Empire West v. Southern California Gas Co.

Citation38 Cal.App.3d 38,112 Cal.Rptr. 925
PartiesEMPIRE WEST, a Limited Partnership, Plaintiff and Appellant, v. SOUTHERN CALIFORNIA GAS COMPANY, a corporation, Defendant and Respondent. Civ. 42328.
Decision Date22 March 1974
CourtCalifornia Court of Appeals

Morton M. Gerson, Los Angeles, for plaintiff and appellant.

Overton, Lyman & Prince, Los Angeles, by John D. McCurdy, for defendant and respondent.

FLEMING, Associate Justice.

Action for $477,000 damages by plaintiff Empire West, a limited partnership against defendant Southern California Gas Company. Plaintiff appeals a summary judgment in favor of defendant.

The issue is whether the facts presented by plaintiff amount to a cause of action. Plaintiff asserts that in 1963 and 1964 defendant fraudulently misrepresented the prospective cost of operation for a gas heating and cooling system in plaintiff's planned 108-unit apartment house. Thereafter, in reliance on defendant's misrepresentations plaintiff built the apartment house in 1965 equipped with a gas heating and cooling system. According to the complaint, installation of the gas system cost $27,000 more than an electrical system would have cost, and operation of the system costs $8,000 a year more than the amount defendant said it would cost.

Public policy precludes recognition of a cause of action based on these facts. In effect, plaintiff seeks a reduction in charges for the gas it needs to operate its heating and cooling system. Public Utilities Code section 532 forbids defendant from refunding 'directly or indirectly, in any manner or by any device' the scheduled charges for its services. A public utility 'cannot by contract, conduct, estoppel, waiver, directly or indirectly increase or decrease' the rates fixed for its services. (Transmix Corp. v. Southern Pac. Co., 187 Cal.App.2d 257, 264, 9 Cal.Rptr. 714; see Gardner v. Basich Bros. Construction Co., 44 Cal.2d 191, 193-194, 281 P.2d 521; Gardner v. Rich Mfg. Co., 68 Cal.App.2d 725, 730, 158 P.2d 23; Butler v. Bell Oil & Refining Co., 70 Cal.App.2d 728, 730, 161 P.2d 559; Groom v. Holm, 176 Cal.App.2d 310, 315, 1 Cal.Rptr. 410.) It is established doctrine that scheduled rates must be inflexibly enforced in order to maintain equality for all customers and eliminate preferential treatment for some. (R. E. Tharp, Inc. v. Miller Hay Co., 261 Cal.App.2d 81, 86, 67 Cal.Rptr. 854.) Without inflexibility collusive judgments based on allegations of fraud might easily and effectively disguise a public utility's preferential treatment of particular customers. (See People ex rel. Public Util. Com. v. Ryerson, 241 Cal.App.2d 115, 120-121, 50 Cal.Rptr. 246.) The reality of these dangers finds substantial support in past history and experience. Practical necessity, therefore, requires uniform enforcement of the policy against rate discrimination even though some hardship may result in a particular case. (See Pittsburgh, C. C. & St. L. Ry. Co. v. Fink, 250 U.S. 577, 582, 40 S.Ct. 27, 63 L.Ed 1151.)

Plaintiff, however, contends its case differs from the traditional unlawful rebate cases in that the asserted misrepresentation concerns the amount of gas to be used, not its cost. But identical policy considerations against preferential treatment of customers apply, whether the public utility misrepresents cost (South Tahoe Gas Co. v. Hofmann Land Improvement Co., 25 Cal.App.3d 750, 760-761, 102 Cal.Rptr. 286), or amount of service (United States v. Associated Air Transport, Inc. (5th Cir. 1960) 275 F.2d 827, 838-839; see also Kentner Truck Line v. Maier Brewing Co., 183 Cal.App.2d 89, 91, 6 Cal.Rptr. 572), or classification of service (Porto Transport, Inc. v. Consolidated Diesel Electric Corp. (SDNY 1956) 19 F.R.D. 256, 258; see Annot., 'Carrier's understatement of charges where discrimination is forbidden,' 83 A.L.R. 245, 88 A.L.R.2d 1375.) A public utility will not be allowed to circumvent equality in rates by misrepresenting, either collusively, dishonestly, or negligently, the amount of service a customer will require. (United States v. Associated Air Transport, Inc., supra.) As was said in 88 A.L.R.2d, pages 1383 and 1387, 'Where a mistake occurs through the carrier's giving erroneous information with respect to routing, mileage, or type of service to be rendered, rather than with respect to the rate itself, the public policy which seeks to prevent discrimination requires that the carrier may collect the full rate after any undercharge which results from the mistake. [Citing cases.] . . . Consistent with the general policy of allowing no one to avoid payment of lawful freight charges the courts have dismissed the question of the carrier's honesty or...

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