author: BLAIR, J.

text:
    MARY S. LIEBING, Appellant v. MUTUAL LIFE INSURANCE COMPANY OF NEW YORK.
    Division One,
    January 2, 1917.
    1. LIMITATIONS: Action on Policy: Extended Insurance: Forfeiture. The statute (Sec. 7897, R. S. 1899) expressly providing that no insurance policy “shall, after payment upon it of three annual payments, be forfeited or become void by reason of non-payment,” is a part of the policy contract, as much so as if it were written into the policy, and the liability for extended insurance is a liability under the policy, the policy being simply extended by force of the statute; and a suit on a policy claimed to have been extended by payments made and the operation of the statute beyond the time of the insured’s death-, is a suit on the policy, and not a liability “created by a statute” in the sense in which those words are used in section 1889, Revised Statutes 1909, declaring that “an action upon a liability created by a statute other than a penalty or forfeiture” shall be barred in five years; and being an action on the policy, is not barred within ten years.
    2. INSURANCE: Notice of Death: Waiver: Claim for Extended Insurance. The provision in Sec. 6948, R. S. 1909, that “notice of the claim and proof of the death shall be submitted to the company in the same manner as provided by the terms of the policy, within ninety days after the decease of the insured,” was manifestly enacted for the benefit of the company, and is a provision that it can waive, and having been waived does not bar the beneficiary’s right to assert a claim for extended insurance.
    3. -: -: Evidence of Waiver. Proofs of death of the insured made by the insured’s administrators on another policy within thirty days, that thereafter beneficiary’s attorneys, within the time prescribed by statute, wrote the company concerning the policy in suit, claiming that the company was liable thereon, and that the company’s general solicitor replied, denying liability on the policy and declaring that it had been cancelled one year before the insured died, constitute evidence of waiver of formal proofs of death.
    4. -: Extended Insurance: Loans: Deductions Affected by Subsequent Amendment to Statute. An insurance company is not entitled to deduct from three-fourths of the net value, ascertained by the statutory rule, any loans it had made to the insured on the policy, except loans made on account of past-premium payments; and that rule, fixed by Sec. 7897, R. S. 1899, governed a policy issued in 1901, and such policy or rule was not affected by an amendment to the statute enacted in 1903. The binding force of a contract depends on the laws in existence when it is made.
    5. -: Cash Option in Lieu of Bonds: Allegata et Probata. Where ' the policy obligated the company to pay fifty one-thousand-dollar bonds, but contained a provision for a cash option of $65,250 in lieu of bonds, to be available upon condition (1) that the policy shall have matured under its terms and (2) that “all deposits previously due thereon shall have been made and the contract maintained and continued in force and effect from date of issue,” the two conditions were eliminated upon the insured’s death within the statutory extended period, by the statute, which was a part of the contract, and, by its force, extended the policy and bound the company “to pay the amount of the policy, the same as if there had been no default in the payment of premium, anything in the policy to the contrary notwithstanding;” and plaintiff by suing for $65,250 in money and offering the policy in evidence as proof of the contract did not plead one contract and prove another.
    6. -: --: Calculating Net Value. Where the policy obligated the company to pay fifty one-thousand-dollar bonds, but contained a provision for a cash option for $65,250 when the policy “matures under its terms,” a calculation of the net value of the policy based on the assumption that it was one for $65,250 is not wrong, for the policy, by the statute, whi®h is a part of the contract, matured “under its terms” when the insured died within the extended period.
    7. -: Net Value: Gross or Net Premium. Gross premium consists of the net premium plus loading for expenses and contingencies; net premium represents the cost of insurance; and the insured’s proportion of the “cost of insurance” is the amount he must pay to meet his share of maturing policies; when that is ascertained, according to the mortality tables, and distributed over the premium-paying period, the early payments obviously exceed the cost, and this excess constitutes the reserve or net value, and the actuary does not use gross premiums as the basis of his calculations of net values.
    8. —-: Forfeiture: Statute. In view of the provisions of Sec. 7898, R. S. 1899, the rule of some courts that an insurance policy containing no provision that non-payment of premiums shall work a forfeiture will not be held to be forfeited by reason of such nonpayment, has no application to a suit upon an extended policy, even though is contains a forfeiture clause; for this statute itself is a non-forfeiture law, constitutes a part of the policy, is mandatory, and covers the whole matter.
    Appeal from St. Louis City Circuit Court. — No». George G. Hitchcock, Judge.

      Remanded (with directions).-

      James J. O’Donohoe for appellant.
    (1) Sec. 7897, R. S. 1899, was in force when the policy in suit was issued and the same entered into and became a part thereof as much so as if copied therein. Hence the full three-fourths of the net or reserve value of the policy is applicable to purchase term insurance, for the outstanding loan is not deductible. The amendatory Act of 1903 (Laws 1903, p. 208) is inapplicable. Smith v. Ins. Co., 173 Mo. 329; Burridge v. Ins. Co., 211 Mo. 158; Whittaker v. Ins. Co., 133 Mo. App. 664; Christensen v. Ins. Co., 152 Mo. App. 551; Paschedag v. Ins. Co., 155 Mo. App. 185; Christensen v. Ins. Co., 160 Mo. App. 486; Grillen v. Ins. Co., 178 Mo. App. 89; Blum v. Ins. Co., 197 Mo. 513. It is also well settled that loans are not deductible in the absence of statute providing therefor. Ins. Co. v. Wallace, 93 Ind. 7; Ins. Co. v. Ross, 93 Ga. 205; Ins. Co. v. Little, 56 Ind. 405; Ins. Co. v. Dutcher, 95 U. S. 269; Ins. Co. v. Curry, 115 Ky. 100; Ins. Co. Woods, 39 N. E. (Ind.) 206; Ins. Co. v. Wright, 126 Fed. 88. (2) There is no forfeiture stipulation in the policy for either non-poyment of premium or failure to pay loans and none should he supplied by construction. Haas v. Ins. Co., 84 Neb. 682; Tetley v. Mc-Elmurry, 201 Mo. 394; Gruwell v. K. & L. of Security, 126 Mo. App. 496; McCollom v. Ins. Co., 61 Mo. App. 352; Ins. Co. v. Statham, 93 U. S. 24. The provision in the loan agreement authorizing defendant to cancel the policy and apply the cash surrender value thereof to repay the loan contravenes Sec. 7897, R. S. 1899, and is void. Gillen v. Ins. Co., 178 Mo; App. 89. The loan agreement cannot enlarge on the policy. Francis v. Ins. Co., 243 Pa. 380; Bozeman’s Admr. v. Ins. Co., 113 S. W. (Ky.) 836. All defenses are eliminated by the incontestability stipulation. Harris v. Ins. Co., 248 Mo. 304. Since the death of the insured occurred within the term of temporary insurance as determined under the non-forfeiture laws of Missouri, the defendant is hound to pay the amount of the policy the same as if there had been no default in tbe payment of deposits, anything in the option stipulation to the contrary notwithstanding. Sec. 7899, R. S. 1899; Sec. 6948, R. S. 1909; Havens v. Fire Ins. Co., 123 Mo. 403; Marshal v. Ins. Co., 80 Mo. App. 18; Williams v. Ins. Co., 73 Mo. App. 607; .Biker v. Assurance Co., 57 Mo. App. 559; Ampleman v. Ins. Co., 35 Mo. App. 308. A policy issued in Missouri “shall specify the exact sum of money which it promises to pay.” Sec. 7903, R. S. 1899; Sec. 6952, R. S. 1909; Sec. 7925, R. S. 1899; Sec. 6972, R. S. 1909. (3) No act or amendatory act has application to the rights of parties to a contract entered into before the same became operative. Sec. 10, art. 1, U. S. Constitution; Sec. 15, art 2, Mo.. Constitution ; Jamison v. Zauch, 227 Mo. 406; Vanata v. Johnson, 170 Mo. 269; Fisher v. Patton, 134 Mo. 32. (4) To require the defendant to apply three-fourths of the reserve value of Missouri policies as commanded by the non-forfeiture statute is no violation of the due process of law or the equal protection of the law clauses of either the State or National Constitutions. Burridge v. Ins. Co., 211 Mo. 158; Kennard v. La., 92 U. S. 480 ; Davidson v. New Orleans, 96 U. S. 97; Head v. Mfg. Co., 113 U. S. 9. (5) Sec. 7899, R. S. 1899, names no penalty for failure to make claim or furnish proof within ninety days after the death of the insured and none is supplied by construction. State ex rel. v. Swanger, 212 Mo. 472; Dezell v. Fidelity & Casualty Co., 176 Mo. 253; Tetley v. McElmurry, 201 Mo. 394; G-ruwell v. K. & L. of Security, 126 Mo. App. 496. Proofs of death were dispensed with by defendant receiving and accepting proofs under another policy. Lowenstein v. Ins. Co., 227 Mo. 100; Ins. Co., v. Ins. Co., 97 Pa.. St. 15; Dakin v. Ins. Co., 77 N. Y. 600; Richards on Insurance, p. 411. The right, if it existed, to require claim to'be made and proof of death to be furnished within ninety days after the death of the insured was waived prior to the insured’s death by defendant’s claim of right to appropriate the reserve value of the policy to repay the loan, and its pronounced position, namely, that the policy had no value and was canceled. Walker v. Maccabees, 177 Mo. App. 52; Fischer v. K. & L. of Security, 190 Mo. App. 615. Want of claim and proofs of death were waived by the insurer disclaiming liability on other grounds. Dezell v. Ins. Co., 176 Mo. 253; Hollenbeck v. Ins. Co., 133 Mo. App. 57; Weber v. Ancient Order of Pyramids, 104 Mo. App. 729; Keller v. Ins. Co., 95 Mo. App. 627; Welsh v. Guaranty Fund Life Soc., 81 Mo. App. 30; Mensing v. Ins. Co., 36 Mo. App. 602; Ins. Co. v. Elliott, 108 N. E. 784. At no time after the death of the insured would the defendant have admitted liability or accepted proofs of death, and hence making claim or offering to make proofs would be wholly idle formalities, and “the law never requires the doing of a useless act.” Printing Co. v. St- Louis, 213 Mo. 43-; Statler v. Eailroad, 200 Mo. 142; Bank v. Blackwelder, 81 Mo. App. 432; Coscareis v. Ins. Co., 175 Mo. App. 139. They were waived by the insurer defending on other grounds. Dezell v. Ins. Co., 176 Mo. 253; Ins. Co. v. Kyle, 11 Mo. 278; Welsh v. Life Sóc., 81 Mo. App. 30; Johnson v. Casualty Co., 122 Mo. App. 369; Meisenbach v. Maccabees, 140 Mo. App. 76. And such waiver may be made after the lapse of the stipulated time for .the delivery of the proofs of death and need not be based upon a new agreement nor combine the elements of an estoppel. Dezell v. Ins. Co., 176 Mo. 253; Hamilton v. Eailroad, 80 Mo. App. 601; Crenshaw v. Ins. Co., 71 Mo. App. 48; Fink v. Ins. Co., 66 Mo. App. 513. Statutes, like policy • provisions, can be waived. McLeod v. Ins. Co., 190 Mo. App. 653; Chandler v. Ins.' Co., 180 Mo. App. 394; Lewis v. Ins. Co., 52 Me. 492; Neilson v. Assur. Soc., 139 Cal. 332; Ins. Co. v. Wenning, 58 Fed. 541. (6) This action is founded on a written policy of insurance for the payment of money or property and falls within the ten-year section of the Statute of Limitations, namely, Sec. 4272, E. S. 1899, now'Sec. 1888, E. S. 1909. State ex rel. v. Brown, 208 Mo. 613; Curtis v. Sexton, 201 Mo. 230; Bridges v. Stephens, 132 Mo. 552; Carr v. Thompson, 67 Mo. 472; Martin v. Knapp, 45 Mo. 48; Moorman v. Sharp, 35 Mo. 283; Reyburn v. Casey, 29 Mo. 129; Howe v. Mittleberg, 96 Mo. App. 490; Shinn v. Wooderson, 95 Mo. App. 6; Miner & Frees v. Howard, 93 Mo. App. 569.

      'Fordyce, Holliday £ White’ for respondent; Frederick L. Allen of counsel.
    (1) The action of the trial court in refusing to set aside the nonsuit should be affirmed if for any reason the plaintiff was not entitled to go to the jury. Pope v. Boyle, 98 Mo. 531. (2) This action was upon a liability created by statute other than a penalty or forfeiture, and hence barred in five years from the death of the insured. R. S. 1909, secs. 1887, 1888, 1889; R. S. 1899, secs. 7897, 7898, 7899, 7900; Assurance Soc. v. Pettus, 140 U. S. 226; Price v. Conn. Mutual, 48 Mo. App. 293; Smith v. Ins. Co., 173 Mo. 329; Burridge v. Insurance Co., 211 Mo. 178; Dezell v. Fidelity & Casualty Co., 176 Mo. 266; 25 Cyc. 850; Turner v. Bums, 42 Mo. App. 96; Pleadwell v. Class Co., 151 Mo. App. 63. (3) The plaintiff was not entitled to claim extended insurance under the non-forfeiture laws of the State of Missouri since she had failed to submit notice of the claim and proof of death in the same manner as provided by the terms of the policy within ninety days of the death of the insured. R. S. 1899, sec. 7899; R. S. 1909, sec. 8057; State ex rel. v. Roach, 258 Mo. 553 ; State ex rel. v. St. Louis, 174 Mo. 145. (4) The plaintiff failed to make a case for the jury since neither the contract nor the right to extended insurance was proved as alleged. Lindsay v. Morris, 30 Mo. 412; Jackson v. Hardin, 83 Mo. 186; Dunlap v. Kelly, 105 Mo. App. 6; Webster v. Nance, 183 Mo. App'. 217; Price v. Connecticut Mutual, 48 Mo. App. 295.
   BLAIR, J.

This is an appeal from an order overruling a motion to set aside an involuntary nonsuit taken by appellant in the circuit court of the city of St. Louis in an action she instituted on an insurance policy issued by respondent, September 29, 1901, on the life of Frederick W. Y. Blees, the then husband of appellant.

Respondent, in its answer, admitted its corporate capacity and that it was engaged in the life insurance business; that it issued the policy sued on; that the annual premiums (each amounting to $4291.50) were paid in September 1901, 1902, 1903 and 1904, but denies any premium was thereafter paid; that in March, 1904, the policy was, with its consent, duly assigned by the insured to his wife, this appellant; and that Frederick W. Y. Blees, the insured, died September 8, 1906. The answer contained several affirmative defenses; (1) that insured and his wife, in October, 1904, secured from respondent a loan equal to the full surrender value of the policy September 29, 1905, to-wit, $9550, the proceeds “divided as follows: $4291.50 to pay premium due September 29, 1904; $468 for interest; and $4790.50 paid Blees by company’s check; that the borrowers signed a loan agreement authorizing respondent, at its option, in case of default in payment of the loan September 29, 1905, without demand and without notice, to apply cash surrender “consideration of $9550 to the payment of loan and interest” and cancel the policy; that the loan was not paid and respondent exercised its option and so applied the cash surrender value to the payment of the loan and canceled the policy, and that it was thereby rendered void; -(2) that the repayment of the loan mentioned under “(1)” supra, was a condition of the insurance provided for in the policy; that the failure of Blees to repay violated this condition; that this was a violation of the “condition of the insurance other than the non-payment of premiums” within the meaning of section 6948, Revised Statutes 1909 (Sec. 7899, R. S. 1899) and for this reason the policy had lapsed and been canceled and there was no liability thereon; (3) that while the policy was issued in 1901, but two premiums had been paid prior to the Act of 1903, whereby section 7897, Revised Statutes 1899, was amended to permit indebtedness other than that for past due premiums and interest to be deducted from three-fourths of the net value of the policy under that section; that the amendment is applicable and that when deductions are made according thereto there was nothing remaining and the insurance was not extended by the act, but lapsed, and no recovery can be had for that reason; (4) that no proof of death was made in ninety days as provided by section 7899, Revised Statutes 1899,- and for that reason the action cannot be maintained; and (5) that, in any event, if there be a cause of action, it is for extended insurance and arose in September, 1906, while the action was not commenced for more than six years thereafter, and that the liability under the non-forfeiture laws is one created by statute and, therefore, barred in five years (Sec. 1899, R. S. 1909), and for that reason appellant must fail.

In the reply waiver of proof of death was pleaded, in addition to a general denial.

The policy consisted of a promise to deliver to the assured, his executors, administrators or assigns, fifty $1,000 bonds, payable in gold coin twenty years after issuance, with five per cent, interest. The delivery of the bonds was conditioned upon the maintenance of the policy in force and effect, and proof of the death of the insured. It concluded thus: “This contract is subject to the mutual agreements endorsed hereon and is issued on condition that on its delivery” and each year thereafter during the first ten years of the continuance of the contract, insured pay the respondent company ‘$4291.50. The “mutual agreements” endorsed on the policy provided for (1) place of payment of premiums; (2) thirty days grace in payment of premiums; (3) for automatic paid-up insurance after three payments in case of failure “to make any subsequent deposit,” i. e. pay premiums, provided no loan had been made on the policy; (4) for extended insurance, after three years, on failure to make any subsequent deposit, on conditions and for periods stated; (5) for cash surrender value on conditions and for amounts set out; (6) for loans on the policy on given conditions; (7) for apportionment of surplus; (8) as follows:

“Cash Option in Lieu oe Bonds. — It is hereby mutually understood and agreed between all the parties hereto, that the beneficiary under this contract shall have the option of accepting in settlement of this contract, when it matures under its terms, the sum of sixty-five thousand two hundred and fifty gold dollars in lieu of the insurance of fifty thousand dollars of bonds as stipulated in said contract, provided all deposits previously due thereon shall have been made and the contract maintained in full force and effect from date of issue. ’ ’

These were followed by (9) restrictions as to service in army and navy; (10) provision that understatement of age in application should result in an “equitable adjustment of the amount of the insurance or other benefit,” and then by this paragraph:

“Incontestability. — After two years from date of issue this contract shall be incontestable if the deposits shall have been made.”

Space, may be saved by stating other necessary facts in connection with the discussion of questions to which they are relevant.

I. The plea of the Statute of Limitations presents the question whether the action is one on a “writing . . . for the payment of money” (Sec. 1888, R. S. 1909) or on a liability “created by a statute 0^er than a penalty or forfeiture” (Sec. 1889, R. S. 1909). Appellant contends her action is upon the policy, as extended by the non-forfeiture law of the State in force when the policy was issued (Sec. 7897 et seq., R. S. 1899), while respondent insists that the non-forfeiture sections mentioned give the right of action; that no cause of action could exist save for them and, therefore, that the • liability- appellant attempts to enforce is one “created by statute” and was barred five years after the death of the insured and over a year before suit brought.

Counsel for respondent practically concede that under principles announced in previous decisions of this court the sections in question (Secs. 7898 et seq.) were read into and became a part of the policy issued to Blees. Their position is that these statutes are undoubtedly mandatory (Equitable Life Assurance Soc. v. Clements, 140 U. S. l. c. 231; Price v. Conn. Mut. Life Ins. Co., 48 Mo. App. l. c. 293, 294; Burridge v. Ins. Co., 211 Mo. l. c. 178, and cases cited); that their provisions override the freedom of the parties to contract, at the time the policy is issued or afterward, in contravention of them» (same authorities), and that in case of conflict between the statute and the policy or contract, the statute controls; wherefore, counsel contend, the very fact that the statute does override conflicting policy stipulations demonstrates that an action for extended insurance is an action, on a liability created by the statute and not one on. the policy. The answer to this contention is found in the fact that the statute is a part of the policy contract, as much so, for the purpose of an action on the policy, as any other. This is the effect of our previous holdings and is put beyond question by the terms of the statute itself which make it clear that the liability for extended insurance is a liability under the policy, the policy itself being simply extended by force of the statute. The statute (Sec. 7897, R. S. 1899) expressly provides that no policy “shall, after payment upon it of three annual payments, be forfeited or become void by reason of non-payment,” but shall be commuted as therein set forth; a further provision is that the temporary insurance is to be for the “full amount written in the policy.’’’ No provision for the surrender of the policy is found in this section. In section 7898, giving a right to demand a paid-up policy, it is provided that the original policy shall be delivered up and canceled. In section 7899, Revised Statutes 1899,' it was and, so far as this policy is concerned, is expressly provided that: “If the death of the insured occur within the term of temporary insurance covered by the value of the policy as determined by section 7897, and if no condition of the insurance other than the payment of premiums shall have been violated by the insured, the company shall be bound to pay the amount of the policy, the same as if there had been no default in the payment of premiums, anything in the policy to the contrary notwithstanding. ’ ’ The statute then requires proof of death, according to the manner provided by the terms of the policy, within ninety days, and then provides that the company may “deduct from the amount insured in the policy” all unpaid premiums, with six per cent, interest compounded, “including the whole of the year’s premium in which the death occurs,” but such premium shall in no case exceed the ordinary life premium for the age at issue” (doubtless of the policy) “with interest,” etc. It is apparent from these excerpts that the Legislature contemplated the extension of the policy itself on the terms provided in the sections mentioned. [Equitable Life Soc. v. Clements, 140 U. S. l. c. 232 et seq.] The policy, under these sections, when issued, carried with it and as a part of it an obligation to pay according to the terms of the statute. This action is one on the policy and not on a liability created by a statute in the sense of section 1889, Revised Statutes 1909. The cases cited from other states are not in point. Our statute pertaining to statutory liabilities (Sec. 1889) is construed with the preceding section pertaining to written contracts (Sec. 1888, R. S. 1909) and this section is broader than that in force in most other states, restricting the application of section 1889 with respect to liabilities “created by a statute” and leading to an interpretation of those words (State ex rel. v. Brown, 208 Mo. l. c. 616 et seq. and cases cited) which does not accord with the interpretation given in other states, as shown by the cases cited by respondent. In the Georgia ease cited (Ga. Mas. Ins. Co. v. Davis, 63 Ga. 471) the action was upon an instrument certifying that decedent was a member of appellant company and was “entitled to all the benefits of said association upon his paying one dollar and ten cents” after notice of death of any other member. The incorporating act defined the benefits to be paid, and the limitation statute involved provided that “all suits for the enforcement of rights under statutes, acts of incorporation, or by operation of law shall be brought,” etc. The court held this limitation, and not that with respect to actions on written contracts, applicable. The decision is obviously not in point. The ten-year statute applies in this casé and the action is not barred.

II. It is insisted, in effect, that the provision in section 7899, Revised Statutes 1899 (now Sec. 6948, R. S. 1909) that “notice of the claim and proof of the death shall be submitted to the company in the same manner as provided by the terms of the policy, with-in ttin^y days after the decease of the insured,” defines a condition precedent to the insured’s right to assert a claim for extended insurance and that this condition cannot be waived by the company. After a careful examination of respondent’s argument on this point, we are of opinion that the decisions in two courts of appeals (Chandler v. Ins. Co., 180 Mo. App. l. c. 398, 399; McLeod v. Ins. Co., 190 Mo. App. l. c. 659) are correct, and hold, as those courts did, that the company may waive this provision, manifestly enacted for its benefit.

III. There was evidence that formal proofs of death were made to respondent by the insured’s administrators on another policy. In fact, the proofs were offered in evidence, but rejected because the witness had testified to their substance. We shall deal with them as a part of appellant’s evidence. These were furnished respondent in October, 1906, thirty days after the death of the insured. Subsequently, attorneys for appellant, within the ninety-day period, prescribed by the statute, wrote respondent concerning the policy in suit, claiming respondent was liable thereon. Respondent’s general solicitor replied, denying liability on the policy and declaring *it had been cancelel in September, 1905, one year before the insured died. That these facts constituted evidence of waiver of formal proofs of death is not disputable. [Loewenstein v. Ins. Co., 227 Mo. l. c. 114 et seq.; Dezell v. Fidelity & Casualty Co., 176 Mo. l. c. 267 et seq.]

IV. Tbe statute (Sec. 7897, R. S. 1899) expressly provided, and this court long since held (Smith v. Mut. Ben. Life Ins. Co., 173 Mo. 329), the company was not entitled, under that section, to deduct from three-fourths of the net value, ascertained by the statutory rule, any loans it had made to the insured on the policy, except loans on account of past premium payments. That section was amended in 1903. It is contended the amended section, which authorizes the deduction of all loans on the policy, which have been made by the company to the assured, governs this ease. The policy was issued in 1901, and the statute became a part of it. The Legislature could amend the statute, but could not impair the obligation of the contract of insurance already issued and in force. The case is not affected by the amendment of the statute in 1903.

In Jarman v. Knights Templars’ & Masons’ Life Indemnity Co., 95 Fed. l. c. 73, Judge Philips, dealing with a like question, quoted, with approval, from McCracken v. Hayward, 2 How. l. c. 612, as follows:

“The obligation of a contract consists in its binding force on the party who makes it. This depends on the laws in existence when it is made. These are necessarily referred to in all contracts, and forming a part of them, as the measure of the obligation to perform, them by the one party and the right acqmred by the other . .
. If any subsequent law affect to dimmish the duty, or to impair the right, it necessarily bears on the obligation of the contract, in favor of one party to the injury of the other; hence any law which in its operation amounts to a denial or obstruction of the rights accruing by the contract, though professing to act only on the remedy, is directly obnoxious to the prohibition0 of the Constitution. ’ ’

The amendatory Act of 1903 was and is prospective .in its operation and in no wise affects the policy in suit. [Burridge v. Ins. Co., 211 Mo. l. c. 173; Christensen v. Ins. Co., 160 Mo. App. l. c. 493.]

V. Respondent insists that appellant pleaded one contract and proved another. It is argued that the policy proved was one whereby respondent contracted, on named 'conditions, to deliver certain gold bonds, whereas the petition counts on a policy for the payment of $62,500 in money. This position is grounded upon the contention that the policy provision for a “Cash Option in Lieu of Bonds” is available to appellant only upon the two conditions, that (1) the policy shall have matured under its terms, and (2) “all deposits previously due thereon shall have been .made and the contract maintained in full force and effect from date of issue.”

The argument advanced assumes the correctness of the contention counsel had previously made that this action is based upon the statute, and is on a liability arising upon the non-forfeiture statute, which contention was overruled in a preceding paragraph. The statute being a part of the agreement and, by its force, extending the policy and binding the company “to .pay the amount of the policy, the same as if there had been no default in the payment of premium, anything in the policy to the contrary notwithstanding” (Sec. 7899, R. S. 1899; Sec. 6948, R. S. 1909), the death of the insured during the period of extended insurance, matured the policy “according to its terms” and fulfilled the first condition in the cash option paragraph. To hold otherwise. would be to permit provisions in the policy to nullify the express words of the statute. The same considerations lead to a like conclusion with respect to the second condition. If the fact that a premium payment has not been made avoids appellant’s right to avail herself of the cash-option feature, the very thing the statute declares shall not affect her rights is allowed to destroy one of them. It is true the policy is to he construed as a whole. In construing it, however, the statute must be kept in mind, and portions of the policy eliminated by it' cannot be invoked to effect the construction of what remains and of the statute itself.

VI. It has been held courts will not take judicial notice of the net value of insurance policies to which the non-forfeiture statutes apply. [Price v. Conn. Mut. Ins. Co., 48 Mo. App. l. c. 295; Leeker v. Prudential Ins. Co., 154 Mo. App. l. c. 450, 163 Mo. 523.] Appellant called an actuary as a witness and he gave expert testimony as to the method of calculating net values and made the calculation on the policy in suit. It is objected he based his calculation on the assumption the policy in suit was one for $65,250, and that tlfis was wrong. This contention rests upon the same views which constitute the basis of the position of respondent discussed in the preceding paragraph. For the reasons there given we hold the assumption is incorrect and the actuary’s testimony was pertinent enough.

It is further contended this testimony must be disregarded as unworthy of belief. It is insisted this follows from the fact that the witness testified ]je did not use, in his calculation, the gross or policy premium. The gross premium consists of the net premium plus loading for expenses . and contingencies, i. e. the net premium represents the “cost of insurance.” The mortality tables furnish a basis for calculating the average duration of life of persons of a given age. Given this average duration or expectancy, the rate of interest to be used, the age of the insured and the amount of his policy, the amount such person must pay to meet his share of maturing policies is ascertainable. This is his proportion of the “cost of insurance” as that term is employed. When that is ascertained and distributed over the term of his expectancy in level or 'equal premium payments, or over the premium-paying period, as in this case, the early payments obviously will exceed this cost and tbe later ones fall short of it, since the risk in' every case increases with advancing years. In the early years of the premium-paying period the policy-holder, therefor, under a policy like this, pays in an excess over the cost of insurance and this constitutes the reserve or net value. The loading has nothing to do with the problem. The witness was right.

VII. In Haas v. Insurance Co., 84 Neb. 682, the cases are collected which announce the doctrine that forfeitures are not favored and will not be aided by construction,'nnd that an insurance policy containing no provision that non-payment of premiums shall work a forfeiture will not be held to be forfeited by reason of such non-payment. It is argued by appellant’s counsel that this rule applies to tMs case. The argument ignores the fact that the non-forfeiture law (Sec. 7897, R. S. 1899, et seq.) constitutes a part of this policy and that it makes full and explicit provision as to what effect the failure to pay premiums shall have in cases falling within its purview. It is as applicable to policies which do not contain forfeiture clauses as those which do. It is mandatory. It disposes of the whole matter fixing with mathematical certainty the period of extension for policies to which it applies. It leaves no room or opportunity for applying, in the manner desired, the doctrine of the Haas case.

The incontestability clause, upon which counsel also relies, contending it excludes a failure to pay premiums as a ground of defense, also is to be read in the light of the whole policy, including the statute, and when that is done counsel’s construction cannot be regarded as sound.

VIII. The issuance of the policy, the payment of four annual premiums, the death of the insured and the assignment of the policy to appellant having been admitted by the answer, and there having been evidence tending to prove Blees died during the period the net value of the policy extended the insurance, and that proof of death was waived, this was not a case the court should have taken from the jury. The cause is remanded to the trial court with directions to set aside the order overruling the motion to set aside the nonsuit and to sustain that motion and to proceed with the cause in a manner not out of accord with this opinion.

All concur.


source: Caselaw Access Project

author: GRAVES, C. J. WOODSON, J.

license: Public Domain

text:
    THE STATE ex rel. WATTS ENGINEERING COMPANY, Appellant, v. PUBLIC SERVICE COMMISSION.
    In Banc,
    January 17, 1917.
    1. PUBLIC SERVICE COMMISSION: Administrative Board. The Public Service Commission is an administrative board created by law, as an arbiter between the public and public service corporations, and as such has been given extensive powers, with the limitation, however, that all its acts are subject to court review. Such corporations should not be permitted to fix an arbitrary and unreasonable rate for product or service.
    2. -: Test Order: Unreasonable Rates. Where the evidence tends to show an exorbitant rate for gas, that the company has capacity for increased- production, and it cannot be said what increase of consumption might follow a reduced rate, a test order made by the Public Service Commission, by which the rates are materially reduced, and wherein provision is made for monthly reports and for a modification after an actual test of the rates fixed, will not be declared unreasonable. There is no better way to determine what effect lower rates will have on a public service than by an actual test.

      Beta, by WOODSON, J., dissenting, with whom BOND, X, concurs, that the law does not permit the commission to take for a .public use the property of a public service corporation, for any time however short, without just compensation; and where the commission has found from the evidence that at the existing and prior rates the company is earning only about one-half of what is a reasonable remuneration on the capital invested, a temporary or test order reducing those rates by more than twenty per cent is confiscatory and unreasonable, and cannot be justified by testimony showing that 'lower rates will increase consumption, but to what extent is not shown or found.

      3. -: Bates in Other Cities. The fact that other cities of similar population are obtaining gas at a much less rate than that charged by relator is some evidence of the fact that its rate is unreasonable. Held, by WOODSON, J., dissenting, with whom BOND, X, concurs, that the reasonableness of the rates charged by a public service corporation cannot be determined by a comparison with rates charged elsewhere, unless it is made to appear that all the conditions under which the service is rendered are the same and that the rates are remunerative.
    Appeal from Cole Circuit Court. — Hon. J. 0. Slate, Judge.
    Affirmed.
    J. L. Hornsby for appellant.
    (1J Neither the Legislature nor a commission with power to regulate and fix rates, can fix rates so low as to deprive a public utility corporation of a reasonable return on the amount of its investment used in the public service. Upon the conception of the right to take tolls as a species of property belonging to a public utility corporation rest all decisions of all courts, both State and Federal, denying the right of legislature or commissions to restrict such tolls below a reasonable amount. In fixing rates experimentation with the property of anyone is never justifiable. Speculations as to the future are not guides for judicial action. Railroad v. Dey, 35 Fed. 881; Smyth v. Ames, 169 U. S. 466; Railroad v. Railroad Comm., 155 Fed. 792; Buel v. Railroad, 1 Wis. R. C. R. 324; Milwaukee El. R. & L. Co. v. Milwaukee, 87 Fed. 577; In re Rochester (N. Y. P. S. C. 2d Dist.), Pub. Utilities, Rep. Ann. 1915-A,.p. 1095; Tel. & Tel. Co. v. Louisville, 187 Fed. 637; Coal & Coke Ry. Co. v. Conley, 67 W. Va. 129. (2) The reasonableness of rates charged by a public utility corporation cannot be determined by comparison with rates charged elsewhere, unless it is made to appear that all the conditions and circumstances under which the service is rendered are the same, and that the rates' elsewhere are remunerative. Railroad v. Dey, 35 Fed. 866; Ames v. Railroad, 64 Fed. 188, cited with approval in Smyth v. Ames, 169 U. S. 528; Arkansas Eate Cases, 187 Fed. 303.

      Wm. G. Busby and Alex. Z. Patterson for respondent..
    (1) The right of a corporation to earn a fair return upon its investment is qualified hy the proviso that in no event shall the company be permitted to charge the consumer more that the service is reasonably worth. Eoad Co. v. Sandford, 164 U. S. 597; Water Works v. San Francisco, 192 Fed. 137; Water Co. v. San Francisco, 165 Fed. 679; Water District v. Water Co., 99 Me. 371; Brymer v. Water Co., 176 Pa. 231; Smyth v. Ames, 169 U. S. 545; Land Co. v. National City, 174 U. S. 757; Cotting v. Stock Yards Co., 183 U. S. 91; Public Service Co. v. Public Utility Board, 84 N. J. L. 474; Long Branch Comm. v. Water Co., 70 N. J. Eq. 84, 71 N. J. Eq. 790; Pond on Public Utilities, secs. 444, 543. (2) In fixing just and reasonable rates, it is proper to consider the probability that increased consumption at the lower rate may result in increased1' earnings. Wilcox v. Gas Co., 212 U. S. 50, 48 L. E. A. (N. S.) 1134; Wyman on Public Service Corporations, sec. 1129. (3) In determining. just and reasonable rates for service of a public utility, comparison with rates customarily charged in localities similarly situated is a proper test. Gas Co. v. Public-Utility Board, 84 N. J. L. 463; Traction Co. v. Chicago, 199 111. 645; Cotting v. Stock Yards Co., 183 U. S. 79; Eailroad v. Wilson, 119 Ind. 358; Johnson v. Eailroad, 16 Fla. 623; Gunning, on Law of Tolls, p. 61; Angelí on Carriers, sec.- 392. (4) The utility corporation assumes the risk of its investment and no return whatever is guaranteed to it. Telephone Co. v. Carthage, 235 Mo. 644; Water District v. Water Co., 99 Me. 371; Smith v. Ames, 169 U. S. 466; Pond on Public Utilities, sec. 454; Water Works v. San Francisco, 192 Fed. 137. _
   GRAVES, C. J.

This proceeding was instituted by the city of Columbia, by filing a complaint with the Public Service Commission against the Watts Engineering Company, a manufacturer, distributor and seller of gas in said city. The complaint charged that the company’s rates charged for gas to consumers were “excessive, exorbitant and unreasonable,” and asked that the same be reduced “to such amount as the commission shall deem reasonable and just.”

In due time the company filed its answer denying the allegations of the complaint. Thereafter, at the time the cause was set for hearing, each party introduced evidence before the commission.

The evidence introduced by the complainant was to the following effect:

That the rates charged by other gas companies in the cities of this State, as compared with the rates complained of, were lower. These rates were ascertained by a study of the schedules of rates of gas utilities of this State, required by law to be filed in the office of the commission. The cities considered in this statement are Boonville, Brookfield, Cape Girardeau, Chillicothe, Clinton, Columbia, Excelsior ¡Springs, Hannibal, Independence, Jefferson City, Kirksville, Lexington, Louisianá, Marshall, Mexico, Moberly, Oak Grove, Rich Hill, Spring-' field, Sedalia, St. Charles, St. Joseph, St. Louis and Kansas City.

Witness Sheppard, a city councilman of Columbia, testified that the rate for gas in Columbia was higher than similar rates in all of. these twenty-four cities, with the exception of Oak Grove, which had only a total population of 641, and in which; a. more expensive kind of gas was manufactured. That only one city (Cape Girardeau) of the twenty-four had as high a minimum charge per month for gas as Columbia.

The appellant objected to a comparison of the rates of some of the cities with the rates in Columbia for the reason that in said cities the same company owned both the gas and electric plants, whereas in Columbia the electric plant was owned by the municipality. This objection was overruled, and exceptions duly saved. The commission ascertained the rates in existence in the cities of Brookfield, Kirksville, St. Charles, Hannibal, and Independence, in all of which the gas utilities were operated independently of the electric utilities.

The results of its findings of these rates and comparison with those of appellant at Columbia are shown by the following table:

It further appeared from the evidence that the cost of coal at Columbia was.less that the average market price in the State, because of competing railroads; that the character of the ground at Columbia was not such as to make the construction -of the plant more expensive than other cities, since the mains could be laid without .cutting. through rock, as was the case at Hannibal. That; Columbia was a city of much wealth, with several schools and colleges, including the" State University; -that, the E. Y". Stephens- Publishing Company >ard other industries were there located.

The evidence showed that the University and the E. Y. Stephens Publishing Company were permanent customers of appellant, and together' consumed fully one-fourth ,,of appellant’s-product;-that the demand by the University was increasing rapidly.

-That the company has in its plant at Columbia three separate equipments for the manufacture of gas:

First: A water gas. equipment in duplicate of ample size to supply the present requirements and-an increase to approximately double these requirements. This equipment is the only part of appellant’s gas producing plant in use at this time.

Second: A coal gas equipment of vertical coal gas retorts of such size as to easily care for the present requirements. This equipment has not been used by appellant for a number of years.

Third: A still older coal gas equipment, capable of caring for the present requirements, but too small to be relied on. This equipment is likewise not in use.

Mr. Babb, witness for complainant, testified that he delayed putting gas into his house for two years on account of the high rates and the high minimum charge of one dollar per month. He also testified that in his opinion the lowering of the rate and the minimum charge per month would materially increase the number of consumers.

J. A. Stewart, witness for complainant, testified that there would unquestionably be a much greater number of customers if the gas rate was lowered. This witness further testified that the appellant company would not supply gas to a new addition in Columbia, and witness was compelled to lay his own mains in .this addition, though there were from forty to sixty consumers in the addition, and prospects of a greater number. That after witness put in his own mains, appellant furnished gas to consumers at its regular rates, to-wit, a new rate of $1.75 to consumers using less than 10,000 cubic feet.

Witness W. J. Sheppard, for complainant, testified that the reduction of rates at Columbia would, in his opinion, materially increase the business of appellant. That the .total value of the appellant’s property, tangible and intangible, used in the service of the public in the production, manufacture and sale of gas at Columbia, was $77,000.,

In determining this value, the commission excluded the value of the coal gas equipment, since it appeared that it was not in use, and had not been used since the water gas equipment was installed, and since it appeared that the water gas equipment was more than ample for the present requirements, and all probable future requirements of Columbia.

A net return of 7.5 per cent, on appellant’s investment was found by tbe commission to be fair and reasonable.

An allowance of three per cent as a Reasonable allowance for. Surplus and contingencies was made, as is required by law. The average annual operating expense of appellant’s plant for the last five years was found to be $15,803.

The evidence for the defendant .showed in substance the following facts:

The defendant offered evidence showing the value of the property of the Columbia Gas Works;-also, the annual receipts and operating expenses of the'business for the last five years. It also appeared from defendant’s testimony that it owned about twelve miles of gas mains, and that, in addition, there were about three miles of mains laid by private enterprise to serve an outlying residence district recently developed for the purpose of real estate speculation,- and that defendant furnished gas through these also, making a _ total of fifteen miles of mains in Columbia.

It further appeared Ghat defendant had made special efforts several times in the last few years to develop and increase the consumption of gas. It also appeared that defendant was operating in competition, so far as the lighting business was concerned, with a-;municipal electric light plant belonging to complainant. It further appeared that defendant sells approximately eleven million cubic feet of gas per annum, of which about one-fourth is sold to two consumers, the ,State University and the E. W. Stephens Publishing Company; that the rates charged for gas by defendant are $1.75 net per one thousand cubic feet per month, and $1.60 net per thousand cubic feet to those using over ten thousand cubic feet per month; that the State University and the E. W. Stephens Publishing Company were the only consumers which need sufficient gas to obtain the rate of $1.60 per thousand cubic feet.

It further appeared from the testimony of Mr. W. H. Judge, who became manager of the gas plant of defendant in 1893, that .when he took charge the rate for gas was $2.70 net per thousand cubic feet; that some time after he took charge, he reduced the rate for fuel gas to $1.50 per thousand cubic feet, but the rate for gas for illuminating purposes remained at $2.70 net per thousand cubic feet until 1907. ■ It appeared from the testimony that in 1907, the rates for gas were changed from $2.70 for illuminating purposes and $1.50 for fuel, to the present rates, $1.75 net to consumers using less than ten thousand cubic feet per month and $1.60 for consumers using more than ten thousand cubic feet per month. That the reduction in the price of fuel gas from $2.70 to $1.50, made about 1895, resulted in a substantial increase in the number of consumers of gas for .fuel purposes, but that the reduction made in 1907, from $2.70 to $1.75 per thousand cubic feet, did not result in any substantial increase, either in the number of consumers or in the amount of gas sold.

After complainant and defendant had introduced their evidence in the case, the commission had its engineer make an inventory and appraisal of the property of the company, and upon this appraisal the commission has fixed the value of the property of defendant used in the service of the public at $77,000. The defendant’s coal-gas plants were worth an additional sum of $10,124, which was by the commission disallowed in fixing its rates. The testimony showed that the plant’is in first-class condition, the quality of gas produced very good, and the service generally satisfactory.

The commission, in deciding this case, found, as stated. above, that the value of the property of the Columbia Gas Works upon which relator is entitled to earn a return is $77,000; that relator is entitled to three per cent of the value of the property for surplus and contingencies each year (depreciation fund) and that relator is -entitled to a net return on its investment of not less than 7-5 per cent, making thus a total return which relator is entitled to earn of 10.5 per cent on a valuation of $77,000, or $8,085.

It further appeared that the entire force employed in the operation of the gas works consisted of only six persons, including the president; that the president received a salary of $1,000 per annum; the general manager, who was also book-keeper, collector, and entire office force, received a salary of $2,000 per annum, and that the other four persons on the pay-roll constituted the mechanical and laboring force of the plant.

It further showed that for some time past, by reason of the exorbitantly high rates charged for insurance, the company had carried its own insurance risk;' that the cost of insurance, if paid to an insurance company, would be $431 per annum; that the average receipts of the company for the past five years had been $21,385.83 per annum, and that the average operating expense for the last five years has been $16,803 per annum, making the annual average net income for the past five vears $4,583.83.

The commission found from the evidence before it that the rates charged by appellant for gas were $1.75 net per 1,000 cubic feet for consumers using less than 10,000 cubic feet, and $1.60 net per 1000 cubic feet for consumers using more than 10,000 cubic feet. (The meaning of the terms “net gas rate,” as used in this connection, is the rate after deduction of amount allowed for prompt payment from the gross rate.) Appellant made a- minimum charge of one dollar per month to all consumers using 600 cubic feet or less.

By the order of the commission, entered after a consideration of the evidence before it, appellant’s rates were fixed as follows:

For the first 10,000 cubic feet per month, a net rate of $1.35 per 1000 cubic feet. For all in excess pf 10,000 cubic feet per month, a net rate of $1.25 per. 1000 cubic feet, with a minimum monthly charge of seventy-five cents.

After the decision and order of the commission made in this case on February 3, 1915, the defendant therein filed its motion for rehearing, which, in due course, was overruled. Thereupon the defendant therein, relator herein, applied to the circuit court of Cole County for a writ of review, assigning numerous reasons therefor. The trial in the circuit court resulted in a finding and judgment against the company, and an affirmance of the order of the commission. From that judgment the company appealed to this court.

It is important, however, that the order of the commission be set out. As to the rates fixed, the foregoing sufficiently outlines the order, but the important part of the order (so far as a determination of this controversy is concerned) reads:

“Order 6. That defendant, Watts Engineering Company, keep true and correct records of its total gross income and total gross operating expenses, from month to month, and file a monthly sheet with the commission, duly verified by its secretary and treasurer, setting forth fully such income and operating expenses, said reports to begin April 1,1915, and continue until otherwise ordered by the commission.
“Order 7. That the commission hereby retains jurisdiction of this case and reserves the right to modify the above named rates at any time on its own motion; and that complainant or defendant shall be at liberty at any time after an actual test of the rates fixed herein has been made to apply to> the commission by motion or supplemental petition, upon such proof’ as either may desire, and upon reasonable notice to said complainant or defendant, for a modification o*. revision of the rates herein prescribed, if found to be unreasonable or unjust to the public or said defendant, or shall fail to provide a fair and just return on the fair present value of defendant’s property as fixed herein.
“Order 8. That this order shall take effect on,February 25, 1915, and that the secretary of the commission shall forthwith serve on each of the parties hereto a certified copy of this order and of the opinion filed herewith. ” .

This outlines the case.

I. If the order made in this case had been one permanent in character the question presented would be entirely different. But such is not the nature of the order made by the Public Service Commission. Our function • is to determine the reasonableness of the order, as we it. The present order is one made for the purpose of making a test, to the end that the real question of a reasonable rate may be ultimately determined. The Public Service Commission is an administrative board, created by the lawmakers, as an arbiter between the general public and the public service corporations, and to this end has been given extensive powers (Laws 1913, p. 602 et seq.), with all its acts subject to court review, however. The fixing of rates is a delicate and vital subject, when both the public interest and the interest of the public service corporations are considered. These corporations should not be crushed by the fixing of inadequate rates, nor should the public.-be imposed upon by arbitrary business methods adopted by such corporations, which would increase rates. To be more pointed, such corporation should not..be permitted to fix an exorbitant rate for their product or service, and then tie the hands of the Public Service Commission, by showing that at those rates their business is unprofitable. A large per cent of profit on limited sale, will'-often not yield, in the aggregate, as much actual profit, as a small per cent of profit :on larger sales. The price of a product may be made so high as to preclude its general use. These are all vital questions for determination by the Public Service Commission.

In the instant case the evidence tends to show an exorbitant rate for gas at Columbia. It further tends to show that a reduction in rates would increase the sales or consumption. Grant it, that there' is evidence contra. No one knows just what increase of consumption might follow a reduced rate. This can only be determined by actual test. Such was the course pursued by the Public Service Commission by the order made in this case, and it is this “test” order that we are called upon to declare unreasonable. To say that the Public Service Commission cannot, under the showing made in this case, make an order putting in a test rate as in this case, would he to sap the very vitals of the Public Service Act.

In discussing a fixed rate (as contra-distinguished from a mere test rate)' the U. S. Supreme Court in Willcox v. Consolidated Gas. Co., 212 U. S. l. c., 50 and 51, said:

“But there may he other cases where the evidence as to the probable result of the rates in controversy would show that they were so nearly adequate that nothing ;but a practical test could satisfy the doubt as to their sufficiency.
“In this case a slight reduction in the estimated value of the real estate, plants and mains, as given by the witnesses for complainant, would give a six per-cent return upon the total value of the property as above stated. And again, increased consumption at the lower rate might result in increased earnings, as the cost of furnishing the gas furnished.
“The elevated railroads in New York when first built charged ten cents for each passenger, hut when the rate was reduced to five cents it is common knowledge that their receipts were not cut in two, but that from increased patronage the earnings increased from year to year, and soon surpassed the highest sum ever received upon the ten-cent rate.”

There is really no better way to determine just what effect lower rates will have on a public service business, than by an actual test.

Again along the same line, the. United States Supreme Court in Louisville v. Tel. & Tel. Co., 225 U. S. 430, used this language: “But when it is remembered what clear evidence the court requires before it declares legislation otherwise valid void on this ground, and when it is considered how speculative every figure is that we have set down with delusive exactness, we are of opinion, that the result is too near the dividing line not to make actual experiment necessary.” '

The interests of the public service corporation are not the only interests to be conserved by the orders of the Public Service Commission.

In Turn Pike Co. v. Sandford, 164 U..S. l. c. 596, it was said:

“It cannot be said that a corporation 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, stock-holders 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 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 its property. The public cannot properly be subjected to unreasonable rates in order simply that stockholders may earn dividends. The Legislature has the authority, in every case, where its power has not been restrained by contract, to proceed upomthe ground that the public may not rightfully -be required to submit to unreasonable exactions for the use of a public highway established and maintained unden legislative' authority. If a corporation cannot maintain such a highway and earn dividends for stockholders, it is a misfortune for it and them which the Constitution does not require to be remedied by imposing unjust burdens upon the public. So that the right of the public- to use the defendant’s turnpike upon payment of such tolls as in view of the nature and value of the service rendered by the company are reasonable, is an element in the general inquiry whether the rates established by law are unjust and unreasonable. That inquiry also involves other considerations, such, for instance, as the reasonable cost of maintaining the road in good condition for public use, and the amount that may have been really and necessarily invested in the enterprise. In short, each case must depend upon its special facts;, and when a court, without assuming itself to prescribe rates, is required to determine whether the rates prescribed by the Legislature for a- corporation controlling a public highway are, as an entirety, so unjust as to destroy the value 'of its property for all the purposes for which it was acquired, its duty is to take into consideration the interests both of the public and of the owner of the property, together with all other circumstances that are fairly to be considered in determining whether the Legislature has, under the guise of regulating rates, exceeded, its constitutional authority, and practically deprived the owner of property without due process of law. ’ ’

The order made in the instant case has in view the working out of the rate question at Columbia along those lines hereinabove suggested. The order and findings show the value of the investment, and the expense of operation. It shows that the plant has capacity for increased production, 'if increased consumption could be procured. The facts tend to show that increased consumption would most probably follow a reduction of rates. Under these circumstances we do not think that the order involved here is an unreasonable one.

II. The fact that other cities of a similar population were procuring gas' at a much less rate is some evidence of the fact that the rates in Columbia were unreasonable. We think'the doctrine well'annoimced in Public Service Comm. v. Public Utility Board, 84 N. J. L. l. c. 474-5, thus: “In.determining the justice and reasonableness of rates, perhaps no better test can ordinarily be found than the rates customarily charged in localities similarly situated, although we do not say that even., that test is infallible. A table printed in one of the briefs shows that while in some municipalities with a population no larger than that of the Passaic district the charge is less than ninety cents, in others it is as high or higher. Upon the whole we find no reason in the rates charged elsewhere to believe that ninety cents is too high for a community with the population of the Passaic district. Nor do we find the charge too low when compared with other municipalities. As a business question, the price seems within the bounds of a fair chance.”

The proof in that case took very much the lines in this case. The evidence there showed the rates for gas given to other communities, and the populations thereof. The showing made in the instant case in this respect was amply sufficient to support the character of the order here made. The order was not an unreasonable one on the showing made, and the judgment of the circuit court, which sustained the order, should be and is affirmed. If after the test, the rate is found to be too low, the matter can be corrected by the Public Service Commission.

Faris, Blair and Bevelle, JJ., concur; Woodson, J., dissents in opinion filed; Bond, and Walker, JJ., dissent.

WOODSON, J.

(dissenting) — There are but two legal propositions here presented for determination; and :the first is stated by counsel for the company in this language:

“The reasonableness of the rates charged by a public utility' corporation cannot be* determined by a comparison with rates charged elsewhere, unless it is made to appear that all the conditions and circumstances under which the service is rendered are the same, and that the rates are remunerative.”

There is no pretense that the facts and circumstances under which the appellant manufactured and distributed gas were the same as those under which the companies in the other cities mentioned manufacture and distribute the same product. For that reason counsel for appellant insist that the comparison of rates mentioned, made by the commission, was erroneous.

There can be no doubt but what that ruling of the commission, as well as that of the circuit court, was improper. We know from observation and common knowledge that the cost of producing an article greatly varies, according to the facts and circumstances surrounding the parties making the production.

While the complainant introduces evidence tending to show that coal was. cheaper at Columbia than in some other parts of the State, and that the cost and expense of laying gas pipe in that city was less expensive than it was in the city of Hannibal, yet they by no means cover all the facts and circumstances involved in the manufacture and distribution of gas. They constitute but a small percentage of the facts, and their cost by no means constitutes the bulk of the cost of such production, or, at least, in the absence of all evidence on that subject, neither the commission nor the court has any authority to so presume. All such facts and circumstances must be established by evidence before such a comparison can be legally made as a basis for or element in an order reducing the prices to be charged for the gas furnished to the consumer.

Moreover, should it be conceded that the cost of production by all of said companies was the same, yet that showing of itself would not warrant a reduction of appellant’s rates, unless the evidence should further show that the rates charged by said other companies produced a reasonable remuneration for the capital invested by them. This is true, for the reason that gas companies, like many other corporations, do not earn a sufficient sum to pay expenses of operation, much less to pay a reasonable percentage on the investment.

The following authorities so hold: C. & N. W. Ry. Co. v. Dey, 35 Fed. 866; Ames v. Union Pac. Ry. Co., 64 Fed. l. c. 188; Smyth v. Ames, 169 U. S. l. c. 528; In re Arkansas Rate Cases, St. Louis Southwestern Ry. Co. v. Allen, 187 Fed. 290.

II. Appellant’s second contention is that the schedule of rates to he charged hy relator, as fixed hy the order of the Public Service Commission, is unreasona^e’ unjust, confiscatory, and, consequently, deprives relator of his property without just compensation.

In order to fully understand this contention as applied to this case, it becomes necessary for us to briefly state the evidence hearing on this point.

The evidence tended to show and the commission found that the value of the property of the company was $77,-000. This valuation does not include the value of $10,124 of the coal gas plants the company owns, hut not in use in the production of gas, hut as counsel does not insist upon having that value added to that fixed by the commission, we will pass it hy.

The commission found that the company was entitled annually to three per cent, of the value of the property for depreciation, repairs, the upkeep of the plant, etc., and 7.5 per cent, interest on the investment, equaling a total of 10.5 per cent.

The average annual gross receipts of the company for the last six years were $21,386.83, and the average annual operating expenses during the last five years were $16,803. The net annual receipts of the company during that period were $4,583.83, or less than six per cent, on the money invested — $77,000.

Deducting the three per cent, for depreciation, etc., from the net income, $4,583.83, leaves a net annual income on. the investment of only $2,273-83, or less than three per cent per annum, being only forty per cent of the income the company was entitled to as fixed hy the commission, 7.5 per cent. In other words, the commission declared that the company was entitled to an annual net income of $8,085, and it found that the company is now earning at its old rates only $4,593.83 net.

It therefore follows from the commission’s own findings that the company is entitled to earn 76 per cent more than its present net income.

Notwithstanding those figures, the commission ordered a reduction of the rates of the company now charged for gas, from $1.75 net to consumers using less than 10,000 cubic feet per month, to $1.35 net, and from $1.60 net to consumers using over 10,000 cubic feet per month, to $1.26 net, equaling a reduction of its present aggregate rates to a fraction more that 20 per cent, and if we deduct this 20 per cent, $454.76, from the present annual net income on the investment of the company, $2,273.83, then its net annual income on investment will be only $1,819.07. And the only reason assigned or shown by the evidence for said reduction of rates, is the testimony of the following witnesses, which is as follows:

Mr. Babb, witness for complainant testified that he delayed putting gas into his house for two years on account of the.high rates, and the high minimum charge of one dollar per month. He also testified that in his opinion the lowering of the rates and the minimum charge per month, would materially increase the number of consumers.

Col. Stewart, a witness for complainant, testified that there would unquestionably be a much greater number of consumers if the gas rates were reduced.

W. J. Sheppard, witness for complainant, testified that the reduction of rates at Columbia would, in his opinion, materially increase the business of the company.

To say nothing of the evidence introduced by the company tending to show a reduction in the rates to be charged for gas would not increase its net income, yet it was upon the foregoing vague and speculative testimony of those witnesses that the commission found that the reduction of the rates mentioned would increase the business of the company, but how much no witness stated, nor did the commission attempt to ascertain or fix the percentage of increase of the earnings of the company would be, if any, caused by said reduction of rates. However,- by implication it must have been sufficient to not only overcome the large difference between the sum the company was entitled to receive on its investment and the sum it was actually receiving under the old rates, but also to so increase tbe volume of its business so as to enable it to pay the three per cent net for depreciation, etc., and the 7.5 per cent on its investment, equaling 10.5 per cent net, amounting as before shown, to the sum of $8,065, as against its present net income of $4;583.83, which would practically double its annual net income.

In order to accomplish this result, the company would have to practically double the volume of its business, with but a small proportional percentage of increase in the cost of production — the exact amount and percentage of each, I have not figured.

In the case of the Chicago, Burlington & Quincy Ry. Co. v- Public Service Commission, 266 Mo. 333, it was held that such vague and speculative evidence, as that before mentioned, was' insufficient to support a similar order of the commission. But independent of any authority upon that subject, it seems to me that common sense would dictate a contrary conclusion to be drawn therefrom, especially in the light of the facts that Columbia has a population of only 9,662, having only one manufacturing plant of any importance, the greatest consumer of gas, and was operating its own independent electrical plant, thereby greatly lessening the demand for illuminating gas.

Under this state of facts we fully concur with the contention of counsel for the company that the rates fixed by the commission are unreasonable, unjust and confiscatory, and, if enforced, would under the State and Federal constitutions deprive it of its property without just compensation; so hold the following cases, cited by counsel, all of which, and many others, we had occasion to examine and consider in the case of White v. Delano et al., Receivers of W]abash Ry. Co., 270 Mo. 16; Chicago & N. W. Ry. Co. v. Dey, 35 Fed. 866, 881; Smyth v. Ames, 169 U. S. 466; Seaboard Air Line Ry. v. Alabama R. R. Comm., 155 Fed. 792; Buell v. C., M. & St. P. Ry. Co., 1 Wis. R. R. Comm. Rep. 324; Milwaukee El. Ry. & Light Co. v. Milwaukee, 87 Fed. 577; In re Rochester, (N. Y. P. S. C. 2 District) Pub. Utilities Rep. Ann. 1915-A, p. 1095; Cumberland Tel. & Tel. Co. v. Louisville, 187 Fed. 637; Coal & Coke Ry. Co. v. Conley, 67 W. Va. 129.

Counsel for tbe commission present tbe four following-legal propositions for decision, viz:

“1. Tbe right of a corporation to earn a fair return upon its investment is qualified by the proviso that in no event shall the company be permitted to charge the consumer more than the service is reasonably worth.
“2. In fixing just and reasonable rates, it is proper to consider the probability that increased consumption at the lower rate may result in increased earnings.
“3. In determining just and reasonable rates for service of a public utility, comparison with rates customarily charged in localities similarly situated is a proper test.
‘ ‘ 4. The utility corporation assumes the risk of its investment and no return whatever is guaranteed to it. ’ ’

That those statements are correct, abstract legal propositions, as shown by the many authorities cited in support thereof, no one will question; but the facts of this case are such, as disclosed by this record, they do not warrant their application to it.

The majority opinion seems to proceed upon the theory that because the order of the commission fixing the unjust and confiscatory rates mentioned is temporary in character, and not permanent, therefore it should be upheld.

In reply to that I wish to state that I know of no law. or morals which authorizes the commission to take the property of this company for public use for any period of time,. however long or short, without just compensation. That such has been done in this case there is no question, which clearly violates both the State and Federal Constitutions. [State v. Canning Co., 157 N. W. (Minn.) 777.]

There is a class of cases which hold, and properly so, that where, upon the' face of the entire record, it appears in all probability that a public service corporation is charging and collecting exorbitant and unreasonable rates for the service performed, the commission may make a temporary order lowering th’e rates to sneh figures as it believes to be reasonable, and require the company to keep an accurate account of its receipts and expenditures during the existence of said order, and determine therefrom whether in fact said rates are reasonable or not; and if by that means they are found to be reasonable, then the rates may be restored or raised to á figure ■ that will yield a reasonable remuneration upon the capital invested in the business. [State ex rel. Missouri Pacific Ry. Co. v. Public Service Coinmission, post, p. 634.] But that is not this case — here the commission has found from the evidence that at the old rate the company is not earning but about one-half of what is a reasonable remuneration on the capital invested. And in the class of cases mentioned, the order generally permits the ■ company to collect and retain the proceeds of the old rates until it can be ascertained whether or not the new rates are reasonable; if found to be reasonable, then the company must refund to its patrons the difference between the old and the new ratesbut if found to be unreasonably low, under this order, then the company can-net recuperate its loss, and, consequently, to that extent its property has been confiscated. So hold the authorities before cited. I therefore dissent.

Bond, Jconcurs.