This case arises out of condemnation by the United States on behalf of the Tennessee Valley Authority of about 12,000 acres of land in North Carolina lying in and along the Hiwassee River, a major tributary of the Tennessee. The land involved in the case was owned by the respondent Southern States Power Company, a North Carolina corporation, and by its wholly owned subsidiary, the Union Power Company, a Georgia corporation. Since condemnation, the Southern States Power Company has assigned its property interest and rights arising out of these proceedings to the respondent W.V.N. Powelson, its sole stockholder. For convenience Powelson and Southern States will be referred to interchangeably as "respondent."
On January 28, 1936, when the original declaration of taking was filed and these proceedings began, Southern States and Union Power owned a small hydroelectric generating plant on the Nottely River, a tributary of the Hiwassee. This was known as the Murphy plant. It had a distribution system which supplied the town of Murphy, North Carolina, and surrounding territory. These companies also owned about 22,000 acres of land on both sides of the Hiwassee and Nottely Rivers. These included lands at four dam sites which are known as the Powelson (site of the Hiwassee dam), Appalachia, Murphy and Nottely sites, a large part of the land required for the Powelson and Appalachia projects, and some of the land required for the Murphy and Nottely projects. Powelson, an experienced hydroelectric engineer, began as early as 1913 and continued until 1931 to explore, survey, and acquire these lands and to develop and promote a plan for constructing an integrated four-dam hydroelectric plant on these rivers and at these sites. The actual cost
Southern States is successor to Carolina-Tennessee Power Co., created by a special act of the North Carolina legislature
The lands condemned by the Government in the present proceedings constitute a part of the site of its Hiwassee dam, a multiple-purpose project constructed by the Tennessee Valley Authority on the Hiwassee River as part of the development of the Tennessee River system for hydroelectric power production, navigation, and flood control. See Report to the Congress on the Unified Development
The property condemned includes the Murphy dam and hydroelectric plant on the Nottely River and about 12,000 acres of land along the Hiwassee River in North Carolina. Of these, some 2,000 acres have been cleared and cultivated. The remaining area is rough and mountainous, consisting in large part of rock surface, mountain peaks and gorges. Much of the land was inaccessible at the time of the taking, there being practically no highways thereon, although there were some cartways.
The condemnation proceedings were conducted pursuant to § 25 of the Tennessee Valley Authority Act of 1933, c. 32, 48 Stat. 58, 16 U.S.C. § 831x.
Both parties sought review of the award before the three-judge District Court for which § 25 of the Tennessee Valley Authority Act makes provision. The District Court reduced the value of the land condemned to $976,289.40 and severance damages to $211,791.23, $100,000 of which was for the Murphy distribution system. Interest was added from the filing of the initial declarations of taking. 33 F.Supp. 519. The Circuit Court of Appeals excluded severance damages for the taking of the Murphy plant on the Nottely River; and also excluded the $18,907.02 awarded as severance damages with respect to land held by Union Power unless within thirty days after the mandate was filed in the District Court that corporation should be made a party so as to become bound by the judgment. With these modifications it affirmed the judgment of the District Court. 118 F.2d 79. The case is here on a petition for writ of certiorari which we granted because of the public importance of the issues raised.
I. A preliminary question relates to the scope of review by the Circuit Court of Appeals under § 25 of the Act.
It is contended that the Circuit Court of Appeals did not perform the functions which § 25 placed upon it. That court stated that § 25 permitted it to consider the findings under review "in the light of the record." 118 F.2d p. 83. It gave weight to the opportunity of the commissioners and judges who took the testimony to see and hear the witnesses. But while it adverted to those circumstances and findings, and modified and "affirmed" the judgment of the three-judge court, we cannot say that it did not perform the functions which Congress gave it under § 25.
The purpose of § 25 was to free the Circuit Court of Appeals from the strictures commonly applicable to its review of disputed questions of fact. Under § 25 it does not sit as a "court of errors." United States v. Reynolds, 115 F.2d 294, 296. Its duty is to dispose of the matter
II. Sec. 25 of the Act authorizes awards covering "the value of the lands sought to be condemned." The storm center of this controversy is whether water power value may be included in respondent's award.
It is argued on behalf of petitioner that even though the Hiwassee River is non-navigable throughout this part of its course, compensation for the loss of any supposed power value is no more permissible than in case of a navigable stream. It is pointed out that United States v. Chandler-Dunbar Co., 229 U.S. 53, held that there is "no private property in the flow" of a navigable stream. United States v. Appalachian Power Co., 311 U.S. 377, 427. And it is contended that although the Hiwassee River is non-navigable at the points in question, the flow at those places has such a direct and immediate effect upon the navigable portion of the river farther downstream as to give the United States the same plenary control over both the navigable and non-navigable portions of the river (United States v. Appalachian Power Co., supra; Oklahoma v. Atkinson Co., 313 U.S. 508), thereby bringing into play the rule of the Chandler-Dunbar case. Cf. United States v. Kelly, 243 U.S. 316. We do not stop to consider that question. For if we assume, without deciding, that rights in the "flow" of a non-navigable stream created by local law are property for which the United States must pay compensation when it condemns the lands of the riparian owner, the water power value which respondent sought to establish cannot be allowed.
The burden of establishing the value of the lands sought to be condemned was on respondent. Ralph v. Hazen,
An owner of lands sought to be condemned is entitled to their "market value fairly determined." United States v. Miller, 317 U.S. 369, 374. That value may reflect not only the use to which the property is presently devoted but also that use to which it may be readily converted. Boom Co. v. Patterson, 98 U.S. 403; McCandless v. United States, 298 U.S. 342. In that connection the value may be determined in light of the special or higher use of the land when combined with other parcels; it need not be measured merely by the use to which the land is or can be put as a separate tract. McGovern v. New York, 229 U.S. 363. But in order for that special adaptability to be considered, there must be a reasonable probability of the lands in question being combined with other tracts
Respondent seeks to avoid that difficulty by reliance on the power of eminent domain granted by North Carolina. The argument is that the means of effecting a combination of lands is not important — it is whether the landowner had a reasonable chance of doing it. This Court, however, held in the McGovern case that in estimating that chance or probability "the power of effecting the change by eminent domain must be left out." 229 U.S. p. 372. And that view was followed in New York v. Sage, 239 U.S. 57, 61. Respondent attempts to distinguish those cases on the ground that, since the landowners in question did not have the power of eminent domain, they were merely denied recovery for a value dependent upon a combination which they could not reasonably expect to effect. But the thrust of the rule is deeper. If the owner's claim against the sovereign were increased by reason of the power of eminent domain, then the very existence of the right of condemnation would confer on the owner "a value for which he must be paid when the right is exercised." Hale, Value to the Taker in Condemnation Cases, 31 Col. Rev. 1, 13.
The fact that the owner also has a power of eminent domain does not alter the situation. See Tacoma v. Nisqually Power Co., 57 Wn. 420, 433, 107 P. 199. The grant of the power of eminent domain is a mere revocable privilege for which a state cannot be required to make compensation. Adirondack Ry. Co. v. New York, 176 U.S. 335; Ramapo Water Co. v. New York, 236 U.S. 579; Western Union Telegraph Co. v. Louisville & Nashville R. Co., 258 U.S. 13. A revocation of that privilege is but a recall
This is a case of first impression. No precedent has been advanced which suggests that a different measure of compensation should be required where the United States rather than the state is the taker of the property for a public project. Nor has any reason been suggested why as a matter of principle or policy there should be a different measure of compensation in such a case. It has long been assumed that in other respects the national government was under "no greater limitation" by reason of the Fifth Amendment than were the states by virtue of the Fourteenth. Hamilton v. Kentucky Distilleries Co., 251 U.S. 146, 156. That view is implicit in condemnation cases where the amount of just compensation required
The right of the United States to exercise the power of eminent domain is "complete in itself" and "can neither be enlarged nor diminished by a State." Kohl v. United States, 91 U.S. 367, 374. Though the meaning of "property" as used in § 25 of the Act and in the Fifth Amendment is a federal question, it will normally obtain its content by reference to local law. Yet when we look to local law in the present case, we find no indication that for purposes of condemnation proceedings instituted by North Carolina the value of the lands in question would be increased by reason of respondent's privilege to use the power of eminent domain. So far as constitutional compulsions are concerned, it is plain, as we have noted, that that factor need not be included in case the state were the condemnor. Moreover, the result in the present case is not different if we assume with the District Court (33 F. Supp. p. 522) that respondent's "prior right" under North Carolina law "constituted a valuable right, which is destroyed by this condemnation proceeding." It does
The law of eminent domain is fashioned out of the conflict between the people's interest in public projects and the principle of indemnity to the landowner. We recently stated in United States v. Miller, supra, p. 375, that "Courts have had to adopt working rules in order to do substantial justice in eminent domain proceedings." Equity and fair dealing do not require the payment by the United States to the landowner of the amount of a valuation of his lands based on the existence of his privilege to use the power of eminent domain. It is "private property" which the Fifth Amendment declares shall not be taken for public use without just compensation. The power of eminent domain can hardly be said to fall in that category. It is not a personal privilege; it is a special authority impressed with a public character and to be utilized for a public end.
This public project, to be sure, has frustrated respondent's plan for the exploitation of its power of eminent domain. We may assume that that privilege was a thing of value and that this frustration of the plan means a loss to respondent. But our denial of compensation for that loss does not make this an exceptional case in the law of eminent domain. There are numerous business losses which result from condemnation of properties but which are not compensable under the Fifth Amendment. The point is well illustrated by two other lines of cases in this field. It is a well settled rule that while it is the owner's loss, not the taker's gain, which is the measure of compensation for the property taken (United States v. Miller, supra; United States v. Chandler-Dunbar Co., supra, p. 81; Boston Chamber of Commerce v. Boston, 217 U.S. 189, 195), not all losses suffered by the owner are compensable under the Fifth Amendment. In absence of a
It is no answer to say that the evidence as to the profits from respondent's hypothetical four-dam project was introduced not as the basis of an award for loss of profits or business but only as a basis for estimating the true water power value of the property. The computation of those profits assumes the very existence of the projected enterprise which the power of eminent domain alone could make possible and which these condemnations frustrated. We repeat that an allowance of any such value would entail a payment for the loss of a business prospect based on an unexercised power of eminent domain. As we have said, no reason based on precedent or principle appears why respondent's privilege to use the power of eminent domain should be treated as "private property" within the meaning of the Fifth Amendment so as to give rise to a private claim against the public treasury. Nor is there any indication that Congress adopted in this regard a more liberalized standard of compensation than would be provided under the Fifth Amendment.
It is suggested that this result would mean that in condemnation proceedings the United States need not pay the value of the property at the time of the taking if the
The result is that respondent's privilege to use the power of eminent domain may not be considered in determining whether there is a reasonable probability of the lands in question being combined with other tracts into a power project in the reasonably near future. If the power of eminent domain be left out of account, the chances of making the combination appear to be too remote and slim "to have any legitimate effect upon the valuation." McGovern v. New York, supra, p. 372. Respondent therefore has not established the basis for proof of the water power value which was asserted.
We hold only that profits, attributable to the enterprise which respondent hoped to launch, are inadmissible as evidence of the value of the lands which were taken. Respondent is, of course, entitled to the market value of the property fairly determined. And that value should be found in accordance with the established rules (United States v. Miller, supra) — uninfluenced, so far as practicable, by the circumstance that he whose lands are condemned has the power of eminent domain. We do not reach the question much discussed at the bar and in the briefs whether evidence of the earnings of respondent's hypothetical four-dam project should have been excluded for the further reason that it was too speculative.
MR. JUSTICE JACKSON, dissenting:
The CHIEF JUSTICE, MR. JUSTICE ROBERTS, MR. JUSTICE FRANKFURTER and I understand the Court to hold that property physically adaptable to power purposes, taken by the Federal Government for power purposes among others, is to be valued as worthless for power purposes as matter of law because its projected development might be defeated if the State should revoke the power of eminent domain admittedly possessed by the owner at the time of the taking. We think it denies proper effect to state law and policy in effect at the time of taking.
Unless this decision overrules the law as stated by Mr. Justice Brandeis for a unanimous Court, flowing streams are natural resources owned and governed by the States, and the rights of their grantees and of riparian owners are settled by the local law which is conclusive on us. Port of Seattle v. Oregon & Washington R. Co., 255 U.S. 56; St. Anthony Falls Water Power Co. v. St. Paul Water Comm'rs, 168 U.S. 349; Shively v. Bowlby, 152 U.S. 1; cf. United States v. Oregon, 295 U.S. 1, 6-7. The States have assumed this to be their right and have written into their laws and constitutions various systems of control and development deemed suitable to their respective climates, industries or economies.
Under its paramount powers over navigation the Federal Government has elected to take this resource out of the control of the State and away from the grantee corporation which is subject to State taxing and regulatory power. This it may do, but only upon making just compensation. But the Court holds that compensation must be computed as if the State had refused to grant what it has granted or had withdrawn what it has given no indication of withdrawing. By thus cancelling for the purpose
Determination of the value of property, particularly as affected by a prospective use, always involves some element of prophecy and some estimation of probabilities. No court that we know of has ever proposed, and we do not propose, to value the power of eminent domain either separately or as an ingredient of property taken. Its existence should be considered only for the purpose of determining the most advantageous probable usefulness of the property as it affects its value. The legal principles governing the solution of the fact questions are laid down in Olson v. United States, 292 U.S. 246. Of course any uncertainty or limitation as to the right to condemn property or evidence of probable impairment, forfeiture, or withdrawal of it would be weighed with other evidence in arriving at a judgment as to the feasibility of the project and value of the property. This Court has said that a possibility of exercise by a governing body of its power to make changes affecting values is a proper subject for consideration in fixing values. Reichelderfer v. Quinn, 287 U.S. 315, 323. But never until now has it held that the law requires present values to be determined as if legally possible, but factually improbable, changes have already taken place.
Few properties are so immune from the effects of governmental authority that some action may not be envisioned which would devalue them. One of the items taken by the Federal Government in this case from respondent and out of control of the State was a going concern, an electric generating plant and distributing system. Since both parties accepted the award made for
No previous decision of this Court supports or authorizes disregard of a presently existing state right of eminent domain in a federal taking of property. In McGovern v. New York, 229 U.S. 363, and New York v. Sage, 239 U.S. 57, the condemnation was by an agency of the State and the condemnees did not have and showed no probability of obtaining such power from the State.
Even less relevant to the question now before us is Sears v. Akron, 246 U.S. 242. It was not a condemnation case at all but a suit in equity to enjoin the City from construction of a dam and reservoir and diversion of river water. The City did not propose to take any property of the company through which plaintiff as a mortgage creditor derived any rights he asserted. In fact the company did not own any property included in the project, although shortly before commencement of the suit, but after the City's development was practically completed, it acquired two small parcels some distance below the City's dam. But the company's charter gave it a right of eminent domain and, although it had taken no step to do so, it claimed the right to expropriate the same property the City was taking. It sought to enjoin the City upon the ground that its unexercised right to take this property was an indefeasible property right which was being defeated and rendered valueless because the City was ahead of it in preempting properties which the company might want to acquire under its power. The State of Ohio had retained power to "revoke any such right to appropriate property until it had been acted upon by acquiring the property authorized to be taken." Id. at 250. The State of course had revoked the power to the extent that it had authorized the City, its own instrumentality, to take the property. But Justice
These cases do not decide what would have been respondent's rights if North Carolina, rather than the United States, had instituted the present condemnation proceedings, thereby expressing her unwillingness to have the respondent carry the project through to completion. They are wholly inapposite to the question we are called upon to decide, which is whether North Carolina's expressed and undoubted willingness that the respondent should do so, and to that end should exercise her sovereign power of eminent domain, may be considered along with all other facts bearing upon the question of the prospects of completion.
The Government and the Court have taken a contrary position to the one now announced when the shoe was on the other foot. In United States v. River Rouge Co., 269 U.S. 411, the Government sought to deduct from the value of property condemned the benefits conferred by the improvement upon the severed property. The owner denied that these benefits should be considered because his enjoyment of them would be terminable by the Government
We think the same rule should apply against as for the Government, and that the property in question was entitled to the benefits at the time being extended by State authority in the absence of evidence of probability that they would be abrogated or curtailed. We do not think that because the power of eminent domain may have been revocable by the State it follows as matter of law that it must be treated as nonexistent, and we dissent from a reversal based on such grounds.
California, Article XIV, § 3: ". . . Riparian rights in a stream or water course attach to, but to no more than so much of the flow thereof as may be required or used consistently with this section, for the purposes for which such lands are, or may be made adaptable, in view of such reasonable and beneficial uses; provided, however, that nothing herein contained shall be construed as depriving any riparian owner of the reasonable use of water of the stream to which his land is riparian under reasonable methods of diversion and use, or of depriving any appropriator of water to which he is lawfully entitled. . . ."
Colorado, Article XVI, § 6: "The right to divert the unappropriated waters of any natural stream to beneficial uses shall never be denied. Priority of appropriation shall give the better right as between those using the water for the same purpose; but when the waters of any natural stream are not sufficient for the service of all those desiring the use of the same, those using the water for domestic purposes shall have the preference over those claiming for any other purpose, and those using the water for agricultural purposes shall have preference over those using the same for manufacturing purposes."
North Dakota, Article XVII, § 210: "All flowing streams and natural water courses shall forever remain the property of the state for mining, irrigating and manufacturing purposes."
Rhode Island, Article I, § 17: "The people shall continue to enjoy and freely exercise all the rights of fishery, and the privileges of the shore, to which they have been heretofore entitled under the charter and usages of this state. But no new right is intended to be granted, nor any existing right impaired, by this declaration."
Utah, Article XVII, § 1: "All existing rights to the use of any of the waters in this State for any useful or beneficial purpose, are hereby recognized and confirmed."
Washington, Article XVII, § 1: "The State of Washington asserts its ownership to the beds and shores of all navigable waters in the state up to and including the line of ordinary high tide in waters where the tide ebbs and flows, and up to and including the line of ordinary high water within the banks of all navigable rivers and lakes: Provided, that this section shall not be construed so as to debar any person from asserting his claim to vested rights in the courts of the state."
Article XXI, § 1: "The use of the waters of this state for irrigation, mining, and manufacturing purposes shall be deemed a public use."
Wisconsin, Article XXI, § 1: "The state shall have concurrent jurisdiction on all rivers and lakes bordering on this state so far as such rivers or lakes shall form a common boundary to the state and any other state or territory now or hereafter to be formed, and bounded by the same; and the river Mississippi and the navigable waters leading into the Mississippi and St. Lawrence, and the carrying places between the same, shall be common highways and forever free, as well to the inhabitants of the state as to the citizens of the United States, without any tax, impost or duty therefor."
The validity of the principle adopted by the majority opinion may be tested against hypothetical cases such as the following:
1. O owns a dock projecting into a navigable stream in State S. The Federal Government may destroy it or require its removal without payment of compensation (United States v. Chicago, M., St. P. & P.R. Co., 312 U.S. 592), but it does not appear likely that it will do so, and the dock is a commercially valuable property. S acquires the dock by condemnation, and seeks to avoid payment by relying upon the power of the Federal Government to destroy its value.
2. O owns a distillery in State S. S acquires it by condemnation, and resists payment by asserting the existence of the Federal Government's power to enact a prohibition law and thereby destroy or diminish the value of the distillery without the payment of compensation (Hamilton v. Kentucky Distilleries Co., 251 U.S. 146).
3. O owns an option upon land owned by State S. The option is revocable at the will of S, but revocation seems unlikely, and the option has commercial value. The Federal Government acquires it by condemnation, but resists payment by relying upon S's power of revocation.
These cases can be further complicated by supposing that the condemnation is not by the sovereign itself, but by a private corporation vested by it with the power of eminent domain.