Bower v. United Gas Improvement Co. , 1908 Pa. Super. LEXIS 249 ( 1908 )

Opinion by

Head, J.,

The city of Philadelphia is the owner of an extensive plant constructed to enable it to manufacture and distribute to its citizens gas for light and heat. For upwards of a half century the city itself operated its plant and during that period adopted and continuously enforced certain regulations deemed necessary to secure payment from the consumers of the amounts due for gas furnished. Among these were the following, adopted in pursuance of an ordinance of city councils enacted in 1838, to wit:

“Sec. 13. In default of payment for gas consumed, within ten days after a bill is rendered .... the flow of gas may be stopped until the bill is paid, etc.

“ Sec. 14. The price of gas will be fixed from time to time by all the trustees and a penalty of three per cent will be added on bills for gas not paid at their office within five days after presentation.”

The practical necessity and reasonableness of some such provisions become apparent when we consider that the consumers supplied now number about 250,000 and that gas is furnished, as the court finds, “on credit to large numbers of persons of small means against whom it is impossible to collect the amounts due by process of law.”

During a large portion of the same period the city, by means of another plant constructed for that purpose, furnished, and still continues to furnish, to the citizens a supply of water. Regulations, similar in character with those already quoted, were duly adopted and have been steadily enforced against consumers of water who allowed themselves to become in default, the chief difference being that a percentage was added, after default, to the bill of the water consumer, much larger than was demanded from the consumer of gas.

It has been definitely settled that in thus undertaking to furnish to its citizens supplies of water and gas, the city was. not discharging any municipal obligation or exercising any power which it possessed only because it was a municipality, but was acting in the capacity and exercising the powers of a private corporation: Western Saving Fund Society v. City of Philadelphia, 31 Pa. 175; s. c., 31 Pa. 185; Wheeler v. Phila., 77 Pa. 338; Baily et al. v. Phila., 184 Pa. 594. In the case first cited Chief Justice Lewis said: “But the contracts which a municipal corporation may make for the purpose of supplying the inhabitants with gas light, in their streets and houses relate to the ‘things of commerce,’ as distinguished in the civil law from the ‘things public,’ which are regulated by the sovereign. Such contracts are not made by the municipal corporation, by virtue of its powers of local sovereignty, but in its capacity of a private corporation. The supply of gas light is no more a duty of sovereignty than the supply of water.”

Acting thus in the capacity of a private corporation what power did the city possess to adopt and enforce regulations to insure payment of gas bills and establish conditions, upon the performance of which, those who had broken their contracts by becoming in default, might condone the breach and again entitle themselves to the rights and privileges which flowed from their contracts but would cease upon their breach?

In Miller v. Wilkes-Barre Gas Co., 206 Pa. 254, the question is thus answered by Mr. Justice Dean: “That a municipality or corporation furnishing water or gas may by ordinance or by laws make reasonable rules and regulations to insure the payment of bills, among others, that of stopping the supply unless all arrearages are paid, whether owing by the tenant in possession or his predecessors, has been settled: Girard Life Ins. Co. v. Phila., 88 Pa. 393; Brumm’s Appeal, 22 W. N. C. 137.” It is clear therefore that a corporation engaged in furnishing a supply of water or gas to the public may lawfully enter into contracts with consumers in which it expressly reserves the right to stop the supply in case of a breach of the contract by the consumer’s neglect or refusal to pay the. stipulated rates at the time and place agreed on.

It is not easy then to perceive upon what ground one, who has voluntarily defaulted in the performance of a contractual obligation, could invoke the aid of a court of equity to restrain the other party from exercising a right, expressly reserved in the contract and declared by the courts to be reasonable and not an abuse of its corporate powers. If the exercise itself of the right to shut off the supply to those who become in default furnishes no ground for interference by a court of equity, it would seem to follow that a mere threat to exercise such right would create no foundation upon which a complainant could rest a bill.

In Girard Life Ins. Co. v. Philadelphia, 88 Pa. 393, the complainant averred in its bill that it had become the purchaser, at sheriff’s sale, of certain premises in the city; that it desired to have a supply of water furnished by the city and was willing to pay for the same; that it had tendered the water rent for one year which was declined and that it had been informed by the water department, that the water rent for three years was due, together with a penalty of fifteen per cent, and that unless said arrears, with the penalty, were paid, the water supply would be stopped; the bill prayed for an injunction to restrain the defendant from cutting off the water supply. It was held that the complainant had no equity to restrain the city and that payment of all the arrearages claimed could be enforced by the city in the manner prescribed by its ordinance.

The controlling principle of this case, having been reaffirmed in a later one to which we shall presently refer, it becomes our duty to apply it to the facts now before us which may be briefly stated thus. The defendant is a private corporation, “duly organized under the laws of the commonwealth of Pennsylvania, engaged in the manufacture of illuminating gas for sale to the plaintiffs and other residents of Philadelphia.” By virtue of a lease made in 1897, the execution of which was duly authorized by councils, the defendant took over the operation of the gas plant owned by the city. As the case is presented to us we have but little concern with the terms of the lease further than to observe that it contains nothing prohibiting the lessee from exercising its corporate right to adopt and enforce the regulations to secure payment of bills which we have already quoted and which had so long been in force and they were accordingly adopted. The defendant therefore has, in this respect, precisely the same powers, which we have seen were possessed by the city itself whilst acting in the capacity of a private corporation supplying its citizens with gas. Each prospective consumer was obliged to sign an application in which he had formal notice of these regulations and agreed to be bound by them. This bill was originally filed by five residents of the city and each one of them after signing such an application, had become a consumer of gas supplied by the defendant. Later, by leave of the court, four other persons were added. It appeared in the case of M. L. Bower, one of the complainants, that during the period from September, 1901, to February, 1905, when his account was closed, he had made default twice and the extra percentage or penalty of thirty cents in one instance and fifty cents in the other was paid by him. The plaintiff Doran had defaulted sixteen times between 1898 and January, 1905, and his extra payments aggregated $2.01. None of the originally named parties were called as witnesses and the record does not disclose any objection made by them or any of them to the payments which, under their contracts, had been demanded and made. Brenzel, whose name was added as a party, testified that after a default he went to defendant’s office and presented his bill with the money called for on its face. Observing the clerk in charge “adding the penalty” he refused to pay it and the bill and his money were returned. Shortly after he received a notice that if he did not pay by such a day the gas would be shut off and he then sent a check because “ the better way for me to do was to go pay it rather than have the gas shut off.” The bill prayed, inter alia, for an injunction restraining the defendant from adding the three per cent or any other penalty to bills not paid at the contract time, from shutting off the gas in case of a refusal to pay such additional sums and for a return of those previously collected.

Have the complainants, by this showing, presented a case that ought to impel a court of equity to strike down a regulation which has existed for upwards of half a century, of which the complainants had ample notice before entering into any relation with the defendant and by which each one of them expressly agreed to be bound when he signed the application which entitled him to receive a supply of gas? The regulation is not attacked on the ground that it is unreasonable, arbitrary or unconscionable. The argument is that a consumer of gas who neglects or refuses to pay his bill at the stipulated time simply becomes the debtor of the company to that extent as he would to the merchant who sold him goods on credit. That the law has declared legal interest to be the only compensation that can be rightfully demanded or recovered for such default and therefore the defendant ought to be restrained from adding three per cent to the bills of those in default and content itself with the addition of legal interest.

The argument seems to us to be more plausible than sound. The city or the present defendant, its lessee, engaging in the business of supplying water or gas to the public, is not in the position of a merchant who may pick and choose his customers, extending credit to those he may consider financially responsible and refusing it to all others. But the defendant is, as the court below finds, “ by law obliged to furnish gas to all persons residing in the city of Philadelphia occupying premises therein who apply therefor and comply with the defendant’s rules and regulations.” No exception is taken to this conclusion. The contract made by each consumer is to continue indefinitely so far as the defendant is concerned, that is to say during the pleasure of the consumer. He may end it at any time, the defendant cannot, unless there has been a breach. When the consumer has voluntarily ceased to perform the conditions upon which the obligation of the defendant rests, it would be anomalous to say that the latter could not in turn determine its obligation. But it seems to us the complainants ask us to say not only that the consumer may end his contract when he chooses, — for this would be conceded — but that he may break it at pleasure and then resume it at will, without performing reasonable conditions imposed by the defendant, not as a penalty for the nonpayment of a debt past due, but as the price of reviving and keeping in force the right to have a future supply of gas under the terms of the broken contract.

A prospective consumer could not go into a court and compel the defendant to furnish a supply of gas unless he would agree to observe and, be bound by every reasonable regulation that has been adopted relating to such supply. The regulation now attacked has never been declared to be unreasonable, nor has it been regarded by the courts as a penalty for the nonpayment of a sum of money at a stipulated time.

Were the company to waive its right to shut off the gas, and undertake to collect by legal process the money that had become due for a previous month or quarter, adding thereto three per cent, we would have before us the question argued at length by the able counsel for the appellants. The consumer in default does not pay the additional three per cent under stress of legal proceedings to collect it, but because he does not wish the company to exercise its conceded right to shut off the gas and thus terminate the relation between them.

We have already seen in Girard Life Ins. Co. v. Phila., 88 Pa. 393, that the plaintiff was held to have no equity to restrain the defendant from shutting off the water supply because the plaintiffs refused to pay three years’ water rent due from a former tenant with the addition of fifteen per cent, under the city regu- ■ lation then in force. Had the court, in that case, regarded the addition of fifteen per cent to the bill as an attempt to impose an illegal penalty, merely for the nonpayment of a debt at a stipulated time, the regulation authorizing it would have been stricken down and the bill sustained at least to that extent. But in Com. ex rel. v. Phila., 132 Pa. 288, where a similar-question arose with relation to a gas supply, it was held the case was ruled by the former decision and that the regulation was reasonable and valid. The necessity for it is strongly stated by the late Judge Thayer whose opinion was practically adopted as that of the Supreme Court.

Upon a careful review of the entire record we are all of opinion the complainants have shown no equitable right to the relief prayed for.

Decree affirmed.