Pioneer Tel. & Tel. Co. v. Westenhaver
| Decision Date | 10 January 1911 |
| Citation | 118 P. 354,29 Okla. 429,1911 OK 47 |
| Parties | PIONEER TELEPHONE & TELEGRAPH CO. v. WESTENHAVER et al. [d1] |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
When the present value of a telephone exchange plant is being ascertained for the purpose of determining what amount the company is entitled to earn as a fair return upon its investment, and such value is ascertained by determining what amount it would cost to reproduce the plant, a reasonable amount for interest on the capital invested in the properties of the plant during period of construction should be allowed.
In determining the present value of a telephone exchange plant for the purpose of testing the reasonableness of rates fixed by order of the Corporation Commission by estimating the cost of reproducing the plant, a deduction for depreciation of the physical properties from age and use should be made from the estimated cost of reproduction, or replacement new.
In ascertaining the present value of said plant for the purpose of fixing rates that shall be charged for services thereon the Corporation Commission should not confine its consideration to their valuation of the bare physical plant where such exchange has a large patronage sufficient to pay operating expenses, fixed charges, and some profits, when such patronage has been built up by expenditure of labor and money for a period of time during which the plant was operated at a loss, but these facts should be considered, and a reasonable amount allowed for its earning capacity as a going concern.
Findings of fact by the Corporation Commission, based upon any competent evidence supporting same, are presumed prima facie to be correct; but, when any finding is not supported by any evidence, and there is strong evidence to the contrary, this presumption does not prevail.
A sufficient amount should be allowed from the earnings of a telephone exchange to make good the depreciation of the plant and replace the deteriorated portions thereof, when they become so impaired that they can no longer be made useful by repair.
Rates charged by a telephone company for services of a telephone exchange that yield only sufficient revenue to pay operating expenses and fixed charges, including a reasonable amount for depreciation and a return of approximately 5.5 per cent. per annum (less than the legal rate of interest) on the value of the properties used in rendering the service, held not excessive, oppressive, or unreasonable to the public.
Appeal from the State Corporation Commission.
Action by E. H. Westenhaver and others and the State of Oklahoma against the Pioneer Telephone & Telegraph Company. Judgment for plaintiffs, and defendant appeals. Reversed.
Edward P. Meany, S. H. Harris, Hunt Chipley, Jno. L. Swayze, and Henry E. Asp, for appellant.
G. A Henshaw, Asst. Atty. Gen., for appellees.
Appellant is a public service corporation engaged in the telephone business in this state. It maintains at various points in the state telephone exchanges, and between many of the towns and cities of the state a long-distance or toll telephone service. It owns and operates at the city of Enid a local telephone exchange and toll lines from that city to other points in the state. At the time this proceeding was begun before the Corporation Commission, appellant was charging for service upon its local exchange at that place the following schedule of rates per month: $3 per month for business telephones; $2 for residence telephones; and $1.50 per month for party-line telephones. This schedule of rates had been enforced by appellants only since December 1, 1907. Prior to that date, the following schedule of rates per month were charged by appellant, to wit: $2 for business wall telephones; $2.50 for desk telephones; $1.50 for residence individual telephones; $1.25 for residence two party-line telephones; and $1 for residence four party-line telephones. On February 4, 1908, appellees filed with the Corporation Commission their petition, complaining that appellant had arbitrarily and unreasonably raised the rate of charges for its exchange service, and prayed for an order of the Corporation Commission prohibiting appellant from charging and collecting under the new schedule of rates, and to require it to restore the rates charged by it and prevailing before December 1, 1907. After answer was filed by appellant several hearings were had before the Commission, at which a great volume of testimony was introduced. On May 12, 1908, the Commission made an order requiring that the rates to be charged by appellant should be practically the same as the rates charged before December 1, 1907, and before the schedule of rates complained of was promulgated and put in force by appellant. From this order, appellant appealed. The case was then briefed by both parties and argued orally in this court. At the original hearing before the Commission, and upon entry of the order appealed from, no finding of facts was made by the Commission and certified to this court, as required by section 22, art. 9, Const. On February 9, 1909, the cause was remanded to the Commission, with instructions to make such investigations of the evidence then in the record, or that might thereafter be tendered before the Commission by any party in interest, as might be necessary to a finding of facts, and to find the facts upon the following questions: First, the value of the property employed by appellant in its exchange at Enid; second, the expense of operating such exchange; third, the amount of expenditures required to keep it in repair; fourth, the depreciation of its property, if any; and, fifth, the income, or the probable income, which appellant will receive from the rates fixed by the Commission. Pioneer Telephone & Telegraph Co. v. Westenhaver et al., 23 Okl. 226, 99 P. 1019. On June 7, 1909, a rehearing was had before the Commission, at which much additional testimony was introduced on behalf of both appellant and appellees. On March 8, 1910, approximately nine months after the rehearing, the Commission made findings of fact and certified the same, together with the evidence taken at the rehearing, to this court, and the cause is now before us for disposition upon its merits.
The power conferred and the duties imposed by the Constitution upon this court in appeals from orders of the Corporation Commission affecting rates and charges for service are dual in their nature. The court must first investigate the order, to ascertain whether it is reasonable and just to the parties it affects, and it must secondly, if it be found that the order is unreasonable and unjust, substitute therefor such order as in the court's opinion should have been made by the Commission at the time of entering the order appealed from. Sections 22, 23, art. 9, Const. The first of these duties is judicial in its nature; the second one is of legislative character. The order appealed from prescribes a rate for business telephones that is $1 per month lower than the present rate charged. The rate prescribed for residence phones is 50 cents per month lower than the present rate. In the finding of facts certified to the court, the Commission suggests that the rate on business telephones should be reduced 63 cents per station per month, and that residence telephones should be reduced 35 cents per station per month. No suggestion is made as to any other rates prescribed by the order. From this suggestion, we understand the Commission to be of the opinion, in the light of the additional evidence taken at the rehearing, and under its findings of the facts, that some of the rates prescribed by the order are too low. Such is the reasonable, if not inevitable, inference to be drawn from the suggestion that some of the rates should he higher than those fixed in the order appealed from. We think this suggestion is a confession of error, and it seems to have been so treated by counsel for appellees. If it was not the duty of this court to make an order, such as should have been made by the Commission, this cause, under the suggestions of the Commission, could and should be reversed and remanded. To substitute for the order appealed from, however, such order as the Commission should have made requires an investigation of the facts and a consideration of those principles of law that are involved in all rate regulation of public service corporations.
At the threshold of this investigation, we are met with the contention of counsel for appellant that some of the findings of fact are not supported by the evidence, and that others are based upon erroneous conclusions of the law. The basis of all calculations as to the reasonableness of the rates to be charged by public service corporations is the fair value of the property used by the corporation in rendering the service to the public. The rule generally established by the courts including the Supreme Court of the United States, for determining the validity of legislative acts, or of orders of boards or commissions, prescribing rates, is that the act is valid, unless the rates be unreasonable to the extent that their enforcement would be equivalent to the taking of property for public use, without such compensation as, under the circumstances, is just to the owner and to the public. The rate is fair when its application will yield a fair return upon the reasonable value of the property at the time it is being used for the public. It is unfair, when it does not yield such return. Knoxville v. Knoxville Water Co., 212 U.S. 1, 29 S.Ct. 148, 53 L.Ed. 371; San Diego Land & Town Co. v. Jasper, 189 U.S. 439, 23 S.Ct. 571, 47 L.Ed. 892; San Diego Land & Town Co. v. National City, 174 U.S. 739, 19 S.Ct. 804, 43 L.Ed. 1154; Smyth v. Ames, 169 U.S. 466...
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