Inadmissible Property Valuation Evidence Could Not Be Used To Impeach Expert During Eminent Domain Proceeding

A court of appeal recently held that inadmissible evidence could not be used during cross- examination to impeach an expert in an eminent domain proceeding.  The court concluded that prior case law did not create a “cross-examination exception” regarding valuation evidence, which statutory law bars as inadmissible, but instead merely allowed a party to impeach an expert by introducing a prior inconsistent valuation by the testifying expert.  (City of Corona v. Liston Brick Company of Corona (--- Cal.Rptr.3d ----, Cal.App. 4 Dist., August 14, 2012).

Facts

Liston Brick Company of Corona (“Liston”) owns approximately 10.75 acres of land in the City of Corona (“City”).  The City filed eminent domain proceedings to acquire easements for the purpose of road widening and related improvements over Liston’s property.  City sought easements for a drain and landscape, slope easements, temporary construction easements, and a right of way, all of which covered approximately 1.45 acres.  City deposited $120,200 as probable compensation and Liston withdrew the deposit and thereby waived any right to contest the taking. 

The Riverside County Transportation Company (“Riverside”) became interested in acquiring Liston’s property and commissioned an appraisal of the entire property (the “Perdue appraisal”).  The appraiser valued the property at $10 per square foot.  Liston and Riverside entered into a purchase and sale agreement for the portion of Liston’s property that did not include the property sought by City (“Riverside Agreement”).  The Riverside Agreement also gave Riverside an option to buy all of the Liston property if City failed to acquire the property interest it sought in the eminent domain action.  The option set the price for the property subject to the eminent domain action at $21 per square foot. 

In the eminent domain action, Liston designated its vice president as an expert on valuation of the property.  The vice president based his opinion on the Riverside Agreement.  City asked the court to find that the following evidence was inadmissible on the issue of valuation:  (1) the Perdue appraisal and any testimony based on it, and (2) the Riverside Agreement and any testimony based on it.  City alleged the evidence was inadmissible pursuant to Evidence Code section 822, subdivision (a).  Liston claimed that is should be able to cross-examine City’s expert witness with the agreement and the appraisal. 

The trial court ruled the Riverside Agreement and the Perdue appraisal were not admissible for the purpose of cross-examination.  Both Liston and City agreed this ruling made it impossible for Liston to dispute the valuation of the property performed by City’s expert.  Therefore, they stipulated to a judgment that allowed City to condemn the property and set just compensation at less than $3 per square foot, for a total of $180,000.  The stipulation preserved Liston’s right to appeal.

Decision

Evidence Code sections 810 through 824 set out special rules of evidence that apply to any action where the value of property must be ascertained, including eminent domain proceedings.  These rules provide that the value of property can only be shown by the opinion of a qualified witness, which may be based on a matter the witness personally knows or perceives or one which is “made known to the witness at or before the hearing, whether or not admissible, that is of a type that reasonably may be relied upon by an expert in forming an opinion as to the value of property . . . , unless a witness is precluded by law from using such matter as a basis for an opinion.” Evidence Code § 814.  The opinion may be based in certain circumstances on a sale or contract for sale that included the property at issue.  Evidence Code § 815.

Evidence Code section 822, subdivision (a), contains six categories of evidence that are inadmissible in eminent domain and inverse condemnation hearings and that cannot be taken into account as a basis for an opinion regarding the value of property.  Section 822, subdivision (a)(4), excludes “[a]n opinion as to the value of any property or property interest other than that being valued.”  Evidence Code § 822, subdivision (a)(4).  This rule, known as “the rule against appraising the comparable” provides that an appraiser is not allowed to “determine the value of an adjacent property and use it as a comparable.”  City claimed this rule applies to the Perdue appraisal and prevents its use at trial.

Additionally, Section 822, subdivision (a)(1), excludes evidence regarding “[t]he price or other terms and circumstances of an acquisition of property or a property interest if the acquisition was for a public use for which the property could have been taken by eminent domain.”  This evidence is excluded because the price paid under such circumstances “is not a reasonable or fair test of market value.”  Subdivision (a)(2), excludes evidence regarding “[t]he price at which an offer or option to purchase or lease the property or property interest being valued or any other property was made, or the price at which the property or interest was optioned, offered, or listed for sale or lease.”  City argued that both subdivision (a)(1) and (a)(2) apply to the Riverside Agreement, and prevents its use at trial.

Liston did not contend on appeal that the Riverside Agreement and Perdue appraisal were outside the scope of section 822, and therefore it forfeited any such contention.  However, the court found that even if it overlooked Liston’s forfeiture, the Perdue appraisal would be excluded under section 822, subdivision (a)(4) because it related to a fee simple interest in the entire Liston property but City only sought to acquire easement interests over 1.45 acres of that property.  Therefore, the Perdue appraisal offered an opinion as the value of a different property interest than the one at issue in the eminent domain action. 

The court also rejected Liston’s argument that even though the Riverside Agreement and Perdue appraisal are otherwise inadmissible, it was entitled to use them during its cross-examination of City’s expert.  Section 822, subdivision (a), clearly states that any evidence in its six categories is inadmissible.  This means that not only can the evidence not come in on direct examination, it cannot be used to test the depth of a witnesses’ knowledge on cross-examination. 

A case cited by Liston that was decided in 1970 allowed evidence excluded by section 822, subdivision (a), to be introduced for purposes of cross-examination.  In that case, an expert valued a building at $8 per square foot.  On cross-examination, the expert was questioned regarding a previous appraisal of another building nearby and the expert admitted that he had valued that building at $16 per square foot.  The court of appeal found the evidence regarding the valuation of the nonsubject property was admissible to impeach the credibility of the expert witness.

The Law Revision Commission later disagreed with the 1970 case and added a comment to section 822, which states: “Section 822 does not prohibit cross-examination of a witness on any matter precluded from admission as evidence if such cross-examination is for the limited purpose of determining whether a witness based an opinion in whole or in part on a matter that is not a proper basis for an opinion; such cross-examination may not, however, serve as a means of placing improper matters before the trier of fact.”  The court found that this comment was intended to reject the earlier case law.  The court found that the earlier case, if it “is good law at all,” is limited in application to “where the same expert has previously rendered an inconsistent valuation of other property.”  It does not allow for an expert to be cross-examined regarding another expert’s valuation of other property. 

The court concluded that, at most, the prior case “merely allows a party to an eminent domain proceeding to impeach an expert with a prior inconsistent valuation by that expert.”  Liston did not offer evidence of a prior inconsistent valuation by City’s expert, and therefore the evidence it offered was not admissible on cross-examination. 

Questions

If you have any questions concerning the content of this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.

William T. Chisum or Jeffrey L. Massey | 916.321.4500

 

Published In: Administrative Agency Updates, Civil Procedure Updates, Commercial Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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