American Tel. & Tel. Co. of Alabama v. Town of New Decatur

• Decision Date: 27 January 1910
• Docket Number: 263.
• Citation: 176 F. 133
• Parties: AMERICAN TELEPHONE & TELEGRAPH CO. OF ALABAMA v. TOWN OF NEW DECATUR.
• Court: U.S. District Court — Northern District of Alabama

176 F. 133

AMERICAN TELEPHONE & TELEGRAPH CO. OF ALABAMA v. TOWN OF NEW DECATUR.

No. 263.

United States Circuit Court, N.D. Alabama, Northern Division.

January 27, 1910

Callahan & Harris, John C. Eyster, and Knox, Acker & Blackmon (Charles D. M. Cole, of counsel), for plaintiff.

W. T Lowe, A. F. Fite, and Tyson, Wilson & Martin, for defendant.

GRUBB District Judge.

This was a bill in equity, the purpose of which was to enjoin the defendant from interfering with the plaintiff's telephone system, consisting of lines of poles and wires, as constructed in the town of New Decatur, Ala., and from instituting legal proceedings in the state courts to enjoin the plaintiff from operating, maintaining, and managing its telephone system in that town. Jurisdiction in the federal court is claimed solely because the controversy is claimed to be one arising under the Constitution of the United States. Diversity of citizenship does not exist between the parties. The action of the defendant, complained of in and sought to be restrained by the bill of complaint, is contended to be in violation of article 1, Sec. 10, of the Constitution, and of the due process clause of the fourteenth amendment thereto and the jurisdiction of this court depends upon whether the bill of complaint shows that such claim is made out by the facts alleged in it.

The bill avers a grant to plaintiff by defendant on June 7, 1898 by ordinance, of a franchise to occupy with its poles and wires the highways of the town, subject to supervision and regulation under the police power of the municipality; the acceptance of the grant by plaintiff; and the construction of its poles and wires in the highways, pursuant to said grant and the use of said highways thereunder for a period of about six years. It further avers that on March 14, 1904, the town of New Decatur adopted an ordinance, the legal effect of which was to repeal the former ordinance granting the franchise; that on May 3, 1904, the defendant adopted another ordinance, providing (1) for the removal from the highways of plaintiff's poles and wires by plaintiff; (2) in the event of plaintiff's failure to effect such removal in 30 days, for the removal thereof by the town officers; and (3) declaring the maintenance of said poles and wires thereafter by plaintiff a nuisance, for which plaintiff's employes and officers were made responsible. It further avers the passage of two resolutions by defendant, the first on May 3, 1904, and the second on May 11, 1904, directing the attorneys of the defendant to institute legal proceedings in the state courts for the purpose of (1) restraining the plaintiff from engaging in and carrying on the telephone business in the town of New Decatur, after the expiration of its existing license, and forbidding the town clerk to reissue a license to it for that purpose, and (2) compelling it to remove its poles and wires from the highways of the town and to cease using them in its telephone business. It further avers that, in pursuance of the said ordinances and resolutions, the authorities intend to take steps to force plaintiff to remove its poles and wires from the highways and cease using and operating them.

Where jurisdiction is predicated upon the ground that the obligation of a contract has been impaired by a state, the questions to be considered are (1) the existence or not of the contract, (2) the obligation arising under it, and (3) whether there has been state legislation impairing the contract obligations.

If the conclusion is reached by the court in this case that the bill of complaint fails to show state legislation impairing contract obligations, then the bill should be dismissed for want of jurisdiction, though the ordinance of June 7, 1898, created a valid contract between plaintiff and defendant to permit the use of its highways for plaintiff's poles and wires without limit as to time. Impairment by a state of the obligations of a contract must be by legislation subsequent to the making of the contract, enacted either directly by the Legislature of the state, or, through delegation, by one of its municipalities. McCullough v. Virginia, 172 U.S. 102-116, 19 Sup.Ct. 134, 43 L.Ed. 382; Oshkosh Water Co. v. Oshkosh, 187 U.S. 437-446, 23 Sup.Ct. 234, 47 L.Ed. 349. If the ordinance of a municipality is relied upon as constituting such impairment, it must be shown to have been enacted pursuant to or under color of legislative authority from the state. In the case of Hamilton Gas Light Co. v. Hamilton City, 146 U.S. 258, 266, 13 Sup.Ct. 90, 92, 36 L.Ed. 963, the court said:

'The jurisdiction of that court (Circuit Court of the United States) can be sustained only upon the theory that the suit is one arising under the Constitution of the United States. But the suit would not be of that character, if regarded as one in which the plaintiff merely sought protection against the violation of an alleged contract by an ordinance to which the state has not in any form given or attempted to give the force of law. A municipal ordinance, not passed under supposed legislative authority, cannot be regarded as a law of the state within the meaning of the constitutional prohibition against state laws impairing the obligations of contracts. Murray v. Charleston, 96 U.S. 432-440 (24 L.Ed. 760); Williams v. Bruffy, 96 U.S. 176-183 (24 L.Ed. 716); Lehigh v. Easton, 121 U.S. 388-392 (7 Sup.Ct. 916, 30 L.Ed. 1059); N.O. Waterworks v. Louisiana Sugar Co., 125 U.S. 18, 31, 38 (8 Sup.Ct. 741, 31 L.Ed. 607). A suit to prevent the enforcement of such an ordinance would not, therefore, be one arising under the Constitution of the United States.'

In the case of Dawson v. Columbia Trust Co., 197 U.S. 178, 182, 25 Sup.Ct. 420, 422, 49 L.Ed. 713, the court said:

'In the case before us, there was no legislation subsequent to the contract and it is not even shown that there was a color of previous legislation for the city's acts. These acts are alleged to be unlawful, and the allegation would be maintained by showing that they were not warranted by the laws of the state.'

The rule to be derived from these cases is that a municipal ordinance to constitute a basis of legislation impairing the obligation of a contract must be enacted under color of an act of the Legislature, either of subsequent enactment, or, if prior, then of continuing effect in the sense that it operates as a subsequent delegation to the municipality of authority to enact the ordinance complained of. The cases relied on by plaintiff's counsel do not conflict with this rule. In each the ordinance was authorized by express specific legislation, generally enacted after the accrual of the contract rights alleged to have been impaired, or, as in the case of Cleveland v. Cleveland City Ry. Co., 194 U.S. 517, 24 Sup.Ct. 756, 48 L.Ed. 1102, by legislation, enacted before the making of the contract, but which was construed as being of continuing force thereafter and until the enactment of the impairing ordinance.

In every case in which the question has been considered, the necessity for municipal action under express specific legislative authority has been recognized. Walla Walla v. Walla Walla Water Co., 172 U.S. 1, 19 Sup.Ct. 77, 43 L.Ed. 341; Vicksburg Waterworks Co. v. Vicksburg, 185 U.S. 65, 22 Sup.Ct. 585, 46 L.Ed. 808; Vicksburg v. Vicksburg Waterworks Co., 202 U.S. 453, 26 Sup.Ct. 660, 50 L.Ed. 1102; Cleveland v. Cleveland City Ry. Co., 194 U.S. 517, 24 Sup.Ct. 756, 48 L.Ed. 1102; Mercantile Trust Co. v. Columbus, 203 U.S. 311, 27 Sup.Ct. 83, 51 L.Ed. 198.

The plaintiff in this case relies upon municipal ordinances and resolutions of the town of New Decatur and threatened action by the town authorities thereunder, as showing legislative action impairing the obligation of the contract. The bill of complaint should show that such ordinances and resolutions were adopted in pursuance or under color of express and specific legislative authority, and that they amounted to more than a mere repudiation of its contract and a denial of liability upon it. The ordinance of March 14, 1904, merely repealed the ordinance of June 7, 1898, which created the contract rights, alleged to have been impaired. The bill does not allege under color of what, if any, legislative authority, this repealing ordinance was enacted. No express power to repeal ordinances is to be found in the legislative charter of the town of New Decatur. All municipal corporations have the inherent power to repeal ordinances, implied from their authority to adopt them. The incorporation of the town of New Decatur as a municipality, with such implied powers, is the only legislative authority that can be claimed for the repealing ordinance. Such authority is not only prior in date to the contract ordinance, but is general and implied, as distinguished from the specific and express legislative authority, which alone has been held by the Supreme Court sufficient to constitute municipal legislation impairing contract obligation within the meaning of this article of the Constitution of the United States.

The ordinances and resolutions directing the plaintiff to remove its poles and wires from the streets, and, in the event of its failure so to do within a stated period, directing the town marshal to effect such removal, and declaring them to be nuisances thereafter, are contended by plaintiff to have been adopted by the defendant pursuant to the general power in its original legislative charter of 1888-89, re-enacted in 1898-99, to remove obstructions in the streets of the town and so to constitute legislation impairing the obligation of the contract ordinance. This legislative power was granted to defendant years before the contract rights accured, and was the general power,...