General Investment & Service Corp. v. Wichita Water Co.
General Investment & Service Corp. v. Wichita Water Co.
Opinion of the Court
This was an action brought by General Investment and Service Company, Inc.,
The facts about which there is no dispute are these. Wichita furnishes water to the residents of the City and to the surrounding area under the following plan. Under Ordinance No. 13-520 the City has given the Water Company a franchise to maintain a waterworks system for the distribution of water to the City proper and to the areas adjacent thereto. The ordinance requires the Water Company to distribute water and fixes the rates which the Water Company may collect for its services in distributing the water. The Water Company does not have a supply of water. Under the ordinance the City obligates itself to furnish to the Water Company at “the reservoirs or pumping station of the Grantee” an adequate supply of water. In order to carry out its obligations, the City has constructed a water system to transport such water to point of delivery. Construction of this system was financed
It is urged that the trial court erred in permitting the ■ City, to be brought in as a third party defendant. The contention is that the facts do not meet the conditions of Rule 14, Fed.Rules Civ.Proc. 28 U.S.C.A. for bringing in a third party. It is not necessary to determine whether the City was properly brought into the case under Rule 14 which provides for bringing in a party which may be liable over to the defendant in the event judgment is obtained against the defendant, or under Rule 24(a) (3), intervention by right, or 24(b) permissive intervention. We think it is clear that the City was the real party in interest since the plaintiffs’ cause of action challenged the right of the City to charge and collect the so-called surcharge. True, plaintiffs only sought an injunction against the Water Company from making the collection. But this injunction was not sought on the ground that the Water Company lacked proper authority as the agent of the City to make the collection, but rather it was sought on the ground that the charge was illegal and that the City lacked statutory authority to levy and collect the surcharge. A ' binding adjudication of that issue could not be made in the absence of the City from the ease. Indeed, it is difficult to see why General makes any issue of that matter at all because in its brief it states, “Appellant reiterates that it has no objection to intervention, but that it strenuously objects to the City of Wichita coming in under Rule 14.” This is like objecting because one entered a room through door (B) whereas he should have entered through door (A). The important thing is that the City is in; it is in a case in which it is the real party in interest and in which is sought to be adjudicated the legality of the charge which it is making for itself. In fact if no application had been made for the entry of the City the court would have been warranted in directing on its own volition that the City be brought in or that the case be dismissed.
Because we have reached the conclusion that the federal court lacked jurisdiction to entertain the action for an injunction and for a declaratory judgment, the merits will not be considered or adjudicated. 28 U.S.C.A. § 1342 provides that “The district courts shall not enjoin, suspend or restrain the operation of, or compliance with, any order affecting rates chargeable by a public utility and made by a State administrative agency or a rate-making body of a State political subdivision, where:
“(1) Jurisdiction is based solely on diversity of citizenship or repugnance of the order to the Federal Constitution; and,
“(2) The order does not' interfere with interstate commerce; and,
“(3) The order has been made after reasonable notice and hearing; and,
“(4) A plain, speedy and efficient remedy may be had in the courts of such State. June 25, 1948, c. 646, 62 Stat. 932.”
While the Act strikes at a rate order made by a State administrative agency or a rate-making body, it applies with equal force to rates fixed by city ordinances. No distinction may be drawn between city ordinances and agency orders.
Subsection (3) of 28 U.S.C.A. § 1342 requires notice and hearing prior to the making of the order, in order to deny the right to challenge the validity of a city ordinance in the federal courts. While the record is silent, we think it must be conceded that the only notice General perhaps had of the ordinance was that which flowed from its publication. But we do not, however, think this prevents the application of Section 1342. Not many cases have considered the effect of failure to give notice prior to the passage of an ordinance fixing a rate. In City of Meridian, Miss. v. Mississippi Valley Gas Company, 5 Cir., 214 F.2d 525, it was held that where no notice was given of a proposed rate change prior to the passage of an ordinance, the Federal courts had jurisdiction to entertain an action for an injunction to restrain the rate. In East Ohio Gas Company v. City of Cleveland, D.C., 23 F.Supp. 965,
As pointed out in this City of Cleveland case, the notice and hearing mentioned in the Act have been considered in a number of cases both by the Supreme Court as well as the lower courts.
The vital part of Section 1342(3) is the provision for a hearing. Notice is only essential to give one affected by the proposed rate ordinance an opportunity for a hearing. The hearing is for the purpose of adducing evidence and establishing the facts. If there is no issue of fact, there is no need of a hearing to make findings of fact which may then be the basis of a judicial review. In such a case there is only a question of law which may be judicially reviewed without a previous administrative determina
But conceding without deciding that the court had jurisdiction because the requirements of Section 1342 necessary to deprive it of such jurisdiction had not been fully complied with, we are still of the view that the court should have denied General the right to proceed in the federal court. The principle is well established and without dispute that under the rule of comity under our dual system of Government in cases involving state laws, rules or regulations, equitable considerations will under certain circumstances require federal courts to stay their hands where the parties have an adequate, speedy and complete determination of the controversy in a state tribunal. No cases need be cited to support this statement. It is recognized without exception. The Supreme Court has held that where there is pending in the federal court a case involving the construction of a state law and if one construction will remove the federal question a federal court should stay its hand, retain jurisdiction and relegate the parties to the state court to first seek a construction of the statute.
We think the trial court reached the correct conclusion in denying General any relief but that it erred in entertaining jurisdiction and entering summary judgment; rather it should have refused to entertain jurisdiction, should have dismissed the action without considering the merits and relegated the parties to the state court. The judgment is therefore vacated and the cause is remanded to the trial court to proceed in conformity with the views expressed herein.
. Herein called General.
. Herein called the Water Company.
. Herein called the City.
. See Fed.Rules Civ.Proc. Rule 21.
. East Ohio Gas Company v. City of Cleveland, D.C., 23 F.Supp. 965, affirmed 6 Cir., 94 F.2d 443, certiorari denied, 303 U.S. 657, 58 S.Ct. 761, 82. L.Ed. 1116.
. This case arose under the. Johnson Act, which preceded Section 1342, the two being substantially the same.
. See Morgan v. United States, 298 U.S. 408, 56 S.Ct. 906, 80 L.Ed. 3288; Ohio Bell Telephone Company v. Public Utilities Commission, 301 U.S. 292, 57 S.Ct. 724, 81 L.Ed. 1093.
. Meredith v. Winter Haven, 320 U.S. 228, 64 S.Ct. 7, 88 L.Ed. 9.
. Alabama Public Service Commission v. Southern Railway Company, 341 U.S. 341, 71 S.Ct. 762, 768, 95 L.Ed. 1002.
Reference
- Full Case Name
- GENERAL INVESTMENT & SERVICE CORPORATION, Inc., individually and on behalf of all other customers of the Wichita Water Company who are required to pay a surcharge for water purchased from the Wichita Water Company v. The WICHITA WATER COMPANY and The City of Wichita, Kansas
- Cited By
- 6 cases
- Status
- Published