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decided: April 15, 1918.



Author: Mckenna

[ 246 U.S. Page 406]

 MR. JUSTICE McKENNA, after stating the case as above, delivered the opinion of the court.

Counsel agree that the issues on this appeal are: (1) The jurisdiction of the District Court. (2) The scope and interpretation of ordinances Nos. 174 and 180. (3) Whether the judgment pleaded by the city is res judicata.

The first proposition needs but little comment. The company attacked the ordinance or resolution of the city requiring the company to remove its poles and wires from the streets as an impairment of the contract constituted by other ordinances and hence invoked against the city the contract clause of the Constitution of the United States and also, on account of the asserted destruction of its property, urged in its protection the due process clause. The city combated both propositions. The District Court, however, sustained both, resting its decision upon the opinion of the Supreme Court of the State in a suit by the city against the telephone company. City of Mitchell v. Dakota Central Telephone Co., 25 S. Dak. 409. We shall presently consider this case. For the disposition of the present contention it is enough to say the case was brought by the city to recover a percentage of gross receipts of the company as provided in ordinance 135. In resistance the company contended that the provision was inserted without authority and was illegal and void, and contended besides that its rights in the streets were not derived from the city but from § 554 of the Civil Code of the State and that it was not competent for the city to impose conditions upon the

[ 246 U.S. Page 407]

     company. The court rejected the contentions and held that under the constitution of the State the city had the right to grant or withhold its consent to the use of its streets, and it necessarily had the right to grant the same upon such terms and conditions as it might choose to impose.

Applying the case, the District Court sustained the validity of ordinance No. 135, but decided that it expired by limitation of time in May, 1913, and that necessarily the rights granted by it terminated on that date, and that the company's rights, if it had any, were derived from ordinance 180 and the resolution of April 10, 1907.*fn1 The court considered the former a valid exercise of the power of the city and a contract between it and the company which was impaired by the subsequent resolutions.

It will be seen, therefore, that the company invoked rights under the Constitution of the United States and the District Court considered them to be substantial, not formal, and accordingly exercised jurisdiction.

The second and third propositions mingle in discussion. The District Court decided, as we have said, that ordinance 180 constituted a contract between the city and the company, and, exerting the right to interpret it, further decided that it gave the company the right to occupy the streets and compelled an injunction against the city's resolution and attempt to remove it. We shall spend no time in vindication of the exertion of the right; it is an established right of the federal courts, when the

[ 246 U.S. Page 408]

     contract clause of the Constitution of the United States is invoked, and we pass immediately to the consideration of ordinance No. 180. As we have seen, it was preceded by some years by ordinance No. 135, and by some months by ordinance No. 174. It was passed, it is contended, to complete the latter; in what respect we shall presently consider.

The case centers upon the ordinance. The telephone company contends that it gives the company the right to operate not merely long distance lines, but a local telephone exchange within the city. In other words, the contention is that it superseded ordinance No. 135 and became a new source of right, a right both of long distance and local exchange. The city opposes this construction and insists that the ordinance confers only the right to maintain a long distance system; that the right to a local exchange was given by ordinance No. 135 and expired with the expiration of that ordinance, May, 1913. And the city urges that its characterization of ordinance No. 180 was sustained by the Supreme Court of the State in City of Mitchell v. Dakota Central Telephone Co., supra.

Counsel are at odds as to the case. It, as we have seen, was brought by the city against the company to recover a certain percentage of the gross receipts of the company, provided to be paid by § 4 of ordinance No. 135. One of the defenses of the company was that that ordinance was in effect repealed and superseded by ordinance No. 180 so far as it related to the payment of the percentage of the gross proceeds of the company. The Supreme Court decided against the defense, reversing the judgment of the trial court. The court, in answer to the contention of the company, held that ordinance No. 180 did not "have the effect of repealing, qualifying, or modifying ordinance No. 135, and the fact that the defendant [the company] paid the 10 per cent. on its gross proceeds for two years subsequently to the adoption of ordinance

[ 246 U.S. Page 409]

     No. 180 clearly shows that it did not claim, for a time at least, that ordinance No. 180 in any manner affected the prior ordinance . . . There is clearly no inconsistency between the two ordinances; one being for a local city telephone system, and the other being for a long distance telephone system."

The court also decided that the resolution of the city of April 10, 1907, had not the effect of repealing ordinance No. 135, but and only the purpose of giving to the company permission to place its wires underground instead of stretching them on poles in the streets.

The decision would seem to need no comment. It clearly adjudged that the ordinances had different purposes, and that ordinance No. 135 was not repealed in any particular by No. 180, the former applying to the local system and the latter to the long distance system.

The District Court, however, did not give the decision this broad effect but considered that it concluded only "that the two ordinances did not cover so exactly the same field and scope that it could be fairly said that the city intended by the passage of ordinance No. 180 to repeal ordinance No. 135." It is not very obvious how ordinance No. 135 could exist for one purpose and not for all the purposes for which it was enacted; how it could exist for the exaction of a revenue from the system and not exist for the system; how it could co-exist for nine years with No. 180 and yet have been superseded by the latter. Besides, the Supreme Court distinguished between the two ordinances, declaring that there was no inconsistency between them, "one being for a local city telephone system, and the other being for a long distance telephone system." The decision, indeed, gave emphasis to the distinction. From the operation of one a revenue was exacted, upon the other no condition was imposed.

It is, however, alleged in the bill that the company had

[ 246 U.S. Page 410]

     by certain enumerated acts acquired a vested right to maintain and operate its telephone exchange and lines, and to secure its peaceable enjoyment of such rights as against the wrongful acts of the city it brought this suit. This idea is not pressed in the argument and is not sustained by the stipulated facts. The case is rested upon "the scope and interpretation to be placed upon Ordinances Nos. 174 and 180," the contention being that they constitute a contract the obligation of which the resolution of the city, requiring the removal of the company's poles and wires from the streets, impairs. And such was the decision of the District Court. The basis of the contention and decision is that those ordinances superseded ordinance No. 135, taking the place of the latter, giving all the rights of a local exchange as the latter did and adding to them the rights of a long distance system; and this conclusion is deduced from the words of the ordinances and explanatory circumstances, the necessary connection, it is said, and the utility of the local system to the long distance system.

First, as to the titles of the ordinances and the words of each that are said to be determinative of their meaning. The title of No. 174 is as follows; "An ordinance to grant permission to the Dakota Central Telephone Lines (Inc.), their successors or assigns, the right to erect poles and fixtures, and to string wires for the purpose of operating long distance telephone lines, within and through the city of Mitchell, South Dakota."

Section 1 provides that "the right and privilege given" shall be for a period of twenty years "for supplying the citizens of Mitchell, and the public in general, facilities to communicate by long distance telephone or other electrical devices with parties residing near or at a distance from Mitchell, and all such rights to be continued on the conditions therein named."

The title of ordinance No. 180 is exactly the same as

[ 246 U.S. Page 411]

     that of No. 174, except that the word "lines" of the latter is changed to the word "system" by the former. Section 1 of No. 180 is the same as section 1 of No. 174, except certain immaterial changes and except the word "in" in the provision expressing the purpose of the granted privilege to be "to communicate by long distance telephone or other electrical devices with parties residing in, near or at a distance from Mitchell . . ."

Stress is put upon the words "system," "within," "through," "in," and "near," and it is insisted that they were necessarily intended to accommodate the residents of the city and to give them the facilities of local and long distance telephone service and that something more was intended than to grant a mere right to carry long distance telephone wires through the city.

The contention has its strength and persuaded the District Court, but it is countervailed by other considerations. Undoubtedly the inducement of ordinances Nos. 174 and 180 was to give to the residents of the city long distance telephone facilities, but it cannot be said that granting such right inevitably or even naturally repealed or superseded the right to operate a local system which was given and then existed under ordinance No. 135, and which then had nine years to run. Besides, the decision of the Supreme Court is a factor of controlling strength. It explicitly decided that ordinances 135 and 180 had distinct purpose and operation and that the latter did not repeal or supersede the former. The issue was tendered by the company and the decision upon it is conclusive against the company.

But if the decision be not given that extent, as it was not by the District Court, and if it be considered that the latter court had a right, as a federal court, to determine the existence of a contract and its elements, such right does not preclude a deference to the views of the state court, which, moreover, have the support of principles

[ 246 U.S. Page 412]

     declared by this court, that grants of rights and privileges by the State or of any of its municipalities are strictly construed "and whatever is not unequivocally granted is withheld; nothing passes by mere implication." Knoxville Water Co. v. Knoxville, 220 U.S. 22, 34; Blair v. Chicago, 201 U.S. 400, 471.

The contentions of the company in the case at bar rest entirely upon implication, the implication of a repeal of one ordinance by another, which is never favored, though the ordinances expressed different purposes and could, and did co-exist for such purposes; and this implication is made to depend upon another, that is, that the ordinary meaning of the words "long distance telephone" used in ordinance No. 180 is translated to signify and derive meaning from the function of the instrumentalities employed, such as transmitters, receivers, poles, wires, switching devices and battery systems, etc.

We may conclude the discussion with the observation that if ordinance No. 180 had been intended to embrace and continue the right granted by ordinance No. 135 and to grant a further right of a long distance telephone system, there was a simple and direct way of doing it, clear to every understanding, and it would not have been left to be collected from disputable circumstances and the function of instruments known only to experts. At any rate, as it has been so left, the ambiguity resulting must be resolved against the telephone company. It should have taken care that the right it sought was clearly defined.

It will be observed that the city expressly declares that it does not intend to interfere with or molest the telephone company in the maintenance and operation of the long distance system, and that the resolution or ordinance of which the company complains is directed only to the telephone system provided for in ordinance No. 135. After certain recitations and whereas it is

[ 246 U.S. Page 413]

     as follows: "Be it further resolved that said Dakota Central Telephone Company be, and it is hereby notified and requested forthwith on the 11th day of May, 1913, to remove from the streets, avenues, alleys and public grounds of the City of Mitchell, South Dakota, all of its poles, wires, cables, fixtures and apparatus of every kind and description used by it in the construction maintenance and operation of its local telephone exchange or system in the City of Mitchell, South Dakota."

Whatever is necessary, therefore, for the maintenance and operation of the long distance system provided for in ordinance No. 180 is not intended to be disturbed. We must leave the adjustment, however, to the District Court.

Decree of the District Court reversed and the case remanded for further proceedings in conformity with this opinion.

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