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Miller v. Glacier Development Co.

July 13, 2007

DEBRA L. MILLER, IN HER CAPACITY AS THE SECRETARY OF TRANSPORTATION FOR THE STATE OF KANSAS, APPELLEE,
v.
GLACIER DEVELOPMENT CO., L.L.C., ET AL., APPELLANTS.



Appeal from Wyandotte district court; PHILIP L. SIEVE, judge.

SYLLABUS BY THE COURT

1. When an entire tract of land is taken in a condemnation action, the measure of compensation is the fair market value of the property at the time of the taking.

2. 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).

3. Any competent evidence bearing upon market value generally is admissible, including those factors that a hypothetical buyer and seller would consider in setting a purchase price for the property.

4. Considerable discretion is vested in the trial court in admitting or rejecting evidence of value, and the latitude accorded to the parties in bringing out collateral and cumulative facts to support value estimates is left largely to the discretion of the trial court.

5. All relevant evidence is admissible under K.S.A. 60-407(f), unless subject to a statutory or other rule of exclusion.

6. In an eminent domain proceeding to determine fair market value, the first issue to be resolved concerning the admissibility of a prior sale or purchase price of the subject property as evidence of its value is the date of the sale or purchase. In order to render such evidence admissible, one must show that the sale or purchase occurred recently and that values in the area have not changed since the sale or purchase.

7. In an eminent domain proceeding, evidence regarding the prior value of the subject property must be closely related in time and circumstance to the only question before the factfinder--the fair market value of the land at the time of the taking--to qualify as relevant and admissible.

8. The court at every stage of a civil proceeding must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties.

9. K.S.A. 60-240(b) gives a district court authority to continue an action at any stage of the proceedings upon such terms as may be just if it finds good cause for the motion.

10. The district court's determination that a motion for a continuance is not supported by good cause, pursuant to K.S.A. 60-240, is reviewed using an abuse of discretion standard.

11. Relevance is the first consideration when examining the district court's decision to exclude evidence.

12. K.S.A. 60-226(b)(1) allows parties to obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action. District courts are instructed to allow discovery unless the discovery sought is unreasonably cumulative or duplicative or is obtainable from a more convenient source; the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or the burden or expense outweighs its likely benefit. K.S.A. 60-226(b)(2).

13. An appeal in an eminent domain action shall be docketed as a new civil action and tried as any other civil action.

14. As a general principle regarding the application of the Code of Civil Procedure to eminent domain appeals, the appeal should be conducted as any other civil trial unless a provision of the Code of Civil Procedure counteracts or contravenes the nature of the Eminent Domain Procedure Act, K.S.A. 26-501 et seq. in which case the particular statute from the Code of Civil Procedure will not be applied.

15. There shall be but one form of action to be known as "civil action," in which the party complaining shall be designated "plaintiff" and the adverse party "defendant."

16. The party appealing the appraiser's award in an eminent domain action is the plaintiff and the other party is the defendant.

17. Neither party bears the burden of proof in an eminent domain appeal because each party has equal duty and responsibility to supply the evidence required by the statute.

18. Under Kansas custom, the plaintiff proceeds first in opening statements, the presentation of evidence, and closing argument. The plaintiff also has the privilege of making the final closing argument. This custom does not counteract or contravene the nature of the Eminent Domain Procedure Act and will be followed in eminent domain appeals.

The opinion of the court was delivered by: Rosen, J.

Affirmed.

In this appeal from an eminent domain proceeding, appellant Glacier Development Company, LLC (Glacier) challenges the jury's $800,000 award for the taking of its real property by the Kansas Department of Transportation (KDOT).

This appeal raises five questions: (1) Did the district court err in admitting evidence of the purchase prices of the subject parcels of land? (2) Did the district court err in rejecting Glacier's motion for continuance of the trial after ruling that evidence of the purchase prices would be admitted? (3) Did the district court err by excluding evidence of a value engineering study of alternative right-of-ways conducted on behalf of KDOT a year before the taking? (4) Did the district court err by refusing to quash the trial deposition of an opposing party in other litigation with Glacier? and (5) Did the district court err by allowing KDOT to (a) proceed first with its evidence and (b) make the last closing argument?

Factual and Procedural Background

Lester M. Dean, Jr., is the sole owner and manager of Glacier. In 1995 and 1996, Glacier purchased 32.6 acres of real property (Lot 3) along Southwest Boulevard in Kansas City, Kansas. In 1996, Glacier also purchased a 0.98-acre parcel (Lot 1) along Southwest Boulevard, upon which a brick office building is situated. Glacier purchased all of the property with the goal of developing the tracts into a business park.

Glacier invested considerable effort to validate its belief in the property's potential. In 1993, Glacier hired an engineering consulting firm to draft plans for buildings on the property. The property was zoned for heavy industrial use, and a final plat was approved. In addition, Glacier took steps to grade and level the property, which was visible from Interstate 35 (I-35), by moving earth and clearing vegetation.

Glacier also consulted engineers and architects on drainage and environmental impact, and obtained feasibility reports and surveys. In particular, Glacier hired Jerry Richardson, a professor of engineering at the University of Missouri-Kansas City, to develop a solution to intermittent flooding near the property. Richardson worked in conjunction with the U.S. Army Corps of Engineers to plan that solution.

During late July and early August 2001, KDOT engaged Ventry Engineering, LLC, (Ventry) to perform a value engineering study of the reconstruction of I-35 from Southwest Boulevard northeast to the Kansas-Missouri state line, which encompassed a large portion of Glacier's property. In September 2001, Ventry released its report, which contained estimates for right-of-way costs at or near Glacier's property. The report estimated the acquisition cost of a considerable portion of the property at $27 per square meter or approximately $2.51 per square foot. According to Glacier's calculations extrapolating from this number, the value of Glacier's land eventually taken by KDOT would be $3.5 million.

In April 2002, KDOT's counsel sent notice to Glacier that Lot 1 and Lot 3 would be taken for KDOT's I-35 reconstruction project. It later filed an eminent domain petition in Wyandotte County; the date of the taking was August 13, 2003. Court-appointed appraisers awarded Glacier $2.19 million for the fair market value of the property. KDOT appealed the appraisers' award to the district court.

In deposition testimony, Dean stated that he did not remember how much Glacier had paid for the subject property. He also testified at his deposition that he placed the value of the property at the time of the taking between $5.7 million and $6.5 million.

Trial Evidence on Fair Market Value

When, as here, an entire tract of land is taken in a condemnation action, the measure of compensation is the fair market value of the property at the time of the taking. K.S.A. 26-513(b); City of Wichita v. Meyer, 262 Kan. 534, 548, 939 P.2d 926 (1997); Urban Renewal Agency v. Tate, 196 Kan. 654, 657, 414 P.2d 28 (1966); The proper remedy for a taking in Kansas is controlled by statute. Butler County R.W.D. No. 8 v. Yates, 275 Kan. 291, 294, 64 P.3d 357 (2003). K.S.A. 26-513(e) defines "fair market value" 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." Whether a prior sale is too remote in time is a question to be determined by the district court in the exercise of judicial discretion. Mettee v. Kemp, 236 Kan. 781, 790, 696 P.2d 947 (1985); Willsey v. Kansas City Power & Light Co., 6 Kan. App. 2d 599, 615, 631 P.2d 268 rev. denied 230 Kan. 819 (1981).

There are three generally recognized approaches to valuation of real property: (1) the cost approach, i.e., the reproduction cost of the property at the time of the taking less depreciation; (2) the market data approach, i.e., the value of the property based upon recent sales of comparable properties; and (3) the income approach, i.e., the capitalization of net income from the property. City of Wichita v. Eisenring, 269 Kan. 767, 774, 7 P.3d 1248 (2000). K.S.A. 26-513(e) provides that fair market value is determined by using any one or more of these methods.

The jury trial in this case began on June 13, 2005. At the trial, Dean did not offer his opinion of the value of the property at the time of the taking. Glacier's expert witnesses' values for the property's fair market value were $4,518,602, $4,000,000, and $4,657,000.

KDOT's experts set the total fair market value of the subject property at $463,000 and $530,000.

One of KDOT's experts was Bernie Shaner, a real estate appraiser. Shaner had appraised Lot 3 in 1993 when Burlington Northern Railroad, the property's previous owner, was going to sell it. His more recent appraisal work on Glacier's property began in July 2002.

Shaner acknowledged that the economic conditions in 1993 were "[p]robably not" the same as they were in 2003, but he indicated that the plat, which was in effect when Shaner performed his 1993 appraisal, had not been modified. Shaner also believed it significant that the property remained subject to a restriction under which it could not be developed until access from a public street was created on the property. This restriction was still in effect as of the date of the taking.

In Shaner's opinion, the highest and best use of the property was industrial, as a storage yard with a small office. Under this scenario, a building of approximately 2,000 square feet could be built and could use a septic system rather than extended utilities. Shaner testified that another alternative would develop 24.45 acres in the floodplain by using dirt fill and by extending the utilities to the property; however, Shaner expected the $3 million process necessary to prepare the property to outstrip its ultimate value. Another alternative, Shaner said, was to improve a smaller 4.5-acre site outside the floodplain. The estimated $312,000 cost associated with extending utilities and building road improvements would reflect the "worth" of the 4.5 acre building site.

The district court permitted KDOT to introduce, over objection, exhibits showing the prices Glacier paid in 1995 and 1996 for the two parcels of land. These prices were recorded in real estate sales validation questionnaires, or certificates of value (COVs), which are required to accompany a "deed or instrument providing for the transfer of title to real estate or affidavit of equitable interest in real estate" that is recorded in the office of the register of deeds. K.S.A. 79-1437c. Such questionnaires are to be retained for 5 years and then destroyed. The COVs showed the total paid for the subject property was $200,527--plaintiff's Exhibit 11 showed Lot 3 sold for $155,527, and plaintiff's Exhibit 12 showed Lot 1 sold for $45,000.

Shaner testified about the COVs, equating them to affidavits. Because of the passage of time between the purchases and the taking, Shaner said that the purchase prices "offer[ed] just a little indication as to what the market said that property was worth at that point in time." He admitted that he did not identify the information in the COVs as comparable sales in his valuation calculations for KDOT.

In conducting his appraisal on Lot 1, Shaner considered the market data approach and testified that the building on the property was of the lowest quality, despite improvements made by Dean. As part of this approach, Shaner examined four comparable sales and made adjustments for passage of time, market conditions, location, access, quality, design, age, condition, and flood zone location. Calculating the comparable sales to be between $14.20 and $20.04 per square foot, Shaner estimated the building on Lot 1 to have a value of $18 per square foot, or approximately $150,000.

Shaner also valued Lot 1 by using the income approach and examined rental comparables. After figuring the net operating income of the building on Lot 1 and calculating the capitalization rate, Shaner arrived at a value of $160,000.

Shaner used the market data approach to value Lot 3. He testified that, although Lot 3 consisted of more than 32 acres, approximately 8 acres lay in the channel of Turkey Creek. He therefore considered the usable area to be 24.45 acres. Shaner also testified about conditions of the property that would present challenges to development, such as limited road access and routing to the property. Moreover, Shaner said, a majority of the tract was in a 100-year floodplain. In addition, the sewer lines and public water lines did not lie within the property, and Shaner estimated it would cost about $40,000 to extend those lines under railroad tracks to the property line. Shaner examined five comparables and made adjustments for size, zoning, density, access to utilities, location, and access to each piece of property. These calculations led him to estimate Lot 3's value at $210,000.

In addition to Lots 1 and 3, Shaner valued Glacier's reversionary interest in two billboards on the property. Using comparable rentals, Shaner estimated the rent on each to be $18,000 per year. At the time of the taking, Glacier would have gotten one of the billboard sites back in 16 years and 9 months; the second billboard site would have reverted to Glacier in 15 years and 11 months. Shaner concluded that the first billboard site's reversionary value was $44,881, and the second billboard site's reversionary value was $48,366, for a total of approximately $93,000.

All of the above led Shaner to a total estimated fair market value for the subject property of $463,000.

KDOT's second expert, Robert Marx, a real estate appraiser, also began his work in connection with the case in July 2002. He found it significant that trains surged by the subject property every 15 to 20 minutes during the day. He also found it significant that there was essentially no public access. As a result of Marx's investigation and analysis, he opined that access was highly restrictive, that any use would be subject to what the City determined was reasonable, and that the property had "flood issues," including the presence of the creek on a substantial part of the property. With regard to the COVs, Marx testified that the documents provided additional support for what his company had ...


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