Del Mar Water, Light & Power Co. v. Eshleman

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 668 In this proceeding in certiorari this court is asked to review and set aside an order made by the railroad commission by which petitioner was directed to deliver from its water system a supply of water for the use of one Glass, who owns property in the Del Mar Heights Tract, said Glass to pay one-half of the cost of extending petitioner's pipeline to the north boundary of said Del Mar Heights Tract, the designated point of delivery. The essential facts developed before the railroad commission are as follows: In February, 1906, the South Coast Land Company was incorporated and shortly afterward bought the townsite of Del Mar, with the exception of a few lots in the locality known as the "old town." The corporation also acquired other realty in that vicinity. In January, 1908, the South Coast Land Company entered into a contract with the Santa Fe Land Improvement Company by which the latter company leased to the former so much of its property on the San Dieguito Ranch, six miles from Del Mar, as might be necessary for sinking wells. Under the terms of the lease, the lessee agreed not to pump more than fifty miner's inches of water during any twenty-four hours. The lessee likewise promised to pump for the lessor water not to exceed fifty thousand gallons during each twenty-four hours for use on the lessor's ranch, and to furnish the Atchison, Topeka Santa Fe Railway Company with water for certain specified purposes at Del Mar. The South Coast Land Company, in February, 1908, brought about the incorporation of the Del Mar Water, Light and Power Company for the primary purpose of supplying water, light, and power to purchasers of land from the South Coast Land Company. To this water company the land company has assigned its lease from the Santa Fe Land Improvement Company for a water supply. The water company has constructed elaborate works by which, pumping from two or three large wells which it has sunk on the leased property, it supplies its quota of water to the Santa Fe Land Improvement Company and to its own customers. These include twenty-four consumers on land bought from the South Coast Land Company and seventeen inhabitants of that part of Del Mar known as the "old town." These latter are all of the consumers *Page 670 of water in said "old town," and they were found there when the land company bought the rest of the town-site. They were occupying land not purchased from the South Coast Land Company and were formerly supplied from wells which the said land company bought, but the use of which was discontinued when the Del Mar Water, Light Power Company brought its new supply to the town. A very large quantity of water is furnished by this company to the hotel, garage and power-house of the South Coast Land Company. The company has on two occasions sold water to persons engaged in highway construction and has occasionally supplied some water to farmers who have hauled it away in barrels, although some applications for water to be removed in this way have been refused. The articles of incorporation of the water company give it general powers to sell water and to generate and furnish electricity for light and power, but no territorial limits are defined as setting aside the area to be served. The principal place of business is Del Mar. The Del Mar Heights Tract, on which the property of Glass is situated, is surrounded on three sides by land belonging to the South Coast Land Company, but it is much more elevated in parts than any of the property of that corporation, which is being supplied by the Del Mar Water, Light Power Company. The Glass property is much higher than the reservoir on Inspiration Point from which the water company conveys water to the property which has been sold by the South Coast Land Company. After taking testimony regarding the operation of the water company and examining experts with reference to the amount of water which might be developed by the water company and its lessor on the latter's property (for the lessor had reserved the unlimited right to develop water on its own account and has developed and is using a considerable and increasing amount) the Railroad Commission found that the Del Mar Water, Light Power Company owns, controls, and operates a water system for hire; that it may reasonably take the fifty miner's inches per day from the sands of the San Dieguito River under its contract with the Santa Fe Land Improvement Company; that the maximum consumption of water hitherto delivered by the water company has been about 8.61 miner's inches per day; that the company "will not *Page 671 within a reasonable time require said fifty (50) miner's inches of water for use on the lands owned by the South Coast Land Company, and that it will have on hand an additional supply of water in such an amount that it can reasonably and safely supply" the land of Mr. Glass; that the present plant of the water company will be adequate for a number of years to supply the inhabitants of the "old town" of Del Mar, the purchasers from the South Coast Land Company and the settlers on Del Mar Heights Tract; that the only additional piping necessary to the delivery of water at the border of said Del Mar Tract would be a pipe-line from the water company's tanks on Inspiration Point to the designated point of delivery. The Del Mar Water, Light Power Company was directed to construct such pipe-line, to collect one-half of the cost thereof from Mr. Glass, and thereafter to deliver water for his use at the point designated, charging twenty-five cents per thousand gallons. In the opinion of the railroad commission, the learned commissioner, Mr. Thelen, said with reference to the construction of this pipe-line: "The engineering question of delivering water to or near the northern boundary of Del Mar Heights Tract is a simple one. There was some conflict of testimony as to the exact location of the pipe, but all parties agreed that it is feasible to lay a pipe-line from the tanks on Inspiration Point, through Arden Heights No. 6, to or near the northern boundary of Del Mar Heights Tract. The distance from the tanks is about 4,300 feet. The South Coast Land Company, shortly after Arden Heights Tract No. 6 is placed on the market, will have to lay a pipe-line through that tract for its own purposes. The pipe-line so laid can readily be used to supply water for use on plaintiff's property. Plaintiff can then pump the water from the point of delivery to his own property, as he has agreed to do." The plaintiff mentioned is Mr. Glass, and the "Arden Heights Tract No. 6" is a tract of land belonging, not to the water company, but to the South Coast Land Company. The opinion also contains the following paragraph: "As the South Coast Land Company might not need the pipe-line throughout the entire extent of its Arden Heights No. 6 Tract, at least for some time, it would not be fair to the defendant company to compel it to bear the entire cost of *Page 672 the installation of this pipe-line, and on the facts of this case, I am of the opinion that the defendant company should construct this pipe-line, but that one-half of the cost should be borne by plaintiff. If other residents of Del Mar Heights Tract later derive water through the same source, plaintiff may call upon them to share with him the outlay which he has made." Petitioner proceeding under section 67 of the Public Utilities Act (Stats. Ex. Sess. 1911, p. 55), contends: 1. That the commission exceeded its authority, for the reason that the Del Mar Water. Light Power Company is not a public utility; and, 2. That, conceding for the purposes of argument the status of the petitioner as a public utility, the railroad commission has not regularly pursued its authority, and the authority pursued is beyond the power of the legislature to confer. It is not necessary at this point to review the constitutional and statutory authority under which the commission acts, because it is conceded that if the petitioner is not engaged in a public use the commission has exceeded its jurisdiction. It is well to remember, however, that "a public utility" as defined by the constitution (art. XII, sec. 23) is, so far as a corporation like the petitioner is concerned, one owning, operating or controlling a plant or equipment "for the production, generation, transmission, delivery or furnishing of heat, light, water or power, . . . either directly or indirectly, to or for the public." That the intention of the incorporators of the water company was merely to furnish an instrumentality for managing and operating the water department of the South Coast Land Company there can be little doubt. But the finding of the commission that petitioner is a public utility is based in part at least upon its articles of incorporation. These are general in their terms, authorizing the company "to construct, buy, lease, and otherwise acquire and dispose of, hold, manage, control, and operate waterworks and distributing systems, ditches, canals, pipe-lines, and all other means or appliances for the acquisition, sale or distribution of water for domestic, irrigation and all other purposes, also to sell and distribute water for domestic, irrigation and all other purposes." It is true that these provisions are broad and that the company *Page 673 might, under its charter, engage in business as a public utility. The mere chartered authority does not, however, mark the nature of the operating corporation any more than the language of a notice of appropriation binds the appropriator to furnish all of the territory mentioned therein. (Palmer v. Railroad Commission,ante, p. 163, [138 P. 997].) It is the naked authority to do business, but unless it be pursued in a certain way it does not make the corporation a public utility. It is true that the corporation did not, as it might have done, in its by-laws limit the use of its water to the purchasers of land from the South Coast Land Company and to the corporations which it was required to furnish with water under the terms of its lease. But in practice its contracts were with the vendees of the land company. The serving of water to the seventeen inhabitants of the "old town" of Del Mar was not sufficient to make the water company a public utility offering its water to the general public. When the land company bought all the unsold lots of the townsite, its property surrounded the places of residence of these inhabitants of "old town." It bought and abandoned the old wells from which these people derived their supply, and its arrangement with the water company to serve water to them no more constituted the latter a public service corporation than did that contract by which the Santa Fe Land Improvement Company was to receive a certain quantity of the water which might be developed. The sales to contractors who were engaged in road building were no more significant than would be similar accommodations by a farmer from his wells, and the same thing may be said of the trifling amounts of water sometimes sold to neighbors and by them hauled away in barrels. That the water company had refused to furnish persons who had not purchased land from the South Coast Land Company was shown without contradiction, and while the reasons assigned were sometimes the scarcity of water, the fact of refusal remains. The fact is highly significant. It is also significant that under the arrangement which the water company had with the land company the latter was furnished with a large amount of water through unmetered pipes for the use of its hotel and other building. All of these facts and circumstances indicate that the Del Mar Water, Light Power Company was merely the incorporated *Page 674 water department of the South Coast Land Company. Indeed, the railroad commission, while holding that the water company was organized as a public utility, recognized some superior right to the water by the South Coast Land Company. The following quotation from the opinion illustrates this: "Where a water company has been organized as a public utility by the owners of a tract of land for the purpose, primarily, of developing that tract, and where the water company thereafter makes arrangements with the owners of water held in private ownership, as is the fact in this case, and water is developed, the owners of the land in question should certainly have, within reasonable limits, the first use of the water so developed. Accordingly, if it appeared in this case that all the water which the water company may develop under its contract, and such additional water as it may secure from the Santa Fe Land Improvement Company, in case such additional water may be developed, is necessary for the reasonable development of the lands of the South Coast Land Company within a reasonable period of time, this commission would not compel the defendant to supply water to outsiders." It is explained in the brief that this language merely meant that if in the future it becomes necessary to limit the territory to be served by the utility, it would be fair and reasonable to consider first the lands of the South Coast Land Company. If, however, the water company has held itself out to the general public of Del Mar as willing to furnish water to that territory, why should the former ownership rather than the location of property be the controlling factor in case a subsequent limitation of the area to be served should become necessary? No logical reason presents itself to our minds why one part of the community should thus be favored unless there be a recognition of the right of private contract between the water company and a selected class of customers, and the moment such right is recognized the status of the water company as a supposed public utility disappears. During the hearing and determination of the case the railroad commission sometimes recognized the practical identity of the two companies, yet insisted that the Del Mar Company was a public utility. For example, the commission has ordered the water company to extend its pipe across the land of the *Page 675 other corporation, although the latter was not a party to the proceeding. We are of the opinion that the Del Mar Water, Light Power Company never intended to engage in a public service and that it did not do so. Whenever the land company sold a lot it agreed to conduct electricity and water to the property line, and the purchaser in each case entered into a contract with the water company for the continued furnishing of those commodities. The facts of this case bring it squarely within the principles announced in Thayer v. California Development Company, 164 Cal. 119, [128 P. 21]. The Del Mar Water, Light Power Company was organized for the purpose of selling water to the purchasers of real property from the South Coast Land Company. It has consistently adhered to that purpose. If the purchaser of land from a rival vendor desires water he may develop it by buying water-rights or by condemnation of water for himself and neighbors. He may not demand a part of the private supply of this petitioner. The determination that the petitioner is a public utility is erroneous and the railroad commission is without jurisdiction in the premises. It has not been necessary to decide whether or not the commission has judicial power authorizing it to determine such a controversy as this. We might rest our decision upon the foregoing discussion and conclusion, but we deem it proper to notice some of the other contentions of petitioner. The commission had no power to order the building of a pipe-line across the land of the South Coast Land Company without compensation paid in advance. (Pacific T. T. Co. v. Eshleman, 166 Cal. 640, [137 P. 1138].) This would amount to the taking of property without compensation. It is argued that, assuming the public character of the petitioner, the order for the construction of the pipe-line is not void because condemnation proceedings might be necessary to carry it out. The case of Wisconsin etc. R.R. Co. v. Jacobson, 179 U.S. 302, [45 L. Ed. 194, 21 Sup. Ct. Rep. 115], is cited as authority for this proposition. In that case it was held that the State Railroad and Warehouse Commission properly directed a railroad company to build a connecting track in such a way that to obey the order it would be necessary to go outside of the company's right of way and to condemn land for that purpose. That *Page 676 case was thus analyzed by Mr. Justice Henshaw in Pacific T. T.Co. v. Eshleman, 166 Cal. 640, [137 P. 1131]: "No court will question the justice of the Jacobson decision under the facts declared by the supreme court. But just criticism may be directed against an attempt to extend the decision beyond the court's own statement of the facts and the law, and beyond what could, by any possibility, have been in the minds of the jurists who pronounced it. The decision itself amounts to a declaration that under the authority of the state constitution or statute, a commission or court authorized to exercise the police power in the matter of the regulation of public utilities, may, in the proper case, order a physical connection to be made between the tracks of two nearby or intersecting railways, and that, though the execution of this order may involve the expenditure of money, and may result in the modification of the use of a portion of the railroad right of way over which the connecting track or tracks be carried, such an expenditure of money, when reasonable, and such a limited change of use of the right of way, on the demand of public interest or convenience, are but the outcome of a legitimate exercise of the police power, and do not constitute a taking of property without due process of law. Such is the decision and the whole of the decision of the Jacobson case." The order which we are here considering was an attempted exercise of the power of eminent domain without compensation paid in advance. It was not an exercise of the police power by way of proper regulation. There was no showing, as in the Jacobson case, that the demands of the public justified the expenditure. Petitioner was ordered to construct at large expense a pipe-line over property belonging to another corporation in order that one customer might be served with water at twenty-five cents per thousand gallons. There was no showing of a demand by the public or any large portion thereof for water to be delivered at the boundary of Del Mar Heights Tract. True, it was ordered that the pipe should be large enough to serve the tract through which it was to pass — a part of the South Coast Land Company's property not yet on the market, but there was no direction that any one but Mr. Glass could demand the service. He was ordered to pay one-half of the cost of building the pipe-line and the *Page 677 petitioner was to get in return for the other half the privilege of selling water to him. If the commission could decree such expenditure for one consumer why could it not provide a similar system of service for each successive applicant, leaving the petitioner the doubtful privilege of collecting a toll which could not compensate it for the enormous outlay in many years, if ever? Of course the commission would do no such unjust thing, but unless its order that water be delivered to Glass should be amended, no other person would have the right to share it. In any view of the matter, the order as made deprives petitioner of property without compensation. It is therefore annulled. Lorigan, J., concurred.