Pacific Tel. & Tel. Co. v. City of Los Angeles

• Decision Date: 25 May 1954
• Citation: 270 P.2d 903
• Court: California Court of Appeals Court of Appeals
• Parties: PACIFIC TEL. & TEL. CO. v. CITY OF LOS ANGELES. * Civ. 19443.

Page 903

270 P.2d 903

PACIFIC TEL. & TEL. CO. v. CITY OF LOS ANGELES. ^*

Civ. 19443.

District Court of Appeal, Second District, Division 3, California.

May 25, 1954.

Rehearing Denied June 14, 1954.

Hearing Granted July 21, 1954.

Roger Arnebergh, City Atty., Bourke Jones, John L. Flynn, Asst. City Attys., and Weldon L. Weber, Deputy City Atty., Los Angeles, for appellant.

John A. Sutro, Francis N. Marshall, Noble K. Gregory, and Pillsbury, Madison & Sutro, San Francisco, and Oscar Lawler, Leslie C. Tupper, and Lawler, Felix & Hall, Los Angeles, for respondent.

VALLEE, Justice.

Appeal by defendant, city of Los Angeles, ¹ from an adverse judgment in an action in which plaintiff, Pacific Telephone and Telegraph Company, ² sought a declaration: (a) that it owns, and has not surrendered any part of its state-wide franchise, and is entitled, without obtaining a franchise from the city, to operate its telephone and telegraph system and business in, and to occupy with its telephone and telegraph lines the public highways and other public places within, the areas which have been annexed to and consolidated with the city since May 19, 1905, in such manner as not to incommode the public use of the roads or highways or interrupt the navigation of the waters; and (b) that to the extent to which plaintiff is required to obtain a franchise from the city, the latter may not charge it for such franchise more than 2% of the gross annual receipts arising from the use, operation, or possession of such franchise. ³

The principal questions presented for decision involve Pacific's rights and obligations under section 536 of the Civil Code which reads: 'Telegraph or telephone corporations may construct lines of telegraph, or telephone lines along and upon any public road or highway, along or across any of the waters or lands within this state, and may erect poles, posts, piers, or abutments for supporting the insulators, wires, and other necessary fixtures of their lines, in such manner and at such points as not to incommode the public use of the road or highway or interrupt the navigation of the waters.' ⁴

In 1891 the city, by Ordinance 1130, granted Sunset Telephone and Telegraph Company, ⁵ its successors and assigns, a franchise to continue and maintain its then telephone system and to erect telephone poles upon and to run wires over and upon the public highways within the city for 25 years.

In 1902 the city granted M. A. King and his assigns a franchise to construct, maintain, and operate conduits, poles, and wires upon the public highways within the city for 50 years, and to transmit sound, signals, conversation, and intelligence through and over its lines by means of electricity ⁶. In 1903 this franchise was assigned to Home Telephone and Telegraph Company. ⁷

Pacific was organized on December 31, 1906, and after January 2, 1907, engaged in the telephone business in various parts of the state, including parts of the city. It acquired the entire capital stock of Sunset, leased its properties, and operated its system. It constructed and maintained telephone lines along and upon the public highways in unincorporated territories then surrounding the city, including areas annexed to the city after 1891, without obtaining a franchise from the county or from the city. ⁸ In 1916, pursuant to an order of the Railroad Commission, it acquired all of the properties of Sunset, including its rights under section 536. In 1916 Pacific organized a subsidiary, Southern California Telephone Company. ⁹ Pursuant to an order of the Railroad Commission, ¹⁰ Southern acquired all the franchises and properties of Home and all the properties and franchises theretofore owned by Sunset, including its rights under section 536, ¹¹ and such franchises and properties of Pacific as would enable Southern to furnish telephone service within the areas in which service had been furnished by Home and Pacific, not including Pacific's toll lines.

After the order of the Railroad Commission had been made, consent of the city was sought to the assignment of the King franchise to Southern. On December 29, 1916, the council of the city enacted Ordinance 35,474 by which the city reserved the right to purchase the properties of Southern under specified procedure. Ordinance 35,474 provided that Southern, its successors and assigns, should operate within the limits of the city as the limits then or might thereafter exist, solely under the rights and privileges granted by the King franchise; and that it, its successors and assigns, should surrender without compensation at the option of the city all rights acquired by it by or through any other franchise theretofore granted and effective in any part of the city as the same then existed or by or through any other franchise theretofore or thereafter granted in any territory outside the limits of the city as the same then existed and which might thereafter be incorporated in or annexed to the city, or which might become part of the city by consolidation. The city, by Ordinance 35,474, reserved the right to require Southern to install service and to extend its system into all parts of the territory within the limits of the city as the limits might then or thereafter exist, and imposed the condition that the principal office of Southern, its successors or assigns, should be located and remain in the city. Southern accepted the terms and conditions imposed by Ordinance 35,474 on April 30, 1917.

From May 1, 1917, until 1930, Southern engaged in an exchange telephone business within parts of the city and adjacent areas; and Pacific continued to engage in both an exchange and toll business in other parts of the state and provided exchange service within parts of the city not served by Southern.

In 1930, pursuant to authorization of the Railroad Commission, Pacific sold to Southern all its franchises and properties in the southern part of the state and withdrew from service in those areas. ¹² Thereafter until 1947 Southern provided exchange and toll service in the Los Angeles area. In 1947, pursuant to authorization of the Railroad Commission, Southern merged with Pacific. ¹³ Before the merger became effective, the city by Ordinance 91,409 consented to the assignment of the King franchise to Pacific. Ordinance 91,409 amended Ordinance 35,474 to the extent that the latter required Southern to maintain its principal office in the city; and, as a condition to the city's consent to the assignment, it required Pacific to agree to the terms and conditions imposed by Ordinance 35,474 and to an agreement entered into January 31, 1947, under which the city and Southern had settled a dispute over the compensation provisions of the King franchise. Pacific accepted the assignment and agreed to the conditions.

From 1850 to 1899 there were 5 annexations to the city. From 1899 to 1906 there were none. From 1906 to October 1951 there were 10 consolidations, 1 exclusion, 6 detachments, and 101 annexations.

On May 24, 1950, the council of the city adopted a resolution purporting to exercise the option reserved in Ordinance 35,474 to require Pacific to surrender rights acquired by it under franchises other than those granted by Ordinances 6,959, 35,474, and 91,409.

The King franchise was to expire on February 8, 1952. On August 24, 1951, Pacific applied to the city for a 21-year franchise to continue to construct, maintain, and operate telephone and telegraph lines along and upon the public highways and other public places within the city as it existed on May 19, 1905, the effective date of section 536 of the Civil Code. On December 17, 1951, the city rejected the application on the grounds that it did not cover the areas annexed to or consolidated with the city after May 19, 1905, and that the city was entitled to compensation in excess of the amount provided in the application. Pacific then filed this action, seeking a declaration of its franchise rights and obligations within the city.

The court in part declared:

1. Pacific is not required to obtain a franchise from the city to operate its business within the city.

2. Pacific has a valid and subsisting franchise from the state under Civil Code section 536 in all areas annexed to or consolidated with the city since May 19, 1905, which has not been surrendered or forfeited in whole or in part.

3. Under its state franchise, Pacific may, without the payment of any money compensation, and has the obligation to, occupy with its telephone and telegraph lines the public highways and other public places, including all the lands owned by the city in its governmental capacity, now or hereafter located within all areas which have been annexed to or consolidated with the city since May 19, 1905, for the purpose of providing a communication service to the people of the state.

4. Pacific's lines include all equipment used in rendering a communication service by means of the transmission of electrical impulses and may be used for transmitting telephone messages, telegraph messages, teletypewriter messages, telephotographs, program services (including radio and television broadcasts), and any other communication service by means of the transmission of electric impulses.

5. The lines must be constructed and maintained in such manner and at such points as not to incommode the public use of public highways and public places.

The city's first point is that the power to issue primary franchises to operate a telephone business rests in the city. A primary franchise as defined by the city is not the franchise to be and exist as a corporation, but is the privilege of conducting a telephone business within the city, as distinguished from the right to use the public highways and other public places. It is argued that after the expiration of the King franchise, Pacific cannot do any business within the city without first obtaining a franchise so to do from the city. The contention cannot be upheld.

The...