Court Opinion

ID: 3588390
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:37:43.712715+00
Date Added: 2024-06-11T13:38:58.928254
License: Public Domain

The Public Service Commission appeals pursuant to leave granted by the Appellate Division, Third Department, upon certified questions of law, from an order of the Appellate Division and a judgment thereon which reversed orders of the Special Term, Albany County, granting defendants' motion for judgment on the pleadings and dismissing the complaint. The Appellate Division granted a temporary injunction against enforcement of the commission's order prescribing permanent rates and struck out four separate defenses in defendants' answer. The following questions were certified:
"1. Is the plaintiff entitled to maintain this action?
"2. Does the complaint state facts sufficient to constitute a cause of action?"
In a prior suit beween the same parties, brought to enjoin temporary rates established by the commission's order of May 27, 1943, we affirmed a dismissal of the complaint (Staten IslandEdison Corp. v. Maltbie, 267 App. Div. 72, affd. 292 N.Y. 611). The present action is a plenary action in equity to enjoin the enforcement of the commission's order of May 27, 1943, prescribing temporary rates and of the commission's final order of June 19, 1945, prescribing final rates to be charged on and after July 1, 1945.
Allegations of ultimate fact held sufficient to show confiscation in Prendergast v. N.Y. Tel. Co. (262 U.S. 43) are substantially *Page 380 
followed in the complaint. Plaintiff alleges that the commission's orders result in confiscation of its property in violation of its constitutional right to receive a fair return upon the value of its property devoted to public use, specifically alleging the cost of its property devoted to such use within the State, the cost of its reproduction, its reasonable value, the maximum rate of return which the rates prescribed will provide, measured in relation to the cost and also in relation to the fair and reasonable value of its property, and that such rates will not afford a reasonable return on such cost or value. These allegations, which for the purpose of pleading must be taken at face value, show returns of 3.07% on depreciated cost and 2.42% on reasonable value and clearly support the claim of confiscation (Prendergast v. N.Y. Tel.Co., supra). Thus the complaint sufficiently alleges confiscation in violation of plaintiff's constitutional right — a question which of course may be determined only after the proofs are in (Municipal Gas Co. v. Public Service Comm., 225 N.Y. 89,98).
The questions certified involve plaintiff's right to maintain the action in equity and the sufficiency of the allegations to warrant injunctive relief. Each of these questions depends upon the adequacy or inadequacy of the remedy available to plaintiff by a certiorari order under article 78 of the Civil Practice Act to review the rate orders of the Public Service Commission.
In People ex rel. Consol. Water Co. v. Maltbie (275 N.Y. 357, appeal dismissed 303 U.S. 158) we held (pp. 369-370): "Upon the hearing of an order of certiorari to review a determination of the Commission, the jurisdiction and power of the Appellate Division are defined and limited by section 1304 [now section 1296] of the Civil Practice Act. These powers do not include an independent consideration by the court of any question of fact."
This was a rate case and we declared, in regard to the scope of our review (p. 366): "In this court the determination of the Commission upon any question of fact is not open to review. We may reverse a decision or annul a determination only for erroneous determination of a question of law, and after careful consideration of the appellant's argument, we find no errors there. Upon every point where the determination of the Commission is challenged we find that there is evidence to support *Page 381 
the conclusion of the Commission and room for the exercise of choice."
This is the established rule in certiorari proceedings to review rate orders of the Public Service Commission and it is applied generally in certiorari proceedings to review determinations of administrative boards (People ex rel. N.Y. Queens Gas Co. v. McCall, 219 N.Y. 84, affd. 245 U.S. 345;Niagara Falls P. Co. v. Water P.  C. Comm., 267 N.Y. 265,278; Matter of Weber v. Town of Cheektowaga, 284 N.Y. 377,380; Matter of Newbrand v. City of Yonkers, 285 N.Y. 164,177-178; Matter of Miller v. Kling, 291 N.Y. 65; Matter ofBolani v. O'Connell, 296 N.Y. 871).
Faced with this limitation upon the jurisdiction and power of the Appellate Division in certiorari proceedings to review a determination of the commission, and seeking an independent consideration by a court of the facts upon which its claim of constitutional right is predicated, plaintiff has brought this plenary action in equity to enjoin confiscation of its property used and useful in the public service, claiming that as a matter of constitutional right it is entitled to a fair opportunity of submitting the issue of confiscation to a judicial tribunal for determination upon its own independent judgment as to both law and facts (Ohio Valley Co. v. Ben Avon Borough,253 U.S. 287).
When the Consolidated Water Co. case (supra) went to the Supreme Court of the United States, the water company sought to raise this question. The Supreme Court held (pp. 159-160): "Appellant contends that it is entitled to the exercise of the independent judgment of a court as to the law and the facts with respect to the issue of confiscation and that such a review has not been accorded because of the limitations imposed by the state practice in certiorari proceedings. 275 N.Y. at p. 370 * * *. Appellant has no standing to raise this question as appellant itself sought review by certiorari and has not invoked the plenary jurisdiction of a court of equity and it does not appear that this remedy is not available under the state law."
We are now confronted with that question.
The Ben Avon case (supra) has never been overruled; on the contrary the principle that where constitutional rights of *Page 382 
liberty or property are involved due process requires independent judicial determination of the constitutional question in the courts, has been reaffirmed. (St. Joseph Stock Yards Co. v.United States, 298 U.S. 38, 51-52; Crowell v. Benson,285 U.S. 22, 46, 60; Baltimore  Ohio R.R. Co. v. United States,298 U.S. 349, 368-369; State Comm. v. Wichita Gas Co.,290 U.S. 561, 569.)
In Phillips v. Commissioner (283 U.S. 589, 600), BRANDEIS, J., writing for the court, stated the general rule regarding administrative findings and the exception as follows: "Save as there may be an exception for issues presenting claims of constitutional right, such administrative findings on issues of fact are accepted by the court as conclusive if the evidence was legally sufficient to sustain them and there was no irregularity in the proceedings." (See, also, Tagg Bros. v. United States,280 U.S. 420, 443.)
An analogy is found in the right to judicial determination on habeas corpus of a claim of citizenship when one is held for deportation under the immigration laws of the United States (NgFung Ho v. White, 259 U.S. 276).
There would indeed be a very drastic limitation upon the constitutional powers of the Supreme Court of the State if it may not enjoin an unconstitutional deprivation of property because of an administrative determination of constitutional right supported by administrative findings of fact believed to be wrong upon a fair consideration of the record. The remedy by certiorari proceedings being thus limited is inadequate in the protection of constitutional right and, in view of the decisions of the Supreme Court of the United States, is lacking in due process. Under these circumstances the Supreme Court of New York as a constitutional court may entertain an action for an injunction, the statutory remedy by certiorari being inadequate.
We are constrained to conclude that the plaintiff is entitled to maintain this action and that the complaint states facts sufficient to constitute a cause of action.
In reaching this conclusion we are not unmindful of the arguments advanced on grounds of convenience, well stated by FOSTER, J., in the court below: "Obviously this is an important question in the field of public utility regulation. It is a simple *Page 383 
matter to allege confiscation in any rate matter, and if such an allegation is sufficient to invoke the jurisdiction of equity then the way is open for separate trials of the same issues in every rate case; first before the commission, and later at an Equity Term of the Supreme Court. Something rather extraordinary is required to justify a procedure so protracted and cumbersome." (270 App. Div. 55, 65.)
We find no compelling necessity for a trial de novo of every rate case in which confiscation is claimed. The illegality in such cases is confiscation or deprivation of property without due process of law. The legality of the rate must primarily depend upon the proceedings before the commission, and the record of those proceedings will of necessity be before the trial court since the statute authorizes determination in the first instance by the commission, and the courts may not properly consider the question without knowledge of the administrative record (Railroad Commission v. Oil Co., 310 U.S. 573; ManufacturersRy. Co. v. United States, 246 U.S. 457, 489-490). This appears to be the practice when injunction suits such as this are brought in the Federal courts. We see no reason for departing from that practice in the trial of this action. We need not now consider under what circumstances, if any, the court may be justified in receiving additional proofs or newly discovered evidence.
We find nothing inconsistent with such a practice in the oil and gas proration cases: Thompson v. Consolidated Gas Corp.
(300 U.S. 55), Railroad Commission v. Oil Co. (310 U.S. 573,supra), Railroad Commission v. Oil Co. (311 U.S. 570), or in the cases arising under the Federal Natural Gas Act: PowerComm. v. Pipeline Co. (315 U.S. 575), Power Comm. v. HopeGas Co. (320 U.S. 591).
The Power Commission cases (supra) arose upon petitions to review orders of the Federal Power Commission under subdivision (b) of section 19 of the Natural Gas Act (U.S. Code, tit. 15, § 717r, subd. [b]). In discussing the scope of review in these cases, Chief Justice STONE, writing for the court in PowerComm. v. Pipeline Co. (supra) said (p. 585): "By long standing usage in the field of rate regulation, the `lowest reasonable rate' is one which is not confiscatory in the constitutional sense. [Citations.] Assuming that there is a zone of reasonableness within which the Commission is free to fix a rate varying *Page 384 
in amount and higher than a confiscatory rate [citations], the Commission is also free under § 5 (a) to decrease any rate which is not the `lowest reasonable rate.' It follows that the Congressional standard prescribed by this statute coincides with that of the Constitution, and that the courts are without authority under the statute to set aside as too low any `reasonable rate' adopted by the Commission which is consistent with constitutional requirements." The opinion then proceeds to a full review of the facts upon which the commission made its determination leading to the conclusion that such determination was consistent with constitutional requirements. In the oil and gas proration cases (supra) the proceedings were by injunction in the Federal courts.
In none of these decisions was the right to try the issue of confiscation disputed. Indeed that was the judicial process pursued in each one of these cases. The opinions are helpful in showing the deference with which a court should consider the findings and conclusions of an expert administrative commission. No doubt a court of equity in this State will be largely influenced by the practice which prevails in the Federal courts.
Counsel for the commission have suggested that the case is of such compelling importance that if judicial review of the question of confiscation is a constitutional requirement, we should broaden the scope of review in certiorari proceedings so as to permit review of that question on the facts as well as the law. This of course we may not do in view of the established limitations on such proceedings to which we have referred. If such changes are desirable, the Legislature, but not the courts, should make them.
Order affirmed, with costs, and each of the questions certified answered in the affirmative.