Nowata County Gas Co. v. Henry Oil Co.

• Decision Date: 22 November 1920
• Docket Number: 5566.
• Citation: 269 F. 742
• Parties: NOWATA COUNTY GAS CO. v. HENRY OIL CO.
• Court: U.S. Court of Appeals — Eighth Circuit

269 F. 742

NOWATA COUNTY GAS CO. v. HENRY OIL CO.

No. 5566.

United States Court of Appeals, Eighth Circuit.

November 22, 1920

Halbert H. McCluer and Charles A. Loomis, both of Kansas City, Mo for plaintiff in error.

Philip Kates, of Tulsa, Okl., and John J. Jones, of Wichita, Kan for defendant in error.

Before HOOK and STONE, Circuit Judges, and JOHNSON, District Judge.

JOHNSON District Judge.

The plaintiff in error, a public service corporation, was engaged in the business of furnishing natural gas to the citizens of the city of Nowata, Okl., for lighting and heating purposes. It obtained the gas which it supplied to its customers from the defendant in error, the Henry Oil Company, at the wells of the defendant company in the Hogshooter district, situated a few miles southwest of the city of Nowata, under a contract entered into by the parties in 1906, by which the defendant company agreed to furnish to the plaintiff certain specified quantities of gas for a period of 13 years at the rate of 2 cents per 1,000 cubic feet of gas.

The defendant, in February, 1916, ceased to supply the plaintiff with gas, because the plaintiff would not agree to pay for the gas to be thereafter supplied at the rate of 8 cents per 1,000 cubic feet, instead of 2 cents per 1,000 cubic feet, as provided in the contract. From February, 1916, until September, 1917, the plaintiff obtained gas from the Quapaw Gas Company to supply its needs, and paid for the same at the rate of 10 cents per 1,000 cubic feet, the market value thereof, and thereafter brought suit in the court below to recover damages from the defendant for breach of said contract.

The case was tried by the court without a jury, and judgment entered in favor of defendant, dismissing plaintiff's complaint. Unless one or more of the defenses hereinafter mentioned prevent a recovery, the plaintiff, under the undisputed evidence in the case, was entitled to a judgment in its favor.

At the conclusion of the evidence the plaintiff requested the court to give certain declarations of law in its favor, one of which was a general declaration of law that the plaintiff was entitled to recover. This request of the plaintiff for a general declaration of law in its favor, with others, was refused by the court. Plaintiff excepted to the refusal of the court to give the directed declarations of law requested by it, and has assigned the same as error.

The trial court made no findings of fact, but delivered an opinion, which appears in the record, and plaintiff has made numerous assignments, based upon the views expressed by the court in its opinion, and has also assigned as error the judgment of the court dismissing the complaint. No question for review is raised by these assignments. Mason v U.S., 219 F. 547, 135 C.C.A. 315; U.S. v. Porter Fuel Co., 247 F. 769, 159 C.C.A. 627.

It is not necessary to state the assignments of error relied upon by the plaintiff which can be considered, other than the assignment of the refusal of the court to give a general declaration of law in its favor, as this assignment raises for review every question discussed by the parties and necessary to this decision.

The defenses relied upon to sustain the judgment of the trial court dismissing plaintiff's complaint will be considered under the following heads:

(1) That the order made in December, 1915, by the Corporation Commission of the state of Oklahoma, in a proceeding before said commission between the parties to this suit, annulled and set aside the price to be paid in said contract of 2 cents per 1,000 cubic feet of gas, and authorized the defendant to charge, and required the plaintiff to pay, 10 cents per 1,000 cubic feet, and that said order is res adjudicata of the matters in issue in this suit.

(2) That, assuming for any reason the said order to be invalid, the plaintiff, nevertheless, is estopped to assert its invalidity or to maintain this action upon the contract, by reason of having initiated before said Corporation Commission the above-mentioned proceeding.

(3) That, assuming for any reason the said order to be invalid, the plaintiff is, nevertheless, estopped to assert its invalidity or to maintain this action upon the contract, by reason of a former proceeding commenced by it against the defendant before said commission.

(4) That the judgment of the court below, dismissing the action, should be affirmed under the evidence and the provisions of section 9 of the act of the Legislature of the state of Oklahoma approved March 26, 1913 (Laws 1913, c. 99), which act reads as follows:

'Every corporation, joint-stock company, limited copartnership, partnership or other person, now, or hereafter claiming or exercising the right to produce natural gas or to carry or to transport natural gas through pipe line or pipe lines, for hire, compensation, or otherwise within the limits of this state, is allowed by, and upon compliance with the requirements of this act, as owner, lessee, licensee, or by virtue of any other right or claim is hereby prohibited from taking more than twenty-five (25) per cent of the daily natural flow of any gas well or wells unless for good cause shown, under the exigencies of the particular case the Corporation Commission shall establish a different per centum under the prescribed rules and regulations therefor.'

(5) That the judgment of the court below dismissing the action should be affirmed under the evidence and the provisions of section 3 of said act which reads as follows:

'Every corporation * * * now or hereafter claiming or exercising the right to carry or transport natural gas by pipe line or pipe lines, for hire, compensation, or otherwise * * * which is now engaged or hereafter shall engage in the business of purchasing natural gas shall be a common purchaser * * * and such common purchasers are hereby expressly prohibited from discriminating in price or amount for like grades of natural gas or facilities as between producers or persons'

-- and of section 5 of the act of the Legislature of said state approved March 30, 1915 (Laws 1915, c. 197), which reads:

'That every person, firm or corporation, now or hereafter engaged in the business of purchasing and selling natural gas in this state, shall be a common purchaser thereof, and shall purchase all of the natural gas which may be offered for sale * * * without discrimination in favor of one producer as against another, or in favor of any one source of supply as against another.'

These several defenses will be considered in their order. Assuming for the moment that the order of the Corporation Commission referred to in the first defense is sufficient in form and in substance, its validity depends upon the jurisdiction or authority of the commission to make it.

It is well settled that the price fixed in a contract between a public service corporation and a customer or patron may be changed, and a different rate fixed, by a public service commission created under the police power of the state. This is true, even though such contract (as was the fact in this case) was in existence before the creation by the state of a commission authorized to fix rates to be charged by public service corporations or public utilities. Raymond Lumber Co. v. Raymond Light & Water Co., 92 Wash. 330, 159 P. 133, L.R.A. 1917C, 574; Manitowoc v. Manitowoc & N.T. Co., 145 Wis. 13, 129 N.W. 925, 140 Am.St.Rep. 1056; Kansas City, B. & N. Co. v. K.C.L. & P. Co., 275 Mo. 529, 204 S.W. 1074; Union Dry Goods Co. v. Georgia Pub. Ser. Corp., 142 Ga. 841, 83 S.E. 946, L.R.A. 1916E, 358; Minneapolis, etc., v. Menasha Woodenware Co., 159 Wis. 130, 150 N.W. 411, L.R.A. 1915F, 732; Pinney & Boyle Co. v. Los Angeles G. & E. Corp., 168 Cal. 12, 141 P. 620, L.R.A. 1915C, 282, Ann. Cas. 1915D, 471; V.S. Bottle Co. v. Mountain Gas Co., 261 Pa. 523, 104 A. 667; Public Utilities Com. of Kansas v. Wichita R. & L. Co. (C.C.A.) 268 F. 37 (decided this term by this court); Munn v. Illinois, 94 U.S. 113, 24 L.Ed. 77; C., B. & Q.R.R. Co. v. Nebraska, 170 U.S. 57, 18 Sup.Ct. 513, 42 L.Ed. 948; Manigault v. Springs, 199 U.S. 473, 26 Sup.Ct. 127, 50 L.Ed. 274; Portland Ry. L. & P. Co. v. R.R. Com. of Oregon, 229 U.S. 397, 33 sup.Ct. 820, 57 L.Ed. 1248; Chicago & Alton R.R. Co. v. Tranbarger, 238 U.S. 67, 35 Sup.Ct. 678, 59 L.Ed. 1204; Union Dry Goods Co. v. Georgia Pub. Ser. Corp., 248 U.S. 372, 39 Sup.Ct. 117, 63 L.Ed. 309; Producers Trans. Co. v. R.R. Com., 251 U.S. 228, 40 Sup.Ct. 131, 64 L.Ed. 239.

The order of the Corporation Commission of Oklahoma, under consideration, does not fix, nor purport to fix, a rate to be charged by the plaintiff as a public service corporation or public utility, and to be paid by the public; but, granting that it fixes a rate at all, it establishes a rate or price to be paid by the plaintiff to the defendant for gas furnished it by the defendant.

Our attention has not been called to any decision by any court which holds that under the police power the state may create an administrative body or commission with authority to fix or establish prices to be paid by a public utility for things purchased and used by it, or, as in this case, for a commodity furnished by it to the public.

It is unnecessary to consider the question above suggested, as the law of the state of Oklahoma conferring jurisdiction on the Corporation Commission over public utilities does not attempt to confer such authority. The statute (section 2, chapter 93, Session Laws 1913) reads as follows:

'The commission shall have general supervision over all public utilities, with power to fix and establish rates and to prescribe rules, requirements and regulations, affecting their services, operation, and the management and conduct of their

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