United States v. Pewee Coal Company/Opinion of the Court

Respondent, Pewee Coal Co., Inc., is a coal mine operator whose property was allegedly possessed and operated by the United States from May 1 to October 12, 1943, to avert a nation-wide strike of miners. Pewee brought this action in the Court of Claims to recover under the Fifth Amendment for the total operating losses sustained during that period. After considering the evidence, the court held that there had been a 'taking' entitling Pewee to compensation. It found the total operating loss to be $36,128.96, but rendered judgment for only.$2,241.26, this amount being the portion of the operating loss which the court found attributable to Government operation of the mine. 88 F.Supp. 426, 115 Ct.Cl. 626. Pewee did not seek review here. We granted the Government's petition for certiorari in which two questions are presented: (1) Was there such a taking of Powee's property as to justify compensation under the Fifth Amendment? (2) If there was, does the record support the award of.$2,241.26?

First. We agree with the Court of Claims that there was a 'taking' requiring the Government to pay Pewee. The facts upon which this conclusion rests are set out in the findings and opinion below and need not be repeated in detail here. See 88 F.Supp. 426, 115 Ct.Cl. 626. The following are sufficient to show the general picture: On May 1, 1943, the President issued Executive Order 9340, 8 Fed.Reg. 5695, directing the Secretary of Interior ' * *  * to take immediate possession, so far as may be necessary or desirable, of any and all mines producing coal in which a strike or stoppage has occurred or is threatened, *  *  * and to operate or arrange for the operation of such mines *  *  * .' On the same day, the Secretary issued an 'Order for Taking Possession' of most of the Nation's mines, including Pewee's. 8 Fed.Reg. 5767. To convince the operators, miners and public that the United States was taking possession for the bona fide purpose of operating the mines, the Government formally and ceremoniously proclaimed that such was its intention. It required mine officials to agree to conduct operations as agents for the Government; required the American flag to be flown at every mine; required placards reading 'United States Property!' to be posted on the premises; and appealed to the miners to dig coal for the United States as a public duty. Under these circumstances and in view of the other facts which were found, it should not and will not be assumed that the seizure of the mines was a mere sham or pretense to accomplish some unexpressed governmental purpose instead of being the proclaimed actual taking of possession and control. In United States v. United Mine Workers, 330 U.S. 258, 67 S.Ct. 677, 91 L.Ed. 884, there had been a government seizure of the mines under presidential and secretarial orders, which insofar as here material, were substantially the same as those issued in the present case. We rejected the contention of the mine workers that 'the Government's role in administering the bituminous coal mines (was) for the most part fictional and for the remainder nominal only.' We treated that seizure as making the mines governmental facilities 'in as complete a sense as if the Government held full title and ownership.' Id., 330 U.S. at pages 284-285, 67 S.Ct. at page 691. It follows almost as a matter of course from our holding in United Mine Workers that the Government here 'took' Pewee's property and became engaged in the mining business.

Second. Having taken Pewee's property, the United States became liable under the Constitution to pay just compensation. Ordinarily, fair compensation for a temporary possession of a business enterprise is the reasonable value of the property's use. See Kimball Laundry Co. v. United States, 338 U.S. 1, 69 S.Ct. 1434, 93 L.Ed. 1765; United States v. General Motors Co., 323 U.S. 373, 65 S.Ct. 357, 89 L.Ed. 311. But in the present case, there is no need to consider the difficult problems inherent in fixing the value of the use of a going concern because Pewee neither claimed such compensation nor proved the amount. It proceeded on the ground that the Fifth Amendment requires the United States to bear operating losses incurred during the period the Government operates private property in the name of the public without the owner's consent. We believe that this contention expresses a correct general principle which under the circumstances of this case supports the judgment for.$2,241.26.

Like any private person or corporation, the United States normally is entitled to the profits from, and must bear the losses of, business operations which it conducts. When a private business is possessed and operated for public use, no reason appears to justify imposition of losses sustained on the person from whom the property was seized. This is conceptually distinct from the Government's obligation to pay fair compensation for property taken, although in cases raising the issue, the Government's profit and loss experience may well be one factor involved in computing reasonable compensation for a temporary taking. Of course, there might be an express or implied agreement between the parties that the Government should not receive operating profits nor bear the losses, in which event the general principle would be inapplicable. But the possibility that such an agreement existed in the present case may be disposed of quickly. Pewee's failure to seek review here makes it unnecessary to consider whether the company consented to bear the disallowed and major portion of the losses sustained during the period of governmental control. And there is no indication that Pewee expressly or impliedly agreed to assume the loss of.$2,241.26 which the court found mainly attributable to increased wage payments made to comply with a War Labor Board decision.

Where losses resulting from operation of property taken must be borne by the Government, it makes no difference that the losses are caused in whole or in part by compliance with administrative regulations requiring additional wages to be paid. With a without a War Labor Board order, when the Government increased the wages of the miners whom it employed, it thereby incurred the expense. Moreover, it is immaterial that governmental operation resulted in a smaller loss than Pewee would have sustained if there had been no seizure of the mines. Whatever might have been Pewee's losses had it been left free to exercise its own business judgment, the crucial fact is that the Government chose to intervene by taking possession and operating control. By doing so, it became the proprietor and, in the absence of contrary arrangements, was entitled to the benefits and subject to the liabilities which that status involves.

The judgment of the Court of Claims is affirmed.

Affirmed.