
    TELEPHONES AND TELEGRAPHS.
    [Franklin (2nd) Court of Appeals,
    July 2, 1917.]
    Kunkle, Allread and Ferneding, JJ.
    Columbus (City) v. Ohio State Telephone Co.
    L Telephone Franchise Ordinance Fixing Rates for Overhead and Conduit System Valid and Enforcibie by Municipality.
    A municipal ordinance granting a twenty-five year franchise to a telephone company to operate an overhead and conduit system and providing for an extension of its conduit system after five years from the completion of its exchange, and fixing a maximum charge for business phones is valid and may be enforced by the municipality in its own behalf and in behalf of customers located within the corporate limits.
    2. Telephone Franchise Fixing Rates for Definite Period not controlled by Public Utilities Commission.
    The public utilities act does not apply-to a municipal ordinance granting a twenty-five year franchise to a telephone company to operate an overhead and conduit system and fixing the rates to private customers. The rates having been fixed for a definite period are not required to be filed with the public utilities commission.
    3. Construction of Conduits at Notice and Request of City Officials Cause for Increasing Rates under Ordinance.
    In an action by a city to enjoin a telephone company from increasing its rates under an ordinance granting the franchise fixing the rates and prescribing the construction, and further providing for an equitable increase in rates upon the city’s requiring the placing of additional wires in conduit, it is a good defense that more than seven miles of conduit have been constructed at the request and under the direction of city officials, and when it appears from the affidavits of both parties that the question of whether such construction was done pursuant to notice or request of the city, the question will be remanded for final determination and trial.
    4. Telephone Company Denied Right to Accept Favorable Provisions of Franchise and Disregard Provision as to Rates.
    A telephone company having accepted a franchise to maintain • an overhead and conduit system cannot disregard the provision as to rates and retain the favorable provisions of the ordinance granting it. Neither is a defense in relation to unanticipated cost and extension of service good.
    [Syllabus approved by the court.]
    Appeal.
    
      H. L. Scarlett, City Solicitor and J. B. King, Asst. Sol. for plaintiff.
    
      
      Daugherty, Todd & Rarey and Geo. H. Jones, for defendant.
   BY THE COURT.

The city of Columbus brought this action against the Ohio State Telephone Company to enjoin the telephone company from putting into effect a proposed increase of its annual charge upon business phones from $40.00 to $54.00 per annum, less a discount of $3.00 for payment in advance.

The petition alleges that the telephone company is operating under a franchise, ordinance and contract dated and taking effect in the year 1899 and continuing for a definite period of twenty-five years. The ordinance provides for the construction and maintenance of at least five miles of conduits and such extension of the conduit system as might be required by the city after five years from the completion of the exchange.

Under the ordinance and contract, the original telephone company, to whose rights the defendant succeeds, agreed that its charge for business phones should not exceed $42.00 per annum, but provided that if the city at any time after five years from the installation of the exchange required the company to place additional wires under ground that the charges for rentals above set forth might be equitably increased, but not exceeding one dollar per month per phone in excess of the charges above stipulated.

The petition alleges that the defendant entered upon and constructed its plant in the streets, alleys and avenues of the city and has constructed and now maintains more than twelve and one-half miles of underground conduits and that the city at no time required or demanded that , the telephone company lay additional conduits over and above the five miles originally' provided for in the ordinance. The city, therefore, contends that the telephone company has no authority to increase its telephone charges upon business phones above the $42.00 per annum provided for in the ordinance.

An answer was filed in whieh the defendant, among other things, admits the terms and provisions of the ordinance and that it is operating under said ordinance. It admits that it has constructed approximately ten miles of additional conduit, which it is now maintaining as a part of its telephone system and that it proposes to raise the schedule of rates on business phones to the sum of $54.00 per annum, less a discount of $3.00 for payment in advance and denies each and every other allegation.

The defendant sets out four additional defenses.

By the first defense it is claimed that the city of Columbus had no legal right to fix the telephone rates to subscribers and that such provision in the ordinance and contract were without consideration.

The second defense alleges, in substance, that the only authority to fix telephone rates is vested in the public utilities commission, under Sec. 614-2 G. C. et seg.; that the telephone company January 1, 1917, filed this proposed schedule of rates with the utilities commission to become effective February 1,1917, and that no objections, protest or complaint having been filed with the public utilities commission to said rates, the same are now the only lawful rates which the defendant is authorized or permitted to charge.

Third defense alleges, in substance, that the city through its duly authorized officers and agents subsequent to the passage of the franchise, ordinance from time to time, notified this defendant to remove its poles and fixtures from certain streets, alleys and public ways and to place the same in conduits beneath the surface of said streets and that in obedience to said orders and notices, the defendant from time to time constructed more than ten trench miles of conduits in addition to the five miles originally provided for in the ordinance and has leased approximately three trench miles of conduits, in all of which it has placed and maintained its telephone wires in the operation of its plant. The defendant, therefore, claims the right to increase the charges upon business phones up to the maximum of fifty-four dollars per annum, as provided in the ordinance.

The fourth defense, in substance, avers that the telephone plant in the city of Columbus has increased in cost and expense far beyond what was contemplated by the parties at the time the franchise ordinance and contract became effective, making the operation of the plant under the franchise rates unprofitable and causing a loss to the company of substantially $60,000.00 per annum and that by reason of such umantiaipated situation, the telephone company is entitled to have the ordinance rates disregarded and equitable rates established in view of existing conditions.

The plaintiff demurred separately to the defenses marked one, two, three and four of the answer and also to all of the answer, for the reason that the facts stated thereon do not separately or jointly constitute a defense.

The demurrer was presented in the common pleas. The common pleas, in searching the record, found that the petition was defective and sustained the demurrer to the petition and dismissed the action. From this final judgment appeal was taken to this court.

The case is submitted here upon the demurrer to the answer and also upon a motion for a temporary injunction.

In support of the claim that the petition is insufficient to constitute a cause of action, it is claimed that the council of the city of Columbus had no authority to fix the rates and that the acceptance of such franchise including the rates was not binding as a contract because there was no consideration.

It must be observed that as a controlling feature, the City of Columbus by the franchise ordinance in controversy granted not only the right to maintain an overhead telephone system but to maintain conduits in the streets, alleys and public places.

The latter feature, we think, constitutes such a grant as would afford a consideration for the fixing of rates in the franchise ordinance.

In the case of Zanesville v. Gas Light Co., 47 Ohio St. 1 [23 N. E. 55], it was held that the fixing of rates by a gas company in the franchise ordinance was valid. That a right to the use of the streets furnished a valid consideration for the agreement of the company fixing prices at which a commodity was to be furnished to the city and to its inhabitants.

This doctrine was followed in the case of Columbus v. Gas Co., 76 Ohio St. 309 [81 N. E. 440], and was extended so as to include a stipulated sum to be paid to the city as compensation for the use of the streets.

In the recent case, of the Columbus Citizens Tel. Co. v. Columbus, 88 Ohio St. 466 [104 N. E. 534], the principle of the gas company case was extended to the case of a telephone company' which obtained in the franchise the right to the use of the streets for conduit purposes.

The case of Farmer v. Telephone Co., 72 Ohio St. 526 [74 N. E. 1078], is limited to the case of a telephone company which obtains its franchise to operate merely an overhead telephone ¡System and does not apply to the case of a telephone company obtaining the use of the streets and alleys for a conduit system.

The right of a municipality to require a telephone or other public utilities company to fix rates in consideration of a franchise to use the streets especially the subsurface, is amply sustained by the weight of authority in other jurisdictions.

Dillon, Municipal Corporations (5 Ed.) page 1952.

Pond, Public Utilities Sec. 431.

McQuillan, Municipal Corporation, Sec. 1741 and cases cited.

We are therefore of the opinion that under the facts stated in the petition the provisions of the franchise ordinance fixing the telephone rates is valid and may be enforced by the city in its own behalf and in the behalf of the consumers located within its corporate limits.

We therefore proceed to consider the sufficiency of the defenses numbered one, two, three and four of the answer.

Defense number one challenges the consideration of a franchise provision fixing rates upon the ground that there is no consideration. This proposition has already been discussed. That defense, in our opinion, is unsuffieient.

Defense number two relates to the filing of the rates with the public utilities commission. Upon consideration of this defense, we have reached the conclusion that the public utilities act does not apply to the ordinance under consideration, for the reason that this ordinance grants a franchise fixing the rates for a definite period. See Sec. 614-19 G. C. Lexington v. Fuel Supply Co., 37 O. C. C. 678 (24 N. S. 537); Taylor v. Niles, 35 O. C. C. 445 (21 N. S. 391).

We think this is also in harmony with the opinion of the Supreme Court in the case of Cincinnati v. Public Utilities Com., decided May 15, 1917.

We think the third defense alleging the extension of the condnit system under notices and orders from the superintendent of fire and police telegraph of the city of Columbus constitutes a good defense and if true, would authorize the company to increase its rates equitably above the $42.00 per annum provided in the franchise ordinance and not exceeding $12.00 per year.

We think the fourth defense in relation to the unanticipated cost and extension of the service is not a good defense.

The company accepted the ordinance and its right to maintain this system, including conduits is based thereon. Whether the company might under the situation set forth in this defense surrender its entire franchise we are not called upon to consider, but having accepted the franchise including the provision as to the rates, we think that they are not now justified in disregarding the provision as to rates and retain the favorable provisions of the ordinance.

We are therefore of the opinion that demurrer should be sustained to so much of the answer as is embraced under numbers one, two and four, and overruled as to so much of the answer as is embraced under number three.

In respect to the motion for a temporary injunction, we have considered the affidavits filed by the city in connection with those filed by the defendant in the court below. We have reached the conclusion that the question as to whether all or a part of the extension of the conduit system over and above the five miles provided for in the ordinance was made by notice or request of the city is considerably involved, and we do not deem it advisable to pass upon this question of fact upon these affidavits, but feel that as matter of public convenience no interference should be made by a temporary injunction at this time, but the case should be put at issue and finally tried and determined.

The motion for a temporary injunction is therefore overruled and the demurrer to the first, second and fourth defenses of the answer sustained and a.s to the third defense overruled.

Kuhkle, AUread and Femedin^, JJ., concur.  