*1 available that other facilities were and should be granted If applicant designated. such place those made, had been there have no a- would been contention before the Commission other difficulty stations bringing in question. There is no might whose interests be drawn respondents that the were showing prejudiced oper- in question. ation of order heard in they were not
Respondents complain heard be- They were argument before Commission. evidence offered was they fore examiner and the filed exceptions considered Commission. by the filed report the examiner’s were applicant August, 1931, served respondents made in following decision of the of the for oral request October. applicant While argument denied, appear any it such does request was made or by respondents they sought than any hearing other that which was accorded. denying
We find no effect to thé ground Commis- judgment sion’s action. Appeals Court is and the reversed direction cause remanded the decision affirm Commission. .of
Reversed. & ELECTRIC ANGELES LOS CORP. v. RAIL GAS COMMISSION OF ROAD CALIFORNIA et al. Argued February 7, 8, 1933.—Decided May 8, No. *3 Overton, Messrs. Paul whom Phleger, with
Mr. Herman Jr., Moore, Harrison, S. were E. and James Maurice brief, appellant. George appellees. Arthur T. Mr. Schrader, Erwin with whom Messrs.
Mr. Frederick von *4 brief, were on the for H. Neal Werner and William P. Angeles, of Los City intervener. Hughes opinion delivered
Mr. Justice .Chief the Court. assails Corporation Angeles Los Gas & Electric
The an order of the Cali- gas by rates fixed confiscatory November, effective fornia Railroad Court, The District 1, 1931. C.R.C. January an judges, granted interlocutory of three injunction and the bill. 58 hearing (2d) dismissed F. final 256. The Company appeals.
The organized in Company, 1909, supplies both gas electric Its rates for the current. latter are not in con The two troversy. departments, in respect to both vestment are operation, and have been sep distinct arately rate-making treated purposes for many years. From when gas natural quantities substantial was first made Los Angeles, available until of- distributed a mixture natural and Company manufac-' tured gas, straight and since 1927 gas natural has .been extends, distributed. The Company’s service over the greater Angeles part neighboring Los cities and 2,900 It has over unincorporated territory. miles of mains and 385,000 meters. From 1917 gas rates Company’s have been fixed California Railroad Commission. were Rate orders made 1917, 1919, 1921, 1923, 1926 During period and 1928. Company’s business gas increased. rate greatly base for its department, as fixed the Commission) grew from approximately in 1916 to 812,500,000 859,000,000 in 1929. about was financed growth lby the sale of Company’s bonds .the and preferred These, according finding stock. the Commission, had been a gradually marketed at lessen at ing that) cost so the time of the hearing which resulted review, the order under it was found that annual the.“ and preferred its bond 6.17 money stock. Approximately per cent. thus amounts chargeable, gas realized is department.1 1Reviewing history Company, financial the Commission 31,1929, outstanding found: December had On in. par public $47,070,000 $19,469,995 hands of the value bonds, par stock, preferred $20,000,000 par value of common stock. depreciation repprted $16,804,105.15. Its reserve on that date All of stock Lighting Corporation. its common is owned 'Pacific $4,500,000 purchased Since 1916 but of this stock cash, has been *5 292 gas the rates 1928, order the Commission’s
Under 7.5 slightly a in excess yield return estimated were of. Concluding 386. these 379, C.R.C. cent. 32 per the Commis higher return, a yielded much actually rates now under It sion the rates order review. reduced cent, in of 9 per gross, to effect reduction was intended , reduction pp. 463, 469. The C.R.C., 35 revenue. about $1,300,000 in revenue and gross to about amounted in net revenue. $1,080,000 In determining
The Commission’s valuations. made of valuations two sorts base, raté $60,-. year 1930, for the gas properties —one and the other cost,” on basis of “historical 704,000 Com The on the fair value.” $65,500,000 basis of estimated that return to mission cent, and, 7.7 7 latter, (cid:127)former basis would be on the per C.R.C., 35 464. per p. cent. The cost had finding as to historical
Historical cost. Com- previously adopted by to the relation method regulation Company’s in the rates. mission Commission in original rate base established 1917 a valuation engi- made the Commission’s 1915. October, 13 In 'the neers as C.R.C. later 724.. including review, now the one under proceedings, rate having however, been Lighting distributed to Pacific $5,500,000, Cor- ¡dividends, representing earnings stock in form of poration left paid on stock property. Dividends have been its common in cent, value) 1918; ($100 par 1916, per per share in 1917 7.4 7.20 cent, cent, cent, 1919; per 1920, 1922; per 8.7 in 8.4 in 1921 and in per cent, cent, per ; per 1924, in included in which is 25 as a 1923 33.75 cent, cent, $2,500,000; per 1925; per 9 9.815 in dividend of stock cent, 1926; per which includes of 21.42 35.17 stock dividend cent, $3,000,000; per per or 15 1929. cent., grown surplus $381,212.97 has from in 1916 to Company’s depreciation reserve increased from while its $4,176,663.09 above, $16,804,105.15.” C.R.C., pp. 447, as said $3,804,383.36 to, *6 in the established upon built cost was historical net additions and betterments as augmented 1917 by books, cur- Company’s the but land at entered with total amount by rent Of fixed the Commis- values.2 the. cost, $1,862,103 sion of historical the sum of on the basis esti- supplies, was for materials and working capital and additions and for 1930, leaving mated net betterments $58,842,187 as the historical cost the fixed property overheads, the end 1929. Aside from the estimates by made the and the Commission of the his- Company by The torical cost this did differ property widely.3 in main treatment of in the lay difference overheads book to entries of additions betterments from 1916 and 1929,"the contends that in' Company the amounts recorded its in respect indirect books construction costs were adequate. The reference to the amounts which should 482; 93, 96; 164, 181; 2 See Í6 C.R.C. 20 id. id. 29 id. 32. ¿ 379, 381. 3 The found: “Estimates of Commission the historical cost of.the property by were in this both proceeding, structural made Com pany by Department. Excluding and the Commission’s Valuation Company figure $300,000 'reached a overheads, approximately higher by.taking than the one by obtained 1917 as rate fixed base up building that, Commission its first decision on while .and Department figure ap Valuation the Commission reached a $300,000 proximately one lower than the thus fact obtained. The estimates, independently employing that each these reached procedure, corresponded closely somewhat different methods and so figure accepted as used and the historical cost the Commission Company' in the as correct series of rate determinations (cid:127) running from 1917 to confirms accuracy. substantial The figure accounting practice-of used conforms to as to investment, -which the bulk of its has approximately increased from $58,000,000 $13,000,000 repre over difference senting during period betterments net additions and as inscribed in, Company’s books and records. Mr. McAúliffe [the Commis Company’s appraiser] appraiser sion’s and the land surprisingly were points close in In the few their results. of difference Mr. McAuliffe’s testimony convincing.” 35 . C.R.C., p. was the more 451. for engineering .superintendence, legal
be included damages, taxes, injuries insurance, interest expenses? contingencies. in- during general construction-and The to classification of fixed structions of the provided accounts that such overheads capital should assigned or apportioned particular accounts so each item of bear its proper share, should and a range considerable of discretion making allocations Company. C.R.C., p. rested Com- itself had of this aver- pany opportunity availed and the from age charge Company’s books these costs 1913 to about 6 1929 was labor direct Commission’s charges. engineers were of material *7 cent, reasonably might 11.25 have opinion per been that the. historical and, basis, on that total charged capital $58,- from of would have been raised cost fixed $61,019,662. Company’s engineers 842,187 to esti- cent, that 14.48 for these'over- mated should allowed $63,413,246. up that historical heads, bringing cost had been that its conclusions The Commission stated allo- assumption Company’s reached that in and betterments were prop- cations additions reporting long-continued made, prac- that effect of the erly had allowed under been Company tice was it in operating expenses, the rate the form of orders, capi- been added which it now claims have items should not thought'that was Company tal. question. The Commission to raise position exception during in the item of con- recognized an interest been when not had charged capital, which, struction operating go into accounts and did charged to income in the there included Com- accordingly was expenses, additional finding historical Cost an allow- mission’s $155,000 which interest, for that the Commission ance, fair. 35 451-453. to be C.R.C. deemed made from the total historical cost deduction was No generating plant equip- for in the the investment found rendered being which the Commission were ment In gas. of natural order unnecessary by the introduction demand, manu- increasing gas to meet rapidly until facturing greatly expanded had been plant daily had a cubic feet plant 98,500,000 The book value capacity. plant, approxi- mately $10,000,000 and the amount includéd therefor estimate of Company’s approxi- historical mately $10,500,000. April, 1927, Since on account of of natural supply gas, the not manu- Company has . gas except .1928, on one March 13, factured occasion, when,, anticipation of a certain amount shortage, (509,000, feet) was manufactured constituted cubic but nine-tenths of one per gas sent on. out. of.'the day. The Commission found the evidence established convincingly existence .a natural gas supply adequate come.” But years to. as the invest- in the manufacturing been plant had made ment. pru- and in déntly faith, it was good included the Commis- sion the estimate the historical cost of the Comr pany’s gas propertiés.
In that as'thus estimate; made, nothing, was deducted depreciation and nothing going was added for concern *8 value. Company
Fair value. The claimed'before the Commis- sion a rate base of approximately $95,000,C00 on the basis of cost new as of January 1, 1930, reproduction less ac- crued depreciation. 35 C.R.C., p. 456. On comparing the Company’s estimate as of that date with the estimate of engineer Commission’s of reproduction cost (of new December in each 31, 1929), case deduction without for depreciation, it appears that the difference, exclusive of overheads and the items mentioned below, was only about
296 In physical property.4 $3,000,000 the valuation of at 24.27 estimate the included overheads Company .its $14,990,278. basis, On cent., or total of that per by of was estimated value the physical property $76,754,919.5 at This depreciation, without Company, of $12,134,665 “reproduction included as above, facilities,” mentioned. standby manufacturing The before the Commission witness testified Company’s of he (in 1930)6 reproduction cost that his estimate “ had attempted prices that would reason to obtain ably stable and over the next three might prevail years “ average used were close to the prices very 3-year period for a Jan prevailed prior those uary there was “a 1, 1930”; opinion and while his slump prices,” he did not temporary probable' think it “ any change there would be substantial within the or three years.” next two of the Commission’s engineer estimate for repro-
duction the same physical property including cost new of 1929, 31, as of December gas manufacturing plant,' unit depreciation, taking prices day without cent., $72,471,207. was As of the per overheads 21.65 for the date, four-year average same unit using prices but . his with $73,210,136, 1926 estimate was years His 22.32 cent.7 estimates on taken at overheads 4 overheads, Company thus amount,- reached exclusive engineer $59,413,008. by the Commission’s $62,596,422, 5 Company's valuation Items This is the total Company’s exhibit and set forth as shown physical property, amount, p. This with findings. 35 C.R.C., in theoCommission’s up- the make Item i organization ($831,7S1) franchises reproduction $77,586,700 claimed total of property. fixed new its July 16, completed hearing the Commission before 6 The 24, 1930. on November was made order and its engineer Commission’s $427,406 allowed amount, This $73,637,542 as- the total makes franchises.” organization and
297 basis, but with last mentioned at per overheads and cent., per respectively, 11.25 were $64,082,282 $67,007,- and 569.8 With unit prices as of June 1930, his estimates for reproduction cost of that new as day, without depreci- ation, cent., cent., overheads at 6 and 11.25 per and 21:64 per cent., $66,- respectively, were $63,399,822, 291,307 $72,040,522.9 and
In at its arriving total estimate reproduction cost new, the Company added to its valuation of physical property the items of “Cost of financing, $5,921,470,” “ “ Promoters’ remuneration, $2,500,000,” and con- Going cern value,' $9,228,667.” These items Commission “ ” did not allow. The items of cost of financing “ ” “ promoters’ profits rejected were too hypothetical and far from removed actuality to properly lodgment find in a rate base.” The Company’s claim con- going cern value was upon expert testimony based Commission regarded as involving Unacceptable theories and assumptions. 460. pp. C.R.C.f
Depredation. $3,470,326 estimated accrued depreciation. The Commission found that this little too and that the accrued depreciation was not less $7,650,000. than stated amount was reached after a careful and in- study detailed volving physical inspection of the property analy- sis of Company’s Id., p. records. n Commission’s conclusion as to value. The Com fair mission’s final conclusion aswas follows: Subject to de duction for accrued and realized depreciation in a sum of approximately $7,650,000, fair value of the property reproduction cost new of the fixed which was covered Company’s $77,586,700. estimate of 8 Adding (see $427,406 the item of 6), Note these were estimates $64,509,688 $67,434,975, as shown the Commission’s exhibit. 9Or, $427,406 (see with the addition of 6), Note these estimates were $63,827,228, $66,718,713 $72,467,928. *10 attached, with business
here involved going property as a level of prices full effect the current and allow giving hot intangible fully elements of value cared ing any for expense for current allowances operating usual and value incident excluding up but built claims various an under assumed recon reproduction a of the property hypothetical struction as too and program uncertain year not for the- figure, enter a base did into rate $62,500,000, year for the and figures,..exceed round using for the 1930 does exceed $64,000,000, year and hereof, are for figures, 'purPoses $65,500,000, which amounts included of as rate base.” These spoken and betterments (supra, p. 293) for additions allowances (for and capital, sup for materials 1930) working and Id., pp. 461, 462. plies. thus treated was depreciation the accrued
Although at fair deductible, order arrive as the Commission results un- operating that thought value, the Commission an by using be shown theory could best fair value der the Commis- base. result that the undepreciated rate- basis for calculation its year for the allowed sion $65,500,000 without deduction return, a valuation ' Id., p. depreciation. estimate return. upon Based The Commission’s and with allow expenses, and revenue assumed operating annuity taxes, Commis depreciation ance for would earn a net re sion-estimated-that rate base. upon undepreciated 7 per turn of. “ re many that was year stated the temperatures that had year”; an abnormal spects normal, that business depression higher than been growth Company’s an effect had adverse had Company’s it was found that the business Still revenue. with was a growth there tendency -and growing The Commission of return to increase. rested rate on conclusions the assumption that con- temperature ditions in the future will be normal business conditions will approximate those of year 1930 and that the gross revenue of 1931 normal temperatures will not be than that of less 1930.” The Commission recognized that the revenue for 1930 less might be than that estimated and, hand,. that the operating other expenses for that year were not at figure. a normal It thought any diminution in revenue is offset amount which operating expense is out normal.” *11 But the Commission clearly the perceived that actual earning position Company the year the 1931 might “be either worse or better than it would be were these assumptions It thought realized.” that disturb-" ing element varying temperatures guarded be might against .by the establishment a temperature reserve. The pointed Commission out that depreciation reserve of the gas department, on December 31, 1929, was' $9,350,689, substantially in excess of the amount of The depreciation.” accrued annual amounts which' had been for depreciation expense allowed had proved larger to be than necessary, suggested it was that a considerable part depreciation might reserve be transferred a temperature for reserve. While, present the Commission purpose, assufned the crea- tion of such a reserve was a matter of company policy,, its desirability was The emphasized. Commission’s order of 24,1930, establishing the rates here in question, November provided acceptance for the at the Company’s option of (cid:127) This gave, an alternative in lieu plan. of the rates pre- schedule scribed, provisional be charged rates to n until the further order of the Commission, involve which was deemed to a reduction in revenue of approximately per cent., instead of per9 other- wise the Company agree contemplated, to establish which should reservé to temperature tfye credited of its earnings gas department
amount which the net in excess of a year for- 1931 should be sum. stated plan accepted. This was not n Decision District Court. Company December, 1930, brought attacking suit in the find and, rate base ings of the1" as to both return. fair of its alleged gas, prop value Company gross and net 195,000,000, reve-'" erties exceeded dommission, by the that under overestimated núes were have, earned, would prescribed rates 4.25 but October ending months the twelve cent, .claimed, fair which it and that the upon (cid:127) rates, for which the-' Commission’s optional temporary than a yield also less fair would provided, order return Upon invalid. equally inter were motion Com record before injunction, entire locutory /the. together additional in evidence mission was received the parties evidence same sub affidavits,, . for final determination. mitted cause findings make specific the District Court did While pf return, the Court and rate expense values, revenue, *12 and the findings of the the evidence Reviewed that, reason- valuations'- were held and the Commission’s a reasonable permitted the prescribed that rates and able major- delivered, for the were one opinions return. Two by the Circuit concurring opinion and a of the Court ity of were the Company the contentions in which' Judge, „ examined. of the Com- and growth stable Considering position “ of sue- with history out that pointed the Court
pany, no real business, competition and profitable and cessful is small and -the the hazard service, of field in its meet Electricity assured. demand of continued probabilities gas as a fuel. All supplanted extent great any not to has of the' affecting business noted, as conditions Company, sustained the Commission in its statement that plaintiff’s securities are capable being marketed at moderate interest and that rates, it will continue to 58 F. grow.” (2d) 259. The Court p. found that “ very Commission was liberal' in its treatment of certain items of that 1924” property”; “since the Company “ has gas, served natural plentiful which the numer- “ oil ous fields in ”; southern California there that is no destroys evidence the Commission’s conclusion that of natural supply will be abundant con- gas stant Commission had found effect that least two artificial gas manufacturing plants were no needed longer and.might retired; well be nevertheless the Commission had in its included them val- uation as a necessary live part operative prop- been erty”; eliminate'd, had that, plants these “the fair value base been approximately would have reduced $3,000,000.” Id.
In produced the evidence on the application inter- injunction locutory was an affidavit of the Commission’s brought who the valuation engineer Company’s December properties down to applying prices unit that date. This prevailing witness, Mr. Dufour, who had been from employed 1921 by Interstate Commerce Commission, from time had served with the California Commission, stated that “he close touch kept labor prevailing costs,” material maintaining as part of Valuation division of the Commission a cost bureau for that purpose; present that “the [December, trend material and 1930] labor cost is downward; due to the present acute unem- ployment wages situation the paid class labor re- quired for this type construction is now lower and due to the large number of applicants for employment from *13 may men capable be selected the efficiency of labor higher, is tending materially decrease the labor costs ”; “ that he the current level cost price
that estimated in the gas public used and useful plaintiff’s' properties 1930, in-' prices prevailing 15, December applying service 1929, 31, land as December and market eluding factor,10 $60,009,099, undepreci- excluding difficulty cost of represent that this would ated”; amount 31, if the existed December unit they properties 15, 1930, on December were prices prevailing and costs used, charges of six cent.” overhead applying in witness, affidavit, Company’s expert replying “ the variations levels dur- price gave opinion his permanent change constitute a year do not ing the_ will reasonable period for a prices levels and price higher be on a level than existed December future "the .on few years, over the next will, average him in his estimate used prices approximate $95,767,351 in the value of shown cost new labor reflected 23,1930.” filed December affidavit herein'on n to the action of the its conclusions as Summing up “ Commission did the Court said: What the Commission, of fair value figure its base rate reaching then in in. and useful all used property to include items the value plaintiff, appraise operative plant It included prices. original market thereof at current as well. It as- franchise values costs organization the ulti- plant, a live active and affirmed sumed attaching included all business as 'the mate total costs Its fair and been for. valúe accounted same had accrued correct estimate allocation assuming the .figure, difficulty factor,” $615,007, which had been estimated represent fey witness to his estimate the increased stated constructing experienced costs would labor originally encountered, physical those present conditions over under and increased subterranean traffic difficulties such as increased' obstructions,” *14 essentially- was one which to, hereinafter referred items cost, present time, at the represented the investment and its connected operative property all the incidentals.” regarded ruling 260. Court (2d) p. 58 E. overheads in with the taking accordance as reasonable. The Court accounting practice Company’s amounts claimed large Company
held that promoters’ for cost remunera- financing, $5,921,470; tion, $2,500,000; attaching con- (going business ‘ $9,228,667; difficulty'’ costs, $580,- cern added value), rejected as for their tótal amounts.” properly were Id:, p.
The Court observed that the matter of accrued depre- ciation, which had not been fair deducted from the base used as affect- important as was Commission, ing annuity allowance to be considered arriving at income. The amount allowed prospective Com- mission annuity as depreciation $1,072,000, while claimed that Company it should be not less $2,344,- than noted, 744. The Court inconsistency of this claim, when the asserted total de- accrued preciation affecting its property only $3,470,326. The Court concluded depreciation that the allowances for which had been prior annuities made to the rate hear- ing under review were excessive and were not controlling; that' depreciation was matter not capable of definite ascertainment and that it had not been shown that Commission had not exercised a reasonable judgment. Id., p. 261.
With respect- tó estimated income for the future, Court referred the Company’s complaint the two preceding years had been marked by unusually high tem- peratures and consequent diminished demand Tor gas, and that it was improper to assume average tempera- tures.” But the Court, familiar with Los condition^ by the Com- thought practice adopted
Angeles, “We the winter adding: may note that fair, mission was it far Angeles, of 1931-32 in the of Los has city thus has one of the progressed January, end of been- rule of aver- many so, And assumed years. coldest to be the reasonable one to temperatures only age seems mild winters the During unusually utility service adopt. *15 it, earn less estimated to be allowed will than was Id., and in colder will earn p. winters more.” of the The action Commission was approved also with allowances for respect the supplies materials for working capital. In final forth that finding the decree the Court set its plaintiff’s the as property values fixed and determined Commission, by the defendant Railroad are the reason- thereof; able the rates such as values fixed are a return on'such values that said render reasonable not Court confiscatory,” and rates are therefore the; (cid:127)“ findings,” opin- further the adopted, as representing Judge ion the two District Judges. filed The Circuit n concurring decree, opin- concurred in the his referring to which, findings his action upon ion of fact for the based. questions the particular
We decision of the approach general the light principles thus presented emphasized have We. frequently has Court declared. We sit a do not as function of the Court. distinctive rights. revision, constitutional but enforce board 439, 446. 189 U.S. Jasper, & Town Co. Diego San Land making rate in- the legislative discretion implied legislative process, entire extends necessarily to the ’power legislative reaching used in de embracing method itself. are that determination as We as well termination constitutional as limi either, long so not concerned method legislative When the transgressed. not are tations bearing upon the valid- a definite may disclosed, it have is judicial ity reached, of the result but function does go beyond question/ the decision of the constitutional question That is rates fixed whether.the are confisca- tory. question upon complainant And' has the may proof burden Court not interfere with the authority exercise the State’s unless confiscation is (cid:127) clearly established. the-property ownership As remains of the com- plainant, question complainant whether is has deprived been fair return for the service'rendered to public property. in the use of the This Court has re- peatedly held that the basis of calculation is the fair property, complainant value of the that .is,that what may is just entitled to demand, it order that have compensation,” is fair return the reasonable property being it time used for the public.” determining In basis, the criteria at hand ascertaining value, exchange market or what is called commonly value, are not available. The is not ordinarily subject of barter and and, sale when rates *16 dispute, earnings produced themselves are rates do not afford for prop- a standard decision. The of erty, base, or rate must be determined under these ines- capable limitations. mindful of And its distinctive func- rights, tion of constitutional the Court enforcement by any has refused be bound artificial rule or formula (cid:127) changed might' upset. conditions We have said 11 466, 547; Ames, 169 U.S. Smyth See v. Diego San Land & Town 739, 757; City, 174 U.S. Co. v. National Willcox v. Consolidated Gas 19, 41; 212 U.S. Co., Cases, Minnesota 352, 230 U.S. Rate 434; Telephone Co. v. Public Bell Southwestern Service Commission, 262 Railway 276, 287; Georgia & Power U.S. Co. v. Railroad Commission, 625, 631; 262 U.S. Co. v. Public Service Com- Water Works Bluefield 679, 690; 262 mission, U.S. Board Commissioners v. New York of 31; Telephone 23, U.S. Co., 271 v. Indianapolis McCardle Co., Water 400, 410; Ry. U.S. St. Louis & O’Fallon v. United Co. States, U.S. 485. of value the purpose judicial ascertainment that not a confiscatory are is mat- whether rates deciding must a formulas, judgment there be reasonable ter of but consideration all relevant basis having proper Cases, 352, 434; Georgia 230 U.S. Minnesota Rate facts.” Commission, 262 Railroad U.S. Power v. & Co. Railway Co. Service v. Water Works 625, 630; Public Bluefield 679, 690. Commission, 262 U.S. n investment property cost of the The actual —the Ames, v. Smyth fact. relevant made —is a have owners considered, be while cost must 466, 547. But 169 U.S. final not an exclusive or test. it is has Court held the investment. The not underwritten have public present value, standard admissible any property, actually than it cost. more or less may worth be effect outlay, of the and circumstances time when consideration. Even demand altered conditions to have be deemed may to reflect what as is revised so cost the investment good faith, and in prudently been invested useful for the longer used and no may property embrace n public. case, present' in the strikingly'illustrated is This manufacturing large gas plant Company has where been gas, has not supply natural which, view used likely be years and is, several used for no would question if all'. But one come, at many years utility sys- public of-an efficient the reasonable of com of its value time evidence good tem “ such actual cost will said’ have We struction.” the amount attrib- measure well to fairly continue so long elements physical uted to prices.” Mc applicable in the level change nois there Co., 272 U.S. Water Indianapolis Cardle *17 has occurred, level change price such when And. development in the construction experience actual recent period, in a experience may especially the property, extravagant estimates. upon check important be an that, This Court has further declared to de- order- value, the cost present teproducing termine prop- fact which should a,relevant have érty appropriate is con- Telephone Bell v. Southwestern Co. sideration. Public Commission, 262 276, 287, U.S. 288; Service Bluefield Commission, Service Water Works v. Public supra; Co., Oil Standard Co. v. Southern U.S. 146, Pacific Indianapolis Co., supra, v. Water 156; p. McCardle 410. Bell Telephone In Southwestern- Co. v. Public Service Commission, supra, this said it impossible Court is amount fair ascertain what to a return upon prop- will service without phblic giving erties devoted considera- etc., labor, supplies, tion the cost of time the An intelligent' is made. honest and fore- investigation of probable values, cast future made viev7 all upon the relevant is If circumstances, essential. the highly important present element costs is wholly disregarded, such a forecast becomes See St. impossible.” Louis & States, O’Fallon Co. Ry. v. United U.S. But again, the Court has not decided that the cost of repro- duction furnishes an Smyth exclusive test. Ames, See supra; Cases, Minnesota Rate supra; Georgia Railway Power Commission, & Co. v. Railroad supra. We have danger emphasized resting conclusions esti- mates of a conjectural character. said, We Minnesota The, Cases, supra, Rate p. 452, eost-of'-reproduction —“ method of service in ascertaining the present value of when plant, it is reasonably applied when of reproducing the property may be ascertained with degree a proper of certainty.- But it does not justify the acceptance results mere, which depend upon conjecture. It is fundamental judicial that the power to declare legis- lative action invalid upon constitutional grounds is to be only in exercised clear cases. The constitutional invalid- ity must be manifest a-nd if it rests upon disputed ques- fact, tions of the invalidating facts be proved. must And *18 308 (cid:127) as of other facts.” true
this is asserted cost, to historical and to cost, to be weight given to actual in the light to new, reproduction be^determined v. Indian McCardle the case. particular of the facts of apolis mpra. Co., Water in the
In to be ascribed.in determining weighty evidence, by as shown case historical cost stant prop development outstanding fact is that period. a recent place taken had, for the most part, erty is shown ground, below that no with the Court agree We upon- Company’s valuation assailing -placed first decisión 1917, the Commission property 724). ac- C.R.C., which.appears and to have been (13 p. starting in later rate point as by the cepted C.R.C., 481 20 C.R.C., (1919); p. 16 investigations. See The; rate fixed in approxi- base (1921). p. of addi- From time the cost $13,000,000. that' mately and under constant supervision and betterments was tions under- ac- Company’s records by the established the Commission. From 1917 regulations of counting Company’s change, but little estimate 1919 there was Commission, rate base capital, fixed 481, 1919, $14,000,000. being C.R.C;, under pp. .16 brought additions and betterments 482. Thus the (.with land at cost of the fixed' cur- the historical Commis- values) $58,842,187, as found up rent ten place in 1929, preceding at the took sion end two-thirds of the latter amount years and approximately . have been the cost additions better- appears to rate base taken at that January!, ments after as the $20,000,000. 20 C.R.C., time was approximately pp. judicial have had occasion to take 98. We notice of labor materials notv high prices prevailing level of war, but in 1922 from as-incident also only 1923 and that there was substantial de- general no from 1926.12 that time to See Lincoln prices cline such Lincoln, 250 U.S. 256, 268; Galveston Gas Co. Galveston, 258 388, 402; U.S. McCardle v. Electric Co. Co., Indianapolis supra, p. Dining Water these *19 years Company’s property cost the fixed the historical of $52,000,- increased additions and betterments over 29 181. There C.R.G, question' 000. can be no that p. from the the cost of additions and betterments 1926—in. just the period preceding Commission’s order under re- at,that of their time. good evidence value view—was prices far- of labor and materials are And, concerned, so as there, no for a we "find warrant that had been conclusion intervened, any change levels'during years in thát the from the in 1917 first valuation which made unfair it the fixing the rates for Company, future, to take the. as found by historical cost the Commission as of evidence ¡at the' value of the structural Company’s property of' the rate On clearly time order. it contrary, appears reason of for that, trend, prices downward labor and materials, which reflected were that cost historical higher were those which obtained düring the later than . period'to which the prescribed rates apply.
We noted at the outset that there is a difference between the parties with to the respect amount which should taken as historical cost. The contends entering addititíns and betterments it bboks charged too capital little to for account overheads) it directs attention opinion engineers .Commission’s cent, per 11.25 of direct labor and material items could reasonably have been charged to for capital indirect con- per struction instead of costs 6 cent., actually the amount charged. difference is $2,000,000. over an With . 11.25 allowance of overheads, Commis- ’ sion’s engineers estimated the historical cost fixed “ Prices,” Department See Bulletin on Wholesale -U.S. Labor, February, $61,019,662 instead of $58,842,187, allowed unnecessary Commission. It
by review . as if the point, contentions valuation were while the. higher figure, made at it would exceed $60,704,000 found cost, Commissionas historical still $65,500,000 it would be under the amount of an fair value, the Commission the basis took, rate undepreciated base. to cost of we
Coming reproduction, agree with items, Company’s Court below included financing, $5,921,470,” pro estimate cost of $2,500,000,” remuneration, conjectural were too moters’ Young, Valley Electric Co. v. allowed. Wabash to be 500. Aside from these items, and that U.S. we Com presently refer, to which shall going reproduction new the estimate fixed pany’s *20 $77,- for depreciation, deduction was without property, $831,781 included for organization which 586,700, $76^754,919. for the franchises, leaving physical property January 1930, of 1, was described as this estimate While date, on of that based, spot prices to be it was stated ” “ of average to prices which were close but years. for three prices preceding the prevailing That prices rests on from 1927 to prevailing the estimate is, In calculation,- this overheads making inclusive. 24.27 per cent. The estimate made were taken at new, engineer reproduction of cost without Commission’s closely corresponds móst above depreciation, $73,637,542, was Company, including of the estimate $73,- franchises, leaving for organization $427,406 of This 210,136 property. for the estimate physical average but was based four-year December 1929, and years 1926 to overheads were unit prices 22.32 cent. figured gas manufacturing plant
In these estimates both deduction, for disuse. The any sum included without of $12,134,665 was included in the Company’s estimate as the cost of this reproducing plant.. Whatever be may of, said of the propriety including plant entire in a based on cost, historical light of prudent valuation we investment, no perceive reason for embracing Unneces- sary facilities estimate of an reproduction. In under, a new present construction conditions it does not appear that such an extensive manufacturing would plant be established, and the finding is District Court sustained if amply the manufacturing facilities no longér needed eliminated, had been fair value base ' have, been reduced by $3,000,000. about .would With that deduction, the estimate of the engineer Commission’s would, $70,000,000, be about without' allowance depreciation.
We find it unnecessary, however, consider details estimates, these objection- for there is fundamental their acceptance as a basis for a finding confiscation. The determination of is present value not an end itself. Its purpose ground for prediction afford as to the n future. It is-to án possible make intelligent forecast of ” in probable future values order that the validity rates “ n may for the future determined. Estimates for to morrow,” prices the Court cannot said, ignore, has Bell Southwestern Co. to-day. Telephone v. Public Commission, supra; Service Water Works v. Bluefield Commission, supra, p. 691; Public Service St. & Louis States, supra. O’Fallon United we know Ry. Co. But value, of present the estimates taken the cost' *21 31, 1929, as of December based reproduction upon aver- 1929, 1927 to from 1926 or furnished age prices no de- of values in the succeeding years. criterion pendable a most serious facing decline prices., It country was period of such depression as entering upon to was con- “ present experience generation.” a new stitute fluctuating conditions case of possible It not the usual Atchison, Topeka & level. changed economic but of a States, 248, 260, 284 U.S. Ry. Fe Co. v. United Santa was shown change, progress an important That for interlocu- the application evidence submitted on al- January, we injunction 1931, which tory have then 'called referred. The witness ready Commission’s estimating of prices, to the trend attention downward cost.,of De- on the of prices prevailing basis property cent., at at 15, taking overhead 1930, cember 31, as of against $64,082,282 as $60,009,099 December supra, $63,399,822 of June 1930. See 1929, and as wit- expert Company’s The mistaken outlook of the p. 6. his reply, supporting his affidavit is disclosed ness for imme- that, opinion, prices his estimate, former would be future, years several come,” diate level ap- than the average higher present the 1929 It is proximately apparent level.” reproduction new or estimates foun- no secure relies, afforded upon which the values, and the rate base dation for future prediction invalidated not to be as fixed of these estimates which by reason involving confiscation trustworthy of credit as deprived of events course prophecies. challenging finding ground appears
No appraisal, upon inspection and made Commission, of the amounted depreciation accrued accuracy admitting not While $7,650,000. undertake to contest it Company does finding, as the maximum amount which can but takes the here, In determining present the evidence. be allowed for accrued depreciation. must made value, deduction Co., 1, 10; U.S. Knoxville Water Minne Knoxville But 457, 458. the Commis- Cases, supra, pp. sota Rate *22 of the Company’s return, its calculation under made sion the rate it fixed, base unde- prescribed, the rates preciated.
As an item additional
the estimates
value thus
far
to be
considered,
Company claims
entitled to an
“
$9j228,667 for
going
allowance of
value.” This Court
“
has declared it to be self-evident
there is an ele
ment of value
an assembled and
plant,
established
over,
doing business and
one
earning money,
not thus ad
and that
vanced,”
element of
a property
value
which should Be considered
right
determining the
property upon
value
which the
right
owner
as a
make a fair return.” Des
Moines Gas Co. v. Des
Moines,
153, 165;
238 U.S.
Denver v. Denver Union
Co., 246
192;
Water
McCardle
178, 191,
U.S.
v. Indianap
Co.,
supra,
olis Water
p.
going
value thus
recognized is not to be confused with
good will,
sense
of value which inheres in
“element
the.
fixed
favorable consideration of
arising
customers,
from an established-and well-known and well-conducted
business,” which, as
Court has
repeatedly said, is
not to be considered in determining whether
fixed
rates
service
are
public
corporations
Des
confiscatory;
Des Moines, supra.
Moines Gas Co. v.
Willcox
See
v.
Co., 212
Consolidated Gas
19, 52;
U.S.
Cedar Rapids
Co.
Cedar
Rapids,
v.
U.S.
669;
Gas
Galveston
Galveston,
Electric Co. v.
Nor
supra, p. 396.
does this
recognition
going
countenance a mere
attempt
recoup past losses. Galveston
Galveston,
Electric
v.Co.
supra,
pp.
395. Deficits
the past do not afford a
legal basis
invalidating fates, otherwise compensa
more
any
than
tory,
profits can be used
past
to sustain-
for the
confiscatory rates
future. Board
Commissioners
Telephone
New York
Co.,
just exercise to treat is -not entitled authority hand, on the other *23 bare , more than nothing bones. organism living . is obviously and limited recognized as thus principle Gas (¡Sedar Co. v. Cedar Rapids application. difficult of specula- to mere It license supra. give does Rapids, history and circum-' of the for consideration tion; it calls attempts pre- and enterprise, the particular stances of necessary again, It .is have been avoided. cise definition the and legislative between relation, distinguish in this task of the Com- It the appropriate functions. judicial affected property value the determine the mission to integrated, operating as that an fixes, the rates it deciding of the Court in it the function and enterprise, is. lay formula, not to down a confiscatory rates are whether arbitrary* an but prescribe allowance, less to much in legislative the action order to result examine the off deny effect is to owner its total the whether determine fair return its use. df the property Rapids Rapids, Cedar supra, Gas Co. v. Thus, in Cedar in decision review, under the that, noted this Court ” “ operation was successful had plant fact into account and that had taken a value been" expressly “ considerably cost,” exceeded its fixed which been for changing warrant the re- court hence found.no Moines, Des supra, Moines Gas Co. v. In Des sult. report the Master’s exclu- dealing with Court, observed that going value, item special of a sion “ Rapids case,” the rule the Cedar Master, applying “ in the estimate of property valued the what already had value, upon the of a plant basis physical he called Master operation.” As the had successful actual cent, in that at 15 valuation, overheads included expenses, Court unable organization addition “ going element of had not been to hold that In it deserved. Denver consideration v. Den- given Co., supra, ver Court, Union Water premising case must be controlled circumstances,” each its own out that Master’had pointed expressly declared that his detailed valuation of the physical and water property no rights included because the increment con- stituted an assembled and established plant, doing busi- earning money,”-and that an ness examination of his true; elaborate convinced Court that report in that And case the Court found that the return allowed question was clearly the ordinance confiscatory. Lincoln, In supra, Lincoln Gas Co. pp. 267, of the questioned Court Master’s propriety treatment value, compensatory but going noting errors favor complainant could not conclude that the Master *24 holding that ordinance wrong the was not shown In confiscatory. Galveston Electric Co. v. Galves took ton, say the Court occasion to supra, that the ex Denver case and the pressions the Lincoln case were modifying the any respect not to be taken as rule Des Moines as the case exclusion declared In & Georgia Railway Power good Co. v. Railroad will. Commission, supra, below finding as to going value In Water was not disturbed. Works v. Pub Co. Bluefield cent, Commission, supra, while lic Service ten had been the total result going value, added for valuation In not be sustained. McCardle could v. Indianap Co., where supra, the rates olis were held Water to be ’ Court found that confiscatory, evidence was to sustain 9.5 per sufficient for “more than going the Commission’s engineer and that value had- nlade no that element. appraisal of light decisions,
In these our inquiry must be, actual scope to the first, as effect the legislative in relation to determination the value of the property as integrated an that of established ’enterprise, and. and, second, requires evidence whether'the the conclusion that ykluation of the is of the the result inadequacy reason As to first that question,
confiscation. it urged, any declined to' allow amount for going Commission, value. It is true that the refusing admit the' assumptions claim for underlying Company’s value, of'$9,228,667 amount as stated that did going it “ for intangible going allow the so-called^ concern its cost current treating operating'expense.” as-a But fail,to the fact Commis- we cannot effect to give $65,500,000 1930; for sion, determining rate base value, of fair stated that from deduction (apart basis “ amount was fair value depreciation) for accrued going property here involved as'a full effect curren! level attached, business giving tojbhe elements of value intangible prices allowing any operating in the and current ex- fully usual cared Court, in its majority opinion, And the District panse.” in- of fair value” figure, rate -^concluded “this base costs and franchise values original organization cluded a, affirmed live active well,” plant hssumed as attaching all included costs the ultimate total accounted and been had accrued business as same was, to take the for.” What the Commission did histori-’ on the same basis calculated plant, cal cost of in the as that used sev- additions and betterments amount, together and this proceedings, eral rate previous *25 and for supplies, and allowed for materials 'With the sums allowance, for inter- the additional with working capital, expenses assigned organization est, amount with the values, up made land at. current franchises, and with and total, To $60,704,000.- historical cost a total ip its fair $4,796,000 reaching added the Commission Included in $65,500,000. base,, of figure, value or -rate $10,500,000 as the cost approximately that rate base $3,000,000 which, or about manufacturing plant, gas longer no facilities found, represented Court District as'the ',317 needed. latter Eliminating amount, margin base,, rate as at fair taken value, over cost, historical $7,796,000. was about If allowance be made incréased overheads, by taking.them at 11.25 per ih figuring the cost of additions and (instead betterments cent, as allocated to capital by the Company in its books'), the allowance of which the Company urges light the testimony of the engineers, Commission-’s and if the difference, $2,177,765 be deducted, there'.would still $5,618,235 in the rate remain base over the historical cost as thus revised. As the historical cost of greater far the, part ,of the fixed .to appears have been taken at' w;ere price higher levels-which than those which have ob- tained to which period rates prescribed are ap- plicable, cannot said to fairly be underestimate the yalue as of this period, excess amount plant $5,500,000 over can be to-elements appropriately assigned of value maj* not have been fully The covered. record no basis for affords criticising 'allow- adequate ance made and supplies, materials entire, working thus the capital, may excess be regarded whatever as value intangible applicable property had as mar- going concern. The fact is gin going the rate base was described as unimportant, if large, enough the rate base-was fact that element. embrace Company remaining then, whether question, requisite greater persuasiveness,
has proved, be treated going may amount for value than that which An allowed. of the evidence substantially examination subject ¡upon this shows offered it to There and uncertain of a highly speculative character.' put their estimates grounds were two witnesses strong light. Company’s their results in a valuation used gave three methods which he had Luick, Mr. expert, forming judgment going of his as to guides' ais in the *26 “ was gross method which the The first revenue,” value. “ experience of that a basis his on the pur- used witness pay property and a ordinarily reasonably will chaser and on a earnings, operating stabilized with .established over year’s gross one revenue and approximately basis basis property.” of This the physical above the value a going $15,801,208.21 would indicate value of witness said “ year the ended December based on revenues for of percentage His second method was to take a 1929.” stating the in his property, witness physical’ the pay “would purchaser approximately per opinion cent, going of reproduction above cost because of the developed.” so This percentáge of a property pro- he $10,638,005. of method called. duced total third “ method which based on a cost of consumer not. gave $8,886,- $25 meter and an per aggregate than of less given witness said that-he had also 700. The considera- exceptionally fact that the an to the had tion an growth, business, established history .good earnings and record of excellent future satisfactory pros- growth Angeles alluded to The witness' Los pects.” and adjoining communities, considering all these fac- January going value as estimated the tors $10,000,000. took Mr. witness, Mr. Luick’s' Miller,
The other con- in which latter figured program, had struction had assumed be there would reproduction, operating department to the one-twentieth over turned each during quarter mains of thé second the service Estimating year year inclusive.” the cost years sixth business during securing period, construction between 8 witness inter- difference took during useful year used est to have been earnings estimated received, net and the with interest, differences during period these total was taken to represent required, cost of assumed *27 Company. business the This present securing from through the second amount, to calculated thus $8,721,878. To this sum the inclusive, to year seventh “ of organizing prop- as estimated cost added witness $506,789, reaching thus the tótal of and erty personnel,” value. going claims as Company which the $9,228,667 , these wit- testimony unnecessary analyze It is in obviously conjectural as it is too us nesses, justify as suffi- to include their estimates a treating the failure for a of confiscation. finding cient basis Our conclusion is that has to sus- Company failed tain rate of $65,500,000. its attack base
The Commission calculated that would cent, in have return of 7 on this rate base. We said per a Water Works Co. v. Public Service Commis Bluefield sion, supra, pp. 692, 693, utility, entitled public .that earn a on the to such rates as will it to return permit of the which it for the convenience of employs at the equal generally being to that made same public in in general country time and part same in other which are at undertakings vestments business but it- by corresponding "uncertainties; tended risks such right has no constitutional as are realized profits or anticipated highly profitable specula or enterprises tive ventures.” We added that the return should be reasonably sufficient to confidence assure financial utility and should adequate, soundness be under the. management, and economical efficient maintain- and and enable it its credit to raise the support money neces its, proper discharge duties.” sary public And for. “ a rate of return recognized we may reasonable high and become too or at one time too low by changes for investment, affecting opportunities the money market generally.” conditions See and business Smith v. Illinois Co., 282 U.S. Telephone Bell 161. Applying considering principles, financial these history of relations and and the opportunities, Company,13 find investments, we it impossible general situation as to is so low to be con as to hold that return Young, Electric fiscatory. p. Wabash Co. supra, then, is to the estimates revenue and question, The the Commis- Company complains expenses. high. estimate of revenue was too The problem sion’s it is temperatures, plain concerns largely justified, fixing rates were to period, taking average tempera- for a apply considerable Court, special knowledge with its tures. District conditions, speaking April, 1932, held that local *28 The Judge of Commission was fair. Circuit the action the finding majority the holding this of supplemented b^'his “ nothing unreasonable in there was the estimate of by temperature Commission so far as returns the is con- “ nothing and that there cerned indicate that due to the possible not,,given effect consideration of, the. consumption gas.” depression upon (2d) 58 F. 262, 286. as.to estimate of controversy expenses
The turns on the sufficiency annuity the depreciation by allowed company The claimed $2,344,000 Commission. (or the Commission’s against $2,306,606) allowance But it is not shown clearly $1,072,000. what .adequate protection allowed will be Commission not there is no basis for view, and purpose concluding' practice under which Commission’s that the large a depreciation accumulated reserve has re- has in injustice Company.14 to the The sulted fact by the represented Company’s depre- not support could be used to reserve the imposi- ciation rate confiscatory did not make it necessary tion an annual to make allowance which 1. Note See See Note light experience would excessive. Smith v. Co., Telephone Illinois Bell supra, 158. The Commis- p. sion was entitled to form its judgment, and the three judges in the court below agreed were the view that discretion the Commission regard this had not been unreasonably exercised. We see no reason to dis- turb this conclusion. few questions minor which remain require do not
specific mention.
Decree affirmed. Mr. Justice Van Devanter did not hear the argument . no and took part in consideration decision case.
Mr. Butler, Justice dissenting.
This is an important case. is The amount stake great, important. involved more principles are The reduction made prescribing when commission what it found to is rates, be reasonable October, definitely shown.. But amount rate of return was reduced indicates a more probable reduction than a million in No-- per year. net reduction made more vember, by the is order undei* consideration than one That year. enough yield re- million *29 of per $14,000,000. seven over There also turn on is $2,500,000 involved more than now by company held subject to claims of it be to customers that refunded them if the order shall be sustained. .. commission, following
.The that admittedly theories are contrary cases, to our decisions in confiscation refused to ascertain or to consider value It property.1 1 (35 443) 445): report (p. in C.R.C. this case states' This many years, Commission for in the exercise of jurisdiction its to character, establish reasonable rates for utilities has rates fixed yield upon land, or property, taking historical actual cost of the however, depreciation sinking at current values and on a calculated mere upon reduction cost fair figures.
made' the last Its/' higher value” is figure than “historical cost.” The basis, money a return somewhat excess of the cost in- fund 474): property.” (p. And Commissioner vested Decoto said “For Supreme thirty-two years Court the United States has consis- controlling tently principles to the by adhered valuation’ laid down pathway spite reasonably the fact that the is now.made it. In clear "courts, by the decisions of some state seem commissions to be persist unto ignoring inclined to a law and themselves the law as by laid down courts. The California Commission has to all out- appearance clung ostensibly ward been one of these. It has theoretically given reality to the historical rate base. In it has effect including to the different elements mentioned the federal courts including going by allowing fair value a rate return between valu.e cent, cent, per per on cost to the historical if there be added cent, 8% per cent., base an amount between 10 historical rate per 12% including approximate going obtained will fair the rate base so cent, cent, per So, per if'there is deducted from Í0 value. also to 12% cent, cent, per per of 8 or historical from a rate of return an 8% readily varying base, seen that is an actual return froni there rate it cent, cent, per upon including per 7.75 fair value therein a reason- arrangement going public value. With this our able' amount During years this commis- been content. the last two utilities have tendency cut the rate return an historical sion shown has cent, cent, per cent., per per between 8 to 7 base from rate 8% per upon fair the rate of value base which reduced return 6.12% regulation.” This is confiscation and not and 6.3 cent.. an commission, address October president Public Com- Railroad and Utilities Association of the National before established law as opposition to constitutional apparently missioners say practically that in “It is safe to here, said: numerous decisions injunc- permanent have which there been none, any of the cases in if have courts, confiscation would actual orders,issued.by the tive federal gen- only from findings. This is stated followed the Commission knowledge of the specific knowledge facts but from eral be- opinions indicates study the court A .’of experience in California. major every case in the practically rate that in yond doubt reasonable findings of the years in that state the last seventeen tribunals.” imposed federal test not have withstood could Convention, pp. 180, Report, Forty-third Annual. *30 323 commission based that increase on its finding that unit prices applicable to the properly prescribing reasonable rates for the future are than higher were those actually paid throughout years for the construction of the property. increase This $4,796,000 amounted to it found correct by the court and district also in the concurring opinion But below. this court excludes it .and holds original to cost. The amount involved that item alone is enough more than require to reversal.
The commission
from
excluded
expenditures
overhead
made
actually
company
the difference between six
cent,
per
per
and 11.25
upon
ground
that the com-
pany charged such difference to operating expenses and
hot
capital.
It refused to give any consideration to the
findings of its
engineer
own
a proper estimate of
of reproduction
cost
as of the
inquiry
date
such
22
overheads would exceed
cent.
per
company’s
esti-
mate
24
was about
per
rulings
cent. Each of these
is di-
rectly contrary
our
decisions. Board
Comm’rs v.
Co.,
Tel.
N. Y.
S. W. Tel. Co. v. Pub.
271
31;
U.S.
Comm’n,
Serv.
The valuation correct plaintiff to be agreed and com- inventory two standby plants to which It included mission. $3,000;000. The district court attributed commission It declared, (2d) 259, that figure. F. adopted that *31 “ live, included as neces- plants commission these a the the this property.” of But court sary part operative item. Three so excludes million thrown out is the sufficient ' It was for the to decide require to reversal. commission plants required properly safeguard whether these are to This public long the service. should court hesitate before are Seven holding they not. on three million $210,000, so cents on each dollars eliminated is about meters, charge of> a small to readiness 385,000 insure to serve. anything
The refused consider or allow commission to adequately value.- Plaintiff’s going gas properties- .for a great and, depression, rapidly before the present serve permitted charge If to reasonable growing demand. high enough be merely non-confiseatory, or those to rates, to an ample to able earn rate plaintiff continue be will charges property. the value Its return gás generally are in with those comparison low collected to regard record that, having for like service. The shows units, gas in natural that plaintiff the effective thermal in its rates than furnishing years, has been recent less are in formerly And, one-half collected it. those absence by finding, charges contrary showing its must just to have and reasonable deemed been considered public. authorities of regulatory State the. very 2 The statement follows: The court’s liberal commission property. company-in items of its treatment certain gas. operations served early furnished artificial Since 1924 it-has plentiful oil gas, which the numerous fields Southern natural commission’s There is no discredits the California. evidence gas supply of will be abundant and con conclusion that natural found effect at least two of the arti stant. The commission longer manufacturing plants plaintiff no- gas were needed and ficial Nevertheless, them in its it included valuation might well be retired. that, property. appears necessary part operative It live as a base would been plants fair value have eliminated, been these had (2d) 256, $3,000,000.” 58 approximately F. reduced court so Unquestionably, .opinion implies, figures be added applicable should millions items find the plaintiff’s order to value of physical the amount protected by the Constitution.. The property, ground on >which. commission going excluded. the, charged was that cost of attaching business was operating expenses. district court followed re- being contrary That commission. this court law; pudiates rulings $5,500,000 and uses over both going value. calculations produce Its to reach value *32 figure substantially the same as fair the commission’s ” figure. value cost appli- But that was by the attained of formula, cation a thing repeatedly condemned here. Cases, Minnesota 230 Rate U.S. 352, 434; Bluefield Water Comm’n, Works Co. Pub. 262 v. Serv. U.S.
690; McCardle Indianapolis Co., v. Water 272 U.S. supra, This Court’s depending mere coinci- upon conclusion — ” dences —that value is the as the fair cost same value figures found by the commission is without support.
figure going used to cover value was arrived at' con- siderations have no to amount relation any reasonably view be may assigned to that element. It (made comes about Add $3,000,000 thus: available excluding standby plants found necessary by com- mission and court) included the district $4,796,000 to (obtained by reversing findings of commission and lower accepted by the court of unit A respect prices). part of that total is to neutralize the used errors in law by the commission and the .committed court in re- lower spect of overheads. Enough is taken to increase that itém from 6 to per 11.25 And the cent. calculatéd balance, is $5,618,235, assigned to going value. That fig- ure is certainly not the of an appraisal or valuation result' of plaintiff’s going value. Neither the amount attributed to the standby plants eliminated nor court
326
to original
commission’s addition’
get
fair'
value
has
figure
any relation
value.
going
When in
going
exists,
confiscation cases
any
the amount
attributable
must
justly
thereto
be ascertained and in-
National
Waterworks Co. v. Kansas
See, e.g.,
cluded.
City,
Co.,
Omaha v.
Water
853, 865;
62
Fed.
Omaha
Moines,
Des
Des Moines Gas Co. v.
218
180, 202;
U.S.
Co.,
Denver
Water
Denver v.
Union
153, 165;
U.S.
Galveston,
Elec.
Galveston
Co. v.
178, 192;
U.S.
258 U.S.
Co.,
supra,
Water
Indianapolis
McCardle v.
388, 396;
414;
Willcox, People
Kings County
ex
L.
rel.
Co. N.Y.
327
may inquire
confiscatory,
attácked as
courts
into the
by which
commission’s conclusion was reached
method
if such rates are based
that,
upon property
valuation
arbitrarily
essential
or
or other
fact that
arrived at
in the
support
evidence,
without
such rates will be
that is
Works,
Ry.
Dept.
Northern Pac.
Co.
Public
set aside.
v.
39, 42-45; Chicago,
Ry.
268 U.S.
M. & St. P.
Co. v. Pub.
Comm’n,
344,
274
351;
Ry.
Util.
U.S.
St.
O’Fallon
L. &
States,
United
Cf.
supra,
Co. v.
485.
United States v.
Ry.,
288; Chicago
Abilene &
265
274,
So.
U.S.
Junction
Case, 264
258, 263;
U.S.
Interstate Commerce Commis
Co., 222
541,
Union
R.
U.S.
sion v.
547.
Pacific
lower
together
court’s decree and
taken
opinion
reasonably
be
may
Equity
construed to comply
In
be
Rule
confiscation
rule should
cases,
70%.
strictly
a definite
enforced. The trial
make
court should
complete statement of the facts on which
rests
it
Cf. Aetna Insurance
judgment.
Hyde,
Co. v.
275 U.S.
440, 447.
In
years
a number of cases
in recent
decided
specially constituted district
failed make
courts
definite
or to
reasons
findings
give
they grounded
their decrees. This court repeatedly
emphatically
required
reminded them
the proper practice and
it
Virginian Ry.
States,
v.
272
followed.
United
Co.
658,
U.S.
675;
St.
Ry.,
588,
Lawrence v.
L.-S. F.
274 U.S.
R.
596;
Chicago,
Arkansas
R. Comm’n
Ry.
v.
R. I. & P.
Co.,
597,
274 U.S.
603;
Line,
Hammond v. Schappi Bus
Cleveland,
171;
C.,
_329 within hereof.” This is the condemnation and decision Maxcy, supra; Railroad of our decisions. Commission v. Jackson, supra; v. Public Service Tax Commissioners Co., supra. Northern Indiana v. Comm’n Co., supra, Wisconsin Tel. Service Public Comm'n of is argument case, special after of decided the from an interlocu appealed interest. The commission enforcement of tory declaring telephone decree rates in the would result confiscation prescribed by commission The no property. of the district court filed company’s of The com findings and made no fact. opinion special was moved to affirm. commission’s contention pany for specification that the decree be reversed lack of should it maintained company of the facts on which rested. abundantly was the facts by decree sustained the. not shown record. We held does the Rule 70% injunc for apply to decisions on applications temporary duty pass tions and clear that the of made the court it ing on such not applications adoption altered {ante, 70): of the said an applica rule. We While p. injunction tion an involve a interlocutory does merits, final of it the ex determination does involve judicial ercise a sound discretion.' That discretion can upon light exercised only be of the determination, issues facts presented, and of the whether complainant has made, make, or has such a showing failed gravity complaint of his as to warrant re interlocutory Thus, lief: if the issue is confiscation, the complainant must make a showing probable factual confiscatory effect of the statute or order with such clarity per suasiveness as demonstrate the propriety in the interest order justice, prevent irreparable injury, action until restraining State’s hearing the mer upon can court had. ... should make the findings of fact and conclusions law that are appropriate interlocutory proceeding.” And we refused, even when
,330 counsel, to con- argument brief and adequate
aided injunction warranted temporary whether sider decree record.- We vacated the facts shown the case utility and remanded against costs to .a decision appropriate conclusions findings and it injunction. And interlocutory for an application definitely a rule promulgate of this court purpose to. fact findings make special courts to requiring district *36 such cases. rule are such for the enforcement a The reasons of. done is The work judgment final entered. stronger where not opinion of the should by court the writer for adequate op- permit Our rules do not here. undertaken trial of such cases for presentation portunity can give the time that Justices Nor is novo. de to enable in our conferences sufficient for and preparation respect reasonable conclusions them reach calculations, revisions and determina- or details of bases in this case. opinion the elaborate tions reflected v. Wisconsin follow Public Service Comm’n should We special the case for Co., and remand vacate decree Tel. special mas- should a appoint court The district findings. specific findings of fact, m.Jke parties, hear the ter to of and recommenda- his conclusions separately state law tion for a decree. a the case to court should have district referred
The has made it Experience a report. master for such special in respect intricate cases rate confiscation are plain that ques- difficult grave and complicated, facts and involve of adequate examination a impossible of tions are master. Dubourg the assistance of a de without court States, United 7 Pet. The re Heirs v. St. Colombe’s occupies in this of pages case the commission port of opinions participating judges record than 71 That burden pages. more through extend great comparison very or concordance is analysis, mere gathered can be from opinion of this court. lack in respect definite of essential findings facts is obvious likely if it is the district that, court had undertaken. separately state law, conclusions it would . sought
have fallen into errors to be corrected opinion Its here. decision was not announced until more than nine months after final submission of the case. This implies criticism, statement no adverse for it often diffi- cult for the judges, consistently performance their duties, other give required travel, the time full advance,of hearings, adequate conferences decision preparation opinions. draft requirement three shall judges participate undoubtedly increases the need for special master.
Chicago, M. & P. Ry. Tompkins, St. Co. v. 176 U.S. was a confiscation case involving the validity state- - made rates. The trial railroad judge, without aid of examined master, the pleadings findings made and proof, of fact, stated his conclusions of law, delivered an opinion and rendered a decree dismissing, the bill. But he failed to find an essential fact, the cost of doing local business. *37 This court remanded case with instructions to refer it to competent Speaking through a master. Mr. Justice Brewer, (p. 179): it said question The then arises what disposition the case shall this court make. Ought we to the testimony, examine find the facts, and from those facts, deduce the conclusion? proper It would doubtless be within the of this competency court an appeal this, to but we equity do are constrained to think it that (particularly would not a case present) like be the the. proper pursue. course to This is an appellate court, and right a parties a to have determination of the facts in the first instance trial court. if Doubtless such deter- challenged on appeal mination is it becomes duty our to testimony examine the and see if it sustains the findings, if not challenged by the facts found are either party but ordinary appellate go beyond not need this court
then justified the decree. such facts whether considering duty it is especially in which of those is one cases think We *of finding clear be a and there should full important ' difficult, questions court. the trial The the facts are the, aid of-the trial arid therefore vast, are interests opinion of this appre--. The writer should be had. oourt . attend, a trial court a case difficulties ciates the case, he, Ames, supra, similar Smyth v. In a this. like Nebraska, Circuit Court Judge presiding Circuit examining testimony, making the work ündertook very It labori finding the facts: computations, and really a work which weeks. It was took several ous, and . all of done master . We are "to have . ought been a. testimony to is to refer practice a better opinion all master,, computations, to make needed competent some necessary to 'observe hardly the facts. It is fully find importance sf view difficulties such competent that the most imperative case it reliable selected, for it is special, or should master, general legislation to with the Of State in matter interfere a light a rates, nor a prescribing light respect matter legislation large property to wreck interests.” such permit Lincoln, Gas Lincoln Co. U.S. involved charges for city, regulating gas. of- ordinance validity findings fact in respect to make court failed T!he below re annually required depreciation of the sums court,. speaking through Justice placements. This Mr. Lurtón, 36Í): gone should have (p. said "cause whose master, upon report beginning spe to a skilled ruling from been and a errors could have assigned cific remanded the district obtained.” case was court master competent instructions tó refer it (cid:127)court *38 findings upon ques his all report fully to With directions with leave both party, parties either raised tions take, evidence. additional
333 Chicago, Ry. M. & St. P. Co. v. While since practice Tompkins not uniform, special has been masters have been quite appointed generally.3
To summarize:
1. There no warrant reversal here of the commis- district court respect sion and unit prices upon which their fair value they figure. built If up business con- ditions since commission made order are deemed figure, to affect that we should remand with directions to Atchison, &T. S. F. the district to find the facts. court Ry. States, 284 Co. v. United U.S. 248, 262. not This should undertake
2.
court
to ascertain the
of overheads
properly
be included.
if
But,
amount
cent,
be
that matter is to
considered
22
here,
per
in-
in the commission’s reproduction
cluded
estimate and
cent,
per
24
should
company’s
ignored
but
be
should
connection with the
11.25
in-
considered
3
Co., 212
Knoxville Water
Knoxville v.
1;
U.S. Willcox v. Consoli
Co.,
19, 24;
dated Gas
212 U.S.
Louisville v. Cumberland Tel. & Tel.
Co.,
Minnesota Rate Cases,
430;
225
Des Moines
352;
U.S.
230 U.S.
Moines,
Des
153;
Gas Co. v.
Denver v. Denver Union Water
238
U.S.
Co.,
178;
Newton v. Consolidated
Co.,
Gas
246 U.S.
165;
258 U.S.
Galveston,
Galveston Elec. Co. v.
388;
Houston v. Southwestern
258 U.S.
Co.,
U.S. 318;
Te
l.
Brush Elec. Co.
259
Galveston,
v.
262
Francisco,
Gas
443;
San
v.
403;
U.S.
265 U.S.
Co.
Railroad
Pacific
Ry. Co.,
Denney
Duluth St.
Comm’n v.
625;
273- U.S.
Tel.
v.
Pacific
Valley
Co.,
& Tel.
Young,
Wabash
Elec. Co. v.
97;
276
287
U.S.
U.S.
Cases,
In Missouri
Rate
part
testimony
U.S.
230
part
open
taken
master and
court.
Diego
appointed
San
Land
None was
Jasper,
& Town Co. v.
189
in:
R.R. Comm’n
439;
Co.,
Louisiana
Tel.
U.S.
v.
U.S.
Cumberland
414;
Louis,
Ry.,
Allen v. St.
Iron Mt. & S.
(At
eluded on of all the made the basis be item should praisal facts. relevant from for this court’s elimination warrant There is ño
3. in- which were standby plants inventory agreed district court. the commission cluded That value. appraisal going no has been 4. There no There arbitrarily excluded below. element it here. attributed to for the amount foundation rational . to apply principles refusal commission’s 5. As the arbi- decisions resulted in by our established valuation rates should undervaluations, prescribed trary aside. ground set the. be vacated and from should appealed decree .6. with Rule compliance reminded case 70%. a special refer case court should district followed practice, with the report
master accordance cases such this. - joins opinion. Mr. Justice Sutherland HARRISONVILLE W. DICKEY CLAY S. MANUFACTURING CO. Argued May March 1933.—Decided
No. 559.