Lincoln Gas & Electric Light Co. v. Lincoln,
250 U.S. 256 (1919)

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U.S. Supreme Court

Lincoln Gas & Electric Light Co. v. Lincoln, 250 U.S. 256 (1919)

Lincoln Gas & Electric Light Company v. Lincoln

No. 52

Argued October 5, 8, 1917

Decided June 2, 1919

250 U.S. 256


A gas company, pending a suit to declare a rate ordinance confiscatory, put the rate in effect as a test, under a stipulation that such action should not be construed as an acceptance of or compliance with the ordinance or be

"shown in evidence or presented to the court in the above entitled cause, or used in any way by either party to influence the action of the court in the disposition of the case."

Held that this in effect relieved the defendant from obligation to observe the

Page 250 U. S. 257

effect of the reduced rate or prepare to meet inferences drawn from it, and hence afforded a reason why a petition for leave to file a bill of review in the district court, based on the test, should not be granted by this Court. P. 250 U. S. 261.

Further grounds for refusing such leave are found in the delay of the plaintiff in instituting the test and in the fact that the results relied on were offset by an error committed in the plaintiff's favor. P. 250 U. S. 262.

The district court, having acquired jurisdiction through a bill presenting a substantial controversy under the federal Constitution, has power to dispose of an issue fairly within the pleadings, without passing on its federal aspect, by application of the constitution of the state. P. 250 U. S. 263.

In a suit challenging the constitutionality of ordinances fixing gas rates and laying an occupation tax, where the district court upheld the rates but declared the tax void, and, after an appeal in which the tax ruling was not assigned as error or referred to by this Court in its opinion or mandate, the rate, on a further trial, was again sustained and the bill dismissed by a final decree, without further mention of the tax, held that the earlier adjudication was to be taken as a part of the final decree, establishing beyond collateral attack in this Court or elsewhere that the tax was void, but that the decree might properly be modified to reiterate such earlier adjudication. Id.

In a rate case involving questions and much evidence concerning plant valuation, methods of estimating and applying depreciation charges, working capital, going concern value, rate of return, etc., this Court is not called upon to recite the substance of such evidence or review the master's findings made after proper investigation. P. 250 U. S. 266.

Eight percent being the lowest rate generally sought and obtained upon capital invested in banking, merchandising, and other business in the vicinity, and 7 percent the legal rate in the state, the court cannot approve a finding that no rate yielding as much as 6 percent could be deemed confiscatory in the case of the complaining gas company; nor is the finding justified upon the ground that the company had such a monopoly and guaranty of profits as would permit of such restriction. P. 250 U. S. 267.

In the absence of any finding or clear evidence that past earnings, invested in a gas company's business were excessive, a finding restricting the "going value" on the theory that they were is erroneous. Id.

Page 250 U. S. 258

In such a suit, occupation taxes which have been conclusively adjudged void and have not been paid should not be allowed as operating expenses. P. 250 U. S. 267.

Having regard for the entire period under investigation, and in the presence of many doubtful items, this Court cannot hold the rate ordinance in question void in the absence of an actual and timely test of its practical operation. Id.

The decree dismissing the bill without qualification is so modified as to be expressly without prejudice to the commencement of a new suit, in which complainant may show if it can, as a result of its practical test since May 1, 1915, or upon evidence of values, costs of operation, and rates of return upon capital as they stand when such suit is brought and are likely to continue, that the rate in question is confiscatory under the new conditions. P. 250 U. S. 268.

The court notices judicially that, principally owing to the war, costs of labor and supplies have advanced greatly since the ordinance was adopted, and largely since the case was last heard in the court below, and that annual returns upon capital and enterprise the world over have materially increased, so that what would have been a proper return for capital in gas plants and other public utilities a few years ago furnishes no safe criterion for the present or the future. Id.

Modified and affirmed.

The case is stated in the opinion.

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