United Gas Public Service Co. v. State

• Decision Date: 30 October 1935
• Docket Number: No. 8176.,8176.
• Citation: 89 S.W.2d 1094
• Parties: UNITED GAS PUBLIC SERVICE CO. v. STATE et al.
• Court: Texas Court of Appeals

89 S.W.2d 1094

UNITED GAS PUBLIC SERVICE CO. v. STATE et al.

No. 8176.

Court of Civil Appeals of Texas. Austin.

October 30, 1935.

Rehearing Denied January 8, 1936.

Appeal from District Court, Travis County; C. A. Wheeler, Judge.

Suit by the State and others against the United Gas Public Service Company. From the judgment, defendant appeals, and plaintiffs cross-appeal.

Judgment reformed, and, as reformed, affirmed.

Baker, Botts, Andrews & Wharton, Tom Scurry, and F. G. Coates, all of Houston, and Mann & Mann, of Laredo, for appellant.

Wm. McCraw, Atty. Gen., Scott Gaines and Alfred M. Scott, Asst. Attys. Gen., Hicks, Dickson & Lange and Edward H. Lange, all of Laredo, and A. R. Stout, of Houston, for appellees.

BLAIR, Justice.

In February, 1909, the city of Laredo granted certain individuals a 25-year franchise to construct and operate a natural gas distribution system in said city. The franchise and all rights thereunder were acquired by appellant through the mesne conveyances of several predecessors. The ordinance and some of the orders and proceedings here involved occurred before appellant acquired the franchise; but it is bound by them, and will be considered as having owned and operated the franchise at all times.

From the year 1921 to December, 1931, the natural gas rate for domestic use in Laredo was 75 cents per M.C.F., with 10 per cent. discount if bill was paid within 10 days from date, and with a minimum monthly bill of $1 per customer. On December 15, 1931, the city of Laredo, a home rule chartered city, acting under the authority given by article 1175, R.S. 1925, by ordinance fixed the natural gas rate for domestic use at 40 cents per M.C.F., with 10 per cent. discount if bill was paid in 10 days, and with a minimum monthly bill of $1 per customer; the ordinance providing that the rate would be effective from January 1, 1932. An appeal under article 6058, R.S. 1925, was perfected from the ordinance to the Railroad Commission. Appellant filed a bond in the sum of $20,000, conditioned that it would refund any excess rates over the rates finally determined to be fair and reasonable. Pending said appeal, appellant filed an application for an increase of the 75-cent domestic rate, which was not acted upon by the city of Laredo because of the pendency of the matter before the commission; and thereafter appellant perfected an appeal, based on this application, to the commission, filing a bond conditioned as the one in the first appeal. The commission consolidated the two appeals, heard them on their merits, and on June 13, 1933, promulgated its order fixing the natural gas rate for domestic use at 55 cents per M.C.F., with minimum monthly bill of $1 per customer. The order provided for a 10 per cent. penalty if bill was not paid within 10 days from date, provided that the 55-cent rate would be effective from January 1, 1932, and further provided that appellant refund to the customers the difference in the amount collected after January 1, 1932, under the 75-cent rate and the 55-cent rate; appellant having continuously collected the 75-cent rate.

On June 29, 1933, appellant filed its bill in equity in the federal District Court, naming the members of the Railroad Commission, the Governor, the Attorney General, and the city of Laredo and its governing officials as defendants, seeking to restrain them from enforcing the 55-cent rate pending a hearing of the matter by a statutory federal court of three judges, alleging that, because the 55-cent rate would not afford appellant a reasonable return on the fair value of its property used in the public service, the rate order was confiscatory and in violation of the just compensation, the equal protection, and the due process clauses of the Federal Constitution.

On July 26, 1933, appellees, the parties named as defendants in appellant's suit in the federal court, filed this suit in the district court of Travis county, alleging that appellant had filed its aforementioned bill in equity in the federal court, and that appellees brought this suit in the nature of an appeal under the terms of article 6059, R.S. 1925, but that "such appeal is not taken because plaintiffs (appellees) are dissatisfied with the rates and charges prescribed in the Commission's said order, but primarily for the purpose of protecting the jurisdiction of the court and its venue to hear and finally determine the matters in controversy, and to enforce the said order, if it should be deemed to be valid upon final hearing," which order appellant was alleged to have continuously violated since its promulgation; and prayer was that appellant be enjoined from charging or collecting any rates for natural gas in excess of the 55-cent rate fixed by the commission, and that the city of Laredo recover for the consumers the difference in the amount collected under the 75-cent rate and the 55-cent rate. Appellees also requested that, pending the final determination of the cause, an order be entered staying all proceedings by the commission or city of Laredo in the collection of the 55-cent rate, which order was entered by the state district court on the date the petition was filed.

On August 1, 1933, appellant and appellees appeared before the statutory three-judge federal court, and appellees' motion to stay all proceedings in that cause until final disposition of the Travis county district court cause was granted; the statutory federal court also enjoined the enforcement of the 55-cent rate, "pending the final disposition of the cause" in the state district court. On the date of this stay order by the three-judge court, appellant filed its petition in the federal District Court, praying for the removal of the cause from the state to the federal court. Appellees answered with a motion to remand the cause to the state court; which motion was granted.

In the state court appellant filed an answer, attacking the 55-cent rate, alleging that the rate order was based on assumption contrary to the facts with regard to the average annual revenues of appellant, and was therefore not supported by any evidence, and that, because the 55-cent rate did not yield a net return of 7 per cent. per annum from January 1, 1932, down to the date of the trial (in April, 1934), and would not yield a reasonable return on the fair value of the property used in the public service, the rate order was therefore unjust and unreasonable and confiscatory and in violation of the just compensation, the equal protection, and the due process clauses of both the State and Federal Constitutions; and prayer was that the appellees be restrained from enforcing the alleged void order.

Under the pleadings and proceedings, the suit filed by appellees in the district court of Travis county was merely one to bring appellant within the jurisdiction of the state court as provided for by section 266 of the Judicial Code of the United States (28 U.S.C.A. § 380), in order to determine the validity of the 55-cent rate; and the amended answer of appellant therein, seeking to enjoin the enforcement of the 55-cent rate, was in effect an appeal by it under article 6059, to determine whether the rate order was unjust and unreasonable as to appellant, and to determine the additional question of whether the enforcement of the rate would result in confiscation of appellant's property used in the public service, rendering the rate order unconstitutional. Upon the issues thus joined in the state court, a trial was had to a jury. The court's charge consisted of definitions and instructions and the following special issue: "Do you find that the order of the Railroad Commission of Texas bearing date June 13, 1933, providing for a $0.55 gas rate to residential consumers within the City of Laredo, Texas, under the facts introduced in evidence before you, is unreasonable and unjust to defendant United Gas Public Service Company? Answer this question `Yes' or `No.'"

The jury answered the issue "No." Accordingly, the judgment enjoined appellant from charging rates in Laredo in excess of the 55-cent rate fixed by the commission until changed by the commission or other authorized authority, dissolved the stay order of June 26, 1933, and provided for a suspension of the judgment upon the perfecting of an appeal and the filing of a supersedeas bond in the sum of $30,000. The judgment declared the commission's order fixing the 55-cent rate to be valid, except that portion making the 55-cent rate effective from January 1, 1932, and for a refund of the difference between the 75-cent rate and the 55-cent rate, but without prejudice to any rights for the collection of such difference in rates should the 55-cent rate be held valid on appeal. Appellant has appealed from the portion of the judgment enjoining it from charging in excess of the 55-cent rate, and has filed a supersedeas bond. Appellees have appealed from the portion of the judgment denying a recovery of refunds.

Appellant briefs the appeal in two parts. In "Part I" and by propositions 1 to 10, appellant seeks to have the judgment below reversed and judgment rendered for it. In "Part II" of the brief and by propositions 11 to 79, appellant contends that the judgment should be reversed and the cause remanded, because of several alleged errors of practice.

We have reached the conclusion that appellant not only failed to establish its claim for reversal and rendition of judgment in its favor, but that, when viewed in the light of the presumption in favor of the validity of the commission's rate order and of the quantum and character of proof required to overcome such presumption, the evidence adduced was insufficient, as a matter of law, to show that the 55-cent rate order was either unjust and unreasonable or confiscatory. In view of this conclusion, all questions of practice presented in "Part II" of the brief go out of the case.

The commission found in its rate order that the fair value of appellan...