Memphis Light, Gas & Water Div., a Div. of City of Memphis v. Auburndale School System

• Decision Date: 24 February 1986
• Citation: 705 S.W.2d 652
• Parties: MEMPHIS LIGHT, GAS & WATER DIVISION, A DIVISION OF THE CITY OF MEMPHIS, Plaintiff-Appellant, v. The AUBURNDALE SCHOOL SYSTEM, Defendant-Appellee. 705 S.W.2d 652
• Court: Tennessee Supreme Court

Page 652

705 S.W.2d 652

MEMPHIS LIGHT, GAS & WATER DIVISION, A DIVISION OF THE CITY

OF MEMPHIS, Plaintiff-Appellant, v. The AUBURNDALE SCHOOL SYSTEM, Defendant-Appellee.

705 S.W.2d 652

Supreme Court of Tennessee,

at Knoxville.

Feb. 24, 1986.

Frierson M. Graves, Jr., Robert Mark Glover and Pete Greer, Memphis (Heiskell, Donelson, Bearman, Adams, Williams & Kirch, of counsel), for plaintiff-appellant.

Carlos C. Smith, Frederick L. Hitchcock and Edward D. Meyer, of Strang, Fletche r, Carriger, Walker, Hodge & Smith, Chattanooga, for amicus curiae, Tenn. Valle y Public Power Assn.

Mimi Phillips White, Memphis, for defendant-appellee.

OPINION

HERSCHEL P. FRANKS, Special Justice.

The issue presented by this appeal is whether a customer is required to pay for all electricity consumed where the utility has, for a number of years, negligently under-billed the customer.

The circuit judge awarded the utility a judgment for $32,316.29. In a split decision, the Court of Appeals reversed, the majority holding the utility was equitably estopped from collecting all but the last six months of the under-billed charges.

The operative facts are not in dispute. In July, 1976, the customer commenced construction of a new building on its campus. Electric consumption in the building was measured by meter and the total electric consumption was to be determined by multiplying the kilowatt usage by a factor of 160; however, due to an error by the utility's billing department, the kilowatt consumption read from the meter was multiplied by a factor of 60 and the customer was billed accordingly.

The under-billing occurred monthly between July, 1976 and January, 1981, when the utility discovered the error and demanded payment for the under-billed amount. This case was filed when the customer refused to pay.

The utility insists the doctrine of equitable estoppel may not be invoked to defeat its claim.

While no reported cases in this jurisdiction have considered the issue, the overwhelming weight of authority from other jurisdictions holds that where a public utility negligently under-bills a customer for electricity consumed, the defense of equitable estoppel is not available to the customer to bar the utility from collecting for the electricity actually consumed. See e.g., 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); Shoemaker v. Mtn. States Tel. & Tel. Co., 38 Colo.App. 321, 559 P.2d 721 (1976).

The customer relies heavily upon Laclede Gas Co. v. Solon Gershman, Inc., 539 S.W.2d 574 (Mo.App.1976). In that case, the court held the estoppel defense would not apply and the utility could collect "the full deficiency due it." Id., at 577. The court further held, however, that since the under-billing resulted from "a defective metering device which could not be detected by the consumer, the plaintiff should be held accountable for any damage caused to defendant." Id.

Laclede is consistent with collecting the full indebtedness. The Court of Appeals did not address the issue of the customer's damages but the trial court determined the counter-claim failed because the evidence on the issue of damages was too speculative to allow recovery. The evidence does not preponderate against the trial judge's determination. ¹ T.R.A.P., Rule 13(d). In sum, Laclede required full payment for the electricity actually consumed but allowed a set-off for any damages actually caused the defendant. Cf. Wisconsin Power & Light Co., supra. ("We do not see any important difference between reducing the amount to be paid plaintiff by a defense of estoppel arising out of negligent billing and reducing the amount by setting off damages arising from negligent billing.") 83 N.W.2d at 151.

Goddard v. Public Serv. Co. of Colorado, 43 Colo.App. 77, 599 P.2d 278 (1979), is essentially similar to the instant case. In Goddard, a public gas company had installed an incorrect index dial on a gas meter. As a result, the meter registered only one-half of the gas actually consumed. The utility sued to recover the full amount for the fuel actually consumed and the customer interposed the doctrine of equitable estoppel as a defense, claiming "they had relied on the previous gas bills in making their determination to purchase the apartment building, had set their rentals accordingly, and could no longer collect the difference in higher heating costs from their tenants." Id., at 279.

The court held that Colorado's public utilities statute forbade estoppel of a public utility "from collecting the established rate.... The Goddards had received the gas at half price contrary to the terms of the statute...." ² The decision implicitly 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. See West Penn. Power Co. v. Nationwide Mutual Ins. Co., 209 Pa.Super. 509, 228 A.2d 218 (1967).

In almost unanimity, other jurisdictions have applied this analysis to preclude the assertion of an estoppel defense against a public utility. See e.g., Bles, supra. In applying these principles to the instant case, the issue thus becomes whether public policy precludes discrimination among utility rate payers so that any device tending to favor one consumer over another is prohibited.

While municipal utilities are specifically exempted from the statutes regulating public utilities, T.C.A., Sec....