Court Opinion

ID: 9418511
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:28:40.403098+00
Date Added: 2024-06-11T17:22:04.427233
License: Public Domain

Mr. Justice McKenna,
dissenting.
I am constrained to dissent on the authority of Missouri ex rel. Southwestern Bell Telephone Co. v. Public Service Commission, ante, 276; and Bluefield Water Works & Improvement Co. v. Public Service Commission, decided today, post, 679.
These two cases follow other cases which they cited, including that of Smyth v. Ames, decided a quarter of a century ago, declaring the rule of regulation to be, that in order to fix a rate for the use of property devoted to the public service, the property must be estimated “ at the time it is being used for the public.” And again, “ that the value of the property is to be determined as of the time when the inquiry is made regarding rates.”
*635The Commission in the present case conceded the rule, and violated it, and upon a unique justification. It said “ The human race is only recovering from an experience the like of which the world never before endured — a world war — a world upheaval — an economic cataclysm. .There are no stable measures of value today.” Upon this the Commission departed from the values which then prevailed, and from those that the rule of law prescribed, that is, the values prevailing at the time the property was being used for the public, and reverted to the values which obtained January 1, 1914, — values that had not existed for over seven years, and no prophecy could say when, if ever, they would exist again.1
To separate the Company from the conditions which existed at the time of regulation was arbitrary and condemned the Company to accept ,an inadequate return upon the value of its property, not only for the then time, but for an indefinite future time. Similar action was condemned in the Telephone Case — no “ economic cataclysm ” repelling. Similar action was condemned in the Bluefield Case — no “ economic cataclysm ” repelling.2 May I ask what had become of the cataclysm ” ? Had it settled in Georgia in conscious indulgence to life and *636business in other parts of the country from its bewildering influence?
The contrariety of decision cannot be reconciled. To anticipate a possible criticism, however, I should say a distinction is attempted to be made between this case and the Telephone Case, a distinction, I think, not sustained by the record. It is said that the present case is unlike the Telephone Case, in that, “ here the Commission gave careful consideration to the cost of reproduction; but it refused to adopt reproduction cost as the measure of value.” The omission was the Commission's error — it was in disregard of the rule of the cases, disregard of the value of the utility at the time of its regulation — the time it was being used by the public. And such value was available. The problem was direct and simple — with no baffling .element in it. It was only to find the reproduction cost of the utility, and this, necessarily, was constituted of the cost of its materials, and the cost of their fabrication, less an estimate of depreciation from the new. These costs and depreciations representing its value at the moment of time it was being regulated and being used by the public, such moment being the time prescribed by the law for the determination of its value — the determination of that upon which the rate for its use was to be based.
There was nothing obscure or puzzling about it. The cost of the materials and of their fabrication was as much a measure of the value of the utility when reproduced as the cost of materials and their fabrication were a measure of the value of the utility when it was produced — a measure of value of reproduction and production. A measure, it is true, of different degree which it was the duty of the Commission to regard, and because the Commission did not regard it, that is, because it did not consider the values at the time it was acting, its action was condemned. There are words in the *637Telephone Case that are pertinent here. Here, as there, a Commission undertook to value the property of a utility without according any weight to the greatly enhanced costs of material, labor, supplies, etc., over those prevailing at a prior time. And it may be said here, as it was said there, “ as a matter of common knowledge these increases were large.”
The error in this case being of like kind to that which was committed by the Commission in that case, it should be visited by the same treatment, that is, a reversal of its action.
It is supposed that this case and the Telephone Case cannot coexist as declarations of law, without explanartion. No attempt, however, is made to justify this case and the Bluefield Case. It seems to be taken for granted that they can coexist in the books in harmonious association. Can they?
For answer, it is worth one’s while to inquire what the Bluefield Case decides. It is said in the opinion that “ The record [in the case] clearly shows that the commission [whose action is reviewed] in arriving at its final figure did not accord proper, if any, weight to the greatly enhanced costs of construction in 1920 over those prevailing about 1915 and before the -yar, as established by un-contradicted evidence; and the! company’s detailed estimated cost of reproduction new, less depreciation, at 1920 prices, appears to have been,/wholly disregarded. This was erroneous.” Citing the Telephone Case as well as other cases.
From this error all of the other errors in the case followed and it, and they, constituted the mistake of the Supreme Court of West Virginia in sustaining the action of the Commission, and the ground of reversal of the Supreme Court.
The cases, this and the Bluefield Case, are identical in errors. In this case the values that existed at the time *638of regulation were wholly disregarded, and those of seven years before, those which existed in 1914, that is, before the war, were deliberately selected. This action was affirmed, as I have pointed out, by the District Court from whose decree this appeal was taken. The decree is affirmed, which is the affirmance of the action of the Commission.
In the Blue field Case the value of the utility at the time of regulation “ appears ”, according to the declaration of the Court, “ to have been wholly disregarded
The Supreme Court of West Virginia affirmed the action of the Commission. This Court in its opinion of today reverses that judgment, which is a reversal of the action of the Commission.
It will be observed the Commissions did exactly the same thing, and yet the action of one is affirmed, and the action of the other reversed. This contrariety of decision I cannot reconcile. There should be reversal of both or the affirmance of both if their identities are to be observed. I, therefore, must dissent from one or the other of the cases, and as the Bluefield Case has the support of the Telephone Case, I dissent from the present case, there being a majority against it, and those cases, besides, expressing my view of the law.
It may be said that if I get rid of the Commission’s action, I must take account of the District Court’s judgment of it upon an independent consideration of the record. I realize that the challenge has serious strength, but as the Court’s opinion is very long, I can only meet the challenge by what I consider the error of the opinion. The Court disregarded, as the Commission did, the rule of law that the value of the Company’s utility should be at the time it was being regulated, that is, at the time it was being used. The Court, however, did not entirely agree with the Commission. It said “in ascertaining the present value of physical properties, though correct *639rules were announced by the Commission, we do not think they were exactly followed.” And again, “ The Commission did not allow the appreciation claimed on the investment since 1914, nor did it deduct from the investments of 1919 and 1920 and 1921, which were nearly a million dollars their admitted reproduction loss, but it did allow the appreciation in market price of real estate.”
The last observation I do not pass upon as it has no consequential bearing on the question in the case. And I proceed to say that I have the impression that the Court’s decision on the Commission’s action was influenced by the Court’s constitutional views. The Court said that “A rate established as reasonable, whether by the company or by the Commission is not guaranteed by the Commission or by the public. Whether it will actually yield more or less than a fair return during its continuance is a risk of the business ” to which the company had devoted its property.
If this is an intimation that the Court was of the view that even if the action of the Commission resulted in a return to the utility of less than that which would be fair and reasonable it would not encounter the opposition of the Constitution, such view was error and, laboring under the error, I can understand that the Court was not anxiously concerned to investigate the grounds of the Commission’s action — not concerned with the “risk of the business.”
There are questions upon other elements of value upon which I do not consider it necessary to pass.
I think the order denying the preliminary injunction should be reversed.

 An expert witness of the Commission testified as follows: “I do not incline to the extreme high values of the war time period, but believe that when business does resume prices will again stabilize at figures considerably lower than the peak of 1920, but far above any pre-war level.”

 The lower federal courts have not felt the bewildering effect— impotent effect I might say — that the Commission discovered in the post-war conditions. St. Joseph Railway, etc., Co. v. Public Service Commission, 268 Fed. 267; Landon v. Court of Industrial Relations, 269 Fed. 433, 444; Potomac Electric Power Co. v. Public Utilities Commission, 276 Fed. 327; Public Service Ry. Co. v. Board of Public Utilities Commissioners, 276 Fed. 979. And a state court has been equally free from confusion. Petersburg Gas Co. v. Petersburg, 132 Va. 82.