Evening star. [volume] (Washington, D.C.) 1854-1972, 1910-05-03
RIGHTS OF THE WASHINGTON GAS COMPANIES

Cthe value of the property and not NOM
inal value 0he face value of the stoclO
Is the thing-the true measure of reason
ableness-why did the legislature Of
Maryland, few weeks ago. pass an act
providing for such valuations In eve y
such case? And coming nearer home
why did the House Of Representatives. on
Friday last, by a two thirds vote, pass
an amendment requiring the interstate
commerce commission to make exhaus-
tive appraisements of the property Of
every railroad doing interstate bus mess?
II the pa value Of the stock is not the
true measure in over-capi a lied cases
how can it honestly be said to be SO in
under-capitalized casas? Is not sauce
for the goose sim sauce for the gander?
If you cannot go behind the returns. so
to speak-to show real value In one
case-how can you do SO to show want
of value in the other?
In Regan VS.. Farmers Loan and
Trust Company, 1874 United States. it
was held that:
1.-The rate to be obnoxious to the
Constitution must permit a reasonable
profit on the company's property"
2. All public service corporations
have a right to make and distribute
earnings upon the actual value OF the
property employed in the conduct of
their business, irrespective Of it's own
ership-and. of course. irrespective OF
the face value or par value of the
securities outstanding against lt-or
of their ownership.
It is a well known fact that a great
number. approximating at least one
| hundred gas companies throughout the
country, are operating under lease by
either the United Gas Improvement
Company Of Pennsylvania or by some
of the several other companies doing
| similar business.
| 8. The company's franchises are
property, and as such are assets upon
- S~1~ lad tn = -
| ings.
The third proposition is sustained by
| long line of unanimous decisions.
| number of which have already been
Supreme Court, delivered by the late
Justice Peckham, speaking for unani-
| nous court in the New York Console
dated gas case. in which he says,
without qualification: 1t cannot oe
disputed that franchises Of this nature
are property and cannot be taken or
used by others without compensation.
In support OF this declaration he
cites the leading case Of the Mononga,
hela VS.. United States, 14s United
States Reports, page 312; People agt.
OBrien, Ill New York. and other cases.
In the Monongahela case, relied upon
by Justice Peckham. Judge Brewer de-
livering the unanimous opinion of the
court, held that even in case In
which Congress had actually forbade
the valuation of franchise, STILL
THAT WAS AN ESSENTIAL PART OF
THE PROPERTY Of the company OF
which it could not be constitutionally
deprived either by act of Congress or
otherwise" The other case relied upon,
the very celebrated case OF People VS..
O'Brien, by unanimous court. has
long stood pre-eminent on account OF
the signal ability OF Chief Justice Ru-
ger, who delivered the opinion and the
eminence OF counsel who appeared IN
it. conspicuous among whom Deing MI.
IrC1sf pvroin
New York The opinion is exhaustive
Of the law on the subject up to the
date of its rendition. Among the sig
nificant declarations in 1t are the 1ol-
lowing:
.'It has been earnestly commended for
the state that such a franchise is
mere license and privilege. and en1oyaole
during the life of the grantee only ana
believe this proposition to be not only
repugnant to justice and reason, but
contrary to the uniform course OF au-
thority in this country"
The whole decision in this case rests
broadly on the proposition that fran
chises are property and cannot be re-
pealed by the state without just COM
pensation; and that any other doctrine
would be destructive Of an incalculabls
amount Of property and of corporate life
and business generally in this country
4. That public utilities do not have to
be incorporated. Their rights relative to
mutual, one and inseparable, and wholly
Independent Of paper capitalization.
The charter of this company Is suf1h-
cient proof of the fact that Incorporation
Congress has maze thereto during the
last fifty years has specifically provided
that it shall apply equally to every per-
son, copartnership. association or cor
ing and selling gas. Obviously, the rate
would be the same IL the business we're
carried on by a natural person instead
of an artificial person "a corporation IN
ISOLATION of natural persons without any
paper capitalization whatever.
5. That public utilities. il capitalized at
ALL should without exception be ideally
capitalized; that Is to say, that there
should be a true coincidence and cOrre-
spondence between the actual capitali1a-
ton inherent in the value OF the invest
ment. and the par or mace value OF the
securities issued against it., to the end
that every dollar in securities may rep
resent neither more nor less than one
hundred cents worth Of property.
In reference to this point, it is hardly
too much to say that the true theory OF
capitalization. so called. is as little un-
derstood by the public generally as that
Of the fifth dimension. Even among men
Of affairs the popular delusion is WIDE
spread that share OF stock Is property.
and the holder Of it entitled to reason
able returns upon its face value and not
merely upon the proportionate part Of
the actual property it represent. From
whence comes the fallacious idea that
to raise the dollar legend upon it in
creases the equity Of the holder and
diminishes that Of the public in the
premises.
In general. it may be said that the face
value Of a share of stock has the same
relation to its actual value as the con-
sideration named in a deed for an I'M
divided interest has to the real value Of
the property conveyed In it. Each car
ries certain percentage of the whole
thinG-Fbe that much or little-and that is
all there is to 1t.
6. Betterments derived from legally es-
tablished rates belong to the company
ma liking them, and their value may and
should be included in the appraisal OF
the property used in every case.
I. 1t is not against public policy, as
defined by the courts. for public service
corporations to permanently invest I'M
divided profits earned under statutory
regulations and rates, in extensions. bet
terments or surplus Of any kind or for
any purpose. AS to this proposition and
the preceding one. in addition to the cases
cited. ! respectfully again refer you to
this resolution itself. 1t is an absolute |
and unqualified subscription to the theory |
tina. betterments are subjects OF capt. |
talization in that it provides for their |
capitalization by this company in the |
future. If those that are to be installed |
during the coming year may properly be |
capitalized. why not those OF last year
and so from year to year back to the be- |
ginning?