In re Alberti

• Citation: 41 F. Supp. 380
• Decision Date: 29 September 1941
• Docket Number: No. 33058-Y.,33058-Y.
• Court: U.S. District Court — Southern District of California
• Parties: In re ALBERTI.

41 F. Supp. 380

In re ALBERTI.

No. 33058-Y.

District Court, S. D. California, Central Division.

September 29, 1941.

Frank P. Doherty, Maurice Gordon, William R. Gallagher, and Frank W. Doherty, all of Los Angeles, Cal., for petitioner.

Mark Watterson, of San Bernardino, Cal., for debtor.

YANKWICH, District Judge (after stating the facts as above).

The effect to be given to the findings of a referee, and, consequently, to those of a conciliation commissioner, was stated by Judge Wilbur in Weisstein Bros. & Survol v. Laugharn, 1936, 9 Cir., 84 F.2d 419, 420:

"Appellee contends that the case having been tried before the referee, and the referee having found that the claimant was entitled to possession of the canned fruit, that the District Court could not disturb the decision. This contention is based upon the familiar rule that where facts are litigated before the referee, and where the witnesses appeared before him, and a decision upon the controverted facts had been made by him, the court will not ordinarily be justified in reversing the finding of the referee as to the controverted facts. In re Gordon & Gelberg 2 Cir. 69 F.2d 81, 83; Rasmussen v. Gresly 8 Cir. 77 F.2d 252; Remington on Bankruptcy (4th Ed.) vol. 8, 3669, p. 41; Ingram v. Lehr 9 Cir. 41 F.2d 169, 170.

"The question here, however, is not at all one of reversal of the referee upon his determination of a factual issue. The error of the referee was in holding that because he had no jurisdiction to determine the rights of the Security First National Bank, a third party, over its objection, he should ignore that right in determining the issue between the parties as to whether or not the debtor or claimant was entitled to possession. Proof that the pledge holder was entitled to possession was proof that both the debtor and claimant were not entitled to possession. The trial court rightly held that under the stipulation the claimant was entitled to a general claim only against the debtor for the amount of $962.04, the value of the canned fruit purchased by it which was not delivered because of the pledge."

This means that, while, on conflicting testimony, we must follow the findings of the referee (or the commissioner), when there is no conflict of testimony, or when the testimony upon which the decision is based is not legally entitled to the effect which the commissioner has given to it, there is no evidence whatsoever to sustain the commissioner.

This review presents the very simple question whether agricultural property can be appraised legally by taking into consideration one factor only, namely, productivity, under the use to which it is being put. The law of California says specifically that while the highest use to which the property can be put is a criterion of value, no value can be determined solely by such use. The Supreme Court of California has expressed this view in a long series of cases. Perhaps the classic case on the subject is San Diego Land & Town Co. v. Neale, 1888, 78 Cal. 63, 20 P. 372, 3 L.R.A. 83. I am reading from page 67 of 78 Cal., page 374 of 20 P., 3 L.R.A. 83: "The word `value' is used in different senses. Bouvier, in his definition, says: `This term has two different meanings. It sometimes expresses the utility of an object, and sometimes the power of purchasing goods with it. The first may be called the value in use; the latter the value in exchange.' For the purposes of the law of eminent domain, however, the term has reference to the value in exchange or market value. There are some cases which seem to hold that the value in use to the owner is to be taken if it exceeds the market value. But it will generally be found, on a careful examination, that such cases either relate to the damage accruing to the owner from the taking, and not to the value of the property itself, or overlook the distinction between the two things. The consensus of the best-considered cases is that for the purposes in hand, the value to be taken is the market value. Citing cases. By which it is undoubtedly meant, not what the owner could realize at a forced sale, but `the price that he could obtain after reasonable and ample time such as would ordinarily be taken by an owner to make sale of like property'. * * The problem, then, is to ascertain what is the market value. Now, where there is an actual demand and current rate of price, there can be but little difficulty. But in many instances (as in the case before us) there is no actual demand or current rate of price, — either because there have been no sales of similar property, or because the particular piece is the only thing of its kind in the neighborhood, and no one has been able to use it for the purposes for which it is suitable, and for which it may be highly profitable to use it. In such case it has been sometimes said that the property has no market value, in the strict sense of the term. * * * And in one sense this is true. But it is certain that a corporation could not for that reason appropriate it for nothing. From the necessity of the case the value must be arrived at from the opinions of well-informed persons, based upon the purposes for which the property is suitable. This is not taking the `value in use' to the owner as contradistinguished from the market value. What is done is merely to take into consideration the purposes for which the property is suitable as a means of ascertaining what reasonable purchasers would in all probability be willing to give for it, which in a general sense may be said to be the market value."

The case came before the court again in San Diego Land & Town Co. v. Neale, 1891, 88 Cal. 50, 25 P. 977, 11 L.R.A. 604. On page 61 of the opinion in 88 Cal., page 980 of 25 P., 11 L.R.A. 604, I find this statement:

"In the case at bar the opinion of some of the witnesses was based on speculative and conjectural calculations of expenditure and profit for a period of five years', and others on a basis of ten years' use of the property in controversy, in connection with the property owned by plaintiff. The facts and figures relied on in support of these opinions not only threw no light on the question, but must have operated to confuse and mislead the minds of the jury. * * *

"The following authorities establish the proposition that the compensation to be awarded the owner of the land condemned cannot be based upon the value of the property to the person or company in charge of the public use, nor by its necessities, and that it is not proper to take into consideration the profits which may result from the use of the land, especially where the profits depend upon the expenditure of large sums of money in carrying out the contemplated enterprise."

So we have both sides of the question. Value in use to the owner is not a criterion of value. Nor is value in use to the person who seeks to acquire the property. This question does not concern us. But it is important, as determining what criteria do not govern the determination of value.

Most of these cases are condemnation cases. But they all deal with the question of value and market value and the manner of determining them.

Value in use as a criterion has been condemned in subsequent cases, among which are: Santa Ana v. Harlin, 1893, 99 Cal. 538, 34 P. 224, and Central Pacific R. Co. v. Feldman, 1907, 152 Cal. 303, 92 P. 849.¹

One of the oldest cases in California, and one which is considered almost a classic, is Central Pacific Railroad Company v. Pearson, 1868, 35 Cal. 247, 261. Speaking of proof of value, the Court said: "The opinions of witnesses, founded upon a knowledge of the location, productiveness, or adaption of the land to other uses, not speculative, or of the market or selling price of the land in the vicinity, are legal evidence to prove its value. * * * But the opinions of witnesses who do not possess this knowledge are not. The opinions of such are worthless as a foundation for intelligent action, even in a matter of business. The business man who forms his judgment upon the opinions of others who have no knowledge of the subject of which they speak, would be obnoxious to the charge of great folly, if not lunacy; and opinions which cannot be accepted as worthy of any influence upon the action of men in the management of their business affairs, certainly ought not to be made the basis of judicial action."

These principles have been reasserted in later cases ever since.

In City of Stockton v. Ellingwood, 1929, 96 Cal.App. 708, 716, 723, 275 P. 228, 232, the Court said: "While the qualifications of the witnesses may be inquired into with considerable minuteness upon direct examination, it does not appear that testimony as to the value of lands for any special purpose may be given by the witness in dollars and cents. The witness may be questioned as to every adaptability that would give value, but his opinion must not be expressed in the general terms of so much money as the market value." Then on page 723 of 96 Cal.App., page 235 of 275 P.: "Market value is to be the measure of damages, and evidence of value for a special purpose is only to be considered as an element of the question. Neither the value in use to the plaintiff nor to the owner is to govern."

The case of Temescal Water Company v. Marvin, 1932, 121 Cal.App. 512, 9 P.2d 335, 336, is very interesting. The entire testimony of a witness was stricken because it was not based upon an understanding of the legal meaning of "market value". The opinion reads: "He described the two beneficial uses for which the land in section 35 was adapted from an engineering standpoint, and further stated that he had familiarized himself with the different uses to which land is generally adaptable, and that the land in section 35 could be put to other beneficial use, irrespective of its uses viewed solely from an engineering standpoint. The witness was then asked if he could give an opinion as to the reasonable market value of section...