City of Tacoma v. Tacoma Light & Water Co.

• Decision Date: 25 August 1897
• Citation: City of Tacoma v. Tacoma Light & Water Co., 17 Wash. 458, 50 P. 55 (Wash. 1897)
• Court: Washington Supreme Court
• Parties: CITY OF TACOMA v. TACOMA LIGHT & WATER CO.

50 P. 55

17 Wash. 458

CITY OF TACOMA v. TACOMA LIGHT & WATER CO.

Supreme Court of Washington

August 25, 1897

On rehearing. For former decision, see 47 P. 738. Disapproved.

Anders J., dissenting.

Parsons, Corell & Parsons and Crowley, Sullivan &amp Grosscup, for appellant.

James Wickersham and Ben Sheeks, for respondent.

REAVIS J.

Action to recover damages for deceit and fraudulent misrepresentations by appellant in the sale of a water and light plant to respondent. The respondent, the city of Tacoma, is a municipal corporation of the first class, and the appellant a private corporation organized under the laws of the state, having its principal place of business in the city of Tacoma, and holding from the city a franchise to furnish water and light to the inhabitants of the city for reasonable compensation. For several years before the sale of its water and electric light plant to the city, appellant owned a system of waterworks which was used for the purpose of supplying the city and its inhabitants with water, and was the owner of an electric light plant and a gas plant operated to supply the inhabitants as well as the city with electric light and gas. It owned waterworks, electric light plant, gas works, sources of water supply, riparian rights, rights of way, lands, lots, and personal property. Its franchise to supply water and light to the inhabitants of the city and to the city was not exclusive, and it appears that there were other companies at the time possessing similar franchises, and to some limited extent operating in the city. Negotiations for the sale of the water and light plant and works and various properties of the appellant were entered into between the parties in the year 1892. The respondent was not authorized to purchase the property offered without submitting the proposition to purchase and to issue bonds for the payment of the purchase money to a vote of the people of the city. After much negotiation, the price was agreed upon between the parties at $1,750,000 for certain properties scheduled by appellant, and the city council of respondent thereupon submitted the proposition to purchase the properties which were described for the price agreed upon to the electors of the city at an election on the 11th day of April, 1893, and afterwards respondent, pursuant to the authority conferred by the electors, on June 22, 1893 purchased the property from appellant for the sum of $1,750,000. The complaint substantially charges that appellant, for the purpose of inducing respondent to purchase its property at the price stated, and with intent to deceive and defraud respondent, prior to the sale by appellant's officers, agents, servants, and employés, falsely represented to respondent and its agents and officers that appellant's waterworks and sources of water supply included the flow from certain springs known as Thomas and Patterson springs, and represented to respondent that the permanent daily flow from those springs was not less than 10,000,000 gallons, and that the daily flow from Clover creek was not less than 15,000,000 gallons, and that the daily flow from Maplewood and Puyallup springs was not less than 13,000,000 gallons, and that the daily flow from Gallagher's Gulch springs was not less than 4,000,000 gallons; and that appellant represented that all of the flow of water mentioned came from gravel beds, and was pure, and that it was at such an elevation above the city as to permit being supplied directly to the three different services by gravity, which would insure economy in working expenses; that the extension to Thomas and Patterson springs could be made for $400,000, and that thereupon the city would have an abundant supply of good, pure water in its highest service; that all of its property was in good and first-class condition, and that it was of the value of $1,750,000; that each and all of these representations were untrue, and were known by appellant to be untrue when made, and that they were made to induce respondent to purchase the property; that appellant from the time of the offer of its property for sale until the sale was consummated continuously asserted, declared, and published that the representations before mentioned were in all respects true, but it is charged by respondent that in truth, as appellant well knew, the permanent daily flow of water from Thomas and Patterson springs did not exceed 2,500,000 gallons, nor did that from all the various sources of supply exceed 20,000,000 gallons; that Thomas and Patterson springs, and the lands upon which they are situated, are of no value whatever to respondent; that it was the purpose of respondent in its purchase of appellant's property to acquire, own, and operate a complete water system adequate to supply by gravity the city and its inhabitants with water; that, of the various sources of supply offered for sale by appellant, Thomas and Patterson springs were the only source from which water could be obtained and conveyed by such system to the more elevated portions of the city, containing a large number of its inhabitants; that the waters from these springs had not therefore been conducted to the city by appellant, but appellant represented that it had made surveys and estimates by competent engineers, and that respondent could, by a gravity system, bring such waters to the elevated portions of the city at an expenditure of about $400,000; that respondent would not have purchased the property of appellant, or any part thereof, but for respondent's reliance on the waters from Thomas and Patterson springs; and that appellant knew that respondent relied upon its representations as to these springs. It is also charged that appellant falsely and fraudulently represented that of the waterworks sold to respondent there was a new conduit, sound and in good condition, for conveying water from sources of supply to the distributing point, of more than 54,000 feet, and that connected with the distributing system thereof there was laid iron pipe to the amount of 349,210 feet, and also represented to respondent that of the land to be conveyed as a part of the plant a certain tract known as "Site for Station A," consisted of 8.16 acres, when in truth, as defendant knew, the conduit was old, rotten, and almost worthless, and of the distributing system there was not more than 293,520 feet of iron pipe laid, and that the "Site for Station A" did not contain more than one acre of land; that appellant represented falsely that from its knowledge of the character and nature of the properties sold they were of the value of $1,750,000, when in truth and in fact, which was well known to appellant, all the properties so offered for sale by appellant were not, at any time, worth more than $750,000; that respondent had no knowledge or means of knowing the falsity of the representations made by appellant, or either of them, until after sale was completed, and the purchase price paid; that it was owing to such false and fraudulent representations by appellant that such purchase was made. It is further charged that with intent to, and for the purpose of, preventing respondent from making any investigation or examination of the property sold, and of the character, value, and condition thereof, the appellant fraudulently and corruptly induced and employed certain of respondent's officers and servants, specifying the president of the city council, and other members of the council, and that such officers and agents of the city, on account of such inducement and employment, failed, neglected, and refused to examine into the character, value, and condition of the property purchased from the appellant, but represented to respondent that it could rely upon the representation made by appellant, and thus prevented any investigation or examination of the sources of the water supply, and of the value, character, and extent of the property purchased from appellant; and that by reason of the deficiencies in the property it was not of any greater value than $750,000, and damages are laid at $1,000,000.

The answer of appellant denies all the allegations of fraud and misrepresentation charged in the complaint, and affirmatively sets up that it afforded every opportunity for an examination of its property before sale, and that respondent employed a competent and fully-qualified civil and hydraulic engineer before the sale to make an examination of appellant's property, including the sources of water supply, and that the engineer, Rudolph Hering, made such examination, and reported to the city council full information as to the kind, character, and situation of the property, including the sources of water supply; and denies that it sold to respondent property otherwise than as the same was described by its deed to respondent, and that the property therein described as "Site for Station A" contained 8.16 acres, and no more.

Respondent, replying, admits that it employed the engineer, Rudolph Hering; that he made some examination of the property of appellant, and that he made a report to the city council, but alleges that he relied entirely upon the representations made to him by appellant concerning all the matters stated in his report, and denies that the report contained full information of the kind, character, and situation of the property, including the sources of water supply, and denies that the respondent purchased the property relying upon the knowledge of its officers, agents, employés, and engineers employed by it to make an examination of the properties, but relying on the representations of appellant.

After all the evidence was in, the superior court withdrew from the consideration of the jury all questions except misrepresentations to respondent relative to...