Waynesboro Water Co. v. Public Service Commission ( 1922 )

Opinion by

Linn, J.,

The principal question for decision is whether a borough, desiring to acquire the plant of a water company, incorporated in 1882, under the general incorporation Act of April 29, 1874, P. L. 73, must first apply to the Public Service Commission for a certificate of public convenience, pursuant to article III, section 3 (d) of the Public Service Company Law, or whether, before applying to the commission, the borough must use the procedure by mai. damus which was available to ascertain the probable price payable for such water works prior to the effective date of the Public Service Company Law, January 1, 1914. The intervening appellee, Waynesboro, first applied to the commission and obtained such certificate. The water company appeals and attacks the jurisdiction of the commission and its conclusions. We all agree that the commission has jurisdiction.

The record shows the Waynesboro Water Company, appellant, was incorporated in 1882 under the Incorporation Act of 1874, and shortly thereafter began supplying water to the public in Waynesboro. Section 34, clause 7, P. L. 95, of the Incorporation Act provides that “It shall be lawful at any time after twenty years from the introduction of water.......into any.......[borough] for the......borough......to become the owners of said works, and the property of said company, by paying therefor the net cost of erecting and maintaining the same, with interest thereon, at the rate of ten per centum per annum,- deducting from said interest all dividends theretofore declared.......” That power “to become the owners” confers upon the borough “the interest of one possessed of a prima facie right......to acquire the property......” (Williamsport’s Case, 232 Pa. 232, 243), and imposes an obligation to sell upon any water company created under the act. While the sum payable could not be stated in the statute, the measure thereof is prescribed so that “The result is one of computation; there is no room for discretion or judgment which may be exercised under one form of proceeding as well as another. Both the contracting parties must be conclusively presumed to have had in view the law which empowered them to contract, and which became part of the contract. At the end of twenty years the defendants have a right to take the works at a price fixed by the law, and that is one of computation”: White v. Meadville, 177 Pa. 643, 655.

Desiring to exert its right to purchase the property from the water company, the borough passed an ordinance approved in July, 1918, reciting that it “desires to become the owner of the plant......and to acquire the same as provided by the [Act of 1874] provided sufficient funds to pay for the same can be raised by bond issue as provided by existing laws, and provided the Public Service Commission......shall approve......” The ordinance authorized the officers of the borough “to take any and all steps preliminary to the acquisition of the said plant......”

Pursuant to that authority, the borough filed a petition with the commission praying for a “certificate of public convenience under article III, section 3 (d) and article Y, sections 18 and 19” of the statute, evidencing the commission’s “approval of the acquisition, construction and beginning of the exercise of the right to operate” appellant’s plant. To that petition, the water company filed an answer challenging the jurisdiction of the commission and putting certain facts in issue. The commission heard the evidence offered by both parties, filed its report and issued its certificate. From the evidence, it made a computation as of April 1,1920, (a date agreed upon) that the cost of erecting and maintaining the plant after adding interest and deducting dividends as specified in the statute, was $234,143.97. It found that the borough had a borrowing capacity of $244,-674.90, and concluded as follows: “Assuming that the applicant has the right and will be able to exercise it in the manner proposed, we conclude and so find and determine that its acquisition of the respondent’s plant, to be municipally operated, is necessary and proper for the service, accommodation and convenience of the public, and therefore an order will be made granting a certificate of public convenience as prayed for subject to revocation or cancellation if the rights thereby secured are not asserted and the respondent’s water plant acquired in pursuance thereof on or before April 1, 1922.” The water company then took this appeal from the order issuing the certificate pursuant to the commission’s report.

Appellant contends the commission has no jurisdiction at this stage; its learned counsel says “the old practice remains [by which a borough acquired such waterworks] but added to the former requirements, is, that the municipality must now secure the consent of the commission before it acquires the plant of a water company.” What then was the practice so referred to?

It has been observed that the act itself furnishes no method for making the computation; it merely states the measure, and it is conceivable that a water company required to sell, may agree without litigation, on the price to be paid by the borough. It was, however, determined in Williamsport’s Case, 232 Pa. 232, that the “old practice” to “estimate the price......it would have to pay for the works” was by'proceeding for mandamus, and it is the rule of that case that if a borough shows that its borrowing capacity approximates the probable price it may have to pay (page 251) a mandamus will issue requiring the water company to submit its books, papers, etc., to the borough for the purpose of estimating the price payable; that .procedure was called the first mandamus proceeding (page 248), and Reynoldsville Borough v. Water Co., 247 Pa. 26, is an instance of its application. Should the water company refuse to sell, on being offered the price computed in the first proceeding “the next step would be the application for another writ of mandamus to compel the conveyance of the waterworks, etc., upon payment of the price offered. The defendant could then raise any issues of fact which it deemed essential to a proper determination of the case, and the issues, particularly those concerning the amount to be paid by the city to the water company, would go to a jury, as in other-instances where property is taken by the state or a municipality”: 232 Pa. 248. It would thus appear that the price which the water company must accept, is determined in the proceeding to compel the conveyance, and not in the first mandamus proceeding. The procedure was again considered by the present Chief Justice in New Brighton Borough’s Case, 247 Pa. 232, in which he repeated “that in cases of this character two mandamus proceedings may be necessary. The second, if required, is to compel a transfer of the plant in question for a price to be then and there determined......247 Pa. 237. He also said “Under our established practice the first mandamus is the initial step in the taking over of waterworks by a municipality and its office is simply to get at the sources of information required to enable the borough to act intelligently and finally to determine whether or not it will make the purchase; after securing this information, however, if the municipal authorities see fit, they may abandon entirely their expressed desire to acquire the property under consideration.” (page 237.)

Appellant’s contention that the “old practice remains,” therefore apparently means, that before the borough may apply for a certificate of public convenience, it must resort to the first mandamus proceeding for the purpose stated. The borough’s answer to that contention is that the Public Service Company Law makes certain requirements of municipalities, before they may avail themselves of the right to acquire the property of such water companies, and that compliance with those requirements involves the ascertainment of the price to be offered, with the same result and effect formerly had by the first mandamus proceeding; that as the borough obtains the necessary information in the investigation made by the commission, there is no occasion also to have the first mandamus proceeding; and that resort to proceedings in mandamus is now inevitable only if the water company refuses to accept an offer of the price so determined by the commission, leaving for determination in this mandamus proceeding (formerly the second mandamus) all the issues therein determinable as they were prior to the enactment of the Public Service Company Law. The borough supports its contention in this respect by what is said upon the subject in the Reynolds-ville and New Brighton cases. Though both those decisions were rendered in proceedings begun before the effective date of the Public Service Company Law, in the Reynoldsville case, the Supreme Court affirmed the issuance of the writ (in the first mandamus proceeding) hut made the following statement now pertinent: “Another objection urged' by the appellant is, that the proceeding to take over the property of the water company was without the approval of the Public Service Commission first had and obtained, as required by article III of the Act of July 26, 1913, P. L. 1374. In answer to this it is only necessary to say that by the express terms of this act it did not take effect until the 1st of January, 1914. At that date the present proceeding was pending, it having been instituted on the law side of the court 8th September, 1913. It is a mistake to suppose that the act merely effected a change in procedure and was therefore retroactive. It operated directly upon the rights of a municipality by qualifying its right to acquire at its own pleasure the property of a water company within its limits, and therefore it can only be allowed retroactive effect as such a result is expressly declared in the act itself.”

In the opinion in the New Brighton case, quashing the proceeding, the present Chief Justice said concerning the effect of the Public Service Company Law upon future proceedings to acquire the property there under consideration: “we take occasion to state that any new efforts made by the plaintiff borough to take over these waterworks will be subject to the provisions of that statute.

“One of the purposes of the Utilities Act was to furnish in cases of the character of the one now before us, a more flexible procedure for ascertaining facts and reaching conclusions than were supplied by the set forms of pleading and procedure in the law courts. Article III, section 3 of the statute, provides that upon the approval of the Utilities Commission, evidence by its certificate of public convenience ‘first had and obtained,’ and upon compliance with existing laws ‘and not otherwise,’ it shall be lawful ‘(d) for any municipal corporation to acquire......any plant._____for rendering or furnishing to the public of any service of the kind or character already being rendered or furnished by any public service company within a municipality’; Article V, section 18, provides that ‘when application shall be made to the commission by any municipal corporation for the approval required by the provisions of Article III, section 3, (d)......such approval......shall be given only and when said commission shall find or determine that the granting or approval of such application is necessary or proper for the service, accommodation, convenience, or safety of the public’; and Article Y, section 19, provides the machinery for making proper investigations — it grants power to the commission to subpoena and compel the attendance of witnesses and the production of books, papers and contracts, etc., and ‘to make such inquiries, physical examinations, valuations, and investigations as it may deem necessary.’ See also section 23 as to valuations, and section 29 [of article VI] concerning the right to an appeal and to an ultimate trial by jury of issues of fact ‘where such right is secured either by the Constitution of the Commonwealth or of the United States.’ On the whole, this act furnishes a complete and what should prove a satisfactory system in cases of this character, and thereunder all the relevant facts in possession of the New Brighton Company or the Beaver Valley Company can be brought out and fully developed, and the rights of all parties conserved; therefore, since the approval of the commission must be first ‘had and obtained’ before the present plant can be actually acquired or operated by the borough, application should be made to that body before any future proceedings, mandamus or otherwise, are instituted in the courts.”

It is clear that if the Public Service Company Law “operated directly upon the rights of a municipality by qualifying its right to acquire at its own pleasure the property of a water company......” (supra) a borough may not require the sale except in conformity with that qualification; and if that require the commission’s approval, as was said in the New Brighton case “before any future proceedings, mandamus or otherwise are instituted in the courts,” the contention of the appellee would seem sound. The argument based on convenience leads to the same result; if the commission’s investigation advises the borough sufficiently “to act intelligently and finally to determine whether or not it will make the purchase” (supra) there is no occasion to get the same information again in a mandamus proceeding.

By substituting for the first mandamus proceeding the application to the commission, the water company is deprived .of no vested right. The legislature qualified the borough’s absolute right to purchase, conferred by the Act of 1874, and provided another method by which the borough may obtain the information necessary to act in the first instance, but that legislation took nothing from the water company. It was not deprived of any property or of any right to possession or enjoyment of property. These rights it may still assert'and maintain, until confronted with what was formerly the second mandamus proceeding; for then, as was said in Williamsport’s Case, 232 Pa. 248, “should an offer of that price be refused the next step would be the application for another writ of mandamus to compel the conveyance of the waterworks, etc,, upon payment of the price offered. The defendant could then raise any issues of fact which it deemed essential to a proper determination of the case, and the issues, particularly those concerning the amount to be paid by the city to the water company, would go to a jury, as in other instances where property is taken by the state or a municipality”: see New Brighton’s Case, 247 Pa. 232 at 237.

As nothing has been done in this case interfering with any right to trial by jury which the water company may have, we consider appellant’s contention to that effect, without merit.

Equally without merit is the claim that “before the commission can take jurisdiction” it must appear “that the borough has elected to purchase the plant.” The act provides that without the commission’s certificate “first had and obtained,” a borough may not “acquire...... any plant......etc.” (article III, section 3), and that “when application shall be made......by any municipal corporation for the approval required by the provisions of article III, section 3 (d)......such approval...... shall be given only if and when the said commission shall find or determine that the granting or approval of such application is necessary or proper for the service, accommodation, convenience or safety of the public”: article Y, section 18. The same article provides in section 19, that “to make such finding or determination it shall hold such hearings......and examine such witnesses and compel the production of and examine such books, papers, contracts or other documents and make such inquiries, physical examinations, valuations and investigations as it may deem necessary or proper in enabling it to reach a determination......”

Considering the uncertainty of the price to be paid, whether when ascertained, it can be borrowed, and the difficulty, labor and expense of determining those two essential elements before applying to the commission for its certificate, as well as the requirement that the commission make its own investigation substantially into the same matters, formerly considered in the first mandamus proceeding, it seems reasonable to conclude that it was not the intention of the legislature to require any greater election by a borough to purchase, before applying to the commission, than was formerly required of a borough when beginning its first proceeding for mandamus; and it had been settled that after the price was ascertained in the first mandamus proceeding, a borough might “abandon entirely their expressed desire to acquire the property under consideration,” (247 Pa. 237). The record shows sufficient action by the borough for the purposes of the application.

We are then brought to two other contentions made by appellant: first, — that the commission erred in computing the amount found to be the cost of erecting and maintaining the plant, and in ascertaining the sum to be deducted as dividends declared from the interest at ten per cent per annum specified in the statute; and second, ■ — that it erred in determining the borrowing capacity of the borough.

We are constrained to hold that the application of the law to the facts properly deducible from the testimony shows that the probable price payable, and the borrowing capacity of the borough are both different from the amounts found by the commission. The difficulty in finding the probable price results largely from the failure of the water company to keep the records contemplated by the statute “so that the borough might, at the proper time, make such investigation as would enable it intelligently to exercise its privilege of purchase”: 247 Pa. 240. For part of the period the water company could produce no records; for part, the records were plainly inconsistent with others available to check them; for part, capital entries in its books were based on estimates by the company which the witnesses considered too low, though disagreeing in amount; they also differed as to the dividends declared. We also think the borrowing capacity is in excess of the amount found.

The question then arises, is the error harmless? These proceedings have supplied the borough with the information necessary to decide whether to purchase the waterworks or to abandon the project, and we assume the borough would have decided that question, had this appeal not been taken. The borough cannot now be deprived of the information; it knows what the water company’s books show, but the'information will not furnish the basis of proceedings to compel conveyance, unless the borough retains the certificate of public convenience issued in this proceeding.. Shall we then return the record to have the commission consider whether in the light of our conclusions as to the legal effect of the evidence on the probable price and the borrowing capacity as found by the commission, it will adhere to its determination that on the whole record the certificate should issue? Whether the service, accommodation, convenience or safety of the public require what this certificate permits, is an administrative matter; we have therefore concluded that our consideration need proceed no further than to see that the record contains evidence to support the order of the commission. We all agree there is such evidence, and that no harm to appellant can result from our conclusion, because it is not obvious that a restatement of the accounts based on the inferences we make from the figures in evidence, would produce such substantial change in the relation of the ultimate totals as to justify our holding that the order appealed from was not “reasonable and in conformity with law” within article VX, section 22, P. L. 1427.

If proceedings to compel conveyance follow, and are resisted by the water company, the contentions suggested in appellant’s argument concerning the cost of erecting and maintaining the waterworks, the interest, the dividends declared, the borrowing capacity of the borough and any other issues involved, will, or may be tried; the evidence may or may not be the same as appears in this record, and the appeal, if any, from the judgment then entered, will be to the Supreme Court and not to this court. In view of those considerations, we deem it undesirable now to indicate why we differ from the commission as to the legal effect of the evidence apparently the basis of its findings in the respects specified.

Concerning the two remaining contentions, we need only say that as we perceive no reason in this record for differing from the commission in its administrative consideration of the future requirements to extend the waterworks, we need not discuss it; and as the constitutionality of the amendment to the Constitution may be raised in tbe proceeding to compel conveyance of tbe waterworks, if brought, we need not now consider it.

Tbe order of tbe commission is affirmed and tbe appeal is dismissed at appellant’s costs.