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District Court of Appeal, First District, Division 1, California.

ELI et al. v. MURPHY et al.*

No. 14933.

Decided: April 21, 1952

Clark & Heafey, Edwin A. Heafey, Oakland, Rankin, Oneal, Luckhardt, Center & Hall, San Jose, Augustin Donovan, Louis B. DeAvila, Oakland, for appellant. James F. Boccardo, Jean M. Blum, San Jose, for respondents.

This appeal by defendant California Motor Transport Co., Ltd. a corporation (referred to as C. M. T.), sued as Black and White Co., raises the question as to whether its subhauler, defendant Leo J. Murphy, was an employee or an independent contractor. This question, in turn, depends upon the legal effect of certain orders of the California Public Utilities Commission (hereafter called P. U. C.). The appeal is also from the court's order granting a new trial as to damages alone in the causes of action of James Eli and Alfred L. Jackson, respectively.


There is no conflict in the facts. C. M. T. is a corporation licensed by P. U. C. as a highway common carrier. Leo J. Murphy is a permitted carrier under P. U. C. operating with a radial common carrier's license. Murphy owns and operates his own truck. C. M. T. received certain freight from California Motor Express Co., Ltd., to be hauled from Los Angeles to Oakland. C. M. T. and Murphy entered into a ‘Lease Agreement’ by which Murphy for a sum agreed to transport from Los Angeles to Oakland such merchandise as C. M. T. might designate in a particularly described truck. The agreement provided that Murphy was to keep his truck in good repair and running order, pay all operating expenses, including gas and oil, wages of driver, and all insurance, including workmen's compensation. It further provided that at no time was Murphy to be an employee of C. M. T., and at all times was to be deemed in exclusive control of the truck. Pursuant to the contract Murphy proceeded to haul from Los Angeles to Oakland the freight which C. M. T. had received from the express company. No directions were given to Murphy concerning the trip, except to take the merchandise to Oakland. There were no instructions as to route or speed. Murphy's son, James, was driving the truck. Just south of Gilroy, James ran into the rear of the car in which plaintiffs were riding. They received injuries in this collision for which the jury assessed their damages in the aggregate sum of $35,500. As no issue is raised as to negligence or adequacy of the verdict, it is unnecessary to go into detail as to either. As to the order granting a limited new trial as to certain plaintiffs on the issue of damages alone, defendant's only attack is as to the question of liability.

P. U. C. Orders.

The trial court in passing on the motion for nonsuit and in instructing the jury that C. M. T. as a matter of law was responsible for any negligence of Murphy or his son James, stated, in effect, that except for the legal effect of the P. U. C. orders, the evidence clearly disclosed that, as a matter of law, the relationship of Murphy to C. M. T. was that of independent contractor. However, the court felt that the effect of the P. U. C. orders was to make as a matter of law the relationship that of employee and employer.

In 1940 the commission adopted General Order No. 93–A, which provided, in part: ‘All passenger stage corporations and highway common carriers shall either own their passenger stages or motor vehicles or lease such equipment for a specified amount on a trip, term or mileage basis. The leasing of such equipment shall not include the services of a driver or operator. All employment of drivers or operators of leased vehicles shall be by contract or agreement, under which the relationship between the passenger stage corporation or highway common carrier and such driver or operator shall be that of master and servant.’ This is the order most strongly relied upon by the court. However, on February 2, 1943, the commission adopted Emergency Resolution No. 16, a portion of which reads: ‘It is hereby ordered that during the existing National emergency and until further order of the Commission, highway common carriers * * * are hereby authorized and permitted to acquire and operate trucks * * * as hereinafter provided, notwithstanding the provisions of Part V of General Order No. 93–A * * *. To perform transportation services * * * carriers, respectively, individually or jointly may acquire equipment as above described, from other such carriers, along with the services of drivers and helpers employed by the latter, by any agreement or contract satisfactory to the negotiating carriers, and without the necessity of placing such drivers and helpers on the payrolls of the carrier * * * subject to the following requirements: * * * The carrier or carriers operating vehicles under the provisions of this order shall issue a manifest record covering each shipment * * * [and] the driver of any such vehicle shall have in his possession a copy of each of such manifest records * * *.’

Effect of Order 93–A.

We start with the premise that without order 93–A the relationship here, so far as the rights of third persons are concerned, would be that of independent contractor. Our first task, then, is to determine the meaning and effect of that order, and whether as to third persons it changes the liability of independent contractors to that of employer-employee. In approaching this question we should have in mind that the intention of the commission to abrogate the common-law and California rule of liability must be clearly apparent. A statute giving a remedy against a party who otherwise would not be liable must be strictly construed in favor of the persons sought to be subjected to its operation. Weber v. Pinyan, 9 Cal.2d 226, 229, 70 P.2d 183, 112 A.L.R. 407. We entertain no doubt of the competency to make such change a condition of the right to a franchise to use the highways as a common carrier. Such action would be the exercise of a legislative, not a judicial, power. Essentially it would be the imposing of conditions for the privilege or franchise of becoming and exercising the functions of a public utility, such privilege embracing the use of the state highways.

We do not think that the order has, or was intended to have, the effect of granting rights not otherwise existing to third persons. What it states is that highway common carriers are prohibited from performing their functions through an independent contractor. The carrier is permitted to lease equipment, but it is prohibited from ‘leasing’ a driver. The order says that the carrier cannot hire an independent contractor, but must operate through employees. But the order does not say what shall happen if it does hire an independent contractor. Certainly the order does not say that if the carrier hires an independent contractor he shall become, ipso facto, an employee. The order does not purport to say that the commission is hereby conferring the right on a third person, if the carrier violates the order, to insist, as a matter of law, that the driver is an employee when, in fact, he is an independent contractor. Order 93–A was intended by the commission to state a regulation imposed upon the carrier. If the carrier violates it, the carrier becomes subject to discipline—perhaps even the loss of its license. But such violation cannot be interpreted to grant the right to third persons to hold the carrier where otherwise it would not have been liable.

The purposes of the order apparently are (1) as pointed out above, to prohibit a highway common carrier from performing its functions through an independent contractor; (2) the surrounding of a common carrier with suitable regulations and requirements, the better to assure the state and the public that it will perform its functions properly and well; also as a convenient method for the P. U. C. efficiently to exercise its regulatory and supervisory power; (3) the greater assurance it will afford of proper and safe use of the highways through the medium of imposing the indicated element of responsibility upon the company to whom the franchise is granted. It has much more at stake in this regard than would any of the several little independent contractors have.

If this objective was intended to include a concept of liability towards the public for the negligent conduct of each driver employed by the carrier, whether on that particular occasion the driver was directly employed or through an independent contractor, then there should have been something in the order to so state. The rules applicable to statutes apply in this respect. When a plaintiff sues under a statute setting up an alleged standard of care in a negligence action, it is common to construe the statute to see if the plaintiff is one of a class of persons whom the statute was intended to protect, and whether the harm which has occurred is of the type which it was intended to prevent. Restatement, Torts, §§ 285, 286; Prosser on Torts, p. 264 et seq. Although the language of the general order is broad, in the light of the express purposes of the P. U. C. in this regard, Public Utilities Code, § 3502, which indicates that regulation of rates is the primary consideration, there should be expressed unequivocally that it was intended to benefit specific members of the public before it is so construed. This section was put in to help the P. U. C. regulate for the general good of the public.

The situation here is distinguishable from that in Taylor v. Oakland Scavenger Co., 17 Cal.2d 594, 110 P.2d 1044, where the court held the company liable for negligence of a driver employed under an independent contract for the reason that the garbage ordinance made it unlawful for any person other than a contractor with the city or a person in the employ of such contractor to collect garbage within the city, and also there was a contract between the city and this contractor in which it was agreed that any person collecting garbage for the contractor was to be considered an employee of the company. The court held that this situation brought the contractor within the rule, ‘If, however, an individual or corporation undertakes to carry on an activity involving possible danger to the public under a license or franchise granted by public authority subject to certain obligations or liabilities imposed by the public authority, these liabilities may not be evaded by delegating performance to an independent contractor.’ 17 Cal.2d at page 604, 110 P.2d at page 1050. Order 93–A did not make it illegal for an independent contractor to haul for the carrier, nor did the carrier agree that if in violation of the order it dealt with an independent contractor the latter would be considered its employee.

Emergency Resolution No. 16.

Assuming that order 93–A did establish a liability as to third persons, resolution No. 16 modified the requirement that as to drivers of equipment leased by the carrier there must be an employer-employee relationship. Resolution No. 16 provides that the carrier is permitted to ‘acquire and operate’ trucks, notwithstanding the provisions of order 93–A. It then states that in doing so, the carrier may acquire equipment from the other types of carriers listed ‘along with the services of drivers and helpers employed by the latter, by any agreement or contract satisfactory to the negotiating carriers, and without the necessity of placing such drivers and helpers on the payrolls * * *.’ (Emphasis added.)

The commission thereby states in effect that the restriction of master and servant relationship set forth in order 93–A no longer applies because the highway carrier can now make any agreement it desires as to drivers of leased equipment satisfactory to it and the radial carrier. The resolution requires that the highway carrier ‘operating’ leased vehicles must comply with certain regulations. The fact that the highway carrier is designated as ‘operator’ and as ‘operating,’ in nowise changes the fact that he is operating leased equipment under an agreement satisfactory to him (here one setting up an independent contract relationship) nor does it change the fact that resolution No. 16 completely suspends the operation of the master-servant requirement under the order.

One of the requirements of resolution No. 16 is that the operating carrier shall issue a manifest record covering each shipment of goods and containing certain data, and that the driver of the leased equipment shall have a copy of such manifest in his possession. Murphy did not carry such a manifest at the time of the accident. It is unnecessary to consider whether the documents issued by C. M. T. and carried by Murphy constituted, in effect, a manifest, as claimed by defendant. We see no basis for plaintiff's contention that the failure to comply with resolution No. 16 in that respect would mean that thereby the independent contractor relationship was ipso facto succeeded by the master-servant relationship. There is no such intention expressed in the resolution. Nor can we understand why the failure to carry a manifest would thereby change the rule of liability as to third persons.

Although there was no discussion of P. U. C. rules in the case, the liability question in Gaskill v. Calaveras Cement Co., 102 Cal.App.2d 120, 226 P.2d 633, was quite similar to that in our case. There M. T. S. had a permit to act as a highway contract carrier, as did one Swain. M. T. S. rented to Swain a trailer and semi-trailer under a contract which provided that Swain was to be considered an independent contractor. M. T. S. had a contract with Calaveras Cement Co. to haul cement. M. T. S., after being advised by the cement company, would advise Swain where to pick up the cement and where to deliver it. Swain paid M. T. S. rental on a mileage basis for the use of the equipment. The court held that under this arrangement M. T. S. was an independent contractor and not liable for the negligence of Swain or his driver. The court there distinguished the situation from that in Taylor v. Oakland Scavenger Co., supra, 17 Cal.2d 594, 110 P.2d 1044, by pointing out that the scavenger company was operating under a franchise from and contract with the city of Oakland which specifically provided that it must assume master and servant liability for the acts of persons engaged by it, while the permits to Swain and M. T. S. provided no such condition.

Neither plaintiffs nor defendants Leo J. Murphy and James D. Murphy appealed from the judgment or from the order granting a new trial on the issue of damages alone. The judgment against C. M. T. and the order granting a new trial on the issue of damages alone as against C. M. T. are reversed, and the trial court is directed to enter judgment against plaintiffs and in favor of defendant C. M. T.

BRAY, Justice.

PETERS, P. J., and FRED B. WOOD, J., concur.