U.S. v. 91.90 Acres of Land, Situate in Monroe County, Mo.

• Decision Date: 06 November 1978
• Docket Number: C-E,No. 77-1944,77-1944
• Parties: 3 Fed. R. Evid. Serv. 1249 UNITED STATES of America, Appellant, v. 91.90 ACRES OF LAND, SITUATE IN MONROE COUNTY, MISSOURI, and Walsh Refractories Corporation,Refractories and Combustion Engineering, Inc., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 79

586 F.2d 79

3 Fed. R. Evid. Serv. 1249

UNITED STATES of America, Appellant, v. 91.90 ACRES OF LAND, SITUATE IN MONROE COUNTY, MISSOURI, and Walsh Refractories Corporation, C-E Refractories and Combustion Engineering, Inc., Appellees.

No. 77-1944.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 12, 1978.

Decided Nov. 6, 1978.

Maryann Walsh, Atty., Dept. of Justice, Washington, D. C., for appellant; James W. Moorman, Asst. Atty. Gen., Carl Strass, Attys., Dept. of Justice, Washington, D. C., on brief.

Jerome W. Seigfreid, Edwards, Seigfreid, Runge & Leonatti, Mexico, Mo., for appellees; Louis J. Leonatti, Mexico, Mo., on brief.

Before ROSS, Circuit Judge, MARKEY, Chief Judge, ^* and HENLEY, Circuit Judge.

HENLEY, Circuit Judge.

This is an appeal by the government in an eminent domain case from a judgment entered on a jury verdict returned in the United States District Court for the Eastern District of Missouri. The jury found that the owner of the property involved in the case was entitled to just compensation in the sum of $245,966.00. The government had contended that the amount of just compensation that should be paid ranged between $26,600.00 and $31,200.00. A post-trial motion of the government for a new trial, or, alternatively, for a large remittitur having been denied, this appeal was timely filed.

For reversal, the government contends that the former owner of the property, C-E Refractories, a division of Combustion Engineering, Inc., hereinafter called "CE" or the "landowner," was permitted by the district court to pursue an improper route in establishing the amount of compensation that it should receive for the taking, and that improper evidence of value was admitted. CE denies that the government's position has merit, and in addition it asserts that counsel for the government failed to make and preserve a proper record in the district court, and, further, that in any event the error or errors, if any, of the district court were harmless and do not call for reversal.

The land directly involved in the case consists of 91.90 acres of land in Monroe County in the northern part of the Eastern District of Missouri. It was originally part of a larger tract of 140 acres of land that CE acquired when it merged with Walsh Refractories Corporation, a manufacturer of firebrick and other refractory products. ¹ Prior to CE's acquisition the land had been owned by Walsh Refractories which had acquired it from a Mr. Lemley.

Walsh Refractories operated and CE still operates a plant for the manufacture of firebrick and other refractory items at Vandalia, Missouri, which is about forty miles from the property with which we are concerned. The property is located between Hannibal and Paris, Missouri, and apparently fronts on a county road in Monroe County.

A portion of the property is underlaid with a deposit of soft plastic clay which CE uses in its manufacturing process to beneficiate other clays that it uses. The clay deposit is located under twenty acres of the property. It appears to be undisputed that there is no clay under the remaining portions of the land.

The exploiting of a clay deposit involves strip mining in the course of which overburden has to be removed so as to expose the deposit; the over-all operation apparently produces pollutants of one kind or another including pollutants that can cause undesirable or dangerous impurities in streams.

In recent years strip miners have been substantially affected in their operations by federal and state legislation designed to protect and improve the natural environment, and strip miners have had to deal with federal and state regulatory agencies, one of which is the federal Environmental Protection Agency (EPA) and another of which is the Missouri Clean Water Commission. Missouri strip miners are now required to avoid stream pollution and to replace overburden that has been removed from mined areas.

On December 16, 1976 the government filed a complaint in condemnation and a declaration of taking whereby the government condemned a portion of the original 140 acre tract for use in connection with the Clarence Cannon Dam & Reservoir Project on the Salt River. The government condemned a little more than 87 acres of the land in fee, and it also imposed permanent flowage easements with respect to two ravines; those easements affected 4.9 acres of land. At the same time the government deposited in the registry of the district court the sum of $22,750.00 as estimated just compensation for the over-all taking. On January 31, 1977 the district court signed an order authorizing the government, represented by the Army Corps of Engineers, to take possession of the property that had been condemned.

In February, 1977 the landowner filed an answer. In that pleading CE did not deny that the government had a right to take and condemn the lands and interests described in the complaint and declaration of taking, but it denied that the $22,750.00 deposited in the registry of the district court was just compensation for the taking. CE prayed that just compensation be determined by reference to the highest and best use of the property, and CE demanded trial by jury.

While the land condemned, including the easements, amounted to 91.90 acres of land which left CE the owner of 48.10 acres, we find it convenient to refer to the property actually taken by the government as the "90 acre" tract and to the portion remaining to CE as the "50 acre" tract.

While it is undisputed that the clay deposit involved in the case is located on the 50 acre tract and that none of it is located on the 90 acre tract, nevertheless the landowner took the position in the district court that it had used the entire 140 acre tract in connection with its extraction of the clay from the 50 acre tract. ² And CE contended that its inability to make use of the 90 acre tract substantially diminished the value of the remaining 50 acres, and that for that reason CE was entitled to have "severance damage" included in its award of just compensation.

Although CE might have abandoned its clay mining operation following the taking and might have contended in the condemnation proceedings that the taking of the 90 acre tract rendered continued mining on the 50 acre tract unfeasible, CE determined to continue the operation, and a few weeks prior to the trial it formed a plan whereby the clay deposit could be mined without utilizing the 90 acre tract. The plan was an expensive one. It called for extensive and costly improvements on the 50 acre tract and it involved the loss of more than 44,000 tons of clay.

At the trial CE undertook to recover for the loss of the clay that its new plan entailed and also sought to recover the cost of the improvements that were called for by the plan.

The government contended that the taking of the 90 acres had not significantly damaged the remaining 50 acres, and that the plan developed by CE for continued mining of the clay was unnecessary and unreasonably expensive. The government also contended that the items in question should not be included in the jury's award of just compensation and that evidence as to them should not be admitted.

In October, 1977 the case was the subject of a four day jury trial. CE called as witnesses Stig E. Scharthi, its plant superintendent at Vandalia; L. Verle Porter, its mining superintendent; Dr. Walter D. Keller of Columbia, Missouri, an eminent retired professor of geology; and Mr. Robert Turner who prior to his retirement had been a mining superintendent for A. P. Green Refractories which, according to Mr. Turner, is the largest manufacturer of refractory products in the world. CE also called as expert "value witnesses" four men qualified in general as real estate appraisers, but none of whom was a geologist and none of whom had any experience in making estimates of the value of clay deposits.

Prior to putting its value witnesses on the stand, counsel for CE had its earlier witnesses describe the property and describe the clay, its special qualities and its alleged scarcity which, according to Mr. Scharthi, amounted to uniqueness.

Mr. Scharthi and Mr. Porter were also permitted to testify as to the quantities of clay involved and to its per ton value, to describe the plan of CE and the cost thereof, and to describe how the plan would affect the mining of the clay deposit. Those witnesses agreed that as of the date of taking there were approximately 327,000 tons of clay in the ground of which 44,000 tons would be lost as a result of the plan being put into operation. ³ Mr. Scharthi testified that the value of the clay in the ground was $1.95 per ton which included an extra ten cents for the alleged "uniqueness" of the material. Scharthi came up with a final figure of $540,097.21, including the value of the 90 acre tract which he considered to be about $1,000.00 per acre.

The testimony of Porter was essentially the same as that of Scharthi; however, his valuation of the clay in place was $1.85 per ton. But, his final figure was somewhat higher than Scharthi's figure.

Those figures were turned over to the appraiser witnesses and were accepted by them in forming and expressing their ultimate opinions as to the amount of compensation CE was entitled to receive on account of the partial taking.

The first value witness called by the landowner was Wayne C. Miller. We need to consider his method of valuation in some detail because it incorporated CE's theory of just compensation in the case and because the other value witnesses called by CE used essentially the same method. Mr. Miller first valued the surface of the entire 140 acres of land immediately before the taking without regard to the minerals, and he placed that value at $1,000.00 per acre or $140,000.00. That valuation was based on a number of sales that he considered to be "comparable sales." He next accepted the tonnage figures on the clay that had been given...