Inland Empire Rural Electrification, Inc. v. Department of Public Service of Washington

• Decision Date: 10 July 1939
• Docket Number: 27568.
• Citation: 92 P.2d 258,199 Wash. 527
• Parties: INLAND EMPIRE RURAL ELECTRIFICATION, Inc., v. DEPARTMENT OF PUBLIC SERVICE OF WASHINGTON et al.
• Court: Washington Supreme Court

92 P.2d 258

199 Wash. 527

INLAND EMPIRE RURAL ELECTRIFICATION, Inc., v. DEPARTMENT OF PUBLIC SERVICE OF WASHINGTON et al.

No. 27568.

Supreme Court of Washington

July 10, 1939

Department 1.

Action by the Inland Empire Rural Electrification, Incorporated against the Department of Public Service of the State of Washington and others for a declaratory judgment determining whether plaintiff is subject to defendant department's jurisdiction. From a judgment declaring plaintiff not subject to the department's jurisdiction, supervision, or control, defendants appeal.

Affirmed.

Appeal from Superior Court, Thurston County; John M. Wilson, judge.

G. W Hamilton and Geo G. Hannan, both of Olympia for appellants.

Davis, Heil & Davis, of Spokane, for respondent.

STEINERT Justice.

The purpose of this action was to obtain a declaratory judgment establishing plaintiff's legal status and determining whether or not it was subject to the jurisdiction of the department of public service. Defendants' demurrer to the complaint was overruled. Upon refusal by defendants to plead further, the court entered judgment declaring that plaintiff was not a public service corporation or a public utility within the purview of the public service commission law and that it was not subject to the jurisdiction, supervision or control of the department. The defendants have appealed.

The complaint, to which we are limited for a knowledge of the facts, presents the case as follows: Respondent, Inland Empire Rural Electrification, Inc., is a corporation, created under chapter 134, p. 255, Laws of 1907 (Rem.Rev.Stat. §§ 3888-3900), which provides for the formation of corporations 'for any lawful purpose except the carrying on a business, trade, avocation or profession for profit.' The corporation was organized by a group of farmers in Spokane and Whitman counties in March, 1937, and is one of many rural electrification projects in this and other states of the Union. Its purposes, in general, are to generate, manufacture, purchase and acquire electrical energy and to distribute the same over its transmission lines, at cost, to its members only. It is financed by the Rural Electrification Administration, a United States' agency which was created under the federal Rural Electrification Act (May 20, 1936, 49 Stat. 1363, 7 U.S.C.A. §§ 901-914), and which is authorized to make loans in the several states and territories for rural electrification and the furnishing of electrical energy to persons in rural areas who are not receiving central station service.

According to its charter and by-laws, membership in the corporation is evidenced by certificate. A person, whether an individual, a partnership or a corporation, may become a member only after acceptance of his, or its, application by the board of trustees, the payment of a membership fee of five dollars and the execution of an agreement to purchase, monthly, not less than the minimum amount of electrical energy as fixed by the corporation from time to time. Not more than one membership may be held, owned or controlled by any one person, partnership, corporation or association, and each member is limited to one vote in the affairs of the company. Any member may be expelled for violation of the by-laws, the articles of incorporation or the rules and regulations of the corporation, and, upon expulsion, voluntary with-drawal or death of any member, his, or its, membership may be cancelled and the membership fee returned.

According, also, to the charter and bylaws, at the close of each fiscal year, and after provision has been made for the payment of operating expenses, interest and matured obligations, taxes and insurance, the corporation is required to apply the earnings to the following purposes in the priority as listed, (1) for the establishment and maintenance of a reserve fund to be used for the payment of outstanding notes, bonds and other instruments of indebtedness, (2) for the establishment of a general reserve fund to be used for working capital, taxes, insurance, and depreciation, (3) for the payment, to the members, of refunds in proportion to the amounts of their purchases of electrical energy and goods from the corporation and (4), to the extent of the remainder, for corporate purposes.

The respondent corporation has constructed its electric facilities with funds derived from loans advanced by the Rural Electrification Administration to the extent of one million dollars, for which the corporation has given its notes secured by an open mortgage on its properties. It contemplates building, in the near future, additional lines in order to serve other persons in adjoining rural areas who desire to become members and who are not now receiving central station service; for such expansion it expects to obtain additional loans from the same source and upon notes secured by the same mortgage.

The corporation obtains its electrical energy from Washington Water Power Company at wholesale rates and in turn delivers it over its lines to its members at retail according to fixed rates. It supplies such energy to its members only and does not intend in the future to render service to or for the public.

As alleged in the complaint, the department of public service, appellant herein, is vested by law, chapter 117, p. 538, Laws of 1911, and subsequent amendatory and supplemental acts (Rem.Rev.Stat. §§ 10339-10459), with certain regulatory and supervisory powers over public service properties and utilities, including regulation of rates and service. Further, under chapter 151, p. 540, Laws of 1933 (Rem.Rev.Stat. Supp. §§ 10439-1 to 10439-15), the department is vested with supervision over the issuance of stocks, bonds, notes and other evidences of indebtedness of public service corporations, and unless the issuance of such evidences be permitted by the department, they are void. Also, under the provisions of chapter 158, p. 556, Laws of 1937 (Rem.Rev.Stat.Supp. §§ 10417 to 10417-6), every corporation subject to regulation by the department, with certain exceptions not relevant here, is required to pay to the department a fee equivalent to a certain percentage of its gross operating revenue.

The department, upon the advice of the attorney general, has heretofore asserted and exercised jurisdiction over respondent as though it were a public service corporation within the meaning of the public service commission law. It has required respondent to submit, for approval, the notes and mortgages which it executed and delivered to the United States, and has demanded that respondent file its rate schedules and submit its membership certificates for approval or disapproval. The department insists that respondent must continue to do these things in the future and also must pay as a fee a certain percentage of its gross operating revenue. Respondent in the past has complied with the requirements of the department, but only under protest, expressly reserving its right to contest the asserted jurisdiction.

Upon this set of facts, as alleged in the complaint, respondent sought a declaratory judgment of its rights.

Two questions, both raised by the demurrer, are presented on the appeal. The first relates to the jurisdiction of the court to entertain the proceeding.

Rem.Rev.Stat.Supp. § 10428, which is an amendment of the public service commission law of 1911, provides: 'Any complainant or any public service company affected by any findings or order of the department, and deeming such findings or order to be contrary to law, may, within thirty days after the service of the findings or order upon him or it, apply to the superior court of Thurston county for a writ of review, for the purpose of having the reasonableness and lawfulness of such findings or order inquired into and determined.'

Appellant contends that, a remedy having been provided by the section just quoted, such remedy is exclusive. We entertain a different view of the matter.

In 1935, the legislature passed the declaratory judgment act, Laws of 1935, chapter 113, p. 305. The law, as amended in 1937, now appears as Rem.Rev.Stat.Supp., § 784-1 et seq. Section 1 of the act (Rem.Rev.Stat.Supp. § 784-1), provides that courts of record shall have power to declare rights, status and other legal relations, whether or not further relief is or could be claimed. Section 2 of the act (Rem.Rev.Stat.Supp. § 784-2) provides: 'A person interested under a deed, will, written contract or other writings constituting a contract, or whose rights, status or other legal relations are affected by a statute, municipal ordinance, contract or franchise, may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract or franchise and obtain a declaration of rights, status or other legal relations thereunder.' (Italics ours.)

We have upheld the constitutionality of that act and have declared that it may be invoked for the purposes designated therein, provided the case presents a justiciable controversy, that is, a cause of action wherein the parties have opposing interests which are direct and substantial, and which involve an actual, as distinguished from a possible or potential, dispute. Acme Finance Co. v. Huse, 192 Wash. 96, 73 P.2d 341, 114 A.L.R 1345; State ex rel. Yakima Amusement Co. v. Yakima County, 192 Wash. 179, 73 P.2d 759; Washington Beauty College, Inc. v. Huse, 195 Wash. 160, 80 P.2d 403.

The required conditions are fully met in the instant case. This action is not one primarily to test the reasonableness or lawfulness of the findings or order made by the commission, for which the remedy would be by writ of error. On the contrary, it is a prevenient action the object of which is to obtain a declaration...