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

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.

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 first 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.

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.