City of Wichita v. Old Colony Trust Co.

AMIDON, District Judge. The Missouri & Kansas Telephone Company is now, and has been for nearly 20 years, the owner of a telephone system in the city of Wichita, which not only serves the purpose of a local exchange, but is at the same time part of an extensive system of long distance telephones reaching from St. Louis, Mo., to the western part of the state of Kansas. The compláinants below (appellees here), the Old Colony Trust Company and Charles J. Hubbard, are trustees under a mortgage executed by the telephone company upon all its property to secure the payment of $1,250,000 of its bonds. In 1902 the mayor and council of the city, claiming that the right of the telephone company to occupy its streets and alleys had terminated, adopted a resolution, which, after reciting among other things “that the said Missouri & Kansas Telephone Company have now no right or authority to maintain and operate its wires, poles, cables, and electrical appliances along, in, over, through, under, or across the public streets, alleys, and public grounds of said city,” required the company to remove its telephone system from the city on or before the 1st day of September, 1902, and in case of its failure so to do the chief of police, fire marshal, and city electrician were directed to remove the same. In furtherance of the same purpose, an ordinance was passed making it a criminal offense for any person, firm, or corporation to set any poles or string any wires in the streets, alleys, or public places of the city, or maintain the same therein, without first having obtained the consent of the city therefor. Under this ordinance the employees and officers of the telephone company were arrested and fined, and the poles set for the repair and extension of its system were cut down and removed. Believing that the city authorities were about to carry the above resolution into effect, the complainants filed their bill herein on the 23d day of August, 1902, reciting the above facts and other facts upon which the telephone company based its right to maintain and extend its system. Issue was joined and testimony taken. At the final hearing a permanent injunction was granted, which, in substance, restrained the city from destroying the telephone system as established and from interfering with the telephone company in repairing and extending the same. Against that decree the city brings the present appeal. — 643 — The telephone company bases its right to maintain and extend its system upon three grounds: (1) Ordinance of the city of Wichita No. 391; (2) Ordinance No. 1,356; (3) a general statute of the state of Kansas. The case can best be considered in connection with these several claims. Ordinance No. 391 was passed in November, 1886. It grants to the United Telephone Company, its successors and assigns, the right to erect and maintain posts, poles, and other fixtures necessary in carrying electric wires in, along, across, and under the streets and alleys of said city. No term being expressly fixed, it is limited by general statute of the state to twenty years. At the time this ordinance was passed the United Telephone Company was the owner of the local exchange in the city of Wichita. On the 25th of February, 1887, by deed dated on that day, this company conveyed to the Missouri & Kansas Telephone Company all its telephone lines as then located, and also the poles, wires, magnetic bells, and switch boards of said company, in said city, together with all the appurtenances thereunto belonging or in anywise appertaining. The franchise is not expressly mentioned in the deed. For this reason the city contends that it did not pass. The grant should be interpreted so as to give effect to the intention of the parties. After the conveyance of the property, the right created by the ordinance was of little value to the grantor, and the property with■out the right would have likewise been of little value to the grantee. It would be a violent construction to hold that the grantor intended simply to convey the tangible property without at the same time transferring the right which alone would make the property of any use. If, notwithstanding its deed, the United Telephone Company were here asserting ownership of the franchise, its contention could not be sustained ; much less can a third party assert such a claim. The conveyance by a railroad company of its road, roadbed, and appurtenances has been held to convey the franchise to operate the same by a necessary implication. Coe v. Columbus R. R. Co., 10 Ohio St. 372, 75 Am. Dec. 518. It is also contended by the city that Ordinance No. 391 was repealed by Ordinances Nos. 538 and 1,356. The first of these was passed in 1888. It was properly terminated at the expiration of five years, and was then succeeded by Ordinance No. 1,356. They are the same in terms, and were passed for and accepted in writing by the Missouri & Kansas Telephone Company. Each contains a general repealing clause. They impose upon the company many duties and grant to it certain rights, and among them the same rights, in substance, as are granted by Ordinance No. 391. Did they repeal that ordinance? If the United Telephone Company had continued to be the owner of the franchise granted by Ordinance 391 at the time the subsequent ordinances were passed, it could not be reasonably contended that the latter repealed the former. But by no principle of construction can the transfer of the franchise give to the subsequent ordinances any greater force by way of repeal than they would have possessed if no transfer had been made. Whether one ordinance repeals another must depend upon their terms, and not upon the ownership of the rights which they create. — 644 — Section 4 of the two ordinances in favor of the Missouri & Kansas Telephone Company, above referred to, reads as follows: “The rights and privileges hereby granted to the said company shall be for the period of five years and until terminated by the resolution of the mayor and council of the city of Wichita upon six months’ notice to be served upon the managing agent of said company at Wichita, said notice to be served at any time after six months immediately preceding the expiration of five years from the acceptance of the provisions of this ordinance by said company.” As the rights granted by these ordinances may be terminated in five years, while those granted by Ordinance 391 run for twenty years, it is further urged by the city that the telephone company waived any rights which it held under the latter ordinance by accepting the former. This contention is also untenable. It is “the rights and privileges hereby granted” which the city has authority to terminate under section 4. It has no power under that section to terminate any other rights or privileges. The company accepted these ordinances conferring upon it certain benefits and subjecting it to certain obligations upon the condition that the'rights and privileges conferred might be terminated at the expiration of five years. From this it by no means follows that the company by implication waived rights which it acquired from another corporation, and for which it paid a large consideration. For the foregoing reasons we hold that the telephone company is the owner of the right granted by Ordinance 391, which by statute will not expire until November, 1906. The provisions of Ordinance 1,356 have already been explained. It was passed March 23, 1896, and accepted by the company in writing April 1st of the same year. Appellant concedes that it confers upon the Missouri & Kansas Telephone Company the right to maintain and extend its system in the city for the term of twenty years, unless sooner terminated by the mayor and common council pursuant to section 4, which is quoted above in full. The only question in respect to this ordinance is, have the rights of the telephone company under it been terminated? The record of a meeting of the council held on the 24th of September, 1900, contains the following entry: “On motion of Councilman Burton clerk was instructed to notify the Missouri, Kansas Telephone Company when their present franchise would expire, and that the city would require them to remove their wires and poles from the streets at that time.” On September 28, 1900, and again on October 13th of the same year, the city clerk served notice upon the telephone company that he had been instructed by the city council to officially notify it that its franchise would expire April 1, 1901. A copy of the motion of Councilman Burton was inserted in the notice. The foregoing is the only action attempted by the city to terminate the rights of the company under the provisions of Ordinance 1,356. Can it be given that effect? An examination of section 4 will show that the discretion which it vests for the termination of the rights and privileges created by the ordinance is reposed in the mayor and council. They are required to exercise that discretion by a resolution. They could terminate those rights and privileges at the expiration of five years, or at any time thereafter within the period of the grant, namely, twenty years. It was for them to fix — 645 — the time. This they failed entirely to do. The defect is not a lack of record, as urged by counsel for appellant, but a want of action. No evidence was offered to show that the entry does not truthfully state what was done. To terminate is to fix the term; in this case to specify the date at which the right shall cease. The motion simply directs the clerk to notify the company “when their present franchise would expire.” No time is specified. That is left to the clerk. It may be that the members of the city council had it in mind to terminate the rights at the expiration of five years, but there is nothing in the motion which so declares. The private but unexpressed intention of the members of the city council cannot be given effect to destroy the important rights created by this ordinance. The ordinance itself requires an outward act which shall clearly convey such an intention. Under the motion that was carried the clerk might as well have given notice that the rights of the telephone company would end on the 1st of April, 1902, as on the 1st of April, 1901. There was nothing in the motion itself, nor in the motion when read in connection with the ordinance, which fixed the date. The action of the council was therefore ineffectual to terminate the rights of the company under this ordinance, and those rights are still in full force. Appellees also contend that they are entitled to occupy the streets and alleys of the city under a general statute of the state. To understand the issue on this branch of the case, it will be necessary to set forth the several laws upon which the parties respectively base their contentions. In 1868 (Gen. St. 1868, c. 23) the Legislature of Kansas passed a statute dealing with the subject of corporations for the construction and maintenance of telegraph lines, which contains this provision : “Corporations created for the purpose of constructing and maintaining magnetic telegraph lines are authorized to set their poles, wires and other fixtures along and across any of the public roads, streets and waters of this state in such manner as not to incommode the public in the use of such roads, streets and waters.” In 1881 (Laws 1881, p. 84, c. 37, § 11, subd. 22) a general statute was enacted providing for the organization of cities of the first class. Among other things, it vested in the mayor and council power— “To grant the right of way for the erection of telegraph or telephone posts and wires along and upon any of the streets, alleys or ways of the city, and change, modify and regulate the same.” In 1885 (Laws 1885, p. 151, c. 104, § 2) an act was passed authorizing the formation of telephone companies. It defined their powers as follows : “All such corporations shall have all the rights and powers conferred, and be subject to all the liabilities and duties imposed by the general laws of this state upon telegraph corporations.” It is manifest from the language of these statutes that, if the telegraph statute was in full force at the time the statute for the formation of telephone companies was enacted, then the latter companies have the right to place their posts and wires in the public streets of the defendant. It is contended, however, by the city that the provi — 646 — sion of the act for the incorporation of cities of the first class above quoted repealed that portion of the telegraph statute conferring authority to set poles in “streets,” and that the right created by that act was, after the passage of the municipal charter act, confined to country highways. Controversies almost identical in character have been frequently before the courts, and the decisions have been uniformly opposed to defendant’s contention here. A statute of Wisconsin authorized the formation of corporations for the purpose of building and operating telegraph lines, empowering them to construct and maintain such lines upon, along, or across any public road or highway. A law, subsequently passed, under which the city of Oshkosh was incorporated, granted to the mayor and council authority to “regulate, control and prohibit the location, laying, use and management of telegraph, telephone, and electric light and power wires and poles in the public streets and alleys.” Acting under the power which they claimed to possess by this charter, the.municipality undertook to compel the Wisconsin Telephone Company to remove its poles and wires from the city. In sustaining the rights of the company under the state statute, notwithstanding the power given by the charter to “prohibit” their exercise, the Supreme Court of Wisconsin uses the following language: “Undoubtedly the common council had authority, and it was its duty, by ordinances, resolutions, or by-laws, to control and regulate the streets, alleys, and public grounds of the city, and to remove and abate whatever might be fairly regarded, as an obstruction or encroachment thereon. Subsection 30, § 3; sube. 6, ■ c. 183, p. 709, Laws 1883. The same section declares that the common council shall have like authority ‘to regulate, control and prohibit the location, laying; use and management of telegraph, telephone and electric light and power wires and poles.’ But we do not think this was designed as giving to the municipalities absolute authority to remove such poles and wires entirely from the city, nor to exclude such companies altogether from carrying on or operating their business within the corporate limits of the city, but simply to regulate the same, and to prohibit such location in improper places. Otherwise the municipalities of the state would have the power to nullify what the legislature had expressly authorized.” Wis. Tel. Co. v. Oshkosh, 62 Wis. 32, 21 N. W. 828. A statute of the state of Michigan, passed in 1833, providing for telephonic and messenger service corporations, contained this provision: “Every such corporation shall have power to construct and maintain lines of wire for use in the transmission of telephonic messages along, over, across or under public places, streets, highways,” etc. The municipal corporation act of the same state, passed in 1895, grants to the city council “authority to regulate or prohibit the use or placing of telegraph, telephone or light poles in or over the streets.” The Supreme Court of the State of Michigan, in Michigan Telephone Company v. City of Benton Harbor, 80 N. W. 386, held that the latter statute did not repeal the former, nor vest municipalities with power to take away the right therein granted to telephone companies. On the contrary, it was decided that the word “prohibit” must be construed as simply granting authority to make proper regulations to preserve to the public the use of the streets as common highways of travel. Speaking to this point, the court says: “It is, bowever, insisted that Act No. 215, p. 441, Pub. Acts 1895, under which the defendant was incorporated, repeals the telephone act in so far as — 647 — It may be held to authorize the use of highways and streets for the erection of poles without the consent of the municipality.” And after quoting the above provision of the charter act, the court proceeds: “The title of this chapter [chapter 22] is ‘Streets and Public Grounds,’ and the above language is found near the middle of the section, which specifies various subjects upon which the council may legislate. Repeals by implication are not favored. To this proposition it is unnecessary to cite authorities. The intent to repeal must very clearly appear, and courts will not hold to a repeal if they can find reasonable ground to hold the contrary. Merrill v. President, etc., 35 Mich. 24; Conners v. Iron Co., 54 Mich. 168, 19 N. W. 938. This case forcibly illustrates the danger of holding general laws repealed by implication in granting charters to municipal corporations. Did the Legislature intend by the above law for the organization of cities to confer upon those municipalities the power to annul the law in regard to telegraph and telephone companies, and to entirely prohibit the use of the telegraph and telephone, which have become essential in commercial transactions. Clearly, such an intention should not be attributed to the Legislature unless the language of the law leads to no other conclusion. We see no difficulty in giving effect to both laws by holding that the latter act confers this authority upon municipalities, subject to the general laws of the state in regard to the use of its streets and highways for telegraph anl telephone purposes. These municipalities may, under this law, prohibit the erection of these poles in places and in a manner which will injure or incommode the public. This was the view taken by the Supreme Court of Wisconsin under a similar decision. Telephone Co. v. City of Oshkosh, 62 Wis. 32, 21 N. W. 828.” In 1860 the Legislature of the state of Minnesota passed a law granting to telegraph companies “the power and right to use the public roads and highways of this state for the purpose of erecting posts or poles on or along the same to sustain the wires or other fixtures.” Laws 1860, p. 106, c. 12. In 1881 this statute was so amended as to include telephone companies. Laws 1881, p. 84, c. 73. The charter of the city of Minneapolis, subsequently passed, granted the following authority to the council: “To regulate and control or prohibit the placing of poles and the suspending of electric or other wires along or across the streets of said city and to require any or all already placed or suspended either in limited districts or throughout the entire city to be removed or to be placed in such manner as it may designate beneath the surface of the street or sidewalk.” The Supreme Court of Minnesota, in the case of Northwestern Telephone Exchange Company v. City of Minneapolis, 86 N. W. 69, held that a fair construction of both these statutes confined the city to a reasonable exercise of its police powers. The statutes referred to in these decisions from Wisconsin, Michigan, and Minnesota present quite as strong a conflict as exists between the telephone statute of Kansas and the act providing for the incorporation of cities of the first class. In the one case by the letter of the statute the mayor and common council of cities are vested with authority to prohibit the exercise of a right granted by the Legislature of the state. In the other case the municipal authorities are authorized to grant, and by implication to refuse, a right of way already granted by state statute. Surely there is as strong a conflict between the grant of power upon the one hand and the right to prohibit its exercise upon the other as there is between the issuance of the same right from two — 648 — authorities, the one superior and the other inferior. The power to prohibit is as incompatible with the existence of a right as the power to grant the same right. We therefore find less difficulty in disposing of the present case upon the same grounds as guided the courts in the cases above cited than was presented to them by the statutes which they had under consideration. The cardinal rule is that repeals by implication are not favored. Such a construction is adopted only when no other reasonable construction can be found. “The implication of a legislative intent to repeal,” says the Supreme Court of Kansas in Stephens v. Ballou, 27 Kan. 594, “must be such as to satisfy the mind beyond a reasonable doubt.” See, also, Keirsey v. Labette Co., 30 Kan. 576, 2 Pac. 864; Hornady v. State, 63 Kan. 499, 65 Pac. 656; Wood v. United States, 16 Pet. 342, 10 L. Ed. 987; Red Rock v. Henry, 106 U. S. 596, 1 Sup. Ct. 434, 27 L. Ed. 251; Frost v. Wenie, 157 U. S. 46, 58, 15 Sup. Ct. 532, 39 L. Ed. 614. The same rule has been declared and enforced by this court in Stryker v. Board of Commissioners, 77 Fed. 582, 23 C. C. A. 286, and Board of Commissioners v. Ætna Life Ins. Co., 90 Fed. 222, 32 C. C. A. 585, cases in which the inconsistency between the statutes under consideration was quite as great as in the present case. We believe that the legislative purpose is given effect when the right granted by the general statute is preserved on the one hand and the full exercise of the police power by way of regulation is upheld on the other. Such has been the uniform holding of the courts. Am. Union Tel. Co. v. Town of Harrison, 31 N. J. Eq. 627; Township of Summit v. N. Y. & N. J. Tel. Co., 57 N. J. Eq. 123, 41 Atl. 146; Rochester v. Bell Telephone Co. (Sup.) 64 N. Y. Supp. 804; Zanesville v. Telegraph & Telephone Co., 64 Ohio St. 67, 59 N. E. 781, 52 L. R. A. 150, 83 Am. St. Rep. 725; Abbott v. City of Duluth (C. C.) 104 Fed. 833. The only decisions that are in apparent conflict are State v. City of Spokane (Wash.) 63 Pac. 1116, and Southern Bell Telephone Co. v. City of Richmond, 103 Fed. 31, 44 C. C. A. 147. Here the conflict, however, is only apparent, for in both these cases the state statute which granted the right to the telephone company contained a provision that it could only be exercised by the consent of the local authorities. The action of the Legislature of Kansas furnishes strong reason for belief that it did not intend to repeal the act of 1868 in relation to telegraph corporations by the statute providing for the organization and government of cities of the first class. There have been two general revisions of the statutes of that state since the latter act was passed— one in 1889, the other in 1899. In both of these revisions the two statutes under consideration are carried forward without change. If it had been the intention of the Legislature by the act for the incorporation of cities to repeal the former statute in so far as the same relates to cities, there would have been some change in the language to indicate this change of purpose. The word “streets” would at least have been stricken out of the former law in these revisions. No such change, however, has been made, and this affords a strong inference that no purpose existed in the mind of the legislature to repeal any part of the statute of 1868. — 649 — Again, it should be remembered that the act of 1868 relates exclusively to telegraph corporations. The municipal charter act vests in the mayor and council power to grant the right of way to such corporations as well as to other companies mentioned in the section. It is, however, a matter of common knowledge that in 1866 Congress passed' a statute which grants to telegraph companies the right to set their poles and stretch their wires along all post roads, and that all letter carrier routes established in any city or town for the collection and delivery of mail matter constitute post roads. The record in this case is silent upon the subject, but it is altogether probable that in cities of the first class in the state of Kansas free mail delivery systems were in force at the time the municipal charter act was passed in 1881, and that such routes have been in existence in those cities down to the present time. A great body of litigation in the federal courts as well as in the state courts informs us that all the telegraph companies of the country promptly accepted the provisions of the act of July 24, 1866 (14 Stat. 221, c. 230). See, for example, as to the Western Union Company, Pensacola Tel. Co. v. W. U. Tel. Co., 96 U. S. 1, 24 L. Ed. 708; and as to the Postal Company, Postal Tel. Co. v. Alabama, 155 U. S. 485,15 Sup. Ct. 192, 39 L. Ed. 231. It is therefore manifest that telegraph companies have at all times since the passage of the municipal charter act in Kansas been entitled, under this federal statute, to occupy the streets of cities of the first class in that state. Their “right of way” there has not been dependent upon municipal consent. Notwithstanding this fact of common knowledge, the Legislature of the state of Kansas has kept in force the statute which, it is urged by the defendant, vests municipal authorities with power to grant and impliedly to refuse to grant such right of way. This statute cannot be construed as we are thus asked to construe it, without rendering it void. If we adopt the construction that it is intended simply to vest in the local authorities police power over the subject, the act then becomes harmonious not only with the other statutes of Kansas, but with this federal enactment. We ought not to entertain the view that the legislature of Kansas has kept this statute in force during all these years with respect to telegraph companies, intending thereby to confer upon municipalities power which would be directly in conflict with federal law. It necessarily follows that, if the right exists in the case of telegraph companies to occupy the streets, subject only to reasonable regulation under the police power, the same right exists in the case of telephone companies, for they, by the express provision of the statute of Kansas, possess all the rights and powers of telegraph companies. There is clearly a verbal conflict between these statutes. It is easy to build up a purely verbal argument which would justify the construction that the former statute was repealed by the latter, but, if we look at the general purpose of the two statutes as the courts of the several states have viewed similar enactments, all real conflict disappears. The construction which reserves to the local authorities the police power over the subject is most consistent with the business to be regulated. Local telephone exchanges are coming to be, in relation to the general telephone business, quite similar to local telegraph offices with respect — 650 — to the general telegraph system. The long-distance telephone is becoming national in its scope. We feel justified in holding that the Legislature of Kansas did not intend to vest in any municipality power to destroy a general system of telephone exchanges extending not only over the entire state, but over several states. The state as a whole is interested in the subject, as well as the city. Furthermore, the extraordinary power which the mayor and council of the city of Wichita are seeking to exercise is such as can only be sustained when resting upon unquestioned right. The local telephone exchange of the Kansas & Missouri Telephone Company has existed in that city for nearly twenty years. It has been built up gradrially. It represents an investment of many thousands of dollars. The municipal authorities claim the power to destroy this large property. Their contemplated action can have no other result. A telephone exchange is not movable property. To remove it is to destroy it. The city makes no complaint that the telephone corporation has not promptly and faithfully complied with all municipal regulations. It claims the right not to regulate, but to expel. It is our conclusion that it does not possess that power. It is possible that such a situation might exist in a city as to justify the refusal to admit a telephone company to the streets and alleys thereof. If the city was already adequately served, and the establishment of a new system would greatly incumber the streets, it might be that in the exercise of the police power a city could properly exclude a company entirely from entering upon its streets or alleys. But no such situation is presented in this case. The city has allowed this corporation to enter upon its streets and alleys and build up this vast property. There is no contention that the primary use of the streets of the city has been seriously impaired. The whole conflict has risen not as the result of a dispute about proper regulation, but as to other and entirely foreign matters; such as the requirement that the company pay 5 per cent, of its gross receipts to the city as a license tax, and that it furnish telephones to patrons at a price to be fixed by the council. The decree in this case is general in its language. Some of its provisions might possibly be construed as dealing with the police power of the city. No such question, however, was before the trial court. The decree must be construed as speaking only to the issues which were upon trial. If any controversy shall hereafter arise between the telephone company and the city in respect of the exercise of any police power on the part of the latter, such controversy should not be dealt with under the decree in this case, but should be considered in an independent suit. As thus explained, the decree is affirmed.