Arkansas Louisiana Gas Co. v. City of Texarkana, Ark.

• Court: U.S. Court of Appeals — Eighth Circuit
• Writing for the Court: GARDNER, SANBORN, and THOMAS, Circuit
• Citation: Arkansas Louisiana Gas Co. v. City of Texarkana, Ark., 96 F.2d 179 (8th Cir. 1938)
• Decision Date: 04 May 1938
• Docket Number: No. 10963.,10963.
• Parties: ARKANSAS LOUISIANA GAS CO. v. CITY OF TEXARKANA, ARK., et al.

96 F.2d 179 (1938)

ARKANSAS LOUISIANA GAS CO. v. CITY OF TEXARKANA, ARK., et al.

No. 10963.

Circuit Court of Appeals, Eighth Circuit.

April 13, 1938.

Rehearing Denied May 4, 1938.

COPYRIGHT MATERIAL OMITTED

J. Merrick Moore, of Little Rock, Ark., and William H. Arnold, Jr., of Texarkana, Ark. (Henry C. Walker, Jr., and William C. Fitzhugh, both of Shreveport, La., on the brief), for appellant.

Benjamin E. Carter, of Texarkana, Ark. (Willis B. Smith, of Texarkana, Ark., on the brief), for appellees.

Before GARDNER, SANBORN, and THOMAS, Circuit Judges.

GARDNER, Circuit Judge.

This is an appeal from that part of the decree entered below which sustained a certain schedule of gas rates as not confiscatory. The suit was brought in equity by appellant as plaintiff, to enjoin the enforcement of the gas rates prescribed by the City Council of Texarkana, Arkansas, and to restrain the officers of the city from interfering with the collection of rates promulgated by appellant. It will be convenient to refer to the parties as they were designated below.

The plaintiff owns and operates gas distribution plants at various towns and cities in Arkansas, Louisiana, and Texas. It owns leases and wells in producing gas fields in Eastern Texas, Northern Louisiana, and Northern Arkansas, from which it secures large quantities of natural gas, and it also purchases from other producers. This gas is transported through pipe lines, and delivered to the municipal border delivery stations to be distributed and sold, or is sold directly from its transmission pipe lines to large industrial consumers. Some gas is sold from its transmission pipe lines to serve distribution plants owned by other corporations.

Under the statutes of Arkansas, city councils are given power to regulate rates charged consumers of gas in the cities of that state. In 1923, the City Council of Texarkana, Arkansas, prescribed a rate of 50 cents per thousand cubic feet for the first 100,000 cubic feet or fraction thereof sold in any thirty-day period to any commercial or domestic consumer, and 22 cents per thousand for additional gas. A graduated scale of lower rates was prescribed for industrial consumers. The schedule provided for a 10 per cent. discount upon monthly bills if paid within ten days. This is referred to in the record as the 45-cent rate.

On May 30, 1930, on application of plaintiff, the City Council passed a resolution which made some increases in the rates. Referendum petitions were filed and an election held at which the voters of the city rejected the resolution. On October 23, 1933, plaintiff filed with the City Council an application for a change of rates, and asked that it be permitted to put into effect a sliding scale of rates as follows:

  For the first   1000 cubic feet  $1.75 per thousand
                  For the next    2000 cubic feet    .75 per thousand
                  For the next    7000 cubic feet    .55 per thousand
                  Over           10000 cubic feet    .35 per thousand
                

with an additional 10 per cent. for failure to pay within ten days. Industrial consumers were to be served under special contract, the rates to be mutually agreed upon without discrimination.

On receipt of this application, the City Council, in accordance with the requirements of the Arkansas statute, fixed a time for hearing and gave notice that it would also consider whether or not a reduction in rates should be ordered. Hearings were accordingly held, and on December 22, 1933, the City Council made detailed findings and entered an order or resolution denying the application and declaring the proposed rates unreasonable and exorbitant, and ordered and directed plaintiff to continue the 1923 rates in effect. The hearing was continued for the purpose of further investigation and consideration of the question of reduction of rates.

On February 13, 1934, after further investigation, the City Council ordered plaintiff, after February 25, 1934, not to charge domestic and commercial consumers in excess of 45 cents per thousand cubic feet for monthly consumption up to 100,000 cubic feet, with a discount of 5 cents per thousand on bills paid within ten days. The order contained provision that, "Except as herein modified, the order embodied in the Resolution of December 22, 1933, shall remain in full force and effect." This is referred to in the record as the 40-cent rate, while, as above observed, the rate prescribed in 1923 is referred to as the 45-cent rate.

Plaintiff filed its bill of complaint in this cause on February 16, 1934, alleging, among other things: "That plaintiff is seeking herein to enjoin the defendants from enforcing the orders of the City Council of Texarkana, Arkansas, issued December 22nd, 1933, and February 13, 1934, and from interfering with plaintiff in its realization of proper charges for gas service furnished the consumers of Texarkana, Arkansas, upon the grounds that the said orders" are confiscatory in violation of the Fourteenth Amendment to the Constitution. It asked for a temporary injunction which was issued as prayed, and the court appointed a special master to hear testimony and make report to the court. The master filed his report, in which he found that the 40-cent rate was confiscatory; that the resolution of 1923 would remain in full force and effect unless it was also confiscatory, but that it was confiscatory. Both parties filed exceptions and the master then filed supplements to his report. When the case finally reached the court for decision, it held that both the 40-cent rate and the 45-cent rate were involved; that the former was confiscatory, which left the latter in effect; and that it was valid. It entered decree permanently enjoining the 40-cent rate, but dissolved the temporary injunction so far as it restrained the enforcement of the rate order of December 22, 1933, which was the 45-cent rate.

Plaintiff seeks reversal on six grounds, which may be stated as follows: (1) The court erred in holding that the invalidity of the 40-cent rate left in effect the 45-cent rate of December 22, 1933; (2) the court erred in underallowing depletion, depreciation, and expenses of the production property; (3) the court erred in its apportionment of production and transportation costs; (4) the court erred in striking from expenses the cost of leaked gas in excess of 10 per cent. of the gas purchased for the local plant and in disallowing the increased costs and expenses that would be necessary to attain and maintain the gas leak at only 10 per cent. of the gas purchased for the local plant; (5) the court erred in treating actual revenues as estimates, and in calculating revenues excessively; (6) the court erred in holding 6 per cent. as a fair rate of return.

1. Was the 45-cent rate properly a subject for adjudication in this case? The contention of plaintiff on this question is thus stated in its brief: "The District Court having declared the 40¢ rate invalid had no power or authority to revive or put into force and effect the previous 45¢ rate. The limit of the court's inquiry was as to the validity of the existing 40¢ rate and such rate having been declared invalid by the court, its jurisdiction ended. The court's function is judicial and not legislative in character and when the court by its decree fixed what it conceived to be a proper rate, to-wit: the 45¢ rate, it thereby exceeded its authority and usurped a legislative right and power."

It also urged that the rate prescribed by the order of December 22, 1933, was temporary and that it expired when the order of February 13, 1934, became effective.

It is true that the function of courts in the matter of rates is judicial and not legislative, but when rate-making bodies, in the exercise of power delegated to them by statutes, prescribe rates for a public utility, the courts have the power to examine them for the purpose of determining whether the prescribed rates are confiscatory. In performing this function they do not prescribe rates nor enact legislation. Central Kentucky Natural Gas Co. v. R. R. Commission, 290 U.S. 264, 54 S.Ct. 154, 78 L.Ed. 307; O'Donoghue v. United States, 289 U.S. 516, 53 S.Ct. 740, 77 L.Ed. 1356; Bluefield Water Works & Improvement Co. v. Public Service Commission, 262 U.S. 679, 43 S. Ct. 675, 67 L.Ed. 1176; Minnesota Rate Cases, Simpson v. Shepard, 230 U.S. 352, 33 S.Ct. 729, 57 L.Ed. 1511, 48 L.R.A.,N.S., 1151, Ann.Cas.1916A, 18; Newton v. Consolidated Gas Co., 258 U.S. 165, 42 S.Ct. 264, 66 L.Ed. 538. If, therefore, the order or resolution prescribing the 45-cent rate was not repealed by the adoption and entry of the order prescribing the 40-cent rate, which the court held to be confiscatory, then on proper pleadings the court had authority to consider the question of the confiscatory character of that rate.

The resolution of December 22, 1933, embodied the 45-cent rate as previously adopted and provided for continuing the hearing on the question of reducing the rate then being charged. This same rate had been adopted in 1923, and but for the resolution of December 22, 1933, this would have remained in effect until changed. It cannot therefore be said that so far as fixing the 45-cent rate is concerned, the legislation was temporary. A void legislative enactment does not operate to repeal a preexisting valid one. Frost v. Corporation Commission, 278 U.S. 515, 49 S.Ct. 235, 73 L.Ed. 483; American Wood Products Co. v. City of Minneapolis, 8 Cir., 35 F.2d 657; Cogger v. Hazen, 66 App.D.C. 196, 85 F.2d 695; Conlon v. Adamski, 64 App.D. C. 274, 77 F.2d 397; Coffeyville Gas & Fuel Co. v. Public Utilities Commission, 116 Kan. 165, 225 P. 1036. It would seem too clear for argument that a law cannot be changed nor repealed by a subsequent act which is void. In City of Texarkana v. Southern Cities Distributing Co., 8 Cir., 64 F.2d 944, 945, it appeared that the rates fixed by the City Council had been nullified by popular referendum. In an opinion by Judge Stone, this court...