Ralph Waldo Emerson observed that a foolish consistency is the hobgoblin of little minds, and a recent Arizona Court of Appeal decision endorses that view. In Salt River Project etc. v. Miller Park, LLC (Ariz.App. 2007) 164 P.3d 667, the Arizona Court of Appeals had to wrestle with the problem of what to do when a property owner in a condemnation case offers testimony of value (ranging from $3,850,689 to $ 5,474,620 as total compensation for the taking), but the condemnor contends that just compensation should be a lot less (only $270,573), and bolsters its argument by demanding that it should be permitted to impeach the owner’s evidence of value by showing that the owner’s representative had earlier testified in a tax assessment proceeding to a much lower value of only $10,000. The trial court excluded that impeachment tetimony, and the jury awarded $4,711,528. The Arizona Court of Appeals affirmed on this point.
We understand how condemnors’ counsel can get upset about a ruling like that, and object to the inconsistency of it, but the inconsistency may be more apparent than real and there are actually good reasons for excluding tax assessment valuation matters from condemnation trials. First, there are evidentiary reasons; the subject property is rarely, if ever, valued for tax purposes on the same date as the condemnation date of value, and that alone can be a big problem – if admitted, the owner would have to be afforded an opportunity to show why the tax valuation figure was deficient or outdated, and that would raise collateral issues and complicate the proceedings, cofusing the jury. More important, in eminent domain, the property is valued for its highest and best use, and “fair market value” represents the highest price the owner could obtain in the open market (see Cal. Code Civ. Proc. Sec. 1263.320). This makes sense. The condemnation prevents the owner from taking his sweet time in marketing his property to receive top dollar, so it is only fair that he be provided with the highest price he could have obtained in a free market transaction absent the condemnation. But there is no such requirement in tax valuation where the property is valued for its “cash value” in its present use, and the owner is free to interpret market uncertainties and ambiguities so as to minimize his taxes. Also, if an error is made in ad valorem valuation, it can be corrected later. But if it occurs in codemnation, it’s curtains — the property is taken, the case becomes final and the compensation cannot be adjusted later on. Finally, with all due respect to our friend, the county tax assessor, ad valorem appraisals are often of poor quality and that is the reason why they are generally not admissible into evidence in eminent domain valuation trials, not even when the owner complains that the government is offering him less than what it contends to be the property’s value in its tax assessment proceedings. So the rule cuts both ways.
This is not a universally followed approach to the problem of inconsistent valuations, but this opinion is uncommon in its extensive canvassing of authorities dealing with this problem. It’s a “good read” for eminent domain trial counsel and appraisers.