State v. SOUTHERN RAILWAY COMPANY

Annotate this Case

148 S.E.2d 210 (1966)

267 N.C. 317

STATE of North Carolina ex rel. NORTH CAROLINA UTILITIES COMMISSION et al. v. The SOUTHERN RAILWAY COMPANY et al.

No. 537.

Supreme Court of North Carolina.

May 25, 1966.

*214 Joyner & Howison, by W. T. Joyner, Jr., Maupin, Taylor & Ellis, by Frank W. Bullock, Jr., Simms & Simms, by R. N. Simms, Jr., Raleigh, for defendant appellants, Henry J. Karison, Washington, D. C., Southern Railway System, Charles B. Evans, Jacksonville, Fla., Atlantic Coast Line Railroad Co., James L. Howe, III, Va., Richmond, Seaboard Air Line Railroad Co., of counsel.

Thomas Wade Bruton, Atty. Gen., George A. Goodwin, Asst. Atty. Gen., for North Carolina Department of Agriculture.

Edward B. Hipp, Raleigh, for North Carolina Utilities Commission.

Cicero P. Yow, City Atty., Wilmington, by Edward B. Hipp, Raleigh, for City of Wilmington.

Bryant, Lipton, Bryant & Battle, by Victor S. Bryant, Durham, for protestant, The American Tobacco Co.

Boyce, Lake & Burns, by F. Kent Burns, Raleigh, for F. S. Royster Guano Co., Smith-Douglass Co., Inc., W. R. Grace & Co., V-C Chemical Co., Carolina Nitrogen Co., and Heide Warehouse Co.

Albert W. Kennon, Durham, for protestant appellee, Wm. Muirhead Construction Co., Inc.

PLESS, Justice.

In determining this appeal the railroads are confronted with the statutes and decisions of the Court, which provide that the burden of proving the justification for increased rates is on them. They are required, too, to show that the proposed rate is just and reasonable. "G.S. § 62-75. BURDEN OF PROOF.In all proceedings instituted by the Commission for the purpose of investigating any rate, service, classification, rule, regulation or practice, the burden of proof shall be upon the public utility whose rate, service, classification, rule, regulation or practice is under investigation to show that the same is just and reasonable. In all other proceedings the burden of proof shall be upon the complainant." They must also overcome the presumption that the order of the Commission is prima facie correct, G.S. § 62-94(e) provides the scope of review on appeal, in part, as follows:

"Upon any appeal, the rates fixed, or any rule, regulation, finding, determination, or order made by the Commission under the provisions of this chapter shall be prima facie just and reasonable * * *"

*215 Stated another way, the shippers and customers of the railroads have no burden of proving anything; the previous rates are presumed to be fair and reasonableso are the orders of the Commission.

This Court is not expected to determine freight rates, that is to the function of the Commission. The right to fix or approve the rates to be charged by public service corporations for the services rendered the public rests in the Legislature. The General Assembly may act directly or delegate its authority to a Legislative Agency or Commission for that purpose. "It is the prerogative of that agency to decide that question. It is an agency composed of men of special knowledge, observation, and experience in their field, and it has at hand a staff trained for this type of work. And the law imposes on it, not us, the duty to fix rates." State ex rel. Utilities Com. v. Southern Bell Telephone & Telegraph Co., 239 N.C. 333, 80 S.E.2d 133.

In 73 C.J.S. Public Utilities § 32, p. 1056 it is said that: A Utilities Commission "is an expert, technical body which devotes its time and talents to the administration of some of our largest and most complex businesses."

"That a specially trained body of experts in charge of public utility matters is necessary and should be expected and permitted to dispose of such questions in the exercise of their best judgment unless their action is arbitrary or unreasonable is the basis of the principle of commission control as expressed in the case of State Public Utilities Commission ex rel. City of Springfield v. Springfield Gas & Electric Co., 291 Ill. 209, 125 N.E. 891, P.U.R.1920C, 640: `The law is settled in this state that the matter of rate regulation is essentially one of legislative control. The fixing of rates is not a judicial function, and the right to review the conclusion of the Legislature or administrative body, acting under authority delegated by the Legislature, is limited to determining whether or not the Legislature or the administrative body acted within the scope of its authority, or the order is without substantial foundation in the evidence, or a constitutional right of the utility has been infringed upon by fixing rates which are confiscatory or insufficient to pay the cost of operating expenses and give the utility a reasonable return on the present value of its property. Chicago, Milwaukee & St. Paul Railway Co. v. State Public Utilities Com., 268 Ill. 49, 108 N.E. 729, [P.U.R.1915D, 133]; State Public Utilities Com. ex rel. Mitchell v. Chicago & West Towns Railway Co., 275 Ill. 555, 114 N.E. 325, Ann.Cas.1917C, 50, [P.U.R. 1917B, 1046]. The Public Utilities Act gives the courts power to determine whether or not evidence has been properly received or rejected, and whether there is sufficient evidence in the record to support the finding of the commission. If the order does not contravene any constitutional limitation and is within the constitutional and statutory authority of the commission and has a substantial basis in the evidence, it cannot be set aside by the courts. The court is without authority to set aside such an order unless it is against the manifest weight of the evidence. * * * It is clear from the salary fixed for the commissioners and the great power vested in the commission by the Public Utilities Act that the Legislature intended to create an office of dignity and great responsibility. It is, therefore, not to be expected that through fear of popular disfavor the commission will coyly toy with the situation. It sits to administer justice to individual and corporation, the weak, the strong, the poor, the wealthy, indifferently, fearing none and fawning on none. The notion that commissions of this kind should be closely restricted by the courts, and that justice in our day can only be had in courts, is not conducive to the best results. There is no reason why the members of the Public Utilities Commission of this state should not develop and establish a system of rules and precedents as wise and beneficial, within their sphere of action, as *216 those established by the early common-law judges. All doubts as to the propriety of means or methods used in the exercise of a power clearly conferred should be resolved in favor of the action of the commissioners in the interest of the administration of the law. There should be ascribed to them the strength due to the judgment of a tribunal appointed by law and informed by experience. * * * The necessity of public regulation of rates arises out of the monopoly of the public service company. The unregulated price of the service ceases, except so far as some substitute for the particular service may be found, to be determined by competition, and the individual consumer is unable to contract on equal terms. Fixing rates by public authority may secure to each individual the advantage of collective bargaining by or in behalf of the whole body of consumers, and result in such rate as might properly be supposed to result from free competition if free competition were possible. A just and reasonable rate, therefore, is necessarily a question of sound business judgment rather than one of legal formula, and must often be tentative, since exact results cannot be foretold.'" Pond, Public Utilities, 3rd ed., § 904, p. 936.

On review, this Court is limited in scope to the questions involved. As stated in 73 C.J.S. Public Utilities § 64 j. (1), p. 1157:

"The powers to be exercised by a court on appeal from an order of a public utility or similar commission are restricted to those conferred by constitution or statute. The reasonableness and lawfulness of an order are subject to review on appeal; and the order may be set aside if it is unlawful or unreasonable or both unlawful and unreasonable. "* * * (T)he only issue before the reviewing court is whether the commission has acted reasonably and legally or has exceeded or abused its powers, and the review is limited to the questions whether the commission acted within the scope of its authority, whether the order is supported by evidence, and whether any constitutional right of a party is infringed thereby, these questions being included in the issue of the reasonableness and lawfulness of the order."

As stated in Pond, Public Utilities, vol. 2, 4th Ed., Sec. 548, p. 984:

"The court * * * is restricted to the question of determining whether any particular rate already fixed is reasonable or otherwise and can not itself fix such rate because this power inheres entirely in the legislative department of the state."

In re the legislative character of fixing rates, the following from 73 C.J.S. Public Utilities § 41a, p. 1081, is applicable:

"Although, in establishing rates for public utilities, a public utility commission does not exercise the full power of the legislature in that regard, the action of a public utility commission in regulating rates is legislative in character, and is subject to the same tests and commands the same regard as a legislative enactment."

With respect to the presumption of validity of rates established by the Utilities Commission, the general rule is stated in 43 Am.Jur. Sec. 186, p. 695:

"In general, a rate fixed by an authorized rate-making body for a public utility is presumed to be valid and reasonable. Accordingly, the courts will not enjoin or interfere with the collection of rates established under legislative sanction unless they are plainly and palpably unreasonable, confiscatory, or excessive, and clearly proved to be such, or unless there was fraud or arbitrariness in fixing such rates."

In effect, this Court occupies the same relative position to the Utilities Commission that it does to the Workmen's Compensation *217 Commission. That is, if the order of the Commission is supported by any reasonable construction of the evidence it is not to be disturbed because a different interpretation could have been placed upon it. We feel that upon a consideration of the evidence before it, the Commission was well justified in failing to find that the proposed increased rates were fair and reasonable.

It has been accepted by all parties that this is not a general rate case. The parties apparently agree that it is one in which the railroads seek a uniform increase on switching charges. While the increase sought appears to be uniform with all of the railroads at all switching points, there the uniformity ceases. Neither the switching charges nor the costs are uniform throughout the State and, as stated previously, the rates extend from $11.98 to $20.14 while the costs claimed by the railroads fluctuate from $32.95 to $43.24, so that only an average cost or an average rate can be presented. The evidence of the railroads shows that an identical increase at every switching point has to be arbitrary and discriminatory. It would put into effect increases in charges for a number of unrelated services at unrelated localities by unrelated railroads. We cannot accept evidence of costs in a seaport town such as Wilmington with its docks, wharves and drawbridges as valid in a hilly or mountain section, such as Asheville or even Winston-Salem. The six appellees, whose operations are in Wilmington, have no interest or concern with costs or rates in Charlotte or Durham.

The carriers contend that they can fairly use National figures as to operations, wages, fuel, maintenance, repairs, depreciation and other business expenses which are the same everywhere. If that be true, we can see no reason why they can make a profit with the proposed increases at Reidsville but will continue to lose varying and widespread amounts at other terminals. While they seek a flat rate increase for switching services at all cities, Mr. Simpson testified that due to the more expensive equipment in use in Charlotte, the switching is more expensive there than at Wilmington.

The Commission was well justified in failing to accept the contentions of the railroads. At one point in their evidence their witness said, "It would be impossible to develop the intrastate engine hours in any state. I do not know how much is attributable to North Carolina all total, interstate and intrastate. I do not know how much is attributable to switch operation in North Carolina. * * * It is a physical impossible (sic) element to develop the separate costs of North Carolina." However, in their briefs, the railroads say that after the Commission's order, they made a study to determine if it were possible to allocate switching costs to North Carolina by reasonably sound and acceptable methods and had determined that this was possible. In view of this statement, it is apparent that the evidence in the record could not be entirely accurate. Taking this situation into consideration and in view of the disparity in costs, as well as revenue, in the six cities tested, we can see no more reason for a uniform increase throughout the State than for the substantial difference in the present charges. The railroads chose the yards to be tested and presumably picked the six they expected to support most favorably their claims. Even from this "chosen few" one will show a profit. We can only surmise that tests at the forty-five other yards would have yielded less favorable results.

The railroads are at liberty to make further application for increased charges which do not have to be uniform but could very properly be based upon actual costs and charges under the prevailing conditions.

The Court has considered all of the exceptions brought forth by the fourteen railroads appealing the order of the Utilities Commission and the judgment signed by *218 Judge Riddle. We are of the opinion that they should not be sustained.

Affirmed.

MOORE, J., not sitting.

LAKE, J., did not participate in the consideration nor the decision of this case.