Hickey v. Roby

• Decision Date: 09 June 1969
• Citation: 77 Cal.Rptr. 486,273 Cal.App.2d 752
• Court: California Court of Appeals Court of Appeals
• Parties: William J. HICKEY, Plaintiff and Appellant, v. W. H. ROBY, Secretary of Vallecito Water Company; Camille Garnier, President of Vallecito Water Company; Vallecito Water Company, a corporation, Defendants, People of the State of California, Intervenor and Respondent. Civ. 25534.

Page 486

77 Cal.Rptr. 486

273 Cal.App.2d 752

William J. HICKEY, Plaintiff and Appellant, v. W. H. ROBY, Secretary of Vallecito Water Company; Camille Garnier, President of Vallecito Water Company; Vallecito Water Company, a corporation, Defendants, People of the State of California, Intervenor and Respondent.

Civ. 25534.

Court of Appeal, First District, Division 1, California.

June 9, 1969.

Hearing Denied Aug. 6, 1969.

Howard M. Downs, Stuart R. Pollak, Jerome B. Falk, Jr., Howard, Prim, Smith, Rice & Downs, San Francisco, for plaintiff and appellant.

Mary Moran Pajalich, Chief Counsel, J. Thomason Phelps, Principal Counsel, Cyril M. Saroyan, Senior Counsel, San Francisco, Public Utilities Commission, for respondents.

ELKINGTON, Associate Justice.

William J. Hickey, plaintiff below, appeals from an order of the superior court setting aside a permanent injunction which purported to enjoin defendant Vallecito Water Company (Vallecito), defendant Camille Garnier, Vallecito's president, and defendant W. H. Roby, Vallecito's secretary, from 'transferring, cancelling or reversing' on Vallecito's books, without Hickey's consent, 18,003 shares of Vallecito stock registered to Hickey. Defendants Vallecito, Garnier and Roby have made no appearance on this appeal. The only respondent is the California Public Utilities Commission appearing, as permitted by Public Utilities Code section 2101, in the name of the People of the State of California. (Unless otherwise stated, all statutory references hereinafter will be to Public Utilities Code.) The commission had intervened in the superior court action. It was on the commission's motion that the subject injunction was set aside.

This appeal is one of 16 proceedings of one kind or another commenced before different tribunals by the various parties, all relating to the subject matter of this appeal--Hickey's claim to 18,003 shares of Vallecito stock. Those proceedings include an action numbered 558,551 commenced in the Superior Court of the City and County of San Francisco, for the purpose of quieting title to the stock.

The parties disagree as to what constitutes the record on this appeal. Somewhat informally the superior court was asked by the commission to consider the following reported decisions: Re San Gabriel Water Company, 61 Cal.P.U.C. 509, Decision No. 66140; Re Vallecito Water Company, 62 Cal.P.U.C. 699, Decision No. 67261; Re Suburban Water Company, 63 Cal.P.U.C. 574, Decision No. 68217; and Re Transfers of stock by Vallecito Water Co. to Calfin Co. and Toll & Co., Case No. 8086, 66 Cal.P.U.C. 654, Decision No. 71795. Hickey offered no objection to the commission's request. At oral argument on this appeal Hickey contended that these decisions were not properly before the lower court. We ascertain, however, that throughout the proceedings below both parties and the court treated these matters as properly before the court for its consideration. Also in the briefs filed with this court each party refers extensively to the reported decisions and their contents. We conclude that the superior court was requested to, and did, take judicial notice of them. This was proper under Evidence Code sections 451, 453. This reviewing court is also required to judicially notice the decisions. (evid.code, § 459.)

Each of the reported decisions we have mentioned was final at the time of the superior court hearing. Such decisions are conclusive and binding on the parties thereto. (See § 1709; Los Angeles Ry Corp. v. City of Los Angeles, 16 Cal.2d 779, 783-784, 108 P.2d 430; Sale v. Railroad Commission, 15 Cal.2d 612, 616, 104 P.2d 38.)

The briefs of each of the parties to this appeal are replete with recitals of factual circumstances which are entirely unsupported by the record. As to such recitals as have been found upon our study of the record to be supported, there has been no substantial compliance with rule 15, Cal. Rules of Court, requiring that the 'statement of any matter in the record shall be supported by appropriate reference to the record.' Our exposition and consideration of the factual base of this appeal will, of course, be limited to such matters as were placed before the superior court, and on which its decision was based. We state such facts, as we must, in the light most favorable to the commission, which prevailed below, giving it the benefit of every reasonable inference and resolving conflicts in support of the trial court's order. (Crawford v. Southern Pacific Co., 3 Cal.2d 427, 429, 45 P.2d 183; 3 Witkin, Cal. Procedure, p. 2246.)

Vallecito was a public utility water corporation. As indicated, its president was defendant Garnier. Garnier was also president of Suburban Water Systems (Suburban), a public utility geographically adjacent to Vallecito, and of Calfin Company (Calfin), a wholly owned subsidiary and the alter ego of Suburban.

One of Calfin's purposes was to do for Suburban things which 'Suburban could not do for itself.' One of the things Suburban could not do for itself was purchase stock of another public utility without permission of the commission. (See § 852.) Garnier and Suburban's directors wished to obtain control of Vallecito. Suburban accordingly advanced $271,000 (or $279,000) to Calfin for the purpose of buying Vallecito stock. Suburban in turn borrowed the money from a bank; it was found necessary to 'pipeline' the funds through Suburban. As purchases of Vallecito stock were made by Calfin the stock was delivered to Toll and Company (Toll), the bank's agent (or nominee or 'street name') as security for the bank's loans to Suburban.

It is noted that as early as March 14, 1961, counsel for Calfin had advised Garnier that in his opinion the purchase by Calfin of any stock in a public utility without the consent of the commission would be a violation of Public Utilities Code section 852.

By January 1964 Calfin had acquired a total of 18,003 shares of Vallecito stock. The entire amount was held by Toll as security for the bank's loans to Suburban, subject otherwise to the order of Calfin.

Earlier, in May 1963, San Gabriel Valley Water Company (San Gabriel), a public utility, also adjacent geographically to Vallecito's area, applied for authority to purchase up to all the issued and outstanding shares of Vallecito. This application, on October 15, 1963, was granted by the commission. (61 Cal.P.U.C. 509.)

In August 1963 Suburban applied to the commission for authorization to purchase the assets (not stock) of Vallecito. The application, on May 26, 1964, was denied. The commission found that Suburban had failed to show its financial ability to carry out the terms of its proposed agreement, and had failed to show that the granting of the application was in the best interest of Suburban's consumers. (62 Cal.P.U.C. 699, 712.) In the same proceedings the commission considered Calfin's purchases of Vallecito stock. It found (May 26, 1964) that 'The purchase of Vallecito stock by Calfin in the manner described herein is tantamount to the purchase of said stock by Suburban and is in violation of Section 852 of the Public Utilites Code and is therefore void.' (Emphasis added.)

Thereafter Suburban sought authority from the commission to purchase the Vallecito stock held by Toll for Calfin. However, before any decision by the commission, and on November 4, 1964, Toll transferred the subject 18,003 shares to plaintiff Hickey.

We now relate the circumstances of the acquisition by Hickey of the Vallecito stock.

Hickey personally advanced no money for the Vallecito shares.

Garnier, apparently anticipating the commission's order made a few days later, 'put out the word to get rid of the stock.' His assistant, George McMillan, who was also an employee of Calfin, thereupon went to the bank (Toll's principal) and arranged for a loan 'to finance the acquisition by an individual of the 18,003 shares of Vallecito stock held by Toll & Co. for Calfin.' (Emphasis added.) The loan was made to Western Pacific Sanitation Company (Western), of which Garnier was president; it was personally guaranteed by Garnier. Counsel for Western was Frederick Schumacher of the law firm of Schumacher and Hale. Schumacher was also Garnier's personal attorney.

On November 3, 1964, Hickey gave to Schumacher and Hale his promissory note for $289,848.30, bearing 6 1/2 percent interest, together with an agreement pledging, as security for the note's payment, 18,003 shares of Vallecito stock. The amount of the note represented the total purchase price of the Vallecito shares at $16.10 per share, a price previously fixed by Garnier and Suburban as the fair market value of the stock. About the same time McMillan, Garnier's assistant, picked up a cashier's check for $289,848.30 at the office of Schumacher and Hale, which he deposited in Calfin's account. Calfin then paid off Suburban's bank loan which had been incurred in order to 'pipeline' funds to Calfin for its purchase of the 18,003 shares.

The next day, November 4, Calfin authorized Toll to release the 18,003 Vallecito shares to McMillan who thereupon directed reissuance of the shares in the name of 'William J. Hickey, mailing address c/o Schumacher and Hale, Century City, 1801 Avenue of the Stars, Suite 950, Los Angeles.'

Hickey paid no interest on his note to Schumacher and Hale, the payees having granted extensions. Schumacher declined at a later commission hearing to testify concerning the movement of the $289,848.30 and the 18,003 shares of Vallecito stock. At the same hearing, Hickey, asked if it was 'from your own personal funds that you purchased this block of shares?' refused to answer, stating, 'I would like to be excused until I can get counsel and be represented.' Thereafter Hickey was represented by Howard M. Downs. Mr. Downs told the commission that 'his office had advised Hickey that the investigation was illegal on various grounds and that the subpoena duces tecum served on Hickey was illegal...