Yezioro v. North Fayette County Municipal Authority

Opinion by

Rhodes, P. J.,

This is an appeal by the North Fayette County Municipal Authority1 from a final decree of the Court of Common Pleas of Fayette County enjoining and restraining the authority from discontinuing water service to several consumers.

On December 2, 1957, several individual consumers instituted a complaint in equity against the authority and against the School District of North Union Township under section 4 of the Municipality Authorities Act of May 2,1945, P. L. 382, as amended by the Act of October 7, 1955, P. L. 671, 53 PS §306 B (h). The consumers sought to compel the authority to continue to provide water service to them through a water line owned by the school district to which their individual service lines are connected.

The controversy arose when the school district requested the authority to discontinue service to the school building supplied by the school district line. The authority proposed to discontinue service to the individual consumers as well, unless one or all of them accepted responsibility for the line previously controlled by the school district. The individual consumers refused this responsibility. The present action was instituted to forestall the impending cessation of service.

The school district line was constructed in 1927 to provide water to the Youngstown School. The line runs for a distance of approximately 1,500 feet from the Youngstown School to its point of connection with a distribution main of the authority. Near the point where the school district line connects with the distribution main a meter was installed to measure the water supplied to the school district. At the time of this connection the water company was privately owned. At various times from 1952 through 1954 the school district granted permission to several individuals to tap on the school district water line, and the private water company provided this service upon separate applications of the consumers. The water company metered the consumption of the various individuals with one exception. The individual consumption was deducted from that registered on the school district meter to determine the consumption billed to the school district.2 The individuals paid for the water metered at their premises.

In May, 1956, the school district requested the authority to discontinue service to its private line, and the authority notified the individual consumers that it would discontinue service unless one or all of them assumed the responsibility for the private line. Pending possible settlement of the matter the school district withdrew its request for discontinuance of service, but reinstated it on December 1, 1957. The consumers then instituted this action to enjoin the school district and the authority from discontinuing their water service.

The consumers also sought by their complaint to have the school district transfer the water line to the authority and to have the authority maintain and repair the line.

After hearing, the court filed an extensive adjudication in which it made findings of fact, discussed in detail the merits and contentions of the parties, and arrived at conclusions of law. The case was treated as one involving an attempted abandonment of service by the authority. The court concluded that the legal requirement of reasonable and adequate service compelled the authority to continue supplying water to the consumers by means of the existing school district line, and that a meter was to be installed to measure the consumption at the Yezioro residence which previously had not been metered. Accordingly, a decree was entered enjoining the authority from discontinuing the service.

The school district filed a consent of record to the continuing use of its water line for the benefit of these consumers and other members of the public upon condition that the school district should not be liable for the payment of any Avater or for the cost of maintenance, repair, upkeep, or replacement. The Yezioros filed their consent to the installation of a meter on their premises.

The exceptions to the adjudication filed by the authority were dismissed and a final decree entered. This appeal followed.

On this appeal the authority contends (1) that the authority is not under obligation to continue furnishing water to individual consumers through a privately owned Avater line which is no longer used to render service to the owner of the line; (2) or that, assuming the obligation to continue rendering service exists, the court erred in this case in requiring the continuation of service through a pipe line alleged by the authority to be inadequate, in poor condition, and not economically feasible to replace.

A municipality or municipal authority owning and operating a water system acts in a proprietary rather than governmental capacity. In the ownership and operation of such facilities it stands on the same basis as a private corporation. Hamilton’s Appeal, 340 Pa. 17, 20, 21, 16 A. 2d 32. A municipal authority has the privilege of fixing and receiving reasonable and uniform rates for the service which it provides, and it has the obligation to render adequate, safe, and reasonable service. Hamilton’s Appeal, supra, 340 Pa. 17, 20, 21, 16 A. 2d 32; Act of May 2, 1945, P. L. 382, §4, as amended by the Act of October 7, 1955, P. L. 671, 53 PS §306 B (h). The purpose of the Legislature in authorizing the creation of a municipal authority was “to benefit the people of the Commonwealth by, among other things, increasing their commerce, health, safety and prosperity, . . .” Section 4 A of the Municipality Authorities Act of 1945, as amended, 53 PS §306 A. By an amendment of 1955,3 the authority is given the power “to determine by itself exclusively the services and improvements required to provide adequate, safe and reasonable service, including extentions thereof, in the areas served: . . . Any person questioning the reasonableness or uniformity of any rate fixed by any Authority or the adequacy, safety and reasonableness of the Authority’s services, including extentions thereof, may bring suit against the Authority in the court of common pleas of the county wherein the project is located, . . . The court of common pleas shall have exclusive jurisdiction to determine all such questions involving rates or service.”4 The burden of proving that the services of the authority are not adequate, safe, and reasonable appears to rest upon the consumers bringing the action in the court of common pleas. Rankin v. Chester Municipal Authority, 165 Pa. Superior Ct. 438, 449, 68 A. 2d 458.

What amounts to adequate, safe, and reasonable service is generally not capable of definition with precision. The duty of the hearing tribunal is to determine, from all the relevant facts and circumstances indicated by the substantial evidence, whether the service provided is adequate, safe, and reasonable for the consuming public. Colonial Products Company v. Pennsylvania Public Utility Commission, 188 Pa. Superior Ct. 163, 169, 170, 146 A. 2d 657.

The consumer complaint in this case is not the usual type service complaint in the sense that the existing service is not alleged to be inadequate or unreasonable; rather, it relates to the complete discontinuance and abandonment of the existing service with which the consumers are apparently satisfied. Although the Municipality Authorities Act, in section 4, 53 PS §306, makes no specific reference to abandonment of service, the issue of the abandonment of service may properly be raised in a complaint questioning the adequacy and reasonableness of the authority’s service as outlined in the Act.

It is clear that the authority is not relieved of its obligation to provide service to these consumers simply because the private line to which they are connected is no longer used to serve the owner of the line. As the court below found, when the authority acquired, in April, 1956, the franchises, equipment, and other assets of the private water company, it assumed all the contracts and obligations to supply water to consumers in the area served by the predecessor company. That obligation did not cease merely because the school district no longer desired water service at the Youngstown School. The private line of the school district, while remaining its private property and not the property of the predecessor water company or the authority, was and is nevertheless a facility of the water company and the authority in so far as the consumers who have been permitted to obtain water from this line are concerned. Overlook Development Company v. Public Service Commission, 101 Pa. Superior Ct. 217, 224. The obligation of the authority to continue rendering service to the consumers on this line does not depend upon the authority’s ownership of the line, but does arise from the obligation of the predecessor water company acquired by the authority and from the fact that, as to these consumers, the private line is a facility of the authority. The court below properly concluded that the private ownership of the line is not, in itself, an excuse for the cessation of providing adequate service so long as the line remains available for use by the authority in furnishing service to these consumers. As we have indicated, the school district has filed a consent of record permitting the use of this line not only by these consumers but by the general public as well. See Overlook Development Company v. Public Service Commission, supra, 101 Pa. Superior Ct. 217, 225.

The exonerative language in the service applications made by the consumers to the predecessor utility cannot be held to mean that the predecessor utility could have discontinued the service then, or that the authority may discontinue the service now, in its sole discretion. The abandonment of service may not depend solely upon private agreements. See Wattsburg Telephone Cooperative Association v. Pennsylvania Public Utility Commission, 182 Pa. Superior Ct. 591, 600, 128 A. 2d 160.

Since the abandonment of service cannot be justified solely on the basis of the private nature of the line, we turn now to a review of the court’s determination that on the facts of the case the cessation of service would deprive the consumer of adequate and reasonable service contrary to the provisions of the statute.

The decree enjoined the authority from discontinuing the existing service to the plaintiff consumers, but it did not require the authority to acquire ownership of the school district line.

The net effect of the court’s decision was to require the authority to continue rendering the same service as it had rendered in the past with the sole exception that the line losses, determined upon the present state of the record to be de minimis or not so substantial as to warrant abandonment of service, shall be absorbed by the authority rather than the school district, at least until actual experience proved the loss was significant. In this regard, it was ordered that the school district master meter be retained in order that the actual amount of line loss could be determined. The court retained jurisdiction of the case for the purpose of ascertaining what repairs or replacements should be made in the event that .the line loss or leakage becomes excessive or the line unserviceable.5

The authority engineer testified that the water unaccounted for, presumed due to line losses or leaks, amounted to 84 per cent in the first quarter of 1958. An exhibit prepared by the engineer purported to indicate that the leaks or line losses were 53 per cent in 1956, and 76 per cent in 1957. The line loss, however, could not be determined with certainty, as the court below found, because of the fact that the Yezioro residence did not have a meter to determine its consumption. We note that the water authority engineer testified that the authority has equipment which would locate the place or places of leakage with some degree of certainty, but that such tests had not been made in the past because the authority did not own the line. The engineer also stated that “normal” line loss or leakage in the average water works system is from ten per cent to twenty-five per cent and is passed on to the consuming public as a cost of production. We think it was proper, under the circumstances, for the court below to hold in abeyance the question of whether the actual leakage ivas unduly excessive and whether the line was actually unserviceable. Certainly the line did not become unserviceable simply because the school district no longer takes water at the Youngstown School.

The court found that requiring the authority to continue this service did not result in a loss sufficient to overcome the duty of rendering service.

In arriving at this conclusion the court considered our statement in Commuters’ Committee v. Pennsylvania Public Utility Commission, 170 Pa. Superior Ct. 596, 604, 605, 88 A. 2d 420, concerning the criteria determinative of the propriety of an abandonment of service and certain of the factors to be considered. These include the extent of the utility’s loss in the particular portion of the service sought to be abandoned and the relation of that loss to the utility’s total operation; the use of the service by the public and the prospects as to future use; a balancing of the utility’s loss with the inconvenience and hardship to the public upon discontinuance of the service; and the availability and adequacy of the service to be substituted. The ultimate test is whether the loss to the utility is unreasonable under all the circumstances, giving due regard to the interests of the public as well as the utility.

On the basis of exhibit 14, submitted by the authority, the court noted that the authority’s production and transmission costs per consumer average $7.72, and that for the four consumers here involved they total $30.88, as compared with the estimated revenues from service to these consumers of $130.04. This appears to have been the only evidence of the cost of service in the record. The court therefore concluded, for purposes of this case, that there would be no loss sufficient to justify abandonment of the service.

The court further found that for the year ending March 31, 1958, residential service provided revenues of $202,075 out of total operating revenue of $311,060; operating expenses were $153,088, leaving $157,972 for debt service and other funds established under the trust indenture. It is noted that the operating expenses of the authority are lower than the amount available for debt service and other funds under the trust indenture. Any loss or decrease in revenue to the authority in assuming the leakage and line loss on the school district line could formulate no good reason for the complete abandonment of service to these consumers, at least until the amount was definitely ascertained, the leaks located, and the actual serviceability of the line determined.

As we have indicated, the court in this proceeding did not direct the authority to acquire ownership of the school district line or to permanently assume the obligation of maintenance, repair, or replacement of the line. Such obligations do not arise as a necessary implication of the court’s decree. These matters were left open for hearing and determination when the matter of repair, maintenance, and replacement of line becomes material.

In this regard we observe that the principal purpose and the obligation of the municipal authority acting in a proprietary capacity are to render adequate, safe, and reasonable service to the consuming public for which it is permitted to charge reasonable and uniform rates. Generally the making of repairs and improvements to meet the duty to render adequate, safe, and reasonable service is upon the utility. While in proper cases such repairs and improvements may be ordered, even though the immediate result thereof would be a financial loss therefrom to the utility, consideration may be given to the attitude of the particular consumers involved toward participation in the cost of the improvements, particularly where the service in general is reasonably adequate and the demands of the particular consumer are unusual or extraordinary. Colonial Products Company v. Pennsylvania Public Utility Commission, supra, 188 Pa. Superior Ct. 163, 172, 173, 146 A. 2d 657. See Riverton Consolidated Water Company v. Public Service Commission, 105 Pa. Superior Ct. 6, 11, 159 A. 177.

The authority argues that, since the statute provides initially that the authority is given the power to determine “by itself exclusively the services and improvements required to provide adequate, safe and reasonable service, including extentions thereof,” the court below could only review the authority’s action to determine whether it was the result of bad faith, fraud, caprice, or amounted to an abuse of discretion. The case of Blumensehein v. Pittsburgh Housing Authority, 379 Pa. 566, 572-574, 109 A. 2d 331, is cited. The Blumensehein case involved the review of a housing authority’s exercise of discretion in choosing the location of a site for a public housing project. In our opinion that situation is not analogous to the determination of the adequacy and reasonableness of the utility service rendered by a water authority. The authority, the same as any public utility, acts in a proprietary capacity and exists for the essential and prime purpose of rendering adequate, safe, and reasonable service to the consuming public. The statute so provides. See Hamilton’s Appeal, supra, 340 Pa. 17, 16 A. 2d 32; Reigle v. Smith, 287 Pa. 30, 134 A. 380. The determination of adequate, safe, and reasonable service is not a matter of discretion; it is a factual and legal determination based upon consideration of the particular facts and circumstances of the service desired, rendered, proposed, or abandoned. Colonial Products Company v. Pennsylvania Public Utility Commission, supra, 188 Pa. Superior Ct. 163, 169, 170, 146 A. 2d 657. Administrative discretion and policy are no substitute for substantial evidence; discretion and policy alone provide no sound reason for the avoidance of such a primary obligation as the rendering of adequate, safe, and reasonable service. Aizen v. Pennsylvania Public Utility Commission, 163 Pa. Superior Ct. 305, 316, 60 A. 2d 443. The statutory provision to the effect that the services provided by the authority are to be determined “by itself exclusively” must certainly have been intended to make it clear that the authority itself, not the creating municipality or some other instrumentality, controlled the initial determination of the service. But it cannot be held to mean that the court of common pleas may not make a determination of the adequacy and reasonableness of the service by application of the usual considerations and standards when the court is called upon to do so as specifically provided in the Act. See Ridley Township v. Pennsylvania, Public Utility Commission, 172 Pa. Superior Ct. 472, 478, 94 A. 2d 168. The Act provides that any person may question the adequacy, safety, and reasonableness of the authority’s services, in which event “The court of common pleas shall have exclusive jurisdiction to determine all such questions involving rates or service.” Consequently, since a consumer may question the adequacy, safety, and reasonableness of the authority’s service, it necessarily follows that the court of common pleas, in which the consumer’s suit is brought, has the power to inquire into the adequacy, safety, and reasonableness of the service in issue. To hold otherwise would be to nullify the right to bring suit given by the Legislature to the consumer.

In this case the court exercised its statutory duty. It considered the facts and circumstances indicating the reasonableness or unreasonableness of the abandonment of service to these consumers. The court did not simply substitute its discretion for the discretion of the authority. From all the evidence the court properly concluded that the proposed abandonment of service was unreasonable. Even if the abandonment of service were principally a matter of discretion, the facts and circumstances of this case demonstrate that the cessation of service would amount to an abuse of discretion and result from an arbitrary execution of the authority’s principal duty and function.

Moreover, what the authority engineer considered “good water works practice” cannot control the determination of this case. In the exercise of the duty of determining the adequacy and reasonableness of service, the court below was not bound to accept as a criterion of adequate, safe, and reasonable service the standard suggested by any particular participant in the proceeding. Colonial Products Company v. Pennsylvania Public Utility Commission, supra, 188 Pa. Superior Ct. 163, 170, 146 A. 2d 657.

The decree of the court below is affirmed subject to the retention of jurisdiction by that court; appellant to pay the costs.

1 Organized under the Municipality Authorities Act of May 2, 1945, P. L. 382, as amended, 53 PS §301 et seq.

2 In October, 1952, the school district granted permission to D. L. Matthews, one of the plaintiffs, to tap onto the school district water line. Matthews applied for and was granted service by the private water company. Matthews constructed a line approximately 525 feet long from his residence to the Youngstown School. In October, 1954, Matthews granted permission to Joseph Cabot to obtain water from Matthews’ private line for use in a storeroom occupied by the plaintiff Yezioro. This plaintiff applied for and was granted water service by the private water company. In October, 1954, the school district also granted permission to Joseph Oabot to tap onto its private line to supply water to premises now occupied by plaintiffs Steve Utlack and Jennie Utlack. This line runs from the premises a distance of approximately 745 feet to its point of connection with the school district’s line, and the application for this service was granted by the private water company. The plaintiffs Walter and Thelma Yezioro also receive water at their residence through a line near the Youngstown School. They have no meter, and apparently this connection was made without application to the authority or its predecessor private utility company. The water used in the past in these premises has therefore been paid for by the school district.

3 Act of October 7, 1955, P. L. 671, 53 PS §306B(h).

4 Prior to tbe present Municipality Authorities Act, municipally owned water companies were subject to tbe regulation and control of tbe courts of common pleas under tbe court’s broad chancery powers. Shirk v. Lancaster City, 313 Pa. 158, 166, 169 A. 557. “The action of tbe municipal board [water board] is subject . . . to tbe control of tbe courts where it discriminates or acts unreasonably ..., as is a private water company to tbe orders of tbe Public Service Commission.” Reigle v. Smith, 287 Pa. 30, 35, 134 A. 380, 381.

5 The court said.: “The Court wiU retain jurisdiction of the ease for the purpose of determining what is proper in the event that this leakage should appear to be unduly excessive, or if the lines become unserviceable. At the present time, the Court is inclined to regard this loss as one to which the rule de minimis applies, or at least as one which has not been shown to be so substantial as to warrant abandonment or cessation of service.”