BREITENSTEIN, Circuit Judge.
The United States brought action to condemn a Wherry Act housing project and commissioners awarded $385,000 as just compensation to appellant, Buena Vista Homes, Inc. The appeal is from the judgment on that award. The issues relate to the instructions, the proper method of handling a reserve fund in determining value, and the adequacy of the award.
With the objective of providing low-cost military housing, built by private enterprise through the medium of Government-insured mortgages, Congress passed the Wherry Act of August 8, 1949.
Under authorization of agreements made pursuant to the Wherry Act, Buena Vista constructed 235 rental units with necessary service structures on 48 acres of leased Government land at the White Sands Proving Grounds in New Mexico. Site improvements such as streets, curbs, and utility lines were constructed by the United States out of appropriated funds and were not a part of the Buena Vista operations. The lease from the Government was for a term of 75 years
The Act of August 7, 1956,
Objection is made to Instruction No. 8 upon the ground that it eliminated from consideration the reproduction cost less depreciation method of valuation.
Instruction No. 9 told the commissioners that the January 2, 1958, rent schedule was the basis of the rental income of Buena Vista.
The mortgage given by Buena Vista to New York Life Insurance Company required that the mortgagor, Buena Vista, pay to the mortgagee, New York, a specific monthly sum which the mortgagee would hold as a reserve for replacements. The purpose of the reserve was to assure that Buena Vista would make the necessary repairs and replacements. Actually the required maintenance was performed by Buena Vista without touching the reserve fund. The Capehart Act authorized the release by agreement of funds set up as reserve for replacement
Instruction No. 15 was given to the commissioners over the objection of Buena Vista. Therein, the court stated that as the reserve fund was returnable to Buena Vista "it should be deducted from the amount you find to be the reasonable market value of defendant lessee's [Buena Vista's] interest in the Wherry Housing Project."
This reserve fund was treated in various ways by witnesses who appeared before the commissioners. Three witnesses arrived at estimates of fair market value from which the reserve fund, under their calculations, should be deducted. Two witnesses made their appraisals upon a basis to which the amount of the reserve fund should be added. One witness
The commission, in its report, stated that in determining value "paramount consideration should be given to capitalization of income approach," and concluded its findings with this:
Both parties filed objections to this report. At the request of the court the commission reviewed its action and submitted a supplemental report. Therein it is stated that the value was based on the capitalization of income method and that:
Thereafter, the court entered an order in which it was recited that Instruction No. 15 was erroneous and that the court desired "the decision of the Commissioners without any regard to the reserve fund and with full knowledge that it will not be deducted from the value determined by them." The court ordered:
The commissioners then filed a second supplemental report in which they said that the reserve fund was taken into account in their original report, that the property needed repairs and replacements costing between $75,000 and $100,000, that this was considered in connection with the reserve fund, and that "as the record now stands [after the withdrawal of Instruction No. 15 relating to the reserve fund] there is a complete void in considering the cost of repairs and replacements which we did consider in our original report." Following these statements, the commissioners said:
The court accepted this report and entered judgment for $385,000. Buena Vista contends that as the commissioners twice found the fair market value to be $440,000, from which should be deducted the reserve fund, the elimination of the reserve fund requires that the $440,000 figure must be taken as the fair market value. The argument is not persuasive.
Buena Vista is entitled to recover the fair market value of the property. The commission adopted the capitalization of income method for the determination of value. This method of valuation contemplates that the property is in good condition and capable of producing the
If such fund were available to the condemnor to make such payments, the value arrived at by capitalization of income would have to be adjusted by the deduction of the repair and replacement cost and the addition of the amount of the reserve fund, or by the deduction of the amount of the reserve fund from the repair and replacement cost and the deduction of the remainder from the capitalization of income figure. The end result is the same in either event when, as here, the cost of the needed repairs and replacements exceeded the reserve fund.
In fact, the fund was not available to the condemnor as it had been returned to Buena Vista. Accordingly, the entire repair and replacement cost had to be deducted from the capitalization of income figure to arrive at the fair market value. That is what the commission did in its second supplemental report.
Another way of stating the problem is that the original instruction considered the reserve fund as tied to the property and hence an item which required consideration in the determination of value, but as the amount of the reserve fund had been paid to Buena Vista that amount would have to be deducted in order to determine the amount of judgment to which Buena Vista was entitled. When that instruction was withdrawn and the commission was told not to deduct the amount of the reserve fund, the court told the commission, in effect, that the reserve fund was not tied to the property and was not a factor in the determination of value. This change in the ground rules threw out of adjustment the figures used by the commission in its previous reports. If the commission then included within the value the amount of the reserve fund, which had already been paid to Buena Vista, a double payment would have resulted in the amount of that fund.
It is apparent that the commission had full realization of the effect of the change in instructions. After full reconsideration of the entire matter, it fixed the fair market value at $385,000. Such conclusion is not inconsistent with the previous actions taken by the commission. The objections of Buena Vista with regard to the treatment and effect of the reserve fund are without merit.
The award is attacked as inadequate. Eight witnesses testified as to value and, without getting into the reserve fund complications, their appraisals ranged from about $225,000 to about $900,000. The award of $385,000 is well within the range of the testimony. This court will not assume the function of retrying the facts.