Rangeley Water Co. v. Rangeley Water Dist.
| Citation | 1997 ME 32,691 A.2d 171 |
| Decision Date | 28 February 1997 |
| Docket Number | FRA-96-161 |
| Parties | RANGELEY WATER COMPANY v. RANGELEY WATER DISTRICT. Docket |
| Court | Supreme Judicial Court of Maine (US) |
William S. Harwood (orally), William C. Knowles, and James I. Cohen, Verrill & Dana, Portland, for plaintiff.
Alan G. Stone (orally), Clifford, Stone & Herman, Lewiston, for defendant.
Before WATHEN, C.J., and GLASSMAN, RUDMAN and LIPEZ, JJ.
¶1 The Rangeley Water District appeals from the entry of a judgment in the Superior Court (Franklin County, Mills, J.) adopting the report of the referee appointed by agreement of the parties to value the assets of the Rangeley Water Company (Water Company) after such assets were condemned by the Rangeley Water District (Water District). On appeal, the Water District challenges the referee's valuation of the assets of the Water Company and his inclusion of the Lakehause water line as a Water Company asset. The Water Company cross appeals, challenging the referee's valuation of its assets. Finding no error in the judgment of the Superior Court, we affirm.
¶2 The Rangeley Water Company was created in February of 1905 by an Act of the Legislature to serve water customers in the Rangeley Lake area. P. & S.L.1905, c. 44. Immediately before the assets of the Water Company were condemned in 1993, the utility served about 385 customers. The Rangeley Water District is a quasi-municipal corporation formed in 1992 by the Legislature. P. & S.L.1991, Chapter 72, § 1 (effective March 11, 1992). The District is regulated by the State under the provisions of 25-A M.R.S.A. §§ 6301 et seq. The Water District exercised its power of eminent domain on January 22, 1993, condemning and subsequently acquiring the assets of the Water Company. P. & S.L. ch. 72, § 13. 1
¶3 The Water District paid $262,000 to the Water Company for its condemned assets. On March 29, 1993, the Water Company sought review of the condemnation award in the Superior Court. By agreement of the Water Company and the Water District, the matter was referred to a court-appointed referee, who held seven days of evidentiary hearings and issued a report to the Superior Court detailing his findings concerning the value of the condemned properties. The referee's initial report to the Superior Court underwent two subsequent revisions 2, and a final report was issued on March 29, 1995.
¶4 Both the Water Company and the Water District objected to the referee's final report valuing the Water Company's condemned assets at $407,504 and filed their objections to the referee's report with the Superior Court. In an order dated February 24, 1996, the Superior Court adopted the final report of the referee in its entirety. A timely appeal by the Water District and cross appeal by the Water Company followed.
¶5 When the court adopts a referee's report in full, we review the decision of the referee directly. The referee's findings of fact are reviewed for clear error. In re Valuation of Common Stock of McLoon Oil Co., 565 A.2d 997, 1001 (Me.1989). "On appeal, we will uphold the court's adoption of those factual findings if there is credible, probative evidence supporting them, even though there may be evidence to support contrary findings." Wellington Associates v. Capital Fire Protection Co., 594 A.2d 1089, 1091 (Me.1991). We will not invade the province of the referee and substitute our judgment for the factfinder, who was appointed by agreement of the parties to value the utility property. "It is not for us to mandate the use of any single appraisal method in valuing" such property. Shawmut Inn v. Inhabitants of the Town of Kennebunkport, 428 A.2d 384, 392 (Me.1981).
¶6 The Water District argues that the referee erred in choosing among valuation models and in applying a final valuation figure to the Water Company's property. The District contends that the referee erred in two ways: first, by failing to consider the sales of three water utilities proximate in time to that of the Rangeley Water Company, and second, by failing to use the "capitalization of income" method of valuation.
¶7 The referee excluded the sales of the Millinocket, Skowhegan and Greenville water companies in arriving at his "multiplier" figure for valuing the Rangeley Water Company because he determined that there was a distinction between the purchase price paid for a water utility by private purchasers of water utilities and the price paid by water district or water utility purchasers. In reaching his conclusion, the referee compiled a list of water utility sales that he considered relevant to his analysis. He averaged the price to net utility plant ratio of the sales of seven water utilities in Maine since 1980, all of which were sold to water districts. The referee excluded those water utilities that were sold to private parties, finding that as a group sales to private companies were at significantly lower prices than sales to water districts. The record indicates that the water utility sales used by the referee sold at prices ranging from 1.60 to 1.88 times net utility plant, while the three properties excluded by the referee sold at an average price of only .76 times net utility plant.
¶8 There is substantial evidence in the record to support the referee's finding of a distinction between private and water district purchasers of water utilities. For example, the Water Company's accountant, John White, testified that certain water utility sales more closely matched the characteristics of the buyer and seller in the case of the Rangeley Water Company. The distinction drawn by the referee was an appropriate means of balancing competing evidentiary offerings from the Water District and the Water Company.
¶9 We have previously approved the use of three standard methods of valuation: the "comparative" method, the "income or capitalization method," and the "reproduction cost new less depreciation" or "cost" method. Shawmut Inn v. Inhabitants of the Town of Kennebunkport, 428 A.2d 384, 390 (1981). We further recognized that "theoretically, all three methods are employed in any appraisal, but often only one or two are useful or even useable in a given appraisal, depending upon its nature and purpose." Id. Notably, we held in Shawmut Inn that it "is not for us to mandate the use of any single appraisal method in valuing commercial or any other taxable property." Id. at 392.
¶10 In his report, the referee conducted an extensive analysis of each of the methods of valuation that were presented to him by the opposing parties and discussed his reasoning for rejecting certain methods and adopting the "comparable sales" method. The referee was not compelled by law to adopt any particular method of valuation, and his reasons for rejecting the "capitalization of income" method of valuation 3 find substantial support in the record. Similarly, the record supports the referee's rejection of both the replacement cost new less depreciation (RCNLD) 4 and the ability to finance 5 methods.
¶11 In addition to arguing unpersuasively that the referee erred in refusing to apply the replacement cost new less depreciation and the ability to finance methods of valuation, and erred in his reliance on the comparative sales method of valuation, the Water Company contends that the referee erroneously excluded $12,000 in construction work in progress (CWIP) and $9,937 in inventory (material and supplies) from the value of the Water Company. The referee concluded that the evidence provided an "insufficient basis for a finding of additional CWIP that should be included in the net operating plant account." That decision is supported by the record. The referee found that the materials and supplies "were also not included in the net operating plant accounts of the comparable companies used as the basis for determining the appropriate factor for application of the comparable sales method." That conclusion is based on extensive testimony offered by both parties about various methods of valuing water utilities. His decision to exclude the $9,937 in equipment and material from the valuation of the Rangeley Water Company finds support in the record.
¶12 The Water Company also argues that the referee erred in reducing the multiplier derived from the comparative sales analysis from 1.65 to 1.55 to reflect the reduction in the value of the Water Company because of its noncompliance with the Safe Drinking Water Act. There is substantial evidence in the record to support the referee's conclusion that the Water Company was not in compliance with the Act and that its noncompliance lessened the value of the company's assets. Although the referee found "scanty evidence" to suggest how the reduction in value should be reflected in the multiplier applied to the Water Company's assets, the referee's application of a .10 reduction in the multiplier appropriately considered numerous aspects of the Water Company's physical plant. 6
¶13 The Lakehause line is an approximately 1200 foot distribution main attached to the Water Company's Route 4 line and extending into the Lakehause development, a three building condominium complex. The Lakehause line provides water service to nine condominiums in the three buildings. The Water District contends that the referee improperly included the Lakehause water line in the valuation of the Water Company. The condemnation order issued by the Rangeley Water District on January 22, 1993, stated that it was taking by eminent domain "the entire plant, properties, franchises, rights and privileges owned by the Rangeley Water Company...." The referee concluded that the Lakehause line was owned by the Water Company.
¶14 Chapter 65 of the Maine Public Utilities Commission (PUC) rules establishes standards and...
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