Product Research Associates v. Pacific Tel. & Tel. Co.

• Decision Date: 14 April 1971
• Citation: 16 Cal.App.3d 651,94 Cal.Rptr. 216
• Court: California Court of Appeals Court of Appeals
• Parties: PRODUCT RESEARCH ASSOCIATES, Plaintiff and Appellant, v. The PACIFIC TELEPHONE & TELEGRAPH COMPANY, Defendant and Respondent. Civ. 26223.

Page 216

94 Cal.Rptr. 216

16 Cal.App.3d 651

PRODUCT RESEARCH ASSOCIATES, Plaintiff and Appellant, v. The PACIFIC TELEPHONE & TELEGRAPH COMPANY, Defendant and Respondent.

Civ. 26223.

Court of Appeal, First District, Division 1, California.

April 14, 1971.

Hearing Denied June 30, 1971.

Lewis, Rouda & Winchell, San Francisco, for plaintiff and appellant.

Pillsbury, Madison & Sutro, Francis N. Marshall, San Francisco, for defendant and respondent.

MOLINARI, Presiding Justice.

Plaintiff appeals from a summary judgment in favor of defendant in an action for damages allegedly sustained as a result of defendant's negligent failure to present adequate telephone service. The gist of the action is that because of the failure to provide such service plaintiff was caused to lose the distributorship of a Japanese product. The sole issue is whether, under the provisions of its tariff schedule, defendant could limit its liability for service failure to the credit allowance therein provided. ¹

Plaintiff contends that the subject schedule provides only for a credit allowance for interrupted service and that it in nowise purports to limit liability for the negligent failure to provide service. It is defendant's position that plaintiff took the subject service on terms established and controlled by tariff rules of the California Public Utilities Commission (hereinafter the 'Commission') and that the Commission Schedule No. 36--T, 1st Revised Sheet 56, paragraph 14(A) is a provision limiting its liability for negligent as well as non-negligent service errors and omissions. Accordingly, defendant contends that where the tariff limitation applies the courts cannot award damages in excess of the amount set out in the tariff schedule since to do so would be a direct interference with the exclusive jurisdiction which the Commission has over the service undertaking and performance of public utility companies.

The subject tariff schedule provides as follows:

'14. Interruptions and Failures of Service

'(A) Credit Allowance for Interruption to Service

'Upon request of the subscriber the Company will allow subscribers credit in all cases where telephones are 'out of service,' except when the 'out of service' is due to the fault of the subscriber, for periods of one day or more from the time the fact is reported by the subscriber or detected by the Company, of an amount equal to the total fixed monthly charges for exchange service multiplied by the ratio of the number of days 'out of service' to the number of calendar days in the billing month. ( ) A day 'out of service' will be considered to exist when service is not available for a period of twenty-four consecutive hours. When any 'out of service' period continues for a period in excess of an even multiple of twenty-four hours then the total period upon which to determine the credit allowance will be taken to the next higher even twenty-four hour multiple. ( ) In no case will the credit allowance for any period exceed the total fixed charges for exchange service for that period.'

The essential question in this case is whether the courts are limited in the damages they may award an aggrieved party by virtue of the subject schedule. The determination of this question turns upon whether defendant may properly limit its liability for negligence by filing with and seeking the approval of the Commission of a tariff schedule limiting liability and, if it may do so, whether insofar as the instant case is concerned, it has actually done so.

We observe, initially, that the Commission does not have Exclusive jurisdiction over any and all matters having any reference to the regulation and supervision of public utilities. (Vila v. Tahoe Southside Water Utility, 233 Cal.App.2d 469, 477, 43 Cal.Rptr. 654.) Thus, under Public Utilities Code, section 2106 ² the courts of this state are expressly granted jurisdiction to award both compensatory and (in a proper case) exemplary damages against a public utility for a loss, damage or injury resulting from any unlawful act or omission to perform a required act. (See Vila v. Tahoe Southside Water Utility, supra; and see Schultz v. Town of Lakeport, 5 Cal.2d 377, 383, 54 P.2d 1110, 55 P.2d 485; Thompson v. San Francisco Gas and Electric Co., 18 Cal.App. 30, 34--35, 121 P. 937.) Accordingly, an aggrieved party may prosecute an action in the courts for any loss or injury arising from a failure of a carrier or public utility '* * * to do any act or thing required to be done by the Constitution or any law of the state or any order or decision of the Commission.' (California Adjustment Co. v. Atchison etc. Ry. Co., 179 Cal. 140, 145, 175 P. 682, 684.)

The jurisdiction of the courts to award damages is not without limitation, however. Thus we note that in cases where the Commission is authorized to establish just and reasonable rates, and to establish rules and regulations governing the same, such rates, rules and regulations become a part of every contract between a public utility and its patrons. (Pratt v. Coast Trucking, Inc., 228 Cal.App.2d 139, 149, 39 Cal.Rptr. 332; Gardner v. Rich Mfg. Co., 68 Cal.App.2d 725, 730--731, 158 P.2d 23; California Adjustment Co. v. Atchison etc. Ry. Co., supra, 179 Cal. 140, 144--145, 175 P. 682.) In such cases the courts are called upon to determine what rates have been established by the Commission and to apply them to the facts as disclosed by the evidence. (Gardner v. Rich Mfg. Co., supra; Pratt v. Coast Trucking, Inc., supra; California Adjustment Co. v. Atchison etc. Ry. Co.,supra.) In applying and enforcing such rates the courts are not fixing rates but are merely employing and carrying out rates already established by the Commission. (Gardner v. Rich Mfg. Co., supra, 68 Cal.App.2d at pp. 730--731, 158 P.2d 23.)

With particular reference to telephone companies, we observe that pursuant to section 489 they are required to file with the Commission a copy of their contract with subscribers for telephone service as well as all rules which 'in any manner affect or relate to rates, tolls, rentals, classification, or service.' Such contract, when approved by the Commission, becomes part of the utilities filed schedule of rates (Pacific Gas & Elec. Co. v. Universal Elec. & Gas Co., 94 Cal.App. 343, 348, 271 P. 377), and such rule, if reasonable, is binding on the parties to the contract incorporating the rule. (Cole v. Pacific Tel. & Tel. Co. (1952) 112 Cal.App.2d 416, 417--418, 246 P.2d 686.)

The jurisdiction of the courts extends also to determining whether a particular tariff or rule approved by the Commission is one which limits the liability of a public utility and, where such tariff or rule purports to exculpate the utility from liability, to decide whether the exculpatory clause is valid. (E. B. Ackerman Importing Co. v. City of Los Angeles (1964) 61 Cal.2d 595, 600--601, 39 Cal.Rptr. 726, 394 P.2d 566; Southwestern Sugar etc. Co. v. River Terminals Corp., 360 U.S. 411, 417--420, 79 S.Ct. 1210, 3 L.Ed.2d 1334.)

It is well settled in this state that a party may contract to absolve himself from liability for negligence except where such exculpation is discountenanced by public policy or statutory inhibition. (Sproul v. Cuddy, 131 Cal.App.2d 85, 95, 280 P.2d 158; John E. Branagh & Sons v. Witcosky, 242 Cal.App.2d 835, 839, 51 Cal.Rptr. 844; Goldman v. Ecco-Phoenix Elec. Corp., 62 Cal.2d 40, 41, 41 Cal.Rptr. 73, 396 P.2d 377; Harvey Mach. Co. v. Hatzel & Buehler, Inc., 54 Cal.2d 445, 447--448, 6 Cal.Rptr. 284, 353 P.2d 924; Vinnell Co. v. Pacific Elec. Ry. Co., 52 Cal.2d 411, 414--415, 340 P.2d 604; Price v. Shell Oil Co., 2 Cal.3d 245, 257--258, 85 Cal.Rptr. 178, 466 P.2d 722; Tunkl v. Regents of University of California, 60 Cal.2d 92, 96--101, 32 Cal.Rptr. 33, 383 P.2d 441; Barkett v. Brucato, 122 Cal.App.2d 264, 276--278, 264 P.2d 978; Loughan v. Harger-Halderman, 184 Cal.App.2d 495, 506, 7 Cal.Rptr. 581; Orlando v. Berkeley, 220 Cal.App.2d 224, 228, 33 Cal.Rptr. 860.) In this state, by the statutory proscription provided in Civil Code, section 1668, ³ one may not exempt himself from responsibility for willful injury to the person or property of another or from violations of law, whether willful or negligent. (Barkett v. Brucato,supra; Loughan v. Harger-Halderman, supra; Orlando v. Berkeley, supra.) The proscription of Civil Code, section 1668 has been held to include an exculpatory clause which affects the public interest. (Tunkl v. Regents of University of California, supra; Union Const. Co. v. Western Union Tel. Co., 163 Cal. 298, 312--315, 125 P. 242.)

We perceive that the rationale of Tunkl does not necessarily require that Every exculpatory clause affecting the public interest must be declared invalid. In Ackerman a distinction is acknowledged between a clause in a private contract purporting to exculpate one from his own negligence and the provisions of a tariff filed with an administrative body possessing pervasive regulatory authority. (61 Cal.2d at p. 599, 39 Cal.Rptr. 726, 394 P.2d 566.) The rationale behind the distinction is that the rate specified in the relevant tariff may have been computed on the understanding that the exculpatory clause is to relieve the regulated utility or carrier of the expense of insuring itself against liability for damage or injury caused by the negligence of the utility or carrier or its employees. (61 Cal.2d at p. 599, 39 Cal.Rptr. 726, 394 P.2d 566; Southwestern Sugar etc. Co. v. River Terminals Corp., supra, 360 U.S. 411, at p. 417, 79 S.Ct. 1210, 3 L.Ed.2d 1334.) Accordingly, it was held in Ackerman that in a proper case, based upon the particular circumstances primarily determined by such a regulatory authority, an exculpatory clause of the type herein involved might be justified. In such a case although an exculpatory clause in a tariff is stamped with the indicia which, under the rationale of Tunkl, places it within the category of a contract affected...