Source: http://supreme.nolo.com/us/253/287/case.html
Timestamp: 2019-04-21 06:10:37+00:00

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An order of a Commission fixing the maximum future rates chargeable by a water company violates due process of law if no fair opportunity is provided by the state law for submitting the question whether the rates are confiscatory to the determination of a judicial tribunal upon its own independent judgment as to both law and fact. P. 253 U. S. 289.
The Public Service Commission Law of Pennsylvania, as construed by the supreme court of the state in this case, fails to provide such an opportunity by way of appeal from the Public Service Commission to the Superior Court, nor does it clearly appear, in the absence of definitive construction by that court, that such opportunity exists by way of injunction proceedings under § 31 of the act or otherwise under the law of the state. P. 253 U. S. 290.
Acting upon a complaint charging plaintiff in error, a water company, with demanding unreasonable rates, the Public Service Commission of Pennsylvania instituted an investigation and took evidence. It found the fair value of the company's property to be $924,744 and ordered establishment of a new and lower schedule which would yield seven percentum thereon over and above operating expenses and depreciation.
Claiming the Commission's valuation was much too low and that the order would deprive it of a reasonable return, and thereby confiscate its property, the company appealed to the superior court. The latter reviewed the certified record, appraised the property at $1,324,621.80, reversed the order, and remanded the proceeding, with directions to authorize rates sufficient to yield seven percentum of such sum.
"The appeal [to the superior court] presented for determination the question whether the order appealed from was reasonable and in conformity with law, and in this inquiry was involved the question of the fair value, for ratemaking purposes, of the property of appellant, and the amount of revenue which appellant was entitled to collect. In its decision upon the appeal, the superior court differed from the Commission as to the proper valuation to be placed upon several items going to make up the fair value of the property of the water company for ratemaking purposes."
It considered those items and held that, as there was competent evidence tending to sustain the Commission's conclusion and no abuse of discretion appeared, the superior court should not have interfered therewith.
conclusion that in the items wherein the superior court differed from the Commission upon the question of values there was merely the substitution of its judgment for that of the Commission in determining that the order of the latter was unreasonable."
Looking at the entire opinion, we are compelled to conclude that the supreme court interpreted the statute as withholding from the courts power to determine the question of confiscation according to their own independent judgment when the action of the Commission comes to be considered on appeal.
The order here involved prescribed a complete schedule of maximum future rates, and was legislative in character. Prentis v. Atlantic Coast Line, 211 U. S. 210; Lake Erie & Western R. Co. v. State Public Utility Commission, 249 U. S. 422, 249 U. S. 424. In all such cases, if the owner claims confiscation of his property will result, the state must provide a fair opportunity for submitting that issue to a judicial tribunal for determination upon its own independent judgment as to both law and facts; otherwise, the order is void because in conflict with the due process clause, Fourteenth Amendment. Missouri Pacific Ry. Co. v. Tucker, 230 U. S. 340, 230 U. S. 347; Wadley Southern Ry. Co. v Georgia, 235 U. S. 651, 235 U. S. 660-661; Missouri v. Chicago, Burlington & Quincy R. Co., 241 U. S. 533, 241 U. S. 538; Oklahoma Operating Co. v. Love, 252 U. S. 331.
Here, the insistence is that the Public Service Company Law, as construed and applied by the supreme court has deprived plaintiff in error of the right to be so heard, and this is true if the appeal therein specifically provided is the only clearly authorized proceeding where the Commission's order may be challenged because confiscatory. Thus far, plaintiff in error has not succeeded in obtaining the review for which the Fourteenth Amendment requires the state to provide.
"Sec. 31. No injunction shall issue modifying, suspending, staying, or annulling any order of the Commission, or of a Commissioner, except upon notice to the Commission and after cause shown upon a hearing. The Court of Common Pleas of Dauphin County is hereby clothed with exclusive jurisdiction throughout the Commonwealth of all proceedings for such injunctions, subject to an appeal to the Supreme Court as aforesaid. Whenever the Commission shall make any rule, regulation, finding, determination, or order under the provisions of this act, the same shall be and remain conclusive upon all parties affected thereby unless set aside, annulled, or modified in an appeal or proceeding taken as provided in this act."
The Supreme Court of Pennsylvania has not ruled upon effect of meaning of § 31, or expressed any view concerning it. So far as counsel have been able to discover, no relief against an order alleged to be confiscatory has been sought under this section, although much litigation has arisen under the act. It is part of the article entitled "Practice and Procedure Before the Commission and upon Appeal." Certain opinions by the supreme court seem to indicate that all objections to the Commission's orders must be determined upon appeal -- St. Clair Borough v. Tamaqua & Pottsville Electric Ry. Co., 259 Pa. 462; Pittsburgh Railways Co. v. Pittsburgh, 260 Pa. 424 -- but they do not definitely decide the point.
"At the hearing of the appeal, the said court shall, upon the record certified to it by the commission, determine whether or not the order appealed from is reasonable and in conformity with law."
But for the opinion of the supreme court in the present cause, this would seem to empower the superior court judicially to hear and determine all objections to an order on appeal and to make its jurisdiction in respect thereto exclusive. Of this the latter court apparently entertained no doubt, and certainly counsel did not fatally err by adopting that view, whatever meaning finally may be attributed to § 31.
Without doubt, the duties of the courts upon appeals under the act are judicial in character, not legislative, as in Prentis v. Atlantic Coast Line, supra. This is not disputed; but their jurisdiction, as ruled by the supreme court, stopped short of what must be plainly entrusted to some court in order that there may be due process of law.
Plaintiff in error has not had proper opportunity for an adequate judicial hearing as to confiscation, and unless such an opportunity is now available, and can be definitely indicated by the court below in the exercise of its power finally to construe laws of the state (including, of course, § 31), the challenged order is invalid.
The judgment of the Supreme Court of Pennsylvania must be reversed, and the cause remanded there with instructions to take further action not inconsistent with this opinion.
order, and (2) that the order, which was reinstated by the supreme court, confiscates its property.
"is unreasonable or based upon incompetent evidence materially affecting the determination of the Commission or is otherwise not in conformity with law,"
"No injunction shall issue modifying, suspending, staying, or annulling any order of the commission, or of a commissioner, except upon notice to the commission and after cause shown upon a hearing. The Court of Common pleas of Dauphin County is hereby clothed with exclusive jurisdiction throughout the Commonwealth of all proceedings for such injunctions, subject to an appeal to the Supreme Court as aforesaid. Whenever the commission shall make any rule, regulation, finding, determination, or order under the provisions of this act the same shall be and remain conclusive upon all parties affected thereby, unless set aside, annulled, or modified in an appeal or proceeding taken as provided in this act."
with the Commission. The appeal provided for in §§ 22-25 was, under the original act, also to the court of common pleas, but was changed to the superior court by the act of July 3, 1915.
No decisions of the Supreme Court of Pennsylvania construing § 31 of this act have been brought to our attention. The company contends, however, that the construction here suggested has been inferentially made untenable by dicta in St. Clair Borough v. Tamaqua & Pottsville Elec. Ry. Co., 259 Pa. 462; Pittsburgh Rys. Co. v. Pittsburgh, 260 Pa. 424; Klein-Logan Co. v. Duquesne Light Co., 261 Pa. 526. But the language relied upon was in each instance used by the court in making the point not that the sole method of review was by appeal, as distinguished from a bill in equity, but that the function of the courts was to review only after the Commission had in the first instance passed upon the case.
insist that the action of the supreme court in reinstating the order found not merely that there was substantial evidence, but, upon a full review, that there was ample evidence to support the findings, and that the order was reasonable. They contend that the course pursued by the supreme court in making such review was that customarily followed in Pennsylvania both by appellate courts on appeals from chancellors and by trial courts on exceptions to reports of auditors, masters, or referees, Barnes' Estate, 221 Pa. 399, and they point out that the same method was pursued on appeal to the supreme court prior to the enactment of the Public Service Company Law at a time when proceedings by consumers to secure reduction of water rates alleged to be unreasonably high were brought in the court of common pleas, subject to appeal to the supreme court. Turtle Creek Borough v. Pennsylvania Water Co., 243 Pa. 401.
review questions of law -- in the present case, whether there was evidence on which the valuation adopted could reasonably have been found -- and, in so holding, it acted upon the established principle, applied in reviewing the findings of administrative boards, that "courts will not examine the facts further than to determine whether there was substantial evidence to sustain the order." Interstate Commerce Commission v. Union Pacific R. Co., 222 U. S. 541, 222 U. S. 547-548. It therefore reinstated the order of the Commission. But it did not do so as an appellate court reviewing on the weight of the evidence findings of fact made by the superior court. It did so solely because the only question before it was whether there was substantial evidence to support the finding of value, for if the valuation was legally arrived at, the order was confessedly reasonable. Interstate Commerce Commission v. Union Pacific R. Co., supra; San Diego Land & Town Co. v. Jasper, 189 U. S. 439, 189 U. S. 441-442. The presumption created by § 23, P.L. p. 1427, by which an order of the Commission is made prima facie evidence of its reasonableness, is in no sense a limitation upon the scope of the review. It is in effect the presumption which this Court has declared to exist in rate cases, independently of statute, in favor of the conclusion of an experienced administrative body reached after a full hearing. Darnell v. Edwards, 244 U. S. 564, 244 U. S. 569.
Second. As the company had the opportunity for a full judicial review through a suit in equity for an injunction, as it was not denied due process by disregard in the proceedings actually taken of the essentials of judicial process, and since it is clear that the findings of the Commission were supported by substantial evidence, the judgment of the Supreme Court of Pennsylvania must be affirmed unless, as contended, the claim of confiscation compels this Court to decide, upon the weight of the evidence, whether or not its property has been undervalued, or unless some error in law is shown.
The case is here on writ of error to a state court. It is settled that, in such cases, we accept the facts as there found, not only in actions at law, Dower v. Richards, 151 U. S. 658, but also where, as in chancery, the record contains all the evidence and it was open for consideration by and actually passed upon by the highest court of the state, Egan v. Hart, 165 U. S. 188; Waters-Pierce Oil Co. v. Texas, 212 U. S. 86, 212 U. S. 107. And this is true although the existence of a federal question depends upon the determination of the issue of fact, and although the finding of fact will determine whether or not there has been a taking of property in violation of the Fourteenth Amendment. Minneapolis & St. Louis Railroad Co. v. Minnesota, 193 U. S. 53, 193 U. S. 65. This Court may, of course, upon writ of error to a state court "examine the entire record, including the evidence, to determine whether what purports to be a finding" upon questions of fact is "so involved with and dependent upon questions of federal law as to be really a decision" of the latter. Kansas City Southern Ry. Co. v. Albers Commission Co., 223 U. S. 573, 223 U. S. 591-593; Cedar Rapids Gaslight Co. v. Cedar Rapids, 223 U. S. 655, 658 [argument of counsel -- omitted]; Graham v. Gill, 223 U. S. 643, 223 U. S. 645. But, in order that such examination may be required or be permissible, its purpose must not be to pass upon the relative weight of conflicting evidence, Oregon Railroad & Navigation Co. v. Fairchild, 224 U. S. 510, 224 U. S. 528, and to substitute the judgment therein of this Court for that of the lower court, but to ascertain whether a finding was unsupported by evidence, or whether evidence was properly admitted or excluded, or whether, in some other way a ruling was involved which is within the appellate jurisdiction of this Court, Northern Pacific Railway v. North Dakota, 236 U. S. 585, 236 U. S. 593; Norfolk & Western Railway v. West Virginia, 236 U. S. 605.
"The ascertainment of the fair value of the property for ratemaking purposes is not a matter of formulas, but it is a matter which calls for the exercise of a sound and reasonable judgment upon a proper consideration of all relevant facts."
The objections to the valuation made by the company raise no question of law, but concern pure matters of fact, and the finding of the Commission, affirmed by the highest court of the state, is conclusive upon this Court. The case at bar is wholly unlike Great Northern Railway v. Minnesota, 238 U. S. 340, and Union Pacific Railroad Co. v. Missouri, 248 U. S. 67, where this Court reversed the judgments as matter of law upon the facts found by the Commission.
In my opinion, the judgment of the Supreme Court of Pennsylvania should be affirmed.
* In Napa Valley Electric Co. v. Railway Commissioners, 251 U. S. 366, this Court had before it in § 67 of the Public Utilities Act of California (St. Extra Sess.1911, p. 55) a procedure substantially similar to that provided by §§ 21-25 of the Pennsylvania act set forth above. The court strongly intimated, if it did not decide, that, under the provisions of the act, the mere denial of a petition to the supreme court of the state for a writ of certiorari amounted to an adequate judicial determination of the petitioner's rights.

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