City of St. Louis v. Western Union Telegraph Co.

• Decision Date: 15 November 1988
• Docket Number: No. 54238,54238
• Citation: 760 S.W.2d 577
• Parties: CITY OF ST. LOUIS, Plaintiff-Appellant, v. WESTERN UNION TELEGRAPH CO., Defendant-Respondent.
• Court: Missouri Court of Appeals

Page 577

760 S.W.2d 577

CITY OF ST. LOUIS, Plaintiff-Appellant, v. WESTERN UNION TELEGRAPH CO., Defendant-Respondent.

No. 54238.

Missouri Court of Appeals,

Eastern District,

Division Two.

Nov. 15, 1988.

James J. Wilson, City Counselor, Edward J. Hanlon, Associate City Counselor, St. Louis, for plaintiff-appellant.

Ziercher & Hocker, P.C., Edward K. Fehlig, Clayton, for defendant-respondent.

KAROHL, Judge.

This appeal arises in an action instituted by the City of St. Louis (City) in an attempt to collect a ten percent charge on gross receipts from respondent Western Union Telegraph Co. (Western Union) pursuant to the provisions of Section 23.32 of the Revised Code of the City of St. Louis. In a second count, City seeks an injunction to prevent Western Union from use of City's streets, alleys and public places for alleged noncompliance with reporting and bonding requirements of the ordinance and for not filing a written acceptance of the privilege granted in Section 23.32.040.

Western Union filed a counterclaim for declaratory and injunctive relief, claiming it is exempt from any charge or tax for use of City's streets, alleys and public places. It also claims application of the provisions of Section 23.32 to its business would: (1) impair its existing contractual rights in violation of U.S. Const. Art. I, Section 10 and Mo. Const. Art. I, Section 13; (2) constitute disparate treatment of Western Union and telephone companies because of the provisions of Sections 23.32 and 23.34 which would deny Western Union equal protection contrary to the provisions of U.S. Const. Amend. 14, Section 1, and Mo. Const. Art. I, Section 2 and the uniformity of taxation requirement of Mo. Const. Art. X, Section 3; and, (3) constitute an unreasonable burden on interstate commerce in violation of U.S. Const. Art. I, Section 7.

The trial court ruled in favor of Western Union on its counterclaim. The trial court relied on a series of holdings in litigation involving the same parties. City of St. Louis v. Western Union Tel. Co., 39 F. 59 (C.C.E.D.Mo.1889), 148 U.S. 92, 13 S.Ct. 485, 37 L.Ed. 380 (1893); [case remanded for additional evidence] 149 U.S. 465, 13 S.Ct. 990, 37 L.Ed. 810 (1893); [denial of petition for rehearing] 63 F. 68 (C.C.E.D.Mo.1894) aff'd, 166 U.S. 388, 17 S.Ct. 608, 41 L.Ed. 1044 (1897). In accord with the holdings in that case the trial court found Western Union had, and continues to have, contractual rights to use the streets, alleys and public places in the city to conduct its business.

On three separate legal grounds the trial court enjoined the City from enforcing Section 23.32 against Western Union. It ruled that enforcement of that section would be unconstitutional because: (1) it would impair existing contractual rights; (2) it would violate federal and state equal protection rights and uniformity of taxation provisions in the Missouri Constitution; and (3) it would violate the commerce clause of the Art. I, Section 8 of the U.S. Constitution. On November 23, 1987, the trial court designated its order a final judgment for purposes of appeal. ¹

City appeals the decision of the trial court on three grounds. First, City contends the trial court erred in holding that the application of Section 23.32 to Western Union would constitute an impairment of Western Union's contractual rights with City in violation of Mo. Const. Art. I, Section 13 and Art. I, Section 10 of the United States Constitution. Second, City claims the trial court erred in holding that Section 23.32 violates the equal protection provisions of Mo. Const. Art. I, Section 2 and the 14th Amendment of the United States Constitution and the uniformity of taxation provision of Mo. Const. Art. X, Section 3, by imposing a ten percent gross receipts license tax on telegraph companies but not on telephone companies providing telegraph services. Third, City claims Section 23.32 imposes a tax not a rental, and taxes only those activities conducted by Western Union in the City of St. Louis. City contends the court erred in holding the charge constitutes an unreasonable burden on interstate commerce and the injunction is overly broad in denying City the power to tax.

City is a municipal corporation and a Constitutional Charter City. Western Union is a public utility operating throughout the United States and elsewhere providing communication services by telegram, teletype, telex, microwave and other forms. It is a telegraph company as defined in Title 47 U.S.C., Section 154. It is licensed by the Federal Communications Commission. Western Union provides telegraph and telephone services in the City of St. Louis and uses the city's streets, alleys and public places in providing such services. It operates a microwave transmission facility in the city and also transmits telegram, teletype, telex and other types of messages over a cable system. Western Union also has agents in the city for the sale of money orders and a business office in the downtown business district.

For several reasons we deny City's first point on appeal; we find the trial court properly concluded the charge imposed by Section 23.32 constitutes a "rent" not a "tax." The distinction is relevant because City contends the "contract" which was the subject of the prior litigation does not contain an express exemption from future tax. City contends that contractual rights will not protect Western Union from a new tax because City did not contract not to tax, and could not so contract, because of the provisions of Art. X, Section 2 which prohibit any such agreement.

We find City of St. Louis v. Laclede Power & Light Co., 347 Mo. 1066, 152 S.W.2d 23 (1941) directly on point. In Laclede Power & Light Co., the City of St. Louis brought suit against Laclede Power & Light Co. to collect a five percent gross receipt charge from the company based on the companies' business of supplying electricity, light, heat and power within the city between 1929 and 1933.

Briefly, the history of Laclede Power & Light Co. is as follows. Laclede Gas Light Company was incorporated and created in 1857. The state conferred a charter on the gas company in that same year. The gas company operated under this charter until 1926 at which time it leased its equipment to Laclede Power & Light Company. In 1884, the City of St. Louis enacted an ordinance regulating the business of vending electricity. The relevant section of the ordinance reads as follows:

Sect. 10. "No person or persons, corporation or association, shall be entitled to any of the privileges conferred by this ordinance, except upon the following conditions: That said person ... shall file with the city register his or its acceptance of all the terms of this ordinance, and agree therein that he or it will file with the comptroller of the city, ... a statement of his or its gross receipts from his or its business arising from supplying electricity for light or power for the six months ... and further agree that he or it will, ... pay into the city treasury 2 1/2 per cent on the amount of such gross receipts up to the year 1890, and five percent on the amount of such gross receipts thereafter." Id. at 23.

The court in Laclede Power & Light Co., found that the relevant charge was a rent, not a tax. "We are of the opinion that the charge of five percent is clearly a rental to be paid by those who obtain a franchise under the terms of the ordinance, and who are required, as a condition precedent to obtaining such a franchise, to agree in writing to pay the five per cent." Id. at 25. The court based its determination on the conduct of the parties from the enactment of the ordinance in 1884, to the time the suit was filed. The court observed that the behavior of the parties "harmonize[d] with the theory that the charge of five percent is a rental...." Id. at 24. The court stated that if the ordinance was a tax then Laclede Gas Light Company should have been paying the tax since it began vending electricity in 1857. Id.

In the instant case, Western Union has never paid a fee for using public streets and alleys since it began its services. In fact, City requested Western Union pay a charge for the use of the streets and alleys almost one hundred years ago, at which time the parties litigated just this issue. In City of St. Louis v. Western Union Telegraph Co., 63 F. 68, 69 (C.C.E.D.Mo.1894), aff'd. 166 U.S. 388, 17 S.Ct. 608, 41 L.Ed. 1044 (1897), the court considered an ordinance passed by City in 1884 in which City attempted to impose a charge of five dollars per telegraph pole for the "privilege of using the streets, alleys and public places" of the city. Ordinance 11,604 of 1881 provided:

Sec. 8. Any company erecting poles under the provision of this ordinance shall, before obtaining a permit therefor from the Board of Public Improvements, file an agreement in the office of the City Register, permitting the city of St. Louis to occupy and use the top cross arm of any pole erected or which is now erected, for the use of said city for telegraph purposes, free of charge.

In Western Union Telegraph Co., the court rejected City's attempt to enforce the 1884 ordinance. After remand from the U.S. Supreme Court, it was determined Western Union had constructed poles and had allowed City to use its poles and cross arms free of charge as required in Ordinance 11,604 of 1881. The court held that Western Union's agreement pursuant to the 1881 ordinance "became a binding contract from which the city could not recede so long as the poles stood in the plaintiff's streets; and when the city took the benefit thereof by using the defendant's poles, it became an executed contract." Western Union Telegraph Co., 63 F. at 71 (C.C.E.D.Mo.1894).

This holding, affirmed by the U.S. Supreme Court, is the final judicial statement on whether City can impose an additional charge for Western Union's use of City's street, alleys and public places. Western Union Telegraph Co....