In re Sear Sport Water Co.

• Decision Date: 09 December 1919
• Parties: In re SEAR SPORT WATER CO. In re LINCOLN WATER CO.
• Court: Maine Supreme Court

108 A. 452

In re SEAR SPORT WATER CO. In re LINCOLN WATER CO.

Supreme Judicial Court of Maine.

Dec. 9, 1919.

Exceptions from Supreme Judicial Court, Penobscot County, at Law.

Separate proceedings by the Searsport Water Company and the Lincoln Water Company before the Public Utilities Commission to obtain increased rates for supplying water for municipal or public uses. A judgment of the commission was entered increasing the rates, and the respective towns and certain of the inhabitants except. Exceptions overruled.

Argued before CORNISH, C. J., and SPEAR, HANSON, DUNN, WILSON, and DEASY, JJ.

Andrews & Nelson, of Augusta, for Searsport Water Co. and Lincoln Water Co.

A. S. Littlefield, of Rockland, and G. W. Thombs, of Lincoln, for water users.

WILSON, J. Under special acts of the Legislature, the Searsport Water Company and the Lincoln Water Company were organized to supply the respective towns of Searsport and Lincoln with "water for domestic, sanitary and municipal purposes," each company being expressly authorized to enter into a contract with the town in which it was located to supply it with water for municipal or public uses.

While the language of the respective charters differs in this respect, there can be no doubt of the authority of each company to contract with any corporation or individual in the town in which it was located to supply water for domestic, sanitary, or industrial uses. No provision is found in either charter, however, in terms authorizing either town to contract with the water company for water for its inhabitants for domestic uses, or to fix or regulate the rates at which it should be supplied to them.

In 1905 the town of Searsport entered into a contract with the Searsport Water Company, and in 1911 the town of Lincoln entered into a contract with the Lincoln Water Company, whereby the respective water companies were to construct reservoirs, lay mains, and furnish to the town water for municipal and fire purposes for a stipulated sum per annum, and also to furnish to the inhabitants of the town water for domestic and sanitary purposes at a fixed rate or price.

Both contracts were still in force in 1918, when each water company filed a new schedule of rates both municipal and private with the Public Utilities Commission under chapter 55, R. S., known as the Public Utilities Law, by which schedules the rates of each water company both for public and private service were increased over those fixed in the contracts with the respective towns. Complaints were filed with the Public Utilities Commission by each town and certain of its inhabitants against the increased rates. A hearing was held. The commission adjudged the rates both for public and private service as fixed in the respective contracts to be "unjust, unreasonable, and unjustly discriminatory," and ruled as a matter of law that it had authority to change the rates even though fixed by contract, and found the rates for private service as fixed in the new schedules of each company to be Just and reasonable, but fixed lower rates for the public service in each case than those set forth in the respective schedules filed, though in excess of the rates stipulated in the contracts.

To the ruling of the commission that it had authority to order new rates substituted for those contained in the contracts, each town and certain of its inhabitants as users of the private service excepted. Both cases come before this court on the exceptions. As the same questions are involved in each case and they were argued together, they are considered in one opinion by this court.

While this court in the recent case of In re Guilford Water Co., 118 Me. 367, 108 Atl. 446, laid down certain principles that are, we think, decisive of the issues in the instant cases so far as the rates for the private service are concerned, contentions not raised in that case have been urged by counsel in the eases now at bar, which require a restatement of the principles we deem controlling in this class of cases. In the cases now before us, a valid contract for public uses entered into by legislative authority existed between each town and the utility supplying it, which did not exist in the Guilford Case, and which presents questions that require full consideration.

The complainants here contend: (1) That although contracts harmful to the public health, safety, or morals may be subject to regulation at all times under the police powers of the state, the evidence in these cases disclosed that the contracts in question were innocuous so far as the public health or safety is concerned, and that, inasmuch as the changes in rates authorized by the Utilities Commission only affected the amount of the stockholders' return, it therefore does not concern the public, and the public interest ceasing to exist, the state's control under its police powers ceases; (2) (hat when the public health, safety, or morals are not involved, the state may authorize a municipality to enter into an inviolable contract fixing the rates for service for a term of years with any public utility, and that the contracts in the instant cases are of that nature: (3) that the supplying of water to a municipality and its inhabitants is a proprietary matter, and any contract by the municipality relating thereto is protected against impairment by the state and federal Constitutions; (4) and that finally, irrespective of the power of control vested in the state, the Legislature did not under chapter 55, R. S., delegate to the Public Utilities Commission the authority to regulate rates established by a contract entered into prior to its enactment.

The questions raised here are not new and have in some form been many times considered by both state and federal courts, and more recently of necessity by Public Service Commissions in the different states. The decisions taken as a whole, however, cannot be said to have contributed to clarity, but rather to obscurity of view as to the nature and scope of the police powers, particularly in their application to the regulation of rates where contracts fixing them have been entered into under legislative authority.

In a recent case before it, Clifton Forge v. Virginia Western Power Co., P. U. R. 1918F, 791, 803, the Corporation Commission of Virginia commented on the seeming inconsistencies in the conclusions of some of the decided cases in the federal Supreme Court, citing Cleveland v. Cleveland City Ry. Co., 194 U. S. 517, 24 Sup. Ct. 750, 48 L. Ed. 1102, and Home Tel. & Tel. Co. v. Los Angeles, 211 U. S. 205, 29 Sup. Ct. 50, 53 L. Ed. 176, and of which Freeport Water Co. v. Freeport City, ISO U. S. 587, 21 Sup. Ct. 493, 45 L. Ed. 679, and Vicksburg v. Vicksburg Water Works Co., 206 U. S. 490, 27 Sup. Ct. 702, 51 L. Ed. 1155, are, perhaps even more conspicuous examples.

An analysis of these and the many other decisions in the federal and state courts in which these questions have been considered discloses that many of the seeming inconsistencies are more apparent than real, and in the federal court at least are the result of having followed the construction by the state courts of the statutes involved. See Home Tel. & Tel. Co. v. Los Angeles, supra, 211 U. S. 277, 29 Sup. Ct. 50, 53 L. Ed. 176; Milwaukee Ry. Co. v. Wisconsin R. R. Com., 238 U. S. 174, 182, 35 Sup. Ct. 820, 59 L. Ed. 1254. However, neither the conclusions nor the reasoning can be said to be harmonious in .'ill the decisions.

Certain principles are no longer questioned. The control or regulation of rates by public utilities is a legislative or governmental function and a legitimate exercise of the police powers of the state. Munn v. Illinois, 94 U. S. 113, 24 L. Ed. 77; Minnesota Rate Cases, 230 U. S. 352, 413-415, 433, 33 Sup. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18; Kennebec Water Dist. v. Waterville, 97 Me. 185, 201, 54 All. 6. 00 L. R. A. 850. Where the public health, safety, or morals are concerned, the power of the state to control under its police powers is supreme and cannot be bargained or granted away by the Legislature. The exercise of the police power in such cases violates no constitutional guaranty against the impairment of vested rights or contracts. Fertilizing Co. v. Hyde Park, 97 U. S. 659, 24 L. Ed. 1036; Butchers' Union Co. v. Crescent City Co., 111 U. S. 746, 751, 4 Sup. Ct. 652, 28 L. Ed. 585; New Orleans Gas Co. v. Louisiana Light Co., 115 U. S. 050, 072, 6 Sup. Ct. 252, 29 L. Ed. 516. New Orleans Water Works v. Rivers, 115 H. S. 674, 6 Sup. Ct. 273, 29 L. Ed. 525; Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 15, 19 Sup. Ct. 77, 43 L. Ed. 341; Atlantic Coast Line R. R. Co. v. Goldsboro, 232 U. S. 548, 34 Sup. Ct. 304, 58 L. Ed. 721; Dirken v. Great Northern Paper Co., 110 Me. 374, 388, 86 All. 320, Ann. Cas. 19141, 390; State v. Mayo, 100 Me. 66, 75 Atl. 295, 26 L. R. A. (X. S.) 502, 20 Ann. Cas. 512.

The power to regulate the rates of public utilities, however, is not dependent on the immediate concern of the public health or safety therein.

"When one devotes his property to a use in which the public has an interest, he in effect grants to the public an interest in that use and must submit to be controlled by the public for the common good to the extent of the interest he has created." Munn v. Illinois, supra, 94 U. S. 120. 24 L. Ed. 77; Union Dry Goods Co. v. Ga. Pub. Ser. Corp., 248 U. S. 372, 375, 39 Sup. Ct. 117, 03 L. Ed. 300; Woodbum v. Pub. Ser. Com., 82 Or. 114, 120, 181 Pac. 301, L. R. A. 1917C, 98, Ann. Cas. 1917E, 996; Boston & Maine R. R. Co. v. County Commissioners, 79 Me. 386, 10 Atl. 113.

The state requires every public utility to "furnish safe, reasonable and adequate facilities." and its rates and charges to be reasonable and just, based upon a fair return on the fair value of the property devoted to the public use. Section 10, c. 55. Its power to do so cannot be questioned. To assume that a Public...