Rural Home Tel'p Co. v. Ky. & Ind. Tel'p Co.

107 S.W. 787, 128 Ky. 209, 1908 Ky. LEXIS 44

• Court: Court of Appeals of Kentucky
• Decided: February 20, 1908
• Status: Published

Opinion

Opinion, op the Court by

Judge Carroll

Reversing’.

Some yearsr prior to 1903 the Kentucky and Indiana Telephone Company owned and operated a telephone exchange in the city of Owensboro, and in connection therewith two exchanges in the county of Daviess outside of the city. Desirous of extending its country business, it was instrumental in organizing in 1903 a company called the “Rural Home Telephone Company,” and this company established in the county of Daviess a telephone system, with exchanges at various points. Although the Kentucky & Indiana Telephone Company and the Rural Home Telephone Company were separate corporations, the general manager of the Kentucky & Indiana Telephone Company was the president of the Rural Home Telephone Company, and they were operated practically as one system; but there was no contract between the two companies. Under the arrangement between them, which continued from 1903 to January, 1907, there was a physical connection between the wires of the two companies, and the patrons of the Rural Home Telephone Company used the lines and exchange of the Kentucky & Indiana Telephone Company in conversing with people in Owensboro; and the subscribers of the Kentucky & Indiana Telephone Company were enabled by its connection with the Rural Home Telephone Company to talk to patrons of the latter living out in the country. In August, 1906, the Central Home Telephone Company, a. holding corporation, came into the control of the. Kentucky & Indiana Telephone Company, and soon thereafter ascertained that there was no. contract between the Kentucky & Indiana Telephone Company and the Rural Home ■Telephone Company. .Thereupon a proposition was made by the management of the Kentucky & Indiana Telephone Company to L. -M. Birk, who owned a large majority of the stock in the Rural Home Telephone •Company and was its secretary and treasurer, that the two companies enter into a contract. This proposition which seemed to recognize the- fact that there had never been any contract between the companies, not being acceptable to the Rural Home Telephone Company was rejected. Failing to make a satisfactory contract with the Kentucky & Indiana Com- . pany, the- Rural Home Telephone Company entered into a contract with 'the Cumberland Telephone Company. After this contract was executed, and in January, 1907, all the lines of the Rural Home Telephone -Company that connected with the lines of the Kentucky & Indiana Telephone Company were cut and attached to the lines óf the Cumberland Telephone Company, whose lines run parallel into Owensboro with the lines of the Kentucky & Indiana Telephone Company. The effect of this.action was to deprive •the subscribers of the Kentucky & Indiana Telephone Company of the use and benefit of the lines and exchanges of the Rural Home Telephone Company, and the Kentucky & Indiana Telephone Company of the advantage it derived from its connection with the Rural Home Telephone Company in the interchange and transmission of messages to and from- the city of Owensboro to all' points in the county of Daviess reached by the Rural Home Telephone Company. "When the Rural Home Telephone Company severed its physical connections with the Kentucky & Indiana. Telephone Company, the 'latter brought this action against it and the Cumberland Telephone Company, charging that the severance of connection was the result of an unlawful conspiracy between the two companies to- injure the -Kentucky & Indiana Telephone Company by transferring the Owensboro business of the Rural Home Telephone Company to the Cumberland Telephone Company, thereby depriving the subscribers of the Kentucky & Indiana Telephone Company of the country, connections they had enjoyed before the severance took place. A temporary restraining order granting it the relief prayed for was issued, and upon final hearing, after the case had been prepared for trial, the court adjudged “the defendants Rural Home Telephone Company and the Cumberland Telephone Company, their agents, servants, and employes, be and they are hereby perpetually enjoined from cutting or severing the telephone line or lines connecting plaintiff’s exchange with the exchanges of said defendant Rural Home Telephone Company ,and from interfering in any way with the service between, plaintiff’s exchange and the exchange of said Rural Home . Telephone Company, and said defendant Rural Home Telephone Company is further enjoined from failing or refusing to receive and transmit without unreasonable delay or discrimination messages coming from or through or destined to or from plaintiff’s exchange.”

The appeal before us is prosecuted from this julgment, and three grounds are relied on for its- reversal: First that the Kentucky & Indiana Telephone Company has no franchise to operate in the city of Owensboro, and therefore cannot invoke the aid of the court: to compel the Rural Home Company to connect or exchange business with it; second, that there was no> contract between the two companies in respect to the-interchange of business or the. connection of their lines, and the Rural Home Telephone Company had the right at any time to sever its physical- relations; and third, that the judgment of the circuit court- is fatally defective in failing to fix or provide any compensation to be paid' to the Rural Home Telephone Company for the use of its lines and exchanges by the Kentucky & Indiana Company. - •

It is conceded that there was no written agreement or any definite verbal contract between the; Kentucky & Indiana Telephone Company and the Rural Home Telephone Company during the time they operated in connection with each other, although there existed an arrangement under which their lines were connected and their • business exchanged. This arrangement, which did hot assume the dignity of a contract, or entitle the parties to the reciprocal rights and obligations that might be imposed by or grow out of contract rights, was not sufficient to justify the Kentucky & Indiana Telephone Company in resting its action for relief upon the violation of any contractual relation between the companies; Bastin Telephone Co. v. Richmond Telephone Co., 117 Ky. 122, 77 S. W. 702, 25 Ky. Law Rep. 1249. Indeed, counsel for the Kentucky & Indiana Telephone Company do not rely upon any contract between the two companies, or place their case upon the ground that any contract right has been violated. The chief contention is that, as 'the lines of the two companies were connected in such a manner as to constitute them for all practical purposes one company in the transmission of messages, the Rural Home Telephone Company had no legal right t-o- sever the connection, thereby refusing to receive or transmit in the usual course-messages. This contention is grounded upon section 199 of the Constitution,' and is‘claimed to be supported by the opinion of this court in the case of Campbellsville Telephone Company v. Lebanon Telephone Company, 118 Ky. 277, 26 Ky. Law Rep. 127, 80 S. W. 1114, 84 S. W. 518. That part of the.section relied on reads as follows: ‘‘Telephone companies- operating exchanges, in different towns and cities, or other public places, shall receive and transmit each others messages- without unreasonable delay -or discrimination. The-General Assembly shall by gerferal laws of uniform operation provide reasonable regulations to give full effect to this section. ” In the. Campbellsville Telephone Company Case, supra, it. appears from the opinion that the Campbellsville Telephone Company and. the, Lebanon Telephone Company entered into a written contract, by which it was agreed that the Lebanon Telephone. Company should build, equip, and maintain a first-class telephone line from Lebanon tó Phillipsburg, to meet and attach to the lines-of the Campbellsville Telephone Company at that ■ place, and -the Campbellsville. Telephone Company agreed to build, equip, and maintain a first-class telephone line from Campbellsville to Phillipsburg, to meet and attach to the lines of the Lebanon Telephone Company; each company to keep its own line in good repair at its. own expense. The controversy-between the two companies came up in this way: Each of the companies fell into the possession of larger companies, and soon afterwards the Lebanon Telephone Company -refused to the Campbellsville Telephone Company the right to make connection with the Lebanon exchange, and excluded its messages. Thereupon the Campbellsville Telephone Company applied for a mandamus against the Lebanon Telephone Company to compel it to receive messages as it had done after the contract was entered into. In other words, the Campbellsville Telephone Company sought a specific execution of the contract. : The rights of the'complaining party to this litigation rested upon the contract ,and the court held that, the'Campbellsville Telephone Company was entitled to the' relief sought, but, in the course of the opinion, and by way of illustrating the mutual rights and, obligations of telephone companies generally, discussed the meaning and effect of section 199, saying that, when' the two telephone companies did make under the contract the connection agreed upon, they complied with the duty imposed by the law of their existence, and that the section of the Constitution implies that such connection shall not only be made and the service allowed, but that it shall be maintained and continued. The radical difference between that case and the one at bar consists in the fact that there a binding ’and enforceable contract existed between the parties and the action was brought for the purpose of compelling one of the companies to perform its part of the contract. Here, although it may not be conceded in terms, it must be admitted that there was no enforceable contract between the Kentucky & Indian Telephone Company and the Rural Home Telephone Company. Confronted with this proposition, the Kentucky & Indiana Telephone Company sefeks to maintain that, although there was no enforceáble contract, yet the lines of the companies were physicálly connected, and it relies on the constitUtionál provision before mentioned to compel the Rural Home Telephone Company to receive and transmit its messages without unreasonable delay or discrimination. This contention brings up for consideration • the question whether or not" the Kentucky & Indiana'''Telephone Cordpany is ih a position to invoke the assistance of the constitutional provision referred to. In the disposition of this question we will not stop to inquire, as it is not before us, whether this section is self-executing or not, or examine into the reciprocal duties and' obligations imposed by it upon telephone companies. If the attitute of the Kentucky & Indiana Telephone Company is such as to put it outside of the protection of this section, it is not material whether it is self-executing or not; nor it is necessary to consider what might be the rights of a company that was in a position to ask the court to apply in its behalf the beneficial provisions of this section.

In opposition to the claim of the Kentucky & Indiana Telephone Company that this section requires the Rural Home Telephone Company to receive and transmit its messages, the point is pressed on our attention by the Rural Home Telephone Company that the Kentucky & Indiana Telephone Company never had a franchise to operate in the city of Owensboro a telephone system, and, being a trespasser and violator of one section of the Constitution, it is not entitled to. invoke in its behalf the benefits of another section of the Constitution. It stands admitted that the Kentucky & Indiana Telephone Company does not own or operate any system of telephones outside of the city of Owensboro, and that it was not granted in the manner required by the Constitution any franchise or privilege by the city to operate or conduct a telephone system within its limits. This being true, the question comes up, can it, in the absence of a contract, maintain an action against the Rural Home Telephone Company. for- refusing to transmit and receive its messages? . And this involves the further inquiry, whether the Rural Home Telephone Company can raise the question that it has no franchise or privilege. Sections 163 and 164 of the Constitution read's as follows:

“Sec. 163.- No * * * telephone company within a city or town shall be permitted or authorized to * * * erect its poles, posts or other apparatus along, over, under or across the streets, alleys or public grounds of a city or town, without the consent.of the proper legislative bodies or boards of such city or town being first obtained.

■ “Sec. 164. No county, city town, taxing district or other municipality shall be authorized or permitted to grant any franchise or privileges or make any contract in reference thereto for a term exceeding twenty years.- Before granting such franchise for a term of years, such municipality shall first after due advertisement receive bids therefor publicly, and award the same to the highest and best-bidder, but it shall have the right to reject any or all bids. This section shall not apply to a trunk railway.”

These sections of the Constitution must be read together; as the right to occupy the streets and public- Way conferred' by section 163 can only be granted .in the manner provided in "section 164. In all the cases involving these sections that’ have come before this court-, the attempt has been made to- give "them such a construction as would fairly carry out the intention of their enactment. Some- of these cáses have come up between rival telephone companies, and among these- cases we may notice the following:

In East Tennessee Telephone Company v. Anderson County Telephone Company, 115 Ky. 488, 24 Ky. Law Rep. 2358, 74 S. W. 218, thé East Tennessee Telephone Company sued out an injunction against the Anderson County Telephone Company, restraining it from erecting poles, posts, and other apparatus preparatory to or necessary to be used in tbe operation-of a telephone exchange over and across the streets, alleys-, and public ways of the city, of Lawrenceburg, upon the ground that it had an exclusive franchise to establish and operate a telephone system in the city. The Anderson County Telephone Company, in its defense to this suit, charged that the franchise alleged to be owned by the.East Tennessee Telephone Company was not granted in the manner provided by the Constitution and statutes, and was therefore void. This contention was sustained, and the petition of the East Tennessee Telephone Company was dismissed. East Tennessee Telephone Company v. Anderson County Telephone Company, 57 S. W. 457, 22 Ky. Law Rep. 418. Thereupon the Anderson County Telephone Company brought suit for damages on the injunction bond executed by the East Tennessee Telephone Company. In this action the Anderson County Telephone Company averred that it bad authority to construct and operate a telephone line and exchange in the city. The East Tennessee Telephone Company in its answer denied that the Anderson County Telephone Company had ever obtained in the manner provided by law the right to establish a telephone system in the city. In a reply the Anderson County Telephone Company admitted that the law was. not complied with in granting it authority to occupy the streets of .the. city, but alleged that the city authorities made no objection to its doing so, and that,- as the city was not objecting, the East Tennessee Telephone Company had no right to complain. It being conceded that the Anderson County Telephone .Company was using the streets and .operating its- exchange without the' legal right so to do, the question before the court was whether it could maintain an action in damages against the East Tennessee Telephone Company because" that company by injunction prevented it from doing an unlawful thing. In holding that the Anderson County Telephone Company could not maintain the action or recover damages, the court said: “In this action it can only recover upon the ground that it was prevented by an injunction sued out by appellant from exercising a lawful right to occupy the streets of the city; and as it is conclusively shown that it had no such legal right, but was a mere trespasser, it has no standing in court. ”

In Rough River Telephone Company v. Cumberland Telephone Company, 119 Ky. 470, 84 S. W. 517, 27 Ky. Law Rep. 32, the Cumberland Telephone Company was operating -a telephone line over and along one of the public streets of Hartford, Ky., when the Rough River Telephone Company erected its poles in such a manner as to injure the service of the Cumberland Telephone Company. Thereupon the latter company obtained an injunction which was made perpetual, restraining the Rough River Telephone Company from interfering with its lines and poles. The Cumberland Telephone, Company had not obtained in the manner provided by the’ Constitution or statutes the right to establish or conduct a telephone system in the city of Hartford. This being so, the question before the court was, could it maintain an action against the Rough River Telephone Company for. interfering, with its system? After quoting with approval the East Tennessee Telephone. Company Case, supra, the’ court said: “No practical difference can be discovered between the effect of preventing a telephone company from operating its franchise by a wrongfully obtained! injunction and from preventing it from so doing by the -wrongful erection of a pole which merely bunched its wires without otherwise injuring them. The injury arises in both cases from depriving the corporation of the power to earn money by the operation of its franchise. A mere trespasser cannot complain that he is prevented from continuing a wrongful act. No injury is claimed to the corporeal property of appellee. The sole injury is the prevention of the full exercise of its invalid claim of a franchise of the streets of the city. It follows, that under the authority cited, as it has no such franchise, it can have received no injury of which equity will take cognizance.”

These cases are sound in principle, and, in our opinion, are conclusive of the question that the Kentucky & Indiana Telephone Company cannot maintain this action. In this case, as in those, the complaining company has no franchise to conduct its business, and hence cannot ask the aid of the court to protect it from injury done to its business by the other company. We are unable to distinguish the cases. If the Anderson County Telephone Company, because it had no franchise to operate in Lawrenceburg, could not recover damages from the East Tennessee Telephone Company for an injury to its business, and if the Cumberland Telephone Company, because it had no franchise to do business in Hartford, could not maintain an action against the Eough Eiver Company for impairing its service, upon what theory can the Kentucky & Indiana Telephone Company, that has no franchise to establish or conduct a telephone system in Owensboro, compel the Eural Home Telephone Company to do business with it? While violating the Constitution and the statute with one hand, the appellant company is asking with the- other the protection of the court. This protection the court under the circumstances will not afford. Even if- it be conceded that section 199 of the Constitution is self-executing*, and that “telephone companies operating exchanges in different towns or cities or other public stations shall receive and transmit each others messages without unreasonable delay or discrimination, ’J this protection only applies to companies that have acquired in a legal way the right to establish and operate telephone systems. The Campbellsville Case did not go further than this, and is no authority for appellee in the case here presented'. It would be approving unlawful conduct and lending aid and assistance to--violators of the law, to hold that a telephone company that had no legal standing in court could invoke the protection of the Constitution to prevent another telephone company from refusing or failing to transact business .with it. - A corporation that in its origin and existence has been a continual breaker' of the law cannot ask the assistance of the court to compel another corporation to transact business with it. In the argument of counsel'for appellant, directed to the point that the court will not inquire into the legal status of a corporation that, aside from its irregular-organization or other delinquencies, may have a meritorious claim that the court would •be disposed to -regard-with favor, our attention is called to the ease of the Cumberland. Telephone Company v. Louisville Home Telephone Company, 114 Ky. 892, 72 S. W. 4, 24 Ky. Law Rep. 1676. In this case the’Home Telephone-Company brought this suit against the Cumberland Telephone Company to restrain it from placing obstructions in the way of its wires and poles that interferred with the successful operation of its system. Among other defenses the Cumberland Company insisted that the Home Telephone Company was a Delaware corporation, and that, as its articles of incorporation did not conform to the laws of Kentucky, it should not be recognized as a legal corporation in this State. In answer to this defense the court said: “Appellee (Home Telephone Company) has not only been incorporated in the state of Delaware, but it has been , recognized by the authorities of the city of Louisville as a corporation, and has been granted by it an important and valuable franchise. It is at least a de facto corporation, and the- rule seems to be that, when an association of persons is exercising corporate franchises under a color of legal organization, the existence of the corporation cannot be inquired into collaterally, but only in a direct proceeding by the government. * * * Where property has been granted to such a corporation, and it brings a suit to recover its property, the defendant cannot be allowed to inquire into the regularity of the organization in -that suit upon the broad principles of common justice and public policy. . * * * To allow a trespasser who has destroyed its property to defeat an action, against him by the corporation on the ground that it was not originally properly incorporated, when the State is not complaining, and the municipality has recognized and contracted with the corporation, would be a perversion of justice.” It will readily be perceived that the principles announced in this cáse are not in conflict with the views expressed in this opinion; and it is equally manifest that it has no essential bearing upon the question presented by this record. In that ease the Home Telephone Company, which was at least a de facto corporation, was asking the court to protect its property rights from invasion and destruction by a rival company. - It was-not invoking- the aid-of one section of the Constitution, while openly disobeying another; nor did it appear in court, asking the .protection of the law, while being itself a trespasser, without legal status.. - ■

The argument is made that the public has an interest in the operation and conduct- of telephone systems,- and that, although the Kentucky & Indiana Telephone Company is operating its line without license so to do, it was- giving to the public a satisfactory service, and, in the absence of complaint by the public, the Rural Home Telephone Company could not, to the • detriment of the -public interest, refuse to transmit and receive its messages. It may be conceded that the service rendered by the Kentucky & Indiana Telephone Company in connection with the Rural Home Telephone Company was satisfactory to the public, and that some of its patrons were subjected to inconvenience by the severance- of the relations between the two companies; but the Kentucky & Indiana Telephone Company will not be permitted in this controversy to protect-itself from the consequence of its wrongful acts upon the pretense that the public good- will be promoted by its continued violation of the law. It must be kept in mind- that this controversy is distinctly between these two telephone companies. The Kentucky & Indiana Telephone Company is not- complaining that any physical injury was done to ■ its property, nor can it successfully maintain that its. legal rights have been invaded. ■ It brings this action to compel- the Rural Home Telephone Company to continue connections with it-. In answer to this the Rural Home Telephone Company replies: You are a -trespasser. You have no legal right, to do-business, and-therefore it was my privilege at any time, there being no contract between ns, to sever my business relations with you. And in this position it is fully sustained by the case before mentioned. Having elected in the establishment of its telephone system not to comply with the law, the courts will leave it where it placed itself— outside the pale of the law — and decline tc? afford it the redress that an observance of the Constitution and obedience to the law might have given it.

It is probably true, as stated by counsel for appellant, that there are companies operating telephone exchanges that have not acquired under the law rights of way along the public? roads and across fields, and it may be that a defense of this nature would not be sufficient to hinder the court in allowing to such company the benefits conferred by section 199 of the Constitution. Upon this question, however, we ex-, press no opinion, as it is not before us. We are dealing with the facts of the case we have, and will not be led away from the' issues presented by the record to thd consideration of supposed difficulties that might come up under a different state of facts. Sections 163 and 164 of -the Constitution, as has been often ruled, are mandatory. The franchise or privilege to establish and operate a telephone system.in a city or town can only be acquired by observing the constitutional provisions, and a company that seeks to defend its right to the use of the streets and highways of a city in any other way than under the Constitution is a trespasser, and without standing in court. In this condition the appellant company comes to the court and asks relief that cannot for the reasons stated be granted. We express no opinion as to what the status of the Kentucky & Indiana Telephone Company would be if its organization was irregular, or if, in other particulars, it was violating or had failed to comply with the law, or was disregarding the rights of other people, or was seeking to enforce or defend contracts made with subscribers or other persons.

It is further insisted that, although the city of Owensboro might have the right to raise the question that the Kentucky & Indiana Telephone Company is occupying its streets without right, the Rural Home Telephone Company in this 'controversy cannot make this defense. In support of this proposition counsel rely upon Cosby v. Owensboro & Russellville R. Co., 10 Bush, 288, and Dulaney v. L. & N. R. Co., 100 Ky. 628, 18 Ky. Law Rep. 1088, 38 S. W. 1050, following it. In the Cosby Case certain property owners sought to enjoin the construction of the railroad along one of the streets of the city, claiming that it would damage their property, and also-upon the ground that the company had no lawful right to construct its road in- the street, because the city council had undertaken to grant the right of way without proper legislative authority for so doing. In considering the rights of the complaining property owners, the court said'. “The rights of the authorities of a city, with legislative warrant, to permit the construction and operation -through its streets, of railroads upon which trains of cars are propelled by steam; is now an open question. Those who purchase lots bordering on a street take their title, subject to the appropriation of the street to such public uses, promotive of commerce and business, as the general good of a city or town may require.” In refusing the property owners relief, the court did not find it necessary to decide whether the city authorities had or not the necessary legislative authority to grant a railroad company the right to lay down its tracks and operate its road through the streets, resting its conclusion upon the ground that the city was not a party to the suit or complaining; and the abutting, property owners who brought the action failed to show that they suffered any injury . distinct from that sustained by the general public, saying: “The entry by the railroad company was an entry upon the possession of the public. The right of action, if there be one, is in the municipal authorities representing the local public immediately interested in Lewis street. If the public shall at anytime abandon the use to which the land constituting a street was dedicated, then the right of possession will revert to the lot owners, and they may complain that the railroad company is encroaching upon their private rights. But, so long as they are not entitled to the possession, and so long as none of their property rights are directly and immediately injured by the acts of the railroad company, they can have no relief, except through the action of the municipal government, charged by law with the duty of pre-. serving and keeping open and in repair the streets of Owensboro.” It will be. observed that the only point determined in the Oosby Case was that the abutting property owners, unless they could show that their private rights were impaired by.the operation, of the. railroad in. the streets, could not raise the question as to whether or not the railroad-' company was lawfully or unlawfully occupying-the street, and this upon the. ground that whether its occupation was lawful or unlawful- did not give it -the right to injure, or take the property of the adjoining owners, and that they had no right of action until they had shown that their private rights were in- some way impaired. •

The attempt is made to apply the doctrine of that case to the one at bar, upon the theory that, as the city of Owensboro recognizes and acquiesces in the right of the Kentucky & Indiana Telephone Company to occupy its streets and transact its business, the Rural Home Telephone Company will not be heard to interpose a defense that the city alone might make. This argument overlooks or ignores what we conceive to be, and have endeavored to show, is the fatal objection to the right of the Kentucky & Indiana Telephone Company to maintain this action against the Rural Home Telephone Company. It is not a question what the city of Owensboro may or may not do. The fact that it has consented to the occupation of its streets by the Kentucky & Indiana Telephone Company does not meet the issue. The Constitution points out in plain terms the way by which a telephone company may obtain the right to occupy the streets of a city or town. If it fails or refuses to comply with these constitutional requirements, the consent or acquiescence of the city in violating them will not give it a legal standing or change its attitude in the eyes of the law as' a trespasser when it -undertakes to invoke the aid of another section of the Constitution to compel another telephone company to transact business with it. The- city authorities of Owensboro cannot, by consenting to the unlawful occupations of the streets .of the city by the Kentucky & Indiana Telephone Company, invest it with legal - rights that it is- not entitled to, or give it a standing in court that can only be obtained by a compliance with the law. If a contrary rule were adopted, the effect of-it would be that two wrongs would make a right, and to allow two parties, by their acquiescence in the nonobservance of the law, to clothe one of them ■with rights and privileges conferred only upon persons who observe the law.

- Our conclusion is that the judgment of the circuit court must be reversed, with directions to dismiss the petition.