Case Title: ARIZONA CORP. COM'N v. Continental Security Guards

Citation: 103 Ariz. 410, 443 P.2d 406

Docket Number: 9020-PR

State: arizona

Court: Arizona Supreme Court

Date: 1968-07-12T00:00:00Z

Document:
103 Ariz. 410 (1968) 443 P.2d 406 The ARIZONA CORPORATION COMMISSION and Armored Motor Service of Arizona, Inc., and Securities Transport Company, Inc., Appellants, v. CONTINENTAL SECURITY GUARDS, an Arizona corporation, Appellee. No. 9020-PR. Supreme Court of Arizona, In Banc. July 12, 1968. *411 Gary K. Nelson, Atty. Gen., Darrell F. Smith, Former Atty. Gen., by H.J. Lewkowitz, Phoenix, Evans, Kitchel & Jenckes, by Earl H. Carroll and G. Starr Rounds, Phoenix, for appellants. Kaplan, Wilks & Abrams, by Richard B. Wilks, Gorey & Ely, by Herbert L. Ely, Phoenix, for appellee. McFARLAND, Chief Justice: This case is before us upon a petition for review of a decision of the Court of Appeals. 5 Ariz. App. 318, 426 P.2d 418. A complaint was filed with the Arizona Corporation Commission, hereinafter called the Commission, by Armored Motor Service of Arizona and Securities Transport Company, hereinafter called intervenors. They alleged that Continental Security Guards, a corporation hereinafter called Continental, was operating an armored-car service without either a permit or a certificate of convenience and necessity, and was soliciting business in competition with the intervenors who previously enjoyed a monopoly in Arizona by virtue of their certificates of convenience and necessity. After a hearing, the Commission issued a cease-and-desist order against Continental, and Continental brought this action in superior court, pursuant to A.R.S. § 40-254, to set aside the Commission's order. The superior court found that Continental was engaged in the business of protecting, in transit, money and valuables transported by it in armored cars, but that "the function of transportation is incidental to the prime function which is the physical protection of the property transported," held that the Arizona Corporation Commission acted in excess of its jurisdiction, and set aside the Commission's order. From this judgment, the Commission and the intervenors appealed. The court of appeals reversed the superior court, and reinstated the findings of the Commission. The answer to the question of whether the Arizona Corporation Commission has jurisdiction over the business of transporting money and valuables in armored cars, for hire, has its roots in the nation's history particularly that of the last half of the 19th century the era of railroad-building and of the "Robber Barons." At first every new road was a boon to everyone, and, in comparison with the old wagon rates, almost any rate was reasonable. About 1880, even though in many places the existing roads were sufficient to serve the public, new lines were built for speculative purposes, resulting in wholesale cutting of rates and many railroad bankruptcies. Unrestrained competition among the railroads developed, which in turn gave rise to kickbacks, rebates, favoritism and discrimination. A railroad would make a concession in rates to a large shipper to get his business. The concession could mean the difference between success and failure for that business, and frequently led to the destruction of its competitor. This made the survivor even stronger and larger and gave him the means to demand even larger concessions. In this way many of the great trusts of those days obtained their power and great size. Another abuse that arose started when the railroads began to acquire interests in enterprises along their rights-of-way. This led naturally to concessions and preferences for those businesses in which the railroads were interested at the expense of their competitors. In like manner, it was to the railroads' interests to concentrate traffic at large cities where it could be handled more cheaply in large quantities than in small cities for handling in small quantities. As a result, the railroads gave lower rates to certain cities than to others which were closer, resulting in favoring the growth of some cities over others. Bankruptcies among the railroads, favoritism to powerful shippers, and rate preferences to some cities over others, eventually brought the people to a realization that the railroads must somehow be controlled, so as to make them serve the public to the best advantage. The result was the Interstate Commerce Act, followed by the great body of case law decided under it, and its subsequent amendments. *413 In Interstate Commerce Commission v. Chicago Great Western Railway Company, C.C., 141 F. 1003, 1014, the court stated: It is thus easy to understand why Arizona's constitution has, from the beginning, provided for the regulation of certain businesses. The Arizona Constitution, Article 15, A.R.S., reads: The legislature has implemented this provision by the following sections appearing in Arizona Revised Statutes, as amended Laws 1960: This Court, in Corporation Commission v. People's Freight Line, Inc., 41 Ariz. 158, 16 P.2d 420, in interpreting the above provisions, has said: This Court has frequently restated the fact that the doctrine of "regulated monopoly" is the basic law of the state. We reaffirmed this principle as late as 1960, in Arizona Corporation Commission v. Reliable Transportation Company, 86 Ariz. 363, 346 P.2d 1091. However, in that case we qualified the rule, stating that: This language was used in connection with the distinction between common carriers and contract carriers. In our pronouncements throughout the years, we have limited the extension of the power of the corporation commission. In Quick Aviation Company v. Kleinman, 60 Ariz. 430, 138 P.2d 897, we held that the carrying of insecticides by plane from the place of takeoff to the fields to be dusted was incidental to the dusting operation, and that in transporting such insecticides the transporter was not acting as a common carrier and therefore not under the jurisdiction of the corporation commission. In Killingsworth v. Morrow, 83 Ariz. 23, 315 P.2d 873, we held that the towing of disabled autos was incidental to the servicing and repairing done to them, and therefore not under the jurisdiction of the commission. In Visco v. State ex rel. Pickrell, 95 Ariz. 154, 388 P.2d 155, we held that trash was not "property," and that the carrier was not subject to the corporation commission's control. While these cases are not exactly like the instant case, they serve to show the underlying aversion of this Court to any extension of the power and scope of the corporation commission to businesses not patently in need of the Commission's control. The Commission took the position that Continental's operation was in violation of the law because if it were a common carrier, it was operating without a certificate of convenience and necessity, while if it were a contract carrier, it was operating without a permit. Continental offers security services of various kinds. Commencing in 1956, it has grown until it now employs more than 150 people and operates five divisions: training and placement; polygraph; investigation; security; and armored-car service, which is part of security. It tries to sell package protection. If it furnishes security guards for a business, it tries to sell its armored-car service too, although it will sell any one service separately. Thinking that it would help its case, it had, prior to the hearing below, discontinued making a separate charge for the armored-car service. At the time of the trial it had only ten customers for its armored-car division, and the armored car itself is leased, not owned. Continental hopes to expand throughout the state, and solicits potential clients throughout the state by mail, telephone, personal contact, and newspaper advertisements. Its armored-car receipts so far account for only about five percent of its gross revenues. It has been soliciting business at prices that appear to be about one-half of what the intervenors have been charging. Continental makes an individual contract with each customer, and probably operates much the same as intervenors, who admittedly do not take on a client unless they can conveniently work him into one of their regular armored-car routes. Intervenors testified that if a solitary potential customer wanted an armored car in a distant place at a special time, he would be turned down unless "you could make a living out of it. In other words, you couldn't have a truck sitting in front of every door." This case was argued both in the trial court and in the court of appeals on the theory that the transportation of money and valuables is incidental to Continental's main business, which is protection and security. Though Continental's armored-car revenue accounts for only five percent of its total receipts, a determination of the type of business cannot be based solely on the percentage of receipts. The use of a percentage as the sole criterion of whether a certificate is needed, would enable a large business to conduct a small common-carrier operation, provided that the ratio of the receipts of the latter to those of the whole business is small. The trial judge put his finger on the core of this matter when he found that Continental's activities The right to regulate common carriers is not, and cannot be questioned. The Constitution and the legislature have delegated this power to the corporation commission. The difficulty arises from the fact that the statutes delegating this power include certain powers with reference to contract and private carriers. It is necessary to ascertain the extent and the legality of those powers. Black's Law Dictionary defines a common carrier as one who carries, or holds himself out as willing to carry, goods for everyone within the limits of his capacity. If he may carry or not, as he deems best, he is but a private individual and is vested, like all other private persons, with the right to make his own contracts. Fixed termini, regular schedules, and uniform tariffs are not essential to make one a common carrier, and the single fact that he makes individual contracts with each customer will not change his character. Claypool v. Lightning Delivery Co., 38 Ariz. 262, 299 P. 126. A good discussion of what constitutes a common carrier is found in Ace-High Dresses v. J.C. Trucking Co., 122 Conn. 578, 191 A. 536, 112 A.L.R. 86, which states: In Terminal Taxicab Company v. Kutz, 241 U.S. 252, 36 S. Ct. 583, 60 L. Ed. 984, Mr. Justice Holmes had the following to say about the distinction between public and private carriers in a case involving a taxicab company: In Georgia Public Service Commission v. Taylor, 172 Ga. 100, 157 S.E. 515, the Syllabus Opinion By the Court, in determining the status of a trucking concern, stated: Despite the fact that A.R.S. § 40-601, subsec. B, supra, makes transportation for more than one consignor or to more than three consignees, prima facie evidence that a carrier is acting as a common carrier, the trial judge found that Continental was not acting as a common carrier. We think that the finding was justified. A.R.S. § 40-607, subsec. A, supra, gives to the corporation commission the power to require a certificate of public convenience and necessity from common carriers, and § 40-608 subsec. A, supra, a permit from contract and private carriers. In State v. Smith, 31 Ariz. 297, 252 P. 1011, we said: In Arizona Corporation Commission v. Reliable Transportation Company, supra, we said: It is therefore clear that the legislature has legally delegated to the corporation commission the power to require a certificate of public convenience and necessity for common carriers and the power to regulate them and their rates in the public interest. It is also clear that the legislature has legally delegated to the Commission the power to require a permit for contract carriers. Such permit implies the fulfillment of certain conditions by the carrier before he can obtain it. The scope of permissible conditions is not as broad as those which can be required of the common carrier. Although the statute provides that the permit may be granted upon such terms and conditions as the Commission may impose, the Commission does not have carte blanche in this regard. In State v. Smith, supra, we limited the Commission's power, saying: *418 In Visco v. State ex rel. Pickrell, 95 Ariz. 154, 388 P.2d 155, we said: It is the duty of the courts to construe a statute in such a way as to preserve both its intention and its validity, if possible. State v. Smith, supra. We therefore construe the statute to permit the Commission to require a permit from a non-common carrier, and to permit the Commission to impose on such carriers only such conditions as are necessary to enable the Commission to carry out its duties with relation to the safety of the public, the condition of the highways, and revenue from taxes on vehicles and carriers, etc. This interpretation specifically excludes control over a contract carrier's rates, schedules, routes, etc., and specifically excludes the power to refuse a permit to such carrier for the sole reason that another carrier holds a certificate of convenience and necessity. To interpret the statute as going further than this would make it unconstitutional, since it would then, in the language of Frost v. Railroad Commission of California, 271 U.S. 583, 46 S. Ct. 605, 70 L. Ed. 1101, be We said in General Alarm, Inc. v. Underdown, 76 Ariz. 235, 262 P.2d 671: In Visco, supra, we quoted with approval the following language from Hertz Drivurself Stations, Inc. v. Siggins, 359 Pa. 25, 58 A.2d 464, 7 A.L.R.2d 438: We also said, in Visco, supra: A case nearly identical with the instant case is Brink's Express Company v. Public Service Commission, 117 Pa.Super, 268, 178 A. 346. There, the Brink's Company's charter permitted it to provide armored-car service for persons or firms The record indicated that: The company furnished services other than transportation such as providing coins for change, storing valuables in its safe, etc. It claimed that it could not separate one charge from the others. The court held the company not to be a common carrier, saying: The corporation commission based its order for Continental to cease and desist on the ground that it The validity of the order depends upon whether the business of Continental is either that of a common carrier or a contract carrier. A comparison of the facts shows that Continental operates very much like Brink's in Brink's Express Company v. Public Service Commission, supra. It does not hold itself out as willing to haul for all potential customers without discrimination. It openly reserves the right to refuse to carry for any applicant even when it has equipment available. Many of its contracts are different from others. So long as it so operates, it cannot be classified as a common carrier. State v. Smith, supra; Arizona Corporation Commission v. Reliable *420 Transportation Company, supra; Brink's Express Company v. Public Service Commission, supra. Furthermore, the business of Continental cannot be classified as that of a contract carrier. The business of Continental is that of protection and security. The general nature of its business is security for various purposes. The armored car is merely a part of the security provided for the protection of money and valuables. It includes protection in transportation to and from the cars. If the transportation were in one of the customer's cars and the driver accompanied by or followed by armored guards in another car, it could hardly be argued that it would be engaged in the business of either a common carrier or a contract carrier. The fact that the armored car is an added security afforded by Continental does not prevent its business from being classified as that of security service. We have held in other cases that where a party is engaged in a business other than that of a carrier, the fact that it uses the highways, at least to some extent, does not of itself make it a carrier. Quick Aviation Company v. Kleinman, supra; Killingsworth v. Morrow, supra; Visco v. State ex rel. Pickrell, supra. The real test is whether the use of the highway is of such a nature that it is not a part of the other business and for that reason the public interest requires that it be regulated as a common carrier, or whether it is of such a nature that it must be classified as a contract carrier. We do not find that either test exists with respect to Continental as it is presently operated. The protective services are the main features of Continental's business. The armored car is merely a part of those protection features. There will be some who will argue that our decision in the instant case puts it within the power of any carrier, by the simple device of making private contracts with an unlimited number, to secure all the privileges afforded to common carriers, without being subject to their duties and obligations. In the words of Frost v. Railroad Commission of California, supra: We might add that we agree with the court in Motor Freight, Inc. v. Public Utilities Commission of Ohio, 120 Ohio St. 1, 165 N.E. 355, when it said: Decision of the Court of Appeals vacated; decision of the Superior Court affirmed. UDALL, V.C.J., and STRUCKMEYER, BERNSTEIN and LOCKWOOD, JJ., concur.