Board of County Commissioners of the County of Weld, a political subdivision of the State of Colorado, Petitioner-Appellee,
DPG Farms, LLC, Respondent-Appellant.
County District Court No. 14CV30182 Honorable Julie C.
Barker, County Attorney, Bob Choate, Assistant County
Attorney, Greeley, Colorado; Hamre, Rodriguez, Ostrander
& Dingess, P.C., Donald M. Ostrander, Joel M. Spector,
Denver, Colorado, for Petitioner-Appellee
Robinson Waters & O'Dorisio, P.C., Richard D. Judd,
Brian A. Magoon, Jena R. Akin, Denver, Colorado, for
1 In this condemnation action, respondent, DPG Farms, LLC
(DPG), appeals from a judgment entered on a jury verdict
after a valuation trial. The issue on appeal concerns the
proper method for determining compensation when the condemned
property, and portions of the remainder, are capable of
2 DPG argues that the district court erred in (1) determining
as a matter of law that water storage was not the highest and
best use of the property; (2) excluding its lost income
evidence which, it says, was admissible under its income
capitalization approach to valuing the affected property; and
(3) denying a substantial portion of its request for costs.
3 Petitioner, the Board of County Commissioners of Weld
County (the County), filed a petition in condemnation to
extend a public road over 19 acres of DPG's 760-acre
property (the Property). When condemnation proceedings were
initiated, the Property was used primarily for agricultural
and recreational purposes.
4 The parties stipulated to the County's immediate
possession of the nineteen acres and proceeded to a valuation
trial. DPG's valuation encompassed two steps:
(1) determining the highest and best use of the Property; and
(2) in light of that determination, calculating the fair
market value of the condemned property as well as any
diminution in fair market value to the residue.
5 According to DPG's experts, the highest and best use of
the Property was mixed: portions of the Property were most
advantageous for continued agricultural and recreational use,
while other portions had the potential for gravel mining and
subsequent water storage.
6 Specifically, approximately 280 acres of the Property
contained gravel deposits. DPG's experts testified that
those acres could be mined over a period of time and then
repurposed for water storage. The evidence of the feasibility
of mining and water storage was set forth in a detailed
development plan (the mining plan). The mining plan split the
280 minable acres into four areas - referred to as
"cells" - located in a horizontal line across the
Property. The nineteen-acre strip condemned by the County ran
through Cell C.
7 DPG's method of valuation proceeded as follows: first,
it used primarily a comparable sales approach to calculate
the pre-condemnation fair market value of the Property.
DPG's appraiser relied on six similar properties (though
only two had potential for mining and water storage) to
arrive at a per-acre value of $11, 500, or $8.74 million for
the entire 760-acre Property. The gravel mining expert, who
was not an appraiser but had substantial experience buying
and selling properties with mining potential, used a similar
approach. He testified that, at the time of the condemnation,
taking into account the expenses and losses inherent in
gravel mining, a willing buyer would have paid approximately
$5, 000 per non-income-producing (agricultural) acre, and
$10, 000 per income-producing (mining) acre, or a total of
$5.2 million for the Property. The County's own appraiser
ultimately endorsed the mining expert's pre-condemnation,
fair market value of the Property.
8 Next, to calculate the loss in value to the Property caused
by the condemnation, DPG switched to what it calls an income
approach. But rather than calculating a post-condemnation
fair market value of the Property (that could be compared
with the pre-condemnation value, as calculated by the
appraiser and mining expert), DPG used its mining plan to
compute the total income that could have been generated from
the nineteen-acre strip ($1 million), as well as from a
twenty-seven-acre portion of Cell C affected by the
condemnation ($2.1 million). It then attempted to present the
$3.1 million loss figure as its compensable damages.
9 The district court excluded only the ultimate loss figure,
concluding that without any evidence of that figure's
connection to the Property's fair market value, the
figure amounted to inadmissible frustration-of-plan damages.
In light of the court's ruling, DPG presented an
alternative damages figure: the appraiser, using his $11, 500
per-acre fair market value figure, testified that the
Property's value decreased by $550, 000 - the value of
the approximately forty-six acres (plus the easements) that
were either condemned or damaged by the condemnation.
10 The jury awarded DPG $183, 795 in damages for the
condemned property and nothing for any damage to the residue.
11 DPG filed a post-trial motion to recover its costs, as
permitted by statute. It sought $248, 680.92, much of which
was attributable to expert witness fees. The district court
rejected a substantial portion of the requested costs on the
grounds that the costs were disproportionate to DPG's
success and that certain expert evidence had been excluded.
The court awarded costs in the amount of $68, 808.96.
DPG's Contentions on Appeal
12 On appeal, DPG contends that the district court erred in
rejecting water storage as the highest and best use of
certain portions of the Property and in excluding its lost
income evidence. DPG also argues that the court erred in
disallowing a significant portion of its costs.
Highest and Best Use of the Property
13 The measure of compensation in an eminent domain case
turns on the value of the entire property as it exists at the
time of the condemnation, "taking into consideration its
highest and best future use." Bd. of Cty.
Comm'rs v. Vail Assocs., 171 Colo. 381, 389, 468
P.2d 842, 846 (1970). Under this principle, the
property's value is based on the most advantageous use to
which the property reasonably may be applied and is not
limited to its current condition. Dep't of Highways
v. Schulhoff, 167 Colo. 72, 77-78, 445 P.2d 402, 405
(1968); see, e.g., State Dep't of Highways
v. Mahaffey, 697 P.2d 773, 775-76 (Colo.App.
1984) (highest and best use of property was gravel mining
despite land currently being vacant and undeveloped). The
four factors to be used in determining a property's
highest and best use are legal permissibility, physical
possibility, financial feasibility, and maximal productivity.
See Appraisal Institute, The Appraisal of
Real Estate 280 (14th ed. 2013).
14 Although the admissibility of evidence regarding property
value is "governed by an expansive, rather than
restrictive, rule, " City of Englewood v. Denver
Waste Transfer, 55 P.3d 191, 195 (Colo.App. 2002), a
district court will not consider evidence of a property's
highest and best use that is overly speculative,
Schulhoff, 167 Colo. at 75, 445 P.2d at 404.
15 Most of the Property's 760 acres could only be used
for agricultural or recreational purposes. The dispute
between the parties centered on the highest and best use of
280 acres of the Property, comprising cells A, B, C, and D,
which contained gravel deposits. The district court
determined that the highest and best use of those acres was
gravel mining, but not water storage as well.
16 The determination of a property's highest and best use
is generally a factual question for the jury unless the
evidence of highest and best use is so improbable or
speculative that it should be excluded from the jury as a
matter of law. City of Quincy v. Diamond Constr.
Co., 762 N.E.2d 710, 715 (Ill.App.Ct. 2002); cf. Bd.
of Cty. Comm'rs v. Rodgers, 2015 CO 56, ¶¶
13, 15-17 (explaining that, after presentation of evidence,
if the court finds that a reasonable jury would not have a