
    McKinley Telephone Company, Respondent, vs. Cumberland Telephone Company, Appellant.
    
      January 28
    
    February 18, 1913.
    
    
      Public utilities: Telephone companies: Contracts: Validity: Sale of lines: Bestriding fields of operation: Preventing competition: Public policy: Specific performance.
    
    1. A contract between the plaintiff and defendant telephone companies, each owning rural telephone lines radiating from a city, for the sale to plaintiff of such of defendant’s lines as were parallel to plaintiff’s, with option to purchase defendant’s other rural lines, and providing against future duplication of lines, for restriction of their respective fields of operation— plaintiff to the rural lines and defendant to the city, — and for the furnishing hy each of free connections to the patrons of the other, and containing other provisions calculated to increase the extent and efficiency and reduce the cost of telephone service in the territory covered, is not contrary to hut in harmony with the public policy of this state evinced by the Public Utilities Act; and, in view of the powers of regulation and of fixing rates given by that act to the railroad commission, such a contract is not one “intended to restrain or prevent competition,” etc., within the meaning of sec. 1791j, Stats.
    2. Specific performance of such a contract may properly be enforced, the remedy at law for a refusal by defendant to transfer its rural lines and for repeated violations of the agreement being inadequate.
    Appeal from an order of tbe circuit court for Barron county: Eeane A. Boss, Circuit Judge.
    
      Affirmed.
    
    This is an action for the specific performance of a contract for the sale of certain telephone lines and to enjoin the violation of the agreement.
    The complaint alleges facts as follows: The plaintiff is a telephone corporation operating several rural telephone lines radiating from the city of Cumberland. The defendant is also a telephone corporation operating several rural telephone lines radiating from the city of Cumberland, and in addition thereto is furnishing telephone service in .the city of Cumberland. Prior to May 6, 1909, some of the rural lines of the parties were parallel and served the same territory, and the plaintiff was contemplating tbe installation of an exchange to furnish telephone service in the city of Cumberland, in competition with.the defendant. To comply with the wishes of the merchants and business men of the city of Cumberland who desired to secure telephone connection with all the patrons of both companies by a single telephone in each business place, and who were willing to secure a reduction in the cost of telephone service to them by an increased rate for the single telephone, which, however, would be less than the combined rates for telephones from both companies, this contract was executed between the plaintiff and the defendant.
    The contract, executed May 6, 1909, provided that the contract should take effect after the state railroad commission had consented to the proposed raising of the rates. Upon this consent being given, the plaintiff was deemed to have purchased from the defendant those rural telephone lines belonging to the defendant which were parallel to lines of the plaintiff, and was to have an option to purchase the other rural lines. The plaintiff was to refrain from furnishing telephone service in the city of Cumberland to the residents of Cumberland, except as to one telephone already installed, and each party, for a period of seven years, was to furnish free connection to the patrons of the other. Defendant was to erect no new rural lines and was not to increase beyond twenty-five the number of telephones on any of the existing rural lines retained by it.
    The complaint also alleges that the conditions of the contract have been complied with by the plaintiff. It is alleged that, contrary to the provisions of the contract, the defendant has extended its lines outside the city, has added new wires to its rural lines in violation of the conditions of the contract, and that it refuses to comply with the option given by it to the plaintiff for the purchase of the defendant’s remaining rural lines. The plaintiff asks for specific performance of the option provisions of the contract and for injunction against violation of the contract in other respects.
    
      Tbis is an appeal from tbe order of tbe trial court overruling a demurrer to tbe complaint.
    
      W. N. Fuller, for tbe appellant.
    Eor tbe respondent there was a brief by B. B. Ha/rt, attorney, and Spencer Timen, of counsel, and oral argument by Mr. Hart.
    
   SiebecKER, J.

Tbe allegations of tbe complaint indicate that tbe plaintiff and tbe defendant made tbis contract with tbe object in view of so conducting tbeir telephone businesses as to avoid duplication of lines for tbe same territory, to restrict tbeir respective fields of operation, to increase tbe extent and efficiency of tbe service, and to avoid tbe increase of ratesi due to a duplication of tbe plants in tbe same territory. It also appears that in making tbis arrangement tbe parties did not thereby gain such control of tbe public service as to enable them to impose exorbitant charges for tbe service on tbeir patrons. The1 contract provides for a specific city rate to business men and merchants, if such rates should be approved by tbe state railroad commission as a reasonable one. Moreover, under tbe law tbe commission bad power to reduce these rates if they should be found excessive. Tbe facts stated also show that tbe plan of combination would probably enhance tbe efficiency of tbe service and that tbe patrons of each company would have tbe advantage of service connection with all tbe patrons of both lines, in place of service connection only with tbe patrons of one of tbe companies. It is therefore clear that so far as these public interests are concerned they are promoted by tbe contract and that there is no ground for objection to its enforcement in tbis regard.

• It however is contended that tbe contract is void because it violates sec. 1791/, Stats., which provides:

“Any corporation organized under tbe laws of tbis state which shall enter into any combination, conspiracy, trust, pool, agreement or contract intended to restrain or prevent competition in tbe supply or price of any article or commodity in general use in tbis state, or constituting a subject of trade or commerce therein, . . . shall, upon proof thereof, in any court of competent jurisdiction, have its charter or authority to do business in this state canceled and annulled.”

It is obvious that the statute is directed against contracts which are violative of the public policy of the state respecting restraints of trade and competition in the supply of any commodity in general use constituting a subject of commerce. The furnishing of telephone service may be classed within the general terms of the statute as the supplying of a commodity constituting a subject of commerce. As heretofore indicated, the contract, in the light of the allegations of the •complaint, does not operate to restrain the supply of this commodity to the public upon established telephone lines, nor does it tend to impose upon them arbitrary and oppressive burdens through the prevention of competition within the field of their operation.

It is argued that the contract prevents the defendant corporation from seeking new fields of operation for the conduct of its business and thus operates to restrain it from supplying telephone service to the public in such new territory. An application of the provisions of the contract to the facts and circumstances as alleged in the complaint clearly shows that the defendant is engaged in a local telephone business in the city of Cumberland and vicinity; that its long-distance service is connected with the Wisconsin Telephone Company; that under the contemplated arrangement it is empowered to furnish telephone service direct to the patrons it retains and to furnish exchange service to all its former patrons who have been transferred to the plaintiff, and also to those who might contemplate securing such service on any of the lines embraced in the contract; and that the defendant is not precluded from making telephone connections with telephone companies other than the plaintiff in territory not embraced within the field of plaintiff’s actual service. The facts and circumstances tbus alleged, witb all tbe reasonable implications, sbow tbat tbe objects of tbe contract are in harmony witb tbe policy of tbe state, embodied in tbe legislative regulations of public utilities, namely, tbat tbe public welfare as regards these enterprises is best promoted through such means as afford tbe highest practical efficiency at tbe lowest cost, and tbat this may best be accomplished by uniting existing facilities, under proper control and regulation, to meet tbe public convenience and necessity, having regard for existing property interests and tbe rights and privileges appertaining thereto. Calumet S. Co. v. Chilton, 148 Wis. 334, 135 N. W. 131.

We are persuaded tbat tbe contract in question is not intended to restrain or prevent competition, nor does it so operate in conducting tbe defendant’s telephone business, in tbe light of tbe provisions of this statute and tbe policy of the state respecting this subject of commerce.

It is contended tbat tbe contract deals witb a transfer of personalty and witb personal services, and hence is not specifically enforceable, and tbat plaintiff has an adequate remedy at law to compensate it for any breach thereof. Tbe defendant has complied witb many of tbe terms and conditions of tbe contract, but refuses to comply witb tbe provision for tbe transfer to plaintiff of its rural lines upon tbe terms agreed on, and refuses to refrain from constructing new rural lines. It is manifest from tbe nature of these contentions tbat tbe plaintiff’s remedy at law, by way of compensation for breach of these conditions, falls short of doing complete justice between tbe parties. To ask compensation for repeated and continuous refusals of tbe defendant to comply witb the specified terms of tbe contract would also be impractical, in view of defendant’s acceptance of tbe benefits of other terms of tbe contract. It is apparent tbat these different agreements constituted a mutual consideration tbe one for the other. We are persuaded that the complaint states a good cause of action for specific performance.

By the Court. — The order appealed from is affirmed.

WiNslow, C. J.

(concurring). I agree with the result solely on the ground that the policy of this state as evidenced by the Public Utilities Act contemplates and provides for just such situations as will be produced by the contract here attacked, namely, situations where the public will be served by one public utility to the exclusion of competing companies of the same kind, and where the ordinary effects of such a monopoly, to wit, the raising of rates of service to excessive figures, will be prevented by the utilities commission. The idea of the law is that monopoly so regulated is preferable to ruinous competition ending in unregulated monopoly.

In my judgment the public utilities law changed the policy of the state with reference to competition between utilities of this kind, and modified sec. 1791/, Stats., so as to make agreements of this kind possible and legal, which before the passage of that act would have fallen within the inhibition of sec. 1791/.

Rearing that the opinion of the court may be understood as intimating that the agreement in the absence of the public utilities law could be upheld in the face of sec. 1791/, I wish to make my position clear.

BarNes, J. I concur in the above.

KeewiN J., and TimliN, J.

The case of Calumet S. Co. v. Chilton, 148 Wis. 334, 135 N. W. 131, is cited in the opinion of the court, and fearing that this citation and our silence would be considered as an approval of some dicta in that case we append this note. The opinion therein by Justice Marshall filed March 4, 1912, is not the opinion of the court and reflects only the personal views of the learned justice wbo wrote it. It was not submitted to tbe court for approval.

We do not agree that there was in tbe particular mentioned in tbe opinion last referred to a mistake in La Crosse v. La Crosse G. & E. Co. 145 Wis. 408, 130 N. W. 530. We cannot assent to any suggestion that tbe reserved power of repeal found in sec. 1, art. XI, Const., is confined to tbe mere power to repeal tbe act creating a corporation, leaving tbe owners of tbe property formerly owned by tbe corporation free to rein-corpórate under tbe general incorporation laws and exercise and enjoy all other former corporate franchises as irrepealable grants. We are not sure that tbe opinion in question means this or will be so understood, but we desire to leave no doubt of our attitude on this question. Tbe language of sec. 1, art. XI, is from one viewpoint narrow, because it was intended thereby merely to obviate tbe effect of tbe Dartmouth College Case, 4 Wheat. 518 (Black River Imp. Co. v. Holway, 87 Wis. 584, 59 N. W. 126), and it-was then thought unnecessary to go further in order to vindicate tbe power of tbe state to control its corporations notwithstanding tbe clause in tbe federal constitution forbidding tbe passage by tbe state of laws impairing tbe obligation of contracts. In the Water Power Cases, 148 Wis. 124, 134 N. W. 330, this court held that an act of tbe legislature conferring upon a corporation tbe right and power to build and maintain a dam in a navigable stream, which grant tbe corporation accepted, was nevertheless repealable at tbe pleasure of tbe legislature, even where tbe corporation bad expended large sums of money in complying with said grant. This grant included all tbe corporate powers and franchises of tbe corporation defendant except tbe mere right to exist as a corporation, and yet was repealable at tbe pleasure of tbe legislature, although of course subject to other provisions of tbe constitution in force and applicable notwithstanding this conceded right of repeal. Tbe precedents cited in that opinion support tbis view, and, omitting mere dictum and argument and considering tbe points actually decided, the great weight of judicial authority is to this effect.

Further, with reference to the opinion of the court in Calumet S. Co. v. Chilton, supra, we desire at the earliest practicable moment to withdraw any acquiescence in the dicta found in that opinion to the effect that a municipality may not do its own lighting if there is present in that municipality an electric lighting company holding an indeterminate permit and standing ready to supply the city with such lighting at rates fixed by it or by the railroad rate commission. The contrary would be to hold that through the railroad rate commission the taxpayers of the municipality may be taxed for the purpose of paying dividends or aiding to pay dividends on the stock or interest on the bonds of an impecunious public service company. We do not think the legislature could do this, nor could any commission deriving its power from the legislature. This would be the result of a ruling which would forbid the city to do its own lighting and compel it to buy from the single public utility within its boundaries, at the same time permitting this utility itself, or the railroad rate commission, to fix rates adequate to give the private investors in the stock and bonds of such public utility a fair return upon their investment, if without such public lighting there would not be a fair return. Patrons or consumers of electric light are free to contract or refuse to contract with such public utility, but in the case mentioned the taxpayer would have no such option.  