*1 Argued September reargued February 11, 1962, 6, reversed and remanded March STATE HIGHWAY COMMISSION NUNES al et 2d
379 P. *2 Attorney Patterson, Assistant General, Robert' J. appellant. for him argued With the cause on Salem, Attorney Thornton, Y. General, Robert were brief Attorney Assistant Lindas, General L. I. and Salem, Oregon Highway State for Com- Counsel Chief and Salem. mission, argued the
Stanley Jones, Medford, cause for C. reargued Reeder, Medford, B. Joel respondents. respondents. On the brief were Reeder Jones, cause for & Bashaw. Justice,
Before Chief Rossman, McAllister, Jus- Goodwin Perry, Sloan, O’Connell, Denecke, tices. J.
O’CONNELL, appeals judgment a Plaintiff from of the circuit county highway court in a of Jackson condemnation ac- way highway right purposes. tion to secure a selling topsoil, Defendants had been in the business of property. highway from the The sand, taking part necessitated the of the land. As a taking plaintiff deprived result of the was of access part alleged to a of his land not taken. Plaintiff parts these had value of $7,800.Defendants’ amended jury answer claimed sum to be fixed $37,250. *3 judgment the value at and $24,500 was entered ac- cordingly.
Plaintiff contends trial that the court in erred over-ruling plaintiff’s objection to the direct examina tion of James one of the Nunes, concern defendants, ing price gravel, topsoil, the market of and sand when yard. ‹ by acknowledges sold the Plaintiff that ‹ The following testimony is illustrative of the of witness Nunes: “Q. purchasing Now, topsoil, one when is. desirous of sand by purchased? gravel, and unit what is it By yard—cubic yard. “A. “Q. selling gravel topsoil, by Does one and sand ever sell acre? informed, Not if he is “A. he wouldn’t. “Q. you property Now, subject do value the that is the gravel inquiry topsoil, purposes as a unit for sand and
this only? My place “A. there? fixing’ may value of land a witness tiie take into ac- count the fact that the land minerals contains which plaintiff’s position enhance its value. But it is may by not ascertain this enhanced witness value multiplying the number of units of the mineral price per market unit. Defendants concede that product multiplication process such taken alone may not be used as the value of the land or added to the' value of the land aside from the minerals. How- argue quantity, quality defendants and ever, per unit of the minerals be considered aas factor evaluating mineral land. theory,
Pursuing defendants elicited from their this testimony quantity, quality witnesses as to and price per gravel topsoil, unit of and but in sand, that the each instance the witness testified materials place” regarded only were evaluated “in as a at the land. The trial factor value adopted urged defendants. Thus, court the view testimony ruling objection plaintiff’s on as to the then current defendants’ witness Nunes place,” topsoil “in court said: value of trial might say, I Ladies and “THE Gentle- COURT: Jury, reference to the basic this, with men damage always question in to the Defendant is the market value as of Febru- fair terms of cash You ary the entire and that tract. 9th, 1961, “Q. your place. Yes, sand, topsoil is what it is most Yes, “A. for. valuable your opinion “Q. of the fair cash to arrive in order And *4 you question, property in have taken into of value market February going market was in of 1961? what consideration Yes, I have. “A. gravel. “Q. topsoil, sand and For I have.” Yes “A. any example, for acre,
are not time to take acreage multiply by arrive at total to and the amount. Your age it question to the dam- basic is take fair cash market to the in terms of Defendant by at it and to not arrive tract, value to the entire you process multiplication, if of understand process multiplica- a of I mean—that .is, what yards process multiplication a of cubic or of tion damage question in terms of acres. The basic of is to the tract. That fair cash market value entire you going question to to at. have arrive is only admitting evidence the market is of The Court yard yard topsoil of a of a cubic or cubic value gravel, insofar as it or affords the reason of sand or basis question, at the for basic which tract.” the entire is testimony upon objected proferred to the
Plaintiff
top
ground
the estimate of the value of the
yardage
gravel on a cubic
basis inter
sand
soil,
jected
of the value of items of
the ease evidence
into
commodity
property
personal
and as such
sold as
of the land. Defendants coun
value
not related
impossible
argument that “It would be
with the
tered
jury
purchaser
prospective
or this
to determine
for a
they
know
the land if
how
of
didn’t
the total value
selling
for—not for the
was
sand
much the
multiplication procedure
maldng
purpose
but
maldng
purpose
an evaluation.” Defendants’
authority. ›
supported
line of
position
one
point
presenting
leading
of view is
this
United
case
Dry
Lake, Gal.,
Bed
Rosamond
Land in
v.
States
› Cade
1954);
(4th
States,
Cir
293.080
F2d 138
United
v.
(D.C.
Supp
States,
F
W.D.
Land,
United
Etc. v.
Acres
Highway
(Miss)
Comm.,
Mississippi State
1959);
Foster
Penn
Noble,
552 F 143 Supp 322 314, (D.C. Cal. In that 1956). case the court said:
“* * * landowner [t]he entitled to have or expert lay witness describe the or commodity substance on the land, quantity thereof, going price thereof as only, upon which the factors may in expert part base his value as to the fair market value of the that parcel question; a land owner is not entitled to present as to testimony the fair market value of the mineral or timber or other substance from the apart value of the land. * # * In other a clear words, distinction must be drawn between what is presented and considered as a underlying expert’s as opinion con factor trasted with the fair opinion market value timber or substance, mineral itself, apart from the land.” not upon have passed precise
We
question pre-
State
Highway
Comm. v. Arnold,
although
sented
341 P2d
343 F2d
1089,
218 Or
1113
we
43,
(1959)
the use of the multiplication method in
disapproved
the value of the
at
that
arriving
property
case.
The cases elsewhere seem to fall into three cate
that a
cases
witness
gories;
(1)
holding
may not use
method in
at
multiplication
value of
land; fi
that the
holding
cases
(2)
multiplication method
used but
may
be
witness
least on
may
not,
testify
as to the
examination,
specifically
direct
quan
land; fl
unit of the
per
materials
tity
price
fi
Land, Etc.,
Supp
Acres of
v. 620.00
101 F
United States
686
City
(W.D.
1952);
v.
Acres of Land in
Ark
United States
13.40
Supp
(D.C.
1944);
Richmond,
N.D. Cal.
F
535
United States
56
v.
Supp
(D.C.
1941);
40 F
811
E.D. Tenn
Marble
Indian Creek
State,
192,
Realty Corporation
Sparkill
268 NY
find to see cifically- process how was used. competing
We must make a between these choice shall first whether so- We consider rationales. acceptable multiplication called method method properly employed. objection no if There could be multiplication the use method in of the figure employed evaluating factor to be. land † quantity (e.g., where the of the material sand, present gravel, timber) is is a there market known sought all material taken. The use of to be multiplication presents problems certain for-rejecting reasons where is not the case. The quotation method are well stated in from Supp Marble Co., v. Indian Creelc 40 F United States Comm, 1941) Highway (D.C. Tenn set out State 77. ‡ Certainly supra at the use of the mul Arnold, mailing tiplication method without deductions for the operating expenses production other would cost proper. · not be multiplication of unit times *7 computation part meaningless except a as abe would arriving profits at the which the of sale a method of † 722, v. Mottman Merc. 51 Wash2d State As noted dissenting): (1958) (Mallery, J., 912, 729, “* * 917 at 918 P2d 321 * price Testimony as the unit of not a criterion to willing pay, purchaser in the a show would absence a of what of present ing demand the entire at the is a that there see, Noble, 40, 495, price.” Utah2d P2d State v. 6 305 But unit language High contrary (1957), quoting from Reiter v. State 501 (1957). 1080, way Commission, 683, 281 1083 177 P2d Kan ‡ summarized in that case be as follows: The recited evils demand, of a existence stable assumes the continued The method costs; possible production it eliminates and stable a stable possible competition or the materials substitution of of better efficiency management materials; of it fails to consider other and business marketing judgment factor as a the materials. · accompanying supra, 6, text. See note produce. personal property would as the materials of presence the materials in the would not of land sale of the of the land unless the enhance the value yield profit. sug net would a This would materials computing multipli gest value of land the that in nothing method be more than would, fact, cation profits. (cid:181) a of those courts However, multiplication apparently accept the do which product regard of but such com not so it consider only putation as one the value of factor the land. n profits generally held that evidence of de It is specu conducted on land is too from business rived ascertaining used in the market value of lative to be recognize exception courts an some However, land. proceed directly profits out of the land where the profits and where the are the entire condemned or exception of value. Such was noted in chief source Oregon Cerruti, 188 Or 214 P2d State of it There was intimated that in ALR2d profits proper case evidence of derived from prov agricultural lands would be of admissible use (cid:181) recognized. Occasionally Thus this has been in United States City Richmond, Supp 535, Land in of 56 F 13.40 Acres of (D.C. 1944) said: N.D. Cal the court See (2d ed value terial also, Orgel, “* 1953): of [*] taking.” [*] not the market What anticipated profits Valuation they really Under value did was from Eminent the land the sale to Domain appraise itself of the rock ma- § of the date present p. significance ruling excluding of a “The true realized or prospective income as direct evidence value is often ob- willingness permit qualified to of the court scured give opinions property, their on the value of the witnesses though apparent on direct or it becomes cross-examina- even largely opinion very tion, on a this is based earning power.” supra. cases cited in note See
556' ing The the market value of the land condemned. ap principle, acceptable, equally same if would be plicable selling gravel and to the business of sand, to be taken. n topsoil sought from the land There are holding profits from the cases, however, some sale of minerals cannot be shown. theory rejecting
As a matter of the cases evidence profits speculative as too would seem to have better of it. There no doubt that the method calls is employment upon of data which is based conjecture. all certain amount of But this is true of made and as estimates value. estimate must 'be practical frequently impossible matter it is to arrive at the valúe of land unless the method employed is in some fashion. Even where there is comparable some evidence of sales of similar land, (represented principally in land differences of the available differences materials gives value) principal the land its the sale of which profits necessitates a consideration of the derivable from the sale of the materials.
Plaintiff
that if the
contends
only
at all it can be used
if there is no
is to be used
comparable
argued
property. It
evidence of sales of
n Cf.,
Bridge
Thompsonville
Co.,
Suffield
82 Conn
State v.
&
(1909) (profits
bridge);
460,
A
from toll
Columbia Dela
74
775-
Bridge
Geisse,
(1875),
v.
NJL
NJL 580
ware
Co.
38
39
aff’d. 38
ferry);
State,
100,
(profits
(1876)
Misc
from
Brainerd v.
74
131
(Ct
1911) (profits
NY
from retail coal business
NYS 221
Claims
together
excellent).
on canal used
where location was
and dock
n 4
(4th
1962); Horgan,
Nichols,
Domain 427
ed
7
Eminent
Hastings
Cases,
Domain
L J
in Eminent
Mineral Valuation
Angeles
App
City
Deacon,
491,
(1955). E.g.,
119 Cal
of Los
Angeles
by County
qualified
Faus,
of Los
P2d 378
(1957);
Co.,
P2d
Cole v. Ellwood Power
48 Cal2d
A
Buckhannon & Northern Railroad
Pa
Va
Scott Coal & Coke
75 W
557 It the case. evidence in present there was such of the valne witnesses clear from the testimony is not the of com- as to value they testifying were whether were sales referred to land. the Apparently parable on the of land of which was determined sales the price This the of the land for basis of value purposes. farm land would for on not indicate what sell would the com- sales However, conceding the market. in the market be- having were of lands value pared contained saleable they topsoil gravel, cause for such lands be paid which would be would price be from determined which could derived profit materials taken from the land. the sale of the soil We no reason the value witness should not be why see the factors which well informed use permitted himself use at he arriving would buyer price for the would pay property. of capitalization
The
income when
em
properly
is an
method of
at the value
ployed
acceptable
of property. it
why
There is no reason
should not
with
the valuation
safeguards
be employed
proper
n The
capitalization
of
of rentals is not uncommon. State
Oregon
103,
346, 349,
Cerruti,
108-109,
Or
214 P2d
16 ALR2d
v.
188
Railway
Gauley
Conley,
(1950);
1105,
Co.
84
1109
& Eastern
v.
Winner,
(1919);
489,
290,
SE
income from the sale of soil materials. This does not mean that the value of the land can be esti simply multiplying mated of materials existing price times per ap market unit. The praiser computation by must deducting refine the costs operation, making allowances for variances in the market calculating of the materials, the extent of the market for such materials in relation to the possible amount of materials taken, rise and fall accounting income, for other factors which expert appraisers take apply into consideration' in *10 method. n ing capitalization the capitalization any The method or other method of merely rough guide evaluation estimating the property. recognized value appraisal of It is that the property of guess involves a considerable amount of litigation stage work. And at the the uncertainties are compounded appraisals frequently because the reflect the bias of the witnesses. n But an estimate must be n McSweeney, See Rights, Appraisal Evaluation of Mineral Society and Evaluation Appraisers, Manual of the American of (1960); Parks, Prop Examination and Valuation of Mineral erty (4th 1957) passim; Winifrey ed Marston, Hempstead, and Engineering Depreciation, seq. Valuation and et IX Encyc Seligman, of Sciences, The Social Valuation, Land (1948). “* * * Since the witnesses derive their fees from the one party controversy, or the other to the the trial often amounts to exaggerations a mere battle of pre lies. To some extent the and varications of the witnesses are discounted the tribunal as a juries judges result of the cross examinations. But few and equipped judgments' independent to form on matters of such a nature, meaningless compromise téchnical and the award is often a crying between the values testified to on both sides. There is a need in the United States for the use of skilled commissions specially judges important trained in the trial of valuation cases.” Encyc Seligman, XI of The Social Sciences 213-214 they the can with do best made the courts must imperfect method. an that the so-called it is our conclusion
Therefore, capitalizing profits multiplication of a form method, may expert an witness used be above, as indicated forming appraisal the of of value the his factor be used unless the witness land. The method not ingredients of all of the the into takes consideration complexities involved referred to above. method using capitalization method make it that evident having knowledge expert appraiser no but one com method is the intricacies of it. n This will mean petent employ the witness to qualified he be to use method unless has will not ap knowledge to be to intricacies able sufficient of its intelligently. ply it present Nunes
In the case defendants’ witness was being property taken. Al- one of the owners selling engaged though he in the business was it not soil materials from the was shown he land, knowledge requisite apply had computed properly. He that he had testified place.” topsoil, “in the value sand computation upon But which he used was based personal property and not the sale of materials as *11 complexities are in texts cited in note 15 These revealed the suggested essay Land The formula in the on above. IX Valuation Encyclopedia Sciences, p. Seligman, Social of The subject. complexity the of the to illustrate There will serve capitalizing is for annual income as follows: the formula i — (or—) land, a is the where V is the value V =--]- r r expected income, i the r the rate interest and is an- annual or decrease. nual increase part brought as a of the land. This is out in the follow- ing testimony: gravel “Q with reference to sand Now, and
place, you acquainted also with the market generally gravel? vicinity in the Medford for sand and
“A Yes. you price get every- “Q And is the the same as gets quality one else for the same gravel? and location of sand and Mostly. jobs “A We ibid on some and a lower gets job man sometimes. “Q But for of sand place— place, “A inOh, it is same. February
“Q And, what 9th, was the current rent—that fair is, cash market value gravel per yard? of the sand and cubic
“A Fifteen cents.” apparent It is from the record that Nunes’ esti upon mate of value which was based the sale of the ma yard produc terials did not include the cost doing (except tion and the cost of business the cost of hauling), nor did it take account of the extent of market such materials in relation to the amount of the materials taken or the other factors considered experts employing method. Even given testimony if Nunes had on these refinements necessary apply properly capitalization, to he was express opinion qualified respect. to not in objection qualifica- no was While made Nunes’ assigned as witness is not tions as error on timely objection appeal, nevertheless was made to the itself use of and since it was applied properly not case must be remanded for a new trial. *12 possibility
In view of the of a it retrial is advisable pass upon question that we of whether a witness properly using multiplication may method disclose jury specifically to the how he arrived at estimate. his holding We have made reference to the cases that the may multiplication so-called be used but that specific may manner of its use not be disclosed to of the evidence. n jury by proponent Orgel, (2d § Valuation p. Under Eminent Domain 164, ed 1953) “willingness comments on the of the courts types bearing admit various of evidence on income, but specifying not its exact amount.” He continues: “Evi dently, get the tribunal be allowed to a taste of juicy pie, the owner’s it to look at from a distance, though may permitted even it not be to become ‘con enticing fused’ a measurement of its dimensions.” ground excluding description the -witness’s specific process computing capitalized always value is not made clear the cases. Thus, Hollister v. ALR Cox, 131 523, Conn A2d recognized the court that the existence of deposits mineral could be considered the witness in estimating the value of the but land, deemed it im portant questions put to note that the to the witness relating presence gravel marketability to the and its general were in terms. The court said: “Neither this question objected any nor the others to contained re quests yards for details as to the number of cubic They properly or similar matters. were (131 95.) explana framed.” Conn at 41 A2d at No given by tion was the court for the restriction on the employed estimating disclosure of the details value of the land. The for this basis restrictive rule
n supra. See note
appears
clearly
more
in other
In
cases.
some cases the
computation
ground
details of
are excluded on the
such evidence would raise collateral issues. Thus
*13
City
Angeles
App
Beacon,
Los
v.
119 Cal
491, 495,
of
(1932)
7 P2d
the court said:
378, 379
n
“* * *'
(cid:127)
accept
profits
To
a statement of net
as
in
at
a fact to be taken into consideration
necessity opens
market
of
the door: To an
value,
investigation
accounting system
the
of those
into
original
operating
plant;
in-
into the costs of
questions
replacements;’
stallation and
raises
of
efficiéncy and
and leads into innumerable
skill;
alleys.”
other
roads and
side
Oregon
In
214 P2d
Cerruti,
State
. of such evidence explained specifically in other more cases. has been explanation in terms of the in- In cases the is some jury complexities competence of the to understand n See 4 p. Nichols, [3], Eminent Domain §12.311 citing 162, p. Orgel, Domain Under Eminent § Valuation (2d 1953). at note 21 ed cases measuring As value. method of gross put of common “The estimates court has it: one juries enough have skill all that courts and life are a measure of value.” Orgel, Valuation to use as p. § makes Eminent Domain Under specifically: point more “* * * may say expert prospective An only earning power earning-power sidering. worth con- is the may exclude a But a court nevertheless jury, prospect, of this because witness’s estimates a. judge position weigh their or no himself, capitaliza- probability apply proper and to rate tion.”
It be that some courts exclude detailed evidence jury danger of the to minimize the computing by multiplying simply quan the value tity consequence unit and as a materials *14 returning an excessive verdict. n per dangers
The recited above difficulties haps weighed against objections real. But these is advisability jury permitting to have all the In to draw inferences. available data from which its litigation it well other areas of established reasoning upon expert which an witness re data and jury. n may presented lies be to the We see no reason making exception an There in condemnation cases. testifying as to the value we hold that witness fore, containing land or other merchantable sand, o.f n Bloomsburg Railroad Searle v. The Lackawanna permitting profits (1859). Pa For cases evidence profits, Orgel, not amount of such see 1 Valua were made but (2d p. 1953). Domain tion Under Eminent § ed n Highway p. Arnold, supra Comm. 84 where See State danger juries returning possible excessive we alluded to the in cases. verdicts condemnation ... n Highway Holding 62, 357 Co., 225 Or. Com. v. Morehouse P2d 266 may questioned
soil materials be on examina direct' computation capitalized tion as to the details of Ms value. if However, the 'Witness testified as to value upon the basis of the method, the ad may party employed verse insist that the method be fully simply by showing quantity and not of the materials and the unit for such materials, as present was done in the case. Then, too, adverse may party cross-examine a witness detail as to the income. n employed capitalizing range inqMry depend part upon The will being period character of the business conducted, during of time which the business has been conducted, of materials available, demand for price stability, such other materials, factors relevant stability profits to the and the net business, in the future. likely produce which it is judgment The of the lower court is reversed and the cause is remanded for a new trial. dissenting.
DENECKE, J., majority holds that the method, may properly applied, expert appraiser be used an determining majority opinion value. The further testify expert that an can states how he used this determining method in value. With I this concur. n Cf., City Angeles Deacon, App 491, 495, of Los 119 Cal “* * * (1932): given 7 P2d opinion A witness who has value, as to market asked on be cross-examination *15 profit importance, any, if he knew of the net attached to and what if he it, questions permitted but such to test the value opinion ventured, and not because the sum involved is to by jury computing the court or be made use basis for by County Angeles market value.” The case was overruled of Los grounds. Faus, P2d 48 Cal2d on different n For cases showing variation, Orgel, this see 1 Valuation (2d 1953). Under Eminent Domain ed § majority, remanded for the ease a new however, ground capitalization trial on the that the method was improperly applied. here To this I dissent, objection that reason the Commission’s not was that being improperly ap- method was plied, but that the method could not be any determining used under circumstances value. dissenting. SLOAN, J., part opinion
I that dissent from in this case by which holds reversible error was committed the trial In court. addition to the reason stated opinion any Mr. I Justice am of the Denegre, error was cured instruction of the court jury.