Public Service Co. v. New Hampton

• Decision Date: 26 November 1957
• Citation: Public Service Co. v. New Hampton, 101 N.H. 142, 136 A.2d 591 (N.H. 1957)
• Parties: PUBLIC SERVICE COMPANY of New Hampshire v. NEW HAMPTON.
• Court: New Hampshire Supreme Court

Page 591

136 A.2d 591

101 N.H. 142

PUBLIC SERVICE COMPANY of New Hampshire v.NEW HAMPTON.

Supreme Court of New Hampshire.

Argued June 4, 1957.

Decided Nov. 26, 1957.

Sulloway, Hollis, Godfrey & Soden, Concord, for plaintiff.

Upton, Sanders & Upton, Concord, for defendant.

BLANDIN, Justice.

The plaintiff's position in broad outline is, first, there was 'no competent evidence to support a finding of a market value of the Ayers Island plant * * * in excess of its net book cost,' and, second, 'That the Trial Court, in reaching its decision applied incorrect principles of law, made findings and rulings contrary to and unsupported by the evidence, and otherwise erred * * *.'

At the outset it must be said that unusual problems are inherent in utility cases such as this.An obstacle to a rational and plain exposition is that due to factors hereinafter discussed, truly satisfactory standards for testing value do not exist.Again, in rate base disputes the interest of the utility is to show the value of its property at the maximum while that of the rate payers is to establish the lowest possible value.In tax cases the situation is exactly reversed.It is the public, represented by the assessors, which seeks to include the last dollar of worth in the assessment, while the company is avidly eager to have the value of its property considered in the most modest light.Generally there are readily available to both parties experts, the disparity of whose estimates increases the difficulty of reaching a fair conclusion.

On the question of value in the present casethe plaintiff's evidence was that the property is electric utility property, having its highest value as such, that it is subject to regulation by the Public Utilities Commission of the State, and in the past its rate base and that of similar utilities has been based on net book cost, or original cost less depreciation.From this the plaintiff argues that the tax value of its plant cannot exceed its rate base or net book cost, both as a matter of law and fact.

The defendant disagrees with this conclusion and produced evidence on valuation consisting of reproduction cost figures less depreciation, a figure based on the cost of an equivalent steam-generating capacity, and a valuation based on the capitalized earning power of the Ayers Island plant.The Court, in its findings and rulings, stated that in reaching its conclusion it considered the rate base, the original cost less depreciation, the factor of regulation, the dependable capacity of the plant at low water, the value of this capacity 'based on the annual cost of alternative steam power capacity,' the return upon investment, and the cost of construction of a new plant.It ruled that 'fair market value for purposes of taxation involves valuation in a free market,' and having weighed all the above factors, made a finding that the market value of the plaintiff's taxable property in New Hampton was $2,400,000 which, multiplied by the agreed figure of fifty-one per cent, that being the proportion of full value at which other property in New Hampton was assessed, would justify an assessment of $1,224,000.The actual assessment being $1,218,899, the Court dismissed the petition.

To resolve the dispute as to whether there was competent evidence to support the verdict it is necessary first to examine the applicable law.RSA 75:1 lays down the rule for appraisal of taxable property as follows: 'The selectmen shall appraise all taxable property at its full and true value in money as they would appraise the same in payment of a just debt due from a solvent debtor, and shall receive and consider all evidence that may be submitted to them relative to the value of property the value of which cannot be determined by personal examination.'In construing this statute in Winnipiseogee Lake Cotton & Woolen Mfg. Co. v. Gilford, 67 N.H. 514, 515, 517, 35 A. 945, 946, our Court said, "The selectmen shall appraise all taxable property at its full and true value in money, as they would appraise the same in payment of a just debt due from a solvent debtor' (Pub.St., c. 58, § 1); that is, 'at its just value.'(Id., c. 233, § 1.)Such value is the market value, or the price which the property will bring in a fair market, after fair and reasonable efforts have been made to find the purchaser who will give the highest price for it.'See alsoTrustees of the Phillips-Exeter Academy v. Exeter, 92 N.H. 473, 481, 33 A.2d 665.The principle laid down here has never been questioned in this state and is recognized elsewhere.Olson v. United States, 292 U.S. 246, 54 S.Ct. 704, 78 L.Ed. 1236.

The establishment of market value as a test for taxation purposes presupposes a market.In instances such as this where only a part of an integrated system is involved, the difficulty, if not the impossibility of finding an actual customer, especially where, as here, the owner has a lawful monopoly in the surrounding area, is obvious.Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 137 N.E.2d 462;seeStevens v. Fellows, 70 N.H. 148, 150, 47 A. 135.Yet it is plain that to hold there is no market value in such instances would mean that valuable property would entirely escape its just share of the burden of taxation.Such a policy would make neither good law nor good sense.Courts recognizing this have acted accordingly and have considered all factors calculated to influence an assumed buyer and seller in a free market.Atlantic & St. L. R. Co. v. State, 60 N.H. 133, 140;Turnley v. City of Elizabeth, 76 N.J.L. 42, 68 A. 1094.In so considering, it must, as previously stated, be remembered that the property is and may be used as an integral part of an entire system and that its value may be enhanced for this very reason.Winnipiseogee Lake Cotton & Woolen Mfg. Co. v. Gilford, 64 N.H. 337, 10 A. 849.In all the circumstances here it is obvious that ordinary standards may not furnish an adequate guide to determine value.Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 137 N.E.2d 462, 481.

Since indisputably the property has its greatest value as an electric public utility the purchaser may be assumed to be such.The plaintiff excepted to the granting of requests that it could be considered as a potential customer.However, it appears under the law that the price an electric utility, including the plaintiff itself or a buyer in its position, would pay to an assumed third person may be considered.Arlington Mills v. Town of Salem, 83 N.H. 148, 140 A. 163.See alsoBoston Gas Co. v. Assessors of Boston, supra, 137 N.E.2d 481, where the Court sanctioned evidence of the value for a sale and lease back to the present owner and others in its class.The evidence of the worth of the property to an electric public utility purchaser including the plaintiff was properly received, and the plaintiff's exceptions are overruled.

The plaintiff claims that evidence of reproduction cost was incompetent.The authorities, and the better reason, it seems to us, are to the contrary.Chicopee Mfg. Co. v. Public Service Co., 98 N.H. 5, 8, 93 A.2d 820;Boston Gas Co. v. Assessors of Boston, supra;see also, People ex rel. Lehigh Valley R. Co. v. Harris, 168 Misc. 685, 6 N.Y.S.2d 794, affirmed281 N.Y. 786, 24 N.E.2d 476.In the Chicopee case, 98 N.H. at page 8, 93 A.2d at page 823, which was a rate case, our court held that while evidence of reproduction cost might be rejected, it could also be admitted as it might 'under some circumstances' be a 'helpful guide.'See also, Grafton County Electric Light & Power Co. v. State, 78 N.H 330, 100 A. 668;Trustees of the Phillips-Exeter Academy v. Exeter, 92 N.H. 473, 486, 33 A.2d 665;Sweet, Inc., v. City of Auburn, 134 Me. 28, 180 A. 803, 104 A.L.R. 784, 790, 795.As to the admissibility of reproduction cost evidence on the issue of market value, the Grafton case, contrary to the plaintiff's contention, has not been overruled.

So, too, we believe testimony as to the economic value of the plant based upon the cost of providing equivalent steamgenerated capacity was properly admitted.If one is contemplating buying an article, the cost of purchasing it as against building a new one is a natural consideration affecting the price.Grafton County Electric Light & Power Co. v. State, 78 N.H. 330, 335, 100 A. 668.The authorities support the competency of such evidence.Winnipiseogee Lake Cotton & Woolen Mfg. Co. v. Gilford, 67 N.H. 514, 517, 35 A. 945;Boston Gas Co. v. Assessors of Boston, supra, 137 N.E.2d 483.The plaintiff's objection to this evidence was based upon the proposition that it indicates only the worth to the owner and as such is incompetent.Trustees of the Phillips-Exeter Academy v. Exeter, supra, 94 N.H. 473, 33 A.2d 665;Sisters of Mercy v. Town of Hooksett, 93 N.H. 301, 42 A.2d 222.However, the principle established in the Exeter case and approved in the Hooksett opinion is that although worth to the owner alone which could not be transferred to a purchaser may not be considered, transmissible value is material.Trustees of the Phillips-Exeter Academy v. Exeter, supra, 92 N.H. 486, 33 A.2d 673.In the present instance, the Court weighed with other factors the worth to the owner which could be transferred to others.Since, as previously pointed out, the owner may be considered a hypothetical buyer, it is apparent the price he would have to pay for building a new equivalent plant would influence his judgment in the purchase of this one.Furthermore, the defendant's expert testified he did not base his calculations solely on value to the owner but also on his knowledge of costs generally.He considered the 'cost of moderatelysized fuel plants of recent design in the northeastern part of the United States,' and tested the figures of the plaintiff against other companies.Applying this method of valuation which he testified without contradiction was 'one of the most common methods' of...