Smith v. State Roads Commission

Finan, J., delivered the opinion of the Court. The unrelenting onslaught of highway construction has ravished two sand and gravel quarries which lay in the path of Interstate Highway 1-95. The quarries, situated in close proximity to each other, had supplied material for road building and general construction in Prince George’s County. The dissatisfaction of the owners of the quarries with the jury’s awards in the two eases in which they were the subject of condemnation has given rise to this consolidated appeal.

The main ground for appeal is predicated on the actions of the lower court which, in determining the admissibility of testimony as to the fair market value of the property, excluded testimony before the jury as to the value of the mineral deposits separate and apart from the value of the land as a whole. The excluded testimony had sought to spell out in detail the unit price of the minerals in place multiplied by the quantity in order to arrive at their value. The appellant took further exception to the court’s instructions to the jury wherein, following the ¹⁵⁶ same rationale as used in excluding evidence, it refused to permit the jury to use the unit price in place times quantity formula in arriving at their award. Case No. 135, referred to as the “Aitcheson” tract, involved the taking of 11.2 acres.

There was testimony that 1,978,708 tons of usable sand and gravel were deposited within the limits of the right-of-way. The jury returned an award of damages in the amount of $67,504. Case No. 244, referred to as the “Hutchinson” tract, contemplated the taking of 15 acres for the purpose of the right-of-way of 1-95 which, in addition, would have caused a “landlocking” of the 36 acres remaining of the original tract, but for the provision that an access-way be provided by the State. There was testimony that 402,-105 tons of usable sand and gravel were lost by the taking.

The jury awarded damages in the amount of $75,000. The lower court following what it believed to be the reasoning of this Court in State Roads v. Creswell, 235 Md. 220 , 201 A. 2d 328 (1964), gave the following instruction to the jury, substantially identical, in both cases: “You are instructed as a matter of law that you are not to attempt to compute the just compensation of this case by multiplying any figures for sand, gravel, or dirt testified to in this ease by any value, price or profit per ton. The quantity and quality of such gravel can be considered by you only in relation to the value, if any, that the presence of such deposits contribute to the value of the land as a whole. In other words, you cannot and must not value the minerals in place by any method to arrive at a value for the land.

However, if you feel that because the land has gravel upon it, it has a higher value than nearby land not adaptable for quarrying purposes, then you may consider such additional value in assessing damages in this case.” ¹⁵⁷ In Creswell, supra, Judge Marbury writing for the Court recognized the problem presented by the question of the evaluation of property containing mineral deposits and stated not only the view of the weight of authority, but what we think, and the lower court thought to be, the better principle of law to be applied in such instances. However, as will be noted in Creswell , the issue as to the use of the multiplication process in determining value, having not been properly preserved for determination on appeal, was not actually before the Court. The Court stated: “By far the most serious contention of the appellant concerns the proper method of determining valuation of condemned property when it contains mineral deposits. There is no disagreement with the general rule in this State.

The measure of compensation is the actual market value of the property, which value depends upon the uses for which the property is available, and any special utility which may enhance its value in the market is an element to be considered. Where the suitability of a property for a particular use contributes to the market value, it can be considered even if it has not in fact been so utilized. State Roads Comm. v. Warriner, 211 Md. 480, 485 , 128 A. 2d 248 , and cases cited, especially Bonaparte v. M. & C. C. of Balto., 131 Md. 80, 83 , 101 Atl. 594 . “Appellant argues that appellee has not shown that the presence of the gravel was relevant, i.e., that it added value to the land. It would seem simple to show valuation of the gravel by multiplying the total number of cubic yards of gravel by a unit value and thereby prove the value of the quantity of gravel to the land.

However, the majority of cases do not permit this method, for the mineral deposit cannot be treated as a separate entity but must be considered an ¹⁵⁸ integral part of the property. Thus while a jury, in deciding upon the damages to the condemnee, may consider what value the minerals add to the property, if any, it may not use the most obvious method of determining what that value is, a rather anomalous situation. For a good discussion of the problem of whether the multiplication process (a) can or (b) cannot be used at all, or (c) may be used as a “factor” in evaluating mineral bearing land, and citations to the various conflicting authorities, see State v. Nunes, 379 P. 2d 579 (Ore. 1963). The question has not previously been decided by this Court, and we are of the opinion that the record before us leaves the matter open because the appellant has not properly preserved the question on appeal.” Id. at 229, 230.

Support for the dictum in Creswell is found in Nichols on Eminent Domain (3rd ed.) Vol. 4, § 13.22, pgs. 412, et seq.: “* * * [T]he rule has been correlatively stated that the value of such mineral deposits cannot be separately determined independently of the land of which it is a part. It cannot be considered as so much potential merchandise to be evaluated as such. The land taken must be valued as land with the factor of mineral deposits given due consideration. In determining the just compensation to be paid to the owner it is not permissible to aggregate the value of the land and the value of the deposit.

Thus, the value of the land as stone land suitable for quarrying — but not the value of the stone separate from the land — is a proper subject of consideration both by the witness and the jury in fixing the amount of just compensation to be awarded. The value of the land is not measured by such facts. The stone is a component part of ¹⁵⁹ the land. However, while the profits, price or value of the minerals taken separately, may not be considered, yet the value, extent and quality of such minerals as exist upon the land may be considered. * * * All legitimate evidence tending to establish the value of the land with the minerals is permissible.

This is not to say that such minerals are to be separately evaluated but that consideration may be given to the quantity of the mineral that can be extracted and to the value thereof purely as evidence for arriving at the value of the land. * * To similar effect see also 1 Orgel on Valuation Under Eminent Domain, § 165. After reading Nichols and Orgel one may well ask, are they not requiring the courts, the expert witnesses and the jury to adhere to a distinction that exists only in intellectual contemplation and dissolves when one views the issue in its real life dimensions. This would be something akin to Plato’s man in the cave who, chained to the stake, knows only real objects by the shadows they cast on the wall in passing. Orgel uses picturesque language to describe his view of the frustration caused by the majority view, stating: “Evidently, the tribunal may be allowed to get a taste of the owner’s juicy pie, and to look at it from a distance even though it may not be permitted to become confused by a measurement of its enticing dimensions.” We think we can extract the essence of what the eminent text writers are trying to say, but it is difficult to logically express it.

This was recognized by the Court in State v. Nunes, 233 Ore. 547 , 379 P. 2d 579 (1963), and that Court made a commendable effort to plow new ground in this area. However, we think what it came up with is simply a more sophisticated version of the multiplication method which in the final analysis is imbalanced by speculation. The Court in Nunes discounted the multiplication method as meaningless unless it was uti ¹⁶⁰ lized as a way of arriving at the new profit from the sale of the materials. However, the vital factor in this process is still a formula in which the quantity of mineral is multiplied by the existing unit price.

The formula is also conditioned by further refinements which seek to take into consideration market demands, market fluctuations, and deduction of operating costs. At first glance, the capitalization method proposed in Nunes does seem to have something to recommend it; however, on closer inspection we think that it is vulnerable to the criticism that it requires the use of too many speculative factors which on balance tips the scale towards an exaggerated market value. With the issue that was lacking in Creswell squarely before us, we think that Judge Mathias in the lower court was correct in instructing the jury that they should not use the multiplication method in arriving at their award. Following the same reasoning, we are of the opinion that the trial judge was also correct in excluding the evidence by which the expert witness sought to testify before the jury how he arrived at his evaluation of the mineral deposits by determining what was the unit value of the minerals in place and multiplying that value times the quantity.

We think such testimony is not only highly speculative, but if a jury is to intelligently analyze it without accepting the gratuitous assumptions inherent in such testimony, it requires them to reach separate conclusions on a gallimaufry of collateral issues- which are more apt to confuse than enlighten. We think the danger in such testimony was set forth with clarity in U. S. Ex. Rel. TV A v. Indian Creek Marble Co., 40 F. Supp. 811 (D. Tenn. 1941), wherein the Court rejecting such testimony stated: “Fixing just compensation for land taken by multiplying the number of cubic feet or yards or tons by a given price per unit has met with almost uniform disapproval of the courts.

This is true because such valuation involves all of ¹⁶¹ the unknown and uncertain elements which enter into the operation of the business of producing and marketing the product. It assumes not only the existence, but the continued existence of a stable demand at a stable price. It assumes a stable production cost and eliminates the risks all business men know attend the steps essential to the conduct of a manufacturing enterprise. It eliminates the possible competition of better materials of the same description and of the possible substitution of other and more desirable materials produced or possible of production by man’s ingenuity, even to the extent of rendering the involved material unmarketable.

It involves the assumption that human intelligence and business capacity are negligible elements in the successful conduct of business. It would require the numeration of every cause of business disaster to point out the fallacy of using this method of arriving at just compensation. No man of business experience would buy property on that theory of value. Values fixed by witnesses on such a basis are practically worthless, and would not be accepted.” Id. at 822 .

We would add that in our opinion the use of the multiplication method would have undue attraction for the jury. They would tend to focus their attention on a pat formula proposed for arriving at just compensation to the exclusion of other important and less speculative evidence of fair