Tоday we find ourselves lodged among melon rinds, coffee grounds, countless tin cans and sundry other unlikely neighbors amidst the City of Duncanville sanitary landfill. In this ignoble setting, we examine one of our most treasured constitutional principles — the Fifth Amendment’s precept that private property shall not be taken for public purposes without just compensation. We consider the question of what constitutes the 1 payment of “just compensation” to a public condemnee who has a duty to replace a condemned public facility. Appellee, the United States, contends that Duncanville is entitled only to the fair market value of its old landfill, which was condemned by the government. Duncanville argues that just compensation is the cost of a substitute landfill. We agree with Duncanville and conclude that under the Fifth Amendment a public condemnee which has a legal or factual duty to replace a condemned facility is entitled to the reasonable cost of a functionally equivalent substitute facility. We conclude also that the trial court’s instruction concerning the substitute facilities standard was inadequate to enable the jury to make an intelli-. gent determination of that cost. Accordingly, we remand for a new trial.
*1358
Indeed, this case is redolent with Fifth Amendment issues, as Duncanville objects also to the trial court’s award of 6% interest under the Declaration of Taking Act, 40 U.S.C. § 258a. This Court has very recently held that the 6% rate is a floor, not a ceiling, on allowable rates of interest in this situation, and that the refusal to allow a higher rate of interest may be a denial of just compensation under the Fifth Amendment.
U.S. v. 329.73 Acres of Land, Situated in Grenada and Yalobusha Counties, State of Mississippi,
(5th Cir.1983)
(en banc)
Duncanville is a small home rule city of approximately 28,000 people located in the southwest portion of Dallas County, Texas. It operated a sanitary landfill on a tract of approximately 50 acres southwest of the city, along Ballwag Road in Dallas County, near the Tarrant County line. The United States condemned this tract (the Ballwag site) pursuant to the construction of Lake-view Lake, a redundantly named U.S. Army Corps of Engineers flood control project. 1 In accordance with the provisions of the Declaration of Taking Act, the government deposited its estimated value of the condemned property, $199,950.00, into the registry of the Court. 2
For approximately two years after the taking of the Ballwag site, Duncanville trucked its daily garbage to a landfill near Ferris, Texas, some 22 miles to the southeast. It then acquired a new site of its own in northwest Ellis County (the Ellis County site), approximately the same driving time from Duncanville as the Ballwag site. This site consists of approximately 113.7 acres. Duncanville has been using the Ellis County site since January 1, 1981.
Duncanville demanded a jury trial on the issue of compensation, contending that the amount offered by the government was inadequate because Duncanville was entitled to' the reasonable cost of substitute facilities, rather than merely the fair market value of the condemned propеrty. Duncan-ville asked for the cost of the Ellis County land, the costs of permitting and preparation, and the costs of the interim use of the Ferris landfill.
After the presentation of evidence and arguments, the trial judge submitted two special interrogatories to the jury. Special question number one required a finding as to the fair market value of the 50-acre Ballwag site, which the jury fixed at $225,-000. Special question number two required a finding as to the cost of supplying a functionally equivalent substitute landfill site, which the jury fixed at $723,654.01. The district court then concluded thаt as a matter of law the market value of the Ballwag site was the proper measure of compensation and entered judgment for $225,000.00. He set interest on the unpaid balance of $25,050.00 at 6%. 3 Duncanville appeals.
The Fifth Amendment to the U.S. Consti- . tution provides,
[N]or shall private property be taken for public use, without just compensation.
The issue here is what measure of compensation is “just” when a public entity is obligated to replace its condemned public facility.
In
United States v. 564.54 Acres of Land, More or Less, Situated in Monroe and Pike Counties, Pennsylvania, (Lutheran Synod),
In
Lutheran Synod,
the Court acknowledged that generally an award of fair market value strikes “a fair ‘balance between the public’s need and the claimant’s loss’ upon condemnation of property for a public purpose.”
“[W]hen market value has been too difficult to find, or when its application would result in manifest injustice to owner or public, courts have fashioned and applied other standards.... Whatever the circumstances under which such constitutional questions arise, the dominant consideration always remains the same: What compensation is ‘just’ both to an owner whose property is taken and to the public that must pay the bill?”
The substitute facilities doctrine arose from that realization that “just compensation” and “fair market value” are not always synonymous. Its genesis is in language written by Chief Justice Taft in
Brown v. United States,
Generally, the substitute facilities standard has been applied to the condemnation of streets, alleyways, bridges, sewers, and other public facilities for which fair market value cannot accurately be determined. Numerous cases have recognized and applied this principle.
See, e.g., United States v. Streets, Alleys and Public Ways in Village of Stoutsville, in Monroe County, Missouri,
*1360 This is a rather different case. Unlike the vast majority of substitute facility cases, here the parties agree that the lаndfill has a determinable market value, although at trial they disagreed as to what that value was. 5 The United States contends that because fair market value can be ascertained, that value must be the measure of compensation. We conclude,. however, that the reasonable cost of a functionally equivalent facility is the just measure of compensation when a public entity is obligated to replace the condemned property.
Although the indemnity principle which animates the just compensation clause of the Fifth Amendment “has not been given its full and literal force,”
Lutheran Synod,
Duncanville’s situation is very different from that of the typical private landowner, or that of the nonprofit condemnee in Lutheran Synod. As the Supreme Court emphasized,
[Rjespondеnt [Synod] is under no legal or factual obligation to replace the camps, regardless of their social worth. As a private entity, respondent is free to allocate its resources to serve its own institutional objectives, which may or may not correspond with community needs. Awarding replacement cost on the theory that respondent would continue to operate the camps for a public purpose would thus provide a windfall if substitute facilities were never acquired, or if acquired, were later sold or converted to another use.
In contrast, in order to continue to provide a necessary public service, Duncan-ville presumably was required to spend certain monies to purchase a new landfill site and prepare that site for its purpose. 6 Its loss from the condemnation was the amount of money reasonably spent in that venture to create a functionally equivalent facility. To deny Duncanville reimbursement for its unavoidable loss would be to deny just compensation.
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The Second Circuit has reached the same conclusion.
Certain Property in Borough of Manhattan, supra; United States v. Certain Property in Borough of Brooklyn,
The Second Circuit, reversing the district court, held for the City. It concluded,
The ‘substitute facilities’ doctrine is not an exception carved out of the market value test; it is an alternative method available in public condemnation proceedings. [Citations omitted] When circumstances warrant, it is another arrow to the trier’s bow when confronted by the issue of just compensation.
When the public condemnee proves there is a duty to replace a condemned facility, it is entitled to the cost of constructing a functionally equivalent substitute, whether that cost be more or less than the market value of the facility taken.., [Citations omitted] The duty may be legally compelled or one which arises from necessity.... We hold, therefore, that if the structure is reasonably necessary for the public welfare, compensation is measured not in terms of “value” but by the loss to the community occasioned by the condemnation.
That loss to the community is the cost of providing the necessary substitute faсility. As we pointed out in
City of Fort Worth,
where we also rejected a strict view of the meaning of “necessity”, “In any proper view of the requirements of just compensation, the substitute ‘necessary’ is that necessary to readjust [the City’s] street and highway system to serve the municipality’s requirements and needs in as adequate a manner and extent and with equal utility as such system would have provided had the facility in question not been condemned, so far as this is reasonably practical.”
In United States v. State of South Dakota Game, Fish and Parks Department,
The Eighth Circuit reversed. It held that the sрecial interrogatory had impermissibly submitted a mixed question of law — “obligation” — and fact — “need”—to the jury. It concluded moreover that the substitute facility theory was improper because the market value of the condemned property was ascertainable.
We find it unnecessary to determine whether we would follow
South Dakota Game, Fish and Parks Department.
First, the finding of need was highly suspect in that case. Second, and more significant, in
Ellsberry Drainage District, supra,
a more recent case, the Eighth Circuit cited
Certain Property in Borough of Manhattan
and recognized that “[t]he substitute facilities doctrine is not an exception to the fair market value test but merely an alternate means of determining what just compensation is when a рublic facility is involved.”
Considering the peculiarities of South Dakota Game, Fish and Parks Department, and in light of Ellsberry Drainage District, there is no indication that the Eighth Circuit would reach a result contrary to that which we reach today. If it would reach such a result, by this opinion which creates no confliсt we must respectfully disagree, ally ourselves with the Second Circuit and conclude that here the measure of just compensation is the reasonable cost of a functionally equivalent substitute facility.
The trial court held that Duncanville had not met its burden of proving the cost of a functionally equivalent substitute facility and so had forfeited its case on the issue. With this we must disagree. Duncanville submitted evidence of the price of the land and of the expense of preparing the site. Witnesses testified that it was necessary to acquire the entire tract, at that price,' in order to avoid more costly severance damage suits. We express no opinion as to the validity of these contentions, but we consider them sufficient to fulfill Duncanville’s burden of presenting a case as to the cost of substitute facilities. 7
An owner of condemned property “must be made whole but is not entitled to more.”
Olson,
[EJquitable principles undergirding just compensation require that the s.ubstitu: tion cost be discounted by reason of the benefit which accrues to the condemnee when a new building replaces one with expired useful years. With deference to several contrary holdings, we believe the amount should be calculated and an appropriate deduction made. [Footnotes omitted]
Here the City of Duncanville has perhaps gained noticeably from the replacement of the Ballwag fill with the new Ellis County site. The Ellis County site comprises 113.7 acres compared with 50 acres at Ballwag, some 15 of which had already been filled. 8 According to uncontradicted testimony, the Ellis County site can be filled to a depth of about 20 feet, as opposed to 10 feet at Ballwag. While the Ellis County site is approximately two miles farther away, it is accessible via faster roads. According to testimony, the Ellis County site has a potential life of approximately 41.6 years, while Ballwag was good only for about 12.8 years more. Generally there is disagreement as to the details of the comparative capacitiеs of the two sites. But it is very clear that the Ellis County site is much better in terms of fillable acreage and life-span than Ballwag. In this particular tale of two landfills, Duncanville’s garbage might well be heard to say, “It is a far, far better rest I go to, than I have ever known.”
Although it recognized that Duncanville might be entitled to the cost of a reasonably necessary substitute facility, the trial court’s instruction on special question number two did not take into account the need to deduct for the benefits which Duncan-ville gained from the acquisition of the new fill. The judge told the jury:
As I previously instructed you, fair market value may not be the sole measure of just compensation. The “cost of substitute facilities” is an alternative measure of just compensation in this case. I will now instruct you regarding this measure of just compensation in this case.
*1363 The burden is on the City of Duncan-ville to establish, by a preponderance of the evidence in the case, that the cost of substitute facilities was as much as the City claims. To “establish by a preponderance of the evidence” has been previously defined, and you are directed to refer back to that definition.
By cost of substitute facilities is meant that compensation due the City of Dun-canville for the taking of its public facilities measured by the reasonable cost of supplying substitute facilities reasonably necessary to enable it to serve its constituents in approximately the same way as it would had the condemnation not occurred. It is a method of compensation by substitution. You are to determine the reasonable cost of construction of a functionally equivalent substitute sanitary landfill.
Simply stated, the cost of substitute facilities represents that amount of just compensation in money to be awarded which will sufficiently allow the City of Duncanville to provide for the replacement of the property and their public facility taken by the Government.
While this instruction fairly set forth the general purpose and meaning of “substitute facilities,” we conclude that it was inadequate to enable the jury to make a fair and complete determination of the costs, including consideration of bеnefits received, of this particular substitute facility. The “reasonable cost” of a “functionally equivalent substitute sanitary landfill” is too brief a standard to ensure that the jury will balance these various positive and negative attributes. 9 Accordingly, we decline to adopt the jury’s award of $723,624.01 and remand the case to the district court for a new trial.
Initially we leave the specifics of the charge to the sound discretion of the trial judge. Likewise, we express no opinion as to the merits or pecuniary accuracy of the various costs claimed by Duncanville. 10 We think it wise, however, to mention a few of the expenses for which Duncanville is entitled to compensation. Clearly Duncanville is entitled to reimbursement for the reasonable cost of an alternative site, along with the reasonable cost of preparing that site *1364 for use as a landfill. Whether the price actually paid is reasonable under the circumstances is for the jury to decide. In addition, Duncanville is entitled to those expenses incurred in using the temporary site at Ferris, over and above those which would have been incurred at Ballwag.
In. holding as we do today, we imply no criticism of the able trial judge. He faced several difficult legal issues and gave them careful and thoughtful consideration. His conduct of the trial was judicious and fair throughout. Nevertheless we hold that the reasonable cost of functionally equivalent substitute facilities is the proper measure of compensation here and that the court’s instruction to the jury was inadequate to enable it to make a fully informed and intelligent assessmеnt of that cost.
Very recently, in
United States
v.
329.73 Acres of Land, supra,
this Court held
en banc
that the 6% interest rate provided as delay damages by the Declaration of Taking Act “sets a floor, rather than a ceiling, on the rate of interest payable on the deficiency.”
In support of its argument that Duncan-ville’s failure to introduce evidence justifies the use of the 6% interest floor, the government cites
United States v. 100 Acres of Land, More or Less, in Marin County, State of California (Drake’s Beach),
In neither Drake’s Beach nor 174.12 Acres, however, was a new trial ordered on the underlying issue of just compensation. Here we remand for a new trial. In light of that fact, and in light of the very recent nature of our en banc holding in 329.73 Acres, we are of the opinion that the City should be allowed to present evidence of the proper rate of interest at trial. As in 329.73 Acres, we do not attempt to set a formula for the calculation of a proper interest rate; instead we leave that factual determination for remand upon the evidence to be presented.. Since the proper interest rate is an elеment of “just compensation,” we consider the determination of that rate to be within the province of the jury as finder of fact. Wardy, supra; Drake’s Beach, supra. 11
The Ballwag landfill will soon be, if it has not already been, transmogrified into a muddy lakebed. It leaves behind this lawsuit as a memento of its former life. In that guise, it will linger for some while longer in the federal courts. We regret that we cannot allow it to rest in watery peace, but we conclude that a new trial is necessary to determine what just compensation the City of Duncanville shall receive for its pássing.
REVERSED and REMANDED.
Notes
. The pаrties stipulated to October 3, 1978, ás the date of taking.
. This money was redeposited in an interest-bearing bank account and later withdrawn, with the accrued interest, by the City of Dun-canville.
. This amount, a total of $29,934.75, was deposited in the court’s registry on December 29, 1981.
. As Justice Marshall points out in
Lutheran Synod,
. That controversy was, of course, settled by the jury. Its finding of $225,000 is somewhat more than the highest figure suggested by the government and considerably less than the lowest figure suggested by Duncanville.
. The collection and disposal of garbage by a municipality is a governmental function imposed by law.
City of Fort Worth v. George,
The decision as to whether substitute facilities are in fact necessary is a question for the trial court.
Wardy v. United States,
We remind the trial court that in considering this question, it is not enough for the government to demonstrate a “reasonably adequate” or “reasonably passable” alternative method of garbage collection which does not require city operation of a sanitary landfill. The City is entitled to a facility or method which will dispose of the refuse of its citizens “in an equally adequate manner as would have been true had there been no condemnation.”
City of Fort Worth,
. At trial the government presented evidence as to the actual cost of several “comparable” landfill sites. The record clearly shows that all but one of these sites were much too far from Duncanville to be even hypothetically suitable for use as Duncanville’s municipal landfill. The government did not demonstrate that any tracts other than the Ellis County site were available for purchase for landfill use in the Duncanville area.
. A portion of the Ballwag acreage was occupied by a creek. At trial there was some dispute as to whether that portion should properly be considered “fillable” acreage.
. We do not adopt, or impose upon the district court, any particular method for making this determination. One possible approach, how- . ever, was suggested by the Second Circuit in
Certain Property Borough of Manhattan:
Several formulas are appropriatе. The one that appears suitable under the facts in the present case is the mathematical formula: One minus the ratio that the remaining useful life of the condemned building [landfill] bears to the useful life expectancy of the substitute facility.
. Solely for purposes of illustration, we set forth below the list-of costs which Duncanville claimed it incurred in the purchase and preparation of the Ellis County site:
1. Land Cost $ 583,400.00 (Actual)
2. Relocating Mobil Pipeline 282,406.63 (Actual)
3. Site Preparation 13,063.98 (Actual)
4. Permanent Fencing 15,290.52 (Actual)
5. Off-Site County Road 107,288.00 (Actual)
6. Relocating Stock Pond $ 6,832.50 (Actual - $10,332.50, less $3,500.00)
7. Engineering Study 15,000.00 (Actual)
8. Soils Investigation 6,479.49 (Actual)
9. Engineering for Soils Inspection of 1,336.39 First and Second Cell Areas (Actual)
10. Engineering for Soils Inspection of Ad- 105,000.00 ditional Cells 150 Cells @ $700.00 Each (Estimated)
11. Three (3) Groundwater Monitor Wells 8,419.08 and Initial Resistivity Survey (Actual)
12. Earth Resistivity Survey for Remain- 20,000.00 ing Portion (Estimated - 20 yr. @ $1000/yr.)
13. Trips to Midlothian and Austin by City 294.93 Officials in Preparation of Permit
14. Attorney Fees Obtaining Permit 1,000.00 (Estimated)
15. Addition Cost - Landfill Operations 76,927.70 Ferris vs. Ballwag
16. Additional Maintenance Cost 25,882.83 Trips to Ferris Landfill
17. Additional Fuel Cost 7,689.11 Trips to Ferris Landfill
TOTAL $ 1,276,311.16
. At issue here is the interest to be assessed for the period of time from the date of taking to the date of judgment. This interest rate is not addressed by section 302 of the Federal Courts Improvement Act of 1982, P.L. 97-194, 28 U.S.C. § 1961, which establishes a varying rate for post-judgment interest in federa! district court civil cases.