The Washington times., 1910-09-30

That portion of the opinion Of the 81
preme Court Of the Urited states IN the
Consolidated Gas Company case dealing
with franchise values is as follows;
a short history Of the complainant.
as to its Incorporation and its capital
and the method by which the value Of
its franchises was arrived at, viii rem
der the further examination Of the case
more inteuigisIe.
Prior TO 1854, there were seven gas
light companiessin New York city, each
operated under separate charters. grant
ed at different times between the years
IS2j and 1865 OF ISL They each had the
right 10 use the streets Of certain por-
ti0ns OF the city for the purpose Of
laying their mains and service pipes IN
order to furnish gas to the city and the
citizens Not one Of the companies had
ever been called upon 10 pay a penny
for such right, but the grant 20 each
was, in the aspect, Eratuity- Il was
not, at the time Of granting franchises
such as these the custom to pay FOR
them.
In 1884. by chapter S6I Of the laws OF
that year, authority to consolidate man
ufacturing corporations was granted
upon conditions mentioned IL the act
The directors Of the corporations pro-
posing TO consolidate were 10 make an
agreement for consolidation. embracing
among other things. the amount Of
capital and the number Of shares Of
stock into which It should be divided,
the capital not 10 be in amount more
than the fair aggregate value Of the
property, franchises, and rights Of the
several co... -anies to be consolidated
Approval of Agreement.
The agreement vas not 10 be valid
until submitted 10 the stockholders OF
each Of the companies and approved by
two-thirds Of each The constituent
companies, which were afterward con
soIidated under their agreement and
pursuant to the act mentioned. were
six IN number, the seventh. the Mutual
Company. Withdrawn
The companies agreed upon the vaIua-
tiOn OF their property which was paid
for in the stock OF the consolidated com
pauy. and the original stock held by the
stockholders of each company vas sur
rendered TO the consolidated COMPANY
The value OF the franchise Of all the
companies was set at the figure OF
SI.ISl.00o.
The court below said that the master
reported there was little direct evidence
before him as TO the value of the fran
the master, by direct evidence. meant
aezti=Hony Of the same kind regarding
their value as had been offered regard
ing every item OF tangible property
there was none at all.
The court further stated that Il does
not appear in the evidence how the val
uatiOn OF the franchises was measured
or why the figures selected were chosen.
but that II was true that. when com
plaIuant was organized. IN 1854, under
the consolidation statute which IN
terms permitted it 10 acquire the prop
eTrE and franchises OF the other COM
panieS. IL issued stock Of the par value
of SIS, GO representing the franchises
Il then acquired and nothing else. and
that the stock was held by purchasers
Who ] am compelled to think had a
right 10 rely upon legal protection for
legally issued stock.
Stock Issued Without Cost.
II is now. OF course, cOutended there
was special stock issued for this partfc-
Ular item. but il was included in the
total sum for which the consolidated
company issued its stock, and. upon its
receipt. the stockholders in the various
companies surrendered their stock IL
those companies
The result was that the amount of the
stock issued by the consolidated com
panv was increased by S7,1SI, ,OG0, repre-
SentinE value Of franchises which was
companies and which had never cost
any Of them a single penny
1t cannot be disputed that franchises
Of this nature are property. and cannot
be taken or used by others without
compensation The important question
X always one OF value Taking their
value in this case aS arrived at TJv
agreement OF their owners. Al the time
or The consolidation that value has
been increased by the finding of the
court below to the sum OF 81. .n1n 600. q z
the time of the commencement OF this
suit
The trial court said:
II however COmplainant's franchises
were worth SIS. coo in 1894. and its
tangible property, at the same time. was
appraised Cas appears in evidencel at
SO. 10000 Gin round figures, then since
complalnant'S business Gin sales voIunCl
has, IN twenty-thTee years, almost quad
rupled- and its tangible assets grown
20 S4Le1,O0o, II appears TO me that
fair method OF liking value OF the fran
chlses IN 1893 IS TO assume the same
growth IN value for the franchise as IS
demonstrated by the evidence in the
case OF tangible property
Franchise of SepaTabIe Value.
If Therefore. the franchise valuation
Of 1854 was propOrtioned to personally
and realty Of S50.OO0.G00 a franchise
valuation proportioned to 81, ,OOO. 900 IN
1915 would be over SI2. .O00O00- This. I
think a logical result from the assump-
ton ! am compelled to start with. J. e,
that franchises have a Separable and in
dependent value But there IS. however,
TO method Of valulng franchises. CH-
cept by consideration OF earnings
Earnings must be pTOpOrtiOned to as
sets and must stand upon the same
plane Of valuation Having, therefore,
a measure Of growth Of tangible assets
from 1884 10 1895, the franchise assets
must be assumed 10 have grown in the
same proportion
L find that the value OF complaInant's
franchises at the date OF inquiry was
rot less than S12,010 600, making a total
valuation Of 5000, 600, upon which the
probable return is $3.50. 900. OF very
considerably less than per cent
The judge stated his own views as op-
posed to including these franchises in
the property upon the value Of which
a return Is to be calculated IN fixing the
amount Of rates. but held that he was
bound by decided cases TO hold against
his personal views
NE are not prepared 70 hold with the
court below as to the increased value
which it attributes to the franchises. It
Is not only too much matter of pure
speculation, but we think il is also Cd
posed to the principle upon which such
valuation should be made This cor
pOTation Is one OF that class which Is
subject to regulation BY the legislature
- --a-4Tar af ~oanz r1T-oF-sfoT Tr.nrs