Denver v. Denver Union Water Co.
246 U.S. 178 (1918)

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U.S. Supreme Court

Denver v. Denver Union Water Co., 246 U.S. 178 (1918)

Denver v. Denver Union Water Company

Nos. 294, 295

Argued October 3, 4, 1917

Decided March 4, 1918

246 U.S. 178

Syllabus

The findings of a special master appointed, with consent of parties, to take the testimony and report it with his findings of fact and conclusions of law for the advisement of the district court, are not conclusive, but subject to review by that court upon exceptions.

Where a master, so appointed, had heard the issues fully and admitted all proffered evidence, and the exceptions to his findings raised no serious questions of fact, this Court found it unnecessary to remand the case to the district court because the latter, erroneously, declined to pass upon the exceptions, but, having before it the evidence and all matters necessary for judgment, proceeded to do what that court should have done -- considered the report, passed upon the exceptions, and made such decree as was deemed equitable.

Where a city was peculiarly dependent upon the continued use of the plant of a water company whose franchise had expired, the situation negativing the idea that other means were presently procurable or in contemplation for supplying the water vital to the community, and an ordinance was passed which, by its enacting provisions, not only fixed the rates which the company might charge in future but, in addition, provided for collecting charges semi-annually in advance for various uses which could not be discontinued on brief notice, required installation of meters for all prospective users, to be paid for monthly, and of hydrants to be ordered thereafter by the city upon extended as well as existing mams at an annual rental, and imposed fines upon the company or its agents for any violation of the ordinance, held that these provisions were inconsistent with declarations in the preamble characterizing the company as a tenant by sufferance and disclaiming any intention to recognize its right to

Page 246 U. S. 179

occupy the streets or continue the service, and that the ordinance should be construed liberally, so as to preserve the substantial rights of both parties, viz. as recognizing the city's dependence on the plant, as conferring, impliedly, whatever privileges might be necessary to enable the company to continue serving the public, as in effect requiring it to furnish water, and in terms forbidding it from exceeding the specified rates, and so as granting a new franchise of indefinite duration, terminable either by the city or by the company at such time and under such circumstances as would be consistent with the duty owed by both to the inhabitants.

In view of the new rights so conferred upon the company, its plant employed in supplying the city with water must not be valued as "junk," but as property useful and in use in the public service, in determining whether the rate fixed by the ordinance allow an adequate return.

Nor is this question of value greatly affected, if at all, by the fact that there is neither right nor obligation to continue the use perpetually, or for any long period that may be defined in advance.

In valuing the plant of a public service company as a basis for determining the adequacy of rates fixed by a city, it is proper to estimate land at present market value, and structures at reproduction cost less depreciation.

Also the "going concern value," due to the fact that the plant is assembled and established, doing business and earning money, is a property right which should be considered in such determinations, and estimated in each case upon the circumstances therein presented.

What rate of compensation may be regarded as adequate depends greatly upon circumstances and locality. In this case, where the net annual return obtainable under the ordinance rates was but 4.3% (approximately), of the value of the plant, excluding certain disputed water rights, in a city where the prevailing rate of interest for secured loans on business and residence properties was 6%, with higher rates for loans less secured, held that the return was clearly insufficient, and that the ordinance amounted to a taking of the company's property without due process of law.

Whether, in Colorado, a company under franchise contract to furnish water for a city becomes the owner of water rights which it originates by diverting water from natural streams and supplying it to the consumers under short license contracts not decided.

Modified and affirmed.

The case is stated in the opinion.

Page 246 U. S. 180

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