Court Opinion

ID: 3804851
Source: CourtListenerOpinion
Date Created: 2016-07-06 07:45:51.837396+00
Date Added: 2024-06-11T07:37:57.302666
License: Public Domain

I dissent from the majority opinion, for the reason that said opinion ignores plain mandatory provisions of the Constitution.
This case presents two appeals: No. 24995, Lone Star Gas Company v. Corporation Commission, and No. 24996, Community Natural Gas Company v. Corporation Commission. These appeals arise from certain orders of the Corporation Commission in cause No. 10777. The proceedings originated before the Commission on November 28, 1930, by the filing of a petition by certain citizens of Walters, Okla., to cause the Corporation Commission to fix the burner-tip rate charges by the Community Natural Gas Company, the distributing company in said municipality of natural gas to consumers, and to require a reduction in said rates. Thereafter all, or practically all, the towns served by the Community Natural Gas Company intervened in said proceedings. After repeated hearings and after the taking of voluminous testimony, the Commission, on March 9, 1933, made extensive findings of fact, concluding with an order in substance providing two things: First, that from said date the Community Natural Gas Company pay to Lone Star Gas Company only 30 cents per M. cu. ft. instead of 40 cents per M. cu. ft. as the gate rate for gas distributed to its patrons within the state of Oklahoma; second, that the reduction of 10 cents per M. cu. ft. ordered as hereinabove set forth be passed on to the domestic consumers of Community Natural Gas Company, and that the Community Natural Gas Company reduce its burner-tip rate to its domestic consumers by 10 cents per M. cu. ft.
The Commission found that the Community Natural Gas Company, the Lone Star Gas Company, and the Lone Star Gas Corporation were allied companies, each independently organized, but each of the two former companies being owned almost exclusively and controlled by virtue of ownership of its voting stock by the holding company, the Lone Star Gas Corporation, a foreign corporation not authorized to do nor doing business within the state of Oklahoma. The Commission further found that the Lone Star Gas Company was a foreign corporation authorized to do business within this state and engaged in transporting gas interstate for distribution at the gates of various cities served by Community Natural Gas Company as local distributor of gas to consumers.
Elaborate findings of fact touching the value of Lone Star Gas Company, and a proper income for the invested capital of said company, were made by the Commission, whereby the Commission arrived at the conclusion that after reducing the gate rate for gas at the city gates from 40 cents per M. cu. ft. to 30 cents per M. cu. ft., the Lone *Page 302 
Star Gas Company would still have an income sufficient to yield a fair income on the fair and reasonable value of its invested capital. Accordingly the Commission made an order reducing the gate rate from 40 cents per M. cu. ft. to 30 cents per M. cu. ft. and directed that the Lone Star Gas Company place said rate into effect, and that the Community Natural Gas Company pay no more than the reduced rate so fixed.
Although much evidence was introduced relating to proper and fair valuation of the invested capital of Community Natural Gas Company, and to the operating expense and gross and net income thereof, the Commission made no finding of fact whatever as to the value of the invested capital, or rate of return of the Community Natural Gas Company but, without such finding of fact, ordered and directed that the Community Natural Gas Company forthwith put into effect a ten cents per M. cu. ft. reduction of its rates to domestic consumers for gas furnished by it.
The theory of the Commission is that by automatically reducing the cost of gas at the city gate by an order effective against the Lone Star Gas Company, thereby reducing the operating expense of the Community Natural Gas Company by ten cents per M. cu. ft., the order is not detrimental to the Community Natural Gas Company, in that it does not decrease its net operating income. In other words, the Commission's theory is: We have saved you (Community Natural Gas Company) ten cents per M. cu. ft. on the gas that you buy, thereby reducing your expense, and if we pass this saving on to the consumer, you will not be injuriously affected.
There would be merit in this theory of reduction of the rates of Community Natural Gas Company if the Commission had power, authority, and jurisdiction to order a reduction in the cost of gas at the gate to be paid by Community Natural Gas Company to the Lone Star Gas Company. But the Commission has no such power or authority. The Lone Star Gas Company is a foreign corporation engaged in interstate transportation of gas, and the sale, transportation, and delivery of natural gas by it to the Community Natural Gas Company constitutes interstate commerce, and the state is without power to prescribe rates or prices charged therefor. State Corporation Commission of Kansas v. Wichita Gas Company et al. (U.S.) 78 L.Ed. 500, 54 S.Ct. 321. This theory of the Commission being fallacious, the results sought to be attained by the order are ineffective, and the order predicated upon such results must find other support as to its foundation. The order of the Commission purporting to establish a gate rate for Community Natural Gas Company to be charged by Lone Star Gas Company was wholly beyond the jurisdiction of the Commission and is void.
We do not mean to say that the Commission is without power to inquire into the reasonableness of the sum paid as a gate rate in the establishment of a proper charge to the domestic consumers by the Community Natural Gas Company. It is disclosed that the companies are interrelated. The Commission has no power to prohibit the unification of the companies involved herein and no power to dissolve their relationship. It has no power of inspection or approval of the contracts between these companies. The powers of the Commission are to regulate, supervise, and control the public service companies, and their services or rates, but these powers do not extend to an invasion of the discretion vested in the corporate management. It does not include the power to approve or disapprove contracts heretofore, or hereafter to be, entered into between the various companies nor to the approval or veto of expenditures proposed.
The powers of the Commission, as respects the acts of public service companies, are limited to an investigation of its acts to determine whether or not they have a reasonable and fair effect upon the rights of the public and to take steps to avoid an unreasonable, unfair, or prejudicial effect upon the public rights. But when such contracts are put forward in a rate-making proceeding, the Commission may ascertain their effect upon the public rights and approve, modify, or reject such effect if found to be unreasonable, unfair, or prejudicial. The Commission may authorize a rate base for Community Natural Gas Company which would enable it to earn a reasonable return upon its invested capital, but the Commission may not go further and insist upon said company declaring dividends in keeping therewith. Such is exclusively within the discretion of corporate management. If such company sees fit to pay to a holding company unreasonable and unnecessary exactions for insignificant services in order to enable the holding company to pay a dividend to its stockholders, such would be no concern of the Commission. But if the Community Natural Gas Company should unwisely expend its income, and in a rate-making case exhibit its contractual relationships between it and the holding company as a justification *Page 303 
for a greater rate, the Commission may and should determine whether or not the payments so contracted to be made by the Community Natural Gas Company to the holding company were unreasonable or prejudicial to public rights. State Corporation Commission of Kansas v. Wichita Gas Company, supra; Springfield G.  E. Co. Case, 291 Ill. 209, 125 N.E. 891; Missouri ex rel. South western Bell Tele. Co. v. Public Service Comm., 262 U.S. 276, 67 L.Ed. 981, 43 S.Ct. 544; O. G.  E. Co. v. Oklahoma Natural Gas Co.,85 Okla. 25, 205 P. 768; Western Dist. Co. v. Public Service Commission,285 U.S. 119, 76 L.Ed. 655, 52 S.Ct. 283; Penn. Gas Co. v. Public Service Commission of New York, 252 U.S. 23, 64 L.Ed. 434, 40 S.Ct. 279.
The authority of the Commission to effectuate a reduction of rates by the method used by it being without foundation, we turn to the record in an attempt to justify the reduction on the theory herein set forth as being within the power and authority of the Commission. But at the very outset we are confronted by the lack of findings of fact by the Commission in its order as to the value of the invested capital of the Community Natural Gas Company; of the rate of return which it has heretofore been paying thereon. We find our pathway barred by the provisions of section 22, article 9, of the Constitution, which has heretofore been considered by this court.
In Pioneer Telephone  Telegraph Co. v. Westenhaver, et al.,23 Okla. 226, 99 P. 1019, this court said:
"Section 22 of article 9 of the Constitution (section 234, Bunn's Ed.) provides that on appeal from the Commission to this court the chairman of the Commission under his seal shall certify to this court all the facts upon which the action appealed from was based and which may be essential to a proper decision on appeal, together with such of the evidence introduced before or considered by the Commission as may be selected, specified, and required to be certified by any party in interest, as well as such other evidence introduced or considered as the Commission may deem proper to certify. All the evidence introduced at the hearing before the Commission has been certified to this court by it, but we do not think that the requirements of this section of the Constitution are complied with by certifying alone all the evidence introduced before the Commission. To so hold would clearly result in giving no meaning to that portion of the section which states that the chairman of the Commission shall certify under seal all the facts upon which the order appealed from is based. It is true that neither this section nor any other section of the Constitution in specific language states that the Commission shall make a finding of facts, but this to our mind is clearly contemplated by the language of this section, requiring the Commission to certify all the facts upon which its order is based; for how could the Commission certify the facts without first finding them? This court with all the evidence in the record now before it might proceed to find the facts, and then, applying the law to facts found, determine whether the order of the Commission is reasonable and just, but this is not the procedure contemplated by the provisions of the Constitution. The finding of fact by the Commission is not conclusive upon this court, but it is highly persuasive. If the facts found by the Commission were set out in the record in this case, there might be no difference between counsel as to the facts, and their contentions be reduced to questions of law.
"In order to pass upon the questions presented to this court by this appeal, it is necessary to know the value of the property employed by appellant in its exchange at Enid, the expense of operating said exchange, the amount of expenditures required to keep it in repair, and the depreciation, if any, in the property of the company, and the income or probable income which the company will receive from the rates fixed by the Commission. These facts may have been found by the Commission before making the order appealed from, but they do not appear in the record, and they are necessary to the consideration by this court of the questions involved in the appeal. The same section of the Constitution above referred to provides that the order of the Commission appealed from shall be regarded as prima facie just, reasonable, and correct, but the court may, when it deems it necessary in the interest of justice, remand to the Commission any case pending on appeal, and require the same to be further investigated by the Commission and exported upon to the court before the appeal is finally decided. If the Commission made no finding of facts upon which it based its order, it should have done so; and if it did make such finding of facts, the same should be before this court to aid and advise it in its consideration of the case on appeal."
In Muskogee Gas  Electric Co. v. State et al., 81 Okla. 176, 186 P. 730, this court reversed a temporary rate order made by the Corporation Commission because the Commission had failed to make findings of fact upon which such order was based. In this connection the court said:
"But an examination of the record fails to disclose the facts upon which the order is made, and the court is therefore without a basis to determine the weight of the *Page 304 
evidence. The requirement of section 22, article 9, Constitution, that the Commission certify on appeal all the facts upon which the order appealed from was based, and which may be essential for the proper decision of the appeal, as well as a written statement of the reasons upon which the action appealed from was based, is not fulfilled by certifying the evidence and an order which states merely the conclusions reached by the Commission. A., T.  S. F. Ry. Co. v. Love, 23 Okla. 192,99 P. 1081; K. C. S. Ry. Co. v. Love, 23 Okla. 224, 100 P. 22; Pioneer T.  T. Co. v. Westenhaver et al., 23 Okla. 226, 99 P. 1019; Midland Val. R. Co. et al. v. State, 24 Okla. 817, 104 P. 1086; A., T.  S. F. Ry. Co. et al. v. State, 47 Okla. 645, 150 P. 108."
In the case of Atchison, T.  S. F. Ry. Co. et al. v. State,47 Okla. 645, 150 P. 108, it is said:
"But this cause must be remanded. This for the reason that, while the evidence before the Commission is before us, there is no finding of facts upon which the order appealed from is based certified to us, as required by article 9, section 22, of the Constitution. This being the state of the record, the cause is remanded to the Commission, with directions to take additional evidence should the Commission see fit so to do, and to find the facts upon which the order is based and certify the same to this court. * * *"
In the recent case of Florida v. United States, 282 U.S. 194, 75 L.Ed. 291, 51 S.Ct. 119, Mr. Chief Justice Hughes, in announcing the opinion of the court, used the following language:
"The Commission made no findings as to the revenue which has been derived by the carrier from the traffic in question, or which could reasonably be expected under the increased rates, or that the alteration of the intrastate rates, would produce, or was likely to produce, additional income necessary to prevent an undue burden upon the carrier's interstate revenues and to maintain an adequate transportation service.
"The question is not merely one of the absence of elaboration or of a suitably complete statement of the grounds of the Commission's determination, to the importance of which this court has recently adverted (Beaumont, S. L.  W. R. Co. v. United States, decided November 24, 1930, 282 U.S. 74, ante, 221, 51 S.Ct. 1), but of the lack of the basic or essential findings required to support the Commission's order. In the absence of such findings, we are not called upon to examine the evidence in order to resolve opposing contentions as to what it shows or to spell out and state such conclusions of fact as it may permit. The Commission is the fact-finding body, and the court examines the evidence not to make findings for the Commission, but to ascertain whether its findings are properly supported." (75 L.Ed. p. 304.)
In the case of Oklahoma City v. Corporation Commission, 80 Okla. 194,195 P. 498, it is said:
"The first essential in fixing rates is to determine the value of the property, and then determine whether the rate is reasonable. The commissioners are permitted to take into consideration the depreciation, repairing, and numerous other items in determining what is fair and reasonable in fixing a rate, but it is always essential that the value of the property be determined. As to the value of the property, the finding of the Commission is as follows: The Commission is not at this time prepared to express an opinion as to the fair, reasonable value of the property now used and useful in serving the patrons of the Oklahoma Natural Gas Co.' If this is a rate, the Commission failed to find the value of the property, which is absolutely essential and necessary before the Commission can fix a rate."
In the case of Tulsa Tribune Co. v. Oklahoma Natural Gas Co.,126 Okla. 280, 261 P. 213, it is said:
"Under section 22, article 9, of the Constitution: * * * The action of the Commission appealed from shall be regarded as prima facie just, reasonable, and correct.' See A., T.  S. F. Ry. Co. v. Miller,28 Okla. 109, 114 P. 1104; A., T.  S. F. Ry. Co. v. State, 28 Okla. 476,114 P. 721.
"We are of the opinion that, inasmuch as the Corporation Commission was in progress of a trial involving the value of the property used and useful in supplying gas to the city of Tulsa, together with other cities and towns, and in the absence of evidence that the respondent company was earning more than that allotted to it as a fair return on its valuation, the Commission was without authority to make a temporary rate in advance of a determination of the value of the property used."
See, also, Southwestern Cotton Oil Co. v. Farmers' Union Co-op. Gin Co., 165 Okla. 31, 24 P.2d 658.
Section 18 of article 9 of the Constitution provides in part:
"Before the Commission shall prescribe or fix any rate, charge, or classification of traffic, and before it shall make any order, rule, regulation, or requirement directed against any one or more companies by name, the company or companies to be affected by such rates, charge, classification, order, rule, regulation, or requirement shall first be given by the Commission, at least ten days' notice of the time and place when and where the contemplated action in the premises *Page 305 
will be considered and disposed of, and shall be afforded a reasonable opportunity to introduce evidence to be heard thereon, to the end that justice may be done, and shall have process to enforce the attendance of witnesses."
We have called attention to some of the above cases for the reason that it is contended that the order under consideration herein is, as recited in the order, only temporary, and the Commission recited in its order that it did not have the necessary facts before it to make a permanent order. Justification of the order is sought for this alleged reason. Whether the order is temporary or permanent in character, we deem it unnecessary to determine. We can perceive no reason why, as the basis of an order, even of a temporary character, the Commission should not make, as provided by the Constitution, findings of fact and reasons for the order so made. Such findings of fact, and the order of the Commission, will, by virtue of the Constitution, be regarded by this court as prima facie just, reasonable, and correct. Such findings are necessary to enable this court to weigh the evidence, and to determine whether or not said findings are contrary to the weight of the evidence, or whether or not said findings are supported by any evidence. The provisions of the Constitution have been given effect by this court in its uniform holdings since statehood. The findings of fact in this case are elaborate as to the Lone Star Gas Company, as to which the Commission had no jurisdiction. There are no findings as to the Community Natural Gas Company as required by the Constitution, and even though this order be treated as temporary, the Constitution, as many times construed by this court, requires the Commission to predicate such order upon findings of fact which, when taken as prima facie just, reasonable, and correct, will support said order.
In the case of Chicago, R. I.  P. Ry. Co. v. State, 117 Okla. 175,245 P. 656, this court held:
"The prima facie presumption of the reasonableness, justness, and correctness of an order of the Corporation Commission, obtaining by reason of section 22, art. 9, of the Constitution, applies only to the facts found by the Commission, or established by evidence upon which the Commission failed to make a finding; and where a fact material to the reasonableness, justness, and correctness of an order is lacking in the finding of facts made by the Commission and is not supplied by the evidence, the presumption obtaining by reason of said section does not apply, and on review in this court such order cannot be sustained.' St. L.  S. F. Ry. Co. v. Newell et al., 25 Okla. 502, 106 P. 818; C., R. I. P. Ry. Co. et al. v. State et al., 10324 L.R.A. (N. S.) 393; A., T. 
S. F. Ry. Co. v. State, 23 Okla. 210, 100 P. 11, 21 L.R.A. (N. S.) 908; A., T.  S. F. Ry. Co. v. State et al., 23 Okla. 510, 101 P. 262; Okla. Natural Gas Co. v. Corporation Commission, 90 Okla. 84, 216 P. 917."
In Interstate Commerce Commission v. Louisville  Nashville Ry. Co.,227 U.S. 88, 57 L.Ed. 431, 33 S.Ct. 185, the government contended that because the law attached validity, prima facie, to the orders of the Interstate Commerce Commission, the failure of said Commission to specifically find facts in support of its conclusions could not render void its order. In answering that argument the court said:
"But the statute gave the right to a full hearing, and that conferred the privilege of introducing testimony, and at the same time imposed the duty of deciding in accordance with the facts proved. A finding without evidence is arbitrary and baseless. And if the government's contention is correct, it would mean that the Commission had a power possessed by no other officer, administrative body, or tribunal under our government. It would mean that, where rights depended upon facts, the Commission could disregard all rules of evidence, and capriciously make findings by administrative fiat. Such authority, however, beneficently exercised in one case could be injuriously exerted in another, is inconsistent with rational justice, and comes under the Constitution's condemnation of all arbitrary exercise of power."
It would be a vain thing for the Constitution to provide that a respondent company, before the Commission can prescribe or fix a rate, shall be afforded a reasonable opportunity to introduce evidence and to be heard thereon, to the end that justice may be done, and then to permit the Commission, after a proceeding had been in progress for four years and thousands of pages of testimony had been adduced, with no further hearing scheduled to take place therein within any definite and reasonable time, to enter a temporary order which might be as disastrous to the respondent company as a permanent order might be. In this connection we desire to call the attention of the Commission to the language used by the Supreme Court of the United States in the case of Prendergast v. New York Tele. Co., 67 L.Ed. 853, 43 S.Ct. 466, as follows:
"Nor did the fact that the orders of the *Page 306 
Commission merely prescribed temporary rates, to be effective until its final determination, deprive the company of its right to relief at the hands of the court. The orders required the new reduced rates to be put into effect on a given date. They were final legislative acts as to the period during which they should remain in effect pending the final determination; and if the rates prescribed were confiscatory, the company would be deprived of a reasonable return upon its property during such period, without remedy, unless their enforcement should be enjoined. Upon a showing that such reduced rates were confiscatory, the company was entitled to have their enforcement enjoined pending the continuance and completion of the rate-making process. Cumberland Telep.  Teleg. Co. v. Louisiana Pub. Service Commission, supra. And see, by analogy, Oklahoma Natural Gas Co. v. Russell, supra; and Love v. Atchison, T.  S. F. Ry. Co., 107 C.C.A. 403, 185 F. 321, 326, affirming 174 F. 59, and 177 F. 493. If the Commission, however, had fixed an early date for the final hearing, this might have been taken into consideration by the court as an element affecting the exercise of its discretion in the matter of granting an interlocutory injunction. Cumberland Telep.  Teleg. Co. v. Louisiana Pub. Service Commission, supra, p. 217. But, in the present case, the Commission was still continuing indefinitely its general investigation, and had not fixed any date for the final hearing."
In the case of Love v. Atchison, T.  S. F. Ry. Co., 185 F. 321 (certiorari denied) 220 U.S. 618, it is said:
"It is as clearly a violation of the Constitution, and one as promptly remediable in the national courts, to take the property of a railroad company without just compensation by the enforced operation of tentative rates during the process of their making as by the operation of final rates after that process is complete. Railroad companies that have been, are, or will be deprived of parts of their property devoted to the public use of transportation without just compensation during the continuance of the rate-making process by provisions of a state Constitution, or of a state law, or by orders of a state commission, prescribing tentative rates and putting them in effect during the rate-making process under severe penalties, may maintain suits for and obtain relief by injunction during the continuance of the rate-making process to the same extent that they may after the process is completed."
See, also, Indiana Gen. Serv. Co. v. McCardle, 1 F. Supp. 113, and Rockland Light  Power Co. v. Maltbie, P. U. R. 1933E, 113.
The voluminous record in this case, consisting of more than 5,000 pages, fully justifies the wisdom of the provisions of the Constitution requiring findings of fact by the fact-finding body — the Commission — to the end that this court will not be required to search out the basic facts in determining the propriety of the Commission's order.
Voluminous briefs have been filed herein by the appellants and on behalf of the Commission. In appellant's brief it is said:
"In its brief the Commission wholly fails to touch upon any of the facts which were developed in this case in respect to the Community Natural Gas Company's property values, the amounts available for depreciation, federal taxes, and return thereon, or what would constitute a fair and reasonable return to it. Indeed, it is by evading these essential facts that the Commission hopes to have its order reducing the rates charged by the Community Natural Gas Company to its domestic consumers affirmed. We submit that the Commission cannot face the facts in this case and at the same time show any justification whatsoever for its action in reducing the burner-tip rates of the Community. In our original brief we pointed out that the Commission's engineers and accountants made an exhaustive investigation of the properties of the Community and the amounts which it had available for depreciation, federal taxes, and return. A lengthy hearing was held, and all of the facts which it was necessary for the Commission to have before it in order to determine what would be a proper rate to be charged by the Community for domestic gas in the various towns in which it operates within the state of Oklahoma are in the record. Under these facts the Commission could find no justification for a reduction in the burner-tip rates of the Community even though it reduced the Lone Star's gate rate charge to 30 cents per thousand cubic feet, and it is for this reason that the Commission has steadfastly refused to make any findings of fact in reference to the property value and earnings of the Community. * * *
"Why does the Commission try to mislead this court into believing that the operating expenses of the Community were excessive when its own auditor, Paul Reed, testified that the operating expenses were normal; that the leakage in the plants was below the average and that the properties were well maintained and efficiently operated? The Commission was not bound by the company's original investment in the property because it employed engineers to determine the reproduction. cost new of such properties; but the Commission was not disposed to be bound by any of the evidence because, as we have pointed out in the schedules appearing at pages 517 to 544 of *Page 307 
our original brief, the Community under the undisputed evidence would earn less than 5 per cent. for return on its property value as determined upon a reproduction cost new basis after an allowance of only 3 per cent. for depreciation and amortization. Such a return would be not only unfair and unreasonable, but confiscatory."
The cause should be remanded to the Corporation Commission, with directions to make findings of fact as the basis for said order and the reasons for the making thereof, either under the evidence already adduced or under such additional evidence as may be, upon proper notice and hearing, introduced by the parties, such additional evidence to be certified to this court as provided by the Constitution.