Scranton Elec. L. & H. Co. v. Scranton Ill. H. & P. Co. , 122 Pa. 154 ( 1888 )

Opinion,

Mr. Chief Justice Gobdon :

The Scranton Electric Light & Heat Company which, in the case in hand, seeks to restrain the defendant from furnishing electric light to the citizens of Scranton, was chartered on May 20, 1884, under the act of April 29, 1874, “ for the purpose of furnishing light and heat to the city of Scranton and suburbs, and the inhabitants thereof.” Soon after the organization of this company the stock thereof was purchased by the president of the Gas & Water Company, in order, as the counsel for the appellant alleges, that “ the two companies might work in harmony, and furnish all the facilities demanded by the public for light without that ruinous competition which might prove disastrous to both.” In other words, the gas company effectually anticipated and prevented a competition that might have proved highly beneficial to the community, by securing the stock of its rival.

Of course, if this were done for a legitimate purpose, and that purpose had been faithfully carried out, no serious objection could be taken to it. But unfortunately for the plaintiff’s case, the master has found that neither in design nor execution was that purpose originated or carried out for the welfare of any one but the company. He finds, “ that from the first of July, 1884, until the commencement of this suit, the business of the company was managed wholly in the interest of the Scranton Gas & Water Company, not with a desire and effort on part of its management to encourage the use of electric light, and to furnish the best and cheapest light practicable, but with the intention, as far as practicable, to restrict the use of electric light for the benefit of the said Gas & Water Company, and depending upon the supposed exclusiveness of the plaintiff’s franchise for protection against competition.” This finding is sustained not only by the oral testimony but by the results. When W. W. Scranton, the president of the Gas & Water Company, took charge of the Electric Company, it had already secured subscriptions for sixty-four arc lights, but within a year thereafter the number of those lights was reduced to fourteen, and up to the time of the establishment of the new company, that number was never increased so much as to exceed twenty. This result seems to have been occasioned by a change in the method of furnishing the electricity which produced an increase of cost, and also by a reduction in the price of gas. This latter result being beneficial to consumers, not only could not be complained of, but prima facie might be regarded as the cause of the falling off of the demand for electric lights. Tins explanation appears, however, from subsequent events, to be fallacious; for, since the establishment of the competing company, the plaintiff has secured contracts for 230 arc lights, and the defendant has placed 100 lights of the same character, together with 4000 incandescent lights. It is thus obvious, that by the operations of the plaintiff, the citizens of Scranton were purposely deprived of a valuable source of illumination without any corresponding benefit.

Now, the primary object of the institution of a corporation is the public welfare, and the interest of the stockholders is but secondary; hence the wilful frustration of that intention by the act of a company is a fraud on the public, and the corporation perpetrating it is entitled to no equitable consideration. According to tbe finding of the master, of this kind of fraud the complainant has been clearly guilty; it has become the mere instrument in the hands of the Gas & Water Company to deprive by a false pretence, the city and citizens of Scranton of a very useful, if not absolutely necessary commodity. How then can it stand in a court of equity ? It is to no purpose to say that its charter cannot be attacked in this collateral proceeding. No one is attacking its charter, but it cannot interpose that charter as a cover for its own fraud. It has appealed to the equitable side of the court to suppress, for its own benefit, a competition that has arisen from its neglect of a charter duty, and without touching upon its legal rights or legal remedies, this, we think, cannot be done. Chancery 'deals oidy with consciouable demands, and with those that are unconscionable, whether through fraud or mere neglect, it will have nothing to do. Therefore, without further comment, we might affirm the decree of the Common Pleas, but as there is another important question involved in the case, we cannot properly pass it without comment.

Under the third clause of the 84th section of the act of 1874, the plaintiff claims the exclusive right to furnish the city of Scranton and its inhabitants with electric lights. This claim may be regarded as sound, if in fact the said section does include electric lighting, but not otherwise. Did the legislature intend to embrace electric lighting in the language, “ companies incorporated under the provisions of this statute, for the supply of water to the public, or for the manufacture of gas, or the supply of light or heat to the public by any other means. ” Before answering this question we must call attention to what has heretofore been regarded as an unalterable rule; that is, that a legislative grant to a corporation of exclusive privileges is, as said by Mr. Justice Git fes, in Emerson v. The Commonwealth, 108 Pa. 111, to be construed most strictly, and we may add, that every intendment not obviously in favor of the grant must be construed against it. Monopolies are favorites neither with courts nor people. They operate in restraint of competition, and are hence, as a rule, detrimental to the public welfare ; nor are they at all allowable except where the resultant advantage is in favor of the public, as, for instance, where a water or gas company could not exist except as a monopoly. Applying then the rule here stated to the case in hand, and we cannot pronounce the conclusion of the master and court below to be erroneous.

In the case above cited the sharpest technicality of construction was adopted in order to defeat the extravagant demand of the corporation claiming the exclusive privilege to furnish the city of Pittsburgh with natural gas for the purposes of fuel. But in the case -before us it is apparent that the legislature did not, in the making of the act of 1874, intend to embrace lighting by electricity. It is true, that the language of this statute seems, at first sight, to be broad enough to embrace all methods of lighting and heating then known, or that might thereafter become known, yet, we suppose, it will not be contended that the intention was' to grant to this company the exclusive privilege of furnishing to the citizens of Scranton coal, wood, oil, and other well known and ordinary materials for lighting and heating. Not indeed, that the law-makers could not have conferred such power, but because it is not probable that they intended to confer a power so unreasonable. It is, therefore, obvious that we must consult not only the letter of the act, but also the intention of its makers. If, however, it were designed to embrace a method of lighting by electricity, a method not then in use for economic purposes, it is remarkable that the means necessary for its proper distribution were not provided for. Under the 84th section of the act, the only one upon which the plaintiff relies for its exclusive right, there is no power conferred to enter upon the public streets for the erection of poles and placing of wires, the privilege of so entering being confined to the laying of pipes only. From this it is clear that the legislature had in mind, not a then unknown process of public lighting and heating, but a process involving the use of gas, or some similar material, for the distribution of which pipes only were necessary. Having thus ascertained the intention of the law-making power at the time of the passage of the act of 1874, we cannot agree to extend the franchise of the plaintiff by construction, but are willing rather to concur in the decree of the court below, because the right so claimed, not only may be, but has proved to be detrimental to the public welfare.

The decree of the court below is now affirmed at costs of appellant.