197 P. 902 | Utah | 1921
Lead Opinion
The plaintiff above named has applied to this court for a writ pursuant to the provisions of what is known as the Public Utilities Act, now found in Comp. Laws Utah 1917, and constituting sections 4775-4853, inclusive, to review certain findings, orders and proceedings of the Public Utilities Commission of this state. In addition to this application 17 other applications were filed, all of which, including this one, were heard and submitted to this court at the same time. "While all of the applications, to a large extent, involve the same
The plaintiff herein, hereinafter for convenience called smelting company, for a long time has owned and operated, and now owns and operates, a smelting plant in Salt Lake county. The Utah Power & Light Company, hereinafter designated power company, for some years has been, and now is, engaged in the business of generating and distributing to the public generally and to private corporations electric energy used for power and lighting purposes. The Public Utilities Commission, hereinafter called commission, is made a party to this proceeding merely because its findings, orders, and proceedings are assailed and are asked to be reviewed as will hereinafter appear.
The facts involved in this application, briefly stated, are as follows:
On June 2, 1915, the smelting company and the power company entered into a written contract wherein the latter contracted to supply the former, at a fixed rate or price, with all of the electrical energy by it required to operate its smelting plant for a stipulated term of years, which term has not' yet expired. The electrical energy, for which the smelting company paid the rate agreed upon, was regularly supplied pursuant to the provisions of the contract entered into between the parties until the commission, made the order which is complained of in this proceeding and to which we shall refer later. On March 8, 1917, and after the contract before referred to was entered into between the smelting company and the power company, the Legislature of this state passed the Public Utilities Act, hereinafter referred to, merely as act or the act, creating the commission and conferring upon
“That the contracts under which the following consumers have hitherto received service he, and the same are hereby, modified to the extent that the rates, rules, and regulations prescribed in the*173 standard sciiedules of the power company now on file with the commission he, and they are hereby, applied to the service rendered to or for the said consumers, in lieu of the rates, rules, and regulations provided in the said contracts.”
Tlie rates referred to in tbe foregoing order, and which are ordered tentatively to supersede tbe contract rates, are considerably higher than were the contract rates.
One of the principal reasons urged why the foregoing order of the commission should not prevail is that the commission has exceeded its power or jurisdiction in making said order for the reason that the contract of the smelting company, as well as the contracts of the other applicants to which ieference has been made herein, are excepted from the act. The provision upon which the smelting company specially relies is found in Comp. Laws Utah 1917, § 4787. It is there provided as follows:
“Notbing in tbis title [act] contained shall be construed to prohibit” common carriers from granting certain free services to tbeir employés, etc.
The clause specially relied on then follows, and is in the words following:
“Nor to prevent tbe carrying out of contracts for free or reduced rate passenger transportation or other public utility service heretofore made founded upon adequate consideration and lawful when made.” (Italics ours.)
In view of the foregoing provisions counsel for the smelting company, as we understand them, contend: (1) That inasmuch as the contract between the smelting company and the power company was entered into before the act was passed, and in view that the contract is “founded upon an adequate consideration and [was] lawful when made,” therefore said contract is excepted from the act, and the commission has no power over it; and (2) that in any event the commission would have no authority to interfere with the rights stipulated in the contract, since doing so would result in impairing the obligation of contracts, which is prohibited by our Constitution.
The commission, upon the evidence, found that the contract was not based upon an adequate consideration as contemplated by the act. Upon that subject the decision of the commission is as follows:
*174 “The term ‘adequate’ as used in the exception clause would seem to imply a separate and additional consideration than the stipulated price to he paid for the service or commodity. It appears to the commission that, in the absence of a showing that as part of the contract price paid for the service there was actually passed from the consumer something of value to the power company in the giving of service to the public, there was no such special consideration as would make the reduced contract rate non-discriminatory. Something of value must he shown to have moved from the beneficiary of the reduced rate or free service to the utility rendering such service. In that event the company would have received something for which it should properly be charged. And, if the showing was that such thing of value actually did pass, the commission would then have to determine the amount of such value and apply it along with the rate fixed in the contract, and thereby ascertain whether or not the thing of value passed from the consumer to the power company justified in the whole or in part the reduced rate named in the contract.”
The commission also held:
“That it has jurisdiction over rates, charges, facilities, and conditions of service in existing contracts under consideration in these proceedings and has authority to modify or change the same.
“After a full consideration of all material facts that may or do have any bearing upon these contracts, the commission finds that the contracts under which service is being given to the following consumers do not carry such special consideration as will entitle them to the service at other than standard schedule rates open to the public generally, as evidenced by the schedules of the power company on file with the commission: [Here follows a long list of companies, including the smelting company.]
“The standard schedules now on file with the commission applicable to each of the power users hereinbefore in this paragraph mentioned should be applied to the service rendered to said consumers in lieu of the rates and charges in effect under special contracts, service under said standard schedules to commence upon the effective date of this order, and to continue until changed by further order of the commission.”
One of the questions that must be determined by this court, therefore, is what is meant by, or what is included in, the term “adequate consideration” as that term is used in the act.
Before entering upon a discussion of that question, it will be convenient for us to here refer to some of the provisions of the act.
“Except as in this section otherwise provided, no public utility shall charge, demand, collect, or receive a greater or less or different compensation for any product or commodity furnished or to he furnished, or for any service rendered or to be rendered, than the rates, tolls, rentals, and charges applicable to such products or commodity or service as specified in its schedules on file and in effect at the time, nor shall any such public utility refund or remit, directly or indirectly, in any manner or by any device, any portion of the rates, tolls, rentals, and charges so specified, nor extend to any corporation or person any form of contract or agreement, or any rule or regulation, or any facility or privilege except such as are regularly and uniformly extended to all corporations and persons; provided, that the commission may by rule or order establish such exceptions from the operation of this prohibition as it may consider just and reasonable as to each public utility.”
Section 4789 provides:
"No public utility shall, as to rates, charges, service, facilities, or in any other respect, make or grant any preference or advantage to any corporation or person, or subject any corporation or person to any prejudice or disadvantage. No public utility shall establish or maintain any unreasonable difference as to rates, charges, service, facilities, or in any other respect, either as between localities or as between classes of service. The commission shall have the power to determine any question of fact arising under this section.”
Section 4798 is as follows:
“The commission is hereby vested with power and jurisdiction to supervise and regulate every public utility in this state, as defined in this title, and to supervise all of the business of every such public utility in this state, and to do all things, whether herein specifically designated, or in addition thereto, which are necessary or convenient in the exercise of such power and jurisdiction.”
Tbe various provisions of tbe act bave been considered by this court in tbe cases of Salt Lake City v. Utah L. & Tr. Go., 52 Utab, 210, 173 Pae. 556, 3 A. L. R. 715, P. U. R. 1918F, 377; Union Portland Cement Go. v. Public Utilities Comm., 56 Utab 175, 189 Pac. 593, and Murray City v. Utah L. & Tr. Co., 56 Utab 437, 191 Pac. 421, to wbicb cases we refer for a more detailed statement of tbe provisions of the act.
Proceeding now to a consideration of wbat contraéis are excepted from tbe act, we are forced to tbe conclusion that
The act is a very comprehensive one, and, in adopting it, it was the evident purpose and intention of the Legislature to prevent, so far as possible, all preferences and discrim-inations by public utilities in their, rates and charges for public service. In connection with that purpose it is also manifest that it was intended to prevent, so far as that could be done, injustice where contracts had been entered into before the pássage of the act in which the rates and charges agreed upon were based upon such a consideration as would work an injustice if the rates were increased without in some way making proper allowances for the consideration upon which the rates agreed upon in the contract were based.
We find no difficulty in arriving at the foregoing conclusion; nor, as we understand counsel’s arguments, is there much diversity of opinion with regard to the correctness of the foregoing propositions. There is great diversity of opinion, however, with respect to what constitutes an adequate consideration within the purview of the act. It is strenuously insisted by counsel for the smelting company that by the phrase "adequate consideration” is. meant such consideration as by text-writers and courts of equity, in equity proceedings, has always ben considered adequate when the question of adequacy of consideration was invoked in such proceedings. In other words, it is contended that the term "adequate consideration,” as. used in the act, must be construed to mean what that term has always been held to mean in the enforcement of contracts. While there is much force to the contention, yet, in view of all the facts, and circumstances, it is far from being conclusive. As before pointed out, the act is intended to accomplish certain specific purposes, therefore all of its provisions, so far as consistent with the rules, of construction, must be construed and applied in harmony with and in furtherance of those purposes. It is a well-recognized rule of interpretation that where there
“Tile sense in which, general words, or any words, are intended to be used, 'furnishes the rule of interpretation, and this is to be collected from the context; and a narrower or more extended meaning will be given, according to the intention thus indicated.”
For a proper application of the foregoing rule see Blaster & Mfg. Co. v. Juab County, 33 Utah, 114, 93 Pac. 53, 14 L. R. A. (N. S.) 1043. Moreover, where, as here, the question affects public interest and where the subject-matter of the contract in question comes squarely within the sphere of governmental functions, the foregoing rules of interpretation should, if necessary, be given full force and effect. Keeping in mind, therefore, that public interests as contra-distinguished from merely private interests are sought to be protected, and that the dominating purpose of the act is to prevent preferences and discriminations respecting the rates charged or received by public utilities for services rendered ■or received, we think that the term “adequate consideration,” as used in the act, must receive a broader meaning than would ordinarly be given to it in cases where merely rights as between parties to a private contract were in question. Under the circumstances just stated, the rule that " would ordinarily be held to applyPas between parties to a private contract, when the adequacy of consideration to support or to enforce such contract in equity is involved, can therefoi*e not be given unlimited application. In view of the foregoing, in our judgment, by the term “adequate consideration, ’ ’ as used in the act, is meant a consideration such as would prevent the utility or person receiving the so-called
In this connection it must be kept in mind that by tbe term “adequate consideration” tbe Legislature could not have intended to use that term as a quid pro quo in tbe sense that as between two parties to a contract tbe consideration passing to tbe utility for tbe service rendered should be equivalent in value to tbe cost of tbe service. With that feature the Legislature bad no concern, nor any right to interfere, unless such interference were necessary in tbe public interest. A utility, in tbe absence of a law regulating tbe service in tbe public interest, may sell or dispose of its property, product, or service at such a price and upon such terms as it may choose, the same as any one else, and tbe Legislature, except in its governmental capacity, cannot, unless it be for tbe public good, interfere with that right. Tbe utility may also sell its service at any price even though it should sustain a loss. When, however, tbe statute, in the- interest of tbe public, steps in, then it must sell its service at tbe same rate to all, and if it has contracted to sell such service for a less price to one than it does to another, such a contract may then be held to be preferential and discriminatory.
By “adequate consideration,” therefore, as that term is used in tbe act, is meant such a consideration as when added to or considered in connection with tbe reduced rate agreed upon will make such rate nonpreferential and nondiscriminatory, by reason of tbe fact that tbe additional consideration paid and received will prevent tbe reduced rate from being preferential, in that tbe contract, within tbe purview of tbe act is then “founded upon an adequate consideration.” Where, under such circumstances, therefore, a reduced rate is contracted for and allowed, neither tbe public nor any other utility can complain, for tbe simple reason that there is in fact no preference or discrimination. When we eon-
Without now pausing to go into the evidence it must suffice to say that the consideration for the rate agreed upon in the contract in question in this proceeding does not measure up to the standard or rule we have just stated, and, there
In connection with the foregoing it is also made to appear that the contract rates are manifestly lower than the regular rates. It is not disputed that the electric energy sold by the power company under the special contracts involved in the hearing to which we have referred amounted to 78 per cent, of its total sales, while for this 78 per cent, the special contractees paid only 39 per cent, of its total earnings. In view of that it necessarily follows that the public and other utilities must pay increased rates to maintain the service.
It is, however, also contended with much vigor that the commission exceeded its authority in interfering with the rate stipulated in the contract in question, for the reason that in doing so it violated both the Constitution of this state and the federal Constitution, both of which prohibit the passage of any law “impairing the obligations, of contracts.” Article 1, § 18, Utah, Constitution; article 1, § 10, federal Constitution.
It has. been held repeatedly, both by the Supreme Court of the United States and the courts of last resort of many of the states, including this court, that the regulation of rates for public utilities is a governmental function coming directly within the police power of the state, and that for that reason the establishing or modifying of rates, although contractual, does not violate the. constitutional provision aforesaid. Among the numerous cases that could
It is, however, insisted that the foregoing cases are not controlling here for the reason that in those cases the contracts in question were entered into after the utilities law was passed, or that the cases emanated from states where there were constitutional provisions authorizing the regulation of rates, while in the instant case the contract in question was entered into long before the act was passed. It is therefore argued that in view that th$re was neither a statutory regulation law nor a constitutional provision authorizing such regulation in force at the time the contract was entered into, it was lawful when made and in view of that the obligations thereby assumed cannot be changed without impairing its obligations. "While it is true that the contract in question was entered into before the act was passed, and equally true that in this state there is no constitutional provision expressly authorizing the Legislature to regulate rates for a service such as is rendered by the power company, yet it is beyond controversy that the right to regulate the rates of public utilities always existed potentially, and that the right could be exercised at any time the state, through its agency, the Legislature, deemed it wise and proper so to do. Where the right to exercise the police power exists we can conceive of no valid reason why the state may not exercise the right at any time, and that every contract concerning rates for public utility service must conclusively be presumed to have been entered into in view of and subject to that right. If that were not so, then a public utility could
In Chicago, B. I. & P. By. Co. v. Taylor, supra, it is said:
“It has been said that the ‘police power is that inherent sovereignty which it is the right and duty of the government or its agents to exercise, whenever public policy [in a broad sense] demands, for the benefit of society at large, regulations to guard its morals, safety, health, order, or to insure in any respect such economic conditions as an advancing civilization of a highly, complex character requires.’ * * * The police power is an attribute of sovereignty, and exists without reservations in the Constitution, being founded on the duty of the state to protect its citizens and provide for the safety and good order of society." (Italics ours.)
In the course of the opinion in the case referred to it is further said:
“As neither the state nor the municipality can surrender by contract the. governmental power to guard the safety, morals, health, and good order of society, a contract purporting to do so is void ab initio, and, being void, it is impossible to speak of laws in conflict with its terms as impairing the obligations of a contract.”
In the case of Producers’ Transp. Co. v. B. B. Comm., 251 U. S. 228, 40 Sup. Ct. 131, 64 L. Ed. 239, the Supreme Court of the United States, in considering the power -of the state to interfere with existing contracts, in the course of the opinion, says:
“That some of the contracts before mentioned were entered into before the statute was adopted or the order made is not material. A common carrier cannot, by making contracts for future transportation or by mortgaging its property or pledging its income, prevent or postpone the exertion by the state of the power to regulate the carrier’s rates and practices.”
The right and duty of the state to regulate the rates of public utilities in the public interest is as much an attribute of sovereignty or of government as are the things enumerated in the excerpt above quoted from Chicago, B. I. & P. By. Co. v. Taylor, supra, and hence comes squarely within the principle there stated.
In Winfield v. Public Service Comm., 187 Ind. 53, 118
“Every charter granted by the state, and every franchise, whether granted by the state directly or by the municipality acting as agent of the state, is granted in view of the rules above stated, and especially in contemplation of the fact that unless the state has in the charter to the utility company, or in the authority to its agent, or by ratification, abandoned its power to so regulate, the state’s power is by implication written into such contract; and therefore the state’s act of regulation, within the limits above stated, is not an impairment of the contract, but rather an exercise of a right provided in the contract.”
A large number of cases are cited.
The same thought is expressed in a different way by the Supreme Court of Oregon in City of Woodburn v. Public Service Comm., etc., 28 Or. 114, 161 Pac. 391, L. R. A. 1917C, 98, as follows:
“If a telephone company’s franchise from a city, limiting rates to be charged, is deemed a contract, the mere fact that it was made prior to the enactment of the Public Utility Act (Laws 1911, p. 483), and before the state attempted to regulate such rates, does not debar the state from increasing the rates as fixed in the franchise, because when the state exercises its police power it does not work any impairment of obligation of the contract; the possibility of the exercise of such power being an implied term of the contract.”
It will be observed that in the foregoing case, although the contract was entered into before the law was passed, yet the Supreme Court of Oregon held that it made no difference. We remark that in the Constitution of Oregon is found a provision precisely like that in our Constitution respecting the impairment of the obligations of contracts. See article 1, § 21, Or. Const.
Nor is. the contention that there is a difference between rates fixed in so-called franchise ordinances and those fixed in ordinary contracts tenable. Indeed, if there'is any difference at all in that regard, it should be in favor of contracts entered into in such franchise ordinances. Franchise ordi-
We remark that while in the cases we have quoted from, as well as in many others, it seems to be assumed that the state may surrender its sovereign or governmental right and power to regulate rates, yet, in view that that question is not directly involved now, we express no opinion upon it.
It is also contended that, although it be conceded that the commission had the power to change the rate agreed upon in the contract in question, yet, in case it did so, it had no power to keep in force all other obligations of the contract assumed by the smelting company. Whether in changing the rates agreed upon in a contract the other provisions thereof are affected, and, if so, to what extent, is not involved in this proceeding, and upon that question we likewise express no opinion.
Nor is the question regarding the extent the rates should be modified or increased, if at all, involved here. It may be, as suggested by counsel, that the power company is demanding a greater increase in rates than it is entitled to. That question, however, is still pending before the commission, and we must assume that the commission will not permit the power company to impose upon the public by granting it the right to charge and collect excessive rates, or rates that are higher than will enable it to effectuate the purpose for which it is created and to adequately serve the public. Nor can we assume that the commission will permit the power company to inflate the value of its properties with a view of enabling its stockholders to realize large profits upon their stock. All of these matters must be determined by the commission, and in discharging its duties in that regard, in
Tbe order of tbe com mission is therefore not vulnerable to tbe objections urged against it, and should be affirmed. Such is tbe order. Costs to be paid by tbe smelting company.
Concurrence Opinion
(concurring). I am aware that neither litigants nor members of tbe bar are much interested in tbe reasons that impel courts to arrive at results in any particular case or group of cases. It is therefore with some reluctance that I essay to put in tbe form of an opinion tbe reasons why I concur in tbe result reached by tbe court in tbe opinion prepared by Mr. Justice FRICK.
I do not agree with tbe reasons given nor with tbe conclusions reached in tbe opinion respecting tbe meaning or intent of tbe Legislature by tbe adoption of tbe much discussed proviso or exception found in Comp. Laws Utah 1917, § 4787.
Three major propositions are involved in the record presented to tbe court in these proceedings: (1) Has tbe Legislature, by a general enactment, power to authorize tbe Public Utilities Commission to investigate contracts made by the utility (power company) with consumers of electrical energy prior to the adoption of tbe Public Utilities Act, and to give tbe commission power to determine whether such contracts are discriminatory or preferential, and, if found to be such, to direct tbe consumer by order to pay additional consideration for such electrical energy? (2) Assuming that tbe Legislature has such powier, has it, in tbe act under consideration, granted such power to tbe commission, or has it not attempted to except such contracts from tbe jurisdiction of tbe commission? (3) Assuming that tbe Legislature has such authority, and assuming further that by tbe provisions
1. The recent decision of the United States. Supreme Court and the opinion of this court in these cases necessitate an affirmative answer to the first query suggested.
2. The proviso, or exception, found in Comp. Laws Utah 1917, § 4787, so far as material, is as follows:
“Nothing in this title contained shall he construed * * * to prevent the carrying out of contracts for free or reduced rate passenger transportation or other public utility service heretofore made founded upon adequate consideration and lawful when made.”
From the language of the proviso, it appears to be con-elusive that the Legislature intended to withhold existing contracts from the control of the commission. I am assuming always in this discussion that such contracts were founded upon an adequate consideration and lawful when made.
The term “adequate consideration,” when used by courts and text-writers, has a well-understood meaning. It may be said to have an “approved usage” in its application, and should be so construed, unless there is. something in the context of the statute wherein it is found to compel a different construction. Comp. Laws Utah 1917, § 5847; Miles v. Wells, 22 Utah, 55, 61 Pac. 569. A contract founded upon an adequate consideration may be said to be such a contract as courts, recognize as binding upon the parties. I find nothing in the act to necessitate the construction of a legal fiction or the indulgence of an assumption that the Legislature intended something foreign to the usual and customarily accepted meaning of the language used. The language is neither ambiguous nor uncertain. It says “adequate consideration,” not special consideration. It is hardly conceivable that if the Legislature intended any other consideration than that understood by the commonly Accepted meaning of the words used, it would not have employed some apt
I cannot, therefore, indorse, the conclusion that the Legislature intended by the words “adequate consideration” a special consideration as determined by the commission and the decision of this court.
3. I am convinced, however, that the attempt of the Legislature to exempt existing contracts from the jurisdiction of the commission must be held to be nugatory, because otherwise it wbuld result in preventing the equal operation of a law of a general nature. It is conceded in the argument that the law creating the Public Utilities Commission is comprehensive in its scope and has for its chief purpose the regulation of such industries as are serving the public, and to prevent discrimination or preferences by such industries. That intent is manifest, not only from the known object of the law, but from the express words set forth in section 4789 and other sections of the act. No one will seriously contend that if the Legislature had by express words undertaken to except certain consumers, or a designated class of consumers, from the jurisdiction of the commission, legislation of that sort would have been within its power. After all, is not-that just the effect of the- proviso? Admitting the power of the Legislature to enact a valid law respecting any subject, such admission carries with it the constitutional necessity on the part of the lawmaking body'to make such law uniform in its application and operation. Northern Pac. By. Co. v. North Dakota, 236 U. S. 585, 35 Sup. Ct. 429, 59 L. Ed. 735, L. R. M 1917F, 1148, Ann. Cas. 1916A, 1; Lake Shore & Mich. Southern By. Co. v. Smith, 173 U. S: 684,19 Sup. Ct. 565, 43 L. Ed. 858. In the last case cited the court said:
“The question is presented in this case whether the Legislature of a state, having power to fix maximum rates, * * * has also the right, after having fixed a maximum rate for the transportation of passengers, to still further regulate their affairs and to discriminate and make an exception in favor of certain persons, and give to them a right of transportation for a less sum than the general rate provided hy law. * * *
*191 “It does not seem to us that this claim is well founded. We cannot regard this exceptional legislation as the exercise of a lesser right which is included in the greater one to fix by statute maximum rates for railroad companies. The latter is a power to make a general rule applicable in all cases and without discrimination in favor of or against any individual.”
The legislative act creating the Public Utilities Commission, by unambiguous language, gave to the commission plenary power to regulate rates to be charged for services by a public utility. In that regard it is general in its application. If that proviso is to be given the effect such as in my judgment the Legislature intended, it would of necessity conflict with the principle of law announced in the above excerpt from the opinion of the Supreme Court of the United States.
Rehearing
On Application for Rehearing.
An application for rehearing has been filed in the above-entitled case and also in the other 17 cases in which the decisions follow the decision in this case.
The only question presented by counsel which requires' consideration on this application is whether, as counsel suggests, this court has, in its decision, approved the order of the Public Utilities Commission in which it required the Utah Copper Company and some of the other plaintiffs to pay the temporary rates fixed by the commission, which rates were m excess of the contract rates existing between the defendant Utah Power & Light Company and the several plaintiffs referred to. That question Was not, nor was it intended to be, decided in any of those cases. As we viewed the matter, and as we now view it, that question was not involved in the proceedings, and hence was not decided. The question of whether the rates fixed by the commission, and which it ordered the plaintiffs aforesaid to pay, were just and reasonable, or Whether they apply to any one or more, or all, of the plaintiffs, or whether, under the circumstances, the commission had the power to make and enforce them, was not considered and not decided.
