Sacramento Valley Electric R. v. Aston

HUNT, Circuit Judge (after stating the facts as above). The question for decision is whether or not the contract sued upon in the first cause of action is made invalid and unenforceable by the Public Utilities Act of the state. It goes without saying that such a contract is in itself not against public policy. A railroad company might well be expected to employ an engineer to gather information and data and to embody the result of his investigations in a report to be used in enlisting capital for the carrying out of the enterprise. When the contract was made, the parties to it evidently believfed that it was not against the statute of the state. Mr. Huston, counsel for the corporation, testi [702] fied before the District Court that it was his opinion that the power to make such a contract was implied in the order of the commission of August 13, 1912. It was not unreasonable to construe the order of August 13th prohibiting the creation of liability and payment of money “except for the commissions as aforesaid” until the sale of stock reached $750,000 as referring solely to prohibiting construction contracts. The purpose of employing Aston was evidently to gather data sufficient to enable the newly incorporated company to take its initial steps toward obtaining preliminary financial aid in the large principal cities abroad and in the United States. The contract in its essence pertained to formative matters rather than to contractual relationships which could not ripen into binding agreements without first having the approval of the commission. Actual construction of the road and liability for money paid out for commissions for sale of stock had.to do with things which would arise after the preliminary arrangements could have been successfully made. The concluding provision of the order of August 13th. requiring the company to submit to the commission for its approval the form of all contracts for the, sale or exchange of stock and before the execution thereof all contracts for grading, bridging, trade, including materials and labor and property, involving costs in excess of $1,000, does not interfere with the power of the company to contract generally and for labor and property, grading, and such matters, where the cost did not involve a sum more than $1,000. Furthermore, the provisions in the same order requiring accurate accounts to be kept and a report to be made to the commission, showing the terms and conditions of sales of stock authorized to be issued, and the use or application of such money or property, lends support to the argument that it was not intended to prevent the company from paying money on accounts of the nature of the one here involved, or other than on account of commissions for the sale of its stock. Confirmation of this view is found in the recital in the supplemental opinion and order of the commission made on September 27, 1913, where the activities of the officers and agents of the company were recognized by the commission as having been the means whereby 90 per cent, of the needed right of way for the railroad line had been obtained, for it is but reasonable to believe that such activities could only have been carried on by persons employed by the railroad company as right of way agents. Some further aid in construing the orders of the commission is found in the supplemental order of September 27, 1913, wherein the commission expressly ratified the action of the corporation incurring obligations in excess of $40,000, this sum being made up of items of expenses apart' from corporate obligations on account of commissions for sales of stock. It appears that informal consultations' were had with Commissioner Edgerton and his views were sought, and while he could not authorize any act to be done which required the authority of the commission, still, as one in authority, his interpretation of the [703] duties and intentions of the commission was entitled to respectful consideration by the officials of the company, and when afterwards the ratification of payments of large sums for expenses and obligations incurred between August 13, 1912, and September 27, 1913, was had by order of the commission, it served to show what construction was placed upon the language used in the order of the commission. Again, a second supplementary order of the commission, dated December 30, 1913, authorizing payment by the company of detailed expenses aggregating nearly $5,000, is evidence of the meaning to be put upon the original order of the commission. There having been no apparent purpose in the commission to prevent the railroad company from making such a contract for services preliminary to construction as is here sued upon, the plaintiff properly prevailed, unless the law itself forbade the contract. The statute, however, makes no declaration that a contract between a public utility and an engineer for work appropriately connected with preliminary matters is void without an order of the commission authorizing the same. With unmistakable certainty stock, stock certificates, bonds, notes, or other evidences of debts issued without an order of the commission shall be void; but notwithstanding the far-reaching power of the commission, as upheld in Pacific Telephone, etc., Co. v. Eshleman, 166 Cal. 640, 137 Pac. 1119, 50 L. R. A. (N. S.) 652, Ann. Cas. 1915C, 822, after careful examination of the several provisions of the act, they fail to satisfy us that it was the intent of the law that the courts should refuse to enforce a contract which has not direct relation to stocks, bonds, and other evidences of debt, and which we cannot find is included in the meaning of the prohibitory terms of the statute. Fackler v. Ford et al., 24 How. 322, 16 L. Ed. 690. It being our conclusion that the contract with plaintiff for services was not beyond the power of the corporation, the District Court was right in its judgment. Affirmed.