Mun. Gas Co. of City of Albany v. Pub. Serv. Comm'n

• Decision Date: 07 January 1919
• Citation: 121 N.E. 772,225 N.Y. 89
• Parties: MUNICIPAL GAS CO. OF CITY OF ALBANY v. PUBLIC SERVICE COMMISSION, SECOND DIST., et al.
• Court: New York Court of Appeals Court of Appeals

225 N.Y. 89

121 N.E. 772

MUNICIPAL GAS CO. OF CITY OF ALBANY

v.PUBLIC SERVICE COMMISSION, SECOND DIST., et al.

Court of Appeals of New York.

Jan. 7, 1919.

Appeal from Supreme Court, Appellate Division, Third Department.

Action by the Municipal Gas Company of the City of Albany against the Public Service Commission, Second District, impleaded with the City of Albany and others. The Gas Company by permission appeals from an order of the Appellate Division (172 N. Y. Supp. 908), affirming an order of the Special Term granting the motion of the Public Service Commission for judgment on the pleadings. The Appellate Division certified the following question, ‘Does the complaint in this action state facts sufficient to constitute a cause of action against defendant Public Service Commission, Second District?’ Reversed, and certified question answered in the affirmative.Neile F. Towner, of Albany, for appellant.

Ledyard P. Hale, of Albany, for respondent Public Service Commission, Second Dist.

Wilber W. Chambers, of Albany, for the Attorney General.

Arthur L. Andrews, Corporation Counsel, of Albany, for City of Albany.

William L. Ransom and Harry M. Chamberlain, both of New York City, for Public Service Commission, First Dist., intervener.

William P. Burr, Corporation Counsel, of New York City (John P. O'Brien, of New York City, of counsel), for intervener City of New York.

CARDOZO, J.

In April, 1907, the Legislature of this state enacted a statute which fixed the maximum charge for illuminating gas in the city of Albany at $1 per thousand cubic feet. Laws 1907, c. 227. Violation of this act was to involve, for each offense, a forfeiture of $1,000 to the people of the state. For many years, the plaintiff, a corporation, has sold gas to consumers in Albany. It has not exceeded in its charges the statutory maximum. But it asserts that changed conditions have made those charges inadequate, and that to compel adherence to the statute is to confiscate its property. At first, it sought relief from the Public Service Commission. Our ruling was that the commission had no power to supersede the statutory rate, and that for confiscation, however unlawful, there must be recourse to other remedies. People ex rel. Municipal Gas Co. v. Public Service Commission, 224 N. Y. 156, 120 N. E. 132. This action was then begun. The complaint, verified August 20, 1918, alleges that during 1917 the net earnings were less than 4 per cent. upon the value of the property; that during the first six months of 1918 there was a deficit of over $31,000; that during the last six months of 1918 the deficit will be greater; that the cost of material and of labor has risen with the war, and that there is no prospect of any decrease; and that if these conditions continue, the deficit for 1918 and also for 1919 will be between $75,000 and $100,000 a year. The defendants are the Public Service Commission for the Second District, the city of Albany, the Attorney General of the state, and the district attorney of the county of Albany. Judgment is demanded that they be restrained from compelling the plaintiff to adhere to the statutory maximum. To that complaint the Public Service Commission demurred, and moved for judgment on the pleadings. The Supreme Court, by an order made November 2, 1918, sustained the demurrer, and gave judgment for the defendant, with leave to the plaintiff to amend. The Appellate Division (172 N. Y. Supp. 908) affirmed the order, and allowed an appeal to this court.

[1][2][3] 1. A challenge to our power meets us at the outset. We are told that the wrong, if there is any, has no remedy in the courts. There is no denial that the rates of public service corporations ought not to be so reduced by statute as to preclude a fair return, and that reduction below this is confiscation. Smyth v. Ames, 169 U. S. 466, 18 Sup. Ct. 418, 42 L. Ed. 819;Minnesota Rate Cases, 230 U. S. 352, 434, 33 Sup. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18;Missouri v. Chicago, Burlington & Quincy R. R. Co., 241 U. S. 533, 36 Sup. Ct. 715, 60 L. Ed. 1148;Rowland v. St. Louis & S. F. R. R. Co., 244 U. S. 106, 37 Sup. Ct. 577, 61 L. Ed. 1022;City & Conty of Denver v. Denver Union Water Co., 246 U. S. 178, 38 Sup. Ct. 278, 62 L. Ed. 649. But the argument is that a statute is either valid or invalid at the moment of its making, and from that premise the conclusion is supposed to follow that there is a remedy for present confiscation, but none for confiscation that results from changed conditions. We do not view so narrowly the great immunities of the Constitution, or our own power to enforce them. A statute prescribing rates is one of continuing operation. It is an attempt by the legislature to predict for future years the charges that will yield a fair return. The prediction must square with the facts, or be cast aside as worthless. Ex parte Young, 209 U. S. 123, 147, 148, 28 Sup. Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764. It must square with them in one year as in another, at the beginning but equally at the end. In all such legislation, from the hour of its enactment, there thus inheres the seed of an infirmity which the future may develop. It is the infirmity that always waits upon prophecy; the coming years must tell whether the prophecy is true or false. All that we can say at the outset is that the power to regulate exists. The validity of its exercise depends upon the nicety of the adjustment between forecast and events. This is as true of a regulation which looks forward a year as of one which looks forward a decade or a century. In either case, with differences only of degree, there is a forecast of the future, which must be justified by results. Into every statute of this kind, we are to read, therefore, an implied condition. The condition is that the rates shall remain in force at such times and at such only as their enforcement will not work denial of the right to a fair return. When the return falls below that level, the regulation is suspended. When the level is again attained, the duty of obedience revives. There would be no obscurity about this if the condition were expressed. It is no less binding because it is implied. The Constitution is the supreme law, and statutes are written and enforced in submission to its commands.

We turn to the precedents, and they give strength to our conclusion. We find no support in them for the principle, now pressed on us by counsel, that confiscation, if only it is avoided to-day, may be practiced with impunity to-morrow. On the contrary, through repeated decisions there runs the consistent thought that, in controversies of this order, experience is the final test, that the courts must bide their time, and let the workings of the law decide. Willcox c. Consol. Gas. Co., 212 U. S. 19, 29 Sup. Ct. 192, 53 L. Ed. 382,15 Ann. Cas. 1034;City of Knoxville v. Knoxville Water Co., 212 U. S. 1, 29 Sup. Ct. 148, 53 L. Ed. 371;Northern Pac. Ry. Co. v. North Dakota, 216 U. S. 579, 30 Sup. Ct. 423, 54 L. Ed. 624;Cedar Rapids Gas L. Co. v. City of Cedar Rapids, 223 U. S. 655, 670, 32 Sup. Ct. 389, 56 L. Ed. 594;Missouri v. C., B. & Q. R. R. Co., 241 U. S. 533, 540, 36 Sup. Ct. 715, 60 L. Ed. 1148;Darnell v. Edwards, 244 U. S. 564, 570, 37 Sup. Ct. 701, 61 L. Ed. 1317;Van Dyke v. Geary, 244 U. S. 39, 37 Sup. Ct. 483, 61 L. Ed. 973. Bills to annul rates have been dismissed ‘without prejudice’ while the outcome remained uncertain. Bills to annul the same rates have afterwards been sustained when the vision of results was clarified by the wisdom that follows the event. Nor. Pac. Ry. Co. v. North Dakota, 236 U. S. 585, 35 Sup. Ct. 429, 59 L. Ed. 735, L. R. A. 1917F, 1148, Ann. Cas. 1916A, 1;Missouri v. C., B. & Q. R. R. Co., supra, 241 U. S. at page 540, 36 Sup. Ct. 715, 60 L. Ed. 1148. But even at such times the courts have not forgotten the possibilities of the future. There has been no irrevocable annulment. Leave has been reserved to the appropriate representatives of the state to move to reinstate the suspended rates whenever changing circumstances may permit an adequate return. Minnesota Rate Cases, 230 U. S. 352, 473, 33 Sup. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18; Missouri Rate Cases, 230 U. S. 474, 508, 33 Sup. Ct. 975, 57 L. Ed. 1571; Missouri v. C., B. & Q. R. R. Co., supra. Nowhere is there the thought or the suggestion of the thought that the controversy ceases to be justiciable when confiscation is postponed. It is true, as counsel for the respondents urge, that the plaintiff has in such circumstances ‘the historic right’ of petition to the Legislature for relief against oppression. But that is not its only right. Village of Saratoga Springs v. Saratoga Gas, E. L. & P. Co., 191 N. Y. 123, 150,83 N. E. 693,18 L. R. A. (N. S.) 713. It has the right, now also grown historic, to invoke, when constitutional immunities are threatened, the judgment of the courts.

[4] 2. The questions remain whether confiscation is a permissible inference from the allegations of the complaint. For more than nine years the statutory rate was adequate. Abnormal conditions brought about a change, and now, when the return is figured upon the value of the property, the outcome is said to be a deficit. The defendants argue that courts must pay some heed to the average results; that the prosperity of one year may atone for the adversity of another; and that confiscation does not ensue unless there has been an unreasonable extension of the period of dearth. That dearth does not signify confiscation unless unreasonably prolonged, may be assumed to be true. Darnell v. Edwards, 244 U. S. 564, 37 Sup. Ct. 701, 61 L. Ed. 1317. The difficult thing is to determine where the line is to be drawn. Its location will vary with the nature of the business, the exigencies of the present, the chances of the future. There is no other test than the rule of reason and...