Brooklyn Union Gas Co. v. Prendergast
| Decision Date | 24 June 1925 |
| Docket Number | No. 1269.,1269. |
| Parties | BROOKLYN UNION GAS CO. v. PRENDERGAST et al. |
| Court | U.S. District Court — Eastern District of New York |
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Cullen & Dykman, of Brooklyn, N. Y. (William N. Dykman and Jackson A. Dykman, both of Brooklyn, N. Y., of counsel), for plaintiff.
Charles G. Blakeslee, of Binghamton, N. Y. (Edward M. Deegan and Melvin L. Krulewitch, both of New York City, of counsel), for defendants William A. Prendergast and others.
John Holley Clark, Jr., of New York City (William Hayward and Charles E. Buchner, both of New York City, of counsel), for defendant Albert Ottinger.
This is an action in equity, the object of which is to have declared unconstitutional, as confiscatory and void, chapter 899 of the Laws of 1923 of the state of New York, which prescribes a maximum rate, in cities containing a population of 1,000,000 or over, of $1 per 1,000 cubic feet of gas of a standard of not less than 650 B. t. u. per cubic foot, and for an injunction restraining the defendants from enforcing or attempting to enforce the provisions of said act.
New York City is the only city of the state which contains a population of over 1,000,000.
This case comes before the court on the motion of the plaintiff for an order sustaining the plaintiff's exceptions to the special master's report, filed herein, and confirming the said report in all other respects, and for a final decree.
The motion came on to be heard on the 15th day of April, 1925, and was, at the request of the attorney for the Attorney General of the state of New York, adjourned to May 5, 1925, when it was argued and all briefs finally submitted.
I agree with all the counsel in this case that the provisions of the Act Feb. 13, 1925 (43 Stat. 938), section 238 of the Judicial Code, which went into effect May 13, 1925, do not apply, inasmuch as the case was finally submitted before a court consisting of three judges could be called, and that, having been finally submitted before such statute went into effect, this court has power to determine this motion and enter a decree.
A preliminary injunction was granted to the plaintiff herein on July 2, 1923, by the statutory court in this District, composed of Circuit Judge Mayer and District Judges Garvin and Campbell, which enjoined the enforcement of the statute, chapter 899, supra, upon the condition, among others, that the plaintiff, pending final decree or until the further order of the court, continue to furnish gas at the rates theretofore fixed and of the thermal content theretofore prescribed by the Public Service Commission as a basis for said rates.
By an order dated October 11, 1923, granted by me, the matter was referred to Almet Reed Latson, Esq., as special master, which order directed him to hear the evidence, make all computations, find the facts and report with recommendations.
The hearing commenced promptly after the master's appointment and proceeded with due diligence. The special master has fully complied with that order, and filed a report which contains a careful and thorough recital of the questions of law and fact, and his findings, together with a well-considered opinion, in which report he recommends the entry of a final decree in favor of the plaintiff.
Plaintiff and defendants have filed numerous exceptions to portions of the master's report.
Chapter 899 of the Laws of 1923 of the Laws of the state of New York, entitled "An act to amend the Public Service Commission Law, in relation to the charge for illuminating gas in cities containing a population of one million or over," became effective on June 2, 1923, and amended the existing statute by adding a new section as follows:
Plaintiff contends that the said act is unconstitutional on two grounds:
(1) That it impairs the obligation of a valid subsisting contract, in violation of the provisions of section 10 of article 1 of the federal Constitution.
(2) That it is confiscatory, and deprives the plaintiff of its property without due process of law, in violation of section 1 of article 14 of the federal Constitution.
I will consider these contentions in that order.
After the former Eighty-Cent Law had been declared unconstitutional, the Public Service Commission instituted two proceedings, which resulted in two orders dated August 30, 1922 — one of which fixed a maximum rate of $1.15 per thousand cubic feet of gas to be charged by the plaintiff and its subsidiary companies, and provided that this rate should remain in operation for one year from October 1, 1922; the other order, which became effective October 1, 1922, changed the standard of gas to be furnished by the plaintiff and its subsidiary companies from 22 candle power to a minimum of 537 B. t. u.
The plaintiff proceeded to comply with these orders, and during the year 1923 expended $108,668.23 in making adjustments of consumers' appliances and those in process of manufacture, in order to make it safe to burn gas of the standard so fixed, instead of 22 candle power gas as prescribed by the former statute. The act complained of became effective on June 2, 1923, while these orders were still in force.
Plaintiff cites, in support of its contention, New York & Queens Gas Co. v. Prendergast, 1 F.(2d) 351, decided by Judge Winslow in the United States District Court for the Southern District of New York.
The act complained of applies to all the gas companies of the city of New York, and I realize how important it is not to have any conflict in the decisions of the courts in adjoining districts of the same circuit on any question, whenever it can be avoided, but the special master in this case has reported adversely to this contention of the plaintiff, and in his opinion has set forth his reasons for such report, with a citation of authorities.
The question is one of the utmost importance, because, if plaintiff's contention should be sustained, further consideration of the many other questions presented might not be necessary.
A consideration of the authorities shows that the power of the Legislature to authorize the making of a contract as to rates is limited. The regulation of rates to be charged by a public utility is an exercise of the police powers of the state (Munn v. Illinois, 94 U. S. 113, 24 L. Ed. 77); and contracts cannot be made which in any way impair or limit this power, nor can one Legislature limit or control a subsequent one in its exercise (B. E. S. R. Co. v. B. S. R. Co., 111 N. Y. 132, 19 N. E. 63, 2 L. R. A. 284; Manigault v. Springs, 199 U. S. 473, 26 S. Ct. 127, 50 L. Ed. 274). Contracts must be understood as made in reference to the possible exercise of the rightful authority of the government, and no obligation of the contract can extend to defeat the legitimate government authority. Union Dry Goods Co. v. Georgia Public Service Corporation, 248 U. S. 372, 39 S. Ct. 117, 63 L. Ed. 309, 9 A. L. R. 1420.
It has likewise been held that the Legislature, for the public welfare, may modify regulations regarding rates which municipalities may impose in granting licenses or permission to use its streets by public service corporations, without impairing the obligation of a contract within the provisions of the Constitution. People ex rel. Village of South Glens Falls v. P. S. Comm., 225 N. Y. 216, 121 N. E. 777.
It has also been held that neither the "contract clause" nor the "due process clause" of the federal Constitution has the effect of overriding the power of the state to establish all the regulations reasonably necessary to secure the health, safety, or general welfare of the community. Atlantic Coast Line v. Goldsboro, 232 U. S. 548, 34 S. Ct. 364, 58 L. Ed. 721. As thus limited the Legislature had authority to empower the Public Service Commission to contract on behalf of the state.
The authority of the Public Service Commission to contract on behalf of the state must be found in some express grant, as such authority will not be implied. Milwaukee Elec. Ry. v. Wisconsin R. R. Com., 238 U. S. 174, 35 S. Ct. 820, 59 L. Ed. 1254; Home Telephone Co. v. Los Angeles, 211 U. S. 265, 29 S. Ct. 50, 53 L. Ed. 176.
The Public Service Commission Law of New York State (Laws of 1910, c. 480), created a commission, and by general provisions fixed its jurisdiction, power, and procedure.
Section 22 of the law, among other things, provided:
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