Boston Gas Co. v. City of Boston

CourtAppeals Court of Massachusetts
Citation433 N.E.2d 483,13 Mass.App.Ct. 408
Decision Date04 June 1982

Gerald McTernan, Asst. Corp. Counsel, Boston, for defendant.

Paul B. Galvani, Boston (H. Reed Witherby, Boston, with him), for plaintiff.

Before HALE, C. J., and ROSE and GREANEY, JJ.

HALE, Chief Justice.

In this action brought in the Superior Court, the plaintiff seeks to recover nearly a half-million dollars for natural gas supplied to the Charles Street Jail (jail) from 1969 through 1977 but never charged to the defendant as a result of a billing error repeatedly committed by the plaintiff over a seven-year period. Prior to trial the plaintiff moved for summary judgment (see Mass.R.Civ.P. 56, 365 Mass. 824 (1974)) based on the pleadings, discovery materials, and affidavits. That motion was allowed, and a judgment for $465,203.81, plus interest from the date of demand was entered for the plaintiff. The defendant appeals, contending that the plaintiff's non-compliance with two provisions of the municipal finance laws preclude it from enforcing its otherwise liquidated claim. In response, the plaintiff argues that, despite its failure to comply with those provisions, G.L. c. 164, § 94, imposes an absolute obligation on the defendant to pay for all of the gas supplied to the jail. Neither party contends that there are any disputed questions of material fact, and we are therefore presented with the need to resolve the apparent conflict between these two statutory schemes. We affirm the judgment.

These are the facts. At all times material to this action the defendant, pursuant to the requirements of G.L. c. 40, § 34, and G.L. c. 126, § 33, has operated and maintained a lockup facility known as the Charles Street Jail. In 1969 the Boston public facilities commission, faced with having to do something about "the substantial air pollution which was being emitted from the jail ... (by) the then-existing coal-fired system," authorized the conversion of the jail to gas heat. Following the completion of that conversion in the summer of 1969, the plaintiff began to supply gas to the jail and continued to do so throughout the period in dispute.

As was the case with other utilities supplying services to the defendant, the plaintiff never entered into a written agreement with the defendant concerning its service to the jail. 1 Nevertheless, the plaintiff regularly submitted statements to the defendant for the amounts it believed were due for the gas supplied to the jail and these statements were paid in due course. All such payments were made pursuant to appropriations for this purpose. Until 1976 those appropriations were sufficient to cover the amounts billed to the defendant by the plaintiff. It is obvious that none of those appropriations would have been adequate had the plaintiff properly billed the defendant for the gas actually used at the jail.

As a result of an audit of large-scale gas users conducted in September, 1976, the plaintiff discovered that the defendant had been billed for only one-tenth of the gas consumed at the jail since the 1969 conversion. This error occurred when the meter which recorded the gas consumed at the jail was misread by the plaintiff's employees as indicating hundreds rather than thousands of cubic feet. The plaintiff promptly informed the defendant of this error and cancelled all outstanding bills. Revised bills reflecting the actual amount due for the period then outstanding (July-September, 1976), were sent to the defendant and were paid. The total amount paid by the defendant for gas service in 1976 was $59,515.71, nearly four times the $15,000 appropriated for the purpose in that year. When the plaintiff sought to recover the $465,203.81 difference between the amount paid by the defendant from July 1969 through June 1976 and the amount that it would have been charged had the meter been properly read, the defendant refused to pay, thereby precipitating the present dispute.

In urging us to affirm the judgment of the Superior Court, the plaintiff argues that this case is controlled by principles of utility rate enforcement. It contends that, under those principles, once rates are validly established by a public rate-making authority, it becomes the absolute duty of all who accept the services or products regulated thereunder to pay for them according to the rates so established. Because the Department of Public Utilities (DPU) is required by statute to examine and to approve the rates that the plaintiff may charge, 2 and because the undisputed effect of the billing error underlying this proceeding was to provide the defendant with gas at less than the lawful rates approved by the DPU, the plaintiff would have us conclude that it is entitled to judgment as matter of law.

The plaintiff's contentions draw significant support in the relevant decisions of this Commonwealth. The Supreme Judicial Court has recognized on several occasions that rates set by public rate-making bodies have the force and effect of law and cannot be altered, whether by mistake, inadvertence, or even by voluntary agreement. In New York, N.H., & H. R.R. v. York & Whitney Co., 215 Mass. 36, 102 N.E. 366 (1913), for example, the court held that the defendant was obligated to pay shipping rates established under the Interstate Commerce Act despite the carrier's error in failing to claim or collect the proper amount at delivery. Similarly, in Papetti v. Alicandro, 317 Mass. 382, 58 N.E.2d 155 (1944), it was held that a carrier subject to the regulation of the DPU under chapter 159B of the General Laws could, and indeed was, obligated to recover rebates which, although voluntarily paid to the shipper, resulted in the carrier's receiving less than the minimum lawful rates. Finally, in Haverhill Gas Co. v. Findlen, 357 Mass. 417, 258 N.E.2d 294 (1970), the court held that contract defenses were unavailable to a customer resisting the efforts of a gas company to recover for gas for which the customer had never been charged as a result of a billing error apparently identical to that committed by the plaintiff here. Noting the strong policies underlying the prohibition of G.L. c. 164, § 94, against discriminatory utility rates, the court stated that the case "was governed by the principles of public rate regulation and the binding effect of rates validly determined by a duly established public rate making authority." 357 Mass. at 421. It thus concluded that the customer's allegations of estoppel and illegality were simply immaterial. Id. at 424, 258 N.E.2d 294.

The defendant does not question the validity of the foregoing authorities. Indeed, in an apparent reaction to Haverhill Gas Co. and the line of cases upon which it is based, the defendant abandoned a number of affirmative defenses (namely estoppel, payment, and laches) initially raised in its answer. Nevertheless, the defendant would have us conclude that the policies and principles reiterated in Haverhill Gas Co. do not control its obligation to pay for gas supplied by a utility which has not complied with applicable provisions of the municipal finance laws. Because of the important interests underlying those provisions and the absence of any authority reconciling them with the apparently conflicting demands of utility rate enforcement under c. 164, we will examine each of the provisions relied upon by the defendant and will consider their application to the present facts.

1. The defendant first alleges that the plaintiff's failure to comply with St.1890, c. 418, § 6, as amended through St.1955, c. 60, § 1, and codified in the City of Boston Code (CBC) as St. 4, § 8 (1975), precludes it from enforcing its claim. In pertinent part, that provision, which we set out in the margin, 3 provides that all contracts in excess of $2000 entered into by a department of the city of Boston must be in writing and be approved by the Mayor. "It is familiar law that one dealing with a city or town cannot recover if statutory requirements such as are contained in the defendant's charter have not been observed," Richard D. Kimball Co. v. Medford, 340 Mass. 727, 729, 166 N.E.2d 708 (1960), and noncompliance with the provisions of CBC St. 4, § 8, will bar claims brought by municipal contractors regardless of the benefits conferred on the city. Adalian Bros. Inc. v. Boston, 323 Mass. 629, 84 N.E.2d 35 (1949). Urban Transport, Inc. v. Boston, 373 Mass. 693, 369 N.E.2d 1135 (1977). See also Ryan v. Boston, 204 Mass. 456, 90 N.E. 581 (1910); Singarella v. Boston, 342 Mass. 385, 173 N.E.2d 290 (1961). The plaintiff concedes that these requirements were not met here but argues that their application is not supported by the language or the policies underlying CBC St. 4, § 8.

We agree. At the very least, the defendant's reliance on CBC St. 4, § 8, presupposes the existence of a "contract." Although the relationship between the parties regarding the plaintiff's service at the jail may have some contractual qualities, it lacks many of the attributes of a typical contractual arrangement. In the first place, the plaintiff is the only source from which the defendant may procure gas in the Boston area. Further, once the decision is made to utilize the plaintiff's services the terms and conditions of that service are in large part dictated by the DPU and not by private agreement. As recognized in Haverhill Gas Co., the nature and scope of such regulation may transform the underlying obligation to pay for utility services into a statutory one. There, the court quoted with approval its observation in New York, N.H. & H. R.R. v. York and Whitney Co., 215 Mass. at 40, 102 N.E. 366 that "(t)he regulation by Congress of interstate commerce rates takes that subject out of the realm of ordinary contract in some respects, and places it upon the rigidity ...

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