Waters v. Pacific Telephone Co.

MOSK, J.

I dissent.

The Public Utilities Commission, by mere regulation, purports to limit liability for negligence inflicted by a utility upon a subscriber to the negligible amount of a credit on the subscriber’s monthly bill. This is in callous disregard of the Legislature’s direction contained in section 2106 of the Public Utilities Code which declares as clearly and as emphatically as the English language permits that: “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. . . .” (Italics added.)

“Any public utility . . . shall be liable . . . for all loss . . . .” How could a statute be more crystal clear? Nevertheless the majority construe section 2106 in a manner which does “not interfere with or obstruct the commission in carrying out its own policies” (ante, p. 11).-This is a strange and unprecedented doctrine. The majority in effect hold that if an administrative agency rule conflicts with an unambiguous legislative enactment, the statute must yield. That this court, which has traditionally been solicitous of negligence victims, now approves of the administrative creation of negligent-immune corporate entities contrary to a relevant statute will come as incredible news to the Legislature, and will cause shock waves to reverberate in the tort and administrative law bar.

*13 On two recent occasions the Court of Appeal has correctly analyzed this precise problem. In 1971 it decided Product Research Associates v. Pacific Tel & Tel Co. (1971) 16 Cal.App.3d 651 [ 94 Cal.Rptr. 216 ] and this court denied a hearing. The precise Public Utilities Commission schedule involved here was at issue there. Despite that definitive opinion, the commission has persisted in the untenable view that its rule prevails over legislative enactments and, apparently, over court decisions.

The Court of Appeal reaffirmed Product Research Associates in its discussion in this case. I believe its analysis is sound and therefore adopt, as my dissent, the opinion of Justice Elkington, concurred in by Presiding Justice Molinari and Justice Sims: *

[ ] The question posed on the appeal is whether this schedule provides the sole measure vf 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 four to three 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. 1971) 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) *14 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 T. & T.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 or decision of the commission.’ . . .” (16 Cal.App.3d, p. 655, fn. omitted.)

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 489 [ ] 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.

*15 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 , 386 P.2d 233 ], stated: “The mandate of the Legislature ... is to place the commission, insofar 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” [1] 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 *16 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." (Italics 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 , 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. . . .” (Italics 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 ]; 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.

*17 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 thé 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 jurisdiction of the commission.’” (Dollar-A-Day Rent-A-Car Systems, Inc. v. Pacific Tel. & Tel. Co., supra, 26 Cal.App.3d 454, 461 , italics ommitted; Vila v. Tahoe Southside Water Utility, supra, 233 Cal.App.2d 469, 478 .)

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 , 13 A.L.R. 274 ]; 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 ; 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 .) In the latter case the court said (p. 477): “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.

*18 Four of these- — Dollar-A-Day Rent-A-Car Systems, Inc. v. Pacific Tel. & Tel. Co., supra, 26 Cal.App.3d 454 ; 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 ; 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), 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. [2]

The remaining case relied upon by the company is Riaboff v. Pacific T. & T. Co., supra, 39 Cal.App.2d Supp. 775 , 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 directory (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), 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 § 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. 1971) Appeal, § 686.)

Some reliance is placed on Pacific Tel. & Tel. Co. v. Superior Court (Sokol) supra, 60 Cal.2d 426 , where damages were unsuccessfully sought for the disconnecting of Sokol’s telephone. But there it was held that the *19 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 .

, 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 , 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 here the state, acting through the Legislature, has chosen not to do so. [ ]

[The judgment should be reversed.]

Brackets together, in this manner [ ] without enclosing material, are used to indicate deletions from the opinion of the Court of Appeal; brackets enclosing material (other than editor’s added parallel citations) are, unless otherwise indicated, used to denote insertions or additions. (See Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 311, fn. 2 , and cases cited [ 70 Cal.Rptr. 849 , 444 P.2d 481 ].)

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

in the case at bench, as in Product Research Associates v. Pacific Tel. & Tel. Co., supra, 16 Cal.App.3d 651 , 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), concerning “[E]rrors or Omissions in [classified] Directories.”