Cent. Union Tel. Co. v. Indianapolis Tel. Co.

• Decision Date: 11 March 1920
• Docket Number: No. 23708.,23708.
• Citation: 126 N.E. 628,189 Ind. 210
• Parties: CENTRAL UNION TELEPHONE CO. et al. v. INDIANAPOLIS TELEPHONE CO.
• Court: Indiana Supreme Court

189 Ind. 210

126 N.E. 628

CENTRAL UNION TELEPHONE CO. et al.

v.INDIANAPOLIS TELEPHONE CO.

No. 23708.

Supreme Court of Indiana.

March 11, 1920.

Appeal from Circuit Court, Marion County; Lewis B. Ewbank, Judge.

Action by the Indianapolis Telephone Company against the Central Union Telephone Company and the City of Indianapolis to compel the specific performance by defendant Telephone Company of a contract to purchase the property and franchises of plaintiff and to quiet title against claims of defendant City under a franchise ordinance. Decree for plaintiff, and defendants appeal. Affirmed.John F. Robbins, Carl H. Weyl, Samuel Ashby, Thos. D. Stevenson, Harry E. Yockey, and Dixson H. Bynum, all of Indianapolis, for appellants.

J. W. Fesler, Harvey J. Elam, and Howard S. Young, all of Indianapolis, for appellee.

LAIRY, J.

This is an appeal from a decree entered by the circuit court of Marion county ordering the specific performance of written contract for the sale by appellee to first-named appellant of all the real estate, buildings, and other properties of appellee, including the local and long-distance telephone lines operated by appellee, and all property owned and used in connection therewith, as well as all stocks and bonds owned by said company and all other property except cash and credits.

The court overruled separate demurrers addressed to the complaint by each of the appellants to which exceptions were reserved; and, on appellants' declining to answer or plead further, the decree was entered on the pleadings. The only question presented for review arises on the exception to the ruling of the court on the demurrer.

By the memoranda filed with the demurrers only one objection is raised as to the sufficiency of the complaint. The complaint sets out in full the franchise granted by the city of Indianapolis to the Indianapolis Telephone Company, under which that company constructed and operated its telephone system. The seventeenth section of the instrument so set is in the words following:

“It is also agreed that the franchise and privileges herein granted by the said city of Indianapolis are so granted upon the distinct condition that neither such franchise nor any rights granted by this contract shall be hereafter assigned nor in any manner transferred by said companies, parties of the second part, either directly or indirectly, without the consent of the board of public works of said city and ratified by the common council of the city of Indianapolis expressed in a resolution regularly adopted by said board.”

The objection made to the complaint is that it does not allege that the city of Indianapolis, by its board of public works, consented to said sale and transfer, and that such consent was ratified by the common council of said city, as required by section 17 of the franchise, and that it is not alleged that the franchise in question was surrendered in the manner and within the time prescribed by section 101 of the Public Utilities Act (section10052x3, Burn's Statutes 1914; section 10052x3 Burns' Supplement 1918).

Section 95 1/2 of the Public Service Commission Act provides that, where two public utilities are engaged in furnishing a like service or product, and are doing business in the same municipality or locality within the state, one of such corporations may lease or sell its property or business or any part thereof to the other, on complying with certain conditions prescribed in the section and at a price and on terms to be fixed by the Public Service Commission. The section expressly provides that such leases or sales may be made with the consent and approval of the Public Service Commission, but not otherwise.

The allegations of the complaint show that appellant Central Union Telephone Company and appellee were engaged at the time of the contract of sale in furnishing like services to the residents of Indianapolis, and were both engaged in business in that municipality. Such allegations further show that all of the conditions precedent to the right to make the sale, as prescribed by the section of the statute cited, had been complied with, and that the consent and approval of the Public Service Commission to the sale and to the price and terms thereof had been obtained as required by said section.

Appellee takes the position that the sole power to give or to withhold consent to a sale of its property and business, under the state of facts disclosed by the complaint, was vested by the Legislature in the Public Service Commission by the section of statute to which reference has been made, and that the power to give or to withhold such consent reserved by the city of Indianapolis in its contract with appellee has been withdrawn by the state and vested in another body of its own creation. If appellee's position is sound, the city of Indianapolis has no power to prevent the sale by withholding its consent when the Public Service Commission has given its consent and approval to such sale.

Appellants take the position that the franchise granted to the city of Indianapolis to appellee and accepted by it constitutes a legal and binding contract between the city and appellee, and that the seventeenth section of that instrument imposes on appellee a contractual obligation within the meaning and within the protection guaranteed by section 10, art. 1, of the federal Constitution. Basing their conclusion on the position thus stated, appellants assert that the state had no power, by any statute subsequently passed, to impair the binding obligations imposed by section 17 of the contract, and that, if the statute on which appellee relies were given the effect claimed for it by appellee, it would be inconsistent with the section of the Constitution cited, and hence would be invalid.

There can be little doubt that it was the purpose of the Legislature to confer on the Public Service Commission the power to control all mergers, consolidations, and sales of public service corporations in such a way as to do justice to the public, as well as to those engaged in furnishing service to the public. It is equally clear that it was not the purpose of the Legislature to divide this power so as to leave any portion of it in the municipality in which the public service corporations were doing business. The complaint does not allege that appellee surrendered its franchise and accepted an indeterminate permit under the provisions of section 101 of the Public Utilities Act; and it must therefore be assumed that the instrument in question has not been abrogated as a whole by a mutual relinquishment of rights and release of obligations thereunder by the state, on the one hand, and appellee, on the other. For the reason stated and for other reasons which need not be here set out, the case of Winfield v. Public Service Commission, 118 N. E. 531, cannot be regarded as a decisive authority on the questions here involved. Under the facts before the court in the instant case the franchise under which appellee was operating, if it is contractual in its nature, as asserted by appellant, is still operative, and the provisions of section 17 are still binding on appellee unless it has been released therefrom by its compliance with the provisions of section 95 1/2 of the Public Utilities Act (Burns 1914, § 10052r3).

[1] There can be no doubt as to the authority of the Legislature to confer on the Public Utilities Commission the power to give its consent and approval to the sale, or lease of the properties of public utility corporations in conformity with a general law enacted on the subject and to provide that such sales or lease might be made with such consent or approval, but not otherwise; and there can be no doubt that the commission may legally exercise the power granted except in cases where the exercise of such power would have the effect of impairing the obligations of a valid and subsisting contract or would otherwise interfere with some constitutional right.

In deciding the question thus presented the court is first required to consider the franchise or grant of authority, as set out in the complaint, under which appellee constructed its telephone plant and under which it was operating when the contract of sale was executed, on which this suit is based.

The written instrument was made and executed by appellee, and by the board of public works of the city of Indianapolis, representing the city, and it was afterward confirmed by an ordinance of the common council of said city. The written instrument so executed was contractual in form containing mutual stipulations and agreements as to the manner in which the plant was to be constructed and operated, the rates appellee was to charge for its service, the conditions under which it might lease or sell, and numerous other agreements and stipulations which are not material to the questions here presented. From a consideration of the instrument as a whole, it is apparent that it was intended to operate as a contract, binding alike on the city and on appellee. If the city had power to make such a contract the writing must be given the force and effect of a valid and binding contract.

[2][3][4][5] Under our system of government, the entire sovereign power rests with the several states except in so far as such power has been expressly delegated to the federal government by the Constitution of the United States. The entire lawmaking power of the state is vested by our state Constitution in the General Assembly; and the Legislature is not restricted in the exercise of that power except by the express provisions of the state Constitution and those provisions of the federal Constitution which apply to the states and by the provisions of treaties concluded in accordance with the provisions of the federal Constitution. The state through its legislative department of government may pass all laws and regulations respecting the peace, the safety, the health, the happiness,...