This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2002).
STATE OF MINNESOTA
IN COURT OF APPEALS
State of Minnesota, by Mike Hatch,
Its Attorney General, petitioner,
KQRS, Inc., et al.,
Filed January 27, 2004
Gordon W. Shumaker, Judge
Hennepin County District Court
File No. CD 2579
Mike Hatch, Attorney General, Louis K. Robards, Assistant Attorney General, Transportation Division, 525 Park Street, Suite 200, St. Paul, MN 55103-2106 (for respondent)
Larry D. Martin, Mark D. Christopherson, Christopher J. Deike, Larkin, Hoffman, Daly & Lindgren, Ltd., 1500 Wells Fargo Plaza, 7900 Xerxes Avenue South, Bloomington, MN 55431-1194 (for appellants)
Considered and decided by Schumacher, Presiding Judge; Shumaker, Judge; and Poritsky, Judge.*
GORDON W. SHUMAKER, Judge
Appellant KQRS argues that the district court abused its discretion in its order limiting discovery of the respondent state’s appraisal information, in its pretrial evidentiary rulings, and in excluding a proposed jury instruction in this condemnation proceeding. Because the district court did not abuse its discretion, we affirm.
Appellant KQRS and its predecessors have operated radio stations at the Golden Valley site in question in this appeal since 1948. From time to time, KQRS has expanded the premises it occupied by purchasing parcels of adjoining land owned by John and Helen Carson. After one such purchase in 1994, KQRS arguably obtained from the Carsons a right of first refusal as to the only remaining buildable land adjacent to the KQRS property. This was the Carson homestead.
In 1996, respondent state of Minnesota adopted a plan to expand Trunk Highway 100 in Golden Valley. The plan contemplated the acquisition of the Carson homestead land and the state negotiated with the Carsons for the purchase of that property. By 1997, the Carsons and the state had reached an agreement for the sale of the land, but, when KQRS asserted its ostensible right of first refusal, the Carsons declined to complete the sale. KQRS bought the property in 1998.
The state then negotiated with KQRS for the purchase of the land. When the negotiations failed to produce an agreement, the state exercised its right of eminent domain and started a quick-take action to acquire only that portion of the KQRS property recently purchased from the Carsons, consisting of two separate parcels. After title and possession were transferred to the state, KQRS relocated its entire radio station operation.
A condemnation hearing before a panel of commissioners ensued. KQRS offered appraisal evidence and argued that the partial taking had frustrated its expansion plans. As a result, KQRS was forced to relocate and it incurred damages in the sum of $1,820,000. The commissioners awarded damages in the aggregate for the two parcels in the amount of $482,000. KQRS appealed to the district court and demanded a jury trial. Prior to trial, both parties made motions in limine. The district court granted the state’s motions to exclude evidence of KQRS’s future development plans and for a protective order precluding the discovery of some of the state’s appraisal evidence. The court denied KQRS’s motion to exclude evidence of the state’s efforts to purchase the property prior to the condemnation and denied KQRS’s requested jury instruction on the value of fixtures.
After these rulings, KQRS concluded that it would be unable to introduce evidence to support its theory of damages, and it offered to stipulate to the commissioners’ award and to other issues, subject to its right to appeal. The state accepted the stipulation. The district court then ordered entry of judgment upon the commissioners’ award in favor of KQRS and provided that, upon conclusion of an appeal, KQRS could move for an award of costs and disbursements. In dispute on appeal are the district court’s in limine rulings.
KQRS challenges the district court’s rulings on the discovery of evidence, the admissibility of evidence, and a requested jury instruction. The standard of review for all three categories of alleged error is that of abuse of discretion. Discovery orders are discretionary. Shetka v. Kueppers, Kueppers, Von Feldt and Salmen, 454 N.W.2d 916, 921 (Minn. 1998). Similarly, whether to admit or exclude evidence is a matter within the broad discretion of the trial court and the court’s rulings will not be reversed on appeal absent a clear abuse of that discretion. Bergh & Misson Farms, Inc. v. Great Lakes Transmission Co., 565 N.W.2d 23, 26 (Minn. 1997). And the same standard is applied to rulings on requested jury instructions. Alholm v. Wilt, 394 N.W.2d 488, 490 (Minn. 1986). The district court abuses its discretion if there is no proper legal basis for a challenged ruling. Pikula v. Pikula, 374 N.W.2d 705, 710 (Minn. 1985).
1. Discovery Order
KQRS requested the production of the state’s 1997 appraisal reports by John Mascari of the Carson homestead; James Kramer of the assembled KQRS/Carson property; and Michael Bownik of the assembled KQRS/Carson property. KQRS also sought to depose James Kramer and appraiser John Callahan about the three appraisals. The only expert appraiser on the state’s witness list was Bownik and his second appraisal was the only appraisal relied on by the state. The district court ordered the state to disclose only Mascari’s and Bownick’s appraisals.
KQRS relies on 49 C.F.R. § 24.102, to support its argument that all the appraisals conducted pursuant to a state’s regulatory duty and any appraisal conducted in connection with a statutory duty unrelated to litigation is not prepared in “anticipation of litigation” and thus, all appraisal information is discoverable. But KQRS fails to show how that federal rule is applicable to this Minnesota action.
Minn. R. Civ. P. 26.03 provides that a court “may make any order which justice requires to protect a party,” including that “discovery not be had.” Minn. R. Civ. P. 26.03(a). And in setting forth the scope and limits of discovery, rule 26.02 provides:
Unless otherwise limited by order of the court in accordance with these rules, the scope of discovery is
* * *
[that] [d]iscovery of facts known and opinions held by experts, otherwise discoverable pursuant to Rule 26.02(a) and acquired or developed in anticipation of litigation or for trial, may be obtained only as follows:
* * *
A party may discover facts known or opinions held by an expert who has been retained or specially employed by another party in anticipation of litigation and who is not expected to be called as a witness . . . or upon a showing of exceptional circumstances under which it is impracticable for the party seeking discovery to obtain facts or opinions on the same subject by other means.
Minn. R. Civ. P. 26.02 - .02(d)(2) (emphasis added).
Minnesota law further limits discovery by providing that
[e]stimated or appraised values of individual parcels of real property which are made by personnel of the state . . . or by independent appraisers acting for the state, its agencies and departments . . . for the purpose of selling or acquiring land through purchase or condemnation are classified as confidential data on individuals or protected nonpublic data.
Minn. Stat. § 13.44, subd.3(a) (2002).
KQRS does not argue that any exceptions apply to discovery of information that is confidential or protected nonpublic data. See Minn. Stat. § 13.441, subd. 3(b) (2002) (providing four exceptions that would allow otherwise confidential or protected nonpublic data to become public).
Rather, KQRS argues that the district court abused its discretion by not allowing discovery of all the state’s expert appraisers’ reports, that Minn. R. Civ. P. 26.02(d)(2) applies only to expert opinions developed in anticipation of litigation, and that the state’s expert appraisers’ reports were not obtained in anticipation of litigation. KQRS is correct in its argument insofar as rule 26.02(d)(2) allows discovery of expert appraisers only if those appraisers’ opinions were developed in anticipation of litigation. But, KQRS’s argument supports the district court’s order limiting discovery because for expert opinion to be discoverable it must be (1) in anticipation of litigation and (2) when the expert is not expected to be called as a witness. Thus, KQRS’s argument that the appraisals were not in anticipation of litigation necessarily results in an acceptable prohibition of discovery by the district court absent any exceptional circumstances, which KQRS does not argue apply here.
In addition, Minn. Stat. § 13.441, subd. 3 (2002), prohibits the discovery of expert appraisal information, and KQRS does not show why this statute does not apply.
Here, the state obtained additional appraisals by Kramer, Bownick, and Callahan for the purpose of acquiring land through purchase or condemnation after KQRS had rejected the state’s direct purchase offer. Because the discovery sought by KQRS does not fit within permissible discovery and KQRS did not carry its burden to show that exceptional circumstances exist under the second prong of rule 26.02(d)(2), or that discovery is allowed under Minn. Stat. § 13.441 (2002), we conclude that the district court did not abuse its discretion in granting the protective order.
2. Admissibility of Evidence
a. Fair Market Value
This case involves the partial taking of KQRS’s radio station property. That taking entitles KQRS to just compensation. Minn. Const. Art. I, § 13. Just compensation for a partial taking of land is calculated as the difference between the fair market value of the entire parcel immediately before the taking and the fair market value of what remains after the taking. State by Humphrey v. Strom, 493 N.W.2d 554, 558 (Minn. 1992). Fair market value is calculated upon consideration of the highest and best use of the property and of the probable price for which the property in its highest and best use can be sold on the open, competitive real estate market. City of St. Paul v. Rein Recreation, Inc., 298 N.W.2d 46, 50 (Minn. 1980).
KQRS argued in the district court and argues here that, in ascertaining the highest and best use of the property at issue, and in calculating before-and-after market values, it is relevant to know of KQRS’s expansion plans, its own demand for such property, the special-use feature of the real estate, and the change in highest and best use that resulted from the taking. The district court’s rulings excluded evidence of these items.
KQRS is entitled to present competent “evidence of any matter [that] would influence a prospective purchaser and seller in fixing the price at which a sale of the property could be consummated.” Id. at 50 (quoting 5 P. Nichols, The Law of Eminent Domain § 18.11 (3d ed. Rev. 1979)). “An owner is entitled to the value of the property for which it may be most advantageously used.” Strom, 493 N.W.2d at 559 n.3 (quotation and citation omitted).
Although the most advantageous use of land, and its highest and best use for a particular landowner might be the current use to which the owner has put the property, the referent of the fair market value calculation is not the landowner, but rather willing buyers in the open, competitive real estate market. KQRS frequently loses sight of this fact in its argument and shifts its focus almost entirely to its own use and its own subjective value. Doing this, KQRS virtually ignores the “market.”
When the condemnor and the landowner agree upon the highest and best use of the land, the landowner’s plans for future development are irrelevant to the issue of fair market value. See Port Authority v. Englund, 464 N.W.2d 745, 750 (Minn. App. 1991) (holding that consideration of evidence of a landowner’s particular plans for development is allowed only for the limited purpose of establishing the highest and best use of the property). See also United States v. Miller, 317 U.S. 369, 374-75, 63 S. Ct. 275, 280 (1943) (holding “that fair market value does not include the special value of property to the owner arising from its adaptability to his particular use”). Conversely, if highest and best use is genuinely in dispute, that is, through admissible evidence reasonably supporting contrary conclusions, there is authority that such plans are relevant and admissible. Id. The district court found that the parties agreed on the highest and best use of the land. The state says so, too. KQRS contends that there was no such agreement.
It is undisputed that this partial taking left intact and undisturbed KQRS’s operation as a radio station. After the taking, KQRS could, if it desired, continue to occupy and use the remaining land as before the taking, but it would not be able to expand its operation at that location. So, before the taking, the highest and best use to this landowner was a radio station. Afterwards, the highest and best use to this landowner was a radio station. The state disagrees.
But the dispositive consideration is market value. The respective appraisal experts for both parties agree that there is virtually no market for a radio station. And they agree that there is a market for an office development and that the marketable highest and best use of the property remaining after the taking is for offices. In the context of marketable highest and best use, the appraisal evidence presented to the district court was consistent, KQRS’s argument notwithstanding. Thus, the district court did not abuse its discretion in ruling that KQRS’s future development plans would be inadmissible at trial.
KQRS argues that its own demand for the use of the property as a radio station is relevant to the calculation of fair market value. KQRS’s appraisal experts define fair market value as “the most probable price [that] a property should bring in a competitive and open market.” As owner of the condemned property, KQRS’s sole demand cannot reasonably be viewed as the competitive real estate market.
In a market as limited as that for radio stations, to treat as relevant the demand of a landowner in an extremely limited market as this would be tantamount to allowing the landowner to control and dictate “market” value. Because KQRS’s sole demand does not reflect the competitive and open real estate market, its demand is irrelevant and the district court did not abuse its discretion by ruling that such evidence would be excluded from the trial.
c. Special-Use Property
A special-use property is one that is so limited by its improvements that it cannot be converted to another use without prohibitively high cost and cannot readily be valued on the open market. See Fed. Reserve Bank v. State, 313 N.W.2d 619, 621 (Minn. 1981) (holding a special-use property is property “treated in the market as adapted to or designed and built for a special purpose”). Examples of special-use property include property that holds expensive health clubs, a federal reserve bank, airline hangars, or large shopping malls. See, e.g., N.W. Racquet Swim & Health Clubs v. County of Dakota, 557 N.W.2d 582, 583 (1997) (holding a 174,551 square-foot building with nine tennis courts, 22 racquetball courts, basketball courts, and an indoor pool is a special-use property); Fed. Reserve Bank, 313 N.W.2d at 620-21 (holding a 541,459 square-foot building, 60% of which was below ground, with a three-story vault, heliport, and firing range is a special-use property); In re McCannell, 301 N.W.2d 910. 915 (Minn. 1980) (holding facility used for main base and cargo handling with hangars to house large jet airplanes and specialized equipment for repairing jet engines is a special-use property); Equitable Life Assurance Soc’y v. County of Ramsey, 530 N.W.2d 544, 547 (1995) (holding a 72 acre shopping mall is a special-use property).
Although KQRS argues, with citation to some authority, that a special-use property needs to be valued on a basis other than the market approach, the respective appraisers did not classify the property as special-use. Rather, they acknowledged that the property could be converted readily to office space. The existing radio station building was equipped for that particular use, but there is no showing beyond mere argument that the building could not be adapted to general office use without prohibitively high costs. The sole reference to the land as a special-use property was from one of the condemnation commissioners who said he considered this to be a special-use property.
d. Project Rule and Admission of Purchase Efforts
The so-called “project rule” provides that the increase or decrease in the value of land because of a proposed improvement should not be considered in calculating the market value of the land. State by Head v. Anderson, 293 Minn. 455, 458-59, 197 N.W.2d 237, 240 (1972). Thus, neither condemnor nor landowner may take advantage of “an alteration in the market attributable to the project itself.” Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470, 480, 93 S. Ct. 791, 797 (1973) (quotation omitted).
KQRS argues that the district court violated the project rule by ruling that the state would be allowed to introduce evidence of its efforts to purchase the land before the condemnation. KQRS contends that the only purpose of the evidence would be to show that the assemblage of the expansion property with the existing property was not possible and would reduce the value of the taken land.
We conclude that the court did not violate the project rule or otherwise abuse its discretion in this ruling. It is unlikely that the project rule applies here because the state and the Carsons had reached an agreement and the Carsons had signed but not delivered deeds before KQRS asserted its claimed right of first refusal. So, evidence of the state’s nearly complete purchase from the Carsons would be relevant to the fair market value of the land before the taking.
Furthermore, KQRS’s reliance on Regents of University of Minnesota v. Hibbing, 302 Minn. 481, 225 N.W.2d 810 (1975) is misplaced. The instant case is factually and legally distinguishable from Regents. In Regents the issuewas whether evidence of a condemnor’s prior acquisition of other property in the same block is admissible to show the improbability of substantial private assemblage. Id. at 484, 225 N.W.2d at 812. Here, the issue does not include evidence of prior acquisition of other property because the land was not acquired by the state and the subject-matter property is the land in question and not “other property.”
Regents also held that “evidence [admitted] of prior acquisition of parcels of land [by the state] where the evidence would limit the assemblage possibilities and thereby adversely affect the market value of the land being condemned” is not admissible. Id. at 487, 225 N.W.2d at 813. Unlike the evidence referred to in Regents, herethe evidence of the state’s offer to the Carsons for the property was not evidence of a prior acquisition by the state nor did the evidence limit assemblage possibilities and adversely affect the market value of the land being condemned.
The Regents court concluded that when no useful purpose is served by the introduction of evidence, and it has no bearing on or relevancy to the determination of the fair market value of the subject property, under the project rule the evidence is inadmissible. Id. at 484-85, 225 N.W.2d at 812. But here, the evidence served the purpose of illustrating that the subject property was not owned by KQRS at the time the state began the acquisition process and served to show the fair market value of the property prior to the taking.
Because the evidence here was not within the limitations of the “project-rule,” we conclude that the district court did not abuse its discretion in denying KQRS’s motion to exclude evidence of the state’s agreement with the Carsons for the purchase of the subject property.
3. Jury Instructions
KQRS next argues that the district court’s denial of a requested jury instruction on the valuation of fixtures was an abuse of discretion. “For fixtures and permanent equipment destroyed or depreciated in value by the taking, the respondent is entitled to compensation.” State v. Robinson, 266 Minn. 166, 179, 123 N.W.2d 812, 822 (1963) (quotation and citation omitted). The district court ruled that because “KQRS was not forced to move due to the State’s acquisition of the [property] . . . thus fixtures were not ‘destroyed or diminished’ by the partial taking,” and thus the removal and devaluation of fixtures was not related to the condemnation and no jury instruction as to this matter was warranted. The fixtures and permanent equipment were neither destroyed nor depreciated in value by the partial taking because KQRS was not forced to move. The Carson property had only been recently acquired by KQRS and then only after the state had apparently purchased the property itself. Additionally, that property was not the site of KQRS’s radio station operations. No fixtures were lost or depreciated, and thus, there was no reason to instruct the jury as to the method of calculating damages for fixtures.
* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.