Almota Farmers Elevator
& Warehouse Co. v.
Court of the
Johnson, pp. 861-865
Facts: Almota had a grain elevator next to some train tracks. Almota had extensively improved the land over a period of many decades. The federal government wanted to acquire the land to build a dam and so it started an eminent domain proceeding against Almota. The government argued that just compensation would be just the value of the rights under the remainder of the lease, while Almota argued that the government should pay whatever Almota could get on the open market for the remainder of the lease. The District Court accepted Almota’s theory, while the Court of Appeals reversed and accepted the government’s theory. Almota appealed to the U.S. Supreme Court.
Issue: What is the proper measure of the fair market value of a leaseholder’s interest in the remaining term of its lease?
Rule: Fair market value is determined by “what a willing buyer would pay in cash to a willing seller”.
Analysis: The majority says that the District Court was right to take into account the value of the improvements on the land and the likelihood that the lease could be renewed. The Court finds that a willing buyer would probably keep using the land the same way it has been used before: as a grain elevator facility. A buyer probably wouldn’t have paid Almota much if they had any other use of the land in mind.
The dissent, surprisingly written by Justice Rehnquist, says that the expectancy interest in the renewal of the lease need not be compensated. This is based on the minority’s understanding of Petty Motor. Rehnquist is usually so strident on private property rights that this opinion really surprises me. He seems to make a stare decisis argument that this decision upsets some other decisions in the same area of law.
Conclusion: The Court of Appeals is reversed and the District Court’s formulation of just compensation is used.