Masonite Corp. v. Pacific Gas & Electric Co.

• Citation: 65 Cal.App.3d 1,135 Cal.Rptr. 170
• Court: California Court of Appeals
• Decision Date: 20 December 1976
• Parties: MASONITE CORPORATION, Plaintiff and Respondent, v. PACIFIC GAS AND ELECTRIC COMPANY, Defendant and Appellant. Civ. 37159.

Page 170

135 Cal.Rptr. 170

65 Cal.App.3d 1

MASONITE CORPORATION, Plaintiff and Respondent, v. PACIFIC GAS AND ELECTRIC COMPANY, Defendant and Appellant.

Civ. 37159.

Court of Appeal, First District, Division 2, California.

Dec. 20, 1976.

Charles T. Van Deusen, Joseph S. Englert, Jr., San Francisco, for defendant and appellant.

Thomas S. Brigham, Ukiah, for plaintiff and respondent.

KANE, Acting Presiding Justice.

Defendant Pacific Gas and Electric Company (hereinafter 'appellant' or P G and E') appeals from the trial court's judgment awarding respondent damages in the sum of $46,508 plus interest for breach of contract. The relevant facts may be summarized as follows:

By a written agreement executed September 28, 1966, appellant undertook to provide natural gas for respondent corporation, a commercial consumer, which maintained and operated a hardboard plant in Ukiah, California. Although respondent utilized gas for the dryer and space heaters, 99 percent of all gas supplied by P G and E was used for the three main boilers generating steam for the production of fiber and hardboard.

The computation of bills which lies at the core of the present controversy involved a relatively complex procedure consisting of several steps. First the raw cubic feet of gas (the so-called volume) had to be measured. This took place by a P G and E gas meter located on respondent's premises. The volume was recorded by an index which was attached to, and driven by, the meter. The index, in turn, drove a pen which recorded the volume 'waves' on a circular flow chart. Second, the additional element figuring in the computation was the recording of the temperature and pressure of gas which was done by recorders also mounted on the matter. The third step was the addition of the gravity factor to the data above described by which the corrected volume of gas delivered to Masonite was calculated. The corrected volume was then multiplied by the therm factor (the heating value of gas). The final figure appearing on the bill was the result of multiplying the therms (BTUs) by the applicable gas rates.

Although the instruments mentioned above were all supplied by P G and E, respondent, too, had meters of its own on each of the three main boilers. One of the meters measured the raw cubic feet of gas consumed, and the other set of meters measured the pounds of steam produced by respondent. Records of the gas and steam readings from Masonite's meters were kept on a regular basis, and Masonite's meters were inspected and calibrated by the manufacturer on November 11, 1971. Masonite also kept records of the board-foot production of the plant on a daily basis.

The gas bills of P G and E were excessively high for the months of November and December 1971. Based upon the readings of its own meters and the unchanged volume of production, respondent claimed that it had been overcharged for gas for the above noted months. After efforts to settle the dispute had failed, respondent initiated a lawsuit against P G and E in order to recover damages for the alleged overcharge.

At the ensuing jury trial, respondent presented evidence showing Inter alia that its production records indicated no significant increase or decrease in the board foot production for November and December 1971; that the readings of their own meters showed no appreciable change in pounds of steam produced or in the volume of gas used by the boilers in the months in controversy; that prior to the P G and E's testing of the meters the parties inspected the Masonite gas system for leaks and found none; and that in the disputed period the kilowatt hour records indicated no significant changes in electricity usage by the plant. Finally, and most significantly, respondent introduced evidence to the effect that when at about 1:30 p.m. on December 28, 1971, the original index was removed from the P G and E meter and replaced with a new index, the volume waves which previously had shown 10.6 per 12-hour period, immediately dropped to 6.4 for the same period and continued at that rate thereafter. In rebuttal, appellant furnished evidence that the tests carried out according to its own rules and regulations failed to show any inaccuracy in its metering, pressure recordation or billing process, and that there was no possible way for the meter or index to register inaccurately.

After receiving evidence and being instructed, the jury rendered a general verdict in favor of respondent, assessing damages in the sum of $46,508 plus interest.

Appellant does not dispute that the foregoing record amply supports the verdict of the jury. Appellant's principal contention on appeal, rather, is that the jury verdict should fail because a considerable portion of the evidence was inadmissible on the basis of irrelevancy. More precisely, appellant argues that respondent's theory of recovery was founded on breach of contract for failing to keep and maintain the gas meters and other facilities in good operating condition. Since the Public Utilities Commission ('P.U.C.') provided a comprehensive regulatory scheme for gas metering, testing and adjustment of bills for meter errors which preempted the field (cf. Waters v. Pacific Telephone Co. (1974) 12 Cal.3d 1, 114 Cal.Rptr. 753, 523 P.2d 1161; Public Utilities Code, ¹ §§ 701, 702, 489, 1759), continues appellant, the Sole permissible means of proving the meter accuracy or overcharge was in accordance with the pertinent regulatory provisions (Gas Rule, No. 17 ('Rule 17') and General Order No. 58--A ('Order 58--A'), ² and any other evidence showing meter inaccuracy, malfunction and/or overcharge was irrelevant and inadmissible as a matter of law. Appellant's position is untenable.

In the first place, the first amended complaint reveals without ambiguity that, contrary to appellant's contention, respondent's claim of breach of contract was predicated on Dual grounds: one, appellant's alleged failure to keep accurate meters and related devices; two, a separate and distinct allegation that the overcharge occurred because appellant billed and collected money for gas actually not delivered to respondent. ³

In the second place, appellant's basis contention, that by regulating the mode of meter testing and by providing for refund in case of overcharge the PUC preempted the field and that therefore no other additional evidence could be presented or received to prove damages, is unsupported by law or reason, and must be rejected.

We are, of course, well aware that the PUC as an expert administrative body has wide regulatory power with respect to public utilities which the courts generally may not abrogate (§ 1759; ⁴ E. B. Ackerman Importing Co. v. City of Los Angeles (1964) 61 Cal.2d 595, 39 Cal.Rptr. 726, 394 P.2d 566). However, the commission does not have Exclusive jurisdiction over any and all matters having any reference to the regulation and supervision of public utilities (Product Research Associates v. Pacific Tel. & Tel. Co. (1971) 16 Cal.App.3d 651, 655, 94 Cal.Rptr. 216; Vila v. Tahoe Southside Water Utility (1965) 233 Cal.App.2d 469, 477, 43 Cal.Rptr. 645). On the contrary, section 2106 expressly empowers the state courts to award both compensatory and (in a proper case) exemplary damages against the public utility for All damages, loss or injury resulting from any unlawful act or omission ⁵ (California Adj. Co. v. Atchison etc. Ry. Co. (1918) 179 Cal. 140, 145, 175 P. 682; Schultz v. Town of Lakeport (1936) 5 Cal.2d 377, 383, 54 P.2d 1110; Vila v. Tahoe Southside Water Utility, supra).

In analyzing the issue at hand in the context of the foregoing premises, we initially underline that while the reasonable rates, rules and regulations of the commission do become a part of every contract between a public utility and its patrons (Hischemoeller v. Nat. Ice etc. Storage Co. (1956) 46 Cal.2d 318, 325, 294 P.2d 433; Sherwood v. County of Los Angeles (1962) 203 Cal.App.2d 354, 359, 21 Cal.Rptr. 810), the rights and duties of the contracting parties are determined by, and derived from, the underlying contract as a whole (Gardner v. Basich Bros. Construction Co. (1955) 44 Cal.2d 191, 194, 281 P.2d 521). As a consequence, in resolving the rights and liabilities of the parties here, we may not look solely to the rules and regulations referred to by appellant, but rather must take into account and construe the entire contract.

The principles relating to interpretation of contracts are, of course, well established. Preponderant among these rules are the following: all applicable law enters into and becomes a part of a contract by inference (Traders etc. Ins. Co. v. Pac. Emp. Ins. Co. (1955) 130 Cal.App.2d 158, 164, 278 P.2d 493; Cole v. Pacific Tel. & Tel. Co. (1952) 112 Cal.App.2d 416, 418, 246 P.2d 686; Gardner v. Rich Mfg. Co. (1945) 68 Cal.App.2d 725, 158 P.2d 23); the whole of the contract must be taken together and effect be given to every part if reasonable practicable (Civ.Code, § 1641; Harris v. Klure (1962) 205 Cal.App.2d 574, 578, 23 Cal.Rptr. 313); ambiguities in the contract, especially in exculpatory provisions, must be construed most strongly against the one who caused the ambiguity to exist, i.e., the drafter (Civ.Code, § 1654; Milton v. Hudson Sales Corp. (1957) 152 Cal.App.2d 418, 427--428, 313 P.2d 936; Basin Oil Co. v. Baash-Ross Tool Co. (1954) 125 Cal.App.2d 578, 596, 271 P.2d 122, see also Transmix Corp. v. Southern Pac. Co. (1960) 187 Cal.App.2d 257, 267--268, 9 Cal.Rptr. 714); the contract must receive such interpretation as will make it reasonable (Civ.Code, § 1643; Kurland v. United Pac. Ins. Co. (1967) 251 Cal.App.2d 112, 118, 59 Cal.Rptr. 258); and lastly, there is an implied covenant of good faith and fair dealing in every contract that neither party will do anything which deprives the other of the benefit of the agreement (Redke v. Silvertrust (1971) 6 Cal.3d 94, 100, 98 Cal.Rptr. 293, 490 P.2d 805; Brown v. Superior Court...