PARR RICHMOND TERMINAL CORPORATION v. RAILROAD COMMISSION OF CALIFORNIA (1935)

This is a petition to review an order of the Railroad Commission directing petitioner to cease and desist from permitting the car loading and unloading of freight without assessing and collecting the charges contained in its published tariffs.

The proceedings were initiated before the commission against petitioner, a public utility wharfinger at Richmond, Cal., by four complainants: Encinal Terminal, Howard Terminal State Terminal Company, and city of Oakland through its Board of Port Commissioners. The charge was that petitioner had permitted a practice which amounted to a rebate or preference, in violation of sections 17(b) and 19 of the Public Utilities Act (2 Deering's Gen. Laws 1931, Act 6386).

Petitioner operates a public wharf at Richmond, and hence is subject to regulation under the Public Utilities Act, section 2(z). Its principal function is unloading and storing freight prought to its pier by rail or truck, for the purpose of shipment by water. For unloading canned goods and dried fruit from railroad cars, its tariff specifies a charge of 40 cents per ton. This is the charge made at all the terminals on San Francisco Bay.

The railroads which serve this area provide in their tariffs for absorption of the cost of unloading the cars; that is, they pay to the consignee, the terminal, or the car unloader an allowance for the cost of unloading. Prior to 1932, the allowance on the above-mentioned commodities (canned goods and dried fruit) was equal to the cost of unloading, but did not exceed 40 cents per ton. On June 1, 1932, the railroads established an amended tariff providing for a flat absorption rate of 40 cents per ton for unloading, regardless of the actual cost. This change would have made no difference in the result if petitioner had continued to unload cars at its published tariff of 40 cents per ton, exactly equivalent to the allowance. But in the summer of 1932, petitioner brought into operation a plan which it had conceived many months before, and which was made possible by the said change in the railroad tariff. Three large shippers of canned goods and dried fruits, the California Prune & Apricot Growers' Association, the Sunland Sales Corporation (affliated with Sun-Maid Raisin Growers' Association), and Hunt Bros. Packing Company, were induced to divert their tonnage from other terminals to that of petitioner, for by so doing, they were able to make substantial savings in their shipping costs.

The method devised was the introduction of a third party, the firm of McCrone & Font, professional car unloaders. Petitioner permitted the said three shippers to come onto the wharf and perform their own unloading. The shippers made private contracts with McCrone & Font to do the unloading for them. Under this arrangement McCrone & Font charged 15 cents a ton to one shipper, and 20 cents a ton to the other two. The three shippers, having paid for unloading at these rates, collected the flat allowance of 40 cents per ton from the railroads, thus realizing a substantial net profit.

In actual operation this plan was for the benefit of the above shippers alone. Whenever petitioner itself handled the unloading, and it did so in practically every case except these three, the standard charge of 40 cents per ton was made. McCrone & Font did unload dried fruit for another concern, the Memorie Fruit Company, in one instance, but charged the 40-cent rate. After these three large shippers had transferred their tonnage to petitioner's terminal, the offer of petitioner to shippers to handle their own unloading was made public, but, as already stated, no shipper save these three took advantage of the proflt thus made available.

At the conclusion of the hearing, the commission made the order to cease and desist, which petitioner seeks to review. Subsequently, while the cause was pending in this court, two important developments occurred. The first was that the railroad tariff allowance for unloading was changed again, to restore the provision in force prior to 1932, i. e., to provide for an allowance for the actual cost of unloading, not to exceed 40 cents per ton. The second was the decision of the commission that car unloaders operating at terminals on San Francisco bay were public utilities, and required to file tariffs with the commission. In re American Hawaiian Steamship Co., 38 C. R. C. 500. As a result of these changes, it would appear that the plan pursued by petitioner can no longer be effective to secure a profit to the shipper. For this reason, the commission suggests that the case is moot, and that it should be dismissed. Petitioner and amici curiae strongly oppose this suggestion and we are not inclined to favor it. No doubt the precise plan of petitioners cannot now be pursued, but it is not sufficiently established that all possible evils in this practice are eliminated by the new railroad tariff and the regulation of car unloaders; nor is it inconceivable that changed circumstances may again present the opportunity which formerly existed. Hence we think a decision on the merits is called for. and our conclusion is that the order of the commission should be affirmed.

Underlying the commission's decision is the general proposition that the unloading of cars is an essential public utility function which the wharfinger may not abandon, and that it cannot therefore lawfully permit the public to use its facilities for the performance of that function without charging for it. The record clearly shows that by its conduct, petitioner not only succeeded by indirection in giving a rebate to certain shippers, but brought about a condition under which unequal and discriminatory rates were in effect. The entire scheme originated with petitioner and was brought into operation by petitioner. Petitioner's agents sought and obtained the flat absorption rate from the railroads, proposed the private unloading method to the three large shippers whose business they were seeking, and brought McCrone & Font into negotiations with the shippers. Although it is claimed that there is no discrimination because petitioner opens its wharf to any shipper on the same terms, the fact is that either because of secrecy surrounding the early transactions, superior bargaining power, or other reasons, the three large shippers in question alone received preferential treatment. It is unnecessary to refer at length to authorities to show that this constituted a violation of the rebate and preference sections of the Public Utilities Act. Section 17(b) prohibits a public utility from charging a greater or less compensation than specified in its schedules on file, and further provides: ‘* * * Nor shall any such public utility refund or remit, directly or indirectly, in any manner or by any device, any portion of the rates, tolls, rentals and charges so specified, nor extend to any corporation or person any form of contract or agreement or any rule or regulation or any facility or privilege except such as are regularly and uniformly extended to all corporations and persons. * * *’ Section 19 provides: ‘No public utility shall, as to rates, charges, service, facilities or in any other respect, make or grant any preference or advantage to any corporation or person or subject any corporation or person to any prejudice or disadvantage. No public utility shall establish or maintain any unreasonable difference as to rates, charges, service, facilities or in any other respect, either as between localities or as between classes of service. The commission shall have the power to determine any question of fact arising under this section.’ Under the broad language of these provisions. any practice which opens the door to preference and discrimination may be prohibited. Many cases decided by the federal courts under similar provisions of federal statutes illustrate this proposition. See United States v. Union Stockyard and Transit Co., 226 U. S. 286, 33 S. Ct. 83, 57 L. Ed. 226; Vandalia R. Co. v. United States (C. C. A.) 226 F. 713; Merchants' Warehouse Co. v. United States, 283 U. S. 501, 51 S. Ct. 505, 75 L. Ed. 1227.

Petitioner's defense, that it made no refund to shippers and did not establish any preferential charges, is easily answered. By permitting the intermediary, McCrone & Font, to perform the car unloading at a charge below the standard rate, it effectively accomplished by indirection what it admittedly could not do directly. Indeed, when it is considered that petitioner itself always charged the standard rate for unloading, but offered shippers the privilege of dickering with private unloaders for lower charges, discrimination would seem to be a necessary incident of its operations.

Petitioner argues, in justification of its actions, that the same discriminatory practice prevails in certain docks on the San Francisco water front which are publicly owned and therefore beyond the regulatory power of the commission. This condition, if it existed, would not necessarily justify the acts of petitioner; but the record does not show that it did exist. All that appears in this connection is that the shipper has access to these docks, and may take care of unloading in his own way. There is no evidence that the private car unloaders operating there ever made charges less than the standard rate, or that any shipper made any special profit, as was the case under petitioner's plan of operation.

We deem it unnecessary to discuss these practices at any greater length, not only because their discriminatory character is apparent, but because also, as previously stated, the new tariffs and regulations will in all likelihood inhibit the practices, at least in their present form.

The order is affirmed.

PER CURIAM.