ÆäÀÌÁö À̹ÌÁö
PDF
ePub

and the Maine Water Company, and granting to them powers and franchises, are referred to in the bill and are admitted by the answer. They are necessarily in the case without further proof. The plaintiff may properly ask for a construction of the franchises granted by those acts. Such construction is a matter of law.

We have not searched for other grants of franchises than those contained in plaintiff's requests 7 and 8. It is not our duty to do So. But we have no hesitation in saying, that so far as the franchises granted by those acts are concerned, they are not exclusive. The legislature may at any time, according to its own wisdom, grant to the municipalities within which this water system is situated franchises similar to the ones in question. It may grant similar franchises to one or more corporations like the Waterville Water Company or the Maine Water Company. In re City of Brooklyn, 143 N. Y. 596, 38 N. E. 983, 26 L. R. A. 270; Long Island Water Supply Company v. Brooklyn, 166 U. S. 685, 17 Sup. Ct. 718, 41 L. Ed. 1165. It has granted similar franchises to this plaintiff, a municipal district, and has even authorized it to take away from the defendant water company all the franchises it holds within the district and Benton and Winslow. Kennebec Water District v. Waterville, 96 Me. 234, 52 Atl. 774. But the defendants say that the Maine Water Company was "practically in the enjoyment of an exclusive franchise," because it had no competitor, although its franchise may not be legally an exclusive one; citing Gloucester Water Co. v. Gloucester, 179 Mass. 365, 60 N. E. 977. And we say that the fact that the company was doing its business without competition may and should be considered by the appraisers when they are valuing the property of the defendant as a going concern.

That fact is one of the characteristics of the going business, and may enhance its value.

We are considering now only the legal situation of the company. There is a difference between a franchise which is practically exclusive and one which is actually exclusive, as there is a difference between uncertainty and certainty. The distinction is vital in principle, and it may be important in fixing value. Of how much or how little importance it is can only be estimated by the appraisers after hearing the evidence.

Again, the charters under which the company operates are subject to repeal by the legislature. Rev. St. c. 46, § 23. The franchises are not perpetual and irrevocable. It may be that it is extremely unlikely that the legislature would repeal the charters without providing for compensation in some way. The probabilities are fairly open to consideration. But the legal condition exists. It is a factor to be considered for what it is worth.

Having considered these general propositions, which are far-reaching, and which af

fect substantially all of the requested instructions, it will now be comparatively easy to pass upon the several requests in the form in which they are presented.

(1) Plaintiff's Requests.

The plaintiff, in request 2, asks that the actual cost of the plant and property, together with proper allowances for depreciation, be declared to be legal and competent evidence upon the question of the present value of the same. We so hold. It is competent evidence, but it is not conclusive. It is not a controlling criterion of value, but it is evidence. National Waterworks Co. v. Kansas City, 10 C. C. A. 653, 62 Fed. 853, 27 L. R. A. 827; Smyth v. Ames, supra; San Diego Land Co. v. National City, supra; Cotting v. Kansas City Stockyards Co., supra; Westchester Turnpike v. Westchester County, 182 Pa. 40, 37 Atl. 905; Griffin v. Goldsboro Water Co., 122 N. C. 206, 30 S. E. 319, 41 L. R. A. 240. Of course, this element is subject to inquiry as to whether the works were built prudently, and whether they were built when prevailing prices were high, so that actual cost, in such respects, may exceed present value. Reagan v. Farmers' Loan & Trust Co., 154 U. S. 362, 14 Sup. Ct. 1047, 38 L. Ed. 1014; San Diego Land & Town Co. v. National City, 174 U. S. 739, 19 Sup. Ct. 804, 43 L. Ed. 1154.

The remainder of plaintiff's request 2 asks that the companies be directed to produce their book accounts and other documentary evidence bearing upon the question of cost before the appraisers. This request raises no question of law, and cannot be considered by us.

Plaintiff's request 3 ought not to be given in the form in which it is presented, which is that "under no circumstances can the value of the plant of the companies be held to exceed the cost of producing at the present time a plant of equal capacity and modern design." Among other things, it leaves out of account the fact that it is the plant of a "going concern," and it seeks to substitute one of the elements of value for the measure of value itself. Montgomery County v. Bridge Company, 110 Pa. 54, 20 Atl. 407. We shall discuss further the competency of the cost of reproduction when we consider defendants' requests 6 and 7.

We have already discussed sufficiently the first two propositions of plaintiff's request 4. The deduction sought to be established by the third proposition is that "the actual rates which may have been charged by the companies, and their actual earnings, have no bearing on the value either of the companies' plant or property, or of their franchises, and are immaterial." We cannot say this as a matter of law. As a matter of proof, we think the evidence of such facts is admissible and material. The value of the evidence, however, depends upon whether the appraisers shall find that the rates charged

have been reasonable or not. If reasonable, these facts furnish one important test, but not the only one, in fixing the present value of plant and franchises. Monongahela Co. v. United States, supra. But if the charges have been excessive, past receipts should not be regarded by the appraisers as a proper test of value. Cotting v. Kansas City Stockyards Co. (C. C.) 82 Fed. 850.

We omit plaintiff's request 5. In argument, the counsel on both sides seem to agree that the selling price of the capital stock of the water company is not to be considered as affecting the valuation of the property. The plaintiff does so in part on general principles; the defendant, because of the special circumstances of this particular case; and it is immaterial to the present discussion which is right. If the claim of the defendants that the entire capital stock of the Waterville Water Company is owned by the Maine Water Company, and that the capital stock of the Maine Water Company represents not only the property in the Waterville system, but also of many others in other towns and cities of the state, is found to be correct, certainly the selling price of capital stock will afford no aid in fixing the value of the Waterville system.

We think the appraisers should be instructed in accordance with plaintiff's requests 6 and 10, without any qualification. They ask that the quality of the water furnished and of the service rendered, and the fitness of the plant and of the source of water supply to meet reasonable requirements in the present and future, be deemed material upon the question of present value.

We have already discussed sufficiently plaintiff's requests 7 and 8, and to some extent its request 9. This last request is that "the appraisers shall regard the franchises of the companies as entitling them to continue business as a going concern, but subject to all proper legal duties governing public service companies." So far, we think the instruction should be given. National Waterworks Co. v. Kansas City, 10 C. C. A. 653, 62 Fed. 853, 27 L. R. A. 827; Newburyport Water Co. v. Newburyport, 168 Mass. 541, 47 N. E. 533. The matter of exclusive franchise referred to in this request has already been disposed of. The remainder of the request is that "the franchise shall not be otherwise appraised or valued." In its present form, this is not approved. It is, to say the least, likely to be misleading. If it means to include all of the franchises of the companies, so far as they have been disclosed to us, it is unobjectionable. But if it is intended to include all franchises not now exercised by the going concern, or future extensions of the use of franchises now exercised, it is objectionable. The plaintiff will take all of the franchises of the companies, except the franchise to be a corporation, and for all of these franchises of which it will

be deprived the Maine Water Company will be entitled to just compensation.

Plaintiff's request 11, in so far as it says that "in fixing the value of the companies' franchises the appraisers may give such regard as is demanded by ample and fair public policy to the past investment, risks, and services of the companies, and to the reasonably just expectations which those who made the investment had in mind when so investing," is approved. We have already discussed this proposition in a former part of this opinion, relating to reasonable rates, to which we think it properly relates.

The remainder of request 11 is not approved. It is that in fixing the value of the companies' franchises the appraisers may give regard "to the faithfulness or unfaithfulness shown by the companies in the performance of their public duty and obligation to furnish pure water at reasonable rates." We do not think that past faithfulness or unfaithfulness in the exercise of a franchise bears any such relation to the present value of it as to make it a proper matter for consideration. It is the franchise as it now exists which is to be taken and paid for. It is the right to do business now, under and within the charter, which must be appraised, irrespective of the past use of that right. If past misconduct has incidentally resulted in lessened business, that matter will have due consideration under other heads. But in this process of condemnation of property, the owner is not to be punished for past misuse of it.

Requests 12 and 13 may be considered together. They seem to imply that the companies in the past have been unfaithful in the performance of their public duties, both by furnishing impure water and by charging excessive rates, and by reason thereof it is claimed that the companies "have rendered themselves liable to such processes as are appropriate to work legal forfeiture" of their rights and franchises, and that this liability to forfeiture is to be considered in fixing the value of the property. We cannot give our assent to this doctrine. If these franchises have become forfeitable for misbehavior of the companies, the remedy is found in quo warranto brought by the state, and only by the state. Any individual affected by the wrongful conduct of the companies might have invoked the intervention of the state. But this does not seem to have been done. On the contrary, it is proposed to take these franchises as they are. Even if forfeitable, they have not been forfeited. They are in full force and vigor. They must be valued as living franchises, not as dead or moribund. Whether the state would ever institute process for forfeiture, and, if it did, whether the court would find the facts as the appraisers might, are questions so very uncertain that an inquiry concerning them must be purely speculative and unfruitful.

To permit this inquiry would be to permit the appraisers to speculate upon what the judgment of the court might be at another trial, under other conditions. We think the franchises must be appraised as they are now held and used by the companies. Whatever the past misconduct may have been, we do not see how it can affect the value of the present right and ability to exercise the franchises. We think, however, that this liability to forfeiture arising from misconduct is to be distinguished from liability to legislative repeal to which we have already alluded. The latter is a limitation of the franchise which inheres in the franchise itself, from its creation. There is no franchise, except as so limited. It is the only kind of a franchise the companies ever held.

Plaintiff's request 13 asks that, if it be found that the companies have actually received more than reasonable rates for the services rendered since operations began, then the amount of such excess shall be deducted from the amount to which the companies would otherwise be entitled. It is not approved. It is sufficient to say that this is not a process of accounting, but one of condemnation of property, for which the owner is entitled by statute and constitution to just compensation at its present value, without any deduction.

(2) Defendants' Requests.

The first paragraph of the defendants' requests presents no question of law, and the second request has already been considered.

Their request 3 is "that any increase of pecuniary obligation or burden or duty, or any damage to or impairment of the value of its remaining property or franchises, in any way resulting to said Maine Water Company by reason of the exercise of the right of eminent domain contemplated by said act of 1899, should be considered by said appraisers, and just compensation therefor should be included." It seems to be assumed in argument, and we assume, that this request is based upon the fact that the Maine Water Company is the owner of other water systems situated at other places. Of course, it cannot refer to any remaining property at Waterville, for there will be none. The argument is that, by depriving the company of its Waterville plant, the general expense of supervision and management will still remain practically unchanged, and will be a proportionately heavier burden upon the remaining property. The language of counsel is that "the economy and efficiency of administration which are sought and obtained by the combination are inevitably more or less impaired by breaking it up, either in whole or in part." The compensation asked is not for property taken, but for incidental damages to other property having no physical connection with or contiguity to that taken, and having no relations whatsoever with the property taken, 54 A.-2

*

except those which grow out of common own. ership. The defendants rest their claim upon the familiar doctrine of damages for severance, namely, that, when a portion of a property is taken, the impaired value of the remainder, by reason of the severance, may and should be considered, and compensation awarded therefor. But we think this case cannot be brought within that rule. That rule applies only when the property taken and the property left may fairly be considered one property, and not when they are separate and distinct. In Bangor & Piscataquis R. R. Co. v. McComb, 60 Me. 290, Kent, J., after stating the reasons for allowance of damages for severance, uses this language: "The constitutional provision cannot be carried out, in its letter and spirit, by anything short of a just compensation for all the direct damages to the owner of the lot, confined to that lot, occasioned by the taking of his land. The paramount law intends that such owner, so far as that lot is in question, shall be put in as good a condition, pecuniarily, by a just compensation, as he would have been in if that lot of land had remained entire, as his own property. How much less is that lot * * worth * than the whole lot, intact, was the day before such taking?" The implication of this language clearly is that the parcels must be of the same property,-in that case, the same lot. In 10 Am. & Eng. Ency. of Law (2d Ed.) p. 1166, tit. "Eminent Domain," it is said that: "To entitle an owner to recover damages to the whole tract when a part of his lands have been taken, there must have been a unity of contiguous parcels. The land must have been together. All of it must have been used as a single tract." In 3 Sedgwick on Damages (8th Ed.) at p. 413, the rule is laid down that: "In assessing damages or benefits, the inquiry is limited to the tract of land immediately affected. This is held to be so much as belongs to the proprietor whose land is taken, and is continuous with it, and used together for a common purpose. * When land is divided into blocks by the owner, and dealt with as such by himself and purchasers, it is held that each block is to be considered as a separate tract, in assessing damages." Laflin v. Chicago, etc., Ry. (C. C.) 33 Fed. 415. Nor are the two cases which the learned counsel for the defendants say are the only ones found, in which the question of damages for the dismemberment of a public service corporation by a compulsory taking has been raised, opposed to this doctrine. In Monongahela Navigation Co. v. United States, 148 U. S. 312, 13 Sup. Ct. 622, 37 L. Ed. 463, the general government was proceeding to condemn, under the power of eminent domain, one of the seven locks and dams owned by the navigation company. The court, calling attention to the doctrine of damages by severance, said: "This is a question which may arise, possibly, in this case,

[ocr errors]

if the seven locks and dams belonging to the navigation company are so situated as to be fairly considered one property,-a matter in which the record before us furnishes no positive evidence. It seems to be assumed that each lock and dam by itself constitutes a separate structure and separate property, and the thoughts we have suggested are pertinent to such a case." The other case so cited and referred to by counsel is U. S. v. Gettysburg Electric Ry. Co., 160 U. S. 368, 16 Sup. Ct. 427, 40 L. Ed. 576. But this case seems rather to be within the rule of the "single tract" cases. The court simply says: "If the part taken by the government is essential to enable the railroad corporation to perform its functions, or if the value of the remaining property is impaired, such facts might enter into the question of the amount of the compensation to be awarded." It was alleged by the company that the effect of the condemnation of the strip of land in question would be to cut off a particular branch railway or extension belonging to it, and destroy its continuity, and prevent its construction. It seems to us clear that the several parts of an electric railway system may properly be regarded as a single property. No other authority cited by the defendants upon this point aids them. The damages occasioned to the company by the taking of the Waterville property, considered with respect to its other and distinct property, if any, will be incidental and consequential. And such damages are not within the statutory and constitutional requirements of "just compensation." Cushman v. Smith, 34 Me. 247; Brooks v. Cedar Brook Imp., etc., Co., 82 Me. 17, 19 Atl. 87, 17 Am. St. Rep. 459, 7 L. R. A. 460.

The defendants' request 4 should be given. It relates to property not directly connected with the water system or plant. It should be appraised "at its fair market value, not at a forced sale, but at what it is fairly worth to the seller, under conditions permitting a prudent and beneficial sale." Chase v. Portland, 86 Me. 367, 29 Atl. 1104; Doughty v. Somerville R. R. Co., 22 N. J. Law, 495; 10 Am. & Eng. Ency. of Law (2d Ed.) 1152; Monongahela Navigation Co. v. United States, supra; Montgomery County v. Bridge Co., supra; Westchester Turnpike v. Westchester Co., 182 Pa. 40, 37 Atl. 905. In Chase v. Portland, our own court quoted with approval from Lawrence v. Boston, 119 Mass. 126, the following: "Market value' means the fair value of the property, as between one who wants to purchase and one who wants to sell any article; not what could be obtained for it under peculiar circumstances, when a greater than its fair price could be obtained; not its speculative value; not value obtained from the necessities of another. It is what it would bring at a fair public sale, when one party wanted to sell, and the other to buy." Palmer v. Penobscot Lumbering Association, 90 Me. 193, 38 Atl. 108. The statute provides for fixing the "just compensation" for the

property taken at its fair and equitable value, but it does not provide for compensation for consequential damages.

Defendants' request 5 has already been discussed. It should not be given, except as already qualified. We hold that the construction cost is admissible, but not controlling, on the question of present value. It must be borne in mind, as said by Mr. Justice Brewer in National Waterworks Co. v. Kansas City, supra, that "original cost' and 'present value' are not equivalent terms," and that besides the elements of wear and tear, and depreciation in physical structure or in value, the property may have cost more than it ought to have cost. San Diego Land Co. v. National City, supra.

Defendants' requests 6 and 7, as limited in their brief, are that neither the reproduction cost of the existing plant, nor the cost at present of a new one differently constructed, but equal or even superior in efficiency to the one now existing, is the legal criterion of the total values to be awarded, or even of the plant or structure value. This is undoubtedly true, if by "criterion" is meant a sole or controlling test of present value. There are other elements besides cost of reproduction or replacement which affect present value. The present value of the property is of vital importance, for, as we have seen, the value of the property at the time it is being used for the public is one of the elements essential in determining what are then reasonable rates, and question of franchise value depends upon the rates which may reasonably be charged. San Diego Land Co. v. National City, supra. We think it will be proper for the appraisers to consider what the existing system can be reproduced or replaced for, because evidence of cost of reproduction will have some tendency to show what is the present value. Such cost will not, however, be conclusive. There are other elements, still

to be noticed, which should be considered in fixing present value. In Newburyport Water Co. v. Newburyport, the cost of the reproduction of all of that part of the physical plant used in pumping and delivering water, less any depreciation, was considered without objection, and seems to have been approved by the court. Gloucester Water Supply Co. v. Gloucester, 179 Mass. 365, 60 N. E. 977; Smyth v. Ames, supra. But the mere cost of reproduction is not enough. Judge Brewer, in National Waterworks v. Kansas City, supra, calls attention to two additional elements, one, that it is a completed structure, connected with buildings prepared for use; and the other, that the company is a going concern. He says (page 665, 10 C. C. A., page 865, 62 Fed., 27 L. R. A. 827): "Nor would the mere cost of reproducing the waterworks plant be a fair test, because that does not take into account the value which flows from the established connections between the pipes and the buildings of the city. It is obvious that the mere cost of purchasing the land,

constructing the buildings, putting in the machinery, and laying the pipes in the streets, -in other words, the cost of reproduction,does not give the value of the property as it is to-day. A completed system of waterworks, such as the company has, without a single connection between the pipes in the streets and the buildings of the city, would be a property of much less value than that ⚫ system connected, as it is, with so many buildings, and earning in consequence thereof the money which it does earn. The fact that it is a system in operation, not only with a capacity to supply the city, but actually supplying many buildings in the city,-not only with a capacity to earn, but actually earning,-makes it true that the 'fair and equitable value' is something in excess of the cost of reproduction."

The court, in San Diego Water Co. v. San Diego, 118 Cal. 556, 50 Pac. 633, 62 Am. St. Rep. 261, 38 L. R. A. 460, holds that the method of fixing present value by ascertaining cost of replacement is not applicable to property of this character, because, chiefly, the construction and development of waterworks is a matter of growth. At the outset the company owning them is a pioneer. It must keep pace with or anticipate municipal growth. The works must be constructed, and usually no reward can be realized by the constructors until some time has elapsed. In the meantime, as the city grows, the facilities of building such works are increased, and the cost of construction thereby diminished. But we think that, at the most, these considerations suggest only that other elements are also taken into account in fixing present value. So far as they relate to the original hazard, we have discussed them in an earlier part of this opinion. We think the inquiry along the line of reproduction should, however, be limited to the replacing of the present system by one substantially like it. To enter upon a comparison of the merits of different systemsto compare this one with more modern systems-would be to open a wide door to speculative inquiry, and lead to discussions not germane to the subject. It is this system that is to be appraised, in its present condition and with its present efficiency.

Defendants' request 8 is, in effect, that, in estimating even the structure value of the plant, allowance should be made, in addition to the value as otherwise established, for the fact, if proved, that the water system is a going concern, with a profitable business and good will already established, and with a present income assured and now being earned. We think this instruction, with a modification to be noted, should be given. Newburyport Water Co. v. Newburyport, supra; National Waterworks Co. V. Kansas City, supra; Gloucester Water Supply Co. v. Gloucester, supra; Bristol v. Waterworks, 23 R. I. 274, 49 Atl. 974. But the term "good will" may be misleading. Lord Eldon said that good will is nothing more than the probability that

the old customers will resort to the old place. Crutwell v. Lye, 17 Ves. Jr. 335. See Flagg Mfg. Co. v. Holway, 178 Mass. 83, 59 N. E. 667. Under any possible definition, it involves an element of personal choice. This phrase is inappropriate where there can be no choice. So far as the defendants' system is "practically exclusive," the element of good will should not be considered. Bristol v. Waterworks, supra.

The defendants, in request 9, ask that in determining the amount to be added to structure value, in consideration of the fact that the system is a going concern, the appraisers should consider, among other things, the present efficiency of the system, the length of time necessary to construct the same de novo, the time and cost needed after construction to develop such new system to the level of the present one in respect to business and income, and the added net incomes and profits, if any, which, by its acquirement as such going concern, would accrue to a purchaser during the time required for such new construction, and for such development of business and income. We think this instruction should be given. These are all proper matters for consideration "among other things." They are not controlling. Their weight and value depend upon the varying circumstances of each particular case. Of course a plant, as such, already equipped for business, is worth more, if the business be a profitable one, than the mere cost of construction.

The defendants' request 10 should also be given. It asks, in effect, that, in addition to structure values already considered, the appraisers should consider all the franchises, rights, and privileges now held by the Maine Water Company within the Kennebec water district and Benton and Winslow, and allow just compensation for them as such. This valuation, however, must be made with reference to the character and duration of the franchises. So far as appears, they are not exclusive, and they are subject to repeal. This we have already discussed. A franchise is property, and it has value. In this case the franchises have value in themselves, inasmuch as they give the owner the privilege of doing what is called a "profitable business." We have already shown that the existence of such franchises may also enhance the value of the plant by which they are exercised. It should be remembered, however, that a frauchise has only one appraisable value, and care should be taken that that value is appraised only once.

The defendants' request 11 should be given In this case. It has been given in part already. It is that the value of a franchise depends upon its net earning power, present and prospective, developed and capable of development, at reasonable rates; that the value to be assessed is the value to the seller, and not to the buyer; and that "just compensation" means full compensation for everything or element of value taken. Monon

« ÀÌÀü°è¼Ó »