84 N.J.L. 463 | N.J. | 1913
The opinion of the court was delivered by
The question is the validity of an order of the board of public utility commissioners fixing the rate for gas
The real controversy in the ease arises upon the writ prosecuted by the gas Compaq. Under section 38 we are given jurisdiction to set aside the order of the commissioners when it clearly appears that there was no evidence before the board to support reasonably such order or that the same was without the jurisdiction of the board. On its face this section ■confers jurisdiction upon this court, but a jurisdiction of a limited character, only to be exercised when it clearly appears that there is no evidence before the board to support their ■order, or where the order is without their. jurisdiction. If this language is taken literally, we should be powerless in any ■case within the jurisdiction of the board to set aside its order if there was any evidence to support it, no matter how overwhelming the evidence to the contrary might, be. It is needless to say that such a literal construction of section 38 would bring it into conflict with our constitution. It needs no act of the legislature to confer on us the power to review the action of an inferior tribunal, and the legislature cannot limit us in the exercise of our ancient prerogative. That the legislature did not intend to do so is made clear-by a consideration of the whole act. We are, by the express terms of section 38, authorized to set aside the order when, it is without the jurisdiction of the board. The jurisdiction of the board to flx rates is by section 16c limited to cases where the existing rate is unjust, unreasonable, insufficient or unjustly discriminatory or preferential. The only words important for the present case are unjust and unreasonable, since .the commissioners themselves went no further in their adjudication.
The presumption in favor of the acts of a judicial or quasi-judicial tribunal does not apply with the same force to a legislative tribunal, nor to a tribunal which possesses not only to some extent the powers of a court but also to some extent the powers of a public prosecutor. A legislative body prescribing- a rule for future conduct is not limited by the same considerations of justice as a tribunal required to do justice in accordance with existing rules; and one in the position of a public prosecutor can hardly be supposed to preserve a judicial frame of mind; he is rather in the position of one who is judge in his own cause. Under the Public Utilities act, the
We must, therefore, determine for ourselves upon all the evidence whether the former rate for gas in the Passaic dis
The first question is whether it was just and reasonable for the commissioners to segregate the Passaic district from the rest of the territory supplied by the Public Service Gas Company, and fix a rate based upon the property of the company and its earnings in that district alone. The gas company is said to be incorporated under a special charter enacted in 1813 by which the Oxy-Hydrogen Company of the United States was incorporated with extremely broad powers and authorized to sell gas anywhere in the state and to lay pipes in all the highways and public grounds. Under this charter the gas company is said to be now supplying two million of the inhabitants of the state all the way from Camden opposite Philadelphia, to Jersey City opposite New York. It has acquired the rights of numerous corporations and conducts its business in six divisions. The argument is that in fixing rates all the property, earnings and expenses of the company throughout the state must he taken into account. As we have already said, the question whether dense centres of population shall share the advantage of a. lower cost of manufacture and distribution with more sparsely settled sections is a question of public or business policy, and that policy the courts ought not ordinarily to attempt to control by substituting their judgment for that of the commissioners, to whom the legislature has enirusted it. A policy may conceivably he adopted that would neither be just nor reasonable within the meaning of the statute. To take an extreme case, suppose the commissioners should segregate a small district in the
The next question is whether the rate fixed was just and reasonable. On the one hand a just and reasonable rate can never exceed, perhaps can rarely equal, the value of the service to the consumer. On the other hand it can never ho made by compulsion of public authority so low as to amount to confiscation. A just and reasonable rate must ordinarily fall somewhere between these two extremes, so as to allow both sides to profit by the conduct of the business and the improvements of methods and increase of efficiency.
Justice to the consumer ordinarily would require a rate somewhat less than the full value of the service to him; and justice to the company would ordinarily require a rate above the ¡mint at which it would become confiscatory. To induce the investment and continuance of capital there must be some hope of gain commensurate with that realizable in other business; the mere assurance that the investment will not be confiscated would not suffice. Many of the (‘ases in the federal courts and in the courts of our sister states have involved a determination of the confiscatory character of the rate under the fourteenth amendment or similar constitutional provisions. We are not called upon to deal with this constitutional question; we have to do only with the question submitted to our judgment by the legislature, and expressed in the language of the statute authorizing the commissioners to fix just and reasonable individual rates. The word “individual" is important. It connotes more than a mere distinction between tlm rates of one- corporation and the joint rates mentioned immediately thereafter. If the legislation related to railroad rates alone, where joint rates arc common, ihe word “individual’' might have a narrow sense pointing to a distinction between the rate fixed by a single corporation and the rate fixed by two or more acting together. The statute relates to all public utility corporations, and the ex-
Fixing rates by public authority may secure to each individual the advantage of collective bargaining by or in behalf of the whole body of consumers, and result in such a rate as might fairly be supposed to result from free competition if free competition were possible. A just and reasonable rate, therefore, is necessarily rather a question of business judgment than one of legal formula, and must often be tentative, since the exact result cannot be foretold. Willcox v. Consolidated Gas Co., 212 U. S. 19; Northern Pacific Railway v. North Dakota, 216 Id. 579. Like so many other questions in the law that involve the reasonableness, of conduct, it is a question of fact to be settled by the good sense of the tribunal it may come before. That it is not a question of legal formula is shown by the decision that a rate may be reasonable, although it fails to produce an adequate return to the public service company, owing to the fact that business lias not developed sufficiently to lie remunerative, or to the fact 'that the plant is on a larger scale than is justified by the present demand. San Diego Land and Town Co. v. Jasper, 189 Id. 439; Long Branch Commission v. Tintern Manor Water Co., 4 Robb. 71. The real test of the justice and reasonableness of an individual rate seems to lie that it should be as low as possible and yet sufficient to induce the investment of capital in the business, and its continuance therein. This also is a business question, and depends on the opportunities that may be offered for more profitable investments and the risk involved. In determining the justice and reasonableness of rates, perhaps no better test can ordinarily
The controversy turns mainly on the allowance for going value and the refusal to allow anything for the value of the franchise. For going value or cost of developing the business, $1,025,000 was allowed. The cities claim that no allowance at all should be made and their writ was prosecuted to secure the correction of this alleged error. For reasons already stated, we cannot in these proceedings lower the rate fixed by the commissioners, and it would be useless therefore to reject this item of the valuation as counsel for the cities ask. The company insists that there should be allowed about twice as much, including preliminary expenses and cost of development. It is necessary, therefore, to determine first whether any allowance at all for going value is proper. We think both on weight of authority and on reason there should be such an allowance. National Water Works v. Kansas City, 62 Fed. Rep. 853; Kennebec Water District v. Waterville, 97 Me. 185; Gloucester Water Supply Co. v. Gloucester, 179 Mass. 365; Town of Bristol v. Bristol and W. Water Works, 23 R. I. 274; Norwich Gas and Electric Co. v. City of Norwich, 76 Conn. 565; Omaha v. Omaha Water Co., 218 U. S. 180. The cost of a gas plant includes not merely the loss of interest while the plant is in course of construction and is building up a paydng business, but even in the case of an old established plant, for the manufacture and
The most important controversy is with reference to the allowance for the value of the special franchises. The ques
We are, however, referred to Willcox v. Consolidated Gas Co., 212 U. S. 19. The court in that case did approve an allowance for the value of the special franchise, but it was so far from holding that the valuation of the franchise was always to be included in ascertaining the value of the property upon which the company was entitled to a reasonable return, that it disapproved such a valuation made in the court below. What it approve^ was a valuation made more tiran twentjr years before, and it was careful to say that the allowance rested upon the peculiar facts of that case, and that its decision could form no precedent in regard to the valuation of franchises generally, where the facts were not similar. The prosecutors urge that the present case is similar and ask that the value of the franchise as fixed at the time of the merger in 189 9j be included in the present valuation of their property. It is difficult to tell from the opinion in the Consolidated Gas Company ease upon what exact ground the allowance was ajoproved. The court refers to the report of a senate committee of investigation soon after the consolidation of the companies, the recognition for twenty years of the agreement as valid, and the fact that the stock had been dealt in for more than twenty years on the basis of the validity of the valuation and of the stock issued by the 'company. Neither of these considerations, however, justify the conclusion that the rates must continue to be so fixed as to make good for all time that valuation. The report of the senate committee seems to have been a mere report of the facts after consolidation was accomplished, and the fact that the stock was dealt
We should be the last to adopt a rule that would deprive innocent persons, who had invested in good faith, of a value based upon the law existing at the time of their investment. We recognize that our social order rests upon the regime of private property protected as well by solemn constitutional provisions as by the long continued policy of the state, including the policy of the very act under which these proceedings axe had, and we ought not, even if we had the power, to undermine that system to the injury of individuals who have invested their earnings in reliance upon its continuance. We are, however, to administer the law as it exists and not to change it because possibly individuals have been unwise or ill advised. At the time of the consolidation of the companies in the Passaic district in 1899, it was well understood that the rates of public service companies were subject to public regulation. If there were any doubt of this at the common law, the doubt was set at rest by the decision of the United States Supreme Court in Munn v. Illinois (and the other “Granger cases” in 1877), 94 U. S. 113. Every stockholder, past or present, in the Paterson and Passaic Gas and Electric Company must be assumed to have taken his stock with knowledge of the law, and the same knowledge must be imputed to every bondholder. He may have thought that the state would not exercise its power to his disadvantage and have paid more for his stock on that account; but the state had done nothing to mislead him. If he depended on the state’s inaction, he took the chance of its exercising its power, just as he took the chance of the company’s being managed successfully. He acquired his stock not upon the basis of any assurance by the state that the then existing rates would continue, but upon his own estimate of the chances and the future value. That there was no assurance of the continuance of then existing rates is demonstrated by the fact that the company itself has pursued a policy of constant re
We are aware of the grave character of the question with which we have had to deal and of the great injury not only to private interests but to the public at large that may result from error, but the same may be said of any legislative policy in matters of moment. We have dealt with the legal principles underlying the case, but the ultimate question is a question of business, and the results cannot be predicted. In such a case the commissioners ought to move with caution. We think in this case they have done so. The order is therefore affirmed, with costs.