Petition for a Writ of Certiorari — Puget Sound Power & Light Co. v. Public Utility District No. 1

OSES ;

| Supreme Court of the United States |

OcToBER TERM, 1941

| PuceT SOUND Power & LIGHT COMPANY, a corpora-

tion, and OLD COLONY TRUST COMPANY, a corpora-

tion, Petitioners,

vs.

PUBLIC UTILITY DISTRICT No. 1 OF WHATCOM COUNTY,

a municipal corporation.

PETITION FOR WRIT OF CERTIORARI

To the United States Circuit Court of Appeals for the

Ninth Circuit

— and —

BRIEF IN SUPPORT OF PETITION

Of Counsel for Petitioner

Puget Sound Power &

Light Ce.:

LOWELL P. MICKELWAIT

FERD J. SCHAAF

Seattle, Washington.

JOSEPH W. KINDALL

Bellingham, Washington.

ELMER E. Topp

RANK E. HOLMAN

Seattle, Washington.

Counsel for Petitioner Puget

Sound Power & Light Co.

E. L. SKEEL

Seattle, Washington.

Counsel for Petitioner Old

Colony Trust Company.

THE ARGUS PRESS, SEATTLE

iii

SUBJECT INDEX

Page

PETITION FOR WRIT OF CERTIORARI...................-..------ 1

a i i hs 5

mate sash Bache sa EE RAO his 5

Public use and necessity ....................:ccscsccssseeeeees 5

Elimination of contractor’s profit ........................ 6

Severance damage to Bellingham office building 6

District offer of wholesale power contract............ 6

Reasons Relied on for Allowance of Writ.................. 7

Public use and necessity .................-.::-:cs:ccseeeeeeeess 7

Instruction to eliminate contractor’s profit........ 7

Severance damage to Bellingham office building 8

District offer of wholesale power contract.......... 9

Dibviod COpGie CO aii ies hiistiscccsmiecsance niente 10

ener een URN Hite MECC RER EY) R Gre Pad 12

BRIEF IN SUPPORT OF PETITION................-..02---0000-+-+ 13

I. Opinions of the Court Below............................. 13

ET, SURO etic inlet pcctiitnelnsibadleaanient 13

TET, SN sca dcipaigahicisdosisicic esac cakciageaciadats 14

IV. Specifications of Error ....................0...00-000--- 14

V. AU sit i ced aiedsiceidaibiacieaies 15

1. There is no necessity for the District to con-

demn the property of the Company.............. 15

2.The Trial Court erred in instructing the

jury to eliminate Contractor’s Profit............ 19

3. The Trial Court erroneously rejected testi-

mony offered by the Company to prove sev-

erance damage to the Bellingham office

DORE oo ccs hose ceapeecea ne eelcniionin 23

a. Testimony of S. P. MacFadden.................. 24

b. Testimony of O. C. Scudder........................ 25

4. The Trial Court erred in admitting the Dis-

trict’s offer of wholesale power contract...... 27

Cometh (iis ici sdi isis les cai eee 31

iv

TABLE OF CASES

Page

ee Gold Mining Co. v. Larson, 279 Fed. ‘

Blomskog, Erickson & Cotton v. Seattle, 107 Wash.

A71, 182 Pac. 571 ........-.----------ceecseeecesssessessseesceseees 29

Board of Directors of St. Francis Levee District v.

Webb, 188 Fed. 67 .........-.--------:-:ecsseeeeeeeeeee* 10, 29, 30

Brooklyn Borough Gas Co. v. Prendergast, 16 F.

(2d) G15 .........ssececeseseneecseesennneceneensneneneseserseneeess 8, 22

Carr v. Zaja, 283 U.S. 52........--------.-----eee 5

Cary v. Corporation Commission of Oklahoma, 17

FB. Supp. 772 ........-.-s-ccsccsecencserscsscnsnsneeenseesenseesees 8, 22

Conqueror, The, 166 U.S. 110........-.-------------e-e 5

Ingram v. Wishkah Boom Co., 35 Wash. 191, 77

Pe BE ciiecnienctsnonscsonnsneiedaidninennannelibiliatcsiiaieinacsieh sahil 9, 26

King County v. Joyce, 96 Wash. 520, 165 Pac. 399..9, 26

Lang’s Estate v. Commissioner, 97 F.(2d) 867...... ll

Louisville & Nashville R. R. Co. v. Behlmer, 169

DEE, GG ivcscinectececcenecisacecaneneasnatinneciaivinnegnnannmbcrgiag 5

Monongahela Navigation Co. v. U. S., 148 U.S. 312 27

Puget Sound Power & Light Company v. City of

Puyallup, 51 F.(2d) 688.........--.---------------- 23, 27, 28

Samish River Boom Company v. Union Boom Com-

pany, 32 Wash. 586, 73 Pac. 670...........---------------- 17

Seattle, In re, 102 Wash. 286, 172 Pac. 1161............ 29

Seattle & M. Ry. Co. v. Gilchrist, 4 Wash. 509, 30

a I acc oisst inrttehoceanasacnonvanseasosebeliceesuinale 9, 26

Seattle & Montana Railway Co. v. State of Wash-

ington, 7 Wash. 150, 34 Pac. 551...........-.------------ 17

State ex rel. Peabody v. Superior Court, 77 Wash.

698, 188 Pac. 277............--.---csece-nenssnseos 10, 28, 29, 30

State ex rel. Portland & Seattle Railway Co. v. Su-

perior Court, 45 Wash. 270, 88 Pac. 201............ 17

State ex rel. Weyerhaeuser Timber Company v. Su-

perior Court, 71 Wash. 84, 127 Pac. 691. ......... 16

State of Washington v. Superior Court, 128 Wash.

TQ, 222 Pac. ZOE ........-----.sec-ceeseeeeeeeneeseenenenenenensees 7,17

TABLE OF CASES v

Page

Textile Mills Securities Corporation v. Commis-

sioner of Internal Revenue (Oct. Term, 1941, No.

ee el hnwins , 86 L. ed. (Adv. Op.) 242.... 11

U.S. v. Gettysburg Elec. Ry. Co., 160 U.S. 668........ 27

U.S. ex rel. T. V. A. v. Powelson, 118 F.(2d) 79.... 27

Washington ex rel. Gra : Harbor Logging Co. v.

Superior Court, 248 U.S. 261.........:..........-.0...0...-

Weber v. West Seattle Land & Improvement Com-

pany, 188 Wash. 512, 63 P.(2d) 418....00000000... 8, 24

Wicklund v. Allraum, 122 Wash. 546, 211 Pac. 760

<sanpinoncnuntegnitenksphel bigiicy 5 wean aheaneaenmapiaieseiaadaie a dae 8, 24

Worcester Electric Light Company v. Attwill, P.U.

i RAE oD isiin niecisieaebedniciaialamteieaniincdiciieins ss 22

STATUTES

Rem. Rev. Stat. of Washington §11605 et seq......... 18

Be Ute, BED ected encase 5

SIREN Aiea Ne 5

I Si soci shciipsacecapiiisselmabieaiaa nian tea al ear, 5

DE isisovoisehevipiiiiceticaes Oates od a rates 5

GD cic cincisciscéisaccabnasscgesametesnenceecien ces 5

SOU shiecasssusslabascasciunseuiscaias ddiace tae Seed 5

EEE ree EN pli eoe ad fre 5

Lewis, Eminent Domain, Sec. 756 ..........-......-.0---.- 29

Washington Constitution, Art. I, Sec. 16................ 28

Washington Constitution, Art. XII, Sec. 22 ............ 18

Rules of Civil Procedure, Rule 73............................ 5

EEE eee

IN THE

Supreme Court of the United States

OCTOBER TERM, 1941

PuGeT SOUND Power & LIGHT COMPANY,

a corporation, and OLD COLONY TRUST ComM-

PANY, a corporation, Petitioners,

vs.

PuBLic UTILITy District No. 10F WHATCOM

COUNTY, a municipal corporation.

PETITION FOR WRIT OF CERTIORARI

To the United States Circuit Court of Appeals for the

Ninth Circuit

Puget Sound Power & Light Company, a corpora-

tion, and Old Colony Trust Company, a corporation,

petitioners, respectfully pray that a writ of certiorari

issue to review the judgment of the United States Cir-

cuit Court of Appeals for the Ninth Circuit entered

October 24, 1941 (R. 1877) affirming the judgment of

the United States District Court for the Western

District of Washington, Northern Division (R. 159).

STATEMENT

This is a proceeding in eminent domain brought by

Public Utility District No. 1 of Whatcom County, a

municipal corporation of the State of Washington,

against Puget Sound Power & Light Company, a Mas-

sachusetts corporation, Old Colony Trust Company, a

Massachusetts corporation, and Harris Trust and Say.

ings Bank, an Illinois corporation. During the trial

Harris Trust and Savings Bank was, upon stipulation

of the parties, dismissed from the proceeding (R. 152,

153). Petitioner Old Colony Trust Company is a

mortgagee of the property involved and will receive

no further mention herein. Petitioner Puget Sound

Power & Light Company will be called the “Company”

and the respondent, Public Utility District No. 1 of

Whatcom County, will be called the “District.”

The action was commenced April 18, 1939, in the

Superior Court of the State of Washington for What-

com County (R. 2-73). On May 6, 1939, the cause

was removed to the United States District Court for

the Western District of Washington, Northern Divi-

sion, upon the ground of diversity of citizenship (R.

74-89). Said District Court is hereinafter referred

to as the “Trial Court.”

The District seeks to condemn the electrical prop

erties owned and operated by the Company in What:

com County, Washington, together with two transmis

sion lines extending in a southerly direction into aé-

joining Skagit County. Pursuant to the Washington

law and practice (see Washington ex rel. Grays Har.

bor Logging Co. v. Superior Court, 243 U.S. 251) the

cause was first heard by the Trial Court upon the

issue of public use and necessity, and on July 31, 1939,

a decree of public use and necessity was granted (R.

110-144).

On April 30, 1940, the cause came on for trial be

fore the court and a jury (R. 190) for the purpose

of determining the just compensation to be paid the

Company (1) for the property to be taken, and (2)

for the severance damages to the remainder of the

Company’s property not taken. The trial continued

until August 7, 1940, when the jury returned its ver-

dict in the sum of $5,000,000 (R. 158). Judgment

upon this verdict was entered August 24, 1940 (R.

159-162).

The petitioners appealed to the Circuit Court of

Appeals from the decree of public use and necessity

and from the final judgment upon the verdict of the

jury (R. 163). In its opinion filed October 24, 1941,

(R. 1832) the Circuit Court of Appeals affirmed the

decree and judgment of the Trial Court, the opinion,

concurring opinion and dissenting opinion being pub-

lished at 123 F.(2d) 286. No petition for rehearing

was filed.

For a further statement petitioners rely upon the

following taken from the majority opinion of the Cir-

cuit Court of Appeals (R. 1834-1835) :

“* * * The company’s present unified or integrat-

ed system of generating, transmission and dis-

tribution facilities, is the result of nearly 50 years

of development of the electric industry in West-

ern Washington. During that period, the com-

pany has become the successor in the operations

of 148 predecessor corporations. The company’s

entire system extends into and serves all or part

of 19 counties in Central and Western Washing-

ton. It distributes electricity over approximately

4,300 square miles of territory. It has 13 hydro-

electric generating plants with a capacity of 202,-

000 kilowatts and 3 steam plants with a capacity

4

of 104,500 kilowatts, the energy being transmit-

ted over 1,538 miles of transmission lines, and

distributed over 8,900 miles of distribution lines

to more than 190,000 customers.

“The company operates in Whatcom County,

the boundaries of which are also the boundaries

of appellee district. The properties sought by ap-

pellee (District) lie in Whatcom County with the

exception of two transmission lines extending to

substations in Skagit County, and include the

ertire electric distribution system of the company

in the former county, and a small hydro-electric

plant of 1750 kilowatts capacity. The properties

sought to be taken by appellee (District) serve

about 9% of the total customers of the company

in all operations, or 17,600, but the only generat:

ing system to be taken has sufficient capacity to

serve only about 10% of the 17,600 customers in

Whatcom County.”

JURISDICTION

The jurisdiction of this Court is based upon Judicial

Code, Section 240 (a), as amended by the Act of Feb-

ruary 13, 1925, c. 229, 43 Stat. 938 (28 U.S.C.A. Sec.

347).

This petition is timely filed. The judgment of the

Circuit Court of Appeals was entered October 24, 1941

(R. 1877). Under Section 8 (a), Act of February 13,

1925 (28 U.S.C.A. See. 350) the application for writ

of certiorari may be made within three months after

the entry of judgment. The fact that the mandate of

the Circuit Court of Appeals has already issued to

the District Court is immaterial and does not render

this application untimely.

The Conqueror, 166 U.S. 110, 113;

Louisville & Nashville R. R. Co. v. Behlmer,

169 U.S. 644;

Carr v. Zaja, 283 U.S. 52, 53.

The jurisdiction of the Circuit Court of Appeals is

based upon 28 U.S.C.A. Sections 225 and 230 and the

Rules of Civil Procedure, Rule 73.

The jurisdiction of the District Court is based upon

28 U.S.C.A. Sections 41 (1), 71 and 72.

QUESTIONS PRESENTED

The first question relates to the validity of the de-

cree of public use and necessity. The other questions

relate to the correctness of certain rulings of the court

during the trial on the issue of just compensation.

Public Use and Necessity

1. Where it appears without dispute that an

equivalent system could be built by the District

speedily and economically, and that the real purpose

of the condemnation is to establish a District-owned

monopoly, is the District’s determination of necessity

for the condemnation arbitrary or capricious?

Elimination of Contractor’s Profit

2. Did the Trial Court err in limiting the jury’s

consideration of an allowance for contractor’s profit

and expense in the estimate of present reproduction

cost of the property?

Severance Damage to Bellingham Office Building

3. (a) Was the witness S. P. MacFadden, as Vice

President in charge of all operations of the Company,

qualified to testify to the diminution in value of the

Bellingham office building caused by the taking of the

balance of the Company’s property in Whatcom

County?

(b) Was the testimony of the witness O. C. Scud-

der, as to severance damage to the Bellingham office

building, based on an incorrect method of estimating

the damage?

District’s Offer of Wholesale Power Contract

4. Should the jury be permitted to consider in re-

duction of severance damages the resolution adopted

by the District during the trial offering to enter into

a five-year contract with the Company for wholesale

power at a rate subject to revision by the state regu-

latory body?

REASONS RELIED ON FOR ALLOWANCE OF WRIT

Public Use and Necessity

1. The commissioners of the District adopted a

resolution finding that it was necessary to condemn

the Company’s properties. The evidence shows with-

out dispute that an equivalent system could be built by

the District speedily and economically. On the other

hand, the District proposes to take the Company’s

retail distribution system in Whatcom County and

leave on the Company’s hands the generating capacity

built to supply such retail market, thus causing great

harm to the Company. The real purpose of the con-

demnation is to establish a District-owned monopoly

in order to eliminate all competition.

The Circuit Court of Appeals held that the deter-

mination of the District commissioners was not arbi-

trary. This is contrary to the law of the State of

Washington as established in State of Washington v.

Superior Court, 128 Wash. 79, 222 Pac. 208, and other

cases, holding that the question of necessity in con-

demnation cases is a judicial one and that where great

damage will be done to the property owner, with rela-

tively little benefit to the taker, no legal necessity is

shown.

Instruction to Eliminate Contractor’s Profit

2. The Trial Court instructed the jury that in giv-

ing consideration to evidence of any cost of reproduc-

tion new studies containing allowances for general

contractor’s profit it should eliminate any such allow-

8

ances as were not represented by corresponding say-

ings in material and labor costs. The instruction con-

stitutes an undue limitation on the consideration to be

given by the jury to the Company’s evidence of re.

production cost and in effect told the jury to eliminate

the allowance of about $500,000 for contractor’s profit

and expense included in the total cost of reproduction

new appraisal of the Company’s witness N. T. Veatch,

Jr. 3

This is contrary to the following cases, among

others: Cary v. Corporation Commission of Oklahoma

(3-Judge D.C., Okla.) 17 F. Supp. 772, and Brooklyn

Borough Gas Co. v. Prendergast (3-Judge D.C., N.Y.)

16 F.(2d) 615, 628, 638, which hold that in a repro-

duction cost estimate it is proper to assume the prop-

erty would be constructed by a contractor and to allow

a reasonable sum for contractor’s profit.

Severance Damage to Bellingham Office Building

3. (a) S. P. MacFadden is Vice President in charge

of all operations of the Company. His testimony that

the severance damage to the Bellingham office build-

ing would be $108,000 was stricken by the Trial Court.

In approving such action, the Circuit Court of Ap-

peals refused to apply the Washington rule that a cor-

porate officer occupies the position of owner and is

competent to testify to the value of the property of

the corporation, as held in Weber v. West Seattle Land

& Improvement Company, 188 Wash. 512, 63 P. (2d)

418, and Wicklund v. Allrawm, 122 Wash. 546, 211

Pac. 760, upon the stated ground that the witness

9

gave not his own opinion but that of experts. As point-

ed out by Judge Stephens in his dissenting opinion

(R. 1871-1872), this is not a fair construction of the

witnesess’s testimony.

(b) O. C. Scudder, a qualified real estate expert,

testified that the diminution in market value of the

Bellingham office building caused by the taking would

be $108,000. The ruling of the Trial Court striking

his testimony was upheld by the Circuit Court of Ap-

peals apparently on the ground that the witness had

failed to follow the approved method of proof of dam-

ages in condemnation proceedings in that he did not

state the value before and after the taking.

This is contrary to the rule in the State of Wash-

ington as established in Seattle & M. Ry. Co. v. Gil-

christ, 4 Wash. 509, 30 Pac. 788; Ingram v. Wishkah

Boom Co., 35 Wash. 191, 77 Pac. 34, and King County

v. Joyce, 96 Wash. 520, 165 Pac. 399, which hold that

a witness, if properly qualified, may give his opinion

as to severance damage without stating the value be-

fore and after the taking.

District’s Offer of Wholesale Power Contract

4. The District was permitted to introduce in evi-

dence, in reduction of the severance damages to which

the Company was entitled, its offer to enter into a five-

year contract with the Company for the purchase of

electricity wholesale at a rate subject to revision by

the state regulatory body.

This is contrary to the Washington Constitution,

Article I, Section 16, which provides that the just com-

10

pensation to which the owner is entitled must be paid

in money, and to the state law as expressed in State

ex rel. Peabody v. Superior Court, T7 Wash. 593, 613,

138 Pac. 277, and other cases, holding that a mere

offer to assume contractual obligations in favor of the

owner cannot be considered on the issue of just com-

pensation. It is also in conflict with the holding of the

Eighth Circuit Court of Appeals in Board of Directors

of St. Francis Levee District v. Webb, 188 Fed. 67, to

the same effect.

Divided Court Below

5. This cause was heard by three Circuit Judges,

each of whom filed a separate opinion. Judge Haney

held that there was no reversible error and that the

decree and judgment of the Trial Court should be af-

firmed. Judge Garrecht concurred in the opinion of

Judge Haney but differed as to the ground for uphold-

ing the Trial Court’s action in striking the testimony

concerning severance damage to the Bellingham office

building. Judge Stephens filed a dissenting opinion in

which he states (R. 1854):

“My dissent is based upon my conviction that

by an instruction given the jury the appellants

were erroneously deprived of the benefit of Mr.

Veatch’s testimony as to the element of contrac-

tor’s profit in his ‘reproduction new’ valuation;

and that the Court erroneously struck from the

record all of the severance damage testimony re-

lating to the Bellingham office building.

“These are substantial items, and if either con-

stitutes error there is no recourse open save re-

versal.”

_———

11

Judge Stephens was of the view that the judgment

should be reversed.

The law established in this proceeding is of great

importance. Public utility districts similar to the dis-

trict involved in this proceeding have been established

in thirty counties in the State of Washington as well

as in other states. Condemnation actions are pending

against this and other public utility companies in Fed-

eral and state courts. This is apparently the first of

such actions finding its way into the Circuit Courts of

Appeals. It involves not only the right to condemn

but also other questions which are likely to arise in

future trials of this character.

Although there are seven Circuit Judges in the

Ninth Circuit Court of Appeals, only two members

thereof have set a precedent for the remaining judges.

The result may well be different in another appeal if

other judges sit. Until the decision of this Court in

Textile Mills Securities Corporation v. Commissioner

of Internal Revenue, October Term, 1941, No. 34, .... U.

S. ......, 86 L. ed. (Adv. Op.) 242, there was no method

of obtaining a rehearing en banc before the Ninth Cir-

cuit Court of Appeals because of its ruling in Lang’s

Estate v. Commissioner, 97 F.(2d) 867, that no more

than three judges could sit in any case. The Textile

Mills case was decided by this Court December 8,

1941, after the time had expired for filing a petition

for rehearing in the instant proceeding.

This Court should now review the matter and settle

the issues raised.

12

CONCLUSION

It is respectfully submitted that the Petition for

Certiorari to review the decision of the Circuit Court

of Appeals for the Ninth Circuit should be granted.

_ ELMER E. Topp,

FRANK E. HOLMAN,

Counsel for Petitioner

Puget Sound Power & Light Company.

E. L. SKEEL,

Counsel for Petitioner

Old Colony Trust Company