Evening star., 1927-02-07
CAPITAL TRACTION VALUATION
is REDUCED $5,15O,OOO BY COURT


by virtue of the acts relating to the
franchises of the respective COM
panies and that the interests Of the
public were protected by a proviso
that the merger should not be effective
without the consent Of the Commits
sioners of the District of Columbia.
The act of March /, 1895, however,
under which the merger was effected,
loes not undertake to prescribe the
prices or terms upon which such a
merger might be effected. nor does It
require the consent of the District
Commissioners as conditional thereto.
Moreover, the record does not dis
close that such consent was ever
actually given. 1t is true that a pro-
viso of this character appears in the
act of June %, 1888 (25 Stat, 1879, 202),
but that statute did not govern the
transaction in question. In our opin-
ion no greater consideration should
be given to the franchises acquired
from the Washington and George
town Railroad Co. than would be given
them If that company were still a go
ing concern and a valuation should
be made of its property under the act.
Nor do we see any reason for eXclud-
ing the franchises of the Rock Creek
Railway Co. from the valuation If
town Railroad Co. be included therein.
Other Cases Cited.
1T is a general rule that franchises
of this character are not to be included
in a rate-base valution. Cedar Rapids
Gas Light Co. VS.. Cedar Rapids, 223
L. s., 655, $50; Georgia Ry. VS.. r. r.
Comm, 262 u. s., 625, 632. The instant
case is not governed by Wilcox VS.
Consolidated Gas Co., PIP u. s., 10, for
in that case the franchises were ex-
pressly named by statute as elements
of value to be included in the con
solidation. Moreover the courts opin-
ion in that case contains the following
respecting it's authority as
a precedent. to wit: What has beer
said herein regarding the value of the
franchises in this case has been neces-
sarily founded upon it's own perculia
facts, and the decision thereon can
form no precedent in regard to the
valuation of franchises generally
where the facts are not similar to
those in the case before u.s. We SIM
ply accept the sum named as the value
under the circumstances stated See
also comments by Judge Hand in Con-
solidated Gas Co. VS.. Newton, Attorney
General, 267 Fed. Rep, 231 ,240: aff'd
Z5S Y. s., 165. Good will likewise
should be excluded from such vaIua-
tlon. Wilcox VS.. Consolidated Gas
Co supra; Des Moines Gas Co. VS.. Des
Moines, 23S U. S., 15S. 1859. Nor can
past losses be capitalized as property
on which to base rates. Knoxville
water Co. VS.. Knoxville, 212 u. s., /,
IA; Galveston Iectric Co. VS. Calves
ton, 25S Z. S., 3SS; CIR. Ry. vs. r. r
Comm, supra.
We hold accordingly that the sum
of S5,150,000 should be deducted from
the valution found by the lower court,
thereby reducing the total valuation
to the sum of $25,756,SSO.
Depreciation Fund Maintained.
The commission complains that the
lower court made no deduction for de-
probation from its estimate of the re-
production cost of the companys prop
erty. In the commissions valuation it
was reported by the engineers that the
deduction for depreciation should ex-
ceed the sum of 81 900 900, but the
commission stated. IS previously ex.
planned the commission approves this
amount as representing true accrued
depreciation, but concludes that, in the
present finding of fair value as a basis
for rates, materially lesser amount
should now be deducted from costs
new. The record does not disclose
what specific sum was thus deducted
by the commission. The lower court,
however, found that no such deduction
should be made, for the reason that
the company had maintained a sinking
FUND for the protection Of it's property
against depreciation, and is annually
setting aside portion of it's earnings
and adding the same to such fund
and that the record fails to disclose
that the rates of fare therefore, fixed
by the commission have been adequate
to justify any deduction for accrued
depreciation from the fair value of the
company's property.
1T appears from the record that
the company has a sinking fund for
depreciation OF $2,075. 1878, of which
81 i 6,930.70 is invested in property
of the company and the residue is
In cash and productive securities. 1t
also appears that the property of the
company has been maintained in the
highest condition in point of material
construction and efficiency; and there
Is no testimony in the record as to
actual depreciation of the property
Valuation for Rate Purposes.
1--WE are convinced that under All
the circumstances 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. 1t may be assumed that the
sinking fund maintained by the com.
pany, part of which has been en-
ployed consistently with it's proper
purpose, is sufficient to balance the
actual deDreciatiOn of the proDar+.,
and this fund does not enter into the
rate-bearing valuation. 1t must be
membered, moreover, that the present
valuation is not intended as a buyine
and selling price of the property, but
for rate-making purposes, and the
company is entitled to collect rates
sufficient to balance the depreciation
as well as to pay a reasonable return
upon the invested capital. New York
Telephone Co. VS.. Prendergast, 900
Fed, 822; Queens Gas Co. case, Fed
ed, 351: Southern Bell Telegraph &
Telephone Co. VS.. Railroad Commits.
sion, Fed. ed. II; Brooklyn Union
Gas Co. VS. Prendergast, Fed (2d).
628.
Accordingly, we modify the decree
of the lower court and do find. adj
Judge and decree that the value of the
property of the Capital Traction Co.
actually used and useful for the con.
venience of the public, at the fair
value thereof on January | 1925, was
$25, ,756,880. 1t is Furthermore ordered,
adjudged and decreed that the COM
mission and it's successors in office
shall forthwith modify their former
valuation and order in accordance
herewith"