State Highway Commission v. Palin, 11741

• Decision Date: 27 November 1972
• Docket Number: No. 11741,11741
• Citation: 503 P.2d 524,160 Mont. 486
• Parties: The State of Montana, Acting By and Through the STATE HIGHWAY COMMISSION of the State of Montana, Plaintiff and Appellant, v. Melvin D. PALIN et al., Defendants and Respondents.
• Court: Montana Supreme Court

Page 524

503 P.2d 524

160 Mont. 486

The State of Montana, Acting By and Through the STATE HIGHWAY COMMISSION of the State of Montana Plaintiff and Appellant, v. Melvin D. PALIN et al., Defendants and Respondents.

No. 11741.

Supreme Court of Montana.

Submitted Sept. 21, 1972.

Decided Nov. 27, 1972.

Daniel J. Sullivan and Donald A. Douglas (argued), Helena, for plaintiff and appellant.

Knight, Dahood & Mackay, Wade J. Dahood (argued), Anaconda, William F. Sheehan, Philipsburg, for defendant and respondent.

JAMES T. HARRISON, Chief Justice.

This is an appeal by the Montana State Highway Commission from a jury award of $48,600 to the defendant, Melvin Palin, in a condemnation suit. The land was used as part of the interstate highway system. Both parties agreed that the highest and best use of the land, located along the Clark Fork River in Granite County, was for grazing. The Palins placed a value of $51,470 on their lands being taken. The State's appraiser computed compensation at $9,850. The Palins' expert witness, Melvin Beck, testified concerning the value of the land and as the basis of his opinion Beck used what he called the 'capitalization of income method'. This testimony was objected to by the State Highway Commission as having no proper foundation.

The controlling issue in this cause is whether this is an appropriate case for the use of the 'capitalization of income method' to determine the value of the land. We conclude that it was not.

The argument made by Palin's counsel was that the opinion testimony given by Beck was supported by substantial evidence and therefore proper for the jury to consider. The record on appeal does not support that argument. The testimony of Beck was based upon hypothetical assumptions and not from any actual information gathered from Palin or anyone else concerning the amount of income that could be derived from the land in question. His testimony concerning the method by which he reached his valuation was:

'Well I first have to determine how many animals can be grazed and fed on this area.'

On voir dire examination it was determined that this carrying capacity of the land was determined by 'observation and study'. In State v. Peterson, 134 Mont. 52, 63, 328 P.2d 617, 623, this Court held that income or revenue from land was 'admissible for the purpose of arriving at the market value of the property'. The only testimony in this record concerning income from the land is that of Palin's brother, who testified that he had cut hay on the land in 1959. He did not testify that the hay had been sold or used in the ranch operation. The end result of this is that Beck's testimony was inadmissible because his basic assumption was not based on income from the land.

This result is not to say we disapprove of the use of the capitalization of income method in determining the value of land. We have previously held that it is a proper method within certain limitations. State Highway Comm'n v. Heltborg, 140 Mont. 196, 369 P.2d 521; State Highway Comm'n v. Bare, 141 Mont. 288, 301, 377 P.2d 357. In Bare we reached the same conclusion as in this case and for the same reason the conclusion reached by the expert witness was not based on tangible factors. We said:

'* * * Mr. Working's application of the method * * * is not an appropriate application. Further, in this case, none of the figures, being based on one year only, and in part pure estimates, have such degree of certainty as to be a credible factor.'

We then went on to...