City and County of Honolulu v. Bishop Trust Co.

• Decision Date: 09 July 1965
• Docket Number: No. 4371,4371
• Parties: , 23 A.L.R.3d 692 CITY AND COUNTY OF HONOLULU, a Municipal Corporation, Plaintiff-Appellant, v. BISHOP TRUST COMPANY, Ltd., and J. Russell Cades, Trustees under Indenture of Trust of T. A. K. Cleghorn, et al., Defendants-Appellees, and John Patrick Betro and Bishop trust Co., Ltd., Trustees for the Vern V. Gilligan and Violet G. Gilligan Trust, intervenors.
• Court: Hawaii Supreme Court

Page 373

404 P.2d 373

48 Haw. 444, 23 A.L.R.3d 692

CITY AND COUNTY OF HONOLULU, a Municipal Corporation Plaintiff-Appellant, v. BISHOP TRUST COMPANY, Ltd., and J. Russell Cades, Trustees under Indenture of Trust of T. A. K. Cleghorn, et al., Defendants-Appellees and John Patrick Betro and Bishop trust Co., Ltd., Trustees for the Vern V. Gilligan and Violet G. Gilligan Trust intervenors.

No. 4371.

Supreme Court of Hawai'i.

July 9, 1965.

Syllabus by the Court

1. Upon the condemnation in fee simple of property zoned for commercial use, the zoning ordinance is admissible in evidence to show the limitations and restrictions applicable to the property.

2. When a zoning ordinance, offered in evidence to show the limitations and restrictions applicable to the property under condemnation, is erroneously excluded but is not marked for identification and is not before the appellate court, that court being unable to scrutinize the provisions of the ordinance to determine their importance likewise is unable to determine whether the error in excluding the ordinance was prejudicial, and will not find reversible error.

3. Under H.R.C.P., Rule 43(c), and offer of proof is not necessary if the nature of the error is otherwise clear.

4. On direct examination of an expert witness as to the reasons for his opinion of value of the property under condemnation, testimony as to the sales prices or lease rentals of other property considered by him in arriving at his opinion is not inadmissible as hearsay.

5. It lies within the discretion of the trial judge whether to permit testimony by 6. Any competent evidence of matters, not merely speculative, which would be considered by a prospective vendor or purchaser or which tend to enhance or depreciate the value of property taken by eminent domain is admissible.

an expert witness on direct examination as to the sales prices or lease rentals of other property considered by him in arriving at his opinion of value of the property under condemnation.

7. Where one side fully develops how its expert witnesses made their appraisals, with testimony and charts setting forth every step of the process, and the other side is not permitted to do the same, the scales are thrown out of balance. Such failure to allow the parties equal range constitutes an abuse of discretion unless called for by the circumstances.

8. In exercising discretion as to comparability of other properties considered by expert witnesses in arriving at their opinion of value of the property under condemnation, the trial court, within reasonable limits, should give rein to the views of the expert witness on the stand, who has found the properties sufficiently comparable, and should leave to cross-examination the points of dissimilarity, which will affect the weight of the opinion.

9. Charts, summarizing figures by which expert witnesses have arrived at their opinions of value by the income approach, used at the trial as an aid in following the testimony and marked for identification but not admitted in evidence, should not be sent to the jury room on retirement of the jury.

10. Where an expert witness has testified that continuance of the present bowling alley represents the best use of the existing improvement taking into consideration the cost of remodeling for other use, and has further testified that a responsible national agency puts out national averages showing what percentage of the gross take bowling alleys generally can pay for rent, the witness may testify as to his ascertainment of the gross take of the existing operation and his application of such percentage thereto, in confirmation of the rental value used by him in valuing the property under condemnation by the income approach.

11. Each party to a condemnation proceeding has the right to adopt his own theory as to the highest and best use of the land taken, and each may introduce evidence without being bound by the theory of the other.

12. Where a lease of property, deemed comparable, provides for periodic renegotiation of the rent, and it is desired to refer to a new rent set for the current period, this presents the question whether the new rent was sufficiently the result of free bargaining to be admissible as evidence bearing on the value of the property under condemnation. The court should not embark on this line of inquiry and should exclude such evidence, at least in the absence of necessity for such evidence.

13. When the parties agree on the amount of compensation to be paid for property under condemnation, the court assumes that all elements of compensation have been included, interest among others. But when the parties stipulate to the value of th eproperty and intend that the stipulated amount be treated the same as if returned by the jury, interest which would have applied in the event of a jury verdict in that amount likewise applies to the stipulated value.

14. Improvements affixed to land have only such value as they add to the land; the sum of the land and improvements cannot exceed the value of the condemned property as a whole. No change in this rule has been effected by R.L.H.1955, § 8-21, which provides that when improvements are separately owned 'the value thereof shall be separately assessed.'

Richard Y. C. Au, Deputy Corp. Counsel, Stanley Ling, Corp. Counsel, samuel B. K. Chang, Deputy Corp. Counsel, City and County of Honolulu, Honolulu, for plaintiff-appellant.

J. Russell Cades, william M. Swope, Smith, Wild, Beebe & Cades, Honolulu, for defendants-appellees.

Before TSUKIYAMA, C. J., and CASSIDY, WIRTZ, LEWIS and MIZUHA, JJ.

LEWIS, Justice.

This is an appeal by plaintiff, hereinafter referred to as the 'City,' from a judgment in eminent domain proceedings, which in part represented an award of just compensation on the verdict of a jury and in part represented stipulated amounts. The City asserts error affecting the jury's verdict. As to the stipulated amounts, it is contended the judgment should not have included interest thereon.

The action was for the acquisition of property at Waikiki for a public park and beach. On February 21, 1958 the City filed an amended complaint, and this has been accepted by the parties as the valuation date.

For condemnation purposes, the property was described as two separate parcels. It was agreed, however, that the two together constituted one entire tract, extending from Kalakaua Avenue to hight water mark. The propety was on the Diamond Head (east) side of the Moana-Surfrider Hotel, next to a public right of way to the beach which ran between the hotel an the subject property.

The smaller of the two parcels, designated Parcel 8-A and Containing 1,920 square feet, was the makai (seaward) portion of the tract. It was an unimproved area subject to a Beach Reclamation Agreement under which this piece was subject to an easement for, and was in use as, a public beach. The value of Parcel 8-A was stipulated, and the only point before us as to this parcel is the right to interest on the stipulated value.

The remainder of the tract consisted of 8,597 square feet, designated as Parcel 8. It had a street frontage of 57.54 feet. The other end of the lot abutted on Parcel 8-A, which gave it beach frontage. The beach frontage was 60.83 feet. At the time of the condemntion there was in effect a 1940 lease of this parcel to Dotvivi Corporation, Ltd., hereinafter called 'Dotvivi.' The lot was improved with a two-story building completed in the latter part of 1941 or early in 1942, occupying approximately 7,000 square feet of the lot. The building was set back from the street about ten feet. There was no parking area.

Before the jury was impaneled, the parties entered into a stipulation in chambers, which was not to be revealed to the jury. It was stipulated that $190,000 was the value of the improvements on Parcel 8. However, the jury was to value Parcel 8 as a whole, and then from the value fixed by the jury's verdict $175,000 (not $190,000) was to be deducted to determine the value of the land. Thereafter, the attorney for Dotvivi announced that he would have a very limited participation in the trial, would put in no evidence, and would not cross-examine. After trial, the jury returned a verdict of $574,400 for Parcel 8.

All of the witnesses agreed that a purchaser would make continued use of the present building, and that the property should be valued accordingly, though one of the witnesses was of the opinion that the building 'as it existed' was not the highest and best use of the property. On the valuation date the building was in use as follows: The Diamond Head (east) side of the ground floor was divided into small shops, which were rented. The ewa (west) side of the ground floor was used by Dotvivi, except for about 750 square feet with frontage on the beach rented for restaurant use. Dotvivi was using its area for the game of Fascination, which subsequently, before this case came to trial, was held an illegal gambling game. ¹ On the second floor dotvivi was operating an eight-lane bowling alley.

At the time of the filing of the original complaint the property was owned in fee simple by members of the Cleghorn family. The property never has been the subject of a sale, having passed by inheritance in a continuous chain of title from the original owner. Prior to the amendment of the complaint, the property was placed in trust, and the trustees and beneficiaries hereinafter are reerred to as 'defendants,' or 'Cleghorn defendants.' Dotvivi has filed no brief in this court and did not appear upon the argument. Certain tenants intervened as defendants but are not parties to this appeal. ²

The questions at issue primarily concern the method of presenting expert testimony as to value. Before proceeding to the specifications of error we will review the evidence at some length.

Contrary to the usual practice ³ defendants put on their evidence first. Their first witness was an...