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Dept. of Pub. Wks. & Bldgs. v. Klehm

OPINION FILED NOVEMBER 20, 1973.

THE DEPARTMENT OF PUBLIC WORKS AND BUILDINGS, APPELLEE,

v.

CARL G. KLEHM ET AL. — (LEE N. ROMANO ET AL., APPELLANTS.)



Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County; the Hon. Edward J. Egan, Judge, presiding.

MR. JUSTICE WARD DELIVERED THE OPINION OF THE COURT:

Rehearing denied January 29, 1974.

On July 8, 1968, the petitioner, the Department of Public Works and Buildings of the State of Illinois (the Department) brought an eminent domain proceeding in the circuit court of Cook County to acquire 20.65 acres of an 85.99-acre tract of land, which was located in northwest Cook County and which the petition alleged was to be used in the construction of an interstate highway. The owner of the tract, Carl G. Klehm, the Schaumburg Plant Project Corporation (the Corporation), which had contracted with Klehm to purchase the tract, and Lee N. Romano, the Corporation's president, were named as defendants in the action.

The entire tract, which is basically rectangular in form, is located at the southwest corner of the intersection of Higgins Road (Route 72) and Rohlwing Road (Route 53). About 2,645 feet of the tract fronts on Rohlwing Road and about 1,082 feet of it fronts on Higgins Road. Klehm did not own the very corner of the rectangle, where the two roads actually intersect. This corner, which was 189 by 205 feet, had been the site of a gas station which was not in use at the time the petition was filed. It is not concerned in this litigation. The 20.65 acres which were taken from the tract was the land that immediately fronted on Rohlwing and Higgins roads.

Four months before the petition to condemn had been filed, Klehm had entered into a contract (styled by the parties as "installment contract to purchase real estate") with the Corporation to transfer title to the entire tract. This instrument, which we shall refer to as the Contract, provided that the purchase price of the tract was to be $1,700,000. It called for the payment of $10,000 as earnest money at the time of its execution, for $990,000 to be paid upon the "first closing," for $350,000 plus interest to be paid at "the second closing," and $350,000 plus interest was made payable at the "third closing." Dates were designated in the Contract for the three "closings." On the same date the Contract was entered into a "supplemental agreement" was executed by the parties which, as it is pertinent here, provided that at his option the seller Klehm was to have the right to select parcels of real estate in northeastern Illinois, which the purchaser, the Corporation, would then acquire with its own funds and transfer to Klehm. Any funds which would be expended by the Corporation to acquire these parcels designated by Klehm were to be "allowed [as] a credit against the purchase price" set out in the Contract. The supplemental agreement also provided that in the event all or part of the tract was condemned Klehm would satisfy his obligation to convey whatever land was taken by eminent domain by turning over to the purchaser the condemnation award. The agreement declared that the purchaser, i.e., the Corporation, was to be obligated to conduct all litigation in connection with any eminent domain proceedings that might be instituted, and the agreement stated that if the award per acre received in any condemnation proceeding was less than the per-acre price under the Contract the purchaser would be required to pay the difference to the seller. If the condemnation award per acre was greater than the Contract price per acre, under the agreement the seller was to pay to the purchaser the difference.

Klehm, under the Contract to sell for $1,700,000, received from the Corporation: $35,000 in cash; $524,600 in cash from the "quick take" award deposited by the petitioner; the purchaser's promissory note for $240,400, and 843 acres of land which were designated by Klehm pursuant to his option under the supplemental agreement. These lands were acquired by the Corporation for $900,000 and their transfer to Klehm was considered to satisfy the purchase price called for in the Contract to the extent of $900,000.

Under the "quick take" provisions of sections 2.1 through 2.10 of the Eminent Domain Act (Ill. Rev. Stat. 1967, ch. 47, pars. 2.1 through 2.10) hearings to determine preliminary "just compensation" were held on July 16, 1968, and the preliminary just compensation was fixed at $600,600. After a jury trial late in 1970, a verdict was returned awarding $454,300 as compensation for the taking of the 20.65 acres. The jury found there had been no damages to the remainder of the tract. The appellate court affirmed (6 Ill. App.3d 752) after an appeal by the Corporation and by the defendant Romano. That court under our Rule 316 certified that the case involved a question of such importance that it should be decided by this court. Ill. Rev. Stat. 1971, ch. 110A, par. 316.

A claim is made by the appellants, the Corporation and Romano, that the trial court erred in permitting the Contract to go to the jury as evidence of the value of the subject property, because the transaction between Klehm and the purchasers, i.e., the Corporation and Romano, really involved exchanges of real estate rather than a sale for cash. It is argued that the transaction between the parties was considered as an exchange by the Internal Revenue Service and that the instrument was designed to avoid a sale, which would have made the seller Klehm liable for capital gains tax. The appellants, citing Jefferson Park Dist. v. Sowinski, 336 Ill. 390, 393, and Lanquist v. City of Chicago, 220 Ill. 69, 72, say that exchanges of land are not admissible as comparable sales of property to assist a jury in establishing the value of the land.

In an eminent domain proceeding evidence of comparable sales of land may be admitted in most jurisdictions, including Illinois, as evidence of the value of the land which is the subject of the eminent domain proceedings. (85 A.L.R.2d 110.) Whether the evidence shall be admitted in a given case rests within the discretion of the trial court. (City of Evanston v. Piotrowicz, 20 Ill.2d 512, 522; Sanitary Dist. of Chicago v. Boening, 267 Ill. 118, 121.) Evidence of a previous sale of the tract of land that is the subject of the eminent domain proceeding may be admitted. (Forest Preserve Dist. v. Hahn, 341 Ill. 599, 603.) The underlying reason for admitting the evidence is that, depending on the similarity of the tracts being compared, the sales price paid in a voluntary sale of one parcel of land may tend to show the fair cash market value of the other parcel. Too, it provides an objective dollar market value for the jury to consider and compare with the testimony of appraisers as to the estimated value of the land to be condemned.

While evidence of comparable sales may be admissible, it is generally said that evidence of exchanges of land is not. (Jefferson Park Dist. v. Sowinski, 336 Ill. 390, 393; Lanquist v. City of Chicago, 200 Ill. 69, 72.) Evidence of a comparable sale gives the jury the benefit of an objective market evaluation, against which it can consider an appraiser's valuation of the property taken. (People ex rel. Department of Public Works v. Reardon (1971), 4 Cal.3d 507, 483 P.2d 20, 93 Cal.Rptr. 852; 4 Nichols' The Law of Eminent Domain (3d ed. rev. 1971), sec. 12.311

, at 125.) In the case of an exchange of lands, however, there is no objective market value presented for consideration by the jury, and the reason for admitting evidence of comparable sales is not present.

The appellate court did not err in holding that the trial court did not abuse discretion in admitting evidence of the Contract. The instrument clearly resulted in a contract of sale and not a bargain for an exchange of lands.

The instrument was designated as an installment contract to "purchase." It fixes a "cash purchase price" of $1,700,000, which was made payable in installments. It provides that if the award per acre was less than the per-acre value established in the Contract the purchaser was to pay the seller the difference between the price per acre called for in the Contract and the amount per acre received in the condemnation proceedings and that if the award per acre was greater than that called for in the Contract the seller was to pay the purchaser the difference. In making these provisions for the contingency of condemnation the Contract referred to the "per acre value established by said installment contract to purchase real estate." The agreement further provided that should the seller exercise his right to designate land to be acquired by the purchaser, any funds expended by the purchaser to acquire the designated parcels were to be "allowed as a credit against the purchase price" set out in the Contract. It is evident that no simple exchange of lands was contemplated. The consideration to be received by the seller was $1,700,000.

We have no doubt that the Contract between Klehm and the Corporation established by agreement an objective dollar market value for Klehm's tract as of four months prior to the quick take of a portion of the tract. The trial court did not abuse discretion in providing the jury with evidence of an objective and voluntarily reached market value. Regardless of how the ...


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