Memphis Natural Gas Co. v. McCanless
| Decision Date | 04 May 1946 |
| Parties | MEMPHIS NATURAL GAS CO. v. McCANLESS, Commissioner of Finance and Taxation, et al. |
| Court | Tennessee Supreme Court |
Appeal from Chancery Court, Davidson County; Thos. A. Shriver Chancellor.
Suit by the Memphis Natural Gas Company against George F. McCanless Commissioner of Finance and Taxation, and others, to recover inspection fees which were paid under protest. From a decree of dismissal, the complainant appeals.
Affirmed.
Canada, Russell & Turner, of Memphis, for appellant, complainant below.
Roy H Beeler, Atty. Gen., William F. Barry, Sol. Gen., of Nashville, Allison B.
Humphreys, Jr., of Lebanon, and Lon P. MacFarland, of Columbia, for appellee.
This is a suit by the Gas Company to recover back inspection fees imposed under Code, section 5459, in the sum of $12,540.48 for the three years ending March 31, 1939. After a distress warrant was issued, the inspection fees were paid under protest, and the bill filed on October 2, 1939, for their recovery. The defendant filed an answer. The Gas Company took its proof in May 1940, and after some delay on account of the induction of several state's attorneys into military service, and the desire of the Gas Company to await the outcome of other litigation in which it was involved with the State, the case was set and submitted to the Chancellor on the depositions of complainant and certain additional stipulations of fact. We quote in the course of the opinion some excerpts from these stipulations, but note at the outset, that it was expressly agreed that all of the facts appearing in the following decisions of cases in which the Memphis Natural Gas Company had been a party, shall be treated as part of complainant's proof in this cause: Memphis Nat. Gas Co. v. Pope, 178 Tenn. 580, 161 S.W.2d 211; Memphis Natural Gas Co. v. Beeler, 315 U.S. 649, 62 S.Ct. 857, 86 L.Ed. 1090; Memphis Nat. Gas Co. v. McCanless, 180 Tenn. 688, 177 S.W.2d 841; Memphis Nat. Gas Co. v. McCanless, 180 Tenn. 695, 177 S.W.2d 843. After the chancellor had delivered a careful and comprehensive opinion which is preserved in the record, a decree was entered dismissing the bill, and the complainant, Gas Company, has perfected its appeal to this Court.
In the brief filed by appellant, there is apparently a single assignment of error which fails to conform with Rule 14, 173 Tenn. 873 et seq., in which the action of the chancellor in dismissing the bill, is assailed by the assertion that the Memphis Natural Gas Company was not, during the years in question, (1) a public utility, (2) subject to control of the Railroad and Public Utilities Commission, (3) nor a corporation to which statutes relating to public utilities apply; that therefore, the inspection was both illegal and fictitious and the imposition of the fees therefor, was violative of the rights of the Gas Company under the 'due process' (Amendment XIV) and 'commerce' (Art. I, sec. 8) clauses of the United States Constitution, and of Art. I, sec. 21 of the Constitution of Tennessee; and that finally, the inspection fee is in effect, a gross receipts tax, not based on costs and expenses incurred by the State, in lawful discharge of its police powers and, therefore, the imposition of this tax on the Gas Company violates the 'due process' and 'commerce' clauses of the United States Constitution.
We consider first, the contention of the Gas Company that it was not for the three years ending March 31, 1939, a public utility subject to control and regulation by the Public Utilities Commission, nor amenable to statutes applying to public utilities in Tennessee.
Code, section 5448, defines a public utility, for the purpose of control and regulation by the commission, as including common carriers of gas or any other like system, plant or equipment, affected by and dedicated to the public use under privileges, franchises, licenses, or agreements granted by the State or by any political subdivision thereof. During the three years ending April 1, 1939, being those for which the inspection fees have been imposed in this case, the Gas Company had, jointly with the Memphis Power & Light Company, a contract with the City of Memphis to furnish natural gas to all citizens of that municipality. The details and effect of this contract are set out at length in reported decisions, Memphis Nat. Gas Co. v. Pope, 178 Tenn. 580, 161 S.W.2d 211; Memphis Natural Gas Co. v. Beeler, 315 U.S. 649, 62 S.Ct. 857, 86 L.Ed. 1090, which are here to be treated under the stipulation as part of complainant's proof. In the Pope case, supra, 178 Tenn. at page 585, 161 S.W.2d at page 212, it is found as a fact:
'* * * that the bulk of all complainant's revenues from every source is derived from its business done with and through Memphis Power and Light Company.' During these same three years the Gas Company also had a contract to furnish natural gas to another retail distributing company, the West Tennessee Power & Light Company.
The Gas Company enjoyed privileges and franchises from the City of Memphis (Pope and Beeler cases, supra), from seven West Tennessee counties, and various franchises for rights-of-way over, through and upon state highways from the state highway department.
Pertinent provisions of the Gas Company's charter are:
'The nature of the business of the company and the objects and purposes proposed to be transacted, promoted or carried on by it, are as follows:
'(a) * * * and to carry on all of the businesses that are usual to or may be conveniently carried on by gas companies or gas pipe line companies.
'At pages 1 and 2 of said charter, it is provided:
'The nature of the business of the corporation and the objects or purposes to be transacted, promoted or carried on by it are as follows, to wit: * * * (b) * * * to construct and maintain conduits and lines of tubing and pipe for the transportation of gas or oil for the public generally. * * *' (Our emphasis.)
During the three years in question, the Company's commercial domicile was in Memphis, where it had offices and kept a crew of employees for operation and maintenance, and the Company was domesticated in the State of Tennessee, to do business here, though it was incorporated under the laws of the State of Delaware. For a disposition of the case on the facts before us, which are undisputed, we find it unnecessary to determine whether powers granted to a corporation by the charter and not exercised, shall, nevertheless, render such corporation a public utility, or whether the character of the corporation shall be determined by the provisions of its charter, and not its exercise of power.
'The answer to that question does not depend upon whether its charter declares it to be a common carrier, nor upon whether the state of incorporation considers it such; but upon what it does.' United States v. Brooklyn Eastern District Terminal, 249 U.S. 296, 304, 39 S.Ct. 283, 285, 63 L.Ed. 613, 616, 6 A.L.R. 527 .
'The term 'public use' is a flexible one. It varies and expands with the growing needs of a more complex social order. Many improvements universally recognized as impressed with a public use were nonexistent a few years ago. The possibility of railroads was not dreamed of in a past not very remote, yet, when they came, the courts, recognizing the important part they were to perform in supplying a public want, did not hesitate to take control of them as quasi governmental agents, and extend to them the right of eminent domain, in order to equip them thoroughly to discharge the duties to the community which followed their grant of franchises. This is equally true as to other appliances which now form important parts of a rapidly widening system of social and commercial intercommunication. So it may be said at the present time that Ryan v. Terminal Co., 102 Tenn. 111, 118, 50 S.W. 744, 745, 45 L.R.A. 303.
This exposition of the phrase 'public use' by Chief Justice Board, has been often quoted and followed in subsequent opinions of this Court. Great Falls Power Co. v. Webb, 123 Tenn. 584, 590, 133 S.W. 1105; Tennessee, Coal, Iron & R. Co. v. Paint Rock Flume & Transportation Co., 128 Tenn. 277, 286, 160 S.W. 522; State v. Union Ry. Co., 129 Tenn. 705, 724, 168 S.W. 575, Ann. Cas.1915D, 1240; Webb v. Knox Co. Transmission Co., 143 Tenn. 423, 434, 225 S.W. 1046; State ex rel. v. City of Memphis, 147 Tenn. 658, 676, 251 S.W. 46, 27 A.L.R. 1257; Ferrell v. Doak, 152 Tenn. 88, 90, 275 S.W. 29, 46 A.L.R. 590; Armstrong v. Illinois Cent. R. Co., 153 Tenn. 283, 295, 282 S.W. 382; Knoxville Housing Authority, Inc., v. City of Knoxville, 174 Tenn. 76, 84, 123 S.W.2d 1085.
These same authorities make it abundantly clear that in our decisions, the terms ' public use' and ' public utility' are synonyms. The statutory definition of Code, section 5448, determines those public utilities over which the Railroad and Public Utilities Commission is given control and supervision. Here it is necessary for us to determine, in view of the assignment of error, whether the Memphis Natural Gas Company is a public utility, and second, whether it is such public utility as is within the jurisdiction and control of the Commission.
It is not disputed that the sale of natural gas to the ultimate consumer is such an operation as is affected by and dedicated to the public use,...
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...not go "to the general maintenance and expense of government." Id. at 293, 332 S.E.2d at 695. See also Memphis Natural Gas Co. v. McCanless, 183 Tenn. 635, 651, 194 S.W.2d 476, 483 (1946) ("To be properly defined as 'taxes' the fees must be paid into the public treasury as a part of the gen......