Opinion
A17-1539
08-12-2019
County of Hennepin, Respondent, v. Sandip C. Bhakta, et al., Appellants.
Michael O. Freeman, Hennepin County Attorney, Louis K. Robards, Assistant County Attorney, Minneapolis, Minnesota (for respondent) Daniel J. Biersdorf, Ryan R. Simatic, Biersdorf & Associates, P.A., Minneapolis, Minnesota (for appellants)
This opinion will be unpublished and may not be cited except as provided by Minn . Stat. § 480A.08, subd. 3 (2018). Affirmed
Kirk, Judge Hennepin County District Court
File No. 27-CV-14-20893 Michael O. Freeman, Hennepin County Attorney, Louis K. Robards, Assistant County Attorney, Minneapolis, Minnesota (for respondent) Daniel J. Biersdorf, Ryan R. Simatic, Biersdorf & Associates, P.A., Minneapolis, Minnesota (for appellants) Considered and decided by Cochran, Presiding Judge; Johnson, Judge; and Kirk, Judge.
Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10. --------
UNPUBLISHED OPINION
KIRK, Judge
Following a jury verdict awarding appellants minimum-compensation damages for the condemnation of their motel, appellants argue that the district court abused its discretion by: (1) denying appellants' motion to exclude the expert testimony of respondent's minimum-compensation witness; (2) denying appellants' motion to exclude respondent's minimum-compensation evidence; (3) denying appellants' motion to exclude the assessed value of their property; and (4) using its equitable powers to offset appellants' judgment in accordance with a prior order requiring satisfaction of appellants' unpaid tax liabilities. We affirm.
FACTS
Appellants Sandip C. Bhakta and Jagruti S. Bhakta (collectively the Bhaktas) were the owners of a motel located in Brooklyn Park, Minnesota. In May 2012, respondent County of Hennepin (the county) filed a petition to acquire the Bhaktas' motel by eminent domain as part of a project to upgrade County Road 81. On August 14, 2012, the district court granted the county's condemnation petition and appointed commissioners to determine damages resulting from the taking. On August 17, 2012, the county made a quick-take payment to the Bhaktas of $765,443.
Following administrative hearings and an inspection of the Bhaktas' parcel, the commissioners awarded the Bhaktas damages of $760,000. The Bhaktas appealed the commissioners' award to the district court. Following trial, the jury awarded the Bhaktas $810,000 in minimum-compensation damages pursuant to Minn. Stat. § 117.187 (2018).
The district court deducted the quick-take funds already recovered by the Bhaktas and entered judgment of $44,567 in their favor. Following the county's successful motion to offset the judgment by the Bhaktas' delinquent taxes on the property, the district court vacated its prior entry of judgment.
The Bhaktas filed their notice of appeal on October 2, 2017. This court dismissed the portions of the appeal pertaining to the district court's denial of their motions in limine, because the Bhaktas did not move for a new trial. County of Hennepin v. Bhakta, 907 N.W.2d 908 (Minn. App. 2017), rev'd, 922 N.W.2d 194 (Minn. 2019). The supreme court reversed and remanded the matter back to this court, holding that a motion for a new trial was not necessary in order to preserve the Bhaktas' challenge to the denial of their motions in limine. County of Hennepin v. Bhakta, 922 N.W.2d 194 (Minn. 2019).
DECISION
Expert testimony
The Bhaktas argue that the district court abused its discretion by denying their motion in limine to exclude the testimony of the county's minimum-compensation expert, Kenneth Helvey. First, the Bhaktas argue that Helvey was prevented from testifying by operation of Minn. R. Civ. P. 37.03(a), which prevents the admission of improperly disclosed expert testimony, because the county failed to produce Helvey's written report in accordance with the timing requirements of Minn. R. Civ. P. 26.01(b)(4). Next, the Bhaktas argue that because Helvey is not a real-estate appraiser, he was not qualified to provide expert testimony regarding minimum-compensation damages.
"The admission of evidence rests within the broad discretion of the [district] court and its ruling will not be disturbed unless it is based on an erroneous view of the law or constitutes an abuse of discretion." Kroning v. State Farm Auto. Ins. Co., 567 N.W.2d 42, 45-46 (Minn. 1997) (quotation omitted). "The district court has considerable discretion in determining the sufficiency of foundation laid for expert opinion . . . . This is a very deferential standard . . . . the decision of the [district court] . . . will not be reversed absent clear abuse of discretion." Gross v. Victoria Station Farms, Inc., 578 N.W.2d 757, 760-61 (Minn. 1998) (quotations and citations omitted).
Production of expert report
The Bhaktas argue that the county did not produce Helvey's expert report in accordance with the timing requirements of rule 26.01(b)(4), and therefore he should have been precluded from testifying. The Bhaktas assert that Helvey's expert report was not disclosed to them until the eve of trial. In support of this assertion, the Bhaktas rely on the county's response to interrogatory 7, wherein the Bhaktas asked the county to: "Identify any minimum-compensation report, as that term is defined by Minn. Stat. § 117.187 that Petitioner intends on introducing at trial." The county responded: "See appraisal report and hearing testimony of Jason Messner. See also hearing testimony of Ken Helvey[.] The county may supplement the minimum compensation information to be offered at trial and will supplement this answer in that event." The county supplemented its response to interrogatory 7 as follows: "There is no minimum-compensation report."
Regardless of whether Helvey's analysis was properly subject to the Bhaktas' request for disclosure in interrogatory 7, the issue on appeal is whether the county provided a written expert report supporting Helvey's proposed testimony in accordance with the timing requirements of rule 26.01(b)(4). The county asserted, and the district court found, that Helvey's expert report was provided to the Bhaktas in 2012. On this basis, the district court did not abuse its discretion in denying the Bhaktas' motion to exclude Helvey's expert testimony for failure to timely produce an expert report in accordance with rule 26.01(b)(4).
Competency to testify
The Bhaktas also argue that the district court abused its discretion by declining to exclude Helvey's testimony on the basis that he was not competent to testify as an expert witness. The Bhaktas assert that minimum-compensation damages can only be based on the appraised value of comparable properties within the community, and because Helvey is not an appraiser, he was unqualified to opine on the Bhaktas' minimum-compensation damages.
The Bhaktas rely on the following language from this court's opinion in County of Dakota v. Cameron: "We discern no reason not to rely on traditionally utilized market-value approaches when determining damages under the minimum-compensation statute." 812 N.W.2d 851, 861 (Minn. App. 2012), aff'd, 839 N.W.2d 700 (Minn. 2013). The Bhaktas assert that this language mandates that testimony regarding minimum-compensation damages can only take the form of market-value appraisals of comparable property, but this argument ignores both the cited language from Cameron and the remainder of that opinion. This court stated only that it could "discern no reason not to rely" on traditional market value when estimating damages. Id. We did not state that only traditional market value may be relied upon, nor did we state that traditional market-value appraisals are required. See id.
Just one paragraph above the passage cited by the Bhaktas, this court stated: "Although the list or offer price may be an appropriate consideration when a comparable property in the community is available for purchase at the time of the taking, it is not the only basis for a damages calculation under the minimum-compensation statute." Id. The Bhaktas assert that Helvey was not qualified to provide expert testimony because his minimum-compensation analysis was based on the list prices of available properties. Because the precedent that the Bhaktas rely upon allows for the consideration of list price when a comparable property is available for purchase, the district court did not abuse its discretion in finding Helvey competent to provide expert testimony.
Minimum-compensation evidence
Similar to their motion to exclude Helvey's testimony, the Bhaktas argue that the district court abused its discretion in denying their motion to exclude the county's minimum-compensation evidence, because it was based upon the list price of properties available for purchase, and did not define the community. As discussed above, because this court stated in Cameron that list price "may be an appropriate consideration" when determining the value of comparable property within the community, the district court did not abuse its discretion in declining to exclude the county's minimum-compensation evidence on this basis. See id.
The minimum-compensation statute provides a remedy to displaced property owners so that they receive compensation sufficient to purchase a comparable property within the community. Minn. Stat. § 117.187; see also Cameron, 839 N.W.2d at 708 ("[T]he phrase 'comparable property' in the minimum-compensation statute refers to a piece of property that has enough like characteristics and qualities to another piece of property that the value of one can be used to determine the value of the other."). In Cameron, the supreme court stated that "[p]roperties located beyond the condemned property's 'community' cannot provide the basis for damages under the minimum-compensation statute." 839 N.W.2d at 706.
The minimum-compensation statute does not define the term "community," but the supreme court has defined it for purposes of the statute as: "an identifiable locality that has a socially or governmentally recognized identity, or a group of such localities. Depending on the facts of a particular case, the relevant 'community' could be a neighborhood, district, town, village, city, county, region, or other similar locality." Id. at 706-07. As defined by the supreme court, "community" is a fluid, fact-specific concept.
Helvey provided the following testimony regarding his selection of comparable properties:
Q: And did Mr. Bhakta tell you or give you an area that he would like to find a motel in?Helvey also testified that "[o]ur search is limited to properties that were currently for sale." Because the county limited its analysis to for-sale properties, it expanded the Bhaktas' preferred community of the 694-494 loop of Minneapolis-St. Paul to the greater-metro area of Minneapolis-St. Paul. Helvey testified: "We began our search trying to find something inside the belt line, but those were difficult properties to identify . . . . So then we just continued to expand . . . our circle of analysis until we could find properties that were for sale."
A: Mr. Bhakta's goal was to stay within the 694-494 loop.
Q: Did he say anything specifically in Robbinsdale?
A: I don't recall a discussion about a specific city, but he definitely was interested in being in the loop.
. . .
Q: Did you look both inside the loop . . . and beyond?
A: Yes. We looked just about anywhere in the general metro area that we could look.
The county justified its expansion of the relevant community for the purposes of its minimum-compensation analysis due to its difficulty in locating comparable properties available for purchase, but a property does not need to be available in order to form the basis of a minimum-compensation analysis, because the statute is a damages remedy only. See id. at 710 ("[W]e conclude that the phrase 'comparable property' in the minimum-compensation statute refers to an existing property—regardless of its availability for purchase—that has enough like characteristics . . . that the value of one can be used to determine the value of the other.") (Emphasis added.)
While the county improperly relied exclusively on properties available for purchase in its characterization of the relevant community, the issue on appeal is whether the district court abused its discretion in denying the Bhaktas' motion to exclude the county's minimum-compensation evidence. Although the supreme court opinion in Cameron clearly states that properties beyond the relevant community cannot form a basis for damages, it also states that the relevant community is a fact-specific issue. Id. at 706-07. Because the relevant community is a fact question, the district court did not abuse its discretion by allowing the county to present its evidence, which the Bhaktas sought to rebut on cross-examination, that the relevant community for the purpose of an award of minimum-compensation damages constituted the greater Minneapolis-St. Paul metro area.
Tax-assessment evidence
The Bhaktas argue that the district court abused its discretion by admitting evidence of the tax-assessed value of the property. The Bhaktas assert that tax assessments are irrelevant to a property's market value. They also argue that the district court abused its discretion in allowing the Brooklyn Park city assessor to testify, because he did not produce an expert report.
Admissibility of tax assessments
The Bhaktas principally rely on a tax case, EOP-Nicollet Mall, L.L.C. v. County of Hennepin, 723 N.W.2d 270 (Minn. 2006), and a bankruptcy case, In re Slovak, 489 B.R. 824 (Bankr. D. Minn. 2013), both of which are distinguishable.
In denying the Bhaktas' motion to exclude, the district court relied on County of Ramsey v. Miller, which provides that "[s]ince all relevant evidence relating to market value should be admissible . . . . the assessed valuation of the property as shown in the county auditor's records should be admissible as bearing upon the fair market value of the property." 316 N.W.2d 917, 922 (Minn. 1982). Contrary to this statement of presumed admissibility, the Bhaktas rely on the following language from EOP-Nicollet Mall:
Regarding relevancy, we conclude that the tax court did not abuse its discretion. EOP's contention at trial was that the assessed value of these four properties was relevant to whether [the county assessor] properly valued the four properties under the sales comparison approach. . . . The tax court's ruling is in
accord with the rule that the assessed value of property for tax purposes, in and of itself, is generally not admissible as direct evidence of value for purposes other than taxation of that property.723 N.W.2d at 283 (quotation omitted). EOP-Nicollet Mall does not hold that assessed value is per se inadmissible, but rather provides that assessed value is not admissible "in and of itself," "as direct evidence of value for purposes other than taxation." Id., see also Slovak, 489 B.R. at 826 ("Generally, the assessed value of a property for tax purposes is not considered direct evidence of a property's market value.") (Emphasis added.)
The county did not offer the assessed value of the Bhaktas' property as direct evidence in and of itself of the market value of the property. The county introduced, through the testimony of Jason Messner, an independent real estate appraiser, the appraised market value of the property as of September 2011—when the county offered to purchase the property—and September 2012—when the county acquired title to the property. Mr. Messner also testified that under the sales-comparison appraisal method, the property had a market value of $675,000, and under the income appraisal method the property had a market value of $676,000. Because the county did not rely exclusively on the assessed value of the property as direct evidence of its market value, but instead introduced its appraised market value under both the sales-comparison and income methods, the district court did not abuse its discretion in admitting the property's assessed value as evidence bearing upon the market value.
Expert report
The Bhaktas argue that the district court erred in allowing the county assessor to testify because he did not produce an expert report in advance of his testimony. In ruling on the Bhaktas' motion to exclude, the district court limited the county assessor's testimony to introducing the official records of the property's assessed value and the Certificate of Real Estate Value. The district court excluded testimony regarding the methodology underlying the assessed value and the history of the property's assessed value. In so ruling, the district court treated the county assessor as a record keeper, not an expert witness.
Certified copies of public records are self-authenticating documents that do not require extrinsic evidence of authenticity. Minn. R. Evid. 902(4). Because the district court limited his testimony to the information contained in the official records, he was treated as a lay witness custodian of records. Therefore, the district court did not abuse its discretion in allowing the county assessor to testify despite the lack of an expert report.
Unpaid-tax offset
The Bhaktas argue that the district court erred by using its equitable powers to offset their judgment by the amount they previously owed for unpaid property taxes. The county sought to offset the judgment by $1,777.72 for unpaid water charges and $58,887.29 for unpaid property taxes, but conceded that by operation of Minn. Stat. § 117.187, the minimum-compensation award could not be less than the quick-take payment amount.
"The right to set off one judgment against another is . . . an incident of the general jurisdiction of the [district] court over its suitors and is of an equitable nature." La Fleur v. Schiff, 58 N.W.2d 320, 324 (Minn. 1953). "This court will reverse a district court's equitable remedy only if the district court abuses its discretion. A district court abuses its discretion if its decision is against the facts in the record or if its ruling is based on an erroneous view of the law." State ex rel. Swan Lake Area Wildlife Ass'n v. Nicollet Cty. Bd. of Cty. Comm'rs, 799 N.W.2d 619, 625 (Minn. App. 2011) (citations and quotation omitted).
The Bhaktas argue that the district court erred as a matter of law in determining that they remained liable for property taxes following the condemnation of their property. The Bhaktas did not challenge the district court's finding that they failed to pay taxes levied against the property in 2009, 2010, and 2011 totaling $58,877.29. The county acquired title to the property in August 2012. The Bhaktas rely on State by Spannaus v. King Props., Inc. for the proposition that "since property tax liens are not personal, the obligation to pay passe[s] with the title." 363 N.W.2d 83, 86 (Minn. App. 1985). The Bhaktas therefore assert that their obligations regarding the unpaid taxes on the property were extinguished when the state took title in August 2012.
This court went on to state in King Props. that "[i]t may well be that some inequity arises in this situation. However, this problem is better addressed in direct negotiations, the Commissioner's award, or with the legislature." Id. Pursuant to Minn. Stat. § 272.68 (2018), "[w]hen . . . a political subdivision of the state . . . acquires a fee interest in property before forfeiture, by any means, provision must be made to pay all taxes, including all unpaid special assessments and future installments thereof, unpaid on the property at the date of acquisition."
In its order granting the county's petition to acquire the Bhaktas' property, the district court ordered that "the District Court Administrator shall, from the deposited funds, pay to the Hennepin County Assessor such amounts as are levied and pending against the Properties as special assessments or other annual charges that may be or become a lien thereon as of the date of transfer of title." Provision was therefore made for the payment of the delinquent taxes at the time the county took title to the property. The district court provided that the unpaid taxes would be deducted from the quick-take award, which was never done.
The Bhaktas' attorney argues that the judgment should not have been offset because he possessed a superior lien on the award. The attorney possessed a statutory lien "upon the interest of [his] client in any money or property involved in or affected by any action or proceeding in which [he] may have been employed, from the commencement of the action." See Minn. Stat. § 481.13, subd. 1(a)(2) (2018). The attorney also possessed a lien "upon [the] judgment . . . . from the time of giving notice of the claim to the judgment debtor. Th[is] lien . . . is subordinate to the rights existing between the parties to the action or proceeding." Id., subd. 1(b) (2018).
While the Bhaktas argue that this is a matter of lien priority, their lawyer misstates the issue on appeal. As required by Minn. Stat. § 272.68, provision was made for the satisfaction of the Bhaktas' delinquent taxes at the time the county acquired title to the property. The district court ordered the court administrator to withhold from the quick-take funds the amount owed by the Bhaktas for unpaid taxes. This was never done. Because provision was made for the payment of the delinquent taxes at the time title was transferred, the district court did not abuse its discretion in using its equitable powers to offset the Bhaktas' judgment in accordance with its August 2012 order granting title to the county.
Affirmed.