Olson v. United States

• Citation: 67 F.2d 24
• Decision Date: 17 August 1933
• Docket Number: No. 9279-9281.,9279-9281.
• Parties: OLSON v. UNITED STATES. KARLSON v. SAME. BREWSTER v. SAME.
• Court: U.S. Court of Appeals — Eighth Circuit

67 F.2d 24 (1933)

OLSON v. UNITED STATES.

KARLSON v. SAME.

BREWSTER v. SAME.

Nos. 9279-9281.

Circuit Court of Appeals, Eighth Circuit.

August 17, 1933.

I. K. Lewis, of Duluth, Minn. (John H. Hougen, of Crookston, Minn., C. E. Berkman, of Chisholm, Minn., and Lewis, Hunt & Palmer, of Duluth, Minn., on the brief), for appellants.

Henry N. Benson and Chester S. Wilson, both of St. Paul, Minn., for the State of Minnesota.

Donald D. Harries, Sp. Asst. U. S. Atty., of Duluth, Minn. (Lewis L. Drill, U. S. Atty., of St. Paul, Minn., and D. N. Lindeman, of Duluth, Minn., Atty. for United States War Department, on the brief), for the United States.

John E. Read, of Ottawa, Canada, K. C. for the Government of Canada.

Before STONE and BOOTH, Circuit Judges, and WYMAN, District Judge.

STONE, Circuit Judge.

These are three separate appeals by landowners from judgments awarding damages in a condemnation proceeding prosecuted by the United States against the lands of each.

These lands border the Lake of the Woods, which is a large body of water partly in the state of Minnesota and partly in Canada. The surface area of the lake is approximately 1,500 square miles with its outlet, by the Winnipeg river, in Canada. There are natural water power sites along that river. In order to utilize and develop these power possibilities, it is necessary to regulate the outflow of the water from the lake so as to maintain a dependable, uniform rate of flow during all seasons. This regulation of outflow must be secured by dams by which the flow can be controlled. The effect of such a dam is to restrain the outflow, to use the lake as a sort of reservoir, and to raise the natural level of the lake. A raised level overflows shore lands. The lands involved here are shore lands so affected and it is this character of damage or taking which is in question.

In 1898, the Keewatin Power Company (a Canadian corporation) constructed, for power purposes, such a control dam in Canada, near Kenora. It utilized the lake as a reservoir and caused an average rise in the lake level of about three feet with resulting invasion of the shore lands. This flooding of shore lands has intermittently continued since 1898 and is substantially the level to be maintained hereafter. No damages were paid for this overflowing of lands.

In 1909, a treaty was made between the United States and Great Britain "relating to boundary waters" (Jan. 11, 1909, 36 Stat. part 2, p. 2448). This treaty established an International Joint Commission which, within defined limits, was given jurisdiction over "all cases involving the use or obstruction or diversion of the waters" (article 8 of treaty) covered by articles 3 and 4 of the treaty and respecting which those two articles required the approval of the commission. This jurisdiction expressly included "uses for power * * * purposes" (art. 8). This treaty was general and did not specifically mention the Lake of the Woods.

The commission was organized and the Lake of the Woods situation was referred to it. The final report (May 18, 1917) of the commission was submitted to the two governments and resulted in the "Treaty and protocol * * * to regulate the level of the Lake of the Woods" (July 17, 1925, 44 Stat. part 3, p. 2108). This treaty provided that "the level of Lake of the Woods shall ordinarily be maintained between elevations 1056 and 1061.25 sea level datum, and between these two elevations the regulation shall be such as to ensure the highest continuous uniform discharge of water from the lake" (article 4). There were other provisions applying to exceptional water conditions. An International Lake of the Woods Control Board was established to secure maintenance of the levels provided in the treaty. In article 8 is a provision that: "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." Article 9 provided:

"The United States and the Dominion of Canada shall each on its own side of the boundary assume responsibility for any damage or injury which may have heretofore resulted to it or to its inhabitants from the fluctuations of the level of Lake of the Woods or of the outflow therefrom.

"Each shall likewise assume responsibility for any damage or injury which may hereafter result to it or to its inhabitants from the regulation of the level of Lake of the Woods in the manner provided for in the present Convention."

To carry into effect this Convention of 1925, the Act of May 22, 1926 (44 Stat. part 2, p. 617) and an amendatory act (April 18, 1928, 45 Stat. 431) were passed. These two acts provided that the Secretary of War should investigate and report to Congress on claims for "damages caused, prior to the acquisition of flowage easements under this Act." The secretary was required to acquire, by purchase or condemnation, "the flowage easements up to elevation one thousand and sixty-four sea-level datum upon all lands in such State Minnesota bordering on the Lake of the Woods, Warroad River, and Rainy River." Such condemnations were to be in accordance with the Act of August 1, 1888 (25 Stat. 357 40 USCA §§ 257, 258) and "with the constitutional provisions of the State of Minnesota which provide that private property shall not be taken, destroyed, or damaged for public use without just compensation therefor first paid or secured."

Being unable to secure these flowage rights upon various tracts by purchase, a condemnation proceeding was instituted, which included lands owned by these appellants. Commissioners were appointed to assess damages to the several tracts sought to be condemned and reported damages as to each. Both the United States and each of these appellants appealed from the awards of the commissioners. The appeals as to the tracts owned by these three appellants were, by agreement and order, consolidated for trial before a jury. From judgments of awards of damages as to the tracts owned by each of these appellants each of them has brought his separate appeal. They are consolidated for hearing and determination in this court.

But one main issue is involved in these appeals. It is raised in the record in various ways — by exclusion of evidence, refusal to charge, and the charge to the jury. The issue is whether the use of these properties for flowage purposes is such a use as, under the circumstances here, can be considered as an element of that value for which compensation must be made. Appellants present their argument under three distinct points, each of which has the same purpose and effect — to allow compensation for this flowage use value.

Point I is that this reservoir or flowage easement was at the time of taking under this action and for years before had been an existing, established easement; that it was a "unit" of value of the land; that it was such "unit" alone which was taken and, therefore, that the measure of value for compensation should be the value of this taken unit and not the difference between the values of the entire tract before and after taking under this action. Point II is that, whatever measure of value (either the above unit or the above difference) be applied, the taking of this existing and established use is a proper element of value in damages and compensation because such use existed at, prior to and independent of this condemnation, is such as may be advantageously employed by others than this condemnor and is such as naturally would or actually has increased the market value of the property. Point III is that the fair annual rental value of the flowage use is an element in compensation for taking of such use. All of these matters have been presented by counsel upon both sides with great ability and with commendable clearness and fairness. About all that could have been put before us, both for and against, has been presented and the court has been materially aided thereby.

I. The Unit Measure.

The brief of appellants reads: "Appellants urge that compensation for property taken, rather than damage to their remaining estate, be employed as the measure of their compensation, because it is more consistent with sound reasoning, and because it more clearly points out the error of the trial court" — that error being "the exclusion of all evidence of the most valuable use flowage which their property has served for thirty years and for which it is adaptable." The discussion, by appellants, of this urged measure of compensation may be helpful in scrutinizing the claimed erroneous action of the trial court, but the vital inquiry under this "point" is whether "it is more consistent with sound reasoning" to employ this unit measure of value.

The reasoning of appellants is that the "orthodox method of assessing just compensation is to determine the value of the whole property before and after the taking and compute the difference"; that this method came into practice in condemnations of rights of way for roads or railroads under circumstances which did not require the taking of the entire property affected; that "a different rule obtains where the entire unit of property is taken"; that the unit rule applies "where the property taken is a separate unit or species of property, and is capable of being acquired and transferred independently of the land on which it may be located"; that "easements of all kinds are dealt with in the law as property, separate and distinct, just the same as any other item of property"; that the matter here dealt with is a "flowage easement"; that flowage rights and reservoirs are listed and valued for rate and taxation purposes, are sold and dealt in as separate units, and conveyances thereof are recorded as such under the laws of Minnesota; that it is "good business and sound economics to treat storage reservoirs and flowage easements as separate units...