St. John v. Missoula Electric Cooperative, Inc.

NO. 96-641 IN THE SUPREME COURT OF THE STATE OF MONTANA 1997

LAURICE ST. JOHN, Plaintiff and Appellant, v.

MISSOULA ELECTRIC COOPERATIVE, INC., Defendant and Respondent.

APPEAL FROM: District Court of the Fourth Judicial District, In and for the County of Missoula, The Honorable Edward McLean, Judge Presiding.

COUNSEL OF RECORD:

For Appellant:

Timothy D. Geiszler; Geiszler & Newcomer, Missoula, Montana For Respondent:

Edward A. Murphy; Datsopoulos, MacDonald & Lind, Missoula, Montana : FILED APR 2 4 1997 Submitted on Briefs: January 30, 1997 Decided: A p r i l 24, 1997 Filed: CLERK OF S d P R E f d E COURT STATE OF MONTANA @+ Clerk Justice W. William Leaphart delivered the Opinion of the Court.

Laurice St. John (St. John), appeals from the Fourth Judicial District Court's Judgment

awarding Missoula Electric Cooperative, Inc. (MEC), $1,160.30 on its counterclaim. We

reverse and remand.

We address the following dispositive issue on appeal:

Did the District Court err in holding that the Payment Agreement entered into between St. John and MEC was a settlement of all disputes?

BACKGROUND In March of 1992, St. John purchased a house fiom Howard Lemm (Lemm) in Lolo,

Montana. St. John did not move into the house for one year after her purchase. During that

period she rented the property back to Lemm. St. John's house is equipped with two

electrical meters, one serving the house (house meter), and the other serving the swimming

pool (pool meter). The pool meter and the house meter were billed separately and given

separate account numbers by MEC. The dispute in this case arises from a bill for electrical

services to the pool meter.

In May of 1993, Lernrn contacted St. John to see if she wanted to use the pool during

the upcoming summer season. In response, St. John contacted a local pool service company

to prepare the pool for use during the summer season. In August of 1993, St. John contacted

MEC to open an account for power to her new house in preparation for her arrival at the

residence later that month. Soon after St. John opened the account, MEC billed her $2,040 for electrical service credited to the pool meter.

In October of 1993, St. John contacted MEC regarding the large bill and contended

that it was a mistake. MEC told St. John that the bill was likely an error and would be

corrected later. However, St. John continued to be billed $2,040 for electrical service

supplied to the pool for the period of July 20, 1993, through August 19, 1993. In addition

to these charges, St. John received a later bill for an additional $2,040 for electrical services

to the pool for the period of October 19, 1993, through November 10, 1993. This made her

total bill $4,080. Although she refused to pay the bill from the pool meter, St. John

continued to promptly pay all bills related to the house meter.

Due to St. John's refusal to pay the bill related to the pool meter, MEC terminated

electrical services to both the house and the pool. Although it would have been possible for

St. John to switch to another supplier for her electrical service, she would first have to obtain

the consent of MEC. St. John had a friend restore power to her home without the permission

or knowledge of MEC. When MEC discovered the unauthorized service, it again terminated

all electrical service to St. John's two accounts.' MEC agreed to reconnect St. John's service provided she enter into a written

agreement to pay the disputed balance in monthly installments. The agreement provided as

follows:

I . We note that termination of electrical servicecan be a matter of grave concern. The media reports that Imelda Marcos' unpaid electric bill of $200,000 may cause a power shutoff at her husband's air-cooled crypt. Winners & Losers, TIME, Feb. 10, 1997, at 19. I Laurice St. John Agree to pay $882.18 at the time of reconnect. And agree to make payments of 250.00 a month until my balance is paid in full.

Previous Balance 3908.87 current charges 237.43 tampering feeldisc 75.00 deposit 264.00 reconnect fee 75.00 Total bal 4,560.30 8/29/94 pmt -900.00 Remaining balance 3,660.30 to make monthly payment of $250.00 I understand that if this agreement is not kept current my account or accounts will be disconnected.

Members signature IS/ Laurice A. St. John 8-29-94 Credit & Collections IS/ Kelly M. Sherick Under the terms of the above document, the repayment totaled $4,560.30. St. John

agreed to make a $900 down payment and pay $250 per month until the remaining balance

was paid. After St. John signed the agreement, and without St. John's knowledge or consent,

MEC altered the document by adding the words "ACCORD AND SATISFACTION." In

order to continue to receive electrical service, St. John made the down payment and ten

monthly installments before she discontinued payments leaving a balance of $1,160.30

charged to the pool meter.

Unable to resolve her dispute with MEC, St. John filed suit against MEC alleging negligent billing and negligent infliction of emotional distress. MEC asserted a counterclaim

against St. John, seeking payment of the balance of $1,160. A trial was held before the court

sitting without a jury.

In its Findings of Fact, the District Court found that St. John had agreed to make

payments solely to restore the electrical service to her house. Nonetheless, the court

concluded that St. John had agreed to "settle" the dispute and had only partially complied

with the settlement agreement. Accordingly, the court entered judgment against St. John in

the amount of $1,160. St. John appeals from this judgment.

DISCUSSION Did the District Court err in holding that the Payment Agreement entered into between St. John and MEC was a settlement of all disputes?

The standard of review of a district court's findings of fact is whether they are clearly

erroneous. Daines v. Knight (1995), 269 Mont. 320,324 , 888 P.2d 904,906 . This Court has

adopted a three-part test in determining whether the findings are clearly erroneous. Interstate

Prod. Credit Ass'n v. DeSaye (1991), 250 Mont. 320, 323 , 820 P.2d 1285, 1287 . This test

includes:

First, the Court will review the record to see if the findings are supported by substantial evidence. Second, if the findings are supported by substantial evidence we will determine if the trial court has misapprehended the effect of evidence. [Citations omitted.] Third, if substantial evidence exists and the effect of the evidence has not been misapprehended the Court may still find that "[A] finding is 'clearly erroneous' when, although there is evidence to support it, a review of the record leaves the court with the definite and firm conviction that a mistake has been committed." . . .

DeSaye, 820 P.2d at 1287 (citing United States v. United States Gypsum Co. (1948), 333 U.S. 364 , 68 S.Ct. 525 , 92 L.Ed. 746 ). The standard of review of a district court's conclusions of law is whether the court's interpretation of the law is correct. Carbon County v. Union Reserve Coal Co. (1995), 271 Mont. 459,469 , 898 P.2d 680,686 ; see also Kreger

1 v. Francis (1995), 271 Mont. 444 , 898 P.2d 672 .

~ The court's ruling in favor of MEC is based upon the premise that "[ilf the parties to a legal dispute enter into an agreement to settle that dispute, the new agreement becomes enforceable according to its terms." The court concluded that "Laurice St. John and MEC entered into a new agreement to settle their dispute on August 29, 1994 and she partially performed her obligations under that agreement, but then breached it by failing to pay the entire amount owed to MEC." We hold that the court's conclusion that St. John entered into an agreement to "settle" the dispute is not correct in light of the court's findings of fact.

~ A number of the court's findings of fact relate specifically to the question of whether

~ St. John had a valid dispute with MEC and whether she entered into an agreement to settle that dispute. The court found specifically that "St. John did not consume 40,000 kwh of

I electricity [$2,040.00] during the period from when her account was opened [August 12, 19931 to the August meter reading [August 19, 19931." The court also found that, although MEC billed St. John for 40,000 kwh consumption from October 19, 1993 through November 15, 1993, "[tlhe pool had been closed and shut down prior to October 19, 1993." These findings would certainly indicate that St. John's challenge to the MEC billing was not without a basis.

Further, with regard to the substance of the "Agreement" that St. John signed in order to restore power to her residence, the court found that "St. John signed a written promise to

1 pay this disputed balance in monthly installments, without admitting she was responsible for those disputed charges, and without agreeing that the payment plan constituted a settlement of the dispute over the pool meter billing." (Emphasis added.) The court also found that St.

John had paid $3,400 to MEC "solely to keep her electrical service to her house." MEC has not cross-appealed from these findings of fact and thus they constitute established facts.

In light of these established facts, it is clear that St. John had a basis for disputing the MEC billing and that, in agreeing to make payments on the outstanding balance in order to restore power to her residence, she did not agree to "settle" the dispute. The court's

~ conclusion that St. John and MEC entered into a new agreement to "settle" their dispute is contrary to the court's own Findings of Fact and is in error.

We hold that the court's judgment in favor of MEC is based upon an erroneous

I conclusion that St. John entered into an accord or agreement to settle her dispute with MEC.

As the record and the court's own findings of fact indicate, there was no such settlement agreement.

Furthermore, once the court found that the dispute had been resolved through a settlement, it did not address the merits of St. John's claims for negligent billing and negligent infliction of emotional distress. MEC contends that St. John failed to present a

prima facie case of negligent infliction of emotional distress. However, it is for the trial court

to determine whether the evidence supports a finding of severe emotional distress. Sacco v.

High Country Independent Press (1995), 271 Mont. 209, 239 , 896 P.2d 41 1, 429 . In the

absence of any findings and conclusions with regard to St. John's claims, we have no basis

for determining whether those claims were of merit. Bauer v. Cook (1972), 182 Mont. 22 1,

228 , 596 P.2d 200,204 . Accordingly, we reverse the judgment for MEC and remand for the

District Court to address the merits of St. John's dispute with MEC's $4,080 bill and the

merits of her claim against MEC for negligent infliction of emotional distress.

We concur:

Justices Justice Terry N. Trieweiler specially concurring.

I concur with the majority's conclusion that the payment agreement between St. John

and MEC did not settle their dispute regarding the amount owed by St. John for electrical

service. I disagree, however, that that resolves all of the issues which must necessarily be

decided on appeal in order to adequately guide the District Court after this case is remanded.

In addition to its conclusion that St. John had settled her dispute with MEC, the

District Court also concluded that she failed to show that her meter malfunctioned or was

misread. This conclusion was also inconsistent with the District Court's findings and should

be specifically reversed by this Court.

The District Court found that seven days after St. John signed up for electrical service

from MEC, she was billed $2040 for 40,000 kwh of service during that time, but that "St.

John did not consume 40,000 kwh of electricity ($2040.00) during the period from when her

account was opened (August 12, 1993) to the August meter reading (August 19, 1993)."

The District Court went on to find that St. John was later billed $2040 for 40,000 kwh

of consumption from October 19, 1993, through November 15, 1993, but that the pool, for

which the electricity had allegedly been consumed, had been shut down prior to October 19,

1993. Therefore, neither could that charge have been correct. In light of these findings, the

District Court's conclusion that plaintiff failed to show her meter malfunctioned or was

misread is incorrect. That conclusion should be reversed and upon reconsideration of this case following remand, the District Court should be directed that judgment cannot be based

on that erroneous conclusion.

I would furthermore conclude that the manner in which St. John was treated by MEC

in this case was unconscionable and that as a matter of law electrical providers who

monopolize electrical service cannot extort payment of legitimately disputed sums from their

customers by terminating electrical service until payment is agreed upon. To fully

understand just how egregous MEC's conduct was, it is necessary to look no further than the

court's findings of fact. The following findings have not been appealed by MEC.

When St. John bought her home in Lolo on March 3 1, 1992, electrical service was

provided through and billed from two separate meters. One meter measured consumption

in the household, and the other meter measured consumption by the garage and swimming

pool. MEC treated the charges separately and billed them separately.

Because the person who occupied the house before St. John bought it continued to

live in the house after she bought it, that occupant continued to be responsible for electrical

service for a period of time after St. John's purchase. St. John first signed an agreement with

MEC to pay for electrical service on August 12, 1993. Seven days later, she was billed

$2040 for electrical service provided to the pool area during that seven-day period of time.

The only devices using electricity through the pool meter, however, were the electric light

bulbs in the garage and the electricity for the pool. Even MEC believed at that time that the meter had to have been misread in order to generate such a substantial and unprecedented

charge.

In November, when St. John was again billed $2040, even after the pool had been

closed and shut down for the winter, she disputed the amount that she was being charged.

She continued to be billed for the full amount through 1993, but was billed separately for her

house and the electrical services provided to the pool. During this time, St. John continued

to promptly pay all bills related to her house. In spite of that fact, on April 5 , 1994, MEC

transferred the $4154 balance attributable to the pool meter to her house meter account, and

then demanded full payment within seven days and threatened to terminate electrical service

if payment was not made. St. John did not make full payment, and the electrical service was

disconnected.

When a h e n d restored unauthorized service to St. John's house in order to avoid the

extreme dificulties caused by the loss of her electricity, MEC discovered the unauthorized

service and sought criminal prosecution of her for unauthorized use of electrical service. It

then again terminated electrical service to her home.

It was under these circumstances that MEC then came to St. John and agreed to

restore the electrical service, which was essential to the habitability of her home, on the

condition that she sign a written agreement to pay the disputed amounts billed from her pool

meter. She signed the promise to make monthly installments, but did not admit she was responsible for the disputed charges, and did not agree that the payment plan constituted a

settlement of the dispute over the amount due for electricity provided to the pool area.

As if MEC's conduct was not sufficiently reprehensible by this point in time, it then

altered the agreement that St. John had signed, without her knowledge or approval, and

added "ACCORD AND SATISFACTION" to the document. Not being sufficiently

embarrassed by that impropriety, it then raised the document St. John signed as an actual

accord and satisfaction in defense to this action.

The electric cooperative's conduct in this case is nothing short of extortion, combined

with deceit.

The predicament in which St. John found herself due to the bungling, overreaching,

and manipulation by MEC was compounded by the fact that she could not switch to Montana

Power Company for her service without MEC's approval, which apparently was never given.

Under similar circumstances, the Supreme Court of Utah held that a public utility has

a higher obligation to render services to the public than does an ordinary business. While,

concededly, MEC is not a public utility, its status is similar in this case because of the

monopoly it had over electrical service to St. John. In Josephson v. Mountain Bell (Utah

1978), 576 P.2d 850 , the public utility which provided telephone service to the plaintiff in

that case terminated service to his home because he was delinquent in payment for his

business phone. The Utah Court held, under the circumstances, that: But it is our opinion that the defendant should not be permitted to use the pressure of imposing a penalty upon the home and the family by denying them a public service they are entitled to and paying for. . . .

In accordance with what has been said above, we cannot see it as other than a deprivation of the plaintiffs of their rights to cut off their home phone service because charges on the separate business phone were delinquent. We therefore agree with plaintiffs' contention that the disconnection of their home phone was wrongful.

Josephson, 576 P.2d at 852-53 (footnote omitted).

Based on the reasoning in Josephson, I would conclude, likewise, that an electric

cooperative with a monopoly over service to its consumers cannot terminate one form of

service which has been hlly paid for in order to leverage payment for another service which

is legitimately or otherwise disputed. Even though the service disputed in Josephson was to

a business premises and the issue was whether service could be terminated to the plaintiffs

residence, the two services involved in this case had been treated just as separately by MEC

prior to St. John's dispute with the cooperative over service to the pool area.

Finally, I would conclude, as the court did in Trigg v. Middle Tennessee Electric

Membership Corp. (Tenn. Ct. App. 1975), 533 S.W.2d 730 , that a company supplying

electricity to the public cannot terminate service to a customer for nonpayment when there

is a bona fide dispute concerning the correctness of the bill. In that case, the Tennessee

Court held that:

A company supplying electricity to the public has the right to cut off service to a customer for nonpayment of a just service bill and the company may adopt a rule to that effect. Annot., 112 A.L.R. 237 (1938). An exception to the general rule exists when the customer has a bona fide dispute concerning the correctness of the bill. Steele v. Clinton Electric Light & Power Co., 123 Conn. 180 , 193 A. 613,615 (1937); Annot. 112 A.L.R. 237 ,241 (1938); see also 43 Arn.Jur., Public Utilities and Services, Sec. 65; Annot., 28 A.L.R. 475 (1924). . . .

. . . A public utility should not be able to coerce a customer to pay a disputed claim.

Trigg, 533 S.W.2d at 733 .

While, once again, the rule applied in Trigg is normally applied to public utilities, the

defendant in that case was the Middle Tennessee Electric Membership Corp., subject to the

Electric Cooperative Law of Tennessee, as codified in Tenn. Code Ann. $5 65-25-101

through -229 (1993). Furthermore, because of the monopolistic nature of MEC's relationship

with St. John, the rationale for the rule is the same in this case.

For these reasons, I concur with what has been said in the majority opinion; however,

feel it is insufficient and would expand the opinion to include the conclusions set forth in this

opinion.

Justice William E. Hunt, Sr., joins in the foregoing specially concurring opinion.

Justice