Arizona Corp. Commission v. Mountain States Tel. & Tel. Co.

• Decision Date: 12 March 1951
• Docket Number: No. 5352,5352
• Citation: 228 P.2d 749,71 Ariz. 404
• Parties: ARIZONA CORPORATION COMMISSION et al. v. MOUNTAIN STATES TEL. & TEL. CO.
• Court: Arizona Supreme Court

Page 749

228 P.2d 749

71 Ariz. 404

ARIZONA CORPORATION COMMISSION et al. v. MOUNTAIN STATES TEL. & TEL. CO.

No. 5352.

Supreme Court of Arizona.

March 12, 1951.

Fred O. Wilson, Atty. Gen., Richard C. Briney, Asst. Atty. Gen., and Mr. Joseph P. Ralston, Phoenix, of counsel, for appellants.

Fennemore, Craig, Allen & Bledsoe, of Phoenix, and J. H. Shepherd, Denver, Col., of counsel, for appellee.

LA PRADE, Justice.

The Mountain States Telephone and Telegraph Company, a public service corporation engaged in the telephone business in Arizona and elsewhere, hereinafter called the company, on January 26, 1949 applied to the Arizona Corporation Commission, hereinafter called the commission, for permission to raise its telephone rates for its intrastate exchange and long distance telephone service, theretofore fixed for the company by the commission, on the ground that the same were not just and reasonable and were confiscatory. After a full hearing, at which much evidence was presented, all requested increases were denied by the commission on July 29, 1949. On August 9th a petition for rehearing was filed, which was granted, and a rehearing was had October 24th through October 28th at which additional evidence was presented. On November 4th, any increase was again denied.

On November 12th a suit to set aside these orders was commenced in the Superior Court of Maricopa County and on November 29th the company filed a motion for temporary relief by allowing it to charge certain rates set forth in the motion, and it was stipulated that the motion and the case on its merits might be considered on the record and evidence already made before the commission and a certain transcript of evidence in an independent matter, a complaint upon the telephone service in the Bisbee exchange. The whole case was argued and briefed and the court finally rendered its judgment on February 28, 1950, upon its findings of fact, that:

(a) the previous schedule of rates retained by the orders of the corporation commission do not provide a fair and reasonable return on the company's property and result in the confiscation of the company's property, contrary to the provisions of law;

(b) that the commission failed to find the fair value of the company's property, and the fair rate of return to be allowed thereon;

(c) that although the commission found a deficiency in the existing telephone facilities, they failed to make an allowance for a fair return on the additional investment required to create such facilities;

(d) that a deficiency still exists in the quantity of facilities available;

(e) and that confiscation of the company's property will continue to exist under the then existing schedules pending a determination of just and reasonable rates by the commission.

'(f) Pending the action of the defendant commission in fixing a just and reasonable schedule of rates, the telephone subscribers and rate payers in Arizona should be adequately protected against imposition of unjust and unreasonable rates by requiring the plaintiff to post a bond in an amount to be determined; the condition of such bond being that should the rates which the plaintiff puts into effect be higher than the rates which are finally determined to be just and reasonable, then plaintiff will refund to its subscribers the excess which it has collected over and above the amount the plaintiff would have collected had the rates finally determined to be just and reasonable been in effect; that if the rates finally determined to be just and reasonable are equal to or more than the temporary rates to be placed in effect, then the bond shall be discharged.'

The judgment decreed:

1. That the orders appealed from were unlawful, and set them aside 2. Remanded the cause to the commission for a determination of the fair value of plaintiff's property devoted to the public service in the state of Arizona and the determination of a fair rate of return to be allowed thereon, and for the fixing of just and reasonable rates on the basis of such determination;

3. That pending the final determination of just and reasonable rates by the commission, the company might put into effect a schedule of rates which would prevent the confiscation of its property and required a bond to guarantee the refund of any charges made in excess of the rates to be established by the commission. This portion of the judgment was essentially in the language of finding (f), supra. Bond in the sum of $250,000.00 was fixed and posted.

From this judgment the commission appealed. While the notice of appeal is from the judgment and the whole thereof, the commission has presented only one assignment of error and that is addressed to paragraph 3 of the judgment, supra. Its arguments are addressed only to this assignment. Accordingly, the findings of the lower court, (a) to (e) both inclusive, supra, all remain unchallenged by this appeal. All of these findings have acquired the status of finality and fixed the law of the case as regards the commission's future action, regardless of the decision on this appeal.

At the time this case was submitted for decision in this court, nine months had elapsed during all of which time the commission had made no attempt to carry out the court's judgment and put into effect a schedule of rates that would not be confiscatory, evidencing a callous disregard of their duty, to the company's financial detriment. This want of consideration and indurate attitude toward the company and the judgment of the lower court is highlighted by the fact that no appeal is here presented from the judgment proclaiming that the rates theretofore established by the commission were unjust, unreasonable, and confiscatory.

Appellants recognize that there may be an appeal from the orders of the commission and that the courts have jurisdiction to set aside its orders fixing rates found by the courts to be confiscatory and hence in violation of the due process clauses of the state and federal constitutions, but they say that in Arizona--courts are precluded under our constitution from going any farther, and the courts' jurisdiction is thereupon terminated; in other words, the court has no power to permit the company to put into effect rates protected by bond pending further action by the commission. They contend that the court, having found and adjudged a wrong exists, has no inherent power to provide relief pending the correction of the unlawful commission orders. And finally, they contend the court's power and jurisdiction is limited to the right to order the commission to afford temporary relief by the fixing of temporary rates, pending further action by the commission, to be enforced by mandamus or contempt proceedings.

The sole question, therefore, before this court is one of jurisdiction, for in view of the fact that the record showed the commission had failed for nine months after the company had applied for relief to grant any, and that the trial court had reasons to believe such a situation would continue for an unreasonable time and in fact has continued for almost a year after judgment, it is obvious that unless in some manner there was immediately established a temporary rate which the company might collect it would have been compelled long since either to operate for an indefinite time with insufficient revenue or to suspend operations during this period, with consequences to business and society in Arizona truly appalling.

A similar question has arisen in many states and it has practically invariably been held that when, as here, the action is based on the claim that the existing rate fixed by public authority is confiscatory and therefore unjust and unreasonable, the proper remedy is for the court to allow the company to fix and collect, pending the determination by the court that a legal rate as been fixed by the proper public authority, a temporary rate on giving proper security for reimbursing its customers for the repayment of overcharges based on such rate if it be later determined to be excessive, and this is true when the rate-making body is established either by constitution, as in Idaho, Georgia, and other states, or by legislation as in Illinois, Pennsylvania, and Kansas. One of the leading cases dealing with this subject is City of Hutchinson v. Hutchinson Gas Co., 125 Kan. 346, 264 P. 68, 74. The court therein reviewed and considered many cases, and says:

'To conclude: When a gas rate prescribed by official authority has been set aside as noncompensatory by a court of competent jurisdiction, the utility company may prescribe and collect reasonable rates of its own making until other lawful rates are promulgated by official authority; and the ad interim rates prescribed by the utility company cannot be summarily enjoined by another district court in independent proceedings, although by proper ancillary proceedings the court which enjoined the officially prescribed rates as being too low may similarly enjoin the ad interim rates prescribed by the utility company if they are shown to be excessively high. * * *'

The same rule is approved in Corpus Juris, Vol. 51, Public Utilities Section 26, in this language: 'When rates established by the state or under its authority are set aside or otherwise become of no effect, a public utility has the right to establish its own...