Omnia Commercial Co v. United States

• Citation: 67 L.Ed. 773,43 S.Ct. 437,261 U.S. 502
• Decision Date: 09 April 1923
• Docket Number: No. 229,229
• Parties: OMNIA COMMERCIAL CO., Inc., v. UNITED STATES
• Court: United States Supreme Court

261 U.S. 502

43 S.Ct. 437

67 L.Ed. 773

OMNIA COMMERCIAL CO., Inc.,

v UNITED STATES.

No. 229.

Argued March 1, 1923.

Decided April 9, 1923.

Mr. Geo. Maurice Morris, of Washington, D. C., for appellant.

[Argument of Counsel from pages 502-507 intentionally omitted] Mr. Assistant Attorney General Riter, for the United States.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

The appellant, on May 19, 19 7, by assignment, became the owner of a contract, by which it acquired the right to purchase a large quantity of steel plate from the Allegheny Steel Company, of Pittsburgh, at a price under the market. The contract was of great value, and if carried out would have produced large profits.

In October, 1917, before any deliveries had been made, the United States government requisitioned the steel company's entire production of steel plate for the year 1918, and directed that company not to comply with the terms of appellant's contract, declaring that if an attempt was made to do so the entire plant of the steel company would be taken over and operated for the public use.

Appellant brought an action in the Court of Claims alleging, in addition to the foregoing, that by the orders of the government the performance of the contract by the steel company had been rendered unlawful and impossible; that the effect was to take for the public use appellant's right of priority to the steel plate expected to be produced by the steel company and thereby appropriate for public use appellant's property in the contract. As a result it alleged that it had incurred losses in a large sum which it sought to recover, as just compensation, by virtue of article 5 of the Amendments to the Constitution. To this petition the United States interposed a demurrer, which was sustained, and the petition dismissed. From this judgment the case comes here by appeal.

A question is raised as to the statutory authority of the officer, who made the order of requisition and gave the directions respecting noncompliance with the contract, to bind the government; but, for the purposes of the case, we assume he was authorized, as he could have been under 39 Stat. 1193, c. 180 (Comp. St. 1918, Comp. St. Ann. Supp. 1919, §§ 3115 1/16 b, 3115 1/16 c), or 40 Stat. 182, 183, c. 29 (Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 3115 1/16 d). We also pass, without deciding, a contention challenging the sufficiency of the complaint and come to the case on the merits.

The contract in question was property within the meaning of the Fifth Amendment (Long Island Water Supply Co. v. Brooklyn, 166 U. S. 685, 690, 17 Sup. Ct. 718, 41 L. Ed. 1165; Cincinnati v. Louisville & Nashville Ry. Co., 223 U. S. 390, 400, 32 Sup. Ct. 267, 56 L. Ed. 481), and if taken for public use the government would be liable. But destruction of, or injury to, property is frequently accomplished without a 'taking' in the constitutional sense. To prevent the spreading of a fire, property may be destroyed without compensation to the owner, Bowditch v. Boston, 101 U. S. 16, 18, 25 L. Ed. 980, a doctrine perhaps to some extent resting on tradition. Pennsylvania Coal Co., Inc., v. Mahon, 260 U. S. 393, 43 Sup. Ct. 158, 67 L. Ed. ——, December 11, 1922.

There are many laws and governmental operations which injuriously affect the value of or destroy property—for example, restrictions upon the height or character of buildings, destruction of diseased cattle, trees, etc., to prevent contagion—but for which no remedy is afforded. Contracts in this respect do not differ from other kinds of property. See Calhoun v. Massie, 253 U. S. 170, 40 Sup. Ct. 474, 64 L. Ed. 843, where an act of Congress invalidating contracts made with attorneys for compensation exceeding a certain percentage for the prosecution of claims against the government was sustained, although it had the effect of putting an end to an existing contract. This court said (253 U. S. 175, 176, 40 Sup. Ct. 476, 64 L. Ed. 843):

'An appropriate exercise by a state of its police power is consistent with the Fourteenth Amendment, although it results in serious depreciation of property values, and the United States may, consistently with the Fifth Amendment, impose for a permitted purpose, restrictions upon property which produce like results. Lottery Case, 188 U. S. 321, 357; Hipolite Egg Co. v. United States, 220 U. S. 45, 58; Hoke v. United States, 227 U. S. 30 , 323; Hamilton v. Kentucky Distilleries & Warehouse Co., 251 U. S. 146. The sovereign right of the government is not less because the property affected happens to be a contract. Louisville & Nashville R. R. Co. v. Mottley, 219 U. S. 467, 484; Union Dry Goods Company v. Georgia Public Service Corporation, 248 U. S. 372.'

In Louisville & Nashville R. R. Co. v. Mottley, 219 U. S. 467, 31 Sup. Ct. 265, 55 L. Ed. 297, 34 L. R. A. (N. S.) 671, it was held that an act of Congress, prohibiting the issuance of free transportation by interstate common carriers, which invalidated a contract for transportation previously entered into and valid when made, did not have the effect of taking private property without compensation. The court, speaking through Mr. Justice Harlan, said (219 U. S. 484, 31 Sup. Ct. 271, 55 L. Ed. 297, 34 L. R. A. [N. S.] 671):

'It is not determinative of the present question that the commerce act as now construed will render the contract of no value for the purposes for which it was made. In Knox v. Lee, 12 Wall. 457, above cited, the court, referring to the Fifth Amendment, which forbids the taking of private property for public use without just compensation or due process of law, said: 'That provision has always been understood as referring only to a direct appropriation, and not to consequential injuries resulting from the exercise of lawful power. It has never been supposed to have any bearing upon or to inhibit laws that indirectly work harm and loss to individuals. A new tariff, an embargo, a draft, or a war, may inevitably bring upon individuals great losses; may, indeed, render valuable property almost valueless. They may destroy the worth of contracts."

The conclusion to be drawn from these and other cases which might be cited is that for consequential loss or injury resulting from lawful governmental action the law affords no remedy. The character of the power exercised is not material. C., B. & Q. Railway v. Drainage Com'rs, 200 U. S. 561, 583-585, 592, 593, 26 Sup. Ct. 341, 50 L. Ed. 596, 4 Ann. Cas. 1175. If, 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. What was here requisitioned was the future product of the steel company, and, since this product in the absence of governmental interference would have been delivered in fulfillment of the contract, the contention seems to be that the contract was so far identified with it that the taking of the former, ipso facto, took the latter. This, however, is to confound the contract with its subject-matter. The essence of every executory contract is the obligation which the law imposes upon the parties to perform it. 'It [the contract] may be defined to be a transaction between two or more persons, in which each party comes under an obligation to the other, and each reciprocally acquires a right to whatever is promised by the other.' Dartmouth College v. Woodward, 4 Wheat. 629, 654 (4 L. Ed. 629). Plainly here there was no acquisition of the obligation or the right to enforce it. If the steel company had failed to comply with the requisition, what would have...