1st Session

No. 493

FOR THE RELIEF OF CERTAIN CLAIMANTS WHO SUFFERED LOSS BY FIRE IN THE STATE OF MINNESOTA DURING OCTOBER 1918

FEBRUARY 16, 1932.-Committed to the Committee of the Whole House and ordered to be printed

Mr. BLACK, from the Committee on Claims, submitted the following

REPORT

[To accompany H. R. 491]

The Committee on Claims, to which was referred the bill (H. R. 491) for the relief of certain claimants who suffered loss by fire in the State of Minnesota during 1918, having considered the same, report thereon with a recommendation that it do pass.

H. R. 491, introduced by Mr. Pittenger, was referred to the Committee on Claims. The committee has given careful consideration to this measure. Extensive and prolonged hearings were had on a similar bill in the Seventy-first Congress. That bill was known as H. R. 5660, and the printed hearings on that bill consist of over 300 pages. A favorable report was made on the bill in the Seventy-first Congress, and is No. 2703, Seventy-first Congress, third session. This committee report and the printed hearings on the bill cover the facts and the arguments in the matter fully. The United States Railroad Administration was ably represented at the hearings, and this same remark applies to the claimants. We are of the opinion that any additional hearings at this session of Congress would not result in any new facts being presented to the committee. The former hearings are complete in every detail, and the report above referred to of Congressman Johnson covers the matters in controversy fully and fairly.

The measure was bitterly opposed by a former Director General of Railroads, when the hearings were held by the committee in the Seventy-first Congress. His arguments were considered by the committee. He made various claims: That the railroads did not set the fires; that a cyclone or high wind did the damage; that other fires. started by other persons caused the damage. He also made other claims. For example, he took the position that the cases were settled and compromised, releases executed, and judgments entered and satisfied; and that no one was compelled to make settlement.

On the other hand, the testimony of the fire sufferers shows clearly that the courts of Minnesota held the Director General of Railroads guilty of negligence in the operation of railroads, and in setting fires, and that under the law, the United States was liable for the loss caused by these fires, and that the railroad fires themselves created the wind which caused the fires to sweep across the country and swallow up small and incipient fires, as it went along on its course of destruction. All of these questions were fully litigated before juries and judges in test cases, and liability was fastened on the Government.

The testimony of the fire sufferers showed that, before the litigation, which was protracted and expensive, the Government indicated that it would either pay all or none of the damage; that if the courts held the Government liable, it would pay in full; that if the courts held the Government was not responsible, it would not pay a cent. Not until after the court decisions favorable to the fire sufferers did the director general indicate any willingness to compromise or pay part of the losses. The director general refused to follow the Minnesota courts or their decisions. He was arbitrary. The fire sufferers were destitute. They faced the possibility of years of litigation and were forced to accept what the director general was willing to pay, and execute such papers as he required. The committee in the Seventyfirst Congress felt that such action was unfair, and not binding on the claimants, after hearing the witnesses and the testimony. Congress is the only place where the claimants can come for redress, due to the releases, etc. As was pointed out by Congressman Peavy in his testimony (p. 11 of hearings) Congress does not pass upon claims where the claimant has a legal obligation he can enforce against the Government.

These matters which have been briefly referred to above are discussed in the report of Congressman Johnson, House Report No. 2703, Seventy-first Congress, third session. That report, as amended, is adopted as the report of this committee. In setting forth the bill, H. R. 5660, as reported out of that committee, Johnson's report has two stenographic errors, and his report is amended to correct them by inserting in line 8 of section 1, first page of report, the words "by the United States" after the word "paid", and before the word "to" in said line; and by inserting in said line 8, after the word "claimant", and before the word "by", the words "less any amount paid to such claimant".

At the request of Congressman Clark, who plans to submit minority views, the Johnson report is further amended by striking out the reference to Congressman Clark's report to the committee.

As amended, it is attached to this report and made a part hereof. H. R. 491 is in the same language as the bill H. R. 5660, as reported out by the committee in the Seventy-first Congress.

The Johnson report, No. 2703, Seventy-first Congress, third session, as above amended, is as follows:

The Committee on Claims, to which was referred the bill (H. R. 5660) for the relief of certain claimants who suffered loss by fire in the State of Minnesota during 1918, having considered the same, report thereon with a recommendation that it do pass with an amendment.

Strike out all after the enacting clause and insert in lieu thereof the following: "SECTION 1. That the Secretary of the Treasury is authorized and directed to pay, out of any money in the Treasury not otherwise appropriated, to each claimant or its or his heirs, administrators, executors, or successors, the amount of

whose loss on account of fire originating from the operation of railroads by the United States in the State of Minnesota on or about October 12, 1918, has been determined by court proceedings or by the Director General of Railroads, the difference between the amount of such loss so determined and the amount actually paid by the United States to such claimant less any amount paid to such claimant by any fire-insurance company on account of such fire: Provided, That notwithstanding the terms and conditions of any policy of insurance, or the provisions of any law, no fire insurance company, except farmers' mutual fire insurance companies, shall have any rights in and to funds herein appropriated, the payments herein provided for, nor to any right of subrogation whatsoever. That said farmers' mutual fire insurance companies shall be paid in the same manner and to the same extent as other claimants: And provided further, That no person who makes claim under this act by virtue of having acquired and succeeded to the rights of the original claimant through purchase and assignment from said claimant of said claim, shall receive more than the amount actually paid for such claim and assignment: And provided further, That in making payments to claimants, the Secretary of the Treasury shall promulgate rules and regulations as to proof required, as to the identity of claimants, validity of assignments, and all other matters in connection with said payments, and his determination as to the person entitled to receive payment shall be final.

"SEC. 2. No payment under the provisions of this act shall be made unless an application therefor is filed with the Secretary of the Treasury by or on behalf of the person entitled to payment within two years after the date of the enactment of this act. All applications shall be referred to the United States Railroad Administration for investigation and adjustment, and payment shall be made by the Secretary of the Treasury in accordance therewith.

"SEC. 3. The words "person" and "claimant," as used in the act, shall include an individual, two or more persons having a joint or common interest, company, partnership, and municipal and private corporation.

"SEC. 4. Any person or group of persons individually or collectively who charge or collect, or attempt to charge or collect, either directly or indirectly, any fee or other compensation for assisting in any manner any person in obtaining the benefits of this act in excess of 10 per centum of the amount of the claim actually paid under this act, shall, upon conviction thereof, be subject to a fine of not more than $500 or imprisonment for not more than one year, or both."

PURPOSE AND EFFECT OF BILL

The bill as originally drawn has for its object the payment of the balance of loss suffered by the claimants in the fires of October 12, 1918, in northern Minnesota. At the time of these fires, the railroads were being operated by the United States Government, as a war-time measure. Several thousand lawsuits were commenced, and "test" cases were tried in different areas, and the courts held the Government liable in damages.

Following the decisions of the courts, the Government paid the litigants a per cent of their loss. The loss, in every case, was determined either by the Director General of Railroads, or by the court, and the per cent paid was based upon the amount of loss so ascertained. The object of the bill was to have the Government pay to the claimants the balance of the loss as fixed by the Government.

EFFECT OF AMENDMENTS

The substitute bill amends the original bill in several particulars.

The words "legal representatives, successors, or assigns" is struck out of section 1 of the original bill and in lieu thereof the following language is substituted: "heirs, administrators, executors, successors."

The object of this amendment is to make definite and certain that only the claimants or their heirs shall be entitled to the benefits of this bill.

The words "third party" are struck out of section 1 of the original bill, and in lieu thereof "Fire-insurance company" is inserted. The phrase, "third party is indefinite, and the testimony shows that the deduction to be made are such payments as were made by fire-insurance companies. This amendment simply carries out the intention of the bill.

The amendments submitted by your committee further provide that the following language be entirely stricken from section 1: "and (2) to each third party or its successors or assigns the difference between the amount of money actually paid by it to a claimant and the amount actually paid by the United States to such third party on account of such fire."

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The effect of this amendment is to exclude fire-insurance companies from the benefits of the legislation. In other words, only actual fire sufferers will be permitted to file claim under the amended bill reported herewith.

In order to further indicate the purposes of your committee in excluding fireinsurance companies, and in preventing any persons from acquiring these claims for a nominal sum, the following new language is added by your committee to section 1 of the bill:

"Provided, That notwithstanding the terms and conditions of any policy of insurance, or the provisions of any law, no fire insurance company (except farmers' mutual fire insurance companies), shall have any rights in and to funds herein appropriated, the payments herein provided for, nor to any right of subrogation (whatsoever). That said farmers mutual fire insurance companies shall be paid in the same manner and to the same extent as other claimants: And provided, That no person who makes claim under this act by virtue of having acquired and succeeded to the rights of the original claimant through purchase and assignment from said claimant of said claim, shall receive more than the amount actually paid for such claim and assignment.

The effect of this new language is to prevent the fire-insurance companies from making any claim whatever to the payments to which the claimants would be entitled under this bill, and also to prevent anyone from buying up these claims for a small amount and then making claims against the Government for the entire balance due to the claimant.

The following language is also added to section 1 of the bill:

"And provided further, That in making payments to claimants, the Secretary of the Treasury shall promulgate rules and regulations as to proof required, as to the identity of claimants, validity of assignments, and all other matters in connection with said payments, and his determination as to the person entitled to receive payment shall be final."

This amendment is incorporated in the new bill because there should be some one with authority to pass upon the validity of the claims filed, the identity of parties, etc. The logical person is the Secretary of the Treasury, who is named for that purpose.

The bill carries the usual provision prohibiting any charge by any person or attorney for rendering service to the particular claimant in excess of 10 per cent of the amount involved. Section 4 is amended but includes the following words after the word "person" in line 1, "or group of persons individually or collectively.' The object of this amendment is to prohibit two or more persons from attempting to collect for service rendered, and the new language will make it impossible for various persons to make individual claims against any particular claimant.

FACTS DEVELOPED AT HEARINGS

On March 26, 27, 28, and 29, 1930, extensive hearings were had by the subcommittee on claims in connection with H. R. 5660. This bill was introduced for the relief of the people who suffered damage in the fires in northern Minnesota on October 12, 1918. At that time the United States Railway Administration was in operation and had control of the railroads in the United States, the President of the United States having taken over the same in connection with other war-time measures. Many fires were started by Government locomotives and by Government employees along the railway rights of way. The courts held the Railway Administration liable for damage resulting from these fires.

The Railway Administration opposed the bill before the committee, claiming that they had made settlement of claims of doubtful liability; that the settlements were fair to the fire sufferers; that they had executed releases of their legal right; and that the official actions of the director general should not be brought into question.

After giving careful consideration to all the evidence, including the contentions of the Railway Administration, the committee finds that the testimony of the Government witnesses corroborated by official documents correspondence, and court decisions, discloses the following facts:

In October, 1918, a most devastating fire occurred in the forest regions of Minnesota. Roughly speaking, some 1,500 square miles of territory was burned over; 4,000 homes and 5,000 barns were burned, and a number of good-sized towns wholly destroyed including the town of Cloquet, with a population of some 12,000 people; 450 people lost their lives, and some 2,000 people received personal injuries sufficient to require medical attention. (Director general reports, p. 43 of printed hearings.)