South Bay Irr. Dist. v. California-American Water Co.

Citation61 Cal.App.3d 944,133 Cal.Rptr. 166
Decision Date15 September 1976
Docket NumberCALIFORNIA-AMERICAN
CourtCalifornia Court of Appeals
PartiesSOUTH BAY IRRIGATION DISTRICT, Plaintiff and Appellant, v.WATER COMPANY, Defendant and Appellant, National City, Intervenor and Appellant. Civ. 14040.

Gray, Cary, Ames & Frye, Eugene L. Freeland, David E. Monahan, Michael J. Myers and Richard A. Paul, San Diego, for defendant and appellant California-American Water Co.

Jennings, Engstrand & Henrikson, Paul D. Engstrand, Jr., John H. Whitney and Ronald L. Endeman, San Diego, for plaintiff and appellant South Bay Irrigation Dist.

Donald F. McLean, Jr., City Atty., National City, for intervenor and appellant City of National City.

Hill, Farrer & Burrill, William M. Bitting and David C. Grant, Los Angeles, amici curiae of California Water Ass'n in support of defendant and appellant California-American Water Co.

Richard A. Clarke, Robert L. Harris and James A. Kaylor, San Francisco, amici curiae of Pacific Gas & Electric Co. in support of defendant and appellant California-American Water Co.

Heller, Ehrman, White & McAuliffe, Weyman I. Lundquist and J. C. Bensick, San Francisco, amici curiae of Citizens Utilities Co. of California in support of defendant and appellant California-American Water Co.

Rollin E. Woodbury, John R. Bury, Tom P. Gilfoy and Jerry A. Brody, Rosemead, amici curiae of Southern California Edison Company in support of defendant and appellant California-American Water Co.

COUGHLIN, * Associate Justice.

In this eminent domain action defendant, California-American Water Company, hereinafter referred to as The Company, appeals from an interlocutory judgment condemning its water works identified as the Sweetwater District of The Company's San Diego division, hereinafter referred to as The Sweetwater System, and awarding compensation therefor in the sum of $14,485,000, with costs of suit in the additional sum of $17,295.97, subject to The Water Company's right to a supplemental trial to determine the amount of compensation to be awarded for designated additional items. The overriding issue on appeal is whether the amount of the award is proper under the evidence and the law in the case.

Plaintiff, South Bay Irrigation District, hereinafter referred to as The Irrigation District, by an amended complaint, and intervenor, the City of National City, hereinafter referred to as The City, by a complaint in intervention, pursuant to a joint powers agreement between The Irrigation District and The City, sought acquisition of The Sweetwater System, in its entirety, for the purpose of establishing an integrated, publicly owned water works system.

The Water Company appeals from the whole judgment. The Irrigation District and The City cross-appeal, with the proviso each of their appeals 'is hereby abandoned' if the appellate court should decide to correct any error they assert by a reversal for a new trial instead of by a modification of the judgment.

The action was initiated by a complaint filed May 10, 1968. Trial commenced on November 1, 1971, before the court without a jury, and concluded with a final argument on August 10, 1972. The issue for determination at the trial was the amount of just compensation to be awarded for the taking, which was raised by The Company's answers alleging 'the fair market value of the properties and rights the Plaintiff seeks to condemn herein is approximately $50,000,000,' and 'the damage' to other property of The Water Company 'not being condemned by the Plaintiff by reason of its severance is approximately $5,000,000.' Written findings of fact and conclusions of law and the interlocutory judgment were filed, following the filing of a written memorandum opinion by the trial judge, proposed findings, and a request for special findings which was denied. The Company moved for a new trial, which was denied, and on May 14, 1973 filed its notice of appeal.

The Sweetwater System, which was initiated in 1869, presently serves an area of 33 square miles, including the City of National City, the City of Chula Vista and contiguous unincorporated territory; serves an average of 14.5 million gallons of water per day to 135,000 persons; impounds and distributes water obtained from the Sweetwater River watershed by means of two large dams, i.e., the Sweetwater reservoir and the Loveland reservoir, also water obtained from wells in the City of National City and water imported from the Colorado River through purchase from the Metropolitan Water District of Southern California; includes a water treatment plant, 21 system reservoirs and tanks, 20 distribution system pumping plants, 318 miles of distribution mains, over 25,000 service connections, and more than 1,200 fire hydrants; and also includes other miscellaneous appurtenant facilities. During the period 1950--1969, Colorado River water comprised 70% Of the water distributed.

Property owned by a public utility water company is impressed with a public use; may be transferred only with the consent of the Public Utilities Commission; may be used only for the purposes to which dedicated unless otherwise authorized by the Commission; and is subject to regulation respecting the rate of return thereon as an investment and the rates charged for its services (Cal.Const. art. XII, §§ 3, 6, 9; Pub.Util.Code §§ 216, subdivs. (a), (b), 451, 454, 456, 851, 2701; Pacific Tel. & Tel. Co. v. Public Util. Com., 62 Cal.2d 634, 645, 44 Cal.Rptr. 1, 401 P.2d 353; Southern Calif. Edison Co. v. Railroad Com., 6 Cal.2d 737, 754, 59 P.2d 808). In determining such rates the Commission is not bound to use any particular formula or mathematical process (gen., see Federal Power Com'n v. Hope Natural Gas. Co., 320 U.S. 591, 602, 64 S.Ct. 281, 287, 88 L.Ed. 333). Historically the profit allowed such a company on its investment is fixed at a percentage of a factor known as the rate base, which, for rate-fixing purposes, equates the investment. It is the value of the property devoted to public use (Pacific Tel. & Tel. Co. v. Public Util. Com., supra, 62 Cal.2d 634, 644, 44 Cal.Rptr. 1, 401 P.2d 353). Investment items or assets included in the rate base are those fixed by rule of the Commission; in general consist of properties constituting the utility plant plus an allowance for working capital, materials and supplies, less designated exclusions and adjustments, e.g., property or portions thereof which are unproductive for public utility purposes (see ibid., pp. 663, 667); do not include all of the company's property or property rights, e.g., contributions in aid of construction, advances for construction and other items hereinafter considered; and are given a money value pursuant to a designated formula. In recent years the value of the items in the rate base has been premised on their original cost less depreciation based on the straight-line remaining-life method (gen., see ibid., pp. 644, 665, 44 Cal.Rptr. 1, 401 P.2d 353).

On May 30, 1965, American Water Works Company bid the sum of $41,000,000 for the Sweetwater and five other water systems then owned by the California Water and Telephone Company; and on December 16, 1965, its wholly owned subsidiary, The Company, through an agreement of transfer and sale, and with subsequent approval by the Public Utilities Commission, became the owner and operator of the six separate water systems for the purchase price of $41,290,517.56, which included the payment of $41,281,361.08 in cash and the assumption of customer deposits in the sum of $9,156.48. The total utility plant rate base involved in the acquisition was $29,120,050.45. The purchase price exceeded the rate base by $12,170,467.11. There is evidence the bid of the parent company in excess of rate base was prompted by its ambition to expand its operation into California. One of the water systems included in the purchase was known as the Coronado District, and it with The Sweetwater District comprised the San Diego division of The Company's water systems.

In 1970 the Great Lakes Carbon Corporation sold the Palos Verdes Water Company to California Water Service Company for $8,839,564, which was 2.3% More than the utility plant rate base. Evidence of the latter sale was admitted under the concept it furnished comparative market data.

The parties stipulated, in determining the issue of just compensation for the property taken, the inventory date would be April 1, 1969, and the valuation date would be August 15, 1969.

The books of The Company showed the depreciated original cost of the items included in the rate base on April 1, 1969, i.e., the date of inventory, was $10,428,065.97, and on December 31, 1969, was $10,598,036.95. 1

At the trial The Company contended just compensation for the taking, exclusive of severance damage, should be between $38,570,956 and $50,000,000; and introduced the opinion testimony of two valuation experts, i.e., J. J. Barr, its president, and John Housiaux, purportedly supporting this contention. On the other hand, The Irrigation District 2 contended just compensation should not exceed $11,300,000, and in support of this contention introduced the opinion testimony of four such experts, i.e., Max Bookman, Harold Heidrick, Jerome Katzin and Edward Neuner, whose valuations ranged from $9,600,000 to $11,300,000.

The Company's experts, in reaching their opinions, relied upon the appraisal method known as the reproduction, replacement or reconstruction-cost-new-less-observed-depreciation approach to determine the value of the utility plan improvements, and added the market value of the land in its natural state, the value of The Company's books, records and documents, the value of its franchises and consents, the value attributable to organizational costs, i.e., costs incident to acquiring the land, constructing the improvements thereon and commencing the utility business, 3...

To continue reading

Request your trial
47 cases
  • Day v. Rosenthal
    • United States
    • California Court of Appeals Court of Appeals
    • August 8, 1985
    ...568, 78 Cal.Rptr. 25.) Ultimate facts are all that must be found; more would be superfluous. (South Bay Irr. Dist. v. California-American Water Co. (1976) 61 Cal.App.3d 944, 997, 133 Cal.Rptr. 166; see also, Seeley v. Combs (1966) 65 Cal.2d 127, 132, 52 Cal.Rptr. 578, 416 P.2d 810; City of ......
  • Armstrong World Industries, Inc. v. Aetna Casualty & Surety Co.
    • United States
    • California Court of Appeals Court of Appeals
    • April 30, 1996
    ...823; People ex rel. Sorenson v. Randolph (1979) 99 Cal.App.3d 183, 187, 160 Cal.Rptr. 69; South Bay Irr. Dist. v. California-American Water Co. (1976) 61 Cal.App.3d 944, 995, 133 Cal.Rptr. 166.) From our review of the trial record, we find insufficient evidence to support a finding that Arm......
  • San Diego Gas & Electric Co. v. Daley
    • United States
    • California Court of Appeals Court of Appeals
    • November 17, 1988
    ...fairly considered as "shedding light" on the market value of the property will be admitted. (South Bay Irr. Dist. v. California American Water Co. (1976) 61 Cal.App.3d 944, 991, 133 Cal.Rptr. 166.) A trial court's ruling on the admissibility of valuation evidence will not be disturbed on ap......
  • Redevelopment Agency v. Elementis Pigments
    • United States
    • California Court of Appeals Court of Appeals
    • August 9, 2002
    ...v. City of Whittier (1972) 8 Cal.3d 39, 51-52, fn. 4, 104 Cal.Rptr. 1, 500 P.2d 1345; see South Bay Irr. Dist. v. California-American Water Co. (1976) 61 Cal.App.3d 944, 984, 133 Cal.Rptr. 166 ["a public agency may agree upon a price more favorable to the seller than a private investor woul......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT