Gulf South Pipeline Company, LP v. Blanche Marie Downey Pitre

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2007-CT-01308-SCT
GULF SOUTH PIPELINE COMPANY, LP
v.
BLANCHE MARIE DOWNEY PITRE
ON WRIT OF CERTIORARI
DATE OF JUDGMENT: 06/26/2007
TRIAL JUDGE: HON. JOHN S. PRICE, JR.
COURT FROM WHICH APPEALED: W ARREN COUNTY SPECIAL COURT OF
EMINENT DOMAIN
ATTORNEYS FOR APPELLANT: LEANN W. NEALEY
FRED EXZELL BOURN, III
ROBERT C. GALLOWAY
ATTORNEY FOR APPELLEE: DAVID M. SESSUMS
NATURE OF THE CASE: CIVIL - EMINENT DOMAIN
DISPOSITION: REVERSED AND REMANDED - 04/15/2010
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
EN BANC.
RANDOLPH, JUSTICE, FOR THE COURT:
¶1. Gulf South Pipeline Company (“Gulf South”) sought a 5.59-acre easement and right-
of-way for a forty-two-inch pipeline through 115 acres of property owned by Blanche Pitre
in Warren County, Mississippi.1 During trial in the Warren County Special Court of Eminent
1
According to Gulf South’s “Complaint to Exercise Right of Eminent Domain,” the
pipeline “shall be buried during construction to provide a minimum cover of not less than
thirty-six inches . . . .” Furthermore, as noted by Gulf South, the pipeline is “parallel to an
existing high-voltage power line easement” on the subject property.
Domain, Gulf South’s appraiser, Brent Johnston, valued the property to be taken at $38,250 2
and opined that the remainder of the property would be unaffected. Johnston testified (1)
that no severance damages were due because of the pre-existing presence of a power line;
(2) that, “because of the 700-foot distance between the pipeline and the other buildings,” no
other damages arose; and (3) that “in the market I found no difference between property with
a pipeline and not.”3
¶2. Pitre’s appraiser, James Hamilton, opined that total damage to Pitre’s property,
including damage to property not taken, was approximately $175,000. Hamilton used sales
comparables for the property actually taken and valued it at $5,000 per acre. However,
regarding damage to property not taken, Hamilton opined that such property would suffer an
additional fifteen percent diminution in value, the shop would suffer an additional thirty
percent diminution in value, and the house would suffer an additional twenty percent
diminution in value. Hamilton testified that, in formulating his opinion for the additional
diminution in value to the remainder property, shop, and house, he could not find sales
2
Using sales comparables, Johnston determined that the property actually taken was
worth approximately $6,000 per acre.
3
Sales comparables relating to properties through which a gas line passed, used by
Johnston and referenced in his deposition, were excluded by the trial court and marked for
identification only. Specifically, the trial court stated:
[t]he Rules of Civil Procedure . . . have a duty to timely and seasonbl[y]
supplement discovery. The comparables that Mr. Johnston was getting ready
to testify to yesterday . . . were supplied to [counsel for Pitre] on June 8th,
which was a Friday afternoon. This trial has been set for June . . . 13th for
some time. It’s been continued several times. I find that that is not . . . timely
and seasonable . . . . So, therefore, any testimony regarding those comparables
is hereby disallowed.
2
comparables. Thus, he failed to offer evidence that he: (1) had applied established and
reliable principles or methods; (2) had relied on accepted publications or other authoritative
appraisal texts; or (3) otherwise had utilized underlying facts or data to support his opinion
as to the remainder. Hamilton maintained that:
[j]ust about everything that we do is the opinion of the appraiser. And we
either back it up with education and all of the information that we can get to
arrive . . . at our opinion. But when it . . . gets down to it, it’s our opinion as
to . . . value . . . .
In Hamilton’s estimation, “[i]t’s tainted property. It’s got that gas line on it, and people are
going to be scared of it.”
¶3. Over objection, the trial court admitted Hamilton’s testimony regarding diminution
to the remainder, despite his earlier testimony that the reliability of an appraisal is dependent
upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c)
the degree of comparability or extent of adjustment necessary for time differences; and (d)
the absence of nontypical conditions affecting the sales price. Following a jury verdict in
favor of Pitre for $175,000, Gulf South moved for judgment notwithstanding the verdict,
which was denied. On appeal, the Mississippi Court of Appeals affirmed. See Gulf South
Pipeline Co. v. Pitre, 2009 WL 596007, at *1 (Miss. Ct. App. March 10, 2009). According
to the Court of Appeals:
[w]e cannot hold Hamilton’s testimony to a strict Daubert[4 ] analysis because
he was unable to find comparable sales to compute an after fair market value.
No argument was made that Hamilton was not a qualified expert. Gulf South
only challenges his method of calculating the after fair market value of the
4
See Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786,
125 L. Ed. 2d 469 (1993).
3
property. We find that the trial judge, as the gatekeeper, did not err in
allowing the jury to hear Hamilton’s testimony.
Pitre, 2009 WL 596007, at *4.
ISSUE
¶4. This Court will consider:
Whether an appraiser can offer opinion testimony on diminution, or lack
thereof, without utilizing any of the three recognized methods for determining
the fair market value of real property.5
ANALYSIS
¶5. The Mississippi Constitution states that “[p]rivate property shall not be taken or
damaged for public use, except on due compensation being first made to the owner or owners
thereof . . . .” Miss. Const. art. 3, § 17 (1890). “[T]he words ‘or damaged’ were added to the
Constitution to secure [for] a private property owner . . . damages not covered by the actual
taking.” Potters II, 608 So. 2d at 1230 (citing Parker, 162 So. at 163). This Court has stated
that “just compensation in cases involving a partial taking is generally the value of the part
taken plus all the damages which the residue of the property suffers, including a diminution
in the value of the remainder.” Miss. State Highway Comm’n v. Franklin County Timber
Co., 488 So. 2d 782, 785 (Miss. 1986). In eminent-domain cases, “[t]he condemnor has the
5
While not raised, but certainly applicable on remand, is Johnston’s testimony on lack
of diminution of the remainder. Johnston’s testimony fails a Daubert analysis, as the
evidence offered regarding comparable sales properly was excluded from jury consideration.
Gulf South’s evidence of diminution of value, or lack thereof, does not address “damages not
covered by the actual taking.” Potters II v. State Highway Comm’n of Miss., 608 So. 2d
1227, 1230 (Miss. 1992) (citing Parker v. State Highway Comm’n, 173 Miss. 213, 219, 162
So. 162, 163 (1935)). In so holding, this Court makes no comment regarding whether the
excluded comparable sales sufficiently constituted “properties similar to the one at issue in
th[is] appraisal.” Rebelwood, Ltd. v. Hinds County, 544 So. 2d 1356, 1360-61 (Miss. 1989).
4
burden of proving the value of the condemned property.” Ellis v. Miss. State Highway
Comm’n, 487 So. 2d 1339, 1342 (Miss. 1986). “After a prima facie case has been made out
by the condemnor, then, if the landowner expects to receive more compensation than that
shown, he must go forward with the evidence showing such damage.” Id. (quoting Miss.
State Highway Comm’n v. Crooks, 282 So. 2d 232, 235 (Miss. 1973)).
¶6. Three standards are accepted in determining fair market value for real property: (1)
the cost approach, (2) the income-capitalization approach, and (3) the market-data or
comparative-sales approach. See Rebelwood, 544 So. 2d at 1360; Franklin County, 488 So.
2d at 785. “These approaches do not, considered singly, establish value. Each rather is one
approach to value, with the appraiser’s estimate of value being, in the end, an opinion which
is the product of a reconciliation of the indications yielded by the three approaches.”
Rebelwood, 544 So. 2d at 1360. See also Adcock v. Miss. Transp. Comm’n, 981 So. 2d 942,
947 (Miss. 2008) (“all three methods of valuation need not be considered in every appraisal,
particularly those of non-commercial property”). The market-data or comparable-sales
approach was used by the experts for both parties for the property actually taken, but not for
the remainder. Using that approach, “the value estimate is predicated upon prices actually
paid in open market transactions for various properties similar to the one at issue in the
appraisal.” Rebelwood, 544 So. 2d at 1360-61 (emphasis added). Neither expert offered
admissible market-data or comparable-sales evidence for the diminution, or lack thereof, in
the value of the remainder.6
6
Contrary to the dissent’s assertion that this Court established by “judicial fiat” the
accepted standards for real estate appraisers, this Court has merely adopted the industry
5
¶7. Mississippi Rule of Evidence 702 provides that:
[i]f scientific, technical, or other specialized knowledge will assist the trier of
fact to understand the evidence or to determine a fact in issue, a witness
qualified as an expert . . . may testify thereto in the form of an opinion or
otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the
testimony is the product of reliable principles and methods, and (3) the witness
has applied the principles and methods reliably to the facts of the case.
Miss. R. Evid. 702 (emphasis added). This Court has stated that “[u]nder the modified
Daubert standard, the trial court must first determine whether expert testimony is relevant
and, second, whether the proffered testimony is reliable.” Adcock, 981 So. 2d at 946-47
(emphasis added). No serious question arises as to relevancy. Certainly, the value of
property is relevant in an eminent-domain taking. See Tunica County v. Matthews, 926 So.
2d 209, 214 (Miss. 2006). In determining reliability, the:
[f]actors to consider may include “whether the theory or technique can be and
has been tested; whether it has been subjected to peer review and publication;
whether . . . there is a high known or potential rate of error; whether there are
standards controlling the technique’s operation; and whether the theory or
technique enjoys general acceptance” within the expert’s particular field.
Adcock, 981 So. 2d at 947 (quoting Miss. Transp. Comm’n v. McLemore, 863 So. 2d 31,
37 (Miss. 2003)).
¶8. Under Rule 702, “trial courts are charged with being gatekeepers in evaluating the
admissibility of expert testimony.” Watts v. Radiator Specialty Co., 990 So. 2d 143, 146
(Miss. 2008) (citation omitted). In short, “[t]he trial judge has the sound discretion to admit
standard, to be followed as a prerequisite to offering opinion testimony. Without
coincidence, that industry standard is also the “statutorily-authorized” standard. Rebelwood,
544 So. 2d at 1360. The dissent’s suggestion that this Court has dictated the methodology
is not supported by the precedent followed by the courts of this State for years.
6
or refuse expert testimony; an abuse of discretion standard means the judge’s discretion will
stand unless the discretion he used is found to be arbitrary and clearly erroneous.” Troupe
v. McAuley, 955 So. 2d 848, 856 (Miss. 2007) (quoting Poole v. Avara, 908 So. 2d 716, 721
(Miss. 2005)) (emphasis added). However, merely speculative expert opinions should not
be admitted. See Edmonds v. State, 955 So. 2d 787, 792 (Miss. 2007) (“a court should not
give . . . an expert carte blanche to proffer any opinion he chooses”); Matthews, 926 So. 2dat 214 (“the trial court is vested with a gatekeeping responsibility to prevent the admission
of expert testimony based on guess or conjecture”); McLemore, 863 So. 2d at 41.
¶9. Neither expert’s testimony as to diminution of the remainder satisfies the requirements
of our rules and established caselaw. Both failed to use time-tested techniques, supported
by peer review or publications, and/or industry standards generally accepted within his field
of expertise. Neither offered comparable sales, whether from Warren County, or any other
county in this state. Hamilton offered no pretense that he was following any recognized
method or procedure acceptable in the appraisal industry, and he admitted he was not relying
on peer-reviewed articles or industry publications.7 Furthermore, Hamilton’s claim that no
comparisons were available defies both judicial knowledge and the evidence excluded by
the trial court. See footnote 3 supra. Pipelines run through numerous counties in Mississippi
and have for more than half a century. Pipelines and power grids cross thousands of tracts
of land in Mississippi. As such, finding comparable sales with utility or pipeline rights of
way should present no impediment to applying the methods utilized in the appraisal industry
7
Johnston’s attempt to satisfy our Rule 702 concerns was properly excluded. See
footnote 3 supra.
7
and previously accepted by the courts of this State. See Rebelwood, 544 So. 2d at 1360;
Franklin County, 488 So. 2d at 785.
¶10. Although there is no dispute that both experts were qualified appraisers, the lack of
an acceptable methodology to formulate the subject opinions fails a Daubert analysis. See
footnote 5 supra. Where an expert admits that no basis satisfying the accepted criteria for
that profession exists for an opinion, the opinion should be excluded. See Edmonds, 955 So.
2d at 792; Matthews, 926 So. 2d at 214; McLemore, 863 So. 2d at 41. Hamilton’s testimony
was purely subjective, little more than rank speculation. As Hamilton’s opinion lacked
reliability when examined through the lens of Rule 702, it should have been excluded. The
Warren County Special Court of Eminent Domain abused its discretion by admitting the
subject opinion testimony into evidence.
CONCLUSION
¶11. Accordingly, we reverse the trial court and the Court of Appeals and remand for a new
trial consistent with this opinion.
¶12. REVERSED AND REMANDED.
WALLER, C.J., CARLSON, P.J., DICKINSON, LAMAR, CHANDLER AND
PIERCE, JJ., CONCUR. KITCHENS, J., DISSENTS WITH SEPARATE WRITTEN
OPINION JOINED BY GRAVES, P.J.
KITCHENS, JUSTICE, DISSENTING:
¶13. I do not agree that the trial court abused its discretion in allowing Pitre’s expert, James
Hamilton, to testify, and I would affirm the jury verdict in favor of Pitre, based in part on this
Court’s “long-standing history of not disturbing jury verdicts in eminent domain
8
proceedings.” Trowbridge Partners, L.P. v. Miss. Transp. Comm’n, 954 So. 2d 935, 944
(Miss. 2007).
¶14. At the time of trial, Hamilton, Pitre’s designated expert, had lived in Vicksburg for
seventy-six years and had worked in the real estate business since 1954. He obtained his
broker’s license in 1967 and his license to appraise both residential and commercial
properties in the early 1990s. Hamilton testified concerning numerous professional
accomplishments over a long career in real estate and, quite correctly, was accepted as an
expert witness by the trial court. Notably, he had testified as an expert witness in at least
forty eminent domain cases.
¶15. With regard to his testimony, Hamilton used comparable sales to establish the fair
market value of Pitre’s property and determined that the 115-acre parcel was worth $5,000
per acre before the taking, an amount $1,000 per acre less than the fair market value
established by Gulf South’s expert appraiser. However, Hamilton was unable to find a
suitable comparable sale by which to measure the diminution in value of Pitre’s remainder.
Clearly, this was due to the unique characteristics of the property at the time of the appraisal.
To that end, Hamilton testified,
We can find land [comparable sales] when we go out just about anytime. We
can find house [comparable sales] about anywhere. But you find houses with
land with gas lines and pipelines on it and find sales of that type of property,
that’s kind of hard to do. . . . If I could have found any, I would have.
Notwithstanding this uncontradicted testimony before the jury, the majority notes that
Hamilton’s assertion that no comparable sales existed defies judicial knowledge. Maj. Op.
at ¶ 9. However, when an expert witness’s testimony defies judicial knowledge, which falls
9
far short of omniscience, our inclination should be to defer to the testimony of a qualified
expert, rather than disregard it altogether. To be sure, the court’s need for, and reliance on,
expert witnesses is rooted in the reality that expert analysis and opinion usually exceed the
knowledge and understanding of technical subject matter that is reposed in the minds of mere
jurists and jurors.
¶16. Here, neither expert presented evidence of comparable sales to the jury to undergird
their opinions regarding diminution of value of the parcel. Gulf South’s expert testified that
the diminution in the value of the land was zero, and Pitre’s expert testified that the
diminution in the value of the land amounted to 15% for the remainder of the parcel not taken
by eminent domain, 20% for the house, and 30% for the barn, the barn being nearer the
pipeline than the house. Hamilton testified that his opinion was based on his expertise,
training, and certification in the field of real estate appraisal, and that “[j]ust about everything
[appraisers] do is the opinion of the appraiser.”
¶17. It is not for this Court to establish, by judicial fiat, the “standards . . . accepted in
determining fair market value for real property.” Maj. Op. at ¶ 6. We should not be in the
business of dictating methodology to real estate appraisers, or to experts in any other field.
It is they, and not we, who are the experts in their respective disciplines. The fact that neither
party’s expert based his opinion on comparable sales is telling. Such information is not
always available, and when it is not, as here, qualified appraisers, such as these, may resort
10
to other appropriate and accepted methodology, including, but not necessarily limited to,
their professional judgment, born of experience.8
¶18. I would hold that the evidence presented by both experts was both reliable and
relevant, and that it was the prerogative of the jury to weigh their relative credibility and the
validity of their opinions. That was done here, and the jury, having heard and considered the
testimony of both experts, concluded that Pitre was entitled to $175,000 for the taking of his
land. Accordingly, I would affirm.
GRAVES, P.J., JOINS THIS OPINION.
8
The “statutorily-authorized” standard mentioned by the majority and by this Court
in Rebelwood, Ltd. v. Hinds County, 544 So. 2d 1356, 1360 (Miss. 1989), is used by the
State to determine the “true value” of a parcel for the sole purpose of assessing ad valorem
taxes. Miss. Code Ann. § 27-35-50 (Rev. 2006). Real estate appraisers in eminent domain
cases, or otherwise, are not statutorily mandated to adhere to this method of appraisal. Id.
11