State ex rel. Payne v. Dakota Central Telephone Co.

GATES, J. This is an original action brought by the state, on the relation of the Attorney General and Board of Railroad Commissioners, against four telephone companies operating/ in South Dakota, viz. the Dakota Ceneral Telephone Company, the Northwestern Telephone Exchange Company, the Nebraska Telephone 'Company, and the South Dakota State Telephone Company. The complaint alleged, in substance, that the defendants threatened, and were about to put into effect certain tariffs and schedules of rates, charges, and regulations governing the transmission of long-distance telephone messages between points wholly within the state, contrary to and without compliance with, the laws of this state in that behalf, and sought injunction. The answer of the defendants admitted the substantial allegations of the complaint, but alleged that‘they were proceeding in accordance with order No. 2495, issued by the Postmaster General of the United States on December 13, 19x8, referred to. as Bulletin 22, made pursuant [466] lo the joint resolution of Congress of July 16, 1918 (U. S. Comp. St. 1918, § 3ii5?4x), and the proclamation' of the President of the United States'of July 23, 19x8. The cause was submitted for judgment upon the pleadings. Much has been said in the briefs about the war powers of Congress and of the President, but we are of the opinion that those questions are beside the issues of this case. In our opinion the determination of this case depends entirely upon the meaning of the second proviso in the joint resolution of July 16, 19x8. The parts of the resolution, material to this case are as follows: “That the President during the continuance of the present war is authorized and empowered, whenever he shall deem it necessary for the national security or defense, to supervise or to take possession and assume control of any telegraph, telephone, marine cable, or radio system or systems, or any part thereof, and to operate the same in such manner as may be needful or desirable for the duration of the war. * * * “Provided, that just compensation shall be made. * * * “Provided further, that nothing in this act shall.be construed to amend, repeal, impair, or affect existing laws or powers of the states in relation to taxation or the lawful police regulations of the several states, except wherein such laws, powers, or regulations may affect the transmission of government communications, or the issue of stocks and 'bonds by such system or systems.” [1] It is contended by plaintiff that the term “lawful police regulations” is there used in its broad sense, which includes the power of rate regulation. Chesapeake & Potomac Telephone Co. v. Manning, 186 U. S. 238, 22 Sup. Ct. 881, 46 L. Ed. 1144. It is contended by the defendants that such tenn is there used in its narrow sense as referring simply to the public safety, health, and morals. Leaving out of consideration for the moment the two exceptions mentioned therein, we may observe that if by that proviso the Congress intended that the states should continue to exercise their undoubted powers to reasonably regulate the intrastate rates and1 charges of telephone companies, then the power to fix such rates did not pass to the President nor to his representative, the Postmaster General. If by that proviso Congress intended to deprive the states of the power to regulate rates for [467] intrastate messages, .then, but not until then, we would have to consider the power and authority of Congress so to do. In our opinion Congress intended the former. The act and the proviso should be so construed unless the contrary clearly appears. The contrary should not be assumed by mere implication. [2] In Reagan v. Mercantile Trust Co., 154 U. S. 413, 14 Sup. Ct. 1060, 38 L. Ed. 1028, the court said: “It must have been known that, in the nature of things, the control of that business would be exercised by the state, and if it deemed that the interests of the nation and the discharge of the duties required on behalf of the nation from this corporation demanded exemption in all things from state control, it would unquestionably have expressed such intention in language whose meaning would 'be clear. Its silence in this respect is satisfactory assurance that, in so far as this corporation should engage in business wholly within the state, it intended that it should be subjected to the ordinaiy control exercised by the state over such business.” In Reid v. People of the State of Colorado, 187 U. S. 137, 23 Sup. Ct. 92, 47 L. Ed. 108, the court said: “It should never be 'hel-d that Congress intends to supersede or by its legislation suspend the exercise of the police powers of the states, even when it may do s.o, unless its purpose to effect that result is clearly manifested.” [3] S'o that, if the clause in the proviso is ambiguous and needs interpretation, the doubt should be resolved in favor of the reserved power of the state. But a consideration of the second exception in the proviso removes, in our opinion, all possible doubt as to the intention of Congress. The material parts of the proviso applicable to the point in question are: “Nothing in 'this act shall be construed to amend, repeal, impair, or affect * * * the lawful police regulations of the several states, except wherein such * * * regulations may affect the * * * issue of stocks and bonds by such system or systems.” It cannot be doubted that the power of a state to regulate the issuance of stocks and bonds by corporations created under its authority is a power entirely foreign to and outside of those powers included in the term “police- power” when such term is used in its narrow sense as referring to the power to preserve [468] public safety, 'health, and morals. Therefore, when -Congress declared that the “police regulations of the several states” left to the states should not “affect the issue of stocks and bonds” of telegraph and telephone companies, it is clear that it had in mind reserving to the states “police regulations” which, if unrestricted, might affect the issue of stocks and bonds. Thus Congress has, by the very wording.of this proviso, declared that it'reserved to the states, subject to two limitations, the full police powers that the states possess as sovereign states. The term “lawful police regulations” is therefore self-interpreted by Congress and needs no interpretation by the -courts. [4] It is further urged that the assumption of control and operation imply the taking over of all revenues, and that by reason of the taking over of the revenues of the companies Congress intended to assume authority to fix all rates, interstate and intrastate. That contention ignores the second proviso .of the resolution. The resolution says nothing about the taking over of the revenues. The provisions of the contracts entered into between the Postmaster General and the telephone -company are not -persuasive of the correct interpretation of the proviso; but, even if the act -does contemplate the taking over of -all revenues, interstate and intrastate, that fact is not entitled to weight in- construing the terms of the proviso, because that fact would not at all be inconsistent with its dependency on the right of the states to continue to regulate intrastate rates. ’ Intrastate rates, as well as interstate rates, established under the authority of law are entitled to the benefit of a presumption that they are fair and reasonable. How can it be said to be inconsistent with the assumption of the revenues for Congress to declare that such assumption was subject to the reasonable rates lawfully established? [5] It is-further urged that, by the several steps taken by Congress, by the President, and by the Postmaster General, the properties taken over have become the properties of the United States government unshackled from state authority, and that this ■ action is in reality one against the United States, which cannot -be -maintained- in this court because Congress -has not- -given its ■ assent thereto. The answer is that, even if the property has become the property of the United States government, the govern- ■ ment’s title thereto is incumbered by the reserved power of -the [469] State to regulate intrastate rates. When, therefore, the Postmaster General seeks to promulgate rates, and the defendant telephone company seeks to carry them out, in definance of the state laws, they are wrongdoers, and are amenable to the laws of this state The action is not one against the United States or its property, but is one seeking to restrain the commission of an unauthorized act. In the Minnesota Rate Cases the Supreme 'Court of the United States very fully went into the question of what- were and what were not suits against the state. Ex parte Young, 209 U. S. 123, 28 Sup. Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764. That decision is authority for .the position which we assert. We are-of the opinion that the injunction sought should be granted, but that it shall provide that it in no wise affects the transmission of governmental communications or the issue of stocks and bonds by the defendants or either of them. ' '