Hancock Rural Tel. Corp. v. Public Service Commission

• Decision Date: 14 October 1964
• Docket Number: No. 20077,20077
• Citation: 201 N.E.2d 573,137 Ind.App. 14
• Parties: , 56 P.U.R.3d 17 HANCOCK RURAL TELEPHONE CORPORATION, Markleville Telephone Company, Inc., Cadiz Rural Telephone Company, Appellants, v. The PUBLIC SERVICE COMMISSION of Indiana, Indiana Bell Telephone Company, Incorporated, General Telephone Company of Indiana, Inc., Knightstown Telephone Company, Appellees.
• Court: Indiana Appellate Court

Page 573

201 N.E.2d 573

137 Ind.App. 14, 56 P.U.R.3d 17

HANCOCK RURAL TELEPHONE CORPORATION, Markleville Telephone

Company, Inc., Cadiz Rural Telephone Company, Appellants, v. The PUBLIC SERVICE COMMISSION of Indiana, Indiana Bell

Telephone Company, Incorporated, General Telephone

Company of Indiana, Inc., Knightstown

Telephone Company, Appellees.

No. 20077.

Appellate Court of Indiana, In Banc.

Oct. 14, 1964.

[137 INDAPP 16]

Arthur H. Gemmer, Fauvre, Dongus, Ging & Gemmer, Indianapolis, for appellants, Busby, Davisson, Cooper & Farr, Anderson, George & Harvey, New Castle, of counsel.

Edwin K. Steers, Atty. Gen., Indianapolis, Marcus E. Woods, Deputy Atty. Gen., for appellees.

[137 INDAPP 17] HUNTER, Chief Justice.

This is a statutory action seeking judicial review of orders of the Public Service Commission of Indiana, (hereinafter referred to as Commission) brought pursuant to the provisions of Acts of 1957, ch. 189, Sec. 1 et seq. (Burns' Ind.St.Ann., 1963 Poc. Supp., Sec. 54-443 et seq.) Appellants' assignment of errors alleges two specifications of error:

'1. The final order of the Public Service Commission of Indiana entered October 2, 1963, in PSCI Cause 29829 is contrary to law.

'2. The order, issued subsequent to said final order, denominated 'Errata Order' of the Public Service Commission of Indiana entered sua sponte on December 13, 1963, in PSCI Cause No. 29829 is contrary to law.'

The administrative proceedings before said Commission in said cause involved the purchase by one telephone company of the exchange of another, the improvement of service in both the purchaser's existing exchanges and the purchased exchange, the establishment of extended area service with adjacent exchanges, and financing in the form of a loan from the Rural Electrification Administration (hereinafter referred to as REA) to accomplish these things. Appellant Hancock Rural Telephone Corporation (hereinafter referred to as Hancock) is the purchaser, appellant Markleville Telphone Company, Inc. (hereinafter referred to as Markleville) is the seller, and appellant Cadiz Rural Telephone Company (hereinafter referred to as Cadiz) is the owner of one of the adjacent exchanges with which extended area service is proposed. Named as appellees are The Public Service Commission, and Indiana Bell Telephone Company, Incorporated and Knightstown Telephone Company, the latter two were [137 INDAPP 18] joint petitioners below for extended area service to their respective exchanges. Also named as appellee is General Telephone Company of Indiana, Inc., named as a respondent in the administrative proceedings, however, said respondent during the course of the proceedings acquiesced in the proposed extended area service to its exchange.

The only answer brief filed in these proceedings is that of the appellee Commission filed by and through the Attorney General.

The proceedings before the Commission were initiated by a joint petition consisting of four separate paragraphs summarized as follows:

Paragraph I requested approval of the acquisition of appellant Markleville's telephone system by appellant Hancock, the issuance to the purchaser of a certificate of territorial authority to cover the new exchange area, and new rates;

Paragraph II asked approval for extended area service from the purchased Markleville Exchange to the Anderson Exchange of appellee Indiana Bell, to the Mechanicsburg Exchange of appellee General Telephone, to the Wilkinson Exchange of appellee Knightstown Telephone, and to the Cadiz Exchange of appellant Cadiz Telephone;

Paragraph III asked approval for appellant Hancock to make improvements in four of its existing exchanges; and

Paragraph IV asked approval of a loan of $295,000 from the Rural Electrification Administration to appellant Hancock to accomplish the acquisition, improvement and extended area service.

In the hearings before the Commission on said petition, neither any telephone company nor any person appeared in opposition to any of the proposals, and the only witnesses and evidence offered, other than that by the joint petitioners, was presented by the Public Counselor, and consisted of an accounting exhibit and [137 INDAPP 19] testimony by a Commission Staff Accountant and an engineering exhibit and testimony by a Commission Staff Engineer.

The evidence presented by joint petitioners demonstrably indicated, as to the acquisition, that both the seller's board of directors and shareholders had unanimously approved the contract of sale, and that purchaser's board had unanimously approved said contract, and that its officers had applied for the REA loan, which had been approved subject to Commission approval. Further, the evidence indisputably indicated, as to the proposed extended area service, that as between the respective exchanges it was approved and desired by the boards of the respective companies, and many responsible persons testified as to the community of interest between said exchanges and the need for such service. As to both the extended area service and as to the improvement of existing exchanges, the evidence was detailed and unchallenged.

However, as to these matters of acquisition, improvement and extended area service, the subject matter of the first three paragraphs of the joint petition, the appellee Commission failed to make any finding in either of said two orders.

It was only relative to the matter of loan approval, the subject of the fourth paragraph of the petition, that appellee Commission made its finding, disapproving said loan, and upon this basis, denied said joint petition in its entirety.

The evidence presented by appellant Hancock on this issue consisted of the testimony and accounting exhibit of its CPA witness, Clarence D'Aoust. His testimony and exhibits showed the method he utilized in determining the value of appellant Hancock's plant, including that to be acquired or constructed with loan funds. [137 INDAPP 20] This method consisted of taking original book costs depreciated, applying a dollar indices against these historic costs to update them in terms of current dollars, so as to adjust for the impact of inflation and to arrive at a current valuation of said property. He testified that from his study he was of the opinion that the long term debt of appellant Hancock did not exceed the fair value of its plant. During the course of his testimony, the Commission was also asked to take administrative notice of the fact of inflation, which it refused to do.

The record indicates that the evidence presented by the Commission's staff accountant was restricted by him to original cost depreciated alone, and in his testimony he (1) made certain subtractions from valuation of the plant for part of the value of the plant being acquired and also for all of the value of the plant to be constructed in the future; and (2) he also made certain additions to the long term debt by including an amount to cover 'memberships issued' by appellant Hancock. He concluded that the long term debt exceeded the fair value of appellant Hancock's plant. In addition, he applied to appellant Hancock a 'debt equity ratio', by which he purported to find appellant Hancock's financial structure unfavorable. As to all these differences between the staff accountant's approach, exhibits and conclusions, and that of witness D'Aoust, counsel for appellant Hancock made timely and repeated objection, and it is upon these issues raised, that appellants predicate error in the Commission orders.

Appellee Commission entered its final order in said proceedings, denying said joint petition, on October 2, 1963. On October 10, 1963 appellant Hancock filed with appellee Commission its Request for Record for Appeal. Thereafter, when it proved impossible to obtain a transcript[137 INDAPP 21] from appellee Commission for filing with this court within the statutory appeal time, appellant Hancock, within its statutory time period, twice petitioned this court for an extension of time to file said transcripts and its assignment of errors, which requests were granted both times. Subsequent to said October 2nd final order, to wit: seventy-two (72) days thereafter, appellee Commission, on December 13, 1963, entered a second order in said administrative proceedings, which it titled an 'Errata Order'. This subsequent order was entered by appellee Commission, sua sponte, without any notice to appellants, or other parties to the proceeding and without any opportunity to be heard. Said 'errata order', among other differences, contained no statement of reason for its issuance, included the testimony of a witness which had been omitted from the first order, included two exhibits which had been omitted from the first order, included a new paragraph of matter outside the record and not in evidence, namely a letter, which had not been in the first order, and made a change in a finding contained in the first order. Like the first order, the 'errata order' denied the joint petition.

First, Specification No. 2 of the Assignment of Errors alleges that said subsequent 'errata order' is contrary to law.

The statute which creates and limits the power of the Public Service Commission of Indiana to modify its orders provides as follows:

'The Commission may, at any time, upon notice to the public utility and after opportunity to be heard as provided in sections fifty-seven to seventy-one (Secs. 54-408-54-422), rescind, alter or amend any order fixing any rate or rates, * * * or any other order made by the commission, and certified copies of the same shall be served and take effect as herein provided for original orders.' [137 INDAPP 22] (emphasis added) Acts 1913, ch. 76, Sec. 76, Burns' Ind.Stat.Ann., 1951 Repl., Sec. 54-427.

The record reveals that seventy-two (72) days after the final order of October 2, 1963, appellee Commission issued its subsequent order of December 13, 1963, in the same cause, and labeled it 'errata order'. Ap...