Pinczkowski v. Milwaukee County

WEDEMEYER, PJ.

¶ 44. (dissenting). I write separately because, in my opinion, the trial court erred when it determined that the sales of the properties adjacent to the Pinczkowski property were not admissible into evidence. Because the sales were voluntary, arms-length transactions, this evidence should have been admitted. Accordingly, I would reverse on this basis.

*547 A. Comparable Sales

¶ 45. The arguments of the parties are clearly set forth. Milwaukee County states that Pinczkowski failed to meet her heavy burden of demonstrating that the sales were indeed voluntary. The County also contends that whenever a sale involves an entity possessing the power of eminent domain, that sale can never be considered voluntary and, therefore, cannot be used to establish fair market value. In support of its position, the County relies on three older Wisconsin cases: Blick v. Ozaukee County, 180 Wis. 45, 192 N.W. 380 (1923); Herro v. DNR, 67 Wis. 2d 407, 227 N.W.2d 456 (1975); and Kirkpatrick v. State, 53 Wis. 2d 522, 192 N.W.2d 856 (1972). Pinczkowski, on the other hand, urges this court to acknowledge the difference between this case and the case law presented by the County. Pinczkowski argues that the facts and circumstances here justify making an exception to the general rule of inadmissibility proffered by the County. The majority accepts the County's argument and concludes that established precedent controls this case. My review strongly suggests otherwise.

¶ 46. In my opinion, Blick, Herró and Kirkpatrick do not control disposition of the instant case for the reasons that follow. In Blick, the Wisconsin Supreme Court found that "the price paid by the condemnor for similar land, even if proceedings had not been begun, where the purchaser has the power to take by eminent domain, is not admissible." Id., 180 Wis. at 46. The court reasoned that the sale of land purchased by an entity with the power of eminent domain does not represent fair market value because the compromised price may be more or less than fair market value in order to avoid the annoyance, expense, and uncertainty *548of litigation. Id. at 47. However, Blick is a case involving a party possessing eminent domain that is actually invoking this power to condemn; therefore, this case does not involve an arms-length transaction and it is not comparable to the present case.

¶ 47. In Herró, the court found the prices the DNR paid for comparable property inadmissible into evidence in order to establish fair market value of plaintiffs property. However, the court's rationale had nothing to do with the DNR's power to condemn, but rather, with the fact that the DNR acquired the comparable property under threat of condemnation. Id. at 433. In Herró, although condemnation proceedings had not begun, "the history of the pending litigation and the prior negotiations clearly indicated that [the] DNR intended to reacquire the property." Id. at 431. Thus, the sales of the comparable properties were not voluntary, arms-length transactions.

¶ 48. The County also cites Kirkpatrick. This case refers to 4 Nichols on Eminent Domain § 12.3113(2) (3d ed. 1978), which states, "[i]f a sale is made to [a body] about to institute [condemnation] proceedings if it cannot acquire the land by purchase at a satisfactory price, the amount paid is not a fair test of market value." However, a look at the complete rule gives a better distinction between voluntary sales and those made through condemnation or under threat of condemnation:

If a sale is made to [a body] about to institute condemnation proceedings if it cannot acquire the land by purchase at a satisfactory price, the price paid is not a fair test of market value. However, the mere fact that [a body], which purchased land by voluntary sale, was invested with the power of eminent domain does not in *549and of itself show that the sale was a compulsory settlement rather than a fair transaction in the market.

5 Nichols on Eminent Domain § 21.02(6) (emphasis added).

¶ 49. It is true that Blick, Herró and Kirkpatrick all held that the prices paid in transactions involving condemnation proceedings, or the amount paid by the condemnor for similar land, even if condemnation proceedings have not yet started, is inadmissible. See, e.g., Blick, 180 Wis. at 46. Wisconsin courts, however, have not had occasion to consider the admissibility of the purchase price of a comparable property negotiated between a body with the power of eminent domain and a seller in a voluntary transaction.1

¶ 50. In setting forth her position, Pinczkowski acknowledges that there are three ways in which an entity possessing eminent domain can acquire property. The most extreme way is where the property owner does not consent to the transfer, but rather, the property is transferred to the entity pursuant to a condemnation process (see Wis. Stat. § 32.05(7) (2001-02)).2

¶ 51. The second method is one of negotiated conveyance before formal initiation of condemnation proceedings (see Wis. Stat. § 32.05(2a)). This "negotiated conveyance" is considered a sale under threat of *550condemnation. With this method, certain guidelines are to be followed: The purchaser has to provide the property owner with certain information and materials. Section 32.05(2a). After the acquisition, the property owner is served with a document indicating the property owner has the right to appeal the amount paid. Id. In addition, such transactions are exempt from transfer tax. Wis. Stat. § 77.25(12). In fact, deeds recorded from a sale under threat of condemnation must indicate that the transfer was made under threat of condemnation in order to qualify for this tax exemption.

¶ 52. The third alternative for an entity possessing eminent domain is to acquire property in an absolutely voluntary manner, also referred to as an "arms-length transaction." As opposed to the second method, this voluntary alternative does not include the right to appeal the amount paid. It does not allow for a transfer tax exemption, and it will not indicate on the deed that the sale was made under threat of condemnation.

¶ 53. Based on my review, the transactions involving the properties adjacent to the Pinczkowski property were arms-length transactions, pursuant to the third alternative described above. The County entered into standard real estate purchase contracts for each property involved; there was no indication on the deed that the properties were acquired under threat of condemnation as required by Wis. Stat. § 32.05(2a), and the sellers paid transfer taxes.

¶ 54. In addition, the County's expert witness who investigated these sales determined that they were voluntary. In Kevin Zarem's appraisal review of the sale of 5607 South 6th Street and 5673-75 South 6th Street, he stated that "[t]he opportunity to acquire [these] site[s] to alleviate peak seasonal parking problems *551prompted the County to negotiate with the property owner to voluntarily sell their property." (Emphasis added.)

¶ 55. The issue then becomes whether an exception should be made to the general rule of inadmissibility in condemnation purchases where the sale is voluntary. As noted, Wisconsin has not squarely addressed this issue.

¶ 56. Courts in other jurisdictions, however, that have dealt with this issue of voluntary sales have concluded that certain facts justify making an exception to the general exclusionary rule. In Slattery Co. v. United States, 231 F.2d 37, 41 (5th Cir. 1956), the court stated:

"The prices paid in settlement of condemnation proceedings or the sum paid by the condemnor for similar land, even if proceedings have not been begun, is inadmissible[.]"... The only recognized exceptions to it are in cases where the fact that parties were condemnor and condemnee either was not known or had no influence because the sale was not in connection with, or in anticipation of, condemnation proceedings.

(Emphasis added.)

¶ 57. In Cain v. City of Topeka, 603 P.2d 1031 (Kan. Ct. App. 1979), the landowner used as evidence the prices of land purchased by a hospital, an entity possessing the power of eminent domain, to show the value of his land. The court in this case found that the purchase was an arms-length transaction and therefore the information concerning the purchase is admissible. Id. at 1034. The court stated, "[t]he mere fact that the purchaser of land was invested with the power of eminent domain does not in and of itself indicate that the sale was anything other than a fair, arm's length *552transaction.... If the evidence is such as to indicate that an arm's length transaction occurred, then the rule [prohibiting admission] does not apply." Id. (Citations omitted.)

¶ 58. In Covina Union High School Dist. v. Jobe, 345 P.2d 78 (Cal. Ct. App. 1959), the plaintiffs wished to purchase strips of land from defendants to be used to widen a highway. The appellate court affirmed the trial court's decision to admit into evidence the prices paid for other similar strips of land purchased for the same reason by the State of California. Id. at 81-82. The appellate court realized that the reason the plaintiffs wished to exclude the prices paid for the other strips of land was because plaintiffs believed that the sales were not voluntary. Id. at 81. However, the court found that these purchases were voluntary, and reasoned that there should be no reason why voluntary sales involving parties with the power to condemn do not represent fair market value when compared to transactions involving parties that do not possess the power of eminent domain. Id. at 83.

¶ 59. Pinczkowski asserts that we should follow the modern trend in other jurisdictions, which is to closely examine the sales of comparable property purchased by entities possessing eminent domain and make an exception to admit the evidence if the sales are found to be voluntary. See also Tennessee Valley Auth. v. Easement and Right of Way, 405 F.2d 305, 307 (6th Cir. 1968) (this case also states the exception in which a sale involving a party with eminent domain is voluntary when not threatened with condemnation. The court found that the sale price of land bought by the school board is admissible because the sale was voluntary).

¶ 60. Based on the reasoning set forth in these foreign referenced cases, I conclude Wisconsin should *553follow suit and declare an exception to the general exclusionary rule for admission of comparable sales involving a party possessing eminent domain power where the transaction is voluntary and one of arms length. We need to specifically address this issue and align with the other jurisdictions that permit the exception to the exclusionary rule.

¶ 61. If it is determined that the transaction falls into the third category and is a voluntary, arms-length sale, the exclusionary rule should not control. Rather, because the sale is voluntary, the general rules relative to assessing property value should apply. Comparable sales are the best evidence of value. United States v. Miller, 317 U.S. 369, 374-75 (1943), Olson v. United States, 292 U.S. 246, 257 (1934). Wisconsin law dictates that evidence of the price paid for comparable property is admissible. Kamrowski v. State, 37 Wis. 2d 195, 201-02, 155 N.W.2d 125 (1967). The County contends that comparable sales law can never apply when the buyer has the power of eminent domain because the sale will never be voluntary. It ill behooves a court to follow a precedential principle of law for which no rational basis exists. To hold an owner of real estate hostage to an entity that possesses the power of condemnation, even when there is no evidence it intends to exercise such power when negotiating an arms-length transaction, defies every principle of logic and common sense.

¶ 62. Pinczkowski admits that she carries a heavy burden to prove a voluntary sale when the transaction involves an entity possessing the power of eminent domain; however, she also stresses that just because an entity possesses eminent domain, this fact alone should not result in assuming the sale was involuntary. I agree. *554In Amory v. Commonwealth, 72 N.E.2d 549, 559-60 (Mass. 1947), the court stated:

A sale to one having the power either to purchase or to take by eminent domain is not for that reason alone to be excluded .... [but] must be scrutinized more closely than one to a party not possessing that power, but if found to be free and voluntary there is no reason why it should be treated differently from one made to such a party.

¶ 63. Therefore, it is necessary to examine the facts and circumstances of the comparable sales. If the comparable sales were voluntary arms-length transactions, the evidence of these transactions is admissible, despite the fact that the buyer possesses the right of eminent domain.

¶ 64. Citing Transwestern Pipeline Co. v. O'Brien, 418 F.2d 15 (5th Cir. 1969), the County argues that Pinczkowski failed to meet her burden. In Transwest-ern, the court found that conclusory statements that sales were voluntary were insufficient to carry this heavy burden to demonstrate that the sales were voluntary and were not influenced by the buyer's possession of the power of eminent domain. The County argues that Pinczkowski relies on similar conclusory statements without providing the necessary factual basis to support the claim that the circumstances surrounding the County's acquisition of properties adjacent to the Pinczkowski property were not public knowledge. I disagree. Pinczkowski provided ample facts to conclude that the sales were voluntary. She proffered the following facts in her offer of proof: (1) the purchased properties were sold under standard real estate contracts; (2) the deeds to the purchased properties were not given "in lieu of condemnation"; (3) the sellers paid transfer tax on the sales, which is not *555required if the transfer is pursuant to eminent domain; and (4) appraisals of the value of the property were consistent with the sale price indicating a voluntary arms-length transaction. The County simply states this conclusion and never indicates what factual basis is necessary as provided in Transwestern. Based on the specific factual assertions proffered in the offer of proof, the instant case is distinguishable from Transwestern.

¶ 65. Accordingly, I would reverse on this issue because, in my opinion, the trial court erred in excluding the comparable sales evidence.

B. Same Project Rule

¶ 66. The County also claims that because the adjacent properties and the Pinczkowski property were purchased as part of the same airport expansion project, this exception cannot be used. The rationale supporting this "same project" rule is that the market value of the condemned property "can be affected, adversely or favorably, by the imminence of the very public project that makes the condemnation necessary." United States v. Reynolds, 397 U.S. 14, 16 (1970). As a result, "the compensation to the owner for the taking of his land must be fixed as though the particular public improvement had never been conceived, planned, announced or begun." Layne v. Speight, 529 S.W.2d 209, 212 (Tenn. 1975). This requires the exclusion of evidence of the price paid for adjacent land acquired for use in the same public project. State v. Hodge, 194 So. 2d 827, 829 (Ala. 1967).

¶ 67. This "same project" rule is not persuasive for several reasons. First, this new issue was not even considered by the trial courtthe County did not move to bar the evidence of the sales on this basis. Because it is *556raised for the first time on appeal, this court may decline to consider it. Wirth v. Ehly, 93 Wis. 2d 433, 443-44, 287 N.W.2d 140 (1980).

¶ 68. Second, the rule would not apply here. The same project rule, Wis. Stat. § 32.09(5)(b), states: "Any increase or decrease in the fair market value of real property prior to the date of evaluation caused by the public improvement for which such property is acquired .. . may not be taken into account in determining the just compensation for the property." Thus, the same project rule states that the impact of a public improvement for which property is taken should not be considered in determining fair market value. The rule does not say, as the County suggests, that sales of property acquired for the same project cannot be considered in estimating fair market value.

¶ 69. Third, assuming that the same project rule did state that sales of property acquired for the same project cannot be considered, at least one of the barred sales was purchased as part of a different project. The property at 5607 South 6th Street, adjacent to the Pinczkowski property to the north, was purchased as part of the Homeowner Protection Program, which funded acquisitions of residential properties for noise abatement, not for airport parking expansion. Therefore, this property was not acquired for the same project as the Pinczkowski property and the same project rule would not apply to this property.

¶ 70. Finally, the County argues that if Wisconsin allows into evidence the sales of comparable property purchased by entities possessing eminent domain if the sales are found to be voluntary, this exception will add to the complexity and length of condemnation proceedings. The result will be longer and more complex trials, *557an increase in cost and time necessary for discovery, and confusion for the jury. This argument is misplaced.

¶ 71. The jury in a condemnation proceeding has the duty to determine fair market value, often based upon sales of comparable properties. In order for a sale to be considered an indication of market value, the sale must meet various conditions. For example, 7A Nichols on Eminent Domain § 13.06 states that "[n]either buyer nor seller [can be] under undue pressure to buy or sell"; and "if a sales transaction does not meet the definition of market value,3 then the sale cannot be used as a market indicator of the probable sale price of the subject property." (Footnote added.)

¶ 72. Thus, determining whether a seller felt under compulsion to sell to an entity with the power of eminent domain would not add anything new to a jury's duty. A jury is capable of determining whether a sale to an entity possessing eminent domain qualifies as a market sale just as it must look at compulsion or other factors indicating whether a sale is a market sale.

C. Conclusion

¶ 73. In sum, I conclude that in a sales transaction involving a party possessing eminent domain, we should not assume that the party took advantage of this power; rather, we must first ask whether the sale was voluntary or involuntary. If the sale of a comparable property is found to be voluntary, this evidence should be allowed to be admitted into evidence to be used to *558assess fair market value for the land in question, regardless of the eminent domain power. In other words, transactions involving entities with eminent domain power that do not use this power should be treated the same as transactions involving parties that have no eminent domain power.

¶ 74. Accordingly, I respectfully dissent.

One commentator discusses the "unmaking of a precedent" in suggesting that "some Justices seem to think that treating precedent like silly putty is preferable to acknowledging that it might be in need of revision." Suzanna Sherry, The Unmaking of a Precedent, 2003 Sup. Ct. Rev. 231. The precedent here, in my opinion, is distinguishable and, if not, needs to be revised.

All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.

"By 'fair market value' is meant the amount for which the property could be sold in the market on a sale by an owner willing, but not compelled, to sell, and to a purchaser willing and able, but not obliged, to buy." Wis JI — Civil 8100 (1994) (eminent domain: fair market value).