City of Phoenix v. Wilson
| Decision Date | 14 March 2000 |
| Docket Number | No. 1 CA-CV 99-0363.,1 CA-CV 99-0363. |
| Citation | 4 P.3d 999,197 Ariz. 456 |
| Parties | CITY OF PHOENIX, a municipal corporation, Plaintiff-Appellant, v. Jewel E. WILSON and Spouse, if Married on December 30, 1986; Stewart Allen Wilson, Trustee of the Stewart Allen Wilson Family Trust; Irvin Ivy Wilson, III, Trustee of the Irvin Ivy Wilson, III, Trustee of the Irvin Ivy Wilson, III Family Trust; Louise Wilson, Trustee of the Irvin I. Wilson, Jr., Trust, Defendants-Appellees. |
| Court | Arizona Court of Appeals |
Mr. William F. McDonald, Assistant City Attorney, Phoenix, for Plaintiff-Appellant.
Mr. Leonard Bell, Dushoff & McCall, Phoenix, for Defendants-Appellees.
¶ 1 In this action for condemnation by the City of Phoenix, the jury awarded the property owners, the Wilsons, $80,000 for the land taken and $99,000 for severance damages. The City appeals from the judgment entered on the verdict, raising two issues:
Upon our analysis of the first issue, we reverse the judgment and remand this case for further proceedings. Because of this disposition, we need not address the second issue.
¶ 2 The Wilsons owned a 23.24-acre parcel of land located on the southwest corner of McDowell Road and 71st Avenue in Phoenix. The City condemned 1.4 acres of the property, the portion on the corner of McDowell and 71st Avenue, for a fire station.
¶ 3 At the time of the condemnation, the full parcel was being used for farming, but the property was zoned RE-43, which allowed for one house per acre, as well as certain other specified uses, including schools and places of worship. In contrast, the City's General Plan indicated that the area should be developed for high-density residential uses such as apartments.
¶ 4 Prior to trial, the City filed a motion in limine asking the trial court to prohibit the Wilsons' expert appraisal witness, Martin White, from testifying to his opinion of the fair market value of the property taken and the resulting severance damages. It maintained that White was using an unrecognized method of valuation. The trial court denied the motion, but the City was allowed to have a continuing objection to White's testimony on the issues raised in the motion. At the conclusion of its case, the City unsuccessfully moved to strike the testimony.
¶ 5 White's testimony was consistent with what he had proposed in his written appraisal for the Wilsons. In his opinion, the highest and best use of the property on the date of valuation was to hold the property as though vacant for future investment with the anticipation of splitting the property into two economic units. According to White, a five-acre portion of the property around the northeastern corner, which portion included the 1.4-acre fire-station site, could form a separate economic unit which would command a higher price than the remaining property. This separate economic unit he thought suitable for development for various uses such as a school or place of worship, or for such non-residential but residential-compatible uses as mini-storage, professional offices, bank branch, dependent care facility, mortuary and hotel or motel. Although the latter uses would require rezoning, he thought that rezoning would be reasonably possible.
¶ 6 White then used a sales comparison approach to separately value hypothetical subdivided parcels, varying between five acres and 13 acres, in order to derive a value for the five-acre economic unit on a before-taking basis. These comparable sales included the sale of a site used for a charter school and one used for a church and school. Based on these comparable sales, White determined that the five-acre economic unit had a $1.25 per square foot value, giving the five-acre parcel a value of $272,250. The 1.4-acre portion taken by the City consequently had a value of $79,600, which he rounded to $80,000.
¶ 7 White then calculated that severance damages accured as a result of the taking. He determined that, because the City took the 1.4 acres in the corner, the remaining 3.6 acres of the five-acre economic unit had lost its economic advantage due to the impact of the taking on access, visibility and frontage. This loss of development potential reduced the value of the remainder of the five-acre economic unit to the value of the adjoining 18.24 acres, which was $.60 per square foot.1 Accordingly, because the property within the five-acre economic unit declined in value from $1.25 per square foot it would have been worth absent the taking to $.60 per square foot, he figured that the severance damages equaled $99,000.
Irvin Wilson also testified to his opinion of the damages that he and the other owners had incurred as a result of the City's taking of the 1.4-acre portion of property.2 While he used the same method of appraisal that White had used, in his view, the separate economic unit on the northeast corner of the property should be a ten-acre parcel, causing severance damages for the remaining 8.6 acres of that economic unit, rather than the 3.6 acres in White's appraisal. Wilson also believed that the property had a higher value than White had found, $3.00 per square foot for the ten-acre economic unit and $2.00 per square foot for the remainder. Using White's method of calculation based on these altered figures, Wilson valued the property taken at $191,055, and he calculated severance damages to be $371,915.
¶ 8 Conversely, the City's appraiser, Dennis Lopez, believed that no separate economic use existed for any portion of the Wilson property because, on the date of valuation, there was little demand for 1.4 commercial corner lots in the area. He testified that the best and highest use of the entire property was either for immediate use as single-family residential property or for later use for multi-family residential development. From the comparable sales he used, Lopez decided that the Wilsons' property had a value of $.55 per square foot. Thus, in his opinion, the value of the property taken was $35,088, and there were no severance damages because there was no change in the value of the remaining property.
¶ 9 The jury was instructed to determine the fair market of the property taken. It also was told that, because the property taken was part of a larger parcel, the property owners were entitled to severance damages in addition to the value of the property taken. Further, the jury was instructed that severance damages were proper if the fair market value of the remaining property was reduced by the taking; "[t]he measure of severance damages, if any, is the difference between the fair market value of the remaining property before the taking and the fair market value of the remaining property after the taking."
¶ 10 The jury found damages in the amounts recommended by White: $80,000 as the value of the property taken and $99,000 as severance damages. The City's motion for new trial was denied, and the City appealed. We will affirm the trial court's ruling on the admission of evidence absent an abuse of the court's discretion or legal error and prejudice. See Brown v. U.S. Fidelity and Guaranty Co., 194 Ariz. 85, 88, 977 P.2d 807, 810 ¶ 7 (1998).
¶ 11 The City's objection to White's evaluation does not go to his opinion of the highest and best use of the Wilsons' property. Rather, it contends that White used an improper method of determining property value. Although the City acknowledges that the Wilsons had a right to introduce evidence that all or portions of their property had higher or more profitable uses or zoning potential (providing that they also could show a "reasonable probability" of a zoning change in the near future), see State ex rel. Morrison v. McMinn 88 Ariz. 261, 264, 355 P.2d 900, 903 (1960); Flood Control District of Maricopa County v. Hing, 147 Ariz. 292, 299, 709 P.2d 1351, 1358 (1985), it asserts that a proper method of valuation must be used. Thus, when a witness such as White bases his opinion entirely upon improper considerations, his testimony should be stricken from the record. See State ex rel. Herman v. Larriva's Ace Electric Co., 11 Ariz.App. 452, 454, 465 P.2d 589, 591 (1970). Indeed, "[w]hile values and damages in condemnation proceedings are not always susceptible of precise proof, nevertheless, they must be arrived at through a recognized method which cannot be fundamentally unfair and unjust." Mobil Oil Corp. v. Phoenix Central Christian Church, 138 Ariz. 397, 400, 675 P.2d 284, 287 (1983), citing City of Tucson v. Rickles, 109 Ariz. 82, 85-86, 505 P.2d 253, 256-57 (1973).
¶ 12 In State ex rel. Ordway v. Buchanan, 154 Ariz. 159, 741 P.2d 292 (1987), the court identified two methods to value condemned property in cases of a partial taking: as part of the whole parcel or as a separate economic unit. As it stated:
In partial taking cases, generally the land taken is valued as part of the whole tract and not as if it stood alone.... The rule protects the condemnee by...
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