Citations
- 92 F.2d 833
Full opinion text
HICKS, Circuit Judge,
1927, the Detroit-Ontario Subways, lnc-> was incorporated under the laws of Michigan for the purpose of constructing an and it granted permission to the Company likewise to build under the river,
jn the ordinance the City retained the right, upon a year’s notice, to purchase the tunnel properties following a specified scale of 'evaluation; and at the end of sixty years from the date of formal opening the City was authorized to acquire the property without any payment whatever.
The entire cost of the project in' round numbers, including the Canadian, and listing such cimrges as five and a half million dollars (declared value) in franchise rights, one and a half million engineering costs, three and a half million for land, six and a half million for tube and approaches, one million for buildings, two and a quarter million for interest during construction, and a host of smaller items, was over $22,000,-000.
t>„„ , ., , .. ... • u^0n , e °- • f re~ ^ the “ f°U+f tlmt,tlle °nglnal COn' / at 10n t,°S f? iot* ^ ace™er* c0‘?t as ° . °yeníi^ ^ A ° ® bmldf^ et i , ^ ^ On July 8, 1932, the Bank and Quotation Record a concededly well-recognized financial publication, quoted the market value of the outstanding bonds, debentures, and stock of the Company at $1,181,025.00, an appalling shrinkage.
Both the master and the court found that after making proper provisions for depreciation, amortization, corporation taxes, m-come taxes, property taxes, and all other applicable elements, the net earnings of the property for the year 1931 were $153,126.-58; for 1932, $135,507.76; for 1933, $103,-014.36; and for 1934, $118,223.37.
The Company charged a fixed schedule of rates for passenger cars and trucks and operated a bus line between terminals for “foot passengers.” Fares were adjusted by the Company itself to meet competition. They were revised as of January 1, 1934, and in the opinion of the receiver resulted in the increase of operating revenues of approximately 7% per cent, over the previous year. He concluded his report for the year 1934 with the opinion “that the competitive position of the tunnel company is considerably improved and while the rates of fare are too low for the service rendered they appear to be all that can be charged as long as the present rates are in effect on our competitors’ facilities.”
Interest on funded debt has been 'in default since May 1, 1932. On December 30, 1934, the amount in arrears on these bonds and debentures was $650,000. The Cornpany had likewise been unable to set up reserves for depreciation of tunnel and appurtenances, or to amortize its land, rights, franchises, etc. At the time of this report of December 30, 1934, these accrued reserves, unmet, amounted to $1,933,856.87. The income account as given for 1934 completely ignored these items which would have been cared for in a healthily functioning business.
The first, tax assessment upon the Detroit portion of the completed tunnel was .for the year 1931 and amounted to $4,383,-240. This was intended as “the true cash value.” It was arrived at by fixing a cash value for the land, estimated upon a square-foot basis, and adding thereto the construction cost of the buildings and improvements on the property of the Company and under-heath the city owned streets and river bed. As re^ectec* b7 tbe Company s books, using the 193} as^ssment as a basis the assessments ^or ^32 1933, and 1934 were arrived at by deductions for depreciation ox 2 per cent, per annum and two horizontal re£uctions aJplied t0 all t in Detroit and w ££ of J c/nt for 1931 , 1Q/2 rpqnp f , ’ y'
As a resu t the assessments upon the property on the Detroit side of the river as f°hows.
.........................ÍS’«n ™
lg3i............... $3 542 530 00
^ *s these assessments which are in dis-Pute here an3 which appellees deem grossly excessive in view of the earnings of the Company for the years involved. Each one was duly protested by the receiver before the B°ard °f Assessors, the Board of ReC°unty Boardof Revlew’ and th