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April 2, 1947

25.4 ACRES of LAND et al. UNITED STATES v. 53 1/4 ACRES OF LAND et al.

The opinion of the court was delivered by: BYERS

These proceedings have been explained in 65 F.Supp. 333, and pursuant to the suggestion that the claimants might wish to present an alternative theory for computing their damages to that of reproduction cost less depreciation, testimony has been taken on behalf of both claimants, which will be discussed as briefly as possible.

That the misgiving heretofore expressed as to the applicable rule of damages was not entirely irrational seems to appear from a footnote to the opinion of Mr. Justice Reed in Federal Power Commission v. Hope Gas Co., 320 U.S. 591, at page 622, 64 S. Ct. 281, at page 297, 88 L. Ed. 333: ' * * * Reproduction cost as the cost of building a replica of an obsolescent plant is not of real significance.' The mains, service, conduits, and other fixtures here involved were rendered incapable of use by the taking which gave rise to these proceedings.

 The effort will be made to avoid repetition of matters deemed to have been covered in the earlier opinion, although that may not always be possible in view of the nature of some of the arguments which require consideration.

 The position of the Government as now understood, and stated in lowest terms, is this:

 These claimants are not entitled to any compensation for the taking of these properties, because the land which was condemned, some 70 acres or more, was added to the Navy Yard; upon that addition new buildings were erected, and new subsurface pipes, conduits and connections were laid by the Government to effect exterior connection with the mains of the Gas Company near the boundaries of the enlarged Yard, and similar connections were made to sources of electric energy owned and operated by the Edison Company; more gas and electricity were consumed in the new buildings and structures during the years 1942-1946 than had been sold to private consumers under the conditions existing at the respective dates of taking (April 1, 1941, and September 19, 1941). That beneficial result, it is argued, more than compensates the claimants for any loss sustained through the takings in question, and hence no award to either is legally possible.

 This assertion turns attention to the results of the taking, rather than to the value of the property to the claimants at the time of taking. This means that the question of value is thus made to turn upon the decision by the Government as to the use it would make of the land condemned. I should suppose that it could have been decided to excavate the entire area and flood it for the purpose of a basin, if the needs of the Navy had so required. Equally, the Government could have decided to manufacture its own gas, and to generate its own electric power (as it did to a marked extent as to high tension current) within the parcel so condemned. In either event, of course, the claimants would not have been favored by a greater sale of gas and electric current within that area, and the argument would not have been advanced. But if it is sound in principle, its validity should not be resolved according to fortuitous circumstance, or the course of events.

 Stated otherwise, the argument seems to be that because a new governmentally constructed distribution system can be supplied from outside the expended Navy Yard, with gas and electric current as required, the distribution plant which has been taken had no value at the time of taking. If that reasoning exposes a sequitur, I am unable to perceive it.

 It is too late in the day to question the rule that 'value is to be ascertained as of the date of taking' (United States v. Miller, 1943, 317 U.S. 369 at page 374, 63 S. Ct. 276,at 280, 87 L. Ed. 336, 147 A.L.R. 55, citing cases.)

 Seemingly the Government argues that what is referred to in the same opinion as a subsidiary rule applies here, on the theory that the increase in said consumption of gas and electric energy implied or involved a benefit to the parts of the companies' integrated systems not so taken, and that such benefits should in effect be assessed against the latter. The relevant passage in the opinion (317 U.S. 376, 63 S. Ct. 281) is this: 'As respects other property of the owner consisting of separate tracts adjoining that affected by the taking (i.e. the unaffected part of these claimants' distribution facilities and plants), the Constitution has never been construed as requiring payment of consequential damages; and unless the legislature so provides, as it may, benefits are not assessed against such neighboring tracts for increase in their value.' (Emphasis supplied)

 Since these claimants are not asserting a claim for consequential damages to property not actually taken; and since there is nothing in the legislation under which this condemnation was effected touching an assessment for benefit, it seems clear that reliance upon the suggested theory is without support in reason or authority.

 It is also too late to deny that to the extent to which the claimants' physical properties in the pipes, conduits, etc., involve also the franchise rights to operate them, these elements, taken together, constitute the basis upon which value must be predicated.

 The nature of the problem is so completely the subject of exposition in Monongahela Navigation Co. v. United States, 1893, 148 U.S. 312, 13 S. Ct. 622, 37 L. Ed. 463, that there is no excuse for misunderstanding it. Incidentally, that case was cited as an authority in the Miller opinion written but four years ago; at page 343 of 148 U.S. at page 633 of 13 S. Ct., Mr. Justice Brewer, speaking for a unanimous court, said: 'It 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 Navigation 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 compensation is not determined by the value to the government 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 requires payment, not merely of the value of the tangible property itself, but also of that of the franchise of which he is deprived.'

 Earlier (148 U.S. 329, 13 S. Ct. 627) it was said: 'So, before this property can be taken away from its owners, the whole value must be paid; and that value depends largely upon the productiveness of the property, the franchise to take tolls.'

 The idea is the same as that which was seeking expression in the earlier opinion in this case in which reference was made to 'the earning power which attached thereto', meaning the properties here involved.

 It is also argued by the Government that since the awards made for damage parcels privately leased from the City of New York were based in part upon their being in receipt of gas and electric current for consumption on those respective premises, the awards made in connection therewith must be deemed to have embraced the claims now asserted, and claimants' compensation should have been carved therefrom.

 It is difficult, if not impossible, to follow that argument. The testimony of the expert on damage parcel values was imported into this ...

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