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United States v. Sanitary Dist. of Chicago

June 21, 1945


Author: Kerner

Before SPARKS, KERNER, and MINTON, Circuit Judges.

KERNER, Circuit Judge.

The question presented by this appeal is the value to be placed upon the temporary use of respondents' leasehold and facilities which petitioner took by condemnation.

Feldmans, the respondents, had a 50-year ground lease from the Sanitary District of Chicago. They built 18 storage tanks thereon. In 1942 they entered into a contract with Defense Supplies Corporation, a wholly owned subsidiary of the Reconstruction Finance Corporation, for the storage of alcohol in 14 of their largest tanks. For receiving, unloading, storing, loading and shipping the alcohol, respondents were to receive slightly more than 5 cents per barrel.Effective June 1, 1943, the Office of Price Administration*fn1 placed a ceiling price on the "storage of alcohol for Defense Supplies Corporation" of 1 cent per barrel per month of tank capacity with an allowance of 2 cents per barrel for handling into storage and 2 cents per barrel for handling out of storage, to and from tank cars, the method generally used for transporting alcohol. Amendment No. 176 to Supplementary Regulation No. 14 to the General Maximum Price Regulation, 8 Fed.Reg. 7262. As a result of this regulation, Defense Supplies Corporation refused to pay storage charges in excess of 1 cent per barrel per month of tank capacity.

Soon after this regulation was passed, which had the effect of modifying the contract, Defense Supplies Corporation found it necessary to institute condemnation proceedings*fn2 in order to get the government-owned alcohol which was urgently needed for the manufacture of explosives. Only the use for 30 days was taken, subject to renewal for additional periods of 30 days. The petition for condemnation of the 14 storage tanks was filed October 26, 1943, and an order of immediate possession was signed the same day. On each successive 30-day period, the number of tanks taken was progressively reduced. The last tank was emptied during the 30-day period expiring May 22, 1944, and complete possession was thereupon returned to the Feldmans.

The total amount awarded respondents was $14,982, whereas the total amount deposited was $4,994. From a judgment directing the deposit into court of the deficiency of $9,988 plus interest, petitioner appealed.

The respondent Sanitary District of Chicago makes no claim for compensation because its interest in the property was not taken.

The contested issues are: (1) Whether the highest and only available use of the tanks for the short periods here involved was for the storage of alcohol, and (2) whether the maximum recovery which the court could allow was the OPA ceiling price of 1 cent per barrel per month.

Under the terms of the ground lease between the Feldmans and the Sanitary District of Chicago, the property could be used only for the storage of petroleum products and the storage of alcohol.

Respondents contend that the highest and best use of the property condemned on the date of taking was not the storage of alcohol and that in any event the price ceiling set by the Office of Price Administration is not controlling in a condemnation proceeding. On the other hand, petitioner contends that the highest and best use of the occupancy condemned on the date of condemnation was the storage of alcohol and that on said date the maximum price that could be paid for such storage pursuant to the Office of Price Administration Regulation constitutes the fair cash market value of the use condemned.

Both parties agree that the standard to be used in evaluating the amount of money which the condemnee should receive is the highest and best use of his property.

In cases of condemnation of private property for public use a wide variety of circumstances must be taken into consideration, including the condition of the property at the time it is taken, City of Chicago v. Jackson, 333 Ill. 345, 164 N.E. 659, and the real test on the question of damages is the present value and not its value at some future time. East St. Louis Light Co. v. Cohen, 333 Ill. 218, 164 N.E. 182. In our case, the court held that "Restricting the use of the tanks to the short periods taken by the petitioner * * *, it is clear from the evidence that the highest and best use of such short term storage facilities of the respondents would be 'Thru-Put' storage of petroleum products, that is, the temporary storage of petroleum products where the product comes in and out of the tanks in less than thirty days." In so ruling, petitioner asserts that the court ignored the indisputable fact that the tanks were already filled with alcohol so they could be used for no other purpose until the alcohol was removed. In other words, petitioner says it is not proper to value property in terms of a use to which it is physically impossible to put it.

The tanks were full of alcohol; and assuming that petitioner's view of the proper means of evaluation is correct, we are faced with the factual question, namely, within what period of time could the tanks be emptied of alcohol so as to become available for "through-put" storage of petroleum? The record before us is far from satisfactory on this issue. In petitioner's brief we find the assertion "The Government removed that alcohol from the 14 tanks in the shortest possible time," while in respondents' brief we find the assertion that "There is not a scintilla of evidence in the record to support this statement. It is untrue - in fact, it is not only untrue, it is absurd. The alcohol could readily have been removed in 30 days, the time ordinarily provided for making tanks ready for occupancy under contracts for the storage of petroleum products. The gasoline could have been put into the tanks at the same time, since the tanks would be emptied one at a time. Accordingly, the terminal could actually have been made immediately available for the 'through-put' storage of gasoline despite the presence of the alcohol."

The record discloses that Abraham Feldman testified on cross-examination, in speaking of the number of tank cars filled per day by pumping out the storage tanks, "I think we pumped [out] two or four cars, it varied." And in response to the question, "What is the most you have ever pumped out?" this witness stated, "The most I have ever pumped [out] was three or four cars." There were 5,460,000 gallons stored in the storage tanks on October 26, 1943, the time of the taking. It appears that the average tank car holds 8,000 gallons. Some hold 6,000, some 10,000. Ignoring the fact that tank cars were often difficult to get in that time of grave national transportation shortage due to the war demands, this means that at four cars per day, each car of 8,000 gallons, it would take 171 days to empty the tanks. This same witness testified that in the period just prior to the time of the condemnation, the Feldman Petroleum Company had been averaging two tank cars per day, i.e., filling two tank cars with alcohol from the storage tanks. At that rate, it would have taken approximately 342 days to get the alcohol out, as compared to the 210 days which the Government took to get it out.*fn3 If railway tank cars should not have been ...

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