MR. CHIEF JUSTICE TAFT, after stating the case as above, delivered the opinion of the Court.
The appellees urge that the concession of the appellant that contracts in respect to the rates to be charged by a public utility are subject to suspension or abrogation by the police power of the State validly exercised through an administrative agency takes out of this case any federal question, because the issue then is only a state question, to wit, whether, under the state statute, the police power was validly exercised. Upon this ground they insist that the bill should have been, and must be now, dismissed for want of jurisdiction and without any inquiry into the other issues of law and fact. The original bill set out two grounds of jurisdiction, first that of diverse citizenship, and, second, that the case arose under the Federal Constitution in that the order violated the contract clause of the Federal Constitution, and also the Fourteenth Amendment. The intervention of the Kansas Company, a citizen
The jurisdiction of the District Court was not limited to federal questions presented by the bill, but extended to the entire suit and every question, whether federal or state, involved in its determination.
The appellant assigns for error that the Circuit Court of Appeals, by directing a dismissal of the bill, refused it a hearing on the truth of the averments of the answer as to the validity of the order, and also on the issue made by the bill and answer as to whether the rates, as fixed by the Commission, deprived it of its property without due process of law and denied it the equal protection of the laws. In this ruling we think there was error.
The stress in the hearing on the motion was put on the two contentions, one, that the order of the Commission was void on its face for lack of a necessary finding that the existing contract rates were unreasonably low, and the other, that the facts averred in the petition of the
There still remain for our consideration the questions upon which the courts below differed.
The Public Utility Law of Kansas, c. 238 of the Session Laws of 1911, creates a commission and makes full provision for its procedure and powers. Section 13 provides that:
"It shall be the duty of the commission, either upon complaint or upon its own initiative, to investigate all rates, . . . fares. . . and if after full hearing and investigation the commission shall find that such rates . . . are unjust, unreasonable, unjustly discriminatory or unduly preferential, the commission shall have power to fix and order substituted therefor such rate or rates . . . as shall be just and reasonable."
Section 14 and § 15 require the complaint against rates, etc., to be in writing, and a formal public hearing of which due notice is to be given to the parties interested.
Section 15 directs how the notice shall be given and how long before the hearing and its contents.
Section 20 provides that, whenever any public utility shall desire to make a change in any rate or rates, it shall file with the Commission a schedule showing the changes desired to be made and put in force by such public utility, but that no change shall be made in any rate without the consent of the Commission and within thirty days after such changes have been authorized by the Commission copies of such schedule shall be filed in every station, office or depot of such public utility for public inspection.
It is said that the order in this case was authorized by § 20 and therefore that all that was needed was the filing of a schedule of changed rates and the consent of the Commission, and that no finding was required as in § 13 and § 16. This construction of § 20 is doubtless correct, but it shows that the filing of a schedule of changed rates under that section cannot accomplish the result of abrogating contract rates. It could not do so any more than would the original filing of a schedule of rates under § 11 requiring every public utility to publish and file with the Commission all schedules of rates do this. The consent of the Commission in § 20 is made necessary only to prevent changing schedules without notice to the Commission
The majority opinion in the Circuit Court of Appeals in maintaining the validity of the order in this case relies on § 18 of the act, which provides that all orders, rates, etc., fixed by the Commission shall be in force thirty days thereafter and shall be prima facie reasonable until changed by the Commission or by a court; and holds from this that it must presume that there was substantial evidence to warrant the findings. But as we have seen there is no finding of reasonableness or unreasonableness. Nor can we suppose that the presumption was to obtain until there was such a finding.
The Supreme Court of Kansas, in applying the statute, recognizes that a contract for rates with a public utility can not be abrogated except after a finding by the Commission that they are unreasonable. This is made clear by the decision in Kaul v. American Independent Telephone Co., 95 Kans. 1. In that case, a number of customers sought to enjoin a telephone company from disconnecting their lines because they did not pay the schedule rates published and filed with the Commission under the law of 1911 we are considering. The complainants showed an agreement by the Telephone Company made before the Act of 1911, by which the Telephone Company had engaged to furnish them the service at lower than the published schedule rates on file with the Commission. The injunction was granted. The court said:
"While that commission is vested with broad regulatory powers it is not shown nor claimed that it has found
The proceeding we are considering is governed by § 13. That is the general section of the act comprehensively describing the duty of the Commission, vesting it with power to fix and order substituted new rates for existing rates. The power is expressly made to depend on the condition that after full hearing and investigation the Commission shall find existing rates to be unjust, unreasonable, unjustly discriminatory or unduly preferential. We conclude that a valid order of the Commission under the act must contain a finding of fact after hearing and investigation, upon which the order is founded, and that for lack of such a finding, the order in this case was void.
This conclusion accords with the construction put upon similar statutes in other States. Public Utilities Commission v. Springfield Gas & Electric Co., 291 Ill. 209; Public Utilities Commission v. Baltimore & Ohio Southwestern R.R. Co., 281 Ill. 405. Moreover, it accords with general principles of constitutional government. The maxim that a legislature may not delegate legislative power has some qualifications, as in the creation of municipalities, and also in the creation of administrative
It is pressed on us that the lack of an express finding may be supplied by implication and by reference to the averments of the petition invoking the action of the Commission. We can not agree to this. It is doubtful whether the facts averred in the petition were sufficient to justify a finding that the contract rates were unreasonably low; but we do not find it necessary to answer this question. We rest our decision on the principle that an express finding of unreasonableness by the Commission was indispensable under the statutes of the State.
We think the motion for judgment on the pleadings should have been granted.
The decree of the Circuit Court of Appeals is reversed and that of the District Court is affirmed.