Petition — 91.90 Acres of Lands, Situate in Monroe County, Missouri, and Walsh Refractories Corporation, C-E Refractories and Combustion Engineering, Inc., v. United States of America

——

Supreme Court, U. \ a

FILED

FEB 21 179

ill

MICHAML @ODAK, JR. CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1978

78-1299

RT bt ay

91.90 ACRES OF LAND, SITUATE IN MONROE COUNTY, MISSOURI, and

WALSH REFRACTORIES CORPORATION, C-E REFRACTORIES AND

COMBUSTION ENGINEEERING, INC.,

Petitioner,

Vv

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals for the Eighth Circuit

JEROME W. SEIGFREID

LOUIS J. LEONATTI

EDWARDS, SEIGFREID, RUNGE &

LEONATTI, P/C

123 East Jackson Street

Mexico, Missouri 65265

Counsel for Petitioner

St. Louis Law Printing Co., Inc., 812 Olive Street 63101 314-231-4477

a cael

qua==s

Law oFrices COPY

EDWARDS, SEIGFREID, RUNGE & LEONATTI

PROFESSIONAL CORPORATION

123 EAST JACASON STREET

FP. Oo. BOX 160

MEXICO, MISSOURI 65265

FRANK 8 COWARDS

'TROME WwW. SEIGFREID

G. ANDY RUNGE

Lou's J. LEONATTI

MICHAEL J POMLMEYER March 5 : 1975

TELEPHONE

(3:4) Se1-220

RECEIVED

MAR ¢

Mr. Michael Rodat, Jr, Clerk 1979

Supreme Court of the United States | OFFICK OF THE CLERK

Supreme Court Building SUPREME Court, U8,

Washington, DC 20543

RE: 91.90 Acres of Land, Etc.,

et al. v. United States of

America, Supreme Court of the

United States, Case No. 78-1299

Dear Mr. Rodak:

While reviewing our copy of the printed Petition for Writ of

Certiorari in the above captioned case, | discovered three errors

in citations which creates some unnecessary confusion.

On page 12, line 14, the local citation to United States v. 91.90

Acres of Land, Etc., “supra 80" should be “Supra 88".

The local citation to United States v. Miller, “supra 281", on

line 11 of page 14 of the Writ should read “supra 376".

Ret tie

Finally, the reference to "(T-28)" on page 19, line 13 should be

corrected to state "“(T-228)".

lease take note of these errors and the apolicable

presale I am enclosing 40 copies of this letter so “aid

may be placed with the printed Petition for Writ of Certiorar :

Please accept my apologies for any inconvenience which may have

occurred as a result of these errors.

With best regards, I am

Very truly yours,

ORIGINAL SIGNED BY

LOUIS J. cnpnaegpled

TTORNEY AT LA

‘OUIS J. LEONATTI

LJL/Ic

cc: Mr. Edwin B. Brzezinski

Mr. James W. Moorman

Attn. Jacques B. Gelin and

Maryann Walsh

The Honorable Wade H. McCree, Jr.

INDEX

Page

Opinions Below .......... 6: eee ee rere rete teenies l

DE oi civic cei vata eeregasecesass Ve ens 2

eer ae kee 2

Constitutional Provisions Involved ...........++++55: 3

ee en nS Seer re re ee ee 3

Reasons for Granting the Writ .............00eeeees 7

I. Unit-Times-Price Method of Evaluation ........ 7

II. Factors Affecting the After Value ............. 13

III. Surface Value of the Land .................- 18

oC ee ey ee eer eee eer Ee 19

Appendix A—United States of America v. 91.90 Acres

of Land, Ees., $86 F.20 TD CASTE) 2... ic cerences A-1

Appendix B—Order Denying Petitioner’s Petition for Re-

hearing, December 11, 1978... 2... cece ccc ee eens A-26

Appendix C—Order Denying Petitioner’s Petition for Re-

hearing En Banc, December 6, 1978 .............. A-27

CITATIONS

Cases

Bauman v. Ross, 167 U.S. 548 (1897) ............... 14

Cade v. United States, 213 F.2d 138 (4th Cir. 1954) .... 10

Clark v. United States, 155 F.2d 157 (8th Cir. 1946) ... 8

Mills v. United States, 363 F.2d 78 (8th Cir. 1966) ..... 7

Mitchell v. United States, 267 U.S. 341 (1925) ......... i)

ii

National Brick Co. v. United States, 76 U.S.App. DC 329,

S36 Fe SO Ge Se ohned ccc pencencns 9, 10, 11, 12

Seattle & M. R. Co. v. Roeder, 70 P. 498 (Wash. 1902) .. 17

Southern P. R. Co. v. San Francisco Sav. Union, 79 P. 961

GE FEED « 0k’: vend bent ne bee bese aeeeeeeee 16

United States v. Becktold Co., 129 F.2d 473 (8th Cir.

WE 6 a on 0c oceeeneceskoteneunecedeeeeeee 8

United States v. General Motors Corp., 323 U.S. 373

GE oss 0a rues os wa lea bee 19

United States v. Miller, 317 U.S. 369 (1943) ...... 11, 13, 14

United States v. 91.90 Acres of Land, Etc., 586 F.2d 79

i S| Re ee 5, 7, 12, 13, 16, 17

United States v. 180.37 Acres of Land, Etc., 254 F.Supp.

COO ever VA BED vec winnie cane eweaeeeees 11

United States v. 403.14 Acres, Etc. in St. Clair County,

Missouri, 553 F.2d 565 (8th Cir. 1977) ............ 17

United States v. 599.86 Acres of Land, Etc., 240 F.Supp.

Se ree CU Te a bivks.n us Uae kee 7

United States v. 1,629.6 Acres of Land, Etc., State of Del.,

360 F.Supp. 147 (D. Del 1973) .................. 11

United States v. 2847.58 A. of Land, More or Less, Etc.,

paw ©. ae Gee Ga OW. FOOD ioc awe ie ken 11

United States v. 237,500 Acres of Land (1964, DC Cal),

236 F.Supp. 44 (SD Calif. 1964), aff'd (CA9 Cal 1968),

G00 F206 Te .... .. 0650555. Cae eee 11

293.080 Acres of Land, Etc. v. United States, 169 F.Supp.

See Gere OU BGUED kicnsincdunakeeaweneeeees 11

Statutes

28 U.S.C. Section 1254(1) (1948)... ccc ccc ccncces 2

Miscellaneous

Annot., 40 A.L.R. Fed. 686-692 (1978) .............. 7,13

~~

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1978

ee

91.90 ACRES OF LAND, SITUATE IN MONROE COUNTY, MISSOURI, and

WALSH REFRACTORIES CORPORATION, C-E REFRACTORIES AND

COMBUSTION ENGINEEERING, INC.,

Petitioner,

Vv

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals for the Eighth Circuit

The Petitioner prays that a writ of certiorari issue to review

the judgment of the United States Court of Appeals for the

Eighth Circuit entered on November 6, 1978; petition for re-

hearing was denied on December 11, 1978; and petition for

rehearing en banc was denied on December 6, 1978.

OPINIONS BELOW

The opinion of the United States Court of Appeals for the

Eighth Circuit is reported at 586 F.2d 79.

on. rae

A copy of the Court’s opinion is reproduced as Appendix A

hereto.

The Court of Appeals entered an order denying Petitioner’s

petition for rehearing (Appendix B) and denying the petition

for rehearing en banc (Appendix C).

JURISDICTION

The judgment of the United States Court of Appeals for the

Eighth Circuit was made and entered on November 6, 1978,

(Appendix A). The petition for rehearing was denied on De-

cember 11, 1978, (Appendix B); the petition for a rehearing en

banc was denied on December 6, 1978, (Appendix C).

The jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

QUESTIONS PRESENTED

Did the Eighth Circuit Court of Appeals err in its finding that

the trial judge was guilty of “plain error”:

I

In permitting C-E’s value witnesses to use “unit-times-price”

as a method of arriving at the value of a clay strip mine? The

weight of authority is that this is a proper method of determin-

ing the before and after value of land underlaid by a mineral

deposit.

II

In permitting C-E’s value witnesses to show how the govern-

ment’s taking of sixty-five (65%) percent of the tract caused

costly revisions in the mining plan and a loss of clay which

el

diminished the fair market value of the remaining tract? The

weight of authority is that such evidence of severance damages

is admissible.

Ill

In purportedly allowing C-E’s value witnesses to ignore the

surface value of the remaining tract in arriving at their estimate

of the fair market value after the taking? The record shows the

surface value of the land was included in the appraisers’ after

value testimony.

CONSTITUTIONAL PROVISIONS INVOLVED

United States Constitution Amendment V, which provides:

“ _ . nor shall private property be taken for public use, without

just compensation.”

STATEMENT

On December 16, 1976, the date of taking, Petitioner, herein-

after referred to as “C-E”, owned 140 acres of land in Monroe

County, Missouri. (T-24) This tract contained a deposit of

“ladle clay”. (T-47, 449) This clay expands, rather than shrinks,

when it is exposed to intense heat. (T-25, 449, 482) It is a com-

ponent of refractory products and is a basic ingredient of brick

used to line ladles that transport molten metals and molten

glass. (T-83) Ladle clay is extremely rare. (T-25, 26, 61, 165,

479, 504) The deposit of ladle clay on C-E Refractories’ 140

acres in Monroe County is the only known deposit of ladle clay

in the State of Missouri. (T-83, 84, 129, 448, 449)

On the date of taking, the United States took title to 87.89

acres of the 140 acre tract in fee and it acquired a perpetual

flowage easement over 4.01 acres. The entire “ladle clay” de-

ee pe

posit is located under the 48.10 acres which C-E retained after

the taking. (T-84, 115, 116) The land condemned is to be used

by the government in connection with the construction of the

Clarence Cannon Dam and Reservoir Project.

Mr. Stig Scharthi, the Petitioner’s plant manager, testified that

there are 327,617.52 tons of ladle clay on the tract of land.

(T-36) He stated that the value of the clay in the ground on

the date of taking was One and 95/100 ($1.95) Dedllars per

ton. (T-35) He testified as to C-E’s plan for mining the clay

before the taking and how this plan had been revised after the

taking. (T-35, 36) In order to remove the clay after the taking

in compliance with various state and federal laws, the company

must construct a moat, four (4) collection ponds to collect sur-

face water runoff, three (3) settling ponds, a roadway, support-

ing equipment, pumps, and fencing. In addition, the overburden

from this strip mine must be transported to another location.

Before the taking, the overburden could have been pushed into

the ravines which are now subject to the flowage easement and

on to the back part of the property, which is the 87.89 acre

tract taken in fee. (T-34, 35, 36, 37, 38, 42, Defendant’s Ex-

hibit B) This would have been a very economical method of

mining the clay and would have minimized any clay loss through

contamination. (T-149) The overburden pushed onto the

87.89 acre tract taken would have provided a natural dam to

prevent runoff into the stream. (T-42) The overburden pushed

into the ravines would have acted as fill, which would have

leveled the land. (T-35) Because of the taking, all mining must

be done within the confines of the remaining 48.10 acres. In

order to mine the ladle clay from this tract, C-E was required

to devise a new mining plan. The plan would cause C-E to lose

44,000 tons of clay. (T-41) According to Mr. Scharthi, the

total loss resulting from the taking of the land, the imposition

of the flowage easement, the loss of clay and the modifications

in the plan for mining the clay was Five Hundred Forty Thou-

ee ene oe

Sex ate

sand Ninety-seven and 21/100 ($540,097.21) Dollars. (T-43-

44) .

Four real estate value witnesses called by C-E testified to the

before and after value of the land. The Court of Appeals

singled out the testimony of Wayne C. Miller as representative of

the Petitioner's method of valuation. [United States v. 91.90

Acres of Land, Etc., 586 F.2d 79, 84 (8th Cir. 1978); Appen-

dix A, p. A-13]

Mr. Miller testified that there had been no sales of other clay

properties in the area in the last twenty ( 20) years. (T-170, 171,

179) Mr. Miller valued the total tract at Seven Hundred Forty-

six Thousand Ninety-two and 41/100 ($746,092.41) Dollars.

(T-181) He explained that in arriving at this value he con-

sidered the fair market value of the surface of the land to be

One Hundred Forty Thousand and no/100 ($140,000.00) Dol-

lars. (T-180) He placed a value on the clay in the ground at

One and 85/100 ($1.85) Dollars per ton. (T-182) The value

he placed on the remaining land after the taking and after the

deduction of severance damage was One Hundred Ninety-nine

Thousand One Hundred Sixty-two and 85/100 ($199,162.85)

Dollars. (T-182) The total damage to the property was Five

Hundred Forty-six Thousand Nine Hundred Twenty-nine and

56/100 ($546,929.56) Dollars. (T-182) Of this damage,

Eighty-one Thousand Six Hundred Ninety-two and 63/ 100

($81,692.63) Dollars represents the actual loss of clay. (T-183)

The government called Dr. William J. Lang of Libertyville,

Illinois as its expert on clay mining. (T-254) It was his opinion

that the total property had a highest and best use as a clay mine.

(T-298) He stated on direct examination that clay in the

ground, located, opened up, stripped, so it is an operating mine,

has a value of One and 85/100 ($1.85) Dollars per ton. (T-

304) He accepted the fact that there were 300,000 tons of clay

under the land in question. (T-338)

wwe ane

Mr. Kniffen was called by the government as a real estate

appraisal witness. (T-396) He testified that the damage to C-E

as a result of the taking was Thirty-one Thousand Two Hundred

and no/100 ($31,200.00) Dollars. (T-401) He valued the

surface of the land at Three Hundred Fifty and no/100 ($350.-

00) Dollars per acre. (T-411) He placed no value on the clay

since Dr. Lang told him that no clay was taken and the mining

of the clay would not be impaired by the taking. (T-411) It

was his opinion that the highest and best use of the tract was as

a clay mine. He could find no comparable sale of property

containing clay in the area or in the counties surrounding the

area. (T-422, 423) Neither could Mr. McReynolds, the gov-

ernment’s other real estate appraisal witness. (T-386)

Evidence of the damage which C-E incurred as a result of the

taking was supported by the testimony of Dr. Walter Keller, who

Dr. Lang conceded was one of the foremost geologists in the

world, (T-333), and Mr. Robert Turner, who for the past twenty-

eight (28) years was mining superintendent for A. P. Green

Firebrick Company, one of the biggest manufacturers of fire-

brick in the world. (T-146)

The jury by its verdict established C-E’s damage at Two Hun-

dred Forty-five Thousand Nine Hundred Sixty-six and no/100

($245,966.00) Dollars. (T-551)

REASONS FOR GRANTING THE WRIT

I

Unit-Times-Price Method of Evaluation

The Court of Appeals has stated that it is plain error to have

testimony which separates the value of minerals, which under-

lays land, from the surface value of the land. This is often

referred to as the “unit-times-price” method of evaluation. There

are conflicting opinions throughout the United States on the

proper method of evaluating minerals which are located be-

neath the land’s surface [See 40 ALR Fed. 686-692 (1978)]

This conflict should be resolved by the Supreme Court so that

the rule in federal condemnation cases is uniform. The rule

should also be made applicable in situations involving improved

real estate in which the same dilemma occurs because the evi-

dence required to prove such loss has not been established by

this Court.

The Eighth Circuit in our C-E case has said:

_. . the landowner is not entitled to have the surface value

of the land and the value or underlying minerals aggregated

to determine market value.

. it is generally not permissible to determine the value

of a mineral deposit by estimating the number of tons in

place and then multiplying the tonnage by a unit price per

ton. [United States v. 91.90 Acres of Land, Etc., 586 F.2d

79, 87 (8th Cir. 1978); Appendix A, p. A-19]

This, the Court of Appeals states, is supported by two Eighth

Circuit decisions which are United States v. 599.86 Acres of

Land, Etc., 240 F.Supp. 563, 572-573, (WD Ark 1965), affd

sub nom Mills v. United States, 363 F.2d 78 (8th Cir. 1966).

However, we do not read either of these decisions as supporting

this position. This method of evaluation was not used in these

cases because there was no showing that there was a market

for the coal the landowner claimed was under his land. A neces-

sary ingredient of the unit-times-price method, is an established

market price. Without this ingredient, its use will result in specu-

lation. This is precisely what these two cases say. However, the

Court of Appeals in our C-E case has interpreted this rule to

mean that any use of the unit-times-price method of evaluating

mineral deposits will always result in speculation. We feel this

is erroneous.

The Eighth Circuit in our C-E case has also inferred that this

same rule would be applied in the case of improvements on

land. However, the case of United States v. Becktold Co., 129

F.2d 473, (8th Cir., 1942), citing a New York case with ap-

proval, states:

‘But when a building has an intrinsic value, which must be

added to the value of the land in order to ascertain the

value of the whole, the owner may not be able to establish

his just compensation unless he is permitted to prove the

value of his land as land and the value of his buildings as

structures. By adding to each other these two quantities the

result is really the value of the land as enhanced by the

buildings thereon.’ [Headnote 13, id at 478-479]

The same rule was followed by the Court of Appeals for the

Eighth Circuit in Clark v. United States, 155 F.2d 157 (8th

Cir. 1946). The Court stated:

We think it was prejudicial not to permit defendants’ wit-

ness to tell the jury what part of the value he placed on the

timber land and what part on the rest of the land. In emi-

nent domain proceedings the rule is that all facts which an

ordinarily prudent man would take into account before

forming a judgment as to the market value of property he

contemplates purchasing is relevant and material. The /and-

=P

owner should be allowed to state and to have his witnesses

testify to every fact concerning the property which he

would normally or ordinarily be disposed to put forth in

order to place it in an advantageous light if he were at-

tempting to negotiate a sale of it to a private individual. He

was entitled to present to the jury all the elements reason-

ably affecting the value of the property for all uses for

which it was suitable. (id at 162)

Then citing a United States Court of Appeals decision in

the District of Columbia on this same proposition, the court

stated:

In National Brick Co. v. United States, 76 U.S.App. D.C.

329, 131 F.2d 30, 31, the trial court rejected testimony

as to the value of sand contained on the land taken. In

reversing the case the court, among other things, said:

‘Obviously, the Court was originally of opinion that the

presence on the property of the sand bank forty to ninety

feet high, containing 300,000 cubic yards of pure sand

was of no consequence in determining the value of the

property taken, and that the added value by reason of the

presence of the sand should not be considered. On this

theory most of the evidence of the additional value of

the sand in the bank as it was and of the additional value

of the property by reason or presence of the sand was

rejected.

‘This opinion of the Court was, of course, wrong, for no

rule is better established than that the special value of

land due to its adaptability for use in a particular business

is an element which the owner of land is entitled to have

considered in determining the amount to be paid in just

compensation. (Mitchell v. U. S., 267 U.S. 341, 45 S.Ct.

293, 69 L.Ed. 644.)

‘|. And we know of no other evidence by which the

jury could be properly guided in determining the value

- 10 —

of the property than to be told the per ton value of the

sand as it lay, or, without this kowledge, how the jury

could ever have reached a judgment based on anything

more than guess or speculation.’

We think the rejection of this proffered evidence was

prejudicial error. [id. at 162]

We believe these decisions state the proper valuation rule

and the established law in the Eighth Circuit at the time our

C-E case was tried. Although the Court of Appeals in our

C-E case has not referred to either of these Eighth Circuit

decisions or the decision in National Brick Co., supra, by its

decision it has overruled the legal principles of these cases.

The rule of the Eighth Circuit before the C-E decision is

strongly supported in the Fourth Circuit in the case of Cade

v. United States, 213 F.2d 138, 142 (4th Cir. 1954):

The trial judge was correct in thinking that the property

should be valued as a whole for the purpose of assessing

compensation for the taking; but this does not preclude

the admission of testimony showing particular elements

of value for consideration by the jury in arriving at the

overall value which they are required to find as the basis

of compensation. The value of a rock deposit, like the

value of a coal mine or an oil well or a building may

properly be shown as bearing upon the value of the prop-

erty being taken, even though the measure of recovery is

the overall value of the property. In no other way would

it be possible adequately to apply the well settled rule that

the most profitable use to which the land can reasonably

be put in the reasonably near future may be shown and

considered as bearing upon the market value. See Mc-

Candless v. United States, 298 U.S. 342, 56 S.Ct. 764,

80 L.Ed. 1205; and opinion of this court in United States

ex rel. Tennessee Valley Authority v. Powelson, 4 Cir.,

138 F.2d 343 and cases there cited.

— _

The 1966 District Court of Virginia case of United States

v. 180.37 Acres of Land, Etc., 254 F.Supp. 678 (W.D. Va.

1966), notes that the unit-times-price method was proper in

valuing land underlaid with a coal deposit where there were

no comparable sales. The court notes any other basis would

have resulted in an arbitrary guess as to valuation.

The unit-times-price method was also approved in the Sixth

Circuit in United States v. 2847.58 A. of Land, More or Less,

Etc., 529 F.2d 682 (6th Cir. 1976); in the District Court of

Pennsylvania, 293.080 Acres of Land, Etc. v. United States,

169 F.Supp. 305 (W.D. Pa. 1959); in the District Court of

Delaware, United States v. 1,629.6 Acres of Land, Etc., State

of Del., 360 F.Supp. 147 (D. Del. 1973); and in the District

of Columbia in United States v. 237,500 Acres of Land (1964

D.C. Cal.), 236 F.Supp. 44 (S.D. Calif. 1962), affd (CA 9

Cal. 1968), 404 F.2d 336.

The clay deposit involved contained very rare ladle clay.

C-E was using this clay in the production of refractory products,

which include firebrick and liners for ladles. There is a present

need for this product and its use will continue and increase in the

future. (T-33, 34, 498) Since it is the only known deposit of

this type clay in Missouri, there are no comparable sales to use

as a measuring rod of value. (T-83, 84, 129, 448, 449, 170, 171,

179, 203, 218, 227, 386, 422, 423)

“| . Where for any reason property has no market resort

must be had to other data to ascertain its value. . .” United

States v. Miller, 317 U.S. 369, 374 (1943).

In the case of minerals in place, what is the test if the unit-

times-price method is not available? The Court of Appeals in

our C-E case did not tell us this. In the National Brick Co. case,

supra, the court said:

. . . we know of no other evidence by which the jury

could be properly guided in determining the value of the

—

property than to be told the per ton value of the sand as

it lay, or, without this knowledge, how the jury could ever

have reached a judgment based on anything more than

guess or speculation. (supra at 30, 31)

The Court of Appeals in our C-E case tells us:

. we think there was substantial competent evidence to

justify the jury in making a before and after market value

award substantially in excess of the amounts testified to by

the government’s value witnesses. [United States v. 91.90

Acres of Land, Etc., supra, 88; Appendix A, p. A-21]

The court did not tell us what the substantial competent evi-

dence was. It did tell us that the unit-times-price method is

“simply too speculative to be permissible.” (United States v.

91.90 Acres of Land, Etc., supra, 80; Appendix A, p. A-22)

Without some guide, this negative approach to the evaluation

of a mineral deposit leaves us adrift without a paddle.

Certainly the purchaser of a mineral deposit wants to know

how much there is, the cost to remove and transport it to a

plant or market, and what the market price for this particular

material will be. In a strip mine, the surface land is only in-

cidental in determining if it is sufficient to accommodate the

overburden and to permit storage of equipment and mined ma-

terials. With these elements in mind, the before fair market

value is determined. A jury has a right to know the factors con-

sidered by the expert in arriving at value estimates. Without

this, the jury would be handed a roving commission and must

base its judgment on guess or speculation. (National Brick Co.

v. United States, supra, at 31)

Presumably, the Court of Appeals has said you can tell the

jury that the highest and best use of the property is a clay mine.

Your value witnesses can give their opinion of the value before

the taking and the value after the taking, but they can’t say

anything more. If they tell the jury the basis of their opinion,

—. =

that will be plain error because they have violated a nonsensical

rule which says their reasoning may not be explained. By merely

stating the highest and best use and the before and after value,

this, according to.the Court of Appeals, will:

. . lead the jury permissibly to infer that before the

taking a reasonable seller would ask more for the overall

property due to the clay deposit, and that a reasonable

buyer would pay more on account of the deposit. (United

States v. 91.90 Acres of Land, Etc., Headnote 17, supra

at 88; Appendix A, p. A-22)

This then suggests the jury should be given a roving commission

to determine the value of land underlaid with a mineral deposit.

The Appellate Court was obviously in error. This error, which

is also contained in several other decisions noted in 40 ALR

Fed. 686-688 should be corrected now.

The test which the court should adopt to clarify this dilemma

is the unit-times-price rule. This rule must have a foundation

of reasonable engineering estimates of quantity and a current

market that is reasonably likely to continue in the future.

II

Factors Affecting the After Value

The Fifth Amendment to the United States Constitution guar-

antees each citizen that his property will not be taken for a

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 condition pecuniarily as he would have occupied

if his property had not been taken. (emphasis added)

United States v. Miller, 317 U.S. 369, 373 (1943).

ee

Often a taking does not involve the acquisition of the entire

ownership. When a partial taking occurs, just compensation

must include any depreciation in the value of the land remain-

ing after the severance has occurred. Mr. Justice Roberts, speak-

ing for this court, stated:

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. (United States v. Miller,

supra, 281.)

The rule for determining damages is stated in Bauman v. Ross,

167 U.S. 548 (1897):

Consequently, 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. (Id at 574)

‘In estimating the damages, the committee are not con-

fined to the value of the land covered by the road, and the

expense of fencing the ground. The owner may suffer much

greater damage by the road depriving him of water, or

by otherwise rendering the cultivation of his farm incon-

venient and laborious; . . .’ (Id at 575, 576)

C-E owned 140 acres of land in Monroe County. After the

taking, C-E was left with 48.10 acres in the tract. (T-84, 115,

116) This tract was extremely valuable to C-E because it con-

tained a rare deposit of ladle clay. (T-25, 26, 61, 165, 479,

504) Drill records and computations by Petitioner’s plant man-

ager indicated the tract contained 327,617.52 tons of ladle

aw

clay. (T-32, 33, 36) This is the only known deposit of ladle

clay in Missouri. (T-83, 84, 129, 448, 449) For years, another

firebrick company has searched for this type clay without suc-

cess. (T-83, 151, 478)

Before the taking, C-E had a plan for mining the tract which

utilized the entire 140 acres. (T-35, 36). As a result of the

taking by condemnation, the mining plan had to be revised.

(T-35, 36) In order to revise the plan so that the maximum

amount of clay could be removed from the tract after the

taking, a loss of 44,000 tons of clay would occur. (T-41) In

order to strip mine the clay in the limited area remaining,

C-E’s engineers determined that it must construct a moat, set-

tling ponds with supporting equipment and pumps, a roadway

and a fence. In addition, the overburden, which could previ-

ously have been pushed into ravines and onto the 115.99 acres

on which no clay was located, must now be transported to

other locations on the tract at an additional cost. (T-36, 37,

38, 42) C-E had little choice. It could either expend the sums

necessary to mine its only deposit of ladle clay or go out of the’

business of producing brick which requires this clay as a basic

ingredient.

Both sides of the case agreed that the highest and best use

of the property is as a clay mine. (T-49, 171, 203, 217, 227,

298, 385, 422) Consequently, one would ask, wouldn’t a will-

ing buyer of the remainder of this property consider the loss

of 44,000 tons of clay, the construction of a roadway and moat,

the settling ponds and a fence, and the cost of shifting the

overburden in determining what such buyer would pay for the

property? And, wouldn’t a willing seller consider the mining

problems which present themselves after the taking in de-

termining the sales price of the 48.10 acres? These certainly

are factors which affect the value of this land. However, the

Appellate Court in C-E tells us we are not entitled to be com-

pensated for these losses since they did not result from the

—_" son

taking but from C-E’s decision to continue mining the clay

from the 50 acre tract and to do it in a certain way. (United

States v. 91.90 Acres of Land, Etc., Headnote 14, supra at 88;

Appendix A, p. A-22) However, in the next breath the court

states:

... C-E was entitled to show that the deposit of clay could

be mined more efficiently if the 90 acres that the govern-

ment took were available for utilization in connection with

the mining operation. Such evidence might well lead the

jury permissibly to infer that before the taking a reasonable

seller would ask more for the overall property due to the

clay deposit, and that a reasonable buyer would pay more

on account of the deposit; and a jury might permissibly

infer that after the taking of the 90 acres the 50 remain-

ing acres, including the 20 acres of clay, were worth less

standing alone than they were worth as part of the larger

original tract. (United States v. 91.90 Acres of Land, Etc.,

Headnote 17, supra at 88; emphasis ours; Appendix A, p.

A-22)

We believe the court’s opinion in C-E is in conflict with it-

self. If the jury is not told how the damage to the remaining

portion of the tract occurred, what evidence will “. . . lead the

jury permissibly to infer that before the taking a reasonable

seller would ask more for the overall property . . .” and after

the taking the property standing alone would be worth less?

(Id at 88)

This matter has been considered in two state court opinions.

In Southern P. R. Co. v. San Francisco Sav. Union, 79 P. 961,

962-963 (Cal. 1905), the court said:

. .. there is no doubt that . . . it may be much more ex-

pensive for him to take them (minerals) out; . . . and it

may be that much valuable mineral would have to be left

. evidence of all these matters would be submitted to

ey. eae

the court and jury and would enter as substantial factors

in determining the value of the easernent. (emphasis added).

In Seattle & M. R. Co. v. Roeder, 70 P. 498, 501 (Wash.

1902), the court stated:

. . evidence is admissible to show that the most advan-

tageous way to work the quarry is by blasting, which will

be rendered more difficult and more expensive by the

proximity of the railroad.

The United States admits that C-E is entitled to severance

damages. In its initial brief in the Court below on Page 12 it

states: /

Because the United States acquired less than C-E’s entire

acreage, C-E is clearly entitled to certain severance dam-

ages.

The matter has been previously considered in the Eighth Cir-

cuit in the case of United States v. 403.14 Acres, Etc. in St.

Clair County, Missouri, 553 F.2d 565, 567[2] (8th Cir. 1977).

The court, in considering severance damages, stated:

‘(O]f course, in determining that value the finder of fact

will take into consideration all factors of value that would

influence a reasonable seller and a reasonable buyer in

negotiating a separate sale of the property that was left to

the former owner after the taking.

The required change in the mining operation of this rare de-

posit of clay is an element of severance damage and it was

error for the court to overrule the previous decisions which es-

tablished this by stating “these consequential damages are simply

not compensable and evidence of them should hrve been ex-

cluded.” (United States v. 91.90 Acres of Land, Etc., supra at

88; Appendix A, p. A-22)

—

Ill

Surface Value of the Land

The Court of Appeals in our C-E case at Page 88, [Headnote

15 App. A, p. A-22] stated that the value witnesses for C-E ig-

nored the surface value of the remaining 50 acres of land imme-

diately after the taking. It is apparent from reading the testimony

of all of the witnesses that this interpretation of the testimony of

the value witnesses called by C-E is erroneous. Each of the wit-

nesses called as value witnesses clearly stated a before value,

which included the clay deposit in the ground, and an after value,

which was diminished by the witnesses’ estimate of the severance

damage which occurred as a result of the taking. Each value wit-

ness heard Mr. Scharthi, Mr. Porter and Dr. Keller testify con-

cerning the value of the clay deposit in the ground and the loss

of clay and additional mining costs which C-E would incur as

a result of the taking. (T-33, 35, 36, 43, 83, 103, 104, 114,

218, 227, 228) Mr. Scharthi testified the grand total of these

when totaled with the value of the land taken, amounted to a

loss of Five Hundred Forty-Thousand Ninety-seven and 21/100

($540,097.21) Dollars. (T-43) Each value witness was a quali-

fied real estate broker and appraiser. Each expressed his opin-

ion of the surface value of the land. (T-168, 170, 181, 199, 209,

216, 219, 227)

Mr. Miller, and the other land appraisal witnesses, considered

the total value of the land before the taking. In Miller’s opinion,

this before value was Seven Hundred Forty-six Thousand Ninety-

two and 41/100 ($746,092.41) Dollars and the value after the

taking was One Hundred Ninety-nine Thousand One Hundred

Sixty-two and 85/100 ($199,162.85) Dollars. (T-181, 182) The

after value given by Mr. Miller included the remaining land. In

explaining his total damage figure, Mr. Miller stated: “This is

the severance damage and the value of the land that was taken

and the loss of clay.” (T-182) It should be specifically noted in

— ee

Mr. Young’s testimony his damage figure considered only the

loss of 87.89 acres in fee and 4.01 acres for perpetual flowage

easement. (T-204) The same considerations were used by Mr.

Colbert (T-220) and Mr. Ridgley (T-228). The specific ques-

tion put to Mr. Ridgley was:

Q: Now, have you, using the comparable sales approach,

as to the land, and by using this [sic] values you have

received from these experts and what you have heard

in this courtroom, arrived at a value of the land im-

mediately after the date of taking?

A: Yes, sir.

Q: What is that value?

A: $195,495.20. (T-28)

This value testimony certainly included the surface value of the

remaining 48.10 acres after the taking. The before value,

after value and damage testimony is the composite the Court of

Appeals seems to require. However, in this instance it is critical

because the surface land and the remaining value of the clay are

not stated separately.

CONCLUSION

A writ of certiorari should issue when the question to be de-

cided is fundamental to the further trial of the matter. The case

of United States v. General Motors Corp,. 323 U.S. 373 (1945),

involved a condemnation proceeding by the government to pro-

cure the temporary use of a building which was occupied by the

defendant under a long-term lease. General Motors offered to

prove various items of cost caused by its loss of the premises.

Its offer of proof was denied by the District Court. The Seventh

Circuit Court of Appeals held that this was admissible evidence.

In the order granting the writ of certiorari, this Court stated:

—_

We think we should review that ruling inasmuch as it is

fundamental to the further conduct of the case. (Id at 377)

This was also a case of first impression in the Supreme Court

and there was a conflict in the decisions of the Circuit Courts of

Appeal.

It is essential at this time that this court establish the rule

for determining the value of minerals which underlay land and

the method of determining consequential damages. The decision

in our C-E case is in direct conflict with other Appellate Court

decisions in the Eighth Circuit as well as decisions in other cir-

cuits and districts of the United States. The opinion in our

C-E case has the effect of overruling those cases which have

established a workable method of determining the value of min-

erals in the ground and consequential damages in the case of a

partial taking of land. There is a need that the matter be clari-

fied and that the rules be fixed as a guide for courts, counsel

and juries in the trial of condemnation cases.

Respectfully submitted,

JEROME W. SEIGFREID

LOUIS J. LEONATTI

EDWARDS, SEIGFREID, RUNGE

& LEONATTI, P/C

123 East Jackson Street

Mexico, Missouri 65265

Counsel for Petitioner

f

APPENDIX

"re

a: vs ae

APPENDIX A

United States of America,

Appellant,

v.

91.90 Acres of Land, Situate in Monroe County, Missouri, and

Walsh Refractories Corporation, C-E Refractories

and Combustion Engineering, Inc.,

Appellees.

No. 77-1944.

United States Court of Appeals

Eighth Circuit

Submitted Sept. 12, 1978

Decided Nov. 6, 1978

In an eminent domain case, the United States District Court

for the Eastern District of Missouri, John F. Nangle, J., entered

judgment on a verdict finding that the landowner was entitled

to compensation in the sum of $245,966. After a post-trial mo-

tion for a new trial or, alternatively, for a large remittitur was

denied, the Government appealed. The Court of Appeals, Hen-

ley, Circuit Judge, held that: (1) where consequential damages

to the landowner did not result from the taking but from the

landowner’s decision to continue to mine clay and to do it in a

certain way, the damages were not compensable and evidence of

them should have been entirely excluded; (2) the district court

committed serious error when it permitted an aggregation of

the estimated surface value of the 140-acre tract immediately

prior to the taking and of the landowner’s estimate as to the

value of the clay underlying 20 of the 48.1 acres of land that

—_

were not taken and when it ignored completely the surface value

of the remaining 48.1 acres immediately after the taking; (3)

the district court erred when it permitted the landowner’s man-

agerial personnel to make estimates of tonnage of clay in the

ground and then multiply that tonnage by a fixed unit price, and

(4) where the district court fell into plain and fundamental error

in connection with the evidence and the instructions and it was

impossible to determine the extent to which the jury considered

incompetent evidence or accepted an improper method of valua-

tion in arriving at its award, a new trial was necessary regardless

of whether the Government's trial counsel made timely and

proper objections to the landowner’s evidence and regardless of

whether the Government’s trial counsel requested proper in-

structions or objected to the instructions given by the trial court.

Reversed and remanded.

1. Eminent Domain Key 122

Where the Government in the exercise of its power of eminent

domain condemns for public use the property of a person, in-

cluding a corporation, the property owner is constitutionally en-

titled to just compensation. U.S.C.A.Const. Amend 5.

2. Eminent Domain Key 124, 131

Just compensation to a property owner for the property or

estate taken by the Government in the exercise of its power of

eminent domain is generally measured by the fair and reason-

able market value of the property or interest taken, as of the

date of the taking.

3. Eminent Domain Key 136

Where the Government condemns only part of a single hold-

ing, just compensation is to be measured by the difference be-

— * on

tween the fair and reasonable market value of the entire owner-

ship immediately before the taking and the fair and reasonable

market value of the portion not taken immediately after the

taking.

4. Eminent Domain Key 138

In cases of partial takings, it is incorrect to think of “severance

damage” as a separate and distinct item of just compensation

apart from the difference between the market value of the entire

tract immediately before the taking and the market value of the

remainder immediately after the taking.

5. Eminent Domain Key 219

In the case of a partial taking, if the issue of just compensa-

tion is submitted to the jury in terms of the difference between

the fair and reasonable market value of the entire tract imme-

diately before the taking and the fair and reasonable market

value of the portion not taken immediately after the taking,

there is no occasion for lawyers or court to talk about “severance

damage” as such and, indeed, it may be confusing to do so.

6. Eminent Domain Key 131, 136

A landowner whose property is condemned in whole or in

part is entitled to the full and perfect equivalent in money of

the property or estate taken and this equivalent is measured by

the concept of fair and reasonable market value.

7. Eminent Domain Key 131

The “fair and reasonable market value” of a tract of land,

for purpose of determining just compensation to condemnee, is

that price which a reasonable seller who desires to sell but is

not required to sell would demand for the property and the price

ss on

which a reasonable buyer who desires but is not required to buy

would pay for the same, assuming a reasonable time for nego-

tiations and explorations of alternatives.

8. Eminent Domain Key 134

A landowner is entitled to have the market value of his prop-

erty determined by reference to the highest and best use for

which it is available and for which it is plainly adapted.

9. Eminent Domain Key 131

In a condemnation proceeding, landowner is entitled to have

the fact finder take into consideration all factors of value that

would affect the market value of the property; however, land-

owner is not entitled to have all factors affecting the value of

his property added together and the total taken as the reasonable

market value of his land.

10. Eminent Domain Key 133

Though improvements on a farm are an element or factor of

value that must be considered in determining what the farm is

worth on the market, for purpose of determining just compensa-

tion in a condemnation proceeding, one does not value the land

as one factor and the improvements as another factor and then

add the two values to determine market value; the value of the

improved property may be greater than, equal to, or even less

than the property in its unimproved state.

11. Eminent Domain Key 134

In the case of land that is underlaid with marketable minerals,

including plastic clay, the existence of those minerals is a factor

of value to be considered in determining market value of the

property, for eminent domain purposes; however, the landowner

mae pee

is not entitled to have the surface value of the land and the

value of the underlying minerals aggregated to determine market

value and the value of the mineral deposit is to be considered

only to the extent to which it enters into and affects the overall

market value of the property.

12. Eminent Domain Key 134

For purpose of determining just compensation for land that is

underlaid with marketable minerals, it is not generally permis-

sible to determine the value of a mineral deposit by estimating

the number of tons in place and then multiplying the tonnage by

a unit price per ton.

13. Eminent Domain Key 95, 107

A landowner is not entitled, at least within the framework of

a condemnation suit, to be compensated for such consequential

damages as loss of business, relocation expenses and the like.

14. Eminent Domain Key 96

Where consequential damages to landowner, including loss of

clay and cost of restructuring its operation of the 48.10 acres

that were left to it after taking did not result from the taking

but from the landowner’s decision to continue to mine clay from

the remaining tract and to do it in a certain way, damages were

simply not compensable in condemnation proceeding and evi-

dence of them should have been entirely excluded.

15. Eminent Domain Key 136

In proceeding to determine just compensation for partial tak-

ing of 140-acre tract upon which landowner operated plant for

manufacture of fire brick and other refractory items, district

court committed serious error when it permitted an aggregation

= mr

of the estimated surface value of the 140 acres immediately prior

to the taking and the landowner’s estimated value of the clay

underlying 20 of the 48.10 acres that were not taken, and in ig-

noring completely the surface value of the remaining 48.10 acres

immediately after the taking.

16. Evidence Key 555

In proceeding to determine just compensation for partial tak-

ing of 140-acre tract, that was partially underlaid by soft clay

deposit, trial court erred when it permitted the landowner’s

managerial personnel to make estimates of tonnage of clay in

the ground and to multiply that tonnage by a fixed unit price;

such approach was simply too speculative to be permissible.

17. Eminent Domain Key 202(1)

In proceeding to determine just compensation for partial tak-

ing of 140-acre tract a portion of which was underlaid with

deposit of soft plastic clay that the landowner used in its manu-

facturing process, landowner was entitled to show that the de-

posit of clay could be mined more efficiently if the 91.9 acres

that the Government took were available for utilization in con-

nection with the mining operation; such evidence might well lead

the jury permissibly to infer that, before the taking, a reason-

able seller would ask more and a reasonable buyer would pay

more on account of the clay deposit.

18. Eminent Domain Key 263

Though there was substantial competent evidence to justify

jury in awarding landowner substantially more than the amounts

testified to by the Government’s value witnesses and though, had

the case been submitted on admissible evidence and on adequate

and proper instructions, award would probably have been af-

sesins MAD cai

firmed without difficulty, where district judge fell into plain and

fundamental error in connection with the evidence and in con-

nection with instructions and where it was impossible to deter-

mine extent to which jury considered incompetent evidence or

accepted an improper method of valuation in arriving at award

that was approximately eight times what the Government was

willing to pay, new trial was necessary whether or not the

Government'’s trial counse] made timely objections to the errors.

19. Eminent Domain Key 122

Though a landowner whose property is taken in connection

with an acquisition by the Government involving the expendi-

ture of millions of dollars of public funds is entitled to just

compensation, the landowner is not entitled to be enriched, nor

is he entitled to be paid for items of damage that are not legally

compensable.

20. Eminent Domain Key 221, 222(1)

In trying a condemnation action, federal district judge has

an obligation to see to it that the landowner’s claim is submitted

to the jury on competent evidence and that the jury has proper

legal guidelines for decision.

se

Maryann Walsh, Atty., Dept. of Justice, Washington, D.C.,

for appellant; James W. Moorman, Asst. Atty. Gen., Carl Strass,

Attys., Dept. of Justice, Washington, D. C., on brief.

Jerome W. Seigfreid, Edwards, Seigfreid, Runge & Leonatti,

Mexico, Mo., for appellees; Louis J. Leonatti, Mexico, Mo., on

brief.

Before ROSS, Circuit Judge, MARKEY, Chief Judge,* and

HENLEY, Circuit Judge.

HENLEY, Circuit Judge.

This is an appeal by the government in an eminent domain

case from a judgment entered on a jury verdict returned in the

United States District Court for the Eastern District of Missouri.

The jury found that the owner of the property involved in the

case was entitled to just compensation in the sum of $245,-

966.00. The government had contended that the amount of

just compensation that should be paid ranged between $26,-

600.00 and $31,200.00. A post-trial motion of the govern-

ment for a new trial, or, alternatively, for a large remittitur

having been denied, this appeal was timely filed.

For reversal, the government contends that the former owner

of the property, C-E Refractories, a division of Combustion

Engineering, Inc., hereinafter called “CE” or the “landowner,”

was permitted by the district court to pursue an improper route

in establishing the amount of compensation that it should re-

ceive for the taking, and that improper evidence of value was

admitted. CE denies that the government’s position has merit,

and in addition it asserts that counsel for the government failed

to make and preserve a proper record in the district court, and,

* The Honorable Howard T. Markey, Chief Judge, United States

Court of Customs and Patent Appeals, sitting by designation.

— po

further, that in any event the error or errors, if any, of the dis-

trict court were harmless and do not call for reversal.

The land directly involved in the case consists of 91.90 acres

of land in Monroe County in the northern part of the Eastern

District of Missouri. It was originally part of a larger tract of

140 acres of land that CE acquired when it merged with Walsh

Refractories Corporation, a manufacturer of firebrick and other

refractory products.’ Prior to CE’s acquisition the land had

been owned by Walsh Refractories which had acquired it from

a Mr. Lemley.

Walsh Refractories operated and CE still operates a plant

for the manufacture of firebrick and other refractory items at

Vandalia, Missouri, which is about forty miles from the prop-

erty with which we are concerned. The property is located

between Hannibal and Paris, Missouri, and apparently fronts

on a county road in Monroe County.

A portion of the property is underlaid with a deposit of soft

plastic clay which CE uses in its manufacturing process to

beneficiate other clays that it uses. The clay deposit is located

under twenty acres of the property. It appears to be undisputed

that there is no clay under the remaining portions of the land.

The exploiting of a clay deposit involves strip mining in the

course of which overburden has to be removed so as to expose

the deposit; the over-all operation apparently produces pol-

lutants of one kind or another including pollutants that can

cause undesirable or dangerous impurities in streams.

In recent years strip miners have been substantially affected

in their operations by federal and state legislation designed to

protect and improve the natural environment, and strip miners

have had to deal with federal and state regulatory agencies,

1 Refractory materials used to line industrial kilns and furnaces

consist of heat resistant clays and perhaps other ceramic materials.

— A-10 —

one of which is the federal Environmental Protection Agency

(EPA) and another of which is the Missouri Clean Water Com-

mission. Missouri strip miners are now required to avoid stream

pollution and to replace overburden that has been removed

from mined areas.

On December 16, 1976 the government filed a complaint

in condemnation and a declaration of taking whereby the gov-

ernment condemned a portion of the original 140 acre tract

for use in connection with the Clarence Cannon Dam & Reser-

voir Project on the Salt River. The government condemned a

little more than 87 acres of the land in fee, and it also imposed

permanent flowage easements with respect to two ravines; those

easements affected 4.9 acres of land. At the same time the

government deposited in the registry of the district court the

sum of $22,750.00 as estimated just compensation for the over-

all taking. On January 31, 1977 the district court signed an

order authorizing the government, represented by the Army

Corps of Engineers, to take possession of the property that had

been condemned.

In February, 1977 the landowner filed an answer. In that

pleading CE did not deny that the government had a right

to take and condemn the lands and interests described in the

complaint and declaration of taking, but it denied that the

$22,750.00 deposited in the registry of the district court was

just compensation for the taking. CE prayed that just com-

pensation be determined by reference to the highest and best

use of the property, and CE demanded trial by jury.

While the land condemned, including the easements,

amounted to 91.90 acres of land which left CE the owner of

48.10 acres, we find it convenient to refer to the property actu-

ally taken by the government as the “90 acre” tract and to the

portion remaining to CE as the “50 acre” tract.

While it is undisputed that the clay deposit involved in the

case is located on the 50 acre tract and that none of it is

— A-11 —

located on the 90 acre tract, nevertheless the landowner took

the position in the district court that it had used the entire

140 acre tract in connection with its extraction of the clay

from the 50 acre tract.2, And CE contended that its inability

to make use of the 90 acre tract substantially diminished the

value of the remaining 50 acres, and that for that reason CE

was entitled to have “severance damage” included in its award

of just compensation.

Although CE might have abandoned its clay mining oper-

ation following the taking and might have contended in the

condemnation proceedings that the taking of the 90 acre tract

rendered continued mining on the 50 acre tract unfeasible, CE

determined to continue the operation, and a few weeks prior

to the trial it formed a plan whereby the clay deposit could

be mined without utilizing the 90 acre tract. The plan was an

expensive one. It called for extensive and costly improvements

on the 50 acre tract and it involved the loss of more than 44,-

000 tons of clay.

At the trial CE undertook to recover for the loss of the

clay that its new plan entailed and also sought to recover the

cost of the improvements that were called for by the plan.

The government contended that the taking of the 90 acres

had not significantly damaged the remaining 50 acres, and that

the plan developed by CE for continued mining of the clay

was unnecessary and unreasonably expensive. The govern-

ment also contended that the items in question should not be

included in the jury’s award of just compensation and that evi-

dence as to them should not be admitted.

2 It appears that overburden taken from the clay deposit was

pushed by a bulldozer onto the 90 acre tract and was dumped prin-

cipally into one or perhaps both of the ravines that have been men-

tioned. And CE claimed that there were additional advantages to

owning the 90 acre tract as an adjunct to the 50 acre tract and par-

ticularly as an adjunct to the 20 acre tract where the clay was

located.

— A-12 —

In October, 1977 the case was the subject of a four day

jury trial. CE called as witnesses Stig E. Scharthi, its plant

superintendent at Vandalia; L. Verle Porter, its mining super-

intendent; Dr. Walter D. Keller of Columbia, Missouri, an emi-

nent retired professor of geology; and Mr. Robert Turner who

prior to his retirement had been a mining superintendent for

A. P. Green Refractories which, according to Mr. Turner, is

the largest manufacturer of refractory products in the world.

CE also called as expert “value witnesses” four men qualified

in general as real estate appraisers, but none of whom was a

geologist and none of whom had any experience in making

estimates of the value of clay deposits.

Prior to putting its value witnesses on the stand, counsel for

CE had its earlier witnesses describe the property and describe

the clay, its special qualities and its alleged scarcity which, ac-

cording to Mr. Scharthi, amounted to uniqueness.

Mr. Scharthi and Mr. Porter were also permitted to testify

as to the quantities of clay involved and to its per ton value,

to describe the plan of CE and the cost thereof, and to describe

how the plan would affect the mining of the clay deposit. Those

witnesses agreed that as of the date of taking there were ap-

proximately 327,000 tons of clay in the ground of which 44,-

000 tons would be lost as a result of the plan being put into

operation.* Mr. Scharthi testified that the value of the clay in

the ground was $1.95 per ton which included an extra ten

cents for the alleged “uniqueness” of the material. Scharthi

came up with a final figure of $540,097.21, including the

value of the 90 acre tract which he considered to be about

$1,000.00 per acre.

% As above stated, the date of taking disclsed by the record was

December 16, 1976, and the plan in question was not devised until

shortly before the commencement of the trial on October 13, 1977.

Thus, it may be doubted that the plan had been implemented to any

substantial extent during the trial period.

— A-13 —

The testimony of Porter was essentially the same as that of

Scharthi; however, his valuation of the clay in place was $1.85

per ton. But, his final figure was somewhat higher than Schar-

thi’s figure.

Those figures were turned over to the appraiser witnesses

and were accepted by them in forming and expressing their

ultimate opinions as to the amount of compensation CE was

entitled to receive on account of the partial taking.

The first value witness called by the landowner was Wayne C.

Miller. We need to consider his method of valuation in some

detail because it incorporated CF’s theory of just compensa-

tion in the case and because the other value witnesses called

by CE used essentially the same method. Mr. Miller first

valued the surface of the entire 140 acres of land immediately

before the taking without regard to the minerals, and he placed

that value at $1,000.00 per acre or $140,000.00. That valua-

tion was based on a number of sales that he considered to be

“comparable sales.” He next accepted the tonnage figures on

the clay that had been given him by Scharthi and Porter, and

he accepted Porter’s value of $1.85 per ton; he also accepted

the figures that had been given him with respect to the costs

of CE’s reconstruction of its operation. He added the sum of

those figures to the $140,000.00 surface value figures and

came out with a total “before taking” figure, including “sev-

erance damage,” of $746,092.71. In coming to an “after tak-

ing” figure, Mr. Miller took no account of the surface value

of the remaining 50 acres of land. He established the “after

taking” value solely by reference to the alleged value of the

clay in the ground, less the value of the 44,000 tons that would

be lost as a result of CE’s plan. His difference between the

“before taking” and “after taking” values in question was

$546,929.56. ©

There was very little difference between Miller’s final figure,

and the final figures reached by the three other value witnesses.

— A-14—

Those figures were: Chester Young, $547,731.56; Murray Col-

bert, $547,731.56; and Darryl Ridgely, $540,097.21. (Mr.

Ridgely had given the 140 acres a surface value of $925.00

per acre rather than $1,000.00 per acre.)

At the conclusion of the testimony of Mr. Miller, counsel

for the government advised the district court and opposing

counsel in chambers that he was going to move to strike the

testimony of all of the value witnesses of the landowner on

the ground that they were taking an improper valuation ap-

proach, and that their testimony was incompetent. However,

counsel stated that he was uncertain as to whether to move to

strike the testimony of the witnesses one by one or to withhold

his motion until all of them had testified. The trial judge stated

that he preferred that government counsel wait until all of the

value witnesses of CE had testified and then make his motion,

and that in the meantime the government’s rights would be

preserved.

After the completion of the testimony of Mr. Ridgely CE

rested, and the government promptly moved or renewed its

motion to strike applying it this time to all of the landowner’s

value witnesses. The trial court overruled the motion, and the

government proceeded to put on its case.

Government first called Dr. William J. Lang, a distinguished

expert in the field of geology, including clays in general and

fire clays in particular. Dr. Lang testified that there is no

shortage of fireclay in the United States or in North Missouri,

that there is no real difference between the clay on the 50

acre tract and other clays in the area, and that qualities of

given clays can be changed rather easily. He did not consider

that the taking of the 90 acre tract affected the clay on the 50

acre tract, and he thought that the plan of operation on that

tract devised by CE was unnecessary and unreasonably ex-

pensive.

— A-15 —

Dr. Lang also testified that in valuing a clay deposit you

do not take an estimated tonnage in the ground and multiply

it by a unit price per ton. He stated that the proper approach

was to multiply an estimated tonnage in the ground by a

royalty that the owner of the clay might expect to receive over

the life of the deposit, and then reduce the expectation to pres-

ent value. He was of the view that a reasonable royalty on the

clay involved in the case was from twenty to twenty-five cents

per ton.

Proceeding, Dr. Lang expressed the opinion that if there

were some 327,000 tons of clay in the ground as of the date of

taking, the maximum amount of tonnage that could be profit-

ably extracted per year was 12,000 tons, and that the extraction

process would cover a little more than 27 years. He calcu-

lated that the annual royalty received would be $3,000.00,

and that using a 10% rate of interest the present value of the

royalty would be $27,763.00. Asked to assume a royalty of

seventy-five cents a ton, he expressed the opinion that the

present value of the expectable royalty payments would be

$83,289.00. Those figures, of course, are very much lower

than the figures resulting from a multiplication of tons in place

by a unit value of each ton.

Dr. Lang’s views were communicated to the value witnesses

that the government expected to call, and they accepted those

views just as the value witnesses called by CE had accepted

the opinions and figures of Mr. Scharthi and Mr. Porter.

The government called two value witnesses, Tom McReyn-

olds and Murray Kniffen.

Mr. McReynolds expressed the opinion that the difference

between the value of the 140 acre tract immediately before

the taking and the value of the 50 acre tract immediately after

the taking was $26,600.00. Mr. Kniffen was slightly more lib-

eral and expressed an opinion that the difference between the

o> frl§

before taking and after taking values was $31,200.00 Mc-

Reynolds thought that the surface value of the land was $300.00

per acre; Kniffen thought that it was $350.00 per acre.

Neither of those two witnesses undertook to give the clay

on the 50 acre tract any dollars and cents value. They did

not do so because they had been advised directly or indirectly

by Dr. Lang that the value of the clay had not been impaired

by the taking of the 50 acre tract. What they did in this con-

nection was to testify that the surface value of the original 140

acres was enhanced to the extent of “x” percent by the pres-

ence of the clay, and that the value of the remaining 50 acres

was enhanced by the same “x” percent by the presence of the

clay.

After the conclusion of the government’s case the landowner

put on some rebuttal testimony and then rested. At this stage

counsel for the government moved for an instructed verdict

within the range of the testimony of its witnesses. That motion

was denied.

Both sides submitted requests for instructions which did not

differ materially from the instructions that the trial judge ac-

tually gave, and there were no objections to the instructions

_ that were given.

Having stated the case in some detail, it now becomes nec-

essary to decide it.

I

[1] Where the government in the exercise of its power of

eminent domain condemns for public use the property of a

person, including a corporation, the fifth amendment to the

Constitution provides that the property owner is entitled to

just compensation for the property or estate taken.

— A-17 —

[2] Just compensation is measured generally by the fair and

reasonable market value of the property or interest taken, as

of the date of taking, which in this instance is December 16,

1976.

Down through the years a number of principles to be ap-

plied in the determination of just compensation have become

established; those principles have generally become pretty well

understood by judges, lawyers and real estate appraisers. And

ordinarily the application of those principles creates no prob-

lem in cases of taking of entire ownerships. However, more

difficulty seems to be encountered in cases in which the gov-

ernment has taken only part of a single holding; while the

solution to the problem is simple, it seems to be frequently

missed. And, the difficulty seems to arise out of the concept

of “severance damage.”

[3] Where the government condemns only part of a single

holding, just compensation is to be measured by the difference

between the fair and reasonable market value of the entire

ownership immediately before the taking and the fair and rea-

sonable market value of the portion not taken immediately

after the taking. Where the partial taking not only deprives the

owner of the property that is actually taken but also diminishes

the value of the property remaining to the owner, this diminu-

tion is often and “somewhat loosely,” United States v. Miller,

317 U.S. 369, 376, 63 S.Ct. 276, 87 L.Ed. 336 (1943), re-

ferred to as “severance damage.”

Problems in connection with the determination of just com-

pensation in cases of partial takings have been discussed by

this court in quite a number of cases including United States v.

403.14 Acres of Land in St. Clair County, Mo., 553 F.2d 565

(8th Cir. 1977); United States v. 1162.65 Acres of Land in

Henry and St. Clair Counties, Mo., 498 F.2d 1298 (8th Cir.

1974); United States v. 967,905 Acres of Land in Cook, et al.

— A-18 —

Counties, Minn., 447 F.2d 764 (8th Cir. 1971), cert. denied,

405 US. 974, 92 S.Ct. 1193, 31 L.Ed.2d 248 (1972); United

States v. Birnbach, 400 F.2d 378 (8th Cir. 1968).

[4,5] It is incorrect to think of “severance damage” as a

separate and distinct item of just compensation apart from the

difference between the market value of the entire tract immedi-

ately before the taking and the market value of the remainder

immediately after the taking. In the case of a partial taking,

if the “before and after” measure of compensation is properly

submitted to the jury, there is no occasion for the lawyers or

the trial court to talk about “severance damage” as such, and

indeed it may be confusing to do so. United States v. 403.14

Acres of Land in St. Clair County, Mo., supra, 553 F.2d at

567, n.2. The matter is taken care of automatically in the “be-

fore and after” submission.

[6] It is thoroughly established by the cases heretofore cited,

including United States v. Miller, supra, one of the leading

cases, that a landowner whose property is condemned in whole

or in part is entitled to the full and perfect equivalent in money

of the property or estate taken, which equivalent is, as indi-

cated, measured by the concept of “fair and reasonable market

value.”

[7] The fair and reasonable market value of a tract of land

is that price which a reasonable seller who desires to sell but

is not required to sell would demand for the property and the

price which a reasonable buyer who desired to buy but was

not required to buy would pay for the same, assuming a reason-

able time for negotiations and explorations of alternatives. That

concept of market value was recognized by the trial court and

by counsel on both sides in this case.

[8] The landowner is entitled to have the market value of

his property determined by reference to the highest and best

use for which it is available and for which it is plainly adapted,

— A-19 —

and here the jury was justified in finding that the highest and

best use of this property both before and after the taking was

the mining of clay from the deposit underlying the 20 acres

that have been mentioned.

[9] The landowner is also entitled to have the fact finder

take into consideration all factors of value that would affect

the market value of the property. From the landowner’s stand-

point, a factor of value would be anything that would induce

a reasonable seller to demand more for the property and would

induce a reasonable buyer to pay more on account of the ex-

istence of the value factor.

[10] It must be kept in mind, however, that the landowner

is not entitled to have all factors affecting the value of his

property added together and to have the total of the additions

taken as the reasonable market value of his land. For example,

improvements on a farm are an element or factor of value that

must be considered in determining what the farm is worth on

the market. But, it is firmly settled that one does not value

the farmland as one factor and then value the improvements

as another factor and then add the two values to determine

market value. That is true because the value of the improved

property may be greater than, equal to, or even less than the

property in its unimproved state.

[11, 12] In the case of land that is underlaid with market-

able minerals, including plastic clay, the existence of those

minerals is a factor of value to be considered in determining

the market value of the property, but the landowner is not

entitled to have the surface value of the land and the value of

underlying minerals aggregated to determine market value. The

value of the mineral deposit is to be considered only to the

extent to which it goes into and affects the over-ali market

value of the property. And it is generally not permissible to

determine the value of a mineral deposit by estimating the

— A-20 —

number of tons in place and then multiplying the tonnage by a

unit price per ton. See United States v. 599.86 Acres of Land

in Johnson and Logan Counties, Ark., 240 F.Supp. 563, 572-73

(W.D. Ark. 1965), aff'd sub nom. Mills v. United States, 363

F.2d 78 (8th Cir. 1966), and cases cited in both opinions.‘

See also United States v. 620 Acres of Land in Marion County,

Ark., 101 F.Supp 686 (W.D. Ark. 1952),° and the compre-

hensive set of instructions that were given by the late District

Judge Harry J. Lemley in United States v. 2,350.2 Acres of

Land in Pike County, Ark., 10 F.R.D. 293, 309-20 (W.D.

Ark. ).°®

[13] The taking of a tract of land or part of a tract by the

government may not only deprive the landowner of his prop-

erty but may also inflict upon him incidental or consequential

damages. While the rule may appear unjust, it is well settled

that the landowner is not entitled, at least within the frame-

work of a condemnation suit, to be compensated for such con-

sequential damages as loss of business, relocation expenses,

and the like. See, e.g., Kimball Laundry Co. v. United States,

338 US. 1, 11-12, 69 S.Ct. 1434 34 L.éd. 1765 (1949);

United States v. Petty Motor Co., 327 U.S. 372, 377-78, 66

S.Ct. 596, 90 L.Ed. 729 (1946); United States ex rel. Ten-

nessee Valley Authority v. Powelson, 319 U.S. 266, 281-86,

63 S.Ct. 1047, 87 L.Ed. 1390 (1943); United States v. 967,-

905 Acres of Land in Cook, et al. Counties, Minn., supra, 447

F.2d at 768-69.

* The opinion of the district court was written by then Chief,

now Senior, District Judge John E. Miller of Fort Smith, Arkansas,

who has had a great deal of experience in eminent domain litigation.

The opinion of this court was written by Circuit Judge (now Mr.

Justice) Blackmun. Those opinions contain good general reviews of

the over-ali law of just compensation in eminent domain cases.

* That opinion was also written by Judge Miller.

6 The published opinion bears no date. However, the writer is

reliably advised that the opinion was filed about 1950.

— A-21 —

Ul

When the evidence in this case is viewed, as it must be, in

the light most favorable to CE, we think that there was sub-

stantial competent evidence to justify the jury in making a be-

fore and after market value award substantially in excess of

the amounts testified to by the government’s value witnesses.

And if the case had been submitted to the jury on admissible

evidence and on adequate and proper instructions, including

cautionary instructions as to what the jury could and could

not consider in arriving at its verdict, we would in all proba-

bility affirm the judgment of the district court without difficulty.

Unfortunately, from our consideration of the over-all record

in the case, we are forced to the conclusion that the trial judge

fell into plain and fundamental error in connection with the

evidence and in connection with instructions, and that a new

trial must be had regardless of whether the government’s trial

counsel made timely and proper objections to the evidence

introduced by CE and regardless of whether he requested

proper instructions, including cautionary instructions, and re-

gardless of the fact that he did not object to the instructions

ultimately given by the trial court. In other words, we apply

to this case the “plain error” rule that is available in excep-

tional cases in which a trial court has committed serious error

that seriously affected the rights of the losing party. See Mor-

row v. Greyhound Lines, Inc., 541 F.2d 713, 724 (8th Cir.

1976); University City, Mo. v. Home Fire & Marine Ins. Co.,

114 F.2d 288, 294-95 (8th Cir. 1940). See also the qualifying

language that appears in 28 U.S.C. § 2111, Fed.R.Civ.P. 61,

and Fed.R.Evid. 103(d), which deal with “harmless error.”

Reference is made also to the discussion appearing in 11 Wright

& Miller, Federal Practice & Procedure, §§ 2882 and 2883.7

7 The question of whether the government’s trial counsel made a

proper record in the course of the trial is sharply disputed. We find

it unnecessary to decide the question. We do think that in the mat-

ter of objections to evidence and in the matter of instructions gov-

ernment counsel should perhaps have been more specific and more

insistent in making the government’s positions clear to the trial court.

— A-22 —

[14] The initial error committed was in permitting CE to

introduce evidence going to establish its consequential dam-

ages, including loss of clay and the cost of restructuring its

operation on the 50 acre tract. Those damages did not result

from the taking but from CE’s decision to continue to mine

clay from the 50 acre tract and to do it in a certain way. Those

damages were simply not compensable in this case, and evi-

dence of them should have been excluded totally.

[15] We think that additional serious error was committed

when the district court permitted an aggregation of the esti-

mated surface value of the 140 acres immediately prior to the

taking and CE’s estimated value of the clay underlying 20 of

the 50 acres of land that were not taken, and in ignoring com-

pletely the surface value of the remaining 50 acres of land

immediately after the taking.

[16] We think also that the trial court erred when it per-

mitted CE’s managerial personnel, Mr. Scharthi and Mr. Por-

ter, to make estimates of tonnage of clay in the ground and

then multiply that tonnage by a fixed unit price. Such an ap-

proach is simply too speculative to be permissible. See Mr.

Justice Blackmun’s discussion in Mills v. United States, supra,

363 F.2d at 80-81; see also the other cases involving mineral

deposits that have been cited.

[17] This does not mean that CE was not entitled to prove

that its property was underlaid with clay, that the clay was

valuable and that it enhanced the over-all value of the prop-

erty. And CE was entitled to show that the deposit of clay

could be mined more efficiently if the 90 acres that the govern-

ment took were available for utilization in connection with the

mining operation. Such evidence might weli lead the jury

permissibly to infer that before the taking a reasonable seller

would ask more for the over-all property due to the clay de-

posit, and that a reasonable buyer would pay more on account

— A-23 —

of the deposit; and a jury might permissibly infer that after

the taking of the 90 acres the 50 remaining acres, including

the 20 acres of clay, were worth less standing alone than they

were worth as part of the larger original tract. But, we feel

that the district court simply went too far in permitting the

landowner to establish in the manner that has been described

that the clay in the ground was worth over $600,000.00 and

then permitting that figure to be added to a $1,000.00 per

acre surface value of the property.

In any condemnation case it is quite likely that some ques-

tionable evidence will get into the record and that some items

of evidence are admissible for limited purposes only. The prob-

lem frequently, if not generally, can be taken care of by cau-

tionary instructions given at the time at which the evidence

comes in or in the course of the final instructions given to the

jury by the trial court, or by initial cautionary instructions

followed by similar instructions in the court’s final charge to

the jury.

Unfortunately, the body of evidence in this case that we

deem to have been inadmissible, or only conditionally admis-

sible, was submitted without precautionary or limiting instruc-

tions, to a lay jury, the members of which could hardly be

expected to be familiar with the technicalities of the law of

eminent domain or to have knowledge of the proper method

of determining just compensation in the case of a partial taking

of lands, part of which were underlaid by a valuable clay de-

posit which was located on the part of the land that the gov-

ernment did not take.

[18] To the credit of the inherent intelligence and common

sense of the jurors, the jury did not accept at face value the

testimony of either side. It awarded somewhat less than half

of the amount sought by the landowner, but it awarded about

eight times what the government was willing to pay. It is im-

— so

possible for us to tell, however, the extent to which the jury

considered incompetent evidence or the extent to which it ac-

cepted the method of valuation put forward by CE.

This is not a case in which an award of just compensation

has been made by a district judge after a bench trial with the

judge making adequate findings of fact and drawing adequate

conclusions of law, nor is it a case tried before a commission

as authorized by Fed.R.Civ.P. 71A(h) with the commission

preparing a report complying with the requirements of United

States v. Merz, 376 U.S. 192, 84 S.Ct. 639, 11 L.Ed.2d 629

(1964). In either of those situations this court would probably

be able to tell the route that the fact finder followed in reach-

ing an ultimate determination as to what would constitute just

compensation for the taking. In this case it is not possible to

follow the jury’s line of reasoning or to know what evidence

it accepted and what evidence it rejected, or what weight it

gave to particular items of evidence.

It is true that as the trial proceeded counsel for the govern-

ment did not request that limiting or cautionary instructions

be given; it is also true that the instructions requested by him

did not differ materially from those submitted on behalf of

CE, and it is finally true that government counsel did not ob-

ject to the instructions ultimately given by the district court

and did not request any instructions particularly geared to the

type of taking involved in this case. That, however, does not

solve our problem as far as instructions are concerned.

The instructions that the district court gave to the jury were

abstractly correct and would have been quite adequate in an

uncomplicated case involving a partial taking of, say, agri-

cultural land and where both sides had proceeded in the light

of a correct understanding of the law. But, the instructions

given in this case were inadequate in view of the nature of the

case and the valuation problems that have been detailed.

a4 ee

— OS —

[19] A case of this kind involves more than a mere clash of

private interests in which a trial judge may feel himself free to

permit the course of litigation to be charted by the opposing

lawyers. Land acquisitions in connection with projects like

the Cannon Dam involve the expenditure of millions of dollars

of public funds. A landowner whose property is taken in con-

nection with such an acquisition is entitled to just compensa-

tion, but he is not entitled to be enriched, and he is not en-

titled to be paid for items of damage that are not legally

compensable.

[20] In trying a case of this kind, a federal district judge is

under an independent obligation, at least to a reasonable ex-

tent, to see to it that the landowner’s claim is submitted to the

jury on competent evidence, and with the jury being given

proper legal guidelines for decision.

That course was not followed in this case, and the judgment

of the district court is reversed and the cause remanded for a

new trial.

— A-26 —

APPENDIX “B”

United States Court of Appeals

for the Eighth Circuit

77-1944 September Term, 1978

United States of America, \ Appeal from the

ppellant, | United States Dis-

_ trict Court for the

91.90 Acres of Land, etc., et al., —— et

Missouri.

Appellee. }

Petition of appellees for rehearing filed in this cause having

been considered, it is now here ordered by this Court that the

same be, and it is hereby, denied.

December 11, 1978

a yD ate

APPENDIX “C”

United States Court of Appeals

for the Eighth Circuit

77-1944 September Term, 1978

United States of America, mye 1a ppeal from the

ppeaem, United States Dis-

vee | trict Court for the

Eastern District of

91.90 Acres of Land, etc., et al., were =

Appellees. |

Petition of appellees for rehearing en banc filed in this ap-

peal having been considered, it is now here ordered by this Court

that the same be, and it is hereby, denied.

December 6, 1978