Court Opinion

ID: 8197395
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:20:52.604781+00
Date Added: 2024-06-11T16:40:48.423903
License: Public Domain

Rosenberry, C. J.
(dissenting). I find myself unable to agree with the construction placed upon the statute by the court. It seems to me to confuse the statutory provisions relating to the issuance of securities with the law relating to the making of rates. Except as the two matters are drawn together by the opinion of the court, they seem to me to be distinct and unrelated. Inasmuch as the construction now placed upon the statute is conclusive, no useful purpose will be served by more discussion.
The following opinion was filed June 20, 1932 :
Fritz, J.
On the motion for a rehearing, argument was ordered. From the briefs and argument upon the rehearing it now appears probable that because of the existence of other material facts than those which are stated in the meager allegations of the pleadings, upon which alone the action was tried, without taking any other proof, the real controversy has not been fully tried. As stated in the former opinion, there were allegations in the answer (which for the purpose of the trial were assumed to be correct) that the rural rates, in the cases in which customers had made donations to finance line construction and extensions, ■'were established upon a basis which did not provide for a return to the utility upon the capital thus donated by customers; that the customers’ donation plan above outlined made it possible for the electric utility to establish a lower rate for rural electric service, which tended to promote the expansion of rural electrification to the. benefit of the utility and also of the public; that the rate schedule of the Luck *360Light & Power Company under which the customers’ donations under consideration were made was constructed upon the principles above set forth, and did not permit said Luck Light & Power Company to earn a return upon the amount of said customers’ donations.” Plaintiff now asserts, without challenge by the defendant, that as a matter of fact conditions have changed so as to extinguish all rights which the original donors may have had in the matter of rates by reason of such donations; and that the donors are now enjoying the general rates of the plaintiff, which are less than the rates they enjoyed prior to the purchase of the property by plaintiff, and less than they ever received by reason of any special arrangement with plaintiff’s predecessor as a result of their donations. If those changes have occurred, all of the rights to which the donors were entitled by reason of their donations may have been satisfied.
So far as the record discloses, defendant refused to permit the issuance of securities upon a basis which included assets acquired by customers’ donations simply because the rate schedule of the plaintiff’s predecessor did not permit such predecessor to earn a return upon the amount of such donations. Clearly, in determining the amount of securities that may be issued upon a public utility property, the question of the return which the utility may be permitted to earn upon its property cannot be ignored. That is one of the elements which sec. 184.09, Stats. 1929, contemplates shall be taken into consideration by the commission in determining the amount of securities that the utility company may be permitted to issue upon its property. Under the public policy of this state, as evidenced by its legislative enactments and recognized by this court in State ex rel. Central S. H. & P. Co. v. Gettle, 196 Wis. 1, 220 N. W. 201, the authority of a public utility to issue stocks and bonds is a mere privilege which is subject to such legislative regulations as are pre*361scribed in sec. 184.09, Stats. Rightly, the legislature has hot confined the factual basis, which the commission is to ascertain and consider in determining the .amount of the security issues, to merely the value of the assets to which the corporation technically has title. On the contrary, after expressly requiring the corporation to submit to the commission, in connection with other data, a verified statement which, among other specified matters, shall state its “previous financial operation and business,” sec. 184.09 (4), Stats., provides that the commission is to exercise its power to issue a certificate of authority to the corporation to issue securities only if it determines that (1) the financial condition, (2) the plan of operation, and (3) the proposed undertakings of the corporation are such as to afford reasonable protection^» purchasers of the securities to be issued. Manifestly, reasonable protection to prospective purchasers is to constitute an important consideration.
It seems that in the development of similar utilities prospective customers who desired utility service, but who resided beyond the normal zone supplied by the utility, would, in order to secure service, contribute substantial amounts to the utility to'defray the expense of extending the service to such customers. Such donations enabled the utility, as in the case at bar, to build the necessary lines and supply the necessary equipment to enable it to furnish to the donating customers the same service which it was furnishing to the public within the normal zone served by the utility. As long as that situation exists, it is apparent that the rates which the utility is permitted to charge should be influenced to some extent, at least, by the fact that the investment necessary to extend such extraterritorial service has been donated by those receiving the service. The extent of such influence,in point of amount and duration, .will depend upon the facts .and circumstances in each case. When the donors;,-,by their *362own contributions, put themselves upon a par, so far as the expense of extending the service was concerned, with those having a right to demand the service of the utility within its normal zone, they should not also be charged a rate which would yield to the utility a return upon the amount of their own donations. True, the title to the property resulting from these contributions vests in the utility, and the utility should be permitted to charge a rate sufficient to cover depreciation of the property and to compensate it for rendering the service. But upon no theory could it be permitted to charge a rate which would yield to it a return upon the investment made by the donating customers to place themselves in a position or relation where the utility could afford to extend its service to them. Where the location of these prospective customers was such as to require a ^special investment by them in order that they might receive the utility’s service, which special investment the utility was unwilling or unable to make, and where the utility was willing to extend its service if such special investment was made by the customers themselves, the utility has no right, as long as that situation continues to exist, to demand a return upon the investment which was thus made by its customers.
However, such conditions may be but temporary and transient. When a public utility of this character extends its original field of operations and service into the rural communities, so that they finally receive regular service in territory where they were theretofore served only by reason of special arrangements with donating customers, the situation is changed somewhat. Such special customers have then become a part of the general public which is served by the utility; and if the facilities by which the utility serves the general public have become all-sufficient to render to such special customers the same service as the utility is rendering, and at the same schedule of rates which the utility is charging, generally in that territory, or the same service that they ren*363dered to such special customers pursuant to the special arrangement, the original relation existing between such special customers and the utility may fade and disappear. Thereupon the reciprocal rights of the utility and the special customers, which existed solely because of the latter’s contributions, may terminate. As such special customers have then become part of the general public served by the utility, their right to its service at the same favorable rates as the general public no longer depends upon their special arrangement with the utility, but now exists by virtue of the fact that they are located within the field occupied "by the utility and are part of the public which the utility must serve. When the time has come that the rates of the utility to the general public within that field are as favorable to the general consumer as the rates to which the special customers were entitled by reason of their original donations and their special arrangement, then all benefits which they could claim by reason thereof have effectually and completely disappeared.
On the other hand, at all times since the acquisition of the property acquired by using the customers’ donations, the legal title thereto has been in the utility. It was completely under the dominion, control, and ownership of the com-’ pany. No one has had or now has any lien or incumbrance thereon, but the donating customers did have a special right in this property. Although that right was not in the nature of a lien or incumbrance, it was a right which the utility was compelled to recognize in the matter of fixing the rates charged those customers. The accounting rules lawfully promulgated by the commission required the public utility to carry on its books an account in which it credited all such customers’ donations; and it was also required to debit such donations to the proper fixed capital account on its books. In due compliance with those rules the Luck Light & Power Company had carried on its books an account entitled “Cus*364tomers’ Line Extension Donations,” showing a balance of $12,034.91, received in cash as such donations from prospective customers to finance the construction and installation of the branch-line extensions. The. rights-of the donors had been duly taken into consideration by plaintiff’s predecessor and the commission in fixing the utility’s charges to the donors. .Whatever burden the fact of those donations imposed upon the utility was as officially of record subject to public inspection, and within the constructive knowledge of the public or any purchaser, as if more formal documents in relation to that burden had been otherwise recorded. The plaintiff, as a public utility, was fully charged with knowledge as to such donations.
So in the case at bar, as long as that special right on the part of the donating customers continues to exist, the utility holds the title to the property acquired by virtue of such donations, subject to that special right. However, if in the course of time such special customers become consumers located within the normal zone, which the utility is legally required to serve at a uniform schedule of rates, then their special rights, arising by reason of their original contributions, become valueless. Their original contributions were for a special purpose., namely, the receipt of service up to the time that the utility should occupy the field and assume a position where it became legally bound to furnish service generally at a uniform schedule of rates to all consumers in that zone. With the termination of that special right on the part of the donors, the utility’s title to the property thus donated is no longer burdened with any such correlative rights or conditions. The utility as the owner thereof is then entitled to earn the same reasonable return upon the present fair value thereof as it is upon all other property owned by it which is actually used and useful in providing the service. McCardle v. Indianapolis Water Co. 272 U. S. 400, 47 Sup. Ct. 144; St. Louis & O’Fallon R. Co. v. U. S. *365279 U. S. 461, 49 Sup. Ct. 384; Waukesha Gas & E. Co. v. Railroad Comm. 181 Wis. 281, 194 N. W. 846; Pabst Corporation v. Railroad Comm. 199 Wis. 536, 227 N. W. 18; Milwaukee v. Railroad Comm. 206 Wis. 339, 240 N. W. 165. Consequently, when the utility has the present unin-cumbered title of property burdened with no condition in the nature of any right existing in any. other person, and the property is used and useful in áccomplishing the purpose of the utility, it is entitled to earn a return thereon; and this right is not affected by the fact that the property was donated to it, 'if all of the rights which may have originally attached by reason of such donations have been satisfied or terminated. If that has occurred in the case at bar, as is now asserted by plaintiff’s counsel, without contradiction, then the commission’s refusal to permit the issuance of securities to the full value of the utility’s assets, without any deduction because of the original donations, may have been improper.
In the absence of proof as to facts essential to ascertain the present condition and status of the correlative rights of the donors and the utility in the respects indicated above, we are unable to determine whether the commission’s .action was warranted by existing facts and conditions or was based Upon an erroneous view of the law. At all events it does appear that in, those respects the real .controversy has not been fully ■ tried. . It seems probable that in the otherwise commendable effort of counsel to abbreviate the record and the trial, the essential facts have not been presented, and that in the absence thereof .a miscarriage of- justice may have resulted. Under the circumstances, this court’s mandate will be modified as follows:
. By the Court. — Judgment reversed, with directions • to grant a new trial to decide the issues of fact suggested as being yet unsolved, and to then render judgment in accordance with this opinion.