Condemnation of Permanent and Temporary Rights of Way for the Transportation of Natural Gas in Buffalo Twp., Washington County, PA Dr. L.G. Smith and Mrs. M.P. Smith, h&w v. National Fuel Gas Supply Corp. ( 2018 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Condemnation of Permanent and :
Temporary Rights of Way for the :
Transportation of Natural Gas in :
Buffalo Township, Washington County, :
Pennsylvania, Over Lands of :
Dr. Larry G. and Mary P. Smith by :
National Fuel Gas Supply Corporation :
:
:
Dr. Larry G. Smith and Mrs. :
Mary P. Smith, husband and wife, :
:
v. :
:
National Fuel Gas Supply Corporation :
:
Appeal of: : No. 1093 C.D. 2017
Larry G. Smith and Mary P. Smith : Argued: May 7, 2018
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE FIZZANO CANNON FILED: June 13, 2018
Appellants Larry G. Smith and Mary P. Smith (Smiths) appeal from the
July 7, 2017 order of the Washington County Court of Common Pleas (trial court)
denying their motion for a new trial and directing the Prothonotary to enter judgment
in favor of National Fuel Gas Supply Corporation (National Fuel). Upon review, we
affirm.
In January 2011, National Fuel, a natural gas company regulated by the
Federal Energy Regulatory Commission, began this condemnation action by filing
a Petition for Approval and Order Filing Bond by Petitioner-Condemnor National
Fuel Gas Supply Corporation (Petition). The Petition sought a 50-foot-wide eminent
domain easement running the length of the Smiths’ property to allow for the
construction and installation of an underground 20-inch high-pressure gas
transmission line across the property. On February 10, 2011, the trial court entered
an order approving the Petition and granting the requested easement (Taking).1
Unable to agree on the appropriate amount of just compensation due
the Smiths under Pennsylvania’s Eminent Domain Code2 for the Taking, the parties
participated in a hearing before a board of view on October 20, 2011. The board of
view issued a report and just compensation award from which the Smiths appealed
seeking a trial de novo, as allowed by the Eminent Domain Code. See 26 Pa. C.S. §
516. The trial court scheduled a trial to begin on January 9, 2017 to determine the
amount of just compensation due the Smiths pursuant to the Eminent Domain Code
as a result of the Taking.
The parties then caused multiple assessments to be conducted for the
purpose of determining the just compensation amount to which the Smiths were
entitled as a result of the Taking and disclosed their respective appraisers and reports
to one another. The Smiths identified Dennis Cestra, David Vogel, and Francis R.
and/or Paul Chiappetta of the Chiappetta Agency, Inc. (collectively, the Smiths’
1
The trial court granted National Fuel a permanent 50-foot-wide easement running the
entire 2,007-foot length of the Smiths’ property, which encumbered a total of 2.3 acres of the
Smiths’ 117-acre property. The trial court also granted a temporary construction easement situated
one foot on the northern side and 15 feet on the southern side of the permanent easement,
containing a total temporary easement of 32,112 square feet, or 0.74 acres.
2
26 Pa. C.S. §§ 101-1106.
2
Appraisers) as their appraisers. The Smiths served the Smiths’ Appraisers’ reports
on National Fuel in addition to a report by an engineer, James E. Gillett, dated
October 20, 2016, and titled “Historical Sample of Damage From Natural Gas
Transmission Pipelines Explosions” (Gillett Report), upon which the Smiths’
Appraisers had partially based their reports. National Fuel noticed its intent to
present the report (Hayden Report or Hayden Appraisal) and testimony of Gary
Hayden and Gary Ciarimboli, both of Hayden Appraisal Services (National Fuel’s
Appraisers), at trial. Each parties’ expert appraisals contained similar pre-easement
assessment valuations as follows: David Vogel reported a value of $1,650,000.00;
Hayden Appraisal Services reported a value of $1,464,000.00; Dennis Cestra’s
reported value was $1,300,000.00; and Francis Chiappetta reported a value of
$1,430,000.00. Supplemental Reproduced Record (S.R.R.) at 24b, 105b, 255b &
374b. The parties’ experts’ post-easement net diminution valuation amounts,
however, varied considerably. As to these valuations, the Hayden Appraisal
reported the net diminution of value at $58,500.00; the Cestra appraisal reported
$464,000.00; the Chiappetta appraisal reported $500,000.00; and the Vogel
appraisal reported $1,339,200.00. See S.R.R. at 105b, 255b, 374b & 4b,
respectively.
Prior to trial, National Fuel and the Smiths each filed motions in limine
seeking the preclusion of the other side’s expert testimony and reports.3 On the
morning of the trial date, January 9, 2017, prior to the commencement of the trial,
the trial court heard argument on the motions in limine and issued two orders. The
3
National Fuel styled its motion as “Motion in Limine to Exclude the Testimony and
Appraisal Reports of David E. Vogel, Dennis Cestra, Francis Chiappetta and Paul Chiappetta, and
Testimony or Reports on Indefinite, Theoretical or Remote Damages.” See Reproduced Record
(R.R.) at 3a-26a. The Smiths’ motion in limine, which they styled as “Motion for Protective Order
in Limine to Disqualify Expert Report and Testimony,” sought to disqualify the expert report
Hayden Appraisal and the testimony of Gary Ciarimboli. R.R. at 27a-57a.
3
first order denied the Smiths’ motion in limine. See Trial Court Order, filed January
9, 2017, Reproduced Record (R.R.) at 100a (First Order). The second order partially
granted National Fuel’s motion in limine by excluding and striking both the expert
report of David Vogel4 and the Gillett Report, and further provided that:
All testimony and reports, expert or otherwise, that relate
to or incorporate indefinite, theoretical or remote damages,
including but not limited to pipeline explosions, burn
areas, potential impact, blast zones and perceived risks
associated with proximity to natural gas pipelines is
precluded, without supporting market data.
Trial Court Order, filed January 9, 2017, R.R. at 99a (Second Order).
After the trial court ruled on the motions in limine, the Smiths did not
request a continuance to either obtain new expert reports or otherwise modify their
existing expert reports. During trial, the Smiths did not present the testimony of any
valuation experts. Instead, the Smiths offered only their own testimony as the former
owners of the property.5 See Notes of Testimony (N.T.) 1/10/2017 at 55-160; R.R.
at 155a-260a; N.T. 1/11/2017 at 171-83; R.R. at 271a-82a. Larry Smith testified
that the correct just compensation was $660,000.00. N.T. 1/10/2017 at 129; R.R. at
229a. For valuation purposes, National Fuel presented the testimony of Gary
Ciarimboli of Hayden Appraisal Services, who testified consistent with the Hayden
4
The Smiths announced their intention to withdraw the Vogel Report prior to trial in their
pretrial statement and during argument on their motion in limine. See Notes of Testimony (N.T.)
1/9/2017 at 10-11.
5
Larry Smith testified that, in 2010, prior to the Taking, he sold Consol Pennsylvania Coal
Company an option to purchase the Smiths’ property for $1,550,000.00 without mineral rights and
$1,901,000.00 with mineral rights. N.T. 1/10/2017 at 104-07; R.R. at 104a-07a. Mr. Smith further
explained that the Smiths sold their property in 2012 for $890,000.00. N.T. 1/10/2017 at 96-99;
R.R. at 96a-99a.
4
Report and valued the correct just compensation amount at $58,500.00. See N.T.
1/11/2017 at 186-256; R.R. at 286a-356a.
On January 11, 2017, the jury returned a verdict awarding the Smiths
$58,500.00 as just compensation for the Taking. N.T. 1/10/2017 at 321-24; R.R. at
421a-24a, 427a. The Smiths filed a Motion for Post-Trial Relief requesting a new
trial two days later. See R.R. at 428a-60a. On July 6, 2017, the trial court issued its
Order and Memorandum denying the Smiths’ post-trial motion and directing entry
of judgment on the jury’s verdict. R.R. at 487a-91a. The Smiths timely appealed to
this Court on July 20, 2017.6
In eminent domain cases, this Court reviews whether the trial court
committed an abuse of discretion or error of law. Lang v. Dep’t of Transp., 135 A.3d
225, 228 n.8 (Pa. Cmwlth. 2016). Further, we note:
The decision to order a new trial is one that lies within the
discretion of the trial court. When determining whether
the trial court abused its discretion, the appellate court
must confine itself to the scope of review. Where, as here,
the trial court has provided a specific reason for its ruling
on a request for a new trial, and it is clear that the trial
court based its decision on that reason, the appellate court
must apply a narrow scope of review and may only reverse
the decision of the trial court if it finds no basis on the
record to support the reason of the trial court. Absent a
clear abuse of discretion, an appellate court will not
interfere with a trial court’s authority to grant or deny a
new trial.
6
On July 26, 2017, the trial court ordered the Smiths to file a Pa.R.A.P. 1925(b) Concise
Statement of Errors Complained of on Appeal, and the Smiths complied on August 14, 2017.
Thereafter, on September 1, 2017, and September 13, 2017, the trial court issued an Order and
Amended Order, respectively, indicating that it would rely on the Memorandum portion of its July
6, 2017 Order and Memorandum as its Pa.R.A.P. 1925(a) opinion in the appeal of this matter.
5
Discretion is abused when a trial court’s decision
represents not merely an error of judgment but where the
judgment is manifestly unreasonable or where the law is
not applied or where the record shows that the action is a
result of partiality, prejudice, bias or ill will.
Lahr v. City of York, 972 A.2d 41, 52 (Pa. Cmwlth. 2009) (internal citations omitted).
The Smiths present the following claims for review:
A. Whether the [t]rial [c]ourt erred when it allowed
the introduction of the testimony and appraisal report of
National Fuel’s Appraiser to the jury.
(i) Whether the jury improperly relied upon, and
based their [sic] award of just compensation on,
inadmissible evidence.
B. Whether the [t]rial [c]ourt erred when it
excluded the introduction of the Gillett Report; and
Ordered all testimony and reports, expert or otherwise,
that relate to damages including but not limited to pipeline
explosions, burn areas, potential impact, blast zones, and
perceived risks associated with proximity to natural gas
pipelines were precluded, without supporting market data.
(i) Whether the [t]rial [c]ourt[] erred when it
determined its Order excluding the aforesaid evidence did
not entirely preclude introduction of the testimony and
reports of the Smiths’ Appraisers.
Smiths’ Brief at 4.
The Smiths’ claims question the trial court’s ruling on the admissibility
of expert testimony. The admission or exclusion of evidence is within the sound
discretion of the trial court, and we will not disturb a trial court’s evidentiary rulings
absent an abuse of discretion. Lower Makefield Twp. v. Lands of Dalgewicz, 4 A.3d
6
1114, 1117 (Pa. Cmwlth. 2010). “A trial court’s ruling on the admissibility of an
expert opinion will not be reversed on appeal absent clear error.” Milan v. Com.,
Dep’t of Transp., 620 A.2d 721, 726 (Pa. Cmwlth. 1993) (citing B.P. Oil Co. v. Del.
Cty. Bd. of Assessment Appeals, 539 A.2d 473, 476 (Pa. Cmwlth. 1988)).
A. National Fuel’s Appraiser’s Testimony and Report
The Smiths claim that the trial court erred by allowing into evidence
the testimony and an appraisal report of National Fuel’s appraiser. See Smiths’ Brief
at 20-23. The Smiths argue that National Fuel’s Hayden Appraisal failed to consider
the fair market value of the Smiths’ entire property before and after the Taking in
that the report did not consider: interference with subterranean mineral rights and
the diminution in value resulting from such interference; the reduction in value due
to the “division” of the property; or the value of, and accommodations required by,
the temporary construction easement. Id. The Smiths further argue that National
Fuel’s appraiser’s failure to consider these items resulted in an improper and
inadmissible expert report and that, as such, the jury based its just compensation
award upon inadmissible evidence. Id.National Fuel, on the other hand, argues the Hayden Appraisal
conformed to the standards articulated by the Eminent Domain Code to determine
damages resulting from a taking. See National Fuel’s Brief at 12-19. National Fuel
argues that: (1) the Eminent Domain Code does not require consideration of mineral
rights in just compensation appraisals; (2) none of the appraisals considered the
mineral lease; (3) the Smiths offered no evidence related to the lease at trial; and (4)
the Hayden Appraisal expressly considered the impact of the easement location and
the temporary construction easement. Id.7
1) Consideration of the Mineral Estate and the Impact of the Property’s
Existing Mineral Lease
The Smiths first argue that National Fuel’s appraiser failed to consider
the impact the easements had on the value of the Smiths’ mineral estate7 and a lease
thereon. See Smiths’ Brief at 20-21. The Smiths rely on Werner v. Department of
Highways, 247 A.2d 444 (Pa. 1968), In re Condemnation Proceeding by S. Whitehall
Township Authority, 940 A.2d 624 (Pa. Cmwlth. 2008), and Morgan Signs, Inc. v.
Department of Transportation, 723 A.2d 1096 (Pa. Cmwlth. 1999), for the
proposition that a failure by an appraiser to consider mineral estate values, or leases
concerning such estates, renders a compensation appraisal completely incompetent.
We disagree.
Initially, the Eminent Domain Code defines “just compensation” as
follows:
Just compensation shall consist of the difference
between the fair market value of the condemnee’s entire
property interest immediately before the condemnation
and as unaffected by the condemnation and the fair
market[8] value of the property interest remaining
7
“Pennsylvania law recognizes three discrete estates in land: the surface estate, the mineral
estate, and the right to subjacent (surface) support.” Consolidation Coal Co. v. White, 875 A.2d
318, 326 (Pa. Super. 2005). These estates are severable, and so different owners may hold title to
separate and distinct estates in the same land. Id.8
The Eminent Domain Code defines “fair market value” as follows:
Fair market value shall be the price which would be agreed
to by a willing and informed seller and buyer, taking into
consideration but not limited to the following factors:
(1) The present use of the property and its value for that use.
8
immediately after the condemnation and as affected by the
condemnation.
26 Pa. C.S. § 702(a). Thus, to determine just compensation, the Eminent Domain
Code requires an examination of a property’s value both before and after a taking.
Id. Further, our Supreme Court has pronounced the following basic principles of
condemnation:
First, the general rule is that the proper measure of damage
for lands taken under the power of eminent domain is the
difference between the market value of the land before the
exercise of the power and as unaffected by it and the
market value immediately after the appropriation and as
affected by it. Second, it is permissible for the condemnee
to introduce evidence of particular items lost through the
condemnation. The condemnee may not, however,
introduce evidence of the [v]alue of the particular items
lost through condemnation but merely the fact that these
items were lost. Third, as far as mineral deposits are
concerned, the condemnee may not introduce evidence of
the number of tons of minerals lost and then multiply that
number by some dollar figure such as the market price or
the royalty payment.
Werner, 247 A.2d at 446–47 (internal citations omitted).
(2) The highest and best reasonably available use of the
property and its value for that use.
(3) The machinery, equipment and fixtures forming part of
the real estate taken.
(4) Other factors as to which evidence may be offered as
provided by Chapter 11 (relating to evidence).
26 Pa. C.S. § 703.
9
The Eminent Domain Code does not include a requirement that, to be
valid, a property assessment must contain a valuation of a mineral estate. Further,
the Smiths’ cited case law does not advance their argument that without an
assessment of a mineral estate, an appraisal is completely incompetent. In re
Condemnation Proceeding by South Whitehall Township Authority concerned
whether the condemnation of a 25-foot-wide utility easement amounted to a fee
simple taking, but did not discuss any requirements relating to expert mineral estate
valuations. Morgan Signs addressed the valuation of a lease for advertising sign
boards on a condemned property. Neither case stands for the proposition that a
failure to consider either the value of a property’s mineral estate or a lease thereon
renders an expert’s property value assessment infirm.
Likewise, while it does concern a mineral estate, Werner does not stand
for the proposition that a proper appraisal must contain a valuation of a mineral
estate. In Werner, our Supreme Court held that a condemnee could introduce
evidence of the existence of a certain tonnage of subsurface sand and gravel on
condemned land, but could not offer a specific calculation of the value of those
subsurface minerals as a deduction from the “before” value of the property for
assessment purposes. Id. at 449. While the Supreme Court determined that mineral
estate valuations could form part of just compensation appraisals, the Court did not
make such valuations mandatory. Id. In fact, the Supreme Court noted that without
accurate and current information regarding costs of mining minerals, bringing them
to market, and market prices, knowledge of the quantity of minerals contained within
a parcel of land does not help to value the land. Id. at 447 (citing Searle v.
Lackawanna & B.R. Co., 33 Pa. 57, 64 (1859)).
10
As a result, in practice, just compensation appraisals conducted by
individuals lacking geology or engineering backgrounds often contain reservation
language explaining that the appraisal does not include the value of a property’s
mineral estate. This occurred in National Fuel’s Hayden Appraisal. However, while
the Hayden Appraisal did not include a discussion of the property’s underlying
mineral estate, it did contain the following express limitation:
7. No opinion is expressed as to the value of subsurface
oil, gas or mineral rights, if any, and we have assumed that
the property is not subject to surface entry for the
exploration or removal of such materials, unless otherwise
noted in our appraisal.
Hayden Appraisal at 8; S.R.R. at 111b.9 At trial, on cross-examination, National
Fuel’s appraiser, Gary Ciarimboli, explained that, while the mineral estate is
included in fee simple ownership, it is not included in the appraisal due to lack of
pertinent expertise. N.T. 1/10/2017 at 238-39; R.R. at 338a-39a. Mr. Ciarimboli
explained that appraisals typically do not include mineral estates for that reason. Id.
at 239; R.R. at 339a. In fact, the Smiths’ appraisals also contained similar
reservation language regarding the mineral estate in question. The Chiappetta
Appraisal stated: “7) Subsurface rights such as minerals, oil and gas deposits were
9
The Hayden Appraisal went on to further limit its findings as follows:
8. We accept no responsibility for considerations requiring
expertise in other fields. Such considerations include, but are not
limited to, legal descriptions and other legal matters such as legal
title, geologic considerations, such as soils and seismic stability, and
civil, mechanical, electrical, structural and other engineering and
environmental matters.
Hayden Appraisal at 8; S.R.R. at 111b.
11
not considered in this report unless specifically noted to the contrary.” Chiappetta
Appraisal Addendum; S.R.R. at 502b. The Cestra Appraisal stated: “6. It is assumed
that there are no hidden or unapparent conditions of the property, subsoil, or
structures that render it more or less valuable. No responsibility is assumed for any
such conditions or for arranging for engineering studies that may be required to
discover them.” Cestra Appraisal at 39; S.R.R. at 303b. With no legal requirement
for the inclusion of a valuation of the mineral estate, and with proper notation of its
exclusion, the trial court did not abuse its discretion by refusing to preclude the
Hayden Appraisal or the testimony of Mr. Ciarimboli.
The lack of an examination of the property’s mineral estate did not
render the Hayden Appraisal incompetent. The Hayden Appraisal noted its lack of
a mineral estate assessment and appropriately limited its findings regarding such
estate. The Smiths had ample opportunity to challenge the Hayden Appraisal
through cross-examination of Mr. Ciarimboli and/or by introducing their own
evidence as to the mineral estate’s value during their case.
The Smiths also argue that the Hayden Appraisal failed to consider the
impact of the Taking on an existing mineral lease on the property. 10 See Smiths’
Brief at 21-22. None of the appraisals discussed this lease, including the Smiths’
appraisals. As the trial court noted:
No one, neither the condemnor nor condemnees, offered
the slightest suggestion that the value of the lease would
be impacted in any way by a pipeline four feet below the
10
In 2007, the Smiths encumbered the property with a lease that enabled Great Lakes
Energy Partners, LLC, to drill and lay pipelines on the property. See N.T. 1/10/2017 at 101-03;
R.R. at 201a-03a; see also Oil, Gas, and Coalbed Lease executed June 13, 2007 (Lease), R.R. at
48a-56a. The Lease defined the leased mineral estate as the “oil, gas, coalbed methane gas and
liquid hydrocarbons” beneath the property. See Lease at 1; R.R. at 48a.
12
surface. It is perfectly obvious that the market value of the
oil and gas estate was exactly the same, both before and
after the [T]aking.
Trial Court Memorandum, dated July 7, 2017 (Trial Court Memorandum), at 3.
Additionally, the absence of testimony or evidence of the impact of the
Taking on the existing mineral lease does not render the Hayden Appraisal
inadmissible. As with the failure to discuss the mineral estate,11 the Smiths could
have addressed the issue during cross-examination of Mr. Ciarimboli or through
their own expert testimony and/or reports, but elected not to do so.
2) Consideration of the Easement Location and the Temporary Construction
Easement
Next, the Smiths argue the Hayden Appraisal failed to consider 1) the
negative impact and reduced utility occasioned by the division of the Smith property
into two parcels and 2) the effect of the temporary construction easement on the
property. See Smiths’ Brief at 22. These assertions are incorrect.
Contrary to the Smiths’ suggestions, and as the trial court properly
noted, the Hayden Appraisal and the testimony of Mr. Ciarimboli contemplated both
the division of the property and the effect of the temporary construction easement.
See Trial Court Memorandum at 3; N.T. 1/10/2017 at 223-24, 242-43; R.R. at 323a-
24a, 342a-43a; Hayden Appraisal at 16; S.R.R. at 119b. Regarding the division of
the property, Mr. Ciarimboli testified as follows:
11
In addition to Werner and Morgan Signs, the Smiths cite Captline v. County of Allegheny,
727 A.2d 169 (Pa. Cmwlth. 1999), in an attempt to extend their argument that assessments that do
not consider mineral estates are invalid to also require assessments to expressly consider leases
that concern the mineral estates of such properties. Captline involved a claim for attorneys’ fees
and expenses in a just compensation/taking matter that hinged on whether a taking was a de jure
or de facto condemnation, and does not advance the Smiths’ argument.
13
Q. But more importantly, you say [in the Hayden
Appraisal], the new easement divides the site in two
parcels?
A. That’s correct.
Q. What did you mean by that?
A. The easement severs the property into two sections.
There’s the main section where the house and the majority
of the land is, then you have the easement and then you
have the area, basically, slopes down to Interstate 70.
Q. Before the easement was there, what was the
topography like where the easement is now?
A. Again, I didn’t see it before the easement. I can go
with what the topography map showed. It’s, basically, the
same as what the easement is now.
Q. Was it capable of having a building put on it?
A. Yes.
Q. Then you go on to say, the new easement restricts the
overall utility of the site. What did you mean by that?
A. Well, again, before the easement, the property is a
whole. After the easement, the property is not a whole
because you have the easement that divides the property
in two sections. So, again, you don’t have that unity of
use. But again, the area that the easement divided, that’s
what you can’t, basically, use. You lose some rights of
that easement area. You can’t build on it. However, you
can walk on it, you can ride a horse on it, you can ride a
bicycle or whatever, I don’t know about a bicycle, but you
just can’t build on that easement area.
14
N.T. 1/10/2017 at 242-43; R.R. at 342a-43a. Regarding the temporary construction
easement, Mr. Ciarimboli testified as follows:
Q: Now, we were talking about the temporary
construction easement. Is that somehow in [the Hayden
Appraisal]? Do you factor that into damages?
A. Yes. That’s included in the damages. Basically, a
temporary construction easement, when somebody takes a
temporary construction easement, they are, basically,
renting the ground for a two-year period.
So what we do in the appraisal world, we take the
area, in this instance, it was .7372 acres, times the after
value land value, which was $3,700 an acre, we give it a
10 percent return, which is a pretty good return, times 10
percent times 2 years. In this instance, the temporary
construction easement number would be $546, and that’s
incorporated in my damage figure.
N.T. 1/10/2017 at 223-24; R.R. at 323a-24a. Accordingly, the record reflects that
both the division of the property and the effect of the temporary construction
easement were addressed, despite the Smiths’ assertion to the contrary.
The Smiths are not entitled to relief on the denial of their motion in
limine as the trial court did not abuse its discretion by refusing to preclude National
Fuel’s Appraisal or the testimony of their expert witness.
B. The Gillett Report and the Limitation of the Smiths’ Appraisers’ Testimony
In their second claim, the Smiths argue that the trial court erred by
partially granting National Fuel’s motion in limine. See Smiths’ Brief at 23-32. The
Smiths argue that the trial court improperly excluded the Gillett Report and further
improperly limited the testimony of their witnesses to preclude references to
15
perceived risks associated with proximity to natural gas pipelines (pipeline stigma)
without supporting market data. Id. The Smiths argue that the trial court’s limitation
on their experts’ testimony effectively precluded the experts from testifying, as the
experts’ reports and opinions all were based, to a certain degree, on the pipeline
stigma notions and data. Id.National Fuel argues that the trial court properly partially granted its
motion in limine. See National Fuel’s Brief at 19-40. National Fuel argues the
Gillett Report was a compilation of pipeline explosion data completely unrelated to
the subject pipeline and/or National Fuel’s operations, and that the Smiths’
appraisers ultimately improperly set the “after” value for the property based on the
indefinite, speculative, and remote possibilities/information contained in the Gillett
Report. Id. Further, National Fuel argues that the trial court merely limited, not
completely precluded, the Smiths’ experts from testifying. Id. at 35-40.
1) The Gillett Report
Our Supreme Court has long held that, in eminent domain takings cases,
a landowner may expect just compensation based on “reasonable certainties inherent
in the present, not for chances or future possibilities.” Gilleland v. New York State
Nat. Gas Corp., 159 A.2d 673, 676 (Pa. 1960); see also Wallace v. Jefferson Gas
Co., 23 A. 416, 419 (Pa. 1892) (holding that testimony of merely speculative,
imaginary, theoretical, and doubtful character, founded upon remote and uncertain
possibilities, should be excluded).
The Gillett Report “provides a historical sample of the observed
damage resulting from the explosions of natural gas transmission pipelines.” Gillett
Report at 2; S.R.R. at 516b. Specifically, the Gillett Report details a 2012 gas
pipeline rupture and explosion in Sissonville, West Virginia. Gillett Report at 2-11;
16
S.R.R. at 516b-525b. Thereafter, the Gillett Report discusses sample data from 19
separate rupture events that occurred throughout Canada and the United States over
the course of 47 years, but never addresses how these events affected real estate
markets in which they occurred. Gillett Report at 12-28; S.R.R. at 526b-42b.
National Fuel did not operate any of the pipelines involved in the explosions
discussed in the Gillett Report.
While relevant in a theoretical sense, the Gillett Report represented
chance or future possibilities as opposed to reasonable, present certainties.
Accordingly, the trial court did not abuse its discretion in precluding admission of
the Gillett Report from trial.
2) Limitation of the Smiths’ Appraisers’ Testimony
Our Supreme Court has held that, “[w]hile an expert’s opinion may not
be based upon pure conjecture, [] an appraisal expert’s best efforts to quantify a
reduction in property valuation as a result of a subjective and intangible stigma is
permissible.” Harley-Davidson Motor Co. v. Springettsbury Twp., 124 A.3d 270,
286 (Pa. 2015). However, the Court cautioned, “while consideration of an
environmental stigma may be examined when determining fair market value, expert
testimony of such stigma may not be offered without any foundation.” Id.Here, the Smiths’ Appraisers reduced the property valuation based on
the possibility of a catastrophic explosion caused by a future pipeline rupture.12 The
Smiths’ Appraisers did not base their stigma valuations on a foundation of market
data indicating an actual fear in the community of a possible gas pipeline explosion.
12
The Cestra Report provided for a 35% downward adjustment of the property’s overall
valuation based on the risk of a pipeline explosion. See Cestra Report at 36-37; S.R.R. at 300b-
01b. The Chiappetta Report provided for a 20% downward adjustment in total value, which it
described as “a subjective conclusion[.]” Chiappetta Report at 22; S.R.R. at 427b.
17
Instead, the Smith Appraisers based their valuations on speculation of a remotely
possible future cataclysmic event such as those discussed in the Gillett Report
without offering any evidence or foundation of the market effect of the stigma in the
area. See Cestra Report at 36; S.R.R. at 300b (discussing pipeline accidents
nationwide as a valuation adjustment); Chiappetta Report at 22, 27-29; S.R.R. at
427b, 432b-34b. The trial court elaborated on its decision to preclude from appraiser
testimony references to possible pipeline explosions without a foundation of market
data as follows:
There is no doubt that a buyer would rather not have
a pipeline on his or her property if it could [b]e avoided.
That is why property owners are awarded just
compensation. When a pipeline comes through, the
surface is disrupted and the owners must deal with dust,
noise and mud. The value of the land taken is largely lost.
After the pipeline is installed, the owners can expect to
encounter from time to time strangers on their land as
maintenance is performed. And every once in a while, in
this huge nation, a pipeline blows up. The danger of a
pipeline is just one of many factors associated with a
diminution in value. If there is any place where the effect
of that danger could be quantified, it would be in
southwestern Pennsylvania[,] which is virtually cross-
hatched with pipelines of all sizes and descriptions. If
such a factor exists in any significant degree, it would be
observable in market data, but none of [the appraisals]
offered any evidence whatsoever that proximity to
pipelines actually decreases property values.
Trial Court Memorandum at 3-4.
The Smiths appear to have drawn the conclusion that the trial court’s
second order limiting the expert testimony in fact completely precluded them from
offering any testimony at trial relating to the risk of pipeline explosions or the effect
18
such a risk would have on an appraiser’s property valuation, as well as any testimony
from appraisers who had considered such risks in conducting their appraisals. See
Smiths’ Brief at 32. We disagree with this interpretation and further note that the
Smiths did not request a continuance to obtain new experts or to amend existing
expert reports in light of the trial court’s order.
The trial court’s order did not completely preclude testimony from the
Smiths’ appraisers Dennis Cestra or Francis Chiappetta and Paul Chiappetta, or
prevent those appraisers from testifying that pipeline properties are less valuable
than non-pipeline properties, partially due to a risk of explosion. See Second Order;
R.R. at 99a. The order instead restricted the appraisers’ possible testimony in terms
of quantification of the reduction in market value based on a possibility of a pipeline
explosion in the absence of market data. Id. Prior to the commencement of trial, the
trial court explained the restriction as follows:
I mean, I don’t [m]ind somebody saying a pipeline
property is less valuable than non-pipeline property, and
one of those reasons is because there is a potential for
explosion. What I don’t want is somebody saying that’s
30 percent or 20 percent, because no one knows that. I
don’t care what Gillett[] says.
But it’s a factor, so I think you can refer to that. I don’t
think you can quantify it. I don’t think it can be quantified.
I think it could, but nobody has done it. . . .
So I’m not going to say he cannot mention the possibility
of an explosion or a failure, but I don’t want to hear any of
that 30 percent. . . .
I don’t want [the appraiser] to mention any numbers. [The
appraiser] has got no basis for any numbers, no legitimate
basis for any numbers that I’m aware of. . . . [T]hat’s the
ruling.
19
N.T. 1/10/2017 at 12-14; R.R. at 112a-14a. The trial court further elaborated on the
effect of its second order as follows:
Our order in limine did not exclude the [Smiths’]
experts’ reports, only that portion of those reports that
sought to introduce an arbitrary percentage deduction in
value because of stigma. Those experts were permitted to
offer their opinion of the amount of just compensation due
the Smiths based on market data. For whatever reason, the
[Smiths] elected to offer no evidence on just compensation
except their own opinion. They cannot complain when the
jury apparently accepted the testimony of the only
professional appraiser they heard.
Trial Court Memorandum at 4.
We find no abuse of discretion in the trial court’s preclusion of
reference to remote possibilities of explosion without a foundation based on market
data or other verifiable information, and we agree with the trial court that the order
so limiting such testimony did not preclude the Smiths’ Appraisers from testifying
at trial. We further note that even if the Smiths believed that the trial court’s ruling
completely precluded their experts on the eve of trial, they made no request to
continue the trial to obtain new experts or to have their expert reports conform to the
ruling.
The trial court did not abuse its discretion in denying the Smiths’
motion in limine because the Hayden Appraisal properly considered the fair market
value of the Smiths’ entire property before and after the Taking. Likewise, the trial
court did not abuse its discretion in partially granting National Fuel’s motion in
limine to exclude the Gillett Report and limiting the testimony of witnesses to
preclude references to perceived explosion risks associated with properties’
20
proximity to natural gas pipelines without supporting market data. Accordingly, we
affirm the July 7, 2017 trial court order denying the Smiths’ motion for a new trial
and directing the Prothonotary to enter judgment in favor of National Fuel.
__________________________________
CHRISTINE FIZZANO CANNON, Judge
21
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Condemnation of Permanent and :
Temporary Rights of Way for the :
Transportation of Natural Gas in :
Buffalo Township, Washington County, :
Pennsylvania, Over Lands of :
Dr. Larry G. and Mary P. Smith by :
National Fuel Gas Supply Corporation :
:
:
Dr. Larry G. Smith and Mrs. :
Mary P. Smith, husband and wife, :
:
v. :
:
National Fuel Gas Supply Corporation :
:
Appeal of: : No. 1093 C.D. 2017
Larry G. Smith and Mary P. Smith :
ORDER
AND NOW, this 13th day of June, 2018, the order of the Washington
County Court of Common Pleas dated July 7, 2017 denying Appellants Larry G.
Smith and Mary P. Smith’s motion for a new trial and directing the Prothonotary to
enter judgment in favor of National Fuel Gas Supply Corporation is AFFIRMED.
___________________________________
CHRISTINE FIZZANO CANNON, Judge