Petition for Writ of Certiorari — Lipsky v. United States

Supreme Court brief1963

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: ‘term -2 Fk i “Office-Supreme Court, U.S.

. Lis TARY ? . FILED

mae BUPREME COURTIIN Bh. : -_ |

| i -» | OCT 20.1962

8 ; Lee & c

INTHE - N JOHN F. DAVIS, CLERK

Supreme Court af the United States |

{foo eer

WEsTERN AiR Lins, INC.,

. : Petitioner,

US. ;

City AND County oF SAN FRANCISCO, © Pim

~~ Respondent. .

Petition for Writ of Certiorari to the District Court |

. of Appeal ‘of the State of California, First Ap- %

pasate District.

Hucu W. Dar ino,

DonaLp K. HALL, |

ie 523 West Sixth St., Suite’ 737, <

i: bh Los Angeles 14, California,

Attorneys for Petitioner,

Of Counsel: ; Reon : ”

~ DaRLING, SHATTUCK, Hatt & CALL, -

523 West Sixth St., Suite 737,

Los Angeles 14, California. 4

Parker & Son, Inc., Law Printers, Los Angeles. Phone MA. 6-9171.

——_

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Statute involved ............... PA Manet. Keceieniics re AO ROE 3 .

Statement ........... shkdbenecastathebinaenntee ED eT, Dae aD egy

A. Respondent’s agreements with the United ee 4

B. Facts basing petitioner’s ships

C. Manner in which federal faestions were raised. 2... 7

D. The T.W.A.-case............ enema balisdeasiaascuieibichmcboinie an

Reasons for granting the writ...... , ainaaslte sioasaseanitit a ee

Appendix : ;

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ais ONO Pre .

ae |

TABLE OF AUTHORITIES GITED see

_ .CASEs a? : _ PAGE

\dditional North-South California Services Case, 4 C. A.B.

373... . : ieeeaores i

Allen v, Pay 101 Cal. 1 App, 2 2d 487, 225’ > 24 a 10

American Railway . -Express Company: v. Leve, 263 U.S. 19 2

. Barringer, re "United States, 319 U. S. EO

Bell v. Hood; 327, U.S. 678....0cs-2 Lavesswdceateneee nine: Oe

Fitzgerald -v. Pan American World + denen. 2 229 F. 2d 499....°10

_ Hammerstein v. Superior Court, aa Ri Te 2.

Hillsborough County Aviation Authority v. National Airlines, Pee as

f< , Reee ee ase oh inibicaiaiabimamiiipanditiideibicaiad 10, 11,12 °

Laughtin-v.-Riddle Aviation, 205 F. 2d. MB

-Michigan-Wi isconsin Pipe. Line To. v. Calvert; 347 U.S. 157 2 ,

; _“ Montana-Dakota Utilities Co.” v, Northwestern Public Service =

pat. sh cicmietascieataonin 10

Northeast Airlines, Inc. v. Weiss, 113_ So. 24 gst, cert. den. ‘

116, So. 2d 772... soap Speen 8

Park v. Board of. Aviation Trustees, 96: 6 MHL 331.76 -A.

2d 514 . Se te sapiens nuiinerceiate 10

People v. Davis. 147 Cal. 346, 81 Pac. er 2

| akc Southein : Airways Co\ v. De Kalb Comgpy; I rs Ga. Ss ea a

eo 1:8 S. E.-2d 234........... mu CeaaTe FEO caeslabescnaieeiiiieuhdstebasite mS eh 10

Texas .& New Orleans R. Co. v. "Railway Clerks, a. U S.

7 alee amass. a eete nee? husscatie tte we 10°

| Texas.& Pacific R. Co. v. Rigshy, 241 U.S. 33.2... ae 10 4

x trans W orld Airlines v. "City and County. of San Francisco, /

228 F. 2d 473, cert. den. 351 U. S: 919... mentee ©

Virginian R. Co. v. “System” Federation, 300 U. S. 8. 518..5 ot i0

‘Western Union a Co. v. Call | Petites Co., 181 —

- U.S ae. aa A. aivninenifiaccnmen ty Ge

Wills v. Trans World Airlines, Inc., 200 Fed. . 360........ 10

= ¢

‘ . |

*) . “ A ad ~ . . \ :

| REGULATIONS pecs ia PAGE

are Code of Federal Regul ations”. Part 550... akaannhenssacon 4

- 14 ‘Code * Federal Regulationt “(1949 Ed. ). Sec. 530. I. .

. ; - STATUTE. t . ; ee eee

Civil: Aeronanties. Act 3 a 1938, Sec.- 308... eet WM

aoe, States Code, Title.49, Sec. 453.02. = an cee a

‘. Ps States’ Code, Title 49, Sets. 1101 et seq... ches =

/ United States Code, ‘Title 49, Sec. 1110.: TARO RIE as ‘3

/ gy United States Code, Title 49, Secs. 1151 et oo pe Ared es 10,

“United States: Code, Title 49, See, 1349 0.

Teivenens =

Federal “Aviatiog Administration Handbook of. Aviation 2

(1961 Ed.), P ee acs adadeihe cinder eaonaniaccipasaiilbianinn seiko 12 <<a

43 Federal Register, Dp. we MER RAD PETA TEL o

14 Federal Register, Pp. £2009 cerscattinnee ies PEPSI EESTI 5

40 Opinions of United: States Atiorngy“< General, ‘pp. 71, 72... am

: e.-

\ t ; ‘3 eit eta i

-Suprem Court tt the United | States.

October “Term, 1962. ate ae

FO wereiisisahadinn or Cee

3 ‘

*WEsTERN Aik LINEs, INC, . ~

. ; - Petitioner,

VS.

City anp County or SAn FRANcIscD,

Respondent.

Petition for Writ of Certiorari to the District Court _

of Appeal of.the State of California, First Ap-

- pellate District. i

. *.

*@,

Court of The Unield States. ee

PIAN

Petitioner, W estern Ajr’ Lines, Ine., prays that a

Writ of certiorari issue to review the judgment of the

District Court, of Appeal of the State of California, |

First Appellate District, affirming the judgment a

the Superior Court of the State of California in and

case.

cay

To the- Honorable, the Chief Justice of The United:

States and the Associate Justices of Ye. Supreme

for the City and’ County of San Fragcisco in the above .

204A A.C. A. 197, 22 ‘Gal. Rptr. eo. an

“

The memorandum opinion of the Superior Coun is’

unreported . and — ‘is printed in the »: \ppendix at paves:

60-72. The epinion ‘of the District Court Gt: ae

printed in the Appendix at pages 1- 59, is reported 1

St urisdiction,

The. judgment of the District Court of Appeal was

a filed on May 28, 1962 _ Rehearing Was Uenied-on June

U. S. 19, 21.

18, 1962. .A timely petition for: hearing by the Su-

preme Court of the State of Califopnia was denied on.

July 25.1962.’ - The Jeet of this. Court’ ‘is. ine

voked under, 28 _. yf C.§ 1257 (3).°

Qu stions Presented.

This casé concerhs* rates charged petitioner at ‘the.

Opinions Beldw,* tae ee

San Francisco. Int rhational - Airport whi¢h it: alleges

were unjustly dise riminat ty in, Vit ame df -the F “ederal

‘Airport Act, 49 U, C. $$ MOL ef sey. and re-

spondent’ s agreements Ww vith the United States giv en to

secure the substantial: Fedefal aid which h: is’ gone into:

development of the: Airport. - Tift District Court, of Ap- .

Peal construed the Aci and the agreements as not Vest-

t. ’ : - Jee

Exercise ‘of jurisdietion: by the California Supreme Court is

(liseretionary. People v. Davis, 147 Cal. 346, 84 Pac. 718, The

: Supreme Court's denis! of a hearing in this cisé made. the Dis-

trict Court of. Appeal the highest court in. California, in. which, a

decision. could be had. American Railway Express Company v.

Levee, 263 Uys. 19, 20-21; Hammerstein v.. Superior. Court, .

341 U.S. 491, 492; Michigan- Wisconsin Pipe Line Co. v. fal-

vert, 347 U. S. 157;.160. THe time for.appiying to this Court

runs from ‘the date “ot the Supreme Court's denial of the petition |

for hearing. American Railway E xpre Ss Cc pmpenyey: Levee, 2

‘.

@..

4 sonable terms and w. ithout unjust discrimi

P | we ns

ing pater, with any rights; The prnatians presented

* ayes. 65 |

% Does petitioner air carrier “have an actionable pri-.,

"vate right to use the Airport free from “Gihjuse dis-

crimination, uyider. or by Virtue of Section, AL of the

Federal Airport Aci, 49 U.S. C. § 1110, or any’, ot

respondent's agreements w ‘ith United States ?

a. : if so, were the subject ‘rates unjust! ly: \ discrimjna-

tory within the meaning. of that term as used in the

‘Federal Airport, Act and in “Tespondent’s agreements

with ‘the United States ?

“ .

f Statute Involved.

Section 1 of the Federal Airport Act, 60 Stat’ 176,

49 U.S.C. § 1110, in its pertinent portions provides: =

“As a condition precedent to his approval of a. -

' project under this Act, the Administrator shall re- ”

ceive assurances in "writing, rn him,

that— §

. (1) the agmport to which the project relates

» . Will be avail&ble* for public use on. fair - rea-

tion;

we* x * *

‘To insure compliance with this. section, the Ad-¢

ministrator shall préscribe such project sponsor- i

ship requirements, consistent’ with the’ terms ‘of

_ this Act, as he: may deem necessary. Among other .

steps to insure such ‘compliance the Administrator’

is authorized to enter into contracts with public -

agencies, on behalf of the United States.”

Par eee ae

* e

‘ seria e . Mh

Statement.

‘Ag Respondént’ s Agreements With the United States.

: Substantial defense funds ‘ were expended on improve-_

‘ments at the Airport during W orld War H under the—

AP-4 Airport: Project Program administered by the -

Administrator, of Civil -Aeronautics’ and as the agreed

‘consideration for the United. States’ “condemmna ation of

: Treasure Istand.? In connection therewith respondent

was fequired to, and, on January 12, 1942, March 1, ,

1944, March 15, 1944, and June 5, 1944, through its

Public Utilities Commission did, enter into agreements

with the United States in w hich - respendent covenanted,

among other. things,- to operate the Airport at all timés

during the useful life of the improv ements ;

”

« . ~~

‘*

, in 1948 aa each of the succeeding years up to ‘the

time of trial of this case in 1958, respondent received

grants of Federal funds pursuant to the Federal Air- |

port Act .for projects: at, the | Airport. . As required by

the Act and prescribed in ‘the regulations of the Ad-.

- ministrator: of Civil Aeronautics, 14 CFR Part 550.

respondent in’each of its eleven applications for such aid

; a ¥ 9 “ os

2Prior to the war substantial W. P-A. funds had been expended .

' in improving the Airport. In 1937 comptying with a request

from the Bureau of Air Commerce, the agency then charged with

administering W. P. A. airport projects, — s Public

Utilities Commission passed this resolution:

“Be It Resolved, That the Public Utilities ‘Commission of

the City and County of San Francisco hereby declares as its

policy that said airport will at all times be operated and

maintained as a municipal airport for the public -benefit;

without unjust discrimination against or in favor of any. air-

craft operator, including sid scheduled airline operator.

. for the use and benefit of the public, on’

reasonable terms and.w ithout unjust discrimination, ’

covenanted, among other things, to operate the Airport

at all times during the useful life of the improvements: '

“.. . for the use. and benefit of the public, on

fair and reasonable terms ‘and w ithout unjust dis-

crimination.” . :

‘B. ‘Racts Basing Petitioner's Claim.

Petitioner commenced operations at the Airport on

May 1, 1944, in compliance with the certificate granted

it in the Additional North-South Califorma Services

-. Case, 4 C. A. B. 373: The only other air carriers ‘then

operating at: the Airport were United Air Lines and °

Trans World Airlines. Both had 20-year .“‘integrated”

leases (entered into with respondent in 1940 and 1942,

respectively) covering their exclusive occupancies at

“the Airport and granting them the right to use the

common facilities at specified rates.‘ Petitioner was

‘

8The Administrator of, Civil Aeronautics’ initial re ulations

under the Federal Airport Act+prescribed. a separate Sponsor’s

Assurance Agreement to be filed with, the Project Application.

12 F. R. 143. Both were incorporated 1 in and made a part of the

Grant Agreement by reference. ‘12 F. R. 5552. Later the sepa-

rate Sponsor’s Assurance. Agreement was dispensed -with by

including the reqtired assurances in the prescribed form of Proj-

ect Application. 13 F. R. 1404; 14 F °R. 2409; 14 CFR (1949

ed.) § 550.11, p. 141. The separate Sponsor's Assurance’ Agree-

ment executed by respondent in 1948 prior to the — in the

forms c@Mtained in addition this covenant:

“... sponsor will"permit all qualified operators, on reason-

.- able terms amd without unjust discrimination; to use the air- —

port for any aeronautical Dusiness or operation up to the

capacity of the airport.”

4The “common facilities’’ comprise the landing areas, runways,

taxiways, loading areas, lighting facilities, public address system,

fire protection service and. other facilities and services the use and

enjoyment of which are shared. in common by all air carriers’

utilizing the Airport. Unless the context otherwise requires, the

term “rates” is used throughout this petition to denote the rates

charged for the use and enjoyment of such facilities and services

refused a similar lease covering all its activities and

occupancies at the Airport. It conducted, its opera-

tions. under authority of a 30-day revocable permit is-

~ sued by. respondent, renting for*its private use a main-

tenancé hangar and space in the terminal building.

~Petitioner was ‘initially, charged the.’same sates for ‘the

common facilities as “specified i in United’s and*T.W.A.’s

'- Jeases, such rates having been adopted in 1942 as the

published rates for the Airport.

In 1946 respondent's Charter was amended to in-

crease from 20 to 40 years the maximum term for

‘which “lands . . . devoted to airport purposes” could

be leased. ~ EASES sane. oe :

Effective September 1, 1946, respondent's -Public

- Utilities Commission adopted a new schedule doubling

the published rates for the common facilities. : United

and T:W.A., continued. to be charged the rates fixed |

in their leases. Petitioner. was charged and paid the

new ratés. oes

Petitioner continued to press for an integrated: lease

but was advised that, respondent was negotiating a new:

‘lease with United and would not ‘discuss the matter

‘with petitioner until: those negotiations had been con-

cluded. In 1947 in consideration of United's moving.

: its Cheyenne, Wyoming, ‘maintenance. base to the’ Air-

port, respondent entered into a new lease with United

| supersedirig the 1940 lease. A site for the maintenance

base was included and the rates specific for the com-

mon facilities were the same as set forth in the 1946.

"published ‘rate schedule. The term of the new lease was

under the leases which are involved and pursuant to the: schedules ;

. from time to time adopted by respondent's Public Utilities Com-

mission.

for 40 years commencing December 1,, 1947, and, ex-

cept for a limited right to renegotiate not to. exceed a

10% increase in the rates each five vears, no right was

reserved to change the rates to be charged United dur-

ing t leasehold term. ei o%

Petitioner thereafter on several “occasions renewed its _

request for an integrated lease. Each time Fespondemt

refused to discuss the matter, with petitioner. -

- Effective January 1, 19519 respondent’ s Public Utili-

ties Commission adopted a new schedule approximately

doubling the 1946 published rates. _ Petitioner. refused

to pay the increase and this action was commenced by

respondent.

C. Manner in’ Which Federal Questions Were Raised.

Paragraph XVI of petitioner’s Amended and. Sup-

plemental Answer filed in the trial court, in its per-

‘tinent portion, alleges:

‘The unjust discriminations by re against

defendant alleged’in paragraphs XIV and XV are .

in violation of Section 1110 of Title 49, U. S. Code,

and the written assurances and agreements of plain-_

- tiff given a thereto to the Civil Aeronau-

tics Administrator. . ” (Clk. Tr. p. 23.]

This contention was. broadened in petitioner’ S$ opening

ALIA Tr. .p. 26] to include respondent’s |

agreemen ith the United States entered into prior

to enactment of the Federal Airport Act, and the is-

sue was tried on that basis. ,

The trial court ruled that neither the Federal Airport.

Act nor respondent’s agreements with the United States

vested any private cause of action in. petitioner for

—

alleged unjust discrimination in the operation of the ;

Airport. ( Appendix, Pp. 68-70). The District Court of |

Appeal took the same view (Appendix, pp. 12-26).

The point was raised and further argued by. petitioner

in its petition to have the case transferred to the Cali-

fornia Supreme ace for hearing, —_ petition was

crmet.

D. The T.W.A. Case.

The Public Utilities Commission’s resolution ,adopt-

ing, the 1951 schedule expressly exempted carriers hav-

ing contract rates.. Notwithstanding, respondent noti-

fied T.W.A. that it would expect T.W.A. to conform

with the 1951 -schedule. or suffer denial of the right

to refuel its aircraft-at the Airport and later. sued to

‘enforce, the scRedule against United after T.W:A.

countered with, @Federal diversity action for. declara-

tory relief. T,.W.A.’s contract rates were upheld in

; Trans W orld Airlines v. City and County of San Fran-

cisco, 9 Cir., 228 F. 2d 473, cert. den.,- 351 U. S.

919, on the ground that ' respondent was specifically. |

authorized by California | law to enter_into. contracts ”-

_ suspending ‘its general rate making power for a rea-

sonable term of years. United’s suit which had been

held in abeyance was thereafter dismissed at respond-_

ent’s request.

Ressons for Granting the Writ.

1. The decision of the California District Court of

Appeal is directly in conflict with the decision of the

Florida District Court of Appeal i in Northeast: Airlines,

Inc. v. Weiss, 113 So.*2d-.884, cert. den:. 116 So. 2d

772 (Fla. Sup. Ct.), on the’ issue of petitioner's rights

under the Federal Airport Act°and respondent's agree--

ments with the United States. -As here, that- case in-

. 3 « ; ———

volved air carrier rates at an airport developed with

Federal funds, the Miami International Airport, clainied.

to be unjustly discrituinatory, in contravention. of the.

Federal -Airport Act. Also as here, | mg-term contract:

rates. not enjoyed by Northeast bottoméd the alleged un-

‘just discrimination. The - Florida District “Court of

Appeal held that “a clear statutory policy against un-"

fair, unjust and discriminatory treatment between. users

of airports” was declared in Section 11 of the Federal

Airpert Act and that Northeast’ s complaint fer injune-

tion and refund stated a cause of: action.» 113 So.

2d at 886-889. .

The decision of the Florida District Court of Ap

peal accords with the statute's ‘intendments. As with

apy 303 of the Civil Aeronautics Act of 1938, 49

U.S. C. § 453 and Section 308: (a) of .the Federal

pore Act of 1958, 49 U.S. C. § 1349, proscribing -

_ any “exclusive right for the use of any bonny d area

or.air navigation facility y upon which Fe ands have

2 _been-expended:*the” aim of Congress was to “prohibit

‘

monopolies and combinations in restraint of trade or

_- commerce, and. to pr mote and encourage competitic m in

civil aeronautics” in accordance with the policies of the

_ Federal aviation laws. 40 Op. A. G. (U. S.) 71, 72.

Section 11 (1) of the Federal Airport Act declares ©

a definite standard established in law and capable. of

erfforcement deviation from which would thwart the.

" purpose va Congress. - Congress’ fashioned no*machin-

‘The California District Court. of Appeal found the. —

court's decision * ‘unacceptable as persuasive autheritw’ (Ap:

dix, p. 21), because the primary concern of the decision was

whether Northeast sho..d have filed its complaint with the

Adminestrator of Civil Aeronautics or the Civil Aeronautics —

Board. ‘

it .

ery: for. enforcement ot the standard. As‘in bee &

New Orleans R, Co. v. Railway Clerks, 281 U. . 548,

568-569, gg Virginian R. Co. v. System! ae

. 300 U. S. 515, 544-545, 550, enforcement by private

* action must have been contemplated. “{W |here fed-

_ eraliy protected rights have been invaded, it has been

the rule from the beginning that courts will be alert to.

adjust their 1emedies so as to grant the necessary re-

lief.” Bell v. Hood, 327 U. S. 678, 684.°

The Civil-sAeronautics and Federal ‘Aviation Acts,

the Federal Airport Act. and thé Intecnational Avia-

tion Facilities Act, 49 U.S. C. §§ 1151 et seq. pre-

"sent, a comprehensive plan for the develépment. and

maintenance of a national .and intetnational air trans-

" portation system adequate to meet the present and fu :

_ ture needs of the fereign and domestic commerce. of the

- United States. the postal service and the national «le.

. fense. Air carriers have a significant. role in that plan

and it is manifest that a principal object of the par-

ticular statutory provision in question and the agree-

ments required thereunder was to protect air carriers

from the disabling effect of favoritism and ' preference

at the. airports which they must use.

2. On the merits of petitioner's claim. the decision

of the California .District C ourt of Aree is in conflict

“Compare Texas ¢ = Pacific R. Co. v. Rigsby. 241 U.S. 33, 390:

Montana-Dakota I tilities Co. v. Northwestern Public- louis Co.,

MIU. _". 246, 261 (dissenting opinion) ; Laughlin v. Riddle Avi-

ation, 5 Ci ir. 205 F. 24.948; Fitzgerald v. Pan American World

Airwavs, 2 2 Cir., 229 F. 2d 499: Wills «=. Trans World Airlines,

. vw. D.C: S$. D. Cal., 200 F. Supp. 360; Allen v. Hussey,

101 Cal. App. 2d-457,'225 P. 2d 674; Hillsborough County Avia-

tion Authority @ National Airlines, 63 So. 2d 641. (Fla, Sup.

Ct.) : Southern Airways Co. v. De Kalb County, 102 Ga. App.

850, 118 S. E. 2d 234: Park v. Board of Avidtion Trustees,

96 N. H. 331, 76 A. 2d 514. .

| e

with this Court’ s decision in MH esiern - ofp HION Tele graph

Co. wv. Call Publishing Co., 181 U.S. 92. among other

decisions. The. tacilities ‘and’ services prov idedyby re-- <

spondent for which the rates in question. were harged 5

were shared by United, TWA: and ° petitione "There i, aes

was no difference in the facilities or the services as

among them. Each used: the same tac ilities and-serv ices

as the others. Notwithstanding, the’ Calitornia District |

* Court’of Appeal ruled that air carriers, such as United, _

leasing land at the Airport tor: private use and_cet it

ting themselves to construct ™ { permanent Tacilities, the EON,

which would be.sised-excusive’ y by them; lawfully may

be granted preferential rates: as té the conimon facili.

ties . (Appendix, pp. 48-475." “The: sole - justification

for Alenying petitioner's: claim was that it never pro-*

pased or was willing Yo lease land and make -perma-

Tent improvements for its own private use at the «Air,

port (Appendix, pp. 48-49). pre

The decision is erroneous, The public service * Which

is involved, and to which Seaion 11 (1) of the Act.

and the corre sponding provisions of resporident’s agree-

ment apply, consists onty of the. common facilities.

Neither Section 11 (1) nor the related provisions of |

Seciior. 303 of the Civil Aeronautics Act, 49 0, S.C.

§ 453. and Sectiog 308 (a) of the Federal Airport

Act. 49 U.S. C. § 1349, have application to private -

facilities at the 4, it Hillsborouyh County Aviation

TAlthough the Co ourt placed T. Ww A. in the same “rate group”

as United. T.W-.A. had not leased anv land at the “Airport or

, agteed to canstruct any permanent ‘facilities.

*The. opinion concedes that the difference in rates cannot be

justified on the ground: simply that United and T.W.A. were

operating at the Airpert before petitioner and had Integrated

leases, whereas petitioner was -iot afforded such a lease t Ap-

pencix, pp. 49-50).

= =

: Auhievity v. National Airlines, 63 So, 2d 61, 63-64

(Fla. Sup. Ct.). Since there. was no “difference” in

the public service, the “principal of equality . . . for- .

bid[s] any difference in charge.” Western ales Tele--

_ graph Co. v. Call Publishing Co.; 181 U. S. 92, 100.

* Unjust discrimination is spread on the record here be-

cause the rate differential was “based primarily on

considerations relating to the identity” of the carriers

(namely,. their need for private facilities at the <Air-

port) “rather than to ‘circumstances attending the ....

service.” L. etic v. United States, 319 vU. S.

= |

3. ‘The large number of airports which ave been

impreved and dev eloped with the aid of Federal grants

: pursuant to the Federal Airpori Act underscores the 1 im- :

; portance of the questions presented.” oo

Conclusion. ae / ;

For the foregoing reasons, this petition for writ of

" certiorari’ should be granted. |

October 18, 1962. eh ae

Respectfully submitted,

| HuGu W. Dar ina,

DonaLp K. HALt,;

523 West Sixth St., Suite 737, °°

~ Los Angeles 14, California,

. Attorneys for Petitioner. -

Of Counsel: ee

DARLING, SHATTUCK, Hau & CaLt,

523 West Sixth St., Suite: 737,

. Los Angeles: 14, California.

*Through 1960, ‘a total of 1.584. airports had been Fedetally

assisted pursuant to the ‘Federal Airport Act, at an aggregate cost

_.in Federal funds exceeding $570 million. [22 1 Statistical Hand-

book of Aviation (1961 ed.); p. 3.

Opinion jot ¢ California District Court of Appeal.

‘In the District Court of Appeal of. .the State of Cali-

fornia, First’ Appellate District, Division One.-

City and County of San Francisca, a Municipal Cor- Hy

poration,. Plaintiff and Respondent, y. W estern Airy

Lines, Inc.; a Delaware Lorre, Defendant and’

Appellant. I Civ. 19344. sO fey °

_ Filed May 28 1962.

We are‘ealled’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 Fran-

cisco International Airport. The- court. below rendered .

agreed amount ‘of. $214,385.74, were properly due and

owing to the plaintiff and denying recovery of any’ por- :

tion 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. ties Oe

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 th¢ juris-

diction and management of the San Francisco Public

Utilities Commission. It is open to all aircraft providing

the aircraft qualifies, under rules and regulations. of

’

APPENDIX... ss *

judgment “declaring that all of. said charges, in the

oe oes

* the Public Utilities Commission vidtastethihe safety” meas-

_ ures. & :

Air traffic in the early years was undergtandably

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 many ‘flights:into the» ‘San Francisco area

could not be completed in bad weather because pf the e -

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 thé second in 1933, - |

- inaugurated scheduled air service in and out of the air- .

port. From 1933 until the end of 1943 they were the

only scheduled air carriers operating regularly from it.

‘Prior to World War JI 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 car- |

.Tiers, 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. is

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 ea This a :

after a preliminary *ecital that United Was willing to

move” its western district headqu: irters: Tr an Oakland te

~ the airy rt, if it chal lease certain premises and tacihe.

tes there, covered 15, aéres of land. common use éacili-

tiex: space in the airport administrative building and pro

vided tor the cans tructifn by the City on the-leased land

vol extensive capital ‘iqproyvements, the’ cost’ of which

“was to ‘be shar ed Iy® the City and (United on a specitied .

basis: |

On October 1.1952. the City entered inte a similar,

if less extensive, lease with WA ior aterm of 20,

vears. ‘This lease also Tad been put out te public bid

Anaccordance with c ity’s charter provisions. “TW A was

the Only bidder; its bid Was accepted and approved:

TWAX's lease covered a spe: citied hangar and ad joi ini

shop space, common tise favilities, and space in the air-

sport’ administration . build! ng. Thus “each of the two

- leases, in addition ‘tc’ providing for exclusive use of

specitig Airport premises, also provided for the’ respec.

tive lessee’s: “use, in ‘common with others: atthe rized su

to do.-and on the same terms, and conditions as apply.

to others” of so- -called ‘common “facilities. . These. fa

cHities are described in identical language in each lease.’

Each” lease provides, in practically -the same. “mga.

for the payment at “identical rates tor the privilege

using the Horegoing common tise facilities, +,

"Each lease “denises and lets unto Lessee the ase. . . of anv

wid all generalsfacilities . 2. including, but without’ limitation,

the landing Field, rutwavs, aprons, axiwavs, sewerage and water

facilities, marker and surface ltghts,- flooditights, landing, lights,

signals, beacuns, aids, control tower, and other conveniences. for

lowling, flving, landings and take-offs; and the ¢ CAUSEWAY s, docks,

wharves and approaches’ thereto, parking: areas, * roads, streets,

bridges, spar tracks, and other facilities and appurtenances of said.

airport, * ag 2 (i

On June 23, 1941, approximately 9 months after the

execution of the United lease and 15 months betore the

‘€xecution of the TWA lease, the City’s Public Utilities

Commission adopted by resolution a schedule of rates

“to be charged . .-. to commerical air litte tranaper-

tation companies for the use of thé airport. “

These rates were the same as the rates prov ided for .

in the preceding United lease and therefore in the sub-

.sequent TWA lease. Indeed the danguage of the com-

‘mission’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 Weggern Air Lines, Inc. commenced

scheduled operations at the airport on May 1, 1944, pur-

suant to a certificate of -public convenience and neces-

sity granted by the federal Civil Aeronautics Board and’

a revocable permit issued by the City authorizing

use of the common use facilities. Under this arrange-.

ment, 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 2 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 peri od not to exceed forty: years

instead of a.period not to exceed twenty years. (Char-

ter of the City and C ounty, of San Francisco (adopted

-Marci 26, 1931, in effect January 8, 1932) § 93, as

ae ae |

amended 1946.) The City, through its Public Utilities

Commission, thereupon commenced negotiations ‘with i Fe

United to the end of entering into a new lease for.a

forty- -year rather than a twenty-year term. These ne-

gotiations extended over a period of six. to eight months.

There is testimony in the record that the € ity proposed

to United ‘that a higher rate be charged for the addi-

tional 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 be-

hind its existing 1940 lease which froze these rates for

an additional 15 years, resisted any attemp” to eliminate”

a rate covenant in the new lease being negotiated; al-

though 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 léase it was entered into

‘pursuant to public bidding procedure. It covered not

only the 15 acres éxclusively leased pnder: 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, — ‘the pay-°

2The paragraph of the 1947 haat dealing with “Common ee

of Airport and Airport Facilities” discards the language of the

1941 lease that “[l]essor further, demises and lets . . .. the use

. . . Of any and all genefal fatilitiés” and-instead . provides that

“Lessee shall have the right, license and, privilege, subject to the

payment of the schedule fees .. . to make use . . . of the Airport

and appurtenances, and all facilities, equipment, improvements and

services which are or hereafter may be provided at or in connec-

tion with the Airport for the common use of those making use of

the Airport, including. .. The comman use facilities thereafter

enumerated are largely the same as those enumerated in the 1940.

_ lease. - Notable . omissions. are: control tower, causeways,

wharves. ae ¢ ;

--—

ment 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 rev ision. The new lease further pro-

vided 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 termi-.

‘nation 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 ‘cove ing the common use facilities at

the airport. When. these attenipts were renewed during |

1946, Western’s representative was told thdt the City

would not negotiate such a lease because of the pen-.

‘ dency of negotiations on the 1947 United lease. After

the execution of the United’ leasé, 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 man-

ager 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 Arfgeles 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. ~

pa Ss }

On November 20, 1950, the City’s Public Utilities

Commission by resolution, adopted, subject to the ap-

proval of the board of supervisors of the City, a new

schedule of rates and charges for the use of the ta-

cilities and services of the airport. Such schedule pro-

posed an increase of the rates- applicable to the com-

‘ mon use facilities. It was in turn approved by the

board of supervisors on December 18, 1950, by a seven-

aye, three- -no, and one-absent vote. The new rates

went into effect on January 1, 1951. Thus, until 1951, :

Western and United were both paying the same rates for

common use facilities, namely. those established by the

1946 schedule, Western because of the direct application

of the schedule’ to its Operations, United because of the

incorporation of the rates of such schedule in its 1947--

lease. TWA, pursuant to tts 1942 lease, was ‘still pay-.

ing rates established by the .1941° schedule and incor-—

porated in such lease. Until 1951, therefore, Western

made no protest with respect to the rates charged for

the common use facilities.

On August 9, _ 1954, the City’s Publié Utilities Com-

_ mission, by resolution, adopted, and on August 23,

1954, the board of supervisors approved a new sched-

“ule of rates and charges which, ‘insofar as the issues

raised before us are concerned, were approximately the

samé as the rates- established by the -1951 schedule. -

Western made payments under both the 1951 and 1954

schedules whereas United and TWA continuéd to pay

the Ipwer. rates set forth respectively in their 1947

and 1942 leases.

The 1951 schedule sowed seeds df litigation. West-

ern objected to it, claiming that the differential between

the rates and charges established therein and, those paid

by United under its lease constituted unjust discrimina-

jes

tion. The refusal of Western to pay. according to the |

, 1951 schedule resulted in the instant action as we shall

- hereafter set forth.

At the same time the City advised TWA that it

would expect payment for,the.use of the common fa-

cilities in accordance with the 1951 schedule. Faced

with a threatened denial of its refueling privileges at .

the airport, TWA, on Feburary 2, 1951, commenced

an action in the United States District Court for the

Northern District of California, Southern Divisign,

against the City and the members of its ‘Public Utilities

Commission seeking as deglaratory judgment that

TWA’s rate were fixed by its lease of October 1, 1942,

and injunctive relief against the City’s action: —On

July 2, 1954, judgment was rendered in favor of the

City, the court holding ‘in effect that the provisions

in the lease setting the rates for common use facilities

were superseded by the City’s 1951. schedule of rates.

(Trans World Airlines v. City and County of San _

Fran, (N.D. Cal. 1954) 119 F. Supp. 516.) - This

_ judgment. was reversed by the Court of Appeals ((9

Cir. 1955) 228 F. 2d 473, cert. ‘den: (1956) 351 U. 5.

919) which held that the City was bound by the rate

; ra of its lease:

‘On October 30, 1953, after. the trial but oe the

judgment in the TWA ‘case, the City commenced an.

action against United in the same United States Dis-

trict Court’ to recover for common use facilities. fur-

nished United upon the theory that charges for the same

should be based on the 1951 schedule rather than on *

United’s 1947 lease. After the reversal of City’s judg-

ment in the TWA case, the above action against United

_ was dismissed by the court.

The period covered by, our narrative was one of con-_

stant growth and expansion in the airpc Us” installa- -

‘tions, facilities and traffic. ‘This resulted not only

from various bond issues approved by the City’s voters

ior the development of the ‘airport but also -in part

from. federal aid funds granted pursuant to various

federal acts. In connection with -such~federal aid, as |

we shall later consider in_more-detail, the City made

‘certain _assuramices “that the airport would be operated. .

for the use and benefit ‘of- the public, on fair and rea-

sonable terms and without discrimination. There is .

abundant evidefice in the record of the foregoing ex-

pansion and. development’ vf the airport. For our pres- .

ent purposes, we need single out. only a few significant,

salient facts: Fixed capital in service increased from

$2,982,163.41 for the fiscal year 1939- 1940, immed

) ately preceding United’s-first lease, to $10,044,297.82°

in. the first post war ( fiscal ) “year ‘of 1945- 1946, to

$37,788, 653.83 in the fiscal year. 1949-1950, . immedi-

ately preceding the’ adoption” of the 1951 rate schédule,

’ and to $40,854,005.27. in ‘the fiscal year 1950-1951 in

which such schedule was adopted. For ‘the same years

the number of in and out passengers increased. from

126,546 . (1939-1940) to 722,408 (1945-1946) to 1)

. 307,307 (1949-1950) and to 1,708,040 (1950-1951).

Correspondingly, the number of scheduled mov ements of

air traffic increased from 17, pia (.1939- 1940} t0 So

pak.

TWA, W ste, America Air; Lines, British Overseas Airways.

. Corporation, Califernia Central Air Lines, the Flying Tiger Line,:

—s

483 (1945-1946) to 79, 77 (1949-1950) antl to 90,-

794 (1950-1951).'

The ‘present action’ was _commienceg on ’ February &4

1952. _ The City filed a complaint on common counts °

_ to. recover the increase. of rates which W estern ‘refused

t+ +t tive

to pay after the effective, date of -the 1951 schedule

together with other items of alleged indebtedness not

germane to.this appeal. ~ By written stipulation tiled

in the instant action on August 12, 1955, the litigants —

agreed that Western would pay to the City under pro-

test the then accrued unpaid differential between the

1946 and the 1951 and 1954 rates and would continue

to pay, under .protest, the 1951- and 1954 rates and

the City would refund. to W estern all of the dif feren-

tial in dispute i in the event of a final judgment in favor

of Western. The parties subsequently agreed that the

issues were limited to the charges made against’ West-

‘ern for the common use facilities during the ~ period

from January 1, 1951, to and including August 31,

2Only two scheduled air carriers, United ae TWA, operated

from the airport during the years 1940 to 1943. By way -of com-

enge l there were 43 or 44 air carriers conducting operations

from~ dg! -24 during the period from January 1954 through

$7. Scheduled air.carriers numberéd 16; United,

apan Air Lines, Pacific Southwest Air Lines, Pan American

Vorld Airways, Quantas Empire ‘Airways, Slick Airways, South-

west Airways, British Commonwealth Pacific Air Lines, Cana-

dian Pacific Air Lines; and Philippine Air Lines. In addition,

there were 11 carriers erforming scheduled contract services for .

‘the Military Transport Service, and 17 nonscheduled or chartered

air carriers (these last ae the ‘period “July 1955 to » June

1956).

are am

1957." and that the amount in controversy was $214, -

385.7 4: These issues were raised by amended pleadings

of the parties.° Western’s position was that the

charges, being discriminatory, were not only beyond the

- power of a.public titility to exact but were also in vio

sae a

lation of the Federal Airport Act and of various as

surances | given ‘by the City to the federal government

that the airport would be oper rated without unjust dis-

crimination.

We find no disagreement ‘between the parties as. to

what the term “commen use facilities” embraces. It

appears clearly from the evidence to ine lude generally

the complete landing area, runways. taxiways, the air

craft loading area, ‘the ‘public address system used

for flight information, airport lighting facilities, fire.

protection service and the emergency ak um Service. _ ‘Tt

is also clear that no air carrier’ has ever been refused.

~ the common use facilities of the airport.

- The trial court found and concluded that the adrport’

Was a public enterprise bur net a public utility, that the

furnishing of comuien tse facilities there did not con-

*The parties apparently agreed on this terminal date because of

a supplemental agreement entered into between the City and

United on — 22, 1957, under the terms of which United

agreed as of July 1957. to pay. the, same rates. as the éther

carriers, thus Mo differentials except as to thelower rate |

still being paid by. TWA under its 1942 lease.

'Upon leave of eourt granted at the time’ of the pre-trial con-

ference Western filed an-amended answer denying ‘ability to-

gether with a counterclaim: for recovery of all monies paid ‘by it

to the City under protest. On the first day of trial the € ity filed

a supplement to complaint. in effect amending its first common

‘count on a book account to allege an indebtedness of $214,385.74.

On the sixth trial day the City filed an amended complaint’ in

effect repeating such claim on a book account, and further alleging

that the above indebtedness included $16,800 for airport fire pro-

_ tection services.

them in. the order presented. aii $.

=12—- &

stitute a public utility service, that the City had not

wrongfully. afd unjustly discriminated in ‘favor of

United and TWA and against Western, that the City

had committed no unjust discrimination in violation of

‘the Federal Airport Act or the Ciiy’s assurances given

pursuant thereto, and that the’ sum of $214,385.74 was

legally and properly chargeable to Western, and due and

owing to the City. Judgment for said amount, with-

out interest, but with costs, was rendered in favor of

‘the Ci ity.

eee

W estern contends beforNus that: .1) The protested

rates were illegally and unlawfully assessed and col-

leted, ‘being unjustly discriminatory in- violation of the

Federal Airport Act and the City’s agreements with

the federal government; 2 ) the airport is a public utility

and therefore charges made for its common use facili-

ties must be uniform, equal and nondiscriminatory ; : and

3) the. 1951 schedule of rates did not become legally ef-

fective and hence the rates billed to W estern pursuant

thereto were illegally charged and c Megted. We consider.

Western has no right of ‘recovery bye irtue of the

Federal Airport Act oF Citys ayreements with the

federal government.

‘Western asserts a claim of unjust discrimination on

two bases: First, it argues ‘that the Federal Airport

Act and various assurances given by the City upon

the receipt of federal aid for its airport preclude the.

exercisé on the part of the City of any power to dis-

criminate among air carriers. .Secondly, it maintains

that the airport is‘a public utility and. as such, is

prevented from prescribing ant wnjustly discriminatory »

rates and charges.

oa vo

~ 634).

koe ae.

Over the years, improvements at the airport were’

in part tinanced’ by federal funds: and in order to re-

ceive them the City was required. to give certain’ as-

surances to the fedeér al government. Western has. di-

rected our attention to several instances of such aid \

Which fall conveniently into two general classifications

—those made-betore, and those made puraanet to, the.

Federal Airport Act-of 1946, \

Between 1935 and 1942, City received for use in. the

development of its airport, substantial WPA funds

provided under various federal acts.* Upon reqtiest ’

of federal. officials, City 's Public Utilitiés Commission,

-on March 8, 1937, passed a resolution (Res. #1%7)

stating-in part: “the Public Utilities Commission . ..

hereby deciares as its policy that said airport will a 7%

all times be operated and maintained as a municipa

airport for the public benefit. without unjust disc rimi-

nation. against. or in favor of any aircraft | operator,

including any scheduled: airMie operator. 2 (Em-

‘phasis added.) | Similar federal funds were received

during World War II under the airport project pro-_

gram. Asa recipient of aid under: this program the —

City, through its Public Utilities Commission, passed.

resolutions’ (Res: #4808. January ‘12, 1942: #6182, °

June §. 1944) each of which stated as follows:

“¢d) The City agrees. that. continuously during . the

term of this agreement, the Airport -will be operated _

-as such ..... and... it will at all times be operated

fer the use and benefit of the public, on reasonable

*A ppellant cites: the following statutes: Emérgency Relief’

Appropriation Act of 1936 (49 Stat. 1608), of 1937 (50° Stat.

352), of 1938. (52 Stat. 809), of 1939 (53 Stat..927), of 194]

(54 Stat. 611). of 1942 (55 Stat. on and of 1943 (56 Stat.

—14— .

terms and@without unjust discrimination, and without

grant or exercise of any exclusive ‘right for use of the

Airport within the meaning of Section 303-of the

Civil Aeronautics Act of 1938.” (Emphasis added. “y

Finally, during the war, as part of the’ ‘overall settle- .

: ment of the condemnation action commenced by the

United States of America to acquire Treasure Island

‘from: the City and for the City’s release of all claims

thereto, the Army and Navy agreed to construct and

complete certain improvements at the San Francisco

Airport.’ In each of said agreements, the. City agreed

that the airport “will ,at all times .be’ operated for

‘the -use and .benefit of the public on reasonable terms

-and without unjust discrimination and without grant or

exercise of any exclusive right for use of [the Airport] .

within the meaning of Section 303 of the Civil Aero-

nautics Act of 1938." "(Emphasis added.) , :

After the war, the City received’ funds for the ,de- | :

vetopment of its airport pursuant to the Federal Air-

port Act of 1946 (49 USCA. §§ 1101-1119). Such

funds were received: during the ten fiscal years begin-

ning with the year 1948-1949 and ending with the

Year 1957-1958. The grand total for all "years was

Tach résolution states that, the Civil Aeronautics Administrator |

“has designated as necessary for national defense a project .

-. fot. development of the San Francisco Airport. . . .” Resolution

_ No. 4808 states that the administrator acts pursuant to the Third

Supplemental National Defense Appropriation. Act of 1942.

*Separate agreements were entered into between the City and -

the United States acting through the Secretary of the Navy

(Navy agreement—March 1, 1944) and the United States, acting

through ‘the’ Secretary of War (Army agreement-—March 15,

1944). Said agreements were made a part of the final judgment

of condemnation rendered by consent of the parties on April 3,

1944, in the condemnation action pending in the United | States

District Court in San Francisco.

ig age en

$$ 1108, 1110,-1111) and ‘the administrative regula,

|__-tions theretinder (14 CFR. §§ 550.1-550.8) required

the City as sponsor , to submit project applications to,

~ and enter into grant agreements with, the Administrator

ot Civil Aeronautics. Assurances in writing were ree *

quired to be given-to the administrator (49 U.S.C.A.

§ 1110 subd, 1) that “the airport to which the project

relates will be available for public use on fair and rea-

sonable terms and without unjust discrimination.” (Em-_

phasis added.) / The various grant agreements incor-

porated the : spective project applications. ard provided

that the C ity “shall operate and maintain the Airport,

as provided/ in the Project Application. Taran

project applications in turn contained the following pro-

visions: “3. The Sponsor will not exercis grant or.

permit any exclusive right for the use of the ‘Airport

forbidderi by Section 303 of the Civil Aeronautics Act’

of 1938, as amended. . . . 4, The Sponsor agrees

that it-will operate the Airport for the use and benefit ~

of ,the public, on fair and reasonable terms and. with-

out unjust discrimination.”* (Emphasis added. )

Appellant: argues that the foregoing statute.’ assur.

ances and resolutions not only. preclude discrimination

but: give the airline discriminated against the right to

recover the. differential in rates. Although appellant

claims that the protested fates were in violation of all

empporets SWE. aos : ‘

*The project application of May 17. 1948, and its accompany -

ing grant agreement incorporated City’s “Sponsor's Assyrance °°

Agreement” which contained not ‘only the above provision on

unjust discrimination but also provided that, subject, to an. excep- .

tion, not applicable; “the sponsor will permit: all qualifred oper- .

ators, on reasonable terms and wtthout unjust discrimination. to

‘ use thé airport for any aeronautical business of operation up to

the capacity of the ajrport.” (Emphasis added.)

—16—!

| ‘ A :

the City’s agreements ‘summarized above, it is apparent

that its alleged right’ of recovery is predicated princi-

pally on the Federal Airport Act and the City’s as-

| sirances ‘givén pursuant thereto. . We. shall therefore

consider this aspect of. the argument first, and then |

the City’s earlier agreements.-. " . S |

At. the outset we find nothing either in. the Federal

Airport Act itself or in the assurances required and

given thereunder specifically conferring on Western a

right to recover excessive airport charges. The act pro- _

vides for the recovery by the Civil Aeronautics Ad-

ministrator of payments made in excess of the United

States’ share of the total project costs and of: certain

advance payments for which the United States has re- |

ceived no benefit. (49 U.S.C.A. § 1113.) It also pre-

scribes criminal penalties for false statements, represen- |

tations and reports. (49 U.S.C.A. § 1118.) We find

no other provision permitting recovery by the adminis-

trator and no provisions at all giving any right: of

us recovery to any other person. . An examination of the

act as a whole discloses that its purpose is to promote

a nationwide system of public airports (see 49 U.S.C.A.

§ 1102) and not to regulate airport operations.”°

Every expression of the intent: of Congress in enacting the.

Federal Airport Act of 1946 and the various amendments thereto

indicates that the purpose of the legislation is to establish a

nationwide system of public airports adequate to meet the present

and future needs of civil aeronautics by providing for the develop-

ment and improvement of civilian airports with federal financial

aid in accordance with a national _ plan. (49 U.S.C. A.

§1103;. House Report No. 1570, March

Code Congressional Service, p. 1469, at rR 1469, 1471; House

Report” No. 2709, July 24, 1950, 1950 U. S. Code Congressional

_ Service, p. 3945, at pp. 3045-3046: House Report Na. 93, March

2. 1959, 1959 U. S. Code Congressional & Administrative News,.

1708 at p. 1707; Senate Report No. 654, August I, 1961, 1961

t. S. Cade Congressional & Administrative News, p. 2707, at p.

2710: House® Report No. 728, July 18, 1961; 1961 U.S. Code

16, 1948, 1948 U.S.”

tPp-"

ok Fee |

* The varicus’ assurances and agreements required front”

thé sponsor, in this case City, under the act are- -promo-

tive of such general purpose. The granting: agreement ,

in each instance entitles the administrator to. recover,

all grant payments made where there has been any mis-

representation or omiXsion ‘of a material fact by the

sponsor. We find no Ather provision for recovery of

funds by the administrator and ‘none whatsoever per-

mitting recovery of money or excess rates by a private”

party. Indeed the language ot the granting agreement .

itself appears to us to point’ up that it is simply wand"

entirely a financial arrangement between two parties.

As the agreement States, iy constitutes “the obligations

and rights. of the United States. and the Sponsor with

respect to: the accomplishment Ot the: Project...”

This echoes the langue ofthe statute (49 v wa. A.

\ Ngee <5 a : By ae a a

None of the“ documents under. consideration conters

on Western. the rights of a third party’ beneficiary.

The various contracts ‘and assurances treated benetits

arid detriments as between only two parties—the United

_ States and the City. Nothing in. them ‘shows any in-

tent of the’ @ontracting parties to confer any benetit

directly and expressly upon’ air carriers such as_ the

defendant. . It is true that air carriers: including West-:

ern, may- he inc any benefited by Ci ity’s assurances

Congressional & Administrative News, p. 2737 et seq. Cf. House .

Report 701, July 22, rey 1989 U. S. Code Congressional &

Administrative’ News, 2065, at p. 2066.) . Nothing in the

above “cited sapheniets * Aegislative purpose, or in any other

legislative histor? mate manilests an intent, either express

ar implied, to provide ysers of the airports receiving “. with a

private remedy for alleged discrimination.. (Cf. 1949 U.S. Code

a ressional Service, pp. 1601, -1811, 1813, 2208, 2270: 1955

. Code Congressional & Administrative News, Pp. 2509 )

WwW

—-1g—

in respect to nondiscriminatory treatment at the airport.

They may also be incidentally benefited by the fact .

that, through federal aid, a public airport is improved

_ with longer runways, brighter beacons, or larger loading.

_ramps, or by the fact a new: public aif port is provided |

for a community. ‘without, one. The various documents

and agreements were, part of a: federal aid program di-

rected to. the promoting of a national transportation —

system. Provisions in such agreements. including the

nondiscrimination clauses, were intendéd to advance

such federal aims and not for the benefit of those who

might be affected by. the sponsor 's failurg ‘to perform.

“To recover as a third party beneficiary,. One must

. show that the contract in question was made expressly

'. for his benefit. (Civ. Code. § 1559; Shutes v. Cheney

(1954) 123 Cal. App. 2d 256, 262.) -While it is not

necessary that the third party be’ LeeeeiMid named as

a beneficiary and that “expressly” means “in an express’

manner: in direct or unmistakable terms; explicitly ;, de-

finitely; directly” (Le Ballister v. Redwood Theatres.

Inc. (1934) 1 Cal. App. 2¢ 447, 448; W atson ¥. Aced

(1957) 156 Cal. _App. 2d 87, 92). nevertheless, as stated

in Shutes v. Cheney, ‘supra, “an intent to make the

obligation inure to. the benefit of the third party must

--have been clearly manifested:by the contracting parties.

[Citation.] Where a contract incidentally benefits a

third person but is not expressly made for his benefit.

he cannot’ recover thereon. [ Citations. ]” (P. 262.)

Moreover, “fa] promisor bound to the United States

by contract to do an act or render a service to

some ‘or-all of the members of the public, is subject to

no duty under the contract to such members to give

compensation ‘for me injurious . consequences of per-

‘ d ’ ae \

i ee :

fofining or attempting to perform it, or of failing to-

-do so, unless, . . . am intention is manifested in the

contract, as interpreted in the. light of ‘the circumstances

"surrounding its formation, that the promisor shall cony-

pensate members of the public for such injurious con: -

‘ sequences... .” (Rest., Contracts, $145.) (See alsa”

~ Ukiah v. Ukiah Water el Imp. Co. ont 142 Cal.

173, 178-180.) u

‘Appellant: urges that the above rule of the Restate-

ment’ is intended to apply only to promisors who are

private persons, citing the Ukiah case, supra. No such

principle is announced in Ukiah. Nor is any sugh’in-

tention apparent in the above seetion 145 of the Re-

statement of Contracts. - Theonly “limitation in such

section as to the class. of the contracting parties is

that the promisee be a governmental body. If it had

been intended to restrict the application of the rule te

nongovernmental promisors, such limitation weuild and

easily could have been imposed. Private persons on

the one ‘hand and governmental units acting in a prp

prietary capacity on the other are not such disparate

promisors: as to require us to fread into the rule a

restriction it does. not express.

The main thrust of Western's argument is aimed:

past the parry of no spe-ific statutory authority and ,

no enforceable: third party beneticiary claim. “The

Federal Airport Act. appellant argues. commands non-

discriminatory treatment of airport users by the recip-

ients of federal aid. and therefere the violation of

such mandate on ‘the part of the airport. creates, by

implication.. an actionable cial right in the airport user

which can sue far the resulti

principal reliance on the case 0

m. Western places

Northeast Airlines.

= ee

‘Ine. . v. Weiss (D.C.A. Fla. 1959) 113 So. 2d 884.

cert. den. (Fla. S.Ct. 1959 116 So. 2d 772) and

cites additional cases as ‘supporting. analogues.

The ‘facts of the Northeast Airlines case are strik-

ingly similar to those of the case before us. In an-

action against the port authority having jurisdiction

over the Miami airport, also developed and improved by

federal funds under various acts of Congress, the plain-

tiff air carrier complained that it was charged rates

and fees which were in excess, of those charged its com-

petitors National Airlines and Eastern Air Lines for

the same services. The. rates charged plaintiff were

_ levied pursuant to resolution of the authority, whereas

the lower rates charged its two ‘competitors had’ been

established prior thereto by lease agreements. North-

east sought an injunction and refund of the excess

charges apparently relying on, among other bases, - the’

Federal Airport Act. of 1946 (49° U.S.C.A. § 1110).

On the defendants’ motion to dismiss, the trial court

held that, since the plaintiff had not exhausted avail-

‘able administrative remedies, the suit. was presented pre-

maturely and rendered an interlocutory order requesting .

plaintiff to file its complaint with the Civil Aeronautics

_ Administration or have its complaint dismissed. This’

order: was reversed by the Florda District ‘Court of

Appeal which held - that “the equity court had juris-

diction of the cause, and that it was’ not to be de-

prived thereof either because of the doctrine of ex-

haustion of administrative remedies.’ or the doctrine —

of primary jurisdiction.” (113 So. 2d p. 887.) This

was the. only question in the case and the limit of

the . appellate court’s holding. Contrary to appellant's

contention, the court” did not consider, ‘much less de-

» wt

cide, that a violation ot the above section of the Fed-—

eral Airport Act created a civil right of action in ‘the

‘plaintiff airline. We find the case unacceptable as

persuasive authority."’ > ..

We turn to appellant's additional authorities. First

we are referred to several federal cases, four of Which»

are opinions of the Second Circuit. While they are

undoubtedly sound statements of legal principle. they

are not helpful to appellant. _ All of them involve situa-

tions which, t to _usgglthe language of Judge Learned

Hand in one of them, Reitmeister v: “Reitmeister (2 Cir.

1947) 162 F. 2d 691, 694, fall “within the doctrine

which, in the “absence of . contrary implications, con

strues a criminal statute, enacted for the protection of

Jn Aerovias . Interam De — vy board of County

Com'rs (D. C. Fla. 1961), 19K F. $= 230, 14 foreign and 4

domestic airlines brought an actio for. injunctive relief and recov-_

ery of overcharges against the samy port authority as operator of

the Miami International Airport..\The basis of the action was

that the airport charged foreign airltes higher rental and service

rates for its facilities than rates charged domestic airlines. The

original complaint vac va th® actiorwas based an the Federal

Airport Act, (49-U. $1110), the Federal Aviation Act

(49 U. S.C. A> B1301 5, va Surplus Property Act (30 U. S.

C A. $1622) and upon alleged violations of certain treaties

(Chicago Convention) and of certain service. agreements entered

into between the United States and the countries of domicile of

the plaintiffs. The complaint was dismissed as to the domestic

airlines and the action proceeded to trial as to the remaining

foreign airline plaintiffs on the sole legal theory of the’ violation

of the above treaties and agreements. © Although ‘the. reason for the

court's action is not disclosed hy the opimon, it appears that no

plaintiff was able te state a cattse wf action under the Federal

Airport Act. “[N Jeithér the, diverse Federal Statutes relied on

by Saye plaintiffs, nor the restrictions contained [in @<ertain deed |

. gave a-right to any of the plaintiffs to gue. (192, F. Supp. |

at P. ee

“6

mie

—22—

a specified class, as creating a civil right in members

of the class, although the pnly —T sanctions are

‘ criminat.”’

Thus in Fitzgerald v. Pan American World, Airways

(2 Cir. 1956), 229 F. 2d 499, * an internationally known

singer and two-ot her companions, all Negro airline,

passengers, brought an action for damages for unjust

discrimination, because of their race or color, in viola-_

tion of 49-U.S.C.A. section 484, subdrvision (b), a.

provision of the Civil Aeronautics Act of 1938 pro-.

scribing unjust diserimination.: The passengers alleged

that although holding reservations, they were. prevent-

ed from continuing their flight because of their race

or color. ‘The pertirient act, so far as applicable, pro-

vided for both criminal “penalties ‘and administrative

‘remeslies. Ag to the first, 49 U. S.C.A. section -622

. subdivision (a) made‘it a federal crinie mee

wilfully. to violate: designated sections of the act in-

cluding section 484. subdivision (b). As to the sec-

-ond, 49 U.S SC.A. section 642, subdivisions (a), (b) and ©

Civil Aeronautics Board of complaint, investigation and

order of compliance. The Court of Appeals, reversing,

dismissal by the District Court, held that since the act

‘made it a federal. crime to violate section 484, subdi-

vision, (b), which — discrimination, the viola-

$ °

—_—_———_—_-

12 Appellant claims that the Fitzgerald case supports the \ Torth-

east Airlines case, The latter case relied on (itzgeratd onl? in

support of the proposition that the doctrine of primary jurisdic-

tion was not: applicable.

‘ .

a. ak

tion of such section created: an actionable civil right in

the plaintiffs as members of a“class .for whose- benefit

the statute was enacted.'* . }

Three other cases. Gf the Second Circuit cited in

| Fitsgerald are also relied upon by appellant, as’ well -

"as one casestrom the Fifth Circuit. As we have point-

ed out, they ‘involve the same principle applied to

other federal statutes... In Reitmeister v. Reitmeister. -

supra, (2 Cir. 1947) 162 F. 2d 691, the court held

that the Communications Act of 1934: 47 US.C.A._

>. section 151 et seq., imposed a civil as’ well as a crim-

inal liability although thé statute made no provision

for the former. In Fischman v. Raytheon Mfg. Co.

{2 Cir. 1951) 188 F. 2d 783, iv was held that al-

though section 10, subdivision. (b), of the Securities

Exchange Act of 1934 (15 U.S.C.A. § 78a et seq.j

did not explicitly authorize a civil remedy, it did create,

. one since it made unlawful the conduct which it pro-

scribed and since there was also an indication that

Congress had always assumed that private actions were

available under the statute. In Goldstein vy. Groesbéck

(2 Cir. 1944) 142 F. 2d 422, the plaintiff. a minority

stockholder, of | certain operating companies, brought

+a shareholder's derivative action against certain hold-

ing companies arid: their officers, charging that com-

tracts had been made in violation of ‘ection: 4(a)(2)-

‘of the Public Utility Holding Company Act of 1935.

(15 U.S.C.A. § 79d(a)(2)). The proscribed ‘conduct.

was made urilawful by. the act which. provided specific

For a further application of this principle see Wills v. Trans

“World Airlines, Inc. (S. D. Cal. 1961), 200. F. Supp: 369, in

which the civil right of action was upheld, on behalf of:an airline

passenger “bumped” off an oversold flight though having priority.

of reservation. - wi

Aw " . ‘ f + . .- ° ~ . .

sanctions in the form of injunctive reliet, criminal

penalties and declaring the contracts void. The court

upheld a private right.of action upon the ground that

the operating companies -were niembers of a class for

whose ultimate protection the legislation was intended,

Two other cases cited by appellant, are to the same

general: effect. In Laughlin v. Riddle Aviation Co.

-(5 Cir. 1953) 205 F. 2d ‘948, the court. permitted

‘ recovery: by an airline pilot .of wages at the higher

rates prescribed by: a decision of the’ National Labor .”

Relations Board and adopted by the Civil Aeronautics

Act on: the ground that. the plaintiff was obviously

one of the persons for whose benefit the statute was’

enacted, even though no civil remedy was specifically

provided therein. The case of Fexas & New Orleans

R.R. Co. v. Brotherhood of Railway ete. ‘Clerks (1930)

281 U.S. 548, held that an enforceable civil right for

an injunction existed for violation of section 2, sub-

‘division 3, of the Railway Labor Act of 1926. Sach

section in-eftect. ‘provided that representatives of man ,

agement, and labor should be. selected without inter-

_ ference, influence or coercion by either party over the

other. Interpreting all of the act as a) whole, in the

light of prior legislation in the field, the court con-

cluded that-it was the intention of Congress in. pro-

hibiting the. above conduct, to. create a legal right in

each labor group even though no statutory penalty was

prescribed for the prohibited acts. ie

The case before us does not fall within the above

‘doctrine. Neither .section 11 of the Federal Airport

Act of 1946 (49 U.S.C.A. N 1110) nor any other sec-

tion of such act indicates an intention to benefit or pro-

tect the class of airline. users of airport facilities. No

. section of the act prohibits unjust discrimination ot

makes’ it unlawful.” No seetion of the act makes ‘it a

federal crime: to’ breach’ or violate the written assur-

ances against unjust discrimination required by sec-

* tion 11. As we-have pointed out, the criminal penalties

of the act apply only to. the making of false statethents

and reports. We can find ne basis, therefore, for

concluding that an actionable civil right is created for

an airline as- a member of a class for whose pro-

tection the statute was enacted. — -

The case ot Allen vy. Hussey (1950) 101 Cal. App.

2d 457, also cited by appellant, does not support: the

proposition which: appellant urges. In the ilen case

leases made by an irrigation district to the detendant

Hussey covering an airport and adjacent property, in- | —

cluding one lease for a term of 34 years at a rental °

of $1 a year, with.an option te renew. for an additjonal .

35 years, were held invalid as being contrary to. public

policy, in breach of trust and in violation of a WPA

sponsor's agreement executed by the bodrd of directors

ot the district agreeing that the airport would not be

leased to a nonpublic agency or private individual. “The

leases were held cancellable upon suit: brought by any

property owners of the district who “were the bene

ficiaries of the public trust. The case does not hold

that a private Tegal remedy is created by the statute

involved. * | eee ex

Finally we return to the earlier federal grants in aid

received by the City before the Federal Airport Act.

“

te |

Our. examination ot ‘the various resolutions of City.

Public Utilities Commission and of the so-called’ Army,

sand Navy agreements entered into-upon the transfer ot

Treasure Island tails to disclose any intention on the

part of the contracting parties that the assurances

therein containéd with reigrence to unjust discrimination

were made for the express benetit of: aircraft opera-

tors. What we have said with respect to the entorce-

ability by third parties of the assurances given under

the Federal Airport Act is applicable here. We find

nothing creating an enforceable third party beneficiary

- . Claim or a right of recovery in aircraft operators for.

reach of the assurances. peat

We hold, therefore, that neither the Federal Air:

port Act of 1946 nor any of the assutances or agree-

ments giten by City under said act or other acts created,

any cause of ation in Western Jor any alleged un-

just discrimination ‘and that the Conclusion ot the trial

court - to such effect was: proper and. must be sus-

“tained.

The airports a public utility.

We proceed’ to determine whether appellant’ s claim

of unjust discrimination can be asserted on the basis

othat the afrport is-a_ public. utility whose r rates and

charges under. acceptable legal principles must be uni

form, equal and nondiscriminatory.

The court below,-as we have pointed out. concluded

that. it Wasna public enterprise but not a public util

ty and that the common use facilities thereat did not

x -*

—

. . —2/— ° ; h

constitute a public utility service. The issue, involving

no evidentiary. conflict, presents a question of law."

We. begin with the San Francisco -Charter- In our

view, a-tair reading of the .applicable provisions of

‘the C ity ’s organic law shows’an intent to designate arid’

establish its: airport as a public utility. Section 120

.of the charter. provides for the creation of a Public

Utilities Commission. Section 121 provides as fol-

. 7 a . . 4

lows: “The public utifities cmmission shall have charge.

of the construction, management, sipervision, main-_

tenance. extension, aperation and control of all public

utilities and’ other properties used, owned, acquired,

leased or constructed by the city and county, including -

‘airports, for the purpose ot supplying any public ubility

service to the city and county and its inhabitants, to

territory outside the limits. of the city--and county,

and to the inhabitants thereof.” . (Emphasis | added. )

Section 122 provides: ‘The San Francisco ‘municipal

railw ay. the S san Francisco water department, the Hetch ”

Hetchy. project until the completion thereof when: it

shall be merged with the water department, the airport,

and any other public utility. hereafter acquired, shall

each be! designated | as a-department under the com-

Interestingly” City in its Original complaint alleges that its

charter confers jurisdiction in the Public. Utilities, Commission

“to manage all public utilities . ... including the Sani Francisco

Airport.” This allegation was incorporated into City's supplement,

te complaint hut omitted frota cits amended complaint. The record

‘is not clear that, as respondent states, “the tria¥ court found as a

matter of fact that the airport is not a public utility. By virtue .

of a general. finding, the court found inter alia that the denials in

paragraph IIT of defendant's amended and ‘supplemental answer

were untrue, defendant denying in such paragraph “that the San

Francisco Airport is a public utility by virtue of ‘plaintiff's Char-

ter, or otherwise.” “The above dyes not “affect our. statement

sypra that the —* is ore of law

e - «

ath

be managed and operated as such.

mission, ... (Emphasis auded.) Finally, if, turther

- confirmation be required, we ‘have the following lan-

guage of section 125: “The public utilities. commis-

sion shall have jurisdiction over oe airport now be:

ing conducted by: the City and County of San Fran-

cisco, as well as over ‘any other airport which said

‘city and county may. hereafter. acquire, maintain or op-

_- erate.” » (Emphasis added.) The above sections read

as a whole convince us that the charter ttended to |

make the airport a public utility and to,place it under

the jurisdiction of City’s Public Utilities Commission. to

Our views are not unsettled by respondent's ‘inter-

_ pretation of the above sections, which we find uncon>.

vincing. City argues that ‘under section 121 a distine-

tion is: made between “public utilities’ and “other prop-

erties used, owned, acquired, leased. or constructed. by

the city and county, including airports, for the pur- -

’ pose of supplying any public utility service. >...” We

discern no intent’to create distinct: categories of proper-

ties but simply, by the use of comprehensive language.

‘to place under ‘the jurisdiction of the commision all

utilities and property used in‘supplying utility service.

- Whatever. forcé City’s argument might have if sec-

‘tion 121 stood dlone, is. dissipated when the section. is

' read together with section 122; which refers to ‘“‘the

”

airport, and any. othef utility. City’s. further

contention that the airlines. rather ‘than City itself,

furnish the public utility. service of transportation at

its airport completely ignores the, heart, of the issue.

The city furnishes a public utility service to the air-

lines, which in turn serve the public ‘as utilities. (Rich-

field Oil Corp. v. Public Util. Com. (1960) infra,

54 Cal. 2d 419, 431, cert. den, 364 U.S. 900.)

“be declared. public utilities by. placing

In’ its construction of section 122 > City then ad-

_ vances the. theory that, in turn, such’ section provides

tor two categories (a) public uulities and (b) entities,

which are not public utilities, giving as an exanmple of.

the latter, the Hetch Hetchy project. The obvious -aim,

ot City’s theory is tu,remove the airport from the first

class and place ‘it in the secorid. ‘It is to be noted

that the sole possible member of the second category

posited by City isthe. Hetch Hetchy: project; Cit».

furnishes us with no authority that such project ‘is

not a public utility, Quite apart from this however, it

appears to us ‘to be a reasonable construction of section

122 that the framers of the charter treated all entities

therein listed, including the airport, as public utilities.

City adverts to other language of section 122 pertaining

to the. ¢ creation ot bureaus tor handling matters “that do

“not pertain exclusiv ely to any one utility or “department” —n

and urges that the use of the word “department” show's

that the charter did not intend the activ ities listed therein

them under the

jurisdiction. of the Public Utilities Cor Imission, This

argument ends in futility for, City whan we consider.

that the San Francisco Municipal Raikway and_ the

San Francisco Department, both of whith City con- .

cedes to be public, rte . are also designated as de-

partments. «(Section 122 E | :

In its proffered construction negating public utility

status for the: airport, City takes the position that,, if

sections 122 be conceded to declare the airport a public

utility, the portion of ee quoted by us supra,

Stating that the commission shall have jurisdiction of

the airport.is: superfluous. We do. not agree. + Sec-

tion 125 deals with the subject of employment of per-

v .

sonnel and in effect states that while airports shall be

under the jurisdiction of the commission, all airport

employees, except the manager, shall acquite civil serv-

ice ‘status and be thereafter governed by the civil serv;

ice provisions of the charter. Finally, City argues

that where the charter intends to declare an activity a

public utility, the expression of its intent is: unequivocal. .

as in section 121 -which states: “Foreign tradé zones, -

‘as may be authorized by acts of Congress to be lo-

ated in the city and county, are hereby declared. to

be public utilities within the meaning of this charter.”

The absurd result of such reasoning would be that the

charter. would reflect no intent to create any public

utilities other than foreign trade zones, and City would

be forced to conclude that the municipal railway and the

water department had not been unequivocally established

as public utilities.

In addition, City’s’ Public Utilities Commission wheri

establishing rates for the common use facilities at the

airport did so pursuant to section 130 of the charter

which grants authority to the commission to fix, change

.and -adjust rates, charges and fares of public utilities.

_ The commission, for example, in its resolutions es-

-tablishing the 1951 and 1954 schedule of rates, re-

ferred to by us. earlier, obviously took such action pur:

-suant to section 130 and further. resolved that the ©

schedules be submitted to City's board of supervisors :

“as required by Section 130 of the C harter.””"®

I5It is also: significant that in the case of Trans World Airlines

v. City and County of San Francisco, supra, the City took the -

position both before the United States District Court and the

Court of Appeals that the San Francisco airport was a public

‘utility. (119 F. Supp. 516; 228 F. 2d 473.)

In essence, a pig utility is. the dedivation of prop-

erty toca public: use,~ Ihe much cited case of Allen v.

Railroad Commission (1918) 179"Cal. 68 contains the.

classic statement of principle: * *What is a public utili-

ty... ? In its broadest sense everything upon which

man ‘oie labor for purposes other than those for.

the benetit of his immediate family, is impressed with <

a public use... . What differentiates all such ac-

tivities from a true public “utility is this,.and this only:

That the devotion to public ‘use must be of such char-

acter that the public generally, or that part of it which

has been served and which has accepted the service, ,

has the right to démand that that service shal! be con-

ducted, so long as it is continued, with reasonable et-

ficiency under reasonable charges. Pablic use, then,

means the use by the public-<ind by every individual

member of .it, as a le yal right. Such is not only’ the

accepted significance of the phrase by the great weight

_ Of authority .. + but is the definition: repeatedly an-.

nounced by this court.’ " (Pp. 88- 89). (See also Rich-

. field. Oil Corp. v Public Unl. Com: (1960) 54 Cal.

2d 410, 430-435, ‘cert. den. 364 U.S. 900; “Cudahy

Packing Coy. ‘Johnson (1939).12-Cal, 2d 583, 586.)

City’s” airport conforms t@ this traditional concept.

- It is beyond question a public airport—irideed an in-

ternational airjort—serving the gener ral passenger pub-

lic withot servation or restriction, In respect to ‘the

problem. a. hand, it also serves _ segment af the.

* public engaged it operating tik hat is, operatcs

_ of scheduled airlines, sane Bee carriers and private

aircraft.. The common’ use’ facilities of the airport

are available. tor, held -out to, and enjoyed by. all

such operators. Such. oper rators are the .custamers or

, "patrons of the’ airport. No air: carriers properly, cer-

—32—- .

tified under federal law are excluded. No carrjer or air-

craft using the airport is refused. its ph fa-

cilities, It is clear to us that such common use fa-

cilities constitute a public utility service.

The. fact that the number of those, using or en-

joying the above public utility service, namely the opera-

tors of aircraft, is by circumstance: relatively limited,

does not ‘destroy. the public character of the service.

(Terminal Taxicab Co. v. Kutz (1916) 241 U.S. 252,.

‘Ee: Camp Rincon Resort\ Co. v. .Eshleman (1916)

172 Cal, 561, 563-564; FoRl Hydro-Electric. Co. v.

-Town of Aurora (1932) 206 Wi is. 489, one 240,

N.W. 418.). oh

Our conclusion that ‘the airport is a public utliity

and its common use facilities are a public utility service

_is consonant with recognized authority (see 12 Mc-

Quillin, Municipal Corporations, § 35.04 at pp. 571- -

573: 5 35.06 at p. 584) and decisions of other states:’*

There is ‘respectable authority holding that a ‘iunicipally .

owned airport is a public utility; independent. of any constitutional

or statutory declarations to that effect. Price v. Storms (1942),

* 191 Okla. 410, 412, 130 P. 2d 523; Ex parte Houston (1950),

93. Okla. Crim. 26, 58 (on rehearing ), at.71 (dictum); State,

ea rel. Sag v. Jackson (1929), 121 Ohio. St. 186, 187-188,

‘* 167 N. FE. 396; City of Toledo v. Jenkins (‘1944.), 143 Ohio St.

141, a 150, 54 N: FE. 2d 656: Jones v. Kock (1946), 79 Ohio

App. 549, 553, 74 N. E. 2d 644; State ex rel. Helsel v. Board

of County Com'rs (Ct. Com. Pleas 1947), 37 Ohio Opinions 58,

79 _N. E. 2d,698, 703, aff'd (1948), 83 Ohio. App. 388, 78 N. E.

2d 694; appeal dismissed (1948), 149 Ohio St. 583, 79 N. E. 2d

911; cf. State, ex rel. Hile y. City of Cleveland: (1927), 26 Ohio

App. 265,266, 160 N. E. 241; State, ex rel. City of Lincoln v.

Johnson’ (1928), 117 Neb. 301, 303-304, 220 N ‘W. 273. :

—33— A |

We have not been referred to any ‘cases, nor’ have

any been found, holding, that ‘a-municipally owned air

port is not a public utility."* -

City has attempted'to negate this public utility status

of its airport on a nuniber of grounds, all of which

we find untenable.” Its basic’ argument is es in the

absence of aly declaration that a particular enterprise

is a utility by Constitution,’ statute or other appli-’

cable law, such enterprise will not be. deemed a ‘public

utility even though involving services available to the

_ publi¢ generally. However. in support of its argu-

— ment,, City cites cases dealing with utilities subject

to the California Public Utilities Coumission. Such

~~ commi: SION, - of constitutional origin, has jurisdiction.

over some public utilities: ~+Eat- Const., art. XT.

§§ 22-23: Pub. Util. Code §§ 202/21137 2501-2728,

_ 2901-2976.) It does not and conceivably coitld not have

jurisdiction over a municipally owned public utility. “In

the absence of legislation ofherwise prov iding. the [ Cal-

ifornia Public Utilities] commission's jurisdiction to

regulate public utilities extends only to regulation of

privately owned utilities.” ( Los Angeles Met. Transit

Auth. v. Public Util Com. (1959) 52 Cal. 2d 685.

661; emphasis added.) Unless the ent terprise or ac-

_tivity in question, is a public utility as defined in the

Tt is worthy of note that in Trans World Airlines v. City and

County of San ran., supra, 119 F. Supp. 516, the U.S. District

~ Court concluded: \that the very —- use facilities Rail to inl

the instant case were offered by the San Francisco airport as a

. public utility serv it Although reversing the District Court, the

_ Court of Appeals di not hold that the airport was not a public.

utility or that’ the above facilities. were not a public utility

service. (Trens World, Airlines y. Fitv & Cotinty of San Fran-

cisco (9 Cir. 1955}, 228 F. 2d 473," cert. den. (19563, 351 U. &.

919.)

Constitution or Public Utilities Code, it. is not subject

to the jurisdiction of such commission, (Television

- Transmission v. Public Util. Com. (1950) 47 Cal. 2d

82, $4.) Respondent's cases theretore (City cites inter

alia:. Television Transmission v. Public Util. Com.,

_ supra; Richfield Oil Corp..v. Public Util. Com., supra,

54 Cal. 2d 419; Pajaro Valley Cold Storage Co. v.

Public Util. Com. (1960) 54 Cal. 2d 250) holding chat

certain enterprises do not tall within the detined classes,

are not determinative of the problem at hand. Re

spondent’s further argument that wees are not with

in the detined classes, in our view, has nothing to

do with the present issue. W hether or. not City’s

airport is a public utility, it. would not be. subject to

fegulation by the ~peaiona Public Utilities Commis-

“sion! ee

Additional ’ ilies referred - ‘to by City dialing

with facilities operated by the municipalities in ques-

tion in their governmental capacities are also distinguish-

able. (City cites inter alia: City of National City

y. Fritz (1949) 33 Cal. 24-635, construction of sewers:

Glass v. City of Iresno (1936) 17 Cal: App. 2d 555.

garbage collection; Larsen v. City & County of S. F.

(1957) 152 Cal. App. 2d 355, offstreet parking.) -In

each: of the foregoing, cases the basis of holding that

the facility in question was not a ‘public utility .wa’

the fac. that in operating such facilities, the ‘City

Was exercising governmental functions, whereas a city

in the operation of ‘its public wtaiities ‘acts in a pro-.

18It is to be neved that the Public Utilities Code contains pro--

visions dealing with utilities owned by municipal corporations.

Although not applicable to respondent here, ‘such sections deline-

ate a wide area for municipal activity in the public utility field.

(See Pub Util. Code ss1d000 10213.)

prietary capacity. (Larsen v. City & County of S.F.,

supra, 152 Cal. App. 2d 355, 307. ne Lee

Respondent places particular reliance upon the opinion”

of this court in the Larsen case. In Larsen We, were

presented with: the question whether. a proposed oft:

street parking facility to. be constructed under the au,

thority of the Parking Law of 1949 (Sts. & Hy.

Code $$ 32500- 34X59) Wasa public ut lity so that leases

thereof Were subject Yo section 123 of the San. Fran

‘Cisco’ Charter. The four reasons unde rlying our hold.

‘ing in Larsen that ottstreet parking was net a pub

lic utility do not exist as determining factors in) the

present proble mM pertaining to. the City’s weal First,

in’ Larsen, we observed that neither the City’s charter,

nor any legislative act. nor ‘the Constit ution de tined

offstreet parking as a public autihity. In the instant

case, as we have poirted out, the charter declares that.

the airport is a public utility. Secon, in’ Larsen,

the Parking. Law of 1949 provided that ‘the furictions

undeftaken thereunder were governmental. In_ tiie in-

stant case, as stated above, the: City, in operating «4

public ‘airport, acts in a proprictar y capacity. Third, in

Larsen, the Parking Law of 1949: vested control

the facility: in the Parking Authority and not in’ the

City’ s municipal: regulatory. body, In the instant CASE,

the airport.is placed under the jurisdiction of the City's

eee

The follow ing language from Coleman v ‘City ot Oakland

(193035 110 Cal. “App. 718, 720, is pertinent 6 the problem. at

hands “We have no hesitancy in dectdmg that in the conduct of

an airport, the municipality is acting in a proprietary capacity’

An Airport fails naturally into the same clac sifications as such

pie utuities 2s lectric light, gas. water. and transportation

‘systems, which are universally classed as proprie tary.” ( Empha-

sis added. )

—36—

Public Utilities Commission. (San Francisco Charter

§§ 121, 125.) Regulatory power vested in the City .

‘pursuant to the Municipal and €ounty Airport Law.

(Gov. Code § 50474) is m turn vested by the City's .

_ charter’ in its Public Utilities Commission. (San Fran-

cisco Charter: §§ 121, 125, 130.) Fourth, in’ Larsen,

a municipal ordinance declared “that off-street parking

fatilitiés are not public utilities and not subject to the

jurisdiction. or control of the city’s Public Utilities

Commission.” (Larsen v. City. and County of S. F.,

supra, 152°Cal. App. 2d at page 367, emphasis not

added.) No similar excluding statement is present be-_

fore us now, We do not believe therefore that our

opinion in Larsen presents an analogy leading to a sim-

ilar conclusion here that the ee: is not a ‘public utili-

ty. |

City also argues that the Municipal ert County Air-

port Law does, not contain a declaration that airports

are public utilities. We do not see how such a declara-

tion is necessary, or its omission fatal, to the regula-_

tory scheme here when it is borne in mind that the

powers of regulation and control are vested by such act

in the City and are in turn vested by the City’s charter

in‘ its commission having jurisdiction over designated

public utilities, including airports. Indeed; we seriously .

“question, although it is not necessary for-us here to

decide, whether the status of City’s airport as a public

utility would be destroyed or affected even by “the ab-.

sence of such declaration in its charter, providing that

there were found present the necessary characteristics of

a dedication of such facility to a public use. (Allen |

. Railroad Commission, supra, 179 Cal. 68; ‘funn’ vy.

‘ale (1876) 94 U.S. 113. ai

" a

Finally, we feel that the court's conclusion that the

airport is a. public enterprise but not a public utility.

when viewed. conceptualistically, is inaceurate. Cali-

fornia authorities holding that a municipal airport is’

a public. enterprise (Krenwinkle v. City ot Los An-

geles. (1935) 4 Cal. 2d 611, 614: ‘Pipes v.. Hilder-

brand (1952) 110 Cal. App 2d 645, 647). simplye de-

cide that in the acquisition and operation of an -air-

port a municipality is acting pre perly within its powers

and not using public funds for a private or commer-

cial purpose. ‘We do not think that the concepts of

“public enterprise?’ and “public utility” are mutually

exclusive. A public utility, properly within the ambit

of municipal powers, is still a public enterprise. Con-

versely, the fact that “a facility is a public enterprise

does not of necessity. prevent it. from being a public

utility.

| Giving due and full respect to the caveat found

in Allen v. Railroad Commission, supra, 179 Cal. 68:

at page 85, that “‘[t]o hold that property has been

. dedicated to a public use is “not a trivial thing” [ci-

tation], and such dedication jis never presumed “with-

Out, evidence of unequivocal intention” fCitation],’”

—

we are of the opinion that such intention js Here mani-

fest, that the San Francisco airport is’ a public utility,

and its common use facilities a public utility service,

There 1s no actionable discrimination,

We turn to consider w hether Western has any claim.

of actionable discrimination assertable on the basis of

our foregoing conclusions. Western claims that since °

‘it was charged substantially higher rates than those

paid by, United and TWA wales their respective -leases

tor the same common use facilities, there was unjust

discrimination as a matter of law. No difference in

rates, so it argues, is valid, unless based on a dif-

ference ‘in service; no reasonable classification, justi-

fying discrimination, can be based on the time of

the commencement: of airline operations at the airport;

and no difterential can f'nd validity in special contracts

available to some but not all users of the facilities.

We first dispose of some preliminary matters. To’

be* successful at all, appellant's claims must find legal

support under the common law, since we find, appli-

cable to appellant, no statute proscribing the inequali-

ty of charges which is the nucleus of its “complaint.

Provisions of the State Aeronautics Commission Act

(Pub. Util. Code §§ 21001-21694) insofar. as’ they

require “equal. ‘and uniform use” (Pub. Util. Code

§ 21637) govern airperts os by the State of Cali-

fornia and do not apply to City's airport -here dis-

cussed. Nor does ile cies in City’s charter (San

Francisco Charter § 130) that “[r]ates. may be fixed |

at varying scales for different classes of service or

consumers” contain appellant's desideratum of equali-

ty. The section, in our view. ‘is permissive in char-

acter.* It does not demand that-all users of facilitiés be °

charged equal rates, ‘nor does it prose ribe unequal rates..

or even give definition to the. terms employ ed.

‘Next, although Western claims that the rates charged

it were unjustly discriminatory, ‘it does not claim that

‘they were unre asonable, in the sense’ that they were

Sxcessive. \In fact..W estern has conceded here, as well

as in the court below. that the rates. charged it were.

inthe above sense. reasenable.. ‘This-is consistent with

® ~@

Se : ~ ——*

ins formal pleadings. In its. first ‘affirmative ‘ates

4 found in its. amended and supplemental. answer, V. est-

erh alleges that the protested rates are “discrimina-

- tory and Unjust.” Nowhere does it allege that such

rates were “unreasonable’ Or “excessive.’

In this state there is no cause of action at com-

mon law for damages for discrimination in the absence

- ot allegation and proof that the charges paid. by the

plaintiff were unreasonable and excessive. Inequality

of charges, standing alone, js not per se. actionable.

(Cowden v. Pacific Coast S.S. Co. (1892) 94 Cal.

470.) In Cowden, the complaint alleged that’ “certain

freight charges constituted a+ discrimination against

plaintiff, ‘who paid at higher rates than another mer-

chant. The court pointed out that at common law,

the. common carrier was not under an ‘dbligation to

treat all customers equally, buit only to charge’ no more

than was reasonable, and held that, in the absence-of a -

statute requiring equality, no cause of action was stated.

“(T]he court concludes that the complaint is deficient

in not stating.that the charge to plaintiff was-unrea-

sonable ; and that the allegation cf discrimination or.

" inequality is not the equivalent. of an allegation of an

excessive charge.” (.P. 480.) ;

Appellant urges that the common law rule has been’

_ expanded by decisions in other’ jurisdictions sO as to >

require: equality as well as reasgnableness of charge,

citing Western Union Telegraph C 0, v. Call Publishing

Co. (1901) 181 U. S.°92. on writ:of. error to Su-

—preme Court of Nebraska : and N2 McQuillin, Mn-

nicipal Corpo.ations (3rd ed. 1950), § 34. 99, pp. 309.

310. Whatever may be our disposition towards an

eclectic consideration of the common law developments

in other jurisdictions, we are of course bound by and

must follow the rule mapenad by the Supreme Court

in C owden. as 9

In addition, appellant argues that as- interpreted by

subsequent ‘California decisions, it is now. required in

this state. under the common. law that public service

charges be equal as well as reasonable and that the

rule announced in Cowden no longer stands. In sup-

port of this position, appellant relies.on Nourse v.

City of Los Angeles (1914) 25 Cal. App. 384; Hob-

"by v. City of Sonora (1956) ‘142 Cal. App. 2d 457;

and Durant v. City of Beverly’ Hills (1940) 39 Cal.

‘App. 2d. 133.. Evert if the decisions of the above

District Courts of Appeal purported to abrogate or

quality the rule announced in Cowden, we would ob-

.- viously still be bound to follow the Supreme Court

opinion in that case. Nevertheless, as we shall show,

the foregoing opinions donot change the Cowden rule.”

Thee Nourse case dealt with a municipal. ordinance

charging water rates to the property serviced and pro-

viding for shut off of supply in the event of delin-

‘quencies, irrespective of change of ownership or oc-

*-“cupancy. It was held unreasonable and. discriminatory

as applied to the petitioner who sought to have water

supplied after it had been shut off because of the---—-——

delinquency of a: former owner.” It was. not a rate

-discrimination case, although the. court commented on

. the city’s “uty’to furnish water to all inhabitants with-

out discrimination.

Cowden v. Pacific Coast: S.S. Co. is cited in Lamb. v. Calif,

Water & Tel. Co. (1942), 2) Cal. 2d 33, 43, and in Southern

Pac. Co. v. California Adjustment Co. (9 Cir. a ha 237 Fed °

954,959,

_—4—

The Hobby case ‘involved anf ordinaneg. imposing an

annual service charge on two-family dWellings outside |

city. limits for sewer connections .with the city’s sew-

age system, T he court held that the nonresident plain-

tiffs had no inte: est in the ‘city’s sewage system, were

not part of the public served and that any rights they

might have could be’ prescated only upon a contrac-

tual relationship with the city. No question of dis-

crimination properly arose. The rule‘of Cowden was

obviously not changed by the case,

In the Durant case, the plaintitf, living outside the

city limits received water service from a ‘privately owned

ped acquired—by the deindant city,

lull charged qifferent rates to consumers

inside and 10se” rh the city limits. Judgment

requiring | (city to supply water to, the plaintiff at

the same rates as charged custbmers within city limits

was reversed. From the 6pinion. three possible bases

for the reversal ‘appear: (1) That the city by acquiring

the private utility assumed a trust to perform its con-

tracts and an obligation to furnish plaintiff water at

reasonable rates, not necessarily at the’ same rates paid:

by residents of the city (It is therefore argueble that

the case was disposed of on its’ particular facts’And not

on principles of public utility common Jaw.) ; (2) that

a utility may classify ‘its customers on a reasonable

basis and charge different rates thereby, the court’ ju-

dicially noticing thany reasons which would justify a-

difference in rates to consumers differently situated:

and (3) that in the absence qf any showing that rates

were unreasonable, untair of fraudulently or arbitrari-

ly established. the plaintiff’ had no grounds for re-

lief. Both parties before us in the instant case, not

de _ .

—42—

surprisingly, have relied’ on Durant. Western argues

that. Durant was reversed because’ the plaintitt failed to

prove substantially identical conditions’ prevailing be-

tween residents and nonresidents. City argues that the

reversal is based on the failure to prove an unreason-

able (i,e. excessive) rate. One thing is clear to us:

Durant does not eliminate the requirement of alleging -

aml proving an unreasonable rate, in order to recover at

common law._ ™~ .

“Since the aseipeadiided ev ‘Meace shows and the ap-

pellant concedes that_the rates charged Western were

not excessive, Western has no actionable claim of dis-

crimination. and under the rule of lawsannounced in.

Cowden, the judgment herein must be aff irmeth..

Assuming arquendos that. Western is not’ precluded

frony recovery by the rule announced in ‘Cowden and

that, even though the ch-.rges paid by it were not exces-

sive, a cause of action lies for discrimination - based

on a difference of rates, we proceed to consider wheth-

er there was unjust and therefore actionable discrim.

ination under the facts in the record before us.

Whether in particular instances a difference of rates,

_ as between. userfo! a public utility service constitutes

‘unjust discrimination, or whether such difference is

justified by the conditions, and circumstances attend-

ing such use, are questions of fact depending on’ the:

_ matters proved in each case. (Interstate Commerée °

Commission v. Atabama Midland Ry. Co: (1897) 168

-US-144, 170: Barringer & Co. v. United States (1943)

319 U.S. 1, 6;% Pennsylvania Co. v. United States

(1915) 236 U.S. 351, 361; Western Union Telegraph

Co. v. Call Publishing Co.. supra, 181 U.S. 92, 103:

Postal Telegraph-Cable Co. v. Associated Press (1920)

coe

ray

i |

228 N.Y. 370, 127 Nak. 256, 258. ) The, trial court

found, that there was no. vnjust discrimination . in the

instant case. Our inquiry then ‘is whether this finding »

is supported by substantial ev idence.

' Turning to consider the problern at hand, we can->

. Not ignore,its historical antecedents. At the. heart o!

‘the contré¥ersy are the two oe .Proper

evaluation .of* the preferential charges which they em-

brace and the al'eged discriminatory treatment: which

they generate ‘can only be made in the light of the

circumstances and conditions out of which they arose.

As we have pointed out, until Western entered the

airport in 1944, United and TWA: were the gnly sched-

-uled air carriers operating from the airport. Thev

had been operating there as the only scheduled airlines

since 1932 and 1933 respectively but had not leased any

land. It is obvious that in 1940. at the time of United's

lease, the airport was still in its infancy. It is also

clear that the following ten years were 2 period of

growth and development. Statistics comparing the fis-

cal year (1939-1940) precetling United's lease with. the

fiscal year (1950-1951) followi ing the 1951 rate schedule.

are cogent and compelling: (a) Fixed capital in serv-

ice ‘increased from slightly less than $3,000,000 to al-

most $41,000,000; (b) airport passengers increased,

from approximately 126,000 . to approximately 1,700.-

000; (c) sck ‘wed air, movements increased from less

than 18,000. to almest 91,000. The record before us is

replete with documentary evidence, including maps and

photographs, which graphically demonstrate the phy sical

expansion and development of the facilities,

United’s first lease in 1940, as we detailed earlier,

covered land and: administration building space as well

as the common use facilities. It. was a parte ot a L pro-

gram in the moving oP U nited's western district head-

quarters ‘to the dirport. Tpeprov ided for the construc- -

‘tion of capital improvements, to ‘the cost of which;

-aecording: to a later-revision, City agreed tof pa:

000 and United agreed to pay $450,000, \plus any

excess cost. TWA’s lease it 1942, also cbvered a

common use facilities. In each ‘instance; as We ‘have

mentioned, the: leases were ‘entered into pursua

public bidding procedure of the ‘charter. ‘ United's

-ond lease in 1947 covered approximately five times as

much land as the first lease and, while nat eliminatiity |

the lease features of the common use facilities, for rea- =

sons. we have indicated earlier, at least resulted’

’ doubling the rates of the earlier lease and orcviding

. for subsequent adjustments at five-year interv als, there-

after. “There was evidence ‘thas United expended ‘ap-

proxirtately $460,000 for: imptovements under the 1940.

lease, and $11, 400,000. ‘between 1947 and. 1957. under

_« the 1947 lease. ae <

The foregoing leases. were thus integrated agreements

for the leasing \ on a long-term basis of. land, and build-

: it a well as common, use facilities and, in the case

t United, for the bonstruct, mn of improvements which

would’ eventually becomie the iperty. of “Ct ity. It is

apparent _ that the parties contergplated the expenditure

of large sums of money in capitah and operating. ex-

penses, and the increase of air traffic by the only two

scheduled airlines, using the airport until Western en>”

_ tered in. 1944. ‘Rate provisions for common use fa-

cilities coritained in-the leases cannot be considered

separately and apart. from the lease agreement as .a

-f£

: “”

a | am

whole. It is ‘dear that, other, ‘considerations moved

té6 C ity in addition to the amounts paid tor such ta-

by: City to:efiect thee expansion and development of

cilities. The leases’ were instruments. . skillfully used —

its airport. To an airport still in infancy and facing -

sthe vicissitudes of. growth, they offered on the part

of its only two important patrons, a long-term guaran-

tee of patronage and support and the commitment of

participation in construction of new facilities. “To in-

sure for itself such advantages, City elected to pro-

ceed by contract: rather than by the usual regulatory

process ‘in prescribing rates for common use facilities

for these two airlines. Its authority tO. so proceed

has been clearly established and each lease entered into

by City ~vas" a valid contract expressly authorized

e &

by state law.” |. (Trans World Airlines v. City & Coun- °

- ty of San Francisco, supra, 228: F.. 2d 473, 470.)

Nevertheless City’s regulatory process remained fully

operative as to other users of such common facilities as

is seen by the rate schedules: adopted by its Public

Utilites” Gp mission in 194k, 1946, 1951 and 1954.,

City thus created two classifications of users of its

_ commoruse facilittes at the airport: One group aiding

- in the growth and development 6f the airport. as we

have pointed out, occupying’ and improving exclusive

facilities and, as an adjunct there@f using common fa-

cilities ;_ the other group, users of. the common facilities

only, uncommitted to the occupancy ‘and dev clopment , of

airport land or other permanent facilities. The first

group therefore used the common use facilities under

different circumstances and conditions than the second

group. There appears to us to bea. logical arid rational

basis for such classification in the. fact that the first

- 8 «

( ; ; :° . . ae *, ; a

le - Si . 46> , ; =

group actively promoted the growth ‘and development

of the airport while the second group was under no

: ‘such obligation. (Cf. Live Oak W. U. Assn. v. Rail-

road Com., infra, (1923) 192 Cal. 132, writ of error

_ dismissed (1926), 269. U. 3. 354.)

~ The above classifications of airport users and the

different methods employed® by City to fix rates ap.

“plicable to each, presented no problems aintil 1951 be- -

_* cause-until then the rates’ applicable to. both classes:

(with the exception of, TWA) were the same. ait

was only when the rates prescribed by each method—con- .

tract and reguldtion—became divergent, upon the adop-

— tion of the 1951 schedule: that’ we ‘find the classifica-

‘- tions challenged. These increased rates -were necessary. °

because of increased operating costs and. demands for °

capital investment. There is no evidence in the record |

_ that such new rates were not reasonable. Appellant

"concedes they were reasonable. City. attempted by legal

action to.make such rates applicable to the leaseholders —

but was unsuccessful: (Trans, World: Airlines v. City &

County of San Francisco, supra, 228 FE. 2d 473.) Since,

as established by the above case, it had authority in fix-

“ing rates to proceed by contract or regulation, we can

‘find no gule of law which compelled it to follow the:

_ former course. It is apparent that the City’s airport

had undergone phenomenal grow th and dev elopment by

1951. Obviously, it was not necessary for City to re-

sort to the same integrated agreements itgfound helpful

under -other conditions. ;

“It is only ‘unjust or unreasonable discrimination

which renders a rate or charge unreasonable ; ana a

utility may, without being guilty of unlawful discrimi-

nation, classify its customers or patrons on any req-

—

oe tay ~ ie Si aS oe

3 : oe ee a %*

sonublé basis,.as according to the purpose for which

they receive its service .or product, or the quantity or

_anionnt received, or-the different character of the serv-

ice furnished, and, subject to the general requirements

of reasonableness . . . make separate rates for each

“class or group, even though there is but: ‘yne- customer

included therein.” (73 C.J.S., Public Utilities, § y

pp. 1049-1050, emphasis silted see Durant v. * City ot

Beverly. Hills, supra, 39-C al, App. 2d 133, 139; Live Oak

V. U. Xssn. v. Railroad Com., infra, (1923) 192 Cal.

132, writ of error dismissed (1926), 269 U.S. 354.)

The» trial court heard and. ex xaimined viliaahiidies evir,

dence dealing with the history. of the airport, its growth

and development, the purposes and objectives of. long-

term leases, and the rate fixing. policies of, the. City’s

Public: Utilities Commission. In our view, it could

_ have properly concluded in the Jight of such evidence

‘that the two classifications of users of ‘the commen fa-

cilities, which we have set out. above, were reasonable

and were based on material differences in the condi: ;

tions and circumstances affecting each’ group. Stated.

another way, the court’ cotild have properly concluded

‘that the contmon use facilities of the airport furnished

to the above lessees under long-term obligations to sus-

tain ‘and develop the airport were not furnished under

the same conditions and circumstances: as they were to

other users of the airport not under such obligations.

Any apparent difference i in rates is excused by dissimi-

lar conditions and circymstances: (Barringer & Co. \

United States, supra, 319 U.S.°1; Western Union Tel.

Telegraph-Cable Co. v.sAssociated Press, supra, 228

N.Y. 370, 127 N.E. 256.) The court's finding therefore

~ of tho unjust diecristinnsion: is Sanply — by: sub-

stantial evidence. |

Western appears to: mke _the position;. owever, ‘hat’

_ considered at any one time the. common use * “facilities

offered by. the City<to all airlines are precisely the

" same and,- ‘therefore, both the service offered to United,

TWA and Western and the conditions under: which that

service was rendered, were identical. The trial court.

was not required to- dissect a continuum of time and

circumstance into separate ‘units or to isolate from their

integrated agreements and thus from: their proper set-

ting, the clauses therein pertaining to the common use’

facilities. The trial court was required to examine the.

meaningless for the court to have confined its atten-

‘ tion to the problem, arising for example- in 1951, of

having different rates fixed by different methods for

two classifications of,users, without examining the gen-

problem as a whole and wholly. <It would have been |

esis and aritecedents of each class to determine the ra- |

tional basis of the classification. “Only by so doing.

could the fOurt determine whether discrimination was

justified or unjust.”

We find nothing i in Western’s efforts to secure what

it refers to as a “lease” which affects or detracts from

the trial court’s finding on the discrimination issue:

The court. found that City refused to give Western a

long-term lease of the common use facilities.” This

21The court's finding’ states in relevant part: “excepting that |

with respect to the allegation contained in paragraph XIV, to wit,

‘that at all times material to this casé plaintiff has. refysed* and

still refuses to enter into a similar or any contract with defendant,’

the Court finds that it is true that defendant demanded and

attempted to negotiate a lease with the plaintiff, for a fixed term

‘of years for common-use facilities and that plaintiff declined and*

refused to enter into such a lease.” °

“2 ; 7? ® ~_ ; , .

. 4 . © 49. ae

: BG - s<c%

does not support’ appellant's . theary of discrimination

because it is clear from the evidence that Western was

- not proposing to etiter into an integrated type of lease

* " similar to that of United, covering land as well as ‘the

common use facilities and proyiding for expenditures

for capital improvements. Westefri admitted, through

its witness Rénda, that it ‘was willing to lease hangar

space but not land which it would develop. “ This’ is

* borne out by the fact that W¢ ¢stern made no attempt to

lease the’ specific lands acquiredby United when they

Were put out to: public bid. It is-understandable when’

itis recalled that Western's maintenance base was ‘at

the Los: Angeles Airport. , It>could be inferred that

Western was not interested in becoming | a catalytic in

City’s airport development. City’s 1947 lease with

United, on the othér Jhand, ,ean be. justified: on the

basis that-C ity, already bow under the 1940 lease. and

the lower rate schedule, was’ successful, through’ the

. 1947 lease, not only in leasing additional land and pro-

viding for United's construction of substantial improve-*

ments thereon but_in cancelling the 1941 schedule of

rates in favor of the. 1946 schedule which doubled the

rate.

Appellant contends that any classification betwee

air carriers ." on the time they .commenced opera-

tions at the atfport is invalid, telying upon Postal

Telegraph-Cable Co, Associated Press, supra, 228

a tee S70, a7 NE. 256: and’ Bradford y. Citizens’

Telephone Co. (1910) 161 Mich. 385, 126 N.W. 444.

Judge Cardozo stated in the Postal Telegraph case that.

“elasses are not ‘just and reasonable’ when the only —

"principle of classification is one of order in time witha i

resulting division between old: customers and new.’

x ground | for the. classification_ made_by the Railroad—-

— te

(228 N. Y,, . 375, 127 N 1.E., p. 257; ‘eeatdle iet:)

We have no quarrel with such statewent. Here, how-

ever, the principle of classification is the difference of

conditions and. circumstances. The Bradford case

which condemned ‘classifications of telephone subscrib-

ers madé on the sole factor of whether they were old’

"or new, is similarly distinguishable from the case before

‘us. a7

Appellant’ s argument that special - rate contracts do

not justify a rate differential unless such contracts are

available to. all users isnot only oversimplified and

~ thus inaccurate but also sought to be applied contrary

ito the facts in this record: Special raté contracts can

justify a differential in rates : if customers holding

contracts and those ‘not holding contracts are-so classi- .

fied.on a reasonable basis under the conditions and cir-

cumstances of the particular case. “(73 C.J.S., Public

Utilities, § 27 pp. 1049-1050, ‘supra; Durant v. City of -

Beverly Hills, supra, 39 Cal. App. 2d, 133.) Indeed -

Live Oak W. U. Assn. v. Railroad Com., supra, 192

~-Cal. 132; upon which appellant 1 relies, does not support

appellant’s proposition. On the contrary, it upholds a

discrimination in rates charged by a-public utility water-

company on the basis of a classification -between old

~ users.who had contracts with the-utility-and new users . .

who .did not. Jhe following language is pertinent to

the case before us: ‘That there is a legical and natural

Commission seems convincing. .A great many.of the

contract consumers had, in various ways from the be-

ginning of the utility’s existence, jaided financially

and otherwise in the ‘construction and .maintenance of

the irrigation system by liberal loans of money,. ad-

. : vancenients, donations of rights of way, and by making.

initial payments: aggregating large amounts for water’

rights... . 2". (192-Cal.. 132 at p. 140: _ emphasis

added.) ~ Nor does appellant's citation of section: 532-ot

‘the Public. Ktilities Code™ ‘support its above argument,

since, as we “have, shown, such’ provisions. of the code

apply only to. priz ately « owned public utilities. | (Los An-

geles’ Met. Transit Authority v. Pyblic Utilities Com.,

", "supra, 52 Cal. 2d 655, 661.)

Since’ we conclude that) there is ng actionable dis-

crimination, we deem it unnecessafy to consider City’s

contention that Western has failed to show any damage

eS apart from the differential i in rates. =

*2Section 532 provides in relevant. part that “Except as in this

article otherwise provided, no public utility shall . . ..extend to

any corporation or person any.form of contract or agreement or ,

any rule or regulation or any facility or privilege except such as

: are regularly and uniformly extended to all corporations and _per-

. | sons. The corymission may by rule or order establish such excep-

tions from the operation of this ‘prohibi ubition—ay-—#t-may” consider

"__just-and_reasonable*as to each pub blic utility.”

-*3For this proposition, City relies on I.C.C. v. United ‘tem

(1933), 289 U. S. 385, 389-392, where Mr. Justice Cardozo de- -

clared that when discrimination alone is the gist of. the claim and

a party who has paid only the reasonable rate sues upon a dis- ~

crimination because some ‘other party has paid less, “the differ-

ence between one srate and another is not the measure of the ;

damages. . ... He’is te recover, the daniages that he has suffered

which may be more shan’ the: preference or less. . . . The question

is not how much better off the. complainant would be today if-it——_—.

had paid a lower rate. The question-is-how much worse off it is '

: hare tene bsbd ess.’ For all that appears the prices

* charged for lumber by producers within the group were the: mar-

ket prices current-generally throughout the entire field of compe-

tition. [Footnote omitted.] If that is so, the producers in the

favored territory were not making use of the preference to mark -

the price down to an equivalent extent, and thus deprive the com-

- plainant, less favorably situated, of a reasonable return. They:

were letting the ‘price stand as it would have been if the tariff :

. had kgen.equal, and taking advantage of the preference to increase -* ~

the profit for themselves. That was gain to them hut it was not

—$—$—>

en, ee —52— -

The 1951 schedule of rates was. validly adopted.

Finally appellant contends that the 1951 schedule oi

rates was not validly adopted as a result of which the

1946 schedule femained in effect until the effective

' date of the 1954 schedule on September 1, 1954.**:

Section 130°of City’s charter provides that should.

the Public Utilities Commission, in fixing rates for a

utility, propose a so-called “deficit schedule,” that is

one which:shall not produce revenue sufficient to pay

operating expenses and other designated charges, for

at least the succeeding. fiscal’ year, it, may do so with

the approval of the board of supervisors by a two-thirds.

vote. The section also prqvides that an ordinary, that.

is nondeficit, schedule becomes effective unless a two-

thirds majority of the board rejects it; upon failure of. .

the board to act within, 30 days in such latter case, the

schedule becomes effective.” | |

- Joss to the complainant. . .. There would be no necessary :cor-

: ‘respondence between preference’ and damage.” “3

We have not been referred to, nor have we found, any Califor-

nia case which passes on the quéstion. In reply, Western's position

is that the parties before us have by stipulation agreed that the

recoverable sum is the amount of the protested rates. As noted, in

out opinion, we do not decide the above point. aes

24Appellant does not question the valid enactment of the 1954

schedule. Hence only-the.pfotested rates chargeable to the period |

January 1, 1951, through ‘August 31, 1954, are here involved.

. Section 130 in relevant part cprovides : a. for each.

utility shall be so fixed that the revenue therefrom shall he suf- -

ficient to pay, for at least the succeeding fiscal year, all expenses

of every kind and nature incident to the operation and mainte- ”

nance of said utility, together with the interest agd sinking fund

for any bonds issued for the acquisition, construction or extension

of said utility; provided that, shouid the commission propose a

schedule pf rates, charges or fares for said utility which shall, not

produce such revenue, it- may ‘do ‘so with the approval of the

board of supervisors, by a two-thirds vote and it shali thereupon

be incumbent to provide by tax levy for the. additional amount *’

necessary to meet such deficit. All other changes in rates, charges

or fafes as proposed by the commission shall be submitted by: the’

| —53—

‘ ‘

As noted earlier, the 1951 ochedle. was approved by

the board of supervisors by a seven-aye, three-no, and

oné absent vote. Since the board is composed of eleven °

members and under the charter (San F rancisco Charter

§ 49) a two-thirds vote means two- thirds of alf the

members, such an approval would - require eight- ~aye

= votes. . The trial court concluded that the 1951 schedule )

“was legally and lawfully adopted by said [ public’ ‘utili-

ties} commission” and “was legally bess lawfully’ ap

proved.’ by the board of, supervisors.” * The main ques-

tion for our determination. enttore ‘te is whether the’. pe

schedule was-a-so-Called ‘ ‘deficit schedule or not. f ice

The record. discloses the following facts: O “Oc:

- tober 5, 1950, the manager of utilities subniitted to the — |

‘ Bublic Utilities Commission a proposed schedule -.

rates and charges together with a statement comparing

the proposed rate and: charge structure d révertue es: °

" titates with existing rates and sa This compari-

son | showed that, predicated on then -existing traffic _——

volun ahd occupancies; the net ineTease would be $140,-.'- a

475 per year. The report showed an estimate deficit —.

of $87, 437\under proposed: rates as contrasted .with an

. estimated deficit of $227, ott under existing rates. The

above-mentioned letter of the mahager ef uti ilities is *si-’

commission to the board: of supervisors for approval, and, except

as in this section otherwise provided, if shall‘require a two-thirds

vote of the board of Supervisors to reject the rate. changes as pro-

posed by the commission,’ and if so. rejected, such-“proposed

changes in schedules of rates, charges or fares shall be returned -

ission for revision. If the supervisors shall fail to act

. on any such/proposed schedule withir thirty days, the schedule

Shall thereupon become effective. ” (Emphasis added. ) . ae

emorandum opinion ef the ‘trial judge teidlentns he felt

re was no evidence that the 1951 schedule would produce

a deficit’ in the: succeeding fiscal year, that is, July 1, 1951, to

June 30, 1952. vip ? ape

2 lent “as” to ) the fiscal year ot which it is speaking but.

~~ the statement of. comparison of estimates of revenue

and expenditures clearly refers to the fiscal year 1950-

1951. _ Thus, such ‘evidence showed that “the .proposed. ~

; schedule of rates wotild produce’, a- deficit in the same

fiscal yearnot in the succeeding: fiscal year. °.No evi-

dence showed that a deficit would be ‘produced in the

ae sueceeding fiscal year, that is, the fiscal, year July -Z,

1951, to June 30, 1952. 3

On November. 20. 1950, the Public Utilities C ommis-, Sx

‘sion - adopted: the above- mentioned proposed schedule. *

(S.F. Pub. Util. Com. Res. No. 11 182.) Approval. by |

the: board of supery isors followéd on December 18, 1950.,

Neither the resolution of the Commission nor the

board refers to ariy dates. The record before: us

. contains fo other evidence as to the proceedings before

the commission’ or the board. Since approval by the:

board of supervisors was not by two- thirds vote, it is |

implicit-in the trial court's conclusion of legal and valid |

adoption and approval, that it- found the 1951 schedule

to bea normal schedule rather than a de ficit schedule.

Tt i is clear that it could not’be a deficit schedule because’

it did not show-a deficit for the “succeeding fiscal s ’

_ year.” ~The ¢ase of Hurst v. City & County of San

Francisco’ (1949) .33 ‘Cal: 2d 298; 302, in construing

section 130 of .the San Francisco Charter states:

“There can be no doubt that the reference to the ‘suc-

ceeding fiscal year’. in section 130 for. which a fare

shall be fixed at least equal to the operating expenses,

schedule is fixed rather than the rest of the fiscal year

in which the rate is established.” ‘(P- 302.)

ty .

a ‘

\ \.

ante

woes” ae

a ; ‘ . 2 ° :

.. Appellant argues that the forecasts made ‘and sub-

‘mitted by the manager of utilities when coupled with

the airport's history of, deficit: operations” make it -

clear that the Public Utilities-€ommission adopted a.

deficit: schedule within the ambit. of section 130 «of -

that such annualized and adjusted figures predicated

on traffic and conditions at the airport in October 1950,

were actually the basis for estimating needs for the -fis-

cal year 1951-1952. Thus, they were intended to show

and did show, an estimated, deficit “for ‘at least’ the suc:

ceeding fiscal peer So

There is no evidence in the record to. support ap- 2

__ pellant’s argument. ~The commission might not have

* intended at “all.to use the. 1950-1951 estimates in the

way urged by appellant. The estimates did not refer

to the next succeding fiscal year. It was appellant's

the charter. Appellant concedes that the estimates here *

‘in controversy referred te the fiscal year 1950-1951

(in other words, the same: fiscal year) but argues

burden to show that they did. Western introduced no

evidence as to what was presented to the board of su-

schedule of rates was submitted for approval. More-

pervisors’ on December’ 18, 1950, at the time the 195]

over the resolution of the P&blic Utilities Commission:

directed that “said schedule of San Francisco’ Airport

Rates and C harges be submitted to the Board of Super-

visors for approval as required by Section 130 of the

@harter and that, when approved, . either ‘expressly,

or . by operation of law, said Schedule of Rates and

Charges go into effect commencing with the first day

"The airport ‘showed a deficit in every year prior tothe 1951;

_ schediile. In all fiscal years 1938-1939 through §1949-1950 City

made: substantial contributions from. genera! tax funds to defray.

deficits, iene $10, 654 ,955.88 for the 12 fiscal years.

\- er hee tie

of Jariuary, 1951.” ( Emphasis: added.) In our. view |

this indicates that the commission did? not. consider that

it’ was “submitting a schedule w ‘hich was a deficit sched-

ule within the meaning ‘of section 130., Lf it had. been.

. a deficit schedule, it could have been approved only by

a two-thirds vote of the board of supérvisors. Only “Ee

nondeficit schedule could have become eff fective “when.

approved, : either expressly or by operation of law,”

that. is, by the failure of the’ oo to act within .

30. days. . ae aoe % e bn

The resolution of the boar Res. No. meee

of 1939) approv ing such schegule isip the record before

cus, bearing the certification of the Gerk ‘of the ‘board |

“that the foregoing” resolution was: adopted by the

-’ Board: of Supervisors, of the City and ‘County of San

a ‘Franeisco at its meeting -of Dec. 18, 1950. ” It is‘pre- -

sumed that the board regularly performed its official

duty and carried out. ‘all procedures necessary to the

full and_proper approval of the schedule submitted ‘to ~_

“it! (Code Civ: Proc., § 1963, subd. 15; Bringle v: Board

of Supervisors (1960) 54 Cal. 2d 86, 89; Millér v.

Planning Commission ( 1956) 138 Cal. App. 2d 598;

‘ 602-603.) Such a presumption is evidence. “(Smith

Smith (1958) 157 Cal. App, 2d 658, 662.)

"Appellant argues, however, that a certain item of

"documentary evidence (Plaintiff's Exhibit 72) would*

- prove conclusively that the 1951 schedule of rates was

proposed as a deficit schedule and that the trial court '

erred jh ‘excluding it. , The salient facts are ironic..

The exhibit | in question is an opinion -of respondent's s

ba |

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city attornéy given in answer to a ‘request by respond.

ent’s controller.” It bears date of December 29, 1950.

11 days after the- board of supervisors. approved the

1951 rate schedule. @ The. exhibit’ was offered ‘by re-

“spowdent, objected to ‘by appellant, and ‘finally excluded -

by the trial court. which: sustained appellant's objection

- thereto.%:- BT %

Appellant: argues that if ‘the exhibit. was objection-

able at all, it was on the ground of ‘hearsay and, since

‘no special objection was made by ‘appellant: on that

. . z . 7 . . . bd ss a

ground, appellant’s general objection, if it aniade’ one.

‘was insufficient to

ts : ‘° .

ee Y vt :

The city attorney's opinion (Opinidh No. 313) quotes the —

controller's request :for an or:nion. . This. quoted material ‘in

turn tefers to'a purported adrissian of the Publie Utilities Com-

mission, ‘The quoted material which -appellant seeks to, utilize as

evidence is as*follows: “ ‘The Publi¢ Utilities Commission, in

making its presentatiqn to. the Board of Supervisors, —

that the schedule of rates and charges’ for the San, Francisco Air-

port, as-proposed under its Resolution ‘No. 11,182, would ‘not~be,

to,use the language of Charter Section 130, “suffigient to pay for

at least the succeeding fiscal year, all expenses of every kind and

nature incident to the: operation and maintenance of ,said utility, *

. together with the interest and sinking fund for anybends issued”

.. for the acqyisition, construction or. extension %

* * :

said utility

@ 9

_ On the last day of the trial respondent's counsel -indicated _

City would offer the opinion as an adininistrative ruling showing

that ‘on the basis of’a city attorney's opinion, the’ supervisors vote .

on the 1951 schedule was valid, Appellant’s counsel questioned

whether.ati opinion vas evidence. The court observed that when

filed, the offered exhibit, like others discussed, would be: marked

for identification subject to:the objection of appellaat’s counsel.

This was pugsuant to a prior ruling of the court under which |

-various exhibigs were’ to’ be so marked and their admissibility in

evidence subséquently argued by counsel for .the parties. The’

exhibit was finally filed with ‘the court during the oral, argument,

raise the hearsay objection, relying:

which occurred some six months after the trial. At.that time, | _

upon. the’ court's’ inquiry of counsel as to whether there was an

objection. to the document, one of appellant’s cotinsel stated: that

there had been an objection previously by another counsel of

appellant. (here :

_—

be * es

| upon Rapp: v. Summerfield. (1958) 161 Cal. | App: 2d

657, 6 As a result appellant takes the poSition that:

at” is not hare precluded by any wbjection in the record, :

from challexiging the trial court’ s exclusion of, the’ ex-

hibit. Pe, teens és

It As: clear to us that appellant’ sc uinsel made an ob- |

a jection, to the exhibit. Since the. ohjection did not spe-

cifically state the grounds | or specify the ‘particular de-

‘fect,- ‘it was a general ‘objection. The rule is settled

that a general objection will hot raise on appeal the

point of erroneous adyrission Qi "evidence on the spe-

cific ‘grounds that it was hearsay’, Such’ an: -objection

- constitutes waiver-of the defect. aw itkin. California.

Eviderice. §§ 700- 703. pp: 732-736; Rupp v. Summer-

field, supra, 161 Cal. App. 2d ee The above rule’

does not apply to the éxclusion .of evidence. When

evidence is excluded. upon a mere estes objection, the

trial court’s ruling will be upheld if any ground exists

for the exclusion (1, Wigmore, Evidence (3d ed. 1940)..

§ 18, pp. 332-338: McBaine, California Evidence Man- <

‘ual, § 1494, p. 537). The document in questian is

clearly hearsay. - Paraphrasing Wigmore. this. “valid

_ ground: was apparent to ‘the judge without express

statement.” (Wigniore, supra. p. 338.) The trial court

did not err in rejecting the exhibit in question.

‘We are of the opinion therefore that the conclusion

of the trial court that the 1951 schedule.of rates was

legally and: lawfully adopted by the Public Utilities

Commission and was legally and lawfully approved by

the board bf. supervisors is supported by the record and

must be upheld. We therefore deem it-unnecessary to

consider other contentions made by City in en: of

. its position or this issue.

“e

| /—59— ,

We theréfore hold that Western ‘has no actionable :

. ¢

claim of unjust discrimination for the recovery of

‘charges paid by it under protest, based upon the Federal —

Airport Act of 1946 or upon any of the assurances or»

‘agreements made by’ City, to the federal government pur- -

suant to such act or other federal acts; that Western has

‘no such actionable ‘claim under principles of public utility

law: assertable upon the* basis, as We SO conclude, that

City’s airport is a public utility and thé common use

facilities thereof are a public utility service; that the

1951 schedule, o1 ¢ rates for the airport was validly

adopted and approved; and ‘that all charges made tor

sych facilities against W estern during the period. here

involved were — and properly made, received* and

retained by City... °

> The judgment is affirmed.

ps ar er ae Sullivan, J. *

ee . - @ 4

-Weconcur: . ee.

Bray, P. J.

Tobriner, J. : ak OH

. :

’

¢«

P ; °

err”

}

we Memorandum Opinion of California

Pose Superior Court. .

Ins the Superior Court of the State of California, in

and for the City and County of San Francisco.

City and County of San Francisco, a municipal corpo--

ration, ‘Plaintiff, vs. Western Air ‘Lines, Inc., a Dela-,

ware corporation, Defendant. No. 414510.

In view of the obvious importance of this case, the

Court deems it desirable to set forth a brief history of

‘the pertinent facts of this litigation. In the year 1940,

and for a number of years prior thereto, the San Fran-

cisco Airport, owned and operated by the City and

County of San Francisco, hereinafter referred to as’

City, was serviced regularly by only two scheduled ‘air-

lines i.e., United Airlines, Inc. -artd Trans World Air-

lines,. Inc., hereinafter referred to as United and TW A,

respectively. In 1940 the City entered into a leasé with -

- United demising certain: premises and specific airport

facilities for a. term.of twenty years; and in 1942 en-

tered into a substantially similar lease for a like’ term ’

with TWA. Both of said leases provided, among other

things (not, germane to this_discussion ) for the pay-

ment of certain chargés afid rates. for “common: use:

facilities’” i.e., those used in Common by _all all airlines such

as landing areas, runways, aprons, taxi-we ways, water fa-

cilities, lights, etc. This litigation involves ony. the

rates charged for common use f facilities. of ats

" In 1944 Western Air Lines hereinafter referred to as

Western, became a user of-the airport under a revocable

perunt authorizing it to utilize the “‘commion use facili-

;

“ties” for which it was charged rates pursuant to a sched-

ule which: had been. adopted by the City in 1941, and

“which rate was the’same ‘ts that charged United and

TWA, under the said leases. As a matter of fagt all

airlines paid the same rates: for common use ve facies

‘between the years 1940 and 1946. ee as

eIn 1946 the Gity, adopted. a new schedule of rates for

these’ facilities whereby the charges were approximately

doubled. These new. rates were paid by all airlines ex-

cepting United and TWA who continued—to~ pay the

rates’ prov ided for in their respective leases. In *1947,

however a new lease Was entered ‘into between the ‘City

and United for a period-ot 40 years, the terms of which

apparently susperseded the 1940 lease. Under this lat-

ter lease United agreed, among other things, s, to lease

seventy-five acres in addition to the fifteen previously

-Idased; -it agreed tu pay the’ rates’ under the 1946 sched-

ule with a provision for a ten. per cent -increase every

five years; and it agreed to erect’ and make certain capi- .

tal improyements: which would: revert to the City at the

termination of the lease. Thus, from, 1946 to 1951 all’

airlines except. TWA paid the same rate for common

‘use facilities.” .

-N .

The City in 1951 and again in 1954 increased. the

rates for these. facilities. Western was billed for these

charges, and it has paid under protest for attic period

‘from January 1,.1951 to August 31, 1957, the ‘difference

between the 1946 rates.and those established in 1951 and

1954. Specifically, this amounts to the sumr of $214.-

* 385. 74 ‘which is the subject. of this litigation. The.

City. is suing te retain this sum paid to it under pro-

test. and Western has counterclaimed for its refund.

During “said period from January 1. 1951°to August _

| wil

31, 1957 TWA has continued to pay the 1941 rates set

by its lease, and United has paid the, 1946 rates plus an.

increase of ten percent in 1953. -, &

Riter the | 1951 rates were promulgated the: City

... sought to impose them upon TWA and it was en-

joined from doing so by a judgment in the Federal -

~ Court which upheld ye validity of. the 1942 lease.

; QrWA v. City and @otnty of San Francisco, 228. Fed.

{2) 473). Upon the rendition of said judgment the

> City @ismissed a suit which it had likewise filed against

_ United for the payment of rates under the said 1951

schedule.

From, 1944 to the present’ time Western has inter-

mittently demanded and attempted to negotiate, alease —

for a fixed term of years for common use fadities,

but the City has declined to enter into such a lease. -

The respective positions of the parties are as follows: |

Western contends that it is being discriminated

: against, and in- this respect maintains that its rates

_ should be the. same‘as those paid by United under—the -

1946: schedule and fixed by its lease. No allegation of

discrimination is made as to the rates paid by TWA.

It is further.’ urged that the 1951 schedule of rates

were illegally adopted.

Western makes" four principal — in its presenta-

tion, to wit: - . is

(1) The San Francisco International Airport is a

public utility and the -furnishing of common use facili-,

ties in connection therewith is a public utility service;

that consequently the fates and charges paid under pro-

test are unjustly discriminatory and legally unenforce-

able under established peop of public utility law.

mum. of eight was required.

—63— % : \ «

This contention is founded on the: premise that there -

can be no discrimination in-rates as between those who -

make use of the facilities. .

(2) The rates and charges paid, under protest are

unjustly discriminatory and legally unenforceable be-_

cause they are in violation of agréements entered into

by the City with the Federai Government to induce the

grant of Federal funds for the development of the Air-

port. ‘ This contention. is based on the premise that

Western is a third party. beneficiary to these agree-

ments: wherein the City gave assurances to the Federal

Government that it would maintain and operate the Air-

port, “without unjust discrimination.”

¢ (3) The 1951 Schedule of rates was illegally adopted -

by the City because the s&id ‘schedule proposed by the

Public Utilities Commission to thé Board of -Supervi-

sors did not recéive the required approval by a two-

thirds vote of the Supervisors as required by Section

130 of the Charter. The contention is made on the,

1s made anu

premise that®.the Schedule“was- “purportedly approved —

by a vote of seven members of the Board Ww hen a mini-

(4) The charge for: “Professional Fire Protection

Service” at the’ rate of $2400.00 per year included as:a

charge in the 1951 Schedule of Rates and included with-

in the amount. paid under protest herein isenot a proper

on charge.

The City. on the other hand, ‘iomhenia: (a) that the

Airport and its common use facilities Are not ‘a “public

‘utility; (b) that the rates involved in this litigation are

covered by the 1954 Schedule of Rates as well as those

provided in the. 195 1 Schedule; ‘(c). ‘that hee rates are -

e.9

fair and reasonable and are not unjustly discriminatory

as to Western under public utility law, California law,

or pursuant to the Agreements entered into with the

Federal Government under the Federal Airport Act and

other‘ contracts for: the grant of federal funds for the _

development of the airport; (d) that these rates are

lawful; (e) that a two- thirds vote of the Board of Su-

« pervisors was not required for the adoption of -the 1951

‘Schedule of Rates and Charges; (f) that Western is

precluded from attacking the legality of the 1951 rates

under principles of estoppel, by the pre-trial conference

order: ‘herein, because of a failure to plead illegality in

its answer, and because a collateral attack will not lie

as to the. determinations of the Board ‘of Supervi-:

sors; (g) that the fire protection charge is proper and

reasonable; and (h) that, in any. event, W estern has

f failed to show that that it has been damaged.”

‘PUBL IC UTILITY ISSUE

¢, Although there is some authority in other jurisdic-

tions td the ef fect that an airport is a public utility, .we

are of the opinion thai this is not the law in California.

‘There is nothing in. the Constitution or the statutory

law of this state which declares an airport to be a pub-

"+i utility ; nor have ‘any of the-decisions of our higher

courts” s0 declared. Our courts have gone no further

than to declare an airport to be a public enterprise.

Western argues that the cases ‘of Krenwinkle v. The '

_ City of Vos Angeles, 4 Cal. (2d) 611; Pipes v. Hilder-

brand, A40,Cal. App.. (2): 645 and Coleman v. The City

* of Oakland, 110 Cal. App. 715, are authority for the

- proposition that the maintenance and operation of an

airport and its facilities is a public utility. The Kren-

me =

/—65——

winkle and Pipes cases go no further than to,state that

the acquisition, conduct and maintenance of an airport

is a public enterprise; the Coleman case only stands tor

the proposition that the operation of an airport: consti-

tutes a proprietary function. None ot these cases

indicate that ‘an airport is a public utility... There is’

~ language in two other cases which lead me to believe

that the. maintenance of an airport ig not a public

utility, to wit, City of Whittier v. Dixon, 24 Cal. (2d)

664, and Larson v. City and County of San Francisco,

152 Cal. App (2d) 355. In both of these cases, which

cite the Krenwinkle case, courts in ¢ escribing—public

parking ‘places and facilities as’a public enterprise.

have ‘used this language. —“Public parking places serve »

a publi purpose. They may be compared to municipal

- airports which have been- recognized as public improve-

ments.’” The Larson. case in holding that a public off-

_street parking facility. provided for under the auspices -

of the Parking . Authority of. the C ity and County of

San Franéisco.is not a _ public utility uses this significant

language, : “Neither. the Charter, any legislative act

nor the Constitution has defined off-street parking as a

public utility.” We: believe that: the analogy can be

drawn between the Larson case and the instant case.

It should be noted® too, that the construction, mainte-

nance, and operation of an airport by a municipality has

been provided for by the. State Legislature by virtue of

* the Municipal Airport Law. (Government ( ‘ode: 50470

et seq.) This state-enactinent does, not declare an air-

port to be a public utility. There is authority for the

proposition that public utility status is created only by

a manifestation of clear intent to do so, (Allen v. Rail-

road Commission, 17 79 Cal. 68.) The Municipal see i

‘i oe P .

& —66—

Law has been held to , Have preempted the field of mu-

nicipally _ owned and operated airports which have been 7

declared not to be. strictly local ‘or municipal affairs, .

but subject ‘to. state law. (See TWA wv. City and

County ‘ef, San . Francisco, supra). Accordingly, any

provision or. enactment by local law or charter

. covering municipal airports inconsistent with or repug-

nant thereto. is superseded “by the Municipal Airport

Law. Furthermore, in the opinion of this Court, the

Charter provisions relied upon by W estern, to wit, Sec-

tions 121 and 122,-do not lead inexorably to the conclu-

sion that the airport is a public utility. A more reason-

able interpretation of these Chayer provisions is that

the airport is not ABsitied as a public utility but merely:

placed under the jurisdiction . of the- Public . Utilities

Commission. It should be likewise noted that the provi-

- sion of the Constitution and- the Public Utilities Code

-are applicable only to private individuals or‘ corpora-

tions engaged in public utility,services and not to munici-

pally ‘owned or operated public utilities, and conse-

quently have ‘no bearing on the issues involved: in the -

~~ case at bar.

“Tf our deterniinatiop ‘of the’ public utility issue is

correct Western Cannot ‘complain that it has been sub-

jected to unlawful discriminatory charges, for if the

airport is not.a public utility: the City may charge any

reasonable rate. Western has stipulated in this case to

“the fact that the rates set by the 1951 and 1954 sched-

ules are reasonable. Its complaint is that while the

rates are reasonable it has been unjustly discriminated

against under public utility law because the City” is

charging lower rates to TWA and United under their.

‘leases. Soe = ;

Assiiming arguendo that the airport is a public wtil- .

ity, can the City impose different, Rates upon separ ate

“users of the same facitities? The City contends that.

‘tinder the common law of the State of California and_

under principles of. pubtic utility law it can do so, rely-

ing on Cowden v. Pacific Coast Steamship, 94 Gal. 470,

and Durant v. City of Beverly Hills, 39 Cal. App. (2) :

133, The contention of Western is based upon authori- *

ties which. hold that under the common. law as inter-

preted by various state and federal cases that “hold that

only one rate may ‘be charged for the -wime service under

similar circumstances and conditions. It is the opinion

of this Court that it is. not necessary. for it to reconcile

‘he purport and effect of the common law as urged by

the respective parties | because this question has been |

finally decided in TWA v. ‘City and County of San

Francisco, Supra. The plain import of the TIVA4 case

adjudicating the, validity of the same TWA lease men- *

tioned above, is that, by virtue of the Municipal Airport

Att, supra, the maintenance of. a’ municipal airport is

not a municipal saffair but subject to state *statutes

which supercede common Jaw doctrines. It was held

therein that the City had the authority under the Act

to proceed to set rates by contract or by regulation: and

that when it elected to proceed ‘by contract, the effect

was. to suspend, during the life of the contract, the

governmental power to fix or ‘regulate rates. It is fur-—

ther held therein that the ‘Act enabled the City to’enter | .

into leases or contracts with a ‘single customer (Gov-~

ernment Code Section 50474), ‘but it does not: follow as.

W estern contends, that any failure ’ to enter into any

& -

—_—

other contract or lease amounts to discrimination. In

‘our. opinion the statute contains no mandate | that: all .

customers be charged identical rates ,regardiess, of the —

reasonable intérpretation of the statute in the Tight of,

-the TWA case is that the City may contract or .lease |

“as it deems fit and that Bich conduct does not amount:

to discrimination,

Western takes eee’ ‘further Resition that it has proven

_ unjust discrimination by - the City in violation of the:

City’ s agreements with the Federal ‘Government. - _This

argument is’ premised on the" theory - that the agree-

ments between the. City and the Government: under the

Federal Airport Act, 49 USC 1110; and prior thereto,

”. are made for a class of third party beneficiaries of °

which Western isa member. Under these contracts the

City agrees that “it will keep the airport open to call

types, kinds, and classes of aeronautical "use without

discriniination between such types, ‘kinds and classes”

and further the City must agree that it will “operate,

the airpert: for the use and ‘benefit of the public, on

~~ fair —_ reasonable terms, w ithout unjust ‘discrimina-

tion.” | Section: 11. Federal Airport Act, supra. The

City must further agree to charge “fair; réasonable,

and nondiscriniinatory prices.” Western further argues

that the use of the term “public” in the Act refers only

to firms and persons. operating aircraft.

The City, on the other hand, says that the Act con-

templates simply a bi-lateral contract ‘with mutual bene-

‘fits and burdens between the parties 4nd no other in- .

& div iduat i is intended to be benefited.

——

Tt is readily apparent that the intent of the’ National

Airport Act was to Set forth a Hie for the develop-

_ ment of various ‘airports in the United States. Nothing

in the statute or in the cases cited by W estern leads this

Court to the ‘conclusion that -the Act vests any private

cause of action in the defendant, nor is the Court able

to glean any intent that the contracts executed under .

the statute were. designed to benefit the airline indus-

try. The Act is silent on the propriety of the City

entering into leases but the state Statute patently recogs, -

nizes that power. The Court is also urtable. ‘to

_ adopt Western's viewpoint in this regard for the reason,

that it is ‘contrary to the general law. A contractor with\

the. United States even if his contract is to render pub-

lic service, does not bind himself to all the public. Re- |

statement of Contracts, Section 145; Ukiah v. Ukiah

Water.Co., 142 Cal. 173. It is manifest that the statute

wnlon wich Western seeks to‘enforce its alleged rightS

is not made for. the benefit of the airline industry

solely, but for the general. public. The narrow inter-

pretation placed on the enactment by Western must

be rejected. . =

Sull another reason militates against defendants’ po-

sition, It is apparent that entering into leasehold ar-

rangements with airlines is a normal. and. customary

manner of doing business in ‘the airport industry. Pre-

sumably Congress was aware of this when the statute

was, enacted. To adopt plaintif fs’ interpretation would -

“mean. that as soon as a lease was executed it would

automatically gear all rates. ‘to those of the lease re-

gardless of any other consideration the parties miay have |

had in mind. This is an obviously incongruous result,

and. to reach it we must be convinced that that was the

‘ff

precise Congressional intent. We are not so. ifelined.

What has been stated above: as to contracts between —

the City and the~Federal Government entered into

pursuant: to the proyision of the Federal Airport Act

“would logically apply with equal vigor to those con-

tracts: between the City and the Federal Government

executed prior to enactment of that statute. a

THE 1951 SCHEDU LE OF RATES.

‘Western challenges the validity of the 1951 Schedule

of Rates on the ground that said rates were. not legally

adopted in- accordance w ith: Section 130 of the Charter.

No attack is made on the validity of the 1954 Sched-

ule. As to this.issue, then, we ‘are concerned only with

the rates from. January 1, 1951 to September 1, 1954.

The City. contends that Western is estopped from rais-

ing this issue for the following . reasons: that it “is :

_ precluded from doing’so by. virtue of the pre-trial or-

‘der; that the issue has not, bgen timely raised; that the

failure. to raise .the issite. in its first answer herein

_ constitutes an admission that -the rates were legally |

, adopted ; and that it.cannot collaterally attack the action

of the Board of Supervisors. In. the Gpinion of this

Court noné of these grounds is tenable. '

Section 130 of the Charter of the City and County of

SanaFrancisco provides, that when the Public Utilities

Commission proposes a. schedule of rates for any utility

_(without limitation, as to public utilities) and the said

schedule of rates will not produce a revenue sufficient’

to pay, for at least the succeeding fiscal year, all ex-

penses of ev ery kind -and nature incidgnt to the opera-

tion and maintenance of said utility, together with the ..

interest and sinking funds for any bonds issued for the

eee Oe

acquiSitian, .¢onstruction or extension of said utility,

itquay do so with the approval of the Board of Supér-

visors by a) two-thirds vote of said Boerd. Tt should be

‘ noted) that said two-thirds véte is required only in- the

situation Where the proposed rate will produce a: deti-

cit in the’ next ensuing fiscal year. Section 130 fur-

ther prov ides that in order to reject any other schedule

of rates a vote of ewo- thirds Gf the Board of Supervisors:

is téquired, and if-the supervisors. fail to act, within

thirty day she schedule shall thereupon become e¢ffec-

tive.

In the case at bar, the ev iain shows that the 1951

schedule’ of rates’ Was acted upon by a vote of 7 ayes.

3 noes, and ‘1 absent. Under Charter Section 19 a

two-thirds, vote requires an affirmance of two-thirds

of the entire membership of the board regardless: ot

how mary are present. The board of SupEry jsors be-

ing comprised of eleven members, two-thirds of the to-

tal membership would require eight votes.

There is no evidence before this Court thai the sched-.

ule-of rates proposed by the, Public Utilities Cominis-

sion.to the Board of Supervisors, pursuant to-a resolu: |

‘tion adopted by: it on. November /20, 1950 to become ef-

fective on January 1, 1951,.w ould produce ai deficit in the

sueceeding fiscal year ive... July 1, 1951 to June 30, 1952.

The evidence only shows that the proposed. schedule

‘would produce a deficit in the fiscal year July 9, 1956

to June 30, 1951, or-in-other words, in the same fiscal

year that the schedule was proposed and adopted. ‘(See

Plaintiff's Exhibits 44, 45 and 46.) Under the authority

of Hurst. 7. City and County of San Francisco, 33

” Cal. (2d) 298, a two-thirds vote'of the board*of super-

72 *

visors is not required under, these circumstances; and a

majerity vote suff ices to legihly adopt the schedule.

The Court has also considered the claim of. Western

that the charges made .for professional fire protection

services at the airport are illegal and improper. These

‘charges were included in the 1951 schedule of rates

above found to be lawfully promiulgated, and they are

proper and reasonable in the light of evidence adduced

at the-trial. : | ;

_ .In view of the. foregoing, judgment is awarded to the -

‘plaintiff ~ City for the.sum of $214,385.74 heretofore

‘paid by the defendant to the plaintiff under protest.

Counsel for the plaintiff is directed to prepare findings:

of fact and conclusions 6f law consistent with vieg@s ex-

pressed herein. ; ‘ |

Dated: December-5, 1958: |

JOHN B. MOLINARI,

_Judge of thie Superior Court. -

°°

| fr:

‘Judgment of California Superior Court.

In the Superior Court ofthe State of Celiforsia;’

and for the City and County ot San Francisco.

City and County of San Francisco, a municipal. cor-,

poration, Plaintiff, vs. Western Air Lines, Inc., a Dela-

ware corporation, Detendant. No. 414510. +

This cause came on al tor trial on the Oth day |

and 13, 1958, before the Honorable John B. Molinari,

presiding without a jury; plaintittf appeared by its attor-

“neys, Dion R: Holm, City Attorney ° Of the City and

County of San Francisco, through” Thoniad M. O'€on-

_ nor, Public, Utilities Counsel, Robert. M. Desky, Deputy

_ City Attorney, MecMorris M. Dow, Deputy City’ Attor-

ney, and by Harold C. Faulkner, Esq., and defendant

appeared by its attorneys Messrs. Darling, Shattuck &

Edmonds, through Douglas lL. Edmonds, Esq., and Don-

ald Keith Hall, Esq., anid the Court having heard the

testimony and having examined the ity ea offered by

the respective parties, and the matter having been orally

for its decision, and the Court being fully advised in the

premises and having rendered its Mem randum Opinion

and an order for judgment on December 5, 1958, and

having tiled herein its findings of fact ‘and: conclusions —

of law, and havirig. directed that judgme nt be ‘entered in

accordance therewith; NOW, THEREF ~— ‘by reason

- of the law and findings aforesaid, -

ee a,

IT IS HEREBY ORDERED, ADJUDGED AND

DECREED:

T. That -the sum of $214,385.74 paid wader protest

pursuant to stipulation and.now on “deposit with plain-

. ‘tiff, is due.and owing to plaintiff from defendant.

be That plaintif fis entitled to the unconditional

ownership and full beneficial use of said sum of $214,- :

385.74, free of any claim thereto, or

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