ENTREMONT v. WHITSELL (1937)

This is a petition to review an order of the Railroad Commission. Petitioners are Paul Entremont, holder of a permit as a radial highway common carrier, and the State Department of Public Works.

In February, 1936, Entremont entered into a contract with the division of highways of the Department of Public Works, by which he agreed ‘to furnish the service or rental’ of three dump trucks of 3 1/2 cubic yards capacity, for hauling gravel or slide material, and for other miscellaneous jobs as required in district 1 in northern California, for 500 hours each, at the rate of $2.50 per hour. Entremont was to furnish the drivers, and operate the trucks at his own expense. Performance under the contract was begun, and the service was rendered, on an 11-mile strip of state highway which was being repaired by the division of highways.

Prior to this work the Railroad Commission had established by its decision the minimum rate for transportation of sand, rock, gravel, excavated material and road building material in dump trucks of such capacity, pursuant to the terms of the Highway Carriers' Act (Stats.1935, chap. 223; Deering's 1935 Supp., Act 5129a, p. 1358). This minimum rate was $2.59 per hour. The commission thereafter on its own motion investigated the above activities of Entremont, and a hearing was held to determine whether its decision was being violated. After full consideration, and after intervention by the State Department of Public Works and others, the commission found that there was such a violation, and ordered Entremont to proceed to collect the undercharge, and to abstain thereafter from charging less than the minimum rate. This proceeding in review followed.

The first contention of petitioners is that the agreement between Entremont and the Department of Public Works did not constitute the transportation of property for compensation over the public highways within the meaning of the Highway Carriers' Act, but was instead a hiring of trucks by the said department, and therefore within the provisions of sections 136 and 136.5 of the Streets and Highways Code (Stats.1935, chaps. 29, 514; Deering's 1935 Supp., Act 8220, p. 1754) requiring competitive bidding for the ‘leasing or renting of tools or equipment for state highway purposes.’ It is, of course, clear that, if Entremont had merely rented his trucks to the department, and the department had as user or lessee operated them for its purposes, the transaction would not be subject to the rate regulations of the commission. But if the transaction was, in fact, a transportation agreement, it would come within the regulatory powers of the commission regardless of the designation of it as a hiring of trucks.

The chief characteristic of renting is the giving up of possession to the hirer, so that the latter himself uses and controls the property. Cal.Civ.Code, §§ 1925, 1955. The renting of motor vehicles normally consists of furnishing them without drivers, for operation by the hirer at his own risk. Carriage of property, on the other hand, involves a bailment of goods for transportation and delivery by the carrier. See State v. Dabney, 176 Ark. 1071, 5 S.W.(2d) 304; Roeske v. Lamb, 39 N.M. 111, 41 P.(2d) 522; State v. Robinson, 42 Minn. 107, 43 N.W. 833, 6 L.R.A. 339. The undisputed facts show that Entremont, the purported lessor, was required to furnish his own employees as operators, and to supply all gas, oil, and other materials necessary for the operation of the machines; where unsatisfactory, they were to be replaced by him; he was to carry compensation insurance on the drivers, and to pay all the expense of repairs to the equipment; he assumed all responsibility for damage or injury to other persons or property by reason of the operation of the trucks. In the course of the work, Entremont and his employees took the usual directions from the foreman of the division of highways as to the material to be transported, but the tracks were in the possession of Entremont, operated by his employees, and subject to his control. Indeed, it would be difficult to conceive of his carrying out the requirements of his contract with respect to operation, repair, supplies, etc., unless he did have possession and control of the machines. The intermittent use of the trucks for miscellaneous hauling jobs, and the payment at an hourly rate, are fully consistent with a transportation contract of a trucking carrier.

Additional evidence on this point is afforded by the fact that Entremont held a permit as a highway carrier, and by the further fact that in his return to the state board of equalization filed in compliance with the Motor Vehicle License Tax Act (Stats.1933, chap. 339, p. 928), he included the income from the present contract as part of his gross receipts from operation of motor vehicles upon the public highways in the transportation of persons or property for compensation.

From all of these circumstances it appears that the commission was justified in characterizing his activities as transportation of property by motor vehicles and not the renting of tools or equipment. See Reavley v. State, 124 Tex.Cr.R. 528, 63 S.W.(2d) 709; Holmes v. R. R. Commission, 197 Cal. 627, 631, 242 P. 486. The case of People v. Tedesco (Cal.App.) 64 P.(2d) 966, cited by petitioners, is in no way helpful in this connection, for the decision was on demurrer, and the actual facts of operation do not appear.

Petitioners further suggest that the transportation involved herein was for the purpose of maintenance of a public highway, and hence did not constitute transportation upon a public highway. There is no merit in this position, for regardless of the purpose of the hauling, there was an actual transportation of materials on a highway open to public travel. In Oswald v. Johnson, 210 Cal. 321, 291 P. 579, much relied upon by petitioners, the highway was under construction and repair, and was closed to public travel. The same was true in the case of Allen v. Jones, 47 S.D. 603, 201 N.W. 353.

The next contention of petitiners is that, even assuming that the contract was one for transportation and superficially within the terms of the Highway Carriers' Act, the statute should be construed as inapplicable thereto. The reasons advanced are, first, that the sovereign, in this case the state, is not bound by its statutes unless expressly mentioned, and second, that the Public Utilities Act (Gen.Laws 1931, Act 6386, and Supplements) and the Civil Code indicate a legislative policy or intent to exempt transportation for the state from regulation, and to favor preferential charges to the state.

The first reason is obviously based upon lan unsound assumption. The Department of Public Works was in this case only a shipper, with materials to be moved. Entremont was the carrier. The statute does not cover shippers, but carriers, and the commission's regulation was directed toward the carrier, and not toward the state. Accordingly, the mere fact that Entremont was engaged in transportation for the state does not mean that the commission was regulating a state agency.

The second reason requires fuller consideration. Section 17(a)(4) of the Public Utilities Act (Deering's Gen.Laws Supp.1935, Act 6386) provides that common carriers may transport persons or property ‘free or at reduced rates' for the United States, state, county or municipal governments, where such free or reduced rate transportation is provided for in the contract. Section 17.5 of the act (Supp.1935) makes the same provision where transportation is for contractors carrying out contracts with the United States, state or other governmental agency in this state. Section 2171 of the Civil Code provides: ‘A common carrier must always give a preference in time, and may give a preference in price, to the United States and to this state.’ These provisions permit preferential rates to governmental agencies such as the Department of Public Works, and there is nothing in the Highway Carriers' Act which attempts to prohibit such preferences. This has been recognized by the commission in a number of instances in which reduced rates to the state or subdivisions have been approved.

But though it is conceded that perferences to governmental agencies are authorized by the Public Utilities Act and not prohibited by the Highway Carriers' Act, it does not follow that any and every contract for a reduced rate is thereby rendered valid. The declaration of policy is not an absolute guarantee of preferences, and it does not determine questions of procedure. In this connection, an important section of the Highway Carriers' Act must be read. Section 11 of said act (Gen.Laws Supp.1935, Act 5129a) provides: ‘If any highway carrier other than a common carrier desires to perform any transportation or accessorial service at a lesser rate than the minimum rates so established, the Railroad Commission shall, upon finding that the proposed rate is reasonable authorize such rates less than the minimum rates established in accordance with the provisions of section 10 hereof.’ This section recognizes the possibility of valid preferential rates, and thereby supports and does not conflict with the declared policy in the above-quoted provisions of the Public Utilities Act. But it adds a requirement for highway carriers which is not made in the case of common carriers, namely, a prior application to the commission for authority to establish the rate; and it gives the commission power to reject the proposed preference, if it appears to create an unjust or unreasonable discrimination against the public interest.

In our opinion this section is clearly applicable to transactions with governmental agencies, and there is no reason for construing it otherwise. If it were not applied, preferences to such agencies would be entirely uncontrolled, with the consequent evils of unwarranted discrimination and price cutting by irresponsible carriers. The commission was given authority to approve reasonable preferences, and its authority must be upheld. Competitive bidding is not prevented; it is still possible to the fullest extent, subject to the commission's approval of the final bid, before the rate goes into effect. An instructive discussion of a similar authority of the Interstate Commerce Commission will be found in United States v. Tennessee, 262 U.S. 318, 43 S.Ct. 583, 67 L.Ed. 999. See, also, City of Hillsboro v. Public Service Commission, 97 Or. 320, 187 P. 617, 192 P. 390, where the court held that service to municipalities was within the regulatory powers of the commission.

It is to be noted, also, that the requirement of prior application to the commission follows logically from the nature of the regulatory provisions of the Highway Carriers' Act. Under the Public Utilities Act, carriers subject thereto establish their own rates by filing tariffs with the commission, subject to the power of the commission to change them for good cause. Doubtless such carriers, under the provisions of the act dealing with preferences, may themselves contract for preferential rates to governmental agencies, and the rates thus made will apply, subject to any later action by the commission. Under the Highway Carriers' Act, perhaps because of the prior experience with large numbers of truckers who engaged in bitter competition at ruinously low rates, a system was established whereby the commission itself fixes the original rates and approves all changes, before they go into effect. There is no logical reason why this prior approval should not be secured before any preferential rate is given. It is to be assumed that the commission will act in accordance with the statutory declaration of policy in favor of preferences to the state, and, under section 11 of the Highway Carriers' Act, will approve any requested preference unless the evidence shows that the particular preferential rate will constitute an unjust or unreasonable discrimination, and that the public interest will suffer thereby. The present proceeding, of course, does not involve any issue of abuse of discretion in the disapproval of a preferential rate.

The order is affirmed.

LANGDON, Justice.

We concur: CURTIS, J.; SHENK, J.; THOMPSON, J.; SEAWELL, J.