Hackensack Water Co. v. Board of Public Utility Commissioners

| N.J. | Nov 14, 1921

The opinion of the court was delivered by

Gumiiebe, Chief Justice.

The judgment appealed from, so far as it affects Hackensack and Temafly, was entered in a certiorari proceeding instituted by tlio Hackensack Water Company to review the action of the board of public utility commissioners fixing t-lie rates to be charged by that corporation to various municipalities that it supplied with water under powers conferred upon it by its charter. The situation developed bjr the proofs was this:

Oil the 28th. day of July, 1920, the water company formally notified forty-six of the municipalities supplied by it that on and after the 1st day o-f August then next the rates Charged for water would be increased to each one of them by seventeen and a half per cent. At the same time the company filed a schedule of the proposed increased rates with the board of public utility commissioners. Thereupon an investigation was instituted by the board for the purpose of determining whether the proposed increase was justified; and the various municipalities interested, as well as the water company, were afforded an opportunity to be heard upon this matter. Upon the conclusion of the hearing the hoard decided that the proposed increase was excessive, but that the water company was entitled to a greater remuneration' than it had been theretofore receiving, and authorized it to increase its rate by nine and one-half per cent, in the ease of each one of the municipalities. Upon the rendition of this decision the company, considering that the1 rate thus fixed was unjust and unreasonable, because it was insufficient to produce an income which would1 be fairly remunerative in view of the amount of capital invested, sued out a writ of certiorari to review the action, of the board; and, after a hearing had upon the return of the writ, th'e Supreme Court concluded upon the proofs taken before the board that the rats allowed by its order was an unjust and unreasonable one and directed that the order he set aside, and the proceeding be remanded to the hoard for a rehearing and a refixin'g of rates for the water company in accordance with the principles laid down by the court in its filed opinion. The court further ordered that pending a rehearing by the hoard, or pending the hearing of an appeal from its judgment to this court (in ease such an appeal should be taken), the scheduled rate filed with the hoard should be effective.

From tin's part of the judgment the Hackensack Improvement Commission and the borough of Tena,fly have appealed.

The first contention made before ns by these two municipalities is that the Supreme Court “had no jurisdiction to set aside tire order of the board of public utility commissioners.” The ground of this contention, is that the power of the Supreme Court in a case like that mow before us is a limited one, conferred upon it by section 38 of the Public Utilities act of 1911, as1 amended in 1918. Pamph. L. 1918, p. 305. By that statutory provision the court is given jurisdiction by ceittorari to review orders of tlie board and to set them aside when it clearly appears that there was no evidence before the hoard which would reasonably support the same, or that they were not within the jurisdiction of the board; and the argument is that in the present case the evidence reasonably supported tlie order which was subjected to review. It is not necessary, for present purposes, to stop to consider the question whether tlie legislature can constitutionally restrict the powers of the SuprenVe Court in dealing with matters brought- up by its prerogative writ of cerliotari. Assuming for present purposes that it can do so, the Supieme Court, in this case, has held, by necessary inference, that the evidence before the board would not reasonably support its conclusion that the rate fixed by it was a just and fair one.

Tills is a finding of fact, and the only question which this court will consider on a review of such a finding by the Supreme Court is whether there were anj' proofs whatever in the case to support it; for it is entirely settled that we will not consider alleged errors of fact in a review of a judgment of the Supreme Court, but only alleged errors of law. Vreeland v. Bayonne, 60 N. J. L. 168; Beecher v. Board of Street and Water Commissioners, 65 Id. 307; Tuckerton Railroad Co. v. State Board of Assessors, 77 Id. 614.

Looking at the proofs which were sent up with the writ of eei tio-rari, we fin'd sufficient evidence to support the Supreme Court’s determination of fact. These appellants, therefore, can take nothing by this ground of appeal.

The next contention is that the Supreme Court, by adjudging that these municipalities should pay to the water company the increased, rates fixed by the schedule of July 28th, 1920, pending a rehearing by the hoard or a review by this court, exceeded its jurisdiction because it lias no power to fix rates. But this contention is based upon a misapprehension of what the court really did. By the sixteenth section of the Public Utilities act, item d (Pamph. L. 1911, p. 377) every public utility corporation is required to file with the board a complete schedule of the rates it proposes to charge for any product, supplied by it. By the seventeenth section, item g, whenever a public utility corporation shall file a schedule exhibiting an increase of an existing rate the board is authorized, either upon the complaint of the party affected by the increase or on its own initiative, to hear and determine whether the increase is just and reasonable; and it is given power, pending such hearing and determination, to suspend the increased rate for a period not exceeding three months. The situation then created by the statute is this: When a public utility company increases its rate and files a schedule thereof with the board the increased rate goes into effect upon the date specified in the schedule, unless the board determines to investigate the1 propriety of the proposed increase, and makes an prder suspending the proposed new rate. When the board takes this course the new rate does not become effective until the expiration of the time limited in that order. But at the expiration of that period the scheduled rate becomes automatically effective. So that, in the present case, therefore, when the order of the board, reducing the scheduled rate, was set aside and nullifiedi, the right of the company to charge that rate became presently complete, unless and until the judgment of the Supreme Court should be reversed by us in case an appeal should be taken, or until some further order should be made by the utilities board upon a rehearing. The part of the judgment which is challenged by this ground of appeal is merely an expressed declaration of the right of the water company under the statutory provision which I have cited, and consequently cannot be successfully attacked.

The only other matter argued by these appellants is that the judgment under review is erroneous because it commands the board of public utility commissioners “to fix rates for the prosecutor in accordance with the principles laid down by this court in ’this cause.” It is contended that this part of the judgment is in conflict with the Public Utilities act which cleaxty intends that1 the powers of the board shall be free and unrestricted, except as limited by the statute itself. But we are not. willing to concede that it was the purpose of the legislature to clothe this board with powers to be exercised by it without regard to established! legal rules or principles. On the contrary, we are entirely .satisfied that it was the intent of the legislature that the exercise of these powers should be controlled not only by the statute itself but by the settled rules and principles of the common law. And as we construe this part of the judgment that is all that the Supreme Court commanded this board to do; that is, to fix rates in accordance with the (legal) principles laid down by the court; and there is no suggestion in the argument of counsel that: these principles are in any degree unsound.

Our conclusion, therefore, on the appeal of these two municipalities is, that so far as they are concerned, the judgment under review must be affirmed.

The appeal of the city of Hoboken from that part of the judgment which affects it: presents a different question from that which has already been considered. The proofs sent up with the writ show that some twenty years ago this municipality and the Hackensack Water Company entered into a contract by which the rates to he paid for the water furnished by the company to the municipality were fixed for the full term of the contract, which has not yet expired. That, in September, 1919, owing to the fact that the cost of labor and material had increased very greatly, the contract rate had ceased to be remunerative; and that for this reason, the company filed a petition with the board, asking it to increase the rates beyond those fixed by the contract to such an extent as to return a fair compensation to the water company for the capital invested and for the services rendered. That the hoard, after considering this petition, dismissed it on the ground that there was no such emergency confronting the company as would justify an alteration of the contract rate.’ That later, and during the hearing upon the question of the propriety of increasing the rate to the forty odd municipalities, specified in the schedule which has been referred to in the earlier part of this opinion, the company filed another petition asking the hoard to take up, as a matter necessarily involved in that hearing, the propriety of increasing the rate charged to Hoboken, and if it was found that the existing contract rate was unjust and discriminatory, when compared with that paid by the other municipalities, “to make an order fixing just and reasonable rates to be imposed” upon the city of Hoboken. And that the board, having received this second petition, after consideration, refused to grant the application for the same reason which led it to dismiss the earlier one.

The water company, by tire certiorari which it sued out, sought to review not only the propriety of the order of the board fixing the rates to be charged to the forty odd municipalities, but also that part of its order which refused to consider its application with relation to the Hoboken rate. The Supreme Court, dealing with this phase of the case, adjudged that the order of the board determining that no action should be taken with respect to the rates paid by the city of Hoboken be set aside, that the board take up the consideration of this matter and fix a proper rate to be charged to that municipality, and “file a rate charging the city of Hoboken the same surcharge as it makes to every other of its consumers;” and that, pending the rehearing or an appeal to this court, Hoboken pay the same rate as the other municipalities.

On this appeal Hoboken contends, first, that the board has no authority to override a contract rate fixed by the agreement of the company and municipality; and second, that the Supreme Court is without power to compel the board to fix a rate charging the city of Hoboken the same surcharge as it makes to every other of its consumers.

The first point, we think, must be decided adversely to the appellant’s contention. It may be conceded that neither the city of Hoboken nor the water company can alter this contract without the consent of the other party to it, but as was said by this court in Atlantic Coast Electric Railway Co. v. Public Utility Board, 92 N. J. L. 168, 173, a contract of this kind imposes no restriction on the sovereign power of the state to fix just and reasonable rates as subsequent conditions may make desirable. It is a contract subject to the state’s sovereign power over rates, and when the state through its board of public utility commissioners exercises its sovereign power over rates the contract rights of the parties must yield. And in tho later case of Collingswood Sewerage Co. v. Collingswood, Id. 509, 511, where a somewhat similar contract between the utilities company and the borough was under consideration, this court said: “The municipalities are exercising a mere delegated authority, are acting as mere agents of the legislature. It cannot be doubted that if * * * the sovereign itself fixes the maximum charge to be made, it would have power to change the rate whenever in its judgment conditions arose which justified such action. To hold that by delegating the rate-fixing power to its creature it had deprived itself of the right thereafter to modify the rate would be tantamount to declaring that the creature is greater than the creator. It would be strange, indeed, if the state, which has power to terminate the existence of the municipalities created by it whenever it may see fit, could not revoke authority granted by it to them, and, in the exercise of its sovereignty, cancel conditions which it had permitted them to impose upon other classes of corporations which had also been created by it.”

Turning to the second proposition, we have no doubt of the power of the Supreme Court to send the case back to the board where it appears to the court that the action complained of was the result of a misapprehension by the board as to the duty imposed upon it by the statute with relation to the matters contained in the water company’s petition. We consider, however, that the court exceeded its jurisdiction in commanding the board to fix the same rate to be charged to the city of Hoboken as that fixed for every other of the company’s municipal consumers. The power to fix the rate is vested in the board' of public utility commissioners by the statute, and the twenty-eighth section declares that when the Supreme Court shall order a rehearing the board shall thereupon proceed to it on the testimony theretofore taken before it, and upon which the order under review is based, and upon such additional testimony, if any. as may be produced before it, and that as the result of such rehearing the board may readopt such order or alter, amend, modify or extend it. The action of the Supreme Court, in declaring the rate to be fixed by the board, is in disregard of this statutory power conferred1 upon the latter, and which it is entitled to exercise without any limitation put upon it by the court. The power to fix rates is not a judicial function, but a legislative one, and the state has created the board of public utility commissioners as its agent for that purpose. An attempt by the Supreme Court to fix a rate is in its essence an attempt to exercise a sovereign power which has not been delegated to it by the state, but which resides solely in the legislative and executive branches of the government.

We conclude, therefore, that the judgment of the Supreme Court to the extent just indicated must be reversed.

What we have just said is equally applicable to that part of the judgment which authorizes the Hackensack Water Company, to charge the city of Hoboken the same rate which it charges, the other municipalities in this litigation, pending an appeal or a rehearing. The effect of the judgment setting aside the order of the utilities board was, as we have already indicated, to restore tire conditions which existed prior to the making of that order. The city of Hoboken was a.t that time paying the contract rate, and that contract rate was left unaltered by the board. Tire Supreme Court was without power to' substitute what it considered a fair rate for that which then existed, and its attempt to do so was extrajudicial for the reason already indicated.

The water company undertakes to justify this part of the judgment upon the theory that it is warranted by a provision contained in the latter part of section 38 of the Public Utilities act, as amended in 1918, which provides that “The Supreme Court may order that such rehearing be had upon such terms and conditions as are reasonable.” But this provision must be construed in the light of the situation with which the legislature was dealing, and that is a ease where a party claiming to be aggrieved by the order of the board sought to have that order set aside by certiorari and a re-healing by the board diiected. The rehearing, if it be granted, is gi anted to the party suing out the writ, and the terms and conditions referred to in the statute are such as the court may consider pioper to he imposed upon the party in whose favor the rehearing is granted. To hold otherwise would be to attribute to the legislature an intent to impose a penalty upon a party to the litigation who protested against the rehearing in addition to the granting of the relief sought by the prosecutor. No such purpose should be attributed to the law making body unless it is clearly and unquestionably expressed in the statutory provision.

The judgment under review, so far as it affects the city of Hoboken, will be reversed to the extent indicated.

On the appeal of Hackensack Improvement Commission and the borough of Tenafly:

For affirmance — Tiie Chancellor, Chief Justice, Teenchard, Parker, Bergen, Minturn, Kaliscit, Black, White, Heppeniieimkr, Williams, Gardner, Ackerson, Yan Buskirk, JJ. 14.

For reversal—None.

On the appeal of the city of Hoboken:

For affirmance—Xone.

For reversal—The Chancellor, Chief Justice, Trenoí lard, Parker, Bergen, Minturn, Kaliscti, Black, White, Heppenheimer. Williams, Gardner, Ackerson, Van Buskirk, JJ. 14.