Oklahoma Gas & Electric Co. v. Oklahoma Natural Gas Co.

1921 OK 31, 205 P. 768, 85 Okla. 25, 1921 Okla. LEXIS 62
CourtSupreme Court of Oklahoma
DecidedFebruary 1, 1921
Docket11778
StatusPublished
Cited by8 cases

This text of 1921 OK 31 (Oklahoma Gas & Electric Co. v. Oklahoma Natural Gas Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Oklahoma Gas & Electric Co. v. Oklahoma Natural Gas Co., 1921 OK 31, 205 P. 768, 85 Okla. 25, 1921 Okla. LEXIS 62 (Okla. 1921).

Opinion

McNEILL, J.

This is an agreed case filed pursuant to section 5303, Revised Laws 1910, by the Oklahoma Gas & Electric Company, a corporation, and other corporations, as plaintiffs, and the Oklahoma Natural Gas Company, a corporation, and the Corporation Commission of this state, as defendants.

The plaintiffs are public service corporations owning franchises in Oklahoma City and other cities and are engaged in distributing and selling gas to the citizens. The Oklahoma Natural Gas Company is a public service corporation engaged in producing, furnishing, and selling natural gas.

This controversy arises over a contract executed on the 22nd day of May, 1907, between the Oklahoma Natural Gas Company and the Oklahoma Gas & Electric Company 'wherein the Oklahoma Natural Gas Company was to sell gas and deliver it into the pipe lines of the Oklahoma Gas & Electric Company in this city and was to receive therefor generally two-thirds of the gross amount collected by the Oklahoma Gas & Electric . Company from its consumers ; said contract to be in force for a period of 20 years. The Oklahoma Natural Gas Company has furnished gas to the Oklahoma Gas & Electric Company under the terms of said written contract, and the Oklahoma Gas & Electric Company has sold the same to the citizens and collected therefor and settled with the Oklahoma Natural Gas Company according to the terms of said contract up to the present time. The status of the other plaintiffs is similar to that of the Oklahoma Gas & Electric Company, and we will not mention their contracts, as the determination of the one question determines the rights of all the parties.

On the 10th day of August, 1920, the Oklahoma Natural Gas Company filed a petition with the Corporation Commission asking the Corporation Commission to fix what is known as a city gate rate, and permit it to furnish the Oklahoma Gas & Electric Company gas under a city gate rate, instead of under its percentage contract, and that the commission ascertain the value of the property of the Oklahoma Natural Gas Company and fix a reasonable city gate rate to be charged the Oklahoma Gas & Electric Company for the gas received by it from the Oklahoma Natural Gas Company.

It is the contention of the Oklahoma Natural Gas Company that the Corporation Commission has authority to fix said city gate rate in lieu of the percentage contract, which expires May 22, 1927, upon the theory that said contracts are subject to 'the superintending power and control of the state in that they affect 'the public’s interest. It is contended by the plaintiff herein that the relation between the Oklahoma Natural Gas Company and the local company is contractual, that of principal and agent, seller and purchaser, and the state has no jurisdiction to alter or impair the terms of the contract between said parties; it being admitted that prior to the execution of the contract the parties sustained no relation toward each other and there was no duty for une 'to contract with the other. The plaintiff contends that the changing of the terms of the contract would be in violation of section 15, art. 9, of the Constitution of this state, and section 10,- art. 1, of the Constitution of the United States, which forbids any state passing any law impairing the obligation of a contract, and in violation of the Fourteenth Amendment of the Constitution of the United States, prohibiting the taking of property without due process of law.

The plaintiff filed a demurrer to the petition of the Oklahoma Natural Gas Company, which demurrer was overruled by the Corporation Commission, and it is alleged that the Corporation Commission will proceed to hear evidence regarding the petition of the Oklahoma Natural Gas Company and the plaintiff has no speedy and adequate remedy at law.

The question involved in this controversy is: Whether the Corporation Commission has power to inquire into the terms of the contract between the Oklahoma Natural Gas Company and the Oklahoma Gas & Electric Company, and if the contract affects the public interest, would the Corporation Commission have power or authority to change 'the terms of the same?

We think, the rule may be stated as follows: Public service corporations have a right to enter into contracts between themselves, .and 'their contracts are not subject to control or supervision of the Corporation Commissioh, unless said contracts are unconscionable, oppressive, and impair the obli *27 gation of the public service corporation to discharge its public duty as a public service corporation to the public. This contention is supported by the holding in the following cases: Dubuque & Sioux City R. Co. v. Richmond, 19 Wall. 584, 22 L. Ed. 173; State ex rel. Corp. Comm. v. Seaboard Air Line R. Co. (N. C.) 92 S. E. 150; Pub. Util. Rep. 1917 E, p. 927; Allen & Lewis v. Ore. R. & Nav. Co., 98 Fed. 16; S. F., Pres. & Phe. R. Co. v. Grant Bros., 228 U. S. 177, 57 L. Ed. 787; Newport News L. & W. Co. v. Peninsula Pure Water Co. (Va.) 59 S. E. 1099; A., T. & S. F. R. Co. v. R. R. Com-(Cal.) 160 Pac. 828; Minneapolis & St. L. R. Co. v. Minnesota, 186 U. S. 257; Philadelphia, Baltimore & Washington R. Co. v. Schubert, 224 U. S. 603; Grand Trunk R. Co. v. R. R. Commission of Indiana, 221 U. S. 400.

The Supreme Court of North Carolina discussed both principles in the case 'of State ex rel. Corp. Com. v. Seaboard Air Line R. Co. (N. C.) 92 S. E. 150, as follows:

“It is undoubtedly true, as contended by petitioner, that public service corporations cannot by contracting among themselves deprive the state of its rights to exercise its police power in the interest of public safety. If the contract "does not adequately protect the public, then the police power may be used to the full extent necessary to require the contracting parties, notwithstanding the contract, to conform to every requirement necessary for the public safety. But, under the guise of an exercise of the police power of the state, the courts cannot deprive a citizen of property or contract rights that have no tendency to injure the public health, morals,' safety, or general welfare. As said in Kansas City So. R. Co. v. Kaw Valley Drainage District, 233 U. S. 75, 58 L. Ed. 857: ‘The decisions also show that a state cannot avoid the operation of * * * (The 14th Amend.) by simply invoking the convenient apologetics of the police power.’ See, also, Mugler v. Kansas, 123 U. S. 623, 31 L. Ed. 205, 8 Sup. Ct. Rep. 273; Eubank v. Richmond, 226 U. S. 137, 57 L. Ed. 156, 42 L. R. A. (N. S.) 1123, 33 Sup. Ct. Rep. 76, Ann. Cas. 1914B, 192.”

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Bluebook (online)
1921 OK 31, 205 P. 768, 85 Okla. 25, 1921 Okla. LEXIS 62, Counsel Stack Legal Research, https://law.counselstack.com/opinion/oklahoma-gas-electric-co-v-oklahoma-natural-gas-co-okla-1921.