U.S. v. 341.45 Acres of Land, More of Less, Located in St. Louis County, State of Minn., s. 79-2075
| Decision Date | 04 December 1980 |
| Docket Number | 79-2083,Nos. 79-2075,s. 79-2075 |
| Parties | 7 Fed. R. Evid. Serv. 829 UNITED STATES of America, Appellant, v. 341.45 ACRES OF LAND, MORE OR LESS, LOCATED IN the COUNTY OF ST. LOUIS, STATE OF MINNESOTA, Edward H. Essling et al., Edna K. Bassett, Appellee. UNITED STATES of America, Appellant, v. 341.45 ACRES OF LAND, MORE OR LESS, LOCATED IN the COUNTY OF ST. LOUIS, STATE OF MINNESOTA, Edward M. Essling, et al., Paul Edward Essling, Administrator of the Estate of Edward M. Essling, deceased, Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Anthony C. Liotta, Deputy Asst. Atty. Gen., Washington, D. C., Thomas K. Berg, U. S. Atty., John M. Lee, Asst. U. S. Atty., Minneapolis, Minn., Jacques B. Gelin, Thomas H. Pacheco, Attys., Dept. of Justice, Washington, D. C., for appellant.
David Essling, St. Paul, Minn., for appellees.
Before BRIGHT, ROSS and STEPHENSON, Circuit Judges.
The United States appeals two condemnation judgments totaling $298,580 resulting from a jury verdict in a condemnation case involving land located in Voyageurs National Park in northern Minnesota. We conclude that the district court 1 erred in admitting evidence regarding the highest and best use of the land and therefore we reverse and remand for a new trial.
In 1971, Congress authorized condemnation of certain lands for the establishment of Voyageurs National Park. The land within the park, of concern in these appeals, is owned by Edna Bassett and Paul Essling. The jury awarded $232,480 for the Bassett land. The land consists of approximately 60 acres of mainland located on Lake Kabetogama and an unimproved island of approximately 1.5 acres on the same lake. The 60 acres of mainland consists of basically two parcels of land. The first parcel of approximately 20 acres is located on the shore of Lake Kabetogama and is bordered on the north by Gold Portage River which is approximately 100 feet wide. The first parcel is joined on its northwestern corner by the second parcel of approximately 40 acres. The second parcel does not front on the lake; however, the Gold Portage River runs through the middle of the parcel. Access to the land is approximately two miles by boat and the nearest road is two to two and one half miles from the land. On the 20-acre parcel there are a few abandoned buildings which were used for a boys' camp. Other than these buildings the land is unimproved and no efforts have been made toward subdivision of the land.
At trial the landowners' appraisers testified that the highest and best use of the land was as a residential recreational subdivision. Gary Hawkinson, one of the landowners' appraisers, testified at length concerning two different methods that could be used to subdivide the complete 60-acre parcel and island into lots. The plans and proposed plats showed that the property could be divided into either 42 or 24 lots. "Plan 2" called for 42 lots, including 21 lots that would not front on either the lake or the river. "Plan 1" consisted of 24 lots; approximately 16 of the lots would have river frontage while the balance would have lake frontage.
The government objected to testimony concerning subdivision of the land as "lacking foundation as to marketability, as to feasibility, and as being speculative and conjectural." The trial judge stated that "the jury will have to decide whether or not they believe that property is as valuable as this man says it is by virtue of the fact that he has indicated it can be subdivided in this way." Hawkinson valued the 60-acre tract and 1.5 acre island at $275,000. Victor Vik, another appraiser for the landowners, valued the land as a residential recreational subdivision at $297,000. The government's appraiser, Douglas Fruen, testified that the highest and best use of the 20-acre parcel was as single-family residential recreational development or cabin sites. However, in contrast, Fruen testified that the highest and best use of the 40-acre parcel was as timberland. Fruen valued the total Bassett land at $76,600.
Hawkinson also testified as to the costs of developing the Bassett land under both Plans 1 and 2. Hawkinson testified that his cost deduction under Plan 1 was $32,000 and under Plan 2 was $46,000. Hawkinson and other of landowners' witnesses testified concerning the costs of subdividing, developing and marketing the 60-acre tract.
The jury awarded $56,100 for the Essling land. The land consists of 23.75 acres of unimproved land located on an inlet which leads from Grassy Bay to Staege Bay. The property has approximately 660 feet of waterfront along the inlet which measures from 100 to 250 feet in width in front of the tract. The nearest road is 6 to 9 miles from the land and access by boat is a trip of 7 to 8 miles.
Hawkinson testified that the highest and best use of the Essling tract was as a recreational condominium development 2 and placed the value of the tract at $81,000. Hawkinson submitted two different condominium plans for the 23.75 acres, each of which proposed 24 units on the site. Some evidence regarding the costs of "trails" and a sewer system was also introduced.
The government objected to the introduction of the condominium plans as lacking "a foundation for any demand for condominiums in the area" and as lacking "foundation as to feasibility, marketability, compliance with applicable health and zoning regulations, speculative and conjectural." These objections were overruled.
The government's appraiser, Fruen, testified that the highest and best use for the Essling land was as sites for one to three cabins and valued the land at $16,500.
The government argues that the district court erred in not excluding as speculative and remote the evidence that the highest and best use of the land was as a subdivision and for condominiums.
In Olson v. United States, 292 U.S. 246, 54 S.Ct. 704, 78 L.Ed. 1236 (1934) the Supreme Court stated:
Just compensation includes all elements of value that inhere in the property, but it does not exceed market value fairly determined. The sum required to be paid the owner does not depend upon the uses to which he has devoted his land but is to be arrived at upon just consideration of all the uses for which it is suitable. The highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future is to be considered, not necessarily as the measure of value, but to the full extent that the prospect of demand for such use affects the market value while the property is privately held.
Id. at 255, 54 S.Ct. at 708 (emphasis added) (citations omitted).
The Supreme Court in Olson also noted that "physical adaptability alone" for a certain use "cannot be deemed to affect market value." Id. at 256, 54 S.Ct. at 709. Olson cautions that:
Elements affecting value that depend upon events or combinations of occurrences which, while within the realm of possibility, are not fairly shown to be reasonably probable, should be excluded from consideration, for that would be to allow mere speculation and conjecture to become a guide for the ascertainment of value-a thing to be condemned in business transactions as well as in judicial ascertainment of truth.
Id. at 257, 54 S.Ct. at 709 (citations omitted).
Thus, Olson teaches that a proposed "use" requires a showing of reasonable probability that the land is both physically adaptable for such use and that there is a need or demand for such use in the reasonably near future.
Our concern in this case is whether the landowners established that the proffered uses of the land were reasonably probable so as to avoid mere speculation and conjecture. The trial judge believed that the jury could decide whether subdivision of the property would be feasible and whether there would be a demand for such lots. There was no preliminary review of the potential use evidence prior to its admission by the trial court.
The Fifth Circuit in United States v. 320.0 Acres, County of Monroe, Fla. (Monroe), 605 F.2d 762 (5th Cir. 1979), found that "(a)t the very least" it is the responsibility of the trial judge "under Rule 71A(h) (FED.R.CIV.P.) to screen the proffered potential uses and exclude from jury consideration those which have not been demonstrated to be practicable and reasonably probable uses." Id. at 815. We recognize as did the court in Monroe that there is authority for the proposition that the trial judge should actually determine the highest and best use issue. The Supreme Court has stated that Rule 71A(h) "provides that, except for the single issue of just compensation, the trial judge is to decide all issues, legal and factual, that may be presented." United States v. Reynolds, 397 U.S. 14, 19, 90 S.Ct. 803, 806, 25 L.Ed.2d 12 (1970). Reynolds established that a "scope-of-the-project" issue was a decision for the trial judge and not the jury. Id. at 20, 90 S.Ct. at 807. The Fifth Circuit in Monroe found that the issue of highest and best use could not be characterized as a "preliminary issue" as was the "scope-of-the-project" issue in Reynolds and thus declined to hold that the highest and best use issue was solely for the judge. Monroe, supra, 605 F.2d at 817. We agree with the reasoning of the Fifth Circuit in Monroe and therefore apply the standards of Monroe to the admission of the highest and best "use" evidence.
First, the trial judge should screen the evidence concerning potential uses. Monroe, supra, 605 F.2d at 815. Then, the trial judge should decide whether "the landowner has produced credible evidence that a potential use is reasonably practicable and reasonably probable within the near future * * *." If credible evidence of the potential use is produced, the jury then decides "whether the property's suitability for this use...
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