State ex rel. State Highway Commission v. Foeller

• Citation: 396 S.W.2d 714
• Decision Date: 13 December 1965
• Docket Number: No. 51228,No. 2,51228,2
• Parties: STATE of Missouri ex rel. STATE HIGHWAY COMMISSION of Missouri, Appellant, v. Julia F. FOELLER et al., On Exceptions of Wellsville Firebrick Company, a corporation, and New Florence Firebrick Company, a corporation, Respondents
• Court: United States State Supreme Court of Missouri

Page 714

396 S.W.2d 714

STATE of Missouri ex rel. STATE HIGHWAY COMMISSION of

Missouri, Appellant, v. Julia F. FOELLER et al., On Exceptions of Wellsville

Firebrick Company, a corporation, and New Florence

Firebrick Company, a corporation, Respondents.

No. 51228.

Supreme Court of Missouri, Division No. 2.

Dec. 13, 1965.

Robert L. Hyder, Thomas E. Cheatham, Jefferson City, for appellant.

Walter D. McQuie, Jr., Montgomery City, William J. Kenney, Kenney, Stevens, Hill & Clark, Pittsburgh, for respondents.

PRITCHARD, Commissioner.

In this condemnation case of a portion of land for the right of way for Interstate Highway 70 in Montgomery County, Missouri, respondents recovered judgment for $82,000 for the taking of 100,000 tons of their subsurface mineral rights to New Florence Flint clay. The clay, described as high quality, is used in the manufacture of superduty fire brick. Appellant contends that the judgment is excessive as a matter of law by $52,000. We thus have jurisdiction of the appeal.

By Point II, appellant insists that the trial court erred in overruling its timely motion to strike the opinion testimony of market value of respondents' witnesses Weiss, McCarthy and Arthur on the ground that their opinions were not based upon proper elements of damage and had no correlation with the established market value of the undeveloped mineral property. Before we review the testimony of these witnesses we set out other background facts.

Although respondent New Florence Firebrick Company (herein called 'New Florence') once engaged in the manufacture of bricks, it now merely holds as its chief assets clay reserves which it leases exclusively to its sister corporation, respondent Wellsville Firebrick Company (herein called 'Wellsville'). On May 1, 1922, New Florence acquired title from one Gilbert (its officer) to fire clay and flint rock deposits, and an easement for the mining thereof, to what was known as the Kobush 80 in Montgomery County, Missouri. This rectangular tract, lying north and south, formerly adjoined old U. S. Highway 40 which is now the north outer road to newly constructed Interstate 70. In the northwest corner of the tract are the clay deposits, the value of which is in controversy. They underly 3.18 acres, the total area taken, and an area to its south. It is not disputed here by appellant that there exists and was taken (actually and by rendering it unminable because of the necessity for subjacent support to the right of way) 100,000 tons of 'New Florence Flint' fire clay which is usable in respondents' business.

On April 2, 1962, New Florence leased to Wellsville said mineral rights, and such lease was subsequently extended, the last term of which extended beyond the date of taking, September 6, 1963. The consideration for the lease was that Wellsville should pay New Florence 30cents per ton for the fire clay removed thereunder. Wellsville, located 7 or 8 miles north of New Florence, is a refractories plant which produces about 100 different refractories products for the steel, metallurgic, glass and other types of heavy industry. The clay deposit in question lies about 3 miles south of New Florence, and has an overburden of sand, rocks, coal and dirt averaging 50 feet in depth. The procedure for mining clay, 20,000 tons of which are used by Wellsville each year, is first to remove the overburden by stripping down to the clay. The specific selections of clay are segregated at the pit into various types and qualities. It is not stockpiled, but is mined in small quantities, then hauled to Wellsville where it is ground and combined into what tests show are the proper percentages of materials, and then it is made directly into brick.

Mr. Russell Weiss testified that he is Vice President in charge of operations for Wellsville, and is Assistant Treasurer of New Florence. He has been employed for 30 years in the refractories business. Among others, one of his duties has been concerned with all acquisitions of clays. Clay mining is done generally within a 30-miles area in, around and about Wellsville, with a larger proportion mined in Montgomery County. New Florence Flint clay is a true flint clay with very low impurities and a relatively high melting point; it has plasticity--the ability to be formed of itself without the addition of other more or less impure types of clay; it is used for superduty and high fired superduty refractories products. It is found mostly in an area centered on the town of New Florence, and within an area of 5 or 6 miles to its south, with some little bit to the north of the town. The clay deposit is a reserve which has been procured, drilled and proved as to quantity and quality, and which is awaiting mining at the earliest date upon which the type of clay is required, and which could not be obtained elsewhere. Wellsville has reserves because experience has indicated that it is becoming increasingly difficult to find high quality clays such as is in the deposit.

Concerning initial acquisitions of clay deposits, and arrangements with landowners therefor, Mr. Weiss testified that at the time exploratory drilling is started, a lease is made, or a stipulation as to payment, for the right to go upon, mine and remove any clay found. For New Florence Flint clay the price, depending on the location, number of feet of overburden and other factors, will normally be in and around 30cents per ton. The lease-contract agreement is entered into usually before any knowledge is available as to quality or quantity of the clay. Testing of the Kobush 80 began in 1958 and was completed early in 1962.

Mr. Weiss testified that as a part of his duties as Vice President of Wellsville he takes part, and has for 20 years, in the acquisition of minerals and mining rights and the negotiating of leases and instruments called warranty deeds for fire clay, being directly concerned therewith. He has discussed the question of acquisition of mining rights with persons in other refractories plants, and thought that, based on his own job duties and contract with persons in other plants, he had an idea of the value of fire clay, mining rights and minerals. He was then permitted to testify that in his opinion the fair and reasonable market value of the minerals and mining rights in and under the Kobush 80 immediately prior to the taking was about $300,000, and after the taking the value was $6,000 for 2,000 tons of clay remaining. He was then asked what factors he took into account in arriving at his valuation before the taking of the property. He answered that there were a great number of factors in addition to the 30cents per ton which would have to be paid for royalties. The first mentioned was the location of the property--the proximity of the deposit to plants, in this case it being almost centrally located from almost all of the refractories companies located in east central Missouri. The second was the very important factor of scarcity of the type of clay--'[E]ach year it assumes a greater and greater importance. The difficulty of finding a pit of this size is very much greater in 1963 than it would have been five years previous.' The third factor was the quality of the clay, in this case excellent. 'Any of the refractories plants in East Central Missouri would consider this to be an attractive pit and valuable mining property.' The fourth factor was the overburden on the clay deposit, in this case around 50 feet. This would be somewhere around 300,000 tons as against a recovery of clay of 100,000 tons, a 3 to 1 ratio. The instant property contains less overburden than some properties presently being mind. The fifth factor entering into the matter of the market value of the clay was testified by Mr. Weiss to be the costs of finding new clay.

On cross-examination Mr. Weiss was referred to answers to interrogatories made by him in which he had listed the sales, leases or transactions he believed to have any value in determining the fair market value of the condemned pit. He was asked if he considered any sales or acquisitions in arriving at his valuation aside from those listed on the interrogatory answer, to which he answered 'I would say no, no other sales or acquisitions.' The interrogatory answer showed that Wellsville had four properties leased 'of 25 cents, 25 cents, 10 cents and 25 cents and 15 cents and 30 cents per ton, is what you pay for it, isn't it?' Mr. Weiss answered, 'Those are the royalty payments, yes.' He testified further that he based his opinion on a great variety of factors, and prefaced those by saying 'In addition to the royalty payments.' In acquiring mining rights from farmers he considered the proximately factor and the overburden, but not the scarcity and quality of the clay, 25cents and 30cents is considered to be a relatively standard and fair royalty payment. For 100,000 tons of clay $30,000 would be all the landowner would ever get.

Robert J. McCarthy is Executive Vice President of respondent companies. He had been continuously employed in the firebrick business since 1939, going with respondents in 1960. He was familiar with the Kobush 80 and the fire clay pit in the northwest corner thereof, and had seen all the maps and drill records on the property. Harbison-Walker Company was mining similar clay on property adjacent to the Kobush 80 and all companies were prospecting and mining in the area where the New Florence clay is found. 30cents a ton royalty is the sum that is set forth in the lease arrangement between New Florence and Wellsville. Royalty payments to landowners are usually, and in respondents' case always, arranged prior to any drilling or testing. The figure of 30cents per ton is the current accepted royalty in the refractories industries in the area for this particular kind of clay under these particular conditions. The 30cents royalty relates to economic value. It is the first step of a long series of things which happen to determine...