Court Opinion

ID: 3482974
Source: CourtListenerOpinion
Date Created: 2016-07-05 21:06:34.27723+00
Date Added: 2024-06-11T13:50:02.839758
License: Public Domain

While agreeing with the conclusions of the court that the commission's method of determining the depreciation reserve was improper and that its order abolishing the second fare to Halethorpe was not unlawful, the writer believes the limitation *Page 609 
of the rate of return to 6.26 per centum was unlawful, and that the conclusions reached by the trial judge were substantially correct.
As was declared in The Railroad Commission Cases,116 U.S. 307, at page 331, "This power to regulate is not a power to destroy, and limitation is not the equivalent of confiscation. Under pretense of regulating fares and freights, the State cannot require a railroad corporation to carry persons or property without reward; neither can it do that which in law amounts to a taking of private property for public use without just compensation, or without due process of law." If a public utility is deprived by a rate regulation of the right to receive a fair return upon the fair value of its property used in the public service, its property is confiscated, and the regulation is void, whether enacted by a legislative assembly or imposed by a commission pursuant to delegated authority. The determination of the constitutionality of a rate "depends upon the valuation of the property, the income to be derived from the proposed rate, and the proportion between the two — pure matters of fact," as was said by Mr. Justice Holmes in Prentis v. Atlantic CoastLine, 211 U.S. 210, 228. To adjudicate the value of the property of a public utility or to determine its earning capacity, or the resultant return upon this value of a proposed rate, is essentially the exercise of a judicial function; and, for that reason, the statute provides for a review by the court in order that the owners of a utility be not deprived of their property without due process of law. Chicago, Mil.  St. P. Rwy. Co. v.Minnesota, 134 U.S. 418, 457; Reagan v. Farmers Loan  TrustCo., 154 U.S. 362; Ohio Valley Co. v. Ben Avon Borough,253 U.S. 287. And this constitutional right to a judicial hearing in rate-making cases embraces not merely questions of law but also questions of fact, which are generally controlling. Supra.
So, the statute provides for a judicial inquiry by an action at law "to vacate and set aside any such order on the ground *Page 610 
that the rate or rates, tolls, charges, schedules, joint rate or rates, fixed in such order is unlawful, or that any such regulation, practice, act or service fixed in such order isunreasonable." Code, art. 23, sec. 404. The mere provision for judicial review is sufficient to demonstrate that the findings of fact by the commission are not made conclusive; and the statute deals with the point and makes the "determination, requirement, direction or order of the commission complained of" only primafacie correct, by providing that "the burden of proof shall be upon the party adverse to such commission or seeking to set aside any determination, requirement, direction or order of said commission, to show by clear and satisfactory evidence that the determination, requirement, direction or order of the commission complained of is unreasonable or unlawful, as the case may be." Code, art. 23, sec. 408; Pub. Serv. Commn. v. Byron,153 Md. 464, 470, 471, 479, et seq.
These provisions of the statute impose upon the court the duty of weighing and adjudging the facts upon which the unlawfulness or unreasonableness of the commission's findings in the instant case depends, and therefore the court cannot accept as final any determination of fact involved in the present controversy, but only give it the prima facie presumption of correctness; so, where the court thus finds from the facts that the action of the commission was either unlawful or unreasonable, it is not only the province but the plain and imperative duty of the court so to decide.
It is held by the commission that the subsisting street railway service is a method of transportation whose maintenance is necessary in the public interest, carrying more passengers during the hours of peak load than ever before in its long history. The present system is, therefore, far from being moribund. So, whatever the risks of its urban business, none is greater than its operation under less than a fair rate of return and the uncertainty that this ruinous situation will be surely, timely, and adequately relieved. A failure to grant such relief invites disaster; and stinted relief *Page 611 
often simply delays a crisis which, when it arrives, will prove immediately disastrous to the owners of the utility and, in the end, to the interests of the public. The position of the utility is made graver, and the public will not ultimately be benefited, by the ruling in the pending case, since, in the opinion of the writer of this dissent, the weight of the evidence clearly and satisfactorily establishes that the Commission's limitation of the fair rate of return to 6.26 per centum of the value of its property is confiscatory, and so unlawful. Bluefield Co. v. Pub.Serv. Commn., 262 U.S. 679, 694-695.
Where the service rendered by the public utility is necessary, the owners of the utility are entitled to a return which will cover the expenses of operation and a fair return upon the property used. The right to compensation is fundamental. Since the property used represents capital invested, and since the continued existence of the utility depends upon the ability both to sustain its credit and to procure its capital requirements from time to time, a fair return on the property used means such a return as will induce capital to supply these financial demands. Capital is the most fluid and independent of commodities, and none is more subject to the law of competition; and the rate at which money is borrowed is the best index of the financial position and condition of the borrower. Under existing circumstances, the utility cannot find a market for preferred or common stock in order to obtain money for capital expenditures, and it has been compelled to procure funds through the issue of bonds and short-term notes. In the opinion of the court is found a table showing the cost to the utility of slightly over $18,000,000 of money, borrowed from July 1st, 1920, to March 1st, 1927, on bonds and securities. The average cost was 7.23 per centum. The lowest cost was 6.6 per centum for money borrowed in 1922 on bonds. The last loan was on March 1st, 1927, when $2,000,000 of three years 6 per centum gold notes were issued at a cost to the utility of 7.32 per centum. Without a sufficient supply of capital there can be no efficient nor economical administration of a municipal street railway system; and the onerous cost of these borrowings reflects the extent to which *Page 612 
the credit of the utility has been impaired by insufficiency of the revenues of the company and the uncertainty of its being allowed an increased rate of return on the value of the property which it employs for the public convenience. It would seem inevitable that a fair return on the property should be more than the cost of money obtained through the sale of bonds and other securities. McCardle v. Indianapolis Water Co., 272 U.S. 400, 419, 420. The clear and convincing testimony in this case is that a basic rate of 6.26 per centum is not a fair return upon the property used, nor sufficient to enable the utility to maintain its credit or to secure its necessary capital at a reasonable cost. This evidence cannot be denied its legal effect by comparing the fares and rates of return allowed to street railway utilities of other municipalities of similar size, where the local conditions and hazards are different and a park tax equivalent to one-half a cent for every fare is not added. Such evidence is entitled to some weight in considering the lawfulness of the rate of return in question, but it is obvious that its value is slight when so much depends upon the circumstances of every case and the nature and method of determining the rate base upon which the return is allowed.
It follows that this testimony cannot prevail over the clear and satisfactory evidence on the part of the utility that a rate of return of 6.26 per centum is not compensatory, and that the case should have been remanded to the commission to ascertain a rate which would not be confiscatory. Public Serv. Commn. v.North. Cent. Rwy. Co., 122 Md. 355, 389, 390.