The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1897-10-12
Their POWER
IS ABSOLUTE
Sweeping Decision as to the
Acts Of Municipal
Councils.
San Diego Loses an 1mpor-
tant Water-Rate
Case.
Courts Cannot Revise the Acts of
the Officers of Corporate
Bodies.

case of no small importance, because
it affects every municipality in the State
where water is sold 10 city by a private
corporation, was decided by the Supreme
Court yes erday. 1t relates to the powers
of a municipal legislative body 20 fix
rates; in its decision the Supreme Court
was of the opinion that the power OF n
municipal Council or Trustees is reposed
in the body by the Legislature and is
not, therefore, subject to revision by the
courts.
The case was that of the San Diego
Water Company against the city OF San
Diego. In February. 1890, that city s
Councilman fixed the water rates for the
city. The water company submitted fig
ures showing tile value of the plant, the
estimated running expenses. etc. As the
ordinance went into effect on July l, 1890,
the company waited until the expiration
OF the life of the ordinance ami then
brought action 20 have the Superior
Court declare the ordinance void and to
enioin the city from its enforcement. In
this the city was defeated and it appe aled
from the decision and lost.
The Superior Court found that the plant
cost $3.50, 900, that me actual operating ex-
penses were $40, 000 that on the outstand-
ing Indebtedness interest was being paid
at the rate of per cent per annum and
that the actual income OF the water COM
pany was slightly in excess OF $4,000. Ii
was further found that the annual depre-
citation in the water plant, on account OF
natural decay, amounted 10 3L per cent OF
the value; and finally the 4ower court
declared the ordinance void and issued an
injunction against its enforce ment
From this San Diego City Appealed,
claiming that under sections l and 2 OF
article XIV of the constitution the Legis-
lature tStatutes of 1881 page SAY, empow-
cred the City Council of San Diego TO hX
water rates, and that the validity OF the
Councils acts in this respect could no m ore
be reviewed by court than II fixed by the
Legislature itself.
The Supreme Court on this point, in re-
versing the decision OF the lower court,
made a most sweeping decision IL holding
that the power of the City Council is de-
rived directly from the STATE constitu-
lion and cannot be reviewed by the court;
with the sole eX lection that when the acts
OF the Council are so unjust as TO be
equivalent to a contscatlon without COM
pensation.
Relative to the receipts of the water
com any, to be used as dividend to the
stockholders, it was shown that the
United States Supreme Court in a similar
case decided that return OF per cent on
the investment could not be construed as
q confscation of property and in the case
at bar the rate is conceded to be 81 per
cent.
The Supreme Court, in reviewing the
evidence presented to the lower court, ex-
pressed disapproval OF the estimate OF ex-
penditures presented by the water COM
pany and said that the charges made for
construction should be made for mainte-
nance and vice versa, and that the actual
operating expenses would seem to be
placed at a higher figure; and further, In
the cos: of the plant was included the
original purchase price of real estate and
the construction of tunnels, which. the
court says, could not be included in the
statement of the annual decay
Justice Van Fleet wrote the opinion,
which was concurred in by Justices Hen
shaw and Mcfarland, and concurring
opinions were written by Justices Ca
route, Temple and Harrison.
A dissenting opinion was presented by
Chief Justice Beatty, who held that
RATES ought to be adjusted to the value
OF the service rendered. and this means
that the water mpanies should be al
lowed to collect annually a gross income
suth clent 10 pay current expenses, main
tain the necessary plant In state of
efficiency, and declare a dividend to stock
holders equal at least to the lowest CUT
rent rates OF interest. not on the par mar
ket value of the stock, but on the actual
value OF the property necessarily Used IN
providing and distributing the water to
consumers"
Justice Beatty did not touch upon the
oonstitutionality of the power of the
Council to fix water rates arbitrarily, but
concludes his opinion by saying: The
findings clearly sustain the conclusion
that In this case the rates fixed were
grossly and palpably unjust to the water
company"