California Water & Tel. Co. v. Public Utilities Commission

• Decision Date: 02 February 1959
• Citation: 334 P.2d 887,51 Cal.2d 478
• Court: California Supreme Court
• Parties: , 27 P.U.R.3d 423 CALIFORNIA WATER & TELEPHONE COMPANY (a corporation), Petitioner, v. PUBLIC UTITLTES COMMISSION of State of California, et al., Respondents. S. F. 19690

Page 887

334 P.2d 887

51 Cal.2d 478, 27 P.U.R.3d 423

CALIFORNIA WATER & TELEPHONE COMPANY (a corporation), Petitioner, v. PUBLIC UTITLTES COMMISSION of State of California, et al., Respondents.

S. F. 19690.

Supreme Court of California

Feb. 2, 1959.

Rehearing Denied March 4, 1959.

Claude N. Rosenberg, Tadini Bacigalupi, Jr., and Bacigalupi, Elkus & Salinger, San Francisco, for petitioner.

Everett C. McKeage, Chief Counsel, Roderick B. Cassidy, Asst. Chief Counsel, Cyril M. Saroyan, Senior Counsel, Rita L. Heiser, Asst. Counsel, San Francisco, Twohig, Weingarten & Schmidt and Saul M. Weingarten, Seaside, for respondents.

SCHAUER, Justice.

This is a proceeding to review an order of the Public Utilities Commission which purports to modify the terms of a certain contract between petitioner and respondent Sawyer, and directs petitioner to re-execute the contract 'as modified' by the commission and thereupon to specifically perform such 'contract.' We have concluded that the commission has acted in excess of its jurisdiction and that the order under review must be annulled.

Petitioner is a public utility engaged in the business of supplying water service to consumers in certain portions of Monterey County. The contract involved provides for the extension of petitioner's water mains and services into unimproved land which respondent Sawyer proposes to subdivide and which petitioner considers outside its dedicated service area. The commission premises its authority to make the subject order on its finding that petitioner has dedicated its service to the territory involved. Petitioner contends that the evidence is insufficient to sustain the finding of public dedication as to the subject area and that petitioner is therefore being deprived of its property without compensation in violation of its constitutional rights. For reasons hereinafter indicated we have concluded that petitioner's argument should be sustained. Because of the nature of the issue it is necessary to summarize all of the evidence which conceivably could tend to support the commission's holding.

In 1948 petitioner's admitted territory of dedicated service extended as far south as the southern boundary of an area known as Carmel Highlands. In that year respondent Sawyer purchased some 1,146 acres of land lying immediately south of Carmel Highlands. This land is known as the Victorine Ranch and, at the time of the Sawyer purchase, apparently contained but two dwelling houses and was in fact, as the name implies, a ranch or farm and not a residential area.

Following oral discussions with certain officers and employes of petitioner and after receiving letters from the manager of its Monterey Peninsula Division to the effect that 'our installations at Carmel Highlands can be extended to the Victorine Ranch with storage tanks which would supply any development that might be contemplated in this area,' and that 'It would not be necessary to supplement our present supply from any other sources,' respondent Sawyer proceeded to subdivide some 23 acres, hereinafter referred to as Tract No. 1, install a water distribution system therein, and construct an 8 inch water main from that distribution system to a 3 inch water main of petitioner's at its termination point some 400 feet north of the southern boundary of Carmel Highlands. This work was completed in October, 1948, and petitioner's local representatives prepared and presented to Sawyer for his consideration and signature a certain proposed contract for the extension of petitioner's service. However, neither Sawyer nor petitioner signed the document.

This unsigned proposal apparently contemplated the extension of petitioner's service to Tract No. 1 as an area contiguous to that being served by petition and also contained proposed agreements for possible later extensions of service to future subdivisions of the balance of the Victorine Ranch area. As to Tract No. 1 the proposed contract provided, in substance, that upon respondent Sawyer's transferring to petitioner ownership of the distribution system and 8 inch pipeline which he had constructed, petitioner would extend its service to Tract No. 1 as a public utility and would refund 'the actual cost of the installation of said facilities' in conformance with petitioner's then effective subdivision main extension rule. Such extension rule (designated Rule and Regulation 19B) provided, in effect, that applicants for main extensions to serve subdivisions would pay the construction costs of the extension and would receive from petitioner, for a period not to exceed ten years, an annual refund of 35 per cent of the gross revenues collected from consumers within the subdivision.

The unsigned document also provided that respondent Sawyer would, as a condition precedent to petitioner's being obligated to supply water to areas other than Tract No. 1, construct at his own expense some 5,000 feet of 8 inch pipeline running from the northern terminus of the 8 inch pipeline installed by Sawyer to the southern terminus of petitioner's certain 8 inch pipeline in Carmel Highlands. There was no refund provision concerning the 5,000 foot pipeline.

The parties, having failed to agree, resumed negotiations and on July 8, 1949, reached agreement. The signed a contract which provided, among other things, that respondent Sawyer in effect transferred to petitioner, without obligation to refund, the pipeline and Tract No. 1 distribution system which he had constructed. Petitioner then connected its 3 inch main with the 8 inch main constructed by Sawyer and commenced service to Tract No. 1. Petitioner concedes, and has conceded throughout, that Tract No. 1, but only No. 1, thereby became and is now within its dedicated public service area. The order of the commission presently under review does not concern the terms of petitioner's service to Tract No. 1; it relates solely to the nature of petitioner's obligation, if any, to extend its mains and services to new subdivisions proposed to be created in other areas of the Victorine Ranch.

Under the July, 1949, contract petitioner conditionally agreed, in effect, to extend its mains and services from time to time to other contemplated subdivisions of the Victorine Ranch land lying below the 600 foot contour. Such main extensions were to be made in accordance with petitioner's Rule and Regulation 19B, provided that Sawyer, as a condition precedent, deposited with petitioner $20,000 toward the cost of the installation by petitioner rather than by Sawyer of the aforementioned 5,000 feet of 8 inch pipeline running from the northern terminus of the 8 inch pipeline in Carmel Highlands. Sawyer agreed to pay petitioner's actual construction costs and construction was to begin upon deposit of the $20,000. Petitioner agreed to refund any portion of the $20.000 that should prove in excess of the actual construction costs, but there was no provision for refund of the actual construction costs themselves. Respondent Sawyer agreed to commence accumulating the $20,000 by opening an escrow savings account and depositing the sum of $1,500 therein concurrently with each and every sale of a lot in Tract No. 1.

Paragraph 9 of the agreement provides that 'This agreement shall at all times be subject to such changes or modification of the Public Utilities Commission * * * as said Commission may from time to time direct in the exercise of (its) jurisdiction.' (Italics added.) Such provision is required by and was inserted pursuant to the commission's General Order No. 96. General Order No. 96 also states that no public utility such as petitioner 'shall hereafter make effective any contract or arrangement for the furnishing of any public utility service * * * under conditions other than the * * * conditions contained in its tariff schedules on file and in effect at the time, unless it first obtain the authorization of the Commission to carry out the terms of such contract or arrangement * * *. Each such contract shall contain a provision indicating the understanding of the parties that it shal not become effective until such authorization of the Commission is obtained.' (Italics added.) The latter provision was not inserted in the subject contract and petitioner did not submit the contract for the commission's approval but, as hereinafter shown, it was not until 1954 that Sawyer requested petitioner to 'make effective' the contract for service beyond the original contiguous areas of Tract No. 1.

Petitioner also agreed to apply to the commission, within 60 days after execution of the contract (July 8, 1949), for a certificate of public convenience and necessity to render water service as a public utility in that portion of the Victorine Ranch lying below the 600 foot contour. Petitioner has not made such application and holds no certificate or franchise to serve the Victorine Ranch area.

In 1954 respondent Sawyer sought water service for certain areas of the Victorine Ranch other than Tract No. 1. Petitioner advised Sawyer that it would not extend its mains or services unless and until Sawyer complied with the condition precedent and, as specified in the contract, deposited with petitioner $20,000 for the construction of the 5,000 foot pipeline. Sawyer did not deposit the $20,000 but, on November 29, 1954, filed a complaint with the commission. The complaint alleged the substance of the foregoing facts, among other things, and prayed that petitioner be required to reduce its demands and extend service to the entire Victorine Ranch territory in accordance with its Rule and Regulation 19B. Petitioner filed an answer which, among other things, contested the commission's jurisdiction to grant the prayed-for relief. Hearings were held during April and July, 1955.

After the case was submitted but prior to a decision, the parties, on May 21, 1956, signed a proposed compromise agreement. LeForust, Inc., to whom respondent Sawyer had previously...