THE STATE OF NEW HAMPSHIRE SUPREME COURT 2011 TERM JULY SESSION. No NEW HAMPSHIRE DEPARTMENT OF TRANSPORTATION PASQUALE FRANCHI

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1 THE STATE OF NEW HAMPSHIRE SUPREME COURT 2011 TERM JULY SESSION No NEW HAMPSHIRE DEPARTMENT OF TRANSPORTATION v. PASQUALE FRANCHI APPEAL FROM THE STRAFFORD COUNTY SUPERIOR COURT BRIEF FOR APPELLANT PASQUALE FRANCHI By: Randall F. Cooper, Bar No. 501 Cooper Cargill Chant, P.A White Mountain Highway North Conway, NH (603) (oral argument by Attorney Cooper)

2 -i- TABLE OF CONTENTS TABLE OF AUTHORITIES... -iii- QUESTION(S) PRESENTED STATEMENT OF FACTS STATEMENT OF CASE SUMMARY OF ARGUMENT ARGUMENT I. THE TRIAL COURT ERRED IN ALLOWING THE STATE APPRAISER TO TESTIFY TO THE PROPERTY S BEFORE AND AFTER VALUES, WHICH WERE NOT FOR ITS HIGHEST AND BEST USE, AS BEING NOT RELIABLE AND IRRELEVANT A. The State had the Burden of Proof to Establish Just Compensation Including Every Material Fact that at Issue in Expert Testimony Relating to the Apprisal(s) Upon Which the Offer of Compensation was Based B. Only Relevant and Reliable Expert Testimony was Admissible C. Only Expert Testimony Valuing the Highest and Best Use of the Subject Property is Reliable and Relevant The Parties Agreed that the Proper Method to Value the Property was the Sales Comparison Approach with the Unit of Comparison being the Price Per Potential Unit The Highest and Best Use of the Property is a Necessary Predetermination before Applying the Sales Comparison Approach The State Appraiser When Testifying Admitted that His Opinion of Value was Not for the Highest and Best Use of the Property

3 -ii- 4. Expert Testimony Not for the Highest and Best Use but to Give the Land Owner the Benefit of the Doubt is Not Relevant And Reversed the Burden of Proof D. The Feasibility Analysis was Neither Reliable Nor Relevant II. III. IV. THE TRIAL COURT ERRED WHEN IT ALLOWED INTO EVIDENCE VALUATION DATA THAT WAS SUBSEQUENT TO THE DATE OF THE TAKING AND INSTRUCTED THE JURY IT COULD CONSIDER THE COLLAPSE OF THE REAL ESTATE MARKET IN CONSIDERING THE AMOUNT OF JUST COMPENSATION THE TRIAL COURT ERRED WHEN IT EXCLUDED FROM EVIDENCE, WHEN OFFERED WITHOUT OBJECTION, THE HISTORIC DEVELOPMENT PLAN FOR THIS PROPERTY UPON WHICH THE LAND OWNER HAD CONSISTENTLY ATTEMPTED TO FOLLOW AND WHICH REFLECTED THE SUBJECT PROPERTY S PROJECTED DEVELOPMENT POTENTIAL THE TRIAL COURT ERRED WHEN IT FAILED TO GIVE REQUESTED JURY INSTRUCTIONS THAT IDENTIFIED THE ISSUES OF MATERIAL FACT AND THE STATE S BURDEN OF PROOF RELATING TO THOSE ISSUES CONCLUSION

4 -iii- TABLE OF AUTHORITIES Federal Cases: th United States v Acres of Land, 586 F.2d 79 (8 Cir. 1978) New Hampshire Cases: Appeal of Pennichuck Water Works, 160 N.H. 18 (2010) , -22- Baxter v. Temple, 157 N.H. 280 (2008) Broderick v. Watts, 136 N.H. 153 (1992) , -32- Daly v. State, 150 N.H. 277 (2003) , -15-, -27-, -30- Davis v. State, 94 N.H. 321 (1947) Fortin v. Manchester Housing Authority, 133 N.H. 154 (1990) Goudreault v. Kleeman, 158 N.H. 236 (2009) Manchester v. Auburn, 125 N.H. 147 (1984) , -23- Sabinson v. Trs. of Dartmouth College, 160 N.H. 452 (2010) , -32- State v. Garceau, 118 N.H. 321 (1978) New Hampshire Statutes: RSA 498-A: , -20- RSA 498-A: RSA 498-A:4(II)(a) RSA 498-A:4(III)(a) RSA 498-A:4(III)(b) RSA 516:29-a(I)(c)

5 -iv- RSA 516:29-b , -17- RSA Chapter 498-A N.H. Rules: N.H. Evid. R N.H. Evid. R N.H. Evid. R Other State Cases: Merced Irrigation Dist. v. Woolstenhulme, 4 Cal. 3d 478, 483 P.2d 1(Ca. 1971) Other Authorities: APPRAISAL INSTITUTE, THE APPRAISAL OF REAL ESTATE (13th ed. 2008) , -16- APPRAISAL INSTITUTE, UNIFORM APPRAISAL STANDARDS FOR FEDERAL LAND ACQUISITIONS ( 2000) , -22-, -23-, -33- Model Civil Jury Instruction Nichols, The Law of Eminent Domain , -27-

6 -1- QUESTION(S) PRESENTED! In the trial of this RSA 498-A:27 petition to have condemnation damages reassessed by a jury, in which the State of New Hampshire has the burden of proof, the Trial Court, acting as the gate keeper, erred in not granting the Condemnee's Motion in Limine to exclude the expert testimony of the State's appraiser when his opinion of value was not for the highest and best use of the property, but for a use that in his opinion was not financially feasible (based upon inadmissable, post-taking, market condition data), but instead offered as giving the Condemnee the "benefit of the doubt.". Apx. 625; T ! To the prejudice of the Land Owner s case, the Trial Court erred when it excluded from evidence relevant exhibits and testimony establishing that the Land Owner s number of potential dwelling units (being the agreed unit of comparison in the application of the Sales Comparison Approach) was historically planned and in process for the property, and was not the Land Owners creation to obtain a windfall as argued by the State. T ! The Condemnee's request for jury instructions with respect to both his theory of the case and its interrelationship with the burdens established by RSA 498-A:19 and the improper consideration of post-taking data and the abnormal market conditions caused by the credit crisis were not given by the Trial Court, which when considered both in context of the charge in its entirety, and in context of the State's closing argument, was misleading to the jury. Apx. 625, 639, 656, 657, 660, 664 and 665; T. 98, 2-15, and 689, 8-11.

7 -2- STATEMENT OF FACTS The land which was the subject of the taking by the New Hampshire Department of Transportation ( The State ) is located in North Conway, New Hampshire at the easterly end of Artist Falls Road and abutting the Mt. Cranmore Ski Area to the south. Exhibit L3, Apx.644. The parcel of vacant land (the Subject Parcel ) is approximately 77.2 acres in size, and is bisected by a transmission line running north and south and extending through the base of the ski area. Exhibit H and L6, Apx. 489 and 645. The Parcel was previously owned by Robert Forcier. Exhibit B(id), Apx.16. In 1979, Mr. Forcier engaged the services of Thaddeus Thorne-Surveys, Inc. of Center Conway, NH and Sasaki Associates, Inc. of Watertown, MA to prepare a development plan for a 212 unit residential condominium development on that portion of the Parcel to the east of the transmission line (to be served by in-ground septic systems). T The development plan identified proposed building sites, an internal road system, and a future connecting road following the transmission line towards the base of the ski area. Exhibit A(id), Apx.1. Mr. Forcier proceeded with the development plan by filing for subdivision approval with the Conway Planning Board for a phased development which included the internal road system. Exhibit A1(id), Apx.6. Mr. Forcier received final approval for the first phase, but any further development was conditioned upon a second access being constructed to the base of Mt. Cranmore. T Mr. Forcier sold the Parcel to Pasquale Franchi in T Previously, the Land Owner had purchased the Mt. Cranmore Racquet Club at the base of Mt. Cranmore, and had attempted to buy the ski area, itself, but was unsuccessful in that endeavor. T. 393 and 399. the

8 Land Owner not only intended to continue with the Forcier development plan (T. 401), but -3- actually began construction of the roadway connecting the land to the base of Mt. Cranmore. T As the Town of Conway required a second access to the base of Mr. Cranmore to allow such a development, further activity was not undertaken until such an access was acquired. T In June, 1994, the Land Owner was able to acquire such a right of way (the Second Access ) from the owner of Mt. Cranmore Ski Area. Exhibit C, Apx.20, T The following facts relate to what occurred between 1999 when the Conway Zoning Ordinance was amended to reflect suggestions by the EPA and which was the subject of Daly 1 v. State of New Hampshire, 150 N.H. 277, 279 (2003) and the actual taking on June 7, The real estate crash of the late-80's was still being felt in the Conway area until By 1999, the physical location of the proposed Conway By-Pass had been established, and in cooperating with USEPA, in March, 2009, the Town of Conway had adopted a Special Highway Corridor Overlay District that restricted development within 500 feet of the highway. Daly, 150 N.H. at 279. Both the proposed highway and the special highway corridor overlay district bisected the Parcel and the Second Access. Exhibit H, Apx.498. When the economy improved, in the fall of 2003, the Land Owner began the process of 1 These facts were not offered into evidence to the jury after counsel conferred regarding issues of relevancy and admissibility (based upon the Dow decision). Instead a stipulation was agreed to resulting in Land Owner s Jury Instruction No. 16, which was included in the jury charge. Apx. 640 and 66 ; T. 669, The facts are relevant for this Court to understand the context in which the issues of this case arise, particularly understanding the Land Owner s attempt to develop the property when property values and demand were greater then when the State got around to taking the property in June, 2007 and contrary to the State s closing argument that the Land Owner was attempting to obtain a windfall (T. 647, 22). 2 The building permit data for the Town of Conway as compiled by the appraiser for the State establish that less building permits issued in 1996 (21), 1997 (21), and 1998(28), then issued in 2008 (29) after the recent financial crisis had occurred. Exhibit 2, p. 47.

9 -4- seeking subdivision approval for the residential development of his land on Artist Falls Road. Density was not limited by soil suitability for in-ground septic systems as the 3 Parcel was now served by municipal sewer and water. Exhibits I and DD, Apx. 490 and 33 The second access requirement still existed (through a limitation on the number of units on a dead end road). Exhibit EE, Apx. 34. Specifically, no more than 35 units were allowed on a dead end road, and Artist Falls Road was a dead end road which already exceeded that number, requiring either a second access or a waiver under the requirements of the regulations. Exhibit EE, Apx.34; T Due to the fact that the Parcel was to be bisected by the Conway By-Pass, when seeking the conceptual consultation with the planning board, the Land Owner suggested that consideration of both the impact of the Bypass and the requirements of the Special Highway Overlay District was premature,...particularly in fact that there is no guarantee by any means that the Conway Bypass Project will proceed, and that my client s ability to develop its land should not be restricted or regulated by the Town of Conway until such time the State of New Hampshire deems it important enough to take this land by 4 eminent domain. Exhibit D(id), Apx.23. The Planning Director refused to schedule a meeting with planning board as being premature until the issue with the by-pass was resolved. Exhibit E(id), Apx.25. Specifically the Planning Director stated in his letter of October 16, 2003: The Town has been assured by the State that the project is proceeding and will continue to do so. Moreover, Mark Hodgdon (Transportation Bureau, Department of Justice) indicated that the lands with the bypass Second Access will be taken. Furthermore, Bill Janelle (the State, Right of Way) has indicated that they would initiate the land acquisition upon your client s request. Exhibit E(id)., Apx. 25. In the fall of 2004, the Land Owner made such a request to the State. Exhibit F(id), Apx.. By letter dated December 29, 2004, the State responded that it anticipated that the appraisals would be completed by the fall of 2005, and that it would prioritize the 3 Based upon zoning requirements, the property could be developed to a maximum of 306 units. Exhibit I, Apx Notwithstanding the mandate of RSA 498-A:4(III)(a), there is no consequence to the State if it fails to make its notice of offer within a reasonable time after the governmental entity, with the statutory authority to condemn, votes to acquire a property. The State apparently considers reasonableness on the pace of its construction plans, and not on the blight and hardship it places on the land owners.

10 -5- Parcel s acquisition based upon the request. Exhibit G (id), Apx.32. It was not until 2 years later that the RSA 498-A:4(II)(a) appraisal for the Franchi parcel was completed on December 12, 2006 (effective October 4, 2006) (the First Appraisal ). Exhibit P(id). The First Appraisal missed entirely the significance of the Second Access, and 5 considered only the available accesses to the Artist Falls Road complex, opining that the optimal use of the Parcel was a planned residential development of single family detached condominiums or attached townhouse condominiums when economically feasible with a density of 49 units before the taking and 21 units after the taking (20 units on the west remnant and 1 6 unit on the east remnant). Exhibit P(id) (Apx. 8, 23-24, 39-41, and 47); T. 162, The First Appraisal conclude that the damages to the Parcel was $165,000 representing the difference between a before value of $450,000 and an after value of $285,000. Exhibit P(id), (Apx.6 and 54). As a result, an RSA 498-A:4(III) Notice of Offer dated April 30, 2007 in the amount of $165,000 was served on the Land Owner. Apx The Declaration of Taking was filed on June 6, 2007 with the N.H. Board of Tax and Land Appeals ( BTLA ) together with a check for $165,000. Apx An Answer was filed on June 12, Apx In anticipation of the RSA 498-A:24 just compensation hearing, the 5 The Artist Falls Road complex includes Thompson Road which extends from Artist Falls road first to the south and then easterly through a previous subdivision running parallel to the Parcel. See Exhibits H and L6, Apx. 489 and The zoning regulations of the Town of Conway typically limit the number of dwelling units on a dead end street to 35 units... After the taking, the portion of the subject site east of the bypass road will only have one point of access... By zoning regulations, this portion of the site could only be developed with one single family home. According to Thomas Irving (Planning Director for the Town of Conway), he is uncertain whether the Town would approve a development on this portion of the site without a second means of access. Exhibit P(id) pp

11 -6- State appraisal as of the date of the taking was completed on June 5, 2008 (the Second Appraisal ). Exhibit Q(id), Apx 149. The Second Appraisal also used the comparative sales approach with the unit of comparison being the sales price per potential unit or lot. Exhibit Q (id), Apx. 44. The number of potential units changed from 49 units to 47 units before and from to 21 units to 18 units after. Exhibit Q., Apx On September 22 and 23, 2008 respectively, the parties exchanged appraisals as provided by BTLA Rules and 25. Apx. 247 and 248. It was at that point that the State realized that its appraiser had not considered the impact of the Second Access on the use and value of the Parcel. The State requested a continuance from the BTLA so that [the State] may hire an engineer to look into the potential subdivision and build out of the property given the disparity between the State s valuation and the Condemnees. Apx.249. As so stated in the Motion and the Consent to Motion with Reservation, the Land Owner was agreeable to the continuance so long as: (1) Both the State and Condemnee agree that the Unit of Comparison is the Price per Potential Dwelling Unit; (2) The purpose of the continuance was to allow an engineer to determine what was the potential density of potential dwelling units, on a before and after basis, that were legally permissible, physically possible, and financially feasible; and (3) The State would forward to the Condemnee a copy of that report as well when it was completed. Apx The Motion to Continue was granted. Apx Subsequently prior to the hearing before the BTLA, the State provided a report and conceptual design plans prepared by CLD Consulting Engineers dated April 10, 2009 and a new appraisal dated July 17, 2009 (the Third Appraisal ). Apx. 254, Exhibits 19, 20, and R(id), (Apx.264, 265 and 266) The CLD conceptual design plans and report identified a before

12 -7- development potential using the Second Access of 147 units, and an after potential of 102 units. Relying exclusively upon the CLD before and after development potential, the Third Appraisal concluded that the damages to the Parcel was $560,000 ($1,690,000 - $1,130,000). Exhibit R(id) Apx The Third Appraisal used the identical comparative sales approach with the unit of comparison being the sales price per potential unit or lot. Exhibit R (id) Apx The State deposited on October, 1, 2009 with the BTLA an additional $395,000 representing the difference between the new appraisal of $560,000 and $165,000 originally deposited... Apx.368. After a view and a hearing, the BTLA issued its report on November 25, 2009, awarding damages in the amount of $1,000,000. Apx STATEMENT OF CASE The State filed in the Carroll County Superior Court on or about December 2, 2009, an RSA 498-A:27 petition to have the damages reassessed. Apx the Land Owner filed a cross-petition on December 7, Apx.381. Subsequently the Presiding Justice of the Carroll County Superior Court recused himself from hearing the case, and it was transferred to the Strafford County Superior Court. Pursuant to the pre-trial scheduling order, the State disclosed yet again another Appraisal dated July 9, 2010 (the Fourth Appraisal"). Exhibit 2(id) Apx The major additions/changes in the Fourth Appraisal were: Updated building permit data through 2009 and MLS data through 2008 A feasibility analysis Apx , Exhibit 10 (Apx. 643). The highest and best or optimal use for the before modified to include the statement,

13 -8- Based on the feasibility analysis previously presented, the conceptual site plan (the 147- unit townhome development) is not currently economically feasible to develop. Apx On November 9, 2010, the Land Owner moved in limine to exclude the testimony of the appraiser for the State pursuant to the provisions of N.H. Evid. R. 702 and RSA 516:29-a in that the testimony would neither be relevant and not rising to the threshold level of reliability, and as well requested a specific pre-trial instruction relating to the sharply declining real estate market. Apx. 25. The State objected to that motion. Apx. 33. The Trial Court (Brown P.J.) did not hold a hearing on the Motion and denied the motion, in part. Apx The jury was selected on December 6, 2010, at which time the Trial Court (Brown P.J) gave its preliminary instruction arising out of its consideration of the Motion in Limine and the State s Objection: You be hearing evidence with respect to fair market value of real estate on June 6, 2007 before the taking occurred and just after the taking occurred. It is common knowledge, however, that the real estate market has sharply declined. Whether property values went up or down after the taking occurs can be considered by you in determining the award of just compensation only to the extent that you find it of assistance in determining the property s fair market value on June 6, T (Jury Selection). 6, The trial was then presided over by Judge Wageling. The judge and jury conducted a view on December 7, 2010, with the trial itself running from December 8, 2010 through December 10, T Various evidentiary issues occurred during the trial which will be identified in the briefing below. Closing arguments and the jury charge (Apx. 671., T ) occurred on December 13, 2011, with the Land Owners s objections to the charge 7 The jury instruction contained in the written decision was modified again upon reconsideration to that actually given.

14 -9- being found at T. 689, The jury returned a verdict in the amount of $560,000. Apx the Land Owner moved for a new trial. Apx. 688 The State objected to the same. Apx The Trial Court denied that motion. Apx.698. This appeal followed. SUMMARY OF ARGUMENT The Trial Court reversed the burden of proof to the prejudice of the Land Owner. First, the Trial Court denied a Motion in Limine and allowed into evidence an irrelevant, expert opinion based not upon the highest and best use of the property, but instead for a use that in the opinion of the appraiser was not economically feasible and for the sole purpose of establishing that a compromise amount of compensation was fair by giving the benefit of the doubt to the Land Owner. This placed an undue and unlawful burden on the Land Owner, which was the burden of the State by statute. Second, the Trial Court denied a Motion in Limine and allowed into evidence, a feasibility analysis, and the expert testimony related to the same, which did not reliably apply the principles and methods of the same to the facts of the case. This wholly inaccurate feasibility analysis, whose direct purpose was to establish the economic infeasibility of the State s proffered before highest and best use, was used indirectly to challenge the economic feasibility of the Land Owner s highest and best use. This error, when coupled with the Trial Court s charge, seemed to place the burden of proving financial feasibility of the highest and best use on the Land Owner, reversing the burden of proof. Third, the Trial Court denied the Motion in Limine and allowed into evidence post-taking date data, and gave both a pre-trial and as part of its charge a carte blanche instruction to the

15 -10- jury to consider the abnormal collapse of the real estate market in their determination of value without any limitation on whether the same would have be known to or considered by a willing buyer and willing seller in the purchase of the subject property. This again placed an undue burden on the Land Owner. Fourth, the Trial Court refused to allow into evidence exhibits which limited the ability of the Land Owner to corroborate that his estimate of the potential units for development (the agreed upon unit of comparison) was based upon an historically supported highest and best use, allowing the State to argue that the Land Owner s claim was merely seeking a windfall or lottery win. Lastly, the Trial Court denied specific jury instructions requested by the Land Owner which identified the two material facts at issue under the facts of this case; the number of potential units for development (the agreed upon unit of comparison) that were lost as a result of the taking and the average price per unit. Instead the charge given by the Trial Court mislead the jury to believe it was that the Land Owner s had the burden to prove both the feasibility and number of potential units on both a before and after basis, with the only burden upon the State to prove that the amount it offered was fair.

16 -11- ARGUMENT I. THE TRIAL COURT ERRED IN ALLOWING THE STATE APPRAISER TO TESTIFY TO THE PROPERTY S BEFORE AND AFTER VALUES, WHICH WERE NOT FOR ITS HIGHEST AND BEST USE, AS BEING NOT RELIABLE AND IRRELEVANT. The standard of review that this Court will be applying with respect to most of the issues on appeal is an unsustainable exercise of discretion standard. The Trial Court s rulings were clearly untenable or unreasonable to the prejudice of the Land Owner s case, and as such the Trial Court s decision should be disturbed. State v. Pelletier, 149 N.H. 243, 249 (2003) A. The State had the Burden of Proof to Establish Just Compensation Including Every Material Fact that at Issue in Expert Testimony Relating to the Apprisal(s) Upon Which the Offer of Compensation was Based. RSA Chapter 498-A is the statute establishing the procedure for acquisition by eminent domain, and for the award of just compensation. At the just compensation hearing before the Board of Tax and Land Appeals, [i]ssues of fact shall be determined upon the balance of probabilities and the burden of proof shall be upon the condemnor. RSA 498-A:19 (emphasis added). This Court, when addressing the order of opening and closing on appeal to the Supreme Court has previously held that the burden of proof would remain on the State. State v. Garceau, 118 N.H. 321, (1978). The State has the burden of proof on all material issues of fact; being all facts that would affect the outcome of the litigation. Sabinson v. Trs. of Dartmouth College, 160 N.H. 452, 455 (2010). The factual issue before the jury is not simply the amount of just compensation and whether that amount is subjectively fair, but was instead to determine the fair market value of the land that was taken. Fair market value is the price which in all probability would have been arrived at by fair

17 -12- negotiations between an owner willing to sell and a purchaser desiring to buy, taking into account all considerations that fairly might be brought forward and reasonably be given substantial weight in such bargaining. Daly v. State, 150 N.H. 277, 279 (2003). Because this was a partial taking, the Land Owner has a right to not only the fair market value of the property actually taken, but also compensation for the effect of the taking on the remaining property, i.e. severance damages. Id. at 280. The preferred method in this State for determining condemnation damages, including severance damages, in partial takings cases is the "before and after" method, whereby the value of the remainder of the tract after the taking is deducted from the value of the whole tract before the taking. This method automatically takes account of severance damages. In all exercises of the power of eminent domain, the condemnor shall have an impartial, qualified appraiser make at least one appraisal of all property proposed to be acquired. RSA 498-A:4(II)(a). In fact, such an appraisal was prepared, the First Appraisal. Exhibit P(id), Apx. 36. And prior to exercising the power, the condemnor must serve upon the land owner a Notice of Offer which shall set forth:... (3) The amount of compensation offered and whether the offer is based on the appraisal required by RSA 498-A:4, II(a), or on some other basis. RSA 498-A:4(III)(b) (emphasis added). In fact such a Notice of Offer was served on the Land Owner, and it specifically stated that the offer of $165,000 was based upon the First Appraisal. Apx.132. Three other renditions of this appraisal were prepared by the State s appraiser. As required by the trial management conference and the provisions of RSA 516:29-b, the State disclosed the Fourth Appraisal as its expert report for trial. Exhibit 2(id), Apx The major additions/changes in the Fourth Appraisal from the Third Appraisal provided to the BTLA were (1) updated building permit data through 2009 and MLS data through 2008, (2) a

18 -13- Feasibility Analysis; and (3) a highest and best use conclusion that the conceptual site plan (the unit townhome development) is not currently economically feasible to develop." Apx On November 9, 2010, the Land Owner moved in limine to exclude all or portions of the testimony of the appraiser for the State pursuant to the provisions of N.H. Evid. R. 702 and RSA 516:29-a in that the testimony did not meet the threshold level of reliability nor was relevant. Apx B. Only Relevant and Reliable Expert Testimony was Admissible. An expert opinion is admissible only after it has been shown to the satisfaction of the court that the "testimony is based upon sufficient facts or data;... is the product of reliable principles and methods; and... [that t]he witness has applied the principles and methods reliably to the facts of the case. Thus, an expert's testimony must rise to a threshold level of reliability to be admissible under New Hampshire Rule of Evidence 702." Goudreault v. Kleeman, 158 N.H. 236, (2009) (citations omitted). In cases where the testimony's reliability is properly taken for granted, or where the information before the court is sufficient to reach a reliability determination, the trial court need not and should not conduct an evidentiary hearing." Pelletier, 149 N.H. at 252. Since the Trial Court did not conduct an evidentiary hearing, it is fair to presume that the Trial Court took for granted that the State s appraiser had reliably applied the common accepted principles and methods of the sales comparison approach to the facts of the case. In reviewing, however, the ruling of the Trial Court on appeal, this Court should assume that the same testimony that was solicited from the State expert at trial (T ) would have 8 The State appraiser at trial, testified that this should have read not economically feasible to develop on the date of the taking. T. 212, 1-9.

19 -14- been the testimony at such a pre-trial hearing. As discussed below, the Trial Court, if it had heard that testimony at such a hearing, would have learned that the expert testimony did not rise to a threshold level of reliability and was not being offered as the fair market value based upon a highest and best use, but instead for the irrelevant purpose of giving the Land Owner the benefit of the doubt. T. 136, 3-6. Normally this Court s review of a trial court's determination of expert reliability under Rule 702 is for an unsustainable exercise of discretion. When the reliability or general acceptance of novel scientific evidence is not likely to vary according to the circumstances of a particular case, however, this Court will review that evidence independently. Baxter v. Temple, 157 N.H. 280, 286 (2008). C. Only Expert Testimony Valuing the Highest and Best Use of the Subject Property is Reliable and Relevant. 1. The Parties Agreed that the Proper Method to Value the Property was the Sales Comparison Approach with the Unit of Comparison being the Price Per Potential Unit. A constant in the various renditions of Independent Appraisal prepared by the State appraiser was the use of the Sales Comparison Approach. The sales comparison approach derives value for the subject property by comparing similar properties that have recently been sold with the property being appraised, identifying appropriate units of comparison, and making adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties, based on relevant, market-derived elements of comparison. Appeal of Pennichuck Water Works, 160 N.H. 18, 39 (2010). The unit of comparison consistently selected by the State s appraiser was potential units making adjustments on the average unit prices as appropriate. Exhibit P (id) at Apx.77, Exhibit Q (id) at Apx. 193, Exhibit R(id) at Apx.316, and Exhibit 2(id) at Apx.436.

20 -15- The Land Owners s appraiser agreed with both the approach and the unit of comparison. Exhibit N(id) at Apx.570. As the Board of Tax and Land Appeals succinctly stated in its Report, the parties through their experts disputed two key issues. The first issue involves how many developable units were lost as a result of the taking. The second issue involves estimating an average value for each unit. Apx. at 372. It was these two issues of material fact that were in dispute, which should have been tried to the jury and for which the State had the burden of proof. As discussed below, the Trial Court, by allowing the State to introduce through its expert the changes contained in his Fourth Appraisal, redefined the factual issue to be decided by the jury, and reversed the burden the proof. 2. The Highest and Best Use of the Property is a Necessary Predetermination before Applying the Sales Comparison Approach. As noted above, given the fact that this was a partial taking, the proper method of valuing just compensation, was a determination of the difference between the fair market value of the property before and after the taking. Daly, 150 N.H. at 280. The condemnee is entitled to a valuation for the most profitable purpose, or advantageous use, to which the property could be put on the day it was taken. Opinion of the Justices, 131 N.H. at One of the first steps in appraising the fair market value of property, before and after the taking, which must necessarily occur before the applicable approaches to value are applied, is a determination of the highest and best use. APPRAISAL INSTITUTE, THE APPRAISAL OF REAL ESTATE 277 (13th ed. 2008). The appraiser s estimate of the highest and best use must be an economic use. An noneconomic highest and best use as conservation, natural lands, preservation, or any use that requires the property to be withheld from economic production in perpetuity is not a valid use upon which to estimate market value.

21 -16- APPRAISAL INSTITUTE, UNIFORM APPRAISAL STANDARDS FOR FEDERAL LAND ACQUISITIONS 18 (2000). The State appraiser correctly used the Appraisal Institutes s definition of highest and best use being the reasonable probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value. THE APPRAISAL OF REAL ESTATE at 277-8; Exhibit 2(id) p. 45; T. 74, The first two steps in determining highest and best use, are testing the legal permissibility of the land, and then testing the physical possibility of those uses, which includes size, shape, terrain, frontage, ease of access, view and similar characteristics. Id. at Only those uses that meet the first two criteria are analyzed further. As long as a potential use has value commensurate with its cost and conforms to the first two tests, the use is financially feasible. Id. at With respect to the first two criteria, the State appraiser relied completely on the civil engineer s input. T. 151, Presumably, he found that the potential use had value commensurate with is cost, for consistently, in all four of his appraisals, the State appraiser found that the highest and best use of this vacant land, both before and after the taking, was identical, As vacant, to hold for the development of a townhouse or single-family residential subdivision when economically feasible. Exhibit P(id), Apx. 42, Exhibit Q(id), Apx.156, Exhibit R(id), Apx. 274, and Exhibit 2(id), Apx Since the taking occurred of vacant land, not a development or a parcel in the process of being developed, such a highest and best use was consistent with the fact that the land was in the residential district, and it must necessarily be held for development because the fictitious willing buyer and willing seller were buying and

22 -17- selling vacant land. T. 210, After the State lost at the Board of Tax and Land Appeals, the State appraiser revisited his analysis and included a feasibility analysis, which altered his conclusion as to highest and best use, but did not alter his conclusion as to the before and after value of the properties. Basically, land values are too low and development costs are too high to make multifamily land economically feasible to be developed as of the effective date of the appraisal... Based on the feasibility analysis previously presented, the conceptual site plan (the 147-unit townhouse development) is not currently economically feasible to develop. A lower density development with lower development costs and a shorter sell out period may offer a more economically feasible option in the future. Exhibit 2(id), pp It was the opinion by the State s expert as to a fair market value of property based upon an economically infeasible use, that gave rise to the Motion in Limine. It was only after the Motion in Limine was denied, and the State presented its case and the testimony of its expert, that the changes in the State s Fourth Appraisal and those reasons become more apparent. Contrary to the requirements of RSA 516:29-b, there was no direct disclosure that the State appraiser was now appraising the property, not for its highest and best use, but to give the Land Owner the benefit of the doubt, which is anything but the standard for the determining the amount of just compensation. 3. The State Appraiser When Testifying Admitted that His Opinion of Value was Not for the Highest and Best Use of the Property. During the direct testimony of the State s appraiser, he opined that the highest and best use of the property was to hold for either a future, single-family, detached-condominium development or attached-townhome development. T. 91, He also opined that as of the date of the taking based upon the feasibility study it was not economically feasible to develop an attached condominium development. T. 97, The State appraiser also testified that respect

23 -18- to a single-family, detached-condominium development might be feasible only if developer willing to hold the property for a long period of time. T. 97, He then stated that he did NOT appraise the property for a highest and best use of holding for development purposes. T. 121, For to do so, based upon his feasibility study, that a developer could only afford to pay $156,000 for the land. T The State appraiser chose not to use comparative sales of properties to hold for future development because, I gave the property the benefit of the doubt. T. 135, And the State appraiser continued to use the 147 units on a before basis because, There again, I gave the property the benefit of the doubt. 4. Expert Testimony Not for the Highest and Best Use but to Give the Land Owner the Benefit of the Doubt is Not Relevant And Reversed the Burden of Proof. All relevant evidence is admissible, and irrelevant evidence is not admissible. N.H. Evid. R Relevant evidence is evidence having any tendency to make the existence of a fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. N.H. Evid. R By his Motion in Limine, the Land Owner objected to State s appraiser being able to offer into evidence as the proper amount of just compensation, a before and after value based upon a use that was not the highest and best use of the subject property, asserting that the same was either irrelevant or any value of such evidence was outweighed by the danger of confusion of the issues or misleading the jury. N.H. Evid. R. 403., Apx It is quite apparent that not only was the study irrelevant, but the State used it to confuse the issues. In its Opening, the State explained to the jury that State appraiser is going to tell the jury that he gave every benefit of the doubt to the landowner. T. 39, The State says that a

24 -19- reasonable use of that property again, giving the benefit of the doubt to the Land Owner a reasonable use of that property is to develop it with a maximum of 147 units. T. 43, So if you draw in 147 units, 147 townhouses you better be able to actually sell out 147 homes. T. 44, The Land Owner says the maximum use of this property is to build out 243 units, put 243 units on that property without regard and there s no evidence that the market can bear 243 units... T. 44, There was no way that you could get that amount of units on that property and sell them in an economically feasible way. T. 47, While a central theme for both the State s case and argument, the State appraiser admitted that he never once in his appraisals ever used the words benefit of the doubt, or made as one of the assumptions in those appraisals that he was giving the land the benefit of the doubt. T And in its closing, the State again emphasized that its appraiser performed an analysis giving the benefit of doubt to the land which the State itself should have challenged not the land owner, for the more probably correct value was that contained in the Second Appraisal. T A landowner whose property is taken by eminent domain is entitled to just compensation, but he is not entitled to be enriched, and he is not entitled to be paid for items of damage that are th not legally compensable. United States v Acres of Land, 586 F.2d 79, (8 Cir. 1978). "Just compensation" requires that compensation be "just" to the public as well as to the condemnee, and not give the landowner a "windfall" at the expense of the public fisc. Merced Irrigation Dist. v. Woolstenhulme, 4 Cal. 3d 478, 493-4, 483 P.2d 1, 11 (Ca. 1971). It was impermissible for the State to give the land owner the benefit of the doubt, if in fact that results in the land owner being enriched for a highest and best use that was not financially feasible.

25 -20- The Trial Court in its charge disagreed with the Land Owner s request regarding the appropriate specific instruction regarding the burden of proof (see below) and instead gave the instruction requested by the State (e.g., The State has the burden of proving that the amount it has offered will justly compensate Mr. Franchi ) T. 684, 4-9. This instruction was borrowed from a sentence in the dicta in a case concerning costs and attorney s fees allowed in an RSA 498-A: 27 appeal. Fortin v. Manchester Housing Authority, 133 N.H. 154, 157 (1990), (e.g. Procedurally, the condemnor continues to bear the burden of proving that the amount it has offered will justly compensate the condemnee, RSA 498-A:19. ). As discussed above, RSA 498-A:19 does not suggest that it is merely the burden of the State to place into evidence whatever number it thinks represents just or fair compensation, but specifically states [i]ssues of fact shall be determined upon the balance of probabilities and the burden of proof shall be upon the condemnor. RSA 498-A:19 (emphasis added). As examined above, just compensation has specific criteria in its measurement, and the jury role is to not simply decide what is fair on a subjective basis. By being able to introduce evidence, not relevant to the value of the property at its highest and best use, but instead for giving the Land Owner the alleged benefit of the doubt, the State was basically allowed to throw a compromise number on the wall, distance itself from the legal requirements of just compensation and argue to the jury it was the amount was fair based upon their common sense. The State argued, [a]s a simple yardstick to measure whether the State s offer of $560,000 is fair and how you know the State s offer was fair was that this amount was similar to the sale price for 69 acres in a rural part of South Conway, N.H. T. 662, 11-14; T. 665, 16-22; Cowall Sale 3 as shown on Exhibit L8, Apx Instead of placing the

26 -21- burden of proof on the State to prove all material facts, i.e. facts that are of consequence to the determination of just compensation or that would affect the outcome of the litigation, the State was allowed through this evidence to tell the jury that the $560,000 that it offered, which the State should have challenged because it exceeded an actual just compensation in the amount of $156,000, was instead a fair amount, a compromise amount, because it gave the benefit of the doubt to the Land Owner. And when [the State appraiser] got done with that [feasibility] analysis, even making that huge assumption, he said this doesn t look feasible. I think you need to go to a lower density, but I am still going to value it this way in these new appraisals, the last two, because it benefits the landowner. And he is being knocked for that? By the landowner? If anybody has a right to knock him for it, it would seem to be his client, the State. We re not knocking him for it. In truth, in truth, if you really look at this, his first appraisal, which is actually his second appraisal that shows the date of the taking the first appraisal was before the taking, his second appraisal that shows the date of the taking, I think he had a before value of around 800 and something for the subject property, That s probably right. T This was a complete reversal of the burden of proof, placing on the Defendant the obligation to discount both amounts testified to by the State s appraiser: the $156,000 that was the probably right amount of just compensation based upon a faulty feasability analysis, and, the $560,000 being offered by the State as a fair amount giving the Land Owner the benefit of the doubt. The denial the Motion in Limine was contrary to law and severely prejudiced the Land Owners case as evidenced by the State s opening and closing. D. The Feasibility Analysis was Neither Reliable Nor Relevant. As noted above, from the outset, the State s appraiser (and the Land Owner s appraiser) agreed that the proper approach for valuing this property was the sales comparison approach, with the unit of comparison being the potential number of residential units that property may be

27 -22- developed, before and after the sale, and making adjustments to the sale price per potential unit of other vacant parcels sold and subsequently developed. Pennichuck, 160 N.H. at 39. Another approach to valuing vacant land is the subdivision or development approach. Reduced to its basics, the development method of approximating the fair market value of raw undeveloped land entails anticipating an ultimate developed use for the land. In terms of its methodology, value for the land once it has been improved is estimated based on a market data approach, and from this figure is subtracted the costs that are needed in order to create the improvements, including a figure for the cost of money and a figure representing a fair profit on the sale of the improved property. The resulting figure represents the value of the land, in its raw state, to the developer. Manchester v. Auburn, 125 N.H. 147, 156 (1984). (emphasis added). This approach, however, is a highly complex method of valuation that includes various variables including, a market study to locate comparable finished lots and selling prices, the lag between effective date of appraisal and the date of approvals, the absorption rate, direct cost of development, design, engineering, permitting, etc. UNIFORM APPRAISAL STANDARDS FOR FEDERAL LAND ACQUISITIONS at 45. When comparable sales are available with which to accurately estimate the property s market value, the development approach should not be relied upon as the primary indicator of value, as it is considerably more prone to error. However, even when adequate comparable sales are available, the development approach can be utilized to test both the highest and best use conclusion and to support the indicated value of the property by the sales comparison approach. Id. Thus, in such a case, if the development approach indicates that the highest and best use conclusion is not accurate, or does not support the indicated value of the property using the sales comparison approach, the appraiser needs to reevaluate his or her conclusions. This feasibility analysis (Exhibit 10) was a badly mis-prepared version of the development approach which skewed completely the actual feasibility of such a project if correct data was used. The following is a the mathematical explanation of the development

28 -23- approach as outlined in Auburn, supra. Minuend (A) Retail Value of Condo Sites Value for the land once it has been improved is estimated based on a market data approach. Subtrahend (- B)_ Subtract Cost to Develop Costs that are needed in order to create the improvements. Subtract Interest A figure for the cost of money. Subtract Profit A figure representing a fair profit on the sale of the improved property. Difference (= C) Equals Cost of Land The resulting figure represents the value of the land, in its raw state, to the developer The State s appraiser anticipated the ultimate developed use of the land as a condominium development of 147 units. T. 126, 8-13, Auburn, 125 N.H. at 156. As noted on Exhibit 10 the Difference or bottom line amount available to purchase the land in its raw state was $156,500, or $1,065 per unit for the 147 units. Apx That as of June 6, 2007, you could only afford to pay $156,000 for the land with numerous favorable assumptions. T. 126, In other words, that as of June 6, 2007, the feasibility study concluded that $156,000 represented that value of the land, in its raw state, to a developer. Auburn, supra. This feasibility analysis or development approach was inadmissable because it failed to apply the principles and methods of the development approach reliably to the facts of the case. RSA 516:29-a(I)(c). First, the analysis and the testimony relating to the same, was not being offered to test both the highest and best use conclusion and to support the indicated value of the property by the sales comparison approach, which is the only proper use in apply the principles and methods for its use in conjunction with the sales comparison approach. UNIFORM APPRAISAL

29 -24- STANDARDS FOR FEDERAL LAND ACQUISITIONS at 45. It was instead being offered to impeach his own highest and best use analysis, in order to place the burden of proof on the Land Owner. Second, the State Appraiser did NOT use the value for the land once it has been improved... based on a market data approach as the minuend but instead a per unit value of land purchased unimproved and for development, e.g.... this is what developers are paying for land before they do their construction for the site. T That basic mistake is confirmed in Exhibit 2 (id) at page 49, when the State appraiser identifies the Peaked Mountain sale in March, 2006 at $20,357 per unit, which is also Land Sale Comparable Property No. 4 at page 96-7, (Apx ) which was unimproved or vacant land. Apx.431. On cross-examination, the State appraiser acknowledged that his minuend of $20,000 per unit came from his comparable sales of vacant, unimproved land. T Thus admittedly, the State s appraiser did not establish the market value of the land once it has been approved... based upon the market data approach. Thus the feasibility study and the testimony relating to the same was very misleading, and if reliably applied to the value of the units if improved, a very different picture would have been presented. The State s appraiser did acknowledge that the developer for multi-family homes has to buy the land at approximately fifteen percent (15%) of the selling price of the constructed condominium units, and there have been other appraisals that have appraised condominiums in the Artist Falls area are from $140,000 to $220,000 per unit. T. 218, But then again no market study had been performed by the State s appraiser. The Land Owner s appraiser did testify about the market data relative to condominium sales in the immediate vicinity of Mt. Cranmore ski area. Stephen Berg, the Land Owner s appraiser, identified those