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United States v. 564.54 Acres of Land

filed: March 27, 1978.

UNITED STATES OF AMERICA
v.
564.54 ACRES OF LAND, MORE OR LESS, SITUATED IN MONROE AND PIKE COUNTIES, COMMONWEALTH OF PENNSYLVANIA, AND BENEDICT F. PASTORINI, ET AL., SOUTHEASTERN PENNSYLVANIA SYNOD OF LUTHERAN CAMP OF AMERICA; SOUTHEASTERN PENNSYLVANIA SYNOD OF LUTHERAN CAMP OF AMERICA, APPELLANT



APPEAL FROM the UNITED STATES DISTRICT COURT for the MIDDLE DISTRICT of PENNSYLVANIA (D.C. Civil No. 70-240).

Rosenn and Van Dusen, Circuit Judges and Herbert J. Stern, District Judge.*fn* Stern, concurring. Rosenn, Circuit Judge, dissenting.

Author: Van Dusen

VAN DUSEN, Circuit Judge.

The principal issues in this appeal are whether the jury, charged with determining damages owed by the United States to the Southeastern Pennsylvania Synod of the Lutheran Church in America ("Synod") for land taken under the power of eminent domain, was properly instructed in the law and whether the jury was sufficiently misled by a remark made by counsel for the Government to require a new trial. We hold that the combination of inadequate instructions by the trial judge and a misstatement of law made by the Government during its closing argument require a new trial.

I.

The trial in this case arose from a condemnation by the Government, as part of the Tocks Island Recreational Project, of three summer camps located on the Delaware River and owned and operated on a not-for-profit basis by the Synod. Prior to trial, the Synod sought a ruling that the proper measure of damages for just compensation under the Fifth Amendment is the cost of constructing substitute facilities to replace the camps, rather than the fair market value of the camps. Noting that the substitute facilities doctrine had only been applied in cases in which the condemnee was a governmental entity, the district court ruled that the substitute facilities doctrine was inapplicable. In an interlocutory appeal under 28 U.S.C. ยง 1292(b), this court reversed, holding that the substitute facilities measure of fair compensation is available to private owners of non-profit facilities if there is no ready market for the facilities and if the facilities are "reasonably necessary to public welfare." United States v. 564.54 Acres of Land, 506 F.2d 796, 800 (3d Cir. 1974). This court did not decide whether the property in this case met the test for the application of the substitute facilities doctrine, but left that issue for the determination of the district court.

Trial was divided into two phases. The first phase considered the issue of whether the substitute facilities doctrine applied to the condemned camps. Via a special interrogatory, the jury found that it did not apply. The second phase consisted of a damage determination using the fair market value test. The jury returned a verdict awarding $740,000. in damages. The Synod moved for a new trial on the phase one issue. Shortly thereafter, the trial judge died, and the judge to whom the case was reassigned denied the motion. This appeal followed.

The record establishes that the three pieces of property, acquired between 1927 and 1947, were treated as one for administrative purposes and that the camps were operated on a not-for-monetary-profit basis by the Eastern Pennsylvania Lutheran Camp Corporation, a Pennsylvania non-profit corporation. The camps lost money each year and were subsidized by gifts from members of the Lutheran Church. The camps provided activities such as water and land sports, nature appreciation activities, and arts and crafts. They were open to children without any restriction as to race or religion. Scholarships to the camps were given to underprivileged and emotionally disturbed children. Campers included children from inner-city Philadelphia, some of whom were provided an opportunity to go to camp as a means of alleviating the "gang" problems in the inner-city. A number of charitable organizations paid the tuition of children who could not otherwise go to camp. These children included Protestants, Catholics, Jews, and children expressing no religious affiliation. These organizations could not afford to send children to camps operated for a profit. Additionally, many campers were not economically deprived and did not receive financial assistance.

Evidence was introduced by the Synod to show that during the period when the Synod knew that the camps were going to be condemned, no camp was on the market, nor was any combination of camps simultaneously on the market which would have adequately replaced the condemned camps. Consequently, the Synod felt the only way to continue the camping operation was to purchase land and construct new camping facilities. The Synod's expert witness testified that a conservative estimate was that it would cost approximately $4,361,000. to replace the camps by constructing new facilities. Apparently, the reason for the great disparity between this figure and the $740,000. fair market value of the camps is attributable to the fact that the condemned camps were allowed to operate in noncompliance with state and federal housing and environmental legislation under grandfather clauses, but a newly constructed camp would require elaborate facilities to comply with this legislation. 564.54 Acres I at 798.

Although the Government did not acquire the camps until 1970, the publicity regarding the Tocks Island Recreational Area caused the Synod to anticipate the condemnation, and in 1964 the Synod purchased land in the Poconos for construction of a replacement camp.

II.

At the conclusion of phase one of the trial, the court submitted to the jury, together with a lengthy charge, the following interrogatory: "Under the principles I have given you, does the doctrine of substitute facilities apply?" The crucial issue in this appeal, as we see it, is whether this interrogatory was submitted to the jury in a confusing and misleading manner in light of the charge to the jury and remarks made by counsel for the Government in summation.

The Synod specifically argues that the court should not have submitted an omnibus question to the jury, but rather should have submitted each of the elements of the substitute facilities doctrine to the jury in a separate question. Our discussion of these elements infra shows that, due to their complexity, this position has great merit, and, in light of our discussion of the elements, the district court may wish to adopt this approach on remand. However, we decline to consider this specific contention, which is part of the larger question of whether the special interrogatory was confusing or misleading, as a ground for reversal. The Synod did not object to the form of the interrogatory at trial, although given ample opportunity to do so, and where a party does not object to the wording of a written interrogatory at trial we will not review it on appeal. Frankel v. Burke's Excavating, Inc., 397 F.2d 167, 170 (3d Cir. 1968). See also Kirkendoll v. Neustrom, 379 F.2d 694, 698 (10th Cir. 1967); Wyoming Construction Co. v. Western Casualty and Surety Co., 275 F.2d 97, 104 (10th Cir.), cert. denied, 362 U.S. 976, 4 L. Ed. 2d 1011, 80 S. Ct. 1061 (1960).*fn1

A determination of whether the jury was confused or misled in answering the interrogatory requires us to examine in detail the principles established by 564.54 Acres I and its progeny and determine whether the charge given to the jury and the alleged prejudicial misstatement of law made by the Government comport with those principles. This will require us to review the jury instructions, to which the Synod did not object in the district court. Although generally jury instructions will not be reviewed on appeal if they were not objected to at trial,*fn2 we have the discretion to review instructions sua sponte if the error is fundamental and highly prejudicial or if the instructions are such that the jury is without adequate guidance on a fundamental question and our failure to consider the error would result in a miscarriage of justice.*fn3 Though this discretionary power should be exercised sparingly, Trent v. Atlantic City Electric Co., 334 F.2d 847, 859 (3d Cir. 1964); Mazer v. Lipschutz, 327 F.2d 42, 52 (3d Cir. 1964), we think it is exercised appropriately in this case. As the following discussion demonstrates, "the jury was without adequate guidance on [a] fundamental question . . . ." Wilson v. American Chain and Cable Co., 364 F.2d 558, 562 (3d Cir. 1966). Failure to rectify this error could result in a miscarriage of justice because it could mean that the Synod would receive several million dollars less in compensation than that to which it is entitled. We turn now to an examination of the principles of 564.54 Acres I, the charge, and the remarks made in the Government's closing argument.

III.

In 564.54 Acres I we held that the substitute facilities doctrine applied to privately owned property if three conditions were met: (1) the property must be operated on a not-for-profit basis; (2) there must be no ready market for the particular type of property; and (3) the property, or facilities, must be "reasonably necessary to the public welfare." Id. at 796. Each of these conditions has complexities and we will analyze each of them in turn.

A. NOT-FOR-PROFIT BASIS

The dispute at the trial over this element of the substitute facilities test concerned whether "not-for-profit" refers to monetary profit or to any type of profit. Specifically, the dispute is whether operating facilities for "spiritual profit" precludes application of the substitute facilities doctrine.

During closing argument, counsel for the Government made the following statements:

"On the question of not-for-profit, we concede they are a religious and charitable organization which was operating on a not-for-monetary profit. No question about it. But, is that the only kind of profit? Think about it. They were putting in operation a camping program which was for the betterment of their religious teachings. Is that not a profit for a religion? [The Synod's counsel] said, 'And if by chance some kid might be converted . . . . Isn't that what they are there for? Isn't that their mission?' So, maybe they were operating not for a monetary profit but maybe for a spiritual profit. [140a]

"He [Pastor Gulliford] said he visited Camp William Penn. I don't know if you recall that. It was just a short part of his testimony. He said that's a city-run camp. He said it handled roughly the same number of children. But he said the difference was, and here's your tip-off why this is not to be considered as a not-for-profit operation; he said, 'They had different goals.' Sure they did. They were there to take care of the children from the ghetto areas, period. They weren't there to promote their religion or any religious teachings, or doctrine." [144a-45a]

The Synod argues that this is a misstatement of the law, and that these statements misled the jury as to the proper test for application of the substitute facilities measure. Of course, a misstatement of law which is prejudicial and not cured can be grounds for a mistrial. See Hockaday v. Red Line, Inc., 85 U.S. App. D.C. 1, 174 F.2d 154, 156 (1949). The Government, however, makes three arguments in response. It argues, first, that this is not a misstatement of law; second, that even if it were, it was cured by the judge; and, third, that the Synod is precluded from raising this issue because it failed to make a timely objection. We reject all three of these arguments.

First, it is clear that the court in 564.54 Acres I was referring to monetary profit. In the context of a discussion of the camps' not-for-profit operation, the court noted that the Synod claimed that the camps were operated at a loss. Surely this means that the camps operated at a monetary loss, not a spiritual loss, and therefore the court also must have been referring to monetary, not spiritual, profits. Moreover, the court noted that if property has no marketplace, the substitute facilities measure is applicable to non-profit facilities and the present value of capitalized future earnings measure is applicable to profit-making facilities. Id. at 799. Because spiritual earnings cannot be capitalized, "profit" in the context of this discussion means monetary profit. This is the only reasonable interpretation of "not-for-profit," for to hold that a private owner cannot qualify for application of the substitute facilities doctrine if he receives any type of profit, no matter how intangible or ephemeral, from his property would render the doctrine inapplicable to private owners in every instance. Every charitable organization receives some type of profit from its public works in the form of the feeling of achievement and satisfaction the contributors derive from their good work or the enhancement of the image of the organization and its members in the eyes of the community.*fn4

We conclude that the remarks by counsel for the Government constituted a clear misstatement of law.

Aside from being a misstatement of law, one of these remarks was improper for a second reason. The second statement quoted above clearly implies that the purpose of the camps was to promote the Lutheran religion, teachings and doctrine. This may have influenced the jurors to find that the substitute facilities measure did not apply because they did not want the taxpayers' funds to be used to convert campers to the Lutheran religion. There is absolutely no evidence in the record to indicate that the Synod used the camps to proselytize. Therefore, this remark was highly inaccurate, as well as prejudicial.

We do not think the trial judge cured this misstatement of law and the resulting prejudice. Counsel for the Synod objected to these remarks and the court overruled the objection without comment (N.T. 784), apparently thinking either that this was not a misstatement of law or that it was not sufficiently prejudicial to require curative instructions. In the charge, the trial judge did tell the jury "to follow the law as stated in the instructions of the Court" (N.T. 788) and that "statements of counsel are not evidence" (N.T. 795). The court, however, never told the jury that the statements of counsel are not law, never told the jury to disregard statements of law by counsel, and never singled out the offending remarks as being erroneous. Because of the inaccurate and highly prejudicial nature of these remarks, we do not think these general instructions cured the damage. Moreover, the only times the charge referred to the non-profit element of the substitute facilities test the court did not specify not-for-monetary-profit (N.T. 798, 802). It would have been an easy matter for the district court to expressly state that the Government's remark was a misstatement of law. The general remarks the dissent finds to be curative fall far short of the type of explicit statement that would have eliminated any possibility of prejudice. The fact that the district court overruled the Synod's objection to this remark (N.T. 784) indicates that the court did not intend to cure the effect of this error.

We think the objection to the improper remarks was timely. The Synod did not object to the remarks at the time they were made nor attempt to rebut them in its closing argument. Rather, counsel objected in chambers after the trial had recessed for the day. Relying on two cases from other circuit courts of appeals, Sanden v. Mayo Clinic, 495 F.2d 221 (8th Cir. 1974), and Hyman v. Life Insurance Company of North America, 481 F.2d 441 (5th Cir. 1973), which held that objection is waived if counsel does not either object or move for a mistrial at the time remarks are made, the district court held that the Synod had waived objection. Although the better practice is to object at the time the remarks are made, the rule of Sanden and Hyman has not been adopted in this circuit. Rather, the rule in this circuit is that, to be reviewable, an error must be called to the attention of the trial court so that the trial court has an opportunity to rule on the matter and correct any prejudicial errors. Shepler v. Crucible Fuel Co., 140 F.2d 371 (3d Cir. 1944). On this standard, the objection was timely, since the trial judge could have corrected any impropriety in supplemental instructions to the jury the next morning.

We note finally that the evidence established that the camps were run on a not-for-monetary-profit basis and that the Government conceded this. Accordingly, the jury could not have properly found that this element of the substitute facilities test was not met, and the court should have ruled that it was met as a matter of law.

B. NO READY MARKET

The jury instructions on the no ready market condition were substantially correct at times and somewhat confusing at one point. Taken alone, therefore, the instructions on this point would not be grounds for reversal. However, since the parties disagree on the meaning of the no ready market condition, and since a clarification of the meaning of that condition by this court will enable the district court on remand to instruct the jury more clearly and succinctly, a discussion of this point is necessary. Although there was no fundamental error in the instructions on this point, any departure from a clear, succinct statement would tend to blur the confusing task the jury faced in answering a complex, multifaceted question.

The Synod interprets the condition that there be no ready market to mean that the facility must be unique in the sense that it cannot be replaced in the marketplace at a cost roughly equivalent to its fair market value. The Government interprets the condition to mean that no market value can be established because the facility cannot be sold in the marketplace. Of course, if there is no market, the facilities can be neither bought nor sold. When the substitute facilities doctrine was first developed, it was in the context of facilities such as highways, which have no market value in this economic sense, see, e.g., Fort Worth v. United States, 188 F.2d 217 (5th Cir. 1951); United States v. Los Angeles County, 163 F.2d 124 (9th Cir. 1947). Highways are never bought or sold on the market. However, when the Court of Appeals for the Second Circuit applied the substitute facilities doctrine to such facilities as a gymnasium, United States v. Certain Property, 403 F.2d 800 (2d Cir. 1968), and we applied the doctrine to camps, it became clear that the concept of a ready market took on a different meaning because camps and gymnasia are bought and sold privately and have market values.

It is important to distinguish between the market for the underlying property adaptable to various uses and the market for the existing facilities. Although a camp owner can readily sell camp property either for use as a camp or because he can obtain a market price determined by alternative uses of the property, a displaced camp owner may not be able to purchase a comparable existing facility because, in a given area, there may be a limited number of camps whose facilities may vary substantially. Thus, a camp at certain times and under certain economic conditions may be sufficiently unique to be irreplaceable in the market,*fn5 requiring the displaced camp owner to purchase property and construct facilities equivalent to those taken. Cf. Newton Girl Scout Council v. Massachusetts Turnpike Authority, 335 Mass. 189, 197-198, 138 N.E.2d 769, 775 (1956). If this is so, the "no ready market" condition is met.

In 564.54 Acres I, at 799-800, the court stated:

"The basic principle underlying the constitutional requirement of 'just compensation' is one of indemnity. The condemnee 'is entitled to be put in as good a position pecuniarily as if his property had not been taken. He must be made whole but he is entitled to no more.' Olson v. ...


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