Alabama Public Service Commission v. Mobile Gas Co.

Decision Date16 April 1925
Docket Number3 Div. 691
Citation104 So. 538,213 Ala. 50
CourtAlabama Supreme Court

Appeal from Circuit Court, Montgomery County; Leon McCord, Judge.

Bill in equity by the Mobile Gas Company against the Alabama Public Service Commission and the members thereof, for injunction etc. From a decree overruling demurrer to the bill respondents appeal. Affirmed.

Harwell G. Davis, Atty. Gen., and Hugh White, Sp. Asst. Atty. Gen for appellants.

Harry T. Smith & Caffey, of Mobile, for appellee.


The bill exhibits the mortgage of 1921 under which appellee is prepared to issue bonds, the petition to the Commission for the permit to issue bonds in a certain amount, the grant of the same, and the order of refusal of the subsequent petition for the additional issue. The underlying mortgage of 1910 is not before us. The opinion of the Commission accompanying and referred to in the order, and thus sought to be made a part thereof, is not set out in the bill with the order of the Commission.

The failure to set out the opinion is challenged by demurrer. The assignment of error must be directed to the irregularity or invalidity of an order, judgment, or decree; the question for the appellate court being whether that judgment is correct, not whether the ground upon which it professes to proceed is tenable. McClung v. Silliman, 6 Wheat. 598, 5 L.Ed. 340; Williams v. Norris, 12 Wheat. 117, 6 L.Ed. 571; Davis v. Packard, 6 Pet. 41, 8 L.Ed. 312. Such is the rule in this court. Alabama Water Co. v. City of Attalla, 211 Ala. 301, 100 So. 490, 493; Alabama Public Service Commission v. Western Union Tel. Co., 208 Ala. 243, 94 So. 472. The better and more convenient practice is to exhibit the opinion with the order, and the agreement of parties to attach the opinion will be observed in the circuit court.

The assignment of error challenging the rendition of the order was sufficient; the many grounds of demurrer were addressed to the right of maintenance of the bill. N.C. & St. L. Ry. Co. v. Blackwell, 201 Ala. 657, 79 So. 129.

The terms of the underlying mortgage are not before us. In its absence, construing the pleading most strongly against the pleader it contained no material contract provisions pertinent to this inquiry as to extension or refunding of said bonds on and after the law day. The fact is adverted to in argument that the mortgage of 1921 contained applicable provisions for the proposed bond issue in sections 6 and 8 of article 1. It provided that the proceeds of the sale of bonds authorized to be used in property additions, acquired or constructed by the company since November 30, 1921, shall not exceed 80 per centum of the actual and reasonable cost of permanent extensions, enlargements, and additions "of and to the property then owned or thereafter acquired by the company, including any additional plant or property acquired by the company, but not including the cost of (1) any shares of stock or bonds or securities, or (2) any improvements or additions necessary for the proper maintenance of the property covered by the lien of this indenture." The provisions of section 8 of article 1, referred to in section 6, are limitations on the right of authentication and delivery of bonds under section 6, article 1, providing, among other things:

"No bonds shall be authenticated and delivered under section 6 of this article (1) unless and until the earnings of the plants and properties of the company, in excess of operating expenses (including in such operating expenses taxes, insurance, and a proper expenditure for or allowance to provide for repairs and maintenance of its plants and property), for twelve consecutive calendar months, ending not more than sixty days prior to the application for the certificate and delivery of such bonds, shall have been not less than one and one-half times the annual interest charge upon (1) all bonds then outstanding under this indenture and those applied for, and (2) all other outstanding indebtedness secured by a lien or liens prior to the lien of this indenture upon all or any part of the mortgaged property."

The mortgage of 1921 recognized the superior lien of the underlying mortgage as being "prior to the lien of this indenture upon all or any part of the mortgaged property." This is shown by provisions contained in section 9, article 1, of the mortgage of 1921. Thus was recognized by the parties to this mortgage the possible necessity of a larger issue than 80 per centum of value that might be incurred as the "cost of (1) any shares of stock or bonds or securities, or (2) any improvements or additions necessary for the proper maintenance" of the property covered by the mortgage. We are not impressed that the action of the Commission may be justified by such contract provisions of said mortgage.

The police power of the state to reasonably supervise, regulate, and prescribe rates for public utilities has been jealously guarded; it has been held that it may not be abridged or suspended by contract between citizens of the state, or by a municipality and its citizens. Alabama Water Co. v. City of Attalla, 211 Ala. 301, 100 So. 490; Union Dry Goods Co. v. Georgia Public Service Corp., 248 U.S. 372, 39 S.Ct. 117, 63 L.Ed. 309, 9 A.L.R. 1420.

The authority of the Public Service Commission to regulate the issuance of securities by public utilities is given statement in the act approved October 1, 1920. Gen. and Local Acts, Sp.Sess.1920, p. 38 et seq. That part of the act which applies to issuance of securities is found as sections 7944-9756 of the Code of 1923, which provide: That the Commission has authority over the issuance, guarantee, or assumption of securities by public utilities (Code, § 9744). That it shall authorize the issue of such securities only when it finds that such issue or assumption (a) is for some lawful object within the corporate purposes of the utility; (b) is compatible with the public interest; (c) is necessary or appropriate for or consistent with the proper performance by the utility of its service to the public as such utility, and will not impair its ability to perform that service; and (d) is reasonably necessary and appropriate for such purpose. And "the Commission shall specify the purposes for which any such securities or the proceeds thereof may be used by the utility making such application." In the matter of an original issue or assumption of securities by a utility on application to that end, these things must enter into the exercise of the authority vested in the Commission.

The function of the Commission in regulating the issue and assumption of securities by utilities is a part of its general and exclusive powers and jurisdiction to regulate and supervise every utility in respect of its rates, service regulations, etc., its franchises, licenses, and contracts, in so far as they affect said rates and service regulations, and in respect of its financing and securities in accordance with the provisions and subject to the reservations of the Public Utility Act of 1920, and its due administration under the federal decisions and the Constitutions of the state and the United States. Gen. and Local Acts, Sp.Sess.1920, pp. 38, 40, 45; Code 1923, §§ 9741, 9744-9756. See State v. Goldstein, 207 Ala. 575, 578, 93 So. 308, for authorities; Hall v. Geiger-Jones Co., 242 U.S. 539, 37 S.Ct. 217, 61 L.Ed. 480, L.R.A.1917F, 514, Ann.Cas.1917C, 643; Alabama Water Co. v. City of Attalla, 211 Ala. 301, 100 So. 490. The powers imposed upon the Commission by the Legislature to regulate public utilities fall within the exercise of the police power--the "least limitable" of the exercise of government.

A statute of the state is tested by the fact whether the enforcement of it abridges the privileges or immunities of citizens of the United States, deprives any person of life, liberty, or property without due process of law, or denies to any person within its jurisdiction the equal protection of the law. Amendment 14, Rights of Citizens, United States Constitution Anno. p. 200. In Hall v. Geiger-Jones Co., 242 U.S. 539, 548, 37 S.Ct. 217, 220, 61 L.Ed. 480, 488, L.R.A.1917F, 514, Ann.Cas.1917C, 643, the court said, of the necessary limitations of the police power as affecting the rights of persons relative to private property:

"We get no accurate idea of its limitations by opposing to it the declarations of the Fourteenth Amendment that no person shall be deprived of his life, liberty, or property without due process of law, or denied the equal protection of the laws. Noble State Bank v. Haskell, 219 U.S. 104, 110, 55 L.Ed. 112, 116, 32 L.R.A. (N.S.) 1062, 31 S.Ct. 186, Ann.Cas.1912A, 487. A stricter inquiry is necessary, and we must consider what it is of life, liberty, and property that the Constitution protects. What life is and what may or may not affect it, we have quite accurate tests; and what liberty is in its outside sense, and, in like sense, what property is. We know that it is of the essence of liberty--indeed, we may say, of life--that there shall be freedom of conduct, and yet there may be limitations upon such freedom. We know that, in the concept of property, there are the rights of its acquisition, disposition, and enjoyment, in a word, dominion over it. Yet all of these rights may be regulated."

And as to the test of a due administration of the law by state authorities, the Supreme Court of the United States said:

"*** In determining whether an order of the Commission shall be suspended or set aside, we must consider (a) all relevant questions of constitutional power or right; (b) all pertinent questions as to whether the administrative order is within the scope of the delegated authority under which it

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