City of Omaha v. Omaha Water Co.

Background

A private water company owned and operated the waterworks that long served Omaha and nearby suburbs. An 1880 city ordinance let Omaha buy the system after twenty years at a value set by three engineers—one picked by the city, one by the company, and a third chosen by those two. In 1903 the city chose to buy; the three-engineer board fixed the value at about $6,263,295.49, but one appraiser dissented and the city rejected the award. The company sued to force the sale, a trial court dismissed the suit for alleged appraiser misconduct, and the federal appeals court reversed, sending the case back for a final decree.

Reasoning

The key questions were whether a majority appraisal could bind the parties, whether the appraisers’ private review of the company’s books voided the valuation, and whether Omaha had power to buy parts of the system outside city limits. The Court explained that this was an appraisement of a public municipal function, not a private arbitration, so a majority decision by the expert engineers was effective. The judges found no evidence of bad faith; as experts the appraisers could inform themselves, including inspecting company books, without the technical protections of a courtroom. The Court also reviewed state laws and concluded the city had authority to acquire the whole, unified system, including extensions serving nearby towns, and that the appraisers properly included the value of the plant as a “going concern.”

Real world impact

The ruling lets the appraisal stand and the purchase proceed, but leaves routine business details to the trial court: sorting out any property to be excluded, fixing substantial title defects if found, and coordinating mortgage payoffs or assumptions before final transfer. The decision remands for those practical steps to be completed.