2005 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit

4-29-2005 

# U SA v . 6.45 Acres of L and

P r e c e de n t i al or N on-P r e c e de n t i al : P r e c e de n t i al
D ocke t N o . 03-2305

F o l low thi s a nd a dd it ion al work s at : http://d i git alc ommon s .l a w . vi l l a no va . e du/thir dc ir c uit_2005

Thi s de c i sion i s br ou gh t t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sity S choo l of L a

w Di git al Re posit or y

. It h as be e n a c c e pt e d for inclusion in 2005 D e c i sion s b y a n author i z e d a dmini s tr at or of V i l l a no va U nive r sity S choo l of L a

w Di git al Re posit or y

. F or mor e inform at ion, p le as e c on t a ct Be n j amin

. C a rl s on@l a

w . vi l l a no va . e du

. Re c omme nde d C it at ion

" U SA v . 6.45 Acr e s of L a nd " (2005). 2005 D e cisio n s . P ape r 1260. http://d i git alc ommon s .l a

w . vi l l a no va . e du/thir dc ir c uit_2005/1260P RE CE DE NT I AL
UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

N o. 03- 2305

UNI T E D S T AT E S OF AM E RI CA ,

A ppel l ant

v.
6. 45 A C R E S O F L A N D , m or e orl es s , s i tuat ed i n C u m b e r l a n d T o w n s h i p , A d a m s C o u n t y, C om m onw eal t h of Penns y l vani a; HANS G. E NGGR E N; CH RI S T I NA A. E NGGR E N, H usban d an d W i fe, t heirH ei rs and / or ass i gn s; UN KN OW N O W NER S; UN KN OW N LESSEES

A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e M id d le D istric t o f P e n n sy lv a n ia ( D

. C

. C i vi l A ct i on N o. 99- cv- 02128) D i s t r i ctJ udge: H onor abl e Sy l vi a H

. R ambo

A r gued J une 30, 2004
Be f o r e : AM BRO , ALD I SERT and ST A PL E T O N , C i r cui tJ udges ( O pi ni on fi l ed: A pr i l 29, 2005)2 T h o m a s L . S a n so n e tti A s s i s t antA t t or neyG ener al T odd S. A agaa r d, E s qui r e ( A r gued) R o b ert O ak ley , E sq u ir e M arc G o rdo n , E sq u ir e U ni t ed St at es D epart m entof J us t i ce E nvi r onm ent& N atur al R es our ces D i vi s i on P. O

. B ox 23795 L ’ E nfantPl aza St at i on W as hi ngt on, D C 20026
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. W i eder , E s qui r e ( A r gued) D av id E

. L eh m an , E sq u ir e N cN ees , W al l ace & N ur i ck 100 Pi ne St r eet P. O

. B ox 1166 H ar r i s bur g, PA 17108- 1166
J ohn C

. G oodchi l d, I I I , E qui r e ( A r gued) C athe ri n e E

. G il lesp ie, E sq u ir e M arisel A co sta, E sq u ir e T im o thyD

. M y g att , E sq u ir e M or gan, L ew i s & B ocki us 1701 M ar ketSt r eet Phi l adel phi a, PA 19103
Irw in W

. A ron so n , E sq u ir e W i l l i g, W i l l i ams & D avi ds on 212 L ocus tSt r eet , Sui t e 400 P. O

. B ox 11997 H ar r i s bur g, PA 17108
A t t or ney s forA ppel l ees3 OPI NI ON OF TH E CO UR T

A M B R O , C i r cui tJ udge

T h e U n it ed S tat es a p p ea ls from th e D istri ct C o u rt ’s j udgm entaw ar di ng co m pens at i on t o O ver vi ew L i m i t ed Par t ner s hi p ( “O ver vi ew ”) and H ans and C hr i s t i na Enggre n ( t he “Enggre ns ”) pur s uantt o t he G overnm ent ’ s t aki ng of 6. 45 acr es of l and i n t he G et t y s bur g N at i onal M i l i t aryPar k. T he G overnm entas s er t s t hat t he D i s t r i ctC our ti m per m i s s i bl yfai l ed to a p p lyth e “ u n it ru le” o f v a lu a tio n in d e ter m in in g th e f a ir
m a rk e t v a lu e o f

th e c o n d e m n e d lan d (in ste a d v a lu in g se p a ra te inte re sts r athe r t h an the a g g reg ate interests as a sing le un it ). M or eover , t he G over nm ent cont ends t hat i n s o doi ng t he D i s t r i ct C our taw ar ded compens at i on t o O ver vi e w an d th e Enggre ns t hat
e x c e e d e d , in a g g re g a te, th e a m o u n t th e U n ited S tate s c o u ld fai r l ybe obl i ged t o pay
. I n es s ence , the G overnm entar gues t hat th e D istric t C o u rt stra ye d f r o m th e c lea r p a th o f

th e u n it ru le
a n d , m ire d in a ju n g le o f v a lu a tio n s o f p a rtial in ter e sts , “d o u b le
c o u n ted ” a k e y c o m p o n e n t o f its e stim a te o f

th e lan d ’s v a lu e , in
e f f e c tc h a r g i n g t h e Gov e r n me n tt wi c e
. Be c a u s e we a g r e e , we r ever s e the j udgm entof t he D i s t r i ctC our tand r emand for f u rt h e r p ro c e e d in g s
.T he r i ght

- of- w ayeas ement o v erT r act4- 220, w hi ch w as 1 app urt enan tt o T ract4-203 , w as al so ow ned byt he E ng grens. T he i ni t i al part ies to t he l eas e w er e the pr edec es s or s - i n- 2 in te re s t to th e p a rt ie s b e f o re u s
. 4 I . F act s and P roce dural H i s t ory
A
. T he C ondem ned P ropert i es
O n D ecem b er12, 1999, t he U ni t ed St at es fi l ed a compl ai nt i n condemnat i on t o acqui r e appr oxi m at el y6. 45 acr es of l and w i t hi n t he boundar i es of t he G ett y s bur g N at i onal M il it ary Par k. T he conde m ned l and cons i s t ed of ( 1) t w o fee
s i m pl e i nt er es t s , des i gnat ed Tra ct4- 203 and Tra c t4

- 204, and ( 2)
m ul t i pl e r igh t- of- w ayeas ement s i n t hr ee tr act s of l and, des i gnat ed Tra ct4- 108, T r act4- 109, and Tra ct4- 220 (c o lle c tiv e ly, th e “ C o n d e m n e d P ro p e rt ie s ” ).

T ract4-203 w as ow ned i n fee si m p le byt he E ng grens. 1 I n 1972, t he E nggr ens l eas ed thi s par cel , w hi ch w as uni m pr oved att he t i m e, t o O ver vi ew fora t er m of 99 y ear s
. O ver vi ew 2 i nt ended t o bui l d on T r act4- 2 0 3 an obs er vat i on t ow er over l ooki ng t he G et t y s bur g B at t l efi el d and t o oper at e the t ow er as a t o u ri stat t r act i on. A ccor di ngl y , t he l eas e pr ovi ded that O v e rv iew w o u ld o w n , ins u re , an d p a ya ll ap p lica b le ta x e s w ith
r es pectt o t he pr opos ed t ow er
. A t t he end of t he l eas e t er m , t he E ng grens w ou l d ret ake p o ss e ssi on of the l and and w ou l d als oO ver vi ew al s o ow ned t he tw o r i ght

- of- w ayeas ement s over 3 T r act4- 108 and Tra ct4- 109. T hes e ea s ement s w er e appurt enant to T rac t 4-2 0 4 an d p rov ided ac ce ss to the tow er. T h e im p ro v em en ts on the C o n d em n ed P rop erti es w ere 4 demol i s hed on J ul y3, 2000.
5 t ake ow nersh ip of t he t ow er
. C ons t ruct i on of t he 307- foot obs er vat i on t ow erw as compl et ed i n 1974.

T r a c t4

- 2 0 4 wa s o wn e d i n f e e s i mp l e b yOv e r v i e w. On 3 t hi s land, w hi ch l ayadj ace ntt o T r act4- 203, O ver vi ew ow ned and op erat ed a g i ftshop , res t aura n t, and parki ng l ot. T hese i m provem ents w ere operat ed in con j un ct i on w i t h t he tow er as a t our i s tatt rac t i on. O ver vi ew gener at ed r evenue fr om t he gi ft sh o p an d restau ran t, an d thro u g h fe es f o r ad m issi o n to th e tow er. O ver vi ew al s o r ece i ved r entfr om t w o cel l ul arphone compani es f o r s p a c e o n th e to w e r s u b le a s e d f o r c e llu la r a n te n n a e
.
B . T ri al P roce edi ngs
T he D ecl ar at i on of T aki ng, w hi ch tr ans ferr ed t i t l e i n t he C ondemned Prope r t i es t o t he U ni t ed St at es , w as fi l ed byt he G overnm enton M ay1 7 , 2 000. T he G overnm entt her eaf t er 4 depos i t ed w i t h t he r egi s t r yof t he D i s t r i ctC our tan es t i m at e of j us tcompensa t i on fort he C ondemned Prope rt ies–$3 m i l l i on. B eca us e the Enggre ns and O ver vi ew contes t ed the fa i r nes s of t he G over nm ent ’ s es t i m at ed pay m ent , a bench t r i al w as s etforA ppr ai s al “met hodol ogy ” ca n m ean tw o t h ing s in t he 5 cont ext of t hi s l i t i gat i on. T he fi r s tki nd of m ethodol ogy , w hi ch i s notin di s put e on appe al , per t ai ns t o one of the ac cept ed t heor i es of val uat i on. T hi s choi ce va r i es w i t h t he natur e of the pr oper t yunderappr aisal , and expe r t s m ayr eas onabl ydi s agr ee over w h i c h wi l l y i e l d t h e mos ta c c u r a t e e s t i ma t e i n any par t i cul arcas e. T he sec ond m eani ng of ‘ m ethodol ogy ’ per t ai ns t o t he l egal pr ocedur e byw hi ch an a w ar d of j us tcompensa t i on forthe U ni t ed St at es ’ t aki ng i s det er m i ned. T hi s s econd type of
m e th o d o lo g yim p lica tes th e u n it ru le, w h ich is th e su b jec t o f th is app eal

. T o av oid conf

usi on , w e refert o the unitru l e no tas a m ethodol ogy but as a “pr ocedur e, ” bec aus e the det er m i nat i on as t o i t s appl i cabi l i t yi s one made bya courtas a mat t erof l aw rathe r t h an b yan ap p raiser. 6 t he so le p urpose o f deter m i ning and aw ardi ng j ust compensa t i on.
Pr i ort o tr ial , t he part i es s ubm i t t ed br i efi ng on t he appr opr i at e met hodol ogy forval ui ng t he C ondemned 5 Pr oper t i es
. A s a r es ul tof t hatbr i efi ng, t he D i s t r i ctC our ti s s ued
a p re trial o rd e r o n A p ril 1 3 , 2 0 0 1 , w h ich sta ted in re lev a n t p a rt:

T he hi ghes tand b es tus e eva l uat i on fort he pr oper t i es ati s s ue ca n be det er m i ned i n ei t herof th e tw o f o llo w in g w a y s: a) as a s i ngl e uni t t ogether w i t h t hei rappur t enant ea sem en ts, o rUn d e rt h e i n c o me c a p i t a l i z a t i o n a p p r o a c h , t h e n e ti n c o me 6 t h a ta t r a c t o f l a n d c a n p r o d u c e i n a t yp i c a l ye a r i s d i v i d e d b y a fact or cal l ed a “c apit al i zat i on rat e. ” T he cap i t al i zat i on rat e i s a r at i o r epr es ent i ng t he r el at i ons hi p betw een t he l and’ s annual net in c o m e a n d its v a lu e . A c c o rd in g to L e n n h o f f , this ra tio i ndi cat es h o w m anyt i m es t he annua l neti ncome a pot ent i al bu y er w o u l d p ayfor t he land. T he q uo t i ent of t hese figures , L ennhoff

t es t i fi ed, r epr es ent s t he fai r m ar ket val ue of the l and.

7 b) t w o ap p r ai s al s – one cove r i ng t r act4- 203 and
a n o th e r a p p ra isa l co v e rin g T ra c t 4 -2 0 4 , e a c h w ith th e ira p p u rt e n a n t e a s e m e n ts

. . . .
A t hr ee- daybench tr i al w as hel d i n N ovember 2001, at
w hi ch t hr ee e xper tappr ai s er s t es t i fi ed t o t he fa i rm ar ketval ue of t he C ondemned Prope r t i es : D avi d L ennhoff fort he G overnm ent , R ober tV o n A n cken forO ver vi ew , and W i l l i am S iv e rlin g f

o r th e E n g g re n s. L e n n h o f f a n d V o n A n c k e n , in
acc or dance w i t h t he fi r s topt i on avai l abl e unde r t he D i s t r i ct C our t ’ s pr etr i al or der, o ffer ed appr ai s al s t hatval ued the C o n d e m n e d P ro p e rties a s a sin g le u n it. S iv e rlin g p u rp o rte d to t ake the s econd opt i on, butr athert han of fe ran appr ai s al of T ra c t 4 -2 0 3 (w ith its a p p u rte n a n t e a se m e n t), h e a p p ra ise d o n ly th e v a lu e o f

th e E n g g re n s’ le g a l in ter e st in th a t p a rc e l.

L ennhoff

t es t i fi ed that t he m os tr el i abl e met hodol ogyby wh i c h t o a p p r a i s e t h e Co n d e mn e d P r o p e r t i e s wa s t he i n c o me capi t al i zat i on appr oach. U s i ng t hi s appr oach, L ennhoff 6S e e g e n e ra lly J a c q u e s B . G e lin & D a v id W . M ille r, The Feder al L a w o f E m in e n t D o m a in § 4. 1 at200, 205- 06 ( 1982) ( “G el i n & M il ler”).
T he cos t ap pr oach ( al s o know n as t he r epr oduct i on 7 appr oach) , accord ing t o L ennhoff , val ues a tr actof l and by es t i m at i ng t he val ue of t he l and as vaca nt , addi ng t he cos tof t he i m pr ovement s , and then deduc t i ng anydepr eci at i on i n t he im p ro v e m e n ts

. S e e g e n e ra lly i d. a t 2 0 0 , 2 1 4 -1 8

. 8 t e s t i f i e d t h a t t h e Con d e mne d Pr o p e r t i e s c o u l d g e n e r at e an es t i m at ed annua l netoper at i ng i ncome of $227, 8 78. H e then di vi ded thi s amount byan es t i m at ed ca pi t al i zat i on r at e of 10. 5% i n or dert o concl ude t hat t he fai r m ar ket val ue of the C ondemned P ropert i es w as approx i m at el y$2

. 2 m i l l i on
. L e n n ho ff als o val ued the C ond em ned Pr oper t i es us i ng a cos tappr oach. 7 A p ply i ng t his al t ernat i ve ap proach , he tes t i fi ed thatt he fa ir
m a rk e t v a lu e o f

th e C o n d e m n e d P ro p e rt ie s w o u ld b e $ 2 .9
m i l l i on. Fi nal l y , L ennhoff compar ed the i ncome capi t al i zat i on appr oach w i t h t he cos t appr oach a nd det er m i ned thatt he form er m ethod w as a more r el i abl e i ndi cat orof t he v al ue of the C ondemned Prope r t i es
. N onethel es s , h e ad o pt ed a va l ue that
r e p r e s e n t e d a “ r e a s o n a b l e r o u n d i n g ” b e t we e n t h e t wo appr oache s , y i el di ng a fi nal concl us ion tha tt he C ondemned P ro p e rt ie s w e re w o rt h $ 2 .5 m illio n
. O vervi ew ’s app rai ser , V on A nck en, t est i fi ed thatt he co st appr oach, an d n ott he i ncome capi t al i zat i on appr oach, w as t he
m or e appr opr i at e met hodol ogyfo r c alcul at i ng t he val ue of theA t th e o u ts e t o f th e trial, O v e rv iew a lso so u g h t to b rin g to 8 t he att ent i on of t he D i s t r i ctC our ti t s al l egat i on t hati n 1994 t he G o v ern m en t eng ag ed in n eg o ti ati o n s w ith O v erv iew to ac q u ir e t he C on dem ned P ropert i es. O vervi ew cl ai m ed that du ri ng t hese negot i at i ons t he U ni t ed St at es appar ent l y r el i ed on an appr ai s al val ui ng t he C ondemned Pr oper t i es at $6. 6 m i l l i on. T he U ni t ed St at es m oved i n l i m i ne t o excl ude ment i on of t he ea r li er ap p r a i s a l b e c a u s e t h e r e was n o e v i d e n c e o f i t s e x i s t ence and becau se i tw ou l d b e extr em el yprej ud i ci al t o the U nit ed S t at es. O ver vi ew i ndi cat ed thati tw i s hed t o di s cus s , att r i al , t he ea r l i er negot i at i ons t hatm ayhave pr ece ded an or al p ur chas e off erby t he U ni t ed St at es
. T he G overnm ent deni ed t hat anyo ral of fer
w a s m a d e . T h e D istric t C o u rt to o k th e m a tter u n d e r a d v ise m e n t. A s s um i ng t he appr ai s al m ent i oned byO ver vi ew exi s t s , i tdoes not appea r t o have be en ent er ed i nt o evi dence orr el i ed upon by th e C o u rt

. W e th e re f

o re d o n o t co n s id e r it o n a p p e a l. See Fed.

9 C on dem ned P ropert i es. A ccordi ng t o V on A n c k e n, t he co st appro ac h r es ul t ed i n an $11. 13 m i l l i on val uat i on of t he C o n d e m n e d P ro p e rties . W h ile th a t es tim a te w a s a p p ro p ria te in Vo n An c k e n ’ s o p i ni o n , h e n o n e t h e l e s s e n g a g e d i n a n i n c o me capi t al i zat i on anal y s i s for t he l i m i t ed purpos e of c al cul at i ng ( for
u se u n d e r th e c o st a p p ro a c h ) c e rta in d e p re c iatio n a m o u n ts w ith
r es pectt o i m pr ovement s on t he C ondemned Pr oper t i es
. V on A ncken’ s i ncome capi t al i zat i on “modi fi cat i on” t o hi s appr ai s al
r es ul t ed i n an es t i m at ed fa i rm ar ketval ue of $11. 5 m i l l i on. V on A ncken e xpl i ci t l yt es t i fi ed that hi s cal cul at i ons , us i ng bot h t he
cos tand i ncome c api t al i zat i on appr oache s , r epr es ent ed the t ot al f a ir m a rk e t v a lu e o f

th e C o n d e m n e d P ro p e rties a s a sin g le u n it. 8R

. A p p
. P

. 1 0 (a). 10 Si ver l i ng, t he Enggre ns ’ expert , di d notval ue the C ondemned Prope r t i es as a s i ngl e uni t

. N ordi d he ca l cul at e the t otal value o f T ra c t4-203 (w i t h it s appu rt enan teasem ent) as a uni t

. R ather , he t es t i fi ed t hat hi s appr ai s al cons i s t ed of the val ue o f t h e E n g g r e n s ’ l e a s e w i t h O v e r v i e w
. H e d i d s o u s i n g t wo m ethods

. Fi r s t , he est i m at ed the amount of t he annua l r ent paym ent s t he Enggre ns w oul d r ece i ve fr om O ver v i e w du r i n g t he y ea r ha lf w a y th ro u g h the 9 9 -y ea r l ea se p eriod (t h e 4 5 th y ea r)
a n d c a p i t a l i z e d t h a ti n c o m e u s i n g a c a p i t a l i z a t i o n r a t e o f 1 0 %. T hi s y i el ded a va l ue of $2. 7 m i l l i on. Second, he ca l cul at ed the netpr esen t v alue of t he ca s h fl ow t o t he Enggre ns undert he
re m a in in g y e a rs o n th e lea se u sin g a d isc o u n t ra te o f 9 .5 % . T h is al t er nat i ve cal cul at i on r es ul t ed i n a val ue of $2

. 5 m i l l i on. Si ver l i ng t hen ave r aged the r es ul t s o f t he tw o m ethods and
c o n c lu d e d th a t th e E n g g re n s’ leg a l in ter e st in T ra c t 4 -2 0 3 a n d its appur t enanteas ement w as w or t h $2. 6 m i l l i on.
C
. D i s t ri ct C ourt ’ s F i ndi ngs
T he D i s t r i ctC our tw ei ghed th e test i m onyof al l t hr ee expertappr ai s er s and dec i ded t h at the i ncome capi t al i zat i on appr oach us ed byL ennhoff w as t he mostappr opr i at e met hod of
v a lu a tio n . H o w e v e r, th e C o u rt o p in e d th a t, co n tra ryto L ennhoff’ s ow n t es t i m ony , t he i ncome capi t al i zat i on appr oach di d notactual l yr es ul ti n t he fa i r m ar ket val ue of t he C ondemned Pr o p e r t i e s a s a who l e
. Ra t h e r , t h e Cou r ts t a t e d i t s b e l i e f t hat11 “[w ] hi l e t he U ni t ed St at es and O ver vi ew purpor t ed t o val ue the pr oper t yas a w hol e, t hei r capi t al i zat i on of i ncome appr oach w as bas ed onl yon t he val ue t hat a hypot het i cal buy erw oul d expec t to e a rn f ro m o p e ra tin g th e
. . . [ t] o w e r, o r O v e rv ie w ’s in te re s t.” In accordanc e w i t h thatbeli ef, t he C ou rt st at ed thati tw ou l d u se L en n h o ff ’s ap p roa ch to ca lculate the v alue o f O v erv iew ’s i nter esti n the C on dem ned P ropert i es ( i

. e. , the val ue of O v e rv iew ’s f

e e sim p le in ter e st in T ra c t 4

- 2 0 4 a n d its
a p p u rte n a n t ea se m e n ts p lu s th e v a lu e o f O v e rv iew ’s le a se h o ld i nt er es ti n T r act4- 203) and t hat i tw oul d cal cul at e s epar at el yt he
v a l u e o f t h e E n g g r e n s ’ i n t e r e s t b a s e d o n S i v e r l i n g ’ s t e s t i m o n y. A c c o rd in g to th e C o u rt, th is p ro c e d u re w a s c o n sis ten t w ith its A pr i l 13, 200 1 o rde r t hatal l ow ed the part i es t o val ue the C ondemned Prope r t i es ei t heras a si ngl e uni t or as t w o di ffe r ent uni t s of l and.

W ith resp ec t t o it s ca lculati o n o f the v alue o f O v erv iew ’s i nt er es t , t he D i s t ri ct C our tm ade f actual det er m i nat i ons r egar di ng t he pr oj ect ed i ncome and expens es at t r i but abl e t o t he C o n d em n ed P rop erti es u sing a c o m b ination o f b o th L en n h o ff ’s
an d V o n A n ck en ’s t esti m o n y
. A p p lyi n g L en n h o ff ’s
m etho d o log y , the C o u rtco n clud ed that the v alue o f O v erv iew ’s i nt er es ti n t he C ondemned Pr oper t i es w as $3. 932 m i l l i on. T he C o u rt the n pr ocee ded t o cal cul at e s epar at el yt he val ue of the E nggr ens ’ i nt er es t

. I n s o doi ng, i tdet er m i ned thatt he bes tw ay to do t his w as t o use t he i nco m e capit al i zat i on app roach to cal cul at e t he pr es entval ue of the futur e i ncome t he Eng g r ens c o u ld e x p e c t to re c e iv e f ro m th e ir lea se to O v e rv iew . U sin g th isT he D i s t r i ctC o u rt ex erci s ed j ur i s di ct i on pur s uantt o 28 9 U

. S

. C

. § § 1331 and 1345 bec aus e the U ni t ed St at es w as t he p la in tif f u n d e r a u th o ri ty g ra n te d to it b yf e d e ra l la w . W e exer ci s e appe l l at e j ur i s di ct i on under28 U

. S. C

. § 1291.
12 ap p ro a c h , the C ou rtcon cl ud ed thatt he v al ue o f t he E ng grens’ in te re s t in th e C o n d e m n e d P ro p e rt ie s w a s $ 2 .7 m illio n
.
A ccor di ngl y , t he D i s t r i ctC our t ent er ed a f i nal j udgm ent agai ns tt he U ni t ed St at es in the amount of $6. 632
m i l l i on— $3. 932 m i l l i on i n favor of O ver vi ew and $2. 7 m i l l i on t o t he Enggre ns
. T he G overnm entt i m el yappea l ed. 9

I I . D i s cus s i on
T h e G o v ern m en t con tend s tha t th e D istri ct C o u rt co m m itted leg al error w h en itp u rpo rt ed to d eterm ine its aw ard of j us tcompensa t i on bys epar at el yval u ing the di s t i nctl egal i nt er es t s of O ver vi ew and the Enggre n s in t he C ondemned P r o p e rties . A c c o rd in g to th e G o v e rn m e n t, th e C o u rt sh o u ld have f ol low ed the “uni trul e, ” ca l cul at i ng t he fe e s i m pl e val ue of t he C ondemned Pr oper t i es ( as i f i n s i ngl e ow ner s hi p) w i t hout
r egar d t o t he consti tuentl egal i nt er es t s
. T he G overnm ent f u r th e r a r g u e s t h a tt h e Di s t r i c tCo u r t ’ s v a l u a t i o n , b yi t s o wn t erm s, w as cl earl yerr on eou s.
W e e x erc ise p lena ryrev iew o v er the D istri c t C o u rt ’s
con cl usi on s of l aw and i t s appli cat i on of the l a w to t he fa ct s.“F ac tual fin d ing s are clea rl yer ron eo u s if the f ind ing s are 10
u n su p p o rt ed b y su b stan ti al e v iden ce , lack ad eq u ate e v iden ti ary s uppor ti n t he r ecor d, ar e aga i ns tt he cl earw ei ghtof t he evi dence orw her e t he d istr i ctcour thas m i s appr ehende d t he
w ei ght of t he evi dence

. ” U ni t ed Stat es v. R om an , 121 F. 3d 136, 140 (3d C ir

. 1997) ( i nt ernal quot at i on om i t t ed)

. A fi ndi ng of fa ct i s also co n side red “c lea rl y e rron eo u s w h en alt h o u g h there is ev iden ce to su p p o rtit , th e re v iew ing co u rto n the e n ti re e v id e n c e is lef

t w ith th e d e f

in ite a n d f

irm c o n v ictio n th a t a m i s t ake has been c om m i t t ed. ” Es t at e of Spearv. C om m is s i oner , 41 F. 3d 103, 114- 15 ( 3d C i r
. 1994) ( ci t i ng U ni t ed St at es v. U

. S. G yps um C o. , 3 3 3 U

. S

. 3 6 4 , 3 9 5 (19 4 8 )). “The gui di ng pr i nci pl e of j us tcompensa t i on .
. . i s t hatt he 11
ow nero f th e c o n d e m n e d p ro p e rty‘m u s t b e m a d e w h o le b u t is

13 Louis W

. E ps t ei n Fam i l

y P ’shi p v. Km ar tC or

p. , 13 F. 3d 762, 766 ( 3d C i r
. 1994)

. W e r evi ew t he D i s t r i ctC ou rt ’ s fac tual f in d in g s f o r c le a r e rr o r. I

nt ’ lA s s ’ n of

M achi nis t s & Aer os

pace W or ker s v. U S A i r w ays , I

nc. , 3 5 8 F

. 3 d 2 5 5 , 2 5 9 (3d C ir

. 2 0 0 4 ). 10

“ T h e U n it e d S ta te s h a s th e a u th o rityto tak e p riv a te pr oper t y for publ i c use by emi nent dom ai n,
. . . but [i t ] i s obl i ged byt he Fi ft h A m endment t o pr ovi de ‘ j us tcompensa t i on’ t o t he
ow nert her eof. ” K i r by F or es t I ndus

. , I nc. v. U ni t ed Stat es , 467 U

. S. 1, 9 ( 1984) ( ci t i ng Kohlv. U ni t ed Stat es , 91 U

. S. 367, 371 ( 1 8 7 6 ) ). In g e n e ra l, “ju st c o m p e n sa tio n ” m e a n s “ th e f a ir 11n o t en ti tl ed t o m or e. ’ ” U ni t ed Stat es v. 564. 54 A cr es of Land , 441 U

. S. 506, 516 ( 1979) ( emphasi s i n or i gi nal ) ( quot i ng O l s on v. U ni t ed S tat es , 2 9 2 U .S . 2 4 6 , 2 5 5 (1 9 3 4 )); s ee al s o U ni t ed St at es v. L. E

. C ooke Co. , I nc. , 991 F. 2d 336, 341 ( 6th C i r
. 1993) ( “ [ O] v e r c o mpe n s a t i o n i s a s u n j u s t t o t h e p u b l i c as under compensa t i on i s t o t he prope r t yow ner , and the l andow ner bear s t he bur den of pr ov i ng t he val ue of the l and. ” ( ci t i ng U ni t ed Stat es v. 69. 1 A cr es of Land , 9 4 2 F

. 2 d 2 9 0 , 2 9 2 (4th C ir

. 1 9 9 1 )) ).
14 m ar ketval ue of the prope r t y on t he dat e i ti s appr opr i at ed. ” I d. at10. “U ndert hi s s t andar d, t he ow ner is e n ti t l ed t o r ece i ve w hata w i l l i ng buy erw oul d payi n cas h t o a w i l l i ng s el l eratt he t i m e of the t aki ng. ” I

d. (in ter n a l q u o tatio n s o m itt e d ). W h ile th is
ru le m a y b e c o m p a ra tiv e ly e a sy to a p p ly w h e n th e p r o p e rty c o n d e m n e d b y t h e U n i t e d S t a t e s i s o w n e d i n f e e s i m p l e b y a s i ngl e ow ner , t hati s notourcas e. H er e the t aki ng w as of d isc re telyh e ld leg a l in ter e sts . T h u s, d o m u lti p le in ter e sts in th is
c a se ju stif

y th e D istric t C o u rt’s d e p a rtu re f ro m th e g e n e ra l u n it
rul e of va l uat i on? W e hol d t hat t hey do not

. N ei t hert he D i s t r i ct C o u rto p inion n o r t h e re co rd p re s e n ts ex tr ao rdin ary ci r cumst ance s t hat j us t i f y t h e e x c e p t i o n a l val uat i on m ethodol ogyempl oy ed. For t hi s r eas on, i tcannots t and.

I ti s w el l

- es t abl i s hed that“[a ] condemnat i on pr ocee di ng i s a pr ocee di ng i n r em. ” U ni t ed Stat es v. 25. 936 A cr es of Land , 1 5 3 F .2 d 2 7 7 , 2 7 9 (3 d C ir. 1 9 4 6 ); s ee Uni t e d S t a t e s v. D unni ngt on , 1 4 6 U .S . 3 3 8 , 3 5 2 -5 3 (1 8 9 2 ); E agl e L akeO f cour s e, the s ame cannotbe s ai d w hen the U ni t ed St at es 12 ta k e s le s s th a n th e w h o le e s ta te

. See N ebr as ka v. U

ni t ed Stat es , 164 F. 2d 866, 868 n. 7 ( 8t h C i r
. 1947)

. T her e t he G o v ern m ent does fac e an obl i gat i on t o s peci fyw hati ti s t aki ng. 15 I m pr ovem ent C o. v. U

ni t ed Stat es , 1 6 0 F

. 2 d 1 8 2 , 1 8 4 (5th C ir

. 1 9 4 7 ). “It i s n o t a t ak ing o f righ ts of p erso n s in the o rdin ary s ens e but an appr opr i at i on of t he l and orpr oper t yi t s el f. ” 25. 936 Ac r e s o f Land , 153 F. 2d at279. W hen the U ni t ed St at es e x e rc ise s its p o w e r o f

e m in e n t d o m a in , it “ tak e s all in ter e sts [ in t he prope r t y ] and as i t t akes t he r es i s notcal l ed upon t o s peci fy t he i nt er es t s t hathappen t o exi s t

. ” A

. W

. D ucke t t& C o. , I

nc. v. U ni t ed Stat es , 26 6 U

. S

. 14 9, 15 1 ( 19 24 ). In fact , an ex erci se 12 of emi nentdom ai n ext i ngui s hes al l i nt er es t s i n t he conde m ned la n d a n d e s ta b lis h e s a n e w title in th e U n ite d S ta te s
. I d. ; 25. 936 A cr es of Land , 15 3 F

. 2d at27 9. A ccordi ng l y , an aw ard of just compensa t i on t akes t he pl ace of t he conde m ned l and and the
var i ous l egal inter es t s i n t he l and ar e “tr eat ed as t hough t r ans ferr ed t o t he aw ar d. ” 25. 936 A cr es of Land , 1 5 3 F. 2 d at 2 7 9 ( c itin g , in tera lia , D unni ngt on , 1 4 6 U .S . at 3 5 1 ); s e e als o Meadow s v. U

ni t ed Stat es , 1 4 4 F .2 d 7 5 1 , 7 5 2 , 7 5 3 (4th C ir

. 1944) ( “The v alue of

t he pr oper t yonce be i ng det er m i ned i n a pr oper pr ocee di ng, t he s um s o det er m i ned s t ands i n t he pl ace of t he pr oper t yand ca n be di s t r i but ed upon the adj udi cat i on of t he
v a lu e o f th e re s p e c tiv e in te re s ts .” ).

Re c o g n i z i n g th a tc o n d e mna t i ons pr ocee d i n r em , w e h ave hel d t hat a n aw ar d of j us tcompensa t i on underfede r al l aw16 cannotbe det er m i ned bys epar at el yval ui ng the var i ous l egal in te re s ts in th e la n d c o n d e m n e d

. See 25. 936 A cr es of Land , 153 F. 2d at279

. T hi s s et t l ed pri nci pl e, r efe r r ed t o as t he “uni trul e”
o r “un divi ded fee rule, ” em bo dies t he i dea t hat “w hen l an d in
w hi ch var i ous per s ons have s epar at e i nt er es t s or es t at es i s t aken byt he U ni t ed St at es for publ i c us e, t he amount of compensa t i on to b e p a id m u st b e d e ter m in e d a s if th e p ro p e rtyw a s in a sin g le
o w n e rs h ip a n d w ith o u t r e f e re n c e to c o n f

lic tin g c la im s o r l ie n s .” I d. ( ci t i ng Me a d o ws , 1 4 4 F .2 d a t 7 5 2 , 7 5 3 ; U ni t ed Stat es v. 576, 7 3 4 A cr es of

Land , 1 4 3 F

. 2 d 4 0 8 , 4 0 9 (3d C ir

. 1 9 4 4 )); B ogar tv. U

ni t ed Stat es , 169 F. 2d 210, 213 ( 10t h C i r
. 1948) ( “A condemnat i on pr o ceedi ng i s an i n r em proc eedi ng and w hen l and i s t aken i n w hi ch s epar at e i nt er es t s or es t at es ar e ow ned by tw o o r m o re p e rso n s, a s b e tw e e n th e p u b lic a n d th e o w n e rs, it is
re g a r d e d a s o n e e sta te.” ); N ebr as ka , 164 F. 2d at868 ( “The gener al fede r al rul e of compensa t i on forcondemnat i on of a f ee i s w el l s et t l ed. T he meas ur e of ‘ j us tcompensa t i on’ undert he F if th A m e n d m e n t f

o r th e tak in g o f

p ro p e rtyin f

e e sim p le
or di nar i l yi s t he fa i rm ar ketval ue .
. . o f the p r oper t yi n fee
ow ner s hi p as of t he t i m e of t aki ng i r r es pect i ve of the n um ber
a n d k in d o f

in te re s ts e x is tin g in it.” ). B uts ee U ni t ed Stat es v. C i t y of N ew Y ork , 1 6 5 F .2 d 5 2 6 , 5 2 8 (2 d C ir. 1 9 4 8 ) (ca lli n g in to d o u b tt h e e x i s t e n c e o f t h e u n i t ru l e )

. I n p r e s c r i b i n g t h i s ru l e , we h av e expl ai ned that“the val ue of the s epar at e i nt er es t s cannot
exce ed t he w or t h of t he w hol e. ” 25. 936 A cr es of Land , 153 F. 2dO ver vi ew s ei zes upon t hi s l anguage i n 2 5

. 9 3 6 A cr es of 13 Land , and i ns i s t s t hatt he uni t rul e i s t her efor e nothi ng m or e than a pr os cr i pt i on agai ns tt he doubl e- count i ng of interes t s i n l and
w hen d eterm i ni ng j us tcompensa t i on. G i ven the w ei ghtof a u th o rity , as w e ll as o u r e x p re ss sta tem e n t o f th e u n it ru le in 25. 936 A cr es of

Land , we c a n n o ta c c e p tOver vi ew ’ s pr opos i t i on. T o t he contr ary , w e have a p p li ed t he uni trul e as t he l egal pr ocedur e by w hi ch j us tcompensa t i on i s t o be det er m i ned and a p p o rt io n e d

. 17 a t 2 7 9 ; see al

so U ni t ed Stat es v. 131. 68 A cr es of Land , 695 13 F. 2d 872, 875 ( 5t h C i r
. 1983) ( “[T] he s o- cal l ed ‘ undi vi ded fe e ru le’

. . . p ro v id e s th a t th e d iv isio n o f a f e e in to se p a ra te in ter e sts cannoti ncr eas e the amount of compensa t i on t hatt he conde m nor h as to p ayfo r t h e tak ing o f th e f ee
. ”).

U n d e r t h e u n i t ru l e , t h e r o l e o f t h e Uni t e d St a t e s , as c o n d e m n o r, en d s o n c e th e to tal am o u n t o f ju st c o m p e n sa tio n is d e ter m in e d . O n lya f

ter th e to ta l a w a rd is d e ter m in e d is it appor t i oned among t he hol der s of var i ous l egal i nt er es t s i n t he
c o n d e m n e d p ro p e rt y
. See U ni t ed St at es v. 1. 377 A cr es of Land , 352 F. 3d 1259, 1269 ( 9t h C i r
. 2003) ( “The ‘ undi vi ded fe e rul e’
e ss e n tiallyo p e ra tes b y p e rm itt in g th e g o v e rn m e n tal a u th o rityto condemn pr oper t ybypr ovi di ng j us tco m p ensat i on, t hen all o w ing the re sp ec ti v e intere st h o lders t o ap p o rt ion the a w ard
a m ong t hemsel ves , ei t her by cont r act or j udi ci al i nt e r ve nt i on
. . . . O nc e t he go ve r nmen tpr ov i de s j us t compensa t i on for t he condem ned prope r t y , i t s r ol e i s atan end18 . . . .” (in ter n a l cita tio n s o m itt e d )); E agl e Lake I m pr ovem ent

C o. , 160 F. 2d at 184 ( “The s um det erm i ned t o be due fort he t aki ng i s appor t i oned betw een the cl ai m ant s , but , as bet w een the
con dem no r and t he co nd em nee, the p ropertyi s val ued as a w ho l e.” ( in ter n a l q u o tatio n o m itt e d )); N ebr as ka , 1 6 4 F

. 2 d at868 ( “[T] he guar ant ee of t he Fi ft h A m endment i s r egar ded as bei ng s at i s fi ed gene r al l yw her e t he cas h val ue of pr oper tyt aken i n fee i s s ubs t i tut ed fo r i tand the ca s h i s al l ocat ed orappor t i oned
a m o n g th e re sp e c tiv e e sta tes o r in te r e s ts o n th e b a sis o f th e ir
re lativ e v a lu e s.” ); Me a d o ws , 144 F. 2d at 753 ( “The val ue of the pr oper t yonce bei ng det er m i ned i n a pr operpr ocee di ng, t he s um s o det erm i ned s t ands i n t he p lace of t he pr oper t yand ca n be di s t r i but ed upon t he adj udi cat i on of t he val ue of t he r es pect i ve in ter e sts .”); C ar l ock v

. U ni t ed Stat es , 5 3 F

. 2 d 9 2 6, 92 7 ( D. C. C i r
. 1931) ( “I ti s a funda m ent al pr i nci pl e, governi ng condemnat i o n p r o c e e d i n g s , whe r e s e v e r al i nt er es t s ar e i nvol ved,
su c h a s e sta tes f

o r life , o r in re m a in d e r, o r le a se h o ld s, o r in
r ever s i on, i n t he pr oper t yt o be conde m ned, al l sh o u l d be combi ned i n det er m i ni ng t he value o f t he fe e, aft erw hi ch the t ot al v alue of t he fe e ca n be s ubdi vi ded i n s at i s fac t i on of t he
v alue s fix ed u p o n the v ariou s interests i n v o lved

. ”).

T h is d o e s n o t m e a n th a t th e f a c t o f d iv id e d o w n e rsh ip in condemned pr oper t yi s t o be w hol l y d isr egar ded. W hen the val ue of c ons t i tuentl egal i nt er es t s i n pr oper t yi s r el evantt o t he fac t fi nder ’ s det er m i nat i on of t he val ue of the l and as a w hol e ( as if in s in g le o w n e r s h i p ) , s u c h e v id e n c e m a yb e c o n s id e re d

. C f. U ni t ed Stat es v. 158. 76 A cr es of Land , 2 9 8 F. 2 d 5 5 9 , 5 6 1 ( 2d19 C ir. 1 9 6 2 ) (“ [ I]f

th e c o n d e m n e d lan d c o n tain s a m in e ra l d e p o sit,

. . . it is pr opert o cons i dert hi s fac ti n det er m i ni ng t he mar ket
v a lu e o f th e lan d a s a w h o le, b u t itis n o t p e rm iss ib le to d e t e r mi n e s e p a r a t e l y t h e v a l u e o f t h e mi n e r a l d e p o s i t a n d add th is to th e v a lu e o f th e lan d a s a u n it. ” ); Me a d o ws , 144 F. 2d at 753 ( not i ng t hatevide n ce o f t he val ue of a s epar at e t i m ber in ter e st in th e c o n d e m n e d lan d m a yb e p ro p e rly c o n sid e re d in d eterm ining the v alue o f th e lan d as a w h o le).

N o r d o w e h o ld th a t th e u n it ru le is to b e a p p lied rig id ly i n al l ca ses. A s t he Supr eme C our thas not ed i n t he emi nent dom ai n cont ext , “[e ] xcept i on al ci r cumst ance s w i l l m odi fyt he
m os tcar eful l yguar ded rul e .
. . . ” Mississi ppi & Rum R i ver B oom C o. v. P at t ers on , 98 U

. S. 403, 408 ( 1878)

. T he s ame can b e s a id w ith re s p e c t to a p p lic a tio n o f th e u n it r u le

. See U

ni t ed St at es v. 499. 472 A cr es of Land , 7 0 1 F

. 2 d 5 4 5 , 5 4 9 (5 th C ir

. 1 9 8 3 ) (pe rm itti n g d ep artur e f rom the u n itrule in c ertain “ rare and com pell i ng ci rcum st ances”); U ni t ed Stat es v. C or bi n, 423 F

. 2 d 8 2 1 , 8 2 8 (10 th C ir

. 1 9 7 0 ) (“[W ]e rec o g n ize tha t dep arture fro m the u n itrule is pe rm issi b le i n u n iqu e situ ati o n s. ”); N ebr as ka , 1 6 4 F .2 d a t 8 6 9 (“ O f c o u rse , lik e a n y o th e r, th e [ u n it] rul e i s notone t hati s aut ocr at i cal l yabs ol ut e. ”) ( ci t i ng Mis s is s i ppi & Rum R i verB oom C o. , 9 8 U .S . a t 4 0 8 ))

.
In so m e in sta n c e s, a d e p a rtu re m a yb e n e c e ss a ryto a v o id g ro s s ly u n

ju s t r e s u lts

. See, e.g. , U ni t ed Stat es v. W

el ch , 217 U

. S. 333, 338 ( 1910) ( i n a t aki ng of a s er vi ent t enement byt he U ni t ed St at es , “the val ue of [an] eas ement [coul d] notbeT h e D istri ct C o u rtex p resse d its b e lief th at t h is pro ce d u re 14
w as per m i t t ed byi t s pr etr i al or d erof A pr i l 13, 2001, w hi ch al l ow ed the part i es t o pr es entval uat i on evi dence fort he C ondemned Prope r t i es ei t heras a si ngl e uni t or as t w o di ffe r ent uni t s of l and. A ccor di ng t o t he G overnm ent , t hi s cons t i tut ed a 20 a sc e rta in e d w ith o u t re f

e re n c e to th e d o m in a n t es tate to w h ich it
w a s a ttac h e d ” ); B os t on C ham berof C om m er ce v
. B os t on , 217 U

. S. 189, 195 ( 1910) ( i n a t aki ng by t he C i t yof B os t on, i tw as not uncons t i tut i onal for a comm onw eal t h cour tt o di s r egar d t he value of the un encu m bered est at e as a w ho l e w here t here w as a g re a t d isp a rityb e tw e e n th e v a lu e o f th e u n e n c u m b e re d w h o le and the val ue o f the estate i n i t s actual s t at e of t i t l e)

. I n ot her i ns t ance s , departur e fr om t he uni trul e m ay s i m pl y be a pr act i cal
n e c e s s ity. See, e. g. , C o rb in , 423 F. 2d at 828- 29 ( i n t he t aki ng of
a fi s h farm by t he U ni t ed St at es , t he t opogr aphy o f th e l and
m ade i ti m pos s i bl e t o appr ai s e al l as pect s of val ue on the l and by anyone appr ai s al m ethodol og y )

. “B uti ti s t o be emphas i zed t hatt he gene r al [uni t ] rul e .
. . i s a ‘ car eful l yguar ded’ one and t hatonl yi n r ar e and e xcept i onal t ypes of s i tuat i o ns [s houl d] departur es fr om i tbe[] per m i t t ed. ” N ebr as ka , 164 F. 2d at869.

In t his case, t he D i stri ctC ou rt ’s determ i nati o n of just compensa t i on depart ed fr om t he uni t rul e. A s i ndi cat ed above , t he C our tdeci ded that , r athert han val ue the C ondemned Pr oper t i es as i f i n s i ngl e ow ner s hi p, i tw oul d i ns t ea d val ue the
s epar at e in ter e sts of O v erv i ew and the Enggre ns i n t he C o n d e m n e d P ro p e rties

. T h e C o u rt’s d e c isio n f a iled to 14m i s i nt erpr et at i on of t he C our t ’ s A pr i l 13t h or deri ns ofaras t he or derr efe r r ed t o t w o s epar at e u n its ( i

. e. , T r act4- 203 and Tra ct T r a c t 4

- 2 0 4 , e a c h wi t h a p p u r t e n a n te a s e me n t s ) a n d n o tt wo s epar at e in ter e sts

. W h il e w e a g ree w ith the G o v ern m en t’ s p o sitio n , w e n o te th a t th e p ro p e r c o n stru c tio n o f th e o rd e r is i r r el evantt o ourul t i m at e concl us i on t hatt he val uat i on p ro c e d u re u se d b y th e D istric t C o u rt im p ro p e rlyig n o re d th e u n it
rul e. T hati s , w e as s es s t he val uati o n pr ocedur e us ed
n o tw ith stan d ing the e x ist en ce o f th e A p ri l 13 th o rde r. W e n o te th a t th e D is tr ic t C o u rt c o u ld h a v e se p a ra tely 15 val ued Tra ct4- 203 and Tra ct4- 204 w hi l e s t i l l adher i ng t o t he
u n it ru le ( v a lu in g e a c h u n it as if it w a s h e ld in f

e e sim p le ow ner s hi p)

. T he uni trul e pr ohi bi t s decons t ruct i on of t he in te re s ts in a “ u n it.”
21 des cr i b e the uni trul e, i t s obl i gat i on t o appl yt he uni trul e by d ef au lt , o r an yrea so n to d ep art f ro m the ru le. T h e C o u rt
cert ai nl ydid notfi nd an extr aor di naryci r cumst ance j us t i fy i ng its d e p a rtu re f

ro m th e ru le. A d h e re n c e to th e u n it ru le h e re , to
r epea t , w oul d have meantt he tw o- s t ep pr oces s of val ui ng t he C ondemned Prope r t i es as i f i n s i ngl e ow ner s hi p and ther eaf t er p roc ee d ing to ap p o rt ion that aw ard am o n g the in teres t- h o lders in th e C o n d e m n e d P ro p e rties

. W h a t th e D istric t C o u rt c o u ld 15
no tdo , con si st ent w i t h the u nitrul e, w as det erm i ne the j ust compensa t i on ow ed byt he U ni t ed St at es bycom put i ng se p a ra telyth e v a lu e o f th e v a rio u s c o n stitu e n t leg a l in ter e sts inT h e E n g g re n s in sis t th a t th e D istric t C o u rt d id n o t, i n f a c t, 16 val ue t hei rl egal i nterest in T r act4- 203, butr atherval ued the p arc el it self. A cc o rdin g ly , they co n tend that the D istri ct C o u rt ’s d e c isio n w ith re sp e c t to th e m w a s in a c c o rd a n c e w ith th e u n it
rul e, and theyr eques tt hatt he j udgm ent be affi r m ed. W e not e, h o w e v e r, th a t S iv e rlin g , the E n g g re n s’ w itn e ss , ex p re ss ly t es t i fi ed t hat he appr ai s ed onl y t he E nggr ens ’ i nt er es t i n T r act4- 2 0 3

— in e f

f e c t, th e p re se n t v a lu e o f O v e rv iew ’s r e n t p a y m e n ts undert he l eas e. M or eover , t he D i s t r i ctC our t ’ s o p i ni on s t at ed e x p licitlyth a t it s a w a r d in f a v o r o f th e E n g g re n s a m o u n ted to t he val ue of the E nggr ens ’ l egal i nt er es ti n t he C ondemned Pr oper t i es
. A ccor di ngl y , w e dee m t he Enggre ns ’ ar gum ent unper s uas i ve. 22 t he C on dem ned P ropert i es. 16

T his do es not end o ur anal y si s, h o w e ver, as w e m ust
a f f irm th e ju d g m e n t o f th e D istric t C o u rt n o tw ith sta n d in g its fai l u r e t o a d h e r e t o t h e u n i t ru l e i f we d e t e r mi n e t h a t t hi s w as “harm l es s ” ( t hati s , i f t he aw ar d of compensa t i on w oul d have b e e n th e s a m e h a d it f

o llo w e d th e ru le ). See 28 U

. S. C

. § 2111 (“ O n th e h e a rin g o f

a n ya p p e a l . . . in a n y c a s e , the c o u rt sh a ll g ive ju d g m en t after an ex am ination o f the rec o rd w ith o u t r eg ard t o err or s or defe ct s w hi ch do notaff ectt he s ubs t ant i al r i ght s of t he p arti es.”); Fed. R

. C i v. P. 61 ( “The cour tateverys t age of t he pr ocee di ng m u stdi s r egar d anyerr orordefe cti n t he pr ocee di ng w hi ch does notaff ectt h e s ubs t ant i al r i ght s of t he par t i es
. ”). A non- cons t i tut i onal l egal err orw i l l be dee m ed har m l es s “i f i ti s hi ghl ypr obabl e t hat t he err or di d notaff ectt he23 j udgm ent

. ” G en. Mot ors C or p. v. N ew A

. C

. C hevr ol et

, I nc. , 263 F .3 d 2 9 6 , 3 2 9 (3 d C ir . 2 0 0 1 ).

W e ca nnotconcl ude that i t i s “hi ghl y pr obabl e” thatt he D i s t r i ctC our tw oul d have r eac hed t he s ame r es ul thad i tadher ed t o t he uni trul e. A s w e i ndi cat ed above , one of the pri n cipl es u n d e rly in g th a t ru le is th a t “th e v a lu e o f th e se p a ra te in ter e sts [ in
c o n d e m n e d la n d ] c a n n o t e x c e e d t h e w o rt h o f th e w h o le .” 25. 936 A cr es of

Land , 153 F. 2d at27 9

. O u r re vi ew of t he
r ecor d l eads us t o concl ude, how ever , t hat i t i s qui t e l i kel yt hat th e su m o f

th e D istr ic t C o u rt’s in d e p e n d e n t aw a rd s— its
as s es s m entof “the val ue of the s epar at e i nt er es t s ”—
s u b s ta n tia lly e x c e e d e d th e v a lu e o f th e w h o le

. Speci fi cal l y , t he D i s t r i ctC our terr oneous l ycons t rued L ennhoff’ s appr ai s al of Tra ct 4 -20 3 as havi ng excl uded the E nggr ens ’ i nt er es t i n t hat l and, and, as a re s ul t , i t“cha r ged” the G overnm ent fo r t h e E n g g ren s’ i n terest tw ice (o n ce fo r O vervi ew a n d o n c e f

o r th e E n g g re n s). T h is o c c u rre d a s f o llo w s. U n d e r its
c h o s e n me t h o d f

o ra p pr a i s i n g Tr a c t4

- 2 0 3

— t h e i n c o me capi t al i za ti o n appr oach— t he D i s t r i ctC our tappl i ed a
ca p it ali za ti o n rate to the land ’s ex p ec ted n et i n co m e. T h e C o u rt
arr i ved att he l and’ s expected n et i ncome byaddi ng up t he
s our ces of g ros s i ncome and deduct i ng expens es
. W hen det er m i ni ng t he expe ns es , t he C our t cons i der ed t he t es t i m onyof b o th L en n h o ff

an d V o n A n ck en
. Itco n clud ed that L en n h o ff ’s
me t h o d , wh i c h e s t i ma t e d e x p e n s e s a s a f l a t6 0 % o f

t h e i n c o me r epr es ent ed byadmi s s i on t o t he tow er, w as t he more s ound.24 A ccor di ngl y , t he C o ur templ oy ed Lennhoff’ s for m ul a for expens es w hen i tdeduct ed them from gr os s i ncome.
I n hi s t es t i m ony , L ennhoff expl i ci t l y s t at ed thatt he 60% of a dmi s s i on r e c e i pt s fo r mul a he us e d f ore xp e ns es d id not in c lu d e lea se p a

y m e n ts

. H e expl ai ned thatbeca us e he w as val ui ng t he f

ee as a w hol e, l eas e paym ent s w er e notcons i der ed
an ex p e n se b ut m erel ya t ransferof f un ds betw een int eres t ho l ders that w ou l d can cel ou tu n d e r a un i tvaluat i on
. B ecause L ennhoff’ s t as k w as nei t her t o appr ai s e O ver vi ew ’ s i nt er es tnor th e E n g g re n s’ in ter e st, b u t ra th e r th e c o m p o site v a lu e o f a ll i n t e r e s t s , h e d i d n o tc o u n ta s a n e x p e n s e w h a tw a s s i m p l y a t r ans ferof val ue betw een i nt er es thol der s t hathad no bea r i ng on t he l and’ s i nher entcapa ci t yt o gener at e i ncome.
D esp it e L en n h o ff ’s rep rese n tat ion s, the D istri ct C o u rt
cons t rued hi s expens e for m ul a as “bas ed onl yon t he val ue that a hypot het i cal buy er w oul d expec t t o earn fr om oper at i ng t he .

. . [ t] o w e r, or O vervi ew ’s i nter est

. ” ( E m phas i s added. ) H avi ng al r eadyveer ed off

t he uni trul e path, w i t h t hi s construct i on of L ennhoff’ s anal y s i s t he D i s t r i ct C o u rt ’ s val uat i on r eac hed a dead e nd. B eca us e Lennhoff di d notdeductl eas e paym ent s as an ex p en se to O v erv iew (co n tr aryto w h at t h e D istri ct C o u rt th o u g h t, he s im p lyv a lu e d T ru st 4 -2 0 3 a s a w h o le u n it), h is appr ai s al m et hodol ogy di d not excl ude— but r at her i ncluded

— t he v al ue o f t he E ng gr e ns ’ i nt eres ti n those pay m ents

. B y p r o c e e d i n g t o a d d t o i t s e s t i ma t i o n o f j u s t c o mpe n s a t i on a s epar at e val uat i on of t he Enggre ns’ in tere s t( i n t he form of aT he G overnm entconvi nci ngl yar gues t hatt he D ist ri ct 17 C our t ’ s $3. 932 m il li o n val uat i on of O ver vi ew ’ s i nt er es ti n t he C ondemned Prope r t i es s houl d actual l yhave r epre sent ed the t ot alval ue of the l and. I f s o, t he aggr egat e $6. 632 m i l l i on of j us tcompensa t i o n aw arde d i ncl udes “$2. 7 m i l l i on w or t h of p re ju d ic e .” 25 c a p italiz a tio n o f

th e in c o m e th e y c o u ld h a v e e x p e c ted to e a rn in l eas e paym ent s over the l i fe of t he l eas e) , t he C our tdoubl ecount ed t he s ubs t ant i al val ue of t he l eas e. T hi s err or , r es ul t i ng ( i n oures t i m at i on) fr om t he D i s t r i ctC our t ’ s fai l ur e t o fol l ow t he
u n it ru le, w a s p re

ju d icia l. 17

I I I . C oncl usi on
W e r e v e r s e t h e j u d g me n to f t h e Di s t r i c tCou r ta nd
r emand forfur t herpr ocee di ngs cons i s t entw i t h t hi s opi ni on.