Petition for Writ of Certiorari — United States v. Toronto, Hamilton & Buffalo Nav. Co.

Supreme Court brief1949

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What actually matters in this document.

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Opinion below @ereeeecse CRUSH apenas en Wap

Jurisdiction ............ penis edadese¥aubiasecseess ee

Specication of errors to be urged iets Base vikes

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fiibe:

BESES wenn

me CITATIONS

fe v. Ross, 167 U.S. 548 . Seceeoeeeveeeees eeneeser "19

Brooks-Scanion Corp. ¥. United States, 265 U.S. 106 ..: 18°

Danforth v. United States, 08 U.S. 271 ......... aise

Davie v. Newton Coal Co., 267 U.S. 292 .............. 19°

Kieselbach v. Commissioner Internal ee, $17

7 ag ~ Pekeemracmnceatlndunaten ®eeseepeeeseeeees 18

Monongahela Navigation Co. v. United States, 148

US. 312 COCOA EEE SOE HEE EEE H HEHE SHEDS SEE ESESO® 18

Olson v. United States, 292 U.S. 246 ...........0008 20

Ralph v. Hasen, 98 F. 3d 68 CSP eeeeoetoesreseeerssers 21

Seaboard Air Line Ry. on Goh sabe be US. .

eeeevees eeeeteesaeeseeeeeeeseeaneeeseersersete heck

United States v. Chandler-Dunbar Co., 229 U.S. 53 .... 18, 20

United States v. Cors, No. 182, this Term ............ 22

United States v. John J. Pelin & Co., Inc., 884 U.S. 624... 21.

United States v. Miller, 317 U.S. 369 £0. cee ccccees 20

United States v. New River Collicries, 262 U.S. 841 ... 19, 20

United States on rel. T.V.A. v. Poweleon, 319 U.S. 266 21

Welch v. T.V.A., 108 F. 2d 95 2... ccc cccecccessecees 21

estchester County Park Commission v. United States,

143 F. 2d 688 .. ee eeeeoe eee ees eee eoee eee eee eeeesnes 21

Statutes:

Merchant Marine Act of 1936, as amended, 88 Stat.

oe 1242:

Miscellaneots:

Bonbright, Valuation of Property cisst)

catego sah Keeue Seheebsadecesis exanas 16

Miscellaneous—Contd. ; ae Page

‘McCormick, Damages (1986) :

Page 181 ..... peeubeecoesccseseovecctece ‘ 20

NE AONE ho aS Nk bib cbc dccedececbeccese dinwa: 19

Nichols, Eminent Domain (oa ed. 1917) PP slese

‘Page 1171-1178 eeresere seer eceoeseseses 17

Orgel, Valuation Under Eminent Domain (1g 6)

Ch. XIV, XV, XVII-XIX . eeeeeeeeereses cere 16

ae ee (9th ed. 1912)

Page 1543 “ @@@eeeeeeoeeeeneeeeeeeeaaeen eeeeene 19

8 Williston, Sales (Rev. ed. 1948)

: § 599 * eeeeeerve ee eeeeereereteeeeesaseee . 19

"§ 599e e@eeeeeeeeeneee Pee ee ee 2 eeeeeeee 19

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Ynthe Supreme Gonrt ofthe Wnited Sites

OcroBeR TERM, 1948 |

—“No.. 624 ,

_ Tue Unrrep States, PETITIONER

a ee

THE Toronto, HaMILTON AND BurraLo

NaviGaTION CoMPANY :

PETITION FOR A WRIT OF CERTIORARI 1:0

ae THE COURT OF CLAIMS

. ps -

The Solicitor General, on behalf of the United —

States, prays that a writ of certiorari issue to

review the judgment of the Court of Claims, en- —

tered in the above-entitled case on December 6,

1948. a pik

OPINION BELOW ° .

Theo opinion of the Court of Claims (R. 14-25) is

~—— at 81 F. Supp. 237.

The Sacdarsivinst of the Court of Claims was en-

tered on December 6, 1948 (R. 25). The jurisdic-

tion of this Court is invoked under 28 U.S.C.

1255(1). :

QUESTIONS PRESENTED |

4. Whether the just compensation payable for

a vessel requisitioned by the United States in 1942, |

after an eight-year period of idleness, may be de-

termined on the basis of capitalization of the earn-

ings realized: from the enterprise in which the

ship was used during the period from 1916 to 1932.

_ 2, Whether, in determining just mepreien

os a vessel requisitioned in 1942 on the Great...

Lakes, the court may disregard a definite demand

and prices prevailing for such vessels in that area

because they did not reflect the most profitable

_ use for which the vessels were physically adapta- .

ble, in favor of a more profitable demand on the ,

_ Atlantic coast of Florida, in the absence of any

showing or finding that the owner would have

availed himself of the latter market. :

STATUTE INVOLVED ‘

The pertinent provisions of the Merchant on

rine Act of 1936, as amended, 53 Stat. 1254, 1255, .

- 46 U.S.C. 1242, are set forth in Appendix A, infra,

24. ) ;

.: nislicints

The findings of the Court of Claims” a 14) me

disclose the following pertinent facts:

1. The Maitland No.1, a car ferry, was built in

1916 for the carriage of railway freight cars on

the Great Lakes. The vessel had a gross tonnage

‘of 2,757 tons, with four railroad tracks on the car

deck, having a capacity of 30 freight cars of the

size in use in 1916 or 26 of the larger, modern

type in use in: 1942 (Finding 6, R. 5). The ves-

: se cost the original owner approximately $362,800.

In August 1916, respondent acquired the vessel at

-a cost of $394,560, a mark-up of about 8.75 per cent

(Finding 7, R. sh. Expenditures of $38,115.46 °

were made by respondent from 1917 to 1930 for

additions and betterments to the ‘veusel (Finding

8, R. 5). ’

me From October 1916 to June 1932, respondent

operated the Maitland No. 1 on Lake Erie, between

_ the ports of Ashtabula, Ohio, and Port Maitland,

~ Canada, a distance of 91 miles. The vessel carried

commodities loaded in freight cars moving between

_., points in the Pittsburgh area, served by the New

York Central Railroad, and points in Canada

served by the Toronto, Hamilton and Buffalo Rail-

way Company,.and afforded a short cut from the

rail route, which moved around the end of. Lake

Erie and through the: congestent —, area

(Finding 9, R. 5-6).

X The Maitland No..1 was : only vessel waned son

and operated by respondent on its. car ferry line.

_ Respondent’s chief source of revenue was derived

pa hag transportation of ‘bituminous coal to

Canada, and its annual income over the sixteen -

and one-half years of operation fluctuated in ac-

cordance with the coal carried. From ‘August 12, |

1916, to January 1, 1921 ndent’s average an-

nual net operating income : s $17,216. 28. In 1921

and 1922, the car ferry was operated at a net loss.

During the next five years (1923 to 1928), the net

operating income averaged $129,893.92 per annum.

In 1928, the net operating income declined sharply

below the 1927 earnings. This downward trend

continued in 1929 and the vessel was operated at

a loss in 1930, 1931, and 1932. By June 1932, traf-

fic handled by the vessel had decreased to the

extent that respondent laid up the vessel. The

operation of the car ferry line was never resumed

after that date. For the entire period from Au-

gust 12, 1916, to June 30, 1932, respondent’s annual .

average net income from the Mattland No. 1 was

$42,816.36, before Federal income taxes. This

amounted to 10.41 per cent of respondent’s in-

vestment (Finding 10, R. 6-7).

The sharp decline in respondent's net operating

income from the Maitland No. 1 in 1928 and 1929:

was solely the result of a diversion of traffic to

other routes. Prior to 1928 the bulk of traffic

handled by respondent consisted of bituminous

coal for movement to the Steel Company of.

Canada at Hamilton, Ontario. In August, 1928, .

this traffic was diverted to Sodus Point, New York,

for movement across Lake Ontario to’ Hamilton.

Most of the remaining traffic was lost in 1932 when

the new Welland Canal was opened, enabling lake

vessels to take shipments directly to Lake Ontario .

points. Since June 1932 there has been insufficient _

traffic available to justify ferry operation (Find-

ing 11, R. 7-8). The vessel remained laid up until

November 1935.

On Nov ember 29, 1935, respondent chartered the

Maitland No. 1 to the Nicholson Universal Steam-

ship Company, which covered the tracks on the ear

deck with planking and used the vessel to carry

‘a

freight across Lake Michigan. On February 10,

1936 an agreement was made whereby title to the

Maitland No. 1 was transferred to Nicholson for

a total consideration of $166,000, and respondent

retained the right to recapture the vessel within a

specified time. Respondent exercised this right on

December 15, 1937, , reacquiring title for $92,894.80

(Finding 12, R, 7-8).

Thereafter the vessel was again laid up at Ashta-

bula, Ohio, the captain and chief engineer remain-

ing on board as shipkeepers, and minor repairs

were made from time to time. From January 1,

1938, to August 20, 1942 the average annual cost

of repairs was about $399

2. On August 20, 1942, the War Shipping Ad-

ministration, acting pursuant to the Merchant

Marine Act of 1936, as amended, 46 U.S.C. 1242,

requisitioned title to, and possession of, the Mait-

land No. 1 on Lake Erie. (Finding 2, R. 4). gfhe

_ next day, a representative of the War Shipping

Administration surveyed the vessel and estimated

the repairs necessary to place her in operating eon-

dition at $34,980 (Finding 14, R. 9). Shortly

after the requisition, the War Shipping Adminis-

tration removed the machinery from the vessel and

sold the hull to a pure shaser who converted it into a

4 barge (Finding 2, R. 4).

On April 20, -1943, the War Shipping Adminis-

tration fixed the sum of $72,500 as just compensa-

tion for the Maitland No. 1 (Finding 3, R. 4).

On December 21, 1943, respondent notified. the

6 -

War Shipping Administration that the amount

fixed by it was unsatisfactory and that it elected

to exercise its statutory right to receive 75 per cent

of the award without prejudice to its.right to sue

for additional compensation. On June 10, 1944,

a was paid the sum of $54,375 oo

+ 4)

On May 15, 1945, respondent, alleging that the

fair value of the vessel was $766,128 (R. 3),?

- brought suit in the Court of Claims to recover

additional compensation for the ss of the

Maitland No. 1 (R. 1-3).

3. The court found that ‘At the:time she was

requisitioned, the use to which the Maitland No. 1

was best adapted was as a car ferry on the Great

Lakes. At that time, however, there ‘was no de- _

mand for the vessel as a car ferry on Lake Erie _

and there is no satisfactory proof that there was

any demand for her for use as a car ferry elsewhere

on the Gréat' Takes.” ( Finding 17, R. 9-10).

1Qn the date of requisition, the book value of the vessel,

~ as shown on respondent’s records was’$75,509.51 (Finding 15, —

R..9). This book value had been computed by deducting .

annual depreciation of four per cent.from the $92,894.80

paid by respondent to Nicholson Universal Steamship Com-

pany on the ‘‘recapture’’ of the vessel, as described above

(supra, p. 5). However, since respondent had initially

taken depreciation from October 1, 1916, to December 31,

tt ee. |

+1919 “at a rate of one per cent per-annum and thereafter at

the annual rate of four per cent, if th i and

| | the: subsequent recapture are ignored as not representing

bona fide sales, the net book value on August 20, 1942, would

have been $37,096.13, From January 1, 1938, to August 20,

1942, respondent maintained insurance on the Mattland No. 1

based on a valuation of $100,000 (Finding 16; R. 9).

: 7.

Most operation of car ferries on the Great Lakes.

has centered on Lake Michigan and the Detroit

River. The only car ferries which have ever oper-. —

present record disclos¢s, are the Maitland No. 1,

the Ashtabula, owned by the Pennsylvania | Rail-

road, and the Marquette and Bessemer No. 2, joint-

ly owned by the Marquette and Bessemer Dock and

Navigation Company and the Pere Marquette Rail-

way Gompany, all three of which operated across

Lake Erie from Ohio to Canada. As noted above,-

ated. elsewhere on oa Lakes, so far as the

lack of traffic and its diversion to other routes had.

caused respondent to take the Maitland No. 1 out

of service in the middle of 1932. The Pennsylvania

Railroad continued the operation of its car ferry,

_/Since unlike the New York Central, it did not con-

trol a rail route into Canada. Neither in 1942 nor

at any time subsequent thereto has the Pennsyl-

vania Railroad required an additional car ferry

to handle its traffic. The Marquette and Bessemer

No, 2, referred to above, was laid up in 1931, was

not operated thereafter, and. was sold in March

- 1942 for $37,724.04. :

With the station of car ferries operated across

the Detroit River, where an entirely different type

of boat was used under different traffic conditions, 3

the balance of the car ferries on the Great Lakes |

operated across Lake Michigan, chiefly between

1930, these car ferries he ; advan-

tage over the all-rail transportation, both in respect

fred

igan and in Wisconsin, ‘Until about .

ee —

eh 2 “f re

Wa Sed

Fun ERs

of time and rates. By 1930, the railroads com- —

pleted ‘‘an outer belt’’ railroad around the City of ©

Chicago, thus avoiding long delays, and the car’,

—ferry rate differential was abolished. Also, changes

in traffic on the ferry lines required more clearance .

between the car decks and the cabin decks of the —

vessels. Thereafter, the ferry lines were unable

to compete, successfully with the all-rail routes. —

Vessels-of the Maitland No. 1 type became obsolete .

for further use as car ferries on the Great Lakes.

By 1936 the majority of these outmoded car fer-

ries had been laid up and were replaced by larger

vessels, having greater speed, larger cargo capacity

and passenger facilities (Finding 17, R. 9-10).

Accordingly, in 1942, the only demand on the ©

Great Lakes for the Maitland No. 1 was for a num- —

ber of secondary uses, but such a demand for non-

. ear-ferry uses did exist (Finding 18, R. 10). Be- —

tween 1936 and 1940 three car ferries, similar to _

the Maitland No. 1, which had been laid up for a —

number of years, were sold for conversion to high- —

way ferries (for—transporting automobiles and _

passengers) in the Great Lakes area. In 1936, the ©

Ann Arbor Railroad sold the car ferry Ann Arbor |

No. 4, which was smaller than the Maitland No. 1,

to the Michigan Highway Department for $25,000.

In 1938, the Pere Marquette Railway Cetasany |

sold the car ferry Pere Marquette No. 20, which —

had been built in 1903 from the same plans as the ©

Maitland No. 1, to the Michigan Highway Depart- _

ment for the price of $50,000, plus an additional

$10,000 for delivering the vessel across Lake Mich-

rae colick Hp

- igan to a shipyard. In 1940, the Pere Marquette

- Railway Company sold the car ferry Pere Mar-

quette No. 17, which had been built in 1901 (from

the same plans as the Maitland No. 1,) to the Mich- -

. igan Highway Department for $65,000 (Finding »

~ 18, R. 10-11). Although the Pere Marquette Nos. 17

and 20 were comparable to the Maitland No. 1 in

size, carrying capacity, speed and design, they were

_ in a poorer state of repair:on the dates sold than

was the Maitland No. 1 on ‘the date of requisition |

(Finding 19, R. 11). |

In 1940 and 1942, two other hick ear ferries,

_ which had been laid up and which likewise were

- ina poorer state of repair than the Maitland No. 1,

were sold to purchasers who removed the engines

from the boilers, tore off the superstructure of the

vessels, and used them as bulk carriers of pulp-

wood. In July 1940, the Pere Marquette Railway -

Company sold the Pere Marquette No. 19 for $24,-

000. The vessel was built from the same plans as the

Maitland No. 1 and was a sister ship of the Pere

_ Marquette No. 20, referred to above. . In March,

1942, the Marquette and Bessemer No. 2 was sold

for $37,724.04. She had been built in 1910 from

the same plans as the Maitland No. 1, was jointly

_. owned by the Marquette and Bessemer Dock and

_ Navigation Company and the Pere Marquette Rail-

way Company and had formerly been used as a

car ferry on Lake Erie (Finding 21, R. 13-14).

4. The Court of Claims then went on to find that

there was a demand in 1942 on the Atlantic Coast

for vessels such as the Maitland No. 1 for use as a

ear ferry between Florida and Cuba Seis 20,

R. 12). ;

: In May, 1941, the Florida East Coast Railroad

_ Company sold the Henry M. Flagler, a car ferry.

which had operated between Florida and Cuba for

$100,000. The Flagler was built in 1914 from sub-

stantially the same plans as the Maitland No. 1 but

was equipped to operate in and had been used in

salt water. As in the case of the Mattland No. 1,

the Flagler had been laid up for ten years prior to

the sale. Between May, 1941 and July 28, 1941,

the purchaser expended $65,820 for necessary re-

pairs. On July 28, 1941, the W. S. A. requisitioned

: the vessel and appraised her value at $170,000,

which the owner “aaa as just compensation

(Finding 20, R. 12).

In June, 1942, the W. S. A. requisitioned two

ocean-going car ferries, the Joseph R. Parrott and

the Estrada Palma, comparable in age, dimensions _

and construction to the Maitland No. 1, which were _

owned by the Florida East Coast Railroad Com- |

pany and had been operated by that company be-°

tween Florida and Cuba. By negotiation between —

the parties, a value of $332,500 for each vessel was

agreed upon, and the company accepted $665,000

in full payment (Finding 20, R. 12-13). ae

_ Shortly after the cessation of hostilities in World

War II, the Grand Trunk Railway Company sold

the Grand Haven, a car ferry formerly operated

on the Great Lakes, for $50,000. The Grand Haven

was built j in 1903, was smaller than the M aitland

No. 1 but had more speed and power. At consid-

~ erable expense, the amount of which is not shown. —

‘in the record, she was floated down the Mississippi

River and conyerted for use as a ferry between ~

Florida and Cuba (Finding 20, R. 12).

-. At the time of the requisition of the Maitland

No. 1 it would have cost not less than $115,000 to :

move her to the Atlantic Coast and fit her for

: operation i in salt water. In addition, some strength- -

ening of the framing would probably have been

_ required before the Maitland No. 1 coud be classi-

- fied for ocean-going service. There is no evidence

as to héw much these additional changes would

have cost (I sa toe lactone |

5. Afte g the foregoing findings, the court.

coneluded, in ‘its opinion, that the fair value for |

the Maitland must be determined as of the putative

Florida location, and :that since the sales trans-

actions described above did not establish-a suffi-

ciently fair and adequate value for the vessel, re-

sort must be had to other methods to establish her

value (R. 22-23). Despite the fact that the Maitland

No. 1 had been laid up since June 1932 and re-

spondent had filed an application with the Inter-

state Commerce Commission on February 11, 1943,

for leave to abandon .its car ferry line because |

‘‘traffic is not available in sufficient quantities to

- warrant continued operation, even if a suitable

car ferry were available’ (Finding 11, R. 8), the

court declared ‘‘we are compelled to resort to a con-

sideration of the earnings of the Maitland No.1 —

during the time the vessel was actually operated as ‘-

a car ferry, in conjunction with the contempora-

neous transactions in vessels of close similarity in

- determining a fair value”’ (R. 23).

- Attributing an average mean residual value of ae

- $50,000 to the Maitland No, 1 as an obsolete car —

ferry, the court capitalized the average annual —

income of $42,816.36 received from 1916 to 1932

at an annual rate of 10 per cent for the estimated

24 years of useful life remaining and arrived at

the sum of $389,767. 15 (R. 23). The court then 1

noted that ‘This figure approximates the amount

paid by defendant to Fl.rida East Coast Car Ferry

Company for the car ferries, Joseph R. Parrott

-and Estrada Palma” (R. 24).° Since the normal

useful life of a car ferry dperated in salt water is _

‘ . only 80 per cent of such a ferry operated in fresh |

water, the court reduced the value of the Mattland

No. 1 by 20 per cent to $311,813.72. Next, the

estimated necessary repairs of $34,980 (Finding’ .

14, R. 9) were deducted. Finally, since it would — ,

- have cost at least $115,000 to move the Maitland a

_ No. 1 to the Atlantic Coast and fit her for salt

water operation, that sum was also deducted, leav-

ing a balance of $161,833.72 (R. 24). Although

the court found that there had been an enhance-

ment of $11,420 in the value of vessels in the Atlan-

tie Coast between 1941 and 1942 because of the

greater demand for vessels which occurred after

the beginning of World War (Finding 20,

—

R. 13), such enhancement was ignored in making |

this computation.

The court, with two judges dissenting, concluded

_ that the fair value at the time of taking was $161,-

833.72. Since petitioner was entitled to credit for

” the sum of $54,375 paid on June 10, 1944, interest

was awarded respondent at 4 per cent per annum

for delay in payment: on $161,833.72 from August

20, 1942, to June 10, 1944, and on $107,458. 12 from

J une 10, 1944 to date of payment (R. 24).

oy udge Whitaker (with whom Madden, J. con- -

eurred) dissenting, was of the opinion that the

capitalization of earnings was improper because

‘‘at the time of its requisition it was earning noth- _

ing and had.earned nothing for quite a long time’’ |

.” (R, 24). Adverting to the price at which compa-

rable vessels sold on the Florida East Coast, he

pointed out that this basis for valuation ‘“‘presup- .

poses that the owner of this vessel on the Great:

Lakes would have been able to sell his vessel after

hé had transported it down there, and there is no

_. showing whatever that it would have been able to

- do so. I feel quite sure that plaintiff would not

'~ have gone to the expense of $115,000 to transport

the vessel to the Florida East Coast in the hope of ,

finding a purchaser ‘there. Just compensation is

to be determined not only as of the time of the

taking but also as of the place of taking. ** * The

War Shipping Administration fixed $72,500 as just:

- eompensation: I do not think the plaintiff has

earried the burden of showing that this was incor-

rect” (R. 25).

ay 1942), predicated upon a ca

-—ent’s realized earnings during e period from mg

hg, : 14

SPECIFICATION OF ERRORS TO BE URGED

— The Court of Claims erred:

1. In making an award of just compensation for

the Maitland No. 1 which was not based on a deter-

mination of the value the vessel had at the place

of taking (the Great Lakes) but the value which it

might have had if it were located on the Atlantic

-coast of Florida. oe

2. In making an award of just compensation Sor.

the Maitland No. 1 (which was taken in August

to 1932.

_ 3. In making an award of just sciaaemantion for

the Maitland No. 1 which was not based on a deter-.

mination of value at the time and place of taking.

4. In disregarding itsfindings of the evidentiary

or primary facts in making. its ultimate finding |

that “‘the fair Value of the sfaitland No. 1 at the

time of the requisition was $161,833.72.”’

5. In making an ultimate finding (that the fair

value was $161,833.72) which was nut sustained by

‘its findings of the evidentiary or primary facts.

6. In failing to deduct, as required by Section

902 of the Merchant Marine Act of 1936, as

amended, 46 U.S.C. 1242, from its ultimate finding

- of the fair value of the Maitland No. 1, the sum of

$11,420 found to represent the enhancement of

value due to the greater demand» for vessels after

the beginning of World War IT.

4%, In failing to make the ultimate finding that

the fair value of the Maitland No, 1 at the time |

and place of taking was no more than $72,500.

&, In failing to hold that respondent has not car-

ried the burden of showing that the sum of $72,500

fixed by the War Shipping Administration as just

- eompensation for the Maitland No. 1 was incorrect.

9. In entering judgment for respondent in the

amount of $107,458.72, with interest at 4 per cent |

per annum for delay in payment on $161,833.72

from August 20, 1942, to June 10, 1944, and on

$107. 458.72 from J we 10, 1944, to date of payment. —

: REASONS FOR GRANTING THE WEIT

In determining the just compensation t®be paid

for the taking of the Maitland No. 1 in August 1942

at the Great Lakes, the Court of Claims has re-

sorted to the doubly novel procedure, first, of bas-

ing its award largely upon a capitalization of re-

'. gpondent’s realized income from 1916 to 1932,

despite the fact that the vessel had been laid up

for eight years and was obsolete for further use

as a car ferry on the Great Lakes, and, secondly,

of relying heavily on a demand and possible mar-

__ ket for a vesse! such ak the Maitland as a car ferry

on the east coast of Florida, some thousands: of

miles from the place of taking, even though a defi-

nite demand did exist at the Great Lakes for such

ships for secondary, non-car-ferrying uses. These -

unusual and erroneous rulings sharply depart from

the accepted principles of eminent domain, and

raise important and substantial. questions bearing

on pending just compensation litigation for mer-

chant ships requisitioned during the war.

eee Se _-—S—-—<( CS;”*;*;‘i‘OSOSCS a

“1, Assuming that no actual market value could —

is be asotttained, the court below stated ‘‘we are com-

led to, resort to a consideration of the earnings

of the Maitland No.1 during the time that the ves-

Hoe IP

sel was actually operated as a car ferry

-(R. 23). By capitalizing the average annual

income of $42,816.36 earned by respondent from

- 1916 to 1932 at an annual rate of 10 per. cent for —

the estimated remaining 24 years of use for the ©

ship, and attributing an average mean residual

value of $50,000 te it as an obsolete car ferry, the

- eourt obtained the basic sunisof $389,767.15 (R.

23).2, We submit, however, that the court erred

seriously in assigning a value to the Maitland —

grounded on capitalization of respondent’s real- .

ized income. It must be borne in mind that. that

which was requisitioned was not the business en-

terprise of respondent, but a vessel which was used

in the business. Whatever the merits of capitaliza-

_. tion of income when an entire business enterprise,

‘such as a public utility, is condemned (Bonbright,

Valuation of Property (1937), ch. XE, XII, XVI,

passim; Orgel, Valuation Under Eminent Domain

(1936), ch. XIV, XV, XVII-XIX, passim), that

method can be clearly misleading when employed

to estimate the value of property owned by the

_ business enterprise. Cf. Lewis, Eminent Domain

(3d ed. 1909) § 727; Nichols, Eminent Domain

(2d ed. 1917), pp. 1171-1173 (realty). Before

2The process by which this figure was reduced to

$161,833.72 in order to take into account the cost of making |

it available on salt water, and in Florida, is described on page

12, supra.

such evidence could properly be considered com-

petent, some means would have to be devised where- |

by measurable shares of the total earnings could

be allocated to the respective income producing

- factors of invested capital, management skill, and

_ general business conditions. Moreover, a capital-

- ization of. profits already realized means nothing,

unless these profits may reasonably be ne.

- continue. - cae °

\ Applying these considerations to ie case at bar,

it is plain that no reliance can be placed upon such

capitalization. During the sixteen and one-half

_ years of operation of the Maitland, the average

annual net income of respondent fluctuated as fol-

- lows: 1916 to 1921—$17,216.28; 1921 to 1922—net

— loss; 1925 to 1928—$129,893. 92; 1930 to 1932—net

‘loss (Finding 10, R. 6)._ On its face, such varia-

tion in income shows that it would be impossible

- to attribute any particular fraction of the earnings

~ to the vessel itself. As the findings reveal (Find-

- thg 11, R. 7-8), the income of respondent was de-

dent upon the adequacy of other traffic routes

and not upon any income producing qualities in-

herent in the Maitland. Supra, pp. 34. Even

if this obstacle of allocation were surmountable,

the fact remains that respondent has not oper-

ated its ear ferry line since June 1932; at no

time - since that date has there been traffic

sufficient to justify vessel operation (Finding

11, R. 8). It is inconceivable that a “willing

buyer’? would give any weight to capitalized

earnings which neither had continued in the

ene

deriv

past nor could’ be expected to continue. ‘Tf

demand is lacking for a property because it is non-

_ productive, it cannot be urged that its present value

may, nevertheless, be measured by its past earn-

ings. Nor does the possibility of profitable opera-

’ tion of the Maitland as a car ferry between Florida

and Cuba affect the bearing of capitalization of.

_realized income upon the vessel’s current ‘value.

to estimate the value of the Maitland as an ocean

_ ear ferry from its income, from tw enty-five to ten

= *

; _ Conceivably, capitalized prospective earnings

* would be relevant ; however, it'i is sheer speculation

years before, as a fresh water car ferry. Such |

~ income was earned under other management, was

mainly from the transportation of coal,

bject to all-rail competition, and, in short,

resvllted from a host of different factors.

‘Finally, it is evident that such uncritical use of

capitalization of income realized from 1916 to 1932,

to determine fair value in 1942, violates the un-

questioned rule that value is to be. ascertained as

of the time of taking. See United States v. Miller,

317 U.S. 369, 374; Kieselbach : y. Commissioner of

~-Fnternal.Revenue, 317 U.S. 399, 403; Danfo?th v.

United States, 308.U.S. 271, 283; Brooks-Scanlon

_ Corp. v. United States, 265 U.S. 106, 123; United

States v. Chandler-Dunbar Co., 229 U.S. 53; 76:

Monongahela Navigation Co. v. United States, 148

U.S. 312, 3414

2. a. Although the Maitland was 5 ronilatined

, ay the Great Lakes area where a demand «xisted

for such vessels, for secondary uses (supra, 1

. / :

—_—_

>" #}

8-9), the Court of Claims predicfed its higher |

finding of value in-large part on the existence

‘of a demand for similar ships on the Florida

East ‘Coast’ for ~use" as car ferries between

Florida and Cuba.* But the general ‘rule,

announced by this Court in dictum, is that just

compensation fer personal property must be

when there is a market for the‘commodity at that —

spot (United States v. New River Colliertes Co.,

262 U.S, 341, 344: Davis v. Newton Coal Co., 267

U.S. 292, 301). The rule as thus formulated: is

identical with the measure of damages for breach

of contract or for tortious conversion. In actions

for breach of.contract, the market value at the time

and place where the contract should have heen per-

formed is the basis for assessing damages. In

cases of wrongful destruction of, or injury to, per-

sonal property, the market value of the place of

wrong is used. Sée 3 Williston, Sales (Rev.-ed.,

1948), §§ 599, 599e; Sedgwick, Damages (9th ed.,

1912), p.°1543; McCormick, Damages (1935), p.

- 182. In all these cases, the purpose of the judgment

is to indemnify’ the plaintiff for his loss, without

more,* and an award of market value at the time

2 For the purposes of this petition, no exception is taken

to the finding of the lower court. that.a ‘demand did exist, at

the time of taking, on/the Florida East Coast for a vessel

such as the Maitland No. 1 for use as a car ferry (Finding

20, R. 12). However, it should be poipted ont that the

court made no finding that if the Mai ad’ been trans-

ported to the Atlantic coast it would have; been sold for that

purpose. See infra, pp. 21-22). 4 eee !

* Bauman v. Ross, 167 U. 8. 548, 574; Seaboard Air Line

Ry. Co.%. United States, 261 U. S. 299, 304; ited States v.

and place of the taking or wrong constitutes a fair

measure of the loss, since that is the sum for which

the plaintiff would presumably have sold the prop-

erty to another or can now replace it for his own”

use.

Here, the court concedes that there were a num-

ber of secondary. uses for the Maitland for which

a demand did exist in 1942 on the Great Lakes

(Finding 18, R. 10), and the findings revéal that

(aside from the 1937 sale of the vessel itself) five .

vessels of the car-ferry type had been sold on the

Great Lakes, during the period from 1936 to 1942,

at/prices ranging from $24,000 to $65,000 (Find-

ings 18-21, R. 10-14). ‘Supra, pp. 8-9. This

definite home market was disregarded because

there was:no demand in that vicinity for the

car-ferry ise which would have been the

most profitable employment for the vessel (R.-

23).. But the law of just compensation does

not require property to be valued at its highest »

price, wherever that highest market may happen

to be. . True, consideration should be given to the, -

‘highest and most profitable use for which the—

property is adaptable’’, but only if the need or \

likelihood of need ‘foy, such use exists ‘‘in the rea-

;

' sonably near future”, and only to the extent that

“the prospect of demand for such use affects thé

market value while the property is privately held.”’

Olson v. United States, 292 U.S . 246, 255; see also

New River Collieries, 262_U. S. 341, 343 ; United States v

Miller, 317 U-S. 369, 373; Bonbright, Valuation of Property

' (1937), p. 409; MeCormick, Damages (1935), p. 181.

Boom v. Patterson, 98 U.S. 403, 408; United States.

v. Chandler-Dunbar Co., 229 U.S. 53, 81; Lewis,

Eminent Domain (3rd ed. 1909), pp. 1232-1233. The

proper inquiry is not what might be the value of

_ the property for a particular use if it were located

- at some other part of the country, but what it is

, now worth in the available market, in view of its

adaptability for that special use and-—all_others. |

_ If the particular use does not affect the market

price in the place of taking because of the charae-

ter of the existing demand, the concept of. fair

value as. indemnification does not require that

yesort be had to other, g#tant, markets, unless

_-the owner shows clearly that he would actually

have dealt in those places. Without such a show-

— ing, to select the location of greatest value, as the

a windfall to the owner who would receive more

_ than he would probably have gotten from a private

| purchaser or’ ‘than he would have to pay for a

replacement. :

_ On the respondent feith the burden of proving

' all the elements of its claim for just compensation

(United States ex rel,,T.V.A. v. Powelson, 319

| U.S. 266, 273; United States v. John J. Felin &

| Co., Inc., 334 U.S. 624, 631; Westchester County

Park Commission v, United States, 143 F. 2d 688,

692 (C.A. 2); Ralph v. Hazen, 93 F.2d 68, 70

- (C.A.D.C.); Welch v. T.V.A., 108 F. 2d 95, 101

€ .A. 6)), but it made no proof that it wouid have

_ sold, or attempted, to sell, the Maitland on the At-

lantie coast of Florida. Owners of bulky property,

like ships, do not ordinarily expend large sums

(here, $115,000) for, transportation to higher

. markets on the chance that a sale might be made | !

there at a better price. And the Court of Claims

made no finding that respondent:would have been

able to sell the vessel had it been transported to

the coast, ner that respondent would have gone to

the expense of placing the M. gitland on the Florida

- Cors, No!

market in the hope of finding a purchaser. The

court likewise made no finding that a demand

existed on the Great Lakes for vessels of this type

to be transported to the Atlantic seaboard and

- fitted for operation as an ocean car-ferry.* In fine,

. there was no warrant for discarding the demand

existing at the place of taking for vessels like the

Maitland, and basing the award on a different

demand which existed only, at a single distant spot.*

i. ‘Twenty-four cases involving claims totaling.

-$9,817,537.57 for vessels requisitioned on the Great

_ Lakes are presently pending in the lower courts.”

- ‘dItis anticipated that, in reliance upon the decision

below, ‘an attempt will be made to secure awards _

_ grounded on. the higher prices prevailing on the

| Wi Hak Gas aul Seiiisle ‘Semel thak wee covered tee

such. purpose sold for $50,000. (R. 12), lees than the edminie-

trative award offered respondent. : 4

the value it found. ‘for the Maitlond on the Atlantic coast the.

enhancement of $11,420 ‘which ‘occurred, as the court found,

between 1941 and 1942 because of the greater demand for

vessels after the beginning of World War II (Finding 20,

R...13). St Brief for the United States, United States v. .

132, this Term; now pending decision.

7 See Appendix B, #fra, p. 26.

Keane coast, . stithoit any é owing that these

coastal markets were available or normal for Géat

Lakes vessels. The instant holding indicates that

the Court of Claims will be receptive to such con-

tentions, with the result that inflated judgments

_will be granted in this class of ship requisition

cow CLUSION

> For the reasons stated, it is respectfully sub-

mitted that this petition for a writ of certiorari -

should be granted. |

_ ert euraee™

| Prop B. PERLMAN, »

oe | Solicitor General. AW

-MmARCH TMG. LS pi

—

i nid tn ite A - ww + ee ee -lUCOCOC Sw Se Se

APPENDIX A

_ Section 902 of the Merchant Marine Act of 1936,

as amended, 53 Stat. 1254, 1255 (46 U.S.C. 1242)

provides, in part, as follows: 3

(a) Whenever the President: shall pro-

‘claim that the security of the national de-

fense makes it advisable or during any na-

tional emergency declared by proclamation

of the President, it shall be lawful for the

Commission to requisition or purchase any

vessel or other watercraft owned by citizens _

of thé United States, or under construction —

within the United States, or for any period |

during «uch emergency, to requisition or —

charter the use of any such property. The

termination of = gags tad so declared ——

-shall be announced by a further proclama- ~

property or the use thereof is so requisi-

tioned, the owner thereof shall be paid just —

compensation for the property taken or for _ _

the use of such property, but in no.case shal!

the value of kook pie gt taken or used be

a ae by ag Cie necessitat-

ing the taking or use. any property is ~ |

‘ / taken and used under authority of this seo”

~ * tion, but the ownership. thereof is not re-

: uired by the United States, such ame ned |

ee shall be restored to the owner in a condition

_ at least as good as when taken, less ordinary

- wear and tear, or the owner shall be paid .

, an amount for reconditioning sufficient to ~

‘7 place the property in such condition. The

“Owner not be paid for any consequen-

tial damages arising from a taking or use

of property under authority of-this section.

PIS 0 0 Me IO DELI A PO SIA NE ANON A EEC Rap ect 3

(d) In all cases, the just compensation .

authorized by this section shall be deter- ~

. mined and paid by the Commission as soon

25 os

as practicable, but if the amount of just

compensatién determined by the Commis-

_ sion is unsatisfactory to the person entitled

thereto, such. person shall be paid 75 per

- @entum of the amount so determined and

_ shall be entitled to sue the United States to

_. recover such further sum as, added to said

75 per centum, will make up such #mount.

as will be just compensation therefor, in the

manner provided for by section 24, para-

ten _ graph 20, and section 145 of the Judicial

ie ne edition, title 28, secs. 41,

‘ nae

Fg DADDY

| APPENDIX B 4

‘Pending Just Compensation Cases Involving

Vessels on Great paxes

Vessel Owner Claim

A. H. Smith Great Lakes Transit Corp. | $ 2,253.21

Back Bay jGartland SS Co. 269,596.00

Bennington Gartland SS Co. 94,364.00

Brockton ~ 1Gartland SS: Co. 230,645.00 |

C. T. Jaffray Great Lakes Transit Corp. - 1,005.90

- Daniel Willard |Great Lakes Transit Corp. 395.32

Edward Chambers/Great Lakes Transit Corp. 974.31

Fred. W. Sargent |Great Lakes Transit Corp. 2,748.43

Fleetwood {Nicholson Transit Co. | 270,000.00

George D. Dixon |Great Lakes Transit Corp. ‘ 387.32

J.E.Gorman.’ {Great Lakes Transit Corp. 1,241.19

H. A. Serandrett |Great Lakes Transit Corp. 1,038.30

J. M. Davis. Great Lakes Transit Corp. _ 707.25

Lucinda Clark |Waterways Transp. Inc. 24,100.00

_Mizpah _|Eugene F. McDonald, Jr. 348,750.00

- Octorara Sand Products Corp. 1,003,333.33

P. E. Crowley Great Lakes Transit Corp. —- 34.92

Sable Detroit & Cleveland Nav. Co.| 7,848,570.00

. Spikes A. J. Huch, exec. 10,000.00

Utica Great Lakes Transit Corp. 2,257.13

W. W. Atterbury Great Lakes Transit Corp. | | 732.54

a “|99,817,587.57

Souree: Appendix D fo Brief for the United States in

‘United States v. Cors, this Term, No. 132, checked —

~ Green’s Great Lakes Directory, 1942 en

. %U. 8. Government Printing Office, 1940 3827450/463 .

5°

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.