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UNITED STATES v. 25.4 ACRES

April 6, 1949

UNITED STATES
v.
25.4 ACRES OF LAND, MORE OR LESS, IN BOROUGH OF BROOKLYN, KINGS COUNTY et al. UNITED STATES v. 53 1/4 ACRES OF LAND, MORE OR LESS, IN BOROUGH OF BROOKLYN, KINGS COUNTY et al.



The opinion of the court was delivered by: BYERS

This cause is most recently reported in United States v. Brooklyn Union Gas Co., 2 Cir., 168 F.2d 391, and is now before the Court pursuant to reversal and remand for further proceedings consistent with the opinion of the Court of Appeals.

The factual situation has been sufficiently recited to forbid repetition, and attention will be confined to the erroneous elements of the decision of this Court as pointed out in review, and the extent to which deficiencies of prior proof may be deemed to have been overcome in the record as now constituted.

 The errors are referred to in the said opinion as follows:

 168 F.2d on page 395, as 'the fallacy * * * permeating the decision rendered, of identifying their (the claimants') loss with the curtailment of their physical facilities'.

 Again, 168 F.2d at page 396: ' * * * the district court * * * got itself into the position of assuming a loss before one was proven and of measuring it by the extent of curtailment of the facilities.' (This passage occurs in a comment upon the Scharff expert opinion which was said to have been accompanied by an accumulation of 'imprecise theory'.)

 Finally, 168 F.2d on page 397, it is said that this court erred in declining to consider, as indicative of the value of the claimants' properties on the days of taking (April 1, 1941, and September 19, 1941), the subsequent consumption of gas and electric current within the area condemned, through the Government's own facilities, which were therein installed after the Navy Yard had been enlarged by the land so acquired. Thus: 'We think the evidence admissible not as a standard of value in itself, but for its bearing upon the prospective values at the time of taking.'

 This seems to import into the value at the critical dates an element of futurity which perhaps is always present in such questions in the sense that all enduring values embrace a factor of potentiality. This court is admonished not to reach a conclusion mechanically, 168 F.2d page 398, which probably implies that formulae should not be ingeniously adopted; the same warning is perhaps appropriate also in the semantic sense.

 The present problem is thought to resolve itself into an attempt to fairly decide whether the taking by the Government of these claimants' sub-surface structures, as clothed with the franchise to operate them for profit, visited a loss upon the claimants for which compensation is required to be made, under the Fifth Amendment to the Constitution.

 While the fact of taking is not in dispute, this court may not conclude that their earning capacity, which was ipso facto demolished, can be deemed to constitute a loss, if in fact the claimants were benefited as the result of the practice of this form of surgery by the sovereign. That is, if a new and profitable earning capacity was thereafter imparted to what remained to the claimants of the unappropriated balance of their properties; this approach is deemed to be required, apparently because what was here taken included only part, instead of the whole, of their franchises, as was shown in the Monongahela Navigation Company v. United States, 148 U.S. 312, 13 S. Ct. 622, 37 L. Ed. 463.

 If the present task is correctly understood, it is necessary to remember additionally the suggestion, 168 F.2d page 395: ' * * * while a franchise must be valued as property in condemnation proceedings, its value is to be based * * * upon what as a matter of business judgment would be considered its worth, if not in sale, at least as a producer of earnings.'

 This court cannot profess to possess business judgment, any more than the capacity to tell, for instance, whether patentable invention is presented in a given disclosure, or whether a ship has been properly navigated. All it can undertake is to offer a conclusion that in a given controversy the evidence is thought to preponderate one way or the other; it is often held to be mistaken in failing to grasp what the evidence really teaches, or indeed what it is. Such lapses are presumptively rectified in the appellate process.

 This is a case in which affirmative testimony has been offered on one side only, since the position of the Government is that no proof is required from it to offset the case for the claimants; in other words, that their testimony adds up to zero.

 If that is a sound conclusion, I confess to an inability to grasp it, for reasons about to be stated. It will be convenient to discuss the elements of proof under separate headings:

 I. The productiveness (i.e. capacity to produce earnings) of these properties within the area taken, in the year 1940:

 A. As to Brooklyn Union Gas Company, the figure of $ 3,956.00 appears in B.U.G. Exhibit 17, and is not controverted.

 B. As to Consolidated Edison Company, the 1940 figure of $ 17,558.22 appears in Edison Exhibit 24, and also is not controverted.

 It results that, as to the capacity of these properties, i.e., the franchises and the instrumentalities of their exercise, to produce earnings in the last year prior to the taking, nothing is left in doubt; and that capacity has been recorded in dollars, in the accounting records of each claimant. Thus is established a fundamental difference between these properties and the losing operation of an elevated railroad spur. Matter of Application of City of New York In re Acquiring Title to Elevated Railroad, etc., 265 N.Y. 170, 192 N.E. 188.

 It seems equally clear that these takings necessarily meant a loss of their capacity to produce earnings, and it is not understood that the Court of Appeals held to the contrary; but it did rule that the loss would be compensable only if it were shown that operations of the claimants during subsequent years, through sales of gas and electric current within the area taken, were not so profitable as to offset or perhaps exceed the revealed capacity to produce earnings on the part of the properties condemned. If it be argued that this smacks of condoning confiscation, provided only it brings about enhanced income to the condemnee, the answer is that such is understood to be the law of this case which this court is required to apply.

 II. The actual experience of these claimants in sales made to the Government, of gas and electricity within the area taken, subsequent to the dates of taking (April 1, 1941; September 19, 1941), namely, 1942-1948:

 A. As to Brooklyn Union Gas Company:

 The figures appear in B.U.G. Exhibit 25, and show actual operating revenues, production costs, maintenance expenses, taxes and net revenue for each year. The bases of allocation are explained with reference to Exhibit 24, later to be referred to, and these accounting practices are not sought to be discredited. The upshot of this Exhibit can be tabulated as follows: Net Revenue (Capacity to Year produce earnings) Loss 1942 $617.11) 1943 934.31) War years. 1944 1,096.73) 1945 549.32) 1946 $12.49 1947 308.23 1948 15.02

 These figures are to be compared with those of 1940 ($ 3,956), which was not a war year.

 B. As to Consolidated Edison Company: The income produced from sales of electric current to the Navy Yard for the years 1942-1947, inclusive, are shown on Edison Exhibit 27, as follows: Year Net Income Loss 1942 $ 14,796.31 1943 $ 51,347.32 1944 81,960.49 1945 77,353.03 1946 13,490.34 1947 7,916.59 $ 195,516.76 *

 The bases upon which revenues and costs of operation, maintenance, depreciation, and taxes have been allocated, were explained in detail, and again there is no testimony calculated to impair or discredit these accounting practices. For the six years involved, the net loss is computed to be $ 144,169.44; there having been profit only in one of those years as shown.

 It will be recalled that the net revenue for this company in 1940 was $ 17,558.22.

 These figures are criticized by the Government, not for inaccuracy, but because it is hard to understand why this company should have continued to supply current to the Government at a loss, when the contract ...


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