Charleston Natural Gas Co v. Gas

• Decision Date: 25 April 1905
• Citation: 50 S.E. 876,68 W.Va. 22
• Court: West Virginia Supreme Court
• Parties: CHARLESTON NATURAL GAS CO. v. KANAWHA NATURAL GAS, LIGHT & FUEL CO. et al.

68 W.Va. 22

50 S.E. 876

CHARLESTON NATURAL GAS CO.

v. KANAWHA NATURAL GAS, LIGHT & FUEL CO. et al.

Supreme Court of Appeals of West Virginia.

April 25, 1905.

MONOPOLIES—CONTRACTS—ENFORCEMENT— PUBLIC POLICY.

1. If two corporations supplying the same community with natural gas make an agreement whereby they parcel out between them the territory, giving to each the exclusive right to sell gas in a given boundary, fixing prices, and prohibiting change of prices except by their mutual consent, binding one company to use for public consumption only gas produced by the other, and prohibiting one from producing from the section of country in which the other produces gas, such agreement tends to monopoly, is void as against public policy, and the courts will not enforce it.

2. Courts decline to enforce contracts which impose restraint, though only partial, upon business of such character that such restraint willto any extent repress competition and prejudice the public.

[Ed. Note.—For cases in point, see vol. 11, Cent. Dig. Contracts, §§ 554-569.]

3. The common law condemns, as against public policy, agreements between public service corporations of a character to prevent free competition in the interest of the public, and will not enforce them.

4. Any agreement between competing public service corporations, the consequence of which is the controlling of prices, limiting of production, or suppressing of competition, so as to create mononoly in things useful to the public, is contrary to public policy and void.

[Ed. Note.—For cases in point, see vol. 11, Cent. Dig. Contracts, § 547.]

5. A combination, the object of which is to obtain sole control of a particular branch of business, is unlawful by common law, against public policy, and all contracts for the accomplishment of this end are void.

(Syllabus by the Court.)

Appeal from Circuit Court, Kanawha County.

Action by the Charleston Natural Gas Company against the Kanawha Natural Gas, Light & Fuel Company and others. Decree for defendants, and plaintiff appeals. Affirmed.

Brown, Jackson & Knight, Simms & En-slow, and Weil & Thorp, for appellant.

Hagar & Stewart, Chilton, McCorkle & Chilton, Pam & Hurd, Mollohan, McClintic & Mathews, McComas & Northcott, and Holt & Duncan, for appellees.

BRANNON, P. The Charleston Natural Gas Company is a corporation chartered to furnish natural gas; having a supply field in Boone county, from which it piped gas for consumption in Charleston. The Kanawha Natural Gas, Light & Fuel Company is also, a corporation for the production and sale of natural gas. It had a supply field in a territory partly in Roane county, partly in Kanawha county, and had laid pipes from that field to the city of Charleston, and was about to lay pipes in its streets to furnish gas for public use. The Charleston Company already occupied the streets with its distributing pipes. The latter company had also leased some territory in Roane county, and, its Boone county field furnishing a poor supply of gas, it was boring wells in Roane county, and was about to run a pipe line from its Roane county field to Charleston to aid it supply from Boone county. In this state of things, January 20, 1903, the two corporations made a written agreement. It gave the Charleston Company "exclusive right to sell natural gas in" a certain section, comprising the main city of Charleston and a large area besides, and gave to the Kanawha Company exclusive right to sell gas in another section adjoining Charleston, also quite a large area. The agreement contained these provisions: "Second. The parties hereto mutually agree that neither of them will, during the life of this agreement, sell or distribute gas in the territory hereby allotted to the other; nor will either party permit any other person or corporation to operate or sell gas under its ordinances in the territory of the other. Third. The Charleston Company agrees that it will not operate for gas, drill wells or acquire territory for gas purposes within the territory now occupied by the Kanawha Company, and described as follows: Big Sandy district of Kanawha County, West Virginia, and the Geary and Walton Districts of Roane County, West Virginia, during the term of this agreement. Fourth. The Charleston Company agrees to take all the gas required for its business under this agreement, from the Kanawha Company, at all times during the period of this agreement, provided the Kanawha Company is able to supply the same, under the terms of this agreement." The agreement also provides that the Kanawha Company shall bring to Charleston gas from its field, and that when brought to Charleston, to its regulator, it shall be for joint use; the Kanawha Company to supply and the Charleston Company to accept from the Kanawha Company the gas necessary to supply the customers of the Charleston Company. The agreement divides the earnings in certain proportions between the two corporations, the agreement to last 20 years. This agreement was carried out, and business carried on under it. Recently a third company (the United States Gas Company) comes into the field. It is engaged in laying a gas pipe line from the city of Huntington to the supply field of the Kanawha Company in Roane and Kanawha counties to supply Huntington, and likely Portsmouth and Ironton, Ohio, and Ashland and Catlettsburg, Ky. The Kanawha Company made an agreement to transfer and assign to the United States Gas Company its assets, leases, and wells—its entire supply field in Roane and Kanawha counties—in consideration of stock and bonds of said United States Gas Company. The Charleston Company filed its bill in the circuit court of Kanawha county, alleging that the Kanawha Company proposed to surrender its charter and discontinue business after its property and assets should be transferred to the United States Company; that the laying of a gas pipe line into said supply field for the supply of gas to other cities and sections (especially the large pipe intended to be laid) will result in a speedy depletion in the supply of gas from said gas field, and in its exhaustion within five years, and in irreparable damage to the Charleston Company, in leaving it without a supply of gas for its business, in violation of the duty and obligation of the Kanawha Company under said contract to supply the Charleston Company with gas. The bill asked an injunction enjoining the Kanawha Company from transferring its assets and property (particularly said gas territory) to the United States Company, and enjoining both com-parries from laying any gas line into said gas territory; asking that the said Kanawha Company be enjoined from discontinuing business, and that said agreement be specifically enforced, and said territory be held by said Kanawha Company to answer the end and purposes of said agreement. A preliminary injunction was granted, but was later dissolved, and the Kanawha Company appeals.

The plaintiff's bill for relief rests on the contract between the two gas companies. That contract is challenged as void and not a valid ground of action in a court of justice, because an unlawful agreement, contrary to public policy, as creating a monopoly in an article necessary for public use for fuel and Illumination, and tending to suppress competition, and impose on the public inordinate prices for it. At one time monopoly meant a grant from King or state of an exclusive right to manufacture or sell certain things, but now it means "any combination, the tendency of which Is to prevent competition, in its broad and general sense, and to control prices to the detriment of the public." 20 Am. & Eng. Ency. L. (2 Ed.) 846; 4 Bl. Com. 159. In the days of Elizabeth, monopoly grants were as numerous as flies. Hume's History of England, 335. When a list was being read in Parliament a member exclaimed, "Is not bread in the number?" "Bread?" said some one. "Yes; I assure you, if affairs go on at this rate, we shall have bread reduced to a monopoly before next Parliament." It has come to that pass verily in our day. The courts have always condemned monopoly, when brought before them. They must continue to do so. They are the bulwark of the public safety. Other branches of government may indulge monopolies. The courts cannot. They are leaning more and more against it, in every form. These two corporations were chartered by the state for public service and benefit. "The supply of illuminating gas is a business of a public nature to meet a public necessity. It is not a business like that of an ordinary corporation engaged in the manufacture of articles that may be furnished by individual effort Hence, while it is justly urged that those public rules which say that a given contract is against public policy, should not be arbitrarily extended so as to interfere' with the freedom of contract, yet, in the instance of business of such character that it presumably cannot be restrained to any extent whatever without prejudice to the public interest, courts decline to enforce or sustain contracts imposing such restraint, however partial, because in contravention of public policy. The subject is much considered and the authorities cited in W. Va. Tr. Co. v. O. R. Pipe Co., 22...