City of Woodburn v. Public Service Commission of Oregon

• Decision Date: 05 December 1916
• Citation: 82 Or. 114,161 P. 391
• Parties: CITY OF WOODBURN v. PUBLIC SERVICE COMMISSION OF OREGON ET AL.
• Court: Oregon Supreme Court

161 P. 391

82 Or. 114

CITY OF WOODBURN v. PUBLIC SERVICE COMMISSION OF OREGON ET AL.

Supreme Court of Oregon

December 5, 1916

In Banc.

Appeal from Circuit Court, Marion County; Wm. Galloway, Judge.

Suit by the City of Woodburn against the Public Service Commission of Oregon and another. From judgment for plaintiff, defendants appeal. Reversed, and suit dismissed.

The city of Woodburn was incorporated by an act of the Legislative Assembly in 1889; but, on June 30, 1909, the legal electors of the city exercised the right of home rule conferred by section 2 of article 11 of the state Constitution, and amended their charter by enacting that the common council shall have authority:

"To grant franchises in, through and upon the streets of the city for public uses and public benefits;" and "to regulate and control or prohibit the placing of poles for electric lights or other purposes, and the suspension of electric and other wires along on cross streets of said city, and to require any or all already placed or suspended, either in limited districts or throughout the entire city, to be removed, or to be placed in such manner as it may designate beneath the surface of the streets or sidewalks."

In October, 1910, the common council granted by ordinance, and the United Telephone Company accepted, a franchise which permitted the company and its successors to construct and maintain telephone poles and wires along the streets of Woodburn. One section of the franchise fixed the monthly maximum rates to be charged for telephones. A telephone plant was installed by the United Telephone Company, but afterwards the franchise and plant owned by it were transferred to the Western Telephone Company, a corporation, and the present owner. The company has extended its lines beyond the boundaries of Woodburn, and it renders service to patrons who reside without, as well as to customers who live within, the city limits. In July, 1915, the Western Telephone Company applied to the Public Service Commission for permission to increase the telephone rates. After giving due notice to both the company and the city, a public hearing was held, and the Commission ordered that the company be permitted to increase its rates on condition that the applicant avoid duplication by effecting a consolidation of its system with a competing telephone plant, which was then occupying the same territory. The two telephone plants were consolidated, and then on December 1, 1915, the Public Service Commission directed that the Western Telephone Company charge a specified schedule of rates. The charges specified in this schedule were greater than the rates fixed in the franchise, and for that reason the city then commenced a suit to vacate the order made by the Public Service Commission, and to enjoin the Western Telephone Company from charging any greater rates than those named in the franchise which had been granted by the city of Woodburn. After a trial the circuit court vacated the order of the Commission, and enjoined the company from exacting any charges in excess of the amounts specified in the franchise. Both the Public Service Commission and the Western Telephone Company appealed.

Charles L. McNary, of Salem, for appellant Western Telephone Co. J O. Bailey, Asst. Atty. Gen. (Geo. M. Brown, Atty. Gen., on the brief), for appellant Public Service Commission. Geo. G Bingham, of Salem, and Blaine McCord, of Woodburn, for respondent.

HARRIS J. (after stating the facts as above).

The decree appealed from is predicated upon the argument that the Public Service Commission was without power to permit the telephone company to charge urban customers more than the rates named in the franchise, which the city had granted prior to the creation of the Public Service Commission. Before proceeding with the discussion, attention will be called to some of the provisions of the legislation which was designed to clothe the Commission with authority to fix the rates to be charged for telephone service. An act to define public utilities and to provide for rate regulation was passed by the Legislative Assembly in 1911 (chapter 279, Laws 1911); but upon the filing of a petition in the office of the secretary of state the measure was referred to the legal voters of the state at the regular general election on November 5, 1912, when they approved the act by a majority vote, and afterwards on November 29, 1912 the Governor proclaimed that the measure was the law of the state. Laws 1913, p. 9. The Public Utility Act is similar to the legislation which has been adopted in most of the states and confers upon the Commission the power to regulate telegraph, telephone, street railroad, heat, light, water, and power plants so that a safe and adequate service may be rendered to the public at reasonable and sufficient rates. The term "public utility" embraces every owner operating a telephone plant for the public "and whether said plant or equipment or part thereof is wholly within any town or city, or not." Section 1. Power to regulate public utilities is conferred upon a Commission which was, at that time, called the Railroad Commission of Oregon (section 6), but is now known as the Public Service Commission of Oregon. Chapter 241, Laws 1915. Every public utility is required to furnish adequate and safe service, and unjust or unreasonable charges are prohibited. The Commission may hold a hearing (section 42), on the complaint of patrons that the rates being charged are unreasonable or unjustly discriminatory (section 41), or on the complaint of any public utility "as to any matter affecting its own product or service" (section 46), or an investigation may be made on the motion of the Commission (section 45); and "if, upon such investigation, any rates * * * shall be found to be unjust, unreasonable, insufficient or unjustly discriminatory * * * the Commission shall have power to fix and order substituted therefor such rate or rates, * * * as shall be just and reasonable * * *" (section 43; and, furthermore, the Commission "shall determine and by order fix reasonable rate or rates, * * * in lieu of those found to be unjust, unreasonable, insufficient or unjustly discriminatory * * * (section 51). The power of a municipality to regulate utilities is provided for by section 61 which declares that:

"Every municipality shall have power--(1) To determine by contract, ordinance or otherwise the quality and character of each kind kind of product or service to be furnished or rendered by any public utility furnishing any product or service within said municipality and all other terms and conditions not inconsistent with the act upon which such public utility may be permitted to occupy the streets, highways or other public property within such municipality and such contract, ordinance or other determination of such municipality shall be in force and prima facie reasonable. Upon complaint made by such public utility or by any qualified complainant as provided in section 41, the Commission shall set a hearing as provided in section 42 and if it shall find such contract, ordinance or other determination to be unreasonable, such contract, ordinance or other determination shall be void. Provided, however, that no ordinance or other municipal regulation shall be reviewed by the Commission under the provisions of this section which was prior to such review enacted by the initiative or which was prior to such review referred to and approved by the people of said municipality or while a referendum thereon is pending."

In brief, the facts present a situation where the legal voters of the city amended their municipal charter and conferred upon the common council authority to grant franchises in the streets for public benefits; the council exercised this chartered power, and granted a franchise to a telephone company, the rates to be charged to be fixed by the terms of the franchise; subsequently the Public Utility Act was passed by the Legislative Assembly, and then referred to all the voters of the state, who approved the measure at a general election; and, finally, upon the application of the telephone company, the Public Service Commission, acting under the authority of the Public Utility Act, specified a schedule of rates to be charged by the telephone company, and the city is now complaining because those rates exceed the charges fixed in the franchise.

The ultimate question for decision is whether the Public Service Commission was lawfully empowered to specify rates different from those fixed by the terms of the franchise. Throughout the discussion it must be borne in mind that the state, acting through the Public Service Commission, is a party to this suit, and consequently judicial precedents, arising out of controversies between none but the immediate parties to a franchise, are not controlling here. Moreover, the present juncture does not call for a decision of the relative rights of the grantor and grantee of a franchise as between themselves. Furthermore, the very purpose of this litigation is to determine whether the state has in fact empowered Woodburn to fix a schedule of rates which the state could not afterwards change, and hence we must also distinguish all those judicial utterances which followed a finding that the state had actually conferred upon a city the power unalterably to fix the rates to be charged by the grantee of a franchise.

Power to govern men and things is inherent in government, and when an owner devotes his property to a use in which the public has an interest, he must submit to be regulated and controlled by the public for the common good. Munn v Illinois, 94 U.S. 113, 24 L.Ed. 77; German Alliance Ins. Co. v. Kansas, 233 U.S. 389, 34 Sup. Ct. 612, 58 L.Ed. 1011, L. R....