Lambrecht v. State Highway Commission

• Decision Date: 28 February 1967
• Citation: 34 Wis.2d 218,148 N.W.2d 732
• Parties: William H. LAMBRECHT et al., Appellants, v. STATE HIGHWAY COMMISSION of Wisconsin, Respondent.
• Court: Wisconsin Supreme Court

Page 732

148 N.W.2d 732

34 Wis.2d 218

William H. LAMBRECHT et al., Appellants, v. STATE HIGHWAY COMMISSION of Wisconsin, Respondent.

Supreme Court of Wisconsin.

Feb. 28, 1967.

Smith, Puchner, Tinkham & Smith, Wausau, for appellants.

Bronson C. La Follette, Atty. Gen., Robert D. Martinson, Asst. Atty. Gen., Madison, Lee A. Bernsteen, Dist. Atty., Oneida Co., Rhinelander, for respondent.

BEILFUSS, Justice.

The issues are: Was it error to admit the opinion evidence as to value based in part upon capitalization of income and, if so, was it prejudicial error?

The defendant, State Highway Commission, moved for a new trial upon the following grounds: (1) because of errors in trial, and (2) in the interests of justice.

In the affidavit in support of the motion, one of the errors at law alleged by the defendant was 'over objection, the expert witnesses for plaintiffs based their opinions of value upon an 'income approach' basis, which was admittedly founded upon testimony in a prior proceeding as to net income which deducted nothing for plaintiffs' own services; one of the plaintiffs also testified as to value upon the same basis; and the result of the verdict manifests that the jury considered that testimony favorably in reaching their verdict.'

The trial court granted the motion for a new trial upon this phase of the motion and in doing so stated as follows:

'This court grants and defendant State Highway Commission of Wisconsin's motion to set aside this verdict and for a new trial because of the fact that the jury had before it testimony on the part of Mr. Foltz and Mr. Stone, two respected real estate men in this community, in which they placed values, but the obvious conclusion from their testimony is that they misunderstood the questions or misunderstood their responsibilities. There was no testimony in this case that would permit them to find values as they did in this case. And in view of the fact that their values now based upon what they claim them to be based upon, the income of the property, is so far different from what they theretofore determined to be the fair market value based upon reconstruction less depreciation, this court must conclude that their testimony was given because of a misunderstanding of their responsibilities in this case or a misunderstanding of the question or based upon an improper formula. They both testified that income property that returned the investment within five or six years would be considered a good investment and upon that basis they fix this value at around 39 or $40,000 before the taking. As a matter of fact, they included, both of them included, in what they thought to be the income derived from the property, the value of the services of three people, the two plaintiffs and their son. Obviously, their services, the value of their services should have been deducted from what they considered to be the net income of the property, and which would result in the true value of the income from the property and in using the formula they used or presumed to use they would have come to a much different conclusion.

'This court from the very beginning felt that this testimony was such that it would shock the conscience of the court to permit this verdict to stand based upon that evidence.

'The court grants the motion to the defendant to set aside the verdict and for a new trial.'

The order for new trial was granted 'because of error in trial' and not in the interests of justice.

Neither counsel's affidavit nor the court's statement to the effect that Foltz and Stone included the value of the services in the net income are exactly correct.

After Foltz and Stone had testified, counsel for the defendant moved to strike the testimony of Foltz, Stone, and Mrs. Lambrecht as to their opinion of value derived from income approach. The motion was not granted. Foltz and Stone were both recalled and both testified that the fact that value of the services of the owners had not been deducted from the net profit would not change their opinions as to fair market value.

In innumerable cases we have stated that an order for a new trial rests in the discretion of the trial court and the order will not be set aside or reversed unless based upon an abuse of discretion.

The rule is subject, however, to the qualification as set forth in Holtz v. Fogarty (1955), 270 Wis. 647, 651, 72 N.W.2d 411, 414:

'Counsel for defendants states correctly that the granting of a new trial for error or in the interest of justice rests largely in the discretion of the trial court. The rule does not apply however where it is clear that the court proceeded upon an erroneous view of law. Weissgerber v. Industrial Comm., 242 Wis. 181, 7 N.W.2d 415; Graff v. Hartford Accident & Indemnity Co., 258 Wis. 22, 44 N.W.2d 565; Myhre v. Hessey, 242 Wis. 638, 9 N.W.2d 106, 150 A.L.R. 889.'

The State Highway Commission contends that the testimony of net income as given by the owners and used by the appraisers was inadmissible and incompetent to establish fair market value, and cites as authority 5 Nichols, Eminent Domain (3d ed.), p. 340, sec. 19.3(1):

'Commercial property. If the owner of property uses it himself for commercial purposes, the amount of his profits from the business conducted upon the property depends so much upon the capital employed and the fortune, skill and good management with which the business is conducted, that it furnishes no test of the value of the property. It is, accordingly, well settled that evidence of the profits of a business conducted upon land taken for the public use is not admissible in proceedings for the determination of the compensation which the owner of the land shall receive.' (Emphasis supplied.)

However, Nichols states and exception to the rule, 5 Nichols, supra, pp. 354, 355, sec. 19.3(5):

'It has been held that where the character of the property is such that a profit is produced thereby without the labor of the owner being expended thereon or where the profits derived from its use are the chief source of its value evidence of such profits is admissible as a criterion of the value of the property.

'Where property is so unique as to make unavailable any comparable sales data evidence of income has been accepted as a measure of value. * * *'

Cited as authority for the exception is a Wisconsin case, Weyer v. Chicago, Wisconsin & Northern Railroad Co. (1887), 68 Wis. 180, 183--184, 31 N.W. 710, 712, wherein it stated:

'The court was asked to instruct the jury that they had no right...