METROPOLITAN WATER DIST. OF SOUTHERN California v. ADAMS et al.
SAME v. HOLMES et al.
These are actions in eminent domain. The plaintiff, engaged in constructing an aqueduct in connection with the bringing into the state of water from the Colorado river, sought to condemn certain lands required by it for reservoir purposes in what is now known as the Cajalco reservoir, situated in Riverside county. The lands required for this purpose embrace 526 parcels, with a total of more than 8,000 acres, and the reservoir was designed to hold some 225,000–acre feet of water. The trial here in question, in which these two actions were consolidated, involved fifty-eight of these parcels of land, was had before a jury and lasted exactly a year. During the trial the plaintiff acquired thirty-six of these parcels and after judgment acquired two more, leaving twenty parcels which are involved in this appeal. The main controversy here relates to ten of these parcels, totaling 862 acres, owned or controlled by the defendants Holmes. The defendants claimed that portions of each of these parcels formed two areas which were specially adapted for use for reservoir purposes, the two areas covering something over 400 acres.
While this appeal is presented upon a bill of exceptions the record, including exhibits, is voluminous. In the interest of brevity references herein to the evidence must be by a general summary, in most instances, rather than by going into details. The defendants presented five witnesses who qualified as what we may call real estate experts, but who testified that they knew nothing concerning the values of the lands for reservoir purposes. They considered the highest and best uses of these ten parcels, which may be referred to as the reservoir parcels although only portions thereof were suitable for the reservoir use claimed by the defendants, as their use for agricultural and subdivision purposes. The defendants also produced three engineer witnesses who testified that they knew nothing of the value of these lands other than for reservoir purposes and who considered their adaptability to such purposes as their highest and best use.
With respect to the ten parcels mainly involved here the defendants' engineer witnesses testified that there are thereon two natural reservoir sites, one capable of holding 3,500–acre feet of water and the other 8,500–acre feet; that to use these reservoir sites it was necessary to bring water in from outside sources as no considerable water was available in that water-shed; that a demand and market for such reservoir sites was to be anticipated in the reasonably near future; and that such use of these portions of the lands constituted their highest and best use. In support of the claim that such a market for lands adapted to reservoir use existed these witnesses were allowed to outline in the greatest detail four projects which they considered feasible, economically and otherwise, for the bringing in of 12,000–acre feet of water to be stored in these two proposed reservoirs and then sold for irrigation purposes, the projects including the use of the water en route at some four or five points for the purpose of developing electrical energy which was also to be sold. These projects involved bringing the water various distances ranging from twenty to thirty-five miles.
These four projects may be generally described as follows: 1. Arrowhead. It was proposed to acquire from the Arrowhead Corporation whatever water rights it has in the upper Mojave basin on the other side of the San Bernardino mountains from these lands; to adjust the claims of those now using the waters of the Mojave river; to acquire from the Arrowhead Corporation and complete certain uncompleted tunnels and works which it was asserted could be used to divert this water into Lake Arrowhead; to acquire from the Arrowhead Corporation the right to so raise the existing dam which creates Lake Arrowhead as to permit an additional storage in said lake of 25,000–acre feet of water, including the right to flood the lands surrounding the lake to the extent necessary to effect such additional storage; to bring said water from Lake Arrowhead to the San Bernardino valley by tunnels and penstocks and through four proposed power houses; and to then conduct a part of this water to these proposed reservoirs by conduits and by obtaining the permission of a private corporation to enlarge and use an existing canal owned and used by it. The cost of this project was estimated at from $4,000,000 to $4,372,500. 2. Rock creek. This was a somewhat similar project, in which it was proposed to divert sufficient water from Rock creek; to temporarily store such water in two proposed reservoirs on the northerly slope of the San Gabriel mountains; to convey the water through an open ditch and through a tunnel to be driven through the mountains to Cajon creek; and then to take this water through this creek, through various power houses, and through various conduits to the proposed reservoirs in question. This project was estimated to cost $6,125,373.3. Mojave. In this project, estimated to cost from $7,052,750 to $8,264,600, it was proposed to bring 40,000–acre feet of water from the Mojave river through the San Bernardino mountains. 28,000–acre feet was then to be sold in the San Bernardino valley and the remaining 12,000 feet taken on to the reservoir sites in question, the water being used on the way to develop electrical power at various proposed power houses. 4. Warm creek. This was a more modest project, estimated to cost from $2,400,000 to $2,509,650. It involved the annual diversion, during the rainy season, of 12,000–acre feet of water from Warm creek, a tributary of the Santa Ana river, and the taking of this water through canals belonging to a private corporation and to the Riverside Water Company to the reservoir sites in question.
These witnesses fully described these projects which they said would be considered by a prospective purchaser of the reservoir lands in question, giving estimates of the cost of acquiring the necessary water and other rights, the cost of constructing various items of the proposed projects and the annual cost of operating the projects, and assuming that money could be borrowed for the purpose of constructing and putting through the projects at a named rate of interest. They also presented figures showing the exact amounts that could be received from the sale of electrical energy at a definite and fixed price and the amounts that would have to be received from the sale of water stored in these reservoirs in order to make the whole enterprise profitable. In making these assumptions, in the case of each project, they allotted a price of $700,000 to $738,500 for the purchase of the two reservoir sites on the Holmes land, including this purchase price as a part of the cost of the proposed project. Having thus supported their claim that these two areas were available as reservoir sites, that a market or demand therefor existed and that their use for that purpose was economical and otherwise feasible, two of these engineer witnesses then testified that the market value of these two areas, comprising the proposed reservoir sites and constituting a portion of each of the ten parcels now in question, was from $715,000 to $738,500. One stated that the market value of the portion of the lands owned by the Holmes which included the two reservoir sites was $715,000, that this portion consisted of 417 acres which he valued at about $1,715 an acre, and that of this he valued a part at $3,000 an acre, a part at $5,000 an acre, and a part at $1,500 an acre. The other valued the area within the two reservoir sites, about 400 acres, at $738,500, “so far as Mr. Holmes owns the basin lands”. The third engineer witness valued all of the Holmes land at $700,000.
Some excerpts may be given to illustrate the nature of the testimony of the engineer witnesses and upon which their opinion as to the market value of portions of these parcels was based. One witness, in describing the Arrowhead project, said in part:
“The cost of pumping figured at eight mills would be $37,570, as an annual charge. The cost of installation, which takes me clear down to the Temescal Canyon, is $506,000. That is included in my four million dollar estimate. The Gage Canal would be used from its intake to practically its end as such—a distance of approximately 13 miles. There would be no expense involved in the use; there would be an exchange.
“As to the length of conduit, in addition to the tunnels, there is a 3,000 foot penstock line to a power house. A penstock is the pressure pipe that leads from the forebay of the power house down to the turbines. Then there are 8200 feet of conduit to another penstock; then 19,400 feet; then 9,000 feet of penstock; then 10,750 feet of conduit; then 21,500 feet which takes it up to the intake of the Gage Canal, and then 2300 feet of conduit from the Gage Canal up to the Holmes' reservoirs. Then there would be 2400 feet of extension for the Gage Canal, which would make a total of 85,550 feet of conduit, or roughly 161/212 miles.
“The breakdown of my elements of expense involved in connection with this project, first—the acquisition of the Arrowhead rights, $200,000; the completion of the Arrowhead project; the completion of the Deep Creek tunnel and increasing the dam, $287,500; then the power drop pipe line and the outlet tunnel of 9,000 feet is $1,258,750. That takes us to the Gage Canal. From there into Cajalco and over the summit out of Cajalco down into Temescal Wash, $506,000 additional. These items, with the exception of the acquisition of the Arrowhead rights, are taken inclusive of 25%. That makes a total up to that point of $2,052,000, which leaves $1,747,750 for the Cajalco reservoirs and dam sites and the cost of construction of the two dams there.”
With reference to the Gage Canal, to which he referred, this witness further testified: “I think an exchange could be worked out. This water will be used in Orange County, and there has been a ‘dicker’ on for several years, an interpretation of a contract there, and I think that could be straightened out in this exchange. That would be one of the factors that would have to be considered by my prospective purchaser unless he would want to enter into some payment with the Gage Canal Company. That would depend upon future negotiations, the result of which at the present time would be unknown.”
In speaking of the proposed Mojave project, he said: “The establishment of the two dams and reservoirs at the Cajalco site is but a part of another program of enterprise. It is the terminal storage on the Mojave project and is the terminal storage of only a portion of the water from the Mojave river. In other words, I propose to bring 12,000 feet of that 40,000 acre feet diversion to the Cajalco reservoir.”
He further testified:
“I am presupposing that a purchaser would buy the Holmes lands and pay $715,000.00 for them for the purpose of tying in with the Mojave project that I have spoken of. That valuation is based upon an assumption that it would be an economical project and a profitable one.” *
“I am basing my estimate of value, as I said I did with reference to the Mojave project, upon the ability of some one to purchase not only the Holmes' sites and dam sites and construct those dams and to pay the price I have mentioned, but on his ability also to procure this water and profitably conduct the enterprise. *
“My statement as to market value presupposes a particular purchaser who would pay $715,000 for the Holmes' reservoir sites and dam sites, and that he would buy those dam sites and reservoir sites as a part and parcel of a large enterprise involving a large expenditure of money; that he would buy the property and pay for the property that particular price because of his particular ability to acquire water on it at a particular price and at a particular expenditure. He might have in mind the consideration of the possible difficulties that might exist in the obtaining of the water. I think he would be convinced the difficulties are not insurmountable; some might be imaginable.”
Another witness testified: “The total cost for my Mojave project is $6,225,373. The project will produce 6,375,600 kilowatt hours per year on an average to the Edison Company plant; 4,900,000 kilowatt hours at the Fontana; and at the Narrows, 13,925,400 kilowatt hours; selling at five mills would produce $126,005. I figured an annual depreciation of $62,254, or 1% straight line depreciation. I figured the yearly operation to be $70,000. I figured 41/212% interest on a municipal organization at the present market; that is an organization which has a taxing power. I figured my customer for the Holmes' land might be a private corporation or a public corporation. If it were a sound, private corporation they obtain their money at 41/212%, so it would make no real difference. The interest item was $280,142. The depreciation fund is invested in either retiring—if they have any securities out bearing interest, and of course, to amortize the debt and also figure the depreciation, would be figuring the same thing twice, so that cannot be repeated in this calculation. The $70,000 covers operation, maintenance, salaries of officers, current repairs, and there are no other items of expense. * My gross figure from the sale of power is $412,396, and subtracting the cost would give a net of $286,391, which is the amount of money I would have to get from the sale of water without giving the project any profit per annum. This divided by 12,000 acre feet of water would mean that the net cost of water delivered without distribution facilities to any of the users would be about $23.80 per acre foot for firm water.”
And further: “In my figures to which I have testified relating to the Mojave project, we allowed $300,000 for the acquisition of water rights in the valley in addition to the $250,000.00 to the Lake Arrowhead Company, and we then added a million dollars for profit on the two reservoir sites and dam sites, of 8500 and 3650 acre feet capacity, respectively.”
There was evidence that permits would have to be obtained from federal and state authorities before any of the four proposed projects could be undertaken, and it was frankly admitted that there were many existing private rights and interests which would have to be acquired or settled with in order to put through any of the proposed projects. One witness testified: “The cost of acquiring water rights (Mojave Project) is included in the figures I have already given you. It would cost $300,000.00, which is not exactly for water rights. I believe it would be desirable to expend about that sum to prevent any unfounded objections, because the water is really surplus water, but many people object even to taking that. It is for that sort of thing either for litigation or for paying for water rights.”
A report introduced in evidence concerning water development in the Mojave Basin, contained the following: “The physical situation encountered in creating the greatest possible use would be complicated even if no development now existed, but when the necessities of existing city and irrigation developments are considered and also the at present unused legal rights to water involved, the situation is extremely complex.”
And another witness testified: “I think it would be prudent for my prospective buyer to iron out all of these difficulties before he buys the Holmes' land. He would want to satisfy himself as to the availability of that water before he pays $700,000 for the reservoir site on the property.”
It may be here noted that these witnesses not only assumed, in connection with their proposed projects, that the necessary water rights and reservoir sites therein contemplated were procurable, but they assumed that these could be obtained at figures which are quite small in comparison with the amounts allotted to similar purposes in putting into use the two reservoir sites on Mr. Holmes' land. For instance, they assume they could acquire both the lands needed for reservoir purposes and the necessary water rights in their proposed projects at about $125 an acre while they allowed more than $1,700 an acre for the Holmes land without any water rights.
The first of these engineer witnesses testified in general as to the adaptability of certain portions of these lands for reservoir purposes, to the fact that water was available for storage therein, that a market and demand existed, and then gave his opinion as to the market value of the areas especially suited for reservoir purposes, being portions of the ten parcels now in question. In the case of this witness the testimony along the lines above referred to, as to the feasibility of certain of these proposed projects for the purpose of bringing in water to store in the proposed reservoirs, with the cost thereof and the income therefrom, was brought out upon cross examination by the plaintiff. In the case of the other two witnesses these matters were gone into upon their direct examination by the defendants. In each instance, objections were made to the expression of an opinion as to the value of these lands for these purposes and of the market value of the lands, which were overruled. Motions to strike were also made upon the ground, among others, that the opinions of value were based upon inadmissible evidence of matters which were too remote and speculative to be considered by the jury or to justify the expression of an opinion of value which was, in fact, based thereon. These motions to strike were denied.
Generally speaking, the ten parcels which included the two claimed reservoir sites contained some 862 acres, about 400 acres of which were said to be especially suited for reservoir purposes and which were included in the four projects proposed by the defendants. The total value given to these ten parcels by the defendants' real estate experts ranged from $211,000 to about $374,000. The defendants' engineer witnesses valued these ten parcels at more than $700,000. The jury allowed for them $507,305, exclusive of an allowance for interest. The court entered judgments in accordance with the jury's award and the plaintiff has appealed.
A number of points raised by the appellant relate to errors in connection with the admission of evidence, and the submission of the same to the jury, in connection with the claimed existence and feasibility of use of two smaller reservoir sites upon a portion of the property involved, and may be treated together. In this connection it is contended that the respondents were erroneously permitted to present for the consideration of the jury a valuation of their properties contingent and based upon the realization of anyone of four highly speculative, remote, conjectural and hypothetical projects for the development and sale of water and electrical energy; that these proposed projects were too remote and speculative because, among other things, they were presented to the jury as prospective sources of profit which would result from the sale of electrical energy at a fixed rate and the sale of water at competitive rates, and because each of these projects involved the acquisition of lands, water rights, rights of way, easements and franchises and the right to use other privately and publicly owned facilities and each was, moreover, dependent upon the discretionary action of state and federal authorities; that each of the respondents' valuation witnesses were not qualified to express an opinion on the market value of the lands because each admitted that he knew nothing about their value except for one purpose; that testimony was erroneously admitted expressing in terms of money the values of the parcels for particular uses; that testimony was erroneously admitted of the aggregate value of the combined portions of several parcels which were claimed to be adapted for reservoir use, and other testimony of the aggregate value of the other portions of these parcels for which no reservoir use was claimed; and that the court erred in overruling the objections to the admission of evidence to the effect that under the four proposed projects water could be furnished to consumers at a rate which the consumers could afford to pay and as low as any water which was available to such consumers, to evidence comparing the cost of developing water storage at Cajalco to the cost of such storage in 225 other reservoirs in southern California, and to evidence of specific plans and figures in connection with the four proposed projects in a manner to visualize them for the jury as completed and working projects.
The respondents contend that the market values of these lands, as testified to by their engineer witnesses, were not contingent or based upon their testimony relating to these four proposed projects; that the opinions as to market values expressed by these witnesses were not based upon the realization of any remote or speculative project but were opinions on market values given by qualified witnesses, taking into consideration the highest and best use for which the particular land was available, namely, its use for a reservoir site; that the witnesses merely considered this use as one that an informed buyer would reasonably consider in arriving at a price he would be willing to pay; and that these witnesses merely gave the evidence to which we have referred to show that a demand for such reservoir sites existed, that these lands were economically and practically adapted to such a use, and that there was a reasonable probability that such projects were feasible and that the lands could reasonably be expected to be required for that purpose within a reasonable time. It is argued that the evidence of the cost of such proposed projects and of the probable cost to consumers of water and electrical energy were admissible as showing the feasibility of using these lands for other reservoir purposes and the probability of an early demand for that purpose. It is further argued that, in any event, the matter of remoteness and speculation in connection with these proposed projects affects only the weight of the evidence and not its admissibility.
In support of their contention that the evidence in question was admissible the respondents particularly rely upon McCandless v. United States, 9 Cir., 74 F.2d 596; Id., 298 U.S. 342, 56 S.Ct. 764, 80 L.Ed. 1205 and City of Stockton v. Ellingwood, 96 Cal.App. 708, 275 P. 228. The McCandless case involved land situated in the Territory of Hawaii. There was evidence that a portion of the land which the government sought to condemn was suitable for the raising of sugar cane if water could be made available. The landowner offered to prove that he owned other land some eight or ten miles away which produced ample water; that it was practical and economically feasible to transport such water to the land in question; that the bringing in of such water could be anticipated with reasonable certainty; and that the cost thereof would be less than the cost of furnishing water to similar lands. The court rejected this evidence as too remote and speculative and instructed the jury it must disregard any possibility of bringing outside water to the land in question, except as such water might be brought from an adjoining tract owned by the same owner. Upon appeal the court pointed out the usual rule that the most profitable use to which land can probably be put in the reasonably near future may be shown and considered by the jury as bearing upon its market value, and after saying that any incompleteness or insufficiency in the offer of proof with respect to the cost of the improvement and the increased value of the land, as suggested by the government, could probably be remedied by additional evidence if necessary, held that the offered evidence related to the value of the land when used for a purpose to which it could probably be put and that its exclusion was prejudicial error. In that case the owner of the land sought to be condemned owned the water supply and sought to prove that it was feasible to bring it to the land in question for use thereon. The court held that such evidence was not too speculative or remote and further intimated that the cost of making the improvement might be shown. Aside from the question as to the weight that should be accorded to this decision in this state, it seems apparent that the instant case involves a degree of remoteness and speculation much greater than the one there being considered. Apart from any other consideration, there is a wide difference between permitting evidence of the cost of reasonably possible improvements to land, through such things as providing for the irrigation or drainage thereof, and permitting evidence of the cost of large and hypothetical projects for purposes not directly connected with the land, which may incidentally involve using the land as a part of the greater scheme. In the instant case, the proposed projects which were so clearly pictured to the jury involved many remote and conjectural contingencies, including the existence of a water supply, the right to remove it to another water shed, the acquisition of reservoir sites and sites for power houses and rights of way for canals and transmission lines, some but not all of which were on public domain, permits from state and federal authorities, the right to use public highways and the facilities of other companies, the existence of a market for power at a fixed price and a market for water at competitive prices, the procuring of financial resources and the investment of several millions of dollars, the element of possible profits therefrom, and the necessity of finding a purchaser willing to undertake a particular project of that magnitude.
In City of Stockton v. Ellingwood, supra, the trial court had refused to strike out testimony as to values which were claimed to be based upon improper considerations by which the witnesses had considered the lands in connection with their use as a part of a completed project. The evidence showed that in considering the availability of lands for reservoir purposes some of the witnesses had testified that it was possible by constructing works to use these lands as reservoir sites, storing water for use in irrigation, and that they believed projects could be developed which would include the use of these lands for reservoir purposes. The court pointed out that even though, as the appellant claimed, “the experts were inclined to envisage a completed project, in testifying as to the adaptability of the properties concerned for reservoir purposes,” it was also true that “the record contains only general testimony as to the demand for reservoir sites, and no specific testimony indicating a present demand for the particular reservoir site in question”, and that “no witness attempted in this case to figure out the profits of the enterprise”. [[[[96 Cal.App. 708, 275 P. 235, 242, 243.] The court there held that while portions of the testimony of certain witnesses might well have been stricken, no prejudicial error had resulted from the refusal to strike out the opinions of value given by the witnesses for the reason that the action was tried by the court without a jury and, in effect, because it might be assumed that the court had disregarded such small parts of the evidence as were improper. See discussion of that case in Temescal Water Co. v. Marvin, 121 Cal.App. 512, 9 P.2d 335. That case cannot be considered as controlling in such a case as the one now before us, where a mass of specific and definite testimony as to the use of the lands in question as a part of completed projects was submitted to the consideration of the jury, including not only detailed estimates of costs and running expenses but the profits which could be expected, based upon fixed rates of interest and prices for electrical energy and upon the sale of water, only about a third of which was to be stored upon the lands in question.
While holding that the adaptability of land to certain uses may be shown, the Ellingwood case in general effect opposes rather than supports the proposition that specific supposititious projects involving the use of the land may be outlined to the jury with detailed estimates of the cost thereof and of the profits that may be made therefrom. The trend of authority in this state is also to the contrary.
In San Diego Land, etc., Co. v. Neale, 88 Cal. 50, 25 P. 977, 981, 11 L.R.A. 604, it is said:
“The cost of works necessary for the utilization of the land for reservoir purposes was an element in the calculation as conjectural and speculative as would be the cost of a railroad, and rolling stock necessary for the operation thereof, in fixing the value of land condemned for railroad purposes. *
“The question was not what the property was worth to a person intending to acquire it and the dam-site and the remainder of the reservoir by purchase or condemnation for the purpose of supplying water over the territory tributary to the system, but what was the market value of the property itself; in other words, what the defendants could have obtained for their land if it had been offered for sale in the market, a reasonable time being given within which to make the sale. The plaintiff must compete in the market with bona fide purchasers generally, but its necessities cannot be taken advantage of. * The condition of the property, the uses to which it may be put, having regard to the existing advantages for making a practical use of the property, and such advantages as may be reasonably expected in the immediate future, are all matters for consideration in estimating the value of the lands (Boom Company v. Patterson [98 U.S. 403, 25 L.Ed. 206], supra); but to attempt to ascertain the value by estimating the cost of works necessary for its use for a particular purpose the cost of operation, prospective sales, and estimated profits, increased demands through growth of population, etc., *.”
In Santa Ana v. Harlin, 99 Cal. 538, 34 P. 224, 227, after saying that a free investigation should be permitted as to the adaptability of the land to the purposes to which it is naturally adapted, the court said: “Such proof should be limited to showing the present condition of the property, and the uses to which it is adapted, and may not be extended to speculative inquiries as to possible future uses under altered circumstances, which may or may not arise.” In that case the court further said: “the present market value of the land is the measure of damages, and not its value in use to the owner or to the parties seeking to condemn it”. In Sacramento, etc., R.R. Co. v. Heilbron, 156 Cal. 408, 104 P. 979, 981, we find: “It is seen, therefore, that this court by its latest utterances has definitively aligned itself with the great majority of the courts in holding that damages must be measured by the market value of the land at the time it is taken, that the test is not the value for a special purpose, but the fair market value of the land in view of all the purposes to which it is naturally adapted; that, therefore, while evidence that it is ‘valuable’ for this or that or another purpose may always be given and should be freely received, the value in terms of money, the price, which one or another witness may think the land would bring for this or that or the other specific purpose is not admissible as an element in determining that market value, for such evidence opens wide the door to unlimited vagaries and speculations concerning problematical prices which might under possible contingencies be paid for the land, and distracts the mind of the jury from the single question—that of market value—the highest sum which the property is worth to persons generally, purchasing in the open market in consideration of the land's adaptability for any proven use.”
In Canal & Irr. Co. v. Stevinson, 63 Cal.App. 767, 220 P. 427, 428, a judgment in favor of the landowner was reversed on the ground that the trial court had erroneously permitted “the defendant to present a proposed elaborate scheme for the reclamation and irrigation of the land, including the details and estimated cost thereof and the cost of the annual maintenance of the same”. The court there said: “We conclude that the introduction of testimony of a proposed scheme of improvement, such as was shown in this case, is not proper for the purpose of showing the adaptability of the land *.” And, also, “In view of the character of the testimony thus admitted, its importance and its probable effect upon the minds of the jurors, we feel that substantial injury resulted to plaintiff and that a new trial of the action should be had.”
In City of Stockton v. Vote, 76 Cal.App. 369, 244 P. 609, 621, a judgment in favor of the landowner was reversed on similar grounds, the court having admitted rather detailed evidence of suggested projects involving the use of the land. The court there said: “From these reports and the testimony of the experts, the entire project was before the jury as clearly as could be in the form of a completed enterprise. The dam was there before them, 200 feet in height, canals on either side of the river came into being, conducting water down to a point near Jenny Lind, where, through penstocks, the water was being dropped from 200 to 250 feet upon waiting water wheels, which, in turn, gave motion to great dynamos, producing a current carrying light and heat to thriving cities in the valley while the impounded waters, having discharged this duty, were carried forward through diverting ditches to some 34,000 acres of lands lying below the foothills at an approximate cost of $42 per acre, a limited portion of the water being taken through conduits to the cities needing impounded water for municipal purposes, the cost of the enterprise being gradually written off by the revenue derived from the sale of the impounded waters for power and irrigation purposes. It is true, that this picture existed only on paper, but the reports referred to enabled the jury to visualize the speculative project as an actuality and measure the market value of the flowage easement sought over the defendant's lands according to the standard thus presented.”
And also: “A reference to the testimony which we have heretofore set forth and the predicate contained in the questions asked, as well as the answers of the witnesses, show that their estimated market value of the land was really an estimate of what they thought the land was worth for a specific purpose.”
Somewhat similar rules of law were applied in the case of City of Oakland v. Parker, 70 Cal.App. 295, 233 P. 68. In East Bay Mun. Utility Dist. v. Kieffer, 99 Cal.App. 240, 278 P. 476,P. 480, 279 P. 178, the court said: “The defendant was permitted to show the volume of water flowing in the Mokelumne river, the capacity of the Lancha Plana reservoir, and the capacity of a reservoir which could be constructed in the Arroyo Seco basin, the amount of electric power which could be developed, the irrigable lands in need of water, the cities and towns, including those in the plaintiff district, which could be supplied with water and power from such a combined reservoir system and the amount now consumed by them, the available use of the system as a means of flood control and of protecting the delta lands of the Sacramento and San Joaquin rivers against salt water. The defendant was not permitted to show the present selling prices of water and power, the increase in the market value of the irrigable lands mentioned which would result from a ‘dependable water supply,’ the increase in value of delta lands which would be caused by holding back the salt water, and other evidence tending to show the returns to be received from the sale of water and electric power. The defendant sought to make such proof by his own witnesses and by cross-examining plaintiff's witnesses. * But the relation between the value of land in proposed reservoir and the current price of water and electric energy is too remote and conjectural to be of any reliable assistance to the jury in determining the market value of the land taken. Although the evidence rejected consisted of proof of past and present facts, the inference sought to be drawn therefrom is highly speculative. Speculative and conjectural calculations of prospective receipts and expenditures and consequent profits to be derived from a prospective enterprise not only throw no light on the issue of the market value of the land to be used in the enterprise, but operate to confuse and mislead the minds of the jurors. * The admission of evidence which leads to conjectural speculations is equally harmful, whether on cross-examination or direct.”
In East Bay Mun. Util. Dist. v. Lodi, 120 Cal.App. 740, 8 P.2d 532, 540, it is said: “The testimony of the appellants' witnesses as to damages estimated the cost of appellants' project and then the sale of energy developed by the project. A quotation from the answer of one of the witnesses will suffice as an illustration of the basis adopted by all of them, to wit: ‘I capitalized the values that were there. I arrived at this value by assuming that the plant would cost $363,300.00, and that the sale output of energy would be at the rate of 41/212 mills per kilowatt, and then capitalized this net profit at 8 per cent, and the sum which invested at 8 per cent would yield the amount of net profit, fixed the market value.’ We have paraphrased the witnesses' answer slightly in order to shorten the same. That this basis of fixing the damages is incorrect is a settled law of this state.”
The test in such a case as this is the market value of the land and not its value in use for a special purpose. The issue here was what the land was worth at the time in question and not what it would be worth as part of a future development after millions of dollars had been spent in making it available for such particular use.
Nearly all of the rules of law set forth in the cases above cited were violated in submitting the evidence in this case to the consideration of the jury. Elaborate prospective schemes for large developments and expensive works, with detailed plans of construction and estimates of cost, including the cost of operation of the completed projects and the rate of interest to be paid on money borrowed, with the amounts of water and power expected to be developed, with the prices to be received therefor and the profits to be realized therefrom, were outlined at great length. The uncertainties and difficulties involved in obtaining water rights, rights of way, and the permission of governmental agencies were minimized and brushed aside. The value of property in use for a particular purpose to the owner or to his prospective purchaser was shown in dollars and cents. A complete picture of the proposed projects was given, by which they were visualized before the jury as completed projects operating at fixed costs and selling water and power at prices which were not only established, but sufficient to return a large profit on the entire investment. One witness even figured for the jury a profit of a million dollars on the enterprise after allowing a stated price for this land, which amount he later gave as its market value.
It plainly appears that the market values thus testified to were what these witnesses thought a buyer coud pay for the property and still make a profit. One witness specifically stated that he was presupposing that a purchaser would pay $715,000 for the Holmes land for the purpose of tying it in with one or more of the proposed projects and that his figure of $715,000, which he gave as the market value, was based upon the ability of someone to purchase a part of the Holmes land at that price and after constructing the works he suggested to “profitably conduct the enterprise.”
The testimony of these witnesses clearly shows, as said in City of Stockton v. Vote, supra, “that their estimated market value of the land was really an estimate of what they thought the land was worth for a specific purpose.” As pointed out in the authorities above cited, the settled law of this state will not permit a witness to arrive at the value of land by taking the costs of suggested improvements and capitalizing these on the basis of a certain return therefrom. While the witnesses here did not use the word “capitalize”, it is rather clear that they did just that.
The evidence of the value of this land for a specific use in connection with prospective enterprises, which was submitted to the jury, involved a consideration of many elements which were exceedingly remote and highly speculative and conjectural. As was said in East Bay Mun. Util. Dist. v. Kieffer, supra, such calculations “not only throw no light on the issue of the market value of the land to be used in the enterprise, but operate to confuse and mislead the minds of the jurors.”
The fact that it took nearly a year to try the one issue as to the market value of this land, the main controversy involving only about 400 acres, is, in itself, suggestive of what must have occurred and what actually took place. The greater part of the time appears to have been devoted to the introduction of testimony along the lines above suggested. In addition to that, voluminous reports and a great deal of testimony were introduced relating to water conditions over a large part of southern California. One of respondents' engineer witnesses even gave the annual rainfall over a period of many years at a point near Los Gatos, in the Santa Cruz mountains. While, admittedly, this was done in error the explanation of the witness as to why he made the error and what he intended thereby constitutes one of the highlights in legal literature. The fact that certain witnesses, having knowledge of the value of the land for only one purpose, gave a detailed valuation to an area made up of portions of many parcels which were being submitted to the jury as separate parcels while other witnesses, having knowledge of values of the land for other purposes and uses only, gave their estimates of the value of the entire parcels would have a tendency to add to the confusion which must have existed in the minds of the jurors, but need not be further considered here.
In our opinion, the record discloses a situation where the market values testified to by these witnesses rested upon elements so remote and speculative that it should not have been submitted for the consideration of the jury. Both the opinions of value thus given and the testimony along the lines above mentioned, upon which such values were based, should have been stricken and not allowed to be considered by the jury.
Nor do we think, as the respondents argue, that the elements of remoteness and speculation, to which we have referred, affect only the weight of the evidence and not its admissibility. In San Diego Land, etc., Co. v. Neale, supra, the court said: “But we think that where a witness bases his opinion entirely upon incompetent and inadmissible matters, or shows that such matters are the chief elements in the calculations which lead him to such conclusions, it should be rejected altogether.” In City of Stockton v. Ellingwood, supra, the court says that if “it appears to the court that the witnesses' testimony is based upon improper considerations, or upon what is usually termed as speculative only, it should be stricken from the record or withdrawn from the consideration of the court or the jury”. In Spring Valley W.W. v. Drinkhouse, 92 Cal. 528, 28 P. 681, 682, after pointing out that it is permissible to show the uses for which lands are adapted, the court said: “Nor would this rule, as supposed by respondent, justify the admission of speculative opinions based upon the necessities of the plaintiff, or what the plaintiff could afford to give for the land rather than to do without it. If it should appear, during the course of the examination, that a witness had given an opinion as to value formed upon any such considerations, it would be the duty of the court to strike such opinion evidence out, as resting upon an illegal and improper basis.” We think the same rule applies if the opinion as to value is based upon the value of the property for a particular use to the owner or for a particular purpose to a purchaser from the owner.
The appellant attacks certain instructions as erroneous and as emphasizing portions of the evidence which were improperly received and submitted to the jury. Only a part of these assignments will be here mentioned, these being referred to by the numbers used in the briefs. In number 2E, after referring to the several projects proposed by witnesses for the defendants, involving the use of a portion of these lands, the court told the jury that if “you find that the evidence which tends to support such projects is credible and is of more convincing force as to the economy, feasibility and practicability of such projects than is the evidence opposed to it and from which it results that the greater probability is in favor of the economy, feasibility and practicability of the project, you should so find”. The only issue which should have been submitted to the jury was the market value of the land in question. This instruction should not have been given for the reasons already indicated and because it tended to center the attention of the jury upon a collateral issue. Instruction number 20, which related to certain elements going to make up market value, contained the following: “The court further instructs the jury that market value is essentially based on assumption, not on fact.” While, technically, it may be true that the element of assumption plays a part in arriving at market values in cases of this kind, such assumption must be based upon facts and this portion of the instruction was both inadequate and misleading. Ordinarily, in cases of this nature, a jury may be trusted to sufficiently indulge in assumptions, without its being specifically invited to excuse the absence of facts. In instruction number 27, the jury was told that the cost of bringing in water for storage in reservoirs upon this land “is an element to be considered by you in determining the value of the land here involved”. This is subject to the same objection as instruction number 2E, both of which invited the jury to substitute its judgment for that of a potential purchaser in determining whether the lands possessed such reservoir adaptability as to affect their market value. Instruction number 28 told the jury that, in the event they found from the evidence that it would be necessary to bring in water from a distance in order to use the reservoirs on this land and that in so doing it would be necessary to cross other lands, they might, in determining the feasibility of the project, assume that rights of way could be obtained from such private lands by condemnation proceedings. This not only tended to minimize the difficulties in connection with a remote and speculative matter but withdrew a question of fact from the jury and imposed an undue burden upon the appellant. In instruction number 29, the jury was told that “to the extent that probable demand by prospective purchasers or condemnors affect market value it is to be taken into account by you in determining the market value of the property here involved”. Market value is to be measured by conditions under which the seller is not required to sell and the buyer is not required to buy, and it was error to instruct the jury to take into consideration the effect of possible future condemnation proceedings upon the market value of the property.
The appellant assigns error in a number of instances in connection with matters placed before the jury during the matters placed before the jury during the arguments by counsel for the respondents, as being both erroneous and without support in the evidence. We will consider only a part of these matters, and these briefly. Complaint is made of certain charts and tabulations which were shown to the jury during the argument, smaller copies of some of them being handed to the jurors. Although these charts were not admitted in evidence we can see no objection to the use of such aids for the purpose of summarizing and collecting portions of the evidence and collecting portions of the evidence which counsel desired to discuss, in a case in which so much time had elapsed and in which the evidence was so voluminous, provided such charts were so prepared as to fairly and accurately depict and state the part of the evidence purported to be covered thereby. In a number of instances here, however, the charts so used misstated the evidence and stated matters not in evidence. Through these charts, and also by one of respondents' counsel in his argument, the jury was told that the appellant, in building the dams for its Cajalco reservoir, used 1,333,000 cubic yards of material taken from a part of the Holmes lands, that the appellant had thereby saved 50 cents a cubic yard in hauling charges and had also saved 14 cents a ton mile for hauling cement, and that “just taking the saving and the cost of the building of the dam due to the proximity of this quantity of material on the Holmes lands, it results in a saving of $665,000”, and that such saving “may well dictate the market value of that property, $665,000 for only 100 acres of land—the material contained in it”. The question at issue was the market value of the land and the cost to the appellant of building a dam in connection with the use of the land which was being condemned had no connection with that issue. There was, moreover, no evidence in the record which supported such an argument. The respondents argue that any error in this was harmless because the highest value found by the jury for any of the land was $1,000 per acre, and that the jury valued the particular land from which these materials were taken at less than the amount the appellant saved in hauling.
In another instance the jury was told that 700–acre feet of water from the Holmes Basin, taken at $450 an acre foot, was worth $315,000. There was no evidence that water was worth that much. In fact, one of respondents' engineer witnesses testified that water could be delivered at that point by one of his proposed projects for about $23.80 per acre foot. What was here attempted was to utilize a report which was put in evidence in which the author capitalized the value of both land and water in another connection and under entirely different circumstances and for another purpose. As used here, the statement was both improper and misleading. Again, the jury was told by one counsel for the respondents that the cost to the respondents of trying this case was more than $88,000. This was, of course, highly improper and although the court, in finally giving its instructions, included one to the effect that no allowance should be made for the cost of this litigation to the respondents it may well be doubted whether the prejudicial effect of giving such information to the jury could be entirely removed. One counsel for the respondents further told the jury in his argument that: “The cost of using our reservoir lands at our prices is much less than any other substitute plan, and is less than one-half of the cost of the water which the Metropolitan is bringing here.” The impropriety of such argument is too obvious to require comment.
Respondents' counsel repeatedly stated to the jury that 31/212 years had elapsed between the time the appellant decided to build its reservoir at the Cajalco location and the time these suits were filed. Not only did this fact, if it was a fact, have nothing to do with the issue submitted to the jury but it was further used as a basis for an argument that the appellant had thereby saved more than a million dollars in interest. One counsel said in his argument: “Mr. Morgan also forgot to remind you that during this period of benevolent waiting to bring this suit the District saved about $1,250,000 on interest alone. The District, by waiting three and a half years, ladies and gentlemen, did not have to put out the money for the construction of that project which their own estimates show is over $9,000,000. They did not have to dispose of the bonds which carry, I think, four or five per cent interest. They did not have to pay that interest, and they saved it.”
Another counsel told the jury the filing of the action was purposely delayed “because it would save them over a million dollars in interest.” It was further argued to the jury that the appellant “is a self-liquidating corporation”, and that it is common knowledge that appellant's project is being “financed by money that is being furnished by the U.S. Government.” It was argued to the jury that the law under which the appellant was condemning this land is iniquitous and unjust. One counsel told the jury that Mr. Holmes was compelled to give up his land without his consent “because they had a right to take it at a price far less that its market value.” Another counsel said in his argument: “* let me say now that this corporation plaintiff in this case has the support, if Your Honor please, of what I call the most iniquitous law, the most unjust law that has been put in our statute books for years and years. What do I mean? Am I using strong language? Let me tell you: let me start, first, and briefly give you a history of this condemnation law. Long back in the days, when we didn't have these $200,000,000 corporations the law was such that your land could not be taken away from you until they paid you just compensation for that land. That is true. I appeal to the constitution before it was amended, as it has been in 1914 and 1928. You can call for that constitution and it will bear me out in that remark. And that is true in other states of this Union where the land cannot be taken away from the landowners until the compensation is paid.” The objectionable nature of the matters above referred to is so apparent as to require no comment, and in an action tried before a jury it can hardly be held that their cumulative effect was other than prejudicial.
In other parts of their arguments counsel for the respondents were guilty of misconduct in what amounts to appeals to prejudice on the part of the jury. The more flagrant instances of this may be treated under two heads. In the first place, it was wrongfully charged that the appellant had accused Mr. Holmes of fraud in connection with the sale of portions of his land some years before this action was filed. This charge was neither supported by the evidence nor material to any issue in the case. In spite of this, the charge was made again and again during the presentation of the evidence and in the argument, and was so repeated and enlarged upon as to be made to assume the aspect of a major issue in this case. The numerous references to this matter justify the inference that this was intentionally done. Having thus built up the idea that the appellant was in this case charging Mr. Holmes with fraud, the respondents repeatedly urged the jury to vindicate Mr. Holmes by means of its verdict. A few excerpts from this portion of the argument will suffice:
“I therefore say to you that the mere mention of it, as it is in the minds of every fair and just and thoughtful man and woman, is enough not only to refute the charge but to damn the fellow who makes the charge. And I say to you that when this great big $220,000,000 corporation finds it necessary to belittle the properties at Cajalco and to beat down the estimation of the market value of those properties by undertaking to assassinate, not by evidence, but by mental suggestions to poison your minds, the character of the man who owns that property, * I say that in the hearts of just men and women in Southern California, and wherever this action of that District in time to come may become known, that District will never live down the reputation that having tried in this case to assassinate the character of the man who owned the property in order that they might receive the property he was compelled to give without his consent—he didn't want to sell it—because they had a right to take it at a price far less than its market value, and far less, less than one-tenth of the price that actually has been received over the years for the sale of the land that lay in the same identical bowl known as Cajalco basin. * She has been here when some of the most brutal attacks, by innuendo and insinuations, against her husband have been made.
“* There was only once when she broke, and that was when the indignities, the insinuations, the innuendoes which she had suffered about her husband's honesty were mentioned by Mr. Clark during his argument. Then when I heard the sobbing, the outburst of that anguished wife behind me, I turned around. The tears were rolling down her cheeks, but that faith which I hope to find, that faith which I do not now understand, came to her rescue, buoyed her up, lifted her, and she smiled, and she said, ‘Go on. Go on.’ *
“We say to you * that no verdict shall be returned by you from which the Metropolitan Water District or any of its legions of employees or attaches or anybody else will ever be able to lift a hand during the few short years of the lifetime of Lawrence Holmes or in the lifetime of any of their young children and say, from that verdict it is a necessary inference that Lawrence Holmes, the father of the children, was a liar and a thief when he sold these lands to these people who bought carob plantations in the great community of Cajalco.”
The court emphasized the matter of fraud by giving the following instruction: “You are instructed that when a person is charged with fraud, the law presumes that he is innocent of the charge, and the burden of proving the fraud rests upon him who charges the fraud. This presumption is evidence in the case, and it approximates in strength the presumption that a person is innocent of crime.”
Many times during their arguments counsel for respondents pictured the appellant to the jury as a great corporation which was using its wealth and power to impose upon the respondents. One counsel, after saying that the delay of three and one-half years in bringing the suit could not be justified “by anything known in the common estimation of mankind”, said: “But I say the evidence in this record shows that one of the most atrocious things, in so far as the fixing of the value of these properties is concerned by you—you good men and women—that delay of three and one-half years was one of the most atrocious and insufferable things of which a condemnor could be guilty, and that does not exclude the Metropolitan Water District.”
After commenting upon the depression and the dire needs of the people living in the Cajalco district he then said it was a necessary inference that the appellant had thus delayed filing its action “in order that they could beat those people down to the point where they could not hang on any longer and would sell off for just what the District would choose to give them. Then that being done to come into this court and for those who had the resources to hang on for a little while longer, the District then to file the suit and then say, look at what we bought.”
Again and again counsel referred to the influence and power and terror that could be exerted by such a tremendous corporation as the appellant; to the unlimited resources, man-power and money of the appellant; that “when this great big $200,000,000 corporation finds it necessary to belittle the properties of the Cajalco”; that the jury was not concerned with the wishes of any such corporation or of any “prince or potentate”; that “this power is so tremendous, what little can we do against this power”; that during the three and one-half year period every one of these owners knew he would have to give up his land and “surrender it to a superior force”; that “You may have looked forward to the time when you would occupy your little home surrounded with evergreen trees, but you are in the way of this corporation. They file the action and they say ‘we need your place and we are going to take it’ ”; and that for three and one-half years these defendants had lived with a “threat hanging over their heads like the sword of Damocles”. One counsel said: “We know the unequal contest here” and then after four references to the $220,000,000 corporation, said: “On the one hand you have them, the corporation, the plaintiff in this case, and on the other hand you have a disorganized, weak defendant, fighting for their homes.” Other counsel said:
“You know, there is something funny about being employed by a great big corporation. It is a peculiar psychological complex that has baffled the psychologists ever since the first big corporation was formed. I don't need to remind you other than briefly of the early days of the Standard Oil Company, and of all the atrocious things that were charged (most of which were proved) against it. It was one of the first of what have finally come to be known as the predatory corporations of America, whose abuses of capitalistic privileges and power mark one of the darkest chapters in the economic and financial history of America. And from that time on down we have our steel company, and all the others. And you remember—What was it?—a billion dollar fine or something? But there is something very peculiar about the fact of being employed by a great big corporation. *
“Bear this in mind, friends, that as we listen to the end of the calling of that roll, the only sound we hear is the patter of those disappearing feet of the District; but bear in mind, when your verdict shall have been returned, finally shall have been written to the chapters in this case, you will find those footfalls coming back and in increasing crescendo the sound of those pattering steps falling on your ear, because, when it is all said and done, the King, the King, the Metropolitan Water District, that believes the King can do no wrong, will be found sitting on his throne in the empire that was Cajalco, the possessor and the user of all that we have.”
The respondents contend that the improper elements thus injected into the case and any misconduct during the argument were those normally to be expected in the heat of such a contest, that many of them were the result of sufficient provocation, and that no prejudice resulted since the amounts found by the jury were less than the highest amounts at which the respondents' witnesses valued the respective parcels. It is often difficult to tell whether verdicts have been affected by such improper matters. It is significant here, however, where a direct appeal was made to the jury to vindicate Mr. Holmes upon a supposed charge of fraud, that the amounts allotted to the parcels owned or controlled by him are substantially larger than those allowed others for similar lands. As to the awards in general, while the jury did not follow the values given by the respondents' engineer witnesses it allowed amounts almost double the values given by the respondents' nonengineer witnesses, and greatly in excess of the values given by the appellant's witnesses. How the jury arrived at the exact amounts fixed by the verdicts cannot be told but these repeated appeals to the emotions and prejudices of the jury are filled with such potential elements of danger that it is not possible to say, under the circumstances of this case, that the verdict was not affected thereby.
The respondents argue that the appellant is not in a position to complain of the misconduct of counsel during argument, in the instances above referred to and many others, since the appellant did not, as each one occurred, request the court to instruct the jury to disregard the same. No such request was made, although objections were made in many instances. However, very early in the argument when an exception was taken to a statement of counsel attacking the appellant for running away from a certain matter, counsel for respondents stated: “May I say this, that I am perfectly willing, after the arguments are concluded, so far as I am concerned, they may note in the printed record any exception to it they desire.” Counsel then proceeded and many of the matters in question are found in his later argument.
While the rule referred to is often applied, this usually occurs in cases where the misconduct is not aggravated either in nature or extent. That rule should not apply here where, in effect, the appellant was invited to refrain from interrupting the argument and to make its exceptions on appeal, and where the instances of improper argument were so numerous and so serious that such instructions, if requested and given, could not reasonably be expected to have cured the error. Moreover, under the circumstances here appearing, a duty rested upon the trial court which should have been exercised of its own motion. In our opinion, the amount and nature of the improper arguments which were here permitted to be addressed to the jury were such as to be potently prejudicial, and were, in themselves, sufficient to require a reversal. While the respondents are entitled to the full market value of their lands, the appellant is entitled to a fair trial on that issue.
The only other point raised, which applies to all of the twenty parcels involved on this appeal, is that the jury should not have been instructed to add interest at seven per cent, from the date of taking possession of the lands to the date of entry of judgment, on the amounts found as the value of the respective parcels. For the reasons given in Metropolitan Water District of Southern California v. E. Bennett Adams, Cal.App., 99 P.2d 675, the opinion in which is this day filed, the allowance of such interest was error.
The judgments appealed from are reversed and the consolidated actions are remanded for a new trial.
BARNARD, Presiding Justice.
We concur: GRIFFIN, J.; THOMSON, Justice pro tem.