author: Donahue, J.

text:
    Wallace et al. v. The Clifton Land Company.

      Real property — Uniform restrictions in deeds — Injunction—Rights of individual or united lot owners — Power of eminent domain —Supersedes contract or covenant, when — Streets and alleys— Establishment by private proprietors — Public dedication and acceptance necessary, when.

    1. Where uniform restrictions are imposed, according to a general plan of allotment, upon all the lots therein, the owner of the allotment covenanting in the deed of conveyance of each separate lot that all sales or leases of other lots in that allotment, similarily located, shall be sold or leased subject to such restrictions, an owner of any lot or lots in such addition may maintain an action to enjoin the owner of any other lot or lots in that allotment from using the same- for purposes other than the uses to which they are restricted.
    2. The owners of other- lots in that allotment, or any number of them, may unite in an action against any lot owner, to enforce by injunction the restrictive covenants written into each deed, in pursuance of the general plan of allotment.
    3. No contract or covenant in a deed restricting the real estate conveyed to/certain uses and prohibiting other uses thereof, will operate to prevent the state or any body politic or corporate, having the authority to exercise the right of eminent domain, from appropriating such property to public use.
    (No. 14751
    Decided July 2, 1915.)
    Error to the Court of Appeals of Cuyahoga county.

      On the 23d day of May, 1914, plaintiffs in error filed a petition in common pleas court of Cuyahoga county, averring that they were owners of lots in what is known as the Clifton Park Addition to the city of Lakewood; that this addition consists of about ninety acres, subdivided into two hundred and twenty-nine lots, all devoted exclusively to residence purposes; that the allotment was laid out by The Clifton Park Land & Improvement Company according to a general plan whereby uniform restrictions were imposed upon the lots thereafter sold, such restrictions running for a period of fifty years from the date of the respective deeds, it being specially covenanted by the land company in each deed “that all sales or leases of lots in such allotment, similarly located, should be made subject to like restrictions as to the use of the same.”
    Plaintiffs further aver that the defendant in error has acquired title to sublots 189, 209 and parts of sublots 188 and 190 through mesne conveyances from the grantees of the original proprietors of this subdivision, and that defendant proposes to devote these lots or part thereof to road and street purposes, and pray for an injunction restraining it from making any other or different use of said lots than as provided in the original deed therefor from The Clifton Land & Improvement Company.
    The defendant for answer admits that it proposes and intends to locate certain streets on the lots described in the petition; avers some streets are now located on a portion of said premises, formerly owned by said Clifton Park Land & Improvement Company, and that said streets are partially graded and sidewalks laid and are open for general use; denies that plaintiffs have any interest in or right to any portion of the premises described in the petition, and asks that petition of plaintiffs be dismissed and that plaintiffs may be enjoined from further interfering in any manner with the defendant in its use and occupation of said premises.
    The cause was tried in the common pleas court, which court granted a perpetual injunction against the defendant, restraining it from using any lots described in plaintiffs’ petition for road or street purposes.
    An appeal was taken to the court of appeals, and that court, on the evidence submitted, made the following finding of fact:
    “That in or about the year 1900, The Clifton Park Land & Improvement Company laid oüt and allotted for residence purposes a considerable tract of land known as ‘Clifton Park’ within the limits of what is now the city of Lakewood, Cuyahoga county, bounded by Lake Erie on the north, by Rocky river on the west and on the south by the tracks of the New York, Chicago & St. Louis Railroad Company, except as hereinafter shown, a substantial copy of said plat is hereto attached and marked ‘Exhibit A.’ In 1904 a plat of a portion of said property was offered and the streets as thereon shown dedicated to the then hamlet of Lakewood which was approved and the streets accepted, a copy of which plat is hereto annexed and marked ‘Exhibit B.’ That the general plan of said allotment adopted by said company provided for the opening of certain roadways or streets, excepting a 'part of certain low lands bordering on Rocky river and Lake Erie and certain other lots, paths and roads to be thereafter used and enjoyed by lot owners in Clifton Park in common; that said plan also provided for the restriction of all sublots in said allotment to use for residence purposes only and that the same should not be used for any business purpose, or any intoxicating liquors sold or exposed for sale thereon; it also provided that no building should be placed upon any lot nearer than ten feet to either of the side lines of said lot without the consent of the adjoining owners, nor within a given distance from the street lines, nor that any house to be built upon any sublot should cost less than a certain fixed sum. The Clifton Park Land & Improvement Company also held out to purchasers of lots, that similar restrictions would.be placed in all sales or leases of lots similarly situated thereafter made. None of said restrictions were applicable to or intended to apply to said Block C, except the restrictions against business uses and the sale of liquor. On April 11th, 1913, a deed to sublot No. 209 in said allotment was executed by The Clifton Park Land & Improvement Company to one J. M. Shallenberger, which deed contained the following restriction:
    “ Tn accepting this conveyance and as a part of the consideration therefor, the Grantee, for himself and his heirs and assigns covenants with the. Grantor that the said Grantee, his heirs and assigns will not sell or allow to be sold on either of said sub-lots any liquor, whether spirituous, vinous or fermented, or use either of said sublots or cause or permit the same to be used for any business purposes whatsoever or for any other purposes than that of a private residence, or erect on either of said sub-lots any apartment house, tenement or other building to be occupied by moré than one family, or erect, maintain or use or permit on said premises a carriage house, stable or other outbuilding except an automobile house without the written consent of the Grantor, nor in any case nearer than 60 feet to the street or avenue on which said lots front, nor (except by agreement with the owner of the adjoining lot) nearer than 10 feet to either of the side lines of either of said lots; that no house shall be erected on either of said sublots which shall cost less than $5000.00; that no house shall be erected on said sublot No. 209 which shall be located nearer than 40 feet to the street or avenue on which the same fronts or nearer than 10 feet to either of the side lines of said lot; that no house shall be erected on said sublot No. 165 or any line of which shall be located nearer than 60 feet to the street or avenue on which the same fronts, or nearer than 10 feet to either of the side lines of said lot. The grantor further covenants with the said Grantee that all sales or leases of lots in said allotment similarly located, shall be made subject to like restricions as to the use of same. The said several covenants, agreements and provisions herein contained shall run with the land hereby conveyed and be binding upon the said Grantee, his heirs and assigns, for the period of 50 years from the first day of January, 1913.’
    “On November 16th, 1912, The Clifton Park Land & Improvement Company conveyed to R. E. Burdick sublot No. 189 and parts of sublots Nos. 188 and 190 in said allotment comprising 100 feet front on the easterly side of Clifton road, together with a parcel of land adjoining thereto containing about one acre and known as ‘Block C/ said deed containing the following restrictions:
    Statement of the Case.
    “ ‘In accepting this conveyance and as a part consideration therefor, the Grantee for himself and his heirs, and assigns, covenants with the Grantor that said Grantee, his heirs and assigns will not sell or allow to be sold on said premises any liquor, whether spirituous, vinous or fermented, or use said premises or cause or permit the same to be used for any business purposes whatsoever, or for any other purpose than that of one private residence on each of the two parcels herein described, or erect thereon any apartment house, tenement or other building to be occupied by more than one family, or erect, maintain or use or permit upon said premises a carriage house, stable or other outbuilding except an automobile house on each of the two parcels herein described without the written consent of the Grantor, nor in any case nearer than 60 feet to the street or avenue on which said lot fronts nor (except by agreement with the owner of the adjoining lot) nearer than 10 feet to either of the side lines of said lot; that no house shall be erected on said premises which shall cost less than $4,000, or any line of which shall be located nearer than 40 feet to the street or avenue upon which the same fronts, or nearer than 10 feet to either of the side lines of said lot. The Grantor further covenants with the Grantee that all sales or leases of lots in said allotment similarly located shall be made subject to like restrictions as to the use of same. The said several covenants, agreements and provisions herein contained shall run with the land hereby conveyed and be binding upon the said Grantee, his heirs and assigns, for the period of 50 years from the date hereof.’
    “And that by mesne conveyance the defendant, The Clifton Land Company, has succeeded in title and is now the owner of all three parcels of land so conveyed to said Shallenberger and Burdick. That all deeds from 1900 down to the present time to purchasers of lots in Clifton Park have contained substantially the same restrictions varying only in immaterial details such as the- cost of a residence to be constructed upon a given lot and varying as to a distance which said residence should be located from the street line on the various streets, but in these two respects also, all similarly located lots were similarly restricted. All deeds in said allotment, including the deed to Shallenberger and to Burdick contain following the granting clauses herein, the following:
    “ ‘Together with the right to use in common with the other owners of the land in said allotment, all portions of said allotment which shall by the Grantor be devoted to the purposes of parks or park spaces for the exclusive use and benefit of such lot owners; but such use of the parks and of any pavilion or bath or boat houses as may be erected thereon by the said company for the benefit of owners of property in said allotment, shall be subject to such rules and regulations as may be established by said company to provide for the taxes and expenses of the maintenance and preservation of the same, and the proportionate part of such taxes and expenses shall be chargeable to the lot herein conveyed and shall be a lien upon said lot to secure its payment.’
    “And also the following covenant:
    , “ ‘The said Grantor further covenants with the said Grantee that it will, before the period of its corporate existence or any renewal or renewals thereof expires, convey the fee in the land reserved for park purposes in the allotment of The Clifton Park Land & Improvement Company, as shown by the plat thereof made and on file in the office of the secretary of the company, to a Board of Trustees of not less than three members, who shall be property owners in said allotment, with power to perpetuate said Board of Trustees, and with power to hold said property for the use and benefit of persons owning lots in said allotment subject to such rules and regulations in regard to the use thereof as hereinbefore provided, and for that purpose the said Trustees shall succeed to all the rights, powers and duties of the company as to use, maintenance, repair, improvements, and for all purposes whatsoever.’
    “The court further finds that there has been substantial compliance by all purchasers and owners of lots in Clifton Park with the restrictions and that there has been no violation thereof, but that a club house was constructed upon four several sublots leased for that purpose on November 7th, 1902, and pursuant to the terms of the lease conveyed in July, 1913, to the Clifton Club; that said deed contained substantially the same restrictions as in all other deeds, save and excepting that the lots should not be used for any other purpose than that of private residence or social club. That the club has erected on said premises a large, commodious and substantial club house which it has ever since run and maintained and that its members have not been or are not confined to residents or lot owners in Clifton Park but is open generally to the public use so far as membership is concerned and that a large number belonging thereto and patronizing the same are not residents or lot owners in Clifton Park. The court further finds that lying to the southeast of said Clifton Park there is a tract of about fourteen (14) acres owned by defendant which it acquired in six several parcels in February, 1914, and that defendant proposes to allot said premises together with Block C and said sublots Nos. 209 and 189 and parts of lots Nos. 188 and 190 as one parcel and to make, construct, lay out, open, improve and dedicate, and to do any act or thing necessary to accomplish or in furtherance of the improving and dedication to the City of Lakewood of sufficient of said sublots Nos. 209, 188, 189 and 190 to make a public street or road, which shall be open and to be used by the public, without charge, in, over and through said lots. The defendant herein, The Clifton Land Company, obtained from different parties the title to six or more pieces of land that had been and were being used for various purposes, bounded substantially as follows: On the north and west by the property owned, or formerly owned, by The Clifton Park Land & Improvement Company; on the south by the Nickel Plate Railroad; on the east by land owned by various parties; the east line being about ISO feet west of Clifton Boulevard, the same containing about 14 acres of land; the only access to, and egress from which, unless street facilities can be obtained over some portion of the premises formerly owned by-The Clifton Park Land & Improvement Company, as heretofore stated, or lots facing on the west side of West Clifton Boulevard, or over the said tracks on the south, is a (private) way, the status of which was fixed by this court in case No. 2SJ-, entitled ‘Swingler, et al., vs. The Zetelmeyer Coal Company, et al./ to the South across the Nickel Plate Railroad and onto Sloan Avenue, a public street in which are two street car tracks, said private right of way being twelve feet wide and belonging to the owners of a part of said pieces of land above named. That this action was brought by plaintiffs as soon as the proposed making of said allotment and the proposed opening, constructing and laying out of said roadways or streets by defendant became known to plaintiffs and that there was no unnecessary delay or laches upon the part of the plaintiffs in so doing.”
    As conclusion of law, the court of appeals found that the plaintiffs are not entitled to the relief prayed for and dismissed the petition at their cost. Error is prosecuted in this court to reverse that judgment.

      Messrs. Cushing, Siddall & Lamb and Messrs. Treadzuay & Marlatt, for plaintiffs in error.

      Messrs. Smith, Taft, Arter & Smith and Mr. D. M. Bader, for defendant in error.
   Donahue, J.

From the facts found by the court of appeals, it is clear that this allotment was laid out by The Clifton Park Land & Improvement Company according to a general plan imposing uniform restrictions for a period of fifty years upon all the lots in this addition, and that, in consideration of the acceptance by the purchaser of the conditions imposed, The Clifton Park Land & Improvement Company agreed that all sales or leases of other lots in that allotment, similarly located, should be subject to like restrictions as to the use of the same.

That being true, it follows that the purchasers and present owners of any of these lots have the right to enforce the restrictions imposed upon these lots in the deeds from the original proprietors, for there could be no purpose in writing such restrictions in the deeds if any one or more of the pur- . chasers or their subsequent grantees or lessees were permitted to disregard the same and devote the property to a use prohibited by the restrictions, regardless of the rights of other lot owners.

These restrictions were not imposed for the benefit of the original proprietor, further than the fact that the general and uniform plan of restricting the allotment to resident purposes might contribute to a readier sale of the lots. The real purpose of the restrictions was to guarantee to the purchasers a quiet residence locality, where they might build their homes and live apart from the noise of manufacturing and the bustle and confusion of the marts of trade. The great majority of these purchasers undoubtedly bought with this idea in view. Their grantor kept faith and imposed like restrictions upon all the lots in this allotment that were similarly located. The purchaser who bought with the intent or purpose of disregarding the restrictions and devoting the property purchased by him to any purpose that might suit his whim or his business needs, regardless of the restrictions written in his deed, has no standing in a court of equity.

It is insisted, however, that this is to be devoted to a public use, that the public has the right to take private property for public use whenever it becomes necessary, and that no contract can be made that will prevent the state or any body politic or corporate, having the right of eminent domain, from appropriating private property to public use. 'That is a self-evident proposition, but it is not the case presented for review.

These private proprietors have undertaken to create a public thoroughfare through this addition and over the lands subject to these restrictions. Public ways cannot be established in this manner. The need of such thoroughfares is a question to be determined by the public authorities. ■ When these authorities have determined the necessities of such ways, private property can be taken for such use, regardless of restrictions or limitations placed upon the same by deed, contract or otherwise, and when established, these ways come under the control of the public authorities, whose duty it is to keep them in repair, free from nuisance and open for public travel. The question whether the owners of other lots in this addition have any property interest in these lots that would require them to be compensated before being taken for public use does not arise in this case.

It is said in argument that these lots have already been deeded to the city of Lakewood for street purposes, but no presumption obtains that the city will accept such grant, for this carries with it burdens of construction, maintenance, care and control that the city authorities may not care to assume.

The only question presented in this record is the question of the right of The Clifton Land Company to devote these lots, covered by these restrictions, to street purposes, and that- question must be answered in the negative.

The judgment of the court of appeals is reversed, and judgment entered for plaintiffs in error, upon the facts found by that court.

Judgment reversed and judgment for plaintiffs in error.

Johnson, Newman, Wanamaker, Matthias and Jones, JJ., concur.

Nichols, C. J., dissents.


source: Caselaw Access Project

author: Johnson, J.

license: Public Domain

text:
    The Hocking Valley Railway Co. v. The Public Utilities Commission of Ohio et al.

      Public utilities — Railroads—Coal rates — Commission’s order conclusive, when — Scope of review by courts — Intrastate traffic rates — Classification of business by state — Proper compensation due carrier — Order not unlawful or unreasonable, when— Guaranties of federal constitution.

    1. This court will not substitute its judgment for that of an administrative board, created pursuant to an act of the legislature, as to matters within its province. Before the court will interfere with an order of the railway commission, or its successors, it must appear from a consideration of the record that the action of the commission was unlawful or unreasonable.
    2. The state, in the exercise of the discretion with which it is vested, in prescribing rates for intrastate traffic may make reasonable classifications of business. The power is not arbitrary and must be used with due regard for the carrier’s right to proper compensation.
    3. Considerations of public interest cannot be invoked as a ground * to compel a common carrier to maintain a rate on a particular commodity that will deny proper compensation.
    4. The order of the railway commission fixing rates under the circumstances of this case is not unlawful or unreasonable; and is not a denial of due process of law or of the equal protection of the laws, or a taking of property without just compensation.
    (No. 14739
    Decided July 2, 1915.)
    Error to the Court of Appeals of Franklin county.
    The New York Coal Company in January, 1910, filed a complaint before the railroad commission of Ohio against The Hocking Valley Railway Company, in which it was alleged .that the rafes on commercial coal in carloads from Nelsonville to Toledo and intermediate points were unreasonable.
    In June, 1911, after a hearing by the commission, it made an order fixing certain rates to be substituted by the railway company and requiring it to desist from charging, collecting and receiving the rates set out in the order for transporting coal in carloads from Nelsonville to Toledo, Ohio, and to certain designated intermediate points.
    The railway company then brought an action in the common pleas of Franklin county praying that the said order be vacated and set aside and that the commission be enjoined from enforcing it.
    On the trial that court refused to set aside the order or to grant the injunction and dismissed the petition. On appeal to the court of appeals of Franklin county, a similar order was entered by that court. This proceeding is brought to reverse the judgment of the court of appeals.
    As stated above, the original complaint was filed with the railroad commission, which has been succeeded under subsequent acts of the legislature by the public service commission and the public utilities commission.
    The railway company alleged that the rates as fixed by the commission are unlawful and unreasonable in the following respects: That said rates ■are unreasonably low and not fair compensation for the service performed; that said rates will operate unjustly and unreasonably discriminate against the interstate commerce in coal in carload lots from Nelsonville, Ohio, to points in other states and territories; that said rates described will operate to unreasonably discriminate against the shippers of coal from the Pomeroy district of Ohio, and will exclude them from the markets at the destinations affected by the order, and give Nelsonville shippers an undue preference and advantage in the transportation of coal, and will have the effect of suppressing competition in the transportation and sale of bituminous coal to and at the destinations affected by the rates in the order prescribed; that the said order is an attempt upon the part of the commission to compel plaintiff to regulate, adjust and fix the interstate rates in which it participates in the carriage of coal in carload lots with reference to its rates in Ohio, and in this way to regulate to some extent the interstate commerce of the plaintiff, which power of regulation is exclusively given by the constitution of the United States to the congress of the United States. Claim is also made that the rates affected by said order will operate to deprive the plaintiff of its property without compensation or due process of law, and that the order undertakes to fix and establish maximum rates for the service therein mentioned, whereas the defendant is without legal authority to establish rates as máximums to be charged.

      Messrs. Wilson & Rector, for plaintiff in error.

      Mr. Edward C. Turner, attorney general; Mr. Lawrence K. Langdon, Mr. Freeman T. Eagleson and Mr. O. E. Harrison, for defendants in error.
   Johnson, J.

The rate on commercial coal in force at the time of filing the complaint by the New York Coal Company from Nelsonville to Toledo was one dollar per ton. This was the rate in force as to all stations beyond Marion. The rate to Marion was eighty-five cents, and from that point south lower rates prevailed.

On the hearing before the commission, at which considerable testimony was introduced, the rate to Toledo was reduced to eighty-five cents per ton, with .proportional rates to the intermediate points.

The proceeding in the court of common pleas was brought under Section 543 et seq., General Code. It is provided in those sections that a certified transcript of all of the proceedings had and testimony taken before the commission shall be filed in the court of common pleas, and that a party to the action may introduce original evidence in addition to the transcript of the evidence offered before the commission.

Section 550, General Code, provides that in actions under the preceding sections to vacate or set aside such order of the .commission, the burden of proof shall be upon the plaintiff to show by clear and satisfactory evidence that such order is unlawful or unreasonable. Since this action was begun, the procedure has been changed by^the act to create the public utilities commission of Ohio (103 O. L., 804, Section 33)..

The courts below, after the performance of their duty to fully examine the evidence and consider the claims of counsel with reference thereto, did not sustain the contention of the plaintiff in error that the order was unlawful or unreasonable.

We have also examined the record, not for the purpose of passing on conflicts in the testimony of witnesses, nor of deciding upon pure questions of fact, but to determine from the record, including the evidence, whether the conclusions of fact, as found by the commission and sustained by the courts below, were so dependent upon questions of law as to be in substance and effect a decision of the latter.

The court will not substitute its judgment for that of the legislature or of an administrative board created by it as to matters within its province. It must appear that the order complained of was unlawful or unreasonable. Until the contrary is shown by the degree of proof required by the statute, the presumption is that rates fixed by the railway commission or its successors, for intrastate traffic, are reasonable and just and yield a compensatory return to the carrier.

In the recent case of Northern Pacific Ry. Co. v. North Dakota, 236 U. S., 585, which involved intrastate rates for transportation of coal, the court say: “The general principles to be applied are not open to controversy. (The railroad property is private property devoted to a public use. As a corporation, the owner is subject to the obligations of its charter. As the holder of special franchises, it is subject to the conditions upon which they were granted. * * * The state may prescribe rules to insure fair remuneration and to prevent extortion, to secure substantial equality of treatment in like cases, and to promote safety, good order and convenience.”

In concluding the opinion it is said: “It is presumed, — but the presumption is a rebuttable one— that the rates which the state fixes for intrastate traffic are reasonable and just. When the question is as to the profitableness of the intrastate business as a whole under a general scheme of rates, the carrier must satisfactorily prove the fair value of the property employed in its intrastate business and show that it has been denied a fair return upon that value. With respect to particular rates, .it is recognized that there is a wide field of legislative discretion, permitting variety and classification, and hence the mere details of what appears to be a reasonable scheme of rates, or a tariff or schedule affording substantial compensation, are not subject to judicial review. But this legislative power cannot be regarded as being without limit. The constitutional guaranty protects the carrier from arbitrary action and from the appropriation of its property to public purposes outside the undertaking assumed; and where it is established that a commodity, or a class of traffic, has been segregated and a rate imposed which would compel the carrier to transport it for less than the proper cost of transportation, or virtually at cost, and thus the carrier would be denied a reasonable reward for its service after taking into account the entire traffic to which the rate applies, it must be concluded that the state has exceeded its authority.”

We assume that the above may be taken as a fair and concise statement of the position of the federal supreme court upon this important subject after full consideration of a number of rate cases which have been recently before it.

The defendant in error points out that it is shown by the record that the Hocking coal district constitutes one of the valuable resources of the state of Ohio; that large amounts of capital are invested in it, large numbers of citizens are.directly employed in its development, and the prosperity and welfare of many industrial and commercial enterprises are dependent-upon the continued existence and growth of the mining operations in the locality; that these are adversely affected by the high rates charged by the defendant for the transportation of coal from this field, and that to remedy these conditions, the complaint was originally filed before the commission. And further, that considerations of public interest suggest a low rather than a high rate on the traffic.

We are not unmindful of the great desirability of the - development of those resources and the highly beneficial results that would accrue to the people of Ohio if all the industries referred to should prosper. Every proper effort of the people and the government should be exerted to bring about this beneficent result. The considerations suggested may be properly, invoked as a ground for the enforcement of reasonable rates; but we are likewise admonished that the rights of the plaintiff railway company are also entitled to consideration, and it is the duty of the state and its administrative agency, as well as of the court, to see that no injustice is done it. The same matter is referred to in the Northern Pacific case, supra.

The court say: “The state insists that the enactment of the statute may be justified as ‘a declaration of public policy.’ In substance, the argument is that the rate was imposed to aid in the development of a local industry and thus to confer a benefit upon the people of the state. The importance to the community of its deposits of lignite coal, the infancy of the industry, and thé advantages to be gained by increasing the consumption of this coal and making the community less dependent upon fuel supplies imported, into the state, are emphasized. But, while local interests serve as a motive for enforcing reasonable rates, it would be a very different matter to say that the state may compel the carrier to maintain a rate upon a particular commodity that is less than reasonable, or — as might equally well be asserted — to carry gratuitously, in order to build up a local enterprise;”

The railway commission, on the hearing of the complaint referred to in this case, was only empowered to fix a rate that was reasonable and that would furnish to the plaintiff company a fair and just compensation. As stated in the language already quoted, “It is presumed, — but the presumption is a rebuttable one — that the rates which the state fixes for intrastate traffic are reasonable and just.c”

The proposition, asserted by the plaintiff in this injunction proceeding, is that the order of the commission was unlawful and unreasonable, and the question before us is whether the record discloses that the plaintiff has by clear and satisfactory evidence sustained its contention.

It is claimed that the commission, in arriving at its conclusion, relied upon the lake-cargo coal rate from Nelsonville to Toledo as a basis for comparison in fixing the cost of service and the rate to be fixed on commercial coal. It is insisted that this is an unfair basis of comparison because of the fact that the lower differential of lake-cargo coal is made for the reason that some consideration must be given to its long haul to final destination at the lake ports for shipment to the Northwest; that long-haul rates are normally lower per mile than short-haul rates; that lake-cargo coal is transported under peculiar conditions, altogether different from those that pertain to the carrying of commercial coal; and that lake coal moves in train loads in the summer and does not require such switching and delivery service as commercial coal.

The plaintiff had formerly established a rate of eighty-five cents for lake-cargo coal from Nelson-ville to Toledo. This was reduced to seventy-five cents by the plaintiff and this reduction is stated to have been made to meet a rate fixed by the interstate commerce commission in another proceeding concerning other parties. It is not contended that the rate of seventy-five cents was not a fair one, and if the commission and the courts below assumed that such a rate, voluntarily accepted by the plaintiff, was compensatory and reasonable in the light of the evidence, we think that no ground of complaint.

The evidence in the cáse consisted of public documents, including various reports of the plaintiff company, and the testimony of a number of officers of the plaintiff company and other witnesses.

In truth, it may be said that the determination of the entire cas:e depends very largely on the evidence. If the result at 'which the commission arrived is justified by the whole record, the process of reasoning by which that result was arrived at, is not important except as it might assist the reviewing courts in the investigation of the case.

It was shown in the evidence that the plaintiff and other railroad companies had accepted and fixed rates for similar services under similar conditions, and as to this also we remark that the commission and the courts below might well have assumed, in the light of the evidence that appears in the record, that these rates, voluntarily accepted and maintained by the company, are reasonable and compensatory, and that they furnish a reasonable basis for comparison or to throw light upon the general subject and give assistance to the commission in fixing a fair rate.

■ One of the witnesses, Hillman, testified as an expert on the question of freight ratemaking, and his testimony occupied a large portion of the record. He prepared and produced a statement of facts, or a schedule, which showed the distances from the different stations, the rates charged for hauling coal, the entire operating cost of hauling it from the Hocking district at or near Nelsonville to each of the points mentioned in the bill of complaint, the revenue per ton per mile, the cost per ton per mile and the ratio of the cost to the revenue.

Mr. Dunham, the traffic manager of the plaintiff, testified to the general effect that certain of the rates maintained and accepted by the plaintiff before the making of the order attacked, are compensatory. The railway company offered no evidence to refute the statements contained in the schedule prepared by the witness, Hillman.

It may be conceded that the cost of service is a difficult matter to determine under any circumstances and that it would be a peculiarly difficult matter for a court without practical experience in railroad operation. However, it would seem to be reasonable that the calculations and conclusions of experts would be valuable in that behalf. It is also a reasonable suggestion that if the railroad company claimed that the deductions of Mr. Hill-man were erroneous, it being in possession of the more exact data by which the error could be determined, it should have produced such data upon the hearing.

As to a similar situation the supreme court of the United States, in the Minnesota rate case, Simpson et al. v. Shepard, 230 U. S., 352, 466, speaking by Mr. Justice Hughes, said: “It .may be said that this would have been a very difficult matter, but the company having assailed the constitutionality of the state acts and orders was bound to establish its case, and it was not entitled to rest on expressions of judgment when it had it in its power to present accurate data which would permit the court to draw the right conclusion.”

It has come to be a well-settled proposition that while the cost of service does not determine rates, it is an important element in arriving at a judgment with reference to a rate. It is recognized in the language of the federal supreme court which is quoted heretofore.

The record also discloses other bases of comparison which might reasonably have been followed by the commission and the courts below and which we are not able to say are.not sustained by the evidence, viz., the railway fuel-coal rate maintained by the plaintiff from the Nelsonville district to Toledo, the rate on commercial coal from the Chesapeake & Ohio and from the Kanawha & Michigan railway companies over the plaintiffs railroad, and the rates fixed by other railway companies for somewhat similar service in Other districts of the country, a number of which are shown by the evidence.

The propriety of deduction from information gathered by evidence of the character just referred to, is likewise recognized in the Northern Pacific case.

Finally, it is earnestly contended by the plaintiff in error that in fixing the rates set out in its order the commission entirely overlooked the fact that the company is entitled to some compensation for profit, for the terminal services rendered by it. The terminal services rendered by the railroad company in the assembling of the coal for shipment and the facilities furnished for distribution at the point of delivery are, of course, as much a service rendered to the shipper as is the hauling of the freight over the railroad line.

It is conceded that the commission, in arriving at its results, concluded from the evidence that the cost of moving the traffic was sixty per cent, of the rate that should be fixed for the shipment; that is to say, if the operating expense is ascertained, that expense is assumed to be sixty per cent, of the rate that should be fixed. The commission found that the cost of hauling coal between Nelsonville and Toledo was 39.02 cents per ton. Assuming that amount to be sixty per cent, of the rate that should be charged, the full rate.is ascertained to be sixty-five cents per ton. The commission added ten cents per ton for terminal service at the originating point and the same amount for the same service at the destination, and fixed the total eighty-five cents as the rate to be charged. The twenty cents was added to cover terminal service, and we are of the opinion that the record justifies the finding of the courts below that the allowance of twenty cents for terminal service was sufficient to cover cost and a proper compensation.

We have not been able to find that this record discloses that the order of the commission denies to the plaintiff company a reasonable reward for its service, or that it is unlawful or unreasonable.

The judgment will be affirmed.

Judgment affirmed.

Nichols, C. J., Donahue, Wanamaker, Newman, Jones and Matthias, JJ., concur. ■


author: Nichols, C. J.

text:
    Shryock, a Taxpayer, v. The City of Zanesville et al.

      Municipal corporations — Public utilities — Erection and construction of purification plant — Resolution authorising employment of engineer, etc. — Not within Sections 4 and 5, Article XVIII, Constitution (1912), when — Referendum on municipal ordinances — Emergency laws — Section 4227-3, General Code (103 O. L., 212), constitutional — Article II, Constitution (1912).
    1. A resolution passed by council of a municipality directing the public service director to employ a competent engineer to prepare plans and specifications for the erection and construction of a mechanical filtration plant for the purification of the water supply of a municipality wherein there was already established and in, operation a complete water system, does not come within the terms of Sections 4 and 5 of Article XVIII of the Constitution in so far as such sections relate to the subject of the acquirement, construction, owning, leasing and operating a public utility by a municipality.
    2. Section 4227-3, General Code, as amended 103 Ohio Laws, 212, authorizing the passage by councils of municipalities of emergency laws necessary for the immediate preservation of the public peace, health or safety, is not repugnant to the constitution but is wholly consistent with all of the sections of Article II when construed together.
    (No. 14661
    Decided July 2, 1915.)
    . Error to the Court of Appeals of Muskingum county.
    The facts are stated in the opinion.

      Mr. C. T. Marshall, for plaintiff in error.

      Mr. A. A. Porter, city solicitor, for defendants in error.
    ' Mr. Edward C. Turner, attorney general, and Mr. Walter M. Schoenle, city solicitor of Cincinnati, file intervening brief by leave of court.
   Nichols, C. J.

In April, 1914, the plaintiff filed his amended and supplemental petition in the common pleas court of Muskingum county stating among other things that in March, 1914, the council of the city of Zanesville had passed a preliminary resolution directing the public service director to employ a competent engineer to prepare plans, specifications and estimates of cost for the erection and construction of a mechanical filtration plant for purifying the water supply of that city, and for such purpose the public service director was therein authorized to contract to pay such engineer the sum of $2,500.

The petition further says that the resolution contained an emergency clause, declaring the measure to be in the interest of public health and safety for the reason that the water supply of Zanesville was impure and dangerous to health and that the state board of health had, in February, 1914, ordered the city to devise plans for the filtration of the water from the Muskingum river.

The petition makes the claim that the foregoing resolution is a proceeding to acquire, construct, own and operate a public utility and to authorize the making of a contract for the purpose of acquiring, constructing, owning and operating a public utility.

It was, in short, the claim of the petition that under 'Sections 4 and 5 of Article XVIII of the Constitution no valid steps such as were contemplated in the resolution could be taken, and that Section 4227-3, General Code, as amended 103 Ohio Laws, 211, 212, wherein provision was made for the passage of emergency laws by city councils, was unconstitutional and particularly in violation of Section 1/ of Article II of the Constitution of Ohio, in so far as it sought to give immediate operative effect to the resolution and thereby avoid a referendum.

Article XVIII of the Constitution deals with the subject of municipal corporations, Sections 4 and 5 reading:

“Section 4. Any municipality may acquire, construct, own, lease and operate within or without its corporate limits, any public utility the.product or service of which is or is to be supplied to the municipality or its inhabitants, and may contract with others for any such product or service. The acquisition of any such public utility may be by condemnation or otherwise, and a municipality may acquire thereby the use of, or full title to, the property and franchise of any company or person supplying to the municipality or its inhabitants the service or product of any such utility.
“Section 5. Any municipality proceeding to acquire, construct, own; lease or operate a public utility, or to contract with any person or company therefor, shall act by ordinance and no such ordinance shall take effect until after thirty days from its passage. If within said thirty days a petition signed by ten per centum of the electors of the municipality shall be filed with the executive authority thereof demanding a referendum on such ordinance it shall not take effect until submitted to the electors and approved by a majority of those voting thereon. The submission of any such question shall be governed by all the provisions of section 8 of this article as to the submission of the question of choosing a charter commission.”

This petition was demurred to. The court of common pleas sustained, the demurrer, the court of appeals affirmed this judgment and error was thereupon prosecuted to this court.

The first inquiry will be directed to the matter of ascertaining if the resolution, wherein it provided for the drawing of plans for the erection of a filtration plant, was the first step toward constructing, and operating a public utility, within the meaning of Sections 4 and 5 of Article XVIII.

The record shows that the city already had established and in operation a complete water system, and that the resolution in question was adopted pursuant to imperative orders from the state board of health to take steps to purify the same. This purification was to be attained by a system of filtration. ' We are constrained to hold that the filtration plant under contemplation was a mere incident to the utility already established and in operation. The filtration process was merely and essentially an improvement made necessary to comply with the order of the state board of health, and was not the original construction of a waterworks plant as a utility of the city.

If every repair, addition or improvement to any utility is to be regarded in the same light as the construction of an entire system, the constitutional provision would be impracticable and cumbersome. Evidently no such result was contemplated, and such a construction is not required. Had it been tne purpose of the constitution framers to require every repair and improvement to come within the terms of Sections 4 and 5 of Article XVIII, it is reasonable to believe that they would have said so.

It is quite evident that these provisions of the constitution were to have no reference to utilities municipally owned and already in operation, but the plain purpose was to enlarge the powers of municipalities in the construction, acquiring, owning, leasing and operating of utilities not already so constructed, acquired, etc., and to facilitate the construction, owning, etc., of utilities by municipalities within the limitations and safeguards of Section 5, Article XVIII.

- If, under the guise of repairing or improving a public utility, any municipality would attempt by resolution to substantially reconstruct a utility, even though municipally owned, and. do this without observing the provisions of Section 5 of Article XVIII, the courts of Ohio, no doubt, would be found open and ready to prohibit any such manifest abuse of the power. However, in the instant case there is no suggestion or intimation of altering or rebuilding the plant already existent, but simply to provide for the purification of the water, and this, not on the initiative, of the council, but at the command of the state board of health speaking with authority.

The question of major importance, however, in this controversy is the one drawing in question the constitutionality of Section 4227-3, General Code, as amended 103 Ohio Laws, 212, providing for the exemption from the referendum of all so-called emergency measures passed by the legislative bodies of municipalities. If this section be unconstitutional, then all laws passed by city and village councils must await the intervening of ninety days before acquiring any operative force, and no emergency, no matter how urgent, whether that of flood, fire, pestilence or impending bankruptcy, can be provided for by immediate legislation.

The disposition of this question requires consideration in its entirety of all of Article II of our Constitution on the subject of the initiative and referendum powers. All of the sections dealing with the subject, with the exception of the particular section in question (1/), deal with it exclusively as a state-wide proposition.

Section If only has to do with the initiative and referendum in its application to municipalities and appears in the following language:

“The initiative and referendum powers are hereby reserved to the people of each municipality on all questions which such municipalities may now or hereafter be authorized by law to control by legislative action; such powers shall be exercised in the manner now or hereafter provided by law.’5'

It is the contention of plaintiff in error that this language cannot in any event be interpreted so as to invest legislative bodies of municipalities with the power of declaring any act to be an emergency law, and, further, that the general assembly has no power to invest the subordinate legislative body with any such authority.

The basis of this argument is that since these powers so reserved to the people are to apply to all questions which municipalities may now or hereafter be authorized by law to control by legislative action, and the question of establishing a filtration plant in a municipality being concededly one which municipalities are now authorized by law to control by legislative action, and, further, that in Section 1/ no provision whatever is made for the passage of any law on any subject of an emergency character, therefore an emergency law can under no circumstance be passed by the council of a municipality. It must be conceded, too, that nowhere in the constitution is there any reference to emergency municipal legislation.

An examination of the constitutions of such states of the Federal Union (fourteen in number) that have adopted the initiative and referendum in one form or another discloses the fact that only four — California, Colorado, Oregon and Ohio— have carried it any further than the application to state affairs, and in each of the four states the subject of municipal initiative and referendum is dismissed with scant consideration and substantially in the language of Section 1/ of our Constitution.

There is but one essential difference in the constitutions of the states named and that of Ohio, the difference being that the Ohio constitution provides that the powers shall be exercised in the manner now (as well as hereafter) provided by law.

This difference is to be explained by the fact that Ohio, prior to the adoption of the amendments of 1912, had a referendum provision of legislative creation applicable to municipalities.

When we stop to consider that a large majority of the people of Ohio live in cities and municipalities and that the matters which such municipalities are authorized by law to control by legislative action are of the most vital importance to such citizens, frequently exceeding in interest matters of legislation controlled by the general assembly, it would be a matter of wonder and amazement that, having once reserved such powers to the several municipalities, the constitutional convention would leave unsettled the manner of the exercise of these mighty powers.

In this connection it will' not escape notice that as to the state-wide exercise of the power the constitution goes into the minutest detail, leaving nothing to the action of the general assembly and concluding with the general statement that the provisions of the whole section should be self-executing, thereby putting it beyond the power of an unfriendly legislature to cripple or destroy it.

It fixes the per centum of electors required to initiate both laws and ■ constitutional amendments as well as to the securing of referendums on laws.

It fixes the time within which the people may have opportunity to secure the required number of signatures, determines the qualifications of signers, describes the character of the petitions to be circulated and provides for the form of the affidavit as to the genuineness of the signatures.

It fixes the tribunal where the petitions may he filed and when they may be filed, provides for the manner of protest and hearing thereon, and specifically details the duties of the officer with whom such petitions may be filed.

It further provides for the preparation of arguments for and against and explanation as to any proposed law or constitutional amendment.

It fixes the basis upon which the required number of signers shall be determined, and finally provides, in Section 1 d, as to just what laws shall be exempt from the referendum, among others, “emergency laws necessary for the immediate preservation of the public peace, health or safety.”

All of these have reference to state laws and none to the ordinances or resolutions of the councils of municipalities.

After having thus explicitly defined the powers so reserved and the method of their exercise, leaving nothing to be necessarily supplied by any other authority so long as it deals with the subject from a state standpoint, the instrument deals with -the question from a municipal standpoint, devoting but five lines to this important branch, first reserving the powers to municipalities and then, in marked distinction to the state-wide aspect of the question, saying, in effect, we now leave the subject in all its details and the working out of the plan to the general assembly.

In construing constitutional provisions the court must apply the same general rules governing the construction of statutes, mindful, however, of the limitation that in such construction a strict rather than a liberal construction should be had; but after all, the real intention of the body framing the law, be it constitutional convention or general assembly, must be ascertained, if humanly possible, and given full effect.

It is urged by plaintiff in error that the clause “Such powers shall be exercised in the manner now or hereafter provided by law” must be limited to such matters as fixing the per centum of signers and their qualifications, the form of the petition and the method of its circulation, filing, protests, etc., and that it cannot be enlarged into the embracing of the subject of emergency laws.

However this may be, the court finds a clear and unmistakable meaning to be given to Section 1/ which will grant to municipal legislative bodies the same power (but subject to the same limitations) of exempting certain classes of laws from the operation of the referendum, provided the legislature but provides the method and the laws so to be exempted comply as to their character to the provisions of Section Id of Article II.

It will be seen that Section 1 of Article II vests all power of legislation in the legislature except such as is reserved to the people. Sections la and lc of Article II relate to the powers reserved to the people. “The first aforestated power reserved by the people is designated the initiative, * * * the second * * * is designated the referendum.”

When we encounter the “initiative and referendum” powers in Section If of Article II of the Constitution, we are compelled (by rules of interpretation which are well settled) to look to the part of the constitution where the phrase is “defined, limited and explained.” A resort to that source, the very foundation of definition and authority as to the meaning and extent of the term, discloses the fact that the people explicitly defined the limit of the powers; that is to say, Section 1, Article II, provides that the referendum is reserved “except as hereinafter provided.” Section Id, Article II, expressly provides that the power shall not be exercised as to emergency, laws, etc. The conclusion, then, is inevitable that the referendum powers reserved to the people of municipalities is that power as defined and limited by the constitution.

While Section 1/ provides that the powers stated are reserved to the people of the municipalities on all questions which the municipality may now or hereafter be authorized by law to control by legislative action, it must be by the “referendum” — the power, right and privilege of referendum, as defined by the constitution.

The last clause of the section provides merely that the manner of exercising the right or power shall be provided by law, and since Sections 4227-3 and 4227-4 merely provide the manner, it is obviously not only not repugnant to the constitution but wholly consistent with it. The general assembly cannot enlarge the power of the people nor can it diminish it.

Every state that has wholly or partially adopted the initiative and referendum feature of government has recognized the absolute necessity of exempting therefrom laws providing for the current expenses of the state government and its penal and charitable institutions, as well as laws of an emergency nature involving the public health, peace and safety, and, recognizing such necessity, they have uniformly written such exemption in the organic law.

Were we to hold that the general assembly could not vest councils of municipalities with power to provide for the passage of emergency laws, we would be inflicting upon them another and an essentially different sort of a referendum than that provided for in the constitution, and one clearly not contemplated either by its framers or the people who adopted it. The initiative and referendum theory of legislation has been in effect but three years in Ohio, and the principle may be fairly said to be yet on trial. Meanwhile it is the solemn duty of all courts to keep hands off and to avoid giving to the provisions of the constitution on that subject a strained construction which, by reason of its very burdensomeness and unreasonableness, would tend to depopularize it. Such character of construction is as unwarranted as judicial construction tending to weaken or emasculate the theory.

Judgment affirmed.

Johnson, Donahue, Newman, Jones and Matthias, JJ., concur.


author: By the Court.

text:
    Nyiry v. Modern Brotherhood of America.

      Jurisdiction — Reversals—Weight of evidence — Error to enter final Judgment, when — Duty to remand for new trial, when.

    If the issues of fact are triable by jury, and there is some evidence upon each essential element of such issues of fact, a reviewing court may reverse under the statute upon the ground that the verdict is contrary to, or against the weight of, the evidence, but such finding does not authorize such court to enter a final judgment against the defendant in error. Its duty is to remand the case for a new trial.
    (No. 14673
    Decided July 2, 1915.)
    Error to the Court of Appeals of Cuyahoga county.
    On December 9, 1910, the defendant in error issued to John Nyiry a benefit certificate in the sum of $1,000, payable on his death to his wife, plaintiff in error. He died about the 1st of June, 1911. Suit was brought in the court of common pleas by the beneficiary against the defendant in error under the terms of the policy, in which petition in said action it was averred “that said plaintiff and John Nyiry each duly performed all the agreements and conditions of said benefit certificate on their part to be performed.”
    The defendant in error answered that some half dozen or more of the answers of said John Nyiry were untrue, especially the one in which he averred that to the best of his knowledge and belief he was in sound health and physical condition, and also the inquiry as to whether or not he had consulted a physician; that the issuing of the policy was based upon the truth of the answers appearing in said application and policy, and but for such belief' in their truthfulness the policy would not have been issued. There was later a subsequent issue raised as to mutual mistake, and a request for reformation of the contract.
    Upon the issues joined the case was by the court of common pleas submitted to the jury. The jury returned a general verdict for the plaintiff and returned a special finding of fact as follows: “Was John Nyiry attended by a. physician in August, 1910? Answer: Yes.”
    Defendant in error filed its motion for judgment on the special finding, . which was overruled. Motion for a new trial was also overruled and judgment entered on the general verdict.
    Error was prosecuted to the court of appeals, which reversed the judgment of the court of common pleas “because the same is contrary to law and the evidence,” and thereafter the court of appeals rendered final judgment in favor of ■ the Modern Brotherhood of America.
    Error is here prosecuted to reverse the judgment of the court of appeals.

      Mr. T. S. Dunlap; Messrs. Bauder & Searles and Mr. S. S. Ford, for plaintiff in error.

      Mr. James F. Walsh, for defendant in error.
   By the Court.

The journal entry of the court of • appeals in this cause is in the blanket form, “contrary to the law and the evidence.” Upon the facts the court of appeals must have found that the verdict was against-the manifest weight of the evidence. The court did not follow the requirements of the statute in pointing out the specific ground of error, which may have been an oversight of counsel rather than of the court. Thereafter, however, the court of appeals undertook to enter final judgment against the plaintiff below.

This brings '.up for review the question as to whether or not there was any issue of fact, and any evidence upon each material element thereof, requiring a submission of the case to the jury. We do not regard the special finding of fact by the jury as conclusive against the general verdict. Upon the contrary, we believe it is reconcilable with the general verdict, and, therefore, we are brought to the question as to whether or not the court of appeals was justified in rendering final judgment against the plaintiff below.

If this was a case for the jury, under the issues pleaded and the evidence offered, then the plaintiff had the constitutional right to a verdict by the jury, and no reviewing court is authorized by the constitution, or statutes pursuant thereto, to render final judgment contrary to said verdict. Its duties in that behalf are limited to having said cause remanded to the trial court for -a new trial. Anything else than this makes a mere mockery out of trial -by jury. Indeed, boiled down, it makes a trial by jury simply a prelude to a trial by judge. We would then have a paper right of trial by jury in theory, while we would have a trial by judge in practice. Such a trial would be an expensive farce, an extravagant nullity and a most palpable violation of the right of trial by jury guaranteed by every state constitution in the Union, and also guaranteed in our federal practice by the federal constitution. Gibbs v. Village of Girard, 88 Ohio St., 34; Slocum v. New York Life Ins. Co., 228 U. S., 364.

The judgment of the court of appeals entering final judgment against the defendant in error below is reversed, and the judgment of the court of appeals, in so far as it reversed the court of common pleas on the ground that the verdict was contrary to the evidence, is affirmed, and this cause is remanded to the court of common pleas for a new trial or such other proceedings as are warranted by law.

Judgment accordingly.

Nichols, C. J., Wanamaker, Newman and Matthias, JJ., concur.


text:
    The Valley Telephone Co. v. The Public Utilities Commission of Ohio.

      Public utilities — Telephone companies — Order to restore service— Section 614-12, General Code — Agreement for line installation and maintenance by complainant — Discriminatory or preferential rates — Absence of schedule — Section 614-19, General Code.

    (No. 14772
    Decided July 2, 1915.)
    Error- to The Public Utilities Commission of Ohio.

      Messrs. Brandon & Ivins, for plaintiff in error.

      Mr. Edwar'd C. Turner, attorney general, and Mr. Lawrence K. Lang don, for defendant in error.
   By the Court.

This case originated before the public utilities commission of Ohio upon complaint of Chauncey R. Bunnell, a resident of Warren county, filed on July 2, 1914, asking for restoration of telephone service from Mills Corner to his residence. After a hearing before the commission an order of restoration of service w.as made, from which order the telephone company prosecuted error.

The record and finding of the commission disclose that in 1905 and until about May 1, 1914, telephone service was furnished to the complainant and others in his vicinity, and installed originally under an agreement that complainant and his associates would construct a telephone line upon the public highway from Mills Corner to their respective residences, the distance to complainant’s residence being about two-thirds of a mile; that pursuant to the agreement such telephone line was constructed by complainant and his associates, the necessary wires, however, although paid for by .them, being strung by the company and connected with defendant’s line at Mills Corner, the line, with the exception of pole renewal, being kept in .repair by the company. In 1911 The New Burlington Mutual Telephone Company obtained from complainant the right to the use of the pole line from complainant’s residence to Mills Corner ■under an agreement obligating itself to renew- the pole line constructed by complainant, providing he would furnish timber to make necessary pole renewals. In the month of April, 1914, one of the poles having been cut down, interfering with defendant’s service, it cut the wires leading to complainant’s residence, discontinued the service and removed the telephone from his residence. Soon thereafter the New Burlington Company renewed the pole and restored the line, but the Valley Company then refused to restore its former service.

Under the peculiar state of facts in this case it is evident that, under the original agreement for installation,’ the obligation rests upon the complainant to restore and keep in repair the line from Mills Corner to his residence, the wires of which to be strung by the company, and under the same arrangement the obligation rests upon the defendant company, upon such renewal and repair, to furnish the complainant such service as the commission deems just and reasonable under the authority conferred by Section 614-12, General Code.

The record disclosing that the line in question has been repaired, since the disconnection of the service, by the New Burlington Company, we are ■ unable to see any error in the order of the commission directing the restoration of service under their contractual obligations, at the rates and upon the terms designated in such order until the publication and filing with the commission of a proper schedule in conformity with law.

Since no schedule of rates was filed with the commission, the question of discriminatory or preferential rates under a preexisting contract (Section 614-19, General Code) was, of necessity, not before the commission. Its jurisdiction relating to service, however, was not ousted thereby.

The orders of the public utilities commission are affirmed.

Order affirmed.

Nichols, C. J., Johnson, Donahue, Wanamaker, Newman, Jones and Matthias, JJ., concur.


author: Matthias, J.

text:
    The Newark Natural Gas & Fuel Co. v. The City of Newark, by Etc.

      Municipal corporations — Ordinance fixing gas rate — Section 3982, General Code — Facts necessary to relieve company — Unreasonable rate — Just compensation determined, how — Effect of voluntary reduction of rate — Only existing conditions considered, when — Expiration of contract with producing company — Confiscatory rate determined by actual operation, when — Rights of company — Court procedure — Transcript of stenographic notes — Considered with bill of exceptions, when.

    1. A transcript of verbatim stenographic notes of testimony in the common pleas court may be adopted and used in the court of appeals by agreement of counsel, and if by proper attachment and reference made a part of the bill of exceptions, will not be stricken from the record, hut will be considered by this court.
    2. Before a gas company may be relieved from compliance with the terms of an ordinance fixing the maximum price for gas, which has been regularly passed in pursuance of the authority conferred by Section 3982, General Code, it must show that the rates so fixed are plainly unreasonable and will result in the taking of its property without just compensation.

      3. In determining whether the price fixed by such ordinance will yield just compensation, it should be ascertained whether the amount of net profits from operation at the prescribed rate will produce a reasonable return upon the value of the plant of the company at the time of the inquiry.
    4. The value of such property resting largely upon opinion evidence, the fact that the company prior to the passage of the ordinance in question had voluntarily reduced its rate to that thereafter fixed by such ordinance and continued the same for several years, may be controlling and justify' the conclusion that such rate is remunerative.
    5. Where the company affeoted by such ordinance is a distributing company only and procures the gas furnished under its franchise from a producing company upon a percentage basis of meter readings, and its contract therefor does not expire until two years subsequent to the passage of the ordinance fixing the maximum price to be charged for gas, the effect of such ordinance should be ascertained from conditions then existing, and, in the absence of evidence to the contrary, the court may properly assume that the price to the distributing company remains the same, and refuse to anticipate a condition that may obtain in the future, or speculate as to the future production of natural gas or the cost thereof to the producing company.

      6. Where it is not clearly shown that a fixed rate for gas will be confiscatory, the company should be required to abide the test of actual experience under such rate, and when certainty rather than prophecy may be obtained, present its case upon actual facts and conditions as may then be shown to exist.
    (No. 14787
    Decided July 2, 1915.)
    Error to the Court of Appeals of Licking county.
    This proceeding originated in the court of common pleas of Licking county, where, on April 25, •1911, a petition was filed by the city of Newark, through its solicitor, Frank A. Bolton, and a mandatory injunction sought against The Newark Natural Gas & Fuel Company to compel it to comply with the provisions of an ordinance of the city passed March 6, 1911, which ordinance fixed the maximum price the defendant company could charge the consumers of natural gas in said city for a period of five years at twenty cents per one thousand cubic feet of natural gas for fuel and light with ten per cent, discount .on all bills paid before the tenth of the succeeding month. Said company had refused to accept the provisions of said ordinance or abide by the terms it specified, and had notified its consumers in said city that it would not accept the price so fixed, and that unless the price of twenty-five cents was paid service would be discontinued.
    Said company furnishes natural gas for fuel and light to the inhabitants of said city of Newark under favor of a franchise granted by said city, through its council, February 21, 1898, and ever since the passage and acceptance of said ordinance said company has continued to supply gas to said city and its inhabitants.
    By its answer said company admits the passage of said ordinance of March 6, 1911, in due form, but avers that it is unreasonable in its terms, deprives said company of adequate profit and operates as a fraud upon the property rights of said company; that it is contrary to and in violation of Section 1, Article I of the Bill of Rights of the Constitution of Ohio, also of Section 19, Article I of the Constitution of the state, for the reason that it is the taking of private property without due process of law, in that said ordinance attempts to compel said company to furnish gas at a price without just compensation or profit. It charges further that said ordinance is contrary to and in violation of Section 1 of the Fourteenth Amendment of the Constitution of the United States, in that it denies to said company the equal protection of the law by compelling it to furnish gas for a period, and at a price, without adequate return, -compensation or profit.
    In the court of common pleas a decree was entered in favor of the city, and on appeal the court of appeals entered the same decree as did the court below, from which decree error is now prosecuted in this court.

      Mr. Eugene Mackey; Mr. S. M. Douglass and Messrs. Fitzgibbon, Montgomery & Black, for plaintiff in error.

      Mr. Ralph Norpell, city solicitor; Mr. Frank A. Bolton, city solicitor, and Messrs. Kibler & Kibler, for defendant in error.
   Matthias, J.

The defendant in error seeks to have stricken from the printed record all of the so-called “Exhibit AA,” excepting exhibits thereto attached, upon the claim that the same is not a part of the bill of exceptions taken in the court of appeals and filed in this court. The matter which defendant in error contends is not properly a part of the record and, therefore, should not be considered by the court, embraces all the evidence offered by the plaintiff in error in the hearing of this case in the court of common pleas. The record shows that defendant in error introduced and read in evidence all the evidence given in its behalf on the trial in the court of common pleas, and that the plaintiff in error then offered and read in evidence all the evidence offered by it in the trial in the court of common pleas, and then follows the statement: “A full and complete transcript of verbatim stenographic notes of said testimony and evidence given on the trial in the court of common pleas is hereto attached, marked ‘AA’ and made part hereof.” In this manner all the evidence given in the lower court is brought into the record in the court of appeals, and by attachment and reference, as above indicated, was made a part of the bill of exceptions by the judges of that court. The record before us shows that counsel for plaintiff in error was allowed by the court of appeals to reserve exceptions to the exclusion of certain evidence sought to be introduced in the court of common pleas. It thus appears that, probably for the purpose of convenience and economy of time, the evidence was placed before the court of appeals in such manner. No objection to this practice is disclosed by the record, and we conclude that only in the instance above stated was exception noted in the court of appeals to the ruling of the court upon the introduction of evidence, and that otherwise the record, as made in the common pleas court, was submitted to and received by the court of appeals in lieu of again calling the witnesses. Under such circumstances this court will consider the evidence thus brought into the record, although in accordance with the decision of Dunn v. The State, 23 Ohio St., 167, statements in such exhibit purporting to recite rulings of the trial court admitting or excluding evidence, cannot be considered.

The ordinance of the city of Newark, the validity of which is questioned, was passed by virtue of the power conferred by Section 3982, General Code, which authorizes the council of a municipality to “regulate from time to time the price which such companies may charge * * * for gas for lighting or fuel purposes;” and further provides that such companies shall in no event charge more than the price specified by the ordinance of council. It is admitted that said ordinance was passed in due form by the council of the city of Newark, and the only issue presented arises from the contention of the plaintiff in error that the rate prescribed by such ordinance is unreasonable and if enforced will result in confiscation of its property.

The Newark Natural Gas & Fuel Company was organized in 1889, and in 1898 was granted a twenty-five-year franchise by. said city. For several years it was both a producing and distributing company, but for the past ten or twelve years it has been a distributing company only, and since 1904 has procured its supply of gas from The Logan Natural Gas & Fuel Company on a percentage basis, under a contract between said companies which expired March 1, 1913. Although the previous ordinance permitted a net rate of twenty-five cents, the eighteen-cent rate was voluntarily adopted by the plaintiff in error sometime prior to the adoption of the ordinance now in question. Plaintiff in error now contends that such reduction was made because of the development of a near-by field, greatly augmenting the supply of gas, but which is now materially reduced.

It is urged by the plaintiff in error that this case differs greatly from many of the adjudicated cases of this character, by reason of the fact that two companies are necessarily affected by the rate, the producing company and the distributing company, and that in the determination of the fairness and reasonableness of the prescribed rate it becomes necessary to consider not only the cost of procuring and distributing gas but also the cost of its production.

However, the facts and the conditions which may properly be considered, as well as the test to be applied thereto by the courts for the purpose of determining every question in controversy in this action, are well settled and have been clearly and concisely announced in what must be regarded as leading cases of the class to which this proceeding belongs. We direct particular attention to the decision of the supreme court of the United States in the case of the City of Knoxville v. Knoxville Water Co., 212 U. S., 1, and Willcox et al. v. Consolidated Gas Co., 212 U. S., 19. In the former case it is held that “Rate making is a legislative function whether exercised by the legislature or by a subordinate body to which power has been delegated, such as a municipality.

“While courts may refuse to enforce legislation on constitutional ground the power should only be exercised in the clearest cases.”

This action of the city, having been taken pursuant to legislative authority, is a proper exercise of legislative power, and, therefore, the company assailing the rates fixed in such manner must show that their enforcement will result in the taking of its property without just compensation. The Cedar Rapids Water Co. v. Cedar Rapids, 118 Iowa, 234.

In Willcox v. Consolidated Gas Co., supra, the rule to be applied in cases of this character for the purpose of ascertaining whether a prescribed rate is unreasonable, is concisely stated. It is there held that “Rates, when fixed by legislative authority, for public service corporations, should allow a fair return upon the reasonable value of the property . at the time it is being used, but the legislative act will not be declared invalid by the courts unless the rates are so unreasonably low that their enforcement would amount to taking the property for public use without compensation.”

Upon the hearing in the court of appeals a very large volume of evidence was introduced tending to show the value of the plant of the Newark Gas Company and the net profits that would be realized under existing conditions at the price fixed. From these factors it was ascertained that the net profits were sufficient to provide the company a fair and just return upon the value of its property. It would not be profitable here to review in detail the large volume of data presented or discuss the various opinions of the several experts who testifled upon the trial of the case. Our only duty is to ascertain whether the conclusion reached by the court of appeals is the correct one. From the record before us it is apparent that if computation be based upon the highest valuation of the complaining company’s plant fixed by any witness, a net profit of ten per cent, would be realized by the company. On the valuation of another witness called by plaintiff in error the rate now complained of yielded in 1911 a net profit of approximately seventeen per cent. In some of these estimates elements were included which should not enter into the calculation. For instance, one expert, upon whose evidence plaintiff in error placed great reliance, and apparently a man of skill and experience in his profession, based his estimate of the value of said plant on the cost of building a competing plant on the same streets and included an item of $33,379 for “pavement over mains,” notwithstanding the record shows that there was no street paving over the mains when the pipes were originally laid. We refer to this instance as illustrative merely and to show the care that must be exercised in following the estimates of the valuation of property of such character.

When property is devoted to a use in which the public has an interest the public is thereby granted an interest in such business and it is subject to control for the common good. Such company is entitled, therefore, only to a fair return on the value of that which is employed for the public convenience (Munn v. Illinois, 94 U. S., 113; San Diego Land & Town Co. v. National City, 174 U. S., 739), and such return should be based upon the reasonable value of the property at the time it is being used by the public. Willcox v. Consolidated Gas Co., supra.

In the calculations above referred to no deduction was made for depreciation of the plant, and the evidence shows that five per cent, a year would be a fair estimate for that item. When the value of property of such character rests so largely upon opinion evidence, the fact that the company, prior to the passage of the ordinance in question, had voluntarily reduced its rate to that specified in the ordinance thereafter passed and maintained the same for several years immediately preceding the passage of such ordinance, may be controlling and fully justify the conclusion that such rate is remunerative.

It may be fairly assumed that rates voluntarily made by the company return not only a fair but adequate compensation, especially in the absence of evidence showing any actual increase of expense or cost of furnishing gas to the Newark patrons. No evidence was offered showing what the Newark company paid the Logan company for gas subsequent to March 1, 1913, although the opportunity was afforded the Newark company to produce such evidence as late as September 26, 1914. The court should not be asked to indulge in mere speculation and arrive at a conclusion based only upon various and varying opinions of experts, which opinions are apparently based upon conditions which are themselves admittedly varying and uncertain. The records of the company showing its net earnings subsequent to 1911 should have been disclosed and all information available placed before the court that would tend to show that the rate fixed is unreasonable. Sufficient time had elapsed to enable the company to place before the court actual facts showing the effect of operation on its plant and the furnishing of gas upon the terms prescribed by this ordinance. The burden is upon the company to show the court that the price fixed is unreasonable, not merely that there is a possibility or probability that it will become so. If there was a change in the price required by the producing company, such evidence should be in the record. Evidence of conditions, not only when the ordinance was passed, but subsequent thereto, was admissible and would have been most helpful to the court in solving the problem presented in a controversy of this character. City of Knoxville v. Knoxville Water Co., supra.

We find in the record no possible basis for the claim that the rate fixed by this ordinance does not yield a fair and just compensation to the plaintiff in error under the conditions obtaining in 1911. The following cases deal instructively with the question of what is adequate compensation: Lincoln Gas & Elec. Light Co. v. Lincoln, 182 Fed. Rep., 926; Willcox v. Consolidated Gas Co., supra, and Cedar Rapids Water Co. v. Cedar Rapids, supra.

However, it is urged by plaintiff in error that in view of the fact that it is now a distributing company only and procures its supply of gas of a producing company, and that its contract with such-company for gas delivered to its lines, upon a percentage basis of meter readings, would expire two years after the passage of said ordinance and three years before the end of the period covered thereby, a proper rate cannot be ascertained without inquiry and determination of the cost of producing gas and transporting it to the lines of the plaintiff in error. Upon this theory much evidence was adduced tending to show that the Logan company, with which the plaintiff in error has a contract for its supply of gas, for various reasons, cannot furnish its product in the future on the terms of its former contract, and included evidence of the value of the plant of the Logan company and computations to ascertain what rate would insure it a fair compensation for its share of the service rendered.

An excursion into a vast field, thus invited, may have been justified under some circumstances, but surely not under the conditions disclosed by this record. In the absence of evidence to the contrary, the court was justified in assuming that the contract price for gas remained the same and need not anticipate a condition which might or might not obtain in the future.

The rule that should guide judicial review of rate-making legislation is thus stated in 3 Dillon on Municipal Corporations (5 ed.), Sec. 1327, p. 2251: “The judiciary ought not to annul or set aside rates established by legislative sanction unless they are proved or shown to be such as to make their enforcement equivalent to the taking of property for public use without such compensation as, under all the circumstances, is just both to the owner and to the public; that is, judicial interference should not occur unless the case presents clearly such a violation of the rights of property under the form of regulation as to satisfy the court that the rates prescribed will have the effect to deny to the company reasonable compensation for its services.”

The evidence disclosed in the record does not show that the rates fixed by this ordinance will result in a violation of the rights of property of the plaintiff in error or that it will have the effect to deprive it of reasonable compensation for its services, and, therefore, fails to establish a present right of plaintiff in error to exemption from compliance with'the terms of said ordinance. Said company will, therefore, be required tó abide the test of actual experience under the rate fixed by this ordinance, and when certainty rather than prophecy may be obtained, it will have the right to present its case upon actual facts and conditions as they may then be shown to exist.

It follows that the judgment of the court of appeals is affirmed.

Judgment affirmed.

Johnson, Donahue, Wanamaker, Newman and Jones, JJ., concur.