Pac. Gas & Elec. Co. v. Hart High-Voltage Apparatus Repair & Testing Co.

• Citation: 18 Cal.App.5th 415,226 Cal.Rptr.3d 631
• Decision Date: 12 December 2017
• Docket Number: F072904
• Parties: PACIFIC GAS AND ELECTRIC COMPANY, Plaintiff and Appellant, v. HART HIGH-VOLTAGE APPARATUS REPAIR AND TESTING CO., INC., Defendant and Respondent.
• Court: California Court of Appeals

18 Cal.App.5th 415

226 Cal.Rptr.3d 631

PACIFIC GAS AND ELECTRIC COMPANY, Plaintiff and Appellant,

v.HART HIGH-VOLTAGE APPARATUS REPAIR AND TESTING CO., INC., Defendant and Respondent.

F072904

Court of Appeal, Fifth District, California.

Filed December 12, 2017

Certified for Partial Publication.^*

Urrabazo Law, Donald Urrabazo, Arturo Padilla and Joon Song, Los Angeles for Plaintiff and Appellant.

Michel & Fackler, Michael D. Michel, Walnut Creek, Kate Morrow and Jeff M. Fackler for Defendant and for Respondent.

FRANSON, Acting P.J.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 Code ¹ section 7952. PG&E alleged it incurred direct 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In the unpublished parts of this opinion addressing PG&E's negligence cause of action, we conclude (1) PG&E has standing to sue if it is a "real party in interest" pursuant to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.

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 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, 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 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 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...