Municipal Gas Co. v. Lone Star Gas Co. , 259 S.W. 684 ( 1924 )

On Motion for Rehearing.

The holding of this court, in the original opinion, to the effect that that clause in each of the contracts which gives the right of forfeiture as a remedy in case of the broach of the terms of the contract should-not be enforced, has been vigorously assailed in motion for rehearing. That holding was based upon the theory that such clause was invalid, and to this holding we adhere, but will state more fully the principles of law upon which such holding is based.

It may be stated as elementary that the parties to a contract may agree and contract with reference to the remedy to be invoked in case of a breach of its terms andl conditions by either party, provided the remedy thus made available against the offending party does not contravene the law of the land or violate the public policy of the state. It may further be stated as elementary that, when parties have legally contracted in reference to a mutual remedy for breach of the contract, such remedy then becomes a vested property right in each of the parties, to be protected by the courts with as much zealous care as any other vested property right. These principles apply to contracts between public service corporations as well as to contracts between private corporations and individuals; and they also apply equally to contracts whose subject-matter deals with the administration of a public utility as they do to those contracts whose subject-matter is not impressed with a public interest.

The test to be applied in each instance is. the same, and, is: Does the contract remedy contravene either the law or public policy? If it does not, it is valid, and the courts can-1 not deprive the parties to the contract of its benefits; if it does, it is invalid, and the courts cannot permit the parties the use of its benefits. . ■

While the rule stated for determining whether a contract remedy is valid is the same with all classes of persons, corporations, and all character, of contracts,-still public service corporations and contracts whose subject-matter affects the public interest are much more limited in the freedom to contract in this respect. This follows because of the duty to the public, a duty that is paramount to private interest.

It is not necessary to discuss all of the limitations in this respect. It is sufficient for this case to state that public service corporations cannot contract, so as to endanger, cause to be suspended, or to be rendered impossible, the performance of duty to the public. Tbe following statements of this rule are deemed sufficient:

In the case of Gibbs v. Consolidated Gas Co. of Baltimore, 130 TJ. S. 396, 9 gup. Ot. 553, 32 D. Ed. 979. Chief Justice Fuller, in delivering the opinion of the court in reference to this rule, says:

“It is also too well .settled to admit of doubt that a corporation cannot disable itself by con- ■ tract from performing the public duties which it has undertaken, and by agreement compel itself to make public accommodation or convenience subservient to its private interests.”

13 Corpus Juris, p. 444, after laying down the general rule in reference to public service corporations as announced by Chief Justice Fuller, says:

“ * * * g0 agreements by railroad companies and other common carriers, water and gas companies, and other quasi public corporations owing duties to the public, which interfere with the performance of such duties, are illegal and void as being contrary to public policy, the question not depending on whether the public has in the particular case suffered any detriment, but on whether the contract is in its nature such as might be. injurious to the public.”

The Supreme Court of this state, in the case of Railway Co. v. Morris et al., 67 Tex. 692, 4 S. W. 156, announces the same rule in the following language:

“It is well settled that corporations organized for public purposes cannot, by contract of sale, lease or otherwise, render themselves incapable of performing their duties to the public, or in any way absolve themselves from the obligation which forms the main consideration for giving them a corporate existence, unless this be done by consent of the state, given through the charter, or in some other manner.”

This'same principle is again affirmed by our Supreme Court in the ease of Raywood Rice, Canal & Milling Co. v. Erp & Ripe, 105 Tex. 167, 146 S. W. 155.

These quotations and citations of authority might be extended to an indefinite length, but the aboye are sufficient to show the rule and to show also its universal application.

Is the tendency of this said forfeiture clause such as to prevent or disable either party to the contracts from performing its duties .to the public? The service to the public is accomplished directly through and by moans of the delivery' of natural gas by appellee to appellant at the various places named in the contracts. The assurance to the public that this delivery will be made, and that service to the public will be performed, rests in the carrying out by both parties of these contracts. Permit either party to declare these contracts at an end, and this assurance is at once removed. The very purpose for which these corporations were created and are allowed to exist was in the instant case made certain of accomplishment by the execution of these contracts. To say that they can contract between themselves for their own private interests to bring these contracts to an end, and thereby destroy the security of service to the public, is to announce a rule that public accommodation and public convenience may be made subservient to the private rights and interests of those who voluntarily took upon themsplves the performance of a great public service. This the courts cannot permit.

The respective motions for rehearing are overruled.