Summary
In Bilton Machine Tool Co. v. United Illuminating Co., 110 Conn. 417, 148 A. 337, the classification of rates for electric current and the procedure in making up the charges and bills against the plaintiff were exclusively within the knowledge and control of the defendant, and the errors therein were not contributed to by the plaintiff or ascertainable by it by the exercise of reasonable diligence.
Summary of this case from Pitt v. StamfordOpinion
The charges made by a public utility light and power corporation for its service must be equal and impartial, reasonable and uniform, and while discrimination in charges may at times exist to some extent, it must appear to be inevitable or incidental, and to have a reasonable basis. Discrimination as to service and rates may be based upon a reasonable classification, and basing the charge or rate by a sliding scale upon the quantity used is an accepted principle of business administration applied to public utility corporations and will be upheld where neither the classification, rates or charges are unreasonable. The P Co. and the S Co. obtained their power under a contract of the P Co. with the defendant, and the power used by each was billed by the defendant in one bill under a single sliding scale, the rate decreasing as the quantity increased. These companies subsequently merged into the B Co., the plaintiff, the P Co. becoming the foundry department and the S. Co. the machine department thereof, and the defendant continued to bill them in the same manner until October 1st, 1917, when the amount of power used exceeded that allowed under the contract. From then until September 24th, 1918, the defendant sent the plaintiff two bills monthly, one for power used in the foundry department figured at the rates under the P Co. contract, and the other for the power used in the machine department, on a separate sliding scale, this arrangement being more advantageous to the plaintiff during the continuance of the contract than a new single sliding scale contract would have been under then current rates, which were higher. The defendant cancelled the P Co. contract as of September 14th, 1918, and from then until December 9th, 1924, continued to send the plaintiff monthly two separate bills for the two departments, each bill figured separately at the prevailing sliding scale rates, which was greatly in excess of what the charge would have been if the accounts had been combined and the rates figured under a single sliding scale. The plaintiff did not know it was entitled to a single billing without the expense of changing the installation or that this would be of large pecuniary advantage to it. The defendant knew these facts, and its practice was to charge its customers for power on a single sliding scale, but it never notified the plaintiff of the saving it might effect by so combining its two accounts. Held:
1. That the classification, according to the sliding scale of rates adopted by the defendant, decreasing as the quantity used increased, was not an illegal mode of classification, nor so far as appears were the charges as made within the gradations of this classification unreasonable. 2. That there was no justification for the defendant having two accounts on its books for the plaintiff after the cancellation of the P Co. contract, and its method of billing the plaintiff, which deprived it of the benefit of a single sliding scale rate enjoyed by other customers, was discriminatory and illegal. 3. That the payments were made by the plaintiff in ignorance of its rights and under a mistake of fact, and it is entitled to recover back the money so paid.
Argued October 30th, 1929
Decided January 6th, 1930.
ACTION to recover alleged overpayments and for an accounting, brought to the Superior Court in Fairfield County and tried to the court, Simpson, J.; judgment for the defendant and appeal by the plaintiff. Error; judgment directed for plaintiff.
The defendant is a public utility company supplying electric current for light and power in Bridgeport and elsewhere in Connecticut. In January, 1916, The Parsons Foundry Company moved to a location in Bridgeport adjoining The Standard Manufacturing Company. Mr. Bilton was president of the first named company, and secretary and treasurer of the second, as well as general manager of both. In March, 1916, the Parsons Company, acting through Mr. Bilton, entered into a five year written contract, terminable by either party two years from the date thereof upon six months notice, by which defendant was to furnish at its expense necessary transformers and meters for the service contracted for and to supply the company with electric power up to 200 H. P. upon a sliding scale at stated rates.
Subsequently defendant informed Mr. Bilton that current for power for the Standard Company could be combined and furnished through the equipment through which power was furnished the Parsons Company, thus giving to each company the full benefit of the sliding scale as provided in the Parsons' contract, which would be a much lower rate than was then in general use with defendant's customers. In consequence of these representations, the plaintiff and defendant agreed on about January 1st, 1917, that defendant should furnish power to the Standard Company through the equipment installed for the Parsons Company. At this time a meter was installed in the transformer house on land of the Parsons Company for the purpose of measuring the current for power consumed by the Standard Company. This meter was not used by defendant. The current so supplied to these companies was billed to, and in the name of, The Parsons Foundry Company, on a single sliding scale rate, giving these companies the benefit of a combined billing or rate in conformity with the Parsons' contract. On May 1st, 1917, the Standard and Parsons companies were merged into The Bilton Machine Tool Company, plaintiff herein, and thereby passed out of existence and the business of the Parsons Company was carried on as a foundry department and that of the Standard Company carried on as a machine tool department of the plaintiff. The Bilton Company succeeded to the Parsons' contract and from the date of the merger until October 1st, 1917, was supplied under that contract and at the rates specified therein with all current that it used, a single bill covering the entire cost of the current consumed. About October 1st, 1917, the power used by these departments exceeded the maximum load under the Parsons' contract, in consequence a transformer burned out.
In order to furnish the increased power and in accordance with defendant's practice it was necessary for plaintiff to sign an application for a new contract. It was advantageous to plaintiff to continue to get its current for the foundry department under the rates provided in the Parsons' contract and Mr. Bilton was unwilling to combine the consumption of current used by these two departments on one meter with one new account and at the increased cost over the Parsons' contract rate and elected to retain that contract which covered the power furnished the foundry department. He accordingly signed an application, order and contract for a larger transformer and meter for the purpose of furnishing the necessary power for the machine tool department and defendant installed an additional transformer and a second meter. The rates charged for this department were higher than the Parsons' contract rate but were the rates charged all consumers under each application and as changed from time to time. After October 1st, 1917, and down to September 14th, 1918, the defendant sent plaintiff two bills each month, one in the name of The Parsons Foundry Company and one in the name of The Bilton Machine Tool Company, the first named figured as per Parsons' contract rates, the last named at the rates charged all consumers. The defendant knew of the merger at least from the date of this application. The plaintiff knew between October 1st, 1917, and September 14th, 1918, that it was in receipt of two bills from defendant for power consumed by it, which were figured on a different sliding scale of rates.
The defendant exercising its rights cancelled the Parsons' contract, effective on September 14th, 1918. From this date to December 9th, 1924, the defendant sent plaintiff, monthly, two separate bills, one made in the name of The Parsons Foundry Company and one in the name of the plaintiff, which were taken from the two ledger accounts maintained by it. The defendant, after its cancellation of the Parsons' contract and after the merger, continued to carry on its books the old ledger account in the name of The Parsons Foundry Company. Each bill was figured separately at the prevailing sliding scale rate and was greatly in excess of what the charge would have been if these accounts had been combined. From September 14th, 1918, to December 9th, 1924, the advantage to the plaintiff in the maintenance of two separate accounts did not exist as theretofore.
It would have been to the large pecuniary benefit of plaintiff from September 14th, 1918, to December 9th, 1924, to have had these accounts combined and the current consumed figured under a single sliding scale.
At no time after its notice of cancellation, March 14th, 1918, did defendant notify plaintiff of the manner in which it was figuring these bills although defendant fully knew that its charges were largely in excess of its prevailing rates if one account was kept and one monthly bill rendered, combining the existing accounts as the plaintiff was entitled to have done. Nor did defendant suggest to plaintiff between these dates that it could by having these accounts combined secure a large pecuniary benefit.
The bills went regularly through plaintiff's different departments and were regularly checked, vouchered and approved for payment. All employees through whom they passed knew that two bills upon the same rates were being received monthly during this period. But, so far as appeared, there was nothing which indicated to them that the plaintiff was entitled to a single billing without the expense of changing the installation and meter or that the change would be of large pecuniary advantage to plaintiff. From the cancellation to his retirement as an officer of plaintiff and down to the beginning of this action Mr. Bilton believed that the plaintiff was getting the benefit of a combined sliding scale rate and did not know of any change from this method until the bringing of this action. Mr. Grippin did not know of this, nor so far as appears did any officer of the plaintiff, until Mr. Grippin was so informed in December, 1924.
During the period between September 14th, 1918, and December 9th, 1924, customers of the defendant of the same class and similarly situated with plaintiff as to equipment were charged upon the basis of a single sliding scale per kilowatt hour and upon a totalized reading of the current consumed measured through the meters used, and not upon the basis of a charge per sliding scale in proportion to the number of meters served when a single contract, order or application had been issued for the entire load; but plaintiff did not know of this practice of defendant.
The practice and policy of defendant from 1915 to 1924, was to induce consumers of electric current for power to combine their loads on one meter and one account and to render separate bills for each separate account and to only open accounts on its books upon a written order, application or contract.
It was also the practice and policy of the defendant during this period not to terminate an account except upon a written order for the same, or upon the nonpayment of bills. The defendant never informed the plaintiff of these rules and practices, and plaintiff never knew of them.
The plaintiff at no time requested the cancellation of the account or bill in the name of The Parsons Foundry Company, nor the removal of the Parsons' meter, nor requested the combination of the current operating both the foundry department and the machine tool department of the plaintiff to a single meter, nor the charge for the current kept on a single account and one instead of two bills sent to it.
Mr. Grippin was treasurer of plaintiff from November 1st, 1918, to the early part of 1922, and became the chairman of its board of directors in October, 1924. In the early part of December, 1924, one of plaintiff's clerks inquired of the secretary if one bill might not be sent by defendant instead of two; he spoke to Mr. Bilton concerning this and thereafter it came to the attention of Mr. Grippin who saw defendant's manager and was informed by him that the reason for the two sets of billing was that there had been no change in the contracts so far as their records showed, and to change this it would be necessary for the plaintiff to sign a new single application, order and contract for the entire current to be consumed.
Mr. Grippin signed such papers and thereupon defendant discontinued its sending of two bills, closed the ledger account of The Parsons Foundry Company and thereafter rendered a single bill to plaintiff and upon a single sliding scale of rates. This change involved no change in the electrical apparatus installed on plaintiff's premises. The only change resulting from the plaintiff's signing of the application of December 9th, 1924, was the closing of the ledger account carried in the name of The Parsons Foundry Company and thereafter combining the current supplied to the foundry department and the machine tool department and the subsequent charging and billing the plaintiff for the combined current upon the basis of a single sliding scale rate.
The plaintiff could at any time between September 14th, 1918, and December 9th, 1924, have signed a similar application and obtained the benefit of a single sliding scale rate and thereby saved from September 14th, 1918, up to and including the bill of December 2d 1924, $9418.12 with interest to the date of judgment, amounting in all to $13,389.89.
But the plaintiff did not know that it had this privilege or that it must sign a new application in order to secure this saving.
Jonathan Grout and Raymond E. Hackett, for the appellant (plaintiff). Lorin W. Willis, with whom was George N. Foster, for the appellee (defendant).
We have incorporated in the foregoing statement of facts the essential facts found by the trial court as corrected by us in a few particulars, the principal corrections including the striking out of most of paragraphs sixty-four, eighty, eighty-one, eighty-two and eighty-three relating to the knowledge of Mr. Bilton and the plaintiff and adding the substance of the facts, without the conclusions, as set forth in paragraphs sixty-five, seventy, seventy-three and seventy-four, sixty-six, sixty-six A and sixty-eight of appellant's draft-finding.
The plaintiff seeks to recover a certain amount of money which it alleges was wrongly charged against it by, and paid by it to, the defendant for power furnished the plaintiff, which constituted an unreasonable discrimination against it.
The trial court held that whatever payments were made were not discriminatory but were voluntary payments, for the recovery of which no action would lie.
The defendant is a public utility corporation engaged in supplying electric current for light and power in the city of Bridgeport and elsewhere in Connecticut and the payments complained of as discriminatory were made by the plaintiff to it for power so furnished.
The defendant is by law vested with certain rights and privileges, and endowed with some of the State's sovereign power and authorized to engage in the public service of supplying electric power to all applicants alike upon the basis of an equality of right in them in respect to service and charges.
The charge made by it for service must be equal and impartial, reasonable and uniform. It must be free from arbitrary imposition and every trace of favoritism. Discrimination in charges and rates may at times exist to some extent, but its inevitableness or incidentalness must appear, as must the reasonable basis for it.
Discrimination as to service and rates may be based upon a reasonable classification. Gallaher v. Southern New England Telephone Co., 99 Conn. 282, 121 A. 686; Western Union Tel. Co. v. Call Pub. Co., 181 U.S. 92, 21 Sup. Ct. 561; Interstate Commerce Commission v. Baltimore Ohio R. Co., 145 U.S. 263, 12 Sup. Ct. 844; New York Telephone Co. v. Siegel-Cooper Co., 202 N.Y. 502, 509, 96 N.E. 109; Cincinnatti, H. D. R. Co. v. Bowling Green, 57 Ohio St. 336, 346, 49 N.E. 121; Pond on Public Utilities (3d Ed.) §§ 270, 275, 279.
Basing the charge or rate by a sliding scale upon the quantity used is an accepted principle of business administration as applied to public utility corporations and this form of classification has been upheld by the courts where neither the classification nor the rates nor charges were unreasonable. Silkman v. Water Commissioners, 152 N.Y. 327, 332, 46 N.E. 612; State ex rel. Mason v. Consumers Power Co., 119 Minn. 225, 229, 137 N.W. 1104. In Western Union Tel. Co. v. Call Pub. Co., 181 U.S. 92, 21 Sup. Ct. 561, the court said in an action against a public utility by one of its patrons: "There is no cast iron line of uniformity
This was manifestly unreasonably discriminatory and hence illegal. The defendant knew of the merger. It had cancelled the Parsons' contract. It knew that the plaintiff was entitled to have all of the power used by it charged upon one ledger account and one bill furnished for this, and it knew that if it continued two accounts on its ledger and billed each account to the plaintiff it would be receiving from the plaintiff more than it was entitled to charge and more than it charged
The classification, according to the sliding scale of rates adopted by the defendant, decreasing as the quantity used increased, was not an illegal mode of classification, nor, so far as appears, were the charges as made within the gradations of this classification unreasonable.
This is not the complaint of the plaintiff. Its complaint is that the defendant presented to it two bills for separate charges for power used in each of its two departments, which it paid, with the result that the amount of these bills greatly exceeded the amount which have been due had the amount of power used in plaintiff's plant been combined and the charge made for the amount used under each of the gradations of this single sliding scale of rates. When the Parsons Company and the Standard Company were separate companies but getting their power from the equipment of the Parsons Company, the power used by each was billed in one bill under a single sliding scale. When these companies were merged into the plaintiff the defendant continued to supply power under the Parsons' contract down to October 1st, 1917, and at the rates provided for in that contract, which were more beneficial to it than defendant's current rates, and defendant sent plaintiff one bill in the name of The Parsons Foundry Company for the power furnished the plaintiff by the defendant and the bills were paid by the Bilton Company.
There was at the time of cancellation a single corporation — the plaintiff — receiving power from defendant. If any corporation using the same power as plaintiff used had at this time applied to defendant for service it would have received power service at the current rates on a single sliding scale which would have been billed on one bill. If defendant had divided the power used by this corporation and charged it upon its books in two accounts billing it in two bills, each based on a single sliding scale the corporation would have paid on each sliding scale a larger amount than if the entire power used had been consolidated and one bill rendered for this based upon one sliding scale of rates.
About October 1st, 1917, it was necessary to increase the power consumed by the plaintiff and to furnish this, and in accordance with defendant's practice, it was necessary for plaintiff to sign an application for a new contract. It was advantageous for plaintiff to get its current for the foundry department under the Parsons' contract rates and it exercised its right to continue to that extent the contract, while for the rest of the power consumed the defendant was to receive the current rates, which it charged plaintiff.
After October 1st, 1917, and down to September 14th, 1918, the date of cancellation of Parsons' contract, the defendant sent plaintiff two bills each month, one in name of The Parsons Foundry Company figured at Parsons' contract rates and one in the name of The Bilton Machine Tool Company, figured at rates charged all consumers.
From the date of cancellation to December 9th, 1924, the defendant sent plaintiff, monthly, two separate bills, made as before and taken from the two ledger accounts maintained by it.
This was manifestly unreasonably discriminatory and hence illegal. The defendant knew of the merger. It had cancelled the Parsons' contract. It knew that the plaintiff was entitled to have all of the power used by it charged upon one ledger account and one bill furnished for this, and it knew that if it continued two accounts on its ledger and billed each account to the plaintiff it would be receiving from the plaintiff more than it was entitled to charge and more than it charged other corporations similarly situated. Despite this it continued from September 14th, 1918, to December 9th, 1924, to keep upon its books two accounts, one against plaintiff and one against the Parsons Company although this company had merged with plaintiff and become nonexistent and the Parsons' contract which was the basis for this account had been cancelled, and it rendered two bills each month for the power used in the foundry and the machine tool departments of plaintiff's plant and based each bill on a single sliding scale, thus depriving plaintiff of the benefit of the quantity used rate on a single sliding scale.
At this time there was only one application or contract for service between these parties and justification for but one account and one bill.
The defendant attempts to justify the sending of two bills by its having two accounts on its books but there is no apparent reasonable basis in the record for carrying the two accounts. When defendant cancelled the Parsons' contract the occasion for the continuance of the account in the name of The Parsons Foundry Company ceased to exist. There then could exist, properly and legally, only one account on defendant's books and that was the account against the plaintiff. Some claimed distinction is attempted to be drawn between the application made by the plaintiff in 1917 for power and that which defendant required plaintiff to make in 1924, upon the theory that the earlier application covered only part of the power used by the plaintiff while the last application covered all used by it. We are unable to so read the earlier application. It was, as we read it, an application for all power which might be required. Certainly after the cancellation of the Parsons' contract it was the only application under which defendant rendered all its service down to December 9th, 1924, and the equipment through which this power was obtained remained the same during this entire period.
The defendant was bound by law to furnish to the plaintiff electrical current without discrimination against it and to treat the plaintiff with equality as it presumptively did all of its patrons similarly situated. This the defendant has failed to do. The charges complained of were unreasonably discriminatory. The remaining point involved is whether the plaintiff was without knowledge of its right to a combined billing and made the payments involuntarily and under a mistake of fact. Both parties seem to acquiesce that the burden of establishing this is on the plaintiff. We shall so assume.
The trial court found that Mr. Bilton did know on October 1st, 1917, that two bills would be rendered, one computed on the sliding scale rate of the Parsons' contract and one on the current rates; the court further finds that Mr. Bilton, after the cancellation of the Parsons' contract, knew that the defendant would continue furnishing power as it had done under two separate contracts or applications until request for discontinuance of service was made it by plaintiff and that Mr. Bilton neglected to inform his subordinates of this but assumed that plaintiff would obtain the benefit of the combined billing. We think the finding as to Mr. Bilton's knowledge of the defendant's course after the cancellation is without support in the evidence. Mr. Bilton, defendant's own witness, denies this. No officer or even employee is shown to have known it, but the contrary is the necessary inference. It is hardly credible that Mr. Bilton or the other officers of this corporation would knowingly have continued to pay these discriminatory rates. The plaintiff's immediate action when Mr. Grippin ascertained that the plaintiff had been paying excessive rates, which it could save by making a new application, is strongly indicative of what would have been done had the plaintiff or any of its officers earlier known this fact. That the employees knew of the two billings upon the same rates was not notice to the plaintiff; they did not know that plaintiff was entitled to a single billing on one sliding scale. Nor did its officers know what its rights were. The plaintiff had no knowledge that it was being discriminated against until after the exposure by Mr. Grippin, neither did it have knowledge that other corporations having more than one meter were being given the benefit of a single sliding scale. The defendant knew all this and knew that the plaintiff was being discriminated against. It was the plain duty of the defendant — a public utility — after the cancellation of the Parsons' contract, to have notified the plaintiff of its right to have all of the power used by it combined and figured on one single sliding scale. It could not continue, through discriminatory rates, to exact from the plaintiff moneys to which it knew it was not entitled and which it should have realized plaintiff would not pay had it known its rights. Ignorance of its rights and payments made by it in mistake through this lack of knowledge constituted in law "mistake of a material fact." It resulted in the plaintiff paying in excess of the rates charged to others for the same service under the same conditions. Armour Packing Co. v. Edison Electric Illuminating Co., 115 N.Y. App. Div. 51, 56. The situation in this case is far afield from that in Verran Co. v. Stamford, 108 Conn. 47, 142 A. 578. There there was knowledge, here there was none, and the party defendant, a public utility, has required one of its patrons to pay for its service an excessive and unreasonably discriminatory rate.
The rule stated in the recent case — Bridgeport Hydraulic Co. v. Bridgeport, 103 Conn. 249, 130 A. 164 — has especial application to this case: "The action for money had and received is an equitable action to recover back money paid by mistake where the payor is free from any moral or legal obligation to make the payment and the payee in good conscience has no right to retain it. . . . The real ground of recovery is the equitable right of the plaintiff to the money. The court finds the plaintiff paid the money under a mistake of its rights and duties. It is admitted by the defendant that the plaintiff was under no moral or legal obligation to pay the money and that the defendant has no moral right in good conscience to retain it. The law of this State is well settled that under such circumstances the plaintiff is entitled to recover back the money so paid."