Petition for Writ of Certiorari — United States Ex Rel. TVA v. Powelson

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Statement--------- 5 aaa ocavevecesssweneneessensse

Specification of errors to be urged. -.---------------------""

Reas for granting the eet 1, Occceustestecbsaseseeece

@pnelusion....-.-----------------7-0070 0077773 sirnatecmnabited

Appendix i eh eegn ened ste e Ne ake eke errs ernSP™ ee © loooe

CITATIONS

Arizona v. California, 283 U. 8. Sno eernian pans 13, 14

Boston Chamber of Commerce v. Boston, 217 U. 8. 189----- 18

Continental Land Co. v. United States, 88 F. (2d) 104. ---- 14, 22

Finley v. United States, 118 F. (2d) $15.---------------- 25

McCandless v. United States, 298 U. S Piblinassss9=—2 sae

McGovern v. New York, 229 U. 8. 363.----------+------- 18

New York v. Sage, 239 U: 8. 57----------+-----------"- 18, 22

. Oklahoma ex re .. Phillips v. Atkinson Co., No. 832, 1940

° Tete ie cescnans ee ee ern 13

Olson v. United States, 292 U. @ 908. .L.ccccvccccacesore 18, 22

—San Diego Land & Town Co. v. Neale, 88 Calif. 50-- ----- -22

Stephenson Brick Co. v: United States, 110 F. (2d) 360 _ - -- 25

Tacoma v. Nisqually Power Co.,; 57 Wash. eee abn 22

United Gas Co. v. R. R: Comm’r., 278 U. 8. 300------ ee

United States v. Appalachian Power Co., 311 U. 8. 377. -- 13,15

., United States v. Bailey, 115 F. (2d) 433 -- ----- Coescwenttn

United States v. Boston, C. C. & N. Y. Canal Co.,.271 Fed.

oe i ng ne Se oe :

_ United States v. Chandler-Dunbar Co., 490 U. 8: 53.-.---- ‘12,

; , _ 13, 14, 15, 16, 17, 18

United States v. Harris, 115 F. (2d) Rp Jeaseeneerose 25

United States v. Meyer, 113 F. (2d) 387- ---- fag pee 22

United States v. Reynolde, 115 F. (2d) 204. -------------- 25

United States v. Rio Grande Irrigation Co., 174 U.8. 690--.- 13 -

Statutes: . - ae : ,

Act of February 26, 1931, c. 307, 46 Mat. 1421....-.----- 4

Federal Water Power Act, c. 285, 41 Stat. 1063, as amended

_ by the Act of August 26, 1935, c. 687, 49 Stat. 803, 833,

842, 846:

ie Wiss hens seano<se + su ciukaseguioncoveenint 16

ee eer er eS rr err 16, 30

oO

d !

n “

Catutee Danton, ) ine Page

Rivers and Harbors Act of 1890, ec. 425, 30 Btat. 1121:

: Bec. $. ee bciahcs cAtumbadgetebhehadearaaine 30

DA Miscitdp csaupedndskDeehkandntebhbtéhonnewsnire 15, 31

’ Tennessee Valley Authority Act of 1933, c. 32, 48 Stat. 58:

Sec. 4 (i)------ Rae ee REP RIVE BOOT 24

a Re reer Te

Tennessee Valley Authority Act of 1933, c. 32, 48 Stat. 58, «

go amended by the Act of August 31, 1935, c. 836, 49

Stat. 1075: - @ ; ;

Sec. 4 (h) and @- BE ay PEE EN are RE Se pie a

Sec. 20a.....---.------- eRe bays A. Teneo vated 16, 17, 29 :

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a a

"4 t

Oa ic wa Sas

Inthe Supreme Court of the Waited States

| OcToBer TERM, 1941

No. — ke

‘Unirep States or America Upon’ THE RELATION.

AND FOR THE USE oF THE TENNESSEE» ‘Vatley —

AUTHORITY, PETITIONER —————————

ve —

W:. Vv. N. Poweisox, AssiGNEE AND SUCCESSOR IX

‘Tedeies OF SOUTHERN STATES POWER e JOMPANY

A Corroration, Et AL.

PETITION FOR WRIT OF CERTIORARI TO THE UNITED

STATES CIRCUIT COURT OF APPEALS FOR THE FOURTH |

CIRCUIT ©

PETITION .

The Solicitor General, on behalf of the United

States of America, acting upon.the relation and

for the use of the Tennessee Valley Authority,

prays that a writ of certion ‘ari issue, to review the

judgment of the United States Cyeuit Court of

Appeals for*the Fourth Circuit affirming, with

modifications, the judgment of award of the United

States District Court for the Western District of

North Carolina entered in the proceedings to con-'

demn respondent’ s lands.

(1)

2

The opinion of the Distriet-Court (1 R. 23) * is

reported in, 33 F. Supp. 519. The opinion of the

Cireuit’Tourt of Appeals (4 R. 2) is reported in

118 F. (2d) 79. 1. 3 .

The judgment of the Circuit Court of -Appeals —

sought to be reviewed was entered on March 10,

1941 (4 R. 15). A petition for rehearing was

denied on May 10, 1941 (4 R. 18). ‘The jurisdic-

tion of this Court is invoked under Section 240 ~

(a) of the Judicial Code, as amended by the act

of February 13, 1925. | .

| QUESTIONS PRESENTED

The Government condemned lands in and adja-

cent to-the Hiwassee River, a principal tributary

of the Tennessee River, for the purpose of con-

structing a dam in the development of an inter-

state system for navigation, flood control and re-

: _ lated purposes. The major* questions presented.

‘are: | . Ses ,

_* Pursuant to stipulation of counsel the record upon this

petition consists of the appendix to the Goyertiment’s brief.

- below (designated as 1 R.), the appendices to the respond-

ent’s brief below (2 R. and 3 R.),,the proceedings of the court

below (4 R.) and a fifth volume of additional matter which

respondent desired to have printed in this petition. The

original transcript has also been filed with the Clerk.

2In addition, there may be a number of subsidiary or

related questions growing out of the foregoing questions

presented and the Specification of Errors to be Urged, infra,

pp. 9-11, which in the interest of compactness we have not

spelled out. aie

—

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1. Whether just compensation for the lands. must

include compensation for .héeir ‘“‘power”’ value as

well as their value computed without reference to

their possjule availability for _ pur- ?

poses. ay

2." Whether, even if the first Noations be dn-

swered itr the affirmative, it was error to ‘consider

evidence of value based upon an imaginary and

highly improbable private hydroelectri develop: ;

ment.

3, Whether the value of the lands fo the Govern-

ment is a proper element to be considered i in aster-

_ mining just compensation. ry Bs.

4. Whether prices paid by the Tennessee Valley

Authority for other lands in negotiated purchases

and in other condemnation proceedings may be.

considered in determining the value of the con-

demned lands. ,

5. Whether, panne Section 25 -of the Tennessee oi

Valley Authority Act, the Circuit Court of Kp- :

‘ peals must exercise its independent judgment and

fix the value of the lands without regard to the

awards orfindings previously made by the com-

Inissioners or by the statutory three-judge district

court. he

STATUTES INVOLVED

_ The Appendix, infra, pp, 26-32, contains the ap-

‘plicable provisions of the Tennessee Vall Au-

thority Act of 1933, the Federal Water Power Act,

and the Riv ers and Harbors Act of 1899. |

4

; STATEMENT ”

On January 28, 1936, the United States, on behalf *

of the Tennessee Valley Authority, filed- a peti-

tion in the United States District Cqurt for the °

Western - District of North. Carolina, to condemn

certain’ lands in and adjacent to ) the Hiwassee

‘River, a major tributary of the Tennessee River.’

The lands here involved were owned by-the South-

ern States Power Company, which has since as-

signed its property interest and rights arising out

‘of these proceedings to the respondent W. V. N.

Powelson,' its sole stockholder.

_ The property condemned consists of approxi-

mately 12,679 aeres of land along the Hiwassee

River in North ‘Carolina, beginning at a point

about twelve miles upstream from the Tennessee-

>On the same day, January 25. 1936, the initial declaration,

of taking was filed ii accordance with the provisions of ¢.

307. 46 Stat. 1421. and Sections 4 ¢h) and (i) of the ‘Ten-

nessee Valley Authority Act of 1933, ¢. 32, 45 Stat. 58, 60, as

amended by the Act of August 31, 1935, ¢. 836, 49 Stat. —

1075. Other dechrations of taking were filed subsequently.

The acreage taken’ by and money deposited with each

- declaration are as follows (1 R. 39): :

‘Date . , Acres ttken = Money drpouted

January 28, 1996_....----- instants tenia.” ae $4. 1, oH

(setober 22, 1906.....-.-...- seas dinapenanetatnansiarte 1.40.6 8, 768. 92

October 12, 1988_...----------«----------- 5.0 6,326.27

Savenibes 2h, BOB qecnpe nee ceccsoonn _ 9,205.54 73. O68. 14

September 1%9_....----------------------- ' 3.0 Dy Ma AP.

OO

"69.977. 94 $08. 005, 27

* For convenience. Southern States Power Company

and W. V. N. Powe will be referred to interchangeably

as “respondent.”

Ps}

North Carolina boundary and extending up the

Hiwassee River about 23 miles to the town of ~*

Murphy. Only 2,000 acres have been cleared and

cultivated. The remafning area is very rough and

mountainous, consisting in large part of rock sur--

face, mountain peaks and gorges. (1 R. 26.) At

the time these proceedings were initiated practi-

cally all of the land was comparatively imacees-

sible; there were no improved highways on the

property, although there were some-cart ways. {1 |

R. 9, 253, 402; Pet. Exs. T, V.) ."

Pursuant to Section 25 of the Tennessee Valley

Authority Act, the District Court apr >inted three

commissioners to take testimony and determine

the value of the property. The Government con-

tended that the. property was worth omy from

#97,000 to $146,000, while respondent sought to

establish a value of $7,500,000. The central points

of difference between the parties were whether the .

property should be valued on the basis of its-use-

fulness for the production of hydroelectric power

and whether the evidence introduced by the re-

spondents was competent and relevant. Over the

_ repeated objection of the Gove rnment (1+ R.

332-356, 470-475), respondent was-pe rmitted to -

introduce extensive evidence purporting to ‘show

that a four-dam hydroelectric development on the

‘Hiwassee River and its tributary, the Nottely

River, could be construeted partly on the larids

condemned, partly on other lands owned or con-

trolled by respondent, and partly on lands owned

by strangers, - ~ : \

i

6 . | an

Based on calculations as to. the cost of con-

. structing the project, together with estimates as

to the amount of power that ‘could be produced,

the cost of production, and the prices at which

; such power could be sold, respondent computed an

annual profit for the imaginary enterprise, gave

it a capitalized value by projecting it arbitrarily

into the future, allocated a portion of it to the

land in controversy, and emerged with a value of

$7,500,000 for the property condemned. (RB.

125-126.)

- The Government undertook ‘to demonstrate af-

firmatively that the land had a maximum market

value of $141,792.55 (1 R. 301). And although it

insisted’ that respondent’s evidence with respect

to the imaginary project was incompetent, it un-

-- Gertook to refute the respondent’s claims by show-

. ing that the property had no commercial value

for power purposes. It offered proof that the

imaginary project would entail an original outlay

far in excess of that suggested by respondent, that

the electric energy which such system could de-

velop was less than.that claimed by respondent,

‘and that sales of the energy could be made only‘at

distant points, with the consequence that the ~

project would operate at a loss rather than at the

-attractive’ profit envisaged by respondent. More-

over, it was shown that. although respondent and

its predecessors had held the property over a

period of 27 years, theré was no prospect of any

such project within the reasonably near future

(1R. 12, 210, 216, 218-219, 225-226, 253, 275).°

poe. 7

At the insistenée of the commissioners and over

the objection of the Government, evidence was in-

troduced as to’the prices paid by the Government

for other lands both in negotiated purchases and

in condemnation: proceedings (Franseript - 3270,

3272, 4594-4603). - gy.

The commissioners found ‘that the land con-

‘ ‘demned had a value of $1,437,000, and’ on the

_ theory that .respondent was also deprived-of the

use of its remaining lands as sites for an inte-

grated hydroelectric system, they awarded $253,000 .

in addition as “‘severage damages” (1 R. 20-22). ~

An award of $110,000 was made for a small hydro-

electric plant in the vicinity of Murphy (1 R. 14-

. Both parties sought review of the awards be-

_fore a three-judge district court under Section 25

- of the Tennessee Valley Authority Act, but later

‘withdrew their exceptions to the $110,000 award ©

for the Murphy liydroelectrie plant.

- The District Court fixed the value of the land

condemned at $976,289.40, a figure which it

reached by placing a value of $200 an acre on the

land to be flooded, on’ the theory that “power

value’’ attached to such land only, ‘and a value of

$10 an acre, which it found to be the agrfultural

value, on all other Jand (1 R. 33). Severance

damages to remaining land of the respondent were

placed at $111,791.23 (1 R. 35), and severance

damages resulting from the taking of the Murphy’

402005 —41+—-—2

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hydroelectric plant were fixed at $100,000 (1 R.

38). To each of these amounts the court added. _-

-_. interest at six percent, calculated on the assump-.

tion that the value of respondent’s lands for water-

_ power purposes’ was destroyed with the filing of

the initial declaration of taking.’ 2

rey

Ss

On appeal from-the District Court’s decision, the ee

court below at the outset rejected the ‘Govern- id

ment’s contention that under Section 25 of the

Tennessee Valley Authority Act, it must exercise

its independent judgment and fix the value of the

lands without regard. to the awards or findings

_ previously made (4 R. 3-4). On the merits, thie

court likewise ruled against the Government,

holding that respondent was entitled to have the

property valued on the basis of its potential use |

as Wp

Mi shest

ye eee

. ©The district court awarded: interest from January 28, |

1936. the date of the filing of the first declaration of taking,

on the total award-of_$976.289.40 for all the lands taken,’

both in this and in the subsequent declarations of taking ee

“(1 R..38). In computing the interest, however. there was 4

deducted from the award $4,001.94, the amount deposited in ;

court with the first declaration of taking, and, $114,153.40, ©

the value of the lands not covered by the first declaration of 2.

taking computed at $10%an acre, which the district edert 7

found te be it~ value for farming, timber growing, and

similar purposes. Interest on this $114,153.40, less the de-

posits thereafter made, was allowed from the several dates

of the subsequent -declarations of taking (1 R. 40-41).

Interest on. the $111,791.23 award’ fixed as the severance -

bin SiR or oa eee AEP RE ELA

damages to remaining land of the réspondent was allowed j

from January 28, 1936. Interest on the $100,000 séverance ;

damages-from the taking of the Murphy plant was allowed 4

only from the date of the ‘taking of the Murphy plant in ;

September 1939 (1 'R. 41-42).. 4

we Sg ea a :

2s anes ‘

eae : ¥ # . bi

sib ae BEY irene maganeess i he SE he

Saat ary ove Lila, ey gat ec:

as part of a proposed hydroelectric development,

‘and, with two modifications," ‘affirmed the judg-

ment of the District Court.

SPECIFICATION OF ERRORS TO BE URGED

“The court below erred:

‘1. In holding that the’ veeneuten was . entitled

to a valuation of his lands based upon their po-

tential.use as part of a hydroelectric development.

2. In ‘failing to hold that the respondent was

not entitled to a valuation of his lands based upon -

their potentiaKuse as part of a hydroelectric .de-

velopment because the respondent had no. private’

property in the water power inherent in the flow

of the Hiwassee River. :

3. In failing to hold that the respondent was not

entitled to a valuation of his lands based upon .

their potential ase as a part .of a hydrovlectrie |

~development. because stich a. development would -

require a-combination, through the exercis&of the

-power of eminent domain, of the lands owned by

respondent with lands owned by. others.

4. In failing to hold that the respondent’ was.

- not entitled to a_valuation of his lands based upon

their potential use as part of a hydroelectric de-

* The court excluded $100,000 severance sdlamages for the

taking of the Murphx plant (4 R. 12), and $18,907.02 of

severance damages attributablesto diminution in value of

Jands owned by a wholly owned subsidiary. waless within

thirty days after the mandaté& was filed in the District Court,

the subsidiary should be made a party (4 It. 33-14).

m)

a - 10 |

velopment because such developrnent was possible,

if at all, only through the combination of respond-

ent’s lands with other properties not subject to

the exercise™@f respondent’s . power of eminent

‘domain, and as to-which there was no showing of

the possibility of acquisition - in any other

manner... |

5, In failing to hold that the respondent was

not entitled to.a valuation of his Jands based upon

their potential use as part.of a hydroelectric de-

velopment on the ground that there was no. reason-

able probability that the lands of the respondent

could have been dev eloped for such purposes in the

reasonably near future, except by the Government.

- 6. In treating as admissible, for consideration in

_ arriving at the value of the undeveloped lands

_ taken, éstimates of possible future profits from.a

hypothetical and unrealized plan of dev elopment.

7. In treating: as admissible for consideration in

arriving at the value of the undeveloped lands

taken evidence as to the money spent by respondent

‘in promoting a speculative and unrealized plan of

development.

8. In holding that a pieced of the value

of respondent’s lands may properly be based on

prices paid by the Government in purchasing or

condemning other lands for the same project.

9. In taking into consideration, in valuing the

lands taken, the value of the lands to the Govern-

ment for its purposes and the effect of the poten-

_tial demand of the Government for such lands.

a Se Ne DA NON ie A

i 7 .

ee eeeeeaeerrrerSseseststéz‘es

11

10. In approving arbitrary valuations» of the

lands unsupported by the evidence.

11. In awarding compensation for damages to .

and physically separated from the land taken and °

“not unified with it‘in any present actual use. |

_ 12. In awarding compensation for damages to_

land not taken, although title to such land was in”

a corporation having no legal or equitable interest

in the land condemned, and in awarding compensa- |

_ tion to a person who' had no legal or equitable in-

terest in the land held to be so damaged.

13, In computing interest on the award for prop-

erty taken from a date prior to the date on which

the declaration of taking was filed rT such

property. .

14. In failing to exercise its independent judg--

‘ ment in fixing the value of the property condemned

without regard to the awards or findings previously

made by the commission or by the district court.

15. In. affirming the judgment’ al the. district

court as modified.

REASONS FOR GRANTING THE WRIT

The court below er roneously decided important

questions relating to the Federal Government’s

power of eminent domain that may have a critical

impact upon a large number of cases. At the

present time the Tennessee Valley Authority has |

pending 206 cdndemnation proceedings involving -

_ 481 tracts of Jand, and the Lands Division of the »

* Department of Justice has pending’ 2,620 condem-..

nation proceedings involving 22,292 tracts of land.

12

Moreover, these figures may be considerably aug-

mented in the near future as a consequence of the

national defense program. , ‘

_ Issues, identical with’ those in the instant case

are present in some of the pending cases, and sev- -——%-.

eral of the rulings of- the court below have poten-

tial application in many of the remaining cases.

But the importance of this case is not limited to

its effect upon pending or, possible future cases;

it must be judged in the light of the entire land-

acquisition program of the Government. ‘One in- ©

dex to the success of* this. program, both from the

point of view of. the Government and from that of

the landowner, is the pereentage of acquisitions

\which can be completed by negotiated purchases.

The decision of the court below, through the con-

fusion caused by its deviation from accepted |

standards of valuation and its ‘acceptance of

theories of value of uncertain future application,

_ is likely to discourage negotiated purchases and

promote litigation. | iE

1. ‘The decision below is in substantial conflict

with the principles established in United States v.

Chandler-Dunbar Co., 229 U.S. 53. There, it-was

held that a landowner had no compensable .rights

in the flow of a navigable stream, with the conse-

* quence that land on the banks of the stream, suit-

able as a dam site or otherwise useful in the pro-

duction of hydroelectric power, must have its >

-yalue determined in: condemnation proceedings

without regard’ to its ‘power’? value. Since the

— :

ee

° ~ = : > a opeueis —— _

; BE RO PSs ot ? ‘ . $ . °

“

13 a

usefulness of the land for power purposes depends

upon the ability of the landowner to erect struc-

tures in the stream, it is obvious that such use

must always be subject to the superior power of

the Federal Government to determine that ec

‘structures be permitted which would be incon-

_ sistent with the plans of the Government for im-

proving the stream in its exercise of the com-

merce power. (The result in the Chandler-Dunbar

* ease was thus predicated upon the plenary power

of the Federal Government over navigation, and<

there, as here, the property was condemned for

“use nfo integrated development of an interstate

(ori ernational) river system, in the aid of nav-

igation, flood control, and related purposes.

_ The only difference between’ the cases is. that

the lands in the instant case are located above the

historic head of navigation. But, under United

States v. Appalachian Power Co., 311 U. S. 377, °

that difference cannot be material for the Court

there held that the plenary power over navigation

may be exercised af a point: above the navigable

portion of the stream (cf. Oklahoma ‘ex rel, Phil-

lips v. Atkinson Co., No. 832, 1940 Term; United:

States v. Rio: Grande Irrigation Co., 174 U. 8.

690: Arizona V. California, 288 U. 8.°423), and in-

cludes ‘‘Flood protection, watershed development

[and], recovery of the cost of improvements

through utilization of ‘power i. _* © oi U. &.

at 426. =z

as

14

Even if the applicability of the Chandler-Dun-

bar r decision be thought doubtful, it is nevertheless

“a matter of considerable importance to have

the issue clarified: The unified development

_ of the river systems of the country for the pur-

poses of promoting navigation, controlling de-

structive floodwaters, developing the watershed,

and recovering the cost of improvements through

the utilization and sale of power is a subject of

ever-increasing importance to the Federal Gov-

ernment. Such developments involve the con-

_ struction of storage dams located on the upper

reaches of the river/or on its tributaries above the

head of navigation, which’ neverthéless play an

essential part in the regulation of the flow of the

river system it. the interests of navigation and

flood control.2 A’ determination by this Court of

* Where the storage dem 5 is constructed hatin the historic

_ head of navigation it is settled that under the Chandler-

Dunbar case dam-site value need not be paid for the land

acquired. Continental Land .Co. v. United States, 88 F.

(2d) 104 (C.C. A. 9th). In the case of a river system which

is being*developed pursuant to a unified plan of develop-

ment, the location of the upétream and tributary stor-

age projects above the historic head of navigation is of 3

little, if any, practical importance. These storage dams mi

are not ordinarily designed to aid navigation at their site; “4

indeed, they, may often block it. Their importance is in

controlling the flow of the river for the purposes of naviga-

tion’ and flood protection downstream (Res. ex. 204, pp. 4

16-23, 89-105). Cf. Arizona v. California, 283 U. S. 423. ae

But if the decision below is aflowed to stand, the basis upon *—éi‘ ie

xhich the Government is obligated to pay for sites acquired °

for tributary and upstream storage dams will depend on this ;

almost fortuitous relationship.

*

se

Co

the extent of the Government’s liability where it

acquires land for these tributary storage dams is

thus of great importance to the Government, par-

ticularly sincé the demands of the present emer-

geney may require the ‘Tennessee Valley Author-

ity.to construct additional dams on the tributaries

of the’ Tennessee River. - | a”

The record leaves no doubt as to the existence

of a factual basis for. the application of the

Chandler-Dunbur . and. Appalachian Power Co. _

decisions. Tle site in respondent’s hypothetical de-

velopment which was the farthest downstream was

only 24 miles above the historic head of navigatiori

(1 R. 314). The operation of respondent’s pro-

posed development would have curtailed naviga-

tion on the lower Hiwassee many months of the

year and would have had a substantial adverse

effect on navigation on -t’ sennessee (1 R.

310-315).". Operation of the present Hiwassee

project by the Government as part of the unified

development of the Tennessee River system is of

substantial aid to navigation’ on, the Tennessee

River and on the Ohio and Mississippi Rivers

(Res. ex. 204, p. 98). Any project ‘located at

the site of the Hiwassee Dam would be of stra-

tegic importance in any program for the control

* Such an effect on navigat ion would seem to be prohibited

under Section 10 of the Rivers.and Harbors Act of 1899 (ce.

425, 30 Stat. 1121, 1151) as an obstruction to the navigable

capacity of the waters of the United States,

402005—41-—-—2

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.

es 16

of floods in the Tennessee and Mississippi River

Valleys (id.’at 18-19, 99), and would have great

potentialities for good ‘or for evil, dependjng.

upon the design and method of operation. <A pri-

vate development for power purposes alone might

well result in subsiantially impairing the flood-

protection benefits to be derived from Government

_ projects located below it on the main stream of the.

Tennessee.” 7 ; of |

*The Federal. Water Power Act and Section 26a

of the Tennessee Valley Authority Act, as

amended," constitute an assumption of federal con-

trol of the sort which underiay the decision in the

Chandler-Dunbar case. Under Section 7 (b) of

the Federal Water Power Act, the Federal Power

Commission. would have, been. obligated to with-

hold its consent for the proposed development con-

templated by respondent if it had found that, this

- © Respondent himself graphically described the difference

between. private operation for power at the particular site in

question and Government operation, for.flood protection (1

R. 99-100, 110-111}. Moreover. it appears that in 1924

one of. respondent's former subsidiaries (Southern Appa-

lachian Power Company) was specifically advised by ‘the

Federal Power Commission that the proposed Murphy proj-

ect. located above the Hiwassee site, “involves storage and

its management to such an extent that it might be a serious

detriment to navigation or materially improve it below” and

that the Commission would therefore assert jurisdiction over

‘ the development under Section 24 of the Federal Water

Power Act. as amended: (1 R. 201-202).

The applicable provisions of these statutes are set forth

in the Appendix, infra, pp. 29-30. —

2

ce

eee OBOE VLE ORIG: BASE BOAT ORT AI Ee”

7 | 9. /

development should be undertaken by the United

States. Under. Section 26a of the Tennessee Valley

. Authority Act respondent’s proposed project could

have been coristructed only if the plans for its con-

struction and operation had been approved by the

‘Board of,Jirectors of the Tennessee Valley “Au-

thority t being in conflict with its plans for

the unified development and regulation of the Ten--

nessee River system. Thus, i in this case, as in the

- Chandler-Dunbar case, the landowners’ right to

erect the structures necessary for the production of -

water power was dependent upon the decision by

the Federal Government that the proposed use of

the river did not conflict with the federal program

for the development of the river system for the’

~ purpose of aiding commerce among the States. In

this case Congress, by specifically authorizing the .

construction of Hiwasseé Dam by the Tennessee

Valley Authority, has made a determination which

precludes the respondent from.asserting a right to

use the lands for hydroelectric purposes. Under

the reasoning of the ( ‘handter-Dunbar case, there-

fore, respondent is not entitled to a valuation of |

his lands based on their value for dam-site pur-

poses,

2. Even assuming the inapplicability of the rule

of the Chandler-Dunbar case discussed above, the —

decision below ‘departs in several important re-

spects from éstablished principles of valuation.

For, even if the Chandler-Dunbar case does not re-

LS

quire exclusion of any “power” value from the

computation of just compensation, the court below

erroneously took several factors into account in

reaching the conclusion that the property in fact

had commercial value for power purposes.

a. In determining that the property had value

for power purposes, the court below considered,

inter alia? its value for power purposes to the Gov-

ernment. Thus, the court stated (4 R. 6):

, Even if it be conceded that the,property

was one which could be developed profitably

as.a power site only by some company or

governmental agency enjoying a low. in-

terest rate, its availability for such develop-

‘ment should not be ignored in placing a

value upen it, particularly where it is being

acquired for the very purpose of such de-

velopment, [Italics supplied. Pre

But it has long been settled that the availability of

the property. for the condemnor’s use is not to be |

considered in determining just compensation.

United States v. Chandler-Dunbar Co., supra at

80-81; Boston Chamber of Commerce v. Boston,

217 U.S. 189, 195." The power of eminent do-

main exists to enable the condemnor to’ aequire

property without being forced to pay a premium

resulting from the value of the land to him.

1 Sée also McGovern v. New York, 229- Us. 363, 372;

Vew York v. Sage..239 U.S. 57, 61; Olson v. U nited States.

0 1, S. 246, 256, 261,

.

ey A oe pees *

ae titania %

That the court was influenced, in part at least,

by the value of the property to the taker, is further

confirmed by its treatment of the evidence of prices

paid by the Government for other lands in con-

junction with the same project. In Reason 3, infra,

pp. 23424, we point out the impropriety of using”,

such evidence at all, but at this point we wil] discuss

it solely to show that the value of the property to —

the condemnor was an element of value that ‘was

‘ considered by the court in reaching its composite

judgment. The court stated that the Government

by prior negotiation had purchased 9/500 acres in

the Hiwassee area at a total price of $396,844.79

(4B. 7-8). This was an average price of approxi-

mately $41 an acre. The property purchased by

the Government, however, included city property

within the town of Murphy and improved tracts

used for churches, schools, and mills having a much

higher value per acre than the unimproved moun-

tain land of respondent .(1 R. 402). After adjust-

ments for such differences, it appeared that the

average per-acre price was $27.70, which would

result in a total valuation for the lands in suit of

$324,953 (1 R. 416). The court, however, disre- —

garded this difference in the character of the land,

stating (4 R. » 8) :

_ It is true that € small part of the a

- thus purchaséd was town property and that

some,of the other had been improved and

its value increased as a result of such im-

20

provement ; but, on the other hand, the avail-

ability of the land for power purposes con-

stituted its chief element of value as a whole,

and it was for such purpose that it was -

heing acquired. {Italics supplied.] _.

Furthermore, even the unadjusted average of

$41 an acre, applied to respondent’s 12,000 acres, .

would have produced a value of only $492,000.

The use which the court made of these figures in

supporfing its valuation of $976,289.40 indicates:

clearly that it was- proceeding on the theory of

determining value to the taker. The court stated

that of 9,500 acres aequired from others at a cost

of $396,874.79, only 1,229 acres were actually to

be flooded. It further stated that to acquire other

lands necessaty for the development the Govern-

ment had spent $158,636, including $96,305 for a

tale mine, and that all of the property acquired

from others made up only one-fifth of the reser-

voir, It then stated (4R.8): © — ..

If a purchaser felt justified in expending

$555,531 for lands to provide approximately

_- “one-fifth of the basin of the reservoir, it.

would not seem unreasonable to place a

value of $976,289.40 upon lands which would

- provide not only the remainder of the basin,

but also the dam site necessary to the devel-

opment. ~~ a. : |

But this figure of $555,531 was paid not for one-

fifth of the land required but. for 10,440 acres plus

an operating tale mine, or 43 percent of the

. . ’

: ,

el lr. ba een” ©

wi eaanetinesntsal ih

21 ;

total land, all acquired for the project. Accord-

" ingly, in this computation the court not only as-.

sumed that the figure used-by it related only toa”

small percentage of the lands aequired but also

ignored the difference in value between the various

_.types of land involved: That treatment was based

upon the theory that since all of the land below

. the contour line was being acquired for dam-site

purposes, it should all be valued upon the basis of

its usefulness for that purpose. The court held

in effect that since the Government had selected

this site for the construction of a dam to serve its

constitutional purposes, that fact was relevant to

establish a value for dam-site purposes, even

_ though there was no’ showing of any independent _

market for such, use. .

b. In- seeking to establisti a commercial value

‘of the property for power purposes, respondent —

_ was permitted to introduce extensive evidence as -

to the cost of constructing a hypothetical private

hydroeleetric development’ orf the lands owned or

controlled by him as“well as on lands owned by

strangers, to compute an imaginary annual profit

‘to be realized from the imaginary enterprise, and

to estimate the value of the property by capitalizing

these imaginary profits. Although both courts be--

low refused to accept in full the figures employed

by respondent, they nevertheless approved the en-

_ tire line of evidence as competent and merely found

a lower valuation than that urged by respondent.

/

‘In refusing to reject that evidence ints totality _

_ both eourts below departed fiom established prin-

ciples of valuation. - It has been firmly’ settled that”

evidence of estimated profits from an unrealized

plan -of development may not be. taken into acs

count.” -'Of course; where property is readily con-

. Vertjble to another use, that fact may be shown in -

determining its value (cf. McCandless v. U nited . °

States, 298 U. S. 342); but where, as here, the -

‘property ‘had been held for 27 years (1 R. 12) and.

where there was no expectation of any sich exten-

sive commercial development in the reasonably near —

future, such evidence was wholly incompetent. Cf.

| Olson v. United States, 292 U. S. 246, 2573 Coniti- -

nental Land Co. V. United States, 88 F. (2d) 104,

111 (CC. A. 9th). Aithough respondent may havé

hgped originally to utilize the property for hy dyo-

electric purposes, his attempts to interest pr ivate

capital in such an enterprise had come to naught

i R. 216, se, 225-226, 253),"° and, inf essences

See, e. g.. U sited States v. Meyer, . 113 F. (2d) 387,

is C. A. 7th) ; United Gas Co. v. R. R: Comm’n, 278 U.S.

300, 317-318; United States v.-Boston, C. C. &.N, ¥. Canal

Co., 271 Fed. 877 (C. C. A, Ist); San Diego Land & Town

Co. v. Neale, 88 Calif, 90, 25 Pac. 967; Tacoma. Nisqually

Power Co.. 57 Wash. 420, 107 Pac. 199.

* 1 Moreover. respondent owned only a portion of the lands

necessary,4or the imaginary project, and although it had

the right of eminent domain in North Carolina, that right

- could not be considered ifi Uetermining whether there was.

~ a reasonable probability of future development: * New York

v. Sage, 239 U.S. 57, 61. And-in any event, the necessary —

lands not Sadedanem included lands in Tennessee and Georgia ~

~- /

_ he is seeking in these acneneiilenans to recoup from.

* the Government, at a profit if possible, his i improvi-

‘dent promoter’s outlay.’* In these circumstances,

the testimony as to the profits to be derived from _

‘the imaginary project was wholly inadmissible. -

3. The decision below is in square confliet with

United States v. Bailey, 115 F. (2d) 433 (G. C. A.

5th), in holding that prices paid by the Govern-—

ment for other lands:acquired for the same project

may De considered in determining jast compensa-

tion. There, in referring-to evidence as to prices.

paid by the Government for property adjoining |

the land condemned, the eourt.stated (p. 434): _

Such evidence complicates the record, con-

fuses the issue, is misleading, and especially

in condemnatiffi cases, raises coHateral is- .

Sues as to the conditions under which such

sales were made; it- should have bee n ex-

eluded.

2

Ss

where respondent did not have the right of eminent domain,

- as well as lands owned by the United States, the State of

‘ North Carolina, and-by utilities none of which could have

: been condemned by respondent. (I R. 157- 168.) a =

/“In support of its award the court below emphasized

that respondent had expended $1,199,603.27 in an attempt to

develop these lands. (4R.5.) But this figure was made up

of miscellaneous expenditures incurred over a period: of

nearly 30 years, including such items as New York office

expense, taxes paid on the lands, the expense of organizing

and dissolving a -pyramid of eight or nine separate cor-

porations, travelling expenses, advertising, interest paid on

bonds, and fees paid for engineering studies ‘admittedly

obsoletesat the time of the trial. (1 R. 1.72, 183-186, 190,

194-198, 204; Res. Ex..187.) The actual cost of the land con-

demned was only’ $277,821.56 (Rés. Ex. 363).

24

Moreover, the question is one of general im-

portance, since. it recurs frequently, particularly

with respect to the Tennessee Valley Authority.

Pursuant to Section 4 (i) of the Tennessee Valley

Authority Act, the Authority always endeavors to

‘ aequire real estate by purchase before resorting to ‘@

condemnation, with the result that in almost every

instance in whigh land ‘is condemned, lands in the

same vicinity have been acquired by purchase. In

many cases it will be to the Government’s interest

to introducé evidence of prices paid in such pur- :

chases, and if the decision below is allowed to stand,

the Government’ will be compelled to take. incon-.

sistent positions pending ‘final adjudication of the —

issue. It is therefore in the public interest that the

~ question be settled. *

4. Finally: there exists a square conflict between

the Fourth and Fifth Circuits as to-the scope of

appellate review under Section 25 of the Tennessee

, Valley Authority Act which provides that the

* * *° circuit court of appeals shall

_upon the hearing on said appeal dispose of

the same upon the record, without regard to

the awards or findings tha etofore made .by

the commissioners or the district judges,

and suck ¢ireuit court of appeals shall there-

upon fix. the value of the said. py

sought to be condemned.

‘The Circuit Court of Appeals for the Fifth Cir-

cuit has interpreted these provisions to mean that ‘¢

it must determine the value of the property by ex- |

Barn STALLS an poe

25

percising its independent judgment on the record,

without giving any. weight tg the findings of the

Commissioners or of the DistMict Court, contrary

" to the position taken by the court below. United

States v. Reynolds, 115 F. (2d) 294 (C. C. A. 5th) ;

Stephenson Brick Co. v. United States, 110 F. -

(2d) 360 (C. C. A. 5th); United States v. Harris, |

(115 F. (2d) 343 (C.-C. A. Sth) ; Finley v. United

— 118 F. (2d)-815 (C. C. A. 5th).

CONCLUSION

For these reasons, it is respectfully submitted

that this petition for a writ of certiorari should

be granted. |

, CHARLES Fay,

Acting Solicitor General.

4 Wuuam C. Firs, Jr.,

— General Counsel,

| Tennessee Valley Au@hority.

Aveust 1941. . | ,

48 Stat. 58:

| | APPENDIX

Tennessee Valley Authority Act of 1933, ¢. 32,

Spe, 25. The Corporation may cause pro-

ceedings to be instituted for the acquisition

by condemnation of any ‘lands, easements,

or_rights of way which, in the opinion of

the Corporation, are necessary to carry out

the provisions of this Act. The proceed-

ings shall be instituted in the United States

- district court for the district in which the

land, easement, right of way, or other in- ©

terest, or any part thereof, is located, and -

such court shall have full jurisdiction to

divest the complete title to the property

sought to be acquired out of all persons or

claimants and vest*the same in the United

States in fee simple, and to enter a decree

quieting the title thereto in the United

States of America. ,

Upon the filing of a petition for con-

demnation and for the purpose of ascer-

taining the value of the property to be ac- —

quired, and assessing~ the compensation to

be paid, the court shall appoint three com-

missioners who shall be disinterested per-

sons and who shall tale and subscribe. an

oath that they do not swn any lands, or

interest or easement in any. lands, which it

may be desirable for the United States to

acquire in the furtherance of said project,

and such commissioners shall not be select-

ed from the locality wherein the land sought

to be condemned lies. Such commissioners

shall receive a per diem of not to exceed

(26)

$15 for their services, together with an addi-

tional amount of $5’per day for subsistence

for time actually spent in performing their

duties as commissioners.

It shall be the duty of such commission-

ers to examine into the value of the lands

sought to be condemned, to. conduct hear-

ings and receive evidence, and generally to

take such appropriate steps as may be

proper for the determination of the value °

of the said lands sought to be “condemned,

and ‘for such purpose the commissioners are

authorized to administer oaths and ‘sub-~

poena witnesses, which said witnesses shal] _ |

receive the same fees as are provided for

witnesses in the. Federal courts. The said

commissioners shall thereupon file a report

setting forth their conclusions as to the

value of the said property sought to be con-

demned, making a separate award and valu-

ation in the premises with respect to each

separate parcel involved.. Upon the filing

of such award in court the clerk of said

court shall give notice of the filing of such

award.to the parties to said proceeding, in

manner and form as directed by the judge

of said court.

Kither or both parties may file exceptions

to the award of said commissioners within

twenty days from the date of the filing of

said award in court. Exceptions filed to

such award shall be heard before three Fed-

eral district judges unless the parties, in

writing, in person, or by their attorneys,

stipulate that the exceptions may be heard

before a lesser number of judges. On such

_ hearing such judges shall pass de novo upon

the proceedings had before the commission-

ers, may view the property, and may take

_additional evidence. Upon sueh hearings

28

the said judges shall file their own award,

fixing therein the value of. the property

sought to be condemned, regardless of the

award previously made by the said commis-

sioners.c - | ’

. At any time’within thirty days from the

filing of the decision of the district judges.

upon the hearing on exceptions to the award

made by the commissioners, either party

may appeal from, stl¢lf decision of the said

judges to the circuit court of appeals, and

‘the said circuit court of appeals shall upon

the hearing on said appeal dispose of the

same upon the record, without regard to the

awards or findings theretofore made by the -

- commissioners or the district judges, and

. guch cireuit court of appeals shall thereupon

fix the yalue of the said property sought to

be condemned. |

Upon acceptance of an award by the

owner of any property herein provided to be

appropriated, and the payment of the money

awarded or upon the failure of either party

to file exceptions to the award of the com--

missioners within the time specified, or upon

‘the award of the commissioners, and the

payment: of the money by the United States

pursuant thereto, or the payment of the

money awarded into the registry of the court

by the Corporation, the title to said prop-

_erty and the right to the possession thereof

shall pass to the United States, and the

United States shall be entitled to a writ in

the same proceeding to dispossess the |

former owner of said property, and all les-

sees, agents, and attorneys of such former

owner, and to put the United States, by its

corporate creature and agent, the Corpora-

tion, into possession of said property.

. * *. ee *

©

Sec. 26a. [As amended by the Act of

August 31, 1935, e. 836, 49 Stat. 1075, 1079.]

The unified development and regulation of

the Tennessee River system requires that no

dam, appurtenant works, or other obstruc-

tion, affecting navigation, flood control, or

public lands or reservaticns shall be con-

structed, and thereafter operated or main-

tained across, along, or in the said river or

any of its tributaries until plans for such

construction, operation, and maintenance

shall have been submitted to and approved .

by the Board; and the construction, com-

mencement of construction, operation, or

maintenance of such structures without such

approval is hereby prohibited. When such

plans shall have been approved, deviation

therefrom either before or after completion

of such structures is prohibited unless the

modifieation of such plans has previously

been submitted to and approved by the

Board. :

* * "- +. “*

Federal Water Power Act, ¢. 285, 41 Stat. 1063,

as amended by the Act of August 26, 1935, c. 687,

49 Stat. 803, 838, 842, 846:

Sap. 7..% -* .*

(hb) Whenever, in the judgment of the

Commission, the development of any water

resources for public purposes should be

undertaken by the United States itself, the

Commission shall not approve any applica-

tion for any project affecting such develop-

ment, but shall cause to be made such, ex-

aminations, surveys, reports, plans, and

estimates of the cost of the proposed devel-

opment as it may find necessary, and shall

submit its findings to Congress with such -

recommendations as it may find appropriate

concerning such development.

7 oe

.

30

SEC. 23. pes

(b) * * * Any person, association,

corporation, State, or municipality intend-

ing to construct a.dam or other project

works across, along, over, er in any stream

or part thereof, other than those defined

herein as navigable waters, and over which

Congress has jurisdiction under its author-

ity to regulate commerce with foreign na-

tions and among the several States shall -

before such construction file declaration of

such intention with the Commission, where-

upon the Commission shall cause immediate

investigation of such proposed construction .-

to be made, and if upon investigation it

shall find that the interests of interstate or’

foreign commerce would be affected by such

proposed construction, such person, associa- .

tion, -orporation, State, or municipality

shall not construct, maintain, or operate

such dam or other project works until it

shall- have applied for and shall have re-

ceed a license under the provisions of this

Act. If the Commission shall not so find,

and if no public lands or reservations are

-affected, permission is hereby granted to

construct such dam or other project works’

_ such stream upon compliance with State

Ws.

Rivers and Harbors Act of 1899, ¢. 425, 30 =

Stat. 1121:

Sec. 9. That it shall not be lawful to

construct or commence the construction

of any bridge, dam, dike, or causeway over

or in any port, roadstead, haven, harbor,

canal, navigable river, or other navigable

water of the United States until the con-

‘ gent of Congress to the building of such

structures shall have been obtained and

31

“until the plans for the same shall have

been submitted to and approved by the

Chief of Engineers and by the Secretary

of War: Provided, That such structures

may be built under authority of the legis-

lature of a State across rivers and other

waterways the navigable portions of which

lie wholly within: the limits of a single

State, provided the location and plans

thereof are submitted to'and approved by

the Chief of Engineers and by the Sec-

retary of War before construction is com-

menced: And provided further, That when

“ag for any bridge or other structure

ve been —— by the Chief of Engi-

neers and by the Secretary of War, it

shall not be lawful to deviate from such

plans either before or after completion of

the structure unless the modification of said

plaris has previously been submitted to and

received the approval of the Chief of En-

_ gineers and of the Secretary of War.

Sec. 10. That the creation of any obstruc-

tion not affirmatively authorized by Con-

gress, to the navigable capacity of any of

the waters of the United States is hereby

a ag and it shall not be lawful to

uild or commence the building of any

wharf, pier, dolphin, boom, weir, break-

water, bulkhead, jetty, or other structures

in any port, haven, harbor, canal,

navigable river, or other water of the United .

States, outside established harbor lines, or

where no harbor lines have been established,

ex on plans recommended by the Chief

of “neta

eers and authorized by the Secre-

tary of War; and it shall not be lawful to:

excavate or fill, or in any manner to alter

or modify the course, location, condition, or

capacity of, any port, roadstead, haven, har- _

32

‘bor, canal, lake, harbor of refuge, or in-

closure within the limits of any breakwater,

or of the channel of any navigable water of

the United States, unless the work has

been recommended f the Chief of Engi- .

neers and autho

War prior to beginning the same. .%

U.S GOVERNMENT PRINTING OFFICE IH4t

by the Secretary of |