EMPIRE WEST v. SOUTHERN CALIFORNIA GAS COMPANY

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Court of Appeal, Second District, Division 2, California.

EMPIRE WEST, a Limited Partnership, Plaintiff and Appellant, v. SOUTHERN CALIFORNIA GAS COMPANY, a corporation, Defendant and Respondent.

Civ. 42328.

Decided: March 22, 1974

Morton M. Gerson, Los Angeles, for plaintiff and appellant. Overton, Lyman & Prince, Los Angeles, by John D. McCurdy, for defendant and respondent.

Action for $477,000 damages by plaintiff Empire West, a limited partnership, against defendant Southern California Gas Company. Plaintiff appeals a summary judgment in favor of defendant.

The issue is whether the facts presented by plaintiff amount to a cause of action. Plaintiff asserts that in 1963 and 1964 defendant fraudulently misrepresented the prospective cost of operation for a gas heating and cooling system in plaintiff's planned 108-unit apartment house. Thereafter, in reliance on defendant's misrepresentations plaintiff built the apartment house in 1965 equipped with a gas heating and cooling system. According to the complaint, installation of the gas system cost $27,000 more than an electrical system would have cost, and operation of the system costs $8,000 a year more than the amount defendant said it would cost.

Public policy precludes recognition of a cause of action based on these facts. In effect, plaintiff seeks a reduction in charges for the gas it needs to operate its heating and cooling system. Public Utilities Code section 532 forbids defendant from refunding ‘directly or indirectly, in any manner or by any device’ the scheduled charges for its services. A public utility ‘cannot by contract, conduct, estoppel, waiver, directly or indirectly increase or decrease’ the rates fixed for its services. (Transmix Corp. v. Southern Pac. Co., 187 Cal.App.2d 257, 264, 9 Cal.Rptr. 714; see Gardner v. Basich Bros. Construction Co., 44 Cal.2d 191, 193–194, 281 P.2d 521; Gardner v. Rich Mfg. Co., 68 Cal.App.2d 725, 730, 158 P.2d 23; Butler v. Bell Oil & Refining Co., 70 Cal.App.2d 728, 730, 161 P.2d 559; Groom v. Holm, 176 Cal.App.2d 310, 315, 1 Cal.Rptr. 410.) It is established doctrine that scheduled rates must be inflexibly enforced in order to maintain equality for all customers and eliminate preferential treatment for some. (R. E. Tharp, Inc. v. Miller Hay Co., 261 Cal.App.2d 81, 86, 67 Cal.Rptr. 854.) Without inflexibility collusive judgments based on allegations of fraud might easily and effectively disguise a public utility's preferential treatment of particular customers. (See People ex rel. Public Util. Com. v. Ryerson, 241 Cal.App.2d 115, 120–121, 50 Cal.Rptr. 246.) The reality of these dangers finds substantial support in past history and experience. Practical necessity, therefore, requires uniform enforcement of the policy against rate discrimination even though some hardship may result in a particular case. (See Pittsburgh, C. C. & St. L. Ry. Co. v. Fink, 250 U.S. 577, 582, 40 S.Ct. 27, 63 L.Ed 1151.)

Plaintiff, however, contends its case differs from the traditional unlawful rebate cases in that the asserted misrepresentation concerns the amount of gas to be used, not its cost. But identical policy considerations against preferential treatment of customers apply, whether the public utility misrepresents cost (South Tahoe Gas Co. v. Hofmann Land Improvement Co., 25 Cal.App.3d 750, 760–761, 102 Cal.Rptr. 286), or amount of service (United States v. Associated Air Transport, Inc. (5th Cir. 1960) 275 F.2d 827, 838–839; see also Kentner Truck Line v. Maier Brewing Co., 183 Cal.App.2d 89, 91, 6 Cal.Rptr. 572), or classification of service (Porto Transport, Inc. v. Consolidated Diesel Electric Corp. (SDNY 1956) 19 F.R.D. 256, 258; see Annot., ‘Carrier's understatement of charges where discrimination is forbidden,’ 83 A.L.R. 245, 88 A.L.R.2d 1375.) A public utility will not be allowed to circumvent equality in rates by misrepresenting, either collusively, dishonestly, or negligently, the amount of service a customer will require. (United States v. Associated Air Transport, Inc., supra.) As was said in 88 A.L.R.2d, pages 1383 and 1387, ‘Where a mistake occurs through the carrier's giving erroneous information with respect to routing, mileage, or type of service to be rendered, rather than with respect to the rate itself, the public policy which seeks to prevent discrimination requires that the carrier may collect the full rate after any undercharge which results from the mistake. [Citing cases.] . . . Consistent with the general policy of allowing no one to avoid payment of lawful freight charges, the courts have dismissed the question of the carrier's honesty or good faith in understating its rates and have held that intentional misrepresentations are not a defense to recovery by the carrier. [Citing cases.]’

Plaintiff contends it should at least recover the extra cost of a gas system over that of an electrical system. Yet nowhere does plaintiff assert it would have installed an electrical system instead of a gas system if defendant had accurately represented the cost of operation, nor does plaintiff assert it would be cheaper to operate an electrical system than its existing gas system. But even if plaintiff had been able to make these assertions, its case would not be helped. For the same public policy that prohibits unfair discrimination in rates forecloses a customer from recovering damages causally attributable to a public utility's misrepresentations about cost of service. For example, the cases uniformly hold that a shipper cannot recover sales losses sustained when he has sold goods at a price based on shipping charges which have been understated by the carrier. (Pittsburgh, C. C. & St. L. Ry. Co. v. Fink, supra, 250 U.S. 577, 40 S.Ct. 27, 63 L.Ed. 1151; Houston & T. C. Ry. v. Ahlers (Tex.Civ.App.) 274 S.W. 333, 334–335; Norfolk & W. Ry. Co. v. Williamson Grocery Co., 103 W.Va. 532, 138 S.E. 102.) The prohibition against recovery of raterelated items even extends to damages flowing from tortious acts arising out of disagreements over misrepresented rates. (Melody v. Great Northern Ry. Co., 25 S.D. 606, 127 N.W. 543 [assault]; Foley v. Chicago Great Western R. Co., 205 Iowa 72, 217 N.W. 563 [ejectment]; Pullman Co. v. Anderson, 205 Ark. 1056, 172 S.W. 2d 431 [wrongful death].)

Plaintiff contends it has been wronged and should have a remedy. (Civ.Code, § 3523.) Plaintiff has a remedy, although not one that will put $477,000 into its pocket. The State Constitution (art. 12, § 23) and the Public Utilities Act (Pub.Util.Code, § 2101) charge the Public Utilities Commission with responsibility for enforcing the laws relating to public utilities. The Commission may proceed against utilities to enjoin illegal acts (Pub.Util.Code, § 2102), to recover penalties for violations of law (Pub.Util.Code, § 2104), and to order reparations for overcharges (Pub.Util.Code, § 734). Plaintiff should have presented its grievance to the proper authority for appropriate action.

The judgment is affirmed.

FLEMING, Associate Justice.

ROTH, P. J., and COMPTON, J., concur.