Williams v. Citizens Gas Co.

Decision Date22 December 1933
Docket Number26,163
Citation188 N.E. 212,206 Ind. 448
PartiesWilliams v. Citizens Gas Company et al
CourtIndiana Supreme Court

From Marion Superior Court; Clarence E. Weir, Judge.

Action by Allen G. Williams, a resident taxpayer of the City of Indianapolis, in behalf of himself and others similarly situated, against Citizens Gas Company and others. From a judgment for defendants, plaintiff appealed.

Affirmed.

William V. Rooker, for appellant.

James M. Ogden, Attorney-General, George W. Huffsmith, Deputy Attorney-General, Edward H. Knight, James E. Deery, William H. Thompson, Albert L. Raab, Thomas D. Stevenson, Louis B Ewbank, Samuel Dowden, Charles Remster, Henry H. Hornbrook Albert P. Smith, Paul Y. Davis, Kurt F. Pantzer, and Ernest R. Blatzell, for appellees.

OPINION

Treanor, J.

The nature of the suit which gives rise to this appeal is as follows:

"Suit by appellant to establish a trust; to quiet title to property of the trust estate; to recover diverted assets of the trust estate; to recapture the trust and its property from delinquent and insolvent trustees and sequester the same with receiverships; to administer the trust during an emergency and at the end of the emergency turn over the trust and its property to its lawful beneficiaries.

"Allen G. Williams, the plaintiff and appellant, appears as a resident and taxpayer of the City of Indianapolis, suing in the right and behalf, and for the use and benefit, of himself and of all other residents and taxpayers of said City, similarly situated, any of whom may join as plaintiffs and appellants herein.

"The property involved in the suit is all the property devoted to the manufacture, sale, and distribution of artificial gas, and its by-products, in the Indianapolis territory.

"The asserted trust is a public charitable trust, created in 1905, whereby, upon the performance of certain stated conditions, the inhabitants and residents of Indianapolis, through the agency of their City, as trustees, were to become the beneficial owners of the gas property, at the end of twenty-five years, as an assurance of cheap fuel and light." (Appellant's Brief, pp. 2 and 3).

The errors relied upon are (1) the action of the trial court in sustaining a motion to strike out certain allegations of the plaintiff's complaint and (2) the sustaining of a demurrer to the complaint.

The allegations which were stricken out are as follows:

"That thereupon it was designed by said confederates that a Public Service Commission should be created in and by the State of Indiana with plenary powers to circumvent the Constitutional restrictions of the State and by those means destroy said Public Charitable Trust and substitute in its place and stead a plan and method whereby said Citizens Gas Company should be required to bear the burden of replacing said Indianapolis Gas Company as a going concern, invested with modern and efficient methods, all to the end that upon the termination of an alliance between said Citizens Gas Company and said Indianapolis Gas Company, the latter Company would be in exclusive control of the territory of Indianapolis for all purposes of gas production and sale, and all without cost and expense to said conspirators but wholly at the cost and expense of the inhabitants and taxpayers of said City of Indianapolis."

Appellant's case, as made by his complaint, is a "recapture case. The property sought to be recaptured is the operating franchise, the physical property and the earnings of the Citizens Gas Company of Indianapolis, Indiana . . . ancillary to the quiet title suit there is an application for a receiver." (Appellant's Reply Brief, p. 1) Appellant questions:

(1) The constitutionality of the Shively-Spencer Act. (Acts of 1913, ch. 76, p. 167, § 12672 et seq., Burns Ann. Ind. St. 1926; § 54-107 et seq., Burns 1933, § 13905 et seq., Baldwin's 1934).

(2) The validity of the lease entered into between the Citizens Gas Company and the Indianapolis Gas Company.

(3) The validity of the action of the Public Service Commission in approving the aforesaid lease.

(4) The validity of the action of the Citizens Gas Company in surrendering its franchise and accepting in lieu thereof an indeterminate permit from the Public Service Commission.

It is true that this Court has not declared expressly that the Shively-Spencer Act is constitutional; but numerous decisions assume its constitutionality and this assumption entered into the reasoning upon which these decisions rested. It is no longer seriously questioned that the legislative branch of government of the various states of the United States has the power to regulate the conduct of all enterprises which are affected with a public interest. [1] This proposition was clearly enunciated in Winfield v. Public Service Commission (1917), 187 Ind. 53, 60, 118 N.E. 531, in the following statement:

"The state's power of control of such matters is one of the elements of the state government, in the exercise of which the people are represented by the legislature. This element of government is commonly called the state's police power, and in the present case applies to the general interest of the citizens of the state in proper public service. The state may deprive itself of the power to exercise this power by granting directly to the public service companies in charters, or by franchises, freedom from the exercise thereof; but, inasmuch as such grant of freedom is in derogation of common right, it is never presumed to have been made by the state, and the state will not be held to have abandoned the right to exercise its police power, unless the state's intention so to do is expressed in terms so clear and unequivocal as to exclude doubt; and if doubt exists it must be resolved in favor of the state. . . .
"Except where the state has thus irrevocably, either directly or indirectly, divested itself of the right to so exercise its police power, the state may, for the public good, regulate the acts and conduct of the public service companies, and the most frequent call for such regulation relates to charges of such companies for their public service; the principle underlying such regulation being that the charges for service shall be fair and reasonable, all things considered, and that the rate fixed shall not be so low as to deprive the company of means of adequate service, nor so high as to unduly burden the public."

In the opinion in the foregoing case this court assumed that the General Assembly could regulate either by direct legislation or by creating a commission with power to regulate individual utility companies, (Winfield v. Public Service Commission, supra, pp. 68, 69) under general legislative standards. All that was said in that opinion in support of the policy of regulating through an administrative body we thoroughly approve and now expressly hold that the method of regulation adopted in the Shively-Spencer Act is constitutional. Appellant urges that the Act violates the principle of "home rule." We cannot see that regulation of public utilities by a state commission is more violative of the principle of home rule than direct and detailed statutory regulation. There is no express provision in the Constitution securing "home rule" in regulation of public utilities and we find no basis in the provisions covering other subjects for a necessary implication of the reservation of any such local power. Further, the decisions of this court expressly deny the existence of any local power of regulation except through delegation by the General Assembly. In City of Richmond v. Richmond Nat. Gas Co. (1907), 168 Ind. 82, 79 N.E. 1031, it was held that a statute which authorized a municipality to fix prices of gas "by contract or franchise" did not confer power to regulate price by ordinance. The earlier case of Lewisville Natural Gas Co. v. State ex rel. Reynolds (1893), 135 Ind. 49, 34 N.E. 702, held that a statute providing "that the boards of trustees of towns, and the common councils of cities, in this State, shall have power to provide by ordinance, reasonable regulations for the safe supply, distribution, and consumption of natural gas within the respective limits of such towns and cities, and to require persons or companies to whom the privilege of using the streets and alleys of such towns and cities is granted for the supply and distribution of such gas to pay a reasonable license for such franchise and privilege" (Acts of 1887, ch. 20, p. 36) did not authorize a municipality to regulate the price of gas by ordinance. In so holding, the still earlier case of City of Rushville v. Rushville Natural Gas Co. (1892), 132 Ind. 575, 28 N.E. 853, was overruled. But even in this earlier case this court treated the power to regulate price as having been conferred by the statute above quoted. We conclude that there is no constitutional reservation, express or implied, of home rule or local self-government, which is violated by the Shively-Spencer Act.

Appellant also urges that the power of granting indeterminate permits to furnishers of public utilities violates § 13 Art. 11 of the Indiana Constitution, which forbids the creation of corporation, other than banking, by special legislative act. Under the Constitution of 1816 the General Assembly created corporations by special acts which frequently not only gave legal personality but also specifically authorized the corporations thus created to engage in the business of furnishing public utilities. The special acts also frequently included special regulations of facilities and rates. [2] In such cases the General Assembly was exercising two powers in one legislative act, (1) the power to create an artificial legal person, and (2) the power to regulate a public utility the...

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