C. G. Blake Co. v. United States

• Decision Date: 04 March 1921
• Docket Number: 2918.
• Parties: C. G. BLAKE CO. v. UNITED STATES.
• Court: U.S. District Court — Southern District of Ohio

275 F. 861

C. G. BLAKE CO. v. UNITED STATES.

No. 2918.

United States District Court, S.D. Ohio, Western Division.

March 4, 1921

Murray Seasongood, of Cincinnati, Ohio, for plaintiff.

Allen C. Roudebush, Asst. U.S. Atty., of Cincinnati, Ohio, and Howard W. Ameli, Asst. Atty. Gen.

PECK District Judge.

The President of the United States, acting by the Secretary of the Navy, requisitioned of the plaintiff, under section 10 of the National Defense (Lever) Act of August 10, 1917 (U.S Comp. Stat. 1918, Comp. St. Ann. Supp. 1919, Sec. 3115 1/8ii), as necessary to the maintenance of the navy, on June 30, 1920, 48.75 gross tons; on July 17, 1920, 3,984 gross tons; on August 20, 1920, 3,003 gross tons; and on September 18, 1920, 1,613 gross tons-- of New River run of mine bunker coal, fixing a price of $4 per gross ton, f.o.b. mines, for the same, which the plaintiff declined to accept. Plaintiff was paid $3 per ton by the government on account, and, in accordance with the provisions of the act, brings this suit to recover 'such further sum as, added to said seventy-five per centum, will make up such amount as will be just compensation,' which, it avers, is not less than $5.60 per gross ton, f.o.b. mines. The government answers that just compensation is not $5.60 per ton, but the sum allowed. The action is submitted on the evidence, without the intervention of a jury.

It is not disputed by the government that coal of the grade in question was freely sold in the open market throughout the period covered by the requisitions at prices as high or higher than claimed by the plaintiff. It is the government's contention, however, that on account of abnormal conditions, resulting from the war and other causes there was no true or fair market, and no such thing as fair market value; that market value, in and of itself, is not the end to be sought in the present investigation, but that the goal of this proceeding is just compensation; that where there is no fair market there can be no fair market value that therefore some other standard must be sought; and that the true measure of just compensation, under the circumstances of this case, is the cost of production including the expense of operation, maintenance, depreciation, and depletion, plus a just and reasonable profit.

The evidence shows that the market price of coal sold for consumption within the United States during the period ranged from $5 to $10, and even as high as $14, per ton; but after the 1st of July it was not less than $5.60 a ton. The market reached its peak in the middle or latter part of August, when the quotations ranged from $8 to $14 a ton, and receded somewhat thereafter. Coal of the same character sold at tidewater for export purposes at prices ranging from $14 to $20 per gross ton. It is true that the Navy Department received five bids upon April 6th, for an aggregate of 285,000 gross tons, at prices ranging from $4.37 to $5, and upon May 18th three bids for an aggregate of 185,000 tons at from $4.48 to $4.82 per ton. These bids were for a very small part of the navy requirement of about 1,200,000 tons, and were received in response to a letter requesting bids sent to those upon the navy list of approved producers, in which it was stated, in substance, that, unless sufficient coal was thus secured, the department would have to continue the practice of requisitioning. In the latter event the producer would either be compelled to accept the price fixed by the department, or, having been paid three-fourths thereof, to sue for the remainder. These bids cannot, therefore, be considered as entirely voluntary quotations. The department rejected them on the ground that the quantity was too small and the price too high.

The United States Fuel Administration had relinquished control of prices April 1, 1920. It is true that the market was extremely irregular, and that the price was frequently dictated largely by the buyers' necessities. Many large dealers, including plaintiff, limited themselves, however, so far as their domestic business was concerned, to prices much below what could have been asked, for the purpose of retaining the good will of their customers for future business, and in view of the provisions of the fourth section of the Lever Act, the unconstitutionality of which was then not decided, restricting dealers to reasonable prices. Certain so-called priority orders of the Interstate Commerce Commission, by which freight cars were ordered to certain portions of the United States for the purpose of relieving local coal shortages, undoubtedly had a tendency to raise prices at some places and reduce them elsewhere. The demand was abnormal as the immediate aftermath of the war, and the supply was curtailed by labor troubles and car shortages. But, when all has been considered, the fact remains that the total coal output of the country, some 600,000,000 tons, including about 35,000,000 tons of the character of that in question, was sold and bought, for the most part, by voluntary transactions, and by persons under no restrictions or necessities, except the restraints of law and the needs that ordinarily impel consumers to buy fuel.

The general rule is, of course, that where one is entitled, in any form of action, to compensation based on the value of property, the measure of recovery, where such property can be procured in the market, is the value of it in the market, and not the cost; but, when there is no market value, the true value must be determined in some other way, from such elements of value as are attainable. Sedgwick on Damages, Secs. 244, 250. The abnormalities of the market, on which the government relies to set aside the ordinary rule and invoke the exception, are of two classes-- those resulting from governmental regulation, and those consequent upon unusual commercial conditions following the hostilities and accompanying a technical state of war.

The fact that laws and governmental regulations affect the sale of commodities does not abrogate the settled rule that market value is just compensation. All transactions in the commercial world are more or less affected by such conditions. Tariffs, transportation regulations, and various legal restraints and restrictions are in constant operation. Neither does the fact that unusual conditions affect the market mean that there is no market or market price. Drouths, floods, commercial panics, crop failures, labor difficulties, and other causes frequently affect markets seriously, but not so as to warrant a court, when assessing compensation consequent upon the exercise of the right of eminent domain, in saying that there is no market. The effects of war may differ in degree, but, so long as a market-- that is, a general buying and selling of the commodity-- exists, the rule persists.

Of the cases cited by the government that most nearly sustaining its contention is Kountz v. Kirkpatrick & Lyons, 72 Pa 376, 13 Am.Rep. 687, an action for damages for failure to deliver oil pursuant to an assigned contract. By the day fixed for delivery an unlawful combination of dealers, including the original purchasing party, but not his assignee, had gained control of the market, and had forced the price up temporarily to a greatly inflated figure. A few days later the price dropped to the normal. The real plaintiff, for whose benefit the suit was prosecuted, was innocent of this inflation. It was held that 'value' and 'market price' are not always convertible terms; that there could be no difference in justice or law between an unnatural depression and an unnatural exaltation in the market price; that neither is the true and only measure of value; that, when the market price is unnaturally inflated by unlawful and fraudulent practices, it cannot be the true means of ascertaining what is unjust compensation. It was concluded (two of the five justices dissenting) that it was a fair question for the jury to determine whether the price which was demanded for the oil on the delivery day was not a fictitious, unnatural, inflated, and temporary price, the result of a combination to...