Opinion
Rehearing Denied June 16, 1970.
Opinion on pages 856 to 867 omitted
HEARING GRANTED
For Opinion on Hearing, see 93 Cal.Rptr. 852, 483 P.2d 200.
[87 Cal.Rptr. 161]Harry S. Fenton, Chief Counsel, Sacramento, Joseph A. Montoya, H. Dean Stillwagon and Charles E. Spencer, Jr., Los Angeles, for plaintiff and appellant.
Hansen & Dolle and Hodge L. Dolle, Los Angeles, for defendants and respondents.
LILLIE, Associate Justice.
Plaintiff appeals from that portion of a judgment in condemnation entered upon a verdict awarding compensation for the taking of Parcel 3 as shown by maps in evidence and arising out of the construction of a State highway in Ventura County, also known as the Simi Valley Freeway. While other determinations were made by the jury on the form of verdict given to it by the trial judge, this appeal relates only to the fair market value of Parcel 3 which, together with all improvements thereon, was fixed in the sum of $182,500.
Before its acquisition by the present proceeding, Parcel 3 consisted of 3.107 acres on which were located a mortuary and a residence. The portion herein acquired from the larger parcel consisted of 2.06 acres, including the mortuary building and the residence which had been removed at the time of trial. Both sides are agreed on the propriety of the methods followed below to obtain the valuation in issue, namely, the use of market data to support the land value followed by the cost less depreciation, or obsolescence, approach (also known as the reproduction cost approach [Ev.Code, § 820]). Although there appears to have been little difference of opinion on the net depreciated value of the mortuary and the residence, there were substantial differences in land values based, in turn, on sales of comparable vacant property. The 2.06 acres acquired being partly zoned CPD (Commercial Planned Development) and partly R. E. (Residential-Estate), the major difference in value related to the portion zoned CPD and stemmed from certain sales used to support the varying CPD zone values; dollarwise it amounted to $46,122 and assertedly was caused by the elimination from the jury's consideration, effectively but erroneously aided by the court, of a key transaction or 'sale' upon which plaintiff's witness relied for his valuation.
The foregoing constitutes plaintiff's first point on appeal and arose as follows: Plaintiff's valuation witness, Mr. Fisher, testified that he took into consideration two sales zoned CPD. Referred to at the trial as 'Sale 5' and 'Sale 6' respectively, the latter (sale 6) was the resale of a portion of the property involved in sale 5 wherein Von's Grocery was the purchaser and Karl R. Sailer was the seller. Mr. Fisher testified that he had verified the selling price of $300,000, or $1.00 a square foot, with Mrs. Sailer; asked subsequently whether it was a cash transaction, he replied: 'I believe my memory is that it was a cash transaction.' Near the close of the trial, Mr. Sailer was called by defendants as a rebuttal-witness and testified that he realized no money from the sale; instead, he was given a piece of property in Firebaugh (Fresno County) which he then still owned. On cross-examination the witness stated he was offered $300,000 for his property, but 'We didn't want the money, so we exchanged for a piece of property up north.' Mr. Sailer was then asked by plaintiff's counsel whether he and Von's Grocery had agreed to the value of sale 5 in the transaction to which objection was made that this was not proper cross-examination. Thereafter a lengthy argument between counsel ensued, during which defendants' counsel represented to the court that the Fresno land was the total consideration for the property involved in sale 5. When plaintiff's counsel endeavored to put several question to Sailer regarding the same transaction, an objection was interposed to each such question and sustained. Plaintiff's counsel then sought to ask certain questions of the same witness in order to make an offer of proof; he was not permitted to do so when the objection was made that the answers to such interrogation [87 Cal.Rptr. 162] were not known. The court then said 'Do you want a little discovery on it?' Mr. Stillwagon, counsel for plaintiff replied, 'Well, I think it is a little late to have discovery at this time, your Honor. We are almost at the conclusion of the lawsuit.' Later, however, plaintiff's counsel moved that Sailer be required to bring in all of the papers involved in the transaction (sale 5), but the motion was denied.
'The offer of proof must be specific in its indication of the purpose of the testimony, the name of the witness, and the content of the answer to be elicited.' (Cal.Evidence, Witkin, Second Edition, p. 1212, § 1311.) But 'A practical exception is also recognized in cross-examination. If counsel were required to disclose the object of a line of questioning, the witness would often be forewarned and the cross-examiner seriously hampered.' (Ibid., p. 1214, § 1314.)
At the conclusion of the evidence a motion by defendants to strike sale 5 on the ground that it was an 'exchange' and not a 'sale' was denied; also denied was their motion to strike the valuation testimony of Mr. Fisher on the ground that he had based his opinion on improper matter. A subsequent attempt by defendants to reopen the two motions was likewise unsuccessful.
Prior to argument, and in chambers, defendants offered an instruction stating that '[i]f Mr. Sailer received only other real property in consideration for the transfer of the property by Von's Market, you are to disregard this transaction.' The instruction was refused. During the argument of plaintiff's counsel, however, the following occurred: 'MR. STILLWAGON: * * * There is a seller and there--is a buyer and there is a seller. So far as Mr. Sailer is concerned, he said he got real estate. He didn't say Von's Grocery sold him some real estate, he said he got real estate. We don't have a representative of Von's here to say that this was $300,000 cash. There is nothing to repudiate that, either. So far as the Von's Company is concerned, we don't know; but there is nothing to repudiate the fact that there is $300,000 cash in this transaction.
'You know, in these days taxes are a pretty big thing, so some people use various techniques to avoid having to pay it to Uncle Sam. One of those techniques is to take, instead of money--which I would, or your would
'MR. DOLLE: I object to this kind of argument, your Honor. My objection, on the grounds that this was not an open market sale and not a comparable sale, was sustained.
'THE COURT: There is no evidence to support that statement in this case, that there was $300,000 cash paid for this property, and the jury is instructed to disregard that statement.
'Your objection is sustained. You are instructed to disregard that statement; it is not evidence in this case.'
Finally, and upon the conclusion of argument by both sides, the instruction (quoted in part above and initially refused) was given in modified form as follows: 'In considering prices paid for comparable properties in weighing the testimony of the experts you must disregard any transaction in which the purchase price consisted of an exchange of other real property.
'You have heard testimony from witnesses for both parties regarding the price paid for property purchased by Von's Markets and sold by one Sailer. If you find that in trade Mr. Sailer received other real property in consideration for the transfer of his property to Von's Markets, you are to disregard this transaction as it would not be a proper basis upon which an expert can form an opinion of value of the subject property.'
On plaintiff's motion for new trial, documents from the escrow on sale 5 were submitted as newly discovered evidence. These documents disclose that Von's and Sailer agreed to 'exchange' the property in question for property to be selected by Sailer and purchased by Von's; in the event Sailer could not find a suitable property for exchange within the time specified, the property (sale 5) would be conveyed by Sailer to Von's for $300,000; Sailer was unable to find an 'exchange' property within the time agreed on, and Von's consented [87 Cal.Rptr. 163] to an extension; property was located in Fresno County belonging to one Miller, the agreed purchase price thereof being separately fixed between Sailer and Miller at $365,820; Von's thereafter deposited with the escrow holder its check for $300,500, to be used as funds to consummate the escrow; the difference between the amount of money paid into escrow by Von's and the purchase price of the Fresno property became the obligation of Sailer. As a result, the official records of Fresno and Ventura Counties reveal three deeds all recorded on April 29, 1966, as follows: (1) grant deed dated April 19, 1966, from Miller to Von's (Fresno); and (3) grant deed from Sailer to Von's, dated April 20, 1966 (Ventura). Accordingly, as urged by plaintiff in argument to the jury, the circumstances above set forth show that it was a three-party transaction.
According to plaintiff, this three-party transaction qualified as a comparable sale within the purview of SECTION 816, EVIDENCE CODE , since Sailer actually was paid $300,500 by Von's even though the proceeds of such sale were immediately used to acquire designated land in Fresno County. That being so, it is also argued that the court erred in restricting cross-examination so that the terms and circumstances of the transaction could be ascertained, it being additionally claimed that it was error for the court to instruct the jury during argument that there was no evidence that cash was paid for this key sale when the evidence was to the contrary.
Section 816, Evidence Code, relates to 'Comparable sales' and reads: 'When relevant to the determination of the value of property, a witness may take into account as a basis for his opinion the price and other terms and circumstances of any sale or contract to sell and purchase comparable property if the sale or contract was freely made in good faith within a reasonable time before or after the date of valuation. In order to be considered comparable, the sale or contract must have been made sufficiently near in time to the date of valuation, and the property soly must be located sufficiently near the property being valued, and must be sufficiently alike in respect to character, size, situation, usability, and improvements, to make it clear that the property sold and the property being valued are comparable in value and that the price realized for the property sold may be fairly considered as shedding light on the value of the property being valued.'
Fair market value has been defined as "the highest price estimated in terms of money which the land would bring in the open market, with reasonable time allowed in which to fine a purchaser. * * *' [Citation.]' (Buena Park School Dist. of Orange County v. Metrim Corp., 176 Cal.App.2d 255, 258, 1 Cal.Rptr. 250.) The court continued: 'This language was carefully chosen. It contemplates a value expressed in terms of money, which means cash or its equivalent. The thought conveyed is that it is the amount which would be given by a purchaser either in cash or its equivalent. The manner of the actual sale is not inyolved. Whether a purchaser would pay cash or would give considerations of equivalent value is not vital, so long as the fair market value governs.' ( Supra, p. 264, 1 Cal.Rptr. p. 256.)
In the present case, while Sailer under the terms of the escrow got a paper credit of $300,500, what he really received for his property (sale 5) was land equivalent in Fresno County the fair market value of which was never established. As pointed out by defendants, 'Its size, use, zoning, condition of title, topography, accessability, demand in the market are unknown and have not been shown. It may not be marketable, or it may require a greater amount of time to convert it to cash.' Too, almost 200 miles separated the two parcels; but section 816 expressly provides that 'In order to be considered comparable * * * the property sold must be located sufficiently near the property being valued * * * to make it clear that the property sold and the property being valued are comparable in value * * *.' Also, since the sale must be an open market transaction, it cannot properly be argued [87 Cal.Rptr. 164] that land in Fresno County competes in the open market with land in Ventura County. In reaching the above conclusions, we do not mean to imply that every three-party transaction is subject to the present criticism that it does not imvolve a comparabel sale for the purpose of fixing fair compensation in a proceeding of this kind. Had the transfer occurred in the open market with due consideration given to the customary and usual tax consequences normally flowing therefrom, the situation manifestly would be otherwise. Here, however, plaintiff's offers of proof to the trial judge purported only to establish an exchange of properties and an attempt to value the real estate received in exchange.
In view of the above considerations and determinations, it would have availed plaintiff nothing if its cross-examination had not been restricted. Such interrogation, if pursued, would simply have elicited a factual situation, heretofore described and discussed, adding nothing to the claims asserted by plaintiff or its witness. Indeed, assuming such additional evidence had been received, the trial court would have been justified in advising the jury (as was done in the absence of evidence said to have been improperly excluded) that, viewed as a comparable sale, 'There is no evidence to support that statement in this case, that there was $300,000 cash paid for this property * * *.' From this it also follows that no error was committed in modifying, and giving, the instruction (heretofore quoted) previously tendered by defendants. Contrary to plaintiff's assertion, the giving of such instruction under the circumstances was not violative of section 607a, Code of Civil Procedure, when liberally construed; as therein provided, if issues are raised during argument (by plaintiff's counsel here) which have not been covered by instructions given or refused, on request of opposing counsel, the court may give additional instructions covering the particular matter.
It should also be pointed out, and bears emphasis, that plaintiff does not complain that the trial court abused its discretion in denying the motion for new trial which was grounded principally on 'surprise.' Here, of course, the 'surprise' arose when rebuttal testimony was given by Sailer impeaching the foundation testimony of plaintiff's expert. It has been declared that 'where a situation arises which might constitute legal surprise, counsel cannot speculate on a favorable verdict. He must act at the earliest possible moment for the 'right to a new trial on the ground of surprise is waived if, when the surprise is discovered, it is not made known to the court, and no motion is made for a mistrial or continuance of the cause.' [Citations.]' (Kauffman v. De Mutiis, 31 Cal.2d 429, 432, 189 P.2d 271, 273.) As earlier shown, the trial court offered plaintiff's counsel an opportunity for discovery, but it was declined.
Plaintiff's next point concerns two instructions relating to the enhancement of value by reason of the improvement--the governing law that property cannot be so enhanced (County of Los Angeles v. Hoe, 138 Cal.App.2d 74, 78, 291 P.2d 98) was not questioned in the trial. At plaintiff's request, therefore, the jury was instructed that they could not consider any enhancement of defendants' property in the before condition due to the public improvement. On the other hand, at defendants' request this instruction was given: 'An increase in market activity or the prices paid for land in an area where there is general knowledge of a coming public improvement are general benefits to which all property owners in the area, including defendants herein, are entitled. Such general benefits are not to be deducted by you from your award of severance damages, if any, or from your determination of the just compensation to be paid for the parcel acquired.' It is argued by plaintiff that the two instructions, taken together, could have done nothing but confuse the jury in that they were first told that they could not consider enhancement in the before condition, and then advised that they could consider prices paid for other parcels even [87 Cal.Rptr. 165] though such prices were enhanced by knowledge of the improvement.
Upon analysis we do not believe that the two instructions are susceptible of the construction urged by plaintiff. While defendants' instruction presumably, and understandably, was offered to offset the effect of that requested by plaintiff on the nonadmissibility of enhancement evidence, they also point out that it was prompted by the type of interrogation adopted by plaintiff's counsel in his cross-examination of their witness. Such interrogation endeavored to bring out the fact that certain sales testified to by the expert were not comparable because a higher valus was placed on the particular parcels due to the construction of the freeway; after lengthy argument, the court foreclosed further cross-examination along those lines. Cited during such argument was an early case, San Diego Land etc. Co. v. Neale, 78 Cal. 63, 20 P. 380, referred to in Hoe, supra, in which the court determined that the owners of a tract above a dam, owned by plaintiff, were not entitled to the benefit from the improvement upon the adjoining land. 'The proposition is, therefore, that the defendants are entitled to the benefit arising from the improvement upon the adjoining land for the purposes of which their land is sought to be taken. This seems to us inadmissible as a direct element of value. It is possible that they might get some benefit from it indirectly. That is to say, the public knowledge of a proposed improvement might cause an actual demand in the market and a subsequent advance in the current rate of price. In such case it would be impracticable for a court to analyze the price and determine the proportion in which any particular element contributed thereto. The scales of justice do not balance quite so delicately as that.' (Supra, p. 74, 20 P. p. 377.) In the case at bar, therefore, if there was public knowledge of the proposed freeway and if the market value of land in the area increased by reason thereof, defendants were entitled to the indirect benefit thereof by proof of comparable sales even though made in condemplation of such improvement. This is not the enhancement factor proscribed in Hoe and the several cases which adhere to the settled rule in that regard; not should comparable sales be discounted upon the assumption that knowledge of the freeway improvement played a part in market behavior. Furthermore, since defendants' valuation witness disregarded the freeway in his determinations as to the value of defendants' property in the before condition, it seems clear that the jury was not misled in the premises.
As its final point, plaintiff asserts that an insufficient foundation was laid by defendants' valuation witness upon which he was permitted to express an opinion as to the reasonable probability of a zone change. That zone change probability is a factor in fixing fair market value was reiterated in People ex rel. Dept. of Public Works v. Donovan, 57 Cal.2d 346, 352, 19 Cal.Rptr. 473, 476, 369 P.2d 1, 4: 'Where there is a reasonable probability that zoning restrictions will be altered in the near future, the jury should consider not only those currently permitted, but also other uses to which the property could be devoted in the event of a change. [Citations.] The jury is entitled to and should consider those factors which a buyer would take into consideration in arriving at a fair market value, were he contemplating a purchase of the property [citations], and it is manifest that plausible and probable changes in the character of the neighborhood and in zoning restrictions in an area constitute such factors.' Plaintiff, while conceding that actual zone changes may be used (on the authority of Donovan) to determine value, nevertheless points out that the issue was not there raised as to the foundation required before a witness may testify to such changes. However, says plaintiff, it was raised in People ex rel. Dept. Pub. Wks. v. Arthofer, 245 Cal.App.2d 454, 464, 54 Cal.Rptr. 878, in which the court concluded, on the showing there presented, that objections to the qualifications of a witness to express an opinion were properly sustained since the expert [87 Cal.Rptr. 166] indicated that he had conferred with appropriate authorities relative to the reasonable probability of a zone change.
As in the instance of plaintiff's previous point, we do not see how the error complained of could have played any part in the eventual determination of the case. The Arthofer decision being confined to the facts there presented, in the present case the record reveals that defendants' witness testified on cross-examination that his valuation of the particular parcel or portion thereof would have been the same 'assuming no probability of a zone change.' He adhered to the same opinion when again questioned by defendants' counsel on redirect examination. Too, there is no contention that the asserted error (assuming such fact arguendo) constituted ground for reversal, standing alone or in conjunction with the immediately preceding point concerning instructions.
That portion of the judgment from which appeal is taken is affirmed.
WOOD, P. J., and THOMPSON, J., concur.