State Highway Commission v. Arnold

ON REHEARING

*82 Robert Y. Thornton, Attorney General, and L. I. Lindas and Charles Peterson, Assistant Attorneys General, Salem, Oregon, for the petition.

Before McAllister, Chief Justice, and Perry, Sloan and O’Connell, Justices.

O’CONNELL, J.

The Commission requests us to reconsider its second assignment of error and to modify our former opinion by holding that in the evaluation of property taken by eminent domain the condemnor’s demand for it should be disregarded entirely.

In our former opinion we said that “If the state’s need for the property is in competition with other similar demands for it the state’s participation in the market may be considered in arriving at the value of the condemned property.” We had in mind the situations where the condemnor’s demand for the property along with the demands of others created its value in the market. Thus, if the owner of a gravel pit is selling-gravel by the yard at three dollars per yard to a variety of customers including the state, its participation in the market influences the price as does the demand of all the others because theoretically at least each separate demand has an influence upon the price. In such circumstances there would be no more reason for disregarding the condemnor’s demand than for disregarding the demand of any other customer. In most eases the fact that the condemnor has a need for the property distorts the price which the seller asks. This danger of distorting the price is the reason which prompted the rule forbidding the consideration of value to the taker. We did not feel that the state was entitled to assume in every case that its demand for *83 the property would necessarily cause such distortion. We relied upon several cases to support our position. Oregon R. & Nav. Co. v. Taffe, 67 Or 102 , 134 P 1024 , 135 P 332 , 135 P 515 (1913); United States v. Boston, Cape Cod & N. Y. Canal Co., 271 F 877 (1st Cir 1921); Olson v. United States, 292 US 246 , 54 S Ct 704 , 78 L Ed 1236 (1934); Mississippi & Rum River Boom Co. v. Patterson, 98 US 403 , 25 L Ed 206 (1878). The appellant-petitioner argues that these cases are not in point because they hold only that the value of the property may be based upon the highest and best use. But in those cases the courts were concerned with the use for which the condemnor sought the property and it was the condemnor’s demand for the property for such use that increased the price. The effect of the holding in those cases was that the condemnor’s demand, although contributing to the price, could be considered in arriving at the value to be paid by it.

We are convinced that the view we took of the matter in our former opinion was consistent with economic theory and with the basis for the rule excluding value to the taker in arriving at the condemnee’s award. However, upon a re-examination of the problem we have concluded that out of practical considerations the position we took in our original opinion must be modified. In most of the cases in which a condemnation suit is brought the condemnor has not participated in the market. Where the property taken consists of a natural resource such as a gravel pit or a cinder cone whose value is arrived at in part at least by considering the market for the materials which make it up, the condemnor may participate in the day to day demand for such materials as other purchasers do and thus influence the price without distorting it. But normally it will not condemn if it can purchase in this *84 manner. And, of course, where the property is not taken for the materials which can be extracted from it the condemnor would very seldom play any part in the market whatsoever. In most cases, then, the failure to exclude the value to the taker in making an appraisal would be an error. In view of this fact the question is whether the possibility that the condemnor’s demand might not have distorted the price should be provided for in formulating a rule governing the use of appraisal evidence in the trial of condemnation cases. We now think that the rule should not be so formulated. Our reasons are as follows. Considering the paucity of situations in which the condemnor’s demand affects the normal market price we think that there would be few instances in which there would be any danger that the exclusion of the condemnor’s demand would produce an unfair award to the condemnee. Weighed against this slight danger is the practical difficulty of drawing the line between the demands of the condemnor as a participant in the general market which establishes the normal market value and its demands which distort the price. The jury would be invited to speculate in an area which already is not only complicated and confusing to the average person but to economists as well. “* * * the issues should be submitted so as to avoid confusing the jury as much as possible.” City of Austin v. Cannizzo, 153 Tex 324, 267 SW2d 808, 812 (1954). State v. Carpenter, 126 Tex 604, 89 SW2d 194 , 89 SW2d 979 (1936). There is a widespread belief that in the trial of condemnation cases juries usually return verdicts in excess of the value of the property taken. Graubart, “Theory Versus Practice in the Trial of Condemnation Cases”, 26 Penn Bar Assoc Quarterly 36 (1954). If this is true the disadvantage to the condemnor can, to some extent, be mitigated by a rule *85 ■which wholly precludes a consideration of the condemnor’s demand for the property in arriving at the market value.

We hold, therefore, that in the evaluation of property taken under eminent domain the condemnor’s demand for it must be disregarded. In this respect our former opinion is modified. The petition for rehearing is denied.