Mayor of Crisfield v. Public Service Commission

Melvin, J., delivered the opinion of the Court. On December 26, 1941, the Mayor and Council of Crisfield, a municipal corporation, applied to the Public Service Commission of Maryland for a certificate of authority to construct an electric light and power system for municipal and other purposes, under the provisions of Chapter 930 of the Acts of 1941. The Eastern Shore Public Service Company of Maryland, a corporation, hereinafter called “Eastern Shore”, which was then, and is now, supplying Crisfield and environs with electricity, intervened in the proceedings and protested the granting of the application. After full and extended hearings, and the taking of voluminous testimony, the Commission refused to issue the certificate of authority and the Mayor and Council of Crisfield, thereupon, filed its petition to the Circuit Court for Somerset County seeking the reversal of this order, under the provisions of Section 415 of Article 23 of the Code (1939 Ed.), as to procedure.

Potomac Ed. Co. v. Public Service Comm., 165 Md. 462 , 169 A. 480 . The case was submitted to the Court on said petition and the answers of the Commission and “Eastern Shore”, respectively, together with a transcript of the record which was before the Commission. No additional ¹⁸³ testimony was sought to be introduced by the petitioner, although it, exclusively, had a right to do so. Code, Art. 23, Sec. 416.

The Court’s conclusion was to affirm the Commission’s order and to dismiss the petition, and it was so decreed. From this decree the present appeal was taken. The record discloses that this is a case of a municipality seeking to enter a field of utility operations already completely occupied by a private enterprise which is, admittedly, rendering to the residents of that municipality (Crisfield) “reasonably adequate, efficient and dependable electric light and power service.” That is what the Commission found as a matter of fact, and the appellant in its petition to the Court admits it to be “substantially a true statement.” It happens, also, to conform verbatim to the special purpose for which the statute in question was enacted, as expressed in the first section of the subtitle (116A). However, the theory advanced by appellant in support of its position in the case is that this private corporation (“Eastern Shore”) is without any franchise at all in Crisfield, it being contended that the only one it had expired on May 9, 1942, and that, therefore, it is not a question here of introducing competition in that particular area, which it is conceded would be unjustified, but of substituting municipal ownership and operation for that of the private enterprise whose rights have terminated.

By way of emphasizing this issue as the controlling one, the appellant, through its counsel, has declared at each stage of this litigation that it will withdraw its application and abandon the project in question unless it can operate exclusively in this field; so that if the Court should determine that the utility company presently serving Crisfield (“Eastern Shore”) is there under a valid “perpetual” franchise, the city will withdraw, even though the franchise is, undeniably, not exclusive. This forthright attitude serves to identify at once the basic point of this appeal and to bring the Court directly to the consideration of it. ¹⁸⁴ In reviewing the record we are confronted at the outset by the provisions of two statutes which are of special significance and applicability, being in the nature of guide posts showing the limitations upon the Court’s jurisdiction in this particular kind of a case. The first is Section 116U of the Act of 1941 (Chapter 930) which, coming after the sections granting certain powers to the Mayor and Council of Crisfield, states, in effect, that the whole act is a nullity without the permission and approval of the Public Service Commission being first obtained and unless and until a certificate of authority'is duly granted by said Commission. The exact wording of the statute is: “116U.

None of the powers granted by Section 116A to 116X of this sub-title shall be exercised by the Mayor and Council without the permission and approval of the Public Service Commission of Maryland first had and obtained and unless and until a certificate of authority is duly granted by said Commission. to. construct and maintain and operate said municipal electric light and power system and issue said revenue notes, bonds or certificates, as provided in Section 401 of Article 23 of the Code of Public General Laws of Maryland, 1939 Edition.” This section (401) lays double emphasis on the necessity 'of obtaining a certificate of authority from the Public Service Commission, and on this point provides that:. “No municipality, except the Mayor and City Council of Baltimore, shall build, maintain and operate for other than municipal purposes any works or systems for the manufacture and supplying of gas or electricity for lighting purposes without a certificate of authority ■granted by the Commission.” There is thus made manifest the legislative intent to clothe the Public Service Commission with supreme authority in such a matter, subject, only, to the condition that its orders must be both reasonable and lawful, as hereinafter more fully noted. The second statute above referred to shows how strongly the presumptions are in favor of the Commis ¹⁸⁵ sion’s orders whenever the court’s review of any of them is sought. This is Section 419, Article 23, Code (1939 Ed.), which provides: “In all trials, actions and proceedings arising under the provisions of this sub-title, or growing out of the exercise of the authority and powers granted herein to the commission, the burden of proof shall be upon the party adverse to such commission, or seeking to set aside any determination, requirement, direction or order of said commission, to show by clear and satisfactory evidence that the determination, requirement, direction or order of the commission complained of is unreasonable or unlawful, as the case may be.” With these statutes of primary importance before us, the question which arises for the Court’s decision is whether or not the appellant on this record has shown by clear and satisfactory evidence that the order appealed from is either unreasonable or unlawful. The order, itself, is based upon three findings which are expressly made a part of it.

These are : “(1) Protestant (“Eastern Shore”) has a perpetual franchise to render electric service in Crisfield; “(2) The residents of Crisfield are now receiving reasonably adequate, efficient and dependable electric light and power service; “ (3) Public necessity and convenience require that the application of the Mayor and Council of Crisfield be disapproved.” Findings numbered (2) and (3), being purely of fact, may be disposed of without the necessity of extended comment, for the decision as to them is entirely free from difficulty. It is sufficient to say that the Court will not substitute its own judgment for that of the Public Service Commission where the record shows substantial evidence to support the latter’s findings of fact, and, moreover, will not examine into the facts any further than to ascertain this result. The presumption of reasonableness is just that strong. This rule of law, as embodied in the statute, has become a legislative mandate designed to protect both the courts and the admin ¹⁸⁶ istrative tribunal from encroachment on their respective provinces, and to promote co-ordination between them when questions of law and of fact arise in any case.

As a fact-finding body, representing the State in the supervision and control of public utilities corporations, the Public Service Commission has been provided by the Legislature with a staff of trained assistants and specialists for the very purpose of furnishing a sound foundation of facts for every finding by the Commission. The Courts have no such facilities or equipment to function in this field of governmental control over public utilities, and will not disturb the Commission’s findings where there appears substantial evidence to support them. Public Service Commission v. Byron, 153 Md. 464, 471 , 138 A. 404 ; Baldwin v. Public Service Comm., 160 Md. 202 , 152 A. 907 ; Public Service Comm. v. Williams, 167 Md. 316 , 173 A. 259 . In the case at bar, not only is there substantial evidence to support the Commission’s findings of fact, but the correctness of finding No. 2, that “the residents of Crisfield are now receiving reasonably adequate, efficient and dependable electric light and power service” is admitted by the appellant in its petition to the Court.

The Commission has found, after a thorough study of the whole case, that the stated purpose for which the Act of 1941, Chapter 930, was enacted, is already being served by the present utility corporation. In so concluding it follows, logically, that “the public necessity and convenience require that the application of the Mayor and Council of Crisfield be disapproved,” this being finding No. 3 upon which the Commission’s order is based. In the face of these facts, the appellate tribunal is now asked to substitute its own judgment for that of the Commission. In so many words, this Court has already ruled that this will not be done.

Public Service Commission v. Byron, supra; Public Service Commission v. Williams, supra. In the former case, in an opinion by Judge Parke, it is stated, at page 481 of 153 Md., at page 411 of 138A: ¹⁸⁷ “When such a question (the reasonableness of the Commission’s order) reaches an appellate tribunal for review in an effort to have an order annulled, the court has no power to substitute its own judgment for that of the commission, and unless it is made to appear by clear and satisfactory evidence that the order was unreasonable the courts are powerless to set it aside on that ground.” In the latter case, in an opinion also by Judge Parke, the Court said, at page 331 of 167 Md., at page 265 of 173 A.: “In the solution of this problem, the court may not substitute its own judgment for that of the commission. As said in Public Service Comm. v. United Rwys. & Electric Co., 155 Md. 572 , at page 580, 142 A. 870 , 873: The commission’s ‘conclusion, of course, is subject to review, but, when supported by evidence, is accepted as final; not that its decision, involving, as it does, so many and such vast public interests, can be supported by a mere scintilla of proof, but the courts will not examine the facts further than to determine whether there was substantial evidence to support the order.’ Baldwin v. Public Service Comm., 160 Md. 202, 207 , 152 A. 907 ; Public Service Comm. v. Byron, 153 Md. 464 , 138 A. 404 .” In view of this clearly defined law, considered in connection with the record before us, the Commission’s order, insofar as it is based upon findings No. 2 and No. 3, must be affirmed. This leaves open for consideration the Commission’s finding numbered “(1)”, which, as hereinbefore stated, is the controlling issue on this appeal.

The finding is: “(1) Protestant (Eastern Shore) has a perpetual franchise to render electric service in Crisfield.” While the determination of this issue by the Commission involved a mixed question of law and of fact, it was the Commission’s plain duty, as well as its jurisdictional right, to make such a determination. It was required by the statutes, Chapter 930, Acts of 1941, and Section 401, Article 23, Code of 1939, to pass on the question as to ¹⁸⁸ whether to grant or refuse a certificate of authority. That was an express duty, in order to perform which it became necessary for it to exercise the implied power of deciding what kind of a franchise, if any, was then held by the private utility corporation serving Crisfield, it being conceded in the case that but one electric light plant, should be permitted to operate in that city. The authority for the exercise of such implied power is found in Section 52 of Chapter 180 of the Acts of 1910, now codified as Section 425 of Article 23, Code of 1939, which provides that: “The public service commission hereby created shall have, in addition to the powers herein [specified], mentioned or indicated, all additional, implied and incidental powers, which may be proper and necessary to effectually carry out, perform and execute all the said powers herein * * * mentioned or indicated.” This is a direct and explicit statement of the legislative intent to confer on the Commission full jurisdiction to completely execute the powers .and duties delegated to it by the statute.

The test of the validity of its orders is always their reasonableness and lawfulness; The denial to it of jurisdiction to ascertain the basis of a reasonable or lawful order would be to give a construction to thé Public Service Commission Law which would paralyze its operations in a case like the-one at bar and thus thwart the legislative intent so plainly expressed. The whole theory upon which both the Act of 1941 and the • municipality’s application is based being that there was no outstanding franchise after May 9, 1942, the Commission was faced with the duty of determining this preliminary question before it could reach a decision as to the reasonableness of an order either granting or refusing a certificate of authority. The lawfulness of the Commission’s order is questioned by the appellant in only one particular — that the franchise of protestant had expired and that, consequently, there was an open field for the appellant to enter at the time it made its application. That is a question which, in the last analysis, resolves ¹⁸⁹ itself into the fundamental one of the reasonableness, vel non, of the order, apart from its lawfulness.

If the Commission’s order was lawful, that is to say, if it correctly found that protestant’s franchise was a “perpetual” one, then its order was also reasonable, it being agreed that a certificate of authority should not have been granted to the municipality to enter a field of public utility operations that was already being adequately, efficiently and dependably served by an enterprise which had a legal right to be there. If, on the other hand, the Commission’s order was unlawful, in that it incorrectly held the protestant’s franchise had not expired on May 9, 1942, then it would necessarily follow that its order was unreasonable, as well as unlawful, for in that event the Commission’s refusal to authorize the municipality’s entrance into the field and its exercise of the powers granted to it by the statute, would be arbitrary and unjustified. The final inquiry, decisive of the case, therefore becomes: What kind of a franchise, if any, did the protestant, “Eastern Shore”, have in Crisfield at the time appellant made its application for a certificate of authority? The corporation claims that it had both a statewide franchise authorizing it to enter Crisfield for the operations in question, and also a local franchise which its predecessors originally acquired under the general corporation laws of Maryland and which, by mesne assignments, became vested in it.

The former claim is based on “Eastern Shore’s” status as a “Class 13” corporation, created under the Public General Laws and empowered to do state-wide business with state-wide franchises; while the latter is based on its status as a “Class 17” corporation, with no franchise rights except in Somerset County. For the purposes of this case — that is, of passing upon the correctness of the Commission’s finding — it is immaterial whether at the time of the filing of its application for a certificate of authority “Eastern Shore” was operating in Crisfield under a “Class 13” or a “Class 17” ¹⁹⁰ franchise. If it had a valid franchise at all to then and there operate, and was doing so adequately, efficiently and dependably, as found by the Commission, then the Court would have no justification for disturbing this finding and setting aside the Commission’s order. As the original franchise applicable to this case was the one granted Eastern Shore’s predecessor as a “Class 17” corporation, it would be appropriate to consider that one first.

Tracing its history from the beginning, the record shows that electric service was commenced in Crisfield about 1902 by the Crisfield Ice Manufacturing Company, which was a “Class 17” corporation formed in 1892 under the general corporation laws of Maryland as then codified. Section 111, Article 23, Code of 1888. This section at first related to gas light companies but was amended by Chapter 306 of the Acts of 1886 so as to read: “For the promotion of gas light or electric light companies.” The franchise conferred upon it also came from this amending statute, through the addition of Section 93A which gave the right to any electric light company formed under said article “to lay, construct or build, lines of conductors under, along, upon or over the streets, squares, lanes, alleys and roads, paved or unpaved and connect same with any manufactory public or private buildings, lamps or other structures or object, and with the place.of supply; * * This Section 93A became Section 111 of Article 23 in the Code of 1888. By Chapter 588 of the Acts of 1890, it was repealed and re-enacted so as to include Somerset and Carroll Counties.

(Kent and Talbot Counties had been the only ones mentioned in the Act of 1886). It was again repealed and re-enacted in 1894, c. 308, so as to include Montgomery and Washington Counties, and as so amended became Section 143 of Article 23 of the Code of 1904. By Chapter 55, page 72, of the Acts of 1910, this section was once more repealed and re-enacted, and became Section 179 of Article 23 of the present Code of 1939. ¹⁹¹ As thus amended in 1910, the franchises granted prior thereto were not altered or affected in any way, the amendment simply making State-wide the offer of franchises to “Class 17” corporations instead of confining it to a few counties, as theretofore, and also requiring that the “proper assent of the municipal authorities” must be obtained. This, as hereinafter noted, could only apply to franchises not already being exercised.

It is relevant to emphasize at this point that the franchise which the Crisfield Ice Manufacturing Company acquired as a “Class 17” corporation was unlimited in duration, did not require the assent of the municipal authorities for its exercise, and that it extended to the environs of Crisfield as well as to the corporate limits of the City. All this is conceded by the appellant, which further conceded that the franchise, thus constituted, continued in full force and effect, and was actually exercised, from 1902 until the spring of 1917, without question. In that year an incident occurred in this corporation’s history which eventually became the basis of the pending litigation. Crisfield Ice Manufacturing Company in April, 1917, entered into a written agreement with one Albert Emanuel, of Ohio, for the sale of its property and assets, including its franchises.

The vendee stipulated as a condition precedent to his purchase that the vendor obtain “a new franchise” to be prepared by the purchaser for the use of the streets and alleys necessary and useful for the operation of the business of the purchaser.” This stipulation is incomprehensible, for the said Company unquestionably held at that time a franchise in Crisfield for the very purpose for which a new franchise was required by this purchaser, and the then existing franchise was of unlimited duration and covered more territory. However, in compliance with the said contract of sale, and under the authority conferred upon it by Chapter 529, page 1078, of the Acts of 1910, the Mayor and Council of Crisfield, on May 9, 1917, passed an ordinance granting to the Crisfield Ice Manufacturing ¹⁹² Company a new franchise. This, as expressly limited by said statute, was for a term of twenty-five years, thus bringing the expiration date to May 9, 1942. Although this franchise was accepted by the Crisfield Ice Manufacturing Company and the sale to Emanuel was approved by the Public Service Commission, it is of special significance that there was no waiver or surrender of the existing “Class 17” franchise and no mention of the substitution of the one for the other; nor was any authority sought from the Public Service Commission by Crisfield Ice Manufacturing Company to exercise the franchise under the new ordinance or to abandon the original and then existing one.

This whole transaction fell through upon the purchaser’s failure to consummate it, and on November 6, 1918, the Public Service Commission formally rescinded its orders of approval. Thereupon, the Crisfield Ice Manufacturing Company sold all its property and assets, including its franchise, to the Consumers Ice Company, whose name was subsequently changed to Consumers Public Service Company. This sale was duly approved by the Public Service Commission on November 7, 1918. In December, 1936, the Consumers Public Service Company was merged with the Eastern Shore Public Service Company, and this merger was, also, duly approved by the Commission.

From the time Crisfield Ice Manufacturing Company began to supply electric current to Crisfield and environs in 1902, the service of this public utility has been continuously rendered without interruption down to, and including, the present time, by Crisfield Ice Manufacturing Company and its successors, Consumers Public Service Company and Eastern Shore Public Service Company, all claiming to operate under the original “Class 17” franchise. That this franchise was transferable or assignable is not open to question in view of the provisions of the statute specifically authorizing such a transfer, and which was in effect when Crisfield Ice Manufacturing ¹⁹³ Company sold out to Consumers, etc., Company in November, 1918, and transferred all of its assets, including franchises, to that corporation. Sec. 32, Art. 23, Code (1918 Supp.), now Sec. 38, Art 23, Code (1939). See also Dillon Mun.

Corp., 5 Ed. par. 1265; Gontrum v. Union Ins. Co., 177 Md. 624 , 11 A. 2d 625 ; City of Detroit v. Detroit Co., 184 U. S. 368 , 46 L. Ed. 592 ; Hagerstown v. Hagerstown Rwy. Co., 123 Md. 183, 91 . A. 170.

This attribute of transferrability of the “Class 17” franchise, in addition to its unlimited duration, supports the classification of it by the Public Service Commission as a “perpetual” franchise, notwithstanding the absence of a specific provision to that effect in the grant itself. While there are constitutional provisions in some states against grants in perpetuity, in Maryland there is no such restriction and the Legislature may, therefore, grant this kind of franchise, subject,