146 F. 150 | U.S. Circuit Court for the District of Southern New York | 1906
The parties to this suit are all citizens of the state of New York, but the main contention — practically, the sole contention — of the complainant is that certain statutes of this state and an order of the gas commission are obnoxious to various provisions of the Constitution of the United States, and for that reason void. This court, therefore, from which appeal lies direct, without review by any intermediate tribunal, to the Supreme Court of the United States, not only has jurisdiction, but is the appropriate forum, because, through a suit brought here a final decision by the ultimate interpreter of that Constitution can be most quickly obtained.
This is a motion by the complainant for a continuance of the temporary injunction, which was issued as the condition of an adjournment asked for by defendants, and also for an enlargement of the terms of «uch injunction. It is in no sense a hearing upon the merits of all the issues presented. The fundamental propositions in dispute involve many controverted questions of fact, and it is the practice of this court not to resolve such questions upon affidavits, but to reserve them for final hearing, where every sworn statement comes to the court, not
1. In entering that order the court did not find, nor did it express nor even intimate an opinion, that the action of the gas commission in fixing the price to be charged for gas at 80 cents per 1,000 cubic feet was confiscatory, nor that the act of the legislature establishing the same price (chapter 125 of 1906) was in that respect unconstitutional and void. It did not undertake to abrogate or nullify that provision of the statute. As between the consumer and the manufacturer, it left the question as to what the former should pay to the latter precisely where it stood before. Any consumer who might be asked to pay the old rate was left by the order entirely free to decline to pay it, and to make a tender at the new rate for the gas he had consumed. Naturally so, because, except for the city of New York, whose situation is exceptional, the individual consumer was not a party to the suit, and had not been served with process. In the case of a consumer, who upon demand chose to pay the old rate, the order provided that the company should not cover the 20 cents difference into its treasury, but should leave it impounded under direction of the court, so as fully to insure its return to the person paying the same in the event of the company’s failing to succeed in its litigation. In the case of a consumer who chose to make tender at the new rate, and to stand upon whatever rights were secured to him by the action of the gas commission in fixing that rate, and by the action of the Legislature in establishing the same rate, the order left him entirely free and untrammeled to apply for such relief as the law afforded him in the event of the company’s seeking to compel payment of the difference. It was not perceived when the order was made, nor is it perceived now, upon what theory this court could by an injunction restrain any individual who was not a defendant, and had never been served with process, from himself applying to an appropriate court if he should conceive himself .to be aggrieved. What relief he might obtain when he so applied would be for that court to determine when it heard his application. The order did, however, provide that the gas company might charge' or demand payment at the old rate, and might collect at that rate from such as chose to pay, and it enjoined the defendants (who are public officers, and, as such, the proper persons to institute and prosecute actions, to enforce and recover certain statutory penalties) from in any way enforcing, or attempting to enforce, two acts of the Legislature and an order of the gas commission, or any of the provisions thereof, against the complainant, until it should have its day in court, upon such a case as it might be able to make, to question the constitutionality of that order and of those acts. The reason why it was thought that a court of equity, irrespective of any question of the merits of the controversy as to the propriety of the new rate, should upon mere inspection of the statutes themselves grant such temporary relief will be apparent upon the statement of a few elementary propositions of law, and an analysis of certain provisions of those statutes.
A corporation which undertakes, for its own emolument, to supply gas to the inhabitants qf a municipality, under charters and franchises
There are two statutes dealing with the matter now in controversy. Neither of- them, in express terms, undertakes to deny the complainant access to any court to test the merit of the contention it makes, viz., that the new rate is confiscatory, and that, therefore, the old rate should be paid. But there are two sections in those acts which challenge consideration. In the gas commission act (chapter 737, p. 2100, of the .Laws of 1905).we find
*153 "Sec. 21. Defense in eases of excessive charges. If it be alleged and established in any action brought in any court for the collection of any charge for gas or electricity, that a price has been demanded in excess of that fixed by the commission' or by statute in the municipality wherein the action arose, no recovery shall be had therein, but the fact that such excessive charges have been made shall be a complete defense to such action.”
In the act which provides that companies furnishing' gas in the borough of Manhattan “shall not charge or receive for gas manufactured, furnished or sold * * * a sum per 1,000 cubic feet in excess of * * * 80 cents,” we find the following:
“Sec. 3. Any corporation, association, copartnership or person violating any provision of this act shall forfeit the sum of .$3.000 for such offense -to the people of the state.”
The drastic character of these provisions will be perceived when their results are considered. If the gas company, pending the final determination of a suit such as this to determine whether the Legislature has fixed a just and proper price, should charge its consumers the lower .rate, and receive the same without protest or demand of payment at the higher rate, it could never recover the difference, even should it be decided by the court of last resort that it was entitled to demand such higher rate. Having delivered'its product for the particular month, and received the amount it asked for such product, that transaction would be finally closed. Both parties having agreed upon the price, without any reservation, it would be the contract price for that month’s delivery, which the seller could not thereafter dispute. If it should take two or three years to get a final decision on the merits, the 20 cents difference of rate, all claim to which during the interim the company had thus abandoned, would concededly amount to several millions of dollars. Should the company ultimately prevail in the test suit, this would be an enormous fine to pay for the privilege of having its day in court. It could escape that fine only by demánding, on presentation of each monthly bill, payment at the higher rate, preserving its claim to the difference, whenever the lower rate was paid and received, by a protest, which would reiterate the demand. The statute (chapter 137, p. 2092, Taws 1905) undertakes effectually to close up that avenue of escape.
Ordinarily, when there is a dispute between seller and buyer as to the rate to he paid for anything, the question is settled by the seller bringing suit for the price of what he has sold calculated at the higher rate. The statute, however, practically undertakes to debar the company from bringing anjr such suits against its customers. The twenty-first section (quoted, supra) provides that if in any action brought to collect any charge for gas it shall appear that a price has been demanded in excess of the rate fixed by the gas commission or by statute, that fact shall be a complete defense to the action — to the whole action — not onN to so much of it as seeks to collect the excess, but also to so much of it as seeks to collect the amount concededly due. Now, whenever the seller of anything verifies a complaint to be used in an action at law, which asserts that he is entitled to receive and asks to recover a sum of money, he may fairly be said to be preparing to make a de
The only course left for the gas company is to bring some direct suit, such as this, to test the constitutionality of the action of the gas commission and of the Legislature in fixing an 80-cent rate, and meanwhile to preserve its rights to the difference by demanding payment thereof, as each monthly bill is presented to each consumer. To close up this avenue of approach to the courts, however, the other act (chapter 125 of 1906) provides that, whenever a manufacturer and seller of gas in the borough of Manhattan shall charge or receive anything in excess of 80 cents per 1,000 cubic feet, it shall for each offense forfeit $1,000 to' the people of the state; and section 1962 of the Code of Civil Procedure makes it the duty of the defendants, the Attorney General, and the District Attorney to institute suits for recovery of such penalties. Every time the company demands payment for -gas furnished at the higher rate, every time it receives such payment from any consumer who may be willing to pay temporarily, and abide the result of the test suit, it incurs such a penalty. Eor very many years it has been the custom in this borough to present monthly bills for gas sold, and it appears from the record that the complainant- has upwards of 390,000 customers. The calculation is a simple one. Long before this test suit could be heard next fall, the aggregate of the penalties incurred would utterly wipe out the entire property of the complainant, whether it were worth the amount found by the gas commission, or were worth the highest estimate at which the most astute and experienced financiers might capitalize it.
Commenting upon a statute which prescribed similar cumulative penalties for every charge of more than a certain sum per head for yard-ing cattle, where a few days’ violation of the statute by merely charging a higher rate would exhaust the entire value of the property in satisfaction of the penalties incurred, Mr. Justice Brewer, writing the opinion in Cotting v. Kansas City Stock Yards Co., 183 U. S. 79, 22 Sup. Ct. 30, 46 L. Ed. 92, says:
“Do the laws secure to an individual an equal protection when he is allowed to-come into court and make his claim or defense subject to the condition that' upon a failure to make good that claim or defense the penalty for such failure either appropriates all his property, or subjects him to extravagant and unreasonable loss ? Suppose a law were passed that, if any laboring man should bring or defend an action, and fail in his claim or defense, either in whole or in part, he should in the one instance forfeit to the defendant half of the amount of his claim, and in the other be punished by a fine equal to half the recovery against him, and that such law by its terms applied only to laboring men, would there be the slightest hesitation 'in holding that the laborer was denied the equal protection of the laws? The mere fact that the courts are*155 open to hear his claim or defense is not sufficient, if upon Mm alone there is Yistited a substantial penalty for a failure to make good Ms entire claim or defense. ⅜ * * Suppose a statute providing that every corporation failing to establish its entire claim or to make good its entire defense should as a 'penalty therefor forfeit its corporate franchise, and that no penalty of any kind except a matter of costs was attached to like failures of other litigants, could it be said that the corporations received the equal protection of the laws? * * ⅜ A statute, although, in terms, opening the doors of the courts to a particular litigant, which places upon him as a penalty for a failure to make good Ms claim or defense a burden so great as practically to intimidate him from asserting that which ho believes to be his rights, is, when no such penalty is inflicted upon others, tantamount to a denial of the equal protection of the laws.”
In the case cited the judges who concurred in reversing the judgment appealed from did so upon another ground, but the language oí M r. Justice Brewer, dictum though it be, commends itself as a clear and forceful exposition of the law.
It is difficult to see in what respect the provisions of the two acts now under consideration, differ from those passed upon in the Kansas City Stock Yards Case, except that they are perhaps more drastic. On this branch of the case there is no controversy as to the facts, and under the opinion last quoted, these provisions seem obnoxious to the fourteenth amendment to the Constitution of the United States. In order, therefore, to secure to the complainant its right to prosecute this suit to its orderly conclusion, without meanwhile being trammeled — or, as it may he more appropriately expressed, overwhelmed — by multitudinous actions for cumulative penalties, the temporary injunction Which restrains the public officers, who are made defendants, and any one else whom the injunction may reach and hold, from enforcing, or attempting to enforce, the provisions of the acts and order of the gas commission against the complainant, will be continued until final hearing and decision of the cause in this court. The judge who hears the cause upon the merits of the whole case may find some good reason for modifying' the injunction, or even for vacating it, but, on the record as it stands now, to this measure of relief the complainant seems clearly entitled.
2. The application to extend the terms of the injunction, so as to enable complainant to collect the 20 cent difference bjr summary measures (such as refusal to supply gas) from such consumers as may not be willing to pay it, to have it impounded, and to abide the result of this suit, presents different questions, and brings us into a field of controversy upon the facts. However obnoxious the statutory provisions already discussed may be to the prohibitions of the Constitution, it would seem that their elimination would still leave a statute consistent and complete. Provisions hampering the right to question a rate fixed by legislative action are not essential to a scheme which undertakes to fix such rate. “It is familiar law that one section or part of an act may be invalid without affecting the validity of the remaining portion of the statute. Any independent provision may be thus dropped out if that which is left is fully operative as a law, unless it is evident from a consideration of all the sections that the Legislature would not have exacted that which is within, independently of that which is beyond, its powers.” Reagan v. Farmers’ L. & T. Co., 154 U. S. 362, 14 Sup. Ct. 1047, 38 L. Ed. 1014.
3. If the only subject of inquiry were the rate fixed by the gas commission, a different situation would be presented. Under the authorities, in fixing the rate to be charged for “public service” by private corporations, two elements of calculation are of fundamental importance: What is the true present value of the property embarked in the enterprise ? and what, in view of the risks of the business, is a fair annual per-
5. A few minor details remain to be disposed of:
(a) The city of New York is the largest consumer, an undoubtedly solvent consumer, and the onfy one made a party defendant. .The rate it is to pay is not regulated by the action of the gas commission, nor by either of the two acts already considered. Chapter 736, p. 2091, of the Laws of 1905, provides that it shall pay only 75 cents per 1,000 cubic feet, and to that act there is raised an additional constitutional question not heretofore discussed. The representatives of the city and of .the complainant have had no difficulty during two or three years of controversy in arranging a modus vivendi, whereby all rights of either side are reserved, and gas is furnished as required. It is not to be anticipated that there will be an}r difficulty about continuing such arrangement, but to facilitate it the order now to be entered may provide that payment by the city at the 75-cent rate, and acceptance thereof by complainant under protest, shall not operate as an accord, satisfaction, waiver, or estoppel, to the prejudice of either side in any litigation, pending or future. Such a clause may make it practicable for these contestants to eliminate some questions as to accruing interest.
(b) This court fully appreciates the importance of a prompt disposition of this cause, which not only presents questions of grave importance, but which, also, including the other causes heard at the same time, affects the interests of nearly half a million of households. There is no apparent reason why a final hearing on the merits should -not be reached with reasonable expedition. In the event of demurrer or exceptions to any pleading being filed by either side, this court will hear and dispose of the same at any time during vacation, upon a week’s notice. As soon as the cause is at issue, upon request of either side and upon four days’ notice, the court will apportion the three months which the rules allow for taking the testimony. Promptness on the part of complainant, which evidently has large interests at stake, may fairly be assumed, but it may' be insured by the insertion in the order of a clause providing that, in the event of any unreasonable delay, ap-'
(c) The Supreme Court in Chicago, M. & St. P. R. R. v. Tompkins, 176 U. S. 167, 20 Sup. Ct. 336, 44 L. Ed. 417, has indicated the practice to be followed in .cases of this kind. The testimony, should not be taken before an examiner, but before some competent master, who is to make all needed computations, and find fully the facts. Such a disposition will, at the proper time, be made of this cause.
(d) The order continuing the injunction should • contain a clause providing that, in the event of complainant failing to succeed finally in the litigation, the preparation of the papers required for refund and the distribution of the amounts due to the respective consumers, including such interest as the condition of the fund after paying expenses of administration may warrant, shall be performed by the company; and, upon its being shown that refund has been made to any consumer by crediting the amount due him upon any current monthly bill or bills, or otherwise, such amount shall be returned to the company, week by week, or at such shorter intervals as the court may approve. It will also contain a further clause that all consumers who may change their address or may remove out of the borough should notify the clerk of the court or the gas company of such change of address, to the end that whatever refund they may be eventually found entitled to may be paid to them at their new address without their being put to the inconvenience of coming to the special master or to the company to collect it.