City of Thibodaux v. Louisiana Power & Light Co.

• Decision Date: 04 December 1963
• Docket Number: Civ. A. No. 6444.
• Citation: 225 F. Supp. 657
• Parties: CITY OF THIBODAUX v. LOUISIANA POWER & LIGHT CO.
• Court: U.S. District Court — Eastern District of Louisiana

225 F. Supp. 657

CITY OF THIBODAUX v. LOUISIANA POWER & LIGHT CO.

Civ. A. No. 6444.

United States District Court E. D. Louisiana, New Orleans Division.

December 4, 1963.

Jos. Loret, Baton Rouge, La., Remy Chiasson, Wollen J. Falgout, Thibodaux, La., Theo. F. Cangelosi, Baton Rouge, La., for plaintiff.

John Peltier, Jr., and Monroe & Lemann, Andrew P. Carter, Eugene G. Taggart, New Orleans, La., for defendant.

FRANK B. ELLIS, District Judge.

On February 4, 1957, the City of Thibodaux, State of Louisiana, a duly incorporated municipality (hereinafter referred to as "City") brought suit to expropriate the electrical power distribution system of the Louisiana Light & Power Company (hereinafter referred to as "Power Company") within the corporate limits of the City pursuant to Louisiana Revised Statutes, Tit. 19:101, LSA, which reads in pertinent part:

Any municipal corporation * * * may expropriate any electric light, gas or waterworks plant or property.

The Power Company removed the suit to the United States District Court for the Eastern District of Louisiana,¹ premised on the original diversity jurisdiction of this Court since Power Company was a citizen of another State under 28 U.S.C. § 1332.² Answer was filed and the matter set down for hearing. By Minute Entry of May 15, 1957, it was stipulated that the seizure would be pursuant to Rule 71A F.R.Civ.P. and that a commission of three would be appointed to determine the value of the property, should that issue be reached. It was further agreed that Power Company would be heard on all its defenses at a special hearing.³ Subsequent to the hearing the District Judge then presiding stayed all further proceedings pending a determination by the Louisiana Supreme Court of the limited application of La.R.S. 19:101, LSA to the expropriation of the facilities of Power Company within the city limits of the City, on the grounds that the paucity of Louisiana law on the subject statute⁴ advised reference of a crucial state law problem to the State Court.⁵ The Fifth Circuit Court of Appeals reversed the District Court on the grounds that abstention was unavailable and inappropriate under the circumstances.⁶ The Supreme Court of the United States reversed the Fifth Circuit and affirmed the District Court's abstention of jurisdiction pending determination of the applicability of the statute by the Louisiana Courts.⁷ Subsequently the right of the City to expropriate the property involved was confirmed by the Louisiana courts and the matter returned to the federal District Court.⁸

A commission of three was appointed and ordered to take testimony and file a report which was to contain "not only the opinions as to value, but also the detailed considerations of which these opinions were based." On May 26, 1961, the District Court issued a "Charge to the Commission" setting out the considerations which were to govern the Commission in its determination of the value of the property to be expropriated. Both the City and Power Company filed objections to the Charge and on June 6, 1961, the District Court entered an Amended Charge.⁹ After the presentation and submission of proposed findings by the parties, the Commission filed its first report on August 21, 1961. Both the City and the Power Company took exception to the Commission's report and after a hearing the District Court, on February 8, 1962, referred the matter back to Commission for the purpose of answering certain specific interrogatories. On February 28, 1962, the Commission filed its Supplemental Report on valuation in response to the District Court's interrogatories. Once again the City and Power Company filed specific objections to the Supplemental Report. On March 27, 1962, the District Court overruled the objections of the City and Power Company to the Supplemental Report of the Commission. No formal judgment was entered. Thereafter the Commissioners' fees were fixed by the District Court.

Both the City and Power Company moved for a new trial¹⁰ and on October 24, 1962, the matter was heard before the District Court as presently constituted, arguments being heard and the testimony of one witness for Power Company being heard. The matters presented were the correctness of the Commission's valuation of the expropriated property and the justification of the Power Company's costs representing expert fees. It is the cross-motion for a new trial which is presently before this court for determination.

PART II

Before delving into the facts of this matter it is important to set out the limitations of the review of the Commissioners' findings on this cross-motion. Under the stipulated application of Rule 71A F.R.Civ.P., the Commission appointed by this Court was governed generally by Rule 53 F.R.Civ.P., and this court, in reviewing the findings of the Commission is bound by Rule 53(e) (2) F.R. Civ.P., which states in pertinent part:

"(2) In Non-Jury Actions. In an action to be tried without a jury the court shall accept the master's findings unless clearly erroneous. * * * The court after hearing objections may adopt the report or may modify it or may reject it in whole or in part or may receive further evidence or may recommit it with instructions."

As to the limits of this Rule, Professor Moore has stated:

"The `unless clearly erroneous' provision of Rule 53(e) (2) is a mandate to the trial court in passing on the master's findings of fact, and prescribes substantially the same test which Rule 52(a) applies to the findings of fact of the District Court on appeal.

"Although Rule 53(e) (2) is a mandate to the trial court, failure to observe the Rule will result on appeal in reversal or modification of the trial court's judgment. The master's findings must be read reasonably; and, although some are deficient, those that are adequate come within the provisions of Rule 53(e) (2), unless the report is rejected modified, or recommitted."

Of course, it goes without saying that conclusions or applications of law are fully within the power of this Court to alter if it is demonstrated that the Commission was in error. To this extent, then, this Court must accept the report of the Commissioners unless clearly erroneous and modify or reject the report in whole or in part and apply the law properly if the Commission did otherwise.

The Power Company is a large public power utility serving Central and South Louisiana for the most part. Among its property holdings are the usual generators, sub-stations, lines, poles, and so forth, which make up a large integrated power complex. In the City of Thibodaux proper the only tangible equipment of Power Company is its ultimate distribution system made up principally of lights, poles, and wiring. The condemnation involved in this action is, as previously mentioned, limited to the corporate limits of the City. However, outside of the corporate limits are the generators and sub-stations of Power Company which supply the power to the lines and poles within the corporate limits. These extra-urban facilities of the Power Company are extensive in size and diversification of location, and are, in fact, what give the intra-urban facilities their value. In addition to its intra-urban property subject to seizure, the Power Company has a franchise to operate within the City which, when suit was filed, had 64 years to run. This the Power Company will lose by the expropriation. Moreover, the loss of the franchise necessitates the building of distribution facilities around the City in order to continue service to other areas of the State of Louisiana. Similarly the expropriation will render useless, in some degree, the extra-urban facilities of the Power Company which had formerly supplied the power to the intra-urban facilities. Lastly, Power Company loses the right to operate in and derive profits from the customers within the City. As a consequence, the City is taking from the Power Company, and for which it must pay, four items:

a) The physical properties within the City.

b) A franchise.

c) The usefulness of certain extra-urban properties.

d) The right of passage through the City to serve other areas.

It was the valuation of these items which prompted the reference to the Commission and which brings this case, now, to its ultimate resolution at the trial court level.

In its initial charge to the Commission, the Court, in addition to general orders, set out the items to be valued by the Commission as follows:

a) Market values of the physical properties to be expropriated.

b) Market value of the Company's franchise rights in the territory affected.

c) Severance damages, if any.

d) Consequential damages, if any.

The general rule to be applied was the valuation as between a willing buyer and a willing seller, with certain important limitations. The facilities were presumed to be useful to the hypothetical buyer in their present location without substantial alteration. Even though the City could operate without a franchise, it was presumed that it would need the same franchise enjoyed by the Power Company. The franchise value might be judged by comparable sales and evidence of actual earnings. Guesses about future profits were to be disregarded. The severance damages were to be considered by evaluating the total system prior to the expropriation and subsequent to it with the resultant figure being severance damages. The cost of relocating around the City was to represent the consequential damages. Both parties objected to this charge and after a hearing and submission of briefs the Court altered the charge in certain material aspects. In the Amended Charge to the Commission the market value was to be determined as at the time the proceedings reopened in this Court subsequent to the abstention. Evidence of future growth, "when proved to a reasonable certainty", could be considered in assessing value to the franchise. As to the consequential damages, the Commission was ordered to consider...