Summary
In State ex rel. Rice v. Public Service Commission, 220 S.W.2d 61, 64 (Mo. banc 1949), it is stated that substantial evidence is evidence which, if true, would have a probative force upon the issues.
Summary of this case from State, City of St. J. v. Pub. ServOpinion
No. 40227.
May 9, 1949.
In a proceeding initiated by the Public Service Commission, said Commission found that the standard traffic agreement of the Bell system provided a fair division of long distance telephone tolls between the exchanges and lines operated by appellant and those operated by the Bell system. The finding of the Commission is supported by the evidence and appellant's share of the division is not confiscatory.
1. PUBLIC UTILITIES: Division of Long Distance Toll Revenues: Jurisdiction of Public Service Commission. The Public Service Commission has jurisdiction to determine the proper division of long distance telephone toll revenues if the parties do not agree upon a division.
2. APPEAL AND ERROR: Public Utilities: Administrative Law: Review of Order of Public Service Commission: Rule Stated. In reviewing an order of the Public Service Commission, it should be determined whether such order is supported by competent and substantial evidence upon the whole record.
3. PUBLIC UTILITIES: Administrative Law: Division of Long Distance Toll Revenues: Finding of Commission Supported by Substantial Evidence. The Commission found that the standard Traffic Agreement of the Bell system, which divided long distance telephone tolls in proportion to the length of the toll line haul, after deducting certain costs, was a fair division, and that there were no exceptional conditions with respect to appellant's system which would justify a larger share of the tolls. These findings were based upon substantial evidence contained in the record.
4. PUBLIC UTILITIES: Administrative Law: Right of Commission to Disbelieve Appellant's Evidence. The Commission was not bound to accept as true evidence of appellant's witnesses which was discredited upon cross-examination. The Commission had the duty to weigh the evidence and might disbelieve evidence although uncontradicted and unimpeached.
5. PUBLIC UTILITIES: Administrative Law: Reference to Records Not in Evidence: Order Supported by Other Evidence. The report of the hearing makes comparisons with figures from the records of the Commission on other telephone systems. This was improper, since these records were not introduced in evidence. But these figures were merely cumulative in discrediting the figures of appellant's experts, and the order of the Commission is amply supported by substantial evidence in the record.
6. PUBLIC UTILITIES: Administrative Law: Division of Long Distance Toll Revenues: Appellant's Burden of Proof Not Sustained: Order of Commission Held Reasonable and Lawful. There was substantial evidence to support the finding of the Commission that the Traffic Agreement provided a fair and reasonable division of long distance toll revenues. Appellant failed to sustain his burden of proof that his system is unusual and peculiar so that the Traffic Agreement is not reasonably applicable, or that the share of the division allowed him is confiscatory. The order of the Commission is both reasonable and lawful.
Appeal from Cole Circuit Court; Hon. Sam C. Blair, Judge.
AFFIRMED.
Donald C. Power and Green Green for appellant.
(1) The appellant was not afforded an opportunity or the right to a fair judicial and open hearing. All the substantial evidence introduced at the hearing established that under the division of tolls as proposed by Southwestern Bell and found by the Commission to be fair and reasonable, would result in appellant operating his business at a loss. The decision and order of the Commission went entirely outside of the record and injected data with respect to station values in its opinion upon which no testimony had ever been introduced and then trended that value to a date certain without any indication of a basis upon which its trends were computed. Such procedure, opinion and order of the Commission is in direct violation of the due process clause of the Fourteenth Amendment to the Constitution of the United States and under the evidence such order and opinion will result in the taking of the property of appellant for public use without just compensation. Ohio Bell Tel. Co. v. Public Utilities Comm. of Ohio, 301 U.S. 292, 81 L.Ed. 1093; West Ohio Gas Co. v. Public Utilities Comm. of Ohio, 294 U.S. 62, 79 L.Ed. 761; State ex rel. Southwestern Bell Tel. Co. v. Public Service Comm. of Missouri, 262 U.S. 276; St. Joseph Stock Yards Co. v. United States of America, 298 U.S. 38, 80 L.Ed. 1033; Interstate Commerce Comm. v. Louisville Nashville Railroad Co., 227 U.S. 88, 57 L.Ed. 431. (2) Under the rate of division of toll as ordered by the Commission the appellant will not receive a fair return on the reasonable value of appellant's property and, by reason thereof such opinion and order if placed in effect is confiscatory in effect and in violation of the Constitution of the United States. Louisiana Water Co. v. Public Service Comm., 294 F. 954, 269 U.S. 597; 52 Am. Jur. 78-79, sec. 47; State ex rel. Southwestern Bell Tel. Co. v. Public Service Comm. of Missouri, 262 U.S. 276. (3) The opinion and order of the Commission is based on data not introduced in evidence and such opinion is contrary to all of the substantial evidence introduced at such hearing and is not supported by any competent substantial evidence introduced at the hearing. Therefore the opinion and order cannot be upheld. State ex rel. Public Service Comm. v. Shain, 342 Mo. 867, 119 S.W. 220; State ex rel. City of St. Louis v. Public Service Comm., 329 Mo. 918, 47 S.W.2d 102; State ex rel. Henson v. Brown, 326 Mo. 230, 31 S.W.2d 208; State ex rel. City of Harrisonville v. Public Service Comm., 291 Mo. 432, 236 S.W. 852; Ohio Bell Tel. Co. v. Public Utilities Comm. of Ohio, 301 U.S. 292, 81 L.Ed. 1093; United States v. Baltimore Ohio Railroad Co., 293 U.S. 454, 79 L.Ed. 587; State of Florida v. United States of America, 282 U.S. 194, 75 L.Ed. 291. (4) The conclusion of the Commission that division of tolls as provided for in the Standard traffic agreements for the period of times for which they were used were fair and reasonable, is contrary to all the substantial evidence introduced in such hearing, is not supported by any substantial evidence, is arbitrary, unfair, unjust, confiscatory and in direct violation of the due process clause of the Fourteenth Amendment to the Constitution of the United States of America. Such order and opinion will result in the taking of the private property of appellant for public use without just compensation. Interstate Commerce Comm. v. Louisville Nashville Railroad Co., 227 U.S. 88, 57 L.Ed. 431; Ohio Bell Tel. Co. v. Public Utilities Comm. of Ohio, 301 U.S. 292, 81 L.Ed. 1093. (5) Since Rice did not agree to an arbitration of the controversy as provided by Section 5697, R.S. 1939, this Commission did not have jurisdiction over the particular issue involved, namely, a matter of private contract between two telephone companies as to a division of toll revenues. (6) The Commission erred in comparing the operations of other telephone companies with those of Rice when there was no testimony produced in the record to show that such operations were comparable and when, in fact, the testimony produced in this case clearly demonstrates that the operations of the other companies presented were not comparable. See Cases under (1). (7) The Public Service Commission's findings and order erred in holding that because the division of tolls as proposed by Southwestern Bell Telephone Company for appellant is the Standard form used in division of tolls between Bell and other companies, that therefore it should produce a fair return or just compensation for appellant. The Commission by the above findings upon which the order was based erred in ignoring the law that what might be a fair return for one may be inadequate for another, depending on circumstances, locality and risks. 52 Am. Jur. 78-79, sec. 47; Ohio Bell Tel. Co. v. Pub. Utilities Comm. of Ohio, 301 U.S. 292, 81 L.Ed. 1093; Louisiana Water Co. v. Public Service Comm., 294 F. 954, 269 U.S. 597. John Mohler for respondent. Concurred in by John P. Randolph, General Counsel, Public Service Commission of Missouri.
(1) Jurisdiction of the Public Service Commission to prescribe the division of revenues obtained from joint business between two telephone companies is specifically conferred by the plain words of the statute. Sec. 5670 (3), R.S. 1939. (2) Such authority to prescribe such division of revenues (or tolls, as such revenues are often called in the business) is indeed implied from legislative authority to a Commission to require physical connection of the lines of two telephone companies for interchange of traffic. 52 Am. Jur. pp. 78, 79, sec. 47. (3) Such authority, whether expressly or impliedly conferred is not inconsistent with constitutional requirements. 16 A.L.R. 362. (4) The appellant's hearsay evidence was inadmissible since it could not qualify under an exception to the rule because of appellant's petulant, sustained refusal to allow respondent access to examine into his plant, records, and operations upon which such evidence was based. Rowland v. Boyle, 244 U.S. 106, 61 L.Ed. 1022; Newton v. Consol. Gas Co., 258 U.S. 165, 66 L.Ed. 538; Michigan Bell Tel. Co. v. P.U. Comm., P.U.R. 1931E, 222, affirmed 45 F.2d 180; In re Wisconsin Tel. Co., P.U.R. 1931E, 101. (5) The Commission was at liberty to disbelieve the appellant's evidence. Under the Missouri rule, the Commission, as any trier of facts, is given carte blanche to disbelieve for any reason sufficient unto itself. Hunter v. Wethington, 205 Mo. 284, 103 S.W. 543; Gannon v. Laclede Gaslight Co., 145 Mo. 502, 46 S.W. 968, 47 S.W. 907; McClellan v. St. Louis, 170 S.W.2d 131; Earhart v. Lumber Co., 140 S.W.2d 750. (6) No matter the rule obtaining in this state, the Commission had ample reason to disbelieve and disregard the appellant's evidence, and did not act arbitrarily or capriciously in doing so. 20 Am. Jur., p. 1031; Hammett v. Wabash R. Co., 128 Mo. App. 1, 106 S.W. 1106; Reichenbach v. Ellerbe, 115 Mo. 588, 22 S.W. 573. (7) The Commission properly considered information acquired in the course of its experience as a test of the worth of appellant's evidence. Re Missouri Standard Tel. Co., P.U.R. 1928C, 695. (8) But even if the Commission had employed such information erroneously, the use thereof was simply superfluous and harmless, as the Commission had abundant other reasons for disregarding appellant's evidence as unworthy of "credence". The result only of the Commission's order, and not the method of arriving at it, is to be tested in this court. Unless the order itself is arbitrary or capricious, it must be sustained; and any claimed error not directly constituting the basis of decision must be disregarded. State ex rel. Potashnick Truck Service v. Public Service Comm., 129 S.W.2d 69; State ex rel. City of St. Louis v. Public Service Comm., 329 Mo. 918, 47 S.W.2d 102. (9) The Commission's order is based on ample and substantial evidence in the record. (10) The appellant's claim of confiscation, even if his evidence had been believed, would be theoretical rather than realistic, and the Constitution is concerned with realities. 11 Am. Jur., sec. 93, p. 721. Under appellant's own evidence, he will receive under the Commission's order some $3000 a year at no out-of-pocket expense. This result amounts not to confiscation, but rather to its antithesis, windfall.
D.A. Rice, the appellant, owns and operates under the name of Doniphan Telephone Company three small telephone exchanges in Wayne County. The Piedmont exchange has 220 telephones, Williamsville has twenty-five, and Greenville has only three, all toll stations. Rice also owns the connecting lines between these three points and furnishes toll service between them. Rice acquired the properties in 1935 by purchase from the Referee in Bankruptcy for the North Central Telephone Company. That company had connected its lines with the long distance lines of the Southwestern Bell Telephone Company and furnished toll service to its subscribers over the Bell network. After Rice acquired the properties, Bell attempted to negotiate an arrangement for dividing toll revenues with him but reaching no agreement after six years Bell decided to discontinue toll service. Thereupon, the Public Service Commission ordered Bell to continue its toll connection with Rice, and Rice to continue to accept toll service from Bell.
The commission also initiated an inquiry and investigation for the purpose of determining the reasonable and proper division of toll revenues between the parties under Section 5670(3) R.S. 1939, Mo. RSA. This section empowers the commission to order a physical connection between telephone lines on its own motion, and if the parties do not agree on a division of the joint tolls among themselves, the commission may establish such division after a hearing.
The commission held a hearing at which the commission itself, Rice, and Bell all produced witnesses. Upon the completion of the hearing the commmission entered its report and order wherein it found as follows: Bell has prepared and uses a standard form of contract for furnishing long distance toll service to local exchanges and for division of toll revenues, known as a Traffic Agreement. At the time of the hearing every telephone system in Missouri had executed such a standard Traffic Agreement with Bell except Rice. Rice was demanding a larger percentage of the gross toll revenues than the division permitted under such agreement. Rice claimed he was losing money on long distance service, and that his share of the toll revenues under the Traffic Agreement was grossly inadequate for his needs. The commission found the evidence produced in Rice's behalf attempting to justify a larger share of the division for him was not entitled to credence. The commission found the division under Bell's Traffic Agreement was reasonable and fair, and ordered Rice to continue toll connections with Bell and to divide toll revenues received therefrom according to the Traffic Agreement until further order of the commission.
Rice appealed to the circuit court which affirmed the commission's order. He then appealed to this court, claiming the division of revenues so ordered is confiscatory and deprives him of his property without due process of law.
Rice first attacks the jurisdiction of the commission to prescribe the manner of dividing the toll revenues. There can be no question but that under Section 5670 (3) the commission has jurisdiction both to order the connection of the lines as well as the manner of dividing the toll revenues derived therefrom, inasmuch as the parties themselves did not agree upon the division. Even if the statute did not expressly authorize the commission to determine the division of tolls as it does, it has been held that such power is a necessary incident to the power to require the connection [64] of telephone lines. See 52 Am. Jur. Tel. and Tel. Sec. 47, Anno. 16 ALR, 352.
In exercising its jurisdiction generally we have heretofore announced the rule in our decisions that the orders of the commission must be based on competent and substantial evidence. State ex rel. v. Shain, 342 Mo. 867, 119 S.W.2d 220. It is now our express duty, under the new constitution, in reviewing an order of the commission to determine whether it is "supported by competent and substantial evidence upon the whole record." Art. V. Sec. 22 Const. 1945. By "substantial evidence" is meant evidence which, if true, would have a probative force upon the issues. Berkemeier v. Reller, 317 Mo. 614, 296 S.W. 739. The term "substantial evidence" implies and comprehends competent, not incompetent evidence. Mississippi Valley Trust Co. v. Begley, 210 Mo. 287, 275 S.W. 540.
Rice complains that there is no evidence in the record to support the commission's order but that all the substantial evidence supports his contention. Certainly the order must be supported by evidence contained and found in the record. Ohio Bell Tel. Co. v. Public Utilities Comm. of Ohio, 301 U.S. 292. And see West Ohio Gas Co. v. Public Utilities Comm. of Ohio, 294 U.S. 63; Interstate Commerce Comm. v. L. N.R. Co., 227 U.S. 88.
At the hearing the commission called its chief engineer as its witness. He testified he had made an investigation of Rice's telephone system and found nothing unique in its location as compared to other telephone companies throughout the State, and found nothing unusual or peculiar in Rice's operations which would have a proper bearing on the question of granting him a greater proportion of tolls than that set out by the Traffic Agreement. The commission also called its chief accountant who testified that employees of the commission had gone to Rice to obtain information for the determination of his case. They found he did not follow the uniform system of accounts as prescribed by the commission in keeping his records, in fact he kept no general books. The only available records were check stubs of bank accounts, a few invoices and contracts, and a subscribers' ledger. They found Rice confused the accounts of his telephone business with other personal business. It was decided that the accounting and engineering work to determine property values, operating expenses and preparation of traffic studies in order to ascertain the details of toll service interchanged with Bell would cost in all about $4,000 which was an expense Rice could not afford. The witness further testified the Traffic Agreement was generally accepted by the telephone companies of this State. The division under the agreement allows for the deduction by each party in the same amount for the costs of originating and terminating toll business from the gross toll revenue, and the balance is then divided in proportion to the length of the toll line haul of each. There was other testimony that the Traffic Agreement represented a fair division and provided adequate revenue from interchange of toll service, and there were 384 such agreements in effect in the State of Missouri. In fact Rice's was the only telephone system which had not entered into such an agreement.
Rice produced evidence to the effect the major part of his system was devoted to toll service and that he could not earn a fair return on the division of toll revenue under the Traffic Agreement. Rice had an inventory and appraisal of his system prepared by experts who also made an analysis of the cost of toll operations and an allocation of plant values to exchange and toll services. Based on these figures the experts testified Rice was losing money on his toll service but earned a return of 17% on his local exchange business. As an example of Rice's figures one expert testified that in addition to the $3,616 Rice retained from the division of toll revenues, Bell should have also paid over to him the extra sum of $7,565.22 in order to make him whole. However, the same expert admitted there might be a "flaw" in his calculations. He also testified the only difference between Rice's system and the normal telephone property in the independent field was that at Greenville Rice had only [65] three stations, all toll, whereas under normal operation the major portion of a telephone business is devoted to local service operation. But the evidence also showed these stations at Greenville were used in Rice's toll service to Piedmont. Also that the old town of Greenville had had about 50 subscribers, that the town was moved because of the building of the Wappapello Dam, and that materials were not then available for rebuilding the local exchange system. The same expert admitted Bell's Traffic Agreement was not unfair but in Rice's case there just wasn't enough paid into the common pot of toll revenues to satisfy all parties.
The commission found the figures and calculations presented by Rice's experts were unconvincing and not entitled to credence. In its report it stated: "We are unable to give credence to the testimony given respecting the values of the property and the allocations thereof, and neither such values or their allocations is accepted herein as convincing proof thereof. Although Rice produced testimony purporting to show there were exceptional and peculiar conditions surrounding the location and operation of these properties to support his proposed valuations and the allocations thereof, which are contrary to common experience and our own in telephone operations, we still are unable, after giving full credit thereto, to find that there is such a difference as will warrant us in finding the values and allocations proposed by him to be true and correct, and to thereby reach a conclusion that the Bell's proposed division of the tolls and charges shown in its traffic agreements are unreasonable or unfair.
"The Commission cannot find that Rice has shown that the division of the tolls and charges as set forth in these standard traffic agreements offered by the Bell have been or are unreasonable and unfair. On the other hand, this Commission believes that such divisions have been and are reasonable and fair, and so finds."
The commission's conclusions that there were no exceptional or peculiar conditions with respect to Rice's system, and the proposed division of tolls under the Traffic Agreement was reasonable and fair were all supported by substantial evidence contained in the record of the hearing which is now before us for examination on appeal.
Rice objects to the findings of the commission because they ignore his evidence. He contends since there was no other evidence adduced which contradicted his figures and calculations, or even disputed them, that the commission is bound to accept them as true. Accordingly he contends his evidence is the only substantial evidence in the record. In asserting his contention he overlooks that on cross examination his evidence was discredited to such an extent that the commission held it not entitled to credence. And certainly if evidence is not credible, it does not meet the required test of being substantial. An appellate court as a matter of law passes upon the matter of substance and not of credibility. In other words an appellate court may say that particular evidence is substantial if the triers of the facts believed it to be true. Keller v. Butcher's Supply Co., (Mo.) 229 S.W. 173.
Whenever an investigation is conducted by the commission it is required under the statute to make a report in writing which shall state its conclusions and its decision or order. Sec. 5688, R.S. 1939 Mo. RSA. Thus it must find and determine the facts. And in doing so the commission determines the weight of evidence presented to it. (Cf. Ohio Utilities Co. v. Public Utilities Comm. 108 Ohio St. 143, 140 N.E. 497.) It may disregard evidence which in its judgment is not credible, even though there is no countervailing evidence to dispute or contradict it. The rule is established in this State that the triers of fact under their duty to weigh the evidence may disbelieve evidence although it is uncontradicted and unimpeached. Weiner v. Mutual Life Ins. Co., 352 Mo. 673, 179 S.W.2d 39; Woehler v. City of St. Louis, 342 Mo. 237, 114 S.W.2d 985.
Rice also complains that the commission's order is based on data not introduced in evidence and not contained in the record. In the commission's report of [66] the hearing there are figures on the reproduction cost per station and the depreciated value per station of seven Missouri telephone companies for the purpose of comparison with the figures on those two items furnished by Rice's experts. There is no testimony in the record to support the comparative figures nor were they introduced as evidence at the hearing. While no doubt such figures were obtained by the commission in connection with its official duties in making valuations and their correctness as to the companies they concern is not now questioned, still Rice was entitled to have them introduced at the hearing, and since they were not he was denied the right to go into their authenticity, and their application to his system. Therefore, injecting them into the report of the hearing was unauthorized and improper, and we will not consider them. But since they merely go to contradict and impeach the figures produced by Rice's experts, and inasmuch as that evidence has been otherwise discredited, any use of such comparative figures was merely cumulative, and does not affect or invalidate the commission's order. The order of the commission is amply supported otherwise by substantial evidence contained in the record.
We find that at the hearing substantial evidence was adduced that the Traffic Agreement provided a fair and reasonable division of toll revenues, and was generally accepted and in use over the State, and that there was nothing peculiar or exceptional about the location of Rice's system or about its operation which made such agreement unfair as to it.
Rice attempted to show as we have stated above, as in the nature of an affirmative defense, that his system and its operation was unusual and peculiar so that the Traffic Agreement was not reasonably applicable. He had the burden of proving this and his evidence was not sufficient to sustain the burden. He also claims that under the Traffic Agreement the share of the division allowed him is confiscatory. Again he had the burden and his evidence does not sustain this claim. The principle is established that a party who claims a rate is confiscatory has the burden of showing it to be such, and a court will not interfere with the exercise of the rate-making power unless confiscation is clearly established. St. Joseph Stock Yards Co. v. U.S., 298 U.S. 38.
In reviewing an order of the commission on appeal the court is limited to determining the sole question whether the commission's order is reasonable and lawful. Sec. 5690 R.S. 1939, Mo. RSA. If the order is supported by competent and substantial evidence it is not arbitrary, oppressive, or capricious but is reasonable. If the order is within both the evidence of record and the law, it is lawful. We find the order in this case is both reasonable and lawful and should be affirmed.
Accordingly, the judgment of the trial court affirming the commission's order is likewise affirmed. All concur.