Source: http://openjurist.org/334/us/624
Timestamp: 2015-09-03 19:32:12
Document Index: 461436831

Matched Legal Cases: ['§ 901', '§ 901', '§ 633', '§ 633', '§ 601', '§ 411', '§ 721']

334 US 624 United States v. John J Felin & Co | OpenJurist
334 U.S. 624 - United States v. John J Felin & Co Home
334 US 624 United States v. John J Felin & Co 334 U.S. 624
68 S.Ct. 1238
92 L.Ed. 1614
UNITED STATESv.JOHN J. FELIN & CO., Inc.
This is a claim for just compensation, based on the Fifth Amendment, by a slaughterer whose meat products the Government requisitioned for war purposes. The Court of Claims awarded damages above the maximum prices fixed by the Office of Price Administration for such products and measured by what that court deemed the replacement cost of the requisitioned property. 67 F.Supp. 1017, 107 Ct.Cl. 155. The implications of this ruling reach far, and so we brought the case here. 330 U.S. 814, 67 S.Ct. 864.
While the immediate facts of this controversy are few and undisputed, they can be understood only in connection with the recognized facts in the meat industry. Of these we must take judicial notice inasmuch as we must translate the idiom of the industry into vernacular English. Also, of course, we must consider the facts in the context of the rather intricate system of meat price regulation by O.P.A.
On January 30, 1942, the President approved the Emergency Price Control Act. 56 Stat. 23, 50 U.S.C.App. § 901 et seq., 50 U.S.C.A.Appendix, § 901 et seq. Accordingly, the Price Administrator, by a series of regulations, established maximum prices for dressed hogs and wholesale pork cuts. Revised Maximum Price Regulation No. 148, issued on October 22, 1942, governed the pork cuts here involved. 7 Fed.Reg. 8609, 8948, 9005; 8 Fed.Reg. 544.
To meet the food needs entailed by the war, the President under the authority of the Second War Powers Act, 56 Stat. 176, 50 U.S.C. Supp. V, § 633, 50 U.S.C.A.Appendix, § 633, created the Food Distribution Administration, with the Secretary of Agriculture as its head. E.O. 9280, 50 U.S.C.A.Appendix, § 601 note, 7 Fed.Reg. 10179. This Administration was given authority to assign food priorities, to 'allocate' food to governmental agencies and for private account, and to assist in carrying out the program of the Lend-Lease Act of March 11, 1941, 55 Stat. 31, 22 U.S.C.A. § 411 et seq. To carry out the task thus delegated by the President, the Food Distribution Administration issued to each packer operating under federal inspection a priority order calling for delivery of a proportionate part of the total quantity needed at the particular time.1 A packer's quota was based on the ratio of meat produced in his plant to the total production in all federally inspected plants.
On March 1, 1943, the Food Distribution Administration, exercising powers not questioned, issued an order requisitioning the lard and pork products in controversy.2 On March 3, 1943, the property was duly seized in respondent' Philadelphia packing house. On March 24, 1943, respondent filed its claim with the Administration for 'just compensation' for taking this property. Its total claim was $55,525, of which $16,250 was for lard and $39,275 for pork cuts. On May 7, 1943, the Administration, by way of preliminary determination of the just compensation for the requisitioned property, fixed the value of the lard at $15,543.78 and the pork cuts at $25,112.50. These amounts were based on the O.P.A. ceiling prices applicable to these products. On May 22, 1943, the preliminary award was made final. Respondent accepted in full payment the award as to the lard; it refused to accept the determination as to the pork cuts and, in accordance with the statutory procedure in the case of rejection of such an award, was paid half of it. On June 24, 1943, respondent instituted this action in the Court of Claims to recover the additional amount which when added to the $12,556,25, the half of the Government's valuation for those cuts, would constitute 'just compensation' for what the Government had taken.
The Court of Claims referred the proceeding to a commissioner, who took evidence and reported to the court. Upon the basis of his report and the underlying evidence, the Court of Claims found as a fact that the replacement cost of the requisitioned pork cuts at the time and place of the taking was $30,293, and concluded, as a matter of law, that such replacement cost and not the maximum ceiling price was the proper measure of damages for the taking. We heard argument at the last Term, and after due consideration deemed it appropriate to order reargument at this Term.3
At the outset it is important to make clear what it is we are called upon to decide. The conventional criterion for determining what is 'just compensation' for private property taken for public use is what it would bring in the free, open market. E.g., Olson v. United States, 292 U.S. 246, 255, 54 S.Ct. 704, 708, 78 L.Ed. 1236; Brooks-Scanlon Corporation v. United States, 265 U.S. 106, 123, 49 S.Ct. 471, 474, 68 L.Ed. 934; L. Vogelstein & Co. v. United States, 262 U.S. 337, 340, 43 S.Ct. 564, 565, 67 L.Ed. 1012. But there must be a market to make the criterion available. Here there was a market in which the respondent could have sold the pork cuts, but it was not a free and open market; it was controlled in its vital feature, selling price, by the O.P.A. It is this fact that creates the problem of the case, assuming that the case is not dogmatically disposed of by holding that inasmuch as the maximum price is the only price which respondent could legally have got for its goods it is just compensation. We are not passing on the abstract question whether a lawfully established maximum price is the proper measure of 'just compensation' whenever property is taken for public use. We are adjudicating only the precise issues that emerge from this case.
The Second War Powers Act, 1942, under which respondent's property was authorized to be taken, restricted compensation for the taking to that which the Fifth Amendment enjoins. 56 Stat. 176, 181, 50 U.S.C.A.Appendix, § 721. In enforcing this constitutional requirement 'the question is, What has the owner lost? not, What has the taker gained?' Boston Chamber of Commerce v. Boston, 217 U.S. 189, 195, 30 S.Ct. 459, 460, 54 L.Ed. 725; McGovern v. New York, 229 U.S. 363, 33 S.Ct. 876, 57 L.Ed. 1228, 46 L.R.A.,N.S., 391. Respondent's sole claim is for the pecuniary equivalent of the property taken. This is not a situation where consequential damages, in any appropriate sense of the term, are urged as a necessary part of just compensation. Respondent does not claim such damages on the theory that, in order to protect its good will, it had to supply its regular customers and that this compelled replacement of the requisitioned pork products by the purchase, slaughter, and processing of live hogs.4 Cf. United States v. General Motors Corporation, 323 U.S. 373, 382, 65 S.Ct. 357, 361, 89 L.Ed. 311, 156 A.L.R. 390; United States v. Petty Motor Co., 327 U.S. 372, 377, 378, 66 S.Ct 596, 599, 600, 90 L.Ed. 729; United States ex rel. and for Use of Tennessee Valley Authority v. Powelson, 319 U.S. 266, 281, 282, 63 S.Ct. 1047, 1055, 1056, 87 L.Ed. 1390. Respondent claims that replacement cost is the proper measure of the value of the property when requisitioned. This action was brought to recover damages which the respondent would suffer, so it maintains, if it accepted the Government's offer of the applicable ceiling prices in satisfaction of 'just compensation.' The burden therefore rests on the respondent to prove the damages it would suffer by not receiving more than the ceiling prices. Marion & R.V.R. Co. v. United States, 270 U.S. 280, 285, 46 S.Ct. 253, 255, 70 L.Ed. 585.
The Court of Claims found that the principal item in the cost of processing respondent's products was what it had to pay for live hogs; that, inasmuch as live hogs were not then covered by price regulation, the Chicago market quotations governed price in the packing industry; that the Chicago average live hog price was $15.59 during March 1943;5 and that, on the basis of this price, the replacement cost for the requisitioned property was $30,293. We are of opinion that in reaching this conclusion the court below failed to take into account decisive factors for the proper disposition of the action brought by the respondent.
We are dealing with a claim for damages arising out of a transaction pertaining to a particular industry, and the transaction cannot be torn from the context of that industry. It is practically a postulate of the slaughtering industry that replacement cost does not afford a relevant basis for determining the true value of the industry's products. 'Manufacturing operations in the meat packing industry do not consist of assembling raw materials for the purpose of obtaining one finished product, but rather of separating or breaking down raw materials (cattle, etc.) into many parts, one of which (dressed carcass) is the major product, and the other parts of which are further processed into numerous by-products.' Kingan & Co. v. Bowles, Em.App., 144 F.2d 253, 254. In consequence, cost in the industry generally is like a fagot that cannot be broken up into simple, isolated pieces. See Greer, Packinghouse Accounting (Prepared by the Committee on Accounting of the Institute of American Meat Packers), passim. 'The accounting procedure in the hog business is even more complicated than that of the cattle, calf, or sheep business, because the operations involve a greater breaking up of the dressed carcass and more numerous processes extending over considerable periods of time.' Id. at 33—34. The problem is one of 'joint cost' in a business which 'produces no single major product,' id. at 213, with the result that no accountant has thus far 'been able to devise a method yielding by-product or joint-cost figures which does note mbody a dominance of arbitrariness and guesswork.' Hamilton, Cost as a Standard for Price, 4 Law and Contemp.Prob. 321, 328; cf. Greenbaum, The Basis of Property Shall Be the Cost of Such Property: How is Cost Defined?, 3 Tax L.Rev. 351, 356—359.
The petitioner was also engaged in by-product processing,6 for the Government took from him 100,000 pounds of refined pure lard. For the value of the lard the respondent accepted the administrative award.7 Admittedly, part of the cost of the live hog must be charged to by-products. However, any method of apportioning the total cost to the by-products is highly speculative.8
Since so much speculative approximation and guesswork entered into the determination of cost, selling price, and profit, the industry, naturally enough, was in almost continuous controversy with the Price Administrator about them. The respondent was party to these controversies. On July 17, 1942, it filed a protest against Maximum Price Regulation No. 148 which was consolidated with the protest of 115 other pork slaughterers against this regulation. On the basis of calculations as to the cut-out value or replacement cost of various pork cuts, the slaughterers contended that the regulation did not allow them sufficient operating margin over the cost of live hogs. In rejecting the protest, on April 23, 1943, the Administrator made this ruling: 'The interdependence of all phases of the operations of packing establishments makes precise evaluation of the relationship between prices on dressed and processed meats and live hog prices impossible except in terms of the over-all financial position of the industry.' In the Matter of Rapides Packing Co., Pike and Fisher, 1 OPA Opinions and Decisions 243. The respondent, on March 8, 1943, had also protested, again on the basis of the cost of live hogs, against the revision of the regulation. This protest was consolidated with those of 15 other pork slaughterers and, substantially on the ground taken in the Rapides Packing Co. case, this second protest was likewise rejected by the Administrator. In the Matter of Greenwood Packing Plant, Pike and Fisher, 1 OPA Opinions and Decisions 296, 299.
Review by the Emergency Court of Appeals was not sought,9 although the first denial of respondent's claim for the replacement cost of pork cuts, based on live hog prices, came shortly after the Government's requisitioning of the products as to which he now makes the same contention. It is noteworthy that the pork price margins were almost the only meat price margins which were not challenged before the Emergency Court of Appeals in what has been called 'the battle of the meat regulations.' See Hyman and Nathanson, Judicial Review of Price Control: The Battle of the Meat Regulations, 42 Ill.L.Rev. 584.
The considerations which underlay the Administrator's meat price determinations are most pertinent to the solution of our immediate problem. The result of his analysis was that the profit and loss data on a slaughterer's entire operations were the only dependable figures from which the fairness of meat prices could be deduced. The Administrator pointed out that the industry, on the basis of its accounting figures, had historically lost money on its meat sales.10 Since, however, by taking the by-product sales into full account its operations as a whole were highly profitable, these meat sale losses were 'more in the nature of bookkeeping losses which failed to take fully into account the integrated nature of the industry.' These views were approvingly quoted by the Emergency Court of Appeals in Armour & Co. v. Bowles, Em.App., 148 F.2d 529, 535.
In both of the consolidated proceedings to which the respondent was a party, the Administrator x plicitly requested to be furnished with the industry's profit and loss data. In the earlier proceeding, no proof of loss was filed by any of the protestants. In the Matter of Rapides Packing Co. supra. In the second proceeding the Administrator made this finding:
'The three Protestants who submitted further evidence did not even thus sustain their claims of individual hardship. One of them showed a net profit of $60,492.44 for the five months period ending March 27, 1942; another a net profit of $6,838.00 for the three months period ending April 1, 1943, and the third failed to submit a profit and loss statement and balance sheet although specifically requested to do so.' In the Matter of Greenwood Packing Plant, supra, at 297.
Not merely does the industry generally seem to have prospered under price control,11 but so did the respondent12 despite the fact that throughout the period in controversy it continued to buy live hogs at prevailing prices and to sell pork products derived from them at the authorized ceiling prices, even when this meant selling its pork products below the price that the Court of