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In re Acquisition of Property by Eminent Domain

Supreme Court of Kansas

March 21, 2014

In the Matter of the Acquisition of Property by Eminent Domain, UNIFIED SCHOOL DISTRICT NO. 365, ANDERSON COUNTY, STATE OF KANSAS, Appellees,
v.
DONALD D. DIEBOLT and SUSAN H. DIEBOLT, Appellants

Page 956

[Copyrighted Material Omitted]

Page 957

Appeal from Anderson District Court; ERIC W. GODDERZ, judge.

SYLLABUS

BY THE COURT

1. In order to preserve an argument that a trial judge erroneously excluded evidence, K.S.A. 60-405 requires the proponent of the evidence to either make known the substance of the evidence in a form and by a method approved by the judge or indicate the substance of the expected evidence by questions indicating the desired answers. Compliance with K.S.A. 60-405 serves a two-fold purpose: It assures that (1) the trial judge is advised of the substance of the evidence and the nature of the parties' arguments and (2) an adequate record is made for appellate review.

2. K.S.A. 60-405 does not require a formal offer of proof in the form of questions and answers. Such things as answers to discovery, arguments on a motion in limine, or in-court dialogue can fully set out the expected evidence and satisfy the requirements of K.S.A. 60-405.

3. The sole issue in an eminent domain action is the fair market value of the taken property, and a property owner's opinion of his or her property's value is relevant.

4. A trial judge may limit the testimony of a property owner regarding those matters the owner believes justify his or her opinion as to a property's value if those reasons are not relevant to the jury's determination of fair market value or are beyond the owner's expertise.

5. A property owner who has not been qualified as an expert in property appraisal cannot assemble the components of and calculate value under the cost approach appraisal method.

Bret A. Heim, of Immel, Works & Heim, P.A., of Iola, argued the cause and was on the brief for appellants.

Lee H. Tetwiler, of Law Office of Lee H. Tetwiler, of Paola, argued the cause and was on the brief for appellees.

LUCKERT, J. MORITZ, J., not participating. DANIEL D. CREITZ, District Judge, assigned.[1]

OPINION

Page 958

[299 Kan. 38] Luckert, J.

In a proceeding under the Eminent Domain Procedure Act, K.S.A. 2013 Supp. 26-501 et seq. , it is well established that an owner of the subject property may testify as to his or her opinion regarding the property's fair market value. Nevertheless, in Manhattan Ice & Cold Storage v. City of Manhattan, 294 Kan. 60, 74-76, 274 P.3d 609 (2012), and Mooney v. City of Overland Park, 283 Kan. 617, 619-20, 153 P.3d 1252 (2007), among other cases, this court recognized limits to the scope of a property owner's opinion testimony. Specifically, a property owner must base his or her opinion on matters that are relevant to the jury's determination of fair market value. And if the property owner is basing his or her opinion on the cost appraisal method, a foundation must be laid establishing the owner has the requisite expertise to perform the appraisal. In this case, the trial judge allowed a property owner, who did not have appraisal expertise, to express a valuation opinion but appropriately applied our caselaw and excluded testimony that was not relevant to the jury's determination and was beyond the owner's expertise. Consequently, we affirm.

Page 959

Facts and Procedural Background

The property at issue in this eminent domain proceeding is a 36.2-acre, unimproved tract of land in Anderson County. Property owners Donald and Susan Diebolt purchased the property for $250,000 in 2006 for the purpose of adding a Garnett location to their lumberyard business, but no improvements had been made to the property before Unified School District No. 365 initiated the condemnation.

After the school district filed its petition, the trial judge appointed three appraisers pursuant to K.S.A. 2013 Supp. 26-504, who valued the property at $278,800. The Diebolts appealed the appraisers' award and requested a jury trial.

[299 Kan. 39] Pretrial

During pretrial discovery, the school district deposed Donald Diebolt. Susan Diebolt was not deposed, nor did she testify at trial. In Diebolt's deposition, he opined that the subject property had a value of " a little under 432 thousand." Diebolt explained that he believed the fair market value of a tract of land is " what you have got in the land," and consequently he calculated the fair market value by totaling " [t]he purchase price plus the costs in the property" minus farm income over the 4.58 years he had owned the property. Diebolt provided a written itemization of those costs, which was marked as Deposition Exhibit 1. These costs included the purchase price, closing costs, loan processing fees, appraisal fees, interest, property taxes, attorney fees, insurance, a topographical site plan and survey, a market site analysis, building plans, and environmental fees. To the sum of these expenses, Diebolt added a 5 percent return on his investment. This sum was offset by farm income of $4,500 that had been received over the period of ownership. Diebolt's total accounting and valuation was $431,501.59. Diebolt also testified he did not have any knowledge or background in valuing real estate or the Uniform Standards of Professional Appraisal Practice.

Following Diebolt's deposition, citing Manhattan Ice, the school district filed a motion in limine in which it sought exclusion of:

" (a) Any testimony by Donald Diebolt as an expert witness in any capacity as to the fair market value of the property that ...

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