Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-02-07
Appeals Tribunal Sets Total
for Rate Purposes at
$25,756,880.
CLAIM FOR w. & G. R. R.
FRANCHISE COST DENIED
Price Declared Based on Specula-
tive Quotations of Securities-De-
probation Ruling Upheld.

The valuation of the Capital Trac-
ton Co. for rate purposes is fixed at
S25.756,SS0 by a decision of the Dis
tr1ct Court Of Appeals rendered today
by Chief Justice Martin. The appel
late tribunal modifies the decision of
Justice Hoehling of the District Su-
preme Court by disallowing a claim
of the company for $3.50, 900 for tho
purchase price of the franchises and
good will of the old Washington and
Georgetown Railroad Co. by the Rock
Creek Railway Co., from which merger
the Capital Traction Co. was created
in 1895. Justice Hoehling had sus-
tanned the claim of the company
and had fixed a total valuation of
$50, ,9o6,SSO.
The Public Utilities Commission
had noted an appeal from the decision
of Justice Hoehling and contested the
allowance of the $780, 900, which the
commission had refused to consider
when in September. 1919, the commits
sion reported it's finding fixing the
company's valuation as of June 80,
1919, at $14.270, ,495.51. This valuation
was based on the normal prices as of
July l, 1914, to avoid the inflated
prices consequent upon the war.
New Valuation Ordered.
The traction company appeal to the
District Supreme Court and following
the decision in the Potomac Electric
Power Co. case it was agreed that the
basis of valuation adopted by the COM
mission was erroneous and Justice
Hoehling was authorized to make a
nov m ion INte
commission appealed principally be-
cause of the allowance of the $5,15O,-
900 mentioned.
In disallowing this amount Chief
Justice Martin declares it was q spec
ulative price paid for the stocks and
bonds of the company and should not
have been paid for the franchise and
good will of that corporation any
more than should payment have been
made to the holders of the securities
of the Rock Creek Railway for it's
good will and franchises. The court
says, "The claim that the sum of
s., 100000 was paid for the franchises
and good will of the w. & G.. r. r. Co.
is not substantial, since the amount
paid was manifestly based upon the
prices of its stocks and bonds then
prevailing in the stock markets and
these prices were largely speculative"
The court declares it makes no
charge of bad faith respecting the
merger but points out that $4,000 600
was paid for the outstanding bonds of
an issue of $4,000,O00, three-fourths of
which were redeemable within four
years and one-half of the remaining in
less than eight years thereafter. "In
our opinion" continues the court, mo
greater consideration should be given
to the franchises acquired from the
w. & G. r. r. Co, than would be
given them If that company were still
going concern and a valuation
should be made of its property under
the act. Nor do we see any reason
for excluding the franchises of the
Rock Greek Railway Co. from the val
uation, If these of the w. & G. r. r.
Co. be included therein
Upholds Depreciation Ruling.
Taking up the claim Of the com
mission that Justice Hoehling had not
provided any deduction for deprecia-
ton which the experts for the COM
mission had estimated at 2,000, 900.
the appellate tribunal adopts the de-
cision of Justice Hoehling that no
figures be set. The court
points out that the company main
tains a sinking fund of $2,075, 1878 to
take care of this item and remarks:
''We are convinced that under all the
the decision of the
lower court upon this subject should
not be disturbed. On the record be
fore us any such deduction would
necessarily rest upon doubtful theories
only.
'It may be assumed that the sink
ing fund maintained by the company,
part of which has been employed
with its proper purpose.
is sufficient to balance the actual de-
probation of the property and this
fund does not enter into rate bearing
valuation. 1t must be remembered,
moreover that the present valuation
is not intended as a buying and sell
ing price of the property, but for
rate making purposes, and the COM
pany is entitled to collect rates
sufficient to balance the depreciation
as we'll as to pay a reasonable re
turn upon the invested capital"
The court orders the commission
and it's successors in office to modify
forthwith it's former valuation and
order in accordance with the de
cision of the appellate tribunal.
George f. Hamilton and G. Thomas
Dunlap, counsel for Capital Traction.
they would take an appeal
to the Supreme Court of the United
States.
Text of Decision.
The text of the courts opinion
I'm the instant case the commits
sion began it's valuation Of the prop
erty Of the Capital Traction Company
N the Month of April, 1914, and on
September 4. 1919, 1t promulgated its
findings. and reported the fair value
IF the company's property as of June
30, 1919. used and useful for elec.
tric railway operations within the Dis
.rict of Columbia" to be the sum OF
s14270,4 1851. In arriving at this
decision, however, the commission
Jailed to first ascertain the reproduc-
ion cost OF the property as of the
late of the valuation, to wit, June 80.
1919, but, instead. ascertained the re-
production cost. as of July /, 1914.
Il then added the subsequent net adj
litions to investment up to June 80.
-919. and accepted the total as the
cost of the property as
If the latter date. This was done
lpon the theory that the increased
prices prevailing during the World
War were abnormal and temporary,
md that reproduction cost should be