Mountain States Telephone & Telegraph Co. v. People ( 1920 )

Mr. Justice Bailey

delivered the opinion of the court.

The action is in quo warranto, brought by the People on relation of O. Clinton Wilson acting in a purely private capacity, having admittedly no interest other than such as is common to all taxpayers in the community, to oust the defendant from an alleged exclusive franchise right or privilege to occupy the streets and alleys of the City and County of Denver for the purpose of giving telephone service. The complaint was amended by striking out the word “exclusive” before the words “public franchise right or privilege.”

A demurrer to the amended complaint was interposed upon two grounds: (1) That the relator shows no right whatever to maintain the action, and (2) That the complaint as amended does not state facts sufficient to constitute a cause of action. This demurrer was overruled, and the defendant answered.

To the answer the relator filed a replication, the first paragraph of which contained a general demurrer. The case was heard upon such demurrer. The defendant sought to have the demurrer carried back to the complaint as amended, but the court denied that request, and sustained the demurrer to the answer. Thereupon the defendant elected to stand by its pleadings and cause as made, and final judgment, not of ouster from the exercise of an exclusive privilege, but an absolute and unconditional ouster from the streets of the city was entered. On this record the defendant brings the case here for review. ' It will be observed, therefore, that the issues involved, to which the assignments of error are directed, are of law only.

The answer sets forth in addition to many other claims and defenses, certain specific matters, which tend to establish that the complaint fails to state facts sufficient to constitute a cause of action, that question having been, raised, in the first instance, by demurrer to the complaint. Upon such demurrer it was argued that the right to maintain this action in any event, did not and could not exist until the duly constituted city authorities had taken appropriate action to terminate and revoke the license to the defendant to be in its streets and alleys, the existence of which license the complaint admits.

The facts thus stated in the answer, the truth of those which are material and well pleaded being admitted by the demurrer, are in substance: That since 1879 the defendant, and its predecessors in interest, have occupied the streets and alleys of the City of Denver, with its telephone lines and equipment, under the formal written permission, and by and with the consent of the duly constituted official authorities thereof, subject always to reasonable police control and proper general regulation. That under such license the defendant company, and its predecessors in interest, constructed its plant within the city limits, at a cost of approximately four millions of dollars, that such plant is a vital and integral part and parcel of an interstate system, extending into and throughout the States of Colorado, New Mexico, Idaho, Utah, Texas, Wyoming and Arizona, constructed at a cost of approximately thirty-six millions of dollars, and of that value, which, if this company is compelled to abandon its Denver connections, would not only be greatly damaged and impaired, but practically destroyed. That just presently before the commencement of this action the defendant had expended over a million dollars in placing underground within the city certain of its lines, under the supervision, upon the authority and by order of the city officials. That as a consideration for such license to so use its streets and alleys, the city had demanded, and at all times had received, for its public business and for the use of certain of its officers,' partially free telephone service. That the city had permission, at all times and without charge, to string and operate its fire alarm and police wires upon the poles -of the defendant, so erected in the city, has done so and still continues to do so. That there never has been an attempt in any way, or at all, by the duly constituted authorities, or by any one whomsoever, to annul, terminate, set aside, alter, withdraw or revoke such license, and that the same is now and at the time of the commencement of this suit was, and still continues to be in full force and effect, and is so recognized, acknowledged, acquiesced in and acted upon by the municipality, which is now receiving and accepting from the defendant telephonic service. That from time to time improvements upon, additions to and extensions of the plant of the defendant have been made with the consent and approval of the city, under its general regulation and police inspection. That the major portion of such improvements, additions and extensions, so as aforesaid made, have been so made within the twelve years next preceding the commencement of this action.

It is thus shown that the defendant had a license from the city to construct a telephone plant, which has been constructed, is being operated and public service being given. In view of the fact that there has been expended, in the construction, additions and extensions of the plant a vast sum of money, that the city has consented to such construction, additions and extensions, has permitted the operation of such plant, has accepted, and still is accepting, valuable considerations for extending such privileges, is still receiving service therefrom, and has taken no step to revoke the license under which the company operates, it would be illogical and unreasonable to hold that a private individual, with no interest other than such as is common to every taxpayer in the municipality, could, under such circumstances, maintain an action of absolute ouster against it. This becomes the more apparent when it is considered that the municipality, through its legislative authorities, has power to revoke licenses, and that a like power is vested in the people, as a whole, through the initiative to bring before the electorate ordinances revoking licenses, with full authority in the voters to give expression through the ballot, to their will on the subject.

By these acts of regulation, supervision and control through its proper officials the City and County of Denver has and does recognize the right of defendant to continue in its streets and in effect requires and demands such continuance.

Under the allegations of the answer, and there is no dispute as to the facts, it seems clear that the telephone company, being in the streets by permission of those having power to extend such privilege, is not a trespasser, and that no action in quo warranto could, under such conditions, be maintained. Without regard to the duration or extent of the right of the telephone company to occupy the streets and alleys of Denver, which we neither consider nor determine, upon authority it is plain that it has such right, so long as the city, in the exercise of jurisdiction, accepts service from it, fails to revoke or attempt to revoke its right to be in its streets, and assumes generally to regulate and control its course of conduct.

In support of this proposition we direct attention to section 1315 of Volume 3, 5th edition of Dillon on Municipal Corporations, where that learned author said “If the city continues to accept a service of water or light from the company and regulates the rates therefor, this gives implied consent to the continued possession of the streets and operation of the works until such time as the city shall, by reasonable notice, see fit to determine the corporation’s tenure of the privileges.”

East Tennessee Telephone Company v. Board of Councilmen, 141 Ky. 588, 133 S. W. 564, is a case in which the Kentucky Court of Appeals expressly ruled that, although the company’s right to be in the.streets could be terminated, that the right, nevertheless, continues until duly withdrawn. At page 591 of that opinion, the court said: “The council has not yet revoked the permission, and until it is revoked the grantee is rightfully in possession.”-

The principle of these authorities was recognized by this court in Denver Tramway Company v. Londoner, 20 Colo. 150, and also in Board of Public Works v. Denver Telephone Company, 28 Colo. 401, 37 Pac. 723. The answer discloses that the city has accepted and continues to accept, service from the company, and has regulated its affairs in such a way as to bring the case definitely within the rule laid down by Dillon, supra, particularly since its right to be in the streets, as appears from such answer, has never been revoked. It is clear, therefore, that when this suit was brought no cause of action for ouster had accrued in behalf of anyone, and that a judgment of dismissal, without prejudice, should have been rendered by the trial court.

If there has ever been any doubt as to the propriety and soundness of this proposition, it has been finally set at rest by two late decisions of the United States Supreme Court, one the City and County of Denver v. Denver Union Water Company, 246 U. S. 178, 62 L. Ed. 649, 38 Sup. Ct. 278, and the other The Detroit United Railway v. City of Detroit, 248 U. S. 429, 63 L. Ed. 341, 39 Sup. Ct. 151. In both cases it was conceded that all street rights had terminated, and that the municipalities in question were free to proceed with ouster suits against the respective utilities. Instead of doing this the municipalities undertook to still regulate the conduct of the business of these companies within their borders and by so doing, the United States Supreme Court, declared, made it lawful for the utilities to continue in the use and occupation of such streets and alleys. These decisions definitely support the contention that this action is premature.

In the Denver Union Water Company case, although the franchise term had expired, and although that fact had been judicially declared, thereafter the City and County of Denver enacted an ordinance regulatory of the rights and privileges of that company. At page 188 of the opinion, the effect of such an ordinance is discussed, in the following terms: “The practical situation existing at the time of its enactment (referring to the enactment of the regulatory ordinance) is sufficiently clear from what has been said. The answer admits the averment of the bill that complainant has been and is compelled to continue to serve the city and its inhabitants with water, because there is no other supply of water available, and a cessation of its service would result in great suffering, damage and loss of life. The city is located in a semi-arid region, and is and for nearly a half century has been, absolutely dependent upon the continued operation of complainant’s system. The termination of the legal franchise in 1910 did not absolve the city from its duty to the inhabitants.' At the time of the enactment of the ordinance of 1914, the company’s plant had been in use for four years since the expiration of the former franchise, * * *.

“It is in the light of all these circumstances that the provisions of the ordinance of 1914 must be read. There is'a preamble reciting that since 1910 the company had been without franchise and a mere tenant by sufferance of the streets, and that, while it had been supplying the city and its inhabitants with water, it had done so ‘at rates that are excessive and that should be reduced and regulated: accordingly’; and there is a declaration that the enactment is made without recognizing the company’s right to occupy the streets or to continue its service, but for the purpose of regulating and reducing its charges ‘during the time it shall further act as a water carrier and tenant by sufferance of said streets.’ But the enacting provisions, in the terms employed and by necessary intendment, are inconsistent with these declarations, and must be taken to override them. The first section establishes, as the maximum charges permitted to be made by the company, a detailed schedule of ‘semi-annual water rates payable in advance on the first day of May and November of each year.’ The various uses are specified, and many of these are of kinds that cannot be discontinued on brief notice. There is a special rate for irrigation by the season, May 1 to November' 1. There is a provision for meter rates, payable monthly, with á clause requiring the company to instal a meter for any person desirous of using water by meter. Section 2 provides that for hydrants, including ‘those which may thereafter be ordered by the council to be set upon existing mains or upon extensions thereof’, the city shall pay annual rentals. And § 4 imposes fines- upon the coihpany and its agents for any violation of the ordinances.

“Of course, these provisions are of themselves inexplicit; but in attributing a meaning to them the choice is between a liberal construction that preserves the substantial rights -of both parties and a strict construction, highly penal and •destructive in its effect upon both. The subject-matter was a prime necessity of life, for which there was no substitute available. The very act of regulating the company’s rates was a recognition that its, plant must continue, as before, to serve the public needs. The fact that no term was specified is, under the existing circumstances, as significant of an intent that the service should continue while the need existed as of an intent that it should not be perpetual. Without attributing to the initiators and to the city council a purpose to subject the inhabitants to grave danger of disease or worse, we cannot read the enacting provisions as leaving the company actually without the right to maintain its plant in the city thereafter, for necessarily this would leave it at liberty to discontinue the service at will. The alternative, which we adopt, is to construe the ordinance as the .grant of a new franchise of indefinite duration, terminable either by the city or by the company at such time and under :such circumstances as may be consistent with the duty that both owe the inhabitants of Denver. It recognizes the dependence of the city upon this plant; by necessary implication confers upon the company whatever privileges may be necessary to enable it to continue serving the public, in effect requires it to furnish water, and in terms prohibits it from exceeding the specified rates.” * * *

The doctrine of'the Denver Union Water Company case was again announced in the Detroit case. In that case the franchise right in certain streets had expired. There was no dispute upon this point. Still the municipality sought to regulate the conduct of the business of the railroad company within the city limits, including the business of the company over and through streets upon which it had no franchise, and upon such facts the United States 'Supreme Court said: “A principal ground upon which the bill was dismissed by the district court was the view of the learned judge that the power to compel the company to remove its tracks from the streets involving the .non-franchise roads included the right to fix terms of continued operation upon such lines, whether remunerative or not. We cannot agree with this view. In our opinion the case in tills respect is ruled in principle, by Denver v. Denver Union Water Co., 246 U. S. 178. In that case the franchise of a water company had expired, and the city might have refused the further use of the streets to the company. Instead of doing this it passed an ordinance fixing rates and requiring certain duties of the company. We held that in that situation the company was entitled to make a reasonable return upon its investment. So here, the city might have required the company to cease its service and remove its tracks from the non-franchise lines within the city. Instead of taking this course the city enacted an ordinance for the continued operation of the company’s system, with fares and transfers for continuous trips over lines composing the system whether the same had a franchise or not. This action contemplated the further operation of the system, and fixed penalties for violations of the ordinance. By its terms the ordinance is to continue in force for the period of one year, unless sooner amended or repealed. This was a clear recognition that until the city repealed the ordinance the public service should continue, with the use of the streets essential to carry on further service. Within the principles of the Denver case this service could not be required without giving to the company, thus affording it, a reasonable return upon its investment. In the Denver case we said: ‘The very act of regulating the company’s rates was a recognition that its plant must continue, as before, to serve the public needs. The fact that no term was specified is, under the existing circumstances as significant of an intent that the service should continue while the need existed as of an intent that it should not be perpetual.’

“In the present case the service upon the terms fixed in the ordinance is continued for a year, the city reserving the right to repeal the ordinance at any time.

“It is clear that the city might have taken a different course by requiring the company to remove its tracks from the ñon-franchise lines; it elected to' require continued maintenance of the public service, doubtless because it was believed that it was necessary in the existing conditions in the city to continue for a time at least the right of the railway company to operate its lines. This amounted t'o a grant to the company for further operation of the system, during the life of the ordinance.”

The foregoing authorities hold, in effect, that before ouster proceedings against the telephone company can be maintained, the city must abandon its powers of regulation over it, or at least decline to exercise them, and revoke or attempt to revoke, by proper legislative action, the right of the company longer to continue in its streets, and decline to accept service from it.

The judgment is reversed, and the cause remanded, with ■directions to dismiss the proceeding, without prejudice to the rights of all concerned.

Decision en banc.

Mr. Chief Justice Garrigues and Mr. Justice Burke concur.