Koffman v. Modern-Imperial Co.

FLEMING, J. Plaintiff appeals from a judgment for defendant in an action on an account.

Plaintiff, assignee of certain accounts receivable of Golden West Livestock Transportation Company, sued to collect $19,000 for trucking services rendered to defendant Modern-Imperial Company during November and December 1961. Modern-Imperial defended on the ground that it had [136]paid Golden West, plaintiff’s assignor, in advance for the trucking services. The trial court allowed defendant’s setoff against plaintiff’s claim and denied recovery.

On appeal, plaintiff contends the allowance of a setoff based on other transactions and accounts violates California’s constitutional and statutory provisions against rate discrimination by common carriers.

Modern-Imperial had formerly been affiliated with Golden West and had sold trucking equipment to Golden West on credit. In May 1961 the owners of Modern-Imperial sold their stock in Golden West to third parties, and the common ownership of the two companies terminated. By November 1961 Golden West still owed Modern-Imperial $42,000 for its trucking equipment, and, in addition, $26,000 for moneys Modern-Imperial had paid Golden West’s creditors in order to protect its security interest in the trucking equipment. These payments included $5,500 to the Internal Revenue Service, $9,000 to one Doty, $2,500 to Fruehauf Trailer Co., and $9000 to Bank of America. During November and December 1961 Modern-Imperial obtained from Golden West at tariff rates the trucking services which form the subject matter of this suit.

Plaintiff, in bringing suit as assignee of the accounts receivable, would normally be subject to any defenses, including setoff, which Modern-Imperial had against Golden West, the Assignor. (Code Civ. Proc., § 368; General Motors Accept. Corp. v. Kyle, 54 Cal.2d 101, 113-114 [4 Cal.Rptr. 496, 351 P.2d 768]; Meyers v. Bank of America, 11 Cal.2d 92, 94 [77 P.2d 1084].) Modern-Imperial would be entitled to an equitable setoff of all amounts owed it by Golden West (Harrison v. Adams, 20 Cal.2d 646 [128 P.2d 9] ; Highsmith v. Lair, 44 Cal.2d 298 [281 P.2d 865]) unless the allowance of such a setoff would violate California’s laws against rate discrimination by common carriers.

The California Constitution provides: . . no railroad or other transportation company shall charge or demand or collect or receive a greater or less or different compensation for such transportation of passengers or freight, or for any service in connection therewith, between the points named in any tariff of rates, established by said commission than the rates, fares and charges which are specified in such tariff.” (Cal. Const., art. XII, § 22.) Substantially the same prohibition against discriminatory transportation rates appears in Public Utilities Code, section 494. These provisions, modeled on the