Dore v. United States

• Decision Date: 01 May 1951
• Docket Number: No. 48682,48683.,48682
• Parties: DORE et al. v. UNITED STATES. INTERNATIONAL RICE MILL. CO., Inc. v. UNITED STATES.
• Court: U.S. Claims Court

97 F. Supp. 239

119 Ct. Cl. 560

DORE et al. v. UNITED STATES.

INTERNATIONAL RICE MILL. CO., Inc. v. UNITED STATES.

Nos. 48682, 48683.

United States Court of Claims.

May 1, 1951.

Herman J. Galloway, Washington, D. C., for the plaintiffs. Paul M. Rhodes and King & King, Washington, were on the briefs.

John J. McGinty, with whom was Asst. Atty. Gen. H. G. Morison, for the defendant.

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

LITTLETON, Judge.

Plaintiffs were millers of rice during the period of commodity price control during World War II. In these suits they seek to recover just compensation for an alleged taking of rice, within the meaning of the Fifth Amendment, through compulsory compliance with Government set-aside orders and forced sale to the Government at certain controlled prices, which so-called sales resulted in losses to plaintiffs.

Rice milling involves the purchase of rough, raw rice; the cleaning, polishing and preparation of that rice for sale; and the distribution into wholesale channels of the milled product. The production and distribution of rice was regulated during the war and immediate postwar period by the Department of Agriculture, and the prices of both rough and milled rice were regulated by the Office of Price Administration. On September 7, 1946, a "miller of rice" was defined as "any person who mills more than 500 barrels of rough rice in any calendar month."¹ Plaintiffs met this definition during the entire period with which we are concerned.

On September 17, 1946, the OPA increased the previously established maximum price of rough rice by approximately $1 per barrel;² no simultaneous increase was made in the price of milled rice. Caught between increased raw material costs and an inflexible ceiling on the finished product, plaintiffs and the industry generally were unable to meet costs of production. Faced with the prospect of selling only at a loss, plaintiffs, through their industry representative, the Rice Milling Industry Advisory Committee, petitioned OPA for an increase in the maximum price of milled rice. An initial request was filed August 15, 1946; a supplemental petition supported by additional cost data was filed October 16, 1946. In response to the initial request for price adjustment, OPA on September 24, 1946, granted an interim increase of approximately $0.50 per barrel in the ceiling price at which milled rice could be sold, specifically recognizing that because of the increased ceiling price granted in rough rice, millers were unable to meet their production costs.³ In stating the considerations involved in the issuance of the September 24 interim price amendment, the OPA announced, in part:

"It appears from an accounting survey conducted by the Office of Price Administration in 1944 and from other information available to this office that rice millers are not now recovering total costs. Under such circumstances, the Price Administrator is of the opinion that an interim adjustment in maximum prices of finished rice is appropriate in order to cover these two known material costs increases. Such adjustment will assure the industry that the maximum prices for finished rice will generally cover total costs for the product.

"The Rice Milling Industry Advisory Committee is now preparing a petition for adjustment of maximum prices of finished rice * * *. The Price Administrator realizes that a considerable period of time may elapse before the petition has been finally prepared and filed with the Office of Price Administration and a decision reached upon it. The information received as a result of the petition will enable the Administrator to determine the extent of any further adjustment that may be necessary."

Effective November 18, 1946, the OPA, having considered the petitions and data submitted by the industry representative, issued a final order supplanting the interim price amendment and raising the ceiling price on milled rice $0.704 per barrel of rough rice milled and also increasing certain distributor markups. The price thus established was based upon an analysis of the data submitted by the Rice Industry Advisory Committee and was considered by the Administrator to be "generally fair and equitable."⁴

Plaintiffs sold no milled rice through civilian markets after the date of the price ceiling increase on rough rice for the reason that, even with the benefit of the interim increase in price for milled rice, they were unable to meet milling costs. During this period, however, plaintiffs (and the industry generally) were required by order of the Government to set aside 40 percent of their production for sale to Government agencies.⁵ Plaintiffs did this, and during October 1946 delivered 3,240,000 pounds of the set-aside rice to Commodity Credit Corporation, a Government purchasing agency, upon its order. The Government paid for the rice at the prevailing OPA ceiling price, which included the interim increase granted September 24, 1946. Plaintiffs complied with the set-aside order of the OPA and sale orders of the Commodity Credit Corporation because failure to do so would have subjected them to civil penalties amounting to business death and, for a wilful violation, to criminal prosecution.

Two questions are presented. The first is whether or not defendant's "purchases" under compulsory set-aside orders constituted a "taking" for which just compensation must be paid, as required by the Fifth Amendment to the Constitution. The second is whether or not, if there was a "taking," the interim price already paid to plaintiffs amounts to "just compensation." The Government contends that the transactions here were strictly "sales" and—not a "taking"—of plaintiffs' rice and that, even if a "taking," the plaintiffs have already received just compensation, within the meaning of the Fifth Amendment, for their losses inasmuch as they have been paid an amount for the rice computed on the bases of OPA maximum prices (interim prices) prevailing at the date and place of taking.

The plaintiffs contend that they did not sell their product voluntarily or willingly but were compelled to part with their rice involuntarily and that the transactions were thus "takings" rather than "sales" and that the amounts paid for the rice on the basis of the interim price were not "just compensation" therefor, but an amount less than the fair value of the rice and so small that, excluding all considerations of profit, an out-of-pocket loss was incurred in the milling of the actual rice supplied the Government.

Did plaintiffs make an ordinary "sale" of their rice to the Government as it contends? A. "sale" implies willing consent to the bargain. A transaction although in the form of a sale, but under compulsion or duress, is not a sale. Cf. Liggett & Myers Tobacco Co. v. United States, 274 U.S. 215, 47 S.Ct. 581, 71 L.Ed. 1006. When, as here, the United States exercises its authority to order delivery and in its sovereign capacity forces the "sale" of property to it for public use there is, in our opinion, a "taking" and just compensation must be made. It is true that the Government did not go through the formal proceedings of requisitioning the rice, but the plaintiffs knew that they had to sell and deliver according to the Government's order or face requisition plus penalties. Plaintiffs did not wish to court the greater detriment, nor delay supplies to the Government by demanding formal requisition. Plaintiffs complied with the Government orders but noted their protest and reserved as best they could their right to seek later what they deemed to be a fair price. We think the record clearly establishes the fact that the Government, in the exercise of unquestioned wartime powers, forced a "sale" of this rice to it. This was a taking of the rice by the Government for public use.⁶ The Constitutional right to just compensation is a matter of substance and is not contingent upon the form by which the Government chooses to acquire the property.⁷

The next question relates to the matter of just compensation. Plaintiffs, having shown that payment based upon the OPA interim price resulted in an actual out-of-pocket loss to them, claim that the price paid did not amount to the "just compensation" guaranteed by the Fifth Amendment to the Constitution. They urge the price paid should have been computed on the basis of the "fair value" of the rice as established by OPA effective November 18, 1946, on the basis of industry cost studies to that date. Defendant does not contest the fact that plaintiffs' actual costs on the rice taken exceeded the amount received from the Government for it, nor does it offer any proof of its own as to "fair value," but contends that just compensation is the OPA maximum price actually in effect on the date of taking, which, in this case, was the interim price set September 24, 1946, pending the results of an industry cost study. The latter price has already been paid plaintiffs; suit here is for the balance between OPA interim price at time of taking and OPA price established by the OPA price order of November 18, 1946. The record in this case shows that it was manifest to the OPA officials that their price before the interim increase was not sufficient to compensate the plaintiff and that the interim price regulation amendment was an attempt, as its language shows, to give in advance at least a portion of the increased costs being incurred by the millers, and this is not denied; and it is admitted that such amendment did not accomplish this result in these cases.

The Fifth Amendment to the Constitution provides that private property shall not be taken for public use without just compensation. Just compensation is the monetary equivalent of the property taken, and the determination of that amount which shall be such equivalent has been held to be a judicial function.⁸

In determining what is "just compensation," each case must...