Michigan Public Utilities Commission v. Michigan State Telephone Co.

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Plaintiff, Michigan public utilities commission, made, in July, 1922, an order to establish rates of defendant, Michigan State Telephone Company. An amendment making the order more specifically applicable to Detroit was made later. Defendant refused to obey the order. It filed a bill in the United States district court at Detroit. An interlocutory injunction issued. To compel obedience plaintiff instituted mandamus in the circuit court for Ingham county. Counsel agreed that plaintiff might apply to this court for an order requiring defendant to show cause why it should not comply with the commission's order, and that, if an order issued, proceedings in other courts would be stayed, the cause speedily brought to hearing here, and the whole matter submitted for decision. Plaintiff applied. The order issued September 5, 1922. Defendant answered:

"That the orders are wholly null and void and of no force and merit whatsoever in that the rates prescribed therein are less than just and reasonable rates, and also are confiscatory of defendant's property used and useful in the furnishing to the public of the telephone service * * * and said orders therefore seek to deprive the defendant of its property without due process of law and deny defendant the equal protection of the laws in violation of its rights under the Fourteenth Amendment to the Constitution of the United States."

Reference was made to Hon. Guy M. Chester as special commissioner. After numerous sittings of the commissioner, filing of many briefs, argument, and the report of the commissioner, counsel finally brought the cause to hearing in our June, 1924, term. We have a record of over 3,000 pages, a 70 page opinion of the commission, an 80 page report of the special commissioner, and many briefs filed in behalf of the parties, the city of Detroit, and 14 other cities of the State.

That this opinion may be kept within bounds, only those facts which are important and essential to the questions considered will be stated, and they will be stated generally. SeeLincoln Gas Electric Light Co. v. City of Lincoln,250 U.S. 256 (39 Sup. Ct. 454).

1. Jurisdiction of this Court. Mr. Justice BIRD, to whom this case was assigned, has declined to consider the merits, stating that plaintiff must be turned out of court on this question. With his conclusion we do not agree. Counsel raise no question of jurisdiction. They concede it. It was invoked by plaintiff, whose petition for the writ of mandamus concludes:

"This petitioner prays further that this court immediately issue an order staying all proceedings under the said orders heretofore made by this petitioner and all actions for the enforcement of penalties for a violation of the same pending and until the final determination of this proceeding in this in the manner provided by section 266 of the judicial code of the United States (37 U.S. Stat. p. 1013)."

No question is raised that the said section is applicable, nor that this is a proper suit in a proper State court, timely brought, requiring under the said section stay of proceedings in the Federal court pending final determination of the cause here. It is our duty to dispose of the case on the merits. SeeRapid Railway Co. v. Utilities Commission, 225 Mich. 425;Prendergast v. Telephone Co., 262 U.S. 43 (43 Sup. Ct. 466);Monroe Gaslight Fuel Co. v. Utilities Commission, 292 Fed. 139.

2. Principles. Language used in a railroad case (Smyth v. Ames, 169 U.S. 466, 526 [18 Sup. Ct. 418]) is applicable here:

"A State enactment, or regulations made under the authority of a State enactment, establishing rates for the transportation of persons or property by railroad that will not admit of the carrier earning such compensation as under all the circumstances is just to it and to the public, would deprive such carrier of its property without due process of law and deny to it the equal protection of the laws, and would therefore be repugnant to the Fourteenth Amendment of the Constitution of the United States.

"While rates for the transportation of persons and property within the limits of a State are primarily for its determination, the question whether they are so unreasonably low as to deprive the carrier of its property without such compensation as the Constitution secures, and therefore without due process of law, cannot be so conclusively determined by the legislature of the State or by regulations adopted under its authority, that the matter may not become the subject of judicial inquiry."

What are the chief elements of just compensation to defendant?

(a) Operating expense, including administration, labor, interest, taxes, certain items of repair and maintenance and the like.

(b) Depreciation, physical and functional, including wear and tear of property by use, the constant destruction of property by earth's relentless processes, and supersession and obsolescence of machines and structures by progress.

(c) A fair return upon the present fair value of the property used and useful in public service.

These elements, when determined, measure the rate to be paid by the public for the service. Upon the issue of confiscation, a Federal question, decisions of the Supreme Court of the United States are controlling.

3. Depreciation Charge. As has been stated, before coming to the question of profit, the company is entitled to earn enough to meet the continuous depreciation of its plant and equipment, and this beyond ordinary current repairs and maintenance. To provide funds from earnings to off-set this depreciation is a right and a duty of the directors of the company. City ofKnoxville v. Water Co., 212 U.S. 1 (29 Sup. Ct. 148). But the property is made up of many parts of varying lengths of life and of varying rates of depreciation. And progress, new invention, new design, new thought, constantly menace present day machines and structures. A machine functioning efficiently today may be obsolete and inefficient tomorrow. The rate of depreciation changes with the age of the plant. Telephone lines are in danger of disaster from sleet and storm.

It is the difficult task of the commission to spread the amount of the depreciation, less salvage, over the years and make an annual allowance in earnings that will be fair to the public and that will fairly compensate the company for the property consumed in service. The particulars of this difficulty are fully set forth in Saliers on Depreciation, p. 131, and in opinion of Mr. Justice Brandeis in Pacific Gas Electric Co. v. City and County of San Francisco, 265 U.S. 403 (44 Sup. Ct. 537).

Respecting theory, purpose and method of accumulating a depreciation fund, there is a wide difference of opinion. See Hayes on Public Utilities, chap. 9; Saliers on Depreciation, chap. 7. Some hold that the fund belongs to the public. Others say that it is a trust fund, or quasi-trust fund, belonging to both the public and the utility to be used for the replacement of invested property when the property is theoretically dead. But the fund is definitely the property of the utility. People,ex rel. Pennsylvania Gas Co., v. Public Service Commission,204 App. Div. 73 (198 N.Y. Supp. 193).

Some contend that the proper basis for valuation is prudent investment cost. See dissenting opinion of Mr. Justice Brandeis, Southwestern Bell Telephone Co. v. Public ServiceCommission, 262 U.S. 276 (43 Sup. Ct. 544); Goddard on Fair Value of Public Utilities, 22 Mich. Law Rev. 777. But it is settled that the rate base is present fair value as defined inSmyth v. Ames, supra, and in the Minnesota Rate Cases,230 U.S. 352 (33 Sup. Ct. 729, 48 L.R.A. [N. S.] 1151, Ann. Cas. 1916A, 18). Computing depreciation (although perhaps convenient to accountants and bookkeepers), on investment cost, or book cost, as distinguished from present fair value, must be rejected. If the rate base is present fair value, then the depreciation base as to depreciable property is the same thing. There is no principle to sustain a holding that a utility may earn on the present fair value of its property devoted to public service, but that it must accept and the public must pay depreciation on book cost or investment cost regardless of present fair value. We repeat, the purpose of permitting a depreciation charge is to compensate the utility for property consumed in service, and the duty of the commission, guided by experience in rate making, is to spread this charge fairly over the years of the life of the property. The commission found the present fair value of defendant's property used and useful in service to be $47,500,000. There was necessarily involved in this finding all proper deduction for deterioration and depreciation and the commission so states. The total of depreciation, physical and functional, was found to be $9,500,000. The total of depreciation charge was also found to be $9,500,000, so that the total depreciation fund equaled the existing depreciation. The business of the company had grown. The plant, repaired and maintained, was efficient, rendering satisfactory service. The depreciation fund had been expended for extensions and betterments, for property the present fair value of which was included in the $47,500,000. The commission deducted the $9,500,000 depreciation fund, so invested, from the depreciated value of the property, $47,500,000, leaving $38,000,000, to which it added $1,500,000 for working capital, making the rate base $39,500,000. The commission did not determine present fair value on book value alone. With vehement criticism of the decisions, it professes to have followed Smyth v. Ames, supra, and other decisions of the United States Supreme Court, herein cited. It was not to deduct book figures of depreciation from book figures of investment. It says:

"If the reserve for depreciation is deposited in banks, the company might get 4 per cent. interest thereon. If it borrows money for capital purposes, it must pay 6 per cent. for it. The intelligent at once ask why the company should deposit its depreciation reserve of approximately $10,000,000 in banks and receive but 4 per cent. interest, and at the same time borrow a like sum and pay 6 per cent. interest therefor. Why not use the money yielding but 4 per cent. in place of that which costs the company 6 per cent.? The reserve for depreciation may be used for capital purposes but it is none the less depreciation reserve. If the $10,000,000 was borrowed and used for capital purposes at 6 per cent. interest, the company would be entitled to earn at least 6 per cent. on it, because it cost that to get it. If the $10,000,000 of depreciation reserve is invested for capital purposes, the company has the use of it for such purposes without its stockholders making any capital contribution thereto. It costs the company nothing to get this $10,000,000. It is derived from rates paid by subscribers and users of its service; and, not having been obtained by capital contributions from stockholders, but from the public through earnings or revenues, the public ought not to be charged rates to pay a return to the company upon that which they themselves have contributed.

"The accrued depreciation reserve paid by the public and reinvested in plant or property should not be made the basis of return to the stockholders. The total present value of the company's property should be decreased in the proportion which such reserve for depreciation bears to the total investment of the company, to ascertain the basis of return to the stockholders."

We think this erroneous. For the $9,500,000 of depreciation charge, the company lost $9,500,000 of its property, consumed in service. How can it be said that it cost the company nothing to get it? The amount received but compensated for the loss. The fund was the property of the company and so invested it had the right to earn on it. Reliance is placed on language used in Louisiana RailroadCommission v. Telegraph Co., 212 U.S. 414 (29 Sup. Ct. 357). The holding there might apply to a case where there was no deduction of depreciation in fixing the rate base, which method finds some support among writers, and in such a case it might not be proper treatment to permit a return on both the undepreciated value of the property and a depreciation reserve. Our examination leads us to think that Mr. Justice Peckham was there considering such a case. For a discussion of this case, see Whitten on Valuation of Public Service Corporations, 316, and see same author's review of cases in chapters 18 and 20, same volume, and his supplement of 1914, chapter 18. It is said in Saliers on Depreciation, p. 418:

"It has been stated that the reserve is the property of the public and therefore should not be permitted to earn a return. This is erroneous. The amount reserved is definitely the property of the company returned through the rates to off-set accrued depreciation on plant but which has not been deducted from cost. If the accrued depreciation were deducted from cost of plant in determining fair value then, on the contrary, extensions financed out of depreciation reserves ought to be included in fair value."

See, also, People v. Public Service Commission, supra; Cityof Charleston v. Public Service Commission, 95 W. Va. 91 (120 S.E. 398); and see Monroe Gaslight Fuel Co. v. UtilitiesCommission, 292 Fed. 139, decided June 9, 1923, by Judges Denison, Tuttle, and Simons, who held that the commission has no right to deduct the amount of depreciation reserve, so invested, from present fair value in fixing the rate base.

The following from New York Telephone Co. v. Prendergast, 300 Fed. 822, decided July 26, 1924, United States district court, southern district of New York:

"These accumulated charges (depreciation reserve) are not a separate fund. The total bears no definite relation to the actual condition of the property; for one item may have been, and was charged years ago against the cost of an article scrapped long since, while another was charged yesterday against one just entering upon its life of usefulness. In fact, the depreciation reserve is a piece of bookkeeping, a monthly charge against earnings, to provide means, not only of covering deterioration from use and time, but of minimizing, and only minimizing, future possible losses of any kind, from storm or fire to changes of fashion. The funds or credits thus reserved are, and always have been, expended in strengthening the company's useful property, but what particular property it is neither possible nor useful to ascertain. * * *

"To deduct from the fair value of plaintiff's property the entire book reserve for depreciation, in order to reach a rate-base, was error of law."

Counsel for defendant make the following pertinent suggestions:

"If the company should sell its entire property, this part (invested reserve) would be conveyed along with the rest. If the property of the new owner should be valued in a rate case would some part of the fair value of the property found upon an appraisal be deducted because of the depreciation accounting of the former owner? Would the books or accounts of the former owner have any bearing upon a fair value of the property? Would not the fair value of the property be the same if the books were destroyed? If that is so, is not the fair value of the property in the hands of the present owner the same, regardless of the books? If the company were mortgaging the property would it mortgage the whole? Can there be any doubt about its right to mortgage all the property to which it has the title regardless of where it got the money to pay for it? If the property were mortgaged and the bondholders should foreclose, would they foreclose upon less than the whole?"

The correction respecting the depreciation fund will, for the purposes of this opinion, increase the rate base from $39,500,000 to $49,000,000, including working capital. This necessitates a denial of the writ. But other questions must be discussed.

4. Complaint of the rate of return, fixed by the commission at 7 per cent., and of the allowance for working capital, $1,500,000, is not pressed and will be passed.

5. 4 1/2% Contract. Between the American Telephone Telegraph Company and subsidiary companies, of which defendant is one, exists a contract by which defendant is required to pay and has paid 4 1/2% of gross revenues in return for rental of telephones, and other services sufficiently set forth by this court in City of Detroit v. Michigan Railroad Commission,209 Mich. 395, and in which this contract was sustained. Doubtless a contract made between these companies, the major company owning nearly all of the stock of the defendant, should be scrutinized closely, and this rule is recognized by the courts.

The commission ordered a very substantial reduction in the amount to be paid under the contract. Subsequently the contract was considered by the Supreme Court of the United States inSouthwestern Bell Telephone Co. v. Public Service Commission,supra, decided May 21, 1923, and sustained, the court saying:

"The important item of expense disallowed by the commission — $174,048.60 — is 55% of the 4 1/2% of gross revenue paid by plaintiff in error to the American Telephone Telegraph Company as rents for receivers, transmitters, induction coils, etc., and for licenses and services under the customary form of contract between the latter company and its subsidiaries. Four and one-half per cent. is the ordinary charge paid voluntarily by local companies of the general system. There is nothing to indicate bad faith. So far as appears, plaintiff in error's board of directors has exercised a proper discretion about this matter requiring business judgment. It must never be forgotten that while the State may regulate with a view to enforcing reasonable rates and charges, it is not the owner of the property of public utility companies and is not clothed with the general power of management incident to ownership. The applicable general rule is well expressed in State PublicUtilities Commission, ex rel. Springfield, v. Springfield Gas Electric Co., 291 Ill. 209, 234 (125 N.E. 891):

" 'The commission to not the financial manager of the corporation and it is not empowered to substitute its judgment for that of the directors of the corporation; nor can it ignore items charged by the utility as operating expenses unless there is an abuse of discretion in that regard by the corporate officers.'

"See Interstate Commerce Commission v. Railway Co.,209 U.S. 108 (28 Sup. Ct. 493); Chicago, etc., R. Co. v. Wisconsin,238 U.S. 491 (35 Sup. Ct. 869); People, ex rel. Delaware HudsonCo., v. Stevens, 197 N.Y. 1 (90 N.E. 60)."

The contract was also sustained in City of Houston v.Telephone Co., 259 U.S. 318 (42 Sup. Ct. 486), decided May 29, 1922.

It is now contended by plaintiff that the record in the case at bar as to material facts is so substantially different from the record in our own case just above cited and the records in the two cases above cited from the United States Reports as to warrant a contrary holding. After a careful examination of the records and briefs in all the cases, we conclude that plaintiff's contention cannot be sustained. The cases cited are decisive of the question presented. The order in this respect is erroneous.

6. Depreciation. The commission fixed the rate of depreciation at 4% to be computed on the total of fair value less land and right of Way (the depreciation fund was not deducted from the base for depreciation). Defendant complains of this and cites a long list of cases in which a higher rate was fixed. Our examination of cases indicates a diversity of holding on the subject, part of the diversity is due to difference of opinion, part to difference in facts considered. Probably in a majority of the cases a higher rate has been sustained. But this is a question of fact depending largely upon the character, nature and age of the property in question, and illuminated somewhat by the experience of the company respecting the subject. And it must not be overlooked that, as the cases show, many minor replacements, and repairs and maintenance are made and charged to operating expense. In practice, this contributes considerably toward keeping the property intact. The commission in its opinion (which see) reviews the question at length and states fully the experience of the company respecting the rate of depreciation and the accumulation of the fund. The rate fixed is comparatively low, but, in the light of the facts of this case, we must decline to hold it confiscatory.

7. Fair Value. The rules and elements for consideration in determining fair value are so well known to those interested in the question that we shall not quote from the cases.

See Smyth v. Ames, supra; Minnesota Rate Cases, supra;Darnell v. Edwards, 244 U.S. 564 (37 Sup. Ct. 701); San DiegoLand Co. v. National City, 174 U.S. 739 (19 Sup. Ct. 804);Detroit, etc., R. Co. v. Railroad Commission, 171 Mich. 335;Southwestern Bell Telephone Co. v. Public Service Commission, supra;Bluefield Water Works Improvement Co. v. Public ServiceCommission, 262 U.S. 679 (43 Sup. Ct. 675); Georgia Railway Power Co. v. Railroad Commission, 262 U.S. 625 (43 Sup. Ct. 680); Brooklyn Borough Gas Co. v. Public Service Commission, P. U. R. 1918F, 335, opinion by former Chief Justice Charles E. Hughes.

The company was organized in 1904 and took over, from the purchaser at foreclosure sale, the property of a former telephone organization. As to what should be held to be the actual book cost to defendant of this property there is conflict of opinion, due to detail and method of purchase and of financing to purchase. We find the then cost in fact to be $6,740,026. The net additions since that time are $41,305,402, so the book cost is $48,045,428, the funds having been provided by capital contribution and reserve or earnings invested. The total of outstanding stock securities and indebtedness on December 31, 1921, was $41,703,732. The assessed value of the property for taxation fixed by the State board of assessors in 1921 was $27,500,000. Appraisals and computations were made to show cost as at December 31, 1920, of reproduction new on average prices of a 10-year period, 1910-1919, of a 5-year period, 1915-1919, and of the year 1919. To these were added the net subsequent additions for 1921, adjusted to the average price of the particular period. The computations allow for observed physical deterioration only as distinguished from full depreciation found by the commission as stated. The special commissioner, correcting certain arithmetical errors, states that:

"The following figures show how these values are to be derived and the correct figures therefor:

10 Year     5 Year      1 Year      1 Year Dep.
Michigan Exchanges. $15,534,746  $17,395,426  $22,902,806  $19,590,641
Toll ..............   9,590,750   10,584,251   13,098,455   10,567,424
------------ ------------ ------------ -----------
Total ........... $25,125,496  $27,979,677  $36,001,261  $30,158,065
Wisconsin Exchange.      25,650       28,187       36,551       27,178
------------ ------------ ------------ -----------
$25,151,146 $28,007,864  $36,037,812  $30,185,243
Common Use ........   $2,107,780  $2,499,783   $2,997,469   $2,943,340
Detroit ...........  $22,167,506 $27,099,263  $35,088,257  $32,948,035
----------- -----------  -----------  -----------
Total .............  $49,426,432 $57,606,910  $74,123,538  $66,076,618

Per cent. condition on basis of last two figures, 89.14; observed depreciation, 10.86 per cent.

"To the appraisal costs of December 31, 1920, the additions during 1921 must now be added.

"At the top of page 33 of the commissioner's opinion are given the actual additions of $4,314,155 * * * and conversion of these by composite index figures to five and ten-year average. The index figure is .8081 for 5-year and .6668 for 10-year as referred to one year. These are added to the preceding totals with the following results:

Total              10 Year      5 Year       1 Year         1 Year Dep.
Dec. 31, 1920    $49,426,432   $57,606,910  $74,123,538     $66,076,618
Add 1921.......    2,876,624     3,486,234    4,314,155       4,314,155
------------ -------------- ------------   -----------
Total ....     $52,303,056   $61,093,144  $78,454,693 (A) $70,390,773(B)

"These figures replace those entitled 1-d to 4-d on page 35 of the commission's opinion and the

10-year average, $52,303,056 5-year average, 61,093,144 1-year average, 78,454,693

are the figures under the designation Appraised Value, One Year Period, etc.

"Under 1-c and 2-c, page 35 of the commission's opinion, the condition per cent. found to exist between 3-d and 4-d (now A and B in preceding tabulation), is applied to the five- and ten-year averages with the following results:

"B divided by A is 89.7%. This applied to the other cost gives:

Ten-year average depreciation.....................$46,915,841 Five-year average depreciation.................... 54,800.550 One-year average depreciation..................... 70,390,773

"This is the depreciated value for each above periods. These are also corrected figures for items 1-e, 2-e and 4-4 of page 35 of the commission's opinion."

We think his finding and computation as to this evidence of value to be substantially, correct. Fair value, $47,500,000, added to full depreciation as found by the commission, $9,500,000, gives $57,000,000 as the undepreciated value of the physical property, which figure is about midway between undepreciated value on the 10-year basis, of which basis favorable comment is made by plaintiff, and undepreciated value of the 5-year basis, which basis is urged by defendant. We quote further from the report respecting additions to plant and equipment during recent years:

"The net additions during the years:

1915, $462,539.01 1916, 2,104,262.76 1917, 3,240,098.71 1918, 3,420,272.39 1919, 6,248,723.64 1920, 5,439,672.42 1921, 4,314,155.04 -------------- Total, $25,229,728.97

"During the years 1915 to 1921 inclusive there was added to the plant $25,229,723.97. This was during the period affected by war prices. In other words, the plant was doubled in cost expenditures during that period. * * *

"From before 1914 to the middle of 1915, a comparative normal or usual level of prices was 100 or 100%. At the close of 1915 it was 120; during 1916, 120 to 145 and 175; during 1917, 145 to 225; during 1918, 165 to 235; during 1919, 230, then down to 185, then up to 245; during 1920, 220 to 275; during 1921, 150; lower since that."

The above is said to be of general commodity prices. Defendant insists that the curves of prices for particular items in question are as follows:

"Taking 1915 as 100, 1916 is 125, 1917 is 158, 1918 is 192, 1919 is 210, 1920 is 239, 1921 is 204 and the average for the five years, 1915 to 1919 is 157. If the average had been determined for the seven years, 1915 to 1921, the average would have been higher."

It may be noted that while it is assumed in this case that the 1914 price level was about normal, it is said to have been 50% above the 1897 level. See note, Southwestern Bell TelephoneCo. v. Public Service Commission, supra, at page 303, where there is a discussion of probable future decline in price levels. The commission also had before it prophecy as to future prices. Some comment is made of nonproductive exchanges, particularly, and of type of equipment, station losses and competitive exchanges, which might call for discussion, but, as they do not affect the result here reached, and, we think, may not arise again, we pass them without discussion.

Considering all the evidence before us, the elements entering into a judgment of fair value (Smyth v. Ames, supra), according to each element due weight (Georgia Railway Power Co. v.Railroad Commission, supra), without slavish adherence to reproduction cost new (Minnesota Rate Cases, supra), noting the trend of prices (Newton v. Consolidated Gas Co.,258 U.S. 165 [42 Sup. Ct. 264]), and probable future costs (Southwestern Bell Telephone Co. v. Public Service Commission,supra), recalling that a large part of this property was acquired during the war period and at very high prices, we must decline to hold that a valuation of the physical property of the company at the sum of $47,500,000, exclusive of working capital, will work confiscation.

8. Going Value.

"That there is an element of value in an assembled and established plant, doing business and earning money, over one not thus advanced, is self-evident. This element of value is a property right and should be considered in determining the value of the property, upon which the owner has a right to make a fair return, when the same is privately owned, although dedicated to public use." Des Moines Gas Co. v. Des Moines,238 U.S. 153 (35 Sup. Ct. 811).

And see Adams Express Co. v. Ohio State Auditor, 166 U.S. 185 (17 Sup. Ct. 604), and City and County of Denver v. DenverUnion Water Co., 246 U.S. 178 (38 Sup. Ct. 278).

The commission made no finding of any amount for going value, stating that the subject had been given such consideration as it was entitled to receive. As we read the opinion of the commission, the consideration given was a denial of anything for going value for the reason that the cost of attaching business had been paid out of earnings. The special commissioner reported:

"Unless defendant by clear and convincing proof has shown that the expense of attaching business has not been paid in the overhead expenses or otherwise by the public, or, if not so paid, then that the commission has not taken it into consideration in fixing the rate base of fair value of property, the finding of the commission on going concern value must stand. The commission did consider it, and found it had been paid by the public in the operating expense."

Assuming that the cost of attaching business has been paid out of earnings, there is no evidence that the funds were not earned lawfully, no evidence that they were not rightfully the property of the company. Considerable or attractive dividends have not been paid. A denial of anything for going value on this ground cannot be sustained. That past high or excessive rates offer no bar to enjoining a present noncompensatory rate is a question we need not discuss.

It is said in Lincoln Gas Electric Light Co. v. City ofLincoln, supra:

"Again, we question the propriety of the master's treatment of 'going value,' which he seems to have estimated at less than otherwise he would have placed it upon the theory that the company's business had been developed, at the expense of the public, in the expenditure of past earnings exceeding a fair return upon the capital invested, and this without any finding, or any clear evidence to which our attention has been called, that past earnings were excessive."

See, also, Monroe Gaslight Case, supra; Newton v.Consolidated Gas Co., supra; Bluefield Waterworks Case, supra;Georgia Railway Power Company Case, supra; Galveston ElectricCo. v. City of Galveston, 258 U.S. 388 (42 Sup. Ct. 351);Houston Case, supra.

The company was entitled to allowance for going value, the amount to be determined fairly by the commission from the facts, including the financial history of the company.

9. That an order of the commission is applicable to franchise contract rates in the cities of St. Joseph and Benton Harbor, is settled by the authorities and statutes reviewed in the opinion of the commission.

In briefs and argument, counsel on both sides, and for the city of Detroit and the other cities, have covered the questions very fully and thoroughly, and have aided the court greatly. In fairness to the commission, it should be said that the record before us contains evidence which was not before the commission.

The bill of fees and expenses of the special commissioner, when approved by this court, will be paid by the State and by the utility in equal shares as provided by stipulation.

Writ denied, without costs.

SHARPE, MOORE, STEEERE, and FELLOWS, JJ., concurred with CLARK, C.J.