Postal Telegraph-Cable Co. v. Associated Press , 162 N.Y.S. 4 ( 1916 )

Smith, J.:

The first contention of the plaintiff is that the Interstate Commerce Act does not require equality of service in the leasing of the wire circuits, hut simply in the sending of messages by the plaintiff itself over its wires. By section 1 of the Interstate Commerce Act it is provided that the provisions of the act shall apply to telegraph, telephone and cable companies engaged in sending messages from one State, territory or district of the United States to another State, territory or district of the United States, “who shall be considered and held to be common carriers within the meaning and purpose of this act.” (24 U. S. Stat. at Large, 379, § 1, as amd. by 36 id. 544, § 7.) Section 3 of the act provides that “it shall be unlawful for any common carrier subject to the provisions of this act to make or give any undue or unreasonable preference or advantage to any particular person, company, firm, corporation, or locality, or any particular description of traffic, in any. respect whatsoever, or to subject any particular person, company, firm, corporation, or locality, or any particular description of traffic, to any undue or unreasonable prejudice or disadvantage in any respect whatsoever.” (24 id. 380, § 3.)

When these contracts were originally made no other contracts were made by or offered to any other news agency which could he held discriminatory under these sections of the Interstate Commerce Act. When, however, in 1915 similar contracts were made under similar circumstancés and conditions with other news agencies at the sum of three dollars per mile per year for night service, although the contracts were for such service between different points than the service contemplated in the contracts in suit, it constituted at least a preference or advantage to a “locality,” and, considering the peculiar service rendered by these news agencies, constituted, I think, a preference to those agencies- with whom the plaintiff contracted for the lesser rate and created an undue and unreasonable prejudice and disadvantage to the defendant." It may be that the plaintiff company was not required to give to any customer the wire service provided for in these contracts. But when this service was generally given and generally offered, it became the duty of the company under the Interstate Commerce Act and under the Kansas act to give such service upon equal terms; and when during the term of the contracts with the defendant such service was given to a rival news agency in competition with the plaintiff, at a lower rate, this came within the prohibition of the acts.

Howsoever the acts be construed, .discriminatory contracts to the prejudice of one party are forbidden by the common law. In Cumberland Telephone & Telegraph Co. v. Kelly (160 Fed. Rep. 316) the rule is stated: “Both telephone and telegraph companies are engaged in a quasi-public service, and * * * without regard to statute, * * * must serve the public without partiality or discrimination.” The same rule was held in Postal Cable Telegraph Co. v. Cumberland T. & T. Co. in the Circuit Court of Tennessee (reported in 177 Fed. Rep. 726), which holds that a Tennessee statute substantially prescribing the duties declared by the Interstate Commerce Act was merely declaratory of the common-law obligation of telephone and telegraph companies, giving a new remedy and imposing severe penalties for non-observance. In Western Union Telegraph Co. v. Call Publishing Co. (181 U. S. 99) the opinion of Mr. Justice Brewer in part reads: “ Common carriers, whether engaged in interstate commerce or in that wholly within the State, are performing a public service. They are endowed by "the State with some of its sovereign powers, such as the right of eminent domain, and so endowed by reason of the public service they render. As a consequence of this, all individuals have equal rights both in respect to service and charges. Of course, such equality of right does not prevent differences in the modes and kinds of service and different charges based thereon. There is no cast iron line of uniformity which prevents a charge from being above or below a particular sum, or requires that the service shall be exactly along the same lines. But that principle of equality does forbid any difference in charge which is not based upon difference in service, and even when based upon difference of service, must have some reasonable relation to the amount of difference, and cannot be so great as to produce an unjust discrimination. To affirm that a condition of things exists under which common carriers anywhere in the country, engaged in any form of transportation, are relieved from the burdens of these obligations, is a proposition which, to say the least, is startling.”

Both, therefore, under the common law and under the Interstate Commerce Act, as well as under the Kansas statute, the plaintiff is forbidden to make discriminatory contracts or contracts which shall create any undue or unreasonable prejudice or disadvantage in any respect whatever as against the defendant.

The second contention of the plaintiff is that the defenses do not allege facts which show that discriminatory rates are given to any of the defendant’s rivals or competitors to its disadvantage or prejudice. It is true that it is alleged that service under any contract made at the lesser rate is not between the same points as the service provided for in the defendant’s contracts. Nevertheless, as before stated, an undue preference or advantage is thus given to those “ localities ” to which the cheaper service is given, and this is forbidden by section 3 of the Interstate Commerce Act. But aside from that we are of the opinion that the complaint alleges sufficient to show a preference given to those companies receiving the lesser rate to the undue and unreasonable prejudice and disadvantage of the defendant itself. The answer states a sharp rivalry and competition between the defendant and other news agencies to whom those contracts are given. We may fairly assume, with the interlacing throughout the whole country of - different telegraph and telephone lines, that the service offered to the defendant’s rivals and competitors at the lesser rate under similar circumstances and conditions must of necessity, although between different points, give to those rivals and competitors an undue advantage. And this fact is explicitly alleged in the answer. Whether or not the proof adduced upon the trial may show any justification for this discriminatory rate given to the defendant’s competitors, the pleading, we think, is sufficient as against the demurrer to present the issue for trial.

The third question presented is, upon the assumption that the rates given to the defendant’s rivals by the later contracts are discriminatory, what effect this act of the plaintiff has upon the defendant’s contracts theretofore made to pay the rate therein prescribed. In 9 Cyc. 582 the rule of law is thus stated: “The law of the place where the contract is entered into at the time of making the same is as much a part of the ■ contract as though it were expressed therein. ” To this proposition many cases are cited from different States, and the rule of law thus stated will hardly be questioned. When the defendant’s contracts were made, therefore, there was written into the same by the statute itself the obligation not to make contracts giving a preference to any locality, and also the obligation not to make a contract in favor of the defendant’s rivals and to the prejudice and disadvantage of the defendant. When, therefore, in 1915, other contracts were made with the defendant’s rivals at a three-dollar rate under similar circumstances and conditions as alleged in the answer, the plaintiff violated its contract with the defendant, which gave to the defendant at least the right to cancel the contract. The defendant was not required to surrender the service, because it had the absolute right thereto under the common law. and under the" statute on account of the public obligation of the plaintiff, and having accepted the service, was clearly liable at least upon a quantum meruit for the reasonable value thereof. Whether the defendant must elect to rescind the contract or may elect to stand upon the same at the lesser rate it is not necessary now to decide. It seems clear that the plaintiff cannot recover more than the rate given to the defendant’s competitors, and the facts showing the discrimination and the breach of the contract by the plaintiff in the giving of these discriminatory rates were, therefore, properly pleaded as a partial defense to plaintiff’s cause of action to recover the full contract price. A recovery upon a quantum meruit may be had under an allegation of service in pursuance of a contract made. (Lockhart v. Hamlin, 190 N. Y. 132; Clapp v. Schaus, 156 App. Div. 683.)

As to the eighth and ninth affirmative defenses pleaded under the laws of the State of Kansas, in which no question of interstate commerce is involved, a somewhat different problem is presented. The Kansas statute as pleaded simply forbids unjust or unreasonable discrimination as to rates exacted by utility corporations within the State. It does not appear that the statute contains any provision such as is found in the Interstate Commerce Act specially prohibiting a discrimination in favor of localities.

There is another distinction which, to my mind, is vital to this determination. While it is alleged that the plaintiff has offered a six-dollar and a three-dollar rate to news agencies between points wholly within the State of Kansas for service similar to that for which the defendant has contracted to pay a twelve-dollar rate, there is no allegation that such service has actually been rendered at the lesser rates within the State of Kansas. So that it does not appear that any discrimination in fact exists for service wholly within that State. An offer to discriminate cannot in law be deemed actual discrimination, and until a lesser rate is given to competing corporations so as to give to such corporations an unfair advantage, the defendant remains liable upon its contract to pay at the twelve-dollar rate.

The order appealed from is, therefore, modified by overruling the demurrer to the affirmative defense alleged in the 7th paragraph of the answer, and as so modified affirmed, without costs, with leave to the plaintiff to withdraw the demurrer as to said defense, and with leave to the defendant to serve an amended answer within twenty days from service of the order to be entered herein.

Clarke, P. J., Scott, Page and Davis, JJ., concurred.

Order modified as directed in opinion and as modified affirmed, without costs, with leave to defendant to amend as stated in opinion. Order to be settled on notice.