Colich & Sons v. Pacific Bell

• Decision Date: 25 February 1988
• Docket Number: No. B023012,B023012
• Citation: 244 Cal.Rptr. 714,198 Cal.App.3d 1225
• Court: California Court of Appeals Court of Appeals
• Parties: PACIFIC BELL, a corporation, Plaintiff and Respondent, v. D.T. COLICH, et al., Defendants and Appellants. UNITED AIR LINES, INC., a corporation, Plaintiff and Respondent, v. COLICH & SONS, et al., Defendants and Appellants.

Page 714

244 Cal.Rptr. 714

198 Cal.App.3d 1225

PACIFIC BELL, a corporation, Plaintiff and Respondent, v. D.T. COLICH, et al., Defendants and Appellants.

UNITED AIR LINES, INC., a corporation, Plaintiff and Respondent, v. COLICH & SONS, et al., Defendants and Appellants.

No. B023012.

Court of Appeal, Second District, Division 7, California.

Feb. 25, 1988.

As Modified March 4, 1988.

Review Denied May 18, 1988.

Joseph Ryan, Jr., Lana Feldman, Larry D. Stratton, Long Beach, for defendants and appellants Colich & Sons, Colich Bros., Inc., and Colich Const. Co

Bart Kimball, John Keiser, Marlene S. Cooper, Los Angeles, for plaintiff and respondent Pacific Bell.

THOMPSON, Associate Justice.

This is an appeal by Colich & Sons, et al. (Colich) from the dismissal of a cross-complaint against Pacific Bell (Pac Bell) for indemnity, comparative contribution and declaratory relief following the sustaining of a demurrer without leave to amend.

We hold that a defendant, such as Colich, consistent with the policy that limitation of liability provisions in a tariff are binding on the public generally, is barred from seeking equitable indemnity for ordinary negligence from a concurrently negligent telephone utility, even though the defendant is not a customer of the telephone utility but instead is a stranger. Nonetheless, we shall reverse the judgment in the instant case, because Colich may be able to amend its cross-complaint to seek recovery up to the allowed $10,000 on the ground of gross negligence, one of the express exceptions to the tariff.

On June 25, 1984, while excavating under a public intersection in El Segundo, Colich, the excavation subcontractor, allegedly struck and damaged Pac Bell's underground telephone cable resulting in an interruption of service to some Pac Bell customers, including United Air Lines (UAL). UAL sued Colich on negligence grounds for damages for lost business revenue and additional operating expenses. UAL alleged that Colich's "severing ... of said lines was negligent in that the phone company had marked in paint on the pavement the location of its underground facilities, but [Colich] so negligently performed the excavation as to disregard those markings" resulting in four days' "service interruption" of voice and data lines at UAL's regional reservations center. ¹

Colich cross-complained against Pac Bell, alleging that if the allegations of UAL's complaint were true, Pac Bell's "negligence or other tortious misconduct" in failing to perform its respective duties, obligations and warranties was the sole or concurrent cause of UAL's damages. Colich sought

full equitable implied indemnity or, alternatively, partial indemnity apportioned on a comparative fault basis. Pac Bell, citing Waters v. Pacific Telephone Co. (1974) 12 Cal.3d 1, 114 Cal.Rptr. 753, 523 P.2d 1161 (Waters ), demurred on the grounds that UAL as a matter of law could not sue Pac Bell directly for its telephone service interruption under the terms of a limitation of liability tariff filed with the Public Utilities Commission (PUC) and, therefore, Colich's derivative claim for indemnity and contribution was likewise barred. This appeal followed the dismissal of Pac Bell as a cross-defendant upon the trial court's sustaining of the demurrer without leave to amend.

DISCUSSION

Colich alleges that it would amend its complaint to specifically allege that Pac Bell failed to adequately mark, identify or communicate the existence of the applicable telephone cables at the construction site. At issue is whether these amended facts will enable it to state a cause of action on the grounds that (1) the tariff does not apply to Pac Bell's failure and/or (2) Pac Bell's failure falls within an express exception to the tariff for gross negligence, willful misconduct or violation of law.

In reviewing a judgment of dismissal entered upon the sustaining of a demurrer without leave to amend, we treat the demurrer as admitting all material facts properly pleaded and all reasonable inferences which can be drawn therefrom. (Buckaloo v. Johnson (1975) 14 Cal.3d 815, 828, 122 Cal.Rptr. 745, 537 P.2d 865; Von Batsch v. American Dist. Telegraph Co. (1985) 175 Cal.App.3d 1111, 1117, 222 Cal.Rptr. 239.) The function of a demurrer is to test the sufficiency of a pleading by raising questions of law. (Von Batsch, supra.) "It is error to sustain a demurrer where a plaintiff has stated a cause of action under any possible legal theory." (Ibid.) But it is not an abuse of discretion to sustain a demurrer without leave to amend if there is no reasonable possibility that the defect can be cured by amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349, 134 Cal.Rptr. 375, 556 P.2d 737; Von Batsch, supra, 175 Cal.App.3d at pp. 1117-1118, 222 Cal.Rptr. 239.) Plaintiff bears the burden of demonstrating that the trial court abused its discretion by showing in what manner it can amend its complaint and how that amendment will change the legal effect of its pleading. ( Von Batsch, supra at p. 1118, 222 Cal.Rptr. 239.)

I. Applicability of the Tariff Provision Limiting Liability for Ordinary Negligence

The PUC has been vested by the Legislature with broad supervisory and regulatory powers. ( Waters, supra, 12 Cal.3d 1, 6, 114 Cal.Rptr. 753, 523 P.2d 1161.) Pac Bell as a public utility is subject to applicable provisions of the PUBLIC UTILITIES CODE. (§§ 216², 761) It is required to file tariffs with the PUC covering the terms and conditions, including rates, classifications and attendant liabilities, under which it renders service. (§ 489) "A public utility's tariffs filed with the PUC have the force and effect of law." (Dollar-A-Day Rent-A-Car Systems, Inc. v. Pacific Tel. & Tel. Co. (1972) 26 Cal.App.3d 454, 457, 102 Cal.Rptr. 651; see also Dyke Water Co. v. Public Utilities Com. (1961) 56 Cal.2d 105, 123, 14 Cal.Rptr. 310, 363 P.2d 326.) ³

The tariff on limitation of liability filed with the PUC (2.1.14 rule no. 14), which is at issue here, is set forth in the margin. ⁴ Colich does not challenge the validity of the tariff provisions limiting liability for ordinary negligence to a credit allowance. Rather, Colich makes a twofold claim: the tariff does not apply to the facts of this case or, alternatively, even if it does apply, an issue of fact exists as to whether PacBell's conduct falls within the specific exemptions for "gross negligence" "willful misconduct" or "violation of law." ⁵ We disagree.

Colich's contention that it can properly state a cause of action for damages under section 2106 ⁶ must be examined in the context of, and in harmony with, section 1759 ⁷. Although section 2106 may authorize a private person to bring an action against public utilities, it must still be construed to harmonize with section 1759, which deprives the superior court of jurisdiction to reverse or annul PUC decisions. (Waters, supra, 12 Cal.3d at pp. 3-4, 114 Cal.Rptr. 753, 523 P.2d 1161; Barnett v. Delta Lines, Inc. (1982) 137 Cal.App.3d 674, 681, 187 Cal.Rptr. 219.)

Our Supreme Court has recognized that damage suits brought against a telephone company under section 2106 must not be used as a device to avoid or interfere with established regulations or practices of the PUC. ( Waters, supra, 12 Cal.3d 1, 114 Cal.Rptr. 753, 523 P.2d 1161; see also Empire West v. Southern California Gas Co. (1974) 12 Cal.3d 805, 811, 117 Cal.Rptr. 423, 528 P.2d 31.) In Waters, our Supreme Court held that "in order to resolve the potential conflict between sections 1759 and 2106, the latter section must be construed as limited to those situations in which an award of damages would not hinder or frustrate the [PUC'S] declared supervisory and regulatory policies." (12 Cal.3d at p. 4, 114 Cal.Rptr. 753, 523 P.2d 1161.) The rationale was that the PUC "has approved a general policy of limiting the liability of telephone utilities for ordinary negligence to a specified credit allowance, and has relied upon the validity and effect of that policy in exercising its rate-making functions." ( Id., at p. 10, 114 Cal.Rptr. 753, 523 P.2d 1161.)

Since "[s]ection 2106 can only be utilized when it will not interfere with or obstruct the [PUC] in carrying out its own policies" (Barnett v. Delta Lines, Inc., supra, 137 Cal.App.3d at p. 681, 187 Cal.Rptr. 219), UAL can only get a credit allowance and cannot state a cause of action for negligence against Pac Bell for UAL's business loss due to interruption of service. Colich, however, argues that the tariff limitation on liability should not apply to bar its cross-complaint for indemnification because it is a stranger to the contract, not a customer.

But, the tariff limitation on liability has been held to apply to third parties as well as to the utility's customers. (Trammell v. Western Union Tel. Co. (1976) 57 Cal.App.3d 538, 551-553, 129 Cal.Rptr. 361.) In Trammell, the court rejected the argument that a limitation of liability provision in a tariff did not apply to a third party who had no knowledge of the provision and had not assented to it. ⁸ The court explained that the limitation of liability provisions "are binding on the public generally" because they "are an inherent part of the established rates and have the force and effect of law". ( Id., at p. 551, 129 Cal.Rptr. 361.)

The parties have not cited, nor has our research discovered, ⁹ any cases wherein a third-party defendant sought equitable indemnity or contribution from a telecommunications utility who was a concurrent tortfeasor for damages arising out of interruption of service. Nonetheless, the same rationale that led the Trammell court to conclude that the limitation of liability provisions necessarily bound the third-party beneficiary plaintiff therein, who also was "not a party to the contract for service with the public utility", (57 Cal.App.3d at p. 553, 129 Cal.Rptr. 361) applies equally to the "third party" defendant herein. Because "California cases hold public utility...