The opinion
Filed 12/12/17
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
PACIFIC GAS AND ELECTRIC COMPANY,
F072904
Plaintiff and Appellant,
(Super. Ct. Nos. CV003013,
v. CVM013599)
HART HIGH-VOLTAGE APPARATUS
REPAIR AND TESTING CO., INC., OPINION
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Merced County. Donald J.
Proietti, Judge.
Urrabazo Law, Donald Urrabazo, Arturo Padilla and Joon Song for Plaintiff and
Appellant.
Michel & Fackler, Michael D. Michel, Kate Morrow and Jeff M. Fackler for
Defendant and for Respondent.
-ooOoo-
* Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is
certified for publication with the exception of part I.C. and part II. of the Discussion.
Plaintiff Pacific Gas and Electric Company (PG&E) sued defendant HART High-
Voltage Apparatus Repair and Testing Co., Inc. (HART) for negligently servicing a large
transformer at a hydroelectric power plant and for damages under Public Utilities Code1
section 7952. PG&E alleged it incurred dirct and indirect costs of approximately $8.1
million.
HART filed a motion for summary adjudication that challenged all of PG&E’s
causes of action.2 The trial court determined the evidence showed MID owned the power
plant and the transformer allegedly damaged by HART. The court concluded that
because PG&E did not own the transformer, PG&E could not prove essential elements of
its causes of action for negligence and damages under section 7952.
In the unpublished parts of this opinion addressing PG&E’s negligence cause of
action, we conclude (1) PG&E has standing to sue if it is a “real party in interest”
pursuant to Code of Civil Procedure section 367 and (2) the evidence presented shows
PG&E held sufficient interests in the transformer and the electricity it delivered to qualify
as a real party in interest. Using the “bundle of sticks” metaphor in which each stick
represents a legally recognized property interest, we conclude PG&E held sufficient
sticks to qualify as a real party in interest. Therefore, PG&E may pursue its negligence
cause of action against HART.
1 All unlabeled statutory references are to the Public Utilities Code.
2 The same motion for summary adjudication was before this court in Merced
Irrigation District v. Superior Court (2017) 7 Cal.App.5th 916, where we concluded
another plaintiff, Merced Irrigation District (MID), was not a “municipal corporation” for
purposes of section 10251 and, therefore, not entitled to recover damages under section
10251. Based on that statutory interpretation, we upheld the grant of summary
adjudication eliminating MID’s cause of action under section 10251.
2.
In the published parts of this opinion addressing PG&E’s claim for damages under
section 7952,3 we reach the following conclusions. First, the transformer was “necessary
or useful … equipment” as that phrase is used in section 7952. Second, PG&E is an
“electrical corporation” for purposes of section 7952. Third, the preposition “of” in the
phrase “equipment of any … electrical … corporation” is used in the proprietary sense—
that is, it refers to the corporation’s ownership of property interests in the equipment.
Fourth, the ownership of property interests in the equipment need not be complete
ownership because the phrase “equipment of any … electrical … corporation” also
encompasses equipment in which the corporation is a partial owner—that is, holds some
of the sticks in the bundle that represent the property interests in the equipment. Fifth,
the evidence presented shows PG&E holds multiple property interests in the transformer
and, thus, PG&E might be regarded as a partial owner of the transformer entitled to
recover the measure of damages set forth in section 7952. Therefore, HART has not
carried its burden of demonstrating PG&E’s cause of action for damages under section
7952 lacks merit.
We therefore reverse the judgment and remand for further proceedings.
FACTS
PG&E, a California corporation, is a public utility regulated by the California
Public Utilities Commission, and its stock is publicly traded under the symbol “PCG.”
PG&E provides gas and electrical service to about 15 million end users in northern and
central California.4 The other plaintiff in this lawsuit, MID, is an irrigation district
3 The first sentence of section 7952 states: “Any person who injures or destroys,
through want of proper care, any necessary or useful facility or equipment of any …
electrical … corporation, is liable to the corporation for all damages sustained thereby.”
(Italics added.) The second sentence specifies a broad measure of damages, which
includes indirect or overhead expenses. Thus, the damages recoverable under section
7952 might be much broader than those recoverable under the negligence cause of action.
4 Panoche Energy Center, LLC v. Pacific Gas & Electric Co. (2016) 1 Cal.App.5th
68, 72.
3.
organized under the laws of the State of California with its principal place of business in
Merced County.
PG&E and MID alleged they were “the owners and operators of a transformer
located at the Exchequer Dam on the Merced River” in Merced County. The transformer
was an Allis-Chalmers 100 MVA Auto Transformer and was part of the power plant at
the Exchequer reservoir. The transformer was large, measuring almost nine feet wide, 23
feet long, and 12 feet high. When operational, the transformer contained approximately
6,800 gallons of oil and weighed 243,000 pounds. The transformer had been custom
built to take the 13.8 kilovolt electricity generated at the Exchequer dam and transform it
into voltages (i.e., 70 kilovolt and 115 kilovolt) that were fed into two separate
transmission systems owned by PG&E.
The relationship between PG&E and MID as it pertains to the power plant and
equipment located at the Exchequer reservoir is defined by their June 25, 1964, power
purchase contract. The power purchase contract stated MID “shall construct at its own
risk and expense, and shall be the sole owner (under Federal Power Commission License)
of, the project” and set forth the requirements and specifications for its design and
construction.5 The specifications addressed the project’s turbines, generators, and the
transformer that is the subject of this litigation.
PG&E contends the power purchase contract (1) entitled it to all electricity
generated by the project; (2) made it responsible for all costs associated with maintaining
and operating the Exchequer power plant; and (3) granted it the right to enter upon,
5 The contract defined the term “project” as “[a] development using the waters of
Merced River and including Exchequer Reservoir, McSwain Reservoir, Exchequer Power
Plant, McSwain Power Plant, dams, project communication facilities, project
headquarters and project roads, tools, operation and maintenance equipment, including
motor vehicles, and all necessary appurtenances for each of the foregoing.” The term
“Exchequer Power Plant” was defined as “[a] hydroelectric generating facility to be
constructed on Merced River at the reconstructed Exchequer Dam, including an intake
structure, a penstock, a power house, and appurtenant facilities.”
4.
operate and maintain any part of the power plant in the event that MID failed to operate
and maintain the project in accordance with the power purchase contract.
In July 2009, HART submitted a quote to MID for servicing the transformer. The
work involved draining the transformer of insulating fluid, performing an internal
inspection, removing and replacing five electro coolers, replacing a variety of gaskets,
replacing other parts, refilling the transformer and performing tests. HART estimated the
total price for this work at $122,415.
In September 2009, MID and HART signed Exchequer Contract 2009-08 pursuant
to which MID agreed to the payment terms in the quote HART submitted and HART
agreed to “perform all services as outlined in ‘Quotation # 090825’ dated Sept. 19, 2008,
to PG&E’s ‘Construction Service Specification No. 4720 Rev. 2’.”6 The procedures
HART agreed to perform stated HART would “[v]erify all tools and materials have been
removed from the transformer after internal inspection and repairs have been performed.”
HART also agreed to maintain insurance coverage in accordance with MID’s
written requirements. HART obtained $1 million in commercial general liability
insurance and $5 million in excess/umbrella liability insurance. MID, but not PG&E,
was named as an additional insured in the certificate of liability insurance.
On November 1, 2009, HART started performing the servicing work on the
transformer. On November 5, 2009, a HART employee was reconnecting low-voltage
leads inside the transformer. Another HART employee who was outside the transformer
handed him a flat washer, a lock washer and a bolt. When the first employee brought the
washers and bolt inside the transformer, his hand struck a support beam, which caused
him to drop the washers and bolt into the transformer’s windings. The bolt and lock
washer were retrieved with a magnet, but attempts to retrieve the flat washer resulted in
6 Neither the Exchequer Contract 2009-08 nor HART’s quotation explicitly
identified PG&E as a party to the contract or as a third party beneficiary.
5.
the washer falling further inside the windings. Additional attempts to retrieve the washer
were unsuccessful.
HART asserted (1) the transformer was not physically damaged as a result of
having the washer was dropped into it and (2) MID chose not to reenergize the
transformer, allegedly out of concern that the transformer could be damaged if it was
restarted with a loose washer inside it. PG&E disputed this assertion, stating the
transformer was damaged. PG&E contended all parties agreed the transformer could not
be reenergized with a loose metallic washer inside and, consequently, the transformer
was rendered unsuited for its intended purpose and had to be replaced. PG&E and MID
believed that energizing the transformer with the metallic washer inside would likely lead
to a fire that would destroy the transformer and might cause an oil spill that would
contaminate the Merced River.
PROCEEDINGS
In November 2012, the first lawsuit arising out of the washer incident was filed
against HART. Federal Insurance Company, as the subrogee of the ACWA Joint Powers
Insurance Authority, sought to recover funds paid to MID under an insurance policy that
covered the transformer. The subrogation action was filed in Merced County Superior
Court and assigned case No. CV003013.
In December 2012, PG&E and MID, as coplaintiffs, filed a lawsuit against HART
in Merced County Superior Court for damages arising out of the washer incident. In
February 2013, based on a stipulation of the parties, the trial court consolidated the two
lawsuits against HART.
In August 2013, MID assigned all rights to its causes of action arising from the
washer incident to PG&E, including the cause of action for breach of contract. In the
assignment agreement, MID represented that it had received $1,032,000 pursuant to its
insurance contract with the Joint Powers Insurance Authority to partially compensate it
for damages or losses arising from the incident, which funds it agreed to forward to
6.
PG&E. MID also represented: “It has been fully compensated by PG&E for any costs
and/or expenses M[ID] has incurred arising from or related to the Incident.” MID and
PG&E also agreed they would be represented by the same law firm in the lawsuit against
HART, with PG&E being solely responsible for the attorney fees and costs of that
representation.
In August 2014, PG&E and MID filed a first amended complaint, which is the
operative pleading in this matter. The first amended complaint alleged four causes of
action against HART: (1) negligence, (2) breach of contract, (3) violation of section
7952, and (4) violation of section 10251. The first amended complaint used the plural
“plaintiffs” in each cause of action and, as a result, it appeared that PG&E was asserting
claims under four legal theories. Subsequently, PG&E clarified that it was not claiming
recourse to section 10251 and, on appeal, PG&E expressly abandoned the breach of
contract cause of action. Accordingly, the causes of action for breach of contract and for
violation of section 10251 are not analyzed in this opinion.
Motion for Summary Adjudication
In June 2015, HART filed a motion for summary adjudication as to all of PG&E’s
causes of action and as to MID’s causes of action for violations of sections 7952 and
10251. The motion did not challenge MID’s causes of action for negligence and breach
of contract.
HART’s separate statement of undisputed material facts asserted HART and MID
were the only parties to the written contract for performing work on the transformer and,
therefore PG&E was not a party to the contract. Based on these factual assertions, HART
argued any duty of care (an essential element of a negligence claim) that might have been
created by the maintenance contract did not extend to PG&E.
HART’s separate statement also asserted other facts were material and undisputed.
The paragraphs most important to this appeal stated:
7.
“6. At the time of the incident alleged in plaintiffs’ complaint, [MID] was
the sole owner of the Exchequer Transformer. [¶] … [¶]
“7. PG&E did not own the transformer at the time of the incident.”
The evidentiary support for these assertions as to the ownership of the transformer
included various discovery responses and the June 25, 1964, power purchase contract
between MID and PG&E, which stated MID “shall construct at its own risk and expense,
and shall be the sole owner (under Federal Power Commission License) of, the project.”
HART emphasized the contract’s reference to MID as “the sole owner” and did not
discuss the effect of the parenthetical immediately following that phrase.
PG&E’s opposition papers addressed the question of ownership by (1) disputing
paragraphs 6 and 7 of HART’s separate statement and (2) asserting PG&E “did have
ownership rights in the Exchequer Transformer at the time of the incident pursuant to the
Power Purchase Agreement and under California statute.” PG&E argued its ownership
rights (1) entitled it to all electricity generated by the project; (2) made it responsible for
all costs associated with maintaining and operating the Exchequer power plant; and (3)
granted it the right to enter upon, operate and maintain any part of the power plant in the
event that MID failed to operate and maintain the project in accordance with the 1964
power purchase contract. PG&E stated its rights were protected by paragraph 12 of the
1964 power purchase contract, which stated in full:
“[MID] shall maintain and defend its land, easements, flowage rights, water
rights, Federal and State licenses and permits, and all other rights and
privileges necessary or useful to the operation of the project and shall not
voluntarily convey, transfer or in any manner encumber any of such rights
without the written consent of [PG&E].”
Similarly, paragraph 18 of the 1964 power purchase contract states no voluntary
assignment of the contract shall be effective without the written consent of PG&E. This
prohibition contains an exception that authorizes an assignment as security for MID’s
financing of the project.
8.
Order Granting Summary Adjudication
In September 2015, the trial court held a hearing on HART’s motion for summary
adjudication. In October 2015, the trial court filed a written order granting summary
adjudication in favor of HART and against PG&E on all the causes of action stated in the
operative complaint.
As to PG&E’s negligence cause of action, the trial court’s order stated HART was
“entitled to judgment as a matter of law on the grounds that [HART’s] Undisputed
Material Facts Nos. 6 and 7 establish [PG&E] cannot prove an essential element of the
claim for negligence, that is that [PG&E] was an owner of the property allegedly
damaged by [HART].” The order also stated PG&E did not present admissible evidence
supporting an inference that it possessed an ownership interest in the transformer. As to
MID’s assignment to PG&E of its claims and causes of action against HART, the court
concluded the assignment was irrelevant because the operative pleading did not allege (1)
PG&E was an assignee or (2) PG&E’s cause of action for negligence was based on an
assignment of rights from MID.
As to PG&E’s cause of action under section 7952, the order stated HART was
“entitled to judgment as a matter of law on the grounds that [HART’s] Undisputed
Material Facts Nos. 6 and 7 establish [PG&E] cannot prove an essential element of the
claim for violation of Section 7952, that is that [PG&E] was the owner of the ‘necessary
and useful equipment’ allegedly damaged by [HART].”
The order granting summary adjudication disposed of all of PG&E’s causes of
action against HART. Accordingly, in November 2015, the trial court entered a
judgment stating (1) PG&E would recover nothing from HART on its complaint and (2)
PG&E was liable for HART’s costs. In December 2015, PG&E filed a notice of appeal
from the judgment.
9.
Judicial Notice of Legislative History
In June 2016, PG&E requested this court take judicial notice of documents
compiled by LRI History LLC7 relating to Statutes 1969, chapter 709 (Sen. Bill No. 939)
and Statutes 1976, chapter 617 (Assem. Bill No. 3398). These statutes amended section
7952 and enacted section 10251, respectively. In July 2016, this court granted the
request for judicial notice, which was unopposed.8
DISCUSSION
I. OVERVIEW OF BASIC CONCEPTS
An analysis of the parties’ contentions relating to PG&E’s standing to sue for
negligence requires an understanding of the basic legal concepts of property, ownership
and standing to sue. The concepts of property and ownership also are relevant to the
analysis of PG&E’s claim under section 7952.
A. Property v. Property Interest
The word “property” has multiple meanings.9 (Union Pacific Railroad Co. v.
Santa Fe Pacific Pipelines, Inc. (2014) 231 Cal.App.4th 134, 157 (Union Pacific).)
Sometimes “property” is used simply to refer to the physical object in question–that is,
the thing itself. (Ibid.) Other times, the word “property” is used with greater accuracy to
“‘to denote the legal interest (or aggregate of legal relations) appertaining to such
physical object.’” (Ibid.) When used in the latter sense, “property” is composed of a
7 The authentication submitted with the documents comprising the legislative
history stated LRI History LLC was formerly (1) Legislative Research Institute; (2)
Legislative Research, Incorporated; and (3) Legislative Research & Intent LLC.
8 This court also granted MID’s request for judicial notice of the same legislative
history in a writ proceeding involving HART’s motion for summary adjudication.
(Merced Irrigation District v. Superior Court, supra, 7 Cal.App.5th at p. 923.)
9 The concept of property varies from context to context. For example, the scope of
the concept of property under the takings clause is more restricted than the concept of
property recognized under the due process clause. (See California Chamber of
Commerce v. State Air Resources Bd. (2017) 10 Cal.App.5th 604, 646-647.)
10.
“‘complex aggregate of rights (or claims), privileges, powers, and immunities.’”
(Hohfeld, Some Fundamental Legal Conceptions as Applied in Judicial Reasoning
(1917) 26 Yale L.J. 710, 746 (Hohfeld).)
Therefore, in a strict legal sense, a physical object such as the transformer is not
itself “property,” but the subject of property. (Union Pacific, supra, 231 Cal.App.4th at
p. 157.) When used in this strict legal sense, the term “property” means only the rights,
privileges, powers and immunities of the owner in relation to the thing, despite the use of
the term to designate the thing (such as land or a chattel) itself. (Ibid.) These rights,
privileges, powers and immunities include the possession, use, enjoyment and disposition
of the thing. (Ibid.)
Stated another way, “property” is the sum of all the legally recognized rights,
privileges, powers and immunities incident to ownership of the thing. (See Dickman v.
Commissioner (1984) 465 U.S. 330, 336; Hohfeld, supra, 26 Yale L.J. at p. 746.) The
“bundle of sticks” metaphor10 often is used to describe property, with each stick
representing a right, privilege, power or immunity. (E.g., Union Pacific, supra, 231
Cal.App.4th at p. 157; see Sterling Builders, Inc. v. United Nat. Ins. Co. (2000) 79
Cal.App.4th 105, 109.)
B. Ownership of Property
The definition of “owner” set forth in Black’s Law Dictionary states: “One who
has the right to possess, use and convey something; a person in whom one or more
interests are vested. An owner may have complete property in the thing or may have
parted with some interests in it (as granting an easement or making a lease).” (Black’s
10 Professor Wonnell of the University of San Diego Law School observed:
“Theorists may tell us that property is a bundle of severable sticks, but it is remarkable
how frequently that insight is forgotten when it is most needed.” (Wonnell, Replacing
the Unitary Principle of Unjust Enrichment (1996) 45 Emory L.J. 153, 196.) He then
describes the right to recover an asset’s monetary value as a normal aspect of property—
that is, a stick in the bundle. (Ibid.)
11.
Law Dict. (8th ed. 2004) 1137, italics added.) The use of the word “interests” in this
definition of “owner” establishes a connection to the definition of “property” discussed
earlier. Specifically, “interest” is defined as follows: “Collectively, the word includes
any aggregation of rights, privileges, powers, and immunities; distributively, it refers to
any one right, privilege, power, or immunity.” (Black’s Law Dict., supra, at p. 828; see
Union Pacific, supra, 231 Cal.App.4th at p. 157.) Thus, the word “interests” is an
overarching label for the rights, privileges, powers and immunities that aggregate to
constitute “property.”
The term “owner” is applied to a variety of situations, as is demonstrated by the
types of owners listed in Black’s Law Dictionary. The list includes “beneficial owner,”
“legal owner,” “general owner,” “special owner” and “limited owner.” (Black’s Law
Dict., supra, at pp. 1137-1138.) A “beneficial” or “equitable owner” is defined as “[o]ne
recognized in equity as the owner of something because use and title belong to that
person, even though legal title may belong to someone else; esp., one for whom property
is held in trust.” (Id. at p. 1137, italics added; see Miller v. Dyer (1942) 20 Cal.2d 526,
529 [equitable owner].) In contrast, the “legal owner” is “[o]ne recognized by law as the
owner of something; esp. one who holds legal title to property for the benefit of another.”
(Id. at p. 1138, italics added; see Parkmerced Co. v. City and County of San Francisco
(1983) 149 Cal.App.3d 1091, 1094-1095 [“legal title” is the antithesis of “equitable
title”].) A “special owner” has a qualified interest in property (such as a bailee), while
the “general owner” holds the primary or residual title to the property. (Black’s Law
Dict., supra, at p. 1138; 73 C.J.S. (2017) Property, §39 [general owner].) A “limited
owner” is defined as a tenant for life or the owner of a life estate. (Ibid.)
To summarize the concepts of property and owner, California law recognizes a
wide range of interests are included in the bundle of sticks that constitutes “property” and
those sticks may be divided and held (i.e., owned) among multiple persons.
12.
C. Standing to Sue*
“Standing” refers to a person’s right to make a legal claim or seek judicial
enforcement of a duty or right. (Librers v. Black (2005) 129 Cal.App.4th 114, 125;
Black’s Law Dict., supra, at p. 1442.) “At its core, standing concerns a specific party’s
interest in the outcome of the lawsuit.” (Weatherford v. City of San Rafael (2017) 2
Cal.5th 1241, 1247.) According to the California Supreme Court, Code of Civil
Procedure section 367 contains California’s general standing requirements.
(Weatherford, supra, at p. 1249.) The statute provides in full: “Every action must be
prosecuted in the name of the real party in interest, except as otherwise provided by
statute.” (Code Civ. Proc., § 367) For purposes of this appeal, the key statutory term is
“interest.”
Under one definition, the “real party in interest” is the person possessing the right
sued upon by reason of the substantive law. (Iglesia Evangelica Latina, Inc. v. Southern
Pacific Latin American Dist. of the Assemblies of God (2009) 173 Cal.App.4th 420, 445
(Iglesia); 4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 121, p. 187 [person who
has the right to sue under substantive law is the real party in interest].) Thus, having
standing and being a “real party in interest” are the same thing. The inquiry into standing
“calls for a consideration of rights and obligations.” (4 Witkin, Cal. Procedure, supra, §
121, p. 187.)
One test for standing is whether the plaintiff has a real interest in the ultimate
adjudication, meaning the plaintiff has either suffered or is about to suffer an injury of
sufficient magnitude to reasonably assure that all of the relevant facts and issues will be
adequately presented. (Schmier v. Supreme Court (2000) 78 Cal.App.4th 703, 707.)
Another version of the test for standing states “a party must be beneficially interested in
the controversy, and have ‘some special interest to be served or some particular right to
* See footnote, ante, page 1.
13.
be preserved or protected.’ [Citation.] This interest must be concrete and actual, and
must not be conjectural or hypothetical.” (Iglesia, supra, 173 Cal.App.4th at p. 445,
italics added.)
II. PG&E’S NEGLIGENCE CAUSE OF ACTION*
The operative complaint alleges (1) HART negligently conducted the maintenance
and repairs of the transformer by dropping the washer into it; (2) the negligence was a
proximate cause of the transformer becoming unusable; and (3) as a direct and proximate
result of the negligence, PG&E sustained damages in the form of property damage, loss
of use, lost profits and future loss of profits. The trial court’s grant of summary
adjudication on PG&E’s negligence claim because PG&E was not an owner of the
transformer can be restated as the court concluding PG&E lacked standing to pursue the
negligence claim.
A. Contentions of the Parties
1. PG&E
PG&E contends the trial court erred when it concluded ownership of the
transformer was an essential element of PG&E’s negligence cause of action. HART
supports its view of California law by referring to the following statement by the
California Supreme Court: “The propriety of an action for damages to property by one
who is not in possession or entitled to possession at the time of its injury has been
recognized in this state under varying factual circumstances.” (Wolfsen v. Hathaway
(1948) 32 Cal.2d 632, 644, overruled on another ground in Flores v. Arroyo (1961) 56
Cal.2d 492, 497.) Responding to the trial court’s reference to essential elements, PG&E
cites Vaughn v. Dame Construction Co. (1990) 223 Cal.App.3d 144, where the court
stated “the essential element of the cause of action [for defective construction] is injury to
* See footnote, ante, page 1.
14.
one’s interests in the property—ownership of the property is not.” (Id. at p. 148, italics
added.)
PG&E also contends it has standing to bring a negligence cause of action because
HART owed it a duty of care. PG&E relies on the factors set forth in Biakanja v. Irving
(1958) 49 Cal.2d 647 (Biakanja), at page 650 to establish a duty of care in the absence of
privity between HART and PG&E. In addition, PG&E argues the public policy of
efficiently providing Californians with water and power favors the recognition of its
negligence claim against HART.
2. HART
HART contends the legal principle applicable to PG&E’s negligence cause of
action is simple and can be stated as follows: “Only the owner of negligently-damaged
property has standing to sue for damages alleged caused by the damage to that property.”
HART argues its evidence demonstrated (1) PG&E was not an owner of the transformer
and (2) PG&E’s claims to the contrary were false. Thus, applying its view of the law to
that evidence, HART concludes PG&E has no standing because it did not own the
transformer.
B. Conclusions of Law
Based on the definitions and legal principles set forth in part I. of this opinion, we
adopt the following conclusions. First, the general standing requirements set forth in
Code of Civil Procedure section 367 apply to causes of action for negligence. Therefore,
PG&E’s standing to sue HART for negligence depends on whether PG&E is a real party
in interest for purposes of Code of Civil Procedure section 367. Second, our
determination of whether PG&E is a “real party in interest” will be based on an analysis
of the various interests (i.e., rights, privileges, powers and immunities) PG&E held in
relation to the transformer and is not limited to whether the label “owner” applies to
PG&E. Third, PG&E will be regarded as a real party in interest if PG&E demonstrates
15.
(1) it holds interests that are concrete and actual and (2) it has suffered an injury of
sufficient magnitude to assure the relevant facts and issues will be adequately presented
in the lawsuit.
These conclusions provide the legal foundation for our analysis of HART’s
motion for summary adjudication because they define the facts that are “material” to the
legal theory presented in the motion—namely, that PG&E lacked standing to sue for
negligence. (See Code Civ. Proc., § 437c, subd. (c) [motion granted if there is no triable
issue of material fact].)
C. Legal Rules Governing Summary Adjudication
1. Standard of Review
Appellate courts independently review the grant of a motion for summary
adjudication. (Haney v. Aramark Uniform Services, Inc. (2004) 121 Cal.App.4th 623,
631.) Appellate courts performing this independent review apply the same three-step
analysis as the trial court. (Pierson v. Helmerich & Payne Internat. Drilling Co. (2016) 4
Cal.App.5th 608, 617 (Pierson); Brantley v. Pisaro (1996) 42 Cal.App.4th 1591, 1602
(Brantley).) The three-step analysis is used to determine whether a triable issue of
material fact exists and whether the moving party is entitled to summary adjudication as a
matter of law. (Pierson, supra, at pp. 616-618.)
2. Step One: Framing the Issues
The first step of the summary adjudication analysis requires the court to identify
the issues framed by the pleadings. (Pierson, supra, 4 Cal.App.5th at p. 617.) Here,
PG&E and MID alleged they were the owners of the transformer and HART negligently
dropped a washer into the transformer, which made the transformer unusable and
proximately caused damage. HART’s motion for summary adjudication challenged
PG&E’s allegation that it was an owner of the transformer and presented the legal theory
that PG&E lacked standing to sue HART for negligence.
16.
In general terms, HART’s moving papers pass the first analytical step. The
question of standing to bring a negligence claim is a question with the potential to be
resolved by summary adjudication. (See Williams v. Superior Court (2017) 3 Cal.5th
531, 558-559 [lack of standing to bring claim under Labor Code may be raised in motion
for summary judgment or summary adjudication]; Two Jinn, Inc. v. Government Payment
Service, Inc. (2015) 233 Cal.App.4th 1321, 1337 [trial court correctly granted summary
judgment on ground plaintiff lacked standing to bring an unfair competition claim].)
3. Step Two: HART’s Burden
The second step of the summary adjudication analysis requires the court to
determine whether the moving party carried its burden and made a prima facie showing
justifying judgment in its favor. (Brantley, supra, 42 Cal.App.4th at p. 1602.) In broad
terms, the prima facie showing is made when the “moving party has established facts
justifying judgment in its favor.” (Pierson, supra, 4 Cal.App.5th at p. 617.)
Stated in more detail, the party moving for summary judgment or adjudication
bears the burden of persuasion that there is no triable issue of material fact and that he is
entitled to judgment as a matter of law. (Aguilar v. Atlantic Richfield Co. (2001) 25
Cal.4th 826, 850 (Aguilar).) In the context of this case, HART bears the burden of
persuasion that “[o]ne or more of the elements of the [negligence] cause of action cannot
be separately established.” (Code Civ. Proc., § 437c, subd. (o)(1); Aguilar, supra, at p.
850.) With respect to the presentation of evidence, the moving party “bears an initial
burden of production to make a prima facie showing of the nonexistence of any triable
issue of material fact.” (Aguilar, supra, at p. 850.) The requisite prima facie showing “is
one that is sufficient to support the position of the party in question.” (Id. at p. 851.)
How does a moving party carry its burden and make the requisite prima facie
showing? The answer is by filing an adequate separate statement of undisputed material
facts, along with sufficient evidence to establish the material facts. (Pierson, supra, 4
17.
Cal.App.5th at p. 617; Code Civ. Proc., § 437c, subd. (b)(1) [separate statement].) The
separate statement acts as the cornerstone for a moving party’s prima facie showing of
the nonexistence of any triable issue of material fact. When preparing the separate
statement, a moving party defendant (1) should accurately identify the facts material to its
legal theory as to why an essential element of the plaintiff’s cause of action cannot be
established; (2) actually include those material facts in the separate statement; and (3)
reference evidence establishing, either directly or by inference, each material fact the
moving party claims is undisputed. (Pierson, supra, at p. 617; see Cal. Rules of Court,
rule 3.1350(d)(3).) In other words, when a defendant’s separate statement omits material
facts, the defendant fails to carry its burden of making a prima facie showing that a cause
of action lacks merit. (AMCO Ins. Co. v. All Solutions Ins. Agency, LLC (2016) 244
Cal.App.4th 883, 904.)
4. Step Three: PG&E’s Burden
If the moving party carries its initial burden, the court proceeds to the third step of
the analysis. That step requires the court to determine whether the party opposing the
motion has demonstrated the existence of a triable issue of material fact. (Pierson, supra,
4 Cal.App.5th at p. 618.)
D. Analysis of Real Party in Interest
HART’s motion attempted to establish PG&E lacked standing to sue.
Consequently, we consider whether HART has carried its burden of establishing that
PG&E is not a real party in interest for purposes of the negligence cause of action. Our
analysis of this question begins by identifying PG&E’s interests in the transformer and
then determining if those interests (1) are concrete and actual and (2) have been injured in
a sufficient magnitude to justify giving PG&E standing to sue for negligence. (See pt.
I.C., ante.)
18.
1. Identification of Interests
The 1964 power purchase contract between MID and PG&E transferred many
interests to PG&E. Some of those interests relate to the transformer.
Paragraph 7 of the 1964 power purchase contract states: “M[ID] shall sell and
deliver to P[G&E] during the term of this contract all the electric power and energy
generated by the power plants of the project, except the power and energy delivered for
project power plant use.” Thus, PG&E has the exclusive right to the benefits produced
by the use of the transformer—specifically, electricity in voltages compatible with
PG&E’s two transmission systems.
PG&E also controls who operates the power plants because MID cannot transfer
the power plants or the obligations under the contract without PG&E’s approval.
Paragraph 12 of the 1964 power purchase contract states MID shall maintain and defend
all “rights and privileges necessary or useful to the operation of the project and shall not
voluntarily convey, transfer or in any manner encumber any of such rights without the
written consent of [PG&E].” Similarly, paragraph 18 states that the contract itself shall
not be assigned voluntarily, except as security for MID’s financing of the project, without
the written consent of PG&E.
Appendix C-5 to the 1964 power purchase contract provides that if MID fails or is
unable to operate or maintain the project or any units thereof (such as the transformer) in
accordance with the contract, PG&E may upon reasonable notice to MID enter upon,
operate and maintain the project or such unit as may be necessary, for and on behalf of
MID, but at PG&E’s own costs and expense. Thus, PG&E has a conditional right to
physical possession of the power plants or particular units.
PG&E also holds an interest in the transformer and the recovery of damages
resulting from HART’s negligent maintenance work because PG&E is contractually
obligated to pay all the costs associated with the project. This interpretation of the 1964
power purchase contract is supported by testimony from David Ward, a PG&E employee.
19.
During his deposition, Ward testified that PG&E was responsible for all costs associated
with the operation and maintenance of the hydroelectric equipment at the Exchequer
power plant.
2. PG&E’s Interests Are Actual, Concrete and Substantial
We conclude PG&E’s interest in all of the electric power and energy emitted by
the transformer was actual and concrete. PG&E’s right to receive the electricity was
vested in the sense that it was “a completed, consummated right for present or future
enjoyment; not contingent.” (Black’s Law Dict., supra, at p. 1595 [definition of
“vested”].) PG&E had received electricity under the 1964 power purchase contract since
the power plants began operations in 1967. Consequently, PG&E’s right had been
consummated and was not contingent upon an event that might (or might not) happen.
We also conclude PG&E’s interests in receiving all of the electrical output of the
transformer and its responsibility to pay the costs of operation and maintenance were
substantial. The function and purpose of the power plants are to generate electricity.
Therefore, the exclusive right to the electricity produced is one of the most important
rights related to the power plants. The transformer is integral to the delivery of the
electricity to PG&E. In other words, there would be little value in holding rights,
privileges, powers and immunities in relation to the power plants and units such as the
transformer, if the holder of such interests could not benefit from the plants’ output of
electricity.
The substantial nature of PG&E’s interests is reinforced by its obligation to pay
the cost of operation and maintenance. This obligation is sufficient to assure PG&E has a
real interest in the ultimate adjudication of the negligence claim. In particular, the costs
PG&E has incurred in connection with attempting to repair and then replacing the
transformer, which PG&E contends are over $8.1 million, are of sufficient magnitude to
reasonably assure that all of the relevant facts and issues will be adequately presented in
20.
the litigation of the negligence claim. (See Schmier v. Supreme Court, supra, 78
Cal.App.4th at p. 707.)
In summary, we conclude PG&E is a real party in interest under Code of Civil
Procedure section 367 and has standing to sue HART for negligence.
E. Analysis of HART’s Arguments
The foregoing section sets forth our affirmative analysis for our conclusion that
PG&E is a real party in interest with standing to sue for negligence. In this section, we
approach the issue from a different perspective and explain why some of the arguments
presented by HART do not negate PG&E’s standing.
1. Contractual Reference to the Sole Owner
An important piece of evidence offered by HART to support its contention that
MID is the sole owner of the transformer and, therefore, PG&E has no ownership
interests is the sentence in the 1964 power purchase contract stating MID “shall be the
sole owner (under Federal Power Commission License) of, the project.” In our view, this
statement does not conclusively establish PG&E holds no property interests in relation to
the transformer—that is, holds no sticks from the bundle constituting the ownership
interests in the transformer. Furthermore, the statement does not conclusively establish
PG&E holds insufficient interests to be a real party in interest.
First, the phrase “sole owner” was not drafted as an absolute statement, but was
modified by the parenthetical “(under Federal Power Commission License).”
Consequently, the sentence, on its face, is capable of being interpreted to mean MID shall
be listed on the federal license as the sole owner. HART has ignored the impact of the
parenthetical modifier and, thus, has presented no argument or authority demonstrating
the entity listed as the sole owner on the federal license must “have complete property in
the thing” as that phrase is used in the definition of “owner.” (Black’s Law Dict., supra,
at p. 1137.) In other words, being listed on the federal license as the sole owner might be
21.
a formality and is not necessarily definitive in every other legal contexts where questions
of ownership may arise.
Second and most importantly, the 1964 power purchase contract must be read as a
whole and other provisions in the contract unambiguously demonstrate MID has “parted
with some interests in [the transformer]” as that phrase is used in the definition of
“owner.” (Black’s Law Dict., supra, at p. 1137; see Civ. Code, § 1641 [contract must be
read as a whole and, if reasonably practicable, each clause helping to interpret the other].)
These other contractual provisions, such as the provision that transfers to PG&E the right
to receive all the electricity produced by the power plants and transformed to the proper
voltages, establish PG&E as “a person in whom one or more interests are vested.”
(Black’s Law Dict., supra, at p. 1137 [definition of “owner”].) Thus, the evidence
presented by HART supports a finding of ultimate fact that PG&E owns some property
interests in the transformer despite the agreement to list MID as the sole owner on the
federal license.
Third, the label “owner” is not determinative of the question whether PG&E is
sufficiently interested in the adjudication of the negligence claim to qualify as a real party
in interest under Code of Civil Procedure section 367. In other words, HART’s focus on
ownership has diverted it from the applicable legal test for standing—namely, whether
PG&E qualifies as a real party in interest. (See pt. I.C., ante [tests for who is a real party
in interest].)
2. Deposition Testimony about Ownership
David Ward, a PG&E employee, was asked during his deposition: “PG&E did not
own the transformer that was removed from Exchequer, correct?” Ward answered,
“Yes.” Next, Ward was asked: “Is it your understanding that PG&E had any ownership
interest in that transformer?” He answered, “No.” As a follow-up question, he was
asked: “Your understanding is [PG&E] did not have any ownership interest in that
22.
transformer, correct?” Ward replied, “Yes, that’s correct.” Earlier in the deposition,
Ward agreed with the statement that “MID owned all of the equipment at Exchequer,
including the transformer that was removed.”
HART characterizes Ward’s deposition testimony as an admission by PG&E that
it does not own the transformer. HART argues the “sworn deposition testimony is
binding upon PG&E for purposes of this motion.”
We reject HART’s contention that Ward’s deposition testimony is a binding
admission for purposes of the summary adjudication motion. First, the portions of
Ward’s deposition testimony in the appellate record do not explain what he understood
the terms “own,” “owned,” and “ownership interest” to mean. As described earlier, the
terms “property” and “owner” have a variety of meanings and we are unable to determine
from the record what Ward’s understanding was when he answered the deposition
questions. For example, he might have meant the holder of legal title to the transformer
or, alternatively, the entity designated as “owner” for purposes of the federal license.
Based on the rule that a court must consider the evidence and all of the inference drawn
from the evidence in the light most favorable to the party opposing summary judgment or
adjudication (Aguilar, supra, 25 Cal.4th at p. 843), we cannot interpret Ward’s testimony
as a binding admission that PG&E held no property interests in the transformer at the
time of the washer incident. Second, Ward’s testimony about “ownership interests” is
contradicted by the terms of the 1964 power purchase contract, which showed that PG&E
held some property interests in the transformer. Therefore, Ward’s deposition testimony
does not establish that PG&E is not a real party in interest.
3. Evidentiary Objections and Exclusion of PG&E’s Evidence
HART contends it met its initial burden of proving by admissible evidence that
PG&E could not establish an element of its causes of action and, consequently, the
burden shifted to PG&E to present admissible evidence that would allow a reasonable
23.
trier of fact to find in his favor. HART further contends PG&E failed to carry its burden
because the trial court sustained objections to the evidence presented by PG&E.
This argument is unavailing because we have concluded HART did not carry its
initial burden of establishing PG&E was not a real party in interest. The evidence
presented by HART—particularly the 1964 power purchase contract—showed that PG&E
held some property interests in the transformer. Consequently, we have not reached the
third step of the summary adjudication analysis and considered whether PG&E
demonstrated the existence of a triable issue of material fact. (See pt. II.C.4., ante.)
4. Homeowner Association Cases
HART relies on cases involving homeowner associations to support its contention
that a plaintiff asserting a negligence cause of action must plead and prove it owned the
property at the time it was damaged. (See Martin v. Bridgeport Community Assn., Inc.
(2009) 173 Cal.App.4th 1024 (Martin); Friendly Village Community Assn., Inc. v. Silva
& Hill Constr. Co. (1973) 31 Cal.App.3d 220 (Friendly Village).)
In Friendly Village, the court concluded a homeowner association lacked
ownership, possession or right of possession in common areas of a condominium project
and, therefore, lacked standing to sue grading contractors for failing to properly cut, fill
and compact the soil underlying the project, which allegedly resulted in damage to the
common areas. The court stated the following principle, which HART contends applies
in this case: “An element of a cause of action for injury to real property is the plaintiff’s
ownership, lawful possession, or right to possession, of the property.” (Friendly Village,
supra, 31 Cal.App.3d at p. 224.) The project’s declaration of covenants, conditions and
restrictions required the homeowner association to repair the damaged common areas, but
also required the association to assess each condominium owner his proportionate share
of the costs. (Id. at p. 225.) The court concluded the condominium owners were the ones
24.
with standing to sue because they were required to bear the cost of repair. (Ibid.) The
court then stated:
“This conclusion is in accord with the rule that every action must be
prosecuted in the name of the real party in interest. (Code Civ. Proc. §
367.) The condominium owners are the real parties in interest, because
they are the ones having an actual and substantial interest in the subject
matter of the action and who would be benefited or injured by the judgment
in the action.” (Friendly Village, supra, 31 Cal.App.3d at p. 225.)11
Friendly Village does not compel the conclusion that PG&E is not a real party in
interest for purposes of the negligence cause of action. Instead, it supports the conclusion
that parties who must pay for the damage done by the alleged negligence have a real
interest in the litigation. Here, PG&E is the party that will bear financial responsibility
for the damages if those damages are not recovered from HART. Consequently, PG&E
is a real party in interest under the reasoning adopted in Friendly Village, supra, 31
Cal.App.3d at pages 224 through 225 because PG&E would benefit monetarily by a
judgment against HART on the negligence cause of action.
In Martin, a husband and wife (the Martins) living in a house in a planned
development community sued the homeowner association over a dispute involving a lot
line agreement. (Martin, supra, 173 Cal.App.4th at p. 1029.) The Martins’ seventh and
eighth causes of action were for (1) negligence arising from an alleged duty the
homeowner association owed the Martins as residents and members of the association to
use reasonable care in maintaining the common areas and (2) negligence per se based on
11 The Legislature overturned the decision by enacting former Code of Civil
Procedure section 374, which read, in part: “An owners’ association established in a
project consisting of condominiums, as defined in Section 783 of the Civil Code, ... shall
have standing to sue as the real party in interest for any damages to commonly owned
lots, parcels or areas ... occasioned by the acts or omissions of others, without joining
with it the individual owners of such project.” (Stats. 1976, ch. 595, § 2, p. 1439,
amended by Stats. 1979, ch. 168, § 1, p. 387; see Orange Grove Terrace Owners Assn. v.
Bryant Properties, Inc. (1986) 176 Cal.App.3d 1217, 1221–1222.)
25.
violations of the Davis-Stirling Common Interest Development Act (Civ. Code, § 1350,
et seq.). (Martin, supra, at p. 1029.) The homeowner association filed a demurrer,
contending the owners of the home, but not the Martins, had standing to sue. (Ibid.) The
trial court sustained the demurrer and the appellate court affirmed. (Id. at p. 1031.)
The appellate court rejected both negligence claims because the duty the Martins
pleaded as being breached was the homeowner association’s duty to maintain the
common grounds. (Martin, supra, 173 Cal.App.4th at p. 1037.) The court concluded
that particular duty arose out of the Davis-Stirling Common Interest Development Act
and the covenants, conditions and restrictions—not out of common law principles of
negligence. (Martin, supra, at p. 1037.) The court concluded that duty was owed only to
members of homeowner association (i.e., the owners of the house). (Ibid.) As a result,
the court concluded the Martins were not the real parties in interest and did not have
standing to sue for negligence. (Id. at p. 1038.) The duty-based rationale set forth in
Martin leads us to PG&E’s arguments for why HART owed it a duty of care.
F. Analysis of Duty of Care
The foregoing analysis focused on the interests of PG&E to determine whether
PG&E was a real party in interest with standing to sue for negligence. An alternate
version of the test for who is the “real party in interest” asks who holds the right sued
upon by reason of the substantive law. (Iglesia, supra, 173 Cal.App.4th at p. 445; 4
Witkin, Cal. Procedure, supra, Pleading, § 121, p. 187 [person who has the right to sue
under substantive law is the real party in interest].)
Here, PG&E contends it has standing to bring a negligence claim because HART
owed it a duty of care. PG&E refers to the following statement by the California
Supreme Court in Biakanja, supra, 49 Cal.2d 647, which provides guidance for courts
making the policy determination as to whether a duty of care exists in a particular case:
26.
“The determination whether in a specific case the defendant will be
held liable to a third person not in privity is a matter of policy and involves
the balancing of various factors, among which are [1] the extent to which
the transaction was intended to affect the plaintiff, [2] the foreseeability of
harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4]
the closeness of the connection between the defendant’s conduct and the
injury suffered, [5] the moral blame attached to the defendant’s conduct,
and [6] the policy of preventing future harm.” (Id. at p. 650.)
PG&E argues that applying the Biakanja factors to the evidence presented shows
there are triable issues of material fact concerning whether HART owed PG&E a duty of
care.
HART’s moving papers were not tailored to the duty-of-care element of a
negligence cause of action. As a result, the moving papers did not present all of the
material facts needed to balance the Biakanja factors and determine whether HART owed
PG&E a duty of care. Consequently, we cannot affirm the grant of summary adjudication
of the negligence cause of action on the ground HART demonstrated it owed PG&E no
duty of care.
III. RECOVERY UNDER SECTION 7952
The trial court concluded PG&E could not establish any entitlement to the
measure of damages set forth in section 7952 because PG&E could not prove it was the
owner of the transformer. HART supports the court’s conclusion by arguing the statutory
phrase “equipment of any … electrical … corporation” should be interpreted to mean
equipment owned by the electrical corporation and, because the undisputed evidence
shows MID was the sole owner of the transformer, PG&E cannot recover damages under
section 7952. PG&E disagrees with HART’s statutory interpretation, contending a
proper interpretation must promote, rather than defeat, the purpose of the statute—
namely, allowing public utilities to recover an enhanced measure of damages from
tortfeasors and thereby preventing those costs from being passed to the general public.
27.
A. Statutory Construction
Our Supreme Court’s approach to the judicial interpretation of California statutes
is well established. (People v. Castillolopez (2016) 63 Cal.4th 322, 329.) A court’s
“‘role in construing a statute is to ascertain the intent of the Legislature so as to effectuate
the purpose of the law.’” (Ibid.) Courts “‘look first at the words themselves, giving them
their usual and ordinary meaning’” because statutory language generally is the most
reliable indicator of that intent. (Ibid.)
1. Statutory Language With a Plain Meaning
When the statutory language, standing alone, is clear and unambiguous, courts
usually adopt the plain or literal meaning of that language. (Hughes v. Board of
Architectural Examiners (1998) 17 Cal.4th 763, 775; Lungren v. Deukmejian (1988) 45
Cal.3d 727, 735 (Lungren).) In this context, ambiguous means susceptible to more than
one reasonable interpretation. (Honchariw v. County of Stanislaus (2013) 218
Cal.App.4th 1019, 1027.)
The plain meaning of the words of a statute may be disregarded only when the
application of their literal meaning would (1) frustrate the manifest purposes that appear
from the provisions of the legislation when considered as a whole in light of its
legislative history or (2) produce absurd consequences that the Legislature clearly did not
intend. (Arias v. Superior Court (2009) 46 Cal.4th 969, 979 [literal construction will not
control when it frustrates manifest purpose of enactment as a whole]; Horwich v.
Superior Court (1999) 21 Cal.4th 272, 276 [statutory language should not be given literal
meaning if it results in absurd consequences].)
2. Ambiguous Statutory Language
Whether statutory language is ambiguous is a question of law subject to
independent review on appeal. (Wells Fargo Bank, N.A. v. 6354 Figarden General
Partnership (2015) 238 Cal.App.4th 370, 381 (Wells Fargo).) When statutory language
is susceptible to more than one reasonable interpretation, courts must select the
28.
construction that comports most closely with the apparent intent of the Legislature, with a
view to promoting rather than defeating the general purpose of the statute. (Ibid.) The
apparent intent of the Legislature is determined by reading the ambiguous language in
light of the statutory scheme rather than reading it in isolation. (Lungren, supra, 45
Cal.3d at p. 735.) Stated another way, the ambiguous language must be construed in
context, and provisions relating to the same subject matter must be harmonized to the
extent possible. (Ibid.) In addition, courts determine the apparent intent underlying
ambiguous statutory language by evaluating a variety of extrinsic aids, including the
ostensible objects to be achieved by the statute, the evils to be remedied, public policy,
and the statute’s legislative history. (Wells Fargo, supra, at p. 381.)
B. Statutory Text
Part of the historical context for the question of statutory interpretation presented
in this appeal is established by the initial version of section 7952, which was enacted in
1951 and stated the following:
“Any person who injures or destroys, through want of proper care,
any necessary or useful fixture of any telegraph or telephone or electric
power corporation or the pipe line, valves or fittings of any gas
corporation, is liable to the corporation for all damages sustained thereby.
Any vessel which, by dragging its anchor, or otherwise, breaks, injures, or
destroys the subaqueous cable of a telegraph or telephone or electric power
corporation or the pipe line of a gas corporation, subjects its owner to
liability for the damages sustained thereby.” (Stats. 1951, ch. 764, § 7952,
p. 2195, italics added.)
The Legislature did not explain the meaning of the phrase “all damages.” For
instance, it did not define “damages” or specify particular items that could be recovered.
In 1969, the Legislature amended section 7952 by (1) adding a provision defining the
proper measure of damages; (2) changing the word “fixture” to the phrase “facility or
equipment;” and (3) making other minor changes. As a result of the 1969 amendment,
section 7952 now provides in full:
29.
“Any person who injures or destroys, through want of proper care,
any necessary or useful facility or equipment of any telegraph, telephone,
electrical, or gas corporation, is liable to the corporation for all damages
sustained thereby. The measure of damages to the facility or equipment
injured or destroyed shall be the cost to repair or replace the property
injured or destroyed including direct and allocated costs for labor,
materials, supervision, supplies, tools, taxes, transportation, administrative
and general expense and other indirect or overhead expenses, less credit, if
any, for salvage, as determined by such telegraph, telephone, electrical or
gas corporations in conformity with a system of accounts established by the
commission. The specifying of the measure of damages for the facility or
equipment shall not preclude the recovery of such other damages
occasioned thereby as may be authorized by law.
“Any vessel which, by dragging its anchor, or otherwise, breaks,
injures or destroys any underwater cable of a telegraph, telephone or
electrical corporation or pipeline of a gas corporation, subjects its owner to
liability for the damages sustained thereby.” (Stats. 1969, ch. 709, § 1, pp.
1389–1390, italics added.)
Accordingly, after the 1969 amendment, section 7952 contained “the measure of
damages for damage done to a facility of a telegraph, telephone, electric or gas
corporation.” (Legis. Counsel’s Dig., Sen. Bill No. 939, 2 Stats. 1969 (Reg. Sess.)
Summary Dig., p. 102.) The statute does not define what the preposition “of” means in
the phrase “equipment of any … electrical … corporation.” (§ 7952.) For instance, it
does not state the phrase refers to equipment (1) owned by, (2) physically possessed by, or
(3) associated or connected with, the electrical corporation. Consequently, even if the
phrase was intended to refer to ownership, the statute does not identify whether that
ownership must be sole and complete ownership or partial ownership—that is, control
over some, but not all, of the sticks in the bundle of interests that constitute “property.”
(See pt. I.A., ante.)
C. Legislative History
We granted PG&E’s unopposed request for judicial notice of documents compiled
by LRI History LLC that relate to the 1969 amendment of section 7952. Consistent with
the positions taken by the parties, we consider all of the documents compiled and
30.
presented. As noted by HART, the legislative materials before this court do not include
documents relating to the initial version of section 7952.
An unitemized document in the Governor’s chapter bill file on Senate Bill No. 939
(1969 Reg. Sess.) described the reasons for amending section 7952 as follows:
“The Public Utilities Code presently establishes liability for ‘all damage’ to
equipment owned by utilities, but does not define ‘damages’. Such
definition is necessary because of the direct interest the consuming public
has in the recovery of this type [of] damage.
“Since the service is so highly specialized, the utilities can most
economically and most effectively restore service to the public by repairing
the damage to their own system. In repairing their own systems, utilities
incur certain indirect costs. [¶] … [¶]
“If the utility, and more importantly, the consuming public, is to be made
whole for the cost of repairing such damage, the party causing the damage
must be required to pay not only the direct cost, but also the indirect cost of
making these repairs. Any indirect costs not recovered from the wrong
doer must be recovered through rates charged to utility customers.
“The absence of a statutory definition of damages to utility property where
the repair work is performed by utility forces has resulted in a great deal of
litigation which could be avoided.
“Justice, equity and common sense require this amendment in order to
define the measure of damage to a utility’s property and to prevent needless
and expensive litigation which must be paid for by the utility and therefore,
the consuming public.” (Italics added.)
The enrolled bill memorandum to the Governor, dated August 7, 1969, for Senate
Bill No. 939 stated, “The bill was sponsored by Southern California Edison Company. It
is intended to more clearly define ‘damages’ by including indirect charges.”
31.
D. Analysis of Meaning
1. Contentions About the Word “Of”
The statutory interpretation adopted by the trial court and HART is based on the
meaning of the word “of” as it appears in the phrase “equipment of any … electrical
corporation.”12 (§ 7952.) HART supports this interpretation by arguing:
“The word ‘of’ and the phrase ‘facility or equipment of … a [sic]
corporation’ are ordinary words and phrases. The word ‘of” connotes
ownership and belonging to. In common usage, the phrase ‘property of’
connotes property which is owned by a particular individual or entity.
PG&E had no ownership interest in the Exchequer Transformer and had no
right to ownership of the transformer, now or in the future.”
PG&E argues HART’s interpretation rewrites the statutory text by replacing the
word “of” with the phrase “owned by,” which does not appear in the relevant portion of
the statute. PG&E further argues the meaning of section 7952 “may not be determined
from a single word” (Lungren, supra, 45 Cal.3d at p. 735) but should promote the
purpose of the statute.
2. Is “Of” Ambiguous?
Whether the word of and the phrase of any electrical corporation are ambiguous—
that is, reasonably susceptible to more than one meaning—presents a question of law.
(Wells Fargo, supra, 238 Cal.App.4th at p. 381.) As explained below, we conclude the
word “of” and, therefore, the phrase in which it was used are ambiguous.
First, we note HART has not supported its argument about the meaning of the
word “of” with a citation to any legal authority or dictionary definitions.13 (See Cal.
12 As to the other words in this phrase, we conclude (1) the transformer was
“equipment” for purposes of section 7952 and (2) PG&E is an electrical corporation. The
latter conclusion is based on cases in which PG&E was allowed to recover damages
under section 7952 and on certain statutory definitions. (See Pacific Gas & Electric Co.
v. Alexander (1979) 90 Cal.App.3d 253 [damage to wood utility poles]; Pacific Gas &
Electric Co. v. Mounteer (1977) 66 Cal.App.3d 809; §§ 204 [corporation], 205 [person],
206 [person, corporation], 218 [electrical corporation].)
32.
Rules of Court, rule 8.204(a)(1)(B) [brief must support each point by argument and, if
possible, by citation of authority].) Thus, HART’s approach implies HART thought it
was not possible to cite authority supporting its argument about plain meaning.
Second, the California Supreme Court has addressed the meaning of the
preposition “of” when it appears in a statute. (See People v. Hallner (1954) 43 Cal.2d
715, 718 (Hallner); Harlan v. Industrial Acc. Com. (1924) 194 Cal. 352, 361 (Harlan).)
In both cases, the court considered whether to interpret “of” as a word of proprietorship
or possession (which is interpretation advocated by HART) and rejected that
interpretation.
In Hallner, supra, 43 Cal.2d 715, the dispute involved a statute making it a crime
to offer a bribe to any “‘executive officer of this state.’” (Id. at p. 717.) The question
presented was whether the phrase “of this state” covered an executive officer of a city.
(Ibid.) Our Supreme Court stated “the word ‘of’ has different meanings” and illustrated
the point by stating it could be “used in its possessive sense or to indicate geographic
location.” (Id. at p. 718.) In the context of the bribery statute, the court concluded “of
the state” meant “in the state.” (Id. at p. 721.) As a result, the court interpreted the
statute to prohibit offering a bribe to an executive officer of a city. (Ibid.) Thus, Hallner
illustrates that the preposition “of” is susceptible to more than one interpretation and
rejects interpreting “of” in its possessive sense.
In Harlan, supra, 194 Cal. 352, the dispute involved a workers’ compensation
statute that limited dependents entitled to death benefits to persons who were “‘in good
faith a member of the family or household of [the deceased] employee.’” (Id. at p. 355,
13 “Courts frequently consult dictionaries to determine the usual meaning of words.”
(In re Marriage of Bonds (2000) 24 Cal.4th 1, 16.) “When attempting to ascertain the
ordinary, usual meaning of a word, courts appropriately refer to the dictionary definition
of that word.” (Wasatch Property Management v. Degrate (2005) 35 Cal.4th 1111,
1121-1122.)
33.
italics added.) The deceased employee was an illegitimate minor, and the applicant for
benefits was the aunt who had raised him as the twin of her own son, who was nearly the
same age. (Id. at pp. 357-358.) The court addressed “the effect to be given to the words
‘of [the deceased] employee’ as used” in the statute. (Id. at p. 360.) In particular, the
court considered whether “the applicant [must be] a member of the family or household
of which said deceased employee was the head or master.” (Id. at p. 361, italics added.)
The court rejected this interpretation, stating:
“Such a restricted construction would tend to defeat rather than to promote
the purpose of the act. We think that petitioner has lost sight of the object
and purpose of the law. It is not to be doubted that the words ‘of such
employee’ are words of identification and relation rather than words of
proprietorship or possession within the contemplation of the act. In this
connection the preposition ‘of’ is very commonly used and has a meaning
well understood. The Standard Dictionary thus defines it: ‘(1) associated or
connected with, usually in some causal relation, efficient, material, formal
or final.’ It will be noted that the act does not employ the term ‘head of the
family’ for the reason, doubtless, that the head of the family or person who
by common consent exercises authoritative domestic control may not, in
fact, be a bread-winner at all, but in many cases a dependent. The act cares
for the support of dependents, and does not concern itself with the real or
nominal heads of families or households except so far as that station may
have a causal relation to the support of dependents of the household.”
(Ibid.)
This quote shows our Supreme Court considered interpreting “of” as a word of
proprietorship or possession and rejected that statutory construction. As a result, Harlan
demonstrates that the preposition “of” is not always interpreted as designating a
proprietary relationship and, therefore, is susceptible to more than one interpretation.
Third, the possibility that the preposition “of” is susceptible to more than one
interpretation is supported by the multiple definitions set forth in Black’s Law Dictionary
(4th rev. ed. 1968) at page 1232:
“A term denoting that from which anything proceeds; indicating origin,
source, descent, and the like; as he is of a race of kings; he is of noble
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blood. [Citation.] Associated with or connected with, usually in some
casual relation, efficient, material, formal, or final. [Citation.]
“The word has been held equivalent to after, [citation]; at, or belonging to,
[citation]; in possession of, [citations]; manufactured by, [citation]; residing
at, [citation]; from, [citation]; in [citation].”14
The case law and dictionary definition establish that, in the abstract, the
preposition “of” can be defined in many ways. Therefore, our next step in resolving
whether the word “of” as used in section 7952 is ambiguous places the word in the
context of the rest of the statutory language and determines whether, in that context, it is
reasonable to interpret the word in more than one way. We conclude more than one
interpretation is reasonably possible because “of” could be interpreted broadly to mean
associated or connected with (Harlan, supra, 194 Cal. at p. 361) or, alternatively, it could
be interpreted more restrictively to mean belonging to or owned by (see Poe v. Seaborn
(1930) 282 U.S. 101, 109 [in federal revenue statute taxing the net income of every
individual, “use of the word ‘of’ denotes ownership”]).
3. Resolving the Ambiguity
When resolving the meaning of ambiguous statutory language, courts (1) select the
construction that most closely comports with the apparent intent of the Legislature, with a
view to promoting rather than defeating the general purpose of the statute and (2) avoid
interpretations that lead to absurd consequences. (Wells Fargo, supra, 238 Cal.App.4th
14 Following the example of our Supreme Court, we cite this version of Black’s Law
Dictionary because it is the edition that was current when the legislation in question was
enacted. (See Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 570, fn. 4 [cite
to the 1968 revised edition of Black’s Law Dict.].) Various editions of Black’s Law
Dictionary has been referred to in federal cases for a definition of “of.” (See American
Soda, LLP v. U.S. Filter Wastewater Group, Inc. (10th Cir. 2005) 428 F.3d 921, 926, fn.
1; Dixon v. TSE International Inc. (5th Cir. 2003) 330 F.3d 396, 397-398; Shaw v.
Dawson Geophysical Co. (S.D.W.Va. 2009) 657 F.Supp.2d 740, 748.
As to the many definitions for the preposition “of,” Webster’s Third New
International Dictionary (1986) at page 1565 lists 20 definitions including “relating to”
and “used as a function word indicating a possessive relationship.”
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at p. 381.) In other words, courts adopt the interpretation that best effectuates the
legislative intent or purpose. (Beal Bank, SSB v. Arter & Hadden, LLP (2007) 42 Cal.4th
503, 508.) In reaching a conclusion about which interpretation best effectuates the
legislative intent or purpose, courts may consider a variety of extrinsic sources, including
the legislative history. (Ibid.) The legislative history might provide insight into the
ostensible objects to be achieved by the statute, such as remedying a particular evil, and
the public policy underlying the statute. (Wells Fargo, supra, at p. 381.)
4. Apparent Intent of the Legislature
The materials in the legislative history do not explicitly state section 7952’s phrase
“equipment of any … electrical … corporation” means equipment owned in whole or in
part by the corporation. However, the materials restate the statutory text and some of the
restatements support inferences about what the Legislature intended the preposition “of”
to mean. The unitemized document quoted in part III.C., ante, refers to (1) “equipment
owned by utilities”; (2) “damage to their own system”; and (3) “the measure of damage
to a utility’s property.” The document includes the sentence: “In repairing their own
systems, utilities incur certain indirect costs.” (Italics added.) These references support
the inference that the preposition “of” was used to mean owned by—that is, to designate
an ownership or proprietary interest in the equipment. However, this inference about the
apparent intent of the Legislature does not bring us to the end of our inquiry. The
inference leaves open the specific question of whether the corporation’s ownership must
be sole (i.e., complete) ownership or extends to partial ownership.
5. Promoting the Legislative Purpose
The absence of statutory text or legislative materials that directly or indirectly
address the sole or partial ownership question leads us to consider which interpretation
best effectuates the legislative purpose. The legislative materials identify that purpose as
requiring the person causing the damages to pay the direct and indirect costs of repair and
36.
thereby preventing those costs from being “recovered through rates charged to utility
customers.” PG&E agrees with this assessment of the legislative materials. Its opening
brief argued the purpose of section 7952 “is to allow public utilities such as PG&E to
more easily recover damages from tortfeasors and avoid passing those costs onto the
general public.” In contrast, HART’s appellate brief focuses on the statutory text and
does not address how the legislative purpose relates to the possibility of partial
ownership.
We conclude the legislative purpose of protecting consumers from paying
increased utility rates to cover damages caused by the want of care of third parties is best
effectuated by interpreting “of” so that it is not limited to complete ownership of the
facility or equipment in question. Direct and indirect costs incurred by a utility in its
capacity as a partial owner have the potential to be passed through to consumers in the
rates charged. Therefore, categorically limiting recovery to utilities that are the sole
owner of the damaged equipment would not best effectuate the purpose of section 7952.
Based on the statutory purpose, we conclude the statutory phrase “equipment of
any … electrical … corporation” encompasses equipment solely owned by the
corporation and some equipment partially owned by the corporation. To fall within the
statutory phrase, partially owned equipment must met the following conditions: (1) the
property interests held by the corporation must be substantial, not trivial; (2) the
corporation must incur actual liability for direct or indirect expenses (or both) in repairing
or replacing the damaged equipment; and (3) a substantial portion of those expenses have
been passed, are being passed, or are reasonably likely to be passed, along to
consumers.15 These conditions assure the recovery allowed a partial owner is aligned
with the legislative purpose underlying the statute.
15 Restating this last element from another perspective, if the economic impact of the
expenses incurred to repair or replace the equipment is a reduction of the corporation’s
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E. Applying the Statutory Interpretation to HART’s Moving Papers
HART’s motion for summary adjudication of PG&E’s cause of action under
section 7952 was based on the legal theory that MID was the sole owner of the
transformer and PG&E did not own the transformer. HART’s legal theory used an overly
restrictive interpretation of section 7952 and did not address PG&E’s ownership of some
interests regarded as property under California law. Although HART’s moving papers
established PG&E was not the sole owner of the transformer, HART’s showing did not
eliminate the possibility that PG&E could prove it was a partial owner satisfying the three
conditions identified earlier in this opinion. As a result of HART’s failure to carry its
burden, we need not proceed to the third step of the summary adjudication analysis and
examine whether PG&E’s opposition papers have demonstrated the existence of a triable
issue of material fact. (See Pierson, supra, 4 Cal.App.5th at p. 618.)
In summary, HART has not carried its burden of demonstrating grounds that
completely dispose of PG&E’s cause of action for damages under section 7952. (See
Code Civ. Proc., § 437c, subd. (f)(1).) Accordingly, that cause of action should not have
been summarily adjudicated.
DISPOSITION
The judgment is reversed. The trial court is directed (1) to vacate the part of its
October 2015 order granting defendant’s motion for summary adjudication as to PG&E’s
causes of action for negligence and for damages under section 7952 and (2) to enter a
new order denying summary adjudication as to those causes of action.
profits, then recovery under the statute is not authorized because the purpose of the
statute is not the protection of shareholder or investor profits.
For purposes of the further proceedings to be conducted on remand, we note the
three conditions are not necessarily the final and binding interpretation of section 7952.
The trial court shall have the flexibility to modify these conditions if (1) legislative
history relating to the 1951 enactment of section 7952 is presented on remand and (2) the
materials in that legislative history justify a modification by showing a different
“apparent intent” or a broader set of legislative purposes.
38.
PG&E shall recover its costs on appeal.
_____________________
FRANSON, Acting P.J.
WE CONCUR:
_____________________
SMITH, J.
_____________________
MEEHAN, J.
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