Kimball Laundry Co v. United States

• Decision Date: 27 June 1949
• Docket Number: No. 63,63
• Citation: 338 U.S. 1,69 S.Ct. 1434,7 A.L.R.2d 1280,93 L.Ed. 1765
• Parties: KIMBALL LAUNDRY CO. v. UNITED STATES
• Court: U.S. Supreme Court

338 U.S. 1

69 S.Ct. 1434

93 L.Ed. 1765

KIMBALL LAUNDRY CO.

v UNITED STATES.

No. 63.

Argued Dec. 7, 8, 1948.

Decided June 27, 1949.

[Syllabus from pages 1-3 intentionally omitted]

Mr. William J. Hotz, Omaha, Neb., for petitioner.

Mr. George T. Washington, Asst. Sol. Gen., Washington, D.C., for respondent.

Mr. Justice FRANKFURTER delivered the opinion of the Court.

On November 21, 1942, the United States filed a petition¹ in the United States District Court for the District of Nebraska to condemn the plant of the Kimball Laundry Company in Omaha, Nebraska, for use by the Army for a term initially expiring June 30, 1943, and to be extended from year to year at the election of the Secretary of War. The District Court granted the United States immediate possession of the facilities of the company, except delivery equipment, for the requested period. The term was subsequently extended several times. The last year's extension was to end on June 30, 1946, but the property was finally returned on March 23, 1946.

The Kimball Laundry Company is a family corporation the principal stockholders of which are three brothers who are also its officers. The Laundry's business has been established for many years; its plant is large and well equipped with modern machinery. After the Army took over the plant, the Quartermaster Corps ran it as a laundry for personnel in the Seventh Service Command. Most of the Laundry's 180 employees were retained, and one of the brothers stayed on as operating manager. Having no other means of serving its customers the Laundry suspended business for the duration of the Army's occupancy.

On November 19, 1943, a board of appraisers appointed by the District Court, in accordance with Nebraska law, reported that 'the just compensation for the value of the use of the premises taken by the United States of America is the sum of $74,940 per annum * * *.' The appraisers made no award of damages for the loss of patrons which they recognized to be probable because at that time the amount of the loss could not be appraised. The Government and the Laundry both appealed the appraisers' award, and the question of just compensation was tried to a jury in March of 1946. The jury awarded an annual rental of $70,000—a total of $252,000 for the whole term—and $45,776.03 for damage to the plant and machinery beyond ordinary wear and tear. The rental award was intended to cover taxes, insurance, normal depreciation, and a return on the value of the Laundry's physical assets. Interest at the rate of 6 per cent was added from November 22, 1942, the day on which the Army took possession, on the amount due for the period between that date and June 30, 1943, and on the rental for each year thereafter from the beginning of the year until paid. Interest on the sum awarded for damage to the plant and machinery was adjudged to run from the date of the verdict, since the plant had not then been returned.

The Laundry appealed to the Court of Appeals for the Eighth Circuit assigning numerous errors in the admission and exclusion of testimony and in the instructions to the jury. The Court of Appeals affirmed the District Court, 8 Cir., 166 F.2d 856, and we granted the Laundry's petition for certiorari, 335 U.S. 807, 69 S.Ct. 30, because it raised novel and serious questions in determining what is 'just compensation' under the Fifth Amendment.

These questions are not resolved by the familiar formulas available for the conventional situations which gave occasion for their adoption. As Mr. Justice Bran- deis observed, 'V lue is a word of many meanings.' Southwestern Bell Telephone Co. v. Public Service Comm., 262 U.S. 276, 310, 43 S.Ct. 544, 554, 67 L.Ed. 981, 31 A.L.R. 807. For purposes of the compensation due under the Fifth Amendment, of course, only that 'value' need be considered which is attached to 'property,'² but that only approaches by one step the problem of definition. The value of property springs from subjective needs and attitudes; its value to the owner may therefore differ widely from its value to the taker. Most things, however, have a general demand which gives them a value transferable from one owner to another. As opposed to such personal and variant standards as value to the particular owner whose property has been taken, this transferable value has an external validity which makes it a fair measure of public obligation to compensate the loss incurred by an owner as a result of the taking of his property for public use. In view, however, of the liability of all property to condemnation for the common good, loss to the owner of nontransferable values deriving from his unique need for property or idiosyncratic attachment to it, like loss due to an exercise of the police power is properly treated as part of the burden of common citizenship. See Omnia Commercial Co. v. United States, 261 U.S. 502, 508—509, 43 S.Ct. 437, 438, 67 L.Ed. 773. Because gain to the taker, on the other hand, may be wholly unrelated to the deprivation imposed upon the owner, it must also berejected as a measure of public obligation to requite for that deprivation. McGovern v. New York, 229 U.S. 363, 33 S.Ct. 876, 57 L.Ed. 1228, 46 L.R.A.,N.S., 391; United States ex rel. T.V.A. v. Powelson, 319 U.S. 266, 63 S.Ct. 1047, 87 L.Ed. 1390.

The value compensable under the Fifth Amendment, therefore, is only that value which is capable of transfer from owner to owner and thus of exchange for some equivalent. Its measure is the amount of that equivalent. But since a transfer brought about by eminent domain is not a voluntary exchange, this amount can be determined only by a guess, as well informed as possible, as to what the equivalent would probably have been had a voluntary exchange taken place. If exchanges of similar property have been frequent, the inference is strong that the equivalent arrived at by the haggling of the market would probably have been offered and accepted, and it is thus that the 'market price' becomes so important a standard of reference.³ But when the property is of a kind seldom exchanged, it has no 'market price,' and then recourse must be had to other means of ascertaining value, including even value to the owner as indicative of value to other potential owners enjoying the same rights. Cf. Old South Association v. Boston, 212 Mass. 299, 99 N.E. 235. These considerations have special relevance where 'property' is 'taken' not in fee but for an indeterminate period.

Approaching thus the question of compensation for the temporary taking of petitioner's land, plant, and equipment, we believe that the award made by the District Court was correct. Petitioner insists, however, that the measure of compensation for a temporary taking which should have been applied is the difference between the market value of the fee on the date of the taking and its market value on the date of its return. But it was known from the outset that this taking was to be temporary, and determination of the value of temporary occupancy can be approached only on the supposition that free bargaining between petitioner and a hypothetical lessee of that temporary interest would have taken place in the usual framework of such negotiations. We agree with both lower courts, therefore, that the proper measure of compensation is the rental that probably could have been obtained, and so this Court has held in the two recent cases dealing with temporary takings. United States v. General Motors Corp., 323 U.S. 373, 65 S.Ct. 357, 89 L.Ed. 311, 156 A.L.R. 390; United States v. Petty Motor Co., 327 U.S. 372, 66 S.Ct. 596, 90 L.Ed. 729. Indeed, if the difference between the market value of the fee on the date of taking and that on the date of return were taken to be the measure, there might frequently be situations in which the owner would receive no compensation whatever because the market value of the property had not decreased during the period of the taker's occupancy.

The courts below also awarded compensation to petitioner for damage to its machinery and equipment in excess of ordinary wear and tear, the award of rental having been adjusted to include an allowance for normal depreciation. The Government does not object to this award, but we think it appropriate to point out that we find it justified on the theory that such indemnity would be payable by an ordinary lessee, though not fixed in advance as part of his rent because not then capable of determination.

The petitioner makes numerous objections to the sufficiency of the evidence in support of the amounts fixed by the jury as the rental value of the physical property and as compensation for damage to the plant and equip- ment in excess of ordinary wear and tear. Suffice it to say that we find these awards adequately supported.

At the core of petitioner's claim that it has been denied just compensation is the contention that there should have been included in the award to it some allowance for diminution in the value of its business due to the destruction of its 'trade routes.' The term 'trade routes' serves as a general designation both for the lists of customers built up by solicitation over the years and for the continued hold of the Laundry upon their patronage.

At the trial petitioner offered to prove the value of the trade routes by testimony of an expert witness based on the gross receipts attributable to each class of customers, and the testimony of one of its officers was offered to show that this value had wholly disappeared during the three and one-half years of the Army's use of the plant.⁴ It further offered to show the cost of building up the customer lists, which had not been capitalized but charged to expense, and losses which would be incurred after the resumption of operations while they were being rebuilt. The petitioner also attempted to introduce evidence of its gross and net income for the eighteen years preceding the taking, the amount of dividends paid, and the...