Community Natural Gas Co. v. Natural Gas & Fuel Co., 7495.

• Decision Date: 26 November 1930
• Docket Number: No. 7495.,7495.
• Citation: 34 S.W.2d 900
• Parties: COMMUNITY NATURAL GAS CO. v. NATURAL GAS & FUEL CO.
• Court: Texas Court of Appeals

34 S.W.2d 900

COMMUNITY NATURAL GAS CO. v. NATURAL GAS & FUEL CO.

No. 7495.

Court of Civil Appeals of Texas. Austin.

November 26, 1930.

Appeal from District Court, Brown County; Joe H. Eidson, Judge.

Suit by the Natural Gas & Fuel Company against the Community Natural Gas Company and another. Judgment for plaintiff, and defendant named appeals.

Reversed and cause dismissed.

McCartney & McCartney, of Brownwood, and Karl F. Griffith and Roy C. Coffee, both of Dallas, for appellant.

Woodruff & Holloway, of Brownwood, John S. Redditt, of Lufkin, and C. E. Garner, of Little Rock, Ark., for appellee.

McCLENDON, C. J.

Suit by Natural Gas & Fuel Company against Community Natural Gas Company (for brevity designated respectively fuel and Community Companies), to enjoin the latter from charging domestic gas consumers in the city of Brownwood rates lower than the maxima fixed in its franchise. The Lone Star Gas Company was joined as party defendant. From a judgment in a trial to the court without a jury, awarding the injunction as prayed for, the Community Company has appealed.

The record shows the following pertinent facts: In 1927, both the Community and fuel companies acquired properties of other concerns operating in the city of Brownwood. The predecessors of the Community Company had been in the field since about 1912; and in 1927 furnished about 2,700 domestic consumers. The predecessors of the fuel company entered the field some eight or ten years later and supplied mainly commercial and industrial consumers, having only a small number of domestic patrons. The predecessors of each corporation operated under separate franchises, providing schedules of rates. Only domestic rates are involved in this suit, and are alluded to in this opinion. For convenience we use the abbreviation M for 1,000 cubic feet. The rates of the Community Company were $1.25 per month for the first M; 60 cents per M for the next 9 M; and 55 cents per M for all over 10 M—expressly designated in its franchise as maximum rates. The franchise rates of the fuel company, which were not expressed as maxima, were 50 cents per M, with a minimum monthly rate of $1.50. There were two other smaller concerns operating in certain districts of the city that had franchise flat rates of $2 per month. Shortly after the fuel company acquired its property, it began extending its mains, paralleling those of the Community Company in the most remunerative domestic districts, and began soliciting the Community Company's patrons at its franchise rates, which as will be noted were lower than those of the Community Company. When this suit was brought the fuel company was serving about 1,000 domestic consumers. During the same period (1927-1929) domestic patrons of the Community Company had dwindled to approximately 2,000. In the meantime the city had passed an ordinance reducing the rates of the Community Company to $1.25 for the first 2 M; 65 cents for the next 4 M; and 50 cents per M for all above 5 M. The Community Company appealed from this ordinance to the railroad commission, and, pending the appeal, obtained a temporary injunction suspending the ordinance upon the ground that the rates were unreasonable. The controversy was compromised and a new ordinance passed fixing the Community Company's maximum rates at $1.25 for the first M; 65 cents per M for the next 4 M; and 55 cents per M for all above 5 M. The fuel company for a short period reduced its rates from 50 cents to 40 cents per M, with a $1.50 minimum per month, but raised them again to the former scale. August 16, 1929, the Community Company advertised and put into effect a rate of 35 cents per M, with a $1.05 minimum monthly rate. The fuel company thereupon brought this suit with the noted result.

The grounds urged by the fuel company in support of the trial court's judgment may be briefly summarized:

1. The franchise rates of the Community Company, although expressed as maxima were the only rates that could be charged by that company until modified by the city, since the city in fixing such rates was exercising its governmental function under R. S. art. 1119.

2. The 35-cent rate of the Community Company was below production cost, and for the sole purpose of stifling competition, running its competitor, the fuel company, out of business, and thereafter raising the rates to a remunerative basis; and was therefore unfair and illegal competition.

3. There was an illegal combination and conspiracy between the Lone Star Company and the Community Company to stifle competition and in restraint of trade, in violation of the anti-trust laws of the state.

The contentions of appellant, on the other hand, are:

1. The franchise rates governing it were as expressly stated only maxima, and it had the right to fix any lower rate it chose.

2. Article 1119 cannot properly be construed as authorizing a city to fix only maximum rates.

3. It was acting within its legal rights in reducing its rates to any figure below the maxima provided in its franchise, regardless of the effect upon the business of the fuel company.

4. Its action in fixing the 35-cent rate was to serve a legitimate purpose of its own, that is, to meet the competition of the fuel company, to preserve its business and plant, and therefore could not be brought in question, even if it were shown that it was also actuated by a desire to run its competitor out of business—an assertion which it denied.

Other contentions urged by appellant need not be noted, as they are not material under the view we take of the case.

There is no merit in appellant's contention that article 1119 authorizes a city to fix only maximum rates, with no power to prevent rate competition below that figure. The language of the article is: "The city council of all cities and towns in the state of Texas of over 2,000 inhabitants, shall have the power to regulate, by ordinance, the rates and compensation to be charged by water, gas, light, and sewer companies, corporations, or persons, using...