U.S. v. VIRGINIA ELECTRIC CO.

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Argument of Perry W. Morton

Chief Justice Earl Warren: Number 49, United States, Petitioner, versus Virginia Electric and Power Company.

Mr. Morton.

Mr. Perry W. Morton: Mr. Chief Justice, may it please the Court.

This condemnation case at an earlier stage was here once before in your October 1955 term.

An earlier judgment against the United States in favor of this respondent was then vacated by you and the case was remanded for further consideration in the light of the case of the United States versus Twin City Power Company that you had decided the week before.

It was in the Twin City case that you held that when the United States builds a water project on a navigable stream and condemns riparian land for that purpose, any element of value arising from the availability of the land for water power purposes must be excluded in the fixing of compensation.

But of course in Twin City, you held that after excluding water power value, enhancement of the land due to water's power site value, there would still be an obligation of the Government which we readily recognize in this case to pay for any other values which might be inherent in the fee type.

Now, while I will summarize the facts of the present case in a moment, I wish to emphasize at the threshold certain very important factual differences which are these.

In Twin City, the bulk of the land which the Government condemned in fee was held by Twin City in fee.

But in the present case, the Government made a settlement fully satisfactory to the owner in fee simple and the respondent power company held only a flowage easement, an easement to plug related to the development of the water power of this navigable stream.

And so it is that in the present case, the basic question in the Government's view is whether the Government is required to pay this power company respondent any compensation for the frustration of a flowage easement it owned once upon a time over land riparian to an interstate navigable stream.

Justice Felix Frankfurter: When you say "once upon a time," did it have that interest --

Mr. Perry W. Morton: It had a piece of paper --

Justice Felix Frankfurter: -- at the time of condem -- up to the time of condemnation?

Mr. Perry W. Morton: The paper was still on record Your Honor.

I'll develop the refinements of that at -- a little later.

We say that we do not have to pay any compensation where the only value such flowage easement could possibly have was directly dependent, necessarily dependent upon a permission which the Government has the constitutional power under the Commerce Clause to grant or withhold and which it had never granted.

Now, the essential facts, beyond dispute as far as the issues before the Court at this time, are concerned are these, the Dan River is the principal tributary of the Roanoke River and is a navigable stream.

In 1944, Congress authorized the construction of the Buggs Island reservoir now known on has the John H. Kerr Dam and Reservoir on the Roanoke River in Virginia and North Carolina as a multipurpose project for navigation, flood control, and the development of water power.

That is the project involved in this case.

You may be familiar with it from your 1953 consideration of the case of Chapman versus Federal Power Commission in which you approved the license issued by the Federal Power Commission to this very same respondent to construct the Roanoke rapid site, so far of this downstream of the eleven possible sites on the Roanoke Basin, whereas this is the Buggs Island project referred to in that case as the highest upstream and was of course built by the Government.

Now, this congressional decision to build this project made in 1944 is just as immune from judiciary reexamination as was the same decision in Twin City which involved exactly the same authorizing act of the Congress.

On the execution of the authority given by this Act, the Government required and condemned a flowage easement over considerable areas of land, the project extends for miles, which would be flooded behind this dam.

This is in the very upper reaches of the reservoir area, which would be flooded behind this dam permanently or intermittently including 1840 acres of a 7400-acre tract, commonly known as the Falkland estate owned by a Mrs. Williams who is not a party to this controversy.

This respondent power company, theretofore, owned easements which for the purpose of this argument at least, would have aggregately on their face permitted it to flood permanently for water power development purposes as against Mrs. Williams and her granddaughters, a total of 1540 acres of the same 1840 acres which the Government condemned its flowage easement of.

Now, respondent's easements on this 1540 acres would allow flooding just to put two or three figures in your minds, up to contour elevation, 321 feet mean sea level whereas the easement which the Government acquired is to flood the Williams' land permanently or intermittently up to contour 330 feet mean sea level as required in the operation of the Government project as constructed.

As a result of correspondence initiated by the attorney for Mrs. Williams, the fee owner more than two years prior to the commencement of this case, the Government accepted from Mrs. Williams an option for the purchase of a flowage easement over the entire 1840 acres previously mentioned for a consideration of $1 and other valuable considerations the receipt and sufficiency of which were thereby acknowledged.

This preliminary correspondence shows that the landowner urged the Government to accept only a flowage easement instead of acquiring the entire fee simple title as it had in Twin City.

Because the Falkland Estate and I might say it was the general policy to acquire the fee-simple title but we were urged to grant -- to take only a flowage easement because the Falkland Estate and now I want to pick out excerpts from the attorney's letter, that's the entire 7400 acres, had long "been devoted exclusively to conservation of wild life and is a well-known game preserve which would be badly cut up," said the attorney if the Government took the entire fee-simple title whereas leaving the fee-simple title in the property -- to the property in the landowners would he said, "Go a long way in alleviating the difficulty."

Well, this option eventually exercised -- executed rather by the landowner and accepted by the Government reserved to the landowner "all such rights", and “privileges as may be used and enjoyed without interfering with the interest of the United States and was made subject only to" and I continue quote "such water flowage, riparian and other rights if any, which the Virginia Electric and Power Company has in or to or rather on is the word, the above described lands.”

The option further contained an express provision that the Government might at its election, acquire the title to the rights described in the option agreement by condemnation instead of by deed and that in the event of condemnation, the landowner would accept the considerations explicit and implicit in the option arrangement as full compensation.

Exercising this election, the Government instituted this condemnation case in 1952 and the record is specific at several points that the landowner has continuously disclaimed any interest whatsoever in any further compensation or consideration.

And so the controversy here presented, is and always has been strictly between the Government and this power company.

Now, the case was first tried in January, 1954 and a judgment was then entered for $61,600 in favor of the power company.

Justice Felix Frankfurter: Would it interrupt your --

Mr. Perry W. Morton: Yes, sir.

Justice Felix Frankfurter: -- course of your argument if I asked whether in any proceedings, between the United States and the owner of the condemned land, with the outstanding flowage interest of the respondents here, whatever that is that may have been deemed to be ever made its appearance in the process by which the imminent domain transaction is completed.

Mr. Perry W. Morton: The complaint simply describes and the declaration of taking to at the earliest part of the record.

The nature of the estate which the Government wanted that is to flow permanently or intermittently and so on and so on and so on over certain described parcels which were set out in appendix to the complaint by a full legal description.

And the -- the parties are then named as parties having an interest or a possible interest in the property.

I would recall to you perhaps the 93-acre case, the Illinois Aircraft case about two years ago now in which you said of course that the mere jointer of a party, the mere bringing of a domain proceeding against a party is not necessarily a recognition of an interest that that party may have.

This forum may be tested to determine the existence of such an interest.

Chief Justice Earl Warren: We'll recess now Mr. --

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Argument of Morton

Chief Justice Earl Warren: Mr. Morton, you may proceed.

Mr. Morton: Thank you, Mr. Chief Justice.

At the recess from the morning hour, I was at the point of saying that the case was first tried in January 1954 resulting in a judgment for $61,600 in favor of the power company.

The only valuation evidence offered at that trial was by the power company.

And it related to the fee simple value of the 1540 acres covered by the power company's easement excluding only merchantable timber, which I insert parenthetically by arrangements with the Government.

Mrs. Williams had been permitted to remove out of all the area that would be covered by the power coop.

Justice Potter Stewart: I missed that.

What did -- what did she (Voice Overlap) --

Mr. Morton: I say all of the timber was --

Justice Potter Stewart: Timber.

Mr. Morton: -- permitted to be removed out of the area that would be covered by the power coop.

Now, the Court of Appeals affirmed.

And as before stated, you granted certiorari, vacated the judgment, remanded the case for further consideration in the light of your Twin City decision the week before.

On remand, the Court of Appeals was constrained to recognize that under the Twin City decision, there could be no recovery against the United States or rights which would have value only in connection with the development of the water power of a navigable stream.

But in returning the case to the District Court, the Court of Appeals directed that there'd be an award to the power company of compensation for the taking of the Government's easement.

Excluding from the valuation, any element of value arising from the availability, these are its words, "of the land for water power purposes due to it's being situate on a navigable stream, but including," and I resume, "other elements of value not related to the flow of the stream such as its value for agricultural or grazing purposes".

Along the return of the case to the District Court, the Commissioners were appointed under Rule 71A (h) and were instructed to return their answers to four specific questions insisting on its position that the power company's flowage easements could have no possible value as against the United States.

The Government again offered no valuation evidence at the retrial before the Commissioners in June of 1958.

And after a further hearing before the Court, the District Court that is, in November of 1958, the Court entered judgment against the United States in favor of the power company, this time for $65,520 plus interest.

In doing this, the Court held that the second of its inquiries to the Commissioners was and I quote, "the appropriate measure of value or compensation" is the word.

That second inquiry had directed the Commission to determine the difference between the fair market value of this Falkland Estate that belonged to Mrs. Williams.

The tract of 7400 acres with and without the servitude of the Government's easement, except that it would assume for that purpose that the easement, the Government's easement covered only the 1540 acres covered by VEPCO's easement up to contour 321 instead of 330 and excluding from both of such valuations any element of value arising from the availability of such land for water power development purposes due to it's being situate riparian to a navigable stream.

And in making their report, the Commissioners stated that $11,720 of the total difference of $65,520 represented "damages to the residue" of the Falkland Estate.

Well, the Government again appeals.

The Court of Appeals again affirmed.

And at that point, you have brought the case here.

On these facts, we think that the courts below have persisted in trying the wrong case.

And we are here in an effort to get the right case at long last decided.

In the Government's view, there is a very simple syllogism which requires a conclusion favorable to the Government against the power company.

The major premise of this syllogism is based upon your decision in the Twin City case that when the Government, in the exercise of its commerce power, appropriates the flow of a navigable stream for a government project, it is not obligated to pay those elements of property value which are solely dependent upon the flow of the navigable stream.

And the minor premise of the syllogism is bottomed upon such cases as Boston Chamber of Commerce against Boston, Messer against United States, the Southern California Fishermen's Association case, United States against Petty Motors that where the United States settles with the owner of one interest in property, the question of compensation for all interests is irrelevant and only the question of just compensation for the interest taken concerns the Government.

Now, I'll come back to that minor premise for a little further development in a little bit.

But I want to deal first with this major premise based on Twin City, currently very much dispute about it.

This case, like Twin City and Chandler-Dunbar is one in which the United States has chosen to exercise its commerce power to the fullest extent in the building of this project.

Indeed, the project, as I have previously noted, and the Twin City Project were adopted, authorized and constructed under the very same authorizing Act of Congress.

Here, for the same reasons and to the same extent to paraphrase your language in Twin City, the United States has displaced all competing interests and has appropriated the entire flow of the river at this point to the declared public purpose.

And for the same reasons, this is not such a situation as those involved in the Gerlach Livestock Company case or the Niagara Mohawk Power Corporation case where the action of Congress, as you have said, fell short of a full exercise of its constitutional power to appropriate the flow of the river to the public domain so that prior rights existing under state law were in those cases, Gerlach and Niagara Mohawk held compensable or otherwise recognized.

Now, by even the stronger reason, we can put aside, as you did in Twin City, such other cases as United States against Kansas City Life upon which the respondent seems so strongly to rely.

The basic lesson to be learned from Twin City is that when the Government exercises its commerce power to the fullest extent without any qualifications, competing interests are displaced without compensation being required under the Fifth Amendment to the extent, and I agree only to the extent, that those interests have a value which is dependent, necessarily and solely upon the flow of the navigable stream, a value which the Government can either grant or withhold as it chooses.

And as you have so recently as last June in the Grand River Dam case said that if the Government does not grant it, it is beholden to no one.

Now, that has been the Government's major premise in this case from the very beginning long before Twin City, long before Grand River as may be seen from the Government's original trial brief.

In 1953, which VEPCO has done us the favor of inserting in its appendix, page 214 and following of the record, "VEPCO counsel has through the years indulged in much talked about the Government changing its position."

Well, let the record speak for itself.

In that context, however, it may be appropriate for me to point out that VEPCO's original answer to interrogatories Record 22.

It claimed compensation measured by the value of its flowage easement "for water power development purposes" and no other.

Under the stress of your remand of the case in early 1956 for reconsideration in the light of Twin City, VEPCO, of course, had to find a new theory.

A theory which we insist still gives its something for nothing.

Obedient to your decision in Twin City, the Court of Appeals on remand held of course that VEPCO was not entitled to values inherent in the flow of the stream.

And I do not understand that VEPCO is now claiming such values or could.

So, while the Government's major premise is by no means to be lost sight of, I would take it that the premise is now conceded by both VEPCO and the Court of Appeals.

Now, at the outset of the Government's second point, its minor premise so to speak, I ask you to examine what it was that VEPCO had.

The Government has never contested that VEPCO once had certain rights against the fee owner.

In the first place, it once had rights as against the fee owner.

Originating in the year 1907, this is a paraphrase of the language of its basic instruments, “To construct and maintain a dam in the Dan River and thereby to raise the water level at the head of Hyco Falls six feet above normal.

In the second place, it once had rights as against the fee owner originating this time in 1925 to build, I'm quoting now excerpts, "To build, to rebuild and again to build any dam or dams it might desire across the Dan River," so that the normal water level behind said dam shall not be higher than what the Government concedes here to be contour 321, resume quote, "together with all riparian rights, water rights, easements and rights of floodage related to the building of such dam on the so-called Falkland Estate," which estate released VEPCO's predecessor from any damages for, and I again resume quote, "anything done within the limits of its rights aforesaid in the development of the water power aforesaid".

In other words, the very documents upon which VEPCO rests and indeed must rest its claim of interest.

And I would remind you that it has the burden of proving its interest show explicitly that the only easement rights which it possessed as against the owner of the fee simple title, were the very rights, which it could not lawfully exercise without the formal consent of the United States and that the prospect of any such consent ever being given vanished, disappeared, expired, terminated.

As early as 1944, this case was brought in 1952, as early as 1944 when the United States decided to build its own project at this location on its own account.

Now --

Unknown Speaker: (Inaudible)

Mr. Morton: Yes, yes, sir.

There has never been any question in this case that Mrs. Williams held a fee simple title to the so-called Falkland Estate at the time of the commencement of this case.

And as far as I know, she still owns that fee title.

The Government took only a flowage easement on that estate in strictest accord with the option agreement previously negotiated with Mrs. Williams at her own urgent request and Mrs. Williams is fully satisfied with that settlement and is honorably and consistently claiming no further or different compensation.

I insist that this respondent power company, which once had only a flowage easement for power purposes on 1540 acres of the 1840 acres covered by the Government's easement had and has no right whatever as a matter of fact or law to question the settlement arrangement between Mrs. Williams and the Government for that is precisely none of its business.

Now, as already noted, the situation in this case differs from Twin City in respect to the fact that in Twin City, the company owned in fee simple the bulk of the land which the Government condemned in fee.

Twin City was therefore entitled to compensation for any other elements of value, agricultural values, timber, forestry, anything else, any other elements of value.

It could prove within the rules for determining just compensation excluding power site value.

The Government does not contend that the fee owner is not entitled to such other values according to the usual rules.

If we had not settled with Mrs. Williams in this case, on the basis entirely satisfactory to her, we would long since have tried the issue of just compensation with her.

But that is not this case and no amount of the confusion with which the case seems to be beset can make it so.

Power rights which Mrs. Williams would have had to compensation in the absence of a settlement can somehow now rub off on VEPCO involves a process of osmosis or alchemy, which I utterly fail to understand.

And yet that, in its simplest terms, is the basis on which the case has been tried ever since you vacated the prior judgment and remanded the case in 1956.

Now, VEPCO says that a condemnation is a proceeding in rem and we wholeheartedly agree.

We insist that the only raise involved in this controversy is the flowage easement which VEPCO held.

VEPCO says that just compensation is to be fixed without regard to the various interests in land and that the Government is not concerned with distribution.

And again, this unit rule is the general rule and we readily concede it.

In fact, the Government is first -- is the first to champion this rule when it applies.

We go straight down the line with the great mass of cases in the respondent's brief in support of this proposition, the unit rule.

We insist, however, that the unit principle does not apply when the unit no longer exists as when the parties themselves have destroyed the unit, as they did in the Boston Chamber of Commerce case or when the Government has already settled with the owner of one interest as it did in the Petty Motor, the Messer, the Southern California Fishermen's and so on cases.

In the Boston case, you long ago held, it was Mr. Justice Holmes I believe in 1910 that the Fifth Amendment and I quote, "does not require a disregard of the mode of ownership of the state of the title".

It does not require that a parcel of land be valued as an unencumbered whole when it is not held as an unencumbered whole.

It merely requires that an owner of property taken should be paid for what has been taken from him.

And the Messer case, in the Fifth Circuit on the authority of your Petty Motor decision and I might insert that the Southern California Fishermen's case at Long Beach was almost exactly the same as the Messer case.

The Messer case said very pertinently that, "Whereas here, the Government settles with the owner of one interest the question of compensation for all interests is irrelevant and the only -- only the question of just compensation for the interest taken concerns the Government."

Now, this exception to the general rule, I want to note, rests upon very sound public policy, the policy of encouraging settlements wherever possible and narrowing controversies to their minimum number and limits.

Multiple hundreds of such partial settlements are made every year.

I know because for seven and a half years, I have had a hand in approving them.

Do you think that such settlements would be made if this sound exception to the unit rule did not protect the Government from paying twice for the same thing?

Of course, they would not be made.

And finally, and very subordinately, I mentioned briefly the second heading of the Government's argument which has to do with the inclusion in the award of $11,720 allowed as "damages to the residue".

For the reasons amplified in our brief, such an element of compensation to VEPCO is completely unsupportable.

Unknown Speaker: (Inaudible)

Mr. Morton: The classic ingredient -- pardon me, Mr. Justice.

Unknown Speaker: (Inaudible)

Mr. Morton: As to Mrs. Williams, there was certainly a residue.

As to VEPCO, its interest ended at 1540 acres is my point.

Unknown Speaker: (Inaudible)

Mr. Morton: Yes.

I think that that is just another name for this thing.

It is called damages to the residue.

And I would point out that for the -- the classic ingredients of so-called severance damages, unity of ownership in fee, unity of use, the existence of a residue, simply are not present in VEPCO's hands.

And while this point by itself would, I think, require reversal.

It serves well to accent the totality of the lower court's basic errors by carrying these errors to their absurd extravagance.

Justice Charles E. Whittaker: May I ask you --

Mr. Morton: Thank you.

Justice Charles E. Whittaker: -- one more question?

Mr. Morton: Yes.

Justice Charles E. Whittaker: Is there any language in VEPCO's easement its right to flow that gives them agricultural accretion where it uses or -- or is it just their right to flow?

Mr. Morton: Their right to flow, Mr. Justice.

The record of those documents begins, there are several of them, the record begins at page 165 that happens to be the instrument that created some rights that stemmed from -- this is one of the later ones.

The one which I think is the most pertinent is the one beginning at record 172.

Defendant's Exhibit C, a deed to the Middle Virginia Power Company, which was one of VEPCO's corporate ancestors, from the Falkland Estate made in 1925.

Now, there was a lot of other property conveyed that -- that has nothing to do with this case.

But I would draw your eye first to the middle of page 173 under the heading second.

The right to build, and this was what I was paraphrasing in my statement in chief, "the right to build, to rebuild and again to build any dam or dams, the said Middle Virginia Power Company may desire across the Dan River at any point," and so on and so on.

And now followed down about 12 lines, so that the normal water level behind said dam or dams shall not be higher than the extreme height to which the -- our company has the right to elevate the waters of the Dan River and then down a couple of lines, together with all the riparian rights, water rights, easements and rights of floodage" to the ballistic extent of the said maximum normal water level and so on.

And if you will turn the page over to third at 174 of the record, the right in perpetuity if you have any charges therefore to abut dam, dams and so on, to build its powerhouse or powerhouses there on rights of ingress and egress and so on.

It describes they have a right to take certain materials in connection with their construction that they have certain privileges of access during construction.

I think both VEPCO and we agree that there are some elements in here which have nothing to do with this case such as the right to build a dwelling and if they paid, I think it's $40,000 an acre they stipulated, they pay a fee for the dwelling there at the dam site.

But now, reading on to record 175 under fourth, a little below the middle of the page, "Falkland Estate does here by covenant to run with the land that it does here by grant and release unto the power company all claims for damages," and so on, got down a little way, "as the result of anything done or omitted to be done by the power company within the limits of its rights aforesaid in the development of the water power aforesaid of the Dan River including the flooding of any of the present land of the said Falkland Estate."

Now, the next fifth on the top of page 176 is, of course, just a -- a privilege that was given or reserved by rather the Falkland Estate to have access to the waters edge and to take part of domestic purposes and things of that sort.

Now, that is basically the document that we have here under consideration.

Unknown Speaker: (Voice Overlap) --

Mr. Morton: There is an earlier one in 1907, I think, I should say in fairness which is not merely as elaborate as this.

It developed out of -- I don't know.

I'll find it here in just a minute.

Developed out of a deed from the Banister Mills Company to the South Boston Electric Company, and I'm noting now at the bottom page 180 and -- yes, 180 of the record and it continues over several -- well, we can really skip all of 181 and go to item fourth at -- near the middle of 182 which is the basic right of floodage involved in this instrument."

The water rights, water power and water privileges owned by the said Banister Mills Company incident to said land and the privilege to construct a dam or dams or other works on said land to raise the water at the head of Hyco Falls six feet above normal," I misread, "six feet high above the usual water level without requiring compensation for any damages thereby to any land owned by the Banister Mills Company on the Dan River."

Justice John M. Harlan: Mr. Morton --

Mr. Morton: Those are the instruments.

Justice John M. Harlan: -- leaving -- putting aside the so-called severance element of the award, would you mind stating again what basis of the award was it to the balance?

Mr. Morton: Yes, I'd be happy to, Mr. Justice, although it has mystified me greatly.

I'll state my understanding here.

The Court of Appeals on remand, as I understand its view, was that now, we were to take what I recognize to be the usual flowage easement rule.

But although -- and we were to ignore the settlement with -- with Mrs. Williams and we were to apply the unit rule and of course, the rule for easements, generally, is a valuation of the sovereignty state with and without the imposition of the easement involved.

Now, this was what it said it should be done.

Justice Potter Stewart: You don't quarrel with that general rule?

Mr. Morton: I don't quarrel with that as a general proposition.

I think that there was error, a minor error in adopting the second instead of another one of the inquiries even if that had been an applicable rule.

In other words, they said you were to assume for the purpose of this inquiry.

The judge directed the Commissioners to do this, please understand.

To assume for the purpose of this inquiry, that the Government's easement came only up to 1540 acres instead of up over 1840 acres.

Now, I passed over that error.

I think it is simply a compounding of a basic error.

We submit that the judgment below should be reversed.

Thank you.

Chief Justice Earl Warren: Mr. Ferrell.

(Inaudible)

Argument of Ralph H. Ferrell, Jr.

Mr. Ralph H. Ferrell, Jr.: Yes, Mr. Chief Justice, and may the Court please.

The interest of Virginia Electric & Power Company are set out in the Exhibit C, just previously referred to the previous deeds and there were very numerous deeds and the 1970 was only a minor part of the flowage rights over the Falkland Estate.

We have paraphrased or quoted rather from the -- the basic provisions that are really involved in this case beginning on page 7 of our brief.

And opposite page 7 is a chart which we submit will help with the understanding of the facts of the case.

And that shows the 7400-acre tract of the Falkland Estate at the confluence of the Banister and the Dan Rivers.

And the Dan River is admittedly a navigable river in Virginia upstream from the Buggs Island Dam.

You will see shaded there the areas between contour 321 and contour 330.

The top line of contour 330 was the extent of flowage under the Government's flowage easement.

The bottom line is the agreed contour line was stipulated where that went to between the parties before the first trial.

Virginia Electric & Power Company was the successor.

I won't go through all the steps but as a matter of fact, there was a deed, the very next exhibit in the record, a deed of January 1942 from the plea owner making certain corrections in the previous deed that I preferred to and which is paraphrased beginning on page 7 which sets out that the power company had the right to build a dam on this tract that you see on page 6 and also to flood permanently and it was a permanent easement to keep water at all times up to contour 321 of this 7400-acre tract.

And that was not of course limited to a dam on the Falkland tract but said any dam downstream, of course, from this area that VEPCO or its predecessor entitled, had the right to perpetually and permanently overflow the land up to contour 321.

There were other rights in there and as a matter of fact, I should call the Court's attention since this amount of damages to the residue has been talked about so much to the fourth provision of the deed which we quote, at the bottom, beginning at the bottom of page 7 of our brief which says forth, "Falkland Estate Incorporated, that hereby covenant to run with the land that it hereby grant and release all claims for damages to the residue of the real estate as the result of the flooding of any of the present land of the said Falkland Estate," which is the 7400 acres.

Justice William O. Douglas: Was that not a personal release by the Falkland Estate to the gratitude of (Inaudible)?

Mr. Ralph H. Ferrell, Jr.: That -- that is a release of damages to the residue and other claims too but since -- I'm directing my remarks just to the damages to the residue, and Article 6 is a provision where all of these are covenants running with the land.

In other words, we had, at the date of the taking, an easement in gross commercial assignable easement in gross to keep water permanently over the land up to contour 321 without the payment of any further compensation to the owner of the underlying fee.

Now, my friend states that there was a settlement in this case with the fee owner.

And I am astounded because the Government's attorney, at the very outset of this case, and it appears in the record on page 34, said that the Government obtained "nothing" under this option agreement.

And the same thing is true of the responses to the interrogatories that we asked, "Do you claim that you've gotten anything from the fee owner?"

And they said, "Definitely, no."

We have that set out in our brief and I won't take anymore time with it on page 10 where we refer to the Government's interrogatories.

And yet, my adversary says, and that's why I think I'll have to go on to the facts of this case a little bit more, he says the courts below, and they have tried this thing or heard it three times, have been trying the wrong case.

And it's only now that we are getting to the right case.

But the truth of the matter is that's the difference between us.

We've been trying in the court below an entirely different case from what I've heard up here this morning or this afternoon.

Because when you start out with what the Government took and then discuss what were the rights in this land, there's no -- you -- there's -- there's just all the difference in the world between the cases appears in the record and the cases made out here.

Mr. Justice Frankfurter asked him a moment ago about where in the pleadings did the easement -- VEPCO's easements rights appear.

Well, he said something about.

Answered that VEPCO was main -- a main party to the agreement.

Well, that is not true.

VEPCO was not a main party.

They filed a condemnation preceding in rem, get so many acres of land to carve out of it, not VEPCO's easement.

They carved out it an easement to necessary for the Kerr Dam to permanently and intermittently overflow this land.

And he says that's exactly the same thing we got on the option agreement.

But if you will read the option agreement, it didn't describe the easement that way and the parties recognized it and although it's not printed in the record on -- in this case, I referred to them in a footnote.

They went back in the court below, the fee owner and the Government and changed it and says, "Insofar as I'm concerned, that -- those easement rights are different."

And I submit that if you compare the easement talked about in the option agreement and the easement content -- condemn, the Government couldn't operate without that -- without excessive additional damages under the -- under the easement talked about in the option agreement.

Justice Charles E. Whittaker: Is this your claim, Mr. Farrell?

Let's see if I can -- would you understand?

Do you think this malice should be arrived at as though the Government were taking this right to flow from the key owner and its value to be assessed on that basis?

Mr. Ralph H. Ferrell, Jr.: No, Your Honor.

If that -- that was the way it started out at first.

And despite the contention that we have changed our position -- as a brief answer to that, I won't go in to it.

The -- the case was tried on the theory of the Government's easement had to be valued as step number one.

Then step number two was that, since they were different interest in --

Justice Charles E. Whittaker: (Voice Overlap) --

Mr. Ralph H. Ferrell, Jr.: -- the land taken --

Justice Charles E. Whittaker: I don't understand what you mean.

The Government's easement had to be valued.

Mr. Ralph H. Ferrell, Jr.: Yes.

Justice Charles E. Whittaker: In what date would taking have to be valued?

Mr. Ralph H. Ferrell, Jr.: That's right.

The Government's easement that they were taking, the raise taken in here was the Government's easement described in that complaint and the declaration of taking.

Justice Charles E. Whittaker: And that value would be the same whether taken from you or from Mrs. Williams.

Mr. Ralph H. Ferrell, Jr.: Or anyone else and that's the way they -- they tried the case.

That's the way --

Justice Charles E. Whittaker: And he got to say that having gotten title from Mrs. Williams to that right to flow, the damages go to you and not her.

Mr. Ralph H. Ferrell, Jr.: Part -- only part of the damages because that's where and that -- of Judge -- the Chief Judge Parker mentioned that in, and I think, his second -- his third opinion that in this case that some confusion exist because of that transfer by the fee owner.

You see, we only -- if you look back at that little tract, we only own up to 321.

And we couldn't validly claim that we won title to damages either for the land taken or damages to the residue as to the black shaded area which incidentally was on the bluff of the -- of the land.

We couldn't validly claim that.

In other words, we did not have, as far as land area is concerned, rights coextensive with what the Government was taking.

Do I make myself clear?

So -- and the Government didn't described it.

You see, the Government in its complaint in this case, they described their easement.

They said nothing about VEPCO's easement which, of course, they did -- they didn't have -- didn't have to do.

But they -- in other words, they did not condemn VEPCO's easement and they didn't want to condemn VEPCO's easement because at that time, the Government was taking the position that your easement is more onerous than ours because we are only going to flood the land intermittently.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Without any compensation.

That's their --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: -- that's their position.

That's right.

And --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: -- and maybe that justify --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: -- well, that's their claim, sir.

But we dispute that because we say that the Commerce Clause does not go further than the banks of the stream and you cannot destroy property rights and increase in land as distinguished from water power.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Yes, sir.

And all the cases support us on that position that when they become -- this raise or carve this flowage easement out of the land which is -- which is -- includes ours over which we have the same or similar rights, it extinguishes.

It extinguishes our rights and extinguish money as their taking.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well, let's put it this way, that Mrs. Williams, on the day of the taking, could not convey the right to the Government to flood the land up to contour 321.

That would have been in derogation of the grant but as this -- this was covenant of title, you -- we had all of the covenants of title and that in it was a valid and existing easement and -- and they do argue that in their brief that they -- that she could've.

But the truth of the matter is that there isn't a lot of support that it would then a valid conveyance and incidentally the letter that he read from a moment ago as to the offer by the fee owner, the offer said, "We will convey you the rights above the contour 318," of course, it was stipulated later, it was the 321.

In other words, she consider that VEPCO had the right and incidentally, the Government represented to the fee owner and to her attorney that they were --

Justice Felix Frankfurter: (Voice Overlap) --

Mr. Ralph H. Ferrell, Jr.: -- going to acquire those rights --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: -- to flood --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: -- they were going to acquire the right to flood from VEPCO by separate negotiations.

And we have it --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: That's what they argue now.

But in the Exhibit H, which is in our brief in which they don't refer to, which the correspondents between the Corps of Engineers, they said in that -- under this option agreement, we can't get all of the things that we wanted.

We've got to get it from VEPCO.

Now, they've changed their mind and say that, "Well, this is something hanging up here in the air and we just don't have to bother with you.

We don't have to -- we don't --

Justice John M. Harlan: Was that --

Mr. Ralph H. Ferrell, Jr.: -- have to negotiate with you."

Justice John M. Harlan: -- was that before Twin City that the position, the Government's position you're describing?

Mr. Ralph H. Ferrell, Jr.: Yes.

Justice John M. Harlan: Is that before Twin City?

Mr. Ralph H. Ferrell, Jr.: They -- they took that position for --

Justice John M. Harlan: (Voice Overlap) --

Mr. Ralph H. Ferrell, Jr.: -- before Twin City.

Justice John M. Harlan: -- although I didn't agree with you, it makes an awful lot of difference, doesn't it?

Mr. Ralph H. Ferrell, Jr.: What?

As to agreeing --

Justice John M. Harlan: To your position now, you're describing a position which the Government took before the decision of this Court in Twin City, as I understand it.

Mr. Ralph H. Ferrell, Jr.: Yes, sir.

It paralleled their position in Twin City.

Justice John M. Harlan: And Twin City -- Twin City supports the position, does it not, that they are presently taken -- taking as to the lack of need for any condemnation with respect to your flowage rights?

Mr. Ralph H. Ferrell, Jr.: No, Your Honor.

And the best answer that I can give to that is the subsequent history of Twin City.

Because in the Twin City case, there were 189 acres of flowage acres in that case and when it went back from this Court to the District Court, the District Court agreed with the Government and said, "As to those flowage acres, you don't have to value it without, you know, excluding water power value."

It went up to the Fourth Circuit and again the Fourth Circuit, for the fourth time, counting that -- last time here when Judge (Inaudible) wrote it but while Chief Judge Parker was that said, "No, that -- this -- the Twin City decision only involved the plus factor."

And it --

Unknown Speaker: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: -- doesn't include any other value.

Unknown Speaker: What value?

Mr. Ralph H. Ferrell, Jr.: The plus factor of water power value.

That was about five times what the value would've been under ordinary circumstances.

And incidentally, I'd like to straighten the record in this case.

We have not changed our position even before Twin City.

We didn't claim water power value.

He read a part of the -- of the interrogatory but we disclaimed it.

And we've said it time and time again even before the first trial and we've never asked for it in a hearing for valuation.

Justice William O. Douglas: As I understand your -- just the claim of something like this.

If a farmer owned a fee interest at this land that you have interest like -- or right in.

If that land was condemned, part of the thing that you would get would be the thing that's awarded to you at present time.

Mr. Ralph H. Ferrell, Jr.: That's right.

Justice William O. Douglas: In other words, what you're -- you're claiming that you're being awarded for a slice a percentage of the fee interest.

Mr. Ralph H. Ferrell, Jr.: Yes, Your Honor.

As a matter of fact, the way this case on the pleadings, and if you will forget the different interests in this case was a garden-variety condemnation case.

The Government calls out this easement, brings the condemnation case against the land, against all the world regardless of interest in the land and say, "We want to value the compensation for this easement."

And that -- and when you do that, as Mr. Morton said, "You value the land before and after the taking of the easement, which includes any so-called damages to the residue and you exclude water power value."

And that was exactly what was done in this case on the second trial when you got the $70,000 award.

Then the next step is, well -- and that's against all the world.

They had a fair trial, that's just compensation.

Water power value hasn't been considered and that is what they would pay and did pay in companion cases that are reported right next to this --

Justice John M. Harlan: But what interest --

Mr. Ralph H. Ferrell, Jr.: -- case.

Justice John M. Harlan: -- have you got in the residue?

That's what I don't --

Mr. Ralph H. Ferrell, Jr.: Alright.

Then you get down to the division of that $70,000, I forget the $100, as between the different owners.

And incidentally, my adversary says the unit rule on that is where you condemn irrespective of the -- of the division in title applies in the usual case, and that's true.

They -- Mr. Augelle in his work talks about the undivided fee rule even though you got a diversity of interest.

You go ahead and forget that as a practical matter and you value the -- the raise as if it was not divided.

And he says in most cases, that's the same.

And the exception to the rule is where it's so divided that the sum of the parts, either greatly exceed the award for getting the division of the parts as of, you know, the one undivided tract or the sum of the parts of so much less, then an injustice would result and then you do not apply the undivided fee rule in determining the -- the compensation.

But in this case, not only of -- is a Boston case not applicable, but because of the facts involved in that case, but in this case the Government argues itself that all -- that -- that some of the parts is equal to the fee because in their brief they said the whole fee value, the full value still stayed in the fee owner and all that was owned it was a little blemish and that is this unexercised flowage easement.

In other words, there was a cloud on the title.

So even by their own admission, this undivided fee rule is the standard for the valuation of a -- of an interest in land, the raise of the Government's easement as applied in this case.

Now, you get down to the apportionment.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Yes, sir.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: They got together and made a contract.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Yes.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well, in -- in the Boston case, they were valuing the -- the dominant tenement.

The ones to -- in whose favor the easement still (Inaudible) land with the ones and said, "If we'll all get together, the -- the damages and so on and so forth are $60,000.

But there, the taking of this land was by the city to change a private way or street to a public street.

And as a result, as a factual the matter, there was no interference with the --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: That's right.

But in this case, there is interference and the fee owner couldn't grant it and how in the world can the Government condemn something out of thin air?

And say it -- it gets it out of the land and -- and you -- you don't have any interest in that land is -- is absurd to me.

Justice Hugo L. Black: (Inaudible) -- suppose you had not -- she had never conveyed anything to you.

She had nothing but the land.

She conveyed nothing to anybody the right and they condemned it.

Mr. Ralph H. Ferrell, Jr.: The award was verified and the award should have been $70,000 because they excluded all water power value and just valued it before and after of agriculture grazing in timberland.

And they said that the difference between those values was 70,000 some hundred dollars.

Justice Hugo L. Black: What -- what I'm talking about is that the Government condemned property that's next to the stream, can the owner get any value for the right to overflowing it or does it --

Mr. Ralph H. Ferrell, Jr.: No, sir.

Justice Hugo L. Black: -- gets the value of the property?

Mr. Ralph H. Ferrell, Jr.: She gets the difference in the value of the servient land before and after the taking of the easement --

Justice Hugo L. Black: Well, I'm talking about --

Mr. Ralph H. Ferrell, Jr.: -- considering all the purposes --

Justice Hugo L. Black: -- condemn the whole -- condemn the whole property take the whole land.

Mr. Ralph H. Ferrell, Jr.: Oh, in fee?

Justice Hugo L. Black: That's right.

Mr. Ralph H. Ferrell, Jr.: A fee taking.

Yes.

Justice Hugo L. Black: They take the whole fee.

Mr. Ralph H. Ferrell, Jr.: They take the whole fee --

Justice Hugo L. Black: Alright.

Mr. Ralph H. Ferrell, Jr.: -- then she would get --

Justice Hugo L. Black: And when they --

Mr. Ralph H. Ferrell, Jr.: -- fee values plus (Inaudible) excluding water power purpose.

Justice Hugo L. Black: When they fixed the value of that, can they take into consideration in fixing the value and added amount for that which you claimed she conveyed to you?

Mr. Ralph H. Ferrell, Jr.: No.

That would -- that would be improper too.

Justice Hugo L. Black: That would be --

Mr. Ralph H. Ferrell, Jr.: That would -- that would be --

Justice Hugo L. Black: -- improper if you say if she has tried to convey something to you that she couldn't get anything for when the -- when the land is condemned that you could get something for what she conveyed to you, is that it?

Mr. Ralph H. Ferrell, Jr.: Why -- why certainly we could and the evidence in this case proved it.

They say we never brought a buy in but you don't have to bring the -- the live in buyer.

There's a hypothetical assumptions --

Justice Hugo L. Black: But suppose --

Mr. Ralph H. Ferrell, Jr.: -- and all I get -- but we have evidence in this case before 1944.

They had gone out and -- and made economic study of this site.

And that there were other -- I've forgotten how many companies, 18 of companies in this particular area and -- and there was a demand for flowage easements and -- and sites in this -- in this general area.

As much as a market as you can find in things of this kind, which I must admit somewhat unique.

But the evidence in this case does show that.

Justice Hugo L. Black: But I don't -- I don't yet see how.

If she couldn't get it, they bought her land, condemn her land -- land if she couldn't get an added value for that what you claim you have that you couldn't get it.

Mr. Ralph H. Ferrell, Jr.: Well, we don't want the --

Justice Hugo L. Black: If she conveyed something to you --

Mr. Ralph H. Ferrell, Jr.: Well, let me --

Justice Hugo L. Black: -- of the value that --

Mr. Ralph H. Ferrell, Jr.: Well, I don't have --

Justice Hugo L. Black: -- she don't have (Voice Overlap) --

Mr. Ralph H. Ferrell, Jr.: -- there is no doubt they're not because you see, she has not conveyed the fee and she has not conveyed them of that amount and we are just asking for a part of it and incidentally, the fee owner from the very outset, has recognized that the Virginia Electric & Power Company has the right.

They were extent, they were existing, there hadn't been abandonment, there was no abandonment through non-use and that we were entitled to the compensation.

She's always taking that position.

In other words, she recognized the -- the legal situation that she was in.

And incidentally, the Government hadn't decided to take a fee in the case as we -- we've brought out.

In other words, that wasn't the consideration there.

We proved it by evidence and how you can say it now is -- is contrary to the evidence in the case.

But in other words, what happened was that the fee owner said, "I understand you want additional rights.

Don't take anything with a flowage easement because you don't see how this thing does go up in the land if you took the fee.

There would be the severance damage although damages would be so much more because you'd be cutting off access while you wouldn't cut it off with the -- with the -- with an easement.

And if you'll do that, I'll give you the additional rights for a nominal sum."

And the Government says, "That's just fine.

We will -- we will negotiate," and she says, "And the latter, we will negotiate with VEPCO for its rights and then it never negotiates and brings this condemnation proceeding."

Now, to answer the damage to the residue, I -- I don't want to dodge that question because the court below answered it very clearly.

After you have -- by the undivided fee rule determine by -- for the garden-variety condemnation proceeding, the just compensation for the -- for the Government's flowage easement, you get down to an apportionment of the -- of the -- of that sum, of the $70,000 sum in proportion to the interest involved in the case or in the -- that have been destroyed and that are affected by the taking.

Justice Charles E. Whittaker: Only such are being taken.

Mr. Ralph H. Ferrell, Jr.: Only such are being taken.

And that's why we had the second inquiry to the Commissioners in the case.

Now, the second inquiry only involved the right up to 321 and it said, "What would have been the damages if you -- the Government's easement had only covered up to 321," the before and after value.

And incidentally, it wasn't the -- the Fourth Circuit's brainchild after the remand from this case.

The Government had argued on the first trial that if we have to pay, you valued it improperly by taking the fee value because we have this permanent flowage you see to overflow the land permanently because we are not taking that right.

We're taking less than that so please only value our easement.

Well, we argued when we got back to the Fourth Circuit that since we hadn't got any water power value, the first go around just please affirm the judgment.

But the court then agreed with the Government and said, "Oh no, the Government isn't taking as much as you have and it's not damaging the land as much as you would damage the land, so we're going to send it back and tried on that basis."

So you see, when you are valuing the land as coextensive with our easement, the before and after value naturally includes damages to the residue.

You see.

Because it's not for the -- it's -- it's not submitted to on what's the compensation for the land taken plus the damages to the residue.

Before and after includes both because at that particular time, the Government was claiming not only -- it was claiming that there were great benefits that would result --

Justice Charles E. Whittaker: Did you own -- did you own the so-called residue?

Mr. Ralph H. Ferrell, Jr.: No, sir, but we owned the easement.

Justice Charles E. Whittaker: But didn't you get the damage for damage to the -- unawarded damage to the residue?

Mr. Ralph H. Ferrell, Jr.: We got a portion of the damages to the residue which is attributable to the easement that we had that include it, as I read on page 8, the damages to the residue and the Fourth Circuit pointed that out.

In other words, you are valuing our easement and our easement covered two things.

It covered compensation for the land that we took directly and it also took any damages cost to the residue as was pointed out on the top -- the bottom of page 7 and the top of page 8.

So, in trying to find out what was our proportionate part of the award, the same standard or the same rule was -- was applied.

In other words, damages to the residue were part of our acquisition cost.

Now, I'll agree that -- that reproduction cost only applies to improvements and things of that nature.

But the net effect of it, may it please the Court, is that what the Court and what was done below, by the courts below was to take a reproduction cost attitude toward the determination or in the determination of the award to be made to the power company for its proportionate part of the condemnation award.

Now, there's one other thing here that I bound to reply to.

He said some about -- it's none of our business as to what happened between VEPCO -- what happened between the Government and the fee owner.

Well, of course, it's not about business except as to the -- as to the -- what she did convey to him and when he says we got something from the fee owner, all I can say is that you didn't get it under the option agreement.

Your counsel said nothing and as a matter of law, you got nothing from it.

And I will go or even further with the Government and say by virtue that option agreement, she didn't increase anyone's right and by the same token, she didn't decrease anyone's rights.

And the --

Justice Potter Stewart: So at least they -- they did get from the free owner the difference between the 321 level and the 330 level.

Mr. Ralph H. Ferrell, Jr.: They -- they -- which would have been -- I've forgotten, $5000 or $6000 under the formula or the -- the full compensation for the Government's easement without any consideration of anything else.

That's right.

And the Fourth Circuit said, "That's good enough for her.

She didn't get that amount but we want to do what's -- what's right by the owner of this -- of this easement that's valid and existing as of the time of the taking."

So it really gives a reproduction or replacement cost figured as of the time of the taking and leaving out the difference in the onerousness, it's not a good word, but in the burden of the -- of the easement that we had as contrasted with the lighthearted easement which the Government claimed at one time it was taking.

Justice Felix Frankfurter: Are you saying (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Value.

Justice Felix Frankfurter: It affects it (Inaudible) could be added for more cost (Voice Overlap) --

Mr. Ralph H. Ferrell, Jr.: Yes, Your Honor.

Yes, Mr. Justice Frankfurter.

That's our position.

And we say that it didn't -- the Kansas City case that he virtuously aside and the Fourth Circuit relied on that in the Cress case and one other case that we didn't cite because it doesn't say so but the net result to that holding is that -- is certainly in support of our case and that's this United States against Chicago, Milwaukee, St. Paul case in 312 U.S., which unfortunately it's not cited in -- in either brief.

But there, if you did have the Mississippi River definitely a navigable stream and a dam that it in the exercise of the paramount navigation servitude and the -- and the Government condemned against the railroad company, a long stretch of railroad right away.

And some -- there were four segments in that case that there was some controversy about as to whether it was within under high-water mark in the -- in the bed of the stream and therefore, subject to the -- to the Government's paramount navigation servitude.

And the Government admitted in that case and the rest of it where they made compensation, I do not how much but anyway, they paid compensation for that taking.

And then as to the four, when you reverse it and sent it back, you said, it'd be just a question of fact that any of the easements that were above high-water mark, they were entitled to compensation for the extra riprapping that they had to do in order to keep the -- the waters of the Mississippi River that have been pushed up on the land by this navigation dam offer of the railroad right away.

Justice Charles E. Whittaker: May I ask you, Mr. Ferrell, please?

How could you have damages for the taking of your privilege to flow if you have no legal right to flow?

Mr. Ralph H. Ferrell, Jr.: Well, if you're going to say it is a privilege to flow, then I'd have to agree with you but that's not what we had.

We had a privilege to overflow riparian uplands from a navigable stream.

Now, it's true we didn't have a license but our privilege is not pertinent and it was not tied in to the granting of a license.

In fact, you read the grant to -- to the power company, our predecessor entitle and it's not as the Government brief claims and that it was conditional, contingent and so on and so forth that it did -- it doesn't say that at all.

In other words, you had to have two things in this case in order to overflow the land.

You had to have a privilege from the fee owner to flood the fee --

Justice Charles E. Whittaker: You had --

Mr. Ralph H. Ferrell, Jr.: -- owner's land and you also had to have a dam to put the water up there to exercise that right.

Chief Justice Earl Warren: That you did come --

Mr. Ralph H. Ferrell, Jr.: And you had to come to Washington, the Federal Power Commission to get that but we -- if we had put, say, to get a license ahead of the flowage easement, it wouldn't have cost us -- I mean, it wouldn't have had any bearing by getting the license in Washington, we wouldn't have the right to flood.

And the Water Power Act clearly recognizes that -- that interest in land and compensation for damage and interest in land after you get a license while you -- you got to pay for it.

So we say you had to get two things and that's -- that's an important dichotomy there and the -- the Fourth Circuit recognized that on several occasions and -- and really said to the Government, "You don't recognize that right and just because you got to have a license doesn't mean that you -- you have a right to flood the land.

You've got to get it some -- from someone."

And this respondent, the power company had it and you could have gotten it from them but you chose not to and you can't do it out of it and that brings me to this point.

Following it to the logical conclusion, there's a windfall somewhere.

Let's suppose the -- the fee owner in 1925 or in 1942 when they got the deed of correction, got $10,000 for the easement to flood a land, which, of course, is very nominal considering what's happened in this case.

Alright, in 1944, they approved -- Congress approves the Buggs Island project and what happened in this case comes along and they say, "Well, we are not going to -- we're not going to pay you," who owns the -- the easement, "(Inaudible) which you pay $10,000.

We're not going to pay you anything."

All the rights, and -- and paraphrasing what they say now, all the rights are in the fee owner.

And they don't say the fee owner's rights have diminished, they say they increased.

That's what the Government says.

Justice Charles E. Whittaker: Increase?

Mr. Ralph H. Ferrell, Jr.: They say they increase.

Yes, sir.

They said they had the full fee value.

And they say if we pay the $50,000 and this thing wouldn't be up -- be up here, they said if the full fee value.

Now, in that case, she would have been entitled to just compensation and if she had wanted to make the agreement and you have to suppose that to get to the truth whether the thing is really just or not, just compensation with the fact that ours is only a cloud on the title, she'd be entitled to let's say $10,000.

She would have already gotten $10,000 for it.

Justice Charles E. Whittaker: (Voice Overlap) did you know that Mrs. Williams, the fee owner, stands in a very different position than you do who merely held the right to flow for she have all other elements of property in this real estate.

Now then, she curved out a portion of that and gave it to you.

Mr. Ralph H. Ferrell, Jr.: For a consideration.

Justice Charles E. Whittaker: For a consideration, and you bought.

Now, sitting here trying to bring this thing down to prior forms to get the couplet out of my mind, I wonder if these were true that the value should be determined as against the fee owner of this easement.

And then to deduct from it -- I mean, then to assume that it's been assigned to you but I think that failed because you didn't get all she own, isn't that true?

Mr. Ralph H. Ferrell, Jr.: When you --

Justice Charles E. Whittaker: She got only a part, the right to flow.

Mr. Ralph H. Ferrell, Jr.: Well, the Government's condemned only a right to flow and let's -- if your --

Justice Charles E. Whittaker: (Voice Overlap) --

Mr. Ralph H. Ferrell, Jr.: -- case -- let's suppose it just adds up to 321, both of them are coextensive because otherwise, I'll have to dodge your answer because the -- the easement --

Justice Charles E. Whittaker: (Voice Overlap) --

Mr. Ralph H. Ferrell, Jr.: -- rights are not for terminate.

Justice Charles E. Whittaker: -- I'm assuming up -- just 321.

Mr. Ralph H. Ferrell, Jr.: Alright, sir.

Justice Charles E. Whittaker: But now the matters conveyed to you by -- by Mrs. Williams, would that still left true with everything else.

It would be, didn't it?

Mr. Ralph H. Ferrell, Jr.: Yes.

Justice Charles E. Whittaker: So, all the Government can take from you is what you have and that's the right to flow.

Mr. Ralph H. Ferrell, Jr.: That's right.

Justice Charles E. Whittaker: And if you have ever a right to flow, how can you be damaged?

Mr. Ralph H. Ferrell, Jr.: Because I had the legal right and it's a -- an easement and gross and it had value as such.

And all the cases of Brooklyn Terminal case and all -- I can't that say that easement and gross that it wasn't a nuisance value, I had a value before this --

Justice Charles E. Whittaker: But here, you have a special circumstance by virtue of the Twin City case.

And absent -- if, of course, that would be true but this case says the right to flow is in the United States, the right to dam that river.

And you cannot do it because and never can because United States has exercised that privilege.

How then could you claim damages by reason of the taking of your right to flow when you never could have exercised it?

Mr. Ralph H. Ferrell, Jr.: Well, I have a property right and if I have an easement and even though it's an easement of way and I have two easements of way and you come and put a three (Inaudible) well, I haven't got a snip there or let the other man who -- who blocks the way and say, "Oh, that one when he used to you," if -- if the man -- if the easement of way had value.

In other words, it has a transferrable value and -- and to say that well --

Justice Charles E. Whittaker: Did it have after the United States elected to build the dam and (Voice Overlap) --

Mr. Ralph H. Ferrell, Jr.: The market -- the market was closed.

The market was closed.

The only -- the only possible purchaser would have been the United States but we haven't ask that in this market where the purchaser, the United States, that it -- any added -- anything be added because of the -- of the competition of the Government and what you're trying to do here to say that otherwise is to -- is to have the converse of the doctrine in the Miller case.

It is to say that the announcement of the Government's plan destroys property rights and property values without compensation.

Justice Charles E. Whittaker: Well, destroys it.

They're always subject to this exercise of the governmental right.

Mr. Ralph H. Ferrell, Jr.: Well, now -- well, that -- I can't go along with you there.

The -- if it's a water right, Your Honor is exactly right.

If it an interest in land above the bed of the navigable stream, I disagree and say that as long as you got a property interest and a property right above the high-water mark on a navigable stream, you're entitled to compensation --

Justice Charles E. Whittaker: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: -- when it's taken all damage.

Justice Charles E. Whittaker: (Inaudible)

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: That's why I said that I disagree with --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well, let me answer that with two -- in two respects as to extinguish.

I don't think that that -- the announcement of the Government construct in the Buggs Island Dam --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: -- extinguish a property right.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Extinguish a market, sir.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well, it extinguishes availability.

Now, the question in this case is does it extinguish the money value?

And I don't think -- well, it --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Oh, it could -- could have been a negotiated matter and they negotiated.

They applied a lot of flowage easements over the use of properties in this area.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Yes.

But then, the -- the Government can't destroy the market.

And then from that say, there are being no market, you and I are entitled to any compensation, the other -- the other basis for -- for determining fair value or just compensation under the Fifth Amendment.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: That's right.

They -- they destroyed the market but then the stock and standard instruction in the case is that you disregard the -- the demands of the Government although the Government must have it and that -- and so on with a hypothetical willing buyer and the willing seller and you just say that you -- in other words it is a -- it is a hypothetical situation.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well then, you would -- you would say what would it cost someone, supposing a buyer not the Government, would pay for a flowage easement as of the date of taking of flowage to this nature.

And of course then we get back to what Mr. Morton admits is the -- is the true rule.

It's -- it's the difference in the value of the servient tenement.

In other words, we get back to -- we didn't have a right to -- to grow temper, we didn't have a right to form it but the value of our easement, which was curved out of it, is -- is measured by the difference in value of the servient State before and after the taking.

And -- and that's what was applied on the second inquiry in this case.

Justice Charles E. Whittaker: Now, now that would be true as between the Government and Mrs. Williams.

But you only get a part of that of first thing.

And for --

Mr. Ralph H. Ferrell, Jr.: Yes, but --

Justice Charles E. Whittaker: -- therefore, you're limited, are you not, to the value of what you own that the Government took?

Mr. Ralph H. Ferrell, Jr.: As a part of that, the thing -- you still don't apply different rules of -- of valuation.

In other words, it would be utterly wrong if we say no double standard of valuation if in this in rem proceeding against this land has no -- in rem proceeding against this land with no regard to the division and ownerships, then you pay the difference in the value before and after the taking.

Alright.

And in the Dunnington case and in the Docket case, the Court said, and Mr. Justice Holmes incidentally wrote Docket -- no, he barely wrote -- no he didn't write Dunnington but he wrote Docket case, he said to you -- if you get a new title and -- and the -- the Government pays for what it took and then it's no business of the Government as to how you divide it later on.

He's in one of the cases because that's for the District Court to decide as to the apportionment of it.

The Government is nowhere solved, they've been treated exactly right and that's what was done in this particular case.

Alright.

Justice Charles E. Whittaker: (Inaudible) -- values before and after has a built in severance damage factor --

Mr. Ralph H. Ferrell, Jr.: That's right.

Justice Charles E. Whittaker: -- to it.

And that would be a correct rule as applied to the owner of the fee who is entitled to the severance damage.

There is a different question of what was (Inaudible) immediately before as oppose to immediately act of the taking.

But here where you do not have anything but a right to flow, aren't you limited by different rules simply to the value of that property?

Mr. Ralph H. Ferrell, Jr.: Well, no.

And if -- if that were true, then we would have to apply the standard first used in the District Court which was that we limited it to the 1540 acres and we said you have the flowage easement and its perpetual permanent and that's really the equivalent of the fee value.

And you didn't have any damages to the residue and that determination.

Justice Hugo L. Black: Suppose the lady --

Mr. Ralph H. Ferrell, Jr.: Well, the Government said that's the wrong way to do it.

Justice Hugo L. Black: -- suppose the lady had sold to the Government, why would you be there?

Mr. Ralph H. Ferrell, Jr.: The lady had sold to the Government.

She did in some of these cases and we divide it --

Justice Hugo L. Black: Sold the fee -- sold a fee simple title, why would you be?

Mr. Ralph H. Ferrell, Jr.: We would -- we would have divided with this particular lady as we did in some cases, we had divided the compensation.

We have apportionment them by agreement of the concession.

Justice Hugo L. Black: Would the -- would the Government have taken it subject to your right to overflow the property?

Mr. Ralph H. Ferrell, Jr.: I doubt it.

According to Exhibit H in this case, they said that they weren't going to take it unless VEPCO joined in the conveyance.

Justice Hugo L. Black: I'm not talking about what they would have done.

I'm talking about legally speaking.

Mr. Ralph H. Ferrell, Jr.: Well, legally speaking, if they take and they still wouldn't have that right --

Justice Hugo L. Black: (Voice Overlap) --

Mr. Ralph H. Ferrell, Jr.: --because the fee owner didn't have the right.

Justice Hugo L. Black: -- take it, suppose they had bought it and paid her what she wanted for the land, what you have is a right to overflow the land which she no longer owned.

Why would you be there?

Mr. Ralph H. Ferrell, Jr.: Well, we would -- had a case under the Tucker Act, I think, in the Court of Claims.

Justice Hugo L. Black: Against whom?

Mr. Ralph H. Ferrell, Jr.: Against the United States Government for the damage --

Justice Hugo L. Black: For buying the land?

Mr. Ralph H. Ferrell, Jr.: Sir.

Justice Hugo L. Black: Buying the land?

Mr. Ralph H. Ferrell, Jr.: No, sir.

Because you see, by the purchaser of the fee, it was subject -- that's an underlying fee.

She didn't have the full fee value.

And she didn't have all of the rights that Government needed and that was -- that's why they didn't take -- didn't exercise option contract in this case.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Because there would have been an extinguishment or taking or damage of easement.

Yes.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well, in that case though --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: No, but in the --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: No, but in the Boston case, they got $5000 for that easement of way.

And it was a -- the difference between the $5000 and the $60,000 had to do with the negative easements of light and air.

And you see -- so when you apply that analogy, the Boston case, as I view it, is --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Sir?

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well, you see -- no, no.

You see, they're taking the -- their way in and out in the Boston case that they had taken the -- the access and light easements of access light and air.

Then I think it would have been an entirely different decision in the case.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: No, sir.

I don't think so.

I --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: No.

I -- I -- it's been sometime.

I have checked it in the last week but my recollection was that the -- the $55,000 had to do with the -- with the other easements but it is true as Mr. Augelle (ph) said that and as Mr. Morton has said.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Yes, because, you see, they made this contract and really what the Court held is that you can't -- you can't treat the condemnor that way.

You can't, by agreement, enhance his damages.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Yes.

But they were trying -- they were trying by agreement to get this undefined fee rule and say that there wasn't any real difference between the sum of interest and the -- and the full fee value, you see.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well, I thought it turned on the fact that the city was taking a private way and making it a public street --

Justice Felix Frankfurter: Yes.

Mr. Ralph H. Ferrell, Jr.: -- but if it had been a railroad and oh, there's -- it's got --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well, if it -- I would think so because you got access light and air and that's the worst place to be on railroad for easements of that kind and as the Roberts case and New York shows.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: No.

Aren't you saying, sir, that they are taking a private flowage easement and tying it in to a public flowage easement?

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well, in that -- in that case then you've got to pay fair value for the -- for that private flowage easements that's been taken in that case and the best way to do is to -- is to determine it on the before and after value of the servient land rather than measuring it as they would have it here by a use factor and that's never done.

You get into how valuable is the use of it and -- and we'll be right in the middle of Twin City's case.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: And of course, that's where they want to force us.

They want to push us into the water --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: -- and we want to stay up on the dry land.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: But I --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: But you've lost --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: -- but the owners lost and not what the --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: And not --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Yes, but it meant something to us.

And -- and one just stop in college either.

And -- and we have had a transferrable value.

And it was an easement in gross and we --we ask up until 1944.

I had a chance to do it and it was being traded around for fair value.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: Well, it had a transferrable value to -- to the United States and I hate to think it wouldn't because then if the United States had negotiated with us and paid us part, we would -- we would have been getting a whole lot value and I there say that, on the state of the record in this case, the United States could have gotten that easement from us and assuming as we did over here that only had the flow up to contour 321, it could have gotten everything it wanted from us and it -- it didn't even have to say (Inaudible) to Mrs. Williams.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: No.

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: It rendered inoperable, yes, sir, but it didn't render it -- it didn't render it valueless or worthless.

It was --

Justice Felix Frankfurter: (Inaudible)

Mr. Ralph H. Ferrell, Jr.: -- still there.

And -- and once you decide though that compensation must be paid, I submit that really, under the Docket and the Dunnington case, it's really none of the Government's business on this record as to how the -- how the award was split between the fee owner and the -- and the power company that own the flowage easement.

And -- and the cases, I think, bear out that statement with all due deference to -- to their position.

And what they're really trying to do in this case is to pamper the rights of Mrs. Williams even though they don't stand in her shoes and I'm not claiming under it.

And to diminish and -- and run down the rights that we have that were perfectly valid, they were perfectly -- they were existing and which would have been very -- would have done the job as far as contour 321 is concerned if they had obtained them by negotiation or purchase from us.

Justice Felix Frankfurter: (Inaudible)

Justice Potter Stewart: Mr. Ferrell, may I ask you a question to be sure that I understand your position.

You told us assuming that all the Government needed was up to 321 assuming that both your records and their plan -- that plan taking this up to 321 forgetting about the difference between 321 and 330.

You've told us that they didn't need to deal with Mrs. Williams at all that they could simply and should simply have dealt with you and acquired property right you already have, that is the easement that had been conveyed to you.

Well, I wouldn't -- though -- there'd be damage to the residue per property owned by her --

Mr. Ralph H. Ferrell, Jr.: Not -- well --

Justice Potter Stewart: -- in that case?

Mr. Ralph H. Ferrell, Jr.: -- through the exercise of the easement, yes.

But in ours that I've quoted from page 608, they -- there was a full release from damage.

Justice Potter Stewart: That had been granted to you.

Mr. Ralph H. Ferrell, Jr.: So --

Justice Potter Stewart: I see.

Mr. Ralph H. Ferrell, Jr.: -- so in other words, our easement included not only for the land after 321 but for the damages to the residue which would result from the exercise of that easement.

Justice Potter Stewart: And that had also been granted to you in this case.

Mr. Ralph H. Ferrell, Jr.: And that had also been granted to us so I say that when you are valuing what we had, you don't just value part of it, you value the whole bundle of rights which included the damages to the residue so the similarity is right there.

Justice William J. Brennan: Well, Mr. Ferrell, what -- what is it -- what's your idea that the Government settled with Mrs. Williams before?

Mr. Ralph H. Ferrell, Jr.: The evidence in this case by her own attorney and his letters is that she offered and said, "If you will take the flowage easement, VEPCO's got all the right below 321."

She used the word "318" or the attorney did because he didn't know any part at the time.

Justice William J. Brennan: So stipulated later.

Mr. Ralph H. Ferrell, Jr.: And if you will do that, I will be glad to convey to you what I have additional rights for $1.

Justice William J. Brennan: What else does she have?

Mr. Ralph H. Ferrell, Jr.: She has -- own -- own that little chart of mine.

She had the land unencumbered fee title to the land you see that's shaded which is --

Justice William J. Brennan: That is -- that is the ridge so-called?

Mr. Ralph H. Ferrell, Jr.: Yes, sir.

And that's 300 acres in there.

And the reason it doesn't appear to be 300 acres is because it's on a block and this is a contour map.

Justice William J. Brennan: Well, is that what you think, the Government obtained from her and that's all --

Mr. Ralph H. Ferrell, Jr.: That's right.

Justice William J. Brennan: -- the settlement?

Mr. Ralph H. Ferrell, Jr.: That's right.

Because in -- well, they haven't obtained anything really from her.

They obtained everything they've got in this condemnation proceeding.

The option agreement was never settled.

And she was a party to the agreement and she's still a party to the agreement, a party to the condemnation case, I'm sorry.

And a final order hadn't been entered as to her.

She's still sitting in -- down there waiting for her dollar.

Justice Potter Stewart: Has she offered this --all this land for $1 to the Government?

Mr. Ralph H. Ferrell, Jr.: The additional rights to the Government for $1, the additional flowage rights.

Justice Potter Stewart: And that's all it is, this nine feet over this long --

Mr. Ralph H. Ferrell, Jr.: That's right.

Justice Potter Stewart: (Voice Overlap) --

Mr. Ralph H. Ferrell, Jr.: The 300 acres, that nine feet between the contour line.

It -- because she said she didn't want the fee taken.

And incidentally, the Government, while they say that was a policy to take the fee, they hadn't made that determination.

They haven't clearly shows that -- that it was not attacked.

In other words, the Government didn't reduced what it was planning to take because of this -- of this offer.

There's no additional compensation.

The Fourth Circuit asked the Government numerous times where was the additional compensation and -- and they never could point it out and the -- and the opinion of the Fourth Circuit which has gone into this thing time and time again and I submit, we have consistently taken the position.

We haven't asked for and we haven't been awarded water power value.

This is a garden variety condemnation case.

The Government has been required to pay.

And the way it was submitted to the Commissioners only what it would had to pay in -- in any event.

And it -- it ought to end right there.

But if you go any further into the matter, the apportionment of that award, which is on a sailboat, in our judgment, is to be property made to Virginia Electric & Power Company for his outstanding property interest existing as of the date of the taking in which was always there and which we hadn't abandoned and which was not contingent upon our getting of license to build the dam.

Justice Potter Stewart: Let me ask you this.

What --

Mr. Ralph H. Ferrell, Jr.: In other words, is -- the dichotomy there and the Fourth Circuit says you've got to have both in order to exercise this use over the land.

But because you got control or you don't have a license, it doesn't mean that you don't have to pay to get -- to get the right to overflow the land.

And when you get the right to overflow the land, the conveyance to Virginia Electric & Power Company, in effect, just transferred it that part of the compensation, if we said it was all coextensive both in rights and in the area, VEPCO would be entitled to it.

Excuse me.

Justice Potter Stewart: I think you answered that question.

Thank you.

Mr. Ralph H. Ferrell, Jr.: Thank you very much.

Chief Justice Earl Warren: Mr. Morton.

Rebuttal of Morton

Mr. Morton: Mr. Chief Justice.

There's been considerable said about our getting nothing under the options.

I'd like to address myself to that first.

In my opening statement, I thought I have taken some character or paraphrase accurately the exhibit which was the first letter from the attorney from Mrs. Williams.

You'll find it on page record 158 in which he says precisely what I quoted it for, that here was an estate of 7000 acres, let's not take the time to read the whole thing now, but I do address your attention to it, estate of 7000 acres, and he knew that we were going to demand title to the land within the 334th contour.

And he says this would very badly cut up their private game preserve.

And wouldn't we please just take a flowage easement.

Now, I can tell you because I deal with such matters all the time that I could settle literally hundreds and hundreds and thousands of flowage easement cases if I could get a policy which would involve the taking of only flowage easements instead of a fee title.

People are delighted to have private lakes.

Now, as to the question of whether a decision had been made.

A decision as to the particular land, indeed, had not been made at the inception of this correspondence April 1950.

And now I'm looking at page 159, the replying letter of Mr. Heasley (ph) -- I mean to Mr. Heasley (ph) by the project engineer.

A decision hadn't been made because the -- this, as I said in my opening statement, was in the highest reaches of the project area.

And up in those reaches, they sometimes do take flowage easements and sometimes they don't.

Individual decision had not been made.

But the engineer here or rather the project engineer very plainly says in the last paragraph of his letter, replying to the first letter, "It has been the policy to acquire a fee simple interest in all lands within the reservoir area.

However, your position in this matter is much appreciated and your letter is being forward to the district office for consideration and reply."

Now, that runs through quite of course of history and you'll find the exhibits here in the following and there was indeed a colonel of the Corps of Engineers that I couldn't have possibly expected to know about the Chandler-Dunbar case or some of the others who did make the statement at one time that -- "Well, we'll have to close this up with you, Mrs. Williams, and then we'll have to deal with VEPCO for whatever we have to acquire from it."

But when they came to writing contracts, I would refer you to the option at -- which begin at page 58.

There was an implication that we have got nothing under this.

I thought two that I had covered that in my opening statement.

Running through the record here -- well, I would hesitate to consume the time to do it during an open session.

The only words that do not track here in the option agreement with the estate taken in the complaint and declaration of taking is that where at one point here, the words "permanently" or "intermittently" were omitted in the option agreement but were put in the others.

Now, what difference does that make?

As long as it is a whole complete right perpetual to overflow as maybe necessary as a result of the construction maintenance and operation of the Buggs Island Dam and Reservoir.

Now, all you need to look at is the 2681-acre case decided about the same time as Twin City in the Fourth Circuit involving this very same project in which the Fourth Circuit said very plainly.

Well, permanently or intermittently this -- this is an important element of valuation but the whole thing is keyed to what is necessary to operate the project.

Therefore, when words of this kind are used in a taking, what the Government gets, it is entitled to prove by evidence offered in the case of what the requirements of the project are.

And then if later takes anymore, of course, it has to pay for that something that it takes more.

Now --

Justice Potter Stewart: Mr. Morton, what if --

Mr. Morton: Yes.

Justice Potter Stewart: -- instead of acquiring this for the purposes of a power -- water power project which the Federal Government had wanted the same property to build a federal building on it, build an army camp, it would have to compensate the -- the respondent, is it not?

Mr. Morton: Well, I think you're pointing out to the difference between the exercise here of the commerce power which is the key to this case.

Justice Potter Stewart: And what?

Between the commerce power and what?

Mr. Morton: And the power of eminent domain for any ordinary federal purpose separated from the full exercise of the Commerce Clause within the meaning of the Twin City case.

Now, if I may deal with -- oh, I -- I want to deal with this option a moment more.

What did Mrs. Williams give under the option? Everything is described here precisely the same as it is in the declaration of taking and in the complaint.

And then she says, "Reserving however to the vendor," that's her, "and her assigns, all such rights and privileges as maybe used and enjoyed without interfering with or abridging the estate rights and interest to be conveyed to the United States in the above described premises subject only," this is record 63, "to the following rights outstanding in 3rd persons namely," then a paragraph begins.

So far, this is a printed form in the original."

Subject to such water, flowage, riparian and other rights, if any, which the Virginia Electric & Power Company has in or on the above described lands."

Now, there is also, as I pointed out in my opening, another provision in the option which gave the Government the right to perfect its interest as against Mrs. Williams by either of two methods, by taking a deed which she agreed to give or by filing a condemnation if for any reason it wasn't satisfied with the deed situation.

In this case, we filed the condemnation, exercising the privilege under this option.

Although it isn't mentioned in the brief, I would -- I think the name of the case is the old Albrecht case which says that an option is then used as the contractual method as a stipulation of settlement to determine the compensation within the framework of the condemnation case.

Now, there's been something said here about a suppose differentiation between a case which rest wholly as Chandler-Dunbar did within the bed of the navigable river and something that lies up above high-water mark.

But I would point out that this is exactly the situation that you dealt with in Twin City.

And if there's any doubt about it, I would like to read this paragraph or at least a part of it from your Twin City decision.

This is at the bottom of 225 over to the top of 226 of 350 U.S."

It is argued, however, that the special water rights value should be awarded to owners of this land since it lies not in the bed of the river nor below high-water but above and beyond the ordinary high-water mark."

An effort is made by this argument to establish that this private land is not burdened with the Government's servitude.

The flaw in that reasoning is that the landowner here seeks the value in the flow of the stream a value that inheres in the Government servitude and one that under our decisions the Government can grant or withhold as it chooses.

It is no answer to say that payment is sought only for the location value of the fast lands.

That special occasion value is due to the flow of the stream.

And if the United States were required to pay the judgments below, it would be compensating the landowner for the increment of value added to the fast lands if the flow of the stream were taken into account.

The Twin City is square on the notes.

So I would summarize very quickly in this way.

There's been something said here about our -- suppose we could have gone out and dealt with VEPCO alone and ignored Mrs. Williams, oh, I submit that this is a complete impossibility.

What did she have?

Just in plain real property terms.

Suppose that this Falkland Estate is X in a mathematical formula, what she had at one time was X minus VEPCO which was a right to flood as against her but which could not, under any circumstance, be exercised by VEPCO without a permit or a license rather from the Federal Power Commission under the Water Power Act.

And at the time of the approval of this project by Congress in 1944 or at least by the time Congress became irrevocably committed to the building of the project through appropriation and the construction which was in 1946, it began, at least by then, any possibility of there being any value in flowage rights against which the United States are on top of which, if you please, the United States had superimposed its constitutional power under the Commerce Clause and I make no apology for the Constitution of the United States.

At that moment, the VEPCO's interest disappeared into thin air.

Justice John M. Harlan: If the --

Mr. Morton: It is -- pardon me.

Justice John M. Harlan: Excuse me.

I didn't mean to interrupt you.

Mr. Morton: Quite alright.

Justice John M. Harlan: If you -- if the Government had made no deal to Mrs. Williams, would you have a quarrel with their position?

Mr. Morton: If we had made no deal --

Justice John M. Harlan: You made no deal.

Mr. Morton: With Mrs. Williams at all?

Justice John M. Harlan: Yes.

Mr. Morton: We would have tried this case with Mrs. Williams but in that event --

Justice John M. Harlan: No, but granted the proceeding, the in rem proceedings you brought here.

Mr. Morton: Then it would be a matter of distribution.

I think the rule which would, in that case, control, since you have a hypothesis --

Justice John M. Harlan: Yes.

Mr. Morton: -- I'll answer it with something it isn't in the brief.

There's another very good old principle of real property law for which I can give you at least a 22-page memorandum which I have here in support.

That when an easement which is created for a specified purpose ceases to be accomplishable, I mean the purpose ceases to be accomplishable, the easement terminates, it ceases to exist, so getting back to X minus VEPCO, at that moment, there was no more minus VEPCO and it became X.

May it please the Court.

Justice John M. Harlan: Well, though would mean that as far as distribution is concern, before --

Mr. Morton: Well, this was the hypothesis.

Justice John M. Harlan: (Inaudible)

Mr. Morton: That's right.

Justice John M. Harlan: -- (Voice Overlap) --

Mr. Morton: We would most certainly have to deal with Mrs. Williams.

That's my point.

Justice Felix Frankfurter: Would you mind getting (Inaudible)

Mr. Morton: She conveyed a right.

This is, of course, through a whole bunch of documents but her predecessors conveyed a right which would be good as against her --

Justice Felix Frankfurter: I don't know --

Mr. Morton: -- taking no one else --

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: It is an interest in property and I don't think we need, for the purpose of this case, to define it because whatever it is, that is subordinate to the superior --

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: Oh, I think there maybe quite a little question about it.

You might say that it is an easement of pertinent in the sense that a flowage easement is necessarily a pertinent to a dam site.

Or if they say, as they do, that it is an easement in gross --

Justice Felix Frankfurter: (Inaudible)

Justice William O. Douglas: She could have put in a dam and floated logs down the river, I suppose.

Mr. Morton: Yes, I suppose she could.

Justice Charles E. Whittaker: Well, of what she gave in this (Inaudible) -- it is justified to this question that she gave to VEPCO the right to flow.

Mr. Morton: She gave --

Justice Charles E. Whittaker: (Voice Overlap) --

Mr. Morton: -- that's right.

She gave --

Justice Charles E. Whittaker: (Voice Overlap) --

Mr. Morton: -- she gave the right to flow.

I'm sure that's the correct answer.

But this was a right, Mr. Justice, which was good only as against her.

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: Well, it gave -- it depends on the side of the thing if you look at it, I suppose.

The one point --

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: -- the one point of view I suppose you're meaning from the indemnity standpoint.

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: They acquired under this easement.

Justice Felix Frankfurter: Did -- did they go beyond though (Inaudible)

Mr. Morton: Certainly.

Justice Felix Frankfurter: Did she give -- did she give to VEPCO (Inaudible)

Mr. Morton: Oh, no.

If -- if -- I miss the point of your inquiry.

Justice Potter Stewart: Well, she didn't give it.

She sold it.

Mr. Morton: She -- she couldn't --

Justice Potter Stewart: (Voice Overlap) --

Mr. Morton: -- possibly do that because this, I think, would run into a direct collision with the Anti-Assignment Act if it is in terms of -- of transferring some right to receive money.

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: I think she sold them the right as far as those two parties were concerned for VEPCO the flow water on her lands.

She did that.

All I'm saying is that this is a completely empty right as against --

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: -- the United States Commerce Clause.

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: And if Mrs. Williams were in Court, we would be thankful for this.

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: The difference is that we settled the thing.

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: It was.

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: That was part of this X that I have referred to.

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: Yes, I think that --

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: No, nothing in the latter to prevent her from selling to VEPCO or FEPCO or to anybody else --

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: -- a right as far as she is concerned.

Justice Felix Frankfurter: In other words, the assessment of value (Inaudible)

Mr. Morton: The difference being, of course, that VEPCO, in the one case, could only build as a licensee of the United States in Section 10, I think it is 10 (d) of the Water Power Act then -- no, it isn't 10 (d), it's 10 (c).

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: Involves --

Justice Felix Frankfurter: (Inaudible)

Mr. Morton: -- involves VEPCO paying damages in any event if it is a licensee.

Now, the plain difference is the difference between the United States building a project itself and the licensee building project.

Justice Charles E. Whittaker: Mr. Morton, did I --

Mr. Morton: Yes.

Justice Charles E. Whittaker: -- correctly understand you to say on to Mr. Justice Frankfurter that the admissive movement (Inaudible) by aiming as an element of her dam, compensation for the right to flow would favor?

Mr. Morton: Compensation for the right to flow, we would favor any element of agricultural forestry or other values inherent in the land but not water power values.

If I had that fuzzed up, I'm terribly sorry.

I certainly can't see how a flowage easement entitles to anyone to agricultural values or trees or the right to raise animals.

Chief Justice Earl Warren: Very Well.