Quinby v. Consumers' Gas Trust Co.

• Decision Date: 17 August 1905
• Docket Number: 10,319.
• Citation: 140 F. 362
• Parties: QUINBY v. CONSUMERS' GAS TRUST CO. et al.
• Court: United States Circuit Court, District of Indiana

140 F. 362

QUINBY v. CONSUMERS' GAS TRUST CO. et al.

No. 10,319.

United States Circuit Court, D. Indiana.

August 17, 1905

Henry Warrum, City Atty. (Merrill Moores, of counsel), for appellant.

Ferdinand Winter and Ayres, Jones & Hollett, for appellee Byron C Quinby.

Lewis C. Walker, Addison C. Harris, and Daniel Wait Howe, for appellees Consumers' Gas Trust Co. and others.

BAKER Circuit Judge.

The complainant's original bill sought to restrain the Consumers' Gas Trust Company from embarking in the business of furnishing artificial gas on the ground that such purpose was beyond the corporate powers of the company, and to compel the winding up of the affairs of the corporation on the ground that natural gas had failed and it was no longer possible to carry on the business for which the corporation was organized. The litigation resulted in a decree in conformity to the prayer of the bill. Consumers' Gas Trust Company v. Quimby (C.C.A.) 137 F. 882.

The complainant has filed an ancillary bill for the purpose of removing a cloud upon the Consumers' Gas Trust Company's title, so that the property may be sold advantageously at the sale which has been advertised for September 11, 1905. The complainant's right to maintain this ancillary bill is founded upon the refusal of the directors, in whose charge the winding up of the affairs of the company was left by the original decree, to take any steps to remove the alleged cloud, which consists in the city's assertion of a right to take over the entire property of the gas company at a price to be fixed by appraisers. This alleged right of the city arises out of section 18 of the franchise contract between the city and the gas company.

Section 18 is as follows:

'The city of Indianapolis shall have the right, by giving at least six months notice, to purchase the entire plant or plants of any corporation, company, firm, or individual accepting the provision of this ordinance, at any time after the expiration of ten years from the date of its passage. The amount to be paid for such plant or plants shall be ascertained by the appointment of three disinterested persons, one to be appointed by said city and one by said corporation, company, firm or individual, and in case of disagreement, two shall select a third. The amount thus fixed shall be paid by said city within six months after the amount to be paid for such a plant or plants shall have been determined as herein provided.'

The cause is now submitted upon the ancillary bill, the city's answer thereto, and a stipulation of facts. Questions arising upon the bill and the answer of the directors of the gas company thereto are reserved for future determination.

The complainant insists that the city is barred from asserting any right under section 18 by reason of its being a party to the main decree. But the original bill was only of the scope hereinabove stated, and did not challenge the right of the city to claim the option, and the decree did not undertake to determine any questions that might arise during the winding up of the affairs of the gas company. The answer of the city contained matter only responsive to the bill; the city's position being the same as that of the other defendants namely, that the gas company's charter authorized it to convert its natural gas plant into an artificial gas plant and thereby to fulfill its charter obligations to the public and to the city. I am of the opinion that this contention of the complainant is unfounded, and this controversy must therefore be disposed of upon its merits.

The complainant asserts that the option is void by reason of the want of corporate capacity on the part of both the city and the gas company. It is obvious, however, that, if either party was wanting in capacity, the contract, which must be a valid engagement between competent persons, must be held void, unless the complainant is estopped from raising the question.

Taking up the question of the gas company's power to execute the option, it is observed that the complainant, standing in the shoes of the gas company, has instituted the present controversy. But inasmuch as the ancillary bill asserts that the city is making an unfounded claim of an interest in the property, which casts a cloud upon the title to the property, the matter stands no differently than if the city had come into court to assert its right, and the gas company were defending on the ground that it was wanting in corporate capacity to enter into the option.

This gas company was organized under the general laws of Indiana for the organization of manufacturing and mining companies. Burns' Ann. St. Ind. 1901, c. 38. Most of the companies organized under this act are purely of a private nature. But the fact that a company has been organized under this act does not decide the question whether the corporation is private or quasi public in character. That question is answered by looking to the character of the business in which the corporation purposes to engage. New Albany Waterworks v. Louisville Banking Company, 122 F. 776, 58 C.C.A. 576. Water companies, organized for the purpose of distributing water to cities and the inhabitants thereof, are formed under this same act. So, also, are companies for distributing artificial gas or natural gas. Companies of this character are universally recognized as being quasi public corporations. A further test, which furnishes the same answer, is this: The Legislature in 1887, authorized cities to grant natural gas companies the privilege of using the streets and alleys. The roads and streets of the state belong to the people, and no agency, neither the Legislature nor its subordinates, the municipalities, can authorize the streets to be used for private purposes. Therefore the investing of natural gas companies with the power to use streets was a declaration and establishment of the fact that natural gas companies are engaged in performing public services, and therefore belong to the class of corporations known as quasi public. It was suggested by the city that the gas company's character of a quasi public corporation did not come into being until the city granted the gas company the privilege of using the streets. But the gas company could not have accepted the use of the streets if it were a private corporation; for example, a corporation engaged in selling fruit or other merchandise from stands. State v. Berdetta, 73 Ind. 185, 38 Am.Rep. 117. The gas company in its charter from the state was endowed with the capacity to accept the privilege of using the streets, and therefore was from the time of its incorporation a quasi public company.

The charter of a corporation of this character is the measure of its powers, and the enumeration of its powers implies the exclusion of all others. Such a corporation can exercise no authority which is not granted to it by the charter under which it exists, or from some other act of the Legislature which granted that charter. Thomas v. Railroad Company, 101 U.S. 71, 25 L.Ed. 950; Oregon Ry. Co. v. Oregonian Ry. Co., 130 U.S. 1, 9 Sup.Ct. 409, 32 L.Ed. 837; Board of Commissioners v. L.M. & B.R. Co., 50 Ind. 85; Eel River R. Co. v. State, 155 Ind. 433, 57 N.E. 388.

A quasi public corporation is bound by definite obligations to the state. The granting of a charter by the state to such a corporation is not simply a license to the corporation to engage merely as long as it chooses in serving the public; but the company's acceptance of the charter (whether granted by a special or a general act) is a promise and undertaking on its part that it will do nothing and suffer nothing to be done that will disable it from performing its duties during the term of its charter. Central Transportation Co. v. Pullman's Palace Car Co., 139 U.S. 24, 11 Sup.Ct. 478, 35 L.Ed. 55; New Albany Waterworks v. Louisville Banking Co., 122 F. 776, 58 C.C.A. 576.

There is no pretense that the gas company was authorized by its charter to enter into an option to sell all of its property in gross. The policy of the state, according to the decisions of the state Supreme Court, is to hold such a corporation to its obligations to the state embodied in the charter. An engagement of such a corporation to strip itself of all its facilities for serving the public is as much against positive law as if that act were expressly prohibited by statute, for the declared rules of public policy are as much a part of the body of the law as any statutory enactment.

Manifestly the...