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AMERICAN-HAWAIIAN S. S. CO. v. UNITED STATES

March 20, 1950

AMERICAN-HAWAIIAN S.S. CO.
v.
UNITED STATES. THE ALASKAN



The opinion of the court was delivered by: LEIBELL

This is an action by the libelant to recover 'just compensation' from the United States for the requisition and loss of its vessel, the S. S. Alaskan, brought under Section 902 of the Merchant Marine Act of 1936, 46 U.S.C.A. § 1242. In an opinion filed January 21, 1949 the District Court confirmed the report of the Commissioner appointed in the proceeding and found the value of The Alaskan to be $ 983,250, 85 F.Supp. 815. While the appeal from the District Court's decision was pending in the United States Court of Appeals, Second Circuit, the government filed a motion in that court on January 2, 1950: ' * * * for an order (1) remanding the cause for the taking of evidence and the making of findings required under the decision of the Supreme Court supervening after perfection of appeal from the decision below, United States v. Cors, 337 U.S. 325, 69 S. Ct. 1086, 93 L. Ed. 1392, decided June 13, 1949; (2) directing the Court below to ascertain what part of the valuation fixed by that Court for the S. S. Alaskan represents (within the meaning of Section 902(a), Merchant Marine Act, 1936, as amended, 46 U.S.C.A. § 1242, 49 Stat. 2015, as amended by the Act of August 7, 1939, 53 Stat. 1254, and within the rule of United States v. Cors, supra) enhancement of value attributable to the Government's need for vessels which necessitated the taking, and enhancement of value attributable to the Government's intervention in the market for vessels prior to the taking in its effort to satisfy such need; * * * .'

The affidavit of the Assistant Attorney General sworn to November 4, 1949, submitted in support of the motion states: '2. This proceeding presents the question whether in a case involving a claim for just compensation for the taking of a vessel by the United States, where the record below was made on a theory of controlling law which, since the perfection of the appeal, has been fundamentally modified by the supervening decision of the Supreme Court in United States v. Cors, 337 U.S. 325, 69 S. Ct. 1086, 93 L. Ed. 1392, for the first time construing the applicable statute, this Court should remand the case for the taking of evidence upon which alone this Court can make the findings required by the Supreme Court for a correct disposition of the case.'

The motion was argued in the Court of Appeals on January 30th and on that day an order was entered 'that said motion be and it hereby is denied; leave be and it hereby is denied; leave be and it hereby is granted to the District Court to hear the application'.

 On the same day the District Court heard the application, counsel presented their arguments thereon and briefs were submitted.

 The government's motion is based on the assumption that the District Court applied a standard of valuation for The Alaskan that does not conform to the standard set forth in the majority opinion in United States v. Cors, 1949, 337 U.S. 325, 69 S. Ct. 1086, 93 L. Ed. 1392. The government further contends that the District Court did not inquire whether any part of the just compensation awarded for The Alaskan was attributable to an enhancement in value due to the government's need of vessels which necessitated the taking of The Alaskan, and that the record made before the Commissioner and in the District Court is blank in respect of proof showing the extent of the government's intervention in the market, which allegedly resulted in an enhancement in value of The Alaskan.

 The libelant, in opposing the motion, contends that the decision of the Supreme Court in the Cors case did not effect any change in the established judicial standards of just compensation so as to constitute a 'supervening decision', and that the government cannot now seek to introduce evidence which was available to it at the time of the trial. The libelant further contends that the government did not, by any activities in the market for ships of the Alaskan type, create any inflationary or speculative increases in the market for vessels of that type, within the meaning of the deductible enhancement clause of Section 902, and that the record does contain evidence upon which the Court and the Commissioner could and did consider the question of any enhancement in value that might be attributable to any government needs which necessitated the taking.

 The government's motion in the Court of Appeals was for a remand. Its application, at the direction of that court, to the District Court may be treated as a motion for a new trial or for relief from the final decree pursuant to Rule 59 or Rule 60 of the Federal Rules of Civil Procedure, 28 U.S.C.A. For reasons hereinafter stated I have concluded that the application should be denied. Section 902 of the Merchant Amrien

 Section 902 of the Merchant Marine Act of 1936, Title 46 U.S.C.A. § 1242, providing for the requisition of vessels by the Maritime Commission 'during any national emergency declared by proclamation of the President', provides in part in subdivision (a): '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 necessitating the taking or use.'

 Subdivision (d) of the same section provides for a resolution of any controversy between an owner and the Commission on the issue of compensation as follows: 'In all cases, the just compensation authorized by this section shall be determined and paid by the Commission as soon as practicable, but if the amount of just compensation determined by the Commission is unsatisfactory to the person entitled thereto, such person shall be paid 75 per centum 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 amount as will be just compensation therefor, in the manner provided for by sections 41(20) and 250 of Title 28.' *fn1"

 The enhancement clause also appears in the Rules of the Advisory Board on Just Compensation (consisting of Court of Appeals Judges L. Hand, Parker and Hutcheson) created by the President on October 15, 1943, by Executive Order 9387, to establish standards and rules for the guidance of the War Shipping Administration in determining the just compensation to be paid for requisitioned vessels. Rule 4 of the rules promulgated by the Advisory Board stated: 'Rule 4.- From the value at the time of taking, there should be deducted any enhancement due, to the Government's need of vessels which has necessitated the taking, to the previous taking of vessels of a similar type, or to the prospective taking, reasonably probable, whether such need, taking, or prospect, occurred before or after the declaration of the national emergency of May 27, 1941. Enhancement due to a general rise in prices or earnings, whenever occurring, should not be deducted. In the application of this rule neither the proclamation of limited emergency of September 8, 1939, nor the facts existing at that time, are in themselves of significance.'

 The principle of deducting any enhancement of value of requisitioned property due to the government's need which necessitates the taking, is discussed in the decision of the Supreme Court in United States v. Cors, 1949, 337 U.S. 325, 69 S. Ct. 1086, 93 L. Ed. 1392, decided after the entry of the final decree in this case. The government had requisitioned a steam tug (The MacArthur) in October 1942 and the owner, Cors, brought an action for just compensation. The Court of Claims found that the market value of the vessel had been enhanced because of greatly increased harbor traffic during the war and by the government's requisitioning of tugs, resulting in a shortage; but the Court of Claims affirmatively declined to deduct from the market value of The MacArthur any enhancement in value due to such causes. On appeal the Supreme Court did not consider the constitutionality of the enhancement clause of Section 902 of the Act in all its aspects or applications, but held that the clause was consistent and 'coterminous' with the prior judicial standards of just compensation which should be applied to the facts in the Cors case, and that enhancement in value due to the government's need was an element to be excluded from market value in determining just compensation to the taker, the same as any special value to the owner should be excluded in determining just compensation. These latter exceptions were stated as part of the judicial standard of just compensation by the Supreme Court in United States v. Chandler-Dunbar Co., 229 U.S. 53, 33 S. Ct. 667, 57 L. Ed. 1063, and United States v. Miller, 317 U.S. 369, 63 S. Ct. 276, 87 L. Ed. 336, 147 A.L.R. 55. In the Cors case the court held that the deductible enhancement was an illustration of the principles inherent in the doctrine which had previously required its exclusion in the Chandler and Miller cases. The Court stated the exception as follows: 'In time of war or other national emergency the demand of the government for an article or commodity often causes the market to be an unfair indication of value. The special needs of the government create a demand that outruns the supply. The market, sensitive to the bullish pressure, responds with a spiraling of prices. The normal market price for the commodity becomes inflated. And so the market value of the commodity is enhanced by the special need which the government has for it.' (337 U.S. 325, 69 S. Ct. 1091.)

 All the Cors case held was that the Court of Claims was in error in including in the market value of the tug an enhancement in value due to 'the Government's need for vessels, which necessitated the taking of many vessels and to the great increase in shipping and in harbor traffic' during the war. *fn2" The Supreme Court held that since the Court of Claims findings 'tell us (the Supreme Court) that some of the enhancement in market value is due to the government's need' and was erroneously included in the award, and since they (the Supreme Court) were 'left in the dark as to how much it may be', it was necessary to send the case back to the Court of Claims for more 'discriminating' findings and for a revaluation which would exclude any increase in the market value of the tug due to the government's needs. The decision of the Court of Claims was accordingly reversed and the cause was remanded.

 At the time of the decision of the District Court in the proceeding at bar the rule of the Chandler and Miller cases had been enunciated, the same rule had been enacted in Section 902 of the Merchant Marine Act, and the Rules of the Advisory Board, which were expressly stated to be in accord with the judicial standards, United States v. Cors, supra, 337, U.S. 334, 69 S. Ct. 1086, 93 L. Ed. 1392, were promulgated. Both this court and the Commissioner considered the statute and the Rules of the Advisory Board. Concerning the Rules the Commissioner said: 'These rules embody established legal principles which should not only govern the action of the War Shipping Administration but should be here applied in the determination of the present issues.'

 In this respect the Court stated (85 f.Supp. 815, 820):

 'The Commissioner in the case at bar, properly gave due consideration to the Rules formulated by the Advisory Board.

 'The Commissioner gave due consideration to Rules 1, 3 and 4 of the Advisory, Board on Just Compensation, which he quotes. *fn3" His report shows that 'enhancement' due to a general rise in prices or earnings was not deducted from the value at the time of taking, but that any enhancement due to the Government's need was deducted.'

 In these circumstances, United States v. Cors supra, does not constitute a 'supervening decision'. The principle of law therein involved had been enunciated in prior Supreme Court decisions, and had been embodied in the statute and in the Rules of the Advisory Board, all of which were duly considered by the District Court and the Commissioner in the case at bar. Respondent's motion, in so far as it rests upon the contention that the Cors decision is a 'supervening decision' does not withstand a careful analysis.

 A second reason for denying the government's motion is the fact that the government's contention that the record in the case at bar lacks any evidence upon which the District Court could have considered the extent of the government's intervention in the market, in passing on the question of deductible 'enhancement', is without merit. The government's contention is stated in its brief as follows: 'Without the additional findings and the additional evidence * * * , the record will not permit this Court to ...


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