ments are to be included in the estimate, are still subjects of controversy. . . .

The principles of just compensation established by the courts in the several cases they have had under consideration are of great assistance in solving many of the difficult questions involved in this character of litigation; but the application of these principles to the facts of a particular case is, after all, the simple rule of determining what, under all the circumstances, is reasonable and just as between the rate payers and the corporation engaged in performing the public service.

§ 28. Justice Peckham in San Joaquin Irrigation Case, 1904Present value.

In Stanislaus County v. San Joaquin and King's River Canal and Irrigation Co., 192 U. S. 201, 26 Sup. Ct. 241, 48 L. ed. 406, decided January 18, 1904, Stanislaus County, California, appealed to the United States Supreme Court from a decree of the Circuit Court setting aside an ordinance adopted by the board of supervisors of the county prescribing the water rates to be charged by the water company for the ensuing year. In reversing the decree of the court below, Justice Peckham, delivering the Supreme Court's opinion, says (at pages 213, 214):

It is not confiscation nor a taking of property without due process of law, nor a denial of the equal protection of the laws, to fix water rates so as to give an income of 6 per cent. upon the then value of the property actually used, for the purpose of supplying water as provided by law, even though the company had prior thereto been allowed to fix rates that would secure to it one and a half per cent. a month income upon the capital actually invested in the undertaking. . . . The original cost may have been too great; mistakes of construction, even though honest, may have been made, which necessarily enhanced the cost; more property may have been acquired than necessary or needful for the purpose intended.

§ 29. Columbus, Ohio, Electricity Rate Case, 1906-Fair present value of tangible and intangible property.

In the case of Columbus Railway and Light Company v. City of Columbus, an application was made for an injunction against the enforcement of a city ordinance reducing electricity rates. The special master reported in favor of a permanent injunction and his report was confirmed by the United States Circuit Court without opinion. The special master, after quoting at length from the decisions of the courts in relation to fair value, says (at pages 29, 49):6

In other words, fictitious values will be disregarded, improvident and unwise expenditures will not be taken into account, but only the fair value of the property will be used as a basis, including, however, in such fair value not only the tangible property devoted to the public service, but such intangible value as may be legitimate and may be justly, under all circumstances, credited to the producer on the one hand, and debited to the consumer on the other, so as to bring about the just compensation rightly belonging to the company, and legitimately to be paid for by the consumer.

Necessarily the ascertainment of such value is in all cases a difficult matter, and its final adjustment by the court can rarely, if at all, be made with mathematical exactness. All the court can do is, from the evidence, to arrive at such a value as will, all things considered, be fairly equally just to both parties. . . . Considering all of the above elements as entering into the valuation of complainant's property, viz., the total cost thereof $2,000,000, the rental or purchase price $1,650,000; the fair replacement value of its tangible property at about $1,600,000; the depreciation properly to be allowed for property not necessary for present use in supplying the service demanded; the addition after the purchase from complainant's lessor of over

6 Columbus Railway and Light Co. v. City of Columbus, No. 1206, in equity, United States Circuit Court, Southern District of Ohio, Eastern Division, Report of Special Master T. P. Linn, June 8, 1906.

$350,000 in cash by way of improvements and extensions; the market value of its securities at the time and shortly prior to the lease $1,700,000, and without attempting to fix any definite value upon the intangible assets, I conclude that the fair value of complainant's property devoted to the public service upon which it is entitled to ask a fair return, and for which the public should be required to pay a reasonable price for its use, is, at least, the sum of $1,650,000. Manifestly this valuation cannot

be made with mathematical accuracy, but in view of the testimony, which can not be reviewed here in detail, it is a valuation which seems to me just to both complainant and defendant as a basis for determining whether or not the ordinance in question will result, upon this valuation, in taking complainant's prop› erty without due process of law.

§ 30. Justice Peckham in Consolidated Gas Case, 1909—Fair value generally includes appreciation.

In Willcox v. Consolidated Gas Co., 212 U. S. 19, 29 Sup. Ct. 192, 53 L. ed. 382, decided January 4, 1909, where it was sought to restrain the enforcement of gas rates prescribed by the New York state legislature, and the Gas Commission, Justice Peckham says (at page 52):

And we concur with the court below in holding that the value of the property is to be determined as of the time when the inquiry is made regarding the rates. If the property, which legally enters into the consideration of the question of rates, has increased in value since it was acquired, the company is entitled to the benefit of such increase. This is, at any rate, the general rule. We do not say there may not possibly be an exception to it, where the property may have increased so enormously in value as to render a rate permitting a reasonable return upon such increased value unjust to the public. How such facts should be treated is not a question now before us, as this case does not present it. We refer to the matter only for the purpose of stating that the decision herein does not prevent an inquiry into the question when, if ever, it should be necessarily presented.

§ 31. Iowa Supreme Court in Cedar Rapids Gas Case, 1909

Reproduction-cost-less-depreciation the controlling factor. In Cedar Rapids Gas Light Company v. Cedar Rapids, 144 Iowa, 426, 120 N. W. 966, 968, decided May 4, 1909, upon an appeal from a dismissal of a complaint to enjoin the enforcement of an ordinance of the council of the city of Cedar Rapids fixing the price of gas, the Iowa Supreme Court, in affirming the dismissal said, at page 432, per Judge Ladd:

There is no controversy, however, if we understand counsel rightly, but that the company is entitled to have its property appraised at its fair value in December, 1906. What such an enterprise was then worth cannot be determined by the mere addition of the separate values of its component parts, nor from the cost alone, nor from what it formerly might have been sold at if such price were influenced by excessive rates, nor from what it might cost to replace alone, for this, in view of its use, would involve mere estimates of depreciation and contingencies incident to construction. .

Any person or corporation contemplating the purchase of such a property quite naturally would inquire into its history, the character of its management in the past, and the amount expended in its construction. . . . A careful review of the entire record, which has been repeated, has led to the conclusion that a fair valuation of the entire plant is somewhere between $300,000 and $350,000. This is largely in excess of its cost, but, according to the record, the value of material as well as the cost of labor has greatly increased since much of the plant was constructed. On the other hand, to put the value above the limit mentioned would require us to ignore the depreciation due to age, decay, inadequacy, and the like, on account of which defendant has been charging off its books large sums, and which the proof shows should be taken into account.

This decision was affirmed by the Supreme Court of the United States, March 11, 1912 (223 U. S. 670). Jus

tice Holmes states that the attitude of the state court was "fair" and that it had "fixed a value on the plant that considerably exceeded its cost."

§ 32. Oklahoma Supreme Court in Pioneer Telephone Case, 1911-Reproduction-cost-less-depreciation the control

ling factor.

In Pioneer Telephone and Telegraph Company v. Westenhaver, 29 Okl. 118 Pac. 354, decided January 10, 1911, an appeal was taken by the telephone company to the Supreme Court of Oklahoma from an order of the Corporation Commission directing the restoration substantially of certain telephone rates which had been increased by the company. In the course of the proceeding before the Corporation Commission a valuation was made of the company's plant. In reversing the Commissioners' order, the court, per Judge Hayes, says (at pages 355, 356):

The basis of all calculations as to the reasonableness of the rates to be charged by public service corporations is the fair value of the property used by the corporation in rendering the service to the public. . . . The rate is fair when its application will yield a fair return upon the reasonable value of the property at the time it is being used for the public. It is unfair, when it does not yield such return. No inflexible method for the ascertainment of the value of the property used in the service has been fixed by legislative bodies dealing with rates, or by the courts in determining the validity of rates, and from the nature of the subject no inflexible method can be fixed. Sometimes the present value is arrived at by ascertaining the original cost of construction and all betterments, and deducting therefrom for depreciation; but this method does not always prove to be fair and just. If there was extravagance and unnecessary waste in the construction, or, as is often the case, fictitious stocks and bonds issued, the proceeds of which did not go into the original construction, such method would prove unfair to the public,