City of Tulsa v. Southwestern Bell Telephone Co.

• Decision Date: 26 January 1935
• Docket Number: 1114.,No. 1113,1113
• Citation: 75 F.2d 343
• Parties: CITY OF TULSA v. SOUTHWESTERN BELL TELEPHONE CO. SOUTHWESTERN BELL TELEPHONE CO. v. CITY OF TULSA.
• Court: U.S. Court of Appeals — Tenth Circuit

75 F.2d 343 (1935)

CITY OF TULSA v. SOUTHWESTERN BELL TELEPHONE CO.^*

SOUTHWESTERN BELL TELEPHONE CO. v. CITY OF TULSA.

Nos. 1113, 1114.

Circuit Court of Appeals, Tenth Circuit.

January 26, 1935.

R. L. Davidson and Neal E. McNeill, both of Tulsa, Okl. (H. O. Bland, W. I. Williams, and Bert E. Johnson, all of Tulsa, Okl., on the briefs), for City of Tulsa.

John H. Cantrell, of Oklahoma City, Okl. (J. R. Spielman and J. A. McCloud, both of Oklahoma City, Okl., and A. J. Biddison, Harry Campbell, Valjean Biddison, and Harry Campbell, Jr., all of Tulsa, Okl., on the briefs), for Southwestern Bell Telephone Co.

Before PHILLIPS, McDERMOTT, and BRATTON, Circuit Judges.

PHILLIPS, Circuit Judge.

The City brought this action against the Southwestern Company. The amended petition set up three alleged causes of action:

In its first cause of action the City alleged that on January 5, 1903, the incorporated town of Tulsa granted a franchise to the Indian Territory Telephone Company for a term of 20 years; that the Southwestern Company succeeded to the rights of the Territory Company under such franchise; that the franchise expired January 5, 1923; that in 1908 the City, under authority of section 3 (a) of article 18, Oklahoma Constitution, adopted a charter which provided that no streets, alleys, or public highways in the City should ever be used by any person, firm, or corporation for the construction or operation of a telephone system without first obtaining authority therefor under a franchise granted by the Board of Commissioners of the City, with the approval of a majority of the qualified electors of the City; that any person to whom such a franchise should be granted, should pay as compensation for the right or privilege enjoyed, 4% of the gross receipts of the business carried on under such franchise; that on April 12, 1928, the charter was amended so as to provide that such compensation should not be less than 1% nor more than 4% of such gross receipts;

And that after the expiration of the 1903 franchise the Southwestern Company, without having secured an extension thereof or the grant of a new franchise, continued to occupy the streets and alleys of the City; that since January 5, 1923, it has enjoyed the privileges and benefits it would have enjoyed had it obtained an extension of such franchise or the grant of a new one, and the City has suffered the same detriment it would have suffered had such franchise been extended or a new one granted; that during such time the Southwestern Company has received in gross receipts $12,934,442.62 from its local exchange service, and $10,054,851.08 from its long distance service; that 4% of such gross receipts, or $919,571.74, is fair and reasonable compensation for the use of the City's streets and alleys by the Southwestern Company, and that having received the benefit of the use of such streets and alleys and having deprived the City of the compensation it would have received had such franchise been extended or a new one granted, the Southwestern Company is liable to the City for 4% of such gross receipts. The City sought recovery thereof.

In its third cause of action the City set out substantially the same facts, and alleged it had been damaged by the unlawful use of its streets and alleys by the Southwestern Company from January 5, 1923, to June 1, 1932, in the sum of $919,571.74, and sought recovery thereof.

In its second cause of action the City alleged the same principal facts as in the first, and sought a judgment of ouster.

As construed by the City, the first cause of action is for the reasonable value of the use of the streets, whether the occupancy by the Southwestern Company was lawful or unlawful, and the third cause of action is for damages for the alleged wrongful occupancy of the streets by the Southwestern Company.

In its amended answer the Southwestern Company admitted the City is a municipal corporation originally organized under the laws of the Indian Territory, and the adoption and approval of the City's charter.

It denied the validity of the franchise, and denied it or its predecessors had accepted same or done business thereunder.

It alleged it had the right to occupy the streets and alleys by virtue of the approval by the Secretary of Interior of an application for a telephone right of way in Tulsa filed by its predecessor, Pioneer Telephone & Telegraph Company, pursuant to the Act of March 3, 1901 (31 Stat. 1083, § 3, 25 US CA § 319), and by virtue of the provisions of article 9, § 2, Oklahoma Constitution, and section 11976, O. S. 1931, originally enacted in 1890 by Oklahoma Territory and carried into the statute law of Oklahoma by section 2 of the Schedule to the Oklahoma Constitution, and by virtue of easements granted to it by adjoining owners.

It also pleaded estoppel, limitation of action, and a judgment in favor of its predecessor, the Pioneer Company, in an ouster proceeding brought against the latter company on September 14, 1908.

On June 5, 1899, the Town of Tulsa undertook to grant to R. H. Hall a franchise to construct a local telephone exchange and system in Tulsa. On October 10, 1899, the Acting Commissioner of Indian Affairs undertook to give to Hall a permit to establish and operate such exchange and system. Hall constructed and commenced the operation of a local telephone system in Tulsa in 1899.

The Territory Company completed a toll line into Tulsa late in 1902 or early in 1903. It desired to purchase Hall's telephone system, but he declined to sell. The Town of Tulsa wanted the Territory Company to acquire Hall's system in order to afford long distance communication to the citizens of Tulsa. To induce Hall to sell, the town on January 5, 1903, enacted Ordinance 36, purporting to grant to the Territory Company the right to construct and operate a telephone system in Tulsa. The Territory Company did not construct a telephone system under that ordinance, but on January 16, 1903, purchased the existing system from Hall.

On November 15, 1907, the Territory Company transferred its telephone system in Tulsa to the Pioneer Company. On July 7, 1917, the name of the Pioneer Company was changed to Southwestern Bell Telephone Company, an Oklahoma corporation. On April 16, 1920, the latter company transferred its property to the Southwestern Company, a Missouri corporation, and the defendant here.

Oklahoma was admitted to statehood on November 16, 1907. Tulsa became a city of the first class under the laws of Oklahoma on December 30, 1907.

On July 3, 1908, Tulsa adopted a special charter. It was approved by the governor on January 5, 1909. Such charter undertook to provide that no person, firm, or corporation should use the streets and alleys of the City for the construction or operation of a street railway, telegraph line, telephone system, or other business of a public or quasi public nature without first obtaining authority therefor under a franchise granted by the City. Paragraph 1, § 1, art. 7, Charter, City of Tulsa. Paragraph 5, § 7, art. 2 of the charter, provided that such a person, firm, or corporation should pay as compensation for the use of the streets and alleys not less than 4% of the gross receipts of the business conducted under such a franchise. As amended April 12, 1928, it provided that such compensation should be not less than 1% nor more than 4% of the gross receipts.

The trial court held that section 7, art. 2, of the charter of the City of Tulsa undertakes to impose a burden on interstate commerce and is void, and that the Southwestern Company and its predecessors had acquired the right to occupy the streets of Tulsa under the Act of March 3, 1901, and section 11976, O. S. 1931.

It rejected proffered proof in support of the pleas of limitation and estoppel, and directed a verdict for the Southwestern Company. Judgment was entered accordingly and both parties have appealed.

Franchise Granted by the Town of Tulsa.

Tulsa was first organized as an incorporated town on January 18, 1898, under the laws of Arkansas, by a judgment of the United States Court for the Northern District of Indian Territory. It was adjudged to be a city of the second class on July 28, 1903, by a judgment of the United States Court for the Western District of Indian Territory.

Incorporated towns in the Indian Territory had no power, under the statutes of Arkansas (Mansfield's Digest) in force in Indian Territory, to grant franchises or rights of way to telephone companies. Muskogee Nat. Tel. Co. v. Hall, 4 Ind. Terr. 18, 64 S. W. 600; Id. (C. C. A. 8) 118 F. 382; South McAlester Eufaula Tel. Co. v. State, 25 Okl. 524, 106 P. 962.

In Muskogee Nat. Telephone Co. v. Hall, supra, decided October 4, 1901, it was held that the Town of Tulsa had no authority to grant a telephone franchise, that prior to the Act of March 3, 1901, the Secretary of Interior had no authority to issue a permit to establish and operate a telephone system in Indian Territory, and that the franchise and permit granted to Hall were void.

Ordinance 36 purported to grant to the Territory Company the right to construct and operate a telephone system in Tulsa for 20 years.

Section 2 provided that the Territory Company might enter upon the streets, alleys, and public grounds within the then and future limits of Tulsa for the purpose of erecting and constructing a telephone system and exchange.

Section 4 provided maximum rates.

Section 6 provided that the Territory Company should "begin the building, construction and erection of said telephone system and exchange within ninety (90) days from the passage and publication of this ordinance" and that such system should "be built of the best material and in the most modern manner."

Thus it will be seen that the purported franchise was not for the acquisition and operation of an established system, but for the construction and operation of a new and modern system, and provided the construction thereof should...