City of Sioux Falls v. Kelley

• Decision Date: 31 March 1994
• Docket Number: 17872,Nos. 17871,s. 17871
• Citation: 513 N.W.2d 97
• Parties: CITY OF SIOUX FALLS, Plaintiff and Appellant, v. Donald D. KELLEY and Daryl W. Kelley, Defendants and Appellees.
• Court: South Dakota Supreme Court

Page 97

513 N.W.2d 97

CITY OF SIOUX FALLS, Plaintiff and Appellant, v. Donald D. KELLEY and Daryl W. Kelley, Defendants and Appellees.

Nos. 17871, 17872.

Supreme Court of South Dakota.

Argued Nov. 16, 1992.

Reassigned Aug. 12, 1993.

Decided Feb. 23, 1994.

Rehearing Denied March 31, 1994.

Janet F. Brekke and Thomas Anderst, Asst. City Attys., Sioux Falls, for plaintiff and appellant.

Mark V. Meierhenry and Sabrina Meierhenry, Danforth, Meierhenry & Meierhenry, Sioux Falls, for defendants and appellees.

AMUNDSON, Justice (on reassignment).

The City of Sioux Falls (City) appeals from a jury verdict in a condemnation suit. Donald D. and Daryl W. Kelley (Kelleys) appeal on the issue of prejudgment interest. We affirm in part, reverse in part and remand.

FACTS AND PROCEDURAL HISTORY

Kelleys owned a construction business in Sioux Falls, South Dakota, from the mid-1940s through the early 1970s. In the late 1960s, the brothers acquired a twenty-seven-acre tract of land located to the north side of 41st Street and to the east side of what is now known as Louise Avenue in Sioux Falls. The land was originally purchased as a fill site to deposit excess dirt from construction projects and for development speculation. By 1973, approximately twelve acres had been sold and the remainder was platted into eight lots as part of Kelleys' subdivision.

Prior to 1984, all of Lot 3 and the south half of Lots 4, 5, 6, and 7, which abut 41st Street, were sold to various commercial businesses. The remainder, consisting of approximately five and one-half acres with some frontage on Louise Avenue, was marketed as one tract through Kelleys' real estate agent.

Due to development in southwestern Sioux Falls the City commissioned an engineering firm to do a drainage study of an area which included Kelleys' subdivision. In May 1990, the engineer submitted a final report to City which identified a portion of Kelleys' subdivision property as being ideal for a storm water detention pond.

After Kelleys became aware of the study, they commenced negotiations with City for purchase of property needed for a detention pond. Kelleys proposed that City purchase all of their remaining property. City declined because the whole tract was not required for construction of the detention pond.

Kelleys hired an appraiser who prepared an appraisal on May 17, 1990. Shortly after that appraisal, Kelleys sold an additional one-hundred feet of Lots 4, 5, & 6 to adjacent owners, leaving only the property to be taken by City and the west three hundred thirty-five feet of Lot 2, which fronted Louise Avenue. Kelleys' appraiser then revised his appraisal to include only the property retained by Kelleys after the sale. In June 1990, City also had an appraisal of the property prepared.

During August 1990, City discovered the subject property might be considered wetlands by the federal government. If so designated the property's suitability for development would be questionable. Based on this new information, City's appraiser prepared a revised appraisal. Because of a wide disparity in land values between the Kelleys' and City's appraisals, City hired a second appraiser to prepare an appraisal of the property in September 1990.

Kelleys negotiated the sale of the west three hundred thirty-five feet of Lot 2 to a Kentucky Fried Chicken (KFC) franchisee on or about October 1, 1990. After the sale, the only land Kelleys had left was the property to be taken for the detention pond, which was isolated and had no street access. ¹

Because City and Kelleys failed to reach an agreement for the purchase of the property, Kelleys commenced an action for trespass and inverse condemnation against City in January 1991. The complaint alleged that City had deprived Kelleys of substantially all of the use and enjoyment of their property since July 1988. On February 4, 1991, City adopted a resolution authorizing the condemnation of Kelleys' property, and a condemnation action was filed on June 3, 1991.

Kelleys then moved to consolidate their inverse condemnation and trespass claims with City's condemnation action. City resisted and moved for summary judgment on Kelleys' claims. On October 17, 1991, the court denied Kelleys' motion to consolidate, granted summary judgment on the inverse condemnation claim, and deferred ruling on the trespass claim until after trial on the condemnation action.

Before the trial started, City's attorney moved to exclude any evidence pertaining to severance damages because Kelleys had sold all of their remaining property, before the established date of taking. Therefore there was no partial taking and thus no severance damages. Kelleys resisted this motion and stated that they would be presenting no severance damage evidence. The trial judge deferred ruling on City's motion until the evidence was offered, and instructed counsel to have witnesses refrain from using the term "severance damages" in their testimony.

At trial, Kelleys' appraiser gave his opinion of just compensation. He valued the whole Kelley tract as it existed on July 5, 1990 (before the KFC sale) and subtracted the KFC sale from the value of the whole tract to arrive at his opinion of just compensation which was $468,000.

City moved to strike the appraiser's testimony because the opinion was based on a partial taking and included severance damages. The trial court overruled the motion, stating that, although the witness "nibbled around the edges" of severance damages, his opinion was given only as to the value of the land taken.

Kelleys also had Don Kelley give his opinion of the land's value. He valued the property taken by City at $764,000, as it existed on February 4, 1991, the date of City's resolution of condemnation.

City called two appraisers to testify. One of the appraisers testified that he initially appraised only the property to be taken in June 1990. In his opinion, just compensation at that time would be $219,300. He further testified that he reappraised the property in May 1991 at the request of City, assuming that the subject property contained protected wetlands. Based on that assumption, he concluded just compensation would be $50,800.

City's other appraiser testified that his appraisal was performed as of October 29, 1990, when Kelleys had not yet sold the KFC property. He valued the whole tract, assuming the existence of protected wetlands on the property, then subtracted the KFC sale from the whole tract's value and arrived at his opinion of just compensation due in the amount of $139,000.

The trial court instructed the jury that the time of the taking was February 4, 1991, the date of City's resolution of condemnation; that the only issue to be determined by them was the amount of just compensation to be paid to Kelleys; and in this case, just compensation was the fair market value of the condemned property at the time of the taking.

The jury awarded $450,000 as just compensation. City now appeals.

Other facts will be referred to as they relate to the issues discussed herein.

ISSUES

1. Did the trial court err in allowing Kelleys to introduce evidence of inverse condemnation into City's condemnation trial?

2. Did the trial court err in allowing Kelleys to introduce evidence of a partial taking, resulting in the injection of a severance damage issue into the condemnation proceeding?

3. Did the trial court err by restricting objections to depositions read at trial to only those objections made at the time the depositions were taken?

4. Whether the trial court erred in refusing to strike the testimony of Kelleys' appraiser regarding the remainder value of severed property.

5. Did the trial court err when it refused to strike the testimony of Kelleys' appraiser regarding purchase agreements used as comparable sales in valuing the property being taken?

6. Was it error for the trial court to allow counsel for Kelleys to use hypothetical questions when cross-examining City's appraiser?

7. Did the trial court err in allowing counsel for Kelleys to question potential jurors during voir dire about their relationship to property owners in a drainage district that did not exist?

8. Whether the trial court erred in restricting City's cross-examination of a witness called by Kelleys.

9. Did the trial court abuse its discretion in restricting the testimony of City's expert on wetlands?

10. Whether the trial court erred in allowing a jury view of the property during jury deliberations.

11. Whether the trial court erred in failing to instruct the jury (a) as to the burden of proof on claims that the property was adaptable to another use, (b) on the presumption of property's current use as its highest and best use, and (c) on speculation and conjecture.

12. Whether the trial court erred in allowing counsel to argue matters of law during closing arguments.

13. Did the trial court properly assess the taxation of costs against City?

14. Did the trial court use the correct method in assessing reasonable attorney fees as costs?

ISSUE ON CROSS-APPEAL

Should the trial court have allowed an allowance for prejudgment interest?

DISCUSSION

ISSUES 1, 2 & 4

Since issues 1, 2 and 4 deal with similar evidentiary rulings we will address these issues at the same time.

The only issue before the jury in a condemnation action is the amount of compensation to be paid for the property taken or damaged. SDCL 21-35-15. City's claims of error in Issues 1, 2 & 4 are connected with both parties' valuation testimony. The theme of City's argument is that evidence dealing with property values prior to the time of taking (February 4, 1991) should not be admitted. However, neither party presented an expert opinion on the fair market value as of the date of taking. The fair market value of property is to be determined at the time of the taking. Basin Elec. Power Co-op., Inc. v. Cutler, 254 N.W.2d 143 (S.D.1977). Kelleys were the only party who submitted an appraisal of the land as of...