Pottsville Broadcasting Co. v. FEDERAL C. COMMISSION, 7016.

Decision Date09 May 1938
Docket NumberNo. 7016.,7016.
Citation98 F.2d 288
PartiesPOTTSVILLE BROADCASTING CO. v. FEDERAL COMMUNICATIONS COMMISSION (SCHUYLKILL BROADCASTING CO., Intervener).
CourtU.S. Court of Appeals — District of Columbia Circuit

Eliot C. Lovett and Charles D. Drayton, both of Washington, D. C., for appellant.

Hampson Gary, Gen. Counsel, George B. Porter, Asst. Gen. Counsel, Fanney Neyman, Asst. Counsel, and Frank U. Fletcher, all of Washington, D. C., for Federal Communications Commission.

Arthur W. Scharfeld, Philip G. Loucks, and Joseph F. Zias, all of Washington, D. C., for Schuylkill Broadcasting Company.

Before GRONER, Chief Justice, and MILLER and EDGERTON, Associate Justices.

GRONER, C. J.

This is an appeal from the Federal Communications Commission.

The Pottsville Broadcasting Company, a newly organized Maryland corporation, applied to the Commission in May 1936 for a permit to construct a local daytime broadcasting station in Pottsville, Pennsylvania. Charles D. Drayton, a lawyer in Washington city, is president of the company. The other officers and directors are residents of Pottsville. Prior to the application the company organized and received subscriptions at $10 each for 2625 shares of its capital stock. Drayton subscribed to 2550 shares in the amount of $25,500. The remaining shares were distributed among the other officers and directors. There is no question as to the financial ability of all to comply with their several obligations.

The application was submitted by the Commission in the usual course to one of its examiners, who in November 1936 recommended that the application be granted. The examiner's findings of fact were that the corporation was in all respects financially qualified to operate the proposed station; that there was need of a local daytime station at Pottsville; that its establishment would not result in objectionable interference; and that the program of entertainment, etc., appeared to be wholly satisfactory.

Some five months later, the Commission overruled the examiner's recommendation. The Commission found that there was need of a local station in Pottsville, sufficient financial patronage reasonably to assure its success, and sufficient local talent to support its service. But the Commission said it appeared from Drayton's testimony before the examiner that the payment of the corporate stock subscriptions was contingent upon the obtaining of an order of the Pennsylvania Securities Commission authorizing the issuance of the stock, and the Commission held that this contingency defeated any finding of financial ability in the applicant. In addition to this ground for denial of the license, the Commission said that the principal stockholder, Drayton, was not a resident of Pottsville, "had no definite plans for residing in that town, or spending a percentage of his time therein" and was not familiar with the needs of the listening audience in that region. The Commission also observed that the record established that "Drayton's interest in the proposed station was primarily for investment purposes".

The applicant appealed to this court under the provisions of section 402(b) (1) of the Act, 47 U.S.C.A. § 402(b) (1). The appeal is based on the alleged error of the Commission in assuming as a matter of law that the consent of the Pennsylvania Commission was essential to the validity of the proposed stock issue, and likewise on the alleged error of the Commission in holding that an applicant for a local station must be a resident of the community intended to be served and must be personally familiar with the local needs.

The Commission answers the first point with the statement that the finding as to the financial status of the company was based upon the testimony of Mr. Drayton himself and that the Commission was justified in accepting it as correct. The testimony of Drayton to which the Commission refers is: "My own subscription consists of 2,550 shares at the total amount of $25,500. This amount will be paid in immediately, if, and when, the present application is granted and the requisite order secured from the Pennsylvania Securities Commission. A similar situation exists as to the other subscribers". But as to this Drayton now says he was mistaken in his assumption that the subscription was not binding without the approval of the Pennsylvania Securities Commission and insists the Commission ought to have examined for itself the laws of Pennsylvania before making its conclusion based on such laws.

We have said on the subject that the applicant for a station permit assumes the responsibility of showing proper financial responsibility in order that the Commission may determine whether the grant of the license would be in the public interest, and we have no...

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