#### Fulton Ferry & Bridge Company v. Huckins.

Opinion delivered March 21, 1927.

*309 J. D. Head and Rose, Hemingway, Cantrell & Lough-borough, for appellant.

Henry Moore, Jr., for appellee.

Kirby, J.,

(after stating the facts). The rates of tolls for ferriage fixed by the Miller County Court are by this proceeding challenged as unreasonable and confiscatory, depriving appellant of its property without just compensation.

It appears that no rates of toll or ferriage whatever' had been fixed by the county court after the organization of the appellant corporation and the taking over by it of the Shults ferry, operated across Red River at Fulton, the last rates fixed by the county court having been made in 1922. Under that schedule $1 was allowed to be charged as toll for ferriage of automobiles and $1 for trucks per ton. No complaint is made of any of the rates fixed in the present schedule except those relating to-*310automobiles and trucks, which are controlling and produce over 90 per cent, of the revenues of the ferry. _

.The county court is given authority, for the protection of the public, to fix the rates of tolls for ferries, and, while it is true that ferries are established for the accommodation of the public, rather than for the gain and advantage of persons operating them, it is also true that the rates fixed must be reasonable, and the question of the reasonableness of ferry rates is one solely for the courts. State v. Arkadelphia Lumber Co., 70 Ark. 330, 67 S. W. 1011 ; Kelly v. Altemus, 34 Ark. 184, 36 Am. Rep. 6; Ex Parte Grayson, 169 Ark. 986, 277 S. W. 538; Covington v. St. Francis County, 77 Ark. 258, 91 S. W. 186.

The courts cannot interfere with the rates or tolls of ferries fixed by the county court unless same are unreasonable, and the burden is on the complaining party to show the unreasonableness of the rates attacked, the presumption being in favor of the reasonableness of such rates. Arkadelphia Electric Light Co. v. Arkadelphia, 99 Ark. 178, 137 S. W. 1093.

The value of the property devoted to the public use should be considered and-determined as of the time when the inquiry is made regarding the rates. Port Richmond & Bergen Point Ferry Co. v. Board of Chosen Freeholders of the County of Hudson, 264 Fed. 998; San Diego Land & Town Co. v. National City, 174 U. S. 739, 19 S. Ct. 804, 14 L. Ed. 1154; Smyth v. Ames, 169 U. S. 466, 18 S. Ct. 418, 42 L. Ed. 819; Minnesota Rate Cases, 230 U. S. 352, 33 S. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. N. S. 1151, Ann. Cas. 1916A, 18.

“Past losses cannot be used to enhance the value of the property or to support a claim that rates for the future are confiscatory. * * * Profits of the past cannot be used to sustain confiscatory rates for the future.” Board of Public Utility Commrs. v. New York Telephone Co., 271 U. S. 23, 46 S. Ct. 363, 70 U. S. Law. ed. 808.

The value of the Fulton Ferry was fixed at $30,000 when a half interest therein was sold to the Conways for *311$15,000, and that such was its reasonable value was recognized upon the organization of the appellant corporation taking it over' for capitalization at that figure.

Appellant, in its argument here, uses this amount, although he does call it the “barebone value,” and insists that a going concern value of $6,000 should be added, but it was a going concern when it was taken over and capitalized, has continued such ever since, and is better equipped now than then, after payment of all operating expenses, profits and dividends. It is true the secretary of the company puts the present value of the personal property of the corporation at $30,000, hut it was returned by him for the year 1925 for taxation at only $4,000 and only paid taxes of $129.48 on all real and personal property in Arkansas for that year. The value of its personal property was placed at $15,000 by the .secretary of the corporation, in its annual return for the year ending January 1, 1926, and on its return made to the Arkansas Railroad Commission the value of the personal property was reported as of January 1,1926, at $6,000. An inventory and appraisement of its personal property was" made by Crawford and McClure, witnesses for appellees, in October, 1926, placing the value at $6,412. Under all the circumstances, no such showing is made as warrants the consideration of an increased value as a going concern.

Neither was error committed in not allowing or considering any additional .rental value of the ferry site owned by the corporation, as contended for. The value of the ferry site was evidently included in the capitalization of the corporation, as correctly indicated by the sale of a one-half interest in the Shults Ferry, a going concern, to the Conways, for the price of $15,000, and the organization of the appellant company taking it over for continued operation as its entire capital at a $30,000 valuation, recognized this to be true. This view is strengthened also by the testimony showing various, official reports thereafter made by appellant corporation, placing the value of its personal property at one-half, *312or even a lower sum than one-half, of the $30,000, and the other testimony relating thereto showing the cost of construction and reproduction.

Appellant’s contention that, the circuit court should have allowed or considered the cost of liability insurance as expense of operation is also without merit. No such insurance had been, was being or intended to be carried by it, and the undisputed testimony shows-that, from the long experience of operation of all five ferries on Bed River in Miller County, two of them for a period of more than forty years, no substantial damage had resulted or been incurred, and it cannot be said that an ordinarily prudent business man would be justified in incurring the great expense of this kind of insurance, in view of such experience. No great amount was claimed or estimated, and none allowed for fire insurance, which would ordinarily be considered a proper charge, but .it is also true that no fire insurance had been carried and no fire losses had occurred during this period of operation.

■ Appellant should have been allowed the $6,000 yearly claimed, and the court should have considered the amount for amortization of the plant during the next three years only when it was shown the ferry would be displaced by the erection of a bridge.

The court should also have considered, in making allowance for necessary expenses of operation, a .reasonable amount for “emergency work,” as appellant calls it, required done in reconditioning “the shifting river bank” after overflows, for the road to the landing. This, notwithstanding no charge had theretofore been made against the company by J. B. Shults, its president, and manager of the ferry, for such work done by teams and men from his plantation hard by. Such work had been done, was necessary, and the testimony shows it will continue necessary to be done so long as the ferry is operated from “the shifting bank” of the overflowing river. We have concluded, however, that the testimony does not show such a probability now of suspension of travel over this State Highway road, the eastern approach to the *313ferry, because of periodic extraordinary overflows of the river, since the roadbed has been raised and graveled, as warrants consideration of the allowance of any amount for loss of tolls or decreased income on that account.

The gross income from the ferry was shown for each of the years.that it had been operated by the appellant corporation and the actual expenses of such operation. The gross receipts for the first five months of the fiscal year that will end May 31,1927, June to October, 1926, are shown to be $31,013:69, and, as appellant puts, it in its brief, “the receipts from the ferry are approximately $60,000 a year, collected in small change from each passenger, and the items of expense are disbursed in small amounts, requiring care and economy.”

■ The net income, as shown by exhibits made by Brooks Shults, secretary, from appellant’s books, by taking the actual expenses charged for operation by the company from the amount of the gross receipts, including, as such expenses, office expense each of J. B. Shults, president, and George T. Conway, vice president, salaries allowed to each of said parties, and the fees and expenses of attorneys in connection with the bridge litigation, was:

For the year ending May 31, 1923.$13,003.08

For the year ending May 31, 1926. 28,430.84

And five months .of the present fiscal year. 14,407.32

Paulk, an expert accountant, made an examination of the books of the appellant company from June, 1922, to November 1, 1926, and an exhibit of the result of such audit, showing- the gross income and 'actual expenditures, the earnings for the fiscal year ending May 31, follows:

Year 1923 .$13,002.07

Year 1924 ..'.. 35,685.42

For 5 months of 1927.. 14,686.76

His schedules showed also the profits made each year by the ferry company, after adding to the net profits, as shown by its books, the salaries and office expenses paid to J. B. Shults and George T. Conway and the interest *314paid on bonds given for tlio bridge franchise, one-half to Conway and one-half to Shults, which, of course, greatly increased the showing of net earnings. There is little difference in the amounts shown as net profits for the five-month period in 1927 by the secretary of the company, $14,407.32, and by accountant Paulk, $14,686.76.

Paulk made schedules also showing the gross and' net income of the appellant company for the years mentioned at the reduced rate of 35 cents for ferriage of automobiles, and for the five months of the fiscal year 1927, leaving the expenses exactly as charged, except a slight reduction for income taxes, which will be reduced as the income was reduced, showing that with such reductions of gross income the net profit at the 35c rate would have been as follows:

■ For the year 1923..$ 4,012.77

For the year 1926.. 11,464.84

For the five months of the present fiscal year.!. 7,335.76

In making these figures, however, be allowed no salaries for the officials and only $100 salary for Brooks Shults, the secretary and bookkeeper, as charged on the company’s books.

The actual audit of total expenses as charged on the books for ferry operation by the secretary for the five months period (attorneys’ fees and expense of bridge litigation not included) is $12,685.52; to this should be added, as above shown, the proportionate amount of the yearly allowance for amortization, $2,500, making in all $15,185.52. The estimated income at the 35c rates for the same period'is $14,472.85, according to the secretary’s calculation, not enough to pay the expenses as .indicated. The income from the reduced rates as estimated by Paulk, one-half that produced by the old rates, is $15,506.84: $321.32 more than the expenses for this period, leaving only a negligible amount for a return on the value of the property used in rendering service to the public.

It can make no'difference that the plant or ferry may have been entirely paid for out of excessive, profits from *315high rates in past years, since the law, in the protection of the owner in enjoyment of the property, does not consider the source from which the money came to purchase it, but only that it is used in rendering the service.

It is true the estimate of the independent accountant showed a substantial amount of earnings over expenses for the five-month period of operation at the 35c rate, but from it was excluded any charge for the salaries of officers,' other items properly chargeable, and no allowance was made for amortization. There might well be excluded from the expense of operation the charge of any salary paid to the vice president, who had no real duties to perform relative to the operation of the ferry, but an additional allowance for compensation could be made to the secretary up to $250 a month, which would offset largely the allowance to the vice president, and not be unreasonable compensation to the secretary for the service rendered, as shown by the testimony. The salary as allowed to the president was begun to be charged and paid before this rate litigation developed, and, although it is large in comparison with the salary of other years, the testimony shows him to be an experienced and capable man, devoting virtually his entire time and attention to the management of the ferry, which has been so efficiently done that no damage to persons and property making use of the ferry has ever resulted during the long time of his supervision. Then, too, in other years it made no difference that the salary reflected by the books was not large, since ample compensation was realized by him out of profits and dividends.

From the testimony and estimates the circuit court should have found that day rates of toll of 50 cents for ferriage of automobiles and 50 cents for trucks (per ton), instead of the 35-cent rate made by the county court, with a night-rate of'75 cents for automobiles and 75 cents per ton for trucks, instead of 70 cents, as fixed by the county court, would have been reasonable and yielded just compensation to the ferry company upon the value of its property used in rendering service to the *316public. Coal District Power Co. v. Booneville, 161 Ark. 638, 256 S. W. 871.

The said rates as fixed by the county court are shown to have been unreasonable, and the circuit court erred in holding otherwise and in not finding and fixing the rates designated above, which will afford a fair and just return upon the investment as reasonable, for which errors its judgment will be reversed, and the cause remanded with directions to reverse and overrule the judgment and order of the county court fixing said unreasonable rates, and adjudge and fix the said rates as reasonable, and have certified its judgment to that court for establishment of the said rates herein designated as reasonable rates of toll for the ferriage of automobiles and trucks at the Pul-ton Perry operated by appellant.

It is so ordered.