CONDITIONAL SALES CONTRACTS UNDER PUBLIC SERVICE LAWS RELATING TO SECURITIES -- DIVIDENDS BY COMMON CARRIERS NOT SUBJECT TO APPROVAL BY PUBLIC SERVICE COMMISSION

CONDITIONAL SALES CONTRACTS UNDER PUBLIC SERVICE LAWS RELATING TO SECURITIES --DIVIDENDS BY COMMON CARRIERS NOT SUBJECT TO APPROVAL BY PUBLIC SERVICE COMMISSION

1. Conditional sales contracts need not be submitted to the public service commission for approval.  They are not included in the term "other evidence of indebtedness" as used in our law pertaining to securities.

2. The Washington Public Service Commission has no jurisdiction to regulate the payment of dividends on common stock by common carriers engaged in both intrastate and interstate business.

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                                                                   May 10, 1950

Honorable Owen Clarke, Chairman
Washington Public Service Commission
Insurance Building
Olympia, Washington                                                                                                              Cite as:  AGO 49-51 No. 272

Dear Sir:

            We have your letter in which you request our opinion in connection with the necessity for approval of securities issued and dividends paid by public service companies in compliance with chapters 151 and 155, Laws of 1933, as amended.  Your questions are as follows:

            "The first situation involves an inquiry from the Washington National Bank of Tacoma, concerning a transaction whereby a motor freight carrier holding a permit from this Commission under authority of Chapter 184 of the Laws of 1935, as amended, is purchasing some motor truck equipment under a conditional sales contract, the bank holding the contract.  The bank has inquired of the Commission and we request your opinion as to whether this conditional sales  [[Orig. Op. Page 2]] contract must be submitted to this Commission, and receive approval of the Commission in order to avoid the effect of Section 9 of Chapter 151 of the Laws of 1933, as amended (Rem. Rev. Stat. 10439-9) declaring unauthorized issues void.

            "The second question upon which we are requesting your opinion involves applications of the Reliable Transfer Company at Seattle, and the System Transfer Company at Seattle, who have respectively submitted applications to the Commission for approval of proposed dividend payments in compliance with Section 11 of Chapter 151 of the Laws of 1933 (Rem. Rev. Stat. 10458-5).  These companies in addition to doing an intrastate business, are also engaged in transporting freight by motor vehicle under common carrier permit from this Commission in interstate commerce moving into or out of the City of Seattle from and to interstate origins and destinations.  In view of the decision inState ex rel. Washington Water Power Company v. Murray, in 181 Wash. 27, does this Commission have jurisdiction under Rem. Rev. Stat. 10458-5 to regulate the payment of dividends upon common stock of these companies operating as common carriers under permit, under the provisions of Chapter 184 of the Laws of 1935, as amended."

            The conclusions reached may be summarized as follows:

            1. Conditional sales contracts need not be submitted to the Public Service Commission for approval.  They are not included in the term "other evidence of indebtedness" as used in our law pertaining to securities.

            2. The Washington Public Service Commission has no jurisdiction to regulate the payment of dividends on common stock by common carriers engaged in both intrastate and interstate business.

             [[Orig. Op. Page 3]]

                                                                     ANALYSIS

            Your first question, which involves section 9, chapter 151, Laws of 1933, as amended (Rem. Rev. Stat. Supp. 10439-9), deals with unauthorized issues of stocks and other securities.  Section 2, chapter 151, Laws of 1933, as amended (Rem. Rev. Stat. Supp. 10439-2), provides for the supervision, regulation restriction, and control of public service companies to issue stocks and stock certificates or other evidence of interest or ownership, and bonds, notes and other evidence of indebtedness and to create liens of their property situated within the state.  Section 1, chapter 30, Laws of 1937 (Rem. Rev. Stat. Supp. 10439-3), sets forth the conditions under which a public service company may issue stocks and stock certificates or other evidence of interest or ownership, and bonds, notes and other evidence of indebtedness.

            The answer to your question seems to be dependent on the meaning of the words "to issue stocks and stock certificates or other evidence of interest or ownership and bonds, notes, and other evidence of indebtedness."  A conditional sales contract would not be included in the terms "stocks, stock certificates, bonds, and notes," and, therefore, we must determine whether the expression "other evidence of indebtedness, other evidence of interest or ownership" includes a conditional sales contract.  We have been unable to find any decision by our supreme court on the term "other evidence of interest or ownership or indebtedness" in so far as the interpretation of our particular law is concerned.

            It is to be noted that in all sections of the law above referred to the words "issue" or "issued" are used.  The word "issue," as defined by Webster's New International Dictionary, is as follows:

            "To cause to issue, to send or let out, to emit, discharge, to deliver or give out as for use, to issue provisions, to put into circulation."

            To the same effect is the definition in Black's Law Dictionary.  Anderson's Law Dictionary defines the meaning of the word "issue", when used as a verb, as follows:

            "To put into circulation, to emit * * *"

            In the case ofChicago and Northwestern Railway Co. v. Railroad Commission of Wisconsin, 155 N.W. 941, 942, we find the following language:

             [[Orig. Op. Page 4]]

            "* * * These rules require us, when we find in a statute words relating to a particular or specific subject, followed by general words, to restrain these general words to persons or subjects of the same genus or family to which the particular person or subjects belong.  * * *"

            In the case ofLusk v. Staughton State Bank, 115 N.W. 813, 815, the court said:

            "The execution and delivery of an instrument or obligation not intended for further circulation by delivery is rarely spoken of as an issue of such instrument.  When we speak of bills, notes or other evidence of debt issued by any bank, it is quite difficult to believe that it is intended thereby to cover or include a contract made by the bank with one of its officers for his salary, or the execution of a bond and mortgage for the purchase money of its office site.  * * *"

            The expression "other evidence of interest or ownership or indebtedness" is referred to in the case ofState ex rel. Veale, County Attorney, v. School Board of Tecumseh Rural High School, District No. 4, et al., 204 Pac. 742, as follows:

            "It is but giving a common and natural effect to the language used to say that the other evidence of indebtedness means such as has been issued and distinct from such indebtedness as may have been merely incurred or created."

            To the same effect is the case of Cincinnati H. & D. Railway Co. v. Kleybolte, 80 Ohio State 311, [[80 Ohio St. 311]]88 N.E. 879, 880, in which the court said:

            "The term 'evidence of indebtedness' is synonymous with 'securities.'"

            Likewise, in the case ofHiller v. Olmstead, 54 F. (2d) 5, the court there said:

             [[Orig. Op. Page 5]]

            "'Evidence of indebtedness' within the statute creating estate by entireties refers only to instruments of same general nature as those mentioned therein."

            Contracts executed by husband and wife for sale of land owned by husband are held not "other evidence of indebtedness."  Hendricks v. Wolf, 279 Mich. 598, 273 N.W. 282, 284.

            InWebster Mfg. Co. v. Byrnes, 207 Cal. 630, 280 Pac. 101, the court, in construing a section of the public utilities act, which is similar to our law, stated:

            "* * * by use of word 'other' in portion providing that public utility may issue notes for proper purposes payable within year after issuance without consent of Railroad Commission, but that no note shall, in whole or in part, be refunded by any issue of stocks or stock certificates, or bonds, notes or any term or character, or any 'other' evidence of indebtedness, without consent of commission, was meant, under doctrine of ejusdem generis, such evidence of indebtedness as had preceded it, as bonds, notes, etc."

            In the case ofState ex rel. Lyon v. McCown, 92 S.C. 81, 75 S.E. 392, the court held that:

            "The warehouse receipts authorized to be issued under the state warehouse act * * * are not 'scrip, certificates or "other evidence of state indebtedness"' within the meaning of constitutional article * * * restricting the issuance of such paper."

            In the case ofIndustrial Loan Investment Co. v. Missouri State Life Insurance Co., 222 Mo. App. 128, 3 S.W. (2d) 1046, 1048, the court, in construing the phrase "other evidence of debt", held:

            "Authorizing seizure under attachment of certain property and other evidences of debt, held to limit evidences of debt, under the rule of ejusdem generis, to those of like kind and character to those specifically mentioned."

             [[Orig. Op. Page 6]]

            In the case ofTicer v. State ex rel. Holt, 35 Okla. 1, 128 Pac. 493, 494, the court in discussing the phrase "other evidence of indebtedness" with reference to bonds, warrants, and other evidence of indebtedness, held that the rule of ejusdem generis applies only to bonds, warrants, and other evidence of indebtedness of that character.

            To the same effect is the case of Wood v. Williams, 142 Ill. 269, 31 N.E. 681, in which the court pointed out that:

            "'Other evidence of indebtedness in writing' as there used refers only to evidences of indebtedness of a similar nature to those particularly enumerated."

            In the case ofPeople v. New York Central and H. R. R. Co., 123 N.Y.S. 125, 127, the court stated:

            "I agree that the words 'other evidence of indebtedness' as stated in the statute, refer to obligations of like character with stocks, bonds, and notes, and that a lease as such is not included therein."

            In the above cited cases the courts have indicated that the general words "other evidence of interest, or ownership, or indebtedness," refer to indebtedness of a similar nature to those particularly enumerated and to words of like kind and character of those specifically mentioned.  We believe the same interpretation should be made with reference to these words as found in our laws.

            As said in theLusk v. Staughton State Bank case,supra,

            "The execution and delivery of an instrument or obligation not intended for further circulation by delivery is rarely spoken of as an issue of such instrument"

            We think the same applies to a conditional sales contract.  It is our opinion that the terms "other evidence of indebtedness," as used in our law pertaining to securities, refers to the words preceding them, such as stocks, stock  [[Orig. Op. Page 7]] certificates, bonds, and notes, and does not include conditional sales contracts without a plain declaration to that effect.  It is, therefore, not necessary for the public service companies to submit such conditional sales, contracts to the Commission for its approval.

            Your second question inquires whether or not the Commission has jurisdiction, under section 11, chapter 165, Laws of 1933 (Rem. Rev. Stat. Supp., sec. 10458-5), to regulate the payment of dividends upon common stock of companies operating as common carriers engaged in doing both an intrastate and an interstate business.  This statute was passed upon by our supreme court in the case of State ex rel. Washington Water Power Co. v. E. K. Murray, 181 Wash. 27, 42 P. (2d) 429.  The court at that time discussed the history of the statute and the meaning of various words found therein.  The court, in that case, stated, page 35:

            "And so, to give the words 'engaged in intrastate business in this state' any meaning whatever, they must be treated as qualifying what immediately follows; and thus treated, the word 'only' was clearly intended and the clause should be read as limiting the application of § 11 to those companies doing only an intrastate business.  * * *

            "We are, however, convinced that there was no intent by this act to regulate the payment of dividends by those engaged in interstate as well as in intrastate business, and that, as it now appears the appellant was actually so engaged, * * *"

            In view of your statement that the companies to which you refer are common carriers engaged in both interstate and intrastate business, we believe the opinion in the above entitled case is controlling, and it is, therefore, our opinion that this Commission does not have jurisdiction, under Rem. Rev. Stat. Supp. § 10458-5, to regulate the payment of the dividends upon common stock of these companies operating as common carriers under permit.

Very truly yours,

SMITH TROY
Attorney General

PHIL H. GALLAGHER
Assistant Attorney General