City and County of San Francisco v. Western Air Lines, Inc.

Decision Date28 May 1962
Citation22 Cal.Rptr. 216,204 Cal.App.2d 105
CourtCalifornia Court of Appeals Court of Appeals
PartiesCITY AND COUNTY OF SAN FRANCISCO, a Municipal Corporation, Plaintiff and Respondent, v. WESTERN AIR LINES, INC., a Delaware Corporation, Defendant and Appellant. Civ. 19344.

Darling, Shattuck & Edmonds, Los Angeles, Hugh W. Darling, Donald K. Hall, Los Angeles, Cal., of counsel for appellant.

Dion R. Holm, City Atty., Thomas M. O'Connor, Public Utilities Counsel, Robert M. Desky, and McMorris M. Dow, Deputy City Attys. of City and County of San Francisco, San Francisco (Harold C. Faulkner, San Francisco, of counsel), for respondent.

SULLIVAN, Justice.

We are called upon to determine whether the plaintiff municipal corporation is entitled to retain, free of any claim of refund, certain charges made against, and paid under protest by, the defendant airline, for the common use facilities provided by the plaintiff at its San Francisco International Airport. The court below rendered judgment declaring that all of said charges, in the agreed amount of $214,385.74, were properly due and owing to the plaintiff and denying recovery of any portion thereof to the defendant upon its counterclaim. The defendant has appealed.

We must examine the controversy before us in the light of its historical setting. Referring to the litigants as City and Western respectively, we first set forth the salient background facts.

The San Francisco International Airport (formerly called the San Francisco Municipal Airport) is located wholly within the adjoining County of San Mateo. It was first opened in 1927, and upon the adoption of the City's new charter in 1932 was placed under the jurisdiction and management of the San Francisco Public Utilities Commission. It is open to all aircraft providing the aircraft qualifies under rules and regulations of the Public Utilities Commission prescribing safety measures.

Air traffic in the early years was understandably limited. Boeing Air Transport, a predecessor of United Air Lines, was the first airline to use the airport, its use of the facilities being confined to a short period in the opening year. Operations of other airlines were, at least until 1932, spasmodic. It was found that between 1932 and 1940 many flights into the San Francisco area could not be completed in bad weather because of the lack of federal aids to air navigation. However two airlines--United Air Lines, hereafter referred to as United, and Transcontinental & Western Air, Inc., later named Trans World Airlines, Inc., hereafter referred to as TWA--the first in 1932 and the second in 1933, inaugurated scheduled air service in and out of the airport. From 1933 until the end of 1943 they were the only scheduled air carriers operating regularly from it. Prior to World War II private and corporate aircraft owners, so-called itinerary craft from other airports, some charter operations and the United States Coast Guard, which maintained an air station there, used the City's airport but there were no nonscheduled air carriers, no cargo planes and no other users of the facilities with airplanes of the same weight category as those of United and TWA. Prior to 1940, neither United nor TWA leased any land at the airport.

On October 1, 1940, the City entered into a lease with United covering the latter's operations at the airport for a term of 20 years. The lease had been put out to public bid pursuant to the provisions set forth in section 93 of City's charter. United was the only bidder; its bid was accepted and approved. This lease, after a preliminary recital that United was willing to move its western district headquarters from Oakland to the airport, if it could lease certain premises and facilities there, covered 15 acres of land, common use facilities, space in the airport administrative building and provided for the construction by the City on the leased land of extensive capital improvements, the cost of which was to be shared by the City and United on a specified basis.

On October 1, 1942, the City entered into a similar, if less extensive, lease with TWA for a term of 20 years. This lease also had been put out to public bid in accordance with City's charter provisions. TWA was the only bidder; its bid was accepted and approved. TWA's lease covered a specified hangar and adjoining shop space, common use facilities, and space in the airport administration building. Thus each of the two leases, in addition to providing for exclusive use of specific airport premises, also provided for the respective lessee's 'use, in common with others authorized so to do, and on the same terms and conditions as apply to others' of so-called common facilities. These facilities are described in identical language in each lease. 1 Each lease provides, in practically the same language, for the payment at identical rates for the privilege of using the foregoing common use facilities.

On June 23, 1941, approximately 9 months after the execution of the United lease and 15 months before the execution of the TWA lease, the City's Public Utilities Commission adopted by resolution a schedule of rates 'to be charged * * * to commercial air line transportation companies for the use of the airport * * *.' These rates were the same as the rates provided for in the preceding United lease and therefore in the subsequent TWA lease. Indeed the language of the commission's resolution is almost identical with that of the lease. Thus, in net effect, the rates of both leases and of the resolution were the same.

The defendant Western Air Lines, Inc. commenced scheduled operations at the airport on May 1, 1944, pursuant to a certificate of public convenience and necessity granted by the federal Civil Aeronautics Board and a revocable permit issued by the City authorizing use of the common use facilities. Under this arrangement, Western's operations were subject to the above-mentioned 1941 schedule of rates. Thus at such time the rates which aircraft operators paid for the common use facilities were the same for all.

In 1946 the City's Public Utilities Commission adopted by resolution a new schedule of rates to be charged for the common use facilities at the airport which were approximately twice those of the 1941 rate schedule. In the same year the City's charter was amended to permit the Public Utilities Commission to lease airport lands for a period not to exceed forty years instead of a period not to exceed twenty years. (Charter of the City and County of San Francisco (adopted March 26, 1931, St.1931, p. 2973, in effect January 8, 1932) § 93, as amended 1946, St.1946, 1st Ex.Sess., p. 221.) The City, through its Public Utilities Commission, thereupon commenced negotiations with United to the end of entering into a new lease for a forty-year rather than a twenty-year term. These negotiations extended over a period of six to eight months. There is testimony in the record that the City proposed to United that a higher rate be charged for the additional property United was interested in leasing, such rate to be in conformity with the 1946 schedule of rates, and that all common use facilities charges be eliminated from the new lease. Apparently United, entrenched behind its existing 1940 lease which froze these rates for an additional 15 years, resisted any attempt to eliminate a rate covenant in the new lease being negotiated, although it would, and eventually did, accept the 1946 schedule of rates if they were made a part of the lease. The new lease was thereafter entered into between the City and United on December 1, 1947, for a term of forty years. Like the 1940 lease it was entered into pursuant to public bidding procedure. It covered not only the 15 acres exclusively leased under the 1940 lease but an additional 73 acres, approximately, to be held on the same basis, and provided for the use by United of the common use facilities, 2 upon the payment of a schedule of rates the same as the above 1946 schedule with a further provision for the revision of rates at five-year intervals, either upward or downward, but not in excess of 10 percent of the rates prevailing at the time of the revision. The new lease further provided that the title to the buildings constructed under the 1940 lease would remain in the City and the title to any new buildings and improvements which United might construct would vest in the City upon the termination of the lease. TWA, however, continued to pay the 1941 rates under its existing 1942 lease.

In the meantime Western had attempted to obtain a long-term lease covering the common use facilities at the airport. When these attempts were renewed during 1946, Western's representative was told that the City would not negotiate such a lease because of the pendency of negotiations on the 1947 United lease. After the execution of the United lease, Western, according to the testimony of its vice president, Dominic P. Renda, continued with its attempts but was advised in 1949 by the City's representatives, including its manager of utilities, that it did not appear likely such a lease would be granted. On cross-examination Mr. Renda stated that at the time the negotiations with United were pending, Western was not interested in leasing any undeveloped property at the airport and was not interested at the time of the trial of the instant case. Western's maintenance base was located at the Los Angeles airport with which Western itself had a thirty-year contract for common use facilities at rates less than those charged at Los Angeles against other carriers which came later and had no leases.

On November 20, 1950, the City's Public Utilities Commission by resolution, adopted, subject to the approval of the board of supervisors of the City, a new schedule of rates and charges for the use of the facilities and services of the airport. Such...

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