Denver Urban Renewal Authority v. Berglund-Cherne Co.

• Decision Date: 19 February 1976
• Docket Number: No. 75--317,BERGLUND-CHERNE,75--317
• Citation: 553 P.2d 99,37 Colo.App. 360
• Parties: DENVER URBAN RENEWAL AUTHORITY, a body corporate and politic of the State of Colorado, Petitioner-Appellant, v.COMPANY, a Colorado Corporation and Elmer A. Johnson, Treasurer of the City and County of Denver, Respondents-Appellees. . I
• Court: Colorado Court of Appeals

Page 99

553 P.2d 99

37 Colo.App. 360

DENVER URBAN RENEWAL AUTHORITY, a body corporate and politic of the State of Colorado, Petitioner-Appellant, v. BERGLUND-CHERNE COMPANY, a Colorado Corporation and Elmer A.

Johnson, Treasurer of the City and County of

Denver, Respondents-Appellees.

No. 75--317.

Colorado Court of Appeals, Div. I.

Feb. 19, 1976.

Rehearing Denied March 25, 1976.

Certiorari Granted May 24, 1976.

John H. Williamson Denver, for petitioner-appellant.

Dawson, Nagel, Sherman & Howard, Raymond J. Turner, Frederick Y. Yu, Denver, for respondent-appellee Berglund-Cherne Co.

COYTE, Judge.

This is an eminent domain proceeding. On March 15, 1974, petitioner, the Denver Urban Renewal Authority (DURA), filed a petition in condemnation to acquire two parcels of land which were located within the Auraria Urban Renewal Project and owned by respondent, Berglund-Cherne Company. Following a hearing on the issue of valuation held before a commission of three freeholders, a certificate of ascertainment and assessment determining a total value for the two parcels was filed with the court by the commission, and a rule and order was thereafter entered based upon the certificate.

DURA appeals from the award of $245,800 for the larger parcel only. It advances two grounds of error as the basis of this appeal: (1) That the commission erroneously prevented DURA's appraiser from stating an opinion as to the value of the property based on the income approach to valuation; and, (2) that the award was based on the incompetent testimony of the property owner, who, though not qualified as an expert, was permitted to relate his opinion of the accrued depreciation of the improvements on his property and his estimate of the value of his property based thereon. We affirm.

DURA called as an expert witness, a real estate appraiser whom it had employed to appraise the two parcels and estimate their fair market value. He testified to the effect that the 'highest and best use' of the large parcel was that of industrialization, its current use; he testified as to comparable sales of similar properties within adjoining areas; and he offered an opinion of the value of this parcel apart from improvements and considering such factors as location, size, and utility. The appraiser then described an alternate method of valuation. He explained, under direct questioning, that to utilize the income approach to valuation, the rent which the property would command in the open market, I.e., the 'economic' or 'imputed' rent, is first ascertained. From that figure certain operating expenses are subtracted to obtain net operating income. Net operating income is then capitalized to yield the value of the property as an entity. From that sum is subtracted a value for the land based on comparable sales, and the remainder is the value of the improvements on the land.

At this point in the testimony, counsel for DURA asked the appraiser: 'What was your opinion as to the economic rent of this parcel?'

Respondent Berglund-Cherne objected to the question and the objection was sustained by the commission on the grounds that any opinion as to economic rent was necessarily based on inadmissible hearsay. The commission grounded its ruling primarily on the holding of City & County of Denver v. Quick, 108 Colo. 111, 113 P.2d 999, and the limited exception to that holding enacted by the legislature in § 38--1--118, C.R.S.1973. Appellant argues that this reliance was misplaced. We disagree.

It is axiomatic that in a condemnation proceeding, the jury or the commission is charged with arriving at the present market value of the property being taken. The measure of compensation is the value of the whole tract and improvements thereon as it exists at the time of the condemnation, taking into consideration its highest and best use. See Board of County Commissioners v. Vail Associates, Ltd., 171 Colo. 381, 468 P.2d 842. However, evidence of speculative or prospective value is barred as distracting from the proper determination of 'how much would the property bring in cash if offered now for sale by one who desired, but was not obliged to sell, and was bought by one who was willing but not obliged to buy.' Department of Highways v. Schulhoff, 167 Colo. 72, 445 P.2d 402, quoting Wassenich v. City of Denver, 67 Colo. 456, 186 P. 533.

Consequently, whenever it is desired that the opinion of a witness on the subject of value be submitted in evidence, it is always necessary, whether the witness is offered as an expert or not, to lay some foundation for the introduction of his opinion, demonstrating that he has had the means to form an intelligent opinion derived from an adequate knowledge of the nature and kind of property in controversy and its value. City & County of Denver v. Lyttle, 106 Colo. 157, 103 P.2d 1; Hoover v. Shott, 68 Colo. 385, 189 P. 848; Butsch v. Smith, 40 Colo. 64, 90 P. 61. In Denver v. Quick, supra, the court added the requirement that an expert cannot testify to the elements which went into the formation of his opinion, if they represent hearsay:

'A witness who has given his opinion as to value May state the reasons for his opinion, and he may of course state as such Reasons any circumstances which he would be allowed to give in evidence as independent facts; but He cannot under the guise of fortifying his opinion state to the jury any facts which, either because the facts themselves are not relevant or because his knowledge of the facts is entirely based on hearsay, are themselves inadmissible. (emphasis supplied)

Here, in laying the foundation for an opinion of value, DURA's appraiser was asked to describe in depth the income approach to valuation. He testified that an element in reaching an estimate of value under that method was a determination of 'economic' or 'imputed' rent. He explained that 'economic' rent was a conclusion based upon an examination of comparable leased property. In this case he stated he had reviewed multiple rental listings compiled by realtors and received information from lessors and lessees in order to allocate 'economic' rent to the subject property. On Voir dire by respondent's counsel, he admitted that few leases are recorded and that his opinion of 'economic' rent was not based on those properties which he personally managed. In view of this testimony we must concur in the ruling of the commission and hold that the objection was properly sustained. Under the rule in Denver v....