Southwestern Bell Tel. Co. v. State

• Decision Date: 14 May 1975
• Docket Number: No. 12301,12301
• Citation: 523 S.W.2d 67
• Parties: SOUTHWESTERN BELL TELEPHONE COMPANY, Appellant, v. STATE of Texas, Appellee.
• Court: Texas Court of Appeals

Page 67

523 S.W.2d 67

SOUTHWESTERN BELL TELEPHONE COMPANY, Appellant, v. STATE of Texas, Appellee.

No. 12301.

Court of Civil Appeals of Texas,

Austin.

May 14, 1975.

Will Sears, Sears and Burns, Houston, for appellant.

John L. Hill, Atty. Gen., John W. Odam, Jr., Asst. Atty. Gen., Mike Willatt, Stockton, Fisher & Willatt, Austin, for appellee.

PER CURIAM:

This is an appeal from the order of the district court of Travis County which temporarily enjoined appellant, Southwestern Bell Telephone Company, from increasing the intrastate long distance telephone rates charged to its Texas customers. Appellee is the State of Texas. We will reverse the judgment of the district court and here render judgment dissolving the temporary injunction.

The Attorney General of Texas filed the suit in the name of the State of Texas 'on behalf of its agencies, departments and citizens.' In its petition appellee alleged that the telephone company announced that it would 'restructure' its rates on long distance intrastate telephone calls with a resulting increase in revenues to the company of about forty-five million dollars. By way of relief appellee prayed that the telephone company be temporarily restrained from increasing the intrastate long distance rates charged to its Texas customers; that after notice and hearing the district court enter a temporary injunction likewise enjoining the increase of those rates; that the court appoint a Master in Chancery 'to perform those duties as may be required of him by the Court;' and that upon final hearing the court enter a permanent injunction enjoining the telephone company from increasing those said rates.

The appellee pleaded that Southwestern Bell provides service to most of Texas. Appellee declared that the company's interstate long distance rates are regulated by the Federal Communications Commission, and that in incorporated cities and towns in Texas the company's local rates are regulated by the governing bodies of those municipalities. Appellee asserted further that the telephone company's long distance intrastate rates are not regulated directly by any governing body, but instead that the company '. . . is permitted to set its own rates so long as they (those rates) are just and reasonable.'

As authority for the filing of the suit, appellee averred that the proposed increase in rates was a toll 'not authorized by law,' Vernon's Ann.Tex.St.Const. Art. IV, § 22; and that the proposed increase in rates was in violation of Vernon's Ann.Tex.Rev.Civ.Stat.Ann Art. 1125, in that the increase was 'excessive and unreasonable.' It was alleged in addition that appellee, its agencies and its citizens would be 'adversely affected by' the increased rate because the rate increase was an 'unconscionable action or course of action' by the company in violation of Tex.Bus. & Comm.Code Ann., § 17.50(a) (3), V.T.C.A., and finally, that the proposed increase would be 'in violation of the public policy and against the public interest of the State of Texas.'

The district court entered a temporary restraining order without notice, and upon notice and hearing, the court entered the temporary injunction order which is the subject of this appeal. That order provided that the company be '. . . temporarily restrained pending hearing hereon from increasing the intrastate long distance rates charged to its Texas customers . . .'

The telephone company assails the judgment by five points of error: (1) the trial court had no jurisdiction to hear and determine the suit as it could not constitutionally fix and determine the rate of any public utility; (2) the Attorney General of Texas had no power to file the lawsuit, and in consequence, the district court had no jurisdiction to hear and determine the suit; (3) the temporary injunction should be dissolved because appellee's pleadings were 'grossly insufficient' to support its entry; (4) the order granting the temporary injunction violated the requirements of Texas Rules of Civil Procedure, rule 683 in that it failed to state the reasons why the injunction was necessary to prevent injury; and (5) the appellee's proof failed to support the entry of the temporary injunction.

Because we reverse the judgment upon the basis of the telephone company's first contention, it will be unnecessary to treat the other contentions.

Tex.Const. Art. II, § 1, provides that the powers of government shall be divided into three distinct departments: legislative, executive, and judicial; and except in instances expressly permitted therein, no person or collection of persons, being one of these departments, shall exercise any power properly attached to either of the others. By authority of Art. II, § 1, legislative acts requiring the exercise by the judiciary of legislative functions are unconstitutional. Daniel v. Tyrrell & Garth Inv. Co., 127 Tex. 213, 93 S.W.2d 372 (1936). Likewise, it is settled that a function of government which the legislature cannot delegate directly to the judiciary cannot be conferred indirectly. Key Western Life Ins. Co. v. State Board of Insurance, 163 Tex. 11, 350 S.W.2d 839 (1961); Texas Vending Comm. v. Headquarters Corp., 505 S.W.2d 402 (Tex.Civ.App.1974, writ ref'd n.r.e.).

Rate-making is a legislative power which the judiciary cannot exercise. Railroad Commission v. Weld & Neville, 96 Tex. 394, 73 S.W. 529 (1903); Daniel v. Tyrrell & Garth Inv. Co., Supra; Lone Star Gas Co. v. State,137 Tex. 279, 153 S.W.2d 681 (1941); City of Houston v. Southwestern Bell Telephone Company, 263 S.W.2d 169 (Tex.Civ.App.1953, writ ref'd). The legislature, however, may delegate the rate-making power to governmental agencies, or to municipal corporations with respect to utilities operating within the boundaries of such municipalities. Kousal v. Texas Power & Light Company, 142 Tex. 451, 179 S.W.2d 283 (1944).

Appellee does not question the premise that rate-making is a legislative power which the judiciary cannot exercise. Appellee acknowledges, and in fact pleads, that the telephone company's long distance intrastate rates are not regulated by any governing body. In the absence of regulation, appellee recognizes that the telephone company may set its own rates. But appellee's position is that the company's right to set its own rates is limited by 'the common law requirement' that the rates be 'reasonable' in amount, and that, accordingly, the district court has jurisdiction to enjoin unreasonable rates. ¹

The appellee argues that the district court was not asked to set the rates that the telephone company might charge for intrastate long distance calls, but instead that the district court was asked to determine that the proposed increase in those rates be enjoined because the increase was unreasonably high. The process envisaged by appellee is that, if upon final hearing, the district court concludes that the proposed increase is unreasonably high, 'the rates will then be sent back to the Appellant (telephone company), and the Appellant will have the responsibility to set rates that are not unreasonably high.' Thereafter, if no one complains, the dispute will be ended. If, however, someone complains that the new rates are still unreasonably high, the same procedural process will be repeated. In the alternative, the appellee states that if the district court determines that the present rates are the maximum reasonably allowed, then that court should permanently enjoin the company from increasing the present rates.

An examination of the order of the court and appellee's argument concerning the relief sought from the district court demonstrates that the district court's order set the company's present schedule of rates as the lawful one. Appellee claims that the court did not set a rate, but rather the court enjoined the company from increasing the present rate because the increased rate was unreasonably high. It occurs to us that before the district court may determine that a rate is 'unreasonably high,' it must necessarily determine what is 'reasonably high.' In arriving at what is a 'reasonable rate' the court would have to consider the same class of evidence and observe the same rules as an agency legislatively empowered to set rates. In that connection, the Attorney General suggests in a supplemental brief that the district court, in passing upon the reasonableness of the proposed rate increase, considered the 'three essential factors' stated in Railroad Commission v. Houston Natural Gas Corp., 155 Tex. 502,...