City of Newport News v. Chesapeake & Potomac Tel. Co. of Va., 4625

• Decision Date: 21 January 1957
• Docket Number: No. 4625,4625
• Citation: 96 S.E.2d 145,198 Va. 645
• Court: Virginia Supreme Court
• Parties: , 17 P.U.R.3d 284 CITY OF NEWPORT NEWS v. THE CHESAPEAKE AND POTOMAC TELEPHONE COMPANY OF VIRGINIA. Record

Page 145

96 S.E.2d 145

198 Va. 645, 17 P.U.R.3d 284

CITY OF NEWPORT NEWS v. THE CHESAPEAKE AND POTOMAC TELEPHONE COMPANY OF VIRGINIA.

Record No. 4625.

Supreme Court of Appeals of Virginia

January 21, 1957.

Harry L. Nachman (Bert A. Nachman, on brief), for the appellant.

T. Justin Moore (George D. Gibson, John W. Riely, Stephen H. Fletcher, H. H. Walker Lewis, Hunton, Williams, Gay, Moore & Powell, on brief), for the appellee.

Oscar L. Shewmake and John C. Goddin, on brief, for Virginia Farm Bureau Federation, Intervenor.

JUDGE: BUCHANAN

BUCHANAN, J., delivered the opinion of the court.

This is an appeal from an order of the State Corporation Commission amending the General Exchange Tariff S.C.C.-Va.-No. 1 of The Chesapeake and Potomac Telephone Company of Virginia so as to provide, for use in this State with respect to all bills rendered on and after January 15, 1956, as follows:

'When a political subdivision of the state charges the company a license tax or franchise fee at a flat rate or based on receipts or based on poles, wires or conduits, such taxes and fees will be billed pro rata to the exchange customers receiving service within the political subdivision, if the aggregate amount of such taxes and fees exceeds one-half of one per cent of the aggregate bills of such customers for exchange service.

'Excluded from the foregoing adjustment are all franchise fees fixed by contract between the company and the locality before 1956.'

In Chesapeake & Potomac Tel. Co. v. Newport News, 196 Va. 627, 85 S.E.2d 345, decided January 17, 1955, we held to be valid an ordinance of the City of Newport News adopted on April 30, 1951, levying a license tax of 3 per cent of the company's gross receipts from business done in the city. On May 3, 1955, on application by the company and after a hearing at which Newport News and others appeared in opposition, the Commission approved an amendment to the company's tariff providing that a license tax based on gross receipts should be charged to exchange customers in the political subdivision imposing such tax. Thereafter the City on October 3, 1955, adopted an ordinance imposing a flat annual license tax of $30,000, which was about the same amount as would be realized from the 3 per cent tax on gross receipts.

Thereupon, on November 7, 1955, the company filed a further application for an amendment to its tariff so as to provide that its rate schedules should not include any license tax, however measured, or any pole, wire, conduit or similar street use tax or exaction, but 'insofar as practicable' any such tax or exaction would be billed to its exchange customers in the political subdivision imposing it. After due notice a hearing was had on that application on December 14, 1955, at which the cities of Newport News, Norfolk and Portsmouth and Henrico County appeared by counsel in opposition. Following the hearing the Commission entered its order disapproving the amendment applied for by the company, but approving an amendment in the language above quoted. The Virginia Farm Bureau Federation appeared before the Commission in favor of the application and on this appeal has filed a brief in support of the Commission's order.

The City of Newport News prosecutes this appeal and in its assignments of error asserts that the order so entered exceeds the constitutional and statutory authority of the Commission; that the order is arbitrary and without evidence to support it; and that it is discriminatory and an unreasonable exercise of the Commission's authority.

The Constitution of Virginia provides that the Commission is 'a department of government' (§ 156-a) and gives it the power and charges it with the duty of supervising, regulating and controlling all transportation and transmission companies doing business in this State, in all matters relating to the performance of their public duties and their charges therefor; and requires that it shall prescribe and enforce 'such rates, charges, classifications of traffic, and rules and regulations * * * as may be reasonable and just;' and the authority of the Commission, subject to appeal, to prescribe rates, charges and classifications of traffic for transportation and transmission companies 'shall be paramount;' but its authority 'to prescribe any other rules, regulations or requirements for corporations or other persons shall be subject to the superior authority of the General Assembly * * *.' (§ 156-b)

Section 56-478 of the Code provides that the Commission shall supervise, regulate and control all telephone companies doing business in this State in all matters relating to their public duties and their charges therefor, and shall establish such rates, charges, rules and regulations as may be reasonable and just; and § 56-480 directs that the Commission 'as often as circumstances may require,' shall change and revise any schedule of rates and charges rules, regulations or requirements so established.

In matters pertaining to the establishment of rates and charges of transmission and transportation companies, the Commission exercises a purely legislative function, and so far as such matters are concerned it is the legislative branch of the government. Norfolk v. Chesapeake, Etc., Tel. Co., 192 Va. 292, 300, 64 S.E.2d 772, 776. Its power in this connection is not limited merely to the change of a particular rate, but includes 'the power to change, under certain conditions, any part of a filed schedule, rate, rule or regulation that in any manner affects the rates charged or to be charged.' Norfolk v. Virginia Electric, Etc., Co., 197 Va. 505, 516, 90 S.E.2d 140, 148.

The power of the Commission to enter an order of the kind involved on this appeal seems clear. The constitutional limitation on this power is that the requirements of the order shall be 'reasonable and just.' On this issue we are required to regard it as prima facie just, reasonable and correct. Const., § 156(f).

The opinion of the Commission giving its reasons for its action (Const., § 156-f) was written by Commissioner Catterall and concurred in by Commissioners Hooker and King, the other two members. Its reasoning runs thus:

A corporation whose rates and charges are fixed by law is entitled to collect from the consumers enough gross income to pay all its expenses, which include taxes. The taxes paid by the company to a locality are used by the locality for the benefit primarily of the people who live there. If a locality can levy taxes that are paid mostly by people who do not live and vote there, self-interest will persuade it to rely on such taxes for the support of local government. When the legislature confers on a municipality the general power of taxation it grants all the power possessed by itself in respect to the imposition of taxes, and just as the General Assembly is the judge of what taxes are necessary and expedient to meet the needs of the Commonwealth, so the local legislature is the judge of what taxes may be levied within the limits of its delegated authority. Fallon Florist v. Roanoke, 190 Va. 564, 577-8, 58 S.E.2d 316, 322. No constitutional or legislative maximum has been placed on the amount of a validly imposed tax. If Newport News could levy a 3 per cent gross receipts tax on the company, as held in Chesapeake & Potomac Tel. Co. v. Newport News (supra, 196 Va. 627, 85 S.E.2d 345), it could impose a much higher tax. The only practical limitation on the taxing power lies in the restraint exercised on the taxing authorities by those who elect them to...