Public Service Commission v. General Tel. Co. of Southeast

• Decision Date: 23 May 1977
• Citation: 19 P.U.R.4th 576,555 S.W.2d 395
• Parties: PUBLIC SERVICE COMMISSION of the State of Tennessee, Z. D. Atkins, Cayce L. Pentecost and Robert N. Clement, Appellants, v. GENERAL TELEPHONE CO. OF the SOUTHEAST, Appellee.
• Court: Tennessee Supreme Court

Page 395

555 S.W.2d 395

19 P.U.R.4th 576

PUBLIC SERVICE COMMISSION of the State of Tennessee, Z. D Atkins, Cayce L. Pentecost and Robert N. Clement, Appellants, v. GENERAL TELEPHONE CO. OF the SOUTHEAST, Appellee.

Supreme Court of Tennessee.

May 23, 1977.

Eugene W. Ward, Gen. Counsel, T. E. Midyett, Jr., Asst. Gen. Counsel, Nashville, for appellants.

Lon P. MacFarland, MacFarland, Colley, Blank & Jack, Columbia, W. C. Fleming, Associate Gen. Counsel, Ward W. Wueste, Jr., Gen. Counsel, Durham, N. C., for appellee.

OPINION

FONES, Justice.

Tennessee Public Service Commission (PSC) appeals from a decree of the Chancery Court of Davidson County directing the Commission to fix rates that would allow General Telephone Company of the Southeast (GT) to earn a minimum of twelve (12%) percent on its common equity, based upon a finding that any rate below that figure would be confiscatory.

I.

The threshold issue asserted by appellant is that the Uniform Administrative Procedures Act (UAPA), codified as T.C.A. §§ 4-501, et seq. governs the procedure for PSC hearings and the review of its decisions and that where the constitutional issue of confiscation is presented, in rate cases, the scope of review prescribed in T.C.A. § 4-523(h) satisfies the requirements of due process, including the claim of confiscation. Appellant urges this Court to reexamine the independent judgment rule announced by the United States Supreme Court in Ohio Valley Company v. Ben Avon Borough, 253 U.S. 287, 40 S.Ct. 527, 64 L.Ed. 908 (1920), and adopted in Southern Continental Telephone Company, etc. v. Railroad and Public Utilities Commission of State of Tennessee et al., 199 Tenn. 122, 285 S.W.2d 115 (1955), and Southern Bell Telephone and Telegraph Company v. Tennessee Public Service Commission et al., 202 Tenn. 465, 304 S.W.2d 640 (1957).

The substance of appellant's contention is that subsequent cases of the United States Supreme Court have explained and modified Ben Avon to such an extent that the so-called independent judgment rule has been abandoned and should be explicitly overruled.

General Telephone's reply is that Ben Avon has not been overruled or eroded and that when the constitutional issue of confiscation is presented, the UAPA has not affected the independent judgment rule. Also, it is urged that PSC affirmatively admitted in the Chancery Court that GT was entitled to that court's independent judgment of the facts and is precluded by Supreme Court Rule 14(4) from raising the question in this Court.

II.

Addressing the latter contention first, we are of the opinion that the issue of the appropriate scope of review in rate cases is properly before the court for decision by virtue of the state of the pleadings of both parties in the Chancery Court and of the compelling necessity of resolving this question, presented by the legislative enactment in 1974 of the UAPA.

General Telephone sought a review of the decision of the PSC in the Chancery Court by filing an original bill of complaint and petition for certiorari. After reciting the facts, GT asserted that the Commission's order of October 10, 1975, was arbitrary, capricious and confiscatory, in violation of Article I, § 8, and Article I, § 21 of the Tennessee Constitution and the Fifth and Fourteenth Amendments to the United States Constitution. Its pleading continues as follows:

"Plaintiff avers that not only does it have a right to apply to this Court for relief because of the constitutional issue involved, and because the Common law writ of certiorari is always available in such cases, but it also is expressly given such right under the terms of Chapter 162 of the Public Acts of 1953, as amended by Chapter 46 of the Acts of 1969, (Tennessee Code Annotated, Section 65-220 through 65-229). The act provides for a judicial review of defendant Commission's action in rate proceedings by 'petition for certiorari to the Chancery Court of Davidson County, Tennessee, within sixty (60) days after the date of entry of the said final Order of the Commission.' "

After quoting in full T.C.A. § 65-229 entitled Scope of Review by the Court, GT asserts that it is entitled to a review of both the law and the facts under the constitutional issues raised and also as a petitioner for certiorari as provided in T.C.A. §§ 65-220 65-229.

Public Service Commission responded to these allegations by admitting that the common law writ of certiorari was available as well as the review provided in T.C.A. §§ 65-220 65-229, "but would show that maybe the same is the procedure as set forth in T.C.A. § 4-523."

In United Inter-Mountain Telephone Company v. Public Service Commission, 555 S.W.2d 389 (Tenn.1977), released simultaneously with this opinion, we have held United Telephone's reliance upon T.C.A. § 65-220 et seq. was misplaced and that the UAPA has entirely superseded these sections in title 65 and that the only method of judicial review of the decisions of the PSC is the petition for review pursuant to T.C.A. § 4-523.

Our reasons for so holding are stated at length in that opinion and will not be repeated here.

The Ben Avon independent judgment rule has provided a third standard of review available in rate cases, where confiscation was alleged. Common law certiorari, and statutory review, formerly T.C.A. § 65-220 et seq. (now T.C.A. § 4-523), each with its standards of judicial review have also been available. All three have been consistently asserted in rate cases, as here, since Southern Continental Telephone Company v. R & P U C et al., supra, in 1955.

The time has come to reexamine the judicial review of rate cases and determine whether or not this third standard of review is necessary to afford a fair opportunity for adjudication by a judicial tribunal of the constitutional issue posed by an allegation of confiscation.

We begin by examining the present status of the Ben Avon independent judgment rule in the federal courts and the courts of our sister states.

III.

Ben Avon involved a review of a decision of the Public Service Commission of Pennsylvania ordering a schedule of rates, wherein the fair value of the water company's property for ratemaking purposes was the disputed issue. The water company asserted that the effect of the Commission's order was a confiscation of its property. Upon appeal, the Pennsylvania trial court differed with the Commission as to the valuation of some items of property, but the Supreme Court of Pennsylvania reversed and reinstated the order of the Commission, concluding that the trial court had merely substituted its judgment for that of the Commission.

The United States Supreme Court reversed the State Supreme Court. As we construe the decision, the Court held that the trial court had construed the scope of review provided by the Public Service Company Act of Pennsylvania to authorize an appropriate judicial review of the constitutional issue of confiscation, but that the court of last resort's opinion construed the review section of the Act so as to deny the water company a "fair opportunity" for submitting a constitutional issue for judicial determination.

The review sections of the Pennsylvania Public Service Law provided in one part that the decisions and orders of the Commission, "shall be and remain conclusive upon all parties affected thereby unless set aside, annulled or modified in an appeal taken as provided in this act." Another section provided that on appeal the court should "determine whether or not the order appealed from is reasonable and in conformity with the law." Implicit in the Supreme Court's opinion is the fact that such a scope of review is subject to a wide variety of interpretations and that the one evinced by the court of last resort in Pennsylvania was too narrow to provide a fair opportunity for appropriate judicial review of an alleged constitutional deprivation.

We think the following quote supports our analysis of the opinion:

"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. (citations omitted.) 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 (it is) in conflict with the due process clause, Fourteenth Amendment. ¹

The Supreme Court of Pennsylvania has not ruled upon effect or meaning of section 31, or expressed any view concerning it.

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, (211 U.S. 210, 29 Sup.Ct. 67, 53 L.Ed. 150). 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 opportunity 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...