IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 97,151
THE CITY OF MISSION HILLS, KANSAS,
Appellee,
v.
RONALD E. SEXTON and FELICIA SEXTON,
Appellants.
SYLLABUS BY THE COURT
1. Granting a motion for a new trial filed pursuant to K.S.A. 60-259(a) is within the trial court's discretion and will not be disturbed on appeal unless there is a showing of abuse of that discretion.
2. A verdict will be set aside as contrary to law where, under the evidence, the verdict is contrary to the instructions given by the trial court. A new trial will not be granted on mere allegations. There must be evidence that the jury consciously conspired to undermine the jury process by ignoring the instructions.
3. When a party challenges a jury verdict as contrary to the evidence, the appellate court does not reweigh the evidence or pass on the credibility of the witnesses. If the evidence, when considered in the light most favorable to the party who prevailed in the court below, supports the verdict, the appellate court should not intervene.
4. Under K.S.A. 26-513(a), private property shall not be taken or damaged for public use without just compensation. In cases of a partial taking where only a part of a tract of land or interest is taken, K.S.A. 26-513(c) provides that the compensation and measure of damages is the difference between the fair market value of the entire property or interest immediately before the taking and the value of that portion of the tract or interest remaining immediately after the taking.
5. Fair market value is defined by K.S.A. 26-513(e) under the commonly understood definition: 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. Under the statute, the fair market value shall be determined by use of the comparable sales, cost, or capitalization of income appraisal methods or any combination of such methods.
6. K.S.A. 26-513(d) provides a nonexclusive list of factors that shall be considered to determine the amount of compensation and damage where it is shown that the factors apply. The factors are not to be considered as separate items of damages, but are to be considered only as they affect the total compensation and damage. Because the list is nonexclusive, 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.
7. When an expert testifies regarding the damages caused when a governmental entity takes a temporary easement and opines that the difference in the fair market value of the condemned property before the taking and the fair market value after the taking is best measured by the rental value during the use of the easement and further opines that such a method takes into account the statutory factors of K.S.A. 26-513(d), the expert utilizes a methodology recognized by statute, and the expert's testimony complies with the Kansas definition of fair market value.
8. Where an expert utilizes a legally accepted methodology to value damages from the taking of a temporary easement, the question as to whether the legally acceptable methodology most appropriately measures fair market value under the facts of the case and any deficiencies in the expert's analysis can be explored through cross-examination. Ultimately, the weight to be given an expert's opinion is left in the hands of the jury. Without question, a factfinder can find one expert opinion more credible than another. It is not this court's duty to pass on the credibility of witnesses, including expert witnesses.
9. Relevance is the first consideration when the trial court decides whether to admit evidence and when the appellate court reviews the trial court's decision. Unless prohibited by statute, constitutional provision, or court decision, all relevant evidence is admissible. Evidence is relevant if it has any tendency in reason to prove any material fact. To establish relevance, there must be some material or logical connection between the asserted facts and the inference or result they are intended to establish. An appellate court reviews the determination of relevancy under an abuse of discretion standard. The party challenging the ruling bears the burden of showing an abuse of discretion.
10. Once relevance is established, evidentiary rules governing admission and exclusion may be applied either as a matter of law or in the exercise of the trial judge's discretion, depending on the contours of the rule in question. When the adequacy of the legal basis of a trial judge's decision on admission or exclusion of evidence is questioned, an appellate court reviews the decision de novo.
11. Landowners are entitled to full compensation for the actual rights acquired by the condemnor, not the rights actually used.
12. The condemnor is required in the verified petition to describe the nature of the interest to be taken, and the appraisers, after receiving written instructions from the court, are required to view and value the land taken, assess damages resulting from the taking, and file a report in the district court clerk's office in which the appraisers identify the interest taken and the damages resulting from the taking. It is from this report that an appeal is taken by a dissatisfied party.
13. The property rights taken by a condemnor are to be determined by the language in the petition for eminent domain and the appraisers' report. A condemnor bears the burden of drafting its petition to show the limitations in its taking.
14. Once the nature of the interest to be taken is identified in the petition and the appraisers' report, parol evidence will not be admitted for the purpose of establishing a lesser interest based on the condemnor's intended use. The rights acquired, not the intended use of those rights, are the basis for assessing landowners' damages.
15. Under K.S.A. 60-261, a new trial cannot be granted based upon an error in either the admission or the exclusion of evidence unless refusal to grant the new trial is inconsistent with substantial justice. If the error does not prejudice the substantial rights of a party, the error is harmless, must be disregarded, and does not afford a basis for reversal of a judgment.
16. An appellant has the burden to designate a record sufficient to establish the claimed error; without such a record, the claim of error fails.
17. An appellate brief may include an appendix, but that appendix is to consist of extracts from the record on appeal; an appendix cannot be used as a substitute for the record on appeal.
18. K.S.A. 26-513(d), which lists nonexclusive factors to consider in ascertaining the amount of compensation and damages, names convenience as a factor. The landowners' opportunity to use or access the property subject to temporary easements can be considered a convenience.
19. Courts employ a two-part test to evaluate alleged violations of a motion in limine: (1) Was there a violation of the order in limine, and (2) if the order in limine was violated, did the testimony substantially prejudice the defendant? The burden is on the party alleging a violation of the order in limine to show substantial prejudice.
20. Courts presume that a jury follows the trial court's jury instructions.
Appeal from Johnson district court; JAMES F. VANO, judge. Opinion filed June 22, 2007. Affirmed.
Frederick K. Starrett, of Lathrop & Gage L.C., of Overland Park, argued the cause and was on the briefs for appellants.
Neil R. Shortlidge, of Stinson Morrison Hecker LLP, of Overland Park, argued the cause and was on the brief for appellee.
The opinion of the court was delivered by
LUCKERT, J.: In this condemnation proceeding, the jury awarded landowners Ronald and Felicia Sexton $10,900 for the temporary partial taking of their property, via two easements, by the City of Mission Hills (City) for a sewer rehabilitation project. The Sextons contend that the trial court abused its discretion by denying their motion for a new trial. In raising this contention, they specifically argue that, in calculating the amount of compensation, the jury's verdict was contrary to the evidence presented at trial and contrary to Kansas condemnation law because it was based upon an expert opinion that used a flawed methodology not supported by Kansas law. The Sextons further assert that the trial court improperly admitted evidence regarding the City's actual use of the property easements and the limited scope of the taking. Finally, the Sextons contend they failed to receive a fair trial because the court erroneously admitted evidence and permitted arguments previously ruled inadmissible by the court in orders in limine.
We reject these contentions and affirm the jury verdict.
Facts
The City began the rehabilitation of Mission Hills Sanitary Sewer District No. 1 to meet various state and Johnson County, Kansas, standards so that the system could ultimately be transferred to the Johnson County wastewater system. The project encompassed the rehabilitation of 11,558 feet of sewer pipe and the repair or replacement of 136 manholes. Six hundred platted lots and 548 residences were within the sewer district being rehabilitated.
As part of the sewer project, the City condemned two temporary easements on the Sextons' property, an estate lot covering approximately 2.29 acres in Mission Hills, Kansas, so that the existing pipe and an existing manhole could be replaced. One easement was an access easement, consisting of a temporary road that enabled the City to move its equipment to the construction area. The second easement was a construction easement utilized to put in a new manhole and to rehabilitate the sewer line itself. The two easements covered approximately 5,242 square feet of the Sextons' property, and the duration of both easements was 1 year, running from August 4, 2005, until August 4, 2006.
The City placed mulch over the access easement and installed, per the Sextons' request, construction fencing around both easements. The amended condemnation petition required the City to replace any landscaping within the easements. The City was also required to repair or replace any "hardscape" or improvements such as sidewalks, walls, fences, lighting systems, and sprinkler systems.
George Eib, a consulting arborist and consulting landscape architect for the City, was called by the Sextons to testify. Eib recommended that the City require the contractor to lay 6 inches of mulch over the access easement area to prevent the compacting of tree roots. He testified that, because of the construction, a 7-inch diameter linden tree would be lost, as would five honeysuckle bushes measuring about 8-feet tall. Eib indicated that all landscaping features within the easements were being replaced.
Expert Valuations
Two experts testified regarding the valuation of the Sextons' property.
Ken Wooten, a certified Kansas appraiser and president and owner of a real estate appraisal company in Prairie Village, Kansas, testified on behalf of the Sextons. Wooten did not perform an actual appraisal of the property, but he testified that the fair market value of the Sextons' property before the temporary takings was $3,954,900, and the estimated total damages after the taking were $480,000.
Wooten evaluated the effect of the City's easements on the remainder of the Sextons' property and opined that heavy construction equipment would cause damage to trees outside of the easement areas. He also testified that the property's view was diminished by the construction equipment, workmen, orange fencing, and mulch. According to Wooten, the City's project negatively affected access to the property outside the easements for lawn maintenance. On another note, Wooten observed that the City's construction easement was located only 30 yards from the Sextons' master bedroom. This led him to conclude that the Sextons would have to invest in additional security measures, such as increased outside lighting, digital cameras, protective fences, and 24-hour security personnel during the active construction periods. Wooten also considered noise and pollution factors in his estimation of damages.
As for loss in marketability, Wooten estimated that it was reasonable to expect a 10, 12, or 15 percent adjustment in the sales price of the Sextons' property for a willing buyer in the marketplace on August 5, 2005.
Bernie Shaner, a professional appraiser in Overland Park, Kansas, testified on behalf of the City. He testified that he performed a "limited scope" appraisal on the land because, in his opinion, the house and the Sextons' property outside of the easement area were not impacted by the taking. Also, the parties agreed that Shaner would not appraise the Sextons' home and, instead, would use the value from certain county tax records.
To calculate the value of the Sextons' property immediately before the taking, Shaner first estimated the value of the land separate from the improvements. To do so, he used a comparable sales approach and performed a "bare ground" appraisal of vacant lots in Mission Hills, using six properties that had been purchased for the purpose of tearing down existing improvements and constructing new improvements. Shaner explained that he selected six properties that were among the most comparable to the Sextons' property and were recent in time and fairly similar in location and size. Because the properties were not identical to the Sextons' property, he made adjustments to the sales prices for differences in location and size. With these adjusted sales, Shaner estimated that the land value of the Sextons' property as of the date of the taking was $22 per square foot or $2,195,500 for the lot. He then used the value of the Sextons' home from the county tax records, $1,759,430, and added that amount to his estimated land value. Shaner concluded that the total value of the Sextons' property immediately before the taking was rounded to $3,954,900.
On the question of the value of the property immediately after the taking, Shaner first assigned a fair rental value to the easements taken by the City. He estimated that each temporary easement was rented at a 10 percent annual rate of return, so $2.20 per foot was the fair rental value of the easements for 1 year. Then, Shaner multiplied the area of each temporary easement by $22 per square foot times an annual rate of return of 9.48 percent. (Shaner explained that 9.48 percent was the 10 percent rate based on one lump sum rental payment paid in advance.) Under this formula, the rental value of the access easement was $8,306, and the construction easement rental value was $2,625, with a rounded-down total equaling $10,900.
Shaner calculated the value of the Sextons' property immediately after the taking by subtracting the value of the land ($2,195,500) from the rental value of the temporary easements ($8,306 and $2,625) and then adding to that figure the value of the improvements ($1,759,430). This totaled $3,943,999, which Shaner rounded up to $3,944,000. In Shaner's opinion, the amount of just compensation for the takings was $10,900, which was the difference between his calculated value of the Sextons' property before and after the taking.
The jury ultimately returned a verdict of $10,900 as just compensation to the Sextons for the City's taking of the two easements on their property. The Sextons filed a motion for a new trial which was denied by the trial court.
Analysis
The Sextons now make a timely appeal from the trial court's denial of their motion for a new trial. Specifically, they argue that their right to a fair trial was substantially affected because: (1) the jury's verdict was contrary to Kansas law and the evidence presented at trial; (2) the trial court admitted evidence showing that the two condemned easements were not used by the City for the entire 1-year term of the taking; and (3) the trial court admitted evidence and permitted arguments that violated the court's prior orders in limine and pretrial instructions to counsel. The Sextons raise several arguments relating to each issue.
Issue 1: Was the verdict contrary to Kansas law and the evidence?
The Sextons first contend that they are entitled to a new trial because the jury's verdict awarding them $10,900 as compensation for the City's taking of two temporary easements on their property was contrary to Kansas condemnation law and the evidence presented at trial. In presenting this argument they contend Shaner's opinion and, therefore, the jury verdict which relied upon the opinion were contrary to Kansas law because the opinion: (a) was based upon rental value methodology and failed to account for the factors included in K.S.A. 26-513(d); and (b) used comparable sales rather than comparable rentals as a basis for valuing the land even though the opinion was based upon rental value methodology.
Standard of Review
Granting a motion for a new trial filed pursuant to K.S.A. 60-259(a) is within the trial court's discretion and will not be disturbed on appeal unless there is a showing of abuse of that discretion. Dougan v. Rossville Drainage Dist., 270 Kan. 468, 485, 15 P.3d 338 (2000); Hurlbut v. Conoco, Inc., 253 Kan. 515, 527, 856 P.2d 1313 (1993).
As a general rule, a verdict will be set aside as contrary to law where, under the evidence, the verdict is contrary to the instructions given by the trial court. City of Ottawa v. Heathman, 236 Kan. 417, 421, 690 P.2d 1375 (1984) (citing 58 Am. Jur. 2d, New Trial § 134); see also Timmerman v. Schroeder, 203 Kan. 397, 400, 454 P.2d 522 (1969) (where jury verdict manifests disregard for court instructions on issue of damages, arbitrarily ignores proven elements of damages and indicates passion, prejudice, or compromise on issues of liability and damages, that verdict should be set aside on motion for new trial). A new trial will not be granted, however, on mere allegations. There must be evidence that "the jury consciously conspired to undermine the jury process by ignoring the instructions. Otherwise, it must be presumed that the jury has properly determined the before and after values before arriving at damages." City of Ottawa, 236 Kan. at 426.
Further, when a party challenges a jury verdict as contrary to the evidence, the appellate court does not reweigh the evidence or pass on the credibility of the witnesses. If the evidence, when considered in the light most favorable to the party who prevailed in the court below, supports the verdict, the appellate court should not intervene. Wahwasuck v. Kansas Power & Light Co., 250 Kan. 606, 617, 828 P.2d 923 (1992).
Kansas Law on Compensation for Partial Takings
Under K.S.A. 26-513(a), "[p]rivate property shall not be taken or damaged for public use without just compensation." In cases of a partial taking where "only a part of a tract of land or interest is taken," such as the City's taking of two temporary easements in this case, the statute provides that "the compensation and measure of damages is the difference between the fair market value of the entire property or interest immediately before the taking, and the value of that portion of the tract or interest remaining immediately after the taking." K.S.A. 26-513(c).
The major issue in a condemnation action is the condemned property's fair market value. Board of Johnson County Comm'rs v. Smith, 280 Kan. 588, 596, 123 P.3d 1271 (2005); City of Wichita v. Eisenring, 269 Kan. 767, 773, 7 P.3d 1248 (2000) (citing 5 Nichols on Eminent Domain § 18.05[1] [3d ed. 1997]). "Fair market value" is defined by statute under the commonly understood definition: "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). The next sentence of the statute states: "The fair market value shall 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).
K.S.A. 26-513(d) provides a "nonexclusive list" of factors that "shall be considered" to determine the amount of compensation and damage where it is shown the factors apply. Some of the factors listed in the statute are: access, appearance, productivity and convenience, severance or division of the property, loss of trees or shrubs, cost of fencing, and proximity to improvements on land. The "factors are not to be considered as separate items of damages, but are to be considered only as they affect the total compensation and damage." K.S.A. 26-513(d). Because the list is nonexclusive, "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." Eisenring, 269 Kan. at 773 (citing 5 Nichols on Eminent Domain § 18.05[1]).
a. Rental Value Methodology and K.S.A. 26-513(d)
First, the Sextons contend that the jury's verdict was contrary to both the evidence and Kansas condemnation law because the jury, in awarding $10,900, obviously relied upon the opinion of Shaner, the City's expert. His opinion, according to the Sextons' argument, is contrary to Kansas law because it "does not include the appropriate factors to be considered under Kansas law in arriving at the fair market value" of the property immediately after the taking. More specifically, the Sextons claim that use of fair rental value fails to take into consideration the K.S.A. 26-513(d) statutory factors. Because Shaner's opinion is contrary to law, the Sextons further argue, the verdict which was based on that opinion is also contrary to the law.
The City responds that the Sextons' argument is a disguised objection to the admissibility of the evidence, an objection which the Sextons waived by not making it contemporaneously. Acknowledging that the issue formulated by the Sextons focuses upon the denial of the motion for a new trial, the City makes an additional argument, citing support for the conclusion that Shaner's methodology comports with standard appraisal practice.
While Kansas eminent domain statutes do not specifically mention the fair rental value methodology as an appropriate means of calculating the value of temporary takings or, for that matter, any taking, income capitalization is specified as one of the methods for calculating fair market value. K.S.A. 26-513(e) (fair market value is to be determined by the "use of the comparable sales, cost or capitalization of income appraisal methods or any combination of such methods"). The capitalization of income method "utilizes a formula to capitalize the fair rental value of the property being appraised." Mooney v. City of Overland Park, 283 Kan. 617, 622, 153 P.3d 1252 (2007). Thus, the income capitalization method utilized by Shaner is statutorily recognized and has been utilized in many Kansas cases.
Despite the statutory recognition of the method, the Sextons have some basis for their complaint regarding the use of the rental value method for valuing the subject property. Phillip Nichols, a prominent commentator on eminent domain law, notes that generally "[i]mplicit in the use of the capitalization method is the futurity of the rental." 4 Nichols on Eminent Domain § 12B.08[3], p. 12B-54.1 (3d ed. 2006). In this case, there is no evidence of the actual rental income, either past or future.
Despite this anomaly, the City is correct that rental value is an accepted method of valuing the fair market value of temporary easements. In fact, Nichols categorizes the rental value approach as the "most widely accepted measure of compensation for the taking of a temporary easement." 9 Nichols on Eminent Domain § 32.08[2][a], p. 32-38. Nichols recognizes that partial takings and temporary easements are often difficult to value; generally the "before and after" rule (like the one in K.S.A. 26-513) measures permanent reductions in fair market value. Hence, appraisers sometimes utilize a rental approach as if the easement area were being rented for the duration of the temporary easement. See 9 Nichols on Eminent Domain § 32.08. Nichols explains, "The advantage [the rental value] method offers is simplicity, particularly if a rental value per square foot can be established." 9 Nichols on Eminent Domain § 32.08[2], p. 32-38. The rental value approach "provides the owner of the property affected by the easement with compensation for the restriction on the owner's fee interest and any resulting interference with the owner's use." 9 Nichols on Eminent Domain § 32.08[2], pp. 32-38 to 32-39.
Other states have also used the fair rental value methodology in the context of temporary easements. See, e.g., City of Fort Smith v. Findlay, 48 Ark. App. 197, 893 S.W.2d 358 (1995) (temporary easement is valued as the fair rental value of the property for the time it is used); Fowler v. City of Boulder, 17 P.3d 797, 801-02 (Colo. 2001) (finding that owner of parcel that was temporarily taken during construction of drainage project was entitled to parcel's fair rental value, as well as restoration costs); State ex rel. Missouri Highway & Transp. Comm'n v. Beseda, 892 S.W.2d 740, 741 (Mo. App. 1994) (damages for a temporary partial taking are reasonable rental value of the land temporarily acquired and damages which the jury might find will result to the remaining land because of such temporary use).
In this case, in stating an opinion regarding the damages caused by the temporary easement, Shaner utilized a methodology recognized under K.S.A. 26-513(e), and his testimony complied with the Kansas definition of fair market value when he testified to the difference in the fair market value of the Sextons' property before the taking and the fair market value after the taking and opined that the difference was best measured by the rental value during the use of the easement.
The Sextons complain that the fair rental value methodology does not take into consideration the statutory factors of K.S.A. 26-513(d). The provision states: "the following nonexclusive list of factors shall be considered if such factors are shown to exist." K.S.A. 26-513(d). We agree that the provision requires the jury to consider the factors. Instruction number 13 included several of the factors listed in K.S.A. 26-513(d), and the Sextons did not object to the instruction.
Moreover, Shaner opined that the rental value methodology took into account the K.S.A. 26-513(d) statutory factors for determining compensation and damages. He explained that in a situation involving a temporary construction easement, the City's rights are more limited than in a situation involving, for instance, a typical residential rental. Shaner indicated that he considered: (1) which factors were relevant to the City's use of the property and (2) how a buyer would perceive this use. Acknowledging that there are circumstances where a rental value alone would not adequately reflect the fair market value of an easement taking, Shaner gave an example of a temporary easement associated with a road widening project that would require removing a large tree from the easement area. To the extent the tree adds value to the property and is not going to be replaced by the condemning authority at its own cost, Shaner opined that an addition would have to be made to the rental value to compensate the landowner for the loss of the tree.
By contrast, Shaner indicated that, in his opinion, no additions to rental value were necessary in this case. According to Shaner's reasoning, such additions were unnecessary because the condemnation petition required the City to restore or replace all grass, plants, shrubs, and trees to match existing "plantings" and landscaping as close as possible with like-kind landscaping and to repair, replace, or restore all existing hardscape and improvements, including sidewalks, wall, fences, lighting systems, and sprinkler systems, to conditions not less than those existing before the commencement of construction. See Jeremy P. Hopkins, Just Compensation: Elementary Principles and Considerations to Ensure the Property Owner is Made Whole, Fundamentals of Condemnation Law and Land Valuation, ALI-ABA 53, 113 (January 2006) (stating the cost to cure damages inflicted to the property is a mitigation of damages doctrine); see also City of Riverside v. Kraft, 203 Cal. App. 2d 300, 303, 21 Cal. Rptr. 425 (1962) ("[O]n the 'cost to cure' theory of severance damage value . . . , that as to the property not taken, the cost of necessarily relocating improvements on the land not taken so as to place the owner as nearly as possible in the position he was before the front of his property was taken, might be considered on the question of the difference in fair market value before and after the taking.").
Consequently, Shaner's opinion did comply with the mandate of K.S.A. 26-513(d); he considered the impact of various factors on the fair market value of the property before and after the taking. It follows that the jury verdict, which was consistent with Shaner's opinion, was not contrary to Kansas law. Thus, in testifying regarding the damages caused by the taking of the temporary easements, Shaner utilized a methodology recognized by statute, and his testimony complied with the Kansas definition of fair market value when he opined that the difference in the fair market value of the condemned property before the taking and the fair market value after the taking is best measured by the rental value during the use of the temporary easement and that such a method takes into account the statutory factors of K.S.A. 26-513(d).
We further note that to the extent the Sextons questioned Shaner's opinion in the context of whether the legally acceptable methodology most appropriately measured fair market value under the facts of the case, any deficiencies in Shaner's analysis were explored through cross-examination. See Willsey v. Kansas City Power & Light Co., 6 Kan. App. 2d 599, 603, 631 P.2d 268 (1981) (once witness has qualified as expert, court cannot regulate the factors used by the witness or his or her mental processes to arrive at his or her conclusion; matters can only be challenged by cross-examination). In this case, although Shaner's va