GAS COMPANY v. PEORIA

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Docket Number

No. 33.

Judges

David Josiah Brewer

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PEORIA GAS AND ELECTRIC COMPANY v. PEORIA.

Mr. E.C. Ritsher, and Mr. W.T. Abbott with whom Mr. W.T. Irwin was on the brief, for appellant:

The contract in question was entered into more than a year subsequent to the filing of the bill of complaint in this cause; it existed for a period of but ten months and was terminated more than a year before the court heard the arguments in this cause.

A complainant who comes into court with clean hands cannot by a temporary act of business accommodation, performed more than a year after the pleadings have been settled — and fully completed and abandoned more than a year before the hearing of the cause, — be denied rights guaranteed to it by the Constitution of the United States.

If the contract in question were vicious and pertinent to the issues in the case, the doctrine of locus poenitentice would apply. As a benign contract and wholly collateral to the issues, it cannot properly be made an excuse for denying to complainant its constitutional rights.

The illegality of corporate acts cannot be raised collaterally, especially, when the action is not one to enforce the illegal agreement, and no rights are predicated upon it. Rector v. Hartford Deposit Co., 190 Ill. 387; Gas Light Co. v. Memphis, 72 F. 952; Bridge Co. v. Streator, 105 F. 729; L.S. M.S. Ry. Co. v. Smith, 173 U.S. 698; Gilbert v. Am. Surety Co., 121 F. 494; Connolly v. Union Sewer. Pipe Co., 184 U.S. 450; Macginnis v. B. M. Con. Co. (Mont.), 75 P. 89; Kinner v. L.S. . M.S. Ry. Co., 69 Ohio St. 376 ; Planters' Bank v. Union Bank, 16 Wall. 483; Strait v. Nat. Harrow Co., 51 F. 819; Dennehy v. McNulta, 30 C. C.A. 422; S.C., 86 F. 825; Wiswall Co. v. Scott, 86 F. 671; Box and Paper Co. v. Robertson, 99 F. 985; Harrison v. Glucose Co., 116 F. 304.

A fortiori, a collateral attack will not be permitted even under a special statute, if the statute is not pleaded or its inhibition challenged by the issues in the case, especially where the remedy given by the statute is cumulative and differs from or is in addition to that given by the common law. Moreover, such defense must be set up by plea and not by answer. Chicago Alton Ry. Co. v. Dillon, 123 Ill. 570; Haskins v. Alcott, 13 Ohio St. 210; Denton v. Moore's Administrator, 2 Tenn. 168; Neagle v. Kelley, 146 Ill. 465; Chambers v. Chambers, 4 G. J. (Md.) 438; Tanning Co. v. Turner, 14 N.J. Eq. 329; Curtis v. Mastin, 11 Paige's Ch. 15; Dyer v. Lincoln, 11 Vt. 301; 1 Daniel's Ch. Pl. Pr., 5th ed., 630; Farley v. Kittson, 120 U.S. 303, and cases cited; Sullivan v. Portland c. R.R., 94. U.S. 806; Dey v. Dunham, 2 Johnson Ch. (N.Y.) 182; Crutcher v. Trabue 5, Dana (Ky.), 82; Hudson v. Hudson's Admr., 6 Munford (Va.), 352; Prince v. Heylin, 1 Atkins, 494.

See also cases in which foreign corporations seeking to recover or protect their property have been met by the defense that they had violated or failed to comply with the provisions of some local statute in compliance with which only would they have the right to do business in such State. Smith v. Little, 67 Ind. 549; St. L. c. R.R. Co. v. Fire Association, 60 Ark. 325; Brewery Co. v. Ester, 86 Hun (N.Y.), 22; Telephone Co. v. Pesauken Township, 116 F. 910.

Such collateral attack is expressly forbidden in the Federal courts. Blodgett v. Lanyon Zinc Co., 120 F. 893.

A defense must either be technically pleaded or the facts constituting such defense must be properly alleged and relied upon on the hearing of the cause in support of such defense. Eyre v. Potter, 15 How. 42; French v. Shoemaker, 14 Wall. 314; Babbitt v. Dotten, 14 F. 19; Spies v. Chicago c. R.R. Co., 40 F. 34; Britton v. Brewster, 2 F. 160; S.C., aff'd 4 F. 808; Price v. Berrington, 15 Jurist, 999; S.C., 7 Eng. L. Eq. 254; Wilde v. Gibson, 1 H.L. Cases, 605; Ferraby v. Hobson, 2 Phillips, 255; Curson v. Belworthy, 3 H.L. Cases, 742; Fire Ins. Co. v. Kavanaugh, 1892, A.C. 473; Harrison v. Guest, 8 H.L. Cases 481; Hickson v. Lombard, 1 H.L. Cases, 324; Tillinghast v. Champlin, 4 R.I. 173; Fisher v. Boody, 1 Curtis, 206; Dashiell v. Grosvenor, 66 F. 334; S.C., aff'd 162 U.S. 425; Leighton v. Grant, 20 Minn. 345.

Even were it permissible to set up the anti-trust act collaterally, and even through such act had been specifically set forth in the answer, it would not have been a proper defense in this case.

The only possible purpose for which a violation of the statute might be urged would be for the purpose of inflicting upon complainant the criminal penalties of the act or to show that complainant was a criminal under the act. 1 Starr Curtis, 2d ed., 1252.

If complainant had violated the anti-trust law, or any other criminal statute, such fact would not bar its rights in this suit. Gilbert v. Am. Surety Co., 121 F. 494; Brewery Co. v. Breweries Co., 121 F. 713; Connolly v. Union Sewer Pipe Co., 184 U.S. 540; Armstrong v. Am. Exch. Bank, 133 U.S. 433; Planters' Bank v. Union Bank, 16 Wall. 483; Armstrong v. Toler, 11 Wheat. 258; Brooks v. Martin, 2 Wall. 70; Sharp v. Taylor, 2 Phillips' Ch. 801; McBlain v. Gibbs, 17 How. 232.

When a court of equity is appealed to for relief, it will not go outside of the subject matter of the controversy and make its interference depend upon the conduct of the moving party as to matters in no way affecting the equitable right which he asserts against the defendant or the relief which he demands. Pomeroy's Eq. Jur. § 399; Lewis' Appeal, 67 Pa. 166; Woodward v. Woodward, 41 N.J. Eq. 224; Insurance Co. v. Clunie, 88 F. 160; Bateman v. Fargarson, 4 F. 32; Chicago v. Union Stockyards Co., 164 Ill. 224; Trice v. Comstock, 121 F. 620; Bonsack Machine Co. v. Smith, 70 F. 383; Mining Co. v. Miners Union, 51 F. 260; Knapp v. Jarvis Adams Co., 135 F. 1008; Yale Gas Stove Co. v. Wilcox, 64 Conn. 101; Delaware Surety Co. v. Layton (Del. 1901), 50 St. Rep. 378; Deering v. Earl of Winchelsea, 1 Cox Ch. 318; Barton v. Mulvane, 59 Kan. 314; Foster v. Winchester, 92 Ala. 497; Wiley v. National Wall Paper Co, 70 Ill. App. 543.

Mr. Winslow Evans for appellee:

The Illinois anti-trust law is valid and its constitutionality as it applies to this case has been upheld. The appellant entered into a combination unlawful under the act and the court will not aid it to reap the fruits thereof. Gibb v. Gas Company, 130 U.S. 396, 412; Russell v. De Grand, 15 Mass. 35.

Mr. William D. Guthrie by leave of the court and on behalf of Darius O. Mills, a party to another pending case involving the question of the power of cities of Illinois to fix the price of gas, submitted a brief contending that such power did not exist under existing statutes.

Mr. James Hamilton Lewis, Mr. Henry M. Ashton and Mr. David K. Tone by leave of the court and on behalf of the City of Chicago, a party to such other pending action, submitted a brief, in support of such power.

A gas company brought an action against a city in Illinois to restrain the enforcement of an ordinance fixing price of gas on the ground that the low price practically amounted to taking property without compensation and that the ordinance impaired contract rights. The case was tried on these questions but they were ignored by the court which decided adversely to the company, although the master had reported that the rates were confiscatory, on the single ground that the company had for a period violated the anti-trust law of Illinois and thereby was not entitled to relief, held that: Although parties making an agreement, unlawful by the anti-trust act of Illinois, may while the agreement is in force be subject to its penalties, whenever they cease to act under the agreement the penalties also cease. As the case had been tried on one theory and decided on another and injustice had probably resulted, the judgment should be reversed and sent back so that the terms and duration of the alleged agreement may be ascertained and taken into consideration in determining the case.

MR. JUSTICE BREWER, after making the foregoing statement, delivered the opinion of the court.

This case was tried on one theory and decided on another. While that does not always and necessarily constitute error, yet, under the circumstances, as disclosed by the record, we are of opinion that injustice has probably resulted and that there should be a reversal of the decree and a further examination in the Circuit Court. As stated in the findings of the commissioner, the bill proceeds upon the theory that the ordinance of September 4, 1900, impaired the rights of contract theretofore existing between the parties, that its enforcement would constitute the taking of private property for public use without just compensation, that the penalties prescribed for a violation of the ordinance were exorbitant and not sanctioned by the laws of the State of Illinois, while the answer justified the provisions of the ordinance by the statements and representations made by the stockholders in the company to the city council at the time the plaintiff's franchise was sought, and alleged that the rate therein fixed was reasonable. On these questions the stress of the controversy was rested. The court entirely ignored them and placed its decision on the single ground that the two companies had by agreement attempted to fix their prices, and therefore came within the scope of the Illinois anti-trust law — an act which had not been in terms referred to either in the pleadings or the report of the master.

There was no positive evidence and no finding by the commissioner of an agreement between the two companies, and while from their action an inference might be drawn that they had entered into some agreement in respect to rates on August 1, 1900, neither its terms, scope nor duration were shown. It also appears from the testimony that that rate was continued by the old company only until January 1, 1901, when an even rate of one dollar per thousand was established, and that this latter rate was on September 1, 1901, also established by the new company, the plaintiff herein. Whether this action of the new company in adopting the rate which had been kept in force by the old company since January 1, 1901, was the result of an agreement or an independent act on its part is not shown. It appears further that in October, 1901, the plaintiff entered into a contract with the old company to supply it with gas for the use of its customers and that, the latter company desisting temporarily from manufacture, this contract continued in force until August 19, 1902, but this was found by the commissioner to have been a purely private business arrangement between the companies and without relation to the charges made by either to its customers. Doubtless it, together with the evidence of changes in holding of stock, tended to show at least a cessation of competition between the two companies, if not of a unity of control or agreement between them.

We shall assume that there was testimony from which the court justly found that the rates announced on August 1 were fixed by an agreement between the two companies. We shall also assume, through without deciding, that while that agreement was in force and the parties were acting under it, neither could recover for the gas that it furnished, nor could this plaintiff question the validity of the ordinance of September 4. But although the stringent provisions of the Illinois anti-trust law may apply to the case of an agreement between two gas companies fixing the price of gas, and even if while the parties are proceeding under it any party receiving gas may avoid payment therefor on that ground, and the city likewise be upheld in an ordinance establishing maximum rates which are not remunerative, yet the making of such an agreement does not subject the companies to a perpetual penalty. Parties making an agreement, unlawful by the anti-trust act, may while the agreement is in force be subject to its penalties, but whenever they cease to act under it the penalties also cease. The punishment adheres to the offense and stops when the offense itself stops. Now it is in evidence that the prices were changed by the old company on the first of January, 1901 — five months after the alleged agreement for a uniform rate — and that for months thereafter each company was charging a different rate, but the decree was one of absolute dismissal — an adjudication that the ordinance of September 4 was valid, an adjudication which became res judicata for all future litigation, and this in the face of the finding by the commissioner, undisturbed by the court, that the rates established by it are not remunerative. and thus work a gradual confiscation of the property belonging to the plaintiff.

We think that under the circumstances the decree should be reversed and the case remanded with instructions either to refer it to a commissioner for further findings, with leave to take additional testimony if that be deemed necessary, showing the terms and duration of the alleged agreement between the two companies, and how far it was acted upon by them, or that the court should itself undertake this investigation and make like findings.

The decree of the Circuit Court is

Reversed.

PEORIA GAS AND ELECTRIC COMPANY v. PEORIA.

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