Knox Lime Co. v. Maine State Highway Commission

• Decision Date: 13 June 1967
• Citation: 230 A.2d 814
• Parties: KNOX LIME COMPANY v. MAINE STATE HIGHWAY COMMISSION.
• Court: Maine Supreme Court

Page 814

230 A.2d 814

KNOX LIME COMPANY v. MAINE STATE HIGHWAY COMMISSION.

Supreme Judicial Court of Maine.

June 13, 1967.

Verrill, Dana, Walker, Philbrick & Whitehouse, by John A. Mitchell, Roger A. Putnam, John L. Sullivan, Portland, for plaintiff.

Lester A. Olson and Atwood C. Nelson, Legal Div., Maine State Highway Commission, Augusta, Sidney W. Wernick, Portland, for defendant.

Before WILLIAMSON, C. J., and WEBBER, TAPLEY, MARDEN, DUFRESNE and WEATHERBEE, JJ.

WEATHERBEE, Justice.

On report. We are concerned here with the taking by the State for highway purposes of a strip of land owned by Byron M. Clark in which the mineral rights were owned by the plaintiff.

On March 1, 1960 the Great Northern Paper Company was the owner of the plaintiff corporation. The plaintiff had been mining limestone on the reference property for the use of the parent company in its mills. Prior to March 1, 1960 the Great Northern Paper Company altered its manufacturing processes and discontinued the use of paper rock and on that date the plaintiff conveyed to Lime Products Corporation the right to enter and remove the limestone from its quarry, the Union Quarry, for a period of three years. Mr. Harold B. Kaler was then president and stockholder of Lime Products Corporation and that corporation commenced production in the quarry late in the Spring of 1960. In 1962 Mr. Kaler and others acquired from the Great Northern Paper Company the ownership of the plaintiff corporation and Mr. Kaler bacame plaintiff's president. Plaintiff issued a new lease to quarry lime rock to Lime Products Corporation on September 1, 1962 and thus became in effect a holding company.

Thus in early 1960 the fee in the land was owned by Mr. Clark, the plaintiff was the owner of the mineral rights in the reference parcel and Lime Products Corporation had the rights under the lease to quarry lime rock.

On March 30, 1960 the defendant condemned and took for public use a strip of land crossing this parcel containing 1.6 acres. Mr. Clark participated in a hearing before the Land Damage Board as a result of which the Board fixed compensation for the taking in the amount of $700.00. Plaintiff, the owner of the mineral rights, received no notice of this hearing and did not participate in it and when notified of the award filed timely notice of its appeal to the Superior Court in Knox County. There the parties agreed to submit the matter to hearing before three referees.

The referees heard the matter during five days in the Spring of 1965. The greater part of the numerous objections made by the defendant concerned offers by the plaintiff of testimony concerning the present worth of anticipated future earnings and of anticipated future royalties, often referred to as capitalization of income and capitalization of royalties. A large part of plaintiff's evidence as to value was based in whole or in part upon these methods and the referees admitted this testimony de bene with its admissibility to be determined by them at the conclusion of the trial.

When the testimony ended, however, the parties agreed to report the matter to this Court without a decision by the referees and it was ordered so reported in accordance with M.R.C.P. Rule 72(b) to be determined by us as the rights of the parties require upon the pleadings, docket entries, exhibits and such testimony presented before the referees as we determine to be legally admissible.

Our problem is complicated by the fact that counsel are now unable to agree on the manner in which the case was presented to the referees, plaintiff's counsel contending that the issue to be determined was the value of the mineral resources alone and defendant's counsel insisting that the plaintiff was to be treated as though it was the owner of the fee, but disregarding the previous award to Mr. Clark.

It appears to us that due to some misunderstanding as to plaintiff's ownership of the mineral rights, the hearing before the Land Damage Board proceeded on the theory that Mr. Clark was the sole owner of the reference property and no consideration was given to plaintiff's interest in the mineral rights. Defendant's counsel, in their brief, conceded that the award to Mr. Clark was independent of any value enhancement of the land by virtue of the fact that it contained minerals. Although the parties may not have fully understood each other's position, it appears to us that the defendant, realizing that plaintiff had been in some manner deprived of its opportunity to present its claim before the Land Damage Board, had waived possible technical objections and had joined in asking that plaintiff be compensated for its damages, in spite of the fact that one award for damage to the property had already been given. The chairman of the Board of Referees said to the parties:

'THE COURT: Besides all the formalities or errors of omission or commission in the past we are now down to the question of what the owner of this mineral deposit is entitled to as result of the construction of this road and this taking. As I understand it, all prior sins of omission or commission have been forgiven and we are down to that fundamental issue, and as far as this Board is concerned, we are not going to be concerned about the question of ownership.' (Emphasis supplied)

It was evidently the intention of the defendant and the referees to restore plaintiff to the same position it would have been in if it had received the required notice and participated with Mr. Clark in the hearing before the Land Damage Board-that is, to be awarded fair compensation by the referees, as it should have been by the Land Damage Board, for the damage to its interest in the property. That interest was the ownership of the mineral deposit.

It does not appear necessary to adopt the fiction that plaintiff is to be considered as the owner of the entire fee as defendant proposes that we do. It is true that the general rule is often stated to be that the value of mineral resources in the earth cannot be determined separately from the land. It appears, however, that the many cases using this language are ones where the title to the surface and the mineral resources are in the same person. In such cases (and when all interests in the property are being determined in the same action) the test is the value of the whole property, considered as land, enhanced (if it is enhanced) by the value of the minerals. These courts are in fact only recognizing that the value of the mineral deposit cannot be determined separately and added as a separate unit to the value of the land. Hollister v. Cox, 131 Conn. 523, 41 A.2d 93, 156 A.L.R. 1412 (1945); Atlanta Terra Cotta Co. v. Georgia Ry. & Elec. Co., 132 Ga. 537, 64 S.E. 563 (1909); Searle v. Lackawanna and Bloomsburg Railroad Co., 33 Pa.St. 57 (1859); Ringwood Co. v. North Jersey District Water Supply Comm., 105 N.J.L. 165, 143 A. 369 (1928); Nichols on Eminent Domain (3d ed.) Vol. 4, § 13.22; 27 Am.Jur.2d, Eminent Domain, § 290. With this we agree.

In Lime Rock R. R. Co. v. Farnsworth, 86 Me. 127, 29 A. 957 (1893), the plaintiff had taken by eminent domain a strip of land in which the limerock and other mineral rights were owned by the defendant. The plaintiff had settled with the owner of the remainder of the land. This court then approved of making a separate determination of the damage to defendant's mineral rights, adding on page 132, 29 A. on page 958, as dicta,

' * * * we have been shown no reason why the rules and principles applicable in other cases of assessing damages for taking land are not applicable in this case. If Mrs. Farnsworth's interest in the land had no market value just before the taking, she has not suffered any legal damage. If her interest then had a market value, how much was it reduced by the company's action would seem to be the question. The existence and the depreciation of the market value can be determined in this case by the same kind of evidence as in other cases.'

Courts in other jurisdictions have found no objection to compensating separately the owner of mineral rights when the fee to the land was in another. State by and through State Highway Comm. v. Arnold, 218 Or. 43, 341 P.2d 1089, 1104, 343 P.2d 1113 (1949); Comstock v. Iowa State Highway Commission, 254 Iowa 1301, 121 N.W.2d 205 (1963); Eagle Lake Improvement Co. v. United States, 5 Cir., 160 F.2d 182; United States v. 4.553 Acres of Land, 208 F.Supp. 127 (D.C.1962); 29A C.J.S. Eminent Domain § 174.

Our problem then is to decide from the pleadings, the legally admitted testimony, exhibits and docket entries, what damage was occasioned to the fair market value of plaintiff's interest in the limestone reserves in the reference parcel as a result of the State's taking.

At this point, a summary of the evidence is necessary to an understanding of our rulings on admission or rejection of certain testimony.

Knox County has a number of limestone deposits of economic value and quarrying this rock has played a significant role in the economic life of the area for several decades. There are several such deposits in the general area which were discussed here and they vary somewhat in their chemical content. The various classes of limerock are marketable for different uses. That with a high calcium content (containing 53.25% calcium oxide or higher-known as 'paper rock') is particularly suitable for use in the paper industry in mills which use that rock in their manufacturing processes. It also finds a market as an element in poultry feed and in the sugar beet industry. Calcium limerock furnishes raw material for the cement industry, and the greatest use for low calcium rock is as fertilizer when it is known as 'agricultural limestone'. Stone with a high calcium content can profitably be mixed with a lower grade material to produce marketable agricultural limestone, and limestone with a high magnesium content is also used to make this product. Much of the...