UNITED STATES v. JOHN J. FELIN & CO., INC.
No. 17
Supreme Court of the United States
Decided June 14, 1948
Argued May 7, 1947. - Reargued November 18-19, 1947.
334 U.S. 624
In the light of the foregoing considerations, the validity of Regulation 3450 is sustained and the decision of the Circuit Court of Appeals is
Reversed.
Assistant Solicitor General Washington argued the
Arthur L. Winn, Jr. argued the cause for respondent. With him on the brief were Wilbur La Roe, Jr. and Frederick E. Brown.
MR. JUSTICE FRANKFURTER announced the judgment of the Court and delivered an opinion in which THE CHIEF JUSTICE and MR. JUSTICE BURTON concurred.
This is a claim for just compensation, based on the
While the immediate facts of this controversy are few and undisputed, they can be understood only in connection with the recognized facts in the meat industry. Of these we must take judicial notice inasmuch as we must
The respondent was engaged in the business of packing pork products in Philadelphia. It bought hogs in Chicago, St. Louis, and Indianapolis and transported them to Philadelphia where they were slaughtered and converted into various pork cuts and products. It sold these products to retail dealers in Philadelphia, and it had also supplied pork products to Government agencies.
On January 30, 1942, the President approved the
To meet the food needs entailed by the war, the President under the authority of the Second War Powers Act,
In conformity with this system, the respondent, on February 2, 1943, was requested to deliver 225,000 pounds of lard and pork products to the Federal Surplus Commodity Corporation for delivery under the Lend-Lease program. The respondent was advised that this order was to be filled in preference to any other order or contract of lower priority, and at the applicable O. P. A. ceiling prices. Insisting that it could no longer afford to sell to the Government at ceiling prices, respondent refused to make delivery.
On March 1, 1943, the Food Distribution Administration, exercising powers not questioned, issued an order requisitioning the lard and pork products in controversy.2 On March 3, 1943, the property was duly seized in respondent‘s Philadelphia packing house. On March 24, 1943, respondent filed its claim with the Administration for “just compensation” for taking this property. Its total claim was $55,525, of which $16,250 was for lard and $39,275 for pork cuts. On May 7, 1943, the Administration, by way of preliminary determination of the just compensation for the requisitioned property, fixed the value of the lard at $15,543.78 and the pork cuts at $25,112.50. These amounts were based on the O. P. A.
The Court of Claims referred the proceeding to a commissioner, who took evidence and reported to the court. Upon the basis of his report and the underlying evidence, the Court of Claims found as a fact that the replacement cost of the requisitioned pork cuts at the time and place of the taking was $30,293, and concluded, as a matter of law, that such replacement cost and not the maximum ceiling price was the proper measure of damages for the taking. We heard argument at the last Term, and after due consideration deemed it appropriate to order reargument at this Term.3
The Second War Powers Act, 1942, under which respondent‘s property was authorized to be taken, restricted compensation for the taking to that which the
The Court of Claims found that the principal item in the cost of processing respondent‘s products was what it had to pay for live hogs; that, inasmuch as live hogs were not then covered by price regulation, the Chicago market quotations governed price in the packing industry; that the Chicago average live hog price was $15.59 during March 1943;5 and that, on the basis of this price, the
We are dealing with a claim for damages arising out of a transaction pertaining to a particular industry, and the transaction cannot be torn from the context of that industry. It is practically a postulate of the slaughtering industry that replacement cost does not afford a relevant basis for determining the true value of the industry‘s products. “Manufacturing operations in the meat packing industry do not consist of assembling raw materials for the purpose of obtaining one finished product, but rather of separating or breaking down raw materials (cattle, etc.) into many parts, one of which (dressed carcass) is the major product, and the other parts of which are further processed into numerous byproducts.” Kingan & Co. v. Bowles, 144 F. 2d 253, 254. In consequence, cost in the industry generally is like a fagot that cannot be broken up into simple, isolated pieces. See Greer, Packinghouse Accounting (Prepared by the Committee on Accounting of the Institute of American Meat Packers), passim. “The accounting procedure in the hog business is even more complicated than that of the cattle, calf, or sheep business, because the operations involve a greater breaking up of the dressed carcass and more numerous processes extending over considerable periods of time.” Id. at 33-34. The problem is one of “joint cost” in a business which “produces no single major product,” id. at 213, with the result that no accountant has thus far “been able to devise a method yielding
If, as suggested in argument, a hog were nothing but an articulated pork chop, and the processing of edible and inedible by-products were not characteristic of the industry, the price of a live hog might well represent the collective cost of the derivative pork cuts. The pork chop, however, is but one of the many edible hog products. According to an estimate about the time of the requisitioning of these pork cuts, there were more than 200 pork items (exclusive of sausage products) in the market. See Supplementary Statement of Considerations for Revised Regulation No. 148, Pike and Fischer, 3 OPA Food Desk Book 46,151. “Most pork products,” the Administrator found, “are consumed in a cured or processed state. Fresh pork products, such as pork chops and fresh ham, represent not over 20 per cent of the vast quantity of pork which moves by rail. The remaining 80 per cent reaches the consumer in a wide variety of processed forms, including dried, dry cured, sweet pickled, smoked, cooked, baked, and canned.” Id. at 46,141. It deserves noting that the requisitioned products in controversy included cured regular hams, cured clear bellies, cured picnics, and salted fatbacks.
The petitioner was also engaged in by-product processing,6 for the Government took from him 100,000 pounds
Since so much speculative approximation and guesswork entered into the determination of cost, selling price, and profit, the industry, naturally enough, was in almost continuous controversy with the Price Administrator about them. The respondent was party to these controversies. On July 17, 1942, it filed a protest against Maximum Price Regulation No. 148 which was consolidated
Review by the Emergency Court of Appeals was not sought,9 although the first denial of respondent‘s claim for the replacement cost of pork cuts, based on live hog prices, came shortly after the Government‘s requisitioning of the products as to which he now makes the same contention. It is noteworthy that the pork price margins were almost the only meat price margins which were not challenged before the Emergency Court of Appeals in
The considerations which underlay the Administrator‘s meat price determinations are most pertinent to the solution of our immediate problem. The result of his analysis was that the profit-and-loss data on a slaughterer‘s entire operations were the only dependable figures from which the fairness of meat prices could be deduced. The Administrator pointed out that the industry, on the basis of its accounting figures, had historically lost money on its meat sales.10 Since, however, by taking the by-product sales into full account its operations as a whole were highly profitable, these meat sale losses were “more in the nature of bookkeeping losses which failed to take fully into account the integrated nature of the industry.” These views were approvingly quoted by the Emergency Court of Appeals in Armour & Co. v. Bowles, 148 F. 2d 529, 535.
In both of the consolidated proceedings to which the respondent was a party, the Administrator explicitly requested to be furnished with the industry‘s profit-and-loss data. In the earlier proceeding, no proof of loss was filed by any of the protestants. In the Matter of Rapides
“The three Protestants who submitted further evidence did not even thus sustain their claims of individual hardship. One of them showed a net profit of $60,492.44 for the five months period ending March 27, 1942; another a net profit of $6,838.00 for the three months period ending April 1, 1943, and the third failed to submit a profit and loss statement and balance sheet although specifically requested to do so.” In the Matter of Greenwood Packing Plant, supra, at 297.
Not merely does the industry generally seem to have prospered under price control,11 but so did the respond-
Most pertinent, therefore, are the pronouncements of the packing industry made before these matters became embroiled in price-fixing litigation. “The cost of a dressed hog carcass, or of a lot of dressed hog carcasses, may be determined quite satisfactorily; but when a carcass is cut up into its various merchantable parts, all record of cost is lost, as it is impossible to determine the cost of any of these cuts.” Greer, Packinghouse Accounting (Prepared by the Committee on Accounting of
It is as old as the common law that an allegation purporting to be one of fact but contradicted by common knowledge is not confessed by a demurrer.14 Of course, findings of fact are binding on this Court, but if this Court had to treat as the starting point for the determination of constitutional issues a spurious finding of “fact” contradicted by an adjudicated finding between the very parties to the instant controversy, constitutional adjudication would become a verbal game.
There are facts and facts, even in Court of Claims’ litigation. It is the function of the Court of Claims to make findings. But when a judgment based on such findings is here brought in question it is the function of this Court to ascertain the meaning of the findings in order to determine their legal significance. The judgment of the court below that “replacement cost” is the proper measure of just compensation and the mode by which it reached the amount of that cost are inescapably enmeshed in considerations that are clearly familiar issues of law and particularly of constitutional law. Where the conclusion is a “composite of fact and law,” Co. v. Cedar Rapids” cite=“223 U.S. 655” pinpoint=“668” court=“U.S.” date=“1912“>Cedar Rapids Gas Light Co. v. Cedar Rapids, 223 U. S. 655, 668, this Court may certainly hold that as a matter of law the findings are erroneous. See, e. g., Washington ex rel. Oregon R. & N. Co. v. Fairchild, 224 U. S. 510, 528. Even when this Court reviews State court judgments involving constitutional issues it “must review independently both the legal issues and those factual matters with which they are commingled.” See Oyama v. California, 332 U. S. 633, 636 (and the authorities therein cited). Similarly, findings concurred in by two courts do not control the decision here where “facts and their constitutional significance are too closely connected” and “the standards and the ultimate conclusion involve questions of law inseparable from the particular facts to which they are applied.” United States v. Appalachian Electric Power Co., 311 U. S. 377, 404. Even where the parties to the litigation have stipulated as to the “facts,” this Court will disregard the stipulation, accepted and applied by the courts below, if the stipulation obviously forecloses real questions of law. See, e. g., Swift & Co. v. Hocking Valley R. Co., 243 U. S. 281.
The prior proceedings between the same parties, as to which we would be blind not to take judicial notice, as well as the unquestioned facts pertaining to the meat industry are relevant to interpret the findings of the Court of Claims. We have concluded that here “replacement cost” is a spurious, i. e. non-legal, basis for determining just compensation. It is as though the Court of Claims had based its opinion on a balance sheet and we had to interpret the balance sheet into actualities. And so we hold that, as a matter of law, the court below erred in utilizing replacement cost as the basis for determining what constituted just compensation.
When due regard is given to the findings of the Court of Claims, they fail to establish that the compensation proffered by the Government for the requisitioned pork cuts, based on the maximum ceiling prices, falls short of
The burden of proving its case was upon the respondent. The nature of this burden was to prove, in light of the governing facts of the industry, that the administrative award for the taking of respondent‘s property was less than just compensation, based as it was on prices which the Administrator had established for those products and which had been left undisturbed by the process devised by Congress for assuring the fairness of these prices. By evidence merely of bookkeeping losses, respondent did not carry its burden of proving actual damage. Just compensation is a practical conception, a matter of fact and not of fiction. Respondent introduced no evidence, and the Court of Claims made no findings, to establish a loss based on its total operations during the period relevant to the slaughtering of the hogs from which the requisitioned products were processed.15 On
The judgment is reversed with directions to the Court of Claims to enter a judgment for the respondent in an amount not exceeding $12,556.25, with interest on the amount of $25,112.50 from March 3, 1943, the date of the requisition, to May 22, 1943, the date of the final award made by the Director of the Food Distribution Administration.
MR. JUSTICE REED, with whom MR. JUSTICE BLACK and MR. JUSTICE MURPHY join, concurring in the judgment.
I agree with the disposition of this case made by JUSTICE FRANKFURTER‘S opinion. However, I cannot concur in the reasoning by which that result is reached. That opinion holds that the respondent is not entitled to recover
Five members of this Court express their agreement that replacement cost, if relevant, has been properly found by the Court of Claims. If replacement cost, determined by any accounting system, is a factor, the evidence on which the Court of Claims based its findings of that cost is not before us, and therefore those findings cannot be properly regarded as unsatisfactory. Even if we assume that the evidence offered did not properly allocate costs, the Government raised no such issue by its petition for certiorari or in its brief. The record does show a finding of replacement cost based upon some evidence. In the absence of that evidence from the record, it must be assumed that it would support the findings. If we assume that replacement cost is relevant, to say that a manufacturer who proves that cost by the results of his own system of cost accounting may not retain his award because a more accurate accounting system exists, though not offered in evidence, disregards the salutary rule that
It may be assumed that the respondent cannot replace the requisitioned hog products at the ceiling price. If respondent was impelled to replace the requisitioned products in its stock, its reasons for so doing lay in the realm of business judgment. There was no legal compulsion. It acted to keep its line of goods complete, to serve its customers and to preserve its good will. Any additional cost to the respondent caused by replacing the products was a consequential damage for which compensation is not given in federal condemnation proceedings. United States v. Petty Motor Co., 327 U. S. 372, 378. See United States v. General Motors Corp., 323 U. S. 373, 382.
It has been long established that in a free market the market price is the proper criterion for determining “just compensation.” Olson v. United States, 292 U. S. 246, 255; Brooks-Scanlon Corp. v. United States, 265 U. S. 106, 123. In Vogelstein & Co. v. United States, 262 U. S. 337, this Court held that the prevailing price in a controlled market was “just compensation.” The Vogelstein Company was a wholesaler of refined copper. Between September 28, 1917, and February 1, 1918, the United States requisitioned from the Company 12,542,857 pounds of copper for which it paid 23.5¢ per pound. But this price was not the result of the interplay of supply and demand on a free and open market; it was a price fixed by an agreement made by the War Industries Board with copper producers and approved by the President on September 21, 1917. Vogelstein Company, although not a producer, had apparently cooperated with the producers in the establishment and maintenance of the 23.5¢ price. The Company argued that it was entitled to 26.8¢ per pound—the average cost to it of the copper requisitioned by the United States. This Court concluded that paying the fixed 23.5¢ was correct. “The market price was paid. The market value of the copper taken at the time it was taken measures the owner‘s compensation.” 262 U. S. at 340. Consequently, the judgment of the Court of Claims dismissing the company‘s petition was affirmed. This acceptance of the fixed price as the market value closely approaches the situation now presented.
It would be anomalous to hold that Congress can constitutionally require persons in the position of the respondent to sell their perishable property to the general public at a fixed price or not to sell to anyone1 and later to hold that the Government must pay a higher price than the general public where it requisitions the perishable property because of a replacement cost, greater than the fixed price. It is true that the United States by exercising its power of requisitioning compelled the respondent to
If the Government fixed prices with the predominant purpose of acquiring property affected by its order, a different situation would be presented. Here we have price regulation of meat products on a national scale with judicial review of those regulations. The Government sought for itself no unique opportunity to purchase.
The respondent, as JUSTICE FRANKFURTER‘S opinion points out, filed several protests against the Maximum Price Regulations controlling the ceiling prices of hog products. These protests were rejected by the Administrator and review by the Emergency Court of Appeals was not sought. It was during the course of these proceedings that evidence of the profit and loss of the industry and of the replacement cost of pork products could properly be introduced. However, once the maximum price had been set and had not been set aside by direct attack, that price became the only relevant measure of just compensation. Whether normally admissible or not,3 the replacement cost of perishable articles then subject to price control, bought to maintain the good will of a business,
MR. JUSTICE RUTLEDGE, concurring.
Six members of the Court agree that the judgment of the Court of Claims must be reversed, but are equally divided in their groundings. Since I am in partial agreement with both groups, I state my own conclusions independently.
It may be, as my brother REED and those who join with him think, that the ceiling price in a wartime controlled market should furnish the measure of constitutional just compensation for property of a highly perishable nature taken. Perhaps also this view should be qualified further, as by some limitation which would make adjustments beyond that price permissible when the circumstances of the taking are such that they would entail destruction of property values beyond those inherent merely in the property which the Government receives and uses.1
But I am also in agreement with my brother FRANKFURTER and those who concur with him that it is not necessary to reach these important constitutional issues in this case. For I think that, with reference to such perishable commodities taken under circumstances like these, the legal market or ceiling price furnishes at least
That burden, I also agree, the respondent has not sustained in this case. The Court of Claims awarded respondent its “replacement costs,” in the view that “when property is taken the owner must be put in as good position pecuniarily as he was in before his property was taken.”2 Payment of the ceiling price did not do this, since as the court pointed out respondent “felt obliged to furnish its customers a certain amount of products, although at a loss, in order to retain their good will and . . . hold its organization together.”3 For this reason it became necessary for respondent to go into the market and purchase live hogs and process them, paying a higher price than it had paid for the hogs from which the products taken had been processed. In this way respondent incurred a loss it would not have incurred had those products not been taken.
On this basis, I agree with MR. JUSTICE REED that the loss is one for consequential damages. That is, it is one to compensate for loss incurred to preserve unimpaired
But respondent asserts its claim to “replacement value” on a different theoretical basis, i. e., not as compensation for loss incurred in preserving good will, but as the proper measure of the value of the property when requisitioned. And if market price, here ceiling price, is not the measure of compensation, it is said “replacement cost” furnishes the best substitute or at any rate an appropriate element for consideration.
The difference in the present circumstances would seem to be highly verbal. For in any event the loss was actually incurred for the purpose of keeping respondent‘s customers satisfied and thus preserving its good will unimpaired; in other words, to prevent the accrual of injury consequential to the taking.
It is true that in circumstances where there is no market value, “replacement cost” has been held appropriate for consideration in reaching a judgment concerning the value which is just compensation. But this seems to me a different thing from allowing such proof, when the loss it reflects has been incurred solely to prevent consequential injury, and there is a market value presumptively valid to compensate for all losses incurred except that loss. To allow that proof in these circumstances would be in substance if not in form to permit an award for elements of consequential damages entirely out of line with the policy of this Court‘s prior decisions concerning compensation for such injuries.5
MR. JUSTICE JACKSON, with whom MR. JUSTICE DOUGLAS joins, dissenting.
It would appear that this Court in this case is exceeding the limitation placed by Congress on its review of Court of Claims decisions.
Taking the facts as found by the Court of Claims, the case is this: Claimant was a meat packer and among its products were pork chops. The Government set a maximum price at which pork chops could be sold. It set no maximum price on the two principal factors in the cost of pork chops, viz: live hogs and labor. The result was that claimant‘s uncontrolled costs mounted until, on what is found to be a fair allocation of costs between chops and other products of the hog, it was costing more to produce the pork chops than the price for which claimant was permitted to sell them. But there were certain collateral benefits derived from supplying old patrons, even at a loss, to avoid heavier losses from shutting down
However, the Government decided to buy claimant‘s chops. It offered the maximum OPA price. As there was no such compensating advantage to the packer in selling its choice cuts to the Government at a loss, as in keeping its business going with its general customers, it refused the offer. The Government then seized its pork chops and the company now claims the “just compensation” which the Constitution guarantees to those whose private property is taken for public use. The Government contends, and the practical effect of the Court‘s holding is, that the company can recover only the maximum price fixed for its products by the Office of Price Administration, in spite of the finding that this is less than it cost to produce or to replace them.
It is hard to see how just compensation can be the legal equivalent of a controlled price, unless a controlled price is also always required to equal just compensation. It never has been held that in regulating a commodity price the Government is bound to fix one that is adequately compensatory in the constitutional sense, so long as the owner is free to keep his property or to put it on the market as he chooses. If the Government were required to do so, the task of price regulation would be considerably, if not disastrously, complicated and retarded. It seems quite indispensable to the Government itself, for the long-range success of price controls, that fixed prices for voluntary sales be not identified with the just compensation due under the Constitution to one who is compelled to part with his property.
The war did not repeal or suspend the
It must be remembered that market price, as such, is not controlling. The
We think the Court of Claims made no error of law in thinking that the controlled market price for voluntary sales was not the measure of just compensation for the seized pork chops. Limiting our review to the scope which Congress has authorized, we find no error in its calculation of just compensation for the purposes of complying with the constitutional requirements.
Notes
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,225,056 Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . 12,950,785 Selling, etc., exp.. . . . . . . . . . . . . . . . . . . . 869,770 Operating profit. . . . . . . . . . . . . . . . . . . . . 404,500 Other income. . . . . . . . . . . . . . . . . . . . . . . . 18,717 Total income.. . . . . . . . . . . . . . . . . . . . . . . . 423,217 Misc. deductions. . . . . . . . . . . . . . . . . . . . . 13,229 Income taxes. . . . . . . . . . . . . . . . . . . . . . . . 176,619 Net income. . . . . . . . . . . . . . . . . . . . . . . . . 233,369 Earn., pfd. share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40.21 Earn., com. share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.97See Moody‘s Manual of Investments, American and Foreign, Industrial Securities, 1944, p. 647. The 1943 net income figure of $233,369 compared favorably with preceding years: 1942—$73,292; 1941—$150,069; 1940—$148,164; and 1939—d$76,936.