Gulf South Pipeline Co. v. Pitre

• Decision Date: 10 June 2010
• Docket Number: No. 2007-CT-01308-SCT.,2007-CT-01308-SCT.
• Citation: 35 So.3d 494
• Parties: GULF SOUTH PIPELINE COMPANY, LPv.Blanche Marie Downey PITRE.
• Court: Mississippi Supreme Court

35 So.3d 494

GULF SOUTH PIPELINE COMPANY, LPv.Blanche Marie Downey PITRE.

No. 2007-CT-01308-SCT.

Supreme Court of Mississippi.

April 15, 2010.

Rehearing Denied June 10, 2010.

COPYRIGHT MATERIAL OMITTED

Leann W. Nealey, Jackson, Fred Exzell Bourn, III, Robert C. Galloway, Gulfport, attorneys for appellant.

David M. Sessums, Vicksburg, attorney for appellee.

EN BANC.

ON WRIT OF CERTIORARI

RANDOLPH, Justice, for the Court:

¶ 1. Gulf South Pipeline Company (“Gulf South”) sought a 5.59-acre easement and right-of-way for a forty-two-inch pipeline through 115 acres of property owned by Blanche Pitre in Warren County, Mississippi.¹ During trial in the Warren County Special Court of Eminent Domain, Gulf South's appraiser, Brent Johnston, valued the property to be taken at $38,250 ² and opined that the remainder of the property would be unaffected. Johnston testified (1) that no severance damages were due because of the pre-existing presence of a power line; (2) that, “because of the 700-foot distance between the pipeline and the other buildings,” no other damages arose; and (3) that “in the market I found no difference between property with a pipeline and not.” ³

¶ 2. Pitre's appraiser, James Hamilton, opined that total damage to Pitre's property, including damage to property not taken, was approximately $175,000. Hamilton used sales comparables for the property actually taken and valued it at $5,000 per acre. However, regarding damage to property not taken, Hamilton opined that such property would suffer an additional fifteen percent diminution in value, the shop would suffer an additional thirty percent diminution in value, and the house would suffer an additional twenty percent diminution in value. Hamilton testified that, in formulating his opinion for the additional diminution in value to the remainder property, shop, and house, he could not find sales comparables. Thus, he failed to offer evidence that he: (1) had applied established and reliable principles or methods; (2) had relied on accepted publications or other authoritative appraisal texts; or (3) otherwise had utilized underlying facts or data to support his opinion as to the remainder. Hamilton maintained that:

[j]ust about everything that we do is the opinion of the appraiser. And we either back it up with education and all of the information that we can get to arrive ... at our opinion. But when it ... gets down to it, it's our opinion as to ... value....

In Hamilton's estimation, “[i]t's tainted property. It's got that gas line on it, and people are going to be scared of it.”

¶ 3. Over objection, the trial court admitted Hamilton's testimony regarding diminution to the remainder, despite his earlier testimony that the reliability of an appraisal is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability or extent of adjustment necessary for time differences; and (d) the absence of nontypical conditions affecting the sales price. Following a jury verdict in favor of Pitre for $175,000, Gulf South moved for judgment notwithstanding the verdict, which was denied. On appeal, the Mississippi Court of Appeals affirmed. See Gulf South Pipeline Co. v. Pitre, 35 So.3d 519, 520 (Miss.Ct.App.2009). According to the Court of Appeals:

[w]e cannot hold Hamilton's testimony to a strict Daubert [ ⁴] analysis because he was unable to find comparable sales to compute an after fair market value. No argument was made that Hamilton was not a qualified expert. Gulf South only challenges his method of calculating the after fair market value of the property. We find that the trial judge, as the gatekeeper, did not err in allowing the jury to hear Hamilton's testimony.

Pitre, 35 So.3d at 523.

ISSUE

¶ 4. This Court will consider:

Whether an appraiser can offer opinion testimony on diminution, or lack thereof, without utilizing any of the three recognized methods for determining the fair market value of real property.⁵

ANALYSIS

¶ 5. The Mississippi Constitution states that “[p]rivate property shall not be taken or damaged for public use, except on due compensation being first made to the owner or owners thereof....” Miss. Const. art. 3, § 17 (1890). “[T]he words ‘or damaged’ were added to the Constitution to secure [for] a private property owner ... damages not covered by the actual taking.” Potters II, 608 So.2d at 1230 (citing Parker, 162 So. at 163). This Court has stated that “just compensation in cases involving a partial taking is generally the value of the part taken plus all the damages which the residue of the property suffers, including a diminution in the value of the remainder.” Miss. State Highway Comm'n v. Franklin County Timber Co., 488 So.2d 782, 785 (Miss.1986). In eminent-domain cases, “[t]he condemnor has the burden of proving the value of the condemned property.” Ellis v. Miss. State Highway Comm'n, 487 So.2d 1339, 1342 (Miss.1986). “After a prima facie case has been made out by the condemnor, then, if the landowner expects to receive more compensation than that shown, he must go forward with the evidence showing such damage.” Id. (quoting Miss. State Highway Comm'n v. Crooks, 282 So.2d 232, 235 (Miss.1973)).

¶ 6. Three standards are accepted in determining fair market value for real property: (1) the cost approach, (2) the income-capitalization approach, and (3) the market-data or comparative-sales approach. See Rebelwood, 544 So.2d at 1360; Franklin County, 488 So.2d at 785. “These approaches do not, considered singly, establish value. Each rather is one approach to value, with the appraiser's estimate of value being, in the end, an opinion which is the product of a reconciliation of the indications yielded by the three approaches.” Rebelwood, 544 So.2d at 1360. See also Adcock v. Miss. Transp. Comm'n, 981 So.2d 942, 947 (Miss.2008) (“all three methods of valuation need not be considered in every appraisal, particularly those of non-commercial property”). The market-data or comparable-sales approach was used by the experts for both parties for the property actually taken, but not for the remainder. Using that approach, “the value estimate is predicated upon prices actually paid in open market transactions for various properties similar to the one at issue in the appraisal.” Rebelwood, 544 So.2d at 1360-61 (emphasis added). Neither expert offered admissible market-data or comparable-sales evidence for the diminution, or lack thereof, in the value of the remainder.⁶

¶ 7. Mississippi Rule of Evidence 702 provides that:

[i]f scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert ... may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

Miss. R. Evid. 702 (emphasis added). This Court has stated that “[u]nder the modified Daubert standard, the trial court must first determine whether expert testimony is relevant and, second, whether the proffered testimony is reliable.” Adcock, 981 So.2d at 946-47 (emphasis added). No serious question arises as to relevancy. Certainly, the value of property is relevant in an eminent-domain taking. See

Tunica County v. Matthews, 926 So.2d 209, 214 (Miss.2006). In determining reliability, the:

[f]actors to consider may include “whether the theory or technique can be and has been tested; whether it has been subjected to peer review and publication; whether ... there is a high known or potential rate of error; whether there are standards controlling the technique's operation; and whether the theory or technique enjoys general acceptance” within the expert's particular field.

Adcock, 981 So.2d at 947 (quoting Miss. Transp. Comm'n v. McLemore, 863 So.2d 31, 37 (Miss.2003)).

¶ 8. Under Rule 702, “trial courts are charged with being gatekeepers in evaluating the admissibility of expert testimony.” Watts v. Radiator Specialty Co., 990 So.2d 143, 146 (Miss.2008) (citation omitted). In short, “[t]he trial judge has the sound discretion to admit or refuse expert testimony; an abuse of discretion standard means the judge's discretion will stand unless the discretion he used is found to be arbitrary and clearly erroneous.” Troupe v. McAuley, 955 So.2d 848, 856 (Miss.2007) (quoting Poole v. Avara, 908 So.2d 716, 721 (Miss.2005)) (emphasis added). However, merely speculative expert opinions should not be admitted. See Edmonds v. State, 955 So.2d 787, 792 (Miss.2007) (“a court should not give ... an expert carte blanche to proffer any opinion he chooses”); Matthews, 926 So.2d at 214 (“the trial court is vested with a gatekeeping responsibility to prevent the admission of expert testimony based on guess or conjecture”); McLemore, 863 So.2d at 41.

¶ 9. Neither expert's testimony as to diminution of the remainder satisfies the requirements of our rules and established caselaw. Both failed to use time-tested techniques, supported by peer review or publications, and/or industry standards generally accepted within his field of expertise. Neither offered comparable sales, whether from Warren County, or any other county in this state. Hamilton offered no pretense that he was following any recognized method or procedure acceptable in the appraisal industry, and he admitted he was not relying on peer-reviewed articles or industry publications.⁷ Furthermore, Hamilton's claim that no comparisons were available defies both judicial knowledge and the evidence excluded by the trial court. See footnote 3 supra. Pipelines run through numerous counties in Mississippi and have for more than half a century. Pipelines and power grids cross thousands of tracts of land in Mississippi. As such, finding comparable sales with utility or...