Natural Gas Service Co. v. Serv-Yu Co-op.

• Decision Date: 29 May 1950
• Docket Number: No. 5087,SERV-YU,5087
• Parties: , 84 P.U.R.(NS) 148 NATURAL GAS SERVICE CO. et al. v.COOPERATIVE, Inc.
• Court: Arizona Supreme Court

Page 324

219 P.2d 324

70 Ariz. 235, 84 P.U.R.(NS) 148

NATURAL GAS SERVICE CO. et al. v. SERV-YU COOPERATIVE, Inc.

No. 5087.

Supreme Court of Arizona.

May 29, 1950.

Stanley A. Jerman and Harold L. Jerman, Walter Roche, Phoenix, for appellant, Natural Gas Service Co.

Knapp, Boyle, Bilby & Thompson, Arthur Henderson, Tuscon, for appellant El Paso Natural Gas Co.

Evo DeConcini, Attorney General, Perry M. Ling, Chief Assistant Attorney General, for appellant Corporation Commission.

Dougherty, Chandler & Connor, Phoenix, for appellee.

LA PRADE, Chief Justice.

After our decision and opinion in this case, see 69 Ariz. 328, 213 P.2d 677, a motion for rehearing was granted and oral arguments heard. An exhaustive and attentive review of our former opinion has not caused the court to arrive at any different conclusion as to the correctness of our original disposition of the case. Our attention has been directed to the fact that the conclusion drawn, that appellee is a public service corporation within the purview of article 15, section 2 of the Constitution, rests on the single factor that: '* * * Its character as a corporation whether it is a public service corporation or otherwise must be determined by what its articles and by-laws authorize it to do rather than by what it is now doing or may do in the immediate future. * * *' 69 Ariz. 328, 213 P.2d 677, 684.

We are now of the opinion that while this analytical observation may be technically correct, admittedly the statement is too broad and though doctrinal in form cannot be defended in the light of reason as exemplified by many well-considered cases. For collection and analysis of applicable cases see Rural Electric Co. v. State Board of Equalization, 57 Wyo. 451, 120 P.2d 741, rehearing denied 122 P.2d 189. The mere power, stemming from its articles of incorporation, 'to manufacture, purchase, acquire and accumulate natural gas and/or gas * * * for its members only, and to transmit, distribute, furnish, sell and dispose of such gas to its members only * * *' etc. standing alone is not enough to brand it as a public service corporation. There were other factors that should have been pointed out, all of which were evidenced by our recitation of the facts in the original opinion.

1. What the corporation actually does.

2. A dedication to public use.

3. Articles of incorporation, authorization, and purposes.

4. Dealing with the service of a commodity in which the public has been generally held to have an interest.

5. Monopolizing or intending to monopolize the territory with a public service commodity. Valcour v. Village of Morrisville, 110 Vt. 93, A.2d 312.

6. Acceptance of substantially all requests for service. Consolidation Coal Co. v. Martin, 8 Cir., 113 F.2d 813, 817; Wingrove v. Public Service Commission, 74 W.Va. 190, 81 S.E. 734, L.R.A.1918A, 210.

7. Service under contracts and reserving the right to discriminate is not always controlling. State ex rel. Bricker v. Industrial Gas Co., 58 Ohio App. 101, 16 N.E.2d 218; Industrial Gas Co. v. Public Utilities Commission of Ohio, 135 Ohio St. 408, 21 N.E.2d 166.

8. Actual or potential competition with other corporations whose business is clothed with public interest. Industrial Gas Co. v. Public Utilities Commission, supra.

While the articles of incorporation authorizing the corporation to act as a public utility are not conclusive, the fact of such authorization may be considered in the determination of the ultimate question. Lamb v. Calif. Water & Telephone Co., Cal.App., 121 P.2d 852, 858, affirmed on appeal 21 Cal.2d 33, 129 P.2d 371. See also Commonwealth v. Fhilbert Paving & Construction Co., 229 Pa. 231, 78 A. 104. In order to classify a corporation which has never engaged in business, access of necessity is always had to its articles of incorporation to determine the purposes for which it was formed and the powers conferred upon it. 18 C.J.S., Corporations, § 22b, p. 400. In this behalf appellee strenuously insists that the powers conferred extended to 'members only,' and that the finding of the court to the effect that the corporation 'has never in anywise held itself out as a public corporation or made any offer or offers to serve the public or any others than its members; that it has never by any solicitation, declaration, act or any other means, indicated any intention of serving the public generally, or of serving any others than the members of the Cooperative' is binding on this court. To this contention we will avert later.

A dedication to public is always a question of intention.

'* * * that intention may be shown by the circumstances in a case. The facts govern. It does not, as will appear later, solely depend upon the wishes and the declarations of the owner. This much, doubtless, is true, that an owner of such a plant must at least have undertaken to actually engage in business and supply at least some of his commodity to some of the public. * * *' Rural Elec. Co., supra [57 Wyo. 451, 120 P.2d 747].

In determining the question of whether we are dealing with a public utility much enlightenment is gained if we know that the utility is dealing with the service of a commodity in which the public has generally been held to have an interest. Van Dyke v. Geary, 244 U.S. 39, 37 S.Ct. 483, 61 L.Ed. 973. The emphasis was placed on this factor in Pennsylvania Chautauqua v. Public Service Commission, 105 Pa.Super. 160, 160 A. 225, and in Industrial Gas Co. v. Pub. Utilities Comm., supra. Appellee suggests that the true criterion by which to judge of the character of the use of any plant or system alleged to be a public utility is whether the public may enjoy it of right or by permission only, being the rule laid down in Junction Water Co. v. Riddle, 108 N.J.Eq. 523, 155 A. 887. This rule was justly criticized in Rural Elec. Co., supra, as a categorical statement not entirely correct, as follows: '* * * While that feature frequently comes into prominence, it is, perhaps, not quite correct to call it a 'criterion.' It is, rather, ordinarily, an incidence, a necessary result, an essential feature, of the dedication to public use. To state that property has been devoted to public use is to state also that the public generally, in so far as it is feasible, has the right to enjoy service therefrom. It may be as difficult to determine the one fact as the other. In such case we cannot determine the right do demand such service by the fact that the plant is a public utility, and the fact that it is a public utility by the fact that the right to demand the service exists. That would be simply reasoning in a circle. * * *'

In the Wyoming case, supra, the cooperative relied on the rule stated in 51 C.J. 5, which states that the test as to whether an owner is a public utility is 'whether or not such person holds himself out, expressly or impliedly, as engaged in the business of supplying his product or service to the public as a class or to any limited portion of it, as contra-distinguished from holding himself out as ready to serve only particular individuals.' In disposing of this contention the court made the following observations which we believe to be especially apropos in the instant case: '* * * Of course, if the service is rendered pursuant to contract or limited membership, it is difficult to hold that one has expressly held himself out as ready to serve the public generally. But the text does not require an express holding out. It may be done impliedly, as by wide solicitation and other factors. Keystone Warehousing Co. v. Public Service Commission, 105 Pa.Super. 267, 161 A. 891; Bingaman v. Public Serv. Comm. 105 Pa.Super. 272, 161 A. 892; Erb v. Public Serv. Comm., 93 Pa.Super. 421. This counsel have overlooked. If by entering into contracts, or limiting service to members, the owner may in all cases escape the burdens attending a public utility, the plaintiff herein cannot be said to be such utility. If that is true, then, of course, plaintiff, though it should absorb all other like organizations in the state, and obtain a large membership in all rural sections therein, could not even then be called a public utility, and we are unable to see how it would make any difference if it should make most of the consumers of electricity in our towns and cities its members. The authorities do not, we think, call for any such result.'

What the corporation does or, as in the instant case, what it proposes to do. See Davis v. People ex rel. Public Utilities Commission, 79 Colo. 642, 247 P. 801; Terminal Taxicab Co. v. Kutz, 241 U.S. 252, 36 S.Ct. 583, 584, 60 L.Ed. 984, Ann.Cas.1916D, 765. In the latter case it was said that a service may affect 'so considerable a fraction of the public that it is public in the same sense in which any other may be called so. * * * The public does not mean everybody all the time.' In the Colorado case of Davis v. People, supra, it appears that Davis hauled freight by truck for over 90% of shippers in his territory. He had organized most of the shippers into an association, which was in fact a sham organization. Davis hauled goods under a contract with this organization. Over his objection he was held to be a common carrier and the limitation of service 'only to members' of the association was branded as 'a mere device to hoodwink the law.' [79 Colo. 642, 247 P. 802]

In the instant case the by-laws provided that membership was open to any one who applied and paid the fees required, and the secretary testified that the only purpose for the organization of the 'Co-op' was to eliminate appellant, the certificated utility in the field. The incorporators of appellee were customers of appellant who proposed to quit appellant and purchase gas direct from the El Paso Company, presumably proposing to use appellee's fixtures or others in their stead. Other users and customers of appellant were standing by prepared to join the 'Co-op' and desert appellee. It is proper to note...