United States v. 967,905 ACRES OF LAND, ETC., STATE OF MINN., 20709

• Decision Date: 01 October 1971
• Docket Number: 20710.,No. 20709,20709
• Parties: UNITED STATES of America, Appellant and Cross-Appellee, v. 967,905 ACRES OF LAND, MORE OR LESS, Situate IN COOK, ET AL., COUNTIES, STATE OF MINNESOTA, et al., Jacob L. Pete and James W. Pete, Appellees and Cross-Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

447 F.2d 764 (1971)

UNITED STATES of America, Appellant and Cross-Appellee, v. 967,905 ACRES OF LAND, MORE OR LESS, Situate IN COOK, ET AL., COUNTIES, STATE OF MINNESOTA, et al., Jacob L. Pete and James W. Pete, Appellees and Cross-Appellants.

Nos. 20709, 20710.

United States Court of Appeals, Eighth Circuit.

August 25, 1971.

Rehearing Denied September 23, 1971.

As Modified October 1, 1971.

Solly Robins, Steven H. Goldberg, Robins, Davis & Lyons, St. Paul, Minn., for appellees and cross-appellants, Jacob and James Pete.

Carl Strass, Atty., Land and Natural Resources Div., Dept. of Justice, Washington, D. C., Shiro Kashiwa, Asst. Atty. Gen., Robert G. Renner, U. S. Atty., Thorwald D. Anderson, Jr., Asst. U. S. Atty., Minneapolis, Minn., Edmund B. Clark, Atty., Department of Justice, Washington, D. C., for appellant.

Before MATTHES, Chief Judge, GIBSON, Circuit Judge, and HENLEY, District Judge.^*

HENLEY, Chief District Judge.

These cases represent an appeal and cross appeal from a final judgment of the United States District Court for the District of Minnesota awarding just compensation in an eminent domain case. The Government is appellant and the landowners are appellees in the basic appeal; their positions are reversed in the cross appeal.

The land involved which we will refer to as Tract 3520 or as "the Pete property" is located on Hoist Bay in Basswood Lake which is a large body of navigable water located on the Minnesota-Canadian boundary. The Lake is practically landlocked; part of its shore line is located in Minnesota, and the rest of it is in Canada. The Lake is located in the Superior National Forest and is included in a wilderness area known as the Boundary Waters Canoe Area; the Forest and Canoe Area are administered by the Forest Service of the United States Department of Agriculture.¹

The question of how much the Government must pay for the taking of the tract in question has been the subject of two protracted jury trials and has produced several memorandum opinions of the District Court, one of which, filed between the first trial and the second trial, appears in 305 F.Supp. 83 (1969). That opinion contains an excellent description of the Boundary Waters Canoe Area and of Government action in connection with the Area. The opinion also contains a full statement of the background facts of the case.

For many years Jacob L. Pete and his son, James W. Pete, operated a sports fishing and hunting resort on Hoist Bay using Tract 3520 as a base of operations. Tract 3520 consists of two parcels of noncontiguous land. The larger parcel contains 40 acres of unimproved land traversed by what is known as Four Mile Portage. The smaller parcel, described at times as Government Lot 6, contains a few acres of land that had been improved by the Petes by the erection of certain buildings and structures as the living quarters of themselves and their families and for the accommodation of visiting hunters and fishermen. The Petes owned only an undivided one-fourth interest in the lands; the other interest was owned by the Izaak Walton League of America Endowment.² However, the Petes owned all of the improvements on Government Lot 6, and they made use of all of the property without paying rent to the League and without accounting to the League for any profits from their commercial operations.

In connection with their business the Petes owned and operated three large cabin barges or houseboats capable of transporting large parties of fishermen from place to place on Basswood Lake and of accommodating them over night and for several days at a time. Pete clients would embark on the barges where they would remain during their stays, traversing the Lake and doing their actual fishing from smaller boats which when not in actual use would be moored to or towed by the barges.³

On December 21, 1965, the Forest Service acting under statutory authority promulgated regulations designed sharply to curtail or prohibit altogether commercial operations in the Canoe Area such as those of the Petes. 30 F.R. 15,738, 36 C.F.R. § 251.85. This action was commenced on January 20, 1966. On that day the Government filed its complaint and declaration of taking and obtained from the District Court an order authorizing it to take immediate possession of Tract 3520. At about the same time the Government acquired all of the other privately owned land on the American side of Basswood Lake, and the Canadian Government acquired all of the privately owned land on the Canadian shore of the Lake.

That action which was ultimately to destroy the business of the Petes created quite a problem about the barges, which for convenience we will call simply the "boats," since they would be deprived of any land base on the Lake and since, according to the finding of the District Court, they could not be removed from the Lake except at prohibitive cost. The Petes claim that they are entitled to be compensated for the boats in this action; the Government says that it is not required to pay for the boats.

Although the order of possession issued by the District Court in January 1966 required the Petes to yield possession immediately, the Forest Service took no steps to obtain immediate possession. On the contrary there was an agreement between the Forest Service and the Petes whereby the latter were permitted to remain in possession of Tract 3520 and to continue their commercial operations which included the use of the boats. The understanding between the Forest Service and the Petes was oral, and the record does not disclose its precise terms or the precise motivation of the Service in permitting the Petes to remain and continue to operate on the Lake. The understanding did not include any requirement that the Petes pay the Government any rent, and they have never paid or tendered any. No demand for rent was made by the Government until after the first trial.

Prior to the first trial the District Court determined, and has adhered consistently to its determination, that it was not feasible to remove the boats from the Lake, that they were "fixtures" "constructively joined" to the realty, and that they should be considered as part of the realty and taken into consideration by the jury in valuing the land.

The first trial of the case took place in June and July, 1969, and the jury was instructed in detail as to the law that would govern it in its deliberations. However, the instructions did not incorporate the rule laid down in United States v. Rands, 389 U.S. 121, 88 S.Ct. 265, 19 L.Ed.2d 329 (1967), to the effect that where lands riparian to navigable waters are condemned by the Government the landowner is not entitled to be compensated for his lands above ordinary high water mark on the basis of any enhanced value due to their access to the water.⁴

The first jury found that the portion of Tract 3520 identified as Government Lot 6 had a value, as enhanced by the boats of $149,000 and that without the boats being considered the value of the land and improvements thereon was $64,000.

On September 11, 1969, the District Court ordered the Clerk to enter judgment based on the $149,000 valuation and in that connection filed its memorandum opinion that was published and has been cited heretofore. In that opinion the Court set out the reasoning which led it to its conclusion that the boats should be considered as part of the realty.

In the course of the first trial the Government undertook to show the value of the tract by the capitalization of income method of valuation, and its expert used a capitalization rate of 7 percent per annum. On September 22 the Government filed a motion for an allowance of rent at the annual rate of 7 percent of the award for the period of time during which the Petes had remained in possession of their properties after the taking⁵ and also filed other motions including an alternative motion for a new trial.

In January 1970 the District Court ruled on all motions pending before it. The Court renewed its holding that the boats were part of the real estate and were compensable, and it denied the Government's claim for rent. However, the Court concluded that it had erred in not applying Rands, supra, and ordered a new trial to correct its supposed error in that regard. But, the Court was not willing to apply Rands to the improvements on the tract including the boats.

The second trial took place in June 1970 and resulted in a verdict as to Lot 6 in the sum of $140,500 with the boats being included in the valuation. The second jury was not asked to value the tract without the boats. However, it was called upon to value the 40-acre portion of Tract 3520 separately, and it valued that portion at $1,000; the 40-acre valuation is not at issue in this appeal.

Both sides filed post-trial motions which the Court considered and denied on August 11, 1970. These appeals followed, and the case is properly before us.⁶

As appellant in No. 20,709 the Government contends that the District Court erred in allowing compensation for the boats, and in limiting its application of Rands to the lands themselves while refusing to apply that case to the improvements, and in refusing the Government's prayer for rent.

As appellants in No. 20,710 the landowners urge that the District Court should not have applied Rands to the lands, and that it erred in so doing.

For reasons to be stated we reverse on both appeal and cross appeal and remand the case for appropriate proceedings including a new trial if the parties are not able to come to an amicable settlement.

I.

Taking up, first, the controversy about the boats, we hold that the District Court permissibly found that due to their size, shape, and weight the boats could not have been removed from the Lake without dismantling them completely, carrying the pieces across Four Mile Portage and then reassembling the boats, and that the cost of such a procedure would have been prohibitive.

The landowners did...