Baltimore Transit Co. v. Hessey

• Decision Date: 27 July 1950
• Docket Number: 51.
• Citation: 75 A.2d 76,196 Md. 141
• Parties: BALTIMORE TRANSIT CO. et al. v. HESSEY et al.
• Court: Maryland Court of Appeals

75 A.2d 76

196 Md. 141

BALTIMORE TRANSIT CO. et al. v. HESSEY et al.

No. 51.

Court of Appeals of Maryland.

July 27, 1950

Clarence W. Miles, Baltimore (Henry H. Waters and J Stanislaus Cook, Baltimore, on the brief), for appellants.

Charles D Harris, General Counsel, and Philip H. Dorsey, Jr. People's Counsel, Public Service Commission.

John J. Ghingher, Jr., Asst. City Sol., Baltimore (Thomas N. Biddison, City Sol., and Edwin Harlan, Deputy City Sol., Baltimore, on the brief), for Mayor and City Council of Baltimore.

Before MARBURY, C. J., and DELAPLAINE, COLLINS, GARSON and HENDERSON, JJ.

HENDERSON, Judge.

On January 4, 1950 The Baltimore Transit Company and its wholly owned subsidiary The Baltimore Coach Company applied to the Public Service Commission of Maryland for authority to increase its fares from a basic 12 1/2 cent fare to a basic 15 cent fare per passenger. After an extended hearing the authority was denied on May 25, 1950, without prejudice to the submission of other proposals for change in or modifications of the fare structure. The Companies declined to submit other proposals and appealed to the Circuit Court No. 2 of Baltimore City where the case was heard upon the bill and demurrer of the Public Service Commission and the answer of the City of Baltimore, intervenor. From an order dismissing the bill filed June 13, 1950 an appeal was taken to this Court and advanced for prompt determination.

The complete transcript of testimony taken before the Commission, with exhibits produced by the parties, was filed with the bill of complaint. Judge Niles, in his written opinion, briefly disposed of any procedural difficulties in the following words: 'My view is that the present order of May 25, 1950 is not procedural or interlocutory, and that it is a final order upon a basic question. Even though the present order extends an invitation to the Transit Company to submit further proposals, and is without prejudice to the right to submit such proposals, nevertheless if none are submitted, the order finally disposes of the case. The order is therefore appealable, and these proceedings are properly brought.' The appellees do not contend that the order was interlocutory, but argue nevertheless that the rejection of the applicants' proposal cannot be deemed confiscatory, since it left the door open for future proposals.

The evidence is perfectly clear and undisputed that under existing rates the Companies are operating at a loss. As stated by Judge Niles, 'the essential fact is that the Transit Company is now operating at a loss of approximately $1,700,000 per year upon the present basic fare of 12 1/2 cents, and the Transit Company asserts that it is faced with bankruptcy unless the fare is raised to 15 cents. Expert testimony for the Transit Company indicates that such an increase in fare would reduce the number of passengers carried, but would probably result in a net profit of $952,100 per year, or a return of 3.1% upon the fair value, or rate base, of the Company of $30,554,000. Expert testimony for the People's Counsel indicates that while such an increase of fare would temporarily convert the present operating loss into a profit of $530,000, or 1.7%, nevertheless such relief would be only temporary; it would not constitute a permanent solution of the Transit Company's financial problem * * *.' In its brief the Public Service Commission makes the flat admission: 'Certainly, the present fares would be confiscatory if the Commission either approved them as a permanent fare basis, or rejected any reasonable method of financial relief proposed by the company. There is no dispute on this point.' Nor can there be any dispute that the proposed increase in revenues would not yield an excessive return, or even a reasonable return, upon the value of the Companies' property. Manifestly, an operating deficit cannot be converted into a profit except by an increase in operating revenue, derived almost wholly from fares, or by a decrease in operating expenses.

The Commission possesses a wide discretion to approve or disapprove a particular rate schedule and its decisions are prima facie correct. But an order will be set aside if the Commission exceeds its jurisdiction or arbitrarily disregards the rights of the parties. Hessey v. Capital Transit Co., Md., 66 A.2d 787, 789, 10 A.L.R.2d 1114, and cases cited.

In that case we held that the Commission's refusal to permit the abandonment of an unprofitable line was unreasonable and arbitrary under the circumstances. In the earlier case of Capital Transit Co. v. Bosley, Md., 62 A.2d 267, 271, we held that an order rejecting an application for a general fare increase was unlawful, where the Company was losing money on its operations in Maryland, because conditioned upon the allowance of a 3-cent fare for school children, less than cost. It was said: 'We think it is impossible to justify the three-cent fare for school children and that the Commission's order is arbitrary, unsupported by substantial evidence and unlawful. The Commission's opinion demonstrates that the existing fares are unreasonable and the new fares are not more than reasonable. Yet its order purports to find that existing fares are reasonable until fares for school children are decreased and plaintiff's losses thus increased'. In both of these cases the fact that the Company was operating at a loss was the controlling factor which made denial of the relief sought unreasonable.

The Commission argues, however, that it acted within its powers in rejecting the proposal because it invited alternate proposals looking towards an increase in fares. But the result was to continue in effect the confiscatory rates, without any present relief. Augusta-Aiken Ry. etc., v. R. R. Comm., 4 Cir., 281 F. 977. 'Present confiscation is not atoned for by merely holding out the hope of a better life to come.' West Ohio Gas Co. v. Public Utilities Comm., 294 U.S. 79, 83, 55 S.Ct. 324, 325, 79 L.Ed. 773. 'The continued enforcement of the rate would operate to take appellee's property without just compensation, and to compel it to suffer daily confiscation. Notwithstanding the matter was pending on rehearing, the appellee had the right to sue in the federal court to enjoin the inforcement of the rate. It was not bound to await final action by the commission, and, if the rate was in fact confiscatory, to serve in the meantime without just compensation.' Banton v. Belt Line, 268 U.S. 413, 45 S.Ct. 534, 535, 69 L.Ed. 1020. 'It is as clear a violation of the Constitution, and one as promptly remediable in the national courts, to take the property of a railroad company without just compensation by the enforced operation of tentative rates during the process of their making as by the operation of final rates after that process is complete.' Love v. Atchison, Topeka & S. F. R. Co., 8 Cir., 185 F. 321, 327.

The case of City of Pittsburgh v. Penn. P. U. C., 165 Pa.Super. 519, 69 A.2d 844, relied on by the appellees, is not to the contrary. There the proposed rate had been put into effect by the Commission, and the remand of the case for further consideration of a proper rate schedule left the schedule as proposed and approved in effect. The remand was apparently based solely on the ground that the evidence did not show affirmatively that the rates were non-discriminatory, presumably a requirement of the Pennsylvania Statute. But the Court seems to have recognized that rates need not be proportionate to the distance travelled. We have held that a classification of rates is permitted but not required. Lewis v. Mayor & City Council of Cumberland, 189 Md. 58, 68, 54 A.2d 319.

The Commission seems to have recognized the difficulty, for it said 'The Company will no doubt feel that it should not be denied any relief pending the studies along...