Ohio Valley Water Co v. Ben Avon Borough, No. 128

• Court: United States Supreme Court
• Writing for the Court: McREYNOLDS
• Citation: 64 L.Ed. 908,253 U.S. 287,40 S.Ct. 527
• Parties: OHIO VALLEY WATER CO. v. BEN AVON BOROUGH et al
• Docket Number: No. 128
• Decision Date: 15 October 1919

253 U.S. 287 40 S.Ct. 527 64 L.Ed. 908 OHIO VALLEY WATER CO.

v.

BEN AVON BOROUGH et al.

No. 128. Argued Oct. 15, 1919.

Restored to Docket for Reargument Jan. 12, 1920.

Reargued March 5 and 8, 1920. Decided June 1, 1920.

Messrs. William Watson Smith, John G. Buchanan, and George B. Gordon, all of Pittsburgh, Pa., for plaintiff in error.

Messrs. Berne H. Evans, of Harrisburg, Pa., and Leonard K. Guiler, David L. Starr, and Albert G. Liddell, all of Pittsburgh, Pa., for defendants in error.

Page 288

Mr. Justice McREYNOLDS delivered the opinion of the court.

Acting upon a complaint charging plaintiff in error, a water company, with demanding unreasonable rates, the Public Service Commission of Pennsylvania instituted an investigation and took evidence. It found the fair value of the company's property to be $924,744 and ordered establishment of a new and lower schedule which would yield 7 per centum thereon over and above operating expenses and depreciation.

Claiming the commission's valuation was much too low and that the order would deprive it of a reasonable return and thereby confiscate its property, the company appealed to the Superior Court. The latter reviewed the certified record, appraised the property at $1,324,621.80, reversed the order, and remanded the proceeding, with directions to authorize rates sufficient to yield 7 per centum of such sum.

The Supreme Court of the state reversed the decree and reinstated the order, saying:

'The appeal [to the Superior Court] presented for determination the question whether the order appealed from was reasonable and in conformity with law, and in this inquiry was involved the question of the fair value, for ratemaking purposes, of the property of appellant, and the amount of revenue which appellant was entitled to collect. In its decision upon the appeal, the Superior Court differed from the commission as to the proper valuation to be placed upon several items going to make up the fair value of the property of the water company for rate-making purposes.'

It considered those items and held that as there was competent evidence tending to sustain the commission's conclusion and no abuse of discretion appeared, the Superior Court should not have interfered therewith.

'A careful examination of the voluminous record in this case has led us to the

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conclusion that in the items wherein the Superior Court differed from the commission upon the question of values there was merely the substitution of its judgment for that of the commission in determining that the order of the latter was unreasonable.'

Looking at the entire opinion we are compelled to conclude that the Supreme Court interpreted the statute as withholding from the courts power to determine the question of confiscation according to their own independent judgment when the action of the commission comes to be considered on appeal.

The order here involved prescribed a complete schedule of maximum future rates and was legislative in character. Prentis v. Atlantic Coast Line, 211 U. S. 210, 29 Sup. Ct. 67, 53 L. Ed. 150; Lake Erie & Western R. R. Co. v. State Public Utility Commission, 249 U. S. 422, 424, 39 Sup. Ct. 345, 63 L. Ed. 684. In all such cases, if the owner claims confiscation of his property will result, the state must provide a fair opportunity for submitting that issue to a judicial tribunal for determination upon its own independent judgment as to both law and facts; otherwise the order is void because in conflict with the due process clause, Fourteenth Amendment. Missouri Pac. R. R. v. Tucker, 230 U. S. 340, 347, 33 Sup. Ct. 961, 57 L. Ed. 1507; Wadley Southern Ry. Co. v Georgia, 235 U. S. 651, 660, 661, 35 Sup. Ct. 214, 59 L. Ed. 405; Missouri v. Chicago, Burlington & Quincy R. R., 241 U. S. 533, 538, 36 Sup. Ct. 715, 60 L. Ed. 1148; Oklahoma Operating Co. v. Love (March 22, 1920), 252 U. S. 331, 40 Sup, Ct. 338, 64 L. Ed. 596.

Here the insistence is that the Public Service Company Law as construed and applied by the Supreme Court has deprived plaintiff in error of the right to be so heard; and this is true if the appeal therein specifically provided is the only clearly authorized proceeding where the commission's order may be challenged because confiscatory. Thus far plaintiff in error has not succeeded in obtaining the review for which the Fourteenth Amendment requires the state to provide.

Page 290

Article 6, Public Service Company Law of Pennsylvania (P. L. 1913, p. 1429):

'Sec. 31. No injunction shall issue modifying, suspending, staying, or annulling any order of the commission, or of a commissioner, except upon notice to the commission and after cause shown upon a hearing. The court of common pleas of Dauphin county is hereby clothed with exclusive jurisdiction throughout the commonwealth of all proceedings for such injunctions, subject to an appeal to the Supreme Court as aforesaid. Whenever the commission shall make any rule, regulation, finding, determination, or order under the provisions of this act the same shall be and remain conclusive upon all parties affected thereby, unless set aside, annulled, or modified in an appeal or proceeding taken as provided in this act.'

It is argued that this section makes adequate provision for testing judicially any order by the commission when alleged to be confiscatory, and that plaintiff in error has failed to take advantage of the opportunity so provided.

The Supreme Court of Pennsylvania has not ruled upon effect of meaning of section 31, or expressed any view concerning it. So far as counsel have been able to discover, no relief against an order alleged to be confiscatory has been sought under this section, although much litigation has arisen under the act. It is part of the article entitled 'Practice and Procedure Before the Commission and upon Appeal.' Certain opinions by the Supreme Court seem to indicate that all objections to the commission's orders must be determined upon appeal—St. Clair Borough v. Tamaqua & Pottsville Electric Ry. Co., 259 Pa. 462, 103 Atl. 287; Pittsburgh Railways Co. v. Pittsburgh, 260 Pa. 424, 103 Atl. 959—but they do not definitely decide the point.

Taking into consideration the whole act, statements by

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the state Supreme Court concerning the general plan of regulation, and admitted local practice, we are unable to say that section 31 offered an opportunity to test the order so clear and definite that plaintiff in error was obliged to proceed thereunder or suffer loss of rights guaranteed by the federal Constitution. On the contrary, after specifying that within 30 days an appeal may be taken to the Superior Court (section 17), the act provides (section 22):

'At the hearing of the appeal the said court shall, upon the record certified to it by the commission, determine whether or not the order appealed from is reasonable and in conformity with law.'

But for the opinion of the Supreme Court in the present cause, this would seem to empower the Superior Court judicially to hear and determine all objections to an order on appeal and to make its jurisdiction in respect thereto exclusive. Of this the latter court apparently entertained no doubt; and certainly counsel did not fatally err by adopting that view, whatever meaning finally may be attributed to section 31.

Without doubt the duties of the courts upon appeals under the act are judicial in character—not legislative, as in Prentis v. Atlantic Coast Line, supra. This is not disputed; but their jurisdiction, as ruled by the Supreme Court, stopped short of what must be plainly intrusted to some court in order that there may be due process of law.

Plaintiff in error has not had proper op ortunity for an adequate judicial hearing as to confiscation; and unless such an opportunity is now available, and can be definitely indicated by the court below in the exercise of its power finally to construe laws of the state (including of course section 31), the challenged order is invalid.

The judgment of the Supreme Court of Pennsylvania must be reversed, and the cause remanded there, with instructions to take further action not inconsistent with this opinion.

Reversed.

Page 292

Mr. Justice BRANDEIS, dissenting.

The Public Service Commission of Pennsylvania, acting upon complaint of Ben Avon borough and others, found, after due notice and hearing, that increased rates adopted by the Ohio Valley Water Company were unreasonable, and it prescribed a schedule of lower rates which it estimated would yield 7 per cent. net upon the value of the property used and useful in the service. The company appealed to the Superior Court, contending that the property had been undervalued and that the rates were, therefore, confiscatory in violation of the Fourteenth Amendment. That court, passing upon the weight of the evidence introduced before the commission, found that larger amounts should have been allowed for several items which entered into the valuation, reversed the order on that ground, and directed the commission to reform its valuation accordingly and upon such revised valuation to fix a schedule of rates which would yield the net return which it had found to be fair. From the decision of the Superior Court the commission appealed to the Supreme Court of the state, contending that the Superior Court had in passing upon the weight of the evidence exceeded its jurisdiction. The Supreme Court sustained this...