Toronto, Hamilton & Buffalo Nav. Co. v. United States

• Decision Date: 06 March 1950
• Docket Number: No. 46435.,46435.
• Citation: Toronto, Hamilton & Buffalo Nav. Co. v. United States, 88 F. Supp. 1016, 116 Ct. Cl. 184 (Fed. Cl. 1950)
• Parties: TORONTO, HAMILTON & BUFFALO NAVIGATION CO. v. UNITED STATES.
• Court: U.S. Claims Court

88 F. Supp. 1016

116 Ct. Cl. 184

TORONTO, HAMILTON & BUFFALO NAVIGATION CO. v. UNITED STATES.

No. 46435.

United States Court of Claims.

March 6, 1950.

Frank J. Mahony, New York City, for the plaintiff. Frederick L. Wheeler and C. Austin White, New York City, were on the brief.

Kendall M. Barnes, Washington, D. C., with whom was Acting Assistant Attorney General H. G. Morison, for the defendant.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN and HOWELL, Judges.

HOWELL, Judge.

On December 6, 1948, this court entered a judgment in favor of plaintiff in the amount of $161,833.72. 112 Ct.Cl. 240, 81 F.Supp. 237. By virtue of a writ of certiorari brought in the Supreme Court of the United States, that Court reversed our judgment and remanded the cause to this court for "further proceedings in the light of this opinion of this court." 70 S.Ct. 217, 223.

In determining what sum would represent just compensation to the owner of requisitioned property at the time and place of taking we are first met with the general proposition that market value at the time and place of taking is just compensation for condemned property. United States v. New River Collieries, 262 U.S. 341, 344, 43 S.Ct. 565, 67 L.Ed. 1014; United States v. Miller, 317 U.S. 369, 374, 63 S.Ct. 276, 87 L.Ed. 336, 147 A.L.R. 55; United States v. Powelson, 319 U.S. 266, 275, 63 S.Ct. 1047, 87 L.Ed. 1390.

However, to establish a "market value," the transactions relied upon must be of sufficient number and the quantities sold extensive enough to establish a proper criterion of market price. United States v. New River Collieries, supra, 262 U.S. at page 345, 43 S.Ct. at page 567.

The sales of car ferries on the Great Lakes at or about the time of the taking of the Maitland No. 1 did not represent a sufficient number of similar vessels to form a proper basis for the establishment of a "market value" according to established legal concepts.

The Supreme Court has told us that a resort to substitute standards such as reproduction costs less depreciation or capitalization of earnings could not be justified under the circumstances. In view of the economic status of the car ferry industry on the Great Lakes at the time of the requisition, it is not probable that anyone would have reproduced a car ferry of the size and type of the Maitland No. 1. Because of the fact that the ship had been tied up at the dock for several years, a consideration of its earnings during the years it had been in operation was not justified.

The most nearly contemporaneous transactions in car ferries of vessels of almost identical age, specifications, carrying capacity, etc., were in connection with three ocean-going ferries, the Henry M. Flagler, Joseph R. Parrott and the Estrada Palma, which were purchased off the east coast of Florida and towed to New York before being placed in service (Tr. pp. 468-589). We will discuss those transactions briefly later on in this opinion.

The Supreme Court has indicated to us that the absence of "market price" does not, ipso facto, rid isolated contemporaneous sales of all relevance and that in all likelihood "the differences between the Maitland No. 1 and ships sold on the Great Lakes between 1936 and 1942 may be calculated with some * * * accuracy"; further, that the circumstances might indicate the relevancy of the Maitland No. 1's insurance valuation.¹

We consider first the matter of insurance. From January 1, 1938, to August 20, 1942, plaintiff maintained insurance on the Maitland No. 1 based on a valuation of $100,000. Most of the cases in which insurance has been considered in the determination of the value of the ship involved deal with vessels in actual operation. However, we can conceive of no good reason why the same considerations should not be made in the determination of the value of a ship tied up at dock. In either case, the owners of the vessels would be guided by the same motives and business considerations in fixing the amount of insurance which they felt would serve that double purpose for which all insurance is intended — i. e., protection against total loss and the desire to be made "whole" as near as possible in the event of total loss.

Our inquires into this subject lead us to the conclusion that while "appraisals for insurance" may be a factor in the determination of value for just compensation, they are always a bit unreliable and sometimes irrelevant. The Petar, D.C., 68 F. Supp. 296, 300. The theory and practice of insurers and insured is to make the limit of insurance much less than the value of the property, while owners are permitted to procure insurance in amounts below this limit. The result is that the amount of insurance has no fixed or uniform relation to the value of the property it covers, and hence does not directly tend to disclose its value. Union Pacific R. Co. v. Lucas, 8 Cir., 136 F. 374; Adelphia Hotel Co. v. Providence Stock Co., 3 Cir., 277 F. 905; Roscoe, Damages in Marine Collision, 35.

Since the Maitland No. 1 was valued for insurance purposes at $100,000, and since there is nothing in the record to indicate anything fictional or fraudulent concerning this amount, we feel justified in proceeding upon the theory that a fair value to represent just compensation could not be any less than that amount.

We have found that the highest and most profitable use for which the Maitland No. 1 was adaptable in 1942, at the time of its requisition, was as a highway ferry for transporting automobiles and passengers on the Great Lakes or similar bodies of fresh water involving no greater length of haul. Further, that its conversion could have been accomplished more economically and more quickly for that purpose than for any other (Finding 18).

In Olson v. United States, 292 U.S. 246, 255, 54 S.Ct. 704, 708, 78 L.Ed. 1236, it was stated that the "highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future is to be considered, not necessarily as a measure of value, but to the full extent that the prospect of demand for such use affects the market value while the property is privately held."

Accordingly, we turn now to a consideration of the transactions in car ferries on the Great Lakes between 1936 and 1942.

Between 1936 and 1940, several car ferries similar to the Maitland No. 1 were sold to purchasers who converted them to highway ferries. In 1938, the Pere Marquette Railway Company sold the car ferry, Pere Marquette No. 20, which had been built in 1903 from the same plans as the Maitland No. 1, to the Michigan Highway Department. The sale price was $50,000, plus an additional $10,000 for delivering the vessel across Lake Michigan to a shipyard. This boat had been laid up in September, 1930 and nothing had been expended on her for maintenance or repairs between that time and the date of sale. In 1936 the owners made a survey of the vessel and estimated that it would cost $173,700 to place her in operating condition for use as a car ferry for a period of 5 years.

In 1940, the Pere Marquette Railway Company sold the car ferry, Pere Marquette No. 17, which had been built in 1901 to the same plans as the Maitland No. 1, to the Michigan Highway Department for $65,000. This vessel had likewise been laid up for a number of years prior to her sale and in 1936 the owners had estimated that an expenditure of $147,200 would have been required to place the vessel in operating condition as a car ferry for a period of five years.

In 1936 the Ann Arbor Railroad sold the car ferry, Ann Arbor No. 4, to the Michigan Highway Department for $25,000. The vessel was much smaller than the Maitland No. 1, being only 250 feet in length as compared with the 350 feet in length of the Maitland No. 1. There is no proof with respect to the age and condition at the time the vessel was sold in 1936.

In addition to the above vessels, which were sold and converted to highway ferries, we have found that in 1940 and 1942, two car ferries, which were in a very bad state of repair, were sold to purchasers who removed the engines from the boilers, tore off the superstructure of the vessels, and used them as bulk carriers of pulpwood.

In July 1940, the Pere Marquette Railway Company sold the Pere Marquette No. 19 for $24,000. The vessel was built to the same plans as the Maitland No. 1 and was the sister ship to the Pere Marquette No. 20 mentioned above. She had been laid up a number of years and just prior to the sale, the owners estimated that an expenditure of $308,000 would be required to recondition her for an additional 15 or 20 years' operations.

In 1942 the Marquette and Bessemer No. 2 was sold for $37,724.04. The vessel was built in 1910 from the same plans as the Maitland No. 1 and had formerly been used as a car ferry on Lake Erie. She had been retired in 1941 and had received no maintenance or repairs thereafter. Prior to the sale the owners had estimated that by spending $300,000 for repairs the vessel could be placed in condition to operate for 15 to 20 additional years.

It is interesting to note that in connection with each of these vessels an estimate was made at or near the time of sale of the amount of money it would require to place them in operating condition, as follows:

-------------------------------------------------------------------
                             |                       |             |    Amount
                             |                       |             |   required
                             |                       |             |  to place in
                  Year of    |   Name of vessel      |    Amount   |   operating
                   sale      |                       |   sold for  |   condition
                -------------|-----------------------|-------------|---------------
                1938........ | Pere Marquette No.    |             |
                             |  20 ..................| $50,000.00  |     $173,700
                1940........ | Pere Marquette No.    |             |
                             |  17

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