Farmers' Educational and Co-op. Union v. Circuit Court of Charles Mix County, 9129

• Decision Date: 22 December 1949
• Docket Number: No. 9129,9129
• Citation: 73 S.D. 203,40 N.W.2d 402
• Parties: FARMERS' EDUCATIONAL AND COOPERATIVE UNION et al. v. CIRCUIT COURT OF CHARLES MIX COUNTY et al.
• Court: South Dakota Supreme Court

Page 402

40 N.W.2d 402

73 S.D. 203

FARMERS' EDUCATIONAL AND COOPERATIVE UNION et al. v. CIRCUIT COURT OF CHARLES MIX COUNTY et al.

No. 9129.

Supreme Court of South Dakota.

Dec. 22, 1949.

As Corrected Jan. 5, 1950.

Joseph Robbie, Jr., Mitchell, Fellows & Fellows, Mitchell, for plaintiffs.

H. A. Poley, Omaha, Neb., H. G. Burke, Omaha, Neb., F. G. Warren, Sioux Falls, R. Williamson, Aberdeen, for defendant Northwestern Bell Telephone Co.

RUDOLPH, Judge.

The Northwestern Bell Telephone Company appealed to the circuit court from an order of the Public Utilities Commission refusing the Company the right to place in effect increased rates for telephone use. The circuit court entered an order which, pending the decision in circuit court, enjoins the enforcement of the Commission's order, and permits the Telephone Company to place in effect certain increased rates upon the furnishing of a bond by the Company conditioned upon the return to the payees of any payment in excess of the Commission's order should that order be sustained on appeal. This is an original proceeding in certiorari to review the validity of the order of the circuit court.

On November 24, 1947, the Telephone Company filed an application for increased rates with the Public Utilities Commission. The basis of this application was that the rates then in existence were inadequate and confiscatory. The Company asked that it be granted authority to increase existing rates as set forth in its Exhibits A and B, which proposed rates were estimated to produce approximately $572,000 additional revenue annually. Hearings were had upon this application but before the conclusion of the hearings the Company on November 29, 1948, filed with the Commission an amendment and supplement to its original application wherein it requested that rates be allowed higher than those set forth in its Exhibits A and B. Following the filing of this amended application further hearings were held before the Commission and the evidence presented covered the operations of the Company ending September 30, 1948 except that there was presented to the Commission a showing that in October 1948 a wage increase was granted to its employees amounting to approximately $212,000 annually.

On October 8, 1949, the Commission, by a majority decision, denied the Company any relief. On October 14, 1949, an application by the Company for a rehearing was denied. The Company perfected its appeal to the circuit court on October 19, 1949 and on October 21 filed its application with the circuit court for ancillary relief pending the appeal which resulted in the order now before us.

In support of its application the Company submitted the affidavit of its vice president and general manager wherein was set forth the value of the Company's property, the revenues received and the expenses paid for the first nine months of 1948, which, according to the affidavit, disclosed an actual loss of $19,813.00. The affidavit then set forth the valuation of the Company property as of October 31, 1949 and proceeded to show the revenues and expenses incurred during the eleventh month period between October 1st, 1948, when the hearings before the Commission were closed, and August 31st, 1949, which it was asserted resulted in an actual loss to the Company of $206,931.00. The affidavit alleged the proposed and requested increased rates would return to the Company only 4.08% on its investment. The Commission submitted the affidavit of its engineer which set forth the valuations, revenues and expense as claimed by the Company and as determined by the Commission after its hearings and alleged that the rate of return being received upon the investment of the Company as shown by the report and order of the Commission was 6.98%. By reference the entire proceedings before the Commission including the final report and order of the Commission was made a part of the affidavit. We believe this statement of facts sufficient for our present purpose.

It may be conceded at the outset that any final rate order of the Public tilities Commission which denies to a public utility an opportunity to earn a fair rate of return on the fair value of its property amounts to a taking of property in violation of the due process clause of the 14th Amendment to the Constitution of the United States and Paragraph 2, Article VI, Constitution of South Dakota. Application of Northwestern Bell Telephone Co., 69 S.D. 36, 6 N.W.2d 165. It may also be conceded that a Commission order denying an increase in rates amounts to confiscation if by such denial the utility is prevented from earning a fair return on its investment. Banton v. Belt Line Railway Corp., 268 U.S. 413, 45 S.Ct. 534, 69 L.Ed. 1020.

Whether confiscation of the property of a utility has resulted from an order of the Commission is a question which may be determined by the courts. Application of Northwestern Bell Telephone Co., supra; Federal Power Commission v. Natural Gas Pipeline Co., 315 U.S. 575, 62 S.Ct. 736, 86 L.Ed. 1037. Our statute, SDC 52.05, provides for judicial review of final orders of the Commission by providing for the appeal to the circuit Court, under which statute the Telephone Company proceeded in this case. We consider first whether this appeal statute is authorization for the court's order.

The order with which we are here concerned amounts to something more than a stay order pending the appeal. Instead of staying proceedings or preserving the status quo this order permits affirmative action whereby the status quo is changed, and temporarily that which the Commission has denied is permitted. We find nothing in the statute which authorizes this type of order. The statute, SDC 52.0502, does provide for a stay but this is as far as the statute goes. Nor do we believe that authority for this order is to be found in SDC 52.04, which relates to rate injunctions. Just what place, if any, this chapter of our code has in the rate making picture, in view of the fact that the appeal is made the exclusive remedy to review any action of the Commission, we need not determine. We hold the view, however, that the remedy therein provided is something different and apart from the appeal procedure under which this cause is before the circuit court.

It is contended that there must be power in the court on appeal to enter this order, otherwise confiscation would result while the appeal is pending. This argument assumes the postulate, that is, that confiscation is established. SDC 52.0310 provides that in any action or proceeding wherein any order of the Public Utilities Commission shall in anywise come in question, the validity of such order shall be presumed. No doubt the reason underlying this statutory presumption is that rather elaborate statutory provision is provided for the determination of fair and reasonable rates by the Commission. SDC 52.02. We know that the Commission employs a corps of experts including a statistician, engineer and rate experts. After the Commission has followed the statutory procedure by giving all interested a fair hearing, and has had the benefit of the experts employed, the order determining the rates resulting from its considered judgment is made presumptively correct and valid. The effect given the order is not, therefore, based upon whim or caprice, but finds sound support in the background of hearings on notice, expert testimony and deliberation which must be indulged before the order is made.

The appeal procedure contemplates a speedy disposal of the judicial proceeding. It is provided, SDC 52.0502, that any appeal from the Commission's order shall be taken within thirty days after the application for rehearing is denied. This appeal was taken five days after the application for rehearing was denied. Upon appeal the case is heard and determined upon the record made before the Commission and no new evidence is permitted. The actual...