Court Opinion

ID: 8806676
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:49:59.639801+00
Date Added: 2024-06-11T17:04:07.683192
License: Public Domain

STONE, Circuit Judge
(concurring in part and dissenting in part). This is a suit by a patron against a public service corporation, lawfully authorized to use the streets and public places of a municipality in order to furnish consumers with electric light and power. The entire petition is a tort action in its pleading. The first count is for damages because of a discriminatory rate; the second and third counts for damages because of unreasonable rates.
I concur in the result reached, but not entirely with the rules of law laid down. Because of the importance of the subject involved, I feel obligated to state wherein I disagree. I agree that discrimination and unreasonableness in rates are distinct and separate grievances, and that the existence of either is, as to the patron, a tort. I am compelled, respectfully, to disagree with the announcement that in cases of discrimination the remedy of money had and received can never be employed, and with a portion of the rule of damages set forth.
*447As to the remedy and proof in cases of discrimination: One of the fundamental principles of our form of government is equality to every person of opportunity and treatment, so far as governmental action extends. This is illustrated in the national and state Constitutions, which forbid and render nugatory all state action resulting in discrimination between members of the same legal classification. The same right of equality inheres in all governmental activity, and, because of the quasi public character thereof, it has its full place in all public service activity. As said by Mr. Justice Brewer, in speaking of one kind of such service (common carriage):
“Common carriers, whether engaged in interstate! commerce or in that wholly within ilia state, are performing a public service. They are endowed by the state with some of its sovereign powers, such as the right of eminent domain, and so endowed by reason of the public service they render. As a consequence of this, all individuals have equal rights, both in respect to service and charges.” Western Union Teleg. Co. v. Call Pub. Co., 181 U. S. 92, 99-100, 21 Sup. Ct. 561, 564 (45 L. Ed. 765).
The evil results of departures by utility companies from this salutary rule of public policy are common knowledge and have received full judicial recognition. That public service companies can, through illegal discrimination, often affect and even control competitive business conditions among their customers, to the extent of enriching one and ruining the other, has been too frequently demonstrated. Even irrespective of competition, favoritism in service or charge may be used for purposes injuriously affecting both the consumer and the public. Without passing upon the truth of the allegation contained in the present petition, yet it is illustrative of possibilities along this line. The statement is:
“The plaintiff further states that the Register & Leader Company, as has been heretofore stated, is the publisher of two daily newspapers having wide circulation in Hie city of Des Moines, and said company has great influence in city politics and in the conduct of city affairs, and the said discriminatory rates to tile Register & Leader Company were granted by the defendant with the corrupt purpose to thereby secure the good will of the Register & Leader Company and its influence in preventing the repeal of the aforesaid Ordinance No. 1566, in order that the defendant might, continue to charge the excessive and unreasonable rates specified in said ordinance, and reap the excessive and unreasonable profits which it could make from customers who were unable to protect themselves, and said corrupt bribe was paid to the Register & Leader Company in total disregard of defendant’s duty in the premises and in total and wanton disregard of the losses which defendant was thereby inflicting upon plaintiff, and said bribe was paid stealthily and secretly, and with the purpose that same should never he detected, and the payment of said bribe was tortious, wrong, and unjust. * * * ”
The above considerations emphasize the necessity of preventing such discrimination, and of shaping the rules of law to that end. This conception is intensified by the thought that discrimination must find its source in the voluntary act of the utility company.
The preventive methods, not statutory, variously tried, have been mandamus, bills in chancery, and suits for damages by the injured party. Obviously, not the least effective methods are such as these, which place a weapon in the hands of the injured party, who, moved *448by impulses of self-protection, necessarily acts in the public interest at the same time.
This obligation of equal service being one imposed by law, its violation is, as to the individual, a tort. Rut wherever one person commits a tort against the estate of another, with the intention of benefiting his own estate, or wherever justice requires it in consideration of benefits received, the tort may be waived and assumpsit brought for the money benefit so received. 1 C. J. 1032; Fanson v. Linsley, 20 Kan. 235; Norden v. Jones, 33 Wis. 600, 14 Am. Rep. 782. It may be noted that Mr. Justice Brewer, then of the Kansas Supreme Court, concurred in the opinion in Fanson v. Linsley. Therefore, though primarily the form of action for such wrong is tort, it is not necessarily so in all instances, for (as with other torts),- if this tort has resulted in the payment by the wronged party of money to the public utility which should not have been paid, then the tort may be waived and recovery of that money obtained through an action for money had and received. Armour Packing Co. v. Edison, etc., Co., 115 N. Y. App. Div. 51, 100 N. Y. Supp. 605. Of course, the waiver of the tort would forfeit all right to consequential damages and confine recovery to the sum wrongfully exacted and withheld.
If 'the action brought be a tort, it would seem to be subject to the ordinary rules pertaining to such suits. The pleading and proof must cover the wrongful act and the quantum of damages. The wrongful act is the denial to one patron of a rate or service accorded another patron in the same legal classification. When this wrongful act has been proven, the right to recover has been established. The remaining inquiry is purely one of quantum of damages. The damages are compensatory, but there would seem to be no reason why, if the proper elements of willfulness and malice. exist, exemplary damages should not be allowed — particularly if it also appear difficult to estimate in money the injury. Scott v. Donald, 165 U. S. 58, 89, 17 Sup. Ct. 265, 41 L. Ed. 632; Day v. Woodworth, 13 How. 363, 371, 14 L. Ed. 181; Press Pub. Co. v. Monroe, 73 Fed. 196, 19 C. C. A. 429, 51 L. R. A. 353; Wilson v. Vaughn (C. C.) 23 Fed. 229.
In proof of compensatory damages, the ordinary rules of evidence would seem proper and sufficient. Where the discrimination is in service or facilities, there is apparently no common circumstance or fact to aid in the damage inquiry. But I cannot escape the conviction that, where the discrimination is in charge or rate, there is present a minimum measure of damages; i. e., the difference in charge or rate. The legal right is to as good treatment (as low a charge or rate) as is given any other legally similar patron. The tort is in a refusal of that treatment. Certainly there is an injury equaling the difference in money value of the treatment (charge or rate) to which the patron was entitled and that which he received. Public policy, in my judgment, requires this view, for otherwise there could never be recovery in any case of rate or charge discrimination, unless there existed competitive conditions between the patrons involved in the discrimination. What possible other loss or damage is suffered by the householder, who pays one price for his -domestic use of gas, wa*449ter, or electricity, while his next-door neighbor, for precisely the same service, rendered under precisely the same circumstances, pays only one-half as much P Or what other injury has the woolen manufacturer received when he pays twice the rate for electric power as does the adjoining candy maker, for precisely the same service, under precisely the same circumstances? Where there is business competition it may be that the discriminating rate has so heavily affected the fixed charges of production as to result in further damage; but, barring competition, the difference in the rate measures the damage, or there is none legally provable. In short, either the definition of what constitutes illegal discrimination as to rates or charges must be so altered as to exclude all of that great class which do not happen to be business competitors, and injured in their business competition, or there results the anomaly of one rule of common law giving a right (valuable not only to the individual, but to the public good), and another rule of the common law, rendering the protection of that right impossible.
Where, as in the present case, competitive conditions are present, and alleged to be affected by the discrimination, there is an additional consideration. The object of business is profit. When any one by an unlawful act reduces the profit of another, the law provides for restitution of that loss. Competition limits the sale price. When a business man is given a lower rate for power, or some other element entering into the fixed cost of the article he produces, it is an absolute certainty that his profit has been increased by just the amount of the reduction. It is equally certain that every competitor has been put at a disadvantage in just that sum. If the competitors have a right to that reduction, and do not receive it, they are damaged, and in just that amount.
The mistake, as I see it, sometimes made in the consideration of the element of damage in discrimination cases, is that nothing is regarded as damage unless it be an actual diminution of the existing property of the one paying the higher rate. So it has been said that if the reduction has resulted in no disarrangement of selling prices, so that the business of the one paying the higher rate has gone on undisturbed, he has not been damaged, though his competitor may have been benefited, and that he cannot complain of a'benefit to another. The fallacy is that he is not complaining that some one else has received a benefit; he is complaining because be has not received the same benefit. The law says that he has a legal right to that benefit. If he had this benefit, his profit would be enhanced to just that amount, because his cost price would be just so reduced. His damage is in being deprived of a right (benefit), the value of which can, in such an instance, be definitely and accurately gauged, although his existing business shows no diminution nor disturbance. The point of view is vital. The law leaves it entirely open for the public utility to grant any favor it desires by lowering its charges. Its only condition is that what is granted to one must he given to all similarly situated. The wrong is not in reducing the rate to one; it is in not reducing it to each of the remainder. New York, N. H. & H. R. Co. v. Ballou & Wright, 242 Fed. 862, 865, *450— C. C. A. -(C. C. A. 9th C.); Wyman Pub. Serv. Corp. § 1290, and citations.
But the favored one may not be satisfied to quietly receive the additional profit through the reduced rate. ' He may carry this advantage into business competition. He may reduce his selling prices to such an extent as to1 get business his competitors might have secured or retained. He may do this to the extent of driving them out of business, ruining them, and obtaining a monopoly for himself. These but add to the injury and the resulting damage. If claimed, they must be supported by proof.
The cases of Penn R. Co. v. International Coal Mining Co., 230 U. S. 184, 33 Sup. Ct. 893, 57 L. Ed. 1446, Ann. Cas. 1915A, 315, Meeker & Co. v. Lehigh Valley R. R. Co., 236 U. S. 412, 35 Sup. Ct. 328, 59 L. Ed. 644, Ann. Cas. 1916B, 691, Lehigh Valley R. R. Co. v. Clark, 207 Fed. 717, 125 C. C. A. 235, Lehigh Valley R. R. Co. v. American Hay Co., 219 Fed., 539, 135 C. C. A. 307, Knudsen-Ferguson Fruit Co. v. Michigan Central R. Co., 148 Fed. 968, 79 C. C. A. 46, and Hoover v. Penn. R. Co., 156 Pa. 220, 27 Atl. 282, 22 L. R. A. 263, 36 Am. St. Rep. 43, cited in the majority opinion, do not, in my judgment, necessarily lead to a different conclusion. The Knudsen-Ferguson Case did not involve discrimination in any way. I do not find that the other cases brought before the court the propriety of employing the remedy of money had and received. They did hold the rule of damage, where the action brought was in tort, to be as announced; but in each of them the court was construing a statute, while this case involves the definition and application of rules of common law. Also., the statute in question (except in Hoover v. Railroad) involved, the important consideration of a published tariff, from which no legal deviation could be made. In such cases there is the vital difference that the lower rate (a departure from the published rate) was, in and of itself, a forbidden, unlawful rate, aside from any question of discrimination, and no one, because of discrimination, or for any other reason, could make that unlawful act the foundation of a right to the same unlawful'act in his favor (Paris Mountain Water Co. v. Camperdown Mills, 98 S. C. 304, 312, 82 S. E. 417, 418), while in this case the lower rate was of itself entirely lawful, but a tort was committed in not giving the same rate to others of the same class.
My conclusion, therefore, is that the first count of the petition is good; that there can be no recovery on any theory of money had and received, because the pleading is for a tort; that proof of facts constituting illegal discrimination in the rate charged, joined to proof of the difference in rate, would authorize recovery for the difference in what plaintiff did pay and would have paid under the lower rate; that any further damage arising from a disturbance of competitive conditions must be proven. Hence the demurrer to this count should have been overruled.
As to the demurrer to the second and third counts of the petition, I agree that the demurrer was properly sustained. Those counts are in tort for damages based on allegations that certain rates were unreasonable. The rates in question were at all times within the maximum *451limits of an ordinance passed under state legislative authority as an exercise of police power and not as part of any contract. As long as that ordinance endures, it clothes the rates prescribed therein with a presumption of reasonableness, and no action for damages can be sustained for alleged injury therefrom.
This suit, being one in tort for damages, does not involve the right of individuals as consumers, users, or otherwise, to challenge the reasonableness of the rates established within the city ordinance maximum by a direct proceeding in equity, the result of which would be to sustain or annul the alleged unlawful rates as to all of the class to which the complainant might belong. ] am not prepared to say that the citizen may not thus, through an action against the utility company, challenge the reasonableness and validity of such an ordinance. If there be no such right, then it results that where the legislative branch, through statute or ordinance, establishes a maximum rate, such action by implication annuls every common-law remedy the citizen has had to protect himself through the courts from an extortionate rate so authorized. Until that question is squarely presented, 1 do not care to affirm or deny the existence of such right. It may not, however, he out of place to suggest in this connection the language of Mr. Justice Miller, in his able concurring opinion in Chicago, Milw. & St. Paul Ry. Co. v. Minnesota, 134 U. S. 418, 459, 10 Sup. Ct. 702, 703 (33 L. Ed. 970), where he says:
“3. Neither Hie Legislature, nor such commission acting under the authority of the Legislature, can establish arbitrarily and without regard to justice and right a tariff of rates for such transportation, which is so unreasonable as to practically destroy the value of property of persons engaged in the carrying business on the one hand, nor so exorbitant and extravagant as to lie in utter disregard of the rights of the public for the use of such transportation on the other.
“<!. In either of these classes of cases there is an ultimate remedy by the parties aggrieved, in the courts, for relief against such oppressive legislation, and especially in the courts of the United States, where the tariff of rates established either by the Legislature or by the commission is such as to deprive a. party of his property without due process of law.
“5. Bui until the judiciary has been appealed to to declare the regulations made, whether by the Legislature or by the commission, voidable for the reasons mentioned, the tariff of rates so fixed is the law of the land, and must ho submitted to both by the carrier and the parties with whom he deals.
“G. That the proper, if not the only, mode of judicial relief against the tariff of rates established by the Legislature or by its commission, is by a bill in chancery asserting its unreasonable character and its conflict with the Constitution of the United States, and asking a decree of court forbidding the corporation from exacting such fare as excessive, or establishing its right to collect the rates as being within the limits of a just compensation for the seiuice rendered.
“7. That until this is done it is not competent for each individual having dealings with the carrying corporation, or for the corporation with regard to each individual who demands its services, to raise a contest in the courts over the questions which ought to be settled in this general and conclusive method.”