Court Opinion

ID: 8272804
Source: CourtListenerOpinion
Date Created: 2022-10-16 19:37:46.051695+00
Date Added: 2024-06-11T16:43:34.877524
License: Public Domain

White, J.
(concurring). This caso and the two oitv appeals (Nos. 3 and 4 of this term) present appeals by two municipalities upon one side and by a public utility companion the other, from the judgment of the Supreme Court with respect to an order by the public utilities commission fixing *598the rate to be charged the public for gas by the utility company in a district which includes the two municipalities.
I am unable to agree with the Supreme Court that certiorari is not the municipalities’ remedy in their cases. I know of no other remedy, and, of course, it cannot be that thejr have none. The commission has fixed a rate of ninety cents, and the municipalities are dissatisfied with the order fixing that rate. They think the rate fixed is too high, just as the utility'- companj' thinks the rate .too low. Neither can bring mandamus because the utilities commission is vested by law with a discretion in fixing the rate. It would be like asking the courts to mandamus or order a jury to agree upon a certain smaller named sum as its verdict in a case where a question of fact involving the amount of the verdict was to be decided. The verdict rendered might be too high or-too low to accord with the legal principles governing the ease, but while a question of fact remains, a mandamus or a court direction is out of the question. The remedy is to set the verdict aside. So here the remedy is to set the commission’s order aside because erroneous, and the proper procedure to accomplish this is by certiorari, irrespective of whether the claim is that the rate fixed is too high or too low. I think, therefore, that the municipalities’ cases cannot be dismissed upon the ground stated by the Supreme Court, and that that court having in fact passed upon the facts involved, we should, as it seems to me, now consider these cases also upon the merits.
Two principal questions are involved in the eases before us: one, was it improper to allow an element of “going value” in coming to a valuation of the property of the utility company to be protected in a rate-making order; and the other, was it improper to exclude the element of the commercial value of the franchise (not an exclusive one) in reaching such valuation?
The municipalities maintain the affirmative of the first proposition, and the gas companj' the affirmative of the second.
*599Taking up the first inquiry: It is quite evident from the testimony and from the findings of the Supreme Court that with the exception of the commercial value of the franchise, the terms “going value” in these cases embraced what the commission thought was the fair present value of all of the elements of the intangible property of the gas company, including the necessary spark of life represented hy adequate permission to use its property for the purposes of its incorporation and in the public streets where it was locally authorized to go. To this extent I think the property of the gas company is entitled to protection in rate-making orders because a failure of such protection permits confiscation. I agree, therefore, with the view of the commission upon this point. To value the present mere physical property of the company in absolute disregard of its previously discharged burdens assumed and performed in the public interest and clearly contemplated by the legislation hy which it was invited to enter upon the public service, is in my judgment confiscatory. Likewise, to value it without considering it as endowed with its life-giving permission to continue its public functions would he confiscation.
T therefore favor an affirmance, upon the merits, of the order of the commission in the eases wherein the cities of Paterson and 1’assaie complained that “going concern value”' had been used as an element of value in establishing the rate:
Coming now to the gas company’s appeal, wherein tire complaint is that an additional value of the franchise (apart from its life-giving function to the company's other property) and dependent upon earnings present and prospective of the company, was not included, 1 incline, to the opinion that the commission took the proper view of this point also.
T take it that this claim must resolve itself into dependence upon one or both of two propositions, viz.—first, that the gas company has a property right to continue to charge unreasonably high rates in the future because of the present market-value of its securities as a result of its having been suffered to do so iu violation of ¡is charter obligations in the past, or second, that its charier right to charge reasonable rates is of *600itself a valuable .property right which must be permitted, under the guise of its own protection, to enlarge itself into a right to charge unreasonable rates.
Taking- up the first of these propositions—it is. not questioned that tlic universally acknowledged obligation of the gas company to serve the public at reasonable rates reserves to the public (the state) the right to regulate the rates to he charged so that they shall conform to this obligation. It follows as a necessary corollary that the franchise of the gas company to charge rates is at all times subject to this right of the state to so regulate them. That the granted franchise to charge rates is a property right protected by law, which cannot be destroyed or impaired except by due process of law and upon compensation, and that it, as an element of property value (dependent in amount upon the rate permitted and likely to he permitted to continue) is subject to taxation, seems to me to be quite apparent; but that this fact should not be held to work a forfeiture of one of the conditions of the grant, viz., that the state should have the right at all times to require that the rates charged shall be reasonable, seems to me to be equally clear. A man might build a hotel twenty stories high, at the seashore, and so arranged that nearly half of its guest rooms have an unobstructed ocean exposure and view to the southwest over his neighbor’s land, and the probabilities may seem to indicate that, by reason of lack of demand for additional hotel accommodations, or inability, „or lack of inclination, of the neighbor to build, that' this exposure and view would continue uninterrupted for a long time, and by reason of this advantageous exposure the hotel might he very profitable so that it had. a fair market value of $2,000,000. No one would doubt that it could not he condemned and taken by the state or the municipality for any public purpose without the owner being paid this market value, nor could he doubt that it was subject to be taxed at this value; hut on the other hand, no one would contend that the owner had thereby acquired a right to prevent his neighbor from building a like hotel, twenty stories high, on his own land, shutting off the ocean exposure and view of the *601first .one, although the effect of his so doing would bo to decrease the market value and the tax value of the first one by a million dollars. If in fact the first hotel had been sold in the interim for $2,000,000, this circumstance would not in any respect alter the ultimate result.
So in the ease of a gas franchise, subject as here to reasonable rate regulation by the state, it is quite evident that if tin1 state for what reason soever, and many may he thought of, omits for a great number of years to enforce its rights and thus allows the company to charge unreasonably high rates 'and there seems every likelihood that this permission of omission would continue, the property value of the franchise in the open market as reflected by the market value of tlu1 company’s stock would be much higher than it would he if the state had at all times and consistently enforced its rights and there was every prospect that it would continue to do so. Assuming for the purpose of illustration, that an unreasonably high rate has been charged by this company in the past, upon what theory can it be contended that, because of this permissive omission on the part of the state in favor of the company during all these years, the state has now forfeited the rights of the public to enforce a condition which it was always the duty of the company to perform whether the state compelled it to do so or not? I think there is none. I suppose it may fairly be assumed that with all the other conditions exactly as they were in this case at the time of the order, if the rate charged by this company in the district in question before the order had been $1.40 instead of $1.10, the claim of the company to he -allowed for value of franchise would have been at least double in amount what it. now is, and that the higher property value as indicated by market value of securities and by valnation of franchise for taxation, would have more than snbstantiated such enlarged claim, (flearly no part of such increase of claim could have any proper foundation for consideration in arriving at a just and reasonable rate, although it would have all the property right hacking now urged for the present claim.
*602[ think we may properly conclude, therefore, that the charging of unreasonably high rates in the past, if they have been so charged, can furnish no ground for the continuation of these rates in the future, and this although a shrinkage of commercial and taxing value of the franchise will be the result of the state’s enforcement of its contract right to require the rates to be reasonable in the future.
Taking up the second proposition—that the company’s charter right to charge reasonable rates is in itself a valuable property right entitled to consideration in rate-making, I suppose it must be conceded that the franchise to charge as a “reasonable rate,” sufficient to yield a net profit of eight per cent, on the value of the company’s property as allowed and established respectively by the findings of the utilities commission in this case, is a very valuable property right. Certainly I think it is. That this valuable privilege is the company’s is beyond question. That it is property is undoubted. That the law protects it against confiscation and subjects it to taxation follows as a matter of course. But that this valuable property right to charge “reasonable rates” should by virtue of its own existence have the effect of converting itself into a still more valuable property right to charge “unreasonable rates,” is of course, preposterous. Presumably the incorporators went into this public utility business because they expected that their charter privilege to charge “reasonable rates” for the gas they were to manufacture, distribute and sell, would be a valuable one, but that fact and the fact that it has become so, cannot have the effect of altering the terms of the contract made with the state. The mere statement of this proposition is sufficiently convincing, but if anything more were needed, a glance at the absurd practical result of the contrary view would be illuminating. If the franchise to charge ninety cents in order to pay eight per cent, .on the value of the company’s property, not including the franchise, is worth a million dollars and must be included and have eight per cent, paid on it also, the rate would have to be one dollar instead of ninety cents; but if the company has the *603property right to charge one dollar, the franchise is worth $2,000,000 instead of one million, and so the rate must be $1.10 in order to pay eight per cent, on this additional million, and so on indefinitely.
That the company’s contract with the state to charge "reasonable rates” cannot be thus evaded, is, of course, quite obvious. The plain fact is that the commercial value of the company’s property right in its franchise can have no effect in fixing the rate it can charge, because by the terms of its contract with the state the stream of its franchise value arises from the spring of its right to charge "reasonable rates,” and in the very nature of things no stream can rise higher than its source.
Eor the reasons above stated I concur in the affirmance of the judgment of the Supreme Court in the gas company’s appeal.
For affirmance—The Chancellor, Treno hard, Kaltscu, Black, White, Terhune, JJ. 6.
For reversal—The Chtee Justice, Parker, Bergen, Yredenburgit, JJ. 4.