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receipts required by said franchise to be paid to the city of Los Angeles will amount to more than the sum of $500,000.
That the plaintiff and its assigns, acting under and pursuant to the terms of this franchise and not otherwise, and particularly on the clauses thereof declaring maximum rates, have constructed more than 5 miles of underground conduit and constructed more than 100 miles of pole lines, and have installed more than 20,000 telephones in said city, and did, in compliance with said franchise, and at great additional expense, construct and erect and is now operating a system of telephone lines having complete copper metallic circuits.
That, on March 27, 1905, the city council of said city passed an ordinance, which is attached to the bill, marked Exhibit C, the twelfth section of which provides as follows: “Sec. 12. It is hereby made the duty of every person, firm or corporation supplying telephones, telephone service or telephone connections to the city of Los Angeles or its inhabitants, to furnish to the city council in the month of January of each year, a statement in writing verified by the oath of such person, or of a member of such firm, or of the president or secretary of such corporation, as the case may be, showing in detail, the amount received by such person, firm or corporation from the renting of telephones, the furnishing of telephone service and the making of telephone connections within the city of Los Angeles, and the revenue derived by such person, firm or corporation, or in any manner arising from the use or operation of a telephone system in the city of Los Angeles, in connection with a telephone system outside of the city of Los Angeles, during the year preceding the date of such statement, and showing in detail all expenditures made by such person, firm or corporation, during the same time for supplying telephones, telephone service and telephone connections to the city of Los Angeles and its inhabitants, and for the purchase, construction and maintenance respectively of the property necessary for the carrying on of such business. Every such person, firm or corporation shall furnish a detailed statement verified in like manner as the statement, hereinbefore in this section mentioned, containing an itemized inventory of all of the works, lines, plant and property owned or used by such person, firm or corporation and necessary or convenient to the carrying on of the business of supplying telephones, telephone service and telephone connections to the city of Los Angeles, or to the inhabitants thereof, and showing the actual cost and present cash value of each item thereof."
That plaintiff has not complied with said section 12 of Ordinance C, nor any part thereof, and plaintiff declines to comply therewith for the reasons herewith set forth.
That said city has arrested and commenced prosecutions against plaintiff's officers, and will continue to arrest and prosecute plaintiff's officers for violations of Ordinance C, unless restrained therefrom.
That defendant, on February 28, 1906, passed an ordinance which is attached as Exhibit D to the bill, fixing rates to be charged by plaintiff for telephone service, and forbidding plaintiff. under penalty of imprisonment, from collecting the rates provided and fixed in ordinance Exhibit B, and will, unless restrained by this court, continue from time to time to pass other similar ordinances.
That the said city, on February 28, 1906, adopted another ordinance, attached to the bill as Exhibit E, whereby a competitor of plaintiff in said city, engaged in like business, was allowed to charge for telephone services sums greatly in excess of that which by said Ordinance D plaintiff is permitted to charge.
That Ordinances C and D, if carried into execution, will impair the obligations of a contract, Exhibit B, and deprive plaintiff of its property without due process of law, and abridge the privileges and immunities of this plaintiff, and deprive it of the equal protection of the law, and that the adoption of said ordinances, Exhibits D and E, fixing the different rates to be charged for the same services, deprives plaintiff of the equal protection of the law and discriminates against plaintiff in favor of the Sunset Telephone & Telegraph Company, a similar corporation, all of which is in violation of the Constitution of the United States, and particularly in violation of article 1, § 10, cl. 1, of said Constitution of the United States, and the fourteenth amendment thereto, and also is in violation of the Constitution of the state of California.
That said Ordinance D is void, for that it is not a general law adopted by said city for the government of all corporations similar in character to plaintiff, but is directed solely against, and applicable to, plaintiff, and discriminates against plaintiff.
That said Ordinances D and E are void, for that said city never had, under the Constitution and laws of the state of California, any power or authority to regulate or fix rates to be charged by telephone corporations for services rendered by them, except that the city of Los Angeles had and bas the power to contract for rates to be charged, and had and has the right to contract in the manner and form as shown by said ordinance, Exhibit B.
That, if the provisions of said charter operate to give the city of Los Angeles the right to fix rates other than by contract or purport or attempt to give it a continuing power to fix and regulate rates of this plaintiff, such provisions of said charter are void, for that in and by the Constitution of the state of California the power to fix such rates, if such power exists at all, can only be exercised by authority of a general law applicable to all municipalities and affecting all corporations similar to plaintiff, and that the Legislature of the state of California has no authority by virtue of said Constitution or otherwise to delegate the power of so fixing rates from time to time to any one municipality or other political subdivision at all, to the exclusion of the others, and has no authority by delegation of its powers to fix the rates to be charged by plaintiff.
That the Legislature of said state of California has never passed, nor is there now, nor has there ever been, in force any general law or statute authorizing the fixing or regulation of rates as aforesaid, but that such general power has been and is withheld from other cities and municipalities within the state. Ordinance D is as follows:
"Ordinance No. - (New Series.) “An ordinance fixing the rates to be charged and collected by the Home Telephone & Telegraph Company, a corporation, for telephones, telephone service and telephone connections, in the city of Los Angeles, during the year commencing July 1st, 1906, and ending June 30th, 1907.
"The mayor and council of the city of Los Angeles do ordain as follows:
“Section 1. That the rates to be charged and collected by the Home Tele phone & Telegraph Company, a corporation, for telephones, telephone service and telephone connections in the city of Los Angeles, furnished to the city of Los Angeles, or to the inhabitants thereof, for the year commencing on the 1st day of July, 1906, and ending on the 30th day of June, 1907, are hereby fixed as follows:
"(1) For each telephone installed and maintained in any business office or premises, connected with the central exchange by an independent or individual circuit, with unlimited service, $5.00 per month.
"(2) For each telephone installed and maintained in any house or place other than a business office or premises, connected with the central exchange by an independent or individual circuit, with unlimited service, $2.00 per month.
“(3) For each extension telephone, $1.00 per month.
"(4) For each private telephone exchange connected with the central exchange by an independent circuit on one trunk line, $5.00 per month; and for each additional trunk line, $4.00 per month; and for each telephone station in such private exchange, $1.00 per month.
“Section 2. Any person who shall charge, demand, collect or receive, either as officer, agent, collector or employé of the said Home Telephone & Telegraph Company, any rate or compensation for telephones, telephone service or telephone connections in the city of Los Angeles, furnished by the said Home Telephone & Telegraph Company to the city of Los Angeles or to any inhabitant thereof, during the year commencing on the 1st day of July, 1906, and ending on the 30th day of June, 1907, in excess of the rates fixed by this ordinance, shall be deemed guilty of a misdemeanor, and upon conviction thereof, shall be punishable by a fine in a sum not exceeding one hundred dollars, or by imprisonment in the city jail for a period not exceeding ninety days, or by both such fine and imprisonment."
There is no express provision in the charter conferring upon the city contractual power, as alleged in the bill, and presumably that allegation is the statement of the pleader's conclusion as to an implied power. However, this matter, as appears from the opinion of the court, is immaterial here.
Oscar A. Trippet and A. B. McCutchen, for complainant.
WELLBORN, District Judge (after stating the facts as above). Plaintiff cites numerous authorities showing this to be a case of equitable and also of federal cognizance. Defendants, however, have not suggested any lack of jurisdiction in either respect, nor is there any ground for such contention. No further reference, therefore, will be made to plaintiff's authorities on this point.
The questions about which the parties are at issue may be conveniently grouped under three general heads as follows: First. Did the laws of the state of California, at the time of the passage of the ordinances attached to the bill as Éxhibits C and D, and here sought to be annulled, the former requiring telephone companies to report to the city council their receipts, expenditures, and value of plant, and the latter fixing the rates to be charged by plaintiff for telephone service, confer upon the city of Los Angeles power to regulate charges for such service? Second. Was such power, if the city possessed it, bargained away by Ordinance No. 6,595, Exhibit B to the bill, which granted to M. A. King, plaintiff's assignor, the franchise under which plaintiff is now operating? This question is included in the next one, and a strictly logical arrangement would require its assignment there, but, on account of its importance, indeed pivotal character, I have given it a separate heading. Third. Do said ordinances, Exhibits C and D, contravene that clause of section 10 of article 1 of the Constitution of the United States, which forbids any state to pass a law impairing the obligations of contracts, or those provisions of the fourteenth amendment to said Constitution, which forbid a state to deprive any person of life, liberty, or property without due process of law, or deny to any person within its jurisdiction the equal protection of the laws? These questions will be considered in the order in which they are propounded, and references hereafter to the ordinances attached to the bill will be by the letters which distinguish them respectively as exhibits.
1. That a state has power to regulate charges for telephone service is well settled (Munn v. Illinois, 94 U. S. 113, 24 L. Ed. 77; Chicago, etc., T. R. Co. v. Iowa, 94 U. S. 155, 24 L. Ed. 94; Spring Valley W. Co. v. Schottler, 110 U. S. 347, 4 Sup. Ct. 48, 28 L. Ed. 173; R. R. Commission Cases, 116 U. S. 307, 6 Sup. Ct. 334, 388, 1191, 29 L. Ed. 636; Budd v. New York, 143 U. S. 517, 12 Sup. Ct. 468, 36 L. Ed. 247; Hockett v. State, 105 Ind. 259, 5 N. E. 178, 55 Am. Rep. 201; Knoxville v. Knoxville W. Co., 107 Tenn. 650, 64 S. W. 1075, 61 1. R. A. 888); and it is equally well settled that this power may be delegated to municipalities (Des Moines Gas Co. v. Des Moines, 44 Iowa, 505, 24 Am. Rep. 756; People v. Suburban R. R. Co., 178 I11. 594, 53 N. E. 349, 49 L. R. A. 650; St. Louis v. Bell Telephone Co., 96 Mo. 623, 10 S. W. 197, 2 L. R. A. 278, 9 Am. St. Rep. 370; McQuillan on Municipal Ordinances, § 583; Danville v. Danville Water Co., 180 I11. 233, 54 N. E. 224).
The remaining question for determination here is this: Was said power, at the times of the adoption of said ordinances, vested in the city of Los Angeles, by delegation from the state of California ? Section 31 of the charter of said city, then and now in force, is as follows:
"Sec. 31. The council shall have power, by ordinance, to regulate and provide for lighting of streets, laying down gas pipes and erection of lamp posts, electric towers and other apparatus, and to regulate the sale and use of gas and electric light, and fix and determine the price of gas and electric light, and the rent of gas meters within the city, and regulate the inspection thereof, and to regulate telephone service, and the use of telephones within the city, and to fix and determine the charges for telephones and telephone service, and connections; and to prohibit or regulate the erection of poles for telegraph, telephone or electric wires in the public grounds, streets or alleys, and the placing of wires thereon; and to require the removal from the public grounds, streets or alleys of any or all such poles, and the removal and placing under ground of any or all telegraph, telephone or electric wires.”
Plaintiff's contention, that the power conferred is only a power to fix and determine charges once for all, that is, permanently, by contract, cannot be sustained. Certainly no such limitation is expressed, nor can it be reasonably inferred. The words themselves, "fix and determine,” when applied to rates, fairly import a continuing power of regulation, Atlantic & Pacific R. R. .Co. v. U. S: (D. C.) 76 Fed. 186. The term “by ordinance” in said section is hardly appropriate to denote a contractual method for the exercise of the power it qualifies, but does suitably designate power of a legislative character. This view is strengthened by section 12 of article 3 of the city charter, which provides that:
"All legislative power of the city is vested in the council, subject to the power of veto and approval by the mayor, as hereafter given, and shall be exercised by ordinance; other action of the council may be by order upon motion."
If, however, the language of section 31 were ambiguous, the doubt should be resolved in favor of that construction which makes the power a continuous one. This precise question was authoritatively decided in the case next below cited, and a precedent more directly in point is rarely found. · There the phraseology of the statute under consideration was, that the city council shall have power “to authorize any person or private corporation to construct and maintain the same [waterworks] at such rates as may be fixed by ordinance and for a period of not exceeding 30 years. The opinion in the case quotes a previous construction by the Supreme Court of Illinois, that "the meaning of this language is not that the waterworks are to be maintained at such established rate as may be fixed by one ordinance for a period not exceeding 30 years. The clause 'for a period not exceeding thirty years' qualifies the words 'construct and maintain the same' but does not qualify the words ‘at such rate as may be fixed by ordinance,'” and then proceeds as follows:
"The statutes are certainly ambiguous, and in resolving the ambiguity in favor of the public the court applied the rule declared in many cases. We said in the Railroad Commission Cases, 116 U. S. 307, 325, 6 Sup. Ct. 334, 342, 29 L. Ed. 636, by Chief Justice Waite, of the power of the regulation of rates :
“ 'This power of regulation is a power of government, continuing in its nature, and if it can be bargained away at all it can only be by words of positive grant, or something which is in law equivalent. If there is reasonable doubt, it must be resolved in favor of the existence of the power. In the words of Chief Justice Marshall in Providence Bank v. Billings, 4 Pet. 514, 561, 7 L. Ed. 939, "Its abandonment ought not to be presumed in a case in which the deliberate purpose of the state to abandon does not appear.” This rule is elementary, and the cases in our reports where it has been considered and applied are numerous.' “These remarks are obviously applicable to the Illinois statutes.
The question is whether the power given to the municipalities of the state was to be continuing or occasional, indeed only special in its purpose, intended to have but one exercise and then bound in contract for 30 years. If the latter had been the intention, it would have been natural to express it. The fullness of sovereignty can be taken for granted, and naturally would be and should be taken for granted. An example is afforded by the act of June 6, 1891. By that act the corporate authorities of any city, which have authorized or shall authorize any individual, company, or corporation to supply water, 'be and hereby are impowered to prescribe by ordinance maximum rates and charges for the supply of water furnished by such individual, company, or corporation.
There is no explicit provision for repetitions of the powernone declaring the power conferred a continuing one. Who now doubts that it is? If rights were claimed and were pleading for a different interpretation, we might have to listen to them, but now undisturbed by them we yield without resistance to that meaning which the subject matter demands in the absence of negativing words.
"Our conclusion is that the powers conferred by the statutes of 1872 can, without straining, be construed as distributive. The city council was authorized to contract with any person or corporation to construct and maintain waterworks ‘at such rates as may be fixed by ordinance, and for a period not exceeding 30 years. The words 'fixed by ordinance may be construed to mean by ordinance once for all to endure during the whole period of 30 years, or by ordinance from time to time as might be deemed necessary. Of the two constructions, that must be adopted which is most favorable to the public, not that one which would so tie the hands of the council that the rates could not be adjusted as justice to both parties might require at a particular time.” Freeport Water Co. v. Freeport, 180 U. S. 599, 21 Sup. Ct. 493, 45 L. Ed. 679.
The various reasons which plaintiff urges in detail against the applicability of said case to the one at bar are not convincing; while the claim, quoting from plaintiff's brief, “that the Freeport Case has been virtually overruled by the Supreme Court in the Detroit Street Car Case and the Cleveland Street Car Case, both of which cases were unanimously decided by the Supreme Court after the Freeport Case,” is certainly untenable, in view of the fact that the opinion in the Detroit Case, which was written by Justice Peckham, one of the dissenting justices in the Freeport Case, cites approvingly the Freeport Case (Detroit v. Detroit Cit. St. Ry. Co., 184 U. S. 368–382, 22 Sup. Ct. 410, 46 L. Ed. 592), and the opinion in the Cleveland Case, which was written by Justice White, who wrote the dissenting opinion in the Freeport Case, cites approvingly the Detroit Case (Cleveland v. Cleveland C. Ry. Co., 194 U. S. 517–536, 24 Sup. Ct. 756, 48 L. Ed. 1102). The opinions in the Detroit and Cleveland Cases show that the Supreme Court had before it in each case the Freeport decision, and yet neither of the two last-mentioned justices expressed any