RENDERED: DECEMBER 16, 2021 TO BE PUBLISHED
Supreme Court of Kentucky 2020-SC-0339-DG
BORDERS SELF-STORAGE & APPELLANT RENTALS, LLC
ON REVIEW FROM COURT OF APPEALS V. NO. 2019-CA-0217 LAWRENCE CIRCUIT COURT NO. 17-CI-00161
COMMONWEALTH OF KENTUCKY, APPELLEE TRANSPORTATION CABINET, DEPARTMENT OF HIGHWAYS
OPINION OF THE COURT BY JUSTICE NICKELL
REVERSING
This is a highway condemnation action instituted in Lawrence Circuit
Court by the Commonwealth of Kentucky, Transportation Cabinet, Department
of Highways, against Borders Self-Storage & Rentals, LLC (Borders), to obtain a
right-of-way for highway construction. A jury awarded Borders the sum of
$140,000 and judgment was entered consistent with the jury’s verdict. The
Court of Appeals affirmed on direct appeal. We granted discretionary review
and reverse.
The Court of Appeals succinctly set forth the historical factual and
procedural background as follows:
The Kentucky Transportation Cabinet, Department of Highways, (Transportation Cabinet) filed a petition to condemn certain real property owned by Borders for a highway project. Kentucky Revised Statutes (KRS) 416.570. The circuit court appointed three commissioners to determine the fair market value of the real property. KRS 416.580. The Commissioners determined the fair market value of Borders’ real property to be $168,623 at the time of taking and $25,000 thereafter, for a difference of $143,623. Borders filed exceptions to the Commissioners’ report and demanded a trial by jury. KRS 416.620.
A jury trial was conducted. Borders sought to introduce as evidence the assessed tax value ($230,000) of the real property as reflected by records held by the Lawrence County Property Valuation Administrator (PVA). The circuit court ruled that the PVA’s tax assessment could not be introduced into evidence by Borders.
Ultimately, the jury found the fair market value immediately before the taking to be $157,000, and the fair market value immediately after the taking to be $17,000, for a difference of $140,000. In a Trial Order and Judgment entered December 6, 2018, the circuit court awarded Borders $140,000 as compensation for the condemnation of its real property by the Transportation Cabinet. This appeal follows.
The sole issue on appeal centers upon whether the circuit court properly excluded evidence of the PVA’s assessed tax value of the condemned real property that Borders sought to introduce.
Borders Self-Storage & Rentals, LLC v. Kentucky Transportation Cabinet,
Department of Highways, 2019-CA-000217-MR, 2020 WL 4498810, at *1 (Ky.
App. July 2, 2020), review granted (Mar. 17, 2021) (“Borders I”).
Citing Culver v. Commonwealth, Department of Highways, 459 S.W.2d
595 (Ky. 1970), and Commonwealth, Department of Highways v. Brooks, 436
S.W.2d 499 (Ky. 1969), the Court of Appeals concluded evidence of the
assessed tax value of real property is admissible only if the value was fixed by
the landowner and offered into evidence by the Commonwealth as a statement
against interest of the landowner. It was uncontested Borders submitted a
2 certified appraisal to the PVA establishing the value of the property at
$230,000 several months prior to the institution of the condemnation
proceedings. On the strength of Culver and Brooks, and acknowledging the
binding nature of Supreme Court precedent, the Court of Appeals concluded
tax assessments may not be introduced into evidence by a landowner and
therefore affirmed the trial court’s ruling. However, the Court of Appeals
expressed its disagreement with the rule, stating “[t]he exclusion of the
assessed tax value of real property when offered into evidence by the
landowner, as opposed to the Commonwealth, strikes us as fundamentally
unfair and legally unsound.” Borders I at *2. Believing the assessed value is
relevant to the fair market value of the property to be taken and therefore
should be put before the jury, the Court of Appeals urged this Court to
reconsider our prior precedents holding to the contrary.
As noted by the trial court and the Court of Appeals, it has long been the
rule in this Commonwealth that PVA values are admissible in condemnation
proceedings only as evidence for the Commonwealth and against the
landowner. Heretofore, the reasoning behind this rule was that a landowner’s
statement was admissible when he attempted to obtain a higher value for his
lands in the condemnation suit than the value placed thereon by him for
purposes of taxation. In such cases, the landowner’s statement of the lower
value was considered to be against his interest and therefore admissible. The
cases applying this rule date back over sixty years and all predate our current
3 rules of evidence by nearly three decades. Today, we are presented our first
opportunity to address the matter under those evidentiary rules.
In Brooks, our predecessor Court concluded a landowner could not
introduce his own prior self-serving declaration of the value of his land because
doing so would constitute an impermissible introduction of objectionable
hearsay evidence. When presented by the Commonwealth, the taxable value
fixed by the landowner was considered competent evidence against him as to
the before value of his lands because it constituted a statement against his
interest when he sought higher compensation in a condemnation proceeding.
On the contrary, when the landowner seeks to present the taxable value he set,
his out of court statement loses its character as a statement against interest,
and same becomes inadmissible as hearsay. On these grounds, the Brooks
Court rejected a landowner’s attempt to introduce what the Court believed was
nothing more than a self-serving declaration.
Culver reiterated the holdings laid down in Brooks, characterizing them
as the “general rule” in Kentucky, and rejected an argument seeking
admissibility of a tax assessment as an admission against the Commonwealth’s
interest. That Court ultimately concluded tax assessments were not admissible
as evidence of value in condemnation proceedings if sought to be introduced by
a landowner.
A key tenet in condemnation actions is fairness, both to the landowner
whose property will be taken by the Commonwealth and to the taxpayers who
will ultimately be responsible for payment to the landowner for the condemned
4 lands. As the Court of Appeals noted, excluding potentially relevant evidence
central to one of the jury’s core decisions—pre-taking value—seems
fundamentally unfair and is contrary to our evidentiary rules. KRE1 401
defines relevant evidence as “evidence having any tendency to make the
existence of any fact that is of consequence to the determination of the action
more probable or less probable than it would be without the evidence.”
Relevant evidence is admissible unless excluded by the Constitution, statutes,
evidentiary rules, or other rules promulgated by this Court. KRE 402. A
landowner’s statement of value to the PVA would generally constitute hearsay
as it is an out of court statement offered to prove the truth of the matter
asserted, KRE 801(c), and would therefore be excluded under KRE 802 unless
one of the exceptions to the hearsay rule applies.
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RENDERED: DECEMBER 16, 2021 TO BE PUBLISHED
Supreme Court of Kentucky 2020-SC-0339-DG
BORDERS SELF-STORAGE & APPELLANT RENTALS, LLC
ON REVIEW FROM COURT OF APPEALS V. NO. 2019-CA-0217 LAWRENCE CIRCUIT COURT NO. 17-CI-00161
COMMONWEALTH OF KENTUCKY, APPELLEE TRANSPORTATION CABINET, DEPARTMENT OF HIGHWAYS
OPINION OF THE COURT BY JUSTICE NICKELL
REVERSING
This is a highway condemnation action instituted in Lawrence Circuit
Court by the Commonwealth of Kentucky, Transportation Cabinet, Department
of Highways, against Borders Self-Storage & Rentals, LLC (Borders), to obtain a
right-of-way for highway construction. A jury awarded Borders the sum of
$140,000 and judgment was entered consistent with the jury’s verdict. The
Court of Appeals affirmed on direct appeal. We granted discretionary review
and reverse.
The Court of Appeals succinctly set forth the historical factual and
procedural background as follows:
The Kentucky Transportation Cabinet, Department of Highways, (Transportation Cabinet) filed a petition to condemn certain real property owned by Borders for a highway project. Kentucky Revised Statutes (KRS) 416.570. The circuit court appointed three commissioners to determine the fair market value of the real property. KRS 416.580. The Commissioners determined the fair market value of Borders’ real property to be $168,623 at the time of taking and $25,000 thereafter, for a difference of $143,623. Borders filed exceptions to the Commissioners’ report and demanded a trial by jury. KRS 416.620.
A jury trial was conducted. Borders sought to introduce as evidence the assessed tax value ($230,000) of the real property as reflected by records held by the Lawrence County Property Valuation Administrator (PVA). The circuit court ruled that the PVA’s tax assessment could not be introduced into evidence by Borders.
Ultimately, the jury found the fair market value immediately before the taking to be $157,000, and the fair market value immediately after the taking to be $17,000, for a difference of $140,000. In a Trial Order and Judgment entered December 6, 2018, the circuit court awarded Borders $140,000 as compensation for the condemnation of its real property by the Transportation Cabinet. This appeal follows.
The sole issue on appeal centers upon whether the circuit court properly excluded evidence of the PVA’s assessed tax value of the condemned real property that Borders sought to introduce.
Borders Self-Storage & Rentals, LLC v. Kentucky Transportation Cabinet,
Department of Highways, 2019-CA-000217-MR, 2020 WL 4498810, at *1 (Ky.
App. July 2, 2020), review granted (Mar. 17, 2021) (“Borders I”).
Citing Culver v. Commonwealth, Department of Highways, 459 S.W.2d
595 (Ky. 1970), and Commonwealth, Department of Highways v. Brooks, 436
S.W.2d 499 (Ky. 1969), the Court of Appeals concluded evidence of the
assessed tax value of real property is admissible only if the value was fixed by
the landowner and offered into evidence by the Commonwealth as a statement
against interest of the landowner. It was uncontested Borders submitted a
2 certified appraisal to the PVA establishing the value of the property at
$230,000 several months prior to the institution of the condemnation
proceedings. On the strength of Culver and Brooks, and acknowledging the
binding nature of Supreme Court precedent, the Court of Appeals concluded
tax assessments may not be introduced into evidence by a landowner and
therefore affirmed the trial court’s ruling. However, the Court of Appeals
expressed its disagreement with the rule, stating “[t]he exclusion of the
assessed tax value of real property when offered into evidence by the
landowner, as opposed to the Commonwealth, strikes us as fundamentally
unfair and legally unsound.” Borders I at *2. Believing the assessed value is
relevant to the fair market value of the property to be taken and therefore
should be put before the jury, the Court of Appeals urged this Court to
reconsider our prior precedents holding to the contrary.
As noted by the trial court and the Court of Appeals, it has long been the
rule in this Commonwealth that PVA values are admissible in condemnation
proceedings only as evidence for the Commonwealth and against the
landowner. Heretofore, the reasoning behind this rule was that a landowner’s
statement was admissible when he attempted to obtain a higher value for his
lands in the condemnation suit than the value placed thereon by him for
purposes of taxation. In such cases, the landowner’s statement of the lower
value was considered to be against his interest and therefore admissible. The
cases applying this rule date back over sixty years and all predate our current
3 rules of evidence by nearly three decades. Today, we are presented our first
opportunity to address the matter under those evidentiary rules.
In Brooks, our predecessor Court concluded a landowner could not
introduce his own prior self-serving declaration of the value of his land because
doing so would constitute an impermissible introduction of objectionable
hearsay evidence. When presented by the Commonwealth, the taxable value
fixed by the landowner was considered competent evidence against him as to
the before value of his lands because it constituted a statement against his
interest when he sought higher compensation in a condemnation proceeding.
On the contrary, when the landowner seeks to present the taxable value he set,
his out of court statement loses its character as a statement against interest,
and same becomes inadmissible as hearsay. On these grounds, the Brooks
Court rejected a landowner’s attempt to introduce what the Court believed was
nothing more than a self-serving declaration.
Culver reiterated the holdings laid down in Brooks, characterizing them
as the “general rule” in Kentucky, and rejected an argument seeking
admissibility of a tax assessment as an admission against the Commonwealth’s
interest. That Court ultimately concluded tax assessments were not admissible
as evidence of value in condemnation proceedings if sought to be introduced by
a landowner.
A key tenet in condemnation actions is fairness, both to the landowner
whose property will be taken by the Commonwealth and to the taxpayers who
will ultimately be responsible for payment to the landowner for the condemned
4 lands. As the Court of Appeals noted, excluding potentially relevant evidence
central to one of the jury’s core decisions—pre-taking value—seems
fundamentally unfair and is contrary to our evidentiary rules. KRE1 401
defines relevant evidence as “evidence having any tendency to make the
existence of any fact that is of consequence to the determination of the action
more probable or less probable than it would be without the evidence.”
Relevant evidence is admissible unless excluded by the Constitution, statutes,
evidentiary rules, or other rules promulgated by this Court. KRE 402. A
landowner’s statement of value to the PVA would generally constitute hearsay
as it is an out of court statement offered to prove the truth of the matter
asserted, KRE 801(c), and would therefore be excluded under KRE 802 unless
one of the exceptions to the hearsay rule applies. We hold the public records
exception applies in these circumstances and permits introduction of the tax
assessed value by a landowner as well as the Commonwealth.
PVAs are unquestionably elected state officials. KRS 132.370. The
property tax records held by the PVA qualify as public records not excluded by
the hearsay rule under KRE 803(8) which states:
Public records and reports. Unless the sources of information or other circumstances indicate lack of trustworthiness, records, reports, statements, or other data compilations in any form of a public office or agency setting forth its regularly conducted and regularly recorded activities, or matters observed pursuant to duty imposed by law and as to which there was a duty to report, or factual findings resulting from an investigation made pursuant to authority granted by law. The following are not within this exception to the hearsay rule:
1 Kentucky Rules of Evidence.
5 (A) Investigative reports by police and other law enforcement personnel;
(B) Investigative reports prepared by or for a government, a public office, or an agency when offered by it in a case in which it is a party; and
(C) Factual findings offered by the government in criminal cases.
One core duty and regular activity of a PVA is to calculate the taxable
value of each piece of property located in his or her county. While there are
several valid valuation methods which may be utilized to estimate taxable
value, all are intended to closely estimate the fair cash value of the property.
The values established by a PVA are presumed to be valid unless a taxpayer
proves otherwise. See Revenue Cabinet, Commonwealth of Kentucky v. Gillig,
957 S.W.2d 206, 210 (Ky. 1997). PVAs maintain records, reports, maps,
photographs, and other documents memorializing various details of each parcel
including the current and historical values estimated for each property. These
documents are central to the daily business of a PVA office. The values
calculated or established by a PVA clearly constitute public records and are
relevant to establishing the fair market value of property to be condemned.
They should not be excluded from admission, regardless of which side seeks
introduction.
In our view, and in light of the foregoing rules of evidence, the ancient
rule against allowing property owners to introduce tax assessed values is no
longer necessary, valid, or fair. Although the Transportation Cabinet urges us
to keep the rule in place because it has been the law in the Commonwealth for
6 over sixty years, we are reminded of the words of Oliver Wendell Holmes, Jr.,
who stated:
It is revolting to have no better reason for a rule of law than that so it was laid down in the time of Henry IV. It is still more revolting if the grounds upon which it was laid down have vanished long since, and the rule simply persists from blind imitation of the past.
The Path of the Law, 10 Harvard Law Review 457, 469 (1897).
Modernization and enhanced professionalism in PVA offices across the
Commonwealth since the 1930’s calls for an increased confidence in the land
values assessed by those offices. KRS 132.190(3) requires all property in the
Commonwealth to be assessed at its fair cash value. Further, in 2012, the
General Assembly enacted KRS 132.191 which “recognizes that Section 172 of
the Constitution of Kentucky requires all property, not exempted from taxation
by the Constitution, to be assessed at one hundred percent (100%) of the fair
cash value” and affirms the duty of the PVA “to value property in accordance
with the Constitution.” Thus, if the PVA’s valuation is the proper standard by
which a landowner should pay money to the Commonwealth, that same
valuation certainly should not be ignored when the landowner calls upon the
Commonwealth to pay money for its lands. The rule of law should, in the
interest of justice and fairness, cut both ways since “what is sauce for the
goose is sauce for the gander.”
Nothing in this Opinion should be construed to say the PVA’s valuation
constitutes a final and unassailable determination of value. Rather, it is one
factor to be considered by the jury in evaluating and determining the
appropriate value of the land to be condemned. Testimony regarding the PVA’s 7 value would be subject to challenge and parties are free to argue the weight to
be given to such valuations.
If the Transportation Cabinet believes a landowner voluntarily increased
the assessment of his lands in an effort to extract a higher price during a
condemnation proceeding, it may wish to question the taxpayer’s motivation for
seeking the increase. The Transportation Cabinet is free to inquire about when
a revised value was assigned, the source or method of calculation of the
increased value, whether the change was the result of an arms-length
transaction or substantial improvements being made, and the history of the
property’s value. Such questions would directly bear on the weight and
credibility the jury should assign to the PVA’s assessment. Of course, the
landowner is free to explore avenues of questioning supporting his statement of
valuation to the PVA.
We hold PVA assessments constitute relevant and probative evidence and
should not be stricken. Borders is entitled to a new trial at which it may
introduce the PVA’s assessed tax value for the condemned lands provided it
lays a proper foundation for same.
For the foregoing reasons, the decision of the Court of Appeals is
reversed, and this matter is remanded to the Lawrence Circuit Court for further
proceedings consistent with this Opinion.
All sitting. All concur.
8 COUNSEL FOR APPELLANT:
Nelson Theodore Sparks
COUNSEL FOR APPELLEE:
Stacy Diane Conley