State ex rel. Snyder v. Portland Natural Gas & Oil Co.

• Decision Date: 06 June 1899
• Citation: 153 Ind. 483,53 N.E. 1089
• Court: Indiana Supreme Court
• Parties: STATE ex rel. SNYDER, Prosecuting Attorney, v. PORTLAND NATURAL GAS & OIL CO.

153 Ind. 483

53 N.E. 1089

STATE ex rel.

SNYDER, Prosecuting Attorney,

v.PORTLAND NATURAL GAS & OIL CO.¹

Supreme Court of Indiana.

June 6, 1899.

Appeal from circuit court, Randolph county; A. O. Marsh, Judge.

Quo warranto proceedings by the state, on the relation of Frank H. Snyder, prosecuting attorney, against the Portland Natural Gas & Oil Company. From a judgment entered on sustaining a demurrer to the information, the state appeals. Reversed.

William H. Williamson and Frank H. Snyder, for appellant. Headington & La Follette and J. J. M. La Follette, for appellee.

JORDAN, J.

This is a proceeding in quo warranto by the state of Indiana, on the relation of the prosecuting attorney of the Twenty-Sixth judicial circuit, to dissolve, and seize the corporate franchises of, appellee. The venue of the cause was changed from the Jay circuit court to the Randolph circuit court, in which court a demurrer was sustained to the information for insufficiency of facts, and judgment was rendered in favor of appellee thereon. The state appeals, and assigns error on the ruling of the court in sustaining the demurrer to the information.

The information alleges: That the defendant is a corporation duly organized in December, 1886, under the laws of the state of Indiana relating to the incorporation of manufacturing and mining companies. The object of its organization is to conduct the business of mining oil and gas, and to furnish the same for fuel and illuminating purposes and for propelling machinery, etc. Its place of business or operation is stated to be at the city of Portland, in the state of Indiana. After its incorporation it obtained from said city permission to lay gas pipes along and under the public streets of that city for the purpose of supplying its inhabitants with gas for light and fuel, and it engaged in furnishing gas to them for such purposes. That the Citizens' Natural Gas & Oil Company was also duly incorporated in February, 1889, under the same laws and for the same purposes as was defendant, and it also was granted the privilege by the city of Portland to lay its pipes in and along the streets of the city for the same purposes as was defendant, and it engaged in supplying gas to the inhabitants of said city for fuel and light. After alleging these facts, the information charges that the defendant on the 1st day of September, 1891, “in violation of law and in the abuse of its corporate powers, and in the exercise of privileges not conferred upon it by law,” entered into a certain agreement or combination with said Citizens' Gas & Oil Mining Company “to fix the rate of gas to be charged by them, and each of them, to the consumers in said city of Portland.” It was further agreed by and between the defendant and said other mentioned company that “neither of said companies should or would attach the service pipes of any gas consumer in said city to its pipe lines if at the time such customer or consumer was a patron of the other company.” It is further averred that the defendant has observed and complied with said agreement, and the price of gas has been fixed thereby, and it has at all times refused to sell or furnish gas to the inhabitants of said city at any other price than the one fixed by said agreement, and in pursuance of said agreement, and in order to prevent competition, it has refused, and still refuses, to supply divers inhabitants of the said city of Portland with gas, who, as it is alleged, were consumers of gas from the pipe line of the said Citizens' Gas & Oil Mining Company. It is further alleged that there is no other corporation, company, or person in said city engaged in supplying gas for light and fuel to its inhabitants. The information is not a model pleading, and may perhaps be said to be open to the objection that in some respects it is uncertain, and in others states conclusions instead of facts. The question, however, presented for our decision, is, are the facts as therein alleged sufficient to entitle the state to demand that the appellee's corporate franchises shall be declared forfeited? Reduced to a simple proposition, the gravamen upon which it bases its demand for a forfeiture of the defendant's corporate rights is that it has, by an agreement, illegally united with the Citizens' Gas, etc., Company, a competing company, under which agreement the price of gas to be charged consumers has been fixed, and has agreed with said company that neither would furnish gas to persons who were patrons of the other company. By this agreement it appears that it was controlled, and at all times refused to furnish its product to divers inhabitants of the city of Portland, simply because they were consumers of gas from the lines of the Citizens' Gas Company. The insistence of counsel for the state is that the defendant, under the facts charged in the information, is shown to have combined with the Citizens' Gas Company to fix and maintain the price of gas, and that these companies agreed with each other not to furnish gas to consumers who were patrons of the other company, in order to prevent legitimate competition; that, in carrying out the compact or agreement, the defendant exercised powers not conferred by law, and committed an act violative of law, and is shown to have abused the rights conferred upon it by the state, and hence it ought to be ousted from longer or further exercising its corporate rights. The Code provides that an information may be filed against a corporation when it does or omits acts which amount to a surrender or forfeiture of its rights and privileges as a corporation, or when it exercises powers not conferred by law. Burns' Rev. St. 1894, § 1145 (Rev. St. 1881, § 1131; Horner's Rev. St. 1897, § 1131, subd. 4). The statute exacts that the information “shall consist of a plain statement of the facts which constitute the grounds of the proceeding addressed to the court.” Burns' Rev. St. 1894, § 1147 (Rev. St. 1881, § 1133; Horner's Rev. St. 1897, § 1133). The authorities assert, as a general rule, that courts will proceed with extreme caution in the forfeiture of corporate franchises, and a corporation will not be deprived thereof unless under express limitation, or for a plain abuse of its powers, whereby it fails to fulfill the design and purpose of its organization. When the state seeks to destroy the life of an incorporated body, it is required to show some grave misconduct,-some act, at least, by which it has offended the law of its creation, or something material which tends to produce injury to the public, and not merely that which affects only private interests, for which other adequate remedies are provided. High, Extr. Rem. §§ 649, 654; People v. North River Sugar-Refining Co., 121 N. Y. 582, 24 N. E. 832;Bank of Vincennes v. State, 1 Blackf. 267. Where, however, the facts disclose that a corporation has failed in the discharge of its corporate duties by uniting with others in carrying out an agreement, the performance of which is detrimental or injurious to the public, it thereby may be said to offend against the law of its creation, and consequently forfeits its right to longer exercise its franchises, and is subject to a judgment of ouster. People v. North River Sugar-Refining Co., 54 Hun, 354, 7 N. Y. Supp. 406;Id., 121 N. Y. 582, 24 N. E. 832;State v. Oberlin Bldg. & Loan Ass'n, 35 Ohio St. 258;State v. Cincinnati, N. O. & T. P. Ry. Co., 47 Ohio St. 130, 23 N. E. 928;State v. Standard Oil Co., 49 Ohio St. 137, 30 N. E. 279; High, Extr. Rem. § 666. Courts have enlarged the rule so that an information in the nature of a quo warranto is now regarded not only as appropriate means of testing the right to exercise corporate franchises, but such proceedings are also a proper remedy for the abuse by a corporation of the powers with which it has been invested. Beach, Priv. Corp. § 53. Of course, as asserted by the authorities previously cited, proceedings in quo warranto will not be countenanced or receive the sanction of a court, as a general rule, where the act complained of is of a trivial character, or where the abuse charged may be said to be a doubtful one, or there exists any other adequate or ample remedy therefor. Id. § 436. Corporations are recognized as creatures of the law, and they certainly owe obedience thereto; and when they fail to perform duties which they were created to...