State ex rel. Indianapolis Water Co. v. Boone Circuit Court

Givan, J. This is an original action brought by the Indianapolis Water Company and its wholly-owned subsidiary, The Shorewood Corporation, wherein they requested a writ of prohibition against the respondent prohibiting it from all other further proceedings in Cause No. C73-6 in the the Boone Circuit Court. The case in the court below was brought as a class action on behalf of all customers of the Indianapolis Water Company who have purchased, and will purchase, water from the Water Company at what the plaintiffs characterize as “excessive rates.” The complaint alleges the Water Company has charged rates based upon expenditures for land purchased in the course of the development of Morse Reservoir. It is alleged that over 6,000 acres were purchased by the Water Company in excess of the land needed to develop the Reservoir, and that subsequently this excess land was transferred to The Shorewood Corporation on a cost basis. It was the purpose of The Shore-wood Corporation to develop this land and sell it for private — 585 — residential purposes at prices greatly in excess of the amount paid for the land. It is plaintiffs’ contention in the court below that the profits so realized should have been taken into consideration in fixing the rates charged to the customers of the Water Company. The plaintiffs seek compensatory damages in the amount of $150,048,000 and $150,000,000 in exemplary damages against the defendants by reason of their alleged misconduct and improper rate charging. A hearing was had on October 29, 1973, in this Court, following which this Court entered an alternative writ of prohibition commanding the Boone Circuit Court to refrain from all further proceedings in the cause or to show cause, if any there be, on or before November 19, 1973, why the writ should not be made absolute. It is the position of the relators that the conduct of the Water Company and The Shorewood Corporation was at all times known to the Public Service Commission. The Public Service Commission did, in fact, following hearings held in 1964 discuss the Morse Reservoir land transaction in some detail and in so doing stated: “However, the Commission cannot condone the absolute failure of management to ascertain the market value by appropriate appraisals when this land was sold to a separate but wholly-owned subsidiary in exchange for that subsidiary’s stock for the reason that any value at the time of the transfer in excess of the book cost should have been reflected in the Petitioner’s surplus account. The Commission finds that the proper accounting of this retirement of land would have been the same under Instruction No. 7 or No. 10 when read in their entirety. Instructions 10E and 7E both clearly indicate that the difference between the book cost and the sale price shall be credited as surplus. An appropriate independent appraisal at the time of the transfer could have resulted in a credit to the surplus account, thus changing the capital structure which, in turn, would have reduced the cost of capital. For this reason, the Commission is taking this fact into account in determining the rate of return in this cause.” — 586 — Again in 1968 and 1969 there were contested hearings before the Commission concerning Water Company rates, and the Morse Reservoir land issue was again presented and discussed. The question was again forcefully presented by the City of Indianapolis which was among the parties opposing the proposed rates of the Water Company and considered by the Public Service Commission. The respondent has relied in part on the case of Foltz v. City of Indianapolis (1955), 234 Ind. 656, 130 N. E. 2d 650. In that case this Court held that where a business is affected by the public interest and the legislature has not provided a procedure to assure fair and reasonable rates, the common law will supply the omission. However, this principle of law does not apply to the case at bar. The Indianapolis Water Company is a public utility coming under the Public Service Commission which has been established by statute for the express purpose of regulating such utilities and having jurisdiction over the rates which they are permitted to charge their customers. The respondent also cites Burns Ind. Ann. Stat., 1951 Repl., § 54-716, IC 1971, 8-1-2-117, which reads as follows: “This act shall not have the effect to release or waive any right of action by the state or by any person for any right, penalty or forfeiture which may have arisen, or which may hereafter arise, under any law of this state; and all penalties and forfeitures accruing under this act shall be cumulative and a suit for any recovery of one shall not be a bar to the recovery of any other penalty. [Acts 1913, ch. 76, §126, p. 167.]” The above statute might well have afforded the plaintiffs in the court below an action had the Water Company fraudulently concealed or withheld information from the Public Service Commission, or if the Water Company had charged rates in excess of those fixed by the Commission. However, neither is the case here. This Court has stated many times that rate making is a legislative and not a judicial function. The legislature has seen fit to establish the Public Service Commission for the express purpose — 587 — of hearing evidence and balancing and weighing the many complicated factors which must be taken into consideration in setting utility rates. Boone County REMC v. Public Service Commission (1959), 239 Ind. 525, 159 N. E. 2d 121; Public Service Commission v. City of Indianapolis (1956), 235 Ind. 70, 131 N. E. 2d 308. The Public Service Commission had the jurisdiction and, in fact, did consider the effect of the activities of the Indianapolis Water Company and The Shorewood Corporation concerning the excess Morse Reservoir land. It did, in fact, after a hearing condemn this activity on the part of these companies and specifically stated that it was taking the fact of this improper conduct on the part of the corporation into consideration in fixing the rates. If the Water Company customers, who are now the plaintiffs in the action now pending before the Boone Circuit Court, felt as they apparently do feel that the Commission did not properly consider or did not properly act upon the facts before it concerning the fixing of the rates following the land transaction, they had the full right under the law to appeal the action of the Commission. They thus had a remedy at law provided by the legislature in the statute establishing the Public Service Commission and fixing its duties under the law. This Court has previously stated in Decatur County REMC v. Public Service Co. (1971), 150 Ind. App. 193, 196, 275 N. E. 2d 857, 28 Ind. Dec. 128, in part as follows: “If the legislature has provided a remedy, courts have no jurisdiction over the subject matter until such time as those remedies are exhausted or denied.” After stating that the parties’ remedy is to proceed through the Commission whose decision is subject to judicial review, the Court went on to state at page 200: “The Commission is entrusted with the authority to control and regulate public utilities. State ex rel. Indianapolis Traction & Terminal Co. v. Lewis, (1918), 187 Ind. 564, 120 N. E. 129. As an administrative agency, it is pre — 588 — sumed to be qualified by knowledge and experience to perform this function. The regulation of public utilities is a technical field requiring expertise in just the kind of determination before us. . . . “Litigants in these circumstances cannot take flight from an adequate statutory administrative remedy by seeking sanctuary in the courts.” Following oral argument in this case, the respondent submitted an additional authority, Democratic Central Comm. v. Washington Metropolitan Area Transit Comm’n., 485 F. 2d 786 (D.C. Cir. 1973). The Court has examined this additional authority and finds that it has no application to the matters at issue in this case. The Washington case was an appeal to the District of Columbia Court of Appeals from a decision of the District of Columbia Commission. After a very lengthy opinion setting out what the Court deemed to be the proper guideline for the rate setting, the cause was “remanded to the Commission for further proceedings consistent with this opinion.” The decision in the Washington case follows the principle of law which we seek to follow in this case; that is, that the question of the proper fixing of rates is a matter to be determined by a Commission established for that purpose. The proper method of attack upon the fixing of a rate by a Commission is to appeal to the courts as provided by statute and not a collateral attack upon the rate fixing process such as attempted in the case at bar. The alternative writ heretofore issued is now madia permanent. Arterburn, C.J., and Hunter and Prentice, JJ., concur; DeBruler, J., dissents with opinion.