U.S. v. 0.376 Acres of Land

• Decision Date: 26 January 1988
• Docket Number: No. 86-5905,86-5905
• Citation: 838 F.2d 819
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. 0.376 ACRES OF LAND, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 819

838 F.2d 819

UNITED STATES of America, Plaintiff-Appellee, v. 0.376 ACRES OF LAND, et al., Defendants-Appellants.

No. 86-5905.

United States Court of Appeals Sixth Circuit.

Argued Sept. 17, 1987.

Decided Jan. 26, 1988.

Bernard E. Bernstein (argued), Allyn Lay, Bernstein, Susano & Stair, Beverly S. Burbage (argued), Richard T. Beeler (Knox Co.) Knoxville, Tenn., for defendants-appellants.

Thomas P. Carolan, Vicki L. Plaut (argued) U.S. Dept. of Justice, Land and Natural Resources Div., Robert L. Klarquist, Washington, D.C., for plaintiff-appellee.

Before MERRITT, KRUPANSKY and NELSON, Circuit Judges.

DAVID A. NELSON, Circuit Judge.

This is an appeal from a district court order denying the award of attorney fees in three eminent domain cases. Each of the landowners was a "prevailing party" within the definition set forth in 28 U.S.C. Sec. 2412(d)(2)(H), but the district court declined to award fees and expenses under the Equal Access to Justice Act because the court found that the government had sustained its burden of showing that its position in the proceedings was "substantially justified." Finding no abuse of discretion, we shall affirm the district court's order.

I

In November of 1984 the United States filed complaints in condemnation and declarations of taking to acquire three separately owned parcels of unimproved real estate in a certain city block in downtown Knoxville, Tennessee. Each of the parcels was being used for surface parking. Their combined area came to approximately 52,708 square feet. The declarations of taking were followed by deposits into the registry of the court of sums totaling $943,850, the government's estimate of just compensation for the land taken. See 40 U.S.C. Sec. 258a.

The cases were consolidated, and the issue of compensation was referred to a three-person commission appointed by the district court pursuant to Rule 71(A), Fed.R.Civ.P.

Among the valuation guidelines provided the commissioners by the district court was a standard-form instruction, captioned "Sales to the Government," that read as follows:

"While the prices paid in sales of similar property between private parties are admissible, the price the Government has paid for other property is not admissible in evidence and is incompetent to prove the market value of land under condemnation. [footnote omitted.] Such sales are not a fair criterion of value for the reason that they are not free sales but are in the nature of a compromise to avoid a lawsuit."

At the request of the landowners, and over the objection of the United States, the district court subsequently qualified its earlier instructions by advising the commissioners that

"[i]n these particular cases that you are to consider, evidence may be presented concerning sales of property to Knoxville's Community Development Corporation ('KCDC'). When the evidence thus presented relates to comparable properties, that evidence should be considered by you and you should determine how much weight to give to that evidence."

The commissioners conducted a view of the landowners' property and heard evidence of just compensation. The landowners presented valuation testimony from two experienced and well-qualified expert appraisers, Robert J. Fletcher and Claude M. Wood. Mr. Wood expressed the opinion that the land was worth $30 per square foot, and Mr. Fletcher opined that it was worth $29.50 per square foot. The United States offered the testimony of Mr. William S. Broome, MAI, also an experienced and qualified real estate appraiser; Mr. Broome expressed the opinion that the land was worth $18.30 per square foot.

All three of the expert witnesses used comparable sales in arriving at their valuations, but they differed as to the comparability of acquisitions made by the Knoxville Community Development Corporation, a governmental body that had the power of eminent domain. The commissioners explained, in their report, that

"[t]he landowners relied upon the Hilton block (Exhibit L-22) which was acquired in 1979 by Knoxville Community Development Corporation ('KCDC') at an average price of $26.27 per square foot and which was adjusted by the landowners witnesses to $30.00 and $29.57 to reflect the change in market between the date of acquisition and the date of taking in 1984. The correctness of these figures was questionable as to whether they included improvements or as to whether the improvements had value at the time of taking. Mr. Broome, the witness for the Government, indicated that he had appraised many of these tracts for as low as $15.00 per square foot and as high as $24.00 per square foot for the land without the improvements which gave an adjusted land value of approximately $20.00 per square foot. See Exhibit L-10. Mr. Broome did not use this property as comparable by reason of the fact that it was part of the property acquired by KCDC.

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"The landowners likewise relied upon the East-West Mall property lying between Gay Street and Market Street north of Church Street, see Exhibit L-13, which was sold in 1973 and 1974 to KCDC at an average price, after razing, of $24.11. Based upon sales of other properties and the fact that this was property bought under threat of condemnation, it appears to be overpriced for some reason known only to KCDC. Particularly since property bought subsequently to said dates sold for less, we consider a fair value of this property as a comparable to be $24.00 per square foot adjusted for 1984.

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"... [M]any of the properties which were used as comparables pursuant to the instructions to the Commission were based on properties acquired by KCDC, who had the right of imminent [sic] domain and the properties may have been acquired to fill special projects for public use, and were later sold by KCDC for less than $2.50 per square foot. This, coupled with the variations in prices paid for the various tracts composing the comparable properties, particularly the Hilton Hotel tract, rendered comparison prices for comparable properties difficult."

The commission questioned the comparability of some of the transactions used by the government's appraisers as well. After weighing all the evidence, the commission determined that each of the parcels it was responsible for valuing was worth $25 per square foot--a number close to the mid-point between the highest valuation attested to by the landowners' witnesses ($30) and the valuation attested to by the government's witness ($18.30). The total value of the three parcels, as determined by the commissioners, came to $1,317,689. The government filed no objections to the report of the commissioners, and the district court entered a judgment fixing just compensation on the basis of the commissioners' valuation of $25.00 per square foot.

The landowners subsequently moved for an award of attorney fees and costs under the Equal Access to Justice Act. That statute provides, in pertinent part, that a court "shall" award attorney fees and other expenses to a "prevailing party" in a civil action brought by the United States (given net worth qualifications that were met by the prevailing parties here), "unless the court finds that the position of the United States was substantially justified...." 28 U.S.C. Sec. 2412(d)(1)(A) (emphasis supplied). As reinstated in amended form in 1985, the Act provides that " 'prevailing party', in the case of eminent domain proceedings, means a party who obtains a final judgment ... the amount of which is at least as close to the highest valuation of the property involved that is attested to at trial on behalf of the property owner as it is to the highest valuation of the property involved that is attested to at trial on behalf of the Government." 28 U.S.C. Sec. 2412(d)(2)(H).

The government did not deny that the landowners were prevailing parties in the case at bar. It is indisputable that the amount of the final judgment ($25 per square foot) was at least as close to the landowners' highest valuation ($30) as to the government's ($18.30), and each of the landowners thus unquestionably comes within the statutory definition of a "prevailing party."

The government maintained, nonetheless, that its position was substantially justified. The government based its argument not only on the existing record but also on newly filed affidavits purporting to show pre-trial settlement offers and describing appraisals made by a certain Mr. Pipkin. That individual had not testified at the hearings conducted by the commissioners, but his appraisals were said to have been used in determining the amounts the government deposited into the registry of the court when the land was taken. The landowners objected vigorously to any use of the government's affidavits, and filed a counter-affidavit contesting the government's account of the settlement offers.

The district court, in a memorandum opinion explaining its decision to deny attorney fees, agreed with the landowners that the position taken by the government in settlement negotiations was irrelevant. In this connection the court relied on 28 U.S.C. Sec. 2412(d)(1)(B), which provides, in pertinent part, as follows:

"Whether or not the position of the United States was substantially justified shall be determined on the basis of the record (including the record with respect to the action or failure to act by the agency upon which the civil action is based) which is made in the civil action for which fees and other expenses are sought."

The district court added that

"the legislative history supports confining analysis of the Government's position to the record when the litigation goes to a final decision. 1985 U.S.Code Cong. & Ad.News at 141. Thus, the court will be restricted to a review of the record only in this cause and will not take into consideration any extrinsic evidence or testimony on this issue."

The district court went on to note, however, that the record of the eminent domain...