(265 Pa. 157) fault or negligence of the directors within the AUDIT OF HANOVER TP. SCHOOL DIST. meaning of Act June 9, 1911 (P. L. 865), in view of School Code, §§ 516, 517, 617, and 2613. Appeal of MORRIS et al. (Supreme Court of Pennsylvania. June 21, 1919.) 62-OB 1. SCHOOLS AND SCHOOL DISTRICTS 2. SCHOOLS AND SCHOOL DISTRICTS 62- FENSE. Although auditors gave no formal notice to school directors of a surcharge at or before filing their report by mail or otherwise, as required by School Code, § 2614, yet, where actual notice appeared from the fact that directors presented evidence at the hearing and were represented by counsel throughout the proceedings, they thereby submitted themselves to the court's jurisdiction, though, had they failed to appear, the want of notice to which they were entitled would have been a valid defense. 3. SCHOOLS AND SCHOOL DISTRICTS 62SURCHARGE AGAINST SCHOOL DIRECTORS FOR IMPROPER PAYMENTS. Appeal from Court of Common Pleas, Luzerne County. In the matter of Hanover Township School District's audit. Judgments against Wm. H. Morris and five others, school directors, in sums aggregating over $1,000, and the directors separately appeal. Affirmed. Argued before BROWN, C. J., and MOSCHZISKER, FRAZER, SIMPSON, and KEPHART, JJ. Benj. R. Jones, F. A. McGuigan, and P. W. McKeown, all of Wilkes-Barre, for appellants. John D. Farnham, of Wilkes-Barre, for appellee. FRAZER, J. This appeal by the members of the school board of Hanover township school district is from a decree of the court of common pleas of Luzerne county, surcharging appellants with certain payments included in their account for the fiscal year ending the first Monday of July, 1912; the amount of the surcharge aggregating $11,458.05. The subject-matter of the surcharge, so far as this appeal is concerned, is money expended in contracts let for repairing the school building and grounds without previous advertising for bids, also money paid for books for the school library at prices found to be exorbitant. [1] Appellants first contend the court was without jurisdiction owing to the failure of the auditors to file a report of their audit in the office of the clerk of the court of quarter sessions, as required by Act of June 9, 1911, P. L. 865, and also failure to notify the school directors of the surcharge at or before the time of filing their report, in accordance with the requirements of section 2614 or the School Code of 1911, P. L. 427. In an4. SCHOOLS AND SCHOOL DISTRICTS 62-swer to this contention, section 2 of the act SCHOOL DIRECTORS SURCHARGED WITH IL- mentioned requires the auditors of every In view of School Code, § 2613, relating to duties of auditors, they may surcharge school directors with improper payments made during the fiscal year, although made on contracts entered into by such directors before the year covered by the account. LEGAL PAYMENTS OF SCHOOL MONEYS. In view of School Code, § 2613, illegal payments of school moneys may be surcharged against school directors, although records of the board do not show that they actually voted for or approved the payments, if it appears that they were present at the meetings without objection to the payments, and if the court from the circumstances may assume that each member voted for or approved the payments, or subsequently ratified the acts of the others. school district to file a report or statement of their settlement or audit "in the office of the clerk of the court of quarter sessions of the county within which such municipality or district shall be situated." Section 3 gives district shall be situated." person interested in the report a right to appeal to the court of common pleas of the county within 30 days after the filing of such report, and further provides, an appeal being taken, the court may "direct an issue to determine the disputed questions of fact be5. SCHOOLS AND SCHOOL DISTRICTS 62tween the officers accounting and the borSCHOOL DIRECTORS MAY BE SURCHARGED FOR ILLEGAL PAYMENTS IN ABSENCE OF FINAN-ough, township, poor district, or school district." Instead of following the provisions CIAL LOSS TO DISTRICT. School directors may be surcharged with of this act, the auditors followed section 2620 illegal payments of school moneys, although of the School Code, Act of May 18, 1911, P. L. there is no evidence to show that the school 309, 428, requiring reports of auditors to be district actually suffered financial loss through filled in the court of common pleas and a copy (108 A.) court. filed with the school board. Section 2622 of [mitted themselves to the jurisdiction of the the Code also provides that persons interested may appeal from the auditors' return within 30 days after the report has been filed "in the same manner as appeals are now taken from a county auditor's report," which was under the Act of April 15, 1834, P. L. 547, §§ 55, 56. The later act of 1911 relates generally to the settlement and audit of accounts of all officers elected or appointed in boroughs, townships, and districts, and does not purport to be an amendment or the School Code, and was repealed at the next session of the Legislature, in so far as it related to school districts (Act of May 20, 1913, P. L. 254). However, the effect of the filing of the auditors' report in the court of common pleas must be considered in view of the provisions of the act in force at that time. [3] Appellants further contend the auditors were without authority to surcharge on contracts entered into previous to the beginning of the fiscal year covered by the account. It appears, however, that payments, the subject-matter of surcharge, were made during the year. Under section 2613 of the Code, the auditors are required to "inspect every school order issued for the payment of money by the board of school directors * during the period of time covered by their audit." Under this provision it is immaterial at what time the contract was made, if the payments were, in fact, made during the time covered by the account. The disbursement of money is the subject-matter of the audit and not existing contracts entered into for the performance of work involving the subsequent expenditure of money. Nothing was paid out under the contracts during the previous year; consequently, that year would not be involved in the account appealed from. If payments are likewise to be excluded from consideration at the time the accounts of the year in which payments were made are before the auditors, no authorities to surcharge the directors at any time would exist. We deem it unnecessary to consider the result if the contract had been made by appellants' predecessors in office; that question does not arise, appellants having been in office at the time the con No question as to the jurisdiction of the court was raised by appellants at the trial of the case. The report, as filed in the prothonotary's office, was in their possession, and not until the argument of exceptions did appellants first contend the court was without jurisdiction because of the error in filing in the common pleas. The purpose of filing is to make a public record for the information of persons interested and who might not otherwise receive notice. Appellants apparently had actual notice as indicated by their appeal, and, consequently, were not injured or misled by the absence of a record in the quarter sessions. While an objection that the re-tracts in question were entered into. port was not filed as required by law would have been effective if made in time, an objection made after appearance and trial on the merits will not receive consideration. No the merits will not receive consideration. No rights were lost by reason of the mistake, inasmuch as the trial of the proceeding involved an investigation of all the facts. Furthermore, the appeal is taken, not from the report as filed, but from the findings and conclusion of the auditors, followed by a hearing attended by appellants. No harm resulted to appellants, nor was technical right lost by reason of the failure to file the report in the quarter sessions, and, as the common pleas had jurisdiction over the subject-matter and the parties, no adequate cause appears for reversal on this ground. Brown v. Com., 2 Rawle, 40; Godshalk v. Northampton Co., 71 Pa. 324. [4] Another assignment questions the right of the court to surcharge the directors in absence of proof that those who were surcharg ed actually voted for or approved the orders for payments made on the contracts. Section 2613 of the Code provides that orders issued in any other manner or for any other purpose than therein specified shall be disallowed and "charged against the person or persons voting for or approving the same." The minutes in regard to the contract for repairing the furnaces show: "Mr. Connor being the lowest bidder, the contract for repairing furnaces and all other work where plumbing is necessary, was awarded to him." The minute referring to the carpenter work states, "The contract for making all necessary repairs where carpentry is required [2] Objection is also made that no notice was awarded to Mr. Ed. Donohue, "five direcwas given appellants by the auditors of the tors voting to award the latter contract. The surcharge "at or before the time of filing contract for laying sidewalks and constructtheir report, by mail or otherwise," as re- ing retaining walls was let for $468.20. The quired by section 2614 of the School Code. minutes fail to indicate the members voting Conceding no formal notice was served on in favor of making the contract. So far as them, yet actual notice appears from the appears, however, the resolutions were passed fact that they presented evidence at the hear- unanimously without objection either at the ing and were represented by counsel through- time or subsequently when orders for paying out the proceedings. Had they failed to ap- out money pursuant to the agreements were pear, the want of notice to which they were presented. Neither was a defense entered by entitled under the act would have been a val- either of the directors at the trial denying id defense; but, having appeared, they sub-participation in the letting of the contract. 108 A.-42 ** In section 2613 it is provided that"Any school order issued in any other manner or for any other purpose than herein authorized shall, if paid, be disallowed by the auditors, and charged against the person or persons voting for or approving the same." On the contrary, their entire contention was [in any other manner, than that provided in this that the money was properly paid out, and act, shall be individually liable to the under the circumstances we are left to as- district for the amount thereof." sume that each member voted for or approved the contract, or subsequently ratified the acts of the others. To say they did not vote for the resolution if they stood passively by and permitted other members of the board to enter into an unlawful contract is of no avail. The duty of each requires him to see that funds of the district are properly expended, and failure to object to improper expenditures of which they have knowledge amounts to a tacit approval of such wrongdoing, and subjects the director to liability for negligence in the performance of his duty. Each was aware the contracts were entered into without competitive bidding, and such knowledge upon the part of the board cast upon each individual member the burden of showing the act was done without his vote, and against his express dissent, or other adequate reason sufficient to excuse liability. [5] Finally, appellants argue the surcharge was improper because evidence was wanting tending to show the municipality actually suffered financial loss through fault or neglect of the directors, within the meaning of the Act of June 9, 1911, P. L. 865, providing for the surcharge of officers "whose act or neglect shall have contributed to the financial loss of any municipality or district," and, so far as appears from the record, the school district received full value for the money paid. Section 617, P. L. 350, of the School Code, provides that every contract in excess of $300 for the construction or repair of school buildings "shall be awarded to the lowest and best bidder, after due public notice has been given." Section 516 confers upon directors the right to pay out "in the manner herein provided, any funds of the district for any or all of the purposes herein provided, subject to all provisions of this act. The use or payment of any school funds in any district, in this Commonwealth in any manner or for any purpose not provided for in this act, shall be illegal." Section 517 provides that"Any school director voting for, or any officer approving, a school order for the payment of school funds for any other purpose, or drawn It thus appears that, in issuing orders for the payment of money, the directors must be governed entirely by the provisions of the Code with respect to both the manner of payment and the purpose. Payments or acts necessary to constitute "nancial loss" must be determined in view of une above provisions of the law. If the term is to include only the difference between the contract price and the actual value of the work done, thus involving a consideration of the details relating to the performance of the contract, prices, etc., and not the entire loss resulting from the drawing and payment of an order pursuant to a contract illegal because made in violation of the express provisions of the Code, such construction would, in effect, nullify the requirements as to public bidding and permit directors to award contracts to favor its bidders, Similar provisions in other statutes requiring competitive bidding have been uniformly construed to invalidate contracts let without observing the statutory requirements. Lewis v. Phila., 235 Pa. 260, 271, 273, 84 Atl. 33. While our conclusion imposes a heavy burden upon appellants, the court is without power to relieve them from the effect of their own carelessness or error, whichever it may be. Flinn v. Phila., 258 Pa. 355, 102 Atl. 24. The duty of this court is to execute the legislative will in the manner prescribed in statutes so long as no constitutional provision is violated, regardless of the hardship of a particular case or whether our opinion as to what the law ought to be coincides with that of the Legislature. McKibbin v. Martin, 64 Pa. 352, 361, 3 Am. Rep. 588; Weber v. Reinhard, 73 Pa. 370, 374, 13 Am. Rep. 747. The judgment of the court below is affirmed. (108 A.) (265 Pa. 274) (Supreme Court of Pennsylvania. June 21, The general principle governing the construction of statutes applies also to the interpretation of Constitutions. 2. TELEGRAPHS AND TELEPHONES 262, New, vol. 17 Key-No. Series-ORDER OF COMMISSION REFUSING CERTIFICATE OF PUBLIC CONVENIENCE DID NOT DEPRIVE TELEPHONE AND TELEGRAPH COMPANY OF ITS CONSTITU TIONAL RIGHTS. application was made for amendment to its charter, specifying a number of additional routes and connections. The application was approved by the secretary of the commonwealth, whereupon the Public Service Commission was petitioned for its consent and for a certificate of public convenience, as reRULES OF quired by section 18 of the Public Service Company Act of July 26, 1913 (P. L. 1374). Objection to several routes named in the amended charter was made by the Cumberland Valley Telephone Company, alleging the latter company was at the time adequately serving the public in the particular localities named, and that the establishing of a competing line would retard, rather than promote, the convenience of the public, and impose the additional burdens of duplication of systems. After hearing before the commission, a certificate was refused with leave, however, to petitioner to amend by striking out two described routes the commission found would result in a duplication of system without means of communication between them. appeal to the Superior Court the order of the Public Service Commission was affirmed, whereupon an appeal was allowed to this court to consider the constitutional question raised whether the Public Service Commission has authority, in effect, to create a monopoly by refusing to permit the establishment of competing lines in designated territory. A telegraph and telephone company petitioning the Public Service Commission for its consent and for a certificate of public convenience as to the company's extensions as required by Public Service Company Act, art. 5, § 18, by the refusal of a certificate as to two described routes found to result in a duplication of system, with leave to amend, was not denied any right under Const. art. 16, § 12, permitting any domestic corporation to maintain telegraph lines and to connect with other lines, and requiring general assembly to enact general uniform law providing for enforcement of the section. 3. TELEGRAPHS AND TELEPHONES 262, New, vol. 17 Key-No. Series - COMMISSION CAN IN ITS DISCRETION REFUSE TELEPHONE AND TELEGRAPH COMPANY LEAVE TO EXTEND LINES. On Appellant contends the conclusion reached by the Public Service Commission and the Under Public Service Company Act, art. 5, Superior Court is inconsistent with the gen§ 9, Public Service Commission has jurisdic-eral policy indicated in article 16, § 12, and tion, in the exercise of a due discretion, to refuse a petition of a telephone company under section 18 of that act to extend its lines into district served by another company. Appeal from Superior Court. Petition for a certificate of public convenience by the Perry County Telephone & Telegraph Company to the Public Service Commission. From a judgment of the Superior Court (69 Pa. Super. Ct. 529) affirming order of the Public Service Commission application docket No. 219, 1919, refusing extensions, the petitioner appeals. Affirmed. Argued before BROWN, C. J., and MOSCHZISKER, FRAZER, WALLING, SIMPSON, and KEPHART, JJ. article 17, § 4, of the Constitution, prohibiting the consolidation of telegraph, railroad, and canal companies, thus indicating an intent to maintain open and free competition in rates and facilities. The latter article relates to "railroads and canals" only, and section 4 provides, in substance, that no railroad, canal, or other corporation shall consolidate with or in any way control a parallel or competing line, and must therefore be limited in its application to railroad companies. This section has been construed not to include street railway companies. Gyger v. Phila. City Pass. Ry. Co., 136 Pa. 96, 20 Atl. 399. While the section is relied upon by appellant merely for the purpose of indicating a general policy established for the control of means of public transportation or communi W. H. Sponsler and Jas. W. Shull, both of cation, the two facilities are so entirely disNew Bloomfield, for appellant. tinct that little help can be derived from a Berne H. Evans and John Fox Weiss, both further reference to this provision, especially of Harrisburg, for appellee. when we find in another section of the Constitution express provision governing telegraph companies. Article 16 of the Constitution relates in general to private corporations, and provides in section 12 that FRAZER, J. The Perry County Telephone & Telegraph Company was incorporated under the general Corporation Act of April 29, 1874 (P. L. 73), with authority to locate its lines over certain designated routes in Perry "Any association or corporation organized county. In 1915, desiring to extend its lines, for the purpose, or any individual, shall have For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes the right to construct and maintain lines of [ly construed against the grantee.' Cleveland telegraph within this state, and to connect the same with other lines; and the general assembly shall, by general law, of uniform operation, provide reasonable regulations to give full effect to this section. No telegraph company shall consolidate with, or hold a controlling interest in the stock or bonds of any other telegraph company, owning a competing line, or acquire, by purchase or otherwise, any other competing line of telegraph." Electric Ry. Co. v. Cleveland, 204 U. S. 116 [27 Sup. Ct. 202, 51 L. Ed. 399]; Blair v. Chicago, 201 U. S. 400 [26 Sup. Ct. 427, 50 L. Ed. 801]. 'It is a general rule that "every public grant of property or of privileges or franchises, if ambiguous, is to be construed against the grantee and in favor of the pc." 1 Cook on Corporations (6th Ed.) § 2; Knoxville Water Co. v. Knoxville, 200 U. S. 22 [26 Sup. Ct. 224, 50 L. Ed. 353]." Appellant seems to concede that a tele- [1] While the language quoted was applied phone company is a telegraph company with- in cases where the question was one of conin the meaning of this section. People's Tele- struction of corporate franchises under statuphone & Telegraph Co. v. Berks & Dauphin tory provision, the general principles governTurnpike R., 199 Pa. 411, 49 Atl. 284; Bell ing the construction of statutes apply also to Tel. Co. v. Com., 2 Sad. 299, 3 Atl. 825; Coch- the interpretation of Constitutions. 12 Corranton Tel. Co. v. Petroleum Telephone Com-pus Juris, 699; Booth & Flinn, Ltd., v. Miller, pany et al., 263 Pa. 506, 107 Atl. 23. The 237 Pa. 297, 306, 85 Atl. 457. right given to a corporation or individual to [2] The provision in question, it will be obconstruct and maintain lines and connect the served, while not self-executing, is subject to same with other lines is thus made ex- "reasonable regulations" to be fixed by the 'pressly subject to such reasonable regula-Legislature. Although it would be the duty tions as the Legislature may provide; con- of this court to declare invalid as unreasonsequently it cannot be successfully argued able a regulation clearly unreasonable as that the right to construct a line is absolute, violating rights expressly granted, yet the regardless of conditions or circumstances in express power, however, thus given the Legisthe locality to be served. The constitutional lature to impose conditions upon the granting provision in question also gives an associa- and use of a public franchise will not be intion or individual the right to connect their terfered with merely because of an unexlines with other lines, and, notwithstanding pressed general policy or spirit supposed to this privilege, plaintiff has successfully re- underlie and pervade the Constitution. Alsisted an attempt on behalf of the Cumber- though in a sense refusal to permit the conland Valley Telephone Company to make struction of a competing line may be concedsuch connection with its line. An argumented as creating a monopoly and thus defeats or theory used by plaintiff in support of its the purpose the framers of the Constitution contention in the proceedings referred to would be equally applicable here against the position it now assumes. Grants and franchises, especially those quasi public in their nature, are to be strictly construed in favor of the commonwealth and against the grantee, inasmuch as they are in derogation of the common-law rights of individuals. In Penn. R. R. Co. v. Canal Commissioners, 21 Pa. 9, at page 22, this court said: "But corporate powers can never be created by implication nor extended by construction. No privilege is granted unless it be expressed in plain and unequivocal words, testifying the intention of the Legislature in a manner too plain to be misunderstood. When the state When the state means to clothe a corporate body with a portion of her own sovereignty, and to disarm herself to that extent of the powers which belong to her, it is so easy to say so that we will never believe it to be meant when it is not said." evidently had in mind in prohibiting the consolidation of competing telegraph lines and railroads, nevertheless, before reaching a conclusion on this question, consideration of other matters directly affecting the decision becomes important, to wit, the burden necessarily following from the maintenance by the public of dual systems to provide facilities which in their very nature are monopolies, and also the existence of legislation conferring upon a public body the power to inquire into and regulate rates alleged to be excessive, thus removing danger of evils experience has taught generally result from a monopoly in the supply of a particular commodity to the public. ity to the public. Competition may be and is very desirable in many lines of business. There are, however, a number of quasi public enterprises which may be classified as natural monopolies where the duplication of facilities merely results in the placing of an additional burden upon the public by forcing patrons to maintain two systems where one would serve the purpose as effectually and at less cost. In this class may be placed the furnishing of gas, water, electricity, and tele""Grants of franchises are usually prepared phone service to the public. The argument by those interested in them and submitted to that competition between between rival facilities the Legislatures with a view to obtain the most liberal grant obtainable, and for this and other serves to reduce the price to the consumer is reasons such grants should be in plain lan- not sustainable logically. The duplication of guage, certain, definite in nature, and contain water systems, for instance, means the ex And in American Transfer Co.'s Petition, 237 Pa. 241, 245, 85 Atl. 143, 145, it was said in an opinion of the lower court affirmed by this court: |