State v. Southern Bell Tel. & Tel. Co.

• Decision Date: 01 September 1958
• Citation: 319 S.W.2d 90,8 McCanless 207,204 Tenn. 207
• Parties: STATE of Tennessee ex rel. v. SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY et al. 8 McCanless 207, 204 Tenn. 207, 319 S.W.2d 90
• Court: Tennessee Supreme Court

Page 90

319 S.W.2d 90

STATE of Tennessee ex rel. v. SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY et al.

8 McCanless 207, 204 Tenn. 207, 319 S.W.2d 90

Supreme Court of Tennessee.

Sept. 1, 1958.

Rehearing Denied Dec. 12, 1958.

Jack Wilson and James M. Glasgow, Asst. Attys. Gen., for appellant.

W. W. Kennerly, Knoxville, George T. Lewis, Jr., and Wm. A. Sands, Memphis, W. D. Spears, Chattanooga, A. A. Kelly, South Pittsburg, Wesley P. Flatt, Jr., Cookeville, J. O. Bass, Robert H. Jennings, C. G. Blackard, Nashville, and C. A. Cameron, Cookeville, for appellees.

PREWITT, Justice.

The State, through its Commissioner of Highways has appealed from the Chancery Court of Davidson County, which upheld the validity and constitutionality of Chapter 170, Public Acts of 1957.

This Act provides for the State to reimburse utilities for the relocation of their facilities located on publicly owned rights of way when necessary due to the construction of interstate highways, and for the reimbursement of utilities for the relocation of utility facilities located on publicly owned rights of way when necessary due to the construction of any highway project which is built with Federal-aid funds, provided that the utility shows hardship to the extent that its financial structure is impaired, or its rates are increased as a result of bearing the cost of relocation, and in the event of disagreement between the Commissioner of Highways and any utility, as to whether the utility is entitled to reimbursement, under Sections 1 and 2 certain controversies must be submitted to arbitration.

The Commissioner attacked the constitutionality of this Act by filing a bill for a declaratory judgment seeking a declaration as to his rights, duties, and interests therein. The public act is alleged to be unconstitutional, violating Article II, Section 31, which forbids the use of the State's credit to or in aid of corporations and others; Article XI, Section 8, which prohibits unreasonable legislative classifications, laws favoring individuals and laws granting rights, immunities, privileges, or exemptions; Article I, Section 17, which prohibits suits against the State; and Article I, Section 20, which prevents the impairment of contracts. The bill, as amended, also charges, that the Act is void for indefiniteness.

The suit was brought against the Southern Bell Telephone and Telegraph Company, which answered the bill. Numerous private corporations, individuals, municipalities and cooperatives were allowed to intervene. All filed demurrers and the company was granted leave to withdraw its answer and file a demurrer.

The trial court sustained the demurrers except as to the right of the Commissioner to institute the suit and held that Chapter 170, does not violate Article II, Section 31 of the State Constitution, and that the expenditures therein provided for are for a public purpose. It is insisted on behalf of the State that the effect of said Chapter 170 is to pledge the State's credit to, or in aid of persons, corporations and municipalities. In the case now before us we find the poles and other facilities on the public highway without charge and holding a mere privilege for this use.

The test of the legislation is whether it comes within the prohibitory language and intent of Article II, Section 31.

It will be noted that in Article II, Section 31, the Constitution expressly prohibits the State's credit to, and in aid, not only of persons, corporations but municipalities as well.

Now, with this situation in mind this statute directing the expenditures of State funds to reimburse utilities for adjusting or removing their facilities from publicly owned right of way so that a State highway may be improved is primarily for the benefit of subscribers of utilities or their stockholders, and is neither a State nor a public purpose.

It has been generally held that these utilities are required to remove their facilities from publicly owned rights of way where necessary to improve State highways, at their own expense. 52 Am.Jur. 64, Telegraph and Telephones, Sections 34, 28, 33, 37, 50; Nashville, C. & St. L. Ry. v. Middle Fork Obion Drainage District, 149 Tenn. 490, 260 S.W. 975; Southern Bell Tel. & Tel. Co. v. State ex rel. Ervin, Fla., 75 So.2d 796; Southern Bell Tel. & Tel. Co. v. Commonwealth, Ky., 266 S.W.2d 308; State of Tennessee v. United States, 6 Cir., 256 F.2d 244.

Article II, Section 29, of our Constitution is permissive under certain conditions while Section 31 is prohibitory. The test of Article II, Section 29, is whether the expenditure of public funds is for a public purpose. McConnell v. City of Lebanon, Tenn., 314 S.W.2d 12.

Under Article II, Section 31, the expenditure must be for a State purpose, which function the state performs for its general public, agencies and instrumentalities of the State for the accomplishment of a State purpose under State control; and the State must have the '* * * right of use * * *' of the property upon which the fund is expended. Bedford County Hospital v. Browning, 189 Tenn. 227, 225 S.W.2d 41, 44; Baker v. Hickman County, 164 Tenn. 294, 47 S.W.2d 1090; Mulkey v. Quillian, 213 Ga. 507, 100 S.E.2d 268.

The use of State credit for reimbursing utilities for removing their facilities from publicly owned right of way fails to serve a State purpose and is not for a public purpose. Mulkey v. Quillian, supra.

In Southern Bell Tel. & Tel. Co. v. Commonwealth, Ky. 1954, 266 S.W.2d 308, 310, the Court said:

'We think, fairly and reasonably construed, the removal and relocation of the poles and lines at appellant's expense may be justified under the specific provisions of the grant. The term 'so as not to obstruct the same' unquestionably relates to the obstruction of improvement, construction, and reconstruction of the state's highways as well as obstruction of travel upon completed highways. * * *

'If construed as requiring removal and relocation at the expense of the state, the franchise was in violation of Article II, Sec. 33, of our Third Constitution, which was carried over into Section 177 of our present constitution, and provided:

"The credit of this Commonwealth shall not be given or loaned in aid of any person, association, municipality, or corporation."

The fact that the Legislature of this State has enacted a law which was not present in the Kentucky case authorizing such expenditures of public monies neither adds to, nor detracts from the force of the Kentucky decision.

If the Legislature is without authority under the Constitution to enact a law, the situation is the same as though there were no attempted enactment. Since the Constitution forbids the State from giving, or lending its credit '* * * to or in aid of any person, association, company, corporation or municipality,' it is immaterial whether there is an attempt to have public monies paid out under the guise of legislative sanction.

We think that the basic test under this Section of our Constitution is whether the expenditure is for a State purpose. In the present case the primary purpose served by the expenditure is for the convenience and benefit of the utilities, the purpose cannot be public. In this connection see Mulkey v. Quillian, supra.

In Bedford County Hospital v. Browning, supra, this Court said, referring to Article II, Section 31:

'The obvious purpose of this Section of our Constitution was to prevent the State from using its credit as a gratuity or donation to any person, corporation, or municipality. * * * This grant does not constitute a gratuity or donation of State credit, as under the terms of the Act itself this constitutes performance of public duties and with no right to reap individual profit.

The Court states three reasons in concluding that the State Hospital Act did not violate Article II, Section 31, as follows:

'1. That the Act is for the accomplishment of not only a public but a State purpose as well.

'2. That the hospitals become the agencies and instrumentalities of the State for the accomplishment of such State purposes under State control, regulation and supervision.

'3. That the objection that the sovereign has no title to the institutions is met by the proposition that it will continue to have the use of the hospitals for the benefit of the people of the entire State.'

In the Bedford County Hospital case the Court pointed out with reference to Article II, Sections 29 and 31 that the Sections are different in purposes, in effect and in wording.

The case of Oswego & S. R. v. State, 226 N.Y. 351, 124 N.E. 8, is not in point. The whole basis of Justice Cardozo's opinion is that the Legislature may enact Acts when equity demands. The facts in the Oswego case showed that equity did demand that the state step in and do equity. We have no question of equity in the present case. The user of the defendants was only permissive.

Certain factual situations were set out in the bill which must be taken as admitted on demurrer, which among other things, appears that the Telephone Company owns and operates a vast communication system for profit in the State of Tennessee, and a part of its facilities, including poles, wires, underground conduits, and other equipment are installed in, upon and under publicly owned rights of way under Section 65-2105 T.C.A. The public rights of way have been acquired at an enormous cost to the citizens and taxpayers of the State, and the Telephone Company, as well as other privately and publicly owned utilities, have used and occupied such rights of way without cost, or expense to them.

The bill charges that in order to participate in the interstate highway program, it was necessary for the State to appropriate and raise large sums of money, necessitating the enactment of Chapter 264, Public Acts of 1957, authorizing the State Funding Board to issue bonds in the amount not exceeding $30,000,000; that the department has estimated that the cost of relocating...