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have any desire to put other than the proper value on the property."

The experts of the utility, while well qualified in experience and education, had not had the opportunity to make the detailed investigation of the property that was made by the commission's engineer, Mr. Pierce. Mr. H. M. Taylor, one of the utility's experts, is a nonresident of Ohio. He spent two days in Portsmouth examining the property and several days in calculating the valuations. Neither Edward L. Cheney nor William Henderson has ever been in Portsmouth. Mr. Sam Wyer, a most eminent engineer, made comparisons of unit prices in the exhibit of Taylor, who spent two days in Portsmouth, with the commission's engineer, and subscribed to Taylor's figures. Mr. Pierce, on the other hand, has within five years already made two appraisals of this property, spending weeks of his time going over the plant. In the appraisal he made for the valuation as of January 15, 1921, no objection was filed either by the city or by the company to the appraisal. Pierce's unit prices in 1920 correspond closely with the unit prices used by Mr. Butterworth, the vice president and general manager of the company, in the present valuation, and the value set by the commission in 1920 upon the basis of those unit prices was some $200,000 less than the instant valuation. Pierce's figures were by no means always lower than those of the utility. He adopted the estimate made by the vice president of the utility of the necessary amount of working capital. He stated that more wrought iron pipe was necessary than did the company's vice president and engineer, and hence estimated a higher price for pipe than this expert for the company, because he based his estimates upon wrought iron instead of upon steel.

Under the doctrine of Lindsey v. Public Utilities Commission, 111 Ohio St. 6, 144 N. E. 729, and Lima Telephone & Telegraph Co. v. Public Utilities Commission, supra, this court should not under these circumstances disturb the commission's order.

While the value of the plant was fixed at $397,502.76 in 1920, with no objection being filed by the company to the appraisal upon which it was based, and with only 14,000 feet of additional mains laid since then, according to the statements furnished by the utility's engineer, and gross additions amounting to $53,509.43, the commission in 1926 allowed an increase in valuation of about $200,000 upon a showing made by the company of only a net expenditure for actual construction cost of about $50,000. In this connection it is significant that, although the record shows that this property was acquired by the present holder in 1925, in a voluntary purchase, the company refused to reveal what price was paid.

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The holder site is the site of the old Portsmouth Gas Company, which has been abandoned for a long period of time. There are two structures upon the property, a brick structure occupied by a bottling plant and a rented dwelling house. Since the record shows that it is not now contemplated, under the rate sought to be established in the instant action, to erect a holder upon this site, the site is not used or useful at the present time, and the commission was justified in eliminating this item from the valuation.

The same conclusion arises with regard to the regulator and meter site. A rented residence occupies the larger part of this lot, and the commission acted properly in sustaining the reduction.

As stated by Spurr, Principles of Public Service Regulation, vol. 2, p. 80:

"That property which has been superseded or abandoned and is no longer used in the public service should not be included in the valuation of public utility property is recognized by the Supreme Court of the United States on the ground that this constitutes depreciation." City of Knoxville v. Knoxville Water Co., 212 U. S. 1, 29 S. Ct. 148, 53 L. Ed. 371.

The utility also urges that an insufficient allowance was made for overheads and intangibles. On the appraisal it was shown that the following allowance is made:

"Organization, preliminary engineering, legal expense, interest and taxes during construction, omissions and contingencies, 7 per cent."

An allowance is also made for overheads in the various items upon which this 7 per cent. is calculated, which runs to 17 per cent. upon all items except real estate, tools, furniture, fixtures, and transportation equipment.

The record gives no testimony whatever of the actual expense incurred in organization, in the erection of the plant, and in the building of the business. This company or its predecessor has been in operation for a period of over 50 years. Obviously, whatever expenses were incurred in organization, prelim

(162 N.E.)

inary engineering, legal expense, interest and taxes during construction, omissions and contingencies on the original establishment of the business, have long since been defrayed out of the rate paid for the gas.

Bearing in mind the fact that the inception cost of the enterprise had long since been incurred, the allowance for overheads was not too small. Des Moines Gas Co. v. City of Des Moines, 238 U. S. 153, 35 S. Ct. 811, 59 L. Ed. 1244.

The company asks that taxes paid during construction be fixed at $9,692, while the total tax paid for the year 1926 upon the entire utility property is $8,570.35.

An allowance is also demanded for the cost of capital for reconstruction. Such capital is not now being raised, and, when raised, over 50 years ago, no doubt its cost was defrayed from the rates paid by the public. The situation which obtains when a utility is a producing company and has been but recently organized is entirely different from the situation which obtains when the utility is a distributing company only, not a producing company, and has been operating for a long period of years. The actual expense of preliminary financing has by this time been absorbed in the prices paid for the gas.

An allowance for hypothetical brokerage fees based on the percentage customarily obtained by bankers for financing such enterprises should not be allowed. Galveston Electric Co. v. City of Galveston, 258 U. S. 388, 42 S. Ct. 351, 66 L. Ed. 678.

The fair value of the plant should not be estimated upon a basis of impecuniosity and exactions, but upon the theory, if used, of reconstruction, by those financially able to build the plant, paying reasonable prices therefor. City of Minneapolis v. Rand (C. C. A.) 285 F. 818.

The allowance for overheads made by the commission in this instance therefore seems to me not to constitute error.

The utility also urges that the commission erred in making no specific allowance for going concern value. The commission in its report fixing the final valuation said that:

"Going concern value inherent in said plant has been duly considered, recognized and included within the items composing said valuation and the allowance for overheads and intangibles, and is fairly, reasonably and truly reflected and shown thereby."

This subject has been fully considered and determined in the case of Hardin-Wyandot Lighting Co. v. Public Utilities Commission, 118 Ohio St. 592, 162 N. E. 262, decided May 9, 1928, to which case reference is made for reason and authority.

In City of Cincinnati v. Public Utilities Commission, 113 Ohio St. 259, 148 N. E. 817, the court said that while the item of going concern value was not specifically referred to, it was considered by the court and proper

ly included in the item denominated "Overheads." Included in that amount, just as in the instant valuation, was an allowance for engineering, administrative and legal expenses, liability insurance, taxes, and interest during construction.

The confusion with regard to this question of going concern seems to have arisen because of the decision of the Supreme Court of the United States in the case of McCardle et al., Com'rs, v. Indianapolis Water Co., 272 U. S. 400, 47 S. Ct. 144, 71 L. Ed. 316. However, as pointed out in Hardin-Wyandot Lighting Co. v. Public Utilities Commission, supra, the McCardle Case affirmed a valuation which contained no specific allowance for going concern. It affirmed a valuation based upon the cost of reproduction new, less depreciation, as estimated by the commission, as of the time of the rate hearing. Professor Whitten, in his valuable work upon Valuation of Public Service Corporations (2d Ed. 1928), in an exhaustive study of the McCardle Case, points out that the authorities cited upon the question of going value in the Indianapolis Water Case in general do not sustain the proposition urged here by the plaintiff in error that in every case a 10 per cent. allowance for going concern must be made in addition to a valuation based upon reproduction cost new of the plant as a complete whole, less depreciation.

Whitten also points out significant decisions of the Supreme Court not mentioned by Mr. Justice Butler in connection with his discussion of going value, and never overruled by the Supreme Court of the United States, as follows:

"Willcox v. Consolidated Gas Co., 212 U. S. 19, 29 S. Ct. 192, 53 L. Ed. 382, 15 Ann. Cas. 1034, 48 L. R. A. (N. S.) 1134, where good will was excluded, nothing was included for going value, and only franchise value of a limited amount under special circumstances allowed.

"Cedar Rapids Gas Light Co. v. Cedar Rapids, 223 U. S. 655, 32 S. Ct. 389, 56 L. Ed. 594, where no separate amount for going value was allowed.

"Galveston Electric Co. v. Galveston, 258 U. S. 338, 42 S. Ct. 351, 66 L. Ed. 678, where nothing was allowed for going value.

"Houston v. Southwestern Bell Telephone Co., 259 U. S. 318, 42 S. Ct. 486, 66 L. Ed. 961, where nothing was allowed for going value.

"State of Missouri ex rel. Southwestern Bell Telephone Co. v. Public Service Commission, 262 U. S. 276, 43 S. Ct. 544, 67 L. Ed. 981, 31 A. L. R. 807, where 'cost of establishing the business' was excluded from the value found by the court, even though the Missouri commission had allowed 10 per cent. for intangible when it built up a rate case on a different theory.

"Georgia Railway & Power Co. v. Railroad Commission, 262 U. S. 625, 43 S. Ct. 680, 67 L. Ed. 1144, where an item amounting to 10 per cent. of the value of the physical property had been allowed for going value by the com

mission and was passed by the court against the company's contention that it should be much more, and a claim for accumulated losses during recent years was rejected entirely."

A careful consideration of Mr. Justice Butler's opinion in the McCardle Case demonstrates that the Supreme Court of the United States did not in that decision lay down the proposition that 10 per cent. was to be allowed for going concern in every case where the valuation of a public utility was the issue. No such statement is made in the decision, and all that Justice Butler does say is that under the impressive facts of this record 91⁄2 per cent. is not too much to allow for going value and water rights. It cannot be too strongly emphasized that the issue in the McCardle Case was whether the valuation was based upon trend prices too low in the average, and, since the allowance affirmed contained no item for going concern, that case is not authority for always allowing going concern value as a specific item.

Plaintiff in error strongly urges in this connection that general overheads are part of the physical property, that going concern is an element of value separate and apart from the physical property, and that hence going concern cannot be included in the general overheads. This court has already held upon this proposition that the allowance of general overheads such as were employed in this case does include an allowance for going concern. City of Cincinnati v. Public Utilities Commis

sion, 113 Ohio St. 259, 148 N. E. 817. In that case the court, quoting from Des Moines Gas Co. v. City of Des Moines, supra, called atten

tion to the fact that:

"What may be called the inception cost of the enterprise entering into the establishing of a going concern had long since been incurred."

-a statement which is true of the present

case.

It is to be conceded that the general overheads do constitute an allowance for direct construction in connection with the physical property. They also, however, constitute an allowance for establishing the business. In the words of this court, in the Cincinnati Case, supra, such overheads enter into the development of the utility property and give it an added value not represented in the value of the physical property.

However, the plaintiff in error then urges that the 7 per cent. allowance for general overheads is purely arbitrary and must be disregarded in view of the testimony of the utility's engineers that such an allowance should be somewhere in the neighborhood of 20 per cent.

The natural interest of the utility's engineers may properly be taken into consideration by the Public Utilities Commission in weighing the evidence. Now the members of

the commission are themselves experts upon matters of valuation. Every working day in the year they are vitally concerned with problems of engineering and financing of public utilities. Their allowance is based upon their experience. It constitutes an estimate just as worthy of consideration as the estimate of the utility's experts, and upon this question we should not disturb the finding of those who have been selected by the state to handle these problems..

(119 Ohio St. 37)

METROPOLITAN LIFE INS. CO. v.
CONTIE. (No. 20895.)

Supreme Court of Ohio. May 31, 1928.

Rehearing Denied June 14, 1928.

Appeal and error -842(3)-Action on policy, defended for insured's false statements of health, presented question of fact not reviewable by Supreme Court.

Action on life policy, defended on ground that insured made false statements as to health, material to risk inducing issuance of policy, presented determination by jury of question of fact which Supreme Court will not review. Kinkade and Jones, JJ., dissenting..

Error to Court of Appeals, Stark County. Action by one Contie, administrator, against the Metropolitan Life Insurance Company. Judgment for plaintiff was affirmed by the Court of Appeals, and defendant brings error. Affirmed.-[By Editorial Staff.]

This is an error proceeding instituted to a judgment of the Court of Appeals of Stark county, which affirmed a judgment recovered against the plaintiff in error for the amount of a life insurance policy, issued on June. 30, 1924, upon the life of one Rose F. Scarfone, who died in November, 1924. The second defense of the answer, in substance, alleged that the insured made statements in her application which were willfully false, fraudulently made, and material to the risk, which induced the plaintiff in error to issue the policy. The third defense of the answer alleged that the insured was not in sound health on the date of the issuance of the policy, and set up the terms of the policy, claiming that under them the company was entitled to declare the policy void in case the insured was not in sound health upon the date of the issuance thereof. Evidence at the trial was given tending to show that the insured falsely represented herself to be in good health, whereas she had recently undergone an operation for cancer. Evidence, on the other hand, was given tending to show that the insured had informed the doctor at the time of her examination that she had recently undergone such an operation. Evi

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(162 N.E.)
1926 were delinquent. Morris Taussig and
E. W. P. Flesch filed objections to a portion
of the taxes levied upon an improved parcel
of real estate which they owned. The ob-
jections were overruled, and judgment and
order of sale followed. The objectors prose-
cute this appeal.

dence was also given tending to establish
that the insured was not in good health at
the date of the issuance of the policy, but
this evidence was contradicted by other
competent testimony. The jury found for
the administrator of the estate of the insured.
The case comes into this court upon al-
lowance of motion to certify the record.
Pomerene & Rodgers and Gnau & Miller, all 1923, the first year of the quadrennial period,
of Canton, for plaintiff in error.

Niles A. Sponseller, of Canton, for defendant in error.

PER CURIAM. It appearing that the record in this case presents a determination by the jury of a question of fact, which this court will not review, the judgment of the Court of Appeals is affirmed.

Judgment affirmed.

DAY, ALLEN, ROBINSON, and MATTHIAS, JJ., concur.

KINKADE and JONES, JJ., dissent.

(330 I11. 606)

PEOPLE ex rel. HARDING, County Collector, v. TAUSSIG et al. (No. 18857.)

Supreme Court of Illinois. June 23, 1928. Taxation 482(1), 530—Increase in assessed valuation without notice to taxpayers and in absence of physical change in property held void, and payment did not validate void portion.

Increase in assessed valuation of improvements made by county board of review without notice to taxpayers and in absence of any physical change in property, which increase was repeated and continued by board of assessors, held void, and payment of taxes on the increased valuation did not validate void portion of assessment.

The board of review of Cook county for

fixed the assessed value of appellants' land at $14,157 and of the improvements thereon at $40,000, making the total assessed value $54,157. For the year 1924 the board of assessors carried forward this total. There after the board of review reduced the assessed value of the improvements from $40,000 to $30,000, thereby fixing for the year 1924 the assessed value of the land and improvements at $44,157. This total was repeated by the board of assessors as the assessed value of the property for 1925. For the same year the board of review without notice, increased the assessed value of the improvements to $40,000 and fixed the assessed value of the land and improvements at $54,157. The taxes extended upon this valuation for 1925 were paid by appellants the board of assessors and the board of rewithout objection. For the year 1926 both view carried forward, in their respective assessed value columns, the figure $54,157. There had been no change in the physical condition of the property since April 1, 1924. Appellants paid that portion of the taxes for the year 1926 which had been extended upon a valuation of $44,157. Their objections relate to the remainder of the taxes extended upon the increase of $10,000 in the assessed value of the improvements.

Appellants contend that the board of re

view had no power to increase the valuation of the improvements in the year 1925 without notice to the taxpayer; that the increase so made was void; and that the repetition of

Appeal from Cook County Court; John D. that increase by the board of assessors and Biggs, Judge.

Application for judgment of sale of land for delinquent taxes by the People, on the relation of George F. Harding, County Collector, against Morris Taussig and another. Judgment of sale entered, and said Taussig and another appeal. Reversed.

the board of review in the year 1926, likewise without notice, was also void. The assessment as fixed by the board of review for the year 1924, it is conceded, was valid. The same board in 1925, without notice to

appellants and in the absence of any physical change in the property, increased the valuation of the improvements on the land. WithWilliam J. Grace, of Chicago, for appel- out notice, and with the condition of the lants.

Robert E. Crowe, State's Atty., Robert C. O'Connell and James F. Clancy, both of Chicago (Hayden N. Bell, of Chicago, of counsel), for appellee.

DeYOUNG, C. J. The county collector of Cook county made application to the county court of that county for a judgment against and an order for the sale of the real estate upon which the general taxes for the year

property unchanged, this increase was repeated both by the board of assessors and the board of review in the assessment for the year 1926. The assessed value as fixed by the board of review in 1924 and continued by the board of assessors in 1925 was never modified or changed in the manner author. ized by law, and it was the only assessment upon which taxes could be legally extended. The increase in the valuation of the improvements made by the board of review in 1925

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was void for the want of notice. People v. Hammond, 325 Ill. 83, 155 N. E. 859; People v. Bender (No. 18764) 161 N. E. 775. The payment of the taxes for the year 1925 on the increased valuation did not give validity to the portion of the assessment which was void. People v. Bender, supra. Appellants' objections should have been sustained.

Exhibit B. In his amended bill appellant states that the written agreement entered into between the complainant and the "defendant" is divisible in law, and the portion of the agreement referring to specific performance of the real estate in question is attached to the amended bill and made a part thereof as Exhibit A. The latter exhibit consists mere

The judgment of the county court is re- ly of excerpts from Exhibit B, and does not versed.

Judgment reversed.

(331 III. 140)

KLIMOWICZ v. COLNON et al. (No. 18886.)

Supreme Court of Illinois. June 23, 1928. Specific performance 114(4)-Bill in suit for specific performance of contract to convey realty held insufficient to show complainant's compliance.

Amended bill in suit for specific performance of contract for sale of realty held insufficient to show that complainant had complied with requirements of contract, or that he was ready, able, and willing to perform, or entitled to relief.

contain all the provisions of that exhibit with reference to the sale of the real estate in question.

From an examination of both exhibits it is manifest that the written agreement is not divisible in law, as stated by appellant in the amended bill. The contract provides that the purchasers will not assign the agreement, or any interest therein, to any person other than the vendor or Milton T. Vanderbilt, and that no transfer or assignment shall be made by the purchasers without the previous written consent of the vendor, and that any such assignment or transfer without such previous written consent shall not vest in the assignee any interest therein. The amended bill was filed by appellant alone, Slyvia Klimowicz not joining with him therein, and no reason is assigned in the bill for her nonjoinder. The amended bill alleges that Colnon entered into a written agreement on the 5th of July,

Appeal from Circuit Court, Cook County; 1923, with appellant, under the terms of Ira Ryner, Judge.

Suit for specific performance by George F. Klimowicz against Philip Colnon and others. Decree for defendants, and complainant appeals. Affirmed.

John F. Tyrrell, John F. Higgins, and Myer H. Gladstone, all of Chicago (Louis Greenberg, of Chicago, of counsel), for appellant.

Rosenthal, Hamill & Wormser and Tolman, Sexton & Chandler, all of Chicago (Lessing Rosenthal, F. Howard Eldridge, and Henry P. Chandler, all of Chicago, of counsel), for ap pellees.

HEARD, J. The circuit court of Cook county sustained a demurrer to a third amended bill of complaint filed in that court by George F. Klimowicz, appellant, against appellees, for the specific performance of a real estate contract. Appellant elected to stand by his amended bill, and a decree was entered dismissing it for want of equity, from which decree he has appealed to this court.

Appellant's third amended bill is based up on a written agreement, dated July 5, 1923, made between Philip Colnon, party of the first part, as vendor, and George F. Klimowicz and Sylvia Klimowicz, his wife, parties of the second part, as purchasers, not in tenancy in common, but in joint tenancy, of an undivided one-fourth of the premises described therein, a copy of which agreement is attached to the amended bill and made a part thereof as

which he agreed to convey to appellant the property described therein, and refers to Exhibit B as a copy of such agreement. This statement of the bill is at variance with said exhibit, which is an agreement between Colnon and appellant and Slyvia Klimowicz, under the terms of which Colnon agreed to convey the property, not to appellant, but to appellant and Sylvia Klimowicz, not in tenancy in common, but in joint tenancy.

The amended bill alleges that in the written agreement Colnon agreed to sell, and appellant to purchase, the premises for the sum of $30,479.17, which amount was to be paid, $7,500 at the time of the signing of the contract and the further sum of $4,479 on or before July 1, 1926, with interest from date at the rate of 6 per cent. per annum, payable semiannually; that he had paid the 6 per cent. interest semiannually as called for in the agree ment, and that "shortly before and at the time of maturity" the complainant tendered in cash the sum of $4,479 to Colnon, but that he refused to accept the same, plus interest; that the balance of the money was to be paid at any time after July 1, 1926, with interest; that appellant is now ready and brings into court the sum of $4,479 in cash, and the balance of $17,000.17 in cash, plus interest. By the terms of the contract the sale was to be made subject, among other things, to all general taxes, special taxes, and special assessments levied after the year 1922, including a special assessment for a sewer in various

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