# County of Los Angeles v. Southern California Telephone Co.

> California Supreme Court · August 13, 1948 · 32 Cal. 2d 378

URL: https://www.frixlaw.com/law-library/cases/9605392

## Case

- **Full name:** COUNTY OF LOS ANGELES, Appellant, v. SOUTHERN CALIFORNIA TELEPHONE COMPANY (A Corporation), Respondent
- **Court:** California Supreme Court
- **Decided:** August 13, 1948
- **Citations:** 32 Cal. 2d 378; 196 P.2d 773; 1948 Cal. LEXIS 231
- **Precedential status:** Published
- **Opinion:** Dissent by Carter
- **Judges:** Gibson, Carter
- **Cited by:** 91 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9605392

## How later opinions describe it (automated extraction)

- holding that California's counterpart to Article V was a "continuing offer extended to telephone and telegraph companies to use the highways"
- rejecting argument that franchise to telephone company granting privilege to maintain its lines and poles on public streets violated California Constitution's anti-gift article

## Opinion text

CARTER, J.
I dissent.
By permitting section 536 of the Civil Code and the Broughton Act to stand side by side, the majority opinion in effect affirms the holding in Inyo v. Hess, 53 Cal.App. 415 [ 200 P. 373 ], that the two statutes have the effect of giving to telephone and telegraph corporations the right to erect and maintain lines along public highways and streets free of any burden whatsoever while every other person or association must comply with a number of regulations and pay money for the same right. Thus the majority perpetuates the type of special privilege conferred upon corporations which is reminiscent of the decade when this legislation was adopted.
In my opinion, this results in a violation of the equal protection clause of the Fourteenth Amendment to the federal Constitution. While it is clear that the equal protection clause does not prevent a state Legislature from enacting statutes which' contain a “reasonable classification,” it is equally clear that it does prevent the states from enacting laws which create unreasonable discrimination. The majority opinion asserts that the differentiation here involved is a “reasonable classification.” To support this argument, eight cases are cited. (Goddard v. Chicago & N. W. Ry. Co., 202 Ill. 362 [ 66 N.E. 1066 ]; Noble State Bank v. Haskell, 219 U.S. 104 [ 31 S.Ct. 186 , 55 L.Ed. 112 ]; Shallenberger v. First State Bank, 219 U.S. 114 [ 31 S.Ct. 189 , 55 L.Ed. 117 ]; Engel v. O'Malley, 219 U.S. 128 [ 31 S.Ct. 190 , 55 L.Ed. 128 ]; Dillingham v. McLaughlin, 264 U.S. 370 [ 44 S.Ct. 362 , 68 L.Ed. 742 ]; German Alliance Ins. Co. v. Lewis, 233 U.S. 389 [ 34 S.Ct. 612 , 58 L.Ed. 1011 ]; Commonwealth v. Vrooman, 164 Pa. 306 [ 30 A. 217 , 44 *394 Am.St.Rep. 603 , 25 L.R.A. 250 ]; Brady v. Mattern, 125 Iowa 158 [ 100 N.W. 358 , 106 Am.St.Rep. 291 ].)
All eight of these cases involved statutes making distinctions between classes of the public. In all eight of the cases, the statutes were upheld as not violative of the Constitution. But the basis of the holdings in seven of the eight cases was that the statutes constituted an exercise of the police power, so-called. This power of the states to make regulations which, while they abridge the rights of some of the citizens, are nevertheless necessary and justified in the interest of the general public, can be invoked only in cases where there is a danger to the general public. A classification may be validly made when it has a reasonable tendency to combat a specific evil. “. . . [T]o justify the imposition of a burden, there must be some connection of causation or responsibility between the person selected or the right impaired and the danger to the public welfare or the public burden which is sought to be avoided or relieved.” (Freund, Police Power, 635.) This element of public danger was present in seven of the cases mentioned. In Noble State Bank v. Haskell, 219 U.S. 104 [ 31 S.Ct. 186 , 55 L.Ed. 112 ], the issue was whether anyone desiring to engage in the business of banking could be required to form a corporation, submit to certain inspections and contribute to an insurance or guaranty fund. The evil which this regulation was designed to check was the frequent failure of individuals engaged in the banking business to meet their obligations, and the resulting insecurity of commercial paper, especially cheeks. The Supreme Court of the United States said: “If the . . . legislature declares . . . that incorporation, inspection and the above-described cooperation are necessary safeguards, this court certainly cannot say that it is wrong.” (Noble State Bank v. Haskell, supra.) [Emphasis added.] Shallenberger v. First State Bank, 219 U.S. 114 [ 31 S.Ct. 189 , 55 L.Ed. 117 ], involved practically the same situation and is based on the same reasons as the Noble State Bank case. Engel v. O'Malley, 219 U.S. 128 [ 31 S.Ct. 190 , 55 L.Ed. 128 ], and Dillingham v. McLaughlin, 264 U.S. 370 [ 44 S.Ct. 362 , 68 L.Ed. 742 ], both involved control of a type of business apparently common to New York during the years of heavy immigration. There, individuals would act as depositaries of small savings deposits made by recent immigrants. A substantial number of these depositaries seems to have absconded with the money so deposited and, of course, the low-income, unsophis *395 eated depositors were nearly helpless. To eliminate this danger and still enable this particular group of depositors to make their small deposits, various statutory enactments were passed which subjected these individual depositaries to rather Strict regulations but exempted from the operation of the regulations banks duly incorporated. Failure on the part of the depositaries to comply with the regulations, such as putting up a bond and submitting to inspections, was made a misdemeanor. Statutes of this type were therefore obviously designed to check an evil and if any further test be needed, the criminal character of the statute is the best indication that the protection of the public was at its basis. In German Alliance Ins. Co. v. Lewis, 233 U.S. 389 [ 34 S.Ct. 612 , 58 L.Ed. 1011 ], a statute imposing a number of regulations on insurance companies was attacked on the ground that it expressly exempted farmers’ cooperative insurance associations from its regulations. The provisions of the statute were regulatory only and it was held that the classification was entirely reasonable because the members of a cooperative farmers’ insurance association are in a far better position to police their own organization than members of the public who deal with unincorporated and unregulated insurers.
The next two eases cited are not binding on this court because they were decided by state courts. But they are equally based on the principle of protection of the public so that they are not only not binding but also inapplicable. Commonwealth v. Vrooman, 164 Pa. 306 [ 30 A. 217 , 44 Am.St.Rep. 603 , 25 L.R.A. 250 ], was a criminal prosecution under a statute making it a misdemeanor for any person other than a corporation to engage in the insurance business. The decision upholding the distinction is based on the police power and the need of the public for protection. Brady v. Mattern, 125 Iowa 158 [ 100 N.W. 358 , 106 Am.St.Rep. 291 ], was a petition for a writ of habeas corpus by a contractor who had been arrested after violating a statute which placed rather stringent controls on individual contractors and required them to put up bonds but exempted corporate contractors and building and loan associations from such controls. The petitioner attacked the constitutionality of the discrimination and the court based its refusal to grant the writ on the fact that the protection necessary to safeguard the public made the classification reasonable.
In the ease at bar, there is no pretence that the discrim *396 ination is in any way designed to protect the general public from the risks involved if it is permitted to deal with unincorporated telephone and telegraph operators. The absence of this element renders section 536 of the Civil Code unconstitutional. It makes a distinction between private persons and partnerships on one side and telephone and telegraph corporations on the other. This distinction would result in a reasonable classification if public welfare were at all involved. Since public welfare is not involved, the distinction results in a discrimination prohibited by the equal protection clause of the Fourteenth Amendment.
The one case cited in the majority opinion which has not been dealt with does seem to state the rule that the policies behind legislation are not open to inquiry by the courts. Goddard v. Chicago & N. W. Ry. Co., 202 Ill. 362 [ 66 N.E. 1066 ]. In that case the argument was made that legislation which permitted a county board to issue permits for the construction of railroads to corporations only was in violation of the state and the federal Constitutions. The court brushed this argument aside, saying: ‘ ‘ The legislature had power to limit the authority of the county board to grant a license to incorporated companies created . . . for the purpose of constructing and operating street railways, and it is not material what reason existed for prescribing the limit. It was a ease for the exercise of legislative judgment with which we are not concerned.” (Goddard v. Chicago & N. W. Ry. Co., supra.) It is submitted that the court was clearly wrong in stating this flat rule. The moment a classification or discrimination is created, the question of whether it shall stand or fall is very much the concern of the courts. It is simply not true that the Legislature can exercise unlimited discretion when it creates such classifications. The majority opinion recognizes this and correctly states the rule that discriminatory legislation must fall unless reasonable and nonarbitrary. The Goddard case, in failing to recognize this rule, would therefore fall even under the view taken by the majority. Besides, being a state case it is not binding here and its persuasive force is dissipated by the ease of Frost v. Corporation Com., 278 U.S. 515 [ 49 S.Ct. 235 , 73 L.Ed. 483 ], which controls the Goddard case as well as the case at bar.
The Frost case, supra, shows that the result reached by the majority is wrong. The distinction created by section 536, the Broughton Act and the decision in this case is not a rea *397 sonable classification: It is an unreasonable discrimination. The present case falls clearly within the rule of the Frost case as it is much stronger on the facts. In the Frost case, a statute required persons and nonagrieultural corporations who wished to engage in the ginning of cotton to make a showing of public necessity as a condition precedent to their being able to obtain a license. Cooperative associations were exempt from this requirement. Under the general laws of the state involved, a cooperative association was free to sell its services to the public and make a profit out of such dealings. The court held that the distinction created an unreasonable classification. ‘ ‘. . . the proviso, as here construed and applied, baldly creates one rule for a natural person and a different and contrary rule for an artificial person, notwithstanding the fact that both are doing the same business with the general public and to the same end, ... it produces a classification which subjects one to the burden of showing a public necessity for his business, from which it relieves the other, and is essentially arbitrary, because based upon no real or substantial differences having reasonable relation to the subject dealt with by the legislation.” (Frost v. Corporation Com., supra, 522.)
In the case at bar, mere enumeration of some of the requirements set forth in the Broughton Act will show that a greater burden results in this case than that of showing a public necessity in the Frost case. Under the Broughton Act, a bidder for a franchise must—unless he is a telephone or telegraph corporation—submit sealed bids, must make immediate payment of a substantial sum if the franchise is struck off to him at the auction, must make an additional large payment within 24 hours, and must pay a tax of 2 per cent on the gross receipts every year. There are other provisions, but those set forth show sufficiently the great disparity created between the privileges enjoyed by corporations under section 536 and those enjoyed by individuals and associations under the Broughton Act.
This classification is unreasonable and discriminatory because nothing is gained through it by anyone including the state, except the corporations which are exempt from the burdens of the Broughton Act. Operators other than those favored few are evidently just as acceptable to the Legislature, provided they pay for the privilege given free to those favored few. Just as in Frost v. Corporation Com., supra, both *398 are engaged in exactly the same type of business, for the same purpose. Both would be public utilities. It is obvious, therefore, that no consideration of public welfare could have been in the back of the legislators’ minds. No real reason for the classification is shown. The majority opinion indulges in conjecture as to what some of these reasons might have been. . That, however, is not a proper solution. The Supreme Court of the United States has laid down the rule that the reasons for the classification must be apparent in order for it to have any chance of being sustained: “To assume that some unnamed public interest exists, which will sustain the discrimination, does not help the matter here; because the assumption can rest only on surmise, with nothing concrete or explicit appearing to support it or to indicate a legislative intent to relate the exemption to any public purpose.” (Colgate v. Harvey, 296 U.S. 404, 425 [ 56 S.Ct. 252 , 80 L.Ed. 299 , 102 A.L.R. 54 ].) The last-cited case involved income tax legislation under which income from investments within the state was favored over that derived from out-of-state investments. The state courts held that such a statute “might” have the purpose of encouraging investments within the state. The Supreme Court answered that contention in the words quoted supra. The suppositions made by the majority opinion in the case at bar are open to the same criticism.
Two more points are raised which purportedly lend support to the holding of the majority: One, that the question of constitutionality of these statutes has been before this court and has been decided and that therefore the classification and the subsequent reliance thereon became tantamount to a rule of property which this court should not disturb except for compelling reasons. Literally speaking, the statement that the constitutionality of the combined effect of these statutes has been before this court is true. The statement, however, contains an ambiguous term: ‘ ‘ Constitutionality. ’ ’ If this word can be construed to include the state Constitution alone, the statement would be correct. Western Union Tel. Co. v. Hopkins and its companion cases, 160 Cal. 106 ff. [ 116 P. 557 ], did pass on the question whether the California Constitution was violated. But the court expressly recognized that nothing more than one single section of the California Constitution had been raised by counsel. The court found that that section had not been violated (art. I, § 11), and discussed one other aspect of the case under the California Constitution. The *399 federal Constitution was not mentioned. How a holding of this kind can result in a “rule of property” is very difficult to conceive. The federal question is before this court for the first time in this case. There is no reason why it should not be squarely met.
The other contention is that no “compelling and cogent reasons” exist in this case for a change of the status of telephone and telegraph corporations under what they conceived the law to be. I believe that such reasons do exist. Under the majority holding the counties will receive no revenue out of franchises operated by telephone or telegraph corporations. In order to meet the requirements of the various budgets involved, the tax rate in those counties is therefore correspondingly higher than it would be if these corporations were subjected to the same duty to pay now resting on the balance of the operators. By subjecting telephone and telegraph corporations to the terms of the Broughton Act and by requiring them to make the payments called for by the act, the revenue of the counties will increase and the tax rate will decrease correspondingly. The result will be a higher operating cost for telephone and telegraph corporations. But, contrary to the contention made by these corporations, this will not have any “disastrous effects” on them. They are given the means of obtaining permission to charge higher rates (Stats. 1915, p. 115 as amended, 2 Deering’s Gen. Laws, Act 6386, § 61 ff.) and will not, as they seem to contend, be driven into bankruptcy. The higher rates which telephone and telegraph corporations may then charge for their services will place the burden of paying for the use of public streets and highways where it belongs: On the subscribers to telephone and telegraph services rather than the taxpayers at large. That, in my opinion, is a reason sufficiently cogent and compelling to make a change, even if a settled situation had existed up to now. Mere lapse of time will never breathe the breath of life into a statute void for unconstitutionality, and the attempt to uphold the statute on this ground evinces a fatal weakness in the basic concept upon which the majority opinion is predicated.
The equal protection clause of the Fourteenth Amendment to the Constitution of the United States has been given renewed vigor by several recent decisions of the Supreme Court of the United States, and in view of this trend I do not anticipate that that court will depart from its pronouncement in *400 the Frost ease which is in clear conflict with the holding of the majority in the case at bar.
It is, therefore, my opinion that the judgment should be reversed.
Appellant’s petition for a rehearing was denied September 8,1948. Carter, J., voted for a rehearing.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9605392. Public record. Not legal advice.