General Tel. Co. of Mich. v. Michigan Public Service Commission, 58

• Decision Date: 29 December 1954
• Docket Number: No. 58,58
• Parties: , 8 P.U.R.3d 97 GENERAL TELEPHONE COMPANY OF MICHIGAN, a Michigan corporation, Plaintiff and Appellee, v. MICHIGAN PUBLIC SERVICE COMMISSION, Defendant and Appellant, and City of Ludington, Defendant.
• Court: Michigan Supreme Court

Page 882

67 N.W.2d 882

341 Mich. 620, 8 P.U.R.3d 97

GENERAL TELEPHONE COMPANY OF MICHIGAN, a Michigan

corporation, Plaintiff and Appellee, v. MICHIGAN PUBLIC SERVICE COMMISSION, Defendant and Appellant, and City of Ludington, Defendant.

No. 58.

Supreme Court of Michigan.

Dec. 29, 1954.

Frank G. Millard, Atty. Gen., Edmund E. Shepherd, Solicitor Gen., Lansing, Daniel J. O'Hara, Charles M. A. Martin, Robert A. Derengoski, Assts. Atty. Gen., for defendant-appellant and defendant.

Foster, Snyder, Foster & Loomis, Plummer Snyder, George W. Loomis, Lansing, John Robert Jones, Columbus, Ohio, for plaintiff-appellee.

Before the Entire Bench.

KELLY, Justice.

General Telephone Company's application of January 22, 1952, for fate relief in the amount of $1,100,000 was partially granted by the Michigan public service commission's order of December 5, 1952, allowing a rate increase of $660,000.

The company appealed to the Ingham county circuit court and introduced additional testimony to that which had been introduced before the commission, and the court transmitted such testimony to the commission for its consideration. The commission refused to consider the additional testimony and advised the court that it found no occasion to modify its order.

On July 30, 1953, the court rejected the contentions of law and fact contained in the commission's report, and found that the rates prescribed by the commission were unreasonable, unlawful and confiscatory. On August 21, 1953, the Court entered a decree remanding the matter back to the commission to fix 'just, reasonable and nonconfiscatory rates,' and, pending action by the commission, the company was authorized to collect rates not in excess of the rates the company had requested the commission to approve. The company was also ordered to provide a $1,000,000 refund bond depending upon the outcome of the appeal by the commission to this Court.

At the hearing before Judge Coash, Ingham circuit court, held in March, 1953, the company introduced testimony in regard to its 1952 activities, including budget, actual expenditures, wage increases, additional and unexpected taxes, and increase in operating expense due to installation of 6,014 new telephones. The company also introduced evidence as to the impact of the commission's order of December 5, 1952, and a claimed reduction in the company's rate of return for 1952 from 6.6% to 4.23% on average capital.

The commission claims that the court erred in receiving and transmitting this testimony to the commission, as this additional testimony arose subsequent to the close of hearings by the commission on July 2, 1952. This testimony was received by the court and transmitted back to the commission pursuant to C.L.S.1952, § 484.116, 116, Stat.Ann. 1953 Cum.Supp. § 22.1456, which reads as follows:

'If upon the trial of said action evidence shall be introduced which is found by the court to be different from that offered upon the hearing before the commission or additional thereto, the court before proceeding to render judgment, unless the parties in such action stipulate in writing to the contrary, shall transmit a copy of such evidence to the commission, and shall stay further proceedings in said action for 15 days from the date of such transmission. Upon receipt of such evidence the commission shall consider the same, and may alter, modify, amend or rescind its order relating to such rate or rates, charges, joint rate or rates, regulations, practice or service complained of in said action, and shall report its action thereon to said court within 10 days from the receipt of such evidence. If the commission shall rescind its order complained of the action shall be dismissed; if it shall alter, modify or amend the same, such altered, modified or amended order shall take the place of the original order complained of, and judgment shall be rendered thereon as though made by the commission in the first instance. If the original order shall not be rescinded or changed by the commission, judgment shall be rendered upon such original order.'

The legislature realized that the additional and/or different testimony introduced before the court could be of such importance that it would result in the commission's altering, modifying, amending, or rescinding its previous order. The legislature provided for the commission's immediate and serious consideration by not only stipulating that 'the commission shall consider' the evidence, but, also, that the court 'shall stay further proceedings in said action for 15 days from the date of such transmission.' There is a total absence of any inference that the evidence the commission shall consider should be restricted or confined to conditions existing or matters which arose previous to the close of the hearing before the commission. It is our opinion that if the legislature had so desired, the statute would have expressly provided for such a restriction.

A similar statute was construed by the supreme court of Indiana in Public Service Commission v. Frazee 188 Ind. 573, 122 N.E. 328 P.U.R. 1919C, 979, as follows:

'Appellant complains of the admission of evidence of operating expenses at a time subsequent to the decision of the commission. The statute * * * provides that the court may hear evidence 'different' from and 'additional' to that heard by the commission; and the statute does not provide that such different and additional evidence shall relate only to matters occurring or existing prior to the hearing or decision of the commission; therefore, so far as expression in the statute is concerned, such evidence may relate to matters occuring after the board's decision and up to the time of trial in the circuit court. The statute further provides that if the trial court hears 'additional' or 'different' evidence, the trial court shall, before rendering judgment, transmit a copy of the 'additional' or 'different' evidence to the commission for its consideration, and that the commission may alter or rescind its order, and must report to the court within ten days. Thus the commission is placed upon the same footing, so far as evidence is concerned, as is the circuit court on appeal; and the fact that the evidence may relate to after matters is unobjectionable.

'Furthermore, the propriety of hearing evidence as to a practical test of the reasonableness of such order especially where that question is not clearly solved by a hearing before the commission, is recognized by the courts. Willcox v. Consolidated Gas Co. [1908], 212 U.S. 19, op. 54, 55, 29 S.Ct. 192, 53 L.Ed. 382, 48 L.R.A., N.S., 1134, 15 Ann.Cas. 1034; Northern Pacific R. Co. v. [State of] North Dakota [ex rel. McCue, 1909], 216 U.S. 579, op. 581, 30 S.Ct. 423, 54 L.Ed. 624. This clearly shows that it is proper to hear evidence of things happening after such an order is entered to properly determine whether such order is valid or invalid. This disposes of all objections made to the admission of such evidence.'

The court did not err in receiving and transmitting this testimony to the commission.

The next contention presented by appellant is that: 'The opinion and decree of the circuit court constitutes a direction, in effect, to the commission to grant additional revenues to appellee beyond those already allowed whereby the court engaged in the legislative function of rate-making which was error.'

The decree of the court, filed August 21, 1953, contains the following:

'Now, Therefore, by reason of the matters of fact and of law so found and determined, the court does hereby Order, Adjudge and Decree that the Rate Order T552-52.11 of defendant Michigan Public Service Commission issued December 5, 1952, as affirmed by its statutory report dated May 22, 1953, is hereby reversed, vacated and set aside as unreasonable and unlawful but only insofar as said order violates the statutory and constitutional rights of plaintiff to earn a reasonable return on the fair value of its property and fails to prescribe reasonable, adequate and lawful rates for plaintiff General Telephone Company of Michigan.

'It is Further Ordered, Adjudged and Decreed that this matter be, and the same hereby is, remanded to the defendant Michigan Public Service Commission to fix and determine in conformity with the findings and holdings of this court as expressed in its opinion dated July 30, 1953, just, reasonable and nonconfiscatory rates for General Telephone Company of Michigan upon the basis of the complete record made in this matter including the proceedings before the defendant commission and the different or additional evidence offered at trial in this court.

'It Is Further Ordered, Adjudged and Decreed that pending action by the commission in so fixing just, reasonable and nonconfiscatory rates, the company be, and hereby is, permitted temporarily to establish and collect rates and charges not in excess of the rates and charges which it requested to be approved by the defendant Michigan Public Service Commission in its application of January 22, 1952.

'* * *

'It Is Further Ordered, Adjudged and Decreed that plaintiff shall set up on its books and records a reserve to which it shall credit currently as soon as practicable after the end of each calendar month a gross sum equal to the difference between the revenues actually billed in such month and those revenues which would have been billed if the rates and charges prescribed in said Rate Order T552-52.11 had been billed as nearly as said difference can be determined reasonably by general estimate and without detailed accounting as to each subscriber. The said reserve shall be employed by plaintiff to make such refunds, if any, as may be required by a further or supplemental order of this court pursuant to the terms and provisions hereof. However, plaintiff shall have full right to use the funds represented by the said reserve as freely for any purpose as the funds represented by the general...