Arkansas Natural Gas Co. v. Norton Co.

• Decision Date: 23 June 1924
• Docket Number: (No. 73.)
• Citation: 263 S.W. 775
• Parties: ARKANSAS NATURAL GAS CO. v. NORTON CO. et al.
• Court: Arkansas Supreme Court

Page 775

263 S.W. 775

ARKANSAS NATURAL GAS CO. v. NORTON CO. et al.

(No. 73.)

Supreme Court of Arkansas.

June 23, 1924.

Appeal from Pulaski Chancery Court; Jno. E. Martineau, Chancellor.

Separate suits by the Norton Company and the American Bauxite Company against the Arkansas Natural Gas Company. Cases consolidated. Decrees for plaintiffs, and defendant appeals. Affirmed.

Moore, Smith, Moore & Trieber, of Little Rock, for appellant.

Rose, Hemingway, Cantrell & Loughborough, of Little Rock, for appellees.

HART, J.

Separate suits were brought by the Norton Company and the American Bauxite Company, against the Arkansas Natural Gas Company in the chancery court, to recover overcharges for gas furnished by the defendant, and also to enjoin the defendant from cutting off the supply of gas of the plaintiffs. The cases involve in the main the same issues and were consolidated for the purpose of trial.

The Norton Company is a corporation engaged in the business of manufacturing grinding wheels, and has a plant at Bauxite, in Saline county, Ark., for the drying of bauxite which it uses in its business.

The American Bauxite Company is a corporation engaged in crushing and drying bauxite at its plant at Bauxite, in Saline county, Ark. Both corporations use gas and other fuel in the conduct of their business.

The Arkansas Natural Gas Company is a public utility, engaged in the business of supplying natural gas to consumers in certain cities, towns, and villages and the territory adjacent thereto in the state of Arkansas.

The Norton Company and the American Bauxite Company were consumers of natural gas furnished at their manufacturing plants by the Arkansas Natural Gas Company. On October 28, 1920, the Norton Company brought suit in equity against the Arkansas Natural Gas Company, to enjoin it from shutting off its supply of gas, for the reason that the plaintiff would not pay the increased price for gas, which it claimed was unreasonable.

On the 2d day of May, 1922, the American Bauxite Company brought suit in the same chancery court against the Arkansas Natural Gas Company, to restrain it from cutting off its supply of gas, and for the recovery of the amount of overcharge which the defendant had illegally exacted from the plaintiff.

A separate decree was rendered in favor of each plaintiff against the defendant on January 24, 1923. By consent of all parties an order was made consolidating the cases, not only for the purpose of trial in the chancery court, but for the purpose of appealing to this court.

The Arkansas Natural Gas Company has perfected an appeal to this court from the decree against it in each of said cases.

It is earnestly insisted by counsel for the defendant that its business of supplying natural gas to users for industrial and manufacturing purposes is a private business, and that in this respect it is not subject to the regulation of its rates as a public utility.

We cannot agree with counsel in this contention. The Arkansas Natural Gas Company is a corporation organized under the laws of the state of Delaware. Its charter authorizes it to prospect for and produce petroleum and natural gas; to transport the same by pipe lines and market and sell the same. Its charter further authorizes it to lay, maintain, and operate pipe lines for the carriage of natural gas, and to purchase or otherwise acquire natural gas, and to transport and pipe the same by means of pipe lines, etc., and to market and sell the same.

The Arkansas Pipe Line Company was organized under the laws of the state of Arkansas. Its charter authorized it to produce and market mineral oils and natural gas for heat, light, and power, by means of pipe lines from without the state to points within the state, or between points wholly within the state, with all the rights incident thereto, including the right to construct and operate telephone and telegraph lines. This company crossed public roads with its pipe lines whenever necessary, and applied to various county courts for permission to do so. In one instance it filed a condemnation suit and made a deposit as in other condemnation cases. It purchased rights of way for its pipe lines from railroad companies and from private individuals and corporations. It laid its pipe lines from a point in the state of Louisiana in a northerly direction to the city of Little Rock in the state of Arkansas and in laying its pipe lines crossed numerous public roads and the right of way of several railroads.

The Arkansas Natural Gas Company took over all the property of the Arkansas Pipe Line Company, together with all the rights it had acquired under the exercise of the power of eminent domain, or the right to exercise that power under the statutes, as a corporation organized under the laws of the state, for the purpose of producing natural gas and transporting or conveying it to market by and through pipe lines.

The Arkansas Natural Gas Company also commenced to exercise all the rights and privileges of a public utility, and filed a schedule of rates, and otherwise subjected itself to the regulation and control exercised over public utilities by the duly constituted authorities of the state of Arkansas. By doing these acts, the defendant constituted itself a public utility, for the purpose of furnishing natural gas to domestic and industrial consumers, and is subject to all the regulations prescribed by statute for utilities of this sort. We think this clear from the principles of law decided in Clear Creek, etc., Co. v. Ft. Smith Spelter Co., 148 Ark. 260, 230 S. W. 897, and 161 Ark. 12, 255 S. W. 903.

Counsel for appellant concedes that the Arkansas Natural Gas Company is a public utility so far as supplying natural gas to domestic and industrial consumers in the city of Little Rock is concerned, but claims that it is not such public utility with reference to the Norton Company and to the American Bauxite Company, which are situated outside of the city of Little Rock, and which it is claimed, on account of their peculiar location and of the large amount of gas they use, are not susceptible of being classified.

Now a corporation supplying natural gas to consumers cannot be considered as a public utility with respect to certain classes of its consumers and as a private corporation with regard to certain others. The acceptance by the Arkansas Natural Gas Company of the franchise and privileges granted it carried with it the duty of supplying all persons and corporations along the lines of its main with natural gas without discrimination. All are entitled to have the same service on equal terms and at a uniform rate. The law will not tolerate a discrimination in the charges of public utility corporations. If this were not so, and if corporations existing by grant of public franchises, in supplying water, gas, electric lights, and the like, could favor certain individuals or corporations with low rates and charge others higher rates for the same service, the business interests and domestic comforts of every one would be at their mercy.

In this connection it many be stated that, while public service corporations cannot act arbitrarily, or discriminate among their consumers similarly situated by way of favoring one consumer or class of consumers over others, a distinction may be made between different consumers or classes of consumers on account of location, amount of consumption, or such other material conditions which distinguish them from each other or from other classes. Yancey v. Batesville Telephone Co., 81 Ark. 486, 99 S. W. 679, 11 Ann. Cas. 135; Southwestern Telegraph & Telephone Co. v. Sharp & White, 118 Ark. 541, 177 S. W. 25, L. R. A. 1915E, 323; and Pond on Public Utilities, § 213, p. 262.

It is next contended by counsel for defendant that to allow plaintiffs to recover overcharges for gas furnished them would impair the obligation of the contract entered into between each of the plaintiffs and the defendant for furnishing gas for use at their manufacturing plants.

We cannot agree with counsel in this contention. It is true that the Arkansas Natural Gas Company made a separate contract with the Norton Company and with the American Bauxite Company to furnish natural gas for use at the manufacturing plant of each company; but the Arkansas Natural Gas Company was operating as a public utility, and it was beyond its power to contract with respect to gas, so far as such contract might interfere with the power of the Corporation Commission to regulate rates for gas furnished. Harrison Electric Co. v. Citizens' Ice & Storage Co., 149 Ark. 502, 232 S. W. 932, and Chambliss v. Clear Creek Oil & Gas Co., 161 Ark. 549, 256 S. W. 873.

It appears from the record that the Arkansas Natural Gas Company filed its schedule of rates with the Arkansas Corporation Commission, which was created by virtue of an act of the Legislature of 1919. In various other ways it also subjected itself to the control of the Arkansas Corporation Commission, and exercised powers and privileges granted to public utility companies under the act creating the Corporation Commission. The act in question provided for what is called indeterminate permits to certain public utilities. Crawford & Moses' Digest, §§ 1653-1656, inclusive.

The latter section in particular provides that any public utility operating under an existing license, permit, or franchise shall, upon filing with the Corporation Commission a written declaration that it surrenders such license, permit, or franchise, receive by operation of law an indeterminate permit as provided by the act, and that such public utility shall hold such permit under all the terms, conditions, and limitations of the act.

The section further provides that the filing of such declaration shall be deemed a waiver by such utility of the right to insist upon the fulfillment of any contract entered into relating to any rate, charge, or service regulated by the act.

By an act...