Acme Delivery Service, Inc. v. Cargo Freight Systems, Inc.

• Decision Date: 19 August 1985
• Docket Number: No. 84SA12,84SA12
• Parties: ACME DELIVERY SERVICE, INC., Plaintiff-Appellee, v. CARGO FREIGHT SYSTEMS, INC., a Colorado corporation, Defendant-Appellant, and The Colorado Public Utilities Commission, Defendant-Appellant.
• Court: Colorado Supreme Court

Page 839

704 P.2d 839

ACME DELIVERY SERVICE, INC., Plaintiff-Appellee, v. CARGO FREIGHT SYSTEMS, INC., a Colorado corporation Defendant-Appellant and The Colorado Public Utilities Commission, Defendant-Appellant.

No. 84SA12.

Supreme Court of Colorado En Banc.

Aug. 19, 1985.

William C. Danks, Denver, for plaintiff-appellee Acme Delivery service, inc.

Charles J. Kimball, Denver, for defendant-appellant Cargo Freight Systems, Inc.

Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Mark Bender, Asst. Atty. Gen., Denver, for defendant-appellant Colorado Public Utilities Com'n.

QUINN, Chief Justice.

Appellant Cargo Freight Systems, Inc. (Cargo Freight) appeals from a district court judgment which reversed an order of the Public Utilities Commission (Commission) granting Cargo Freight's application for a Class B contract motor carrier permit. ¹ Cargo Freight claims that the district court exceeded the proper scope of judicial review in reversing the Commission's permit decision and that it also erred in determining that the issuance of the permit violated rule 12(b) of the Commission's rules pertaining to private motor vehicle carriers. We agree with Cargo Freight and reverse the judgment.

I.

A summary of the factual and procedural history of this case will prove helpful to an understanding of our resolution of the issues. For nearly twenty-one years Acme Delivery Service, Inc. (Acme) served The Denver Post newspaper (the Post) as a contract motor carrier and delivered newspapers to distribution centers in the area of Metropolitan Denver. The Post terminated its arrangement with Acme in March 1981 because of poor service and high costs. From approximately August 1981 until September 1982 Den-Col Cartage and Distribution, Inc. (Den-Col) delivered newspapers for the Post. Den-Col performed this service for the Post pursuant to a Commission order which granted it temporary authority to do so and a subsequent order which extended its authority under an already existing contract carrier permit to include this delivery service. The order of extension stated that it would become null and void in the event Den-Col, which had filed a petition for reorganization in the bankruptcy court, should convert the reorganization petition into a liquidation proceeding.

Den-Col did convert its reorganization petition into a liquidation proceeding and on September 16, 1982, gave notice to the Commission that it no longer had authority under its permit to provide carrier service to the Post. In this same notice Den-Col also stated that Cargo Freight had been formed to provide continued service to the newspaper. Dan Coulter, who had previously served as a dispatcher for Den-Col but was not an officer or shareholder of that company, became the president of Cargo Freight after its formation. ² The drivers who had previously serviced the Post for Den-Col continued to perform those same functions for Cargo Freight.

On September 16, 1982, Cargo Freight applied to the PUC for emergency authority, temporary authority, and permanent authority to operate as a Class B contract motor carrier ³ for the transportation of newspapers for the Post between various points in the Denver Metropolitan area. The Commission initially granted Cargo Freight emergency authority and temporary authority. On October 4, 1982, Acme filed a protest to Cargo Freight's application, and on April 14, 1983, a hearing was conducted before a hearing examiner. The evidence presented at the hearing detailed the difficulties encountered by the Post under its contract with Acme, the circumstances giving rise to the formation of Cargo Freight, the method of operation utilized by Cargo Freight in servicing the Post, and Cargo Freight's record of performance since it began operating under the grant of temporary authority. The hearing examiner issued a recommended decision which included the following findings:

... The Denver Post account was handled by [Acme] prior to [Den-Col] providing service. Acme drivers damaged the newspapers and they were soiled with oil or liquid and/or torn. Acme drivers also caused damage to property where the distribution centers were located and were unable to provide the timely service [which] The Denver Post required.

After [Den-Col] began providing service to The Denver Post, The Denver Post also found that the charges incurred were less than those previously charged by [Acme]. This reduction in costs was attributable to the amount of time spent by [Den-Col] ... in providing the same services. The Denver Post has found that the quality of service which it experienced when Den-Col serviced its account has not diminished since [Cargo Freight] began servicing this account. [Cargo Freight] has provided a specialized service for the benefit of The Denver Post.

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[Cargo Freight] owns no equipment but leases its equipment from five individuals.... The owners of the [leased] equipment operate it or hire additional drivers to operate the equipment for [Cargo Freight]. This equipment has been adequate to meet the needs of The Denver Post. [Cargo Freight] showed a profit in its first quarter of 1983 and is able to pay bills when due and satisfy its creditors.... [Cargo Freight] is financially fit, has adequate equipment and personnel, and is otherwise fit to conduct the operations proposed in its request for [permit] authority.

[Cargo Freight] tailors its services to meet the needs of The Denver Post. Drivers are instructed on the proper procedure to handle the newspapers on behalf of The Denver Post. Most of the drivers deliver their papers to the same destinations. They are familiar with the requirement for timeliness with respect to delivery of the newspapers to the distribution centers. Drivers are also instructed with respect to key service so that they are able to enter distribution centers when locked. [Cargo Freight] also adjusts its operations to deliver the various supplements which are distributed by The Denver Post to the distribution centers throughout the week.... The drivers are provided with manifests that advise them of the quantity and the destination of the papers to be delivered. In the event The Denver Post needs to modify its instructions, it is able to contact Dan D. Coulter who in turn relays the information to the drivers, who generally carry paging devices.

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[Cargo Freight] does and will continue to provide distinctly superior or unique service for the benefit of The Denver Post, and the granting of this permit will not impair the efficient operation of authorized common carriers operating substantially over the same highways.

Based on these findings, the hearing examiner concluded that it was in the public interest to grant Cargo Freight's application for a Class B contract motor carrier permit and so recommended to the Commission.

Acme filed exceptions to the hearing examiner's recommended decision. Although not specifically referring to Commission rule 12(b), 4 CCR 723-12 (1977), which provided that drivers of vehicles leased to a private carrier "shall bear the relationship of an employee to the carrier," Acme claimed that Cargo Freight was unfit to hold a permit because it had no employees of its own. The Commission on September 20, 1983, denied Acme's exceptions and adopted the recommended decision of the hearing officer. It ruled in pertinent part that "Cargo [Freight] properly leases equipment and maintains appropriate control over the operator of such equipment so that Cargo [Freight] is fit to provide the service as herein requested." Acme then filed an application for reconsideration and expressly claimed that Cargo Freight's failure to use its own employees as drivers of the leased vehicles was a violation of rule 12(b), thus rendering it unfit and unable to serve as a contract motor carrier. The Commission denied Acme's application for reconsideration, ruling that it had waived its argument relative to rule 12(b) by failing to include this specific claim in its exceptions to the hearing officer's proposed decision.

Pursuant to section 40-6-115, 17 C.R.S. (1984), Acme filed a petition for judicial review in the Denver District Court. The court reversed the Commission's decision as arbitrary and capricious for two reasons: (1) the circumstances surrounding the formation of Cargo Freight, in the court's view, rendered that company unfit to hold the permit; and (2) rule 12(b) required the drivers of the vehicles used by the permittee-carrier to be employed by the carrier and, again according to the court, the Commission "in granting the permit violated its own [r]ules."

In seeking reversal of the judgment, Cargo Freight basically argues that the district court exceeded the proper scope of judicial review in reversing the Commission's determination of Cargo Freight's fitness and ability to provide the permitted service and also erred in concluding that the Commission violated rule 12(b) in issuing the permit. We will consider each argument separately.

II.

Turning first to Cargo Freight's argument on the proper scope of judicial review, we point out that a district court's review of the Commission's decision to issue a permit is quite limited. The findings and conclusions of the Commission are presumed to be reasonable and valid and will not be disturbed if supported by substantial evidence in the record. Morey v. Public Utilities Commission, 629 P.2d 1061 (Colo.1981); Colorado Municipal League v. Public Utilities Commission, 197 Colo. 106, 591 P.2d 577 (1979). It is peculiarly within the province of the PUC to decide what weight should be accorded the evidence and to choose among any conflicting inferences that may reasonably be drawn from the evidence. Morey, 629 P.2d 1061. Evidence in the record must be reviewed in the light most favorable to the Commission's findings and decision. Morey, 629 P.2d 1061; see Peoples Natural Gas...