State v. Cerruti

• Decision Date: 31 January 1950
• Citation: 188 Or. 103,214 P.2d 346
• Parties: STATE v. CERRUTI et al.
• Court: Oregon Supreme Court

214 P.2d 346

188 Or. 103

STATE v. CERRUTI et al.

Supreme Court of Oregon.

January 31, 1950

Argued Oct. 26, 1949.

Samuel A. Hall, Assistant Counsel for State Highway Commission, of Salem, argued the cause for appellant. On the brief were George Neuner, Attorney General, J. M. Devers Assistant Attorney General and Chief Counsel for the State Highway Commission, G. W. Neuner and C. W. Enfield, Assistant Counsels for the State Highway Commission, all of Salem.

Charles R Harvey argued the cause for respondents. On the brief were Harvey & Harvey, of Portland.

Before LUSK, C. J and BRAND, ROSSMAN, BAILEY, HAY and PAGE, JJ.

LUSK Chief Justice.

The state of Oregon, through its State Highway Commission, commenced this proceeding in eminent domain for the purpose of acquiring 2.47 acres of agricultural land (being a portion of a larger tract comprising about forty-four acres) owned by the defendants, M. A. and Rose M. Cerruti, and against which the defendants, Joseph J. and Mabel F. Fisher, hold a mortgage. The land lies west of Troutdale in Multnomah County, and the parcel to be taken will form a part of the New Columbia River Highway.

The state offered the owners $3,000 as just compensation for the land taken. The jury returned a verdict assessing defendants' damages at $4,000, and from the consequent judgment the state has appealed.

By appropriate assignments of error, based on objections made on the trial, the state raises the question, broadly stated, of the admissibility in evidence of testimony as to profits which may be derived from the use of land as bearing on the question of market value.

In the vicinity of the land in question are farm lands, which, according to substantial evidence, are similar in kind and quality to that of the defendants and which are planted to celery and lettuce. Defendants' land had not been so cultivated. The defendant, M. A. Cerruti, testified that when he acquired the tract in 1946 it was for the most part covered with weeds and Johnson grass, and that he had been cultivating it for the purpose of getting rid of these growths. His principal crop had been corn. By plainting crops of that kind, he testified, he was able to cultivate the land with a tractor and thus get rid of the Johnson grass; this could not be done if small crops were put in because 'you tear all the crops out in trying to get rid of the Johnson grass.' For about six or eight months he had been putting about ten loads of barn manure on the land a week.

W. G. Morrison, a witness for the defendants, who owns and farms land in the vicinity of defendants' land, was asked to state 'how much you are making per acre from cultivating your land'. Counsel for the plaintiff objected on the ground that 'profits are not a proper index of the market value of land, and on the further ground that what a farmer will be making on adjoining ground is no indication of the market value of the property in controversy.' The court ruled: 'I will limit the inquiry as to what like land, similar land, under the usual husbandry or average farmer diligence and attention will produce, not what any one farmer might make, because there might be a disparity between the different kinds of attention and skill and so on.'

Counsel for the defendants then rephrased his question to conform to the ruling, whereupon counsel for the state said: 'If the court please, I don't want to keep interjecting here, but may the record show that we take objection to this type of question and the answers.' The court said 'So understood', and counsel for the defendants made no objection to the ruling. The witness was then permitted to answer the question, and stated that, if the land were cultivated for celery, 'you should get around a thousand crates per acre.' He was then asked what that would mean under the market conditions during the past season and testified that 'there was two of us that realized close to six thousand dollars a piece' on 'approximately seven acres of celery', and that this was net profit.

Other witnesses for the defendants gave similar testimony. One swore that 'the average farmer who uses average diligence and skill in taking care of land and producing crops' should realize a thousand dollars per acre net profit from crops grown on land 'of this type'; another that a tenant on a farm owned by him 'is making $1500.00 a month,' that 'the prior owner must have made that or better', and that a man on an adjoining tract 'was making a very big profit in 1940'; and the defendant, M. A. Cerruti, that farmers on land adjacent to his are realizing $1,200 an acre net profit from celery and lettuce crops. All this testimony was admitted over the repeated objections of the plaintiff.

The record raises two questions: (1) Was it error to admit evidence of the net profit a farmer of average skill and industry could make by cultivating land similar to that of the defendants for the production of celery and lettuce? (2) Was it error to admit evidence of the actual net profits realized from such cultivation of similar lands?

These appear to be new questions in this state. The general rule is that evidence of profits derived from a business conducted on property is too speculative, uncertain and remote to be considered as a basis for computing or ascertaining the market value of the property in condemnation proceedings. Orgel on Valuation Under Eminent Domain 529, § 161; 2 Nichols on Eminent Domain, 2d Ed., 1173, § 446; 2 Lewis on Eminent Domain 1273, § 727. See annotations, 134 A.L.R. 1125, 7 A.L.R. 163. Lewis states the reason for the rule as follows: 'The profits of a business do not tend to prove the value of the property upon which it is conducted. One man will get rich while another will become bankrupt in conducting the same business upon the same property.' Idem. Furthermore, it is to be borne in mind that what is taken is the real property, not the business. Lewis, op.cit., 1272. To the same effect see Orgel, op.cit., 534, § 161.

But there are well-established exceptions to the general rule. The overriding principle is thus stated by Lewis, op.cit., 1274, § 727: 'The profits derived from the use of the property itself may be shown, whenever such profits would be an indication of value. If a valuable city lot is devoted to gardening purposes, the profits derived from it may be no indication of its value. But if it is improved to correspond with its locality and surroundings, the rents derived from it, after deducting taxes and expenses, will be a very important factor in determining what it is worth. Where a toll-bridge was taken, it was held proper to show the income from it during a series of years preceding the taking. So the profits derived from farming afford a criterion of the value of the farm.'

Similarly, it is said in Brainerd v. State, 74 Misc. 100, 131 N.Y.S. 221, 229: '* * * Where the personal skill, experience, and efforts of the owner plays too prominent a part, the profits realized from the business conducted upon real property constitute but little aid in determining the value of the property, but, where the earnings depend chiefly upon the location, soil, or character of the property itself, the profits derived from it may furnish reliable evidence of its value.'

The reason for admitting rental value has been said to be 'because it is almost as fixed and certain as the market value of the property.' Gauley & E. Ry. Co. v. Conley, 84 W.Va. 489, 100 S.E. 290, 292, 7 A.L.R. 157. In the toll bridge, and also in the turnpike cases, and the well-known case of the scenic viewpoints in the vicinity of Niagara Falls, In re State Reservation at Niagara, 16 Abb.N.C., N.Y., 159, evidence was admitted of the profits derived from the use of the properties because such profits were the entire or chief source of value. See Columbia Delaware Bridge Co. v. Geisse, 38 N.J.L. 39, affirmed 38 N.J.L. 580; State v. Suffield and T. Bridge Co., 82 Conn. 460, 74 A. 775; Chestnut Hill & Spring House Turnpike Road Co. v. Montgomery County, 228 Pa. 1, 76 A. 726; Montgomery County v. Schuylkill Bridge Co., 110 Pa. 54, 20 A. 407.

The decision of this court in Public Market Company v. City of Portland, 179 Or. 367, 390, 391, 170 P.2d 586, rests upon its own particular facts. It was there held that evidence of income derived from the business conducted on the property could be considered as an element in determining market value because the case dealt with a special purpose building, there was no comparable property in the city, and consideration of profits was necessary to avoid overvaluation of a new building which constituted an overimprovement of the vacant land. The case is cited by the defendants, but is not in point. Neither is Portland v. Postill, 123 Or. 579, 592, 263 P. 896, 900, cited by the plaintiff, excepting in so far as it recognizes the general rule excluding evidence of profits. There the property was a leasehold interest in part of a building. The question was whether the defendant was entitled to show the profit derived by him from the business--a restaurant and card room--conducted by him on the premises, and the court said that 'evidence of profits of this character is not admissible to show substantive damages, although in certain instances it may be admitted as indicating to some extent the rental value of the premises.' As, however, the defendant had refused to take advantage of an offer of the trial judge to receive the evidence for the latter purpose, it was held that he was not in a position to complain in this court.

The weight of authority seems to support the view that evidence of profits derived from the use of agricultural lands is relevant to the question of market value and therefore admissible. City of Los Angeles ...