State v. Lone Star Gas Co. , 129 S.W.2d 1164 ( 1939 )

PER CURIAM.

We deem advisable further comment, as brief as the subject will admit, upon the issues reiterated in the very able printed argument in support of appellee's motion for rehearing.

Two main contentions are urged in the argument.

1. It is contended that since R.C.S. Art. 6059 provides for judicial review to determine whether rate orders of the Commission are unreasonable and unjust to the complaining party, and since the trial therein provided is the same as in other civil cases, our decision upholding the Commission order on the ground that it is supported other than by conclusive evidence does violence to this article under which the proceeding was brought.

Manifestly, this question, involving as it does, only the proper construction of a state statute, is one solely for the state courts, and contains no element which would confer jurisdiction upon the Federal courts.

As pointed out in Justice BLAIR'S opinion, the proper construction of this article, its prototype Art. 6453, and similar statutes of this state providing for this character of judicial review of administrative orders, has been frequently before our courts, and it is now the established law of this jurisdiction that the factual review of such orders extends only to the question whether they have substantial support in the evidence. In other words, while the trial is de novo, the issues are substantially the same as those in certiorari proceedings.

Moreover, if need there were for further adjudication, the question was foreclosed in so far as this case in this court is concerned by our Supreme Court's refusal of an application for writ of error from our former judgment in this case. That decision rendered our judgment final and immune from attack, save only as regards the issue of the asserted denial of due process under the Federal Constitution. After that decision, only federal questions were left open for review, of which the proper construction of the Texas statute was not one.

2. It is contended that our present decision, in so far as it renders judgment upholding the order as against the verdict of the jury and judgment thereon of the trial court, is in conflict with the Ben Avon case, Ohio Valley Water Co. v. Ben Avon, 253 U.S. 287, 40 S. Ct. 527,64 L. Ed. 908, and Stockyards decision, St. Joseph Stock Yards Co. v. United States, 298 U.S. 38, 56 S. Ct. 720, 80 L. Ed. 1033, of the Federal Supreme Court and the decision of that court in this case.

This court had under consideration the opinion of the Federal Supreme Court in this case for several months, aided by able and exhaustive briefs of the respective parties. Determination of the exact basis upon which that opinion was grounded presented a question of no little difficulty. Its final resolution to the effect that the Federal decision was based upon the fact that our former judgment was erroneous in that it applied an untenable theory, was impelled by several considerations which we will briefly consider.

The Laredo case, United Gas Public Service Co. v. State, Tex. Civ. App. 89 S.W.2d 1094, affirmed, Id., 303 U.S. 123, 625, 58 S. Ct. 483,82 L. Ed. 702, and this case were before this court at the same time, each involving the basic question of the extent of factual review of the Commission's order, as well as other assigned errors assailing the validity of the trial court's judgment. In each case our decision was rested upon the holding that the Commission's order was supported by that degree of probative evidence which rendered it immune from factual attack in the courts. Other assigned errors in each case we declined to consider on the expressed ground that this holding rendered them innocuous. To have applied the rule for which appellee contends — that it was entitled to an independent factual review and jury finding on all issues as to which the evidence raised any substantial dispute — would have required this court, as an imposed duty, to consider the other assigned errors, the result of which would have been a probable remand in the Laredo case and a certain remand in this case. Necessarily implicit in the Federal decision in the Laredo case is the approval of the ground upon which this court upheld the trial court's judgment. This is rendered more certain by the dissenting opinion of Mr. Justice McReynolds and Mr. Justice Butler, which is expressly predicated upon adherence to the Ben Avon rule and the assertion that the independent judicial review required by that rule was shown to have been denied by this court. Manifestly, if the character of review for which appellee contends were required, then the Federal Supreme Court has denied to the utility in the Laredo case the right to have reviewed in this court important questions affecting the validity of the trial court's judgement expressly made reviewable in this court by the laws and decisions of this state. If appellee's version of the basis of the Federal Supreme Court's decision in this case were correct, that decision would be in irreconcilable conflict with the decision in the Laredo case, decided by the same court only three months prior to the decision in this case.

Another difficulty in adopting appellee's construction of the Federal Supreme Court's decision in this case lies in the fact that Mr. Justice Stone, who participated in the decision, pointedly expressed the contrary view to appellee's contention in concurring in the Stockyards decision. The Ben Avon decision was handed down in 1920. Mr. Justice McReynolds wrote the opinion of the court, and a vigorous dissenting opinion was filed by Mr. Justice Brandeis, which was concurred in by Mr. Justice Holmes and Mr. Justice Clarke on the point here at issue. Sixteen years later came the Stockyards decision. That case concerned an order of the Secretary of Agriculture, under the Packers and Stockyards Act of 1921,7 U.S.C.A. § 181 et seq., reducing rates charged by St. Joseph Stockyards Company, which the Secretary held to be unreasonably high. The order was upheld by both the Federal trial and Supreme Courts. The question of independent judicial factual review was not necessarily involved but was discussed in the majority opinion by the Chief Justice. Mr. Justice Roberts merely "concurred in the result." A very able and exhaustive opinion was filed by Mr. Justice Brandeis, who while concurring also in the result, again vigorously dissented from the views upon the point at issue expressed by the Chief Justice. Mr. Justice Cardozo and Mr. Justice Stone concurred in the views of Mr. Justice Brandeis. We have no evidence of Mr. Justice Stone having changed his views upon this subject. If such were the case, it is hardly probable that he would have omitted to make note of the fact in the instant case, if, as contended by appellee, the decision is grounded upon the holding in the Ben Avon and the dictum in the Stockyards cases.

The latest expression of the Federal Supreme Court upon this question which has come to our knowledge is in the recent case of Rochester Telephone Corporation v. U.S. 59 S. Ct. 754, 761, 83 L.Ed. ___, opinion by Mr. Justice Frankfurter. After discussing the subject of factual judicial review of orders of the Interstate Commerce Commission, the opinion reads: "From these general considerations the Court evolved two specific doctrines limiting judicial review of orders of the Interstate Commerce Commission. One is the primary jurisdiction doctrine, firmly established in Texas Pacific Ry. v. Abilene Cotton Oil Co., 204 U.S. 426,27 S. Ct. 350, 51 L. Ed. 553, 9 Ann.Cas. 1075. Thereby matters which call for technical knowledge pertaining to transportation must first be passed upon by the Interstate Commerce Commission before a court can be invoked. The other is the doctrine of administrative finality. Even when resort to courts can be had to review a Commission's order, the range of issues open to review is narrow. Only questions affecting constitutional power, statutory authority and the basic prerequisites of proof can be raised. If these legal tests are satisfied, the Commission's order becomes incontestable. Interstate Commerce Commission v. Illinois Central R. R.,215 U.S. 452, 470, 30 S. Ct. 155, 160. 54 L. Ed. 280; Interstate Commerce Commission v. Union Pacific R. R., 222 U.S. 541, 32 S. Ct. 108,56 L. Ed. 308."

The order there under review was that of the Communications Commission holding that the Rochester Corporation came under its jurisdiction, which presented the factual issue in the case. The opinion concludes: "The record amply justified the Communications Commission in making such findings. Investing the Commission with the duty of ascertaining `control' of one company by another, Congress did not imply artificial tests of control. This is an issue of fact to be determined by the special circumstances of each case. So long as there is warrant in the record for the judgment of the expert body it must stand. The suggestion that the refusal to regard the New York ownership of only one third of the common stock of the Rochester as conclusive of the former's lack of control of the latter should invalidate the Commission's finding, disregards actualities in such intercorporate relations. Having foundthat the record permitted the Commission to draw the conclusion that itdid, a court travels beyond its province to express concurrence therewith as an original question. `The judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.' Mississippi Valley Barge Line Co. v. United States, 292 U.S. 282, 286,287, 54 S. Ct. 692, 693, 694, 78 L. Ed. 1260; Swayne Hoyt, Ltd. v. United States, 300 U.S. 297, 303, et seq., 57 S. Ct. 478, 480,81 L. Ed. 659." (Emphasis supplied.)

It is to be noted that Mr. Justice McReynolds and Mr. Justice Butler concurred only in the result.

The Supreme Court of Wisconsin had under consideration in 1937 the question whether independent judicial factual review was essential to due process under the Federal Constitution in appeals from state administrative boards as regards the facts essential to the jurisdiction of the administrative board. Such independent factual review had been held essential in appeals from orders of Federal agencies in Crowell v. Benson, 285 U.S. 22, 52 S. Ct. 285, 76 L. Ed. 598.

The Wisconsin case was an appeal from an award of the Industrial Commission of that state and presented the question whether an independent judicial review of the jurisdictional fact question — whether the injury arose in the course of the employment of the employee — was essential to satisfy due process. The opinion by Justice Wickhem is a clear, logical, and convincing presentation of the issue, and evidences a thorough familiarity with the subject and with the judicial literature and adjudications thereon. The conclusion was reached that the Crowell case is limited in its application to review of orders of Federal agencies and concerns the distribution of Federal governmental powers under the Federal Constitution; and that it has no relation to distribution of powers under state constitutions. Consequently where, under the constitution, laws, and decisions of a state, factual determinations, whether or not they are jurisdictional, are committed to an administrative agency under proper safeguards, independent factual judicial review is not essential to due process. The specific holdings on this subject are thus expressed: "It is our conclusion: (a) That the Compensation Act provides with respect to jurisdictional facts for a review of the same character and extent as that afforded by certiorari; (b) that this review satisfies the requirements of due process and avoids constitutional objections grounded upon the delegation of judicial power to a commission; (c) that these conclusions are not foreclosed by the doctrine of the Crowell Case; and (d) that this has been consistently held by this court since the enactment of the compensation act." General Accident F. L. Corp. v. Indus. Com., 223 Wis. 635, 271 N.W. 385,392.

In an able address upon the "Power of the courts to set aside Administrative Orders," delivered before a conference held in March, 1938, at Cincinnati under auspices of the Ohio Bar Association, Chief Justice Rosenberry, who participated in the Wisconsin decision, made the following interesting comment thereon:

"The court was called upon to review the whole matter recently (1937) and after giving full consideration to Crowell v. Benson, held that the compensation act provides with respect to jurisdictional facts for a review of the same character and extent as that afforded by certiorari; that such a review satisfies the requirements of due process and that this determination is consistent with the holding in Crowell v. Benson. By some it is thought the court unduly limited itself with respect to its right of review as to jurisdictional facts; that instead of holding as it did if there was any evidence, however slight, which sustained the finding, it should have held that it would inquire upon the whole evidence whether the minds of reasonable men could have come to the conclusion reached by the administrative agency.

"Although the precise question has not been discussed by the Supreme Court of the United States so far as I am able to discover, prior cases indicate that this determination will be upheld. In 1932, upon the authority of two prior cases, the decision in Helfrick v. Dahlstrom M. D. Co., 256 N.Y. 199, 176 N.E. 141, (1931), was affirmed by the Supreme Court of the United States. Dahlstrom Metallic Door Co. v. Industrial Board, 284 U.S. 594, 52 S. Ct. 202. That was just shortly before Crowell v. Benson. The Act under consideration in that case made the findings of the administrative agency conclusive. The Court of Appeals of New York upheld the statute on the authority of Interstate Commerce Commission v. Union Pacific R. R. Co. (1912), 222 U.S. 541, 32 S. Ct. 108, 56 L. Ed. 308, and other cases. It held that rate-making was a legislative matter while the determination of compensation was a judicial matter and for that reason the findings of the industrial board could be made conclusive. I had supposed the law was the other way — that a finding of fact by the legislature was given the greater weight. I have always supposed the rule was the other way, that if you had a legislative determination of fact, that that was conclusive, but apparently the Court of Appeals thought differently. It is worthy of note that the Court of Appeals in commenting upon the distinction between rate cases and other cases involving administrative determinations of jurisdictional facts said:

"`So many are the complications in determining the question of fair return that necessity, not theory, has moved the courts to this conclusion.'

"This is the best justification for the distinction between constitutional and jurisdictional facts and other facts upon which liability must rest that I have found in a court decision. Whether necessity is a satisfactory basis for the distinction, I leave to you."

Likewise of interest, we think, is Chief Justice Rosenberry's following comment upon the Ben Avon decision, especially in view of the holding of the Wisconsin case and the Chief Justice's above comment thereon:

"It is difficult to understand why such great dignity should be assigned to constitutional or jurisdictional facts in the field of administrative law when they are not accorded equal dignity in other fields, as for instance, in the field of taxation or the taking of private property by condemnation.

"* * * Value may be found by a taxing officer and in a proceeding before a tax board of review if the board of review confirms the assessment it becomes conclusive if sufficient evidence is adduced before the board to sustain the assessor's valuation. On the other hand the finding of a rate-making agency which proceeds in conformity with due process requirements is not accorded finality. It is submitted that the determination of fact, that is, value, is no more `jurisdictional' in one case than in the other. If the assessor's valuation is in excess of the true value of the property assessed and the taxpayer is compelled to pay a tax upon the excess, his property is confiscated just as much as the property of a utility is confiscated if it is taken by way of an order fixing rates based on a value lower than its reasonable value. The ultimate consequences may be very much more important in one case than in the other but it seems to me that the legal principles which underlie the two are exactly the same.

"The Act under consideration in Crowell v. Benson did not provide that all the evidence should be offered in the proceeding before the deputy commissioner. The sweeping language of the decision leaves no doubt that as to the so-called constitutional or jurisdictional facts the person against whom liability is asssessed is entitled to a trial de novo in a court in all cases."

The question of the proper extent of judicial review of administrative orders has had in recent years the widest possible consideration by courts, law writers, and law organizations; and the literature thereon is voluminous. While there is a wide divergence of view as to the necessity and propriety of administrative agencies in many fields which they have invaded in recent years, it is quite generally recognized that such agencies are becoming more and more essential under our rapidly changing economic and social conditions. Such agencies in the field of utility and carrier rate-making are of long standing and are practically universally employed. There is no substantial disagreement regarding their necessity.

In the June, 1939, issue of the American Bar Association Journal is published for the first time an essay by Prof. Malcolm McDermott, Professor of Law, Duke University Law School, upon the subject, "To What Extent Should Decisions of Administrative Bodies be Reviewable by the Courts?" The essay received "the award in 1939 contest conducted by the American Bar Association pursuant to the terms of bequest of the late Judge Erskine M. Ross." Thus concisely does Prof. McDermott summarize the criticisms that have been directed against these bodies: "* * * The well-recognized disadvantages pertaining to administrative action are the tendency toward arbitrariness, lack of legal knowledge, susceptibility to political bias or pressure, often brought about by uncertainty of tenure, a disregard for the safeguards that insure a full and fair hearing, and a dangerous combination of legislative, executive and judicial functions."

For several years past the American Bar Association has had under careful study the subject of administrative agencies through its special committee created for that purpose. The last (1938) report of that committee was drafted by its Chairman, Roscoe Pound, Dean of the Harvard Law School. It constitutes a comprehensive treatise upon the subject, dealing largely with methods and expedients recommended as therapeutics for the "disadvantages" pointed out by Prof. McDermott. We quote the portion of the report setting forth asserted principles which should govern "with reference to state as well as federal administrative agencies" touching the subject of factual judicial review:

"(2) Judicial review of findings of fact should be preserved to the extent of ascertaining whether there has been a finding as distinguished from an arbitrary pronouncement, and whether that finding has a reasonable support in substantial evidence.

"(3) Judicial review should be jealously preserved to the extent of assuring due process of law by requiring a hearing of both sides, allowing each side to present its case fully and to meet fully everything to be used against it in arriving at a determination, precluding inspections with one party present and not the other, and interviews with representatives of one side in the absence of or without notice to the other.

"(4) Judicial review should be preserved to the extent of assuring action upon evidence rather than a preformed conception of the facts, and requiring determinations to proceed on the basis of full consideration of evidence and not on general ideas of expediency or getting things done.

"(5) Judicial review should be so limited as to insure (by requirement of record and findings) the three foregoing requirements, without substituting findings of fact or declarations of policy (within legal limits) by a court for findings or declarations committed by law to administrative agencies." American Bar Association Reports, Vol. 63, p. 361.

Appended to the report is a draft of a federal bill designed to effectuate the recommendations of the report. This draft was further considered in January, 1939, by the House of Delegates of the Association and adopted with some changes not pertinent here, and has been introduced in the Congress as S. 915, where it has received unanimous favorable report by the Senate Judiciary Committee. The provision relating to the extent of factual judicial review reads: "* * * Any decision or order of any agency or independent agency shall be set aside if it is made to appear (1) that the findings of fact are clearly erroneous, or (2) that the findings of fact are not supported by substantial evidence, or (3) that the decision or order is not supported by the findings of fact, or (4) that the decision or order was issued without due notice and a reasonable opportunity having been afforded the aggrieved party for a full and fair hearing, or (5) that the decision or order is beyond the jurisdiction of the agency or independent agency, as the case may be, or (6) that the decision or order infringes the Constitution or statutes of the United States, or (7) that the decision or order is otherwise contrary to law."

A similar committee of the Association's Section of Judicial Administration has for the past two years considered the subject as it relates to state agencies. The report of that committee, which will be placed before the Section's meeting in July, is quite generally in agreement with that of the Association's special committee, and is accompanied by a proposed uniform state bill.

The "inconveniences" above pointed out, which constitute the main criticisms of administrative agencies, concern chiefly the subjects of personnel, the method of hearing and that of reaching and recording decisions. To minimize these "disadvantages", Dean Pound's report recommends methods and expedients designed to improve the personnel and procedure of such agencies. The problem of personnel is not peculiar to this branch of government, it is inherent in every branch. The judicial department is not altogether free from it. And this is true not only with reference to the judges but also the juries, — the triers of facts. The latter afford a perennial source of criticism. While the above Section report recognizes the possible eventuality of an ultimate holding by the Federal Supreme Court in line with the Ben Avon case, it is interesting to note that the report recommends that, where independent judicial factual review should be held essential to due process, such factual determination should be made by the judge and not the jury. In states where the common law distinction between law and equity is preserved this may be possible, at least where the reviewing proceeding is one in equity. But in this state, where the distinction between law and equity (other than to enforce the general principles of equity jurisprudence) has never been recognized, and the constitutional right of trial by jury is the same regardless of the proper classification of the case, it is difficult to conceive of that right being denied in a judicial proceeding held to require an independent factual review as an essential to due process. This, however, we hold not to be essential where, as here, the instrumentality created by the state is required to afford every essential to due process; as was held in the Wisconsin decision. Where, as here, a state, in the untrammeled exercise of its appropriate sovereign powers, has delegated to a quasi-legislative (or quasi-judicial) agency the authority of factual determination under proper legal safeguards and according to recognized legal standards that meet every essential requirement of due process, judicial review of the orders of such agency as to its factual determination is limited to the question whether the prescribed legal standard of probative evidence has been met. And this, whether such standard be: the scintilla of evidence rule, in vogue in some states, but never recognized in this state (Joske v. Irvine, 91 Tex. 574, 44 S.W. 1059); the substantial evidence rule, quite generally applied and recommended in the above committee reports; the rule that the findings of fact must be found not to be "clearly erroneous" (proposed Federal act); or the rule that the evidence taken as a whole is such that "the minds of reasonable men could have come to the conclusion reached by the administrative agency (Chief Justice Rosenberry's above address)." This judicial review presents a question of law only.

The above inconveniences, if at all applicable to the Texas Commission, are so in but very slight degree. Certainly they have no application to the order under consideration.

The Texas Railroad Commission was created in 1891, under express constitutional authority, if not in fact mandate. Art. X, Sec. 2. This provision was adopted by the people of Texas in 1890, because it was then thought that the powers essential to the proper functioning of such agency could not be otherwise delegated. The Commission was later (1894) expressly recognized in the constitution (Art, XVI, Sec. 30), its members made elective, and their tenure of office fixed at six years, with overlapping terms. In 1920 the legislature extended the rate-making function of the Commission to utilities, up-held in City of Denison v. Municipal Gas Co., 117 Tex. 291, 3 S.W.2d 794. The Commission has had wide experience in rate-making in the several fields delegated to it; besides having at its disposal technical advisers of recognized expert ability, especially in the intricate and difficult field of rate-making valuation. Its members are selected by the qualified electorate of the entire state, just as are the Governor and Justices of the Supreme Court. Their tenure of office is the same as that of the Supreme Court Justices. Every safeguard to a fair and impartial decision was afforded in this instance. The hearing lasted some seven months and every opportunity to present evidence and its views thereon was afforded the utility. The fact findings of the Commission were drawn with painstaking care, and, as we have held, are supported by abundant, if not in fact overwhelming competent evidence. They have been most carefully and, as we believe, accurately analyzed in Justice BLAIR'S opinion. Every practical requirement of due process has been fully satisfied by the Commission — unless the states are impotent to create effective fact finding agencies in the utility rate-making field.

To set this order aside on the ground that appellee is entitled to an independent review of the facts would in effect be to transfer to the trial court the legislative function of rate-making, and require that court, through the intervention of a jury of men inexperienced in the technical and intricate subject involved, to substitute its judgment for that of the trained and experienced experts whom the law has provided for that purpose.

We are loath to believe that the Federal Supreme Court will set aside the order upon the invoked ground; and we are confirmed in the view that its mandate does not direct us to do so.

On the other hand, if ultimately our conclusion should not be upheld, it would be far better to have the issue definitely and authoritatively settled by the Federal Supreme Court in a review of our present judgment, than to subject this controversy, so important to a vast number of our citizenry as well as to the utility, to the delay, inconvenience, and expense necessarily incident to a remand for a new trial. This court will lend every facility in its power to that end.

The purpose of this memorandum is not in any particular to alter or amend the views and holdings set forth in Justice BLAIR'S opinion, but only to record the full concurrence of each member of this court therein.