Mr. George T. Washington, of Washington, D.C., for petitioner.
Mr. Arthur L. Winn, Jr., of Washington, D.C., for respondent.
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 Fifth Amendment, by a slaughterer whose meat products the Government requisitioned for war purposes. The Court of Claims awarded damages above the maximum prices fixed by the Office of Price Administration for such products and measured by what that court deemed the replacement cost of the requisitioned property. 67 F.Supp. 1017, 107 Ct.Cl. 155. The implications of this ruling reach far, and so we brought the case here. 330 U.S. 814 .
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 [334 U.S. 624 , 626] translate the idiom of the industry into vernacular English. Also, of course, we must consider the facts in the context of the rather intricate system of meat price regulation by O.P.A.
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 Emergency Price Control Act. 56 Stat. 23, 50 U.S.C.App. 901 et seq., 50 U.S.C.A.Appendix , 901 et seq. Accordingly, the Price Administrator, by a series of regulations, established maximum prices for dressed hogs and wholesale pork cuts. Revised Maximum Price Regulation No. 148, issued on October 22, 1942, governed the pork cuts here involved. 7 Fed.Reg. 8609, 8948, 9005; 8 Fed.Reg. 544.
To meet the food needs entailed by the war, the President under the authority of the Second War Powers Act, 56 Stat. 176, 50 U.S.C. Supp. V, 633, 50 U.S.C.A.Appendix, 633, created the Food Distribution Administration, with the Secretary of Agriculture as its head. E.O. 9280, 50 U.S.C.A.Appendix, 601 note, 7 Fed.Reg. 10179. This Administration was given authority to assign food priorities, to 'allocate' food to governmental agencies and for private account, and to assist in carrying out the program of the Lend-Lease Act of March 11, 1941, 55 Stat. 31, 22 U. S.C.A. 411 et seq. To carry out the task thus delegated by the President, the Food Distribution Administration issued to each packer operating under federal inspection a priority order calling for delivery of a proportionate part of the total quantity needed at the particular time. 1 A packer's [334 U.S. 624 , 627] quota was based on the ratio of meat produced in his plant to the total production in all federally inspected plants.
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' 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. [334 U.S. 624 , 628] ceiling prices applicable to these products. On May 22, 1943, the preliminary award was made final. Respondent accepted in full payment the award as to the lard; it refused to accept the determination as to the pork cuts and, in accordance with the statutory procedure in the case of rejection of such an award, was paid half of it. On June 24, 1943, respondent instituted this action in the Court of Claims to recover the additional amount which when added to the $12,556,25, the half of the Government's valuation for those cuts, would constitute 'just compensation' for what the Government had taken.
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 [334 U.S. 624 , 629] At the outset it is important to make clear what it is we are called upon to decide. The conventional criterion [334 U.S. 624 , 630] for determining what is 'just compensation' for private property taken for public use is what it would bring in the free, open market. E.g., Olson v. United States, 292 U.S. 246, 255 , 708; Brooks- Scanlon Corporation v. United States, 265 U.S. 106, 123 , 474; L. Vogelstein & Co. v. United States, 262 U.S. 337, 340 , 565. But there must be a market to make the criterion available. Here there was a market in which the respondent could have sold the pork cuts, but it was not a free and open market; it was controlled in its vital feature, selling price, by the O.P.A. It is this fact that creates the problem of the case, assuming that the case is not dogmatically disposed of by holding that inasmuch as the maximum price is the only price which respondent could legally have got for its goods it is just compensation. We are not passing on the abstract question whether a lawfully established maximum price is the proper measure of 'just compensation' whenever property is taken for public use. We are adjudicating only the precise issues that emerge from this case.
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 Fifth Amendment enjoins. 56 Stat. 176, 181, 50 U.S.C.A.Appendix , 721. In enforcing this constitutional requirement 'the question is, What has the owner lost? not, What has the taker gained?' Boston Chamber of Commerce v. Boston, 217 U.S. 189, 195 , 460; McGovern v. New York, 229 U.S. 363, 46 L.R.A., N.S., 391. Respondent's sole claim is for the pecuniary equivalent of the property taken. This is not a situation where consequential damages, in any appropriate sense of the term, are urged as a necessary part of just compensation. Respondent does not claim such damages on the theory that, in order to protect its good will, it had to supply its regular customers and that this compelled replacement of the requisitioned pork products by the purchase, slaughter, [334 U.S. 624 , 631] and processing of live hogs. 4 Cf. United States v. General Motors Corporation, 323 U.S. 373, 382 , 361, 156 A.L.R. 390; United States v. Petty Motor Co., 327 U.S. 372 , 377, 378, 66 S.Ct 596, 599, 600; United States ex rel. and for Use of Tennessee Valley Authority v. Powelson, 319 U.S. 266 , 281, 282, 1055, 1056. Respondent claims that replacement cost is the proper measure of the value of the property when requisitioned. This action was brought to recover damages which the respondent would suffer, so it maintains, if it accepted the Government's offer of the applicable ceiling prices in satisfaction of 'just compensation.' The burden therefore rests on the respondent to prove the damages it would suffer by not receiving more than the ceiling prices. Marion & R.V.R. Co. v. United States, 270 U.S. 280, 285 , 255.
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 [334 U.S. 624 , 632] replacement cost for the requisitioned property was $30,293. We are of opinion that in reaching this conclusion the court below failed to take into account decisive factors for the proper disposition of the action brought by the respondent.
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 by-products.' Kingan & Co. v. Bowles, Em.App., 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 [334 U.S. 624 , 633] by-product or joint-cost figures which does note mbody a dominance of arbitrariness and guesswork.' Hamilton, Cost as a Standard for Price, 4 Law and Contemp.Prob. 321, 328; cf. Greenbaum, The Basis of Property Shall Be the Cost of Such Property: How is Cost Defined?, 3 Tax L.Rev. 351, 356- 359.
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 Fisher, 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 dry, 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 [334 U.S. 624 , 634] of refined pure lard. For the value of the lard the respondent accepted the administrative award. 7 Admittedly, part of the cost of the live hog must be charged to by-products. However, any method of apportioning the total cost to the by-products is highly speculative.