*1 37,984 37,941 Nos. Telephone Appel Corporation, Company, Corporation lee, v. Commission of The State The State Commissioner, Jeff A. Chairman Kansas, De Robertson, Commissioner, Witt M. M. Com Stiles, Charles Warren, Corporation missioner, as Members of the State Commission Kansas, Respective Office, the State Their Successors in Appellants. (219 361) P. 2d Opinion filed June Doug- Wichita, Fleeson, City, T. Gates, Howard of Kansas Louis R. cause, the briefs for the argued Ottawa, and were Gleason, las
.appellants. Lloyd Topeka, S. Wichita, Webb, Lilleston, Robert F. L. W. argued cause, City, Missouri, briefs Miller, the were the of Kansas appellee. for' the opinion The of the court was delivered they appeals, consolidated after reached J.: These two Parker, proceeding commenced before court, have to do with a rate require a review Corporation Kansas and State Commission statutory a county entered in of the district court of Shawnee orders to proceeding court, pursuant in that authorization review instituted (G. by the 66-II80, inclusive), 66-118a to 1935, the statute S. Telephone issue Company. The all decisive Southwestern 1935, 14, requires judicial 66, ch. art. in each construction G. S. commonly referred as the dealing holding companies and to with affiliate statute. it proper understanding to a of the issue involved order insure refer, briefly possible, necessary place as to what took
will be as jurisdiction having in here in contro- the tribunals over matters was first down to versy proceeding from the time instituted appeals in which judgment rendition of the district court from cannot This, might point, it as well be at this were taken. noted any degree brevity considerable when faced be done with ap- consisting Appellants’ pages of: abstract of 1,012 record pellee’s pages, counter abstract of 749 each of which describes at length complicated or sets forth 185 prepared some in toto exhibits ap- appellants’ public pages; certified brief of 124 accountants; pages; appellants’ reply pages, of 146 brief pellee’s brief appellee’s response appellants’ containing brief reply 27 pages. opinion It be stated effort to shorten should likewise an permits throughout we course, as much as record shall, its appellants appellee refer to the Commission and the as when reason, the same later it neces- Southwestern. For becomes sary namely, Elec- corporations, to mention two additional Western Telegraph Company, Telephone tric and the American & Company named as second as we refer to one first Western and will American. filed September 30, 1947, application an
On permission put into effect in Kansas new the Commission exchange schedules of rates for properties and for intra- state toll property jurisdiction under the of the Commission. proceeding provides, was instituted G. under S. 66-117 toll, among things, change any other that no shall be rate, or charges by public utility schedule of without the consent application Commission. The It 34,333-U. docket No. many sets forth reasons for proceeding institution of the rate allegations includes existing that under effect rates South- western was not able to money earn a sufficient amount of Kansas pay furnishing telephone actual costs of service in the State and that the rate proposed schedules therein produce $3,279,- would 000 in gross additional revenue.
October 3, 1947, conformity provisions with the of G. S. making 66-110, duty it the Commission, upon complaint either investigate initiative, public its own utility rates and pro- viding if hearing investigation after they unjust *3 power shall fix have the and order such substituted rates shall just be reasonable, assigned and the Commission application for hearing January 5, on 1948. Thereafter and the Southwestern stipulation Commission entered into a which and per- authorized latter, mitted 9, 1947, October to issue an order wherein it found: by that in order to determine the applica- issues raised carry imposed upon tion and to out the by duties it law it was neces- sary investigate operations for it to all of the of Southwestern, its segments subsidiaries and other members or affiliates, of the Bell system charges affect rates and now or appli- to made state, appraise property cable within the and to wherever located just which affects the determination or establishment of or reason- exchanges charges by able within the covered appli- Southwestern’s cation; expenses necessarily the costs and incurred in the making reasonably investigation of or attributable such and appraisal against making should be assessed that in Southwestern; investigation, appraisal proceedings and all involved, the Com- power and authority mission should exercise the upon by conferred it chapter investigation and directed that 66; G. S. be initi- purpose out for the and in ated and carried the manner set forth findings. in such hearing on for due course. application
The came Evidence by Southwestern between support January thereof introduced 5 oral and deposition testimony. 1948. This consisted both rested its evidence and had adduced its case After Southwestern application. filed a motion to dismiss the the Commission for counsel clearly portrays position quite lengthy but their motion so This important interpreted statute should be respect to how the allega- set deem it forth the substance of the that we worth-while respective paragraphs. they Summarized tions to be found in its read: by most adduced light
1. Construed in its favorable the evidence fails to is entitled the relief wholly Southwestern establish it it seeks. legislature having a
2. The Commission is creature of the fixing function of rates. power duty performing legislative legislative per- required and adhere to directions It is to observe extends no taining authority to this and its further. function beyond establishes 3. The evidence adduced Southwestern con- portion plant a its investment and question that substantial furnished charges made for materials and commodities sists from, and Ameri- and for services rendered Western purchased can, corporations with which it affiliated. a ex- portion operating substantial evidence shows year previous years for and for
penses of the current Southwestern years contemplated coming composed for expenses for made American charges by Western and sold furnished rendered and materials commodities services companies. affiliated by such to Southwestern 239 of laws Kansas for Chapter session 5. Section 66-1403) (G. reads: S. 1935, ascertaining charge a 3. In rate or to be “Sec. reasonableness charge public utility, holding a or affiliated services rendered a charge commodity company, purchased materials or or furnished determining holding company, or affiliated shall be consideration in *4 charge showing by utility rate or reasonable unless there be a made by charge holding or as to actual cost to the or affiliated affected rate company commodity. showing furnishing such service material or Such by utility setting consist of an statement out in de- shall itemized furnished commodity items, tail the various cost for services rendered and material or by holding company.” or furnished affiliated charge this 6. Under statute for services rendered or for ma- by companies may terial or commodities furnished such affiliated be- a by consideration Commission its determination of charge to be rate or made Southwestern unless there reasonable showing by made as to the actual cost to Western and to American of such materials and commodities. No showing made. has been respect only
7. With showing attempted Western the profits Southwestern has been that the made as a result Western of charges for services rendered and materials and commodities furnished and sold to Southwestern have been reasonable. respect With only to American showing attempted is that services were rendered and materials and commodities furnished American to Southwestern which were of value utility. addition Southwestern attempted has to show operating the entire expenses of American including long department. lines South- western attempt made no to show the individual costs of the services rendered or the materials or commodities allegedly furnished thus completely ignoring the mandate of the last sentence of the statute quoted. heretofore
9. It is the belief of counsel for the Commission that is the appropriate time to provisions call attention to of the statute out- lining the duties of the everyone Commission to concerned. It is in the interest of subscribers, general Southwestern and the public, that expensive proceedings in investigations be if possi- avoided ble. Such proceedings will be unnecessary at this time since the re- quirements of the statute have not been met Southwestern. theory
Further indication as to the actual which the motion to dismiss was based is to be found in a statement made one of the argument Commission’s who, counsel in the course while it was being said: presented, comply they with the is to only way can statute show “Now the in which articles. Of what manufactured benefit of these
the cost to Western Electric general profit Electric makes on its that Western is it Commission to this percent? operation percent,, The mandate of that statute or 5 of 6 to manufacturing come here state as that old arm should their ie Syracuse, Kansas, magneto they cost of manu- have out there set that says. they bought facturing That is what statute When so much. sets, wit, the transmitter and the receiver from the of these old in 1927 all they developed they attempted yesterday, show, did or have as was A. T. & T. paid the A. T. & for those sets which show how much Southwestern T. years or five obsolete four later?” became some day foregoing the same on which the January 10,1948, motion was an dismissing order heard, the Commission South- filed order, containing findings This application. western’s fact and definitely establishes law, so conclusions Commission’s con- *5 The reference. detailed merits that it too statute struction by or set reference paragraphs, identified important contents of are as follows: substance, forth of fact:
Findings substantially holding holding company ais 1. American corporations all three and Southwestern and all the stock Western statutes. meaning applicable within the companies are affiliated 3 of the motion paragraph 2. verbatim contents Repeats heretofore mentioned. allegations paragraph 4 of
3. Restates such motion. the actual as to by showing 4. Southwestern There has been materials and services, for such cost to and to American Western by South- furnished an statement commodities, nor is there itemized for items, services setting costs western out in detail the various commodity holding or by the and material and furnished rendered them. companies, affiliated or either of 5. possible The evidence of such nature while it is for the is charges findings of Commission to determine described in fact (3 motion) 2 and 3 substantial, impossible 4 of the it for is it to or approximate charges determine the exact total amount of findings. described either of such to determine the amount impossible 6. Under the evidence is receiving reason, for net revenues which Southwestern currently among depreciation taken, others, they by the are affected against depreciation Southwestern’s invest- must tested be impossible ment. Under affected the statute it is the evidence as to determine Southwestern’s investment.
Conclusions of law:
1. Is paragraph a restatement motion heretofore described. the provisions (as Under S. 1935, of G. 66-1403 heretofore
quoted) no charges services refidered or materials com- by the companies modities furnished above named affiliated may be Southwestern consideration Commission in its or charge determination of a reasonable rate to be made South- payers there western to rate unless be showing South- as to the actual western cost Western and to American respec- tively, for such materials and commodities. offered
3.' evidence part When by reason the Commission which cannot considered offered, there remains from the entire statute eliminated *6 light the most favorable to South- taken in nothing in evidence grant can Southwestern the which the Commission upon western relief prayed for. the application
4. sustained and dismissed. The motion should be original application of its Some after the dismissal two weeks sought rehearing upon grounds, gen- to obtain a Southwestern effect, eral nature of were to that Commission’s dismissing unlawful, unreasonable, application action in its was improper unfair. Inasmuch Southwestern concedes the con- placed upon struction the statute is that it to be the trial findings court, respect presently whose thereto will be set for forth, application rehearing the details its are not as essential purposes for informative as those of the motion order to which However, application we have heretofore referred. does reveal interpretation of the statute, Southwestern’s its views as to the required extent and character of evidence in order to conform with facilitating its terms other proper matters a understanding of what it was before Commission at the moment made its order copy of dismissal. For that reason, thefeof, omitting the exhibits to, appended therein referred to and part opinion. made a this application rehearing Southwestern’s for was denied the Com- February ground mission 2,1948, on on no appeared reason why granted it should be proceeding and the reopened. (pursuant
March 3, 1948 to G. S. 1935, 66-118a to in- 66-II80, clusive) , application Southwestern an filed for a review the Com- dismissing mission’s action application its initial in the district county. court of sufficiency Shawnee of the form of ap- question. plication present is not For purposes it can be said allegations grounds while its are more in detail, the for relief substantially on are therein relied the same as those set out in the for application rehearing, attached hereto as an appendix, and that prays judgment vacating and setting aside the Commission’s order of dismissal as unlawful and unreasonable. proceedings district court, including
After certain in the denial ancillary permitting put an temporary order into application effect the schedules filed rates dismissed on jurisdiction grounds grant was without the court such relief, appeal which is not here involved because taken from such July upon ap- ruling, 26, 1948, Southwestern’s district court on case to plication, stayed proceeding the review and remanded the the evidence the Commission with directions to hear consider proffered that was not admitted the hear- Southwestern but ing of application rehearing. for a remanding just order mentioned
Previous to rendition put into application permission Southwestern had filed an designed temporary force rates under bond and effect increased yield approximately appli- This amounting $3,349,000. revenues 36,060-U. Part of cation Commission as No. was docketed heard. After the rendition in such docket had evidence been remanding Commission heard addi- the district court’s order the Eventually, August 9-30, tional on this docket in this received docket January 14, upon the evidence temporary *7 approving entered order schedules Commission its annual produce additional revenues bond, designed rates under permanent rates. pending final determination $3,313,977 the Except as hereinafter stated now in and effect. Such are force rates in this are not involved rulings in such docket proceedings the or appeal. 36,060-U, hearing in docket
At the conclusion the (docket 34,333-U). case its in the remanded filed offer evidence large portion of the evidence in such case a It offered as evidence 36,060-U. in docket Subse- received it which had been adduced and 36,060-U in docket Was quently, by stipulation, all of case. part in the remanded made a of the record September 23, it, 1948, with evidence in both dockets before affirming the Commission an order entered its dismissal order of January 10, nothing order there in This states the addi- requiring justifying tional evidence setting modifying aside or enlarged it of such order. Thereafter caused the record to certi- pending. fied to district court in the review proceeding there review of the due time Commission’s order on dismissal came court and tribunal, conformity for trial in the district 66-118f, presented by heard cause the issues G. S. and exhibits introduced before the the evidence Commission and record certified. record having reviewed the Later, after consideration respective parties filed and briefs the abstracts to the September 26, proceeding, the district court 1949, ren- review judgment dered holding January- Commission’s order of 10, 1948, affirmed September 23, its order of 1948, dismissing application Southwestern’s was unreasonable and unlawful and set such order aside. At the same time it returned and adopted aas part judgment findings of fact and conclusions of law. Its findings of fact read: op
“Findings Fact Telephone Company, “1. corporation, Southwestern Bell a Missouri herein Applicant, operates integrated telephone system referred to as owns and an Kansas, Missouri, Arkansas, Oklahoma, within the states Texas and a small part Illinois; portion system telephone of its located in Kansas consists of lines, plant, equipment comprising exchanges facilities and numerous lines, furnishing public. toll both intrastate and interstate service to the Applicant Telephone “2. All the stock of is owned American Telegraph Company, corporation, a New York herein referred to as American. substantially operating American also owns all or all the stock in fifteen other telephone companies, large majority minority in three others and a in three others, companies being all operating companies. herein referred to as Bell performs Applicant, “3. Applicant American certain services for for which pays payments charged expenses operating American. These Appli- cant’s accounts. many years “4. substantially American has for owned and now owns Company, Inc., the stock of Western, Western Electric herein referred to as Applicant many years bought from which buys has for and from which still substantially equipment, supplies, all its materials and as well as certain serv- ices, plant both for opera- the construction of its and for the maintenance and Things purchased capitalized (charged tion thereof. for construction have been plant accounts) things purchased investment for use in maintenance operations charged expenses operating Applicant’s have been accounts. Beginning kept “5. in 1913 has accounts accordance with the System Telephone Uniform Companies, prescribed by Accounts for Interstate Commerce Commission from 1913 to 1934 and thereafter *8 Commission, pursuant Federal Communications to a statute of the United prohibits keeping any prescribed States which the of other than accounts those prohibits keeping any and prescribed. them in manner other than that Applicant respondent Commission, September “6. 30, 1947, filed with the on application change its for to consent its filed of schedule intrastate and rates put into effect and telephone new increased schedules of rates for intrastate gave application in 34,333-U. service Kansas. The Commission said Docket No. 9, 1947, Commission, “7. On October motion, the on its own entered an 34,333-U initiating investigation order said Docket No. an to determine Applicant permitted change whether should be effect, the rates then in the just reasonableness and lawfulness of the then current rates or a schedule of rates, directing investigation and reasonable and that such should include the operations Applicant, segments of System its affiliates and other of the Bell upon Applicant’s rates, which ordering have an effect that of the costs investigation charged Applicant. by Applicant 23, 1947, depositions on were taken On October 20 “8. by subject services, materials and commodities furnished matter of costs Western, at all times thereafter all this connection and and in American and Applicant pertinent and its affiliates were made records of books and special participated counsel The Commission’s the Commission. available to request depositions con- taking the matter was and at their of these in the cross-examination, 8, 1947, which time the for further at tinued until December depositions taking further cross-examination was was resumed and such of these 10, through December carried on December documentary January 1948, Applicant by 5-10, evidence oral'and “9. On support application. depositions presented of its its case Applicant’s testimony, January 10, 1948, the conclusion of “10. at On special counsel, application Commission, dismissed the the motion of its complied requirements ground Applicant with had not on the that 1935). (Section Chapter 239, 66-1403, L. 1931 G. S. Kansas Section Applicant show, did not in the manner and to the dismissal order finds that required by by Commission, extent statute as construed the costs to by its affiliates of services rendered and materials commodities furnished Applicant, concludes the statute therefore them forbids the Com- charges services, mission to consider the for such materials and commodities. part Said order of dismissal further concludes that when that evidence which cannot be considered the Commission because of said statute is eliminated, nothing there remains in the which evidence the Commis- grant Applicant prayed sion can the relief for. Application rehearing Applicant “11. was filed in which it provide specific proof any proof offered to certain additional desired services, relating to costs materials and commodities furnished to it its application Applicant That affiliates. was denied. The then instituted this proceeding Thereafter, stayed proceeding for review. this Court and re- manded the case to the Commission with directions to hear and to consider proffered by Applicant application rehearing on its presentation application. at the time of that Additional evidence was Applicant. any introduced No evidence was offered at time September Commission. On the Commission entered its find- order ing require that the justify additional evidence did not a modification of original its order of dismissal and it affirmed that order. The entire record is before this Court. by Applicant “12. The evidence introduced proceedings in these on the subject matter of costs to companies affiliated materials and commodities Applicant furnished them testimony included oral consisting approximately 3,300 pages, together approximately 185 de- consisting documents, tailed exhibits studies and records. twenty-two operating companies, one, “13. The separate territory, furnishing engaged, each the same communica- equipment operating practices, and uniform tions services with standardized many problems can in common that be solved and have better and more eco- nomically by organization companies a centralized on behalf all the than
467' duplicating company attempting and the work to do such work itself each Départment maintains, and Bell in its General of others. American jointly Western, subsidiary Telephone Laboratories, a centralized owned with a telephone phases specialists perform of work on all busi- staff who such of traffic, accounting including engineering, legal, ness, research, scientific matters, operating companies. of Bell For the costs of other the benefit together patent work, of finanical services and licenses and with costs such protection, compensated a a under uniform contract called ‘license American is Applicant, operating companies, including Bell make contract’ under percentage operating monthly payments to American at a uniform their revenues. contracts, “14. The rendered American under the license services companies exceptions, minor are not individual services rendered to individual simultaneously They general for all the areas. are are done nature company operating companies. benefits Bell Each such is entitled to the only charge from work one made for the entire mass of all the done including by American, maintaining services. The a centralized staff cost through Telephone Laboratories, the centralized research done Bell companies, operating cost and the of the cost common to all Bell company only each can be de- rendered to license contract services appropriate by apportionment basis. on termined some American, Applicant’s “15. of all costs to included statement separated applicable contract, called ‘license between those to the license applicable, costs,’ and those not so termed ‘non-license costs.’ American’s Bell Labora- costs’ to show the cost to the were divided itemized ‘license Department were further of American. Such costs tories and General Bell Labora- itemized and divided as between the various divisions Department subdivisions Each these tories the General of American. oper- Bell all the to the services rendered American’s costs attributable among the ating companies was then allocated the license contracts under including Applicant, in the State companies, and to licensee per- appropriate work nature of the Kansas, on the factors basis of Engineering maintaining Plant instance, g., e. the cost in each formed and assist Company, is to whose function advise Division of American apportioned companies’ plant, operating problems on concerned with the company. plant operating each relative amount the basis of the All American, such costs were actual costs to and did not cease to actual they apportioned. when were herein- Such costs shown in the detail were specified years summary before for the 1946 and form for the years prior Payments thereto. nine under license contract year’s oper- capitalized by Applicant only not in the but are reflected current only ating expenses. rates To determine for the future the reasonableness payments past years That, is material. a statement of such for the few Applicant showed. ap- companies operating “16. Western manufactures and sells the Bell things purchases proximately separate 48,000 and in addition varieties companies 30,000 operating approximately varieties others and sells to supplies. *10 covering all materials and commodities from Western “17. bills April approxi- Applicant contained from 1916 to funished it to mately billing approximately 2,700,000 18,000,000 3,000,000 ‘items.’ Of these operations. Applicants were furnished the Commission with used Kansas relating operations. original of all bills from Western its Kansas many single billing repre- item, addition, a such as a central office instances sents thousands of different varieties of manufactured items each of which has separately price. single Moreover, billing frequently rep- a a determined item large physical units, resents a of number identical so that indi- the number of physical purchased by Applicant many vidual units from Western times the billing number of items. expenses “18. The accounts of reflect dollars of investment or physical apparatus. rather than of units material or These dollars include not purchases only expenditures from Applicants, Western but other of such as wages employees, payments of its to outside contractors and taxes. When physical plant purchased installed, units of charged their cost is to a plant account, g., equipment, e. central office and when such a unit is removed original from service its estimated account, cost is credited to that the esti- being mated average unit cost most cases the unit units, cost of all like attempt being identify made to particular purchase the unit retired with a order. all plant Since of millions units which enter into the and are later tagged particular removed from billing are not it orders, not known by billing physical items what purchased units of material from Western are surviving plant in the accounts. Since the cost to Western of such units will vary depending year on the manufacture, impossible it is to determine the surviving they cost units unless can original billing be associated with the from Western. large part Applicant’s “19. A plant presently devoted to its intrastate business in Kansas during was installed years therein prior the fifteen 66-1403, enactment Section S.G. Kansas 1935. Said section makes no dif- type ferentiation in required of cost dependent statement upon whether the purchases wei'e made before or after its physical enactment. The millions of comprising portion units plant prior installed to the enactment of tagged the statute had not been Applicant’s in and plant out of and it was impossible, therefore, at passed the time the Act was impossible and is still surviving physical to associate the billing units with the items on Western’s they purchased. bills under which were might theoretically possible “While it begining have been passage with the of the Act to physical have tabulated each the millions of units thereafter purchased Applicant’s books, associating and out of billing each with its from partial Western and thus to have billing obtained a list items of the plant surviving, this would beyond have been a task burdensome all reason impossible practical as a matter. purchased physical pres- “20. from Since the units Western and millions items, ently surviving Applicant’s plant billing cannot be identified with the they purchased Western, impossible under which it would were be to' surviving furnish a statement of the of each cost Western unit now for which unit made, cost each separate charge individual even if the a billed known. were physical approximate to it compute unit cost can “21. Western begin given year by with an estimate methods which manufactures in units it a (standard cost) apportionments large shop very but number involve a accepted enough be to actual cost to achieve results close which nevertheless companies purposes by manufacturng practical which make as such for all computed year any large variety one cannot These items. costs year closed, year have been which is until the is over and the books for year ordinarily product after of that has been sold. Since Western most of physical units, computa- tens of thousands of different since manufactures requires large apportionments tion of cost number of and calcu- of each compute lations, ordinarily complete not Western does cost of current only physical groups. individual units but of classes or The Commission was shop physical furnished with the standard cost of each individual unit AVestem manufactured from 1916 to 1947 and also the annual variation and *11 apportionment products necessary compute other factors of classes to complete any physical current Western cost to of one of the units manu- theoretically possible compute It would factured. be from this data to complete physical represented of cost to Western each of units 2,700,000 billing 3,000,000 applicable to period items to Kansas for the 1916 1947, inclusive, to do require but to so for of would items 500 man- years accountng of effort. Since accountants must work from the same rec- ords, twenty thirty it is doubtful more than to could be at used one Assuming twenty-five used, time. years could twenty it would take to complete fifty such a If used, statement. years. were it would take ten This impossibility practical purposes. constitutes for all listing The mere of these require pages costs would 240 volumes of 500 each. “22. To determine the cost to Western of each individual article furnished Applicant to separate Western and charge for which paid was made and Applicant’s plant and now which remains in impossible. would be respect “23. to the cost to Western of services, materials and commodities Applicant, Applicant furnished it to showed relevant evidence: “(a) The total of Companies sales Western to all Bell and the cost to year Western such of sales for each 1947, from 1916 to inclusive, itemized into product (apparatus the three classes and equipment, lead-covered cable and supplies). wire and “(b) Applicant The total sales of Western to and the cost to Western of year for such sales each from 1947, 1916 to inclusive, itemized into the three product classes. “(c) Applicant sales of The Western to for its use in Kansas and the cost to year AA'bsternof sales for each 1947, from 1916 to inclusive, itemized into product the three classes. “(d) plant telephone placed year amount in dollars of The each from 1916 inclusive, plant 1947, Applicant’s plant to that remained in Kansas and in its 1947, 31, portion $68,469,324; December a total of accounts on of that total represented by purchases Western, $41,587,558, from and the to cost Western respective purchases costs to Western $39,950,186. and the thereof, These major plant prescribed year account separately for each for each shown were rights way, land, franchises, Accounts, System to wit: in the Uniform installations, drop apparatus, equipment, station buildings, station office central fittings, pole exchanges, special private and wire, booths branch and block conduit, wire, underground fur- wire, cable, exchange aerial toll lines, aerial major plant purchases account fixtures, in each The and vehicles. and niture years product classes for each the three itemized into were further Applicant’s purchases Western reflected 1947, from Of the total inclusive. to prior lack plant, only percent to 1916. Because of the surviving made 3.9 were impossible Applicant prior fur- years adequate it is data purchases. of such the cost to Western nish years, “(e) paid 1943 to of the five to Western each amount for use Western furnished and materials for services charged plant operation were in Kansas and which of its the maintenance Western, expense accounts, broken down Applicant’s cost thereof to and the required by expense accounts, expense are those groups accounts toas Western, purchases in each System Accounts. Such total the Uniform classes, together product expense account, classified into the three is further by product thereof, classes. cost with the Applicant, consisting performed by “(f) it for for services to Western Cost (ii) Service, inspecting, (i) material, disposing junk in- Class B called Western, reissuing servicing called Class C suring, returned materials Distributing (Hi) Service, as Miscellaneous of other services referred to through eight-year period by Applicant Services, for the were shown House furnishing repair 1947; service for and the cost to Western years separately 1943to for the also shown computations apportionments followed and the “24. The methods services, determining and commodities materials the costs Western herein, by Applicant’s Applicant, in ac- were shown furnished to accounting procedures produced accepted ac- the most cost cordance with com- of such materials and of actual cost to Western curate statement *12 possible to make. which it was modities by Applicant in case constituted a state- introduced this “25. The evidence services, Applicant’s com- materials and cost to affiliates ment actual by Applicant them in sufficient itemization and detail modities furnished to profits affiliates, the made said to enable the Commission determine Applicant, them, with the reasonableness the each of such transactions services, charges for such said affiliates to materials made charges profits commodities, to which such affect rea- and the extent the Applicant’s for its intrastate services in Kansas. sonableness of rates by Applicant ignored payments the to its affiliates be deter- “26. Unless operating expenses, mining the record shows conclu- its investment and its sively by testimony Applicant’s revenues from intra- uncontroverted expense operations operations, than state in Kansas were less the of such only capital employed resulting operating on not in no return the but an actual during year entire 1947and the first four months of 1948.” deficit days judgment the Commission Within three from date of conclusions filed a wherein it attacked motion for a new trial findings all its 2, law trial court and 3, Nos. and 5 made Along 7, 10 and 16. findings 1, 2, 3, 4, 6, 9, fact except Nos. findings of fact objections with such specific this it filed motion by the requested findings and in of those made addition lieu judgment. court in the it adhered to its event appeal an 1949, perfected On 23, November the Commission dock- appeal September from the was judgment court’s 37,941. eted No. court as case trial was for a new days Two motion later the Commission’s notice 1950, it filed its January Subsequently, 3, overruled. appeal This is appeal overruling from the such motion. order 37,984. involved in case No.
When what has been length heretofore related at considerable specific purpose for the of thoroughly demonstrating respec- their positions carefully tive analyzed, question as there can be no 239, parties how the claimed the provisions 3, chapter of section (G. Laws for 1931 S. 66-1403), hereinafter referred to as the statute, hearings should be construed at the several before Briefly Commission. summarized it can be said that at time counsel for the Commission contended and the Commission held that the actual affiliates, cost Western and Southwestern’s American, services, materials and commodities furnished inclusive, sold Southwestern affiliates from 1916 to charges including items together them, physical with remaining longer plant, no in its must item itemized, be shown and by item, there compliance otherwise was statute proceeding no evidence it in therefore which would warrant application. the merits of On other determine Southwestern’s position hand Southwestern took the that an itemization of by years and of such materials and commodities costs underlying of costs product classes, with detail to the elements so all that the statute making up itemized, the total costs was required. premise that the fundamental
It must be remembered order of dismissal that when all of based its the Commission could not be con- offered .which entire evi- of the statute was eliminated because sidered nothing remained in the viewed evidence, most dence offered *13 light, upon favorable grant which it could any relief. kept When this is in mind it very becomes from the obvious nature single question parties the agree is involved our task now is not weigh in the evidence reflected extensive record presented has been but to determine whether the evidence adduced in support application of Southwestern’s scope comes within the statute. It even becomes more manifest when—as here —it clearly appears throughout the proceedings entire before the and in the Commission court below the basic differences between parties type arose over the evidence which would meet its requirements. just expressed the view
Notwithstanding the court has painstak- ingly examined purpose the evidence as abstracted for the of reach- ing respect own just its decision with thereto. It had well as be now stated making determined, that after that examination it has except for a minor few matters not deemed sufficiently im- portant require specific mention, the trial findings court only correctly fact not summarized the evidence before the Com- mission at the hearing applica- conclusion of the Southwestern’s gave import tion it but to which it was entitled and that such findings approved. should determining findings of fact warrant approval our we have
not objections been unmindful the Commission’s to such find- ings request findings, or additional heretofore referred to. they The fact have not been specific detailed or attention in opinion they this does not mean have been overlooked. It suffices say giving that after careful consideration arguments made in support their we have decided the evidence does not warrant objections sustaining either the findings request or the for ad- findings ditional and that to deal at length with contentions ad- respect vanced thereto to detail the testimony on which the findings depend would not contribute anything importance to the body opinion. of our law or add to this
Both in their briefs and in oral argument parties not only affirmatively concede but assert sole and all decisive issue in- appeal is whether volved Southwestern’s showing before Commission was of such character as to constitute compliance with requirements of the statute. interesting
Thus, note, although it no sense to be re- controlling of our garded decision, that we are now called time to construe a first statute which the record clearly re- *14 1931; veals been law of state its enactment in has has the since been line interpreted by hearings the in former in rate Commission Southwestern; by only with the contended for and is construction the today forty-eight of its and to be found statute kind character the union. states of the clarity view of the issue and the interest of we deem it again quote though statute even it is
worth-while to the to be found in the reads: opinion. elsewhere It ascertaining charge by 3. In the a “Sec. reasonableness of rate or to made public charge by holding utility, a services rendered a or com- affiliated
pany, charge commodity purchased or for material or furnished or hold- from a ing company, determining or affiliated shall be consideration in a reason- charge by showing by utility or a able rate unless there be made the the affected charge holding company to rate or as to the actual cost the or affiliated fur- commodity. nishing showing and or such service material Such shall consist by utility setting of an the itemized statement furnished the out in detail items, commodity various cost for services rendered and material or furnished (G. 66-1403.) holding company.” 1935, the or affiliated S'. judgment In rendering incorporated trial the court made and four controlling decree all important and of law. Con- conclusions clusion No. 2 strictly limited statute, to of its construction the Nos. 3 and 4 sufficiency deal with the of the con- evidence under that struction, No. 5 merely while indicates the of the judgment. nature Such conclusions lawof read: 66-1403, “2. 1935,applies variety Section G. S. Kansas in a wide of circum-
stances, selling single commodity at one extreme to an affiliate at the selling other extreme to one of tens of things, thousands different and was in- require only tended to such character and amount of itemization and detail as practicable would be particular reasonable in the of circumstances the having case, regard purpose the statute was to intended serve. That purpose is to utility’s enable public Commission determine whether investment, operating expenses rate or charges by base have been inflated profits affiliates include unreasonable affiliates, to such so that Com- may mission disallow the part, any, unreasonable determining if the reason- public utility’s of ableness rates. hearings required Commission, Applicant “3. In the before the made the statutory showing itemization, in sufficient and with sufficient detail under foregoing any interpretation statute, under reasonable companies, Western, actual cost the affiliated American and ma- Applicant complied it, terials and commodities furnished requirements 66-1403, of Section S.G. Kansas 1935. respondent Commission “4. furnished There was sufficient evidence purchased Applicant, from it ol and services the cost to Western materials Applicant rendered it to services the cost to American of such determined the amount Commission could have which evidence the charges Appli- costs and the reasonableness said affiliates to cant; respondent charges refusal of Commission to consider such was unlawful unreasonable. January its order affirmed “5. order the Commission September aside.” 23, 1948, should be set unlawful and was unreasonable and for the a statute construe required here—a court Where—as has and all that legal precedent time the benefit first without parties claims regarding the argument it is extended before know of no we be construed should they how such statute believe respective by detailing their opinion prolonging its sound reason for give proper duty to it to be its *15 Rather we conceive contentions. then, guided and advanced weight every and contention to each and announce statutory construction, reach well established rules of be in- statute must as to how the independent conclusion its own It suffices to in the case at bar.. terpreted. we have done That everything par- say long and careful consideration after arguments say and in oral we have had in their briefs their ties be construed as set forth have concluded the statute must fully of law No. which has been heretofore trial court’s conclusion quoted repeated. therefore need not be we and so construed jWhen difficulty concluding little in further evidence have under the findings of as reflected fact its Nos. conclusions laws 2, 3, 4 and are likewise correct and conclusions, that such as well judgment decreeing as its the Commission’s order of dismissal was unlawful, unreasonable and must be approved. confirmed and misunderstanding against possibility In insure conclusion, to opinion out that this is import, perhaps pointed as to its should strictly involved, namely, issue here the construc- limited sole question tion to be that the statute, the affiliate whether granted requested Southwestern is to be or denied increased rates as yet application is a matter to be determined the Commis- complete hearing sion after a full pro- on the merits of the rate ceeding instituted Southwestern. judgment is affirmed.
APPENDIX Rehearing Application for appli- Company, Telephone Comes now Southwestern in the above rehearing for a moves the Commission herein, cant the Com- or decision order that the the reason entitled matter for put permission application dismissing applicant’s mission ex- toll its intrastate schedules Kansas new into effect in unreasonable, improper and unlawful, change rate classification states that: applicant application support unfair. of this dismissing appli- 1. or decision the Commission Said order consent constitutes a refusal of the Commission’s application cant’s 66-117, putting required by applicant’s as G. S. section into exchange rate of rates for its intrastate toll effect new schedules applicant continue to furnish and is a direction that classifications filed presently under its intra- service in the state of Kansas said classifications. The uncontroverted exchange rate state toll and existing presently shows that the before this Commission exchange toll and rate classifications intrastate applicant’s rates for accordingly said order unreasonably and confiscatory; low and laws the state of Kansas. the statutes is in violation of Finding general summary of all No. the other findings, provides follows: *16 showing by Applicant, has no in the “There been evidence adduced the South- Telephone Company,
western Bell as to the actual cost to the Western Elec- Company Telephone Telegraph Company the tric and to American re- spectively services, commodities, of such materials and nor is there an item- by Applicant setting ized furnished the statement out in detail the various items, commodity by cost for. services rendered and material or furnished the companies, holding or or affiliated either of them.” finding the From said Commission as of concludes a matter law: “(2) provisions Chapter the of Section of 239 of the 1931 Session Under charge for services rendered or for or commodi- Laws of Kansas materials companies by furnished the above named affiliated to the Southwestern ties Company may Telephone be consideration Commission Bell the in its charge of a reasonable rate or to be made determination showing Telephone Company payers to rate unless there be Bell Telephone Company the cost to as to the the Southwestern actual Telephone Company Telegraph the American Western Electric Company, respectively, services, materials and commodities. for such “(3) part by Applicant that of offered which cannot When all the evidence provisions of be the reason the of the statute considered Commission nothing offered, is the entire there remains in the eliminated from upon light Applicant which evidence taken in its favorable the most grant prayed Commission the relief for.” can the interpretation
The aforesaid said Commission, statute applied as in the case, extreme, circumstances of this harsh, and erroneous applicant and inflicts an impossibility proof. of chapter Section 3 239 of the 1931 Session Laws of Kansas does attempt not specify the amount of itemization and detail which the statement thereby required shall contain and the only rea- sonable construction of the statute is that the statement shall con- tain such itemization practicable as detail and reasonable in particular case, regard circumstances having both to the nature of commodity material in par- furnished ticular case purpose and the which statute is intended serve.
4. To determine the actual cost to Western Electric Company, (hereinafter Inc. called separate Western), items it has furnished applicant part and which are a plant applicant in impossible. Kansas be would 1946 alone Western manufac- tured several of apparatus hundred million items and equipment, of (each which there approximately 44,000 were differing varieties from other) and it over 150,000 manufactured different varieties piece parts going into those various items. actual cost of an item manufacture identical will vary substantially with in production, variations volume of material prices, rates, wage efficiency, labor amount of overtime other variables, it necessarily follows cost of actual manu- facturing item, an identical shop, vary even the same will de- pending prevailing the conditions at the time of manufacture. To attempt to ascertain the actual cost to Western items incorporated which will telephone plant particular be job by keeping state pro- costs on each item or batch items as tagging through duced and then those items to their ultimate desti- nation so actual cost so determined could be associated with telephone each item in the plant, would be a task of tremendous magnitude impossible practical cost, Its as a matter. many might case of items, small well exceed the cost manufacture. *17 Furthermore, statement of costs arrived such methods would at be of error opportunity multiplicity unreliable because the would great keeping so with the vast amount of detailed record tremendous required. number of calculations manufac- corporation and believes that informed Applicant is attempts to do cost complex products turing large variety of ac- employs a cost described or manner above accounting a par- sales to the cost of its segregate to counting system designed only The method total sales. from the cost of its ticular customer of its sales to the cost can determine corporation which such a on the basis apportionments byis the use of particular customer Camman affidavit of Eric A. relies on the product Applicant classes. allegations. foregoing of the support 1 in as Exhibit hereto attached purchases 'a manufactures, Western Apart from articles of other manufacturers from thousands variety supplies great appli- companies, including System for resale to suppliers thousand varieties thirty well over supplies comprise cant. Those other). paid by West- (each price differing from the of items place on the time varies, depending supplies ern for those tag each costs. To handling and related do Western’s as purchase, a task of such tre- usage would be through to its ultimate item such matter. impossible practical as a as to be magnitude mendous of each the actual cost possible if it been to ascertain 5. Even had year, the applicant to in each item furnished Western different by the ascertaining the total cost to of all such items task of Western magnitude process of itemization and cumulation would be in- wholly period 1916-1946, For the as to be unreasonable. applicant estimates that the number of on clusive, entries Western’s applicant neighborhood eighteen million. bills Applicant testimony Young showed of Burton R. operating telephone companies cost of sales of Western to the System separated from the Bell its cost of total sales to all cus- period year for each of 1916-1946, tomers inclusive. To prior ascertain such costs be a task of tremendous would magnitude due condition of years. the records for earlier Applicant estimates that less than percent of the book cost plant in Kansas of October 31,1947, represented by charges applicant prior Western to 1916. testimony Young, of said Burton by R. also showed total sales to Bell customers in percentage profit on its Western’s percentage years profit and its 1916-1946, inclusive, each period. testimony total Said for said applicants alone sales applicant percentage profit on sales alone was showed that said study. study costs of on a Said shows the Western’s sales based applicant product three main in each classes each Western’s *18 product of in each said applicant costs of sales years, of the within of sales of the cost by apportionment being obtained classes offer not Applicant did Companies. all Bell product class to profit to Western that the evidence, in since it believed study of cost ascertained, and that Western’s fact to be was the ultimate ascertaining such applicant only step an intermediate sales showing of study cost of the results of said A tabulation profit. product- main applicant in each of the three sales Western’s Eric year appended affidavit of in each is as Exhbit A to the classes Camman hereto attached. A. logical divi- the most constitute classes product
Said three main class, apparatus first The into classes. sales sion Western’s manufactured Western of articles principally consists equipment, parts of many component of the character, highly fabricated cost of fabrication is the interchangeable and where the which are single class, The second lead-covered important most element cost. products where wire, cable and consists of manufactured Western lead) (principally copper prin- of raw materials the cost is cipal supplies, of cost. The third class, element consists articles purchased suppliers Western other manufacturers and where costs are resale, composed principally pur- Western’s price and purchasing, warehousing distributing. chase the cost of apportioned total cost of Western’s Applicant believes that 1916-1946, at period inclusive, arrived applicant over the sales to product classes in each of the on the basis apportionments thirty-one years more accurate than would a statement of cost by cumulating job assuming of individual up items, costs built forth in said Exhibit possible, and, A, were as set is as accurate and practicable by any detail of itemization as it as much to obtain within the bounds of possibility. method reasonable System are companies of the Bell em- operating telephone All the general character, the same rendering service of ployed telephone highly plant, which is standardized general type with the same -uniformity; appli- high degree sales to and in which there is a inclusive, fair 1916 to cross-section period cant over the Telephone Companies period. over that sales to all Western’s sells is and price any item which Western has been the same throughout Companies period. said Telephone to all Bell . with the Uniform in accordance accounts keeps and the Federal Commission by the System prescribed of Accounts sepa- do not show Such accounts Commission. Communications Company Electric from Western rately portion purchases of its However, of Kansas. in the State telephone operations in its used Commission, applicant has made the further information purchases operations used in estimate of of such portion an plant gross to its ac- Kansas on the basis of the relative additions by years has period counts for the from 1916 inclusive. It also estimated the to Western of such in the same purchases cost manner as that used to determine Western of the cost to its sales to *19 A applicant shown on Exhibit of the Camman affidavit hereto at- The apportioned tached. estimated and sales cost of sales in such manner to the State of Kansas are shown on Exhibit attached. Applicant by
7. testimony of'Harry showed C. Gretz that the services rendered the operating companies to telephone by the American Telephone and Telegraph Company largely consist work problems done on common to all of which can companies, be done efficiently more and economically in a more centralized group than itself; if each company attempted perform to the work research, system engineering that fundamental and standardization by and the other centralized services Tele- furnished American phone Telegraph Company are undertaken on behalf and for the benefit of telephone operating companies simultaneously so that the costs are not susceptible specific segregation thereof by companies, apportioned. but be must
Applicant showed the testimony Harry C. Gretz the said costs to the Telephone Telegraph Company American services rendered operating telephone companies to separated year from all other 1946, costs for the apportionment and an expense such costs items of to the applicant’s operations in the State of Kansas based appropriate factors shown expense. Applicant each item of apportioned showed such cost years for period 1937-1946, inclusive. apportioned cost of services furnished Tele- American Company
phone Telegraph applicant years for the 1937- 1946, inclusive, at arrived manner above described ac- is and in detail of practicable curate as much itemization as it is possibility. to obtain within the bounds reasonable purchases particular identify impossible It charged appli- were years which long period over Western applicant therein, but con- remain now plant accounts cant’s purchases siders that such probably represent forty-five about per- fifty-five cent to percent plant of its total investment in Kansas. The extent to payments Telephone American Telegraph Company enter applicant’s expense into operating ac- fully counts shown record this case. payments appli- estimates that charged to Western accounts,
cant’s operating expense maintenance) (principally the four ending 1947, months 31, approxi- October amounted to mately $470,000,including payments for both materials and $1,410,000 anon annual basis.
9. The decision and order of the Commission in this case is departure from the course which the Commission has heretofore taken in determining proof required the character of under section chapter the 1931 Session Laws of In Docket No. Kansas. 13777,this Commission, present applicant city and the of Hutch- stipulated inson pertaining subject a record to this which went no if further, far, pertaining indeed as the record this case the' subject. same reaching The Commission in case an order in that necessarily accepted said evidence proof as sufficient the reason- charges ableness of the charges made' for service rendered and the for materials and commodities furnished the Western Electric Company Telephone and the American Telegraph Company. *20 proof Such as made the evidence adduced in Docket No. consistently accepted by has been in this Commission various rate proceedings involving applicant subsequent this to the date when presented such evidence was in said Docket. Formal orders have increasing applicant proceed- been issued rates of in this numerous ings, including 17441, 18429, 19206, those in Docket Nos. 19207,19232,19344, 19629-U, 19628-U, 20173-U, 20879-U, 19627-U, 21343-U, 21440-U, 21209-U, 21688-U, 22148-U, 22281-U, and requirement any showing additional on the 22402-U, without subject matter at issue herein, except previously the evidence pre- throughout sented in Docket No. 13777. The Commission intervening years thus interpreted requiring has said statute as proof presented more than the character of in Docket No. 13777 'and this case. chapter Kansas, 10. Section 3 239 of the 1931 Session Laws historically Commission, construed as aforesaid meets constitutionality. interpretation tests of The said statute present order, however, this Commission would render said void Fourteenth statute conflict Amendment to the Constitution the United in denying applicant States process due of law because of the impossibility of compliance alleged. as herein applicant
11. The prove offers to alleged appli- facts in this cation and those contained the exhibits hereto, attached if rehearing granted and this case reopened, applicant will so prove said facts. 37,955
No. rel., Mellinger, County ex Samuel of Kansas, Attorney of State Kansas, Lyon County, Appellee, v. Adel F. Throckmorton, State Superintendent of Instruction; Public Spellman, County Edith Superintendent of Lyon Public County; Instruction of and Glad County Superintendent of Public Instruction of iola Bowman, Lyon Coffey County; and Joint School District 1 No. Coffey Counties, Appellants. (219 413) P. 2d Opinion filed June 10, 1950. Hotchkiss, Lyndon, argued cause, ap- Alex and was on the briefs for pellants Spellman, County Superintendent Lyon Edith of Public Instruction of County, Lyon Coffey. and Joint District No. Counties of Forbes, Burlington, argued cause, Frank T. the briefs appellant Bowman, County Superintendent Gladiola of Public Instruction *21 Coffey County. argued Malone, Topeka, Wheeler, Marion, Clarence and John E. cause, Mellinger, county attorney Lyon county, and Samuel them appellee. the briefs