State v. Southwestern Bell Tel. Co.

• Decision Date: 09 July 1975
• Docket Number: No. B--5327,B--5327
• Parties: The STATE of Texas, Petitioner, v. SOUTHWESTERN BELL TELEPHONE COMPANY, Respondent.
• Court: Texas Supreme Court

Page 526

526 S.W.2d 526

The STATE of Texas, Petitioner, v. SOUTHWESTERN BELL TELEPHONE COMPANY, Respondent.

No. B--5327.

Supreme Court of Texas.

July 9, 1975.

Rehearing Denied Sept. 24, 1975.

John L. Hill, Atty. Gen., Stockton, Fisher & Willatt, Mike Willatt, Austin, for petitioner.

Clark, Thomas, Denius, Winters & Shapiro, Donald Scott Thomas, Austin, Sears & Burns, Will Sears, Houston, Ford W. Hall, Dallas, for respondent.

STEAKLEY, Justice.

Southwestern Bell Telephone Company, Respondent, is a public utility furnishing telephone service to the people of Texas, interstate and intrastate. At this time it is statutorily unregulated as to the intrastate rates it charges in Texas. ¹

On January 30, 1975, Bell announced a long distance intrastate telephone rate increase to become effective March 1, 1975. It was designed to net Bell additional annual revenue of approximately 45 million dollars. On February 7, 1975, suit was instituted by the Attorney General of Texas in the name of the State of Texas to enjoin the proposed rate increase as unreasonably high. The State sought to temporarily enjoin the effectuation of the announced rate increase, pending final trial. After hearing, the trial court did so. An appeal was taken by Bell and the Court of Civil Appeals rendered judgment dissolving the temporary injunction. We granted writ of error at the instance of the State. We reverse the judgment of the Court of Civil Appeals and reinstate the temporary injunction.

The view stated by the Court of Civil Appeals was that the determination in court sought by the State, i.e., that the rate increase was unreasonably high, called for the exercise of an impermissible legislative function; or, as phrased by the court, would be 'tantamount to judicial ratemaking.' This was thought to be violative of the separation of powers ordained by Article 2, § 1, of the Texas Constitution, Vernon's Ann.St. ² 523 S.W.2d 67.

We first narrow the issue before us at this stage of the proceeding. We are not now concerned with whether or not, upon final trial, the State will be successful in establishing the unreasonableness of the intrastate rates proposed by Bell. The action under appellate review here is the exercise by the trial court of the discretionary power to hold in abeyance the effectiveness of the rate increase, pending trial, thereby maintaining the status quo. We have defined the status quo as being the last, actual, peaceable, non-contested status that preceded the pending controversy. Janus Films, Inc. v. City of Fort Worth, 163 Tex. 616, 358 S.W.2d 589 (1962); Transport Co. of Texas v. Robertson Transports, 152 Tex. 551, 261 S.W.2d 549 (1953). We have also said that to warrant issuance of a temporary injunction, the applicant need only show a probable right and probable injury; that the applicant is not required to establish that he will finally prevail in the litigation; that the judgment of the trial court will be upheld unless we are convinced that it represents a clear abuse of discretion; and that there is no abuse of discretion if the evidence tends to sustain the cause of action as alleged. Oil Field Haulers Ass'n v. Railroad Commission, 381 S.W.2d 183 (Tex.1964); Transport Co. of Texas v. Robertson Transports, supra; Texas Foundries v. International Moulders & F. Wkrs., 151 Tex. 239, 248 S.W.2d 460 (1952); Southwestern Greyhound Lines v. Railroad Com'n, 128 Tex. 560, 99 S.W.2d 263 (1936); Annot. 109 A.L.R. 1235 (1937).

We have also recognized the risk of injustice in the immobilization of a defendant from a course of conduct he may have the legal right to pursue; and that this calls for the further rule that the trial court abuses its discretion when the law is misapplied to established facts, or when the evidence does not reasonably support the conclusion that the applicant has a probable right of recovery. City of Spring Valley v. Southwestern Bell Tel. Co., 484 S.W.2d 579 (Tex.1972); Camp v. Shannon, 162 Tex. 515, 348 S.W.2d 517 (1961); Southland Life Ins Co. v. Egan, 126 Tex. 160, 86 S.W.2d 722 (1935).

This points up Bell's essential position. It asserts that until the Legislature subjects it to intrastate rate regulation, it may charge as it wills for its intrastate telephone service; that the Courts are without jurisdiction to test the reasonableness of its rates at the suit of the State through the Attorney General; that the Attorney General is without lawful power to bring suit attacking the reasonableness of its rates; and that there was no factual support for the temporary injunction in the evidence offered by the State.

Bell is a privately owned public utility supplying a necessary communication service in which, for all intents and purposes, it enjoys a monopoly. It is a business affected with a public interest. This concept is expressed in Munn v. Illinois, 94 U.S. 113, 126, 24 L.Ed. 77 (1876):

Property does become clothed with a public interest when used in a manner to make it of public consequence, and affect the community at large. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created.

As such, Bell is under the major legal obligations of offering its services without undue discrimination, and at reasonable rates. As to the first, it is settled that the obligation of a utility enjoying a monopoly, whether private or public, to fix non-discriminatory rates is enforceable in the courts. It was said in City of Texarkana v. Wiggins, 151 Tex. 100, 246 S.W.2d 622, 624--5 (1952):

The common-law rule that one engaged in rendering a service affected with a public interest or, more strictly, what has come to be known as a utility service, may not discriminate in charges or service as between persons similarly situated is of such longstanding and is so well recognized that it needs no citation of authority to support it. The economic nature of the enterprise which renders this type of service is such that the courts have imposed upon it the duty to treat all alike unless there is some reasonable basis for a differentiation. . . .

The utility consumer is thus at the mercy of the monopoly and, for this reason, utilities, regardless of the character of their ownership, should be and have been, subjected to control under the common-law rule forbidding unreasonable discrimination.

As to the second, it is held that in the absence of rate regulation by some authorized body, state or municipal, the telephone company may prescribe and apply its own rates, subject to the dictates of reasonableness and justice. Southwestern Bell Tel. Co. v. Houston Ind. Sch. Dist., 397 S.W.2d 419 (Tex.1965); City of Nassau Bay v. Nassau Bay Telephone Co., Inc., 517 S.W.2d 613 (Tex.Civ.App.1974, writ ref'd n.r.e.); General Tel. Co. of Southwest v. Cities Littlefield, 498 S.W.2d 375 (Tex.Civ.App.1973, writ ref'd n.r.e.); City of Carrollton v. Southwestern States Tel. Co., 381 S.W.2d 401 (Tex.Civ.App.1964, writ ref'd n.r.e.); City of Houston v. Memorial Bend Utility Co., 331 S.W.2d 418 (Tex.Civ.App.1960, writ ref'd n.r.e.). This legal obligation upon the telephone company--that of not exacting exorbitant or unreasonable charges for its services--would be meaningless if there were no judicial redress for its violation. Of course, the fixing or revision of rates is not a judicial function and under our system of separation of powers the courts do not and cannot regulate rates of public utilities; but the determination of whether rates fixed by the utility are unreasonably high is a judicial function. In granting the relief here sought, the Court does not fix a rate or prescribe a future charge; it does no more than determine whether the rate as fixed by Bell is, or is not, lawful. As observed in Interstate Com. Commission v. Railway Co., 167 U.S. 479, 499, 17 S.Ct. 896, 900, 42 L.Ed. 243 (1897) It is one thing to inquire whether the rates which have been charged and collected are reasonable--that is a judicial act; but an entirely different thing to prescribe rates which shall be charged in the future--that is a legislative act.

The distinction thus drawn is applicable to rates fixed by the utility as well as to those otherwise prescribed. Such fact does not convert the function exercised by the courts from judicial to legislative. See also Ball v. Texarkana Water Corp., 127 S.W. 1068 (Tex.Civ.App.1910, no writ).

The United States Supreme Court has addressed the other side of the coin, i.e., when the utility invokes judicial relief from prescribed rates claimed by the utility to be too low and hence to be violative of due process and equal protection of the law. In Chicago, Milwaukee and St. Paul Railway Co. v. Minnesota, 134 U.S. 418, 458, 10 S.Ct. 462, 467, 33 L.Ed. 970 (1890), the utility attacked a statute of Minnesota that, as interpreted by the Supreme Court of the State, provided that rates prescribed by a State commission shall be final and conclusive. The Court held the statute to be in conflict with the Constitution of the United States. In doing so, the majority wrote:

. . . The question of the reasonableness of a rate of charge for transportation by a railroad company, Involving as it does the element of reasonableness both as regards the company and as regards the public, is eminently a question for judicial investigation, . . . (Emphasis added).

It is noteworthy that the three dissenting Justices advanced the view that a judicial question as to the reasonableness of rates arises only when there has been legislative inaction.

The Court also wrote in Reagan v. Farmers' Loan & Trust Company, 154 U.S. 362, 399, 14 S.Ct. 1047, 1055, 38 L.Ed. 1014 (1894):

These cases all support the proposition that while it is not the province of the courts to enter upon the merely administrative duty of framing a tariff...