Pacific Telephone & Telegraph Co. v. Public Utilities Commission

PETERS, J., Concurring and Dissenting.

I agree with the basic determinations in the majority opinion, but I disagree with what is there said about the propriety of excluding philanthropic contributions from Pacific’s operating expenses. From that portion of the opinion I dissent.

The philanthropic contributions here involved include gifts to united funds, community chests, and to the Red Cross, contributions to colleges and universities, to hospitals, and *678 to various cultural societies. The sums involved were clearly reasonable, under the circumstances, and there is no finding that they did not benefit the corporation, and its ratepayers.

The majority opinion states that such contributions for the test year amounted to $702,000. The commission allowed $305,000 of this sum as an operating expense. Thus, the only question presented to this court was the propriety of that allowance. The majority of this court held only that Pacific could not challenge the propriety of that allowance on the ground that it was too small. But both the commission and the majority then went on to decide an issue not before them. In its opinion, the commission stated that it was putting Pacific on notice that in the future it shall be the policy of the commission to exclude all such contributions from operating expenses. How the allowance of $305,000 as part of those expenses for the test year can be justified if the threatened future policy is legally sound, which it is not, does not appear. In any event, once the commission had decided to allow the $305,000 as an operating expense the proposed future policy of the commission was not in issue. Yet the majority opinion and the concurring opinion of Mr. Justice Mosk go out of their way to approve this gratuitous statement of future policy. These holdings, both of the commission and of this court, amount to no more than advisory opinions on an issue not properly before the commission or this court. In California such advisory opinions are not permissible, and are quite dangerous to the law. Moreover, in this case, the advisory opinions are, I believe, unsound.

What is or is not a proper operating expense is a question of fact, or a mixed question of fact and law. Here the only evidence on the issue was to the effect that such contributions were reasonable in amount and purpose, that they were of a value, in excess of the expenditures, to the corporation and its ratepayers, and under present concepts of corporate responsibility, both public and private, were reasonably required. Thus a question of fact—benefit to the ratepayers —was presented to the commission. It made no findings on the issue as required by section 1705 of the Public Utilities Code. (See also California Motor Transport Co. v. Public Utilities Com., 59 Cal.2d 270 [ 28 Cal.Rptr. 868 , 379 P.2d 324 ], and Associated Freight Lines v. Public Utilities Com., 59 Cal. 2d 583 [ 30 Cal.Rptr. 466 , 381 P.2d 202 ].) Had findings been made, in view of the uncontradicted evidence on the issue, they would have had to be to the effect that such contributions *679 were of real benefit to the ratepayers, and the conclusion would have been inevitable that they were a proper business and operating expense.

In place of findings on this issue, all that appears in the commission’s opinion is an argument to the effect that such contributions are improper because they constitute “an involuntary levy on the ratepayers.” Of course, all corporate expenditures, properly approved, constitute such a levy. The real question is not whether they are an “involuntary levy,” but whether such expenditures are of economic benefit to the ratepayers and are reasonable in amount and purpose.

The arguments contained in the commission’s opinion, and in the majority and concurring opinions of this court, are necessarily based on the outmoded concept that philanthropic contributions, whether by a public or private corporation, are not for a corporate purpose, and are ultra vires. California has expressly repudiated this outmoded concept as to private corporations. Section 802, subdivision (g), of the Corporations Code provides that every corporation may “Make donations for the public welfare or for charitable, scientific, or -educational purposes.” (See Notes 3 A.L.R. 443 , 39 A.L.R.2d 1192 , 50 A.L.R.2d 447 .) This section embodies the modern concept of corporate responsibility.

It is no answer to say, as do the majority and concurring opinions, that public corporations may make such contributions under section 802, subdivision (g), supra, and charge them to their stockholders, but cannot charge them as an operating expense. Obviously, disallowing such contributions as an operating expense will necessarily diminish the amount of such contributions, and will correspondingly lessen the assumption by such corporations of their corporate responsibilities, to the detriment of the community, of the corporation and its ratepayers.

No blanket rule prohibiting all such expenditures as operating expenses, regardless of their nature and purpose, should be approved. The determination of whether such expenditures are a proper operating expense should only be made after a proper consideration of the nature and purpose of the expenditure, and whether, in fact, it benefits the ratepayers and the corporation. This is the view expressed by many state commissions and courts as referred to in the briefs.

In our society, private charities are the recognized vehicle for handling many community problems. Most private charities operate, at least in part, with volunteers, at a cost to *680 the community far less than would be required if government, with its paid workers, undertook this obligation. Private charities are largely dependent on private and public corporate contributions. Aside from the social responsibility of such corporations to make such contributions, it seems obvious that encouraging and helping to support such charities is of real economic benefit to the corporations involved, and to the ratepayers of public corporations. Certainly, as a pure business proposition, it is more economical for a public corporation to support private charities than it would be if the corporation had to pay increased taxes to support government-operated activities. Of even more obvious benefit to the ratepayers are contributions to educational institutions for scholarships and research, included by the commission and this court under the term ‘ ‘ contributions. ’ ’

Thus, I first object to the court or commission discussing at all the subject of a blanket prohibition against such expenditures, because the issue is not involved. Secondly, I cannot leave unchallenged the gratuitous advisory opinion of the commission and of this court to the effect that not one cent of such expenditures shall, in the future, be included as an operating expense.

The application of petitioner Blincoe for a rehearing was denied May 26, 1965.