Public Service Commission v. United Railways & Electric Co.

Offutt, J., delivered the opinion of the Court. The United Railways & Electric Company of Baltimore came into existence on the fourth day of March, 1899, as the result of a merger of all the street railway lines operating in and near Baltimore, with a total authorized capitalization of $76,000,000, of which $38,000,000 was in bonds, $14,000,-000 in preferred stock, and $24,000,000 in common stock. The base fare at that time charged by its several constituent companies within the city limits was five cents, and by chapter 313 of the Acts of 1900, the consolidated corporation, hereinafter called the company, was specifically limited to a fare of five cents for the transportation of adults, and three cents for children, from any point on its lines within said city to any other point thereon which could be reached directly or by transfer at intersecting points, and that schedule it maintained until 1918. In the meantime!, the State, moving with a growing trend throughout the country, had abandoned its traditional policy of regulating public service corporations by direct legislative action, and had by chapter 180 of the Acts of 1910 created the Public Service Commission of Maryland, hereinafter called the commission, to which it had committed plenary powers in respect to regulating the rates and service of public utilities, and had repealed existing legislation fixing rates for service furnished by such utilities, such repeal to' become effective when and as the commission determined in accordance with the law that such rates should be superseded by others.

Gregg v. Public Serv. Commn., 121 Md. 30 . ⁵⁷⁶ And on July 19th, 1918, the company for the first time applied to the commission for its approval of a schedule of rates under which it would receive six cents for adults, and a uniform increase of one cent from children between four and twelve years of age and riders using’ commutation tickets. The commission was unable to hear the application immediately, and the company, on August 28th, 1918, with the assent of the commission, filed a revised schedule, which took effect October 1st, 1918, and remained in effect until January 7th, 1919, when it was formerly approved by the commission. ° On May 23rd, 1919, the company applied for a further increase from six to seven cents for cash fares, with four tokens for twenty-five cents, which it subsequently changed to a request that it be permitted to collect a cash fare of ten cents with two tokens for fifteen cents, and on September 30th, 1919, it was permitted to charge a cash fare of seven cents or six and one-half cents when tickets or other tokens were purchased. On December 26th, 1919, it again applied for an increase in its rate schedule, and the commission advanced the base fare from six and one-half cents to seven cents flat.

On March 31st, 1921, at the company’s request, the commission authorized a further increase of the base fare to seven and one-half cents, and, on August 1st, 1927, it filed an application for permission to increase its base fare to ten cents, which was 100 per cent, more than it had charged prior to October 1st, 1918, and 33 1/3 per cent, more than it had been allowed to charge from March 31st, 1921, until it filed that application; and, in connection with that request, it alleged an apprehended financial crisis, and urged that it be allowed to put the increase in effect immediately as an emergency measure, pending any hearing that might be had on its application for a permanent increase of its base fare to ten cents. The application for an emergency rate was denied but, on February 10th, 1928, the commission passed an order which denied the application for an increase of the base fare to ten cents, but which permitted the company “to' charge and ⁵⁷⁷ collect for the transportation of persons over its several street railway lines, in Baltimore City and vicinity, a base rate faro of eight and one-third cents when tickets or fare cheeks- are purchased, or nine cents cash, for the conveyance of each passenger over twelve years of age, and five cents for each child between the ages of four and twelve years, between any of the points designated in the schedule of the said company filed with the commission pursuant to the requirements of the commission’s Order No. 8240 entered in Case No. 1682 on May 26th, 1924, or between intermediate points, in either direction, on any of such lines, except in so far as the zones on any of the said lines are hereinafter modified or changed. That the first fare zone on the Halethorpe line be and it is hereby extended to the terminus of the said line at Halethorpe, effective from and after midnight of February 12th, 1928.” The company, being dissatisfied with that order, on March 13th, 1928, filed, in Circuit Court No. 2 of Baltimore City, a bill of complaint, in which it asked that that order be nullified in so- far as it or any previous order of the commission prevented it from charging a flat ten cent fare, or from continuing the first and second Halethorpe zones, and it further asked that the commission be enjoined from enforcing that order or any prior order limiting the company’s rates. The commission answered, the ease was set down, evidence offered by the commission, the company, and intervening persons interested in the matter, and after argument submitted for decree, and on May 11th, 1928, a decree was filed vacating the order in so far as the same purports to limit the rates of the plaintiff; except, however, as to that portion of said order which extended the first fare zone on the Halethorpe line to the terminus of said line at Halethorpe, as to1 which latter provision in said order “the bill of complaint is- hereby dismissed,” and enjoining the defendants from enforcing that or any other orders of the commission in so far as they limit o:r purport to limit the rates of fare to- be charged by the company.

From that decree the company and the com ⁵⁷⁸ mission appealed, the company on the ground that the court erred in abolishing the second zone on the Halethorpe line, and the commission on the ground that the court erred in vacating so- much of its order as affected the rate of fare to be charged by the company, and in enjoining it from enforcing such order. It may be noted that the relief granted in the decree is not precisely that prayed in the bill. The commission by its order did three things, it refused the company’s application for a ten cent fare, it fixed an eight and one-third cents fare, and it consolidated the two Halethorpe zones in one. The appellee, in its bill, asks thait all orders of the commission which limit its rates or prevent it from charging a ten cent fare be set aside, and that the commission be enjoined from enforcing any such orders. .The decree does not refer to a ten cent fare at all, but vacates all orders of the commission, so far as they purport to limit the-“rates of the plaintiff,” and it based that ruling upon the commission’s “election” not to have the case remanded to them.

But the court clearly had no right to fix the company’s rates, since its function was judicial and confined to determining whether the order of the commission was valid or invalid, and, if in its judgment the action of the commission was unlawful,- it should have remanded the case to the commission for such further action as might be appropriate, for even if in fact the eight and one-third cent rate allowed was inadequate to allow the company a fair return on the value of its property, that fact did not oust the jurisdiction of the commission to- fix the company’s rates, nor did it authorize the court or the company to fix them, for under the statute the power to do- that is in the commission alone. Gregg v. Pub. Sen. Comm., supra,; Chenoweth v. Pub.

Serv. Comm., 143 Md. 626 ; Havre de Grace Bridge Co. v. Pub. Serv. Comm., 132 Md. 24 ; Code, art. 23, sec. 375.

But, as the decree reads, it not only vacates the order of the commission of February 10th, 1928, but in effect all other orders affecting the company’s rate schedules, and it therefore either terminates this proceeding entirely ⁵⁷⁹ and leaves the company free to' file a new application for increased rates, or it leaves the question of rates altogether at the discretion of the company. But neither of those alternatives was authorized by anything in the statute, hut, if the order was invalid because it- was unfair, confiscatory, unlawful, or for any reason, it should have been vacated and the case remanded to the commission, for1 further proceedings in accordance with such guides, rules, and standards as the court might by appropriate- order or decree direct. The central dominating1 question presented by the appeal is whether the schedule of rates promulgated by the commission is insufficient to yield such an income as will give to the company a fair return on the value of its property. In the argument of the case it was said that- the commission had limited the company to a return of 6.26 per cent, on the value of its property, but the order did not so state.

What it did do, was to- fix a schedule of rates which, after deducting the allowances approved by the commission for maintenance, replacement, operation, financing, and other expenses, would yield that return, hut, if more efficient or economical management resulted in a larger net return, there wasi nothing in the order to prevent the company from retaining the benefit of that saving, even though it increased its net earnings to more than 6.26 per cent, of the value of its property. So that the question actually is- whether a schedule of fares which, after deducting all reasonable and proper expenses for the management and operation of the company, permits it to earn a net return of 6.26 per cent, on the value of its property, is confiscatory within the meaning of the state and federal constitutions, or unlawful and unreasonable1 within the meaning of the statute creating the commission. To that question there are various approaches, all differing in some degree in the effect they have upon the meaning and weight of the facts of the case. It may he approached from the company’s point of view, in which case the commission’s function would he largely administrative, and the ultimate determination of the pro ⁵⁸⁰ priety of its rates ■would rest with the company, and the sole test of the lawfulness of such rates would he whether they were fair to it, and would yield what in its judgment was a proper return on the valuation of its property.

It may be approached from the standpoint of the patrons of the service, in which event the power of the commission to fix the rates would be bounded on one side by the rule that the rates must in no event exceed the value of the service, and on the other by the rule that, so long as the rates did not exceed the value of the service, the company was entitled to a fair return on the value of its property. Then there is a third approach, in which the question is viewed from the standpoint of the State, in which case, factors which from the standpoint of the public or the corporation have varying weights, such as the nature and necessity of the service, the effect of its continuance or withdrawal, both upon the security holders of the corporation, and upon property values, and the welfare of the people in the territory served by it, the extent to which the State itself is a partner in the enterprise, and the circumstances and conditions under which the company acquired and exercises its franchises and privileges, may become of paramount and controlling importance, and in our judgment the question must be approached from that direction. Before dealing specifically with it, however, we will refer briefly and generally to the powers, functions and duties of the commission, to the extent of its jurisdiction, and to the weight to be given its decisions. That the power committed to the commission is legislative in character, notwithstanding that the manner in which it is exercised is forensic, is no longer open to question (Gregg v. Pub.

Serv. Commn., supra,, Chenoweth v. Pub. Serv. Commn., supra), and, except where limited by the statute itself or some constitutional provision, the acts of the commission, done in the exercise of its statutory powers, are entitled to the same weight which would be given a direct act of the legislature.

Knoxville v. Knoxville Water Co., 212 U. S. 8 ; Pub. Serv. Commn. v. Byron, 153 Md. 464 . ⁵⁸¹ There has been and. is some uncertainty as to the extent to which courts will go in reviewing the conclusions and decisions of such administrative agencies as the appellant. In Interstate Commerce Commn. v. Union Pac.

R. R. Co., 222 U. S. 541 , in reviewing an order of that commission, it was said: “There has been no attempt to make an exhaustive statement of the principle involved, but in cases thus far decided, it has been settled that the orders of the commission are final unless (1) beyond the power which it could constitutionally exercise; or (2) beyond its statutory power, or (3) based upon a mistake of law. But questions of fact may be Involved in the determination of questions of law, so that an order, regular on its face, may be set aside if it appears that (4) the rate is so low as to be confiscatory and in violation of the constitutional prohibition against taking property without due process of law; or (5) if the commission acted so arbitrarily and unjustly as to fix rates contrary to evidence, or without evidence to support it; or (8) if the authority therein involved has been exercised in such an unreasonable manner as to cause it to be within the elementary rule that the substance, and not the shadow, determines the validity of the exercise of the power. * 'x‘ * “In determining these mixed questions of law and fact, the-court confines itself to the ultimate question as to whether the commission acted within its power. It will not consider the expediency or wisdom of the order, or whether, on like testimony, it would have made a similar ruling. ‘The findings of the commission are made by law prima facie true, and this court has ascribed to them the strength due to the judgments of a tribunal appointed by law and informed by experience.’ Illinois C. R. Co. v. Interstate Commerce Commission, 206 U. S. 441 . Its 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 ⁵⁸² further than to determine whether there was substantial evidence to sustain the order.” While in the later case of the Ohio Valley Water Co. v. Ben Avon Borough, 253 U. S. 289 , where the Supreme Court of Pennsylvania held that, where there was substantial evidence to support them, the findings of the public service commission would not be reviewed on appeal, the court, in reversing that decision, said: “The order here involved prescribed a complete schedule of maximum future rates and was legislative in character. * * * In all such cases, if the owner claims confiscation of his property will result, the state must provide a fair opportunity for submitting that issue to a judicial tribunal for determination upon its own independent judgment as to both law and facts; otherwise the order is void because in conflict with the due process clause, 14th Amendment. * * *” The question came before' this court and was decided in Public Serv.

Commn. v. Byron, supra, in accordance with the views expressed in Interstate Commerce Commn. v. Union Pac. R. R. Co., supra. In that case, speaking through Judge Parke, it was said: “The first rule is that the order will not be disturbed except upon clear and satisfactory evidence that it is unreasonable or unlawful. This is a legislative mandate which is reinforced by the fact that the commission is a tribunal erected by law, informed by experience, and assisted by a trained corps of subordinates.

Code, art. 23, sec. 408; Public Serv. Commn. v. North. Cent. Ry.

Co., 122 Md. 355, 388, 391, 392 ; Havre de Grace Bridge Co. v. Public Serv. Commn., 132 Md. 16, 24 ; Interstate Commerce Commn. v. Union Pac. Ry. Co., 222 U. S. 541 .” And that statement of the rule is not only supported by the weight of authority (see discussion in Diclcinson on Administrative Law), but is required by the statute itself (Code, art. 23, sec. 408), and appears to be indicated by the very nature and necessity of the thing, for reasons pointed out by Judge Parke in Pub.

Serv. Commn. v. Byron, supra. It is true that in Ohio Valley Water Co. v. Ben Avon Borough, supra, the court ⁵⁸³ said that, where the issue of confiscation was raised, the dne process clause of the Fourteenth Amendment required that provision be made for submitting that question to some judicial tribunal authorized to adjudicate it upon its “own independent judgment as to both law and facts”; and that expression is consistent with the theory that in reviewing the decision of an administrative agency the court would review the facts as in an equity ease. But such a conclusion is inconsistent with all prior decisions of the Supreme Court, and while in Bluefields Wader Works Co. v. Pub.

Serv. Commn., 262 U. S. 689 , it was again stated that upon the question of confiscation the utility was entitled to the “independent judgment of the court as to both law and facts,” it is not thought that, by that language, the court in either of those cases meant to say anything more than that, where the facts are undisputed or must be taken as established, and the inference to be drawn from them inevitable, the courts will review any conclusion of law predicated upon such facts. But we do not believe that it was intended to overturn the policy, established by the decisions of that court and by many state and federal statutes, which commits to such agencies as public service commissions the ascertainment of facts which rest in conflicting evidence, and we find therefore no inconsistency between the language quoted from those opinions and the language of this court in Public Serv. Commn. v. Byron, supra.

And we feel, too, that in dealing with the constitutional question involved in confiscation some weight must be given to the statute, which places upon the person attacking the decision of the commission the burden of establishing its unlawful or unreasonable character by “clear and satisfactory proof.” Pub. Serv. Commn. v. Byron, supra. Reverting now to the main question presented by the appeal, the first inquiry is whether a schedule of rates which permits the appellee to earn 6.26 per cent, on the fair value of its property can be said to bo confiscatory within the meaning of that clause of the Fourteenth Amendment of the Federal Constitution, which denies to the states the power of ⁵⁸⁴ depriving any person of Ms property without due process of law. 'Confiscation, in that sense, is essentially a relative, and not an absolute, term, and it does not exist apart from' the facts which are said to occasion it.

No fixed or general rule can be announced by which it can be determined whether it exists in any given ease, because whether it exists or not must be determined from factors which vary with the facts of each case, since rate cases, like wills, seldom have “twin brothers.” Covington & L. Turnpike Co. v. Sandford, 164 U. S. 592 et seq., and we know of no authority for the proposition that public utilities, without regard to circumstances or conditions, are entitled to a return of any given amount of percentage on the value of their properties. Eor wMle there are cases wMch hold that such utilities are entitled to a return of six or seven or eight per cent, on the value of their properties, they have no controlling weight, because the decisions are uniformly found to be based upon facts peculiar to the several cases. So in this particular case, in deciding whether the schedule of rates prescribed by the commission is confiscatory, we must be guided by the facts of this case, and are little aided by what this court or some other court may upon different facts have found to be lawful or confiscatory, fair or unreasonable rates. To attempt to analyze in detail the mass of factual and opinion evidence adduced before the commission is neither practicable or necessary, since such facts as are relevant to the question before us rest for the most paid in records of the company or the commission, and are not in dispute, and we will at this time only refer to such as are necessary to indicate the contentions of the parties.

The total value of the company’s property, including easements, may be placed at $15,000,000. That was the valuation placed upon it by the commission in 1924, and while there was some dispute as to whether that figure should not be increased to include additions since the valuation, that contention was not stressed in this court, but was treated as a matter of detail which could be adjusted to fit the facts at ⁵⁸⁵ some future time, so that the figure of $75,000,000 may be treated as the true value of the company’s property for all the purposes of this case. The financial structure of the company appears from, the following 'tabulation, in which .'the “basic value” of its property is assumed to be $70,000,000, the value placed upon it by the commission exclusive of the value of the easements, which has been fixed at $5,000,000: Per Cent. Glass of Outstanding of Basic Securities 12/31/1926 Value Per Cent.

Outstanding of Basic 6/30/1927 Value Mortgage Bonds.$47,405,000 67.7 $47,405,000 67.7 M i s c e llaneous Obligations.. 6,392,700 9.1 7,664,200 10.9 Income Bonds. . 13,977,000 20.0 13,977,000 20.0 Total Bonds and Miscellaneous Obligations.. 67,774,700 96.7 69.046.200 98.7 Stocks......... 20,461,200 29.2 20.461.200 29.2 Grand Total. .$88,235,900 126.0 $89,508,400 327.9 And it appears that the company has for some time past been paying, and still pays, dividends on its common stock at the rate of four per cent., and that that stock, having a par value of fifty dollars per share, has in late years sold ou the Baltimore Stock Exchange at prices ranging from sixteen dollars to twenty-one dollars per share, and it further appears that its mortgage bonds bought at current market prices yield the purchaser a return of about six per cent. From time to time, since 1913, the company has had occasion to borrow for varying periods, and the rates at which this money was bought, as shown by the following tabulation, throws some light upon the changes in its credit: ^{586 587} From another table, filed by people’s counsel, it appears that the net income of the company, for the years from 1920 to 1926, inclusive, was as follows: 1920, $1,043,599.21; 1921, $735,230.58; 1922, $799,268.99; 1923, $976,266.38; 1924, $976,068.39; 1925, $980,609.53; 1926, $1,010,-054.43; and that for the same period the operating income was: 1920, $17,313,589.84; 1921, $16,332,865.34; 1922, $16,122,592.02; 1923, $16,461,798.86; 1924, $16,453,-254.31; 1925, $16,621,220.20; 1926, $16,715,709.07. Another tabulation filed on behalf of the people indicated the following ratio of funded debt to track operation per mile, and gross revenue per dollar in a number of American cities: Funded Debt and Income Bonds Funded Debt per Mile of Track Operation Funded Debt per Dollar Gross Revenue Baltimore.......$67,774,700 $164,000 4.05 Without Income Bonds....... 53,797,700 130,000 3.22 Detroit.......... 35,155,000 1.63 Los Angeles..... 19,852,000 1.64 San Francisco . . . 1.19 Pittsburg....... 34,215,000 57.700 1.57 Boston.......... 49,839,000 100,200 1.41 Cleveland....... 5,495,000 13,310 .30 St. Louis........ 52,590,000 120,900 2.80 St. Paul, Minn. . . 19,478,000 38.700 3.40 Buffalo.......... 25,392,782 62,200 2.47 Providence......13,714,000 47,200 1.61 Washington...... 5,606,000 77,000 1.21 Cincinnati....... 5,288,400 19,840 .65 Indianapolis..... 13,497,517 56,300 2.35 Denver.......... 10,863,500 48,900 2.38 Still another table showed the current rates of fare, rate of return, and base, in twelve representative American cities comparable in size to Baltimore, to be as follows: ⁵⁸⁸ Rate of Return Base Pare Baltimore (New Pare). . 6.26 $75,000,000 9 c— 3 for 25c Boston............... . 4.64 159,025,142 10c— 4 for 25c (limited) Chicago Surface Lines. 6.27 164,600,000 7c— 3 for 20c Cincinnati............ 4.16 36,381,017 10c— 3 for 25c Cleveland............ 4.35 37,106,506 7c— 8 for 50c Kansas City.......... 1.82 23.300.000 -15 for $1.00 8c- Los Angeles .......... 3.06 54.000. 000 5c Philadelphia......... 5.07 216,000,000 8c-2 for 15c Pittsburg. ............ 5.85 68.170.000 10c-3 for 25c St. Louis............. 4.66 52,024,192 8 c-2 for 15c San Praneisco........ 5.37 35.000. 000 5g Washington.......... 4.69 50.000. 000 8c— 6 for 40c And another table lists seventy-nine American cities, each having ai population of over 100,000, and shows the-population of each city, the rate of fare charged on the street railways, and commutation privileges, established in connection with such fares in each city. In analyzing that table Mr. H. Carl Wolf, engineer for the commission, testified: “Of the 81 cities listed as having a population of 100,000 or more, only nineteen of them have a fare higher than Baltimore.

There are thirty cities with a ten cent fare. Only one of these has a straight ten cent fare with no tokens. Ten of them, or one-third the number, have an eight and one-third cent token fare, six of them have an eight and one-third cent token fare, plus a pass system, one of them has a seven and a half cent token fare, plus a pass system, and when the commission recalls that at the present time ninety-seven per cent, of the full fare passengers in Baltimore are nsing the token fare, they will see that the ten cent — seven and a half cent fare, plus a weekly pass,» if applied to Baltimore, would cause practically no increase in fare, and probably a decrease. There is one of these thirty cities with a. ten cent fare which has not a token fare hut which does have a pass, and eleven of them with ten cent fares charge seven and one-half cents or lower for tokens with no passes.” ⁵⁸⁹ And in criticising that analysis Mr. C. D. Emmons, president of the company, said: “I have this from the late bulletin: that the trend of fares over the United State® has been upward since July 1st, 1923, and is continuing upward.

On October 1st, 1927, the average fare of 272 cities reporting was 7.9516 cents and November 1st, 1927, the average fare was 7.9846 cents, which is the highest average fare that the street railway industry has ever had, not excluding the war1 period. “There are at the present time, or since the November bulletin, there have been twelve- different cities that have changed the rate of fare. There are three interurban roads that have changed the rate of fare. At the present time there- are fourteen fare cases pending. “Q. What are the direction of those changes? A. The changes are all up- with the exception of a municipal city which has put in a weekly pass, and the information here does not say about the flat fare.

I presume it’s the same, a flat fare with a weekly pass. I think they give a -statement that there are only, I have forgotten, of basic ten cent fare cities, but my statement here is that there aro — I got this morning, dated November 26th, from New York — this gives 219 United States cities. Q. Having a basic fare of ten cent ? A. That’s right, yes.

(Mr. Tingley) : Those are not cities of over 100,000 ? (The Witness) : No; but I counted the cities of over 100,000 in this and there are- tbirty-ono cities of over 100,000 that have a basic ten cent fare-. * * * (The Witness) : Cicero, Illinois, 65,400; Forest Park, Illinois, 10,768; Maywood, Illinois, 12,072; Oak Park, Illinois, 53,500; Auburn, Maine, 16,985; Bangor, Maine, 25,978; Bath, Maine, 14,731; Lewiston, Maine, 35,500; Villercia, Massachusetts, 3,646; Boston, Massachusetts, 787,000; Braintree, Massachusetts, 10,580; Concord, Massachusetts, 6,461; Framingham, Massachusetts, 17,033; Holyoke, Massachusetts, 60,400; Lexington, Massachusetts:, 6,350; Natick, Massachusetts, 10,907; Needham, Massachusetts, 7,012 ; Newburyport, Massachusetts, 15,618; Newtonville, Massa ⁵⁹⁰ chusetts, 5,700; Wakefield, Massachusetts, 13,025; Waltham, Massachusetts, 35,700; Wellesly, Massachusetts, 6,224; Woburn, Massachusetts, 16,574; Worcester, Massachusetts, 193,300; Morristown, New Jersey, 12,548; Ocean City, New Jersey, 3,721; Lackawanna, New York, 17,918; Mauchnuck, Pennsylvania, 3,666; West Chester, Pennsylvania, 11,717. * * * (Mr. Clark) : How many states now have you cited there? (The Witness) : Six states.” From other tables it appears that the wages of “platform” men have increased from a maximum of twenty-two cents an hour in 1913 to- a maximum of fifty-three- cents an hour in 1926, that other wages showed an approximately similar increase, and that during the same period the general cost of living showed an increase- from a base index of 100 to an index of 173. Perhaps the most significant fact connected with the question before us is the decline in the number of revenue passengers carried by the company, from 253,834,179 in 1919, to 225,225,633 in 1926, and 145,256,760 (August approximated) for eight months of 1927.

Coincident with that decline was a gradual increase in the rates of fare from five cents prior to 1919 to seven and one-half cents in 1927, and an increase in the registration of automobiles from 85,430 in 1919 to- 267,649 in 1926. In connection with those figures a further fact appears, which is that, while the total number of revenue passengers is decreasing, the peak load of passengers, that is, the greatest number of passengers carried during the “rush hours” each day, has increased, and, to accommodate that increasing demand, it has become necessary for the company to- maintain an increased equipment, which is to some degree idle during a part of the day. One of the contentions made by the company was that the existing rates so affect its credit that it is compelled to- pay unreasonably high rates for money, and in connection with that contention it filed a table showing the rates it has paid since 1920, which in part shows: ⁵⁹¹ These facts are but a small part of those to be found in the mass of evidence contained in the record, but they are sufficient to indicate the grounds for the conflicting contentions of the parties to this appeal, which, as we understand them, are in substance as follows: In respect to the main question, the appellant appears to contend that the schedule of fares promulgated by the commission is, under existing conditions, all that the service is worth, and fair alike to the company and the public, but that, whether fair to the company or not, no higher rates should be allowed, because the company is only entitled to collect from the public the value of the service it renders. The contention of the company, on the other hand, seems to be that it is entitled to earn a fair return on the value of ⁵⁹² its property, that “fair return” moans a return of at least eight per cent, on the value thereof, and that it is entitled to a schedule of rates high enough to insure that return regardless of the value of its service to the public.

Or reduced to its lowest terms, and quoting its own language, the company’s proposition is that “compulsory limitation of the company’s rates to yield a maximum of less than eight per cent, is confiscatory and unlawful,” while the commission contends that “rates must in no event exceed the value of the service, regardless of return or confiscation”; and somewhere between those extreme theories lies the law. Manifestly the proposition submitted by the company is broader than the law, while that of the commission is too indefinite and vague tó be of much aid in settling the question before us. There is, so far as we know, no rule of law which guarantees to public service corporations the right to earn eight per cent, on the value of their properties, regardless of the fairness of their rates to the public or of any other fact or circumstance, but the law, as stated in Covington & L. Turnpike Co. v. Sandford, supra, is to the contrary There it is said (page 596) : “It is proper to say that if the answer had not alleged, in substance, that the tolls prescribed by the act of 1890 were wholly inadequate for keeping the road in proper repair and for earning dividends, we could not say that the act was unconstitutional merely because the company (as was alleged and as the demurrer admitted) could not earn more than four per cent, upon its capital stock. It cannot be said that a corporation operating a public highway is entitled, as of right, and without reference to the interests of the public, to realize a given per cent, upon its capital stock.

When the question arises whether the legislature has exceeded its constitutional power in prescribing rates to be charged by a corporation controlling a public highway, stockholders are not the only persons whose rights or interests are to be considered. The rights of the public are not to be ignored. It is alleged here that the rates prescribed are unreasonable and unjust to the company and its stockholders. But that involves an inquiry as to what is ⁵⁹³ reasonable and just for the public.

If the establishing of new lines of transportation should cause a diminution in the number of those who need to use a turnpike road, and, consequently, a diminution in the tolls collected, that is not, in itself, a sufficient reason why the corporation, operating the road, should be allowed to maintain rates that would be unjust to those who must or do use the property. The public cannot properly be subjected to unreasonable rates in order simply that stockholders may earn dividends.” Eor is there any rule by which we may precisely determine what is the actual value to the public of such service as that which the company sells. When the company speaks of a “return of not less than eight per cent.” on its property, it must be remembered that nearly $68,000,000 of its actual value is covered by bonded indebtedness or other obligations bearing1! a fixed rate of interest far below that rate, and that the balance of the eight per cent, return remaining after paying that interest would go to the holders of stock having a par value of $20,461,200, the real value of which is $7,000,000, if the easements are valued at $5,000,000, or $2,000,000, if they are excluded, which would necessarily be greater than an eight per cent, return on the value of that stock. But aside from that, and assuming that the rate schedule will yield less than eight per cent, on the actual value of all the company’s property, or even less than eight per cent, on the actual value of the stock, that fact alone cannot characterize it as confiscatory, but other factors must be considered.

It is argued that an eight per cent, return is necessary to enable the company to borrow money at reasonable rates, and that the fact that it is limited to a rate schedule which will yield a return of only 6.26 per cent, puts it at a, disadvantage as a borrower and weakens its credit. But the evidence fails to support that contention. It is true that there is in the record a mass of subjective and highly conjectural testimony pro and con relating to it, much of which tends to support the company’s contention, but, whilst its usefulness may be conceded, the speculative opinions of ex ⁵⁹⁴ perts who are themselves interested in increasing the rate of return on similar utilities cannot be substituted for the judgment of the commission, and accepted as a conclusive determination of the question, at least where the judgment of the commission is based upon substantive evidence. The value of such securities as the obligations of public utility companies depends in the main upon the security they offer, as well as the rate of return which they will pay the investor.

And it is quite as reasonable to assume that the fact that the ratio of the company’s funded debt to the value of its property is, as the commission found, approximately ninety per cent., affects its credit, as the fact that it can only earn 6.26 on the value of its property. In connection with that contention, the company asserts that the use of the automobile for the transportation of those who otherwise would use its lines has increased to such extent that it has reduced its net revenue to such a point, that any rate schedule indicating a return of less than eight per cent, on the value of its property impairs the security offered investors, and lessens the confidence of the public in its financial stability, and that therefore it is entitled as of right to a schedule which will insure such a rate of return regardless of its effect on that part of the public who for one reason or other are obliged to use its lines. But if, as the company contends, it is required to pay more for its money because of the risk resulting from the increasing competition of the private automobile, it certainly cannot expect to correct that condition by raising its rates to such a point that investors will purchase its stock as a gambling or speculative venture. Nor in fact do we see any occasion for the gloomy outlook of the company’s witnesses.

It appears to be well and economically managed, and the market price of its securities-indicates continued public confidence in its stability, as well as in its ability to liquidate its obligations, when and as they accrue, and from the volume of its business there is little likelihood that it will cease to be a highly productive property, not only useful but essential to the city’s welfare and the public convenience, and profitable to its owners, provided ⁵⁹⁵ sufficient allowance is made for keeping its property from depreciating.. There seems to he no question l>ut that the private automobile is a serious competitor of