State v. Busby

• Decision Date: 20 July 1925
• Docket Number: No. 23023.,No. 22955.,22955.,23023.
• Citation: 274 S.W. 1067
• Parties: STATE ex rel. CITY OF ST. JOSEPH v. BUSBY et al. (two cases).
• Court: Missouri Supreme Court

274 S.W. 1067

STATE ex rel. CITY OF ST. JOSEPH v. BUSBY et al. (two cases).

No. 22955.

No. 23023.

Supreme Court of Missouri, in Banc.

July 20, 1925.

Appeal from Circuit Court, Buchanan County; T. B. Allen, Judge.

Certiorari by the State, on the relation of the City of St. Joseph, against William G. Busby and others, composing the Public Service Commission of Missouri, and the St. Joseph Gas Company. The circuit court set aside an order of the commission, and from such judgment the commission and the company separately appeal. Reversed and remanded, with directions.

L. H. Breuer, of Rolla, Frank a Atwood, of Carrollton, and R. Perry Spencer and James D. Lindsay, both of Jefferson City, for appellant Public Service Commission.

William E. Stringfellow, of St. Joseph, for appellant St. Joseph Gas Co.

Herman Hess, H. L. Kavanaugh, Alva F. Lindsay, City Counselor, and Culver, Phillip & Voorhees, all of St. Joseph, for respondent.

PER CURIAM.

Due largely to the fact that changes in the personnel of the court followed the original hearing in this case, two rehearings were had. On the second rehearing the opinion of DAVID E. BLAIR, J., written shortly after the first rehearing, received the concurrence of a majority of the court and hence was adopted. The opinion follows:

"These cases are really one case. After a hearing in review upon certiorari, the circuit court of Buchanan county entered its judgment setting aside an order of the Public Service Commission (herein referred to as commission) granting the St. Joseph Gas Company (herein referred to as company) certain increased rates and charges for gas sold to its consumers in the city of St. Joseph (herein referred to as city). Both the company and the commission appealed from such judgment to this court. Upon refusal of the circuit court to suspend its order during the pendency of such appeal, the company was granted a special appeal by this court, and this court ordered a supersedeas upon conditions not here important.

"On November 5. 1920, after a hearing, the commission granted the company authority for a period of 7 months to charge certain increased rates for artificial gas delivered to its customers in the city of St. Joseph and to make certain service charges, and found the value of the property of the company used and useful in its business of manufacturing and furnishing artificial gas to be $1.888,752.93, as of the date of July 1, 1920. After unsuccessful motion for rehearing, the city sued out of the circuit court of Buchanan county a writ of certiorari, as provided by the Public Service Commission Act (Laws 1913, p. 556), and on hearing there the final judgment of that court, on April 16, 1921, was that the order of the commission be set aside and for naught held, and that the costs be taxed against the company. The appeal to this court is from such judgment.

"The history of the controversy between the city and the company has extended over a period of several years. We will only briefly refer to such history. In February, 1914, the city filed complaint with the commission attacking the reasonableness of the rates then being charged by the company for artificial and natural gas. The company was then furnishing natural gas, but, owing to the uncertainty of a sufficient supply thereof, was prepared to manufacture artificial gas as well, The supply of natural gas was afterwards cut off by reason of the mains being washed out by the action of the Missouri river. They were never relaid. From that time the company has furnished artificial gas only

"On November 27, 1915, the commission fixed the value of the company's property as of March 1, 1915, at $1,672,821 and approved the existing rates for artificial gas of $1 per 1,000 cubic feet and for natural gas at 40 cents per 1.000 cubic feet. On September 17, 1918, the company filed with the commission a new schedule of rates which were increases over the rates then in effect. After the necessary hearings, the commission, on December 2, 1918, fixed the value of the property of the company, as of October 31, 1918, at $1,761,000, in round figures. This was arrived at by starting with the value previously fixed as of March 1, 1915, subtracting depreciation since that date, and adding subsequent expenditures and additions to stores and supplies. The commission then 'hied a rate for artificial gas of $1.30 per 1,000 cubic feet for the first 50,000 cubic feet, $1 15 per 1,000 cubic feet for the next 50,000 cubic feet, and $1 per 1,000 cubic feet for all over 100.000 cubic feet.

"So far as the record shows, both the valuations made as of March 1, 1915, and as of October 31, 1918, became final. The value as of July 1, 1920, complained of in this case, and fixed November 5, 1920, by report and order of the commission, was arrived at by adding to the value of the plant as of October 31, 1918, in the sum of $1,761,000, additions to December 1, 1919, of $3,000, other additions in 1919 of $10,419.50, additions for the first 6 months of 1920, $1,356.70, additions otherwise charged, but properly chargeable to capital account. $4,600, increase in stores and supplies, $73,987, and increased working capital $34,389.73. The total thus found was $1,888,752.93.

"The commission, on such ascertained value, found the then existing rates were insufficient and unreasonably low, and authorized the company to charge $1.60 per 1,000 cubic feet for the first 50,000 cubic feet, $1.45 per 1,000 cubic feet for the next 50,000 cubic feet, and $1.20 per 1,000 cubic feet for all over 100,000 cubic "feet used per month. In addition to the foregoing block rates for gas actually used, it authorized the imposition of service charges of 50 cents to $1.25 per month, determined by the size of the gas meter used. It is the report and order of November 5, 1920, which is assailed by the petition for certiorari and now before us on appeal.

"I. While the order of the commission entered November 27, 1915, which fixed the value of the company's property as of March 1. 1915. at $1,673,000, became final, it will materially assist in the solution of the question of the propriety of the rate base, used in the report and order of November 5, 1920, of $1,888.752.93, and the reasonableness of the rates and charges based thereon, to examine the elements considered in the valuation as of March 1. 1915. An examination of the report of the commission written by the late Commissioner Kennish, a former honored member of this court, as such report is found in Marshall v. St. Joseph Gas. Co., 3 Mo. P. S. C. loc. cit. 415, discloses that no allowance whatever was made for going value. On this point Judge Kennish said:

"'Burns & McDonnell have included the substantial sum of $154,163 as going' value, There is no doubt that a public utility with an investment of over $1,500,000 in successful operation, and earning a reasonable return has and ought to have a value in excess of the actual cost of the physical property. A plant thus in successful operation would certainly have a value in excess of such cost on the market; and, even if such a plant were not successful, solely because of unreasonably low rates being imposed upon it by a rate-making body, a value above that of the physical property should, notwithstanding, be allowed to it in a rate-making case. However, we are valuing the property of a company whose rates were voluntarily made and put into effect by the company itself, without restriction or regulation in that regard by the state or municipality, and whose business, according to its own showing, has been unprofitable each year for a period of almost 10 years, It is needless to say that such a property is not a desirable investment and does not have a market value above the cost of the physical property. That this condition is not due to mismanagement of the plant, but rather to the fact that natural gas was unexpectedly brought to the city of St. Joseph, does not alter the situation, The fact remains that we find the property under voluntary rates unprofitable and without any value above that of the physical property, and, in our opinion., the commission would not be authorized in a rate-making case to add a value as a going concern that does not in fact exist,'

"Burns & McDonnell were civil engineers employed by the city in that case, and their conclusions were at least presumptively fair to the city. They fixed the value of the physical property at that time at $1,461,315.39, and going value at $154.163, so that it is apparent they thought the item of going value should have been at least 10 per cent, of the value of the physical property.

"In the case of In re St. Joseph Gas Co., 6 Mo. P. S. C., loc. cit., 706, the commission fixed the value of the companys property for rate-making purposes at $1,761.000. This was arrived at by taking the value fixed as of March 1, 1915, at $1,673,000. The commission deducted $67,500 to cover depreciation charged since March 1, 1915, and added $75,570.49 to cover net additions to capital account and $80,000 to cover additions to stores and supplies, making the exact figure of $1,761,070.40. It is evident that no allowance for going value was made in the value thus fixed as of October 31, 1918.

"In its report and order of November 5, 1920, the commission started with the value fixed as of October 31, 1918 ($1,761,000), and added certain items which we have already noted, and arrived at the value of $1.888,752.93. None of the items added were for going value. It thus appears that there is nowhere in any of the valuations made by the commission any allowance whatever for going value. That the company was entitled to an allowance for going value at the time of the report and order of November 5. 1920, cannot well be doubted. [Omaha v. Omaha Water Co., 215 U. S. 180, loc. cit. 202, 203, 30 S. Ct. 615, 54 L. Ed. 991, 48 L. R. A. (N. S.) 1084; Des Moines Gas Co. v. Des Moines, 238 U. S. 153, loc. cit. 165, 35 S....