Indiana & Michigan Elec. Co. v. Hurm, 1-880A202

Citation422 N.E.2d 371
Decision Date29 June 1981
Docket NumberNo. 1-880A202,1-880A202
CourtCourt of Appeals of Indiana
PartiesINDIANA & MICHIGAN ELECTRIC COMPANY, an Indiana Corporation, Plaintiff- Appellant, v. Bernard E. HURM, Cecelia J. Hurm, Defendants-Appellees.

Thomas W. Yoder of Livingston, Dildine, Haynie & Yoder, Fort Wayne, for plaintiff-appellant.

Jack R. Robinson, Rockport, John R. Werner, Cannelton, for defendants-appellees.

RATLIFF, Judge.

STATEMENT OF THE CASE

Plaintiff-appellant Indiana & Michigan Electric Company appeals the judgment of the Dubois Circuit Court on a jury verdict awarding damages to the defendants-appellees Bernard E. Hurm and Cecelia J. Hurm in an action in eminent domain.

We affirm.

STATEMENT OF THE FACTS

Bernard E. Hurm and Cecelia J. Hurm, husband and wife (hereinafter called "the Hurms"), owned ten acres of land in Spencer County near Rockport, adjacent to U.S. Highway 231 (also State Road 45) and approximately one mile from the Ohio River. Mr. Hurm was born on the property, and in recent times his son and family resided in a mobile home on the property. The land had been used for grazing and crop-raising, and its improvements included a cinder block building used for storing seed corn, a cinder block wash house, a brooder house, an old barn, a well, and a septic system. The land is near a railroad and it is zoned "planned heavy industrial."

The Indiana & Michigan Electric Company (hereinafter called "I&M") desired this ten acre parcel as part of a site for a new electrical generating station. On June 13, 1977, I&M filed a complaint for condemnation of the fee simple interest in the Hurms' property in the Spencer Circuit Court, to which the Hurms filed objections. On September 16, 1977, the court overruled the objections, ordered the fee simple interest condemned to I&M's use, and appointed appraisers to assess the Hurms' damages. The cause was transferred by change of venue to the Dubois Circuit Court. The issue of damages was tried to a jury, and on February 13, 1980, the trial court entered judgment on the jury's verdict in favor of the Hurms in the amount of $102,500.

STATEMENT OF THE ISSUES

1. Whether the trial court erred in refusing to permit an I&M witness to testify as an expert to the highest and best use and fair market value of the Hurms' property, because the witness took into consideration information from officers of lending institutions in forming his opinions.

2. Whether the trial court erred in refusing to permit an I&M witness to testify as an expert that the Hurms' property was not suitable for septic tanks for industrial purposes, because the witness lacked sufficient expertise and had not had experience in issuing septic tank permits for heavy industrial uses.

3. Whether the trial court erred in permitting one of the Hurms' witnesses to testify as to what he had read in a transcript of the testimony of I&M's expert witness at the earlier necessity hearing.

4. Whether the trial court erred in admitting evidence of prices paid for other properties, where such properties were not comparable to the Hurms' property.

5. Whether the trial court erred in sustaining the Hurms' objections to the introduction of photographs of properties which the Hurms' expert witnesses had relied upon as comparable properties in arriving at their opinions of fair market value.

6. Whether the damages awarded to the Hurms are excessive.

DISCUSSION AND DECISION
Issue One

I&M contends that the trial court erred in refusing to allow its expert real estate valuation witness David O. Grundhoefer to testify, apparently because he had consulted with loan officers of two banks in the area about real estate values. The Hurms' attorney was given permission to question Grundhoefer out of the jury's presence. Grundhoefer's answers revealed that he could not recall the names of the two loan officers with whom he had spoken. Furthermore, the loan officers had not viewed the Hurms' property and he did not inform them of the identity of the property he was appraising. They gave him only one real estate transaction to use as comparable property, which he did not pursue. Other than that one sale, Grundhoefer and the loan officers did not discuss any specific property but, instead, talked in general terms. One of the loan officers told him that a one-acre building site would probably have a value of about $4,000. Grundhoefer said that his opinion of the fair market value of the Hurms' property was based 25% to 30% upon the opinions of the loan officers. Grundhoefer also viewed the property himself, consulted real estate sales people and appraisers, and studied other comparable properties.

Counsel for the Hurms stipulated that Grundhoefer was qualified as an expert real estate valuation witness but objected to his testifying in this particular case because of his reliance upon the hearsay opinions of the loan officers. Counsel for I&M made an offer of proof by fully examining Grundhoefer out of the jury's presence.

In Duncan v. George Moser Leather Company, (1980) Ind.App., 408 N.E.2d 1332, 1343, Chief Judge Buchanan analyzed the various Indiana decisions on the question of when an expert witness may rely upon a report which either has not been admitted into evidence or is not admissible as substantive evidence because it is hearsay "In order for the opinion to be admissible (1) the expert must have sufficient expertise to evaluate the reliability and accuracy of the report, (2) the report must be of a type normally found reliable, and (3) the report must be of a type customarily relied upon by the expert in the practice of his profession or expertise."

The trial court here would have been justified, under the facts of this particular case, in determining that the information given Grundhoefer by the loan officers was not of a type normally found reliable. Grundhoefer could not even recall the names of the loan officers he consulted, thus impeding the Hurms' ability to cross-examine him regarding the reliability and credibility of the bases of his opinion. In Duncan v. George Moser Leather Company, supra, Judge Buchanan said in reference to the first of the three requirements quoted above: "The primary purpose for requiring an expert to have the ability to evaluate the hearsay reports is to afford the nonpresenting party the right to meaningfully cross-examine the witness both as to his actual opinion and the reports and hearsay information upon which he bases his opinion." 408 N.E.2d at 1343. Grundhoefer was stipulated to be an expert in the field, but the lack of identification of some of his sources of information would have limited the Hurms' ability to explore those sources. Moreover, the values of comparable properties, or "comparables," are recognized as valid bases for an opinion of the fair market value of another piece of property. Trustees of Indiana University v. Williams, (1969) 252 Ind. 624, 251 N.E.2d 439. However, the trial court reasonably could have concluded that a hypothetical piece of property with an estimated value does not constitute a comparable and is not otherwise a reliable source of information upon which to base an opinion. Consolidated Traction Co. v. Jordan, (1905) 36 Ind.App. 156, 75 N.E. 301, cited by I&M, does not stand for the proposition that a valuation witness with personal knowledge of the subject property may give his opinion of fair market value regardless of his reliance upon unreliable hearsay. Consequently, we cannot say that the exclusion of Grundhoefer's testimony pertaining to the fair market value of the property was error.

Although the record is somewhat unclear as to the exact ruling issued by the trial court on the question of the admissibility of Grundhoefer's testimony, it appears that Grundhoefer was permitted to testify before the jury only for the purpose of identifying certain photographs. The Hurms concede that Grundhoefer's consultation with the loan officers would have affected only his opinion as to the fair market value of the Hurms' property and not his opinion as to the highest and best use, which he also stated in I&M's offer of proof. Grundhoefer had opined that the highest and best use was "as a residential site with some small acreage." Grundhoefer stated in I&M's offer of proof that he had inspected the property himself.

At the end of the offer to prove, counsel for I&M re-offered Grundhoefer as a witness to establish the fair market value of the Hurms' property and also to establish the highest and best use of the property. Counsel for the Hurms raised the same objection he had previously made, and the trial court noted it was making the same ruling for the same reason. The trial court, therefore, erred in excluding Grundhoefer's testimony as to his opinion of highest and best use.

In State v. Hamer, (1936) 211 Ind. 570, 199 N.E. 589, cited by I&M, a valuation witness in a condemnation case had been one of the court-appointed appraisers to whose report the landowners had filed exceptions. Counsel for the landowner objected to the competency of the witness, and the trial court sustained the objection as to the witness's opinion of the value of the real estate. The supreme court held that the trial court erred in excluding the witness's testimony. The landowners argued that the state had made no offer to prove and that there was, therefore, no error in sustaining the objection. The supreme court said, however, that where the objection is to the competency of the witness rather than to the competency of the evidence, no offer of proof is necessary. The landowners further argued that sustaining the objection was not error because the witness's testimony would have been cumulative and because the trial court had discretion to limit the number of witnesses. The supreme court stated that the trial court had not limited the number of witnesses either before the trial or at any other time, but simply refused to permit this witness...

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