Boone County Sand and Gravel Co., Inc. v. Owen County Rural Elec. Co-op. Corp.

• Decision Date: 28 July 1989
• Docket Number: No. 88-CA-980-MR,88-CA-980-MR
• Citation: 779 S.W.2d 224
• Parties: BOONE COUNTY SAND AND GRAVEL COMPANY, INC., Appellant, v. OWEN COUNTY RURAL ELECTRIC COOPERATIVE CORPORATION, Appellee.
• Court: Kentucky Court of Appeals

Page 224

779 S.W.2d 224

BOONE COUNTY SAND AND GRAVEL COMPANY, INC., Appellant, v. OWEN COUNTY RURAL ELECTRIC COOPERATIVE CORPORATION Appellee.

No. 88-CA-980-MR.

Court of Appeals of Kentucky.

July 28, 1989.

Discretionary Review Denied

by Supreme Court

Nov. 22, 1989.

Nick Benson, Walton, for appellant.

Anne P. McBee, Burlington, for appellee.

Before GUDGEL, LESTER and McDONALD, JJ.

GUDGEL, Judge:

This is an appeal from a judgment entered by the Boone Circuit Court. Appellant contends that the court erred by adjudging that its counterclaim for damages failed to state a cause of action. We disagree. Hence, we affirm.

Appellee Owen County Rural Electric Cooperative Corporation filed a complaint against appellant Boone County Sand and Gravel Company, Inc., to recover $36,266.21 for electric service provided from May 10, 1985, through June 10, 1986, for which appellant had been underbilled by appellee. Appellant pleaded the defense of estoppel and counterclaimed for damages incurred as a result of the underbilling.

The court entered a summary judgment in the amount of $36,266.21 for appellee, adjudging that the defense of equitable estoppel was not available to bar the utility company from collecting for electricity appellant had consumed. Memphis Light, Gas & Water Division v. Auburndale School System, 705 S.W.2d 652 (Tenn.1986). Thereafter, the court also granted appellee's motion for summary judgment on appellant's counterclaim on the ground that it failed to state a claim for relief. This appeal followed.

The issues before us are whether the defense of equitable estoppel is available as a defense to a public utility's claim to recover for all electricity consumed and whether the utility may be held liable for damages as a result of negligently underbilling a customer.

Appellant alleged that the underbilling was caused by appellee's use of an incorrect multiplier in computing appellant's bills. On two occasions during the thirteen-month period of underbilling, appellant inquired as to whether its bills were correct. Relying on assurances that the bills were correct, appellant alleged that it miscalculated its overhead and, as a result, overestimated its profit margin. Appellant argued that it subsequently paid an inflated price for stock when buying out certain stockholders.

The trial court, following the weight of authority from other jurisdictions, determined that the defense of equitable estoppel will not bar a utility from collecting for all electricity consumed. Memphis Light, supra; Chesapeake & Potomac Tel. Co. of Virginia v. Bles, 218 Va. 1010, 243 S.E.2d 473 (1978); Haverhill Gas Co. v. Findlen, 357 Mass. 417, 258 N.E.2d 294 (1970); Wisconsin Power & Light Co. v. Berlin Tanning & Mfg. Co., 275 Wis. 554, 83 N.W.2d 147 (1957); Sigal v. City of Detroit, 140 Mich.App. 39, 362 N.W.2d 886 (1985); Corp. De Gestion Ste-Foy v. Florida Power & Light, 385 So.2d 124 (Fla.App.1980).

In each of the cited cases, the customers argued as appellant does that they incurred damages as a result of detrimental reliance upon the utility's negligent underbilling. Nevertheless, these courts held that statutes which require that public utilities adhere rigidly to rate schedules approved by the public service commission preclude a customer from interposing the defense of equitable estoppel in an action by a utility to collect the balance of charges negligently omitted in earlier billings.

KRS 278.160(2), which is similar to the statutes involved in the cases cited, states as follows:

No utility shall charge, demand, collect or receive from any person a greater or less compensation for any service rendered or to be rendered than that prescribed in its filed schedules, and no person shall receive any service from any utility for a compensation greater or less than that prescribed in such schedules.

The decisions foreclosing the defense of equitable estoppel "recognized that where a statute declares that public utilities must charge all customers of public power alike according to a standard rate schedule, it is a contravention of public policy to estop the utility from collecting the full amount due for utilities consumed even where the customer has been negligently under-billed." Memphis Light, 705 S.W.2d at 653. The Supreme Court of Tennessee concluded that "[i]f the customer could successfully assert an estoppel defense, it would in effect...