Court Opinion

ID: 9608922
Source: CourtListenerOpinion
Date Created: 2023-08-22 03:19:49.012439+00
Date Added: 2024-06-11T13:30:20.663029
License: Public Domain

GIBSON, C. J.
I dissent.
I am of the view that the commission’s finding that there was a dedication of service by the company with respect to the Vietorine Ranch property is supported as to all portions of the ranch other than the part above the 600-foot contour. It is not disputed that, if there was such a dedication, the commission has authority to order the company to extend service to the dedicated area when such service becomes necessary. The order of the commission should be affirmed, with the possible exception of certain provisions discussed hereinafter relating to the form of the order.
In considering the propriety of the commission’s order we must keep in mind the rule that the Public Utilities Commission is a statewide agency which derives adjudicating power from the Constitution (Cal. Const., art. XII, § 22) and that its factual determinations, for example, those of public convenience and necessity and of reasonableness, are not subject to re-examination in a trial de novo but must be upheld by a reviewing court if they are supported by substantial evidence. (Southern Pac. Co. v. Public Utilities Com., 41 Cal.2d 354, 362, 367 [260 P.2d 70] ; Pacific Greyhound Lines v. Railroad Com., 11 Cal.2d 427, 429 [80 P.2d 971] ; see California Portland Cement Co. v. Public Util. Com., 49 Cal.2d 171, 175, 176 [315 P.2d 709]; cf. Shepherd v. State Personnel Board, 48 Cal.2d 41, 46 [307 P.2d 4].)
The water company admits that in 1948 its territory of dedicated service extended south to the southern boundary of Carmel Highlands. In that year respondent Sawyer purchased the Vietorine Ranch which contained 1,146 acres of land lying immediately south of Carmel Highlands. After receiving letters from an officer of the water company to the effect that its installations could be extended to the ranch with storage tanks that would supply any development that might be contemplated in this area, Sawyer subdivided 23 acres, herein referred to as Tract Number 1, installed a water distribution system therein, and constructed an 8-inch water main to connect with the company’s 3-inch main some 400 feet north of the southern boundary of Carmel Highlands.
*503In July 1949 the parties signed an agreement which provided for the transfer to the water company, without obligation to refund, of the 8-inch pipeline and the distribution system in Tract Number 1. The agreement provided in part as follows: The company, within five days, was to connect its 3-inch main with the 8-inch main and, within 60 days, to apply to the Public Utilities Commission for a certificate of public convenience and necessity “to render water service as a public utility in that portion of said Victorine Ranch lying below the 600 foot contour.” Sawyer agreed to pay the company the cost of installing an 8-inch pipeline running some 5,000 feet to connect the one previously built by Sawyer with an existing 8-inch pipe of the water company. He was to create a fund of $20,000 toward this purpose, the fund to be turned over to the company upon the construction of ten homes in Tract Number 1 or in the event Sawyer should subdivide an additional portion of the main tract. The company agreed “to extend its facilities to other portions of said tract lying below the 600 foot contour in accordance with Published Rule and Regulation 19B of Company,” provided such additional areas were developed in units of not less than five acres. With respect to the portion of the ranch lying above the 600-foot contour, the company agreed to supply water under terms and conditions acceptable to it, but the contract provided that the company should be under no obligation to serve that area if Sawyer and the company were unable to agree on reasonable terms. It was further provided that the services to be rendered by the company and the rates to be charged should be subject to such rules and regulations as were or should be established by the Public Utilities Commission and that the agreement should be subject to such changes and modifications as the commission might direct in the exercise of its jurisdiction.
The company’s rule 19B referred to above, filed with the commission, provided that applicants for extensions of mains to serve tracts and subdivisions should pay the construction costs of the necessary facilities with certain minor exceptions and should receive from the company, for a period of not to exceed ten years, an annual refund of 35 per cent of the gross revenue collected from consumers within the subdivision. It thus appears that the 1949 agreement was more favorable to the company than its rule on file with the commission with respect to who should pay the costs of the 8-inch main already *504built by Sawyer, the contemplated 5,000-foot pipeline, and the distribution system for Tract Number 1.
Following execution of the July 1949 agreement, the company connected its 3-inch main with the 8-inch main built by Sawyer and commenced service to Tract Number 1. The company concedes that Tract No. 1 thereby became a part of its dedicated public service area.
The company, however, failed to comply with its unconditional promise, under the 1949 agreement, to apply within 60 days to the Public Utilities Commission for a certificate of public convenience and necessity “to render water service as a public utility in that portion of said Victorine Ranch lying below the 600 foot contour.” Moreover, the company did not comply with paragraph X of General Order Number 96 of the commission which, in accord with section 532 of the Public Utilities Code, declares that a water company cannot make effective any contract for furnishing public utility service under conditions other than those contained in its schedules on file with the commission (in this ease, rule 19B of the company) unless it obtains commission authority for any arrangements which deviate therefrom. Here, as we have seen, the 1949 agreement contained several departures, favorable to the company, from its rule 19B, and these departures, under the law, could not be made effective without approval. The company thus violated the law when it put the 1949 agreement into effect, without commission approval, by proceeding into a portion of the ranch area, namely, Tract Number 1.
In view of the fact that the company proceeded into a portion of the ranch area, commenced service, and operated there for a period of several years, at all times purporting to act under the 1949 agreement, there was clearly a dedication by the company to furnish water to the area, at least in accordance with the terms and conditions of that agreement. One of these terms, and a part of the consideration due to Sawyer, was the unconditional promise of the company to seek within 60 days a certificate of public convenience and necessity with respect to the entire ranch below the 600-foot contour, and the extent of the dedication must be measured by this term of the agreement, which cannot properly be severed from the remainder of the contract. In the analogous case of Lukrawka v. Spring Valley Water Co., 169 Cal. 318, 324 et seq. [146 P. 640, Ann.Cas. 1916D 277], a water company, organized under a statute permitting the formation of corporations to supply *505water to a city or town, had commenced service to part of San Francisco. It was held that the company, by proceeding under the statute and accepting the statutory franchise which was applicable to the whole city, dedicated its service to the entire city. Although in the present case there is no franchise to show the boundaries of the land to be served, the extent of the area of dedication is clearly indicated by the provisions of the 1949 contract under which the company obligated itself to apply for a certificate of public convenience and necessity as to all portions of the ranch below the 600-foot contour.
The 1949 contract is not, as asserted by the majority opinion, merely a conditioned or provisional obligation upon the part of the company to obligate itself in the future. The existence of the agreement itself is unconditional, and the company’s promise to apply for a certificate is likewise unconditional. While the contract by implication makes certain acts by Sawyer conditions precedent to performance by the company of its obligation to serve the portions of the ranch outside of Tract No. 1 in accordance with rule 19B, such conditions would merely affect the time for performance of those duties and do not excuse the company’s failure to perform its unconditional promises nor operate to terminate the completed dedication. If the company in 1949 had performed its duty to apply for such a certificate and for approval of the terms and conditions of the contract which departed from its rule 19B, and if the commission had granted those requests and had approved the contract, there obviously would have been a completed dedication of service to the entire ranch below the 600-foot contour. Under such circumstances the commission would have had authority to order the company to render service to the area, upon performance by Sawyer of his obligations under the 1949 agreement, giving Sawyer a reasonable time for performance upon his part within the meaning of the contractual provisions. The company should not be permitted to rely either on the fact that it breached its agreement by failing to apply for the certificate or on the fact that it violated the law by putting the contract into effect without first obtaining commission approval.
The foregoing conclusions are not affected by the fact that in 1956 the company, Sawyer, and a purchaser of a part of the ranch property entered into a compromise agreement which expressly provided that it should have no force and effect until dismissal of Sawyer’s complaint and unqualified *506approval by the commission of the 1949 agreement as modified by the compromise. The 1956 compromise adopted, with certain amendments, the provisions of the 1949 agreement relating to the extension of service to all the ranch below the 600-foot contour but was conditioned upon dismissal of the complaint and unqualified approval by the commission of all the terms of the 1949 agreement as amended by the compromise. The 1956 compromise indicates at least a conditional intent upon the part of the company to dedicate its services to all portions of the ranch below the 600-foot contour, and, in any event, it is clear that the 1956 agreement discloses no desire upon the part of the company to depart from its announced intent, as declared in the 1949 agreement, to extend service to all portions of the ranch below the 600-foot contour. Although the 1956 compromise, standing alone, would not be sufficient to show a dedication, in view of the fact that it was conditioned upon an approval which was never obtained, this is immaterial because, as we have seen, there was a completed dedication of service to the whole ranch below the 600-foot line as a result of the 1949 agreement and the action of the company pursuant thereto in commencing service to part of the ranch.
Under the circumstances of this ease the commission, in addition to concluding that the company had dedicated its services to all the ranch property below the 600-foot contour, could also order the company to render service upon terms different from the conditions set forth in the 1949 contract, and the commission was not required to make a choice between accepting or rejecting the agreement as an entirety. As the majority opinion recognizes, the commission may properly regulate the service which must be given in an area to which the utility is dedicated and the terms on which extensions into new areas may be made, and any arrangements made by the utility which deviate from its rules on file with the commission, unless approved by the commission, are of no force and effect. (Pub. Util. Code, § 532; Paragraph X of General Order No. 96 of the commission.) When the company put into effect the 1949 agreement by extending service thereunder to a portion of the ranch area, without complying with its promise to seek a certificate of public convenience and necessity and in violation of the order requiring commission approval of deviations from the company’s filed rules, it was bound to know that it acted at its peril. The company thus assumed the risk that the commission would subsequently conclude that the company had dedicated its services to the entire *507area as delineated by the promises under which it purported to act, that the company could be ordered to render service within the area under reasonable regulations, and that such contract terms as were not acceptable to the commission could be disregarded.
Any other conclusion would be very unfair to Sawyer and other persons interested in the ranch property, would give the company benefits to which it was not entitled, and would permit the company to circumvent the law requiring commission approval of extensions of service upon terms different from the company’s filed rules. The company purportedly acted under the 1949 contract when it entered into the ranch property, began to serve a portion of it, and continued that service during the intervening years to the date of this proceeding. Sawyer and other persons interested in the ranch property clearly had a right to rely upon the fact that the company, by its conduct, indicated that it intended to fulfill the obligations which it had undertaken in 1949, including the unconditional, express promise to apply for a certificate of public convenience and necessity to serve the entire ranch property below the 600-foot contour and the implied in law promise to seek commission approval of the arrangements. In view of all the circumstances, including the contract and the fact that the company was at all times aware of Sawyer’s plans to continue subdividing the land, the commission could reasonably conclude that it would be unfair to permit the company, at this late date, to be released from its agreement to apply for permission to serve the entire area. Moreover, it should be noted, in this connection, that the commission could reasonably consider the possibility that, for purposes of economy of operation and public convenience, only one water utility should serve the entire ranch area, that the company’s entry into a portion of the area made it impossible for any other utility to perform such unit service unless the company was forced to withdraw, and that, since the company had entered Tract Number 1 under nonapproved conditions but pursuant to its agreement to extend service to the balance of the ranch, the company should be required to serve the portions outside Tract Number 1 as a condition to applying in Tract Number 1 terms of service which depart from rule 19B.
Contrary to the position taken by the majority opinion the order of the commission, when properly construed, concerns the terms of the company’s service to Tract Number 1 *508and does not relate solely to the company’s obligation to serve other areas of the ranch. The terms of extension of the company’s service to Tract Number 1, under the 1949 agreement, obviously include the various promises of Sawyer and the company with regard to construction of pipelines, payment therefor, connections with the company’s system, and transfer of Sawyer’s 8-inch main and distribution system to the company. These promises clearly related to, and were parts of the consideration for, the company’s agreement to enter Tract Number 1 as well as for its agreement to apply for a certificate as to other portions of the ranch. Thus, when the commission, by its order, prescribed terms other than those fixed by the 1949 agreement for construction of and payment for pipelines, it was in effect altering the terms of extending service to Tract Number 1 as well as to the remaining property. The majority opinion does not discuss the right of the commission under ueneral Order Number 96 and the undisputed facts of this ease to order the company to revise the unapproved terms upon which it entered Tract Number 1 in 1949 or, as an alternative, to withdraw from that tract. If the commission were not permitted to make such an order, any company could ignore the commission, flout the rules discussed above, and establish service on its own exorbitant terms by simply entering a tract and commencing service under private arrangements without obtaining commission approval.
I find no merit in that portion of the majority opinion which appears to argue that there has been no dedication of service to the ranch area outside of Tract Number 1 because, it is asserted, “Sawyer has not sought, much less received, actual water deliveries to himself for his own use” upon this portion of the ranch but, rather, has sought an “obligation running to himself, not as a water consumer, but as a private individual engaged in the business of subdividing uninhabited land.” Under the evidence presented here the commission could reasonably conclude that in 1949 Sawyer, to the knowledge of the company, was planning to subdivide the entire ranch property and that the 1949 contract was made in order to assure a water supply for the subdivided area. Unquestionably this was true with respect to Tract Number 1, and the agreement and the other circumstances discussed above are sufficient to justify a similar conclusion with respect to the remainder of the ranch. The use of a contract of this type, subject to approval of the commission, is clearly an appropriate method for a subdivider and a water company to employ *509for the purpose of establishing for the subdivider, in advance of actual construction, the necessary water supply for his tracts, and it would be wholly unreasonable to require that he receive some of the water for his personal use or that he obtain the signatures of prospective home owners, who are probably unknown to him. The implied finding of the commission that the parties to the agreement contemplated and arranged for service by the company to the public, as distinguished from some private contractual service which would not come within the jurisdiction of the commission, is likewise supported by the provision of the 1949 agreement requiring the company to apply for a certificate of convenience and necessity with respect to the remainder of the ranch property. As we have seen, the factual determinations of the commission, under its constitutional powers, are not subject to reexamination in a trial de novo and must be upheld by this court if they are supported by substantial evidence.
The finding of the commission is that there had been a dedication of service to the balance of the ranch, but the only provision in the contract relating to service above the 600-foot contour is that the company should not be under any obligation to serve that area unless it was able to agree with Sawyer on reasonable terms. There was merely an agreement to agree in the future, which is not sufficient to show a clear intent to dedicate service to the area above 600 feet. However, the portion of the finding as to the upper area is severable, and the deficiency of evidence does not require any modification of the commission’s order since it does not direct that any action be taken with reference to the land above the 600-foot contour.
It is not necessary in this dissent to discuss the power of the commission to compel a utility to extend its mains into a wholly new and nondedieated area on terms other than those agreed to by the utility.
In view of the holding of the majority opinion it is likewise unnecessary for this dissent to consider, with respect to the form of the commission’s order, whether the company can properly be ordered to “modify” or “re-execute” or “perform” its 1949 contract as amended. The commission, nevertheless, has the power, as the majority opinion recognizes, to order a public utility to render certain services on certain terms and conditions, and, in so doing, it is not bound by the company’s previously negotiated contracts. It would *510be a minor matter to correct, or direct the commission to correct, any technical errors of this type in its order.
In my opinion the order of the commission should be affirmed, except insofar as concerns the possible technical errors referred to above.
Traynor, J., concurred.
The petition of respondent Public Utilities Commission for a rehearing was denied March 4, 1959. Gibson, C. J., and Traynor, J., were of the opinion that the petition should be granted.