Sizemore v. Public Service Commission

OPINION A

Pfaff, C. J.

Appellants have brought here for judicial review a decision of the Public Service Commission dated August 1, 1958, relating to the matter of rates, tolls, charges, rules and regulations applicable to intrastate message toll telephone service in the State of Indiana pursuant to Acts of 1957, ch. 189, §54-443, Bums’ 1951 Replacement (Supp.). The proceeding before the Commission was numbered as Ex Parte No. 27660.

It appears from the record that one company, not a party to this review, hereinafter referred to as Indiana Bell, owns and operates the basic telephone network in Indiana; that there are 185 other telephone companies and Indiana Bell has toll agreements with 115 of. them; that in 1957 approximately 33,500,000 toll messages were interchanged between Indiana Bell and other companies in Indiana and the dollar volume was approximately $28,000,000; that more than half of the messages originated in telephone exchanges other than Indiana Bell.

This one company, Indiana Bell, duly filed its petition for an increase in rates and a general increase was granted by an order entered on April 3, 1958, Commission Cause No. 27493, although a reduction was made for some types of calls. The order or decision in that cause was not challenged.

Thereafter, on the same date, without any petition or request for a rate increase and without notice or a hearing, the Commission, on its own motion, issued an order authorizing the increase of long distance telephone rates of all other companies to correspond with those of Indiana Bell. This order in what is designated as an Ex Parte proceeding stated that the Commission had entered into an investigation of the changes and revisions of the rates of Indiana Bell to determine what effect they might have on intrastate message toll rates generally. It made a finding that it has been the general practice of the Commission to apply a uniform schedule of message toll rates throughout the state, and that uniformity was necessary to avoid unjust discrimination and unreasonable preferences or advantages and to avoid confusion and complication in quoting and charging of rates.

On April 15, 1958, June, 1958, and June 9, 1958, patrons and rate payers of the territory served by Illinois Bell Telephone Company, patrons and rate payers of the territory served by the Moores Hill Telephone Company and Southeastern Indiana Rural Telephone Company, patrons and rate payers of the territory served by the General Telephone Company filed their respective motions to set aside the order entered in the Ex Parte proceeding, Commission Cause No. 27493, for lack of notice, hearing, and failure to comply with statutory requirements. All three motions are substantially the same except for identity of location and individuals. Omitting- formal parts and signatures said motions read as follows:

“1. They are residents of the territory served by the Illinois Bell Telephone Company, a public utility operating in the State of Indiana and under the jurisdiction of the Public Service Commission of Indiana.

_ “2. On April 3,1958, the Public Service Commission of Indiana approved an order in Ex Parte No. 27660, wherein said Illinois Bell Telephone Company and numerous other telephone utilities were granted an increase in rates and charges applicable to intrastate message toll service in the State of Indiana.

“3. That said order was entered without formal petition on behalf of any affected utilities and without any statutory or legal proceedings being commenced or pending before the Public Service Commission of Indiana.

“4. Said order was issued without notice to the patrons, customers of any of the affected utilities or to the general public and said patrons, customers and general public were deprived of the right of hearing.

“5. Said order was issued without hearing, determination or finding of value of property involved or rate of return thereon or of service available to the patrons and customers of the utilities affected.

“6. That the order of said Public Service Commission of Indiana approved April 3, 1958 is improper, illegal and deprives the patrons and customers of said utility of property and rights without due process of law.

“WHEREFORE, the undersigned persons on their own behalf and on behalf of other persons similarly situated move that said order of April 3,1958 be set aside and declared null and void.”

Thereupon the Commission held a formal hearing and on May 5, 1958, entered an order reading as follows :

“The Commission, having heretofore on its own motion conducted a summary investigation of intrastate message toll rates within the State of Indiana, and as a result of such investigation, and in order to prevent improper or unlawful discrimination, authorized telephone companies in Indiana furnishing intrastate toll services in anyway connected with the toll facilities of Indiana Bell Telephone Company to file and make effective certain uniform and conforming rates, said procedures and authorizations having been a long and well established practice of the Commission for the fixing of such uniform intrastate toll rates;

“The Commission, now upon further consideration, is satisfied that sufficient grounds exist to warrant a formal hearing of the matters so investigated.

“IT IS THEREFORE ORDERED BY THE PUBLIC SERVICE COMMISSION OF INDIANA that a formal hearing be held with respect to the matters so investigated after proper notice to the utilities interested and to such other interested persons as the Commission shall deem necessary.

“IT IS FURTHER ORDERED that the mailing of a copy of this order to the utilities interested and to such other persons as the Commission shall deem necessary shall constitute the statement notifying such utilities and other interested persons of the matters under investigation.”

That said notice of the hearing was published in 31 of the 92 counties of Indiana. No notice was published in the additional counties wherein patrons and rate payers of the utilities affected by the rate increases resided.

On June 12, 1958, hearing was had. Illinois Bell Telephone Company appeared as an intervenor. No other telephone utilities appeared in any capacity. George L. Diven, Public Counselor of Indiana entered a special appearance for the purpose of questioning the jurisdiction of the Public Service Commission of Indiana to enter an order increasing rates and moved that the action abate. Said special appearance and motion to abate reads as follows:

“Comes now George L. Diven, Public Counselor, and enters his appearance specially herein for the purpose of presenting the Motion to Set Aside the order of this Commission entered on April 3, 1958, and to question the jurisdiction of the Commission to fix any rates under this proceedings.

“It is specifically stipulated that by this appearance the requirements of legal notice and procedure for determining of rates is not waived and that the rate payers, patrons and the public who might be affected by any order on rates entered herein are not made parties to said Ex Parte proceeding for any purpose other than to present said motion and to question the jurisdiction of the Public Service Commission of Indiana to establish any rates or charges for telephone service by said proceedings as now pending, and said rate payers, patrons and public waive no rights they have and consent to no jurisdiction.

“Comes now George L. Diven, Public Counselor, and having appeared specially herein for the purposes and under the conditions set out therein, now moves that this proceeding abate for the following reasons:

“1. No proper statutory proceeding for determination of rates has been filed or is pending herein.

“2. Notice as required by statute has not been issued.

“3. The Public Service Commission of Indiana has no jurisdiction to hear evidence or establish rates in the manner or in the proceedings now pending.

“Further oral objection appears to a specific question. The question, objection and ruling are: Now, Mr. Roby, do you know what has been the custom in Indiana over this period of time that you have been with the Commission or prior thereto in regard to intrastate toll rates ?

“Mr. Diven: To which we object, first, for the reason that there is no issue properly presented or pending before this Commission relative to the establishment of toll rates or any other rates, that there are no petitions pending in this matter seeking the establishment of any rates, there is no legal proceeding which is now undergoing hearing for the establishment of rates; for the further reason that what might have been the custom of a Commission, this Commission or any other Commission or body would be absolutely immaterial and irrelevant to the issues of this case unless it can be shown that there was complete compliance with the statutes and laws of Indiana. The mere occurrence or precedent of something which is basically illegal within itself does not thereby establish a precedent which creates legality. For example, I might say we read daily of a bank being robbed, which might be a precedent for getting money out of a bank, which doesn’t establish legality or propriety of a proceeding. It is absolutely immaterial and irrelevant and the answer here sought doesn’t prove or dis-prove any issue before this Commission at this time.”

The motion was overruled.

After hearing evidence the Commission entered its order on August 1, 1958, purporting to confirm its order of April 3, 1958. The finding of fact and order of the Commission reads in part as follows:

“1. That it has jurisdiction of the subject matter of this proceeding and all necessary parties thereto.

“2. That due notice of the hearing of this cause was given and published as set forth herein.

“3. That any lack of uniformity in message toll telephone rates for calls within this state would result in discrimination and confusion, injury to service, unnecessary expense to all concerned, customer dissatisfaction, and interference with the dialing of such calls by customers, and would be of no advantage to the public.

“4. That the fixing of uniform rates for all telephone companies in this state for message toll telephone service within this state in a single proceeding is a desirable and necessary step in order to protect the public against discriminatory rates for such service.

“5. That the uniform rates, tolls, charges, rules and regulations for message toll telephone service within this state which have been filed herein and which are the subject of this proceeding are fair, just, reasonable and nondiscriminatory.

“6. That the order entered in this cause on April 3, 1958, all proceedings had and taken in compliance therewith, and all rates, tolls, charges, rules and regulations filed thereunder should be in all things ratified, approved and confirmed, subject to the power of the Commission and to reexamine the matter if the reports required under the said order should show any reason to do so.

“IT IS, THEREFORpE, ORDERED BY THE PUBLIC SERVICE COMMISSION OF INDIANA that the orders heretofore entered in this cause be and they are hereby in all things ratified, approved and confirmed, subject to the power of the Commission to reexamine the matter if the reports required under the order of April 3, 1958, should show any reason to do so.

“IT IS FURTHER ORDERED that the rates, tolls, charges, rules and regulations filed thereunder and approved by the Commission are re-approved and confirmed and that such rates, tolls, charges, rules and regulations shall continue in effect until further order of the same is required.

“IT IS FURTHER ORDERED that the Plea in Abatement and motion to set aside the order of April 3, 1958, be and the same are hereby overruled.”

On February 19, 1959, General Telephone Company of Indiana, Inc., United Telephone Company of Indiana, Inc., and the Eastern Indiana Telephone Company filed a petition in this court to be made parties appellee which was granted. Hereinafter the term appellee shall refer to the above named parties. Other appellees will be referred to as the Public Service Commission of Indiana and Illinois Bell Telephone Company.

The order of August 1, 1958, is brought here for judicial review.

Appellees argue that in making the order of April 3, 1958, in this cause the Commission proceeded under §54-412, Burns’ 1951 Replacement¹, and that under such section the Commission is not required to give notice or hold a formal hearing; that it was authorized by §54-423, Burns’ 1951 Replacement², to establish new rates whenever upon investigation it found existing rates to be unjustly discriminatory.

However, §54-412, supra, merely provides that a Commission may make a summary investigation, with or without notice. No authority is given to change rates solely on the basis of such investigation. Rather, §54-413, Burns’ 1951 Replacement, provides that if, after making such investigation, the Commission is satisfied that sufficient grounds exist to warrant a formal hearing, notice shall be given, and a time and place for hearing and investigation set. It seems clear to us that the Commission in this case was not acting under these sections of the statute. It entered its order on April 3, 1958, (which it later purported to confirm on August 1, 1958) without notice or a hearing.

Neither do we believe that §54-423, supra, grants authority to the Commission to change rates without notice or hearing. In our opinion, the “investigation” therein referred to is not the summary investigation referred to in §54-412, supra, but a formal hearing and investigation held after notice. We find no indication in any of the statutes that the Commission is authorized to change rates, tolls or charges solely on the basis of its own investigation without notice to anyone. We think the following words of Judge Bobbitt of our Supreme Court in Pub. Ser. Comm, et al., etc. v. Ind. Bell Tel. Co. (1956), 235 Ind. 1, 27, 130 N. E. 2d 467, are equally applicable here:

“In a matter such as the action at bar the Commission cannot act on its own independent information, but must base its findings upon evidence presented in the case, with an opportunity to cross-examine witnesses, to inspect documents or exhibits, and to offer evidence in explanation or rebuttal and nothing can be treated as evidence which has not been introduced as such. Public Serv. Comm. v. Ft. Wayne U. Ry. Co., supra (1953), 232 Ind. 82, 96, 111 N. E. 2d 719; Atchison, T. & S. F. Ry. Co. v. Commerce Commission (1929), 335 Ill. 624, 167 N. E. 831, 837; Ohio Bell Teleph. Co. v. Public Utilities Comm. (1937), 301 U. S. 292, 81 L. Ed. 1093, 1099, 57 S. Ct. 724.

“The order of the Commission not only must be founded upon facts specially found by the Commission, but such facts must be based upon substantial evidence. Public Serv. Comm. v. Ft. Wayne U. Ry. Co., supra.

“The findings must be sufficiently specific to enable the court to review intelligently the Commission’s decisions. Public Serv. Comm. v. Ft. Wayne U. Ry. Co., supra.”

The Public Service Commission derives its authority from the statutes and possesses only such power as is conferred by statute. Boone Co. REMC et al. v. Pub. Serv. Com. (1958), 129 Ind. App. 175, 155 N. E. 2d 149; Gen. Tel. Co., etc. v. Pub. Serv. Comm. of Ind. et al. (1958), 238 Ind. 646, 150 N. E. 2d 891, 154 N. E. 2d 372; Chicago & E. I. R. Co. v. Public Service Comm. (1943), 221 Ind. 592, 49 N. E. 2d 341.

Inasmuch as the Commission was without authority to enter the order of April 3, 1958, it could not at a later date confirm the unauthorized order as of the date of such order. As stated by Judge Bierly of this court in Indiana Telephone Corp. v. Public Serv. Com’n of Ind. (1960), 131 Ind. App. 314, 171 N. E. 2d 111, 124:

“We find nothing in the statute giving the Commission the power to cancel, or to fix, rates retroactively. The statute provides the Commission with the power to fix rates for the future if it finds the rates in effect to be unreasonable or unjust; but we look in vain to find statutory authority for the Commission to fix rates for the past. The Commission has no powers except those conferred by statute. Chicago & E. I. R. Co. v. Public Service Comm. (1943), 221 Ind. 592, 49 N. E. 2d 341; New York Central R. Co. v. Public Service Comm. (1922), 191 Ind. 627, 134 N. E. 282.”

Appellees state in their argument that since Indiana Bell was organized, intrastate telephone rates have been uniform for all telephone companies in Indiana; that such uniformity has been maintained by adjusting the rates of all telephone companies connecting with Indiana Bell whenever Indiana Bell rates have been revised, either upward or downward; that this has been done as the result of a petition by Indiana Bell alone. Appellees admit that the fact that this practice has never been challenged “is of course not conclusive as to the validity of the practice”, but urge upon us that the practical construction given a statute by public officers is entitled to be considered persuasive and of great weight in cases of doubt. Zoercher v. Indiana Associated Telephone Corp. (1937), 211 Ind. 447, 456, 7 N. E. 2d 282; Groher, Treas., v. Colgate-Palmolive-Peet Co. (1932), 94 Ind. App. 234, 178 N. E. 242. We find no necessity for resorting to such practical construction here.

Appellees General Telephone Company of Indiana, Inc., United Telephone Company of Indiana, Inc., and the Eastern Indiana Telephone Company argue that the Commission is entitled to prescribe uniform toll rates and that, therefore, the individual situation of any particular company with respect to value of its property and its rate of return is necessarily irrelevant, because the toll rates prescribed for Indiana Bell determine the toll rates of all other companies regardless of the value of their property or their operating income and expenses; that the individual situation of each company with respect to such matters would necessarily preclude uniformity. As appellants themselves point out, the situation of every telephone company in the state with respect to fair value and rate of return is practically certain to be different from that of every other company, and if toll rates depended upon the individual situation of each company the result could well be 185 different toll rate schedules. Appellees further argue that if the application of the Indiana Bell toll rates brings in either an excessive or an inadequate return, the remedy is by lowering or raising the other rates of the individual company.

We are not cited any authority to support, the statement that toll rates prescribed for Indiana Bell determine the toll rates of all other companies. We find nothing in the law of Indiana to indicate that because certain rates, tolls and charges would produce a fair return to the largest telephone company, or the smallest, or the average that it can be assumed the same rates, tolls and charges would automatically apply to the other 185 telephone companies.

“The rate making process involves a balancing and weighing of many factors, including general economic and business conditions of the future period and its effect upon the other estimates.” Boone County Rural E. Mem. Corp. v. Public Serv. Comm. (1959), 239 Ind. 525, 159 N. E. 2d 121, 125.

In Pub. Ser. Comm. et al. etc. v. Ind. Bell Tel. Co. (1956), 235 Ind. 1, 15, 16, 130 N. E. 2d 467, 473, Judge Bobbitt, speaking for our Supreme Court, said:

“Proper rates are those which produce a fair and nonconfiscatory return, and such as will enable the company, under efficient management, to maintain its utility property and service to the public, and provide a reasonable return upon the fair value of its used and useful property. Public Service Comm. v. Indianapolis Rys. (1948), 225 Ind. 656, 76 N. E. 2d 841; Columbus Gas, etc. Co. v. Public Service Comm. (1923), 193 Ind. 399, 140 N. E. 538; McCardle v. Indianapolis Water Co. (1926), 272 U. S. 400, 71 L. Ed. 316, 47 S. Ct. 144. . . .

“Appellants correctly assert that as a general rule the trial court may not weigh the evidence and substitute its discretion for that of the Commission. Public Service Comm. v. City of LaPorte (1935), 207 Ind. 462, 193 N. E. 668; Warren v. Indiana Telephone Co. (1940), 217 Ind. 93, 26 N. E. 2d 399. Neither can the court as a general rule disturb the findings of the Commission where it has conformed to statutory procedural methods and where its decision is supported by substantial evidence. However, an exception to this general rule occurs where, as here, the order is being questioned as confiscatory. Public Service Comm. v. Indianapolis Railways (1947), 225 Ind. 30, 75 N. E. 2d 434; Ohio Valley Water Co. v. Ben Avon Borough (1920), 253 U. S. 287, 40 S. Ct. 527, 64 L. Ed. 908; St. Joseph Stock Yards Co. v. United States (1936), 298 U. S. 38, 80 L. Ed. 1033, 56 S. Ct. 720.

“Hence, where a rate established by the Commission is attacked as confiscatory, the court may, upon its own independent judgment, review that issue as to both law and facts, to the end that constitutional rights may be protected. Public Service Commission v. Indiana Bell Tel. Co. (1953), 232 Ind. 332, 347, 108 N. E. 2d 889, 112 N. E. 2d 751, supra; Public Service Comm. v. Indianapolis Rys. (1948), 225 Ind. 656, 76 N. E. 2d 841, supra; Staten Isldnd(s) Edison Corporation v. Maltbie (1947), 296 N. Y. 374, 73 N. E. 2d 705, 707, 8 A. L. R. 2d 825; Opinion of the Justices (1952), 328 Mass. 679, 106 N. E. 2d 259, and cases there cited; St. Joseph Stock Yards Co. v. United States (1936), 298 U. S. 38, 56 S. Ct. 720, 80 L. Ed. 1033, supra; Ohio Valley Water Co. v. Ben Avon Borough (1920), 253 U. S. 287, 64 L. Ed. 908, 40 S. Ct. 527, supra.”

What may be a fair return for one public utility may be inadequate or excessive for another depending upon circumstances, locality and risk. Wabash Valley Elec. Co. v. Young (1933), 287 U. S. 488, 502, 53 S. Ct. 234, 77 L. Ed. 447. Affirming D.C., 1 F. Supp. 106; United R. & Electric Co. v. West (1930), 280 U. S. 234, 50 S. Ct. 123, 74 L. Ed. 390.

No evidence was submitted concerning property valuation, operating expenses or service at the hearing before the Commission. Proper factors for the determination of rates were not considered. The order being reviewed was not sustained by sufficient evidence and is contrary to law.

The order of the Commission being contrary to law for the reasons above discussed, the same is hereby ordered set aside.

Ax, and Bierly, JJ., concur.

Myers, J., concurs with opinion.

Concurring in Opinion op Ppapf, C. J.

1 . “Whenever the Commission shall believe that any rate or charge may be unreasonable or unjustly discriminatory or that any service is inadequate, or can not be obtained, or that an investigation of any matters relating to any public utility should for any reason be made, it may, on its motion, summarily investigate the same, with or without notice.”

2 . “Whenever, upon an investigation, the commission shall find any rates, tolls, charges, schedules or joint rate or rates, to be unjust, unreasonable, insufficient or unjustly discriminatory, or to be preferential or otherwise in violation of any of the provisions of this act, the commission shall determine, and by order fix just and reasonable rates, tolls, charges, schedules or joint rates to be imposed, observed and followed in the future in lieu of those found to be unjust, unreasonable, insufficient or unjustly discriminatory or preferential or otherwise in violation of any of the provisions of this act.”