Paducah Independent School District v. Putnam & Sons, LLC
2017 Ky. LEXIS 282
| Ky. | 2017Background
- Paducah Independent School District condemned a 2.79-acre gravel parking tract owned by Putnam & Sons, LLC as part of a larger school expansion; the taking was effective May 19, 2011.
- Putnam owned adjacent property (an ~8.2-acre former Modine factory site plus another small lot); dispute centered on whether the taken tract should be valued standalone or as part of an integrated whole.
- District’s appraiser valued the taken tract as a separate vacant lot (~$60,000). Putnam’s appraiser claimed integrated highest-and-best-use as a regional warehouse complex, valuing the taken tract contribution at ~$750,000 (later reduced to ~$665,000 after a post-taking sale).
- Trial court rejected both extremes, found Putnam’s integrated-warehousing theory speculative and unsupported, and computed value by using (1) Putnam’s 2002 internal transfer valuation of all Modine properties ($550,000) and (2) Putnam’s 2012 sale of the remainder ($435,000), arriving at $115,000 for the taken tract.
- The Court of Appeals reversed, concluding the trial court relied on stale and incompetent evidence (the 2002 transfer). The Supreme Court of Kentucky granted review and reinstated the trial court judgment.
Issues
| Issue | Putnam's Argument | District's Argument | Held |
|---|---|---|---|
| Whether the taken 2.79-acre tract should be valued as part of an integrated whole (regional warehousing) or standalone | The tract was essential to an integrated regional warehousing highest-and-best-use; integration raises the tract's value substantially | Integrated use was speculative; no evidence of a reasonable probability of near-term combination/use | Trial court did not abuse discretion in rejecting Putnam's integration theory as speculative; Supreme Court affirms rejection |
| Whether the trial court erred by relying on Putnam’s 2002 internal transfer valuation (nine years old and between related parties) to value the property in 2011 | The 2002 transfer was too old and non-arm’s-length to be competent evidence of 2011 fair market value | The transfer was admissible and probative (owner’s certified assessment admits as admission against interest); combined with 2012 remainder sale it provided substantial evidence | Trial court's use of the 2002 valuation (together with the 2012 sale) was not clearly erroneous and provided competent substantial evidence |
| Whether the trial court should have appointed a neutral appraiser (KRE 706) after rejecting both parties' appraisals | Putnam implied a retrial or appointment was necessary to avoid reliance on inadmissible or stale evidence | District argued court reasonably used available evidence and could decline KRE 706 appointment | Trial court did not abuse discretion in declining to appoint an expert under KRE 706; no retrial required |
| Admissibility and weight of comparable sales distant in time or non-arm’s-length | Old or related-party transfers lack probative value; appellate reversal required | Prior sales/comparables are admissible unless market changed drastically; weight goes to the factfinder | Supreme Court applied liberal admissibility approach: older or imperfect comps can be considered and weighed by the factfinder; Court of Appeals overstepped by substituting its view |
Key Cases Cited
- Baston v. Cty. of Kenton ex rel. Kenton Cty. Airport Bd., 319 S.W.3d 401 (Ky. 2010) (just compensation and fair market value principles)
- Olson v. United States, 292 U.S. 246 (U.S. 1934) (highest-and-best-use and consideration of adaptability)
- United States ex rel. Tennessee Valley Auth. v. Powelson, 319 U.S. 266 (U.S. 1943) (special adaptability and reasonable probability of combination)
- McGovern v. New York, 229 U.S. 363 (U.S. 1913) (speculation versus reasonable probability in valuation)
- Stocker, Commonwealth, Dep’t of Highways v. Stocker, 423 S.W.2d 510 (Ky. 1968) (expectation/probability required for change in highest-and-best use)
- Ky. Props. Holding LLC v. Sproul, 507 S.W.3d 563 (Ky. 2016) (bench-trial review standards under CR 52.01)
- United States v. 320.0 Acres of Land, 605 F.2d 762 (5th Cir. 1979) (balancing compensation fair to public and landowner)
- Portland Nat. Gas Transmission Sys. v. 19.2 Acres of Land, 318 F.3d 279 (1st Cir. 2003) (real estate valuation uncertainties)
- Major v. Commonwealth, Dep’t of Highways, 448 S.W.2d 54 (Ky. 1969) (owner’s certified assessment admissible as admission against interest)