United Gas Corporation v. Shepherd Laundries Co.

Citation189 S.W.2d 485
Decision Date18 July 1945
Docket NumberNo. A-331.,A-331.
CourtSupreme Court of Texas

This suit was instituted in Harris County by the respondent, Shepherd Laundries Company, Inc., against the petitioner, United Gas Corporation, for damages because petitioner charged respondent a higher rate for natural gas furnished it in Houston for certain periods between June 1934 and October 1942 than it did other customers in that city "under similar and like circumstances." The petition of respondent charges that during such period the gas company, and its predecessor in business, supplied gas to respondent at 19¢ per 1000 cubic feet for the first 1000 per month, 18¢ for the next 9000 cubic feet, and 17¢ for all additional gas used during the month, while during the same period gas was furnished to other customers similarly situated at lower rates. This suit is for the difference between the rate paid by respondent and the lower rate paid by other similar customers. Based upon jury findings that the favored customers were served under similar and like circumstances, and upon undisputed facts that they received gas at lower rates, judgment was rendered for respondent in the sum of $5094.10, which was affirmed by the court of civil appeals. 181 S.W.2d 929.

The petitioner's chief contention is that respondent is not entitled to recover because no claim was made that the rate charged it was unreasonable or that the lower rate given to other customers caused respondent any loss or damage in its business. In this connection it further asserts that this is merely a case of discrimination in rates, not involving an overcharge, and that the measure of damages in such instances is not the difference in the two rates but the actual loss, if any, suffered as a result of the lower rates to others, which damage must be alleged and proved as in the case of all other torts. In passing on this question we must first determine the exact nature of respondent's suit.

The respondent did not assert that it paid an unreasonable rate or that the lower rate extended to certain other customers had been duly established by the utility company or any rate-making body as the rates applicable to its business. Its claim was not that it had paid more than was due under an established rate, but simply that others paid less, and that this mere inequality in rates subjected it to a discrimination in violation of article 1438, Vernon's Ann.Civ.St. It was alleged that during part of the time respondent was paying the 19-18-17¢ rate above mentioned, such customers in Houston as Public Laundries, Ineeda Laundry, Port City Packing Company, Fehr Baking Company and St. Joseph's Infirmary, in the same classification and under similar situations, were furnished gas by petitioner at 14-13-12¢ for like amounts; and that at other times during such period Oriental Textile Mills, Texas Creosoting Company and the United Creosoting Company were being furnished gas at 16¢ for the first 1000 cubic feet and 15¢ for all additional gas. It was not alleged that any of the customers receiving the lower rates were competitors of respondent or that it had suffered any actual loss in its business or otherwise as the result of the action of the utility company in extending lower rates to others. More specifically, it did not allege that it had suffered a loss in an amount equal to the difference between what it had paid under the higher rates and what it should have paid under the lower rates. The petition concludes with the allegation that the giving of the lower rates was a discrimination against it and the prayer is for the difference between the higher and the lower rates.

The jury found that all of the above-named customers of petitioner were consumers under similar and like circumstances as respondent. There were no findings or proof of actual damages or that the rates charged respondent were unreasonable.

There are two utility companies furnishing gas to citizens in Houston and vicinity, one of which is petitioner. At the time of the trial petitioner was serving a total of 83,524 customers. Of this number 76,098 were residential customers, 6048 were commercial customers and 366 were industrial customers. Respondent was of the latter class.

Houston is a home rule city and has the power to fix rates for all public utilities operating in it. Art. 1175, Vernon's Ann. Civ.St. In 1925 the city council fixed $1.05 per 1000 cubic feet as the maximum rate at which all gas might be sold in the City of Houston. By subsequent ordinances the rates for residential and commercial consumers were successively reduced, but no ordinance was ever passed reducing the maximum rate of $1.05 for industrial customers. It left lesser rates for such users to be fixed by the utility company. Article 1435, Vernon's Ann.Civ.St., confers upon such utility corporations the right to fix reasonable rates for gas to all customers. The fixing of such rates by utility corporations is limited by article 1438, Vernon's Ann.Civ.St., which prohibits discrimination in rates or service "under similar and like circumstances." Any rates fixed by the utility company may be supplanted by rates fixed by the city or the Railroad Commission of Texas as provided by law. Art. 6053, et seq., Vernon's Ann. Civ.St. But neither of such governing bodies ever fixed any rates in Houston for industrial customers. The Railroad Commission has uniformly refused to fix rates for the sale of gas to industrial consumers anywhere in Texas. An example of such policy and the reason therefor will be found in the Commission's opinion in Re Community Natural Gas Co., 15 P.U.R., N.S., 149, 164, as follows:

"It is not our purpose or intention in this proceeding to fix the purchase price or sale price for industrial gas for the reason that the sale price for industrial gas fluctuates along with the price of other competitive fuels."

All industrial customers of petitioner were served under written-term contracts in which there were embodied the rates which had been established by the utility company for the class of business to which the customer belonged. A total of 64 industrial customers, including all laundries, were served at the 19-18-17¢ rate charged respondent. This rate was denominated as the Gulf Coast Rate Division Industrial Service Schedule IS #3. In fixing these rates the following factors were considered: (a) Load factors; (b) volume consumed on an annual basis; (c) value of service to customer; and (d) competition between gas and other fuels as well as competition between customers for whom the rate is designed.

It was in keeping with these factors that the rate of 16-15¢ was extended to the Oriental Textile Mills and the two creosoting companies between May 1, 1937, and October 10, 1942. There was no showing that these rates were not those established for the industries to which they were applied nor was there any proof that these rates were applicable to respondent's business. However, the rates extended these three companies furnished the basis for $3539.41 of the amount of the total recovery against petitioner in the sum of $5094.10.

The remainder of the recovery in the sum of $1554.69 was predicated upon lower rates extended to Public Laundries and certain refunds by reason thereof given to St. Joseph Infirmary, Fehr Baking Company and Port Side Packing Company. The discrepancy arose by virtue of a fuel oil adjustment agreement in written contracts with certain industrial users. The contract of this type with industrial consumers served at the 19-18-17¢ rate provided that the monthly bills for gas service should be decreased or increased at the rate of one-sixth of one cent per 1000 cubic feet of gas delivered for each one cent per barrel decrease or increase from $1 per barrel of Gulf Coast Grade "C" Bunker fuel oil, in cargo lots, plus 20¢ per barrel for transportation, storage, handling and other miscellaneous expenses incident to the sale of such oil. It further provided that in no event should such decrease or increase exceed 5¢ per 1000 cubic feet. In the early part of 1933, when the price of fuel oil was very low, the utility company authorized the making of contracts with industrial customers served at the 19-18-17¢ rate whereby the oil adjustment clause in Rate Schedule IS #3 should be waived for a period of one year and that during such time the customer should pay for gas used at the net rate in "Rate Schedule IS #3 minus Five (5¢) cents per thousand cubic feet for all gas used."

On June 29, 1933, the utility company entered into such a contract with Public Laundries. The main body of the contract contained a stipulation for the 19-18-17¢ rate designated as Schedule IS #3 for a term of two years beginning June 1, 1933, and containing the old fluctuating fuel oil clause. However, by rider attached to and made a part of such contract the fuel oil clause was suspended and a flat reduction of 5¢ from the IS #3 rate was effectuated. This rider stipulated that the waiver should also extend for the two-year period. The respondent and others of the same class who had contracts with...

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