265 U.S. 206

HOME TELEPHONE & TELEGRAPH CO. OF SPOKANE
v.
KUYKENDALL, Director of Public Works, etc., et al.

Messrs. W. V. Tanner, of Seattle, Wash., Frank T. Post, of Spokane, Wash., H. D. Pillsbury, of San Francisco, Cal., and Otto B. Rupp, of Seattle, Wash., for appellant.

Messrs. Raymond W. Clifford and John H. Dunbar, both of Olympia, Wash., for appellees.

Mr. Chief Justice TAFT delivered the opinion of the Court.

These appeals present the same question as that just considered and decided in the appeal of the Pacific Telegraph & Telephone Company against the same appellees. 265 U. S. 196, 44 Sup. Ct. 553, 68 L. Ed. ——. The bill averred that the plaintiff was a corporation of Washington, owning and operating a telephone system in the city of Spokane and territory adjacent thereto, known as the Spokane Exchange; that on September 20, 1922, it filed with the Department of Public Works a schedule of rates by which those of 1919 as approved in that year by the Public Service Commission, the predecessor of the Department of Public Works, were substantially increased; that the Department suspended the new rates, and March 31, 1923, finally denied the company its application for increase, thereby limiting it to prior rates alleged to be confiscatory in character. In detail, the bill set out the cost of the Spokane system at over $4,000,000 and its present value at $5,710.684, and averred that a fair return thereon would be 8 per cent.; that the actual return therefrom had been:

                                 On Cost     On Fair Value
 
     Year 1919................... 2.95%         2.14%
     Year 1920................... 1.79%         1.30%
     Year 1921................... 2.35%         1.71%
     Year 1922................... 3.07%         2.28%

and that the order of March 31, 1923, by which an increase of rates had been denied operated to limit it to the prior rates which it alleged were and would continue to be confiscatory. The prayer was for a temporary and permanent injunction.

These appeals were heard at the same time with the two just disposed of in the Pacific Telephone & Telegraph Co. Case, and the same orders were made therein by the District Court. There is no difference in the cases except that on the motion for a temporary injunction an affidavit of the assistant corporation counsel of Spokane was filed, which set forth, among other reasons for denying an injunction, an ordinance of the city of Spokane of April, 1909, in which rates for telephone service by the Home Telephone Company in that city were fixed in a schedule much lower than the one said to be necessary for a fair return, and alleged that the ordinance was still in full force and effect, was a valid contract between the city and the company, and that thus the bill of the plaintiff must fail. Upon argument and brief in this court counsel for the company insist that under the decision of the Supreme Court of Washington in State ex rel. Spokane Falls Gaslight Co. v. Kuykendall, 119 Wash. 107, 205 Pac. 3, action of the city in reducing the rates of the ordinance in 1913 and increasing them in 1919 must be held to terminate the contract of the ordinance and bring the rates within the regulation of the Public Service Commission or its successor, the Department of Public Works.

It is obvious that upon this appeal we could not safely pass upon an issue raised upon an affidavit and not shown in the bill. The temporary injunction was denied and the bill was dismissed by the District Court on the same ground as that explained at length in the Pacific Telephone & Telegraph Company. For the same reasons as therein stated, we must dismiss the appeal in No. 539 as merged in No. 790, and reverse the District Court in the latter appeal, and remand the case for further proceedings, when, upon answer and the merits, the effect of the ordinance referred to and other questions raised in the affidavit can be fully considered.