Denney v. Pacific Telephone Telegraph Co Same v. Home Telephone Telegraph Co

• Decision Date: 20 February 1928
• Docket Number: Nos. 150,151,s. 150
• Citation: 72 L.Ed. 483,276 U.S. 97,48 S.Ct. 223
• Parties: DENNEY, Director of Public Works of Washington, et al. v. PACIFIC TELEPHONE & TELEGRAPH CO. SAME v. HOME TELEPHONE & TELEGRAPH CO
• Court: U.S. Supreme Court

276 U.S. 97

48 S.Ct. 223

72 L.Ed. 483

DENNEY, Director of Public Works of Washington, et al.

v PACIFIC TELEPHONE & TELEGRAPH CO.

SAME

v. HOME TELEPHONE & TELEGRAPH CO.

Nos. 150, 151.

Argued Jan. 9, 1928.

Decided Feb. 20, 1928.

Messrs. Arthur Schramm, Jr., of Seattle, Wash., John H. Dunbar and H. C. Brodie, both of Olympia, Wash., Alex M. Winston, of Spokane, Wash., and Thos. J. L. Kennedy, of Seattle, Wash., for appellants.

Mr. Otto B. Rupp, of Seattle, Wash., for appellees.

Mr. Justice McREYNOLDS delivered the opinion of the Court.

It will be convenient to dispose of these causes by one opinion as was done in the court below. Pacific Tel. & Tel. Co. v. Whitcomb et al. (D. C.) 12 F.(2d) 279.

Appellees operate telephone plants in Seattle, Tacoma, and Spokane, Wash., under local franchises which designated maximum permissible rates. These were granted prior to 1911, but after adoption of the present Constitution of the state.

The 'Public Service Commission Law' of Washington (chapter 117, Laws 1911; Remington's Comp. Stat. 1922, §§ 10339-10441), authorized a public service commission and directed that telephone rates, tolls, contracts and charges 'shall be fair, just, reasonable and sufficient.' etc. It further provided—

'Sec. 43 (Remington's Comp. Stat. 1922, § 10379).-Nothing in this act shall be construed to prevent any telegraph company or telephone company from continuing to furnish the use of its line, equipment or service under any contract or contracts in force at the date this act takes effect or upon the taking effect of any schedule or schedules of rates subsequently filed with the commission, as herein provided, at the rates fixed in such contract or contracts: Provided, however, that the commission shall have power, in its discretion, to direct by order that such contract or contracts shall be terminated by the telephone company or telegraph company party thereto, and thereupon such contract or contracts shall be terminated by such telephone company or telegraph company as and when directed by such order.'

'Sec. 55 (Remington's Comp. Stat. 1922, § 10391).-Whenever the commission shall find, after a hearing had upon its own motion or upon complaint, that the rates, charges, tolls or rentals demanded, exacted, charged or collected by any telegraph company or telephone company * * * are unjust, unreasonable, unjustly discriminatory or unduly preferential, or in any wise in violation of law, or that such rates, charges, tolls or rentals are insufficient to yield reasonable compensation for the service rendered, the commission shall determine the just and reasonable rates, charges, tolls or rentals to be thereafter observed and in force, and fix the same by order as hereinafter provided. * * *'

Chapter 7, Laws of 1921, vested in the Department of Public Works powers theretofore intrusted to the commission.

Control of the telephone systems owned by appellees was assumed by the Postmaster General August 1, 1918, and retained for one year. He fixed rates for Seattle, Tacoma, and Spokane higher than the maximum rates permitted by the original franchises.

The Act of July 11, 1919 (41 Stat. c. 10, p. 157) repealed the Act of July 16, 1918 (40 Stat. 904)-which authorized federal control of telephone systems-and directed that rates established by the Postmaster General should continue for four months after the termination of federal control (July 31, 1919), unless sooner modified or changed by public authorities.

August 8, 1919, the Public Service Commission directed appellees to observe the rates established by the Postmaster General; and they continued so to do. January, 1922, the Department of Public Works by formal complaint challenged the reasonableness of these rates. In the autumn of 1922 appellees files schedules of proposed increased rates which were suspended. Extended hearings were had concerning the value of properties devoted to the service and the reasonableness of the rates proposed. The department found and declared the value of the properties; also 'that the existing rates are just, fair, reasonable, and sufficient; that the proposed increased rates, both toll and exchange, are unjust, unfair, unreasonable, and more than sufficient.' And on March 31, 1923, it ordered 'that the applications of respondents for increased rates be and the same are hereby denied; that the proposed increased rates in their entirety be and they are hereby permanently suspended; that the same shall not become effective, and existing rates shall remain in effect until the further order of the department.'

Shortly thereafter appellees began these proceedings in the United States District Court. They attacked the valuations by the department and alleged that the rates designated by the order of March 31, 1923, were confisca- tory. The matter went to a master and was heard upon his report, etc. The court approved the master's conclusions that the department's valuations were too low and the prescribed rates were confiscatory. It accordingly adjudged the challenged order void and without effect.

The causes are here by direct appeal. The valuations approved by the court are not questioned; nor is it now claimed that the rates prescribed by the departmental order would yield adequate returns. But it is said that these rates must be regarded as contractual franchise rates and therefore they cannot be confiscatory in a constitutional sense.

Appellants maintain that under the statutes of Washington when the department terminates a...