Waters v. Pacific Telephone Co.

• Decision Date: 09 July 1974
• Docket Number: S.F. 23071
• Citation: 114 Cal.Rptr. 753,12 Cal.3d 1,523 P.2d 1161
• Court: California Supreme Court
• Parties: , 523 P.2d 1161 Mona WATERS, Plaintiff and Appellant, v. PACIFIC TELEPHONE COMPANY, Defendant and Respondent. In Bank

Page 753

114 Cal.Rptr. 753

12 Cal.3d 1, 523 P.2d 1161

Mona WATERS, Plaintiff and Appellant, v. PACIFIC TELEPHONE COMPANY, Defendant and Respondent.

S.F. 23071.

Supreme Court of California,

In Bank.

July 9, 1974.

Vernon W. Humber and Frederick E. Watson, San Francisco, for plaintiff and appellant.

Pillsbury, Madison & Sutro, Francis N. Marshall, Noble K. Gregory, Walter R. Allan, San Francisco, Rankin, Oneal, Center, Luckhardt, Marlais, Lund & Hinshaw, Edward A. Hinshaw, San Jose, and James A. DeBois, San Francisco, for defendant and respondent.

Frederick T. Searls, John C. Morrissey, Malcolm H. Furbush, Linda S. Friedman, San Francisco, Rollin E. Woodbury, Robert J. Cahall, William E. Marx, Rosemead C. Hayden Ames, Donald J. Richardson, Jr., San Francisco, Gordon Pearce, Los Angeles, Lynn Schenk, Dinkelspiel, Pelavin, Steefel & Levitt, Claude N. Rosenberg, John P. Mathis, San Francisco, Scott K. Carter, San Francisco, and John S. Fick, Los Angeles, as amici curiae on behalf of defendant and respondent.

BURKE, Justice.

In this case we must reconcile provisions of the Public Utilities Code which (1) deprive the superior courts of jurisdiction to 'review, reverse, correct, or annul' any order or decision of the Public Utilities Commission or to interfere with the commission's performance of its official duties (Pub.Util.Code, § 1759) ¹ and which (2) vest the superior courts with jurisdiction to award damages against any public utility which acts unlawfully, or fails to act as required by law (§ 2106). ²

In the instant case, defendant Pacific Telephone Company (Pacific) allegedly failed to furnish plaintiff adequate telephone service, as required by section 451; ³ accordingly, plaintiff instituted a damage action in superior court pursuant to the provisions of section 2106. As will appear, however, the commission has adopted a policy of limiting the liability of telephone utilities such as Pacific for acts of ordinary negligence to a specified credit allowance, as set forth in approved tariff schedules which form a contract with telephone service customers. Since an award of substantial damages to plaintiff would be contrary to the policy adopted by the commission and would interfere with the commission's regulation of telephone utilities, we have concluded that section 1759 bars the instant action. We further conclude 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 commission's declared supervisory and regulatory policies. Our disposition of this case will not insulate the commission's policies regarding limitation of liability from review by this court; under sections 1756--1758, this court retains jurisdiction to review, on petitions for writ of review or certiorari, the lawfulness of any order or decision of the commission in accordance with the procedures set forth in those sections. As the instant action, however, is not before us on a petition for writ of review, we must focus our attention solely upon the question whether plaintiff's damage suit in superior court was properly dismissed.

Plaintiff, a real estate broker, alleged she suffered substantial damages by reason of pacific's failure to provide adequate telephone service. According to plaintiff, on September 15, 1964, she contracted with Pacific to provide such service, but 'continuously and up to and including the present time (April 1966) said defendants (Pacific and Fictitious defendants) have breached said agreement in that they have continuously failed to perform the agreement.' Plaintiff's alleged difficulties with her telephone included lack of proper maintenance service, incompleted calls, unauthorized removal of phones, improper installation of phones, and a variety of other frustrating experiences specified in her complaint. She sought from Pacific a total of $750,000 in damages as a result of Pacific's alleged negligence and breach of warranty.

In its answer, Pacific contended that under paragraph 14(a) of its tariff schedule 36--T, the customer is entitled to receive only a 'credit allowance' in an amount limited to 'the total fixed charges for exchange service' for the period during which the customer's phone is out of service. ⁴ Subsequently, Pacific sought a partial summary judgment limiting the amount of damages awarded to plaintiff to the fixed service charges for the period, as provided in the tariff schedule.

The trial court granted Pacific's motion, on the basis that the commission has exclusive authority to regulate all operations of public utilities, that the provisions of tariff schedule 36--T were approved by the commission and intended by it to limit the liability of telephone utilities to the amounts specified in the tariff, that such limitation is operative and binding upon plaintiff, and that the trial courts are without authority to interfere with or annul the commissions' orders and decisions. Plaintiff voluntarily waived her right to recover any credit allowance under Pacific's tariff, and a judgment of nonsuit was entered in Pacific's favor. Plaintiff appeals.

Initially, we note that the commission has been vested by the Legislature with broad supervisory and regulatory powers. 'The commission may supervise and regulate every public utility in the State and may do all things, whether specifically designated in this part or in addition thereto, which are necessary and convenient in the exercise of such power and jurisdiction.' (§ 701.) Every public utility must obey the orders, decisions, directions or rules prescribed by the commission 'in any way relating to or affecting its business as a public utility . . ..' (§ 702.)

The commission is specifically empowered to require utilities to file tariff schedules containing rates, charges and classifications, 'together with all rules, contracts, privileges, and failities which in any manner affect or relate to rates, tolls, rentals, classifications, or service.' (§ 489.) The commission may from time to time prescribe changes in the tariff schedules 'as it finds expedient . . .' (§ 490) and may, following a hearing, establish new rates, classifications, rules, contracts, practices or schedules in lieu of prevailing ones. (§ 729; see § 761.) The subject of limitations upon liability of telephone utilities has long been considered to be a proper subject for commission regulation and supervision, ⁵ and appropriate provisions have been included in Pacific's tariff schedules for several years prior to the events which led to the filing of plaintiff's complaint.

For example, at least as early as 1950 Pacific had filed with the commission for its approval tariff schedules which employed the credit allowance device as a limit of Pacific liability to its customers. (See Cole v. Pacific Tel. & Tel. Co., 112 Cal.App.2d 416, 417, 246 P.2d 686.) Cole involved a suit for $25,000 in damages for failure to include a customer's name and advertisement in Pacific's classified directory. Pacific's tariff schedule and contract with its customers provided that 'In case of error or omission of the advertisement by the company, the extent of the company's liability shall be limited to a pro rata abatement of the charge paid to the company as the error or omission may affect the entire advertisement.' The court upheld and enforced the foregoing provision.

The court first noted that 'When such rule is of record with the Public Utilities Commission, its provisions, if reasonable, are binding upon the parties to the contract and will operate to limit the telephone company's liability as therein set forth. . . . 'The rates charged for such service are governed and fixed by the Public Utilities Act, supra. They cannot be varied or departed from and are in part dependent upon (Pacific's) rule of limitation of liability . . .." (Cole v. Pacific Tel. & Tel. Co., Supra, 112 Cal.App.2d 416, 417--418, 246 P.2d 686, 687.) The court discussed applicable cases from other jurisdictions which uphold the right of regulated utilities to limit their liability, and explained that 'The theory underlying these decisions is that a public utility, being strictly regulated in all operations with considerable curtailment of its rights and privileges, shall likewise be regulated and limited as to its liabilities. In consideration of its being peculiarly the subject of state control, 'its liability is and should be defined and limited.' (Citation.) There is nothing harsh or inequitable in upholding such a limitation of liability when it is thus considered that the rates as fixed by the commission are established with the rule of limitation in mind. Reasonable rates are in part dependent upon such a rule.' (Id., p. 419, 246 P.2d, p. 689.) The court concluded that, although a particular limitation provision may be challenged as unreasonable, the question of reasonableness should first be directed to the commission, not the trial courts. (See also Riaboff v. Pacific T. & T. Co., 39 Cal.App.2d Supp. 775, 102 P.2d 465, upholding a similar limitation provision.)

More recently, in Davidian v. Pacific Tel. & Tel. Co., 16 Cal.App.3d 750, 94 Cal.Rptr. 337, Pacific faced a $63,200 damage claim based upon its alleged negligence in omitting plaintiff's name and other information from the classified directory. Pacific successfully contended that it had limited its liability for such negligence by means of a credit allowance provision similar to the provision involved in the instant case (fn. 4, Ante). The provision in Davidian required Pacific to 'allow credit for errors or omissions in listings of its subscribers' in various specified amounts 'not in excess of' the monthly service charge or advertisement charge. Although the provision did not expressly state that Pacific's liability was limited to the credit allowance provided, the court...