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12/31/97 BOROUGH MIFFLINBURG v. WILLIAM A. HEIM

December 31, 1997

BOROUGH OF MIFFLINBURG, APPELLEE
v.
WILLIAM A. HEIM, T/D/B/A/ SCARLET "D", APPELLANT V. WALTER J. RAFACZ, T/D/B/A/ TECHNICAL SERVICES COMPANY, APPELLEE; BOROUGH OF MIFFLINBURG, APPELLEE V. WILLIAM A. HEIM, T/D/B/A/ SCARLET "D", APPELLANT V. WALTER J. RAFACZ, T/D/B/A/ TECHNICAL SERVICES COMPANY, APPELLEE



Appeal from the ORDER ENTERED September 25, 1996, Docketed September 30, 1996, in the Court of Common Pleas, Civil Division, Union County, No. 94-888.

Appeal from the JUDGMENT ENTERED September 30, 1996, in the Court of Common Pleas, Civil Division, Union County, No. 94-888.

Before: Cavanaugh, Hudock and Tamilia, JJ. Opinion BY Cavanaugh.

The opinion of the court was delivered by: Cavanaugh

Filed December 31, 1997

OPINION BY CAVANAUGH, J.:

These consolidated appeals are from the orders entered September 25, 1996, which granted Summary Judgment in favor of appellees, the Borough of Mifflinburg and Walter Rafacz, t/d/b/a Technical Services Company. We affirm.

Appellant is the owner of a hotel/restaurant, the Scarlet "D," (hereinafter "the restaurant") located in the Borough of Mifflinburg. Mifflinburg provides electricity for all residents and businesses within its borders. In October of 1988, appellant arranged for the re-classification of the restaurant's electricity usage from "commercial" status to "GLP-2" status. In order to meet the requirements of this re-classification, Walter Rafacz, an independent contractor for the Borough, installed a new electric meter at the restaurant. However, in calculating the electric usage at the restaurant, the new meter incorrectly employed a multiplier of 40 (forty) instead of employing the correct multiplier of 80 (eighty). This resulted in the restaurant's being underbilled by approximately 50% for the electricity it purchased. *fn1 The error was discovered, and appellant informed thereof, in December, 1993. However, appellant alleges that he did not become aware of Mr. Rafacz's role in the miscalculation until October of 1995. Appellant's subsequent petition for leave to join Mr. Rafacz as an additional defendant was granted by the court, resulting in Mr. Rafacz becoming a party to the action by complaint filed January 2, 1996.

It is undisputed that between December 19, 1989 and November 15, 1993, appellant was underbilled by $29,717.20. Appellant repaid a portion thereof, leaving an unpaid balance of $26,518.65. When appellant refused to pay the remaining amount, the Borough sued to collect the unpaid balance under the authority of West Penn Power Company v. Nationwide Mutual Insurance Co., 209 Pa. Super. 509, 228 A.2d 218 (1967) (hereinafter West Penn I).

In West Penn I, due to an error in billing, the "customer was billed for less than the amount of electric service supplied and the customer paid the bills as presented." Id. at 510-11, 228 A.2d at 219. The power company brought suit "for the difference between that billed and paid and the amount that should have been billed and paid based on the quantities [kilowatt hours] actually supplied." Id. at 511, 228 A.2d at 219. In its answer, under new matter, the customer averred facts to constitute the defenses of accord and satisfaction, payment, estoppel, and breach of contract. The power company filed preliminary objections thereto, in the nature of a motion to strike and in the nature of a demurrer, alleging that the only issue the court could consider was whether the customer had paid in full for the amount of electricity it actually received. The court agreed and granted the motion to strike as well as the demurrer. It explained that, because the tariff or rate to be charged by a utility for electricity is established by law, that "the only issue presented by the pleadings relates to the quantity of electricity (KWHRS) served by plaintiff to defendant..." Id.

On appeal, the lower court's actions were affirmed by a panel of this court which held:

We agree with the court below that the only issue is whether the appellant has paid in full for electricity furnished it by the utility. A utility can only charge the customer the lawful rate as tariffed. It cannot make a special contract with the customer. There can be no favored treatment for a customer. It cannot demand or receive directly or indirectly a greater or lesser rate than specified in its tariff."

Id. at 511-12, 228 A.2d at 220.

The West Penn I panel went on to analyze the appellant's defenses as raised in its new matter, and determined that, under the factual circumstances of the case, the defenses of accord and satisfaction, payment, estoppel, and breach of contract were not available to appellant. Id. In the present case, the Borough disclosed the existence of West Penn I, supra, to counsel for appellant in December of 1993. However, the Borough admitted in its appellate brief and at oral argument before this court that it did not disclose to appellant's counsel the existence of West Penn Power Co. v. Piatt, 405 Pa. Super. 467, 592 A.2d 1306 (1991) (hereinafter West Penn II). *fn2

In West Penn II, due to a "mistake by the West Penn [Power Company] technician who had installed the electric meter" in appellant's commercial building, which resulted in the use of "an incorrect multiplier in calculating the amount of each monthly statement," appellant was underbilled for the electricity provided by the power company to its commercial building for a period of ten years. Id. at 469-70, 592 A.2d at 1307. The power company brought suit to recover funds lost as a result of its underbilling. Appellant counterclaimed, raising the defense of detrimental reliance. Appellant was a commercial landowner whose revenues were generated by the rents it charged to tenants occupying the building in question. Appellant calculated its rental fees, in part, on the expenditures it made for utility services to the building. Therefore, for the ten year period in question, because the power company had been undercharging appellant for electricity, appellant had been undercharging it tenants for rent.

The power company moved for judgment on the pleadings with regard to appellant's counterclaim, and for summary judgment on its complaint. After briefing and argument, the court granted both motions, premised upon application of West Penn I, supra. On appeal, a panel of this court reversed the lower court and remanded for trial. In doing so, the panel clarified the holding in West Penn I :

In [ West Penn I ], as here, West Penn sought to recover funds lost as a result of its underbilling of a customer, Nationwide Insurance Co. ("Nationwide Insurance"). In its defense, Nationwide Insurance averred facts to constitute defenses of accord and satisfaction, payment, estoppel and breach of contract. The trial court ruled that the only issue was whether Nationwide Insurance had paid in full for the electricity furnished by West Penn. On appeal, this court agreed that the only issue properly raised concerned whether Nationwide Insurance had paid in full for the electricity. We also held that Nationwide had failed to sustain its defenses. In so holding, we noted that a utility can only charge the customer the lawful rate as tariffed, and cannot provide customers with preferential treatment. However, we went on to evaluate the defenses raised by Nationwide Insurance, and rejected them because they were without merit on the facts alleged. The important point to be drawn from the analysis in [ West Penn I ] is that this Court did not suggest that there is a general prohibition against the assertion of defenses to a public utility's attempt to recover amounts it undercharged a customer. Furthermore, our examination of [ West Penn I ] indicates that no such prohibition exists. The [ West Penn I ] court merely held that a utility is entitled to recover amounts it undercharged a customer, at least when that customer failed to allege sufficient facts in its defense to raise a disputed issue of material fact or show that the utility is not entitled to judgment as a matter of law. [ West Penn I ] leaves open the question of whether a utility is entitled to recover amounts it undercharged a customer when that customer asserts a meritorious defense. Thus, the trial court could properly have granted appellee summary judgment and judgment on the pleadings based on [ West Penn I ] only if the pleadings indicated that appellee was entitled to judgment as a matter of law on appellant's counterclaim, and the counterclaim was clearly and without a doubt meritless.

West Penn II, at 472-74, 592 A.2d at 1308-09 (footnotes and citations omitted).

The West Penn II court then determined that appellant had pleaded sufficient facts to establish its defense of detrimental reliance and that West Penn was, therefore, not entitled to prevail on appellant's counterclaim. For the same reason, the panel determined that West Penn was not entitled to judgment as a matter of law. Therefore, the West Penn II panel held that the trial court's grant of judgment on the pleadings in favor of West Penn as well as its grant of Summary Judgment in favor of West Penn constituted error requiring reversal and remand for trial.

In sum, it is fair to say that West Penn II put a fine point on West Penn I.

In the case presently before us, appellant avers that he did not become aware of the existence of West Penn II, (supra) , until July 25, 1996. On August 6, 1996, appellant filed a Petition for Leave to File an Amended Counterclaim and New Matter citing West Penn II, (supra) , and asserting the defense of detrimental reliance. The court issued a rule returnable date of August 20, 1996, for appellees to show cause why appellant's petition to amend the pleadings should not be granted. By the court's order dated August 22, 1996, and filed of record on August 26, 1996, appellant's petition to amend the pleadings was denied. On September 23, 1996, appellant filed a motion requesting that the court:

1. Amend its order of August 22, 1996 by adding that the Court is of the opinion that such order involves a controlling question of law as to which there is a substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the matter; and

2. Stay proceedings in this matter until the appellate court disposes of Defendant's Interlocutory Appeal.

Appellant's motion was denied by order dated September 30, 1996, and filed October 1, 1996. In the meantime, the Borough filed its motion for summary judgment, which was granted by the court on September 25, 1996, in favor of the Borough and against appellant in the amount of $24,018.83. On that same date, the court granted the motion for summary judgment of additional defendant, Mr. Rafacz, based on the statute of limitations. Appellant appeals from both orders.

I. APPEAL AT 00843 HARRISBURG 1996

In this appeal from the order which granted Summary Judgment to the Borough, appellant raises two issues for our review:

1. THE LOWER COURT ERRED IN DENYING APPELLANT'S PETITION FOR LEAVE TO FILE AMENDED COUNTERCLAIM AND NEW MATTER TO PLAINTIFF'S COMPLAINT WHERE APPELLEE AND ADDITIONAL DEFENDANT FAILED TO DEMONSTRATE THAT THEY WOULD BE PREJUDICED BY THE AMENDMENT.

2. THE LOWER COURT ERRED IN GRANTING SUMMARY JUDGMENT TO APPELLEE WHEN IT SHOULD HAVE GRANTED LEAVE TO APPELLANT TO FILE AN AMENDED COUNTERCLAIM AND NEW MATTER TO PLAINTIFF'S COMPLAINT AND ...


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