In a dramatic change in eminent domain law, the PA Supreme Court has now opened the door, in certain circumstances, for the use of purchase offer amounts in valuing condemned properties. Prior to this decision, the general law in PA was that offers could only be used to establish demand for a particular use but the offer amounts were inadmissible. However, the PA Supreme Court has now held that the offer amount itself could be admissible.
In Lower Makefield Townhip v. Lands of Dalgewicz, a township condemned a 166-acre farm for a public golf course. During the jury trial, the property owner testified regarding interest shown by several developers. He described some of the offers received including an agreement of sale with Ryland Homes for $5.1 million and a sales agreement with Toll Brothers for $7 million, contingent upon the condemnation being overturned. The property owner also testified to an offer from Pulte Homes, Inc., including the $8 million offer price and the offer letter was also introduced into evidence.
The condemnor objected, arguing the offer was inadmissible as it did not result in a sales agreement and any testimony concerning the offer price would be irrelevant and prejudicial. The trial court overruled the objection stating that it would be appropriate to “let in what was going on with this piece of land in terms of developers from a reasonable time before to a reasonable time after the taking.” The trial court observed the Township could cross-examine Mr. Dalgewicz on the nature of the offer, and that its evidentiary value was “something that should be argued to the jury. The jury determined the fair market value of the property was $5,850,000. On appeal, the Commonwealth Court affirmed.
The Supreme Court held:
[W]e hold there is no bright-line rule prohibiting testimony of bona fide offers into evidence, especially, as in the present case, when a contract has been signed and the offer is used to show that contract’s reasonableness. In so holding, we are guided by the principle that “[t]he admission or exclusion of evidence is within the sound discretion of the trial court[.]” Whether an offer is bona fide and whether it should be admitted are questions best left to the trial court as the gatekeeper of the evidence.
The Court explained the prior law regarding the admissibility of offers as follows:
This Court has held offers to buy property subject to condemnation proceedings are inadmissible to prove the value of the property. This limitation arose from the concern “testimony of the amount of an offer by one who did make it would offend the ‘[h]earsay’ rule, and the admission of the testimony by the offeror himself would lead to the investigation of collateral matters, and confuse the main issue.” In Anderson, this Court further explained that inquiring into the amount of purchase offers “would introduce wholly collateral issues as to the bona fides of the alleged offer, the conditions under which and by whom it was made and all of a host of other unrelated issues[.]” (citations omitted).
In breaking from this prior law, the Court relied upon Section 1105(1) of the PA Eminent Domain Code which provides a qualified valuation expert may “state any or all facts and data which the expert considered in arriving at an opinion[.]” Further, § 1105(2) provides a qualified valuation expert may “testify in detail as to the valuation of the property on a comparable market value, reproduction cost or capitalization basis[.]” Id., § 1105(2). The Court explained “The General Assembly makes clear this section is intended “to change existing law which severely restricts the testimony of the expert witness on the ground that ‘collateral issues’ are introduced.” Id., § 1105(2), Joint State Government Commission Comments — 1964. The General Assembly’s liberalization of the Eminent Domain Code explicitly permits testimony that may introduce “collateral issues” in direct contrast to the reasoning relied on in Kelly and Anderson; thus, continued reliance on their dictates is misplaced.”
In this case, the Court found that since the Pulte offer constituted “data which the expert considered in arriving at an opinion,” it could be introduced through the expert’s testimony. The Court then addressed “the relevancy and speculative nature of offers” and opined, “we agree with the Commonwealth Court that this particular offer was relevant because it helped prove the reasonableness of the Toll Brothers offer and it was probative of the fair market value of the property.” It further noted that the offer was made by “a large, sophisticated developer and home builder with a nationwide presence; there is no evidence to suggest its offer was not genuine, issued in bad faith, or an attempt to inflate the value of the property. Testimony, including from appellant’s own expert, established the process which a large developer, such as Pulte Homes or Toll Brothers, undertakes before submitting an offer. This was not some ‘fly by night’ contractor rushing to make a bid and betting the farm on the success of a development it might not have the resources to complete.”
Although this case does not permit evidence of offer amounts in every instance, it still is a major change from existing law.