KELLER v. THORNTON CANNING COMPANY

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District Court of Appeal, Fifth District, California.

David KELLER, Henry Keller, and Alvin Hessler, Plaintiffs and Appellants, v. THORNTON CANNING COMPANY and Thornton Beverage Company, Defendants and Respondents.

Civ. 677.

Decided: October 19, 1966

Chargin & Briscoe, and Ann M. Chargin, Stockton, for appellants. McCutchen, Doyle, Brown, Trautman & Enersen, and Loyd W. McCormick, San Francisco, for respondents.

OPINION

This is an appeal from a judgment for respondents shippers on a separate trial of affirmative defenses to an action by highway carriers to recover hauling tariff undercharges.   The original contract for hauling at a rate claimed to be less than that fixed by the Public Utilities Commission was entered into between appellants' predecessor, a certified highway carrier, and respondent Thornton Canning Company and its subsidiary, respondent Thornton Beverage Company, firms engaged in food canning and beverage production.

The original certified carrier was a partnership organized November 1, 1959, consisting of three partners, LeRoy Hessler, Norman Bosche and James O. Kelly.   A five-member partnership took over the business effective January 1, 1960, although the partnership formalities were not completed until March 1, 1960.   LeRoy Hessler and Norman Bosche dropped out of the partnership, and four new partners, Roland Hessler, Alvin Hessler, David Keller and Henry Keller joined the remaining partner, James O. Kelly.

About July 18, 1960, the five-man partnership applied to the Public Utilities Commission for authority to have Radial Highway Common Carrier Permit No. 34–3702 transferred from the original partnership to them.   However, that transfer was never completed because one of the original permittees, Mr. Bosche, was unavailable to sign the necessary documents of transfer.   In October of the same year a corporation was formed and took over the partnership business.

On April 12, 1961, the Public Utilities Commission authorized the transfer to the corporation of permit No. 34–3702, issued to the original partnership.   Thus three separate business entities operated the carrier service:  the original partnership that was issued a permit, an interim partnership that applied for but never received a transfer of the permit, and a corporation to which the permit was transferred.

On July 7, 1961, the commission served notice upon the corporation that an examination of the records covering hauling under the permit revealed certain charges “which appear to be in violation of the minimum rates, established by this Commission.”   These undercharges occurred during the time the carrier was operated by the second or interim partnership and by the corporation.   The order provided:

“You are further directed (1) to review your records for all transportation performed since the records review date indicated above, (2) to complete this review and to inform the Commission by letter not later than August 22, 1961 of the amount of undercharges disclosed by your audit, (3) to collect the undercharges found as a result of such audit as well as the undercharges shown on the attached statement, (4) to inform the Commission by letter when the total amount of the undercharges has been collected, and (5) in the event all undercharges are not collected by November 7, 1961, to submit to the Commission, on the first Monday of each month thereafter, a report of the undercharges remaining to be collected specifying the action taken to effect collection in full.”

A copy of the notice was served upon the shippers.

Subsequently, appellants took assignments from the others who had been associated with them in the hauling, and brought this action to collect undercharges.   Respondents answered, pleading, among other things, the special defenses of release and satisfaction and the failure of the five-man partnership to obtain a highway carrier permit.   The special defenses were tried first, and the action proper never came to trial because of a favorable judgment on the affirmative defense that the carrier was unlicensed.

 The principal question on this appeal is whether a highway carrier operating without a permit from the Public Utilities Commission can recover undercharges from a shipper.   In support of the judgment, respondents draw an analogy to Lewis & Queen v. N.M. Ball Sons, 48 Cal.2d 141, 308 P.2d 713, and its offspring, which hold that an unlicensed contractor cannot recover for work performed pursuant to a contract, even on quantum meruit.   The purported analogy fails, however, because, as pointed out in Lewis & Queen, the contractor's license cases rest largely upon Business & Professions Code section 7031, which specifically provides that a nonlicensed contractor may not bring or maintain any action in any court of this state for the collection of compensation for the performance of any act or contract.   The legislature is vested with power to impose a like forfeiture by way of penalty upon a carrier that has failed to obtain a permit from the Public Utilities Commission.   But it has not done so;  rather, the Legislature has provided the commission with a number of courses of action, both remedial and penal, separate and apart from those applying to other licensing agencies.

Under the facts of this case considerations other than the absence of a statute similar to Business 7 Professions Code section 7031, militate against the defense of operating without a permit.   The Public Utilities Commission issued a permit to the original trucking partnership and, after the partners changed and during the pendency of a request to transfer the permit to the new partnership, it continued to supervise the operations of the carrier.   Reports were regularly submitted to the commission, and its agents inspected and supervised the operations of the carrier to the same extent and in the same manner as though the application for transfer of certificate had been completed.   There was no hiatus in supervision by the commission at any time up to incorporation and the transfer of the original permit to the corporation.

Furthermore, the public has an obvious interest in the commission's enforcement of its tariff rates as a necessary attribute of supervision of highway carriers.   Without standard tariff rates, ruinous competition might well result in a carrier neglecting to properly maintain equipment used on the highways or a failure to carry adequate insurance, as well as a deterioration in the quality of service.   One means of protecting the public interest is by enforcing minimum tariff rates for all freight carried upon public highways, whether or not the carrier has first secured a permit.   Moreover, article 12, section 22, of the California Constitution, the source of commission jurisdiction over highway carriers, does not limit regulation to certificated carriers, nor do we find any such limitation in the Public Utilities Code.

 The foregoing discussion of the commission's inherent power over all intrastate highway carriers, whether certificated or not, brings us to our final point, that the superior court had no jurisdiction to nullify the effect of the commission's proceedings even if at one time appellants did operate without a proper permit.   Although the defense that the carrier lacked a permit was directed at appellants, indirectly respondents challenged the jurisdiction of the commission to order appellants to collect the undercharges.   The trial court upheld this defense, and summarily denied appellants' right to proceed without regard to the merits;  it thereby invalidated regulatory action taken by the commission.   The trial court exceeded its jurisdiction, as Public Utilities Code section 1759 provides:

“No court of this State, except the Supreme Court to the extent specified in this article, shall have jurisdiction to review, reverse, correct, or annul any order or decision of the commission or to suspend or delay the execution or operation thereof, or to enjoin, restrain, or interfere with the commission in the performance of its official duties, except that the writ of mandamus shall lie from the Supreme Court to the commission in all proper cases.”

(Wallace Ranch Water Co. v. Foothill Ditch Co., 5 Cal.2d 103, 121, 53 P.2d 929;  Pacific Tel. & Tel. Co. v. Superior Court, 60 Cal.2d 426, 429, 34 Cal.Rptr. 673, 386 P.2d 233;  Pratt v. Coast Trucking Inc., 228 Cal.App.2d 139, 145–150, 39 Cal.Rptr. 332.)

Respondents rely upon Orlinoff v. Campbell, 91 Cal.App.2d 382, 205 P.2d 67, to distinguish this case from the general rule expressed in the cases just cited.   In Orlinoff an unlicensed carrier was not permitted to enforce a hauling contract, but the Public Utilities Commission was nowise concerned with that case.   Here, a permit had been issued to the original carrier, a request had been made to transfer the permit to its successor, although never completed, and the original permit was transferred to the final successor carrier, a corporation.   The commission asserted its jurisdiction over appellants at all times, while the facts of Orlinoff do not reflect commission supervision over the hauling.   The most significant distinction, however, is that in Orlinoff an unlicensed carrier instituted an action upon his own initiative for damages for breach of contract, while here the action was instituted in order to comply with a directive of the Public Utilities Commission to collect undercharges.  (Cf. People v. Ryerson, 241 A.C.A. 149, 153, 50 Cal.Rptr. 246.)

 Although little mention is made of a purported release of all claims for undercharges in return for $1,000, it should be noted that the release is not a valid defense to an action instituted under order of the commission to collect some $50,000 in undercharges.   For reasons of public policy, discussed above, such a release and satisfaction is invalid without the approval of the commission.

The judgment is reversed.

STONE, Justice.

CONLEY, P.J. and McMURRAY, J. pro tem.*, concur.

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