People Ex Rel. Public Utilities Commission v. Mountain States Telephone & Telegraph Co.

243 P.2d 397, 125 Colo. 167, 1952 Colo. LEXIS 296

• Court: Supreme Court of Colorado
• Decided: February 11, 1952
• Docket: 16709, 16711
• Status: Published

Opinions

Mr. Justice Moore

delivered the opinion of the court.

By order of this court, causes No. 16709 and No. 16711, pending here on writ of error, were consolidated and one set of briefs captioned in both cases was authorized, such briefs to be considered as filed in both proceedings.

The said cases in the trial court involved identical questions and our considered opinion concerning controlling questions makes it unnecessary to incorporate in this opinion all the contentions of the parties as to the law which should be applied to facts concerning which there is no material conflict. We will herein refer to the City and County of Denver as City, and the Mountain States Telephone and Telegraph Company will be designated as the Telephone Company.

In the year 1919 this court handed down its decision in the case of the City and County of Denver v. Mountain States Telephone and Telegraph Co., 67 Colo. 225, 184 Pac. 604, in which by a four to three decision it was held that the telephone service being rendered by the company in the City and County of Denver, and the rates to be charged therefor, were matters “local and municipal” to the City, and that said service and rates were proper subjects for exercise of the regulatory powers of the City granted in section 6, Article XX of the Colorado Constitution, which authorizes a home rule city to adopt a charter, “which shall be its organic law and extend to all its local and municipal matters.”

Thereafter, and in 1921, the City adopted an ordinance purporting to regulate the telephone rates and service within its boundaries, and telephone service was supplied thereunder without change until 1947. In that year the Telephone Company offered a new service rendered on a uniform basis known as the Denver Metropolitan Exchange Service, covering the metropolitan area, which disregarded the municipal corporate limits of the City and extended to the fringe area surrounding the city limits and the incorporated areas and communities constituting what might be termed the Denver metropolitan area. This new service offering, and the rates to be charged for the same, were approved and concurred in by the mayor, city attorney, and city council of the City by ordinance No. 140 series of 1947 initiated by that council. The rates for the new service were filed with the Public Utilities Commission and approved by it, and the service and rates were placed in effect in October, 1947.

Thereafter, Mel E. Sarpy and Eugene Frantz filed an action against the Telephone Company in the district court of Denver, challenging the rates being charged for the above mentioned service and asking that the Telephone Company be enjoined from collecting said rates. This action is denominated Sarpy, et al. vs. The Mountain States Telephone and Telegraph Company, Civil Action 59450, Division 5, and is now pending before the district court in the City and County of Denver.

On November 22, 1949, the Public Utilities Commission of the State of Colorado, and the individual members thereof, filed a complaint for declaratory judgment naming as defendants the Telephone Company, the City, the Denver City Council, the said Sarpy, and others identified with the controversy as representatives of a class of persons having an interest therein. Counsel for the Commission in said action for declaratory judgment contend, generally, that the Public Utilities Commission of the State of Colorado now has, and, since at least October 1947, has had, jurisdiction over the metropolitan telephone exchange service and the Telephone Company in the Denver metropolitan area, including the service rendered within the city limits, and over the rates to be charged therefor. This action was considered by the same Judge before whom the Sarpy case is now pending and upon motion of all parties for summary judgment the trial court dismissed the complaint of the Public Utilities Commission and, by judgment duly entered, sustained the position contended for by the City and County of Denver and by Sarpy’s counsel, the effect of which was to reinstate the rates and regulations governing telephone service within the City as provided by the ordinance of 1921. This action is No. 16709 in this court.

The Telephone Company sued out a separate writ of error seeking review of the same judgment. This action is No. 16711 in this court. Thus the Public Utilities Commission, in Action No. 16709, -and the Telephone Company, in Action No. 16711, seek reversal of the judgment of the trial court as above indicated.

The ultimate question for determination in this case is whether the Public Utilities Commission of the State of Colorado is the agency authorized to regulate the charges of the Telephone Company for the telephone exchange service furnished .within the limits of the City. Counsel for the City and Sarpy contend, upon the authority of Denver v. Telegraph Company, supra, that the power to regulate the rates of the Telephone Company lies in the municipality, and under our holding.in the recent case of Berman v. Denver, 120 Colo. 218, 209 P. (2d) 754, the exclusive method provided by law for the exercise of said regulatory power is by the initiation of an ordinance by the people of the City and County of Denver. If the early case of Denver v. Telegraph Company, supra, is to be followed under the rule of stare decisis, and if the rule announced in Berman v. Denver, supra, be then applied, these conclusions would seem to be well justified. Denver v. Telegraph Company, supra, was decided by a four to three vote of the justices, and lengthy opinions appear in the report of the case which contains three concurring opinions expressing agreement in the opinion written by Mr. Justice White, and giving that opinion effect ten months after his term expired as a justice of this court. Three logical and well reasoned dissenting opinions also are included in the report of the case. Unquestionably the issues there determined were decided by a very narrow preponderance of opinion. It is equally certain that the majority opinion was clearly out of harmony with the very great weight of authority as evidenced by the numerous cases decided by appellate courts throughout the country prior to that time. The case of Berman v. Denver, supra, likewise was decided by a divided court with two judges not participating.

Under the view we take of the instant case, it is unnecessary for us to reconsider our opinion in the Berman case. We are not called upon either to be governed by it or to overrule it. Although we now hold that the intracity business conducted by the Telephone Company is not a matter of local and municipal concern to the City and County of Denver, or any other home rule city, it does not necessarily follow that the. services of all public utilities, functioning in whole or in substantial part within a municipality, must thus be classified. Whether a particular business activity is a matter of municipal concern to a city depends upon the inherent nature of that activity and the impact and effect which it may or may not have upon the areas outside the municipality. It cannot properly be said that all services supplied by any public utility company within a municipality are matters of local or municipal concern to the municipality without reference to the kind of service offered, the nature and extent of the physical properties involved, or the demand for, and use of, the services in areas outside the city.

It is ably argued by counsel for the Public Utilities Commission and the Telephone Company that our 1919 decision, in which we held that the service rendered by the Telephone Company within the corporate limits of Denver was a matter of local and municipal concern, 'is no longer controlling, because of the subsequent growth of the business, the numerous changes in techniques involved, and the difference in the type of service now being offered. In effect, it is argued that the march of progress in the telephone industry has changed that which was “local and municipal” in 1919, to a matter of importance and general public interest to the inhabitants of the state as a whole. We cannot, however, follow the suggestion that these changes and improvements offer an opportunity to declare a distinction of substance, because we are convinced that they have only extended in degree that which was clearly present at the time of our decision in Denver v. Telegraph Company, supra.

If we are to be governed by the rule of stare decisis and follow this early decision, then without question the Public Utilities Commission is without jurisdiction to regulate the business and rates for telephone service within the City and County of Denver. Accordingly we re-examine our opinion in Denver v. Telegraph Company, supra.

Question to be Determined.

Shall we now hold that the lawful regulation of the business and rates of the Telephone Company within the limits of the City and County of Denver is a matter of general concern to inhabitants of the state outside, as well as inside, the city limits, and that such business, and the regulation thereof, is not purely a “local or municipal”-matter, notwithstanding the 1919 decision of this court to the contrary?

We answer this question in the affirmative. The rule of stare decisis, although highly beneficial in its place, does not justify or demand the continuance of an erroneous conclusion when error is manifest, where injustice, chaos and confusion result, and where no vested property rights have arisen in reliance upon the erroneous decision. It is universally recognized that, notwithstanding the rule of stare decisis and the inclination to follow precedent, the courts of last resort have the power, and it sometimes is their duty, in serving the interests of justice, to depart from rules previously established by court decision. This especially is true where to adhere to the rule and blindly follow precedent would be more harmful to the public at large than to correct a manifest error and establish a sound principle.

In People ex rel. v. Cassiday, 50 Colo. 503, 117 Pac. 357, in discussing the rule of stare decisis we said: “We are not unmindful of the importance of this valuable and salutary principle, recognized in every land whose jurisprudence, like our own, rests largely upon precedent. Generally courts will adhere to a former decision, though found to be erroneous, where acquiesced in for a long time, and especially if it has become a rule of property. However, where vital public rights are involved, and a decision regarding them is to have a direct and permanent influence, it becomes not only the right, but the duty of a court to fully and carefully reconsider those questions, and permit no previous error to continue if it can be corrected. The rule of stare decisis rests upon the ground of public policy, and manifestly it would be grievous error to apply it where such application would result in more harm than good. While no mere doubt in the mind of the court, as to the soundness of a previous rule, will either require or permit of its review, it is equally clear that, if such decision is radically unsound, and serves no useful or wholesome purpose, but results only in great and needless hardship, not contemplated by law, and where no serious results are likely to follow its reversal, then the rule of stare decisis does not, and should not be permitted to, interfere to prevent a reconsideration of the principle involved, or with a reversal of a doctrine formerly announced. Of the power of this court to overrule a previous decision, and of its right and duty to do so on proper occasion, there is no question.”

In Wolf v. People, 117 Colo. 279, 187 P. (2d) 926, Mr. Chief Justice Burke, in writing the opinion of the court, said with relation to the rule of stare decisis: “We are not unconscious of the fact that that rule is frequently ignored with the general approval of the courts, for certain definite and often valid reasons. Among these are doubtful decisions handed down by closely divided courts and recent decisions establishing rules' not yet firmly embedded in the jurisprudence of the jurisdiction.” In the instant case our former opinion, which forms the basis of the trial court’s judgment, is admittedly “doubtful” and “handed down by a closely divided” court. Mr. Justice Burke, who then was just entering upon his long and distinguished career as a member of this court, freely expressed the then existing doubts in his concurring opinion in the early telephone case.

Other cases, in which the powers and duties of the court with relation to the rule of stare decisis are discussed, are: Imperial Securities Company v. Morris, 57 Colo. 194, 141 Pac. 1160; People ex rel. v. Le Fevre, 21 Colo. 218, 241, 40 Pac. 882. We recently declined to follow the rule of stare decisis and expressly overruled an earlier decision in the case of Urbancich v. Mayberry, 124 Colo. 311, 236 P. (2d) 535. Finally, upon this question, we believe that the instant case comes squarely within the language of this court’s opinion in the case of Calhoun Gold Mining Co. v. Ajax Gold Mining Co., 27 Colo. 1, 59 Pac. 607, wherein we said: “We understand, generally, that when a decision has established a settled rule of property, upon which rights are predicated (and especially those relating to real estate), the law will be adhered to by the court announcing it, and those bound to follow its adjudications, even if erroneous (Black on Interpretation of Laws §152), but this rule is not inflexible. Courts are not bound to perpetuate errors merely upon the ground that a previous erroneous decision has been rendered on a given question. If it is wrong, it should not be continued, unless it has been so long the rule of action, and relied upon to such an extent, that greater injustice and injury will result by a reversal, though wrong, than to observe and follow it.”

First and foremost we expressly overrule our decision in Denver v. Telegraph Co., supra, because at the time it was decided the rule announced was without adequate support in the law. The concurring opinion of Mr. Justice Burke includes the following statement: “I think it can not be denied that the question, upon reason, is a close one, nor that the great weight of authority, exclusive of the Home Telephone case [211 U.S. 265], is to the contrary.” (Italics supplied.)

In the Home Telephone case referred to by Judge Burke, the telephone company operating in Los Angeles, California, brought the action and expressly alleged that the city council of Los Angeles had the power to regulate telephone service and the use of telephones within the city, and to fix and determine charges for that service. That there was in fact no disagreement as to whether the city in that case had the power of regulation is further emphasized in the court’s opinion by the following language: “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.” (Italics supplied.) Thus it is clear that in that case there was no issue or contest as to whether the City of Los Angeles had the power to regulate the utility. That power was admitted. The real issue in the case was whether the city, having exercised its admitted power by establishing rates in a franchise, could, during the term of that franchise, change those rates.

• No good purpose would be served by including in this opinion the numerous authorities from the various states which hold that telephone service has come to be generally recognized as not being local or municipal to any particular city or town; and that the only effective and logical regulation to which major telephone companies should be subjected is regulation upon a state-wide basis. The weight of authority to this effect is overwhelming.

In the State of Colorado there are now fourteen home rule cities operating as such under Article XX of the Constitution of Colorado. To uphold the contention of counsel for the City, and Sarpy, in effect, wopld be to determine that each of these cities, in regulating telephone rates within their limits, should analyze and determine the property, revenues and expenses of the telephone company involved in the furnishing of telephone service in such city; that, by the exercise of some mysterious magic, they should segregate these from the properties, revenues and expenses of the company not directly involved in furnishing service to the city in question; and arrive at a rate which would yield a fair return to the company on that portion of the property involved in providing such local service, and insure adequate protection to the consuming public. To assume that such a task can be accomplished effectively and efficiently, or at all, is manifestly absurd and ridiculous. In determining whether confiscation was brought about by any rate which might be established by any one of the fifteen separate regulating agencies which would thus be operating upon the business of the telephone company at the same time, a court would of necessity be required to go beyond city boundaries and inquire into the property, revenues and expenses of such utility on a statewide basis in order to do justice.

While the authority of the state to regulate the telephone company is unquestioned, such regulation must be reasonable and it seems to us grossly unreasonable to subject a telephone company to separate regulation by as many agencies as there are home rule cities operating in the state, and in addition thereto to provide regulation outside home rule cities by the Public Utilities Commission. As so aptly stated by Mr. Justice Scott in one of the three dissenting opinions in Denver v. Telegraph Company, supra:

“The contention that each city operating under the amendment may regulate public utilities operating within its borders, must apply to all alike. It follows that if it applies to telephones, it likewise applies to railroads. In case of these utilities one company may operate in all municipalities and throughout the state.

“It also follows that the one utility may be regulated by as many powers as there are cities of the specified class within the state, and by the commission as to all territory outside the cities. Each city may fix a different rate; the commission may fix a different rate from either city, for the same utility and for like service.

“Can it be denied that such a scheme would not infringe the equal rights of citizens of the state, or the well being of the state. It would not only permit the corporation to do this, but would compel them to do so, regardless of the necessary discrimination between citizens of the state as to rates to be charged and regulations to be observed. It would require the deficiency of income from one city to be supplied by overcharge in other cities, or by the body of the state, outside the cities; for the constitution as construed by the courts, guarantees the reasonable expense of operation, and a reasonable return on the investment in public utilities in the matter of fixing the rates to be charged. The logical result of such a plan, is confusion, chaos and injustice.”

We are convinced that a proper protection of the interests of all the interested parties, including the general public, requires that our former decision be overruled.

Accordingly we now hold that the Public Utilities Commission of the State of Colorado is the sole .agency authorized to regulate the business and rates of the Mountain States Telephone and Telegraph Company within the State of Colorado; that the regulation of the business of said company and the rates to be charged for service is not a “local or municipal” matter; and that municipalities operating as Home Rule Cities have no power, authority or jurisdiction to attempt such regulation.

The judgments are reversed and the causes remanded for entry of judgments consistent with the views herein expressed.

Mr. Justice Holland dissents.