Pennsylvania Case of the Month: Lower Makefield Township v. The Lands of Chester Dalgewicz, et al., No. 789 C.D. 2009, Commonwealth Court of Pennsylvania (September 1, 2010)

October 2010Newsletters In the Zone

This case before the Commonwealth Court of Pennsylvania involved the condemnation by Lower Makefield Township of a 166-acre farm for the construction of a golf course on December 6, 1996. An earlier dispute involving this condemnation resulted in a Commonwealth Court ruling on July 11, 2001, that the taking was for a legitimate public use. The matter then went before a Board of View in May 2003. The Board of View valued the property at $3,990,000, and the Dalgewicz family (the condemnees) appealed to the Court of Common Pleas. After a six-day trial in November 2008, a jury awarded the condemnees $5,850,000. The township appealed to the Commonwealth Court, raising four issues. Three of the issues concerned items the court admitted into evidence, and the fourth concerned the granting of a jury trial even though the condemnees failed to request a jury trial when they filed the Notice of Appeal.

The first evidentiary issue involved the court’s admission into evidence of an agreement of sale the condemnees signed on December 16, 1998—two years after the taking—with Toll Brothers, Inc. for the sale of the property. Under that agreement, Toll agreed to pay a base price of $7,000,000 based upon 100 approved building lots. The purchase price would be adjusted in $70,000-per-lot increments if more or fewer than 100 building lots were ultimately approved, with a minimum purchase price of $6,650,000. Toll could terminate the agreement if fewer than 90 building lots were approved. The township argued the agreement should have been excluded because it was executed more than two years after the taking and was thus not proper evidence of the value of the property at the time of the taking.

The Eminent Domain Code provides agreements “made within a reasonable time before or after the condemnation” may be admitted as evidence of value of the property taken (26 Pa.C.S. §1105). Whether an agreement of sale is probative of the value of the property is within the discretion of the trial court. In this case, the Commonwealth Court found the trial court did not abuse its discretion in admitting the agreement. Issues concerning the fluctuation of the market value of the property between the date of taking and the date of the agreement were addressed in testimony at trial. The condemnees offered testimony from both their appraiser and one of the property owners as to the nature of the market, and the township cross-examined both witnesses on the issue of market fluctuations. Because the jury was provided sufficient evidence to put the agreement in context, the court ruled the admission of the agreement was not an abuse of the trial court’s discretion.

The next evidentiary issue concerned the admission of a 1998 letter of intent from Pulte Home Corporation, wherein Pulte offered to purchase the property for $8,000,000. The Pulte letter of intent was admitted through the testimony of one of the property owners, who confirmed the offer was for $72,700 per lot, assuming a minimum of 110 approved building lots. The property owner testified his family rejected the Pulte offer and instead accepted the Toll offer, only because “the family felt more comfortable with Toll Brothers’ ‘reputation’ and its ‘ability to deliver.’” The township argued the letter of intent should have been excluded because it did not result in an agreement of sale.

Under Pennsylvania case law, offers are not generally admissible to prove value because they usually constitute hearsay and are speculative in nature. However, in this case both parties stipulated as to the authenticity of the letter of intent. The court also found the letter of intent had probative value as to the fair market value of the property. The offer was from a national home builder, and there was no evidence of bad faith on the part of Pulte. In addition, because the Pulte offer was a “firm offer that Condemnees could have accepted upon receipt,” it was not merely speculative. The Commonwealth Court therefore found the trial court did not commit an error in admitting the letter of intent as evidence of value.

The third evidentiary issue involved the introduction by the condemnees of an appraisal dated September 18, 1996, by William Mount (the Mount appraisal), which was authored for the township. William Mount was a prior appraiser retained by the township and not the appraiser testifying at trial. Generally, an expert report is inadmissible hearsay unless the expert who prepared the report can be cross-examined at trial. However, in this case the condemnees introduced the Mount appraisal to use it in the cross-examination of the township appraiser testifying at the trial.

In this case, the Commonwealth Court ruled the admission of the Mount appraisal was proper because the township’s counsel actually provided its new appraiser with a copy of the Mount appraisal for purposes of preparing for his cross-examination at trial. As a result, the Mount appraisal fit within the hearsay exception that permits experts to testify regarding reports upon which they relied in reaching their conclusions. The township’s appraiser testified his appraisal method and his valuation were substantially the same as the Mount appraisal. He differed from the Mount appraisal in that he believed only 90 lots would be approved as opposed to the 112 lots reflected in the Mount appraisal’s calculations. Because the appraiser used the Mount appraisal to buttress his own conclusions, and because the township had adequate opportunity to address the issue of the Mount appraisal on redirect examination, the Commonwealth Court found the township was not prejudiced by the introduction of the Mount appraisal and therefore the trial court did not commit an error.

Finally, the Commonwealth Court found even though the condemnees did not properly and formally request a jury trial when they filed their Notice of Appeal (as required by §517 of the Eminent Domain Code), both the condemnees and the township prepared for trial as if it would be a jury trial and referenced the fact it would be a jury trial in correspondence. Only after the township changed attorneys in January 2006, did it raise the issue of the condemnees’ failure to properly request a jury trial. Because the township, in essence, acquiesced to a jury trial through its course of conduct, the Commonwealth Court found the township was not prejudiced in actually having a jury trial. The Commonwealth Court also found §517 of the Eminent Domain Code was not “meant to be construed so rigidly so as to deprive a party of a constitutional right; especially when, as here, the purpose of the provision was otherwise satisfied and the oversight was not a result of questionable conduct or bad faith.” In addition, the township was unable to demonstrate how it was harmed by having a jury trial. Since “there is no inherent prejudice in proceeding to trial by jury as opposed to trial before a judge,” the trial court did not commit an error in allowing a jury trial.

For more information, please contact Michael J. Kornacki at 215.299.2895 or [email protected].