Rasmuson v. United States , 807 F.3d 1343 ( 2015 )

United States Court of Appeals
for the Federal Circuit
______________________
MARK R. RASMUSON, BRENDA S. RASMUSON,
IVA MILLER, MARTIN MEIER, DAVID A. JUST,
CAROLYN J. JUST, DELTON DIXON, PLEASANT
VALLEY GOLF CLUB, INC., ROBERT AASTRUP,
DONALD TAYLOR, BETTY TAYLOR, DOROTHY M.
JOHNSON, REX ENGEBRETSON, JURGENS
FARMS CORP., DEAN JURGENS, SCHUMACHER
FARMS, INC., THOMAS FLOY, RICHARD STILLE,
CURTIS STILLE, PAMELA STILLE,
Plaintiffs-Appellees
v.
UNITED STATES,
Defendant-Appellant
______________________
2014-5089
______________________
Appeal from the United States Court of Federal
Claims in No. 1:09-CV-00158-NBF, Senior Judge Nancy
B. Firestone.
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WILMA N. ADKINS, HOWARD BURROWS,
GONNER FARM, LLC, JAN ROSE FARM, INC.,
JAMES A. HARP, CLAYTON LINDSTROM AND
GAYLE LINDSTROM, HUSBAND AND WIFE,
BOYCE L. LANGE, TRUSTEE, FRANK MARTIN,
2 RASMUSON V. US
DAVID CHONGO AND CHRISTINE CHONGO,
HUSBAND AND WIFE, RONALD PINYAN, TODD
MAURICE JOHNSON, CURTIS MENNENGA,
TRUSTEE, HOPE CHURCH OF THE NAZARENE,
RODNEY KNOX AND PAMELA KNOX, HUSBAND
AND WIFE, RONALD GAULKE AND KAREN
GAULKE, HUSBAND AND WIFE, SHARON BURT,
THOMAS BLAKE, MERRILL GOERING AND
LINDA GOERING, HUSBAND AND WIFE, JAMES A.
BRADY AND PATRICIA A. BRADY, HUSBAND AND
WIFE, DAVID F. JOHNSON, MELLISSA S.
CHAPPELLE, DALE BARRETT AND KATHLEEN
BARRETT, HUSBAND AND WIFE, RONNIE L.
SMITH AND DEBORAH A. SMITH, HUSBAND AND
WIFE, DAVID E. BROONER AND CYNTHIA L.
BROONER, HUSBAND AND WIFE, DOUG
SCHMELING, JOHN T. CURPHEY, FOR
THEMSELVES AND AS REPRESENTATIVES OF A
CLASS OF SIMILAR PERSONS,
Plaintiffs-Appellees
v.
UNITED STATES,
Defendant-Appellant
______________________
2014-5092
______________________
Appeal from the United States Court of Federal
Claims in No. 1:09-CV-00503-NBF, Senior Judge Nancy
B. Firestone.
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RASMUSON v. US 3
STEVE JENKINS, DONALD BURG,
Plaintiffs-Appellees
v.
UNITED STATES,
Defendant-Appellant
______________________
2014-5107
______________________
Appeal from the United States Court of Federal
Claims in No. 1:09-CV-00241-NBF, Senior Judge Nancy
B. Firestone.
______________________
Decided: October 5, 2015
______________________
THOMAS SCOTT STEWART, Stewart Wald & McCulley,
LLC, Kansas City, MO, argued for plaintiffs-appellees.
MATTHEW LITTLETON, Environment and Natural Re-
sources Division, United States Department of Justice,
Washington, DC, argued for defendant-appellant. Also
represented by KATHERINE J. BARTON, SAM HIRSCH.
______________________
Before O’MALLEY, CLEVENGER, and HUGHES, Circuit
Judges.
HUGHES, Circuit Judge.
In these Rails-to-Trails cases, the Court of Federal
Claims found that the plaintiff-landowners were entitled
to just compensation for the inverse condemnation of their
respective properties. In awarding compensation to the
landowners, the Court of Federal Claims determined that
4 RASMUSON V. US
an appraiser is not required to take into account the
physical remnants of a railroad easement when determin-
ing the value of the land before the taking occurred.
Because we conclude that an appraiser must consider the
value of a landowner’s property before the easement,
which in this case includes the physical remnants of the
railroad, we vacate and remand.
I
The plaintiffs own tracts of land adjacent to three
railway corridors in central Iowa. Pursuant to the Na-
tional Trail System Act Amendments of 1982, the Surface
Transportation Board issued Notices of Interim Trail Use
(NITUs) for the corridors. NITUs “preserve established
railroad rights-of-way for future reactivation of rail ser-
vice” and permit the railroad operator to cease operation
without legally abandoning any “rights-of-way for railroad
purposes.” 16 U.S.C. § 1247(d). The trial court found that
“[b]ut for issuance of the NITU[s], under Iowa law the
[railway] easement[s] would have reverted back to plain-
tiffs upon cessation of railroad operations, and plaintiffs
would have enjoyed land unencumbered by any ease-
ment.” J.A. 583; see also J.A. 1981 n.5; J.A. 2106 n.7.
Accordingly, the trial court found that a taking occurred.
The court then held a bench trial to determine com-
pensation. Focusing on parcels for which the highest and
best use was farmland, the trial court used the “before
and after” method to determine the value of the land
subject to the government’s easement. The court deter-
mined that the “before” state of the land should take into
account the value of the land as it existed before the
NITU easements, but ignore any physical remnants of the
railway’s use, which would have remained if the railway
easement had been permitted to lapse. The government
appeals. We have jurisdiction under 28 U.S.C.
§ 1295(a)(3).
RASMUSON v. US 5
II
We review the Court of Federal Claims’ legal conclu-
sions de novo and its findings of fact for clear error. Otay
Mesa Prop., L.P. v. United States, 670 F.3d 1358, 1363
(Fed. Cir. 2012). The landowners have the burden of
establishing the value of the railway corridor, which is a
question of fact. Bd. of Cnty. Supervisors of Prince Wil-
liam Cnty. v. United States, 276 F.3d 1359, 1364 (Fed.
Cir. 2002). But a finding on the value of a railway corri-
dor that “is derived from the application of an improper
legal standard to the facts” must be remanded for new
factual findings for application of the correct legal stand-
ard. Walther v. Sec’y of Health & Human Servs., 485 F.3d
1146, 1152 (Fed. Cir. 2007) (citations omitted).
A landowner subject to a taking is entitled “to be put
in as good a position pecuniarily as if his property had not
been taken.” Olson v. United States, 292 U.S. 246, 255
(1934); Otay Mesa, 670 F.3d at 1368. The landowner
“must be made whole but is not entitled to more.” Id.
Landowners are therefore generally entitled to the fair
market value of their land, which is defined as “‘what a
willing buyer would pay in cash to a willing seller’ at the
time of the taking.” United States v. 564.54 Acres of
Land, More or Less, Situated in Monroe & Pike Cntys.,
441 U.S. 506, 511 (1979) (quoting United States v. Miller,
317 U.S. 369, 374 (1949)) (hereinafter Lutheran Synod).
And in the easement context, “the ‘conventional’ method
of valuation is the ‘before-and-after’ method, i.e., ‘the
difference between the value of the property before and
after the Government’s easement was imposed.’” Otay
Mesa, 670 F.3d at 1364 (quoting United States v. Va. Elec.
& Power Co., 365 U.S. 624, 632 (1961)).
The issue on appeal is a narrow one. The parties dis-
pute whether or not the “before” condition requires the
appraiser to adopt the counterfactual assumption that the
expiration of the prior easement—i.e. the easement be-
6 RASMUSON V. US
longing to the railway—would return the property to the
landowners free of the physical remnants of the railway’s
use. The landowners view the “unencumbered” land as
not only free of any legal restrictions, but also free of any
remnants from the railway’s use of the easement such as
earthen embankments, ties, and poor soil conditions. The
government, however, views the “before” condition as the
land as it would have laid but for the issuance of the
NITUs, which could include the physical remnants of the
railway’s use of the land in some circumstances.
We conclude that the fair market value of the land in-
cludes the physical remnants of the railway that would
have remained on the landowners’ property but for the
issuance of the NITUs. Here, the trial court found—and
the parties do not contest—that but for the government’s
easement, the railway easements would have lapsed and
the land would have returned to the landowners. Because
the railway companies did not have an obligation to
remove the physical railroad construction features, and
there is no evidence in the record that they would have
done so, the landowners would have regained possession
of their land with the physical structures. See Macerich
Real Estate Co. v. City of Ames, 433 N.W.2d 726, 730
(Iowa 1988) (interpreting Iowa law pertaining to the
abandonment of railway rights, and emphasizing that a
railroad has a right to enter and remove the physical
track materials). Absent the NITUs, the land would have
returned to the landowners with the physical remnants of
the railway. A proper appraisal methodology has to
account for those physical conditions.
Further, “[i]n ascertaining market value, considera-
tion should be given to all matters that might be brought
forward and reasonably be given substantial bargaining
weight by persons of ordinary prudence . . . .” Appraisal
Institute, Uniform Appraisal Standards for Federal Land
Acquisition § B-2 (2000 ed.); see also Lutheran Synod, 441
U.S. at 511 (defining fair market value). Here, all experts
RASMUSON v. US 7
agreed that a reasonably prudent buyer would consider
evidence of an abandoned railway when formulating an
offer for agricultural property. Thus, a “before” calcula-
tion that does not take into account the costs of removing
the physical remnants of the railway will result in an
artificially inflated value and yield a windfall to the
landowner. 1 See Olson, 292 U.S. at 255 (The property
owner “must be made whole but is not entitled to more.”);
see also Otay Mesa, 670 F.3d at 1368 (just compensation
“should be carefully tailored to the circumstances of each
particular case” (citing Kimball Laundry Co. v. U.S., 338
U.S. 1, 20 (1949)).
III
Having concluded that the trial court applied the in-
correct methodology in calculating the compensation owed
to the landowners, we must vacate and remand for new
proceedings under the proper standard with both sides
having the opportunity to address the valuation for the
effects of the remnants.
VACATED AND REMANDED
1 To be sure, the remnants of the railway are also
relevant to determining the “highest and best use” of the
landowners’ property. See Olson, 292 U.S. at 255. But
the determination of a highest and best use does not
obviate the need to determine the fair market value in
light of the physical condition of the property. See, e.g.,
id. (“The highest and most profitable use for which the
property is adaptable . . . is to be considered, not neces-
sarily as to the measure of value, but to the full extent
that the prospect of demand for such use affects the
market value while the property is privately held.”).