Appeal from the District Court of the United States for the Eastern District of Pennsylvania; William H. Kirkpatrick, Judge.
Before MARIS and JONES, Circuit Judges, and BARD, District Judge.
This appeal raises a single question. In a case to determine the value of property taken by the United States under the power of eminent domain, is a written contract for the sale of the identical property executed shortly before the taking admissible in evidence as bearing on the market value of the property?
The trial court refused to receive into evidence such a contract offered by appellant-owner.
On August 25, 1941 the United States instituted proceedings to condemn certain parcels of land in the City of Philadelphia, among which was a tract of about 88 acres belonging to the appellant. A board of view was appointed, testimony was taken, and a report filed fixing the value of appellant's land. The United States was dissatisfied with the viewers' award and appealed therefrom. The case was tried in the district court before a jury which returned a verdict for the property owner in the amount of $64,162.50. This appeal by the owner followed.
The agreement offered was entered into on June 7, 1941 between the owner and the Northeast Park Realty Company for the sale of the property here involved for a total consideration of $82,768.75. The agreement of sale contained a plan for subdividing the land, which was unimproved and undeveloped, and called for periodic payments on account of the purchase price and periodic conveyances of various subdivided portions of the land as such payments were made. The total consideration was to be paid within twenty-five months of the execution of the agreement. The first payment by the buyer under the agreement was to have been made by July 7, 1941. On that date the parties agreed to extend the date of performance to July 25, 1941. On the latter date the parties met to make settlement and to make the first conveyance under the agreement. Counsel for the buyer arrived and said that he had received notice from the government that the land would be taken under the power of eminent domain and that his client should not proceed with the settlement.
Appellant urges that the trial court erred in holding that, under the law of Pennsylvania, evidence of the price at which a property has been sold is inadmissible in condemnation proceedings as proof of its value. He argues that Reinhold v. Ephrata Borough, 171 Pa. 425, 33 A. 362, relied upon by the trial court in its opinion, is not controlling on this question and that under other Pennsylvania authorities such evidence is admissible.
A careful consideration of the Pennsylvania authorities leads to the conclusion that such evidence is inadmissible under Pennsylvania law. While it is probably true that there is no Pennsylvania decision which squarely covers the present case, the results and reasoning of the most analogous cases are clearly hostile to the admission of evidence of the sale price of land taken by eminent domain. It has long been settled in Pennsylvania that evidence of the sale price of lands similar to the parcel condemned is inadmissible. Henkel v. Wabash Pittsburg Terminal R.R. Co., 213 Pa. 485, 62 A. 1085; Schonhardt v. Pennsylvania R.R. Co., 216 Pa. 224, 65 A. 543; Pennsylvania Co. for Insurances on Lives, etc., v. Philadelphia, 268 Pa. 559, 112 A. 76. The principal reason upon which this rule is based is significant because it is broad enough to be equally applicable to evidence of sales of the very property condemned. This reason is that "market value" in this type of case in Pennsylvania depends on the "judgment of the community" rather than that of a particular buyer and seller. In the early case of East Pennsylvania Railroad v. Hiester, 40 Pa. 53, the Supreme Court of Pennsylvania, after pointing out that one objection to the admissibility of evidence of the sale price of similar land was the introduction of numerous collateral issues, continued at page 55 of 40 Pa.: "But even this is not the most serious objection. Such testimony does not disclose the public and general estimate which, in such cases, we have seen is a test of value. It would be as liable to be the result of fancy, caprice, or folly, as of sound judgment, in regard to the intrinsic worth of the subject-matter of it; and, consequently, would prove nothing on the point to be investigated. The fact as to what one man may have sold or received for his property, is certainly a collateral fact to an issue, involving what another should receive, and, if in no way connected with it, proves nothing. It is, therefore, irrelevant, improper, and dangerous. Not so with a market value. That is a recognized fair test. It holds good, let the demand and supply be as they may, and is equally reliable, whatever may be the relative value of money and property, or the circumstances of the country. It is supposed to represent the judgment of the community, and approximately fixes the value of a given article or thing, as it may do the character of a person."
Similarly, in Schonhardt v. Pennsylvania R.R. Co., 216 Pa. 224, at page 228, 65 A. 543, 544, the Supreme Court of Pennsylvania said: "The proper test of value when the whole property is taken is the market price, and this is to be shown, not by proof of particular sales, but by the general selling price."
And in Friday v. Pennsylvania R. Co., 204 Pa. 405, 54 A. 339, at page 408, the Supreme Court of Pennsylvania said: " * * * the general selling price is not to be shown by evidence of particular sales of alleged similar lots, but is to be fixed in the mind of the witness from a knowledge of the price at which lots are generally held for sale, and at which they are sometimes actually sold, in the course of ordinary business in the neighborhood."
We therefore accept the government's contention that under the Pennsylvania concept of the market value of property in eminent domain proceedings, evidence of the price at which it was sold is not sufficiently relevant to be considered by the jury. This should be contrasted with the Pennsylvania concept of market value adopted in cases involving the proper assessment for purposes of taxation, in which it is recognized that "a previous sale of a property has a substantial bearing upon the question of market value." Hickey's Appeal, 326 Pa. 467, 192 A. 923, 924; Edmond's Appeal, 314 Pa. 382, 172 A. 103; see also Hudson Coal Company's Appeal, 327 Pa. 247, 193 A. 8; Kaemmerling's Appeal, 282 Pa. 78, 127 A. 439 (public sale); Sailer's Appeal, 120 Pa.Super. 69, 181 A. 854 (public sale).*fn1
The question is presented, however, whether the Pennsylvania concept of value for purposes of eminent domain governs in a condemnation proceeding brought by the United States against land in Pennsylvania. This question was recently answered by the United States Supreme Court in United States v. Miller, 317 U.S. 369, 63 S. Ct. 276, 87 L. Ed. 336, 147 A.L.R. 55. In that case it was held that the owner of property condemned by the United States is not entitled to the benefit of any increment in the value of his property resulting from the fact that adjacent lands were condemned, regardless of whether such increment could be considered in determining value in condemnation proceedings under the law of the state in which the land was situated. Said Mr. Justice Roberts, speaking for the Court, at page 379 of 317 U.S., page 283 of 63 S. Ct., 87 L. Ed. 336, 147 A.L.R. 55: "The respondents also say that, whatever the criterion of value adopted by the federal courts, Congress has adopted the local rule followed in the state where the federal court sits; and they claim that the California rule is settled that fair market value at the date of taking is the standard of value, without elimination of any increment attributable to the action of the taker. We need not determine what is the local law, for the federal statutes upon which reliance is placed require only that, in condemnation proceedings, a federal court shall adopt the forms and methods of procedure afforded by the law of the State in which the court sits. They do not, and could not, affect questions of substantive right, - such as the measure of compensation, - grounded upon the Constitution of the United States."
In an earlier part of the same opinion, the Supreme Court set forth at length the standard by which the amount of compensation due an owner of land condemned by the United States is to be determined. On pages 373, 374 of 317 U.S., on page ...