Seattle Gas & Elec. Co. v. Citizens' Light & Power Co.

• Decision Date: 12 June 1903
• Docket Number: 1,071.
• Citation: 123 F. 588
• Court: United States Circuit Court, District of Washington, Northern Division
• Parties: SEATTLE GAS & ELECTRIC CO. v. CITIZENS' LIGHT & POWER CO.

123 F. 588

SEATTLE GAS & ELECTRIC CO. v. CITIZENS' LIGHT & POWER CO.

No. 1,071.

United States Circuit Court, D. Washington, Northern Division.

June 12, 1903

Burke Shepard & McGilvra, E. C. Hughes, and Bausman & Kelleher, for complainant.

H. R Clise, John B. Hart, and Preston, Carr & Gilman, for defendant.

HANFORD District Judge.

The amended bill of complaint sets forth that by a certain ordinance of the city of Seattle passed in the year 1873, and re-enacted, with amendments, in the year 1881, a franchise was granted for the construction and maintenance of a plant for the manufacture of gas, and for the distribution thereof throughout the city by means of pipes to be laid in the streets of Seattle and any additions thereto. Said ordinances also granted a monopoly for a limited term of 25 years from the 6th day of June, 1873. By limitation of time, the exclusive right to manufacture and supply illuminating gas within the city of Seattle has ceased; but it is only the exclusive feature of the franchise which has been extinguished the complainant's right as successor of the original beneficiaries named in the ordinances referred to being perpetual-- a perpetual, nonexclusive franchise to continue the business and use the streets having been confirmed to the complainant, as the assignee and successor of the beneficiaries named in said ordinances, by a decree of this court, which is set forth in the amended bill of complaint.

The defendant is a corporation organized and existing under certain general statutes of the state of New Jersey providing for the formation of corporations, and it has undertaken to supply illuminating gas in the city of Seattle in competition with the complainant, and for that purpose it has placed within the streets of the city a system of mains and service pipes parallel to and crossing the pipes of the complainant's system. By this suit the complainant attacks the right of the defendant to use the streets of Seattle for the purpose of laying gas pipes therein, on two grounds, viz.: First, the defendant corporation is not authorized by its charter to engage in the gas business anywhere, and all of its transactions as a manufacturer and supplier of illuminating gas are ultra vires; and, second the defendant has pursued and is pursuing systematically a vexatious course towards the complainant by excavating the streets and laying gas pipes parallel to and in such near proximity to the complainant's pipes as to cause serious and unnecessary injury to the complainant's system, and increase the burden and expense of maintaining the same.

The amended bill of complaint has not been answered, but the defendant has made opposition to the granting of an injunction by affidavits, and has filed a special demurrer to the tenth paragraph, alleging indefiniteness and insufficiency of the averments contained in said paragraph, and also that the whole of said paragraph is irrelevant and immaterial. The tenth paragraph of the amended bill of complaint is the part wherein the complainant disputes the right of the defendant to engage in the gas business, and charges that by so doing its transactions are ultra vires, and that by using the streets of the city of Seattle, and making excavations therein for the purpose of laying and extending and repairing gas pipes, and by disturbing the earth underneath the complainant's pipes, the defendant is guilty of maintaining a nuisance, causing special injury and damage to the complainant.

In his oral argument upon the hearing of the application for an injunction pendente lite, and upon the demurrer, one of the solicitors for the defendant made a counter attack, questioning the right of the complainant to hold or enjoy the franchise and special privileges granted by the city of Seattle. But the questions thus argued should have been raised by a demurrer or plea in order to merit attention. Good practice requires that all issues, of law or fact, should be clearly presented in conformity to the rules of pleading. Therefore the court will not consider any attack made upon the plaintiff's case by mere oral speech.

Upon the argument one party insisted and the other conceded that, although the state of New Jersey has a statute providing especially for the formation of corporations to manufacture and sell gas, yet this defendant was organized under the general incorporation laws of New Jersey, so that it is not subject to the restrictions and limitations of the gas act, and derives none of its claimed powers therefrom. Therefore the question raised by the demurrer is whether a corporation formed under the general statutes of New Jersey is authorized by the law of its creation manufacture and sell illuminating gas and acquire the right to use the public streets of a city outside of New Jersey for the purposes essential to that business. This being a question of New Jersey law, the highest court of the state of New Jersey is the highest authority to which the question can be referred. That court has rendered a definite and unequivocal decision, holding that the gas act is the only law under which corporations may be organized in New Jersey for the purpose of carrying on a gas manufacturing business; therefore no argument to the contrary can rightfully prevail in any other court. The following quotation from the opinion of the Supreme Court of New Jersey in the case of Richards v. City of Dover, 61 N. J. Law, 400, 39 A. 705, must be accepted by this court as an authoritative declaration of the law of the defendant's domicil, by which its powers are restricted and limited:

'The passage of these general laws authorizing the incorporation of gas companies shows a clear legislative intent to separate gas companies from those corporations which may lawfully be organized and promoted under the general corporation act, and to subject the former to limitations and restrictions not applicable to the latter. Reference to some of the provisions of the gas act of 1876 disclosed such intention too clearly to permit it to be disregarded. Sections 19, 20, 21, and 27 (Gen. St. pp. 1611, 1612), containing stringent provisions for the protection of the public, are made expressly to apply only to corporations formed under said act. These provisions cannot be rendered nugatory by the simple device of incorporating under the general corporation act. The defendant company was organized under the general corporation act, and therefore, not being subject to any of these safeguards, the only construction of this legislation which can reasonably be accepted is that the right to exercise the privilege of laying gas pipes and conducting gas business is not within the scope of its charter rights, and cannot be conferred upon it by municipal authority. The general powers over streets and the lighting of streets granted to the common council by the charter of Dover must be exercised in subordination to the public laws of the state, and cannot be invoked to justify the evasion of the regulations so carefully provided by the gas act. * * * In my judgment, the Legislature has clearly expressed its intention that no corporation shall acquire or exercise the franchises of a gas company without subjecting itself to the salutary provisions of the gas act by incorporating under it.'

The only way in which the defendant has attempted to avoid the effect of the above decision is by arguing that the decision only states the law applicable to corporations operating within the state of New Jersey. This contention assumes that the general laws of New Jersey confer ample powers upon corporations organized thereunder to manufacture, distribute, and sell gas wherever licenses to do so can be obtained, and that all restrictions upon the exercise of said powers imposed by the laws of New Jersey are of a local character, applicable only within the state of New Jersey. The Supreme Court of New Jersey, however, in the Dover Case, did not rest its decision upon any special prohibitory statute, but took a comprehensive view of the entire body of the New Jersey statutes bearing upon the subject, and reached the conclusion 'that the right to exercise the privilege of laying gas pipes and conducting a gas business is not within the scope of the charter rights' of a corporation organized like the defendant in this case under the general laws of New Jersey, 'and that such right cannot be conferred upon it by municipal authority. ' By the law of New Jersey as it has been construed by the Supreme Court of that state, a New Jersey corporation, not incorporated under the gas act, has no right to become a supplier of gas, and has no capacity to acquire such right by a grant of privileges from a municipal corporation; and this is not because of any local prohibitory statute, but because such a corporation is not endowed by its creator with any authority whatever to engage in that particular business.

The statutes of New Jersey to which my attention has been directed do not in any manner evince an intention to discriminate against corporations whose operations are confined within the boundaries of New Jersey, nor to confer upon corporations operating elsewhere enlarged powers, or any rights whatever which they are not permitted to exercise and enjoy within that state. It has become a habit of business men in this country to organize corporations in one state to operate in another, and presumably there is some advantage to be gained thereby, otherwise the practice would not be continued. But no sound reason has been advanced, and none occurs to my mind, for giving additional encouragement to the practice by judicially expanding the powers of such corporations so as to include additional rights and powers to be exercised abroad, but not at...