Court Opinion

ID: 9679618
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:00:09.96612+00
Date Added: 2024-06-11T13:09:13.200332
License: Public Domain

BARROW, Justice.
This suit was instituted in a District Court of Bexar County by Herbert M. Schenker, Marvin C. Beck and John J. Mullen, allegedly as a class action under Rule 42, Texas Rules of Civil Procedure, on behalf of themselves, and for and on behalf of 187,249 consumers of electricity and 161,011 consumers of gas, furnished by the gas and electricity systems owned by the City of San Antonio and operated by the Public Service Board of the City under authority of Arts. 1111-1118, Vernon’s Ann. Civ.Stats. Defendants are the City of San Antonio, a Home Rule City, the Public Service Board and the individual members thereof, and the indenture trustees under the indenture agreements by which the system was purchased by the City from the San Antonio Public Service Company in 1942, and refinanced on three subsequent occasions.
The trial court, after a hearing on defendants’ plea to the jurisdiction and plea in abatement, entered a final judgment providing in part as follows:
“All parties, Plaintiffs and Defendants, having announced ready on the said pleas to the jurisdiction and in abatement and the Court having considered the pleadings and heard the evidence and arguments of counsel for both Plaintiffs and Defendants and having taken the case under advisement after submission of written briefs, is of the opinion and finds that the relief sought by Plaintiffs as electric and gas consumers relate to the reasonableness of electric and gas rates heretofore charged and to be charged by the City of San Antonio, which are legislative and municipal matters over which the courts have no jurisdiction; and that the record in this case shows that the Defendants, under Article 1113, Revised Civil Statutes [Vernon’s Ann.Civ. St. art. 1113], as amended, are authorized to fix the rates charged to these Plaintiffs and that the Defendants have exercised this authority, and therefore Paragraph I of Plaintiffs’ First Amended Original Answer and the corresponding plea in the Answer of Defendants Harris Trust and Savings Bank and F. O. Mann, as Trustees, are sustained and this cause should be dismissed with prejudice.”
*628The suit was accordingly dismissed with prejudice.
The various ordinances enacted to authorize purchase in 1942 and setting rates at that time, were introduced in evidence, as were the trust indentures and the City Charter. Plaintiffs alleged substantially that: the City acquired the gas and electricity systems on October 25, 1942, for the sum of $33,950,000.00, which sum was provided by issuance of bonds payable solely out of revenues; an indenture agreement was entered into with the bond holders which provided that the Board of Trustees should have complete authority, power, management and control of the Utility, including setting rates (it is seen that the indentures do not authorize the Board to set rates) ; that since purchase the City has never fixed, adjusted, or changed any rates; that the City Charter adopted in 1951, calls for the appointment of a “Supervisor of Public Utilities” to furnish information to the City Council, but no supervisor has been appointed and the information has not been furnished; that the City Charter has been violated in the purchase of material without calling for bids; that since October, 1942 (when the ordinance was passed authorizing purchase and setting the rates), no public hearing has ever been held by the City Council to enable the public to analyze the operation, rate structure, rates and charges of the system; that plaintiffs have been required to pay excessive, exorbitant and unreasonable rates, which have substantially increased the value of the utility system to where it is now worth $152,000,000.00; that this surplus is the result of the inequitable and confiscatory policies and actions in not setting fair and reasonable rates as required by law; that said surplus is held in implied and constructive trust for the benefit of plaintiffs, and they ask for refund of the excess accumulated in the four years prior -to the filing of suit; that the unreasonable, extortionate and discriminatory rates charged plaintiffs by defendants deprived them of their property without due process of law and are confiscatory and discriminatory; that City has refused to perform its mandatory legislative duty to fix and adjust utility rates; that the rates and charges yielded a net return on fair value of approximately 18% the last four years, and such rates of return were unreasonable, excessive, extortionate, discriminatory and constituted a direct taking of plaintiffs’ property without due process of law in violation of United States and Texas Constitutions; furthermore, these excessive rates are a discrimination against consumers in favor of other classes of citizens; that Art. 1113, R.C.S., Vernon’s Ann.Civ.St. art. 1113, provides for setting of rates, but in setting rates defendants have included expense items which do not constitute legitimate and legal operating expenses, by transferring excessive sums to the City in lieu of taxes and furnishing free services to City; plaintiffs pray that upon hearing the court set a reasonable and fair maximum net rate of return upon actual fair value of the properties of the system, and prohibit defendants from making illegal payments to the City and from improperly furnishing services to the City, or, in the alternative, that City be required to hold a public hearing for the purpose of establishing reasonable and fair rates.
We will not set forth the reasons asserted by defendants that the court lacked jurisdiction, as the rule is clear that where the cause is dismissed it is our duty to search the record and see if there is sufficient reason to sustain such a dismissal. Glen Oaks Utilities, Inc. v. City of Houston, 161 Tex. 417, 340 S.W.2d 783.
It is important to recognize at the outset that this is not a case wherein a consumer complains of discrimination in the charge made against him as compared to the charges made other consumers, Kousal v. Texas Power & Light Co., 142 Tex. 451, 179 S.W.2d 283; it is a complaint, purportedly on behalf of all classes of consumers, that the entire rate structure is *629improper in that excessive rates are ■charged.
 It is fundamental that the fixing ■of rates is a legislative and not a judicial function, and that the only power of the ■court is to enjoin the enforcement of an illegal rate. It cannot set a rate either for past or future operations. Railroad Commission v. Houston Natural Gas Corp., 155 Tex. 502, 289 S.W.2d 559; Lone Star Gas Co. v. State, 137 Tex. 279, 153 S.W.2d 681; Kousal v. Texas Power & Light Co., supra. This legislative function of rate making has been delegated by the Legislature to the City. Art. 1113 and Art. 1175, § 12, Vernon’s Ann.Civ.Stats.
 The rule is now equally well established that where a city has refused to perform its statutory duty to fix reasonable rates which will yield a fair return upon the fair value of the property owned by the franchise holder, the Texas Courts will exercise their equity powers to enjoin the enforcement of confiscatory rates. Glen Oaks Utilities, Inc. v. City of Houston, supra; General Telephone Co. v. City of Wellington, 156 Tex. 238, 294 S.W.2d 385; City of Houston v. Southwestern Bell Tel. Co., Tex.Civ.App., 263 S.W.2d 169.
The application of this rule has been limited in Texas to suits on behalf of the franchise holder. City of El Paso v. El Paso City Lines, Tex.Civ.App., 227 S.W.2d 278. Plaintiffs have cited us to cases from other jurisdictions which have given a consumer the right to seek relief from the courts for excessive utility rates. Among these are: Griffin v. Goldsboro Water Co., 122 N.C. 206, 30 S.E. 319, 41 L.R.A. 240; Washington Water & Electric Co. v. Pope Mfg. Co., 176 Ga. 155, 167 S.E. 286; Kiefer v. City of Idaho Falls, 49 Idaho 458, 289 P. 81; Holton Creamery Co. v. Brown, 137 Kan. 418, 20 P.2d. 503; Hicks v. City of Monroe Utility Co., 237 La. 848, 112 So.2d 635; Twitchell v. City of Spokane, 55 Wash. 86, 104 P. 150, 24 L.R.A.,N.S., 290.
We expressly do not determine this issue, as in our opinion the trial court did not err in dismissing the suit for want of jurisdiction. It is fundamental that courts have no initiative in the matter and that administrative remedies must be exhausted before the courts will intervene. Glen Oaks Utilities, Inc. v. City of Houston, supra. Sec. 135 of the San Antonio City Charter provides in part that: “The council shall have the power to call a public hearing, giving reasonable notice to the holder of a franchise, to determine whether or not an application to increase rates shall be granted or to determine whether or not the rates currently charged by any holder of a franchise for the service rendered are excessive.” By this provision, the council may be called upon to determine whether rates are excessive, and it does so by calling a public hearing. Since it is the council and not the court which must make this initial determination, one must first take his complaint there. There is no allegation or contention that plaintiffs had ever sought any relief from the City before filing this suit.
In San Antonio Transit Co. v. City of San Antonio, Tex.Civ.App., 323 S.W.2d 272, Chief Justice Murray, speaking for this Court, said:
“A transit company desiring to increase its rates must apply to the City Council for a new rate and must invoke the rate fixing powers of the City before it may resort to the courts. (Citing authorities.) * * *
“It is quite possible that with the inflationary period we have been having for some time, that a rate that was proper yesterday may be insufficient today, but before a company can refuse to continue to apply the existing rate it must go before the City Council and seek a new rate, as a prerequisite to going into court and seeking to enjoin the existing rate. The City Council is the proper body in the first in*630stance to set aside an old rate and fix a new one.”
This rule was followed in City of Houston v. Memorial Bend Utility Co., Tex.Civ.App., 331 S.W.2d 418, wherein it was held:
“When the ordinance was passed, the rate fixed became the rate promulgated by law and it could not be changed except in a manner provided by law. The utility could not itself promulgate new rates until the existing rates fixed by law be set aside. The only way the rates could be changed would be through a hearing before the City Council. The courts could not intervene until appellee first exhausted its remedy before the City Council. San Antonio Transit Company v. City of San Antonio, Tex.Civ.App., 323 S.W.2d 272, no writ hist. Of course, if the Council should deny a hearing and seek to continue to enforce an ordinance that appellee contends operates to confiscate its property, the courts would intervene to determine whether there was in fact confiscation.”
Since there was no allegation that plaintiffs had complained of excessive rates to the City Council or sought to have them lowered, the courts could not intervene and the suit was properly dismissed.
We do not believe the plaintiffs have a justiciable interest to assert this cause of action complaining of excessive rates charged all consumers, and the suit was properly dismissed for that reason. In San Antonio Conservation Society v. City of San Antonio, Tex.Civ.App., 250 S.W.2d 259, writ ref., it was held that suit to enjoin construction of a bridge could not be brought by the Conservation Society, its members, or persons who owned property on the river and alleged they would be financially affected by depreciation of their property if the bridge was constructed across the San Antonio River. The Court held they had no justiciable interest to authorize the bringing of suit, as they shared the San Antonio River in common with all the people of San Antonio and with the public in general, and “any impairment of this right is an injury or damage sustained by appellants in common with the general public. Only lawfully constituted guardians of the public interest may maintain actions for the redress of such character of injuries.” See also Estes v. City of Granberry, Tex.Civ.App., 314 S.W.2d 154, wr. ref.; West Tex. Utilities Co. v. Smith, Tex.Civ.App., 168 S.W.2d 665, wr. ref.; Powell v. City of Baird, Tex.Civ.App., 132 S.W.2d 464; City of Corpus Christi v. Flato, Tex.Civ.App., 83 S.W.2d 433.
For these reasons the trial court did' not err in dismissing plaintiffs’ cause of action for want of jurisdiction. This was not a trial on the merits and the court erred in dismissing the suit “with prejudice.”' Crofts v. Court of Civil Appeals, Tex., 362 S.W.2d 101; McDonald, Texas Civil Practice, § 17.20. We, therefore, reform the judgment to strike these two words from the judgment entered in this cause.
The order of dismissal as reformed is hereby affirmed.