Lanning v. Osborne

• Decision Date: 22 March 1897
• Docket Number: 716.,671
• Citation: 79 F. 657
• Court: U.S. District Court — Southern District of California
• Parties: LANNING v. OSBORNE et al. RIPPEY v. SAN DIEGO LAND & TOWN CO. et al.

79 F. 657

LANNING v. OSBORNE et al.

RIPPEY v. SAN DIEGO LAND & TOWN CO. et al.

Nos. 671, 716.

United States Circuit Court, S.D. California.

March 22, 1897

Works &amp Works, for complainant Lanning.

Withington & Carter and C. H. Rippey, for complainant Rippey.

C. H Rippey, Haines & Ward, and J. S. Chapman, for defendants Osborne and others.

Works &amp Works and Works & Lee, for defendant San Diego Land & Town Co.

ROSS Circuit Judge.

The bill in this case, to which there are a large number of defendants, was filed January 6, 1896. It alleges, among other things: That on the 4th day of September, 1895, the complainant was, by an order and decree of the circuit court of the United States for the district of Massachusetts, duly made and entered, appointed receiver of all of the property of the San Diego Land & Town Company, with full power to take possession of and manage, operate, and control the same including the plant and water system in the bill mentioned and that by an order of this court, duly made and entered September 30, 1895, the said first-mentioned order was duly confirmed as to all property of the said company situated within the jurisdiction of this court, including the said water plant and system, and that the complainant was by the said last-mentioned order duly appointed receiver of the said mentioned property, with full power and authority to manage and control the same,-- by virtue of which orders and decrees the complainant took possession of and entered upon and continued the management thereof as such receiver. That the San Diego Land & Town Company, of which the complainant is thus the duly appointed and qualified receiver, is a corporation duly organized and existing under and by virtue of the laws of the state of Kansas, and at the times mentioned in the bill was doing business in the state of California. That during all the times mentioned the company was, and still is, the owner of valuable water, water rights, reservoirs, and of a pipe system for furnishing water to consumers for domestic, irrigation, and other purposes, and of a franchise for the impounding, sale, distribution, and disposition of such waters to the defendants and other consumers, and to the city of National City, in this state, and its inhabitants. That its main reservoir and supply of water is, and was at the times mentioned, situated in a small stream called the 'Sweetwater River,' in San Diego county, distant about five miles from National City; and that its system of reservoirs, mains, flumes, aqueducts, and pipes covers and can supply a limited amount of territory, consisting of certain farming lands within and outside of National City, and in part of the residence portion of that city. That the company, in procuring the water and water rights, reservoirs, and distributing system owned by it, and in preparing itself to supply consumers with water, expended, up to January 1, 1896, $1,022,473.54, which was reasonably necessary for those purposes. That by the expenditure of that sum of money the company procured and owns, subject to public use, and the regulation thereof by law, the property mentioned. That the capacity of its reservoir is 6,000,000,000 gallons of water. That the defendants are the owners, respectively, of tracts of land under the company's water system, most of the defendants owning and holding small tracts of only a few acres each. That each of the defendants has, by purchase or otherwise, become the owner of a right to a part of the water appropriated and stored by the company necessary to irrigate his tract of land, and is liable to pay for the use thereof such rental as the company is entitled to charge and collect. That the annual expense of operating and keeping in repair the reservoir and water system of the company, and of furnishing the consumers with water, is, including interest on its bonds, and excluding the natural and necessary depreciation of its system, $33,034.99. That in order to pay the company the amount of its annual expenses and an income of 6 per cent. on the amount actually invested in its water, water rights, and water system up to the 1st day of January, 1896, it is necessary that rates for the water sold and consumed be so fixed as to realize to the company the sum of $119,791.66. That the total amount that was realized by the company from sales of water and water rights and from all other sources on account of its business of supplying water to consumers outside of the city of National City for the year ending January 1, 1896, was about $13,000, and that no more than that sum can probably be realized for the year ending January 1, 1897, at the rates now prevailing. That all of the mains and pipes of the company and other parts of its property used in furnishing water to consumers are perishable property, and require to be replaced at least once in 16 years, and require frequent repairs. That in order to acquire the water and water rights and to construct its system of waterworks, the company was compelled to and did borrow $300,000, and that it is compelled to pay, as interest thereon, $21,000 annually, which sum must be realized from the sale of its water, and is a part of its operating expenses. That the proportionate share of the revenues of the company that should be raised by water rates within the limits of National City, as compared with the revenues that should be raised and paid as rates by consumers outside of that city, is about one-third. That the amount that can be realized from that city and its inhabitants per annum from the rates now prevailing under the ordinance established by that municipality is about $10,715, and no more. That the value of the water, water rights, reservoirs, franchises, and property necessary for the proper operation of the business of the company and now held by it is $1,100,000, and that the same is necessary for the use of the company in furnishing water to the defendants and other consumers. That the city of National City is a municipal corporation of the sixth class, organized under the general laws of the state of California; and that the rates to be charged for water within the city are fixed by its board of trustees, as provided by law. That the company commenced to furnish water to consumers in the year 1887. That it was then informed by its engineer that its system and the supply of water that could be stored thereby would furnish water to consumers sufficient to irrigate 20,000 acres of land, and would supply such water, in additon thereto, as would be necessary for domestic use inside and outside of the city of National City. That the company was then unfamiliar with the operation of a plant and system of the kind constructed by it, and did not know what the cost of operating and maintaining the same would be. That, relying upon the report and estimate of its engineer, and believing that by fixing and charging an annual rate of $3.50 per acre for irrigation it could meet its operating expenses, and pay it some interest on its investment, it fixed and established, and has since charged, the rate of $3.50 per annum, and no more, until January 1, 1896. That, instead of being able to supply from its system water sufficient to irrigate 20,000 acres, it has been demonstrated by actual experience that the system will not supply water sufficient to irrigate to exceed 7,000 acres, together with the water demanded for domestic use, and probably not to exceed 6,000 acres, although there are about 10,000 acres under the system susceptible of irrigation. That at the rate of $3.50 per acre, if water should be demanded and used upon the whole of the lands which the system is able to supply with water, and rates are allowed in National City equally high for domestic use and irrigation, the company would not be able to pay its operating expenses and maintain its plant and system; and that the company has been, and still is, under the rates mentioned, losing money every year, and its plant and system has been and is gradually going to decay from natural depreciation consequent upon its use in supplying consumers with water, without any revenue or means being provided for replacing the same, whereby the system and the money invested by the company therein will be wholly lost to it, and it will, if the rate of $3.50 per acre be maintained, be compelled to furnish water to consumers at an actual and continual loss. That, in order to pay the costs of operating the plant and maintaining the same, and pay the company a reasonable interest on its investment, or a reasonable sum for its services in supplying water to the defendants and other consumers, it will be necessary for it to charge a rate per acre per annum of not less than $7 for irrigation purposes, which sum is a reasonable rate for consumers to pay, and the smallest amount for which the company can furnish the water without loss to it. That by the laws of the state of California the board of supervisors may, upon the petition of 25 inhabitants who are taxpayers of the county, fix the rate of yearly rental to be collected by the company, but no such petition has ever been presented, or rates fixed, in the case of the company. That, for the reasons stated, the company gave notice to the defendants that on January 1, 1896, it would establish a rental of $7 per acre per annum for water supplied to their, and each of their, lands for irrigation, and that from and after that date they, and each of them, would be required to pay that sum for the irrigation of their, and each of their, lands, and that the receiver, after his appointment, and before the date mentioned, gave a similar notice. That the defendants, and each of them, refused to pay the rate of $7 per acre, and maintained that neither the...