City of Osceola, Iowa v. Utilities Holding Corporation, 9081.

• Decision Date: 14 January 1932
• Docket Number: No. 9081.,9081.
• Citation: 55 F.2d 155
• Parties: CITY OF OSCEOLA, IOWA, et al. v. UTILITIES HOLDING CORPORATION.
• Court: U.S. Court of Appeals — Eighth Circuit

55 F.2d 155 (1932)

CITY OF OSCEOLA, IOWA, et al. v. UTILITIES HOLDING CORPORATION.

No. 9081.

Circuit Court of Appeals, Eighth Circuit.

January 14, 1932.

R. E. Killmar, of Osceola, Iowa (O. M. Slaymaker, of Osceola, Iowa, on the brief), for appellants.

C. J. Lynch, of Cedar Rapids, Iowa (Donnelly, Lynch, Anderson & Lynch and F. L. Anderson, all of Cedar Rapids, Iowa, and J. L. Parrish, of Des Moines, Iowa, on the brief), for appellee.

Before STONE and VAN VALKENBURGH, Circuit Judges, and SANBORN, District Judge.

VAN VALKENBURGH, Circuit Judge.

In April, 1897, the city of Osceola, Iowa, although, apparently, without power so to do, passed ordinances granting to the Iowa Telephone Company and to the Clearfield & Mount Ayr Telephone Company, their successors and assigns, the right to erect, maintain, and use upon the streets, alleys, and public highways of said city the poles, wires, and fixtures necessary and convenient for supplying to the citizens of said city, and the public communication by telephone or other electric signals. These ordinances were accepted by the two company grantees, and they proceeded immediately to construct their respective systems. The Iowa Company installed a local exchange and began operating it about June, 1897. The Clearfield & Mount Ayr Company began the construction of its lines in the spring and summer of 1897, building about six miles of pole lines in the city, installing a switchboard, and establishing a toll-line station during that period. By September, 1897, it had constructed lines in from the south and west, and, later in the year operated a line to Des Moines. The local exchange of the Clearfield Company was not fully operated until 1901. The acceptance of the franchise grants, and the constructions thereunder above recited, were made prior to October 1, 1897.

The laws of Iowa prior to October 1, 1897 (section 780, Code of Iowa, 1851, and amendment thereto, section 1324, Code of Iowa, 1873), provided that any person or company might construct a telephone line along the highways of the state, and might erect the necessary fixtures therefor. The Iowa Supreme Court has construed this provision of the Iowa law to confer upon those complying with its terms a special franchise in perpetuity, subject only to a proper exercise of the police power and to any expressly reserved power. State v. Iowa Tel. Co., 175 Iowa, 607, 623, 154 N. W. 678, Ann. Cas. 1917E, 539. Acceptance, it would seem, might be made merely by occupancy of the streets for the purpose of telephone operation; and the company can still claim under the state law, even though it commenced operations under a void city franchise ordinance. State v. Chariton Tel. Co., 173 Iowa, 497, 155 N. W. 968.

In March, 1913, the city of Osceola by an ordinance, approved at an election, granted to C. T. Ayres and others a franchise containing certain provisions with respect to rates. Subsequently, and before the institution of this litigation, by mesne conveyances and assignments, the foregoing franchise rights were acquired by appellee. September 17, 1929, the common council of Osceola passed an ordinance fixing the maximum rates to be charged for telephone service within that city. November 16, 1929, appellee filed its bill of complaint, attacking said ordinance as unconstitutional and void as taking complainant's property for public use without due compensation, and without due process of law, and as denying to complainant the equal protection of the law. The cause came for hearing upon the application for temporary injunction, and, prior thereto, the city council repealed the ordinance upon which appellee's bill was based. Finding the validity of that ordinance moot, the court denied the application for injunction, but gave to complainant ten days within which to amend its bill of complaint, upon the following stated considerations: "While there are perhaps other allegations in the petition upon which a Court could determine the matters presented, the Court feels that it would be better practice in the event the plaintiff is claiming on other actions on the part of the city that affect their constitutional rights, that before any action is taken the plaintiff should so declare in its petition in order that the defendant may know the exact position to be taken by the plaintiff company in the prosecution of its application for an injunction and for affirmative relief."

Complainant accordingly amended its bill, averring that the right to fix and regulate telephone rates within the state of Iowa is vested solely in the Legislature of that state. It adopted all the allegations of its original bill with respect to its franchise rights, and declared that the rates specified in the ordinance to C. T. Ayres and others, to which reference has been made, would be confiscatory if enforced. Appellant, answering, denied that complainant had ever acquired any right to operate a telephone system in Osceola, unless under the said franchise granted to C. T. Ayres and others in 1913.

On final hearing, the trial court decreed as follows:

"That the terms of a certain ordinance, known as Ordinance No. 48 and adopted and approved by the defendant city on the 4th of March, 1913, by which there was granted to C. T. Ayres, F. J. Emary and D. M. Gibson and their assigns a franchise to operate a telephone exchange within the said city, are void in so far as they attempt to regulate and fix the rates for telephone service within said city, for the reason that the said defendant city has no power to regulate said rates or contract with respect thereto.

"That the complainant is entitled to a decree of this Court establishing its rights within the City of Osceola, Iowa, as herein set forth.

"That the testimony introduced in this case is not sufficient to satisfy the Court that the defendants will in the future interfere with the rights of the complainant with respect to the occupancy of the streets and other public places of the defendant city and the collection of lawful and reasonable rates for the service performed and, therefore, that a permanent injunction ought not at this time to be entered, but that the Court should retain jurisdiction of this cause for the purpose of the future adjudication of such issue if occasion therefor arises.

"Wherefore, it is ordered and decreed that the complainant's right to occupy the streets, alleys and other public places of the defendant, City of Osceola, Iowa, for the purpose of constructing, maintaining and operating a telephone plant and by the use thereof rendering telephone service to the public, and the right to charge and receive just and lawful compensation for the service rendered, free and unhampered by the rate provisions contained in the ordinance hereinbefore referred to granting a franchise to Ayres et al., and their successors, under and by virtue of the terms of the franchises acquired by the Iowa Telephone Company, as hereinbefore set out, be and the same are hereby established; all of said rights to be subject to the proper exercise of the police power as the same may be vested in said city.

"The Court retains jurisdiction of this case for the purpose of hearing and...