Olson v. United States Karlson v. Same Brewster v. Same 8212 582

Decision Date30 April 1934
Docket NumberNos. 580,s. 580
CourtU.S. Supreme Court

[Syllabus from 247 intentionally omitted] Messrs. I. K. Lewis, of Duluth, Minn., and Harry H. Peterson, of St. Paul, Minn., for petitioners.

The Attorney General and Mr. Charles Bunn, of Washington, D.C., for respondent United States.

Mr. George Wharton Pepper, of Philadelphia, Pa., for Government of Dominion of Canada appearing pursuant to the Provisions of the Protocol, accompanying Convention to Regulate the Level of the Lake of the Woods, February 24, 1925.

Mr. Justice BUTLER delivered the opinion of the Court.

These cases arise in a condemnation proceeding instituted by the United States in the federal District Court for Minnesota to acquire easements of flowage upon lands bordering upon the Lake of the Woods in that state. The only substantial question is whether, on the facts disclosed by the record and others of which judicial notice may be taken, the actual use and special adaptability of petitioners' shorelands for the flowage and storage of water, that inter alia will be available for the generation of power, may be taken into consideration in ascertaining the just compensation to which petitioners are entitled.

The superficial area of the Lake of the Woods is between fourteen and fifteen hundred square miles; it lies in Minnesota, Ontario, and Manitoba. Many streams flow into it. The Rainy river and Warroad river are the largest of those touching Minnesota. The former, coming from the east along the international boundary, drains a very large territory lying on both sides of the line. The latter, not so large, coming from the south, drains a considerable area within Minnesota and empties into the southwesterly part of the lake. The outlets of the lake are in Canada; they combine to make the Winnipeg, a great river, flowing northwesterly to Lake Winnipeg. In 1898 a Canadian corporation, by agreement with the Crown, put in operation the Norman dam for the control of outflow down the Winnipeg. Since the construction of this dam, and in consequence of it and other dams in the outlets, shorelands, in disregard of the rights of owners, have been intermittently flooded for the impounding of water used in Canada for the generation of power and other purposes.

In 1909 the United States and Great Britain made a treaty which (art. 8) created an international joint commission and conferred upon it jurisdiction in terms broad enough to include cases involving the elevation of the Lake of the Woods as the result of these dams. 36 Stat. 2451. In 1912 questions arising out of the raising of the lake were referred to the commission, and, after hearings and extensive studies, it made its final report in 1917. The United States and Great Britain then consummated the treaty of 1925 (44 Stat. 2110) which provides (article 8): 'A flowage easement shall be permitted up to elevation 1064 sea level datum upon all lands bordering on Lake of the Woods in the United States, and the United States assumes all liability to the owners of such lands for the costs of such easement.'1

By an act to carry into effect the provisions of the last-mentioned treaty (Act of May 22, 1926, 44 Stat. 617, as amended April 18, 1928, 45 Stat. 431), Congress directed the Secretary of War to acquire by purchase or condemnation flowage easements up to the specified elevation upon all lands in Minnesota bordering upon the Lake of the Woods, the Warroad river, and the Rainy river, and that compensation should be made in accordance with the Constitution of Minnesota which declares (article 1, § 13): 'Private property shall not be taken, destroyed or damaged for public use, without just compensation therefor first paid or secured.' Commissioners appointed to ascertain the damages sustained by the several owners by reason of such taking made their awards. The United States and these petitioners appealed. The cases were tried together, the jury returned verdicts for the amounts to which petitioners were found severally entitled and judgments were entered accordingly.2 Petitioners ap- pealed. The Circuit Court of Appeals affirmed. 67 F.(2d) 24.

At the trial petitioners sought to have just compensation ascertained on the theory that the flooding of their lands (for brevity called 'use for reservoir purposes'), the circumstances which make them specially adaptable for that use and the fact that prior to condemnation such adaptability had increased their market value should be considered by the jury in determining just compensation. And, in order to establish a basis on which to rest that submission, petitioners offered to prove the followign facts:

There are valuable power sites at the outlets and in the Winnipeg river which cannot be fully developed without flooding the shorelands. The industries using these waters to produce power are well established and financially responsible. Demand for electricity there produced will increase. The raising of the lake level creates a storage reservoir, of which petitioners' lands form a part, that serves to increase potential capacity by about 200,000 continuous horse power which is worth more than $1,000,000 annually. Competition exists for the right to develop and control that capacity, the value of which is so great that one or another of the competitors would have acquired the flowage rights if the United States had not done so. It is entirely practicable for private enterprises to acquire flowage e sements. Publicity, long given to the great value of the lake as a storage reservoir, created a demand and affected the market value of shorelands needed for that purpose. And, in connection with the facts above stated, petitioners offered to prove the fair market values of their lands before and after the imposition of the flowage easement, taking into consideration all the facts and circumstances affecting market prices.

Respondent, having obtained leave to establish foundation for objection to petitioners' offers to prove, introduced evidence of the following facts:

The main shore line of the Lake of the Woods, including the affected reaches of the Rainy river, exceeds 1,035 miles of which more than 110 are in Minnesota. There are in the lake a number of islands of a mile or over in length and approximately 10,000 smaller ones. The shore lines of the islands exceed 1,180 miles of which about 20 miles are it Minnesota. Below sea-level datum 1064, established by the treaty, there are about 850 parcels owned by more than 775 individuals. If mortgagees and other claimants are counted, the number to be dealt with is not less than 1,225 persons. Of these, only 496 live on or near the land, 186 live elsewhere in Minnesota, and 123 in other parts of the United States and Canada. The addresses of 401 are unknown. The United States owns a considerable part—about one-fifth—of the shore line in Minnesota. Small areas are held under homestead entries. The state of Minnesota owns a small piece subject to contracts of sale.

And it was made to appear:

None of the 35 miles of shorelands in Manitoba, of which about 14,427 acres lie below contour 1064, are privately owned. In 1915 they were reserved by the Dominion in anticipation of action by the International Joint Commission to regulate lake levels, and in 1930 they were transferred to the Province. In Ontario more than 700 persons own shorelands. In 1920 that Province, in accordance with the recommendations of the Commission, withdrew its lands below the established level—about 13,043 acres—from private entry. On the Canadian side about 40 Indian reservations include 8,600 acres below the established level along about 250 miles of shore line. These lands may be disposed of only with the assent of a majority of the male members of the band of the full age of 21 years at a meeting summoned for that purpose according to the rules of the band, and subject to the approval of governmental authority.

The Lake of the Woods is one of the water communications which by the Webster-Ashburton Treaty is required to be free and open to the use of the citizens and subjects of both countries. Its usefulness for navigation is a matter of great concern. The United States is interested in navigation and in the protection of owners of shorelands on the American side rather than in the development of power in Canada. The levels controlled by dams in the outlets were regulated by Canadian authority until the creation of an international regime in pursuance of the Treaty of 1925. Regulation has not been exclusively for the Production of power but, so far as practicable, for the protection of all interests, including navigation, logging, domestic use of water, irrigation, and power.

The trial court, being of opinion that under the circumstances neither the use nor the special adaptability of petitioners' lands for reservoir purposes could be considered in determining their market value, excluded the evidence offered by the petitioners. He instructed the jury first to determine as to each piece of land its fair market value on May 4, 1929—before the easement was imposed—taking into consideration the fact that prior to the taking the government had the right to maintain the level of the lake up to 1059 sealevel datum (that may be taken as the natural level); next to find the fair market value after the taking, and that the difference is the amount for which the government is liable. To guide the jury in the ascertainment f such values, the court charged: 'You will take into consideration all of the use for which the property was available on May 4, 1929, and May 5th, 1929, and determine what use it was most valuable for, and base your award thereon; but you will not make an award based on any claim for reservoir value. I have held that under the law the value of these lands could not be based upon the use of the lake and its...

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