# Petition for Writ of Certiorari — Lipsky v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1963
- **Citation:** 371 U.S. 953

## Text

so

: ‘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.

ee

Hucu W. Dar ino,
DonaLp K. HALL, |
ie 523 West Sixth St., Suite’ 737, 7

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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

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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 : ;

—

eS pean

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.
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 :

t

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: |
Q

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-°

7

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 ¢ ;

of

4

te

--—

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.

x

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

5

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

~
DO

=o

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.

a

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.

i

—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
© $6,007,025.86. Both the applicable statute (49 U.S.C.A.
$$ 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.)

a
—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 ..

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 @. 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

eX

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-

Pd

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.

Ye

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

oe

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 .

a

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.)

.

ae

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
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

ee

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

nf
"
A

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 ”

_ 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-

é
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

&
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( ; ; :° . . ae *, ; a
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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.
Co. v. Call Publishing ©6.. sixpra, 181 U.S. 92: Postal
Telegraph-Cable Co. v.sAssociated Press, supra, 228

N.Y. 370, 127 N.E. 256.) The court's finding therefore

fn
>

~ 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 Citycould 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

\s

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-

a

. : 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

—$—$—>
ee

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’

ay

| —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-’

L

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,
means the next complete fiscal year after the date the ©
schedule is fixed rather than the rest of the fiscal year
in which the rate is established.” ‘(P- 302.)

-
+)

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.. 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 -

A

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.

oe

\- 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 |
}s

| : - ’ \
‘a eeoe: 6 “a : cee . |

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- 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-

a

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.

_ © THE DISCRIMINATION ISSUE

“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 —

circumstances ‘surrounding the lease ©: contract., 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

v

‘ff

i.

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
ee

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. -

Q

°°

| 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 |
ot January, 1958, and continued on “January 7, 8, 9,10 ©
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
argued on August 11, 1958, and submitted to the Court. ©
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 any — ‘thereof,
' of defendant. |

3, That defendant take nothing under its re |
and supplemental answer, or under any of the affirma-
tive defenses or the counterclaim alleged therein.

4, That the plaintiff do have and recover from de-
fendant its costs in this action amounting to the sum

Dated: This 6th day of May, 1959. :
Joun B. Mo_LiNnarI,. |
Judge of the Superior Court.
- Filed May 6, 1959. Martin Mongan, Clerk: By
R. -J.. Tracey, Deputy Clerk. .

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_0622%3A2. Public record. Not legal advice.