been fairly evenly divided, this is not so today. The Massachusetts rule is now followed by most jurisdictions. Needless to say, those courts which still follow the Pennsylvania rule (they *423are, according to Nichols, Arizona, Idaho, Kansas, Michigan, Minnesota, Oklahoma, and Pennsylvania; 5 Nichols, Eminent Domain, §21.3[1], at 427-428, n. 2 [Rev 3d ed 1962]) would not accept hearsay evidence of comparable sales if they will not accept primary evidence of them. Oregon follows the Massachusetts rule. State Highway Commission v. Parker, 225 Or 143, 159, 357 P2d 548, 555 (1960), states as follows:
“The general rule for the determination of the market value of property admits in evidence the price paid for similar property recently sold. Sutherland on Damages (4th ed) § 447 states:
“ ‘Evidence of the price for which the property in question or other like property sold at a sale made under normal conditions is usually competent to show its value * * *.’
“We have accepted that rule. * *
Of those courts believing the sale price of comparable property is relevant, some admit hearsay evidence by an expert of such prices for the purpose of showing the basis of, and to explain, the expert’s opinion of the value of the property in question. Oregon also falls into this group. In State Highway Commission v. Arnold, 218 Or 43, 69, 341 P2d 1089, 1101, 343 P2d 1113 (1959), the court stated:
“We think that an expert witness’ opinion as to value should be received even though it is based in part upon statements or reports of others, as it was in the present case, if the jury is informed of the source and character of the information upon which the witness draws his inferences.”
Of those jurisdictions accepting hearsay evidence of comparable sales to explain an expert’s opinion some allow such testimony only if elicited on cross-*424examination and some allow its nse on either direct or cross-examination. Oregon falls within the group allowing its introduction by either method. In State Highway Commission v. Parker, supra, at page 160, Justice Rossman, referring to three Oregon cases, stated as follows:
“* * * Three of them (La Grande v. Rumelhart [118 Or 166, 246 P 707 (1926)], Portland v. Investment Co. [64 Or 410, 129 P 756 (1913)], and Dallas v. Boise [44 Or 302, 75 P 208 (1904)]) constitute clear holdings that the price recently paid by a willing buyer to a willing seller for a similar property is admissible upon direct examination in cases of this kind. Oregon R & N Co. v. Eastlack [54 Or 196, 102 P 1011, 20 Ann Cas 692 (1909)] is a holding that such evidence is also admissible upon cross examination. We have no doubt as to the admissibility of such evidence.”
Only one jurisdiction, the State of Montana, has allowed the use of hearsay evidence of comparable sale prices, when testified to by an expert, as substantive evidence of the value of the property being condemned. State Highway Commission v. Greenfield, — Mont —, 399 P2d 989, 991-992 (1964). The court stated its reasons for so ruling, at page 992, as follows:
“All expert opinion is based on ‘hearsay’ to a great extent and much of what is presented by such witnesses is ‘secondary’ evidence. We feel we can achieve speedy litigation and still preserve the truth by the rule adopted here. It must be shown that the witness is expert and that the sales are comparable and recent. With these safeguards plus the fact that the witness has his professional reputation riding on his testimony we feel that the repugnancy of this line of testimony is reduced, if not eliminated altogether. The development of a value pattern by one experienced in the business ■and knowledgable as to the area involved will best *425bring uniformity to the market value determination in the most efficient manner. * '* *”
The case is weakened because it relies upon cases cited to substantiate part of an annotation in 95 ALR2d 1217 (1964). The annotation states, at page 1224:
“The group of cases discussed in this section of the annotation support the rule that evidence of other comparable sales, even though founded on hearsay information, is admissible, both as independent substantive evidence of the market value of the real property in dispute, and as an explanation of the basis upon which the expert value witness arrived at his opinion of value. # * *”
Surprisingly, none of the cases cited justify that statement or are authority therefor. Some of them specifically refuse to pass upon the question posed by the annotation. For example, State Highway Commission v. Parker, supra, at page 165, states as follows:
“This opinion does not hold that the expert’s testimony is admissible as substantive evidence. It goes no further than to hold that the testimony which he gave as to other sales is admissible merely as a foundation of his opinion.”
The Supreme Court of Iowa has accepted another sort of hearsay — revenue stamps on deeds to comparable properties — as substantive evidence of value of the property being condemned. Redfield v. Iowa State Highway Commission, 251 Iowa 332, 99 NW2d 413 (1959). The court, at page 343, stated as follows:
“* * * The revenue stamps are as reliably indicative of the consideration as a recited amount would be. The stamps were attached to the deed pursuant to federal statute, the violation of which is a crime. With this reason for affixing the stamps we think the revenue stamps attached to the deed *426may be said to indicate with reasonable certainty the consideration paid. * * *”
Some cases can be found where it appears that admitted evidence of the prices of comparable sales may have been hearsay, but the only question discussed was whether -the sale price of comparable property was relevant and therefore admissible. There is no way to tell whether there was in fact primary evidence of the comparable sales, whether one or both parties were willing to admit the hearsay statement was accurate, or whether the hearsay objection was ever made. In any event, the hearsay aspect is not discussed in the appellate opinions.
Several courts have stated that hearsay testimony is not admissible as substantive evidence of value. Examples are as follows:
In People v. Nahabedian, 171 Cal App2d 302, 310, 340 P2d 1053, 1058 (1959), the court said:
“It must be remembered that the facts stated as reasons for the opinion of the witness do not become evidence in the sense that they have independent probative value upon the issue as to market value. On the contrary, they serve only to reinforce the judgment of the witness, that is, they go to the weight to be accorded his opinion * *
In Stewart v. Commonwealth, 337 SW2d 880 (Ky 1960), the court used the following language, at pages 884-885:
“* * * He proposed to support his opinion by discussing, inter alia, the prices paid for the Second Street properties just mentioned, but was not permitted to do so because his information was founded on hearsay. The question thus raised is of first impression in this jurisdiction.
“It was correctly pointed out in Commonwealth v. Begley, 1938, 272 Ky 289, 114 SW2d 127, that *427evidence of comparable sales is admissible on tivo theories, (1) as independent substantive evidence of the value of the property to which the comparison relates, and (2) as foundation evidence supporting the opinion of the expert witness. If it were admissible only on the first of these theories there would certainly be no reason why the hearsay rule should not apply. * * *”
In United States v. 5139.5 Acres of Land, 200 F2d 659 (4th Cir 1952), the court held, at page 662, as follows:
“* * * And, although there is some conflict in the decisions, we think the better rule is that where the opinion of an expert witness is based in part on such sales, he should be permitted to give the details of the sales upon which he bases the opinion, although the facts so stated do not become independent evidence. * * *”
In United States v. Katz, 213 F2d 799 (1st Cir), cert. denied 348 US 857, 75 S Ct 82, 99 L Ed 675 (1954), the court considered the admissibility of hearsay evidence both to explain the expert’s opinion and as substantive evidence of the value of the property in question. The court rejected the argument that, as a rule of law, such testimony was admissible under either theory. The court said, at page 800, as follows:
“* * * in the absence of recent voluntary sales of the condemned land itself, the best evidence of value available is the prices at which comparable lands in the vicinity of the land condemned change hands in voluntary transactions at about the time of the taking. This does not in any way imply that hearsay evidence is admissible to show the prices paid in voluntary transactions involving reasonably similar lands having the requisite propinquity in time and distance. And we are not aware of any persuasive reason of necessity, *428or even of convenience, calling for a departure from the hearsay rule to admit such evidence. * * * most transactions are likely to be influenced by the motives of the parties thereto, such as the special needs or the strong desires of the buyer, the financial or other exigencies of the seller, and the whims, follies, fancies or ignorance of local values on the part of one or both of them. Since these are all matters of which persons with only hearsay knowledge of a sale can be expected to know little or nothing, whereas those with firsthand knowledge, such as a party to the sale itself or the broker or agent who affected it, can be expected to know at least something, we think the hearsay rule should be adhered to in the interest of justice to both parties. Nor does information as to prices gleaned from the recitations of consideration in deeds in the Registry, or revenue stamps affixed thereto, give any real help in arriving at value. More often than not the true consideration paid is not stated in a deed, there appearing only a formal statement of consideration. And the value of the revenue stamps affixed to a deed is determined by the consideration paid exclusive of the value of liens or encumbrances at the time of the sale, I.R.C. $ 3482, 26 U.S.C.A. § 3482, so that accurate knowledge of the price paid cannot be calculated from revenue stamps without accurate knowledge of the value of liens and encumbrances on the land at the time of the sale which might or might not appear in the records of the Registry.”
The court held that hearsay evidence might be admitted, at the discretion of the trial judge, only in the limited situation where such testimony is introduced to show the basis for an expert’s opinion. See Bailey v. U. S., 325 F2d 571 (1st Cir 1963), which explains the holding in the Kata case.
The only text that can be found that discusses the *429specific point in issue is 5 Nichols, Eminent Domain, § 21.3 [1], 431-432 (Rev 3d ed 1962):
“The price paid for similar land, when admitted as independent evidence of value, must be proved with as much formality as any other material fact, and witnesses are not permitted to testify in regard to sales unless they were parties thereto, or were the brokers who effected the sale, or in some other manner knew the price paid of their own knowledge, and not as a matter of common rumor, or from hearsay only.”
1 Orgel, Valuation Under Eminent Domain § 133, 575-576 (2d ed 1953), touches on the problem indirectly when discussing whether an expert may take into consideration hearsay while forming his opinion. He states as follows:
“* * * There is some doubt whether a witness may consider sales data as to which he has no personal knowledge and which would, if offered as independent evidence, be rejected as hearsay.” (Emphasis ours)
All evidence is admissible unless there is a reason for excluding it. This is limited by the general rule that hearsay testimony is not admissible. The reason for the rule against hearsay, though variously expressed, is the belief that such testimony is not of sufficient veracity to be reliable because the speaker of the reproduced statement is not present in court and thus not under oath and subject to cross-examination.
There are many exceptions to the hearsay rule. While the exceptions cannot all be explained by rational analysis, most of them involve a feeling by the courts that there is something about the particular type of testimony which guarantees veracity to a *430greater extent than that of ordinary hearsay. Wig-more’s analysis has been criticized by other legal writers; however, he probably defines the reasons for most of the exceptions as well as any when he contends that to qualify as an exception to the hearsay rule the testimony in question (1) should be necessary, and (2) should have added or special guarantees of trustworthiness. 5 Wigmore, Evidence § 1420 (3d ed 1940).
The more modern tendency has been to define necessity as meaning convenience rather than absolute necessity. Morgan, Some Problems of Proof Under the Anglo-American System of Litigation 168 (1956). As an illustration, there is a necessity for making a dying declaration an exception to the hearsay rule because otherwise the testimony would be lost. This cannot be said of office records kept in the usual course of business because it is possible to have those who made the records testify, even though it might be highly inconvenient and time consuming. If the rule of necessity is applied to the present situation, it must be concluded that there was in fact no absolute necessity for admitting hearsay testimony of the sale price of comparable property. A buyer, seller, or broker could have been summoned into court for the purpose of giving first-hand information relative to the sale price. Such a practice may be inconvenient and time consuming to a degree. Whether it would be sufficiently inconvenient and time consuming to say that hearsay testimony was necessary is questionable.
What are the special guarantees of trustworthiness surrounding hearsay testimony of sales prices in condemnation eases? The reasons for added trustworthiness of this particular type of evidence have been advanced as follows: (1) if one who has personal knowl*431edge of the sale price should lie to the expert, the expert’s skill and general knowledge of value allow him to detect and distrust such misrepresentation which appears to him to be at variance with the property’s true value; (2) the expert’s professional reputation rests upon the reliability of his opinion and this will cause him to inquire further if the reported sale price does not appear to be proper; (3) the price of land sold is relatively easy to document.
In addition to those reasons for bringing into court and subjecting to cross-examination a participant in the comparable sale enumerated in United States v. Katz, supra, we would like to suggest another. The situation is fraught with danger of actual misrepresentation when not guarded by cross-examination. The parties to the collateral transaction about which inquiry is made have no particular interest in the condemnation proceeding in question and therefore may resent inquiry by strangers about their personal and private transactions. This leads to misrepresentation. Also, there is a natural human tendency to want to appear to have made a “good deal” in the eyes of others; thus, a seller would be inclined to magnify the price at which he sold and the purchaser to minimize that at which he bought. Capital gains and losses arising out of sales of property as reflected in income tax liabilities and credits can also be a powerful factor leading to misrepresentation. Another factor inducing misrepresentation is that it may be advantageous to appear to have purchased cheaply because the amount of the property’s assessment for ad valorem taxes is related to its market value. Reasons for misrepresentation of sales prices are inherent in many real property transactions.
*432Whether or not hearsay evidence should be admitted is perhaps partially dependent upon how stringently the qualifications of an expert appraiser may be defined by the court. It is customary in this jurisdiction to allow the trial judge a wide latitude of discretion in determining who is qualified as an expert. In most instances the standards required are not too high, and anyone is usually permitted to qualify who has any experience as a salesman of real property. The less stringent the qualifications of an expert, the less assurance that hearsay admitted through him would not suffer from lack of trustworthiness.
It is the opinion of the court that while there may be persuasive reasons why hearsay testimony of comparable sales should be admitted as independent substantive evidence, there are more persuasive ones why it should not. The strong possibilities that (1) reasons may exist for the participating parties to misrepresent and (2) the transaction may not be a free and open sale by a willing seller and purchaser with full knowledge lead us to refuse to give up the guarantee of trustworthiness afforded by cross-examination.
The dictum in State Highway Commission v. Parker, supra, at page 160, is an expression of the law with which we agree:
“* * * However, if an expert states the ground upon which his opinion is based, his explanation is not proof of the facts which he says he took into consideration: Wigmore on Evidence, 3rd ed., § 655. His explanation merely discloses the basis of his opinion in substantially the same manner as if he had answered a hypothetical question. It is an illustration of the kind of evidence which can serve multiple purposes and is admitted for a single, limited purpose only.”
*433That portion of the original opinion of this court holding that hearsay evidence of the sale price of comparable property, testified to by an expert, may be considered as independent substantive evidence of the value of the property being condemned is hereby withdrawn. The judgment of the trial court granting a new trial to defendant is affirmed.