Commissioner v. Gillette Motor Transport, Inc.

PETITIONER: Commissioner
RESPONDENT: Gillette Motor Transport, Inc.
LOCATION: Dry Docks at Reed, WV

DOCKET NO.: 359
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 364 US 130 (1960)
ARGUED: Apr 21, 1960
DECIDED: Jun 27, 1960

Facts of the case

Question

Media for Commissioner v. Gillette Motor Transport, Inc.

Audio Transcription for Oral Argument - April 21, 1960 (Part 2) in Commissioner v. Gillette Motor Transport, Inc.

Audio Transcription for Oral Argument - April 21, 1960 (Part 1) in Commissioner v. Gillette Motor Transport, Inc.

Earl Warren:

Number 359, Commissioner of Internal Revenue, Petitioner, versus Gillette Motor Transport, Incorporated.

Mr. Barnett.

Wayne G. Barnett:

Mr. Chief Justice, may it please the Court.

During World War II, the Government seized and operated, for a short period, a number of motor carriers in the Midwest that were closed down by strikes.

The respondent is one of those carriers whose properties were in the federal control for about 10 months.

The respondent is now, been given an award of just compensation for that seizure measured by the rental value of his equipment for the 10-month period.

The question is whether that award is ordinary income, as we contend that it is, or whether it is capital gains.

The Tax Court held that it was ordinary income.

The Court of Appeals for the Fifth Circuit -- it was capital gains.

That decision which was in direct conflict with the decision of the Eighth Circuit involving another carrier, is here on certiorari.

The facts of the seizure are relevant here only as background and can be briefly dealt with.

In August 1944, the over-the-road drivers of a 103 motor carriers in the Midwest went out on strike.

The strike was prompted by a refusal of the carriers to pay a wage increase recommended by the War Labor Board.

Because of the emergency, President Roosevelt promptly directed the Office of Defense Transportation to take possession and control of those lines and restore them to operation.

That was accomplished by a series of orders and directives in that effect of which was that the carriers were required to pay the wage increase and resume normal operations subject to all of these to an ultimate federal control.

Now, the federal control was relinquished as to the respondent in June 1945, it was approximately 10 months after they were first seized.

After the war, Congress established the Motor Carrier Claims Commission to determine whether the carriers were entitled to just compensation under the Fifth Amendment for that seizure and if so to determine the amount as the word of that Commission to the respondent that is an issue here.

The Commission held in this case and in other cases that the dominion exercised by the Government over the carriers was efficient to constitute a constitutional taking of the temporary use and possession of the physical properties.

It held that in the case of a temporary taking, the proper measure of just compensation as the rental value of the property for the period that was taken.

And since the respondent here would have been free to lease out its equipment, trucks and trailers individually, that rental value should be measured here by the rental value for each item of equipment and the Court determined that those rental values added them up and the total was the award made.

Now -- and that award represented a net rental.

That is to say, the rent that respondent could have obtained for its trucks in excess of all operating expenses, all depreciation, as those cost had already been recovered out of the operating revenues.

So in -- in effect, this award represents pure rent.

It's a return on investment to the petitioner for the use of his property for the 10-month period.

Charles E. Whittaker:

Is there any real good reason, Mr. Barnett, was characterizing this award as to rents, besides what you've mentioned?

Wayne G. Barnett:

I -- I don't think it makes any difference how it is characterized.

I will come to that.

I -- I simply wanted to explain how the Commission arrived at its figure.

Charles E. Whittaker:

Yes.

At least it isn't a war that damages -- you call it a register or what not.