Ida Van Dyke v. Paul Geary

• Decision Date: 07 May 1917
• Docket Number: No. 52,52
• Citation: 244 U.S. 39,37 S.Ct. 483,61 L.Ed. 973
• Parties: IDA A. VAN DYKE et al., Appts., v. W. PAUL GEARY et al., Members of the Corporation Commission of the State of Arizona, et al
• Court: U.S. Supreme Court

244 U.S. 39

37 S.Ct. 483

61 L.Ed. 973

IDA A. VAN DYKE et al., Appts.,

v.

W. PAUL GEARY et al., Members of the Corporation Commission of the State of Arizona, et al.

No. 52.

Argued March 23, 1917.

Decided May 7, 1917.

Messrs. William C. Prentiss and F. C. Jacobs for appellants.

Messrs. Samuel Herrick, George W. Harben, R. William Kramer, and Mr. Wiley E. Jones, Attorney General of Arizona, for appellees.

Mr. Justice Brandeis delivered the opinion of the court:

In 1909 Ida A. Van Dyke and her husband organized a corporation under the name of the Miami Town-site Company, to acquire a tract in Gila county, Arizona, and establish a town thereon. A large part of Miami is now located on that land. In order to supply residents and others thereon with water for domestic, commercial, and fire purposes, the Van Dykes introduced a water system which developed rapidly. In October, 1913, the Arizona Corporation Commission, a public service com- mission with the usual powers of regulation, instituted before itself a proceeding to have the rates charged by the water system declared excessive, and to have reasonable rates established. The Van Dykes, who were duly served, filed a 'plea in bar;' alleged that the plant was the individual property of Ida A. Van Dyke; that the business was operated by her with her husband as manager, and not by a corporation; and denied not only the validity of the order, but also the jurisdiction of the Commission over them. The objection to the jurisdiction was overruled; and the Commission proceeded to a hearing on the merits, at which the Van Dykes offered no evidence. On May 1, 1914, after an elaborate report, an order was entered greatly reducing the water rates. The Van Dykes promptly filed a motion for a rehearing, which was denied. Thereupon they applied to the Commission to stay the operation of the order pending proceedings for review in the state court. This application also was denied. Then they filed, in the district court of the United States for the district of Arizona, this suit against the members of the Commission, the attorney general of the state, and the county attorney, to enjoin the enforcement of the order and the prosecution for penalties for failure to observe the same, and to have the order itself canceled.

Both plaintiffs and defendants are citizens and residents of Arizona. Jurisdiction of the Federal court was invoked solely on the ground that the order of the Commission, if enforced, would deprive plaintiffs of their property, in violation of the 14th Amendment; and that the penalties prescribed by the Arizona statute for failure to obey the order are so severe as to prevent resort to the remedies therein provided for testing in the state courts the validity of the orders. An interlocutory injunction was applied for; and the case was heard before three judges, under § 266 of the Judicial Code [36 Stat. at L. 1162, chap. 231, Comp. Stat. 1913, § 1243]. The jurisdiction of the court was sustained under the rule declared in Exparte Young, 209 U. S. 123, 52 L. ed. 714, 13 L.R.A.(N.S.) 932, 28 Sup. Ct. Rep. 441, 14 Ann. Cas. 764; but the court refused relief against the order reducing water rates, saying:

'The evidence submitted by the complainants plainants does not afford this court a satisfactory basis on which to adjudicate the question of the value of the property used as a water plant, and therefore the court cannot say that the rates prescribed by the Corporation Commission are confiscatory, and there is no basis on which an order could be made declaring them illegal. If hereafter it shall appear that, under actual operation of the plant under these rates, the return allowed by such Corporation Commission operates as a confiscation of the property of complainant Ida A. Van Dyke, she may, at the expiration of one year, again present her evidence to the court and obtain appropriate relief on the facts then presented.

'The court will retain jurisdiction of the case, with permission to complainant Ida A. Van Dyke, if so advised, after the expiration of one year, to renew her application for an injunction against the rates established by the Corporation Commission as confiscatory. In the meantime the rates established will remain in force.'

From an order entered in accordance with this opinion the Van Dykes appealed; and this court has jurisdiction to review the whole case. Louisville & N. R. Co. v. Garrett, 231 U. S. 298, 58 L. ed. 229, 34 Sup. Ct. Rep. 48.

The errors alleged are, in substance, as follows:

First. That the Arizona Constitution and Public Service Corporation Act were constitued and applied to subject property owned and operated by a natural person to regulation as a public service corporation.

Second. That a water system established for the purpose of furnishing water only to purchasers of lots from the Miami Townsite Company was treated as a public water system.

Third. That the rates fixed are confiscatory.

These alleged errors will be considered in their order.

1. Whether the Arizona Corporation Commission had jurisdiction to regulate a water system owned by an individual.

Arizona was admitted as a state February 14, 1912; and on that date its Constitution, which had been adopted December 9, 1910, took effect. By article 15 it created (§ 1) a Corporation Commission with full power to establish reasonable rates in the public services; and declared (§ 2) that corporations engaged in furnishing water 'shall be deemed public service corporations.' The Arizona Public Service Corporation Act (Ariz. Rev. Stat. 1913, title 9, chap. 11) provides that the term 'public service corporation' shall include 'water corporation,' § 2278(z); that 'water corporation' shall include 'every corporation or person . . . owning, controlling, operating, or managing any water system for compensation within the state,' § 2278(x); that the term 'person' includes an individual, § 2278(d); and that the term 'water system' shall include all property used in the supply or distribution of water 'for municipal, domestic, or other beneficial uses,' § 2278(w). It is clear that the legislature intended that the powers of the Corporation Commission should extend to plants owned and operated by individuals, and that the language used by it was adequate to express that intent. But it is insisted that provisions of the Arizona Constitution forbid the grant of such a power by the legislature; and the question resolves itself into this: Are the terms 'corporation' and 'public service corporation' in article 15 of the Constitution, used in the limited sense of incorporated companies, or do they include all public utilities, both incorporated and unincorporated, and whether they be firms or individuals?

Article 15, entitled, 'The Corporation Commission,' consists of nineteen sections,¹ and confers broad powers of regulation. The character of the service, that is, whether it is public or private, and not the character of the ownership, determines ordinarily the scope of the power of regulation. The need of such regulation and the manner of exercising it are the same whether a public utility is incorporated or not; and the purpose of a public service commission could easily be frustrated if concerns owned by individuals were excluded from its operation. The district court accordingly declined to give a technical mean- ing to the term 'public service corporation,' and interpreted it in the broad popular sense as embracing all public utilities. That construction is in line with numerous decisions holding that statutes imposing certain liabilities on 'railroad corporations' embrace all railroads, whether individually or corporately owned.²

It is contended that article 14, entitled, 'Corporations Other Than Municipal,' renders this liberal construction of article 15 inadmissible. Section 1, of article 14, defines "corporation,' as used in this article . . . to include all associations and joint stock companies having any powers or privileges of corporations not possessed by individuals or copartnerships;' and § 16 provides that the records of 'all public service corporations' shall at all times be subject to the inquisitorial powers of the state. It is argued that the term 'public service corporation,' thus excluding individually-owned utilities, could hardly have a different meaning in the very next article of the Constitution. But the answer is that article 14 deals only with the organization, incorporation, management, and powers of technical corporations, and the definition therein of 'corporation' is, for that reason, expressly limited by the phrase 'as used in this article.' This is significant and is entirely in harmony with the view that the term as used in some other article, having a wholly different purpose, should bear a different and broader construction.

Furthermore, the powers of the Arizona Corporation Commission are not limited to those expressly granted by the Constitution. Section 6 of article 15 authorizes the legislature to 'enlarge the powers and extend the duties of the Corporation Commission;' and the legislature, by defining 'water corporation' to include 'persons' owning a water utility, clearly extends the powers of the Commission to individually-owned concerns. So that, even if the Commission was not originally vested by the Constitution with power over utilities owned by individuals, it now has that power directly by legislative enactment. In other words, the Constitution prescribed a certain minimum of power with which the Commission was intrusted; it authorized the legislature to enlarge from time to time the scope of the Commission's duties; and the legislature extended them to water concerns owned by individuals.

This...