Corporation v. United States United States v. Corporation

Citation44 S.Ct. 471,265 U.S. 106,68 L.Ed. 934
Decision Date12 May 1924
Docket Number385,Nos. 367,BROOKS-SCANLON,s. 367
PartiesCORPORATION v. UNITED STATES. UNITED STATES v.CORPORATION
CourtUnited States Supreme Court

Messrs. John Junell, of Minneapolis, Minn., and Jackson H. Ralston, of Washington, D. C., for Brooks-Scanlon Corporation.

[Argument of Counsel from pages 107-110 intentionally omitted] The Attorney General and Mr. Henry M. Ward, of New York City, for the United States.

[Argument of Counsel from pages 111-113 intentionally omitted] Mr. Justice BUTLER delivered the opinion of the Court.

This case arises out of the exertion of the power of requisition conferred on the President by chapter 29, 40 Stat. 182, approved June 15, 1917, known as the Emergency Shipping Act (Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 3115 1/16 d).1 There is involved the question whether a certain contract for the construction of a ship was requisitioned, and, if it was, upon what basis is just compensation to be ascertained.

The act empowered the President (a) to order from any person for government use ships or ship material of kind and quantity usually produced by such person; (b) to requisition contracts for the building of ships; (c) to require the owner of any shipbuilding plant to place at the disposal of the United States the whole or any part of the output of the plant; (d) to requisition any shipbuilding plant or part thereof; (e) to requisition any ship in process of construction; and compliance with all orders issued under the act was made obligatory. By executive order of July 11, 1917, he delegated these powers to the United States Shipping Board Emergency Fleet Corporation. On August 3, 1917, the claimant was the assignee and owner of a contract by which the New York Shipbuilding Corporation agreed to construct a ship, known as hull No. 193. The contract was made March 28, 1916, and after some modification it provided for the construction of a ship of 8,597 deadweight tons, to be completed and delivered on or before February 1, 1918. The contract price was $831,630.

Prior to August 3, 1917, the claimant or its assignor had secured the services of an architect, furnished plans and specifications to the builder, employed a bureau to inspect the work as it progressed, and had paid to the builder on account of the contract price installments amounting to $419,500, which with interest paid, architect's fees and the value of the plans and specifications, amounted to $473,710.58, exclusive of the cost of inspection.

Immediately after the execution of the contract, the builder ordered all materials required, for which sufficient data then existed, and, before August 3, 1917, completed its orders for substantially all that were needed to perform the contract. Between 35 and 40 per cent. of the required materials had been delivered to the builder ready for use, and, on that date, the ship was about 19 per cent. completed. The Court of Claims found that all materials so ordered were delivered at the prices fixed in the orders and were used in the construction of the ship, and that nothing was purchased after that date, except materials used for construction, at a cost of $31,000, ordered for military protection. At that time claimant held on deposit in various solvent banks a sum of money sufficient to pay all the remaining installments of the contract price, and the builder was ready and willing to perform the contract.

On August 3, 1917, the Emergency Fleet Corporation served on the builder its order and notice requisitioning all of the ships, including hull No. 193, under construction in the builder's shipyard, and the materials necessary for their completion. The order required the builder to complete the ships. It stated that compensation would be paid for 'ships, materials and contracts requisitioned.' The builder was required to furnish plans and specifications of the requisitioned ships, and a statement of the payments made and amounts still due, and other information 'necessary to a fair and just determination of the obligations of the Emergency Fleet Corporation in taking over these ships and contracts.'

On August 22, the Fleet Corporation caused its district officer to deliver to the builder a formal written notice, which recited that the ships had been requisitioned, and that an order had been given the builder to complete them, and ordered the builder to 'proceed * * * in conformity with the requirements of the contract, plans and specifications under which construction proceeded prior to the requisition of August 3, 1917. * * *' and stated:

'For the work of completion heretofore and herein ordered the corporation will pay to you amounts equal to payments set forth in the contract and not yet paid. * * *'

The builder accepted the order. The Fleet Corporation gave directions to the claimant not to make, and to the builder not to accept from claimant, any further payments on account of the contract.

On August 28, the Fleet Corporation notified the claimant that it had issued to the builder notice of requisition, and inclosed a copy. The letter advised that the Fleet Corporation's district officer had been authorized to take over claimant's inspection officers. It requested a verified statement of the payments made to the builder prior to requisition. It said:

'It is the present intention of the corporation to reimburse you promptly, so far as funds are available, for the payments heretofore made to the shipbuilder if * * * such payments are found in order and in conformity with the contract requirements.'

In requested a statement of indirect expenditures, such as the cost of superintendence, original design and interest on funds already paid, and said that the owner might submit any other matters deemed pertinent; that it presumed that it was addressing those entitled to receive compensation on account of the requisition of the vessels, and asked that there be included in claimant's answer 'all evidence of ownership which is necessary to establish the right of those who are entitled to receive the compensation provided by law.'

On December 8, 1917, the Fleet Corporation made a contract with the builder and the American International Corporation relating to the completion and disposal of hull No. 193 and other ships requisitioned. It required the builder to complete the ship 'in accordance with the specifications annexed to the respective contracts under which such hulls were being constructed for the former owners prior to August 3, 1917. * * *' It also provided that the Fleet Corporation should have credit for all sums theretofore received by the builder from former owners. The Fleet Corporation agreed to indemnify the builder from all loss or liability arising out of claims of the former owners occasioned by the requisition order, or any subsequent acts or orders.

January 23, 1920, the Fleet Corporation awarded claimant $442,683.82 as just compensation. It paid the builder for construction of the ship $412,130, which, added to the award, makes $854,813.82. This would be the total cost to it of the ship, if its award as to compensation were accepted. The contract price was $831,630. The cost of construction for military protection was $31,000. The Court of Claims found that at the time of the requisition, the value of such ships was $200 per deadweight ton, and was the same on February 1, 1918. The Court of Claims also found that claimant had paid to the builder $239,500 in cash, $180,000 in notes, and $28,433.33 interest on notes making $447,933.33, and that it also paid architect's fees amounting to $5,500, and furnished plans and specifications of the value of $20,277.25, making in all $473,710.58. The amount of the award was unsatisfactory to claimant, and 75 per cent. of it, $332,012.87, was paid. The judgment was for $231,549.12.2

Both parties appeal.

Did the United States requisition claimant's contract?

The act of Congress conferred upon the President the power to take claimant's contract, and also to take the ship materials and the ship in process of construction. It required compliance with all orders issued under it. No question is raised or involved as to the obligation of the builder to comply with orders given it to complete the ship in accordance with the contract. It was ordered to do so, and it accepted the order. We are not here concerned with its rights or obligations, but the orders given the builder show that expropriation of claimant's contract and rights was intended. By its orders it put itself in the shoes of claimant and took from claimant and appropriated to the use of the United States all the rights and advantages that an assignee of the contract would have had. The credit for, and advantages under the contract resulting from, payment of $419,500, made by claimant to builder were taken. The use of the plans and specifications for the construction of the ship as well as the benefit of inspection prior to the requisition date, August 3, 1917, were also taken over. The contract was not terminated. The direct and immediate result of the requisition orders and acts of the Fleet Corporation was to take from claimant its contract and its rights thereunder. Because of material ordered and furnished and work performed prior to requisition, the United States was enabled to obtain the ship earlier than it could have caused a like ship to have been planned and built, and secured the benefit of prices prevailing immediately after the making of the contract, when the builder ordered materials for the construction of the ship. At the time of requisition, costs were higher than the contract prices. At that time, and on February 1, 1918, the date fixed for completion, the value of such ships was greatly in excess of the contract price, and in excess of the amount awarded to claimant plus the amount paid by the Fleet Corporation to the builder.

Omnia Company v. United States, 261 U. S. 502, 43 Sup....

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