Clark Ferry Bridge Co v. Public Service Commission of Commonwealth of Pennsylvania

• Decision Date: 05 February 1934
• Docket Number: No. 274,274
• Citation: 291 U.S. 227,78 L.Ed. 767,54 S.Ct. 427
• Parties: CLARK'S FERRY BRIDGE CO. v. PUBLIC SERVICE COMMISSION OF COMMONWEALTH OF PENNSYLVANIA
• Court: U.S. Supreme Court

291 U.S. 227

54 S.Ct. 427

78 L.Ed. 767

CLARK'S FERRY BRIDGE CO.

v PUBLIC SERVICE COMMISSION OF COMMONWEALTH OF PENNSYLVANIA.

No. 274.

Argued Jan. 18, 1934.

Decided Feb. 5, 1934.

Appeal from the Superior Court of the Commonwealth of Pennsylvania.

[Syllabus from pages 228-230 intentionally omitted] Mr. George Ross Hull, of Harrisburg, Pa., for appellant.

[Argument of Counsel from pages 228-231 intentionally omitted] Messrs. E. Everett Mather, Jr., and John Fox Weiss, both of Harrisburg, Pa., for appellee.

Mr. Chief Justice HUGHES delivered the opinion of the Court.

The Superior Court of Pennsylvania affirmed (as modified) an order of the Public Service Commission of that state prescribing a tariff of tolls to be charged on the bridge of the Clark's Ferry Bridge Company over the Susquehanna river, 108 Pa.Super.Ct. 49, 165 A. 261, 265. The company brings this appeal.

In its review of the facts the Superior Court states that the bridge is comparatively new, having been completed in May, 1925. The bridge replaced and was con- structed near the site of a wooden bridge which had been acquired by the incorporators of the present company. In August, 1925, a complaint was filed with the Public Service Commission alleging that the rates in effect were unreasonable. By its order of June 8, 1926, the commission found the fair value of appellant's property to be $767,800, and that appellant was entitled to receive a gross annual revenue of $85,905 on the basis of a return of 7 per cent. on that fair value, after allowing operating expenses, taxes, an annual depreciation allowance, and amortization of bond discount. An appeal from the commission's order was taken to the Superior Court, but was withdrawn, and in February, 1927, the company filed a new tariff. The rates thus fixed were continued in effect until July, 1929, when the company made a voluntary reduction. In January, 1930, the commission began the present proceeding on its own motion and, after hearings, determined that the fair value of the appellants' property, as of February 2, 1932, was still $767,800, and that the annual gross revenue which should be allowed was $84,124 on the basis of a return of 7 per cent. on that fair value, after allowing expenses and annual depreciation. 11 Pa. P.S.C. 222.¹ In this calculation, an item of $1,331 for annual bond amortization was omitted. The Superior Court held that it should be included and modified the commission's order accordingly, that is, so as to provide that the allowable gross revenue should be $85,455.

First. Appellant contends that the commission and the court treated the valuation in the commission's decision of 1926 as res judicata in the present proceeding. We do not so construe the commission's report or the court's opinion. The commission received evidence as to alleged changes in value and estimates of the cost of reproducing the property. The commission determined that 'cost conditions' had not 'changed materially' since 1926, and, 'upon a complete examination of the entire record in both proceedings,' the commission found that the fair value of the property was $767,800 as of February, 1932. 11 Pa. P.S.C. at page 231. The Superior Court, in construing the action of the commission, said: 'When the subsequent complaints were filed, the commission evidently did not consider its previous findings as barring appellant from raising the question of the fair value of its property in 1930 and the proper allowances to be made for operating expenses and depreciation, but instituted an investigation, and, as already stated, admitted in evidence appellant's reproduction cost estimate and its supporting testimony, and put in evidence the reproduction cost esti- mate of one of its engineering staff, and the report of the result of an examination of appellant's books and records.' The court acted upon what it stated to be 'the legislative mandate of the amendment of June 12, 1931, P.L. 530 (section 1 (66 PS § 836)), that, in an appeal of this character, we shall consider the record and 'on (our) own independent judgment * * * determine whether or not the findings made and the valuations and rates fixed by the commission are reasonable and proper." It was in this view that the court examined the 'main controversies' between the parties. 108 Pa. Super. Ct. at page 63, 165 A. 261, 266.

Appellant attacks the finding of fair value upon the grounds that it was based solely on the original cost of the bridge property and that the amount paid by the appellant for the bridge was less than its fair value at that time and less than its fair value in 1930. It is not open to question that the reasonable cost of the bridge is good evidence of its value at the time of construction. And we have said that 'such actual cost will continue fairly well to measure the amount to be attributed to the physical elements of the property so long as there is no change in the level of applicable prices.' McCardle v. Indianapolis Water Co., 272 U.S. 400, 411, 47 S.Ct. 144, 148, 71 L.Ed. 316; Los Angeles Gas & Electric Corp. v. Railroad Commission, 289 U.S. 287, 306, 53 S.Ct. 637, 77 L.Ed. 1180. In this instance, as the state court observed, the utility is not 'a complicated system which has taken years to construct and enlarge, like a waterworks, or gas works, or electric light plant, or street railway system,' but is 'one structure, a reenforced concrete bridge, built, as it now is, without additions or improvements.' It appears that the bridge was built under a contract awarded in June, 1924, after competitive bidding, and was open to traffic in May, 1925. It is manifest that, when the commission made its first decision in June, 1926, the reasonable cost of the structure furnished a proper basis for determining its fair value. Of the amount of the total valuation, at that time, of $767,800, the sum of $592,253 was taken as the construction cost on the basis of the actual outlay which included $566,301 paid to the contractor for the bridge and approaches. Appellant then insisted, and still insists, and it was shown, that the contractor sustained a loss. This was said to amount to about $143,000, that is, on labor and material, with overhead and depreciation of plant, as distinguished from a loss of profits. The evidence as to this was given by the contractor's auditor who attributed the loss to an unusual flood. He said: 'We would have made money probably if things would have gone alone smoothly without any high water.' The court accepted this explanation—the only one given—stating that 'a sudden rise in the Susquehanna river during the course of the work was responsible for the loss; without it there would have been a fair profit.' The court estimated that $20,000 additional, 'spent on the cofferdam construction,' would probably have obviated the loss, adding, 'We have increased the cofferdam expense to cover this amount.' Appellant complains that this statement was based on speculation and has no support in the record. But appellant's case is no stronger. The evidence gives no adequate ground for a conclusion that with reasonable care the loss could not have been prevented. The outstanding fact is that the contract was let in the usual way to the lowest bidder and the contractor received a substantial bonus ($22,050) for finishing the work before the stipulated date. To sustain the contention that the actual cost of the structure was less than a reasonable cost at the time, it was necessary for the appellant to give convicing proof. But such proof is lacking. We find no satisfactory basis for holding that the fair value of the property in June, 1926, was greater than $767,800 as it was then determined to be.

The question is whether the proof shows that the value was greater in 1932. Appellant relies upon the estimate of engineers as to the cost of reproduction new of the physical property, as of September 1, 1929, together with 'all additional expenditures required over and above the bare cost of the physical property, to put the bridge in operation as an income-producing property.' This estimate gave a total cost of reproduction new less depreciation (the estimate being exclusive of two other elements of alleged intangible value described as 'attached business value' and 'location value') of $875,644.30. The commission's engineer made a similar estimate based upon prices prevailing during the last three months of 1930, which gave the cost of reproduction new, less depreciation, as $741,871. There were also charts showing the price trends for labor and materials for 1924 to 1930, inclusive. As summarized by the court, the evidence shows 'that in 1924, when the contract for the construction of the bridge was awarded, construction prices were reported as being 215% of the 1913 level; that in September, 1929, when appellant's reproduction cost estimate was made, they were 208% of the 1913 level; and that during the last three months of 1930 they fell to about 198%.' It would serve no useful purpose to review the details of the estimates of reproduction cost. The court carefully considered them and properly concluded that the trend in prices from 1924—5, when the bridge was built, to 1931—2, when the commission determined its present fair value, was 'downward rather than upward,' and that 'in the absence of proof that the prices paid for the construction of the bridge were abnormally low, there is no reason why in the short period of six years after its completion, with the tendency of prices for both...