State v. Flannelly

• Decision Date: 04 October 1915
• Docket Number: 20,324. 20,360
• Parties: THE STATE OF KANSAS, ex rel. H. O. CASTER, as Attorney for the Public Utilities Commission of the State of Kansas, et al., Plaintiff, v. THOMAS J. FLANNELLY, as Judge of the District Court of Montgomery County, and JOHN M. LANDON et al., as Receivers of the Kansas Natural Gas Company, Defendants. THE STATE OF KANSAS, ex rel. JOHN S. DAWSON, as Attorney-general, etc., v. THE INDEPENDENCE GAS COMPANY et al. (THE PUBLIC UTILITIES COMMISSION OF THE STATE OF KANSAS, Appellants; JOHN M. LANDON and R. S. LITCHFIELD, as Receivers, etc., Appellees)
• Court: Kansas Supreme Court

152 P. 22

96 Kan. 372

THE STATE OF KANSAS, ex rel. H. O. CASTER, as Attorney for the Public Utilities Commission of the State of Kansas, et al., Plaintiff, v. THOMAS J. FLANNELLY, as Judge of the District Court of Montgomery County, and JOHN M. LANDON et al., as Receivers of the Kansas Natural Gas Company, Defendants.

THE STATE OF KANSAS, ex rel. JOHN S. DAWSON, as Attorney-general, etc., v. THE INDEPENDENCE GAS COMPANY et al. (THE PUBLIC UTILITIES COMMISSION OF THE STATE OF KANSAS, Appellants;

JOHN M. LANDON and R. S. LITCHFIELD, as Receivers, etc., Appellees)

No. 20,324. No. 20,360

Supreme Court of Kansas

October 4, 1915

Decided July, 1915.

Case No. 20,324. Original proceeding in mandamus.

Case No. 20,360. Appeal from Montgomery district court; THOMAS J FLANNELLY, judge. Opinion filed October 4, 1915. Reversed.

Court dismissed.

A. E Helm, of Wichita, Fred S. Jackson, of Topeka, and H. O Caster, of Oberlin, for The Public Utilities Commission.

Robert Stone, and George T. McDermott, both of Topeka, for defendant Thomas J. Flannelly.

O. P. Ergenbright, T. S. Salathiel, both of Independence, Chester I. Long, of Wichita, and John H. Atwood, of Kansas City, Mo., for the Receivers.

Marshall, J. Dawson, J.

OPINION

MARSHALL, J.

In January, 1912, the attorney-general commenced an action in the district court of Montgomery county, entitled The State of Kansas v. The Independence Gas Company, The Consolidated Gas, Oil & Manufacturing Company, and the Kansas Natural Gas Company. The petition charged that the defendants were violating the antitrust laws of the state, and prayed for an ouster of the defendants and the appointment of a receiver for their properties. The cause was tried October 1, 1912, and judgment rendered February 15, 1913. R. S. Litchfield and John M. Landon were appointed receivers for the Kansas Natural Gas Company. The gas companies engaged in distributing natural gas furnished by the Kansas Natural Gas Company to the consumers were then made parties defendant to the action, were served with a copy of the judgment, and each was restrained from appearing in any other court for the determination of any matter in connection with its contract with the Kansas Natural Gas Company. These receivers were also appointed receivers for the Kansas Natural Gas Company in Missouri and Oklahoma. At the time this judgment was rendered, all the property and assets of the Kansas Natural Gas Company were in the possession of receivers appointed by the United States district court for the district of Kansas, in a suit brought by a bondholder of the company after the action in the state court had been tried. The district court of Montgomery county, upon the rendition of its judgment, directed its receivers to apply to the federal court and ask that court to direct the federal receivers to turn over the property in their hands to the receivers appointed by the state court. Litigation followed, which terminated in all the property of the Kansas Natural Gas Company being turned over to the receivers appointed by the state court. All the property of the Kansas Natural Gas Company is now in the possession and control of these receivers.

In December, 1914, the creditors and stockholders of the Kansas Natural Gas Company entered into a stipulation and agreement fixing the amounts that were due the bondholders, lienholders and stockholders of the Kansas Natural Gas Company and the companies subsidiary thereto. This agreement provided that the receivers might, as expeditiously as possible and whenever deemed advisable by the court, make application to the public utilities commission for compensatory rates for gas. On April 9, 1915, under the direction of the court, the receivers filed with the public utilities commission an application for compensatory rates for gas. After hearing the application, the commission, on July 16, 1915, made findings and rendered an opinion, stating that in all markets where the net price of gas to consumers is 25 cents per thousand cubic feet the rates should be increased to 28 cents net, but because more than half the gas supplied and marketed by the receivers of the Kansas Natural Gas Company is sold in the state of Missouri it would be manifestly unfair to permit the receivers to advance the price of gas to their Kansas patrons unless a corresponding increase is made to consumers in Missouri; and further stating that the commission awaits the pleasure of the rate-regulating body or bodies of Missouri having jurisdiction of the subject matter, and if in that state proper and necessary orders be issued establishing similar rates in Missouri, an order, effective simultaneously if possible, will be issued by the commission, fixing the rates as above indicated.

On July 26, 1915, on the application of the receivers, the district court entered an order making the public utilities commission a party defendant in the action in which the receivers were appointed. The receivers then presented a petition to that court, asking that the commission be enjoined from enforcing any and all orders made by the public utilities commission; and that the court, upon the final hearing of the petition, fix and determine a fair, lawful, reasonable and compensatory rate to be paid for natural gas supplied by the receivers in the state of Kansas. Summons and a temporary restraining order were issued and served on the commission in Shawnee county. On August 7, 1915, the public utilities commission appeared specially and presented a motion to the court to quash the summons and service thereof, challenging the jurisdiction of the court on the grounds that neither of the commissioners was served with summons in Montgomery county, and that their official residence was in Topeka, Shawnee county. This motion was denied August 12, 1915. On August 17, 1915, H. O. Caster, attorney for the public utilities commission, filed in this court an application for an alternative writ of mandamus against Thomas J. Flannelly, judge of the district court of Montgomery county, and John M. Landon and R. S. Litchfield, receivers of the Kansas Natural Gas Company, praying that Thomas J. Flannelly, judge of the district court, be commanded to vacate and set aside the order making the public utilities commission a party defendant in the action in that court, to set aside the temporary restraining order in that action, and to dismiss the suit against the public utilities commission; and praying that John M. Landon and R. S. Litchfield, receivers of the Kansas Natural Gas Company, be compelled to perform their legal and public duties or show cause to this court why they should not do so. To this petition R. S. Litchfield and John M. Landon filed their answer September 22, 1915, in which they allege that the business in which they are engaged--that of producing, transporting and selling natural gas--is interstate commerce, and is therefore not under the control of the public utilities commission; that the price at which gas has been sold in Kansas and Missouri is unreasonable, inadequate, unremunerative, noncompensatory and confiscatory; that unless a reasonable, proper advance is made in the price of gas it will be impossible to continue the operation of business; and that the rates and regulations prescribed in the opinion of the commission rendered July 16 are unreasonable, unremunerative, noncompensatory and confiscatory, unlawful and void, and will deprive the receivers of the property in their possession and under their control without due process of law, in violation of the fourteenth amendment of the constitution of the United States.

On August 24, 1915, the public utilities commission filed in the district court of Montgomery county its demurrer to the petition of the receivers, not waiving any rights under the motion to quash, and, continuing to challenge the jurisdiction of the court, demurred on the grounds that the court had no jurisdiction over the persons of the defendants, or either of them, and had no jurisdiction over the defendant, the public utilities commission, or the subject matter of the action. This demurrer was overruled August 25, 1915. The public utilities commission then announced in open court that it elected to, and did, stand upon its demurrer. The commission did not plead further. On the same day notice of appeal from the decision of the court in overruling the demurrer of the public utilities commission was filed. The appeal was filed in this court September 9, 1915. After the demurrer was overruled, the receivers introduced evidence in support of their petition, and on August 27 the court found that the receivers are engaged in interstate commerce; that the findings of the commission and its orders, or threatened orders, are a cloud upon the title to the properties and assets of the Kansas Natural Gas Company in the hands of receivers of the court; that they are unreasonable, unremunerative and confiscatory in effect; and specially found that the commission's findings and threatened orders with reference to the allowance of waste in the distributing systems are unlawful, unreasonable and confiscatory; are an interference with the administration of the property by the court, a taking of the estate in the hands of the court without due process of law, a dissipating and wasting of the assets of the estate in the hands of receivers, and an interference with interstate commerce in which its receivers are engaged; and then permanently enjoined the public utilities commission, its members, officers and attorneys, from putting into force or effect the opinion, order, and findings thereof. The court further found that it will be advisable, beginning with October 1, 1915, to establish a rate of 30 cents, to be changed or...