Case Name: May Department Stores Company, Appellant, v. Union Electric Light & Power Company and Cupples Station Light, Heat & Power Company
Court: Supreme Court of Missouri
Jurisdiction: Missouri
Decision Date: 1937-06-30
Citations: 341 Mo. 299
Docket Number: 
Parties: May Department Stores Company, Appellant, v. Union Electric Light & Power Company and Cupples Station Light, Heat & Power Company.
Judges: Ferguson and Bradley, CC., concur.
Reporter: Missouri Reports
Volume: 341
Pages: 299–334

Head Matter:
May Department Stores Company, Appellant, v. Union Electric Light & Power Company and Cupples Station Light, Heat & Power Company.
107 S. W. (2d) 41.
Division One,
June 30, 1937.
Edivard A. Hold, Sullivan, Reeder •& Finley and Lewis, Rice, Tucker, Allen <& Chubb for appellant.
McCammon Jo Sandison, Taylor Sandison and John P. McCammon for respondents.
NOTE: Opinion filed at September Term, 1936, April 21, 1937; motion for rehearing filed; motion overruled at May Term, 1937, June 30, 1937.

Opinion:
HYDE, C.
This is an action in equity for an accounting for the purpose of ascertaining and recovering alleged overcharges for electricity. An injunction against future excess charges was also sought. It was stated that the exact amount collected from plaintiff, in excess of lawful rates (filed with and approved by the Public Service Commission), could' only be determined from meter readings in the sole possession of defendants; but that the total excess charges, for a six-year period from April 30, 1924, were in excess of $400,000. Suit was commenced May 2, 1930. A referee was appointed (Hon. Charles P. Williams), who heard the evidence, reported findings of fact and conclusions of law, and recommended a judgment for plaintiff for $111,938.54. Exceptions to findings of facts and rulings of law were filed to this report by both parties. The trial court overruled plaintiff's exceptions, sustained defendants' exceptions, and entered judgment dismissing plaintiff's bill. From this judgment plaintiff has appealed.
The contracts and leases, out of which this case arose, as well as the case of Railway Exchange Building v. The Light & Development Company, 341 Mo. 334, 107 S. W. (2d) 59, decided concurrently herewith, were entered into, because of the construction of the Railway Exchange Building, in 1912. Our Public Service Commission Act became effective April 15, 1913. We will make a statement here for both eases, since it is stipulated "that all the oral and documentary evidence and the pleadings in each of said causes may be considered so far as they may be material in the other." The corporations involved will be hereinafter referred to, as follows: The May Department Stores Company as May; the Railway Exchange Building Company as Railway; the Light & Development Company (referred to in the contracts as the Plant Company) as Development; the Cupples Station Light, Heat & Power Company as Cupples; Union Electric Light & Power Company as Union; and the Kingston Investment Company as Kingston. May was to occupy the basement and the seven lower floors of the new building, which was to cover the entire block between Olive and Locust and Sixth and Seventh streets in the city of St. Louis. Storage, loading facilities, heat, light, and power were to be furnished in a building on the north side of Locust Street, and Kingston's property, adjoining this building on the north, on the corner of Seventh and St. Charles streets. Kingston was a subsidiary of May.
The petition states and the evidence shows that following contracts and leases were made for the purpose of accomplishing these purposes:
A Contract between Kingston, May a/né Railway.
This contract provided for a new building on the Kingston property suitable for storing merchandise, the construction of a tunnel under Locust Street, and a suitable location in the Kingston building for an electric light, power, and steam plant. May and Railway were to pay for, own, and maintain the conduits, wires and pipes necessary for their service. May was to have a lease for the Kingston Building but it was provided that it should sublet to Development "space . . '. suitable for the installation, maintenance and operation of a plant or plants adequate to furnish light, heat and power" for both buildings; and that May "will cause its sublease to require (on penalty of forfeiture) that the Plant Company shall at its own expense install, operate and maintain in said leased space, such a plant or plants with a sufficient reserve or excess in capacity to provide such reasonable security against suspensions in service, as will conform to good engineering practice." It was further provided that Railway, upon failure of the Plant Company "to furnish and maintain an adequate supply of light, heat or power," should have the right to purchase the plant.
A lease from Kingston to May.
This lease rented to May the storage building to be erected by Kingston and contained provisions, concerning the location of a light, heat and power plant therein, similar to those above mentioned.
A lease from May to Development.
This lease provided that May would cause certain construction and alterations, in the Kingston building leased to it, "to constitute premises suitable for the construction, installation, maintenance and operation therein of a modern first-class light, heat and power plant, adequate and suitable to supply all of the light, heat and power which may be required for the Railway Exchange Building and its tenants, as well as for all other customers of the Plant Company." This lease required Development to "install, operate, and maintain in said leased space, a new, modern, first-class power, lighting and heating plant of capacity sufficient to supply all of the electric current for light and power and steam for heat and for heating hot water, which may be required by the Railway Exchange Building, and by. any of its tenants, in addition to the requirements of all other customers of the Plant Company, said plant to have a sufficient reserve or excess in capacity to provide such reasonable security against suspensions in service as will conform to good engineering practice; and . at all times during the life of this lease maintain in said plant premises a plant equipment of the character and capacity above described." There were also provisions for the forfeiture of the lease upon violation of its covenants or agreements. The right to sublet, 'to a "public service corporation satisfactory to the lessor" and to Railway,- was also granted to Development but the sublessee was to be required to give bond for its performance.
A contract between May and Development.
This is the service contract, which is directly involved in this controversy. Defendants claim that it settles the rights of the parties as to charges and that was the circuit court's view. • This contract recited that May "is desirous of providing for its use electricity for light, heat and power and steam" (for various named purposes), and that Development "will erect, own and operate a steam and electric plant"" located in the premises (of the Kingston property) leased to it by May. It then stated:
"First: The Plant Company agrees to furnish to the May Company its entire requirements of electric current for electric light, heat and power purposes and steam for heating the premises and for heating water for toilet and cleaning purposes and high pressure steam for cooking and other purposes during the term of this contract. Said plant, which shall be constructed and operated by the Plant Company as hereinbefore recited, shall be a new, modern, first class power, lighting and heating plant of capacity sufficient to supply all of the electric current for light and power and steam for heat and heating hot water as well as steam for cooking and other purposes, as above stated, -for the May Company. . . .
"Second: The Plant Company agrees to maintain its electric service in such a way as to supply at all hours of the day or night (except when prevented by act of God or other causes not due to neglect or fault of the Plant Company) an adequate, continued and uninterrupted supply of electric current as may be required by the May Company, such service to be delivered at the switchboard of the Plant Company in the engine room of the Plant Company in City Block No. 127. The Plant Company further agrees to furnish an adequate, continued and uninterrupted supply of low pressure steam of not to exceed 2 lbs. gauge pressure (except as herein otherwise provided) as above specified as and when required during the heating season from October 1st to May 1st of each year by the May Company for its use for heating its premises, and a supply of low pressure steam for heating water for toilet and cleaning purposes as well as a supply of high pressure steam for cooking and other purposes as and when required by the May Company for its use during the heating season and from 7 A. m. to 6 p. m. of all working days from May 1st to October 1st of each year, such steam service to be delivered to steam header in engine room of the Plant Company. . . .
"Third: The May Company agrees to take from the Plant Company its entire requirements of electric service and steam for heat for its premises as above described."
It was further provided that, during the life of the contract, May would "take and pay for electric service, when accompanied by the additional service to be furnished hereunder, an amount per annum of not less than one million five hundred thousand (1,500,000) kilowatt hours. ' ' Provisions a-s to- rates are .hereinafter set out.
A contract "between Railway and Development.
This was also a service contract with provisions, as to furnishing electricity and steam, similar to those of the May service contract. It is the basis of the action in Railway Exchange Building v. The Light & Development Company, supra, and is further discussed therein.
The term of all these leases and contracts was forty years and there were certain renewal privileges granted. Other relevant provisions contained therein will be referred to later in this opinion. Development was permitted, under these contracts to serve other customers from the Railway plant. Development was a holding company and apparently intended to assign this contract to its operating company as soon as it was made. Some of the principal stockholders (also directors) óf May were among the largest stockholders of Development and served on its board of directors. Since many of the referee's findings of fact were not excepted to, we will take his findings as to such matters as undisputed facts. (Some facts were also stipulated.) As to controverted facts, this being an equity case, we are free to make our own findings, being bound neither by the view of the referee nor that of the trial court. [Shaw v. Butler (Mo.), 78 S. W. (2d) 420.] Especially must we do so where much of the evidence is documentary and the. chancellor and the referee do not agree. For reasons hereinafter more fully discussed, we find the situation, disclosed by the facts stated in the petition and supported by evidence (if accepted as true), sufficient to make a case for the equitable relief of an accounting for unlawful overcharges. [Dahlberg v. Fisse, 328 Mo. 213, 40 S. W. (2d) 606; Kansas City Power & Light Co. v. Midland Realty Co., 338 Mo. 1141, 93 S. W. (2d) 954, affirmed 57 Sup. Ct. 345, 81 L. Ed. 290.]
The Railway and Kingston buildings were built in 1912, the electric and heating plant was installed, and the connecting tunnel was constructed. The actual operation of the plant was begun by Cupples. The exact time when this commenced does not appear, but in 1912 Development became the owner of all the capital stock of Cupples; and, by a contract dated February 20, 1913, between Development and the Phoenix Light, Heat & Power Company, arrangements were made for Phoenix to supply "all the electrical energy for power and light" - which Development "might require for the use of its two plants," between May 1 and October 1 of each year. These were the- Railway plant and the Cupples Station plant. This latter plant furnished electric current for light and power, steam for heating, and other service to buildings, near its location, belonging to Washington University. The Phoenix contract also- provided' that between October 1 and May 1 of each year Phoenix would furnish "such electrical energy "for light and Power" as Development "might desire to take for use at its two plants." The maximum limit to be furnished to both plants at any time was set at 1500 Kilowatts. For installation of converter or substation equipment to comply with this contract, Development sublet to Phoenix space (approximately twelve feet by thirty-two feet) in the Railway plant. At this time, Cupples operated another large plant called the Heine plant, and two or three smaller plants. The three large plants were .tied together and operated harmoniously so that current generated from all three went into the Cupples system during the daytime. In the nighttime, the Railway plant served the entire Cnpples system in the city and also furnished current to a Development subsidiary in the county.
Prom 1912 to 1923, Cupples continued to operate in this manner. Its city customers were mainly in the downtown district; it had 123 attached to the Railway plant, 122 to the Heine plant, and 68 to the Cupples Station plant. The referee found that "the Cupples Company also owned and used in serving its customers, approximately 186, 152 duct feet (equivalent to 34% miles) of subway, and approximately 100,086 conductor feet (equivalent to about 189/10 miles) of underground cables. . A very considerable overhead or pole system, of lines." The referee also found that during this period "the energy furnished (to May and Railway) came in undefinable part from other major plants such as the Cupples Station plant and the Heine plant, as well as from the purchases from the Barnes Hospital plant and from the Phoenix Company;" that "until the making of arrangements with Barnes Hospital (some time subsequent to the Phoenix contract) the Cupples Company had for some time been badly overloaded in endeavoring to take care of all its customers;" that "after making of the Barnes Hospital arrangements, it lacked ideal reserve capacity, . . . was seeking no new customers;" and that "to insure itself against overload and possible temporary breakdown . . . was proposing to erect another plant." The referee further found "the Railway Exchange plant had four boilers arranged in two batteries of two boilers each. These boilers had a total steam capacity of around 100,000 pounds per hour. The entire steam requirements of the Building Company and the May Company did not exceed approximately 40,000 per hour. . . . The Railway Exchange plant was engaged . in the production of high and low pressure steam; and it appears that the plant purchased no steam from outside sources."
The referee's report shows the following concerning the financial condition of Cupples:
"The report for the year ending December 31, 1922, shows the total depreciated fixed assets of the Cupples Company as being $1,569,251.08; its current assets were $130,270.08; its prepayments were $6,032.41 making total assets of $1,705,553.57. Its current liabilities were $486,101.12, in which the largest item was under the head of 'Notes Payable' in the sum of $426,544.32. . . . For the year 1922, the' net operating revenue of the Cupples Company was $393,202.73. Of this amount $132,653.61 was received from customers who were supplied with light and power under permits secured from the franchises of the Cupples Company. The balance of the revenue was obtained from the operation of isolated plants. The net profit for all operations for the year 1922, appears to have been $40,565.49. ' '
In 1923 Development sold the capital stock of Cupples to Union. [Sec. 13, P. S. C. Mo. 507.] As may be noted from this report, the North American Company, which owned the capital stock of the Holding Company that was the owner of the capital stock of Union, had previously purchased the capital, stock of Development, the Holding Company of Cupples. Union was and is an operating company, and its was authorized to purchase the stock of Cupples and Development's other operating subsidiaries bn the theory that unified control would be more economical and result in better and cheaper service. Plaintiff seeks to recover alleged overcharges for all electricity and steain furnished after April 30, 1924, on the theory that after that time the applicable rates were the rates of Union, filed with and approved by the Public Service Commission. Plaintiff contends that Union destroyed the separate corporate entity of Cupples, made it a mere instrumentality or department of Union, and that the service received was therefore actually Union service. Plaintiff further contends that Union. rates fully cover the service contracted for and rendered, and are much less than the contract rates. Defendants' contention is that the contract rates apply and that nothing has happened since the contract was executed which could make any other rates supersede the contract rates. Plaintiff apparently could gain nothing by claiming scheduled rates of Cupples (if Statute of Limitations would permit) prior to that date, because it seems that the contract rates were lower than any applicable- rates ever filed by Cupples.
The May service contract provisions as to rates were, as follows:
"Fifth: The May Company agrees that it will pay the Plant Company (which will accept) for the service furnished under this contract at the rate of Two and One-Fourth Cents (21/4«) per kilowatt hour of electric -current delivered plus a flat payment of Two Thousand Dollars ($2,000.00) per year and for which rate or price for electric current there shall also be furnished without additional compensation an adequate supply of low pressure steam for heating the premises during the heating season and for heating water for toilet and cleaning purposes as well as high pressure steam for cooking and other purposes, all in amount and time as hereinbefore set forth. .
"Eighth: It is further understood and agreed by and between the parties hereunto that while the price of Two and One-Fourth (2%c) per kilowatt hours shall be the price to be charged for service under this contract and beginning at the time this contract goes into effect, nevertheless said price per kilowatt hour shall be subject to revision and adjustment from time to time during the life of this contract at the end of each five year period thereof, such adjustment to be made on a basis of comparative cost of adequate fuel, taking as the present standard Belleville shaker lump coal screened through a one and one-half inch (1?4") screen at Two Dollars ($2.00) per ton delivered at the Plant Company's premises and having a heating value of ten thousand five hundred (10,500) B.T.U. per pound of coa.1. Should the cost' of the cheapest adequate fuel at any such adjustment period be greater than the cost herein established as the present standard then the price for service hereunder per kilowatt hour during the five year period or portion thereof then ensuing shall be increased in percentage equal to one-half the percentage of said increase in cost of fuel. Should the cost of the cheapest adequate fuel at any such adjustment period be less than the cost herein established as the present standard then the cost for service hereunder per kilowatt hour shall be decreased in percentage equal to one-half the percentage of decrease in cost of fuel."
Plaintiff sued on the theory that the contract rate per kilowatt hour only covered electricity and that steam was to be furnished at the flat rate of $2000.00 per year. The referee construed' the contract (we hold correctly) to mean that the total payments covered both steam and electricity; and that "repayment to which plaintiff is equitably entitled is the difference between the tariff rates for electricity and for steam, and what plaintiff paid under, and in reliance upon, the contract for both." There were other provisions concerning rates for steam in excess of 200,000 pounds per month between May 1 and October 1 of any year; and concerning equipment to be furnished by each party. In accordance with the provision for adjustment, after each five-year period the rates were changed and fixed for next five-year period upon the agreed basis. There does not seem to have been any real disagreement about these adjustments until in July, 1929, six years after Union purchased Cupples. One such adjustment was made after this purchase. As to this adjustment the referee's report shows that, in 1923, "the price for electricity (and appurtenant steam) was 4.25 cents per kilowatt hour;" that "this remained the rate under the contract until May 1, 1924;" that thereafter "the rate was reduced to 3.625 cents per kilowatt hour; and that "this rate remained in effect until May 1, 1929." He further found that "at the expiration of this five year period, in 1929, the parties were inextricably in dispute and there was no agreement arrived at between them as to any price to be charged under the service contract for the succeeding' five year period;" but that "apparently the Cupples Company or the Union Company made the best estimate they could and reduced the rate under the contract to 3.2 cents per kilowatt hour;" and that plaintiff has paid this rate under protest.
In less than a year after these leases and contracts were made, the Missouri Public Service Commission Law was enacted. The first question for consideration is: What was the effect of this law upon these contracts? Prior to its enactment the only protection to consumers as to rates and service was their right to make the best contract they could with utilities in competition with each other for their business. This law was the result of growing feeling that such competition, as existed in this field, was inadequate to protect the public. It provided, in lieu of competition and the right of private bargaining, impartial treatment of everyone under regulations approved and enforced by the State. In determining the scope and purpose of the law this court said that the Public Service Commission Act, by use of the police power of the State, intended "to provide a speedy and sensible scheme for settling controversies so prevalent, so obstinate, so old, so raw and inflamed between public utility companies and their patrons." [State ex rel. City of Sedalia v. Public Service Comm., 275 Mo. 201, 204 S. W. 497; State ex rel. Missouri Southern Railroad Co. v. Public Service Comm., 259 Mo. 704, 168 S. W. 1156.] This court also said that the Public Service Law recognized "certain generally accepted economic principles and conditions, to-wit, that a public utility . . . is in its nature a monopoly; that competition is inadequate to protect the public, and, if it exists, is likely to become an economic waste; that State regulation takes the place of and stands for competition; that such regulation, to command respect from patron or utility owner, must be in the name of the overlord, the State, and to be effective must possess the power of intelligent visitation and the plenary supervision of every business feature to be finally (however invisibly) reflected in rates and quality of service." [State ex rel. City of Sedalia v. Public Service Commission, supra; State ex inf. Barker v. Kansas City Gas Co., 254 Mo. 515, 163 S. W. 854.] Contracts cannot limit this regulation because our Constitution specifically provides: "The police power of the State shall never be abridged, or so construed as to permit corporations to conduct their business in such manner as to infringe the equal rights of individuals, or the general well-being of the State. ' ' [See. 5, Art. XII.] Therefore, "the power of the Public Service Commission . . . overrides all contracts, privileges, franchises, charters or city ordinances." [State ex rel. City of Kirkwood v. Public Service Comm., 330 Mo. 507, 50 S. W. (2d) 114; see, also, State ex rel. City of Sedalia v. Public Service Comm., 275 Mo. 201, 204 S. W. 497; City of Cape Girardeau v. St. L.-S. F. Railroad Co., 305 Mo. 590, 267 S. W. 601; State ex rel. Washington University v. Public Service Comm., 308 Mo. 328, 272 S. W. 971; Kansas City Power & Light Co. v. Midland Realty Co., 338 Mo. 1141, 93 S. W. (2d) 954; Midland Realty Co. v. Kansas City Power & Light Co., 57 Sup. Ct. 345, 81 L. Ed. 290; see, also, 3 Pond's Public Utilities, chap. 32,. sees. 900-913.] Regulation of rates certainly could not be successful without regulating all rates, and in the Wash ington University case, this court said "that contract prices count for naught in the fixing of rates."
The United States Supreme Court, in the recent Gold Clause cases, clearly stated the reasons for the application of this principle, saying:
"Parties cannot remove their transactions from the reach of dominant constitutional power by making contracts about them. . . . If shippers and carriers stipulate for specified rates, although the rates may be lawful when the contracts are made, if Congress through the Interstate Commerce Commission exercises its authority and prescribes different rates, the latter control and override in consistent stipulations in contracts previously made. . To subordinate the exercise of the Federal authority to the continuing operation of previous contracts would be to place to this extent the regulation of interstate commerce in the hands of private individuals and to withdraw from the control of the Congress so much of the field as they might choose by 'prophetic discernment' to bring within the range of their agreements." [Norman v. B. & O. Railroad Co., 294 U. S. 240, 55 Sup. Ct. 407, 79 L. Ed. 885.]
Such "prophetic discernment" in this case, considering the terms of these contracts and leases and their extension provisions, would, if given validity, have the effect of withdrawing these transactions of the utilities and consumers involved from all regulation by the Public Service Commission for half a century. Since the Public Service Commission is not a court, it can neither enforce, construe nor annul contracts, but it "deals with public utilities upon the theory of public service, without regard to any contracts." [Kansas City Power & Light Co. v. Midland Realty Co., supra.] Contract provisions are wholly immaterial where it has authority to act. If it was limited by contracts about matters it is authorized to regulate, the certain result would be inequality between consumers. If all consumers similarly situated are to be treated alike, a contract dealing with one on a different basis from others cannot be recognized. If one consumer by reason of a contract pays less for or gets more service for his money than others, he pays less than it is worth (because the commission is directed to fix just and reasonable rates) and others would have to pay more than their service is worth in order to make up the difference it would cost the utility to give the one consumer special treatment. [See State ex rel. Empire District Electric Co. v. Public Service Comm., 339 Mo. 1188, 100 S. W. (2d) 509; see, also, 1 Pond's Public Utilities, chap. 13, secs. 270-295.] The purpose of providing public utility regulation was to secure equality in service and in rates for all who needed or desired these services and who were similarly situated. Of course, this required classification for rates and service on the basis of location, amount used, and other reasonable considerations, but this does not give public utilities and tbeir customers the right to fix their own classifications by contract without regard to the rest of the public. Likewise, any such classifications they did make before the act was passed, when they had the right to do so, was subject to reclassification by the commission. Thus it is settled beyond question that the provisions of the contract involved here, as to rates and service, could not stand against any action by .the commission in conflict therewith.
This brings up this further question: Were public utilities which had fixed rates aild classifications of service with consumers prior to the act required to thereafter obtain approval of and authority to continue rates and classifications then in effect? We think that affirmative action for this purpose was intended; that it made no difference whether such rates had previously been fixed by contract or otherwise; and that not only were prior agreements as to rates and service subject to reclassification and change, but that it was clearly the intention of the act that they should be reclassified (or the commission's approval of the existing rates and classifications obtained) within a reasonable time after it became effective. Otherwise, how could equality in rates and service be established? Could it have been intended that every individual consumer's private arrangements with any utility should remain as it was until the commission discovered it by investigation and specifically ordered that it be abandoned?
Section 5189, Revised Statutes 1929, provides concerning electrical corporations as follows:
"1. . . . Every electrical corporation, . . . shall furnish and provide such service instrumentalities and facilities as shall be safe and adequate. . . . All charges made or demanded . . . shall be just cmd reasonable and not more than allowed by law or by order or decision of the Commission. . . . Every . . . charge . in excess of that allowed by law or by order or decision of the commission is prohibited.
"2. No . . . electrical corporation . . . shall directly or indirectly by any special rate, rebate, drawback or other device or methods, charge, demand, collect or receive fro>m any person or corporation a greater or less compensation for gas, electricity . . . or for any service rendered or to be rendered in connection therewith, . . . than it charges, demands, collects or receives from a/mj other person or corporation for doing a like and contemporaneous service with respect thereto under the same or substantially similar circumstances or conditions.
"3. No . . . electrical corporation, . . . shall make or grant any undue or -unreasonable preference or advantage to any person, corporation or locality, or to amy particular description of service in any respect whatsoever." (As to heating companies see Section 5228, R. S. 1929.)
Some of the commission's powers to determine these matters and enforce its findings stated in Section 5190, Revised Statutes 1929, are as follows:
"1. Have general supervision of all . . . electrical corporations. . . .
"2. . . . Have power to order such reasonable improvements as will best promote the public interest, . . . and protect those using . . . electricity . . . and have power to order reasonable improvements and extensions of the works, wires, poles, pipes, lines, conduits, duets and other reasonable devices.
"12. Have power to require every . . . electrical corporation, . to file with the commission and to print and keep open to public inspection schedules showing all rates and charges made, established or enforced or to be charged or enforced, all forms of contract or agreement and all rules and regulations relating to rates, charges or service used or to be used, cmd all general privileges and facilities granted or allowed. . . .No corporation . . . shall charge, demand, collect or receive a greater or less'or different compensation for any service rendered or to be rendered than the rates cmd charges applicable to such services as specified in its schedule filed and in effect'at the time; . . . nor to extend to any person or corporation any form of 'contract or agreement . .- . or my privilege or facility, except such as are regularly and uniformly extended to all persons and corporations under like circumstances." (All italics ours.)
(Sec. 5249.) "The commission shall ascertain, determine and fix for each kind of public utility suitable and convenient standard commercial units of service, product or commodity."
These provisions mean that a public utility may by filing schedules suggest to the commission rates and classifications which it believes are just and reasonable, and if the commission accepts them they are authorized rates, but the commission alone can determine that question and make them a lawful charge. The first Public Service Commission construed the act as requiring its affirmative approval of all rates, because it did make an order requiring "every electrical corporation . . . not later than October 15, 1913, to have on file . . . schedule of all rates, rentals and charges of whatever nature made by such . . . corporation . . . for each and every kind of service which it renders as were in force on April 15, 1913, together with proper supplements covering all changes." Cup-pies' schedule filed pursuant to this order set out "a combined light and power rate consisting of a service charge of $3.50 per month per K.W. demand, plus and energy charge of 2 cents per K.'Wl for all current used." It also stated that "in addition to the present schedules, we have a number of contracts at varying rates made prior to April 15,. 1913, tbe rates in some eases being a part of the leases of the premises, said leases having in some instances years to run." Certainly merely making such .general statement about contracts in a schedule, without showing service furnished or rates charged, could not reasonably be construed as an authorization to continue all their provisions or to make them prevail over applicable scheduled and authorized rates. Moreover, later Cupples' schedules filed in 1917 and 1918, canceling and replacing this original schedule, did not in any way mention these contracts. Union also filed its rates pursuant to this original order and has filed new schedules both before and since it acquired Cupples' stock in 1923. While the further question must be determined, as to whether May is actually doing business with and receiving service from Cupples or from Union, in order to determine whether Cupples or Union rates now apply, clearly one or the other must apply rather than any private contract rate never filed with or disclosed to the commission. This view has very recently been sustained by the United States Supreme Court, in affirming the Midland Realty Company case supra, in which it said: "The rates . . . filed . . . and . . . promulgated by the commission in accordance with the statute have the same force and effect as if directly prescribed by the Legislature," and it could not reasonably be contended "that immediate exertion by the Legislature of the State's power to enforce reasonable and nondiscriminatory rates depends upon or is conditioned by specific adjudication in respect to existing contract rates."
In order to determine whether there are applicable scheduled rates, it is necessary to decide whether charges are to be figured from Cupples' schedules or Union schedules. If it be Cupples' schedules, plaintiff could recover nothing, because the last Cupples' schedules were filed in 1918 (amended in 1920), and provide higher rates than plaintiff paid. The status of Cupples since Union acquired its stock in 1923 is the decisive question. On this issue, we adopt the following facts, without use of quotation marks, which were stated in referee's report:
The first physical act of change was the removal of the office and records of Cupples from its old quarters in the Railway Exchange Building to the building of Union on Twelfth Street. A general engineering conference was held, as a result of which there was a comprehensive interconnection made of Union and Cupples overhead lines. These various cut ins enabled Union to serve customers of Cupples, and did away with the necessity, from a broad operating standpoint, of the two companies maintaining wasteful duplicate facilities. When these eutins were made, Cupples' plants were synchronized with those of Union. The various Cupples' plants, instead of being unified together and having no connection with Union, were thereafter able to operate as a sj^stem only in conjunction with Union. (All Cnpples' plants were dismantled except the Railway plant and the Cnpples Station plant.) The contract with the Phoenix Company appears to have been terminated at the end of June, 1923. Many of Cupples' overhead lines were dismantled or abandoned; the remainder were connected with the system of Union. The electric customers of Cupples were begun to be switched or transferred over to the Union. This process of transfer appears to have been steadily carried on until all Cupples customers not under special contracts were made Union customers. The reason for these transfers were the estimated greater profit to Union under its own rates.
The president, vice-president, secretary and treasurer of Union were respectively elected to the corresponding offices in Cupples and have held such corresponding offices ever since. The first three compose the directorate of Cupples. As officers of both companies, they occupy the same general office quarters, which belong to the Union, and for which no rental is charged to or paid by Cupples. The manager of Union's steam service department was appointed manager of Cupples, and as such, took charge of all of Cupples' steam and electric service plants, and has ever since remained in charge. None of the officers of Cupples received any compensation as officers or employees of Cupples. Their salaries are paid to them by Union. About the end of August, 1926, Cupples established a so-called pay roll bank account which it operated as follows: Twice a month Union draws a check equal to the pay roll records of Cupples. This check is deposited in its pay roll bank account by Cupples and its pay roll checks drawn against it. (Since 1924 there have usually been less than twenty Cupples employees in all plants.) Expense accounts are paid by Union and credited and charged in the intercompany accounts. Union keeps for itself all cash discounts on purchases made for Cupples, charging to the latter company the full price. Union pays the rental on the premises occupied by the Railway Exchange plant as reserved in the leases therefor, charging and crediting such payments in the intercompany accounts. All bills for services rendered by (or in behalf of) Cupples to its customers (including May and Railway) have at all times been made out an$ are now being made out in the name of Cupples. All checks received in payment of such bills have been made out to Cupples and these checks, as well as all other cheeks issued to Cupples (except for a short period), have been and are still being indorsed over to the Union by common officers of the two companies, deposited in Union's bank account, credited to Cupples and charged to Union on the inter-company accounts.
Early in 1924, Union required another substation to serve direct current to its downtown customers, and after looking - about for a suitable downtown location, Union installed a substation in a space approximately thirty-six feet by thirty-two feet in the Railway plant. A rental for this space was charged to the Union in the intercompany accounts, but there appears to have been no written or, indeed, any very definite arrangement. This substation consisted of one 5000 horse-power motor and two connected 1,875 K. W. direct current generators with other accessory equipment. This unit was to be and has been supplied with alternating current from the Union's high voltage system. It had a capacity approximately four times greater than the Cupples equipment that was devoted to the generation of direct current. The substation installed by Union receives 13,000 volts alternating current from the high voltage system of the Union Company, which it converts into 230 or 240 volts direct current. Upon installation and completion of the substation there were extensive cut ins and connections of Union cables in and with the Cupples underground system. The general effect was to unify the Cupples underground system with that of Union so that they could be operated' as one. Apart from cut ins and connections, in some instances the Cupples cables were entirely removed, which had the effect of rendering impossible the further service of certain of its old customers by Cupples and direct Union connections were made.
Prior to the installation of the substation two 4,000' volt cables, from Union's Ashley street plant, carrying alternating current, were brought into the Railway plant and connections made with Cupples converters and transformers. When the generators in the Railway plant were used, part of the current received by May came from the plant, and part from Ashley Street. The same was true of direct current. The alternating current delivered from these Ashley Street cables was measured by Union meters before passing into Cupples machines. The greater part of the direct current production by Union's substation in the plant passed into and reinforced the downtown Edison network of Union. Since the completion of the substation, most of the direct current for May and Railway has been obtained from Union rather than- from operation of the plant converters. In addition, probably in- the fall of 1924, a steam pipe connection from the Ashley plant of Union was laid into the Railway plant.' After the installation of the substation, the use of the direct current generators in the plant was discontinued. In 1925-1926 and 1927 there was practically no generation from any source at the Railway plant. Whatever steam was used by this plant or sold by this plant during these years was obtained from the Union Company. Substantially all the electric power delivered to May or Railway was purchased from Union. In the years 1928, 1929 and 1930 there was generated in the Railway plant about 900,000 kilowatt hours per year, which was manifestly generated as a matter of economical administration in order to get work out of high pressure steam bought from Union, which had to be reduced to low pressure steam for use by May and Railway. There was practically no operation of the Railway plant boilers in 1927 after May 18th; no operation of the boilers in 1928, and practically no operation of the boilers in 1929. In 1930, the operation equaled one boiler for a period of thirty-three ten-hour days. At all times the boilers were kept in good condition ready to operate.
The Cupples Statiou plant, after the completion of the substation, had its switchboard torn out and a new panel put in whereby the plant could receive current from Union Company or could (and did to a considerable extent) generate current and project it into Union Company's system. A Union cable was run into Cupples Station. In 1928, 1929, 1930 and 1931 most or nearly all of the current generated at the Cupples Station plant must have been for the sake of getting low pressure steam. The electric current generated at Cupples Station plant went into the Union system, and the service to Washington University at Cupples Station plant came from the Union system. All current and steam furnished to Cupples by Union has been metered and charged to Cupples in the intercompany accounts, and vice versa as to current and steam furnished by Cupples to Union. As a final result of the changes, Cupples could not serve its old outside customers save in conjunction with Union. At the close of the year 1930, the Railway plant had only three customers, to-wit: May and Railway under the service contracts, and the Dolph Building on Locust Street under the tariff filed. The Dolph Building, which was controlled by May, was not switched for fear of bringing about a'possible demand by May for direct service by Union instead of under the service contract. So far as the Cupples Station plant was concerned, by 1930, Washington University, pursuant to its requirements under its lease contract, was the sole electric customer supplied by the Cupples Station plant. In 1930 Cupples Station steam customers numbered fourteen, and no steam has ever been brought by Union into the Cupples Station plant. At no time since the acquisition of its stock by Union has Cupples ever solicited' any new electric customers for any of its plants.
Cupples has retained its corporate charter. It has held annual stockholders' meetings and elected directors as provided in its bylaws and articles of association. Regular directors' meetings have been held and minutes preserved of all stockholders' and directors' meetings. Annual reports and' anti-trust affidavits of Cupples have been regularly made to the Secretary of State of Missouri, and regular annual reports of Cupples have also been made to the Missouri Tax Commission as required by law. The corporation franchise tax of Cupples has been regularly paid by Union and charged to Cup- pies in the intercompany accounts. The annual reports of Cupples required to be filed with the Missouri Public Service Commission have been made and filed. Reports by Cupples have been made to the State of Missouri and to the United States, under State and Federal Income Tax laws and the taxes assessed thereon have been paid by Union and charged to Cupples in the intercompany accounts. Returns of Cupples' taxable property have been regularly made in the name of Cupples to the proper tax authorities in Missouri by common employees of Union and Cupples, acting for Cupples in- the making of such returns; and such state, city and school taxes as have been assessed thereon against Cupples have been paid by Union and charged to Cupples. Insurance policies on property and boiler insurance policies have been issued from time to time to Cupples and premiums thereon paid by Union and charged to Cupples. Ever since the Missouri "Workmen's Compensation Law has been in effect, insurance, has been carried by policies issued to Cupples covering the risk under such law. Since June, 1925, there have been monthly credits in the intercompany accounts to Cupples ánd corresponding charges to Union of $4350.08, based upon vouchers for rental of property of Cupples (poles and fixtures, overhead and underground distribution system, etc.) used by and chargeable to Union at $52,-237 per annum. (Without this rental Cupples would have shown a loss instead of a net profit for every year.)
The referee's conclusion was that after the completion of the substation in the Railway plant in July, 1924, ' ' Cupples was instrumentalized and that from ¡juch date the corporate entity of Cupples ought to be disregarded." The chancellor found that "Cupples maintained its corporate entity and performed its corporate duties in a manner sufficiently independent of Union to entitle it to be treated as a public utility (corporation)."
What are the tests to be applied to determine whether the acts of one company can be charged to another? Defendants cite the criticism of the use of such terms as "instrumentality," as furnishing no real basis for decision, made by Professor Latty in his recent instructive book on "Subsidiaries and Affiliated Corporations." Cases in this field can hardly be reconciled. In Berky v. Third Avenue Ry. Co. (N. Y.), 155 N. E. 58, a leading case holding against liability for acts of a subsidiary company, Justice Cardozo said:
"The whole problem of the relation between parent and subsidiary corporations is one that is still enveloped in the mists of metaphor. Metaphors in law are to be narrowly watched, for starting as devices to liberate thought, they end' often by enslaving it. We say at times that the corporate entity will be ignored when the parent corporation operates a business through a subsidiary which is characterized as an 'alias' or a 'dummy.' All this is well enough if the picturesqueness of the epithets does not lead ns to forget that the essential term to be defined is the act of operation. Dominion may be so complete, interference so obtrusive, that by the general rules of agency the parent will be a principal and the subsidiary an agent. Where control is less than this, we are remitted to the tests of honesty and justice." (Our italics.)