Southern Pac. Co. v. Arizona Corp. Commission

• Decision Date: 15 July 1965
• Docket Number: No. 8424,8424
• Citation: 404 P.2d 692,98 Ariz. 339
• Parties: SOUTHERN PACIFIC COMPANY, a Corporation, Petitioner, v. The ARIZONA CORPORATION COMMISSION and Jack Buzard, E. T. 'Eddie' Williams, Jr., and John P. Clark, as Members of and Constituting Said Commission, Respondents.
• Court: Arizona Supreme Court

Page 692

404 P.2d 692

98 Ariz. 339

SOUTHERN PACIFIC COMPANY, a Corporation, Petitioner, v. The ARIZONA CORPORATION COMMISSION and Jack Buzard, E. T. 'Eddie' Williams, Jr., and John P. Clark, as Members of and Constituting Said Commission, Respondents.

No. 8424.

Supreme Court of Arizona, In Banc.

July 15, 1965.

Rehearing Denied Sept. 21, 1965.

Evans, Kitchel & Jenckes, Phoenix, for petitioner.

Darrell F. Smith, Atty. Gen., Robert W. Pickrell, former Atty. Gen., Robert S. Murlless, Asst. Atty. Gen., Gerald A. Machmer, Sp. Asst. Atty. Gen., for respondents.

STRUCKMEYER, Vice Chief Justice.

Petitioner is a railroad corporation engaged as a common carrier in interstate and intrastate commerce in the States of Oregon, California, Nevada, Utah, Arizona, New Mexico, Texas and Louisiana. Included in its operations are interstate passenger trains running between El Paso, Texas, and Los Angeles, California, through Arizona. Effective April 18, 1964, petitioner revised its interstate train service so as to eliminate one westbound passenger train and one eastbound passenger train. On the same day, the Corporation Commission of Arizona, without notice, entered an order requiring petitioner 'to maintain present traffic train schedules through Arizona pending public hearing.'

On April 29th, the Commission vacated the order of April 18th, apparently being of the view that there was serious question as to the legality of such an ex parte order, and entered an order to show cause directing that a public hearing be held before the Commission on May 19th as to why the passenger service previously provided should not be restored. This hearing was subsequently continued to June 1, 1964. At that time petitioner announced ready to proceed with evidence as to the need for such service but the Commission refused to hear petitioner's evidence for the reason that petitioner's action in withdrawing the trains from service was without authority of law. On motion unanimously carried it directed that petitioner 'be forthwith ordered to immediately restore the service that has been discontinued.' On June 3rd, the Commission entered its Decision No. 35247, of which petitioner complains, ordering service restored consistent with the schedules on file with the Commission prior to April 20, 1964. Subsequently petitioner's motion for rehearing was denied. We granted certiorari pursuant to A.R.S. § 12-2001, it appearing the Commission had started proceedings for contempt under A.R.S. § 40-424 and that the Attorney General of Arizona, on the authority of A.R.S. § 40-422, had applied for a writ of mandamus in the Superior Court of Maricopa County to compel the operation of the trains. An appeal as provided by law in these circumstances is not adequate. Cf. Whitfield Transportation, Inc. v. Brooks, 81 Ariz. 136, 302 P.2d 526.

Petitioner urges that the Commission does not have the power to arbitrarily order petitioner to operate a passenger train, or trains, through or within Arizona without a hearing and a determination that the public convenience and necessity requires it and that, therefore, the Commission's decision and order are void.

The foregoing statement of the case is illustrative of a frequent area of collision between the management of a corporation charged with the responsibility of economic operation of corporation assets for the benefit of its stockholders and regulatory bodies charged with the responsibility of requiring that public utilities be operated in the public interest.

'One of the most persistent criticisms of the regulatory process is its ultimate tendency to divide or separate managerial responsibility. The continuing success as well as the efficient operation of any commercial enterprise depends primarily upon its ability to centralize responsibility and establish a unified management. The regulatory process is at odds with this principle by seeking to divide the responsibilities of management between the administrative agency and the public utility official. It is a mistake to assume that the effectiveness of the regulatory device can be measured solely by the extent of the interference with the legitimate functions of management. Such administrative intervention, although necessary to effectuate many legislative policies, may act as a barrier to the normal accomplishments of progressive management.' Robert M. Cooper, Techniques of Public Control--An Appraisal of Methods, 201 Annals 6. (Emphasis in original.)

While the duty of a railroad corporation to provide reasonable facilities for the transportation of passenger and freight is one which always existed and is not granted by statute, the statute only providing a method by which these pre-existing duties may be enforced, Southern Pac. Co. v. Railroad Commission of Oregon, 60 Or. 400, 119 P. 727, plainly it is not the purpose of regulatory bodies to manage the affairs of the corporation.

'It must never be forgotten that, while the state may regulate with a view to enforcing reasonable rates and charges, it is not the owner of the property of public utility companies, and is not clothed with the general power of management incident to ownership.' State of Missouri ex rel. Southwestern Bell Telephone Co. v. Public Service Commission of Missouri, 262 U.S. 276, 289, 43 S.Ct. 544, 547, 67 L.Ed. 981, 31 A.L.R. 807.

Moreover, it cannot be doubted but that a public utility may, in the first instance, in the exercise of its managerial functions, determine the type and extent of service to the public within the limits of adequacy and reasonableness. Duquesne Light Co. v. Pennsylvania Public Utility Commission, 164 Pa.Super. 166, 63 A.2d 466. In the exercise of the regulatory power, the legislature may interfere with the management of public utilities whenever public interest demands, but there is no presumption of an attempt on the part of the legislature to interfere with a corporation any further than the public interest requires and no interference will be adjudged by implication beyond the clear letter of a statute. Chesapeake & Potomac Telephone Co. v. Manning, 186 U.S. 238, i2 S.Ct. 881, 46 L.Ed. 1144.

Respondents assert that authority for its interference with the company's decision to eliminate an interstate train is to be found in A.R.S. § 40-367. Subsections A, B and C provide:

'A. No change shall be made by any public service corporation in any rate, fare, toll, rental, charge or classification, or in any rule, regulation or contract relating to or affecting any rate, toll, fare, rental, charge, classification or service, or in any privilege or facility, except after thirty days notice to the commission and to the public as provided in this chapter.

'B. Notice shall be given by filing with the commission and keeping open for public inspection new schedules stating plainly the change to be made in the schedules then in force, and the time when the change will go into effect.

'C. The commission, for good cause shown, may allow changes without requiring the thirty days notice provided for in this section by an order specifying the changes so to be made and the time when they shall take effect, and the manner in which they shall be filed and published.'

Admittedly petitioner did not give notice to the Commission thirty days in advance of a change in train service. Petitioner, however, asserts that § 40-367 has no application to the facts of this case; but we think otherwise.

A.R.S. § 40-367, subsec. A prohibits changes in both fares and in rules, regulations or contracts affecting any service. This section must be read in parimateria with the antecedent section, § 40-365. ¹ By subsection A thereof, every common carrier shall file with the Commission schedules showing rates, fares, charges and classifications for transportation between termini within this state of persons and property. By subsection B,

'The schedules shall plainly state * * * all rules or regulations which may in any way change, affect or determine any part or the aggregate of the rates, fares, charges and classifications or the value of the service rendered to the passenger, shipper or consignee.' A.R.S. § 40-365, subsec. B. (Emphasis supplied.)

We think that the frequency of the service rendered affects the value of the service and goes to determine the aggregate of the rates, fares and charges made. The legislature, by § 40-365, has required common carriers to file schedules in the first instance, which schedules must include rules and regulations affecting the value of service rendered. It has prohibited, by § 40-367, changes in these rules and regulations except upon thirty days notice to the Commission and the public.

The question then becomes as to the power of the Commission to prevent violations of § 40-367. Under Article 9, Violations and Penalties, A.R.S. § 40-421 et seq., the Commission is required to enforce all laws affecting public service corporations and shall require that all violations be 'promptly prosecuted and penalties due the state therefor recovered and collected * * *.' Upon request of the Commission, the attorney general shall institute and prosecute actions or proceedings for violations. By A.R.S. § 40-425, any public service corporation which fails to comply with any provisions of law is subject to a penalty of not less than $100 nor more than $5,000 for each offense. The corporation commission can, therefore, instigate an action through the attorney general for punishment for the failure to comply with the provisions of § 40-367. Moreover, for violation of its orders, the commission is empowered to fine a public service corporation up to $5,000. A.R.S. § 40-424.

In addition, the Commission urges that it has the right to order petitioner to immediately restore the discontinued service, as it did in its Decision No. 35247 of June 3, 1964. It points first to the failure of the petitioner to comply with its General Order No. U-8 promulgated by the...