BOREMAN, Circuit Judge.
This is a condemnation proceeding initiated by the United States on November 1, 1957, to acquire the equity in certain rental housing property located at Fort Bragg, North Carolina, and constructed under the original Title VIII of the National Housing Act, commonly known as the "Wherry Act," 63 Stat. 570 (1949), 12 U.S.C.A. § 1748 et seq. On June 12, 1958, the District Court appointed a commission pursuant to Rule 71A(h) of the Federal Rules of Civil Procedure, 28 U.S.C.A., to determine the amount of compensation to which the owners were entitled. After extensive hearings, the commissioners filed a report, finding that the fair market value of the condemned property was $16,986,989, from which was subtracted the sum of $15,196,018.37, that being the stipulated amount, as of November 1, 1957, of an outstanding mortgage to be assumed by the Government. The owners were awarded $1,790,970.63 for their equity. Later, at the request of the District Court, a supplemental report was filed by the commission, but that report simply confirmed the original. The District Court then made extensive findings of fact which differed in certain aspects from the findings of the commissioners, and drew therefrom conclusions of law.
The United States appeals from the District Court's substitution of its own findings and conclusions for those of the commission and the resulting increase in the award to the owners. There is a cross-appeal by the owners, who contend that the District Court erred in failing to consider and give effect to additional
The property which was condemned consists of 2000 family housing units, a shopping center composed of eight stores, seven related service buildings, ten miles of paved highways, electric street lights, and complete water, sewer and electric service. It is located on a 516.89 acre tract of land owned by the United States and included in the Fort Bragg military reservation; the tract, in two sections, was leased by the Government to the defendant-owners for a period of seventy-five years, one section from April 1950, the other from September 1951. The condemned property is completely landscaped and has playground and park areas. In effect, it is a self-contained city for about 6000 persons. The lease permitted the lessees to remove, at the termination of the lease, all improvements placed on the land.
The commission found that the improvements on the leased lands had a remaining economic life of thirty years as of the date of taking and that the value of the owners' residual interest in the lease and improvements thirty years from the date of taking would be negligible. The "reproduction-cost-less-depreciation" method and "comparable-sales" method of evaluating the property were rejected by the commission in favor of the "capitalization-of-income" method. The owners argue that the District Court erred in instructing the commission as indicated below
The commission concluded that, even though the lease had approximately seventy years to run at the time of the taking of the property, the residual value, after thirty years, for the leasehold and improvements was negligible as of November 1, 1957. With this conclusion the District Judge disagreed. He was convinced that the commission had erred further in determining a remaining economic life of only 30 years for the improvements on the leased land and found a remaining economic life of 35 years which, as we shall point out, is supported by the evidence. Though the theoretical basis for the court's ultimate determination is not clearly explained in its opinion
In addition to its reported opinion, the District Court prepared an unreported statement of its findings of fact and conclusions. In this statement the testimony of the Government witness Cantwell, a real estate appraiser, is analyzed, characterized as chimerical, and shown to be premised, in its crucial aspect dealing with the remaining economic life of the condemned property, almost entirely on speculation which has no apparent support from other evidence in the record. It is from Cantwell's testimony alone that the commission found and determined a remaining economic life of 30 years. The District Court noted that Cantwell based his opinion on "his market information" that "a typical purchaser of Wherry equities was an individual or syndicate; that such individuals are normally mature people of approximately forty years old or better." He further speculated that, because of the advanced age of the theoretical purchasers, they would want to recover their investment within a relatively short period of time and would not be interested in property with a long economic life. Yet, as the District Court points out, Cantwell had earlier written in his appraisal report that there had been no outright sales of Wherry housing to his knowledge. At no point does Cantwell give the source of his "market information" about typical investors and their probable ages.
Cantwell further testified that, in his opinion, no prudent investor would want to risk his funds in a venture such as the Fort Bragg project unless he could recover his investment, in addition to earning an income thereon, within a reasonably short time in view of the effect of technological development on military planning and the probability that Fort Bragg would not always be able to provide sufficient numbers of personnel to occupy the Wherry housing. The District Judge, however, points out that Fort Bragg is as permanent as any military post could possibly be. Furthermore, the Commandant of the Fort had, subsequent to the completion of the Wherry housing, issued a certificate of need to authorize
The District Court, in its unreported findings, further explains that:
Seven expert appraisers appeared before the commission — four for the owners and three for the Government. The owners' witnesses estimated a remaining economic life of 50 years, 40 years, 40 years and 34 years, respectively. The Government experts chose 50 years, 45 years and 30 years, respectively, as their estimates of the remaining economic life of the property. The finding by the District Court of a 35-year remaining economic life of the property was apparently made after carefully and properly considering the factors just mentioned which the judge found were not properly considered by the commission and Cantwell.
The Government contends that the District Court had no authority to substitute its own findings for those of the commission. As a general rule, the facts as determined by the finder thereof are accepted by the reviewing court. In its brief the Government argues that "the resolution of questions of credibility of witnesses is peculiarly a matter for the factfinder who saw them testify, heard the inflection of their voices, and observed their relative candor in answering questions." We find no fault with this statement of principle. However, where the factfinder bases a finding on opinion testimony of an expert witness whose stated reasons for his opinion are patently unsound and without support in the record, the reviewing court should reject, as clearly erroneous, the finding based on such testimony. See United States v. Twin City Power Co., 248 F.2d 108 (4th Cir.1957), certiorari denied, 356 U.S. 918, 78 S.Ct. 702, 2 L.Ed.2d 714 (1958); United States v. Waymire, 202 F.2d 550 (10th Cir.1953); United States v. 44.00 Acres of Land, 234 F.2d 410 (2d Cir.), certiorari denied, 352 U.S. 916, 77 S.Ct. 215, 1 L.Ed.2d 123 (1956); and United States v. Twin City Power Co. of Ga., 253 F.2d 197 (5th Cir.1958). The holding of this court in United States v. Twin City Power Co., the case cited first above, is almost directly in point and controls the instant case. We reject the Government's contention that our decision in Cunningham v. United States, 270 F.2d 545 (4th Cir.1959), certiorari denied, 362 U.S. 989, 80 S.Ct. 1078, 4 L.Ed.2d 1022 (1960), overruled Twin City, supra.
Chief Judge Parker, writing for this court in the Twin City case, said, 248 F.2d at 112:
Though there is language in Cunningham which, when isolated from the rest of the decision, might indicate a retreat from Twin City (248 F.2d 108), the holding of Cunningham does not conflict with Twin City or our holding in the instant case. The rule governing these cases can be simply stated: The District Judge has the authority and duty to review the findings of the commission, and such findings must be accepted by him unless he considers them clearly erroneous. Upon review of the District Court's findings and judgment, we must first determine whether or not the District Judge erred in accepting or rejecting the findings of the commission. The next step is to decide whether or not the substituted findings of the Judge are properly supported by the evidence. Thus, where the evidence before the commission is in virtual equilibrium and the preponderance for one side or the other is slight, the commission's findings could not be rejected by the District Court merely because the judge preferred the opposite line of evidence, which, if accepted, would support other findings; in such a situation where the commission's findings are based on substantial, though conflicting, testimony, we would be compelled to hold that the District Court erred if the commission's findings were rejected. Applying the rule to Twin City, Cunningham and the instant case, it is apparent that there is no conflict. In Twin City and in the instant case, the respective findings of the commissioners are not supported by the evidence; their findings were thus clearly erroneous and were properly set aside by the District Courts. It would have been error in each instance if the District Court had not modified the commissioners' findings to conform to the evidence. In Cunningham, the evidence, though equivocal in part, supported the findings of the commission; such findings were thus not clearly erroneous, and the District Court erred in setting them aside and substituting its own findings therefor.
The owners-defendants, in their cross-appeal, argue primarily (1) that the District Court erred in failing to designate forty years as the remaining economic life of the condemned property; (2) that the value of the property as a "going concern" was not adequately considered; and (3) that the District Court erred in instructing the commission to consider evidence of reproduction cost less depreciation "only when there has been a showing by a preponderance of evidence that a reasonable, prudent person would reproduce the projects on November 1, 1957, for the figure or amount given as replacement or reproduction cost."
With respect to the third point, it is noted that the owners cite a number of Fourth Circuit cases for the proposition that evidence of reproduction cost of the buildings is properly to be considered in the evaluation of condemned property.
The owners contend that the District Court's determination of fair market value of the property is "manifestly unjust," but we find no merit in the contention.
For the foregoing reasons, the judgment of the District Court is
Remaining Capitalization economic interest life rate 50 years 6½% 40 years 6½% 50 years 7 % 45 years 7 % 40 years 6 % 34 years 5½% 30 years 6 %