City of Billings v. Public Service Commission , 67 Mont. 29 ( 1923 )

MR. CHIEF JUSTICE CALLAWAY

delivered the opinion of the court.

The city of Billings during the year 1907 granted to P. A. Williams a franchise, authorizing him to construct a plant for the purpose of distributing to the public hot water for heating purposes, and permitting him to lay and maintain pipes and the like under the streets and public places in the city in furtherance of that purpose. Among its provisions the ordinance fixed rates to be charged private consumers for heat to be furnished, and it was provided that: ‘ ‘ The regulation and control of prices and rates for heating service under this ordinance shall be subject to any statute of this state relative thereto, now in force or hereinafter enacted.” The city received this preference: “The said P. A. Williams, his heirs, successors, or assigns, agrees to furnish heat to the city hall, fire station and library buildings during the life of this franchise, free of any charge or cost to the city, radiation and all connections to be installed and maintained by the city.” Williams accepted the franchise and it seems that he and his successors, including the Billings Utility Company, hereinafter referred to as the Utility, complied with its terms until the order complained of here was made. As the result of hearings held in 1918 by the Public Service Commission, in which the affairs of the Utility were under consideration with reference to rates, the city was required to pay the Utility for the heat furnished to the city hall, fire stations and library buildings. Being dissatisfied, the city commenced this action against the commission and the Utility for the purpose of having the order vacated and set aside. Upon issues properly joined trial was had, whereupon the district court confirmed the commission’s order by its judgment. The city moved for a new trial which was denied. The appeal is from the judgment and order denying a new trial.

The question for decision, therefore, is whether the commission had the right to establish a rate for the service furnished the city by the Utility notwithstanding the provision of the ordinance respecting free heat.

It is insisted by the city’s counsel that the granting and acceptance of the franchise created an inviolable contract which may not be disregarded by the commission, for two reasons: (1) It is said the contract is inviolable under the provisions of the last sentence of section 3892 of the Revised Codes of 1921, that section being a part of the Act which created the Public Service Commission (Chapter 52, Laws of 1913); (2) but if it be conceded that the city had not the right to enter into an inviolable contract fixing rates for its inhabitants, it did have that right respecting rates for itself in its proprietary capacity.

1. It is conceded that the franchise constitutes a contract between the city and the Utility. This obligation was entered into by them with the knowledge that while the city ■was permitted to contract respecting rates, the sovereignty at any time, in furtherance of the public welfare, might exercise its inherent power of rate regulation and control. (State ex rel. Billings v. Billings Gas. Co., 55 Mont. 102, 173 Pac. 799; Sandpoint Water & Light Co. v. Sandpoint, 31 Idaho, 498, L. R. A. 1918F, 1106, 173 Pac. 972.) That the legislature might set this power in motion was recognized by the very terms of the ordinance. When the legislature created the Public Service Commission as an administrative arm of the sovereignty, giving to the agency thus created ample authority to exercise through the police power of the state a supervisory control over all public utilities, the sovereign prerogative was asserted. In creating the commission the intention of the legislature was “to provide a comprehensive and uniform system of regulation and control of public utilities.” (Billings Gas Co. Case, supra.) This language was approved in Doney v. Northern Pacific Ry. Co., 60 Mont. 209, 199 Pac. 432, and is now approved again. If such was not the intention, then the Act creating the commission was and is a legislative mockery. Prior to the date upon which the Act was passed, every rate to a consumer of a product of a public utility in Montana rested on private contract between the consumer and the utility. Some of these rates were unjust, unreasonable, discriminatory, unduly preferential. To put a stop to practices of that character, to improve the service rendered by public utilities, to- cause to be fixed just, reasonable and equitable rates for the service rendered, and to equalize the burden between consumers, manifestly were objects within the legislative intention. That the ordinary course of business should be continued without sudden disturbance and to guard against precipitate action, section 11 of the Act (3891) provided, among other things, that every public utility should file with the commission and make public its schedules showing all rates, tolls and charges then established for service performed, which should not exceed the rates in force at the time of the passage of the Aet, that a copy of these schedules under the direction of the commission should be printed and kept in every station or office of the utility where payments are made by consumers or users, open to the public, and that these should not be changed without the concurrence of the commission. Section 12 (3892) provided that: “It shall be unlawful for any public utility to charge, demand, collect, or receive a greater or less compensation for any service performed by it within the state, or for any service in connection therewith, than is specified in such printed schedules. * * * The rates, tolls and charges named therein shall be the lawful rates, tolls and charges until the same are changed, as provided in this Act. It shall likewise be unlawful for any publie utility to grant any rebate, concession, or special privilege to any consumer or user, which, directly or indirectly, shall or may have the effect of changing the rates, tolls, charges, or payments, and any violation of the provisions of this section shall subject the violator to the penalty prescribed in section 3888 of this Code. This, however, does not have the effect of suspending, rescinding, invalidating, or in any way affecting existing contracts.”

In the Billings Case, supra, this court, having under consideration the effect of the concluding sentence of section 3892, said: “It is very clear that this sentence refers to the preceding sentence of the section exclusively, and not to the terms of the Act in its entirety.” That this is the correct interpretation we have not the slightest doubt. Not only is this consistent with the plain rules of grammar as well as of statutory construction, but any other interpretation would lead to the absurd result that the legislature created in form a powerful agency for the public good which at the same time it throttled into a state of innocuous futility. If it be held that the sentence applies to the entire Act, then it must follow that all contracts existing when the Act was passed are beyond the power of the commission, no matter what special privileges they carry, nor how unjust, discriminatory and unreasonable the contractual rates may be, nor how repugnant that construetion would be to the purpose of the Act. When we comprehend the purpose of the Act, observe the broad regulatory-powers granted to the commission by other sections of it, and follow the ordinary rules of statutory construction, we see that the legislature did not intend to, nor did it, bring about any such absurdity. It seems certain that by the use of the sentence in question, and upon a subject of so much importance, the law-making body could not have intended to curtail the exercise of the police power of the state. Such intention will not be inferred. This court heretofore has recognized the rule that the sovereign authority is not bound by the general language of a statute which tends to restrain or diminish the powers, rights, or interests of the sovereign—the people. (Aetna Accident & Liability Co. v. Miller, 54 Mont. 377, L. R. A. 1918C, 954, 170 Pac. 760.)

Following its established practice, this court will endeavor to. construe an Act of the legislature so as to give effect to all its parts, and will never declare any part of it inoperative if it is reasonably possible to reach any other conclusion. Furthermore, it is reasonable to assume that, if the legislature had intended to apply the concluding sentence of section 3892 to the entire Act, it would have done so by placing the same in a separate section, or by expressing its intention in plain words.

What, then, is the true meaning of the sentence? Simply this: That, until changed by the commission, the rates, tolls and charges were to remain as fixed in existing contracts; that the passage of the Act did not ipso facto operate to invalidate or affect existing contracts, even though the contracts granted rebates, concessions and special privileges—which it was one purpose of the Act to eliminate from public utility life in this state. In other words, the sentence read with its context merely provided a device to maintain existing rates until such a time as the commission, after investigation, might see fit to change them. Pending that time the utilities were protected from prosecution even though, the existing contracts granted rebates, concessions and special privileges.

We conclude, then, that the Act did confer upon the commission the power, within the lawful exercise of its authority, to change the rates, tolls and charges in public utility contracts, regardless of whether they existed prior to the passage of the Act. This view is consistent with the great weight of authority. (City of Helena v. Helena Light & Ry. Co., 63 Mont. 108, 207 Pac. 337; Salt Lake City v. Utah Light & Traction Co., 52 Utah, 210, 3 A. L. R. 715, and note, 173 Pac. 556; see, also, 9 A. L. R. note 1165 et seq.; 10 A. L. R., note 499 et seq.)

It is not to be denied that the decision of this court in Helena Light & Ry. Co. v. Northern Pacific Ry. Co., 57 Mont. 93, 186 Pac. 702, lends warrant to the city’s contention in this case. In that case the court held that the last sentence of section 3892 applies to the entire Act; Mr. Justice Holloway dissenting. In neither of the opinions is the Billings Gas Case, supra, mentioned. It was overlooked by court and counsel. In the Helena Case the sole question presented to the court was whether the contract between the Helena Light & Railway Company and the Northern Pacific Railway Company by its terms gave to the latter company the privilege of renewing, or rather extending, it for an additional period. In neither brief was there any discussion of section 12 (3892), except one side affirmed and the other denied that it had a bearing on the question referred to above. An inspection of the record discloses that the briefs in the Helena Case were filed before the Billings Gas Case was decided, and its controlling force was overlooked by everybody. Had it been called to the attention of the court, the erroneous construction given the concluding sentence of section 3892 doubtless would have been avoided. The decision in Helena Light & Ry. Co. v. Northern Pacific Ry. Co., supra, in so far as it conflicts with what is said in this opinion, is now overruled.

2. Nor is there any basis for the city’s contention that it is entitled to preference where its inhabitants would not be. The city is a consumer, as are its inhabitants who patronize the Utility. When the city receives its heat free, the Utility’s other patrons foot the bill. Discrimination of this sort is not to be tolerated, and the commission was right in putting a stop to it. On this subject, see City of Hillsboro v. Public Service Commission, 97 Or. 320, 187 Pac. 617, 192 Pac. 390; Woodburn v. Public Service Commission, 82 Or. 114, Ann. Cas. 1917E, 996, L. R. A. 1917C, 98, 161 Pac. 391; Public Service Electric Co. v. Public Utility Commission, 87 N. J. L. 128, 93 Atl. 707; Id., 88 N. J. L. 603, 96 Atl. 1015; Kenosha v. Kenosha Home T. Co., 149 Wis. 338, 135 N. W. 848; Sandpoint Water & Light Co. v. Sandpoint, supra.

The judgment and order are affirmed.

Affirmed.

Associate Justices Cooper, Holloway, Galen and Stark concur.