Appendix — Board of Commissioners of the Port of New Orleans v. United States

>? ikea aR tals Wr See aE

APPENDIX A

| _ IN THE |

United States Court of Appeals

FOR THE-FIFTH CIRCUIT ~

No. 18837

—U NITED STATES OF AMERICA,

- Appellant,

versus

_MICHOUD INDUSTRIAL FACILITIES and BOARD

~OF COMMISSIONERS OF THE PORT OF

NEW ORLEANS, Ef AL, -

Appellees.

“(AND REVERSE, TITLE:. —

Appeals from the United state s District Court for the

Eastern Disific t of Louisiana.

‘«(Migust 22, 1963.)

oO

Before TUTTLE, C hief jules. RIVES and BROWN,

Circuit Judges.

TUTTLE, Chief Judge: There.is here in issue: the‘

correctness of the determination by the trial court, based

upon the awards made by commissioners, of the values of

three different types of interests resulting from. the con-

demnation by the United States of the 1,000.22-aere tract.

- of land,.and 22 buildings comprising the Michoud Indus- .

trial Facilities in New Orleans, Louisiana. The three

Fete ee eR tO IVER AE

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‘ine giving rise to the edd for three types of valu-

ation, occurred as follows:

‘Effective May 1, 41951, the Government took pos-

session of all but one building. (the Laclede Steel Com-

pany: Building) and all of the land comprising the Mi-.

choud facilities. It took possession initially under a tak- ~

ing of’a leasehold for the entire property.to December. 23,

1952, extendible to June 30, 1975. .This required valu-

atian of this yight of possession from May 1, 1951 to.“

December 23, 1952. By Amendment, filed in February,, ~

1952, the Government took the entire leasehold ‘estates

of the tenants, for ‘whatever period they were to- run.

This required a valuation of the several leaseholds from

‘the May 1, 1951 date of taking possession. Finally, on:

‘December 22, 1952, the Government filed an Amendment.

taking the fee of the property. This, of course. required.

a valuation of the. fee' as of December 23, 1952.

A brief iaitery of this property “will aid in a discus-

sion of the appeal. . 7

‘Yhe property, consisting of 1,000°22 acres ‘of land

and improvements, while within the city limits of the

City of New Orleans; abutting on the United States High-

wi 90 from New Orleans to Mobile, is approximately

miles east from downtown New. Orleans. Much un-

improved and tundeveloped land lay. between the built-up

city and this tract. It is bounded by two canals, the Intra-

‘coastal Canal on the south and the Michoud Canal on the

east. It is served by rai] connections, with the main line

of the Louisville and Nashville Railroad at the extreme

I. By using the term “fee” we do not use it in a technical sense,

but we use it as that interest,owned by the Dock Board separate from

the, interest of the lessees, and separate from the interest of the United

Stztes Government, which heid a vendor's lien on the entire property

. arising trom its previous sale to the Dock wae: 4

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northeast side of the property. The tract was originally.

acquired by the United States in 1942.0n behalf of the -

_ Deferise Plant Corporation for the construction of a ship-

' yard. At that. time ‘the land was marshy and subject to ©

tidal overflow, but it was filled and graded and drainage

was provided. The industrial plant, which had cost the

United States approximately $17,721,000, was completed

in 1944. During the period of “construction the purpose.

of the plant was changed from, ship building to the fabri-

cation of aircraft. This effort was equally abortive and

‘no aircraft were built, so that by the end of the Second

World War the plant stood as a monument to the inef-

. ficiencies of waging a war which requires tremendous

industrial construction before production-of war essentials

can be undertaken.

eas At -the ae of the.War,. the property was declared

surplus. Extehsive efforts were made to dispose of it

-without success. In November, 1947, it was sold, together

with all machinery, equipment, tools, furniture, fixtures,

and other personal property located thereon, tor the Board —

of Commissioners of the Port of New Orleans, which, for

convenience, we vefer to herein-as the “Dock Board.”

The contract of sale called for the payment of $9,506,-

541, with no cash down, and the total consideration to

_ be paid only from rents and aa its which the Dock Board

might receive for fifteen years. The property;«onsisted

of 22 buildings and 16 other .installations: inchiding some’

trackage, sewerage facilities. airplane runways, docks,

parking lots, etc.. The buildings themselves covered ap- °

proximately 50 acres. Much the Jarzest and most .im- :

portant facility was a main manufacturing building more

than ‘a quarter of a mi’e ix Jenzth, with ceiling heights

from 48 to 55 feet. Other important buildings were a

.

ad’.

two-story. administration building, 837 - feet long, and a

¢*

tme-atery engineering building, 1157 feet long. FR

Because of the bearing on the outcome of the appeal -

.of underlying legal questions, we eoncltide that it is not-

necessary to maké a more specific or accurate description

of the facilities and land.that were subject to valuation. .~,

These legal problems arise from the peculiar circum-

stances: (1). thatthe 1,000.22-acre tract with such a

‘tremendous complex including buildings of truly gargan-_

_.tuan size, which must be valued as a whole by determin-

ing its fair market value, does not really have any com-

parables in th® market on which expert opinions of valu-

ations can be based; (21 that the very size and nature of.

the improvements so narrowly limit the potential market

of those who might be ready, willing and able to acquire

and use the property for which it was most ideally suited

that; according to the principles announced: by this. Court

_in United States v. Benning Housing, 5°Cir., 276 F. 2d

248, the cost of reproduction, less depreciation, cannot be

used as an aid to valuation;-and (3 31 the fact that within ©

a few months of the date of taking on May ,If 1951, of

all of the unleased space, there was approximately 1,767,-

000: square: feet of space in these buildings then being _

offered to the public ‘by the Dock Board for long term

leases at rentals of approximately 20 cents per square,

foot per year and more than-700 acrés of raw land being

offered at $200 to $350 rent per annum, is so indicative

- of the lack of demand and the lack of the rental possi-

bilities of the property as to completely dominate, if not

absolutely control, the incomie factor in any ‘capitalization

formula for arriving at’ the fair matket value of the °

property as i ie 1, 1951; there’is also the fact that

- on December 23, 1952, any hypothesis dealing’ with an

assumption. Pe ther e would be a purchaser ready, will- °

ing ard able to buy fr fm a seller. ready, willing and able

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to sell, must ; include the fact that these buildings with

1,767,000. square feet of floor space would hang over the

New Orleans market for similai factor y and warehouse

- space to such a-degrée that it must also be considered. to

have a dontinating, if not an absolutely controlling, place

."

’

in determining the market value of. the’ fee as of that

date on any valuation based on capitalization of income.

‘ Finally, there is the circumstance that the lack of avail-

able space for the tenants to lease when their leasehold

interests were taken. by the May 1, 1951-condemnation

was directly attributed to the contemporaneous taking

by the Government of all of the unoecupied space in the

Michoud buildings.

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On May 1, 1951, there were 32 lessees of part of the

‘property, much-the greater, part of whom held ‘space in

the tremendous main manufacturing building, but some-

of whom had entire buildings or spaee in the office build-

ing and the engineering building. The latest of these -

leases to be executed had been signed as receritly as Janu- -

ary, 1951. One of these January leases was for 4,200 |

square feet of space in the main manufacturing building ©

for a term of nearly five years at 20 cents per foot; one

of, them was for 45,300 square feet of space in the manu-

‘ . ° . . ‘ sae ¥

facturing building for a.ierm of 10 years at 20 cents per,

square foot; another was for (400 square feet’ in what

is known as the office or administration building for. a

term of ten years at/25 cents a square foot. All of these

leases were in conformity with. a published rate schedule

of the Dock Board dated May 1, 1950, which offered

nearly 1,500,000 feet ofspace jn the main manufacturing

building at 20 cents per b it for terms of from 5 fo 25

years and offered some 40,Q00 square feet in the office

~ building at 30 cents per square foot for office, use and at

25 cents per square foot for: light manufacturing. It also

offered 60,000 square feet in the, engineering building at —

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30 cents per square foot for office space and 25 cents per

square foot for light manufacturing space.

» In the same schedule published by the Dock Board

as of May oe the rental rates for the vacant land

were $200 pér

canals nor roads, $300°per acre per year for lands adja-

cent to canals and roads, $300 per acre per year for land

adjacent to paved roads only and $350 per acre, per year

ot 15 acres that. were paved. The only acreage leases in

ect were one for two acres entered into April 15, 1950

at $350 per acre and one for one acre entered into in

January, 1951 for $300 per acre.

The main thrust of the Government’s argument here

is that there was so much building space available in the

three principal buildings owned by the Dock Board (from

- 85 to 95 per cent o¢ the tote! space according to the par-

ticular building! and so much vacant land in: the tract

offered .to the public for rent at an-average price per

square foot of a little over 20 cents per year for the build-

ing space and an average rental of $300 per year for the

land that for all valuation purposes as to the three dif-

ferent takings involved here, these rentals at which the .

‘property was being offered to the public up to January

_ ° 15, 4951, were either controlling. as a matter of law or

they were so overwhelmingly dominant. in light of the

‘then existing conditions as to. make any different finding

of valuation clearly erroneous. ApplVing the Govern-

_Ment’s contention throughout, thus giving the guoted.

prices of the property, the effect of completely controlling

the market value, with-a few ‘modifications pw ard to

meet certain specific situations.- would produce ‘a total

award for the Dock Board's inter ests of less than 3h 000,-

000. This is contrasted with-opinidn evidence by vitnesses

“for the Bock. Board of $24,500, 000 to $22 325,695, and,an

“f

r acre per year for 400 acres, neither on

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award bythe Commission of $14,322:234 for the fee —

interest as-of December 23, 1952. Likewisé the Govern-

ment’s approach would produee a nominal valuation only

for the cancellation of the leases of the tenants, based

principally on the loss to them of improvements in their

leased space, as contrasted with valuations of some $800,-

' 000 arrived. at by the tenants’-expert witnesses and an

award by, the commissioners ‘to. the tenants of $702,293.02,

representing the value of their leases above the rentals

they had agreed to pay to the Dock Board.

We have carefully read the record so far as germane

* to these principal contentions of the- parties and it is

' apparent that. in all of the opiniong as to value testified

to by the witnesses for the Dock ‘Board and the lessees,

they ignored o~ undertook to cxplain as irrelevant both

the rental rates being paid by the legsee, the fact that the

leases had been made in some instances just three months.

before the first taking and the fact that there would be

‘over 1,767,000 square feet of similar space available on

the market both as of the date of the taking of the un-

-oceupied space from May 1 to December 23 from the Dock

Board and as of December 23, 1952, the date as of which

‘the value of the fee in the Dock Roard was to be arrived

at. Of course, also, the witnesses discarded as irrelevant

to the, valuation of May 1, 1951, the date on which.the

lessees’ interests" were to be valued, the fact that the Lock

. Board had up to January 1951 been offering this tre-

mendous urused space for rent at an ayerage a little

above 20 cents per square foot.

“We think it is equally plain from reading the 255.

page report by the Commissioners that they disregarded

excluded any assumption as to théexistence of the 1,767,-

——"

: these.same facts and they based their findings of values

hypotheses used by the var ae aisal experts which

AS

000 square feet of vacant space. Since we conclude that

the failure of the expert witnesses to take this factor into

consideration destroyed the value of zhe testimony -and

conclude also that the commission erred in excluding this

fact frem its consideration in arriving at the valuations, .

_ we will first discuss. this feature of the case. ee

. - r e

No authority need be cited -for the proposition that

- in a condemnation -proceeding such as that here before -

the Court the owner of the property taken is entitled to

just compensation and that within the meaning of the

Fifth Amendment to the Constitution just compensation

is the fair market value of the property at the time of

taking contemporaneously paid in money. It is equally

understood by all courts dealing. with the matter that

_ “in determining this value the highest and most profit- -

able use for which the property is adaptable and needed,

or is likely to be needed in-the near future, is to be con-

sidered.” Cameron Development Co. v. U. S., 5th Cir., 145

F. 2d 209.

The Takings from the Dock Board.

_ Turning our attention first to the pr operty: of the

Dock Board that was taken, we find this to have been

taken by the Government in two separate steps. The

first step was the taking on May Ist, 1951 of a leasehold

interest until December 23, 1952, in all of the unoccupied

_. space in the buildings and all of the unoceupied .acreage

of raw land; the second being the taking on December

23, 1952, of the fee title of the Dock Board in the same

propérty; that is, the entire right, title and interest which

the Dock Board owned; which of course excluded the lease-

hold estates held by the tenants as of that date. As’ to

these two takings, it was clearly erroneous for the ex-

nee Puckacnein hare : Sl wey i acied

. ings having 1,76

which up until 3 months previously had not appealed to

ete ag

pert witisentis upon. whose testimony the Commissioners °

relied so strongly and for the commissioners themselves

to ‘disregard the undoubted fact that a hypothetical pur-

chaser of the leasehold in rest ‘of all of the unoccupied

, to December 23, 1952, would

e property in light of the fact

ing 1,000.22 acres of land and puild-

,000 square feet of rentable property,

that he would be b

the prospective users of such space at a rate of a little

more than 20 cents a square foot. It, of course, makes

no difference ‘that on May 1, 1951, this large area of.

usable space was not actually on the market to be rented

because of its having been removed by the Government.

What the court has to do as of May: Ist is determine

what the hypothetical purchaser would pay to a hypo-

‘uhetical owner of the leasehold interest both Being in the -

market: without being :under any compulsion te buy or

sell. Such hypothetical, parties would necessarily have —

in mind that here is a thousand acre tract with 22 build-

ings and many other installations. which must be valued

as a whole with all of its advantages and disadvantages,

and it must be valued as of that date in light of existing

opportunities for investment. If, -instead of 1.700.000

square feet of vacant space, there had been a few hun--

dred thousand feet whichthe Dock Board was still offer-

ing at 20 cents a square foot we would say it.would still

be necessary for the Commissioners to give some con-

sideration to the fact that rentals would sti!] be made at

20 cents, since no matter what caused the price of 20

plus cents per square foot to be fixed it was obvious that ~

the available space had not all been taken at that price.

Such rental price would therefore be the best proof of

the going’ market value as of the time the last leases were

made in January.

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Where, as was here the case, some 85 per cent’ of the”

entire building space was still hanging over the market

as of January, 1951, a failure to consider this fact in

appraising .the value of a lease to run from May’ Ist to

December 23, 1952, is indicative of a failure to apply

the underlying principles of appraising such property.

So, too, with respect to the December 23,. 1952 valu-

ation: of the fee. The Commissioners arrived at their -

valuation by ‘capitalizing the anticipated income from the

property. Of course, such valuations wouid vary directly

according to the rental value assigned by the fact finders

to the property. The Commissioners found an average

valuation of all of the building space of 60 cents. per |

square foot as contrasted with the average of a little over

20 cents per square foot at which it was 6ffered in Janu-

' ary, 1951. We do not understand that the Government ~~

here contends that this court should determine. that the

20 plus cents average should be accepted as a matter of

law and the award modified accordingly. We do not do

so. We do hold, however, that the Commissioners erred .

in not considering as one of the most important elements

of the value as of the date’of December 23,-1952, the fact .

that a hypothetical purchaser and seller would arrive at

a price which would be largely controlled by the fact that

the purchaser’s return on his investment would depend on

his being able to rent it on a market which, less than two

years previously, had been unable to absorb a large part

of it ata rental of approximately 20 cents per square foot.

‘The extreme significance of ‘the treatment given to’

this excess of factory space and excess of land in the

two valuations as of May 1, 1951, and December. 23,

1952 is fully recognized by the Commissioners. By their

‘improper treatment of these facts, their findings and

conclusions are necessarily distorted. This is indicated

SOU Saoe NC eaialinaa iad All

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by the statement of the Commissioners in their findings:

“Whether or not this portion of the property was

actually on the market significantly enough bears

* upon the opinions of the experts as to the supply

of industrial property on the market and _conse- .

quently would have a strong bearing on. the -rea-

sonablenesas and validity of their estimates of

alue.” (Emphasis added)

mmissioners then pointed to the fact that no

itted by the Dock -Board after January

10, 1951, which action by the General Services Adminis-

tration of the Government the Commission said, “turned

out to be the means employed to prevent the Dock Board

from making any further leases because [it] had a pro-.

spective tenant for the unleased ‘portion of the property.”

Thereupon, the Commissioners found “the Dock Board

thereupon considered that the property was off the mar-

-ket at that time;” and further, “under these circum-

_ stances, we can only conclude that the unoccupied portion

. of the property had been removed from the open market ©

on January 10, 1951, and.was not in fact available in

the market from that date until the institution of these

proceedings.” .

‘ . Thus, it is clear that in determining the value of the -

unleased portion on a rental basis from May 1, 1951 to,

- December 23, 1952, the Commissioners treated the matter

as if the 1,767,000 square feet of unrented space were not"

overhanging the market. This, as we ‘have pointed out °

above, would not be the case if we were to assume the

existence of a hypothetical purchaser and hypothetical

seller on May 1; bargaining over the price to be paid for

." such a lease.

| The Appellee Dock Board stresses strongly the testi-

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mony given by a number of its witnesses to the effect. |

that the 20 plus cent rental rate for which the property

was being offered up to January 10, 1951 was a “‘sub-

standard”, a “bargain”, and “ridiculously low” rate for

the space. It is argued that the Dock Board did not need

to make the kind of profit on the property that a private

investor would. This, of course, has no relevance at all

in the argument here made, because, no matter how .

“ridiculously low” the price for the space was, it was not:

being rented by the public even at that low price. - It

makes no difference what it was that caused the Dock

Board to price the property under the market, if, in fact,

it did so and the property remained vacant. When it

became apparent that such large quantities of the prop-

erty would not move at that sub-standard price, then that

price obviously was the most that could be obtained for

it at the time.

It is inescapable from what we have said, touching

on the treatment accorued by the Commissioners to the

‘large area of unoccupied space that would have been avail- —

able to 4 hypothetical purchaser on May 1, 1951, on a

lease to December 21, 1952, and to a purchaser of the fee

- on December 23, 1952, that the findings and conclusions

_of the Commissioners as to the value of these two items

. cannot stand.

What we have said with respect to the building space

applies with equal force to the vacant land. The Com-

missioners concluded that the fair market rental value

of the unleased excess land was $407,546.00 per ‘annum

or approximately $575 per acre. This -contrasted with .

rentals at which the land was offered by the Dock .Board

up through January 15, 1951, ranging from $200 to $300

per acre. We find no basis in the evidence to warrant

the Commissioners disregarding the rental rates which

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had been widely offered and unaccepted by the public in

computing the value afew months later of the land which

was not improved by the buildings. In ‘computing the

value of the fee to the land on December 23, 1952, the

‘Commissioners assigned an average of $8,391.00 per acre

based upon-a rate of $12,000 ‘per acre for 243.85 acres

of so-called waterfront land and $7,000 for the remainder.

This produced a total valuation of $5,938,142 for the 707

acres of open land. We think it is clear that the Commis-

sioners disregarded the fact that the hypothetical seller

and purchaser as of December 23, 1952, would have to

consider a price to be paid for the entire 1,900.22 -acres

improved as it was._ It could not be viewed upon the as-

-sumptign indulged by the Commissioners that the Michoud |

tract would be off the market in arriving at ‘that valu-

ation. ; .

Moreover, we conclude that the Government properly

challenges the valuation of this land as of December 23,

1952. No reasonable hypothesis is stated by any of the.

witnesses to support their opiniens of an acreage value

in excess of $8,000 per acre for the excess land other than

comparisons. with small tracts ‘from 1 acre to 15 acres!

on the Harvey Canal.* In commenting on the bases of

the opinions of the several experts who testified before.

the Dock Board as to the values of the: land, the. Com- .

missioners characterized the testimony in the follewing

(WAGUESPACK?:: “This valid by the wit- .

ness-appears to be nothing more than his particu-

lar costs of reproduction method of appraisal of

the buildings with his opinion and judgment of

2 This canal is the westward extension of che intra-coastal canal

and extends from the Mississippi River westward from a point some

.three miles upstream from Canal Street in downtown New Orleans.

The industria! sites on the “Harvey Canal were heavily built-up at this

time, _ largely by petroleum and related industries.

Als

we have

- building costs and depreciation’ arrived at by/ his

desire to be competitive if he were offering the

property for sale on December 23, 1952. /Added

to this is his competitive valuation of the Jand, not

a reproduced cost of land, to arrive at his idea of

what a willing buyer would have paid a_ willing

seller.”

(LEMARIE!: “Mr. Lemarie stated that the most

comparable land to that of Michoud was the land

along the intracoastal cana] at Harvey, Louisiana

and that sales at Harvey were very largely the

reason for his opinion of the value of the property ©

in question here.

(BLUM): “The valuations which Mr. Blum placed 7

on the land as aforesaid were arrived at by con-

sideration of what he referred to as comparable

to Harvey, Louisiana. He described a saje of about

2-1/4 acres of land loca on the intracoastal

canal of Harvey, Louisiana in July, 1948 for

$13,500 “per acre and chose to predicate his Mi-

choud land valuation principally on’that sale.”

(AS TO ALL THREE WITNESSES) : “The Dock

Board experts, holding that their opinions of value

were based on their judgment, experience and

knowledge as industrial realtors, did consider, as

lteady pointed .out, the cost of repro-

ducing the Michoud land in arriving at their con-

clusions./ For these purposes, they employed the

original ‘cost of the improvements made and the

factor, 1.98, of incredse in-such costs. All. except

Waguespack, also took into account the .ues —_—

_ of the land at Harvey, Louisiana.”

We have carefully read the findings of fact and con-

clusion of the Commissioners and we find that they

adopted the witness Lemarie’s opinion of value. On this

res ies the Commissioners stated:

“In reaching our conclusion of the fair market

~ value of the excess land, we have adopted the i

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acre valuations placed thereon by. Mr. Lemarie,

because we believe the evidence fairly sustains

_ those valuations, which are $12,000 per acre for

243.85 acres of the so-called waterfront land and

$7,000 per acre of the remainder. But; because we

are of the opinion that the value influence of the

canals would be more reasonably reflected in the .

whole of the. property, we have computed the ©

weighted average value per acre, which we find

to be $8,391 per acre. Applying such rate to the

707.68 acres of excess land, we have reached our

aforesaid conclusion of the fair market value of

. . that agreage.’

There was ng evidence anywhere in the record /of

any tract of land approximating that of 707 acres, con-

‘sidered separately from the improved part of the Mi-

choud tract, or a total of 1,000 acres of land. including

the improvements, having sold for any sum approximat-

ing $8,391 per acre. We think it is apparent from the -

statement of the Commissioners that the only conceivable

basis for their valuation was that propounded by the wit-

ness, Lemarie, who stated that he was basing it on com-

parisons with property sold on the Harvey Industrial

Canal. While we have recognized the general proposition

- that this court would not substitute its judgment for that

of the trial court in determining whether a particular

- sale was- too remote in point of time or was not com-

parable in size, this principle related merely to the ad- -

missibility of the evidence to be considered by ‘the trial |

court. See International Paper Co. v. United States, Sth

Cir., 227 F. 2d 201. It falls far short of constituting ‘a

rule that the appellate courts may not reverse a finding

_ of value which it finds to have been based on a comparison

of the condemned property with other tracts which neither —

by Jocation nor quantity of land involved or other char-

acteristics bear any resemblance to each other in the mar-

ral

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ket. We, of course, do not attempt to ascertain the true: -

value of the unused land as a part of the total tract to.

be valued. We do conclude, however, that the Dock Board

did not carry its burden of establishing what the true .

value is. Again, it is necessary for us to reiterate that

the Commissioners did not have before them the problem

of valuing separately the 707 acres of land. They had

‘the problem of valuing 1,000.22 acres with all of the im-

provements and subject to all of the limitations which

characterized the Michoud Industrial Facilities. What the

Commissioners did in this respect was to accept the valu-

ation based on a witness’ -testimony that in his opinion

27 cents per foot for the waterfront property and 20 cents °

per foot for the remainder of the acreage was the fair

market value.. To the extent that he had any backing

for this estimate at all it was that small tracts of land of

two or three acres fronting the Harvey Canal, some fif-

teen miles distant, had- sold at 30 cents per square foot.

In this connection, when witnesses and Commissioners _

speak of valuing some 790 acres of land at so much pe~

square foot, it must be borne in mind that they are deai-

ing with approximately 30,000,000 square feet. No wit-

ness testified that :t was customary or usual in the New

Orleans market to buy or ‘Sell any’ substantial acreage on

a square foot basis.

_ Obviously, since what we are dealing with here is

not a lease of 1,767,000 square feet of. floor space in the .

buildings alone or a lease of the unused acreage alone

from May 1, 1951 to December 23, 1952, but is a lease

of the entire tract of land, including the improvements

thereon less the occupied portion for that peridd, it was

improper for the- Commissioners to appraise the rental

value of the buildings, even if they had used the proper

rental value for’them, and ther. appraise the renta! value

ef the land separately and add the two together in order

“Ali

to compute the value of: the property on a rental basis

for these periods of time. See United States t: Buhler, .

5th Cir. 305 F. 2d 319. What the Government took and,

what should be valued is the entire tract for a period of

approximately 20 months. This, again, must be what

hypothetical parties dealing at arms’ length would agree

_on, viewing the land and buildings, with the disadvantages:

of much of the choice locations having already been leased

to others. We find no evidence in the record directed to- .

wards an ascertainment of the worth of the land as im-

_-proved in the hands of a willing purchaser acquiring it

froma willing seller for such a leasehold interest.

Moreover, the method of appraising the value of the

rental on the vacant lahd from May’1 to’ December 23 is

dleariy erroneous. The Commissioners accepted the testi-

mony of one of the witnesses that the land would be

worth an average of $5,391.00 an acre on December 23,

1952, and they then simply discounted this by 10 percent

in ordér to compute its value as of May 1, 1951, and then

assuming that an investment of this kind should yield a

rental return of 6 percent to the owner they found that

the annual rental value of this property was $407,546

per annum or $672,451 for the period..It is difficult to

understand where the Commissioners found the authority

for assuming a rental value of land based on their con-

ception of what the land was worth. This is the reverse

of the usual protess of ascertaining the value of land by

capitalizing its rental potential. We think it is plain that

_. in the absence of any-substantial evidence to the contrary

it must be taken as we have indicated above that the

‘rental rates for the land, which were ifreffect as of Janu-

ary 10, 1951 must. ‘be deemed to be the rents to be used

for the valuing of the taking by the Government on May

1, 1951.

°.

. ‘La

Als .

< .

There is another source of gross over-valuation of the

_ value of this leasehold resulting from the manner in which

the Commissioners merely assumed that land haying a

value of so much per acre would yield rent. of 8 percent

_7 ,of that amount to the owner. Such an assumption is

hased on the theory that the land would be fully utilized,

in spite of the fact that between 85 and 90 percent of

the open land here in issue had failed to attract tenants

_ at the $200 to $350 offering rates. It would be.a wild .

assumption, indeed, that would justify a finding that the

Dock Board actually Jost rental ‘during the period from —

of May 1, 1951 to December 23, 1952, equal to a stated

rate of return on the value of the property. It would be

- equally improper for the Commissioners to arrive at a-

value under such-circumstances by simply multiplying —

the correct rate per square foot for rent by the number

‘of square feet available and then applying this for the

entire 20 month period. It must be apparent to anyone

consideri ing the facts here that no »fatter * how energetic

the owner of this property might be in pushing leases at

the 20 cent per square foot -rént in the buildings or at

the stated rent per acre of lan} for the vacant land, such

owner could not be expected fully to utilize all of the

vacant space for the entir’ period to December 23,1952.

Nor could it be assumed, that a hypothetical tenant inter-

ested in this entire space would be likely to be found who

happened to need exactly the amount of space, both: in

land and buildings here available, to warrant a finding

that every acre of the land and every foot of the buildings

would actually contribute its rental possibility to the in-

come for period.

To simiplify, the thought we have just expressed, we

state that on the record before us any suggestion that

if the’ Government had not condemned this property in -

thé nature of a lease from May 1, 1951 to December 23,

Memncee poh ot Al9.

1952, either the Michoud Industries or any other owner

of the property would actually. have enjoyed net ‘rentals

of $2,260,911 of which $672,451 was for land and the

‘remainder for unleased’ portions ofthe buildings, would - +

be simply fantastic. After all, what the Court is required

to do is to determine the figure’ which would compensate —

_- Michoud Industries for the loss it suffered by being de-

prived of this property for this period of time. What the

Commissioners haye done is to assign a value for-rental

purposes of 54 cents per square foot for every square foot *

, Of space in the buildings although approximately 3 months

earlier there were 1,767,000 feet. of space available at 20

plus per square foot and to assign approximately $575

per acre rental value to the unoccupied land although at °

the same time ‘previously there was over 700 acres of this

land available for rent at $200 to $350 per acre. They.

then multiplied this figure by. the total number of square °

feet and acres, respectively, and multiplied this result by

1.65 years. The Commissioners thus gave the Dock Board

the sum of $2,260,911 as rental value for the premises.

It appears that for the ‘reasons just cited, as well as

because of the use by the Commissioners of the incorrect

rental. figure, previausly discussed, the valuation of Dock

Board’s temporary interest must be set. aside. .

THE. LESSEES! INTERESTS.

Turning now to the third taking, that is of the prop-

erty owned by the lessees, which was taken by the Govern-

ment on May.1, 1961, we find that the lessees have a

much more appealing arcument against the application

of the principle Whigh we have heretofore held eéntrols

the value of the interests of the. Léck Board.” This is be-

cause.of the fact that when the tenants who were oecupy-

ing space in the Michoud property were faced with the

A20

¢ 2

necessity of surrendering the property, they were required

to find space on the markét.in the vicinity of the city of

‘New Orleans as it then existed. At that time, as they

point’ out, the Government had coincidentally -condemned

the 1,767,000 square feet of the Michoud manufacturing,

office, and engineering buildings. The tenants, therefore,

_ were faced with the prospect of going out of business or

- findiig other space adequate to their needs. The proof —

offered -by them was to the effect that such spdce was.

available only at rentals some three times as much as - |

they had been paying under their lease agreement with

‘the Dock Board. Under these circumstances, the lessees

_ gay, the fact that some of them had acquired their leases

. then market value, even though the mar

-as late as January, 1951, and the fact that other space

-was available as recently as January at rentals of twenty

plus cents per square foot should not enter into. ‘the pic-

ture at all.

% Unfortunately for the lessees the courts séem’ to have

dealt with this very situation where the person whose

property. is condemned by the Government h

obtain a valuation for the property. taken Pased on the

has risen by

reason of the needs ‘of the Governrhent which brought

about the original taking. We note. Agape ted the Su-

preme Court decision in United States v. Cors, 337 U.S.

325. There the United States condemned a tug seeds by '

Cors. it appears that at the time the tug was’ condemned ° -

the second’ World War had been in- progress for sometime,

and the Court of Claims found a “fair market value at

the time of taking of $15,500,” but, as the Supreme Court

said in its epinion:

“The Court of Claims found that at the time -

of the requisitioning there, existed in and about the

port of New York ‘a rising market and a strong

demand for tugs.of all types’ due in part at least

sought to

v?

a

oP ACEL A21

- i .

to the government’s requisitioning . program. It

‘found that the market’ value of the tug had been

enhanced $5,000 by October 15, 1942, due (1) to

the great increase in shipping in harbor traffic

because of the war, and (2) to the government's -_

need for vessels in the prosecution of the war.”

In reversing the judgment for reconsideration by the

Court of Claims, the § preme Court said:

gag?

“In time’ of war or other national emergency,

the demand of the government for.an article or

commodity often causes the market to be an un-

fair indication of value. The special reeds of the,

government create a demand that outruns the

supply. *The market, sensitive to the bullish pres-

sure, responds with a spiralling of prices. The

normal market price for -the-commodity becomes.

inflated, and so the market value of the commodity

is enhanced by ¢he special need which the goverr-

ment has fr it.

“That seems: to have been the situation in the

present case, for, as we have seen, the Court of

. Claims found that at the time of the’ requisition

there was a ‘rising market and a strong demand

for tugs of all types’ in and around the port of

New York, due in part at least to the shortage of -’

tugs jaan from the government’s requisition-

ing program. °

“It is not fair that the go. ‘ernment be required

to pay the enhanced price which its demand alone

has created. That enhancement reflects elements

of value that was created by the urgency of its.

need for the article. ft does not reflect what it

‘willing buyer would pay in cash to a williig seer,’

United States v. Miller. supra. 874. ‘in a fatr mar-

ket... That is ¢ value which the ‘government

icself created ard hence in fairness should net by

required to pay.” “Pave a5 '

— A22

While this rule may well work a hardship to a ten-

ant who must relocate at a time when the Government

has taken space occupied by him, and who must unques-

tionably pay for the space later rented by him at the

going rate, even though that rate be an inflated one, it

_ seems clear that the Supreme Court has settled this issue

in such manner as to be binding on this Court. We are

forced to conclude, therefore, that it was-error for the

Commissioners to disregard the rental rates paid by the

tenants insofar as it was similar to the laf%e amount .of

space still unoccupied in the buildings. It is true, as con-

tended by some of the appellees, that some of them had

acquired particularized space with peculiar and especially

valuable characteristics that could not be duplicated in

any of the remaining vacant space in the buildings. To

the extent that the lessees have proved the existence of

such facts and to the extent that they heve proved that

they had somethir& of a bargain in making their own

leases that kept their leases from representing the fair)

market value of the®space at the time the leases were en-.

tered into, they are entitled to the benefits of their bar-

gzin. Asx to all other tenants. and: as to all space which

. Was suspectible of being duplicated in unleased space in

the buildings. we conclude that the Commissioners -and

the trial court erred in not accepting the terms of the

particular leases or the going rate as of January. 1951,

whichever is higher, as the fair market value of the space

as of May Ist of that year. In order, therefore. that these

- principles may be given effect in arriving ‘aj the proper

valuation of the leasehold interests. the award to the

‘terants must be set aside.

CROsS APPEALS

We have considered the cross appeals by tle Deek

lsourd and by the Laclede Steel Company touchine on the

aye ner eenene eceneer oe

A23 .

dates from, and the amounts on, which interest should run

against the Government. The Dock Board contends that

interest should run on the entire amount of the value |

-ulfimately found te be due for the taking-of the fee inter-

est owned by it without a prior deduction of the balance

of some $9,600,000 which it owes the Government for the

original purchase price of the property. We think it is

immaterial what the title held by the Dock Board may

be called or known ‘under the Louisiana Jurisprudence.

It is clear that the trial court had the authority to dis-

tribute the award to the parties who had an interest in

the property. The Government had such an interest by

virtue of its contract of. sale to the Dock Board. The

court thus had the authority and duty te award to the

Government the amount stil] owed to it by the Dock Board

and then to provide that interest should be paid to the

Dock Board only on the balance, if any, of the total

valuation. ‘

Laclede complains that. although it was not actually

required to surrender the premises occupied by it until

November 1. 1951, it was entitled to interest from. May

1, 1951, because such was the date at. which the United

States originally ‘sought temporary use and occupancy in

its petition of condemnation. However, the court's origi-

nal order granted the United States the right of pos-

session to the leased premises a~ cf May 1. 1951 to ether

_tenants, but not- as to Laclede. By an order entered on

the motion of Laclede it wa~ permitted to remain in pos-

session until November 1. 1951. It contended that it

was merely a tenant of the Government between May 1

and November 1 and it was actuahy out of pOS*ESsiGn as

of the earlier date. We conciude thar this argument thas

" no merit. See United. States v. Mahowald, sth. Cir., 209

F; 2d 751. - ‘

o t=

2 we " .

Azs |

On the cross appeal of Laclede Steel Company the

judgment as to the date of thé running of interest is af- .

firmed. The cross appeal of the Dock Board is without -

merit and it is held that upon the final award Ueing

arrived at in favor of the Dock Board, it will be proper

for the trial court to deduct the amount then due to the

United States under the original contract of sale before

permitting interest to run against the United States.

DISPOSITION ON REMAND. ;

' The rulings we have made as to the measure of mar- -

ket value at the time of the several takings, simplifies

somewhat the remaining issues to be disposed of by the

trial court. These issues are: What was the fair market

value of the right to possession of the property from May

1, 1951, to December 23, 1952?; what was the fair mar-

ket value of the property on December 23, 1952?; what.

‘was the fair market value of the several leases in light

of the standard heretofore set?

This case has been pending. for a longtime, the origi-

nal complaint having been filed in April, 1951. This

court has previously dealt with the problem arising when -

it has become necessary for us to reverse a District Court

judgment based upon findings of Conimissioners, -which

we have found to be erroneous. In United States, v.

Leavell & Ponder, Inc., 286.F. 2d 398, we found it neces-

sary to reverse the judgment of the Distriet Court, which

adopted in full the findings. and conclusions of Commis-

sioners. We said an page 409:

“The failure of the commissioners here to com-

prehend the true nature of their duties, as evi-

denced: by their departure from known and ac-

cepted standards of ‘valuation and their complete

failure’ to recognize and apply rules of evidence

iN

Oo... 4. ASB.

during the hearing, make it impossible for the trial

court or this court to determine whether its find-

ings were based legally on admissible evidence,

and its failure to make adequate subsidiary find-

ings Of fact emphasize the reason for the rule that

_ reference to a commission is the éxception and not

_ the rule.”

ty

We then said:

| “A jury trial at which the trial judge promptly -

rules on the admissibility of .prope: testimony and

then narrows. the issue ‘by appropriate, charge to

the jury may, indeed, frequently simpiify even

What appears to be a complex vauaten of _

erty.”

In that case we sent the case back for trial by a jury.

More recently, in United States vy. Frank S. Buhle

et al, F. 2d , having determined that the scent

sioners in that case also failed. to apply recognized. valu-

ation standards, we said:

“As pointed out in. the opinion of this court,

when the case was here last, we were then, as -we

are now, loathe to cause a further delay in the

final disposition in this matter by taking such

action as requires a full, new hearing before the

commissioners or on a remand now requiring that

the matter be heard by a jury. Having pointed out

’ certain areas in which we feel that the decision ‘of -

the trial court must. be reversed as being clearly

erroneous, we -think the matter. now stands in

such a posture as would permit the trial court to |

reconsider findings based on the commission’s re-

. port and giving effect t» our rulings announced

‘ in this opinion. As this court decided in United

States v. Twin Citv-Power Co. of Georgia, 5 Cir.,

254 F. 2d 197, at page 204, we said: ‘It. would be

- futile for the court simply to direct the commission

to reconsider its findirgs.’ ”

: is

' A26

| Nevertheless, we do not conclude that the case should

not be referred once again to the Commissioners. We do

. net wish to circumscribe the trial court in its determina-

__ tion whether the valuation questions remaining should be

passed on by a further reference or by a jury, or whether

the trial court considers that sufficient evidence is avail-

able and sufficient findings as to. basic facts are present

in the original record to permit it to reconsider its own

order approving the Commissioner’s report and permit it

“to give effect to the rulings herein announced without a

further submission to a jury. :

The findings of value by the trial court in favor of

the Dock Board and of the lessees, are, for the re2.ons

heretofore stated clearly erroneous. They are RE-

VERSED and the case REMANDED to the trial court

for further proceedings not inconsistent with this opinion.

re

BROWN, Circuit Judge, dissenting:

Amplifying the strictures voiced in United States v.

Ledveil & Ponder, Inc., 5 Cir., 1961, 286 F. 2d 398, 409

and echoed. more recently in the second appeal in United

States v. Buhler, 5 Cir., 1962, 305 F. 2d 319, 331, against

the use of Commissioners or, for that matter, anything’

but a jury trial in condemnation cases no matter how

complex, the Court’s opinion gives the impression of: a

-runaway Commission indifferent to its duties, oblivious

to the law and interested only in granting an award re-

flecting the. exaggerations of self-interested persons pos-

ing as experts. Ending as it does with words bearing

overtones that “it would be futile for the court simply

to direct the commission to reconsider its findings,” added

' meaning is read into the broadside from Leavell & Ponder

_ which charges the Commissioners with a “failure * * * to

&»

*

| A27

comprehend the true nature of their duties, as evidenced .

_ by their departure from--known and accepted standards

of valuation and their complete failure to recognize and

apply rules of evidence’ during the hearing ** ° ,” 286

F. 2d 398, 409. ‘

As unrewarding either to the dissenting Judge, the

jurisprudence; or to the losing party as is a dissent in a

case of this kind, I feel compelled to register my reasons —

for any difference with the Court. The record, when

properly analyzed will, in my judgment, reveal that this

was a proper case for th: use of a Gommission. The

Commission. was composed of conscientious citizens, one ©

of whom was a well regarded and competent lawyer of

New Orleans. And if—as the Com holds—there. were

errors, they were errors of the distinguished trial Judge,

long experienced in this field.

This is important, not as a defense of the intuagiitg

gf the persons comprising the Commission, but as a strong

indication to me that what the Court is doing is retrying

a condemnation case. So long as F. R. Civ. P. 52 (a) and

53 stand, that is not our function.

THE NEED FOR A COMMISSION.

Within a short time of ‘he filing of the Government’s

complaints, 37 lessees had become parties in addition to

the Dock Board.. On the principles enunciated in the

trial Cévrt’s written charge, the Commission’s Report

and now in this Court's opinion, these were in effect 38

separate suits. True, there were some common questions,

both of law and fact, but in the final analysis each ten-

ant’s claim stood on its own. And as to the Dock Board -

, The Gor ernme nt assigns Only one error as to feceipt of evidenee—

testimony on reproduction cost Which was rejected by the Commission.

A28

each of the 37 leases (plus others) preseuted facts or

circumstances having some bearing on its three claims

‘ of (1) reserved rent, (2) value of the occupancy of the

unleased portions of the premises and (3) the value of

the fee as of December 23, 1952. In addition there was

the fourth main claim-on behalf of the tenants as to the

value of the unexpired leaseholds. That also bore further

on the Dock Board’s fee claim since under supplemental

instructions, the Commissioners were required to ascer-

tain the adverse effect of outstanding leases as of ‘the

date of taking of the fee. Thus by simple arithmetic the

. tenants’ claims alone presented in excess of one hundred

issues, - .

\

Mure important than mere statistics was the subject

matter which the Commission necessarily had to deal

with as the witnesses undertook to reconstruct a value to

supply the fictiona] test of the willing seller und willing

buyer concérning a property which no one would sell and

no one would buy. Besides the physical characteristics

of the property which in thie index to the Report ran the

gamut of a description of each of the main buildings, the

facilities, the electrical, water, sewérage, railroad system,

flying ficid, parking lots, fuel tanks, wharves, fences.

and gates; the conditjon of the: property, the needs for

rehabilitation, the Commission had to deal with what it

described. zis: the “economic factors and conditions” bear-

ing upon the-upply and-de‘nand for property of this

kind in the New Orleans area. These factors, the Report

stated, would “include location of the property, access to

transportation facilities. utilities, labor supply. police and

fire protection, insurability, availability of comparable

property, protection from flood and demand ‘for the in-

dustrial property in tge New Orleans avea.” This went

off into interesting. byt essential. forays into such things

as the intricacies of railroad tariff rates. switching lim-

Ah we OF & Wee” os Oia

.

Soe npn a eeepe ee mee

.

*

A29

its, and an involved inquiry into availability. and cost of

- insurance, and the like. The summaries of these factors ¥

(other than availability of industrial property) alone |

takes 20 printed pages in the Commission’s Report. “And,

_ of course, all of these were merety subordinate to the

principal question of market values.

This multi-party, multi-issue case, which Government —

counsel estimated would take 6 to 8 months to try, was

not one suited for a jury trial. Under F. R. Civ. P. 71A,

the Court was authorized to appoint a Commission. We

ought not in this way retroactively criticize the Judge for

this’ ~— action.

PROCEEDINGS OF THE COURT AND —

COMMISSION. | ;

The Court appointed a Gommission with a New Or-

leans attorney as its chairman. Numerous pre‘ria] hear-

ings were held. The Court invited suggested charges to

be given by the Court to. the Commission. Thee were

the subject of cxtensive comment, criticism,, objection and

hearing. As its alpha and omega as its scriptural guide.

these are reprinted in the opening pages of the Commis-

sion’s Report. The trial Judge’s order confirming the

Report states expressly tha: “no exceptions were taken

to the charges as finally given by the Court.”*. The Com-.

_-mission held hearings and took evidence on 70 days. As

the Report states, the “record in-tl.is matter consists of

7.262 pages of testimony of fifty-oné witnesses, some of

whom were examined and cross examined for cne to-

fifteen days. consecutively. * * *.” In addition 367 ex-

20F the seven numbered specifications-ef errors, plus those run-.

ning from 2/a) through fy). the Government complains of. hone save

the instruction on Srigina! and reproduction costs. Th is is a matter of

no conseqience since the Commission's Report expressly rejects-this us

a bas: for the award. :

-

A30

hibits were received. Testimony of the principal experts

for the claimants (Lemarie, Waguespack, Blum, and Car-

rere) ran in the neighborhood of 700 pages each. That

of. the Government experts (Aschaffenburg and Johnson)

was even longer. Full briefs were filed and extended

arguments were heard by the Commission.

The Report of © the Ciaieibie, prepared tens

haste, reflected the authorship of its attorney-chairman

by a style that would do credit to any*lawyer, or for that

matter any judge. It covers 250 pages of the printed

‘record. It is a model. of detailed, non-argumentative and

objectively p discussion of the evidence pro and

con, witness by witness, issue by issue. After giving the

parties the better part of a year-in which thoroughly to .

brief the matter, Judge Chirsteriberry heard arguments

over several] days. He overruled ‘the objections of the

Government. sustained the Report of the Commussion, and

entered a final judgment based thereon. . Judge Christen-

berry’s order expressly made “the report of the commis-

et >> | the findings of fact and conclusions of law of |

this case.’

Of course a record of that length inquiring into the

multiple issues of this involved case had much conflict

. in it. The case ended as it began with the parties in

dispute as to the principal question of valuation of the

several interests appropriated. This Court’s opinion

recognizes as the first element that “1) * * * the 1000.22-

acre tract with such a tremendous complex including

buildings of a truly gargantuan size, which gnust be

valued as a whole by determining its fair market value,

' does not really have any comparables in the market on

. which expert opinions of valuations can be based.” This

is a recognition that if the Fifth Amendment is to have

the vitality which courts read into it, the determination

i

A3l

of market value inescapably rests upon the expert judg-

ménts and opinions of those skiJled in the field after the

trier of fact makes such modification and adaptation of

them-as the total record reas nably required.*

A brief consideration of the Report anc -he record

demonstrates, in my opinion, that: while the Commission

did not accept the conténtions of the Government, it

did not, as the Court’s opinion charges, ignpre these

factors as irrelevant, nor was the Commission’s action

a departure from accepted principles.

| “TREATMENT OF UNLEASED SPACE AND VACANT

ars LAND.

The Court’s opinion would lead one to think that the

experts for the Dock Board and tenants, as well as the

Commission, looked on the case as though the 1,767,000

square feet of unrented space, as well as the, 700 acres

of vacant land, was actually under lease.‘ It: also im-

plies that in iving their several opinions, the experts

were unaware hat despite active solicitation of tenants

at the unjform 20 cent rate, substantial areas remained

unoccupied. This leads the Court to state that “we think

3 The Supreme Court has ma:y times pointed out the elusive nature

of this problem especially where large or unusual properties having no

market currency are involved. See, e.g., Mississippi & Rum River Boom

Co. v. Patterson, 1879. 98 U.S. 402, 25 L. Ed. 206; Olson v. United

States, 1934. 292 U.S. 246, 54 S. Ct. 704, 78 L. Ed. 1226; see. alse United

States v. Wateree Power Co.,-4 Cir., 1955, 220 F. 2d 226 The concur- .

ring opinion of Mr. Justice Frankfurter in United States v. Toronto,

Hamilton & Buffalo Navigation Co., 1949, 228 U.S. 396, #7. 70 S(t

217, 94 L. Ed. 195, dispels the easy myth that all becomes simple by

e> hanging the term “just compensation” for “market value.” He «tates:

“Resort to the conventional formulas, for ascertaining just compensation

for the taking of property rarelg bought and soid, and having therefore

no recogni market value, does not\yield fruitful results. The vari-

ables are teo many to permit of anything except an informed judgment.

Everything therefore, turns en the process of judgment to the end that

judgment not based on standards too difficult of ‘application or ev:-

dence too tenuous for solid inference.” ; °

‘The Court states that these experts “ignored cr undertook to ®x-

; plain as irrelevant” or “discarded as irrelevant” the fact of the large

amount of space available at the low rate of 20 cents per square foot.

. 4 9

et ial eee e.g

\

;

*-and, therefore, at May 1, 1951, the Micho

CRC eee

‘it is: equally plain <'2-* the Commissioners Bee ane

garded these same faets and they’ based their findings of

‘ values on sa ee used by the various app isal experts

; which excluded ahy assumption as to the existence ‘of the*

[million] square feet of vacant space.” ‘ Awgto the two

takings by the Dock.Board, the Couft then ‘holds that “fy

was clearly erronéous for thé expert nie upon whose,

testimony t Commissioners relied’-* * * and for the

Comuitacibudh themselves t to disregard the undoubted fact °

- <fthat a hypothetical -purchastr *(*2* ” would make his

offer in, the Fight « of, unoccupied. areas of land and build-’

ings. x ‘ge :

hale inaplicatign of: the Court's, opinion is that

P witnesses and the CAmmission were indifferent

pletely oblivious tothe admitted fyct of (a) the

20° cént uniform rate, and: (b) the existence of a banal

amount of unleased property. But_ the ‘Commission’s

“Repart does not bear out this charge. Whe Report re-

_fiegts the Commissjon’s awareness of the problem. .It

-stated: “The Government has contended | ‘that. because ~*

substantial areas,.land and buildings, were unrented to ~

January 1959, — lack of demand was thereby indicated

Muls, cons

clusively Ystablished the’ fair market

cl ( / ; rental vaca ag

that dafe. We do not btlieve this cor tention terable ;

the ligt of all of the evidence.” .The ¢ ‘ommission then “

referred to. thauncontradicted : ‘testimony that the .prop-

ty actually h een, taken off as-early as . January

dust how a witness can be “clearly erroneous” is not clear. The

was obviously admissible. Whether the lisserted omission of

this factyr deprived it of any significance goes to its weight.: In any

case no Q jection. by the Government is shown to the admissibility of ~

, and no error is assigned for its receipt.: Even in the ideal

ial epitomized in Learelkh & Ponden, 286 F. 2d 398, 4109,

»posed to make a complex case.simple, the judge by the

so-called prompt rulings on admissibility of this kind ‘éf ‘evidence would

be engaging ~ dangerous business) yas an intrus ion pn th

' e. fact finding |

function of tre jury. ; ;

: * Should be “1951”. » ’

lad

.

7

:

oy

ee

oO

.

ot,

J

Pi RE Ee a:

1951. By, presumably anticipating the very argument

udvanceby this Court th€t the theoretical willing pur--

debi must look at the property.as they found it

20 May 1, the Commissien coftinued further. Even, a eS

it had been on the market, we don’t’ understand that,

because «it may aot have been all or substantially all

rented} it would necessarily follow that the existing rent-

“als would be absolutely controlling, in the determination

of Yair market rent,. any more than: had it been fully

rented or fully unrented. If. no portions were rented, we

don’t believe that such would render ‘its fair market value

nil. The owner, we understand, is entitled to have his.

., property not, only considered in the light of its high

and mest profitable use, but in the light of all condition},

* not ‘alone. one, that make the market which determines

the v value of-his property.’ ° ;

In many other piaces a nd ways, the Commission also

revealed that its decision ‘was an articulate judgment

formed as a result of the study of this whole vast record

als and vacant space; Thus, as to the Dock . d uni-

fea including the Government's contention on standg “ rent-.

form rental contracts. the Commis ssion stated “ a is no,

2 stion that the rents-were not arriv ed at with reference

), Hor were they intended to coincide with, fair market

scsi value when established or ‘in the future during the

effectiveness of the schedule.” The Dock Board was snot

n the business of making money Au Gf preperty rentals.

s q public’ agency it was int erfested in éxpanding the

economy vf the city and port. ‘The payment of rent was

secondary. The objective tvas to attract and hold new and:

crowing industries. “The Michoud rentals.” stated the

Commission. “were: labele? pioneer, substandard and un-

realistic Yents by the appraisal witnesses for the Dock

v

Board * * And we beliews the recordé herein supports

‘> ee J 7 a

«

a | = 5%

°

DS re cee

_ their opinions that these stant are not ‘indicative of and

“do hot-represent the fair market ne of the prop-

erty ‘at the critical dates involved here :

t ° Pa > . s

Nor by. any stretch of the imagination Were the Com-

missigj.ers freelancing on their own. Judge Christenberry

had given precise written instructions with a clarity that

could not have been improved: on ‘in an oral charge to a

weary jury at the end of a 6-months trial. At the Govern-

‘ ent’s request, he first charged,. consistent with its theory

Ch asserted, ghat the Commission could Seonsi r the

"1947 “price of $9,500, 000 on the‘ sale by thé Government

to the ‘Dock Board. On the other hand, the Court. in-

structed that value was not dependent ; suport the use to —- ~

which the property. has been. devoted but sheuld be “ascer-

tained and fixed on just consideration of all the uses for

which the property is suitable * * * " as to which — ts

dence as to all such uses may be offered by either side.”

But the Judge. Was eyen: more. direct. The Court charged

that the experts in reaching opinions and the Commission

‘in ‘determining just” compensation “are. entitled to -con-

sider. many factors including, but not necessarily limited

to" * (a) rentals for comparable property in the New

Orleans area.” That instruction went on to ‘make the |

matter specific. “In. consider’ ing et panel ty the

Dock Board: for property ieased a‘ Michoud facilitiék, you

~are.also erititled to give consideration to the [a] special

-cireumstances affecting this property, such as the [b] —

availability of comparable space as of the date of the tak-

ing, [ec] factors which might have influenced the eDock

e

4

. ®Instruction XXIV, see also substantially repeated: in XXVI.

©

Board in making these leases, (d] which would’ not -be

“present in the ease of other landlords on the open mar-

ket, and fe] éther special - circumstances — might

t bears repeating that the ieee acquiesced in

this charge. The record shows. no objéction to it in the

trial Court, and the specifications oi error here do not

attack it. Pore . :

If this instruction was erroneous, ile we ought not"

to criticize the Commissioners for a breach pf their duty,

- And_ before Judge Christenberry car be: put in. error,

‘date to hold that:

there must be some objection. properly made ‘prior ‘to the

commencement of a long and involved and expensive hear- -

ing.”

The rules are changed after the game is over. Instead

of Judge Christenberry’s declaration that ‘the Commission

was “entitled to give consideration to the special cir-

cumstances affecting this preperty, such as the av ailability

of comparable space * * * " etc., this Court now holds

that as to the Dock Board te ey was clearly errone-

ous * * * for the commissioners themselves to disregard

the undeubted fact that.a hypothetical purchaser ai ee

would have made his offer’ for the property in. light of

the fact that he would: be buying 1000.22 acres of land

-and buildings having 1,767,000 square feet ‘of rent»ble

)

appealed to the prospective users of such ‘space at a rate

Of a little mere’ than 20 cents a square foot.” Likewise,

instead of declaring: that the trier of fact should give

Ps

A35 -

_ property, which up until 3 months previously had not.

some considey ‘ation to this, the Court goes on as a man.

oe

“~

* Letters in brackets [ ] added... :

‘Ti 2% record “hens that when. tne Judge finished réedine the cor-

rected charge tg th® Commissioners he invited.written excenticns and

objectiéns. The record is silent os to any objection concerning this one.

such rental price would therefore be .

.

- d “

; A36

the dest proof of the going market value as. of the time

‘the last leases were made in January.”

-_- 5

Of course the difticuity’ in working with ‘the Court's

opinion is that it is difficult to ascertain, when ‘we ‘are

declaring law: and when we have taken on the role of

persons skilled: in the sale, lease, rertal, disposition and

management of ‘large industrial properties in a -major

port. Thus, to the argument that the“.* * * Dock Board

stresses strongly the testimony * * *: that’ the 20+ ‘cent

AZental rate * * * was a ‘sub-standard,’ a a ‘bargain,’ a

-‘ridiculously low’ rate for the space’ since “.* * * the

Dock Board did not heed to make the kind of protit’* * *

that a private investor would,” the Couyl respends with

- this absolute. “This, of course,“has no relevance’* *. -*.

because, no matter how ‘ridiculously low’ the price for

“the space was, it was not ‘being rented by the public

even at that low price. 1t makes ‘no difference what it

was that caused the: Dock Board to price the praperty

under the market if? in fact, it did so and the property

remained Vagant. When_it became apparent that such

.lurge quantities of the property would not move at that -

sub-standard. price, then that price obviously was the most -

pat could be obtained for it at that time.” +

here are only two things wrong with that statement. _

First, as I read the cases, it is mst correct as a thatter of

. * , . .

law. - Seeond, jt is hardly true as a matter of economics:

As to the economies, it asserts that unless,

“pivee of. property —- an industrial or business:

ho

-_—— =

> Only slightly wanes down is the Cents further declaration, | =

_disavewing a holding that the 20>-cent lease rates must be accepted *

a matter of law.” The-Court does not stop there. The Court goes on $0

hold that the Commissioners erred in not considering “as one of the

most iniportant elements * * * the fact * * ‘that the purchaser.and

-seller gaan be “largely controlled by, the fact that the purchasers’ re-

‘twtn * ould, de pend on his being able te rent it on a market t which

ess than twe years previously. had been unable fo chsorb a large, rear?

of jt at a rental of approximately 20) Jonts per Se ucgry foot.”

: se ;

ad

Pe)

A37

plex is fully rented at the rate iota offered, it. proves.

-that the market demant is less than the rate being of-

fered. If. that were so, a major modern office building,

if condemned shortly after completion, would- have no

value on capitalized rents. Nor would a- major shopping

center which takes time to fully lease: In this respect,

there is, of coursd, a significant difference between the —

Dock Board’s claim for ‘a) the value of occupancy from ~

May 1, 1951 to December 23, 1952, and.(b). the. value.

of the fee on December 23, 1952. The former is essentially

a probiem of. making good to-the property owner the in-

come which he would have earned during that brief -period

of occupancy.- Unless in reasonable likelihood all of it

would have been leased-for the indicated rental value, the

Court, on familiar principles of damages, could not make

an award for 100°. occupancy.” The fee claim, however, .

2 . -a° . tue

does not rest upon the immediate earnings of the property:

as ‘of. the date of taking. The ‘property owner is being

permanently deprived of his ownership. He is being de-

prived of. the opportunity to receive income in the future.

That future is here not less than the agreed expectancy

of 33 years for the useful life of the buildings. True, the

future must be a. foreseeable one. But for pr

such vast proportions as this Michoud facility, its rental

capability in an area and_era of increasing property

values and business expansion can_

nearly two years before (January 10, 1951 versus Decem-

her 2 23. 19 gy are of dominant. controlling —

The Court’s approach is, to me, also faulty on the

law. For under the. law yralue on a capitalization formula oo

is not. determined by improvident or unusual leases which,

a e or / .

Except to illustrate the vital difference between the two claims,

I do not presently intimate any ylew as to the element of the award for

-occupancy. of $2.364, 040.45. Po

rdly be fixed by ©

ordaining as a matter of law that r ntal rates offered _

”

eo. Is

(ae pe en cane cs

in the credited judgment of -qualified. competent experts, ..

do not actually reflect going market conditions.. “Where

property in condemnation has been leased for_a particular

. use, evidence of what the owner can fairly and reasonably”

receive as rental return for suth use, even though. this

amount differs from the rental fixed in the existing lease,

is proper 2s_a possible capttalization factor to assist in

the determination’ of actual market yalue. For capitaliza-

. tion purposes, neither the condemneg nor ‘the. condemnor

shauld be bound by the rental of an unreasonable or im-

‘provident lease.” Chicago B & Q R.R. v. North Kansas

City Development Co., 8 Cir., 1943, 134 F. 2d 142, 152.

- See also. Westchester County Park Commission x, United

States, 2 Cir., 1944, 143 F..2d 688," 693; Siffentes. r.

United States, 1 Cir., 1948, 168 F. 2d 264, 266; 1 Orgel,

Valuation Under Imminent Domain § 179, p. 704, $,182,

p..708; 5 Nichols, Imminent. Domain, § 19.2; p. 215:

The Commission, from the running, ceaseless advocacy

- of the parties,. the-examination, re-examination, cross ex-

‘amination, recross examination and swabbing ofall of the

witnesses through hours and days of endless testimony,

was theroughly-familiar with the Government’s-main—7—

theme.~ The Commission did not “ignore” it. It was

w eighed and found Wanting. ae ia

I for one do not claim to “know enough about New

Orleans industrial property to declare; with the full

weight of law behind it, that no reasonable person could

have so concluded: 3

. GOVERNMENT'S EXPERTS ASCR IBE. RENTAL

VALUE IN EXCESS OF DOCK BOARD UNIFORM

Ee, . _ - RATES.

¢ ) :

" Scoalis proffered by the cgndemnees were not the

sole source of facts showing a value‘in. excess. 6f Dock

Board rates. The Government expert Aschaffenburg re-

I” . 4

i 3 ‘ | f° s

. > 2 S "e we “ — .

; 6 is ™,

. . ; 7

. fs ” se

peatedly asserted that between the period May 1,-1951-

_ December 23, foe, there had been an increase 6f ap-- -

proximately 12 to 15 percent in the level of industrial

-rents. Likewise the Government expert Johnson asserted

that there had been an increase in excess of 50 percent

‘¢ over the Dock Board contract Fates in the same period — -

* of time.'' Since the Court holds that the Dock Board con-

tract rates were theoretically available on May 1, it is

_eyident that theré must besa comparable increase if they

~ “sare to be.used in capitalizing value as of December 1952.

¢ —___ Yet Government counsel are indifferent to that here.

Moreover, as to individual leaseholds the Government

experts gave sworn opinions substantially in excess of £3)

. the contract rate. For example as to the Laclede lease “~

ink the Hammer Building where Lemarie stated a rental °

value of 75 cents per square foot ‘which was accepted

| by the Commissioners), Government expert Nichols gave

. -it-a value of 40 cents and Johnson 30 cents per square: .

* foot. Similarly, Johnson asserting that a substitute prop-.-

.erty on Gentflly Road was camparable to that formerly ve

‘occupied by Cloar-Glass Company, Inc., in effect placed - ~*~

ad 49.8 cént value on Cloar’s lease: For other ‘eases,

stfu ffenburg fixed the value of: 40 cents per square

foot for floor space in the main munufacturing building — .

nd 50 cents per square foot inthe Dry Kiln Building. -

4 . : Se

Ee

‘ The Government offered*tach of these two witnesses. ’

ve Despite this and now, ‘without objectioy to the charge = —-

given to the Commission. it_now feels free.to assert, as

5 —————

et 5

1! This is a moderate summury of their testimony as the -Report

reflects: “However,-* * * Mr. Aschaffenburg and Mr. Johnson, in their

._ conclusions of the fairremy/ket value of the property,* predicated their %

2 estimates of the expected income, in their capitalization approaches, on +?

increases of' 331;,% to 100° in. the square foot rates. of particular

areas, and a weighted averagé increase computed by us a¥ 70% to 80%,

a in the case of Aschaffenburg,-and 50% in the case of Johnson. in the

——— ; _* | fair rental_values, per square foot, of the buildings at Michoud at De-

Be cember 23, 1952, over May 1, 1951." . eae ag

Add

: t :

it does, that the value of this leasehold could not exceed

__ + the 20.cent published rate.

. The fact that some of these figuess were testified to -

in connection with the claims of the’ tenants for the

value of the unexpired leaseholds is of no significance. .

If the leaseholds én the critical date had that vilue to.

the lessee; it is because the leases had a free market value,

in that ‘amount: To determine the value of the fee on

that same date thrdugh the capitalization process, the

same market value would have to be applied. -

_ These few instances picked at random out of “this

“vast record illustrate why in this hypothetical process of:

treating with a buyer and seller-who never. in fact ex-

isted, it is the informed judgment-of those having exten-

sive practical dealings with properties of this kind which

finally prevails: Where such witnesses for both sides ad-

vance, as they did here, substantia] and detailed reasons

ae why the Dock Board published rates were not indicative,

it_was permissible for’ the Commission to credit these ex-

planations' and, determine fhat’ the published rate was not

a reliable guide of real worth. ‘

. VALUATION OF THE. . VACANT LAND.

As to the valuation of the vacant land® areas, the

decree of Judge Christenberry expressly adopting the

findings of the Commission is swept aside with the pro- .

nouncement that “we *’* * conclude.* * * that the ‘Dock .

Board djd not carry its burden of establishing what the

true value is.”” In reaching this conclusion several errors

‘are specified.: The first, as in the case of unleased por-

tions of the buildings, was the lack of any “basis in the

evidence to warrant the Commissioners disregarding the

_ rental rates which had been widely offered *-* * ” for the

a ¢@

|

- AAL.

Sy o

unimproved land. Second, sales of ming on the Harvey

-Cdnal are the sole basis for acreage values in the neigh- _

borhood of $8,000 and as a inatter of law this is not a -

comparable. Third, values of buildings and values of’

vacant land ought not to have been separately ascertained

and then aggregated. And relaied to this, there is no evi-

dence cn the aggregate valug of the entire or: to

a willing, single oe ae t

= We deal first with the Harvey Canal matter. ° The .

Court first states there is “no reasonable hypothesis gees

stated by any of the witnesses to support ° ‘their opinions

of an: acreage value in excess of $8,000 per acre* * * ~~ ,

_. . other than comparison to small tracts * *@& on the Harvey”

-- ~~" Canal.” Later am, after pointing out whafno one can

deny that there was. simply no instance the salé of

land approximating 707 acres, whether considered sep-

arately or as a part of an improved tract of 1,000 acres,

the Court reached this conclusion. “We think it is ap-

parent from the statement of the commissioners that the

only conceivable | basis for their valuation’was that pro-°:

pounded’ by the witness, Lemarie, who. stated that he was

basing it on comparisons with prope) sy sold on the Har-

-vey Industrial Canal.” This leadythe Court to declare ~

the rule; recast by ame in affirmat{ye terms, that an®appel-

late court “may * * * reverse d'finding of value which it

finds to have been based on a comparison: of the con-

demned property with other tracts which neither by lo-

cation nor quantity of land involved or other character-

isties bear any resemblance each other irf the market.”

\ ; . c gh

+> With all deference, these conclusions are not support- _

ed -by the record, and tHe legal declaration iis in error.

- In condemnation cases evidence ‘of sales of other -prop-- ’

erties is admissible for either one or both of two pur- °

poses: (1) to establish an actual going market for sales -

- ?

dan

O°: aa2.’ ne ea ae ee

of like property. which ‘then becomes the best (if not the

only) measure of just compensation; (2) as tangible evi-

_ dence of one of the many factors leading a skilled expert

— ta, reach’a conclusion on value -where there is no going

market... The distinction is vital as this Court has pointed.

’ out. “When the effort is not to show the sale of other |

> property * * * as.a-stahdard of value, but these are re- —

ferred to by a witness experienced in_ dealing with such

properties in the geighborhood and qualified to haveaan

opinion on values, merely, as things in his knowledge -

‘ which contributed to the opinion’ which as an experienced

man he holds, his opinion ought not to be rejected from

evidence, but ought to go to the jury for their considera-

tion of its reliability * * *,” Atlantic Coast Line R.R. vs

United States,'5 Cir., 1943, 132 F. 2d 959, 963. As we

more recently stated in approving this case, the “experts

mustgbase their opinions on such information in the art |

that accounts for their becoming experts.” And, not sur- ©

prisingly, that means that-even. “a certain amount of .

hearsay is a neceSsary ingredient of the dpinion * * *.”

International Paper Co. v. United States, 5, Cir., 1955,

_- 227-F. 2d 201, 208. What was sail by the Ninth Circuit

J in United States v: Johnson, 9 Cir., 1960, 285 F. 3g 36,

\

e

.

39, n. 2, properly characterizes the evidence in: this rec-.—

ord as to. Harvey Canal sales. “FE rthermore, such evi-

dence was not offered or ads the measure of’ value

of the property on the date of taking, but was merely

one, approach used by all the experts, including the one

Who testified for the- Govérn , in arriving at their

opinions + to the value ie property: and as a check

on such opinions.” ‘That Court then proceeds to Maintain -

\ the distinction as to the legal admijssibility _and treatment :

-such-evidence is to receive. “Quote [sic] obviously when evi- .

dence of the price for which similar property~has been

sold is offered as Substantive proof of the vglue.of the

-

.

oe eee -A43

property under. consideration, a foundation ‘should be laid

showing that’ the cther property was sufficiently near

that in question, and that it was.sufficiently like the prop-

erty in ‘question cas to character, situation, usabilit¥ and '

improvements to make it clear that the two tracts ‘were —

comparable in value. ‘However, where evidence of sales”

of similar property is offered not as substantive proof of

value, but' merely in support | of, and gs ~baekground for,

the: opinion of an expert as to the value of the land’ in

question, the requirement of such foundation’ is not so

strict.”" 285 F..2d 35, 4]. Continuing on and quoting |

~ from Chief Judge Parker, the Court then’ points out that

2?

the expert’s s opinion is tg be tested through cross examina-

tion which ‘was, of course. done. at great lengths here.

As we pointed out , in Atlantic Coast. Line RR. v.

U nited States, supra, any other rule would effectually

_deny Fifth -Amendment protection to large or unusual

properties: especially in an era and area-of an expanding

economy in which no: ‘comparable sales could be cited or

pointed out. It is uncontradicted, as the Commission's

Report found, that “all experts agreed that there. were

no 4racts’ of industrial properties av ailable which were

situated on a tidéwater.channel ini or around N vew Orleans

* * *-which was similar -in size,*c haracter and condition

ux the Michoud land.” The Commission was not, as this

Court’s opinion implies, misled into believing that Harvey

ond Mic! -vad.were comparable.}? he Commission under

the heading ‘ef ‘tComparable Sales” extensively analyzed

‘he testimon’ of the competing experts. It pointed out

hat 00 Dock Board's appraisal Witnesses ‘in ‘reaching ©

bd as. * ‘

12 The many rie ate were recognized. For example, the Com-

mission f6 und * ‘there were available for ind ust rial use. larger, acrevges

n surfounding parishes, some of wi = had Mississippi Rit. ‘frontages

niv and. so me without any kind of water frontage. Libemise. there was

he iene are Sou tne 1 ustrial aaa t 2 et 7; Lo ‘ ‘ Bie fillsne

; ae x or

£ . 3

. . sd

.

e 6 .*

Ad +

their suites of value” either “relied on“ or. attached

considerable weight” toesales at Harvey as*all thought it

“was the most’ comparable * * * because it was located

on the same tidewater cgual.” In. the same ‘discussion

the Report pointed dut thatthe “Government appraisers .

) : cited none of’the sales at Harvey, assigning generally as ~~

tHe reason the fact that they considered the property “at *

| _Harvey not comparable to the Michoud land of

the smaller size of the former * * *.” Following is the.

~. Commission then discussed at greater length the sale of

the 140 acres of raw land adjoining Michoud purchased ~

by the New Orleans Public Service in August 1952.'* In.

usin® this as a basis for value both sets of‘ experts had

‘to make numerous adjustments because of the difference |

in elevation, the expenses ‘to- raise that land ta the eleva- .

tion of the improved Michoud ! land, etc. But this was not

“all... The Commission followed. this by an even more ex- .,

tended discussion of. the value of various leases cited

as. comparables... Aftet all of: this information—Harvey —

‘Canal. Public Service, leases, etc.--had been weighed and *

analyzed, the Commissi6s recorded its conclusions. In so -

doing the Commission ‘expressly. discloséd that its valua- ©

tions were not the product of any erraneous use of assert-

ed comparables. 2

8 This was cited as significant by all of the experts. — °

'4 The Report stated: “Because of the nature, character and size of

the property in suit and the non-existence of any other property*in the -

are. bearing greater likeness or similarity to that in suit than those.

involved in the cited sales and leases-of other, properties, it is under-

_standable, that the appraisers fad to-resort to the cited sales ahd leases

for market data. They have-undoubtedly produced what thejr judgment

dictated was the best data available under the circumstances which, we

believe, demanded that gteater latitude, than normally allowed, be_per-

mitted in the introduction of. such’ market data.

“Neediess to say, jwe c cannot and do not predicate any findings or

corclusiéns of value, or awards of just compensation solely on eny indi-

¥idual sale or lease cited. We do not regard the evidence of market data

conclusive cr in itself détermimative of the issues of ‘value he ein. Such,

evidence of that data as we have given. weivht, viewed, in tne litht of

ithe whole eg | oy the évidenee, has. however, furnished us with some

“indies itidN the v gues to be dete rmined.” ’

"th . 3 -

/

a opinion, this Court was thetarget of petty garbling ‘which,

hee Pale i Set AB:

Though this. fact is. not mentioned in the Court’s .

even within the limits of strong: advocacy, hardly does :.

credit to the sovereign, The impression “which the Gov-.

ernment soufht to creaté is’ that these opinions of .Mr.

Lemarie, seriously considered by the Commi§sion, were.

mere: exaggerations in beha!f of interests served by him_

for a fee. Thus the Government urged the Court to reject,

as it does, Mr. Lemarie’s valuation of $12,000 per acre -

for waterfront property at Michoud because he got the .

‘figure “out of my -head.” *

ae . ie On

I resist the temptation to embellish it, for the record,

as. i aecarta is more than sufficient refutation:

ree: Out of my head. ‘

2

: ““Q. In other words, you had nothing to rely

on as a comparable to give you a figare of. 30 cents -

per‘square foot?) .¢

“A. Mr. Wisdom [Gévernment counsel], I

think “the formulas that I used are means of check-

ing. But I think that reasonable. judgment is ex-

pected Of me gs 2 witness that has: been in the- 5°

business forget ma years.as I have been to apply °

- that -reasondble judgment to the figure that I have. -

compiled. I have compiicd'a lot of figures here, but

when I get-right down to it. use what-I consider

is reasonable judgment to determine the. wahie: f

, the ey: ek! Ps oe

ee Sue *

MQ, I can under: stand. Mr. Lemarie. your. . .

stating that 30 cents was the figure per. squars

foot that vou. assigned as the value of the property ;

= at Michout, and that if you say -so, that that was :

a matter of judgment, but what T want sto make. ,

- certain ‘is. that there were no comparable Proper- j ‘6

ties that you eximined ‘that led you to that con- ’

~clusion? 7 ae

er

a . . .

aie te ‘ : : e --« .

i ae 7 ast , 47 ' ** sor . . ’ * *%

MGis bane alan MIPTICUIaP ‘Property Inco

bs i H I :

/

Moe

- consideration. I know that property. in the heart

of the city sells for $1.50 ‘to $2.00 a square foot.

I knaw that property sells in other areas for 50

cents a square foot. I -know that property has

sold on the Harvey Canal for 40, 50, and 60 cents

square foot. . I know, that property down: in the’

5 rear area here along the river front has sold

_ for $1,00 and’$1.25 a square foot. I put all of that

- together and I used my. experience that I have had,

sind reasonable judgment in determining ‘If I know

* all of this, what is this worth’ and I say it is:

worth 27 to 30 cents a Square foot.” of

Coir

That Gesiaele and the Commission were “aa “sound

d, the Government expert, Johnson, makes clear. |

first testifying that he investigated sales of other

prop&yties which he thought to be as comparable as possi-

ble, Jotmagn ir response to this question: “What did you

do in. order to help you reach your conclusions as to the

values you ‘placed. on the open land * > *.” gave this

answer : Cy "s

a. “A. * * * But in the final analysis | used my

‘judgment based on my years of experience, and

knowlegé cf industrial property in this vicinity.”

Ant, then, -breathing life int» recognized’ works on Yeal

estate appraisal.” Mr. Johnson stated that “1 thoroughly

subscribe” io @lart's text that “after the apprals' r has

applies “ill the theory and has analyzed all of the: data,

Landepes Comes up with hig conclusions, he shoul! walk

— ° ] ‘ ‘ aah ! 4 . j anh '

ham acrors the s #eetand put it on the curbs: and

s * \

>1 try in Vy rt | + : “aig . oe o tea

BAY LO himself, ° Now, What.can |! peddle it tor: And if

the onswer doesnt coincide with the answer do ter: ined

Soe y] f } . ae oy bs ¢ é

by the study of all of the data. then they. owebt te co out,

the wvindew end the comn sense froure <hotl s the

? ' 2 were “e ?

‘é : ‘ e . , ‘ ’

conclusion.” Elaborating on this he concluded :

ro ee thoroughly. subscribe to it. I think

about 25 percent of the appraisal business is ex-

perience and 25 percent theory and 50 percent of.

‘it common sense, maybe 51 percent of it common

sense.” :

P haps stated in more » traditional language that is

precisékx what the SixtlfCircuit is saying in Knollman ev.

United States, 6 Cir.,.1954, 214 F. 2d 106, 108.9.

I have dwelt on this at length iui to me it dee

_ onstrates <that no matter how much we sugarcoat it, -in

. - this reversal this Court is engaging in the process of fact

finding, In our remote positions whether in the Court-

‘house at New Ovleans or from our various home envirans,

+ Wwe’ are undertaking to declare as a matter of law that in

these opinions these working New Orleans rez! estate

oo. simply do not know what they are talking about.

To, reverse the judgment, we are Saying as Judges that

no reasonable man could find fhat waterfront property

of the.kind available at Michoud*does-not -have the value .

* placed on. it by Lemarie or the others. When Courts

make such statements, it inevitably means’ that Judges are

here testifying from their own or collective experience.

In order’ ‘for us to say that no reasonable m man coul® hold,

| we must Jus know the Tacts, “Ys that. is so, then [ am

— < ae : a = .

‘Woes of the Government c\perts a that thes: fgur handled

Pm industrial property in New Orican i ali other trokers com-

bined ‘ :

“fT am unable to understardadane, ¢oart’s emticism directed at the

Ete Me for aceepuny o>; ‘bused upon square footage. I

wonld doubt that one as seasaned BQ Juvisre ¢ nristenberry was misled

by the ylittering. meenitude of 0.000% square feet. He, as must be et

. 86 as to the CommMissaonpers and the re estite experts who made a living

at ther trade, is presemaly able to translote 15,560 square sect mto

1} ” amount to aseertaen the jy. oy gore: Moreover, tnere is «

positive ‘testimony’ that industr-ai property is sold on a square

fry isis in New Oriea sir preed by air is Fated by pounds,

by rie vtidred we . rot Pit busimessmen somehow han-

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°

unaware of the moment it came to me that waterfront

properties do not reflect their extraordinary value as deep

as 1,000 feet. If in that, process my own experience counts

for anything, I have difficulty in.excluding rather inti-

mate knowledge gained by going into, around and through —

‘numerous docks, terminals, shipyards, and_ the _ like

“e¢. throughout ports in the Gulf Coast.

° Z . .

. The next error specified is that the Commission val-

ued the.vacant land and ‘the building areas (leased and —

unleased) separately and added the two together. This is

another instance of the Court’s preoccupation with the

hypothetical willing seller-purchaser of the entire property

as a whole. Granted, that this is the ultimate aim in the

evaluatjon -protess, there is nothing in the law, and cer-~

tainly nothing in the experiénce of businessmén And eco-

nomics, which would commit either the Commission or

the experts to the artificial process of giving one single

value one time gnd without any elaboration. as a break-

down. re :

In-evaluating an office building in a modern city, for

example, any real estate man in hi@ right mind would

certainly differentiate between the rents obtainable for

ground floor space, that in sub-basemerits, that in exterior

office spate and that for interior -spaces-near corridors,

“elevators, service areas and the like. Likewise, the so-

ealled theoretical investor about ready to purchase prop-

erties as‘compkex as Michoud would necessarily arm ltim-

self with w staff of inspectors, surveyors and appraisers.

“by'which to determine the reasonable value of the identi-

tiable component ‘party! of the-complex. Trus, in that

process one cannot addf2. and 2 and get‘moye than 4. But

+. unless 27and, 2 are first identified and then added, the.

so-called expert wowkl indeed, lay himself open to the

charge urged by aaa against Lemarie that

-

o

Buon A4g

his‘opinion would be “out of my head” and nothing more.

Certainly tie! in United States v. Bulder, 5 Cir.,

1962, 305 F. 2d 319, 325, or the earlier case so often mis-

Seay @) the Government in these appeals, United States

Certain Parcels of Land in Rapides Parish, 5 Cir.,

1945, 149. F. 2d 81, forbids the proper use of an articulate

breakdown of component values so long as the evidence

‘shows that separate values-are. tentatively deteymined in

the cours® of ascertaining the economic value for the

theoretical sale of the whole. -Any other rule would pro-

duce absurdities, both in aconomies and judicial. adminis-

tidh. Thus, applying it literally, an expert put on the ©

a after first testifying as to, His general qualitica-

tiéns, could be asked but two questions: (1) do you have.

“an opinion? 12) What is your opinion as Jo. the oa

value of the entire property if sold to a*single purchaser?

‘It takes no great prescience to predict that any such pro-,

‘cedure would be severely cendemned. And if-—as the

Court implies—the expert is. not permitted to elucidate.

on che breakdown of constituent, values in the course of

his direct ex: rmination, he certainly would not be permit-

ted to go into it on cross examination, The trier of fact |

avould then have 2 bald, naked opinion, nothing more.

nothing less. ‘ ae '

The quest for the “hypoth: tical seller meeting the

hypothetical buyer negot jating >on a hypothetical _sale

which would never in ract Le ‘made has not yet reguced |

the Fifth Amendment to any such absurdity.

Moreover; this case was not tied before the Com-

missiai under any aitificin! procedural’ shackle by which

one and only one: figure could ever be stated. In the first

place the Court's charge (XXIV» stated that value “is to

~he ascertained and ‘fixed on just consideration. ofa!) the’

>

.

A50 “

uses for, which the property is suitable, and evidence as .

to all such uses may be offered’ by either side.”'* The

Commission “concluded that the. weight of the evidence’

establishes that single occupancy of the plant is indicated

as its highest and best use * * *.” It fully understood

what that meant. In the light of its holding that “ * * *

the property in suit, taken as a whole, had no counter-

part in New Orleans or surrounding area,” the Report

stated the problem in traditional terms. “The appraisal of

- the fair market value must be made considering the in-

formed willing hypothetical seller and purcha: ie

of the whole. ° >

equally - important the Government ‘through the ques-

tions propounded by its advocate and responses ade by ©

its experts foMowed exactly that same method. In detail-

. ing the evidence from Government exnert Aschaffenburg

‘covering pages 415-447 of the Report), the first 11 pages |

reflect his analysis ard methods‘employed in valuing va-

cant acreage (not including acreage attributable to build-

°ings:.- His testimony and the Commission’s analysis ®f it

- demonstrates further that the single-shot method envis-

aged by the Court’s opinion never Would work, For in his

judgment the raw acreage had to be further divided into

several sub-categories such as submerged, batture land,

etc. In other testimony, he then elaborately evaluated the -

buibfinds from a rental standpoint for purposes of capi-

talization. And Chart No. 3 annexed as a part ofthe .

Commission Report reflects ‘that while his figures* were

different, he, as did the Dock Board experts, attributed

s separate dollar values to:(a} land attributed to buildings,

‘bh! the value of buildings theggon , (ce) the value of open

land and (d) the deductions from the value onaccount of

existing long term leases. The same was true of Govern-

‘IS Tf this was an error, the Government did not object below, and it

asserts none here. :

e

is o Aol

ment expert Johnson (pages 447-47%) ."° Moreover,’ pawn

sop’s testimony ‘as the Commission’s detailed analysis of

its reflects) illustrates the very process through which’

intelligent, conscientious, experienced; competent real es-

tate experts go in arriving at some idea of value where,

as here, there is and can be no real comparable.*’ Thus

the Government’s own expert valued vacant land, not on

‘the basis of the Dock Board rental rates of $200 to $350

per acre which this Court lays down as the imperative

_standard,*' but rather upon a reconstruction based upon

his entire judgment and experience. That professional

opinion, as with that of others, was a matter for the triers

of fact to weigh in the light of all other’ evidence.

For similar reasons I think there is no basis for the

_Court’s criticism that fixing rental values for vacant land ©

.. by a specified return on stated land yalues “is. the reverse

of the usual process ‘of ascertaining the value of land by

capitalizing its rental potential.” A consideration of the

detailed Report “shows: that ail of the experts—recogniz-”

ing that in the final analysis it was a matter of infoyaied

1% He treated vacant land in. ‘four-main- cutegitietattlbating. a a sep- :

arate per acre dollar value to each to produce a ‘total vamey Of $2,305,697-

00 for the open land.

The report then discusses in detail his calculations. ona capitaliza-

tion method for producing the effective values ofthe buildings and

land thereunder. Chart No. 3 reflects this valuy’ sepfrately states “

$: 3,705, 55 a 8

-0 Thus, for’ example, his estimate of sapo. per acre .for- land ia

category “G"-—Protected by Levee—was referable ‘to three cited. sales.

Starting with an adjusted cost of raw land At Miche id of $1,455 he-then

added increments such as the following’ to reflect advantages of the

Michoud property ‘over the cited sales:

. For sewerage facilities $500 per acre

For drainage 50O*per acre -

Michoud cleared, leveled and graded 300 per acre

Michoud waterfrontage greater ~* 400 per acre

Location of Michoud somewhat better © . 500 per acre

These or similar. adjustments produced Michoud values of $3, 655 ed $4,244

which he rouhded-off at $4,000.

“1 The Court states on vacant land values: ‘“We think it is plain that. .

in the absence of any Substantial evidence to the contrary, it must be

taken * * * that the rental rates for the land * * * in effect as of January

10, 1951, must he deemed to be the rents to be used for the valuing of the

takine * * * May 1, 1951."

{ ei, ‘

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Pn a various methods to -test. tn result. In

such testing, an element which is proved by-one approach

is Assumed to be — in — another.*”

“THE. LESSEES' INTERESTS. :

o If: J can understand w ‘hat the Court, says, , the Lessees

for all practical purposes are thé real victims of a fiction.

In the Court’s preoccupation with the hypothetical ideal

“of a single seller and a single purchaser of: property that

never was or would be- seld, the Lessees with valuable ad-

vantageous leaseholds are caught between ‘two fictions.

men The Court reasonsthat ‘the leaseholds had no extra-

- ordinary-valut because theoretically on May 1, 1951—the

instant before condemnatjon—they could’ have obtained

like space from unleaseC pertions of Michoud itself. And

-as to those few leases which the Court seems ‘tu, recognize.

might have some extraordinary advantage, the less sus-

tained by-thehesseés ix not recoverable ‘because the cost

to them of replaceme nt space was brought about by the

Government taking of Michoud itself. f

Thus what has no value suddenly becomes irreplace-

able. 1 do not think that the Fifui Amendment has yet

become so “fictionalized by United. States +. Cors, 1949,

337 U.S..325; 69S. Ct. 1086, 93 L. Ed, 1392." 6

° the ‘record — the Commission's findings show the .

~ existenre of -a-real economic value in favorable leases.

The loss. of the Lessees is the, loss *ststained by having

thet valuable intérest taken away. The loss does not

come frém increased costs by virtue of the Government °

condi mmition.

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22 The Jaw is not above sueh cireuler reason: ng. Compare the test

for esudies an instructed verdic t with that for er ranting. . in. 0.1

s Pn

on"

3 - .

DISPOSITION ON REMAND. .

I-have two principal concerns as to the Court’s pro- »

posed disposition on remand. The first. is that 1 am baf-

fled by the outlined . disposition or remand. [| try: to put:

myself in the position of the District Judge? Just what

is-he to do? What Sact findings .are to be respected?

Where is he to find the subordinate facts upon Which pre-

*ymably he is to make some. more of his own?

¢

The “second is that wile it lene not mnandatorily

order kk retrial before a jury, the Court’s coments, ‘que-

tations and directions add up to anether strictureagainet oo

-the use of Commissioners undey any cifcumstqnce—

‘ease began as a complicated .one: -1t is still complicated.

We have anarety added to its complica tions.

&

~ The presence of a Suter on the bench in the presence

of 12 jurors is nqt going to chgnge it.. Except as to Gost

of reproduction ‘which the Commissioners. rejected |,

ii a - we have had to deal’witn turns upc

- admissibility of evidence as such. The hope ex

therefore in United States ¢.*Leaveil & Ponder;

F.2d 398-7 409, Will not invest us or the Ariai Judge

with the poweR of an aic chemist: we cannot’ make simple

that w hich is evinplex.

°

”

1 only: know one thing: this case will be back with

us“vears and thousands and thousands of pages later.

. 7 ; : >

_ Tt has been tried on jegal principles to which there

was no timely objection registered or preserved. #1, was

certainly the kind of case pee a jury trial ee gS eel

F.R.Civ.P. T1Ath). Fact finttings have been. “mde “hy

—

——

—

—_ —

2A gury-triaf at at Which the trial judge. promptly rules on the ad-

missibility of the proper testimony and ti.en narrows the issue by appro

re priate charge to the’ jury may. indeed, frequently simplify even what

CR appears to be a compex valuation problery.” :

s

——---- —- Peal

Pe

-A54 ; ; :

tHe body constituted under the rules to determine such u

case. There, in the main, it should end. For that is’ the

meaning.of clearly erroneous even in condemnation cases.**

oe

24 United States v. Tampa Bay Garden Apdgtments, Inc., 5 Cir., 1961, —

294 F. 2d 598; Parks v. United States, 5 Cir.. 1961, 293 F. 2d 482; United ©

States vy. Twin City Power Co., 5 Cir., 1958, 258 F. 2d 197; Stephens v.

United States, 5 Cir., 1956, 235 F. 2d 467. oe . ;

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PARI

ane AD5

APPENDIX B

Federal Rules of Civil Procedure:

~ Rule

F ndings by the Court »

. (@) Effect. In all actions tried upon the facts with-

out a jury or with an advisory jury, the court shall find

the facts specially and state: separately its conclusions of

law /thereon and direct the entry ‘ef the appropriate judg-"

ment; and in granting or refusing interlo¢utory injunc-

- tions the court shali similarly set forth the findings of .

fact and conclusions ef Jaw whith constitute the grounds « |

r of its action. Requesta : for findings are not necessary for

purposes of review. _ Findings of fact shall not be set

aside unless clearly erroneous, and due regard shall -be ©

given to the opportunity. of the trial court to judge of

“the credibility of the witnesses. The findings of a master,

.to the extent that ‘the “court adopts sthem, shall “be con- °

sidered as the findings of .the court: If an opinion or

memorandum of ‘decision is filed, it will be sufficient ‘if

the findings.of fact and conclusions of law appear there- -

in. Findings of fagt and conclusions of law are unneces-

sary on decisions of motions under Rules 12 or 56 or any

other motiop excépt as provided in Rule 41‘b'.- As

amended Dec. 27, 1946, effective March 19, 1948. 4

. Rule 53(e)(1I) Sorin in

(II) In ‘Non-Jury Actions. . In an action to be tried —

without a jury the court shal] accept the master’s find-

ings of fact unless cleariy erroneous. Within 10 «days

after being served with notice of the filing. of the report *

‘any party may-serve written objection= thereto’ upon the

other parties. Application to the court for. action upon

the report and upon objections thereto shall be by motion

and upon notice as prescribed. in @fule 61d). The court

after hearing ‘may adopt the report or may modify it or

| &

A56- at

|

may reject, it in whdle-or in part or may. receive further

ovinenes or may recommit .it with instructions. —

Rule TIACh) a eS eae &

(h) Trial. If. the action involves ‘ie exervise of the

power of eminent domain under the law of tic United

“ States, any tribunal specially constityged by an Act of

Congress governing the case for the trial of the issue of ~

_ just compensation shall be the tr ibunal for the determina-

tion: of that issue; but if there is no such pecially con- .

stituted tribunal any party may have a trial by jury of

the issue bs just compehsation by filing a demant there-

for 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, loca-_

- tion, or quantity of the property to be condemned, or for

other reasons in the interest of justice, the issue of com-

pensation shali be-determined’ by a commission of three

persons appointed by it. If a commission is appointed it

shall have the powers of a master provided in subdivision .

- (ec) of Rule 53 arid proceedings before it shall be govérned

by the provisions of paragraphs (1) and (2) of sub-

‘diyision id) of Rule 58. Its action and report shall be

. determined aby a majority and its findings and report .

shall have the effect” and be dealt with by the court in

accordance with the practiee, prescribed in paragr ‘aph (2e

of subdivision ie) of Rule 53. Trial of all issues shall

othetw ‘wise be by. the court. '

28 U.S.C. 125411) , § hes

§ 1254. Courts of appeals; - certiorari; appeal, certified

questions:

Cases’ in ‘the courts of appeals may be reviewed by

the Supreme Court by the following. methods:

€ . J ad 7

(3 ‘ ; Pm Abd7 °

(1) -By writ of certiorari granted upon the petition

_ of any party to any civil or criminal case, before or after

_ rendition of judgment or decree; ae,

28US.C.138 = 40

§ 1358.-' Eminent domain

The district courts shall fave original jur risdiction of

all proceedings to. condemn real estate for. the use of the

‘United States or its departments or agencies. June 25, «°

1948, c. 646, 62 Stat. 935,.~ |

ake Ws

40 U.S.C. 258a ‘7 ,

§ 2586. Same; lands, easements, or idiiiciiiolaiay for pub-

lic use; taking of possession and title in advance

re F of final judgment; authority; procedure

: “In any proceeding in any court of: the United States

‘outside of the Districy,of Columbia which has been or

may be instituted by and in the. name of and uiuder the

authority of the United St tates: for’ the acquisition of any

land oy easement or right of way in lerd for the. public

use, the petitioner may file ‘in the cause, with the petition -

or at any time before judgment,’a declaration of taking

; signed -by ‘the authority empowered by lav jo acquire the

lands described in the petition, decl¥yig that said lands

ao ~ are thereby taken for the use “of thyp/United States. Said

declaration. ef taking shall copfain -oF have. annexed

, . thereto—+ ae |

4

(1i A statement of pe authority under which and

r + the public use for whiebSaid lands are taken.

\- ; (2) A destripsion’ of -the lands: taken sufficient for

. +r ¢. * ’ : ,

the identification’ thereot.

Gtutement of. the estate or interest ino said

er for said public use.

°

ee oe A eg Ss dy

(4) A plan showing the lands taken. _ __

fae : \ 30 SH, s

(5) A statement of the sum of money estimated by

said acquiring authority” to be: just compensation -_ the.

land taken, Siorks

—— ‘

«

: Upon the filing. said. didiasetias of taking and of the

. deposit in the court, to the yse of the’ persons entitled

‘thereto, of the mount. of. the estimated compensation

‘stated in said declaration, title to the said lands in fee

~ simple absolute, or such less estpte or interest therein as’ |

. is specified in said declaration, shall vest. in tKe United ..

States of America, and said lands shall be deemed to be -

‘condemned and taken for the -use of the United States,

and the right to just compensation for the same shall vest.»

in the persons entitled thereto; and said ‘compensation

shall be ascertained and awarded in said proceeding and °

- established by judgment therein, and. the’ said judgment

shall include, as partiof- the just compensagion awarded,

interest at the-rate of 6 per centum per annitm on the

amount finally» awarded as the value of the property as

of the date of taking, from said date to the date of pay-

ment; but intérest shall not be allowed on sé muclr ‘thereof -

as shal] have been paid: into the court. No sum so paid

"into the court’ shall be, chargpd with commissio: < or:

_poundage.

£4

ed |

- Upon the applicationi of the parties in interest, - the

court.may order that the money deposited in the court, or

any part thereof# be paid forthwith. for or°on account of

the just compensation to be awarded in said proceeding.

If the: compensation finally awarded in respect of said

lands, or any parcel thereof, shall exceed the amourt of

the mawey so received by any person entitled, the -court

_ shall. enter juidgment againstthec waited States for the

amount. of the deficiency.

Gian: the filing-of/a, declaration of taking, the court

- shall®have power to ‘fix’ ‘the time within which and the

ternis upon which the -parties in possession shall be re-

. quired to surrender possession .to the petitioner. The

court shall have power to make such orders in respect: of

‘ encumbrances, liens, rents, taxes, assessments, insurance,

and other charges, if. any, as slfall be just and equitable.

Feb. 26, 1931, ¢. 307, § 1, 46 Stat. 1421.

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