City of Milwaukee v. R.R. Comm'n

• Citation: 206 Wis. 339,240 N.W. 165
• Parties: CITY OF MILWAUKEE v. RAILROAD COMMISSION ET AL.
• Decision Date: 12 January 1932
• Court: United States State Supreme Court of Wisconsin

206 Wis. 339

240 N.W. 165

CITY OF MILWAUKEE

v.RAILROAD COMMISSION ET AL.

Supreme Court of Wisconsin.

Jan. 12, 1932.

Appeal from a judgment of the Circuit Court for Dane County; August C. Hoppmann, Circuit Judge.

Action by the City of Milwaukee against the Railroad Commission of Wisconsin, the Milwaukee Electric Railway & Light Company, and others, wherein defendant last named filed a cross-complaint. From a judgment dismissing the complaint and cross-complaint, the City appeals, and defendant last named serves notice to review the judgment in so far as the court refused to set aside a portion of an order of the Railroad Commission.--[By Editorial Staff.]

Reversed and remanded, with directions.

Action was commenced on May 20, 1930, by the city of Milwaukee, to set aside an order of the Railroad Commission of Wisconsin, entered May 1, 1930, fixing the street railway rates of fare and the fare zones of the defendant the Milwaukee Electric Railway & Light Company, in the city of Milwaukee and neighboring territory. The order increased the rates of fare in the city of Milwaukee, and extended the single fare area so as to include all the territory within a radius of five and one-half miles from the intersection of Sixth street and Wisconsin avenue in said city. The Milwaukee Electric Railway & Light Company, by answer and cross-complaint, admits that said order is unlawful and unreasonable in fixing as a single fare area a circle having the radius referred to in the complaint, but it alleges that such infirmity in said order results from the fact that this defendant is deprived of a reasonable return; and it denies that said order loads the city of Milwaukee and its traveling public with an unreasonably high rate of fare or with a rate of fare which is even equal to the cost of service plus a reasonable return; and seeks relief from that portion of the order which abolished the first two suburban zones and deprived the transportation system of all additional fare revenue theretofore derived from such zones. After a trial of the issues joined by answers filed by the Railroad Commission and ten other municipalities in Milwaukee county, who were also made parties defendant, the circuit court entered judgment on October 2, 1930, dismissing the complaint and cross-complaint. The city of Milwaukee appealed from that judgment, and the Milwaukee Electric Railway & Light Company served notice, under section 274.12, Stats., to review the judgment in so far as the court refused to set aside that portion of the order of the Railroad Commission of Wisconsin of May 1, 1930, which abolished the first and second suburban zones, and deprived said respondent of all revenue therefrom.John M. Niven, City Atty., of Milwaukee, for appellant.

John W. Reynolds, Atty. Gen., Samuel Bryan, Asst. Atty. Gen., Shaw, Muskat & Sullivan, Joseph F. Schoendorf, Albert B. Houghton,C. R. Dineen, Maxwell H. Heriott, George H. Gabel, and Hubert O. Wolfe, all of Milwaukee, Edward G. Minor, of Cudahy, and Laurence C. Gram, of West Allis, for respondents.

FRITZ, J.

The proceedings before the Railroad Commission were commenced by a petition filed by the Milwaukee Electric Railway & Light Company (hereinafter called the railway company), in which it alleged that the rates of fare on its system were inadequate; that it had been compelled to use part of its earnings from the electric light and power business, in which it was also engaged, to make necessary extensions and improvements of its street railway, and that it doubted the propriety of such diversions of money from its light and power earnings; that it requested an examination of the characteristics of the existing single fare area and the grant of such rates as would enable the railway company to earn a fair return. The company offered to place in effect reduced rates for electric current equal to whatever increased revenues were realized from the increase in fares. The city of Milwaukee petitioned that the existing single fare area be extended to include the former city of North Milwaukee, and also other territory, which had recently been annexed. Ten adjacent municipalities, which are in the Milwaukee metropolitan area and are served by the same railway system, also filed petitions.

The commission in its decision said: “In prescribing rates we must deal with the system as a whole. * * * All of the suburban and city systems should be handled as one system serving one metropolitan area. * * * Since the original zone prescription the areas in which zone fares apply have undergone a growth commensurate at least with the growth of the single fare area. These zones still fail to pay their way, but with the development of the areas they appear each year to be less of a drain upon the system. The time has arrived, we believe, when it will be entirely consistent and proper to eliminate some of this zone area and include it in a single fare area. It is to all intents and purposes today a part of the area served by the urban system and we see no reason why it should not be included.”

The commission found that during 1928 the railway company failed to earn a fair return on the rate base in the single fare and suburban areas; that the single fare area should be extended so as to include all lines within a radius of 5.5 miles from the traffic center, instead of only 3.7 as theretofore, as a result of which the first two extra fare suburban zones were included in the single fare area; that a reasonable fare, within the single fare area, is 10 cents or six tickets for 50 cents--instead of the former rate of 7 cents or eight tickets for 50 cents--or a weekly bearer pass for $1; that for each zone of approximately one mile, and lying beyond the new single fare area, the fare should be 3 cents or twenty tickets for 50 cents, instead of twenty-five tickets for 50 cents as theretofore. Details as to minimum fares within zones, reduced fares for minors, etc., which are immaterial on this appeal, were also provided for. In its decision the commission said:

“The additional revenues of approximately $400,000 which this order contemplates will not give a fair return upon the value of the railway property. However with conditions in the street railway business as they are it would not be possible to prescribe rates of fare which would assure the Company a return of 7 1/2%.”

[1][2] On its appeal the city of Milwaukee assigns as error that the circuit court and the commission erred in holding that the Railroad Commission was authorized to adopt the regional unit system for rate-making purposes, and to disregard city limits in fixing a single fare area, which included suburban territory that had failed to pay its own way, whereby some of the burden of suburban transportation was loaded on the city of Milwaukee. The city of Milwaukee contends that, prior to and since the creation of the commission, the city of Milwaukee was the recognized unit in providing street railway service for its inhabitants, and that no express authority was given by statute to the commission to disregard the city limits in fixing rates, and no such power will be implied. The city relies on the decision in Eau Claire v. Wis.-Minn. L. & P. Co., 178 Wis. 207, 189 N. W. 476, which held that the commission was not authorized to treat a group of cities as a unit in fixing the rates of a public utility for electric current, but that each municipality constituted a unit. That decision related to public utility rates and not to street railway rates; consequently, it is not controlling in the case at bar. Even as to public utility rates section 196.03, Stats., was amended after that decision by chapter 390, Laws of 1929, so as to authorize the commission to consider two or more municipalities as a unit “if in its opinion the public interest so requires.” The opinion in the Eau Claire Case expressly recognized the rule followed in M. E. R. & L. Co. v. R. R. Com., 171 Wis. 297, 177 N. W. 25, as to railway rates, viz., that the true test of the reasonableness of a rate is its effect upon the entire railway system,--suburban as well as urban,--which is operated by the railway as a common carrier, regardless of whether a particular part thereof is operated at a profit or a loss under the prescribed rates. The “entire system” as found by the commission under the evidence in this case consists of the suburban and city system which serves the one metropolitan area, consisting of eleven political and municipal units, which together constitute but one contiguous, compact, and quite homogeneous community. The evidence warranted that finding, and the commission's announcement, after extended consideration, with the advantage and benefit of the expert technical knowledge which was at its disposal, must be accorded the greatest deference, and should be set aside only with great caution and reluctance. Eau Claire v. Wis.-Minn. L. & P. Co., supra; Oshkosh W. W. Co. v. R. R. Com., 161 Wis. 122, 127, 152 N. W. 859, L. R. A. 1916F, 592.

[3][4] If the former single fare area had produced sufficient to enable the railway to earn a fair return on the rate base for that area, in 1928, so that no increase in fare for that area would have been warranted, city patrons might have been prejudiced by the addition of an unprofitable extra fare zone to the existing single fare area, in immediate connection with a contemporaneous increase in the single fare for the new enlarged single fare area. But, as insufficient revenue in 1928, to yield an adequate return upon the rate base, necessitated an increase in fare for the then existing single fare area at all events, the order increasing the fare cannot be considered unreasonable or unlawful so as to justify the setting aside thereof by a court (section 196.46, Stats.) solely because of an increase in fare. That increase was necessary and proper at all events under the evidence and the findings of the commission. Whether, in...