Creason v. UNIFIED GOV'T OF WYANDOTTE COUNTY, 85,469.

• Decision Date: 02 November 2001
• Docket Number: No. 85,469.,85,469.
• Citation: 33 P.3d 850,272 Kan. 482
• Parties: ROBERT J. CREASON, Appellant, v. THE UNIFIED GOVERNMENT OF WYANDOTTE COUNTY, KANSAS, Appellee.
• Court: Kansas Supreme Court

272 Kan. 482

33 P.3d 850

ROBERT J. CREASON, Appellant, v. THE UNIFIED GOVERNMENT OF WYANDOTTE COUNTY, KANSAS, Appellee.

No. 85,469.

Supreme Court of Kansas.

Opinion filed November 2, 2001.

John C. Tillotson, of Murray, Tillotson, Nelson & Wiley, Chartered, of Leavenworth, argued the cause and was on the brief for appellant. Timothy P. Orrick, of Parkinson, Foth & Orrick, L.L.P., of Lenexa, argued the cause and was on the brief for appellee.

The opinion of the court was delivered by

LOCKETT, J.:

Landowner Robert J. Creason appeals a jury determination of compensation due for the total taking of his rural residential property by Wyandotte County, Kansas, for a speedway project. Creason claims the trial judge erred in (1) instructing the jury to disregard his expert testimony on the commercial and domestic values of a gas well on the property; (2) denying his motion in limine and overruling his objections to the defendant's expert testimony of value based on the comparative sales method; (3) refusing to permit his cross-examination of a witness as to a prior panel appraisal of the property which included a value for the gas well; and (4) failing to give his requested jury instruction as to valuation of special use property.

Creason was the owner of rural residential property in Wyandotte County, comprised of approximately 31.5 acres. In addition to Creason's residence, the property contained a horse barn, a riding facility, a large stocked lake protected by groundwater filters, a large industrial shop building, over 2,800 cultivated trees, and an operating natural gas well.

The gas well was used for Creason's personal consumption. After the well was placed in production in the early 1980's, Creason extended a gas line to the vicinity of the gas company's line at the edge of his property. The gas company tested the gas and offered Creason a contract for the sale of the gas. However, Creason did not sign the contract because it required him to be available on the property to monitor the well.

On November 10, 1998, the Unified Government of Wyandotte County, Kansas City, Kansas, (County) filed an eminent domain action to acquire Creason's property for the construction of the Kansas Speedway project. The court-appointed appraisers awarded Creason $370,000 for the taking of his property. Creason was dissatisfied with the award and appealed to the district court.

On May 15-18, 2000, the sole issue for the jury to determine was the amount of just compensation for the property taken. After the evidence was presented, the jury was instructed that the measure of compensation it was to award was the fair market value of the property immediately before its taking. "Fair market value" was defined by the district court as 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. The jury was further instructed that in determining fair market value, it should consider all of the possible uses to which the property could have been put, including the best and most advantageous use to which the property was reasonably adaptable, and that the uses considered must be so reasonably probable as to have had an effect on the market value of the property at the time of the taking. The jury was then specifically instructed to disregard the testimony of Dwayne McCune (Creason's expert) and Creason regarding the separate value of the gas well on Creason's property and to not award any separate amount as damages for Creason's gas well.

The testimony regarding the fair market value of the property without the gas well was set out for the jury. The court then listed the witnesses and the amounts the witnesses had testified to regarding the fair market value of Creason's property immediately prior to the taking:

"Robert J. Creason $471,000 (Property Owner) "Gary Gurss $394,000 "(Witness) [real estate appraiser who testified on behalf of Creason] "Bernie Shaner $310,000 "(Witness) [real estate appraise; who testified on behalf of the County] "Christopher McCord $305,000

"(Witness) [real estate appraiser who testified on behalf of the County]"

The jury returned a verdict of $378,000 as just compensation for the taking of Creason's property. Creason appealed, raising three issues.

Our jurisdiction is pursuant to K.S.A. 26-504 (an appeal from a final order in an eminent domain proceeding).

COMMERCIAL AND DOMESTIC VALUES OF THE GAS WELL

This jury trial commenced on May 15, 2000. On July 14, 2000, approximately 2 months later, this court filed City of Wichita v. Eisenring, 269 Kan. 767, 7 P.3d 1248 (2000). Therefore, the district court did not have the advantage of our decision in City of Wichita v. Eisenring at the time of trial. Some issues in this case are controlled by the standards and the law stated in City of Wichita v. Eisenring.

The measure of compensation is the fair market value of the property or interest at the time of the taking. K.S.A. 26-513(b). Prior to 1999, Kansas did not statutorily define fair market value. Compare K.S.A. 26-513 (Furse 1993) with K.S.A. 26-513. The case law prior to 1999 recognized three approaches to property valuation: the comparable sales method (also known as the market data method), the depreciated replacement cost method, and the capitalization of income method, which is based upon what the property is producing or is capable of producing in income. Previously, the favored approach to valuation in Kansas was the comparable sales approach. See Ellis v. City of Kansas City, 225 Kan. 168, 172, 589 P.2d 552 (1979). Because, in most instances, comparable sales of property in the same vicinity, with similar characteristics, usually resulted in a very accurate reflection of the fair market value of the property taken, judicial preference for the comparable sales approach was well established in this state. City of Wichita v. Eisenring, 269 Kan. at 774. Due to its sometimes speculative nature, the capitalization of income approach to valuation was strictly limited to cases where it was difficult, if not impossible, to use the comparable sales approach. 269 Kan. at 774.

In prior condemnation cases, the "unit rule" required that improvements, located upon land which is condemned, are not to be valued separately but are a part of the real estate and must be considered in determining the value of the land taken. Ellis, 225 Kan. 168, Syl. ¶ 1. The "unit rule" denoted a process of appraisal whereby the total value of real estate is first determined without placing a value on each of the separate contributing items. Consideration of the value of buildings and improvements is limited to the extent they enhance the value of the land taken. 225 Kan. at 171. In contrast, the "summation method" of appraisal denotes a process of appraisal whereby each of several items that contribute to the value of real estate are valued separately and the total represents the market value thereof. Use of this method of appraisal has generally been rejected since it fails to relate the separate value of the improvements to the total market value of the property. City of Manhattan v. Kent, 228 Kan. 513, 518, 618 P.2d 1180 (1980).

The 1999 amendment to K.S.A. 26-513 included the addition of subsection (e), which provides:

"`Fair market value' means 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. 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." (Emphasis added.)

In City of Wichita v. Eisenring, this court reviewed the 1999 amendment and held that the comparable sales method was no longer the preferred method of valuation in condemnation proceedings. 269 Kan. at 774. By virtue of the 1999 amendment, the three generally recognized methods of valuing real estate stood on equal footing: the depreciated replacement cost approach—the reproduction cost of the property at the time of taking less depreciation; the comparable sales approach—the value of the property based upon the recent sales of comparable properties; and the capitalization of income approach—the capitalization of net income from the property. 269 Kan. at 774.

As noted previously, some cases decided prior to the 1999 amendments to K.S.A. 26-213 recognized that the comparable sales approach to valuing property was not always appropriate because there were situations where the property was so unique that there was no ascertainable market, and there were no sales of reasonably similar or comparable property. In such a case, the depreciated replacement cost method or the capitalization of income method was used to derive a value for the property taken and a fair determination of the damages due. Ellis v. City of Kansas City, 225 Kan. 168, Syl. ¶ 3, 589 P.2d 552 (1979). As this court stated in Eisenring v. Kansas Turnpike Authority, 183 Kan. 774, 779, 332 P.2d 539 (1958):

"The absence of market value, in the sense that there is a lack of

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