Pabst Corp. v. R.R. Comm'n

• Decision Date: 08 October 1929
• Citation: 199 Wis. 536,227 N.W. 18
• Parties: PABST CORPORATION ET AL. v. RAILROAD COMMISSION ET AL.
• Court: Wisconsin Supreme Court

199 Wis. 536

227 N.W. 18

PABST CORPORATION ET AL.

v.RAILROAD COMMISSION ET AL.

Supreme Court of Wisconsin.

Oct. 8, 1929.

Appeal from a judgment of the Circuit Court for Dane County; A. G. Zimmerman, Circuit Judge. Action begun January 6, 1927; judgment entered February 2, 1929.

Action by the Pabst Corporation and others against the Railroad Commission of Wisconsin and others. From the judgment, plaintiffs appeal. Affirmed.--[By Editorial Staff.]

Action by the plaintiffs, who are consumers of large quantities of water, to vacate and set aside orders of the Railroad Commission dated December 9, 1926, and November 22, 1928, authorizing the city of Milwaukee to place into effect a schedule of rates under which consumers, within the city, were required to pay a service charge of $2 per annum for every meter, and at the rate of 7 cents per 100 cubic feet of water supplied by the city. Prior to January 1, 1921, the city charged for water at the rate of 4 1/2 cents per 100 cubic feet. On January 1, 1921, the city, without authority, raised the rate to 7 cents per cubic feet, and has ever since charged and collected from consumers, within the city, at that rate, in addition to the service charge of $2 per annum for every meter.

The circuit court sustained the orders of the commission, and entered judgment which provided that the commission's orders were lawful and that the rates therein specified are reasonable and lawful rates. Plaintiffs appealed from that judgment.Lines, Spooner & Quarles, Gold & McCann, and Lamfrom, Tighe, Engelhardt & Peck, all of Milwaukee (Charles B. Quarles and Morris Karon, both of Milwaukee, of counsel), for appellants.

John W. Reynolds, Atty. Gen., J. E. Messerschmidt, Asst. Atty. Gen., and John M. Niven, City Atty., and Clifton Williams, Sp. Asst. City Atty., both of Milwaukee, for respondents.

FRITZ, J.

Plaintiffs' principal contentions are that the rate schedule permits the city to earn an excessive return on the reasonable valuation of its water plant, and that the rate is inequitable, unreasonable, and unjustly discriminatory against large users of water.

The respective functions and powers of the Railroad Commission and of the courts, in relation to the establishment of rates for public utility service, were thoroughly considered and well defined in M., St. P. & S. S. M. R. Co. v. Railroad Commission, 136 Wis. 146, 116 N. W. 905, 17 L. R. A. (N. S.) 821, and Waukesha Gas & Elec. Co. v. Railroad Commission, 181 Wis. 281, 194 N. W. 846, 849, 850. During the course of the opinion in the latter case, this court said:

“It may as well be said here as anywhere that the courts approach the question of whether or not a rate is reasonable from an entirely different standpoint than does the Commission.” Page 287.

“It is the duty of the Commission to prevent unreasonable exactions by the utility on the one hand, and also to protect the rights of investors from confiscation by imposition of rates which are too low on the other. The rate should be in the language of the statute ‘just and reasonable.’ In other words, not so low as to approach the line of confiscation nor so high as to be unjust and oppressive. A just and reasonable rate need not approach either line.”

“Under the present utility law we have nothing to do with the intricacies of ratemaking, with questions of management, and other factors which may operate to increase or diminish the revenues under the established rate.” Page 288.

“Having regard to the statute solely, it is apparent that the determination of the Commission cannot be disturbed unless it shall be made to appear to the court by clear and satisfactory evidence that the rate established by it is either unreasonably low or unreasonably high. The court is not called upon to substitute its judgment for that of the commission as to what the rate should be. In building up the rate, the Commission must necessarily consider not only the legal rights of the parties, but, as has been pointed out, matters of public policy, and must give weight to the various factors entering into the problem. The court cannot disturb the finding of the Commission unless it can say that the established rate has no basis in reason. It is manifest therefore that there is a zone within which the determination of the Commission cannot be disturbed. This does not mean that the Railroad Commission has power to choose as a matter of policy between the different rates, but that if in the exercise of its judgment in ascertaining the just and reasonable rate the result reached is within the zone of reasonableness, it must be judicially approved.” Page 290.

In the case at bar, the proof established, and the commission found--after making proper additions for the going concern value, and proper deductions for depreciation, and obsolescence, and for costs of parts of the distribution system which had been paid directly out of special assessments against property owners--that on January 1, 1925, the net book cost of the city's water plant was $15,496,252, and that the cost of reproduction would be $33,000,000. In its decision and order, dated December 29, 1926, the commission adopted a valuation of $17,000,000 as a basis for rates. In fixing that value at but $17,000,000, although the reproduction cost would be $33,000,000, the commission said: “We see no reason for making an allowance in this case for appreciation due to presentdayprices beyond any that has been made in previous cases.”

Shortly after the commission filed that decision, this court in Waukesha Gas & Elec. Co. v. Railroad Commission, 191 Wis. 565, 569, 211 N. W. 760, modified its expressions in the earlier case of Waukesha Gas & Elec. Co. v. Railroad Commission, 181 Wis. 281, 194 N. W. 846, but did not intend to withdraw what was said in that case any farther than was necessary to conform to the federal rule announced in McCardle v. Indianapolis Water Co., 272 U. S. 400, 47 S. Ct. 144. 71 L. Ed. 316. So far as the conclusion in Waukesha Gas & Elec. Co. v. Railroad Commission, 181 Wis. 281, 194 N. W. 846, was out of harmony with that federal rule, it was modified; otherwise the conclusions reached in that case stand. The federal rule requires that the commission, in ascertaining the present value, shall give due consideration to the present day cost of construction. It does not require that the value so fixed shall be, or even substantially agree with the reproduction cost, less...