United States v. Trout, 24186.

• Decision Date: 04 December 1967
• Docket Number: No. 24186.,24186.
• Citation: 386 F.2d 216
• Parties: UNITED STATES of America, Appellant, v. O. C. TROUT, Jr. and wife, Dora S. Trout, Appellees. O. C. TROUT, Jr. and wife, Dora S. Trout, Appellees, v. UNITED STATES of America, Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

386 F.2d 216 (1967)

UNITED STATES of America, Appellant, v. O. C. TROUT, Jr. and wife, Dora S. Trout, Appellees.

O. C. TROUT, Jr. and wife, Dora S. Trout, Appellees, v. UNITED STATES of America, Appellant.

No. 24186.

United States Court of Appeals Fifth Circuit.

December 4, 1967.

COPYRIGHT MATERIAL OMITTED

William O. Murray, Jr., 1st. Asst. U. S. Atty., San Antonio, Tex., Edwin L. Weisl, Jr., Asst. Atty. Gen., Roger P. Marquis, Elizabeth Dudley, Raymond N. Zagone, Attys., Dept. of Justice, Washington, D. C., Ernest Morgan, U. S. Atty., San Antonio, Tex., Charles Andrew Gary, Asst. U. S. Atty., San Antonio, Tex., for appellant.

Edward W. Watson, Galveston, Tex., for O. C. Trout, and another, appellees-appellants. Eastham, Watson, Dale & Forney, Galveston, Tex., of counsel.

Before WISDOM, THORNBERRY and GOLDBERG, Circuit Judges.

THORNBERRY, Circuit Judge:

This appeal is from a judgment of the district court awarding appellees, Mr. and Mrs. Trout, $72,202 as the fair market value of 210 acres condemned by the United States for the purpose of building the Canyon Dam in Comal County, Texas. Appellees had owned a 731.9-acre ranch bordering on the banks of the Guadalupe River since 1942. The United States filed the Petition for Condemnation and Declaration of Taking in January, 1960. The 210 acres taken in fee encompassed all of the Trouts' wooded land and fertile fields as well as all of their improvements for residential and ranching purposes except one hog pen. The 521.9 acres remaining to the owners could be described as caliche-rock country, far less valuable for ranching than was the land taken. In the Declaration of Taking, just compensation for the land taken was estimated at $62,645 and that sum was deposited. As the landowners would not agree that this amount represented just compensation, the United States proceeded to file a complaint in federal district court pursuant to 28 U.S. C. § 1358. The district court thereupon exercised its discretionary authority under Fed.R.Civ.P. 71A (h) to submit a case involving the power of eminent domain to a commission.¹ After three separate hearings, the commission filed a report in March, 1966, which was adopted by the district court. Although we regret that this case has already consumed the litigants' time and energies for nearly eight years, we are nevertheless constrained to reverse and remand for further proceedings.

I.

At the first hearing on August 13, 1962, the witnesses for appellees were Mr. Trout himself and G. E. Melliff, an independent appraiser. The questions asked by counsel were designed to elicit opinions of value. Stated generally, the correct measure of value in a case involving condemnation of part of a tract is the fair market value of the entire tract immediately before the taking less the fair market value of the remainder immediately afterwards. Mr. Trout valued the entire property before the taking, including the improvements, at $140,000 and the acreage remaining afterwards at $25,000. He placed a minimal value on the remainder because he did not know what he could do with it. Though he placed a low value on the remainder and valued some of the property taken as high as $750 per acre, he admitted on cross-examination that he had never made a study of what similar property sold for in the area.² Mr. Melliff valued the entire property before the taking, including improvements, at $112,683 and the remainder at $13,757, the difference being $98,926. He testified that he considered the highest and best use of the property before the taking to be ranching and agriculture and the highest and best use of the remainder to be grazing. He, like Mr. Trout, admitted on cross-examination that he had not studied land sales in the area though he knew there was a demand for lakeside subdivision as a result of the Canyon Dam project.³

Murrah Nolte, an experienced staff appraiser with the United States Corps of Engineers, presented the evidence for the Government. He valued the entire property before taking at $116,180. This amount included improvements and also $18,200 worth of general benefits. The amount ear-marked for general benefits reflected increased property values over the county resulting from the contemplated government project. The total valuation was based on six sales of property in the area between 1954 and 1958. These sale prices ranged between $70 and $308 per acre, some of the land sold being comparable to Mr. Trout's pasture land and some of it being comparable to his river bottom and crop land. Nolte valued the remainder after the taking at $113,200, thus estimating appellees' loss at approximately $3,000. His appraisal included the same estimate of $18,200 for general benefits and also an estimate of $55,000 for special benefits. This latter sum reflected the increase in value of land bordering on the government project because of its potential use for lakeside subdivision. At this point, the witness was relying on three sales of property in the area between 1958 and 1960; the respective prices per acre were $191, $200, and $315. On the basis of these prices and the kinds of property involved, he valued the remainder at a little more than $200 per acre.

After the first hearing, the commissioners submitted a report in which they valued the entire property before taking at $98,820 and the remainder at $52,480, thus estimating the Trouts' loss at $46,340. While they did not accept the low value placed on the remainder by the landowner and Melliff, they obviously rejected the proposition that property values were greatly enhanced by the Canyon Dam project. Since this first report was conclusory in nature and did not indicate why certain values were chosen, the district court resubmitted the case for further evidence and more detailed findings. A second hearing was held on December 16, 1963 at which the same expert witnesses and Mr. Trout broke down the total valuations they had given for improvements at the first hearing into individual valuations for each improvement. The commission's second report calculated appellees' loss to be $72,202. The $26,000 increase over the estimate in the first report is explained by the fact that the commissioners decided to place a greater value on the entire property before taking and a lesser value on the remaining acreage. They accepted Melliff's estimate of $112,000 for the entire property and a figure of $40,000 for the remainder. The latter sum represented the estimate of the remainder made by Nolte before he was instructed to consider special benefits attributable to the project. In its second report, the commission found that the 521 acres remaining were best suited for ranching and that the Government had failed to prove that this acreage would be suitable for lakeside subdivision. In effect, it gave no weight to the three sales between 1958 and 1960 used by Nolte to demonstrate that the remainder's value was enhanced by special benefits.

For yet a third time, the district court resubmitted the case for the purpose of taking additional evidence on the issue of enhancement. There was a hearing on December 13, 1965 at which Nolte presented recent sales of comparable property to show that subdivision development was continuing in the Canyon Dam area and that market values were still increasing. An engineer testified as to the structure and capacity of the reservoir in order to show that the location of Mr. Trout's property would be suitable for home building. As to all of the testimony presented at the third hearing, appellees objected that it should not be considered because appellant had an opportunity to present it at the previous hearings and did not do so. In March, 1966, the commission filed a brief statement which simply reaffirmed the second report; and in May, 1966, the district court entered a judgment adopting the findings of the commission. The Government appeals the award of $72,202; the Trouts, though they filed a cross-appeal, ask only that the judgment of the lower court be affirmed.

II.

It has been settled since Bauman v. Ross, 1896, 167 U.S. 548, 574, 17 S.Ct. 966, 976, 42 L.Ed. 270, that when the remainder is "specially and directly increased in value by the public improvement," the increase in value offsets the owner's recovery for land taken. By Section 6 of the Rivers and Harbors Act of 1918, Congress gave this principle the force of statute in cases like the one before us.⁴ Thus, in computing the award to the Trouts, the commission was bound to deduct the value of the remainder from the value of the entire property before taking and to include in the value of the remainder any special benefits arising from the Canyon Dam project.

Special benefits, as distinguished from general benefits which do not offset recovery, "are those which are direct and peculiar to the particular property." United States v. 2,477.79 Acres of Land, More or Less, Situate in Bell County, Texas, 5th Cir. 1958, 259 F.2d 23, 28. While the Government has requested this Court to clarify the definition of special benefits, we do not believe that this case presents an appropriate setting for an exhaustive discussion of the distinction between general and special benefits.⁵ We only observe, as did this Court in the Bell County case, supra, that an increase in the market value of the remainder caused by its frontage on the body of water contemplated by the government project is a special benefit within the meaning of the statute.⁶ The benefit signified by increased market value is a special one even though market values in the community have increased generally because of the government project. United States v. River Rouge Improvement Company, 1926, 269 U.S. 411, 46 S.Ct. 144, 70 L.Ed. 339; United States v. Fort Smith River Development Corporation, 8th Cir. 1965, 349 F.2d 522; United States v. Crance, 8th Cir. 1965, 341 F.2d 161. It is the distinct benefit to the remainder caused by its...