United States v. CERTAIN INTERESTS IN PROPERTY, ETC.

• Decision Date: 24 November 1959
• Docket Number: 12498.,No. 12497,12497
• Citation: 271 F.2d 379
• Parties: UNITED STATES of America, Plaintiff-Appellee-Appellant, v. CERTAIN INTERESTS IN PROPERTY IN CHAMPAIGN COUNTY, State of Illinois, Chanute Gardens Corporation and Chanute Apartments Corporation, Defendants-Appellants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

271 F.2d 379 (1959)

UNITED STATES of America, Plaintiff-Appellee-Appellant, v. CERTAIN INTERESTS IN PROPERTY IN CHAMPAIGN COUNTY, State of Illinois, Chanute Gardens Corporation and Chanute Apartments Corporation, Defendants-Appellants-Appellees.

Nos. 12497, 12498.

United States Court of Appeals Seventh Circuit.

October 21, 1959.

Rehearing Denied November 24, 1959.

C. M. Raemer, U. S. Atty., Danville, Ill., Perry W. Morton, Asst. Atty. Gen., Robert D. McKnelly, Asst. U. S. Atty., Danville, Ill., Roger P. Marquis, Harold S. Harrison, Attys., Dept. of Justice, Washington, D. C., for the United States.

Samuel Goldstein, New York City, Joseph M. Williamson, Urbana, Ill., Samuel Goldstein & Sons, M. Robert Goldstein, Arthur D. Goldstein, Michael J. Goldstein, New York City, for defendants-appellants-appellees.

Before HASTINGS, Chief Judge, and PARKINSON and CASTLE, Circuit Judges.

HASTINGS, Chief Judge.

This action was brought by the United States to condemn defendants' interests in two so-called "Wherry"¹ housing projects located on the Chanute Air Force Base at Rantoul, Illinois, subject to the interests of the mortgagees. The district court awarded $7,100,000 as just compensation. In No. 12497, defendants-appellants appeal from the sufficiency of the amount awarded, asserting errors in the measure of just compensation adopted, in the admission of certain valuation evidence and in conclusions of law. In No. 12498, the plaintiff-appellant appeals from rulings with respect to the interests being acquired, the law applicable to this federal eminent domain proceeding and from other conclusions of law by the district court, all directed, not to the valuation issue, but to the question whether the United States was empowered to condemn defendants' interests subject to outstanding mortgages.²

There were two housing projects built by Jonathan Woodner Company as sponsor and organizer of defendant corporations. Defendant Chanute Gardens Corporation is the owner of Chanute Gardens (apartments for non-commissioned officers) and Chanute Apartments Corporation is the owner of Chanute Apartments (apartments for commissioned officers). It was stipulated that construction began on February 1, 1951 and was completed in March, 1953, at a cost to the builder of $8,297,969.23, exclusive of builder's and architect's fees, and trial by jury was waived.

The land on which the projects were erected (69 acres for Chanute Gardens and 27 acres for Chanute Apartments) was owned by the United States and leased by the Secretary of the Air Force to the defendant corporations for a period of 75 years at a nominal annual rental, "to be used for the purpose of erecting, maintaining and operating a housing project." Among other things, the leases provided that the premises be leased to personnel designated by the Air Force; set out the method of determining rental rates; required the lessees to pay any local taxes levied upon the leaseholds; prohibited any assignment without Air Force consent; specified that the buildings and improvements as erected and completed become "real estate and part of the leased lands, and public buildings of the United States;" and stated that "upon the expiration of this lease, or earlier termination, all improvements made upon the leased premises shall remain the property of the Government without compensation," except as to certain utility facilities.

The declaration of taking was filed May 1, 1957, and on that date each leasehold was encumbered by a mortgage owned by the New York State Employee's Retirement System and guaranteed by the Federal Housing Administration. There was also an outstanding loan made by the Air Force to the builder to enable it to complete the projects. It was stipulated that as of May 1, 1957, there was a total balance due on the mortgages of $6,145,694.31, and a balance due on the Air Force loan of $410,771.26, subject to any credits and offsets in favor of defendants.

No. 12497.

The court viewed the premises and heard evidence introduced by both parties on the issue of just compensation. In addition there was a stipulation of certain uncontroverted facts. There was no evidence of comparable sales. After reviewing the evidence on the various factors found by the court to be relevant to just compensation (see the memorandum opinion referred to in footnote 2), the trial court found that the reasonable construction cost of the two projects was approximately $8,200,000, without builder's and architect's fees; and that the fair cash market value based on capitalization of rents was about $6,950,000. The court then finally found that "based upon the competent evidence and the view of the premises, that the defendants as owners of the leasehold interests are entitled to just compensation as of May 1, 1957, in the amount of $7,100,000," and judgment was entered accordingly, the award to include the amounts due on the mortgages and the Air Force loan and to bear interest at the rate of 6% as provided in the Declaration of Taking Act, 40 U.S.C.A. § 258a.

Defendants contend that the judgment should be reversed and a mandate issued directing judgment based on a proper finding of reproduction cost less depreciation in the sum of $9,150,000 as established by their evidence. The government makes no complaint as to the amount of the award of $7,100,000 insofar as the district court adopted fair market value as the measure of just compensation.

We have carefully considered the several rulings of the trial court with reference to the evidence and find no prejudicial error. We hold that there is more than ample competent evidence to support the award of $7,100,000. We are not required to guess or speculate on how the district court arrived at this final figure. Where there is no evidence of comparable sales it has been aptly said: "* * * assessment of market value involves the use of assumptions, which make it unlikely that the appraisal will reflect true value with nicety * * * and that this involves, at best, a guess by informed persons." United States v. Miller, 1943, 317 U.S. 369, 374-375, 63 S.Ct. 276, 280, 87 L.Ed. 336. (Emphasis added.)

It is well settled that in condemnation proceedings the award of just compensation "should be measured in various ways depending upon the circumstances of each case and that no general formula should be used for the purpose," the courts retaining the concept of market value as a practical standard. United States v. Miller, supra, at pages 373-374 of 317 U.S., at page 280 of 63 S.Ct. Or, as it has been more concisely stated, it is "market value fairly determined." Olson v. United States, 1934, 292 U.S. 246, 255, 54 S.Ct. 704, 708, 78 L.Ed. 1236.

Defendants' contention that the district court should be confined to a consideration of reproduction cost less depreciation is not well taken in this case, and such method generally is held to be one of the least reliable indicia of market value. United States v. 49,375 Square Feet of Land, etc., D.C.S.D.N.Y. 1950, 92 F.Supp. 384, 388, affirmed United States v. Tishman Realty & Const. Co., 2 Cir., 1952, 193 F.2d 180, certiorari denied 343 U.S. 928, 72 S.Ct. 761, 96 L. Ed. 1338. We are not satisfied that the property interest taken in this case is so unique as to take it outside the general rule. We have carefully examined defendants' many arguments to the contrary and the cases on which they seek to rely and do not find them to be controlling here.

Much has been written on the subject of "just compensation" and the cases are legion giving various expressions as to how it should be determined. In the final analysis, however, when the condemnee has been awarded just compensation based on market value fairly determined, having regard for the various factors dictated by the circumstances of each particular case, he may be said to have been made whole.

We hold that the district court, in its finding of just compensation in the amount of $7,100,000, did not err in its interpretation of the evidence and its findings based thereon and that it applied the correct legal criteria in so doing. As to the appeal in No. 12497 the judgment is

Affirmed.

No. 12498.

In its declaration of taking the government specifically condemned all right, title and interest of defendants in each of the leaseholds, subject to each mortgage. The district court held, in effect, that state law (Illinois) applies to the definition of the property interest the government can condemn; that a leasehold interest subject to a mortgage is not a recognized legal estate in Illinois, since in Illinois a mortgagee has only a lien and not a vested interest in the leasehold; and that the entire leasehold must be condemned, including the...