Court Opinion

ID: 5401445
Source: CourtListenerOpinion
Date Created: 2022-01-08 10:43:42.616659+00
Date Added: 2024-06-11T08:30:27.165444
License: Public Domain

Bergan, J.
(dissenting). The opinion of Justice Halperk exposes the atmosphere of thin rationalization which underlies the Telephone Company’s argument that the words “ value of the property ’ ’ as used in the New York statute mean a 1 ‘ value ’ ’ which is to be reached by resort to reconstruction cost. Nowhere has it been better demonstrated than he has done here, that the word “ value ” standing alone did not mean in 1910 when the statute was enacted and does not now mean the term of weighted special implication which lawyers and economists attached to Smyth v. Ames (169 U. S. 466 [1898]) and which had acquired the technical name of ‘£ fair value ’ ’. These terms which have a similar sound, have a sharp dissimilarity in meaning, historically and legally, as his opinion shows in a clear logical sequence and I concur in it. I add some additional general observations which lead me to vote to confirm the order of the Public Service Commission.
The purpose that lies squarely at the bottom of the public regulation of a telephone rate in New York is to bring it about that££ All charges ” for service ££ shall be just and reasonable”. (Public Service Law, § 91.) Everything that implements this or affords a procedural means to implementation, as for example, the requirement of subdivision 1 of section 97, that due regard among other things be given to the value of the property used ought to be read with that legislative purpose held closely in view.
Precisely this same term —£ £ just and reasonable ’ ’ — also dominates the purpose of the Federal statute (Natural Gas Act, § 5; U. S. Code, tit. 15, § 717d), a reading of the words of which led to the constructions in 1942 (Power Comm. v. Pipeline Go., 315 U. S. 575) and in 1944 (Poiuer Comm. v. Hope Gas Co., 320 IT. S. 591) that abandoned the judicially imposed requirement that had lasted from the end of the nineteenth century, that in ascertaining ££ value ” of utility property for the purpose of rate making, weight must be given to £ 6 the present as compared with the original cost of construction ” (Smyth v. Ames, supra, p. 546).
A word used in a legislative procedural prescription for judicial or quasi-judicial action in the future is not some rigid and metallic point. It is, rather, a point of reference which may change, and will be expected by the Legislature to change in actual practice with the needs, conditions and viewpoints which call up its application. This would be so especially of an expression such as£ ‘ value of the property ’ ’, cast by the Legisla*39ture in subdivision 1 of section 97 of the Public Service Law, in a setting of unusually guarded words.
There is nothing about this to lead one to think that the Legislature meant to freeze forever into New York law one of the long list of elements which a Supreme Court opinion written over half a century ago by Mr. Justice Harlan set forth in support of the logic of the judgment that the court was then entering on constitutional grounds in Smyth v. Ames (169 U. S. 466, 546, 547, supra). The same court accorded no such immutability to the definitive words of 1898 when those very words were treated in 1944 as no longer an essential criterion, or even a workable basis, for modern rate making. (Power Comm. v. Hope Gas Co., supra.)
The standard of 1898 had, in the intervening years, undergone an usually rigorous assault by lawyers and economists alike who saw no sense to tying rate making to the shifting standards involved in attempting to ascertain what a theoretical new cost of the utility enterprise would be from time to time and working all this into rates to be paid by the consumer.
One of the chief critics of the rule of 1898 was Mr. Justice Brandéis. In the concurring opinion in Southwestern Tel. Co. v. Public Serv. Comm. (262 U. S. 276) in which Mr. Justice Holmes joined, he expressed the view that under the doctrine of Smyth v. Ames not only is effective judicial review often rendered impossible (p. 296) but that “ inherent in the rule itself, is arbitrary action, on the part of the rate regulating body ” (p. 297). He noted that even then [1923] State utility commissions while admitting evidence required by the rule “ failed, in ever-increasing numbers, to pay heed to it in fixing the rate base ’ ’ (p. 301).
Criticism of the rule appeared on a broad front. It was all bu4 universal. (See for example Hale, Fair Value Merry-go-Round, 33 Ill. L. Rev. 517; Henderson, Railway Valuation and the Courts, 33 Harv. L. Rev. 1031, 1051; 2 Bonbright on Valuation of Property [1st ed.], pp. 1094 et seq., pp. 1152, 1154; the dissenting opinion of Mr. Justice Stone in West v. Chesapeake & P. Tel. Co. [295 U. S. 662, 680]; the dissenting opinion of Mr. Justice Black in McCart v. Indianapolis Water Co. [302 U. S. 419, 423 et seq.]; and the concurring opinion of Black, Douglas, and Murphy, JJ., in Power Comm. v. Pipeline Co. [315 U. S. 575, 599 et seq. supra], where the Justices adverted to the “ havoc ” raised by the rule [p. 605].)
Even if the New York Legislature felt itself bound in a constitutional sense in 1910 when it used the term “ value of the *40property actually used in the public service ” to regard one component of “ value of the property ” as present cost because of the language of the Supreme Court’s opinion in 1898, it must be deemed to have done so with the reservation that if, after many years, the Supreme Court changed its notion of the essential criteria of value, the New York Public Service Commission would have the same freedom of construction of the word ‘ ‘ value ’ ’.
It ought to be kept in mind, however, that the Legislature did not enact the words of Mr. Justice Harlan literally into a New York statute. He had some other things to say about what he thought were “ matters of consideration ” which no one would say the New York Legislature meant to include in “ value of the property ” when it was used in our statute. He thought, for example, that the market value of the utility’s bonds and the market value of its stock should be reflected in the calculation of the rates to be charged the public (169 U. S. 466, 546, 547). He thought that the “ amount ” of its bonds should be reflected.
It can scarcely be thought that the Legislature took that literally and it did not enact literally a requirement addressed to the Public Service Commission that it must take more implicitly one of the other items on his list of criteria, that “ the present as compared with the original ” cost of construction must be considered. The Legislature, on the contrary, enacted a statute in general words addressed to “ value ” and left open in this respect the method of determining value to the commission. The constrictive definition is a court-made and not a legislative-made constriction and the court that made it has now flatly disavowed it.
It makes a hard case to say that if the Supreme Court itself was able to look at the constitutional requirement of “ value ” differently in the space of half a century, nevertheless the Public Service Commission will always be required to continue to look at the word only by the measure of an abandoned judicial standard. What “ value ” the property has was delegated by the Legislature wholly to the commission to determine and everything about the delegation of power suggests broad procedural freedom consistent with due process.
The definition of a word, even when the word finds its way into a statute, cannot be so solidly encased in meaning that it never changes. When people who use the word in private intercourse or apply it in public action come after a long time to look at it in a new way, its meaning, either in nuance or in emphasis, is different.
*41A present-day “ due ” regard for “ value of the property ” would suggest the usual meaning that people would give to it in 1955. They would not necessarily look at the thing the way they did in 1898; and the Legislature gave a sufficiently flexible context to the statutory words to admit of the change.
Even if this court might think that 1 ‘ value of the property actually used ” could be read only to include a consideration of the theoretical present cost of the plant, rather than what the Public Service Commission thinks it means, it is still not easily to be said that the commission’s view of meaning is so grossly wrong that its determination in this rate case has to be annulled. A reasonable difference in viewpoint on such a question of definition between the commission and the court would, of course, have to be resolved in favor of the commission under familiar principles of administrative review.
A recent survey of decisions of State regulatory commissions and of State courts since Power Comm. v. Hope Gas Co. indicates how impractical the rule of Smyth v. Ames was in administration, and how readily the opportunity to abandon its handicaps was seized upon by the States. (Rose, Hope Case and Public Utility Valuation, 54 Col. L. Rev. 188 [Feb. 1954]). Of forty-three States studied, nineteen have explicitly changed from fair value to original cost or prudent investment. Pour States had used this method before the Hope case and continue to use it; and eight use original cost as the measure of fair value. Nine continue to follow the older meaning of value. The ‘ ‘ disintegration of the fair value formula ” it is noted in the survey (p. 212) “ has been rapidly accelerated by the Hope decision ”.
An example of the judicial utilization of the Hope case by a State as a new exit to freedom from the restraint of the “ fair value theory ” long imposed by Smyth v. Ames, under a statute somewhat similar to the Natural Gas Act, is Utah Power & Light Co. v. Public Service Comm. (107 Utah 155 [1944]). The Utah statute authorized but did not require the commission to consider value of the property used in the public service to arrive at rates; but by long judicial and administrative construction the legislative mandate to the commission to fix “ just, reasonable or sufficient rates ” (Utah Code, 1943, § 76-4-4) had been held to require consideration of fair value under the necessities imposed by Smyth v. Ames. The Natural Gas Act on which the decision in the Hope case was based contained a somewhat similar power to determine ‘1 value ’ ’, although the rates were to be just and reasonable.
*42The Utah Supreme Court was of opinion that no legislative recasting of words thus construed and enacted by the Legislature with the requirements of Smyth v. Ames in mind was needed to permit the commission to abandon the policy of proof it had followed under compulsion. With the compulsion removed a new definitive freedom arose. We would be well advised in New York to follow the implications of this decision even though there exist those differences in statutory structure which have been noticed.
New York has no such compelling ties with the dead past as to accept willingly a crippling, and quite unnecessary, limitation on its freedom to regulate a telephone utility by fixing a fair and reasonable rate; nor has it any compulsion to be required by judicial construction to stand in the company of States which seem for the moment to continue to deem this limitation on public power necessary because of very narrow views of statutory construction or for other reasons.
The petitioner persistently treats the statutory words ‘ ‘ value of the property actually used ” as though these words have to mean, and could mean only, the present theoretical cost of acquiring and now putting together a new utility plant. No one, and particularly not the telephone company, has any thought of doing any such theoretical thing. The value the petitioner thus contends for in effect is not the value of property “ actually ” used, the cost of which is known because it was actually paid out, but the value of idealized property conceived in the web of hypothesis and bought in theory.
Of course the words “ value of the' property actually used ” have no such intrinsic meaning as used in this context; and no sensible man free to infer a meaning that common words would commonly carry with them would necessarily think they meant any such thing. The construction that “ value of the property actually used ” means present cost of putting a theoretical utility together was a construction employed by judges and lawyers; but it was employed by them under constraint.
It was a construction bent into place by the pressing force of Smyth v. Ames. Its artificiality and its hopeless ineptitude for the regulation of telephone rates ought not to survive when that force has been released. We certainly should not by sheer habit continue to pay blind homage to a dead constraint.
If one addresses oneself in turn to the realities which lie below this dispute about what words in the statute mean, it would seem awkward and unworkable to regulate the rates to be charged by a gigantic utility by a consideration of the ever-*43shifting level of what it would cost at any particular time to acquire and put together the property used in the public service.
This kind of value never stands still. Which of its gyrations would be reflected in the rates, and how deep the thrusts of rise and fall would be permitted to cut into the rates, would be so much a matter of judgment and degree, and so reflective of the imagery of hypothesis expounded on the witness stand, that public regulation could easily find itself held by no firm anchor.
It is said on the argument in this court that not all slight changes in value would be reflected in rates, but only those which are substantial; but, of course, with property of this magnitude it would not be hard to illumine any change in value as being substantial. There are, perhaps, “ plateaus ” of economic values in terms of dollars which will not ever be penetrated downward, and it is said that the clearly visible strata in these plateaus would be safe enough lines at which a regulatory commission would undertake to reflect new levels by authorizing new rates.
But the area of economic thinking to which these theories have a relevancy is not quite an exact science. The work of Keynes, a leading economic theorist of this century suggests through his active life constant shifting and recasting of economic views. (Of. Harrod on The Life of John Maynard Keynes [1951]). Much that he thought one year he put aside or treated differently in the next or succeeding years. The spot where the economy, in irreversible movement, reaches a plateau of value; as well as the theoretical cost of putting together a huge public utility at any given moment, are both matters of how a man thinks, and how he arranges and rearranges the materials of his experience to form his final judgments.
We are freed of Smyth v. Ames and we ought not impose a new judicial restraint on the New York Public Service Commission against its own view of the problem by creating an inescapable duty of integrating such vague elements into the telephone rate. The Legislature has given to the commission, and it has not given to the court, the responsibility to fix a rate that will be “ just and reasonable ”.
The orders should be affirmed.