State ex rel. Public Service Commission v. Southern Pac. Co. (State Tax Commission, Interveners)

• Decision Date: 30 April 1938
• Docket Number: 5998
• Citation: 95 Utah 84,79 P.2d 25
• Court: Utah Supreme Court
• Parties: STATE ex rel. PUBLIC SERVICE COMMISSION et al. v. SOUTHERN PAC. CO. et al. STATE TAX COMMISSION et al., Interveners

79 P.2d 25

95 Utah 84

STATE ex rel. PUBLIC SERVICE COMMISSION et al. v. SOUTHERN PAC. CO. et al.

STATE TAX COMMISSION et al., Interveners

No. 5998

Supreme Court of Utah

April 30, 1938

Mandamus proceeding by the State of Utah, on the relation of the Public Service Commission of Utah, and the members thereof, against the Southern Pacific Company and others to require the defendants to file on blank forms furnished by the Public Service Commission therefor a list of all tangible and intangible property of the defendants together with a declaration of the true value of the property, as required by statute, wherein the State Tax Commission of Utah and others intervened.

ALTERNATIVE WRITS OF MANDAMUS PREVIOUSLY ISSUED RECALLED AND PEREMPTORY WRITS OF MANDAMUS DENIED.

Joseph Chez, Atty. Gen., and John D. Rice, Deputy Atty. Gen., for plaintiffs.

Bagley Judd, Ray & Nebeker, Van Cott, Riter & Farnsworth Ingebretsen, Ray, Rawlins & Christensen, George H. Smith, R. B. Porter, W. Hal Farr, Dickson, Ellis, Parsons & McCrea, Fabian & Clendenin, George R. Corey, Calvin Behle, Irvine, Skeen & Thurman, and G. S. Anderson, Jr., all of Salt Lake City, Ray E. Dillman, of Roosevelt, Wallace Calder, of Vernal, and Burton Mason, of San Francisco, Cal., for defendants.

Irwin Arnovitz, Ned Warnock, and Herbert B. Maw, all of Salt Lake City, for interveners.

FOLLAND Chief Justice. HANSON and MOFFAT, JJ., WOLFE, Justice, concurring. LARSON, Justice, dissenting.

OPINION

FOLLAND, Chief Justice.

This case is to test the validity of chapters 87 and 100 of Laws of Utah 1937, amending and adding certain provisions in the statutes relating to the Public Service Commission and the State Tax Commission. The pleadings are voluminous. Plaintiffs, the Public Service Commission and the individual members thereof, instituted the action by petition for a writ of mandate requiring each of the defendants, all of whom operate public utilities within the State of Utah, to file on blank forms furnished by the commission and pursuant to demand of the commission therefor, a list of all its tangible and intangible property, together with a declaration of its "true value" on or before March 10, 1938, pursuant to provisions of chapter 87, Laws of Utah 1937. Among other things plaintiffs alleged:

"That said returns under the provisions of said Chapters 87 and 100 of the Laws of Utah, 1937, are designed to aid in forming a base for the taxation of said defendants, and the refusal of said defendants to file said information as required by said law and said order of the Public Service Commission of the State of Utah will prevent the taxation of public utilities as provided for in chapter 100, Laws of Utah, 1937, and will impair the revenues of the State of Utah."

An alternative writ of mandate was thereupon issued to each of the named defendants. Shortly thereafter the State Tax Commission and individual members thereof filed a complaint in intervention praying that an order be entered requiring the defendants and each of them to file such return with the Public Service Commission as required by chapter 87 and the order made pursuant thereto by said Commission and in accordance with the alternative writ issued by this court. The State Tax Commission alleged among other things:

"Under the provisions of Section 80-5-54X, chapter 82, Laws of Utah, 1935, as amended by chapter 100, Laws of Utah, 1937, such record assessment of public utilities must be prepared and copied into the book from the records prepared by the Public Service Commission, known as 'Record of Assessment of Utility Companies' and the State Tax Commission of Utah must accept as true the actual value of the tangible property of the utilities in Utah as shown by the Public Service Commission and the State Tax Commission must assess the properties of the defendants and other public utilities from the valuations so recorded."

"The defendants, and other utilities in the year 1934 paid taxes upon their property in the sum of $ 4,053,714.31, which was 23.18% of the total paid by taxpayers on their property in that year. In the year 1935, the defendants and other public utilities paid the sum of $ 4,032,622.44, which was 23.14% of property taxes paid by taxpayers during that year. In the year 1936, the defendants, and other public utilities paid $ 3,603,409.94, which was 22.96% of all property taxes paid by taxpayers during that year. That your interveners must, by the first Monday in May in each year assess all property required by law to be assessed by it. The State Tax Commission must, before the third Monday in June of each year apportion the total assessment of all property assessed by it to the several counties so that such assessment may be placed upon the books and records of the several counties.

"That no levy of tax can be intelligently made by the State Tax Commission, the several county commissions and the municipalities until all taxing units have been advised of the assessed valuation of the property in the State, counties and other taxing units. Until such assessments are made and levies set, no taxes can be collected from the defendants or other public utilities, which will seriously jeopardize the finances of the State of Utah and render impracticable the levy and assessment of all classes of property subject to taxation in the State of Utah."

Defendants in certain groupings filed answers and cross-complaints to the complaints of plaintiffs and interveners and prayed that the alternative writ of mandate be quashed and the court issue a restraining order prohibiting the members of the Tax Commission and the members of the Public Service Commission from attempting to enforce the provisions of chapters 87 and 100, Laws of Utah 1937, pending final hearing and from attempting to impose the penalties provided for in sections 76-6-23 and 76-6-25, R. S. Utah 1933; and that said chapters 87 and 100 be declared unconstitutional and void. A temporary restraining order as prayed for was thereupon issued by the court. Defendants by their answers admitted the allegations quoted above from plaintiffs' complaint and complaint in intervention; also admitted and denied other allegations; and by way of further answer alleged:

"Chapter 87 of the Laws of Utah, 1937, was introduced in the 1937 legislature of the State of Utah as Senate Bill No. 77 by the same senator and on the same date and as a companion bill to Senate Bill No. 76, which became chapter 100, Laws of Utah, 1937. Thereafter, as companion bills, these two bills followed parallel and approximately simultaneous courses through the Senate and House of Representatives until final passage of both on March 11, 1937, and approval by the Governor of the State of Utah on March 22, 1937. As alleged in Paragraph 11 of the complaint herein, Chapters 87 and 100 of Laws of Utah, 1937, were designed to form a single and exclusive base for the taxation of the property of all public utilities within the State whose rates are based on valuation of their properties establishing as the assessed value for tax purposes of the property of each such utility the value of its property for rate purposes, regardless of whether such company in actual practice does in fact earn a fair return or any return at all on such property or suffers an actual annual net loss from its operations and regardless of whether the present market value of the property is comparable to the amount upon which said utility is entitled to earn. The two chapters were enacted separately instead of in a single statute only because of a plan which has been in use since the adoption of the Revised Statutes of Utah, 1933, whereby new legislation is adapted to the existing code numbers, thereby giving to new statutes section numbers appropriate to the numbering in the Revised Statutes.

"Article XIII, Section 2, of the Constitution of the State of Utah provides that all taxable property within the State of Utah shall be taxed in proportion to its money value, which by its own connotation and by express legislative enactments means 'full cash value,' which in turn means 'the amount at which the property would be taken in payment for a just debt due from a solvent debtor,' which in turn means 'present market value.' Present market value depends upon the present or prospective value of the use of the property. The inquiry as to the present market value of the property of a public utility is an inquiry as to what that property is worth at the time of the inquiry. The tax assessor must, within legal limits determine present market value and not what capital has been invested in the property.

"The inquiry made by a regulatory body into the value of a public utility for rate purposes is an inquiry into the present value of capital invested in property used and useful in the public service and upon which the owners of the utility are entitled to earn but are not assured a fair return.

"A public utility which operates at a net loss and without prospects of profitable operation attracts no capital and has no market value, although its value for rate purposes may be very substantial. As the net profits of the utility increase from nothing to a fair return the property becomes increasingly attractive to capital and of increasing market value and its market value tends to approximate the equivalent of the value of its property for rate purposes."

It was further alleged that most of the answering defendants had not during the past several years earned a fair return on the value of their property used and useful in rendering public service, and that the market value of such properties was less than it would be if it had earned a fair return on the value of such property; that the application of the...