Staten Island Edison Corp. v. Maltbie

The Public Service Commission appeals pursuant to leave granted by the Appellate Division, Third Department, upon certified questions of law, from an order of the Appellate Division and a judgment thereon which reversed orders of the Special Term, Albany County, granting defendants’ motion for judgment on the pleadings and dismissing the complaint. The Appellate Division granted a temporary injunction against enforcement of the commission’s order prescribing permanent rates and struck out four separate defenses in defendants’ answer. The following questions were certified:

“1. Is the plaintiff entitled to maintain this action?

“ 2. Does the complaint state facts sufficient to constitute a cause of action? ”

In a prior suit beween the same parties, brought to enjoin temporary rates established by, the commission’s order of May 27,1943, we affirmed a dismissal of the complaint (Staten Island Edison Corp. v. Maltbie, 267 App. Div. 72 , affd. 292 N. Y. 611 ). The present action is a plenary action in equity to enjoin the enforcement of the commission’s order of May 27, 1943, prescribing temporary rates and of the commission’s final order of June 19, 1945, prescribing final rates to be charged on and after July 1, 1945.

Allegations of ultimate fact held sufficient to show confiscation in Prendergast v. N. Y. Tel. Co. ( 262 U. S. 43 ) are substantially

The questions certified involve plaintiff’s right to maintain the action in equity and the sufficiency of the allegations to warrant injunctive relief. Each of these questions depends upon the adequacy or inadequacy of the remedy available to plaintiff by a certiorari order under article 78 of the Civil Practice Act to review the rate orders of the Public Service Commission.

In People ex rel. Consol. Water Co. v. Maltbie ( 275 N. Y. 357 , appeal dismissed 303 U. S. 158 ) we held (pp. 369-370): “ Upon the hearing of an order of certiorari to review a determination of the Commission, the jurisdiction and power of the Appellate Division are defined and limited by section 1304 [now section 1296] of the Civil Practice Act. These powers do not include an independent consideration by the court of any question of fact.”

This was a rate case and we declared, in regard to the scope of our review (p. 366):“In this court the determination of the Commission upon any question of fact is not open to review.. We may reverse a decision or annul a determination only for erroneous determination of a question of law, and after careful consideration of the appellant’s argument, we find no errors there. Upon every point where the determination of the Commission is challenged we find that there is evidence to sup

This is the established rule in certiorari proceedings to review rate orders of the Public Service Commission and it is applied generally in certiorari proceedings to review determinations of administrative boards (People ex rel. N. Y. & Queens Gas Co. v. McCall, 219 N. Y. 84 , affd. 245 U. S. 345 ; Niagara Falls P. Co. v. Water P. & C. Comm., 267 N. Y. 265 , 278; Matter of Weber v. Town of Cheektowaga, 284 N. Y. 377 , 380; Matter of Newbrand v. City of Yonkers, 285 N. Y. 164 , 177-178; Matter of Miller v. Kling, 291 N. Y. 65 ; Matter of Bolani v. O’Connell, 286 N. Y. 871 ).

Faced with this limitation upon the jurisdiction and power of the Appellate Division in certiorari proceedings to review a determination of the commission, and seeking an independent consideration by a court of the facts upon which its claim of constitutional right is predicated, plaintiff has brought this plenary action in equity to enjoin confiscation of its property used and useful in the public service, claiming that as a matter of constitutional right it is entitled to a fair opportunity of submitting the issue of confiscation to a judicial tribunal for determination upon its own independent judgment as to both law and facts (Ohio Valley Co. v. Ben Avon Borough, 253 U. S. 287 ).

When the Consolidated Water Co. case (supra) went to the Supreme Court of the United States, the water company sought to raise this question. The Supreme Court held (pp. 159-160): “Appellant contends that it is entitled to the exercise of the independent judgment of a court as to the law and the facts with respect to the issue of confiscation and that such a review has not been accorded because of the limitations imposed by the state practice in certiorari proceedings. 275 N. Y. at p. 370 * * *. Appellant has no standing to raise this question as appellant itself sought review by certiorari and has not invoked the plenary jurisdiction of a court of equity and it does not appear that this remedy is not available under the state law.”

We are now confronted with that question.

The Ben Avon case (supra) has never been overruled; on the contrary the principle that where constitutional rights of

In Phillips v. Commissioner ( 283 U. S. 589 , 600), Brandeis, J., writing for the court, stated the general rule regarding administrative findings and the exception as follows: “ Save as there may be an exception for issues presenting claims of constitutional right, such administrative findings on issues of fact are accepted by the court as conclusive if the evidence was legally sufficient to sustain them and there was no irregularity in the proceedings.” (See, also, Tagg Bros. v. United States, 280 U. S. 420 , 443.)

An analogy is found in the right to judicial determination on habeas corpus of a claim of citizenship when one is held for deportation under the immigration laws of the United States (Ng Fung Ho v. White, 259 U. S. 276 ).

There would indeed be a very drastic limitation upon the constitutional powers of the Supreme Court of the State if it may not enjoin an unconstitutional deprivation of property because of an administrative determination of constitutional right supported by administrative findings of fact believed to be wrong upon a fair consideration of the record. The remedy by certiorari proceedings being thus limited is inadequate in the protection of constitutional right and, in view of the decisions of the Supreme Court of the United States, is lacking in due process. Under these circumstances the Supreme Court of New York as a constitutional court may entertain an action for an injunction, the statutory remedy by certiorari being inadequate.

We are constrained to conclude that the plaintiff is entitled to maintain this action and that the complaint states facts sufficient to constitute a cause of action.

In reaching this conclusion we are not unmindful of the arguments advanced on grounds of convenience, well stated by Foster, J., in the court below: “ Obviously this is an important question in the field of public utility regulation. It is a simple

We find no compelling necessity for a trial de nova of every rate case in which confiscation is claimed. The illegality in such cases is confiscation or deprivation of property without due process of law. The legality of the rate must primarily depend upon the proceedings before the commission, and the record of those proceedings will of necessity be before the trial court since the statute authorizes determination in the first instance by the commission, and the courts may not properly consider the question without knowledge of the administrative record (Railroad Commission v. Oil Co., 310 U. S. 573 ; Manufacturers Ry. Co. v. United States, 246 U. S. 457 ,489-490). This appears to be the practice when injunction suits such as this are brought in the Federal courts. We see no reason for departing from that practice in the trial of this action. We need not now consider under what circumstances, if any, the court may be justified in receiving additional proofs or newly discovered evidence. !

We find nothing inconsistent with such a practice in the oil and gas proration cases: Thompson v. Consolidated Gas Corp. ( 300 U. S. 55 ), Railroad Commission v. Oil Co. ( 310 U. S. 573 , supra), Railroad Commission v. Oil Co, ( 311 U. S. 570 ), or in the cases arising under the Federal Natural Gas Act: Power Comm. v. Pipeline Co. ( 315 U. S. 575 ), Power Comm. v. Hope Gas Co. ( 320 U. S. 591 ).

The Power Commission cases (supra) arose upon petitions to review orders of the Federal Power Commission under subdivision (b) of section 19 of the Natural Gas Act (U. S. Code, tit. 15, § 717r, subd. [b]). In discussing the scope of review in these cases, Chief Justice Stone, writing for the court in Power Comm. v. Pipeline Co. (supra) said (p. 585): “ By long standing usage in the field of rate regulation, the * lowest reasonable rate ’ is one which is not confiscatory in the constitutional sense. [Citations.] Assuming that there is a zone of reasonableness within which the Commission is free to fix a rate varying

In none of these decisions was the right to try the issue of confiscation disputed. Indeed that was the judicial process pursued in each one of these cases. The opinions are helpful in showing the deference with which a court should consider the findings and conclusions of an expert administrative commission. No doubt a court of equity in this State will be largely influenced by the practice which prevails in the Federal courts.

Counsel for the commission have suggested that the case is of such compelling importance that if judicial review of the question of confiscation is a constitutional requirement, we should broaden the scope of review in certiorari proceedings so as to permit review of that question on the facts as well as the law. This of course we may not do in view of the established limitations on such proceedings to which we have referred. If such changes are desirable, the Legislature, but not the courts, should make them.

Order affirmed, with costs, and each of the questions certified answered in the affirmative.

(dissenting). Plaintiff is a New York State corporation doing an intrastate business in the production and sale of electric power. After hearings and other appropriate proceedings before it, defendant Public Service Commission made and promulgated its order fixing permanent rates to be charged by plaintiff. Plaintiff thereupon brought the present suit in equity to enjoin the enforcement of the order. The complaint herein asserts that the rates so established by defendant commission are so low as to be confiscatory

Let us at once dispose of the idea that the present decision merely gives plaintiff its choice between two established modes of attacking, in the courts, commission-fixed rates. At a later point in this opinion we will deal more extensively with the historical background of rate review in New York, but we

If it were not for the Ben Avon case (supra) and the structure of argument built thereon, we could dispose of plaintiff’s suit summarily, fdr it is settled in the decisions of this court that no such bill in equity lies. Certiorari is the remedy provided for reviewing the Public Service Commission’s rate orders (People ex rel. Central Park North & East River R. R. Co. v. Willcox, 194 N. Y. 383 ). In such a certiorari proceeding there is no second trial of the facts but an examination of the legality of the order — that is, an inquiry by the court as to whether the order is arbitrary or capricious or without support of substantial evidence (People ex rel. New York & Queens Gas Co. v. McCall, supra). In other words, it is the same sort of review afforded by our courts as to determinations by other administrative agencies (Matter of Miller v. Kling, supra). The contention that a rate is confiscatory is, like every other question of law, fully litigable in such proceedings (People ex rel. New York & Queens Gas Co. v. McCall, supra). Such was the New York law before the Ben Avon case, and this court saw nothing in the Ben Avon case to compel a change in the rule (People ex rel. Consol. Water Co. v. Malthie, supra). In both the New York & Queens case and the Consolidated Water case (supra), there were claims of confiscation, but in each instance this court held that certiorari was a sufficient remedy. Both those cases went thereafter to the Supreme Court ( 245 U. S. 345 and 303 U. S. 158 ) but the point we are here passing on was not decided by that tribunal, in either case. Both were certiorari cases and in neither did this court say in so many words that an equity suit might not have been brought to establish that the rates were confiscatory. But that was the plain meaning of Judge Lehman’s language in the Consolidated Water case, at page 370 of 275 New York: “ It is true that a determination by

Standing on those prior decisions of ours, we could stop at this point and vote for a dismissal of the present suit. But the prominence given the Ben Avon case {supra) in the briefs here, and a desire to pay due attention to the decisions of the Supreme Court, prompts some further discussion. The Ben Avon opinion does say that, in rate cases “ if the owner claims confiscation of his property will result, the State must provide a fair opportunity for submitting that issue to a judicial tribunal for determination upon its own independent judgment as to both law and facts; otherwise the order is void because in conflict with the due process clause, Fourteenth Amendment ” (253 U. S. at p. 289). On its face, in its setting and against its particular factual background, that quoted language does seem to mandate a full new trial in the courts of facts disputed before the commission, and it has been frequently cited by judges and commentators as meaning just that. Whether or not it has been (implicitly but not explicitly) overruled by later cases in the same court (see Railroad Commission v. Oil Co., 310 U. S. 573 , 311 U. S. 570 ; Power Comm. v. Pipeline Co., 315 U. S. 575 , and Power Comm. v. Hope Gas Co., 320 U. S.

This court, itself, after the Ben Avon decision, again tested our certiorari procedures by that case’s rules and found that they stood the test (Consolidated Water case, supra). This court thought then that due process does not require that any fact be tried out twice in separate tribunals before a binding result be reached. The property owner who charges confiscation is given a court determination of that issue, but the issue is decided by the court on the reasonable factual holdings made by another competent tribunal, as to values and other items basic to rate making. That special tribunal created and equipped by the Legislature for the special task has already investigated the facts and arrived at an appropriate rate. All of that is then examined by a court to see if the owner’s rights are being violated. A brief look at the development of the law of rate making will show, we think, why the courts of New York hold that this system lacks no element of due process.

By affirming the orders below in the present suit, we are holding that our customary certiorari proceedings under .article 78 of the Civil Practice Act somehow fail to meet the tests outlined above. Wherein are they deficient? The ultimate determination of the validity of commission-established utility rates is now, as it always has been, in the courts. In this State certiorari as a traditional and accepted method of reviewing the action of inferior bodies or officers is older than the Fourteenth Amendment, and older than the State itself (People ex rel. Republican & Journal Co. v. Lasansky, 208 N. Y. 435 , 441). In our State the whole judicial power is not committed to the courts in the first instance (People ex rel. Steward v. Railroad Comrs., 160 N. Y. 202 , 207) but the courts have always been empowered to re-examine the judicial or quasi-judicial action of other bodies by way of certiorari (Mopers v. Smedley, 6 Johns. Ch. 28 ; People ex rel. Hanford v. Thayer, 88 Hun 136 ; Hyatt v. Bates, 40 N. Y. 164 , 166). For over a century the Hew York courts have found it sufficient to review such actions as to their

To bring our list of New York decisions down to date, we point to Matter of Bumsey ( 296 N. Y. 113 ), decided in January of this year. The Bumsey Corporation was ordered by the State Labor Department authorities to pay penalties totaling $1,000 for delays in filing its payroll statements. The corporation insisted that all the evidence taken at the departmental hearings proved that it had been absolutely impossible to get the reports in on time. Section 623 of the State Labor Law provides that * ‘ A decision of the appeal board shall be final on all questions of fact * * #.” It was argued to us that the statute, insofar as it forbade the courts to weigh the fact issues as to confiscation of property by means of an unwarranted fine, was unconstitutional (see Point III, respondent’s

In Coler v. Corn Exchange Bank ( 250 N. Y. 136 ) Chief Judge Cabbozo, stating this court’s approval on a long-established method of seizing property, wrote: “ Not lightly vacated is the verdict of quiescent years ” (p. 141). He there cited Ownbey v. Morgan ( 256 U. S. 94 , 108, 111) which tells us that one good way of testing court procedures for due process is to see whether they are familiar and time-honored. The Fourteenth Amendment itself expresses an insistence that the States perpetuate old and settled ideas of justice. In the Color case, Chief Judge Cabbozo quoted also from Jackman v. Rosenbaum Co. ( 260 U. S. 22 , 31): “ The Fourteenth Amendment, itself a historical product, did not destroy history for the States and substitute mechanical compartments of law all exactly alike. If a thing has been practised for two hundred years by common consent, it will need a strong case for the Fourteenth Amendment to affect it * * The practice in this State for well over a hundred years has been for the courts to perform their proper judicial functions in relation to quasi-judicial bodies by testing the actions of those bodies for reasonableness and legality, without ousting them from their own special fields of investigation. Due process demands no more.

As we understand the majority’s position, it is that due process requires a plenary equity suit to try plaintiff’s allegation of confiscation, but that no new testimony need be taken, and that the equity court may try the issue on the proof already taken by the commission. It must be clear: first, that plaintiff seeks no such proceeding and does not want new findings on the evidence already heard but demands a real de nova trial, and, second, that, while a new determination on the commission record may satisfy concepts of due process, it finds no authorization or precedent in any procedural statute, rule or decision in this State. After this plenary equity suit has gone to trial and Special Term has weighed for itself the commission testimony, the party aggrieved by the Special Term decision will, we assume, have a right of appeal to the Appellate Division. On. such an appeal the weight of the evidence will again be open. That will make three separate, independent weighings,

The Public Service Commission was set up in this State forty years ago. The commission has been investigating and fixing utility rates ever since. The scope of its work and the number and kind of services regulated by it have been gradually increased by the Legislature. The commission now has several hundred officers and employees and an annual budget of about two million dollars. It regulates about thirty-five hundred separate corporations and has conducted thousands of investigations and hearings, a large percentage of them having a direct or indirect effect on rates. Bate reductions running into vast sums have been ordered and put into effect. How a way has been found to take away pretty much all finality from the commission’s rate-making function. We make no prediction as to the size and force of the impact of this present decision on the whole carefully built and strengthened system of protecting the interests of the people of this State. The decision, it cannot be denied, upsets a workable and working system. It authorizes an additional cumbersome and elaborate method of court review when there is neither practical nor theoretical need therefor. And, based as it is on a construction of the Federal Constitution, our ruling will be beyond the power of the State Legislature to correct.

In Administrative Justice and The Supremacy of Law by Dickinson, published in 1927, this was said as to authorizing the courts to make new findings in these cases: “It is like permitting the court to substitute its conclusion in place of the jury’s as to whether the plaintiff in a negligence action did or did not see an approaching vehicle. If the court’s * inde

The order appealed from should be reversed and the complaint dismissed, with costs in all courts. Both certified questions should be answered in the negative.

Lewis, Conway and Dye, JJ., concur with Thacheb, J.; Desmond, J., dissents in opinion in which Loughran, Ch. J., and Fttld, J., concur.

Order affirmed, etc.