State ex rel. Winlock Water Co., Inc. v. Department of Public Works

• Decision Date: 31 December 1934
• Docket Number: 25161.
• Citation: 180 Wash. 278,39 P.2d 603
• Court: Washington Supreme Court
• Parties: STATE ex rel. WINLOCK WATER CO., Inc., v. DEPARTMENT OF PUBLIC WORKS et al.

39 P.2d 603

180 Wash. 278

STATE ex rel. WINLOCK WATER CO., Inc., v. DEPARTMENT OF PUBLIC WORKS et al.

No. 25161.

Supreme Court of Washington

December 31, 1934

Department 1.

Appeal from Superior Court, Thurston County; John M. Wilson, Judge.

Proceeding by the State, on the relation of the Winlock Water Company Inc., against the Department of Public Works and others. From a judgment sustaining the findings of the Department in fixing the fair value of the property of the Water Company for rate-making purposes, plaintiff appeals.

Affirmed.

R. E Ostrander, of Olympia, for appellant.

G. W Hamilton and Ferd J. Schaaf, both of Olympia, for respondents.

MAIN Justice.

This is an appeal by the Winlock Water Company from a judgment of the superior court sustaining the findings of the Department of Public Works in fixing the fair value of its property for rate-making purposes.

The town of Winlock had, according to the 1930 census, a population of 864, and on June 30, 1933, 256 customers were receiving service from the utility. The water company was incorporated in 1913, under the laws of this state, with a capital stock of $25,000, consisting of 250 shares of common stock of the par value of $100 each. This was, on May 15, 1930, increased to $25,000 common stock and $10,000 preferred stock. All of the capital stock, with the exception of a few qualifying shares, was owned by C. E. Leonard, the president of the corporation. After the corporation was formed, the town council of Winlock granted it a franchise for water service for a period of forty years. Prior to the incorporation of the utility, the president thereof, individually, had been supplying the inhabitants with water. After the corporation was formed, it took over the system which had been used prior to that time. The water had been obtained by pumping from wells.

In 1928, water was taken from Olequa creek, and was used by the inhabitants for approximately a year. Complaint as to the quality of the water was made, and the state health department condemned the use thereof, unless it was chlorinated. After this, the Olequa plant was disconnected and water since that time has been supplied from the wells.

At the time of the hearing, there were four wells in operation. In order to produce these, thirteen wells in all had been dug. Owing to the fact that Winlock is situated on the divide between the watersheds of the Chehalis and Lewis rivers, it was not always possible to get water in sufficient quantity by digging a particular well. Whether the well would produce water in the quantity necessary, there was no way of determining until after it was dug.

The department, after a hearing, found that the fair value of the corporation's property used and useful in the public service, including working capital, material, and supplies, as of June 30, 1933, was $34,800. The only witnesses at the hearing were the chief engineer of the department and one of his assistants who made the investigation as to the property, and C. E. Leonard, the president of the corporation, and his son H. W. Leonard who was the superintendent of the plant and had charge of its operations. The department refused to include the cost of the Olequa plant in the rate base, and the corporation says that this should have been included. Where the Department of Public Works has made a finding upon a question of fact, such finding will not be disturbed by the court unless it bears evidence of having been arbitrarily reached and without a full and due consideration of all the controlling facts. Puget Sound Electric Ry. v. Railroad Commission, 65 Wash. 75, 117 P. 739, Ann. Cas. 1913B, 763; State ex rel. Tacoma Eastern R. Co. v. Northern Pacific Ry. Co., 104 Wash. 405, 176 P. 539; North Bend Stage Line v. Denney, 153 Wash. 439, 279 P. 752; Robertson v. Department of Public Works (Wash.) 39 P.2d 596.

The appellant invokes the rule approved in Southwestern Bell Telephone Co. v. Public Service Commission, 262 U.S. 276, 43 S.Ct. 544, 67 L.Ed. 981, 31 A. L. R. 807, to the effect that the department is not the financial manager of the corporation, and was not empowered to substitute its judgment for that of the directors thereof, and cannot ignore items charged by the utility unless there is an abuse of discretion in that regard. Giving effect to that rule, it will not sustain the appellant's contention. The department, in the exercise of its judgment, had a right to pass upon the question of whether the appellant, in making the investment in the Olequa plant, acted prudently; and, in the exercise of that judgment or discretion, when all the facts are considered pertaining to the construction of this plant, it is clear there is no evidence of arbitrariness on the part of the department in refusing to include the cost of the Olequa plant in the rate base.

This case does not fall within the rule of the cases of Town of Milton v. Railroad Commission, 185...