Donham v. Pub. Serv. Comm'n

• Court: United States State Supreme Judicial Court of Massachusetts
• Writing for the Court: RUGG
• Citation: 122 N.E. 397,232 Mass. 309
• Parties: DONHAM v. PUBLIC SERVICE COMMISSION.
• Decision Date: 03 March 1919

232 Mass. 309
122 N.E. 397

DONHAM
v.
PUBLIC SERVICE COMMISSION.

Supreme Judicial Court of Massachusetts, Suffolk.

March 3, 1919.

Case Reserved from Supreme Judicial Court, Suffolk County; Chas. A. De Courcy, Judge.

Petition in equity by Wallace B. Donham, receiver of the Bay State Street Railway Company, against Frederick J. MacLeod and others, constituting the Public Service Commission, to review orders of the Commission respecting fares to be charged by the company. On reservation by a single justice of the Supreme Judicial Court for the consideration of the full court, on petition, amended petition, answers, and stipulation. Petition dismissed.

Currier, Young & [232 Mass. 311]Pillsbury, of Boston (Samuel H. Pillsbury and Frederic B. Greenhalge, both of Boston, of counsel), for petitioner.

Henry C. Attwill, Atty. Gen., and Wm. Harold Hitchcock, Asst. Atty. Gen., for respondents.

John W. Cummings and Chas. R. Cummings, both of Fall River, for city of Fall River.

RUGG, C. J.

This is a petition in equity brought by the receiver of the Bay State Street Railway Company against the public service commissioners under the authority of St. 1913, c. 784, § 27, ‘to review, annul modify or amend’ orders and rulings of the defendants respecting fares to be charged by the street railway company. The allegations of fact contained in the petition, to which is annexed a copy of the report and order of the public service commissioners here complained of, are admitted by the answer. The case is reserved upon the petition and answer and a stipulation incorporating in the record certain decisions of the public service commissioners. The plaintiff was appointed receiver on the 12th of December, 1917, and since then has been operating and managing the street railway. The street railway is extensive in miles of track and number of municipalities served, furnishing urban and interurban transportation for the people residing in eighteen cities varying in size from Fall River, with a population of one hundred twenty-four thousand seven hundred ninety-one, to Woburn with sixteen thousand four hundred ten inhabitants, and thirty-six or more country towns in the eastern part of the commonwealth. It is described as ‘one of the largest street railway systems in point of mileage in this country. On June 30, 1914,

[122 N.E. 399]

it operated in all 951 miles of single track. It owned 897 miles located in Massachusetts, all of which it operated except 27 miles in the sourthern part of Boston.’ 4 M. P. S. C. R. S. It operates in Boston only to a limited extent and barely touches New Bedford. Excluding those cities, the population of the territory served is one million three hundred thirty-five thousand seven hundred eighty-seven.

[232 Mass. 312]The receiver in October, 1918, filed with the public service commissioners under the provisions of section 20 of said chapter 784, a schedule of proposed fares and charges, (being increases), in substance eliminating all reduced rate tickets except tickets for pupils in the public schools, establishing enlarged city zones with a uniform cash fare of ten cents and dividing its country lines into zoners or sections about two miles long with a minimum cash fare of ten cents good for two zones or sections, and five cents for each additional zone or section thereafter. The receiver estimated that the proposed rates would produce annually from two million to two million and a half dollars additional revenue. The public service commissioners held hearings in accordance with section 21 of the act and in December, 1918, filed a report in general disapproving the proposed rates and requiring the receiver to cancel them and to file a new schedule in substantial compliance with the rates, fares and charges fixed by the commission in its findings and conclusions. The schedule of fares outlined in the report of the public service commissioners was to continue for a tentative trial period of two months. It is the contention of the receiver that the schedule and order of the public service commissioners withholds from him as receiver a reasonable return for the service rendered and a fair recompense upon the investment honestly and prudently made in the property and thus deprives him of his property without due process of law, denies him the equal protection of the laws, and that the rates, fares and charges established by the report and order of the public service commissioners are unjust, unreasonable and confiscatory.

The pertinent provisions of the statute, so far as concerns the powers of the public service commissioners respecting rates, are in sections 21 and 22 of said chapter 784. Succinctly stated the street railway company, when a change in rates is proposed, must file a schedule showing present rates and proposed changes. Thereupon the public service commissioners may hold a hearing and in case an increase of fares is proposed, ‘the burden to show that such increase is necessary in order to obtain a reasonable compensation for the service rendered’ shall be upon the street railway company. ‘Reasonable compensation for the service rendered’ is the test established, when a decrease in rates is asked, for the exercise of the power of the public service commissioners, ‘to determine what [232 Mass. 313]will be the just and reasonable rate or rates, fare or fares.’ Section 21. Whenever, after hearing, the public service commissioners are of opinion that the ‘rates, fares or charges or any of them * * * are unjust, unreasonable, unjustly discriminatory or unduly preferential, or in any wise in violation of any provision of law or that the rates, fares or charges or any of them * * * are insufficient to yield reasonable compensation for the service rendered and are unjust and unreasonable, the commission shall determine the just and reasonable rates, fares and charges to be charged for the service to be performed and shall fix the same by order. * * *’ The scope of the powers conferred by the statute upon the public service commissioners is far-reaching. Subject only to the limitations that the fares, rates and charges must ‘yield reasonable compensation for the service rendered’ and must be ‘just and reasonable’ having relation to ‘the service to be performed’ and must not violate any provision of law, its powers are ample. Arlington Board of Survey v. Bay State St. Ry., 224 Mass. 463, 469, 113 N. E. 273. It is implied from the nature of statutory law that the powers of boards of public officers thereby created must always be exercised subject to the provisions and guaranties of the Constitution of the commonwealth and that of the United States. It is not contended by the receiver that the public service commissioners have exceeded their statutory powers (save in one particular hereafter to be noted) unless they also have transgressed the restrictions imposed by the Constitutions of the state and nation.

The rule established by the public service commissioners for their guidance in fixing rates in an earlier case and apparently intended to be followed by them in others, so far as applicable, is that under the Massachusetts law ‘capital honestly and prudently invested must, under normal conditions, be taken as the controlling factor in fixing the basis for computing fair and reasaonable rates,’ and that ‘such rates are to be allowed as will yield a fair return upon such investments.’ Bay State Rate Case, 4 M. R. S. C. Rep. 11 & 12.

In an earlier hearing where the subject of the amount of capital honestly and prudently invested by the Bay State Street Railway Company and then usefully employed in its business was considered exhaustively, the public service commissioners decided that amount to be $39,104,340, and that the rate of income to which it [232 Mass. 314]fairly was entitled was six per cent per annum. 4 M. P. S. C. Rep. pp. 52, 64, 66. These figures plus investments shown to have been made since and now approximately $41,170,000 as the present total prudent and usefully employed investment,

[122 N.E. 400]

appear to be assumed as substantially correct by the public service commissioners in their report and order now under review.

The present situation as to estimated expenses and income is set forth in the report of the commissioners, with accompanying schedules as follows:

‘The company's petition for higher fares is based upon a statement of operating results under present conditions. For the year ending December 31, 1918, these figures are as follows (nine months actual, three months estimated):

+-----------------------------------------+
                ¦Operating expenses ¦$8,790,767 ¦
                +-----------------------------+-----------¦
                ¦Taxes ¦484,720 ¦
                +-----------------------------+-----------¦
                ¦Depreciation ¦1,104,000 ¦
                +-----------------------------+-----------¦
                ¦Total ¦$10,379,487¦
                +-----------------------------+-----------¦
                ¦Gross income ¦10,045,464 ¦
                +-----------------------------+-----------¦
                ¦Deficiency ¦$334,023 ¦
                +-----------------------------+-----------¦
                ¦Six per cent, upon investment¦2,470,200 ¦
                +-----------------------------+-----------¦
                ¦Total defieciency ¦$2,804,223 ¦
                +-----------------------------------------+
                

‘The present fares, however, have only been in effect since June, and same is true of certain increases in wages. On December 6, 1918, moreover, the National War Labor Board granted further increases in wages estimated by the company to amount to about $875,000 yearly. Assuming, then, a full year's operation on the basis of present fares and present wages, the figures above given are changed, as follows:

+-----------------------------------------+
                ¦Operating expenses ¦$10,233,000¦
                +-----------------------------+-----------¦
                ¦Taxes ¦484,720 ¦
                +-----------------------------+-----------¦
                ¦Depreciation ¦1,104,000 ¦
                +-----------------------------+-----------¦
                ¦Total ¦$11,821,720¦
                +-----------------------------+-----------¦
                ¦Gross income ¦10,466,000 ¦
                +-----------------------------+-----------¦

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