Arkansas State Highway Commission v. Stanley

• Citation: 4 A.L.R.2d 749,353 S.W.2d 173,234 Ark. 428
• Decision Date: 08 January 1962
• Docket Number: No. 5-2510,5-2510
• Parties: , 4 A.L.R.3d 749 ARKANSAS STATE HIGHWAY COMMISSION, Appellant, v. Marshall STANLEY et ux., Appellees.
• Court: Supreme Court of Arkansas

Page 173

353 S.W.2d 173

234 Ark. 428, 4 A.L.R.3d 749

ARKANSAS STATE HIGHWAY COMMISSION, Appellant, v. Marshall STANLEY et ux., Appellees.

No. 5-2510.

Supreme Court of Arkansas.

Jan. 8, 1962.

Rehearing Denied Feb. 19, 1962.

Dowell Anders and Paul Johnson, Little Rock, for appellant.

J. B. Milham, Ben M. McCray, Benton, Kenneth C. Coffelt, Little Rock, for appellees.

GEORGE ROSE SMITH, Justice.

The appellees, Marshall Stanley and his wife, owned a rectangular tract of about 67 acres in Saline county. This is an action by the highway commission to condemn 18.03 acres for a 350-foot right of way running diagonally across the Stanleys' land. After the taking the landowners will be left with two triangular parcels, one of about eight acres lying northwest of the new highway and the other of about 41 acres lying southeast of it.

This appeal questions a verdict and judgment awarding the appellees $150,000 for the 18.03 acres. For reversal the commission contends that the verdict is not supported by substantial competent evidence and that the trial court erred in refusing to permit the condemnor to make exploratory drilling tests upon that part of the land not being taken. We are of the opinion that the commission is right in both contentions.

Stanley testified that he bought the land in 1943 for about $8.00 an acre. The tax assessor testified that the 1960 assessment of the entire 67 acres, at 20 per cent of its value, was $440, indicating a worth of about $32.50 an acre. One of the appellees' witnesses, a real estate dealer, valued the land, apart from its minerals, at $200 an acre, or $3,600 for the parcel being taken. The highway commission offered the testimony of two real estate appraisers; one fixed the value of the 18.03 acres at $3,500, the other at $3,750.

The verdict of $150,000 finds the land being condemned to be worth about $8,320 an acre. The appellees insist that this figure is supported by testimony tending to show that the tract contains valuable mineral deposits.

Two kinds of minerals have been found within the tract and extracted commercially. The first, referred to as white gravel, is used in surfacing driveways and walks. Drilling tests indicate that the tract contains 34,966 cubic yards of this gravel. Stanley has been selling it since 1943 for $2.00 a yard. His loading and severance tax expense is 15cents a yard, leaving a return of $1.85 for the gravel.

The second mineral is a fairly pure mixture of sand and gravel that can be used as the aggregate in the manufacture of concrete. Concrete that is made from this aggregate, with cement and water, is suitable for the production of septic tanks, grease traps, and well tile. The appellees' tests indicate that the tract contains 241,759 cubic yards of this concrete aggregate.

The appellees relied upon three witnesses in their attempt to establish the value of the mineral deposits. Stanley himself described the physical characteristics of the land and recounted his experience in selling white gravel. He said that in seventeen years he had made from 100 to 150 sales in the Benton area. That would be a sale about every six weeks. The average volume of each sale is not shown. Stanley also explained the process by which he used the aggregate in the manufacture of septic tanks, grease traps, and well tile. He gave the yield from a yard of raw material and the selling prices for the finished products. This information, however, could not have been of any help to the jury, for there is no testimony about such essential factors as the cost of the cement, the labor expense, and the volume of sales.

After this introductory testimony Stanley stated that in his opinion the tract taken is worth twenty million dollars. This figure is arbitrary in that it has no relation whatever to any fact in the record. Stanley made no effort to say how he arrived at his valuation; it seems to have been plucked from the air and might equally well have been ten thousand dollars or a hundred million dollars. Even the opinion of an expert in the field of land valuation is not substantial evidence if he fails to show a fair or reasonable basis for his conclusion. Arkansas State Highway Comm. v. Byars, 221 Ark. 845, 256 S.W.2d 738. There is still less reason for finding the fanciful figure fixed by Stanley to be a sufficient foundation for the verdict in this case.

The appellees' other two valuation witnesses were allowed to arrive at an opinion by multiplying the number of yards of each material by a fixed unit price. The witness Kimzey, a retired geologist not possessing any demonstrated expert knowledge of values, testified that 300,000 yards of concrete aggregate, at $5.00 a yard, would be worth $1,500,000; that 34,966 yards of white gravel, at $1.85 a yard, would be worth $64,687.10; and that these figures, when added to a land value of $3,600.00, produced a total valuation of $1,568,287.10. The third witness, a real estate broker, used a similar method of computation in arriving at a valuation of $2,311,347.00.

The practice of determining value by multiplying the number of yards or tons of material by a unit price has, as Orgel points out, been uniformly rejected by the courts. Orgel, Valuation Under Eminent Domain (2d Ed.), § 165; Nichols on Eminent Domain (3d Ed.), § 13.22. Well-reasoned decisions include United States v. 620.00 Acres of Land, etc., D.C.Ark., 101 F.Supp. 686; United States v. 765.56 Acres of Land, etc., D.C.N.Y., 174 F.Supp. 1; Hoy v. Kansas Turnpike Authority, 184 Kan. 70, 334 P.2d 315; Gulf Interstate Gas Co. v. Garvin, Ky., 303 S.W.2d 260; State v. Mottman Mercantile Co., 51 Wash.2d 722, 321 P.2d 912.

We had occasion to touch upon the rule in Ark. State Highway Comm. v. Cochran, 230 Ark. 881, 327 S.W.2d 733, where we said: 'As a general rule the market value of a tract of land cannot be determined simply by estimating the amount of stone or other mineral that it contains and then multiplying that estimate by a fixed price per unit.'

The exclusionary principle is plainly sound. The ultimate question for the jury is the market value of the land, the price that would be agreed upon by a willing buyer and a willing seller in a transaction at arm's length. The mechanical process of assigning a retail value to every yard of mineral within the earth does not carry the jury beyond the realm of guesswork. That narrow formula fails to take into account vital considerations such as the cost of excavating the material, the cost of processing it, overhead expenses, the market for the finished product, and so on. In the case at bar the jury had almost no information about these matters. If the jurors had assumed without proof that an average order for white gravel for a driveway was, say, ten cubic yards, they might readily have determined that it would take Stanley almost 400 years to sell the deposits in the tract if the demand continued at the same rate as in the past. Obviously no purchaser would pay full retail value for the gravel in place in order to hold it for decades or centuries before recovering his investment. But what would he pay? The appellees' proof left the jury without the facts needed for an answer to this question.

We are cited principally to our decision in City of Little Rock v. Moreland, 231 Ark. 996, 334 S.W.2d 229, where we upheld a finding that a tract of land in Pulaski county, containing bloating clay that could be used in the manufacture of a lightweight concrete aggregate, had a fair market value of about $181 an acre. There is little resemblance between that case and this one. There, as the opinions indicate, the litigants produced the best expert testimony that could be found, the judgment of men engaged in the business with actual experience in the matter of locating and constructing new plants for the production of lightweight aggregate. They had familiarized themselves with the pertinent considerations, such as the cost of erecting and operating a plant, the amount of the finished product that the market available to a Pulaski county plant could be expected to absorb, the availability of mineral deposits in addition to those within the land being condemned, and the competition to be expected from other building materials. The final decree in that case rested upon comprehensive proof of a substantial nature. Similar evidence is not to be found in the present record.

The second issue is the matter of discovery. Before the trial the highway commission, having been refused access to that part of the appellees' land not being condemned, applied to the court for an order permitting it to enter this land and make test drillings for the purpose of determining the extent of the mineral deposits therein. In response to this motion the appellees waived their claim to severance damages and used that waiver as a basis for contending that the condemnor was not entitled to explore the rest of their land. The court sustained the landowners' position and entered an order declaring that no proof would be received concerning the physical characteristics of the land not being taken.

This was error. Our discovery statute provides: 'Upon motion of any party showing good cause therefor * * * the court in which an action is pending may * * * order any party to permit entry upon designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated object or operation thereon.' Ark.Stats. 1947, § 28-356.

The language of this statute was taken verbatim from Federal Civil Rule 34, 28 U.S.C.A. It follows that our legislature, in adopting the wording of the federal rule, also adopted the principle of liberal construction that had been announced in the leading case of Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451: 'We agree, of course, that the deposition-discovery rules are to be accorded a broad and liberal treatment. No...