Blackledge v. Farmers Independent Telephone Company

• Decision Date: 23 February 1921
• Docket Number: 21176
• Citation: 181 N.W. 709,105 Neb. 713
• Parties: LEWIS H. BLACKLEDGE ET AL., APPELLEES, v. FARMERS INDEPENDENT TELEPHONE COMPANY, APPELLANT
• Court: Nebraska Supreme Court

181 N.W. 709

105 Neb. 713

LEWIS H. BLACKLEDGE ET AL., APPELLEES, v. FARMERS INDEPENDENT TELEPHONE COMPANY, APPELLANT

No. 21176

Supreme Court of Nebraska

February 23, 1921

APPEAL from the State Railway Commission. Reversed.

REVERSED.

Howard S. Foe, Stiner & Boslaugh and W. M. Whelan, for appellant.

Lewis H. Blackledge and Bernard McNeny, contra.

OPINION

FLANSBURG, J.

Appeal from an order of the Nebraska State Railway Commission requiring physical connection between telephone companies for the exchange of local service, as well as for the transmission of long-distance messages.

The Farmers Independent Telephone Company and the Lincoln Telephone & Telegraph Company, both Nebraska corporations are engaged in the telephone business at Red Cloud, Nebraska. Each operates a local exchange, and in that business they are direct competitors. The Farmers company has, also, farm lines extending into the country, and has switching exchanges with certain other independent companies which operate small telephone exchanges in neighboring towns. The Lincoln company has an extended business over the entire state and operates long-distance lines in connection with and as a part of the Bell system throughout the United States and Canada.

For some years prior to October 1, 1917, a physical connection had been maintained between the exchanges of the two companies at Red Cloud, and the subscribers of the Farmers company had been given the privilege of directly transmitting telephone messages over the Lincoln company's long-distance lines. By reason of the duplication of telephones, found necessary by many subscribers, and the other inconveniences incident to the division of the local business at Red Cloud between the two companies, a movement began among certain telephone users for the elimination of one or the other of these companies from the field. Meetings were held and an agreement reached by a number of citizens to the effect that they would patronize the Farmers company exclusively. As a result, 84 of the Lincoln subscribers immediately transferred to the Farmers company. The Lincoln company, in the protection of its own interests, promptly discontinued the long-distance service formerly rendered the subscribers of the Farmers company. The Farmers company then made application to the railway commission for an order requiring the reestablishment of the long-distance service. In that proceeding the two complainants, who are citizens of Red Cloud, and telephone users, intervened; the one praying for an order to require the two companies to mutually exchange all telephone service, local as well as long-distance, and the other that the two companies be required to consolidate their telephone systems in Red Cloud.

The railway commission, after a hearing, entered an order requiring the Lincoln company to furnish long-distance service to subscribers of the Farmers company and to reestablish physical connection between the two plants for that purpose. It also ordered that the two companies make necessary physical connection, and that each be required to receive and transmit all local calls, originating on the lines of the other, where destined to a subscriber on its own local lines. As compensation for the exchange of local service, the rates to all local subscribers of each of the companies were increased. All business subscribers were increased 75 cents a month, residence subscribers 20 cents a month, and farm and switching subscribers 10 cents a month. The railway commission then made a specific finding, to the effect that the above orders, if granted without other conditions, would work injuriously to the Lincoln company and would result in a practical confiscation of its properties at Red Cloud, since all of its subscribers would eventually, under the circumstances created, transfer to the Farmers' lines. It was therefore further ordered, avowedly as a protection to the interests of the Lincoln company, that the future local telephone business should be divided, and that neither company should accept new or additional local subscribers in numbers sufficient to change the proportion in size that one company bore to the other on October 1, 1917. The Farmers company appeals, complaining of all those provisions, except the order covering the long-distance service.

It is insisted that the statute, Laws 1913, ch. 79 (Rev. St. 1913, secs. 7414, 7417), requires only connections with trunk and toll lines, and not a general exchange of local business. The title and body of the act, we think, confirm this contention. The title of the act refers only to "trunk and toll" lines, and the body of the act also refers specifically to such lines and provides for the division of tolls for long-distance service only. It is also provided that the tolls for the transmission of each particular message shall be divided, in part, upon the basis of the number of miles of line furnished by the respective companies. We find nothing in the act, however, which attempts to limit the general power of the railway commission over telephone companies in so far as its action may go beyond and not be in conflict with the mandatory provisions of this act.

By the Constitution (article V. sec. 19a) the railway commission is given general power to regulate and control such companies according to its own judgment and discretion, subject to the general constitutional limitations, and except in so far as the legislature shall, by specific legislation, provide how, and limit to what extent, that power shall be exercised.

The railway commission has, then, full and plenary power, legislative in character, to control these companies, and to pass reasonable rules and regulations for the conduct of their business. It is authorized, in that regard, to exercise the police power of the state and that power of regulation and control which is impliedly reserved by the state in the grant of charters to such public utilities.

It is the contention of the Farmers company that a physical connection can be required between telephone companies only through a legislative enactment or by virtue of contract, and that the order of the railway commission goes beyond the provisions of the statute, above mentioned. It is true that, by the common law, public utilities owed no duty beyond their existing lines, and, therefore, no obligation to make physical connections or exchange service with each other. Each had the right to operate independently. Where the common law is not changed by legislation, a court would, therefore, find no authority upon which to base an order for such physical connections or exchange of service. Home Telephone Co. v. People's Telephone & Telegraph Co., 125 Tenn. 270, 141 S.W. 845; Pacific Telephone & Telegraph Co. v. Anderson, 196 F. 699; Home Telephone Co. v. Sarcoxie Light & Telephone Co., 236 Mo. 114, 36 L. R. A. n. s. 124, 139 S.W. 108; State v. Cadwallader, 172 Ind. 619, 87 N.E. 644 (on rehearing) 89 N.E. 319; Pacific Telephone & Telegraph Co. v. Eshleman, 166 Cal. 640, 50 L. R. A. n. s. 652, 137 P. 1119.

The railway commission is, by the Constitution, delegated authority which is, in its nature, legislative, and the common law is not a limitation upon that power. Its orders, as well as the statutory enactments of the legislature, must meet constitutional requirements, and must not be oppressive nor arbitrary, nor disregard substantial property rights.

The question arises whether or not the order of the railway commission in this case, based in part upon the statute mentioned, and in part a direct exercise of its own power, can be justified as a reasonable regulation of the business and service of these companies, or does it offend against those constitutional inhibitions, prohibiting the taking of property without due process of law, or without just compensation?

Although it has been held (Pacific Telephone & Telegraph Co. v Eshleman, supra) that, to require physical connection between different telephone systems and to compel one company to furnish the service of its lines to the patrons of the other company, cannot, under any conditions, be justified as a regulation, but must be considered a taking of property, and that it can only be accomplished through the exercise of the power of eminent domain, it is now quite universally recognized that the state, or its delegated authorities, may, in the exercise of its police power or its power to regulate public service corporations, compel such physical connections and compel the one company to furnish its wires for the transmission of messages originating on the other company's lines, provided that an arrangement is made so that the company required to render the service will receive proper compensation for the additional service which it renders, and that such conditions are imposed as will protect such company in its individual management and control of its own property, and that the order does not so operate as to create or allow of such discriminatory conditions as will cause injury to...