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United States v. 60.14 Acres of Land

decided: June 24, 1966.

UNITED STATES OF AMERICA, APPELLANT,
v.
60.14 ACRES OF LAND, MORE OR LESS, SITUATE IN WARREN AND MCKEAN COUNTIES, STATE OF PENNSYLVANIA, AND ARTHUR W. SEIBEL, ET AL.



Staley and Freedman, Circuit Judges and Cohen, District Judge.

Author: Freedman

FREEDMAN, Circuit Judge.

On January 18, 1963 the government condemned land in Warren and McKean Counties, Pennsylvania for the Allegheny River Reservoir Project. Included in the condemned area was a residence owned by Carl F. Laubach and Florence Laubach, his wife, in Corydon Township, Warren County, Pennsylvania. At the trial before a jury on June 15 and 16, 1964 the owners were their only witnesses; the husband testified that in his opinion the fair market value of the property at the time of the taking was $32,000 and his wife gave similar testimony. The jury rendered a verdict for the owners in the amount of $26,000. The United States has appealed.

Appellant complains that the testimony of the husband should have been stricken out because it did not go to fair market value at the time of taking but instead was based on a fair return on his investment. We are satisfied on a careful review of the record that the complaint is not well founded. While the husband did not testify with a precision which would have rendered such an argument frivolous, nevertheless, his evidence read in its ordinary meaning and not artificially was adequate for consideration by the jury under the accepted standard of what a willing buyer would pay in cash to a willing seller of the property.*fn1

A more important issue is raised by the trial court's ruling that the government's only witness, Minsinger, who was presented as an expert, was not qualified to give his opinion of the value of the property.

Minsinger testified and was cross-examined at length on voir dire regarding his competency. The record shows that he holds a Pennsylvania real estate broker's license; he maintained a real estate office, apparently in Pittsburgh, doing a general real estate business from 1937 until 1946, when he began devoting himself to real estate appraisals. To qualify for this work he took courses in real estate at the University of Pittsburgh and attended real estate appraisal classes, conferences and seminars conducted by the American Institute of Real Estate Appraisers. He has made appraisals for various public bodies having the power of condemnation and for private corporations and has testified in the Allegheny County courts. He has appraised property as far east as Carlisle, Pennsylvania and as far west and south as West Virginia and as far north as one hundred miles beyond Pittsburgh, Pennsylvania. He is a past president of the Western Pennsylvania Association of Residence Appraisers. He is a member of the American Institute of Real Estate Appraisers, which requires ten years experience and the passing of an examination and has twelve to fifteen members in Western Pennsylvania.

Minsinger had not made any appraisals in the Warren County area and did not know the market nor did he have any knowledge regarding comparable sales there until the United States Corps of Engineers contracted with him in early 1961 to appraise some 200 properties in the Allegheny River Reservoir Project. To perform the service required by his contract he visited Warren County, obtained from the courthouse records a list of all sales of real estate for the period beginning in 1955 and investigated these sales by talking to the owners, and inspected and took photographs of the properties. He ascertained the purchase prices shown by the tax stamps on the recorded deeds of the properties, and verified them by inquiry of the grantees. His inquiries necessarily were circumspect and he could not say positively in each case that the seller might not have been under some compulsion to sell. Using the information he thus obtained, he compiled a sales catalogue which consisted of approximately 150 parcels. He testified that as a result of his investigation he became familiar with the sales and sales prices in Warren County.*fn2

On February 12, 1962, almost a year prior to the condemnation and almost two and one-half years prior to the trial, he inspected the Laubach property for the specific purpose of appraising it. He went through the interior of the buildings and examined their condition and their utilities and appointments. He also took photographs of the property which were identified as government exhibits. He testified that they substantially represented the condition of the buildings on the date of condemnation, less than a year later. He also familiarized himself with the area in which the property was located. When he came to make his appraisal of the property he had his catalogue before him and winnowed out the 150 properties to four which he considered comparable. These, according to the records, had been sold for $8,850, $9,100, $10,500 and $8,500. He made allowances for the differences between these comparable properties and the Laubach property and arrived at his appraisal of it. Thereafter he spent a great deal of time in the vicinity on his assignment as appraiser and was able to bring down his observations from the time of the original inspection in February, 1962 to the date of the taking on January 18, 1963. The government offered to prove that he valued the Laubach property at $13,000. This opinion evidence was excluded on the ground that the witness was not qualified.

It is of course well established that the determination of the competency of an expert witness lies generally in the discretion of the trial judge and that his decision will not be interfered with unless such discretion is abused or its exercise is manifestly erroneous. Salem v. United States Lines Co., 370 U.S. 31, 35, 82 S. Ct. 1119, 8 L. Ed. 2d 313 (1962); Stillwell and Bierce Manufacturing Co. v. Phelps, 130 U.S. 520, 9 S. Ct. 601, 32 L. Ed. 1035 (1889); Arnold v. Loose, 352 F.2d 959, 962 (3 Cir. 1965); United States v. 13,255.53 Acres of Land, 158 F.2d 874 (3 Cir. 1946). See 2 Wigmore, Evidence (3d ed. 1940), § 561. In the present case, however, what is involved is not whether the trial judge in his discretion accurately evaluated the factual circumstances relating to this particular witness's competency but rather the correctness of a general rule of law which he believed was binding and which would render an entire class of witnesses incompetent. Such a ruling of law, though an element in the decision on competency, is, of course, not restricted to the narrow review which applies to the exercise of discretion. E.g., United States v. Featherston, 325 F.2d 539, 543 (10 Cir. 1963); Roth v. Bird, 239 F.2d 257, 261-262 (5 Cir. 1956); Hickey v. United States, 208 F.2d 269, 278 (3 Cir. 1953), cert. denied, 347 U.S. 919, 74 S. Ct. 519, 98 L. Ed. 1074 (1954); Bratt v. Western Air Lines, 155 F.2d 850, 853 (10 Cir. 1946), cert. denied, 329 U.S. 735, 67 S. Ct. 100, 91 L. Ed. 635.

There can be no doubt that Minsinger was thoroughly familiar with the Laubach property*fn3 and the current value of real estate in the area in which it was situated. He obviously was well trained and experienced in the business of valuing real estate. Indeed, the court below acknowledged his general qualifications, but barred his testimony because he had acquired his knowledge of values in the area as a result of a search and study of sales which had already occurred, rather than contemporaneously with the transactions in the course of his business as a real estate broker. The court relied for this view on the Pennsylvania case of Tiffany v. Delaware, L. & W.R.R. Co., 262 Pa. 300, 303, 105 A. 101 (1918), followed in Schuck v. West Side Belt R.R. Co., 283 Pa. 152, 155, 128 A. 832 (1925), which held that a witness may testify as a real estate expert on the basis of the hearsay information of other sales in the area which he has acquired contemporaneously in the course of his business in following the trend of market conditions, but is not qualified if he has acquired all his information retrospectively from public records and interviews. See also Struthers v. Phila. & Delaware County R.R. Co., 174 Pa. 291, 34 A. 443 (1896).

This was the Pennsylvania rule applicable to Pennsylvania eminent domain proceedings at the time of trial. A week after the trial, however, Pennsylvania adopted the Eminent Domain Code of 1964*fn4 which made substantial changes in the Pennsylvania law, and whose provisions regarding evidence (Title VII) immediately became applicable in proceedings then pending. (§ 302). It authorized an expert to testify on direct examination "as to the valuation of the property on comparable market value" (§ 705(2)), including "the price and other terms of any sale or contract to sell * * * comparable property made within a reasonable time before or after the date of condemnation." (§ 705(2) (i)). The draftsmen expressly stated that they intended by this provision to permit evidence of comparable sales on direct as well as cross-examination of the expert and that it should be admissible as evidence of market value as well as for credibility purposes (see Comment to § 705(2) (i)). The liberalizing purpose of the Act is shown by another provision (§ 705(6)) that a valuation expert, if otherwise qualified, "shall not be disqualified by reason of not having made sales of property or not having examined the condemned property prior to the condemnation, provided he can show he has acquired knowledge of its condition at the time of the condemnation." The comment underscores this purpose, saying, "many highly competent appraisers do not make sales and have not made sales on property." The statute has therefore undermined for future cases in Pennsylvania the foundation on which the Tiffany rule rested.

But even prior to the adoption of the Eminent Domain Code we do not believe that in a proceeding under the federal power of eminent domain the Pennsylvania courts would have applied the rule of the Tiffany case to bar a witness such as Minsinger. The Pennsylvania law of eminent domain has long reflected a conception of market value which emphasized the intangible true worth of the property. The Pennsylvania courts spoke of comparable sales as irrelevant to market value, and they were therefore excluded both as substantive evidence of value and as corroboration of an expert's opinion. In a leading early case the Pennsylvania Supreme Court said of such testimony: "It does not disclose the public and general estimate which * * * is a test of value. * * * The fact as to what one man may have sold or received for his property, is certainly a collateral fact to an issue, involving what another should receive, and, if in no way connected with it, proves nothing. It is, therefore, irrelevant, improper, and dangerous. Not so with a market value." East Pennsylvania Railroad v. Hiester, 40 Pa. 53, 55-56 (1961).*fn5 Such data could be referred to only in cross-examination, to test the accuracy of the expert's opinion (East Pennsylvania Railroad v. Hiester, supra, p. 56), and then only if he in fact had relied upon the sale in forming his opinion.*fn6 It is not difficult to perceive the close connection between Pennsylvania's conception of market value and its rule that the expert who testified to valuation must have a general awareness and responsiveness to the climate of local opinion, of which comparable sales are merely sporadic expression.

The federal conception of market value differs from that of Pennsylvania; it is intimately related to selling prices in the market, and evidence of comparable sales therefore has always been admissible both as substantive evidence and to support a witness' opinion.*fn7 Indeed, it has been described as the best evidence of market value.*fn8 We may therefore conclude that even prior to the Eminent Domain Code the Pennsylvania courts would have permitted a witness such as Minsinger to testify as an expert if they had been called upon to determine the market value of real estate under the more objective federal standard.

We do not, however, decide this case by determining whether the Pennsylvania courts would have applied the decisions on which the trial judge relied in a proceeding in which the federal rule of market value prevails. The competency of witnesses in an eminent domain proceeding in a federal court is not determined by conformity to state law. On the contrary, Rule 71A(a), added to the Federal Rules of Civil Procedure in 1951, brought the procedure in such cases under the Rules. Rule 43(a) provides that both the competency of witnesses to testify and the admissibility of evidence are determined by applying the most liberal of these standards: (1) the federal statutes, (2) the rules of evidence ...


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