*1 TEXAS al. CO.v. SERVICE PUBLIC GAS UNITED et Reargued December Argued 15, 18, 1937. October No. 13. Decided February 14, 1938.
<M T—Í *2 ap- G.. Coates for Bullington and F. P.
Messrs. John Coates, F. with whom Mr. G. reargument. on the pellant appellant for brief, on the Bullington was P. Mr. John argument. original on Lange, H. with and Edward M. Scott
Messrs. Alfred McCraw, Attorney Texas,' General Mr. William whom reargument and on on appellees brief, for onwas argument. original Hughes opinion delivered the Justice Chief Mr. Court. Company, chal- Gas Public Service United Appellant, fixed the Railroad Com- of a validity lenges gas supplied natural .for Texas mission of Laredo. City in the uses for domestic City Council of Laredo, on December en- gas acted ordinance rates which included a rate fixing per 40 cents feet cubic for domestic consumption, cent, with a a discount on provision per payment days, bills within ten the ordinance to become effective January 1, on 1932. The rate had been 75 previously cent, m. per cents c. f. with a 10 per pay- discount for days. ment within ten The Texas Com- Border Gas pany, which natural supplying gas to consumers in Laredo, filed an with appeal Railroad Commission posted required supersedeas bond accordance provisions with the of Articles 6058 and 6059 of the Re- (1925).1 Civil Statutes of vised Texas The condition of *3 city a government 1“Art. 6058. control.—When Appeal jity from any existing reduced, gas utility has ordered the by affected by may appeal filing to the such order Commission with it on such may direct, petition terms and conditions the Commission a and decision, regulation, ordinance, review the bond to or order of the appeal being city, municipality. Upon or such taken town the Com hearing may a make mission shall set and such order or decision may just regard to the matter involved therein as it deem appeal hear The Commission shall such de reasonable. novo. When distributing company concern, any local or ever whose rates have by any municipal government, change any been fixed desires rates, charges, application it rentals or shall make its to the utility municipal government where such located such munici sixty government application determine said pal days shall within determination presentation may longer unless the thereof after be government agreement. municipal by reject If the deferred should application sixty or fail or refuse to act on it such within said days, utility appeal may to the Commission provided. as herein then Commission shall determine the said matters in any But involved sixty days filing appeal by within after utility such such such or appeal said such further with Commission time as such utility writing to, agree municipal but the rates gov fixed such shall changed remain in full force and effect until ordered shall ernment Commission. any gas Appeal utility orders.—If or party “Art. 6059. other any rate, with decision of classification, be dissatisfied at interest should refund to Company the bond was col- any the benefit of consumers excess rates City charges above the rates shall lected “over and be a fair and reasonable return finally determined to value used and useful supply- of its City natural service to the gas gas natural ing Laredo.” Commission, the South hearing
Prior to the before owned and Company, operated Texas Gas gas sold to properties transported transmission city gate, at the Laredo Company the Texas Border Gas The Texas Border proceeding. was made a to the party increase of rates applied City Gas to the for an Company City’s act, appeal because of the failure to took and, Comfnission as The two provided. to the the statute The Public Serv- appeals were consolidated. United Gas a Delaware entered its Company, corporation, appear- ice on appeals alleging acquired ance both had of both properties companies. Commission, by order 1933, fixed a 55 cents m. per of June rate of c. f. with cent, penalty per of 10 for non-payment within ten rule, charge, order, regulation adopted by Commission, act or may utility party petition setting such dissatisfied or file a forth the objection particular competent juris- cause of thereto in a County against in Travis diction the Commission as defendant. Said *4 precedence all action shall have over other causes on the docket of a nature and shall different be tried and determined as other civil party may right in said court. Either said action causes have the appeal appeal; appel- and said shall be at once of returnable to the court, appealed precedence late and said action so shall have in said appellate pending. of all causes a different character court of therein right accrues, If the court be session at the time action such of may during filed such ready suit and stand after the term trial In days proof notice. all trials under article the burden of ten this plaintiff, satisfactory the who must show clear and shall rest rates, regulations, orders, classifications, the acts or evidence unjust charges complained or them.” of are unreasonable and to it January 1, retroactive to was made the order days, and S.) 2 U. R. 503. (N. 1932. P. brought Company then Public Service
The United Gas for the States the United suit in the District Court of the of enforcement District of to restrain Southern Texas 1933, the State of July 26, On the order. Commission’s City in- of Commission the members the the Texas, of Travis Court the suit in the District present stituted under Article 6059 in the of appeal nature County the state jurisdiction the of of purpose protecting for the if order deter- Commission’s court the enforcing stayed all thereupon The court mined to be valid. state or of the the officials Commission, the proceedings by order until to enforce Commission’s City, State August 1, 1933, On suit. determination composed of three United Court of the States District in that stayed proceedings all 380, 28 U. C. judges, S. of the suit final determination pending court, order the state Subject to the state court. 75 cent rate. charge its has continued Company in a judgment state court resulted on The trial order 1934, which sustained the Commission’s April 24, far was made retro- 1933, except its 13, June so being the order held 1, 1932, part January active to to the Court Company appealed The then invalid. judgment on rendered October Appeals, Civil judgment of the trial court so as reforming portion the retroactive Commission’s declare affirming judgment order enforceable and valid and Supreme (2d) modified. 89 S. W. 1094. thus Court of the State refused writ error.
A taken to this Court from appeal motion dismiss of Civil judgment Appeals of the Court denied. hearing, S. 667. the Court ordered Upon reargu- U. 2 SeeNote *5 the parties desired to hear noting especially that it
ment, effect of the appli- as to the on the state of the evidence 1932 and years rate to the cation the Commission’s for those expenses is, as to the revenues rights to the effect years basis, on as the bond years, with to those appellant, respect 302 U. given appeal on its to the Commission. S. Reargument accordingly. has been had invoking process equal protec- the due
Appellant, of the Fourteenth Federal tion clauses of the Amendment in the state it has Constitution, proceedings contends that process and also that procedural been denied due confiscatory. prescribed rate is Commission, rulings. proceedings The and its before a full It received vol- gave hearing. The Commission City and the by appellant uminous evidence offered controversy and their were every phase counsel Commission fully argument. opinion heard of the utility from the time that the history reviews the Company Border Gas received its franchise Texas City 1909. The Commission found the interrela- and that companies present tion of the concerned properties which had become the owner of the appellant, itself a unit operating companies, of the former System. It was view of the “interre- the United Gas ownership,” gather- that the company operation lated properties and distribution used and use- ing, transmission city of Laredo were valued as a com- serving ful in a of other property. bined As consumers number com- Laredo area served, munities within the were also it be- necessary appropriate came to allocate to Laredo its pro- Methods of allocation were portion. by submitted and the Commission respective parties adopted weighted been average per cent., had taken the City’s mean approximate percent- as an between two engineer ages Company’s engineer, used coming the *6 to a fair and allocation. Evidence of closest correct his- of torical cost and cost less reproduction new depreciation was The on Company’s appraisal submitted. the basis cost reproduction new, depreciation, $1,231,601. less was appraisal City’s engineer The the on the same basis $810,698. City showing was adduced evidence the depreciated July 31, historical cost to $709,991.23.
The Commission the valuation purpose of its di- into properties groups, (a) gathering vided three sys- (b) and tem, system, (c) transmission distribution sys- tem. The Commission stated and considered the respective of each While the in- appraisals group. City cluded an of $124,668 depreciated allowance as the cost of portion extending transmission lines Pescadito Jennings Field, Junction to the distance of 26 miles, about “that the Commission found line this only day used one during period twelve months’ end- ing July 31, 1932, transporting gas Laredo,” and further that “the line condition of this such that is could safely profitably neither nor transport necessary City.” volume of gas The Commission concluded if that, Company’s properties were reproduced, necessary. section the line would not be The Commission then considered the questions work- ing capital, of concern going value accrued depre- ciation. referring After respective estimates, cent, Commission decided that over-all per “the condi- tion” of the properties was 78 per cent.
The Commission’s conclusion was that the total “pres- fair ent value” the properties $886,000. The Com- said: mission
“In arriving at a decision and making order herein deemed just Commission to be and reason- carefully we have able, fully considered all evi- presented dence and all the facts and re- circumstances due con- herein; upon giving the record fleeted in the inhering of value all sideration elements have valued proceeding, in this involved with busi- concern, an operating Company’s properties for materials ample made allowance attached; have ness overheads; and general working- cash, supplies, Pescadito-Jennings Trans- have included such value System Jennings Gathering mission Line and the West *7 last that these two clearly the record discloses (although used, they nor are being named are neither property items the pres- and we find necessary standby equipment), Company used, of and properties fair value of the the ent of distributing transporting gathering, useful the to be in City Laredo, Texas, of natural within the gas $885,000.” the sum of depreciation annual rate fixed the
The Commission cent. The Commission per be 3 which should allowed at cent, per rate of return of 7 that an annual also found adequate. was properties the present on value the revenue,” “available Commission respect With a of presented “setup” op- that the had Company said months’ expenses for the twelve erating revenues hand, the 31, 1932, only. On other ending July period City “setup” covering a similar the presented the had 1931,.and 1930 and for the years ending 30, 1929, June period years. 1932—a of four The ending July 31, year opinion was the that the one year ending of Commission It not be taken as a test July 31, 1932, period. should of knowledge be a matter common that believed to standpoint year a business 1932 was general “from the City’s 1929.” year since exhibit was deemed worst the year 1931 subnormal, the fiscal was also show that that year, Commission concluded neither that nor the be years, of those two- should taken as an average an thought test. The Commission also that it adequate Company take year unfair 1930 would
CO t-H or an of years, 1930, 1932, the three average year it that the appeared year point best experienced gross revenues had Company whole, thought since 1928. On the Commission would if an justice be done revenues and ex- average for the four fiscal penses years, 1929, should period computation be taken as test for the fair upon which a return predicated. should be had stipulated by It been at outset parties a m. a fair per five cents c. f. was and reasonable price gas at well. While the Commission did not make specific findings with to revenues and respect ex- penses for it years took as basis, reject did certain allowances for which the Company contended. As to charge allowance in relation to gathering gas purchased the Carolina-Texas field, gather- ing lines in which were the of an affiliate, the cent, charge Commission allowed a per one-half one cent, instead of one per which the Company sought. respect With not particularized by to items the Commis- we think sion, that it substantially appears from its opin- *8 ion that the Commission, save the disallowed, as to items City’s the accepted exhibit which covered the revenues and expenses four-year the period and stated sepa- rately the items contained therein which were deemed to be questionable.
The the for all rate, Commission found uses, domestic of 55 cents m. c. the minimum per bill f., user per per month to be one dollar and the penalty for non-payment days within ten to be 10 per cent., “just to be and reason- The able.” Commission found that application its would “a return in produce net excess of seven per cent (7%) per present annum bn the fair value of the properties, provision after for operations and reserve for deprecia- The tion.” Commission ordered that the rate should be effective from and after 1 January 1932, and that there
132 for the benefit City of Laredo to the should refunded the difference between the gas of domestic consumers and the amount existing rate the amount collected under the consumers under Com- by due that would have been order. mission’s Travis Coun- in the District Court proceedings
The It begun essentially de novo. was trial was ty.—The jury, had March, 1934, and before was motion and cause jury discharged de- have the appellants The entire record being overruled. termined in evidence and addi- placed Commission was before the testimony property values, introduced as to tional accrual, revenues, expenses, rates reserve depreciation It the evidence was return, brought etc. appears The as time trial. evidence possible as near appellant which again and adduced expenses to revenues ending July 31, 1932, years year to the and the related appellees and the introduced evidence for they which four-year had their period, addressed Commission, before also for the computations year 1933. evidence, appellant
At moved for a close instruction favor and also peremptory its for the sus- order for the pension years the Commission’s motions were Appellant 1933. These overruled. then jury to the to have case submitted on “special moved a “special charge.” and not The court upon* issues” charge that 'in its view on stated “special issue” request. with complied hence then certain jury special to submit to the moved issues separately stated; is, jury were should make findings component values of separate parts during years re- appellant’s *9 necessary also to the amount of the ma- spectively, and supplies working capital, cash and the terials and “going value,” be allowed for should amount which toas cost of at the average well mouth gas proper annual depreciation allowance reserve. These requests were refused.
The trial the jury single special court submitted to a issue as follows: you
“Do find that order of the Railroad Commis- sion of bearing 13, 1933, Texas date June providing for fifty-five cent to gas rate residential within consumers city of Laredo, under the Texas, facts introduced in you, before unreasonable and unjust evidence as to Public defendant, United Gas Service Company. An- ‘yes’ swer question this or ‘no’.” The court prefaced submission with the following- definitions instructions:
That “fair return” by was meant the appellant “on present entitled earn fair value of property which it for the employs convenience of the public being to that equal generally at made the same time within the general part same country in- vestments other business undertakings which are at- by tended like risks and uncertainties.” That the rate of return reasonably should be sufficient “to assure con- fidence in the financial utility soundness and should adequate under efficient and management economical maintain support its credit and enable it to raise money necessary for the proper discharge of its duties.”
That “fair value” was meant “the reasonable worth at time that this is being used and useful in the public service.” That “used and useful” was meant all the embraces property “actually being used” that service also property as was rea- such sonably necessary permit “continuous and efficient service.”
That by “operation expenses” meant such expenses were incurred in operation of appellant’s property furnishing gas the people of Laredo. *10 meant the amount “annual by depreciation”
That necessary compensate to reasonably annum that was per and necessary replacements any and wearing out for property. appellant’s retirements cost new” meant “the cost by “reproduction That may reasonably which under the conditions the owner if property reproduced to exist were be expected new.”
That value” was meant added value “going whole, used useful for serv- appellant’s property as and ing the over the sum of the values of its City, component parts, by reason of the fact “that it is an operating, as- and property, sembled established with a functioning personnel, plant trained co-ordinated and with property, attached, customers its and business established.” Referring to the findings Commission, and the transcripts of evidence and exhibits, were before the Commission and had been in evidence, introduced the court told the that the jury might be same considered for purpose assisting jury in determining whether the Commission’s order was unreasonable and unjust no other purpose. The court concluded charge with the following instructions: “You are instructed the burden of proof is upon United Gas defendant, Public Service Company, satisfactory clear and show evidence that the rate pro- mulgated by the Railroad Commission in its said order June 13, 1933, is unreasonable unjust as to it.
“You are further instructed that in determining your light answer said issue of all the evidence intro- defendant, duced this case the United Gas Public Service is Company, entitled to receive a fair return at this time on the fair present value of its property that public used and useful in the service after first deducting all necessary expenses a fair operating reasonable depreciation amount for the annual of said property, and fair considering what is a value of said property you take into consideration all .will elements value you, that have been introduced evidence before includ- reproduction cost new of said amount ing *11 (if any)' of that inheres in said going property. value “By unjust’ 'unreasonable is meant that the rate in of prescribed and the said order the Railroad adopted low not provided Commission was so have fair fair of property return value defendant’s in supplying used and useful the service furnished Public to the Company United Gas Service inhabitants city Laredo, within the of Texas.” exceptions took to the court’s Appellant charge and to of requests. refusal its negative. The in the jury special answered the issue judgment motion for non obstante Appellant’s veredicto judgment was denied was entered. judgment
The court ruled that provision the Commission’s order of the requiring refund excess over, separable collections the Commission’s was a part, as the court was of the the Com- opinion mission’s application retroactive of its rate to January the provision refund, invalid, for a were part the Commission’s order was set aside without prejudice right City to the to recover the excess collections, that provision appeal. should be sustained on enjoined The judgment appellant any then from making rate, charge excess of the Commission’s with direction for supersedeas pending appeal upon filing of a A for a trial, described bond. motion new in which again objections stated its rulings, the court’s was denied. ruling
The the Court Civil Appeals.—The appel- the conclusion that appellant late court reached had not only to establish its claim for failed and for reversal, favor, in its but that “when judgment viewed in the light Commis- validity in favor of the of the presumption of the quantum and of the character order, sion’s rate such the evidence required presumption, to overcome proof law, a matter of to show that insufficient, as adduced was 55‡ unjust and unreasonable or was either rate order added, ques- “all view, In that the court confiscatory.” “go out practice,” presented appellant, tions' case.” court noted the fact the Commission had property valuation of the
reluctantly included Pescadito-Jennings representing $124,688, items had “included the West line, transmission and also pipe $10,342”, at a value of Jennings System Gathering found that these “two Commission although the they necessary standby items are neither used nor are' that there was evidence The court also said equipment.” *12 trial court and the Commission both the before appellant’s property fair value of “the tended to show for and that a annual accrual $700,000; to be about 2% Referring be fair and reasonable.” would depreciation and expenditures, revenues operating as to the evidence computations based on the forth tables court set the average appellees showing of the accountant expert year and the four-year period the for net revenues exist- appellant’s on the basis of were calculations These the criterion which court thus stated rate. The 75 cent ing contentions: overruling appellant’s it applied the upon that rates are not based rule is settled “The but what any year alone, upon one of business results a period business over average the being as estimated is nearly possible as as gauged being future the years; only It also the rule ... past experience. of can fur- complained rate under the experience actual of the rate as to the effect guide or any real criterion nish ob- experience should be and that this business; on for of time period such a a test practical tained business determine particular will under the facts uncertain influence. are of doubtful or the matters which ap- In the court on rate, absence of an actual test all peal against complaining must resolve doubts rate and the party; pare unsparingly; down valuations unjust and un- appear clearly confiscatory, must to be or by injunction restrain reasonable before the should experience in advance of actual enforcement equal while practical pror results the rate. And clauses of tection, course, process the due and the due nation guard against of both state and fundamental laws the use of taking of, compelling private prop- or erty just compensation, for without still public service under all they public utility right do not assure the to' a conditions and circumstances have return If value of the so used. actual experience complained under the rate of should proper period of time may reveal the rate order then be reasons, sufficient channels.” changed through proper on this the court said: Proceeding principle, “In continuously charged case instant has rate; and collected the hence no actual test has been An made under the lower rate. actual test of the lower have resulted return might larger by bring- mani- ing appellant’s business, about an increase festly court would not be warranted in this holding confiscatory, unjust lower rate was either or and un- law, a matter of advance of reasonable, an actual *13 So when rate; test of the ... the valuation (about pared down to this lowest valuation $700,000), expenses and doubtful items of are the net rev- deducted, by appellant received under the enues rate the for year ending 31, 1933, December would afford more than a return. And based on the $700,000 calculations 11% valuation and the estimated difference in revenues be- rate, tween the 550 rate and the 750 show a return more if rate lower But even the year the than for 7% year for the a yield return not did not or would 7% the enjoining not be warranted this court would period too because the test rate, of the enforcement rate and under the lower made no actual test short, to the year evidence showed undisputed the abnormal.” held that the trial the court opinion, its concluding
In ruling provision the retroactive its court erred appellate The court order was invalid. the Commission’s the Commission to review the that on appeal said to sus- City’s ordinance, the Commission was authorized require utility City pend the rate fixed and conditions as Com- “on such bond terms give trial had refused to re- direct.” The court may mission in the appeared but it record. the bond in evidence ceive quoted condition and noted that court its appellate filed on to that court was appeal bond supersedeas Com- held that similarly conditioned. The determining that mission the rate power had City’s ordinance was unreasonable to “sub- fixed rate just therefor, own and reasonable stitute its city ordinance for of date of the it effective as make substituted.” which was Appeals of Civil then entered judgment
The Court retrospective provision and refund of the sustaining the affirming judgment order Commission’s modified. as thus trial court process.—There question procedural due First.—The not have for did ground holding is no Appellant’s fair Commission. evi- hearing before the weighed; were arguments was received dence findings The Commission made and considered. heard appellant’s property, permissible as to value of rate of return. The depreciation allowance expenses years for the four of revenues and amounts
139 sufficiently appear, took as a basis Commission which the exhibit to which the stated, City’s from already as estimated in its The opinion. referred Commission appears Commission’s rate revenue at the amount of rate of return to simple calculation, applying In after the for depreciation. annual allowance base no lack of due procedure the Commission’si there the Federal Constitution. Railroad process required by Co., v. Gas & Electric Commission of Pacific California U. Los v. 388; Angeles 302 S. Gas Co. Railroad Commis sion, 287, 305; 289 U. S. West Ohio Gas Co. v. Public 304, (No. 1), 63, 294 S. 70. Utilities Comm’n U. courts,
With to the respect proceedings the state tried appellant urges that the case was not and determined law, to the required by state and we are referred state courts statutes and the decisions Texas trial and on It appeal. in the court proper procedure function, judgment of the state reviewing not our court, questions. solely local We are to decide concerned judgment final rights. federal with asserted taken in the case must be as determin instant state all actually adopted satisfied state procedure that the ing Paullin, 231 U. Lee 583, 585; John S. v. requirements. v. Co., Central Georgia 109, 110; 252 U. S. Ry. Central of Edwardsville, 190, 194, 269 U. 195. S. Union Co. v. of due under the Federal requirement process As it denied contends that Constitution, appellant and law judicial judgment upon facts independent Valley Ohio Water Co. v. Ben entitled. See which was 287; 253 S. Water Co. Borough, U. Works Avon Bluefield Comm’n, 679; Corpora 262 U. S. State Public Service v. Co., 569; U. Gas S. St. Comm’n v. Wichita tion States, United Yards Co. v. U. S. Joseph Stock court undoubtedly purported the state The proceeding judicial review. the Court independent As to afford case, of Texas said in the instant Appeals of Civil *15 or trial of the issues whether the rate was unreasonable itself confiscatory Appellant recognizes was “de novo.” full essentially novo, trial de new and testi- that the “was property value, depreciation as to mony being introduced return, revenues, rates of etc.” expenses, reserve accrual, trial by was received Appellant’s evidence question heard. The whether appellant’s contentions were in thus procedure due the court’s was accorded process is, (1) trial; propriety comes to the mode of in (2) the manner which the issues by jury, a trial jury. were submitted to the in difficulty presenting not fail to appreciate We do case, in a especially issues jury complicated to a voluminous, where, here, embracing the evidence is and a host of details in experts valuations of conflicting in with operations, accounts of elaborate appraisals in trials of such cases without a jury tabulations. Even analysis a master for the special the service of to values respect with and return has details evidence We have had abundant occasion to found advisable. been difficulty such familiar with the determinations. become questions dealing policy pro- are not with as to But we procedure entitled to determine the cedure. The State is requisite as it due courts, long provides proc- so of its question on that we have never held that ess. And by the State to for trial power provide beyond they complicated. of fact because are jury questions by jury at law triable the federal courts often Cases complex questions, as, most difficult and involve presenting cases at law issues of example, patent Tucker validity infringement. Spalding, See v. Grant, Keyes 25, 36, S. 453, 455; 37; Wall. v. U. Co., 319, 325; Coupe 135 U. Belting v. Schultz S. v. Royer questions 579. Most difficult Royer, 565, 578, 155 U. S. trials, with much protracted conflicting expert fact infrequently presented not in criminal testimony, are jury. The issue of or may triable life death cases
r—1
decided in such a
We have held that
case.
a State may
modify
by jury
a trial
or abolish it altogether, Walker v.
Dow,
92 U.
Sauvinet,
90;
S.
Maxwell v.
instant case was submitted The special issue was submitted whether the Commission’s rate was “un- *16 unjust as to submission, reasonable defendant.” This instruction in under the court’s relation to the of import unjust,” “unreasonable and phrase covered, appel- as bar, lant at this the issue conceded whether the rate was not ask to confiscatory. Appellant did have the issue of confiscation submitted the use of that precise term. question The then as to the denial the submission issues which appellant requested particular given by as to character of the instructions the trial court. requested which appellant issues were for special component to the value of
findings parts appellant’s years 1932 and 1933 and as to the during property necessary supplies, to cover material and work- amounts It certain other items. will going value, and ing capital, these issues did not embrace all special that be observed jury consider, should as for which questions ex- example, questions revenues, operating operating penses and return for the to which the evidence be- period fore Court related not for the appropriately simply If years 1932 and 1933. trial jury permissible, was, we questions hold it we cannot aside say—putting correct practice under the state law not reviewable here— appellant entitled under the Federal Constitution to have framed special jury, issues and submitted to the much less that appellant demand that the particu- could singled should be out and specially-
lar items it mentioned question in the light We consider passed upon. possesses the State power provide the total which conducting them, the manner of jury trials, and for any alleged imposed by limitations respect not with McConnico, 168 U. S. Castillo state statutes. See v. not repeat, at and need length, We have stated some given by the trial court. The instructions general to receive jury right were instructed as to the that is a fair fair of its used property return on the value jury and that the should public and useful service of value that had take into consideration all elements reproduction evidence, including been introduced value, amount of going cost new of the and the if The court defined the terms any, that inhered it. value,” return,” it as “fair “fair “used and used, such depreciation,” “annual useful,” “operation expenses,” value,” the court “going new” and cost “reproduction adequate rate of would constitute what explained could given were be taken return. No instructions federal appellant’s right; conflict with any sense to if jury, duly followed the contrary, on the *17 right. enforce that not but instructions, could objecting charge upon grounds while to the Appellant, request ampli- not submit and impressive, that are not did might jury’s have aided the con- fied instructions which object content apparently Appellant sideration. that were and to a given, instructions to the pertinent requests limited and to stand its charge, general issues. special as to unable to hold that we are there such a record
Upon right so far as procedural of federal due a denial concerned. process have said question
Second.—The of confiscation.—We coming here from a state in rate cases inquiry our that
143 of the officials in the the action state court “is whether is consistent with the consequences enjoy of its totality something of a revenue regulated utility .by ment Co. line of confiscation.” West Ohio Gas than the higher (No. supra. This Court 1), v. Public Utilities Comm’n (1) fact a state court findings will review of a as the result right where a federal has been denied evidence to to be without shown the record finding of law as to a a conclusion support it, (2) where intermingled as to right federal of fact are so findings ques in the federal necessary, pass upon order to make it City Ry. Southern Co. tion, analyze Kansas facts. Co., Northern 591; 223 U. S. Albers Commission v. Dakota, 585, 593; U. S. Co. v. North Ry. Pacific 605, 609, S. Conley, v. U. Ry. & Western Co. Norfolk Dunken, 266 S. 389, Insurance Co. U. Aetna 610; v. Life not to issues analysis, determine 394. We make inferences, and conflicting testimony or arising on fact as a trier of the state court the function thus to usurp function our own perform proper but to facts, findings arising upon of law deciding question City Ry. Southern Kansas permits. which the evidence Co., supra. Albers Commission Co. v. in the trial determined of fact the issues were
Here, practice under the state agree court. Counsel to make authority findings had no Appeals Court of Civil conflict, it may is without the evidence of fact. “Where any conflict there is But where judgment. render authority no to sub- has issue, on material evidence the trial fact for those of court.” findings of stitute its 171 W. State, 501; S. Tex. Post v. only held not had Appeals Civil
Court of that it to judg- claim was entitled good failed make its to the that, having regard presump- but favor ment rate order and the clear of the Commission’s tion favor satisfactory required overcome such pre- proof *18 evidence was insufficient as matter sumption, appellant’s law to show that Commission’s was confisca- of the Court of Civil Appeals was tory. reasoning legal questions. directed to the decision of those Upon judgment of the trial court confiscation, the issue finding affirmed and thus its of fact not dis- turbed. questions presented (1) are as to
Separate the value (2) return appellant’s property op- to its first, erations. to the Commission found the value As But the Commission $885,000. stated that this included which was neither property valuation used nor If that useful. it be assumed the Commission in the legislative might exercise of its discretion include that fixing rate,” “reasonable still appellant would not be entitled to its inclusion on the issue of confiscation. While evidence as to value was con- flicting, we are unable to conclude that there was not adequate finding evidence to sustain the total useful, making after property used deductions for the portions sort, not of that was worth not more than $750,000. the Court of Civil
Appellant complains Appeals a valuation “$700,000” based its conclusion inadmissible, contends is and that appellate rule as to the burden of misapplied proof in value must be holding “pared down unsparingly” But must distinguish to that amount. we “between what done,” was said and what was between “dictum and de- cision,” reasoning between and conclusion. Dayton Light Comm’n, & v. Public Power Co. Utilities 292 U. S. 290, 298, appellate 302. What the court did was to af- firm trial judgment if, think, court and as we at appellant’s property $750,000 a valuation would support we need adequate evidence, go have no the case. further part relation to that *19 return respect operations, With to the crucial the question whether was to appellant is entitled have regard rate for the future fixed with to the result sole in con- operations years 1933, the as fix tends, or it the rate a con- permissible to was years, is, sideration of the returns for a number of the years for four taken 31, 1932, the prior July 1932 and Commission, or and the period years for trial 1933, as shown before the court. evidence by the part held in latter hearing Commission the 1932 and made in from the June, Apart its order 1933. question order, raised the feature of its retrospective fixing we think it that in for the future manifest its rate was not limited to of opera- Commission the results year for the ending only tions Not was that July, single but a year, but the Commission regarded year abnormal in ruling and the of its that re- propriety spect supported by common knowledge economic at Similarly, conditions that time. the trial court, sitting in spring not bound to limit its vision of 1932 What happen results and 1933. would in the necessarily future was a matter of prophecy. The Com- not mission’s rate had been into and in put effect esti- consequence what be the mating requirement would of the the court was entitled to reasonable for prediction, basis of a especially contemplated emergence view from a period extreme As Court depression. of Civil Appeals observed, way open to the appellant change seek a in the proof rate on of actual experience. Of course, appellant was entitled to take its on chances review trial appellate of the court’s judgment, but it can- not complain delay incident to that review and its must be as it judged case stood before trial court. We hold that there was no error in into taking consideration years of appellant’s operations results for the 1929 to 1933, inclusive, according to the evidence produced confiscation issue of determining court, and
trial return thus shown. average light show tending evidence introduced Appellees the basis of calculated on revenues, operating appellant’s ex- operating deducting and after the 55 cent rate annual allowance and the to be allowable penses deemed ending 30, 1929, June years for the depreciation, *20 net amounts 1932, yielded July 31, and $48,556.88, re- $123,293.02, $91,554.04, $106,815.36, $46,371.85. Appellant year 1933, for the spectively, and net op- the 55 cent rate its on the basis of contends $10,086.25, for 1932 would have been but erating revenue necessary, think it for We do not 1933, $18,408.39. of the Commission’s rate validity far concerns the so opinion in to extend this prospective application, in and con as to these pro detail the contentions stating which relate to the estimates, questions largely permissi- expenses. for We are satisfied operating ble allowances for appellant’s operations that if we consider the results of adequate 1929 to the evidence was period, the entire judgment the of the trial court. support respect question validity Third.—With of the part of that Commission’s order made its in January 1, 1932, light retroactive to considered rate to the relating intervening period of the evidence and of appeal on the to the Commission given the bond from City’s ordinance, equally this Court is divided and of the Court of in judgment Appeals Civil that re- accordingly affirmed. lation is
Judgment affirmed. Reed took part Mr. Justice no the consideration and decision of this case. Black, concurring.
Mr. Justice I judgment concur in Although sustaining I below, agree rights do not that the of this Delaware in Texas are derived from corporation doing business
vr or that the Fourteenth Amendment1 Fourteenth Amend- deprives ment Texas its constitutional power to deter- utility mine reasonableness intra-state rates that State. applying
Even the Fourteenth Amendment under the doctrine, I prevailing do believe not this Court questions) (apart procedural upon to do called question than more determine sole of confiscation. Any indication this Court of the value of company’s unjustifiably will subsequent affect control making valuations purposes.2 record a striking discloses of satisfactory absence evidence the actual cost of the company’s properties; its funded indebtedness; the actual investments of stock- company; profits past holders years; percentage of past profits to actual investment. These have important matters bearing the issue confis- only cation. There is evidence that part the com- depreciation reserve, pany’s accumulated over and above *21 expenditures repairs for and property maintenance, $500,000—or approximately reaches over to 40% 70% of of the various estimated values all company’s In assets. addition has not beyond shown an reasonable doubt that there is actual investment of stockholders—over above amount borrowed could be capital—which Appellant confiscated.3 has obvi- ously failed to establish all the elements to necessary prove beyond a reasonable doubt4 that the rate fixed by the State will result in confiscation of its property; 1 filed dissent in Connecticut General See Ins. Co. v. Johnson, Life ante, p. 83. 2 Indianapolis 400; See McCardle v. 272 U. S. Co., Water McCart v. 419; Supp. 302 Co., 110; U. S. 13 F. Indianapolis 89 F. Water (2d) 522, 525, 526. Chicago Ry. 339; 3 Cf. v. Wellman, 143 U. S. & T. see G. Co. case, supra.
dissent in McCart Diego City, 739, 754; Cf. San v. National 174 U. S. Co. Land Wheat. Ogden Saunders, v.
Operating Expenses.—The record shows appel- many lant one of associates and affiliates corporate is with the Electric Bond and Share Company connected all System. Practically operating and the United Gas appeared inter-company charges among these expenses associates, etc. Under circumstances con- affiliates, these merely by be established proof fiscation cannot alleged expenditures of appellant purporting books show made, associates, by through affiliates, have or been validity strong presumption these etc. only by proof be overcome by rates—fixed State—can to have been made or expenditure, alleged that each affiliate, an associate or was through or incurred was fair and reasonable. or incurred and fact so made illustration, made this case. As was not proof Such City impossible said that it was testifying for a witness expenses for the operating him ascertain proper his examination confined because year and the South Company Border Gas Texas Texas South support I these items “and all saw Company Gas I was not or invoices, able had no inter-company were or not.” proper whether items determining way income is absorbed appellant’s major part Since “operating in the name of ex- companies associated transactions, operations by intercorporate penses” associates, affiliates, etc., are brought of these expenses Referring intercorporate inquiry. the field within subsidiaries, holding companies, associates, transactions Court has said: etc., this affiliates, these averments were uncontra- that as urged “It with the when taken facts constitute, previ- they dicted *22 jade case for the of a reasonableness stated, prima ously be true were it might This well not for charged. rate the and control of the line ownership pipe unity of of fact the negotia- An averment of system. the distribution and in the wholesale a reduction procure to effort and tion
CO m light means little the of the fact the negotiators are acting holding both the of interest,—that same company which controls All of aver- both. these facts so red far pleadings would be more with persuasive to the respect parties of the rate were propriety if independent each other and length. at arm’s dealing of Where, however, they cónstitute and single but interest involve the embarkation of the total in what is capital in effect enterprise, one and profit the elements double of thei reasonableness must inter-company charges of of necessarily subject inquiry scrutiny and of before question as to the retail rate based of lawfulness thereon can be satisfactorily answered. . . The argument
“. is made that the proofs de- manded will Commission involve an extensive and unnecessary valuation of the pipe-line company’s prop- erty analysis of business, that this burden not be should thrown upon appellant. Whether this is so we need not now decide. It enough that in say of view the of relations and the parties, power implicit fix arbitrarily therein maintain respects costs distributing company which not do represent true rendered, value of the service the state is en- authority showing titled the reasonableness such fair costs, although may presentation this involve a evi- required dence would not be in the case parties dealing length at general arm’s and open mar- ket, subject safeguards the usual bargaining and competition.” Distributing v. Public Comm’n, Co. Western Service U. S. 126, 127. frequently are
“Purchases made a member or members of a system or subsidiaries, from comparative affiliates and with infre- quency strangers. obscurity At times or confusion has been widespread bom such relations. There is belief that transfers complicate between affiliates or subsidiaries task rate-making impede regulatory commissions the search Buyer for truth. *23 the reasonableness
Not fail to only prove did requested it did of its but not—as intercompany dealings, its paid by of open court—produce list salaries full It that evidence did show associates, affiliates, etc. is true associates, re- affiliates, etc., of officers of some $100,000 year but there was no $65,000 ceived from to or their of of proof of the reasonableness such salaries gas expenses. local distribution upon appellant’s effect of importance declared the previously This Court has question confiscation in determining salaries Wellman, 143 Ry. & T. Co. v. U. S. Chicago G. There it was said: operating expenses
“Of these consist? Are what do extravagant salaries; fifty to they up partially made to and in president, hundred dollars one thousand Surely, officers? before proportion like to subordinate adjudge to an act of the upon legis- courts are called . . . . maximum rates for railroad com- fixing lature . . . unconstitutional, they fully . . should be to be panies receipts earnings done with as to what is advised . of vested protection . . While company. it has duty courts, is a supreme rights legislative power rests sub- this, not come corporation railroad any to the discretion servient salaries, and unreasonable or exorbitant may, by earnings into way, transfer improper other in some ” 'operating expenses.’ to call pleased what out a utility pay large part chooses a public When affili- corporate associates, expenses” “operating of its conceivably might be used payments these ates, etc., may dealing length, not be at arm’s circumstances: seller in such may poor criterion them be a agreed between price and the v. Public Utilities Comm’n Light Dayton & Co. Power value. 295; Co. v. Distributing Public Service 292 U. S. Ohio, Western 119; Telephone Smith v. Illinois Bell U. S. Kansas, Comm’n of Telegraph v. Telephone & Co. United 133.” American 282 U. S. Co., States, 232, 239. 299 U. S.
drain the operating company’s income and to inflate the “operating expenses.” Inflated operating expenses inevi- *24 tably lead to inflated rates. Since associates, affiliates, etc., ordinarily do not deal at “arm’s length” appellant had of proving the burden the fairness and reasonable- ness of all or expenditures charged made as inter-company transactions. by Jury.—Appellant
Due Process Trial con- tended the court below that “the submission this of deprive case will jury ... a this defendant of hearing character trial contemplated under of Constitution and laws the United States and of of Constitution and laws the State Texas.” Appellant of of here further insists that over appellant’s protest, the court below submit the cause to a jury “Despite did recog- body nized such a inability to deal adequately with of . proof , despite appellant’s that nature . . vigorous of protest to extricate this efforts itself situation ...”
The Constitution of United States does prohibit not jury, Amendment, trial but the Seventh by judicially con- strued a limitation on the federal government,6 provides:
“In law, at common where the Suits value in con- dollars, troversy twenty shall exceed right trial by of no fact jury preserved, by be tried shall a jury shall in any be otherwise reexamined Court of the United according than to the rules States, of the common law.” in 18557 that “The
This Court said words, ‘due process undoubtedly were law,’ convey of intended to the same words, ‘by meaning as law the land’ in Magna 8 Again said: Charta.” this Court 6 243, 247; 7 Baltimore, Barron v. Pet. Edwards v. 21 Wall. Elliott, 532, 557.
7 Murray’s
Lessee v. Hoboken Land &
Imp. Co.,
“When Charta his by judgment peers etc., be ‘but deprived life, to a trial twelve referred byor the law the land/ from Eng- to this emigrated country Those who jurors. great this their privilege with them ‘as brought land ‘The birthright and trial ... inheritance, country, prin- is esteemed one jury justly one’s greater Constitution; our what cipal excellencies of or any life, liberty estate, security person can have his any or of, injured sure of divested being than not these, and verdict of twelve honest without the sense . men his . .’” impartial neighborhood? or of our spirit There the letter Constitu- nothing amendment, deprives any tion or constitutional *25 by of fact to a trial right jury. to issues state of the submit determina- preference indicates no for That Constitution by by judges. or masters judges appointed tion of facts contrary, Constitution, the our Federal the Con- On State our a national tradition demonstrate well- stitutions, by for preference jury. established trial of of the made to the objections acceptance “One the it from the of the Convention as came hands Constitution express in the not, words, preserve of 1787 was it did that by jury, it, and that under tried right by trial facts of by be reexamined the the United could courts jury of the according than to otherwise the rules com- States was intended mon law. The Seventh Amendment to to objections, deprive meet these courts of any authority.”9 such the United States of in reasoning just Further, the case referred “Upon 9 Murray, Wall. would to Justices v. 278] [The last to clear that clause the Seventh seem by this court of the facts retrial Amendment forbids . . . jury present in the case. by the tried Q. 226, 243. Chicago, v. 166 U. S. Chicago, B. & R. Co. in evidence opinion if were of view of the “. . Even we . finding right, in that no jury that erred money, in had been taken substantial value of the of a street opening reason company, railroad cannot, reex- ground, we on that right way, across its state court. We are judgment amine the of whether final permitted inquire pre- the trial court only guidance jury law any scribed rule of disregard company’s right just in absolute compensation.”10 cause tried in the courts of Texas accordance
This cases. regular applicable with to such procedure jury provided The facts were submitted State, harmony with constitution and laws of of this nation. Under these people the traditions of the “due circumstances, proper interpretation no words Amendment, the Fourteenth process of law” contained has been justify can the conclusion to that “due contrary process.” of its property deprived Orleans, In this Court Davidson v. New October, 1877, the Fourteenth Amend- discussing 105—in U. S. ment—said: be, or under whatever other may this
“But however case, may we review the Constitution clause of the Federal has, without due party hold that a not possible it is law, when, of his deprived property, been process of has, affecting by the laws it, he regards the issues *26 according to the justice, in State, a trial a fair to such a case.” applicable proceeding modes of affirmance. I concur in the McReynolds and Mr. Mr. Justice opinion of
Separate Butler. Justice opinion judg- I are of that the
Mr. and Butler Justice reversed. We adhere to the be ment under review should Id., 244, announced in Ohio Valley doctrine Co. v. Ben Avon Bor 253 U. ough, S. often and reaffirmed. When rates a fixed service public corporation by an administrative body alleged are confiscatory be the Federal Constitu requires tion that fair opportunity be afforded for submit ting controversy judicial to a tribunal for determina tion its independent judgment own both as lawto and facts. Here such opportunity has been denied. 13, 1933,
June the Texas Railroad Commission directed to observe a new schedule of By rates. bill presented to the United District States Court June 1933, appellant challenged .this action as confiscatory. July 26, 1933, began the Commission this in proceeding state court filing original petition which, among other alleged— things,
“Notwithstanding defendant’s remedies are adequate complete and the courts this State, and notwith- standing constitutional every legal and right to which it may be entitled is and will fully safeguarded and pro- tected in said court, defendant, nevertheless, elected to did, day on or about the 29th of June, 1933, file its bill complaint the District Court of the United States for the of Texas, Southern District Laredo Division, in a cause entitled, Cas Public Service Company, United A. plaintiff Smith, al., v. Lon et defendants, No. 32 in cause Equity, being your a wherein defendant plaintiff and wherein each and all of your plaintiffs are defendants, except the State of Texas. . . .”
“In said action said United States District Court, United Gas Public Service Company alleges in substance and effect that the order entered the Railroad Com- mission of Texas fixed and prescribed rate confiscatory used and useful public service, is unconstitutional alleged that said order and upon said temporary allegation restraining order out [obtained] your enjoining restraining plaintiffs of said court
Oi Ox Texas) compelling the State of (except each themof your or defendant observe said attempting compel order of said Commission.” attempting allege that defendant' is
“Plaintiffs of the the lawful order the laws of this and evade State rates fixing prescribing Railroad of Texas Commission gas for of natural charges the distribution and sale City and that Laredo, charg-. within the limits of by Railroad a rate in of that ing prescribed excess are suf- Commission, plaintiffs herein, them, each adequate is no fering irreparable injury, there by remedy prescribed the laws of this State which will protect public interest involved and rights herein.” plaintiffs are of having
“Plaintiffs desirous the constitutional questions involved in the being attack made United Gas Public Service Company upon the Commission’s order heard and determined in the courts this State, and to that end desire this court to a enter stay pro ceedings in accordance with the provisions of Section 38 [380*], Title U. S. C. to the end all pro ceedings in the district of the courts United States will be stayed pending final determination of this cause in the courts of this State.” * 380, Title Sec. 28 U. C. . provided S. “. . It is further if hearing application
before the final of such a federal [to injunction] brought a suit shall have been in a court of the State jurisdiction having thereof under the laws such State, to enforce order, accompanied by such statute or stay in such State court of proceedings under such statute or pending order the determination such suit court, such proceedings State any all court of the United restrain States to the execution of such statute or order shall stayed pending the final determination of such suit in the courts stay may of the State. upon proof Such be vacated after made hear- ing, days and notice of attorney ten served general State, that being the suit in the prosecuted State courts is not with diligence good . faith. . .” *28 in in of an court the nature “This action is this filed Civil terms of Article Revised under the appeal plain- taken because the appeal but not Statutes, such charges and dissatisfied with rates tiffs herein are primarily in Commission’s said but order, prescribed jurisdiction of this for purpose protecting finally to and determine Court its venue hear if in enforce the controversy order, and to said .matters upon hearing.” be determined be valid final should defendant appear The asked: That petition ap- final have answer; upon plaintiffs that trial that defendant be from propriate judgment; enjoined by rates other than those fixed the Com- charging any that an mission; pro- also order issue further staying ceedings pending the Commission termination suit, this &c.
July, 1933, the state court entered order as stay 17, 1933, August Commission’s prayed. appli- States District Court all cation, United ordered that in court action proceedings stayed, pending final by the state court. indicated, appellant unwillingly
Under the compulsion in and filed an appeared setting the state court answer rights up its under the Federal Constitution. The matter for novo. supposed to stand de hearing Voluminous both presented evidence sides. objections definite Notwithstanding appellant’s instructions, a duly presented requests adequate its for single jury. you issue “Do find was submitted to the bearing the order of of Texas the Railroad Commission 13, 1933, gas date June for a cent fifty-five providing Laredo, city rate to within the residential consumers Texas, you, under the facts introduced evidence before unjust Gas is unreasonable and United defendant, ‘Yes,’ Company? question Public Service Answer this ” “No,” or ‘No.’ jury judgment The answered affirming in part the Commission’s order was entered. Court Appeals The of Civil took the cause for review upon the record made the District Court. fol- lowing excerpts its opinion sufficiently indicate the reasons which moved it to sustain partly partly the judgment overrule of the trial court and finally action in toto. approve the Commission’s “We have reached not the conclusion that appellant only failed to establish its rendi- claim reversal and judgment favor, tion of but that when in the viewed *29 in light the favor of the the presumption validity of order, quantum Commission’s rate and charac- required ter of to overcome such proof presumption, evidence law, adduced was as a matter of insufficient, 55‡ to show that unjust rate order was either confiscatory. In unreasonable or view of this conclusion, in II.’ questions all Tart practice presented the brief go out of the case.”
“In of an rate, absence actual test of the the court on must all against resolve doubts appeal complaining down valuations and the rate party; pare unsparingly; clearly confiscatory, must to be or appear unjust and the court by injunction unreasonable before should restrain its enforcement in advance of actual experience practical results of the rate.”
“That actual test of the any practical advance rate, of the new the court on will appeal result not dis- it is upon conflicting turb the rate where based evidence any or as to other property, to valuations item used the calculation of the rate; as a basis for because do so merely findings would substitute of the court or jury conflicting evidence for that of the Commission, and the court to therefore exercise the permit would legislative v. Shupee, rate-making. R. R. Commission function of 73 W. (2d), 295; (2d), 57 W. affirmed S. S. And 'resolving against’ appellant, all doubts ‘and using pared unsparingly,’ valuations down there could judicial no reasonable doubt mind
have been confiscatory unjust nor rate was neither un- 55‡ Gas 258 U. Co., S., reasonable. Newton v. Consolidated 165.”
Considering Appeals the rules which Court of Civil trial, quite evidently appellant applicable declared no submit law and facts adequate opportunity had fair controversy judicial to a tribunal for relevant to the according independent judgment. to its own determination required to accept weighty presumptions' A tribunal against pare all defendant, it, resolve doubts against judgment to the utmost refuse down valuations conflicting to valuations its favor when the evidence elements, independ- could not reach important other or law and facts—could not judgment respect ent fair determination. To us the judicial at a arrive empty courts seem an show. in the state proceedings WATER CO. ex rel. CONSOLIDATED v. NEW YORK MALTBIE et al. *30 Decided February 14, Argued February 1938.
No. 380. George Mr. H. Burgess, with whom Thayer Mr. brief, appellant. Kenny was on the