United States v. 15.00 ACRES OF LAND, ETC.

• Decision Date: 23 March 1979
• Docket Number: No. J-72-C-39.,J-72-C-39.
• Citation: 468 F. Supp. 310
• Parties: UNITED STATES of America, Plaintiff, v. 15.00 ACRES OF LAND, MORE OR LESS, IN the COUNTY OF MISSISSIPPI, STATE OF ARKANSAS, and F. E. Scott, et al., and Unknown Owners, Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

468 F. Supp. 310

UNITED STATES of America, Plaintiff, v. 15.00 ACRES OF LAND, MORE OR LESS, IN the COUNTY OF MISSISSIPPI, STATE OF ARKANSAS, and F. E. Scott, et al., and Unknown Owners, Defendants.

No. J-72-C-39.

United States District Court, E. D. Arkansas, Jonesboro Division.

March 23, 1979.

Walter G. Riddick, Asst. U. S. Atty., Little Rock, Ark., for plaintiff.

Graham Partlow, Everett E. Harber, Blytheville, Ark., for defendants.

MEMORANDUM OPINION

ROY, District Judge.

This action involves the government's condemnation of a fifteen acre rectangular tract of land located in Mississippi County, Arkansas. The land in question is situated in the western portion of the Big Lake National Wildlife Refuge¹ and is completely surrounded by properties which have been previously taken by the government as part of its wildlife refuge project. The events and circumstances giving rise to the present controversy are summarized below.

On August 16, 1972 the government filed a notice of condemnation. In due course summons were issued and served upon the defendants. The government also tendered on the same date the amount of $3,750.00, its estimated amount of compensation for the property condemned. The defendants subsequently appeared by counsel and contested the government's valuation of the tract of land.² Thus, the sole issue presented by this case is whether the defendants have been justly compensated for their respective interests in the subject tract. Before considering the valuation issue, however, it is helpful to consider the physical characteristics of the property and the interests of the respective defendants.

The fifteen acre rectangular tract is located about one quarter of a mile from a ditch on the western boundary of the Big Lake National Wildlife Refuge. There are no roads or hiways providing direct access to the property. Most of the year the property is covered by water of varying depths and even in the drier parts of the year the land has water on it since a slough meanders through the property. Access to the tract³ is attained either by walking, wading or by boat, depending on current water levels. Parts of the tract are clear and other parts are covered by various kinds of trees and other vegetation. The tract itself has little, if any, natural food for ducks although, as previously indicated, food crops for ducks are planted on certain areas of the wildlife refuge. The only structure on the tract at the time of taking was a single "duck blind".⁴

John Charles Bright and Hayes T. Sullivan acquired an undivided three-fourths interest in the fifteen acre tract by a quitclaim deed from Mr. and Mrs. F. E. Scott. The deed was recorded on March 17, 1972, approximately five months prior to the date of taking, in Record Book 260, page 400 in the office of the Circuit Clerk of Mississippi County, Arkansas. The amount of consideration paid by Mr. Bright and Mr. Sullivan for their undivided three-fourths interest in the property was $3,750.⁵ Bill Cude acquired an undivided one-fourth interest in the tract by warranty deed from Mr. and Mrs. Leroy Carter. The deed evidencing the conveyance to Mr. Cude was dated November 15, 1971, but was not recorded in the Circuit Clerk's office until March 8, 1972. Mr. Cude's deed appears in Record Book 260 at page 306. Mr. Cude testified at trial that he paid $937 for his undivided one-fourth interest in the fifteen acre tract.

Every witness that testified for the defendants acknowledged that the highest and best use of the tract was for duck hunting. Mr. Lingman, the government's appraiser, while reluctant to assign a single best use for the land admitted that the tract was locally acknowledged as a good duck hunting area. Mr. Lingman, a senior real estate appraiser who now works as a review appraiser, testified that the highest and best use of the fifteen acre tract was for "duck hunting and timber production." Mr. Clyde A. Stewart, an employee of the United States Fish and Wildlife Service, contradicted Mr. Lingman's testimony, however, at least to the extent of Mr. Lingman's conclusion that timber production was one of the best uses of the fifteen acre tract. Mr. Stewart conducted a 100% cruise⁶ of the timber on the tract and determined a market value for the timber based on his inventory and investigation of potential sales of the timber. Mr. Stewart testified, in comparative terms, that the amount of timber on the tract was small and that the logging conditions were adverse. Furthermore, while the court is obliged to consider all uses of the property, including prospective or potential uses, in establishing value, it appears from the court's assessment of the testimony that timber production and duck hunting are mutually exclusive uses of the fifteen acre tract. Testimony of witnesses who were experienced duck hunters established that the existence of trees is a necessary prerequisite to a good duck hunting area. Thus, if the timber on the tract was severed, as would be contemplated by any economically feasible timber production operation, the value of the tract as a duck hunting area would be wholly vitiated. In view of this factor and all the other evidence produced at trial the court must conclude that the highest and best use of the fifteen acre tract was for duck hunting.

The central issue in this case is determining what constitutes the fair market value of the property in question. While none of the parties have disputed this ultimate objective their methods of reaching the desired end had differed drastically. It is thus the method of the respective parties in determining the value of the property which provides the real controversy in the present suit. The essential controversy is clearly manifested by the extreme differences in value offered by the condemnor and condemnee. For example, the defendants have earnestly contended that the tract of land has a fair market value of between $100,000 and $150,000 if the direct capitalization of net income approach is utilized to determine the value of the property. The government, on the other hand, has contended with equal vigor that the condemnees' method of valuation is inappropriate and that the fair market value of the fifteen acre tract is only $4,325 if value is determined through comparable sales. It thus appears that the fair market value of the tract cannot be established until the appropriate method of computing the property's value has been resolved. We proceed to the resolution of the latter issue.

The objective in any condemnation proceeding is, of course, to fairly compensate, to indemnify, the owner for the loss sustained as a result of the government's exercise of its powers of eminent domain. The usual method of attaining this goal is by awarding the owner or owners the fair market value of the property, the basic measure of compensation in a condemnation case. Alternative methods of valuation, such as the direct capitalization of net income, are appropriate only when fair market value cannot be determined or would provide inadequate compensation. United States v. 3,727.91 Acres of Land, Etc., 563 F.2d 357, 360-361 (8th Cir. 1977). After reviewing the evidence in the present case we must conclude that direct capitalization of net income is an inappropriate basis for determining the fair market value of the fifteen acre tract.

In the present case the defendants have arrived at the fair market value of the fifteen acre tract by capitalizing anticipated profits from the prospective rental of blinds to persons desiring to hunt ducks on the tract. The evidence admitted without objection at trial clearly established that the defendants had not yet built additional blinds and had not charged any person for duck hunting on the tract prior to the date of taking.⁷ It thus appears that the defendants' valuation of the tract is based wholly on the loss of future profits, profits which, although completely unrealized at the time of taking, were to be derived through the utilization of the land for an anticipated business opportunity. Loss of prospective or anticipated business opportunities are not compensable in a condemnation case where the realization of the opportunity has not even begun as of the date of taking. As the United States Supreme Court observed in United States ex rel. Tennessee Valley Authority v. Powelson, 319 U.S. 266, 281, 63 S.Ct. 1047, 1056, 87 L.Ed. 1390 (1943), "It is a well settled rule that while it is the owner's loss, not the taker's gain, which is the measure of compensation for the property taken, not all losses suffered by the owner are compensable under the Fifth Amendment. In absence of a statutory mandate citations omitted the sovereign must pay only for what it takes, not for opportunities which the owner may lose." Compare, Monongahela Navigation Co. v. United States, 148 U.S. 312, 13 S.Ct. 622, 37 L.Ed. 463 (1893). Nor can the condemnees recover the value of their land as measured by the future loss of profits. This rule and its underlying justifications were cogently stated by the Court in the case of United States v. General Motors Corporation, 323 U.S. 373, 379-380, 65 S.Ct. 357, 360, 89 L.Ed. 311 (1945):

"The sovereign ordinarily takes the fee. The rule in such a case is that compensation for that interest does not include future loss of profits, the expense of moving removable fixtures and personal property from the premises, the loss of goodwill which inheres in the location of the land, or other like consequential losses which would ensue the sale of the property to someone other than the sovereign. No doubt all these elements would be considered by an owner in determining whether, and at what price, to sell. No doubt, therefore, if the owner is to be made whole for the loss consequent on the sovereign's seizure of his property, these elements should be properly considered. But the courts have generally held that they are not to be reckoned as part of

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