B-32493, MARCH 10, 1943, 22 COMP. GEN. 877

B-32493, MARCH 10, 1943, 22 COMP. GEN. 877

COMPENSATION FOR VESSELS REQUISITIONED FOR USE UNDER SECTION 902, MERCHANT MARINE ACT OF 1936, AS AMENDED WHERE, UNDER AUTHORITY OF SECTION 902 OF THE MERCHANT MARINE ACT OF 1936, AS AMENDED, THE OWNER OF A VESSEL WAS NOTIFIED THAT THE VESSEL, PREVIOUSLY REQUISITIONED FOR USE, WAS TO BE REQUISITIONED FOR TITLE, THE SIMULTANEOUS PROTEST BY THE OWNER, ACCOMPANIED BY A REQUEST THAT THE REQUISITIONING FOR TITLE BE RECONSIDERED BY THE GOVERNMENT, PRECLUDES THE EXISTENCE OF ANY IMPLIED CONTRACT SUCH AS MIGHT BIND THE GOVERNMENT TO ITS PREVIOUS ACTION OF REQUISITIONING FOR TITLE AND, THUS, RENDER IMPROPER A CONTINUANCE OF THE VESSEL IN A STATUS OF REQUISITIONED FOR USE. WHEN THE GOVERNMENT REQUISITIONS THE USE OF A PRIVATE VESSEL PURSUANT TO SECTION 902 OF THE MERCHANT MARINE ACT OF 1936, AS AMENDED, UNDER A CHARTER RESERVING TO THE GOVERNMENT THE RIGHT TO TAKE TITLE TO THE VESSEL AT A FUTURE DATE SHOULD SUCH ACTION BECOME NECESSARY OR DESIRABLE, THE CHARTER SHOULD CONTAIN A PROVISION THAT, IN THE EVENT SUCH RIGHT IS EXERCISED, THE COMPENSATION OTHERWISE PAYABLE FOR THE VESSEL WILL BE REDUCED IN THE AMOUNT OF THE CHARTER HIRE PREVIOUSLY PAID FOR ITS USE BY THE UNITED STATES. SECTION 902 (A) OF THE MERCHANT MARINE ACT OF 1936, AS AMENDED, RELATING TO THE COMPENSATION TO BE PAID OWNERS OF PRIVATE VESSELS REQUISITIONED FOR USE OR TITLE DURING A NATIONAL EMERGENCY, AND PROVIDING THAT "IN NO CASE SHALL THE VALUE * * * BE DEEMED ENHANCED BY THE CAUSES NECESSITATING THE TAKING OR USE," OPERATES TO PROHIBIT THE PAYMENT OF CHARTER HIRE FOR VESSELS WHICH WERE IN EXISTENCE ON SEPTEMBER 8, 1939--- AND WHICH WERE REQUISITIONED FOR USE THEREAFTER, TO THE EXTENT THAT IT EXCEEDS THE FAIR MARKET VALUE OF THE USE OF SUCH VESSELS ON SAID DATE, PROVIDED SUCH EXCESS BE DETERMINED AS DUE TO THE ECONOMIC CONDITIONS DIRECTLY CAUSED BY THE NATIONAL EMERGENCY. THE COMPENSATION PAYABLE FOR THE USE OF VESSELS REQUISITIONED FOR USE UNDER SECTION 902 OF THE MERCHANT MARINE ACT OF 1936, AS AMENDED, TO WHICH THE USUAL TESTS OF FAIR MARKET VALUE ARE INAPPLICABLE BECAUSE OF THEIR UNIQUE CONSTRUCTION AND METHOD OF OPERATION, MAY BE DETERMINED ON THE BASIS OF ACTUAL EARNINGS OF SUCH VESSELS FOR THE YEAR 1939 WHILE IN THE HANDS OF THE OWNERS, SUBJECT TO ADJUSTMENT FOR ABNORMALITIES IN ACCORDANCE WITH THE FORMULA PRESCRIBED BY SECTION 722 OF THE INTERNAL REVENUE CODE FOR DETERMINING BASE PERIOD EARNINGS IN CONNECTION WITH THE COMPUTATION OF EXCESS-PROFITS TAX, PROVIDED THERE BE ELIMINATED FROM SUCH AMOUNT ANY ELEMENT OF PROFIT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ADMINISTRATOR, WAR SHIPPING ADMINISTRATION, MARCH 10, 1943:

I HAVE YOUR LETTER OF FEBRUARY 12, 1943, AS FOLLOWS:

THE PURPOSE OF THIS LETTER IS TO MAKE INQUIRY AS TO WHETHER OR NOT YOUR OFFICE WOULD HAVE ANY OBJECTION TO THE SETTLEMENT BY THE WAR SHIPPING ADMINISTRATION OF ITS OBLIGATIONS TO SEATRAIN LINES, INC. ARISING OUT OF THE TAKING OF FIVE SEATRAIN VESSELS UNDER THE CIRCUMSTANCES SET FORTH IN THIS LETTER, SUCH SETTLEMENT BEING ALONG THE LINES HEREINAFTER DISCUSSED.

IN THE LATTER PART OF JUNE AND THE EARLY PART OF JULY, 1941, THE MARITIME COMMISSION TOOK OVER FOR USE THE VESSELS SEATRAIN HAVANA AND SEATRAIN NEW YORK, WHICH VESSELS WERE TURNED OVER BY IT TO THE NAVY DEPARTMENT FOR USE AS NAVAL AUXILIARIES. THESE TWO VESSELS WERE NOT FORMALLY REQUISITIONED, BUT IF SATISFACTORY CHARTER ARRANGEMENTS WITH THE OWNER WERE NOT ARRIVED AT THROUGH NEGOTIATIONS, THE VESSELS WERE TO BE TREATED AS HAVING BEEN REQUISITIONED AND THE OBLIGATIONS OF THE GOVERNMENT FOR SUCH USE WERE TO BE SETTLED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 902 OF THE MERCHANT MARINE ACT, 1936, AS AMENDED.

IN FEBRUARY, 1942, THE SEATRAIN TEXAS WAS REQUISITIONED FOR USE AND TURNED OVER TO THE WAR DEPARTMENT FOR MILITARY PURPOSES.

IN MAY, 1942, THE VESSELS SEATRAIN NEW JERSEY AND SEATRAIN NEW ORLEANS WERE REQUISITIONED FOR USE, IN ACCORDANCE WITH THE GENERAL PROGRAM OF THE WAR SHIPPING ADMINISTRATION OF PUTTING INTO EFFECT SUCH REQUISITION FOR SUBSTANTIALLY ALL LARGE VESSELS. THESE TWO VESSELS WERE, FOR SOME MONTHS, OPERATED FOR THE ACCOUNT OF THE WAR SHIPPING ADMINISTRATION IN THE CARRIAGE OF LOADED CARS BETWEEN NEW ORLEANS, LOUISIANA, AND HAVANA, CUBA. ABOUT SEPTEMBER, 1942, THE SEATRAIN NEW JERSEY WAS ALLOCATED TO THE NAVY DEPARTMENT FOR USE AS A NAVAL AUXILIARY AND THE SEATRAIN NEW ORLEANS, ALTHOUGH CONTINUING TO BE OPERATED FOR ACCOUNT OF THE WAR SHIPPING ADMINISTRATION, WAS SHIFTED INTO A SERVICE ESTABLISHED BETWEEN PORT EVERGLADES, FLORIDA AND HAVANA, CUBA.

SHORTLY AFTER THE ACQUISITION OF THE FIRST TWO VESSELS, NEGOTIATIONS WERE ENTERED INTO BETWEEN THE MARITIME COMMISSION AND THE OWNER, WITH A VIEW TO FIXING THE RATE OF HIRE AND OTHER CHARTER TERMS. WHEN THE WAR SHIPPING ADMINISTRATION, PURSUANT TO EXECUTIVE ORDER OF THE PRESIDENT TOOK OVER THE CHARTER AND REQUISITION FUNCTIONS OF THE MARITIME COMMISSION, SUCH NEGOTIATIONS WERE THEREAFTER CONDUCTED BY THE WAR SHIPPING ADMINISTRATION. I DO NOT BELIEVE IT NECESSARY TO DISCUSS IN DETAIL THE COURSE OF THESE NEGOTIATIONS EXCEPT TO SAY THAT THEY DID NOT RESULT IN ARRIVING AT AN AGREEMENT WHICH I COULD APPROVE.

FOLLOWING THE BREAKDOWN OF THE NEGOTIATIONS IN OCTOBER, 1942, THE WAR SHIPPING ADMINISTRATION NOTIFIED THE OWNER ON OCTOBER 6, 1942, THAT THE VESSELS WERE TO BE REQUISITIONED FOR TITLE. THE OWNER PROTESTED AGAINST THIS ACTION ON THE PART OF THE WAR SHIPPING ADMINISTRATION AND REQUESTED ME, FIRST, TO EXAMINE INTO THE QUESTION AS TO WHETHER THERE WAS ANY COMPELLING NECESSITY FOR THE GOVERNMENT TAKING TITLE TO THESE VESSELS RATHER THAN CONTINUING TO EMPLOY THEM ON A CHARTER BASIS, AND, SECONDLY, INDICATING THAT IF REQUISITION FOR TITLE WAS NOT INSISTED UPON, FURTHER NEGOTIATIONS WOULD BE UNDERTAKEN WHICH MIGHT LEAD TO A REDUCTION IN CLAIMS OF THE OWNER FOR HIRE BELOW ITS PREVIOUS DEMANDS.

FOLLOWING RECEIPT OF YOUR LETTER OF NOVEMBER 28, 1942, OUTLINING YOUR VIEWS AS TO THE EMPLOYMENT OF VESSEL VALUES AND RATES OF HIRE AS OF SEPTEMBER 8, 1939, AS A PROPER METHOD OF DETERMINING COMPENSATION UNDER THE PROVISIONS OF SECTION 902 OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, THE WAR SHIPPING ADMINISTRATION AND THE OWNER UNDERTOOK TO EXAMINE INTO THE QUESTION AS TO WHETHER OR NOT, WITHOUT CONCEDING THE FINAL VALIDITY OF YOUR VIEWS, A RATE OF HIRE FOR THE SEATRAIN VESSELS COULD NEVERTHELESS BE ARRIVED AT IN CONCORD WITH YOUR VIEWS. SUCH EXAMINATION SEEMED TO SHOW THAT, ASSUMING THE RESULT OF OPERATIONS FOR THE YEAR 1939 COULD BE ADJUSTED FOR CERTAIN ABNORMALITIES EXISTING IN THAT YEAR, A MUTUALLY SATISFACTORY RATE OF HIRE COULD BE ARRIVED AT WITHIN THE FRAMEWORK OF YOUR COMMUNICATION.

FOLLOWING DISCUSSIONS BETWEEN THE STAFF OF THE WAR SHIPPING ADMINISTRATION AND REPRESENTATIVES OF THE OWNER, OF WHICH YOUR OFFICE WAS KEPT INFORMED, THE FOLLOWING GENERAL PROPOSAL WAS CONDITIONALLY APPROVED BY ME:

1. CHARTER HIRE RATES TO BE DETERMINED ON THE BASIS OF 1939 EARNINGS, CONVERTED TO A 5-SHIP OPERATION AND CORRECTED FOR ANY ABNORMALITIES WHICH COULD BE DEMONSTRATED TO HAVE HAD A SERIOUS EFFECT UPON SUCH EARNINGS;

2. THE CORRECTION OF 1939 EARNINGS FOR ABNORMALITIES SHOULD BE ON THE SAME BASIS AS WOULD BE RECOGNIZED BY THE BUREAU OF INTERNAL REVENUE IF, UNDER APPLICABLE PROVISIONS OF THE INTERNAL REVENUE LAWS, THE YEAR 1939 WAS CONSIDERED AS A BASE YEAR FOR THE PURPOSE OF EXCESS PROFITS TAX COMPUTATION;

3.THE AMOUNT WHICH MIGHT BE DETERMINED BY THE USE OF 1939 EARNINGS, SUBJECT TO ADJUSTMENT TO A 5-SHIP OPERATION AND CORRECTION FOR ABNORMALITIES, AS OUTLINED ABOVE, WAS NOT TO EXCEED THE AMOUNT WHICH WOULD HAVE BEEN PAYABLE UNDER A FORMULA PREVIOUSLY DISCUSSED, WHEREBY SETTLEMENT WAS SUGGESTED THROUGH THE USE OF A BASIC FIGURE REPRESENTING 1941 EARNINGS (AFTER DEPRECIATION AND INTEREST), LESS 25 PERCENT, AND ADDED TO SAID BASIC FIGURE, IN THE CASE OF EACH VESSEL, THE ACTUAL DEPRECIATION AND INTEREST APPLICABLE THERETO. THE BASIC FIGURE UNDER THIS FORMULA WOULD HAVE BEEN, FOR EACH VESSEL, $415,327.83;

4. IT WAS TO BE ASCERTAINED FROM THE WAR DEPARTMENT AND THE NAVY DEPARTMENT WHETHER THEY HAD ANY OBJECTION TO CONTINUING THESE VESSELS ON A CHARTER BASIS RATHER THAN REQUISITION FOR TITLE;

5. SUCH CLEARANCE SHOULD BE OBTAINED FROM THE COMPTROLLER GENERAL AS MIGHT BE CONSIDERED ADVISABLE IN THE LIGHT OF ALL THE CIRCUMSTANCES.

IN VIEW OF THE PREVIOUS CONNECTION OF THE MARITIME COMMISSION WITH THIS MATTER, I SOLICITED AND SECURED THE APPROVAL OF THAT BODY AND ACCORDINGLY INDICATED MY WILLINGNESS TO THE DISPOSITION OF THIS MATTER ALONG THE LINES OF THE ABOVE NUMBERED PARAGRAPHS.

THERE HAS NOW BEEN WORKED OUT BY THE STAFF OF THE WAR SHIPPING ADMINISTRATION, AFTER CONSULTATIONS WITH REPRESENTATIVES OF THE OWNER, A COMPUTATION AS THE PROPER BASIC FIGURE TO BE USED ON THE THEORY THAT THE MATTER BE SETTLED THROUGH THE USE OF 1939 EARNINGS, CONVERTED TO A 5- SHIPOPERATION AND ADJUSTED FOR ABNORMALITIES. A SUMMARY OF THE COMPUTATIONS, WHEREBY SUCH BASIC FIGURE WAS ARRIVED AT, IS APPENDED TO THIS LETTER. IT SHOWS THAT, ON THIS BASIS, THE AMOUNT REPRESENTING THE EARNINGS PER SHIP IS $398,704.56 TO WHICH IS TO BE ADDED, IN ORDER TO OBTAIN THE ANNUAL CHARTER HIRE OF THESE VESSELS, THE ACTUAL DEPRECIATION AND INTEREST CHARGES APPLICABLE THERETO.

IT IS UNDERSTOOD WITH THE OWNER THAT IF THE INTERNAL REVENUE BUREAU SHOULD REVIEW THE ADJUSTMENT FOR ABNORMALITIES, THEN THE HIRE WILL BE ADJUSTED SO AS TO REFLECT ANY CHANGE MADE IN ANY SUCH ALLOWANCE FOR ABNORMALITIES, PROVIDED THAT THE BASIC EARNINGS FIGURE FOR HIRE (NOT INCLUDING DEPRECIATION AND INTEREST) SHALL NOT BE INCREASED ABOVE THE AMOUNT OF $415,327.83. THE OWNER RESERVES AND SHALL HAVE THE RIGHT AND OPPORTUNITY TO PRESENT TO THE ADMINISTRATOR REPRESENTATIONS THAT THE ALLOWANCES MADE FOR ABNORMALITIES ARE UNFAIR TO THE OWNER AND THE ADMINISTRATOR AGREES TO MAKE ANY CORRECTIONS WHICH HE MAY FIND FAIRLY DUE.

THE SEATRAIN VESSELS ARE UNIQUE WITH RESPECT TO METHOD OF OPERATION, AND THEIR CONSTRUCTION AND USE INVOLVE PATENTED AND OTHER SPECIAL FEATURES. THE PROPER RATE OF HIRE IS, IN MY OPINION, MOST READILY DETERMINABLE THROUGH THE USE OF ACTUAL EARNING POWER OF THE VESSELS WHILE THEY WERE IN THE HANDS OF THE OWNER.

FURTHERMORE, THE SPECIAL SHORE TERMINALS, INDICATES THAT, AT THE CONCLUSION OF HOSTILITIES, THE USE OF THESE VESSELS BY THE GOVERNMENT IS NOT FEASIBLE, NOR WOULD IT BE FEASIBLE TO DISPOSE OF THEM OTHERWISE THAN TO THE PRESENT OWNER. IT IS TO BE CONCLUDED THEREFORE, THAT UNLESS THE WAR OR NAVY DEPARTMENTS MAKE STRUCTURAL CHANGES THEREIN FAR BEYOND WHAT I UNDERSTAND HAS SO FAR BEEN DONE, SO AS TO MAKE RESTORATION TO THEIR ORIGINAL USE PROHIBITIVELY EXPENSIVE TO THE GOVERNMENT, WE SHOULD CONTINUE TO CHARTER THESE VESSELS RATHER THAN TO ACQUIRE TITLE THERETO. IT IS UNDERSTOOD, OF COURSE, THAT IN THE EVENT OF FUTURE MAJOR STRUCTURAL CHANGES, THE GOVERNMENT STILL RESERVES THE RIGHT TO REQUISITION TITLE AT THAT TIME, AND THE GOVERNMENT'S POSITION IN THIS RESPECT HAS BEEN MADE ENTIRELY PLAIN TO THE OWNER.

I WISH TO POINT OUT THAT TWO OF THE VESSELS WERE NOT COMPLETED UNTIL LATE IN THE YEAR 1940 AND DID NOT GET INTO FULL OPERATION UNTIL 1941. UNDER THESE CIRCUMSTANCES, SETTLEMENT AS TO ALL FIVE VESSELS ON THE BASIS OF 1939 EARNINGS APPEARS TO BE BEYOND THE REQUIREMENTS OF YOUR LETTER AND IS FAVORABLE TO THE GOVERNMENT'S INTERESTS.

WITH REGARD TO THE RESTORATION OF THE VESSELS TO THEIR STATUS AS CHARTERED VESSELS, NO TENDER OF JUST COMPENSATION ON THE BASIS OF ACQUISITION FOR TITLE HAS BEEN MADE. NO ACTION BY THE GOVERNMENT BY WAY OF MAKING STRUCTURAL CHANGES HAS BEEN TAKEN WHICH WOULD NOT HAVE BEEN TAKEN REGARDLESS OF THE STATUS OF THE VESSELS. NOTICE OF REQUISITION FOR TITLE WAS PROMPTLY PROTESTED BY THE OWNER AND SUCH PROTESTS HAVE BEEN UNDER CONSIDERATION BY THE WAR SHIPPING ADMINISTRATION. THEREFORE, NO SUBSTANTIAL OBJECTION EXISTS TO PLACING THE VESSELS ON A USE BASIS. FURTHERMORE, AS INDICATED ABOVE, I DO NOT CONSIDER IT DESIRABLE UNDER PRESENT CIRCUMSTANCES THAT THE UNITED STATES ACQUIRE TITLE TO THESE VESSELS.

SECTION 902 OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, APPEARS TO AUTHORIZE THIS COURSE OF ACTION, INASMUCH AS IT PROVIDES (SUBSECTION C) AS FOLLOWS:

"IF ANY PROPERTY IS TAKEN AND USED UNDER AUTHORITY OF THIS SECTION, BUT THE OWNERSHIP THEREOF IS NOT REQUIRED BY THE UNITED STATES, THE COMMISSION, AT THE TIME OF THE TAKING OR AS SOON THEREAFTER AS THE EXIGENCIES OF THE SITUATION MAY PERMIT, SHALL TRANSMIT TO THE PERSON ENTITLED TO THE POSSESSION OF SUCH PROPERTY A CHARTER * * *.'

IT IS MY VIEW THAT THE GOVERNMENT HAS, UNDER THE STATUTE, A REASONABLE TIME TO DETERMINE WHETHER, IN THE LIGHT OF ALL THE CIRCUMSTANCES, IT SHOULD ACQUIRE THE VESSELS FOR USE OR FOR TITLE, AND THAT THE MERE NOTIFICATION TO AN OWNER OF THE TAKING FOR TITLE IS NOT, IN AND OF ITSELF,CONCLUSIVE ON THE UNITED STATES AS TO THE CHARACTER OF THE TAKING, IF, WITHIN A REASONABLE TIME THEREAFTER, IT APPEARS THAT THE BEST INTERESTS OF THE UNITED STATES WOULD BE SERVED BY THE EMPLOYMENT OF THE VESSEL ON A USE OR CHARTER BASIS.

IN CONCLUSION, I MAY STATE THE PROBLEMS ON WHICH YOUR VIEWS ARE SOLICITED AS FOLLOWS:

1. IS THE ADMINISTRATIVE SETTLEMENT OF CHARTER HIRE FOR THESE VESSELS ALONG THE LINES OUTLINED IN THIS LETTER AND THE APPENDIX HERETO, SUBJECT TO OBJECTION BY YOU IN THE LIGHT OF YOUR GENERAL LETTER OF NOVEMBER 28, 1942?

2. IS THERE ANY OBJECTION ON YOUR PART TO NOT CARRYING OUT THE REQUISITIONING OF THESE VESSELS FOR TITLE AND CONTINUING THEM IN THE STATUS OF VESSELS REQUISITIONED FOR USE AND SUBJECT TO THE RESERVATION OF THE GOVERNMENT'S RIGHT TO REQUISITION THESE VESSELS FOR TITLE IF SUCH COURSE OF ACTION IS AT A LATER DATE CONSIDERED NECESSARY FOR THE PROTECTION OF THE GOVERNMENT IN THE LIGHT OF CIRCUMSTANCES WHICH MAY THEN ARISE?

THE PRESENCE OF LEGAL OBJECTION TO THE PROPOSED ACTION OF YOUR ADMINISTRATION IN REQUISITIONING THESE SEATRAIN VESSELS FOR USE RATHER THAN FOR TITLE UNDOUBTEDLY WOULD RENDER UNNECESSARY CONSIDERATION OF THE PROPRIETY OF THE CHARTER HIRE FOR SUCH VESSELS FIXED UPON THE BASIS SET OUT. HENCE, ATTENTION FIRST WILL BE DIRECTED TO THE PHASE OF THE MATTER COVERED BY YOUR SECOND QUESTION.

SECTION 902 OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, 53 STAT. 1255, 46 U.S.C. 1242, UNDER WHICH THESE VESSELS WERE TAKEN, PROVIDES IN PERTINENT PART AS FOLLOWS:

WHENEVER THE PRESIDENT SHALL PROCLAIM THAT THE SECURITY OF THE NATIONAL DEFENSE MAKES IT ADVISABLE OR DURING ANY NATIONAL EMERGENCY DECLARED BY PROCLAMATION OF THE PRESIDENT, IT SHALL BE LAWFUL FOR THE COMMISSION TO REQUISITION OR PURCHASE ANY VESSEL OR OTHER WATERCRAFT OWNED BY CITIZENS OF THE UNITED STATES, OR UNDER CONSTRUCTION WITHIN THE UNITED STATES, OR FOR ANY PERIOD DURING SUCH EMERGENCY, TO REQUISITION OR CHARTER THE USE OF ANY SUCH PROPERTY. THE TERMINATION OF ANY EMERGENCY SO DECLARED SHALL BE ANNOUNCED BY A FURTHER PROCLAMATION BY THE PRESIDENT. WHEN ANY SUCH PROPERTY OR THE USE THEREOF IS SO REQUISITIONED, THE OWNER THEREOF SHALL BE PAID JUST COMPENSATION FOR THE PROPERTY TAKEN OR FOR THE USE OF SUCH PROPERTY, BUT IN NO CASE SHALL THE VALUE OF THE PROPERTY TAKEN OR USED BE DEEMED ENHANCED BY THE CAUSES NECESSITATING THE TAKING OR USE. IF ANY PROPERTY IS TAKEN AND USED UNDER AUTHORITY OF THIS SECTION, BUT THE OWNERSHIP THEREOF IS NOT REQUIRED BY THE UNITED STATES, SUCH PROPERTY SHALL BE RESTORED TO THE OWNER IN A CONDITION AT LEAST AS GOOD AS WHEN TAKEN, LESS ORDINARY WEAR AND TEAR, OR THE OWNER SHALL BE PAID AN AMOUNT FOR RECONDITIONING SUFFICIENT TO PLACE THE PROPERTY IN SUCH CONDITION. THE OWNER SHALL NOT BE PAID FOR ANY CONSEQUENTIAL DAMAGES ARISING FROM A TAKING OR USE OF PROPERTY UNDER AUTHORITY OF THIS SECTION. * * * * * **

IF ANY PROPERTY IS TAKEN AND USED UNDER AUTHORITY OF THIS SECTION, BUT THE OWNERSHIP THEREOF IS NOT REQUIRED BY THE UNITED STATES, THE COMMISSION, AT THE TIME OF THE TAKING OR AS SOON THEREAFTER AS THE EXIGENCIES OF THE SITUATION MAY PERMIT, SHALL TRANSMIT TO THE PERSON ENTITLED TO THE POSSESSION OF SUCH PROPERTY A CHARTER SETTING FORTH THE TERMS WHICH, IN THE COMMISSION'S JUDGMENT, SHOULD GOVERN THE RELATIONS BETWEEN THE UNITED STATES AND SUCH PERSON AND A STATEMENT OF THE RATE OF HIRE WHICH, IN THE COMMISSION'S JUDGMENT, WILL BE JUST COMPENSATION FOR THE USE OF SUCH PROPERTY AND FOR THE SERVICES REQUIRED UNDER THE TERMS OF SUCH CHARTER. * * * THUS, UNDER SAID SECTION THE WAR SHIPPING ADMINISTRATION (AS SUCCESSOR TO THE UNITED STATES MARITIME COMMISSION UNDER EXECUTIVE ORDER NO. 9054 DATED FEBRUARY 7, 1942), IS AUTHORIZED TO REQUISITION PRIVATE VESSELS DURING CERTAIN PERIODS OF EMERGENCY, EITHER FOR TITLE OR FOR USE. AND, OF COURSE, THE DETERMINATION AS TO WHICH OF THESE ALTERNATIVES WOULD, IN THE CASE OF A PARTICULAR VESSEL OR GROUP OF VESSELS, BE IN THE BEST INTERESTS OF THE UNITED STATES, IS THE RESPONSIBILITY OF THE WAR SHIPPING ADMINISTRATION.

SECTION 902 LEAVES TO FUTURE DEALINGS BETWEEN THE ADMINISTRATION AND THE OWNER THE EXTENT TO WHICH INTEREST IN THE VESSEL IS TO VEST IN THE UNITED STATES. THAT IS TO SAY, THE TAKING ALONE DOES NOT INDICATE THAT TITLE TO THE VESSEL IS REQUIRED BY THE GOVERNMENT. MOREOVER, SUBSECTION (C/--- AS STATED IN YOUR LETTER--- WOULD SEEM TO RESERVE TO THE ADMINISTRATION THE RIGHT SUBSEQUENTLY TO CHARTER THE VESSEL IF AS SOON AFTER THE TAKING "AS THE EXIGENCIES OF THE SITUATION MAY PERMIT" SUCH COURSE APPEARS TO BE THE MOST ADVANTAGEOUS FROM THE STANDPOINT OF THE GOVERNMENT. HENCE, THE PRINCIPAL DOUBT IN THE INSTANT CASE AS TO THE AUTHORITY OF THE ADMINISTRATION TO CHARTER THESE SEATRAIN VESSELS STEMS FROM THE ACTION OF THE ADMINISTRATION IN PREVIOUSLY GIVING NOTICE TO THE OWNER THAT THE TAKING WAS FOR TITLE.

WHEN THE GOVERNMENT APPROPRIATES OR REQUISITIONS PRIVATE PROPERTY UNDER LEGISLATIVE AUTHORITY, THE TAKING GIVES RISE TO AN IMPLIED PROMISE TO PAY JUST COMPENSATION FOR SUCH PROPERTY. UNITED STATES V. GREAT FALLS MANUFACTURING COMPANY, 112 U.S. 645; UNITED STATES V. LYNAH, 188 U.S. 445; UNITED STATES V. NORTH AMERICAN COMPANY, 253 U.S. 330; PHELPS V. UNITED STATES, 274 U.S. 341. WHERE THE STATUTE AUTHORIZES--- AS DOES SECTION 902 --- A REQUISITIONING OF PROPERTY EITHER FOR TITLE OR FOR USE THE NATURE OF THE IMPLIED PROMISE NECESSARILY DEPENDS UPON THE FACTS AND CIRCUMSTANCES INVOLVED. AN IMPLIED CONTRACT DOES NOT ARISE FROM DENIALS AND PROTESTATIONS OF PARTIES, BUT FROM THEIR COMMON UNDERSTANDING WHEREBY MUTUAL INTENT TO CONTRACT WITHOUT FORMAL WORDS THEREFOR IS SHOWN. E. W. BLISS CO. V. UNITED STATES, 253 U.S. 187; JONES V. MENCIK, 286 F. 890. HENCE, REGARDLESS OF THE SIGNIFICANCE WHICH OTHERWISE MIGHT BE ATTRIBUTED TO THE PRIOR NOTICE BY THE ADMINISTRATION AS TO THE NATURE OF THE TAKING, THE SIMULTANEOUS PROTEST BY THE OWNER OF THE VESSELS, ACCOMPANIED BY A REQUEST THAT SUCH COURSE OF ACTION BE RECONSIDERED, PRECLUDES THE EXISTENCE OF ANY IMPLIED CONTRACT SUCH AS MIGHT BIND THE GOVERNMENT TO THE ACTION PREVIOUSLY INDICATED.

IT IS NOTED THAT THE PROPOSED CHARTER WILL RESERVE TO THE GOVERNMENT THE RIGHT TO TAKE TITLE TO THESE VESSELS AT A FUTURE DATE SHOULD SUCH ACTION BECOME NECESSARY OR DESIRABLE. ALTHOUGH NOT SO STATED IN YOUR LETTER, IT IS PRESUMED THAT THE CHARTER WILL FURTHER PROVIDE THAT IN THE EVENT SUCH RIGHT IS EXERCISED, THE COMPENSATION OTHERWISE PAYABLE FOR THE VESSELS WILL BE REDUCED IN THE AMOUNT OF THE CHARTER HIRE PREVIOUSLY PAID FOR THEIR USE BY THE UNITED STATES. UNDER SUCH CIRCUMSTANCES, THERE WOULD APPEAR TO BE NO LEGAL OBJECTION TO CHARTERING THESE VESSELS RATHER THAN TAKING TITLE THERETO, IF SUCH COURSE BE DETERMINED BY YOUR ADMINISTRATION AS IN THE BEST INTERESTS OF THE UNITED STATES.

THE DECISION OF NOVEMBER 28, 1942 (22 COMP. GEN. 497), RENDERED UNDER AUTHORITY OF SECTION 8 OF THE ACT OF JULY 31, 1894, 28 STAT. 207- - 208, AS AMENDED BY TITLE III OF THE BUDGET AND ACCOUNTING ACT, 42 STAT. 24, RELATED PRIMARILY TO THE EFFECT OF THE ENHANCEMENT CLAUSE OF SAID SECTION 902 OF THE MERCHANT MARINE ACT, 1936, UPON THE AMOUNT OF JUST COMPENSATION WHICH LAWFULLY MAY BE PAID WHEN THE TITLE TO A VESSEL HAS BEEN REQUISITIONED UNDER SAID ACT. IN THIS CONNECTION, IT WAS HELD (QUOTING FROM THE SYLLABUS):

SECTION 902 (A) OF THE MERCHANT MARINE ACT OF 1936, AS AMENDED, RELATING TO THE COMPENSATION TO BE PAID OWNERS OF PRIVATE VESSELS REQUISITIONED BY THE UNITED STATES DURING THE EXISTENCE OF A NATIONAL EMERGENCY, AND PROVIDING THAT "IN NO CASE SHALL THE VALUE OF THE PROPERTY TAKEN OR USED BE DEEMED ENHANCED BY THE CAUSES NECESSITATING THE TAKING OR USE," OPERATES TO PROHIBIT THE PAYMENT OF COMPENSATION FOR SUCH VESSELS BASED ON VALUES IN EXCESS OF THOSE EXISTING ON SEPTEMBER 8, 1939--- THE DATE OF THE PRESIDENT'S PROCLAMATION OF A "LIMITED NATIONAL EMERGENCY"--- PROVIDED THE EXCESS BE DETERMINED AS DUE TO ECONOMIC CONDITIONS DIRECTLY CAUSED BY THE NATIONAL EMERGENCY. HOWEVER, WITH RESPECT TO THE EFFECT OF SAID ENHANCEMENT CLAUSE UPON THE AMOUNT PAYABLE AS CHARTER HIRE FOR THE USE OF A VESSEL REQUISITIONED ON A TIME CHARTER BASIS, IT WAS HELD (QUOTING FROM THE SYLLABUS):

THE LIMITATION IN SECTION 902 (A) OF THE MERCHANT MARINE ACT OF 1936, AS AMENDED, UPON THE COMPENSATION THAT MAY BE PAID BY THE UNITED STATES FOR VESSELS REQUISITIONED FOR TITLE OR USE DURING ANY NATIONAL EMERGENCY, PROHIBITS ANY INCREASE IN COMPENSATION BY REASON OF AN ,ENHANCEMENT" IN VALUE OF THE VESSEL FROM CAUSES NECESSITATING THE TAKING OR USE, AND HAS NO APPLICATION TO INCREASED COSTS OF OPERATION, ETC., IN CASES WHERE THE USE OF A VESSEL IS REQUISITIONED.

SUBSECTION (B) OF SAID SECTION 902 LIMITS THE VALUES WHICH MAY BE PLACED UPON VESSELS TAKEN OR USED UNDER SAID SECTION IF IT APPEARS EITHER THAT A CONSTRUCTION-DIFFERENTIAL SUBSIDY HAS BEEN PAID ON THE VESSEL UNDER THE PROVISIONS OF TITLE V OF SAID ACT OR THAT THE VESSEL CONTAINS NATIONAL DEFENSE FEATURES PREVIOUSLY PAID FOR BY THE UNITED STATES. IT MAY NOT BE DETERMINED FROM THE FACTS STATED IN YOUR LETTER WHETHER THE PROVISIONS OF THIS SUBSECTION HAVE APPLICATION TO THE INVOLVED VESSELS. HOWEVER, IT WILL BE ASSUMED FOR THE PURPOSES OF THIS DECISION THAT ALL FIVE VESSELS HERE INVOLVED WERE CONSTRUCTED WHOLLY WITH PRIVATE FUNDS.

THE STATISTICS AND COMPUTATIONS APPENDED TO YOUR LETTER ARE DESIGNED TO EFFECT CERTAIN ADJUSTMENTS IN THE ACTUAL EARNINGS FOR THE THREE VESSELS IN OPERATION DURING THE YEAR 1939, TOGETHER WITH ADJUSTMENTS IN THE 1941 EARNINGS FOR THE TWO VESSELS COMPLETED AND PLACED IN OPERATION SUBSEQUENT TO 1939, IN ACCORDANCE WITH SECTION 722 OF THE INTERNAL REVENUE CODE, AS AMENDED BY SECTION 222 OF THE REVENUE ACT OF 1942, PUBLIC LAW 753, APPROVED OCTOBER 21, 1942, 56 STAT. 914. THERE IS NO INDICATION IN YOUR LETTER OR IN THE ATTACHMENTS THERETO AS TO THE MARKET VALUE OF THE FIRST GROUP OF VESSELS ON SEPTEMBER 8, 1939. SUCH OMISSION PROBABLY IS DUE TO YOUR DETERMINATION THAT "1THE SEATRAIN VESSELS ARE UNIQUE WITH RESPECT TO METHOD OF OPERATION, AND THEIR CONSTRUCTION AND USE INVOLVE PATENTED AND OTHER SPECIAL FEATURES" OR TO YOUR OPINION THAT " THE PROPER RATE OF HIRE IS * * * MOST READILY DETERMINABLE THROUGH THE USE OF ACTUAL EARNING POWER OF THE VESSELS WHILE THEY WERE IN THE HANDS OF THE OWNER.' IT IS RECOGNIZED THAT OTHER THAN THE USUAL TESTS MAY HAVE TO BE RESORTED TO IN FIXING THE CHARTER HIRE FOR THE USE OF PARTICULAR TYPES OF VESSEL. SEE THE I.C. WHITE, 295 F. 593, 595.

THE NATURE OF THE OBJECTION HEREINAFTER DISCUSSED PROBABLY WILL BE MORE READILY UNDERSTANDABLE IF IT BE ASSUMED THAT THE PROBLEM CONCERNS ONLY THOSE VESSELS ACTUALLY IN OPERATION DURING THE YEAR 1939. THE ABSENCE OF EVIDENCE OF THE FAIR MARKET VALUE OF SUCH VESSELS ON SEPTEMBER 8, 1939, WOULD SEEM TO HAVE THE EFFECT OF MAKING THE PRINCIPLES LAID DOWN BY SAID DECISION OF NOVEMBER 28, ONLY INDIRECTLY APPLICABLE IN THE PRESENT PROBLEM. PERHAPS, IT WOULD BE ADVISABLE SPECIFICALLY TO STATE THE STANDARD TO WHICH THE PROPOSED CHARTER HIRE MUST CONFORM IN ORDER TO COMPLY WITH THE ENHANCEMENT CLAUSE OF SAID SECTION 902. SAID CLAUSE WOULD APPEAR TO PROHIBIT THE PAYMENT OF CHARTER HIRE FOR VESSELS IN EXISTENCE ON SEPTEMBER 8, 1939, AND REQUISITIONED FOR USE BY THE GOVERNMENT THEREAFTER, EXTENT THAT IT EXCEEDS THE FAIR MARKET VALUE OF THE USE OF SUCH SEPTEMBER 8, 1939, PROVIDED SUCH EXCESS BE DETERMINED AS DUE TO THE ECONOMIC CONDITIONS DIRECTLY CAUSED BY THE NATIONAL EMERGENCY.

WHILE IT WOULD APPEAR UNNECESSARY FOR PRESENT PURPOSES TO DISCUSS IN ANY DETAIL THE EFFECTS OF THE EXCESS-PROFITS TAX PROVISIONS OF TITLE II OF THE REVENUE ACT OF 1942--- A MATTER PRIMARILY FOR THE CONSIDERATION OF THE BUREAU OF INTERNAL REVENUE--- IT MAY BE HELPFUL TO CONSIDER BRIEFLY THE PURPOSE OF SECTION 722 OF THE INTERNAL REVENUE CODE, AS AMENDED THEREBY. THE COMMITTEE ON WAYS AND MEANS, HOUSE OF REPRESENTATIVES, IN ITS REPORT ( NO. 2333, PAGE 142) ON H.R. 7378, WHICH SUBSEQUENTLY BECAME THE REVENUE ACT OF 1942, EXPLAINS SUCH PURPOSE AS FOLLOWS:

IN THE LIGHT OF THE GREATLY INCREASED EXCESS-PROFITS TAX RATE, IT IS BELIEVED DESIRABLE TO AFFORD RELIEF IN MERITORIOUS CASES TO CORPORATIONS WHICH BEAR AN EXCESSIVE TAX BURDEN BECAUSE OF AN ABNORMALLY LOW EXCESS PROFITS CREDIT. THEREFORE SECTION 722 WHICH CURRENTLY EXTENDS RELIEF ONLY IN A LIMITED CLASS OF CASES IS REVISED AND BROADENED SO AS TO REMOVE EXISTING INEQUITIES AND TO ALLEVIATE HARDSHIP IN CASES WHERE RELIEF CANNOT NOW BE OBTAINED. UNDER THIS REVISION, CORPORATIONS SATISFACTORILY ESTABLISHING ELIGIBILITY FOR RELIEF WILL HAVE THEIR EXCESS PROFITS TAX RECOMPUTED ON THE BASIS OF THE EXCESS PROFITS CREDIT BASED ON INCOME. THIS CREDIT WILL BE PREDICATED UPON AN AMOUNT WHICH IS A FAIR AND JUST REFLECTION OF THE NORMAL EARNING CAPACITY OF THE BUSINESS AND WHICH IT IS ENTITLED TO RETAIN BEFORE THE IMPOSITION OF AN EXCESS PROFITS TAX. SUCH AMOUNT WILL BE USED AS A CONSTRUCTIVE AVERAGE BASE PERIOD NET INCOME, REPLACING THE ACTUAL AVERAGE BASE PERIOD NET INCOME IN THE RECOMPUTATION OF THE TAX UNDER THIS SECTION. IN THE CASE OF ELIGIBLE TAXPAYERS NOT NOW ENTITLED TO USE THE EXCESS PROFITS CREDIT BASED ON INCOME, PROVISION IS MADE FOR THE USE OF SUCH CREDIT COMPUTED UPON THE CONSTRUCTIVE AVERAGE BASE PERIOD NET INCOME. IN ORDER TO ELIMINATE CONSIDERATION OF THE EFFECTS OF THE WAR, IT IS PROVIDED THAT, IN DETERMINING THE CONSTRUCTIVE AVERAGE BASE PERIOD NET INCOME, NO REGARD SHALL BE HAD TO EVENTS OR CONDITIONS AFFECTING THE TAXPAYER, AN INDUSTRY OF WHICH IT IS A MEMBER, OR TAXPAYERS GENERALLY, OCCURRING OR EXISTING AFTER DECEMBER 31, 1939. THUS HIGH WAR PRICES, SWOLLEN DEMAND, AND OTHER FACTORS WHICH WOULD NOT BE NORMAL PRIOR TO THE IMPOSITION OF THE EXCESS PROFITS TAX SHALL BE ELIMINATED IN THE COMPUTATION OF THE NORMAL OR AVERAGE EARNING CAPACITY OF THE TAXPAYER.

IN OTHER WORDS, WHERE THE USE OF THE ACTUAL NET INCOME FOR THE BASE PERIOD RESULTS IN AN UNJUST EXCESS-PROFITS TAX DUE TO THE INFLUENCE OF UNUSUAL AND EXTRAORDINARY FACTORS ON THE BUSINESS OF THE TAXPAYER DURING SUCH PERIOD, THE LAW PERMITS CERTAIN ADJUSTMENTS IN SUCH NET INCOME RESULTING IN WHAT IS TERMED "CONSTRUCTIVE AVERAGE BASE PERIOD NET INCOME.' AND, IT IS THIS AMOUNT, COMPUTED AS PROVIDED BY THE TERMS OF SAID SECTION--- SUBSEQUENTLY TO BE ADJUSTED IN ACCORDANCE WITH ANY CHANGES ACTUALLY EFFECTED THEREIN BY THE BUREAU OF INTERNAL REVENUE--- WHICH IT IS HERE PROPOSED TO USE AS A BASE FOR DETERMINING THE CHARTER HIRE FOR THESE SEATRAIN VESSELS. THE LAST SENTENCE OF THE ABOVE-QUOTED PORTION OF THE COMMITTEE REPORT TO THE EFFECT THAT HIGH WAR PRICES, SWOLLEN DEMAND, AND OTHER ABNORMAL FACTORS ARE NOT REFLECTED IN THE AMOUNT COMPUTED IN ACCORDANCE WITH THE FORMULA CONTAINED THEREIN, WOULD APPEAR TO SUPPORT THE USE OF SUCH AMOUNT AS INDICATIVE OF THE FAIR MARKET VALUE OF THE USE OF THE VESSELS DURING THE YEAR 1939.

HOWEVER, NOTWITHSTANDING SUCH FACT, THERE IS CONSIDERABLE DOUBT WHETHER THE RATE THUS DETERMINED IS NOT SUBJECT TO THE FOLLOWING FUNDAMENTAL OBJECTION. THE PURPOSE OF THE FORMULA PRESCRIBED BY SECTION 722 IS--- AS ABOVE STATED--- TO PROVIDE A FAIR BASIS UPON WHICH TO COMPUTE THE "GREATLY INCREASED EXCESS-PROFITS TAX" IMPOSED BY SAID REVENUE ACT OF 1942. NEVERTHELESS, THE AMOUNT OF NET INCOME SO CALCULATED APPARENTLY INCLUDES SOME PROFIT--- HOWEVER NORMAL--- WHICH THE ACT EXEMPTS FROM THE OPERATION OF THE EXCESS-PROFITS TAX. IN FACT, THE VERY TERM "EXCESS PROFITS TAX" SEEMS TO LEAVE THAT CONCLUSION INESCAPABLE.

BOTH TEXTBOOK WRITERS AND THE COURTS AGREE THAT SINCE THE ELEMENT OF PROFIT DEPENDS SO MUCH UPON THE FORTUNE, SKILL, AND GOOD MANAGEMENT WITH WHICH A BUSINESS IS CONDUCTED IT, ALONE, FURNISHES NO TEST OF THE VALUE OF THE PROPERTY AND MAY NOT BE ACCEPTED IN CONDEMNATION PROCEEDINGS AS PROOF OF MARKET VALUE. ORGEL," VALUATION UNDER EMINENT DOMAIN," SECTION 177; 2 LEWIS, EMINENT DOMAIN, 3D EDITION, SECTION 670; 2 NICHOLS, EMINENT DOMAIN, SECTION 1172; CITY OF LOS ANGELES V. DEACON, 7 PAC. 2D 378, 379; GAULEY AND E. RY. CO. V. CONLEY, 100 S.E. 290, 291; WEST CHICAGO PARK COM-RS V. BOAL, 83 N.E. 824, 828. THIS PRINCIPLE WOULD APPEAR EQUALLY FOR APPLICATION WHERE THE DETERMINATION INVOLVES THE FAIR MARKET VALUE OF THE USE OF THE PROPERTY. SEE, IN THIS CONNECTION, HUDSON NAVIGATION CO. V. UNITED STATES, 57 C.1CLS. 411; GULF REFINING CO. V. UNITED STATES, 57 C.1CLS. 559. THE SOUNDNESS OF THE RULE IS APPARENT WHEN CONSIDERED IN THE LIGHT OF THE USUALLY EMPLOYED STANDARD OF MARKET VALUE, THAT IS, THE AMOUNT A WILLING BUYER WOULD PAY A WILLING SELLER FOR THE PROPERTY OR FOR ITS USE. SEE 29 C.J.S. 137, PAGE 974, AND CASES CITED. A PROSPECTIVE CHARTERER OF A VESSEL MIGHT BE INTERESTED IN THE EARNINGS OF THE VESSEL IN THE HANDS OF ITS OWNER AS SOME INDICATION OF WHAT HE HIMSELF MIGHT EXPECT TO EARN FROM THE VESSEL, BUT HE CERTAINLY WOULD NOT BE WILLING TO PAY THE SUM TOTAL OF SUCH EARNINGS TO THE OWNER AS CHARTER HIRE. IN OTHER WORDS, HE WOULD BE WILLING TO PAY ONLY ITS FAIR RENTAL VALUE.

ON THE OTHER HAND, THE SAME AUTHORITIES STATE THAT WHERE THE GOVERNMENT TAKES NOT ONLY THE PROPERTY BUT ALSO THE BUSINESS CONDUCTED THEREON, EVIDENCE OF PROFITS IS ALLOWABLE. IT MIGHT BE ARGUED, UPON A SHOWING THAT IT IS NOT NOW POSSIBLE TO REPLACE THESE SEATRAIN VESSELS WITH OTHERS SUITABLE FOR THE PURPOSE OF CARRYING ON THE BUSINESS OF THE OWNER, THAT THE ACTION OF THE GOVERNMENT IS TANTAMOUNT TO A TAKING OF THE BUSINESS. HOWEVER, IN THIS CONNECTION, ATTENTION IS INVITED TO THAT PORTION OF SECTION 902 ABOVE QUOTED WHICH STATES "THE OWNER SHALL NOT BE PAID FOR ANY CONSEQUENTIAL DAMAGES ARISING FROM A TAKING OR USE OF PROPERTY UNDER AUTHORITY OF THIS CTION.' THUS, A CLEAR DISTINCTION IS APPARENT BETWEEN A CASE SUCH AS THIS--- WHERE ALL FIVE VESSELS HAVE BEEN TAKEN OFF THEIR USUAL ROUTES AND FOUR OF THEM TURNED OVER TO MILITARY AND NAVAL USES--- AND A CASE SUCH AS THE APPROPRIATION BY THE GOVERNMENT OF THE USE OF A RAILROAD WHERE THE BUSINESS OF THE ROAD CONTINUES AS USUAL AFTER IT HAS PASSED INTO GOVERNMENT HANDS. COMPARE, RAILWAY STEEL SPRING CO. V. CHICAGO AND E.I.R. CO., 261 F. 690; COMMISSIONER OF INTERNAL REVENUE V. MIDDLAND VAL. R. CO., 57 F. (2D) 1042.

ACCORDINGLY, IF, AS WOULD APPEAR FROM THE PRESENT RECORD, THE PROPOSED CHARTER HIRE FOR THESE SEATRAIN VESSELS AS COMPUTED IN ACCORDANCE WITH THE FORMULA PRESCRIBED BY SECTION 722 OF THE INTERNAL REVENUE CODE, AS AMENDED, INCLUDES AN ELEMENT OF PROFIT EARNED BY THE OWNERS OF THE VESSELS, THROUGH THEIR OPERATION DURING THE YEAR 1939, SUCH AMOUNT WOULD APPEAR TO BE IN EXCESS OF THE FAIR MARKET VALUE OF THE USE OF SUCH VESSELS AS LIMITED BY THE ENHANCEMENT CLAUSE OF SAID SECTION 902 OF THE MERCHANT MARINE ACT OF 1936, AND TO SUCH EXTENT UNAUTHORIZED. SEE, PARTICULARLY, GULF REFINING CO. V. UNITED STATES, SUPRA. HOWEVER, IF SUCH PROFIT AS MAY BE CONTAINED IN SUCH AMOUNT BE ELIMINATED--- WITH A FAIR DEGREE OF ACCURACY--- THIS OFFICE WOULD NOT BE REQUIRED TO OBJECT TO OTHERWISE PROPER PAYMENTS FOR THE USE OF SUCH VESSELS UPON THE BASIS SET FORTH.