City of Mitchell v. Board of Railroad Commissioners

WHITING, J.

The Dakota Central Telephone Company, hereinafter spoken of as the company, owns and operates telephone lines extending over various portions of this state, and included within its properties are local telephone systems in many of our cities; among such cities are Mitchell and Huron, hereinafter spoken of as plaintiffs. Prior to the late war, the systems in'plaintiff cities were operated under franchises granted by plaintiffs, which franchises purported to fix the maximum rates that might be charged for telephone services. The company had accepted the rates as fixed by the Mitchell franchise. Whether it ever accepted those fixed in the Huron franchise is a matter now in dispute. When the federal government took over the telephone systems of the country, it raised the rates to be charged for telephone service throughout this state. In anticipation of the return of its lines to its control and management, the company, some months prior to such return, petitioned the Board of Railroad Commissioners of this state, hereinafter spoken of as the Board, and sought from' such Board authority to continue such higher rates in effect when such lines should be returned to their control. A hearing was had at which the justness of the rates' seems to have been thoroughly investigated. The-Board granted the relief asked by such company. By certiorari proceedings, plaintiffs seek to have the legality of the action taken by such Board determined by this court. While a separate proceeding has been instituted by each plaintiff, the two were submitted together *436 upon one set of printed records, and will both be disposed of in this decision.

[x] For the purposes of this decision, we will assume that the company accepted the rates fixed in both franchises. It is unquestioned that the Board had, under the police power of the state full power over the rates to be charged for telephone services in this state, unless such power 'had been limited by a constitutional provision hereinafter referred to. The real question before us is, Has the Board power to authorize a telephone company to charge rates for telephone service within a municipality in excess of the maximum rates specified in a franchise granted by such municipality and accepted by the telephone company?

[2] Section 3, art. 10, of the state ‘Constitution provides that—

“No * * * telephone line shall be constructed within the limits of any * * * city without the consent of its local authorities.”

This court held, in City of Mitchell v. Telephone Co., 25 S. D. 409, 127 N. W. 582 , that a city had the right to impose conditions to its consent, and that the acceptance of such conditions was binding upon the telephone company. Relying upon the above holding, plaintiffs contend that there exists between them and the company valid and binding contracts which the Board is without power to impair. Plaintiffs urge that, by giving to them the power to refuse permission to the compan)r to construct lines within their corporate limits, and therefore power to impose conditions upon the grant of such permission, the Constitution has lodged in plaintiffs the exercise of police power; and that, to the extent to which such power has been lodged in them, the Constitution has restricted the exercise of such power by any other state agency. Certainly, if this section of the Constitution has conferred upon these cities the power to fix charges for public service as a condition to allowing plaintiff to enter such cities," then a binding contract exists. City of Watertown v. Watertown Light & Power Co., 42 S. D. 220, 173 N. W. 739 ; Southern Iowa Electric Co. v. City of Chariton, 254 U. S....., 41 Sup. Ct. Rep. 400, 65 L. Ed. -.

[j] Of course it is conceded that the Constitution does not expressly confer such police power upon municipalities, and that, if it is conferred, it is by implication. Courts should hesitate to *437 hold that a sovereign power of the state, the free exercise of which by the proper agencies of the state might be essential to the general welfare of the state, such as the police power, has, by implication, been taken from legislative control and lodged, even in part, with the municipalities of the state. -Courts should also hesitate to hold that, by implication, the Constitution has conferred upon municipalities a power through the exercise of which it might be able to confiscate the property of public service corporations. As stated by the late Chief Justice White, in City of San Antonio v. San Antonio Public Service Co., 254 U. S. --, 41 Sup. Ct. 428:

“The fact is that all the contentions of the city * * * but illustrate the plainly erroneous theory upon which the entire argument for the city proceeds; that is, that limitations by contract upon the power of government to regulate the rates to be charged by a public service corporation are to be implied for the purpose of sustaining the confiscation of private property.”

[4] By legislative enactment, certain police powers are expressly conferred on municipalities; but to so confer a power subject to future legislative control is far different from conferring indefinite powers by implication.

[5] To give the above section of the Constitution a construction that might and certainly frequently would bring about situations under which public service corporations enjoyed rights in conflict with the general well-being of the state would render it inconsistent with section 4, art. 17, of such Constitution, which specifically provides that—

“The exercise of the police power of the state shall never be abridged or so construed as to permit corporations to conduct their business in such manner as to infringe the equal rights of individuals or the general well-being of the state.”

The state of 'Pennsylvania has constitutional provision (Const, art. 17, § 9) the same as section 3, art. 10, supra. In a case on all fours with this one, except that street car rates were involved, being the case of City of Scranton v. Public Service Commission, 268 Pa. 192 , 110 Atl. 775 , the court declared:

“While the constitutional provision requiring the consent of a municipality to the construction of a street railway within its limits is clear and can have but one meaning, it must be read in *438 connection with the equally clear third section of article ió of the Constitution, which declares that—

" ‘The exercise, of the police power of the state shall never be abridged or so construed as to permit corporations to conduct their business in such manner as to infringe the equal rights of individuals or the general well-being of the state.’ * * *

“Street passenger railways 'have become necessities. * * * Though this is so, they cannot be operated in any municipality without its consent. With such consent they may be, and, as between the local authorities and the railway companies, there may be attached to it terms and conditions which must be performed by the companies, but a municipality may not annex such terms to its consent as will deprive the commonwealth of its inherent police power to see that a street passenger railway company is not prevented from serving the public by the municipality’s enforcement of conditions in a consenting ordinance that have become impossible of performance. What may have been a reasonable rate of fare at the time of the passage of a consenting ordinance may, under changed economical conditions, become confiscatory, and a street passenger railway company may not be able to serve the public on account of insufficient revenues, based upon the fare fixed in the ordinance. When such situation arises, as it has arisen and will arise again, there must be relief somewhere to the public, and it lies in the police power of the state, which is never to be abridged nor bartered away.”

See, also, City of San Antonio v. San Antonio Public Service Co., supra.

In City of Woodburn v. Public Service Commission, 82 Or. 114 , 161 Pac. 391 , L. R. A. 1917C, 98, the court said:

“When examining the contention urged by the municipality', we must not lose sight of the fact that the right to regulate rates by changing them -from time to time as the welfare of the public may require is essentially a police power; and, since the right to regulate rates is an inherent element of sovereignty, when seeking to ascertain whether this part of the police power' has been conferred upon the city, either with or without limitation, we are constantly governed by the rule that the delegation of the sovereign right to regulate rates must be clear and‘express, and 'all doubts must be resolved against the city. Home Tele *439 phone Co. v. Los Angeles, 211 U. S. 265 , 29 Sup. Ct. 50, 53 L. Ed. 176 ; Milwaukee Elec. Ry. v. Wisconsin R. R. Com., 238 U. S. 174 , 35 Sup. Ct. 820, 59 L. Ed. 1254 ; Benwood v. Public Service Commission, 75 W. Va. 127 , 83 S. E. 295 , L. R. A. 1915C, 261; State ex rel. Webster v. Superior Court, 67 Wash. 37 , 120 Pac. 861 , L. R. A. 1915C, 287, Ann. Cas. 1913D, 78; City of Manitowoc v. Manitowoc & Northern Traction Co., 145 Wis. 13 , 129 N. W. 925 . Quoting from Charleston Consol. Ry. & Lighting Co. v. City Council, 92 127, 75 S. E. 390 .

“ ‘The state’s power to regulate by compulsion the charges of public service corporations is one of such vast and increasing importance to the public that the courts will not attribute to the state the intention to part with it or to delegate it unless the intention is clearly and unmistakably expressed.’ ”

[6] We are of the opinion that section 3, art. 10, gave to plaintiffs no police power whatsoever. We should so hold even in the absence of section 4, art. 17, as we agree that any delegation of police power must be clear and express, and certainly, in the lig'ht of section 4, art. 17, we could not hold that the people intended, by section 3, art. 10, to do by implication the very thing which, by section 4, art. 17, they forbid the -Legislature from doing. We are therefore of the opinion that, while plaintiffs had the right, when granting permission to the company to establish lines within their territory, to impose conditions which, when accepted, became binding contracts, such conditions must not conflict with the provisions of section 4, art. 17, of the Constitution. Southern Iowa Electric Co. v. City of Chariton, 254 U. S. -, 41 Sup. Ct. Rep. 400, 65 L. Ed. -; City of Lead, etc., v. Western Gas & Fuel Co., 44 S. D. 510, 184 N. W. 245 , handed down herewith.

It follows that the Board acted withip its jurisdiction in making the orders sought to 'be reviewed, and that the present proceedings should be dismissed. They are dismissed, at plaintiffs’ costs.