Lincoln Gas Electric Light Co v. City of Lincoln

• Decision Date: 02 June 1919
• Docket Number: No. 52,52
• Citation: 250 U.S. 256,63 L.Ed. 968,39 S.Ct. 454
• Parties: LINCOLN GAS & ELECTRIC LIGHT CO. v. CITY OF LINCOLN et al
• Court: U.S. Supreme Court

250 U.S. 256

39 S.Ct. 454

63 L.Ed. 968

LINCOLN GAS & ELECTRIC LIGHT CO.

v CITY OF LINCOLN et al.

No. 52.

Argued Oct. 5 and 8, 1917.

Decided June 2, 1919.

[Syllabus from pages 256-258 intentionally omitted] Messrs. Robert Burns, of New York City, E. C. Strode, of Lincoln, Neb., and Charles A. Frueauff, of New York City, for appellant.

Messrs. W. M. Morning, C. Petrus Peterson, and G. W. Berge, all of Lincoln, Neb., for appellees.

Mr. Justice PITNEY delivered the opinion of the Court.

This is an appeal from the final decree of the District Court dismissing the bill of complaint in a suit brought by the Lincoln Gas & Electric Light Company, a Nebraska corporation, against the city of Lincoln and its officials, praying for an injunction to restrain enforcement of an ordinance of the city adopted November 19, 1906, which had the effect of reducing complainant's charges for gas from $1.20 to $1 per 1,000 cubic feet, and an ordinance adopted December 10, 1906, assessing an annual occupation tax upon gas companies in the city.

The action was instituted in December, 1906, without previous test of the $1 rate, in the then Circuit Court of the United States for the District of Nebraska. Besides grounds not pressed, the rate ordinance was attacked upon the ground that its enforcement would deprive complainant of its property without due process of law, in contravention of the Fourteenth Amendment. The tax ordinance was attacked upon grounds of state law, and also upon the ground that it was violative of the 'due process' and 'equal protection' clauses of the Fourteenth Amendment. Upon final hearing the court, by decree entered April 6, 1909, dismissed the bill as to the rate ordinance, without prejudice to the commencement of a new action, but decreed that the ordinance levying an occupation tax violated the Constitution of Nebraska and was for this reason illegal, and granted a permanent injunction against its enforcement. 182 Fed. 926.

Upon appeal by complainant to this court it was found that there was a great mass of conflicting evidence relating to the value of complainant's plant, the cost of operation, and the gross and net income; that the case had not been referred to a master, nor had specific findings of fact been made by the court below, but only general conclusions which were found not to be sufficient in view of errors assigned which opened up substantially the entire case. For this reason the decree was reversed, and the cause remanded to the District Court, with directions to refer it to a master with leave to both parties to take additional evidence. A temporary injunction which had been granted in the court below and continued in force until final decree and afterwards pending the appeal, under a bond conditioned to account for overcharges if the rate ordinance should be sustained, was by the decree of reversal continued in force until final decree in the court below, upon condition that a new bond with sureties was given to account for overcharges to consumers since the original restraining order, in the event the ordinance should be sustained. 223 U. S. 349, 32 Sup. Ct. 271, 56 L. Ed. 466.

Upon the going down of the mandate, the District Court referred the case (July, 1912) to a master, to take the proofs and report his findings of fact and of law. After a full hearing he made an elaborate report (September, 1914), to which complainant filed about 125 exceptions, with a motion to recommit the case to the master for additional findings, which motion was denied. The master found the rate ordinance was not confiscatory, and (differing from the former decision of the Circuit Court) held that the occupation tax ordinance was valid, and included the tax as an operating expense. Upon the hearing of the exceptions the report of the master was confirmed by the District Court, and the bill dismissed as to the rate ordinance, by decree entered September 23, 1915; the judge filing a memorandum to the effect that he did not agree with the master as to the validity of the occupation tax ordinance, but deemed it unnecessary to pass upon this in the decree, since the result reached by the master would only be strengthened by adjudging the tax invalid, while, if the judge should agree with the master upon that question, he still would confirm the report. In other words, assuming the occupation tax ordinance to be valid, the addition of this tax to the annual outgoes of complainant would still leave the $1 rate compensatory.

Complainant brings the case to this court by appeal, with about 120 assignments of error, one of which is that the District Court erred in not decreeing that the occupation tax ordinance was in violation of the Fourteenth Amendment in that it amounted to a denial of the equal protection of the laws.

Pending the hearing upon the master's report, and on or about May 1, 1915, complainant, notwithstanding the injunction pendente lite, put into effect a net rate of $1 per thousand feet for gas, and has maintained it since.

Upon the strength of this test, and before the argument of this, the second appeal, complainant presented to us a petition for leave to file a bill of review in the court below upon the ground that, according to the master's findings, complainant, in the year 1907, earned so small a return that the rate ordinance would have been confiscatory upon the valuation as found by him, but for this additional finding:

'All human experience has shown that increased consumption follows quickly a reduction in the price of commodities, and the evidence in this case satisfactorily shows that gas is no exception to the rule.'

The petition averred that the experience of complainant in an actual test of the reduced rate during a considerable period since May 1, 1915, showed that the view of the master was erroneous, and in fact under actual operating conditions there was no increase of consumption.

The application for leave to file a bill of review will be denied, for the following reasons:

First, because the $1 rate was put into effect pursuant to a written stipulation made between the parties in the cause to the effect that the action of the company in so doing should not be construed as an acceptance of or compliance with the ordinance in controversy, and should not be 'shown in evidence or presented to the court in the aboveentitled cause, or used in any way by either party to influence the action of the court in the disposition of the case.' Hence defendant was not called upon to observe the effect of the reduced rate, or prepare to meet inferences drawn therefrom.

Secondly, because complainant might have made a practical test of the ordinance rate before bringing this suit for an injunction, and certainly ought to have resorted to the test long before it did so. As early as the month of January, 1909, this court, in two notable rate cases, indicated its view of the importance, in any but a very clear case, of subjecting prescribed rates to the test of practical experience before attacking them in the courts. Knoxville v. Water Co., 212 U. S. 1, 16, 18, 29 Sup. Ct. 148, 53 L. Ed. 371; Willcox v. Consolidated Gas Co., 212 U. S. 19, 54, 29 Sup. Ct. 192, 53 L. Ed. 382, 15 Ann. Cas. 1034, 48 L. R. A. (N. S.) 1134. When those decisions were announced this case was pending in the Circuit Court, and shortly thereafter it was decided adversely to complainant upon the question of the validity of the rate, the Knoxville and Willcox Cases being cited. 182 Fed. 926, 929. Then, if not before, complainant might have made a practical test of the sufficiency of the rate, instead of waiting six years longer before doing so. The litigation has been extremely tedious and burdensome to both sides, and it ought now to be brought to a conclusion upon the record as it stands.

And, thirdly, the argument based upon the master's finding as to the return that complainant would have earned in the year 1907 under the prescribed rates is vitiated by the fact that he included as an operating expense $4,466, the amount of the estimated occupation tax, which was not paid and (as we shall see) has been conclusively adjudged in this suit to be unenforceable. Eliminating this would increase the net return for the year approximately 1 per cent. upon the investment.

Coming to the merits, we will deal first with the occupation tax ordinance. This is important not only because considerable sums of unpaid taxes have accumulated pending the litigation, but because of the effect of the tax, if sustained, upon the question of the adequacy of the rate.

The ordinance imposes an occupation tax upon all gas companies manufacturing and furnishing gas to the inhabitants of the city of Lincoln equivalent to 2 1/2...