No. 3723 | Utah | Jan 27, 1922
This is a proceeding in certiorari, under the Public Utilities Act (Comp. Laws, § 4834), to review certain proceedings of the defendant Commission in the matter of the application of the defendant power company to increase its steam service rates.
. The material facts are that plaintiff for several years last past has been engaged in the hotel business in Salt Lake City,
On April 1, 1916, the plaintiff and power company entered into two written agreements, as parts of the same transaction, by which the plaintiff agreed to sell to the power company its plant, equipment, and property theretofore used in connection with its business of generating light and heat, for a consideration of $214,300, payable in equal annual installments, covering a period of 15 years. It was agreed that the power company might anticipate the payment of any installment, and also that the plaintiff might declare the contract forfeited on the happening of certain contingencies enumerated therein. In the event of forfeiture the title and possession of the property was to revert to the plaintiff.
In the second agreement the power company agreed to deliver to plaintiff, for its own use and for certain of its cusr' tomers, electric energy and steam heat for certain purposes at “wholesale,” up to a certain amount, for the flat sum of $55,000 per annum, payable in equal monthly installments. The two contracts covered the same period of time, were interdependent, and neither would have been executed without the other. They are hereafter referred to as one contract. In pursuance thereof the power company entered into possession of the property, and both parties, except as hereinafter stated, have complied strictly with the terms of the agreement.
On April 6, 1921, the power company, by its application filed with the defendant Commission, asked for an increase of rates for its steam-heating service in an amount greatly in excess of the contract rate agreed upon by the parties. Plaintiff protested said application, and in answer thereto set up and relied upon said agreement, contending that it was of such a nature and the consideration therefor was such as
After considering the application of the power company, the protest and answer of the plaintiff thereto, and evidence and arguments in support of the respective contentions of the parties, the Commission arrived at the conclusion that the contract relied on by plaintiff was valid when made, and was supported by a lawful consideration, but that the Commission was not bound by the date of the contract in determining the adequacy of the consideration, but might consider the question of adequacy as of the date when the hearing was had in 1921. Considering the matter from that point of view, the Commission concluded that the consideration was inadequate,^ and for that reason held that the contract was discriminatory and preferential. Plaintiff was therefore placed upon the standard schedule for light, heat, and power, but the Commission, after investigating the value of what it termed a special consideration paid by the plaintiff in excess of that paid by the public generally, allowed plaintiff an annual credit throughout the life of the contract in the sum of $5,683.41.
In the foregoing brief statement of the facts we have omitted as immaterial many details; our purpose being to simplify the questions to be determined by the court. Plaintiff applied for a rehearing before the Commission, and the application was denied. As stated in the beginning, the case is before us on a writ of review.
Plaintiff’s principal contention is that the contract between it and the defendant company, entered into April 1, 1916, whereby defendant agreed to supply plaintiff with electrical energy and steam heat during the life of the contract for a'flat sum per annum, was founded upon an adequate consideration and lawful when made; that the rate fixed by the Commission for steam heat service and which the plaintiff is
Tbe defendant power company’s reply to this contention is best stated in its brief filed in the case:
“There is no question that the contracts between the Utah Hotel Company and the Utah Power & Light Company were valid when made, and were based upon an adequate consideration as that term is defined and established by legal decisions extending from time immemorial to the present date, but these decisions were applied to contracts between individuals in which the state or society had no concern. The basis of the Public Utilities Act is the regulation of utility service in the interest of society as a whole, and is entirely in derogation of purely private rights, secured by contract or otherwise, of individual members of society whenever such rights are in conflict with the major public interest. It is in the light of this controlling purpose oí the law that all of its provisions are to be construed, and when it exempts, or rather permits the Commission to exempt, from the application of the standard rule of uniformity of rates and service, in accordance with regularly filed and published schedules, ‘contracts heretofore made based upon adequate consideration and valid when made,’ the application of such exemption is to be construed in the light of the interest of the public in securing service, and not in the light of private interests of either of the contracting parties.”
In tbe same connection defendant contends tbat tbe question before tbe court was authoritatively settled by the decision of this court in U. S. Smelting, Ref. & M. Co. v. Utah Power & Light Co., 58 Utah 168" court="Utah" date_filed="1921-02-28" href="https://app.midpage.ai/document/united-states-smelting-refining--m-co-v-utah-power--light-co-8657043?utm_source=webapp" opinion_id="8657043">58 Utah 168, 197 Pac. 902. The decision in tbat case has acquired a unique distinction in tbe case at bar, in that both parties quote excerpts from it and profess to rely on tbe doctrine therein enunciated in support of their respective contentions. The plaintiff in tbe instant case was also one of tbe plaintiffs in tbe case referred to, and defendant power company now makes tbe point that tbe questions involved in tbe present case are res adjudicaba. Whatever merit there may be in this contention, in view of the fact that the Commission expressly reserved the plaintiff’s case for
These eases were decided in the order above named. The last case cited has just been forwarded to the publisher. It will not be necessary to review any of the cases at great length except the Smelting Company Case, relied on for certain purposes by both plaintiff and defendant. A brief reference to the other cases will be sufficient.
In Salt Lake City v. Utah Light & Traction Co., supra, the defendant owning and operating a street railway system in Salt Lake City and vicinity applied to the Public Utilities Commission for an increase of fares for transportation on its railway system for the alleged purpose of meeting the increased costs and expenses of operating its railway. A hearing was had before the Commission, and evidence was taken both for and against the application. The Commission granted the application in part, and authorized the defendant to raise its fares in certain particulars. The case came before this court on a writ of review under the Public Util
“Since Const, art. 12, § 8, providing no law shall grant the right to operate a street railway within any city without its consent, does not, in express terms, delegate the power to fix rates, a franchise ordinance, made pursuant thereto, fixing passenger rates, and accepted hy a street railway company, although it constitutes a binding contract between the parties, is subject to the rate-making power of the state.”
In Union Portland Cement Co. v. Public Utilities Commission, supra, plaintiff applied to this court for a writ of prohibition restraining the defendant Commission from assuming to exercise jurisdiction to pass upon the reasonableness or unreasonableness of certain contracts fixing rates for pub-tic utility service, which contracts were entered into before the passage of the Public Utilities Act. The question presented was not determined by the court, for the reason that the act provided a plain, speedy, and adequate remedy by writ of review. The position of the' court on the merits of the case, however, was clearly foreshadowed in the opinion as published in the Pacific Reporter at pages 595, 596, in 56 Utah at page 180, citing a recent decision of ,the Supreme Court of the'United States in line with defendant’s conten-, tion in the instant case.
In Murray City v. Utah Light & Traction Co., supra, one question involved was the right of defendant railway company to increase its fares in disregard of a contract evidenced by a franchise ordinance. The opinion, as far as that feature of the case is concerned, is sufficiently reflected in the first headnote of the syllabus:
"Power to fix iare to be received by a street railway or its proprietary companies having been retained by the state by the Public Utilities Act, such power can be exercised by it whenever the necessity requires, despite ordinance of city granting railway right to operate over a street; such action not impairing obligation of a contract.”
The Commission having found that the contract relied on was not founded upon an adequate consideration, in view of
After some further elaboration of the term “adequate consideration” and illustrating its meaning by pertinent examples, the court proceeds to a consideration of the constitutional questions involved. After referring to the constitutional provision invoked by plaintiff, to wit, artiéle 1, § 18, of the Utah Constitution and article 1, § 10, of the federal Constitution, the court, at page 182 of Yol. 58 Utah Reports and at page 907 of the Pacific Reporter above referred to says:
“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 he cited in support of the foregoing proposition we shall refer only to the following. * * * ”
The eases are numerous, and need not be cited in this opinion. After citing the cases the court then proceeds to dispose of the identical question presented here:
“It is, however, insisted that the foregoing cases are not con*398 trolling 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 there 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 he 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, ajid 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 enter into a long term contract, say for fifty years or longer, in which it was given a preferential or discriminatory rate, and it thereby not only could prevent any other similar utility to successfully compete with it, but it could successfully defy the sovereign state itself. Such happily is not the law.”
The court then refers to C., R. I. & P. Ry. Co. v. Taylor, 79 Okla. 142" court="Okla." date_filed="1920-06-29" href="https://app.midpage.ai/document/chicago-r-i--p-r-co-v-taylor-3801438?utm_source=webapp" opinion_id="3801438">79 Okl. 142, 192 Pac. 349, one of the cases before cited, and quotes therefrom pertinent excerpts, one of which we here reproduce:
“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.”
The court also refers to Producers’ Transportation Co. v. R. R. Comm., 251 U.S. 228" court="SCOTUS" date_filed="1920-01-05" href="https://app.midpage.ai/document/producers-transportation-co-v-railroad-commission-99490?utm_source=webapp" opinion_id="99490">251 U. S. 228, 40 Sup. Ct. 131, 64 L. Ed. 239" court="SCOTUS" date_filed="1920-01-05" href="https://app.midpage.ai/document/producers-transportation-co-v-railroad-commission-99490?utm_source=webapp" opinion_id="99490">64 L. Ed. 239, and quotes from the opinion as follows:
“That some of the contracts before mentioned were entered into before the statute was adopted or the order made is not material.*399 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 tbe state of the power to regulate the carrier’s rates and practices.”
In connection with, the excerpt last quoted., which relates to transportation service, the opinion of this court continues:
“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, R. I. & P. Ry. Co. v. Taylor, supra, and hence comes squarely within the principle there stated.”
Reference is made to many other cases, all to the same effect. The opinion concludes by affirming the order of the Commission.
The writer is convinced that enough has been said to illustrate the views of this court in respect to the question presented for our consideration. There is one case, however, which has not been reviewed. The case of Utah Copper Co. v. Public Utilities Commission, supra, is the very last expression of the court. The opinion, which was mailed , to the publisher during the present month, January, 1922, contains the following paragraph pertinent to the question now under review:
“As to the jurisdiction and powers of tbe Commission generally to regulate the public utilities of the state, and fix the rates to be charged the public in accordance with our Utilities Act, regardless of contractual relations, we need not here comment. These questions have already been considered and determined by this court, as we think, in accordance with the legislative intent and the mandate of our State Constitution” — citing the Utah cases.
Whatever may be said concerning the merits of these decisions as correct expositions of the law, there is no escape from the conclusion that they determine the constitutional question presented here, and are therefore stare decisis. They hold without qualification or evasion that in the fixing of rates for public utility service under the Utah Public Utilities Act the Commission is not limited or controlled by the provisions of antecedent contracts, but is at liberty to disregard such contracts altogether if they come in conflict with what the Commission finds to be a reasonable rate under the
These observations are entirely impersonal. There is nothing in the record in this case impeaching the good faith of plaintiff notwithstanding our opinion that its constitutional rights have not been infringed in the matter complained of.
Plaintiff calls the attention of the court to the following cases from other jurisdictions: City of Superior v. Douglas Co. Tel. Co., 141 Wis. 363" court="Wis." date_filed="1910-02-01" href="https://app.midpage.ai/document/city-of-superior-v-douglas-county-telephone-co-8189775?utm_source=webapp" opinion_id="8189775">141 Wis. 363, 122 N. W. 1023; Gas Co. v. City of Adrian, 209 Mich. 52" court="Mich." date_filed="1920-02-27" href="https://app.midpage.ai/document/lenawee-county-gas--electric-co-v-city-of-adrian-7950758?utm_source=webapp" opinion_id="7950758">209 Mich. 52, 176 N. W. 590, 10 A. L. R. 1328; City of Moorhead v. Union Light, Heat & Power Co. (D. C.) 255 F. 920" court="D. Minnesota" date_filed="1918-10-26" href="https://app.midpage.ai/document/city-of-moorhead-v-union-light-heat--power-co-8810587?utm_source=webapp" opinion_id="8810587">255 Fed. 920. These cases lend considerable support to plaintiff’s contention that contracts in cases of this kind as well as in other cases should be construed as of the time they were entered into rather than of a subsequent date. It would be a useless consumption,of time and space to give these eases an extended review. They are not only in direct conflict with the decisions of this court to which we have called attention, but to recent decisions of the Supreme Court of the United States in which the identical question presented here was adjudicated and determined. Union Drygoods Co. v. Georgia Pub. Ser. Corp., 248 U.S. 372" court="SCOTUS" date_filed="1919-01-13" href="https://app.midpage.ai/document/union-dry-goods-co-v-georgia-public-service-corp-99267?utm_source=webapp" opinion_id="99267">248 U. S. 372, 39 Sup. Ct. 117, 63 L. Ed. 309" court="SCOTUS" date_filed="1919-01-13" href="https://app.midpage.ai/document/union-dry-goods-co-v-georgia-public-service-corp-99267?utm_source=webapp" opinion_id="99267">63 L. Ed. 309,
It follows from wbat has been said in the preceding pages that the order of the Commission authorizing the power company to increase its rates in the instant case should be affirmed.
In connection with the order increasing the rate, it will be remembered that the Commission also ordered the power company to allow the plaintiff an annual credit during the life of the contract between the parties in the sum of $5,683.41, on account of what plaintiff, by virtue of said contract, had paid more than other consumers of the same class. As to whether or not the Commission had jurisdiction to determine the amount of the excess paid by the plaintiff and direct it to be applied as a credit on plaintiff’s account with the power company we deem it prudent to withhold our
But one question remains. Plaintiff complains that the Commission did not expressly find whether or not plaintiff is to be supplied with service at “wholesale,” as provided in the contract, and that the finding as to the rate to be paid by plaintiff is uncertain and indefinite. After a careful examination of the findings both in the original report and upon l'ehearing before the Commission, we are forced to con-
It is therefore ordered that the order of the Commission, except as to the question reserved, be affirmed, and that the cause be remanded to the Commission for further findings in accordance with the views expressed in the opinion.