Traverse City v. Mich. R.R. Comm'n

• Decision Date: 18 July 1918
• Docket Number: No. 77.,77.
• Citation: 168 N.W. 481,202 Mich. 575
• Parties: TRAVERSE CITY v. MICHIGAN RAILROAD COMMISSION et al.
• Court: Michigan Supreme Court

202 Mich. 575

168 N.W. 481

TRAVERSE CITY

v.MICHIGAN RAILROAD COMMISSION et al.

No. 77.

Supreme Court of Michigan.

July 18, 1918.

Appeal from Circuit Court, Ingham County, in Chancery; Howard Weist, Judge.

Bill by the City of Traverse City against the Michigan Railroad Commission and another to enjoin proceedings under an order of the Commission permitting an increase in telephone rates. From a decree dismissing the bill and affirming the order, plaintiff appeals. Affirmed.

Argued before OSTRANDER, C. J., and BIRD, MOORE, STEERE, BROOKE, FELLOWS, STONE, and KUHN, JJ. Parm C. Gilbert, of Traverse City, for appellant.

Philip H. Travis, of Grand Rapids, (Travis, Merrick, Warner & Johnson, of Grand Rapids, of counsel), for appellee Citizens' Telephone Co.

Alex. J. Groesbeck, Atty. Gen., and Thomas G. Baillie, Asst. Atty. Gen., for appellee Michigan Railroad Commission.

STEERE, J.

This controversy involves the validity of an order by the Michigan Railroad Commission permitting the Michigan Telephone Company to charge and collect stated rates in excess of those specified in its franchise contract with plaintiff under which the telephone company had been operating. It is a continuation of the differences between the municipality and public utility company reported in Traverse City v. Citizens' Telephone Company, 195 Mich. 373, 161 N. W. 983, to which reference is made for a sufficient statement of the facts and relations of the parties up to the time that case was decided.

During the progress of that litigation it was the impression of the trial court that the questions involved more properly belonged in the first instance to the state Railroad Commission than to the court, intimating the propriety of initiatory steps being taken by application of one of the parties to that body, whose action in the premises was reviewable by the courts as provided by statute, but the suggestion was not acted upon by the litigants at that time, and the case was pressed to a final hearing in this court. After it had been decided in the lower court and was pending on appeal to this court, the Citizens' Telephone Company applied to the Railroad Commission for authority to make increased charges, on the ground that existing rates were inadequate to produce reasonable returns on investment and cost of operation. The city filed written objections to the application with the Railroad Commission claiming that the rates were controlled by a contract between the parties. Hearings were had upon the application while the chancery suit between the parties was pending in this court, but on the suggestion of counsel the commission withheld final disposition of the matter until after this court handed down its opinion in the chancery case when, in July, 1917, an order was made by the commission authorizing the Citizens' Telephone Company to put into effect a new scale of rates for Traverse City, some of which were higher than those named in the ordinance contract, which had been the subject of litigation in the chancery suit and held by this court to be a binding contract between the litigating parties as the case then stood in that record. The city thereupon filed a bill in the Ingham county circuit court in chancery to enjoin proceedings under such order, claiming that the Railroad Commission had no power to make the same. Answers were duly filed and the case brought to a hearing, which resulted in a decree dismissing plaintiff's bill, and affirmance of the Railroad Commission's order, from which plaintiff has taken an appeal to this court.

The grounds upon which plaintiff attacks the order are, as stated in counsel's brief:

‘The order of the Michigan Railroad Commission violates the terms of the franchise granted to the telephone company by the plaintiff city and accepted by the telephone company and under which the telephone company has always operated.’

‘The order of the Michigan Railroad Commission is void as being without consideration, and because it deprives the city of all control and regulation over the telephone company, and takes the funds allowed under the new rates without consideration.’

‘The law under which the Michigan Railroad Commission claims authority to make this order is unconstitutional.’

‘The Citizens' Telephone Company is now estopped from seeking to collect or charge rates different from those named in the franchise.’

‘The order violates our Constitution, particularly as being opposed to the home rule provisions thereof.’

Act 206, Pub. Acts 1913 (2 Comp. Laws 1915, § 6689 et seq.), under which the order in question was made, declares all persons, corporations, and associations operating telephone lines or exchanges doing business in Michigan to be common carriers subject to all applicable laws regulating transportation of persons or property by railroad companies within the state. By it general control of all telephone lines and companies within the state is given to the Michigan Railroad Commission, with ample powers, amongst which it is expressly authorized--

‘to make, alter, amend or abolish any rate or charge for any service, and may regulate by rules or orders any service or facility; and it shall likewise prescribe the standard of construction and equipment that shall be maintained by any person, copartnership or corporation maintaining a physical connection between the lines and facilities of any such person, copartnership or corporation, and the lines and facilities of any other person, copartnership or corporation.’

This act committing to the commission control of telephone lines and companies as common carriers is similar in plan and provisions to statutes of other states prescribing the powers granted to, proceedings before, and duties of Public Utility Commissions in matters over which they are given control. It closely follows and, in effect, is a revision with amplifications of Act 138, Pub. Acts 1911, which was under consideration and sustained to the extent questioned in Telephone Co. v. Railroad Commission, 174 Mich. 220, 140 N. W. 496, and In re Briggs, 178 Mich. 28, 144 N. W. 501.

As indicated in the record of proceedings prior to this appeal and by plaintiff's brief, the reasonableness of the schedule of rates allowed by the commission is not involved, but, as stated by its counsel to the commission, plaintiff's position is that the ‘rates are fixed by franchise,’ and the inquiry is limited to whether the commission possessed power to change the rates. In Traverse City v. Citizens' Telephone Co., supra, this court held that the telephone company was operating under an accepted franchise of the city which stood as a binding contract between the parties to it in the absence of the exercise of any paramount governmental authority, regardless of whether it was by absolute right of the parties to contract as to rates and inviolable or permissive only and subject to state control; it being said:

‘Accepting it as permissive only, it remains valid between the parties until such time as the reserved state control is asserted and interposed against it. The statute conferring controlling powers upon the railroad commission does not of itself abrogate the contract.’

This but followed the equitable rule applied in Monroe v. Railway, 187 Mich. 364, 153 N. W. 669, which is well supported by decisions in other jurisdictions. Although it was there said ‘plaintiff was not given by its charter express power to regulate rates,’ whether the contract was permissive only was not a controlling issue as the case then stood, but the state authority having been appealed to and since asserted in disregard of this contract it becomes material to authoritatively determine its character in that particular.

The status of telephone companies recognized at common law as analogous to common carriers, and sometimes held to be such, is settled in this state by the statute so classifying them. That the state may regulate charges of common carriers and the power to fix the rates which they may charge the public for their services is a legislative and not a judicial function is now elemental, the judicial function, or power of the courts, being limited to determining whether any particular rate fixed by the Legislature or its duly authorized agency is reasonable or otherwise.

Neither the Railroad Commission nor the municipality had any rate-making power, except that which the Legislature might delegate to them to exercise as state agencies. There is no doubt that it is competent for the Legislature to delegate its control over and power to regulate charges of common carriers operating within the state to a board or commission created for that purpose and within the range of legitimate municipal purposes to municipalities, but when such power is delegated to a municipal corporation by its charter it must be done in express terms. Jacksonville v. Bell Telephone Co., 57 Fla. 374, 49 South. 509;St. Louis v. Bell Telephone Co., 96 Mo. 623, 10 S. W. 197,2 L. R. A. 278, 9 Am. St. Rep. 370. No power is given Traverse City by its charter in express terms to fix rates to be charged by telephone companies operating within its borders, nor is such authority inferable from the conferred power to regulate and control the use of its streets by telegraph, telephone, and other companies referred to, and quoted, so far as material, in Traverse City v. Citizens' Telephone...