No. 80-1-163, Appeal from the Order of the Superior Court, as per Order of the Supreme Court allowing said appeal on the 9th day of September, 1980 at No. 228 W.D. Misc. Docket, 1980.
Paul D. Shafer, Jr., Meadville, for appellants.
Norman H. Stark, James M. Antoun, Erie, for appellee.
Roberts, Nix, Larsen, Flaherty, Kauffman and Wilkinson, JJ. Roberts, J., files an Opinion in Support of Affirmance in which Nix and Wilkinson, JJ., join. Flaherty, J., files an Opinion in Support of Reversal in which Larsen and Kauffman, JJ., join. O'Brien, C.j., did not participate in the consideration or decision of this case.
The Court being equally divided, the order of the Superior Court is affirmed.
OPINION IN SUPPORT OF AFFIRMANCE
This appeal from an order of the Superior Court granting judgment n.o.v. to appellee National Fuel Gas Distribution Corporation (NFG) presents the question whether a utility ordered by the Public Utility Commission to discontinue service to a new customer may be held liable for breach of contract. At trial, the court instructed the jury that, not-withstanding the duty of NFG to obey the order of the commission, NFG would be liable for breach of contract if it was guilty of "contributing fault." Restatement of Contracts § 458 (1932). The jury returned a verdict in favor of appellants and awarded damages of $45,000. On appeal, a majority of the Superior Court granted NFG's motion for judgment n.o.v. Observing that NFG is not an ordinary party to a contract but rather "a 'utility,' . . . subject to control and regulation by the PUC," the Superior Court correctly held that such a utility "should not be subjected to liability for damages to others for acts done by it in compliance with the PUC's orders unless there is evidence of bad faith or malice on [the utility's] part, or gross negligence." Kasemer v. Nat'l Fuel Gas Distribution Corp., 279 Pa. Super. 334, 341, 421 A.2d 226, 229 (1980). Applying this standard, which properly recognizes the practical difficulties faced by a utility in serving two masters, the Superior Court found that appellants had neither alleged nor proved the existence of such conduct on the part of NFG.
The facts of this case present a classic example of the difficulties with which a utility is faced when confronted with the conflicting demands of one of its customers and the Public Utility Commission. On April 1, 1975, NFG determined that it could not supply gas to additional tenants of appellant without exceeding its peak capacity in violation of a February 1972 order of the PUC. On May 27, 1975, appellants secured an injunction from the court of common pleas directing NFG to provide gas service to appellants' tenants. NFG immediately complied with the injunction. On July 23, 1975, the PUC ordered NFG to cease making
sales to customers other than those already being served. NFG thereupon refused to supply gas to additional tenants of appellants. On August 12, 1975, the court of common pleas held NFG in contempt of the May 27 order. NFG immediately purged itself of the contempt by renewing the supply of gas to appellants' customers. NFG also appealed the contempt order to the Superior Court, challenging the jurisdiction of the court of common pleas to enter the order in light of the conflicting cease and desist order of the PUC. NFG did not ask for a supersedeas, but continued to provide gas service to appellants until the PUC intervened and secured a supersedeas on October 6, 1975. On March 6, 1975, appellants filed a motion to remove the supersedeas. NFG responded by asking the Superior Court "to maintain the supersedeas as modified until such time as it decides the jurisdictional issue that is the subject of the Appeal." Record at 63a. On November 22, 1976, the Superior Court affirmed the contempt order, and NFG immediately resumed service to appellants. In short, NFG attempted throughout these proceedings to comply in good faith with every conflicting order it received.
The Opinion in Support of Reversal would hold that NFG's answer in opposition to appellants' motion to remove the supersedeas constitutes "contributing fault" under section 458 of the Restatement of Contracts and thus subjects NFG to liability for breach of contract.*fn* Yet if NFG had supported appellants' motion, it would have been denying the authority of the PUC to regulate its gas distribution.
It would be absurd to hold NFG liable for breach of contract for its belief that it was subject to a valid order of the commission statutorily empowered to regulate it. Especially is this so in light of section 508 of the Public Utility Code, which provides that "[t]he commission shall have
power and authority to vary, reform, or revise, upon a fair, reasonable, and equitable basis, any obligations, terms, or conditions of any contract heretofore or hereafter entered into between any public utility and any person, corporation, or municipal corporation, which embrace or concern a public right, benefit, privilege, duty, or franchise, or the grant thereof, or are ...