Iske v. Metropolitan Utilities District of Omaha , 183 Neb. 34 ( 1968 )

White, C. J.

This is a proceeding in eminent domain. The defendant, Metropolitan Utilities District of Omaha, which furnishes water service to the metropolitan area of Omaha, Nebraska, is constructing a well field adjacent to the Platte River south of Omaha. As a part of that project, the defendant condemned a 284-acre tract of land owned by the plaintiff, George Thomas Iske.

The Iske tract contains Cedar Island, which has an area of 173 acres and is approximately 1% miles in length, and river-bed land amounting to 111 acres. Cedar Island is separated from the north bank of the Platte River by a narrow chute or waterway. Cedar Island is subject to a gravel lease owned by the Gerhold Company, a corporation

The appraisers appointed by the county judge awarded $190,380 to the plaintiff and $36,660 to the Gerhold Company. The plaintiffs’ Iske and the defendant separately appealed to the district court where the appeals were consolidated. The issue tried there was the fair market value of the land and leasehold taken by the defendant. The jury returned a verdict for the plaintiff in the amount of $510,150, and for the Gerhold Company in the amount of $26,850. The defendant’s motion for new trial was overruled and it has appealed.

The evidence shows that the highest and best use of Cedar Island is for the production of sand and gravel followed by use for recreational purposes. There is sand and gravel to: a depth of approximately 50 feet under Cedar Island with an overburden of from 1% to 3 feet. The sand and gravel deposit could also be used to supply á large volume of water for industrial purposes. The area in Sarpy County immediately north of Cedar Island is zoned for industrial use.

The plaintiff’ produced two expert witnesses who testified that in their opinion the fair and reasonable market value of the Iske land was between $825,000 to $925,000, and $1,500,000 respectively. The defendant later moved to strike this testimony. The rulings on the motions to strike and on other objections made to this evidence are the basis for the defendant’s principal assignments of error.

The plaintiff’s first expert witness, Glenn Chase, testified that he had made a detailed study of the Cedar Island area and of the real estate sales in Cass and Sarpy Counties; and that there were no comparable sales of real estate which could be used as the basis for an appraisal. He based his appraisal upon an “income approach.” The parties stipulated that the opinion testimony of this expert witness was not based on the “prices! of other sales of property.”

Chase testified that he considered that the gravel would be exhausted in 12 years; that he computed an annual income by applying the royalty specified in the Gerhold Company lease to this estimate of the gravel which would be produced each year; and that he then applied a “discount or capitalization rate” of 7 percent (factor 7.943) to arrive at the value of this income. He further considered that Cedar Island would be available for recreational use after the gravel had been removed; that he computed an annual income from this use by assuming that there would be 232 lots to be rented and applying a rental rate of $2 per front foot less an amount for “Losses and administration”; and that he then applied a discount factor to this amount to obtain a present value of this income.

The plaintiff’s second expert witness, F. Pace Woods, considered the possibility of industrial use as well as sand and gravel production and recreational use. In valuing the property for sand and gravel production, Woods testified that he considered that it would yield a royalty in excess of $1,000,000. In valuing the property for recreational use he testified that he used the “income method” although his testimony does not show any computations used in arriving at a value. His opinion as to its value for industrial uses was based upon the factors that he considered necessary for industrial property.

The defendant contends that the testimony of the plaintiff’s expert witnesses should have been stricken because their testimony was, in part, based upon an improper measure of damages. The defendant argues that these expert witnesses should not have been allowed to testify concerning the quantity of sand and gravel available and the royalty rate specified in the Gerhold Company lease.

Where land taken by eminent domain has valuable deposits of gravel, this circumstance may be considered so far as it may affect the market value of the land, but part of the realty cannot be separately valued for its materials as an item in addition to the market value of the land. Pieper v. City of Scottsbluff, 176 Neb. 561, 126 N. W. 2d 865; Medelman v. Stanton-Pilger Drainage Dist., 155 Neb. 518, 52 N. W. 2d 328. Evidence may be received to show that the lands involved contain gravel deposits that are adaptable to commercial development and the fair market value of the lands in view thereof.

An expert witness may consider the quantity of a mineral in place of its unit price as a factor in determining the fair market value of the land. Pieper v. City of Scottsbluff, supra; United States v. Land in Dry Bed of Rosamond Lake, 143 F. Supp. 314; State Highway Commission v. Nunes, 233 Or. 547, 379 P. 2d 579. An expert witness may be permitted to use and testify to the factors which a well-informed buyer would use in arriving at the price he would pay for the property. Clark v. United States, 155 F. 2d 157.

The record in this case indicates that the plaintiff’s expert witnesses did not value the sand and gravel in place as an item separate from the value of the land, but used this information as a factor in arriving at the value of the land.

In determining the value of the plaintiff’s land, after the production of sand and gravel had been completed, at least one of the plaintiff’s expert witnesses assumed that the property would be developed in accordance with a plan that had been described by a previous witness, John J. Thompson.

Thompson is a civil engineer who has had experience in planning and developing property for recreational use. He testified that he was: familiar with Cedar Island and had prepared a design for development of recreational lots on the island. Exhibit 16, which was received over objection, is a design or preliminary plat prepared by Thompson. It is an overlay, drawn over an aerial photograph of Cedar Island. The admission of exhibit 16 is assigned as error.

As a general rule, exhibits which are practically instructive to explain the evidence or aid in its interpretation or application by the jury may be admitted. Dawson v. City of Lincoln, 176 Neb. 311, 125 N. W. 2d 908.

But giving defendant’s objection its maximum range, the exhibit is challenged as being irrelevant because it is speculative, conjectural, and highly prejudicial. The determination of this question overlaps and partially embraces the larger question of the admissibility of the testimony of the expert witness Glenn Chase as to the capitalization of income on the recreational and residential lots as being a relevant factor in the determination of the present market value. In approaching this question we must remember that a direct issue was drawn in this case as to whether Cedar Island could reasonably be developed into a residential or recreational area. Was it a reasonably prospective use of the property? The plaintiff had alleged, and the defendant denied, that Cedar Island was “peculiarly adapted to development into, a recreational area.” The plaintiff was attempting to show that a reasonably prospective use, of Cedar Island would be its development for recreational purposes after sand and gravel production had been completed and that this factor would affect the considerations influencing the present market value of the property. The resolution of this question was primarily for the jury under conflicting issues and evidence, and should be decided like any other question of fact at issue in a case. It is not for the court to determine under the guise of a determination of the admissibility of evidence. In Medelman v. Stanton-Pilger Drainage Dist., supra, this court held that in a condemnation proceeding, where evidence was conflicting as to adaptability of lands for a prospective use, it was a fact issue for the jury to determine under the evidence. This court said in that case as follows: “If, by reason of its surroundings, or its natural advantages, or its artificial improvements:, or its intrinsic character, it is peculiarly adapted to some particular use, all the circumstances which made up this adaptability may be shown, and the fact of such adaptation may be taken into consideration in estimating compensation.” The evidence shows that the witness Chase is an expert appraiser who spent approximately 36 days and made an exhaustive examination of the land, zoning regulations, and many other factors relevant to the determination of whether this land bad a prospective use for recreational or residential lot purposes. Exhibit 16 was no more than an illustration and a depiction in graphic form of the logical development of this testimony. If the prospective use was a relevant consideration, a graphic portrayal of the plan of such use was also relevant. The exhibit does not overreach the scope of the oral testimony. It particularizes, explains, and serves to establish the accuracy and credibility of the expert witnesses’ testimony. Such an exhibit would be highly relevant on cross-examination. We can see no reason why it could not be introduced on direct examination. In considering this question we observe that the expert witnesses for both the plaintiff and the defendant are in agreement that this island, both, in its present and future state after the development of lakes, had recreational possibilities. From the evidence the jury, therefore, could reasonably infer that the development for recreational or residential lot purposes is a prospective use which, in turn, is a factor that affects the present market value of the property. See, 27 Am. Jur. 2d, Eminent Domain, § 280, p. 70; Medelman v. Stanton-Pilger Drainage Dist., supra; Pieper v. City of Scottsbluff, supra; Langdon v. Loup River Public Power Dist., 144 Neb. 325, 13 N. W. 2d 168.

We are aware that there is considerable authority supporting the holding that such a plat or exhibit is not admissible in evidence. See, 5 Nichols (3d Ed.), Eminent Domain, § 18.11(2), pp-. 159, 160, 161; State Highway Commission v. Deal. 191 Or. 661, 233 P. 2d 242; Earl M. Kerstetter, Inc. v. Commonwealth, 404 Penn. 168, 171 A. 2d 163. But the recent cases hold that such evidence is admissible on the issue of the suitability of the tract for subdivision purposes, which, as we have pointed out, was a direct issue in this case. Arkansas-Louisiana Gas Co. v. Lawrence, 239 Ark. 365, 389 S. W. 2d 431; Commonwealth Dept. of Highways v. Denny (Ky. App), 385 S. W. 2d 776; State Highway Commission v. Conrad, 263 N. C. 394, 139 S. E. 2d 553, 12 A. L. R. 3d 553; Cherokee Pipe Line Co. v. Jury (Okla.), 393 P. 2d 503; Hawaii Housing Authority v. Rodrigues, 43 Hawaii 195. Such evidence is admissible even in the jurisdictions that hold generally that such a plat or evidence is not admissible, when there is an issue of the suitability of the tract for subdivision purposes in the case. State Highway Commission v. Deal, supra; Forest Preserve Dist. v. Krol, 12 Ill. 2d 139, 145 N. E. 2d 599. There is both disagreement and diversity of approach in the authorities on this problem. However, much of the confusion can be resolved by pointing out that such evidence is inadmissible as speculative and conjectural when the only showing is that the property could be used for subdivision purposes. Where, on the other hand, as- here, the use for subdivision purposes is not merely speculative and not too remote to influence present market value, such evidence is admissible. See, 29A C. J. S., Eminent Domain, § 273 (2), p. 1197; Arkansas State Highway Commission v. O. & B., Inc., 227 Ark. 739, 301 S. W. 2d 5; Santa Clara County Flood Control & Water Conservation Dist. v. Freitas, 177 Cal. App. 2d 264, 2 Cal. Rptr. 129; Oakley v. State (Tex. Civ. App.), 346 S. W. 2d 943, 163 Tex. 463, 356 S. W. 2d 909, 95 A. L. R. 2d 1207; Buena Park School Dist. of Orange County v. Metrim Corp., 176 Cal. App. 2d 255, 1 Cal. Rptr. 250.

We now consider the problem of the competency of the valuation testimony of plaintiff’s expert witnesses with reference to its use as a residential and recreational area. Again, this question overlaps the previous one discussed. Chase was an expert appraiser, had made a thorough inspection of the property, and testified in detail as: to the various factors he took into consideration in valuing the property, both from the standpoint of the gravel deposits and of its use for recreational and subdivision purposes. It is stipulated there were no comparable sales. That being true, this witness used the “income approach.” He computed the annual income from this use by assuming there would be 232 lots to be rented and applying a rental rate of $2 per front foot less an amount for “Losses and administration”; and then he applied a discount factor to this amount to obtain a present value of this income. The result he reached was not considered by him as a separate, value of the property but as a factor that was taken into consideration in determining the present market value that he testified to was between $825,000 to $925,000. That capitalizing of an estimate of the net rents -of a probable use of the property is an accepted method of valuation cannot be questioned. 27 Am. Jur. 2d, Eminent Domain, § 286, p. 87; 4 Nichols (3d Ed.), Eminent Domain, § 13.22, p. 418.

This testimony on behalf of the expert witness Chase came in without objection on the part of the defendant, without any cross-examination of the witness as to foundation, and was not objected to until after this witness had been cross-examined. Whatever the rule may be in other jurisdictions, the rule in this state is that either lay or expert witnesses may be used to testify as to the value of a tract of land taken, or the value of the remainder thereof immediately before and immediately after the taking, if proper foundation is laid showing they have an acquaintance with the property and are informed as to the state of the market, the weight and credibility of their testimony being for the jury. Medelman v. Stanton-Pilger Drainage Dist., supra; Langdon v. Loup River Public Power Dist., supra; Wahlgren v. Loup River Public Power Dist., 139 Neb. 489, 297 N. W. 833. In the Medelman case we said: “What a witness considers in coming, to his conclusion as to the value thereof can be brought out in cross-examination.” It would seem, therefore, under the clear holdings in our cases, and there is no contention here that we should narrow it, that an expert witness once qualified may testify as to valuation, and that the weight and credibility of what the expert witness considers in coining to his conclusion as to value at the time of the taking, are matters for the jury to determine. Weight to be given to such expert testimony, assuming his proper qualifications and his examination of the property, is ordinarily a question for the jury. Jurors are not bound by the testimony of expert witnesses. Their evidence is to be weighed as that of all other witnesses. Langdon v. Loup River Public Power Dist., spura; Medelman v. Stanton-Pilger Drainage Dist., supra; McNaught v. New York Life Ins. Co., on rehearing, 143 Neb. 220, 12 N. W. 2d 108. We are aware of cases from other jurisdictions that vary from this holding, but the above holding is the law of the State of Nebraska and we see no reason for a departure therefrom. Our rule in condemnation cases' in this state is consistent with that in other areas of litigation where it is well established that the data and reasoning upon which an expert witness relies is admissible to the jury. And, as we have seen, the assumptions upon which Chase’s valuation testimony is based, mainly, the probable and available use of the property for recreational and subdivision purposes, and its division into component units for that purpose, were submitted to the jury under competent evidence and furnish a basis for this testimony. We fully realize that there is a diversity of cases and confusion on this subject in the reported authorities. Many of these variations result from the application of different statutes and the application of different basic principles regarding the admission of expert testimony in condemnation cases. The cases, passing upon the question of whether the capitalization of income method may be applied by the multiplication of a unit rental value or sale price, follow three different patterns. There are cases holding that the multiplication unit method of capitalizing income may not be used at all. Some cases hold that it may be used but that the expert witness may not, on direct examination, testify as to the quantity and price per unit of the land or materials involved. And, third, some cases hold that the expert witness may not only use the multiplication method but he may also explain specifically how he used it by referring to the quantity and the price per unit and the data and evaluation methods employed. All courts agree, and of course the rule has been complied with here, that if the capitalization of income method is used by applying it to the multiplication of the different units of income, such a result cannot be taken as the value of the land but must be used only as a factor in evaluating the present market value of the land itself. See, Medelman v. Stanton-Pilger Drainage Dist., supra; Pieper v. City of Scottsbluff, supra.

Defendant complains in this case that various costs and expenses and other factors that should have been considered as a foundation for Chase’s: testimony were not considered by him. The essence of' this complaint is that Chase failed to take into consideration the cost of the development for recreational purposes and that, therefore, his capitalization of “income approach” was inadmissible. The difficulty of this argument is: First, that most of this testimony was brought out on cross-examination and there was no objection to the expert witness’ direct testimony; and, second, and more important, the expert witness did testify as to some costs of development. The essence of the defendant’s complaint is that there were more and other costs reasonably attributable and that they were not taken into consideration as the defendant developed on cross-examination. The difficulty of this argument is almost apparent. It would require the upsetting of every case in which it could be developed that there were some of the multiple and various elements in the cost of developing a subdivision that were not taken into consideration by the expert witness. Our rule, and the sensible rule, is that such matters go to the weight and credibility of an expert’s testimony and not to its admissibility. This argument has the further difficulty that it would require this court to became a super expert and to lay down categorically what the different elements and principles were that must be considered by an expert appraiser in using the capitalization of “income approach.” This holding would be akin to requiring a doctor to perform certain tests and to use certain equipment or machines, or to make other standards, purely technical in nature, as foundation for the admission of his testimony. Such a position is, of course, untenable. And we further point out that if such an “a priori” standard should be created then the application of the different factors involved would varv from case to case and that in many oases new and additional or different factors would probably be involved or be required. This would result in a guessing contest in the trial of every condemnation case as to the admissibility of an expert witness’ capitalization income testimony, even though such expert witness was properly qualified. As we have said, the trial of a law suit should not depend upon judicial speculation as an expert witness’ credibility or on an expert witness’ venture into judicial credulity.

As we have pointed out herein, an expert witness may consider the quantity of a mineral in place and its unit price as a factor in determining the market value of the land at the time of the taking. Pieper v. City of Scottsbluff, supra; United States v. Land in Dry Bed of Rosamond Lake, supra; State Highway Commission v. Nunes, supra. It is difficult to see any difference between the unit price of a prospective sale of minerals or gravel and the unit price of the prospective use of the units remaining in place. Can it be said in fact, much less as a matter of law, that there is any less prospective stability in the one than in the other? How, then, can it be said that the movement of the soil or minerals makes it more or less a capital expenditure than the same sale of the soil or minerals remaining in place? If unit price relates to value in one, it would seem that it must necessarily follow that it relates to value in the other. In 27 Am. Jur. 2d, Eminent Domain, § 286, pi. 87, it is stated as follows: “Where such income is derived from the intrinsic nature of the property itself, and not from a business conducted on the property, the courts, as a general rule, accede to the view that income from property in the way of rents and profits is an element of consideration in arriving at the market value or measure of compensation to be paid. * * * The valuation of condemned property by capitalizing the net rents is said to be an accepted method of valuation.” See, also, Pieper v. City of Scottsbluff, supra, and cases cited therein. We are unable to find an explanation of any such distinction as to the uses of unit prices in fixing valuation between these two types of available or prospective uses in the cases discussing this proposition.

Consequently, we hold that an expert witness, otherwise properly qualified, may be permitted to use and to testify concerning the different factors affecting valúation which a well-informed buyer would use in arriving at the price which he would pay for the property at the time of the taking. We hold that where land taken by eminent domain has a reasonable prospective use for recreational and subdivision purposes, this circumstance may be considered so far as it may affect the market value of the land at the time of the taking, and that part of the realty cannot be, separately valued for its prospective use for recreational and subdivision purposes as an item in addition to the market value, of the land. We hold that capitalization of income of rentals from a reasonably prospective use of the property is an acceptable method of arriving at the value of the property as a factor in the determination of its present market value, and that an expert witness may testify as to the quantity and unit price resulting from such reasonably prospective use and sale of all or part of said property.

The defendant contends that the evidence does not sustain the verdict for the Gerhold Company. The Ger-hold Company lease provided for a royalty of 15 cents per cubic yard for sand, sand gravel aggregate, and overburden material removed and sold, and 18 cents per cubic yard for road gravel. The defendant produced evidence of lower royalty rates for other leases in the area and expert testimony that the fair royalty rate for that area and for Cedar Island was from 12 cents to 13% cents per cubic yard.

The Gerhold Company argues that the extent and quality of the gravel deposit under Cedar Island has been proven by the test wells which were drilled, and that the advantageous location of Cedar Island plus the fact that the supply of gravel in adjacent areas has been substantially exhausted, make its gravel lease on Cedar Island more valuable. The evidence shows that the cost of truck transportation is around 7 cents per cubic yard.

From our review of the record we conclude that the evidence presented a question for the jury and that it is sufficient to sustain the verdict for the Gerhold Company.

The defendant also complains of instruction No. 12 and the form of verdict which was submitted to the jury. Instruction No. 12 advised, the jury that its verdict concerning the taking of the leasehold interest “* * * will find for the plaintiff, Gerhold Company, A Corporation, and in assessing the amount of its recovery you will award to it such sum of money, if any, as you find it has proved by a preponderance of the evidence will be just compensation * * The verdict form followed the language of the instruction and contained a finding for the plaintiff and a blank for the amount of the recovery.

The defendant contends that the court should have permitted the jury to find for the defendant, and that the effect of the instruction and verdict form was to require the jury to award damages in some amount for the Gerhold Company.

The only issue in this case was the amount of damages, if any, that the landowner and lessee were entitled to receive from the defendant. Bushey v. French, 171 Neb. 809, 108 N. W. 2d 237, cited by the defendant,. involved an issue of liability and is not in point. Instruction No. 12 contained the words “if any” and did not compel an award of damages for the Gerhold Company. We find no error in the instruction or in the form of the verdict.

The defendant complains that the Iske verdict is excessive. The plaintiff’s expert witnesses testify to a range from $825,000 to $1,500,000. On the other hand, the defendant’s expert witnesses testify to a range between $85,000 to $106,232. The jury verdict fell in between the two sets of conflicting expert testimony, being $510,150. The above situation is a frequent one in condemnation cases. Our court has often discussed the function of the jury in this kind of a situation. As we have pointed out, there, was no error in the trial that could be asserted as properly related to an error in the amount of the verdict. The weight and the credibility of the testimony of either lay or expert witnesses is for the jury. Expert opinion evidence, widely varying in this case, is to be considered and weighed by the triers of fact like any other testimony. The expert witnesses’ testimony is purely advisory and is not binding on the triers of fact. The amount of damages sustained is peculiarly of a local nature and ordinarily is to be determined by the jury and this court will not ordinarily interfere with the verdict if it was based upon admissible testimony. When the evidence is conflicting the verdict of the jury will not be set aside unless it is clearly wrong. A landowner only has one day in court and he must recover all of his damages in this condemnation proceeding. Much of the testimony that the defendant now objects to as being incompetent was received in evidence without objection and the errors it now complains of were not specifically objected to. In this situation it ordinarily cannot complain of error with reference to an excessive verdict. The above rules of law are enunciated and promulgated in Medelman v. Stanton-Pilger Drainage Dist, supra; Kennedy v. Department of Roads & Irrigation, 150 Neb. 727, 35 N. W. 2d 781; Phillips Petroleum Co. v. City of Omaha, 171 Neb. 457, 106 N. W. 2d 727, 85 A. L. R. 2d 570; Connor v. State, 175 Neb. 140, 120 N. W. 2d 916; State v. Dillon, 175 Neb. 444, at pp. 452, 453, 122 N. W. 2d 223. We further point out.that the defendant introduced like evidence to that it now complains of in this case as being objectionable because of an improper use of the capitalization of “income approach.” It cannot now complain. A party may not successfully complain of the introduction of evidence, of a like character to that which it subsequently introduced, even if it is developed on cross-examination. Johnson v. Airport Authority, 173 Neb. 801, 115 N. W. 2d 426; Tyrrell v. State, 173 Neb. 859, 115 N. W. 2d 459; Sump v. Omaha Public Power Dist., 168 Neb. 120, 95 N. W. 2d 209; Allen v. Massachusetts Mutual Life Ins. Co., 149 Neb. 233, 30 N. W. 2d 885; 1 Wigmore on Evidence (3d Ed., 1940), § 18 (d) at 344; 5 C. J. S., Appeal and Error, § 1506C, p. 894; Mackie v. Hessell, 5 Mich. App. 559, 147 N. W. 2d 464.

We have examined the re,cord and come to the conclusion that the verdict was not excessive. Among many-other pertinent factors we note the following: The verdict of the jury was over $300,000 less than the minimum valuation by the plaintiff’s expert witnesses. It is self-evident that it gave careful consideration to the weight and the credibility- of plaintiff’s expert testimony as it also did to the defendant’s expert witnesses who placed a quite inadequate valuation of around $100,000 on the property. It was undisputed in the case that the whole island was underlaid with about 50 feet of the finest type of gravel; that it is the only land remaining close to the industrial part of Omaha that has large gravel deposits; that it is impervious to floods; that other gravel deposits south of Omaha have been depleted; that it is the only remaining site south of Omaha that is adaptable to industrial use requiring large volumes of high quality water; that it has accessible to it good highway, railroad, and river transportation; that this property is ideal for use for recreational lots and for subdivision purposes; that both parties introduced testimony that they had prospective use for recreational and subdivision purposes; and that such use was particularly valuable because of the development of a lake as a result of the gravel depletion. We note that the jury viewed the property and this has been given important significance in the determination of the excessiveness of a verdict in an eminent domain case. See, State v. Dillon, supra, and cases cited therein. Under these circumstances. and considering the applicable rules, this court cannot say that the verdict in this case was clearly wrong.

Other errors assigned by the defendant have been examined and have been found to be without merit.

On cross-appeal plaintiff Iske assigns as error the refusal to allow attorneys’ and expert appraisers’ fees under section 76-720, R. R. S. 1943. We sustain this contention. The evidence supporting this assertion was undisputed, and the defendant made no objection. No reason appears why such allowances should not have been made. While the statute says that the court “may” award such fees, it is clear that the word “may” may not be subverted to destroy the plain meaning and intent of the statute. There may, of course, be circumstances in which such an award should not be granted, but it is clear that the latitude permitted by the statute is directed primarily at the amount. See Pieper v. City of Scottsbluff, supra.

The judgments of the district court for plaintiffs Iske and Gerhold Company, a corporation, are affirmed. The order refusing the motion for the allowance of attorneys’ and appraisers’ fees is reversed and remanded.

Affirmed in part, and in part

REVERSED AND REMANDED.