#### CORPORATION COMMISSION and CITY OF HENDERSON v. HENDERSON WATER COMPANY.

(Filed 24 June, 1925.)

Corporation Commission — Corporations—Judgment—Appeal and Error— Presumptions — Evidence — Burden of Proof — Cities and Towns— Franchise — Municipal Corporations.

The Corporation Commission is empowered by statute to fix just and reasonable rates or charges for the services rendered by certain public-service corporations, including water companies within the incorporated limits of a city or town, C. S., 2783, upon certain evidence specified by the statute, C. S., 1068, the rate so fixed being taken as prima facie just and reasonable, C. S., 1067; and where a user of the public service appeals to the court claiming the rates fixed by the commission were unreasonable or excessive, it is required of him to show by his evidence upon the trial the truth of his contention, and in the absence of such evidence it is not erroneous for the trial judge to instruct the jury to find in favor of the justness of the rates so fixed by the commission, though it appears that these rates were in excess of those fixed by the franchise of the public-service corporation granted by the city or town.

Clarkson, J., dissenting.

Appeal by city of Henderson from *Bond, J.,*at October Term, 1924, of YaNCE.

On 27 September, 1922, Henderson Water Company filed its petition witb tbe Corporation Commission of North Carolina praying said commission to establish and put into effect a schedule of rates to be charged by said water company for services to be rendered by it to tbe city of Henderson and its inhabitants. Hpon notice of tbe filing of said petition, tbe city of Henderson filed answer thereto, denying that tbe schedule of rates proposed by tbe petitioner was reasonable, and alleging that tbe schedule then in force, pursuant to tbe contract between tbe city and tbe water works was reasonable, and ought to remain in force. Tbe Henderson Water Company, pursuant to contract, based upon an ordinance of said city, has a franchise to furnish water to tbe city of Henderson and its inhabitants for 40 years, from tbe year 1892. Rates *71to be charged for service under said franchise are fixed in the contract. After a full hearing of testimony and consideration of arguments and briefs, the commission found that a schedule of rates, as set out in its order, was reasonable. It was ordered that the schedule of rates in force prior to the filing of the petition for hydrant service might be increased by petitioner ten per cent, and that the schedule of rates, found by the commission to be reasonable, applicable to meter readings might be charged for and after.the month of April, 1923. Except as and to the extent granted, the petition was denied. This order is dated 29 March, 1923. A supplemental order was entered by the commission on 9 April, 1923, applicable principally to maximum rates for automatic sprinklers.

The city of Henderson and certain interested parties filed exceptions to said order and supplemental order, which were overruled by the commission. The cause was then heard, upon appeal to the Superior Court of Vance County. Judgment was rendered therein as follows:

“This cause coming on to be heard before his Honor, W. M. Bond, judge presiding and a jury, upon appeal by defendants (city of Henderson and other interested parties) from an order of the North Carolina Corporation Commission establishing water rates to be charged by the Henderson Water Company, and an issue having been submitted and answered as follows:

“Are the rates fixed in this cause by the Corporation Commission, regulating prices of water supply, just and reasonable? Answer: Wes.’

“Now, on motion of J. H. Bridgers, J. B. Zollicoffer and Thomas M. Pittman, attorneys for plaintiff (Henderson Water Company)

“It is considered and adjudged that the orders of said commission establishing such charges or rates are hereby affirmed and the commission is authorized to proceed in the enforcement thereof until changed as provided by law.

“The defendants (city of Henderson and other interested parties) having contended that the rates named by the Corporation Commission are in excess of those fixed by contract between the city of Henderson and the Henderson Water Company and in violation of such contract, and that the procuring authority for and charging such rates by the water company is such a breaking of the contract that the city of Henderson is entitled to have rescission and cancellation thereof, and asked the court to hold and adjudge that the contract is thereby abrogated, and the defendants (city of Henderson and other interested parties) relieved from all and every obligation and liability in respect thereof:

“Such motion and application of the defendants is denied and the court holds and so adjudges, that such contract was made in subordination to the police power of the State, which may be rightfully invoked *72by either party thereto, and subject to a fair exercise of such police power, is equally binding and obligatory upon all the parties thereto.

“It is further adjudged that plaintiff recover of defendants the cost of the action to be taxed by the clerk.

“W. M. BoNd, *Judge. Presiding.”*

From said judgment, city of Henderson appealed to the Supreme Court, assigning errors based upon exceptions.

*Perry & Kittrell and Hichs & Son for city of Henderson.*

*J ere P. Zollicoffer, J. H. Bridgers and Thomas M. Pittman for Henderson Water Company.*

CoNNOR, J.

At the close of all the evidence, the court instructed the jury upon the issue submitted, to wit: “Are the rates fixed in this cause by the Corporation Commission,, regulating the price of water supply, just and reasonable,” to answer the same “Tes.” Under this instruction, the jury so answered the issue. Appellant, city of Henderson, excepted to this instruction and assigns same as error.

Petitioner is a public-service corporation, and the Corporation Commission is vested by law with full power and authority to fix and establish any and all rates which it may charge for services rendered by it. O. S., 2783. When the Corporation Commission is called upon, by either the corporation or those to whom the services are rendered, under its franchise, to exercise this power and authority, it is its duty to fix and establish just and reasonable rates to be charged for such service. The rates or charges, established by the commission, shall be deemed just and reasonable, C. S., 1067. The burden was therefore upon appellant to offer evidence sufficient for the jury to find upon appeal and under the instructions of the court, that the schedule of rates, established by the commission, in this case, were not just and reasonable to both petitioner and respondent.

Upon a careful consideration of the evidence, as set out in the statement of the case on appeal, we must sustain the instruction of the court. The evidence chiefly relied upon by appellant is the testimony of Mr. W. A. Hunt. This witness is a member of the city council, and is by profession a banker. He was one of the receivers of petitioner, appointed by the court’ on 13 October, 1921, and discharged when.its property was restored to appellee by the court on 3 July, 1922. He testified that the books of the water company showed that its property cost $162,000; that allowing 1% a year during the life of the property to cover depreciation, he was of the opinion that the present fair value of the property was $115,000. He was also of the opinion that the *73property would pay a fair return under proper management at tbe rates allowed under tbe franchise. He expressed tbe opinion tbat these rates were reasonable and tbat be was qualified to so state. He considered tbe ratio of expenses to income too high. He bad no information as to tbe cost of additions to tbe property since be was discharged as receiver in 1922, but knows tbat considerable additions have been made under tbe orders of tbe city. He was further of opinion tbat tbe company employed more clerks in tbe office than was necessary for tbe conduct of its business.

There was evidence also tbat tbe plant was sold in 1894 under a decree of foreclosure and conveyed to a trustee for creditors by deed, in which tbe recited consideration was $32,101; tbat tbe income for 1920 was $27,385.94, and tbat tbe value as assessed for taxation in 1920 was $46,000; tbe tax valuation for 1924 was $75,000. During a period of five years — from 1917 to 1922 — tbe rates charged were less than tbe maximum fixed by tbe contract. Several customers of tbe water company testified as to tbe increase in amounts paid by them under tbe rates fixed by tbe Corporation Commission. One of these customers operated a public swimming pool, another was tbe manager of a hotel, and another of tbe American Cotton Oil Company.

There was no evidence offered by appellant from which tbe jury could have found tbe facts which, under C. S., 1068, tbe Corporation Commission is required to consider in fixing maximum rates to be charged by corporations subject to its power and authority as to these matters. Tbe burden was upon appellant and, therefore, tbe assignment of error cannot be sustained. There was evidence offered by appellee sufficient to sustain tbe rates established by tbe Corporation Commission.

At tbe beginning of tbe trial, and again at tbe close of all tbe evi-. dence, tbe city of Henderson moved tbe court to bold tbat tbe rates fixed by tbe contract between tbe city of Henderson and tbe Henderson Water Company were binding upon tbe company, and tbat neither tbe Corporation Commission nor tbe court .bad power or authority to change these rates within forty years, tbe life of tbe contract. Tbe motion was denied; appellant excepted and assigns same as error.

The ruling of tbe court is sustained by tbe decision of this Court in *Griffin v. Water Co.,*122 N. C., 210; *In re Utilities Co.,*179 N. C., 151; *Corporation Commission v. Mfg. Co.,*185 N. C., 17.

Tbe power conferred by its charter upon tbe city of Henderson “to provide water and lights and to contract for same, provide for cleansing and repairing tbe streets, regulate tbe market, take proper means to prevent and extinguish fires,” is subject to tbe police power of tbe State, with respect to rates to be charged under such contracts as tbe city may make under its charter by a public-service corporation.. *74Constitution of N. C., Art. VII, sec. 12, sec. 14; Art. VIII, sec. 1. This assignment of error cannot be sustained.

Tbe city of Henderson moved the court, in view of its ruling that the Corporation Commission had the power to change the rates, to hold that the change of the rates in the exercise of this power upon the application of the water company and the charging for service provided by the contract at the rates established by the commission in excess of the contract rates, was such a material change and alteration of the contract or franchise as to release the city of Henderson from the obligation of the contract. Defendant excepted to the refusal to so hold and assigns same as error.

This proposition of law is not material to this controversy and is not presented on the record. Ve, therefore, do not now decide the question presented by this assignment óf error.

Ve have considered the assignments of error based upon exceptions to rulings upon evidence. *We*find no error in such rulings and do not deem it necessary to discuss them. Upon consideration of each of the assignments of error,\ we affirm the judgment. There is

No error.

CuaeKSON, J., dissenting.