1. Upon this appeal under § 25 of the Tennessee Valley Authority
Act, the Circuit Court or Appeals complied with the requirement
that it dispose of the matter "upon the record, without regard to
the awards or findings theretofore made," and fix the value. P.
319 U. S.
2. In a proceeding to condemn lands under § 25 of the Tennessee
Valley Authority Act, the burden of establishing their value rests
upon the respondent landowner. P. 319 U. S.
3. In a proceeding under § 25 of the Tennessee Valley Authority
Act, the owner sought to establish a special value for the lands
Page 319 U. S. 267
upon the ground of their special adaptability, when united with
other tracts owned by him and with tracts owned by strangers, for
use in forming a multiple-dam hydroelectric plant which he
(1) That, in order to permit consideration of such special
adaptability, there must be a reasonable probability of the
condemned tract's being thus combined with other tract in the near
future; otherwise the special use would be too remote and
speculative to have any legitimate effect upon the valuation. P.
319 U. S.
(2) The landowner's privilege to use the power of eminent domain
-- granted by the State in which the lands were situate, but not
exercised, and revocable by the State -- may not be considered in
determining whether there is a reasonable probability that the
lands condemned could be so united with other tracts into the
projected power plant in the reasonably near future. Without the
power to condemn, the chances of incorporating lands as
contemplated by the project are too remote and slim to have any
legitimate effect on the valuation. P. 319 U. S.
4. In condemning lands for a federal project, the United States
is not required to make compensation for the loss of a business
opportunity, dependent upon their owner's privilege to use the
state power of eminent domain in acquiring other lands, where such
privilege has not been exercised and is revocable by the State, and
where the State need not make such compensation were it the sponsor
of the project and the taker of the lands in question. P.
319 U. S.
118 F.2d 79 reversed.
Certiorari, 314 U.S. 594, to review a judgment of the Circuit
Court of Appeals which affirmed with modifications a judgment of
the District Court, 33 F. Supp. 519, in a condemnation case.
Page 319 U. S. 268
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
This case arises out of condemnation by the United States on
behalf of the Tennessee Valley Authority of about 12,000 acres of
land in North Carolina lying in and along the Hiwassee River, a
major tributary of the Tennessee. The land involved in the case was
owned by the respondent Southern States Power Company, a North
Carolina corporation, and by its wholly owned subsidiary, the Union
Power Company, a Georgia corporation. Since condemnation, the
Southern States Power Company has assigned its property interest
and rights arising out of these proceedings to the respondent W. V.
N. Powelson, its sole stockholder. For convenience, Powelson and
Southern States will be referred to interchangeably as
On January 28, 1936, when the original declaration of taking was
filed and these proceedings began, Southern States and Union Power
owned a small hydroelectric generating plant on the Nottely River,
a tributary of the Hiwassee. This was known as the Murphy plant. It
had a distribution system which supplied the town of Murphy, North
Carolina, and surrounding territory. These companies also owned
about 22,000 acres of land on both sides of the Hiwassee and
Nottely Rivers. These included lands at four dam sites which are
known as the Powelson (site of the Hiwassee dam), Appalachia,
Murphy, and Nottely sites, a large part of the land required for
the Powelson and Appalachia projects, and some of the land required
for the Murphy and Nottely projects. Powelson, an experienced
hydroelectric engineer, began as early as 1913 and continued until
1931 to explore, survey, and acquire these lands and to develop and
promote a plan for constructing an integrated four-dam
hydroelectric plant on these rivers and at these sites. The actual
Page 319 U. S. 269
of the lands involved in this case, as distinguished from the
total investment in them, [Footnote
] was $277,821.56.
Southern States is successor to Carolina-Tennessee Power Co.,
created by a special act of the North Carolina legislature
] in 1909.
Carolina-Tennessee was granted broad powers, and was authorized by
the state to take by eminent domain riparian lands and water rights
along any nonnavigable stream of North Carolina. [Footnote 3
The lands condemned by the Government in the present proceedings
constitute a part of the site of its Hiwassee dam, a
multiple-purpose project constructed by the Tennessee Valley
Authority on the Hiwassee River as part of the development of the
Tennessee River system for hydroelectric power production,
navigation, and flood control. See
Report to the Congress
on the Unified Development
Page 319 U. S. 270
of the Tennessee River System, Tennessee Valley Authority,
March, 1936, pp. 18-20, 96, 99. The dam itself is situated on land
acquired from the respondent and known as the "Powelson site." It
was stipulated that the Hiwassee River is not navigable at the site
of the Hiwassee dam or in any part of its course through
respondent's land. [Footnote
The property condemned includes the Murphy dam and hydroelectric
plant on the Nottely River and about 12,000 acres of land along the
Hiwassee River in North Carolina. Of these, some 2,000 acres have
been cleared and cultivated. The remaining area is rough and
mountainous, consisting in large part of rock surface, mountain
peaks, and gorges. Much of the land was inaccessible at the time of
the taking, there being practically no highways thereon, although
there were some cartways.
The condemnation proceedings were conducted pursuant to § 25 of
the Tennessee Valley Authority Act of 1933, c. 32, 48 Stat. 58, 70,
16 U.S.C. § 831x. [Footnote 5
Under the procedure therein specially prescribed for condemnations
on behalf of the Tennessee Valley Authority, the District Court
appointed three commissioners to take testimony and to determine
the value of the property. The Government contends that the
property was worth from $95,000 to $165,000. Respondent sought to
establish a value of $7,500,000. Respondent's valuation was based
on the theory that the property condemned, together with other
property owned by respondent, could be united with numerous other
tracts owned by strangers for the construction of an elaborate
four-dam hydroelectric project. Only one of the four projected dams
was to be located on the
Page 319 U. S. 271
property condemned, viz.,
at the site of the Hiwassee
dam, which, taken alone, was not considered commercially feasible
for power development. The Commission found that the land condemned
was suitable for use as the site of a hydroelectric power plant;
that such use furnished the basis for its greatest inherent value,
and that it had a value of $1,437,000, [Footnote 6
] though its cost was only $277,821.56. The
Commission awarded $253,000 in addition as severance damages in
respect of lands not condemned but remaining in the ownership of
Southern States and Union Power.
Both parties sought review of the award before the three-judge
District Court for which § 25 of the Tennessee Valley Authority Act
makes provision. The District Court reduced the value of the land
condemned to.$976,289.40, and severance damages to $211,791.23,
$100,000 of which was for the Murphy distribution system. Interest
was added from the filing of the initial declarations of taking.
United States v. Southern States Power Co.,
33 F. Supp.
519. The Circuit Court of Appeals excluded severance damages for
the taking of the Murphy plant on the Nottely River, and also
excluded the $18,907.02 awarded as severance damages with respect
to land held by Union Power unless, within thirty days after the
mandate was filed in the District Court, that corporation should be
made a party so as to become bound by the judgment. With these
modifications, it affirmed the judgment of the District Court.
United States v. Powelson,
118 F.2d 79. The case is here
on a petition for writ of certiorari which we granted because of
the public importance of the issues raised.
I. A preliminary question relates to the scope of review by the
Circuit Court of Appeals under § 25 of the Act.
Page 319 U. S. 272
That section provides for the appointment of commissioners, who
"to examine into the value of the lands sought to be condemned,
to conduct hearings and receive evidence, and generally to take
such appropriate steps as may be proper for the determination of
of the lands. The commissioners are required to report such
value and make an award. Review of the action of the commissioners
is by a three-judge district court, which
"shall pass de novo
upon the proceedings had before the
commissioners, may view the property, and may take additional
evidence. Upon such hearings, the said judges shall file their own
award, fixing therein the value of the property sought to be
condemned, regardless of the award previously made by the said
There is an appeal from that court to the circuit court of
"shall, upon the hearing on said appeal, dispose of the same
upon the record without regard to the awards or findings
theretofore made by the commissioners or the district judges, and
such circuit court of appeals shall thereupon fix the value of the
said property sought to be condemned."
It is contended that the Circuit Court of Appeals did not
perform the functions which § 25 placed upon it. That court stated
that § 25 permitted it to consider the findings under review "in
the light of the record." 118 F.2d page 83. It gave weight to the
opportunity of the commissioners and judges who took the testimony
to see and hear the witnesses. But, while it adverted to those
circumstances and findings, and modified and "affirmed" the
judgment of the three-judge court, we cannot say that it did not
perform the functions which Congress gave it under § 25.
The purpose of § 25 was to free the Circuit Court of Appeals
from the strictures commonly applicable to its review of disputed
questions of fact. Under § 25, it does not sit as a "court of
errors." United States v. Reynolds,
115 F.2d 294, 296. Its
duty is to dispose of the matter
Page 319 U. S. 273
"on the record, without regard to the awards or findings
theretofore made," and to fix the value. But it need not blind
itself to the special advantages of the tribunals below in
evaluating the evidence. A trial de novo
with the fresh
taking of evidence is not required. An independent revaluation of
the property condemned is contemplated. And that requirement was
II. Sec. 25 of the Act authorizes awards covering "the value of
the lands sought to be condemned." The storm center of this
controversy is whether water power value may be included in
It is argued on behalf of petitioner that, even though the
Hiwassee River is nonnavigable throughout this part of its course,
compensation for the loss of any supposed power value is no more
permissible than in case of a navigable stream. It is pointed out
that United States v. Chandler-Dunbar Co., 229 U. S.
, held that there is "no private property in the flow"
of a navigable stream. United States v. Appalachian Power
Co., 311 U. S. 377
311 U. S. 427
And it is contended that, although the Hiwassee River is
nonnavigable at the points in question, the flow at those places
has such a direct and immediate effect upon the navigable portion
of the river farther downstream as to give the United States the
same plenary control over both the navigable and nonnavigable
portions of the river (United States v. Appalachian Power Co.,
supra; Oklahoma v. Atkinson Co., 313 U.
), thereby bringing into play the rule of the
case. Cf. United States v. Kelly,
243 U. S. 316
do not stop to consider that question. For, if we assume, without
deciding, that rights in the "flow" of a nonnavigable stream
created by local law are property for which the United States must
pay compensation when it condemns the lands of the riparian owner,
the water power value which respondent sought to establish cannot
The burden of establishing the value of the lands sought to be
condemned was on respondent. Ralph v. Hazen,
Page 319 U. S. 274
93 F.2d 68, 70; Welch v. Tennessee Valley Authority,
108 F.2d 95, 101. Respondent endeavored to carry that burden by
introducing evidence that the property condemned had a fair market
value of $7,500,000. As we have said, the theory was that the lands
condemned, together with other property owned by respondent, could
be united with several hundred other tracts owned by strangers, and
that a four-dam hydroelectric project could be constructed upon all
those lands. [Footnote 7
] As we
have noted, only one of the four hypothetical dams was to be
located on the lands condemned. That was at the Hiwassee dam site,
which, considered alone, was not contended to be profitable for
power development. Although respondent owned or controlled some of
the other lands necessary for the four-dam project, about half of
them were in adverse hands. It was practically conceded that the
acquisition of all the property necessary for the four-dam
development could not, in all reasonable probability, be
accomplished without resort to the power of eminent domain. It was
insisted, however, that, since that power had been conferred by
North Carolina, the case should be viewed as if respondent owned
every foot of land required for the hypothetical project.
Respondent proceeded from that assumption to other assumptions: an
estimated cost of $30,000,000 for the four-dam project; an annual
output of 512,500,000 kwh of so-called reserve, or superprimary, or
"Saluda-type" energy; [Footnote
] a production cost of electricity
Page 319 U. S. 275
of 3.75 mills per kwh, and a selling price of 6.34 mills per kwh
for all the energy produced. On the basis of those assumptions, an
assumed net return was computed. That assumed net return was
capitalized at a given rate and a portion of that sum,
$7,500,000, was allocated to the lands in question.
Petitioner challenged most of those assumptions. It introduced
evidence that the cost of the four-dam project would be higher than
respondent assumed; that the total annual fixed charges of the
project would exceed those estimated; that the production of energy
would be less, the cost per kwh would be greater, and the sale
price per kwh would be lower than respondent estimated. The
Commissioners, the District Court, and the Circuit Court of Appeals
found, on the basis of respondent's estimates of the four-dam
project, that the lands had a water power value, and that their
availability for power purposes constituted the chief element of
their value and the basis for the highest value in the property.
All agreed, however, that respondent's estimate of $7,500,000 was
too high. And, as we have noted, the District Court and the Circuit
Court of Appeals concluded that the fair market value of the lands
for power purposes was some $976,000.
An owner of lands sought to be condemned is entitled to their
"market value fairly determined." United States v. Miller,
317 U. S. 369
317 U. S. 374
That value may reflect not only the use to which the property is
presently devoted, but also that use to which it may be readily
converted. Boom Co. v. Patterson, 98 U. S.
; McCandless v. United States, 298 U.
. In that connection, the value may be determined
in light of the special or higher use of the land when combined
with other parcels; it need not be measured merely by the use to
which the land is or can be put as a separate tract. McGovern
v. New York, 229 U. S. 363
But, in order for that special adaptability to be considered, there
must be a reasonable probability of the lands in question being
combined with other tracts
Page 319 U. S. 276
for that purpose in the reasonably near future. Olson v.
United States, 292 U. S. 246
292 U. S. 255
In absence of such a showing, the chance of their being united for
that special use is regarded "as too remote and speculative to have
any legitimate effect upon the valuation." McGovern v. New
p. 229 U. S.
Respondent seeks to avoid that difficulty by reliance on the
power of eminent domain granted by North Carolina. The argument is
that the means of effecting a combination of lands is not important
-- it is whether the land owner had a reasonable chance of doing
it. This Court, however, held in the McGovern
in estimating that chance or probability, "the power of effecting
the change by eminent domain must be left out." 229 U.S., p.
229 U. S. 372
And that view was followed in New York v. Sage,
239 U. S. 57
239 U. S. 61
Respondent attempts to distinguish those cases on the ground that,
since the landowners in question did not have the power of eminent
domain, they were merely denied recovery for a value dependent upon
a combination which they could not reasonably expect to effect. But
the thrust of the rule is deeper. If the owner's claim against the
sovereign were increased by reason of the power of eminent domain,
then the very existence of the right of condemnation would confer
on the owner "a value for which he must be paid when the right is
exercised." Hale, Value to the Taker in Condemnation Cases, 31
Col.Rev. 1, 13.
The fact that the owner also has a power of eminent domain does
not alter the situation. See Tacoma v. Nisqually Power
57 Wash. 420, 433, 107 P. 199. The grant of the power of
eminent domain is a mere revocable privilege for which a state
cannot be required to make compensation. Adirondack Ry. Co. v.
New York, 176 U. S. 335
Ramapo Water Co. v. New York, 236 U.
; Western Union Tel. Co. v. Louisville &
Nashville R. Co., 258 U. S. 13
revocation of that privilege is but a recall
Page 319 U. S. 277
of a part of its sovereign power for which no price may be
exacted. North Carolina follows that view. Yadkin River Power
Co. v. Whitney Co.,
150 N.C. 31, 63 S.E. 188. Accordingly, it
seems clear that, if North Carolina, rather than the United States,
were constructing this public project and condemning the identical
lands for the purpose, respondent need not be compensated for the
loss of an opportunity to develop a power project through
utilization of the right to condemn. In case this was North
Carolina's project, respondent's chances of combining these
numerous tracts into one ownership for a power project would be
measured without reference to the power of eminent domain. The
inclusion of eminent domain would be but an indirect method of
making North Carolina pay for the destruction or impairment of the
privilege. [Footnote 9
the private company's privilege to use the power of eminent domain
need not be reflected in the valuation if the property were taken
by the state is indicated by those few cases which seem to have
reached the point. See Tacoma v. Nisqually Power Co.,
That result is the necessary import of this Court's
ruling in Sears v. Akron, 246 U.
. Suit was brought in that case by the trustee of
the property of an Ohio corporation to enjoin the City of Akron
from constructing a dam and reservoir on the Cuyahoga River. The
corporation had received from the state of Ohio the right to
construct and operate a power system on the river. And it was also
given by the state
Page 319 U. S. 278
the power of eminent domain so that it might acquire the
property necessary for the project. In that case, the land
acquisition program of the private company apparently was not as
far advanced as was respondent's in the present case. But the
difference in degree of development is unimportant, since, in each
case, the private project was still inchoate, and had not
progressed beyond the promotional phase when the public project was
launched. This Court held that, although the project constructed by
the City of Akron might imperil or wholly defeat the company's
project, there was no impairment of contract, and no taking or
appropriation of the company's property. In the latter connection,
Mr. Justice Brandeis, speaking for the Court, stated that it was
"that Ohio retained the power as against one of its creatures,
to revoke any such right to appropriate property until it had been
acted upon by acquiring the property authorized to be taken."
246 U.S. p. 246 U. S. 250
It was accordingly held that the city was free, as against the
"to appropriate any of the land or any of the water rights which
might otherwise have come under the development described in its
certificate of incorporation."
pp. 246 U. S.
This is a case of first impression. No precedent has been
advanced which suggests that a different measure of compensation
should be required where the United States, rather than the state,
is the taker of the property for a public project. Nor has any
reason been suggested why, as a matter of principle or policy,
there should be a different measure of compensation in such a case.
It has long been assumed that, in other respects, the national
government was under "no greater limitation" by reason of the Fifth
Amendment than were the states by virtue of the Fourteenth.
Hamilton v. Kentucky Distilleries Co., 251 U.
, 251 U. S. 156
That view is implicit in condemnation cases where the amount of
just compensation required
Page 319 U. S. 279
by the Fifth Amendment is in issue. See, for example, Omnia
Co. v. United States, 261 U. S. 502
261 U. S.
-509. We do not see why the protection given to
"private property" under the Fifth Amendment imposes upon the
United States a duty to provide a higher measure of compensation
for these lands than would be imposed by the Fourteenth Amendment
upon the state if it were the taker. [Footnote 10
] Nor has any reason based on considerations
of equity and fair dealing been advanced for justifying a higher
measure of compensation in the instant case because the lands are
being taken for a public project sponsored by the United States,
rather than by North Carolina. The warrant or authority for putting
the United States at such a disadvantage is not apparent.
The right of the United States to exercise the power of eminent
domain is "complete in itself," and "can neither be enlarged nor
diminished by a State." Kohl v. United States,
91 U. S. 367
91 U. S. 374
Though the meaning of "property," as used in § 25 of the Act and in
the Fifth Amendment, is a federal question, it will normally obtain
its content by reference to local law. Yet, when we look to local
law in the present case, we find no indication that, for purposes
of condemnation proceedings instituted by North Carolina, the value
of the lands in question would be increased by reason of
respondent's privilege to use the power of eminent domain. So far
as constitutional compulsions are concerned, it is plain, as we
have noted, that that factor need not be included in case the state
were the condemner. Moreover, the result in the present case is not
different if we assume with the District Court (33 F.Supp. p. 522)
that respondent's "prior right" under North Carolina law
"constituted a valuable right which is destroyed by this
condemnation proceeding." It does
Page 319 U. S. 280
not follow that that "prior right" was "private property,"
within the meaning of the Fifth Amendment, which was taken by the
The law of eminent domain is fashioned out of the conflict
between the people's interest in public projects and the principle
of indemnity to the landowner. We recently stated in United
States v. Miller, supra,
p. 317 U. S. 375
that "Courts have had to adopt working rules in order to do
substantial justice in eminent domain proceedings." Equity and fair
dealing do not require the payment by the United States to the
landowner of the amount of a valuation of his lands based on the
existence of his privilege to use the power of eminent domain. It
is "private property" which the Fifth Amendment declares shall not
be taken for public use without just compensation. The power of
eminent domain can hardly be said to fall in that category. It is
not a personal privilege; it is a special authority impressed with
a public character, and to be utilized for a public end. [Footnote 11
] An award based on the
value of that privilege would be an appropriation of public
authority to a wholly private end. The denial of such an award to
the landowner does no injustice. It is true that respondent's
possession of the power of eminent domain was, in part, the basis
of an opportunity to unite the present lands with others into a
power project. But he is not being deprived of values which result
from his expenditures or activities. The fruits of the exercise of
Page 319 U. S. 281
of eminent domain are not being appropriated. And there is no
basis for raising an estoppel against the United States, as there
was thought to be in Monongahela Navigation Co. v. United
States, 148 U. S. 312
See Omnia Co. v. United States, supra,
pp. 261 U. S.
-514. The landowner is, to be sure, deprived of a
preferential advantage which was an incidental attribute of the
public authority with which the state endowed him. But that
advantage had no higher dignity than a promise of a gratuity. It
had not been availed of to develop an existing and going enterprise
which the United States appropriated. Respondent's project was only
a speculative venture -- a promotional scheme wholly in
Thus, we conclude that respondent had no interest
under his unexercised power of eminent domain which rises to the
estate of "private property" within the meaning of the Fifth
Amendment. Cf. 55 U. S. Delaware
& R. Canal Co.,
14 How. 80, 55 U. S. 94
This public project, to be sure, has frustrated respondent's
plan for the exploitation of its power of eminent domain. We may
assume that that privilege was a thing of value, and that this
frustration of the plan means a loss to respondent. But our denial
of compensation for that loss does not make this an exceptional
case in the law of eminent domain. There are numerous business
losses which result from condemnation of properties but which are
not compensable under the Fifth Amendment. The point is well
illustrated by two other lines of cases in this field. It is a well
settled rule that, while it is the owner's loss, not the taker's
gain, which is the measure of compensation for the property taken
(United States v. Miller, supra; United States v.
Chandler-Dunbar Co., supra,
p. 229 U. S. 81
Boston Chamber of Commerce v. Boston, 217 U.
, 217 U. S.
), not all losses suffered by the owner are
compensable under the Fifth Amendment. In absence of a
Page 319 U. S. 282
statutory mandate (United States v. Miller, supra,
317 U. S. 376
the sovereign must pay only for what it takes, not for
opportunities which the owner may lose. See
Valuation Under Eminent Domain (1936) § 71, § 73. On the one hand
are such cases as Monongahela Navigation Co. v. United
where it was held that the United States had
appropriated a going enterprise to its own ends, and must make
compensation accordingly. But it is well settled in this Court
"[f]rustration and appropriation are essentially different things."
Omnia Co. v. United States, supra,
p. 261 U. S. 513
Thus, in Mitchell v. United States, 267 U.
, the owner was denied compensation for the
destruction of his business which resulted from the taking of his
land for a public project even though the business could not be
reestablished elsewhere. This Court, after noting that "settled
rules of law" precluded
Page 319 U. S. 283
a consideration of "consequential damages" for losses of a
business or its destruction, stated:
"No recovery therefor can be had now as for a taking of the
business. There is no finding as a fact that the government took
the business, or that what it did was intended as a taking. If the
business was destroyed, the destruction was an unintended incident
of the taking of land."
267 U.S. p. 267 U. S. 345
That .which is not "private property" within the meaning of the
Fifth Amendment likewise may be a thing of value which is destroyed
or impaired by the taking of lands by the United States. But, like
the business destroyed but not "taken" in the Mitchell
case, it need not be reflected in the award due the landowner
unless Congress so provides.
It is no answer to say that the evidence as to the profits from
respondent's hypothetical four-dam project was introduced not as
the basis of an award for loss of profits or business, but only as
a basis for estimating the true water power value of the property.
The computation of those profits assumes the very existence of the
projected enterprise which the power of eminent domain alone could
make possible and which these condemnations frustrated. We repeat
that an allowance of any such value would entail a payment for the
loss of a business prospect based on an unexercised power of
eminent domain. As we have said, no reason based on precedent or
principle appears why respondent's privilege to use the power of
eminent domain should be treated as "private property" within the
meaning of the Fifth Amendment, so as to give rise to a private
claim against the public treasury. Nor is there any indication that
Congress adopted in this regard a more liberalized standard of
compensation than would be provided under the Fifth Amendment.
It is suggested that this result would mean that, in
condemnation proceedings, the United States need not pay the value
of the property at the time of the taking if the
Page 319 U. S. 284
state where the property is located might destroy or diminish
that value through an appropriate exercise of its police power. It
is manifest that such is not the case. A state may, of course,
destroy or diminish values by an assertion of its police power
without the necessity of making compensation for the loss.
Hamilton v. Kentucky Distilleries Co., supra; Block v.
Hirsch, 256 U. S. 135
256 U. S. 156
While such a change will not be presumed (United States v.
River Rouge Imp. Co., 269 U. S. 411
the possibility or probability of such action, so far as it affects
present values, is a proper subject for consideration in valuing
property for purposes of a condemnation award. See
Reichelderfer v. Quinn, 287 U. S. 315
287 U. S. 323
We do not disturb those general principles. The United States no
more than a state can be excused from paying just compensation
measured by the value of the property at the time of the taking
merely because it could destroy that value by appropriate
legislation or regulation. But we have here a unique situation. The
power of eminent domain which respondent seeks to have reflected in
the valuation is largely unexercised, and need not be reflected in
the measure of compensation if the state which conferred the
privilege were the taker of the lands. If these numerous tracts had
already been united by respondent through the power of eminent
domain into a power project, distinct problems would be posed, as
Sears v. Akron, supra,
indicates. Then, the United States
would be acquiring a business, not simply frustrating a promotional
scheme. We merely hold that the United States, in absence of a
specific statutory requirement, need not make compensation for the
loss of a business opportunity based on the unexercised privilege
to use the power of eminent domain where the state need not do so
were it the sponsor of the public project and the taker of the
lands. The constitutional obligation of the United States to make
compensation does not extend so far.
Page 319 U. S. 285
It is true that this result will reduce an award which the
Circuit Court of Appeals noted was approximately equal to
respondent's total investment in the lands acquired for its
project, plus 3% interest. But the Fifth Amendment allows the owner
only the fair market value of his property; it does not guarantee
him a return of his investment. Minnesota Rate Cases,
230 U. S. 352
230 U. S. 454
Brooks-Scanlon Corp. v. United States, 265 U.
, 265 U. S. 123
Olson v. United States, supra,
p. 292 U. S.
The result is that respondent's privilege to use the power of
eminent domain may not be considered in determining whether there
is a reasonable probability of the lands in question being combined
with other tracts into a power project in the reasonably near
future. If the power of eminent domain be left out of account, the
chances of making the combination appear to be too remote and slim
"to have any legitimate effect upon the valuation." McGovern v.
New York, supra,
p. 229 U. S. 372
Respondent therefore has not established the basis for proof of the
water power value which was asserted.
We hold only that profits, attributable to the enterprise which
respondent hoped to launch, are inadmissible as evidence of the
value of the lands which were taken. Respondent is, of course,
entitled to the market value of the property fairly determined. And
that value should be found in accordance with the established rules
(United States v. Miller, supra
) -- uninfluenced, so far
as practicable, by the circumstance that he whose lands are
condemned has the power of eminent domain. We do not reach the
question, much discussed at the bar and in the briefs, whether
evidence of the earnings of respondent's hypothetical four-dam
project should have been excluded for the further reason that it
was too speculative. [Footnote
Page 319 U. S. 286
The judgment is reversed, and the cause is remanded to the
Circuit Court of Appeals for proceedings in conformity with this
The sum of $1,061,942.53 had been invested by respondent through
1935 in the entire 22,000 acres of land owned by it. Of this sum,
Powelson personally contributed $586,196.21. The total expenditure
included $188,271.86 for lands not condemned, $73,412.68 for taxes,
$82,480.81 for New York office expense, $94,074.71 for legal
expenses, $14,321.68 for traveling expenses, $64,358.46 for
construction of transmission lines for and operation of the Murphy
plant, $194,487.50 for interest and amortization as respects the
bonds on the Murphy plant, and expenditures for surveying,
engineering studies, advertising, and furniture.
N.C.Priv.L.1909, c. 76, p. 185.
A rival, the Hiawassee River Power Company, organized under the
general laws of the State, proceeded to acquire lands and rights by
contract, deed, and condemnation, and threatened to construct a
hydroelectric plant on the Hiwassee River which would interfere
with the development projected by Carolina-Tennessee.
Carolina-Tennessee engaged in a long litigation to establish its
rights as against its rival. That litigation established the prior
and dominant right of respondent's predecessor to develop the water
power in this territory, and sustained its claim to condemn the
land and water rights of the Hiawassee River Power Company.
Carolina-Tennessee Power Co. v. Hiawassee River Power Co.,
171 N.C. 248, 88 S.E. 349; 175 N.C. 668, 96 S.E. 99; 186 N.C. 179,
119 S.E. 213; 188 N.C. 128, 123 S.E. 312.
Tennessee River and Tributaries, H.Doc No. 328,
71st Cong., 2d Sess., p. 216.
46 Stat. 1421, 40 U.S.C. § 258a; § 4(h)(i) of
the Tennessee Valley Authority Act of 1933, 48 Stat. 58-61, 16
U.S.C. § 831c(h)(i).
The Commission also awarded $110,000 for the Murphy plant, which
sum had been deposited by the United States when it filed its
declaration of taking.
While respondent owned most of the lands necessary for the
Appalachia reservoir, about half of those not yet acquired lay in
the state of Tennessee, in which, so far as appears, it had no
power of eminent domain. And, according to respondent's estimates
of the lands necessary for the other three projects, it had yet to
acquire 22% of the Powelson reservoir, 73% of the Nottely, and 96%
of the Murphy.
The theory was that the projected reservoirs would store water
during the wet season, and that the power would be sold neighboring
utilities during the dry season. The name given that type of power
is said to derive from the fact that Lexington Water Power Co. sold
the output of its Saluda plant to Duke Power Co. on a similar
We do not have here the question of a market value affected by
market prices which may reflect to some extent the power to
condemn. As to that situation, this Court stated in Olson v.
United States, supra,
p. 292 U. S.
"It is common knowledge that public service corporations and
others having that power [eminent domain] frequently are actual or
potential competitors not only for tracts held in single ownership,
but also for rights of way, locations, sites, and other areas
requiring the union of numerous parcels held by different owners.
And, to the extent that probable demand by prospective purchasers
or condemnors affects market value, it is to be taken into
Cf. Chicago, B. & Q. R. Co. v. Chicago,
166 U. S. 226
166 U. S. 233
166 U. S. 241
arising under the Fourteenth Amendment.
See Pollard's Lessee v.
3 How. 212, 44 U. S. 223
Boom Co. v. Patterson, 98 U. S. 403
98 U. S. 406
United States v. Jones, 109 U. S. 513
109 U. S.
-519; Spencer v. Railroad Co.,
137 N.C. 107,
121-122, 49 S.E. 96; Jeffress v. Greenville,
154 N.C. 490,
493, 494, 70 S.E. 919; Wissler v. Yadkin River Power Co.,
158 N.C. 465, 74 S.E. 460. In the latter case, the Supreme Court of
North Carolina stated (pp. 466-467):
"This power of eminent domain is conferred upon corporations
affected with public use not so much for the benefit of the
corporations themselves, but for the use and benefit of the people
And see Long Island Water Supply Co. v. Brooklyn,
166 U. S. 685
Cincinnati v. Louisville & Nashville R. Co.,
223 U. S. 390
Pennsylvania Hospital v. Philadelphia, 245 U. S.
; Brooks-Scanlon Corp. v. United States,
265 U. S. 106
De Laval Steam Turbine Co. v. United States, 284 U. S.
. In the Monongahela
case, the United States
condemned a lock and dam constructed at the invitation of the
United States and operated by the owner under a franchise from
Pennsylvania. This Court held that the special facts of the case
required that the franchise or going concern value of the
enterprise be included in the compensation payable to the owner. It
was said, in the first place, that the franchise granted to the
company by Pennsylvania was a valuable property right, since it was
a contract under the rule of Dartmouth College v.
4 Wheat. 518, and protected against
impairment by the state. Secondly, the Court noted that the United
States did more than destroy the business; it appropriated the
enterprise for public purposes. Moreover, as was stated in
Omnia Co. v. United States, supra,
pp. 261 U. S.
-514, the Monongahela
case "rested primarily
upon the doctrine of estoppel, as this Court has in several cases
since pointed out."
See Bothwell v. United States, 254 U.
; Joslin Co. v. Providence, 262 U.
, 262 U. S. 675
Atwater & Co. v. United States, 275 U.
; United States v. Carver, 278 U.
; Mullen Benevolent Corp. v. United
States, 290 U. S. 89
See Sharp v. United States, 191 U.
, 191 U. S.
-350; San Diego L. & T. Co. v. Neale,
Cal. 50, 58-63, 25 P. 977; Matter of City of New York,
App.Div. 272, 275, 103 N.Y.S. 441; New York Central R. Co. v.
234 N.Y. 208, 218, 137 N.E. 305; Sparkill Realty
Corp. v. State,
268 N.Y. 192, 197 N.E. 192; Burt v.
117 Mass. 302, 306; Hamilton v. Pittsburg,
B. & L.E. R. Co.,
190 Pa. 51, 57, 42 A. 369. Cf.
United Gas Co. v. Railroad Commission, 278 U.
, 278 U. S.
MR. JUSTICE JACKSON, dissenting.
THE CHIEF JUSTICE, MR. JUSTICE ROBERTS, MR. JUSTICE FRANKFURTER,
and I understand the Court to hold that property physically
adaptable to power purposes, taken by the Federal Government for
power purposes, among others, is to be valued as worthless for
power purposes as matter of law because its projected development
might be defeated if the State should revoke the power of eminent
domain admittedly possessed by the owner at the time of the taking.
We think it denies proper effect to State law and policy in effect
at the time of taking.
Unless this decision overrules the law as stated by Mr. Justice
Brandeis for a unanimous Court, flowing streams are natural
resources owned and governed by the States, and the rights of their
grantees and of riparian owners are settled by the local law which
is conclusive on us. Port of Seattle v. Oregon & Washington
R. Co., 255 U. S. 56
St. Anthony Falls Water-Power Co. v. St. Paul Water
Comm'rs, 168 U. S. 349
Shively v. Bowlby, 152 U. S. 1
United States v. Oregon, 295 U. S. 1
295 U. S. 6
States have assumed this to be their right and have written into
their laws and constitutions various systems of control and
development deemed suitable to their respective climates,
industries, or economies. [Footnote
Page 319 U. S. 287
The Hiwassee River, therefore, is a resource of the North
Carolina. To obtain the advantage of its latent energy, that State,
by special act of its Legislature, created
Page 319 U. S. 288
a corporation and gave it extensive powers, including the right
of eminent domain. [Footnote 2/2
The corporation acquired, partly by purchase and partly by
condemnation, the dam sites, bed of the stream, riparian lands, and
key properties necessary to the development. The right to acquire
by condemnation any additional lands needed was never repealed or
withdrawn, but, on the other hand, was confirmed by the state
courts in a series of litigations. [Footnote 2/3
] There is no finding or evidence that
forfeiture, repeal, or impairment of these rights has been
considered or threatened by the State or is even remotely probable,
even if legally possible.
Under its paramount powers over navigation, the Federal
Government has elected to take this resource out of the control of
the State and away from the grantee corporation which is subject to
State taxing and regulatory power. This it may do, but only upon
making just compensation. But the Court holds that compensation
must be computed as if the State had refused to grant what it has
granted, or had withdrawn what it has given no indication of
withdrawing. By thus cancelling for the purpose
Page 319 U. S. 289
the power of eminent domain, it holds as matter of law that the
project was not feasible to execute, and that the lands assembled
for power purposes, admittedly physically adaptable to the use and
taken by the Government for that purpose, have no power utilization
value. This seems to us not easily reconciled with the respect due
to local law in a matter of the kind.
Determination of the value of property, particularly as affected
by a prospective use, always involves some element of prophecy and
some estimation of probabilities. No court that we know of has ever
proposed, and we do not propose, to value the power of eminent
domain either separately or as an ingredient of property taken. Its
existence should be considered only for the purpose of determining
the most advantageous probable usefulness of the property as it
affects its value. The legal principles governing the solution of
the fact questions are laid down in Olson v. United
States, 292 U. S. 246
course, any uncertainty or limitation as to the right to condemn
property or evidence of probable impairment, forfeiture, or
withdrawal of it would be weighed with other evidence in arriving
at a judgment as to the feasibility of the project and value of the
property. This Court has said that a possibility of exercise by a
governing body of its power to make changes affecting values is a
proper subject for consideration in fixing values.
Reichelderfer v. Quinn, 287 U. S. 315
287 U. S. 323
But never until now has it held that the law requires present
values to be determined as if legally possible, but factually
improbable, changes have already taken place.
Few properties are so immune from the effects of governmental
authority that some action may not be envisioned which would
devalue them. One of the items taken by the Federal Government in
this case from respondent and out of control of the State was a
going concern, an electric generating plant and distributing
system. Since both parties accepted the award made for
Page 319 U. S. 290
this plant it is no longer an issue, but is illustrative of the
legal problem raised by the Court's opinion. Doubtless, the State
Government had power to make many innovations detrimental to its
success and to impose burdens that would detract from its value,
and perhaps had reserved powers to annul its corporate or special
franchises. But we would not suppose that such hypothetical
destruction of property values could be invoked to minimize
compensation payable on a taking, any more than hypothetical
accretions to its rights through state action, possible but never
accomplished, could increase such compensation. In many cases, the
beneficial use, and hence the value, of abutting property may be
decreased if public authority closes or obstructs a public street
or canal, or changes the grade of a street, or the location of a
county seat. [Footnote 2/4
Page 319 U. S. 291
But, in all such cases, the compensation payable should be the
value of the property at the time of taking, allowing for any
influence that these contingencies might exert, which would depend
upon their probability.
No previous decision of this Court supports or authorizes
disregard of a presently existing state right of eminent domain in
a federal taking of property. In McGovern v. New York,
229 U. S. 363
New York v. Sage, 239 U. S. 57
condemnation was by an agency of the State, and the condemnees did
not have, and showed no probability of obtaining, such power from
Even less relevant to the question now before us is Sears v.
Akron, 246 U. S. 242
was not a condemnation case at all, but a suit in equity to enjoin
the City from construction of a dam and reservoir and diversion of
river water. The City did not propose to take any property of the
company through which plaintiff as a mortgage creditor derived any
rights he asserted. In fact, the company did not own any property
included in the project, although, shortly before commencement of
the suit, but after the City's development was practically
completed, it acquired two small parcels some distance below the
City's dam. But the company's charter gave it a right of eminent
domain and, although it had taken no step to do so, it claimed the
right to expropriate the same property the City was taking. It
sought to enjoin the City upon the ground that its unexercised
right to take this property was an indefeasible property right
which was being defeated and rendered valueless because the City
was ahead of it in preempting properties which the company might
want to acquire under its power. The State of Ohio had retained
power to "revoke any such right to appropriate property until it
had been acted upon by acquiring the property authorized to be
taken." 246 U.S. at 246 U. S. 250
The State, of course, had revoked the power to the extent that it
had authorized the City, its own instrumentality, to take the
property. But Justice
Page 319 U. S. 292
Brandeis pointed out that
"Nor are we called upon to determine to what extent the
commencement of the acquisition of needed property in preparation
for the power development, or even actual commencement of
construction, would have vested in the company the right to
complete the development."
The decision is now relied upon to establish the
point it expressly reserved. Moreover, the Ohio company had tried
to use its power of condemnation, and Ohio courts had held its
charter did not authorize it to take lands essential to its
project. Cuyahoga River Power Co. v. Northern Realty Co.,
244 U. S. 300
the case now before us, the North Carolina courts had held the
power given by that State to this company was complete and prior to
every other at the very location involved here. [Footnote 2/5
These cases do not decide what would have been respondent's
rights if North Carolina, rather than the United States, had
instituted the present condemnation proceedings, thereby expressing
her unwillingness to have the respondent carry the project through
to completion. They are wholly inapposite to the question we are
called upon to decide, which is whether North Carolina's expressed
and undoubted willingness that the respondent should do so, and, to
that end, should exercise her sovereign power of eminent domain,
may be considered along with all other facts bearing upon the
question of the prospects of completion.
The Government and the Court have taken a contrary position to
the one now announced when the shoe was on the other foot. In
United States v. River Rouge Co., 269 U.
, the Government sought to deduct from the value
of property condemned the benefits conferred by the improvement
upon the severed property. The owner denied that these benefits
should be considered because his enjoyment of them would be
terminable by the Government
Page 319 U. S. 293
at any time. The Court sustained credit for the benefits,
pointing out that "there was nothing in the evidence indicating any
probability that the Government would at any time abrogate or
curtail this right in any respect." 269 U.S. at 269 U. S.
We think the same rule should apply against, as for, the
Government, and that the property in question was entitled to the
benefits at the time being extended by State authority in the
absence of evidence of probability that they would be abrogated or
curtailed. We do not think that, because the power of eminent
domain may have been revocable by the State, it follows as matter
of law that it must be treated as nonexistent, and we dissent from
a reversal based on such grounds.
Typical provisions from state constitutions are:
California, Article XIV, Section 3:
". . . Riparian rights in a stream or water course attach to,
but to no more than so much of the flow thereof as may be required
or used consistently with this section, for the purposes for which
such lands are, or may be made adaptable, in view of such
reasonable and beneficial uses; provided, however, that nothing
herein contained shall be construed as depriving any riparian owner
of the reasonable use of water of the stream to which his land is
riparian under reasonable methods of diversion and use, or of
depriving any appropriator of water to which he is lawfully
entitled. . . ."
Colorado, Article XVI, Section 6:
"The right to divert the unappropriated waters of any natural
stream to beneficial uses shall never be denied. Priority of
appropriation shall give the better right as between those using
the water for the same purpose; but when the waters of any natural
stream are not sufficient for the service of all those desiring the
use of the same, those using the water for domestic purposes shall
have the preference over those claiming for any other purpose, and
those using the water for agricultural purposes shall have
preference over those using the same for manufacturing
North Dakota, Article XVII, Section 210:
"All flowing streams and natural water courses shall forever
remain the property of the state for mining, irrigating and
Rhode Island, Article I, Section 17:
"The people shall continue to enjoy and freely exercise all the
rights of fishery, and the privileges of the shore, to which they
have been heretofore entitled under the charter and usages of this
state. But no new right is intended to be granted, nor any existing
right impaired, by this declaration."
Utah, Article XVII, Section 1:
"All existing rights to the use of any of the waters in this
State for any useful or beneficial purpose are hereby recognized
Washington, Article XVII, Section 1
"The State of Washington asserts its ownership to the beds and
shores of all navigable waters in the state up to and including the
line of ordinary high tide in waters where the tide ebbs and flows,
and up to and including the line of ordinary high water within the
banks of all navigable rivers and lakes: Provided, that this
section shall not be construed so as to debar any person from
asserting his claim to vested rights in the courts of the
Article XXI, Section 1:
"The use of the waters of this state for irrigation, mining, and
manufacturing purposes shall be deemed a public use."
Wisconsin, Article IX, Section 1:
"The state shall have concurrent jurisdiction on all rivers and
lakes bordering on this state so far as such rivers or lakes shall
form a common boundary to the state and any other state or
territory now or hereafter to be formed, and bounded by the same,
and the river Mississippi and the navigable waters leading into the
Mississippi and St.Lawrence, and the carrying places between the
same, shall be common highways and forever free, as well to the
inhabitants of the state as to the citizens of the United States,
without any tax, impost or duty therefor."
See also Kaukauna Water Power Co. v. Green Bay Canal
Co., 142 U. S. 254
142 U. S. 272
cf. International Paper Co. v. United States, 282 U.
Private Laws of North Carolina, 1909, c. 76, p. 185.
Carolina-Tennessee Power Co. v. Hiawassee River Power
171 N.C. 248, 88 S.E. 349; 175 N.C. 668, 96 S.E. 99; 186
N.C. 179, 119 S.E. 213; 188 N.C. 128, 123 S.E. 312; Hiawassee
River Power Co. v. Carolina-Tennessee Power Co., 252 U.
; 267 U. S. 267
examples and citation of cases in Reichelderfer
v. Quinn, supra,
at 287 U. S.
The validity of the principle adopted by the majority opinion
may be tested against hypothetical cases such as the following:
owns a dock projecting into a navigable stream in
The Federal Government may destroy it or require
its removal without payment of compensation (United States v.
Chicago, M., St. P. & P. R. Co., 312 U.
), but it does not appear likely that it will do
so, and the dock is a commercially valuable property. S
acquires the dock by condemnation, and seeks to avoid payment by
relying upon the power of the Federal Government to destroy its
owns a distillery in State S. S
acquires it by condemnation, and resists payment by asserting the
existence of the Federal Government's power to enact a prohibition
law, and thereby destroy or diminish the value of the distillery
without the payment of compensation. Hamilton v. Kentucky
Distilleries Co., 251 U. S. 146
owns an option upon land owned by State
The option is revocable at the will of S,
revocation seems unlikely, and the option has commercial value. The
Federal Government acquires it by condemnation, but resists payment
by relying upon S
's power of revocation.
These cases can be further complicated by supposing that the
condemnation is not by the sovereign itself, but by a private
corporation vested by it with the power of eminent domain.
fn2/3|>footnote 3, supra.