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(211 U. S. 265)

HOME TELEPHONE & TELEGRAPH COM- | fact accorded by ordinances providing that

PANY, Appt.,

V.

CITY OF LOS ANGELES, A. C. Harper,
Mayor, and R. W. Dromgold, Edward A.
Clampitt, Walter J. Wren, Niles Pease,
A. J. Wallace, Henry H. Yonkin, Henry
Lyon, Bernard Healy, and Everett L.
Blanchard, Members of the Common Coun-

cil.

TELEGRAPHS AND TELEPHONES (§ 33*) -
RATES.

the rates be fixed at a meeting of the city
council held in February in each year, and
requiring the telephone company to furnish
the city council annually in that month
a statement of its receipts, expenditures,
and property employed in the business.
Law, Cent. Dig. § 847; Dec. Dig. § 298.*]
TELEGRAPHS AND TELEPHONES (§ 33*) —
RATES.

[Ed. Note.-For other cases, see Constitutional

5. No valid objection to intrusting a municipal council with the power to regu1. Municipal authority to enter into a contract fixing unalterably, during the term late telephone rates can be based upon the of the franchise, charges for telephone serv- theory that the council is not an impartial ice, and disabling itself from exercising the tribunal because it is, in effect, made a charter power of regulation, must, at the judge in its own case, or that the judgvery least, necessarily be implied from the ment and sense of justice of the councilmen controlling statutes, even if it be conceded will be distorted by their dependence upthat anything less than a clear and affirma- on the will of the people which results a sufficient from a provision in the city charter emtive legislative expression is foundation upon which to rest an authority powering 25 per cent of the electors to recall a member of the council and require of this nature. him again to stand for election.

[Ed. Note.-For other cases, see Telegraphs and Telephones, Cent. Dig. § 21; Dec. Dig. § 23; Municipal Corporations, Cent. Dig. § 1315.] TELEGRAPHS AND TELEPHONES (§ 33*)

RATES.

2. Charter authority to regulate telephone service and to fix and determine the charges therefor does not empower a municipality to enter into a contract fixing unalterably, during the terms of the franchise, the charges for such service, and disabling itself from exercising the power of regulation.

[Ed. Note.-For other cases, see Telegraphs and Telephones, Cent. Dig. § 21; Dec. Dig. § 63.] EQUAL CONSTITUTIONAL LAW (§ 242*)

PROTECTION OF THE LAWS.

6. Municipal regulation of the rates
which a telephone company may charge,
on a lower scale than those prescribed for
a competitor, does not necessarily deny
the equal protection of the laws, since such
competitor may bring its patrons into com-
munication with a larger number of per-
sons, dwelling in a more widely-extended
territory, and may render much more valu-

[Ed Note.-For other cases, see_Telegraphs
and Telephones, Cent. Dig. § 21; Dec. Dig. §able service.
83; Municipal Corporations, Cent. Dig. § 1315.]
TELEGRAPHS AND TELEPHONES ( 33*) al Law, Cent. Dig. § 691; Deo. Dig. § 242.*]

RATES.

3. Municipal authority to contract away the charter power to regulate telephone rates

[Ed. Note.-For other cases, see Constitution

A

[No. 173.]

ber 30, 1908.

cannot be gathered from the provisions of Argued October 21, 1908. Decided Novem-
Cal. act March 11, 1901 (Cal. Stat. 1901, p.
265), under which the telephone company ob-
tained its franchise from the city, that
application for a franchise must be filed,
and, in the discretion of the council, pub-
lished, that the city is entitled to a per-
centage of the receipts, that the grantee
must give bond to perform every term and
condition of the franchise, that no condi-
tion shall be inserted which restricts com-
petition, or favors one person against an-
other, and that the franchise must be sold
to the highest bidder, especially since the
1st section of the act provides that fran-
chises "shall be granted upon the condi-
tions in this act provided, and not other
wise."

[Ed. Note.-For other cases, see Telegraphs and Telephones, Cent. Dig. 21; Dec. Dig. § 33.*]

PPEAL from the Circuit Court of the
United States for the Southern Dis-
trict of California to review a decree sus-
taining a demurrer to the bill in a suit to
restrain the enforcement of municipal
ordinances fixing telephone rates. Affirmed.
See same case below, 155 Fed. 554.
The facts are stated in the opinion.
Messrs. Oscar A. Trippet and A.
Haines for appellant.

Messrs. Leslie R. Hewitt, John W.
Shenk, and W. B. Mathews for appellees.

*Mr. Justice Moody delivered the opin-
ion of the court:

This is a suit in equity brought in the CONSTITUTIONAL LAW (§ 298*)-DUE PROCESS OF LAW-NOTICE AND HEARING. circuit court of the United States by the 4. Municipal ordinances fixing telephone appellant, a telephone company, against the rates do not deny the due process of law city of Los Angeles and its officers. The guaranteed by U. S. Const., 14th Amend., object of the suit is to restrain the enforcebecause the section of the municipal char-ment of certain ordinances which fixed the ter under the authority of which they were enacted does not expressly provide rates to be charged for telephone service; for notice and hearing, where both notice required every person, firm, or corporation and an opportunity to be heard were in supplying telephone service to furnish an

For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

1

nually to the city council a statement of the revenue from, and expenditures in, the business, and an itemized inventory of the property used in the business, with its cost and value; and provided a penalty for charges in excess of the rates fixed and for failure to furnish the required statements. The defendants demurred to the bill, the demurrer was sustained, and an appeal was taken directly to this court on the constitutional questions, which will be stated.

The ordinances complained of were enact ed by virtue of the powers contained in § 31 of the city charter, which is as follows:

"(Sec. 31.) The council shall have power, by ordinance, to regulate and provide for lighting of streets, laying down gas pipes, and erection of lamp-posts, electric towers, and other apparatus, and to regulate the sale and use of gas and electric light, and fix and determine the price of gas and electric light, and the rent of gas meters within the city and regulate the inspection thereof, and to regulate telephone service, and the use of telephones within the city, and to fix and determine the charges for telephones and telephone service and connections; and to prohibit or regulate the erection of poles for telegraph, telephone, or electric wire in the public grounds, streets, or alleys, and the placing of wire thereon; and to require the removal from the public grounds, streets, or alleys of any or all such poles, and the removal and placing under ground of any or all telegraph, telephone, or electric wires."

It was decided by the judge of the court below, and is agreed by the parties, that this section of the charter conferred upon the city council, in conformity with the Constitution and laws of the state of California, the power to prescribe charges for telephone service. Not doubting the correctness of this view, we accept it without extended discussion. The power to fix, subject to constitutional limits, the charges of such a business as the furnishing to the public of telephone service, is among the powers of government, is legislative in its character, continuing in its nature, and capable of being vested in a municipal

corporation.

arises are alleged in the bill and admitted by the demurrer.

The company obtained its franchise under the provisions of a statute of the state enacted March 11, 1901 (Stat. 1901, p. 265), which was later than the adoption of § 31 of the city charter. This statute provides that, among other franchises, "the franchise "to erect or lay telephone wires upon any public street or highway" shall be granted by municipal corporations only upon the conditions prescribed in the act. The conditions enumerated are that an application for the franchise shall be filed with the governing body of the municipality, of which advertisement, in the discretion of the city council, shall be made; that the advertisement must describe the character of the franchise to be granted and state that it will be sold to the highest bidder, who must pay annually to the municipality, after five years, 2 per cent of the gross annual receipts of the business; that the franchise shall be struck off to the highest bidder; and that a bond must be given by the purchaser to secure the performance of "every term and condition" of the franchise. There are other provisions not material here. By proceedings conforming to this statute a franchise to construct and operate a telephone system for fifty years was sold to M. Adrian King, which, by assignment, assented to by the city, came into the hands of the plaintiff company, which constructed the works and has since operated them. The franchise was granted by an ordinance. In the view we take of the case we need do no more than state very briefly the main features of the ordinance. It grants a franchise for fifty years, which is to be enjoyed in accordance with terms and conditions named, stipulates for certain free service for the city, and the payment to it, after five years, of 2 per cent of the gross receipts, and provides that the charges for service shall not exceed specified amounts.

This ordinance, enacted by the city council, which exercises the legislative and business powers of the city, and, as has been shown, the charter power of regulating telephone service and of fixing the charges, contains, it is contended, the contract whose obligation the subsequent ordinances fixing lower rates impaired. Two questions obvi

The company, however, insists that the city, having the authority so to do, has contracted with it that it may maintain the charges for service at a specified stand-ously arise here. Did the city council have ard, and that, as the rates prescribed in the unalterably, during the term of the franthe power to enter into a contract fixing, ordinances complained of are less than that chise, charges for telephone service, and disstandard, the ordinances therefore impair abling itself from exercising the charter the obligation of the contract, in violation power of regulation? If so, was such a conof the Constitution of the United States. tract in fact made? The first of these two This is the first question to be considered, questions calls for earlier consideration, for and the facts out of which the contention it is needless to consider whether a contract

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in fact was made until it is determined this may be found in the cases of Freeport whether the authority to make the contract Water Co. v. Freeport, supra; Rogers Park was vested in the city. The surrender, by Water Co. v. Fergus, 180 U. S. 624, 45 L. contract, of a power of government, though ed. 702, 21 Sup. Ct. Rep. 490; and Knoxin certain well-defined cases it may be made ville Water Co. v. Knoxville, 189 U. S. 434, by legislative authority, is a very grave act, 47 L. ed. 887, 23 Sup. Ct. Rep. 531, where and the surrender itself, as well as the au- no authorized contract was found, as conthority to make it, must be closely scruti- trasted with Detroit v. Detroit Citizens' nized. No other body than the supreme Street R. Co. supra, and Cleveland v. Clevelegislature (in this case, the legislature of land City R. Co. 194 U. S. 517, 48 L. ed. the state) has the authority to make such 1102, 24 Sup. Ct. Rep. 756, where a cona surrender, unless the authority is clearly trary conclusion was reached. delegated to it by the supreme legislature. The general powers of a municipality or of any other political subdivision of the state are not sufficient. Specific authority for that purpose is required. This proposition is sustained by all the decisions of this court, which will be referred to hereafter, and we need not delay further upon this point.

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tract to abandon the governmental power itself. It speaks in words appropriate to describe the authority to exercise the gov ernmental power, but entirely unfitted to describe the authority to contract. It authorizes command, but not agreement. Doubtless, an agreement as to rates might be authorized by the legislature to be made by ordinance. But the ordinance here described was not an ordinance to agree upon the charges, but an ordinance "to fix and determine the charges." It authorizes the exercise of the governmental power and nothing else. We find no other provision in the charter which, by any possibility, can be held to authorize a contract upon this important and vital subject. Those relied on for that purpose are printed in the margin.†

The facts in this case which seem to us material upon the questions of the authority of the city to contract for rates to be maintained during the term of the franchise are as follows: The charter gave to the council the power "by ordinance to regulate telephone service and the use of telephones within the city, and to fix It has been settled by this court that the and determine the charges for telephones state may authorize one of its municipal and telephone service and connections." corporations to establish, by an inviolable This is an ample authority to exercise the contract, the rates to be charged by a pub-governmental power of regulating charges, lic service corporation (or natural person) but it is no authority to enter into a confor a definite term, not grossly unreasonable in point of time, and that the effect of such a contract is to suspend, during the life of the contract, the governmental power of fixing and regulating the rates. Detroit v. Detroit Citizens' Street R. Co. 184 U. S. 368, 382, 46 L. ed. 592, 605, 22 Sup. Ct. Rep. 410; Vicksburg v. Vicksburg Waterworks Co. 206 U. S. 496, 508, 51 L. ed. 1155, 1160, 27 Sup. Ct. Rep. 762. But for the very reason that such a contract has the effect of extinguishing pro tanto an undoubted power of government, both its existence and the authority to make it must clearly and unmistakably appear, and all doubts must be resolved in favor of the continuance of the power. Providence Bank v. Billings, 4 Pet. 514, 561, 7 L. ed. 939, 955; Railroad Commission Cases, 116 U. S. 307, 325, 29 L. ed. 636, 642, 6 Sup. Ct. Rep. 334, 388, 1191; Vicksburg, S. & P. R. Co. v. Dennis, 116 U. S. 665, 29 L. ed. 770, 6 Sup. Ct. Rep. 625; Freeport Water Co. v. Freeport, 180 U. S. 587, 599, 611, 45 L. ed. 679, 688, 693, 21 Sup. Ct. Rep. 493; Stanislaus County v. San Joaquin & K. River Canal & Irrig. Co. 192 U. S. 201, 211, 48 L. ed. 406, 412, 24 Sup. Ct. Rep. 241; New York ex rel. Metropolitan Street R. Co. v. New York State Tax Comrs. 199 U. S. 1, 50 L. ed. 65, 25 Sup. Ct. Rep. 705. And see Water, Light, & Gas Co. v. Hutchinson, 207 U. S. 385, 52 L. ed. 257, 28 Sup. Ct. Rep. 135. It is obvious that no case, unless it is identical in its facts, can serve as a controlling precedent for another, for differences, slight in themselves, may, through their relation with other facts, turn the balance one way or the other. Illustrations of the truth of

†Section 2 (article 1).

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12.) To manage, control, sell, lease, or otherwise dispose of any or all the property of the said corporation; and to appropriate the income or proceeds thereof to the use of the said corporation; provided that it shall have no power to mortgage or hypothecate its property for any purpose.

"(17.) To provide and maintain a proper and efficient fire department, and make and adopt such measures, rules, and regulations for the prevention and extinguishment of fires, and for the preservation of property endangered thereby, as may be deemed expedient.

"(22.) To make and enforce within its limits such local police, sanitary, and oth

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This being the condition of the charter | into the contract. In Los Angeles v. Los powers, the act of 1901, under which the Angeles City Water Co. 177 U. S. 558, 44 company derived its franchise, was passed. L. ed. 886, 20 Sup. Ct. Rep. 736, the con. The 1st section of that act provided that tract was in specific terms ratified and confranchises "shall be granted upon the con- firmed by the legislature. In Detroit v. ditions in this act provided, and not other- Detroit Citizens' Street R. Co. 184 U. S. 368, wise." Here is an emphatic caution against 46 L. ed. 592, 22 Sup. Ct. Rep. 410, the conreading into the act any conditions which tract was made in obedience to an act of are not clearly expressed in the act itself. the legislature that the rates should be In view of this language it cannot be sup- "established by agreement between said posed that the legislature intended that so company and the corporate authorities." significant and important an authority as The opinion of the court, after saying (p. that of contracting away a power of regu- 382), it may be conceded that clear aulation conferred by the charter should be in- thority from the legislature is needed to ferred from the act, in the absence of a enable the city to make a contract or agreegrant in express words. But there is no ment like the ordinances in question, includsuch grant. The argument of the appel- ing rates of fare," pointed out (p. 386) that lant, that the authority was granted, is "it was made matter of agreement by the based upon the provisions of the act that express command of the legislature." In an application for the franchise must be Cleveland v. Cleveland City R. Co. 194 U. S. filed, and, in the discretion of the council, 517, 48 L ed. 1102, 24 Sup. Ct. Rep. 756, published; that the publication must state the legislative authority conferred upon the "the character of the franchise;" that the municipality was described in the opinion city is entitled to a percentage of the re- of the court (p. 534) as "comprehensive ceipts; that the grantee must give bond to power to contract with street railway comperform "every term and condition of panies in respect to the terms and conditions such franchise;" that no condition shall upon which such roads might be constructbe inserted which restricts competition ed, operated, extended, and consolidated." or favors one person against another; In Cleveland v. Cleveland Electric R. Co. and that the franchise must be sold to the highest bidder. It is urged that though authority to contract for the maintenance of rates is not expressed in the act, it is necessarily implied from these provisions. But we are of the opinion that there is no such necessary implication, even if anything less than a clear and affirmative expression would be sufficient foundation upon which to rest an authority of this nature. The decisions of this court, upon which the appellant relies, where a contract of this kind was found and enforced, all show unmistakably legislative authority to enter er regulations as are not in conflict with | tion of the council may be by order upon general laws and are deemed expedient to motion. maintain the public peace, protect property, promote the public morals, and to preserve the heath of its inhabitants.

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201 U. S. 529, 50 L. ed. 854, 26 Sup. Ct. Rep. 513, precisely the same authority appeared. In Vicksburg v. Vicksburg Waterworks Co. 206 U. S. 496, 51 L. ed. 1155, 27 Sup. Ct. Rep. 762, the court said (p. 508): "The grant of legislative power upon its face is unrestricted, and authorizes the city 'to provide for the erection and maintenances of a system of waterworks to supply said city with water, and to that end to contract with a party or parties who shall build and operate waterworks."" Moreover, in this case the construction of the supreme court of Mississippi of its own statutes was fol

"(Sec. 16.) Six members of the council shall constitute a quorum for the transac tion of business, but no ordinance shall be passed or other act done granting a franchise, making any contract, auditing any bill, ordering any work to be done, or supplies to be furnished, disposing of or leas ing the city property, ordering any assessment for street improvement, or building sewers, or any other act to be done involving the payment of money, or the incurring of debt by the city, unless two

thirds of the members of the whole council vote in favor thereof. All other ordinances may be passed by a vote of a majority of the whole council.

"(Sec. 33.) It shall, by ordinance, provide for maintaining a fire alarm and police telegraph system, and for the cleaning and sprinkling of graded and accepted streets."

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lowed. On the other hand, it was held in must not be forgotten that, presumably, the Freeport Water Co. v. Freeport, 180 U. S. courts of the states, and certainly the 587, 45 L. ed. 679, 21 Sup. Ct. Rep. 493, that courts of the United States, are open to two acts of the legislature, passed on suc- those who complain that their property has cessive days, authorizing municipalities to been confiscated by an act of regulation of "contract for a supply of water for public this kind, and that the latter courts will, use for a period not exceeding thirty years," | under all circumstances, determine for and to authorize private persons to con- themselves whether such confiscation exists. struct waterworks "and maintain the same But we need not now decide whether notice at such rates as may be fixed by ordinance, and hearing were required. Both were given and for a period not exceeding thirty years," in this case. An ordinance of the city prodid not confer an authority upon the munici- vided that the rates should be fixed at a pality to contract that the water company regular and special meeting of the city should be exempt from the exercise of the council held during the month of February governmental power to regulate rates. In of each year, and another ordinance, as has this case, too, the construction of the high- been shown, required the telephone company est court of the state was followed. See to render annually, in the month of Febru Rogers Park Water Co. v. Fergus, supra. ary, to the city council, a statement of its All these cases agree that the legislative au- receipts, expenditures, and property emthority to the municipality to make the ployed in the business,-facts which would contract must clearly and unmistakably ap- be material on the question of fixing reasonpear. It does not so appear in the case at able rates. This shows that a sufficient bar. The appellant has failed to show that notice and hearing were afforded to the the city had legislative authority to make appellant, if it had chosen to avail itself of a contract of exemption from the exercise them, instead of declining to furnish all of the power of regulation conferred in the information, as it did. If notice and an charter. It therefore becomes unnecessary opportunity to be heard were indispensable, to consider whether such a contract in fact which we do not decide, it is enough that, was made. The appellant's contention, that although the charter be silent, such notice there was a violation of the obligation of its and hearing were afforded by ordinance, as contract, must therefore be denied. in this case. So, it was held in Paulsen v. Portland, 149 U. S. 30, 38, 37 L. ed. 637, 640, 13 Sup. Ct. Rep. 750, and it was held in San Diego Land & Town Co. v. National City, 174 U. S. 739, 43 L. ed. 1154, 19 Sup. Ct. Rep. 804, that the kind of notice and hearing (in that case provided by statute) which the ordinance in this case afforded was sufficient. For these reasons the contention of the appellant on this part of the case is denied.

The appellant also contends that the ordinances fixing rates are wanting in due process of law, and therefore violate the 14th Amendment of the Constitution of the United States, because the section (31) of the charter, under whose authority they were enacted, does not expressly provide for notice and hearing before action. But rate regulation is purely a legislative function and, even where exercised by a subordinate body upon which it is conferred, the notice and hearing essential in judicial proceedings and, for peculiar reasons, in some forms of taxation (see Londoner v. Denver, 210 U. S. 373, 52 L. ed. 1103, 28 Sup. Ct. Rep. 708), would not seem to be indispensable. It may be that the authority to regulate rates, conferred upon the city council by § 31 of the charter, is not an authority, arbitrarily, and without investigation, to fix rates of charges, and that, if charges were fixed in that manner, the act would be beyond the authority of the council. It is not unlikely that the California courts would give this construction to the ordinance. San Diego Water Co. v. San Diego, 118 Cal. 556, 38 L.R.A. 460, 62 Am. St. Rep. 261, 50 Pac. 633. Acting within the authority thus limited it would seem that the character and extent of the investigation made and notice and hearing afforded, in the exercise of this legislative function, would be left to the discretion of the body exercising it. It

We do not understand that an objection to the ordinance requiring the statement of the appellant's receipts, expenditures, and property is made, except in so far as it is a step in the rate-making process. If a further objection is made, we see nothing in it. See San Diego Land & Town Co. v. National City, supra.

The appellant further insists that the city council is not an impartial tribunal, because, in effect, it is a judge in its own case. It is too late, however, after the many decisions of this court which have either decided or recognized that the governing body of a city may be authorized to exercise the rate-making function, to ask for a reconsideration of that proposition. In this connection the appellant calls attention to the fact that, by the charter of the city, 25 per cent of the electors may recall a member of the council and require him again to stand for election. Nevertheless, he takes part in the rate-making function under his personal

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