HENRY E. HOLMES et al., Petitioners, v. RAILROAD COMMISSION OF THE STATE OF CALIFORNIA et al., Respondents, 197 Cal. 627

MYERS, C. J. Review to annul a decision and order of the respondent Railroad Commission. The decision sought 'to be reviewed was the outcome of a proceeding before the Commission wherein the respondents Highway Transport Company and S. B.

McLenegan. & Son, both “certificated” common carriers of freight by motor-truck between San Francisco and San Jose and intermediate points, filed complaint alleging that the petitioners herein were operating motor-trucks without having obtained a certificate of public convenience and necessity to do so for the transportation of freight for hire over the public highways between San Francisco and San Jose and intermediate points along and over the same routes and roads over which the complainants were "operating; that such operations were in violation of law, were in direct competition with the complainants, and resulted in injury and damage to them.

The defendants therein, petitioners here, filed an answer denying the allegations of the complaint and setting up as a separate defense that defendants were the owners of certain automobile trucks which they leased to a number of “selected” shippers of freight for use by said shippers in the distribution of merchandise between San Francisco and such points in San Mateo and Santa Clara Counties as from time to time served the convenience and necessity of said shippers.

The answer further denied that the defendants were common carriers, that they operated between fixed termini or over a regular route, that they were operating in violation of law and that they were subject to the jurisdiction of the Railroad Commission. Upon the issues thus joined the Railroad Commission after due notice and after a full and extended hearing rendered its decision and order now before this court for review, wherein it was found that the defendants, petitioners herein, were operating as a transportation company as that term is defined in

section 1(

c) of

chapter 213, Statutes of 1917 (Stats. 1917, p. 330), as amended (Stats. 1919, p. 458), and that they were engaged in the operation of motor-trucks over the public highways for compensation, over a regular route and between fixed termini, namely, “San Francisco to San Jose and intermediate points.” The Commission thereupon made its order directing the defendants to cease and thereafter desist from any and all such transportation unless and until they should secure a certificate of public convenience and necessity therefor.

The defendants, after the denial of their petition for a rehearing of said order and decision, instituted the present proceedings in this court for a writ of review to annul the same. Petitioners were engaged in operating three motor-trucks in the transportation of merchandise consisting principally of drugs, drug sundries, and groceries from wholesale houses in San Francisco to retail dealers in San Jose and at other points in Santa Clara and San Mateo Counties, which points, for the most part, are intermediate points between San Francisco and San Jose.

Petitioners operated under separate contracts with the several shippers, twenty-three in number, each contract being entered into severally by petitioners as one party and by one of the shippers as the other party thereto. These contracts were substantially alike in their terms (except as to minor variations not deemed pertinent to the present inquiry). By each of these contracts the petitioners purported to lease their trucks to the shipper for use by the latter in transporting its merchandise from San Francisco to points in Santa Clara and San Mateo Counties at an agreed rental of $19.50 per truck per day.

It is further provided that if on any day only a portion of the capacity of any truck is used for such transportation the rental shall be such proportion of said rental of $19.50 as is represented by the ratio which the capacity of the truck actually utilized in the transportation of the lessee’s merchandise bears to the total agreed capacity of the truck, and, further, that the minimum rental in connection with any transportation shall be based on one-thirtieth of the capacity of the truck.

It is apparent from the other provisions of these “leases” and from the manner in which they were performed by the parties that they are nothing more than contracts for the transportation of merchandise for compensation at the rate of thirty-two and one-half cents per hundred pounds, subject to a minimum charge of sixty-five cents per shipment. The Commission so found and its finding is abundantly supported, if not compelled, by the evidence.

The Commission did not expressly find upon the issue as to whether or not the petitioners were operating as common carriers, which was alleged in the complaint and denied in the answer. The finding is that the petitioners “are operating a transportation company as that term is defined in

section 1(

e) of

chapter 213 of the Statutes of 1917 and amendments thereto; that they are engaged in the operation of autotrucks over the public highways for compensation, over a regular route and between fixed' termini, namely, San Francisco to San Jose and intermediate points, . . . ” Petitioners contend that this finding must be taken by us as a negative finding upon the allegation that they were operating as common carriers and we are inclined to agree with this contention.

The carrier respondents strongly insist that under the rule which requires the construction of findings so as to support the judgment we should construe this as a finding that petitioners were in fact operating as common carriers and that such finding is amply supported by the evidence herein. It may be that the evidence herein would sustain such a finding if it had been made by the Commission. As to that we express no opinion. We are of the opinion that the present is not a proper case for the application of the rule invoked by the carrier respondents.

A careful reading of the entire decision of the Commission, of which the quoted finding forms but a part, makes it clear that the Commission did not intend to find as a fact that petitioners were operating as common carriers. On the contrary, the Commission took the view that petitioners were subject to its jurisdiction under the other facts and circumstances found herein, regardless of the question whether they were operating as common carriers or as private carriers, and in accordance with that view it deliberately and intentionally omitted to find upon this question.

If, therefore, we should conclude that the operation of petitioners as common carriers is a fact essential to the jurisdiction of the Commission over them, it would be our duty to annul this decision and order. This precise question was involved in the recent ease of Frost v. Railroad Com., ante, p. 230 [240 Pac. 26], which was decided by us adversely to petitioners’ contentions herein. That case must be regarded as controlling with respect to this phase of the present inquiry, and the respective counsel for the petitioners and for the Railroad Commission so concede.

Counsel for petitioners argue most earnestly that our decision in the Frost case is erroneous and should be promptly overruled. We have given careful consideration to these arguments and are not disposed to depart from our views as expressed in that case.

The gist of our conclusion in that case may be briefly stated as follows: The legislature by the 1919 amendment to the Auto Stage and Truck Transportation Act plainly intended and attempted tó extend the jurisdiction of the Railroad Commission to private carriers when engaged in the business of transportation companies as there defined and to subject such private carriers to the burdens, obligations, and limitations imposed by that act.

The question, then, is whether the state has the power" to impose such burdens and limitations upon private carriers when using the public highways for the transaction of their business or whether its power in this behalf is limited in its application to public carriers. It is now universally recognized that the state does possess such power with respect to common carriers using the public highways for the transaction of their business in the transportation of persons or property for hire.

That rule is stated as follows by the supreme court of the United States: “A citizen may have, under the fourteenth amendment, the right to travel and transport his property upon them (the public highways) by auto vehicle, but he has no right to , make the highways his place of business by using them as a common carrier for hire. Such use is a privilege which may be granted or withheld by the state in its discretion, without violating either the due process clause or the equal protection clause.” (Buck v. Kuykendall, 267 U. S. 307 [38 A. L. R. 286, 69 L. Ed. 623, 45 Sup. Ct.

Rep. 324].) (Italics added.) Petitioners emphasize the words which we have italicized and insist that this rule is limited in its application to common carriers. We think it is equally applicable to all persons who seek to make a special and private use of the public highways by transacting their private business thereon and that it applies with equal force to private carriers who engage in the business of transportation for hire upon the public highways. The reason for the rule which authorizes the state to prohibit the private use of the highways by such carriers is not that they are common carriers.

It is that they are making a private use of the public highways, which are owned and paid for by the public and which are open alike to all persons. It is true that common carriers are subject to regulation by the state because the fact that they are engaged in public service causes their business to be effected with public interest and thus justifies the, regulation thereof by public authority. But this is not, as it seems to us, the reason for the existence of the rule above quoted.

The circumstance that' they are public carriers would subject them to regulation, but it would not subject their business to complete prohibition, it being a business which is not inherently unlawful or wrongful, but it is universally conceded that the state does have the power and the right to completely prohibit the use of its public highways by a common carrier. This must rest not upon the fact that he is a common carrier, but upon the fact he is making a private use of the public highways.

This conclusion is not based, as petitioners assert, upon the power of the state to regulate the use of its highways, it is based upon the power of the state to prohibit the private use of its highways or in its discretion to grant the privilege of such private use upon such conditions as it may see fit to impose. By the statute here in question the state says in effect to the citizen: “I will grant you the special privilege of using my highways for your private business upon condition that you in turn submit yourself and your property to such regulations as I impose.

I will not compel you to submit to these regulations, but if you are not willing to do so, I shall not grant you this special privilege.” A conclusion somewhat analogous to this is presented in the case of Producers Transp. Co. v. Railroad Com. (176 Cal. 499 [169 Pac. 59]), relied upon by petitioners herein. It was there held that a state has no power by mere legislative fiat, nor even by such fiat embodied in its constitution, to transmute a private carrier into a common carrier.

With that conclusion we are in entire accord, but it was also there held that if a private carrier exercises the right of eminent domain in aid of his transportation business he will be deemed thereby to have dedicated his transportation system to a public use and to have thereby become a public carrier. The circumstance that the right of eminent domain is a right of sovereignty which is inherent in the state does not seem to us of particular importance. The important fact, as it seems to us, is that the right of eminent domain is not possessed by individuals as a matter of right.

When the state offers to grant this right to an individual, it is as to him a special privilege. If the state offers this privilege to him upon expressed conditions, he will be deemed, if he exercises the right, to have accepted the offer and to have agreed to the conditions. He is under no compulsion to submit to the conditions. If he does not submit to the conditions he cannot exercise the privilege. If he does exercise , the privilege he will be deemed to have voluntarily agreed to the conditions. Herein lies the distinction between the present case and the ease of Michigan Public Utilities Com. v.

Duke (266 U. S. 570 [36 A. L. R. 1105, 69 L. Ed. 445, 45 Sup. Ct. Rep. 191]). Counsel for petitioners direct our attention to the fact that the reasoning adopted by us in the Frost case and adhered to herein was urged upon the supreme court of the United States in the Duke case and was by that court rejected. We agree that it was properly rejected in that case because it was not tenable under the facts of that case.

It could not be said that by continuing in the transportation of property for hire after the enactment of the Michigan Public Utilities Act Duke had voluntarily elected to dedicate his property to a public use, because Duke had no opportunity for an election. He had no choice but to continue in the transportation of property after the enactment of the statute. He was under compulsion so to do because, of his contracts which were in existence and subsisting at the time of its enactment.

Therefore, to hold the statute applicable to him would be to say in effect that the state had the power to transmute him from a private carrier into a public carrier nolens nolens, and this we agree it could not do.

This is what we had in mind when we said in this connection in the Frost case, “to give it effect in its application to his situation would have been to impair the obligation of those contracts.” We intended thereby to point out that the only liberty of choice offered by the Michigan statute in its application to Duke was a Hobson’s choice between dedicating his property to the public on the one hand and breaching his contracts on the other.

We did not intend thereby to intimate that the decision of the United States supreme court in the Duke case was rested in part upon the impairment of the contracts provision of the federal constitution. It clearly was not. In the present case the petitioners did not enter into the transportation business until long after the enactment of the statute here in question. We find here no such obstacle as there was in the Duke case in the way of the conclusion that by so doing petitioners must be deemed to have voluntarily elected to submit themselves to the conditions imposed by the statute.

We do not agree with petitioners that the Washington decisions cited by us in the Frost case have all been overruled by the later decisions of that court in Davis v. Metcalf, 131 Wash. 141 [229 Pac. 2], They were not expressly overruled therein. On the contrary, they are cited with apparent approval. It must be conceded, however, that the implications of some of the language used in the opinion in that case appear to be in conflict with your conclusions in the Frost case and herein.

That case, however, did not involve the question of the power of the Railroad Commission to make an order in respect of a private carrier such as is here under review. That case arose as a suit in equity by a certificated carrier to procure an injunction restraining an uncertificated carrier from transporting goods for compensation over a regular route in competition with the plaintiff. The trial court denied the injunction and the supreme court affirmed the judgment.

It does not necessarily follow from anything said or decided in that case that if the Railroad Commission of that state had, after a hearing, made an order requiring the defendant to desist from further transportation over, the highways until he obtained a certificate of public convenience and necessity, that such order would have been annulled by the court. That question has not yet been litigated in the state of Washington so far as we are advised. The recent Utah case of State v. Nelson, 65 Utah, 457 [238 Pac. 237], is, we think, distinguished from the present case by the differences in the Utah statute.

The grant of jurisdiction to the Commission in that statute is “to supervise and regulate every public utility in this state as defined in this title. ...” The term “public utility” is defined to include “every . . . automobile corporation . . . where the service is performed for or the commodity delivered to- the public or any portion thereof.” The term “common carrier” is defined to include “every . . . automobile corporation . . . operating for public service within this state; and every person or corporation . . . engaged in the transportation of persons or property for public service over regular routes between points within this state.” (Italics added.) The

section of the Utah statute providing for the issuance of certificates of public convenience and necessity, while it does not expressly so provide, nevertheless indicates by clear implication the legislative intent that it shall be applicable only to public utilities as above defined. The Utah court held correctly, as we think, that the intent of the Utah statute was to limit the regulatory powers of the Railroad Commission to common carriers and other public utilities.

Having reached this conclusion the language in its opinion which is relied upon by petitioners herein must, as it seems to us, be regarded as obiter. We agree with petitioners that the case of Hissen v. Guran, 112 Ohio St. 59 [146 N. E. 808], is in conflict with our conclusion in the Frost case herein. It may be noted, however, that the reasoning which has impelled us to our conclusion does not appear to have been suggested to or at all considered by that court. We are disposed to adhere to that conclusion, notwithstanding the absence of any direct authority to support it.

If the foregoing conclusion is sound, it is, as it seems to us, a sufficient answer to all of petitioners’ contentions based upon the guaranties of the federal constitution, with the possible exception of the contention that the Auto Stage and Truck Transportation Act as amended and as construed by us denies to petitioners the equal protection of the law. Petitioners’ first point under this contention is disposed of by our decision in the case of Franchise Motor Freight Assn. v. Seavey, 196 Cal. 77 [235 Pac. 1000].

Petitioners seemingly take the position that there is no legitimate basis for a classification and distinction between private carriers engaged in the business of transporting freight over the public highways on the one hand and private individuals engaged in other lines of business transporting their own freight over the public highways as an incident to such business on the other hand.

Petitioners propound the following question: “What reasonable ground of distinction is there between a private carrier engaged in the business of transporting his own freight over the public highway between two points and another private carrier who is engaged in the transportation of the same class of freight between the same points at the same time over the same highway, the only distinction being that the freight transported by the latter belongs to his neighbor or some other third party instead of to himself?” The facts assumed in this question are self-contradictory.

One who transports merely his own freight over the highway is not a carrier, private or otherwise. He may be a farmer or a manufacturer or a merchant or what not, but the business in which he is engaged is not the business of transportation. He is not a carrier unless he engages in the business of transportation of the persons or property of others for compensation. One who transports merely his own goods is of necessity engaged in some business other than transportation and the transportation of such goods is no more than an incident to such business.

So, also, one who transports the goods of another as a servant or agent of such other is not engaged in the business of transportation, but in so doing is engaged in the business of his master or principal, whatever that business may be. But one who engages as an independent calling in the transportation of goods for another or for others under contract and for compensation is engaged in the business of transportation and is a carrier.

The true question in this behalf is, therefore, Is there a natural or inherent basis for a classification and distinction between those who engage in the business of transportation of the property of others for compensation over the public highways, thus making a private use of those highways, and those on the other hand who are engaged in other lines of business and who use the highways in the transportation of their goods merely as an incident to such business, for which purpose the highways are open alike to all? This question seems to us to answer itself.

It is too well settled to require citation of authority that a statute is not lacking in uniformity if it operates alike upon all those comprised within a class defined therein which is based upon some natural, inherent, or constitutional ground of classification. We find no merit in the suggestion that the act is unconstitutional in that it vests an arbitrary discretion in the Railroad Commission. The discretion of the Commission is not arbitrary but is controlled and guided by the relation of the facts found by it to the public convenience and necessity (Tarpey v.

McClure, 190 Cal. 593, 600 [213 Pac. 983], and cases cited). The final contention necessary to be considered herein is that the finding of the Commission to the effect that petitioners were operating between fixed termini and over a regular route is unsustained by the evidence.

The statute defines the words “between fixed termini or over a regular route” to mean “the termini or route between or over which any corporation or person . . . usually or ordinarily operate any automobile, bus, auto truck, stage or auto stage, even though there may be departures from said termini or route, whether such departures be periodic or irregular.” It also provides that this shall be a question of fact and that the finding of the Commission thereon shall be final and shall not be subject to review.

We agree with petitioners that the finding is, however, subject to review, notwithstanding the last-mentioned provision of the statute, for the reason that the fact in question is one which is essential to the jurisdiction of the Commission. Such review, however, cannot extend beyond the inquiry as to whether or not there is some substantial evidence to support the finding. If there is, the finding must be sustained, no matter how much evidence there may be in conflict therewith.

In this connection, it is to be noted, however, that it is not necessary that the evidence shall sustain both of the findings of the Commission, namely, that petitioners were operating between fixed termini and that they were operating over a regular route. The statute is in the disjunctive and it is sufficient in this connection to sustain the jurisdiction of the Commission if there was substantial evidence to support either of these findings.

The decision of the Commission contains a fair résumé of the evidence upon this question and we quote therefrom as follows: “Defendants contend that they are not operating between fixed termini nor over any regular route, because they have had no depot at any point in San Mateo or Santa Clara counties, nor have they a telephone at such points; that deliveries are made either to store or sidewalk; that there is no point in any' city or town in San Mateo or Santa Clara counties which constitutes a terminus, since the destination of trucks is determined entirely by the load which the ‘lessees’ of the particular truck happen to offer for transportation on that particular trip; and that there are no cities or towns in San Mateo or Santa Clara county to which any trucks regularly go on all trips. “It is true that each and every truck operated down the Peninsula by defendants does not stop for pick-up or delivery of merchandise at each and every point along the highway, San Francisco to San Jose, inclusive, and that on occasions the trucks have gone off the highway for several miles to make deliveries to points such as the County Poor Farm back of Belmont, Camp No. 4 on the Skyline Boulevard, Chadwick and Sykes’ Camp three miles east of Redwood City, etc.

The evidence, however, does show that there is only one main highway known as the Peninsula Highway over which the trucks of the defendants usually or ordinarily operate; that defendants’ drivers are instructed during fair weather to use what is known as the Bay Shore Highway out of San Francisco to its connection with the main Peninsula Highway at San Bruno and in rainy weather to use the Mission Road through Colma to San Bruno. From San Bruno there is but a single route through Burlingame, San Mateo, Belmont, Redwood City, Menlo Park, Palo Alto and other intermediate points, to San Jose.

This main State Highway is usually and ordinarily used with the exception of the infrequent occasions upon which, as mentioned above, a truck carries merchandise destined to points somewhat off the highway. “In connection with defendants’ Exhibit No. 12, entitled ‘Some Routes used by H. E. and P. W. Holmes,’ P. W. Holmes testified that no two of such routes were alike. Route No. 3 names Redwood City only; No 5 BurlingameRedwood City; No. 12 Redwood City-Burlingame. These three routes, however, when taken in connection with San Francisco as a northern terminus, are identical in every respect.

Transposing the names of communities does not differentiate as to route over which the trucks travel, but merely shows a difference in the routing of particular deliveries. In fact, this entire exhibit in the main substantiates the contention of complainants’ that defendants’ trucks do usually and ordinarily operate over a regular route or between fixed termini as represented by manifests therein named. “Defendants further contend that they have no fixed termini due to the fact that the manifests submitted in the evidence covering the month of January, 1924, show a different southerly terminus on different trips.

Analysis of this evidence shows that during the thirty-day period above mentioned, San Jose or a .point immediately adjacent to the city limits of San Jose, such as Alum Rock, Meridian Road, etc., appears as the most southerly terminus upon twenty occasions, the most southerly destination on other occasions being some point along what is known as the main Peninsula Highway, San Francisco to San Jose, such as Redwood City, which appears some seven times, or Palo Alto, which appears some five times. “Certainly if a truck carries no merchandise for delivery upon a specified trip which would necessitate it going the entire length of its route and has no call for a pick-up on the northbound trip, it would in any ease turn back after making its most southerly delivery, and if this Commission should hold that the law contemplated this class of operation as not being over a regular route no truck operator in the state could be held to fall within the provisions of the state regulation, due to the fact that one or more of his trucks on infrequent occasions might not cover the entire route usually or ordinarily served by him.” In addition to the foregoing it may be noted that at the hearing before the Commission petitioners introduced an exhibit consisting of a

schedule showing the points of all deliveries made by them during the second week of each of the months of December, 1923, and January, February and March, 1924, in connection with which they produced testimony that the deliveries during those weeks were fairly typical of all of their operations. The

schedule shows all of the deliveries made by petitioners on twenty-three working days comprising those weeks and it appears therefrom that upon every one of those days petitioners made deliveries from San Francisco to San Jose and to intermediate points. Under the statute it is immaterial that there were departures from the termini and from the route “whether such departures be periodic or irregular.” We are satisfied that the finding of the Commission is sustained by the evidence, and if it were conceded that the evidence would equally sustain a contrary finding that circumstance would be immaterial.

The decision and order of the Commission are affirmed and the writ discharged. Lawlor, J., Richards, J., Waste, J., Seawell, J., and Lennon, J., concurred.