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Buchanan Energy (N), LLC v. Lake Bluff Holdings, LLC

United States District Court, N.D. Illinois, Eastern Division

April 4, 2017

BUCHANAN ENERGY (N), LLC, a Delaware limited liability company, Plaintiff,
v.
LAKE BLUFF HOLDINGS, LLC, an Illinois limited liability company, Defendant.

          MEMORANDUM OPINION AND ORDER

          Young B. Kim United States Magistrate Judge.

         In this declaratory judgment action, which is before the court on consent, see 28 U.S.C. § 636(c), Plaintiff Buchanan Energy (N), LLC ("Buchanan") and Defendant Lake Bluff Holdings, LLC ("Lake Bluff) have filed competing motions in limine to exclude the opinions of the other party's real estate appraiser. Buchanan seeks to bar expert opinions from Lake Bluffs appraiser, Michael MaRous. Lake Bluff similarly moves to exclude expert opinions from Buchanan's appraiser, Daniel P. Currier. For the following reasons, both motions to exclude are denied:

         Introduction

         Buchanan seeks a declaratory judgment that it is entitled to purchase real property in Lake County, Illinois ("the Property")[1] from Lake Bluff pursuant to a purchase option in a Lease. (R. 57, Pl.'s Mot. at l.)[2] The purchase option sets the price based upon the average of three appraisals: one from an appraiser retained by Buchanan; one from an appraiser retained by Lake Bluff; and one from a joint appraiser. (Id. at 1, 5 n.l.) The purchase option does not specify the methodology to be used or the facts and assumptions to be considered by the appraisers. (R. 1-1, Compl. Ex. A at 12.) The parties' primary dispute in this lawsuit relates to whether the appraisers should value the Property with or without improvements. (R. 57, Pl.'s Mot. at 1; see also R. 42, Jan. 25, 2016 Min. Entry.) Buchanan argues that the valuation should not include any improvements, while Lake Bluff asserts that the valuation should include the improved gas station on the Property. (R. 57, Pl.'s Mot. at 1-2.)

         In calculating the "vacant land" value, Buchanan relies upon valuations from its appraiser Currier for $295, 000, Lake Bluffs appraiser MaRous for $675, 000, and the joint appraiser for $493, 100.[3] (Id. at 7.) "[B]y simply averaging the appraisers' vacant land values, " Buchanan claims that the purchase option price should be $487, 775. (Id. at 1, 5 n.l.) Lake Bluff, on the other hand, calculates the price at $1, 135, 000 by averaging the "as is, improved" valuations from its appraiser for $1, 200, 000 and the joint appraiser for $1, 070, 000. (Id. at 2, 7.) All appraisers used the sales comparison approach in determining their valuations. (Id. at 6, Ex. 1, MaRous Dep. 124:6-8, June 16, 2016; R. 58, Def.'s Mot., Ex. 2, Currier Dep. 109:11-14, Aug. 11, 2016.) And all appraisers were retained and performed their valuations pursuant to Buchanan's exercise of its purchase option before the present litigation commenced. (R. 57, Pl.'s Mot. at 2.)

         Both parties challenge allegedly unreliable data and faulty methodology used by the other party's appraiser. (Id. at 12-16; R. 58, Def.'s Mot. at 3-8.) Buchanan criticizes, inter alia, the following purported errors in MaRous's analysis:

• MaRous assumed that Lake Bluff had purchased the gas station improvements on the Property. (R. 57, Pl.'s Mot. at 12-13, Ex. 1, MaRous Dep. 33:11-37:12; 108:2-20.)
• Lake Bluffs counsel directed MaRous to appraise the Property under its "highest and best use . . . [as] a successful operating gas station." (Id. at 13, Ex. 1, MaRous Dep. 21:1-8; 27:2-12.)
• MaRous did not mention Buchanan's exercise of its option to purchase the Property, even though the Uniform Standards of Professional Appraisal Practice ("USPAP") "require the appraiser to report and analyze any option involving the property during the past three years." (Id. at Ex. 1, MaRous Dep. 90:2-8; 92:16-24; 102:5-103:14.)
• MaRous initially estimated the vacant Property value to be close to the as-improved Property value but then offered dramatically different valuations, ad. at Ex. 1, MaRous Dep. 84:13-85:16.)
• MaRous considered monthly gallonage sales showing gasoline volume sold. (Id. at 14, Ex. 1, MaRous Dep. 81:13-84:12; 101:20-102:4.)
• Before MaRous finalized his report, Lake Bluffs attorney gave MaRous Buchanan's appraisal, citing its "ridiculous value of $295, 000" and advising that Lake Bluff would need to pursue litigation to "throw[] out" the appraisal. (Id. at 14, Ex. 1, MaRous Dep. 73:2-75:16.)
• MaRous testified that he considered rental properties in his valuation as a consideration of "market activity, " but he did not cite any specific rental properties. (Id., Ex. 1, MaRous Dep. 98:8-100:18.)
• MaRous used non-comparable sales, including multi-residential land, an outlot around a Home Depot, and incorporated land, in determining his valuation. (Id., Ex. 1, MaRous Dep. 125:21-127:23.)
• MaRous cited comparable land sales ranging from $14.95 per square foot ("psf) to $33.78 psf, but then found the Property's land value to be $34.20, higher than the cited range. (Id., Ex. 1, MaRous Dep. 124:19-23; 128:15-129:17.)
• MaRous cited improved comparable sales of $335 psf, $328 psf, $985 psf, $303 psf, and $1, 038 psf, but then valued the improved Property at $1, 172 psf. (Id. at 15, Ex. 1, MaRous Dep. 134:21-136:24.)
• MaRous cited improved comparable sales that included gas stations, even though MaRous did not know who owned the improvements. (Id. at 14-15, Ex. 1, MaRous Dep. 130:20-22; 134:7-20.)
• MaRous made errors in his report, which he said he would correct but did not. (Id. at 15, Ex. 1, MaRous Dep. ...

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