City of Tulsa v. Southwestern Bell Telephone Co.

• Decision Date: 29 January 1934
• Docket Number: No. 1293.,1293.
• Citation: 5 F. Supp. 822
• Parties: CITY OF TULSA v. SOUTHWESTERN BELL TELEPHONE CO.
• Court: U.S. District Court — Northern District of Oklahoma

5 F. Supp. 822

CITY OF TULSA v. SOUTHWESTERN BELL TELEPHONE CO.

No. 1293.

District Court, N. D. Oklahoma.

January 29, 1934.

H. O. Bland, City Atty., Bert E. Johnson, Asst. City Atty., N. E. McNeill, and Davidson & Williams, all of Tulsa, Okl., for plaintiff.

Spielman, Cantrell & McCloud, of Oklahoma City, Okl., and Biddison, Campbell & Biddison, of Tulsa, Okl., for defendant.

FRANKLIN E. KENNAMER, District Judge.

Plaintiff's petition contains three causes of action. The first is to recover 4 per cent. of the gross revenue derived by defendant from its business at Tulsa from January 5, 1923, to June 1, 1932, under certain provisions of the city charter hereafter mentioned; the second is to eject defendant from the streets and alleys of the city; and the third is to recover damages for defendant's alleged unlawful use of the streets and alleys of plaintiff from January 5, 1923, to June 1, 1932.

At the close of all the evidence, defendant has moved for a directed verdict.

The town of Tulsa, Indian Territory, was incorporated January 18, 1898. The townsite was surveyed and platted December 11, 1901, and the plat approved by the Secretary of the Interior April 11, 1902. Some time prior to January 5, 1903, one Hall had constructed a telephone system in Tulsa, but his service to the public seems to have been unsatisfactory. The Indian Territory Telephone Company made several unsuccessful attempts to purchase Hall's business. The town officers, believing the Indian Territory Telephone Company would render more efficient service, were desirous of having that company in Tulsa. They conceived the idea that if an ordinance was adopted granting the company the right to do business in Tulsa, Hall's willingness to sell his business might be affected. Consequently, on January 5, 1903, the town of Tulsa adopted Ordinance No. 36, purporting to grant to the Indian Territory Telephone Company, for a term of twenty years, a franchise to conduct a telephone business in Tulsa, and to use the streets and alleys for that purpose. The Indian Territory Telephone Company did not construct a system under that franchise, but shortly after its granting, purchased Hall's business and equipment.

On July 28, 1903, the town of Tulsa was made a city of the second class by court order signed by Judge C. W. Raymond.

The Indian Territory Telephone Company filed with the Secretary of the Interior a plat showing the location of its telephone system in Tulsa, and on June 8, 1907, the plat was approved by the Secretary of the Interior, by writing across it: "Approved: Subject to the provisions of the Act of March 3, 1901 (31 Stat. 1083), Departmental regulations of March 26, 1901, and the amendment of March 15, 1907, thereto, and subject also to any prior, valid existing rights and adverse claims."

The defendant has, since statehood, succeeded to all the rights of the Indian Territory Telephone Company.

After Oklahoma was admitted to the Union, and on July 3, 1908, the city of Tulsa adopted a special charter, which was approved by the Governor of Oklahoma on January 5, 1909.

The plaintiff concedes the right of defendant to use the streets and alleys from January 5, 1903, to January 5, 1923, the period covered by Ordinance 36, before mentioned. Section 1 of article VII of the Charter of Tulsa prohibits the use of streets and alleys for the construction or operation of a telegraph line, telephone system, or any other business of a public or quasi public nature without obtaining a franchise. (On April 12, 1928, the section was amended in respects not here material.) Section 7 of article II, paragraphs 1 to 5, provide that no franchise or easement shall ever be held valid, unless granted pursuant to the charter; that no act or omission of the city or its officers shall be construed to confer or extend a franchise or easement by estoppel, that no franchise shall ever be directly or indirectly extended beyond its original term, and that no franchise shall be granted or renewed without the approval of a majority of the qualified voters of the city voting thereon at a special or general election; and paragraph 5 of said section provides: "All persons or corporations to whom franchises may hereafter be granted, or their assigns and successors, shall as compensation for the right or privilege enjoyed pay to the city a sum not less than four per cent of the gross receipts of the business pursued by the holders of the franchise. The amount of said bonus or compensation shall be fixed by ordinance granting the franchise and shall be payable on the second day in January in each year for the preceding year. Said bonus or compensation shall be exclusive of and in addition to all lawful ad valorem taxes upon the values of the franchises or other property of the holders thereof, and lawful occupation taxes imposed upon the occupation or calling of the holder of such franchise. The Board of Commissioners may, however, in their discretion in the order granting any franchise provide that no bonus shall be paid for the first five years thereof."

This paragraph was effective from the date of the approval of the charter until April 12, 1928, when it was amended to read: "All persons or corporations to whom franchises may hereafter be granted or their successors and assigns, shall as compensation for the right and privilege enjoyed pay to the city a sum of not less than one (1) per cent nor more than four (4) per cent of the gross receipts of the business pursued by such franchise holder, payable annually. The Ordinance granting the franchise shall fix the time and manner of payment, and shall further provide for the determination by the Board of Commissioners or governing Board of the City the rate of such gross receipts tax to be paid from year to year according to the earnings and financial condition of the holder thereof. Such compensation shall be in lieu of any vehicle or license tax. The Board of Commissioners may, however, in their discretion, in the Ordinance granting such franchise provide that no compensation shall be paid for the first five (5) years during which the same is in force and effect."

Plaintiff's contention, and the theory of its first cause of action, is that in view of these charter provisions, the defendant, by using the streets and alleys for its telephone system after expiration of Ordinance 36, has become liable to the city for 4 per cent. of the gross proceeds of defendant's business. Not so. It is apparent that some latitude is given as to the amount of the bonus or compensation to be paid, the original section providing for not less than 4 per cent., and the amended section providing for from 1 to 4 per cent. Both permit waiver of the bonus for as long as five years. Both presuppose the adoption of an ordinance fixing the compensation and the terms of the franchise, and such an ordinance can only be adopted after affirmative vote of the people of the city at a general or special election. The manifest intention is that legislation is required to make the charter provisions effective. Indeed, the charter provisions may be said to be a grant of power to legislate, and nothing more. They are not self-executing. Davis v. Burke, 179 U. S. 399, 21 S. Ct. 210, 45 L. Ed. 249; Tampa Waterworks Co. v. Tampa, 199 U. S. 241, 26 S. Ct. 23, 50 L. Ed. 170; State ex rel. Reardon v. Scales, 21 Okl. 683, 97 P. 584; Ex parte Wagner, 21 Okl. 33, 95 P. 435, 18 Ann. Cas. 197.

Even if the charter provisions be considered as self-executing, they are not enforceable here. The levy is attempted to be made on total gross revenue of defendant, without regard to the source of the revenue, and is in addition to all property taxes. The evidence is undisputed that a substantial part of such revenue arises out of interstate commerce, and the equipment of defendant in the streets and alleys of Tulsa is an essential factor in producing interstate tolls. In these circumstances, the charter, if self-executing, must be held invalid as imposing a burden on interstate commerce. New Jersey Bell Telephone Company v. State Board of Taxes and Assessments of the State of New Jersey, 280 U. S. 338, 50 S. Ct. 111, 74 L. Ed. 463; Western Union Telegraph Company v. State of Texas, 105 U. S. 460, 26 L. Ed. 1067; Wabash, etc., Ry. Co. v. Illinois, 118 U. S. 557, 7 S. Ct. 4, 30 L. Ed. 244.

Compare Postal Telegraph Cable Co. v. Adams, 155 U. S. 688, 15 S. Ct. 268, 360, 39 L. Ed. 311.

Since the charter provision itself provides no method of or formula for separating local and interstate revenue for the purpose of collecting the percentage sought to be exacted, the entire provision is void, even as to revenue from purely local sources. Damselle Howard v. Illinois Central R. R. Co., 207 U. S. 463, 28 S. Ct. 141, 52 L. Ed. 297; Weems v. Bruce (C. C. A. 10) 66 F. (2d) 304. And see Western Union T. Co. v. State of Kansas, 216 U. S. 1, 30 S. Ct. 190, 54 L. Ed. 355; Eureka Pipe Line Co. v. Hallanan, 257 U. S. 265, 42 S. Ct. 101, 66 L. Ed. 227.

The charter provisions, being void, cannot be made the basis for an implied contract. An unconstitutional law is no law at all. No rights may be based on it, nor are any duties imposed by it. Cooley's Constitutional Limitations (7th Ed.) p. 259; 12 C. J. p. 801; Mayor, etc., of Baltimore v. Williams (C. C. A. 4) 61 F.(2d) 374. The situation presented by this case is entirely different from that in City and County of Denver v. Stenger (C. C. A.) 295 F. 809, and that case is not authority here.

As a defense to all three of the causes of action in plaintiff's petition, defendant urges that the Secretary of the Interior on June 8, 1907, pursuant to Act of Congress of March 3, 1901 (31 Stat. 1077), granted to defendant's predecessor in interest, the Indian Territory Telephone Company, a right of way in the nature of an easement for the construction, operation, and maintenance of telephone lines and offices for general telephone business in the ...