United States v. 34.09 ACRES OF LAND, ETC.
| Decision Date | 22 March 1968 |
| Docket Number | Misc. No. 4036. |
| Citation | 290 F. Supp. 551 |
| Parties | UNITED STATES of America, Plaintiff, v. 34.09 ACRES OF LAND, MORE OR LESS, IN the CITY OF NORFOLK, STATE OF VIRGINIA; Allen Apartments Corporation, a Maryland Corporation, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Virginia |
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Robert M. McKee and Marcus L. Beckner, Jr., Lands Division, U. S. Department of Justice, Washington, D. C., for plaintiff.
Breeden, Howard & MacMillan (Robert R. MacMillan) Norfolk, Va., and Raymond R. Dickey, Washington, D. C., for defendants.
On August 31, 1962, the United States of America filed a complaint and declaration of taking of the subject property consisting of a leasehold interest held by Allen Apartments Corporation, the owner and operator of a 400-dwelling unit Wherry housing project, subject to the existing mortgage thereon. The project is located on 34.09 acres of land owned by the United States and adjacent to the Naval Operating Base, Norfolk, Virginia. It is conveniently situated in close proximity to the working area at the Naval Operating Base and Naval Air Station. The improvements consist of 29 one-story and 30 two-story buildings, having a total of 400 housing units, made up of 80 one-bedroom units, 240 two-bedrom units, and 80 three-bedroom units, or a total of 1,600 rooms. The apartments may generally be characterized as typical low-cost F.H.A. construction.
It would unduly prolong this memorandum to relate the history and purposes of the Wherry Act, all of which is reported in prior decisions involving condemnation cases where Wherry Act projects have been acquired, initially by discretionary acquisition under the original Capehart Act, and later made mandatory under the 1956 amendments, 42 U.S.C., section 1594(b). Suffice it to say, a lease was entered into between the Secretary of the Navy, representing the United States, and Allen Apartments Corporation, on June 27, 1952. The lease was for a period of 75 years, with a cancellation clause at the option of the United States at the end of 50¼ years— thus leaving slightly in excess of 40 years to run from the date of taking. The lease provided, among other things:
On July 1, 1952, the corporation executed a note and mortgage in the amount of $2,412,700. These documents provided for fixed monthly payments of principal and interest, plus mortgage insurance on the declining balance, with the right of prepayment as to principal in amounts not exceeding 15% per annum of the original principal, and with a premium of 3% less 1/8 of 1% for each year elapsed as to any excess. Requirement was made for adjusted mortgage insurance premium charges in the event of prepayment. Agreeing with the Government, these premiums for prepayment, together with other reasons hereinafter stated, constituted an impediment to any prospective refinancing of the project.
At the time of taking, the balance due on the mortgage was $2,038,553. The mortgage payments were apparently current. Thus the principal of the mortgage had been reduced by the sum of $374,147 as of the date of taking, at which time the Government assumed the obligation under the mortgage.
Apparently the total cost of the project was $2,867,000.1 The application for F.H.A. insurance made on April 14, 1952, included (1) a statement of the average monthly rental per unit, (2) the gross rental income, (3) the net income available for debt service, including the amount necessary to amortize the mortgage, and (4) the net income available for dividends, corporate and income taxes, and surplus. The application reflects a cash equity of $103,300, and an equity representing building and architect's fees in the approximate sum of $320,000.
The project analysis, submitted on some date following the application for F.H.A. insurance, reflects the net operating income (including the amount available for debt service) to be $165,281. While gross rentals may be changed from time-to-time by agreement, the debt service obligations could not be altered after the completion of the project and the issuance of insurance of the F.H.A. mortgage.
The level annual installments of principal and interest on the mortgage were $132,698.52. The mortgage insurance premiums, in the amount of ½ of 1% of the declining principal balance, brought about a slight variance in the monthly payments.
The common stockholders of Allen Apartments Corporation were members of the families of Benjamin and Herman Cohen. These family interests, as of the date of trial, owned an additional 429 rental housing units in the Norfolk area, as well as approximately 3,000 units on the east coast. Under the provisions of the Wherry Act, the Commissioner of the Federal Housing Administration became the owner of the preferred stock, making the rent schedule and rental increases being subject to his approval.
The location of the project was an excellent site for a low-cost housing project. There is no indication that it would not continue to be a good location by reason of its proximity to the Naval Operating Base and Naval Air Station. If walking is permitted in this day and time, it would be no great effort for workers at these establishments to walk to and from their work. There are other industries within the nearby area where employees could readily be persuaded to rent units in Allen Apartments, if the military and civilian personnel proved to be insufficient. Indeed, witnesses are in substantial agreement that the project would only average a 3% vacancy, despite the fact that the vacancy rate for 1960, 1961 and 1962 had exceeded this figure.2
On December 31, 1962—four months after the taking—the Court visited the project at the request of (and in company with) counsel in the case. Admittedly the exterior painting of the wood trim, gutters and downspouts had been allowed to "go by the board." This was due to the fact that a Navy appraiser and owner's appraiser had suggested to the owner that no painting be done as the Navy planned to modernize the project by making the apartments larger. The Court visited several typical apartment units and drove around the entire project. There were many vacant apartments as the Navy had left the same empty as each family moved out, all in anticipation of its rehabilitation plans. At best, vacant apartments are not attractive to the eye, but the Court likewise visited one occupied apartment and observed others in the same category by looking through the windows. In short, the interior of the units, while in some need of painting and a few miscellaneous repairs, was not nearly as bad as described by Government witnesses, and not as good as indicated by condemnee's witnesses—a situation that is not uncommon in the trial of any case.
By the fair market value of property taken is meant what the property would sell for in cash, or terms equivalent to cash, when offered for sale by one who is willing but is not obliged to sell, to one who desires but is not obliged to buy. Riley v. District of Columbia Redevelop. Land Agency, 100 U.S. App.D.C. 360, 246 F.2d 641 (1957). Market value, fairly determined, should be measured in various ways, depending on the circumstances of each case, and no general formula should be used for the purpose, but the court should retain the concept of market value as a practical standard. United States v. Miller, 317 U.S. 369, 373, 63 S.Ct. 276, 87 L.Ed. 336; United States v. Certain Interests In Property, 271 F.2d 379 (7 Cir., 1959). Assumptions must be used which makes it unlikely that the appraisal will reflect the true value with nicety. Just compensation should not be determined by selecting any one formula of valuation and pursuing that to the very end as this would inevitably give an erroneous result. United States v. 49,375 Square Feet of Land, 92 F.Supp. 384, 387 (S.D. N.Y., 1950), affirmed on opinion of trial court, sub nom., United States v. Tishman Realty & Construction Company, 193 F.2d 180 (2 Cir., 1952). It is well settled that the award in a condemnation case cannot be made by mechanical or mathematical processes, nor can the process of adjudication be governed by a fixed formula. United States v. Cors, 337 U.S. 325, 69 S.Ct. 1086, 93 L.Ed. 1392 (1949); United States v. Whitehurst, 337 F.2d 765 (4 Cir., 1964). And while the testimony of experts is undoubtedly of value, the trier of fact is not bound to follow the expert. Sartor v. Arkansas Natural Gas Corporation, 321 U.S. 620, 627, 64 S.Ct. 724, 88 L.Ed. 967 (1944); United States v. Honolulu Plantation Co., 182 F.2d 172 (9 Cir., 1950). Stated otherwise, opinion evidence is not evidence of fact. Iriarte v. United States, 157 F.2d 105, 167 A.L.R. 494 (1 Cir., 1946). These fundamental principles must be considered in weighing the evidence of experts testifying in this prolonged nonjury trial.
The parties are in agreement that the familiar formula of reproduction cost less depreciation is not applicable to this case. No effort has been made to raise this issue.
Condemnee's witness, Rountrey, presented a hypothetical refinancing of the mortgage as one means to arrive at fair market value....
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