Peoria Gas & Elec. Co. v. Peoria, 200 U.S. 48 (1906)

200 U.S.
48
26 S.Ct. 214
50 L.Ed. 365
PEORIA GAS & ELECTRIC COMPANY, Appt.

v.
CITY OF PEORIA, Appellee.
No. 33.
Argued October 30, 1905.
Decided January 2, 1906.
This was a bill filed in the circuit court of the United States for the
northern district of Illinois by the Peoria Gas & Electric Company to
restrain the enforcement of an ordinance passed by the defendant, fixing
the price of gas. A decree was entered in the circuit court dismissing the
bill, and the case was brought directly here, as involving a constitutional
question.
The facts are these: Prior to 1899 for a period of many years the Peoria
Gaslight & Coke Company had manufactured and furnished gas to the city
of Peoria and its citizens. The business had been profitable and the stock
was valuable. In 1899 the plaintiff company was organized to construct
gas works in Peoria, and that city, by ondinance, granted to it a franchise
permitting it to construct and operate a gas plant and lay mains along
certain streets, etc. It is charged that in order to obtain this franchise the
promoters of the plaintiff company represented that it was to be a Peoria
company and enterprise, and that it would furnish gas at a cheaper rate
than the old company; that in fact it was a scheme of certain Chicago
capitalists, who, as soon as the ordinance was passed and the plant
constructed, appeared as owners of substantially the entire stock. After the
new company was organized and its plant constructed, the two companies
became competitors, the competition being so sharp that in the early
summer of 1900 the new company lowered its price to 30 cents per
thousand cubic feet for both light and fuel gas. On July 31, 1900, after a
conference between the managers of the two companies, both raised the
rate to $1.15 net for light and 75 cents net for fuel gas, to take effect
August 1, 1900. The announcements of this raise in the rates were
published in the Peoria papers on the same day, each announcement being
in precisely the same language. On September 4, 1900, the city passed an

ordinance providing that the maximum price for gas should be 75 cents
per thousand cubic feet, and that the gas to be furnished should not be less
than eighteen candle power.
On September 18, 1900, the plaintiff filed this bill of complaint, setting
forth its organization, the ordinance under which it was given authority to
occupy certain streets and that of September 4, 1900; alleged that the latter
ordinance was invalid, as establishing a rate which was not remunerative,
and in effect confiscatory, and was thus taking private property for public
use without just compensation, and depriving the plaintiff of its property
without due process of law. The city answered, narrating the
circumstances attending the organization of the plaintiff and the passage
of the ordinance authorizing it to occupy the streets and supply the city
with gas, with the representation made at the time, and claimed an
estoppel by reason thereof; showing also the rates which had been the
result of competition, the raise in price by the two companies, charged that
this was by agreement between the companies, alleged that the ordinance
of September 4 was passed in good faith and to prevent extortion by the
companies, and also that the rate fixed was reasonable. While the answer
alleged that the fixing of the rates from the 1st of August was by
agreement between the two corporations, it did not, in terms, plead that
the agreement was in violation of any particular statute.
By consent a special commissioner was appointed to take the proofs and
report the same, with his findings and conclusions thereon. He took an
enormous amount of testimony, the printed record in this court amounting
to 1,780 pages. From it he found and reported that the rate prescribed by
the ordinance of September 4 did not furnish compensation, was
confiscatory in its effect, and therefore unreasonable. Exceptions were
taken by both sides to different portions of his findings and conclusions of
law. On a hearing before the circuit court the question of the
reasonableness of the rates prescribed was ignored, the court found that
the increase in rates on August 1, 1900, was the result of an illegal
combination between the two gas companies, and in violation of the
Illinois antitrust law of 1891, that, therefore, the plaintiff was not entitled
to any relief against the ordinance of September 4, and entered a decree
dismissing the bill.
The antitrust act of Illinois, approved June 11, 1891 (Laws 1891, p. 206),
forbids the entering into any 'pool, trust, agreement, combination,
confederation, or understanding . . . to regulate or fix the price of any
article of merchandise or commodity,' and punishes the same by fine.
Sections 5 and 6 are as follows:

'5. Any contract or agreement in violation of any provision of the
preceding sections of this act shall be absolutely void.
'6. Any purchaser of any article or commodity from any individual,
company, or corporation transacting business contrary to any porvision of
the preceding sections of this act shall not be liable for the price or
payment of such article or commodity, and may plead this act as a defense
to any suit for such price or payment.'
Subsequently and in 1893 another act was passed, which was held by this
court in Connolly v. Union Sewer Pipe Co. 184 U. S. 540, 46 L. ed. 679,
22 Sup. Ct. Rep. 431, to constitute class legislation, and to be void. An
amendment in 1897 to the act of 1891 was subject to the same objection.
The supreme court of Illinois has since held that the act of 1891 was not
repealed by the act of 1893 or the amendment of 1897, and is still in force.
People ex rel. Akin v. Butler Street Foundry & Iron Co. 201 Ill. 236, 257,
66 N. E. 349; Chicago, W. & V. Coal Co. v. People, 214 Ill. 421, 454, 73
N. E. 770.
Messrs. E. C. Ritsher, William T. Abbott, and W. T. Irwin for appellant.
[Argument of Counsel from pages 51-54 intentionally omitted]
Mr. Winslow Evans for appellee.
Messrs, James Hamilton Lewis, Henry M. Ashton, and David K. Tone filed
a brief on behalf of the city of Chicago, party to another pending case
involving the question of the power of cities in Illinois to fix the price of
gas.
Mr. William D. Guthrie filed a brief on behalf of Darius O. Mills, party to
another pending case involving the question of power of cities in Illinois
to fix the price of gas.
Statement by Mr. Justice Brewer:
Mr. Justice Brewer delivered the opinion of the court:
This case was tried on one theory and decided on another. While that does not
always and necessarily constitute error, yet, under the circumstances, as
disclosed by the record, we are of opinion that injustice has probably resulted,
and that there should be a reversal of the decree, and a further examination in
the circuit court. As stated in the findings of the commissioner, the bill
proceeds upon the theory that the ordinance of September 4, 1900, impaired the
rights of contract theretofore existing between the parties, that its enforcement
would constitute the taking of private property for public use without just
compensation, that the penalties prescribed for a violation of the ordinance
were exorbitant and not sanctioned by the laws of the state of Illinois, while the
answer justified the provisions of the ordinance by the statements and
representations made by the stockholders in the company to the city council at
the time the plaintiff's franchise was sought, and alleged that the rate therein
fixed was reasonable. On these questions the stress of the controversy was
rested. The court entirely ignored them, and placed its decision on the single
ground that the two companies had, by agreement, attempted to fix their prices,
and therefore came within the scope of the Illinois antitrust law,an act which
had not been in terms referred to either in the pleadings or the report of the
master.
2
There was no positive evidence, and no finding by the commissioner, of an

agreement between the two companies, and while, from their action, an
inference might be drawn that they had entered into some agreement in respect
to rates on August 1, 1900, neither its terms, scope, nor duration were shown. It
also appears from the testimony that that rate was continued by the old
company only until January 1, 1901, when an even rate of $1 per thousand was
established, and that this latter rate was, on September 1, 1901, also established
by the new company,the plaintiff herein. Whether this action of the new
company in adopting the rate which had been kept in force by the old company
since January 1, 1901, was the result of agreement, or an independent act on its
part, is not shown. It appears further that in October, 1901, the plaintiff entered
into a contract with the old company to supply it with gas for the use of its
customers, and that, the latter company desisting temporarily from
manufacture, this contract continued in force until August 19, 1902; but this
was found by the commissioner to have been a purely private business
arrangement between the companies, and without relation to the charges made
by either to its customers. Doubtless it, together with the evidence of changes in
holding of stock, tended to show at least a cessation of competition between the
two companies, if not of a unity of control or agreement between them.
We shall assume that there was testimony from which the court justly found
that the rates announced on August 1 were fixed by an agreement between the
two companies. We shall also assume, though without deciding, that while that
agreement was in force and the parties were acting under it neither could
recover for the gas that it furnished, nor could this plaintiff question the validity
of the ordinance of September 4. But although the stringent provisions of the

Illinois antitrust law may apply to the case of an agreement between two gas
companies, fixing the price of gas, and even if, while the receiving gas may
avoid payment therefor on receiving gas may avoid payment therefore on that
ground, and the city likewise be upheld in an ordinance establishing maximum
rates which are not remunerative, yet the making of such an agreement does not
subject the companies to a perpetual penalty. Parties making an agreement,
unlawful by the antitrust act, may, while the agreement is in force, be subject to
its penalties; but, whenever they cease to act under it, the penalties also cease.
The punishment adheres to the offense, and stops when the offense itself stops.
Now it is in evidence that the prices were changed by the old company on the
1st of January, 1901 (five months after the alleged agreement for a uniform
rate), and that for months thereafter each company was charging a different
rate; but the decree was one of absolute dismissal,an adjudication that the
ordinance of September 4 was valid,an adjudication which became res
judicata for all future litigation; and this in the face of the finding by the
commissioner, undisturbed by the court, that the rates established by it are not
remunerative, and thus work a gradual confiscation of the property belonging to
the plaintiff.
4
We think that under the circumstances the decree should be reversed and the
case remanded with instructions either to refer it to a commissioner for further
findings, with leave to take additional testimony, if that be deemed necessary,
showing the terms and duration of the alleged agreement between the two
companies and how far it was acted upon by them, or that the court should
itself undertake this investigation and make like findings.
The decree of the Circuit Court is reversed.

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200 U.S.

PEORIA GAS & ELECTRIC COMPANY, Appt.

in precisely the same language. On September 4, 1900, the city passed an

Sections 5 and 6 are as follows:

There was no positive evidence, and no finding by the commissioner, of an

of the ordinance of September 4. But although the stringent provisions of the

The decree of the Circuit Court is reversed.

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