American Bond & Mortgage Co. v. United States

• Decision Date: 12 October 1931
• Docket Number: No. 4291.,4291.
• Parties: AMERICAN BOND & MORTGAGE CO. et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Seventh Circuit

52 F.2d 318 (1931)

AMERICAN BOND & MORTGAGE CO. et al. v. UNITED STATES.

No. 4291.

Circuit Court of Appeals, Seventh Circuit.

July 9, 1931.

As Modified on Denial of Rehearing October 12, 1931.

George W. Swain, Frank H. Scott, and Edward B. Hayes, all of Chicago, Ill., for appellants.

George E. Q. Johnson, U. S. Atty., of Chicago, Ill., John Lord O'Brien, Asst. to Atty. Gen., and Charles H. Weston and William G. Davis, Sp. Assts. to Atty. Gen., for the United States.

Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.

EVANS, Circuit Judge.

Appellee brought this suit to enjoin the continued operation of a radio broadcasting station (WMBB-WOK), which was being operated by appellants after the Federal Radio Commission had refused their application for a renewal of license. The District Court granted the injunction, and this appeal followed.

When this appeal was first presented to this court, it appeared to us and to counsel that there were certain questions or propositions of law concerning which instructions from the Supreme Court were desirable, and we accordingly certified such questions or propositions to the Supreme Court, under the supposed authority of section 346, tit. 28, US CA.¹ But the Supreme Court concluded that the questions certified need not be answered, and dismissed the certificate. American Bond & Mortgage Co. et al., 282 U. S. 374, 51 S. Ct. 118, 75 L. Ed. 395.

Upon the second presentation of this appeal to this court, appellants narrowed their previous contentions by not pressing their attack upon the constitutionality of the Federal Radio Act, but contended that the order of the Radio Commission refusing to extend the license under which they had previously operated, was arbitrary, unreasonable, and unfair. This attack is predicated upon the following established facts:

Appellant American Bond & Mortgage Company, an Illinois corporation, was engaged in selling securities throughout the United States. Appellant Trianon, Inc., an Illinois corporation, operated for profit a public ballroom in Chicago. These two corporations conducted this broadcasting station, using the same transmitter and dividing the expense of operation. The station was located at Homewood, Ill., about 25 miles from the city of Chicago.

Broadcasting at this station dated back to a period before the passage of the first Federal Radio Act. After the creation of the Radio Commission, licenses were granted and renewed to conduct the broadcasting station at the aforementioned place, and in August, 1927, the Commission issued a construction permit for the construction of a new transmitter at Homewood, and upon its completion, issued a license authorizing full time operation on a frequency of 1190 kcs. with 5,000 watt power. This license was renewed from time to time until it expired September 1, 1928. In May, 1928, the Commission entered a general order to the effect that it would hear all applications for renewals of licenses or permits for conducting broadcasting stations July 9, 1928, and notified the appellants, as well as all other applicants, that unless a showing was made that public interest, convenience, or necessity would be served by renewing the licenses, they would be denied. The hearing was had, and the Commission denied appellants' application, the order to be effective September 1, 1928.

The Commission set forth its reasons for adopting this order, stating that it was acting in compliance with the equalization requirements of section 5 of the amendatory Act of March 28, 1928 (47 USCA § 89); that such action would promote the public interest and convenience; that it would greatly improve receptive conditions in the broadcasting band by the elimination of a part of the interference which then existed.

Appellants showed that large sums of money (over $100,000) had been expended by them in building their station and in developing their business, and that the benefit of this expenditure would be wholly lost if the order of the Commission were not reversed. They likewise showed that no objection had been made to the manner in which they had conducted their station, and that the only reason for the order of discontinuance was the necessity of reducing the number of broadcasting stations in order that the radio users might secure the maximum enjoyment through lessened interference. It also appeared that public convenience necessitated the regulation of broadcasting stations and the only practical way of eliminating interference was to reduce the number of broadcasting stations.

Without going into the details of the evidence, it may be said that the proof showed that the congressional act was to secure a more even geographical distribution of broadcasting stations and the elimination of trouble, so annoying to the radio users, which arose through interference. It appeared that a 5,000 watt power broadcasting station has a radius of area of good service to suburban dwellers of approximately 100 miles and a radius of area of fair service to rural listeners of approximately 1,000 miles; that a station of such power, however, interfered with another station broadcasting on a similar wave length 3,000 miles away.

Appellants do not now question the necessity of regulation nor the propriety of limiting broadcasting stations in such manner as to give the best service to the possessors and users of radios. Their contention, however, is that the Commission acted arbitrarily when it denied appellants' permit without providing any compensation for the loss of property, which such order of discontinuance necessarily entailed. Their position, briefly stated, is that in denying a renewal of license to one broadcasting station, which had not offended against the rules of the Commission, solely to reduce the number of such stations, the Commission should have required the other broadcasting stations to pay a fair sum to appellants to compensate them for their loss. They contended that if other licensees did not care to continue upon the condition that they pay appellants for their loss, appellants should have been permitted to continue upon the condition that they pay their proportion of the loss which some other licensee suffered through the loss of its license.

While there seems much of merit in this position, appellee contends that appellants are in no position to make this contention in this suit at this time because of their failure to appeal to the Court of Appeals of the District of Columbia, as provided by section 16 of the Radio Act of 1927, U. S. Code Supplement, title 47, § 96 (47 USCA § 96). Appellee also contends that the license, under which appellants operated, ran for a limited period only; that no vested rights were acquired thereunder, and, therefore, the order of the Commission was valid and appellants were entitled to no compensation for the loss of their property. Technical Radio Laboratory v. Federal Radio Commission, 59 App. D. C. 125, 36 F.(2d) 111, 66 A. L. R. 1355.

We are well satisfied that there is a vital difference between the rights of one whose property (in coal land such as was considered in Pennsylvania Coal Co. v. Mahon, 260 U. S. 393, 43 S. Ct. 158, 67 L. Ed. 322) is confiscated by judicial decree and the rights of one to the use of the air, which right is dependent upon a government permit limited both as to extent and time. The former is vested. The latter is permissive.

We are likewise satisfied that appellants are not in a position to attack an order of the Radio Commission which was within its power to make, without first exhausting the remedies given them by the Radio Act, to wit, by appealing to the Court of Appeals of the District of Columbia.

The view of the Supreme Court on this proposition is clearly indicated in White v. Johnson, 282 U. S. 367, 51 S. Ct. 115, 118, 75 L. Ed. 388, a case similar to the one under consideration, in which similar questions were at the same time certified to the Supreme Court, and in which the certificate was likewise dismissed. But respecting redress against unjust and arbitrary action of the Commission, the court employed the language quoted in the margin.²

Other authorities, holding that one cannot attack an order such as is here under review without availing himself of all of the remedies provided by the statute for the correction or the modification of the order, are: Gorham Manufacturing Co. v. State Tax Commission of New York, 266 U. S. 265, 269, 45 S. Ct. 80, 69 L. Ed. 279; First National Bank v. Board of Com'rs of Weld County, 264 U. S. 450, 453, 44 S. Ct. 385, 68 L. Ed. 784.

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