Yucaipa Water Co. No. 1 v. Public Utilities Commission

• Decision Date: 25 November 1960
• Citation: 9 Cal.Rptr. 239,54 Cal.2d 823,357 P.2d 295
• Court: California Supreme Court
• Parties: , 357 P.2d 295, 37 P.U.R.3d 154 YUCAIPA WATER COMPANY NO. 1 (a Corporation), Petitioner, v. PUBLIC UTILITIES COMMISSION of the State of California, Respondent, Yucaipa Domestic Water Company (a Corporation), Real Party in Interest. S. F. 20365.

Page 239

9 Cal.Rptr. 239

54 Cal.2d 823, 357 P.2d 295, 37 P.U.R.3d 154

YUCAIPA WATER COMPANY NO. 1 (a Corporation), Petitioner, v. PUBLIC UTILITIES COMMISSION of the State of California, Respondent Yucaipa Domestic Water Company (a Corporation), Real Party in Interest.

S. F. 20365.

Supreme Court of California, In Bank.

Nov. 25, 1960.

Rehearing Denied Dec. 21, 1960.

Surr & Hellyer and James R. Edwards, San Bernardino, for petitioner.

William M. Bennett, Chief Counsel, Roderick B. Cassidy, Asst. Chief Counsel, and Mary Moran Pajalich, Senior Counsel, San Francisco, for respondent.

Hyer & Graeber, Taylor & Smith and Edward F. Taylor, San Bernardino, for real party in interest.

Clayson, Stark & Rothrock, George G. Grover, Corona, Best, Best & Krieger, James H. Krieger and Arthur L. Littleworth, Riverside, and Dudley K. Wright, Los Angeles, as amici curiae on behalf of petitioner.

TRAYNOR, Justice.

In this proceeding Yucaipa Water Company No. 1 attacks an order of the Public Utilities Commission determining that it is a public utility water corporation subject to the jurisdiction of the commission and directing it to file a financial report and cease and desist from increasing its rates to the Yucaipa Domestic Water Company pending further commission action.

No. 1 is organized as a nonpublic utility mutual water company and has not heretofore been regulated by the commission. Domestic is a regulated public utility water corporation. It secures all of its water from No. 1 and owns approximately 5 percent of No. 1's stock. In 1959 a dispute arose between the two companies over a substantial increase in the rate No. 1 proposed to charge Domestic and extensions of service by Domestic into areas served by No. 1. Each company filed a complaint against the other with the commission, and thereafter the commission instituted an investigation on its own motion into the operations of No. 1. The parties stipulated that the commission should first determine whether or not No. 1 is a public utility subject to its jurisdiction, and its determination of that issue is the only question before us for review. The commission found that No. 1 is a public utility that has dedicated its property to public use (see, Pub.Util.Code §§ 216, 240, 241, 2701, 2702) and that it is not exempt from regulation under section 2705 of the Public Utilities Code. No. 1 attacks both of these findings.

No. 1 operates in an area of about 3,500 acres including Yucaipa township. It was organized in 1910 and initially supplied water primarily for irrigation purposes. At the present time, however, about 74 percent of its sales are to domestic users. It also provides service to the Yucaipa Domestic Water Company, poultry farms, trailer parks, scheduled water users, and special users at specified rates. Special users include hospitals, schools, churches, parks, and other large users. With the exception of one domestic user, it supplies water only to its shareholders and lessees of shares from its shareholders. Its shares are freely transferable and are not appurtenant to the land, and users may obtain water in addition to the per-share entitlement by paying special rates. In 1959 No. 1 had about 2,000 domestic users and supplied water to over 100 lessees of shares. It maintained a list of shareholders who were willing to lease shares and referred nonshareholder applicants for service to them. It billed lessees of shares directly, but held the shareholder liable for any unpaid bill. In each of the years 1956, 1957, and 1958 it added 80 to 100 new domestic users to its system, and to increase the number of permissible service connections, it split its stock to permit a connection for each half share instead of each share.

No. 1 contends that since it is organized as a nonpublic utility mutual water corporation that supplies water only to its shareholders, lessees of shares from its shareholders, and one other person, it has not held itself out as willing to supply water to the public or any portion thereof and that it has not therefore dedicated its property to public use. See, Richfield Oil Corp. v. Public Utilities Commission, 54 Cal.2d 419, 6 Cal.Rptr. 548, and cases cited. No. 1's organization as a mutual and its formal limitations on its services do not preclude a finding of dedication, however, if it has held itself out as willing to supply water to the public or any portion thereof.

'Property may be shown to have been devoted to a public use by implication from the acts of its owners and their dealings and relations to such property, without regard to statutory provisions. (Citations.) The test to be applied * * * is whether or not those offering the service have expressly or impliedly held themselves out as engaging in the business of supplying the water to the public as a class, 'not necessarily to all of the public, but to any limited portion of it, such portion, for example, as could be served from his system, as contradistinguished from holding himself out as serving or ready to serve only particular individuals, either as a matter of accommodation or for other reasons peculiar and particular to them. (Citing cases.) The rule, of course, is that if there was any evidence before the Commission that would justify its finding, its order cannot be annulled.' Van Hoosear v. Railroad Commission, 184 Cal. 553, 554, 194 P. 1003, 1004.' Samual Edwards Associates v. Railroad Commission, 196 Cal. 62, 70, 235 P. 647, 650; see also California Water & Telephone Co. v. Public Utilities Commission, 51 Cal.2d 478, 493-494, 334 P.2d 887; Western Canal Co. v. Railroad Commission, 216 Cal. 639, 646-647, 15 P.2d 853; Rogina v. Mendocino State Hospital, 53 Cal.P.U.C. 108, 111; Plumas-Sierra Rural Electric Cooperative, Incorporated, 50 Cal.P.U.C. 301, 309; California Electric Power Co. v. Mesa Electric Cooperative, Inc., 47 Cal.P.U.C. 118, 126.

The evidence supports the commission's finding of dedication in this case. It it true that No. 1 did not expressly offer service to everyone in its service area on condition that prospective consumers purchase shares of stock from it. Had it done so, its holding itself out to serve the public would be patent, and the attaching of a condition that any member of the public could meet would not affect its offer. Dedication may also be shown by implication, however, and in the present case, it may clearly be inferred. Thus, No. 1 steadily increased the number of its service connections; it split its shares to double the permissible number of such connections; it supplied water to a substantial number of lessees of shares; and it expedited the leasing of shares to those who wished water service. There is no evidence that anyone in its service area who wished water service could not obtain it by purchasing or leasing half a share or more. Under these circumstances, the commission could reasonably infer that No. 1 supplied its shareholders and lessees of its shares not merely for the reason 'peculiar and particular to them' that they were such, but primarily for the reason that they were members of the public in No. 1's service area who accepted its offer of service by becoming shareholders or lessees of shares.

No. 1 contends that even if it has dedicated its property to public use, it is exempted from public utility regulation by section 2705 of the Public Utilities Code. That section provides:

'Any corporation or association which is organized for the purpose solely of delivering water to its stockholders or members at cost, and which delivers water to no one except its stockholders or members, or to the State or any agency or department thereof, or to any school district, or to any other mutual water company, at cost, is not a public utility, and is not subject to the jurisdiction, control or regulation of the commission.'

Its converse, section 2702, provides:

'Any corporation or association organized for the purpose of delivering water solely to its stockholders or members at cost which delivers water to others than its stockholders or members, or the State or any department or agency thereof or any school district, or any other mutual water company, for compensation, becomes a public utility and is subject to Part 1 of Division 1 and to the jurisdiction, control, and regulation of the commission.' See also, Pub.Util.Code, §§ 216, 240, 241, 2701.

The commission contends that No. 1 is a public utility as defined in subdivision (c) of SECTION 216 OF THE PUBLIC UTILITIES CODE¹ on the ground that it delivers water to Domestic, which in turn delivers it to the public. It points out that subdivision (c) of section 216 refers to the delivery of a commodity 'either directly or indirectly' to the public and asserts that the word 'delivers' in section 2705 should be interpreted to mean 'delivers directly or indirectly' to avoid a conflict with subdivision (c). The very purpose of section 2705, however, is to exclude the water corporations there defined from the general provisions of Division 1 of Part 1 of the Public Utilities Code defining public utilities (Pub.Util.Code §§ 216, 240, 241) and the more specific provisions of section 2701 redefining public utility water corporations. Moreover, there is nothing in the broad definition of subdivision (c) of section 216 to indicate that it, any more than any of the other definitions of public utilities, is paramount to the express exception created by section 2705. Accordingly, we must look beyond subdivision (c) to determine whether the word 'delivers' in section 2705 means 'delivers directly or indirectly.'

The exemption created by section 2705 indicates a legislative determination that when a mutual water corporation is substantially customer-controlled and delivers water at cost, the usual judicial contract remedies available to those who deal with it are an adequate substitute for public utility regulation. That determination applies when the customers include...