Willcox v. Consolidated Gas Co., 212 U.S. 19 (1909)
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Willcox v. Consolidated Gas Company
Nos. 396-398
Argued November 4, 5, 6, 1908
Decided January 4, 1909 *
Opinion Filed January 12, 1909
212 U.S. 19
APPEALS FROM THE CIRCUIT COURT OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK
Syllabus
It is not a question of discretion or comity for the federal court to take jurisdiction of a case; it is the duty of that court to take jurisdiction when properly appealed to, and it should not be criticized for so doing even though the case be one of local interest. Cohens v. Virginia, 6 Wheat. 264, 404. The right of a party plaintiff to choose the federal court cannot be properly denied. In re Metropolitan Receivership, 208 U.S. 90, 110.
Rates, when fixed by legislative authority for public service corporations, should allow a fair return upon the reasonable value of the property at the time it is being used, but the legislative act will not be declared invalid by the courts unless the rates are so unreasonably low that their enforcement would amount to taking the property for public use without compensation. San Diego Land and Town Co. Cases, 174 U.S. 739; 189 U.S. 439.
Except in very clear cases, courts should not interfere with state rate legislation before the legislation goes into effect. Knoxville v. Water Co., ante, p. 1.
Value of the property employed being an essential element in determining whether a rate is or is not confiscatory, and being also largely a matter of opinion, where the determination of the question depends upon such value, a court of equity should hesitate to interfere by injunction to suspend the rate before it goes into operation and a fair trial has been made.
Franchises of public service corporations are property, and cannot be taken or used by others without compensation, and, where a state has by legislative enactment permitted such corporations to capitalize such franchises, their value at the time of such capitalization should be included in the value of the property as an element for fixing rates; but no increased value of such franchises should be allowed.
Public service corporations such as gas companies are subject to the legislative right to fix rates which permit not more than a fair return on the property used.
Whether a rate yields such a fair return as not to be confiscatory depends upon circumstances, locality, and risk, and no particular rate can be established for all cases.
Under all the circumstances of this case, this Court concurs with the court below that six per cent is a fair return on the value of property employed in supplying gas in the City of New York, and a rate yielding that return is not confiscatory.
In estimating value of franchises for the purpose of fixing rates, it is immaterial that the corporation is taxed on a greater value than that allowed if it charges its taxes as operating expenses in determining net income.
Where a public service corporation has a monopoly, such as of supplying gas in a large city, "goodwill" cannot be considered as an element of value of the property employed.
For purpose of fixing rates, the value of property employed should be determined as of the time when the inquiry is made, and, as a general rule, the corporation is entitled to the benefit of increased value since acquisition.
A provision in a state statute requiring a public service corporation to perform its service in such a manner that its entire plant would have to be rebuilt at a cost on which no return could be obtained at the rate fixed deprives the company of its ability to secure such return, and is unconstitutional and void.
Ex parte Young, 209 U.S. 123, followed as to the unconstitutionality of provisions in a state statute for penalties for violations so enormous as to be overwhelming.
Provisions in a gas rate bill for rate, pressure, and penalties for violation may be, as held in this case, separable, and the unconstitutionality of the provisions as to pressure and penalties will not affect the provisions as to rates.
Provision in a gas rate act establishing one rate for the municipality and another for individual consumers is not an unreasonable classification, and does not render the act unconstitutional under the equal protection clause of the Fourteenth Amendment.
Where none of the different classes of consumers complain of different rates, the corporation cannot complain of such differences provided the total receipts are sufficient to yield an adequate return.
Where, as in this case, in an action brought before the rate takes effect, complainant fails to sustain the burden of clearly showing that a rate act is confiscatory, the bill should be dismissed without prejudice to right of the complainant to bring another action after the rate goes into effect if it then proves to be confiscatory.
So held in regard to the New York Eighty-Cent Gas Law.
157 F. 849 reversed.
The appellee, complainant below, filed its bill May 1, 1906, in the United States Circuit Court for the Southern District of New York against the City of New York, the Attorney General of the State, the District Attorney of New York County and the Gas Commission of the State to enjoin the enforcement of certain acts of the legislature of the state, as well as of an order made by the Gas Commission, February 23, 1906, to take effect May 1,1906, relative to rates for gas in New York City. Since the commencement of the suit, the Gas Commission has been abolished and the Public Service Commission has been created by the legislature in its stead. The official term of Attorney General Mayer has also expired, and Attorney General Jackson, his successor, has been substituted in his place.
The ground for the relief asked for in the bill was the alleged unconstitutionality of the acts and the order because the rates fixed were so low as to be confiscatory. Upon filing the bill, a preliminary injunction was granted (146 F. 150) and, after issue was joined, the case was referred to one of the standing masters of the court to take testimony, in conformity to the practice indicated in Railroad v. Tompkins, 176 U.S. 167, 179.
A hearing was had before the master, who reported in favor of the complainant. The case then came before the circuit court, and, after argument, a final decree was entered restraining defendants from enforcing the provisions of the acts and the order relating to rates or penalties. 157 F. 849. These various defendants, except the district attorney, have taken separate appeals directly to this Court from the decree so entered. The acts which are declared void as unconstitutional are chapter 736 of the Laws of 1905, which limits the price of gas sold to the City of New York to a sum not to exceed 75 cents per thousand cubic feet. The act also requires that the gas sold shall have a specified illuminating power, and a certain pressure at all distances from the place of manufacture. Penalties are attached to a violation of the act. The other act is chapter 125 of the Laws of 1906, limiting the prices of gas in the Boroughs of Manhattan and the Bronx, to other consumers than the City of New York, to 80 cents per thousand cubic feet, with like penalties as in the act of 1905, and with the same provisions as to illuminating power and the pressure in the service mains. The order which was declared invalid was one made by the Gas Commission created under and by virtue of chapter 737 of the Laws of 1905, the order providing that the price of gas in the city should be not more than 80 cents to consumers other than the City of New York. The order had the same provisions as to illuminating power and pressure as the acts above mentioned. The master and the court below found that the 80-cent rate was so low as to amount to confiscation, and hence the acts and the order were invalid as in violation of the Federal Constitution.