San Diego Land Town Company v. James Jasper

• Decision Date: 06 April 1903
• Docket Number: No. 193,193
• Citation: 23 S.Ct. 571,47 L.Ed. 892,189 U.S. 439
• Parties: SAN DIEGO LAND & TOWN COMPANY, Appt. , v. JAMES A. JASPER, Charles H. Swallow, William Justice, John Griffin, and Howard M. Cherry (Members of and Constituting the Board of Supervisors of the County San Diego, State of California), and M. T. Hall et al
• Court: U.S. Supreme Court

189 U.S. 439

23 S.Ct. 571

47 L.Ed. 892

SAN DIEGO LAND & TOWN COMPANY, Appt.,

v JAMES A. JASPER, Charles H. Swallow, William Justice, John Griffin, and Howard M. Cherry (Members of and Constituting the Board of Supervisors of the County San Diego, State of California), and M. T. Hall et al.

No. 193.

Argued March 10, 1903.

Decided April 6, 1903.

Messrs. John D. Works, Bradner W. Lee, and Lewis R. Works for appellant.

Messrs. A. Haines and T. L. Lewis for appellees.

Mr. Justice Holmes delivered the opinion of the court:

This is a bill in equity brought in the circuit court against the board of supervisors of San Diego county and others for the purpose of having certain water rates which have been fixed by the board, declared void. It is alleged that the rates are so low as to amount to a taking of the plaintiff's property without due process of law. The circuit court decided that it did not appear that the rates would have that effect, and dismissed the bill, whereupon the plaintiff appealed to this court.

By a statute of California approved March 12, 1885, the board of supervisors of the counties are to fix the maximum water rates in cases like the present. They are authorized to proceed to a hearing upon a petition of twenty-five inhabitants who are taxpayers, and the rates when fixed are to be binding for not less than one year. Subject to that limitation they may be re-established or abrogated upon a similar petition, or a petition of the water company subjected to the regulation. The rate was fixed in this case upon a petition of twenty-five taxpayers. The present bill made the petitioners parties, as well as the board, and alleged that they were not water takers, but were induced to petition by the consumers, in order that the latter might not admit that any rates other than those originally fixed by the company could be established by anyone. The petitioners, after a demurrer by them to the bill was overruled, failed to answer, and the bill was taken pro confesso as against them. On these facts, before coming to the merits, the appellant contends that this bill should not be dismissed. It says that the only parties in interest have made default, and that the ordinance regulating the rates was procured by a fraud upon the supervisors, with the consequence, we suppose it to be intended, that the ordinance should be set aside on that ground without going further into the case.

The preliminary objections may be disposed of in a few words. The default of the petitioner is relied upon as the ground of expressions in one or two cases here and elsewhere, that the duties of the supervisors are judicial in their nature. Spring Valley Waterworks v. Schottler, 110 U. S. 347, 354, 28 L. ed. 173, 176, 4 Sup. Ct. Rep. 48; Jacobs v. San Francisco, 100 Cal. 121, 130, 34 Pac. 630. The conclusion drawn is that when the original plaintiffs disappear, the case is at an end. We need not stop to consider to what extent or for what purposes the proceedings before the supervisors properly may be termed judicial. See, further, San Diego Land & Town Co. v. National City, 174 U. S. 739, 750, 43 L. ed. 1154, 1159, 19 Sup. Ct. Rep. 804; Cambridge v. Railroad Comrs. 153 Mass. 161, 171, 26 N. E. 241. It is obvious that they are not so in such a sense as to do the appellant any good. The petitioners did not complain of injury to any private interest of theirs. They had none. They appeared on behalf of the public only, and asked purely legislative action in the form of a general rule for the future to govern the public at large. San Diego Land & Town Co. v. National City, 43 L. ed. 1154, 1159, 19 Sup. Ct. Rep. 804; Spring Valley Waterworks v. San Francisco, 82 Cal. 286, 6 L. R. A. 756, 22 Pac. 910, 1046; Smith v. Strother, 68 Cal. 194, 8 Pac. 852; Janvrin, Petitioner, 174 Mass. 514, 47 L. R. A. 319, 55 N. E. 381. As soon as such a rule was established, if not as soon as a hearing was begun, the petitioners were merged in the public affected by the rule. The present bill is an independent proceeding to have the ordinance declared void. In such a case the body making the regulation is the usual, proper, and sufficient party respondent, and the default of those who set the original proceedings in motion is immaterial, so long as it defends the case.

The charge that there was a fraud practised on the board hardly deserves mention, except for the undue warmth with which it has been pressed. There are no allegations in the bill sufficient to open the question. The board is here adhering to and defending its action, professing still to be satisfied. There is no indication of fraud or attempt at fraud. The course adopted was adopted for reasons which appear on the face of the bill, the situation was made plain at the hearing before the supervisors, and we see no evidence that the parties did more than exercise their legal rights.

Coming now to the merits, the first thing to be noticed is that the ordinance complained of took effect in November, 1897, and that after a year from that date the appellant was free to apply for a modification of the rates. It did not do so. There is no allegation or suggestion that the board is corrupt, or that it purposes and intends, without regard to evidence, to adhere to unjust rates so as to destroy or impair the value of the appellant's works. Under such circumstances the question arises whether this is much more than a moot case, in view of the principles adverted to in Tennessee v. Condon, 189 U. S. 64, post, p. 579, 23 Sup. Ct. Rep. 579, or at least whether the appellant should not be required to exhaust its other remedies before coming into court. In any event, the limited effect of the ordinance must be taken into account when we are called on to declare it 'such a flagrant attack upon the rights of property under the guise of regulations as to compel the court to say that the rates prescribed will necessarily have the effect to deny just compensation for private property taken for the public use.' San Diego Land & Town Co. v. National City, 174 U. S. 739, 754, 43 L. ed. 1154, 1160, 19 Sup. Ct. Rep. 804, 810. In a case like this we do not feel bound to re-examine and weigh all the evidence, although we have done so, or to proceed according to our independent opinion as to what were proper rates. It is enough if we cannot say that it was impossible for a fairminded board to come to the result which was reached.

The scheme of the California statute is as follows: The board is to estimate the value of the property actually used and useful in furnishing the water, and the annual reasonable expenses, including the cost of repairs, management, and operating the works. The cost of permanent improvements is not to be included under this last head, but 'when accomplished shall be included in the present cost and cash value of such work.' Then the board is to adjust the rates so that the net receipts and profits of the water company shall be not less than 6 nor more than 18 per cent upon the said value of the used and useful property. The board in this case estimated the value of the plant to be $350,000, and the returns at the rates fixed to be $34,442, or 6 per cent on the value and the expenses necessary to maintain and operate the plant, which were found to be $13,442.

The main object of attack is the valuation of the plant. It no longer is open to dispute that under the Constitution 'what the company is entitled to demand, in order that it may have just compensation, is a fair return upon the reasonable value of the property at the time it is being used for the public.' San Diego Land & Town Co. v. National City, 174 U. S. 739, 757, 43 L.ed. 1154, 1161, 19 Sup. Ct. Rep. 804, 811. That is decided, and is decided as against the contention that you are to take the actual cost of the plant, annual depreciation, etc., and to allow a fair profit on that footing over and above expenses. We see no reason to doubt that the California statute means the same thing. Yet the only evidence in favor of a higher value in the present case is the original cost of the work, seemingly inflated by improper charges to that account and by injudicious expenditures (being the cost to another company which sold out on foreclosure to the appellant), coupled with a recurrence to testimony as to the rapid depreciation of the pipes. In this way the appellant makes the value over a million dollars. No doubt, cost may be considered, and will have more or less importance according to circumstances. In the present case it is evident, for reasons, some of which will appear in a moment, that it has very little importance indeed.

The property of the company and its predecessor consisted, not only of the waterworks, but of a large amount of land. On the evidence the waterworks may be estimated at about a quarter of the total value. The earlier company was unable to raise the money it needed. Its bonds for $500,000, secured by mortgage, were not worth more than 95, and an attempt to raise a further loan on mortgage failed. The whole amount that the market and interested stockholders were willing to lend on all the security it could offer was $650,500. The company was put into the hands of a receiver, who issued some certificates, which, we infer, were made a paramount lien. Then, by arrangement with the stockholders who were willing to go on, the mortgage was foreclosed and all the property was sold to those stockholders for the nominal...