Cumberland Telephone & Telegraph Co. v. City of Louisville

Citation187 F. 637
PartiesCUMBERLAND TELEPHONE & TELEGRAPH CO. v. CITY OF LOUISVILLE.
Decision Date25 April 1911
CourtUnited States District Courts. 6th Circuit. United States District Court of Western District of Kentucky

W. L Granbery and A. P. Humphrey, for complainant.

Clayton B. Blakey, City Atty., and Huston Quin, Asst. City Atty., for defendant.

EVANS District Judge.

The complainant, which we shall call the company, in February 1909, was charging the following rates for services in the city of Louisville:

Business. Within the two mile radius of nearest exchange. Private metallic ............................................ $8.00 per month 2-station metallic ........................................... 5.00 " " Public pay station (coin device) private ..................... 4.00 " " (Agent's service free out and in, and divide with any cash deposits for local city calls.) City and county telephones within city limits ................ 4.00 " " Residence. Private, within city limits .................................. 4.00 " " Private, beyond city limits and within three miles of nearest exchange ........................................... 4.50 " " 2-station, within city limits ................................ 3.00 " " 2-station, beyond city limits and within three miles of nearest exchange ........................................... 3.50 " " Extension set ................................................ 1.25 " " Country Rates. Business or residence--add to the exchange rate 50 cents per month, per mile, or fraction thereof, if Private subscribers are located beyond the exchange radius. Metallic Exchange radius for business is two miles--for residence, three miles--from nearest Louisville exchange. Business or residence--add to the exchange radial rate 25 cents per month, 4-party per mile, or fraction thereof Metallic if the subscriber is located beyond the exchange radius. For exchange radius, see above. Extension set ................................................ 1.25 " " A discount of 50 cents per month is allowed on all rates above enumerated if rental is paid quarterly in advance. Private line instruments $12.00 per year, per instrument, to which is added mileage charge of $30.00 per mile, per annum. Extension bells (business or residence) .......................... net $0.15 per month Joint user (business) .................. " 1.00 " " List (business) ........................ " .25 " " List (residence) ....................... " .25 " " Loud ringing extension gongs ........... " .25 " " Buzzers and push buttons ............... " .25 " "

The defendant in its answer says 'that the rate ordinance, referred to in paragraph 4 of the bill, was passed after as thorough and complete investigation as the authorities of the city of Louisville were able to make; that said investigation was based on the reports made by the complainant to the Louisville Board of Trade, on the published annual and monthly reports made by the complainant wherein the operations and other facts in connection with the telephone system of said complainant company were detailed, and on the facts gathered from the telephone directory issued by the complainant, and on a comparison of the respective charges, operations, property, receipts, and operating expenses of the complainant company and the Louisville Home Telephone Company. ' Though the burden in respect to these allegations rested upon the city they were left wholly unproved. No testimony whatever was offered in their support, vague and general as they are. No member of the legislative body which enacted the ordinance presently to be noticed was called as a witness. The then mayor did testify on behalf of the city, but did not allude to the subject. He, as well as two other officials, confined their statements to the condition of another company which appears to have been then seeking some relief in the way of legislation. So that we may fairly say that, without making any adequate inquiry into the real facts upon which such action could intelligently be based, the defendant, which we shall call the city, on February 27, 1909, through its legislative department, enacted, and on March 6, 1909, the mayor approved, an ordinance which was as follows:

'Be it ordained by the general council of the city of Louisville:

'Section 1. That no company, corporation or individual operating, conducting, maintaining a telephone system, or furnishing telephone service in the city of Louisville, shall charge more for service than the following rates which are hereby fixed, established and ordained to be the maximum rates that may be charged for telephone service in the city of Louisville.
'Sec. 2. For each telephone in a business house or office the maximum rate or charge shall not exceed, for a single or private line, unlimited service, $5.50 per month, or at the rate of $66.00 per year. For a party line, unlimited service, $4.00 per month, or at the rate of $48.00 per year. For each telephone in a residence the maximum rate or charge shall not exceed, for a single or private line, unlimited service, $3.00 per month, or at the rate of $36.00 per year. For a party line, unlimited service, $2.00 per month, or at the rate of $24.00 per year. For each extension desk telephone the maximum rate or charge shall not exceed $1.00 per month, or at the rate of $12.00 per year.
'Sec. 3. Any person, firm or corporation violating any provision of this ordinance or charging a higher rate for telephone service than is fixed by this ordinance shall be subject to a fine of not less than $5.00 nor more than $25.00 for each offense. Each charge for telephone service in excess of the rates herein fixed and each month that such charge is made for such service shall constitute a separate offense.'

Of course the city was not bound by any law or constitutional provision to make any inquiry before enacting the ordinance, but when it is known that it did not do so in respect to a matter as important and intricate as the one involved, the weight of any presumption in favor of its action is lessened. However plausible it may appear on paper, guess work, if ever admissible upon so difficult a problem as rates, is likely to lead to unsatisfactory results and possibly palpable injustice. As the rates thus fixed effected a very material reduction, the company, on March 8, 1909, filed its bill, in which it prayed that the city be enjoined from enforcing the ordinance. The ground upon which that relief was sought, speaking generally, was that the rates fixed by the ordinance were confiscatory, and would not, if enforced, permit the company to earn a fair, reasonable and just income and return upon the value of its property in the city used for operating and conducting its business. In April, 1909, the case was referred to a special master, with instructions to take the testimony and report to the court his conclusions upon various questions set forth in the order of reference, the details of which need not be stated. The order of reference was, of course, designed to afford the means for ascertaining all the facts necessary to enable the court to meet the requirements of the rules laid down by the Supreme Court, notably in Knoxville v. Water Co., 212 U.S. 1, 29 Sup.Ct. 148, 53 L.Ed. 371, and Willcox v. Consolidated Gas Co., 212 U.S. 19, 29 Sup.Ct. 192, 53 L.Ed. 382.

Great labor was thus devolved upon the master in the effort to ascertain the facts bearing upon the case from many points of view, and the mass of testimony has made up a most voluminous record, the study of which has imposed upon the court also a great task. After many months devoted to the work, the master filed a report stating his conclusions of fact and of law. Many exceptions thereto have been filed by the parties, and the questions raised have been the subject of very interesting and instructive argument. Where a master makes findings of fact it is the usual practice of courts of equity to treat those findings as, prima facie, correct, and not to disturb them, unless he has proceeded upon an erroneous theory of the law applicable to the case or has made findings of fact which are clearly against the weight of the testimony. Much less weight, however, is given to this prima facie presumption in cases where the powers of a legislative body are called in question, or where constitutional rights are involved. Such delicate and important questions demand the more direct attention and labor of the court itself. 212 U.S. 1, 29 Sup.Ct. 148, 53 L.Ed. 371.

In many cases the Supreme Court has stated the general rules applicable to the essential propositions which must lie at the bottom of the claim to relief against the ordinance in question. It seems to be settled that while rates which, under the circumstances, are unreasonably high may not be charged by a public utility corporation to enable it to earn dividends which otherwise it could not earn, yet such corporation should be permitted to charge rates which are, under all the circumstances, reasonable and just, and which afford a fair return upon the value of its property. The legislative department of a state or city may compel the corporation to charge rates which are reasonable and just, but may not fix rates which are so law as to deprive it of a fair return upon the value of its property which at the time is being used for the public in the operations of the company within the jurisdiction of the legislative body which attempts to fix rates. Were this not so, property of the company would be used not for the benefit of its owners but for that of the public, in which case the property would be appropriated by the public without just compensation, and would be a violation of constitutional rights.

In Knoxville v. Water Co., 212 U.S. at page 17, 29 Sup.Ct. at page 153 (53 L.Ed. 371), it was said: ...

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