Opinion ID: 501878
Heading Depth: 2
Heading Rank: 2

Heading: The Appraisal Methodology

Text: 12 The government's first contention on appeal is that the landowners' market data or comparable sales valuation methodology (the average royalty rate per ton of material being provided in the general vicinity of the Quarry multiplied by the number of tons removed by the government) is fatally flawed because it does not include a capitalization factor to discount the lump sum payment of a stream of expected future income to its present value and to reflect the risk that this projected future income might not materialize. 1 13 A number of courts have recognized that utilization of the capitalization of income method to value property taken under the government's powers of eminent domain may be appropriate under certain circumstances, particularly where the condemned property contains in place minerals. 2 However, none of these cases provide support for the government's proposition that this method is mandated as a matter of law in the instant situation. The government's reliance on United States v. Whitehurst, 337 F.2d 765 (4th Cir.1964) and Foster v. United States, 2 Cl.Ct. 426 (1983) in arguing that an appraiser must discount or capitalize expected income from mineral deposits taken by the government, is misplaced. In Whitehurst, the court acknowledged the legitimacy of the capitalization of income method in some circumstances, but rejected its use under the particular facts of that case because the appraisal witness had relied upon pure speculation. 337 F.2d at 774-76. Similarly, in Foster, the court found that although one appraiser's use of the capitalization of income approach made an interesting mathematical exercise, application of the methodology in that case was defective. 2 Cl.Ct. at 455. 14 While both the comparable sales and the capitalization of income approaches advanced in this case are among the appraisal methodologies generally recognized by the Ninth Circuit as valid, the former technique is usually considered most appropriate. United States v. 100 Acres of Land, 468 F.2d 1261, 1265 (9th Cir.1972). However, where there are no strictly comparable sales, the court must resort to other methods. Id. Here, where there were no comparable one-time sales, one possible alternative method was to extrapolate from the royalty rate being paid in the area. Such an approach previously has been utilized in this circuit. See United States v. 237,500 Acres of Land, 236 F.Supp. 44 (S.D.Cal.1964), aff'd in relevant part, United States v. American Pumice Co., 404 F.2d 336 (9th Cir.1968). 15 Whether or not it was then appropriate to discount the value obtained through this modified comparable sales approach was a determination for the trial judge to make based upon the evidence before him. Of the six witnesses who testified as to the appraised value of the limestone and decomposed granite, only appellant's expert Paschall discounted the amount of the royalty income. Appellee's experts disagreed with this methodology. For example, Alderman testified that a discount factor was inappropriate in determining the market value of a given quantity of limestone removed from the ground. Grijalva and Gray testified that the proper way to value a fixed quantity of limestone removed from the ground is to multiply the quantity taken by the fair market royalty rate, without discounting. This court will not reweigh the evidence nor reassess the credibility of witnesses. See United States v. 429.59 Acres of Land, 612 F.2d 459, 462 (9th Cir.1980). 16 In construing the constitutional requirements of the Takings Clause, U.S. Const. Amend. V, the Supreme Court has been careful not to reduce the concept of 'just compensation' to a formula. United States v. Cors, 337 U.S. 325, 332, 69 S.Ct. 1086, 1090, 93 L.Ed. 1392 (1949). In United States v. Miller, 317 U.S. 369, 373-74, 63 S.Ct. 276, 280, 87 L.Ed. 336 (1943), the court stated: 17 It is conceivable that an owner's indemnity should be measured in various ways depending upon the circumstances of each case and that no general formula should be used for the purpose. 18 Further, the court noted that in determining what fair market value constitutes just compensation, courts have had to adopt working rules in order to do substantial justice in eminent domain proceedings. Id. at 375, 63 S.Ct. at 281. 19 This broad language has been interpreted by lower courts to mean that the law is not wedded to any particular formula or method in determining fair market value as the measure of just compensation. Sill Corp. v. United States, 343 F.2d 411, 416 (10th Cir.), cert. denied, 382 U.S. 840, 86 S.Ct. 88, 15 L.Ed.2d 81 (1965); see also Snowbank Enterprises, Inc. v. United States, 6 Cl.Ct. 476, 486 (1984); United States v. 3,698.63 Acres of Land, 416 F.2d 65, 68 (8th Cir.1969). In accordance with these courts, we hold that the trial court was not restricted to a particular method in arriving at the fair market value for the condemned material. Its goal is to assure that the landowners are restored to the pecuniary position they would have occupied had the property not been taken. United States v. 100 Acres of Land, supra, 468 F.2d at 1265. The district court's determination of which valuation methodolgy would best achieve this goal is one of fact and we conclude that its reliance upon the testimony of the landowners' expert witnesses in making this determination was not clearly erroneous.