State v. Cumberland Tel. & Tel. Co.

• Decision Date: 25 March 1905
• Citation: State v. Cumberland Tel. & Tel. Co., 86 S.W. 390, 114 Tenn. 194 (Tenn. 1905)
• Parties: STATE v. CUMBERLAND TELEPHONE & TELEGRAPH CO. et al.
• Court: Tennessee Supreme Court

86 S.W. 390

114 Tenn. 194

STATE v. CUMBERLAND TELEPHONE & TELEGRAPH CO. et al.

Supreme Court of Tennessee.

March 25, 1905

Appeal from Chancery Court, Davidson County; John Allison Chancellor.

Suit by the state, on the relation of certain citizens, against the Cumberland Telephone & Telegraph Company and others. From a decree for relators, defendants appeal, and the cause was referred to the Court of Chancery Appeals, which reversed the decree and dismissed the bill, and relators appeal. Affirmed.

E. H Hatcher and Figures & Padgett, for appellants.

Vertrees & Vertrees and W. L. Granberry, for appellee Telephone Company.

BEARD C.J.

The bill in this cause was filed upon the relation of certain citizens of Columbia, in Maury county, in this state, asking a decree ousting the Cumberland Telephone & Telegraph Company from the further exercise of its corporate franchises in Tennessee, save as they might concern interstate commerce. Many allegations of abuse upon the part of this company of its corporate duties and rights as furnishing grounds for such decree are made in the bill, only two of which were sustained by the chancellor. Upon an appeal to this court the cause was referred to the Court of Chancery Appeals, when that court reversed the decree of the chancellor and dismissed the bill. The cause is now before us for review.

The Cumberland Telephone & Telegraph Company is a corporation organized under the laws of Kentucky, and is engaged in a general telephone business in Tennessee, Kentucky, Alabama Mississippi, and other states. As early as 1883 or 1884 it entered this state, and established exchanges in many of its cities and towns. From these places lines were extended until, at the time of the filing of the present bill, practically all parts of the state were placed in easy telephonic connection, and by business arrangements which were made with other telephone systems the people of Tennessee were placed in touch with exchanges throughout the United States, and possibly Europe. Among the exchanges so established was one in the city of Columbia.

Through this exchange its citizens had all the advantages accruing to patrons of the company from its extensive interstate as well as foreign connections. In the development of the system, rates were fixed which in the process of time became so unsatisfactory to some of the people of that city and county that, after a fruitless effort to secure a reduction, a competitive company, called the "City Telephone Company," was organized, the avowed purpose of which was to give cheaper telephone service to its patrons. A large number of these relators were instrumental in this movement, and at the time of the filing of this bill were pecuniarily interested in its success. Upon the organization of this company a central exchange was opened in Columbia, and from it lines were extended connecting with exchanges established at different points in Maury county. The service which was rendered was charged for at figures much below the rates exacted by the defendant company. The rates thus fixed were found after a time much too low to enable the company to furnish efficient service, so that, to keep it in operation, donations, amounting to four or five thousand dollars, were made to it by citizens of that community.

The reductions referred to above, made by the new company, were promptly met by its competitor, and a war of rates began. The Cumberland Telegraph & Telephone Company agreed, among other things, to furnish telephone service at residences for 50 cents a month, and in some cases one of its canvassers proposed to place instruments in the homes of its subscribers without cost to them.

These details, while not essential to a right determination of the case, yet serve in part to illustrate the animus of these companies to each other, and furnish, in part, a motive for the institution of this proceeding. They clearly indicate that the contest involved a struggle for continued supremacy on the part of the older company, and for existence upon the part of the younger. Such a contest, in the nature of things, must have engendered much of personal bitterness; that it did do so is shown in this record.

Other facts found by the Court of Chancery Appeals which raise the questions of law made on the decree of that court will be referred to as these questions are presented in their proper order.

Before, however, coming to the consideration of these questions, it is well to state two propositions, well established by the authorities, which bear in a general way upon this controversy.

The first of these is that a telephone like a telegraph company is a common carrier of news, and as such is touched with a public use. The second is that the admission of a foreign corporation to do business in this state is a matter of comity, and not of right, so that, when such corporation enters the state and undertakes business herein, it becomes amenable to our laws, and subject to the jurisdiction of our courts, exactly as is a private individual or a domestic corporation. 6 Thomp. on Corporation, § 7886; Bank of Augusta v. Earle, 13 Pet. 519, 10 L.Ed. 274.

Coming now to the grounds of forfeiture insisted upon by the relators, we find the first of these to be that of a failure upon the part of the defendant company to register abstracts of its charter in the various counties of this state where it was doing business, as required by chapter 31, p. 44, of the Acts of 1877, amended by chapter 122, p. 264, of the Acts of 1891.

As to this, it is found by the Court of Chancery Appeals that the defendant company in April, 1891, filed, as required by these two acts, a duly certified copy of its charter in the office of the Secretary of State of Tennessee, and an additional copy in April, 1894, but that it failed to file an abstract of the charter, in each of the counties of the state where it opened up exchanges for business, with the register of these respective counties. The court reports that the corporation intended to file these abstracts, but by an inadvertence they were sent to the clerks of the county courts of these several counties, and, as a result, were not registered at the time they were so sent. However, after the institution of this suit in 1896, and before the answer of the corporation was filed, upon discovering this mistake, these abstracts were registered in the several counties, though, under an act amendatory of the acts of 1877 and 1891, this was no longer necessary.

In other words, the failure upon the part of the corporation to meet the statutory requirement in this respect, which was not the result of willfulness and intentional disregard of the law, but rather of a pure inadvertence or mistake, would have been fatal to any application for affirmative relief made to one of the courts of the state for a breach of a contract which had been entered into with it as to business done in one of these counties, is unquestionably true. Cary-Lombard Co. v. Thomas, 92 Tenn. 593, 22 S.W. 743; Harris v. Columbia W. & L. Co., 108 Tenn. 245, 67 S.W. 811. But will an omission such as this move the court to the extreme step of decreeing a forfeiture of its right to transact all intrastate business?

If a corporation is found guilty of an act of omission or commission which is expressly declared to be a cause of forfeiture of its franchise, clearly a court has no discretion to refuse such a judgment. State v. Oberlin, etc., Ass'n, 35 Ohio St. 258; State v. Penn., etc., Canal Co., 23 Ohio St. 121; People v. Northern R. R., 53 Barb. 98. In such a case, as a mere matter of law, a court is bound to award a judgment of ouster. Neither mistake on the part of the corporation nor subsequent good behavior will disable the state from demanding such judgment. 5 Thompson on Corporations, § 6644.

But it is to be observed that there is no statute which declares in terms that a violation of the duty imposed in the regard now being considered involves, necessarily, a forfeiture of the right to do business in this state. If there was such statute, then, whether reasonable or unreasonable in its nature, it would be the imperative duty of the courts to enforce it. But as the law is silent, and the court is called upon to deal so rigorously with this corporation, it must be controlled by general principles as laid down in well-considered cases, and by the best text-writers dealing with the subject.

First of all, we think a controlling consideration, when such action is invoked, must be the public interest; will it be subserved or not by the application of so strenuous a remedy? If it will not, then, in the absence of flagrant and persistent violation of a statutory duty, and especially where in the violation there is no menace to the public welfare, it would seem, as a matter of natural reason and justice, that the extreme penalty of forfeiture should not be exacted. It is not every excess of power nor every omission of duty which will constitute cause of forfeiture of the charter of a corporation. Harris v. Miss. Valley, etc., R. R., 51 Miss. 602; Town of Royalton v. Town of West Fairlee, 11 Vt. 438. Courts act with extreme caution in proceedings which have for their subject the forfeiture of corporation franchises, and we think that the great weight of authority is that a court may exercise its discretion, and should refuse a judgment of forfeiture if upon the whole case it finds that the interest of the public does not require it.

As is said in the valuable work of Mr. Spelling on Inj. and other Ex. Rem. vol. 2, § 1777: "That the court may exercise a considerable latitude of discretion, both as to whether it will grant a rule upon the defendant to show cause, where the proceeding is instituted in...