Public Utility District No. 1 v. Washington Water Power Co.

147 P.2d 923, 20 Wash. 2d 384

Opinions

Blake, J. —

These cases come up on appeals by both plaintiffs and defendants from judgments entered on verdicts of a jury. The plaintiff in each case is a county-wide public utility district. Each district proposes to acquire all the properties within its confines owned and used by defendant Washington Water Power Company in the generation, transmission, and distribution of electricity.

The Douglas county case was transferred to Okanogan county and consolidated for trial with the case brought in that county. Separate verdicts were returned, upon which the court entered judgments in the respective amounts, with interest from the date of verdicts. The cases have been consolidated on appeal.

Defendants’ appeal is directed only at the judgment in the Okanogan county case. The error presented is upon the denial of challenges to four jurors on the ground of implied bias. The appeals of plaintiffs raise two questions: (a) whether the judgments should have provided for the offset of earnings against interest during the periods between the date of the verdicts and date of appropriations, the time when the awards are actually paid; and (b) whether the judgments should have provided for compensation to defendant Washington Water Power Company for improvements and betterments made during such periods.

Since the latter questions are common to the appeals in both cases and, in any event, must be disposed of, we shall discuss them first.

The right of the property owner to interest on his judgment and the right of the condemner to have rents, profits, and earnings offset against interest during the period between verdict and appropriations, were first considered by this court in State ex rel. Donofrio v. Humes, 34 Wash. 347, 75 Pac. 348. That was an action in mandamus to com pel the city of Seattle to issue a warrant for the amount of a condemnation award, with interest from the date of verdict. The trial court granted the writ as prayed for. With respect to the question now under consideration, this court, after citing and quoting from Plum v. Kansas, 101 Mo. 525, 14 S. W. 657, 10 L. R. A. 371, said, p. 356:

“In that case it was held, as we have seen, that the judgment of condemnation draws interest, but there, as in the case at bar, the owner remained-in possession for a time, and the court expressly held that it would be inequitable to permit him to recover interest and at the same time retain the benefits of the possession held by him, meanwhile, as trustee for the city. The landholder sought to enjoin the city from taking possession without paying lawful interest from the date of the award of damages. The court stated that before obtaining relief he should do equity, and should account for rents and profits which accrued to him after the condemnation. Thus, in a measure, the rents and profits were held to offset the interest. But that the one was the necessary legal equivalent of the other was not held. Neither can it be so held here. The rate of interest upon the judgment is fixed by law, but the value of rents and profits depends upon market conditions. We think the rule followed in the Missouri case cited is eminently just, and under that rule the respondents here are not entitled to a warrant including interest, inasmuch as there has been no accounting for rents and profits. If an accounting were here, and an excess of interest over rents appeared, respondents would be entitled to have such excess included in their warrant. On an accounting, however, the city would not be entitled to deduct from the face of the judgment any excess of rents over interest, for the reason that no express contract to pay any sum as rent exists, and since the city has voluntarily permitted the use and occupation, it ought not to be heard to demand a sum in excess of its own fixed interest obligation in the premises.”

The purport of'the decision is clear: That an award in condemnation proceedings bears interest from date of verdict; that the property owner is entitled to rents and profits accruing from the property subject to accounting and offset to the extent of accrued interest; that the burden of accounting for rents and profits is upon the property owner.

The question was next before the court in North Coast R. Co. v. Aumiller, 61 Wash. 271, 112 Pac. 384. In general, the court approved the rule laid down in the Donofrio case. The court, on page 275, quoted from Randolph on Eminent Domain, § 280, as follows:

“ Where the landowner is left in possession for a time after the date of valuation, the possession has been deemed equivalent to interest. In other decisions possession is not deemed equivalent to interest, as it is permissive only, and does not carry the right to improve the property save at the possessor’s risk. The best rule is that which does not arbitrarily make possession equivalent to interest, but allows interest from the date of valuation, and reduces the amount by the estimated value of the possession.’ ”

The court then said:

“And without further citation, the overwhelming weight of authority is to this effect. It is also to the effect that, inasmuch as the landowner has nothing to do but to receive full compensation before his land shall be taken, the question of whether the possession has been equal to interest on the award is a fact to be established affirmatively by the condemning party.”

Interest was allowed in full because there was no showing that the property owner received any rents or profits during the period between verdict and payment of the award. But, in further support of the rule laid down, the court quoted from 2 Lewis, Eminent Domain (3rd ed.), § 742, as follows:

“ Where damages are assessed for property to be after-wards taken, the award or verdict should include interest from the time with reference to which the damages are estimated, to be reduced by the value of the use of the property to the owner while he continues to have such use. As we have before observed, the estimating and payment of the compensation should be concurrent with the taking. As this is impossible in practice, a time must be selected with reference to which the compensation shall be assessed and to which the title will relate when the compensation is paid. This point of time must necessarily be before the compensation can be paid. Between that time and the payment the owner has only a qualified use of his property. He may use it as it is, but he cannot improve or sell it except subject to rights acquired by the condemnation. As his just compensation is withheld from him, though necessarily, he should have an equivalent for such withholding, and that, in law, is legal interest. . . .

“ Tt is true that, until the company actually takes possession, at the end of the proceedings, the owner has the legal right to possess and use the land. It cannot be assumed that the value of this legal right is equivalent to the interest on the assessed value of the land. From the time of the award, he is practically deprived of his right to dispose of the land. His possession is precarious, hable to be terminated at any time; he cannot safely rent, he cannot safely improve, if he sows he cannot be sure that he will reap. As he is not placed in this position by any act of his own, is not in as a wrongdoer, nor under any contract, there would be no justice in charging him with any assumed value of the use. Where the owner has actually derived benefit and value from his possession and use between the filing of the award and the assessment by the jury, the value of such possession and use may be ascertained by the jury and the amount of it deducted from the interest allowed” (Italics ours.)

That the rule as stated by the court in the Aumiller case has the sanction of a substantial majority of the courts, is beyond cavil. Annotation, 32 A. L. R. 98; note, 96 A. L. R. 150, VIII. (Indeed, many courts go so far as to hold that, where the owner retains possession, interest is not allowable.) See note to Brown v. United States, 68 L. Ed. 175, II.

The rule laid down in the Donofrio and Aumiller cases is predicated on the principle that a property owner in condemnation proceedings is entitled to just compensation — no more and no less. That the rule does afford just compensation is, we think, apparent under the facts as disclosed by this record. Concerning annual net income upon the properties in Okanogan county, Mr. Robinson, president of the defendant company, testified: “I have estimated that the net before depreciation and before Federal income tax at $200,000 which I think is probably low.”

Now, the jury found the value of those properties to be $2,227,531 as of the date of verdict — January 1, 1943. Had the district been in a position to pay the award at that time, the defendant would have received no interest and no income from the properties. That, in such case, it would have received just compensation in contemplation of Art. I, § 16, of the constitution, could not be denied. Assuming a year will have elapsed between the date of verdict and date of payment, defendant would have us hold that just compensation must include both interest' ($133,650) on the amount of the award and the full amount of the net earnings from the properties ($200,000). To uphold this position, we think, would accord defendant more than just compensation for its properties. Certainly, to uphold it would not be in accord with the rule laid down in the Donofrio and Aumiller cases for ascertaining what is just compensation.

If the rule of those decisions is still applicable, the judgments in these cases should have provided for the offset of net earnings against interest on the awards. And that rule is applicable if those decisions have not been overruled. It is not contended that they have been expressly overruled. It remains to be determined, however, whether they have been overruled by necessary implication in the cases of State ex rel. Washington Public Service Co. v. Superior Court, 86 Wash. 155, 149 Pac. 652, and State ex rel. Oregon-Washington Water Service Co. v. Hoquiam, 155 Wash. 678, 286 Pac. 286, 287 Pac. 670.

In the latter case, it was baldly stated, p. 694: “The property owner is entitled to interest from the date of the award and to the income of the property up to the time that the amount of the award is paid. . . . ” In support of the statement, the court cited North Coast R. Co. v. Aumiller and State ex rel. Washington Public Service Co. v. Superior Court, supra. Obviously, the Aumiller decision not only does not support the statement, but also is contrary to it.

The statement is supported, however, by language used in the public service company case — language which the court itself recognized as dictum. That decision was upon an original application by the public service company to this court for a writ of prohibition to prevent the superior court of Pierce county from entering a judgment of appropriation pending an appeal from an award made in condemnation proceedings brought by the city of Olympia. The judgment which the superior court proposed entering provided for an accounting of earnings against interest from the date of the award. The court said, p. 163:

“Upon the principal grounds urged by the relators, therefore, we do not believe that they are entitled to a writ prohibiting the entry of the judgment and possession by the condemner. We desire to point out, however, that the form of the judgment offered, and which it is the superior court’s alleged intention to enter, provides for an accounting from the date of the award of the jury of April 20, 1915. We assume that this is an inadvertence. Upon due consideration, the superior court would doubtless correct that provision. The city is entitled to no accounting of the earnings and profits of the condemned property previous to the payment of the money to the property owner or into court for his benefit.”

Obviously, the proposed judgment was not before the court for review. It had never been entered. Recognizing that the language quoted was merely advisory, the court concluded its opinion as follows, p. 164:

“We can only grant or deny the writ in whole. We assume that this minor matter pointed out in the proposed form of decree has only to be called to the attention of the respondents to be corrected and avoid the necessity of further proceedings in regard thereto.” (Italics ours.)

Clearly, this decision cannot be said to overrule the Donofrio and Aumiller cases by implication, for the question decided in those cases was not, and could not properly be, an issue before the court upon the application for the writ of prohibition. So, the public service company decision fails as authority for the statement which we have quoted from State ex rel. Oregon-Washington Water Service Co. v. Hoquiam, supra. Since the court cited the Aumiller case as authority for the statement, it is apparent that it had no intention of repudiating the rule there laid down. Not only was the statement made without supporting au thority, but, manifestly, it was also inadvertent. We say this because of the circumstances and manner in which the question was presented to the court. The case came up on appeal by the property owner from judgment on the award. The judgment provided for an offset of earnings against interest. The appellant contended that it should also have provided for compensation for improvements and betterments made and added to the property subsequent to the award and prior to payment of it. Answering this contention, respondent said in its brief:

“In this state the award draws interest at the legal rate from the date of rendition. North Coast R. Co. v. Aumiller, 61 Wash. 271; State ex rel. Donofrio v. Humes, 34 Wash. 347.

“Interest on the award from August 27, was paid into court for relators.

“City of Hoquiam was not entitled to revenues of the system until it paid the award into court. State ex rel. Wash. Pub. Serv. Co. v. Court, 86 Wash. 155.

“The water company was thus doubly compensated from the date of the award. The award drew interest, and it had the revenues of the system.”

With this concession on the part of respondent, the question as to whether earnings should be offset against interest was moot. The court decided no issue. There was no issue before the court on the question. In effect, the court did nothing more than acquiesce in what amounted to a stipulation between the parties as to their legal rights. Upon a question arising under such circumstances, the court cannot be said to have made a decision, at least not such a decision as to be binding on subsequent litigants, or as establishing a precedent.

Notwithstanding the language used in the Washington Public Service Company and the Hoquiam cases, we think the decisions in the Donofrio and Aumiller cases stand unimpaired as authority upon the issue under consideration.. Consequently, the judgments should provide for the offset of net earnings of the properties against interest on the awards.

The plaintiffs suggested also that the judgments provide for compensation on account of improvements and betterments made and added to the properties between the entry of the verdicts and the payment of the awards. The trial court, of course, rejected the suggestion upon the theory that, under the decision in the Hoquiam case, defendant was entitled to interest on the awards and the earnings from the properties until the awards are paid. The general rule is that improvements and betterments placed upon property condemned for public use are subject to the judgment of award. 2 Lewis, Eminent Domain (3rd ed.), p. 1319, § 742, and p. 1704, § 962. In § 962, it is said:

“The right of the owner to use and enjoy the property until it is actually taken is undoubted. But his right to place improvements upon it and to recover the value of such improvements presents a question of more difficulty. Somewhere in course of the proceedings a point of time must be fixed upon with reference to which the damages shall be assessed and to which the title shall relate. We have heretofore given our reasons for selecting the filing of the petition as the point of time referred to in the absence of any statutory provision. But, wherever that point of time is fixed, up to that point of time the owner may put improvements upon his property and recover their value, but after that point of time improvements will be made at the risk of being taken without compensation. This seems to us the plain conclusion from the reason of the matter.” (Italics ours.)

This rule, however, may not afford “just compensation” to a public utility the property of which is the subject of condemnation. In proposing that the judgments provide for compensating defendant for improvements and better-ments, plaintiffs recognize what is obviously true: That defendant, as a public utility, may be under the necessity of making improvements to and extensions of its physical properties, the cost of which cannot properly be absorbed as expense of maintenance and operation. For any such betterments and improvements as may be reasonably necessary and prudently made between the date of the awards and the orders of appropriation, the defendant is entitled to compensation, and the judgments should so provide.

As stated, defendants’ appeal concerns only the Oka- nogan county case and arises from the court’s denial of challenges to four jurors on the ground of implied bias. The challenges were based on the following facts:

The plan under which the utility district proposed to acquire the defendants’ properties, contemplated the issuance of revenue bonds payable over a period of thirty years. The four jurors challenged were customers of defendant and residents of the district. They expected to continue the use of the electricity in case the utility district acquires the properties. The defendant excused two of the jurors by peremptory challenges. The other two remained on the jury. Obviously, the two jurors had an interest in the result of the action, for, depending on the amount of the verdict, the rate they would pay as users of electricity for the period of thirty years would be more or less affected. It is asserted that, at common law, their interest, however slight, in the result of the action was sufficient to disqualify them as jurors.

It is questionable whether that assertion is warranted in view of this court’s decisions in the cases of Rathbun v. Thurston County, 8 Wash. 238, 35 Pac. 1102, and Mironski v. Snohomish County, 115 Wash. 586, 197 Pac. 781. In those cases, the court held that the pecuniary interest of a taxpayer is not sufficient to disqualify him as a juror in an action in which the county of which he is a resident is a party. In the latter case, the court, p. 587, gave the following reasons for the ruling:

“ . . . this court, in the somewhat early case of Rath-bun v. Thurston County, 8 Wash. 238, 35 Pac. 1102, held that a tax-payer, called as a juror in an action to recover against a county in which he was a tax-payer, was not subject to a challenge on the ground that he had an interest in the result of the action. [Citing cases.] The rule is rested on the principle that the interest of the tax-payer in the result of the action is so remote, indirect and slight that it may fairly be supposed to be incapable of affecting his judgment. While the rule thus announced, as the appellant argues, may be opposed to the weight of authority, it is not without support in other jurisdictions.”

Apart from the decisions, however, we have a statute defining implied bias, Rem. Rev. Stat., § 330 [P. C. § 8495]. In so far as it is pertinent, it provides:

“A challenge for implied bias may be taken for any or all of the following causes, and not otherwise: . . .

“4. Interest on the part of the juror in the event of the action, or the principal question involved therein, excepting always the interest of the juror as a member or citizen of the county or municipal corporation ” (Italics ours.)

Taking the statute at face value, we think the four jurors challenged were not disqualified as for implied bias. The utility district is a municipal corporation. Laws of 1931, chapter 1, p. 6, § 4 (Rem. Rev. Stat., § 11608 [P. C. § 4498-14]). The jurors are citizens and members of it. Theoretically, there may be said to be some difference in their status as users of electricity and their status as citizens and members of the district. Under the evidence, however, we think any such difference can have no practical effect upon their interest in the result of the action. It appears that eighty per cent of the people of Okanogan county are users of electricity. The two challenged jurors who sat in the case used electricity for residential lighting only. The average annual charge for such service in Okanogan county is $38.20.

Paraphrased, certain language used in the Rathbun case, p. 242, stands out with particular significance with respect to the situation presented in this case:

“ . . . being [ratepayers] . . . the [jurors] are, to a limited extent, interested. This is an interest that is not taken into consideration by the law. They are qualified jurors in such cases and their verdict must receive the same consideration at the hands of this court as the verdict of a jury in any other case.”

The judgment is affirmed on defendants’ appeal. On plaintiffs’ appeals, the causes will be remanded, with directions to modify the judgments so as to provide for offset of earnings against interest between the date of the verdicts and the date of payment of the awards, and also provide for compensating defendant for any betterments or im provements as may be reasonably necessary and prudently made during that period.

Jeffers, Mallery, and Grady, JJ., concur.