Tennessee Public Service Co. v. City of Knoxville

• Decision Date: 09 March 1936
• Citation: 91 S.W.2d 566,170 Tenn. 40
• Parties: TENNESSEE PUBLIC SERVICE CO. v. CITY OF KNOXVILLE et al.
• Court: Tennessee Supreme Court

91 S.W.2d 566

170 Tenn. 40

TENNESSEE PUBLIC SERVICE CO. v. CITY OF KNOXVILLE et al.

Supreme Court of Tennessee.

March 9, 1936

Appeal from Chancery Court, Knox County; A. E. Mitchell, Chancellor.

Suit by the Tennessee Public Service Company against the City of Knoxville and another, wherein defendants filed demurrers. From a decree overruling the demurrers, defendants appeal and complainant filed the record for error, seeking to correct portion of decree.

Decree in accordance with opinion.

Simpson Thacher & Bartlett, of New York City, Frantz, McConnell & Seymour, Jennings & O'Neil, and Grimm & Tapp, all of Knoxville, and Trabue, Hume & Armistead, of Nashville, for plaintiff.

Kennerly & Key, W. H. Peters, Jr., and Frank Montgomery, all of Knoxville, for defendant City of Knoxville.

Fowler & Fowler, of Knoxville, for defendant Hess & Barton, Inc.

HOLMES Special Judge.

This is a suit by Tennessee Public Service Company to enjoin the city of Knoxville from making certain contracts with the Tennessee Valley Authority and the Federal Emergency Administration of Public Works, and to enjoin the city of Knoxville from constructing or having constructed an electrical distribution system, and to enjoin the city of Knoxville from carrying out a construction contract with the defendant Hess & Barton Inc.

The chancellor granted a fiat for writ of injunction.

The defendants filed separate sworn answers, which, by stipulation, were withdrawn, and defendants allowed to stand upon their demurrers filed.

The original bill was twice amended. And upon the hearing on the demurrers to the bill, as amended, the chancellor overruled all grounds of the demurrers, and allowed an appeal.

Complainant has filed the record for error, seeking to correct one portion of the chancellor's decree.

For convenience and brevity, complainant will be referred to hereinafter either as complainant or TPS; city of Knoxville as the city; Hess & Barton, Inc., as Hess & Barton; Tennessee Valley Authority as TVA; and the Federal Administration of Public Works as PWA.

It is unnecessary to set out in detail the averments of the bill nor the grounds of demurrers. Reference will be made to the bill as it may become necessary.

One of the assignments of error made by the defendants below is that the chancellor should not have allowed the first and second amendments to the original bill. The amendments are quite long, and need not be set out here.

Suffice it to say that whether or not the amendments should be allowed was matter for the exercise of the chancellor's discretion. And unless there has been an abuse of discretion, there can be no reversal. We are unable to see that there was an abuse of discretion in allowing the amendments.

Right of Complainant to Maintain Suit.

Defendants insist that TPS does not show that it has any right to maintain the suit.

TPS bases its right to sue on its status (a) as a federal taxpayer; (b) as a municipal taxpayer; and (c) as owner and holder of a nonexclusive franchise granted to it by the city.

(a) There can be no reason for TPS asserting that it is a federal taxpayer except for the purpose of enjoining an alleged unwarranted disposition of money or property belonging to the government of the United States. For reasons to be hereinafter stated, we are of opinion complainant cannot maintain this suit on its status as a federal taxpayer.

(b) and (c) It is unnecessary to encumber this opinion with a discussion of the standing of TPS as a municipal taxpayer; and unnecessary to determine whether it may maintain this suit on its status as a municipal taxpayer, because the bill does aver that TPS has a franchise from the city of Knoxville; that it is furnishing electric current to the city and to the inhabitants; that its service has been, and is, efficient and sufficient. It is true that the franchise is not exclusive.

Let it be conceded that TPS, as holder of a nonexclusive franchise, has no right to an injunction to restrain nor prevent unlawful competition. And let it be conceded that the city itself may lawfully enter into competition with TPS. We are dealing, now, only with the right of complainant to wage its suit, not with its right, ultimately, to relief. The complainant avers that it is the intent and purpose of the city illegally to compete with complainant, in that the contracts with PWA and TVA require that the city shall agree and bind itself that TVA shall have full and complete power, during a period of twenty years, to control and fix the rates at which the city shall furnish electric current to consumers.

Whether the city can, lawfully, make such contracts, and having made them, can lawfully compete with complainant are questions which complainant, having a property right in its franchise, is entitled to have adjudicated. Frost v. Corporation Commission of State of Oklahoma, 278 U.S. 515, 49 S.Ct. 235, 73 L.Ed. 483; City of Campbell v. Arkansas-Missouri Power Co. (C.C.A.) 55 F. (2d) 560.

We have carefully read the briefs filed on behalf of defendants; and while there are some authorities cited which, upon a casual reading of same, are opposed to our conclusion in this regard, we are satisfied with our conclusion that the owner and holder of a franchise, though not exclusive, is entitled to relief by way of injunction against threatened or actual injury to his property right through illegal competition.

We do not regard the principle stated in Noell v. Tennessee Eastern Power Company, 130 Tenn. 245, 169 S.W. 1169, as in conflict with the conclusion we have reached. In Noell v. Tennessee Eastern Power Company a petition had been filed by the power company to condemn certain land owned by Noell, who demurred to the petition on the ground that the acts (chapter 208 of Acts of 1895 and chapter 127 of 1909) were unconstitutional, in that the acts conferred rights of eminent domain on corporations organized thereunder, and withheld by implication this right from individuals, firms, and partnerships. The lower court overruled the demurrer and this court, in affirming the action of the lower court, said: "It is not necessary to determine this question here, however, for the reason that the plaintiff in error, Noell, who thus assails the acts as discriminatory, is not a person adversely affected by the alleged discrimination." 130 Tenn. 245, at page 247, 169 S.W. 1169.

Suppose the petition to condemn had recited and shown on its face that the power company had refused and failed to pay the privilege tax assessed against it, or suppose that the petition had shown on its face that the power company had refused and would refuse to recognize any right or power of the state to control its resale rates. Upon such a showing, would the court have held that the power company could exercise its right of eminent domain?

In this connection, Hess & Barton contend that complainant cannot sue in the same cause claiming as taxpayer and as owner of a franchise.

We are unable to see that there is any conflict or incongruity. We cannot see why, if by the same act or acts, injury is threatened to one as a taxpayer and also to his property rights in a franchise, he may not, in the same suit, seek to assert his rights in both capacities.

Estoppel.

Defendants insist that because complainant entered into a contract with TVA looking to a sale of complainant's distribution system to TVA complainant is estopped to deny the right and power of the city to acquire, own, and operate an electric distribution system.

And it is claimed complainant is judicially estopped to deny or question the right of TVA to produce and sell to the city electric energy, or to deny the right of the city to own and operate an electric distribution system.

In the view we have in respect of this court's jurisdiction to determine any question of the rights and powers of TVA, and in the view we have of the right and power of the city of Knoxville to own and operate an electric distribution system, it is of no consequence whether or not complainant is estopped to make these particular questions.

However, if those were live questions, we should be in accord with that part of the opinion of the chancellor which holds the facts alleged do not show an estoppel, neither in pais nor judicial.

Can this court consider the questions made in the bill in respect of the claimed invalidity of the Act of Congress creating TVA (16 U.S.C.A.§§ 831-831cc), or the Act of Congress, title 2 NIRA (40 U.S.C.A. § 401 et seq.), under which PWA is claiming to function? And can this court determine whether the administrator has authority under title 2 NIRA to make the supposed loan and grant to the city of Knoxville?

Our answer to those questions must be in the negative. TVA is a corporation, chartered by Act of Congress. Neither the corporation, nor any representative, nor agent thereof, is party to this suit. In respect of title 2 NIRA, no agent, representative, nor officer of the government of the United States is party to the suit. In the absence of such party or parties, we think this court is without jurisdiction as to these matters.

We do not mean to be understood as committing ourselves to a declaration that the validity of an Act of Congress can never be drawn in question unless the government of the United States, or some agent, representative, or officer of the government is made party. But we do mean to say that the validity of an Act of Congress cannot be put in question unless there is a party to the suit who is claiming some right thereunder, or attempting to enforce some provision contained in the act. Neither of which conditions obtain here.

As stated in complainant's brief (volume 1, page 177) "The court is determining merely the...