279 F. 949 | 6th Cir. | 1922
The Telephone Company (called hereafter the company or the Home Company) filed a bill alleging in subsiance that the city had passed an ordinance fixing the telephone cnarges at a confiscatory rate, and moved for a preliminary injunction. This was granted, and the city brings this appeal.
Without going into details, we are satisfied that the ordinance oí May 26th is an eviction nisi. It was seemingly carefully drawn to bring out that purpose and effect. It follows that the bill cannot be maintained merely on the theory of the Denver and the Detroit Cases.
“Sec. 3037Ü1. That eighteen months before the expiration of any franchise acquired under, or prior to the present Constitution, it shall be the duty of the proper legislative body or boards to provide for the sale of a similar franchise to the highest and best bidder, on terms and conditions, which shall be fair and reasonable to the public, to the corporation, and to the patrons of the corporations: Provided, that if there is no public necessity for the kind of public utility in question, and, if the municipality shall desire to discontinue entirely the kind of service in question, then this section shall not apply.”
Tills statute plainly made it the duty of the city, before the expiration of the company’s franchise, to prepare and offer for sale a suitable new franchise, which the company could purchase if it wished, and whereby it could continue its business .and the patrons continue to receive service, without the interruption caused by building a new plant. That one purpose of this statute was to protect from being arbitrarily ejected those public utilities whose franchise expired, and to do so by requiring procedure thereunder for the benefit of the company as well as for the benefit of the city, seems to us obvious upon its face; and such purpose and effect were declared by the Kentucky Court of Appeals when it said—although obiter—in Gathright v. Byllesby, 154 Ky. 106, 126, 157 S. W. 45, 54:
“The statute requiring a sale of a similar new franchise was evidently-passed for the benefit of the owner of the expiring franchise, and he only can complain if the ciLy offers a different franchise.”
The Kentucky Court of Appeals, also in the same case, quotes with seeming approval the decision of a lower court witli reference to finis statute, that—
*954 “The city of Louisville must offer for sale a franchise of a character similir to that heretofore held by the [owner of the expiring franchise] before the-city would be permitted to exclude that company from the use of its streets.” 154 Ky. 111, 157 S. W. 47.
Adopting the sáme view which has been thus approved by the Kentucky courts, we conclude that the city had no lawful right to refuse to comply with section 3037d and at the same time arbitrarily to exclude the company. It follows that the situation considered by the mi-r ority in the Detroit Case is not created, and—unless for other reasons to be discussed—the company could not be compelled in May, 1921, to accept confiscatory rates as the price for being allowed to continue l:s business.
It may be conceded, for the argument, that the Legislature would 1 ave no power to compel the council to permit a new and additional rse of the streets, and to do so by requiring a new and second franchise to be sold when there was one in existence and satisfactory operation. . Such concession does not reach this case. To compel the city to permit' burdening the streets with a new easement is one thing, but i: is quite another thing merely to require that the council, when it has c nee consented to such burden, shall be reasonable, and not arbitrary, ii its" treatment of the property which has been dedicated to public use r nder that consent, and shall not insist that such property be practically destroyed while it still desires public service of that character, and while the company continues willing to render it upon reasonable conditions. We do not doubt that the protection of invested property, to tiat extent, continued to be within the reasonable discretion of the Legislature, without impairment by section 163.
A desire on the part of the company to compel the offering of a new franchise, and a willingness to buy it upon fair terms, should be conditions precedent to receiving the aid of an injunction based on this statute. The bill in this case did not contain any prayer for such affirmative proceedings; but it prayed general relief, and this is probably sufficient to authorize the imposition of any proper condition. However, an amendment in this respect would put the bill in. more satisfactory form, and the company, on the argument in this court, asked leave to make such amendment. It ought to be granted, and the pleadings accordingly recast as far as necessary. Tacking such amendment, the bill should be dismissed.
Further, in the ordinary railroad rate case, and (in less degree) with reference to a gas company in a great city, it is not practicable to provide anything like complete protection to the rights of the public in case the company finally fails. The items of excess charge are relatively trifling, and the persons who might be entitled to a refund constitute as to the railroads a fugitive class, and as to the gas company a largely shifting class. A large share of railroad travelers will in such case permanently lose the excess charges which may turn out to have been improperly paid, and with the gas company the expense of making refunds of trifling amounts, and the constant changes in the body of beneficiaries, make protection by bond substantially defective. With a telephone company in a city of this size such defects in the protection by bond are minimized. The body of ratepayers is relatively permanent, the amounts are large enough to justify the necessary bookkeeping, and the ratepayer has in his own hands a practical aid to collection through deduction from future bilis. In this sort of case, when the court, as a condition of injunction against enforcing the ordinance races, requires a bond to secure the refunding of any excessive charge that may be finally adjudged, and such a bond is given, and its sufficiency is not questioned, another, and, so far as wc know, the only remaining general, reason for requiring the trial period also disappears. On the other hand, if an injunction is refused, and the company finally turns out to be right, its loss is irreparable.
We will not undertake such a detailed discussion of the elements involved as would be fitting if we were reaching an independent final conclusion upon the matters in dispute. We refrain from doing so, not only because of the nature of this appeal already discussed, but also because there is an unusual probability that the record which will control any final decree will be distinctly different from that now here. The members of the court have not all been inclined to take the same view as to the questions involved, and in the endeavor to reconcile those views so much time has elapsed that the mandate will not go down until about one year after the injunction issued—indeed, the conclusion now reached is that of a majority of the court only. Thus there will have been a trial period, and the operating income and outgo upon the basis of the ordinance rates can be determined with much greater certainty •:han when everything was to be estimated in advance. It is sufficient ':o say, generally, that plaintiff’s proofs tended to show such a valuation md probable net income as to indicate a return of only 1 per cent. We find it unnecessary to express our definite opinion as to any one of the elements entering into this computation. Very large deductions from plaintiff’s extreme claims could be made without changing the result. For example, a cut of $1,000,000 in the valuation and of $60,000 in the estimate of depreciation for the year, leaving other elements unchanged, would only bring the return up to 3% per cent. Upon this state of :he record, and after giving consideration to all the various criticisms by die city, we cannot say that the trial judge’s conclusion that there would . be no compensatory return was so distinctly beyond the scope of his discretion on such a motion as to justify us in pronouncing it the result of an abuse of discretion, or of a misapprehension of the facts or principles involved. Further than this we need not at this time go.
We do not think that an ordinance should be held insufficient to satisfy the obligation of the city now involved merely, because it is for a short term; no constitutional or statutory provision requires it to be for the full term. We think such an ordinance (if it is to be for an unchanging rate) should last long enough to make it worth while, but not so long as to cover these revolutionary changes in cost, which are generally anticipated but which can cot be foretold, and hence that it may well be for as short a time as 3 years. It does not follow that to offer a 3-year franchise would be a permanent and ultimate performance of all duty under section 3037d. Apparently the situation will be a recurrent one; but such offer will be a sufficient compliance with Ihe city’s present, duty, under existing and unusual conditions, so that the company, if it should refuse to accept for the sole reason that the term was so short, would not be entitled to equitable relief.
The case will be remanded for the entiy of an order, modified as íerein directed. No costs will be awarded in this court.
The Eighth Circuit Court of Appeals applies tlie same rule to this class of cases. Allen v. Omaha Co., 275 Eed. 1, 3.
We do not overlook that a trial period was thought proper in a telephone rate controversy in Louisville v. Cumberland Co., 225 U. S. 480. 32 Sup. Ct. 741, 56 L. Ed. 1151; but not only was that upon a final deoi-ee, but also the newly prescribed rate was a reduction, and the master had found that it would result in an increase of business after the first year, so as to cause an increased income.