Van Dyke v. Geary
1917 U.S. LEXIS 1604 · 244 U.S. 39 · 37 S. Ct. 483 · 61 L. Ed. 973
May 7, 1917 · Docket 52
Headnotes
Generated summaries- Headnote 1
The statute’s language expressly expands the term to cover individually owned water utilities, making them subject to the Commission’s regulatory authority.
- Headnote 2
Thus, even if the Constitution did not originally grant jurisdiction over individually owned utilities, legislative amendment gave the Commission that authority.
- Headnote 3
A water system serving the public falls within the Commission’s jurisdiction regardless of whether it is owned by a corporation or an individual.
- Headnote 4
A reduction in rate of return alone does not constitute a taking; the claim requires proof of substantial undervaluation or cost miscalculation.
- Headnote 5
The district court correctly refused an interlocutory injunction where the record did not demonstrate that the rates were confiscatory, but it preserved jurisdiction for a future application.
- Headnote 6
The Public Service Corporation Act’s inclusion of persons owning water utilities is valid because it is a matter “obviously connected” to the regulation of public‑service corporations.
- Headnote 7
Such a construction aligns with cases holding that statutes using terms like “railroad corporations” apply to both corporate and individually owned railroads.
- Headnote 8
The Arizona legislature expressly defined these terms so that the Corporation Commission's regulatory reach could extend to utilities owned by individuals as well as by corporations.
- Headnote 9
The Constitution provides a minimum grant of power to the Commission but allows the legislature to broaden its duties, which it did by defining “water corporation” to include persons.
- Headnote 10
The District Court interpreted “public‑service corporation” broadly, holding that the character of the service, not the form of ownership, determines regulatory scope, thereby giving the Commission jurisdiction over individually‑owned utilities.
- Headnote 11
The Court emphasized that regulation is justified when property is used for a public purpose, following Munn v. Illinois, and that excluding individually‑owned utilities would frustrate the Commission’s purpose.
- Headnote 12
The Commission set a minimum return of ten percent after depreciation; the Court held that without proof of inadequate valuation or cost underestimation, the rates are not a taking.
- Headnote 13
The District Court applied this doctrine, refusing an interlocutory injunction because the record did not establish that the rates were confiscatory.
- Headnote 14
The Court ordered that the plaintiff could return after one year with new evidence to seek an injunction, and the rates would remain in force meanwhile.
- Headnote 15
The Court held that the Act’s title, relating to public‑service corporations, adequately covered the provision extending the definition to persons owning utilities.
- Headnote 16
The Court explained that the two constitutional provisions serve different purposes and may be read harmoniously, allowing the Commission’s jurisdiction over individually‑owned utilities.
- Headnote 17
The statute’s definitions expressly broaden the term “public‑service corporation” so that individually‑owned water utilities fall within the Commission’s regulatory reach.
- Headnote 18
Thus, even if the Constitution originally limited the Commission’s authority, the legislature may expand it to cover individually‑owned water systems.
- Headnote 19
Whether a utility is incorporated or individually owned is irrelevant; what matters is that the service benefits the public.
- Headnote 20
A reduction in the rate of return alone does not constitute a taking under the Fourteenth Amendment.
- Headnote 21
The court must see a clear showing of a taking and the absence of an adequate state‑court remedy before enjoining enforcement.
- Headnote 22
The constitutional limitation on titles does not invalidate the Public Service Corporation Act’s inclusion of individually‑owned utilities.
- Headnote 23
The public nature of the service makes the system subject to rate regulation even though it serves only the townsite’s residents.
- Headnote 24
Statutory language expressly expands the term “public‑service corporation” so that it covers water utilities owned by individuals, not just incorporated entities.
- Headnote 25
This constitutional grant permits legislative expansion of the Commission’s regulatory authority beyond the powers originally vested in it.
- Headnote 26
The District Court’s construction that the Commission’s jurisdiction embraces individually‑owned utilities follows from the combined effect of the statutory definition and constitutional authority.
- Headnote 27
Regulation is justified when the activity serves a public interest, regardless of whether the utility is owned by a corporation or an individual.
- Headnote 28
The Van Dyke water system supplied the entire community of Miami; the service’s public character subjects it to Commission regulation despite individual ownership.
- Headnote 29
To constitute a taking, the plaintiff must show that the valuation is grossly inadequate or that operating costs are vastly underestimated.
- Headnote 30
The District Court correctly refused injunction because the record did not establish that the rates were confiscatory.
- Headnote 31
The district court retained jurisdiction for up to one year, permitting the plaintiff to re‑apply if the rates proved confiscatory.
- Headnote 32
The court held that the Act’s title covering public‑service corporations is sufficient even though it also defines “persons” owning water utilities.
- Headnote 33
The statute’s definition broadens the term “public‑service corporation” so that individually‑owned water utilities fall within the regulatory scheme.
- Headnote 34
Thus, even if the Constitution’s original grant was limited, legislative amendment can extend commission jurisdiction to individually‑owned utilities.
- Headnote 35
A utility that furnishes water to the public is subject to regulation regardless of whether it is owned by a corporation or an individual.
- Headnote 36
This construction aligns with precedent that statutes using the term for railroads apply to both corporate and individually owned railroads.
- Headnote 37
The Constitution’s separate provisions can be given different constructions when they serve distinct legislative objectives.
- Headnote 38
The act’s title concerning public‑service corporations sufficiently covers its provisions that extend the definition to persons owning utilities.
- Headnote 39
The fact that the system is owned by an individual does not change its public character; therefore its rates are subject to commission regulation.
- Headnote 40
A mere reduction in rate of return does not constitute a taking; the plaintiff must show that the rates deprive a reasonable return based on actual value and costs.
- Headnote 41
The district court correctly denied an injunction because the record did not demonstrate that the rates were confiscatory, but it retained jurisdiction for a future injunction if confiscation later appears.
- Headnote 42
The statutory construction expands the commission’s jurisdiction to entities that are not incorporated, allowing regulation of individually‑owned water utilities that supply water to the public.
- Headnote 43
The legislature used this constitutional grant to define “water corporation” to include persons, thereby giving the commission authority over individually‑owned water systems.
- Headnote 44
Whether a utility is incorporated or owned by an individual is irrelevant where the service provided is of a public nature.
- Headnote 45
Because the Arizona legislature defined “water corporation” to include persons, the commission lawfully regulated the Van Dyke individually‑owned water system.
- Headnote 46
The system supplies a large community with essential water, making the property “clothed with a public interest” and subject to regulation.
- Headnote 47
The commission required at least a ten‑percent return after depreciation; absent proof of grossly inadequate valuation or severely underestimated costs, the rates are not a taking.
- Headnote 48
The district court refused an interlocutory injunction because the record did not demonstrate confiscation, but it retained jurisdiction to revisit the issue after a year.
- Headnote 49
The court held that the Public Service Corporation Act’s provision expanding “public‑service corporations” to include persons owning utilities is a matter “properly connected” with its title and therefore valid.
- Headnote 50
The statutory definition expands the term beyond incorporated entities, allowing individuals who own and operate water systems to fall within the regulatory scheme.
- Headnote 51
Thus the commission’s jurisdiction may be expanded by legislative action to cover individually‑owned water systems.
- Headnote 52
Regulation is justified when the service benefits the public, irrespective of whether the utility is incorporated or owned by an individual.
- Headnote 53
The combination of the statutory definition and the constitutional power to enlarge the commission’s duties gives the commission jurisdiction over individually‑owned water utilities.
- Headnote 54
The system’s use of the owner’s land to supply a community makes the property a matter of public interest, so the rates are subject to commission oversight.
- Headnote 55
To prove a taking, the plaintiff must show that the valuation is grossly inadequate or that operating costs are vastly underestimated.
- Headnote 56
The court must have a clear showing of unconstitutionality before enjoining the enforcement of a state official’s action.
- Headnote 57
The court rejected a narrow reading that would invalidate the Public Service Corporation Act because the title did not mention “persons” owning utilities.
- Headnote 58
The statutory definitions were drafted to expand regulation to individually‑owned water utilities, showing that the legislature intended the commission’s jurisdiction to cover owners who are natural persons.
- Headnote 59
The legislature exercised this constitutional power by defining “water corporation” to include persons, thereby giving the commission authority to regulate individually‑owned water systems.
- Headnote 60
The District Court interpreted “public‑service corporation” broadly to encompass all public utilities regardless of ownership form, upholding the commission’s jurisdiction over the Van Dyke water system.
- Headnote 61
The Court emphasized that regulation depends on whether the service is public, following Munn, and that excluding individually‑owned utilities would frustrate the commission’s purpose.
- Headnote 62
Evidence showed the Van Dyke system supplied the entire community, making the property a matter of public interest; therefore the rates were subject to regulation.
- Headnote 63
The commission required at least a ten‑percent return with depreciation. The Court held confiscation requires a grossly inadequate valuation or a severe underestimate of operating costs.
- Headnote 64
The district court refused an interlocutory injunction because the record did not establish that the water rates were confiscatory, satisfying the Young standard.
- Headnote 65
The court ordered that the plaintiff could renew her injunction request after one year if the rates proved confiscatory, preserving an avenue for later relief.
- Headnote 66
The Court held that the Public Service Corporation Act, titled to regulate public‑service corporations, validly included a provision extending the definition to “persons” owning utilities.
- Headnote 67
The statutory definition in the Arizona Public Service Corporation Act expands the Commission’s jurisdiction to cover water utilities owned by natural persons as well as corporations, making such individually‑owned systems subject to rate regulation.
- Headnote 68
The Constitution supplies a minimum grant of authority but permits legislative expansion; by defining “water corporation” to include persons, the legislature legitimately broadened the Commission’s regulatory reach.
- Headnote 69
The Court applied the principle that regulation follows the public nature of the service; therefore, an individually‑owned water system serving the community falls within the Commission’s power.
- Headnote 70
The Court rejected the argument that the statute was invalid for not expressly mentioning persons in its title, emphasizing that the subject of regulating public‑service corporations includes the broader definition therein.
- Headnote 71
The Commission required at least a ten‑percent return after depreciation; the Court held that without showing the valuation was grossly inadequate or costs greatly underestimated, the rates cannot be deemed a taking.
- Headnote 72
The district court properly denied an interlocutory injunction because the record did not establish that the rates were confiscatory, but it kept jurisdiction to hear a future application should the plaintiff later prove confiscation.
- Headnote 73
The Court found that the Van Dyke system furnished water for the benefit of the community at large, invoking the public‑interest principle of Munn v. Illinois, and therefore fell within the Commission’s regulatory authority.
Opinion
delivered the opinion of the court.
In 1909 Ida A. Van Dyke and her husband organized a corporation under the name of the Miami Townsite Company to acquire a tract in Gila County, Arizona, and establish a town thereon. A large part of Miami is now located on that land. In order to supply residents and others thereon with water for domestic, commercial and fire purposes, the Van Dykes introduced a water system which developed rapidly. In October, 1913, the Arizona Corporation Commission, a public , service com mission with the usual powers of regulation, instituted before itself a proceeding to have the rates charged by the water system declared excessive, and to have reasonable rates established. The Van Dykes, who were duly served, filed a "plea in bar”; alleged that the plant was the individual property of Ida'A. Van Dyke; that the business was operated by her with her husband as manager, and not by a corporation; and denied not only the validity of the order but also the jurisdiction of the commission over them. The objection to the jurisdiction was overruled; and the commission proceeded to a hearing on the merits, at which the Van Dykes offered no evidence. On May 1, 1914, after an elaborate report, an order was entered greatly reducing the water rates. The Van Dykes promptly filed a motion for a rehearing, which was denied. Thereupon they applied to the commission to stay the operation of the order pending proceedings for review in the state court. This application also was denied. Then they filed, in the District Court of the United States for the District of' Arizona, this suit against the members of the commission, the Attorney General of the State and the county attorney to enjoin the enforcement of the order and the prosecution for penalties for failure to observe'the same; and to have the order itself cancelled.
Both plaintiffs and defendants are citizens and residents of Arizona. Jurisdiction of the federal court was invoked solely on the ground that the order of the commission, if enforced, would deprive plaintiffs of then-property in violation of the Fourteenth .Amendment; and that the penalties prescribed by the Arizona statute for failure to obey the order are so severe as to prevent resort to the remedies therein provided for testing in the state courts the validity of the orders. An interlocutory injunction was applied for; and the case was heard before three judges under § 266 of the Judicial Code. The jurisdiction of the court was sustained under the rule declared in Ex parte Young, 209 U. S. 123; but the court refused relief against the. order reducing water rates, saying:
“The evidence submitted by the complainants does not afford, this Court a satisfactory basis on which to adjudicate the question of the value of the property used as a water plant, and therefore the Court cannot say that the rates prescribed by the Corporation Commission are confiscatory, and there is no basis on which an order could be made declaring them illegal. If hereafter it shall appear that under actual operation of the plant under these rates, the return allowed by such Corporation Commission operates as a confiscation of the property of complainant, Ida A. Van Dyke, she may, at the expiration of one year, again present her evidence to the Court and obtain appropriate reliéf on the facts then presented.
“The Court will retain jurisdiction of the case with permission to complainant, Ida A. Van Dyke, if so advised, after the expiration of one year, to renew her application for an injunction against the rates established by the Corporation Commission as confiscatory. In the meantime the rates established will remain in force.”
From an order entered in accordance with this opinion the Van Dykes appealed; and this court has jurisdiction to review the whole case. Louisville & Nashville R. R. Co. v. Garrett, 231 U. S. 298.
The errors alleged are, in substance, as follows:
First: That the Arizona Constitution and Public Service Corporation Act were construed and applied to subject property owned and operated by a natural person to regulation, as a public service corporation.
Second: That a water system established for the purpose of. furnishing water only to purchasers of lots from the Miami Townsite Company was treated as a public water system.
Third: That the rates fixed are confiscatory.
These alleged errors will be considered in their order.
1. 1. Whether the Arizona Corporation Commission had jurisdiction to regulate a water system owned by an individual.
Arizona was admitted as a State February 14,1912; and on that date its constitution, which had been adopted December 9,1910, took effect. By Article XV it created (§ 1) a corporation commission with full power to establish reasonable rates in the public services; and declared (§ 2) that corporations engaged in furnishing water "shall ■be deemed public service corporations.” The' Arizona Public Service Corporation Act (Ariz. Rev. Stats. 1913, Tit. 9, c. XI) provides that the term "public service corporation” shall include “water corporation,” §2278 (z);' that "water corporation” shall include "every corporation or person . . . . owning, controlling, operating, or managing any water system for compensation within this State,” §2278 (x); that the term "person” includes an individual, § 2278 (d); and that the term "water system” shall include all property used in the supply or distribution of water “for municipal, domestic, or other beneficial use,” § 2278 (w). It is clear that the legislature intended that the powers of the Corporation Commission should extend to plants owned and operated by individuals, and that the language used by it was adequate to express that intent. But it is insisted that provisions of the Arizona Constitution forbid the grant of such a power by the legislature; and the question resolves itself into this: Are the terms "corporation” and “public service corporation” in Article XV of the constitution, used in the limited sense of incorporated companies, or do they include all public utilities both incorporated and unincorporated and whether they be firms or individuals?
Article XV, entitled "The Corporation Commission,” consists of nineteen sections, 1 and confers broad powers of regulation. The character of the service, that is, whether it is public or private, and not the character of the ownership, determines ordinarily the scope of the power of regulatipn. The need of such regulation and the manner of exercising it are the same, whether a public utility is incorporated or not; and the purpose of a public service commission could easily be frustrated if concerns owned by individuals were excluded from its operation. The District Court accordingly declined to give a technical mean ing to the term “public, service corporation,” and interpreted it in the broad popular sense as embracing all public utilities. That construction is in line with numerous decisions holding that statutes imposing certain liabilities on “railroad corporations” embrace all railroads whether individually or corporately owned. 1
It is contended that Article XIV, entitled “Corporations other than Municipal,” renders this liberal construction of Article XV inadmissible. Section 1, of Article XIV defines “'corporation/as used in this article ... to include all associations and joint stock companies having any powers or privileges of corporations not possessed by individuals or co-partnerships”; and §16 provides that the records of “all public service corporations” shall at-all times be subject to the inquisitorial powers of the State. It is argued that the term “public service corporation,” thus excluding individually-owned utilities, could hardly have a different meaning in the very next article of the constitution. But the answer is that Article XIV deals only with the organization, incorporation, management and powers of technical corporations, and the definition therein of “corporation” is for that reason expressly limited by the phrase “as used in this Article.” This is significant and is entirely in harmony with the view that the term as used in some other article having a wholly different purpose, should bear a different and broader construction.
Furthermore, the powers of the Arizona Corporation Commission are not limited to those expressly granted by the constitution. Section 6 of Article XV authorizes the legislature to “enlarge the powers and extend the duties of the Corporation Commission”; and the legislature, by defining “water corporation” to include “persons” owning a water utility, clearly extends the powers of the commission to individually-owned concerns.' So that even if the commission was not originally vested by the constitution with power over utilities owned by individuals, it now has that power directly by legislative enactment. In other words the constitution prescribed a certain minimum of power with which the commission was intrusted; it authorized the legislature to enlarge from time to time the scope of the commission’s duties; and the legislature extended them to water concerns owned by individuals.
This construction of the Arizona Constitution by the District Court is. in harmony with the contemporaneous construction evidenced by the Public Service Corporation Act (supra) enacted at the first session of its legislature. In the absence of an authoritative decision of the Arizona Supreme Court" to the contrary, this legislative construction, reasonable in itself and designed to accomplish the obvious-purpose of the constitutional provision, ought not to be set aside by this court. Louisville & Nashville R. R. Co. v. Garrett, 231 U. S. 298, 305.
Appellants contend also that even if the legislature had power to extend the jurisdiction of the Corporation Commission to water systems owned and operated by individuals, the Public Service Corporation Act was, in this respect, invalid under Article IV, Part 2, § 13 of the Arizona Constitution, because this purpose was not expressed in the. title of that act. 1 Constitutional provisions re quiring the subject of legislative acts to be embraced in the title are not to be given a strained and narrow construction for the purpose of nullifying legislation. The “subject,” as expressed in the title, is the-regulation of “public service corporations”; and the provision in the act that “public service corporations” shall include'“persons” owning a public utility is a matter obviously connected therewith.
2. 2. Whether the Van Dyke Water System is a private business.
The Van Dyke system appears to be the only water supply of the inhabitants of the original town of Miami (not including the “additions”). The. number of water takers is not shown. But it appears that the large consumers who used meters numbered, at the time of the commission’s investigation, 675, yielding a revenue of $11,378.10; and that the number of small takers must have been much larger, since the revenue derived from the flat rates was $14,517.35. “Property does become clothed with a public interest when used in a manner to make it of public consequence, and affect the community • at large.” Munn v. Illinois, 94 U. S. 113, 126. The property here in question was devoted by its owners to supplying a large community with a prime necessity of life. That Mrs. Van Dyke pumps the water on her own land, stores it in tanks on her own land and thence conducts it through pipes all upon her own land (the strips reserved in the streets for conduits being-owned by her), and delivers it to purchasers at the boundary line between her and their properties; and that lot purchasers bought with the understanding that they might purchase water from Mrs. Van Dyke’s water system at rates fixed by her — are all facts of no significance; for the character and extent of the use make it public; and since the service is a public one the rates are subject to regulation.
Counsel contend that the use is not public, because water is furnished only to particular individuals in fulfillment of private contracts made with the purchasers of townsite lots. But there is nothing in the record to indicate that such is the fact. Purchasers seem to have bought merely with the oral understanding that water could be secured from the Van Dyke system. Affidavits filed by appellants state expressly that their water system is operated “for the purpose of supplying the residents and inhabitants of said Miami Townsite with water, and not for the purpose of supplying persons outside of said townsite, or the public generally with water.”' The offer thus is to supply all the “inhabitants” within the given area; and that of course includes, sub-vendees, tenants and others with whom the Yan Dykes had no contract relations. The fact that the service is limited to a part of the town of Miami does not prevent the water system from being a public utility. See Del Mar Water &c. Co. v. Eshleman, 167 California, 666, 681-3.
3. 3. Whether the rates fixed are confiscatory.
The commission decided that the net return to. the owner upon the value of the property employed should be at. the rate of at least ten per cent., after allowing an annual depreciation charge of three and one-half per cent. Water rates prescribed on this basis obviously cannot be held confiscatory unless either the valuation placed upon the property used was grossly inadequate or the cost of operation greatly underestimated. These elements are largely matters of fact and opinion, as to which both the commission and the District Court, after careful examination, found against the appellants. The case is presented to us on contradictory affidavits dealing with the items of value which go to make up the water system. We cannot say "that it was impossible for a fair-minded board to come to the result which was reached.” San Diego Land & Town Co. v. Jasper, 189 U. S. 439, 442; Knoxville v. Knoxville Water Co., 212 U. S. 1, 18.. .And the provision in the order of the District Court by which it retained jurisdiction of the case with permission to Mrs. Van Dyke to renew her application for an injunction after one year, if the rates fixed appeared to be confiscatory, afforded her appropriate protection.
The decree of the District Court is
Affirmed.
Included are the following:
“Section 1. A Corporation Commission is hereby created to be com posed of three persons, who shall be elected at the general election to be held under the provisions of the enabling Act approved June 20, 1910, and whose term of office shall be cb-terminous with that of the Governor of the State elected at the same time,- and who shall maintain their chief office, and reside, at the State .Capital. . . „
“Sec. 2. All-corporations other than municipal engaged in carrying persons or property for hire; or in furnishing gas, oil, or electricity for light, fuel, or power; or in furnishing water for irrigation, fire protection, or other public purposes; or in furnishing, for profit, hot or cold air or steam for heating or cooling purposes; or in transmitting messages or furnishing public telegraph or telephone service, and all corporations other than municipal, operating as common carriers, shall be deemed public service corporations.
“Sec. 3. The Corporation Commission shall have full power to, and shall, prescribe just and reasonable classifications to be used, and just and reasonable rates and charges to be made and collected, by public service corporations within the State for Service rendered therein, and make reasonable rules, regulations, and orders, by which such' corporations shall be governed in the transaction of business within the State, and may prescribe the forms of contracts and the systems of keeping accounts to be used by such corporations in transacting such-business, and make and enforce reasonable rules, regulations, and orders for-the convenience, comfort, and safety, and the preservation of the health, of the employees and patrons of such corporations; Provided, that incorporated cities and towns may be authorized by law to exercise supervision over public- service corporations doing business therein, including the regulation of rates and charges to be made and collected by such corporations: Provided further, That classifications, rates, charges, rules, regulations, orders, and forms or systems prescribed or made by said Corporation Commission may from time to time be amended or repealed by such Commission.”
Union Pacific Ry. Co. v. De Busk, 12 Colorado, 294, 304; Pittsburgh, C. C. & St. L. Ry. Co. v. Lightheiser, 168 Indiana, 438; Schus v. Powers-Simpson Co., 85 Minnesota, 447, 450-451; Lewis v. Northern Pacific Ry. Co., 36 Montana, 207, 218.
The Arizona Constitution (Art. IV, Part 2, § 13) provides that:
“Every Act shall embrace but one subject and matters properly connected therewith, which subject shall be expressed in the title; but if any subject shall be embraced-in an Act which shall not be expressed in the title, such Act shall be void only as to so much thereof as shall not be embraced in the title.”
The Act is entitled:
“ An Act relating to Public Service Corporations, Providing for the Regulation of the Same, Fixing penalties for the Violation Thereof, and Repealing Certain Acts; with an Emergency Clause.”