Mayor of Baltimore v. Kelso Corp.

Gilbert, C. J., delivered the opinion of the Court. This appeal is the sequel to City of Baltimore v. Kelso Corp., 281 Md. 514 , 380 A.2d 216 (1977) (Kelso I). The English had a word for the report of the real estate appraiser hired by the Mayor and City Council of Baltimore (City) in this condemnation case. That word was ñoccinaucinihilipiliñcation. 1 2 It means the habit of estimating things as worthless or of belittling the achievements of others.

A jury in the Court of Common Pleas, presided over by Judge Albert L. Sklar, displayed its disagreement with the City’s evaluation of land and improvements thereon, formerly owned by the Kelso Corporation, et alia 2 (Kelso) and which had been subject to a "quick take” by the City. For details of the "quick take,” see Kelso I, supra. Notwithstanding the City’s appraisal of $78,291 as the value of the Kelso property that had been condemned, the jury, after hearing the evidence and the other evaluations found, by their verdict, the fair market value of Kelso’s property to be $261,275, a sum that is approximately three and one-half times that offered by the City to Kelso. ²⁸⁷ Patently miffed by what it perceives to be unwarranted generosity on the part of its citizens-jurors, the City has brought its lamentation to this Court wherein they seek to reverse the judgment. The City has propounded three questions for our consideration, namely: "I. Did the lower court commit reversible error by permitting testimony relating to the re-use appraisal of certain lots which was prepared at the City’s request in conjunction with its plan for the Orchard-Biddle Project and in anticipation of selling said lots to G.S.A.?

II

Did the lower court commit reversible error when it instructed the jury that it could compare the re-use appraisal with the City’s acquisition appraisal?

III

Did the lower court commit reversible error by refusing to allow the City to question Kelso about the amount of its 'investment’?” So that the reader will have a better understanding of our discussion of each of the three questions, we shall set forth a resume of the facts giving rise to this case. — THE FACTS — The seeds of this controversy were sown more than seven years ago, when the City, commencing in October 1972, and continuing through May 1973, filed eight separate petitions of condemnation against Kelso. 3 The subject of the condemnation consisted of a number of properties, totalling 52,255 square feet. All were located in Baltimore City in the area bounded by Sarah Ann Street to the north, Saratoga Street to the south, Pine Street to the west, and Pearl Street to the east. ²⁸⁸ The properties have been consolidated with others and now form a part of the Department of Health, Education & Welfare’s recently constructed Social Security Administration complex. Initially and ostensibly, the Kelso land was sought by the City for use in its proposed "Renewal Plan for the Orchard-Biddle Neighborhood Development Program Urban Renewal Area.” Baltimore City Ordinance No. 1175 (Nov. 15, 1971). Battle was joined when Kelso moved to dismiss the City’s petitions to condemn the Kelso holdings.

The appellee alleged that the City, "with malice aforethought,” had rezoned the subject properties from Second Commercial to Residential, see Baltimore City Ordinance No. 1051 (April 20,1971), thus depressing the market value. Kelso theorized that the City, after acquiring the property at an advantageous price, planned to rezone the property for commercial use, and then to sell it at a substantial profit to the Federal government for the construction of the Social Security Complex. 4 The trial court, following a hearing, agreed with Kelso and dismissed the petition to condemn. The matter wended its way to the Court of Appeals after by-passing this Court. That forum, in Kelso I, supra, reversed the trial court, holding that inasmuch as Kelso had not challenged either the right or the authority of the City to exercise its power of eminent domain, the petition should not have been dismissed.

Kelso I was remanded to the trial court where Kelso II came into being. 5 Trial in the matter subjudice commenced on September 5, 1979. Phillip E. Klein, a real estate appraiser, testified for the City that the neighborhood, immediately adjacent to the ²⁸⁹ Kelso tracts, consisted of "a blighted area, a lot of vacant land, a lot of buildings not being used and partially vandalized.” The appraiser viewed the "highest and best use for the subject property” to be an "assemblage for residential development.” Klein valued the parcels at $86,950 in fee, which, after payment of the underlying ground rents, resulted in the net figure of $78,291, or approximately $1.50 per square foot. The City put Klein’s "condemnation appraisal” into evidence. It consisted of a single page table, listing the properties, their size, and a brief computation of the appraised value.

To what appears to be the consternation of the City and Mr. Klein, Kelso’s counsel was then permitted to inquire about a "re-use appraisal,” which Klein prepared only two months after the "condemnation appraisal.” The "re-use appraisal” was intended by the City to be presented to the General Services Administration (G.S.A.) as part of the City’s successful effort to convince that federal agency of the desirability of locating the Social Security expansion in Baltimore City instead of Baltimore County. The area of the property embraced in the "re-use appraisal” ranged in size from 515,577 square feet to 693,551 square feet. 6 All the Kelso property was included in the re-use appraisal. In stark contrast to the paucity of information contained in the "condemnation appraisal,” the "re-use appraisal” comprised seventy-four pages. Compared to Klein’s direct testimony, the "re-use appraisal,” it is fair to say, was significant for its stress of the advantageousness of the geographical location of the area in which the Kelso land and that of others was situated.

Klein, therein, cited the close proximity of the State Office Building Complex, the University of Maryland at Baltimore, the "central business district,” including "restaurants, and centers of ²⁹⁰ entertainment and culture, the financial district, . . . Charles Center,” hotels and motels, as well as the Maryland General Hospital. Accessibility to the property by both public or private transportation was described as "excellent.” 7 According to the re-use appraisal, the "highest and best use of the subject property is for office building and uses ancillary thereto.” Klein, in response to the questioning of Kelso’s attorney told the jury that in his report, he valued the tract at approximately $8.00 per square foot, a price per square foot of over four times his evaluation of the Kelso land. 8 Kelso’s counsel drew from Klein the admission that each of his statements regarding the larger tract was equally applicable to the Kelso parcels standing alone. Klein explained to the jury the differences in the appraisal.

He said: "The reason ... [for the difference] is because there were two — the two different interpretations and elements of emphasis were appropriate. In one instance, I was dealing with a 50 to 52,000 square foot site within — as it existed without the project. Then I attributed the highest and best use as for residential development or possibly at no more value, second commercial development, with a small warehouse. ²⁹¹ Now, within the confines of that appropriate appraisal, means of appraisal, and within the confines of the legislative definition, the characteristics of the neighborhood as relate to the benefits of this residential development of one hundred units were to a small commercial development which is one thing. Then we get into an appraisal of a twelve to sixteen acre site, instead of a one and a half acre site, we get into a reuse appraisal of an area where the central core has all been eradicated.

There has been a new area completed. I am looking at a site now where its contemplated use is regional in nature, with multi-thousand or multi-million square foot facility, where thousands of employees will be coming and going and visitors each day. So that the relationship of that facility, and its utility for the purpose, has an identity with the State Office Building, which is also a governmental facility eight miles away, and has an identity with the cultural and recreational and the financial center of the city. And the subway and the arterial highways become much more important and a more material factor in evaluating this 12.6 acre site cleared of the slums where thousands of people are going to come and go every day.

Then it becomes a matter of importance in respect to an appraising a parcel without the benefit — not entitled to the benefit of the project, and a parcel of land a tenth or more or less in size and surrounded by the dilapidated facilities which are proximate to it.” The City, via its attorney, sought to elicit from Dr. Saul Moses, a stockholder and the Secretary-Treasurer of Kelso, the price Kelso had paid for the parcels of land. Judge Sklar refused to allow the evidence to be heard by the jury because the sales had occurred more than five years prior to the condemnation and "the mass transit Metro Rapid Line ... ²⁹² the station at Lexington Market, ... [and the] extension of Lexington Market” among other changes, foreclosed a fair comparison of the sales. The trial judge did permit the City, however, to question Dr. Moses about one lot inasmuch as that particular lot had been purchased within five years from the date of the "quick take.” As we have said, the jury returned a verdict in the amount of $261,275, or $5 per square foot. 9 — THE LAW— The City strenuously objects to Judge Sklar’s permitting the appellee to interrogate Mr. Klein about the "re-use appraisal.” While not specifically articulated by the City, the legal basis of the exception seems to be that of relevance. The City avers that Md. Real Property Code Ann. (1974) § 12-105 (b) forbids the inclusion within "fair market value” of "any increment in value proximately caused by the public project for which the property condemned is needed.” The City reasons that the re-use appraisal was "directly related to the Orchard-Biddle Project” and “was influenced by the project” so that the document was "inadmissible as a matter of law.” We observe that the Real Property Art. § 12-105 is not a rule of evidence and does not operate so as to circumscribe the scope of cross-examination.

The City’s argument ignores our recent decision in City of Baltimore v. Smulyan, 41 Md. App. 202 ,