Winfield v. Public Service Commission
| Decision Date | 11 January 1911 |
| Docket Number | 23,058 |
| Citation | 118 N.E. 531,187 Ind. 53 |
| Parties | Winfield et al. v. Public Service Commission |
| Court | Indiana Supreme Court |
From Cass Circuit Court; Henry H. Vinton, Special Judge.
Suit by Maurice Winfield and others against the Public Service Commission and the Logansport Home Telephone Company. From a judgment for defendants, plaintiffs appeal.
Affirmed.
George A. Gamble, D. D. Fickle and D. C. Arthur, for appellants.
Evan B Stotsenburg, Attorney-General, Burt L. New, Rabb, Mahoney & Fansler, and Long, Yarlott & Souder, for appellees.
Ferdinand Winter and J. A. Van Osdol, amici curiae.
Harvey J. Lairy, J., did not participate in the consideration and determination of this cause.
The complaint in this case alleges that in 1901 the city of Logansport granted to the Logansport Home Telephone Company a "franchise, license and permit" to construct and operate a telephone exchange and system of wires, poles, and so forth, in said city, and over and through the highways thereof; that the term of said franchise was forty years; that the franchise fixed maximum rates to be charged for telephone service, providing that under certain circumstances the city might reduce said rates, "but in no event shall the city of Logansport, or said" grantees or their assigns "increase the rates * * * above the rate set out" in the franchise. That in further consideration of the rates, franchises and privileges herein granted, the said "grantees, their successors and assigns agree to furnish the city for office use one telephone each for" specific offices and departments, aggregating twenty-one, "free of rental"; that grantees accepted said franchise, and said Home telephone company, the assignee, has constructed and maintained in operation since 1901 the exchange and system contemplated, and has furnished service at the rates named, and free to the city, and was so doing at the time of the creation by the general assembly of the state, in March, 1913, of the Public Service Commission. That to "avoid its said contract with said city," said telephone company "pretended to surrender its said franchise * * * to the Public Service Commission" and "accepted from said Public Service Commission what is denominated in said act as an indeterminate permit." That thereafter said company applied to said commission for an increase of rates; that on a hearing had before said commission, the commission made an order increasing said rates beyond the maximum rates fixed in said franchise; and that under said order the city was deprived of free telephones. Appellant alleges that he is a patron of said company, and a resident taxpayer of said city; that he sues on behalf of himself and other taxpayers who may join in the action; that said assignee company is a corporation organized in the year 1901, under the laws of Indiana; that said company now claims to operate its said exchange and system under said indeterminate permit; that said acts and conduct of said company are in violation of the Constitution of the United States, prohibiting the state from impairing the obligations of contracts, and of the Constitution of Indiana, which denies the general assembly power to pass laws having such effect; that the order of said commission violates § 7 of the act creating the commission. The Public Service Commission and said company are made defendants. That said city, on the demand of plaintiff, refused to prosecute this action. Plaintiff prays that said order of said commission increasing said rates be declared void, and the commission "enjoined from granting any rates exceeding" said maximum rates. Ten other citizens petitioned, and were permitted, to join as plaintiffs.
The court sustained the separate demurrer of each defendant to the complaint, and rendered judgment against the plaintiffs. The errors alleged and assigned are the sustaining of said demurrers and the rendition of said judgment.
The claim of plaintiffs that in 1901, and prior thereto, the city of Logansport, under statutes of the state, had exclusive power over its streets and highways, and the right to make the contract alleged; and that said contract was binding on said telephone company and said city may, with some reservations, be conceded. Generally speaking, such contracts, when only the rights and interests of the city and utility are being considered, are valid, binding, and mutually enforceable; and unless the public welfare, in the judgment of the state, requires, the legislature cannot impair the obligations thereof. Lewisville Nat. Gas Co. v. State, ex rel. (1893), 135 Ind. 49, 34 N.E. 702, 21 L. R. A. 734; City of Indianapolis v. Consumers, etc., Co. (1895), 140 Ind. 107, 116, 39 N.E. 433, 27 L. R. A. 514, 49 Am. St. 183; City of Rushville v. Rushville Nat. Gas Co. (1904), 164 Ind. 162, 73 N.E. 87, 3 Ann Cas. 86; Westfield, etc., Co. v. Mendenhall (1895), 142 Ind. 538, 41 N.E. 1033; City of Noblesville v. Noblesville Gas, etc., Co. (1901), 157 Ind. 162, 60 N.E. 1032; Muncie Nat. Gas Co. v. City of Muncie (1902), 160 Ind. 97, 101, 66 N.E. 436, 60 L. R. A. 822; Milwaukee Elec. R., etc., Co. v. Railroad Com. (1914), 238 U.S. 174, 35 S.Ct. 820, 59 L.Ed. 1254.
There are decisions of this court strongly supporting the right of cities in matters of local self-government. State, ex rel. v. Denny (1889), 118 Ind. 382, 21 N.E. 252, 4 L. R. A. 79; State, ex rel. v. Denny (1889), 118 Ind. 449, 21 N.E. 274, 4 L. R. A. 65; City of Evansville v. State, ex rel. (1889), 118 Ind. 426, 21 N.E. 267, 4 L. R. A. 93; State, ex rel. v. Fox (1901), 158 Ind. 126, 63 N.E. 19, 56 L. R. A. 893. Such decisions do not apply, however, when the interest of the public generally is involved, as it is in general telephone service.
The streets and other highways of the city are, however, a part of the other and general highways of the state and, as such and to the extent that the interests involved are not purely local to cities and incorporated towns, such power as a municipality has over them is granted to the municipality by the state, and may be modified or withdrawn by the state from the municipality, unless the state has waived its right to do so. Therefore, the municipality, so far as affects the public welfare, acts, in granting franchises to public service corporations, as the agent of the state, and cannot bind the state beyond the authority delegated by the state to the municipality in that respect. The existence of limitations of authority in the agent is known to all, because they are reservations by virtue of the state's police power. Board, etc. v. Lucas (1876), 93 U.S. 108, 23 L.Ed. 822; Home Telephone Co. v. Los Angeles (1908), 211 U.S. 265, 29 S.Ct. 50, 53 L.Ed. 176; Stanislaus Co. v. San Joaquin, etc., Co. (1903), 192 U.S. 201, 24 S.Ct. 241, 48 L.Ed. 406; Milwaukee Elec. R., etc., Co. v. Railroad Com., supra; City of Benwood v. Public Service Commission (1914), 75 W.Va. 127, 83 S.E. 295, L. R. A. 1915C 261; City of Owensboro v. Cumberland Telephone Co. (1912), 230 U.S. 58, 33 S.Ct. 988, 57 L.Ed. 1389.
The state's power of control of such matters is one of the elements of the state government, in the exercise of which the people are represented by the legislature. This element of government is commonly called the state's police power, and in the present case applies to the general interest of the citizens of the state in proper public service. The state may deprive itself of the power to exercise this power by granting directly to the public service companies in charters, or by franchises, freedom from the exercise thereof; but, inasmuch as such grant of freedom is in derogation of common right, it is never presumed to have been made by the state, and the state will not be held to have abandoned the right to exercise its police power, unless the state's intention so to do is expressed in terms so clear and unequivocal as to exclude doubt; and if doubt exists it must be resolved in favor of the state. City of Indianapolis v. Navin (1898), 151 Ind. 139, 47 N.E. 525, 51 N.E. 80, 41 L. R. A. 337; Milwaukee Elec. R., etc., Co. v. Railroad Commission, supra; Home Telephone Co. v. Los Angeles, supra; Covington, etc., Turnpike Co. v. Sandford (1896), 164 U.S. 578, 587, 17 S.Ct. 198, 41 L.Ed. 560; Addyston Pipe, etc., Co. v. United States (1899), 175 U.S. 211, 20 S.Ct. 96, 44 L.Ed. 136; Providence Bank v. Billings (1830), 4 Pet. 514, 561, 7 L.Ed. 939; Charles River Bridge v. Warren Bridge (1837), 11 Pet. 420, 547, 9 L.Ed. 773; Stone v Farmers' Loan, etc., Co. (1885), 116 U.S. 307, 347, 6 S.Ct. 334, 388, 1191, 29 L.Ed. 636; Stanislaus v. San Joaquin, etc., Co., supra; Freeport Water Co. v. Freeport (1900), 180 U.S. 587, 21 S.Ct. 493, 45 L.Ed. 679; Woodburn v. Public Service Commission (1916), 82 Ore. 114, 161 P. 391, L. R. A. 1917C 98.
The state may also authorize municipalities to grant, in a franchise to a public service corporation, freedom from the exercise of the state's power of regulation; but such franchises are never construed to have this effect, unless the state's grant of authority to the municipality, and the municipality's grant in the franchise are expressed in terms positive and clear, as above indicated. Home Telephone Co. v. Los Angeles, supra; Milwaukee Elec. R., etc., Co. v. Railroad Commission, supra. In the decisions last cited the court distinguished several cases, wherein it was held that the state had itself authorized the municipality to fix unalterably rates, which distinguished cases are relied on herein by appellants.
A state may ratify a franchise containing such an exemption made by a municipality, though the municipality had no power to so exempt at the time of granting the franchise, but the questions then are: (1) What was the...
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