Southwestern Bell Telephone Co. v. State Corp. Com'n of State of Kan., 54789

• Decision Date: 29 April 1983
• Docket Number: No. 54789,54789
• Citation: 233 Kan. 375,664 P.2d 798
• Parties: SOUTHWESTERN BELL TELEPHONE COMPANY, Appellant, v. STATE CORPORATION COMMISSION OF the STATE OF KANSAS and the Boeing Company, Appellees.
• Court: Kansas Supreme Court

Page 798

664 P.2d 798

233 Kan. 375

SOUTHWESTERN BELL TELEPHONE COMPANY, Appellant, v. STATE CORPORATION COMMISSION OF the STATE OF KANSAS and the Boeing Company, Appellees.

No. 54789.

Supreme Court of Kansas.

April 29, 1983.

Syllabus by the Court

1. K.S.A. 66-118d limits judicial review of an order of the State Corporation Commission of Kansas to a determination of whether the order is lawful and reasonable.

2. The fee title to public highways in Kansas may or may not be governmentally owned, depending upon the circumstances which established the highway.

3. At common law the dedication or laying out of a public highway creates only an easement in the public. The fee title to the property remains in the abutting property owners.

4. In the construction of a public utility tariff, the rules of statutory construction are applicable.

5. Rules for the construction and interpretation of a public utility tariff considered and applied.

6. Upon review of an order of the State Corporation Commission construing a public utility tariff, the record is examined and it is held: The order of the Commission was unreasonable as a matter of law.

Lawrence A. Dimmitt, Topeka, argued the cause, and Michael C. Cavell, Topeka, was with him on the brief for appellant.

C. Edward Peterson, Asst. Gen. Counsel, Topeka, argued the cause, and Brian J. Moline, Gen. Counsel, Topeka, was with him on the brief for appellee, Kan. Corp. Com'n.

Milo M. Unruh of Arn, Mullins, Unruh, Kuhn & Wilson, Wichita, argued the cause, and Milo M. Unruh, Jr., of the same firm, and Robert R. Sweatt, Wichita, were with him on the brief for appellee, The Boeing Co.

HOLMES, Justice:

Southwestern Bell Telephone Company (Bell) has appealed from a judgment of the district court which affirmed an administrative order of the State Corporation Commission (KCC) in a proceeding wherein The Boeing Company (Boeing) sought relief from the application of certain tariffs for service rendered to Boeing at its military aircraft complex at Wichita.

The Boeing complex at Wichita covers several acres of land and is divided into three major segments by Oliver Street and its intersection with MacArthur Road. Attached as an appendix is a map or drawing of the area. The portion designated "A" includes the general administration building, along with others, and houses the main telephone service equipment for the complex. Service by Bell to portion "A" is charged at what is called an "on-premises" rate while the connecting service to areas "B" and "C" is charged at the "off-premises" rate. The amount charged by Bell under its adopted tariffs is considerably more for "off-premises" service than for the "on-premises" service. Boeing filed a formal complaint with the KCC contending that the off-premises rate being charged for areas "B" and "C" was improperly applied and that the on-premises rate applied to the entire complex. The KCC agreed, and upon appeal, the district court affirmed the KCC order. Bell has appealed that decision.

At the outset it might be well to again set out the appropriate scope of review as provided by the controlling statute, K.S.A. 66-118d. The statute provides, in part:

"Said proceedings for review shall be for the purpose of having the lawfulness or reasonableness of the original order or decision or the order or decision on rehearing inquired into and determined, and the court hearing said cause shall have the power to vacate or set aside such order or decision on the ground that such order or decision is unlawful or unreasonable." (Emphasis supplied.)

The judicial scope of review in the district court and on appeal is limited to the determination of the lawfulness and reasonableness of the KCC order. It has been generally held that a finding of unlawfulness under various administrative appeals statutes applies to the procedural aspects of the proceedings before the agency and the determination of whether the action taken was within the authority of the agency. City of Wichita v. Board of Sedgwick County Comm'rs, 232 Kan. 149, Syl. p 4, 652 P.2d 717 (1982); Central Kansas Power Co. v. State Corporation Commission, 221 Kan. 505, 511, 561 P.2d 779 (1977). There is no contention in this case that the KCC order suffered any procedural infirmity or was beyond the authority of that agency to address.

The KCC and the district court based their decisions upon an interpretation of what constitutes a "public highway" as defined in the Bell tariff under attack. The Bell tariff on file with the KCC since 1953 defines premises to be:

"PREMISES:

....

"B. All of the buildings occupied by the same customer, provided that:

1. All of the buildings are located on the same plot of ground which is not intersected by a public highway.

NOTE: A public highway is considered to mean a vehicular thoroughfare which is governmentally owned." (Emphasis added.)

Service to all stations on the premises are billed at one rate. If some of the customer's stations are off-premises, as defined by the tariff, then a different rate applies. Bell has considered Oliver Street and MacArthur Road to be governmentally owned vehicular thoroughfares and has thus charged Boeing at an off-premises rate for extension telephone service to the areas east of Oliver Street and south of MacArthur Road.

Public utilities in this state, including Bell, are required to file their tariffs with the KCC. K.S.A. 66-108. Rates, fares, tolls, charges, etc. exacted by a public utility from its customers are required to be just, reasonable, not unjustly or unreasonably discriminatory and not unduly preferential. K.S.A. 66-107; 66-110. Tariffs are those terms and conditions which govern the relationship between the utility and its customers. Tariffs may be and usually are initially the handiwork of the regulated utility. Carter v. American Telephone & Telegraph Company, 365 F.2d 486, 496 (5th Cir.1966). Tariffs duly filed, however, generally bind both the utility and the customer. Teleco, Inc. v. Southwestern Bell Telephone Co., 511 F.2d 949, 953 (10th Cir.1975). Tariffs filed with regulatory agencies must comport with any conditions, schedules and provisions authorized by the agency and amended tariffs and schedules of rates are not effective unless approved by the KCC. Sunflower Pipeline Co. v. Kansas Corporation Commission, 3 Kan.App.2d 683, Syl. pp 4-7, 600 P.2d 794 (1979). Tariff approval is not given in "desultory fashion or through routine procedures," but must be based upon investigation and hearing at least when the proposed tariff changes existing tariffs. Kansas Power & Light Co. v. Mobil Oil Co., 198 Kan. 556, Syl. p 6, 426 P.2d 60 (1967); K.S.A. 66-117.

It is the position of Boeing that the Note in the Bell tariff precludes it from applying the off-premises rate to the Boeing complex. While no one could argue that Oliver Street and MacArthur Road are not public highways and vehicular thoroughfares, Boeing contends they are not "governmentally owned" and therefore all the buildings on, and services to, the Boeing Wichita complex are on one plot of ground and are subject to the on-premises rate for telephone service.

Oliver Street and MacArthur Road came into being as "public highways," by virtue of the Laws of Kansas, 1872, ch. 181. That act declared,

"That all section lines in the counties of Republic, Jefferson, Cloud, McPherson, Butler, Montgomery, Chase, Mitchell, Osborne, Miami, Sedgwick, Sumner, Neosho, Cherokee, Labette and Crawford be and are hereby declared public highways."

The common law of this state, however, has declared for many years that such public highways only grant an easement to the public on the land. The fee title, according to the vintage case of Comm'rs of Shawnee Co. v. Beckwith, 10 Kan. 603 (1873), is never "owned" by the government but continues vested in the abutting landowner(s). In Beckwith the court held:

"In this state it would seem that by the laying out and establishing of a road or highway the public acquire only an easement in the land. The fee in the land never passes to the public, but remains in the original owner." Syl. p 2.

In J & S Building Co. v. Columbian Title & Trust Co., 1 Kan.App.2d 228, 563 P.2d 1086 (1977), the Court of Appeals recognized the distinction between public highways in which the public merely had an easement and those in which the public, through the "The distinction to be drawn between common law dedication on the one hand and statutory dedication on the other was recognized early in the law of this state as illustrated in two cases decided in 1873. In Comm'rs of Shawnee County v. Beckwith, 10 Kan. 603, a non-platted, non-city highway was held to be owned in fee by the adjoining landowners, but in Atchison & N.R. Co. v. Garside, 10 Kan. 552, the fee of a street dedicated under what is now K.S.A. 12-406 was said to vest 'absolutely' in the county. It has long been established that the fee of a statutorily dedicated street vests in the county in trust, while control of the street rests in the city. (Douglas County v. City of Lawrence, 102 Kan. 656, 171 Pac. 610.)" p. 234, 563 P.2d 1086.

government, owns fee title. The court stated:

Thus, it is obvious that the fee title to public highways in Kansas may or may not be governmentally owned, depending upon the circumstances which established the highway.

The KCC based its order on the finding that "governmentally owned" as used in the Boeing tariff could only apply to the fee ownership as contemplated by the common law. Two experts, both prominent real estate attorneys in Wichita, testified at length about the title to the Boeing real estate. Both were of the opinion that as Boeing owns the property on both sides of Oliver Street and MacArthur Road, the bare fee simple title to the property occupied by the highways was vested in Boeing. The expert witness for Bell, however, was of the opinion that "governmentally owned" as used and contemplated in the Bell tariff could...