*1 S80 CO. TELEPHONE BELL
SOUTHWESTERN TEX., ANTONIO, OF SAN v. CITY
et al.
No. 7528. Appeals, Fifth Circuit. Court of
Circuit 25, 1935. Feb.
Rehearing Denied Orleans, Henriques, of New C. James Louis, Clausen, Mo.,
La., of St. Wm. E. W. Phillips, both of Dal- and Nelson H. Duls las, Tex.-, Henry D. and L. M. Bick- and E. Antonio, Tex., ettj appel- of San both lant. Teagarden, Wright Bruce W. Carl John- Cobbs, son, Jr., T. D. all of San An-
tonio, Tex., contra.
n
SIBLEY,
BRYAN,
and WALK-
Before
ER,
Judges.
Circuit
SIBLEY,
Judge.
Circuit
Com-
The Southwestern
city of
against the'
pany filed a bill
to restrain the en-
and its officials
of rates for
a scale
forcement
which had been estab-
within
service
lished
June
city,
by authority of the
assert-
predecessor
n
the scale had become
confiscatory;
*2
higher
complaint,
tions of its bill
it
a
of
and that
enjoin interference with
and to
proof
has not been
proposed
shown
company had
scale which the
which,
hearing,
complained
that the rates
of
the ordi-
and
city,
a
and
after
upon
they
confisca- nances
are
are in-
denied
which
based
rejected. The answer
been
tion,
confiscatory.”
valid or
in
rates were
The
four-
the old
fourth
that
and asserted
points
subparagraphs
teen
out several issues
that the
fair and reasonable and
burden,
plaintiff
American on which the
had the
which
connection with
intimate
opinion
sufficiently
and with
court’s
it had not
Telephone Telegraph Company
carried,
causing
but
Company
findings
there are no
as to
was
what
issue,
any
the truth is about
save that there
losses which the San Antonio
qualified
bear;
is a
and
ought not to
tentative statement of a
upper
that
Southwestern
lump
as
including
in
sum the
limit
of
properties,
Bell
of value
and all its
states,
on
prosperous
which a return
and other
was
earned
cities
was
year
dividends;
question,
for each
in
paying
and a finding
and
fair
and that its busi-
was a
nonconfiscatory rate of
ness
in San Antonio
and
return. The fifth
paragraph
there
if it
segregated,
not to be
but
dissolves
temporary injunction
repayment
April
and
aft-
orders
nowas
confiscation. On
of excess charges
bond,
under the
and dis-
hearing, the court held that confiscation
er a
bill,
shown,
reserving
misses the
enjoined temporarily
ju-
administrative
scale,
risdiction.
requiring a
the old
enforcement of
Bell
given
bond to be
the Southwestern
The effect of
wholly
the decree is
repay
from
conditioned to
all sums collected
wipe
specific report
out the detailed and
patrons
if it
in excess of the old scale
master,
the
to a
and to substitute what amounts
temporary injunc-
should be held that the
general
finding
plaintiff
that the
improperly granted.
this
tion was
Under
it,
proven its case. To
not
review
bond,
injunction
the new scale has
study in
have to
detail the whole of a record
referred
charged to this date. The case was
make, just
it
though
took months
master,
on
special
to a
and March
it had never
a master
report
comprehensive
he filed a
and detailed
specific
judge.
nothing
We have
found but
company in
upholding the
its contentions
rate of
return.
cannot be that more
confiscatory
old
that the
rates were
3,000 pages
of evidence which enabled
necessary to avoid confiscation.
new rates
finding
every
master to make a
on
exceptions were made
Numerous
city.
nothing
proven.
whatever was'
The
in the case
The decision
conformity
on its face not
decree is
Illinois
51
(28
Equity
Rules. Rule
§
USCA
255, having appeared,
prescribes the
form
de
723)
to the master
the cause was re-referred
cree,
putting in
prohibits
anything
it
but
re-
further
take further evidence and make
findings
order.
decree
The
effective
May
report
port. The additional
was filed
required by
law
of fact
conclusions of
25, 1932,again upholding
the contentions
(28
723) are not
70j4
§
the new rule
USCA
company.
exceptions covering
New
decree,
go
are to
entered
into
but
“be
pages
city. The
printed
were filed
numbering
very
of rule
of record.” The
condensed record of the evidence covers
places it
of rule
re
ahead
71 which
3,300
opinion
70^4
pages. The court in
about
decree,
to the
lates
shows that
contents
careful consideration
which showed
something preced
it
deals
questions of
important
discussed
case
findings
put
of fact
ent.
Whether
fact,
in no
it was
sense
law and
but
is
elsewhere
a mere
the decree or
matter
de-
C.)
Supp.
611. A
(D.
F.
of facts.
form,
they
“special”
but that
shall
signed
from which
cree was
“separately” from
conclusions
made
decree,
re-
appeal is taken.
after
required by
7Oyi, and
re
is
rule
proceedings
referring law
citing some
are substantial. Neither has
quirements
proceeds
five
opinion,
to formulate in
to the
numbered
may
here. Cases
occur which
findings
met
paragraphs the
of the been
insufficient
is
as a matter
The first
that the suit was
evidence
court.
issue,
briefly
finding brought. The
prematurely
second
authorize a
law
may
error,
gen
master has committed
the new
finds that the
rule
finding,
negative
but there must be a
report
his
should be set
and that
held for
ity
aside
eral
special
questions
equal
dealing wdth all
and a
naught.
third
brev-
stating of the facts which are
plain- separate
that the
finds that
states
found,
prove
not found. The
allega-
failed
issues
material
tiff “has
judgment.
However,
opinion
degree
of detail
a matter
the court’s
here,
more and
argument
found with
decree and from
Uncontested facts
generality.
apparent
be is
questions
ones should
The contested
there are some
importance
put
con
decide each
which
such detail as
we can now consider
them,
thereby
It
purpose
test
aid the
concerning
further trial of the cause.
*3
appears
by enabling it
tracing
that in
historical cost
being to aid review
the
the.rule
to
points
be restricted
exact
on which
Antonio
the books
to the
available begin in
ascertaining
error is claimed. In
whether
1915 with entries which
are not
imposed
may
scale
known to be
there is confiscation
an
actual costs but
necessary have arisen
always
appraisals
rates we believe it to be
or other form'
of estimate.
al entries of
to fix the
These
property
value of the
used and
are followed
the usu
(cid:127)
public;
useful in the
amount of
the
additions and betterments
service
the
and
use;
time,
retirements from
count
time to
gross income received for its
and the ac
has stood as
operation
the items of
maintenance,
the
investment
account. We do not
and other deductions to be al
think these old entries
ought
lowed;
to
regarded
and the rate of return that will
as mere self-serving
statements which
compensation.
value,
afford a fair
have no
These
evidential
or that
presence
their
may
items
involve
either
subcontests
invalidates the whole
or
evidence as to
They manifestly
utility
law fact.
in this
historical cost.
do
Public
companies
required
are
report upon
keep
them has-
to
case. The master’s
such ac
counts, which are the
wholly
periodical
been
A rate of return of
basis of
discarded.
reports.
sworn
They
found,
open
are
inspection
but all else has
6
by rate-fixing
they
bodies
general finding
always
figure
to a
in effect been reduced
in rate investigations.
there
The rates
the
is not convinced that
here in
that
is confiscation.
question were
Angeles
1918,
established in
The case of Los
three
years
questioned
after
Commission,
the
Corporation
Railroad
Gas
v.
entries were
made. The
287,
637,
1180,
rate ordinance
53
itself
U. S.
S. Ct.
recites that
applicant
where,
here,
had
not
showing,
holds that
as
the court is
that the
city
employed
officialshad
process
experts
reviewing
legislative
of rate
analyze
the showing and
making,
exercising
judicial
conduct
independent
but is
func
in
vestigation
assets,
into
ascertaining
legislative
liabilities,
tion of
whether
rev
enues,
expenses,
Constitution,
rate conflictswith the
it is con
capital entitled
to a return in
not so
way
Antonio,
cerned
much with the
the rate
of San
thereupon granted
operation
at as with its actual
applied
increase
was arrived
and result. But
the court can
for. Almost certainly
questioned
this does not mean that
en
tries then came
escape separate inquiry
into
under review and stood un
corrected.
used,
Since
necessary
property
elements of
in
the additions and
come,
return,
expense,
approach
betterments recorded
and fair
or fail to
in amount
present
the whole
tentatively
special findings required by
make
70j4.
approved
rule
value of
court,
the master’s
dis
found
When
results are
so that the
discarded,
represented
values
through depreciation
ought
to be
the old entries must
another reference or
replacements
else a substitution of
have
largely disappeared.
finding's
Compare
detailed
is
court.
If evidence
Angeles
Los
Commission,
lacking
Corporation
Gas
meet some
view
the law
Railroad
court,
at
opportunity
pro
page
entertained
53 S. Ct.
L.
a
1180. There
given.
litigation
to be
is in
duce
after fair
like this
presumption
had,
opportunity
proof
good
sufficient
is not
faith and correct
precise
proven ought
point
attending
issues
to be
ness
the basic
required
records
out,
why
kept by
public
ed
with the reasons
corporation.
evidence be
service
produced is
The things
insufficient.
that are
Ohio Gas Co. v. Public Utilities Com
West
found,
they mission,
to be
Ed.-,
established
55 Ct.
decided
definitely appear on
7, 1935;
a review without January
Consolidated Gas Co. v.
study
record. The
242;
the whole
case must
(D. C.)
page
Newton
F.
at
trial
spe
returned to the
court for more
v. Consolidated Gas
Newton
exceptions
rulings on the
cific
mas
L.
66 Ed. 538.
report,
report
if
entries,
ter’s
shall
questioned
irregular,
continue
while
rejected,
entirely
another
refer-'
part'of
accounts and
have
special
ence
many years,
findings
proof
substituted
stood for
by so
until now
the court.
origin
their exact
has become unavail-
proceeds
of
sidiaries,
foreign
shown
sub-
thus
sale
two
cost
historical
able. While
com-
without
the Bell
connection with
less
by the books
business;
clearly
ownership
and the
of stock in oth-
entry could
every
if
plete than
er
brings
large
it evi-
subsidiaries
dividends.
sustained,
think
explained and
conclusive,
weighed. While
the fact that Western
worthy
received
dence
slightly
sells
higher prices
Electric
dependents
to in-
far-reach
question to which
Another
elsewhere,
buy
who could
arises
attached
consequences have
competing
manufacturers do not under-
the historical
circumstance
out of the
sell,
powerful
prices
evidence
exchange includes
cost of the San
Companies
made to the Bell
are not exces-
bought from
much
inquiry
sive. We do not intend to foreclose
the estimates
Company,
matter,
into the
for our
examination
partly
are based
reproduction cost
*4
casual,
evidence has been
pre-
but we are
The West
company.
by that
prices quoted
pared
to
that a failure to make mathe-
Bell
Electric and Southwestern
ern
matical demonstration of the exact cost and
by
controlled
practically owned
each
profit
things
in the
bought from Western
Telegraph Com
Telephone &
the American
Electric
not to exclude their
from
cost
officials.
by different
though manned
pany,
account,
the investment
nor Western Elec-
monopoly
not a
Electric has
The Western
on
tric
which are the
prices,
market,
lowest
in
available
sells to
equipment
as it
telephone
such
the
from being considered in esti-
Telephone Telegraph Com
the American
pany
mating reproduction costs.
subsidiaries,
quotes them
but it
its
The Southwestern Bell
only
in
owns
it makes
prices than
lower
somewdiat
operates
the San
exchange
Antonio
prices made
the
and lower
dependents
by
whose rates are fixed
the officialsof
equip
that
on similar
manufacturers
by other
city, but also toll
leading
lines
to other cities
Illi
in
held
This fact was
ment.
135,
within
without the state of
for
Texas
Co., 282 U.
Telephone
S.
nois Bell
by
which rates are fixed
other
to be con
authorities.
L. Ed.
51 S. Ct.
Generally speaking,
equipment
the
prices
Electric
that
clusive
city is used both for
long
local and
unjust
for
distance
by-pass
not a
fair and were
were
telephoning, and
company’s
property
pub
from
taken
to the American
profits
rates,
switchboard
and from the
outward used whol
means
lic
separate
toll
ly
reg
in the
service. The
rate
ques
that
inquiry into
there should
that
requires
separation
proper
a
by ex ulation
here
inquiry
made
was
tion. Such
business,
ty
many
ap
used
with some fair
for
managing official
of the
amination
of its portionment
compen
Electric and
of or some
method
years of the Western
average
businesses,
testimony
for that used in both
showed
sation
His
books.
disposition
years (at
corresponding
low ebb
with a
fifteen
a
of rev
profit over
expenses,
per
over cost
enues
neither busi
present) of around
unjustly
Bell ness will bear
equipment sold to the
the burdens of the
of the
price
cent, annually
fixing
respective
their
on other
Ex
per
rates.
Companies, and
changes
separate
and toll lines
the Bell
were at first
plant allocable
company’s
his
owned,
paid
line
tending ly
and the toll
owner
studies
produced
He also
business.
exchange
percentage
a
less than
owner
the tolls
profits were
to show
messages
coming
originating
from
within
large
by a number
earned
were
exchange. When the toll line owner
Electric Com
the
acquired
The Western
manufacturers.
exchange,
beside
this division of tolls
of business
great deal
pany does
continued,
percentage paid
often
es was
Companies, and
Bell
that
timates and
being charged
resorted from the tolls
as an
allocations
business,
accounting of the toll
Bell
in the
and as
separate the
business.
in the effort
accounting
exchange,
in the
of the
main reason
income
in the
to us to be
They seem
equip
of its
as mere
rental for the use
able,
sort of
not to
pro ment,
exchange bearing the
ex
of the cost of
whole
handling
guesses.
prop
maintaining
subject
just
operating
patents
pense
seems
ducing new
provided
prosperity
plan
a return
erty.
This
ex
great
criticism.
proportioned
some de
Company
change
as a whole is
business
the Western
accuracy to the use made of its
profits
of excessive
gree
demonstration
not a
business,
capable
the toll
Bell
or from the
business
figure fair to both busi
being fixed at a
exchange.
large
A
cash divi
simplest
apparently is the
meth-
mainly
.
distribution
It
explained as
nesses.
dend is
situation,
was
different
should
uses of the
dealing
od of
approved City
recognized
attribu-
properly
Houston v. Southwest-
the return
Co.,
table to
ern
each service
be ascertained.
noted,
may be
learn in
Illinois Tele-
Ed. 961.
We
Lindheimer v.
Ct.
however,
frequent
phone
use
it a
yield
it less
nearby
might
an allocation
exchange for
calls
distant
infrequent
for
reached
revenue than an
use
basis of use was afterwards
per call
no ex-
costly
fixed rate
and more
calls. A
trial court so
taken,
might
ception
have worked
exact formula
minute
use
but the
case,
accurately.
present
appear,
Supreme
more
In the
does not
Court
and the
If,
making passed
that in
no judgment
Bell contends
on it.
as we under-
Southwestern
stand,
toll
no
legislation
both its local and its
beyond
rates
direct
specific
its switchboard has alone been con-
and no
action
fhe rate-mak-
rates,
concerned,
sidered as the basis for
toll
while
bodies
we think it was
managerial right
company
the switchboard and all else within
initiate
business,
situation,
exchange
dealing
has been referred to the
mode of
with the
only
compensate
subject
so that the toll rates
rate-making
to control
bodies
service,
subject
extra switchboard
the intra switch- and
.to the criticism of the court.
being
upheld
service on all calls
considered The master
of a
idea
board
local and
just
paid
rates,,
proper
treatment.
Judge
The’ District
dis-
*5
though
calling “long
agrees.
instead of
We
it
believe
devolves on the trial
dis-
tance”
telegraph
a
telegram.
officehad
been called
court to ascertain and
practica-
out a
simple
formula,
send a
one,
is said that this
ble
if there be
that is better
view of
service is
almost
now
suggested by
company,
than that
this,
universally adopted.
The
denies
permit
adjustment
an
it.
to
This was
the case to
plan ignores
and contends that'the
the fact
half-heartedly attempted
on the
in long
telephoning
master,
that
scriber or
distance
the sub-
by
second reference
pay
actually
station
con-
user is
rejected
court has
these results also. If an
through
exchange equipment
nected
with apportionment
practicable,
method
the toll line and
toll
uses the whole
it
ought
proof adapted
be settled and the
paid
which
for the communication as a
practicable,
to it. If none is
none
consequence
unit. This
demanded,
view involves as a
be
and some
adjustment
mode of
apportionment
an
exchange
of the entire
adopted
per-
similar to the toll
property,
expense
and of
operating
plan
centage
long
above mentioned. This
it,
maintaining
between the local and
expensive litigation ought not to
the toll
of it
according
business
to the use made
away because the master and the
thrown
each,
by
the amount of use to be as-
by
court have differed as to the rule which
by
certained-by counting calls or
a consid-
ought to
the case
be tried. The
eration of
time consumed in them.
apportionment
for an
a formula
or the find-
the toll rate for the
be fixed
communication
ing
practicable
none is
seems
rather
prop-
exchange
so as to cover the use of the
question of fact to be settled in the first
erty
business,
apportioned
to the toll
by the trial court than one of law
instance
owner,
compensated
will be
for the
use
reviewing
court can
now
which
exchange
all his
when
rates are
Duluth,
attempt to solve.
Groesbeck v.
apportion-
fixed on basis
likewise
of the
Co.,
607, 608,
A. R.
250
40
U. S.
S. S.
S. Ct.
rate-making body appor-
one
ment. But if
tions the
38,
ground so excessive is if it disallowed claimed as that no con- be shown. Lindheimer Illi- fiscation can supra. nois Bell no Since was made whatever the District