Court Opinion

ID: 8657043
Source: CourtListenerOpinion
Date Created: 2022-11-24 21:17:01.106099+00
Date Added: 2024-06-11T16:56:46.607903
License: Public Domain

FRICK, J.
The plaintiff above named has applied to this court for a writ pursuant to the provisions of what is known as the Public Utilities Act, now found in Comp. Laws Utah 1917, and constituting sections 4775-4853, inclusive, to review certain findings, orders and proceedings of the Public Utilities Commission of this state. In addition to this application 17 other applications were filed, all of which, including this one, were heard and submitted to this court at the same time. "While all of the applications, to a large extent, involve the same *171questions, and while the several applicants have on some phases presented the same arguments, yet in practically every application there are also some minor questions that are not common to all, and as to those separate arguments are presented. The principal or controlling question, which involves the construction of certain provisions of the Public Utilities Act of this state, is, however, involved in all of the applications. The applications will therefore be considered collectively except where the questions differentiate.
The plaintiff herein, hereinafter for convenience called smelting company, for a long time has owned and operated, and now owns and operates, a smelting plant in Salt Lake county. The Utah Power & Light Company, hereinafter designated power company, for some years has been, and now is, engaged in the business of generating and distributing to the public generally and to private corporations electric energy used for power and lighting purposes. The Public Utilities Commission, hereinafter called commission, is made a party to this proceeding merely because its findings, orders, and proceedings are assailed and are asked to be reviewed as will hereinafter appear.
The facts involved in this application, briefly stated, are as follows:
On June 2, 1915, the smelting company and the power company entered into a written contract wherein the latter contracted to supply the former, at a fixed rate or price, with all of the electrical energy by it required to operate its smelting plant for a stipulated term of years, which term has not' yet expired. The electrical energy, for which the smelting company paid the rate agreed upon, was regularly supplied pursuant to the provisions of the contract entered into between the parties until the commission, made the order which is complained of in this proceeding and to which we shall refer later. On March 8, 1917, and after the contract before referred to was entered into between the smelting company and the power company, the Legislature of this state passed the Public Utilities Act, hereinafter referred to, merely as act or the act, creating the commission and conferring upon *172it tlie powers and duties provided in said act. After the commission had been created and organized, the power company, as provided in the act, filed with the commission certain schedules of rates and charges for supplying electrical energy, including the terms and conditions upon which the power company would supply power and light to the public. The power company also filed with the commission the contract entered into between the smelting company and the power company, and also the contracts the power company had theretofore entered into with other users of its electrical energy for power and other purposes. In September, 1919, pursuant to the act, the commission made an order in which it was stated that the rates fixed in the contracts filed with the commission as aforesaid were not in harmony with the general rates charged by the power company, and that such rates were preferential and discriminatory and in violation of the provisions of the act. The commission also made an order requiring all of the users of electrical energy under the contracts aforesaid to appear before the commission and show cause why the rates fixed in those contracts should not be held to be discriminatory and in contravention of the provisions of the act. Pursuant to that order a protracted hearing was had before the commission, at which the power company, upon the one hand, and all the other holders of contracts, upon the other, and perhaps others, produced a large mass of expert and other evidence in support of their respective contentions. After the hearing terminated the commission made its findings and conclusions as required by the act, which findings and conclusions, together with the record of the proceedings, have been certified to this court by the commission for review. It must suffice to state- that the gist of the findings and conclusions of the commission is that the rates and charges for electrical energy as fixed in the contracts before referred to are discriminatory and in violation of the provisions of the act. The commission also made the following order:
“That the contracts under which the following consumers have hitherto received service he, and the same are hereby, modified to the extent that the rates, rules, and regulations prescribed in the *173standard sciiedules of the power company now on file with the commission he, and they are hereby, applied to the service rendered to or for the said consumers, in lieu of the rates, rules, and regulations provided in the said contracts.”
Tlie rates referred to in tbe foregoing order, and which are ordered tentatively to supersede tbe contract rates, are considerably higher than were the contract rates.
One of the principal reasons urged why the foregoing order of the commission should not prevail is that the commission has exceeded its power or jurisdiction in making said order for the reason that the contract of the smelting company, as well as the contracts of the other applicants to which ieference has been made herein, are excepted from the act. The provision upon which the smelting company specially relies is found in Comp. Laws Utah 1917, § 4787. It is there provided as follows:
“Notbing in tbis title [act] contained shall be construed to prohibit” common carriers from granting certain free services to tbeir employés, etc.
The clause specially relied on then follows, and is in the words following:
“Nor to prevent tbe carrying out of contracts for free or reduced rate passenger transportation or other public utility service heretofore made founded upon adequate consideration and lawful when made.” (Italics ours.)
In view of the foregoing provisions counsel for the smelting company, as we understand them, contend: (1) That inasmuch as the contract between the smelting company and the power company was entered into before the act was passed, and in view that the contract is “founded upon an adequate consideration and [was] lawful when made,” therefore said contract is excepted from the act, and the commission has no power over it; and (2) that in any event the commission would have no authority to interfere with the rights stipulated in the contract, since doing so would result in impairing the obligation of contracts, which is prohibited by our Constitution.
The commission, upon the evidence, found that the contract was not based upon an adequate consideration as contemplated by the act. Upon that subject the decision of the commission is as follows:
*174“The term ‘adequate’ as used in the exception clause would seem to imply a separate and additional consideration than the stipulated price to he paid for the service or commodity. It appears to the commission that, in the absence of a showing that as part of the contract price paid for the service there was actually passed from the consumer something of value to the power company in the giving of service to the public, there was no such special consideration as would make the reduced contract rate non-discriminatory. Something of value must he shown to have moved from the beneficiary of the reduced rate or free service to the utility rendering such service. In that event the company would have received something for which it should properly be charged. And, if the showing was that such thing of value actually did pass, the commission would then have to determine the amount of such value and apply it along with the rate fixed in the contract, and thereby ascertain whether or not the thing of value passed from the consumer to the power company justified in the whole or in part the reduced rate named in the contract.”
The commission also held:
“That it has jurisdiction over rates, charges, facilities, and conditions of service in existing contracts under consideration in these proceedings and has authority to modify or change the same.
“After a full consideration of all material facts that may or do have any bearing upon these contracts, the commission finds that the contracts under which service is being given to the following consumers do not carry such special consideration as will entitle them to the service at other than standard schedule rates open to the public generally, as evidenced by the schedules of the power company on file with the commission: [Here follows a long list of companies, including the smelting company.]
“The standard schedules now on file with the commission applicable to each of the power users hereinbefore in this paragraph mentioned should be applied to the service rendered to said consumers in lieu of the rates and charges in effect under special contracts, service under said standard schedules to commence upon the effective date of this order, and to continue until changed by further order of the commission.”
One of the questions that must be determined by this court, therefore, is what is meant by, or what is included in, the term “adequate consideration” as that term is used in the act.
Before entering upon a discussion of that question, it will be convenient for us to here refer to some of the provisions of the act.
*175Section 4788 reads as follows:
“Except as in this section otherwise provided, no public utility shall charge, demand, collect, or receive a greater or less or different compensation for any product or commodity furnished or to he furnished, or for any service rendered or to be rendered, than the rates, tolls, rentals, and charges applicable to such products or commodity or service as specified in its schedules on file and in effect at the time, nor shall any such public utility refund or remit, directly or indirectly, in any manner or by any device, any portion of the rates, tolls, rentals, and charges so specified, nor extend to any corporation or person any form of contract or agreement, or any rule or regulation, or any facility or privilege except such as are regularly and uniformly extended to all corporations and persons; provided, that the commission may by rule or order establish such exceptions from the operation of this prohibition as it may consider just and reasonable as to each public utility.”
Section 4789 provides:
"No public utility shall, as to rates, charges, service, facilities, or in any other respect, make or grant any preference or advantage to any corporation or person, or subject any corporation or person to any prejudice or disadvantage. No public utility shall establish or maintain any unreasonable difference as to rates, charges, service, facilities, or in any other respect, either as between localities or as between classes of service. The commission shall have the power to determine any question of fact arising under this section.”
Section 4798 is as follows:
“The commission is hereby vested with power and jurisdiction to supervise and regulate every public utility in this state, as defined in this title, and to supervise all of the business of every such public utility in this state, and to do all things, whether herein specifically designated, or in addition thereto, which are necessary or convenient in the exercise of such power and jurisdiction.”
Tbe various provisions of tbe act bave been considered by this court in tbe cases of Salt Lake City v. Utah L. & Tr. Go., 52 Utab, 210, 173 Pae. 556, 3 A. L. R. 715, P. U. R. 1918F, 377; Union Portland Cement Go. v. Public Utilities Comm., 56 Utab 175, 189 Pac. 593, and Murray City v. Utah L. & Tr. Co., 56 Utab 437, 191 Pac. 421, to wbicb cases we refer for a more detailed statement of tbe provisions of the act.
Proceeding now to a consideration of wbat contraéis are excepted from tbe act, we are forced to tbe conclusion that *176not all existing contracts were intended to be excepted, but only those which, were "founded upon an adequate consideration.” To determine just what is meant by that phrase is not entirely free from difficulty.
The act is a very comprehensive one, and, in adopting it, it was the evident purpose and intention of the Legislature to prevent, so far as possible, all preferences and discrim-inations by public utilities in their, rates and charges for public service. In connection with that purpose it is also manifest that it was intended to prevent, so far as that could be done, injustice where contracts had been entered into before the pássage of the act in which the rates and charges agreed upon were based upon such a consideration as would work an injustice if the rates were increased without in some way making proper allowances for the consideration upon which the rates agreed upon in the contract were based.
We find no difficulty in arriving at the foregoing conclusion; nor, as we understand counsel’s arguments, is there much diversity of opinion with regard to the correctness of the foregoing propositions. There is great diversity of opinion, however, with respect to what constitutes an adequate consideration within the purview of the act. It is strenuously insisted by counsel for the smelting company that by the phrase "adequate consideration” is. meant such consideration as by text-writers and courts of equity, in equity proceedings, has always ben considered adequate when the question of adequacy of consideration was invoked in such proceedings. In other words, it is contended that the term "adequate consideration,” as. used in the act, must be construed to mean what that term has always been held to mean in the enforcement of contracts. While there is much force to the contention, yet, in view of all the facts, and circumstances, it is far from being conclusive. As before pointed out, the act is intended to accomplish certain specific purposes, therefore all of its provisions, so far as consistent with the rules, of construction, must be construed and applied in harmony with and in furtherance of those purposes. It is a well-recognized rule of interpretation that where there *177is doubt respecting tbe true meaning of certain words then “the words should be read in the' light of the conditions and necessities which they are intended to meet and the objects sought to be attained thereby.” Brummitt v. Waterworks Co., 33 Utah, 312, 93 Pac. 837, 14 L. R. A. (N. S.) 619, 126 Am. St. Rep. 828. There is also another 1,2 cardinal rule of interpretation to which courts in particular cases must have recourse Avhieh, by the author of Sutherland, Statutory Construction, in section 279, is stated thus:
“Tile sense in which, general words, or any words, are intended to be used, 'furnishes the rule of interpretation, and this is to be collected from the context; and a narrower or more extended meaning will be given, according to the intention thus indicated.”
For a proper application of the foregoing rule see Blaster & Mfg. Co. v. Juab County, 33 Utah, 114, 93 Pac. 53, 14 L. R. A. (N. S.) 1043. Moreover, where, as here, the question affects public interest and where the subject-matter of the contract in question comes squarely within the sphere of governmental functions, the foregoing rules of interpretation should, if necessary, be given full force and effect. Keeping in mind, therefore, that public interests as contra-distinguished from merely private interests are sought to be protected, and that the dominating purpose of the act is to prevent preferences and discriminations respecting the rates charged or received by public utilities for services rendered ■or received, we think that the term “adequate consideration,” as used in the act, must receive a broader meaning than would ordinarly be given to it in cases where merely rights as between parties to a private contract were in question. Under the circumstances just stated, the rule that " would ordinarily be held to applyPas between parties to a private contract, when the adequacy of consideration to support or to enforce such contract in equity is involved, can therefoi*e not be given unlimited application. In view of the foregoing, in our judgment, by the term “adequate consideration, ’ ’ as used in the act, is meant a consideration such as would prevent the utility or person receiving the so-called *178free, or the reduced, rate under an existing contract from receiving a preferential or discriminatory rate, and for which service tbe public or some other utility would be required to pay a higher rate. In other words, by adequate consideration is meant such a consideration as when all the elements which enter into the transaction are considered would prevent the beneficiary under the contract from receiving a substantial preference or advantage over the public or other utility in the matter of rates or charges for the 3 services rendered. To illustrate: If, for example, the power company had entered into a contract with some other utility to supply 'such utility with electric energy in consideration that such utility should pay a stipulated rate or charge for such service, and in view that the utility had advanced to the power company something which was of the reasonable value of $2,000, the rate had been reduced, say 40 per cent. beloW the ordinary rate, when in truth and in fact such reduction should have been, say, 20 per cent., in order to prevent the rate agreed upon from being a preferential and discriminatory one, then, and in such event, the consideration aforesaid of $2,000 would be inadequate to justify the commission in continuing the contract rate, and it should cancel it. This would be so for the reason that in continuing such a contract rate the commission would bring about the very result which was sought to be prevented by the act. That is, if the commission would continue in force the reduced rate specified in the' contract, it would manifestly result in permitting a preferential and discriminatory rate to be continued in force, which would result, in injustice to all other utilities, as wfell as to the public, who were required to pay the higher rate upon the one hand, while, upon the other, if the, commission entirely ignored the consideration in the supposed case, and should enforce the established rate, which might be considerably higher, it would result in injustice and perhaps injury to the utility or person who had paid the consideration for the reduced rate. The commission is therefore given the power to so regulate existing contracts as to prevent all preferential rates upon the one hand *179and injustice upon tbe other. By section 4788, supra, tbe commission may also regulate rates in all cases so as to prevent injustice. Tbe exceptions in tbe statute are therefore intended to have application only so far as may be necessary to prevent preferential rates from being enforced on tbe one band and from working an injustice upon tbe other.
In this connection it must be kept in mind that by tbe term “adequate consideration” tbe Legislature could not have intended to use that term as a quid pro quo in tbe sense that as between two parties to a contract tbe consideration passing to tbe utility for tbe service rendered should be equivalent in value to tbe cost of tbe service. With that feature the Legislature bad no concern, nor any right to interfere, unless such interference were necessary in tbe public interest. A utility, in tbe absence of a law regulating tbe service in tbe public interest, may sell or dispose of its property, product, or service at such a price and upon such terms as it may choose, the same as any one else, and tbe Legislature, except in its governmental capacity, cannot, unless it be for tbe public good, interfere with that right. Tbe utility may also sell its service at any price even though it should sustain a loss. When, however, tbe statute, in the- interest of tbe public, steps in, then it must sell its service at tbe same rate to all, and if it has contracted to sell such service for a less price to one than it does to another, such a contract may then be held to be preferential and discriminatory.
By “adequate consideration,” therefore, as that term is used in tbe act, is meant such a consideration as when added to or considered in connection with tbe reduced rate agreed upon will make such rate nonpreferential and nondiscriminatory, by reason of tbe fact that tbe additional consideration paid and received will prevent tbe reduced rate from being preferential, in that tbe contract, within tbe purview of tbe act is then “founded upon an adequate consideration.” Where, under such circumstances, therefore, a reduced rate is contracted for and allowed, neither tbe public nor any other utility can complain, for tbe simple reason that there is in fact no preference or discrimination. When we eon-*180sider all of the provisions of the act, and keep in mind that free as well as reduced rate service is provided for, we can see no escape from the foregoing conclusions. How would it be possible, under the provisions of the act, to sustain a contract for free service? If a contract for free service cannot be sustained, because it would be preferential, then one for a reduced rate service cannot be sustained. What would be an adequate consideration to support a contract for “free” service under the act? Manifestly, such a consideration as would prevent the rate agreed upon from being preferential and discriminatory. To do that the consideration would have to be such as would at least approximate, if not equal, the amount that would have to be paid for the service under the usual and ordinary rate. It could be nothing less, and yet not be discriminatory or preferential. To my mind it is utterly inconceivable why the adjective “adequate” was used in the act if it was not used in the sense herein-before indicated. If the word had reference merely to adequacy of consideration as between the parties to the contrat, then it is entirely without force or effect. As between the parties the agreement on the part of the power company to supply electrical energy at a stipulated rate or price and the promise on the part of the smelting company to take the energy and to pay therefor the price agreed upon certainly was an adequate consideration to sustain the contract anywhere and in any court, either of law or equity, without anything more. Why, then, speak of- an adequate consideration. The only reason for using that term in the statute was that a contract, in order to come within the exception, had to be founded upon such a consideration as would require the smelting company to pay, approximately at least, the same rate as the public or any other utility was required to pay for electrical energy which was being used under similar circumstances. The purpose of using the term was to protect the public as well as other public utilities from being discriminated against by having to pay a higher rate for electrical energy than those Avho are paying for the same energy under contracts-. If, therefore, the consid*181eration passing from tbe contract bolder to the power company was approximately sufficient to prevent the contract rate from being preferential and discriminatory, then such consideration was an adequate consideration within the contemplation of the act; otherwise not. By what we have said we do not mean that the adequacy- of the consideration can be ascertained as though it were weighed in the scales of an assayer or an apothecary, but what We do mean is that by adequate consideration is meant such’ a consideration for the service as will clearly prevent the rate agreed upon in the contract from being preferential or discriminatory. We are also of the opinion that in determining whether a contract in which a specific rate is agreed upon is founded upon an adequate consideration or not the commission must take into consideration all of the facts and circumstances and all of the matters which have a direct relation to the subject-matter, and from all of those things determine whether the contract in which a reduced rate is agreed upon is founded upon an adequate consideration, and whether the reduced rate agreed upon is or if it should be continued in force will be or become preferential and discriminatory. If, after a consideration of the foregoing elements a rate, if continued, would be preferential and discriminatory, then, in our judgment, the commission should find that the contract fixing such rate is not founded upon an adequate consideration within the purview of the act, and the rate agreed upon should be modified so as to prevent it from being preferential and discriminatory. It needs no argument to demonstrate that 'whether a rate is founded upon an adequate consideration and is preferential and discriminatory or not is, to say the least, a mixed question of law and fact, and, in most instances, principally one of fact, and must therefore be determined by the commission from all the facts and circumstances as before indicated.
Without now pausing to go into the evidence it must suffice to say that the consideration for the rate agreed upon in the contract in question in this proceeding does not measure up to the standard or rule we have just stated, and, there*182fore there was ample authority for (the commission 4 to refuse to approve the rate agreed upon in said contract.
In connection with the foregoing it is also made to appear that the contract rates are manifestly lower than the regular rates. It is not disputed that the electric energy sold by the power company under the special contracts involved in the hearing to which we have referred amounted to 78 per cent, of its total sales, while for this 78 per cent, the special contractees paid only 39 per cent, of its total earnings. In view of that it necessarily follows that the public and other utilities must pay increased rates to maintain the service.
It is, however, also contended with much vigor that the commission exceeded its authority in interfering with the rate stipulated in the contract in question, for the reason that in doing so it violated both the Constitution of this state and the federal Constitution, both of which prohibit the passage of any law “impairing the obligations, of contracts.” Article 1, § 18, Utah, Constitution; article 1, § 10, federal Constitution.
It has. been held repeatedly, both by the Supreme Court of the United States and the courts of last resort of many of the states, including this court, that the regulation of rates for public utilities is a governmental function coming directly within the police power of the state, and that for that reason the establishing or modifying of rates, although contractual, does not violate the. constitutional provision aforesaid. Among the numerous cases that could 3 be cited in support of the foregoing proposition we shall refer only to the following: TJmon Co. v. Georgia P. S. Co., 248 U. S. 372, 39 Sup. Ct. 117, 63 L. Ed. 309, 9 A. L. R. 1420; Pinney & Boyle Co. v. Los Angeles G. & E. Co., 168 Cal. 12, 141 Pac. 620, L. R. A. 1915C, 282, Ann. Cas. 1915D, 471; Bolt & Nutt Co. v. Light & Power Co., 275 Mo. 529, 204 S. W. 1074; Miltvaukee Elec. By. v. Wisconsin B. B. Com., 238 U. S. 174, 35 Sup. Ct. 820, 59 L. Ed. 1254; State v. Billings Gas Co., 55 Mont. 102, 173 Pac. 799; City of *183Pcmhusha v. Pawhuslca 0. & G. Co., 64 Okl. 214, 166 Pac.' 1058; City of Woodburn v. Public Service Commission, 82 Or. 114, 161 Pac. 391, L. R. A. 19170, 98; City of Hillsboro v. Public Service Commission of Oregon, 97 Or. 320, 187 Pac. 617, 192 Pac. 390; Limoneira v. Railroad Commis°sion, 174 Cal. 232, 162 Pac. 1033; Winfield v. Piiblic Service Commission, 187 Ind. 53, 118 N. E. 531; Chicago, R. I. & P. Ry. Co. v. Taylor (Okl.) 192 Pac. 349. The question was also considered by this court in Salt Lake City v. Utah L. & Tr. Co., 52 Utah, 210, 173 Pac. 556, 3 A. L. R. 715, P. U. R. 1918-F, 377.
It is, however, insisted that the foregoing cases are not controlling here for the reason that in those cases the contracts in question were entered into after the utilities law was passed, or that the cases emanated from states where there were constitutional provisions authorizing the regulation of rates, while in the instant case the contract in question was entered into long before the act was passed. It is therefore argued that in view that th$re was neither a statutory regulation law nor a constitutional provision authorizing such regulation in force at the time the contract was entered into, it was lawful when made and in view of that the obligations thereby assumed cannot be changed without impairing its obligations. "While it is true that the contract in question was entered into before the act was passed, and equally true that in this state there is no constitutional provision expressly authorizing the Legislature to regulate rates for a service such as is rendered by the power company, yet it is beyond controversy that the right to regulate the rates of public utilities always existed potentially, and that the right could be exercised at any time the state, through its agency, the Legislature, deemed it wise and proper so to do. Where the right to exercise the police power exists we can conceive of no valid reason why the state may not exercise the right at any time, and that every contract concerning rates for public utility service must conclusively be presumed to have been entered into in view of and subject to that right. If that were not so, then a public utility could *184enter into a long-term contract, say 50 years or longer, in which it was given a preferential or discriminatory rate, and it thereby not only could prevent any other similar utility to successfully compete with it, but it could successfully defy the sovereign state itself. Such, happily, is not the law.
In Chicago, B. I. & P. By. Co. v. Taylor, supra, it is said:
“It has been said that the ‘police power is that inherent sovereignty which it is the right and duty of the government or its agents to exercise, whenever public policy [in a broad sense] demands, for the benefit of society at large, regulations to guard its morals, safety, health, order, or to insure in any respect such economic conditions as an advancing civilization of a highly, complex character requires.’ * * * The police power is an attribute of sovereignty, and exists without reservations in the Constitution, being founded on the duty of the state to protect its citizens and provide for the safety and good order of society." (Italics ours.)
In the course of the opinion in the case referred to it is further said:
“As neither the state nor the municipality can surrender by contract the. governmental power to guard the safety, morals, health, and good order of society, a contract purporting to do so is void ab initio, and, being void, it is impossible to speak of laws in conflict with its terms as impairing the obligations of a contract.”
In the case of Producers’ Transp. Co. v. B. B. Comm., 251 U. S. 228, 40 Sup. Ct. 131, 64 L. Ed. 239, the Supreme Court of the United States, in considering the power -of the state to interfere with existing contracts, in the course of the opinion, says:
“That some of the contracts before mentioned were entered into before the statute was adopted or the order made is not material. A common carrier cannot, by making contracts for future transportation or by mortgaging its property or pledging its income, prevent or postpone the exertion by the state of the power to regulate the carrier’s rates and practices.”
The right and duty of the state to regulate the rates of public utilities in the public interest is as much an attribute of sovereignty or of government as are the things enumerated in the excerpt above quoted from Chicago, B. I. & P. By. Co. v. Taylor, supra, and hence comes squarely within the principle there stated.
In Winfield v. Public Service Comm., 187 Ind. 53, 118 *185N. E. 531, tbe Supreme Court of Indiana, in the course of the opinion, after stating that unless the state has clearly divested itself of the right to exercise the police power to regulate rates, held that the state may “for the public good regulate the acts and conduct of the public service companies,” and further said:
“Every charter granted by the state, and every franchise, whether granted by the state directly or by the municipality acting as agent of the state, is granted in view of the rules above stated, and especially in contemplation of the fact that unless the state has in the charter to the utility company, or in the authority to its agent, or by ratification, abandoned its power to so regulate, the state’s power is by implication written into such contract; and therefore the state’s act of regulation, within the limits above stated, is not an impairment of the contract, but rather an exercise of a right provided in the contract.”
A large number of cases are cited.
The same thought is expressed in a different way by the Supreme Court of Oregon in City of Woodburn v. Public Service Comm., etc., 28 Or. 114, 161 Pac. 391, L. R. A. 1917C, 98, as follows:
“If a telephone company’s franchise from a city, limiting rates to be charged, is deemed a contract, the mere fact that it was made prior to the enactment of the Public Utility Act (Laws 1911, p. 483), and before the state attempted to regulate such rates, does not debar the state from increasing the rates as fixed in the franchise, because when the state exercises its police power it does not work any impairment of obligation of the contract; the possibility of the exercise of such power being an implied term of the contract.”
It will be observed that in the foregoing case, although the contract was entered into before the law was passed, yet the Supreme Court of Oregon held that it made no difference. We remark that in the Constitution of Oregon is found a provision precisely like that in our Constitution respecting the impairment of the obligations of contracts. See article 1, § 21, Or. Const.
Nor is. the contention that there is a difference between rates fixed in so-called franchise ordinances and those fixed in ordinary contracts tenable. Indeed, if there'is any difference at all in that regard, it should be in favor of contracts entered into in such franchise ordinances. Franchise ordi-*186nanees, so far as contractual, are precisely like other contracts. There is nothing in either onr Constitution or any statute whereby the state has surrendered its right to regulate the rates of public utilities at any time. 6 There is therefore no basis for the foregoing contention, and in view of what has been said the Legislature was clearly within its rights when it authorized the commission to regulate the rates and charges of public utilities in existing contracts.
We remark that while in the cases we have quoted from, as well as in many others, it seems to be assumed that the state may surrender its sovereign or governmental right and power to regulate rates, yet, in view that that question is not directly involved now, we express no opinion upon it.
It is also contended that, although it be conceded that the commission had the power to change the rate agreed upon in the contract in question, yet, in case it did so, it had no power to keep in force all other obligations of the contract assumed by the smelting company. Whether in changing the rates agreed upon in a contract the other provisions thereof are affected, and, if so, to what extent, is not involved in this proceeding, and upon that question we likewise express no opinion.
Nor is the question regarding the extent the rates should be modified or increased, if at all, involved here. It may be, as suggested by counsel, that the power company is demanding a greater increase in rates than it is entitled to. That question, however, is still pending before the commission, and we must assume that the commission will not permit the power company to impose upon the public by granting it the right to charge and collect excessive rates, or rates that are higher than will enable it to effectuate the purpose for which it is created and to adequately serve the public. Nor can we assume that the commission will permit the power company to inflate the value of its properties with a view of enabling its stockholders to realize large profits upon their stock. All of these matters must be determined by the commission, and in discharging its duties in that regard, in *187view of tbe abnormal conditions existing, tbe greatest care must, and no doubt will, be exercised to prevent injury to tbe public or to tbe public utility.
Tbe order of tbe com mission is therefore not vulnerable to tbe objections urged against it, and should be affirmed. Such is tbe order. Costs to be paid by tbe smelting company.
CORFMAN, C. J., and WEBER and THURMAN, JJ., concur.