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Court of Appeal, First District, Division 1, California.

Mona WATERS, Plaintiff and Appellant, v. PACIFIC TELEPHONE COMPANY, Defendant and Respondent.

Civ. 30834.

Decided: October 25, 1973

Vernon W. Humber, Frederick E. Watson, San Francisco, for plaintiff and appellant. Pillsbury, Madison & Sutro, Francis N. Marshall, Noble K. Gregory, San Francisco, Rankin, Oneal, Center, Luckhardt, Marlais, Lund & Hinshaw, Edward A. Hinshaw, San Jose, for defendant and respondent.

Plaintiff Mona Waters' action against Pacific Telephone Company (hereafter sometimes the ‘company’ or ‘telephone company’) sounded in ‘negligence’ and ‘breach of warranty.’ The allegations of the complaint, if true, established that over a period of one and one-half years she, a real estate broker, had suffered substantial damages proximately resulting from grossly inadequate telephone service.

The trial court held, as a matter of law, that certain statutes and ‘Schedule 36–T, paragraph 14(a)’ filed by the telephone company with the Public Utilities Commission, deprived the court of jurisdiction other than to award minor ‘credit allowances.’ Judgment was entered accordingly. Plaintiff's appeal is from that judgment.

Schedule 36–T, paragraph 14(a)1 provides, in effect, that when a telephone is ‘out of service’ without fault of the subscriber, he shall be allowed credit on his bill for the time the instrument was inoperative.

The question posed on the appeal is whether this schedule provides the sole measure of relief when a telephone subscriber suffers damage because of the inadequacy of the service.

We resolved an identical question, involving the same schedule, against the telephone company in Product Research Associates v. Pacific Tel. & Tel. Co. (1971) 16 Cal.App.3d 651, 94 Cal.Rptr. 216. The Supreme Court by a 4 to 3 vote denied a hearing on that decision which as the company's counsel suggest, lends little, if any, additional authority to it. (See 6 Witkin, Cal.Procedure (2d ed.), Appeal, §§ 669–670.)

The company asks that we reconsider our holding in Product Research Associates, stating: ‘[There is] a square conflict of decision between this Court's Product Research decision on the one hand, and all other decisions which have dealt with the question of limited liability under telephone tariffs in California. . . . Without Product Research, appellant [Mona Waters] would be faced with an unbroken line of decisions upholding Pacific's series of tariff provisions limiting its liability for negligent service failures and directory errors and omissions as part of the company's customer service contracts and rate structure. Product Research stands alone to the contrary. . . .’

The ‘unbroken line’ of judicial decisions relied upon are Dollar-A-Day Rent-A-Car Systems, Inc. v. Pacific Tel. & Tel. Co. (1972) 26 Cal.App.3d 454, 102 Cal.Rptr. 651; Hall v. Pacific Tel. & Tel. Co. (1971) 20 Cal.App.3d 953, 98 Cal.Rptr. 128; Davidian v. Pacific Tel. & Tel. Co. (1971) 16 Cal.App.3d 750, 94 Cal.Rptr. 337; Cole v. Pacific Tel. & Tel. Co. (1952) 112 Cal.App.2d 416, 246 P.2d 686; and Riaboff v. Pacific Tel. & Tel. Co. (1940) 39 Cal.App.2d Supp. 775, 102 P.2d 465.

We have reexamined Product Research Associates and have concluded that it correctly states the law.

Among other things, we pointed out in Product Research Associates, that:

‘[U]nder Public Utilities Code section 2106 the courts of this state are expressly granted jurisdiction to award both compensatory and (in a proper case) exemplary damages against a public utility for a loss, damage or injury resulting from any unlawful act or omission to perform a required act. . . . Accordingly, an aggrieved party may prosecute an action in the courts for any loss or injury arising from a failure of a carrier or public utility ‘. . . to do any act or thing required to be done by the Constitution or any law of the state or any order of the commission.’ . . .' (16 Cal.App.3d, p. 655, 94 Cal.Rptr. p. 218.)

We elaborate on this concept.

California's Constitution, article XII, section 23, as relevant, provides:

‘The [Public Utilities] Commission shall have and exercise such power and jurisdiction to supervise and regulate public utilities, in the State of California, and to fix the rates to be charged for commodities furnished, or services rendered by public utilities as shall be conferred upon it by the Legislature, and the right of the Legislature to confer powers upon the [Public Utilities] Commission respecting public utilities is hereby declared to be plenary and to be unlimited by any provision of this Constitution. . . .’

In the exercise of the broad power conferred upon it, the Legislature has enacted Division One, Part One (§§ 201–2113) of the Public Utilities Code. (Hereafter, unless otherwise noted, all statutory references will be to that code.)

Section 4892 provides that a telephone company shall file with the Public Utilities Commission schedules showing its rates together with all rules and contracts which in any manner relate to such rates and its telephone service. Upon such filing and approval by the commission, the schedule becomes, in effect, the contract between the company and its subscribers. (See Vila v. Tahoe Southside Water Utility, 233 Cal.App.2d 469, 474, 43 Cal.Rptr. 654; Sherwood v. County of Los Angeles, 203 Cal.App.2d 354, 359, 21 Cal.Rptr. 810.) Schedule 36–T, paragraph 14(a), is such a schedule.

Section 701 states:

‘The commission may supervise and regulate every public utility in the State and may do all things, whether specifically designated in this part or in addition thereto, which are necessary and convenient in the exercise of such power and jurisdiction.’

Section 1759, upon which the company places heavy emphasis, provides:

‘No court of this State, except the Supreme Court to the extent specified in this article, shall have jurisdiction to review, reverse, correct, or annul any order or decision of the commission or to suspend or delay the execution or operation thereof, or to enjoin, restrain, or interfere with the commission in the performance of its official duties, except that the writ of mandamus shall lie from the Supreme Court to the commission in all proper cases.’

Summarizing these statutes the Supreme Court in Pacific Tel. & Tel. Co. v. Superior Court (Sokol) 60 Cal.2d 426, 430, 34 Cal.Rptr. 673, 675, 386 P.2d 233, 235, stated: ‘The mandate of the Legislature . . . is to place the commission, in so far as the state courts are concerned, in a position where it may not be hampered in the performance of any official act by any court, except to the extent and in the manner specified in the code itself. . . .’

But there are other pertinent statutes, also enacted by the Legislature under the authority of article XII, section 23, which have gone unnoticed in the company's briefs in Product Research Associates and on the instant appeal.

The first is section 451 which, in relevant part, asserts:

‘Every public utility shall furnish and maintain such adequate, efficient, just, and reasonable service, instrumentalities, equipment, and facilities as are necessary to promote the safety, health, comfort, and convenience of its patrons, employees, and the public.’

Section 451 is a statutory command that the telephone company ‘shall'3 furnish ‘adequate’ service to its patrons. Failure to do so violates the statute and is unlawful. It expresses the public policy of this state that public utilities, without the customary competitive business incentives, shall be held to a high standard of performance in the service they have undertaken to render.

Section 2106 provides:

‘Any public utility which does, causes to be done, or permits any act, matter, or thing prohibited or declared unlawful, or which omits to do any act, matter, or thing required to be done, either by the Constitution, any law of this State, or any order or decision of the commission, shall be liable to the persons or corporations affected thereby for all loss, damages, or injury caused thereby or resulting therefrom. If the court finds that the act or omission was wilful, it may, in addition to the actual damages, award exemplary damages. An action to recover for such loss, damage, or injury may be brought in any court of competent jurisdiction by any corporation or person. . . .’

Here, for the purpose of this appeal, the evidence established that the company furnished and maintained inadequate telephone service to plaintiff, a patron, contrary to section 451. Since adequate service was required by a ‘law of this state’ the company was liable to plaintiff ‘for all loss, damages or injury caused thereby and resulting therefrom.’ And an ‘action to recover for such loss, damage or injury may be brought in any court of competent jurisdiction.’ (Emphasis added; § 2106.)

The company, however, speaks of the state's policy that the commission be allowed to function free of encroachment by the courts. It insistently contends that allowing plaintiff her action would ‘hamper’ the commission. The argument is that its schedule's ‘credit allowance’ is an integral part of the ‘rate making’ procedure, and that but for it, telephone rates would necessarily be higher.

We note first, the previously quoted language of Pacific Tel. & Tel.Co. v. Superior Court (Sokol), supra, 60 Cal.2d 426, 430, 34 Cal.Rptr. 673, 675, 386 P.2d 233, 235, that the legislative mandate requires that the commission ‘not be hampered in the performance of any official act by any court, except to the extent and in the manner specified in the [Public Utilities Code] itself. . . .’ (Emphasis added.) Section 2106, allowing court actions for damages resulting from violation of law, is clearly one of the exceptions contemplated by the Supreme Court.

Furthermore, it seems doubtful that amounts paid as damages in such cases are to be considered expenses of operation, to be paid ultimately by the utility users in higher rates, instead of by the company's shareholders. ‘In rate making it is settled that the commission need not accept cost figures that are unjustifiably high because of inefficient methods of operation. . . .’ (Cal. Mfrs. Assn. v. Public Utilities Com., 42 Cal.2d 530, 536, 268 P.2d 1, 4; and see 64 Am.Jur.2d, Public Utilities, § 188, pp. 703–704.) And it may reasonably be said that any claim or judgment paid by the telephone company, if considered a cost of doing business, is necessarily related to the rates allowed by the commission. This is true whether the claim or judgment results from ‘inadequate service’ or, for instance, the negligent operation of a company automobile.

Damage actions brought against public utilities under section 2106 do not tend to hamper the commission in the performance of its duties. By entertaining such actions courts do not “review, reverse, correct or annul' any order or decision of the commission,' or ‘. . . suspend or delay the execution or operation thereof, [or] enjoin, restrain or interfere with the commission’; section 1759 is therefore not offended. (See Coast Truck Line v. Asbury Truck Co., 218 Cal. 337, 339, 23 P.2d 513.) Indeed, such actions brought under section 2106 tend to enforce the Public Utilities Code, and thus assist the commission in the performance of its duties. ‘Existence and exercise of this [§ 2106] jurisdiction is in aid and not in derogation of the commission.’ (Dollar-A-Day Rent-A-Car Systems, Inc. v. Pacific Tel. & Tel. Co., supra, 26 Cal.App.3d 454, 461, 102 Cal.Rptr. 651 656; Vila v. Tahoe Southside Water Utility, supra, 233 Cal.App.2d 469, 478, 43 Cal.Rptr. 654.)

We find several cases where public utilities, acting contrary to statute in matters otherwise within the commission's jurisdiction, were found to be subject to court action under section 2106 (or its predecessor, Public Utilities Act, § 73, Stats.1915, ch. 91, p. 165) by an aggrieved person. When these cases were decided, section 1759, here relied upon (or its predecessor statute, Public Utilities Act, § 67; Stats.1915, ch. 91, pp. 161–162) was in effect. Where excess charges had been levied by a public utility, relief was available to the customer through court action. (California Adj. Co. v. Atchison, etc. Ry. Co., 179 Cal. 140, 144–145, 175 P. 682; Sunset Pac. Oil Co. v. Railroad Co., 110 Cal.App. (Supp.) 773, 777–780, 290 P. 434.) Where a public utility acted without the required ‘certificate of public convenience and necessity,’ an interested party had recourse to the commission or to the courts. (Coast Truck Line v. Asbury Truck Co., supra, 218 Cal. 337, 338–339, 23 P.2d 513; Truck Owners etc., Inc. v. Superior Court, 194 Cal. 146, 157–159, 228 p. 19.) And one refused water service could have enlisted the aid of the court or the commission for appropriate relief. (Vila v. Tahoe Southside Water Utility, supra, 233 Cal.App.2d 469, 477–480, 43 Cal.Rptr. 654.) In the latter case the court said (p. 477, 43 Cal.Rptr. p. 660): ‘It has never been the rule in California that the commission has exclusive jurisdiction over any and all matters having any reference to the regulation and supervision of public utilities. So to hold would be to deny any meaningful application of section 2106 expressly granting jurisdiction to the courts to award both compensatory and (in a proper case) exemplary damages.’ In each of these cases it was found that the court action aided, rather than hampered, the commission in its duties.

We now consider the ‘unbroken line’ of cases upon which the telephone company relies.

Four of these—Dollar-A-Day Rent-A-Car Systems, Inc. v. Pacific Tel. & Tel. Co., supra, 26 Cal.App.3d 454, 102 Cal.Rptr. 651, Hall v. Pacific Tel. & Tel. Co., 20 Cal.App.3d 953, 98 Cal.Rptr. 128, Davidian v. Pacific Tel & Tel. Co., supra, 16 Cal.App.3d 750, 94 Cal.Rptr. 337, and Cole v. Pacific Tel. & Tel. Co., 112 Cal.App.2d 416, 246 P.2d 686-concerned only claims of negligence in the omission of subscribers' names or advertising, or refusal of advertising, in the telephone book's classified section or ‘yellow pages.’ Unlike section 451 requiring the furnishing and maintenance of adequate telephone service, no statute (at least none brought to our attention) makes a corresponding requirement concerning the yellow pages, the use of which is optional to the subscriber. Reasonably, and according to authority (see Hall v. Pacific Tel. & Tel. Co., supra, pp. 954–955, 98 Cal.Rptr. 128), use of the classified section of the telephone book is no part of the adequate telephone service required by law. In these four cases the basic premise of that presently before us—a violated statutory duty—is missing.4

The remaining case relied upon by the company is Riaboff v. Pacific Tel. & Tel. Co., supra, 39 Cal.App.2d (Supp.) 775, 102 P.2d 465, which was decided by the appellate department of the San Francisco City and County Superior Court. There a subscriber's name was erroneously spelled, and therefore misplaced, in the telephone director (as distinguished from the yellow pages). The court applied a then existent ‘credit allowance’ rule of the telephone company. Although the court seemed to think otherwise (pp. 777–778, 102 P.2d 465), the directory listing was probably a part of the adequate service required of the company by the then operable section 13(b) of the Public Utilities Act. (Stats. 1915, ch. 91 p. 122.) But we observe that the court failed to consider section 73 of the Public Utilities Act (predecessor to the present day section 2106), which also in such cases authorized damage actions ‘in any court of competent jurisdiction.’ Citing authority, Mr. Witkin tells us that ‘[p]robably the strongest reason for overruling a decision is that it is contrary to a statutory provision which was either not discovered or was known but ignored in the opinion. . . .’ (6 Witkin, Cal. Procedure (2d ed.), Appeal, § 686.)

Some reliance is placed on Pacific Tel. & Tel. Co. v. Superior Court (Sokol) supra, 60 Cal.2d 426, 34 Cal.Rptr. 673, 386 P.2d 233, where damages were unsuccessfully sought for the disconnecting of Sokol's telephone. But there it was held that the telephone company had acted according to law, i. e., ‘upon reasonable cause’ to believe that the telephones were being used for an illegal purpose. Section 2106 was therefore inapplicable.

None of the authorities relied upon by the telephone company is found to be inconsistent with our holding in Product Research Associates v. Pacific Tel. & Tel. Co., supra, 16 cal.App.3d 651, 94 Cal.Rptr. 216.

It is urged that we must accept the interpretation of the commission that Schedule 36–T, paragraph 14(a), provides the sole remedy for deficient telephone service. The argument is patently invalid. Plaintiff's rights, if any, are derived from Public Utilities Code sections 451 and 2106, not the telephone company's schedule. The court having jurisdiction over the case must itself construe these statutes. Concerned with orders of the commission, the court in Coast Truck Line v. Asbury Truck Co., supra, 218, cal. 337, 339, 23 P.2d 513, 514, stated: ‘As a court of general jurisdiction, the superior court may properly interpret and give effect to any document or order even though it be the result of action by the legislative, executive, or judicial branch of the government. . . .’

We make no assertion that the state may not allow the Public Utilities Commission to limit a public utility's liability for its negligence, or acts done in violation of law. We have determined that there the state, acting through the Legislature, has chosen not to do so.

The judgment is reversed.


1.  The full text of Schedule 36–T, paragraph 14(a) follows:‘14. Interruptions and Failures of Service(a) Credit Allowance for Interruption to Service‘Upon request of the subscriber the Company will allow subscribers credit in all cases where telephones are ‘out of service,’ except when the ‘out of service’ is due to the fault of the subscriber, for periods of one day or more from the time the fact is reported by the subscriber or detected by the Company, of an amount equal to the total fixed monthly charges for exchange service multiplied by the ratio of the number of days ‘out of service’ to the number of calendar days in the billing month.‘A day of ‘out of service’ will be considered to exist when service is not available for a period of twenty-four consecutive hours. When any ‘out of service’ period continues for a period in excess of an even multiple of twenty-four hours, then the total period upon which to determine the credit allowance will be taken to the next higher even twenty-four hour multiple.‘In no case will the credit allowance for any period exceed the total fixed charges for exchange service for that period.’

2.  Public Utilities Code section 489:‘Under such rules as the commission prescribes, every public utility other than a common carrier shall file with the commission within such time and in such form as the commission designates, and shall print and keep open to public inspection, schedules showing all rates, tolls, rentals, charges, and classifications collected or enforced, or to be collected or enforced, together with all rules, contracts, privileges, and facilities which in any manner affect or relate to rates, tolls, rentals, classifications, or service. Nothing in this section shall prevent the commission from approving or fixing rates, tolls, rentals, or charges, from time to time, in excess of or less than those shown by such schedules.’

3.  “Shall' is mandatory and ‘may’ is permissive.' (Pub.Util.Code, § 14.)

4.  In the case at bench, as in Product Research Associates v. Pacific Tel. & Tel. Co., supra, 16, cal.App.3d 651, 94 Cal.Rptr. 216, we are concerned only with the telephone company's Schedule 36–T, paragraph 14(a) covering ‘Interruptions and Failures of Service’ (see fn. 1, ante) and failure to furnish the statutorily required ‘adequate service.’ Neither in Product Research Associates, nor here, do we pass upon the company's Schedule 36–T, paragraph 17(b)3 (see Davidian v. Pacific Tel. & Tel. Co., supra, 16 Cal.App. 3d at p. 753, 94 Cal.Rptr. 337), concerning ‘[E]rrors or Omissions in [classified] Directories.’

ELKINGTON, Associate Justice.

MOLINARY, P. J., and SIMS, J., concur. Hearing granted; TOBRINER and SULLIVAN, JJ., did not participate.