Bergeman v. State Roads Commission of Md.

• Decision Date: 13 November 1958
• Docket Number: No. 25,25
• Citation: 218 Md. 137,146 A.2d 48
• Parties: Richard C. BERGEMAN et ux. v. STATE ROADS COMMISSION OF MARYLAND.
• Court: Maryland Court of Appeals

Page 137

218 Md. 137

146 A.2d 48

Richard C. BERGEMAN et ux. v. STATE ROADS COMMISSION OF MARYLAND.

No. 25.

Court of Appeals of Maryland.

Nov. 13, 1958.

Rehearing Denied Dec. 12, 1958.

Victor H. Laws and E. Dale Adkins, Jr., Salisbury (Adkins, Potts & Laws, Salisbury, on the brief), for appellants.

Walter W. Claggett, Sp. Atty., Easton (C. Ferdinand Sybert, Atty. Gen., Joseph D. Buscher, Sp. Asst. Atty. Gen., and Hamilton P. Fox. Jr., Sp. Atty., Salisbury, on the brief), for appellee.

Before BRUNE, C. J., and HENDERSON, HAMMOND, PRESCOTT and HORNEY, JJ.

HENDERSON, Judge.

In a condemnation proceeding filed on February 8, 1957, by the State Roads Commission the jury awarded the defendants $23,000 and from a judgment in that amount entered March 10, 1958, after a motion for new trial had been overruled, the defendants appeal here. The property in question, at 127 East Church Street in Salisbury, consists of a lot binding on Church Street for about 63 feet, with a depth of about 58 feet, containing about 3,707 square feet, improved by a two-story frame dwelling house, from 50 to 75 years old, but renovated and remodeled in its interior after its purchase by the appellants in 1948. On the first floor are a dentist's office and a beauty parlor, with a living room and kitchen in the rear, occupied by the appellants. On the second floor there are four bedrooms and two baths, three of these bedrooms being rented to weekly or daily tenants, and the other bedroom and bath being occupied by the owners. The taking was total, and no question is raised as to its necessity. Nor was any objection made as to the court's charge. The chief contention is that there was no legally sufficient evidence to support the jury's verdict, since the testimony as to value ranged from $26,588. to $48,000. It is further contended that there were prejudicial errors in the court's rulings upon the admissibility of evidence.

The appellee produced a witness, William G. Rayfield, who after qualifying as a real estate expert testified that he had made an appraisal and explained the basis for his opinion. His first method was by estimating the replacement cost of the building (28,000 cubic feet, at 60cents per cubic foot), less depreciation (30%), which produced a figure for the building of $11,760. To this he added the estimated value of the land, at a square foot value of $4, or $14,828, and arrived at a total value for the property of $26,588. It is conceded that this is a proper method of valuation. See Baltimore City v. Himmel, 135 Md. 65, 107 A. 522 and Pumphrey v. State Roads Commission, 175 Md. 498, 2 A.2d 668. His second method was by estimating the gross income from the property which he thought would be about $4,000 a year, less expenses, which he estimated at about $1,950 a year, or a net income of $2,150. (Actually, the difference would be $2050.) Capitalizing the net income at 8%, which he testified would be a reasonable return, he arrived at a figure of about $27,000, which he felt was a verification of his appraisal under the first method. He testified that 'most investors look for a 7, 8 or 9% return on their money.' This method of valuation by capitalizing the net rents is also an accepted one. See 1 Orgel, Valuation Under Eminent Domain (2d ed.) §§ 157, 176, 177. The courts distinguish between the capitalization of rentals and of profits from a business. Cf. Lustine v. State Roads Commission, 217 Md. 274, 280, 142 A.2d 566.

The appellee then produced a witness, Alfred T. Truitt, who, after qualifying as a real estate expert, estimated the value at $26,700. His physical appraisal, based on reproduction cost (27,448 cubic feet at 70cents per cubic foot) less depreciation (40%) for the building ($11,540), plus a land value at $4 a square foot ($14,820), produced a total of $26,360. His income appraisal, which he stated to be a better test under the circumstances and in that particular locality, came to $26,700. His gross income figure was $4,308, but he made an allowance for vacancy of 'one month in each 12 months period in the area, except the owner's quarters,' which reduced the gross income to $4,025 per year. He calculated the expenses or charges against gross income at $2,423. He capitalized the net of $1,602 a year at 6%, making $26,700. When asked why he used 6%, he testified 'well, 6% is as much as anyone can hope to get from an investment, and is a likely income from investment.' In cross-examination, he testified that 'net income capitalized at 8% in this case would give a value of $20,025.'

The appellants produced as their real estate expert, S. Denmead Kolb. He calculated there were over 38,000 cubic feet in the building, by including the attic and the unexcavated portion of the basement. However, he used a square foot computation, using $15 per square foot, depreciated at 33 1/3%, and came up with a figure for the building of $25,040. He added the value of the land at $5 per square foot, for an overall valuation of $43,575. Using the income method, he found a gross income of $4,308. He allowed $200 for vacancies, and estimating the expenses at $1,700, came up with a net figure of $2,608. Using 6% for capitalization, he arrived at a value of $43,340, as a test of his first valuation.

The only other testimony as to value was that of Mr. Bergeman, one of the appellants, who testified he had $31,095 invested in the property, for which he had paid $11,500 in 1948. He testified that the rentals were $4,308 a year, including an allowance for his own occupancy, and an allowance for the dentist's office, although that had been vacant since July 1955. The actual expense of operation came to about $800 per year, not including the value of Mrs. Bergeman's srevices in connection with the rentals, or his own services. He valued the property at $48,000.

The appellants state the question to be 'the extent to which the jury in a condemnation case is bound by the testimony as to damages presented to it.' They argue that since the lowest estimate given by any expert was higher than that found by the jury, the jury must have either based their finding on pure speculation, or upon their own estimates derived from their view of the property, rather than upon the sworn testimony in the case. On the question of the function of a view, the authorities are not in accord as to whether the information and knowledge gained by a jury's view of the property sought to be condemned is evidence or not. The better view seems to be that it is real evidence to be considered. See 5 Nichols on Eminent Domain § 18.31; 1 Orgel, Valuation Under Eminent Domain (2d ed.) § 129; 4 Wigmore on Evidence (3d ed.) § 1168; McCormick on Evidence, § 183; 53 W.Va.L.Rev. 103. But it is generally recognized that an award based entirely on a view, and contrary to all the other evidence, cannot be sustained. In Maryland a view is provided for before the taking of testimony under Code (1957), Art. 33A, sec. 7; but sec. 9 provides that thereafter the trial shall proceed as in other civil cases. In Kurrle v. Baltimore City, 113 Md. 63, 76, 77 A. 373, it was held that the mere fact that the jury had viewed the premises did not preclude the court from passing upon the legal sufficiency of the evidence presented in court. But the emphasis to be placed upon the view has been variously stated. Tide Water Canal Co. v. Archer, 9 Gill & J. 479; Baltimore City v. Megary, 122 Md. 20, 89 A. 331; Patterson v. Mayor & City Council of Baltimore, 124 Md. 153, 161, 91 A. 966; Hajewski v. County Com'rs of Baltimore County, 184 Md. 161, 167, 40 A.2d 316. Cf. Cordish v. Bloom, 138 Md. 81, 90, 113 A. 578. For present purposes, we may assume that a verdict based solely upon a view could not stand. The question remains as to whether there was legally sufficient evidence in the sworn testimony to support the verdict.

It seems clear that the jury was not bound to accept the conclusions of any expert. As we said in State Roads Commission of Maryland v. Novosel, 203 Md. 619, 625, 102 A.2d 563, 566: 'The jury's function is to determine whether the emphasis sought to be given the facts in any of the testimony is correct, and they need not follow any witness' judgment as to the weight to be given to a particular factor in arriving at a valuation.' In Murray v. United States, 76 U.S.App.D.C. 179, 130 F.2d 442, a verdict for less than the amount fixed by any expert was sustained, where there was other evidence to support it.

The jury in the instant case may well have agreed with the conclusion of the witness, Truitt, that the capitalization of net rentals was a better test under the conditions in that locality, than a formula based in part upon the reproduction cost of an old building. In 1 Orgel, supra, § 176, p. 699 it is said: 'Market value of vacant land plus reproduction cost of structures (with allowances for physical depreciation) is one possible index of the value of the entire property. But if is a plausible measure of value only under the rarely valid assumption that, if the building were to be destroyed, it would be reconstructed substantially with its present design and material, and on the same or similar land. The mere determination of the validity of this assumption requires an estimate of the probable earning power (that is, the rent value) of the whole property. For if the property could not be rented to yield on replacement cost, it would not be replaced. In effect, then, the value of the property is measured by the lesser of two alternative measures--the cost of replacement (minus allowances for depreciation) and the capitalized rent value of the enterprise for which the property is adapted.' For a discussion of the weakness inherent in estimates of reproduction cost, see Chesapeake & Potomac Telephone Co. of Baltimore City v. Public Service Commission, 201 Md. 170, 183, 93 A.2d 249.

On the other hand, the jury may well have found that the capitalization rate of 6%,...