Southern Bell Tel. & Tel. Co. v. City of Birmingham, Ala.

• Decision Date: 03 January 1914
• Docket Number: 240.
• Parties: SOUTHERN BELL TELEPHONE & TELEGRAPH CO. v. CITY OF BIRMINGHAM, ALA., et al.
• Court: U.S. District Court — Northern District of Alabama

211 F. 709

SOUTHERN BELL TELEPHONE & TELEGRAPH CO. v. CITY OF BIRMINGHAM, ALA., et al.

No. 240.

United States District Court, N.D. Alabama, Southern Division.

January 3, 1914

J. T Stokeley, of Birmingham, Ala., and J. C. Rich, of Mobile Ala., for plaintiff.

Romaine Boyd, of Birmingham, Ala., for defendants.

GRUBB District Judge.

This is a bill filed by the plaintiff to restrain the enforcement of an ordinance of the city of Birmingham, and to have it declared null and void and a cloud on the plaintiff's title to its franchise to collect tolls from its subscribers. The parties defendant are the city, in its corporate capacity, the three commissioners, in their official capacity, and also individually, as representing the class of subscribers to plaintiff's service who are or will be affected by the increase of rates, who are made parties under the authority of Equity Rule 38 (198 F. xxix). A temporary injunction is prayed for in the bill, and the matter is submitted for decision only upon the application for an injunction pendente lite at this time.

The ordinance assailed was enacted December 12, 1913, and, in effect, repealed a previous ordinance of December 22, 1911, which purported to make effective an agreement, between the plaintiff and the city, to fix rates for service to be charged by the plaintiff to the inhabitants of the city, in the future, for a period of five years. By its terms, the plaintiff was to have the right to raise its rates, for duplex residence service, 50 cents a month to each subscriber, beginning the 1st day of January, 1914. The repealing ordinance merely recited the making of the agreement, the passage of the ordinance; that the contract was ultra vires of the powers of the city commission; that it had been breached by the plaintiff's alleged failure to give the character of service stipulated to be given by plaintiff to its subscribers, and declared the contract and ordinance rescinded and annulled as being both ultra vires, and as having been breached by plaintiff. This is the ordinance the validity of which is assailed by the bill. The contention of the plaintiff is that the repealing ordinance impairs the obligation of the original contract and the ordinance ratifying it, and is for that reason obnoxious to both the federal and state Constitutions.

In order to sustain the contention that the ordinance of December 12, 1913, is invalid for the reason asserted, the plaintiff must establish: (1) The existence of the contract; (2) the obligation imposed on the city and its inhabitants by it; and (3) the impairment of such obligation by state legislation. Each is essential to plaintiff's relief and must be established to the satisfaction of the court before an injunction pendente lite should be granted.

The rule is well settled that an ordinance of a municipality, the effect of which is merely to deny liability on a contract or to declare the repudiation thereof, and which prescribes no antagonistic rights or duties, is not legislation impairing its obligation, though the contract so repudiated is valid and binding. In the case of St. Paul Gas Light Co. v. St. Paul, 181 U.S. 142, 21 Sup.Ct. 575, 45 L.Ed. 788, the court expressed the principle in this language:

'The other provision in question created no new right, or imposed no new duty substantially antagonistic to the obligations of the contract, but simply expressed the purpose of the city not in the future to pay the interest on the cost of the construction of the lamp posts which were ordered to be removed. That is to say, it was but a denial by the city of its obligation to pay, and a notice of its purpose to challenge in the future the existence of the duty to make such payment. This denial, whilst embodied in an ordinance, was no more efficacious than if it had been expressed in any other form, such as by way of answer filed on behalf of the city in a suit brought by the company against the city to enforce what it conceived to be its rights under the contract. When the substantial scope of this provision of the ordinance is thus clearly understood, it is seen that the contention here advanced of impairment of the obligations of the contract arising from this provision of the ordinance reduces itself at once to the proposition that wherever it is asserted on the one hand that a municipality is bound by a contract to perform a particular act, and the municipality denies that it is liable under the contract to do so, thereby an impairment of the obligations of the contract arises in violation of the Constitution of the United States. But this amounts only to the contention that every case involving a controversy covering a municipal contract is one of federal cognizance, determinable ultimately in this court. Thus to reduce the proposition to its ultimate conception is to demonstrate its error.' In the case of Mercantile Trust Co. v. Columbus, 203 U.S. 311, 27 Sup.Ct. 83, 51 L.Ed. 198, the court said:

'The ordinance and act were not mere statements of an intention on the part of one of the parties to a contract not to be bound by its obligations. Such a denial on the part, even of a municipal corporation, contained in an ordinance to that effect, is not legislation impairing the obligation of a contract. St. Paul Gaslight Co. v. St. Paul, 181 U.S. 142 (21 Sup.Ct. 575, 45 L.Ed. 788).'

And after quoting from the case there cited, the portion incorporated in this opinion, the court said further:

'In the case at bar the conditions are entirely different. There was not merely a denial by the city of its obligation under the contract, but the question is whether there were not new and substantial duties in positive opposition to those contained in the contract created and their performance provided for by the ordinances and act. The act of the Legislature aided the city by granting it power to itself erect waterworks and to issue bonds in payment thereof, and the city was proceeding to avail itself of the power thus granted, when its progress was arrested by the filing of the bill in this case and the issuing of a temporary injunction. It would seem as if the case were really within the principle decided in Walla Walla v. Walla Walla Water Co., 172 U.S. 1 (19 Sup.Ct. 77, 43 L.Ed. 341); Vicksburg Water Co. v. Vicksburg, 185 U.S. 65 (22 Sup.Ct. 585, 46 L.Ed. 808); again reported 202 U.S. 453 (26 Sup.Ct. 660, 50 L.Ed. 1102, 6 Ann.Cas. 253); Davis v. Los Angeles, 189 U.S. 207 (23 Sup.Ct. 498, 47 L.Ed. 778); Knoxville Water Co. v. Knoxville, 200 U.S. 22 (26 Sup.Ct. 224, 50 L.Ed. 353.)'

The case of Dawson v. Columbia Trust Co., 197 U.S. 178, 181, 25 Sup.Ct. 420, 422 (49 L.Ed. 713), clearly differentiates the class of cases in which the ordinance merely denies liability and repudiates the contract obligation from the other class in which the ordinance creates rights or duties antagonistic to the contract rights, charged to have been impaired. In that case, the court said:

'The mere fact that the city was a municipal corporation does not give to its refusal the character of a law impairing the obligation of the contracts or deprive a citizen of property without due process of law. That point was decided in St. Paul Gaslight Co. v. St. Paul, 181 U.S. 142-150 (21 Sup.Ct. 575, 45 L.Ed. 788). Undoubtedly the decisions on the two sides of the lines are very near to each other. But the case at bar is governed by the one which we have cited, and not by Walla Walla v. Walla Walla Water Co., 172 U.S. 1 (19 Sup.Ct. 77, 43 L.Ed. 341), which is cited and distinguished in St. Paul Gaslight Co. v. St. Paul. In Vicksburg Waterworks Co. v. Vicksburg, 185 U.S. 65 (22 Sup.Ct. 585, 46 L.Ed. 808), the city had made a contract with the waterworks company, and afterwards a law was passed authorizing the city to build new works. The city, acting under this law, denied liability and took steps to build the works, whereupon the waterworks company filed its bill, alleging the law to be unconstitutional. This bill was held to present a case under the Constitution. In the case before us there was no legislation subsequent to the contract, and it is not even shown that there was a color of previous legislation for the city's acts. These acts are alleged to be unlawful, and the allegation would be maintained by showing that they were not warranted by the laws of the state. See Hamilton Gas Co. v. Hamilton City, 146 U.S. 258-266 (13 Sup.Ct. 90, 36 L.Ed. 963); Lehigh Water Co. v. Easton, 121 U.S. 388-392 (7 Sup.Ct. 916, 30 L.Ed. 1059). We repeat that something more than a mere refusal of a municipal corporation to perform its contract is necessary to make a law impairing the obligation of contracts, or otherwise give rise to a suit under the Constitution of the United States.'

In the case of Weller et al. v. City of Gadsden et al., 141 Ala. 642, 37 So. 682, 3 Ann.Cas. 981, the then Chief Justice said 'The last question is whether, in view of the nullity of the ordinance, assailed by the bill, a resort to a court of equity by the complainants, under the circumstances disclosed, is either proper or necessary. This question has not been discussed by counsel for the city, who have confined themselves to insisting that the ordinance contract was totally invalid, and that, at all events, the city had the right to repeal or revoke it, before work was begun. It necessarily arises, however, and must be decided, upon the motion to dismiss for want of equity; for although the rights of appellants are declared, in arriving at the ultimate conclusion here reached, it would be idle to return the case to the court below, merely for the purpose of having a decree, nullifying that which appears on its face to be void. 6 Am. & Eng. Ency. Law (2d Ed.) 155; Meloy v. Dougherty, 16...