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CALIFORNIA.

Railroad Commission.

In re APPLICATION OF E. H. COOKINGHAM OPERATING UNDER

THE NAME AND STYLE OF LAGUNA BEACH TELEPHONE
COMPANY FOR A CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY FOR THE ACQUIRING AND CONSTRUCTION
OF A TELEPHONE SYSTEM AT LAGUNA BEACH,

Application No. 9264-Decision No. 13123.

Decided February 8, 1924. Purchase of Property Authorized Certificate of Convenience and

Necessity Granted — Value Determined Rates Established.

OPINION.

This is an application for a certificate of public convenience and necessity authorizing the acquisition and operation of a telephone system at Laguna Beach, and vicinity, in connection with a toll system operated by The Yoch Company between Laguna Beach and the town of Tustin in Orange County. In view of certain complications which have arisen, it is desirable that the facts pertaining to the application be briefly reviewed.

The toll line operated by The Yoch Company between Laguna Beach and Tustin was constructed primarily for the use of a hotel located at Laguna Beach and for the personal use of Mr. Yoch. In 1916 rates were filed with this Commission for toll service over this line, and the property has ever since been operated as a public utility toll line. Sometime prior to July, 1923, Mr. Cookingham, the applicant herein, negotiated with The Yoch Company for the purchase of this toll line, it being his intention after the acquisition of this line to construct a local exchange at Laguna Beach which, operated in connection with the toll line, would give a regular business and resi

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dence telephone service at Laguna Beach which had not theretofore been rendered. Pursuant to this plan, an application was filed with this Commission on July 25, 1923, by Mr. Cookingham for a certificate of public convenience and necessity authorizing the acquisition and operation of the proposed system, including the toll line owned by The Yoch Company. The Yoch Company did not join in this application, and since the authority requested was for a transfer of the property owned by The Yoch Company, the applicant was advised that it would be necessary to file an amended application in which The Yoch Company should join. Accordingly, a joint application was filed on October 9, 1923, by E. H. Cookingham, applicant herein, and The Yoch Company for authorization to transfer the toll line from The Yoch Company to Cookingham and for the construction and operation by the latter of a local telephone exchange at Laguna Beach under certain schedules, rules and regulations set forth in the application, or under such rates, rules and regulations as the Commission might prescribe.

A hearing was held in this matter before Examiner Williams on November 14, 1923, at Laguna Beach, at which time and place evidence was taken and the matter submitted.

It appears that Laguna Beach, a town with a population of approximately 1,000 permanent residents, located some 20 miles southeast of Santa Ana, is a summer resort of growing popularity, having a population during the summer months of 4,000 or 5,000 people. As above set forth, the only telephone service heretofore rendered at Laguna Beach was that furnished by the toll station of The Yoch Company. An investigation in connection with this proceeding leads to the conclusion that there is a public need for the establishment of a local exchange at this place. The operation of such an exchange in connection with the toll line proposed to be transferred, for the price stated in the application, is, in our opinion, a matter which should be approved in the interest of public convenience and

Cal. necessity and the Commission will, therefore, authorize the transfer and the establishment of the exchange service proposed by the applicant, subject, however, to certain conditions which appear to be proper.

This case is complicated, however, by the fact that subsequent to the hearing in this matter, it has come to the attention of the Commission that Mr. Cookingham has, without awaiting any authorization from this Commission so to do, actually taken over the operation of the toll line and attempted to take a transfer thereof from The Yoch Company to himself. Moreover, it has further come to our attention that Mr. Cookingham has actually constructed and placed in operation the local telephone exchange for which the construction and operation was requested in this application, and that he has installed, connected and rendered service to a number of telephones for residence and business use, and has charged and collected rates for this unauthorized service.

Section 51 (a) of the Public Utilities Act provides, among other things, that no telephone corporation "shall henceforth sell, lease, assign, mortgage or otherwise dispose of or encumber the whole or any part of its * line, plant or system necessary or useful in the performance of its duties to the public without first having secured from the Commission an order authorizing it to do so. Every such sale, lease, assignment, mortgage, disposition, encumbrance made other than in accordance with the order of the Commission authorizing the same shall be void.”

Section 50 (a) of the Public Utilities Act contains the provision that no telephone corporation shall hereafter begin the construction of a line, plant or system or of any extension of such line, plant or system "without having first obtained from the Commission a certificate that present or future public convenience and necessity require or will require such construction."

In view of the foregoing, it is clear that the acquisition and operation of the toll line and the construction and operation of the local exchange by Mr. Cookingham as a

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public utility “for compensation" were contrary to the
plain provisions of the law. This is a matter which can
not and will not be countenanced by this Commission. It
is recognized, however, that there is a genuine need for
telephone service in the community of Laguna Beach, and
a denial of the application would result in undue hardship
upon the residents thereof. If, therefore, E. H. Cooking-
ham should within a reasonable time, not to exceed thirty
days after the effective date of this order,
(1) Refund to the parties who paid them, any and all moneys which

he may have collected for this unauthorized local exchange service,
and shall satisfy this Commission that he has so refunded all such

moneys, or (2) In case of any persons who have paid him any such moneys and

who cannot now be found, he should satisfy this Commission that he has deposited with some person or bank approved by this Commission a sum of money sufficient to cover their said payments, subject to repayment to them if and when located,

thereby freeing himself from any charge of having violated the law, either through lack of understanding of its provisions or otherwise, then it would seem that the public interests would best be served by granting this application. This may be done by the issuance of a supplemental order when the Commission has received satisfactory assurances that the applicant legally appears before the Commission otherwise than in the attitude of one who has been operating a utility for compensation without authorization by the Commission, as required by law.

As to the toll line, no authorization having been heretofore granted for its transfer by The Yoch Company, we must regard the operation of this property by Mr. Cookingham as that of an agent or trustee for The Yoch Company. The disposition of collections heretofore made by him for toll service is, therefore, a matter for settlement between him and his principal.

The application also asks that the Commission either approve a schedule of rates, rules and regulations submitted by applicant, or that the Commission prescribe

[ Cal.

such rates, rules and regulations as it may find to be reasonable, and we deem it proper, at this time, to set forth our views as to these matters in order that all parties may be fully advised as to the present opinion of this Commission concerning the service here in question.

Exhibits A, B, and C attached to the application show an inventory and appraisal of the property involved in the transfer, together with the additions and betterments proposed for the immediate future. The following figures are shown:

$2,550.00

Plant to be transferred ...
Proposed additions and betterments:

Laguna Beach-Tustin Line
At Laguna Beach

3,066.00
8,659.00

TOTAL

$14,275.00

The Commission, through its engineering department, has made a check of the properties involved in the transfer and finds that the sum of $2,550 is a reasonable price to be paid therefor. It should be clearly understood, however, that this figure does not necessarily represent the value of the transferred property for rate-making purposes. In order to establish a proper value upon which reasonable rates may be prescribed, a figure representing the historical cost of the properties which will be in operation upon the completion of the construction work now in process must be determined.

The toll line between Tustin and Laguna Beach has been reconstructed. A 50-line magneto switchboard will be installed in Laguna Beach to take the place of the temporary board now in operation, and a distribution system is in process of construction.

A detailed survey and valuation of the properties and check of the figures and information submitted by Mr. Cookingham have been made by the Commission's engineering department, and it appears that a reasonable rate

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