# Petition for Writ of Certiorari — Henjes v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1950
- **Citation:** 339 U.S. 978

## Text

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MAR 27 1950

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SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1949

No. 705

HELEN K. HENJES anp EDMUND F. BOWEN, as
Executors or THE Last Witt anv TESTAMENT oF Gerp
H. Henses, Deceasep, anp HENJES MARINE, INC.,
a CoRPORATION, Potltionere,

vs.

THE UNITED STATES

PETITION FOR WRIT OF CERTIORARI TO THE
COURT OF CLAIMS

Epmunp F. Lams,
Counsel for Petitioner.

Euus, Hovucnton & Eis,
Of Counsel.

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TABLE oF Cases CITED

Brooks-Scanlon Corp. v. United States, 265 U.S. 106. 9,11
Cooke v. United States,91 U.S. (1 Otto) 389... 20
S

wie 20h yc aay areas 0
Long Island Water Supply Co. v. City of Brooklyn,
ee 9,12
Lynch v. United States, 292 U. S. ER 9, 16, 20
Monogahela Navigation Co. vy. United States, 148
ee ete iat 9, 11, 12, 16, 22
Muschany v. United States, 324U.8.49..... 17, 22
Omnia Commercial Company v. United States, 261
ES teehee 11
Reading Steel Casting Co. v. United States, 268 U.S.
neni og 20
United States v. Bostwick, 94 U.S. (4 Otto) 53... 20
United States v. Cors, 69S. Ct.1086....... 22
Union Pacific Railroad Co. vy. United States, 99 U.S.
Mee ce 20

Statutes Crrep
Merchant Marine Act, 1936, as amended 46 U.S.C.

ere 24
28 U.S.C. 1255 (See. 3 (b) Act of February 13, 1925,
$0959 cine a RL ee oe oe ane 2
—7527

Se |

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SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1949

No. 705

HELEN K. HENJES ann EDMUND F. BOWEN, as
ExecutTors oF THE Last WILL aNp TESTAMENT OF GERD
H. HenJes, Decrasep, anp HENJES MARINE, INC.,
a CORPORATION,

Petitioners, |
against

THE UNITED STATES

PETITION FOR A WRIT OF CERTIORARI TO THE
COURT OF CLAIMS

The petitioners, Helen K. Henjes and Edmund F. Bowen,
executors of the last will and testament of Gerd H. Henjes,
deceased, and Henjes Marine, Inc., pray that a Writ of
Certiorari issue to review the judgment of the Court of
Claims entered in the above entitled case on January 3,
1950.

Opinion Below

The opinion of the Court of Claims (R. 18-31) is reported
in 87 F. Supp. 780.

——

2

Jurisdiction
The judgment of the Court of Claims was entered on
January 3, 1950 (R. 32). The jurisdiction of this Court

is invoked under the provisions of 28 U. S. C. 1255 (See,
3 (b) of the act of February 13, 1925, as amended).

Statement

This is a suit to recover just compensation for the
taking by the United States of title to and possession of
the diesel tug Roperr Henses on August 1, 1942. The tug
Rosert Henses was owned by Gerd H. Henjes, deceased,
who was also the owner of all the capital stock of Henjes
Marine, Ine., a New York corporation (R. 19). Prior to
February 25, 1942, the Roserr HeNJEs was operated by
Henjes Marine, acting as the agent of Gerd H. Henjes
(R. 20).

On February 25, 1942, the tug was delivered to con-
tractors performing work for the Navy Department at
Floyd Bennett Field, Brooklyn, New York (R. 20). These
contractors, White Construction Co., Ine., Underpinning
& Foundation Co., Inc. and Riggs, Distler & Co., Inc., had,
on December 17, 1941, entered into a cost-plus-a-fixed-fee
contract with the United States, acting through the Chief
of the Bureau of Yards and Docks of the Navy Depart-
ment, for the expansion of facilities at the Navai Air
Station, Floyd Bennett Field, New York. The contract is
known as Navy Contract NOy-5176 (R. 20). This contract
recited that the parties thereto, being the United States of
America and the said contractors, ‘‘with the intent and
purpose to accomplish certain projects hereinafter men-
tioned within the shortest practicable time by cooperative
mont * * * & mutually agree as follows”? (R.12). The
contract provided that the work in the field on behalf of the
government should be in charge of an officer designated

, ae

by the Contracting Officer, and that no equipment costing
in excess of $200.00 should be purchased by the Contractors
and that no equipment should be leased by them at a
rental of more than $100.00 a month except by approval in
writing of the Contracting Officer or his representative.
This contract remained in full force and effect during
all of the times herein involved (R. 20).

This contract also provided that in addition to the
fixed fee to be paid to the contractors, the contractors
should be paid the actual net cost of the materials actually
furnished and the services and labor actually performed
under the terms of the contract (R. 14-15) ; it being stated
to be the intent of the contract that the contractors shall
be reimbursed for all out-of-pocket expenditures made by
the contractors for or on account of the contract ‘‘which
are specifically or impliedly authorized, sanctioned or ap-
proved by the Contracting Officer or by his direction,’’
and that ‘‘actual net cost’’ will include ‘the amount of
rental approved by the Contracting Officer for plant and
equipment owned or procured by the Contractors”? under
the provisions of the contract, ‘‘for use in connection with
the work’’ under the contract (R. 15).

On March 11, 1942, the contractors, with the written
approval of the officer-in-charge under Navy Contract
NOy-5176, entered into a written contract with Henjes
Marine, Ine. for the charter or lease of the tug Roperr
Henyes at the rent of $100.00 per 24-hour day. This char-
ter was on a bare-boat basis under which the contractors
agreed to furnish the crew and pay all other expenses of
operation. There was no specified term in the lease and
the contractors reserved the right to terminate the lease
at any time that it appeared to the Government’s advan-
tage to do so. However, it was further specifically pro-
vided that unless the title to the equipment passed to the

a

- —
4

Government at an earlier date, the rental period would
terminate when the equipment was removed from the site
of the work, provided this was done within a reasonable
time after notice from the contractors or the officer-in-
charge that the equipment was no longer required (R. 21).
There was contained in the charter agreement a specific
provision requiring the lessor to deliver title to the equip-
ment to the Government when and if the total rental paid
for the equipment should equal the valuation thereof
plus 1% per month for each month or fraction thereof
such piece of equipment had been in use, and whereby
upon completion of the work performed by any piece of
equipment under Navy Contract NOy-5176 or upon ter-
mination of the charter, as otherwise provided in the
charter, the Government might, at its option, purchase
any piece of equipment by paying to the lessor the differ-
ence between the valuation thereof plus 1% per month for
each month or fraction thereof such piece of equipment
had been in use, and the total rentals which had been paid
for such piece of equipment. By the charter agreement,
the tug was appraised at $100,000.00 (R. 21).

While the tug Roserr Henses was working under this
charter agreement upon the expansion of the facilities at
Floyd Bennett Field under Navy Contract NOy-5176, on
July 20, 1942, a Procurement Officer of the Navy Depart-
ment requested the War Shipping Administration to requi-
sition title to the tug. The request was made, as stated
therein, ‘‘by the Naval Air Station, Floyd Bennett Field,
New York. Tug to be acquired by the Navy and turned
over to Officer-in-Charge, Contract No. NOy-5176, Naval
Air Station, Floyd Bennett Field, New York, for further
transfer to the contractor under charter agreement’’ (R.
22). In accordance with this request on August 1, 1942, the
War Shipping Administration acting pursuant to Section .

__ —

902 of the Merchant Marine Act of 1936, requisitioned
title to and possession of the tug Rosert HenJes together
with all her tackle, apparel, spare parts, gear and equip-
ment, stores and supplies on board, and simultaneously
delivered the vessel at its then iocation at Floyd Bennett
Field to the Navy Department, and the vessel was there-
after continued in use for the expansion of the facilities
at Floyd Bennett Field under Navy Contract NOy-5176 to
and including January 23, 1943 (R. 22). No notice had
been given by the contractors or by the officer-in-charge
under Navy Contract NOy-5176 terminating the charter
or requesting the removal of the tug from the site of the
work.

If the Ropert Henges had not been requisitioned on
August 1, 1942, the plaintiff, Henjes Marine, Inc. would
have earned bare-boat rental amounting to $15,100.00 for
the continued use of the tug on the expansion of facilities

| at Floyd Bennett Field under Navy Contract NOy-5176 up
until January 23, 1943 (R. 25).

If the Government on August 1, 1942, exercised the
option to purchase the tug granted it by Article VII of
the charter agreement, the price which it would be required
to pay is $91,900 (R. 25).

: On October 5, 1942, the War Shipping Administration
| wrote Gerd H. Henjes advising that it had appraised the tug
at the sum of $51,781.00 and offered him that amount as
|

5

just compensation for the vessel (R. 23). This offer was
declined, whereupon the Government advised Mr. Henjes
that he had the privilege of accepting 75% of that amount
and suing the United States to recover such additional sum
as would be just compensation. After considerable corre-
spondence between the parties, during which Mr. Henjes
insisted upon his right to recover compensation in accord-
ance with the terms of the charter agreement, an arrange-

_—_—a
6

ment was worked out whereby Mr. Henjes was paid the sum
of $38,835.75, being 75% of $51,781.00, reserving to him
the right to sue the United States for such additional sum
as ‘‘will make up such amount as will be just compensation
for the vessel as provided by the Constitution and Laws
of the United States’’ (R. 24). Immediately thereafter,
Henjes Marine instituted suit in the Supreme Court of the
State of New York against White Construction Co., Inc,
Underpinning & Foundation Co., Inc., and Riggs, Distler &
Company, Inc., the contractors under Navy Contract NOy-
5176, to recover the amount of $15,100 for the use of
the tug from August 1, 1942 to January 23, 1943, in accord-
ance with the terms of the charter agreement of March 11,
1942. The contractors were defended in that action by the
United States Attorney, and after a trial of the issues by
the Court without a jury, a judgment was entered dismiss-
ing the complaint on the ground that the taking of the
vessel by the Government effectuated a frustration of the
contract between Henjes Marine and the said contractors
(R. 24-25). The present action followed.

In the present action, the plaintiffs have contended that
they were entitled to be paid as just compensation the
amount which the Government would have been required
to pay for the tug Ropert HenJes as upon the exercise
of the option to purchase under Article VII of the charter
agreement, $91,900.00, less the prior payment of $38,835.75;
alternatively that they should be paid as part of just com-
pensation, in addition to the value of the tug, determined
aliunde the charter agreement, the sum of $15,100.00—the
value of the bare-boat charter hire which would have been
earned by the tug under the charter agreement until the
completion of her work at Floyd Bennett Field under Navy
Contract NOy-5176, had not the tug been requisitioned on
August 1, 1942 (R. 29-30).

The Court of Claims rejected both these contentions (R.
30) and held that the value of the Roserr Henves on the
date of requisition, exclusive of any enhancement in value
due to the causes necessitating the taking, was $60,000.00
(R. 27). Judgment was entered accordingly (R. 32).

7

Statutes Involved

The pertinent portions of the Merchant Marine Act, 1936,
as amended, 46 U.S. C. 1242, are set forth in an appendix
hereto, pu. 24-25.

Contract Provisions Involved

The applicable articles of the charter agreement between
the Henjes Marine, Inc. and the Navy contractors covering
the tug Ropert Henges provide as follows (R. 8-9):

ArticLte IV

The Lessor shall initiate shipment of the equipment
to the site of the work immediately. It is estimated
that the equipment will be used for approximately ....
working hours, but the Lessee reserves the right to
increase or decrease the rental period, or to termi-
nate at any time that it appears to the Government’s
advantage to do so, and payment of rentals then due
shall constitute payment in full.

ARTICLE V

A. The Lessor shall be paid at the rate prescribed
in Schedule ‘‘A’’ attached hereto and made a part
hereof. The rental period shall begin on the delivery
of such equipment to a common carrier for shipment
to the site of the work, as evidenced by bill of lading
covering such shipment or other evidence satisfactory
to the Officer-in-Charge, and shall terminate, unless
tile to the equipment passes to the Government at an
earlier date, on the date of removal of such equipment
from the site of the work, as evidenced by a receipt
signed by the Lessor, provided such equipment is re-

8

moved within a reasonable length of time after notice
by the Lessee or the Officer-in-Charge to the Lessor
that such equipment is no longer required. If the
equipment is not removed within a reasonable length
of time, the rental shall terminate on the date of the
notice that such equipment is no longer required. * * *

Articte VII

The Lessor shall deliver to the Government title to
any piece of equipment free of all liens and encum-
brances when and if the total rental paid to the Lessor
for such piece of equipment shall equal the valuation
thereof, plus one percent per month for each month or
fraction thereof such piece of equipment has been in
use, and at the completion of the work performed (by
any piece of equipment) under the principal Contract
or upon termination of the contract as provided in
Article VI, the Government may at its option purchase
any piece of equipment by paying to the Lessor the dif-
ference between the valuation of such piece of equip-
ment plus one percent per month for each month or
fraction thereof such piece of equipment has been in
use and the total rentals theretofore paid for such
piece of equipment, provided that if such payment is
made by the Government, the Lessor shall deliver to
the Government title to such piece of equipment free
of all liens and encumbrances.

Questions Presented

1. Where the United States takes property, which has
been leased to a contractor employed by the Government to
perform by cooperative effort with a department of the
Government work authorized by Congressional appropria-
tion, for the express purpose on the part of the United
States of re-leasing the property to the contractor for use in
the performance of the authorized work, must not the
United States pay as the ‘‘just compensation’’ required
by the Fifth Amendment, damages of appropriation for

9

the taking of the lease in addition to the value of the prop-
erty taken?

9. Where the United States, in the exercise of its para-
mount powers, takes property which it has an existing option
to purchase at a stipulated price, is not, the price stated in
the option agreement the measure of just compensation
under the Fifth Amendment?

Reasons for Granting the Writ

1. What was here taken was not merely the tug Rosert
Henses but the contract with the contractors under Navy
Contract NOy-5176. The tug Roperr Henses was requi-
sitioned at the specific request of the Navy Department for
the express purpose of being simultaneously transferred to
the Navy and turned over to the officer-in-charge under
Navy Contract NOy-5176 ‘‘for further transfer to the con-
tractor under charter agreement’’ (R. 22). Such a trans-
fer to another department of the Government is specifically
authorized by See. 902 (e) of the Merchant Marine Act
(Appendix, p. 24, infra). The tug actually continued to
be employed in connection with the expansion of the fa-
cilities at Floyd Bennett Field under Navy Contract NOy-
5176 to and including January 23, 1943 (R. 22). In holding
that under such circumstances the damages which plaintiff
suffered by the loss of charter hire which it otherwise
would have earned ‘‘were damages of frustration and not
of appropriation, and are not compensable,’’ the decision
of the Court of Claims is in conflict with the decisions of
this Court in Brooks-Scanlon Corp. v. United States, 265
U. S. 106; Monongahela Navigation Co. v. United States,
148 U. S. 312; Long Island Water Supply Co. v. City of
Brooklyn, 166 U. S. 685; and Lynch v. United States, 292
U. S. 571. The decision of the Court of Claims is also in
conflict with the rationale of this Court’s recent decision

7
10

in Kimball Laundry Company v. United States decided

June 27, 1949, 93 (No. 17) L. Ed. Adv. Op. 1420.

In the Brooks-Scanlon case, the Government requisi-
tioned a number of ships under construction in the ship-
yard of New York Shipbuilding Corporation, among which
was a hull known as #193 which the shipbuilding corpora-
tion was under contract to construct for the claimant. The
requisition order required the shipyard to complete con-
struction for the Government, and the Government subse-
quently entered into a contract with the shipyard for the
completion and disposal of the said hull. The Fleet Cor-
poration awarded the claimant as just compensation the
amount of payments previously made to the shipbuilder and
the Court of Claims slightly increased the award following,
however, the same method of ascertaining just compensa-
tion. This Court held that by the taking of the uncompleted
hull and entering into a contract with the shipbuilder to
complete the hull in accordance with the claimant’s contract
with some modifications, the Government expropriated the
claimant’s contract and that the claimant was entitled to
be compensated for the value of his contract and not merely
for the monies which he had expended and the plans and
specifications which had been taken over by the Govern-
ment, saying (265 U. S. 120):

‘‘The contract was not terminated. The direct and
immediate result of the requisition orders and acts of
the Fleet Corporation was to take from claimant its
contract and its rights thereunder.’’

and further (at P. 121):

‘*It must be held that the claimant’s contract and
its rights and interests thereunder, were expropriated.”’

The Court of Claims in the present case cited for its
ruling that the damages sustained by petitioner were dam-

a
11

ages of frustration and not of appropriation, the decision
of this Court in Omnia Commercial Company v. United
States, 261 U. 8. 502. In that case it was not the claimant’s
contract which was appropriated but the product of a steel
mill not owned by the claimant. The facts were that
claimant had made a contract with a steel mill for its entire
output but while the contract was still entirely executory,
no steel having been delivered, none having been appro-
priated to the contract and no part of the purchase price
having been paid, the Government requisitioned the steel
company’s entire production. The requisition was made
not for the purpose of completing or performing the steel
mill’s contract with the claimant but for other use. Re-
covery was denied to the claimant in that case because
nothing belonging to the claimant had been taken. The
distinction between the Omnia case and the present one is
well pointed out in the decision of this Court in the Brooks-
Scanlon case at 265 U. S. 120, 121.

Moreover, the Omnia case itself specifically recognizes
the obligation of the Government to make compensation for
the taking of a contract as well as any other property for
public use, saying (261 U. S. 510):

‘Tf, under any power, a contract or other property
is taken for public use, the government is liable; but if
injured or destroyed by lawful action, without a taking,
the government is not liable.’’

In the present case the Government took plaintiff’s con-
tract with the Navy contractors just as truly as it took the
claimant’s contract in the Brooks-Scanlon case.

That mere compensation for the physical value of the
thing taken is not the measure of just compensation, where
by the taking the owner is deprived of and the Government
acquires rights of value in addition to the thing itself, is
firmly established by the decisions of this Court in Monon-

12

gahela v. Umted States, 148 U. S. 312, and Long Island
Water Supply Co. v. City of Brooklyn, 166 U. S. 685.

In the Monongahela case, the United States, by condem-.
nation proceedings, appropriated a lock and dam of the
Monongahela Navigation Company located on the Monon-
gahela River near Pittsburgh, Pennsylvania. The Act of
Congress pursuant to which the appropriation was made
provided, ‘‘That in estimating the sum to be paid by the
United States, the franchise of said corporation to collect
tolls shall not be considered or estimated’’ (148 U. S. 313),
An award was made to the plaintiff in the condemnation pro-
ceeding pursuant to the proviso of the said Act in the amount
of $209,000.00 ‘‘not considering or estimating in this de-
cree the franchise of this company to collect tolls’’ (p. 319).

This Court held that it was not ‘‘concluded by the declara-
tion in the Act that the franchise to collect tolls is not to
be considered in estimating the sum to be paid for the prop-
erty’’ (p. 328); and held that the Government was re-
quired to pay as just compensation under the Fifth Amend-
ment, not merely the value of the physical property taken
but also the value of the franchise to collect tolls; saying
(p. 341):

‘‘The theory of the government seems to be, that the
right of the Navigation Company to have its property
in the river, and the franchises given by the state to
take tolls for the use thereof, are conditional only, and
that whenever the government in the exercise of its
supreme power assumes control of the river, it de-
stroys both the right of the company to have its prop-
erty there, and the franchise to take tolls. But this
is a misconception. The franchise is a vested right.
The state has power to grant it. It may retake it, as it
may take other private property, for public uses, upon
the payment of just compensation. A like, though a
superior, power exists in the national government. It
may take it for public purposes, and take it even against

——

13

the will of the state; but it can no more take the fran-
chise which the state has given than it can any private
property belonging to an individual.’’

and further (p. 343): ;

‘Tt is also suggested that the government does not
take this franchise; that it does not need any authority
from the state for the exaction of tolls, if it desires to
exact them; that it only appropriates the tangible
property, and then either makes the use of it free to
all, or exacts such tolls as it sees fit, or transfers the
property to a new corporation of its own creation, with
such a franchise to take tolls as it chooses to give. But
this franchise goes with the property; and the Naviga-
tion Company, which owned it, is deprived of it. The
government takes it away from the company, whatever
use it may make of it; and the question of just com-
pensation is not determined by the value to the govern-
ment which takes, but the value to the individual from
whom the property is taken; and when by the taking
of the tangible property the owner is actually deprived
of the franchise to collect tolls, just compensation re-
quires payment, not merely of the value of the tangible
property itself, but also of that of the franchise of
which he is deprived.’’

In the Long Island Water Supply case, the City of Brook-
lyn pursuant to statutory authority condemned the physical
properties and franchise of the Water Supply Company,
which at the time had a contract with the City as the suc-
cessor to the town of New Lots, for the providing of water
for which it was paid a fixed fee for each hydrant. The
condemnation was opposed by the Water Supply Company
on the ground that the legislative act authorizing the con-
demnation was a law impairing the obligations of contract.
In affirming the decision of the New York Court of Appeals
upholding the condemnation, this Court said (166 U.S. 690) :

‘‘Second, a contract is property, and, like any other
property, may be taken under condemnation proceed-

14

ings for public use. New Orleans Gaslight Co. v. Loui-
siana Light & H. P. & Mamufacturing Co., 115 U. 8.
650, 673. Its condemnation is of course subject to the
rule of just compensation * * *.’’

Similarly in the instant case the plaintiff had a subsist-
ing contract whereby it was to receive a fixed bare-boat
charter. rental per day for the use of its tug on a govern-
ment project which was in process but far from completion.
The plaintiff had a continuing right to receive such bare-
boat charter hire as long as the tug continued to be em-
ployed on the project. The Government took the tug and
with it, the right to collect charter hire for the use of the
tug while it continued to be employed on the project; for
it took the tug for the express purpose of continuing it
under charter to the contractors. If the taking in the
instant case were for a public use not related to the proj-
ect upon which the tug was then employed, a different prob-
lem would be presented. The owner of the tug could conceiv-
ably carry on his business with the contractor by substitut-
ing an equivalent tug to perform the contract. But here
he was deprived of that opportunity; for it was not only
his tug but also his contract which was taken. The situa-
tion is analogous to that existing where the Government
condemns business property with the intention of carrying
on the business where, as noted by this Court in its recent
decision in Kimball Laundry Company v. United States,
supra, the taker is obligated to pay not merely for the
value of the physical property taken but also for the going-
concern value. As this Court also noted in the Kimball
Laundry case, where the owner is allowed no more for the
taking of fee title to business property than the value of
the physical property, it is upon the justification that the
going-concern value has not been taken because the owner
is left free to move his business to a new location. Although
in the Kimball Laundry case there was not a taking of fee

_

— ———

title but merely a taking of temporary use, the rationale
upon which this Court proceeded in holding that ‘‘since
the Government for the period of its occupancy of peti-
tioner’s plant has for all practical purposes preempted
the trade routes, it must pay compensation for whatever
transferable value their temporary use may have had,’’ is
equally applicable here. The rationale of that case is that
an ‘‘exercise of the power of eminent domain which has
the inevitable effect of depriving the owner of the going-
concern value of his business is a compensable ‘taking’ of
property.’’ The tug Roserr Hensges in the instant case
was a business property having a going-concern value in
the sense that at the time of the taking it had a subsisting
earning capacity, free and clear of expenses, of $100.00
per day. That going-concern value was taken by the Gov-
ernment in the instant case just as much as the res itself,
since by the taking under the circumstances here present
the owner was deprived of the opportunity of substituting
other property (the equivalent of moving his business to
a new location) to continue to realize the going-concern
value of his business.

15

In denying the plaintiffs below any recovery for the
loss of rental or lease monies which they sustained, the
Court of Claims points to the fact that the charter agree-
ment was for an indefinite term and stipulated that it
could be terminated at any time it appeared to the Govern-
ment’s advantage to do so (R. 30). The termination,
however, which was envisaged by the contract was a ter-
mination by return of the equipment to the owner (Article
V of the Charter Agreement, R. 8); it was not a termina-
tion by the taking of title to the equipment unless title were
taken pursuant to the option provided for in Article VII
(R. 9). To treat the taking of the title to the tug, unless
the Government thereby exercised its purchase option, as

“=

= ai

16

a termination of the charter contract in accordance with its
terms, is to prefer the form to the substance.

As this Court ‘said respecting the Fifth Amendment,
writing by Mr. Justice Brewer in Monongahela v. United
States (148 U. 8. 312, 325):

‘‘And with respect to constitutional provisions of
this nature it was well said by Mr. Justice Bradley,
speaking for the court, in Boyd v. United States, 116
U. S. 616, 635, ‘Illegitimate and unconstitutional prac-
tices get their first footing in that way, namely, by
silent approaches and slight deviations from legal
modes of procedure. This can only be obviated by
adhering to the rule that constitutional provisions for
the security of person and property should be liberally
construed. A close and literal construction deprives
them of half their efficacy, and leads to gradual de-
preciation of the rights, as if it consisted more in sound
than in substance. It is the duty of courts to be
watchful for the constitutional rights of the citizen,
and against any stealthy encroachments thereon.
Their motto should be obsta principits’.’’

Rights against the United States, arising out of contract,
have the same constitutional protection under the Fifth
Amendment as other contracts. Said this Court in Lynch
v. United States, 292 U.S. 571, 579:

‘‘The Fifth Amendment commands that property
be not taken without making just compensation. Valid
contracts are property, whether the obligor be a
private individual, a municipality, a State or the
United States. Rights against the United States
arising out of a contract with it are protected by the
Fifth Amendment. United States v. Central P. R.
Co., 118 U. 8. 235, 238, 30 L. ed. 173, 174, 6 S. Ct. 1038;
United States v. Northern P. R. Co., 256 U. S. 51, 64,
67, 65 L. ed. 825, 828, 830, 41 S. Ct. 439.”’

2. The decision of the Court of Claims in rejecting peti-
tioners’ claim to the option price of the tug as stipulated

_ ——e

17

in the charter agreement or lease, is in direct conflict with
the decision of this Court in Muschany v. United States,
324 U.S. 49.

The Court of Claims has attempted to distinguish the
Muschany case from the present one on the ground that
in the Muschany case the contract was directly with the
Government and stipulated that if condemnation was re-
sorted to, the option price should measure the land owner’s
compensation, while there is no such obligation found in the
instant case (R. 30). Petitioners urge that the attempted
distinction is invalid.

The contract for the leasing by the Navy Contractors
of the tug Ropert Hengezs, entered into with the authoriza-
tion and approval of the contracting officer of the Navy
(R. 10), was as much a contract of the United States as if
it had been made and entered into directly between the
plaintiff and the Navy Department.

The charter party or lease of the tug Ropert HenJes in
the instant case could only be entered into by the contractors
with the authorization and approval of the contracting officer
of the Navy in charge (R. 12-13). The agreement, by its
terms, was made subordinate to the principal contract (Navy
Contract NOy-5176), and it was entered into for the use and
benefit of the United States (R.7). It was terminable when
it appeared to the advantage of the Government to terminate
it (R. 8) and it contained an express provision binding the
owner to convey title to the United States upon the fulfill-
ment of certain conditions, and gave the United States
the opinion to purchase for a stipulated price (R. 9).

The contract in the Muschany case, as will be observed
by reference to that contract (pp. 342-4 of the Record in the
Muschany case, Nos. 31 & 32, Oct. Term 1944) was no more
a direct contract with the United States than was the
charter agreement in the instant case in respect of the
option agreement. The option contract in the Muschany

18

case was negotiated by a real estate broker, appointed by
the United States but to be compensated by the land owner,
and the only action taken by the United States in respect
of the contract was the mere marking of the option agree.
ment ‘‘accepted’’ by an officer in the War Department
(se foot note 1 at 324 U.S. 70).

The charter agreement in the instant case was both au-
thorized and approved by the Navy officer-in-charge under
the principal contract (Navy Contract NOy-5176), and by
the principal Contract the Government obligated itself to
reimburse the contractors for the hire paid for the tug
(R. 15).

The statement by the Court of Claims in its opinion that
the option in the Muschany case ‘‘stipulated that if con-
demnation were resorted to, the option price should measure
the landowner’s compensation’’ (R. 30), is not entirely
accurate. The provision respecting resort to condemna-
tion in the option in the Muschany case read as follows:
(Muschany Record, p. 344, Fol. 495; Nos. 31 & 32, Oct.
Term 1944):

‘“‘If for any reason the title to the land is not ap.
proved by the Attorney General, the Government will
proceed to acquire the land by condemnation proceed-
ings instituted in the District Court of the United
States in which said property is located, under a con-
sent verdict fixing the award at the agreed valuation
and in accordance with all the terms and provisions of
this option and will upon filing its petition in such pro-
ceedings deposit said agreed purchase price with the
clerk of said court, same to be disbursed by said officer
pursuant to the decree entered in such condemnation
proceedings.’’

Thus the condemnation proceeding stipulated for in the
option was a consent proceeding designed to clear title.
The condemnation proceeding actually instituted by the

—

19

Government in the Muschany case was not instituted under
or pursuant to the option but was instituted without regard
thereto, and the Government’s position in the said proceed-
ing was that it was not bound thereby. The fact that the
option in the Muschany case provided a means of clearing
title by the institution of consent condemnation proceed-
ings; whereas the option in the present case merely im-
posed upon the owner the obligation of giving a clean title,
affords no distinction in principle between the two option
contracts. Resort to requisition by the War Shipping Ad-
ministrator under Sec. 902 of the Merchant Marine Act
for acquisition by the Navy, which is authorized by Sec.
902 (e), was as much an exercise of the option to purchase
in the instant case as the resort to condemnation in the
Muschany case; or conversely, the taking of title in the one
case by requisition under Section 902 of the Merchant
Marine Act and in the other case by the declaration of tak-
ing without regard to the option agreement, were each
equally an attempted repudiation of a valid existing con-
tract.

Section 902 (a) of the Merchant Marine Act under which
the taking was effected here, provides: ‘‘When any such
property * * * is so requisitioned, the owner thereof
shall be paid just compensation for the property taken
* * *»? Just compensation for the property taken where
there is an existing option to purchase for a stipulated price
is, it is urged, the price so stipulated as much where the
taking involves a vessel requisitioned under Section 902
of the Merchant Marine Act, as it is the stipulated price
in the case of lands taken by condemnation proceedings.

3. The decision of the Court of Claims is in conflict with
the well-established and traditionally respected principle,
frequently emphasized by this Court, that the United States
is bound by its private contracts to the same extent as

——
20

individuals and may not by the exercise of its paramount
powers abrogate its contract obligations. Cooke v. United
States, 91 U. S. (1 Otto) 389; United States v. Bostwick,
94 U.S. (4 Otto) 53; Union Pacific Railroad Co. v. United
States (Sinking Fund Cases), 99 U. 8. (9 Otto) 700; Freund
v. United States, 260 U. S. 60; Reading Steel Casting Co.
v. Umted States, 268 U. S. 186; Lynch v. United States,
292 U. S. 571.

Writing by Mr. Justice Butler, this Court said in the
Reading Steel Casting Co. case (268 U.S. at p. 188):

‘‘The contract is to be construed and the rights of
the parties are to be determined by the application of
the same principles as if the contract were between
individuals. Smoot’s Case, 15 Wall. 36, 47; Amoskeag
Mfg. Co. v. United States, 17 Wall. 592, 595; United
States v. Smith, 94 U.S. 214, 217.”’

and in the Lynch case (292 U.S. at p. 580) by Mr. Justice
Brandeis:

‘‘But Congress was without power to reduce ex-
penditures by abrogating contractual obligations of
the United States. To abrogate contracts, in the at-
tempt to lessen government expenditure, would be not
the practice of economy, but an act of repudiation.
‘The United States are as much bound by their con-
tracts as are individuals. If they repudiate their obli-
gations, it is as much repudiation, with all the wrong
and reproach that term implies, as it would be if the
repudiator had been a State or a municipality or a citi-
zen.’ Sinking Fund Cases, 99 U. S. 700, 719.’’

The tug Rosert HenJes at the time of its requisition was
under charter to contractors employed by the Navy Depart-
ment to perform, by cooperative effort with the Navy De-
partment, a public work authorized by Congress. The
contract between the United States and the contractors
forbade the contractors to purchase any equipment costing
in excess of $200.00 or to lease any equipment at a rental

A

21

of more than $100.00 per month except after approval in
writing by the contracting officer or his representative (R.
20). The contract for the charter or lease of the tug Rospert
Henses was approved by the Navy officer-in-charge (R. 10)
who by the terms of the construction contract, NOy-5176,
was the representative of the contracting officer (R. 13).
The contract for the charter of the tug was made by the
contractors under and pursuant to the construction con-
tract, NOy-5176 (R. 7) for the use and benefit of the
United States in the performance of the authorized work.
The United States obligated itself by the terms of the con-
struction contract, NOy-5176, to pay the amount of the
rental provided for in the charter (R. 15) and the charter
agreement by its terms required the owner to convey title
to the tug to the United States upon receipt by the owner of
charter hire equivalent to the agreed valuation of the tug
plus 1% per month and gave the United States an option
to purchase the tug during or at the termination of the
charter by paying the lessor the difference between the
amount of rental theretofore paid and the value of the tug
as stipulated in the charter agreement. It is urged by peti-
tioners that this contract was a contract binding upon the
United States, and upon the owner of the tug in favor of
the United States, as much as if it had been entered into
directly between the owner and the Navy Department with-
out the intermediation of the contractors of the Navy De-
partment. To permit the Government, under such circum-
stances, to take title to the tug by the exercise of the requisi-
tioning power given to the Adminisirator of the War Ship-
ping Administration under Section 902 (a) of the Merchant
Marine Act of 1936 for transfer to the Navy Department
and delivery by the Navy Department back to the Navy con-
tractors, without requiring the Government to pay as just
compensation either the option price or the value of the
charter hire earned by the tug until the completion of its

a

work under Navy contract NOy-5176, is to sanction a re.
pudiation by the United States of its contract obligations,

4. The questions presented are of general public im.
portance.

In United States v. Cors, 69 8. Ct. 1086, this Court granted
certiorari because of the importance of the decision ‘jn
the settlement of claims arising as a result of the requisi-
tioning program during the period of recent hostilities.”
The present case presents another phase of the same
problem.

Additionally, it presents the problem of the extent of
the constitutional protection afforded the individual against
the demands of the Government. As this Court said in
Monongahela Navigation Co. v. United States, 148 U. §.
312, 324:

‘‘The question presented is not whether the United
States has the power to condemn and appropriate * * *
for that is conceded, but how much it must pay as com-
pensation therefor. Obviously, this question, as all
others which run along the line of the extent of the
protection the individual has under the Constitution
against the demands of the government, is of impor-
tance; for in any society the fullness and sufficiency of
the securities which surround the individual in the
use and enjoyment of his property constitute one of
the most certain tests of the character and value of the
government.’’

22

The case also presents the problem of the validity of
obligations assumed by the United States under a contract
made by contractors employed by it, with its approval and
for its benefit. As this Court said in Muschany v. United
States, 324 U.S. 49, 66:

‘‘Tt is a matter of public importance that good faith

contracts of the United States should not be lightly
invalidated.’

>

23

Conclusion

For the reasons stated, it is respectfully submitted that
this petition should be granted.
Epmunp F. Lams,
80 Broad Street,
New York 4, New York,
Counsel for Petitioner.

Of Counsel:
Exus, Hovexton & Eis,
Southern Building,
Washington, D.C.

24

APPENDIX

The pertinent portions of the Merchant Marine Act,
1936 (Act of June 29, 1936, c. 858, Title IX, Sec. 902,
49 Stat. 2015) as amended August 7, 1939, c. 555 Sec. 3, 53
Stat. 1255, 46 U. S. C. 1242, provide as follows:

Sec. 902 (a) Whenever the President shall proclaim
that the security of the national defense makes it advisable
or during any national emergency declared by proclama-
tion of the President, it shall be lawful for the Commission
to requisition or purchase any vessel or other watercraft
owned by citizens of the United States, or under construc-
tion within the United States, or for any period during
such emergency, to requisition or charter the use of any
such property. The termination of any emergency so de-
clared shall be announced by a further proclamation by
the President. When any such property or the use thereof
is sO requisitioned, the owner thereof shall be paid just
compensation for the property taken or for the use of
such property, but in no case shall the value of the property
taken or used be deemed enhanced by the causes necessi-
tating the taking or use. If any property is taken and used
under authority of this section, but the ownership thereof
is not required by the United States, such property 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
place the property in such condition. The owner shall
not be paid for any consequential damages arising from a
taking or use of property under authority of this section.

(e). The Commission is authorized to repair, recondi-
tion, reconstruct, and operate, or charter for operation,
any property acquired under authority of this section.
The Commission is further authorized to transfer the
possession or control of any such property to any depart-
ment or agency of the Government of the United States
upon such terms and conditions as may be approved by the
President. In case of any such transfer the department or

eee

_
25

agency to which the transfer is made shall promptly re-
imburse the Commission for its expenditures on account of
just compensation, purchase price, repairs, reconditioning,
reconstruction or charter hire for the property trans-
ferred. Such reimbursements shall be deposited in the
construction fund established by section 206 of this Act.

(7527)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386417_0125%3A1. Public record. Not legal advice.