A-72338, APRIL 13, 1936, 15 COMP. GEN. 896

A-72338: Apr 13, 1936

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PAYMENT FOR SERVICES CURRENTLY RENDERED IS AUTHORIZED AT THE INCREASED RATES ESTABLISHED BY CITY ORDINANCE AFTER COURT DETERMINATION OF INSUFFICIENCY OF PRIOR RATES. REQUESTING DECISION WHETHER PAYMENT IS AUTHORIZED ON A VOUCHER TRANSMITTED IN FAVOR OF SOUTHWESTERN BELL TELEPHONE CO. IN CONSIDERATION THEREFOR THE GOVERNMENT AGREED TO PAY "A SUM EQUAL TO THE LEGALLY ESTABLISHED RATES AND CHARGES FOR SIMILAR SERVICES AND FACILITIES FURNISHED OR OFFERED TO THE BUSINESS SUBSCRIBERS OF THE EXCHANGE BY WHICH SERVICE IS FURNISHED THEREUNDER.'. THE COMPANY APPLIED TO THE CITY BOARD OF COMMISSIONERS FOR PERMISSION TO INCREASE ITS RATES ON THE GROUNDS THAT THE RATES EXISTING BY VIRTUE OF THE 1918 ORDINANCE WERE CONFISCATORY OF ITS PROPERTY.

A-72338, APRIL 13, 1936, 15 COMP. GEN. 896

TELEPHONE SERVICE - INCREASED RATES WHERE A CONTRACT FOR THE FURNISHING OF TELEPHONE SERVICE TO THE GOVERNMENT PROVIDES FOR PAYMENT AT LEGALLY ESTABLISHED RATES, PAYMENT FOR SERVICES CURRENTLY RENDERED IS AUTHORIZED AT THE INCREASED RATES ESTABLISHED BY CITY ORDINANCE AFTER COURT DETERMINATION OF INSUFFICIENCY OF PRIOR RATES.

COMPTROLLER GENERAL MCCARL TO LT.COL. C. NEWTON, JR., UNITED STATES ARMY, APRIL 13, 1936:

THERE HAS BEEN RECEIVED BY INDORSEMENT FROM THE CHIEF OF FINANCE YOUR LETTER OF MARCH 5, 1936, REQUESTING DECISION WHETHER PAYMENT IS AUTHORIZED ON A VOUCHER TRANSMITTED IN FAVOR OF SOUTHWESTERN BELL TELEPHONE CO., HEREINAFTER CALLED THE COMPANY, SAN ANTONIO, TEX., IN THE AMOUNT OF $13.12 COVERING TELEPHONE SERVICE FOR THE PERIOD DECEMBER 26, 1935, TO FEBRUARY 11, 1936, UNDER CONTRACT NO. 1070-SC-93 DATED JULY 25, 1934, AND RENEWED JUNE 20, 1935. OF THE SUM CLAIMED, $4.37 RELATES TO THE PERIOD DECEMBER 26, 1935, TO JANUARY 10, 1936, THE BALANCE OF $8.75 RELATES TO WHAT APPEARS TO BE THE REGULAR BILLING PERIOD, NAMELY, JANUARY 11 TO FEBRUARY 10, 1936.

BY THE TERMS OF THE AFOREMENTIONED CONTRACT THE COMPANY AGREED TO FURNISH, INSTALL, AND MAINTAIN AT DESIGNATED ESTABLISHMENTS OF THE UNITED STATES ARMY IN THE EIGHTH CORPS AREA, WHICH INCLUDES SAN ANTONIO, TEX., CERTAIN TELEPHONE SERVICE, INCLUDING THE FACILITIES THEREFOR, AND IN CONSIDERATION THEREFOR THE GOVERNMENT AGREED TO PAY "A SUM EQUAL TO THE LEGALLY ESTABLISHED RATES AND CHARGES FOR SIMILAR SERVICES AND FACILITIES FURNISHED OR OFFERED TO THE BUSINESS SUBSCRIBERS OF THE EXCHANGE BY WHICH SERVICE IS FURNISHED THEREUNDER.'

PURSUANT TO THE LAWS OF TEXAS THE CHARTER OF SAN ANTONIO, TEX., SAID CITY BY ORDINANCE APPROVED JUNE 20, 1918, PRESCRIBED RATES FOR TELEPHONE SERVICE WITHIN THE CITY. ON FEBRUARY 7, 1928, THE COMPANY APPLIED TO THE CITY BOARD OF COMMISSIONERS FOR PERMISSION TO INCREASE ITS RATES ON THE GROUNDS THAT THE RATES EXISTING BY VIRTUE OF THE 1918 ORDINANCE WERE CONFISCATORY OF ITS PROPERTY. THIS REQUEST WAS DENIED AND ON MARCH 26, 1928, THE COMPANY FILED A SUIT IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DIVISION OF TEXAS, SAN ANTONIO DIVISION, IN EQUITY, AGAINST THE GOVERNING BODY OF THE CITY, ALLEGING THAT THE RATE ESTABLISHED AS AFORESAID WAS CONFISCATORY OF ITS PROPERTY. A TEMPORARY INJUNCTION FOLLOWED RESTRAINING THE CITY FROM REQUIRING THE COMPANY TO OBSERVE THE RATES PRESCRIBED OR FROM INTERFERING WITH THE COMPANY IN PROMULGATING AND CHARGING RATES SUFFICIENT TO AFFORD A FAIR AND REASONABLE RETURN ON THE FAIR VALUE OF ITS PROPERTY. THE ORDER OF THE COURT FURTHER CHARGED AND OBLIGATED THE COMPANY TO CAUSE TO BE EXECUTED A BOND WITH GOOD AND SUFFICIENT SURETY TO SECURE THE CITY AND OTHER TELEPHONE SUBSCRIBERS IN THE CITY OF SAN ANTONIO, TEX., AGAINST ALL SUMS THAT THE COMPANY MAY THEREAFTER COLLECT IN EXCESS OF THE RATE ESTABLISHED BY THE ORDINANCE OF JULY 20, 1918.

ON FEBRUARY 20, 1928, THE TRIAL COURT ENTERED A DECREE DISSOLVING THE INTERLOCUTORY INJUNCTION AND DISMISSED THE SUIT. (SEE SOUTHERN BELL TELEPHONE CO. V. CITY OF SAN ANTONIO, 2 FED.SUPP. 611.) ALSO, THE COURT OVERRULED A MOTION FOR REHEARING (SEE THE REPORT OF THE CASE STYLED AS ABOVE IN 4 FED.SUPP. 570). THEREAFTER, THE COMPANY PROSECUTED AN APPEAL TO THE CIRCUIT COURT OF APPEALS, FIFTH CIRCUIT, WHEREIN A DECISION WAS ASIDE THE DECREE OF THE TRIAL COURT AND REMANDING THE CAUSE FOR FURTHER PROCEEDINGS. A PETITION FOR A WRIT OF CERTIORARI TO REVIEW THE DECISION OF THE APPELLATE COURT, SUPRA, WAS DENIED BY THE SUPREME COURT OF THE UNITED STATES ON MAY 20, 1935. (SEE SAN ANTONIO ET AL V. SOUTHWESTERN BELL TELEPHONE CO. 295 U.S. 754.)

ON DECEMBER 30, 1935, AN ORDINANCE WAS PASSED BY THE GOVERNING BODY OF THE CITY OF SAN ANTONIO AND DULY APPROVED BY ITS MAYOR, REPEALING THE ORDINANCE OF JUNE 20, 1918, AND SETTING FORTH CERTAIN SPECIFIED RATES FOR VARIOUS TELEPHONE SERVICES EFFECTIVE DECEMBER 26, 1935.

ON JANUARY 1, 1936, THE UNITED STATES DISTRICT COURT WHEREIN THE SUIT AFOREMENTIONED WAS ORIGINALLY FILED, UPON CONSIDERATION OF A STIPULATION AND AGREEMENT (WHICH IS NOT EMBRACED IN THE PRESENT RECORD) ENTERED INTO BETWEEN THE COMPANY AND THE SAID CITY, APPROVED SUCH AGREEMENT AS THE BASIS OF A CONSENT DECREE AND FURTHER ORDERED, IN SUBSTANCE, (1) THAT THE TEMPORARY INJUNCTION DATED APRIL 23, 1928, BE MADE PERMANENT INSOFAR AS THE APPLICATION AND ENFORCEMENT OF THE RATES ESTABLISHED IN 1918 UP TO THE DATE OF THE INSTANT DECREE IS CONCERNED; (2) THAT THE COMPANY PAY WITH SIMPLE INTEREST AT THE RATE OF 6 PERCENT PER ANNUM TO EACH OF ITS CUSTOMERS IN THE SAN ANTONIO EXCHANGE THE DIFFERENCE BETWEEN THE RATE WHICH IT COLLECTED UNDER THE PROTECTION OF THE SAID TEMPORARY INJUNCTION AND THE RATES WHICH WERE MADE EFFECTIVE DECEMBER 26, 1935, BY THE ORDINANCE PASSED BY THE GOVERNING BODY OF THE SAID CITY AND APPROVED BY THE MAYOR DECEMBER 30, 1935.

DURING THE PERIOD COVERED BY THE TEMPORARY INJUNCTION, AS PREVIOUS THERETO, THE UNITED STATES PAID FOR TELEPHONE SERVICE WITHIN THE CORPORATE LIMITS OF THE CITY OF SAN ANTONIO, TEX., THE RATE PRESCRIBED BY THE ORDINANCE OF JUNE 20, 1918, IT BEING HELD BY DECISION OF THIS OFFICE DATED SEPTEMBER 9, 1929, A-28453, IN SUBSTANCE THAT, WHEN A CONTRACT FOR THE FURNISHING OF TELEPHONE SERVICE SPECIFIES THAT PAYMENT SHOULD BE MADE AT THE LEGALLY ESTABLISHED RATE, THE UNITED STATES IS NOT OBLIGATED TO PAY AN INCREASE OF RATE MADE BY THE TELEPHONE COMPANY UNDER THE PROTECTION OF A TEMPORARY INJUNCTION ISSUED BY THE UNITED STATES DISTRICT COURT PENDING A FINAL DECREE WITH REFERENCE THERETO, IN THE ABSENCE OF A SHOWING THAT THE INCREASE NAMED IN THE TEMPORARY INJUNCTION WAS MADE OR APPROVED OF DULY AUTHORIZED STATE OR GOVERNMENT COMMISSION AS PROVIDED IN THE CONTRACT.

THE QUESTION UNDER CONSIDERATION IS WHETHER THE RATES ESTABLISHED BY THE ORDINANCE APPROVED DECEMBER 30, 1935, ESTABLISHING RATES EFFECTIVE DECEMBER 26, 1935, MAY BE PAID FOR SERVICE RENDERED THE GOVERNMENT BY THE COMPANY, IN THE CORPORATE LIMITS OF SAN ANTONIO, TEX., ON AND AFTER DECEMBER 26, 1935.

IN VIEW OF THE FOREGOING PAYMENT ON THE VOUCHER FOR TELEPHONE SERVICES RENDERED OVER THE PERIOD DECEMBER 26, 1935, TO FEBRUARY 11, 1936, IS AUTHORIZED AT THE RATE SPECIFIED IN THE ORDNANCE, SUPRA, FOR THE PARTICULAR SERVICE INVOLVED.