Where the contract claimed to have been impaired was made with
one of several corporations merged into the complainant, and
concededly affects only the property and franchises originally
belonging to such constituent company, divisional relief cannot be
granted affecting only such property when the bill is not framed in
that aspect, but prays for a suspension of the impairing ordinance
as to all of complainant's property.
The rule that a special statutory exemption does not pass to a
new corporation succeeding others by consolidation or purchase in
the absence of express direction to that effect in the statute is
applicable where the constituent companies are held and operated by
one of them, under authority of the legislature.
Even if the asserted exemption from change of rates existed and
had not been lost by consolidation, the bill cannot be sustained
where no such contract rights as alleged have been impaired or
destroyed by the ordinance.
The facts are stated in the opinion of the court.
Page 194 U. S. 7
MR. CHIEF JUSTICE FULLER delivered the opinion of the Court.
This was a bill to restrain the City of Chicago from putting in
force a general ordinance passed October 15, 1900, providing that
corporations, companies, or persons manufacturing, selling, and
distributing gas in the City of Chicago for illuminating or fuel
purposes should not charge individual consumers more than
seventy-five cents per thousand cubic feet, and providing
Page 194 U. S. 8
penalties for violation of its provisions. The bill was demurred
to, and an opinion delivered on hearing on demurrer. 114 F.
384.
The opinion took a wider range than the bill as framed called
for, because of certain facts not therein set forth, but which were
admitted on the argument, and accordingly it was suggested that the
bill be amended to bring in these facts, and, this having been
done, the demurrer was renewed to the amended bill, whereupon,
after argument, the court gave an additional brief opinion (which
appears in the record), sustained the demurrer, and dismissed the
bill, as amended, for want of jurisdiction. Subsequently it was
stipulated and agreed by and between the parties that the decree as
entered did not correctly recite what was intended by the court,
and that it should be amended by striking out the words "for want
of jurisdiction," and inserting in lieu thereof the words
"upon the merits as to the alleged contract rights of the
complainant, but without prejudice to any other suit in respect to
the question of power of the city council under the laws of the
State of Illinois."
An order was then entered by the court, amending its previous
decree
nunc pro tunc in the particulars named.
The facts presented by the amended bill were these: the People's
Gaslight & Coke Company was incorporated by a special act of
the General Assembly of Illinois, approved February 12, 1855,
creating it a corporation, with the usual powers and liabilities,
with a capital stock not to exceed $500,000, and with power to
manufacture and sell gas in the City of Chicago and "to lay pipes
for the purpose of conducting the gas in any of the streets or
avenues of said city, with the consent of the city council," and by
the fourth section it was expressly provided that the company
should furnish and supply to the city, for its public uses at the
election of the proper authorities of the city, "a sufficient
supply of gas at a rate not exceeding two dollars per thousand
feet, and the inhabitants of said city at a rate not exceeding two
dollars fifty cents per thousand feet." The city council passed an
ordinance, August 30, 1858,
Page 194 U. S. 9
granting the company permission and authority
"to lay their gas mains, pipes, feeders, and service pipes in
any of the streets, avenues, highways, public parks, or squares
throughout said city, subject at all times, however, to the
resolutions and ordinances of the common council of said city."
The act of 1855 was amended February 7, 1865, so as to allow an
indefinite increase of the capital stock, and by section 3 of this
act, all the corporate powers of the corporation were vested in a
board of directors and such officers and agents as the board should
appoint, with power to the board to
"adopt such bylaws, rules, and regulations for the government of
said corporation and the management of its affairs and business as
they may think proper, not inconsistent with the laws of this
state,"
the section continuing and concluding,
"and the fourth section of said act is hereby repealed; but ten
years after the passage of this act, the Common Council of the City
of Chicago may, by resolution or ordinance, regulate the prices
charged by said company for gas; but said Common Council of the
City of Chicago shall, in no case, be authorized to compel the said
company to furnish gas at a less rate than three dollars per
thousand feet."
In 1870, a new constitution of the State of Illinois was
adopted, providing that no law "making any irrevocable grant of
special privileges or immunities shall be passed," Art. II, § 14;
that the general assembly should not pass local or special laws
"granting to any corporation, association, or individual any
special or exclusive privilege, immunity, or franchise whatever,"
Art. IV, § 22, and that no corporation should be
"created by special laws, or its charter extended, changed, or
amended, except those for charitable, educational, penal, or
reformatory purposes, which are to be and remain under the
patronage and control of the state; but the general assembly shall
provide, by general laws, for the organization of all corporations
hereafter to be created."
Art. XI, § 1.
June 5, 1897, an act was passed "in relation to gas companies,"
which authorized and empowered gas companies to
Page 194 U. S. 10
sell, transfer, convey or lease their real and personal
property, rights, franchises, and privileges, in whole or in part,
to any other gas company doing business in the same city, town, or
village, and provided that, by complying with the provisions of the
act, gas companies doing business in the same city, town, or
village might consolidate and merge into a single corporation,
which should be one of said merging and consolidating
corporations.
"The companies, parties to the agreement or agreements which
provide for consolidation and merger shall thereupon be and are
hereby declared to be consolidated and merged into the one
corporation specified in such agreement or agreements."
Laws Illinois 1897, p. 179, §§ 2, 8.
The ninth and eleventh sections read as follows:
"§ 9. Any corporation purchasing or leasing the real and
personal property of any other company or companies, as provided
for in section 1, or any consolidated corporation, as authorized by
section 2, shall be subject to and shall perform, for each of the
companies so entering into said agreement or agreements, the legal
obligations now resting upon each of them, respectively, under
their respective charters and ordinances, except where the
provisions thereof conflict with the exercise of the powers herein
granted, in the same manner and to the same extent as if the
companies had remained individual and distinct, and such
performance by said corporation so purchasing or leasing, or by
such consolidated corporation, shall be held and considered as the
performance by each of the respective companies so selling,
leasing, or consolidating, of the legal obligations theretofore
resting upon each of them respectively:
Provided, however,
that nothing in this act shall be construed as extinguishing said
companies entering into the agreement or agreements mentioned in
this act, or annulling or impairing any of their respective
franchises, licenses, or privileges, but they shall severally be
regarded as still subsisting, so far as their continuance for the
purpose of upholding any right, title, or interest, power,
privilege, or immunity ever exercised or enjoyed by any of them,
may be necessary
Page 194 U. S. 11
for the protection of their respective creditors or mortgagees,
or any of them; the separate exercise of their respective powers,
and the separate enjoyment of their separate privileges and
immunities, being suspended until the protection of such creditors
or mortgagees shall require their resumption, when such suspension
shall cease, so far as, and for such time as, the protection of
such creditors or mortgagees may require."
"§ 11. Any corporation purchasing or leasing the property of any
company or companies, or into which any company or companies are
consolidated and merged under this act, shall be, at the time of
availing itself of or accepting the benefits of this act, in the
actual business of furnishing gas to consumers, and shall be
subject to the following provisions:"
"Such corporation shall not increase the price charged by it for
gas of the quality furnished to consumers during any part of the
year immediately preceding such purchase or lease or such
consolidation and merger."
"Such corporation shall furnish gas to consumers as good in
quality as it furnished previous to such purchase or lease or such
consolidation and merger."
The People's Gas Light & Coke Company under this act became
consolidated with some ten other gas companies, most of which were
organized under general laws passed in pursuance of the
Constitution of 1870. One of them, the Chicago Gas Light & Coke
Company, was incorporated by special act of February 12, 1849,
amended February 9, 1855, but this contained no restriction on the
right of the general assembly or the city to regulate the price of
gas from time to time.
The bill quoted from the eleventh section of the act of 1897 the
clause in reference to the increase of price for gas of the quality
furnished consumers during any part of the year immediately
preceding purchase or lease, or consolidation and merger, and
alleged the fact to be that, during the year immediately preceding
the acquisition by complainant of the various other gas companies,
complainant charged the net rate or price of one dollar per
thousand cubic feet, and since the acquisition
Page 194 U. S. 12
of the plants and property of those corporations that
complainant had uniformly charged the same net rate or price for
gas sold by it in the city, which gas was better in quality and of
higher candle power than the gas theretofore sold by the companies
acquired, and complainant averred, as matter of law, that the price
or rate thus fixed was a fixing and regulating by the state of the
price or rate to be charged by complainant for gas supplied
subsequent to the acquisition of said other companies.
The bill also set forth an agreement made between the city and
the People's Gas Light & Coke Company, July 20, 1899, which
recited that agreements had theretofore subsisted between the city
and the People's Company, and between the city and certain other
gas companies, which companies subsequently became merged into the
People's Company, and provided for a continuance of the lighting of
the streets on the same terms as it had been done, and for the
payment by the People's Company to the City of a certain percentage
of the gross receipts of the People's Company from the sales of gas
during 1899, including therein the receipts from the operation of
the properties of each of the gas companies consolidated with the
People's Company, and for the payment by the City of amounts due or
to become due to the People's Company or confession of judgment for
amounts remaining unpaid, and the bill further set forth certain
orders of the city between August 5, 1897, and March 11, 1901, for
the laying of pipes and mains by the People's Company in the
streets and avenues of the city. Certain mortgages were likewise
referred to, and it was alleged that bonds thereunder had been sold
to parties who purchased the same in the belief that the city was
prohibited by its charter from compelling the People's Company to
furnish gas at a less rate than three dollars per thousand cubic
feet.
The bill also averred that the People's Company, prior to the
consolidation, distributed gas chiefly in the west division of the
city, although its pipes and mains extended into the south
Page 194 U. S. 13
division, and that the other companies, or nearly all them,
severally had plants and were engaged in manufacturing and
distributing gas in various other sections of the city.
On March 5, 1900, the city council passed an ordinance which
provided
"that no corporation, company or companies, firm or persons
manufacturing, selling, supplying, or distributing gas in the City
of Chicago for illuminating or for fuel purposes shall charge,
exact, demand, or collect from any consumer thereof more than the
sum of seventy-five (75) cents per one thousand (1,000) cubic feet
of gas consumed or used."
The jurisdiction of the circuit court was invoked on the ground
of impairment or deprivation by the ordinance of contract rights of
complainant acquired by its charter, and the bill prayed, among
other things,
"that it may be adjudged and decreed that, by said charter of
the People's Gas Light & Coke Company, the people of the State
of Illinois agreed with the People's Gas Light & Coke Company
that the Common Council of the City of Chicago should never be
authorized to compel the People's Gas Light & Coke Company to
furnish gas at a less rate than $3 per thousand cubic feet, and
that such contract is a valuable property right of the said
People's Gas Light & Coke Company."
The circuit court declined to specifically dispose of
complainant's contention that, by the Act of February 7, 1865, the
state had contracted that the city should never require the company
to furnish gas at a less rate than three dollars per thousand feet,
because it held that the limitation or exemption, even if conceded,
did not apply to the territory and rights acquired by the merger,
and that the bill did not seek divisional relief, and was not
framed in that aspect; while most of the consolidated companies
were organized under the general incorporation law passed in
pursuance of the Constitution of 1870, and the right to fix
reasonable rates was reserved, the works not having been installed
under any explicit contract to the contrary, if such could have
been entered into.
As to the clause of the eleventh section of the Act of June
5,
Page 194 U. S. 14
1897, providing:
"Such corporation shall not increase the price charged by it for
gas of the quality furnished to consumers during any part of the
year immediately preceding such purchase or lease, or such
consolidation and merger,"
the circuit court ruled that this did not fix a rate unalterable
by either party, but a rate beyond which the consolidated companies
could not go.
The circuit court further held that the contention that the
state's power to regulate rates had not been delegated to the city
was not a federal question, and that, as the ground of impairment
or deprivation of contract rights acquired by the charter failed
under the bill as framed, the court could not go further and decide
that question in this case. While the decree, as it stands, amended
by consent, in terms reserved the question, to be raised in some
other appropriate suit in a proper court.
In these circumstances, we are constrained to decline the
consideration of that question so far as it relates to the
contention that power to regulate was conferred by the general law
of Illinois of 1871-1872 providing for the incorporation of cities
and villages under which the City of Chicago as now constituted was
incorporated.
But the decree dismissed the bill "as to the alleged contract
rights of complainant," and, in so doing, the circuit court dealt
with the alleged fixing of rates by the act of 1897, as well as
with the alleged contract of 1865, that the city should not be
authorized to fix a rate of less than three dollars; for although,
as we have said, it was the impairment or deprivation of the latter
which was made the ground of federal jurisdiction, it was in effect
as asserted to have been modified by the act of 1897. We agree with
the circuit court that the clause of section eleven of the act of
1897, that
"such corporation shall not increase the price charged by it for
gas of the quality furnished to consumers during any part of the
year immediately preceding such purchase or lease or such
consolidation or merger,"
read according to the plain and ordinary signification of
Page 194 U. S. 15
the words, it being a general law applicable to every gas
company and to every city in the state, was not intended to fix and
did not fix, a rate unalterable by either party, but simply a rate
above which consolidated companies could not go. This disposes of
it as an independent ground of relief, and leaves to be considered
the provision of the amended charter of 1865, that,
"ten years after the passage of this act, the Common Council of
the City of Chicago may, by resolution or ordinance, regulate the
prices charged by said company for gas; but said Common Council of
the City of Chicago shall, in no case, be authorized to compel the
said company to furnish gas at a less rate than three dollars per
thousand feet,"
as affected by the act of 1897. That is to say, was the city cut
off from reducing the price below one dollar, conceding the power
of the state to do so?
It is contended, on the one hand, that the first part of this
provision granted the city the general power to regulate the price
after ten years, and that the latter part then ceased to operate as
a restriction. And, on the other hand, that the whole clause
constituted a contract that the general assembly would not
thereafter authorize the city to fix the rate at less than three
dollars. But it is expressly conceded that the general assembly
possessed the power to regulate the price of gas and to prescribe
reasonable rates, and that, as complainant availed itself of the
act of 1897, and thereby acquired the plants of other gas
companies, it can now only charge the rate it had been charging the
year immediately preceding the acquisition of those
properties,-namely, one dollar per thousand cubic feet.
Assuming, but without intimating any opinion to that effect,
that, by the amended charter of 1865, the state contracted with the
People's Gas Light & Coke Company that the city should not
thereafter be empowered to reduce the price of gas below three
dollars per thousand feet, the preliminary inquiry is whether, by
the consolidation, that contract was extended to the plants of, and
territory occupied by, the companies absorbed.
Page 194 U. S. 16
The circuit court held that it was not so extended, and that as
the bill sought relief in respect of the entire plants and
territory, the entire system as consolidated, it could not be
maintained, because there was no such contract which the ordinance
impaired or destroyed.
It is said that partial relief might have been accorded unless
by the consolidation the alleged exemption was lost, but the bill
was not framed in the alternative, and the ordinance itself did not
contemplate a divided operation, although, if the exemption existed
as to part of the system, the ordinance would not necessarily be
wholly void, but might be held inoperative
pro tanto,
notwithstanding serious difficulties in so applying it.
See
Chesapeake and Ohio Railroad Company v. Virginia, 94 U. S.
718, and cases cited.
Was the alleged exemption extended by the act of 1897 when the
other companies were acquired?
Prior to that time, the operations of the People's Company were
practically confined to the west division of the city, and although
it was empowered to lay pipes in any of the streets or avenues,
this was only with the city's consent. The city in 1858 authorized
the company to do this, but this was "subject at all times" to the
city's resolutions and ordinances.
It is true that, after the acquisition of the other companies
the city compromised with the People's Company in respect of claims
for gas furnished, and also ordered the company to lay mains in
streets which formerly did not have them, but this action was not
equivalent to consent to the extension of the alleged restriction
on rates to territory acquired under the merger, with the
accomplishment of which the city had nothing to do.
The act of 1897 provided that the consolidated corporation
should be subject to the legal obligations of the companies taken
over, and most of these were not exempt from the right of
regulation, and were obliged to submit to its exercise.
By the state constitution, the general assembly was forbidden to
make "any irrevocable grant of special privileges or
immunities,"
Page 194 U. S. 17
and the general rule is that a special statutory exemption, such
as immunity from taxation, from the right to determine rates of
fare, or to control tolls, and the like, does not pass to a new
corporation succeeding others by consolidation or purchase, in the
absence of express direction to that effect in the statute.
St.
Louis & San Francisco Railway v. Gill, 156
U. S. 656;
Norfolk & Western Railroad Company v.
Pendleton, 156 U. S. 667;
Covington &c. Turnpike Company v. Sandford,
164 U. S. 586;
Minneapolis & St. Louis Railway Company v. Gardner,
177 U. S. 332;
Georgia Railroad & Banking Company v. Smith,
128 U. S. 174. And
the same rule is applicable where the constituent companies are
merely owned and operated by one of them as authorized by the
legislature. An exemption held by the latter would not pass to the
others unless so provided. So that the act of 1897 cannot be
construed as extending any prior immunity the acquiring company
possessed over the whole system of all the companies
consolidated.
And if not, and the circuit court was right, as we think it was,
in holding that, under the present bill complainant's alleged
exemption could not be enforced as to so much of the system as
originally belonged to it, then the court was justified in
declining to discuss whether, by the consolidation, the alleged
exemption was lost altogether.
In short, agreeing with the circuit court, we are of opinion
that the asserted immunity (conceding it
arguendo) did not
extend to so much of the system as passed to the consolidated
company from companies not possessing such immunity in their own
right; that, under this bill, relief could not be accorded in
respect of part of the system; that no contract that the price of
gas should not be reduced below one dollar per thousand feet was
created, nor was the alleged original exemption merely modified and
extended, and that the decree dismissing the bill because there
were no such contract rights as alleged impaired or destroyed by
the ordinance was right.
Decree affirmed.