Kings County Lighting Co. v. Nixon

• Decision Date: 13 October 1920
• Citation: 268 F. 143
• Parties: KINGS COUNTY LIGHTING CO. v. NIXON, Public Service Commission of New York, et al.
• Court: U.S. District Court — Southern District of New York

268 F. 143

KINGS COUNTY LIGHTING CO. v. NIXON, Public Service Commission of New York, et al.

United States District Court, S.D. New York.

October 13, 1920

[Copyrighted Material Omitted]

Samuel F. Moran, of New York City (George L. Ingraham, of New York City, on the brief), for plaintiff.

Wilbur W. Chambers, Deputy Atty. Gen., and Terence Farley and William S. Jackson, both of New York City, for defendants.

HOUGH Circuit Judge.

In view of the nature of this case, all the evidence submitted to the master has been read and considered, to the end that the exceptions filed might be disposed of after an independent review of the record, even as to matters of fact. It does not, however, appear necessary to make new findings, as the exceptions argued refer to those made by the master.

Defendants' Exceptions.

These exceptions extend substantially to every proposition found either in the master's report or opinion. Yet they may be grouped with sufficient accuracy under the following heads:

(1) Plaintiff has sought to support its case almost wholly by incompetent evidence, viz. its own books.

(2) The period from January 1, 1919, to June 30, 1920, is too short a time upon which to base any finding of the nature of a statutory gas rate.

(3) Plaintiff is prevented by the accepted rules of equity from advancing the contention here made, because it has during all or most of the year and a half above referred to persistently and deliberately disregarded the statutory rule that the gas produced by it must be of '22 candle power.'

(4) Plaintiff is barred from prosecuting this action by a judgment entered March 29, 1920, in the Supreme Court of New York, wherein relief similar to that now demanded was sought.

(5) The city of New York is a necessary party defendant herein without which no legal determination of the matters involved can be had.

(6) The master erred, after finding that plaintiff must necessarily enlarge its capacity at an expense of not less than $1,600,000, in assuming:

'That this amount should be added to the stipulated value of complainant's plant used in the public service, for the purposes of this case.'

(7) The master erred in holding that 'gas unaccounted' for should be estimated at as much as 11 per cent. of the total gas produced, and in not holding that no more than 8 per cent. should be so allowed.

(8) The master erred, in that he allowed as operating costs to the plaintiff excessive sums for coal, oil, repairs, clerical expenses (auditing), and uncollectables.

(9) The master erred in holding that 8 per cent. on the investment was a fair return.

No exception not assignable to one of the foregoing heads, seems to me worthy of mention.

I. This fundamental exception is necessarily disposed of by the ruling of Learned Hand, J., in Consolidated Gas Co. v. Newton, 267 F. 231, unless I should feel obliged in conscience to disagree with my colleague. Under all ordinary rules of procedure, Judge Hand's opinion is now the law of this court.

But I am not in the least inclined so to disagree. The object of the statute has been well pointed out in People ex rel. New York Railways Co. v. Public Service Commission, 223 N.Y. 378, 119 N.E. 848. It is to make the method of accounting by regulated corporations uniform, 'so that the accounts could be readily comprehended by those required to examine the same. ' The object is 'not to regulate the management of their finances, but to show what the management was. ' While the Public Service Commissions in this state are not in any full sense ratemaking bodies, they may be described as the eyes of the commonwealth, to keep watch on the public utilities of the state. It is for this purpose that they are authorized and indeed directed to regulate account keeping, to the end that the act of seeing what has been done may be easily performed.

The system is now almost nation-wide, and the most prominent example of its application is the system of railway accounting promulgated and enforced by the Interstate Commerce Commission. Yet it is said that books so kept are not even prima facie evidence of the facts related therein. Definitions sometimes advance argument, and it is to me material to observe what evidence means. Dean Wigmore, in his well-known treatise (volume 1, p. 3), has collated the historic definitions, and in commenting upon them points out that evidence is always a relative term. Yet there is a constant contained in it, viz. the relation between the proposition to be established and the material evidencing the proposition.

In the matter before the court the proposition to be established is what it costs to make gas, and the logical inquiry is: How would any person interested in that question and acquainted with business go about to ascertain the correct answer? If he found that all gas- making companies were in the business for profit, and all were required by public authority to keep accounts showing their expenses and charges, would he not first investigate and prima facie accept the results shown by such books? There is but one answer to this inquiry. And when he further learned that such accounts were used by the Public Service Commission (and properly used) whenever complaint was made by the public that the consumer's price for gas was too high, I do not think he could doubt that the books were of the same evidential value as always, when the question propounded was whether the rate compelled the maker to manufacture gas-- by means of impairment of capital.

The use of entries kept in the regular course of business, and of abstracts of such entries, when the practical inconvenience of producing the entrants on the witness stand plainly outweighs the probable utility of so doing, has greatly increased of late years, and properly so. Otherwise modern business could not be investigated in courts. Confining reference to the appellate court of this circuit, instances may be found of using the train sheet of a train dispatcher (Chesapeake, etc., v. Stojanowski, 191 F. 720, 112 C.C.A. 310); books kept even by assistant weighers and in a criminal cause (Heike v. United States, 192 F. 83, 112 C.C.A. 615); the books of banks and abstracts from them as evidence against the bank official under indictment (Parker v. United States, 203 F. 950, 122 C.C.A. 252); similar books as against the surety of a dishonest employe in a civil suit (American Surety Co. v. Pauly, 72 F. 470, 18 C.C.A. 644, affirmed 170 U.S. 133, 18 Sup.Ct. 552, 42 L.Ed. 977); any maritime papers commonly kept under international maritime customs (Grace v. Browne, 86 F. 155, 29 C.C.A. 621; Bacon v. Conroy, 172 F. 532, 97 C.C.A. 158); and the books of controlled and controlling corporations in Barber, etc., Co. v. Forty-Second Street Co., 180 F. 648, 103 C.C.A. 614.

The exceptions referred to under this head are overruled.

II. Relying upon the rule of Willcox v. Consolidated Gas Co., 212 U.S. 19, 29 Sup.Ct. 192, 53 L.Ed. 382, 48 L.R.A. (N.S.) 1134, 15 Ann.Cas. 1034, it is asserted in various forms that a year and a half of such a time of trouble as has afflicted the world during and since the World War is too short a period to enable any court (and presumably any other tribunal) to measure and pass judgment upon a statutory public utility rate. This case is singular, in that the question presented is not whether 80 cents for gas affords a fair return for the making, but what shall be done when it appears that it costs more than 80 cents to make and distribute the gas, before there is or can be any question of profit or return at all.

The point is that the 80-cent rate is confiscatory, not because it does not yield a sufficient percentage on capital, but because to produce it at that price consumes capital. Neither the Willcox Case nor any other decision can be cited to show that any definite or fixed period of experimentation is a necessary prerequisite to a suit of that kind. If plaintiff were getting any return at all another question might be presented, but it is to me a matter of no doubt whatever that a year and a half is a long enough time to experiment with proved capital losses before applying for relief.

The argument is also made (as a variant of this point) that the times are abnormal, and that corporations like plaintiff are only carrying their share of the public burden in gratuitously distributing gas for a reasonable time. Whether this court has power to consider that argument may be doubtful; but, assuming that it may be considered, I am of opinion that the eleemosynary practice has lasted a reasonable time, and the exceptions under this head are overruled.

III. The contention that plaintiff comes into court with 'unclean hands,' because it has failed to furnish gas of the statutory candle power, cannot prevail in this district, after the action of the court which granted the temporary injunction in ruling upon...