The City of Winfield v. The Court of Industrial Relations

• Decision Date: 10 June 1922
• Docket Number: 24,140
• Citation: 111 Kan. 580,207 P. 813
• Parties: THE CITY OF WINFIELD, Appellant, v. THE COURT OF INDUSTRIAL RELATIONS et al., Appellees
• Court: Kansas Supreme Court

207 P. 813

111 Kan. 580

THE CITY OF WINFIELD, Appellant, v. THE COURT OF INDUSTRIAL RELATIONS et al., Appellees

No. 24,140

Supreme Court of Kansas

June 10, 1922

Decided January, 1922.

Appeal from Shawnee district court, division No. 2; GEORGE H WHITCOMB, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. NATURAL GAS RATES--Power of Court of Industrial Relations and of Public Utilities Commission to Modify or Change Established Natural-gas Rates. During the time the court of industrial relations was vested with the duties and functions of the public utilities commission, that court, and the commission prior to and subsequent to that interval, had power to set aside and change the rate for natural gas furnished to the inhabitants of the city of Winfield, notwithstanding the city's objection thereto, and notwithstanding the existence of a contract between that city and the party which supplied the natural gas, which contract had been made and promulgated by a city ordinance prior to the enactment of the public utilities law; and whatever might be urged against the impairment of such contract by the other party thereto, the changes in the rates and service by order of the state tribunal did not as against the city violate the contract clause of the federal constitution.

2. SAME--Contracts Between City and Public Utility--City Acts as Agent of the State--Power of State Over Such Contracts. In exercising the power of making contracts with public utilities, and in enacting ordinances with reference thereto, a city acts as an agent of the state in its governmental character, and it is within the power of the state to withdraw that authority and confer it upon another governmental agency, such as the court of industrial relations or the public utilities commission, and such later governmental agency has the power with the express or implied assent of the utility concerned to alter the contract and other incidental regulations theretofore established by the city.

3. SAME--Supplying Gas to City--Supervision of Public Utilities Commission. Where the gas supplied to a city in this state through a local distributing company is furnished by a gas transportation and sales company which has its chief sources of supply in Oklahoma, and which similarly transports and delivers gas to many other cities in Kansas, the rates and service in such city are subject to the original jurisdiction of the public utilities commission under its regulatory and supervisory powers conferred by statute.

4. SAME--Installation of Devices for Regulating Gas Pressure--Order of Commission Valid. The public utilities commission has power to order the installation of devices for regulating gas pressure, and the fact that its order to that effect is experimental, and the use of the pressure regulating devices only required for six months, does not affect its validity.

5. SAME. Under authority of statute the city of Winfield contracted in 1906 for natural gas at prescribed rates and pressure, and enacted an ordinance to the same effect. Under the powers vested by the public utilities act of 1911, and acts of 1919, 1920 and 1921, the court of industrial relations and the public utilities commission made orders which changed the rates and pressure defined by the contract and city ordinances of 1906. The gas supply of Winfield is chiefly derived from a transportation company which similarly supplies other cities in that part of the state, and the rates and gas pressure in Winfield have a substantial and consequential effect on the rates and gas pressure in other cities. Held, that the matter of regulating gas rates and gas pressure in Winfield is within the original jurisdiction of the tribunal which exercises the powers conferred by the public utilities act and supplemental legislation.

A. M. Jackson, J. E. Torrance, and S. C. Bloss, all of Winfield, for the appellant.

A. E. Helm, of Topeka, for the appellees; H. O. Caster, of Bartlesville, Okla., of counsel.

OPINION

DAWSON, J.:

The city of Winfield brings this appeal from a judgment of the district court of Shawnee county upholding an order of the court of industrial relations which increased the rates for natural gas which had been prescribed by ordinance in 1906, which rates were also prescribed by a contract of about the same date between the city and one Pattison, assignor of successive utility companies which have been supplying the city with that commodity pursuant to such ordinance and contract.

Another matter involved herein relates to the validity of an order issued by the public utilities commission after it was reestablished and reinvested with authority over public utilities by the act of 1921. This order directed that a certain device for regulating and limiting the gas pressure be supplied to the patrons of the gas company in Winfield. It also prescribed a certain gas pressure, substantially less than that provided by the city ordinance of 1906. The district court declined to interfere with that order, and its propriety is also within the scope of this appeal.

The city's main contention is that these official state boards, the court of industrial relations and the public utilities commission, had no power to make the orders appealed from because such orders impaired the contract of 1906 between the city and Pattison and his assignees. Pattison had agreed to supply the city with gas at a rate not exceeding thirty cents per thousand cubic feet. The details of the contract and ordinance need not be stated. The order of the state tribunal created certain distributing zones of the cities supplied by the Wichita Natural Gas Company, the trunk line company which transports, sells and distributes natural gas throughout that section of the state; Winfield, Arkansas City and neighboring towns were put in zone 1; Wellington, Wichita and others in zone 2; and Newton, Hutchinson and others in zone 3; and a charge of seventy-five cents per month per customer, plus a rate of fifty-six cents per thousand cubic feet, was prescribed for customers in zone 1, and higher graduated rates in zones 2 and 3, which were further away from the gas transportation company's sources of supply.

Did the state tribunal have power to make these orders? There can be no doubt that the public utilities law conferred upon it that power, unless the city is correct in its contention that the order impaired the contract of 1906 within the inhibitions of the federal constitution. In our own cases concerning orders of the state commission over rates and service of public utilities, it has not hitherto been necessary to decide this precise point, although we barely avoided it in City of Cimarron v. Water, Light & Ice Co., 110 Kan. 812, 205 P. 603, because there the contract in question was made after the enactment of the public utilities act. Here the question must be squarely met and decided, because this contract was made in 1906, and the public utilities statute extending general state control over public utilities like gas companies and creating a state board to exercise that control was not enacted until 1911.

It goes without saying that under the inhibitions of the federal constitution the state may not enact a law which impairs the obligation of an ordinary contract between private individuals. Yet even this rule is not without its exceptions. (Union Dry Goods Co. v. Georgia P. S. Corp., 248 U.S. 372, 63 L.Ed. 309; 9 A. L. R. 1423, 39 S.Ct. 117, and note.) It has also been declared many times that when the state authorizes one of its municipal corporations to make a contract with private parties or public-service corporations for a reasonable term of years, the state cannot by subsequent legislation impair that contract to the prejudice of the party with whom the contract was made, nor without the assent of such party thereto. The many cases declaring this principle are the ones here pressed upon our attention by counsel for the city. But these cases do not reach the matter here concerned. Here the state authorized its own subordinate governmental agency, the city of Winfield, to make a contract with Pattison and his assignees. Now the state by further legislation says in effect, "I resume this power and confer it upon another governmental agent, a public utilities commission or an industrial court, and I authorize it to act for me instead of my municipal corporation at Winfield." When the city of Winfield made that contract with Pattison it was acting as the agent of the state for the benefit of the people of that municipality. Until the public utilities law was enacted, the city and Pattison might have amicably changed that contract. In the act of 1911 the state put forward another agent clothed with power to deal with Pattison; and that agent of the state with the express or implied consent of Pattison's present assignee has abrogated and changed certain features of that contract; and neither the federal inhibition concerning the sanctity of contracts nor any other constitutional principle is violated thereby. This course of reasoning is pursued by most, if not all, of the courts which have had occasion to consider it. In the Cimarron case, supra, the leading cases with pertinent annotations which deal with this subject were cited. (See, also, Sandpoint W., etc., Co., Ltd. v. Sandpoint, 31 Idaho 498, 173 P. 972, L. R. A. 1918F, 1106; Arlington Board of Survey v. Bay State St. Ry., 224 Mass. 463, 113 N.E. 273; North Wildwood v. Public Utility Comm'rs, 88 N.J.L. 81, 95 A. 749; Portland v. Public Service Commission, 89 Ore. 325; City of Salem v. Salem Water, Light & Power Co., 255 F. 295.)

Strictly speaking, these cases announce no new principle. The state creates governmental officers and agencies,...