1977 FEDERAL EMINENT DOMAIN SEMINAR: BASIC ELEMENTS OF JUST
COMPENSATION
November 1977
When the founding fathers were drafting the amendments to the
Constitution, they remembered some of their earlier grievances against
George III and some of the problems that had arisen under the Articles
of Confederation. In the Fifth Amendment, they made sure that a citizen
cannot be held for an infamous crime without a presentment or an
indictment, that he cannot be tried twice for the same offense, that he
cannot be compelled to be a witness against himself, and that he cannot
be deprived of life, liberty or property without due process of law.
The draftsmen added, almost as an afterthought, or so it would appear,
12 very important words which state "nor shall private property be taken
for public use, without just compensation."
And there at the end of the Fifth Amendment to the United States
Constitution is the general charge to you and me and everyone connected
with the vast land acquisition program that is being prosecuted
throughout this nation. Whatever we do; however we operate; the end
result or our work must be to provide just compensation.
As you read those 12 important words, you will note that there is
nothing stated about the "power" to condemn private property. This
omission implies that the power to condemn is an attribute of
sovereignty going back to I Kings, Chapter 21, when King Ahab and
Jezebel teamed up to acquire the vineyard of Naboth, the Jezreelite,
without providing one shekel of compensation. Thus, you can assume that
the founding fathers recognized the inherent power the sovereign to
acquire private property for a public purpose. All they wanted to do
was to limit that power by making sure that when the power is exercised
just compensation will be provided.
Now when you search for a definition of the term "just compensation"
you open up a long line of cases that go back to our basic Supreme Court
case of United States v. Miller, 317 U.S. 369, 373-374 (1943), wherein
Justice Roberts said:
The Fifth Amendment of the Constitution provides that private
property shall not be taken for public use without just
compensation. Such compensation means the full and perfect
equivalent in money of the property taken. The owner is to be put
in as good position pecuniarily as he would have occupied if his
property had not been taken.
It is conceivable that an owner's indemnity should be measured
in various ways depending upon the circumstances of each case and
that no general formula should be used for the purpose. In an
effort, however, to find some practical standard, the courts early
adopted, and have retained, the concept of market value. The
owner has been said to be entitled to the 'value,' the 'market
value,' and the 'fair market value' of what is taken. The term
'fair' hardly adds anything to the phrase 'market value,' which
denotes that 'it fairly may be believed that a purchaser in fair
market conditions would have given,' or, more concisely, 'market
value fairly determined.' (Footnotes omitted.)
Our friends in the appraisal business use a slightly different
terminology. They say that market value is the price which a willing
buyer would pay to a willing seller, each being fully informed and
neither being under compulsion to act.
Those of you who are just beginning this business of trying
condemnation cases will soon find out, if it is not already apparent,
that the term fair market value will become a part of your everyday
vocabulary. At each trial, your valuation witnesses should be asked to
give the jury their definition of the term; and, in your suggested jury
instructions, the textbook definition complete with citations should be
set out. For these reasons, I believe it may be well worth your time to
become thoroughly familiar with every detail of the concept.
The Supreme Court has set out some excellent guidelines. It has
stated that "compensation means the full and perfect equivalent in money
of the property taken" and that "it does not exceed market value fairly
determined." In other words, it is a price which would result from "the
haggling of the market." Kimball Laundry Co. v. United States, 338 U.S.
1 (1949); United States v. Douglas, 207 F.2d 381 (C. A. 9, 1953),
cert. den., 347 U.S. 920 (1954); United States v. 883.89 Acres of Land
in Sebastian County, Arkansas, 314 F.Supp. 238 (W.D. Ark. 1970). Also,
the Supreme Court counsels that "the owner is to be put in as good a
position pecuniarily as he would have occupied if his property had not
been taken." Seaboard Air Line Ry. Co. v. United States, 261 U.S. 299,
304 (1923); United States v. New River Collieries, 262 U.S. 341, 343
(1923); Olson v. United States, 292 U.S. 246 (1934); United States v.
Miller, 317 U.S. 369 (1943). The court has also stated that "the
question is what the owner lost, not what has the taker gained." United
States v. Petty Motor Co., 327 U.S. 372, 373 (1946); United States ex
rel. T.V.A. v. Powelson, 319 U.S. 266 (1943); Monongahela Navigation
Co. v. United States, 148 U.S. 312 (1893). It has instructed that
market value means value "at the time of taking contemporaneously paid
in money." Olson v. United States, supra, at page 255; Jacobs v. United
States, 290 U.S. 13 (1933). "At the time of the taking" means the date
of actual possession or constructive possession by the entry of an order
for possession or the filing of a declaration of taking. If the actual
date of possession precedes the date of the filing of the declaration of
taking, the former date governs. United States v. Dow, 357 U.S. 17
(1958); King v. United States, 504 F.2d 1138, 1142 (C.Cls. 1974);
United States v. 35.163 Acres of Land in Cook County, Illinois, 332
F.Supp. 799, 802 (N.D. Ill. 1971). "Contemporaneously paid" means that
interest is allowed from the date of taking on the award or on the
difference if there has been a deposit of part of that amount under a
declaration of taking. This additional amount is not interest as such,
because the United States does not owe interest except as provided by
statute or contract. Smyth v. United States, 302 U.S. 329, 353 (1937);
Collins v. United States, 93 F.2d 1001 (C.A. 6, 1938). It is a part of
just compensation itself and interest becomes the measure for equating
the later payment to contemporaneous payment. Seaboard Air Line Ry. Co.
v. United States, 261 U.S. 299, 306 (1923).
The rate of interest has been fixed by statute at 6 percent per annum
since the Declaration of Taking Act, 40 U.S.C. Section 258a, was passed
on February 26, 1931. Periodically since World War II and increasingly
since the Arab oil embargo of 1973, defendants have been contending that
6 percent per annum was inadequate within the meaning of the Fifth
Amendment. We have held to the statutory rate in most instances.
However, last year the Ninth Circuit held in United States v.
Blankinship, 543 F.2d 1272, 1274 (C.A. 9, 1976), that under certain
circumstances the Fifth Amendment does require a rate of interest in
excess of 6 percent. The court refused to fix a rate in that case but
instead ordered the trial court, which had earlier picked a rate of 8.5
percent, to obtain evidence:
* * * that would have been available to the person from whom the
property has been taken had he, at the date of taking, invested
the total amount of any deficiency in the original deposit in a
marketable public debt security issued by the United States
Treasury having a duration commencing with the date of taking and
ending with the deposit in the registry of the court of the entire
deficiency with proper interest.
In other words, the Ninth Circuit is saying that the rate the United
States Treasury has to pay for short-term bills may be the proper rate
of interest. It is interesting to note that on remand, 431 F.Supp.
403, the trial court found that Treasury bills for 2 1/2 years returned
6.78 percent. It then weighed those yields against shorter term bills
and held that the defendants were entitled to interest at the rate of
7.75 percent per annum. This interest problem was first raised in 1972
in United States v. 100 Acres of Land in Marin County, Cal., and Drake's
Beach Estates, Inc., 468 F.2d 1261 (C.A. 9, 1972). After the jury
returned its award, Drake's Beach filed a cross-appeal from the denial
of its motion for interest at the prevailing rate rather than the 6
percent awarded in the judgment. The Ninth Circuit felt that Drake's
Beach should have introduced evidence in regard to interest during the
evaluation trial. Since it did not do so, the Court denied the
cross-appeal on the grounds Drake's Beach was not entitled to another
trial to prove additional elements of just compensation which it could
have presented during the original trial. As far as we know, the Ninth
Circuit is the only circuit not adhering to the statutory rate of 6
percent and even the trial judge in the Marin County case stated he
would have provided a rate of 7 percent but for the statute requiring 6
percent. We hope you will help us hold to the statutory rate of 6
percent in the other circuits. Unless your opponents raise this
question during the trial, then we think Marin County will give you some
support for contending that after the trial, it is entirely too late to
even bring up the question.
"Paid in money" means cash or the equivalent of cash. Kerr v. South
Park Commissioners, 117 U.S. 379, 386-387 (1886). The court has said
that fair market value must be a "transferable value that has an
external validity." This means the elimination of "personal and variant
standards." A "loss to the owner of nontransferable values deriving from
his unique need for the property or an idiosyncratic attachment to it,
like loss due to an exercise of the police power, is property treated as
part of the burden of common citizenship." Kimball Laundry Co. v. United
States, 338 U.S. 1, 5 (1949).
Now then, it may be well to take a look at what does not constitute
just compensation. It goes without saying that the term does not
condone a raid on the Federal Treasury. In eminent domain cases, the
Constitution requires that compensation be just both to the party whose
property is taken and to the public which is to pay for it. Frequently,
the courts have had occasion to note the tendency of landowners to
forget the second half of this proposition. For example, in United
States v. Merchants Matrix Cut Syndicate, 219 F.2d 90, 98 (C.A. 7,
1955), cert. den., 349 U.S. 945, the court made this comment:
All too frequently, profit seeking motives creep into
condemnation cases. This observation, no doubt, will be
distasteful to those who envisage the public treasury as fair game
in such proceedings. Though competitive existence in our society
may stimulate such desires, just compensation, only, remains the
yardstick in eminent domain proceedings.
In United States v. Petty Motor Co., 327 U.S. 372 (1946), the Supreme
Court said, "just compensation is not what the taker gained, but what
the owner lost." Just compensation does not include any value due to
special adaptability of the property to the owner's purpose or the fact
that he was holding it for a particular purpose. United States v.
Miller, 317 U.S. 369 (1943). Demand created by the project itself is
not included in the definition. Cameron Development Co. v. United
States, 145 F.2d 209, 210 (C.A. 5, 1944); United States v. 158.24
Acres of Land in Bee County, Texas, 515 F.2d 230, 233 (C.A. 5, 1975);
United States v. 8,968.06 Acres of Land in Chambers and Liberty
Counties, Texas, 326 F.Supp. 546, 548 (S.D. Tex. 1971). Just
compensation cannot be reduced to a formula or a rigid rule for
determining it under all circumstances in all cases. The Constitution
is "intended to preserve practical and substantial rights, not to
maintain theories." United States v. Dickinson, 331 U.S. 745, 748
(1947). The concept does not entitle an owner to recover his investment
in the property because "It is the property and not the cost of it that
is safeguarded by the Constitution." Olson v. United States, 292 U.S.
246 (1934). Although original cost has been allowed in evidence as
bearing on value, the factfinder is still required to ascertain fair
market value because the cost is not necessarily the fair market value.
United States v. Savannah Shipyards, Inc., 139 F.2d 953, 956 (C.A. 5,
1944). Loss of profits, destruction of a business conducted on the
property, good will, going-concern value and moving costs are not
compensable. Bothwell v. United States, 254 U.S. 231, 233 (1920);
Futrovsky v. United States, 66 F.2d 215, 217 (C.A. D.C. 1933);
Sponenbarger v. United States, 21 F.Supp. 28, 35 (E.D. Ark. 1937).
However, moving costs may be awarded by the acquiring agency by an
administrative determination pursuant to the provisions of the Uniform
Relocation Assistance and Real Property Acquisition Policies Act of
1970, Public Law 91-646, 42 U.S.C. 4651 et seq.
The Supreme Court's concept of just compensation does not permit a
violation of the so-called "unit rule" in an effort to increase awards.
Many times the appraiser for the property owner will estimate the value
of the improvements, the number of walnut trees, and even the number of
fish in the lake and add up the various components of the subject tract
in order to arrive at a total value. The unit rule requires that the
appraiser consider the property as a whole and place one value thereon.
The various components of the property should be considered separately
only as they contribute to the value of the whole. United States v.
Dunnington, 146 U.S. 338, 351 (1892). If there are several owners of
the property such as a lessee, life tenant or remaindermen, then their
interests can be apportioned by the court once the award for the entire
ownership has been determined. Nebraska v. United States, 164 F.2d 866,
868 (C.A. 8, 1947), cert. den., 334 U.S. 815 (1948).
However, the Supreme Court fully supports the proposition that when
only a part of a tract is taken, the owner is entitled to what is
commonly called "severance damages." Bauman v. Ross, 167 U.S. 548, 574
(1897); Sharp v. United States, 191 U.S. 341, 351-352 (1903); United
States v. Chicago, B. & Q. R. Co., 82 F.2d 131, 136 (C.A. 8, 1936). The
term "severance damages" is not a technically correct term since this is
not damages in the orthodox sense, but it is an element of value arising
out of the relation of the part taken to the entire tract. To put it in
more technical language, it is any diminution in the value of the
remainder caused by the taking. The Supreme Court put it this way in
United States v. Miller, 317 U.S. 369, 376 (1943):
* * * If only a portion of a single tract is taken, the owner's
compensation for that taking includes any element of value arising
out of the relation of the part taken to the entire tract. Such
damage is often, though somewhat loosely, spoken of as severance
damage. (Footnote omitted.)
The proper method of measuring just compensation in a partial taking
case is to first find the fair market value of the entire property
before the taking. Next find the fair market value of the property
remaining in the defendant's ownership. Then subtract the value of the
remainder from the value of the whole. This difference between the
before value and the after value includes both the value of the part
taken and any severance damages. Baetjer v. United States, 143 F.2d 391
(C.A. 1, 1944), cert. den., 323 U.S. 772 (1944); Stephenson Brick Co.
v. United States, 110 F.2d 360 (C.A. 5, 1940).
When a claim for severance damages is asserted, the first and
generally the most important question presented is what constitutes a
single tract as distinguished from separate tracts in the same
ownership. The two most important factors to determine involve the
question of unity of title and unity of use. Physical location is not a
controlling factor in determining whether lands constitute a single
tract or entity. Tracts of land may be contiguous and not constitute a
single tract, while, on the other hand, lands may be separated by
considerable distances and still be considered as an entity. United
States v. Evans, 380 F.2d 761 (C.A. 10, 1967); United States v. 105.40
Acres of Land in Porter County, Indiana, 471 F.2d 207, 211 (C.A. 7,
1972). As the Supreme Court said in United States v. Miller, supra, at
376:
* * * a parcel of land which has been used and treated as an
entity shall be so considered in assessing compensation for the
taking of part or all of it.
As respects other property of the owner consisting of separate
tracts adjoining that affected by the taking, the Constitution has
never been construed as requiring payment of consequential damages
* * * .
Care should be taken to make sure your opponent does not introduce
elements of damages that are not compensable. Evidence of business
losses, inconvenience to an owner, cost of removing personal property,
and frustration of plans are clearly inadmissible in condemnation cases.
Omnia v. United States, 261 U.S. 502, 508-513 (1923); Bothwell v.
United States, 254 U.S. 231, 233 (1920); United States v. Honolulu
Plantation Co., 182 F.2d 172 (C.A. 9, 1950). With respect to such
claims, the rule is that the Government pays only for what it takes not
for opportunities the owner may have lost. United States ex rel. T.V.
A. v. Powelson, 319 U.S. 266, 282 (1943); Southern Amusement Company v.
United States, 265 F.2d 34, 37 (C.A. 5, 1959); North Kansas City
Development Co. v. Chicago, B. & Q. R. Co., 147 F.2d 161, 164 (C.A. 8,
1945). Also, watch out for claims that the acquisition of adjoining
lands of others for the same project reduces the value of the subject
property. The owner is limited to compensation for what is taken from
him, not for the taking from others. Campbell v. United States, 266 U.
S. 368, 372 (1924); Boyd v. United States, 222 F.2d 493 (C.A. 8, 1955).
Neither does the Government pay for consequential damages, such as
damage to good will, special value to an owner, and other personal
values. United States v. Petty Motor Co., 327 U.S. 372 (1946);
Mitchell v. United States, 267 U.S. 341 (1925).
Now, there are partial takings other than the taking of the the fee
to a part of an integrated ownership. There are also flowage easements,
scenic easements, road easements, utility easements, and avigation
easements which will be discussed in more detail this afternoon at the
roundtable discussion. The same basic law applies to such takings in
that the measure of just compensation is the value of the property
before the taking less the value of the property after the taking. Here
again, the basic problem is one of appraising. What is the diminution
in value resulting from the taking, excluding all speculative,
conjectural and consequential damages?
Finally, there are temporary takings which give appraisers
considerable difficulties. When the Government condemns a leasehold,
usually the right to occupy and use a piece of property for a specified
period with the right to renew for additional periods, compensation is
simple measured by the fair rental value of the property based upon what
comparable properties are renting for plus restoration damages, if any.
Kimball Laundry Co. v. United States, 338 U.S. 1, 7 (1949); Riverside
Military Academy, Inc. v. United States, 122 C.Cls. 756 (1952).
Complications arise when the Government condemns the right to occupy
and use property already under lease. Such a tenant may have a claim
depending on the duration of the unexpired term of his lease. The
Government is still required to pay fair rental value; but where the
tenant's entire leasehold is taken, the measure of damages to the tenant
is the value of the use and occupancy of the leasehold for the remainder
of the tenant's term, plus the value of the right to renew, less the
agreed rent under the lease. The lessor continues to receive the rent
reserved under the lease. However, whenever the Government takes a
temporary use of a portion of a leased building from a tenant holding
under a long-term lease, the Government is required to pay the
reasonable cost of moving out personal property, preparing the space for
occupancy, storage of the lessee's goods, and the cost of fixtures
destroyed or depreciated in value. United States v. General Motors
Corp., 323 U.S. 373, 382 (1945). This rule is limited to the exact
facts as set out in the General Motors case, i.e., a temporary taking
from a tenant who holds under a long-term lease. In United States v.
Petty Motor Co., 327 U.S. 372 (1946), the court held that when the
tenant's entire leasehold is taken, removal and relocation expenses and
incidental costs are not allowable.
I hope that some of these points and authorities will help you in
your day-to-day journey through the process of helping the courts to
determine what is just compensation.
LAND AND NATURAL RESOURCES DIVISION
By Frank E. McAnear
1977 FEDERAL EMINENT DOMAIN SEMINAR: PREPARING FOR SETTLEMENT
NEGOTIATIONS
November 1977
Chief Justice Burger stressed the importance of efficient disposition
of cases to the credibility of the judicial system in remarks delivered
on March 11, 1971, at the National Judiciary Conference:
In the civil area people who cannot afford the high cost of
litigation but are too well off to qualify for legal aid are
forced to stand by in frustration and often in want, while they
watch the passage of time eat up the value of their case.
We are rapidly approaching the point where this quiet and
patient segment of Americans will totally lost patience with the
cumbersome system that makes people wait two, three, four or more
years to dispose of an ordinary civil claim.
Courts' costs, not including lawyers' fees, now run as high as
$250.00 an hour. To help ease the burden, Chief Justice Burger
suggested that judges impose heavy fines on parties who carry cases they
could have settled up to jury selection before their lawyers reach an
agreement. "Independent of what we do in the courtroom itself," he
said, "we need careful study to make sure that every case which reaches
the courtroom stage is there only after possibility of settlement has
been exhausted." As attorneys representing the United States, it is your
job to actively explore the settlement possibilities of any case.
The Attorney General is authorized to accept or reject offers of
settlement and has delegated to United States Attorneys the authority to
accept or reject offers which do not exceed the gross sum of $40,000.00,
provided the offer does not exceed the deposit, the recommendation of
the authorized field representative of the acquiring agency has been
secured. If the compromise settlement will control or adversely
influence the disposition of other claims totaling an amount in excess
of $40,000.00, or where there is a question of law or policy involved
which should receive the attention of the Department, or where the
settlement involves the revesting of title to land or any interests
therein, or improvements, pursuant to 40 U.S.C. 258f, the settlement
must be submitted to the Department for approval even if it involves an
amount less than $40,000.00. See 41 Fed.Reg. 53,660 (1976) (to amend 28
C.F.R. Part O, app. to Subpart Y); U.S. Attys. Manual Section 5-3.600
et seq. It should be noted that all settlements over $40,000.00,
including those in the amount of the deposit of estimated compensation,
require Department approval.
The Context for Involvement: Pretrial Conferences
Rule 1 is the polestar, the alpha of all Federal rules. It says in
relevant part:
* * * They (the Federal Rules of Civil Procedure) shall be
construed to secure the just, speedy, and inexpensive
determination of every action.
This rule is of such significant importance that it would seem that
if in fact the application of any rule accomplishes an unjust result,
the offending rule should not be applied.
Rule 16 (Pre-Trial Procedure; Formulating Issues), in relevant part,
says:
In any action, the court may in its discretion direct the
attorneys for the parties to appear before it for a conference to
consider
(1) The simplification of the issues;
(2) The necessity or desirability of amendments to the
pleadings;
(3) The possibility of obtaining admissions of fact and of
documents which will avoid unnecessary proof;
(4) The limitation of the number of expert witnesses;
(5) The advisability of a preliminary reference of issues to a
master for findings to be used as evidence when the trial is to be
by jury;
(6) Such other matters as may aid in the disposition of the
action. (Emphasis added.)
Rule 83, little known and less appreciated, is the symbolic omega of
the Federal rules. It says in relevant part:
* * * In all cases not provided for by rule, the district courts
may regulate their practice in any manner not inconsistent with
these rules.
The combination of these three rules, in light of expereicne and the
practicality of pretrials, is authority for a district judge to require
parties to make a good faith attempt at reaching a fair settlement.
These rules also provide the basis for requiring counsel to appear at
pretrial with full authority to act, or, if they have less than full
authority, then to coordinate with the person who possesses such
authority.
Some of the problems that the condemnation attorney must recognize
prior to his preparation for settlement conferences are the following
factors:
1. That, in some cases, extensive settlement negotiations have been
entertained by Government agency representatives without success;
2. That the estimated just compensation deposited into the registry
of the court may at times be more than or less than the Government's
appraisal;
3. That the estimated just compensation may not cover all of the
interests as set forth in the estate acquired or to be acquired;
4. That the owner(s) of the property may be unknown;
5. That there may be title difficulties;
6. That there may be legal problems affecting value which must be
resolved prior to the final estimate of value;
7. That service of process (notice of complaint in condemnation) has
not been completed with all the necessary parties who may have an
interest in the proceeding;
8. That there may be two or more appraisals which have great
disparities between the various estimates of fair market value;
9. That the proposed settlement may have an impact on the agency's
direct purchase program, or on your negotiations with other defendants;
Therefore, it is necessary for you to consider the problem areas
which I have outlined. How, then, should the attorney proceed to
prepare for settlement negotiations.
Previous Negotiating History
When the agency institutes a request for condemnation, generally, you
will be furnished with negotiation reports in the condemnation assembly.
It is essential that you have some background as to what offers were
made by representatives of the acquiring agency and what counteroffers
were made on behalf of the landowner. Invitations to offers suggested
by you that are considerably below the acquiring agency's negotiations
may create an impasse or inhibit further negotiations. At the same time
you may realize that a suggested settlement price in excess of the
landowner's initial demand might create problems in obtaining favorable
recommendation from the acquiring agency or from the Department. The
negotiation reports will give you some background as to the basis of the
landowner's demand, that is to say, allocations for timber, sand and
gravel, and other factors which may not have been considered by the
appraiser at the time of the appraisal.
Offers of Settlement Should Cover all Interests
In general, settlements should cover all interests in the tract
condemned. Separate settlements for partial interests can lead to
duplicate compensation being paid by the Government. Offers not
including all interests will be approved only in exceptional
circumstances and should be explained and fully justified.
If you have received an offer from the surface owner, it is incumbent
that you advise the Department what the fair market value is of the
surface interest and how much is allocated for the mineral interest.
Your transmittal letter should advise why you are unable to obtain a
settlement for all interests. Additional information should be
submitted outlining how you intend to dispose of the outstanding rights
of mineral owners or other parties who have failed or who were unable to
join in the proposed stipulation. The amount of the Government's
liability with respect to the outstanding interests should also be
stated and explained. Lastly, your recommendations should spell out why
a partial settlement would serve the Government's best interest.
Deposits
At the time that the declaration of taking is filed, the declaration
of taking sets forth the amount of the estimated just compensation.
This sum may be the same as the updated appraisals or it may be more or
less. The Government is not bound by its deposit. See Southern
Amusement Company v. United States, 265 F.2d 34 (C.A. 5, 1959).
If for some reason the Government's appraisal is not approved or is
not satisfactory to you and you have not vouched for or are not
satisfied with a particular appraisal witness, it is possible that a new
appraiser may assign a sum less than or, at other times, more than the
deposit. Therefore, it is incumbent for you to read and carefully
analyze all appraisal reports. The subject property should be inspected
by you and the comparable sales used by the appraiser should be
reviewed. You must determine whether the appraisal is based on sound
legal principles and appraisal practices. If it is determined that the
appraiser did not follow the correct legal principles or did not
correctly analyze the information gathered or, as could be the case, did
not make a complete and thorough investigation, then these matters must
be called to the attention of the appraiser. The appraiser should be
given every opportunity to reanalyze the report and, if required,
reappraise the property. If the appraiser is unwilling or unable to
correct the report and, if necessary, change the appraised value,
another appraiser should be employed. It is of the utmost importance
that, prior to the institution of negotiations, the Government appraisal
be sound. It is equally as important that the attorney be thoroughly
familiar with the defendant's property and the sales and general area
where the property is located.
Once the attorney is completely satisfied that the appraisal is
sound, what is next? The method of proceeding is, I believe, dictated
by the fact that the defendant has one important advantage. The amount
of the Government's appraisal is often known, while the Government
attorney does not even know if the defendant has an appraisal. The
various agencies for which land is condemned are, as a general rule,
required to offer the landowner the amount of their approved appraisal,
and in many instances the owner is told that the offer is in the amount
of the Government's highest approved appraisal. Another disadvantage is
that the amount of the Government's appraisal has been deposited into
the registry of the court, if a declaration of taking has been filed,
and since the owner will withdraw this amount without affecting his
rights to contest the value, it is a rare instance indeed where a
settlement can be negotiated at a figure in the amount of the
Government's appraisal, unless, of course, the initial appraisal was in
some manner defective or conditions between the date of original
negotiations and the filing of the action affected the value of the
property.
Disparities Between Two or More Appraisals
In the event that you have two or more appraisals that have large
disparities between the estimated fair market values or differences
between the highest and best use or problems relating to severance
damages, the appraisals should be submitted to the Department for
analyses prior to the commencement of your negotiations, together with
your observations.
The Department will attempt to furnish you with advice as to the
validity of the appraisals or noted discrepancies. At times, it will be
suggested that you attempt to obtain a new appraisal from the acquiring
agency.
Legal Problems
Your appraiser may have failed to recognize that there may not have
been unity of title, unity of possession or unity of interest when he
assigns severance damages to the remainder. Consequently, his estimate
of the fair market value may be legally erroneous. See Mattox v.
United States, 375 F.2d 461 (C.A. 4, 1967).
If an appraiser has utilized the "substitute facilities" concept in
estimating just compensation instead of using fair market value, it may
be necessary that you obtain a pretrial ruling from the court prior to
your negotiations based on what could be an erroneous appraisal
conclusion. See United States v. 564.54 Acres, Monroe and Pike
Counties, Pennsylvania, 506 F.2d 796 (C.A. 3, 1974).
History of Other Settlements or Awards by Trial
If you are prepared to commence negotiations, it should be important
to you to consider the effects of a particular settlement on your future
negotiations with other defendants. A settlement with one owner may be
utilized by another owner as a "floor" for consideration in negotiations
on a different tract. However, each case should be determined on its
own merits.
Therefore, it may be helpful to you if you coordinate with the local
representatives of the acquiring agency as to the agency's views prior
to the commencement of negotiations.
Trial Risks
In considering an offer of settlement, it is incumbent upon you to
ascertain the acceptance of the settlement as opposed to taking the risk
of trial and consider the history of awards of other cases tried in your
jurisdiction.
When you have considered all of these preliminary factors and have
received sufficient data to commence negotiations, it is important to
learn from the defendant or his counsel all the information that you
need to assist you in attempting to request an invitation of an offer
from the defendant. This information may be obtained from the following
sources:
1. Negotiation reports;
2. Interrogatories;
3. Depositions;
4. Information from the landowner as to the amounts estimated
by defendant's appraisal witness and the bases therefor.
Generally, the best method is to elicit from the defendant an offer.
It should be requested that an amount be submitted that would be
acceptable as settlement for the taking of the property. In requesting
an offer from the defendant, the request should be made for the absolute
minimum figure which would be acceptable -- one which, if not accepted,
would require a trial. This method of negotiation results in one
advantage to the Government. Although it is unlikely that the defendant
will in fact give you the minimum figure upon your initial request, you
have at least obtained information upon which you can reach a relatively
sound opinion as to whether or not further negotiations would be
productive. If the original offer is in an area considered by you to be
completely unreasonable, you can so advise the landowner and much time
may be saved by suggesting that negotiations in the range suggested
would appear fruitless. If however, the offer is within a range
considered by you as reasonable, further negotiations may be continued
by eliciting from the landowner the basis and reasons for the offer and
by submitting your position on the points brought up.
Title Problems
The attorney must obtain updated title evidence through the date of
recordation of the lis pendens or whatever notice is proper under local
law. See U.S. Attys. Manual Section 5-3.524. This is necessary in
order to determine whether you have properly joined and served the
notice of the complaint on all of the parties who may have an interest.
Service of process must be accomplished in accordance with Rules 4, 5,
and 71A, F.R.Civ.P.
Unless you are in a position to determine who holds valid title to
the property, your negotiations may inadvertently exclude other parties
in interest. If you believe that there is a title conflict, you should
file a motion for a hearing to determine title. See United States v.
Atomic Fuel, 383 F.2d 1 (C.A. 4, 1967). Failure to obtain the consent
of all the necessary parties, may prevent you from closing the case thus
subjecting you to trial.
For settlement policy and guidelines in condemnation cases, your
attention is directed to the United States Attorneys' Manual Section
5-3.600 et seq.
In processing offers of settlement that are beyond the authority of
the United States Attorney to approve, it is necessary that you furnish
the Department with the following information:
1. The amount of the offer;
2. The amount of the landowner's claim in the event of trial;
3. The amount of each of the Government's updated appraisals
and the name of the appraiser you will use at the time of trial;
4. The names of the defendant's witnesses and the amount of the
defendant's appraisals.
In addition, you will be required to obtain the recommendation for
settlement from the local representative of the acquiring agency and
that said recommendation should be forwarded to the regional and/or
departmental headquarters of the acquiring agency for coordination with
the Chief of the Land Acquisition Section of the Department. You should
also be able to advise whether or not there are legal issues that may
have to be resolved or unfavorable court rulings, the history of the
awards in the particular districts and the percentage increase above the
Government's high testimony.
In the event that there is sufficient time to process the Form OBD-43
(formerly USA-156) (Proposed Settlement of the Government's Liability),
you should allow at least a 2-week period for review from the time the
Department receives the form. In the event that the offer of settlement
exceeds $250,000.00, the offer of settlement must be reviewed by the
office of the Associate Attorney General. If all of the necessary
appraisals and information are received by the Department and there are
no unusual aspects and the settlement is favorable, you should receive a
notification from the Department within 1 month. If you are unable to
obtain a continuance of the trial for that period of time you should
advise the Department of the court's refusal to continue the case
pending consideration by the Associate Attorney General. In the event
that you receive telephonic authority to stipulate to a settlement which
is approved by the Department, it is still necessary for you to furnish
the Department with Form OBD-43, together with the appraisals and the
full details outlining your reasons for recommending acceptance so that
all records may show written authorization for the acceptance of the
settlement. It is necessary that you advise the landowner that you can
only recommend settlement and the Department has the ultimate
responsibility in authorizing settlement. By emphasizing this point,
you should leave no doubt in the mind of the party you are dealing with
as to what your authority is. The defendant should be advised only
whether or not you would be willing to recommend that a certain figure
be accepted. It is extremely important that in every instance you take
the position that any offer of settlement must be inclusive of interest.
This action will prevent many problems which otherwise might arise.
All discussions should be predicated on the basis of one figure which
includes all damages and all interests. If you do not accomplish this,
the landowner may claim the settlement figure approved by the Department
did not include interest, although it was understood by you to be so
inclusive.
As supplement to this article you should examine the following:
1. Land and Natural Resources Division Directive No. 7-76
(Redelegation of Authority to Initiate and Compromise Land and
Natural Resources Cases). 41 Fed.Reg. 53,660 (1976) (to amend 28
C.F.R. Part O, app. to Subpart Y);
2. A Form No. USA-155 at U.S. Attys. Manual Section 5-3.868;
3. A Form No. OBD-43 (formerly USA-156) at U.S. Attys. Manual
Section 5-3.867.
Parties and attorneys who have reached a settlement agreement feel
that they have received their day in court and achieved a fair and
reasonable result, because each of the parties has reached a desirable
objective. Remember that a settlement is a final disposition of a case.
There is no trial and no appeal. And finally, settlement results in
the saving of time and money.
In conclusion, I wish to state in terms of Shakespeare's King Henry
IV, "A peace is of the nature of a conquest. For them, both parties are
subdued and neither party loses."
LAND AND NATURAL RESOURCES DIVISION
By Philip M. Zeidner
1977 FEDERAL EMINENT DOMAIN SEMINAR: METHODS OF PROCESSING YOUR
CASELOAD
November 1977
Introduction
There is probably no area of Federal court practice which has a
greater direct impact on the public and is less understood than
condemnation. This is especially true for owners of relatively small
low value properties. In most instances they are involuntary
participants in a Federal court proceeding brought about through no
fault of their own. From the Government perspective, the acquisition of
small tracts of little value can require the same amount of paper work
and the same expenditure of time as very large tracts of significant
value. Efforts must be made to minimize the cost of acquisition
incurred by the United States and at the same time to secure for each
property owner a prompt resolution of the question of the value of his
land. Fortunately, these two goals are not mutually exclusive; they
are compatible. Through the years, methods have been developed to aid
in the prompt disposition of small tracts. Much of the work in this
area has been done by Philip M. Zeidner, Assistant Chief of the Land
Acquisition Section. Articles appearing in prior seminar texts and
elsewhere by Mr. Zeidner and others dealing with methods of processing
your caseload are included in the bibliography to this paper. I
continue in the hope that the following observations will augment, to
some degree, the material which is already available.
On October 11, 1974, the Big Cypress National Preserve was
authorized. The Preserve encompasses 570,000 acres of land (890 square
miles) in three south Florida counties and includes up to 60,000
separate ownerships (tracts). Congress has mandated the project be
"substantially complete" within 6 years of its authorization. The
overwhelming majority of the ownerships fall within the small tract
category. It has been estimated that up to 20,000 tracts will be
acquired by referral to the Department of Justice for condemnation. The
experience gained in this massive acquisition program should prove
extremely helpful in future endeavors of this type. Much of this paper
is based upon this experience.
Planning Is The Key
Long before the first tract is referred to the United States Attorney
for condemnation, the planning effort should begin. The Land
Acquisition Section, United States Attorney and agency staff who will
have direct responsibility for the condemnation aspect of the
acquisition program should be designated. Once these designations are
made, each individual should become familiar with the purpose of the
project, its size and legislative history. At this point, a meeting,
preferably at the project site, should be held to view the lands, to
discuss the recources available to the condemnation effort and to
identify the major legal issues, administrative and appraisal problems
which can be anticipated. Personnel requirements should be determined.
Thought should be given to the paper flow once the program becomes
operational. Early identification of problem areas should result in
early solutions. Out of this preliminary interface between attorney and
client, an effective liaison will develop. The resulting benefit in
increased efficiency will be well worth the initial time and resource
investment.
Having defined the legal issues, administrative and appraisal
problems, the process of resolving problems should be undertaken as a
coordinated effort between client and attorney. The underlying goal is
to create the capability of processing the cases as quickly and
efficiently as possible. Coordination in the developing of standardized
procedures and forms will greatly reduce the clerical requirement. It
is helpful in this area to isolate routine requirements for interagency
transmittals and to develop precarbonized forms to accomplish this
function. When ordering forms, care should be taken to assure that the
contents of the forms and number of copies comply with the needs of the
users. Agreement should be reached as to the timing of intermediate
title binders and up-dated appraisal reports. This will avoid needless
transmittals and at the same time will assure that this information will
be available when needed.
It has also proven helpful to establish a liaison with one person at
the agency field office (preferably the agency attorney responsible for
condemnation) to be responsible for all requests to and from the agency.
He is in an ideal position to garner the assistance requested and to
transmit the request to the United States Attorney's office.
In the final planning stage, the legal forms of a repetitive nature
should be drafted. Most, if not all, of the original filing documents
are the same for all cases. These documents can easily be produced in
preprinted carbonized forms.
The agency will have made at least preliminary efforts to employ a
title company for the preparation of title reports and closing of direct
purchase cases. Thought should be given to utilizing the title company
to handle distribution of awards in the condemnation cases, thereby
relieving much of the burden from both the United States Attorney's
office and the court. Form applications for the withdrawal of funds and
orders can be devised. In the application the landowner designates the
title company as his agent to receive the award on his behalf and to
make the disbursements to satisfy outstanding taxes and other liens.
This procedure has been received enthusiastically by landowners and by
the court.
If the project is expected to consume a great deal of the court's
time and resources, consideration should be given to discussing the
matter with the Chief Judge and the clerk of the court. The court will
obviously require time to prepare to process and to hear the cases.
Many of the administrative details can be worked out in advance. For
example, in the Southern District of Florida, the court has approved
single spaced pleadings, multiple judgment and order forms and case
style modifications. It should be remembered that the elimination of a
single sheet of paper or the reduction of a few minutes of processing
time per case, reduces costs and increases efficiency in direct
proportion to the number of cases filed.
Filing The Case
The effectiveness of your planning effort will become evident with
the receipt of the first assembly of cases. It is recommended very
strongly that the cases be reviewed and filed as quickly as possible.
This will help to avoid a backlog and will aid the continuity of contact
with the landowner defendant. After the case is filed and reported to
the agency and to the Department, negotiations for settlement should
begin with the landowner. This early contact can in some instances
prove extremely effective. Even if your contacts do not result in
settlement, they will give you an insight into what the landowners
believe the value of their property to be and why. The exposure to the
defendant's point of view will aid in evaluating your own case and in
preparing your trial strategy with respect to their case. A letter from
the Assistant United States Attorney to the landowner advising him of
the pendency of the litigation and soliciting a settlement can be a
helpful tool in initiating negotiations. Enclosing a stipulation as to
compensation and return envelope will enhance the prospect of a return.
In Big Cypress, discovery is commenced with the initial filing of the
case by having the marshal serve a standard set of interrogatories on
defendant landowners along with the notice of condemnation. This
procedure is followed for three reasons. First, it avoids the need to
handle a file a second time to serve interrogatories; second, it gives
the defendant landowner some insight into what will be required of him
in order to prepare for trial; and third, the possibility that
discovery may be overlooked is avoided. I believe it is incumbent upon
the landowner to realistically consider the merits of a settlement based
upon all of the factors which have a bearing upon that decision. It is
pointless for a landowner to be separated from his money because he
labored under a misconception of what his cost and responsibilities will
be in the event of trial. The answers to the interrogatories may also
disclose areas for consideration by the appraisers for the Government.
As the cases are reviewed and filed, similarities among them will
become apparent. For purposes of disposition, they will be grouped into
cases where the owner is unlocatable or for some other reason will not
appear at trial and, of course, the group will include cases where an
active defense can be anticipated. There will also be a group made up
of the undecideds.
Disposal
The easiest and oftentimes most neglected cases to dispose of are the
uncontested cases. This probably results from the fact that there is no
"squeaky wheel" to be greased. The Department's Small Tract Program
contains some excellent suggestions for disposal of these cases.
Experience in the Everglades National Park project and Big Cypress
National Preserve project has shown that the program works well.
Shortly after completing a survey of the cases in these projects it
was determined that a significant number of cases would be uncontested.
At this point, a meeting was held with the judge assigned the cases and
the procedure which follows was proposed and accepted by him. He agreed
to allot court time on a periodic basis to hold hearings on the
uncontested cases.
The program commences with the identification of all cases in which
service has been perfected either by personal service or by publication
and continuation of title evidence has been obtained. The cases are
grouped according to similarity of location and size. The client agency
is advised of the intention to take the cases to trial and their
concurrence is requested. This step is essential to assure that the
cases have not been settled in the interim by direct purchase.
Once cleared by the agency, the court is advised of cases that are
ready for trial and a date is set for the combined pretrial conference
and trial. The agency is then requested to update the appraisals to the
date of trial. (Note: if a Declaration of Taking has been filed, this
appraisal should be updated to the date of its filing.)
A notice of pretrial conference and trial is then mailed to all
parties in interest. Shortly thereafter, the Governments proposed
pretrial stipulation is forwarded to the defendants. In the United
States Attorney's office the cases set for pretrial-trial are segregated
(we use blue folders to identify them) and access to these cases is
restricted. This is done to assure that no additions are made to the
file without coming to the attention of the trial attorney.
Within a week or so of trial, the updated appraisal reports should be
completed and furnished the trial attorney. The appraisal documentation
used in the southern district consists of a schedule of all comparable
sales used for all of the cases and separate sheets for each tract
identifying the tract and disclosing the appraiser's final opinion of
the fair market value of tract on a per acre and overall basis. Segment
maps showing each of the tracts are also provided.
Since the properties will be similar as to size, location, access and
the like, they are reviewed for consistency. If differences are noted,
the appraiser should be able to explain them. At this point, a pretrial
interview with the appraiser is in order.
During the pretrial interview with the appraiser, any questions
concerning his report should be resolved and his court presentation
reviewed. The appraiser's courtroom presentation consists of the
following elements:
1) Qualifications;
2) Description of his approach to value;
3) Description of the area appraised;
4) Description of the common characteristics of all the tracts;
5) Introduction of the schedule of sales;
6) Introduction of individual appraisal sheets.
The appraiser is advised that even though there may be no
cross-examination except for possible questions from the judge, he
should be as prepared as if he were to testify in an adversary
proceeding.
The pretrial conference is usually an extremely brief affair. Some
landowners can be expected to appear so it is a good idea to bring along
some blank stipulations. The setting provides an excellent opportunity
to negotiate settlement. This is particularly true if agency
representatives with settlement authority are at the hearing. At the
hearing, the court will usually urge the defendants to seriously
consider settlement and advise them of the hazards of pro se litigation.
The court will usually give the defendants who do appear an opportunity
to hire an attorney and get appraisals. This is accomplished by
continuing the pretrial conference. Immediately after the pretrial
conference is adjourned, the judge convenes for the purpose of trying
the uncontested cases. At the outset, counsel must waive trial by jury
if it has been requested by the Government. The docket is then called
and the appraisal witness takes the stand and testifies and offers his
comparable sales exhibit and individual appraisal sheets.
Judgment is requested on the basis of the appraiser's opinion of fair
market value reflected in the exhibits. Utilizing this procedure,
judgments have been obtained in as many as 150 cases in less than 45
minutes of court time. Promptly after the court grants judgment, a
multiple judgment form is submitted. Its use will relieve the court of
having to sign more than one judgment to dispose of many cases. A
similar compound form can be used to pay the real estate taxes due on
the tracts.
In the cases in which opposition is anticipated, pretrial conferences
should be requested only after discovery has been completed. It is
suggested that as soon after you are prepared to try your case and can
answer the interrogatories which you propounded at the filing of the
case, appropriate motions compelling discovery should be filed. These
motions, aside from the gathering of information about the defendant's
case, will establish the attitude in the recipients that the Government
is serious about trying the law suit. This is an excellent time to
discuss the possibility of settlement.
As far as possible, cases scheduled for the pretrial conference
should be as similar as possible. This will avoid a great deal of
confusion and aid in getting uniform pretrial rulings. The court should
be urged to set an early trial date. This is so time to lose momentum.
You are ready for trial; the quicker you get there, the better.
Sufficient numbers of Assistant United States Attorneys and agency
representatives should be on hand to handle any settlement negotiations
precipitated by the pretrial conference.
Summary
There are six key points to remember in successfully processing the
caseload generated by a major land acquisition project.
1) Get involved with the project and its personnel as soon as
possible.
2) Realistically assess the legal and administrative problems
which may be anticipated and make personnel requests and
commitments sufficient to handle the tasks.
3) Plan and coordinate your efforts with the client agency and
the court.
4) Create standardized forms and procedures to handle as much
of the routine repetitive steps as possible.
5) Group cases in accordance with their similarities and
process them in bulk.
6) Once you have prepared for trial, use your best efforts to
get the cases tried as promptly as possible.
Finally, you are reminded that the Land Acquisition Section stands
ready and able to provide the benefit of its experience in assisting
with the successful completion of your assignment in land acquisition.
LAND AND NATURAL RESOURCES DIVISION
BIBLIOGRAPHY
CONDEMNATION SEMINAR II, 1963
Tab O -- The Small Tract Program, Edwin Langley
CONDEMNATION SEMINAR III, 1964
Tab H -- Office Organization and Disposition of Small Tracts
James J. Conrad
CONDEMNATION SEMINAR V, 1971
Tab D -- Administrative Aspects of Tract Disposition --
Disposition of Tracts, Part II, Disposition of Uncontested and/or
Small Tracts (p. 6)
CONDEMNATION SEMINAR VI, 1973
Tab N -- Small Tract Program -- Including Transmittal of Final
Assemblies -- Philip M. Zeidner
UNITED STATES ATTORNEYS' MANUAL -- 1977
Title 5: Land and Natural Resources Division
5-3.912 Ten Point Program for Settlement or Dismissal within
One Year, Jan. 11, 1977, Ch. 3, pp. 43-46
5-3.913 Program for Expeditious Processing of Small Tract
Acquisitions, Jan. 11, 1977, Ch. 3, pp. 46-54
INDEX
A. FILING THE CASE
1. Notice of Condemnation
2. Complaint in Condemnation
3. Lis Pendens
4. Certificate for Publication -- Foreign or Domestic
5. Interrogatories
6. Civil Action Designation Form
7. Marshal's Service Form
8. Notice by Publication
9. Letter transmitting notice to newspaper
10. Letter transmitting galley proof for publication
11. Letter to the Department of Interior forwarding initial
pleadings.
B. STIPULATION AS TO COMPENSATION
1. Stipulation as to Compensation
2. Application for Withdrawal of Funds
3. Letter transmitting Stipulation and Application to landowner
4. Letter to the Department of Interior seeking approval when
appraisal figure is increased
5. Compromise settlement -- U.S. Attorney's approval
6. Judgment
7. Letter to the National Park Service requesting funds
8. Letter to the landowner forwarding copy of Judgment
9. Clerk's Receipt depositing funds in the Registry
10. Order requesting the Clerk to disburse the funds
11. Letter to the National Park Service transmitting check
C. PRETRIAL CONFERENCE AND TRIAL
1. Notice for Pretrial Conference and Trial
2. Pretrial Stipulations
3. Letter forwarding Stipulation to all individuals noticed for
trial
4. Judgment -- Blanket judgment to cover uncontested cases
5. Clerk's Receipt depositing funds in the Registry
6. Letter to landowner notifying him that judgment was entered
and transmitting an Application for Withdrawal of Funds
D. MISCELLANEOUS PLEADINGS
1. Motion to Add Party Defendant and Order Granting Motion
2. Motion to Strike, Memorandum of Law and Order Granting
Motion
3. Disclaimer
4. Notice to Dismiss
5. Motion and Order to Correct Clerical Error
6. Motion and Order to Vacate Judgment
7. Motion for Redeposit of Funds, Memorandum in Support of
Motion and Order Granting Motion
8. Motion to Show Cause and Order Granting Motion
9. Motion and Order for Appointment of Attorney Ad Litem
By Arnold M. Weiner
1977 FEDERAL EMINENT DOMAIN SEMINAR: APPRAISALS AND APPRAISERS
November 1977
For the purpose of our talk here today, I will treat the topics
assigned in the decending order of their complexity. The first topic
will be Methods of Appraisal, followed by How to Examine an Appraisal
Report for a Rural-Residential Property, Selection of Appraisers, Fees,
and finally, Number of Appraisals Needed.
The three traditional methods or approaches to the appraisal of real
estate are the market data approach, the income approach and the cost
approach. All three approaches rely on data found in the market place
and, for this reason, all three approaches, while different, are in
effect, market approaches to value. It is important to recognize this
concept for it removes the mystery from the techniques employed by
appraisers in estimating the market value of a property. In a prior
appraisal seminar the three approaches to value were treated in a very
technical sense. You should have a copy of this seminar entitled,
Appraisal Study Course, in your libraries. Moreover, there are numerous
books which cover the subject in a simple, striaght forward manner.
Therefore, in this seminar, while I will go through the mechanics of the
three approaches, emphasis will be placed on their strengths and
weaknesses in order to prepare the trial attorney for a more
comprehensive direct and cross-examination of the expert witnesses.
The Market Approach
The market data approach is a process of comparing market data; this
is, prices paid for similar properties, to arrive at the market value of
the property to be appraised (hereinafter called "subject property").
Market data that is truly comparable, when carefully verified and
analyzed, is normally the best evidence of value because it represents
the actions and reactions of buyers and sellers in the competitive
market. As in the other two approaches to value, the market data
approach is based on the principle of substitution, which in this
approach implies that a prudent person will not pay more for a property
than it will cost to buy a comparable substitute property.
In processing the market data approach, the appraiser generally takes
the following six steps:
1. Finds similar or comparable properties for which pertinent
sales and/or rental data are available;
2. Verifies the prices as to terms, motivations, bona fide
nature, and time;
3. Reduces the sales prices to a unit price, that is, to a
price per acre, price per square foot, price per front foot, or
other appropriate measure;
4. Compares the important attributes of each of the comparable
sales with those of the subject property on the basis of time,
location, and physical characteristics;
5. Notes and considers all dissimilarities, both physical and
economic, in terms of their probable effect on the sale price,
and;
6. By careful observation and analysis, forms an opinion of the
relative value of the subject property, as compared with the
This outline sets the stage for a step-by-step analysis of the market
data approach to value. Item 1 offers no particular problem. However,
it is important to point out that the comparable sales gathered should
be as close to the subject property as possible. You will find many
times that the defendant's appraiser will go far afield in order to find
sales which will support a higher value. Proper appraisal procedure
dictates that you stay as near to the subject property as possible in
selecting comparable sales and those sales selected should have a good
basis for comparison.
Before proceeding with Item 2 which deals with the processing of the
data found in Item 1, it is necessary to back track a bit to define
market value. There are many types of value, for example, going concern
value, insurable value, value for estate purposes, etc. The value
concept we are concerned with here is market value which is defined as
the amount in cash, or on terms reasonably equivalent to cash, for which
in all probability the property would be sold by a knowledgeable owner
willing but not obligated to sell, to a knowledgeable purchaser who
desires but is not obligated to buy. Certain concepts are evident and
others are inherent in this definition of market value. The sale must
be for cash or cash equivalent, the principals in the transaction must
be knowledgeable, and neither party must be subject to undue compulsion,
duress or abnormal pressure to buy or to sell. To find and to verify
sales, meeting these conditions, is an arduous task -- on reflection one
might say an impossible task. Nevertheless, it is the task of the
appraiser to make the effort through interviews with the buyer, seller,
closing attorney, or title officer. If possible, more than one of those
listed should be interviewed. It is amazing the conflicting information
you get. Not too many sales are made for cash. So what is a cash
equivalent sale? One calling for a cash down payment of 15 or 20
percent and a note at the current interest rate secured by a first deed
of trust on the property, could be called a cash equivalent sale since
there would be little difficulty in marketing the note without discount.
On the other hand, a sale involving 2 or 3 percent cash and notes
secured by two or three deeds of trust on the property, certainly would
not qualify, and this sale price would normally exceed a sale made for
cash or cash equivalent. Likewise, a sale consummated under duress,
compulsion, or abnormal pressure would not meet the requirements of the
definition because the price negotiated could be abnormally high or low
depending on whom these pressures were applied.
A bona fide sale is one meeting the definition of market value.
Accordingly, a sale between relatives, to a condemning authority, of
partial interests, or a tax sale, would not qualify under the
definition.
Verification of the time of the sale would seem to be easiest to
accomplish; just look at the date of the deed. But not so fast. What
about the deed resulting from the exercising of a 3 year old option? Or
the deed resulting from the completion of a contract for deed entered
into 10 years ago? If those deeds were dated today, could you properly
say that the verified price reflected today's market? I think not.
Many sales have taken several years to negotiate; the effective date of
these sales is the date there was a meeting of the minds regarding the
price to be paid.
The data received in the verification process should be meticulously
recorded. In addition to verification of the items listed under Item 2,
the appraiser should take pictures of all the sales. They should be
dated and identified. Dimensions and descriptions of all improvements
should be recorded and their location spotted on a plat of the property.
A map should be prepared showing the location of the comparable sales
in relation to the subject property, and other important landmarks in
the area such as cities, towns, schools, or others that the situation
might require.
It can be seen that the verification of data is a detailed and time
consuming task. Properly done it is the strength of the market data
approach; sloppy preparation is the usual weakness.
Continuing on now to Item 3 of our outline, we have the the important
task of assigning a unit price to the comparable sales. Every type of
real property sells on the basis of some unit. It is just like potatoes
in a supermarket which sell for so much per pound, or corn which may
sell for so much an ear, or wine which sells for so much a quart. It is
imperative that the appraiser learns the basic unit by which each type
of real estate sells. Assigning the wrong basic unit to comparable
sales can distort the value of the subject property. Some examples of
the basic unit for various properties include price per bay, for
trucking terminals; price per hole, for golf courses; price per
funeral conducted, for funeral homes; price per gross square foot of
building, including land, for warehouses, and price per room or price
per square foot of net usable area for apartment buildings. This list
is not all inclusive and other type properties exist against which a
different unit would apply. The opportunity for appraisers to
manipulate figures to inflate the value of the subject property is
unimaginable in this area of the market data approach. For example, let
us say we have a comparable warehouse sale having a gross area of 20,000
square feet (outside dimensions) on an acre of land. Let us say the net
usable area (inside dimensions, less certain exclusions) is 18,000
square feet. It is a current sale and the sale price is $400,000.00 or
$20.00 per square foot of gross area, or $22.22 per square foot of net
usable area. The subject property is the same size and age. All things
being equal, the subject property should sell for the same price.
However, the wily appraiser may multiply $22.22 (net rentable area unit
price) times 20,000 (gross square foot area of subject) to indicate a
value for the subject of $444,400. The unit figures on each property
type listed above can be manipulated just as in this example. It
behooves the appraisal analyst, and the trial attorney to be on guard
against such tricks, and to recognize the correct unit for dividing the
sale price for each type of property encountered.
Items 4 and 5 of the outline involve critical steps in the market
data approach. Here the actual process of comparison is carried out and
recorded in a manner which can be analyzed and interpreted into an
indication of value of the subject property.
"Comparable" implies that two or more things have a basis for
comparison. Obviously the more nearly alike the comparables are to the
subject property, the easier it is to make and to record decisions as to
their relative value. In this regard, the sale of the subject property
itself, near the date of valuation, may be the best evidence of value.
If such a sale meets the requirements of the definition of market value
and is near the time, little or no adjustments would be required. As
time passes, adjusting the sale of the subject property to the current
date becomes more complicated, but it still may be the best evidence of
value. Such things as the improvements added after the sale, or a
change in the highest and best use, or a change in the general level of
real estate values, will have to be considered and reflected by
adjustments to the sale price.
Before proceeding further on the subject of making comparisons, it
would be well to discuss the various techniques of making adjustments.
First, the comparable sale is always adjusted to the subject property.
From this point, the comparable sales may be adjusted and compared in
several ways, such as addition or subtraction by percentages; use of
actual dollar amounts; or narration of the differences, merely
indicating why and to what extent each comparable is considered better
or poorer than the property being appraised. All these techniques are
good, the latter, perhaps, being the best for trial purposes since no
particular figure would have to be supported and justified. Most
adjustments can be supported in the market by a competent appraiser, and
the trial attorney should accept no less.
Getting back now to actual adjustments to be made, we find that
"time" is one of the most important elements. Time here refers to the
span between the date of the sale and the date of the appraisal. In a
rapidly changing real estate market, either up or down, it is obvious
why sales consummated near the date of the appraisal more nearly reflect
market value. If it becomes necessary to adjust a sale for time, say
one that took place in 1974, the best way to do it is to find sales and
resales of the same property in this time frame. For example, say a
property in the neighborhood sold in June 1974 for $20,000.00, and again
in June 1977 for $30,000.00. In the absence of any improvements to the
property or change in highest and best use, you can infer that property
in the area was increasing at the average rate of 16.67 percent per
annum ($30,000 divided by $20,000). If at all possible this percentage
increase should be checked by more than one sale/resale. This
percentage then becomes the basis for adjusting the comparable sales for
time. In a falling market you attorneys will be confronted with the
spectacle of appraisers for the defendant using the oldest possible
sales to support a current market.
Adjustment for location is critical to arriving at market value.
Keep in mind that similar properties might sell for more in one
neighborhood than in another. Also keep in mind that identical zoning
does not necessarily mean identical value. Commercial land with C-1
zoning in one area of a city may bring $10.00 a square foot while in a
depressed or decaying area, land with the same zoning may command only
$2.00 a square foot. If it becomes necessary to go outside the
immediate area for comparable sales, it behooves the appraiser to try to
determine the general level of prices in both areas. He then can arrive
at a percentage factor to adjust the comparable sale for location.
Adjustments for physical characteristics can be broken down into two
categories: 1. Site and land improvements and 2. Building improvements.
Similar properties may differ regarding site qualities; that is, in
frontage, size, landscaping, terrain, shape, and load bearing capacity.
For example, the subject property might have a 50-foot lot whereas a
comparable sale has a 60-foot lot. Likewise, properties differ as to
site improvements such as plantings, lawn, drives, fences, parking area,
barbecues, and swimming pools, to name a few. Adjustments follow one of
the same techniques indicated above. It is not possible to give all the
details of these techniques here, but a few points will be made to put
you on guard against the typical chicanery which may be practiced in
making these adjustments. Remember that cost does not necessarily equal
value. A rich man may pay full price (cost) for a swimming pool in his
back yard; a low-income family barely able to afford their own home may
not pay a dime for the pool. A second bathroom in a home in a
neighborhood of one bathroom homes may not command a price sufficient to
cover the cost of installation of the second bath. Features such as
this are called over-improvements for the area. Likewise, it does not
follow that if a half acre lot sells for $10,000.00 a full acre lot will
sell for $20,000.00. People of various economic levels seek out the
areas they can afford. If a half acre lot will meet their needs, they
will pay very little more for the additional half acre. Likewise, if
people of a higher economic level require a full acre to meet their
needs and desires, they will not enter into a lower economic level
neighborhood to satisfy their needs and desires.
A final word on the adjustments of comparable sales has to do with
the technique of bracketing. The appraiser attempts to find comparable
sales, some of which having a higher value, and some having a lower
value, than the subject property. In this manner, he effectively puts a
lid on upper and lower limits of value of the subject property, and
avoids the predicament of having to adust all sales downward or all
sales upward which is not a good trial position to be in.
Under Item 6 of our outline, the appraiser reviews all the data
gathered for accuracy and the soundness of adjustments made to the
comparable sales. Typically, the comparable sales will not all indicate
the same dollar value of the subject property. The final conclusion of
value reached by the appraiser is an amalgamation of all the data
collected, and his best judgment gained by experience and study of the
appraisal process.
The Income Approach
The income approach is the appraisal technique which converts
anticipated benefits (dollar income or amenities) to be derived from the
ownership of property into an estimate of value. The income approach is
widely applied in appraising income-producing properties. Anticipated
future income and/or reversions are discounted to a present worth figure
through the capitalization process. /1/
In this part of our discussion we will again attempt to show the
strengths and weaknesses of the approach so that you as a trial attorney
will be able to present your case using the best available evidence, and
also to enable you to attack and expose the inaccuracies of the
opposition's case.
For the purpose of this discussion, we will present a sample income
approach summary, and then give the strenths and weaknesses of each
item. Keep in mind that there are numerous variations for presenting an
income approach, but all forms must include income, expenses, and
capitalization rate.
Sample Operating Statement
Income
Gross annual potential income $ 24,960
Vacancy and loss, 5% 1,250
Effective gross income $ 23,710
Expenses
Administration, $23,710 x 5% $ 1,185
Heat, $1,493, adjust to 1,500
Electric, $246, adjust to 250
Water 160
Janitor, actual 2,700
Supplies and miscellaneous 400
Decorating, 3-year average 1,800
Repairs and maintenance,
3-year average 1,350
Taxes, most recent year 3,300
Insurance, 3-year average 265
Total expenses $ 12,910
Net annual income $ 10,800
Capitalized at overall capitalization
rate, assumed to be 10%,
Indicated property value = $10,800
divided by .10 $108,000
Income
Estimating the gross annual potential income is critical, and an
error at this point may be compounded in the process of valuation. /2/
For example, if the effective gross income in the sample above is
increased only 10 percent to $26,081, and the expenses remain unchanged
at $12,910, the net annual income increases from $10,800 to $13,171, or
an increase of 22 percent, not only in net income but also in indicated
value.
In the analysis of gross income, the appraiser is concerned with its
quantity, quality, and durability. He is seeking an estimate of
economic rent. Although the economic rent may be reflected by the
actual gross income received, the appraiser may adjust the income up or
down depending on other comparable rentals in the market. The trial
attorney will have to decide if the market evidence is reasonable and
supportive of the appraiser's opinion. The opposition's appraiser may
attempt to use income that would be generated by a higher and better use
than the present use. If this happens, it will be necessary to show the
forecasted gross income is speculative and the projected highest and
best use is remote and unlikely to occur in the foreseeable future. To
further support the gross income estimate, income statements from the
owner for a 3 to 5 year period are helpful and desirable.
If the opposition's appraiser includes income based on excess rent or
percentage rent, the attorney should familiarize himself with the
correct procedure in processing these kinds of rental to prevent the
appraiser from using too high a gross rental. Again, the facts in the
market will determine whether and to what extent excess rents or
percentage rents are reasonable. This reasonableness also applies to
the various kinds of leases, such as long and short term, and units of
rental measurement.
In most areas office buildings are rented on the basis of net
rentable area (inside measurements less exclusions). The attorney
should be on guard that the appraiser does not substitute gross rentable
area (outside measurements) for the subject and use comparables based on
net rentable area.
Few buildings remain fully occupied during their useful life. Thus
it is necessary to adjust the gross potential income downward to reflect
vacancy and rent loss. This item may not be large, on the average, but
it is necessary to estimate a percentage that considers possibly low
vacancies during good times and high vacancies during depressions and
when the building is old, less functional, and less desirable as a
rental property. In the absence of reliable data, a reasonable
explanation and estimate by the appraiser is acceptable. Some items to
consider are the tenant quality and ability to pay, lease terms, and
escape clauses. IBM is a high quality tenant whereas a new, unproven
company may present a greater risk to continuous tenancy and regular
rental payments. History of the vacancy experience of the subject
property should be obtained from the owner, if possible.
Effective gross income is the amount that remains after deducting a
reserve for vacancy and rent loss from gross potential income or
economic rent.
Expenses
Although expenses vary from year to year, it is necessary to
stabilize the probable future annual expenses in order to process the
income approach. The appraiser projects annual expenses, similar to
projecting gross income, by observable trends. Actual expenses should
be obtained from the owner, if possible. Statements for 3 to 5 years
would be desirable to facilitate the expense projection.
Expenses listed in the sample operating statement are not all
inclusive, nor will all the items be appropriate for all classes of
properties. Additionally, leases may include or exclude various
expenses.
In the time allotted, we will not attempt an explanation of all the
expense items, but we want to emphasize that each expense item must be
related to the subject property, as apart from a purely business related
expense, and the expense item must be supportable either with hard data
or a reasonable explanation. The trial attorney, with the appraiser's
aid, must be on guard that the opposition's witness does not omit any
appropriate expense items and thus inflate the value.
Although income and expenses are estimated separately, a definite
relationship exists between them. The amount of income for given types
of properties varies directly with the amount and quality of services,
furnishings, and facilities offered the tenants. Increased revenue from
superior conveniences and amenities provided occupants is in turn based
on higher operating outlays to supply these services. Typically,
however, while gross income rises and falls in proportion to percent
occupancy, some operating expenses are relatively inflexible. Property
taxes and insurance payments do not diminish, even with fluctuations in
occupancy. Heating, cooling and janitorial services, too, remain
relatively constant. Except for managerial service cost -- which is
considered a percentage of the effective gross income -- other expense
charges are relatively inflexible. /3/
Various types of properties typically fall into certain
income-expense ratios. Following are several examples:
Residential, single-family structures 35-40%
Apartment buildings -- walkup 40-50%
Apartment buildings -- automatic
elevator 55-65%
Office buildings 40-50%
Store and loft buildings 50-60% /4/
The list above is not all inclusive and will vary between areas.
Also, with the rapidly increasing cost of utilities, adjustments will be
required. But, the important thing for the trial attorney to remember
is that within the neighborhood or market data sampling areas, a certain
relationship exists between income and expenses. It is the duty of the
appraiser to demonstrate that his data is sound and that the expense
ratio arrived at is proper for the particular type of property
appraised.
Capitalization Rate
By definition, the capitalization rate is: "The sum of a Discount
Rate and a Capital Recapture Rate. It is applied to any income stream
with a finite term over which the invested principal is to be returned
to the investor or lender." /5/
Selection of the proper capitalization rate is extremely important in
the processing of the income approach. To evaluate real property
through the income approach, the following formula is used:
Net Income divided by Overall Rate = Property Value
Now there will be variations where other methods will be employed,
such as gross income being divided by a gross capitalization rate or its
reciprocal, the gross rental multiplier, but the three basic ingredients
in the formula are always involved -- income, rate and value.
To demonstrate the significance of the capitalization rate, we have
constructed a table showing a property that produces $10,000 per year
net income and an evaluation of the property using several different
rates of capitalization.
Net Income Cap Rate Indicated Value
$10,000 .06 $ 166,667
$10,000 .08 125,000
$10,000 .10 100,000
$10,000 .12 83,333
$10,000 .16 62,500
Note the geometric impact on value. Just two percentage points
separate the 6 percent rate from the 8 percent rate, yet the 6 percent
rate indicates a 33 percent higher value than the 8 percent rate.
Needless to say, the attorney must be convinced that the capitalization
rate used by the appraiser is as accurate as possible, considering the
limitations of the market data which may be available.
As shown in the "Sample Operating Statement," 10 percent is the
direct ratio between annual net income and indicated property value.
The rate used in our sample statement is also referred to as the
"Overall Rate" and is considered to be most reliable and easy to use.
Depending on the technique employed in the capitalization process, an
appraiser may use parts or variations of the capitalization rate such as
split rate, recapture rate, and interest rate.
The capitalization rate used in the sample statement and any other
evaluation of improved properties, includes two items:
1. A return on invested capital or interest rate; and
2. A return of the wasting capital asset -- the improvements.
This latter part is called the recapture rate.
In order to select the proper capitalization rate, the appraiser must
obtain data from the market that is appropriate to the subject property.
Four methods for selection of a capitalization rate are as follows:
1. Rate Selection by Direct Comparison. /6/ This method involves
finding sales of comparable properties, determining net income, and
estimating recapture. The overall capitalization rate is derived by
dividing the sale price into the net income. Serious errors result if
properties are selected where the ratio of land to improvement values
differ from the subject property because land is entitled to return on
investment and improvements are entitled to return on and of investment.
Example:
Subject Property -- assume land is 30 percent and improvements
are 70 percent of total value.
Sale Property -- land is 80 percent and improvements are 20
percent of total value.
If we assume that appropriate interest rate for both properties is
say 8 percent and both the subject and the sale improvements are
similarly depreciated and have 25 years remaining economic life, then to
recapture the remaining value of the improvements in 25 years, a rate of
.04 is required (100 percent of value divided by 25 years equals .04).
Subject Sale
Land .30 x .08 = .024 .80 x .08 = .640
Improvements .70 x .12 = .084 .20 x .12 = .024
Capitalization Rate .108 .664
10.8 percent versus 6.64 percent
Divergence in rates is increased if, for example, the subject has
depreciated more than the sale and has a remaining economic life of say
20 years. This would increase the recapture rate to .05, plus interest
rate of .08 or .13 instead of .12, which gives the following:
Land .30 x .08 = .024
Improvements .70 x .13 = .091
.115
2. Rate Selection by Comparison of Quality Attributes. /7/ In this
method the appraiser analyzes the subject and sales for the following
items:
a. Reliability of the gross income prediction.
b. Likelihood of competitive construction.
c. Reliability of expense prediction.
d. Expense -- income ratio.
e. Burden of management.
f. Marketability of the property.
g. Stability of value.
The sale properties are rated on a percentage basis relative to their
quality in the above items. The actual interest rate for each sale is
multiplied by the rating assigned. The average (approximate) interest
rate for the sales indicates the ideal. Then the subject is rated
according to its quality attributes, and the percentage estimated is
divided into the ideal interest rate to give the indicated interest rate
for the subject.
This is a highly analytical method that requires numerous judgments.
It is seldom used in the pure form. To attack this method, the trial
attorney would have to know the sales data quite well, their attributes,
sale price and net income after recapture. The attorney should be on
guard that the appraiser provides for recapture either as an expense
item or as an addition to the interest rate.
3. Rate Selection by Band of Investment. Interest rates are
frequently derived by this method, which consists of weighing the first
mortgage rate and the equity rate as shown in the following example:
Portion Interest
of Value Rate Product
First mortgage .80 x .085 .068
Equity .20 x .11 .022
Composite interest rate 1.00 .090
or 9 percent
The first mortgage rate can be determined easily, but the equity rate
is difficult to obtain in the market. Appraisal witnesses using the
"Bank of Investment" or the more comples "Mortgage Equity Method of
Capitalization," still have the responsibility of obtaining their data
from the market whether it be from simple extraction of sales and leases
or through discussions with informed persons.
Again, the attorney should watch for the omission of provisions to
recapture the remaining value of the improvements.
4. Rate Selection from Gross Rent Multiplier. In this method, gross
annual income rather than net annual income is the key, because annual
expenses are not available to the appraiser. Properly executed, the
gross rent multiplier requires careful research of the sales data to
determine gross annual income, operating expense ratio as a percentage
of gross income, and judgments involving depreciation of each sales
improvements and land to building ratios.
Examples of how these four methods of deriving capitalization and
interest rates are processed are shown on Pages 347 through 369 of
appraisal textbook. /8/
The trial attorney should be suspicious of any appraisal where the
capitalization rate is derived from data not obtained in the market.
The best data will be obtained from sales having close comparability to
the subject, but acceptable data can be obtained from appropriate
mortgage rates, other property sales, informed investors and other
sources. Keep in mind: the income approach is in fact a market
approach in that nearly all the items contained are extracted from the
market place.
The Cost Approach
The Cost Approach is a method in which the value of a property is
derived by estimating the replacement or reproduction cost of the
improvements, deducting therefrom the estimated depreciation, and then
adding the value of the land obtained from the market approach. This
approach is based upon the assumption that the reproduction cost new
normally sets the upper limit of building value provided that the
improvement represents the highest and best use of the land. /9/
More simply, the value indicator developed in the Cost Approach is
built in four steps as follows:
a. An estimate of the reproduction or replacement cost of the subject
improvements.
b. An estimate of depreciation from all causes, i.e., physical
deterioration, functional obsolescence and economic obsolescence.
c. An estimate of the land value as if unimproved and ready for
development at its highest and best use.
d. Summation of a, b, and c above.
The composition of the Cost Approach, the process of developing this
approach, and its place or importance in appraisal for use in Federal
eminent domain proceedings are treated in Tabs F, G, J, and R of the
Department's Appraisal Course Study Manual which you have in your
library. Our purpose, as before, is to point out the weaknesses in the
approach as an indicator of market value and the areas in which it is
frequently subject to incorrect treatment or processing.
The first area of consideration is the estimate of Reproduction Cost
New or Replacement Cost New. The former envisions duplication of the
existing improvement with a physically identical structure using the
same or the most closely similar available materials. The latter
assumes replacement of the subject improvement with a structure designed
to serve the same purpose or function, that is, having the same utility.
There are several methods of developing improvement cost new under
either of the above assumptions. Unfortunately, the all too frequently
used method is the "common knowledge," "everybody knows" or "from my
experience" approach. Whenever a square foot or cubic foot or lump sum
cost figure appears in the Cost Approach citing the above basis and
without reference to other support, it should be suspect. We might add
here that in all facets of the Cost Approach, as well as the Market and
Income Approaches, support is critical and the involved attorney should
assure himself of its existence and adquacy whether it is in the body of
the report or only in the appraiser's notes.
The acceptable methods include estimates of local contractors who
have adequately inspected the subject and/or have its plans and
specifications. They also include use of any of the several reputable
building cost services such as Marshall Valuation Service, Boeckh
General Estimate Manual, and the Dodge Building Cost Calculator. These
services publish cost data, providing average costs of construction for
a wide range of building types. The cost estimates are further broken
down to reflect different levels in quality of construction within given
building types. The costs are generally national averages and
adjustment factors are provided for regional and local cost differences
and for time elapsed since the base cost determination. They include
elapsed since the base cost determination. They include provision for
adjustment for size and differences in unit costs. In addition,
correction factors are provided for elements that may be added or left
out of the "typical" model.
A third method is comparison of the subject to the final total
contract cost of a closely similar structure that has been recently
completed. This is data found in the market place.
In all of the above methods, the validity of the estimate is
dependent on the appraiser having an accurate and thorough knowledge of
construction of the subject and his care and accuracy in matching costs
from one of the above methods to his subject.
In the general run of appraisals, particularly if a value estimate is
being forced, the "from my experience" method or a building cost service
manual is used. In either case, even if the "from my experience" figure
appears to be in the ballpark, the unit cost used will be that of the
average or typical building unmodified for the peculiarities or
specifics of the subject.
Often a seemingly minor difference in construction material or
quality may make a significant difference in the unit cost of a
building. Problems in site adaptation on the subject property may cause
its cost to vary materially from the indices referred to above.
Foundation costs may also vary widely.
The process of developing an accurate cost of reproduction or
replacement requires detailed knowledge of the subject and of the
composition of the data base used. It is very difficult for a layman to
recognize when such an estimate has been shaded up or down. Most
commonly, an estimate is pushed up by allowing credit for a slightly
better quality of construction that it has in relation to the typical,
or by failure to recognize shortcomings in the subject quality.
To properly treat Cost Approach testimony, the attorney should assure
himself that:
a. His appraiser is knowledgeable and experienced in dealing
with properties of the subject type;
b. He is knowledgeable of construction costs, has relied on a
sound data base and is consistent in his application of the data
to the subject; and
c. His appraiser has considered all of plus and minus factors
of the subject as compared to the data base.
In the case of more complex structures where the Cost Approach may be
used, services of a professional Cost Estimator or Architect Engineer
working in coordination with the appraiser might be advisable.
The inherent weakness here is that even if the existing type of
structure still represents the general use to which the market would
likely put the site, it would likely not reproduce the structure. If it
replaced the structure as to function, the Cost Appraoch would call for
replacement cost new of the same usable space while the market might
replace with a considerably greater or lesser usable space. Thus, in
both cases, the appraiser would be starting off with an unrealistic
premise. In the latter case, since it is not reproducing a structure
exactly, the market's replacement estimate is subject to considerable
variation in opinion or judgment.
To be certain that an estimated cost new of the improvement is sound,
the following information is necessary:
a. Is the appraiser using reproduction or replacement cost new?
b. If the former, has he actually provided for reproduction of
a duplicate structure?
c. If the latter, has he replaced with the same functional
utility?
d. Has he used a consistent measurement base, i.e., compared
cost/gross square foot to subject's gross square foot?
e. Does he recognize and make adequate allowances for
differences in quality size and installed equipment between
subject and base?
The second step in the Cost Approach is the estimate of depreciation.
There are several ways of setting out or building a depreciation
estimate. The estimate may be given as a lump sum. This may be
developed from "observed depreciation," an age/life estimate, or a
comparison of new construction cost of a similar structure with sale
prices of properties similar to the subject in age, function and
condition, where land contribution can be extracted from the sale price.
The estimate may set out separately, physical depreciation, curable
and incurable; functional obsolescence, curable and incurable; and
economic obsolescence.
A third method involves assigning depreciation estimates to various
components of the structure, i.e., bone structure, roof, wiring,
plumbing, elevators, etc., all of which have differing life
expectancies.
From the standpoint of weakness, the depreciation estimate is the
most critical step in the Cost Approach since it is the most difficult
to support. It involves too many areas calling for judgment, or where
judgment, good or poor, is used to avoid the difficulty of finding
support.
Insofar as physical depreciation is concerned, some curable items
such as roof repair, painting, and calking, easily can be estimated with
accuracy. The same is true for certain elements of curable functional
inadequacy. The measure is usually the cost to cure.
The line between what is curable and what is incurable is an economic
determination as much as it is a question of physical possibility. Thus
the appraiser's judgment is a substantial element here.
The most common practice in all but the more complicated properties
is for the appraiser to give a lump sum estimate or a percentage of
depreciation which is based on "observed condition" and may or may not
include the phrase "from all causes." The degree of accuracy in the
estimate is only as good as the care taken in the observation. The
appraiser using this method often overlooks functional and economic
factors.
To assure validity of an "observed" depreciation estimate, the
appraiser should be able to detail what he "observed" in the subject and
what he "observed" in the comparable properties used as his yardstick to
determine the dollar extent of the depreciation. He should be able to
show consideration of all of the elements of depreciation.
In the ideal situation, a lump sum estimate could be developed by
comparison with recent sales of improved properties closely similar to
the subject. The extent of depreciation would be reflected in the
difference between the replacement cost new of the improvements, plus
land and the sales prices of the comparable properties.
Where there is a lack of nearby, very similar, recently sold
buildings of about the same age as the subject, the estimates of the
noncurable types of depreciation and obsolescence are more difficult to
measure. The fact remains, however, that a guess, or unsupported
estimate has little validity and is more often wrong than right. The
appraiser must go further afield into sales of properties of similar use
but perhaps differing physical characteristics, or in different
neighborhoods to extract by analysis the penalty the market imposes for
age, inutility and location or neighborhood disadvantages.
He may find yardsticks in the market indicating overall detractions
from value or, if necessary, indications of market penalty for
individual elements from analysis of separate sales.
The appraiser may use the age/life method in which he estimates an
"effective" age for the structure that may be less, equal to or greater
than its actual chronological age. He then estimates a remaining
economic life for the improvement and depreciates the property by the
percentage the effective age is to the total of effective age, plus
remaining life.
In this method again, its validity depends upon the accuracy of the
estimates and the accuracy depends upon the support provided. Here also
the appraiser, in estimating age and life, too frequently ignores or
overlooks functional and economic obsolescence.
In attempting to assess the validity of, or error in a depreciation
estimate, the crux of the matter is in how it was developed. To show
validity the appraiser must first show a thorough inspection of the
subject made with an eye for all elements of depreciation/obsolescence.
He must then support, to name a few, the cost of curing curable items
such as roof replacement, painting, and heating/cooling system
deficiencies. The more costly items, he should be able to demonstrate
that the cost to cure is economic. For the noncurable elements, the
appraiser must be able to produce support from the market for the extent
to which he penalizes the subject.
Depreciation may be measured by use of comparable sales data or it
may be measured by capitalization of the loss in rent arising from the
depreciation. For instance, the difference in rents from two office
buildings, identical except that one has elevator and the other is
walk-up, when capitalized at the appropriate rate, would give the loss
in value due to functional obsolescence.
Since the support for depreciation comes from analysis of sales or
rentals of similar properties, it should be apparent that without such
data, the appraiser has merely guessed at his depreciation estimate.
The third step in the Cost Approach is the estimate of land value.
This estimate is made as if the land were vacant and ready for
development to its highest and best use, which may or may not be the
existing use. Land value for the Cost Approach is obtained by
comparison with recent sales of unimproved similar lands. The points to
watch here are set out in the Market Approach, i.e., that the supportive
data is timely, is similar in size, shape, topography, available
utilities and services, and location. Where differences exist between
sales and the subject, the adjustments made should be supported from
market data.
The final step in the Cost Approach is simply the addition of the
land value to the estimated depreciated cost of the improvements.
The resultant value indicator, assuming proper processing of the cost
approach steps, will normally reflect the upper limit of value. This is
the result of the land being valued as if free and ready for optimum
development when, in fact, it is not. Except in the case of a
relatively new building, an existing building rarely represents the
highest and best use of a site. This limitation will remain on the
property until demolition of the structure is economically justified.
The apparent inconsistency of valuing land whose use is restricted as
though it were unrestricted, yields a high land value. This value is
carried into the final conclusion in the summation process and may
reflect an inflated value.
The Cost Approach in the final analysis is dependent on market place
almost entirely. The cost new, whether for replacement or reproduction
is obtained from data on current new construction similar to the subject
physically or in size and function. Thus the cost new is derived from
analysis of data from the current market in new construction.
Aside from relatively minor costs to cure, the only solid method of
measuring depreciation/obsolescences is through comparison of new
functionally sound construction versus improvement contribution drawn
from sales of properties similar to the subject as it exists.
The land itself is valued from the market.
In summary, the validity of a Cost Approach estimate of value should
first be tested as to whether its component parts are based on simple
observation and guess or upon supporting material. If the former, it
should be rejected or countered with a supported estimate.
If the estimate is based on data from the market and/or cost
services, the data should be analyzed by a knowledgeable person as to
its appropriateness or comparability to the subject and the
reasonability of its relation to the subject. With this analysis in
hand, the involved attorney can prepare for meaningful cross-examination
or rebuttal testimony.
How to Examine an Appraisal Report for a Rural Residential Property
In order to discuss this subject it will be necessary to establish an
appraisal problem around which to work. Lets assume we are buying the
fee interest in a 200-acre farm 3 miles beyond the city limits of a
large metropolitan city. It is presently used as a farm but city
population pressures have pushed up land prices generally beyond the
economic level for such use. The land is gently rolling and the entire
acreage is under cultivation. It has 4,000 feet of frontage on a paved
road. A good set of buildings adorn the farm, including three new silos
and a large dairy barn. It has been in the family for many years.
Current zoning is R-20A permitting subdivision into 20-acre parcels with
septic systems and wells. Developers are required to put in paved
streets meeting county standards. Electricity and telephones are
available at the site.
Der T. Windshield has appraised the property as of the current date
and he estimates the market value to be $200 per acre, or $240,000.
This is one of the more difficult appraisal assignments involving the
market approach to value. It is also one where we seem to get the
poorest appraisals. The details surrounding the subject property and
comparable sales are normally lacking and a thorough analysis of the
social, economic, political, and physical factors affecting the area is
invariably poor.
To hurry our review along, we will assume the appraiser has properly
identified the property as to ownership, size, legal description, and
tract number; that the effective date of the appraisal is proper; that
he has the proper definition of market value, and he has correctly
defined the estate to be taken. We will also assume that the farm
improvements have been carefully inspected, measured and their square
foot area and condition are properly recorded.
Since by definition we have indicated that property values in the
immediate area have gone beyond the point of economic utilization as
farms, it is essential that the appraiser delve deeply into the social
and economic aspects of the metropolitan area, the population, trends,
and the direction of growth of the city in order to arrive at a
supported opinion of the highest and best use of the subject property.
Highway patterns, interchanges, transportation systems, and natural
barriers to access are a part of the study. If there is growth toward
the subject, is it residential or industrial or commercial? If one or
all of the above are moving toward the subject, what is the average land
absorbtion rate of each of them for the past 3 years? What are the
average annual housing starts, if residential seems to predominate?
Growth normally follows the main traffic artery leading into the city.
But the probable route of main sewer and water trunk lines if they are
to be extended into the suburbs is also an important consideration. If
at all possible, sanitation engineers avoid sewer pumping stations.
Thus they follow the natural drainage contours. Properties located in
the drainage area normally have the edge when it comes to development
for they may cost less to develop.
After setting forth all the physical, economic, social, and
governmental forces acting and reacting on property values in the
metropolitan area, the appraiser should turn his attention to the
neighborhood of the subject property. What are the neighbors doing with
their property? Is there any subdivision of farms into 20-acre tracts
(permitted under existing zoning)? If none appear to be going that
route it probably means that developers cannot make a reasonable profit
after meeting the zoning requirements of R-20A zoning. It is likely
that the cost of putting in the paved roads prices the lots above the
market. Thus, the developers are waiting for a change in zoning to a
more intensive use, or for the price level to change permitting them to
absorb the development costs and still make a profit.
After a final check with zoning officials and the metropolitan
sanitary commission, the appraiser finds they are going to hold firm to
the R-20A zoning and any change will coincide with an extension of a
48-inch sewer trunk line into the area probably in 1982, or 5 years
hence.
After an analysis of all the data collected, the appraiser concludes
that the highest and best use of the subject property is for continued
farming during the interim period of about 5 years, with possible
subdivision at the end of that period.
The appraiser is now ready to collect comparable sales. He should
collect all the sales in the area surrounding the subject property, both
large and small which have taken place within a reasonable period of
time. They should all be properly verified as to buyer and seller,
motivations, time, selling price and terms. Improvements should be
carefully inventoried and inspected. Type and length of road frontage
should be accurately recorded. Accurate distances of the sales from the
main highways and interchanges as well as from the probable extension of
the sewer trunk line should be determined. Soil types, terrain, and
soil productivity of all farm size sales should be observed and
recorded. Pictures of all comparable sales should be taken and the time
and identity of photography should be noted.
In making their initial collection of data, it is important that the
appraiser be on the lookout for speculators in the area making their own
market and driving the prices up. This shows up when you find grantee,
Joe Smith, principal in the XYZ Company, selling the same property to
Joe Smith, principal in the S & L Corporation, 6 months later. Careful
attention must be directed to when the sales actually took place. The
date on the deed is not necessarily the date the meeting of the minds
took place.
The appraiser is now in a position to select and to compare with the
subject property those sales which are most comparable in terms of time,
size, location, topography, soil productivity, and improvements. The
unit of comparison is price per acre, including improvements.
Care should be given to selecting sales between the subject property
and the city limits, as well as sales just beyond the subject property.
Remember that land values decrease as the distance increases from the
heart of the city. By doing as indicated, the appraiser has an
opportunity to bracket the subject property with a range in value and to
set the upper limit. This procedure also avoids the untenable position
of having to adjust all the sales downward (if only sales are selected
which are between subject and city limits), and conversely, adjusting
all sales upward if you select all sales beyond the subject property.
And further, it avoids that limbo area of "how much down," or "how much
up".
Finally, a word about the improvements on the subject property. If
the appraiser had not been able to find sales having similar
improvements, he would have had to resort to other means to value them.
Most appraisers would have gone to the cost approach. This is perfectly
alright if the appraiser recognizes that functional and economic
obsolescence, to say nothing of physical depreciation, are playing havoc
with the contributory value of the barns, silos, and supporting farm
buildings. A potential buyer will pay very little for these
improvements knowing that in a relative short time they would normally
be torn down to accommodate a higher use. Moreover, at the very moment
land prices in the area of the subject property preclude profitable
farming by a current buyer. The present owner is undoubtedly doing
alright and his return on the capital he invested is probably adequate.
This results, however, only because most of his investment was made
years ago when land and improvements were cheap relative to today's
costs. Analyze the building contribution to overall value very
carefully; most appraisers would over value the farm buildings when
appraising the subject property.
In my opinion Der T. Windshield has done an adequate job in
appraising the subject property.
Selection of Appraisers
Selection of expert witnesses is a difficult task. Unfortunately,
often times you are not able to tell how he will perform until you have
spent the money to hire him. To compound the problem, the hiring of an
expert to testify must be, of necessity, an almost personal thing. The
expert I might pick would be an anathema to one attorney and a prince to
another. Personalities often clash.
Nevertheless, expert witnesses must be selected and are selected
throughout the country. Our Section maintains a list of available
appraisers. This list contains the names of over 3,000 people who are
experts in one field or another and who have requested their names be
placed thereon. Although we are continually looking for new talent, we
generally work from the list or from personal knowledge in recommending
names to the trial attorneys or to other members of the Government
seeking our help.
Procedurally, it works like this. If an acquiring agency, such as
the Corps of Engineers, desires to hire an expert witness, their
representative will get in touch with the local United States Attorney
and with me in the central office to see if there are any objections to
using him. Their request will usually be accompanied by a qualification
sheet on the individual. If we or the United States Attorney express no
objections, they will proceed to hire the individual. Because of the
size of the operation, we are not able to know all the witnesses
personally. Neither are you attorneys. As a result, an occasional
bummer is selected but not many. If you attorneys decide you need an
additional expert for trial purposes you should contact me, or a member
of the staff, as well as the representative of the acquiring agency for
additional input into the final selection. The three of us working
together can generally come up with a winner.
Needless to say, we want to hire the best talent available. We want
to hire honest, capable people who will render unbiased opinions which
are fair both to the Government and to the taxpayers. It behooves us to
make every effort we can to locate such people. You attorneys could
help us by interviewing, time permitting, designated appraisers (MAI's,
SRA's, ASA's) in your area with an eye to locating experts who write
good reports and are comfortable on the witness stand. A telephone call
or two to attorneys of state and local agencies who have used them will
also produce meaningful information as to their capabilities as an
appraiser and witness.
Fees
Fees for expert witnesses in the Land and Natural Resources Division
amounted to over $500,000.00 in fiscal 1977. Therefore, it is a serious
matter for those having the responsibility of negotiating for these
services.
Appraisal fees are getting more competitive as time goes by and more
people are entering the field. You will find that in each metropolitan
area a certain range in fees will prevail for appraising the various
types of property. Before contracting for a particular appraisal
service, the contracting officer should identify the prevailing range in
fees for the particular type of property under consideration. This
range can be determined by talking to others in the area such as the
Corps of Engineers, State Highway Department, and local city and county
officials who have contracting responsibilities for appraisal services.
Appraisers, as well as most other professional groups, are prohibited
by their code of ethics from entering into a bidding contest for an
assignment. However, this does not preclude the contracting officer
from negotiating with more than one expert to arrive at the best
possible fee for the desired service.
Occasionally, an assignment is of such magnitude and complexity that
a set of specifications will be required to cover the work to be
accomplished. In these situations the contracting officer should submit
the specifications to three or four equally qualified experts and ask
for their proposal. Since the specifications become the basis for a
contract, they should be written with great care to avoid
misunderstanding, and the waste of time and money in making amendments
after a proposal has been accepted. If the contracting officer desires,
the members of the Appraisal Section can be of assistance in writing the
specifications.
Negotiations for appraisal services should be conducted on the basis
of a flat fee. However, for trial testimony, or pretrial conferences,
the fees should be based on a daily rate which can be broken down on the
basis of the hours expended.
The current schedule for EXPERT WITNESS EXPENSES is contained in the
United States Department of Justice Notice No. OBD N 2110, dated
September 10, 1976. The contracting officer should familiarize himself
with this Notice prior to conducting negotiations.
Number of Appraisals Needed
There is no general rule to rely on to tell you how many appraisals
of each particular property are needed. One thorough appraisal prepared
by a competent appraiser will suffice in many cases. However, there are
times when a second, or even a third appraisal report may be needed.
Usually our review of the first report will indicate whether a second
appraisal is needed. There are times when the appraisal assignment is
extremely complicated, or there is a decided lack of data on which to
base a firm opinion of value. Or maybe it turns out that the appraiser
just does not have the ability to perform in a competent manner. In
these instances a second appraisal is certainly justified.
Occasionally, the two opinions of value are so far apart that they are
irreconcilable for trial purposes. If the trial attorney feels that he
needs two appraiser witnesses, it will then be necessary to hire a third
appraiser.
Another guide to the number of appraisals needed is the amount of
money at issue. Certainly, properties having a value in excess of
$75,000 would justify two appraisals in many instances. The Appraisal
Section can render valuable assistance in analyzing the appraisal
reports and recommending what to do. In the final analysis, the trial
attorney will have to decide the number of witnesses he wants, and to
make his judgments accordingly. In making these judgments LAND AND
NATURAL RESOURCES DIVISION DIRECTIVE NO. 11-68 should be of great
assisance.
/1/ Boyce, Byrl N., Real Estate Appraisal Terminology, American
Institute of Real Estate Appraisers and The Society of Real Estate
Appraisers, Ballinger Publishing Company, Cambridge, Massachusetts,
1975, p. 112.
/2/ American Institute of Real Estate Appraisers, The Appraisal of
Real Estate (Chicago: The Institute, 6th Ed., 1973), pp. 309-329.
/3/ Ring, Alred A., The Valuation of Real Estate, Prentice-Hall,
Inc., Englewood Cliffs, New Jersey, 1963, 430 pages.
/4/ Ibid.
/5/ Boyce, Byrl N., Real Estate Appraisal Terminology, American
Institute of Real Estate Appraisers and The Society of Real Estate
Appraisers, Ballinger Publishing Company, Cambridge, Massachusetts,
1975, p. 34.
/6/ American Institute of Real Estate Appraisers, The Appraisal of
Real Estate (Chicago: The Institute, 6th Ed., 1973), pp. 347-369.
/7/ American Institute of Real Estate Appraisers, The Appraisal of
Real Estate (Chicago: The Institute, 6th Ed., 1973), pp. 347-369.
/8/ American Institute of Real Estate Appraisers, The Appraisal of
Real Estate (Chicago: The Institute, 6th Ed., 1973), pp. 347-369.
/9/ American Institute of Real Estate Appraisers, The Appraisal of
Real Estate (Chicago: The Institute, 6th Ed., 1973), p. 262.
LAND AND NATURAL RESOURCES DIVISION
By Norman E. Lauer
1977 FEDERAL EMINENT DOMAIN SEMINAR: EXAMINATION OF TITLE EVIDENCE
November 1977
The condemnation assembly consists of many component parts, none of
which are more important to the successful completion of the case than
the title evidence upon which the case is based. It is for this reason
that, in order to effectively prosecute condemnation cases and to avoid
serious problems and possible losses, it is essential that the
Department's Standards for the Preparation of Title Evidence in Land
Acquisitions by the United States (U.S. Attys. Manual Section 5-12.000)
be strictly observed. (See U.S. Attys. Manual Section 5-3.530 et seq.
The Necessity For Title Evidence
In order that the United States may acquire clear title to real
property in a condemnation action, it is necessary to joins as
defendants in the action all persons having or claiming an interest in
the property. Persons having an interest in property include those
owning an estate in the land (e.g., fee owner, lessee, tenant) and those
having a lien or encumbrance on the land (e.g., mortgagee, taxing
authority, materialman, mechanic). Title evidence, which may be an
abstract, certificate of title, title insurance policy, or other
satisfactory evidence of title will disclose the names of persons having
an interest in the property of record as of a given date. A
supplemental form of title evidence required in all cases is a
certificate as to parties in possession and mechanics' liens, which will
disclose the names of possible claimants whose interests are not of
record. Persons having (or claiming) an interest in the property at the
time of the commencement of lis pendens or other appropriate notice are
necessary parties and must be joined in the action as defendants.
By joining as defendants all persons disclosed by the title evidence
as having a possible interest in the property as of the commencement of
lis pendens notice, and, in the course of proceedings, by giving those
parties notice and opportunity to be heard at the trial or hearing on
just compensation, due process will have been afforded and the final
judgment will be res justicata as to those parties. If the United
States secures a judgment of condemnation fixing compensation and
ordering distribution to the wrong person or to fewer than all persons
entitled thereto, the party having a compensable interest who was
omitted from the proceedings has been denied due process and is entitled
to bring an action against the United States for just compensation. The
United States may thus be compelled to pay twice for the same
acquisition. Where the interest of the omitted party was a matter of
record but was not disclosed by the title evidence, the United States
may recover its loss from the title company or abstractor up to the
limit of liability.
Types of Acceptable Title Evidence
The Standards set forth in detail the specifications for the various
types of title evidence which are acceptable to the Department. Without
going into detail, the most widely used types of title evidence are:
(a) Abstract of title prepared in accordance with the
regulations by approved abstracters or by qualified and competent
abstracters employed by a department or agency of the Government,
(b) Certificates of title prepared in accordance with the
regulations concerning form and contents of certificates of title
by approved title corporations in jurisdictions where coporations
may legally issue such certificates, and
(c) Title insurance policies prepared in approved form by
approved insurance corporations.
Of course, th-re are other types of title evidence which are
acceptable, such as Torren's Certificate, certified copies of the public
records and memorandum of title, but their use is extremely limited.
The authority to approve the use of other forms of title evidence is
vested in the Department and any title evidence that is furnished to you
which does not meet the specifications heretofore noted should be
forwarded to the Land Acquisition Section for consideration. The
Department has from time to time approved the use of unusual forms of
title evidence, such as memorandums of title in wetland acquisitions,
last owner searches in short term takes, certificates of officials of
State Governments when acquiring sovereign lands and attorneys'
certificates. Once again, the use of such title evidence must first be
approved by the Department.
On August 1, 1973, the Land and Natural Resources Division prepared
and forwarded to all United States Attorneys a discussion of the basic
title evidence requirements for condemnation cases. These regulations
are so important and their observance is so essential that I think it
would be advantageous to you if I review the most pertinent parts of the
regulations of the Department as they relate to title evidence for
condemnation cases.
It has been observed that in a number of instances, certificates of
title, title reports, and title insurance policies have been found to be
deficient. The deficiencies most frequently noted are (a) the title
evidence is not properly continued, (b) the amount of insurance
protection is inadequate or not stated, and (c) the title evidence is
incomplete.
Title Evidence Must Be Properly Continued
In connection with a request for the institutional a condemnation
action, you are furnished certain preliminary evidence of title. This
preliminary evidence of title will necessarily predate the institution
of proceedings, often by a substantial period. For purposes of
instituting suit, the preliminary evidence of title may properly be
relied upon for identification of those persons to be joined as original
defendants. But prior to the distribution of any funds on deposit,
settlement of the claim, or judicial determination of just compensation
the evidence of title in declaration of taking cases must be continued
to a time immediately subsequent to the commencement of lis pendens or
other appropriate notice to disclose the state of title at that time.
In complaint only cases, sound judgment must be used to determine
whether it is necessary to secure intermediate title evidence to the
date of the valuation hearing. Based upon the information disclosed by
the continuation of the evidence of title, any additional parties shown
to have, or who may claim to have, any interest in the property involved
must be joined as defendants in the case and any changes in the naming
of necessary and proper parties defendant must be effected. There is no
hard and fast rule regarding the procurement of intermediate title
evidence but you must keep in mind at all times that it is imperative
that all proper parties be noticed. In the Whiskeytown acquisition in
California, there was a period of nearly four years between the original
title evidence and the valuation hearings. Naturally, it was imperative
that updated title evidence be secured. Of course, in complaint only
cases, final title evidence to a date subsequent to the recordation of
the judgment must be secured.
Lis Pendens Notice
In connection with the institution of proceedings, a notice of the
pendency of the action or lis pendens shall be filed or recorded among
the proper local records, except in those jurisdictions where the law is
settled that the commencement of the action is notice to all persons
affected.
The steps necessary for the commencement of lis pendens notice are
determined by the law of the particular state. Some states follow the
common law, which is that notice commences upon the mere filing of the
complaint. Some common law stated, however, have the additional
requirement that the defendants must be served with process before
notice will commence. In other states the common law has been
superseded by statute and the filing of a prescribed form of notice of
lis pendens is necessary to commence notice. And where, under local
law, either a declaration of taking or a judgment on declaration of
taking is entitled to be recorded and to give notice, the recording
thereof would commence notice.
Limitation of Liability
Certificates of title and title insurance policies, in addition to
being properly continued, must also comply with the Department's
requirements with respect to the limitation of the title company's
liability. As set forth in U.S. Attys. Manual Section 5-3.534, it is
required that:
Generally, certificates of title (5-3.832) or title insurance
policies shall not limit the liability of the title company to a
sum less than 50 percent of the reasonable value of the property.
As to acquisitions valued at more than $50,000, the limitation of
liability of the issuing title company under the certificate of
title or title insurance policy may be limited to 50 percent of
the first $50,000 and 25 percent of that portion of the value in
excess of that amount.
The "resonable value of the property," in the context of a
condemnation proceeding, is the amount awarded as just compensation in
the judgment. Where the title company has limited its liability to a
sum substantially less than that permitted, an endorsement to the
certificate or policy must be obtained from the title company providing
for an acceptable amount of coverage. (Reasonable compliance with the
requirements as to the percentage limitation of liability is all that is
required.)
Recitations in the certificate or policy that the limitation of
liability is "as per agreement," "to be agreed upon," or the like, are
unsatisfactory. In such instances it will be necessary to obtain an
endorsement providing adequate coverage in a stated dollar amount. A
certificate or policy that does not state a dollar amount of coverage,
but states that coverage is in "the amount of the award" or a stated
percentage (not less than permitted) of the award, is acceptable.
Certification of Ownership
(Section 5-3.533 and 5-3.924)
It is essential that the title evidence discloses the names of the
persons in whom title was vested at the time of commencement of lis
pendens or other notice. This should present no problem in cases
instituted by complaint only.
In cases in which a declaration of taking has been filed and either
the declaration itself or a judgment thereon has been recorded, the
continued evidence of title typically recites that title to the property
as of the effective date thereof is vested in the United States of
America, followed by an appropriate reference to the recordation of the
declaration or judgment. However, such a recitation will be
insufficient unless accompanied by a statement that prior to the filing
for record of the declaration or judgment, as the case may be, title was
vested in a named person or persons.
Curative Materials
(Section 5-3.538)
When transmitting title evidence to the Department as part of a final
transcript of record, there should be included evidence of the
disposition of any outstanding compensable interests disclosed by the
evidence of title which interests are not barred by the condemnation
proceedings. For example, an official receipt for the payment of ad
valorem taxes should accompany title evidence disclosing unpaid taxes
which were a lien on the property on the date of taking.
Certificate As To Parties In Possession And Mechanics' Liens
(Section 5-3.536)
As part of the title evidence, it is necessary to obtain (ordinarily
from the local representative of the acquiring agency) a certificate as
to parties in possession and mechanics' liens dated immediately
following the commencement of lis pendens notice. All parties disclosed
by the certificate to have an interest in the property must be joined as
defendants in the case. When submitting a final transcipt to the
Department, the title evidence is incomplete unless it includes a
certificate of parties in possession and mechanics' liens. A form for
this certificate, designated "Certificate of Inspection and Possession,"
is set forth at U.S. Attys. Manual Section 5-3.831.
Final Title Evidence
The final title evidence submitted to the Department in the final
transcript must satisfy the following requirements:
(a) The abstract must be continued to the date commencement of lis
pendens or other official notice.
(b) A supplemental certificate or continuation title report, binder,
or endorsement based on a search of the records to the date of
commencement of lis pendens notice must be obtained. No final
certificate or policy is required provided the preliminary certificate,
report, or binder does not improperly limit the title co0pany's
liability or the company assumes the required financial liability and
the certificate, report, or binder contains no provision under which the
issuing company denies liability for losses if the final certificate or
policy is not issued.
The final title should be promptly secured and examined and after
determining that the proceedings are proper that all parties have been
properly served and that no appeal has been filed within the time
allowed, the final transcript should be transmitted to the Department.
The transmittal letter should explain how any title objections noted in
the title evidence have been eliminated or attach thereto any curative
data obtained to eliminate such objections.
The resources of the Land and Natural Resources Division are at your
disposal should questions arise with regard to the title evidence
requirements to which I have referred. I should like to again caution
you that your careful observance of the Department's standards for title
evidence is essential if you are to effectively prosecute condemnation
cases.
LAND AND NATURAL RESOURCES DIVISION
By Ralph G. Eskite
1977 FEDERAL EMINENT DOMAIN SEMINAR: DISCOVERY
November 1977
Federal litigation today almost requires some discovery in order to
properly prepared for settlement or trial. This is particularly true
with the relaxation of evidentiary requirements by the Federal Rules of
Evidence. For example, Rule 705 allows experts to testify as to
opinions and reasons therefor without prior disclosure of the underlying
facts or data. In order to make an informed decision of whether or not
to cross-examine the witness and attack the underlying facts or data,
discovery is essential. Needless to say, without discovery
cross-examination of such a witness is dangerous at best.
The decision of whether to initiate discovery or react to your
opponent's decision is personal and usually depends upon the facts of
the particular case. An excellent discussion of practical application
of discovery, as well as various advantages and disadvantages thereof,
is set forth in Attorney's Guide to Effective Discovery Techniques, by
Walter Barthold. A brief summary of the advantages of discovery set
forth by Mr. Barthold would include access to your opponent's evidence,
contentions and theories of the case. In addition, an informed and
proper evaluation of the case for settlement or trial purposes is
provided by full discovery. An efficient and relatively easy manner of
gathering facts as well as preservation of evidence for later use in
trial is gained through the use of discovery. Finally, greater latitude
and more safety is allowed in exploratory questions by way of discovery
than in cross-examination during the course of the trial.
Minor disadvantages would include the expense involved and delay in
proceeding to trial. A more important disadvantage is disclosing your
case to the opponent. Generally, you can expect return interrogatories
and notices of depositions from your opponent. Occasionally, discovery
may prove more beneficial to the landowner in a condemnation case since
the Government usually has secured more technical data concerning the
case. This is particularly true when the question of potential highest
and best use is the issue. Perhaps the greatest risk in initiating
discovery is forcing your opponent to prepare his case for trial. For
example, in complex litigation involving minerals, detailed
interrogatories will put your opponent on notice that he needs to retain
geologists, consulting engineers and similar witnesses. In cases
involving potential subdivisions, questions concerning expenses,
absorption rates, etc., will alert your opponent that these areas will
be subject to intense cross-examination and thus he will be forced to
secure the necessary witnesses and data.
In most condemnation cases it has been my experience that an
exchange, either by interrogatories or pretrial order, of the witnesses'
names and addresses, qualifications, summaries of the testimony,
including highests and best use, value conclusions and comparable sales
is sufficient. However, in complicated cases interrogatories may be
used as a tool to identify potential deponents and documents suitable
for requests to produce for either your case-in-chief or to properly
prepare for cross-examination.
There follows a brief outline of the discovery rules, together with
citations interpreting the rules.
I. Rule 26: General Provisions Governing Discovery.
A. Discovery Methods
1. Deposition upon oral examination or written questions
2. Written interrogatories
3. Production of documents and entry upon land for inspection
4. Physical and mental examinations
5. Requests for admissions
B. Scope of Discovery. Any matter that is relevant to the
issue is discoverable except:
1. Privileged matter
2. Material obtained in anticipation of litigation is limited.
Rule 26(b)(3) allows discovery of documents prepared in
anticipation of litigation only upon a showing of substantial need
and inability without undue hardship to obtain the equivalent by
other means. In United States v. 145.31 Acres in Huntingdon
County, 54 F.R.D. 359 (M.D. Pa. 1972), aff'd without published
opinion, 485 F.2d 682 (C.A. 3, 1973), the court stated that there
was no compelling need for discovery of the appraisal report of
the Government's real estate expert, holding (p. 360):
* * * Rule 26(b)(4) provides in relevant portion for discovery
of "the substance of the facts and opinions to which the expert is
expected to testify and a summary of the grounds for each
opinion." (emphasis supplied by the court) It thus appears that a
party is not entitled as a matter of source to an expert's report
itself nor to be informed of its location. Although the court has
the power pursuant to Rule 26(b)(4)(A)(ii) to order discovery
beyond these limits, the need for such discovery was not
compelling here.
But see, United States v. 25.02 Acres of Land in Douglas
County, 495 F.2d 1398 (C.A. 10, 1974), and United States v.
2,001.10 Acres in Troup County, 48 F.R.D. 305 (N.D. Ga. 1969).
Rule 26(b)(4) limits discovery of facts known and opinions held by
experts developed in anticipation of litigation as follows:
a. By interrogatories you may obtain the names of expert
witnesses expected to be called at trial, the subject matter of
the expected testimony, the substance of the facts and opinions
and a summary of the grounds for each opinion. The court, in
United States v. John R.-Piquette Corp., 52 .F.R.D. 370 (E.D.
Mich. 1971), held (P. 372):
Rule 26(b)(4)(A), intended to facilitate cross-examination and
rebuttal of experts at trial, is expressly limited to those
experts who will be used as witnesses at trial. This subsection
also provides for the method to be used in obtaining the
information desired, i.e., through interrogatories to the other
party requesting information regarding (1) the identity of any
expert witness the other party expects to call at trial; (2) the
subject matter on which the expert is expected to testify; and
(3) the substance of the facts and opinions to which the expert is
expected to testify and a summary of the grounds for each opinion.
After this step has been taken and should the moving party wish
further discovery, he may so move under 26(b)(4)(A)( ii).
Recognizing that the court must take cognizance on the one hand of
the defendants' burden of proving the value of the land, and on
the other hand of the interest of the Federal Rules in refining
the issues in order to obtain a speedy determination at the trial,
this court believes the best course is to follow the "two step"
procedure set forth in the amended rule rather than the "free
discovery" advanced by the Meyer case.
Also, discovery has been denied of facts and opinions contained
in reports on matters about which the witness is not expected to
testify. Bailer v. Meister Brau, Inc., 57 F.R.D. 11 (N.D. Ill.
1972), and Inspiration Consolidated Copper Co. v. Lumbermens
Mutual Casualty Co., 60 F.R.D. 205 (S.D. N.Y. 1973). However, the
names and addresses of experts who have been retained in
anticipation of litigation and who are not expected to be called
at trial is discoverable by interrogatories without any special
showing of exceptional circumstances. Baki v. B. F. Diamond
Const. Co., 71 F.R.D. 179, 182 (D. Md. 1976); Sea Colony, Inc. v.
Continental Insurance Company, 63 F.R.D. 113 (D. Del. 1974),
contra, Perry v. W. S. Darley & Co., 54 F.R.D. 278 (E.D. Wis.
1971).
b. The court may order further discovery. Fees are allowable
for the expert's time and it is discretionary with the court as to
an allocation of the fair portion of the expenses incurred in
obtaining the facts and opinions.
c. Facts known and opinions held by expert witnesses retained
in anticipation of the litigation but not expected to be called as
a witness may be obtained upon a showing of exceptional
circumstances. Anticipating the changes in discovery, the court
in United States v. 2,001.10 Acres in Troup County, 48 F.R.D. 305
(N.D. Ga. 1969), did not allow discovery of an expert witness
retained by the Government, but not to be called at trial, holding
(p. 308):
Considering the authorities before the court, it is the opinion
of the court that it must follow a middle course in this case,
considering, on the one hand, the defendants' burden of proving
the value of the land in the case, and, on the other hand, the
interest of the Federal Rules in refining the issues in order to
obtain a speedy determination at the trial. Absent a showing of
hardship, of "unfairness" neither of which the defendants allege
here, the defendants must make their own investigation and prepare
their own case.
Fees for expert's time and fair portion of expenses in
obtaining facts and opinions are allowable.
3. Physical and mental examinations for good cause upon court
order. (Rule 35)
4. Limitations imposed by the court under local rules or by
protective order.
C. Protective orders
Upon motion and for good cause shown. Expenses, including
attorney's fees, allowable to prevailing party.
D. Sequence and Timing
Any sequence and timing may be simultaneous with opponent.
E. Supplementation of Responses. No duty to supplement except
as follows:
1. Change of identity or location of persons having knowledge
of discoverable matters and experts expected to be called as
witnesses together with the substance of his testimony.
2. The response was incorrect or is no longer true.
3. By court order, agreement of the parties or by new requests
for supplementation of prior responses.
II. Rule 27: Depositions Before Actions Pending Appeal.
Normally used to perpetuate testimony and not to be used as
fishing expedition for grounds for bringing suit.
III. Rule 28: Persons Before Whom Depositions May Be Taken.
Any disinterested person who is not an employee or relative of
the parties or attorneys, and has authority to administer oaths.
IV. Rules 29: Stipulations Regarding Discovery Procedures.
Parties may modify the procedures, except court approval
required, for extending the time limits for interrogatories (Rule
33), production of documents (Rule 34), and requests for
admissions (Rule 36).
V. Rule 30: Depositions upon oral examinations.
A. At any time, except plaintiff needs leave of court within
first 30 days, unless defendant sought discovery or the person to
be examined is leaving the district and more than 100 miles from
the place of trial, or is leaving the United States. Subpoenas
under Rule 45 available.
B. Notice of examination and general requirements.
1. Reasonable notice in writing to every other party, stating
name and address of person to be examined and the time and place
for the deposition. If subpoena duces tecum is issued, the
designation of the materials to be produced should be attached to
or included in the notice. The court may enlarge or shorten the
time.
2. Requests for production under Rule 34 may accompany notice
to a party deponent.
3. Corporation or other entity may designate person to testify
if no individual named.
4. Examination and cross-examination proceeds as at trial, with
witness under oath and objections noted in the deposition.
5. The objecting party or deponent may suspend the deposition
to seek a court order if the examination is being conducted in bad
faith. Expenses, including attorney's fees, are allowable to the
prevailing party.
6. The witness has 30 days after submission to him to sign the
transcribed deposition or the officer will do it for him and note
the reason. Any changes in form or substance are noted upon the
deposition by the officer together with the reasons given by the
witness.
7. The original deposition is filed with the court by the
officer. Upon request of a party, documents identified during the
examination are attached to the deposition and filed with the
court.
8. Failure to attend or to serve subpoena. If the party giving
notice of the deposition fails to attend or fails to issue a
subpoena to a non-party, and the witness does not attend,
expenses, including attorney's fees, may be allowed.
VI. Rule 31: Depositions Upon Written Questions.
Similar to oral examination, except the notice of deposition
includes the written questions. Ordinarily used only when
deponent at great distance and uncomplicated issue.
VII. Rule 32: Use of Depositions in Court Proceedings.
A. Use of deposition. Part or all of deposition may be used at
trial or hearing, under rules of evidence, as if witness present,
for the following:
1. To contradict or impeach the deponent as a witness.
2. For any purposes by an adverse party if deponent was a
party, corporation, or other entity.
3. For any purpose by any party if the witness is ill or dead
or outside the subpoena jurisdiction or with court approval.
4. If only part of deposition offered, adverse party may
require other parts and other parties may introduce any other
parts.
B. Objections to admissibility. Objections may be made at the
trial or hearing except as follows:
1. All errors and irregularities in notice are waived unless
written objection made at time.
2. Disqualification of officer waived unless made before
deposition or when discovered with reasonable diligence.
3. As to taking of deposition, objections to competency,
relevancy or materiality are preserved unless the ground could
have been removed if presented timely. Errors and irregularities
in the manner, oath, form of questions or answers and conduct of
parties, are waived unless objected to at taking of deposition.
4. Completion and return of deposition. Errors and
irregularities by the officer are waived unless motion to suppress
is promptly made.
VIII. Rule 33: Interrogatories to Parties.
A. Procedure. Any party may serve upon any other party written
interrogaties to be answered, under oath, within 30 days of
service. They may be served with service of the notice of
condemnation, which then allows 45 days to answer. Objections to
questions must be furnished with the answers within the 30 days.
The answers are signed by the party and objections are signed by
the attorney.
B. Use at trial. The use of interrogatories is limited only by
the rules of evidence and Rule 26(b).
C. Option to Produce Business Records. The answer may specify
which records contain the information and make them available for
inspection and copying.
IX. Rule 34: Production of Documents and Things and Entry Upon Land.
A. Scope. Any document discoverable under Rule 26(b) is
subject to inspection and copying. The entry upon land may be for
inspecting, measuring, surveying, photographing, testing or
sampling the property or any designated object or operation on the
land, within the scope of Rule 26(b).
B. Procedure. A court order is not required. The request
should describe with reasonable particularity the item or category
to be inspected and specify a reasonable time, place and manner of
the inspection. The response must permit the request or specify
the objections thereto within 30 days of service, or 45 days, if
served with notice of condemnation.
C. Persons not Parties. The rule applies to persons who are
not parties.
X. Rule 35: Physical and Mental Examination of Persons.
A court order is required and made for good cause shown. This
rule does not preclude discovery of a report of an examining
physician or the taking of a deposition of the physician in
accordance with other rules.
XI. Rule 36: Requests for Admissions.
A party may serve upon any other party written requests for
admissions of the truth of any matters within the scope of Rule
26(b) that relate to statements or opinions of fact, or the
application of law to fact, including the genuineness of
documents. The requests are admitted unless written objections
and the reasons therefor are served within 30 days after service
of the requests. Each request should be separate and
incorporation by reference is usually not allowed. The requests
may be made at any time. Unsatisfactory answers are subject to
court review on motion. Any admission is for the pending action
only.
XII. Rule 37: Failure to Make Discovery.
A. Motion for order compelling discovery applies to failure of
deponent to answer a question during deposition (Rule 30), failure
of corporation or other entity to designate deponent (Rule 30),
failure to answer interrogatories (Rule 33), and failure to
respond to or refusal of request for inspection (Rule 34).
Evasive or incomplete answers are treated as a failure to answer.
The prevailing party may be entitled to expenses, including
attorney's fees, after hearing.
B. Failure to comply with order.
1. When deposition outside district and deponent fails to
appear or answer question, such failure may be contempt of that
court.
2. The court in which the action is pending may impose the
following sanctions:
a. the designated facts are established
b. the disobedient party cannot support or oppose designated
clams or cannot introduce designated matters in evidence
c. strike portions of pleadings, dismiss the action or enter
judgment by default
d. in lieu of the above or in addition, contempt of court
e. the court shall also require the failing part or his
attorney, or both, to pay expenses incurred unless circumstances
make such award unjust
3. Expenses on failure to admit. (Rule 36) Expenses in proving
genuineness of document or truth of matter may be assessed.
4. Expenses against the United States. Except to the extent
permitted by statute, expenses and fees may not be awarded against
the United States.
5. Sanction would appear to apply only to parties and recourse
to Rule 45 (subpoena) is necessary for non-party.
XIII. Rule 45: Subpoena.
A. Service is by the marshal, his deputy or any person not a
party and 18 years of age or older.
B. Subpoena for deposition requires proof of service of notice
of deposition. A resident of the district may be deposed only in
the county where he resides, or is employed or transacts his
business in person.
Nonresidents may be deposed only in the county where he is
served with a subpoena or within 40 miles from the place of
service.
LAND AND NATURAL RESOURCES DIVISION
By Harry W. McKee
1977 FEDERAL EMINENT DOMAIN SEMINAR: OBTAINING POSSESSION IN A
CONDEMNATION CASE
November 1977
When real property is being acquired by condemnation, the Federal
agency requesting the acquisition will usually request that the
Department of Justice obtain possession of the property for the
Government.
When such a request is made, the trial attorney should first
determine that the requesting agency has complied, to the greatest
extent practicable, with the provisions of the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970
(Relocation Act), Public Law 91-646, 42 U.S.C. Section 4651 et seq.
The purposes of the Relocation Act is to establish a uniform policy
for the fair and equitable treatment of persons displaced as a result of
Federal and Federally assisted acquisition programs. It provides
specifically in Section 301(4), 42 U.S.C. Section 4651(4), that:
No owner shall be required to surrender possession of real
property before the head of the Federal agency concerned pays the
agreed purchase price, or deposits with the court in accordance
with section 1 of the Act of February 26, 1931 (46 Stat. 1421; 40
U.S.C. Section 258a), for the benefit of the owner, an amount not
less than the agency's approved appraisal of the fair market value
of such property, or the amount of the award of compensation in
the condemnation proceeding for such property.
Section 301(5), 42 U.S.C. Section 4651(5), provides:
The construction or development of a public improvement shall
be so scheduled that, to the greatest extent practicable, no
person lawfully occupying real property shall be required to move
from a dwelling (assuming a replacement dwelling as required by
title II will be available), or to move his business or farm
operation without at least ninety days' written notice from the
head of the Federal agency concerned, of the date by which such
move is required.
While the Relocation Act establishes certain requirements to be
complied with by the Federal agency acquiring the property, it provides
no penalties for noncompliance. Moreover, it should have no effect upon
the condemnation proceeding. Sections 102(a) and (b), 42 U.S.C.
Section 4602(a) and (b), of the Act provide:
(a) The provisions of Section 301 of title III of this Act
create no rights or liabilities and shall not affect the validity
of any property acquisitions by purchase or condemnation.
(b) Nothing in this Act shall be construed as creating in any
condemnation proceedings brought under the power of eminent
domain, any element of value or of damage not in existence
immediately prior to the date of enactment of this Act.
To date, the courts have held that title III of the Relocation Act
creates no rights in condemnees that can be asserted as a defense in a
condemnation action. In United States v. 416.81 Acres and Mercantile
National Bank, 525 F.2d 450, 454 (C.A. 7, 1975), Mr. Justice Clark
reviewed the legislative history of the Relocation Act and stated:
* * * Their arguments might have some force were it not for the
language of Section 102 (4602) of the same Act, which states:
The provisions of Section 301 (4657) of Title III of this Act
create no rights or liabilities and shall not affect the validity
of any property acquisitions by purchase or condemnation.
It appears clear, therefore, that Section 301 is entirely
exhortatory and that appellants' reliance upon it is misplaced.
See also, Rhodes v. City of Chicago, 516 F.2d 1373 (C.A. 7, 1975);
Paramount Farms v. Morton, 527 F.2d 1301 (C.A. 7, 1975); aff'g 384 F.
Supp. 1294 (W.D. Wis. 1974); Barnhart v. Brinegar, 362 F.Supp. 464, 472
(W.D. Md. 1973); Rubin v. Department of Housing and Urban Development,
347 F.Supp. 555 (E.D. Pa. 1972) and Will-Tex Plastics Mfg., Inc. v.
Department of Housing and Urban Development, 346 F.Supp. 654 (E.D. Pa.
1972), aff'd 473 F.2d 1399 (C.A. 3, 1973).
Despite the lack of penalties, failure to comply with the Relocation
Act may prejudice the Government's position before the court and hamper
or delay the granting of an order of possession. Accordingly it is
suggested that prior to the filing of a motion for possession, the trial
attorney should determine that the acquiring agency has fully complied
with the provisions of the Relocation Act or that there are valid
reasons for noncompliance.
While failure of an agency to comply with the Relocation Act is not
enforceable in the condemnation proceeding, Section 213 of the Act, 42
U.S.C. Section 4633, provides a grievance procedure for a displaced
person to follow if he is aggrieved by an agency determination.
Judicial review of agency decisions is governed by the provisions of the
Administrative Procedures Act, 5 U.S.C. Section 701 et seq. Barnhart v.
Brinegar, supra at 472.
Condemnation cases are instituted by the filing of complaint.
However, the Government can elect to accompany the filing of the
complaint with a declaration of taking pursuant to 40 U.S.C. Section
258a et seq.
In those cases where only a complaint has been filed, title to the
estate condemned is not transferred to the Government until the
determination and payment into the registry of the court of just
compensation. Accordingly, the filing of a complaint gives the
Government no ownership rights in the property which would normally
entitle it to possession. See United States v. Parcel of Land in
District of Columbia, 100 F.Supp. 498, 502 n.5 (D.C. D.C. 1951), wherein
reference is made to a letter written by United States Attorney General
William D. Mitchell to the Honorable George S. Graham, Chairman
Committee of the Judiciary, House of Representatives, regarding a
proposed draft of the Declaration of Taking Act, 40 U.S.C. Section 258a,
stating:
* * * and of course, unless the Government is ready to bind
itself to pay the ultimate award it should not be allowed to take
possession before the final judgment.
However, possession can be obtained, provided adequate provision has
been made to pay for such possession. This can take the form of an
advance deposit of the estimated just compensation, where authorized by
statute, or reliance on the implied obligation of the Government to pay
for what it takes. Commercial Station Post Office v. United States, 48
F.2d 183, 184, 185 (C.A. 8, 1930).
Congressionally enacted legislation, contemplating advance possession
by the Government, usually requires payment of compensation. Section
301(4) of title III of the Relocation Act mandates that to the greatest
extent practicable no owner should be required to surrender possession
of real property until payment of the agreed purchase price or deposit
of the estimated just compensation into the registry of the court.
Section 594 of title 33 of the United States Code, governing
acquisitions by the Secretary of the Army for river and harbor
improvements, provides for the granting of immediate possession to the
Government provided that certain and adequate provision is made for the
payment of just compensation.
The taking of possession does not cause a transfer of title of the
estate described in the complaint. However, it does entitle the owner
to additional compensation. If the award is ultimately satisfied, the
additional compensation will take form of interest from the date the
Government entered into possession to the date the judgment was
satisfied. But if the Government takes possession and then abandons the
proceeding prior to the satisfaction of the judgment, the owner would be
entitled to compensation for the temporary use and occupany of the
property. Dismissal of condemnation actions is governed by Rule 71A(i),
F.R.Civ.P. In the event of dismissal, the owner may move for
compensation in the District Court proceeding or seek relief in the
Court of Claims pursuant to 28 U.S.C. Section 1346(a)(2) and 1491.
United States v. Dow, 357 U.S. 17, 22 (1958); O'Connor v. United
States, 155 F.2d 425 (C.A. 9, 1946); Moody v. Wickard, 136 F.2d 801,
803, 804 (C.A. D.C. 1943). It should be borne in mind that the date of
the granting of possession, in a complaint case, will also be the date
of valuation of the estate being condemned. United States v. Dow,
supra.
The second method of acquisition and the one more commonly used is
the filing of a complaint accompanied by a declaration of taking and the
deposit of estimated just compensation in the registry of the court.
The Declaration of Taking Act, 40 U.S.C. Section 258a et seq., is
applicable in all acquisitions outside the District of Columbia. It was
modelled after D.C. Code Section 16-1314 which governs all similar
acquisitions within the District of Columbia. It provides, upon the
filing of a declaration of taking and the deposit of estimated just
compensation, for the immediate transfer to the Government of title to
the estate described in the declaration of taking. The Act, 40 U.S.C.
Section 258a, states, as to possession:
Upon the filing of a declaration of taking, the court shall
have power to fix the time within which and the terms upon which
the parties in possession shall be required to surrender
possession to the petitioners.
The Declaration of Taking Act does not give the court discretion as
to whether to grant possession, but rather as to the time and terms of
possession. It was intended to expedite the taking of title and
possession by the Government. On page 1 of R. Rep. No. 2086, 71st Cong.
3d Sess. (1930), appears the following expression of intent:
The bill is intended to expedite the taking of title and
possession of lands authorized to be acquired by the Government
for use outside the District of Columbia and thus hasten the
construction of public buildings and works authorized by Congress.
Congressman Graham stated at 74 Cong. Rec. 779 (1930):
* * * (T)he Government steps in and by its power of eminent
domain takes, the bill simply provides that it shall not be
hindered and obstructed by dilatory motions. The money may be
paid in to court and possession had at once.
See also 74 Cong. Rec. 777, 779 (1930) (statements by Congresmen
Stafford and La Guardia).
The courts have recognized that the Act was intended to facilitate
the transfer of immediate possession to the Government. In United
States v. Miller, 317 U.S. 369, 381 (1942), the Supreme Court stated
that:
The purpose of the statute is twofold. First, to give the
Government immediate possession of the property and to relieve it
of the burden of interest * * *. Secondly, to give the former
owner, if his title is clear, immediate cash compensation to the
extent of the Government's estimate of the value of the property.
See also United States v. Dow, supra at 23; Bishop v. United States,
288 F.2d 525, 527-528, (C.A. 5, 1961); United States v. 53 1/4Acres in
Brooklyn, 176 F.2d 255, 258 (C.A. 2, 1949).
It seems clear that upon the filing of a declaration of taking and
the payment of estimated just compensation into court, the Government is
entitled to immediate possession. However, the court can fix the time
and terms for the surrender of possession. As a result, courts are
usually lenient in allowing sufficient time for an occupant or user of
the condemned property to find a suitable relocation facility. This is
especially true when the acquiring agency failed to give the occupant
ninety days' written notice to vacate the property as required by
Section 301(5) of title III of the Relocation Act.
In the event an order of possession issues in favor of the Government
and the occupant refuses to vacate the condemned property the Government
may elect to collect rent from the occupant or move the court to issue a
writ of assistance to forcibly remove the occupant from the premises.
Rule 70, F.R.Civ.P.
Since the right to reimbursement for occupancy of property follows
ownership, the courts have held that where an occupant retains
possession of the condemned property after title has transfered, the
condemning agency is entitled to be compensated. Certain Land in
Washington, D.C. v. United States, 355 F.2d 825, 826 (C.A. D.C. 1965);
United States v. Certain Land in Manhattan, 332 F.2d 679 (C.A. 2, 1964);
United States v. Certain Interests in Brooklyn, 302 F.2d 201, 203-204
(C.A. 2, 1962); United States v. 6,576.27 Acres in McLean County, 77
F.Supp. 244, 248 (D. N.D. 1948).
The Declaration of Taking Act grants to the court the
* * * power to make such orders in respect to encumbrances,
liens, rents, taxes, assessments, insurance and other charges, if
any, as shall be just and equitable.
Accordingly, the trial attorney can move the court to determine the
fair market rental value of the property during the period of occupancy.
The motion should be supported by an affidavit of value or the
testimony of a qualified real estate appraiser.
In the event a writ of assistance is obtained to remove the occupant
from the premises, the Government may have to provide the movers and
vehicles to move the occupant's goods, however, it appears that local
procedures differ. The trial attorney should consult with the United
States Marshal to determine local procedure before attempting to execute
the writ.
There is a third method by which the Government can obtain possession
and that is by seizure. While this method is rarely used, the Sovereign
can seize and hold property at will. See United States v. Dow, supra at
21; United States v. Merchants Transfer and Storage Company, 144 F.2d
324 (C.A. 9, 1944). In every instance, the trial attorney should
attempt to obtain possession by order of the court.
LAND AND NATURAL RESOURCES DIVISION
By David A. Clarke, Jr.
1977 FEDERAL EMINENT DOMAIN SEMINAR: DEVELOPMENT OF THE CASE
November 1977
Scope
This paper deals with some practical problems connected with
preparing for the trial. Trial tactics, pretrial procedure, and
substantive legal issues are not discussed.
Purpose
The reason for investing so much time, talent, and money in preparing
for trial is to enhance our chances of ultimately being able to persuade
the fact-finder that the Government's side of the issue is the more
convincing. While it is important to present a strong affirmative case,
it is equally important -- if not more so -- to present a strong
negative case, i.e., to prove the defendant wrong.
Careful and costly preparation is no guarantee of success. Too many
other variables are involved. Yet, the benefits of sufficient
preparation should generally yield lower awards, less interest, lower
settlements, and most importantly, a more correct result. But, not to
be overlooked, it should also instill greater confidence in the
attorney, and hence, a better performance, which, in turn, should yield
greater respect from judges, opposing counsel, expert witnesses, and
acquiring agencies.
Ours is a problem of persuasion; therefore, let us now consider some
of the ways and means of preparing to be more persuasive.
High Risk Cases
But first, let's get well in mind what we're talking about. Any case
requires preparation, but the amount of time spent in preparation varies
with the importance of the case. This paper addresses preparation of a
major case but the methods may be adapted to other types of cases. A
large amount of money alone does not make a major case in the sense of
justifying a massive amount of preparation. The essential factor that
calls for and justifies more than usual preparation is the magnitude of
the risk involved. What is the spread?
In general, high risk cases fall into three categories: natural
resources cases, subdivision cases, and partial takings. All are
difficult to appraise because of the frequent absence of a sales
yardstick by which to measure their value.
Natural resources cases involve oil, gas, coal, clay, limestone,
sand, gravel, and timber -- as well as many other resources. For the
most part, these are hidden asset cases. In nearly all, their value
hinges on differing views (optimistic/pessimistic) about the future.
These are fertile cases for high spread -- high risk.
Subdivision cases, whether commercial, residential, recreational, or
industrial, also frequently involve putting a present price on tomorrow.
And, because some experts claim to be able to foresee a more rosy
future than others, these cases too are ripe for a big spread.
In partial taking cases, where either an estate slice or an area
slice, or both, have been carved out of a larger pie, we are apt to be
confronted with both high "before" values and low "after" values, which,
again, creates a big spread.
The point is: the magnitude of the preparation should be governed by
the magnitude of the risk.
Understanding the Problem
In order to avoid rushing in where angels fear to tread, a
substantial amount of time and effort should first be invested in trying
to grasp the nature of the problem to be solved. This first phase
(attorney preparation) should include the following:
1. Study Case
(a) Nature and History of Project -- this effort should, among
other things, shed some light on how the project is perceived by
the public, i.e., beneficial or detrimental, which, in turn, will
have some bearing on whether the case should be tried to a judge,
jury, or commission. For example, if the project is very
unpopular, it may be wise to avoid a jury and thereby cut the
risk. On the other hand, if the project is very popular, and if
we have a partial taking, we should not overlook the possibility
of claiming that the remainder of the parcel has been benefited.
(b) Declaration of taking -- must be completely understood.
For example, in flowage easement cases, or other easement cases,
what discretionary powers are placed in the hands of some
Government official? There is a difference between determining
value based on the premise that this official will be a "nice guy"
(the implicit claim of the acquiring agency) or a "bad guy," which
is apt to be the explicit claim of the defendant.
(c) Negotiators Reports -- as well as personal discussions with
negotiators, appraisers and others, should reveal, at least
preliminarily, a considerable amount of information about the
defendant (a soulless foreign corporation or an old widow), the
nature and amount of the defendants' claim, and particularly, the
reasons behind the claim.
(d) Appraisal Reports -- should be read with a high degree of
skepticism. Look for deficiencies in the appraiser's
qualifications in general, and specifically as to whether the
appraiser has been "stretched," e.g., is a farm appraiser trying
to put a value on a peat bog. Also look for his legal predicates
and attempts to use sales which simply "don't fit," e.g., sales of
barely proven coal land and leases to measure the value of an
operating mine.
2. Visit Site and Vicinity
This should be done with appraisers. They should be the best
guides and, in addition, this is an excellent time to lightly quiz
them about vulnerable points in their reports. Notes and perhaps
some photographs should be taken, but this is primarily a time for
the attorney to get the big picture well in mind, for appraising
the appraisers, and for ascertaining what impact a later visit
will have on the minds of the factfinder.
3. Study New Subject Matter
One of the things that makes a case have more than the ordinary
amount of risk is the land's potential for some unusual use. For
example, if a salt dome is being taken for the storage of large
amounts of crude oil, the question arises as to whether or not
existing caverns and/or newly created caverns can also be used for
the storage of other products. Hence, the need for the attorney
to immediately start learning about the geology of salt domes,
liquified natural gas, salt mining, oil refining, the
petro-chemical industry, pipelines and a dozen other subjects that
are new to the attorney. A good source for general information is
simply a good encyclopedia. Articles in various publications
should be read, clipped, and saved; and, of course, the brains of
later acquired special experts are to be picked very clean.
The Search for Talent
The attorney has many functions to perform. One is the need to serve
as a casting director. Who is to be selected to play which part? Where
are the potential actors to be found? Who will pay them? How much are
they to be paid?
A complex high-risk case invariably requires that non-appraisal
subsidiary experts be employed. In fact, it is usually essential that
such experts be employed and their work performed before the appraisal
experts reach their final conclusions. The appraiser's conclusions are
thus dependent upon the findings of the subsidiary experts. This
situation exists because ordinary land appraisers are usually limited by
experience to a rather narrow field of appraising, e.g., farms, ranches,
industrial, recreational, commercial, and because, while they may know a
considerable amount about the principles of appraising, they probably
know very little about subject matter outside of their regular line of
appraising. On the other hand, special experts such as geologists,
engineers and chemists are apt to know very little about appraising.
Thus, we have the perpetual problem in these types of cases: how do we
bridge the gap between the appraiser and the specialist? Do we try to
make a specialist out of the appraiser or make an appraiser out of the
specialist or make the appraiser dependent on the various specialists?
The latter solution is preferable in most cases, but there are some
specialists who have, by necessity, become rather good appraisers, such
as petroleum geologists for oil and gas cases, mining engineers in coal
and other "hard mineral" cases, and foresters in timber cases.
Where are these subsidiary experts to be found? Some suggestions:
(a) ask the original appraiser and people in the acquiring agency, (b)
search other federal and state agencies, (c) local universities, (d)
various professional and trade associations, (e) people in private
industry and (f) private consultants. Take your time. Interview
several. Remember, you're a casting director. You need just the right
actor to play a certain part. One geologist is not just as good as
another.
Who will pay the bill? The short answer is: generally the acquiring
agency. Thus, it is important from the very beginning that the
acquiring agency understand the need for these experts and the purpose
of their special investigations and reports. Sometimes they are very
expensive. For example, it may be necessary in a timber case to have a
very accurate timber cruise, or in a sand and gravel case for a core
drilling program to be performed. Generally, the work and detailed
report will be paid for on a lump sum basis by the acquiring agency with
a provision in the contract that the expert will later appear, if
needed, for consultation, preparation, and court attendance at so much
per day, with this daily rate to be paid by the Department of Justice.
The important thing in determining the rate is that all parties need to
know in advance just how and when, and how much the specialist is to be
paid.
A word of caution: be especially sure to inquire about potential
conflicts of interest. Be sure to relate to the specialists and
appraisers the names of all defendants and attorneys in this and related
cases. It could be embarrassing if it later comes to light that the
expert has already been retained by the opposing side in a companion
case, or may have some special reason for grinding an ax (pro or con) in
the present case.
At this stage of preparation, it is desirable to retain not only
essential experts, but also what may be called insurance witnesses, i.
e., experts or others who may never be called as witnesses, but who may
nevertheless be used if the need arises.
Discovery
Information about the other side's case can be obtained both
informally and formally.
Informal discovery, in addition to information gleaned from
negotiators, appraisers, various reports and the defendant's pleadings,
can also be obtained by simply conferring with opposing counsel. It is
surprising how much can be found out in this way over a cup of coffee or
whatever. Preliminary settlement attempts will frequently result in a
rough layout of the defendant's whole case. The nature of the claim,
the degree of seriousness, names of witnesses, the amount claimed, mode
of trial, and the possibility of stipulating as to certain matters, will
generally emerge. In addition, an arrangment can generally be made for
a later exchange of appraisals, which, if you get as much as you give,
may be all the discovery that will be necessary.
Formal discovery can, of course, run the gamut of everything provided
for by the rules. Harry W. McKee is addressing the intracacies of
formal discovery. What is proposed here are some practical
considerations to guide a decision of which way to go. Remember, before
you start down the road of formal discovery, that this sword cuts both
ways. Will the amount of extra information hoped to be obtained be
worth the extra time, talent, and expense?
Interrogatories, though often used by Government attorneys, are
frequently misused. While they may have a proper role to play in a
particular case, they rarely live up to expectations. The reasons for
this development are: (a) interrogatories are addressed to parties, not
witnesses, and, therefore, are usually answered by attorneys who either
do not answer within the time permitted or who say that the requested
information is not now available or who so hedge their answers that
nothing definite is stated; (b) if properly answered they amount to
little more than an abstract of an appraisal or other report.
Therefore, why not just get (by exchange) the original reports? (c)
Interrogatories at an early stage in the case are usually futile because
answers are not usually available until the other side has also finished
their investigations and reports and are, therefore, answered (in some
fashion) very late in the game (like just before trial). (d)
Interrogatories take a lot of time -- both to prepare and answer and are
always encumbered with the chance of one side or the other being hauled
before the judge to explain why they haven't been answered or
sufficiently answered; (e) prematurely answered interrogatories
frequently either lock the Government into an unfortunate position or
make escape hazardous, and (f) lastly, if a definite position is really
sought on a few matters, this can usually be accomplished by either a
direct request for admission by stipulations.
This is not to say, however, that there are cases where
interrogatories can be helpful. They can be, for example, when only
limited information is sought and when opposing counsel won't divulge
anything on an informal basis, and especially when essential information
is known only to the party rather than by expert witnesses, such as
business records on income producing properties, the results of
exploratory investigations in mining and oil and gas properties, and
timber cruises in timber cases. However in these situations,
interrogatories should generally be only a prelude to motions to produce
the documents. It is better to have the original documents than some
lawyer's version of the contents of those documents via his answers to
interrogatories.
Depositions, on the other hand, can be a valuable discovery tool.
This is primarily because information is being obtained directly from
the person who will be testifying at the trial. Depositions are
particularly valuable if taken after an exchange of appraisals and after
documents have been produced. Then the bones of the defendant's
appraisals and reports can be fleshed out in great detail and supporting
data can be thoroughly examined. Now we know what the witness will say:
there will be less surprise, deviations from his testimony can be
handled on cross-examination, rebuttal evidence can be prepared,
cross-examination can be better prepared, and the attorney will have an
opportunity to judge the effectiveness of the witness. But, care should
be taken when a deposition is taken to refrain from too much
cross-examination. Otherwise, the witness learns more about your case
than you will about his. There is no point in forewarning a witness
before trial as to the content and manner of your cross-examination.
Also, if the Government's witnesses are being deposed, an opporunity
will be afforded the attorney to measure the effectiveness of his own
witnesses and hopefully their areas of vulnerability can be patched up
prior to trial.
Prove the Defendant Wrong
With or without an exchange of appraisals and formal discovery, it is
essential to know in advance the nature of the defendant's claim and how
he will proceed to prove his case. By standing in the other attorney's
shoes, it should be possible to accurately anticipate what he must prove
in order to prevail; hence, the great importance that must be attached
to marshaling all sorts of evidence to resist the main thrusts of his
case. It is our job to help him fail. Most good verdicts are obtained
not when the Government puts on a strong affirmative case, but when the
defendant's case is seriously undercut. This is why we really need our
special witnesses and experts, because when these sharp knives have done
their work -- offensively as well as defensively -- the appraisal
witness (the money many) becomes little more than surplusage. For
example, in a hard mineral case, the defendant's high value invariably
hinges on a series of "ifs" coming true. "If" there is sufficient
quantity, quality, mineability, no competition, no substitute materials,
high demand, high prices, and no restrictive Government regulations, the
land can be worth a lot of money; but if just one of these compounded
"ifs" is not true, the land may be worth very little. Hence, the
importance of not conceding the truth of any "if," for, if just one link
can be cut out of the chain, the defendant's whole case may fall. In
this connection, however, it is more important to "kill the deposit,"
i.e., find a fatal flaw in the deposit (of minerals) itself rather than
to try and cut them off at the pass on some economic or governmental
basis, because if nothing can be found wrong with the deposit, it is too
easy for a jury to believe that in some way, some time, someone, will be
able to make it pay off.
Exhibits
Generally, in order to persuade, we have to communicate. This is so
whether the factfinder is judge, jury or commission. But, good
communication looms up as a major hurdle if our audience is a jury.
They must be sent to school. As teachers we will do well to remember
that they are apt to learn better through their eyes than through their
ears. This is why a condemnation case is a "show and tell" affair. The
"showing" is accomplished via demonstrative exhibits.
A few suggestions: exhibits of the demonstrative variety should (a)
look professional, (b) be large enough for all to see at one time, (c)
be kept as simple as possible, (d) be as few in number as possible, (e)
be prepared by the experts using them, with attorney guidance, (f) be
shown to opposing counsel and marked before trial, and (g) presented in
a logical order.
Give the preparation of exhibits ample time and attention. Use your
imagination. Avoid duplication as much as possible and, to accomplish
this, offer to let the defendant (who often presents his case first) use
some of your exhibits. This will tend to reduce confusion in the minds
of the jury.
Specifically:
1. Vicinity Maps -- can cover an area as large as a state or
region, but we will need a map that covers at least the local
area. This map should show cities, highways, rivers, other
identifying features and their relationship to the subject
property which should be prominently depicted, and the map should
be large enough to also show the location of comparable sales.
2. Project Maps -- are generally only needed in partial taking
cases. They should be designed to show the relationship between
the completed project and the remainder of the subject parcel.
This should be done in considerable detail so the jury will
clearly understand exactly how the remainder will be benefited,
e.g., new roads, interchanges, lakes, subway stations.
3. Tract Maps -- should show the essential features of the
entire unit such as tract dimensions, acreage, lakes, streams,
fields, contours, internal roads, improvements, as well as the
relationship between the part taken and the remainder.
4. Aerial Photographs -- should be taken near the time of
taking. Tract boundaries need to be well outlined. The dates of
the photos placed on the map, taken from both a veritical and
oblique position, and the oblique photos, should be in color.
Aerial photos are particularly helpful to show past flooding and
the movement of rivers, as well as the internal features of a
large tract that are easily missed or difficult to see on a jury
view.
5. On Site Photographs -- should be in color and large enough
for all to easily see at one time. Make it easy for a witness to
point out various features to the jury. Err on the side of taking
too many pictures. You can always edit them later, and be sure to
take pictures that show the disadvantages of tract; the defendant
will not overlook showing the advantages.
6. Pictures of Comparables -- if comparable sales are the
yardstick, then pictures (both aerial and on site as well as maps)
of the comparables are essential. How would the factfinder be
better able to judge their comparability" Quality is a matter that
is difficult to orally describe. Pictures are the best way to get
around this problem. In effect, instead of taking the factfinders
to view the comparables on the ground, you are bringing the
comparables, via pictures and maps, to the factfinders. But,
don't just take pictures of your comparables. Find out in advance
what comparables the defendant will use and then take pictures of
his comparables. Defendants have a propensity for hitching
themselves to the highest sales they can find (don't worry about
cheap sales) and your pictures may very well explain for
themselves why the defendant's comparables went for a high price.
7. Diagrams, Sketches, Charts, Schedules, Graphs, Models,
Samples, and Summaries -- are all designed to serve a special
purpose and therefore should be prepared (with attorney guidance)
by the same expert who will use them at trial. And, in this
connection, a provision in their preparation of exhibits.
In mineral cases and oil and gas cases, it is essential to have
diagrams showing the nature of the deposit. In flowage easement
cases, you may need graphs (keep simple) showing both past and
future flooding. In timber cases, some sketch or diagram will be
necessary to illustrate cruising methods. In hard mineral cases,
it is not only interesting but very desirable to have typical
samples of ore, as well as a model of a core, which can be
depicted on a long pole or tube, or the actual cores themselves
can be brought to court. For ease of comparison, and so the
factfinders will not have to remember a lot of numbers, a summary
type schedule can be prepared which shows the relationship between
the subject parcel and the comparable sales. And, summaries of
the value conclusions reached by each appraiser can be prepared,
so that the factfinders will be able to easily put their finger on
the numbers testified to by each witness. For example, one sheet
of paper (large) bearing the name of the witness can show the
"before," "after" and "difference" numbers stated by each witness.
Sometimes, by stipulation, a joint summary exhibit of this kind
can be prepared which will show similar numbers for all witnesses
-- on both sides. Such "before" and "after" summaries or
schedules are especially helpful when the jury is being asked by
special verdict to determine "before" and "after" values.
Final Settlement
Negotiations
Evidence is developed not only for trial. Extensive preparation is
also needed for pretrial conferences with the court and for the
preparation of pretrial orders, and it is utterly essential in order to
intelligently determine the amount for which a case should be settled.
Major cases or any cases are not tried just for the exercise or the
experience -- there is too much risk involved.
You will note at this point, i.e., after complete preparation, that
there may be little resemblance between the original amount and the
final amount of estimated just compensation. And, for that matter,
there may be little resemblance between the original and the final cast
of characters in our drama. The point is: that sooner or later some
effort should be made to settle the case -- with emphasis not on the
value of the land, but on the value of the lawsuit. There is a
difference. So now, after complete preparation, we will be far more
able to accurately assess the full extent of the costs, interest, and
risk involved if the case goes to trial. Of course, settlement attempts
can -- and perhaps should be -- made at an earlier time, but we should
realize when we do so that we are in a much poorer position to assess
the probable outcome of a trial.
Before the Curtain Goes Up
Now there follows an outline of some of the details that need to be
taken care of both shortly before and immediately before the trial
commences:
A. General conference with witnesses
1. Collectively (saves time)
2. Discuss general strategy
3. Establish order of witnesses
a. Logical order -- tell story from beginning
b. Special experts first
c. Appraisers last
d. Best appraiser on cross-examination goes first
e. Last appraiser mostly for rebuttal
4. When will witnesses be needed at trial?
a. Depends if owner goes first
b. Depends on whether witnesses excluded
c. If not excluded, have witnesses in courtroom during
testimony of their counterparts
d. Arrange for some witness to be at counsel table
e. Have witnesses leave after testifying
5. Determine necessity for out-of-time witnesses -- make
arrangements accordinly
6. Determine availability for consultation during trial
a. Arrange place in court house
b. Arrange place for evening sessions
7. Notes during trial
a. Note pads for witnesses
b. Passed to assistant or during recess
8. Arrange for a calculator -- and for someone to run the thing
9. Iron out contradictions
a. Done before final conference
b. Don't let one witness undercut others
10. Cross-feed information
a. Also before final conference
b. Necessary for one witness to know about the testimony of
others, especially the appraiser witnesses
B. Conferences with individual witnesses
1. Determine whether prefers free narrative, or to be led, or
both.
2. Prepare with each witness an outline of his testimony
a. So both attorney and witness know order and subject matter
and exhibits to be used.
b. Don't prepare specific questions and answers
c. Let witness be himself
d. Develop outline in logical order, e.g.:
(1) Qualifications
(2) Procedural steps taken
(3) Description of site
(4) Appraisal method used and why
(5) Appraisal method not used and why
(6) Factors considered and why
(7) Owner's claim considered and why discarded or discounted
(8) Opinion of value
e. Give copy of outline to witness
(1) So he can study
(2) Keep a copy for direct examination
3. Prepare witness for cross-examination
a. Points of vulnerability
4. Find out weaknesses
a. Before final conference
b. Avoid or mitigate
c. Bring out on direct examination:
(1) Lack of college degree
(2) Not local appraiser
(3) Does not own land
(4) Does not buy or sell land
(5) Any deduction from amount of original appraisal and why
(6) Appraise mostly for Government
(7) Reliance on others for data
(8) Not member of professional organizations
(9) Has not appraised this kind of property before
C. A few do's and dont's for witnesses:
1. Discuss at general or individual conferences
2. Direct Examination:
a. Be an advocate for your opinion
b. Take thick appraisal report to stand
(1) In full view of jury
(2) Refer to only for details
c. Have exhibits organized in order to be used
d. Talk to attorneys unless situation requires otherwise
e. Don't use jargon
f. Take calculator to stand
t. Body language
(1) Look and act confident
(2) Project attitude of fairness and objectivity
h. Show respect for owner
i. Stop, if objection or motion
j. Spell difficult or unusual words for reporter and others
k. Be prepared to illustrate something on large sheet of paper
-- have proper pencils handy
3. Cross-Examination
a. Be sure question is understood
(1) Careful of multiple questions
(2) Careful of adjectives
b. Think before answering -- but not too long
c. Don't look to lawyer for help
d. Don't act guilty
e. Don't slump in chair
f. Speak up
g. Don't volunteer too much. Remember, there is redirect
h. Don't evade
i. Admit talking to attorney and others
j. Don't try to be a comedian -- let lawyers be clowns
k. Admit good features of tract
l. Don't be afraid to say, "I don't know," or "I can't recall"
m. Be courteous to opposing counsel
n. Project objectivity
D. Exhibits
1. Determine order to be used
2. Make exhibit list
3. Select exhibit man
a. Give copy of list
b. In charge of exhibits
c. Keep record of admitted or rejected
d. Get materials to make last minute exhibits or changes
4. Obtain easels, etc., for displaying exhibits
5. Make pointer, pencils, tacks available
E. Organize Files
1. Trial files (separate folder for each)
a. Voir dire
b. Opening statement
c. Cross-examination (each witness)
d. Direct examination (each witness)
e. Closing argument
f. Instructions
g. Form of verdict
h. Motions
i. Witness list
j. Exhibit list
2. Case files (separate folder for each)
a. General notes
b. Pretrial orders
c. Legal issues (briefs, cases, memos, etc.)
d. Pleadings
e. Correspondence
f. Appraisals
g. Various reports
h. Documents
i. Data on owner's sales
Conclusion
Semper Paratus is not just a good motto for the boy scouts.
LAND AND NATURAL RESOURCES DIVISION
By Max E. Findley
1977 FEDERAL EMINENT DOMAIN SEMINAR: THE PRACTICAL APPLICATION OF
THE NEW RULES OF EVIDENCE
November 1977
The purpose of this paper will be to broadly discuss the New Federal
Rules of Evidence as they apply in condemnation cases.
Because these rules did not become effective until July 1, 1975,
there are very few court decisions interpreting them and this is
especially true in civil actions.
Previously, the basic rule in civil actions dealing with evidence was
Rule 43, F.R.Civ.P., which was then entitled "Evidence." The rule was
amended in anticipation of the new evidence rules by orders of the
Supreme Court in late 1972 to its present form. The effective date of
this amendment was to coincide with the effective date of the new rules
of evidence. Rule 43, F.R.Civ.P., is not entitled "Taking of Testimony"
and retains only those portions not specifically covered by the new
rules, namely that testimony of witnesses in trials be taken orally.
An important starting point in discussing these rules is what
latitude do the courts retain and what latitude, if any, have they lost
in developing and modifying the rules of evidence within the courts of
the United States, or, put another way, in what areas do the Federal
Rules of Evidence change the status quo.
A useful article on this point appears in Saltzburg & Redden, Federal
Rules of Evidence Manual (2d. Ed. 1977). The article is entitled, "A
Brief Essay on the Relationship between the New Rules and Common Law
Doctrine" and commences at page 735. The article suggests as a starting
point examining those rules proposed by the Supreme Court but deleted by
the Congress and their reasons therefor. There are basically four rules
which fall in this category if you exclude the 13 rules dealing with
privilege which were substituted by the very general Rule 501 of the
Federal Rules of Evidence. They are as follows:
Rule 105. SUMMING UP AND COMMENT BY JUDGE (Not enacted.)
After the close of the evidence and arguments of counsel, the
judge may fairly and impartially sum up the evidence and comment
to the jury upon the weight of the evidence and the credibility of
the witnesses, if he also instructs the jury that they are to
determine for themselves the weight of the evidence and the credit
to be given to the witnesses and that they are not bound by the
judge's summation or comment.
Rule 303. PRESUMPTIONS IN CRIMINAL CASES (Not enacted.)
(a) Scope. Except as otherwise provided by Act of Congress, in
criminal cases, presumptions against an accused, recognized at
common law or created by statute, including statutory provisions
that certain facts are prima facie evidence of other facts or of
guilt, are governed by this rule.
(b) Submission to jury. The judge is not authorized to direct
the jury to find a presumed fact against the accused. When the
presumed fact establishes guilt or is an element of the offense or
negatives a defense, the judge may submit the question of guilt or
of the existence of the presumed fact to the jury, if, but only
if, a reasonable juror on the evidence as a whole, including the
evidence of the basic facts, could find guilt or the presumed fact
beyond a reasonable doubt. When the presumed fact has a lesser
effect, its existence may be submitted to the jury if the basic
facts are supported by substantial evidence, or are otherwise
established, unless the evidence as a whole negatives the
existence of the presumed fact.
(c) Instructing the jury. Whenever the existence of a presumed
fact against the accused is submitted to the jury, the judge shall
give an instruction that the law declares that the jury may regard
the basic facts as sufficient evidence of the presumed fact but
does not require it to do so. In addition, if the presumed fact
establishes guilt or is an element of the offense or negatives a
defense, the judge shall instruct the jury that its existence
must, on all the evidence, be proved beyond a reasonable doubt.
Rule 406. HABIT; ROUTINE PRACTICE (Subdivision (b) not
enacted.)
(b) Method of proof. Habit or routine practice may be proved
by testimony in the form of an opinion or by specific instances of
conduct sufficient in number to warrant a finding that the habit
existed or that the practice was routine.
Rule 804. HEARSAY EXCEPTIONS: DECLARANT UNAVAILABLE
(Subdivision (b)(2) not enacted.)
(b) Hearsay exceptions. The following are not excluded by the
hearsay rule if the declarant is unavailable as a witness:
(2) Statement of recent perception. A statement, not in
response to the instigation of a person engaged in investigating,
litigating, or settling a claim, which narrates, describes, or
explains an event or condition recently perceived by the
declarant, made in good faith, not in contemplation of pending or
anticipated litigation in which he was interested, and while his
recollection was clear.
From an examination of these four rules proposed by the Supreme Court
but deleted by the Congress, we see three different relationships
between the new rules and the common law.
First, the deletion of Rules 105 and 303 demonstrated that Congress
chose to be silent as to what they were to do when they came to these
specific points. The silence appears to be an intent to preserve the
status quo in these areas.
Second, the treatment of Rule 406(b) illustrates that Congress
believed that this area should be handled by the courts on a
case-by-case basis. See 4 U.S.Cong.News 7079 (1974).
Third, the reasons given for the deletion of proposed Rule 804(b)(2)
illustrates that Congress does not expect the courts to look either to
the common law nor adjudication to develop these principles but rather
to come to the Congress when changes are sought.
The authors give further analysis as to each of the 11 articles
actually adopted commencing at page 741.
Because of the broad scope of this topic, it will be necessary to
limit my discussion to those rules which have some practical application
in the field of eminent domain. Because these rules did not become
effective until July 1, 1975, there are very few court decisions
interpreting them and this is especially true in civil actions.
Article I
General Provisions
Rule 101-SCOPE-provides that these rules govern all proceedings
before United States courts, except as stated in Rule 1101(c). None of
the instances set forth in Rule 1101(c) apply to eminent domain cases.
Rule 103-RULINGS ON EVIDENCE-is merely a codification of the rules as
they existed prior to the enactment of the Federal Rules of Evidence.
Subsection (b) of this rule is nothing more than the old Rule 43(c),
F.R.Civ.P.
Rule 104-PRELIMINARY QUESTIONS-provides that preliminary questions
concerning the qualification of a person to be a witness for the
admissibility of evidence shall be determined by the court. In making
this determination the only restrictions upon the court by this rule are
those dealing with privilege which broadens the court's discretion.
Rule 106-REMAINDER OF OR RELATED WRITINGS OR RECORDED
STATEMENTS-primarily follows the standard common law practice prior to
the enactment of these rules that a party may require the adverse party
to introduce other parts of a writing if only part is offered. This
rule is a restatement of Rule 32(a)(4), F.R.Civ.P., which deals with the
use of depositions in Court proceedings.
Article II
Judicial Notice
Rule 201-JUDICIAL NOTICE OF ADJUDICATIVE FACTS-has been broadened to
allow the courts to take judicial notice of the adjudicative facts.
This provision does not refer to legislative facts and therefore it
should be assumed that there has been no change with regard to the
previous law as to this aspect.
An example of an adjudicative fact is found in Goodman v. Stalfort,
411 F. Supp. 889 (N.J. 1977). This involves a personal injury suit
resulting from plaintiff pouring fluid on charcoal he thought had gone
out but had not. This resulted in an explosion that blew up his hand.
The court judicially noticed that if any combustion is taking place in a
charcoal grill when combustible fluid is added, the addition is certain
to result in an instantaneous flareup of the volatile liquid coming in
contact with the burning charcoal.
Legislative facts are those which have relevance to legal reasoning
and the lawmaking process, whether in the formulation of a legal
principle or ruling by a judge or court or in the enactment of a
legislative body.
Please note that Rule 201 is more restrictive as to the admission of
adjudicative facts than it is in respect to judicial notice of
legislative facts. An illustration is Hawkins v. United States, 358 U.
S. 74 (1958) in which the court refused to discard the common law rule
that one spouse could not testify against the other because adverse
testimony by one spouse against another in a criminal proceeding would
destroy almost any marriage. This conclusion has a large intermixture
of fact, but the factual aspect is not indisputable.
Article III
Presumption in Civil Actions and Proceedings
Rule 301-PRESUMTIONS IN CIVIL ACTIONS AND PROCEEDINGS-merely
clarifies and places the burden of rebutting the presumption on the
person against whom the presumption is directed. Unfortunately, there
had been substantial disagreement in the past among the courts regarding
the proper weight to be given presumptions. An example may help to
illustrate how the rule works in practice. Let us take the case where
there is a question as to whether an option contract was accepted by the
acquiring agency within the time period specified. Let us assume there
is a presumption that a letter mailed is received, and the Government
introduces evidence that it mailed its acceptance of the option
contract. Then the optionor must produce evidence that it did not
receive the same in order to rebut this presumption. Otherwise, the
court would have to find that the acceptance was based on the mailing
and the presumption. However, if the optionor is able to offer evidence
that it did not receive the acceptance then apparently the presumption
disappears and it becomes a weight of the evidence question.
Rule 302-APPLICABILITY OF STATE LAW IN CIVIL ACTIONS AND
PROCEEDINGS-provides that the Federal court will look at the State law
to find the rule of decision with respect to the effect of a
presumption. This is not at all surprising in view of Erie Railroad Co.
v. Thompkins, 304 U.S. 64 (1938).
However, note should be taken in condemnation cases that application
of State rules of evidence have been severely curtailed by courts which
have adopted the view that Federal condemnation because grounded on the
Constitution would be governed both substantively and procedurely by
Federal law. United States v. 93,970 Acres, 360 U.S. 328 (1959);
United States v. Miller, 317 U.S. 369 (1943).
Article IV
Relevancy and its Limits
Rule 401-DEFINITION OF RELEVANT EVIDENCE-is consistent with that
definition that has been and is being developed in most Federal courts
although for some reason many Federal judges seem to be of the opinion
that this rule broadens the scope of the term relevancy. This author
from his limited experience perceives that because of this rule the same
courts feel that all of the rules of evidence have generally been
liberalized insofar as allowing more to come into evidence. This rule
would appear to extend to matters of discovery. Apicella v. McNeil
Laboratories, Inc., 66 F.R.D. 78 (E.D.N.Y. 1975). However, it is
suggested that the difficult relevancy questions will be resolved in
favor of discovery, while at trial they may not be admissible.
Rule 402-RELEVANT EVIDENCE GENERALLY ADMISSIBLE: IRRELEVANT EVIDENCE
INADMISSIBLE-is no more than a codification of the law as it previously
existed in Federal courts. As was stated in United States v. Jacobs,
547 F.2d 772, 777 (C.A. 2, 1976):
* * * The obvious purpose of the catchall clause (the first
sentence of Rule 402) was to bar common law rules of evidence or
state rules of evidence if inconsistent.
Rule 403-EXCLUSION OF RELEVANT EVIDENCE-ON GROUNDS OF PREJUDICE,
CONFUSION OR WASTE OF TIME-is a codification of the common law rule.
The court may exclude otherwise admissible evidence if its probative
value is substantially outweighed by the danger of unfair prejudice, the
confusion of issues, or of misleading the jury. United States v.
6,816.5 Acres of Land in Rio Arriba County, 411 F.2d 834, 839 (C.A. 10,
1969), states in part:
* * * but the opportunity for confusing the jury and needlessly
lengthening the trial are such that the courts are allowed wide
latitude in controlling the extent of such inquiry. Grain Dealers
Mutual Ins. Co. v. Farmers Union Coop., 377 F.2d 672, 680 (10th
Cir. 1967). It must be assumed that the court will use its
discretion wisely during the course of any new trial.
Rule 408-COMPROMISE AND OFFERS TO COMPROMISE-basically is a
codification of the old common law rule that settlement offers can not
be used to prove liability. However, this rule goes further and not
only precludes the offers of compromise themselves but also any evidence
of conduct or statements made in compromise negotiations, if evidence is
being offered to prove liability for, invalidity of or amount of a
claim. Offers of settlement and surrounding incidents are admissible
for other purposes, such as to prove bias, prejudice or to negate a
contention of undue delay. It should be noted however, that documents
utilized in compromise negotiations which were otherwise discoverable
are not protected by this rule.
It has been recognized that evidence of prices paid by the Government
or other entities processing the power of eminent domain for purchase
through private negotiations, of land in connection with the project is
generally not admissible. Evans v. United States, 326 F.2d 827 (C.A. 8,
1964). In the District of Columbia, the admissibility of a settlement
offer was left witin the discretion of the court. Nash v. District of
Columbia Redevelopment Land Agency, 394 F.2d 571 (C.A.D.C. 1967), cert.
den., 393 U.S. 844. This apparently has been superseded by the passage
of Rule 408. There have been no published decisions in the District
Court or the Circuit Court for the District of Columbia since the
promulgation of the Federal Rules of Evidence. However, in at least four
cases district judges in the District of Columbia have excluded
negotiated purchases based on Rule 408 where previously such evidence
would have been admitted under the Nash ruling.
In Maryland the Court in a case tried after the enactment of the
Federal Rules of Evidence excluded an offer previously made but not
accepted by the landowners. The deposit in that case was based on the
amount offered and the verdict and judgment entered thereon were for a
lesser amount. On appeal Washington Metropolitan Area Transit Authority
v. One Parcel of Land in Montgomery County, Maryland, C.A. 4, No.
76-1380, decided January 12, 1977 held:
There would be no less incentive to accept the offer, and the
purpose of the act would be frustrated. /*/
Article V
Privileges
Rule 501-GENERAL RULE-specifically provides that the privilege of a
witness, person, Government, State or political subdivision thereof,
shall be governed by the principles of the common law and it may be
interpreted by the courts of the United States in light of reason and
experience, except when State law provides the basis for decision the
privileges should be determined under State law. The Congress clearly
left the subject of privilege solely to the courts for their
interpretation and development.
This Article unlike Article VIII-HEARSAY-does not in any way pre-empt
this area from the judiciary.
Article VI
Witnesses
Rule 601-GENERAL RULE OF COMPETENCY-provides that every person is
competent to be a witness except as set forth in these rules. Its
purpose is to eliminate technical impediments to one's ability to appear
as a witness. Now only judges (Rule 605) and jurors (Rule 606( a)), in
cases in which they are sitting are generally barred as incompetent.
Rule 607-WHO MAY IMPEACH-abolishes the traditional rule against
impeaching one's own witness by providing that any party may attack the
credibility of a witness. This trend can be seen in Rule 32(a)(1), F.
R.Civ.P., which provides that any party could impeach a witness with his
own deposition and also old Rule 43(b), F.R.Civ.P., which was abolished
in anticipation of this rule.
Rule 611-MODE AND ORDER OF INTERROGATION AND PRESENTATION-Subsection
(a)-is merely a restatement of the traditional role of the court which
is to exercise reasonable control of the manner in which the proceedings
are conducted. Subsection (b) specifies that the court may allow
cross-examination to go beyong the scope of the direct examination in
the exercise of discretion. This provision goes a little further than
the traditional common law. Subsection (c) which deals with leading
questions basically follows the old rule, however, it has been softened
slightly to allow leading questions on direct where they are necessary
to develop the testimony.
Rule 612-WRITING USED TO REFRESH MEMORY-amplifies slightly the
doctrine that any writings used, such as appraisal reports, by the
witness who is testifying to refresh his memory, is available to the
adverse party for production, inspection, cross-examination and or
introduction into evidence. Subsection (2) would additionally include
such material used by the witness to refresh his memory before
testifying, if the court in its discretion determines it is necessary in
the interests of justice.
Rule 613-PRIOR STATEMENTS OF WITNESSES-changes the common law
doctrine which required that the proper foundation had to be laid.
Under the new rule you can now confront the witness concernings the
prior statement without actually showing it to him. On request you must
allow opposing counsel to see it. It is suggested that one protect
himself from such surprise by making a demand for any prior and
inconsistent statements or for that matter any admissions against
interest made by utilizing the provisions of Rule 26(b)(3), F.R.Civ.P.
However, Rule 613(b) provides that when you are using extrinsic
evidence of a prior inconsistent statement by a witness, unless the
interests of justice require otherwise, it is necessary that you
afforded him an opportunity to explain or deny it and the opposing party
must be afforded an opportunity to interrogate the witness thereon.
This provision does not apply to admissions of a party under Rule
801(d)(2).
Rule 614-CALLING AND INTERROGATION OF WITNESSES BY COURT-is in
substantial accord with the common law as it provides that the court may
call witnesses and then all parties may cross-examine any witness so
called. The court may also question any witness. However, Rule 614(c)
has an added provision which does not require the attorney to object to
the court's interrogation immediately but does allow him to defer making
the objection until the first opportunity presents itself outside the
hearing of the jury.
Rule 615-EXCLUSION OF WITNESSES-is now mandatory if requested by
either party or the court on its own motion. There is no time period as
to when this request must be made. The three exceptions are a party, an
officer or employee of a party which is not a natural person designated
as a representative by the party's attorney or a person whose presence
is shown by a party to be essential to the presentation of his cause,
i.e., an appraiser expert. Since this rule has gone into effect, I have
known of appraisal experts who have been allowed to remain in the court
after the invocation of the rule under the second and third exceptions.
Previous to the enactment of these rules the exclusionary rule on
witnesses was discretionary. See United States v. Miller, 499 F.2d 736
(C.A. 10, 1974).
This rule does not automatically preclude a witness from testifying
when there has been a violation of the sequestration order. United
States v. Whiteside, 404 F. Supp. 261 (Del. 1975). Additionally, it
would appear that this rule also applies to the taking of depositions.
Williams v. Electronic Control Systems, Inc., 68 F.R.D. 703 (E.D. Tenn.
1975).
Article VII
Opinions and Expert Testimony
Rule 701-OPINION TESTIMONY BY LAY WITNESSES-primarily a departure in
theory rather than practice from the common law. Judge Learned Hand
stated more than a half a century ago in Central Railroad Co. v.
Monihan, 11 F.2d 212, 213-214 (C.A. 2, 1926):
The truth is, as Mr. Wigmore has observed at length * * * that
the exclusion of opinion evidence has been carried beyond reason
in this country, and that it would be a large advance if courts
were to admit it with freedom. The line between opinion and fact
is at best only one of degree, and also depends solely upon
practical considerations, as, for example, the saving of time and
the mentality of the witness * * * It is a good rule as nearly as
one can, to reproduce the scene as it was, and so to correct the
personal equations of the witnesses. But one must be careful not
to miss the forest for the trees, as generally happens, unless
much latitude is allowed.
Actually the important aspect of this rule is that the opinion must
be rationally based on the percention of the witness i.e., personal
knowledge, and be helpful to and understanding of the witness or of an
issue. An example of a lay witness testifying in a condemnation suit
would be a tenant farmer describing productions or soil fertilities.
Rule 702-TESTIMONY BY EXPERTS-generally follows the common law rule.
It is now only required that the testimony be helpful rather than be
beyond the lay comprehension of the trier of fact. Therefore, the test
only requires that the subject matter be difficult rather than beyond
the ordinary understanding.
The specialized knowledge portion of Rule 702 would seem to include
landowners. However, the landowners' testimony should relate to fair
market value and not merely personal value. United States v. Sowards,
370 F.2d 87 (C.A. 10, 1966).
Rule 703-BASIS OF OPINION BY EXPERTS-at first blush would seem to go
far beyond the traditional common law restrictions on the bases of the
expert opinion. Now it is only necessary if of a type reasonably relied
upon by experts in the particular field in forming opinion or inferences
upon the subject, then the facts or data need not be admissible into
evidence.
In a condemnation case this theory had pretty well evolved prior to
the adoption of these rules. See Wilson v. United States, 350 F.2d 901
(C.A. 10, 1965); Bailey v. United States, 325 F.2d 571 (C.A. 1, 1963);
United States v. Featherston, 325 F.2d 539 (C.A. 10, 1963); United
States v. 18.46 Acres of Land in Swanton and Franklin Counties, 312 F.
2d 287 (C.A. 2, 1963); United States v. Lowrie, 246 F.2d 472 (C.A. 4,
1957); District of Columbia Redevelopment Land Agency v. 61 Parcels of
Land, 235 F.2d 864 (C.A.D.C. 1956); International Paper Co. v. United
States, 227 F.2d 201 (C.A. 5, 1955); United States v. Katz, 213 F.2d
799 (C.A. 1, 1954); United States v. 5,139.5 Acres of Land in Aiken and
Barnwell Counties, 200 F.2d 659 (C.A. 4, 1952); H & H Supply Co. v.
United States, 194 F.2d 553 (C.A. 10, 1952); United States v. 25.405
Acres of Land in Arlington County, 172 F.2d 990 (C.A. 4, 1949).
Rule 704-OPINION ON ULTIMATE ISSUE-merely resolves this problem which
occurred in some jurisdictions; however, this is not new in
condemnation since the appraisers testify to the fair market value of
the property which is the ultimate issue to be tried.
Rule 705-DISCLOSURE OF FACTS AND DATA UNDERLYING EXPERT OPINION-does
not make any radical changes. Some courts would regularly sustain
objections to opinion on the basis that a proper foundation had not been
given. Other courts would not sustain such an objection. The new rule
provides for giving a very general description of a process used by the
expert before he gives his opinion. It does not require him to provide
the specific data underlying the opinion. However, the rule does
reserve to the court the right to require otherwise. Therefore, this
would indicate that you would need additional grounds other than the
lack of a proper foundation to object to the opinion being given prior
to giving the underlying data. In order to come up with the additional
objections you would have to determine through discovery if the facts
relied upon formed a reasonable basis for the opinion in order to
proclude the jury from hearing the bottom line figure, i.e., the just
compensation due. If you do not utilize discovery, then you will not
know the additional basis for your objection until after the jury has
heard the figure and then your only recourse will be a corrective
instruction, which sometimes will be a less than desirable solution.
Rule 706-COURT APPOINTED EXPERTS-provides the court may upon its own
motion of the motion of any parties enter an order to show cause why an
expert witness should not be appointed by the court. Note that this
rule is in accord with much of the common law doctrine but is much more
specific as to the manner of appointment and the method of compensation.
Also note that this rule would allow depositions of court-appointed
experts without restriction and therefore appears to supercede Rule
26(b)(4), F.R.Civ.P., which does contain some restrictions with respect
to the deposing of experts. For a more detailed discussion of this rule
see Bua-Trial Lawyers Guide 1 Spring 1977 Experts-Some Comments Relating
to Discovery and Testimony Under the New Federal Rules of Evidence.
It has been indicated that the compensation for court-appointed
experts in condemnation cases should be paid by the Administrative
Office of the United States Courts. United States ex rel. TVA v. 109
Acres, 404 F. Supp. 1392 (E.D. Tenn. 1975).
However, it is the opinion of the Department of Justice that in
above-mentioned case the expert had been appointed prior to the
enactment of this rule and therefore, this case is not controlling. It
is the Department's position that such experts should be paid by the
Department of Justice. The Controller General has been requested to
give an opinion.
At the risk of being branded as a devotee of Learned Hand you are
commended to an article which appears in May 1901 issue of the Harvard
Law Review. See Learned Hand-Historical and Practical Considerations
Regarding Expert Testimony, 15 Harv. L. Rev. 40 (1901). This article
provides an excellent history of the use of experts going back to 1345
a.d. The author, after discussing the use of conflicting experts by the
parties, and its attendant problems concludes at page 56 supra:
It is obvious that my path has led to a board of experts or a
single expert, not called by either side, who shall advise the
jury of the general propositions applicable to the case which lies
within his province. The Constitution of such an advisory
tribunal is a matter which I shall not here discuss, as it is a
question to be worked out very possibly in different ways at
different places and times. * * *
Article VIII
Hearsay
Rule 801-DEFINITIONS-is self-explanatory. The definition of
"Hearsay" which appears in subsection (c) is a fair restatement of the
common law. This is also true of the definition of "Statement" which
appears under subsection (a) and of "Declarant" which appears in
subsection (b), however, under subsection (2) of subsection (a)
"nonverbal" conduct constitutes a statement only if it is intended as an
assertion. This is resolved the question some courts had as to whether
nonverbal conduct not intended to be an assertion was admissible or not.
Additionally it is important to note that subsection (d) includes a
provision for statements which are not hearsay. Basically this section
deals with matters that fall within the common law definition of
hearsay. This subsection is further divided into two categories, i.e.,
prior statements by witness which basically is a "new exception" and
admission of party-opponent which falls within the traditional
exceptions.
Rule 802-HEARSAY RULE-is the standard common law doctrine that
hearsay is inadmissible unless an exception is applicable. However,
this rule codifies the exceptions and severely restricts the development
of any new exceptions by the court. The Supreme Court may prescribe
rules but only pursuant to statutory authority. The exceptions to the
hearsay rule are contained in Rules 803 and 804 and also by virtue of
being excluded from the definition of hearsay, under Rule 801.
There are other exceptions allowed under Rules 803(24) and 804(b)(
5). These two subsections are worded exactly alike. These provisions
for other exceptions are extremely narrow and futhermore the proponent
of such "other" exceptions must give the adverse party fair warning by
providing the name and address of the declarant and the particulars of
the statement in order that the party-opponent may have an opportunity
to meet it.
Rules 803 and 804 provide the various exceptions to the hearsay rule.
The distinction between these two rules is that the exceptions in Rule
803 apply even if the Declarant if available to testify while the
exception in Rule 804 applies only if the witness is unavailable.
Unavailability includes exemption by reason of privilege, refusal to
testify, claimed lack of memory, inability, or the witness is beyond
reach of process. Please note that the most important hearsay exception
in condemnation is not contained in this article but is found in Rule
703-THE BASIS OF OPINION TESTIMONY BY EXPERTS-which has already been
discussed.
The fact that a statement is an exception under Rule 801, 803 and 804
is not a guarantee of admissibility but only that it will not be
excluded solely because it is hearsay.
Rule 806-ATTACKING AND SUPPORTING CREDIBILITY OF DECLARANT-allows the
declarant of a hearsay statement which is admitted into evidence to be
impeached in the same manner as a witness under Article VI.
However, there is some confusion under this Rule as to why the first
sentence includes "non-hearsay" admissions under Rule 801 but does not
include them in the last two sentences. The second sentence deals with
the deletion of any requirement to afford an opportunity to the witness
to explain or deny. The third sentence affords the opportunity to the
party against whom the hearsay statement was admitted to call the
declarant and cross-examine him. It is suggested that this omission of
"non-hearsay" admissions was an oversight and should be read into the
last two sentences.
Article IX
Authentication and Identification
The traditional rule has always been that the admission of real
physical evidence such as weapons or contraband must be identified prior
to admission because it is only then that such evidence becomes
material. However, in dealing with documents this need is not so clear
since most documents tend to identify themselves. This article does not
greatly differ from the common law.
Rule 901-REQUIREMENT OF AUTHENTICATION AND IDENTIFICATION-follows
this tradition but provides in subsection (a) that any evidence
"sufficient to support the finding that the matter in question is what
its proponents claims" meets this requirement. Subsection (b) gives 10
examples, all of which are self-explanatory. Note these examples are
illustrative only.
Rule 902-SELF AUTHENTIFICATION-merely folows the common law rule of
certain exceptions wherein the documents authenticate themselves.
Rule 903-SUBSCRIBING WITNESS TESTIMONY UNNECESSARY-abolishes the need
for producing or accounting for subscribing witnesses at trial unless
"the laws of the jurisdiction whose laws govern the validity of the
writing" so demand. The likelihood of the exception to Rule 903
occurring in a condemnation suit is quite remote.
Article X
Contents of Writings, Recordings and Photographs
Rules 1001-1004 are the Federal version of the best evidence rule.
Rule 1001-DEFINITIONS-provides the necessary definitions.
Rule 1002-REQUIREMENT OF ORIGINAL-is the traditional requirement that
the original writing be produced except as otherwise provided in these
rules.
Rule 1003-ADMISSIBILITY OF DUPLICATES-is an important departure from
the common law rule and gives the same status to a duplicate as an
original unless a genuine question has been raised as to the
authenticity of the original or unless under the circumstances it would
be unfair to admit the duplicate in lieu of the original.
Rule 1004-ADMISSIBILITY OF OTHER EVIDENCE OF CONTENTS-deals with when
and how secondary evidence of the contents will be admissible. There is
a provision for giving reasonable notice if the documents are in the
hands of a party-opponent under subsection (3). However, this could be
circumvented by a motion to produce under Rule 34, F.R.Civ.P. and then
introducing duplicates which now carry the same weight as originals.
It is important to note that there is no longer any recognition of
degrees of secondary evidence except, of course, duplicates which carry
the same weight as originals if admitted.
Rule 1005-PUBLIC RECORDS-retains the traditional exception from the
best evidence rule for public documents. The importance of this rule
has been diminished considerably by the passage of Rule 1003 allowing
for the admission of duplicates.
Rule 1006-SUMMARIES-continues the tradition that voluminous writings
may be introduced by summaries so long as the originals or duplicates
are made available to the other party for copying and/or inspection.
Rule 1007-TESTIMONY OR WRITTEN ADMISSION OF PARTY-allows the
admission without accounting for the nonproduction of the original by
showing a written admission or an admission made under oath of the other
party as to the existence of said original.
Rule 1008-FUNCTIONS OF COURT AND JURY-defines the function of the
judge and jury as far as writings are concerned. Basically, if the
question goes to the fulfillment of a condition, it is a question for
the judge. If it is a question of fact, i.e., did the writing ever
exist, or if another writing produced at trial is the original, or
whether other evidence of the contents correctly reflects the contents,
is for the jury to decide.
/*/ Curiously the footnote refers to the Nash ruling yet neither
really differentiates it nor overrules it. The decision is also silent
as to Rule 408, Federal Rules of Evidence.
LAND AND NATURAL RESOURCES DIVISION
By Thomas P. Carolan
1977 FEDERAL EMINENT DOMAIN SEMINAR: PROVING JUST COMPENSATION BY
MARKET VALUE
November 1977
In eminent domain matters there are generally three approaches to
value employed by expert appraisers in arriving at the fair market value
of property taken. These are commonly referred to as the market or
comparable sales approach, the income or economic approach, and the cost
or reproduction-cost-less-depreciation approach. There are some
variations in these approaches, such as the substitute facilities
doctrine, but basically these variations relate to one of the methods
noted.
The major problems then in every condemnation proceeding are to first
determine the approach most applicable, and second, the best manner of
presenting that approach in light of the facts of the particular case.
For example, the comparable sales approach will be of no value if in
fact there have been truly no comparable sales in the vicinity of the
property within a reasonable time of the valuation in question; the
economic approach cannot be applied if the property is not potentially
income producing; and the cost approach will be inapplicable if the
property is unimproved.
In determining which method of valuation to be applied it should
first be ascertained whether the property in question is customarily
bought and sold in the open market, and if so whether there are any
comparable sales which may serve as a guide to fair market value. If
the answer to either is in the negative, then the cost or income
approach would be more appropriate, depending upon the specific type of
case. For example, it has been held that the acquisition of a church or
school building, not ordinarily bought or sold on the open market, would
require the application of the cost approach.
It has been said that ideally the most accurate valuation conclusion
will be arrived at when all three approaches can be applied. That is,
to improved income producing property, located in an area where
comparable sales have taken place. In such cases, the appraiser applies
each of the valuation methods and then compares them, gleaning therefrom
a single valuation figure.
However, there is a distinction that one must be aware of even in
such a case. An approach actually relied upon by an appraiser in
reaching his conclusion must be supported by independent evidence
whereas the use of other methods simply as a check does not call for the
submission of independent evidence thereof. Therefore a trial attorney
should be careful to use only the best evidence available and except to
having the appraiser indicate that he has given consideration to
secondary methods, he should refrain from offering any opinion of fair
market value on speculative or less reliable approaches.
Market Approach
Under the Constitution, where the government acquires property
through its power of eminent domain, the obligation is to pay just
compensation to the land owner. Fifth Amendment -- Constitution of the
United States, " * * * not shall private property be taken for public
use, without just compensation." Case law has interpreted just
compensation to mean fair market value and generally speaking has deemed
that fair market value is the price which a purchaser, willing but not
compelled to buy, and a seller, willing but not compelled to sell, would
probably agree upon at the time of the taking by the government. United
States v. Miller, 317 U.S. 369, 374-375 (1943); Olson v. United States,
292 U.S. 246, 257 (1934).
Therefore, what we are trying to determine in a condemnation case is
a price the property would bring if exposed to sale in the open market.
In arriving at fair market value the courts have held that in the
absence of a recent sale of the condemned property itself, the "best
evidence" of value is comparable sales of a similar properties made
voluntarily and in good faith at or about the time of the taking and not
reflecting any project enhancement. United States v. Miller, supra;
Olson v. United States, supra; Onego Corporation v. United States, 295
F. 2d 461, 463 (C.A. 10, 1961); Welch v. Tennessee Valley Authority,
108 F. 2d 95, 101 (C.A. 6, 1939), cert. den. 309 U.S. 688; Baetjer v.
United States, 143 F. 2d 391, 397 (C.A. 1, 1944), cert. den. 323 U.S.
772; United States v. 18.46 acres (Thibault), 312 F. 2d 287, 288 (C.A.
2, 1963). The term "comparable", it should be noted, does not mean
"identical". No two parcels are ever identical, but the more similarity
the greater the effectiveness of this approach.
Irrespective of the law on the subject, the market approach is
actually the most realistic way of estimating market value, inasmuch as
people determine value and the market approach is based on values set by
willing buyers and willing sellers. Moreover, lay jurors and lay
commissioners (as well as most judges) are singularly influenced by
comparable sales since they can readily discern their relevance and
probably did themselves follow the same line or reasoning and
investigation in purchasing a new home, office or industrial building
for their own personal use.
Since a prior sales of the condemned property, reasonably near in
time, on the open market, is singularly the best evidence of value, the
first question to be determined is whether such a sale has taken place
and if so, the circumstances surrounding same. It should be noted that
if the records and verifications indicate special circumstances may
exist involving the transaction, no harm will come from taking the
deposition of the owner himself. The deposition cannot be used against
the government and the information obtained from the owner concerning
the property should answer all questions as to the sale of which the
appraiser should be fully informed.
Obviously recent sales of the same property are exceptions rather
than the rule, and in any event, the appraiser should search for
additional sales which he might consider comparable to the subject
property. United States v. 18.46 acres (Thibault), supra; United
States v. Benning Housing Corp., 276 F. 2d 248, 253 (C.A. 5, 1960);
United States v. Lowrie, 246 F.2d 472, 474 (C.A. 4, 1957); Knollman v.
United States, 214 F. 2d 106, 109 (C.A. 6, 1954); Westchester County
Park Commission v. United States, 143 F. 2d 688, 693-694 (C.A. 2, 1944),
cert. den. 323 U.S. 726; United States v. Meyer, 113 F. 2d 387, 397
(C.A. 7, 1940), cert. den. 311 U.S. 706; United States v. Baetjer,
supra; United States v. Featherston, 325 F. 2d 539 (C.A. 10, 1963).
This investigation should consist of collecting market data from
whatever sources are available -- e.g., public records, property
transfer services, other appraisers and realtors, personal interviews
with buyers, sellers, attorneys or brokers, properly verified and
documented, and, of course, from his own experience if he has been
involved in sales of real estate in the area or has appraised in the
area.
Such items as revenue stamps will in most instances give an
indication of the price paid for a particular property, however caution
must be exercised and the appraiser should be instructed to attempt to
verify the information with someone personally involved in the
transaction. Ramming Real Estate Co. v. United States, 122 F. 2d 892,
895 (C.A. 8, 1941); Dickinson v. United States, 154 F. 2d 642, 643 (C.
A. 4, 1946); Baetjer v. United States, supra.
Once the information has been gathered and the appraiser has
investigated the sales, and is satisfied that all available evidence
concerning same has been obtained (to the satisfaction of the attorney
as well), the comparison process begins. Baetjer v. United States,
supra; District of Columbia Redev. L.A. v. 61 Parcels of Land, 235 F.
2d 864 (C.A. D.C., 1956). Each market transaction should be judged for
comparability in several aspects, namely -- date, location neighborhood,
topography, improvements, if any, its income, and any other special
conditions. From such a study the appraiser should be able to discern
the points of similarity to the subject property as well as the
differences in selling prices. The appraiser should be able to make
adjustments as against the subject property, preferably by dollar amount
rather than the use of percentages, so as to be able to explain any
differences such as in time and location that require adjustment.
The next problem then, as far as the attorney is concerned, is to be
able to properly present the information gathered to the triers of the
facts. United States v. Johnson, 285 F. 2d 35, 40 (C.A. 9, 1960).
Graphic evidence is a most reliable tool, and photographs of the subject
property and of the comparable as well as a large map showing the
location of the various comparables in relationship to the subject
property is a must. These will provide physical connections, to the
oral testimony and should serve to bolster a witness's credibility by
showing thoroughness of preparation as well as to make a destructive
cross-examination more difficult.
I would be remiss should I fail to state that the same investigations
and verifications noted above in regard to the sales intended to be used
by the government's expert should be followed in regard to the
landowner's sales. To be able to bring out on cross-examination
dissimilarities between the condemned property and the condemnee's sales
is often just as essential to the success of the government's case as is
the presentation of the government's sales.
It cannot be over-emphasized that the "market approach" is really the
truest test for determining market value, and as such should take
precedence over any other method of appraisal. To rely on other methods
to support an opinion of value is to disregard the "best evidence".
Income Approach
A second approach to the valuation of property for eminent domain
purposes is the income approach. As its designation implies, this
method is restricted to income-producing property. It should be further
noted that when using this approach one must keep in mind that: (1) the
evidence of income being relied upon is to be related to the character
of the property and not the skill of the owner; (2) the valuation is to
be based on the current economic rent at date of appraisal rather than
on potential income; (3) the rental must be deemed free of collusion;
(4) the rental period must be reasonably proximate to the date of
taking; and, (5) the property is one devoted to a legal use. United
States v. Leavell & Ponder, Inc., 286 F. 2d 398 (C.A. 5, 1961); United
States v. 158.76 Acres in Townshend, Vt., 298 F. 2d 559, 561 (C.A. 2,
1962); United States v. Benning Housing Corp., supra.
The income approach is a method used to estimate the market value of
a property based upon the income it produces. Under this approach the
estimated net return over the estimated life of the improvement is
capitalized at a rate which will provide for the recapture or
amortization of the investment, sometimes termed depreciation, as well
as a proper return to the investor. Likins-Foster Monterey Corp. v.
United States, 308 F. 2d 595 (C.A. 9, 1962); United States v. Tampa Bay
Gardens, Inc., 294 F. 2d 598 (C.A. 5, 1961); Buena Vista Homes, Inc. v.
United States, 281 F. 2d 476 (C.A. 10, 1960).
This approach to the valuation of property is, at best, complicated.
In the event of trial the clarity with which the appraiser can explain
the computations made and the assumptions on which they are based will
determine the impact his conclusion of value will have. Unlike the
market approach for example, which is based on evidence easily
understandable by jurors, the capitalization-of-income method is based
on mathematical computations and assumptions, and is a method of
determining value to which most jurors will never have been exposed.
It is therefore essential even when using this method to employ
market data information wherever possible, for example in the
capitalization rate selected and in the estimate of both future income
and expenses incident to the producing of income.
Capitalization of income comprehends the use of a rate of return in
comparable investments. Therefore evidence of such investments should
be sought. The value of many properties is judged by investors by the
rate of return that can be expected as indicated by calculating a
property's expected or actual income productivity, and therefore if at
all available, the use of comparable sales or rentals to establish a
capitalization rate becomes most important.
As for the actual presentation of the evidence when using this type
of approach, the use of charts showing sale prices or rentals of various
comparables, as well as the net income and the manner in which the
transaction was analyzed to determine the capitalization rate should be
explored thoroughly. Failure to adequately convince the jury that each
step in the capitalization of income process has been properly applied
to the particular valuation will lessen or even eliminate any
effectiveness that the approach and conclusion derived therefrom might
otherwise have.
Cost Approach
A third approach to the valuation of property which is generally used
when no comparable sales are available and the property being condemned
is not income producing is called the cost approach. United States v.
Certain Interests in Champaign County, Ill, Chanute Garden Apartments,
et al., 271 F. 2d 379 (C.A. 9, 1959), cert. den. 362 U.S. 974. This
method is usually applied where the property is unique, or is being used
for some special purpose such as a church or school. It can be also used
if highest and best use shows potential for development and "market
demand" for same is established.
This is the least desirable approach since in using this method the
appraiser adds the estimated value of the land to his estimate of the
reproduction cost new, less depreciation of the building and
improvements. The problem here is that the land, as enhanced by
improvements, is not being treated as an integral unit, as it should be,
but rather the parts are being separately appraised and then added
together. However, even in the cost approach the value of the land
should be determined by comparable sales so the gathering of market data
information is still required. If, of course, comparable sales are
available for that particular type of property, then the cost approach
should not be relied upon, except merely as a check.
Moreover, generally absent a showing that it is relevant or material
because of closeness in time and circumstances, evidence of the original
cost of the building is inadmissible. United States v. 6.87 acres of
land, etc., 52 F. Supp. 594 (E.D.N.Y., 1943), aff'd. 147 F. 2d 351 (C.A.
2, 1945). Similarly, reproduction cost-less-depreciation evidence will
not be admissible unless the adaptability of the improvement to the land
is established, and the prices upon which the reproduction cost is
calculated are normal and not inflated. United States v. Certain
Interests in Champaign County, Ill., Chanute Garden Apartments, et al.,
supra.
Two methods for determining reproduction costs are commonly used.
The first involves a determination of unit cost (for example, cost per
square foot) and multiplication of that cost by the total number of
units involved; the second, and more preferable method, and one for
which market data information may be available, considers an estimate of
the cost of materials plus the cost of construction, taking account of
an appropriate deduction for depreciation. It is required of the
appraiser estimating depreciation to consider not only physical
depreciation but functional obsolescence and economic aspects as they
relate to the particular type of improvement. United States v. Certain
Property in Borough of Manhattan, 403 F. 2d 800 (C.A. 2, 1968).
Finally, even though the property is unique, the reproduction cost
method should not be employed where the reproduction of the improvement
being condemned is not necessary, or where it can be shown that no
prudent person would reproduce it.
Substitute Facilities
An offshoot of the cost approach comes into play with the doctrine of
substitute facilities. This approach is based upon the principal of
relocation, or what a given property can be substituted for on the
market. The substitute facilities doctrine has been generally employed
in those cases where the property being condemned was publicly owned, so
unique in nature that it would not be bought and sold on the open
market, and was necessary to replace for the benefit of the general
welfare of the community. The usual type cases involved the
government's acquisition of a street or highway, or some public
facility. 4 Nichols, Eminent Domain Section 12.313 (Rev. 3d Ed., 1970).
The theory behind the substitute facilities doctrine is that because
of the unique nature of the property taken it has no true market value
and the application of the market value standard would not be just.
Just compensation is therefore measured by the cost of constructing
reasonably necessary substitute facilities to replace those acquired.
Washington v. United States, 214 F. 2d 33, 39 (C.A. 9, 1954). In Brown
v. United States, 263 U.S. 78 (1923) where the government had condemned
an old town and was attempting to provide the condemnee with new land
sites, the court concluded that the best means of making the parties
whole as "a method of compensation by substitution". In Town of Bedford
v. United States, 23 F. 2d, 453 (C.A. 1, 1927) the doctrine was extended
to cover the cost of town roads for the court felt that the town had a
legal duty to maintain roads for its citizens and to build new roads
would add an additional burden on the taxpayers, which according to the
court should be compensated by the federal government.
In more recent cases, the courts have more liberally applied the
substitute facilities theory, holding for example, that the duty to
replace need not be a legal one in order to justify compensation.
United States v. Des Moines County, 148 F. 2d 448, 449 (C.A. 8), cert.
den. 326 U.S. 743 (1945). In United States v. Certain Property in the
Borough of Manhattan, supra, the court found that "if the structure is
reasonably necessary for the public welfare compensation is measured not
in terms of 'value' but by the loss to the community occasioned by the
condemnation." More recently in United States v. 564.54 acres of land,
506 F. 2d 796 (C.A. 3, 1974), the court held that the substitute
facilities doctrine would be applicable if it could be justified by the
overall needs of the community and those need not be based on a legal
obligation. The Third Circuit in the same opinion also reasoned that
there is no justification for limiting the application of the substitute
facilities doctrine to public condemnees, holding that property owned by
a charitable organization and being operated on a not-for-profit basis
might fall within the doctrine if all of the other elements were met.
Even though the doctrine has been liberalized by eliminating the
requirements of public ownership and legal necessity to replace, the
courts have still maintained that there must be a reasonable necessity
to replace the facilities acquired. In United States v. Street, Alleys
and Public Ways in the Village of Stoutsville, 531 F. 2d 882 (C.A. 8,
1976), the court upheld the government's claim that it was obligated to
construct only those new roadways necessary to provide access to those
residences isolated by the government's taking, and that since the
village's sole purpose was to serve the needs of its citizens it could
only be compensated for those replacement streets needed at the time of
the court action.
In recent years the doctrine has been extended to include a school
playground and a city owned bathhouse. United States v. Certain
Property in Borough of Brooklyn, 346 F. 2d 690 (C.A. 2, 1965); United
States v. Certain Property in Borough of Manhattan, supra. In the
former, the government was required to pay the cost for the acquisition
of nearby property, the demolition of the buildings situate thereon and
the cost of construction of the playground area. In the latter
decision, the government was required to pay the cost for the acquition
of land and the construction of a functionally equivalent substitute for
the bathhouse. It should be noted that in this case physical
depreciation and functional obsolescence was allowed and the payment for
items such as terrazzo floors, plaster walls, found in the old building,
was not required. However, the costs to bring other items in the old
building to up-to-date standards, such as a larger swimming pool, were
required to be paid.
Even with this doctrine the gathering of market data information for
consideration by the appraiser, as well as by the triers of the fact,
can be essential. It goes without saying that comparable sales, where
available, would be most helpful in evaluating the land acquired or to
be substituted. Moreover, construction costs of similar facilities, if
available, located in the general area, could serve well as a guide in
cross-examination of the landowner's experts. There is also the
question of whether the utility offered by the improvement on a
comparable property could be substituted for the improvement on the
subject property, or one location substituted for another as of the date
of taking. City of Wichita v. Unified District No. 259, 439 P. 2d 162
(Kan. 1968); Jefferson County, etc., v. Tennessee Valley Authority, 146
F. 2d 564 (C.A. 6, 1945); Brown v. United States, 263 U.S. 78 (1923);
State of Washington v. United States, 214 F. 2d 33 (C. A. 9, 1954),
cert. den. 348 U.S. 862. These are just a few areas to indicate
generally what the appraiser should be looking for from a market data
standpoint when applying the substitute facilities theory.
In conclusion, market data information is most favorable regardless
of the appraisal approach required to establish just compensation.
Wherever proper the market approach should be used since it is, as the
courts have stated, the "best evidence" of fair market value. However,
even if other methods are required, market data information can and
should play a major role in at least one aspect of the type of proof
required. A case based upon comparable sales in whole, or in part, is
one with a solid foundation.
LAND AND NATURAL RESOURCES DIVISION
By Peter H. Ruvolo
1977 FEDERAL EMINENT DOMAIN SEMINAR: TEMPORARY AND PARTIAL TAKINGS
November 1977
Partial Takings
My comments on partial takings are intended only as a summary of the
general principles involved. For a study in depth, reference should be
made to previous articles and the source materials cited, in VI
Condemnation Seminar 1973 under Item "V," by Max E. Findley, and in V
Condemnation Seminar 1971 under Item "T," by Harry W. McKee.
When the Government condemns but a part of a larger, unitary tract,
Federal law requires compensation to be made not only for the value of
the land taken but also for the diminution in the value of the remainder
area as a result of the taking (severance damage). E.g., United States
v. Miller, 317 U.S. 369, 376 (1943); Sharp v. United States, 191 U.S.
341, 350-356 (1903); Bauman v. Ross, 167 U.S. 548, 574 (1897); United
States v. Honolulu Plantation Co., 182 F.2d 172, 175 (C.A. 9, 1950),
cert. den., 340 U.S. 820; Baetjer v. United States, 143 F.2d 391, 396
(C.A. 1, 1944), cert. den., 323 U.S. 772.
A taking may seriously reduce the value of the remaining property,
such as where a working farm is cut in two by a limited access highway,
leaving substantial farm improvements on one side and the farmland on
the other, with the access between them by means of a distant county
road across the new highway. But the picture drastically changes if
there is an interchange on the land, or close by, which creates valuable
commercial frontage. Many projects involving the Department in recent
years have been acquisitions by the Corps of Engineers for reservoirs.
A partial taking for such a project may ruin a farm, but may change the
highest and best use of the remaining land from agriculture to
residential subdivision, with a lake view. Thus, in partial takings the
remainder may be damaged, that is, reduced in value, or it may be
enhanced, or not affected at all.
In partial takings just compensation is usually measured by what is
called the "before and after" approach to value. In the before
situation the property that qualifies as the unit or larger parcel is
valued as of the date of taking without reference to the project. In
the after situation, the land remaining of the original unit or larger
parcel is valued on that same date considering the effects of the
project. The difference between those two figures -- the before and the
after -- constitutes the entire just compensation due, which includes
both the value of that which is actually condemned and a reduction in
value, if any, to the remainder. United States v. Miller, supra;
Bauman v. Ross, supra; McCoy v. Union Elevated Railroad Co., 247 U.S.
354, 364 (1918).
A threshold determination that must be made prior to applying the
before and after approach is the extent of the unit or larger parcel
from which the condemned land was "severed." For land to qualify as a
remainder to be either reduced in value or enhanced, there must be both
a unity of use and a unity of title with the land taken for the project.
United States v. Evans, 380 F.2d 761 (C.A. 10, 1967); Kolstad v.
United States, 262 F.2d 839 (C.A. 9, 1959); Winn v. United States, 272
F.2d 282 (C.A. 9, 1959); United States v. Mills, 237 F.2d 401 (C.A. 8,
1956); International Paper Co., v. United States, 227 F. 2d 201 (C.A.
5, 1955); United States v. Waymire, 202 F.2d 550 (C.A. 10, 1953);
United States v. Honolulu Plantation Co., supra; Baetjer v. United
States, supra, at 394.
The valuation figure in the before situation, and the valuation
figure in the after situation, should be the result of separate
appraisals. Where the taking has a major impact on the unit, such as in
drastically reducing the size, or changing the highest and best use, the
approach to value in each, and the comparable sales, may be entirely
different. Trial counsel must look carefully into the factual and legal
assumptions forming the basis for the valuation conclusions in each
approach.
There are some partial taking cases where adherence to the before and
after rule is not practical due to the size of the unit and the expense
involved in appraising it. An example would be condemnation of a few
acres of a large ranch or a large timber holding, where the land taken
is not unique or especially adapted to the use of the whole. (See
Uniform Appraisal Standards for Federal Land Acquisitions, 1973, p.
25). However, in such a case the appraiser should have sufficient
knowledge of the entire property -- the unit -- to enable him to testify
that the value of the remainder has not been affected, or if it has,
that damages are limited and readily measurable, such as by a "cost of
cure" approach. /1/ Nevertheless, if it is determined by discovery that
the defendants are claiming substantial damages, it may be desirable in
some cases to be prepared on a formal before and after approach, for
rebuttal purposes.
It is important to remember that the before and after rule, with
respect to disregarding the effect of the project in the before value,
and considering it in the after value, is not without qualification.
The case law recognizes a distinction between "general" and "special"
benefits allowing an offset only for those benefits which are considered
"special." /2/ Bauman v. Ross, 167 U.S. 548, 574 (1897); 6,816.5 Acres
in Rio Arriba County v. United States, 411 F.2d 834, 837 (C.A. 10,
1969); United States v. 2,477.79 Acres in Bell County, 259 F.2d 23
(C.A. 5, 1968); United States v. Trout, 386 F.2d 216 (C.A. 5, 1967);
Aaronson v. United States, 79 F.2d 139, 140 (C.A.D.C. 1935); United
States v. 930.65 Acres in Jefferson County, 299 F. Supp. 673 (D. Kan.
1968).
However, the line of demarcation in the case law between general and
special benefits is not clear-cut, and is difficult to distinguish and
separate in the appraisal process.
As a broad proposition, general benefits are usually defined as those
which are common to the area by reason of the project (the applicable
area being variously defined by different courts), while special
benefits are those peculiar to the property in litigation by reason of
the project.
A principle behind the distinction is that land-owners in a project
area whose property is not taken share in the general but not in the
special benefits. Thus, the reasoning goes, to offset general benefits
would penalize a condemnee by placing him in a position inferior to that
of his neighbors whose land has not been condemned.
An early landmark case discussing benefits is Bauman v. Ross, supra,
which arose out of a condemnation under a District of Columbia statute
providing that in a partial taking the jury could offset the benefit.
/3/
In rejecting a challenge to the constitutionality of the statute, the
Court said at 574-575:
* * * when part only of a parcel of land is taken for a
highway, the value of that part is not the sole measure of the
compensation or damages to be paid to the owner; but the
incidental injury or benefit to the part not taken is also to be
considered. When the part not taken is left in such shape or
condition, as to be in itself of less value than before, the owner
is entitled to additional damages on that account. When, on the
other hand, the part which he retains is specially and directly
increased in value by the public improvement, the damages to the
whole parcel by the appropriation of part of it are lessened. If,
for example, by the widening of a street, the part which lies next
the street, being the most valuable part of the land, is taken for
the public use, and what was before in the rear becomes the front
part, and upon a wider street, and thereby of greater value than
the whole was before, it is neither just in itself, nor required
by the Constitution, that the owner should be entitled both to
receive the full value of the part taken, considered as front
land, and to retain the increase in value of the back land, which
has been made front land by the same taking.
The Court stated at 584:
The Constitutional of the United States contains no express
prohibition against considering benefits in estimating the just
compensation to be paid for private property taken for the public
use; and, for the reasons and upon the authorities above stated,
no such prohibition can be implied; and it is therefore within
the authority of Congress, in the exercise of the right of eminent
domain, to direct that, when part of a parcel of land is
appropriated to the public use for a highway in the District of
Columbia, the tribunal vested by law with the duty of assessing
the compensation or damages due to the owner, whether for the
value of the part taken, or for any injury to the rest, shall take
into consideration, by way of lessening the whole or either part
of the sum due him, any special and direct benefits, capable of
present estimate and reasonable computation, caused by the
establishment of the highway to the part not taken. (Emphasis
added.)
The "special and direct benefit" wording of Bauman v. Ross appears in
the Act of July 18, 1918, 40 Stat. 911, 33 U.S.C. Section 595.
In all cases where private property shall be taken by the
United States for the public use in connection with any
improvement of rivers, harbors, canals, or waterways of the United
States, and in all condemnation proceedings by the United States
to acqjire lands or easements for such improvements, where a part
only of any such parcel, lot, or tract of land shall be taken, the
jury or other tribunal awarding the just compensation or assessing
the damages to the owner, whether for the value of the part taken
or for any injury to the part not taken, shall take into
consideration by way of reducing the amount of compensation or
damages any special and direct benefits to the remainder arising
from the improvement, and shall render their award or verdict
accordingly. (Emphasis added.) /4/
In the ultimate analysis, the setting off of benefits principle
appears to be rooted more in constitutional principles than in statute.
This is demonstrated in Aaronson v. United States, 79 F.2d 139 (C.A.D.
C. 1935) where the trial court instructed the jury to take special
benefits into consideration in assessing compensation. This instruction
was claimed to be in error because the statute under which the
proceedings were held contained no provision for setting off benefits.
The court held, at 140, that the absence of such a provision was of no
consequence, saying:
* * * The Legislature must determine the need for the taking,
but the ascertaining of what is just compensation is a judicial
function. It is, therefore, of no consequence whether a provision
be inserted in the condemnation act requiring the jury to take
into consideration either damages on the one hand, or benefits on
the other, for in either case they will be competent to do this
without such a provision, since both are elements inherent in the
determination of an award which is the equivalent of just
compensation. In this view, while it was entirely permissible for
Congress in the act to expressly provide that the jury might take
into consideration benefits to the remainder of a parcel from
which a part is taken, the omission -- without express words
showing an intent to prescribe a rule of compensation more
favorable to the owner than the Constitution requires -- no more
affects the principle on which the proceeding is based than would
a like failure in the act to provide for damages.
In United States v. River Rouge Improvement Co., 269 U.S. 411,
415-416 (1926), the Court defined "special benefits" in the following
context:
We are of opinion that an increase in the value of the
remaining portion of any parcel of land caused by its frontage on
the widened river, carrying a right of immediate access to and use
of the improved stream, would constitute a special and direct
benefit within the meaning of the statute, as distinguished from a
benefit common to all the lands in the vicinity, although the
remaining portions of other riparian parcels would be similarly
benefited. This is in accordance with the rule recognized by this
court and established by the weight of authority in the state
courts in reference to special benefits to lands abutting upon a
new or widened street. Bauman v. Ross, 167 U.S. 548, 575; Allen
v. Charlestown, 109 Mass. 243, 246. (Additional citations
omitted.) In Allen v. Charlestown, supra, 246, the rule is thus
stated: 'The benefit is not the less direct and special to the
land of the petitioner, because other estates upon the same street
are benefited in a similar manner. The kind of benefit, which is
not allowed to be estimated for the purpose of such deduction, is
that which comes from sharing in the common advantage and
convenience of increased public facilities, and the general
advance in value of real estate in the vicinity by reason thereof.
* * * The advantages of more convenient access to the particular
lot of land in question, and of having a front upon a more
desirable avenue, are direct benefits to that lot, giving it
increased value in itself. It may be the same, in greater or less
degree, with each and every lot of land upon the same street. But
such advantages are direct and special to each lot. They are in
no proper sense common because there are several estates, or many
even, that are similarly benefited.'
In United States v. 2,477.79 Acres in Bell County, 259 F.2d 23, 28
(C.A. 5, 1958), which involved condemnation for a project within the
scope of 33 U.S.C. Section 595, there is this discussion of the
difference between general and special benefits:
* * * The reduction or offset is only with respect to special
benefits accruing to the remaining land and no deduction will be
made for general benefits. (Citations omitted.)
General and special benefits have been thus distinguished:
'The most satisfactory distinction between general and special
benefits is that general benefits are those which arise from the
fulfillment of the public object which justified the taking, and
special benefits are those which arise from the peculiar relation
of the land in question to the public improvement. Ordinarily the
foregoing test is a satisfactory one, though sometimes difficult
to apply. In other words, the general benefits are those which
result from the employment of the facilities provided by the new
public work and from the increased general prosperity resulting
from such enjoyment. The special benefits are ordinary merely
incidental and may result from physical changes in the land, from
proximity to a desirable object, or in various other ways.' 3
Nichols on Eminent Domain, 3d Ed., 45 Section 8.6203.
* * * We think that special benefits are those which are direct
and peculiar to the particular property as distinguished from the
incidental benefits enjoyed to a greater or less extent by the
lands in the area of the improvement. A special benefit is
nonetheless such because other lands in like situations are
similarly benefited.
In the case of United States v. Crance, 341 F.2d 161 (C.A. 8, 1965),
which involved a partial taking for a reservoir project, the district
court instructed the jury, in effect, that for benefits to be special
they must not be such as to be enjoyed generally by other tracts in the
neighborhood, no portion of which was taken. /5/ In reversing on this
and other grounds, the Tenth Circuit said, at 167:
It is settled that special benefits do not become general
merely because other lands in the area are similarly benefited.
(Citations omitted.) The District Court's definition of 'special
benefits' is inaccurate.
The Land and Natural Resources Division in various appellate briefs
/6/ has argued that there should be no distinction between special and
general benefits and that the before and after process mandated by
constitutional principles as interpreted in the case law, necessarily
requires that the after value include all elements of value that would
be considered in the market place. Further, it has argued that to fail
to include general benefits in the after value as an offset against the
remainder, in effect, allows the landowner to secure a pro tanto
enhancement due to the project, contrary to the Miller rule.
The courts have not been receptive to the Department's position.
Accordingly, we must be prepared to differentiate between general and
special benefits at trial. However, some cases give a much broader
meaning that others to special benefits, in holding that a benefit
arising under a particular set of facts is special and not general. /7/
There is authority that any increase in value by reason of the
project that can be definitely measured in the market constitutes a
special benefit. United States v. Trout, 386 F.2d 216 (C.A. 5, 1967).
In that case, which also involved a reservoir project, the trial court
confirmed a commissioners' report which rejected the Government's claim
for offsetting special benefits, on the ground there was no evidence
relating to the capacity and structure of the reservoir. In reversing,
the Fifth Circuit defined special benefits in the following context:
* * * it was unrealistic for the commission to doubt that the
Canyon Dam would come into existence or that the Trouts would have
waterfront property after the dam was completed. Olson v. United
States, 1934, 292 U.S. 246, 257, 54 S.Ct. 704, 709, 78 L. Ed.
1236 established the rule that an element or event affecting value
must be shown to be reasonably probable and not a matter of
speculation, but in this case the building of Canyon Dam was not a
matter of speculation. The increasing prices of property
bordering on the contemplated project make this clear. Moreover,
in demanding evidence pertaining to the structure of the
reservoir, the commission misconceived the issue of special
benefits. The question is whether the market value of the
remainder was increased by its prospective frontage on the water.
Market value 'is * * * a reflection of the state of mind of the
public with respect to the property.' United States v. Smith, 5th
Cir. 1966, 355 F.2d 807, 809. If the commission felt that willing
buyers would have paid more for the remainder at or about the time
of taking because of the contemplated project, then an offset for
special benefits would have been in order. (Emphasis added.)
In practical application, the interpretation given to special
benefits in the Trout case, supra, approaches the effect of the
Department's position that no distinction should be made between special
and general benefits. Although the interpretation given in Trout
reflects a minority view, it is believed to represent the better rule.
Until such time that the courts see the wisdom of the Department's
position as to general versus special benefits, a partial solution is to
argue the soundness of the approach on benefits adopted in the Trout
case.
The next hurdle in qualifying benefits as an offset against just
compensation due is that the land taken must be within the "scope of the
project." That is, if from the time that the Government became committed
to a project, it was probable that the property would eventually be
acquired, then that property cannot participate in price increases
created by the project. The reasoning is that the Government should not
be required to compensate for values that it has created. Conversely,
if it did not appear to be probable at the outset that the property
would be acquired, then an owner is entitled to participate in price
increases created by the project in the same manner as his neighbors who
had no part of their land taken. The rule serves notice to parties in
the market place as to both the extent and the limits of the area in
which project related enhancement is to be excluded in an eventual
taking. Thus, if the taking is outside the original scope of the
project, the owner is entitled to have project enhancement included in
the before value (just as it must be included in the after value), and
there is no offset. For cases dealing with "scope of the project" see:
United States v. Reynolds, 397 U.S. 14 (1970); United States v.
Miller, 317 U.S. 369 (1943); Shoemaker v. United States, 147 U.S. 282
(1893); State of Louisiana, Sabine River Authority v. Lindsey, 524 F.
2d 934 (C.A. 5, 1975); United States v. 959.68 Acres in Mercer County,
415 F.2d 401 (C.A. 3, 1969), cert. den., 397 U.S. 964; United States v.
First Pyramid Life Insurance Co. of America, 382 F.2d 804 (C.A. 8,
1967); United States v. Crance, 341 F.2d 161 (C.A. 8, 1965), cert.
den., 382 U.S. 815; John L. Roper Lumber Company v. United States, 150
F.2d 329 (C.A. 4, 1945); Scott v. United States, 146 F.2d 131 (C.A. 5,
1944).
An additional point to note, in considering enhancement and benefits,
is that in contrast with the rule in some states permitting the offset
of benefits only against the amount of severance damages, the Federal
Rule allows an offset against both the value of the land taken and
severance damages. United States v. Miller, supra; Bauman v. Ross, 167
U.S. 548 (1897); United States v. Fort Smith River Development Corp.,
349 F.2d 522 (C.A. 8, 1965); Pokladnik v. United States, 378 F.2d 59
(C.A. 5, 1967); United States v. Trout, 386 F.2d 216 (C.A. 5, 1967);
Aaronson v. United States, 79 F.2d 139 (C.A.D.C. 1935).
Temporary Takings
In many instances the Government requires only a temporary use of
property. The estate is acquired for a specified period of time. In
addition, the estate may include the option to renew for additional
periods.
Just compensation for the taking of a temporary interest in property
is measured by the fair rental value of the temporary use and occupancy
acquired. Kimball Laundry Company v. United States, 338 U.S. 1, 6-7
(1949); United States v. Petty Motor Co., 327 U.S. 372, 377-378 (1946);
United States v. General Motors Corp., 323 U.S. 373, 382, 383 (1945);
Phelps v. United States, 274 U.S. 341, 342-343 (1927); Kansas City
Southern R. Co. v. Commissioner of Internal Revenue, 52 F.2d 372,
379-380, 381 (C.A. 8, 1931), cert. den., 284 U.S. 676 (1931); In re
Condemnation of Lands for Military Camp, 250 Fed. 314 (E.D. Ark. 1918);
Pope v. United States, 26 C. Cls. 11, 13 (1890); Johnson v. United
States, 4 C. Cls. 248, 251 (1868); Johnson v. United States, 2 C. Cls.
391, 415-416, 419 (1866).
Sometimes the Government acquires all or part of the interests of a
lessee. In a situation where the estate condemned constitutes all of
the term of a lessee, the fair rental value of that leasehold includes a
consideration of what a willing buyer would pay for the lease --
considering the probabilities of renewal. Almota Farmers Elevator Co.
v. United States, 409 U.S. 470 (1973).
As a general proposition, the rules for determining just compensation
applicable to fee acquisitions also apply to the determination of rental
value in temporary takings. But there are variations. There have been
temporary takings where the factual situations have induced the Courts
to recognize a right to receive just compensation, either as part of
fair market rent, or in addition to rent, for elements that would be
considered as consequential damages in fee acquisitions, and
noncompensable. However, the allowance of such compensation, contrary
to the general rule, has only been permitted when the United States has
taken a temporary portion of a long-term lease and the long-term tenant
was obligated under the lease for the remainder of the term after the
Government's occupancy ceased. /8/
A leading case involving such a situation is United States v.
General Motors Corp., supra. There the Government condemned part of the
unexpired term of a lessee for occupancy of a warehouse which was
equipped for and used in the leaseholder's business. The lessee was
allowed recovery for the cost of removing stored property, and in
addition was entitled to show elements that would affect the price which
would have to be asked and paid for a temporary occupancy to make the
lessee whole, such as for temporary storage elsewhere and returning of
the lessee's goods to the premises at the end of the Government's term.
The Court said (at 383):
Some of the elements which would certainly and directly affect
the market price agreed upon by a tenant and a sublessee in such
an extraordinary and unusual transaction would be the reasonable
cost of moving out the property stored and preparing the space for
occupancy by the subtenant. That cost would include labor,
materials, and transportation. And it might also include the
storage of goods against their sale or the cost of their return to
the leased premises. Such items may be proved, not as independent
items of damage but to aid in the determination of what would be
the usual -- the market -- price which would be asked and paid for
such temporary occupancy of the building then in use under a
long-term lease. The respondent offered detailed proof of amounts
actually and necessarily paid for these purposes. We think that
the proof should have been received for the purpose and with the
limitation indicated. Proof of such costs as affecting market
value is to be distinguished from proof of value peculiar to the
respondent, or the value of good-will or of injury to the business
of the respondent which, in this case, as in the case of the
condemnation of a fee, must be excluded from the reckoning.
(Emphasis Added.)
Another leading case is United States v. Petty Motor Co., 327 U.S.
372 (1946), where the Government's temporary taking was for a period
longer than the leasehold term of the tenant. In denying the tenant's
claim of entitlement to compensation for costs of moving and
reinstallation of equipment at another location, the Court held that
condemnation all interests in a leasehold should be treated in the same
manner as condemnation of all interests in the fee title, and that in
neither situation should evidence of the cost of removal or relocation
be admitted. Such costs are apart from the value of the thing taken and
personal to the lessee. The lessee would have to move at the end of his
term, and to bear these costs, unless the lease was renewed.
The just compensation due in a temporary taking can usually be
readily measured when the property interest condemned is of a type that
is rented, and there is no disagreement as to the highest and best use.
For instance, many suburban and rural post offices occupy privately
owned structures under long-term leases. Normally, there is ample
market data to support a rental rate on similar type structures, which
can be adjusted to the subject.
The vast bulk of temporary takings involving the Department are to
acquire rights in vacant land, or in semi-vacant land, for military
training and experimental purposes. For land conceded to have a highest
and best use for agricultural or grazing uses, the obvious comparables
are leases for like purposes in the area. But for some property there
may be no reason why anyone would rent it, and accordingly, no market
data to support a rental rate. Or the land may be rentable, such as for
grazing, but the owners contend it has a higher and better use, for
which there is no rental market data. Or the rental market data may be
adequate, but the Government's estate is so unique that it offers little
comparison to that market.
An example of a unique estate is in the so-called co-use area of the
White Sands Missile Range in New Mexico. There the Government acquired
the right by negotiation (with one exception) to require the ranchers on
10-days' notice to leave the premises for up to 12 hours while missiles
pass overhead from Utah to the main part of the Range to the south. The
Government also acquired the right to come onto the land in the co-use
area to search for and retrieve any stray hardware. There the
Government acquired aspects of a personal right -- to require the
ranchers to leave the premises at such times and for such periods that
the commanding officer of the Range directs. The Government's position
is that the measure of compensation is the fair rental value of the
ranch before imposition of the estate less the rental value with the
estate. Evacuation expenses, such as for a motel in town and
subsistence, have been handles administratively as the events occur.
There is a tendency by both landowners, and by our client agencies,
to arrive at "rental value" on the basis of what is considered to be a
reasonable rate of return on the fair market value of the property;
that is, by taking a percentage of fee value as the rent. Use of this
approach is prevalent when it is believed that comparable rental data is
not readily available. The practice is to equate the fee value to
"money in the bank" available for investment in the money market at the
highest rate. This percent of fee value approach to determining rent is
not proper. United States v. 883.89 Acres in Sebastian County, 442 F.2d
262 (C.A. 8, 1971); United States v. Michoud Industrial Facilities, 322
F.2d 698 (C.A. 5, 1963); United States v. 117,763 Acres in Imperial
County, 410 F. Supp. 628 (S.D. Cal. 1976).
The basic fallacy of the percent of fee value approach is that it
does not reflect the income the owner could have received from the land.
The income that the owner could have received from a like investment is
the proper measure of rent.
In United States v. Michoud Industrial Facilities, supra, a land
commission determined rent to be 8 percent of fee value, on the
assumption that an investment of this kind should yield that return. In
rejecting that approach the court said (at 707):
* * * It is difficult to understand where the commissioners
found the authority for assuming a rental value of land on their
conception of what the land was worth. This is the reverse of the
usual process of ascertaining the value of land by capitalizing
its rental potential. * * *
There is support for a percentage approach in dictum found in the
case of In Re Condemnation of Lands for Military Camp, 250 F. 314 (E.D.
Ark. 1918). However, this was overruled in the case of United States v.
883.89 Acres in Sebastian County, supra, where the landowner's testimony
at trial consisted of experts who arrived at the fair market value, and
then applied the going interest rate in the area to that figure. In
rejecting that approach, the Eighth Circuit held (at 265):
* * * In the instant case the testimony of the experts for the
landowner, in arriving at value was, at best, conjecture,
speculation, or unwarranted assumption and as such has no
probative value. See 6816.5 Acres of Land, Etc., Rio Arriba Co.,
N.M. v. United States, 411 F.2d 834 (10th Cir. 1969); People of
Puerto Rico v. United States, 132 F.2d 220 (1st Cir. 1942), cert.
denied 319 U.S. 752, 63 S.Ct. 1165, 87 L.Ed. 1706 (1943).
Further, the district court for the Southern District of California
has expressly refused to follow In Re Condemnation of Lands for Military
Camp, supra, in the case of United States v. 117, 763 Acres in Imperial
County, supra. In that case the Government had condemned a 1-year lease
on mountain desert lands for the Chocolate Mountain Gunnery Range, with
an option to renew for 4 additional years. There was virtually no
economic use for the land, and no market data relating to leases or
rentals. However, there were numerous sales of the property for
speculation. The defendants contended that rents should be determined
on the basis of the "use value" of the land for speculative purposes.
After arriving at a fee value from the speculative sales, they
determined rent on the basis of 8 percent of the fee value figure. The
Government's valuation evidence was nominal, arrived at on the basis
that something was owed for a taking of part of the defendants' bundle
of rights, and not from any rental data, as such.
The district court, in the opinion now pending on appeal by the
defendants to the Ninth Circuit, held that sales resulting from
speculative ventures did not constitute a valid basis for determining
land values, with the result that the rental determination based on a
percentage of a figure arrived at by that method, necessarily fell with
it. The Court rejected the argument that the owner was entitled to a
return as rent based on a percentage of fee value, saying (at 631 n.3):
I do not know if In Re Condemnation of Lands for Military Camp,
supra, is contrary because the opinion describes the land there
involved as wild land without more. If the opinion stands for the
proposition that, regardless of the use value of land, the owner,
in a case where a temporary use is taken, is entitled to a fair
return based on market value, then I refuse to follow it.
In the case of United States v. 36,480.00 Acres in El Paso County,
Civil No. E.P. -70-CA-132 (W.D. of Texas, El Paso Division), tried to
April of this year, the court allowed rental evidence based on a
percentage of fee value to go to the jury for "whatever it was worth"
and then attempted to protect the record by charging the jury that the
best evidence was comparable rentals. The issue of admissibility of
this percentage of fee value evidence is pending on appeal to the Fifth
Circuit.
As previously indicated, the Government's temporary taking often
includes an option to renew. A typical estate would be for an initial
term of 1 year, with an option by the Government to renew from year to
year for a given number of years. The rental value is determined as of
the beginning of the initial term. Pope v. United States, 26 C. Cls.
11, 13 (1890). The option carries with it the right to renew from year
to year at the same rental rate set for the initial term, United States
v. 70.39 Acres of Land, 164 F. Supp. 451, 474 (S.D. Cal. 1958), aff'd
sub nom. Carlstrom v. United States, 275 F.2d 802 (C.A. 9, 1960).
The option to renew gives flexibility to the lessee to renew or not
to renew, as its needs develop into the future. Conversely, the owner
is tied to both a constant rent and to the uncertainty of whether the
Government will exercise its renewal option at the end of each term.
However, it would seem that the lessor's interests are protected as to
this uncertainty of renewal if sufficient advance notice is given to
afford the opportunity to re-lease. If the rental demand is seasonal,
the notice requirement should be a reasonable time in advance of
commencement of the season.
The value of the option to renew for additional terms subsequent to
the initial term, as in the determination of the rent for the initial
term, would be by the testimony of experts. Value for the option must
necessarily rest on the premise that rental rates are going to increase
during the option periods. This anticipated increase can be paid
annually on top of the constant rental rate, or as a lump sum at the
beginning of the initial term. The procedure of paying by the year
offers the obvious advantage to the Government of not paying for an
option that may not be exercised. Sometimes the value of the option is
"lumpted" in as part of the rent without a separate consideration. The
logical approach for measuring this value would be to determine the
amount by which the anticipated yearly market rate, for each year of the
option period, exceeds the rent set for the initial term.
Assuming a leasehold term of 1 year with a constant rental rate of
$1.00 per unit, and assuming an option to renew from year to year for 4
succeeding years with a straight increase in rental rates of 10 cents
per year, the value of the option in any given year would be as follows:
Initial
Term 2nd Yr. 3rd Yr. 4th Yr. 5th Yr
Value of Option $ .00 $ .10 $ .20 $ .30 $ .40
Constant Rate 1.00 1.00 1.00 1.00 1.00
Total $1.00 $1.10 $1.20 $1.30 $1.40
In the above illustration the value of the option could be paid each
year in addition to the constant rent. An alternative would be to
average the increase for a value to the option of 25 cents per year
(with the result that the Government would be paying somewhat more than
the going rate in the first 2 years, and less in the last 2 years).
Another alternative would be to refer to the Inwood tables to determine
the value at the beginning of the initial term of the right to receive
10 cents for the first renewal period, 20 cents for the second, 30 cents
for the third, and 40 cents for the fourth, which would be paid as a
lump sum.
It is not uncommon that the condemning authority, particularly the
Department of the Army, continue to require property after the end of
its last option period, and requests condemnation of an additional term
of years. Usually, there is no intervening period of time between the
end of one period and the beginning of the successive estate. A
successive taking is not the same cause of action as that taking
preceding it, because, although the parties and the property (and often
the estate) may be the same, a different period of time is involved.
Thus, the just compensation determination for a term of years is not res
judicata with respect to a successive term. United States v. Johnson,
420 F.2d 955 (1970).
Another aspect of temporary takings is the prospect that the
property, both as to the land and improvements, may suffer physical
damage during the Government's occupancy. The Government is obligated
to restore the premises, or, alternatively, to pay damages to the extent
that the improvements contributed to the value of the land. This
obligation to the owners does not accrue until the end of the
Government's last leasehold term, even though the Government may acquire
successive estates in separate proceedings. This is for the reason that
accrual prior to expiration of the Government's last leasehold term
would involve a piecemeal determination and gross speculation on
something unknown and unknowable. United States v. 883 Acres in
Sebastian County, 442 F.2d 262, 265 (C.A. 8, 1971); United States v.
Gila River Prima-Maricopa Indian Community, 391 F.2d 53, 56 (C.A. 9,
1968); Flood v. United States, 274 F.2d 483 (C.A. 9, 1960), cert. den.,
363 U.S. 805 (1960); United States v. 266.33 Acres in Island County, 96
F. Supp. 647, 648 (W.D. Wash. 1951); United States v. 1,447.56 Acres in
Christiana Hundred New Castle County, 71 F. Supp. 1005, 1008-1009 (D.
Del. 1947).
In closing, the nature of the estate in temporary takings sometimes
goes beyond the familiar real property concepts upon which much of the
case law relating to just compensation has grown. But although there
are differences, just compensation in temporary takings is measured by
the basic legal principles that are applicable to permanent takings.
/1/ In some instances, severance damages may be measured by the "cost
of cure," i.e., the cost of mitigating the effects of a partial taking.
Such costs might include, for example, the cost of fencing, constructing
an access road, rip-rapping a shoreline, and relocating improvements.
The rule, however, is that "the cost to cure is a measure of damage,
only when it is no greater in amount than the decrease in the market
value of the (remainder) property if left as it stood." (Footnote
omitted.) Nichols on Eminent Domain Section 14.22 at pp. 14-75.
/2/ However, as will be discussed more fully below, the Department
has taken the position that there should be no distinction between
"special" and "general" benefits and that all benefits susceptible of
valuation and not speculative can properly be offset.
/3/ The partial text of the statute as recited in the opinion reads
(at 557):
* * * where the use of a part only of any parcel or tract of
land shall be condemned in such a proceeding, the jury, in
assessing the damages therefor, shall take into consideration the
benefit (that) the purpose for which it is taken may be to the
owner or owners of such tract or parcel by enhancing the value of
the remainder of the same, and shall give their verdict
accordingly; and the court may require, in such case, that the
damages and the benefits shall be found and stated separately.
/4/ It has been held that the applications of this Act is not limited
to navigable waters only. United States v. Easements and Rights Over
Certain Land, 259 F. Supp. 377, 379-380 (E.D. Tenn. 1966).
/5/ The full text of the District Court's instruction to the jury was
as follows (at 166):
'Now, what do we mean by special benefits? The Court instructs
you that the term special benefits, as used in these instructions,
means any benefits causing an increase in the market value of the
92 1/2-acre tract of land directly by reason of its position in
relation to the Wheatland public access area, and which benefits
are not enjoyed generally by other tracts of land in the
neighborhood, no portion of which land is taken for said public
access area, and such benefits are special and not (Tr. 411)
general benefits, although conferred, and if you find that the
benefits of the access area are general to the larger area of land
in that vicinity or to the public generally, they would be public
or general benefits and not special benefits.'
/6/ United States v. 901.89 Acres in Davidson and Rutherford
Counties, 436 F.2d 395 (C.A. 6 , 1970); 6,816.5 Acres in Rio Arriba
County v. United States, 411 F.2d 834 (C.A. 10, 1969); Pokladnik v.
United States, 378 F.2d 59 (C.A. 5, 1967); United States v. Trout, 386
F.2d 216 (C.A. 5, 1967); United States v. Fort Smith River Development
Corp., 349 F.2d 522 (C.A. 8, 1965). See also: "The Effect Upon
Compensation of an Increase in Value of Land Due to Location of a
Federal Project in an Area" by Edward B. Clark, IV Condemnation Seminar
1966, Item "I."
/7/ See United States v. Alcorn, 80 F.2d 487 (C.A. 9, 1936) for an
example of a narrow interpretation as to what constitutes a special
benefit. For an in-depth discussion of different holdings as to general
vis-a-vis special benefits, see 145 A.L.R. 7, 48.
/8/ In Kimball Laundry Company v. United States, supra, the Secretary
of the Army acquired temporary use of the buildings and equipment of a
laundry, to operate as a laundry for a military installation. It was
held that just compensation included the transfer value of laundry
routes served by the Company. The estate authorized by Congress to be
condemned went beyond the usual real property concepts and included the
taking of elements of personalty, i.e. the business. By virtue of this
Congressional authorization, and the unusual factual situation, Kimball
is distinguishable from most cases involving condemnation of temporary
interests in real property.
LAND AND NATURAL RESOURCES DIVISION
By Don Strouse
1977 FEDERAL EMINENT DOMAIN SEMINAR: RIPARIAN PROPERTY -- PUBLIC
VERSUS PRIVATE INTEREST
November 1977
The Congress of the United States has the power "* * * to regulate
Commerce with foreign Nations, and among the several States, and with
the Indian Tribes." U.S. Const. art. I, Section 8, cl. 3. The purpose
of the commerce clause is to insure a unified system of interstate
commerce and to maintain a free flow of commerce between the States.
Great Atlantic and Pacific Tea Co. v. Cottrell, 424 U.S. 366 (1976);
National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753
(1967). Commerce includes navigation. Pacific Seafarers, Inc. v.
Pacific Far East Line, Inc., 404 F.2d 804, 131 U.S. App. D.C. 226
(1968), cert. den., 393 U.S. 1093 (on remand 48 F.R.D. 347). The power
of Congress to regulate navigable waters is incident to its general
commerce power. Leovy v. United States, 177 U.S. 632 (1900); Cooley v.
Board of Wardens, 53 U.S. (12 How.) 299 (1851); Gibbons v. Ogden, 22
U.S. (9 Wheat.) 1 (1824). This power to control and regulate commerce
of necessity extends to control of all navigable waters of the United
States. United States v. Chicago, Milwaukee, St. Paul & Pacific
Railroad, 312 U.S. 592 (1941).
Navigable Waters Of The United States
There are two tests for determining whether a given body of water is
a navigable water of the United States. A physical characteristic of
the water, tidal or non-tidal, determines which test is appropriate in a
given case. In Great Britain, water was navigable if it was subject to
the ebb and flow of the tides and all navigable water was the property
of the Crown. Bulstrode v. Hall, 1 Sid. 148; Pearce v. Scother, 9
Q.B.D. 162; Toberry v. Silva, 45 Ch.D. 98; Murphy v. Rhine, Ir.R., 2
C.L. 143; see Packer v. Bird, 137 U.S. 661, 666-667 (1891). Initially,
the ebb and flow of the tides was the exclusive test for navigability of
waters in the United States. Waring v. Clarke, 46 U.S. 456, 5 How. 441
(1846); The Steamboat Orleans v. Phoebus, 36 U.S. 138, 11 Pet. 175
(1837); The Thomas Jefferson, 23 U. S. 465, 10 Wheat. 428 (1825). It
should be noted that most of the early cases involved a determination of
the extent of the maritime jurisdiction of the courts. The ebb and flow
test is still viable and may be used to determine the navigability of
any given water. United States v. Stoeco Homes, Inc., 498 F.2d 597
(C.A. 3, 1975), cert. den., 420 U.S. 927; see Zabel v. Tabb, 430 F.2d
199 (C.A. 5, 1970); United States v. Lewis, 355 F. Supp. 1132 (S.D. Ga.
1973). Therefore, if water is subject to the ebb and flow of the tide,
it is legally navigable, whether or not it is navigable in fact.
As the United States expanded westward, it was necessary to develop
an alternative test which would take into account the nature of the
western rivers. It soon became the rule that a water which was
navigable in fact was navigable in law. Packer v. Bird, 137 U.S. 661
(1891); The Daniel Ball, 77 U.S. (10 Wall.) 557 (1870); The Genesee
Chief v. Fitzhugh, 53 U.S. (12 How.) 443 (1851). As the court said in
The Genesee Chief. v. Fitzhugh, supra at 457:
It is evident that a definition that would at this day limit
public rivers in this country to tide-water rivers is utterly
inadmissible. We have thousands of miles of public navigable
water, including lakes and rivers in which there is no tide. And
certainly there can be no reason for admiralty power over a public
tide-water, which does not apply with equal force to any other
public water use for commercial purposes in foreign trade.
A water is navigable in fact when it is "* * * a continued highway
over which commerce is or may be carried on with other States or foreign
countries in the customary modes in which such commerce is conducted by
water." United States v. Appalachian Electric Power Co., 311 U.S. 377,
406 (1940); The Daniel Ball, supra at 563. Under the current
interpretation of this test, if a water can be made useful for
interstate or foreign commerce with the available technology, then the
water is a navigable water. United States v. Appalachian Electric Power
Co., supra, Weiszmann v. District Engineer, 526 F.2d 1302, 1305 (C.A. 5,
1976); Rochester Gas v. Federal Power Commission, 344 F.2d 594, 596
(C.A. 2, 1965).
The original test set forth in The Daniel Ball, supra at 563, was
that:
* * * (T)hose rivers must be regarded as public navigable
rivers in law which are navigable in fact. And they are navigable
in fact when they are used, or are susceptible of being used, in
their ordinary condition, as highways for commerce, over which
trade and travel are or may be conducted in the customary modes of
trade and travel on water. And they constitute navigable waters
of the United States within the meaning of the acts of Congress,
in contradistinction from the navigable waters of the States, when
they form in their ordinary condition by themselves, or by uniting
with other waters, a continued highway over which commerce is or
may be carried on with other States or foreign countries in the
customary modes in which such commerce is conducted by water.
This test was expanded in United States v. Appalachian Electric Power
Co., supra, where it was held that a river which required artificial
aids for improvements was navigable, if the improvements were reasonably
feasible (a balance between cost and need). As the Appalachian Electric
Power Co. Court said at 407-408:
To appraise the evidence of navigability on the natural
condition only of the waterway is erroneous. Its availability for
navigation must also be considered. "Natural and ordinary
condition" (United States v. Oregon, 295 U.S. 1, 15) refers to
volume of water, the gradients and the regularity of the flow. A
waterway, otherwise suitable for navigation, is not barred from
that classification merely because artificial aids must make the
highway suitable for the use before commercial navigation may be
undertaken. * * * The district court is quite right in saying
there are obvious limits to such improvements as affecting
navigability. These limits are necessarily a matter of degree.
There must be a balance between cost and need at a time when the
improvement would be useful. When once found to be navigable, a
waterway remains so. * * * Nor is it necessary that the
improvements should be actually completed or even authorized. The
power of Congress over commerce is not to be hampered because of
the necessity for reasonable improvements to make an interstate
waterway available for traffic. (Footnotes omitted.)
The fact that a river contains non-navigable portions does not
prevent that river from being a navigable water if commerce can proceed
around the non-navigable stretches, by portage or otherwise. Economy
Light Co. v. United States, 256 U.S. 113, 123 (1920); The Montello, 87
U.S. (20 Wall.) 430 (1874). Occasional or sporadic use by hunters and
trappers is not sufficient to prove navigable capacity. United States
v. Oregon, 295 U.S. 1, 20-24 (1935). If a body of water was ever
navigable, however, it does not lose that characteristic even if its
later use changes or use of the water is abandoned. United States v.
Appalachian Electric Power Co., 311 U.S. 377, 408; Arizona v.
California, 283 U.S. 423, 453-454 (1931); Economy Light Co. v. United
States, supra at 123; Davis v. United States, 185 F.2d 938, 943 (C.A.
9, 1950). A river need not be navigable all year in order to be a
navigable water of the United States. Nelson v. Leland, 63 U.S. (22
How.) 48 (1859). It is also possible that a given river by navigable in
part and non-navigable in part. See, e.g., Oklahoma v. Atkinson Co.,
313 U.S. 508, 523 (1941). Therefore, it is essential that any proof as
to the navigability of a given body of water relate directly to the
stretch of water of concern in your case.
Since the Federal control of navigable waters of the United States
arises under the commerce clause, it would seem logical that the same
test for the extent of the power should apply to the determination of
navigability as applies in other commerce clause situations. In
general, the power of Congress under the commerce clause extends to any
link in the chain of interstate or foreign commerce or any activity
within the nexus of interstate or foreign commerce. Katzenbach v.
McClung, 379 U.S. 294 (1964); Heart of Atlanta Motel v. United States,
379 U.S. 241 (1964); Wickard v. Filburn, 317 U.S. 111, 128-129 (1942);
Houston & Texas Railway v. United States, 234 U.S. 342 (1914). It would
seem that a water should be considered navigable under the Federal test
if it is or was a link in conducting interstate or foreign commerce or
trade, whether or not such commerce was by water. However, in a case
interpreting section 9 of the Rivers and Harbors Act of 1899, 33 U.S.C.
Section 401, the Tenth Circuit held that the test as set forth in The
Daniel Ball, 77 U.S. (10 Wall.) 557, 563 (1870), which specified that
those rivers are navigable which "* * * by themselves or by uniting with
other waters, (form) a continued highway over which commerce is or may
be carried on with other States or foreign countries in the customary
modes in which commerce is conducted by water (emphasis added)," had not
been modified by later opinions. Hardy Salt Co. v. Southern Pacific
Transportation Co., 501 F.2d 1156, 1167 (C.A. 10, 1974). Therefore, an
offer of proof which consisted of affidavits showing intrastate
navigation to a rail center was held to be insufficient as a matter of
law to establish the navigability of the Great Salt Lake. Id. at 1166
and 1169. See Utah v. United States, 403 U.S. 9 (1971) for discussion
of the Great Salt Lake. It should be noted that under the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.,
Congress has utilized its commerce clause power to extend its control to
"waters of the United States."
Although under the Rivers and Harbors Act of 1899, 33 U.S.C. Section
403 et seq., the Corps of Engineers has authority to declare a waterway
navigable, a determination of navigability by the Corps may be
significant, but is not binding on the court. See, United States v.
Oregon, 295 U.S. 1, 23 (1935); Montana Power Co. v. F.P.C., 185 F.2d
491, 495 (C.A.D.C. 1950), cert. den., 340 U.S. 947; United States v.
Kaiser Aetna, 408 F. Supp. 42, 54-55 (D. Ha. 1976). Courts may take
judicial notice of the navigability of a stream or of the geographic or
physical characteristics bearing upon navigable capacity. Arizona v.
California, 283 U.S. 423, 452 (1931); The Montello, 87 U.S. (20 Wall.)
430, 441 (1874); Davis v. United States, 185 F.2d 938, 944 (C.A. 9,
1950); Continental Land Co. v. United States, 88 F.2d 104, 108 (C.A.
9, 1937). In some instances, Congress has declared rivers navigable
waters of the United States and, due to the broad extent of the commerce
power, such a determination would be entitled to great deference by the
court. Continental Land Co. v. United States, 88 F.2d 104 (C.A. 9,
1937), cert. den., 302 U.S. 715.
Navigation Servitude
Once it has been established, or you think you can establish, that
the body of water which flows through or borders the property being
condemned is a navigable water of the United States, of what use is that
fact in a condemnation case? The answer, of course, depends on the
specific facts of any given case, but there are three major avenues
which you should explore whenever you hear the lap of navigable waters.
The relation of the commerce power to the property might be such that no
compensation is owed to the landowner for the Government's use of the
stream or it may be that certain uses must be eliminated from
consideration as highest and best use or, perhaps, the landowner must
demonstrate the reasonable probability of obtaining permits from the
Corps of Engineers before a proposed use may be considered as the
highest and best use. Adequate pretrial preparation should consider
each of these possibilities.
The title to the bed of a navigable water of the United States is a
question of State law. James v. Dravo Contracting Co., 302 U.S. 134
(1937); United States v. Holt State Bank, 270 U.S. 49 (1926). The
question of whether or not a water is navigable is a question of Federal
law. United States v. Oregon, 295 U.S. 1, 14 (1935). The original
colonies, and States that were formed from the original colonies, had
ownership of the beds of navigable waters before the formation of the
Federal Government. This ownership transferred to them with the
transfer of sovereignty from Great Britain. (As noted above, the Crown
held title to navigable waters in Great Britain.) Title to the bed of
navigable waters was not transferred to the United States by the
Constitution and, thus, was reserved to the States. Mumford v.
Wardwell, 73 U.S. (6 Wall.) 423 (1867); Pollard v. Hagan, 44 U.S. (3
How.) 212 (1845). In order to put the later states on an "equal
footing" with the original States, when a new State was established,
title to the beds of navigable waters transferred from the United States
to the State. Texas v. Louisiana, 410 U.S. 702 (1973); Utah v. United
States, 403 U.S. 9 (1971); United States v. Texas, 339 U.S. 707 (1950),
rhg. den., 340 U.S. 907; United States v. Oregon, 295 U.S. 1, 14
(1935). Each State by its own laws could then establish whether the
title was to be in the riparian landowner or in the State or in some
other entity. Kaukauna Water Power Co. v. Green Bay & Mississippi Canal
Co., 142 U.S. 254 (1891); Rundle v. Delaware & Raritan Canal Co., 55
U.S. (14 How.) 80 (1852).
It is important to remember that title to the bed of a navigable
water does not mean absolute control as if it were dry land. Under the
commerce clause, the Federal Government has a dominant servitude which
resides in all navigable waters. United States v. Holt State Bank, 270
U.S. 49, 54-55 (1926). This servitude subjects all private ownership
rights to control by the Federal Government in the interest of
navigation. Gibson v. United States, 166 U.S. 269, 271-272 (1897). It
should be noted that the navigation servitude is not co-extensive with
Congressional power to control waters through regulation pursuant to the
commerce clause. Compare United States v. Virginia Electric & Power
Co., 365 U.S. 624 (1961) with United States v. Rio Grande Irrigation
Co., 174 U.S. 690 (1899). For this reason, care should be taken when
reading opinions in this area. The navigation servitude is basically a
rule of no compensation similar in rationale to that set forth in United
States v. Fuller, 409 U.S. 488 (1973), that the Government need not pay
for using what it already controls. The question is how far does the
servitude extend and what are a private landowners rights to
compensation upon the Government's exercise of its servitude.
The test for determining the extent of the navigation servitude
depends upon whether the navigable water is tidal or non-tidal. In
tidal waters the control of the Federal Government extends to the mean
higher high water line. United States v. California, 381 U.S. 139, 171
n.40 (1975); United States v. Turner, 175 F.2d 644, 646-647 (C.A. 5,
1949), cert. den., 338 U.S. 851. This unusual formulation is occasioned
by the fact that both coasts in the United States experience two high
tides each day. The difference between the two on the east coast
appears to be insignificant but on the west coast the higher high tide
is substantially higher. See Coast and Geodetic Survey, United States
Department of Commerce, Manual of Tide Observations (1965). On a
navigable non-tidal water the servitude extends to lands below the
ordinary high water mark. United States v. Chicago, Milwaukee, St.
Paul & Pacific Railroad, 312 U.S. 592, 597 (1941). The ordinary high
water mark is the line caused by the highest normal flow, that is,
excluding droughts and floods. Id. at 596; Alabama v. Georgia, 64 U.
S. (23 How.) 505, 515 (1859); United States v. Claridge, 416 F.2d 933,
934 (C.A. 9, 1969). As this is a factual determination, some
amplification of the origins of the test should prove helpful in
determining what evidence is necessary to establish the ordinary high
water mark.
Legally, a river is composed of various parts, including the water,
the banks and the bed. In construing the language of the cession which
determined the boundary between Alabama and Georgia along the
Chattahoochee River, the Supreme Court in Howard v. Ingersoll, 54 U.S.
(13 How.) 384, 415-416 (1851), distinguished between these parts:
* * * When banks of rivers were spoken of, those boundaries
were meant which contain their waters at their highest flow, and
in condition they make what is called the bed of the river. They
knew that rivers have banks, shores, water, and a bed, and that
the outer line on the bed of a river, on either side of it, may be
distinguished upon every stage of its water, high or low; at its
highest or lowest current. It neither takes in overflowed land
beyond the bed, nor includes swamps or low grounds liable to be
overflowed, but reclaimable for meadows or agriculture, or which,
being too low for reclamation, though not always covered with
water, may be used for cattle to range upon, as natural or
uninclosed pasture. But it may include spots lower than the bluff
or bank, whether there is or is not a growth upon them, not
forming a part of that land which, whether low or high, we know to
be upland or fast lowland, if such spots are within the bed of the
river. Such a line may be found upon every river, from its source
to its mouth. It requires no scientific exploration to find or
mark it out. The eye traces it in going either up or down a
river, in any stage of water.
It appears that "the outer line on the bed of the river" which was
discussed in Howard is the ordinary high water mark used to determine
the limits of the United States' navigation servitude. It is clear that
the dominant servitude of the Federal Government extends to the entire
bed of this stream, including all lands below the ordinary high water
mark. United States v. Chicago, Milwaukee, St. Paul & Pacific Railroad,
supra. The location of the ordinary high water mark is a question of
fact. United States v. Chicago, Milwaukee, St. Paul & Pacific Railroad,
supra at 599; United States v. 21.54 Acres in Marshall County, 491 F.2d
301, 306-307 (C.A. 1973). It is a physical fact to be determined by
inspection of the river bank and not by arithmetical calculations based
on gauge records and river elevations. Kelley's Creek v. United States,
100 Ct.Cl. 396, 405-406 (1944). (It is to be noted that when dealing
with tidal waters, gauge records and other statistics may be used and,
in fact, are often the best evidence of the higher high water mark.)
Since the ordinary high water mark is the line which divides the
upland from the river bed, United States v. Chicago, Burlington & Quincy
Railroad, 90 F.2d 161, 170 (C.A. 7, 1937), it is necessary to determine
what constitutes the bed of the river. Although it has been stated that
the bed of the river is that land upon which the action of the water has
been so constant as to destroy terrestrial vegetation, United States v.
Chicago, Burlington & Quincy Railroad, supra at 170, it appears that the
true test is that the river bed is land upon which the waters have so
exercised their dominion that the value for agricultural purposes is
destroyed. Borough of Ford City v. United States, 345 F.2d 645, 648
(C.A. 3, 1965), cert. den., 382 U.S. 902; Harrison v. Fite, 148 F. 781,
783 (C.A. 8, 1906) (decided under Arkansas law); Paine Lumber Co. v.
United States, 55 F. 854, 865 (E.D. Wisc. 1893). Although in Ford
City, supra, at 648, the court identified agricultural purposes with
terrestrial vegetation, it appears that if cattle can graze upon the
land the test is satisfied. Paine Lumber Co. v. United States, supra at
865; see Howard v. Ingersoll, 54 U.S. (13 How.) 384, 416 (1851).
The agricultural vegetation test is not the only test which may be
applied to determine the ordinary high water mark and there is authority
which indicates that the vegetation test is a secondary test to be used
only "* * * where there is no clear, natural line impressed on the
bank." Borough of Ford City v. United States, supra at 648. The primary
test deals with the physical characteristics of the land itself, that
is, a clear line shown by erosion, shelving, change in soil, litter and
destruction of terrestrial vegetation is the ordinary high water mark.
Id. When there is other physical data the vegetation test functions as
a complement to the other observed characteristics. If it is impossible
to ascertain a clear line at the property being condemned, but such a
line is identifiable at other sites (in close proximity) along the same
stream, it is permissible to use data gained from these other sites to
establish the ordinary high water mark on the subject property. Id.
The "no compensation" rule of the navigation servitude applies to the
use of lands under the ordinary high water mark of a stream. United
States v. Rands, 389 U.S. 121, 123 (1967); United States v. Virginia
Electric & Power Co., 365 U.S. 624, 628 (1961); Federal Power
Commission v. Niagara Mohawk Power Corp., 347 U.S. 239, 249 (1954);
United States v. 422,978 Square Feet in San Francisco, 445 F.2d 1180,
1186 (C.A. 9, 1971); Borough of Ford City v. United States, supra. In
order for the "no compensation" rule to apply the Government must be
acting pursuant to legitimate navigational purpose. United States v.
422,978 Square Feet in San Francisco, supra; Coastal Petroleum Co. v.
United States, 524 F.2d 1206, 1209-1210 (Ct.Cl. 1976); Lewis Blue Point
Oyster Cultivation Co. v. Briggs, 229 U.S. 82 (1913). When Congress
specifically states that a project is for navigation purposes that
determination is conclusive, if the stream is navigable and the means
are not unrelated to the control or improvement of navigation. United
States v. Grand River Dam Authority, 363 U.S. 229, 232 (1960); Arizona
v. California, 282 U.S. 423, 452 (1931); United States v. River Rouge
Improvement Co., 269 U.S. 411, 419 (1926); Scozzafava v. United States,
199 F. Supp. 43, 45 (S.D.N.Y. 1961). The court will not look at the
specific subparts of a project to determine if they are reasonably
necessary. Arizona v. California, supra at 456; United States v.
Commodore Park, Inc., 324 U.S. 386 (1945). The court may not substitute
its judgment for congressional determination that an action is for
improvement of navigation. United States v. Twin City Power Co., 350
U.S. 222, 224 (1956). If the project is in fact in aid of navigation,
it is not necessary that the statute authorizing the project so state
and the court will look to the project's effect. United States v.
Commodore Park, Inc., supra at 386; United States v. 422,978 Square
Feet in San Francisco, supra at 1187. If the statute does not set forth
navigation as a purpose, it is, of course, necessary to provide the
court with sufficient information upon which a finding of navigation
purposes may be based. United States v. 50 Foot Right of Way in
Bayonne, 337 F.2d 956, 960 (C.A. 3, 1964).
The fact that purposes other than navigation will be served does not
invalidate the action, even if those other purposes would not justify an
exercise of congressional power. United States v. Commodore Park, Inc.,
supra at 391; Arizona v. California, supra at 456. Although, as noted
below, the Government's commerce control over navigable waters is not
limited to control for navigation, it appears that the "no compensation"
rule applies only when the project is in aid of navigation. United
States v. River Rouge Improvement Co., supra at 419; United States v.
50 Foot Right of Way in Bayonne, supra.
Once it has been established that the project is, at least in part,
in aid of navigation, it is not necessary that the activity itself be in
aid of navigation. United States v. Commodore Park, Inc., supra at
392-393. The Government may in fact destroy the navigability of a given
water in aid of the navigability of another water. Id. The action may
destroy access to navigable waters. Scranton v. Wheeler, 179 U.S. 141
(1900). The activity may change the course of a navigable water. South
Carolina v. Georgia, 93 U.S. 4 (1876). All of these may be done without
compensation being owed to the riparian landowner, so long as the
activity is confined to the bed of the stream.
Water Related Uses
Just as United States is not required to pay compensation for the use
of the bed of a navigable stream in furtherance of navigation purposes,
the Federal Government does not pay for the appropriation of the waters
of a navigable river or the alteration of its flow. "When the United
States appropriates the flow either of a navigable or a nonnavigable
stream pursuant to its superior power under the Commerce Clause, it is
exercising established prerogatives and is beholden to no one." United
States v. Grand River Dam Authority, supra at 232; United States v.
531.13 Acres in Oconee County, 366 F.2d 915, 922 (C.A. 4, 1966). This
rule stems from the fact that, under the commerce clause, the Government
may grant or withhold the right to use navigable streams. Therefore, it
would be creating private claims in the public domain to require the
United States to pay for this value. United States v. Twin City Power
Co., 350 U.S. 222, 228 (1956); see United States v. Fuller, 409 U.S.
458 (1973).
This "no compensation" rule applies to claims for water power value,
because the value for power purposes depends on the flow of the streams.
United States v. Virginia Electric & Power Co., 365 U.S. 624 (1961);
United States v. Grand River Dam Authority, 363 U.S. 229, 232 (1960);
United States v. Twin City Power Co., supra; United States v. 531.13
Acres in Oconee County, supra. An owner riparian to a navigable stream
has no property right in the natural levels of water adjoining its land
or to the use of the natural difference as a powerhead or runoff.
United States v. Willow River Power Co., 324 U.S. 499, 509-510 (1945);
United States v. Chandler-Dunbar Water Power Co., 229 U.S. 53, 69-70
(1913).
An interesting question arises when the power site is on a
non-navigable tributary of a navigable stream. In 1917, the Supreme
Court held that the owner of a mill on a non-navigable stream was
entitled to compensation for the loss in value, caused by the
destruction of the power of the mill dam, which was a result of the
construction, in aid of navigation, of locks and dams upon navigable
rivers. United States v. Cress, 243 U.S. 316, 329-330 (1917). Cress
was distinguished by the Court in later cases. United States v. Willow
River Power Co., supra; United States v. Chicago, Milwaukee, St. Paul &
Pacific Railroad, 312 U.S. 592, 597 (1941). In Willow River, the water
of a navigable stream was raised three feet destroying the utility of a
power generating dam on a non-navigable tributary. United States v.
Willow River Power Co., supra at 500-501. This loss was found to be
noncompensable and the Court stated that there is no property right in
the water level of a navigable stream. Id. at 510-511. Then in United
States v. Grand River Dam Authority, supra, compensation was denied for
the water power value of a dam on a non-navigable tributary of a
navigable river. Although United States v. Cress, supra, has not been
directly overruled, it would appear that its precedential utility has
been destroyed. See United States v. 531.13 Acres in Oconee County,
366 F.2d 915, 922 (C.A. 4, 1966).
A related rule was developed by the Court which applied when uplands
were taken in connection with a navigation project. It was held that
the landowner was not entitled to compensation for any value which
resulted from the property's location riparian to a navigable stream.
United States v. Rands, 389 U.S. 121 (1967); United States v. Virginia
Electric & Power Co., supra at 624; United States v. Twin City Power
Co., supra at 228. This rule has been modified by Congress with the
passage of Section 111 of the Rivers and Harbors Act, 33 U.S.C. Section
595a, but, since the rule is still applied in some circumstances, a
development of the underlying principles is warranted.
In United States v. Twin City Power Co., supra, lands adjoining a
navigable river were condemned in connection with a navigation project.
The landowner, a power company, sought compensation which included the
value of the land as a site for hydroelectric power operations. Id. at
223. Compensation based upon this use was denied on the grounds that
the special location value was due to the flow of the stream and the
landowner had no property right in the flow of the stream. Id. at
226-228. Since the Government could grant or deny this use of a
navigable stream, "(t)o require the United States to pay for the
water-power value would be to create private claims in the public
domain." Id. at 228.
It was later made clear that it was the "navigation privilege" which
affected the measure of damages when riparian lands were taken. United
States v. Virginia Electric & Power Co., supra at 629. The theory, Id.
at 629, was that:
* * * Thus, just as the navigational privilege permits the
Government to reduce the value of riparian lands by denying the
riparian owner access to the stream without compensation for his
loss, * * * it also permits the Government to disregard the value
arising from this same fact of riparian location in compensating
the owner when fast lands are appropriated. (Citations omitted.)
United States v. Virginia Electric & Power Co., 365 U.S. 624 (1961),
involved the acquisition of flowage easements from a power company, so
the holding could be limited to a claimed use for hydroelectric power,
an activity subject to Federal licensing. In 1967, the Supreme Court
affirmed a broad reading of the rule of Virginia Electric & Power Co.,
supra. United States v. Rands, supra. In Rands the Government
condemned land which had an alleged highest and best use as a port site.
Id. at 122. It was held that the special value as a port site could
not be considered as the value arose from access to and use of navigable
waters. Id. at 124-125. The Court found that the Federal power to
regulate navigable waters and exclude users was sufficiently broad so
that to award compensation for port site value would be to create a
private claim in the public domain. Id. at 125.
The decision in United States v. Rands, supra, provided the impetus
for Congress to legislatively establish a higher standard of
compensation when there has been a total taking of riparian lands.
Section 111 of the River and Harbor and Flood Control Act of 1970, 33
U.S.C. Section 595a, provides that when the United States acquires all
of an ownership, or easements over all of an ownership, just
compeansation will be based "* * * upon all uses to which such property
may reasonably be put * * * any of which uses may be dependant upon
access to or utilization of such navigable waters." This provision
applies when the United States is acting "* * * for the public use in
connection with any improvement of rivers, harbors, canals, or waterways
of the United States * * *." This language has been interpreted broadly
to include not only traditional navigation projects, such as locks and
dams, but also to apply when actions are in furtherance of aesthetic,
ecological, environmental, economic or commercial public interests in
navigable waterways. United States v. 967,905 (sic) Acres in Cook
County, 447 F.2d 764, 771 (C.A. 8, 1971) (the correct acreage is
967.905) (this was a taking for the Boundary Waters Canoe Area).
When the case involves a partial taking of real property, the holding
of United States v. Rands, 389 U.S. 121 (1967), still appears to be
viable when evaluating the remainder. Section 111, 33 U.S.C. Section
595a, provides, in pertinent part:
* * * In cases of partial takings of real property, no
depreciation in the value of any remaining real property shall be
recognized and no compensation shall be paid for any damages to
such remaining real property which result from loss of or
reduction of access from such real property to such navigable
waters because of the taking of real property or the purposes for
which such real property is taken.
As all riparian use depends upon access to the water, it seems that,
in the case of a partial taking, any impact on riparian usage of the
remainder is excluded from consideration. However, there are not yet
any published court rulings on this issue.
Permits And Regulations
The power of the Congress to regulate under the commerce clause is
far more extensive than the direct control of the beds of navigable
rivers. E.g., United States v. Rio Grande Irrigation Co., 174 U.S. 690
(1899). Navigable waters are an important public asset; therefore,
private use is subordinate to the public interest. United States v.
Republic Steel Corp., 362 U.S. 482, 491 (1960). Regulation of navigable
waters was delegated to the Corps of Engineers by the Rivers and Harbors
Act of 1899, 33 U.S.C. Section 401 et seq. Section 10 of the act, 33
U.S.C. Section 403, provides that the permission of the Corps of
Engineers is necessary
* * * to excavate or fill, or in any other manner to alter or
modify the course, location, condition, or capacity of, any port,
roadstead, haven, harbor, canal, lake, harbor of refuge, or
inclosure within the limits of any breakwater or of the channel of
any navigable water of the United States * * *.
The Rivers and Harbors Act is to be interpreted broadly and not given
a narrow or cramped reading. United States v. Pennsylvania Chemical
Corp., 411 U.S. 655, 669-670 (1973); United States v. Republic Steel
Corp., supra at 492. The Corps of Engineers may, and does, consider
wildlife and environmental concerns under the Fish and Wildlife
Coordination Act, 16 U.S.C. Section 661 et seq., and the National
Environmental Policy Act of 1969, 42 U.S.C. Section 4321 et seq. Zabel
v. Tabb, 430 F.2d 199, 209-214 (C.A. 5, 1970), cert. den., 401 U.S. 910.
The regulations promulgated pursuant to the Rivers and Harbors Act
define the bodies of water over which the Corps has extended its
juridiction, including, in some instances, artificial channels, canals
and backwashes. 33 C.F.R. Section 209.260 (1976). Administrative
procedures governing permits and regulations under the control of the
Corps are set forth in Part 209 of 33 C.F.R.
It is the fact of alteration or modification and not the location of
the activity which triggers the Corps jurisdiction. Permits may be
required for dredge and fill activities on uplands adjacent to navigable
waters. United States v. Sexton Coves Estates, Inc., 526 F. 2d 1293,
1298-1299 (C.A. 5, 1976); Weiszmann v. District Engineer, 526 F.2d 1302
(C.A. 5, 1976); Joseph G. Moretti, Inc., 526 F.2d 1311 (C.A. 5, 1976);
Zabel v. Tabb, supra at 213; United States v. Perma Paving Co., 332
F.2d 754, 757 (C.A. 2, 1964). Corps' permits may be required for
construction in non-navigable streams. United States v. Rio Grande
Irrigation Co., supra at 708. As a factual prerequisite for Corps
jurisdiction, it is necessary to show "* * * some effect upon navigable
waters, some alteration or modification of either course, location,
condition or capacity of those waters." United States v. Joseph G.
Moretti, Inc., supra at 1309. Of course, activity within a navigable
water, including the fill of submerged wetlands, is subject to the
permit requirement. Tatum v. Blackstock, 319 F.2d 397 (C.A. 5, 1963).
The Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251 et seq., was enacted in order to "* * * restore and
maintain the chemical, physical and biological integrity of the Nation's
waters." 33 U.S.C. Section 1251. To further this goal, Congress
provided for research, grants for improved treatment plants, procedures
for effluent control and regulation, including the requiring of a
permit, from the Administrator of the Environmental Protection Agency,
or the Chief of the Corps of Engineers, for discharges of pollutants
into navigable waters. See Leslie Salt Co. v. Froehlke, 403 F. Supp.
1292, 1296 (N.D. Cal. 1974), for discussion of relationship between the
Environmental Protection Agency and the Corps of Engineers in regard to
permit issuance. Under the Federal Water Pollution Control Act, the
term "navigable waters" is not limited to the definition developed by
the courts, but relies on a broader commerce power test. Natural
Resources Defense Council, Inc. v. Callaway, 392 F. Supp. 685, 686
(D.D.C. 1975); Leslie Salt Co. v. Froehlke, supra; United States v.
Holland, 373 F. Supp. 665 (M.D. Fla. 1974). Congress defined "navigable
waters," for purposes of this statute as "* * * waters of the United
States, including the territorial seas." 33 U.S.C. Section 1362(7). It
has been held improper to adopt regulations, pursuant to this act, which
limit the definition of navigable waters to a test based on usage in
interstate or foreign commerce. Natural Resources Defense Council, Inc.
v. Callaway, supra; United States v. GAF Corp., 389 F. Supp. 1379,
1383 (S.D. Tex. 1975). Federal authority under this act extends beyond
the mean high water line to include non-navigable tributaries of
navigable streams, United States v. Ashland Oil and Transportation Co.,
504 F.2d 1317, 1328-1329 (C.A. 6, 1974), wetlands and areas periodically
overflowed. Conservation Council of North Carolina v. Costanzo, 398 F.
Supp. 653, 673-674 (E.D.N.C. 1975) aff'd 505 F.2d 498 (C.A. 4, 1974),
528 F.2d 250 (C.A. 4, 1975); P.F.Z. Properties, Inc. v. Train, 393 F.
Supp. 1370, 1380-1381 (D.D.C. 1975) (note that the court used the
narrower "navigability" test under the old regulations); Leslie Salt
Co. v. Froehlke, supra at 1297. The regulatory jurisdiction under this
act extends to the protection of wildlife and natural resources. P.F.Z.
Properties, Inc. v. Train, supra at 1381. Sierra Club v. Leslie Salt
Co., 412 F. Supp. 1096, 1100-1102 (M.D. Cal. 1976), discusses the
distinction between the Rivers and Harbors Act and the Federal Water
Pollution Control Act.
States have also recognized the importance of preserving their
navigable waters and have sometimes imposed stringent controls on water
related activities. It is important to note that the definition of
navigability under State law is not necessarily the same as the Federal
definition. Therefore, in determining the application of State water
law, a different factual investigation may be necessary.
The issue of permits and governmental control may arise in an action
to condemn riparian property when there is a claim that the property's
highest and best use is not its actual use. The burden of proof of the
reasonable probability of a change of use is on the party proposing the
theory. Olson v. United States, 292 U.S. 246, 255 (1934). If the
hypothetical use would impact on the water, the proponent must also show
the reasonable probability of obtaining all necessary permits and
approvals. See United States ex rel. TVA v. Powelson, 319 U.S. 266, 273
(1934); United States v. Smith, 355 F.2d 807, 809 (C.A. 5, 1966); cf.
United States v. 25.02 Acres in Douglas County, 495 F.2d 1398, 1400-1401
(C.A. 10, 1974).
CONCLUSION
When handling the acquisition of riparin property, there are many
aspects to consider, not all of which have been set forth in this paper.
It is important that the necessary facts are carefully marshalled, for
these principles appear to be an attempt to give the landowner less than
just compensation. This appearance is deceptive and it is up to the
trial attorney to convince the court that the Government's interest, the
interest of the people of the United States, is superior to that of any
individual. Then, the award will be fair to both the landowner and the
United States.
LAND AND NATURAL RESOURCES DIVISION
By Regina L. Sleater
1977 FEDERAL EMINENT DOMAIN SEMINAR: CHOICE OF METHOD OF TRIAL
November 1977
Introduction
A considerable amount of discretion is lodged with the local trial
attorney in his choice of a method of trial in a Federal eminent domain
proceeding. The preference of a method will naturally be somewhat
governed by local practice and custom, as well as by the rules
hereinafter discussed. There is likewise certain discretion in the
choice of a method of trial reposed in the district judge. As to when
and what method of trial should be demanded or requested by the trial
attorney, some guidelines have been set out in Title 5, United States
Attorneys' Manual. The method will be further dictated by the
provisions of Rule 71A(h), Federal Rules of Civil Procedure.
In determining the choice of method of trial, the local trial
attorney is generally in a better position to evaluate some of the
criteria I feel important in selecting his preference -- i.e., the
number of judges available in relation to the total caseload; the
number of eminent domain cases in a particular district; whether or not
the property is similar in kind, use and locale; and generally, which
method would most likely result in an expeditious, orderly disposition,
with justice being done to the Government as well as to the landowners.
This paper will not attempt to anticipate each and every situation or
contingency, as that would be impossible. However, I will attempt to
discuss some of the reasons, as well as the advantages or disadvantages,
of the different methods of trial in various situations.
In initially selecting the method of trial, U.S. Attys. Manual
Section 5-3.551 provides in pertinent part:
In order to preserve the right to a trial by a jury or a
commission, a demand for a jury trial should be filed in all major
tract cases and in any other cases when by reason of special
circumstances the Department requests such demand or the United
States Attorney determines that it is in the interest of the
United States that a jury trial should be demanded. Major tracts
include all tracts involving deposits of estimated compensation of
$100,000 or more and other tracts involving claims for
compensation in such amounts and tracts in which significant and
complex legal problems may be decided. * * * Under Rule 38(b),
F.R.Civ.P., a demand for a jury trial may be endorsed upon a
pleading. In the cases referred to above, the demand for a trial
by jury should be endorsed upon the complaint in condemnation * *
* and notice of the demand should be included in the notice of
condemnation.
As to all pending cases, except those in the major-tract
program, United States Attorneys are authorized to waive jury
trials if, in their discretion, it is in the interest of the
United States to do so, except when contrary instructions are
issued by the Department as to a particular case. Juries will be
waived in cases in the major-tract program only upon instructions
from, or with the prior consent of, the Department.
If it is subsequently determined that the use of a commission
is advisable, a motion should be made for the appointment of the
commission. The motion should set forth the facts justifying the
use of the commission. The order of court appointing the
commission should include a finding of fact by the court as to the
necessity for use of the commission.
Methods of Trial Pursuant to Rule 71A(h), Federal Rules of Civil
Procedure
Eminent domain is an incident of sovereignty and was exercised back
in the 1800s. Kohl v. United States, 91 U.S. 367 (1875). The first
general statute, however, that was passed by Congress authorizing the
filing of condemnation cases in Federal courts was enacted on August 1,
1888 (25 Stat. 357, 40 U.S.C. Section 257). From those early cases
until 1951, the forms and methods of procedure in Federal eminent domain
proceedings were that as prescribed by local law, even though
substantive law -- such as the measure of compensation -- were governed
by the Federal Constitution and thus, Federal law. United States v.
Miller, 317 U.S. 369, 379-380 (1943).
Thus, as can readily be seen, the forms and methods of procedure in
condemnation cases varied considerably, as some states provided for
juries in all condemnation cases, some for the use of commissions only,
and others for the use of commissions and, upon either party objecting
to the commission's award, a trial de novo before a jury. 28 U.S.C.A.
Rule 71A, Notes of Advisory Committee on Rules, p. 578.
In August 1951, Rule 71A was adopted and set forth, for the first
time, a uniform procedure to be followed in Federal eminent domain
proceedings. Section (h) of that Rule governs the choice of method of
trial, providing as follows:
(h) Trial. If the action involves the exercise of the power of
eminent domain under the law of the United States, any tribunal
specially constituted by an Act of Congress governing the case for
the trial of the issue of just compensation shall be the tribunal
for the determination of that issue; but if there is no such
specially constituted tribunal any party may have a trial by jury
of the issue of just compensation by filing a demand therefor
within the time allowed for answer or within such further time as
the court may fix, unless the court in its discretion orders that,
because of the character, location, or quantity of the property to
be condemned, or for other reasons in the interest of justice, the
issue of compensation shall be determined by a commission of three
persons appointed by it. * * * Trial of all issues shall
otherwise be by the court.
The Rule thus provides in ordinary cases for three possible methods
of trial -- trial by jury, trial by the court or trial by commission.
(The exception provided in the Rule that "any tribunal specially
constituted by an Act of Congress governing the case for the trial of
the issue of just compensation shall be the tribunal for the
determination of that issue", refers to instances such as the TVA
commission system, and the special type of jury procedure provided in
the District of Columbia). The ultimate method, however, is not a
purely discretionary choice of the parties or of the court; as the Rule
provides for at least four limitations.
1. Unless one of the parties makes demand for jury trial, the
trial should be by the court.
This should usually expedite the disposition of cases because of the
shorter time generally required for non-jury trials. In addition, this
method might well expedite payments to landowners; conserve time of
judges, attorneys, witnesses and jurors; reduce liability for interest
on delayed payments, and promote amicable settlement agreements.
One question which has arisen in connection with the request for a
jury trial is whether such a request is a prerequisite to the court's
referring the case to a commission. Rule 71A(h) has no specific
provision which would allow a party to initially request a commission
trial, and might thus be read as only allowing a commission after a
demand for jury trial has been made. United States v. Vater, 259 F.2d
667 (C.A. 2, 1958); United States v. Bobinski, 244 F.2d 299, 301 (C.A.
2, 1957). However, I have known many instances where the courts have
referred cases to a commission upon the motion of one of the parties or
even upon the court's own motion. It is extremely unlikely that a court
would be reversed on appeal solely on such a reference in the absence of
a jury demand.
2. If a party makes timely demand for a jury trial, the court
should not deny such demand and try the case itself. The court
should either grant the jury demand, or appoint a commission.
3. There must be some reason other than pure discretion, for
the court to deny a jury demand, and order a commission trial,
"unless the court in its discretion orders that, because of the
character, location or quantity of the property to be condemned,
or for other reasons in the interest of justice * * *. (Emphasis
added)
The Rule contemplates some exceptional circumstances arising from the
particular case itself. Congestion of court calendars alone is not just
cause, United States v. Hall, 274 F.2d 856 (C.A. 9, 1960), cert. denied
362 U.S. 990, nor is a "desire to remove all obstacles that cause delay
and bring this action to a conclusion." United States v. Theimer, 199
F.2d 501 (C.A. 10, 1952).
4. The only issue that can be referred to a jury or commission
is that of just compensation. "Trial of all issues shall
otherwise be by the court."
There may be occasions when other factual or legal issues must be
decided before the question of the amount of compensation to be awarded
is submitted to the jury. Such issues may also arise during the course
of a commission hearing, in which event, the question or questions
should be submitted to the trial judge for resolution.
The United States Supreme Court has recognized that the judge, in a
jury-tried condemnation action, has a much broader role than in a
conventional jury trial. United States v. Reynolds, 397 U.S. 14 (1970).
The issue of "just compensation" is to be defined narrowly to only
include the amount to be awarded. The Supreme Court has held that such
issues as whether acreage was "within the scope of the project" are for
the judge, not the jury, to decide. United States v. Reynolds, supra.
The Question of Referral
There is no constitutional right to a jury in Federal condemnation
actions. Bauman v. Ross, 167 U.S. 548 (1897); United States v. 158.24
Acres of Land, Bee County, Texas, 515 F.2d 230, 232 (C.A. 5, 1975).
"The Seventh Amendment applies only to 'suits at common law', and
therefore only in those actions triable before a jury at common law at
the time the Amendment was adopted, can the right be raised". Sykes v.
United States, 392 F.2d 735, 739 (C.A. 8, 1968). As condemnation
proceedings are statutory rather than common law actions, they do not
come within the Seventh Amendment. Nor is there a right to a commission
trial. United States v. Vater, supra. Under Rule 71A(h), the general
view is that jury trials should usually be available if demanded with
commission trials the exception. United States v. 21.54 Acres in
Marshall County, W. Va., 491 F.2d 301 (C.A. 4, 1973).
As previously stated, there should be some reason, arising out of the
nature of the case itself, in order for the court to deny a jury demand,
and order referral to a commission. There is substantial discretionary
power granted to the court in this decision. The question arises as to
the reviewability of the exercise of this discretion as a practical
matter. The court's selection of the method of trial appears to be
final in most instances, as reversal of such determinations on appeal
have been infrequent. Appellate courts seem reluctant to order retrial
merely because of the choice of method of trial, Mills v. United States,
357 F.2d 659 (C.A. 5, 1966), although in one instance, shortly after the
adoption of Rule 71A, reversal on appeal was based on abuse of
discretion by the trial court in referring the matter to a commission.
United States v. Theimer, supra. Courts of appeal, although reluctant
to reverse solely on the basis of choice of method of trial, have, in
cases where the court finds other error requiring reversal and remand
for new trial, directed that the new trial be before a jury rather than
a commission. United States v. Leavell & Ponder, Inc., 286 F.2d 398
(C.A. 5, 1961), cert. denied 366 U.S. 944 (1961). Therefore, it is
important to preserve any possible error in the selection of the method
of trial by making timely objection.
Objections to a commission trial may be based on certain
disadvantages of such system. They might include:
1. Delay -- often due to the pressure of other business
commitments of the chosen commissioners;
2. Expenses -- the cost of paying the commission to hear the
case, as well as expenses arising because of delay, such as
interest liability and larger witness fees;
3. A less established procedure -- the lack of procedural rules
as to how a commission should function, the necessity for close
supervision by the district court to insure fairness to the
parties;
4. The absence of a judge -- in complex cases, a judge is
necessary to clarify the issues and to keep the case moving.
Balancing to some extent these disadvantages to the commission system
are the advantages envisioned by the drafters of Rule 71A(h), based on
the use of the commission in TVA proceedings. These were:
1. In large governmental projects where large areas of land of
similar kind are condemned, the commission system tends to prevent
discrimination and provides for uniformity in compensation.
2. Where large areas and many small landowners are involved,
the commission may travel to the various areas to receive the
evidence from the owners, thus alleviating the hardship placed on
owners.
3. The commission is able to view the premises more easily than
a jury, as it is impractical to take juries long distances.
4. The use of a commission lessens the burden on courts.
28 U.S.C.A., Rule 71A, Notes of Advisory Committee on Rules, page
578.
Whether or not these advantages are actually relevant considerations
in any particular case will turn on the circumstances of the case.
Requests for a commission trial have not been limited to large-scale
projects, such as the TVA projects. It might still be argued that a
commission trial should be reserved for those circumstances where it is
most appropriate, rather than being granted almost as a matter of course
whenever requested.
Trial Methods -- Some Problem Areas
Court-Tried Cases
Since Rule 71A(h) includes no special provisions for the conduct of
non-jury trials, they are conducted in accordance with the general
principles of eminent domain and the Federal Rules of Civil Procedure.
Under Rule 52(a), F.R.Civ.P., problems may well arise as to the court's
findings. Rule 52(a) required that "the court shall find the facts
specially and state separately its conclusions of law thereon." This
requirement does not necessarily envision a certain degree of
technicality or formality, but the writing of full findings is
considered to be an important part of the decision-making process in
court-tried cases, as well as cases tried before a commission. Although
not a condemnation case, the reasoning is well expressed in United
States v. Forness, 125 F.2d 928, 942-943 (C.A. 2, 1942), cert. denied
316 U.S. 694:
It is sometimes said that the requirements that the trial judge
file findings of fact is for the convenience of the upper courts.
While it does serve that end, it has a far more important purpose
-- that of evoking care on the part of the trial judge in
ascertaining the facts. For, as every judge knows, to set down in
precise words the facts as he finds them is the best way to avoid
carelessness in the discharge of that duty. Often a strong
impression that, on the basis of the evidence, the facts are
thus-and-so gives way when it comes to expressing that impression
on paper. The trial court is the most important agency of the
judicial branch of the government precisely because on it rests
the responsibility of ascertaining the facts. When a federal
trial judge sits without a jury, that responsibility is his. And
it is not a light responsibility since, unless his findings are
'clearly erroneous,' no upper court may disturb them. To
ascertain the facts is not a mechanical act. It is a difficult
art, not a science. It involves skill and judgment. As
fact-finding is a human undertaking, it can, of course, never be
perfect and infallible. For that very reason every effort should
be made to render it as adequate as it humanly can be. (Footnotes
omitted)
If the findings are incomplete, or if they do not reflect the mental
process involved in reaching that decision, specific objections should
be made to preserve error for appeal.
Jury-Tried Cases
There being no special provision in Rule 71A as to the conduct of
jury trials, again the general principles of eminent domain and the
Federal Rules of Civil Procedure govern.
One question in a jury trial is whether or not the jury should view
the property. A view of the property may be allowed in condemnation
actions at the discretion of the court. A view is mandated in the
District of Columbia by D.C. Code Section 16-1359. Elsewhere, such a
view is not required, nor is it a right of a party, but is frequently
advisable, if possible or feasible. Some confusion regarding view arose
from a statement in United States v. Merz, 376 U.S. 192 (1964), that a
commission should be informed "of the right to view the property and of
the limited purpose of viewing." The cases which have addressed this
question of view have generally found view to be within the discretion
of the trial court. Phelps Dodge Corp. v. Atchison, Topeka and Santa Fe
Ry. Co., 400 F.2d 20 (C.A. 10, 1968); United States v. Johnson, 285
F.2d 35 (C.A. 9, 1960). The view is not independent evidence of value,
but is an aid to the jury in understanding and interpreting the evidence
presented at trial. Some factors to be considered concerning the
desirability of view might well be whether or not changes in the
physical condition of the property would render the view either useless,
meaningless and/or misleading; the presence of demonstrative evidence
at trial which sufficiently apprises the jury of the conditions of the
property that would be gleaned from a view; and the facility with which
the view could be had.
Another aspect for consideration in a jury-tried condemnation action
is the verdict. Rule 59, F.R.Civ.P. grants the trial court authority to
order a new trial if the jury verdict is against the clear preponderance
of the evidence. The rule is that there must be substantial evidence to
support the jury's decision. In condemnation cases, this has evolved
into a "within the range of the testimony" tule. Evans v. United
States, 326 F.2d 827 (C.A. 8, 1964). See also Winston v. United States,
342 F.2d 715, 720 (C.A. 9, 1965). Generally, a verdict between the high
and low opinions of value properly in evidence is considered to be
supported. There have been instances where verdicts outside the range
of the high and low opinions have been upheld. United States v.
1,162.65 Acres in Henry and St. Clair Counties, Mo., 498 F.2d 1298 (C.A.
8, 1974); Murray v. United States, 130 F.2d 442 (C.A.D.C. 1942).
Usually, verdicts beyond the range, or contrary to law, are
reversible. Scott Lumber Co. v. United States, 390 F.2d 388 (C.A. 9,
1968). In an action where the property had been appraised by government
appraisers at $9,922, and by the owners' appraisers at $23,885, and the
owners had agreed to sell for $16,000, the trial judge was upheld in
setting aside the verdict for $36,500. United States v. Hayes, 172
F.2d 677 (C.A. 9, 1949).
If counsel feels the verdict is excessive, he should file a motion
for new trial. This might be accompanied with a motion for remittitur
conditioned upon the granting of a new trial. Such a situation might
arise where an owner is the only witness to testify as to the value of
his land, as is generally permitted, even over objection. Such
testimony is often unsupported by any factual basis.
In eminent domain procedings, the form of verdict used may be of some
significance. Usually, the jury is only asked to return a general
verdict as to an amount, but it is possible to request a special
verdict, or general verdict accompanied by answers to interrogatories,
as provided for in Rule 49, F.R.Civ. P. The form of verdict may prove
helpful in determining the basis on which the jury made its decision.
Special verdicts, or general verdicts with interrogatories, may be
easier to overturn on appeal than general verdicts, as inconsistencies
between specific answers and the total amount of compensation awarded
may indicate that the jury considered factors other than the admissible
evidence.
A verdict reached by quotient or lot would be grounds for reversal.
A jury should not reach its decision by any arbitrary means, such as
averaging each juror's opinion of value, or averaging the high and low
figures presented in evidence, or by other mathematical averages, such
as totaling the testimony and dividing by the number of witnesses.
Occasionally, it is apparent that this is exactly what occurred, and
should be corrected by new trial or reversal. The problem, however,
arises in attempting to prove error. The rule generally is that a juror
may not impeach his own verdict. McDonald v. Pless, 238 U.S. 264
(1915); Hoblik v. United States, 151 F.2d 971 (C.A. 8, 1945). It is,
therefore, important to make every effort to dissuade the jury from
utilizing any such method in its decision-making process. One way to
obviate such a quotient verdict would be to stress, during summation to
the jury, the error of such lot or mathematical computations, and the
importance of a rational, sound basis or foundation from the evidence
for its decision. Such an argument could then be reinforced by a
requested instruction, which would further impress this upon the jury.
A suggested instruction might be:
The jury is instructed that it is not to arrive at its verdict
by the quotient method. For example, it is not to take the
valuations testified to by the experts of plaintiff and defendant,
and add them together and then divide the results by the number of
experts. In other words, your verdict is not to be one of
mathematical chance, but one arrived at by the deliberate judgment
of the jury based upon the evidence as presented in the trial of
this case, and applied to the law as given you in these
instructions by the court.
Commission Trials
The specifics of a commission trial will be dealt with separately in
another portion of this Seminar. At this point, I wish merely to note
certain problem areas.
Although Rule 71A(h) provides for the commission system of trial, the
procedure to be followed is not set out. The United States Supreme
Court in United States v. Merz, supra, supplied us with some guidelines,
and dealt specifically with one of the more troublesome areas in the use
of commissions -- the commission report. Rule 71A(h) states:
* * * If a commission is appointed it shall have the powers of
a master provided in subdivision (c) of Rule 53 and proceedings
before it shall be governed by the provisions of paragraphs (1)
and (2) of subdivision (d) of Rule 53. Its action and report
shall be determined by a majority and its findings and report
shall have the effect, and be dealt with by the court in
accordance with the practice prescribed in paragraph (2) of
subdivision (e) of Rule 53.
Rule 53(e)(2) states that the court shall accept the master's
findings of fact unless "clearly erroneous." Merz held that since, by
Rule 71A(h), the report has the effect of a master's finding of fact
under Rule 53(e)(2), conclusory findings alone are not sufficient, as
the findings will be accepted unless "clearly erroneous". The
commission is to be instructed to reveal "the reasoning it uses in
deciding on a particular award, what standard it tried to follow, which
line of testimony it adopts, what measure of severance damages it uses",
etc. Id. at 198. The Court in Merz felt that requiring these more
detailed findings would aid the court both in reviewing the findings of
the commission, and would cause the commission to give more careful
consideration to its findings and report.
* * * The commissioners need not make detailed findings such as
judges do who try a case without a jury. * * * The path followed
by the commissioners in reaching the amount of the award can,
however, be distinctly marked. Such a requirement is within the
competence of laymen; and laymen, like judges, will give more
careful consideration to the problem if they are required to state
not only the end result of their inquiry, but the process by which
they reached it.
As previously pointed out, this reasoning, of course, applies equally
to the findings of fact and conclusions of law in a court-tried case.
The inadequacy of the report may be a basis for a remand with
instructions, or corrections by the court, or for reversal. Therefore,
objections to the report should be timely made and with specificity, to
preserve possible error. United States v. Trout, 386 F.2d 216 (C.A. 5,
1967); United States v. Buhler, 305 F.2d 319 (C.A. 5, 1962).
Use of Magistrates in Federal Condemnation Actions
Title 28, U.S.C. Section 636(b) authorizes district court judges to
assign to United States magistrates certain specified duties, such as
hearing certain pretrial matters, conducting certain hearings, including
evidentiary hearings, and "such additional duties as are not
inconsistent with the Constitution and laws of the United States."
Section 636(b)(2) specifies:
* * * A judge may designate a magistrate to serve as a special
master pursuant to the applicable provisions of this title and the
Federal Rules of Civil Procedure for the United States district
courts. A judge may designate a magistrate to serve as a special
master in any civil case, upon consent of the parties, without
regard to the provisions of rule 53(b) of the Federal Rules of
Civil Procedure for the United States district courts.
The question has been posed as to the use of magistrates as special
masters in Federal condemnation actions. As set forth in 28 C.F.R.
Section 50.11 (1976), attorneys in the Department of Justice should not
agree to the designation of magistrates serving as masters whenever it
is concluded that such designation is in contravention of the
Constitution or Rule 53(b), which limits such reference as follows:
53(b) Reference. A reference to a master shall be the
exception and not the rule. In actions to be tried by a jury, a
reference shall be made only when the issues are complicated; in
actions to the tried without a jury, save in matters of account
and of difficult computation of damages, a reference shall be made
only upon a showing that some exceptional condition requires it.
I feel that under the existing rules regarding magistrates, a blanket
reference of all condemnation cases to a magistrate acting as a special
master would be a prima facie violation of Rule 53(b).
The only issue to be decided by a jury or commission in condemnation
actions is just compensation. This is normally not a "complicated"
issued, and a reference to a magistrate would not seem appropriate under
Rule 53(b). If the action is tried without a jury to the court, the
rule provides that unless there are "matters of account and of difficult
computation of damages", references are to be made only upon
"exceptional conditions". Eminent domain actions do not generally
involve "matters of account" as that term is commonly understood, nor
"difficult computation of damages". Evidence is presented, usually in
the form of expert opinion testimony, as to the amount of compensation
contended by each side. Therefore, since the provision in Rule 71A(h)
for a commission is designed to meet exceptional conditions arising from
the case itself, it is unclear exactly what the courts would consider to
be "exceptional conditions" justifying the reference to a magistrate.
Congestion of court calendars and the complexity of the case have been
held not to be such "exceptional conditions" in a pre-Magistrate Act
case, LaBuy v. Howes Leather Co., 352 U.S. 249 (1957). LaBuy was
reaffirmed in a post-Magistrate Act case, Mathews v. Weber, 423 U.S.
261 (1976). See also, Ingram v. Richardson, 471 F.2d 1268 (C.A. 6,
1972).
In cases where trial counsel feels that a reference to a master has
been improperly granted, he should make timely objection to preserve
error on appeal. Counsel might also consider application for a writ of
mandamus, with the requisite Solicitor General's approval, to set aside
the reference. Courts seem reluctant to grant such extraordinary
relief, but it has been done where a reference was found to be improper.
TPO Incorporated v. McMillen, 460 F.2d 348 (C.A. 7, 1972).
Preserving Appellate Error
Counsel should, from the outset of trial make timely objections to
preserve error for appellate review. Some of the common areas where
objections may arise include the appointment of a commission, the
commissioners appointed, introduction of inadmissible evidence, the
tendering of and objections to instructions, the sufficiency of the
evidence to support the jury verdict, the arguments of counsel, and the
findings and report of the judge or commission.
Appointment of a Commission -- As already discussed, almost never
will the court's appointment of a commission be reversed on appeal.
However, it is important to object to preserve any chnace of the court's
directing a retrial on another issue and specifying the type of trial
upon remand. United States v. Leavell & Ponder, supra.
The Commissioners Appointed -- This objection should be made at the
time of appointment, or at the time counsel discovers removal to be
necessary. If not objected to promptly, such objection may be
considered to have been waived. United States v. 615.10 Acres in
Grayson et al. Counties, Va., 327 F.Supp. 691 (D.Va. 1971).
Introduction of Inadmissible Evidence -- The importance of preserving
error by timely objection was illustrated quite graphically in a recent
Tenth Circuit condemnation action, United States v. 1,036.05 Acres in
Sweetwater County, Wyoming (#75-1835, C.A. 10, April 29, 1977). On
appeal, the Government alleged that the trial court's admission of
extensive evidence of the relationship between the condemned lands and
Federal permit lands was reversible error. In denying this claim, the
court emphasized that, other than minor objections to particular
questions, the Government never objected to most of the testimony at
trial, upon which they later based their appeal. Although Rule 46,
F.R.Civ.P., makes a formal exception unnecessary, a party must still
make it clear that he objects to an action of the court in order to
preserve the point for an appeal. United States v. Vater, supra; 5A
Moore's Federal Practice Paragraph-46.02.
The Tendering of and Objections to Instructions -- Counsel should
make timely and specific objections to the Instructions given by the
trial court and tender written requested instructions. Rule 51, F.R.
Civ.P., provides specifically that:
* * * No party may assign as error the giving or the failure to
give an instruction unless he objects thereto before the jury
retires to consider its verdict, stating distinctly the matter to
which he objects and the grounds of his objection.
In a golf course condemnation action, condemnee's objection that the
trial court did not adequately instruct the jury concerning the weight
of the evidence was not raised at trial, and thus was not preserved for
appeal. United States v. 84.4 Acres in Warren County, Pa., 348 F.2d 117
(C.A. 3, 1965).
The Sufficiency of Evidence to Support the Verdict -- A motion for
directed verdict or for judgment notwithstanding the verdict is one
means of preserving the question of the sufficiency of the evidence, as
is a motion for new trial. If the verdict is thought excessive, or
outside the range of the evidence, a motion for remittitur or
alternatively for new trial, will also preserve error. The court can
deny the Government's motion on the condition the condemnee remit a
portion of the award. United States v. 1,160.90 Acres in Holmes County,
Miss. (Fisackerly), 432 F.2d 910 (C.A. 5, 1970). In Fisackerly, the
appellate court disapproved the district court's order directing a new
trial or a remittitur below the highest amount the jury could have found
from the evidence (the landowners' lowest amount).* This is the "maximum
recovery rule". Objection should also be made if the decision appears
to be a quotient verdict, with no rational basis.
*Editor's Note: In the Fifth Circuit, the Government, as a general
rule, no longer requests remittiturs.
The Arguments of Counsel -- Any objections to the arguments of
opposing counsel should be made either during, or immediately after, the
argument. This was illustrated in United States v. 1,036.05 Acres,
supra. A second argument on appeal presented by the Government in that
case was that a new trial should have been granted because of a
deliberate attempt to prejudice the jury against the Government during
the allegedly inflammatory closing argument of landowner's counsel.
Again, the court, in denying the error, relied on the Government's
failure to object to the closing argument either during or after, and
his failure to move for a mistrial. For a discussion of the areas of
responsibility between counsel and the court in protecting the record on
oral argument, see Sill Corporation v. United States, 343 F.2d 411, 421
(C.A. 10, 1965).
Findings and Report of Judge or Commission -- Timely objections
should be made both to any deficient or erroneous findings of the judge,
or the report of the comission. The objection should specify in what
respects the report or findings are inadequate, United States v. Lewis,
308 F.2d 453 (C.A. 9, 1962), based on the standard set out in Merz. The
standard set for recognizing errors not objected to at trial is much
higher on appeal than if they had been timely preserved. If considered
at all, such error must be of a more substantial nature than one
properly preserved. It is certainly more advisable, when in doubt, to
make the necessary specific objections than to chance recognition of
possible error on appeal. As a general rule, points not raised and
preserved at the trial level will not be considered on appeal unless
they amount to fundamental error. United States v. Vater, supra at 672;
5A Moore's Federal Practice Paragraph-46.02.
Conclusion
As stated in the introduction, this discussion of preference of
method of trial is certainly not all comprehensive, nor is it intended
to be directive. It is hoped, however, that it will be helpful to the
trial attorney in weighing some of the pros and cons in areas where he
has the discretion to choose, or in aiding the court in its choice, and
that by being apprised of some of the benefits as well as the pitfalls
of the various methods, the trial attorney will more nearly select the
method applicable to his district and particular case. This should
result in a more expeditious disposition of your caseload, while
assuring a compensation that is fair and just to the public as well as
to the landowners.
In the unlikely event the trial attorney receives an unfair or unjust
award or verdict, it is hoped that, from some of the suggestions
contained herein, he will have sufficiently protected his record so that
the error might be corrected.
LAND AND NATURAL RESOURCES DIVISION
By B. Richard Taylor
1977 FEDERAL EMINENT DOMAIN SEMINAR: SUPPLEMENT TO CHOICE OF METHOD
OF TRIAL
November 1977
Department of Justice Policy Regarding the Trial of Condemnation Cases
by United States Magistrates
Please note that the Department's policy in regard to the use of
magistrates has just been changed. By Order No. 751-77 dated October 5,
effective October 15, 1977, the Attorney General has revised the
Department's policy to encourage the legal Divisions to accede to
referrals to magistrates as special masters when to do so would be in
the interest of the United States under the circumstances. See Volume
42, No. 200, Page 55470 of the Federal Register dated October 17, 1977.
On November 2, 1977, the Assistant Attorney General, Land and Natural
Resources Division, approved the implementation of the following
guidelines for consensual referral of condemnation cases to magistrates
acting as special masters: consent is authorized where 1) the
landowner's clam does not exceed $40,000.00, 2) no difficult legal
question is involved, and 3) referral will be in the interest of the
United States under the circumstances. These guidelines are subject to
modification as experience develops.
Consent to trial by a magistrate in a role other than special master
under the provisions of Rule 53(b) -- for example, as a trial judge --
is not authorized by the Department at this time, although there is some
prospect of change. That prospect is found in S. 1613, the proposed
"Magistrate Act of 1977". This proposed Act, which has the strong
backing of the Attorney General, provides, inter alia, that upon the
consent of the parties a magistrate may conduct any or all proceedings
in any jury or nonjury civil matter and order the entry of judgment in
the case, when specially designated to exercise such jurisdiction by the
court. This bill passed the Senate on July 22 and is now before the
House.
LAND AND NATURAL RESOURCES DIVISION
TITLE II -- EQUAL ACCESS TO JUSTICE ACT
By B. Richard Taylor
1977 FEDERAL EMINENT DOMAIN SEMINAR: COMMISSION TRIALS AND
POST-TRIAL PROCEEDINGS
November 1977
Introduction
This topic will concentrate on the practical aspects of commission
trials of just compensation likely to face an Assistant United States
Attorney who handles condemnation cases in his district. Hopefully, it
will include helpful suggestions on moving commission-tried tracts to
conclusion whether they are major, intermediate, or small. It is also
hoped that some of the advantages of the Department's small tract
program can be incorporated.
It is suggested that you review the excellent articles written by
Roger P. Marquis in your 1963 condemnation seminar manual, volume II,
tab J; the 1964 manual, volume III, tab Mc, volume IV of the 1966
condemnation seminar manual, tab H, and the article by B. Richard Taylor
in volume VI of the 1973 manual.
Whether a Commission Should Be Used
1. Disadvantages of Using a Commission
Where you are afforded a choice, a preliminary determination whould
be made as to whether using a commission to try your cases is preferable
to trying the cases with a jury. You may not have a choice as to
whether you will have a commission. While it has been customary for the
Government to demand jury trials, some courts nevertheless often refer
condemnation cases to a commission. One reason is the increased
criminal case workload in most districts, including legislation giving
priority to criminal cases. This often compels a court to decide that
its condemnation cases can be determined sooner if tried by a
commission.
There are some very good reasons for not using a commission. A
disadvantage of commission hearings is that some courts neither solicit
nor welcome any imput or suggestions as to who will serve as commission
members. Procedures used in the jury selection process simply are not
required in the selection of a commission. This is not to suggest that
your input should not be offered or that objections should not be made
to the appointment of commissioners considered to be biased or
imcompetent. It means only that the court can appoint anyone it pleases
as a member of the commission. If a commission is liberal in making
awards, you can be burdened with this in all the hearings for a given
project. While, in theory, a commission is supposed to make its
findings in each individual case based on the testimony before it in
that case, there is a tendency for a trend of valuation to be
established early and for the commission to make its own appraisals.
You must, of course, guard against any ostensible signs of this to
protect your record. But early trend-setting seems to be an ailment
which plagues many commissions.
Another disadvantage of commission trials is that your court may not
welcome any input or suggestions as own predetermined form of
instructions and feel it does not need the Government's "help." However,
a complete set of "boilerplate" instructions should be offered by
motion. Incidentally, the "boilerplate" jury instructions provided in
earlier Department seminar manuals can be used and adapted to commission
hearings. In any event, the court is not required to solicit proposed
instructions from the parties.
A further disadvantage of commission trials results from the
reluctance of many commission chairmen to make exclusionary rulings.
How often have you objected to a sale adduced by landowners as a
comparable sale, made your objection and received a ruling that "it goes
to the weight, rather than the admissibility." Generous liberality as to
the admissibility of sales is almost always harmful to the Government,
because the commission delegates itself too much latitude as to what it
can consider in making its findings. The unhappy ending to this tale is
that the commission will usually not weigh the dubious sales properly
even after you have engaged in thorough cross-examination. In addition,
the Federal Rules of Evidence lean in the direction of more liberality
and admissibility of opinion testimony. Rules 701-705 can easily force
the Government attorney opposing admissibility to develop the
landowner's case on cross-examination if a landowner-witness is allowed
to state a bare, unsupported opinion of value. Rule 705 could be read
to permit this. Without prior discovery of the underlying basis for the
opposing expert's opinion, the Government attorney must cross-examine
most cautiously. This situation is not limited to commission hearings,
but it does provide additional opportunity for the commission to be more
lenient in favor of admissibility. Of course, motions to strike sales
thought not to be comparable and motions to strike testimony weakly or
entirely unsupported should be made both at the close of landowner's
case and at the close of all the evidence to protect the record.
If the award of the commision is too liberal and such liberality is
based on sales admitted over the Government's objections, then the
objections to the report and findings of the commission are filed.
Objections should be filed whenever the commission's report is legally
insufficient or based on errors of law. If the court is reluctant to
overturn the commission's findings although "clearly erroneous" then the
Government's burden is to win its case on appeal.
2. Advantages of Using a Commission
While I have been accentuating the negative with regard to the use of
commissions, I must say that there are also certain advantages to trying
your cases before a commission.
The first advantage is that as condemnation attorney for your office,
you can usually arrange the scheduling of the condemnation cases in your
district, consistent with your other duties. The commission could do
this work, but my experience is that they would rather let the United
States Attorney's office do it.
Another advantage of the commission system is that your caseload can
be moved to conclusion more rapidly. Priorities given criminal cases by
legislation such as the Speedy Trial Act have made it more difficult for
courts in some judicial districts to give prompt attention to
condemnation cases.
Using a commission also has an advantage in that a commission usually
becomes familiar with the real estate market in a project area through
testimony adduced and by views of the property in the project area. If
fair-minded, the commission has the opportunity to apply common sense in
arriving at its findings.
The greatest advantage of using commissions, in this attorney's view,
is that it provides a means of rapidly moving your caseload. I wish to
offer a few suggestions as to the mechanics of this.
Mechanics of Commission Trials
1. Appoinment of Commission
Preliminary settlement negotiations should be attempted as to each
ownership before setting any cases for trial. Those tracts still not
settled should be promptly scheduled for trial. Also included for trial
settings should be those tracts where it is impossible to settle with
all the owners because of title defects, but where it is required to
have findings of just compensation.
First, you should move that the court appoint a commission as to
those cases which are being scheduled for trial. As of October 1, 1977,
responsiblity for the payment of commissioners was transferred from the
Department of Justice to the Judiciary. On September 27, 1977, a
communique was sent to all district court judges advising them of the
regulations governing the appointment of commissioners. It was
necessary for all commissioners to be reappointed as of October 1, 1977.
Since commissioners are considered judicial officers, it is the
responsibility of the clerk of the court to transmit all appropriate
materials, including AO Form 79, to the Personnel Division of the
Administrative Office of the United States Courts. Maximum rate of
compensation remains the daily rate payable to a GS-18.
You should attempt to suggest names of potential commissioners to the
court whom you know to be impartial and realistic. You should suggest
persons whom you know will listen to the evidence and have a record of
being realistic, or at least impartial, in their findings. If you are
able to persuade the court to appoint a commission to your liking, you
may have won your biggest battle. However, as said earlier, the court
may appoint whomever it pleases. It is important that the chairman of
the commission be a lawyer because he must make rulings on
admissibility, motions to strike, and generally control the flow of the
case.
If you find any of the commissioners are objectionable, you should
file objections within 10 days of the order appointing them spelling out
your objections with particularity. Some grounds for objection are
those relating to demonstrative bias against the Government or past
business contact with the defendants. Obviously, this had to be done
skillfully, especially if the court appoints old friends as
commissioners.
2. Reporting the Hearing
The regulations of the Administrative Office of the United States
Courts provide that, in general, sound recording equipment be used for
recording commission hearings. The court is responsible for the fees of
a court reporter if the use of sound recording equipment is not
feasible. Transcripts must be specifically requested and then the party
requesting must pay for the transcript.
3. Instructions to Commission
This is another critical preliminary area where there appears to be
no requirement that the court solicit the Government's input. As stated
previously, the court may have its own "boilerplate" instructions that
it believes to be adequate. Nevertheless, it is still urged that you
submit your own set of instructions to the commission by motion.
Oftentimes the court's instructions are either not thorough or are
erroneous in parts. Since the instructions provide the law which will
guide the commission throughout all its hearings it is most important to
you that they correctly state the law of Federal condemnation and that
they correctly anticipate the legal questions likely to arise in your
trials. Such proposed instructions should be accompanied by appropriate
citations of authorities.
The court may not adopt your form of instructions, but if you have
appropriately submitted them and have been overruled, then this error is
preserved for appeal purposes. You can adopt appropriate instructions
from suggested jury instructions provided by the Department of Justice
in its 1971 and 1973 condemnation seminar manuals.
4. Obtaining Expeditious Hearings
Assuming that the commission is appointed, your next step is to
schedule your cases for hearing. You should make a realistic estimate
of the time it should take to try each case. Presumably, you have
reviewed the appraisals, have conducted preliminary negotiations with
landowners or their attorneys, and have been incontact with the
acquiring agency to get acquainted with any unusual legal or factual
problems likely to arise. You also have disposed of preliminary matters
before the court which might arise, such as the right to take, title
questions, motions on peculiar law questions, and discovery. After that
you must use your best judgment in estimating how long the trial of each
ownership will take and, perhaps, add an extra day as a safety margin.
Next, I suggest that you draft a proposed fall-winter-spring schedule
setting for hearing one or two cases each week for 3 weeks out of the
month starting Tuesday. The draft of the trial calendar should be
furnished to each commissioner to resolve any conflicts he may have.
Then the draft of the calendar can be revised into final form. On the
trial calendar one day in the first week of each month should be
scheduled to hold a "docket call" and pretrial hearings for the cases to
be tried that month. The "docket call" is for the purpose of making
ready announcements for the month.
It is assumed that the Government has previously completed service of
process on the necessary parties and has notified all the parties and/or
attorneys by certified mail of the hearing and has furnished them with
copies of the trial calendar. Presumably also, the notices of the
hearings have been sent at least 30 days is suggested. During the
pretrial hearing any genuine conflicts that the landowners or their
attorneys have with the trial schedule can be adjusted at that hearing.
The trial should be set for another time certain by mutual agreement of
the Goverment, landowners and the commission. This usually effectively
prevents the landowner's attorney from moving for further continuances,
because the new trial date was agreed to by him.
Another advantage of holding the "docket call" or pretrial hearings
separately from the trials of just compensation is that the parties can
avoid incurring the expense of having witnesses wait around needlessly
should the case be continued. This also avoids the additional clerical
burden of having to send new notices for a new hearing because the
notice is provided orally before the commission and in the presence of
all the necessary parties.
Another benefit to be gained by scheduling a "season" of cases is
that it forces landowners to decide whether they are really going to try
their cases or settle them when confronted with an actual trial
schedule. My own experience has been that more than half the cases set
down for trial are settled.
Once the trial schedule for the month has been finalized at the
pretrial hearing and the parties have all announced ready, then actual
pretrial matters can be disposed of orally before the commission. This
should be recorded. The matters included should be those usually
covered in a more formal pretrial order, such as stipulations that there
are no jurisdictional questions, the estate taken, the date of taking,
description of the subject property, names and addresses of witnesses
and the estimated time of trial. Having these oral stipulations taken
on the record prevents a landowner's attorney from filing last-minute
motions with the court, deposing your witnesses at the last moment, or
otherwise bringing in elements of surprise which tend to disrupt the
orderly progress of your hearings. Such an informal pretrial conference
before the commission performs the basic function of any pretrial in
narrowing down the issues including those within the single issue of
just compensation.
I mentioned Tuesday as a day for the trial settings for a practical
reason. You need the day before the trial to make last-minute
preparations with your witnesses. This prevents your having to spend
most of your Sundays througout the year interviewing witnesses. You can
do this easily on Monday. It is assumed that long before the trial
setting you have toured the project area with your appraiser, have
inspected the sales in the area, including not only your comparable
sales but also the high-priced sales landowners are likely to use
against you in the hearing. It is also assumed you have previously made
a very thorough study of your appraisal reports and have thoroughly
"cross-examined" or interviewed your own witnesses so they can be
prepared for trial. The Monday of each trial week simply serves as a
final review between you and your witnesses as to what your testimony
will be and allows you to make a final inspection of the subject
properties, your comparable sales and the landowners' likely comparable
sales, so you can fix in your own mind the details of such sales. I
also suggest that you make a "sales book" of the project area
alphabetized by grantor including each sale writeup and that you also
obtain all the sales writeups of every staff and fee appraiser who is
working in the area for the Government. You must insist that the
acquiring agency furnish you with all the sales writeups of all staff
and fee appraisers in the project. It is embarrassing for you to be
surprised with a high-priced sale you have never heard of before. Only
continuous updating can save you from this. These sales writeups should
provide you information as to each sale including the grantor-grantee,
the size, time, location, price, confirmation, and, oftentimes, a
sketched plat or photograph of the sale property to supplement your
physical inspection.
Thus, the trial before the commission of a particular tract is
generally limited to testimony and arguments. I can only give you my
own experience. In the Western District of Texas where the Government
was acquiring farmland or ranchland for reservoir projects, 2 days would
usually be sufficient time for hearing each ownership. The cost
approach was never used, and the income approach rarely used. As a
practical matter where rural property was being condemned, the market
data approach was almost universally applied. The Government would
usually have one appraisal witness and sometimes a hydrologist.
Defendants would usually have one appraisal witness, landowners, a local
realtor, and an occasional pecan expert. In any event, you should use
your own judgment and experience in estimating the time of trial. As
the trials are heard more trial time opens up because previously
scheduled cases begin to settle. Thus, if some trials take longer than
anticipated, conflicts with other settings may be mooted because of
additional settlements resulting from your setting the cases for
hearing.
The most important thing I wish to emphasize is that you must have a
"game plan" and a seasonal calendar and that you must do your best to
stick to that plan. We found such a plan worked quite well in our
district and we moved our caseload rapidly once we put the plan into
operation.
Another benefit of scheduling your cases for a "season" is that the
bulk of the notices of hearings are sent at one time. One of the most
time-consuming clerical burdens for your secretary is that of sending
out notices of commission have to be sent only two or three times a year
with an occasional exception. It is less difficult and time-consuming
to send out notices for a whole season at one time as compared to send
out notices for a few cases many times. Getting "tooled-up" requires
about the same amount of time for each group of settings. Your office
should also have word-processing equipment and clerical personnel who
have word-processing capabilities.
Attached are samples of trial calendar (Exhibit "A"), pretrial
hearing checklist (Exhibit "B"), and forms of notice (Exhibit "C").
With respect to your notices, be certain that you also notify your
witnesses, the acquiring agency, the court reporter, and, of course, the
court. Although after October 1, 1977, the clerk of the court is to
make arrangements for space and facilities, you may have to make
arrangements for a place to hear the cause. I have found that the grand
jury room in the United States courthouse in the division where the
property is located is a good place to hold hearings. Arrangements
should be made with the court to avoid conflicting hearings. At the
conclusion of a particular commission hearing, physical arrangements for
a view should be made, if requested by either party. If your trial has
any financial significance a view should be requested by the Government.
You can usually request the acquiring agency to furnish transportation
for the commissioners. A van or wagon will usually work well, if it is
sufficient to transport the commissioners, the commissioners first view
the subject tracts and then view the alleged comparable sales. Viewing
the property and the comparables should assist the commissioners in
making realistic findings.
5. Making Your Record
It cannot be over-emphasized that you must make proper objections at
every stage of the proceeding where you consider you are being harmed so
that the error you are urging is preserved. This may begin with the
objection to the appointment of commissioners and objections to the
cour't instructions to the commission, both those which are erroneous
and those you submitted which the court refused to adopt. It is also
most important that you make strong and articulate objections to
improper testimony, including non-comparability of sales, followed by
motions to strike such sales and other improper testimony, both after
landowners rest and after the conclusion of all the evidence. In some
instances, it may be appropriate to move to have the question referred
to the court for resolution, rather than to proceed on an erroneous
legal ruling. Objections to improper arguments should also be made.
Finally, if the award is too high in your estimation, objections should
be made to the commission report and findings. If you have previously
made your proper objections, then you have laid a predicate for
objecting to the report and findings of the commission. You should then
make a determination as to whether you believe, first, the award is too
high, and second, whether, even if too high, such findings contain
reversible error. If so, and if you preserved that error, then your
predicate for both objections to the report and findings and a possible
appeal has been properly laid. You should immediately forward a copy of
the report and findings to the Department to discuss whether it is
advisable to file objections. Due to the fact that you have only 10
days within which to file objections to the report, in many cases you
should telephone the Department as soon as the report is received so
that no time is lost.
The fact that you are not successful in having your objections at the
hearings sustained does not mean you should not continue to make them.
It is quite easy to get discouraged and succumb to the temptation to "go
along to get along" and acquiesce in unfavorable rulings when you see
you are not getting anywhere with your objections. Nevertheless, if
they are well-founded objections they should be made and the reasons
articulated. Also, do not forget to make offers of proof of evidence
which you adduced but which was excluded by the commission. All of this
will not guarantee a victory on appeal nor will it guarantee that an
appeal will be taken. However, if you do not preserve error in your
record there simply will not be a record upon which an appeal can be
based.
6. Filing Timely and Specific Objections to Commission Report
If you have properly preserved your error in the record and the
commission comes in with an excessive award, the rules allow you 10 days
to file objections to the report and findings of the commission. This
is simply not adequate time because a transcript of the hearing cannot
be transcribed by the court reporter in such a short period. The best
procedure is to file some preliminary general objections to the award
within the 10-day period accompanied by a motion for a 60-day extension
to file more complete objections, citing as reasons the time needed to
order a transcript and to review it. Then you can file the detailed
objections before the termination of the 60 days. These objections
should be detailed ones, specifically pointing out the page references
from the transcript of the objectionable matters and citing the proper
authorities in support of your contentions. You should write your
objections to the findings and report as if it were an appellate brief,
although a "shotgun" approach is probably preferable on your points of
error, while in writing an appellate brief you would probably select
only the strongest points. The court reviewing your objections then has
an opportunity to know what you thought was harmful. This can be done
if you have organized and articulated your objections and supported them
with specific references to the transcript and proper citations of
authority. If the court is persuaded, it "may adopt the report, or may
modify it, or may reject it in whole or in part, or may receive further
evidence or may recommit it with instructions" as provided by Rule
53(e)(2), F.R. Civ.P.
If the court is not persuaded by your objections, it will overrule
them and most likely enter a judgment fixing just compensation. The
time for filing a notice of appeal is 60 days from entry of such
judgment. When judgment is entered, the Department of Justice must be
informed immediately and furnished copies of the judgment. It should
also have been previously furnished a copy of the transcript of the
commission hearing. You should also submit to the Department your
written recommendation regarding the appeal and detailing your reasons.
It is important that you take all the steps necessary to preserve the
Government's right to appeal. The recommendation of your office will be
carefully considered by the acquiring agency, the Land Acquisition
Section, the Appellate Section, and the Solicitor General. Then a
decision will be made as to whether or not your case will be appealed.
About 5 days prior to the end of the 60-day period, you are
authorized by the Department to protect the Government's right to appeal
by filing a notice of appeal with the district court. Rule 11( a),
F.R.App.P., permits 40 days after the filing of the notice of appeal to
transmit the record to the Court of Appeals. Rule 11(d) allows a motion
to extend the time for transmission of the record to a time no later
than 90 days from the date of the filing of the notice of appeal. Of
course, you should keep both the Land Acquisition Section and the
Appellate Section fully informed as to all developments.
Conclusion
In summary, I have mentioned ideas that have worked in one district
in the country for one Assistant United States Attorney. Like all
suggestions, they are made to be adapted to the particular circumstances
of a given district and to the needs and requirements of the particular
lands attorney. However, I do urge that it is a workable plan that will
move your cases to conclusion, should your cases be tried before a
commission.
LAND AND NATURAL RESOURCES DIVISION
EXHIBIT A
CONDEMNATION TRIAL SCHEDULE (AUSTIN DIVISION)
DATE TIME
SEPTEMBER, 1974
September 3 9:30 Pre-Trial before commissioners of
cases set for September.
September 10 9:30 Just compensation hearins on:
A-73-CA-108 MF-1173-1 Tr. 340 (Simcik,
et al)
A-73-CA-110 MF-1173-2 Tr. 337 (Dobias,
et al)
September 17 9:30 Just compensation hearings on:
A-73-CA-111, Tr. 338 (Sladecek, et al)
A-73-CA-132, Tr. 310 (Lawrence, et ux)
September 24 9:30 Just compensation hearings on:
A-73-CA-133, Tr. 350
A-73-CA-119, Trs. 348E-1 & 348E-2 (Marek,
et al)
A-73-CA-120, Tr. 352E (Puste jousky, et al)
OCTOBER, 1974
October 2 9:30 Pre-trial before commissioners of
cases set for October.
October 8 9:30 Just compensation hearing on:
A-73-CA-195, Tr. 612 (H.B. Fox, et al)
A-73-CA-200, MF-1173-7, Tr. 330 C. C.
Allison, et al)
October 15 9:30 Just compensation hearing on:
A-73-CA-201, Tr. 334 (Allison, et al)
A-74-CA-057 MF-1178-8, Tr. 333 (Allison,
et al)
October 22 9:30 Just compensation hearing on:
A-74-CA-058, Tr. 357 (C. C. Allison, et al)
A-74-CA-059, Tr. 358 (C. C. Allison, et al)
NOVEMBER, 1974
November 8 9:30 Pre-trial before commissioners of
cases set for November.
DATE TIME
November 12 9:30 Just compensation hearings on
A-72-CA-64, Tr. 105 (D. b. Wood, et al)
A-72-CA-64, Tr. 204 (West Mesa Development
Co. et at)
DECEMBER, 1974
December 3 9:30 Pre-trial before commissioners of
cases set for December
December 10 9:30 Just compensation hearings on:
A-73-CA-137, Tr. 206 (Murray, et al)
A-73-CA-161, Tr. 202 MF-1035-3
(Tucker estate, et al)
December 17 9:30 Just compensation hearings on:
A-73-CA-112 MF01035-1 Tr. 210E
(Giles, et al)
A-74-CA-088 MF-1035-4 Tr. 513E
(Smith, et al)
A-74-CA-089 Tr. 514E (Smith, et al)
A-74-CA-090 Tr. 518E (Risley, et al)
A-74-CA-091 Tr. 519E (Greinert, et al)
JANUARY, 1975
January 3 9:30 Pre-trial before commissioners of
cases set for January
January 7 9:30 Just compensation hearings on:
A-74-CA-116 MF-1035-5 Tr. 400 series
(Rex Hawes, et al)
A-74-CA-117 Tr. 408 series
(Jerry Hawes, et al)
A-74-CA-118 Tr. 409 series
(Jerry Hawes, et al)
Tr. 410 series
(Jerry Hawes, et al)
January 14 9:30 Just compensation hearing on:
A-74-CA-121 MF-1035-6, Tr. 401 & 402
(Hall, et al)
The tracts of land set out in the calendar have been set on the
indicated dates for pre-trial hearings and hearings of just
compensation. All parties or their attorneys are expected to dispose of
pre-trial matters and enter into stipulation of such matters as date of
taking, estate condemned property description, and be prepared to
furnish names of witnesses and dispose of any other unresolved issues
other than the issue of just compensation. Witnesses need not attend
these pre-trial hearings, but it is the duty and responsibility of the
parties, or their attorneys, to inform their own witnesses as to the
time and places they are to appear at the hearings on just compensation.
Any motions for continuance shall be made at the pre-trial hearing for
the indicated tract and will be decided upon at that time.
The tracts set for hearing as indicated on the calendar will be heard
by special commission appointed by the court. The tracts will be tried
"back to back" in order of listing on the calendar during the respective
weeks. Parties, or their attorneys, and witnesses for the respective
parties are expected to be available on call and to be prepared for
trial on the indicated date and indicated time and subsequent days
during that week.
UNITED STATES ATTORNEY
By
Assistant United States Attorney
AUSA/oo
Tract No.
EXHIBIT B
PRE-TRIAL CHECKLIST
1. Notice of hearing for all landowners and/or attorneys.
2. Appearance by all landowners or attorneys.
3. Jurisdictional issues.
4. Any pending motions
5. Attorneys:
a. . . . Assistant United States Attorney for the United States
of America
b.
c.
d.
6. Description, estate taken stipulated.
7. Date of taking:
8. Owners of interest of subject property in tract as of the date of
taking were:
9. Contested issues of fact.
a. Highest and best use of subject property.
b. Fair market value of subject property as of the date of
taking.
10. Contested issues of law:
11. There are no anticipated contested issues of law except:
a. As to possible objections to offers of evidence, the
admissibility of which has not been stipulated prior to trial.
b. As to possible theories of valuation where it is urged such
theories are not permissible under the federal law of eminent
domain.
c. As to the qualifications of any witness to testify as an
expert or giving opinion of value.
12. Names and addresses of witness:
a. For landowner.
b. For United States.
c.
d.
13. Any party attempting to introduce a sale of a particular property
as evidence of the value of the subject property as a comparable sale
must, before such so-called comparable sale is admitted into evidence
and before being permitted to testify as to the price paid for such
so-called comparable property, show comparability of the sale to the
Commission and show the following data:
a. Grantor:
b. Grantee:
c. Date of sale:
d. Number of acres:
e. General location and location with respect to subject
property.
f. Ratio of cropland, bottomland, pasture land, etc.
g. Ratio of improvements.
14. The burden of proof to establish the fair market value of the
subject property as of the date of taking is on the landowners.
15. Landowners will open and close arguments. Arguments will be
limited to . . . for each side.
16. This tract will be tried beginning at:
EXHIBIT C
UNITED STATES ATTORNEY
WESTERN DISTRICT OF TEXAS
655 E. DURANGO BLVD
HEMISFAIR PLAZA
SAN ANTONIO, TEXAS 78206
Mr. Landowner
200 East Bank
River, Texas
Re:
Dear Mr. Landowner:
The above-referenced tract of land has been set for pre-trial hearing
and just compensation hearing in the Grand Jury Room, Federal District
Courthouse, 200 East 8th Street, Austin, Texas, at the time and dates
underlined on the attached trial schedule.
Very truly yours,
United States Attorney
By
Assistant U. s. Attorney
Return Receipt Mail Request Is Not Available On JURIS
By Harold O. Atkinson
1977 FEDERAL EMINENT DOMAIN SEMINAR: OPENING AND CLOSING STATEMENTS
November 1977
Opening Statement
A. Which Side Opens.
While the Government generally institutes a condemnation action, and
appears in the caption of the pleadings as plaintiff, in Federal
condemnation law, the Government is only nominally the plaintiff.
Under Federal law, the burden of proving the issue of just
compensation is on the former landowner, who appears in the proceedings
as defendant. U.S. ex rel T.V.A. vs Powelson, 319 U.S. 266, 273(1943).
In most, if not all districts, local court rules will determine the
order in which opening and closing statements are presented.
Generally, these rules provide that the party or parties having the
affirmative of the issue involved in the case will first present opening
statements to the injury.
Thus, in a land condemnation case, though the Government is
plaintiff, the former owner or owners, will first open to the jury.
Further, local court rules generally provide that the party first
opening to the jury will have the first opportunity to to present
closing arguments at the conclusion of the evidence.
Therefore, the former landowner or owners, will have the first
opportunity to close to the jury.
The former landowner has the added advantage of a brief rebuttal at
the conclusion of Government counsel's closing remarks. Rebuttal is
strictly limited to matters not touched on by former owner's counsel in
his initial closing remarks.
Conceivably, the Government may, under some circumstances, be
entitled to a brief surrebuttal. However, this is a rare opportunity,
seldom granted by the trial judge.
B. Content.
I. Purpose.
The purpose of the opening statement is twofold: (1) affords counsel
the opportunity to develop a personal relationship with the jury,
especially in those jurisdictions where the judge conducts the voir
dire; and, (2) to inform the jury what the evidence will prove.
Do not underrate the importance of personal contact with the jury.
It is imperative that you create a favorable impression with the jury.
In this respect, while dress is important, your actions are more
important. Try to be seriously relaxed. Emphasize to the jury that you
are not just representing an agency of the United States, but the people
of the United States of which we are all a part.
Inform the jury what the Government's evidence will prove, not what
it may prove.
Introduce the Government's witnesses. If your expert appraiser is an
M.A.I., compare him to a medical specialist, a C.P.A., or a C.L.U.
insurance agent.
II. Keys To Effective Opening Statements.
Bring everything into focus for the jury. Point out to them that
they are laymen, but that after listening to all the evidence, they are
expected to be instant realtors.
Keep your remarks simple, but hit all the important facts which you
feel strengthen the Government's case.
Don't argue the case at this point.
Be fair, but tell the jury that it is entitled, under the law, to
view the evidence as potential buyers. Remind jurors of principle that
in sales, the rule is, "let the buyer beware".
Emphasize that the jury is entitled to and should absolutely
disregard all of the landowner's evidence which is speculative.
III. Appearances Before Jury.
Act interested in the case. Don't speak in a monotone. Vary your
speech pattern, if possible.
Try not to rely on notes, but if they are necessary, don't shuffle
them.
Don't hang on the podium where one is used. Move around so that the
jury stays alert. Emphasize points with your hands. Above all, look at
the jury when you are talking to it.
Closing Statement
I. Introduction.
Explain to the jury the purpose of the closing argument. Tell them
what their function is, i.e., it is the trier of fact. The jury is to
determine the facts upon which it will rely on in fixing the amount of
just compensation to be paid the former landowner. Remind the jurors
that it is their recollection of the facts, not yours, that control;
nor those of opposing counsel or the Court. If your recollection of the
facts does not coincide with theirs, it is not intentional nor done to
deceive or mislead them. That is the reason for a jury panel; to pool
its collective recollection.
You should explain to the jury the law applicable to (a) burden of
proof, (b) credibility of witnesses, especially the self-serving
interest and bias of the landowner, and last, but not least, (c) the law
applicable to reliance upon speculative evidence, even though perhaps
allowed into the case. Depending upon the factual circumstances, it may
be appropriate to explain that the value of former owner's property is
to be determined unaffected by the particular Government project for
which the property was acquired.
II. The Government's Evidence.
In some jurisdictions the trial judge will limit or attempt to commit
counsel to a pre-determined length of closing argument. Therefore, you
may have to tailor the depth of review of the evidence to the length of
time allowed for your closing argument.
In any event, highlight the qualifications of your expert real estate
appraiser, his time devoted to research and development of his report.
Emphasize the quality of Government's exhibits and the efforts expended
to present all possible evidence of the subject property and approach to
value for the jury's benefit and consideration.
Use the physical evidence, the Government's exhibits, to insure that
the jury understands the case.
III. The Landowner's Evidence.
Try and discredit the witnesses and exhibits presented by the
landowner. At every opportunity come down hard on the speculative
nature of the landowner's theory of value.
Remind the jury that the law gives them the right to view the
landowner's evidence as potential buyers. Make them wary of sales
'puffing'. Would the jurors pay the kind of money sought by the
landowner if there is any speculative question of value. Tell them to
use their good common sense and every day experience in evaluating the
landowner's evidence of value.
IV. Presentation.
Acknowledge the Court and opposing counsel.
The same general rules governing the opening statement are applicable
here. Speak directly to all the individual members of the jury panel.
Keep on the move, and try not to refer to notes any more than is
necessary.
Perhaps the most important point to remember is to keep your closing
argument crisp and to the point. Whatever you do, don't put the jury to
sleep. If you do, all your time and effort will have been in vain.
V. Do's And Don'ts.
A. Do's
You are entitled to present a firm and vigorous argument of your
case. You should present a fair verbal analysis of the evidence both of
the Government and the landowner. You can suggest the inferences and
conclusions which the jury should draw from the evidence.
B. Don'ts
Do not argue facts which are not in evidence. Do not deliberately
mis-cite the facts. However, as previously stated, an honest
misrecollection is permissible. It is not proper to interject your
personal opinions or beliefs into the case.
You should try to leave the impression with the jury that the
Government is firm, but fair with the former landowner. Do not allow
the jury to be persuaded that the Government is arbitrary, insensitive
and capricious to the landowner. If you do, start reaching for the
checkbook.
LAND AND NATURAL RESOURCES DIVISION
By James W. Walker
1977 FEDERAL EMINENT DOMAIN SEMINAR: RECENT DEVELOPMENTS AND CASES
OF INTEREST
November 1977
Throughout the seminar you have heard references to the principles of
law applied in eminent domain proceedings and to many of the cases
upholding these principles. I will try, without being too repetitious,
to give you an insight into what has occurred in the courts, during the
past few years, relating to our field.
Cases Affecting the Government's Determination to Take
As fully discussed previously, the authority for Federal takings is
constantly being challenged. In one challenge to the taking of an
outstanding leasehold interest, the Fourth Circuit found ample authority
existed where an appropriations act provided for the acquisition of or
leasing of property for the same public purpose. The court held that an
appropriations act need not refer to the specific transaction if the
project comes within the class of expenditures that Congress intended to
authorize. United States v. Right to Use and Occupy 3.38 Acres in
Alexandria, 484 F.2d 1140 (C.A. 4, 1973).
Other challenges pertained to the taking of Indian lands. In one,
the Tenth Circuit found there was authority for the taking, but only
because specific authorization had been enacted. Plains Elec. Gen. &
Tr. Coop. v. Pueblo of Laguna, 542 F.2d 1375 (C.A. 10, 1976). The
dissent would have relied on the rule that until recently was deemed
inviolative, that is:
The right of condemnation is an essential power to enable a
State government to function. There is no reason why a difference
should be made based on who may own the land.
In the other case, however, involving the Winnebago Tribe of Indians,
the Eighth Circuit held that the United States could not condemn the
tribe's reservation lands because there had been no specific
congressional authorization to abrogate the treaty granting the lands to
the tribe. United States v. Winnebago Tribe of Nebraska, 542 F.2d 1002
(C.A. 8, 1976).
Rule 71A(e), F.R.Civ.P. sets forth the procedures for challenging the
taking of lands by condemnation. The basic law is expressed in Berman
v. Parker, 346 U.S. 26, 32-33 (1954), that review by the courts is
limited to whether the purpose for which the property is taken is a
congressionally authorized public use. Thus, in United States v.
416.81 Acres and Mercantile National Bank, 514 F.2d 627 (C.A. 7, 1975)
and United States ex rel. T.V.A. v. Two tracts in Loudon County, 387 F.
Supp. 319 (E.D. Tenn. 1974), the courts determined that the takings were
not arbitrary and capricious simply because the property being condemned
may ultimately be resold to private parties, and that it is not for the
courts to review the necessity of the taking if the taking benefits an
overall public purpose. In the Mercantile National Bank case, the
appellate court affirmed the district court's action denying the
landowners a hearing on their objections to the taking. The objections
had not been supported by detailed allegations as would justify a
hearing, and the Seventh Circuit explained that Rule 12(f), F.R.Civ.P.
gives unrestricted authority to the district court to strike
"insufficient" defenses, even on its own initiative -- without a motion
to strike -- in order to expedite proceedings.
However, the Eighth Circuit held that it might be the better practice
for the district court to have a hearing where the issue was whether the
location of lands being acquired for the Clarence Cannon Dam and
Reservoir was in substantial compliance with the project plans referred
to in the act authorizing that project. United States v. 255.25 Acres
in Monroe County, 553 F.2d 571 (C.A. 8, 1977).
In United States v. Winnebago Tribe of Nebraska, 542 F.2d 1002 (C.A.
8, 1976), the court addressed itself to claims that the operation of the
lakes the Corps of Engineers was to build would raise the water table
under the remainder tracts and reduce the farming productivity to raise
soybeans. The Eighth Circuit found that:
The damage to the remainders results from a direct physical
invasion of that land by the waters of the United States. The
invasion is a substantial one that amounts to a taking in the
nature of an easement. (Cases ommitted) The award of damages for
this taking, not specified in the declaration of taking, has the
effect of permitting a counterclaim in a condemnation suit. This
may not be done. United States v. 3,317.39 Acres, Etc., Jefferson
Co., Ark., 443 F.2d 104, 106 (8th Cir. 1971), cert. denied, 404
U.S. 1025 (1972). The nature and extent of the interest to be
acquired by condemnation lies within the discretion of the
authorized federal officials. It cannot be increased or decreased
by the courts. Id. at 105-106.
Thus, the damages were distinguished from severance damages which may
properly be considered in a condemnation proceeding and the court upheld
the well-established principles with regard to the district court's
jurisdiction.
The Tenth Circuit found that the United States was proceeding
improperly when it attempted to enforce the provisions of the New Mexico
Enabling Act in a condemnation proceeding involving tenants' interests
in grazing leases. That court said that, where it was the duty of the
Attorney General to prosecute appropriate proceedings to enforce the
fiduciary duties of the State, a remedy was provided for in the Act and
there could not be a collateral attack on the validity of the State's
leasing practices in the condemnation proceeding. United States v.
41,098.98 Acres in Sierra, et al., Counties, 548 F.2d 911 (C. A. 10,
1977).
Several of the courts have ruled that an acquisition by condemnation
may not be defeated by the failure to file an environmental impact
statement in accordance with the National Environmental Policies Act, 42
U.S.C. Sections 4331-4347. Denying a landowners' complaint as to the
Secretary of the Army's noncompliance with NEPA, as well as the Uniform
Relocation Assistance and Real Property Acquisition Act, 42 U. S.C.
Section 4630, the Federal Water Pollution Control Act, 42 U.S.C.
Section 1153, and the Clean Air Act, 42 U.S.C. Section 1857, the Eighth
Circuit stated:
* * * It has been held again and again that the 'only question
for judicial review in a condemnation proceeding is for a * * *
congressionally authorized use.' United States v. 416.18 (sic)
Acres of Land, 514 F.2d 627, 631-32 (7th Circ. 1975).
United States v. 255.25 Acres in Monroe County, 553 F.2d 671 (C.A.
8, 1977). The Monroe County court recognized that no allegations had
been made of harm to the environment, no interest in the environment had
been alleged, and no claims were made that the landowners were within
the zone of interests protected by NEPA; neither was any injury alleged
to the landowners within the scope of NEPA or the other acts. The
United States prevailed in its contention that questions of scope and
environmental effect of the entire project are foreign to the
consideration of the taking of one small segment.
To the same effect was United States v. 178.15 Acres in Grayson
County, 543 F.2d 1391 (C.A. 4, 1976), where the Fourth Circuit rejected
the landowners' contention that the United States lacked the power to
condemn because of a failure to file an EIS. Thus, the district court's
unpublished order upholding the right of the United States to take the
land was affirmed.
Several of the courts have ruled on the nonapplicability of the
provisions of the Uniform Relocation Assistance and Real Property
Acquisition Act, 42 U.S.C. Section 4630, to condemnation proceedings,
and that the failure to comply therewith may not invalidate such
proceedings. United States v. 255.25 Acres in Monroe County, 553 F.2d
571 (C.A. 8, 1977); United States v. 416.81 Acres and Mercantile
National Bank, 525 F.2d 450 (C.A. 7, 1975); and Paramount Farms, Inc.
v. Morton, 527 F.2d 1301 (C.A. 7,1975).
Cases Pertaining to the Determination of Just Compensation
a. Commission Reports:
In 1964, the Supreme Court defined the duties of a commission
appointed under Rule 71A(h), F.R.Civ.P., insofar as the completeness of
its report awarding just compensation is concerned. United States v.
Merz, 376 U.S. 192 (1964). That Court decided that the report must
reflect the "path" followed by the commissioners in reaching the amount
of the award. Since that time, many commission reports have been
attacked on grounds of inadequacy, but with little success. In the
latest case to test this issue, the Eighth Circuit found that the award
involved was not the result of a free-wheeling commission; that it was
based on evidence and not on any "assumed expertise" on the part of the
commission. United States v. 403.14 Acres in St. Clair County, 553 F.
2d 565 (C.A. 8, 1977). The Seventh Circuit, in United States v. 573.88
Acres in Crawford, et al., Counties, 531 F.2d 847 (C.A. 7,1976),
expressed its view that commissioners appointed to resolve issues of
just compensation are not required to explain the exact thought
processes they utilize nor are they required to develop and apply a
mathematical formula which can be programmed, computerized and then
reviewed by the district court like an algebraic equation, to constitute
a permissible "path."
B. Options:
The district court in United States ex rel T.V.A. v. 1.2 Acres in
Monroe County, 390 F.Supp. 256 (E.D. Tenn. 1975), followed the
established law and held that, where prior to the taking the United
States and the landowner had executed a contract for the sale of
property, such contract constituted a binding stipulation specifically
enforceable against the landowner. However, in United States v. 114.64
Acres in Custer County, 504 F.2d 1098 (C.A. 9, 1974), the district court
had denied the Government an opportunity to establish the validity of an
option contract. The Ninth Circuit reversed, holding that evidence of
the preexisting contract should have been admitted, subject to any
defenses as to its validity or enforceability, noting that, even if
invalid, the contract would be admissible as an admission by the party
on the issue of value.
C. Evidence Usually Inadmissible:
Certain evidence is not generally admissible in a condemnation trial
to prove value. Precondemnation offers of settlement are among this
type of evidence. In this regard, the Fourth Circuit has affirmed the
exclusion of such an offer, recognizing that its purpose is to expedite
acquisition and avoid litigation. In so holding, the appellate court
stated:
* * * To permit the offer to be received in evidence in effect
would put a floor on recoveries in condemnation proceedings. No
amount of explanation would prevent the jury from giving the
landowner at least that much. There would be less incentive to
accept the offer, and the purpose of the Act (P.L. 91-646) would
be frustrated.
Washington Metropolitan Area Transit Authority v. One Parcel of Land
in Montgomery County, 548 F.2d 1130 (C.A. 4, 1977). It will be observed
that Rule 408 of the new Federal Rules of Evidence, Pub.L. 93-595 (88
Stat. 1926), Jan. 2, 1975, made such evidence inadmissible, thus in
effect overturning an earlier decision in Nash v. D. C. Redevelopment
Land Agency, 395 F.2d 571 (D.C. Cir. 1967).
The Ninth Circuit, in United States v. Weyerhaeuser Company, 538 F.
2d 1363 (C.A. 9, 1976), affirmed the trial court's ruling that the
United States is not obligated to compensate for an element of value
arising from the expectancy of continued Government payments -- or tolls
-- for use of a road for timber removal. The court states: "A
property's special adaptability to an owner's needs and its special
value to the condemnor are elements which have been excluded in order to
render the assumed market free from unfair influences." As this case
presented a situation where a "special or extraordinary" element of
value had been created by the Government, it would not be included in
the just compensation payable, being attributable to the Government's
activity.
A decision that requires special attention is that of the Ninth
Circuit in United States v. 10.0 Acres in Lake County, 533 F.2d 1092
(C.A. 9, 1976). In this case, the Government acquired an easement in
certain road segments to provide access to the Mendocino National
Forest. The defendants had paid the underlying fee owners for the
easement and had obtained a use permit over the intervening Federal
lands. The road did not abut the land claimed to be damaged at any
point. The district court denied compensation to the defendants on the
ground that they failed to show actual damages. The appellate court
reversed, however, stating:
* * * Once a taking "nexus" is established * * *, the resulting
loss, if any, is a question for the jury to decide. * * * If loss
of value to the dominant estate is in fact caused by the
government's destruction of the exclusive easement, then there is
a taking from the appellants as well as from the owners of the fee
under the easement.
* * * The loss of the exclusivity of the easement is a direct
loss that is reflected in the market place, and, because the loss
results from a taking of an interest in land, it is compensable.
The Ninth Circuit distinguished United States v. Pope & Talbot, 293
F.2d 822 (C.A. 9, 1961), where compensation for public intrusion upon
the solitude of the defendant's land was denied. This distinction was
based upon the fact that the court found, in the Lake County case, that
the easement owners had purchased an exclusive right whereas, in Pope &
Talbot, the right was merely as easement for general access.
D. Date of Valuation:
One of the most fundamental principles in condemnation law is that
property is valued as of the date of taking or trial, whichever is
earlier. This principle was upheld in United States v. 161.99 Acres in
Collin County, 512 F.2d 65 (C.A. 5, 1975). Thus, the landowners were
not entitled to compensation for the taking of their land based on its
value at the time of trial rather than at the time of taking 3 years
earlier, despite alleged exceptional circumstances causing the value of
the land to nearly double between the date of taking and the date of
trial.
E. Highest and Best Use:
A basic determination in the evaluation of property being condemned
is its highest and best use in the reasonably forseeable future. Thus,
in United States v. 46,672.96 Acres in Dona Ana, et al., Counties, 521
F.2d 13 (C.A. 10, 1975), where no evidence was shown that anyone other
than the Government could or would use the land for a missile range, the
commission was prevented from relying upon such use as a basis for its
determination of just compensation.
Neither may the highest and best use be speculative. In United
States v. 158.24 Acres in Bee County, 515 F.2d 230 (C.A. 5, 1975), the
landowner presented testimony that the highest and best use of the land
being acquired was for ranchettes, i.e., small recreational tracts,
whereas the United States argued for ranching in conjunction with the
parent tract. The Fifth Circuit held that the landowner's testimony was
speculative and thus was properly excluded by the trial court from the
jury.
The effect of a zoning regulation on the determination of highest and
best use was shown in United States v. Certain Parcels in Monroe County,
509 F.2d 801 (C.A. 5, 1975), where land was acquired for a Coast Guard
search and rescue facility. The Fifth Circuit found that the trial
court erred in ruling that the subject lots were zoned for single family
rather than commercial use. The appellate court's decision was based on
(1) evidence that the land had commercial status, (2) the uncontradicted
testimony that the official zoning documents -- which used a color
coding system -- also reflected a commercial status for the land, and
(3) the zoning records were to be given full faith and credit under the
Business Records Acts, 28 U.S.C. Sections 1762 and 1738.
F. Project Enhancement:
As you have heard, it is a general rule that project enhancement must
be excluded where the property taken was within the scope of the project
from its inception. This matter was recently fully considered by the
Fifth Circuit, including the effects of the passage of time on a taking
involving this issue. United States v. 62.17 Acres in Jasper County,
539 F.2d 670 (C.A. 5, 1976). In the Jasper County case, the Government
had surveyed a dam and reservoir intending to take the fee title up to
171 feet from mean sea level and a flowage easement to 179 feet m.s.l.
In 1961, a purchase was negotiated of land from a large tract. In 1965,
an error was discovered in the surveyed 171 foot m.s. l. line which
made it necessary to take an additional interest. The funds were
available in 1971 and the lands were taken. Prior to trial, the
Government moved to exclude enhancement due to the land's proximity to
the dam and reservoir. The Fifth Circuit held that the facts did not
support the trial court's theory of estoppel but that the facts were not
sufficiently developed to determine the scope-of-the-project issue.
(The court's opinion tended to indicate that the land was within the
scope of the project, however.)
The Fifth Circuit, in Jasper, explained that the "scope of the
project" test imposes upon the Government a required level of public
disclosure of the probability that a certain tract will be acquired for
the project. If the Government originally placed sufficient information
in the public domain to bring the property within the project's scope,
then both present and prospective landowners stand on notice that the
land is subject to condemnation without compensation for enhancement.
As the Jasper County case was instituted under the Rivers and Harbors
Act, 33 U.S.C. Section 595, the court said that there is a presumption
that the Secretary of the Army fully offsets enhancement to the
remainder in negotiating the purchase of part of a tract under 33 U.S.C.
Section 596. But the court further stated, at page 676:
* * * In the context of a negotiated purchase, however, one
cannot be certain that the offset took place, and the presumption
should not be irrebuttable. Defendant, standing in the shoes of
his predecessor, cannot complain of the Government's refusal to
pay compensation for enhancement that it never deducted. Just as
we cannot permit a single payment for a double taking, we cannot
countenance a double payment for a single taking. The Government
should therefore have an opportunity to rebut the presumption of
full offset.
The Jasper County case is significant for its scope-of-the-project
test, which requires the assessment of three factors: (1) the
foreseeability of any change in the reservoir line and of the particular
tract's falling within the ambit of such a change; (2) the length of
time between the original acquisition and the subject taking; and (3)
the Government representations concerning the finality of the original
boundary line.
The scope-of-the-project test was applied differently in United
States v. 31.43 Acres in Whitman County, 547 F.2d 479 (C.A. 9, 1976).
There, the trial court had found that the lands being acquired for the
Lower Granite Lock and Dam were within the original scope of the project
and that there was no second taking. That court said that the lapse of
some 4 years between "takes," while extensive, is not so long as to lull
property owners into a false sense of security when the entire time span
of the project is considered. Nevertheless, the trial court found that
representations, made during the acquisition of the earlier property --
that the remaining lands would have enhanced value -- were relied upon,
and, since citizens should be able to rely on statements and actions of
Government agents, the Government was estopped from claiming a setoff
for the enhanced value. On review in an interlocutory appeal, however,
the Ninth Circuit reversed and remanded the case to the district court,
stating that factors not chargeable to the Government had caused the
relocation of the right-of-way that necessitated the taking of the
additional lands, which factors had been found by the district court to
be "continuous and highly public." Thus, the trial court had erred in
applying the doctrine of estoppel and in not applying the rule of United
States v. Miller, 317 U.S. 369, 376-377 (1943), that enhanced value
should not be included in compensation upon condemnation of lands within
a project's original scope. (In the Whitman County case, the intensity
of the dispute was traced to a change in the highest and best use of the
land: being agricultural prior to the project and valued at $16,450.00;
and being industrial for port use with project influence and valued at
$148,500.00)
G. Credible Evidence:
Ordinarily, the Government takes the position that all testimony in a
condemnation trial must have some support from the market place to be
credible and admissible. United States v. Sowards, 370 F.2d 87 (C.A.
10, 1966). It is also sound law that sales of similar or "comparable"
properties in the area constitute the best indication of value, United
States v. 344.85 Acres in Perry County, 384 F.2d 789 (C.A. 7, 1967), and
that lack of comparability will render a sale inadmissible. Loughranv.
United States, 64 F.2d 555 (C.A. D.C., 1933). However, in D. C.
Redevelopment Land Agency v. Thirteen Parcels of Land, Etc., in the
District of Columbia, 534 F.2d 337 (C.A. D.C., 1976), where the district
court had ruled that testimony based on a noncomparable sale rendered a
landowner's testimony inadmissible, the appellate court reversed,
holding that where proffered testimony may have been inadmissible if
proffered by an expert witness, a landowner is given more leeway in the
testimony presented than the expert.
H. Range of the Evidence:
One of the principles that seemed to have been well entrenched in the
law is that the verdict, to be acceptable, must be within the range of
the evidence. In United States v. 1,162.65 Acres in Henry and St.
Clair Counties, 498 F.2d 1298 (C.A. 8, 1974), however, the Eighth
Circuit held that, where the totality of the eivdence supports the
award, the award will be upheld, notwithstanding the fact that it is
outside the range of all of the expert's evaluations.
Looking at the admission of evidence itself, the Tenth Circuit, in
United States v. 45,131.44 Acres in El Paso, et al., Counties, 483 F.2d
569 (C.A. 10, 1973), ruled that the Government's expert valuation
withnesses could give their opinion on direct examination concerning
fair market value of refractory clay deposits on the basis of the
"range" of sales studied by them, without specifying the sales. The
pretrial exchange of sales lists, full opportunity for
cross-examination, and the clay company's failure to show lack of sales
comparability were emphasized. (This procedure places the burden on the
cross-examiner to show that the testimony is not substantiated, and
discovery becomes imperative prior to trial if the expert is expected to
testify in this manner. A court order limiting the testimony to that
which is disclosed prevents surprise resulting from last-minute
changes.)
I. Appropriate Measure of Damages:
The measure of damages to be applied to various properties was the
subject of several appeals. You will recall that in United States v.
83.32 Acres and Georgia Vitrified Brick and Clay Co., 480 F.2d 1143 (C.
A. 5, 1973), the Fifth Circuit rejected the Government's argument that
multiplication of tonnage of clay by a unit price is an impermissible
mineral valuation process. The Fifth Circuit approved the trial court's
method -- under the facts of that case -- of estimating the recoverable
tons of phyllite and multiplying by a figure that was one-half of a
reasonable royalty and reduced further for the cost of mining and
transportation.
In United States v. 2,847.58 Acres in Bath, et al., Counties, 529 F.
2d 682 (C.A. 6, 1977), the Government again urged reliance upon the
standard set forth in United States v. Indian Creek Marble Co., 40 F.
Supp. 811, 822 (E.D. Tenn. 1941), that the unit-times-price method of
valuation is too speculative in nature to permit its introduction in
Federal eminent domain proceedings. We argued that the method so
denigrates the value of a witness' testimony as to render that testimony
worthless. Nevertheless, the Sixth Circuit rejected this position and
accepted the testimony by the defendants that it was a common practice
to buy and sell such interest on the basis of their value in place.
Although the Government did not prevail in the Bath case, the opinion
has a good discussion of the cases relied on by the United States.
In an appeal involving compensation to the village of Stoutsville for
the taking of certain public streets in connection with a Federal dam
project, the Eighth Circuit, in United States v. Streets, Alleys and
Public Ways in Stoutsville, 531 F.2d 882 (C.A. 8, 1976), held that just
compensation could be supplied by providing substitute facilities that
were reasonably necessary in the circumstances and that the United
States need not finance unnecessary public streets, even though a need
for the same might develop in the future. In other words, the
reasonable necessity must be determined as of the date of taking.
In a departure from the general rule, the "substitute facilities"
doctrine was approved by the Third Circuit for evaluating non-profit
community facilities in private ownership. The case involved, however,
United States v. 564.54 Acres in Monroe and Pike Counties, 506 F.2d 796
(C.A. 3, 1974), was restricted to appropriate cases and has never been
recognized in any other circuit. The case is easily distinguishable
from most factual situations, in that the facilities involved three
summer camps located on three separate tracts along the Delaware River
owned by the Lutheran Church. The camps had been operated on a
nondenominational basis for many years at a continuous loss of profits,
and the church could have continued operating the camps with their
then-existing primitive facilities. Development of new camps would
require far more elaborate facilities, especially for housing and sewage
treatment, and as a result the cost of developing a new site would total
far more than the alleged market value of the existing facilities. It
is evident from a reading of this opinion that the court here considered
the facts to be closely analogous to the situation where public or
community facilities are owned by a governmental entity and the only
difference it found was in the nature of the ownership, i.e., private
versus governmental. The facilities were also considered unique,
because they constituted an existing non-conforming use under both State
and Federal legislation. Based on these considerations, the court
concluded that the rationale for applying the "substitute facilities"
approach to governmentally owned facilities was present, and that it
could be applied to the community facilities owned by the Church. Thus,
the Third Circuit remanded the case for a determination of whether it
was an "appropriate" case for the application of the substitute
facilities doctrine. The court had assumed there was no market for the
camp facilities. However, onremand the United States was able to
establish the existence of a market and it was on this basis that the
award was ultimately reached.
The proper measure of value for temporary use takings was discussed
by the Tenth Circuit in United States v. 41,098.98 Acres in Sierra, et
al., Counties, 548 F.2d 911 (C.A. 10, 1977). The issue was the
valuation of the estate taken in view of the interest of the State's
lessee in the lands. Contrary to the position urged by the United
States, the court upheld the district court that a proper valuation
formula was the rental value of both the State-owned lands leased by the
defendants and the fee lands of the defendant lessees as one ownership
unit.
The case of Alamo Land and Cattle co. v. State of Arizona, 424 U.S.
295 (1975), involved distribution of a condemnation award. The Supreme
Court ruled that the State, acting in its capacity as trustee of lands,
must receive the full value (fair rental value as of the beginning of
the lease term) of the possessory interest transferred by the lease, and
upon Federal condemnation the State must also receive the full value of
its reversionary interest. But the State is not additionally entitled
to receive the compensable value of the leasehold interest.
Some land merely holds the world together and is almost useless
except for some Government projects. Thus, the district court in a case
involving the leasehold taking of this type of land held that the fact
that the land had use as a gunnery range could not be considered in its
evaluation; that a measure of yearly rental based on a percentage of
market value must be rejected since (1) that method of valuation bears
no relationship to a fair market value of the property which has no
substantial use; and (2) a market for speculative purposes is not the
kind of a market on which a condemnation award should be based. In this
instance, the trading had been completely indiscriminate. The court
held that market value must have related to some potential use of the
land, and that the Government should not, by reason of its needs for the
land, "be forced to be a participant in a game of wits with someone at
the end of the trading chain of speculators losing, whether it takes a
temporary use or the fee." United States v. 117,763 Acres in Imperial
County, 410 F.Supp. 628 (S. D. Cal. 1976).
Issues Ancillary to the Main Issue of Just Compensation
A case which is expected to have an impact on some of our
condemnation awards is United States v. Blankinship, 543 F.2d 1272 (C.
A. 9, 1976), which was previously discussed by Mr. McAnear. You will
recall that in that case the Ninth Circuit decided that interest was
part of the just compensation and that the Fifth Amendment, under
certain circumstances, requires the use of a rate of interest in excess
of the 6 percent provided for by the Declaration of Taking Act, 40 U.S.
C. Section 258(a)(5). The Ninth Circuit in that case stated that the
determination of a proper and reasonable rate of interest is a factual
question to be determined by the trier of fact. Nevertheless, the
practice that has developed is for the parties to agree that the court
may determine the proper rate of interest in a hearing subsequent to the
trial of the amount of just compensation payable. (The Blankinship case
was a judge-tried case, so the issue on remand was tried by the judge.)
Various unsuccessful attempts have been made to obtain reimbursement
for attorneys' fees and other expenses in condemnation proceedings. The
most recent decision denying such fees to a landowner was by the Ninth
Circuit in United States v. 4.18 Acres in Idaho County, 542 F.2d 786
(C.A. 9, 1976). The district court dismissed the condemnation case as
having been filed prematurely, that is, before full compliance had been
had with the National Historic Preservation Act, but denied attorneys'
fees. In affirming the denial of attorneys' fees, the Ninth Circuit
stated that the Act relied upon by the defendants -- the Uniform
Relocation Assistance and Real Property Acquisition Policies Act, 42 U.
S.C. Section 4654(a) -- was intended by Congress only to create a narrow
exception to the general rule of non-recovery of litigation expenses.
In this case, there was no lack of authority to condemn or of a public
purpose, and no "abandonment" could be found, since the suit was not
dismissed at the instance of the Government, 0ut on the motion of the
landowners over the Government's opposition to the dismissal.
The Seventh Circuit, in United States v. 416.81 Acres and Mercantile
National Bank, 525 F.2d 450 (C.A. 7, 1975), addressed many issues, one
of which was discovery. In its decision, the court held that the
failure of the Government to produce certain documents or to permit
inspection of the Government's written appraisal reports until the day
of trial was not prejudicial where the Government objected to production
of the reports, no motion was filed by the landowners requesting an
order for production, and the trial court had ordered that the written
appraisals be produced for the landowners' inspection upon payment of
one-half of the fees and expenses, notwithstanding their failure to file
such a motion. See Rules 26(b)(4), 37(a)(2), F. R.Civ.P. This case
has been discussed by several of the other speakers.
In United States v. 1,629.6 Acres in Sussex County, 503 F.2d 764 (C.
A. 3, 1974), the Third Circuit ruled that no prescriptive rights against
the United States may be obtained and that the United States retains
title to land it dredges away to form a channel for navigation.
And in United States v. Haddon, 550 F.2d 677 (C.A. 1, 1977), the
First Circuit upheld title in the United States where the defendants
asserted insufficient notice of condemnation. The court stated: "an
owner may contest 'the validity of the taking as not being for a purpose
authorized', * * * but where the owner is injured only by lack of
notice, his remedy would seem to be limited to damages, see Schroeder v.
City of New York, 371 U.S. 208 (1962)." Under the facts of the Haddon
case, the court found nothing to warrant payment for damages, as the
appellants were not owners when the land was condemned -- holding title
through a deficient tax deed from the county 13 years after title vested
in the United States -- and not among those entitled to just
compensation for the taking itself.
Another action involving the issue of whether a party held an
interest in land was one in which the Florida Supreme Court ruled, on
interlocutory appeal to that Court, that a developer of a subdivision
(and its successor) had no interest acquired by the United States. The
court ruled that, absent an expressed contrary intent, a conveyance by a
real estate developer of a platted subdivision lot included, under that
State's law, a reversionary interest in the streets and roads up to the
center line, subject to an easement in favor of the public. United
States v. 16.33 Acres in Dade County, 537 F.2d 182 (S.Ct. Fla., 1977).
The Eighth Circuit held that an unenforceable contract for a deed
does not create a compensable interest entitling the purported grantees
to compensation upon condemnation by the United States. United States
v. 308.56 Acres in Sheridan County, 520 F.2d 660 (C.A. 8, 1975).
And the Sixth Circuit refused to find that the trial court had abused
its discretion in commenting on the evidence in its charge to the jury,
or that unreasonable pressure had been put on the jury to reach a
verdict. United States v. 2,847.58 Acres in Bath, et al., Counties, 529
F.2d 682 (C.A. 6, 1976).
A few other cases, although not condemnation cases, may be of
interest to you. One is Chacon v. Granata, 515 F.2d 922 (C.A. 5, 1975),
an action against a city and an air force base seeking injunctive and
declaratory relief with respect to annexation of the plaintiffs' land by
the city. The plaintiffs alleged that the annexation was a first step
in a scheme by the defendants to deprive the plaintiffs of their
property without just compensation, either by unlawful zoning ordinances
or eminent domain proceedings after annexation had driven down property
values. (The city manager admitted that the purpose of the anticipated
zoning or condemnation was to prevent uses of the subject land that
would interfere with aircraft operations at the Randolph Air Force
Base.) The Fifth Circuit held, among other things, that annexation
itself inflicted no legal injury on plaintiffs even if it caused a
decline in value of their property, and that since annexation was
lawful, the motives of those who legislated it were beyond judicial
scrutiny.
A case involving the Tucker Act for inverse condemnation is of
interest, because it pertains to the taking of land for a public project
over a long period of time. As the lands involved were within the outer
boundaries of the Point Reyes National Seashore in Marin County,
California, the landowners alleged their lands had been taken by the
Government. The Ninth Circuit, in Hilkovsky v. United States, 504 F.2d
1112 (Ct.Cl., 1974), found that the mere description of the intended
national seashore by metes and bounds did not effect a taking by itself,
distinguishing the Drakes Bay Land Company v. United States case, 424
F.2d 574 (Ct.Cl., 1970). In Hilkovsky, the court stated, at page 1115:
* * * Plaintiffs' only complaint of Government taking is the
length of time that the Government has been buying, trading for,
or condemning theirs and others' lands within the boundaries of
the National Seashore, but that is not enough.
Going one step further, the district court in United States v. 3.66
Acres in San Francisco, 426 F.Supp. 533 (N.D. Cal. 1977) ruled that the
mere filing of a complaint in condemnation by the Government does not
constitute a taking for which compensation should be awarded. The just
compensation would be the fair market value of the land at the date of
trial and no more. The trial court in this case, as had the appellate
court in the Hilkovsky case, supra, distinguished the facts from Drakes
Bay Land Company v. United States, supra. In Drakes Bay, a taking was
found to have occurred not by the passing of the legislation authorizing
the project, but by the actions of the National Park Service employees
which made development of the landowner's property impossible. In its
decision in the 3.66 Acres case, the district court observed that
Congress recognized that landowners sometimes deserve more compensation
than the fair market value alone would provide, but that it did not
intend such compensation to be recovered by the landowner in a
condemnation action. Instead, Congress attempted to fill some of the
gaps in just compensation by enacting the Uniform Relocation Assistance
and Real Property Policy Act of 1970, 42 U.S.C. Section 4601 et seq.
However, the district court was also careful to point out that the
relief provided for in that Act may not be sought in the condemnation
proceeding. See 42 U.S.C. Section 4602(b). The landowners would have
to seek damages in excess of just compensation in an appropriate action
under the Tucker Act, 28 U.S.C. Section 1346(a).
Another case that may one day be pertinent to condemnation is United
States v. Union Oil Co. of California, 549 F.2d 1271 (C.A.9, 1977).
This case pertained to a reservation under the Stock-Raising Homestead
Act of 1916 of "all coal and other minerals." The Ninth Circuit ruled
that "(a)ll of the elements of a geothermal system -- magma, porous rock
strata, even water itself -- may be classified as 'minerals,'" and, as
such geothermal resources are excepted from grants of public lands.
And lastly, there is the unpublished opinion in United States v.
155.35 Acres in Arapahoe, et al., Counties (C.A. 10, No. 75-1450, Nov.
10, 1976) (Unpublished), wherein the Tenth Circuit held that a party
cannot obtain a new trial because of the incompetence of its own freely
selected trial counsel.
Except for the case just cited above, no unpublished opinions have
been discussed in this paper. But a word seems proper about opinions
being rendered by the appellate courts that are labeled "Not to be
Published." This refers, of course, to publication in the West Reporting
System. Publication of the opinions is being curtailed as a method of
expediting the handling of cases in the appellate courts and to cut down
on the paper work. The Ninth Circuit, however, is the only circuit to
date that has a rule disallowing citation of its unpublished opinions
for purposes of stare decises. Until the other circuits adopt rules
with regard to the use of unpublished opinions, they may be used in the
same manner as published opinions. The burden, however, will be on the
attorney citing the case to furnish not only the court but also opposing
counsel with copies of the unpublished opinions.
I have endeavored to give you a view of what the courts have been
considering in recent years and how they have been reacting. It would
seem fair to interpret their actions as liberal in favor of the
landowners. The cases interpreting the Fifth Amendment still control,
even so.
Let me share the one pearl of wisdom that reached my desk sometime
ago, authored by a very competent and experienced condemnation attorney:
Be it ever so humble
There's no place like home.
But from fair market value
We never must roam.
Thank you.
LAND AND NATURAL RESOURCES DIVISION
By Sophie S. Cozier
1973 REGIONAL SEMINAR ON CONDEMNATION PRACTICE AND PROCEDURE: INDEX
September 1973
Recent Cases Affecting the Acquisition of Land
Discovery in Condemnation Actions
Evidence
Analysis of Appraisal Reports
Analysis of Case Law Re Comparable Sales
Preparation, Procedures and Trial in Hard Mineral Takings
Flowage Easement Evaluations
Transmission Line Easement Evaluation
Pre-Trial, Trial and Post-Trial Procedures and Motions
Administrative Aspects of Trace Disposition
The Role of the Acquiring Agency Prior to Condemnation
Coordination of Activities with the Acquiring Agency After the
Filing of a Condemnation Case
Conduct of Commission Trials
Preparation, Procedures and Trial in Oil and Gas Takings
Appendix of Authorities
Preparation and Procedures in Non-DT Cases
Valuation of Potential Subdivision Lands
The Unit and Severance Damages or Benefits
Instructions to a Jury or Commission
Addendum of Citations to Jury and Commission Instructions
General Condemnation Problems
LAND AND NATURAL RESOURCES DIVISION
1973 REGIONAL SEMINAR ON CONDEMNATION PRACTICE AND PROCEDURE: RECENT
CASES AFFECTING THE ACQUISITION OF LAND
September 1973
Condemnation Cases
As always is the case in eminent domain litigation, there are hard
factual situations which the courts give sympathetic consideration to
and bend what were thought to be settled principles of law. This year
has been no exception. Rules of law have again been bent slightly to
arrive at what the courts conceive to be a more just result, at least,
from the condemnee's point of view.
The Supreme Court has now required the payment of compensation for
the useful life of improvements placed on a leasehold without limitation
to the remainder of the lease term. /1/ The Court also has determined
that, in the condemnation of fee land, no compensation should be given
for any value added by revocable grazing permits issued under the Taylor
Grazing Act. These grazing leases specified that no property right was
given by the issuance of the grazing permit. /2/ As a result of this
ruling, the Government's motion for summary reversal was granted,
remanding to the District court a similar case for appropriate
disposition. /3/
The Court denied certiorari in suits which sought to enlarge the
scope of the Government's taking and introduce valuation evidence
relating to flooding beyond the condemned area, as well as a case
involving a federal land patent which was held not to have conveyed
islands in a navigable stream along with fast land, contrary state law
notwithstanding. /5/ Whether the unit rule on valuation has been
violated was again determined to be a factual question to be determined
by the district judge. /6/ The taxing of costs by the district court in
a condemnation trial, which has been a recurring problem, was again
determined to have been improper. /7/ After approving instructions
given a commission regarding sales being the best evidence of market
value, the United States was awarded interest on its overpayment to the
condemnee from the date of judgment. /8/ In a controversial decision
the market value standard was equated to the developer residual
approach. This decision is a prime example of just how far some courts
of appeals will go to avoid reversing a landowner's favorable verdict.
/9/ In approving the exclusion of sales as a proper exercise of
discretion the court placed its decision on the grounds of judicially
noticed incomparability, /10/ while the exclusion of sales after the
date of taking from consideration was found to be a per se abuse of
discretion. /11/ When confronted with a complex state and federal
project, and multiple suits in federal and state courts, the court,
while regretting the possibility of a double compensation windfall being
given to the landowners, placed the responsibility and cost on the
state. This was due to the state's failure to have pursued its state
court remedy. /12/ In a dispute over a condemnation award for a
schoolhouse which had been used to educate Seneca Indians, the State of
New York, which furnished a substitute school, was found to be entitled
to the compensation for its taking. /13/ By summary affirmance, a
landowner's claim to entitlement to a jury trial and to a greater estate
to be specified by the declaration of taking was rejected. /14/ A
similar result was arrived at in a Tucker Act suit where the disputed
raising of the water level one-half mile from the Government's project
was involved. It was held that a taking of property requires
"substantial interference" with rights in it, not a mere tortious
invasion. /15/
The deposit and disbursal of a deficiency judgment pending appeal, to
stop the interest from accumulating, does not moot the appeal. Interest
must be paid on the withdrawn deposit from the date of final judgment by
the landowner when it is determined that he must refund any excess
deposit withdrawn from the court's registry. /16/ An award for the
taking of an easement over a timber company's private road was set aside
and a new trial ordered based upon showings that the district court had
used erroneous assumptions of the existence of prior rights under a
contract. /17/ The removing of property from the tax rolls of the City
of Boston by the United States' taking does not constitute a taking
which entitles the City of Boston to compensation. The city's contract
claim was held to be an unconsented suit against the United States.
/18/ Increasing a Rule 71A(h) commission award by the district court was
found to be error without having examined the transcript of evidence
presented to the commission. /19/ In a challenge to the right to take,
landowners were found to be entitled to a hearing on this issue. /20/
An Appropriation Act was also found to be authority for a taking. /21/
In a contest between oil and gas lessors and the lessee over
entitlement to compensation in condemnation of the mineral interests, it
was determined that insubstantial production did not extend the lease
term. /22/ A Rule 71A(h) commission determined the cost of a municipal
sewage plant should be paid by the Government even though it was not
described in the Government's declaration of taking. Part of the system
was taken which was found by the commission sufficient to constitute a
taking of the whole. /23/ The taking of access rights was found to have
reduced the value of property not taken even though the access rights
had not been legally sufficient to support a residential subdivision.
If there was error, it was found to have been waived by the Government's
failure to object. /24/
It is obvious from an examination of the cases decided this year that
the position of the Government in condemnation cases is not viewed by
the courts as having equal footing with that of the condemnees. The
Government's treatment is somewhat less than equal, as demonstrated by
the courts' reluctance to rule for the Government and tendency to
support almost any favorable verdict for the condemnees.
Cases Other Than Condemnation Which May Affect the Acquisition of
Property
The courts, vying with each other to author precedents in the rapidly
expanding area of environmental law, have been prolific in the number of
their decisions. We mention a few of those affecting federal projects
involving acquisition. Environmentalists have succeeded for a time in
blocking the construction of many such projects. Examples of projects
enjoined or partially enjoined as not having complied with the National
Environmental Policy Act (NEPA) are a dam on the Little Tennessee River
/25/ and the Truman Dam and Reservoir Project, as to which a limited
injunction was issued due to the fact that the project had been
commenced six years prior to enactment of NEPA. /26/ The courts have
refused in several instances to enjoin ongoing construction pending
completion of an Environmental Impact Statement (EIS) and its review,
/27/ and denied preliminary injunctions against the construction of dams
where the adequacy of the EIS has been challenged. /28/
While recognizing that courts may not substitute their judgment for
the agency decision, an EIS has been found inadequate for its
unsatisfactory discussion of alternatives. /29/ In approving an EIS as
adequate the standard of review was held to be one of good faith
objectivity, rather than subjective impartiality which was subject to
review to determine whether the agency's decision was arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with
law. /30/ Certiorari was denied when sought by the environmentalists to
have reviewed the arbitrary and capricious standard of review. /31/
Laches was found to bar stoppage of construction of a highway through
a city park where the environmental harm had already largely occurred.
/32/ In another highway case which passes through a city park, federal
funding was halted as to a 4.25-mile segment where 16 miles of a 23-mile
loop had already been constructed. It was determined that NEPA and the
statutes regarding the taking of park land must first be complied with.
/33/
A NEPA statement was found necessary to be prepared by the National
Capital Planning Commission prior to giving approval of a proposed
change in zoning by a District of Columbia agency. /34/
The rule of reasonableness was applied by the court in remanding for
a determination as to the effect on the environment of a 10-story office
building to be constructed in a downtown area. /35/ A proposed
detention center and garage, notwithstanding the filing of a negative
impact statement, were enjoined since the negative EIS would likely be
found inadequate under the arbitrary and capricious standard of review.
/36/ In refusing to halt construction of a jail in New York City the
court refused to enjoin the project but went on to require a negative
impact statement nearly as comprehensive as a full NEPA statement.
Certiorari was sought and denied. /37/ The Supreme Court denied
certiorari in a suit challenging the filling of certain submerged areas
in San Francisco Bay. /38/ Dismissed as moot were appeals from an
injunction blocking a federal flood control project since an EIS had
been filed subsequent to the issuance of the injunction. /39/
The Supreme Court denied certiorari in a case where attempts were
made to compel the issuance of a lapsed permit to dredge and fill
without giving consideration to environmental consequences. The suit
had been dismissed in the court of appeals as not being ripe for
decision. /40/ The dismissal of a suit to compel the Corps of Engineers
to prevent a power company from constructing expanded generating
facilities on a land fill owned by the company and completed under
permit some 20 years previously was affirmed. /41/ Challengers to a
rezoning petition were found to lack standing as not being within the
zone of interests protected by the Federal Water Pollution Control Act.
The court concluded that the Act does not suggest a private Attorney
General approach through private suits. /42/
We have touched only a few of the recent federal decisions involving
the various statutory schemes to prevent the waste or pollution of man's
environment, emphasizing only those with a fairly direct effect on
acquisition policies.
In conclusion, it should be noted that the effect of these new laws
and decisions upon land valuation may be significant when claims are
made for a highest and best use which may not be permitted in certain
areas by federal or state statutes. A study of this latter matter is
being conducted, and its results will be furnished to you when complete.
/1/ Almota Farmers Elev. & Warehouse Co. v. United States, 450 F.2d
125 (C.A. 9, 1971); 409 U.S. 470 (1973).
/2/ United States v. Fuller, 442 F.2d 504 (C.A. 9, 1971); 409 U.S.
488 (1973).
/3/ United States v. 6,404.19 Acres in Phillips Co., Mont. (Lock), .
. . . F.2d . . . . (C.A. 9, 1973).
/4/ United States v. 3,317.39 Acres, Etc., Jefferson Co., Ark., 443
F.2d 104 (C.A. 8, 1971), cert. den., . . . . U.S. . . . .
/5/ Severson v. United States, . . . . F.2d . . . . (C.A. 7, 1971),
cert. den., . . . . U.S. . . .
/6/ United States v. 105.40 Acres in Porter County, Ind. (Northern
Indiana Bank and Trust Co., Trustee for Bethlehem Steel Corp.), 471 F.
2d 207 (C.A. 7, 1972).
/7/ United States v. 2,186.63 Acres of Land, Wasatch Cty., Utah, 464
F.2d 676 (C.A. 10, 1972).
/8/ United States v. 421.89 Acres of Land, Marion, Polk and Warren
Cos., Iowa (White Materials Corp.), 465 F.2d 336 (C.A. 8, 1972).
/9/ United States v. 100 Acres of Land, Etc., Marin Cty, Cal.
(Drakes' Beach Estates, Inc.), 468 F.2d 1261 (C.A. 9, 1972).
/10/ United States v. Certain Land in Squares 532 and 570, etc.,
Parcels 1 and 9 (D. C.), 473 F.2d 94 (C.A. D.C. 1972).
/11/ United States v. 1,129.75 Acres of Land, Cross and Poinsett
Cos., Ark., 473 F.2d 996 (C.A. 8, 1973).
/12/ United States v. 2,997.06 Acres of Land, Etc., Marion Cty, Fla.
(Ocala Manufacturing, Ice and Packing Co. and Canal Authority of the
State of Florida, 471 F.2d 320 (C.A. 5, 1972).
/13/ United States v. 62.39 Acres of Land, Cattaraugus Co., N.Y.
(Seneca Nation of Indians), 473 F.2d 1404 (C.A. 2, 1973).
/14/ United States v. 2,431.4 Acres, Hancock Co. Miss. (Clay
Calhoun), 473 F.2d 1389 (C.A. 5, 1973).
/15/ Harris v. United States, . . . . F.2d . . . . (C.A. 8, 1972).
/16/ United States v. 3,317.39 Acres, Jefferson Co., Ark. (Ark-Mo
Farms, Inc.), 443 F.2d 104 (C.A. 8, 1973), cert. den., . . . U.S. . . .
/17/ United States v. 201.19 Acres, Grays Harbor Co., Wash. (Simpson
Timber Co.), . . . F.2d . . . (C.A. 9, 1973).
/18/ United States v. 6.321 Acres, Suffolk Co., Mass. (City of
Boston, . . . F.2d . . . (C.A. 1, 1973).
/19/ United States v. 444.79 Acres, Clermont Co., Ohio (Lynam), . .
. F.2d . . . (C.A. 6, 1973).
/20/ United States v. 58.16 Acres, Clinton Co., Ill. (Cooley), . . .
F.2d . . . (C.A. 7, 1973).