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AGO 1966 No. 105 - September 26, 1966
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John J. O'Connell | 1957-1968 | Attorney General of Washington


COMMON CARRIERS ‑- COMMON AND CONTRACT ‑- REQUIREMENT OF PERMIT WHERE COMPENSATION PAID FOR TRANSPORTATION.

A purchaser of merchandise is required to obtain a permit as a common or contract carrier of motor freight where he is the purchaser of merchandise at a price f.o.b. destination which includes prepaid transportation, and, at his option, in his own vehicle, he picks up the merchandise at the seller's premises and transports it to destination, receiving from the seller the transportation charges which would have been applicable had the merchandise been transported by motor common carrier.

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                                                              September 26, 1966

Honorable Patrick D. Sutherland
Commissioner, Washington Utilities
and Transportation Commission
Insurance Building
Olympia, Washington 98501

                                                                                                              Cite as:  AGO 65-66 No. 105

Dear Sir:

            By letter previously acknowledged, you have requested the advice of this office on a question which we paraphrase as follows:

            Is a purchaser of merchandise required to obtain a permit as a common or contract carrier of motor freight where he is the purchaser of merchandise at a price f.o.b. destination which includes prepaid transportation, and, at his option, in his own vehicle, picks up the merchandise at the seller's premises and transports it to destination, receiving from the seller the transportation charges which would be applicable had the merchandise been transported by motor common carrier?

            Your question is answered in the affirmative for the reasons set forth in our analysis.

                                                                     ANALYSIS

            We reach the conclusion herein that some type of authority is required under the above circumstances.  However, resolution  [[Orig. Op. Page 2]] of the question of whether common or contract authority is necessary is heavily dependent upon the individual facts.  For that reason we will consider only a situation in which a single shipper and a single consignee engage in a transaction of the above nature, in which case the required authority would be a contract permit.  We can conceive of situations in which the purchaser-trucker could require common carrier authority but this is to be determined by the nature of the operation.  Miles v. Enumclaw Cooperative Creamery Corporation, 12 Wn.2d 377, 121 P.2d 945 (1942).

            The pertinent statutory provisions applicable are set forth in chapter 81.80 RCW.  Contract carriers are defined by RCW 81.80.010 (5) to include:

            ". . . all motor vehicle operators not included under the terms 'common carrier' and 'private carrier' . . . and further shall include any person who under special and individual contracts or agreements transports property by motor vehicle for compensation."

            A private carrier is defined in RCW 81.80.010 (6) as:

            ". . . a person who, in his own vehicle, transports only property owned or being bought or sold by him in good faith and only when such transportation is purely an incidental adjunct to some other established private business owned or operated by him in good faith."

            Under the assumed facts, there is apparently no question that the consignee, using his own equipment, is moving property being bought by him in good faith.  If no other element were involved, there could be no doubt that the transportation would fall into the "private carrier" category.  But payment of transportation charges by the shipper to the consignee removes the transaction from the realm of private carriage, making the movement one for compensation, and therefore subject to the regulatory jurisdiction of the utilities and transportation commission.1/   The transaction is squarely within the prohibition  [[Orig. Op. Page 3]] of paragraph 2 of RCW 81.80.260 which states "No 'private carrier' as such shall transport property for compensation."

            InElkins v. Schaaf, 189 Wash. 42, 63 P.2d 421 (1936), at page 48, our court adopted a definition of the term "for compensation" as used in the public service laws to mean "compensation pursuant to contract or agreement for . . . trucking, the regulation of such compensation being one of the chief purposes of the Act."  We view the direct payment of transportation charges as controlling regardless of the ownership of the commodities hauled.

            While the question remains open in this state, it has been resolved for many years in other jurisdictions.  The landmark case in this area of the law is Collins-Dietz-Morris Co. v. State Corporation Commission, 154 Okl. 121 [[154 Okla. 121]], 126, 7 P.2d 123 (1931), which involved the regulatory status of certain operations conducted by the company.  The issue before the court was stated as follows:

            "There are thus presented two major questions:  First, whether a delivery of goods belonging to a corporation by a truck belonging to the corporation over the public highways of the state of Oklahoma without a direct charge to the customer for transportation of the goods, the cost of the transportation being added to the overhead cost of the business, comes within the provisions of the act; and second, whether a delivery of goods belonging to a corporation by a truck belonging to the corporation over the public highways of the state of Oklahoma without a direct charge to the customer for transportation of the goods, the cost of the transportation being added to the price of the particular goods being delivered, comes within the provisions of the act."

            The court characterized the first as a "Class X Transaction" and the second as a "Class Y Transaction," and found that a Class X transaction, in which no compensation was paid for transportation, was not jurisdictional.  It was concluded that the act in question was not intended to embrace that class of transportation where goods are sold for a fixed price or conveyed mainly as an incident to the sale and where the  [[Orig. Op. Page 4]] price of the goods is not dependent upon whether or not they are delivered.

            A different conclusion was reached with respect to Class Y transactions, however, the court stating at page 127:

            ". . . the price of the goods delivered includes a direct charge for the delivery thereof.  The cost of the delivery not only is reflected in the price of the goods delivered, but the price of goods delivered is greater than the price of goods sold by the same wholesale house that are not delivered.  That the title to the goods remains in the vendor until delivered is immaterial.  Since the seller receives compensation for the delivery of the merchandise, we must conclude that the legislative intent, as shown by the terms of the act, was that this delivery be included in the provisions of the act."

            The courts have never had any great difficulty with what the Oklahoma Supreme Court described as a Class X arrangement.  InRountree v. State Corporation Commission, 40 N.M. 152, 56 P.2d 1121 (1936), it was observed that each of the appellees was engaged in the mercantile business, operating his truck for the transportation of his own property as an incident to his principal business for sale at the market price at destination.  The cost of transportation was charged to general overhead expense, and no specific charge was made to the purchaser or added to the price.  The court concluded that this did not constitute transportation of property for compensation.

            While the status of such carriage has not been before the supreme court of this state, it has nonetheless come to the attention of the predecessor of the Washington Utilities and Transportation Commission.  The Department of Public Service issued its order M.V. No. 30648 in Department of Public Service v. Centennial Flouring Mills Co., 28 P.U.R. (n.s.) 48 (1939), in which it held the operations of Centennial in the distribution of its products in Spokane and surrounding territory to be those of a "limited contract carrier" subject to economic regulation.  This order was subsequently reversed in Centennial Flouring Mills v. Department of Public Service, Thurston County Cause No. 18220, by judgment entered May 3, 1940, from which no appeal ensued.  Among the findings of fact  [[Orig. Op. Page 5]] entered by the court were the following: That Centennial never made any transportation charge of any character to its customers nor was there any hidden special charge or compensation paid by any customer for transportation, and that operating costs for transportation were charged to general overhead and distributed over all goods sold whether delivered or not.  The court held the operation to be that of a private carrier.

            On the other hand, both state and federal courts distinguish between the above factual circumstances and those in which a direct charge is made (or compensation is received for transportation).  InSmith et al. v. New Way Lumber Co., 84 S.W.2d 1104 (Texas-1935), it was found that a lumber company which charged more for its products which it delivered by truck, the extra charge covering only the cost of delivery and varying with the weight of the shipment and the distance hauled, was operating as a motor carrier for compensation and hire, and required a permit from the state railroad commission.

            We noted previously that ownership of the goods was not of prime concern.  This is borne out by decisions under the Interstate Commerce Act when classification of carriers has been at issue.  In A. W. Stickle & Co. v. Interstate Commerce Commission, 128 F.2d 155 (C.A. 10-1942) (Cert. den. 317 U.S. 650), an order of the I.C.C. classifying certain operations as those of a contract carrier was upheld as against a contention that the operation was private in character.  In that case, the company entered into contracts with purchasers to sell them lumber and to transport the lumber from the mill to their customer's yard for a stipulated compensation to be paid for transportation services.  At the time of trial, the company sought to camouflage the transportation charge by collecting on delivery of the lumber thirty percent of the total charge of the lumber and the transportation thereof instead of a stated charge for transportation.  In either event the customer agreed to pay an amount which included compensation to Stickle & Co. for transportation of the lumber.  On these facts, the court stated at page 160:

            ". . . A carrier may not avoid the requirements of Part II, supra, [of the Interstate Commerce Act] by subterfuge or device, or by posing as a private carrier when, in substance and reality, he is engaged under individual contracts in  [[Orig. Op. Page 6]] transportation by motor vehicle of property in interstate commerce for compensation.  Ownership of the commodity transported is not the sole test.  The primary test . . . is transportation for compensation."  (Emphasis supplied.)

            The court went on to conclude that the company was a contract carrier by motor vehicle subject to regulation under Part II of the Interstate Commerce Act.

            Of similar import on title and risk of loss as having no particular significance areInterstate Commerce Commission v. Tank Car Oil Corp., 151 F.2d 834 (C.A. 5-1945);Scott v. Interstate Commerce Commission, 213 F.2d 300 (C.A. 101954); andSay v. Prior Oil Co., 43 A.2d 417 (157 Pa. Super. 629-1945).

            To our knowledge no court or regulatory agency has been called upon to classify the operation of a consignee exercising an option to pick up a shipment at the seller's dock and receiving specific compensation for so doing.  In our judgment, however, whether the shipper or the consignee receives the compensation is a matter of pure form and not substance.  If the seller himself had undertaken to move these commodities to destination and receive direct payment for this service he would be subject to classification as a common or contract carrier.  We can see no possible basis upon which to distinguish the status of the consignee where he uses his own equipment and as part of the contract arrangement is compensated for such action.  While the movement may be incidental to the business of the shipper, it is nonetheless for compensation pursuant to contract or agreement for trucking, and as such would be contract carriage.  Trudeau v. Pacific States Box & Basket Co., 20 Wn.2d 561, 148 P.2d 453 (1944).

            In addition, we cannot conceive how an arrangement of this nature could be calculated to foster a stable rate structure free of discrimination, and provide shippers with a stabilized service and rate structure, or preserve in the public interest common carriage of commodities by motor vehicle, all of which are enunciated legislative policies to be found in RCW 81.80.020 and RCW 81.80.030.

             [[Orig. Op. Page 7]]

            It is our opinion that transportation of commodities under the arrangement you describe is operation for compensation and as such is proscribed by the public service laws in the absence of the requisite authority issued by the commission.

            We trust the foregoing will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

JAMES R. CUNNINGHAM
Assistant Attorney General

                                                         ***   FOOTNOTES   ***

1/"Transportatoin charges" as used herein are not limited to tariff rates but would include any form of direct compensation.  See,Collins, infra.

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