U.S. v. 429.59 Acres of Land

• Decision Date: 25 January 1980
• Docket Number: No. 76-3739,76-3739
• Citation: 612 F.2d 459
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. 429.59 ACRES OF LAND et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 459

612 F.2d 459

UNITED STATES of America, Plaintiff-Appellant, v. 429.59 ACRES OF LAND et al., Defendants-Appellees.

No. 76-3739.

United States Court of Appeals Ninth Circuit.

Jan. 25, 1980.

Regina L. Sleater, Dept. of Justice, Washington, D. C., for plaintiff-appellant.

Paul D. Engstrand, San Diego, Cal., argued, for defendants-appellees; A. E. Walkoe, C. Michael Cowett, San Diego, Cal., on brief.

Appeal from the United States District Court for the Southern District of California.

Before WALLACE and FARRIS, Circuit Judges ^*, and LUCAS ^**, District Judge.

LUCAS, District Judge:

The Government challenges the amount of compensation awarded the landowners in this condemnation proceeding (40 U.S.C. § 258a). The compensation was set by a Commission appointed by the District Court pursuant to Rule 71A(h) of the Federal Rules of Civil Procedure. The District Court approved the Commission's findings and entered judgment for the landowners in the sum of $6,915,750 together with interest. The Government argues that the Commission erred in finding that the highest and best use of the condemned property was a marina and in valuing the property for that purpose. The Government also contends that the District Court erred in instructing the Commission to value the property taken as an economic unit and in setting the rate of interest payable on the deficiency award. We affirm.

The land taken adjoins the Imperial Beach Naval Air Station along the Pacific Coast between the City of San Diego and the Mexican border. On May 19, 1971, the date of taking, the land was undeveloped tidal marshland in the Tijuana River estuary. On April 11, 1974, the District Court appointed the Commission to determine the amount of just compensation. The District Court instructed the Commission to consider "all of the uses and purposes for which (the property) is adaptable and available, including its highest and best use." The District Court also instructed the Commission that the landowners had the burden of proving that any permits or agreements necessary to develop the property as a marina "within the realm of reasonable probability (could) have been secured at the time of the date of taking, or in the reasonably near future from said date."

After hearing extensive evidence, both oral and documentary, the Commission found that "the highest and best use of the subject property on May 19, 1971, was for a public and private marina for commercial and residential purposes." The Commission gave the following reasons for that determination: (1) "the subject property was part of an area which, for several years preceding the date of taking, had been the subject of studies, proposals, plans, zoning regulations, designs and cost estimates respecting its use as a marina;" (2) the owners of the property and others had entered into agreements to develop the property as a marina and had taken steps to obtain the permits necessary for such a development; (3) the evidence established the "adaptability, availability, desirability and economic feasibility" of using the property for a marina; and (4) appraisers and engineers testified that a marina was the highest and best use for the property.

Throughout these proceedings, the Government has argued that the landowners failed to prove that the highest and best use of the property was a marina because it was not reasonably probable that the permits and agreements necessary to construct a marina could have been obtained on or near the date of taking. It is undisputed that a series of permits and agreements would have been necessary to construct a marina, including (1) permits from the United States Army Corps of Engineers to cut an ocean entrance, dredge a tidal estuary, and deposit spoil, and (2) an agreement with the State of California, owner of the tideland areas of proposed development settling boundaries or arranging a property exchange. The Government contended that federal and state environmental legislation, together with regulations implementing those statutes, would have prevented developers from obtaining the necessary permits and agreements.

I

The Commission's findings of fact must be accepted unless they are clearly erroneous. (United States v. Merz, 376 U.S. 192, 198, 84 S.Ct. 639, 11 L.Ed.2d 629 (1964); Fed.R.Civ.P. 71A(h) & 53(e)(2).) Our review of the record convinces us that the Commission's finding that the property could have been developed as a marina cannot be disturbed on appeal. Inherent in the finding of the highest and best use is the determination that the necessary permits and boundary agreement would be obtained at the date of taking or within the foreseeable future from that date, despite any environmental concerns.

The testimony on this issue was sharply conflicting. The Commission chose to accept opinion evidence from developers and appraisers that it was reasonably probable that the necessary permits and agreements could have been obtained. The Commission refused to credit contrary testimony by government witnesses. We are not permitted to reweigh the evidence nor to reassess the credibility of the witnesses.

Just compensation for condemned property is measured generally by the fair and reasonable market value of the property or interest taken. Market value is the price which a reasonable seller who desires to sell but is not required to sell would demand for the property and the price which a reasonable buyer who desired to buy but was not required to buy would pay for the same, assuming a reasonable time for negotiations and explorations of alternatives. United States v. 91.90 Acres of Land, etc., 586 F.2d 79, 86 (8th Cir. 1978) Cert. denied 441 U.S. 944, 99 S.Ct. 2162, 60 L.Ed.2d 1045 (1979); Cf. United States v. Miller, 317 U.S. 369, 374, 63 S.Ct. 276, 87 L.Ed. 336 (1943). In determining market value, consideration must be given to all the facts and circumstances that would reasonably go into the making of a bargain of purchase and sale. United States v. Smith, 355 F.2d 807, 809 (5th Cir. 1966); United States v. Johnson, 285 F.2d 35, 41 (9th Cir. 1960).

The landowner does have the burden of establishing the value of the property subject to condemnation. United States ex rel. TVA v. Powelson, 319 U.S. 266, 273, 63 S.Ct. 1047, 87 L.Ed. 1390 (1943); United States v. Shewfelt Investment Co., 570 F.2d 290, 291 (9th Cir. 1977). The landowner may prove the market value of the subject property by submitting evidence of recent sales of similarly situated property. United States v. Johnson, supra. He may also seek to prove the market value by submitting the testimony of expert witnesses who are qualified to appraise the value of the subject property, and who have a factual basis for forming an opinion. United States v. 100 Acres of Land, 468 F.2d 1261, 1268 (9th Cir. 1972), Cert. denied, 414 U.S. 822, 94 S.Ct. 119, 38 L.Ed.2d 54 (1973); United States v. Smith, supra; United States v. Johnson, supra.

Comparable sales may be cited by the expert as a basis for his opinion on the value of the property. When sales of other property are used as a basis for expert testimony, the requirement of showing similarity between the subject property and the other sales is not as rigorous as it is when the sales of other property are offered as substantive proof of value. United States v. Johnson, supra. Instead, the proper inquiry is whether the expert has made careful inquiry into the facts of the other sales, and whether his opinion is founded upon such careful inquiry. In situations where there are few instances of comparable sales in recent times, the expert is only expected to make a reasonable estimate of the market value of the subject property after examining all the relevant facts. United States v. Glanat Realty Corp., 276 F.2d 264, 266 (2d Cir. 1960).

Even though the reasonable and willing buyer would consider it reasonably probable that the necessary permits and agreement would be obtained on or near the date of taking, it is still possible, as the Commission recognized, that such a buyer might be affected in his valuation of the subject property because of delays caused by environmental concerns. The record shows that the landowner's expert witness, Jones, took the effect of environmental concerns into account in making his appraisal of the subject property. In particular, he stated that he was aware of the enactment of environmental legislation and regulations between 1968-71, that he had examined these, and had examined the files of the Corps of Engineers. Reporter's Transcript (R.T.) 1654-58, 1684-89. From an assessment of these environmental laws and policies, his investigations with the governmental agencies, and general knowledge, he concluded that it might have been more difficult to obtain the necessary permits and agreements in 1971 than it would have been in 1968.

Jones made his appraisal by starting with the per acre value of the Coronado Cays development, a property which was sold three years before the date of taking and one which "had the same situation relative to obtaining boundary agreements with the State and property which involved the handling of materials on a dredging basis." R.T. 1383. He then made adjustments to that base value for increased property values in the ensuing three years; for the better location of the subject property; for the reduced holding period required with the subject property; and for the cost of the ocean cut necessary to develop the subject property.

The increase for the reduced holding period of the subject property, as compared with Coronado Cays was made because "the subject property, as of May,...