Case ID: ad_169/html/0690-01.html
Source: Caselaw Access Project
Author: {"author": "Putnam, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Village of Fredonia, Appellant, v. Fredonia Natural Gas Light Company and Others, Respondents.
    Second Department,
    October 1, 1915.
    Public service corporation — gas "company — unconditional franchise to lay gas mains — failure to operate • gas plant — when village cannot attack franchise.
    Only the sovereign power of the State can assert .a breach of condition of a corporate franchise by an action in the nature of quo warranto.
    Where a franchise to lay gas mains in the streets of a village is unconditional and the duty to continue to supply gas to the village is not absolute, the village is not entitled to maintain a suit to restrain the corporation from using its franchise by laying new gas pipes in the streets," merely because it suspended operations for a period of years owing to its inability to compete with another company furnishing natural gas, and this aside from the fact that the suit, though nominally brought by the village, is really in the interest of a competing company. Moreover, the village, by continuing to tax the franchise of such gas company during the period when it had suspended operations, is estopped from contesting the existence of the franchise.
    For the above reasons the village cannot invoke the Public Service Commissions Law requiring the approval of the Public Service Commission to the laying of gas mains.
    
      It seems, that if the gas company is attempting to lay defective pipes, or is guilty of maladministration, the village has a remedy without . resorting to equity.
    Appeal by the plaintiff, Village of Fredonia, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Chautauqua on the 8th day of December, 1914, dismissing the complaint upon the merits, upon the decision of the court, after a trial at the Chautauqua Special Term.
    
      Louis L. Thrasher, for the appellant.
    
      William S. Stearns and George Clinton, Jr., for the respondents.
   Putnam, J.:

This appeal from a judgment dismissing the complaint has been transferred to this Appellate Division, pursuant to section 281 of the Code of Civil Procedure.

The village of Fredonia seeks to restrain the operation of a franchise to the predecessor of the defendant company. The facts are set forth in the opinion of the Special Term denying the motion to continue the temporary injunction. (84 Misc. Rep. 150.) The plaintiff’s appeal from this order resulted in the injunction being restored, the Appellate Division of the Fourth Department stating “that there is sufficient doubt as to the law and facts involved, respecting the right of the defendant to lay its pipes as proposed, to require the reinstatement of the preliminary injunction until the hearing and determination of the action.” (162 App. Div. 924.)

Upon final hearing the complaint was dismissed on the merits, the court having found and held that the right to lay gas pipes in the streets of Fredonia, and transferred to the Fredonia Natural Gas Light Company (herein called for brevity the Fredonia Company), had never been forfeited. This franchise had been duly executed by the village authorities on February 29, 1864, under the village corporate seal.

After reciting the incorporation of the village and its authority under the act passed May 2, 1829 (Laws of 1829, chap. 351), to provide for public lighting of its streets, there was granted to Messrs. Forbes and Barmon “the exclusive privilege of laying their gas pipes and other machinery under ground along or across any or all the streets, lanes or alleys of said village (excepting the exclusive privilege of that part of Main street from Center street to the stone bridge), and from time to time to repair the same as may be necessary, they doing no unnecessary injury to the same, and restoring the said streets, lanes or alleys, so far as may be, to their original condition, in as short a time as can well be done, so as not to impair their usefulness.’’

For many years the Fredonia Company, as owner of this franchise, used in its mains gas. from natural gas wells; after that source failed it supplied manufactured gas from coal. ‘ In 1905 another franchise was granted to the Frost Gas Company, which thereupon furnished natural gas in competition with the Fredonia Company. In April, 1911, the Fredonia Company, being unable to carry on the competition, stopped supplying gas. In 1912 defendants William and Samuel Carroll became owners of the stock of the Fredonia Company. They also control the South Shore Natural Gas and Fuel Company (which supplies natural gas to the neighboring city of Dunkirk) and has a high pressure main extending practically to the Fredonia village line. The defendants Carroll also conduct a steam heating plant in Fredonia, which furnishes steam to some fifty or sixty local consumers who include the normal school, churches, schools, business establishments and private residences. On December 22,1913, the Fredonia Gas Company, by William Carroll as manager, sent to the village trustees of Fredonia a letter, stating that it proposed under its franchise to lay a four-inch gas main through certain streets to the heating plant and desired the co-operation of the village authorities. Counsel for the Frost Company attended the ensuing meeting of the village trustees. The next day the Frost Company wrote officially to the president of the village, undertaking to bear all expenses in connection with testing the validity of the Fredonia Gas Company’s franchise. This suit then followed in which the Messrs. Carroll are also joined as defendants.

It appears that after the Fredonia Company’s activity was dormant its special franchise was assessed and the taxes were paid thereon. The justice vacating the injunction held that “the receipt and retention by the village of benefits therefrom, upon the plainest principles of law and equity, should estop the plaintiff from now asserting that no such franchise rights exist. ’>

Plaintiff also invokes the Public Service Commissions Law (Consol. Laws, chap. 48; Laws of 1910, chap. 480). In March, 1912, within a year after it stopped its operations, the Fredonia Company presented to the Public Service Commission a petition setting forth that it had ceased supplying gas because the business yielded less than $25 a month against monthly expenses of $300. It prayed for permission to suspend its business of manufacturing illuminating gas until the further order of the Commission, without prejudice to petitioner’s right to re-engage in the business under its franchise in said village. . The Public Service Commission dismissed this application for want of jurisdiction. The Fredonia Company filed no reports with the Public Service-Commission for the years 1911, 1912 and 1913, but it kept up its corporate existence by meetings of its stockholders and directors.

Upon the trial an employee of the Frost Company testified that gas leaking from mains may injure shade trees. It was objected that this was not within the issues, also that such damage would be subject to remedy by the individual owners. There was also evidence that certain of defendant’s mains in Main and Church streets had become rusted. These pipes, however, were not part of the connection proposed to be made with the heating plant.

It nowhere appears that plaintiff or the inhabitants of the village had ever made any demand on defendant to furnish gas after it stopped its manufacture.

Aside from the question of this suit, nominally by the village, being really in the interests of 'the Frost Company, the legal issue may be put thus: Did the nonuser above stated entitle the village of Fredonia to sue in equity to enforce a forfeiture of the respondent’s franchise ?

Mr. Justice Pound has found that the Fredonia Company never surrendered or abandoned the right or privilege granted by plaintiff to Forbes, its assignor, nor has it ever suspended or discontinued the exercise of the same; that it stopped furnishing gas, as, at the time of such discontinuance, it had substantially no consumers remaining to take gas from its lines. From this he concluded that the right or privilege granted to Forbes, and assigned to the Fredonia Company, is still in full force and effect. He added: “It is not every nonuser that will furnish grounds for a forfeiture. To work a forfeiture there should be something wrong; and not only a wrong but one arising from willful abuse or improper neglect; such neglect as indicates an indifference to the demands of public duty. (People v. Bristol & Rensselaerville Turnpike Co., 23 Wend. 236; People v. Atlantic Ave. R. R. Co., 125 N. Y. 513.) Forfeiture is a punishment for fault, not for misfortune.”- (81 Misc. Rep. 592.)

The learned justice goes on to show that this franchise contains no condition as to furnishing gas. He adds significantly: “The village has not even attempted to revoke it, except by bringing this action, which seems to be in the interest of the rival company rather than the village as such. A competitor should not be thus eliminated unless the law plainly so declares.”

It appears that before this decision the plaintiff had petitioned the Attorney-General to institute a suit to dissolve the Fredonia Gas Company. It also asked to have the Forbes franchise annulled at the suit of the People. Both these applications were denied in an opinion of Deputy Attorney-General Kellogg, on May 18, 1914. (Reports Attorney-General, 1914, vol. II, pp. 228-232.)

On this appeal it is again urged that the village of Fredonia has a standing to question the validity of the franchise, and may claim a forfeiture from the alleged non-user.

The accepted doctrine that only the sovereign power can assert a breach of condition of a corporate franchise by action in the nature of quo warranto (Elizabethtown Gas Light Co. v. Green, 46 N. J. Eq. 118; Joyce Franchises, § 486) is recognized in this State. (City of New York v. Bryan, 196 N. Y. 158.) Further, the village of Fredonia cannot tax this franchise without admitting its existence. Such a power to tax has been supported by the doctrine of estoppel, which makes out a franchise from the fact that such pipes are suffered to lie under public streets. (People ex rel. United Natural Gas Co. v. Priest, 152 App. Div. 249.) The rule of estoppel works both ways. The act of levying and accepting taxes upon such a franchise must clearly debar the municipality from thereafter declaring that no such taxed right exists.

Considering that this franchise was unconditional, the duty to continue to supply gas was not absolute. The suspension of such supply, as here appears, did not entitle plaintiff to the relief sought. We are also of opinion, for the reasons stated, that plaintiff cannot invoke section 68 of the Public Service Commissions Law in this proceeding.

Without resorting to a court of equity, plaintiff has a continuing, valid and effective remedy against defective pipes, or through possible mal-administration in laying, securing and operating the mains which defendants propose to install. This is under its legislative power, by proper and reasonable municipal ordinances.

The judgment should, therefore, be affirmed, with costs.

Carr, Stapleton, Mills and Rich, JJ., concurred.

Judgment affirmed, with costs.