Before BIGGS, McLAUGHLIN, and KALODNER, Circuit Judges.
McLAUGHLIN, Circuit Judge.
This appeal concerns the valuation of the steam tanker Virginia, known to have been torpedoed by enemy action, May 12, 1942. There are two subsidiary questions arising out of the interest allowed on the main sum; one of these is brought up by libellant's cross appeal, the other is in the main case.
At the time of the loss, the vessel was insured through the War Shipping Administration by the government in connection with its requisition time charter of the ship. The suit under Section 225 of the Merchant Marine Act of 1936 as amended*fn1 is to have determined, in accordance with the warrant of the insurance, "just compensation" for the Virginia as provided for in Section 902 of said act.*fn2
It is to be noted that the government objected to the jurisdiction of the District Court in the matter, contending it was for the Court of Claims. We upheld the District Court jurisdiction in United States v. Leahy, 148 F.2d 462. The government specifically saves the question.
The government while conceding that "market value is the permissible test [for "just compensation"] where the boat has a ready market," denies that such market existed. It further asserts that what was presented as sales of comparable ships by libellant were not in reality sales which would constitute a market or establish a market value. It then urges that the construction costs of the Virginia and of her six sister ships should be the measure of the just compensation for the loss under the facts of this case. Appellee, insisting that market value is the test, says that as the best evidence of such value it presented proper proof of sales of comparable ships. The case was referred to a Special Commissioner who in an exhaustive report upheld the libellant. At the hearing on exceptions to the Commissioner's report, the government represented that it had new evidence affecting the final prices of the ships the sales of which had been relied on by libellant. The Court thereupon rereferred the suit to the Commissioner. There was a further hearing, after which the Commissioner filed a supplemental report which concluded that "the first report should not be modified in any way by reason of the evidence offered at the re-hearing." The District Court after consideration of the reports, "respondent's objections thereto and the briefs and arguments of the proctors" adopted the reports as proper and valid with the exception of the interest allowed by the Commissioner. In all other respects the reports, findings, and conclusions of the Commissioner were confirmed.
The Supreme Court has long since settled the principles by which compensation for the loss of the Virginia must be decided. In one of the leading cases, United States v. Miller, 317 U.S. 369, 374, 63 S. Ct. 276, 280, 87 L. Ed. 336, 147 A.L.R. 55, Mr. Justice Roberts said, "* * * value is to be ascertained as of the date of taking. * * * Where, for any reason, property has no market resort must be had to other data to ascertain its value; * * *." In the case of the total loss of a vessel, as here, the Supreme Court in Standard Oil Co. of New Jersey v. Southern Pacific Co., 268 U.S. 146, 155, 156, 45 S. Ct. 465, 467, 69 L. Ed. 890, said that "the measure of damages is its market value, if it has a market value, at the time of destruction. * * * Where there is no market value, such as is established by contemporaneous sales of like property in the way of ordinary business, as in the case of merchandise bought and sold in the market, other evidence is resorted to. The value of the vessel lost properly may be taken to be the sum which, considering all the circumstances, probably could have been obtained for her on the date of the collision; that is, the sum that in all probability would result from fair negotiations between an owner willing to sell and a purchaser desiring to buy. * * * And by numerous decisions of this court it is firmly established that the cost of reproduction as of the date of valuation constitutes evidence properly to be considered in the ascertainment of value." And in Brooks-Scanlon Corp. v. United States, 265 U.S. 106, 44 S. Ct. 471, 474, 68 L. Ed. 934, which involved compensation for a partially completed ship requisitioned by the government, the Court said, "The value of property may be greater or less than its cost; and this is true of contract rights and other intangibles as well as of physical things. It is the property and not the cost of it that is protected by the Fifth Amendment."
The Rules for Determination of Just Compensation promulgated by the Advisory Board to the War Shipping Administration follow the above outlined principles.*fn3 Rule 1 provides: "Just compensation for vessels requisitioned for title or for use is to be determined on the basis of value as of the date of taking, * * *. Value means value on the American market, not on foreign markets."
And Rule 3 states that: "Where market value cannot be determined by sufficient sales, or hirings of vessels of like character, made at or about the time of taking, it is to be determined by the administrator from a consideration of cost of construction, acquisition cost so far as relevant, improvements, replacement costs, depreciation, earnings, physical condition, appraisals for insurance or other purposes, and any other relevant facts upon which a reasonable judgment as to value can be based. These various matters are to be given such weight by the Administrator, as in his opinion they are justly entitled to, in determining the price that would probably result from fair negotiations between an owner willing to sell and a purchaser desiring to buy."
The sales so vigorously objected to by the government were by the Maritime Commission of T2-SE-A1 and T3-S-A1 type tankers in 1942 and 1943 to a number of private purchasers. Fourteen of the T2 ships were sold in 1942 to at least six different buyers including competitors of libellant. There were nine of this kind sold in 1943 by June 21st of that year to three oil companies. In the last half of 1943 an additional nine were sold to three purchasers. Seven of the T3s were sold in 1943 to two oil companies. Because the testimony for the libellant largely centered on the T2 type, sales of which far exceeded those of T3s, the Commissioner ignored the T3 type in determining the Virginia's market value. The Commissioner found that the spread of T2 sales over 1942 and 1943 made no material difference "since conditions were comparable throughout the entire period." This does not seem to be disputed.
The average price obtained by the Maritime Commission for the T2s was three million dollars. Arthur A. Fisher, a witness for the government, was the Maritime Commission examiner who handled most of its tanker transactions. These amounted to 71 down to the trial date. The mechanics of sale were complicated because of the necessity of proceeding under Section 509 of the Merchant Marine Act of 1936, 46 U.S.C.A. §§ 1159. During the war time emergency, the Commission, anticipating the need for a large number of vessels for war service, had placed such a large number of contracts for ship construction that "ship yards generally were not available for contract, private contract." As a result, a private operator, to obtain a tanker, was forced to proceed through the Commission. To keep within Section 509, the operator had to apply to the Commission for aid in the construction and acquisition of the particular vessel. As Fisher said, "That is the way the applicants made the application." If the Commission approved it would assign or allocate the vessel to the applicant and assign to him the Commission's interest in the construction contract. Fisher was familiar with all of the T2 and T3 sales by the Commission in 1942 and 1943 and testified that "They were all of them sold under the provisions of Section 509 of the Act." A mortgage was executed in connection with each sale "as part of the purchase price" and covered "the balance of the tentative determined estimated selling price." All the vessels were sold at actual cost to the Commission with the final actual cost to be subsequently determined by the Commission. Sometimes, instead of cash downpayment, trade-ins of old vessels were allowed, but there were no trade-in transactions with respect to T2 tankers prior to October 1943. Because the procedure setup required aid in the construction and acquisition of the vessel, even though a purchaser should wish to pay 100% cash, he would be restricted to a partial down payment. "The Maritime Commission retained title to the hull under construction up to the date it was completed. Then there was a simultaneous delivery by the shipyard of the completed vessel to the Maritime Commission and it in turn delivered it to the purchaser against the payment of cash and notes."
From all this the Commissioner concluded that:
"Despite all the legal smoke screen thus set up, in my opinion, the transaction amounted to nothing more nor less than a sale of the vessel to the purchaser as of the date of the delivery of the vessel. To be sure, the price was tentative and could vary either up or down as later estimates of cost might dictate, but nevertheless a sale had taken place.
"The conclusion to be reached then, is that there were sufficient sales of the T2 type tanker within a sufficiently limited period to constitute a market of this type of tank vessel. I think it can be reasonably said, also, that these sales were ...