Hempy v. Public Utilities Commission

DOOLING, J. This is a proceeding to review an order of the Public Utilities Commission which authorizes the transfer of certain highway operating rights upon condition that specified creditors of the transferring utilities be given preferéntial treatment in the payment of their claims.

Highway Transport, Inc. was a highway common carrier (Pub. Util. Code, § 213) and Highway Transport Express was an affiliated express corporation (Pub. Util. Code, § 219). On March 7, 1960, they requested the commission to suspend their operating authority. On the same day they made common-law assignments for the benefit of creditors to petitioner. On March 8, 1960, the commission on its own motion ordered an investigation and suspended the operative rights of the two Highway companies pending further order. On May 19, 1960, petitioner, the two Highway companies (hereinafter referred to collectively as “Highway”) and Interstate Motor Lines, Inc. jointly applied to the commission for authority to transfer Highway’s operating rights to Interstate as provided in an agreement between petitioner and Interstate made on March 31,1960. Conditioned upon the commission’s approval, Interstate agreed to pay $127,000 for the transfer, of which $52,000 was allocable to intrastate as distinguished from interstate operating rights. A hearing was had on the joint application and the commission on August 2, 1960, issued its decision and order. It found that the proposed transfer of Highway’s operating rights to Interstate “would not be adverse to the public interest and should be authorized,” and it ordered approval of such transfer upon condition that the sales contract between petitioner and Interstate be modified to provide that 52/127 of the amount to be paid by Interstate to petitioner “be applied first toward payment of amounts due to [the] commission for transportation rate fund fees and penalties from Highway . . . and amounts due to C.O.D. creditors of Highway . . . before any payments are made to other creditors and stockholders of Highway.” Petitioner applied for a rehearing which was denied.

Petitioner attacks the legality of the condition imposed on the commission’s approval of the transfer of Highway’s operating rights. He maintains that such conditioned approval was an act in excess of the commission’s jurisdiction because [217]the matter of creditors’ preferences is exclusively for the courts to adjudicate.

We are satisfied that petitioner is correct in this contention. Under section 851 of the Public Utilities Code, “No public utility . . . shall sell, lease, assign, mortgage, or otherwise dispose of or encumber the whole or any part of its . . . property necessary or useful in the performance of its duties to the public, or any franchise or permit . . . without first having secured from the commission an order authorizing it so to do.” The predecessor of this section (then Public Utilities Act, § 51a) was construed in Hanlon v. Eshleman, 169 Cal. 200 [146 P. 656]. In that case this court said at pages 202-203: “The commission’s power is to be exercised for the protection of the rights of the public interested in the service, and to that end alone. The sales, leases, or encumbrances affected by section 51a are dispositions of property of a public utility ‘necessary or useful in the performance of its duties to the public.’ . . . All that the commission is concerned with, therefore, is whether a proposed transfer will be injurious to the rights of the public.” By its order approving the transfer here in question respondent commission has determined that the rights of the public interested in the service will be adequately protected and will not be injuriously affected by the transfer.