INTHE SUPREME COURT OF THE STATE OF MONTANA

No. 11821

THE STATE OF MON'IANA, 

### ACTING 

### BY AND THROUGH THE STATE HIGHWAY COMMISSIOIT OF THE STATE OF MONTANA, Plaintiff and Appellant, ltjls*q pwZl 

# 'F
A!, .&: , - 

### j( VS. Cc-pba T

### :972 

# *., L re%, 1 

# p3

FRED i. METCALF and KENNYBELLE &. NETCALF,husband and wife, and +~~oPB,G~ 

## $* ,.<,? CARL NELSON and JANE DOE NELSON, CLERK OFSUPEEMECOURT husband and wife, or as a single STATEOF MONTAI'dU Inan

### , Defendants and Respondents.

ORDER

IT ISORDERkXl that the above Opinion promulgated on Augus~ 8, 1972,be amended in the foflowingmanner: Om page 10, line 16 from the top of the page, strike the following:

18

Too,McLeod was allowed to assume the correctness of certain facts testified to by otherwitnesses, but outside his personal knowledge as to whether such factswere correct. On retrial such testimony should not be permitted, unless the criteria set forthhere can be met. 11 The petition for rehearing is denied. Dated this 25th day of September, 1972.No, 11821 INTHE SUPREME COURT OF THE STATE OF 

### MONTANA

.I 1972

THE STATE OF MONTANA, ACTING BY AND THROUGH THE STATE HIGHWAY COMMISSION OF THE STATE OF MONTANA, Plaintiff and Appellant,

FRED L. METCALF & KENNYBELLE METCALF, husband and wife, Defendants and Respondents,

Appeal from: District Court of the Third Judicial. District, Honorable Sid G. Stewart, Judge presiding, Counsel of Record: For Appellant: Daniel J. Sullivan argued, Helena, Montana 59601. James R, Beck, Highway Department, Helena, Montana 59601. For Respondent: Clayton R, Herron argued, Helena, Montana 59601.

Submitted: June 19, 1972Mr. JusticeJohn Conway Harrison delivered the Opinion of the Court.
This is an appeal from a judgment for defendants after a juryverdict in their favor in the district court of the third judicial district, county of Granite. Proceedings in the dis.trict courtwere in eminent domain following an award by commissioners appointed to assess damages as compensationby reason of appropriation of defendants' property forhighway purposes. Plaintiff, State ofMontana, acting by and through the State Highway Commission and hereinafter referred to as the Highway Commission,appeals and presents three issues for this Court's consideration: 

### 1. In a condemnation action,when it is demonstrated that a valuation witness doesnot possess a peculiar knowledge of the property beyond that which is possessed by men generally, but is merely basing his testimonyuponunsupported assumptions and conjecture, is it error for the district courtnot to strike the testimony of the witness? 

### 2. In a condemnation action, is it error for the district court to refuse the following instruction:

1IYou are instructed thatwhere testimony is submitted in an effort to establish just compensation, and that such testimony is obtained from expertwitnesses, then, and in that event, the opinions as expressed by the experts must be foundedupon substantiated evidence,and must not be based uponunsupported assumption, conjecture or speculation.11 3. When the opinion expressedby a witness isbased on speculation and conjecture and is opposed by undisputed facts and the dictates of common sense, is it sufficient to support the award in this case? The property taken by the state for construction of the Interstate highway can be broken down into two parcels. The total acquisitionwas some 16.5 acres. ParcelNo. 1---consists

### . >ofhay land; the residence and clinic of Dr. Fred L. Metcalf,
a veterinarian;and a shelterbelt and landscaping around the residence. ParcelNo. 

### 2

# --- consists of a two acre tract with
a mound of earth containing a gypsum or gypsite deposit of some 23,000 tons. The entire thrust of this appeal is directed to thevalue of parcel No. 2 and no discussion or issue ismade as to parcel No. 

### 1. As to the value of the property taken, the jurywas given three possible verdicts: (a) it could set the valuation of the deposit, 

### (b) it couldhave set a separate valuation on each parcel, or (c) it could have listed the value of the property taken, the damages to the remainder and the total award. The jury chose to make only a total award of $125,000, indicatingno separatevaluations, The basic facts involved are not contestedby either party, The land involved is part of a twenty acre tract of land owned by Fred L. Metcalf and KennybelleMetcalf,husband and wife, hereinafter referred to as defendants. The takingwas necessary for the purpose of constructing a four lane controlled access Interstatehighway. The Metcalf property is located some 

### 4or 

### 5miles west of Drummond,Montana. The entire tract owned by defendants is south of,and adjoining
on its length primary U.S. HighwayNo. 10. South of the tract is the mainlhe of the Northern Pacific Railroad. The tract is located on a slope risingupward from east to west. The lower and eastern part of the propertywas used for raising grass. Above that area was the residence and animal clinic of defendant, the only veterinarian in Granite County. The property around the house was landscaped and had an extensive shelterbelt, almost surrounding the house. West and uphill from the improved area was the access road fromU.S.Highway No. 10which ran southerly from the highway, thence eastnear or into the Northern Pacific right-of-way, then back north to the east side of dekndants' house and clinic. This road was alsoused by
one Mr, Nelson to gain access from U.S. No. 10 to a siding of the Northern Pacific Railroad called Bradham siding, Other than this roadway, the land west of the improved
areawas initsnatural state and would be considered as grazing land. It contained, however, a long, low .mound running approximately from U.S, Highway No. 10 ina southerly direction to, and into, the Northern Pacific right-of-way. The mound covered approximately two acres of the tract. This mound became important inthis casewhen itwas discovered that it contained and was composed of the chemical compound "gypsum" or because of the texture of the deposit, the correct terminology could be "gypsite", but hereinafter willbe referred toas "gypsum". The nature of the highway acquisition was that some 16.5
acres of the tract were taken, leaving only a strip of land about 3.5 acres in sizebetween the constructed Interstate and the primary Highway No. 10which was left inplace as a frontage road for the Interstate. The taking took the hay land, the residence and clinic, the shelterbelt and landscaping, and went through the mound containing the gypsum. The roadway to the railroad sidingwas preserved by means of a concrete structureunder the Interstatehighway. At trial, there was disputed testimony as to the exact value of the damage inflictedby the taking of parcel No. 1. Defendants introduced testimony that placed their damages for that parcel at $70,000; the Highway Commission introduced testimony that fixed damages at $40,000. But here, on appeal, the main issue is whether ornot the gypsum deposit, or parcel No. 2, was correctly valued by thejury.To find the jury's valuation of parcel No. 2 we can only ascertain it took the valuation testimony of defendants' witness XcLeod, or $80,000, as its value leaving the balance of the $125,000 award, or $45,000, as the value of parcel No. 1. On retrial, the jury should designate the award for each parcel and then the total, The gypsum deposit was discoveredby statehighway geologists in 1963. The purpose of their explorationwas to determine the strata of the mound insofar as itwould affecthighway construction. This type of deposit was not suitablebase on which to construct a highway; consequently, the mound was removed and stockpiled a short distance from thehighway. The deposit of gypsum occurred naturally from the evaporation and percolation of ground waters. The two acre deposit extended downwards from ground surface at an average overall depth of 7.8 feet, and varied in depth between 3 and 12 feet. An average of about 

### .4of a foot of overburden existed over the deposit. The deposit contained 23,500 tons of gypsumwhich was 

### 85% or better pure gypsum. 

### It contained 21,000 tons which was 90% gypsum or better, a generally accepted commercialgrade of gypsum. Gypsum, even though the percentage is less than 90%,
canbe used for agricultural purposes. Agriculturally gypsum has threemain purposes: (1) to treat alkali soils, (2) to provide sulphurnutrients to soils (the gypsum here involved contained 17% sulphur on the average), and (3) to condition soils to allow a greater permeation ofwater and soil nutrients. Gypsum is beneficial to sand-loam soils, silt-loam soils,and to loam and sandy soils generally. All of these types of soil exist in the lower valley of Granite County and in western Montana

# . Defendants introduced testimony that one retail source in Hamilton,Montana, has been selling 500 to 600 tons of gypsum for agricultural purposes per year, and that inwestern Montana generallythe retailbuyers of gypsum inbulk have been paying $10 per ton, plus shipping costs of $10 per ton. Defendants contended that if retailbuyers could buy gypsum at a cheaperprice, theywould buy and sellmore. Defendants also contended ranchers and farmers in the Drummond area must pay $22 to 

### $26 per ton retail for sacked gypsum material and that a fewweeks after the discovery of this gypsum deposit defendants sold approximately 130 tons to farmers and ranchers in the area at a price of $10 per ton,with purchasers hauling away their gypsum. These sales stoppedwhen legal counsel advised defendants that the state of Montana presently owned the gypsum. Defendants also introduced testimony that the cost of shipping this gypsum to Hamiltonwould be between $5 to $7.37 per ton, depending onwhether rail or road transportationwas used. They further contended that a market exists for the widespread
use of gypsum inwestern Montana, and that good public relations and good advertisingwork would open the market for rapidly increased sales. Defendants argued, insofar as the gypsum property was concerned, theyhad established proof of its presence, quality, and quantity;and that therewas a need, demand,and market available at the location of the deposit. The Highway Commission contended the gypsum deposit contained excessive amounts of water; consequently, itwould not meet commercial standards. Its expert testified the gypsum deposit contained 25% to 30% freewater and the presence of free water in excess of 25% disqualified the deposit as being commercial. Another Commission expertwitness testified the depositwas definitely too small to be commercially usable and the best that defendantswould be able to do was to make local sales to local people. He further testified hewas unaware of any deposit of this nature thathad been commercially developed.TheHighway Commissionalleges that a material part of the verdictwas based on speculation and conjecture; therefore, the judgment shouldbe reversed and a new trial ordered with directions that the value of the property should be established only on substantiated, factual evidence. It argues defendants did not produce
a witness who,by study or experience,understood the truenature of the deposit of gypsum, so as to be qualified to testify as to its economic value for commercialpurposes. Dr. PaulB, Alexander, Ph.D., a professional geographer and consulting geologistwas the defendants' principal expertwitness. He is a professor at the University of Montana and at the time he testified was president of the Montana Explorations Company, a mineral exploration company. Prior to his teaching career,he
was a geologist for the Anaconda Company for fiveyears,had served
as a consultant for various oil companies in California and Canada and had been self-employed. He was hired by defendants and made his study of the deposit while itwas still inplace. Under his direction, samples of the gypsumwere taken and sent to various laboratories forvaluation. He determined the deposit contained
some 23,140 tons of 

### 85% or better gypsum, and testified it had commercialvalue as an agricultural fertilizer. Defendants then produced as a witness one Roy McLeod of Philipsburg,Montana. McLeod had been superintendent, assistant manager, and manager of the Trout Mining Company of Philipsburg for 

### 18 years. Although no longer in the mining business,McLeod
was still active, from time to time, as a consultant onvalue of mining properties. Over plaintiff's objections, McLeod testified the value of the gypsumwas $80,000 for the acreage involved. The Highway Commission contends McLeod did not have sufficient knowledge to make the estimatehe did, and that he should nothave been allowed to testify as to value of the deposit because he: (1) had never seen the deposit in question, 

### (2) knewnothing of gypsum, (3) had never studied the economic aspects of the gypsum market, 

### (4) had no knowledge of sale of land containing gypsum in place, 

### (5) had no knowledge of the quality standards applicable to the chemical compound to make it commercially marketable, and (6) had never investigated any gypsum deposits. In addition to their two expertwitnesses,defendants introduced testimony from individuals directly involved in agriculturewho testified as to the commercialuse of gypsum, County ExtensionAgent D. L, Becker testified as to the alfalfa acreage in the county;David Dutton, a rancher in the area who had purchased a 12 ton load from defendants, told of its use and value as a fertilizer;Clifford Nelson, a rancher and purchaser, testified as to its agriculturalvalue; as did Ernest Wight, another rancher. All were in agreement that the deposit could be beneficially used when mixed with the clay type soil of the
area. Also, Martin Ueland of Hamilton,manager of the Bitter Root Cannery testified as to the use of gypsum in that area, its price and quantity used. Donald Graham, Corvallis, soil scientist at the Western Branch Experiment Station, testified the soil of most of thewestern Montana counties,particularly those counties where hay and alfalfa are important crops, would respond to the application of gypsum. He introduced slides of experimentswhich showed as high as a sevenfold increase inan alfalfa crop after the application of gypsum. With the foregoing as background,we now look to the issues raised by the Highway Commission. First,wewill consider the alleged error by the court in refusing to strike the testimony of witness McLead. Admittedly bothAlexander and McLeod were not gypsum experts, but both have credentials in the mining field.Due to the type of deposit involved here, itwould havebeen almost impossible to have found an expertwho could testify as
an expert, as to the type of deposit found. A11 witnesses, for both plaintiff and defendants, testified that the type of deposit found here is an unusual deposit,not often found. However, Dr. Alexander, a teaching geologist,most certainlyhas the necessary professional credentials to help the jury establish the value of the deposit here involved. On rebuttal,Dr. Alexander testified, in answer to the Highway Conmission's expertwitness Criswell, that in evaluating a deposit such as this one two views must be considered 

### (1) the

IIlarge company" evaluation,and (2) the "small guy" valuation.
He testified that a large companywould find such a deposit valueless,but that a small operator could commercially develop the deposit by using a back-hoe or prime mover to load the gypsum
on trucks. Wilbur Criswell, the expert witness for the Highway Commission,was a graduate of the Montana School of Mines with a 

### B.S. inmining engineering. He had pursued this occupation for some 24years and had considerable experience in locating, evaluating and securingmarket informationon gypsum, but for the most part he was interested in rock gypsum deposits as opposed to a small

IIgypsite" deposit,as here involved. He felt that such a small deposit had no commercial use, at leastnot to the people forwhom he had worked. Reviewing the expert testimony before the jury,we find (1) Dr. Alexander testified that in his opinion the deposithad commercial value, but set no figure; (2) Mr. Criswell testified ithad little or no value,but 

### (3) Mr. McLeod testified the deposithad a value of $80,000. Mr. McLeod was allowed to testify over repeated objectionsby plaintiff Highway Commission, and wefind that allowing such testimony was prejudicial error necessitatingreversal and a new trial. Here, McLeod was allowed to testify and set a figurebased
on a hypothetical question which assumed factsnot inevidence the as to the market values of gypsum and the value of/gypsum in place. Clearly, from the evidence produced and from ~c~eod's experience as a mining man, he could not testify as to a gypsum depositwhat amount a willing buyer would pay and a willing seller would accept, neither of whom was acting under duress, which is the accepted legal definition of the fairmarket value of property. Certainly, his figure of $80,000 had a material effect on the verdict. The Highway Commission moved to strikethe answer to the hypothetical question, but was overruled. The lengthy hypothetical question covered allof the fact material listed heretofore, and more, but it lacked the expertiseneeded to provide information on a willing buyer and a willing seller. T-os, M-eod
was al-1-d to a-ssume Che c-orret-ess of cer-tagit. f-aets test434-d t+ -by ocher Wi-t*e.sser;-, bu* out4dehi-sper-sonel- knowledge as towhether sueh Eacas were c+errec%.Qn-retxza-1 such testirneny shmld not be per-mi&&ecl, un1.e~-sthe cxi---i.-~~ set for* here can be met. Both the Highway Commission and defendants rely on two
cases of this Court regarding witnesses competent tomake valuation

figures. Statev. Peterson, 134Mont. 52, 63, 328 P.2d 617; StateHighway Comm'n v. Antonioli, 145 Mont. 411, 416, 401 P.2d 563. In Peterson, this Court said that to qualify as a witness competent togive opinion testimony as tovalue, that witness must have: 

## "*

# * 9~ some peculiar means of forming an intelligent and correctjudgment as to the value of the property inquestion beyond what ispresumed tobe possessed by men generally. 11InAntonioli, the Court stated: "'Where the testimony submitted to the jury and relied uponby the landowners in their efforts to establish just compensation is testimony from exDertwitnesses. the opinions as expressed by thb expertsmust'be founded upon substantiated evidence and must not be based upon unsupported assumption,conjecture or speculation."' (Emphasis added). See: United Statesv. Certain Land, Etc.(~.c.Ala.l963), 214 F.Supp, 148, 150;Texas Electric Service Co. 

### v. Vest (Tex.Civ. App. 1958), 310 S.W.2d 733;LosAngeles Countyv. SignalRealty Co., 86 Cal.App. 704, 261 

### P. 536; State Highway Comm'n v. Smith & Jesson, 141Mont. 302, 377 P.2d 352. Clearly,based on the holdings of the above cited two Montana cases,McLeod lacked the peculiar knowledge required to set thevalue estimate of $80,000. Inview of our holding on the first issue,it is unnecessary to consider appellant's second and third issues which to some extent have been covered in our discussionherein and they should not arise on retrial. Judgment is reversed and the cause remanded to the district court for a new trial. /


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We Concur: 

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................................ Chief Justice

AssociaaJustices.