Billings Utility Co. v. Public Service Commission

MR. COMMISSIONER JACKSON prepared the opinion for the court. On December 13, 1918, the Billings Utility Company, a Montana corporation, engaged in the public service of furnishing hot-water heat in the city of Billings, Montana, filed with the Public Service Commission its petition for an increased rate. A hearing was had on January 17, 1919, at which evidence in support of the company’s petition was introduced, and the protestant, Montana Realty Company, was also heard. Subsequently Report and Order No. 259, Public Service Commission of Montana, was filed, denying the increase. (12 Mont. R. R. & P. S. C. 120.) Thereafter this action was instituted in the district court to vacate and set aside the above-mentioned order on the ground that it was erroneous and unreasonable. Issue was joined by the answer of the commission. The cause was tried to the court sitting without a jury, on May 9, 1919. At the trial, in addition to the transcript of the evidence offered at the hearing of January 17, 1919, new evidence was received. Pursuant to subdivision (b), section 26, Chapter 52, Session Laws of 19jL3, a copy of the new evidence was submitted to the — 30 — commission by the court, and, after having reviewed the same, the commission declined to rescind, modify or amend its order. Thereafter, the court heard the defense of the commission, and on August 19, 1919, found fully in its favor. From the judgment and an order denying a new trial,. plaintiff appeals. At the outset we cannot refrain from comment on the splendid brief filed herein on the part of the respondent, prepared by counsel for the Public Service Commission. Assistance of such material character is greatly appreciated. It aids the court in collecting the authorities applicable, and in arriving at an understanding and determination in such an important case, with little waste of valuable time in research. In their brief, counsel for plaintiff urge several errors, but on the oral argument they abandoned all save two questions, vis., the plan of fixing valuation of public utilities and the element of value contained in a “going concern.” They expressly stated that no value could be given to the franchise, and that they had no right to ask for a separate surplus fund; that it must be created from dividends. The commission, before the hearing on the petition of December 13, 1918, had already granted increased rates to the company as follows: August 31, 1917, five cents per square foot of radiation, approximately fourteen cents over- the 'rate of 1915. This was an emergency order, which was continued by a supplemental order November 23, 1917; July 18, 1918, a second supplemental order, granting an additional increase of two cents per square foot; November 20, 1918, a further additional increase of six cents per square foot was granted. Thus it will be seen that during the period of price soaring on materials and labor, the commission, appreciating the conditions, acted accordingly. The rate base finally fixed by the commission is the real point of attack herein. It was established after' having considered four estimates made by competent experts. No one of the tabulations submitted was in whole adopted, the commission using its own discretion as to the values and depreciation. — 31 — A diversity as to amount and method of ascertainment appears from a perusal of the different estimates, but it is unnecessary to weigh down this opinion with a mass of intricate calculations. The commission’s value of $133,351.71 rests on the 1914 base of $82,000 the sum which Meyers, superintendent of the plant, and more familiar with it than any other person, then thought the plant was worth, and to that amount was added every dollar which the company officials testify has been devoted to the plant since 1914. The additional sums were from two sources; $51,085.23 from rate earnings and $19,750 new capital. This value of $82,000 was made under oath by Meyers, as receiver, before the present defendant came into possession, and it is highly unreasonable to assume that his estimate was less than the actual value, as he was endeavoring to realize every cent possible for the creditors. The same figure was reported by Meyers in his first annual report to the Public Service Commission as the value of the plant on June 30, 1914, for rate-making purposes. For the “fair prices” on the “reproduction cost” theory, all of the engineers reverted to the years 1914 and 1915. What, then, as the defendant fairly urges, could be a better foundation for the commission to select than the Meyers appraisal of 1914? Every increase of value added to the plant since 1914 is embraced in the additional sums mentioned. Depreciation, however, takes its toll. The commission selected $62,000 as a depreciation base, excluding from the value of $82,000 the company’s own valuation of realty at $20,000, and applied the rate of five per cent agreed by all to be approximately fair, for four years, making a depreciation of $12,400. On the earnings turned into physical property and the new capital, it takes an average term of two years at five per cent on $70,835.23 as principal, making additional depreciation of $7,083.52. A total depreciation of $19,483.52, deducted from the base $152,835.23, gives the value of the plant for rate making in 1919, in the sum of $133,351.71. It was shown at the trial that the results of nine months’ operation under the — 32 — rates attacked netted the company approximately eight per cent on the valuation of $180,000, and a little less than eleven per cent on the valuation of $133,000. The following sections from Chapter 52, Session Laws of [1] 1913, quite clearly and unequivocally set forth the force and character of rates and charges fixed by the commission, the ground upon which recourse may be had to the courts, and the procedure therein: “Section 25. All rates, fares, charges, classifications and joint rates fixed by the Commission shall be enforced, and shall be prima facie lawful, from the date of the order until changed or modified by the commission, or in pursuance of section 26 of this Act,” etc. “Section 26. Any party in interest being dissatisfied with an order of the commission fixing any rate or rates, fares, charges, classifications, joint rate or rates, or any order fixing any regulations, practices or services, may within ninety (90) days commence an action in the district court of the proper county against the commission and other interested parties as defendants to vacate and set aside any such order on the ground that the rate or rates, fares, charges, classifications, joint rate or rates, fixed in such order is unlawful or unreasonable, or that any such regulation, practice or service, fixed in such order is unlawful or unreasonable,” etc. “(a) No injunction shall issue suspending or staying any order of the commission except upon application to the court or judge thereof, notice to the commission having been first given and hearing having been had thereon; provided, that all rates fixed by the commission shall be deemed reasonable and just, and shall remain in full force and effect until final determination by the courts having jurisdiction. ' “(b) If, upon the trial of such action, evidence shall be introduced by the plaintiff which is found by the court to be different from that offered upon the hearing before the commission, or additional thereto, the court, before proceeding to render judgment, unless the parties to such action stipulate in — 33 — writing to the contrary, shall transmit a copy of such evidence to the commission, and shall stay further proceedings in said action for fifteen (15) days from the date of such transmission. Upon receipt of such evidence the commission shall consider the same and may modify, amend, or rescind its order relating to such rate or rates, fares, charges, classifications, joint rate or rates, regulation, practice or service complained of in said action, and shall report its action thereon to said court within ten days from the receipt of such evidence * # “ “(e) In all actions under this Act the burden of proof shall be upon the party attacking or resisting the order of the com-' mission to show that the order is unlawful or unreasonable, as the ease may be.” The rates fixed, as by the statute directed, are prima facie, lawful, can be attacked in court on the sole ground that they are unlawful or unreasonable, shall be deemed reasonable and just until final determination by the courts and the burden of proof rests on the party antagonizing the order. It is well-settled law that rate-making is purely a legislative [2] act, and as such the power of the courts is circumscribed and restrained in interference with determinations reached within the scope of legislative authority. The legislature itself has the undoubted authority to regulate public utilities,0 and by means of a duly constituted commission it operates through its administrative medium. “The establishment of a rate is the making of a rule for the future, and therefore is an act legislative, not judicial, in kind.” (Prentis v. Atlantic Coast Line Co., 211 U. S. 210, 53 L. Ed. 150, 29 Sup. Ct. Rep. 67; Munn v. Illinois, 94 U. S. 113, 24 L. Ed. 77; Peik v. Chicago & N. W. Ry., 94 U. S. 164, 24 L. Ed. 97; Reagan v. Farmers’ Loan & Trust Co., 154 U. S. 362, 38 L. Ed. 1014, 14 Sup. Ct. Rep. 1047; St. Louis & S. F. Ry. Co. v. Gill, 156 U. S. 649, 39 L. Ed. 567, 15 Sup. Ct. Rep. 484; Interstate Commerce Commission, v. Cincinnati etc. Ry. Co., 162 U. S. 184, 40 L. Ed. 935, 16 Sup. Ct. Rep. 700; Inter — 34 — state Commerce Commission v. Texas & Pac. Ry. Co., 162 U. S. 197, 40 L. Ed. 940, 16 Sup. Ct. Rep. 666; Interstate Commerce Commission v. Cincinnati etc. Ry. Co., 167 U. S. 479, 42 L. Ed. 243, 17 Sup. Ct. Rep. 896; Railroad Commission Cases, 116 U. S. 307, 29 L. Ed. 636, 6 Sup. Ct. Rep. 334, 388, 1191; Smyth v. Ames, 169 U. S. 466, 515, 42 L. Ed. 819, 18 Sup. Ct. Rep. 418; McChord v. Cincinnati & N. R. Co., 183 U. S. 483, 46 L. Ed. 289, 22 Sup. Ct. Rep. 165 [see, also, Rose’s U. S. Notes].) The court has not the power to substitute its judgment for [3] that of the commission, nor can it set the commission’s conclusions aside when they have been made lawfully and reasonably, within the proper sphere of authority. “There has been no attempt to make an exhaustive statement of the principle involved, but in cases thus far decided, it has been settled that the orders of ■ the commission are final unless: (1) Beyond the power which it could constitutionally exercise; or (2) beyond its statutory power; or (3) based upon a mistake of law. But questions of fact may be involved in the determination of questions of law,' so that an order, regular on its face, may be set aside if it appears that (4) the rate is so low as to be confiscatory and in violation of the constitutional prohibition against taking property without due process of law; or (5) if the commission acted so arbitrarily and unjustly as to fix rates contrary to evidence, or without evidence to support it; or (6) if the authority therein involved has been exercised in such an unreasonable manner as to cause it to be within the elementary rule that substance, and not the shadow, determine the validity of the exercise of the power. [Citing cases.] “In determining these mixed questions of law and fact, the court confines itself to the ultimate question as to whether the commission acted within its power. It will not consider the expediency or wisdom of the order, or whether, on like testimony, it would have made a similar ruling. — 35 — “ ‘The findings of the commision are made by law prima facie true, and this court has ascribed to them the strength due to the judgments of a tribunal appointed by law and informed by experience.’ (Illinois Cent. R. Co. v. Interstate Commerce Commission, 206 U. S. 441, 51 L. Ed. 1128, 27 Sup. Ct. Rep. 700.) Its conclusion, of course, is subject to review, but when supported by evidence is accepted as final; not that its decision, involving as it does so many and such vast public interests, can be supported by a mere scintilla of proof; but the courts will not examine the facts further than to determine whether there was substantial evidence to sustain the order.” (Interstate Commerce Commission v. Unión Pac. B. B. Co., 222 U. S. 541, 56 L. Ed. 308, 32 Sup. Ct. Eep. 108; see, also, State Public Utilities Commission v. Springfield Gas & Elec. Co., 291 111. 209, 125 N. E. 891; Muskogee G. & E. Co. v. State (Okl.), 186 Pac. 730; Minneapolis, St. P. & S. S. M. B. Co. v. Bailroad Commission, 136 Wis. 163, 17 L. E. A. (n. s.), 821, 116 N. "W. 905.) There was nothing tangible before the commission or trial court with respect to “going concern” value. The various inventories and appraisals do not contain the item, and there is no effort on the part of the utility company to suggest what it should be. For aught this court may know, allowance for “going concern” may be included in the liberal estimate placed on the company’s real estate. There was evidence showing it to be greatly less in value than the figure of the company, but the commission allowed the company’s valuation to stand. However, with respect to both matters complained of, the burden of proof is upon the plaintiff company. The burden of showing that the rate established by the commission was unlawful, unauthorized, unreasonable 'or erroneous was plainly not sustained. There was ample evidence to support the action of the commission, and the court was in duty bound to fully affirm its conclusion. Rehearing denied January 6, 1922. For the reasons herein contained, we recommend that the judgment and order be affirmed. Per Curiam: For the reasons given in the foregoing opinion the judgment and order are affirmed. Affirmed.