SPENCER DIESEL INJECTION & TURBO, INC., Plaintiff-Appellant, vs. THE CITY OF SIOUX CI TY, IOWA, A Municipal Corporation, et al., Defendants-Appellees.
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IN THE COURT OF APPEALS OF IOWA
No. 7-069 / 06-0494
Filed April 25, 2007
SPENCER DIESEL INJECTION & TURBO, INC.,
Plaintiff-Appellant,
vs.
THE CITY OF SIOUX CITY, IOWA, A Municipal
Corporation, et al.,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Woodbury County, Gary E. Wenell,
Judge.
Property owner appeals from a district court ruling in an eminent domain
appeal ascertaining the amount of damages for the condemnation of its fee
interest in real estate. AFFIRMED.
Stanley E. Munger and Jay E. Denne of Munger, Reinschmidt & Denne,
L.L.P., Sioux City, for appellant.
Connie E. Anstey, Assistant City Attorney, Sioux City, for appellee.
Heard by Sackett, C.J., and Mahan and Miller, JJ.
2
MILLER, J.
Property owner Spencer Diesel Injection & Turbo, Inc. (Spencer Diesel)
appeals from a district court ruling in an eminent domain appeal ascertaining the
amount of damages for condemnation of its fee interest in real estate at
$202,000. We affirm.
I.
BACKGROUND FACTS AND PROCEEDINGS.
On March 14, 1996, Spencer Diesel purchased an approximately 22,500
square foot piece of property located at 807 Third Street in Sioux City, Iowa for
$136,000. Don Mittelstadt, president of Spencer Diesel, acquired the property
through a defaulted loan. The property was used as a surface parking lot by the
former owner. The lot was paved with asphalt, which was in poor condition.
Soon after gaining possession, Mittelstadt learned there was an old gas station
on the lot that required environmental cleanup. He could not use the property
until the environmental cleanup process was finished in 1998. After the cleanup
was completed, Mittelstadt discovered Civic Partners, a development company in
California, was interested in developing the surrounding area.
He held the
property in hope of leasing it on a long-term basis to Civic Partners. However, he
never entered into a lease agreement with Civic Partners.
The City of Sioux City informed Mittelstadt in March 2002 it was interested
in acquiring the property for use as a parking lot in connection with the Downtown
Development Project, a thirty-five million dollar well-publicized downtown renewal
venture. Deane Davenport performed an appraisal of the property on behalf of
the city. Davenport valued the property at $202,000 as of April 9, 2002 pursuant
to a comparable sales or market data approach. He also analyzed the value of
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the property according an income capitalization approach, which resulted in a
value of $182,000. Davenport placed the greatest weight on the comparable
sales method. Upon receipt of Davenport’s appraisal, Mittelstadt offered the city
a two year lease at $3,500 per month with an option to buy at the end of the
lease for $600,000.
The City did not accept Mittelstadt’s offer and instead
initiated condemnation proceedings.
On April 23, 2003, the condemnation commission met to view the
condemned property and appraise the damages sustained by reason of the
condemnation.
After hearing testimony from Davenport and considering his
appraisal report, the commission determined Spencer Diesel would sustain
damages of $202,000.
Spencer Diesel did not appear at the condemnation
hearing.
Spencer Diesel filed an appeal with the district court. The city obtained a
second appraisal of the parking lot prior to trial on the appeal.
The second
appraisal was performed by Michael Plummer. Like Davenport, Plummer also
used both a comparable sales and income approach in his analysis of the
property. He determined total consideration should be given to the comparable
sales approach, which resulted in a value of $200,000 as of April 23, 2003.
Spencer Diesel did not retain an appraiser, nor did the company designate an
expert witness to testify at trial regarding the value of the property. Prior to trial,
the city filed a motion in limine, seeking in part to prohibit Spencer Diesel from
introducing any evidence of the value of the property based upon an income
capitalization method.
The district court determined that the business value
evidence should not be presented.
The city redacted all references to the
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income capitalization value from the appraisals completed by Davenport and
Plummer.
Spencer Diesel requested a continuance in order to obtain an
appraisal and designate an expert witness to testify as to the value of the
property. The district court denied that request. The parties waived a jury, and
the matter proceeded to trial before the court.
At trial, Davenport and Plummer’s redacted appraisal reports were
admitted into evidence.
Davenport and Fred Lock, Plummer’s supervisor,
testified on behalf of the city regarding the findings of the appraisals. 1
Both
Davenport and Lock stated they were able to determine the value of the property
through the comparable sales method. Davenport testified the fair market value
of the property was $202,000, while Lock testified the value of the property was
$200,000. In an offer of proof, Mittelstadt testified on behalf of Spencer Diesel
that he believed the property was worth $600,000. In another offer of proof,
Spencer Diesel’s accountant, Bob Houlihan, testified as to his valuation of the
property using an income approach. Houlihan’s testimony relied on redacted
portions of Davenport’s appraisal. He substituted different rental and occupancy
rates to arrive at values ranging between $450,000 and $589,000 for the
property.
The district court determined the fair market value for the property was
$202,000, the same value fixed by the condemnation commission. The court
relied on the appraisal reports completed by Davenport and Plummer and the
testimony presented by the city in support of those reports. The court noted that
1
Michael Plummer was unable to testify at trial due to a serious medical condition.
5
Spencer Diesel failed to present credible evidence it was entitled to more than
$202,000 as fair and just compensation for the taking of the property.
Spencer Diesel appeals the district court ruling. It contends the district
court erred in 1) barring all evidence of the income approach to the valuation of
Spencer Diesel’s property, 2) assessing the fair market value of Spencer Diesel’s
property at $202,000, and 3) denying Spencer Diesel’s request for a
continuance.
II.
SCOPE AND STANDARDS OF REVIEW.
The district court is given appellate jurisdiction over awards of the
compensation commission. Iowa Code § 6B.18; Chao v. City of Waterloo, 346
N.W.2d 822, 824 (Iowa 1984).
The case is tried to the district court as an
ordinary proceeding. Iowa Code § 6B.21. We review ordinary proceedings for
the correction of errors at law. Iowa R. App. P. 6.4; Sunrise Developing Co. v.
Iowa Dep’t of Transp., 511 N.W.2d 641, 643 (Iowa Ct. App. 1993). 2 The sole
issue for the district court’s determination is the amount of damages caused by
the taking.
Iowa Code § 6B.23; Iowa State Highway Comm’n v. Read, 228
N.W.2d 199, 202 (Iowa 1975).
The factual findings of the district court are
binding on us if supported by substantial evidence. Iowa R. App. P. 6.14(6)(a).
The amount of condemnation damages is peculiarly within the province of the
trier of fact. Sunrise Developing Co., 511 N.W.2d at 645. Thus, appellate courts
have consistently refused to interfere with the amount absent a showing it was
wholly unfair or unreasonable. Id.
2
Spencer Diesel contends we must conduct a de novo review of the district court
proceedings because their right to just compensation is constitutionally protected.
Although Spencer Diesel’s underlying right to just compensation is constitutional in
nature, our review of this type of case for errors at law is well established.
6
The district court’s evidentiary rulings are reviewed for an abuse of
discretion. Kurth v. Iowa Dep’t of Transp., 628 N.W.2d 1, 5 (Iowa 2001). The
court’s determination of whether to grant a motion to continue is also reviewed
for an abuse of discretion. In re Estate of Lovell, 344 N.W.2d 576, 578 (Iowa Ct.
App. 1983). An abuse of discretion occurs when the trial court exercises its
discretion on grounds clearly untenable or to an extent clearly unreasonable.
Kurth, 628 N.W.2d at 5 (citations omitted).
III.
MERITS.
Both the Iowa and United States Constitutions prohibit the taking of private
property without just compensation. U.S. Const. amend. V; Iowa Const. art. I, §
18; Aladdin, Inc. v. Black Hawk County, 562 N.W.2d 608, 611 (Iowa 1997). “In
determining what constitutes ‘just compensation,’ courts must look to the
individual facts of each case.”
Sunrise Developing Co., 511 N.W.2d at 643
(quoting CMC Real Estate Corp. v. Iowa Dep’t of Transp., 475 N.W.2d 166, 170
(Iowa 1991)). The general rule states:
A court may consider all factors indicative of the value of the
property, and which would have been present in the minds of a
willing buyer and a willing seller, unless the considerations
advanced are too speculative or remote, and thus not a necessary,
natural, or proximate result of the taking.
Kurth, 628 N.W.2d at 6 (citation omitted).
“‘When the entire property is taken . .
. the measure of damage is the reasonable market value at the time of
condemnation. . . .’” Id. (quoting Aladdin, 562 N.W.2d at 611-12). In such cases,
“the usual guide to the fair market value of the property is comparable sales
figures.” Id. at 7.
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Where condemnation of a fee interest is sought, evidence of business
profits is generally inadmissible as an independent element of damage or as
relevant in determining the value of the land because it is too uncertain and
depends upon too many contingencies. Id. The only exceptions to the rule
prohibiting valuation by the business profits or income capitalization approach
are when the property taken is a leasehold or land used for agricultural purposes.
Id. at 7 (citations omitted). Resort to other methods of valuation may also be had
where there are no comparables, no market, and no general buying and selling
of the kind of property in question. Sunrise Developing Co., 511 N.W.2d at 643
(citing Comstock v. Iowa State Highway Comm’n, 254 Iowa 1301, 1309, 121
N.W.2d 205, 210 (1963)).
A.
Business Value Testimony.
Spencer Diesel’s first assignment of error is that the district court erred in
excluding evidence of the value of the property based upon an income
capitalization approach. It argues: (1) there were no comparable sales, (2) an
exception to the general rule prohibiting evidence of the business value of the
property applies, and (3) the city was judicially estopped from arguing against the
income approach. We will address each argument in turn.
Spencer Diesel asserts there are no comparable sales because the
property was singularly situated in the heart of the city’s Downtown Development
Project.
We disagree.
The appraisers were able to determine fair and
reasonable market value based upon the comparable sales or market data
approach. In fact, both Davenport and Plummer placed the greatest weight on
the comparable sales method in valuing the property.
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The comparable sales identified by the appraisers included other
properties being used as parking lots in the same area as the subject property.
According to Spencer Diesel, the comparable sales identified by the appraisers
were not similar to its property given the city’s development project and the
property’s location in relation to that project. The district court correctly noted
that “comparable” in the context of property valuation does not mean identical.
See, e.g., Sears, Roebuck & Co. v. Sieren, 460 N.W.2d 887, 890 (Iowa Ct. App.
1990) (finding large anchor store space and small retail shop spaces to be
comparable properties). 3
Moreover, “the value to be ascertained does not
include, and the owner is not entitled to compensation for, any element resulting
subsequently to or because of the taking.” Olson v. United States, 292 U.S. 246,
255, 54 S. Ct. 704, 708-09, 78 L. Ed. 1236, 1244 (1934).
Spencer Diesel next argues we should adopt the approach utilized by the
courts in Standard Oil Co. v. Commonwealth of Kentucky, 414 S.W.2d 570 (Kent.
Ct. App. 1966) and Private Property for Municipal Court Facility v. Kordes, 431
S.W.2d 124 (Mo. 1968) and create a new exception to the comparable sales rule
for parking lots. We reject this argument and find those cases do not apply to the
situation presented herein. The property owners in both cases were able to
produce evidence of clear and permanent profits from a business operation on
the property. Standard Oil, 414 S.W.2d at 571; Kordes, 431 S.W.2d at 126.
There was no such evidence presented in this case because Spencer Diesel did
not operate a business on the property. The figures used by Spencer Diesel’s
accountant in valuing the property according to the income approach were
3
Although Sears involved a tax assessment dispute, we believe its reasoning regarding
the valuation of property is equally applicable in a condemnation action.
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uncertain and speculative due to the lack of any income history. See Comstock,
254 Iowa at 1308, 121 N.W.2d at 209 (determining that “[a]nticipated profit has
too many variables . . . to be the sole basis for fixing value.”). Furthermore, in
Standard Oil, the court allowed use of a recognized gasoline industry formula in
valuing the property. Standard Oil, 414 S.W.2d at 572. There is no accepted
parking lot industry formula upon which Spencer Diesel could rely.
Finally,
Kordes does not treat a surface parking lot as a species of unique property nor
does it sanction evidence of business profits as a per se rule of proof of value
when such land is taken. Land Clearance for Redevelopment Auth. of Kansas
City v. Coen, 773 S.W.2d 465, 468 (Mo. App. 1989).
Spencer Diesel argues in the alternative that evidence of business profits
should have been admitted pursuant to the recognized leasehold exception. We
determine this exception does not apply because there was no evidence of a
valid lease. The only evidence Spencer Diesel presented regarding a supposed
lease was Mittelstadt’s testimony that he had an oral contract with Civic Partners
to enter into a lease agreement for the parking lot. However, the city established
through its cross-examination of Mittelstadt and Spencer Diesel’s accountant,
Houlihan, that no such lease agreement was ever entered into.
Spencer Diesel’s final argument regarding its first assignment of error is
that the city was judicially estopped from arguing against the income
capitalization approach because the city relied on such an approach in the
condemnation proceeding. The doctrine of judicial estoppel “prohibits a party
who has successfully and unequivocally asserted a position in one proceeding
from asserting an inconsistent position in a subsequent proceeding.” Winnebago
10
Industries, Inc. v. Haverly, 727 N.W.2d 567, 573 (Iowa 2006) (citations omitted).
The doctrine is applicable in administrative, as well as judicial, cases. Id. A
“fundamental feature” of the doctrine is “proof that the inconsistent position has
been successfully asserted in the prior tribunal . . . .
Without such proof,
‘application of the rule is unwarranted because no risk of inconsistent, misleading
results exists.’” Id. (quoting Wilson v. Liberty Mut. Group, 666 N.W.2d 163, 166
(Iowa 2003) (other citations omitted).
condemnation hearing.
Spencer Diesel did not appear at the
More importantly, the damages awarded by the
commission were equal to Davenport’s valuation of the property using the
comparable sales approach. Therefore, judicial estoppel does not apply because
Spencer Diesel failed to present proof that the city successfully relied on the
income approach in the condemnation proceedings.
In conclusion, we find the district court did not abuse its discretion in
excluding evidence of the valuation of the property using an income approach.
Two appraisers testified there were comparable sales available. None of the
exceptions to the general rule prohibiting valuation by the business profits or
income capitalization approach applied.
The city was not judicially estopped
from seeking to exclude evidence of the income capitalization method. Having
determined the district court did not abuse its discretion in excluding evidence of
the business value of the property, we now must decide whether there is
substantial evidence supporting the award of $202,000 as compensation for the
taking of the property.
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B.
Fair Market Value of the Condemned Property.
Spencer Diesel claims the district court erred in finding that the value of
the property was $202,000. The district court’s determination that there were
comparable sales available is supported by substantial evidence.
The city
presented two expert opinions and appraisal reports as to the fair market value of
the property at the time of the condemnation.
Davenport’s appraisal of the
property using the comparable sales method valued the property at $202,000 as
of April 9, 2002. Plummer appraised the property at $200,000 as of April 23,
2003 pursuant to the comparable sales method.
Spencer Diesel did not retain an appraiser, nor did the company designate
an expert witness to testify at trial regarding the value of the property. Mittelstadt
testified that he believed the property was worth $600,000.
However, this
estimate is not supported by any other evidence admitted at trial. Spencer Diesel
contends the property should have been valued at a minimum of $13.42 per
square foot, which was the sale price of property located at 1214 Fourth Street
and identified by both of the city’s appraisers as a comparable sale. The district
court rejected this argument because Spencer Diesel failed to offer any credible
evidence suggesting that more weight should be given to the sale at 1214 Fourth
Street than the other comparable sales relied on by the city’s experts.
The heart of most property valuation cases is the evidence of experts
regarding their professional judgments as to the fair market value of the subject
property. Sears, Roebuck & Co. v. Siereni 484 N.W.2d 616, 617 (Iowa Ct. App.
1992); see also Kurth, 628 N.W.2d at 4; Sunrise Developing, 511 N.W.2d at 643.
The district court’s conclusion regarding the fair market value of the property is
12
supported by substantial evidence presented by the city.
We accordingly
conclude Spencer Diesel has failed to show the ascertainment of damages in this
case was wholly unfair and unreasonable. Sunrise Developing Co., 511 N.W.2d
at 645.
C.
Motion to Continue.
Spencer Diesel argues the district court erred in denying its request for a
continuance. A continuance “may be allowed for any cause not growing out of
the fault or negligence of the movant, which satisfies the court that substantial
justice will be more nearly obtained.” Iowa R. Civ. P. 1.911(1). Trial courts have
broad discretion in determining whether to grant motions for continuances.
Hawkeye Bank & Trust Co. v. Michel, 373 N.W.2d 127, 129 (Iowa 1985). As
stated previously, we review a court’s decision to grant or deny a continuance for
abuse of discretion. Lovell, 344 N.W.2d at 578. To prove the court abused its
discretion in denying the motion to continue, Spencer Diesel must show the court
exercised its discretion for clearly unreasonable or untenable reasons.
In re
Estate of Olson, 479 N.W.2d 610, 613 (Iowa Ct. App. 1991).
Following the district court’s ruling on the city’s motion in limine, Spencer
Diesel requested a six-month continuance so it could obtain an appraisal and
expert witness. Spencer Diesel’s motion to continue was made less than one
week before trial. The trial had been scheduled for approximately six months.
Spencer Diesel’s counsel was involved with the case for more than a year prior
to trial. The case had been pending for about two and a half years at the time
the request to continue was made. Under the circumstances, we cannot find the
13
district court abused its discretion in denying Spencer Diesel’s request for a
continuance.
IV.
CONCLUSION.
We conclude the district court did not abuse its discretion in prohibiting
evidence of the income capitalization approach or business profits when
determining the value of the condemned property.
We further conclude the
district court’s ruling ascertaining the damages for condemnation of Spencer
Diesel’s property at $202,000, the same amount assessed by the condemnation
commission, is supported by substantial evidence.
Finally, we conclude the
district court did not abuse its discretion in denying the motion to continue.
AFFIRMED.
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