Raymond Lumber Co. v. Raymond Light & Water Co.

• Decision Date: 29 July 1916
• Docket Number: 13081.
• Citation: 92 Wash. 330,159 P. 133
• Court: Washington Supreme Court
• Parties: RAYMOND LUMBER CO. v. RAYMOND LIGHT & WATER CO. et al.

159 P. 133

92 Wash. 330

RAYMOND LUMBER CO. v. RAYMOND LIGHT & WATER CO. et al.

No. 13081.

Supreme Court of Washington, En Banc.

July 29, 1916

Appeal from Superior Court, King County; Everett Smith, Judge.

Suit by the Raymond Lumber Company against the Raymond Light & Water Company and another, in which the Public Service Commission intervened. From judgment for plaintiff, defendants and the Public Service Commission appeal. Reversed and remanded, with directions.

Murphy & Lee, of Seattle, W. V. Tanner and Scott Z. Henderson, both of Olympia, and C. H. Fuqua, of Raymond, for appellants.

Corwin S. Shank and H. C. Belt, both of Seattle, for respondent.

MAIN J.

This action was brought for the purpose of restraining the Raymond Light & Water Company, a public service corporation, from denying to the plaintiff the right to receive water from that company in accordance with the rate fixed in a contract between the two companies, and for the purpose of recovering the excess payments for water over the contract rate, which payments had been made prior to the institution of the action. Before the case was tried, the Public Service Commission became a party by intervention. The trial of the cause resulted in a money judgment for what the plaintiff claimed to be the excess water payments, and also for the injunctive relief prayed for. From this judgment the defendants and the Public Service Commission appeal.

The facts are briefly these: During the year 1905, the then village of Raymond contained 300 inhabitants. During the month of September of that year, Charles L. Lewis and Edward Hulbert, being desirous of securing a location for a sawmill visited Raymond with this object in view. As a result of this visit three contracts were entered into, one on September 9 1905, between the Raymond Light & Water Company, a corporation, and Charles L. Lewis and Edward Hulbert. By this contract that corporation agreed to furnish water, necessary for the use and operation of a sawmill to be thereafter erected and operated by Lewis and Hulbert, for a period of 40 years, at the rate of $5 per month for each and every steam boiler contained in the mill.

On the same date a contract was made between Stella J. Raymond and Leslie V. Raymond, her husband, and Lewis and Hulbert, by which, for a consideration of $1, the Raymonds agreed to convey to Lewis and Hulbert, a tract of land consisting of approximately 19 acres, for a mill site. At about the same time, and at least not later than the 11th day of September of the same year, the Raymond Land & Improvement Company, a corporation, contracted with Lewis and Hulbert, that if they would locate and operate a mill upon the site covered by the contract with Stella J. Raymond and her husband, that that company would build, or cause to be built, a spur track leading from the line of the Northern Pacific Railway Company which passed through Raymond, to the site upon which the mill was to be erected. Thereafter the mill was erected, and in accordance with the agreement the mill site was conveyed.

For a period of about 7 years the Raymond Light & Water Company continued to furnish water to the mill, as provided in its contract with Lewis and Hulbert.

During the month of August, 1912, the city of Raymond, by its proper authorities, filed a complaint against the Raymond Light & Water Company with the Public Service Commission, charging that the rates of the water company were unreasonable and excessive, and alleging that the supply of water furnished by the water company to the citizens of Raymond was inadequate and insufficient. The Raymond Light & Water Company answered the complaint, and alleged that under the existing rates its returns upon its investment were insufficient, and that it had spent large sums of money in furnishing the city of Raymond with a water supply, and intended to still further extend and expand its system and plant.

Thereafter, and during the month of February, 1913, a hearing was had before the Public Service Commission upon the issues thus raised by the complaint and answer. During this hearing it developed that the water company had been furnishing water to the Raymond Lumber Company, which had succeeded to the rights of Lewis and Hulbert under their contract with the water company, at the rates specified in that contract. The rate at which the lumber company received water was less than that charged to other water users, except that one or more other mills received water at the same rate as the Raymond Lumber Company. The Public Service Commission found that the rates charged the Raymond Lumber Company and the other mill companies, were discriminatory, and ordered that the water company terminate the contracts with the mill companies, including the Raymond Lumber Company. Thereafter the water company installed a meter upon the pipe leading to the Raymond Lumber Company's plant, and notified that company that it would be required to pay for water in accordance with the water company's published rules and tariff.

After this notice, for a period of about 23 months before the institution of the present action, the Raymond Lumber Company paid the tariff rate for water, most of the time under protest. The difference between the sum which it would have paid under the contract and that which it paid under the tariff rate was approximately $2,218.95. This is the item for which a money judgment was entered in this action.

The principal question in the case is whether the Public Service Commission had power to direct the water company to cease to furnish water under the contract, and charge for the same at its published tariff rate.

By the Public Service Commission Law (Laws 1911, c. 117), the Public Service Commission therein created is given jurisdiction to determine the rate that shall be charged, and the service that shall be rendered by public service corporations, including water companies. This act was passed subsequent to the time when the water contract under which the Raymond Lumber Company is claiming was executed. Hence, at the time the contract was entered into, the parties thereto had a right to contract with reference to the rate.

In the briefs there is considerable controversy over whether this water contract is a mutual obligation; and also whether the other two contracts could have any bearing when considering the validity of the water contract. Without following this discussion, so far as the decision of this case is concerned, it will be assumed, but not decided, that there was a consideration for the water contract at the time it was entered into, and that the contract, at the time, was a valid obligation between the parties.

The question then arises, if the contract was valid at the time it was entered into, can it be terminated under the provisions of the Public Service Commission Law subsequently passed? As already stated the water company was a public service corporation, and jurisdiction over its rates and service was conferred by the Public Service Commission Law upon the Public Service Commission. The power to regulate and control the rates of public service corporations is within in the legitimate exercise of the police power of the state. This power may be exercised by the Legislature itself by enacting a law fixing rates, or the Legislature may delegate the power to fix rates to a properly constituted commission, subject to judicial review. State ex rel. Webster v. Superior Court, 67 Wash. 37, 120 P. 861, L. R. A. 1915C, 287, Ann. Cas. 1913D, 78. In this state the Legislature has conferred the rate-making power upon the Public Service Commission by the Public Service Commission Law.

It is contended that even though the state under its police power may fix the rates to be charged by public service corporations, that notwithstanding this fact a contract, valid when entered into, is not subject to be abrogated under the provisions of a law subsequently enacted. This contention cannot be sustained. The rule is that contracts upon subjects which are within the police power, even though valid when made, must be taken to have been entered into in view of the continuing power of the state to control the rates to be charged by public service corporations. Portland Ry., etc., Co. v. Railroad Commission, 229 U.S. 397, 33 S.Ct. 820, 57 L.Ed. 1248; Milwaukee Electric, etc., Co. v. Wisconsin R. R. Comm., 238 U.S. 174, 35 S.Ct. 820, 59 L.Ed. 1254; Chicago, B. & Q. R. Co. v. Nebraska, 170 U.S. 57, 18 S.Ct. 513, 42 L.Ed. 948; Louisville & N. R. Co. v. Mottley, 219 U.S. 467, 31 S.Ct. 265, 55 L.Ed. 297, 34 L. R. A. (N. S.) 671; Philadelphia, B. & W. R. Co. v. Schubert, 224 U.S. 603, 32 S.Ct. 589, 56 L.Ed. 911; Dawson v. Dawson Telephone Co., 137 Ga. 62, 72 S.E. 508; Atlanta, etc., R. Co. v. Camp, 130 Ga. 1, 60 S.E. 177, 15 L. R. A. (N. S.) 594, 124 Am. St. Rep. 151, 14 Ann. Cas. 439; Texas Ry. Co. v. Scott, 77 F. 726, 23 C. C. A. 424, 37 L. R. A. 94; Manitowoc v. Manitowoc, etc., Co., 145 Wis. 13, 129 N.W. 925, 140 Am. St. Rep. 1056; Milwaukee Electric, etc., Co. v. Railroad Comm., 153 Wis. 592, 142 N.W. 492, L. R. A. 1915F, 744, Ann. Cas. 1915A, 911; Kenosha v. Telephone Co., 149 Wis. 338, 135 N.W. 848; President, etc., v. Southern Wis. Power Co., 149 Wis. 168, 135 N.W. 499; United Fuel Gas Co. v. Public Service Commission, 73 W.Va. 571, 80 S.E. 932.

In the Portland Railway Case it appears that this railway company had a system of street railways in the city of Portland, and also two or more interurban lines entering the same city, and connecting with its street railway systems. Upon one of these interurban lines a ten-cent fare was charged to what was known as Milwaukie station. On the other line a five-cent fare was charged to what was known as...