Free Response in Opposition to Motion - District Court of Arizona - Arizona

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John A. Weil, Bar No. 005621 WEIL & WEIL , PLLC 1600 S. Fourth Avenue, Suite C Yuma, Arizona 85366-1977 Tel: (928) 783-2161 Fax: (928) 783-6082 Attorney for Defendants Curtis

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 By: v. 192.019 Acres of Land, et al., Defendants. The Defendants/Owners herein object the Government's Motion in Limine regarding prices paid by the United States for properties in the project area (Woodman and Associated Citrus Packers Parcels). The United States' purchases are not substantive evidence of comparable sales. However, the Government has opened the door for the admission of this evidence because the Government's expert utilized all real property transactions which "could have been known to a prospective buyer on the valuation date". It would constitute and abuse of discretion for the Court to deny Defendants/Owners the opportunity to test the accuracy of the Government's expert's method of valuation. Respectfully submitted this 19th day of July, 2006. WEIL & WEIL, PLLC /s/ John A. Weil John A. Weil Attorney for Defendants Curtis UNITED STATES OF AMERICA, Plaintiff, DEFENDANTS' OPPOSITION TO MOTION IN LIMINE REGARDING PRICES PAID FOR SIMILAR PROPERTY Case No. CV 03 2006 PHX SRB IN THE STATE DISTRICT COURT DISTRICT OF ARIZONA

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MEMORANDUM OF POINTS AND AUTHORITIES INTRODUCTION Fundamentally, there should be one rule for admission of sales data applicable to both

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 consider these transactions to be "comparable sales", but the transactions are analyzed in his report for Federal Land Acquisitions. It was a matter of public record (assessor records) on the taking date that the Naval Facilities Engineering Command previously acquired two parcels of property within the project area. The purchases occurred over one year prior to the filing of the condemnation actions and were for citrus properties at sales prices of $16,500.00 per acre. Defendants' appraiser, Jim L. Sanders, does not Sales data of similar property near the time of the taking is considered the best evidence of value and is admissible as substantive evidence in the case. There is a split of authority on whether sales data on sales to the condemnor is admissible for that purpose, but the recent trend is to admit evidence of a sale to the condemnor. See, Nichols on Eminent Domain, Third Edition, Vol. 5 §21.03 and Section B-18, Uniform Appraisal Standards and the Government's expert precluded from testifying. The reason is that the Government's expert has considered a great deal of sales data that cannot be considered an arm's length sales price. If the rule in the case is to allow this evidence, Defendants are entitled to an equal opportunity of offering sales data. II. STATEMENT OF FACTS sides of this controversy. Defendants/Owners would welcome a restrictive rule excluding all sales data that does not evidence an arms length negotiated sales price and that requires compliance with the definition of "comparable sale" under the Uniform Appraisal Standards for Federal Land Acquisition. Under that rule all of the Government's sales data would be excluded

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in connection with "bracketing" principles and to analyze citrus as a carrying use for properties with industrial potential. The transactions are identified in Mr. Sanders' report as "Farm Sale No. 9", a sale by Robert Woodman on August 30, 2002 to the Naval Facilities Engineering Command of 60

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 property having industrial potential. "While sales to government entities should be viewed as suspect from the outset, they cannot, and should not, be rejected by appraisers as invalid comparable sales out of hand, especially in those situations wherein a paucity of private sales are available for use in a sales comparison approach to value."[emphasis added] In summary, Mr. Sanders concluded that the sales reflected a type of "pure citrus sale", having no industrial component, and this information was used to "bracket" or compare citrus sales with sales in his report for the limited purpose of analyzing the sale of the citrus properties without a price component for industrial development. (Mr. Woodman and Mr. Spencer had concluded that because of the public announcement of the intent to condemn the properties could not be sold for industrial development) In making this decision, he relied upon the Uniform Appraisal Standards for Federal Land Acquisitions (Washington DC 2000) Section B-18 (attached as Exhibit "A"): Significantly, Mr. Sanders investigated the specifics regarding these transactions by interviews with the participants, Robert Woodman and Mr. Spencer at Associated Citrus Packers. Both Mr. Woodman and Mr. Spencer will testify at trial regarding the information provided to Mr. Sanders. Mr. Sanders considered these sales to be voluntary. He felt the sales should be analyzed because they were the only sales that occurred within the project area. Mr. Sanders included the acres at $16,500.00 per acre. The second sale is identified as "Farm Sale No. 10" and also occurred in August 2002 as a part of the transaction wherein Associated Citrus Packers transferred the property to Marlin Packing, who in turn sold the property to the Naval Facilities Engineering Command for $16,500.00 per acre.

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The Government's appraiser, John D. Dorchester, Jr., had a more extreme position. Mr. Dorchester concluded that the Bend, Velda and 14th Street Properties were "limited market properties". Dorchester P104, L10 ("The issue of limited market property is that there may be a

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Sales involving the exchange of property are not admissible because they are considered Q. Articulate for me the methodology you used to arrive at your value so it can be evaluated by other experts in the field . . . . From an appraisal perspective, we need to determine whether or not a property is, what I would call, a commonly marketed property, or one that has special characteristics that might render it either be limited or non-market . . . . this property has very unique characteristics. Amongst those unique characteristics are that it is not in an established area of land use patterns consistent with its zoning. Most of the properties in the area are zoned for, or have been used as vacant land, residential, citrus, other farm. Properties down off the mesa are largely farmed, different soils, different characteristics. On the mesa, we can look at sales of properties that might be meaningful, not to tell me exactly what this property is worth, but a reasonable buyer and a reasonable seller in conjunction with market value definition would look at what is going on this market place. According to Mr. Dorchester, all transactions are important even if the price does not reflect fair market value. Thus, Mr. Dorchester considered in his report many types of sales that clearly are excluded if offered as substantive evidence of value: i. Artificial Price in Exchange. limited number of buyers. There also may be a limited amount of market indication from which buyers and sellers can be identified or their actions quantified.") (Exhibit "B" attached) Mr. Dorchester flatly stated that he relied upon any information regarding any transaction that could have been known to a buyer on the taking date:

A.

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unreliable indicators of market value. Federal Standards Section B-4, Page 39; United States v. Leavell & Ponder, Inc., 286 F.2d 398, 406 (5th Cir. 1961); Eaton Real Estate Valuation and Litigation (Second Edition 1980, Page 20). Nevertheless, Mr. Dorchester relied upon an exchange

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 It is recognized in appraisal practice that a financial, business or family relationship between the parties to a sale may effect the price of the property and, therefore, the transaction may not represent fair market value. Appraisal of Real Estate (Twelfth Edition 2001, Page 433) One of Mr. Dorchester's sales transaction is a sale from Wayne Kees to ACP. Mr. Spencer will testify that Mr. 5 Document 142 A. paid to the broker. In other words, the sales price was artificial. Amazingly, Mr. Dorchester testified that he did not care because his analysis was based on what would be known to the general market and not whether the amount was accurate: Q. If you determined from the buyer that the $600,000.00 stated amount in the escrow instructions was not considered the value of the property, would that cause you some concerns in using this in your analysis? My analysis doesn't go to fraud or mistake, my analysis goes to what was general market knowledge. In this instance, I have indications that the general market knowledge had a belief that this transaction was a $600,000.00. And if that is the way that the market operating with the same belief of information was operating as of the date of value, even if it was wrong, it could be a market factor. of property between Associated Citrus Packers ("ACP") and Glen G. Curtis. Mr. Dorchester did not verify the sale with the parties and his report calls the transaction a "sale". The representative for ACP, Mr. Spencer will testify that the amount listed in the escrow (and subsequently filed with county assessor) was chosen to set an amount for title insurance and to calculate the commissions

Thus, Mr. Dorchester concluded that this sale did not reflect fair market value, but relies upon it for "general market knowledge". ii. Insider Transactions.

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Kees was an insider of ACP and that the sales price does not represent an arm's length transaction. Nevertheless, Mr. Dorchester included this insider transaction in his sales data. Again, Mr. Dorchester insisted the insider transaction provided meaningful "transaction history in the world of

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2002 of an undivided 25% in 80 acres of citrus. Again, Mr. Dorchester acknowledged that the iii. So how did I use it? I used it by showing that it is a piece of market information that is out there. It is a part of transition history and world of the marketplace . . . ." Partial Interest Sales. A. Q. A. In terms of "any sort" the answer is, I think I would. But I used it as a comparable sale as we defined it earlier? No, I would not. And the difference here again is what we are trying to do in the sales description is show market reports, market activity. If this is something that is reported in the market, the market needs to know the factors you are talking about if they are going to try to make a direct comparison. But it is one of the pieces of reported market information. In our discussion about comparable versus transaction that is why we just call it a transaction? How does this transaction help you determine a value for the subject property? The information that I had - from the original source that was verified by them earlier looked to me to be a price that was low. And in my analysis, I said that this didn't appear to be an informed seller. the marketplace": Q. If you knew that Mr. Kees had been a director of Associated Citrus Packers for many years, stockholder, a personal close friend of Mr. Spencer and discounted the price as an insider transaction, would you still use this as a market comparison of any sort in your analysis?

Another type of sale that is suspect is the transfer of undivided interest. Mr. Dorchester included in his report as a sale of "20 acres" from Elton Slate to James D. Woodman on March 12,

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transfer price was not indicative of fair market value, but it is included as a sales transaction in his report. There are many other examples of sales transactions utilized by Mr. Dorchester that clearly

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Indeed, evidence of sales to the condemnor is admissible as substantive evidence where a foundation is laid that it was not the result of compulsion. The rule is eloquently explained in Nash v. D.C. Redevelopment Land Agency, 395 F.2d 571 (DC 1967): "Upon the question whether in a condemnation proceeding evidence may be introduced as to the price paid by a condemnor for property similar to that in suit, there is a division of authority. The weight of authority outside this jurisdiction is that such evidence is inadmissible. But in Washington Home for Incurables v. Hazen, 1934, 63 App. D.C. 185, 70 F.2d 847, we adopted the minority rule 7 Document 142 As noted, the recent trend is to admit evidence of transactions with a condemnor. Again, the view is expressed that each case is unique, and that in most cases, the fact finder should receive all of the relevant facts for evaluation. Thus, the fact that the buyer had the power to condemn the property, will generally go the weight of the evidence, rather than its admissibility. State v. McDonald, 88 Ariz. 1352 P.2d 343 (1960) conclusions by providing the jury with information on additional transactions. This is prejudicial. The Government has opened the door on the issue of "general market knowledge" and Defendants/Owners are entitled to present their evidence on what information was available to buyers on the taking date - including information of sales to the Government. III. RECENT TREND would not be admissible as substantive evidence of a comparable sale because the transaction does not reflect a negotiated arms length transaction. In essence, the Government is requesting that their expert be allowed to consider any sort of land transaction, but that Defendants/Owners not be allowed to rebut the Government expert's

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and held the admission of such evidence proper. We based our ruling upon O'Malley v. Commonwealth, 1902, 182 Mass. 196, 65 N.E. 30, in which the opinion for the Supreme Judicial Court of Massachusetts was written by Holmes, then Chief Justice of that tribunal. * * The theory of admissibility is that although evidence of a purchase by the condemnor of property similar to that involved in a condemnation proceeding is less persuasive on the issue of market value than evidence of a purchase by a stranger, there is no reason in principle why such evidence should not be admitted provided the purchase by the condemnor was made without compulsion; in short, it is held that objection to this type of evidence goes to its weight, not to its competency. Id. 76 U.S. App. D.C. at 121, 131 F.2d at 444 . . . Whenever the Government decides to pay a certain price, it has arguably made an uncoerced judgment as to fair market value which is relevant in the trial of any other condemnation of related property, and which, when offered by the condemnee, the trial judge does not err in admitting, provided he gives the Government a full opportunity to show to the jury the differences between the two properties which explain the disparity in the Government's respective evaluations." Another case is United States v. 264.80 Acres of Land, Ramsey Cty., N.D., 360 F.Supp. 1381 (1973) where the court explained its reasoning as follows: "This Court, after carefully reviewing the cases, finds that the recent trend has been in favor of granting the trial court broad discretion in determining the admissibility of sales such as the one in contention. The Government's objections do not support a per se exclusionary rule, but go to the weight of the evidence. United States v. 1,129.75 Acres of Land, 473 F.2d 996 (8th Cir. 1973); United States v. 691.81 Acres of Land, 443 F.2d 461 (6th Cir. 1971); Nash v. D.C. Redevelopment Land Agency, 129 U.S. App. D.C. 348, 395 F.2d 571 (1967); United States v. 145.31 Acres of Land, 54 F.R.D. 359 (M.D. Pa. 1972) . . . The Bureau had made several other purchases in the area, and it is the view of this Court that taken together, all of these purchases had a significant impact on the general market value of land in that community . . . The law of evidence in federal courts favors a broad rule of admissibility and is designed to permit the admission of all evidence which is relevant and material to the issues in controversy, unless there is a sound and practical reason for excluding it." Moreover, the courts have been particularly inclined to admit sales to the government where there is project influence and no other sales in the area are available. Nichols on Eminent Domain,

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Third Edition, Vol. 5, Section 21.03 [1] (2006); Division of Administration, State Department of Transp. V. Espy, 413 So.2d 714 (Fla. 3d Dist. Ct. App. 1982) (The court admitted evidence of the sale of comparable property notwithstanding the fact that the sale was to the condemning authority

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9 Document 142 Engineering Command were widely known in the area, and would have had an equal, if not greater impact on the market than the land transactions utilized by the Government's expert. How can the Government come into court with dozens of dissimilar sales transactions having no relevancy on the issue of fair market value, and then complain that Defendants/Owners seek to offer additional transactions that were also known to the hypothetical buyer on the taking date? offered as substantive evidence of a comparable sale. Clearly, the courts strongly favor allowing a defendant the opportunity to submit rebuttal evidence in cases where the government's expert has opened the door to consideration of all types of transactions. Defendants/Owners are entitled to submit their evidence on what may have had an impact on the general market value of land in the community on the taking date. The evidence will show that purchases by the Naval Facilities influenced the price the government paid for the [comparable] property may well disclose the presence of artificially inflated values in the sale price of that property. Nevertheless, this is merely a possibility, which cannot be determined through use of a general exclusionary rule prior to trial.") IV. REBUTTAL TESTIMONY As noted above, courts disfavor an exclusionary rule where evidence of the transaction is because of the lack of sales in the area); State Department of Highways v. Myrick, 258 S.2d 157 (2d Cir. 1972); Charleston R.C. v. Spartanburg Bonded Warehouse, 149 S.E. 236 (1929) A general exclusionary rule has clearly been rejected. United States v. 69.18 Acres of Land, 443 F.2d 461, 462-463 (6th Cir. 1971). ("The possibility that the condemnation itself may have

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In summary, the evidence regarding the Woodman and ACP sales is relevant to test the "broad patterns" identified by the Government's expert. CONCLUSION The modern trend is to allow admission of sales to the Government for purposes of proving fair market value. In this case, Defendants/Owners do not claim that the Woodman and ACP sales establish market value. Indeed, the price paid is significantly less than what Defendants/Owners contend to be the value of their property. Nevertheless, Defendants/Owners are entitled to present the "full picture" to the jury. Mr. Woodman is entitled to explain all of the events surrounding the subject properties, including the fact that he ultimately sold his property to the government. Also, it is important that these transactions occurred over a year prior to the initiation of condemnation proceedings, and that they were not compulsory sales (other than the general project influence, which existed in the area for over eight years). Most importantly, this evidence goes directly to the Government expert's theory of the case and is critical rebuttal evidence. Respectfully submitted this 19th day of July, 2006. WEIL & WEIL, PLLC By: /s/ John A. Weil John A. Weil Attorneys for Defendants

I hereby certify that on July 19, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Sue A. Klein Assistant U.S. Attorney Two Renaissance Square 40 North Central Ave., Suite 1200 Phoenix, AZ 85004-4408 /s/ Linda Simpson Case 2:03-cv-02006-SRB Document 142 10 Filed 07/19/2006 Page 10 of 10