City of Mitchell v. Dakota Cent. Telephone Co.

• Decision Date: 24 May 1910
• Parties: CITY OF MITCHELL et al. v. DAKOTA CENTRAL TELEPHONE CO.
• Court: South Dakota Supreme Court

127 N.W. 582

25 S.D. 409

CITY OF MITCHELL et al. v. DAKOTA CENTRAL TELEPHONE CO.

Supreme Court of South Dakota

May 24, 1910

Appeal from Circuit Court, Davison County.

Action by the City of Mitchell and others against the Dakota Central Telephone Company. Judgment for defendant, and plaintiffs appeal. Reversed, with directions.

Haney J., dissenting.

Lauritz Miller, for appellants.

Null & Royhl, for respondent.

CORSON J.

This is an appeal by the plaintiffs from a judgment entered in favor of the defendant. The action was instituted by the plaintiffs to recover of the defendant the sum of $1,731.77, together with interest alleged to be due the plaintiffs, being 10 per cent. of the gross receipts of the defendant as specified in section 4 of ordinance No. 135, of the city of Mitchell granting to the defendant the right to install a telephone system in the city of Mitchell, approved May 11, 1898. The defendant set up various defenses in its answer; the material ones in the view of this court being: (1) That the provision in ordinance No. 135 for the payment of 10 per cent. upon the gross earnings of the company in excess of $2,400 per annum was inserted therein without authority and is illegal and void. (2) That ordinance No. 180 passed by the city of Mitchell in 1904 in effect repealed and superseded the provisions of ordinance No. 135 so far as it relates to the payment of the 10 per cent. on the gross proceeds of the defendant. The case was tried by the court without a jury upon an agreed statement of facts, the substance of which was adopted by the court as its findings of fact. The fourth section of ordinance No. 135, in which the right was granted to the defendant to install a telephone system in the city of Mitchell, reads as follows: "That in consideration of the said city of Mitchell granting to the said F. B. Elce his associates, heirs and assigns, the right and privilege to use the streets, alleys and public grounds of the said city of Mitchell, for the erection and maintenance of a public telephone system, *** provided, also, that at any time after three years from the adoption and approval of this ordinance that the gross receipts of the said telephone system for any one year shall be in excess of the sum of two thousand four hundred dollars ($2,400), the said F. B. Elce, his associates, heirs and assigns, shall pay to the city of Mitchell ten per cent. of the amount in excess of two thousand four hundred dollars ($2,400) received as gross receipts from the said telephone system, which said sum shall be paid to the city at the end of each and every year, and the city council shall have the right and privilege to examine the books of the said telephone system for the purpose of ascertaining the gross earnings of the said telephone system." The court also in its findings finds as follows: "That F. B. Elce, the grantee in said ordinance No. 135, duly accepted the terms and conditions of said ordinance, and that under and in pursuance thereof the said grantee therein, F. B. Elce, installed a local telephone system in said city of Mitchell, S. D., and used and occupied the streets, alleys, and public grounds and highways of said city with the poles, wires, and fixtures used in the operation of said telephone system, under the restrictions, limitations, and conditions of said ordinance No. 135." It is further found by the trial court that all of the rights and privileges granted to the said F. B. Elce were transferred to the defendant in this action. The court further finds that ordinance No. 180 was adopted by the council of the city of Mitchell on the 7th day of June, 1904. This ordinance in effect grants to the defendant the right and privilege to erect poles, string wires on any of the streets, alleys, and public highways of the city of Mitchell, excepting certain portions thereof, and to maintain the same for a period of 20 years from and after the passage and approval of the ordinance. "Supplying the *** citizens of Mitchell, and the public in general, facilities to communicate by long distance telephone or other electrical devices with parties residing in, near or at a distance from Mitchell, and all such rights to be continued on the condition herein named." The ordinance then proceeds to specify certain conditions, but there is no provision in respect to the payment of any percentage of the gross proceeds arising therefrom to the city. There seems to be no question raised as to the amount due the city if it is entitled to recover any sum whatever in this action. The court in its conclusions of law concludes, among other things: "(1) That the city of Mitchell was without power or authority to impose a gross earnings or charter tax as a condition of its consent to erect, construct, or maintain telephone lines and exchange in the city of Mitchell. (2) That that portion of the ordinance of May 11, 1898, known as ordinance No. 135, which imposes a gross earnings or franchise tax, is void. *** (4) That the plaintiff is not entitled to recover in this action. *** (7) That defendant is entitled to recover its costs and disbursements in this action." The appellants assign the following errors: "(1) The court erred in making conclusions of law Nos. 1, 2, 4, and 7. (2) The court erred in rendering judgment in favor of defendant, dismissing plaintiffs' complaint, and awarding costs to the defendant. (3) The court erred in not entering and rendering a decision and judgment in this action in favor of the plaintiffs as demanded in plaintiffs' complaint."

The appellants contend for a reversal of the judgment in this case "that the city of Mitchell had full power and authority to pass said ordinance No. 135, and to impose upon its consent to the use of its streets for telephone purposes the conditions therein prescribed; that said ordinance No. 135 is valid in every respect and is in full force and effect, and by virtue of its provisions the defendant company is under legal obligation to pay to the plaintiff city the amount prayed for in the complaint herein; that ordinance No. 135, when acted upon, became a valid and binding contract which the defendant is now estopped to deny; that the trial court erred in its conclusions of law Nos. 1, 2, 4, and 7, and in rendering judgment dismissing plaintiffs' complaint and awarding costs to the defendant." The respondent contends in support of the judgment that the city of Mitchell was without authority to impose the condition specified in section 4 of ordinance No. 135 relating to the payment of 10 per cent. of its gross proceeds in excess of $2,400, and that the provision providing for the payment of the 10 per cent. of the gross proceeds was void. The respondent further contends that ordinance No. 180 passed by the city of Mitchell in 1904 in effect repealed the provisions relating to the 10 per cent. of the gross receipts provided for in section 4 of ordinance No. 135. It will thus be seen that the questions presented are: (1) Did the city of Mitchell have authority to grant to the predecessor of the defendant the right to establish its telephone system in the city of Mitchell upon the condition that it pay to the city 10 per cent. of its gross proceeds over and above the sum specified? (2) Did the subsequent ordinance No. 180, granting to the defendant the right to maintain a long distance telephone system within the city of Mitchell, have the effect of repealing the provisions relating to the payment of the 10 per cent. of its gross proceeds as provided in section 4 of ordinance No. 135? Section 3, art. 10, of the state Constitution, provides as follows: "No street passenger railway or telegraph or telephone line shall be constructed within the limits of any village, town or city without the consent of its local authorities." It is quite apparent from this section of the Constitution that there is reserved to the municipality the right to grant or refuse to grant to telephone companies the privilege or franchise for establishing a telephone system within the municipality, and that it necessarily follows that, if it had the right to refuse to grant such franchise or privilege, it necessarily has the right to grant the same upon such terms and conditions as it may choose to impose, and, if the telephone company accepts the conditions, they become binding upon the company. Such company cannot accept the grant and proceed to install their plant and refuse to comply with the conditions upon which the grant was made.

Section 554 of the Civil Code provides as follows: "There is hereby granted to the owners of any telegraph or telephone lines operated in this state, the right of way over lands and real property belonging to the state, and the right to use public grounds, streets, alleys and highways in this state subject to control of the proper municipal authorities as to what grounds, streets, alleys or highways said lines shall run over or across, and the place the poles to support the wires are located; the right of way over real property granted in this act may be acquired in the same manner and by like proceedings as provided for railroad corporations." The latter law does not, in our opinion, have the effect of repealing subdivisions 9, 10, and 17 of section 1229, Rev Pol. Code, which confers upon cities the right to control and manage its streets and alleys. Both Codes, having been passed at the same time, must be construed together, and these sections will also be construed with reference to the state Constitution known as section 3 of article 10, which is hereinbefore quoted. These sections construed together would seem (1) to give the city exclusive right to control its streets and alleys, and (2) the Constitution prohibits the state from passing any law granting to an...