Title: BG&E v. Hendricks

State: maryland

Issuer: Maryland Supreme Court

Document:

Baltimore Gas and Electric Company v. Michael Hendricks, et al.
No. 78, September Term, 1996
Termination of utility service:  burdens of proof.
IN THE COURT OF APPEALS OF MARYLAND
                  
No. 78
                  
September Term, 1996
__________________________________
                 
BALTIMORE GAS AND ELECTRIC COMPANY
                 v.
                 
MICHAEL HENDRICKS et al.
__________________________________
        Bell, C.J.
        Eldridge
        Rodowsky
        Chasanow
        Karwacki
        Raker
        Wilner,
                 JJ.
__________________________________
Opinion by Wilner, J.
__________________________________
        Filed:  May 7, 1997
      The original amount in dispute was $1,353.  Hendricks
1
later acknowledged responsibility for $187 of that amount,
leaving $1,166 in controversy.
Baltimore Gas and Electric Company (BG&E) complains about an
order of the Public Service Commission (PSC) precluding the company
from terminating utility service to Michael Hendricks at 4500
Kathland Avenue.  The Circuit Court for Baltimore County affirmed
the PSC order.  We granted certiorari before BG&E's appeal could be
heard by the Court of Special Appeals and shall affirm the judgment
of the circuit court.
The 
underlying 
dispute 
concerns 
whether 
Hendricks is
responsible for a $1,166 bill for utility service rendered to the
Kathland Avenue property during the period from July 30, 1990
through July 24, 1991.   BG&E sought to terminate service because
1
of the unpaid bill.  Hendricks, the current owner and occupant of
the property, claimed that he did not order the service for that
period and therefore did not owe the money.  At issue, essentially,
is which party had the burden of proof, what was required to be
proved, and what standard of proof was to be applied. 
I.  FACTUAL AND PROCEDURAL BACKGROUND
A. The Dispute
Mr. Hendricks maintains that, on July 24, 1991, he telephoned
BG&E to request that gas and electric service for 4500 Kathland
Avenue be started in his name.  The company representative informed
him that he would have to pay a deposit of $174 and a $20
- 2 -
application fee.  By September 4, 1991, both amounts had been paid.
Two weeks later — on September 19 — BG&E sent employees to read the
meters.  
As a result of those readings, BG&E sent Hendricks a bill for
$1,353.  Upon Hendricks's inquiry, BG&E informed him that the bill
was for gas and electric service from July 30, 1990 through
September 19, 1991.  When Hendricks protested that he had not
ordered any service prior to July 24, 1991 and had not occupied the
property before then, BG&E responded that, according to its
records, it had received a telephone call on July 27, 1990 from
someone claiming to be Michael Hendricks requesting that the gas
and electric service be placed in his name and that, upon that
request, service had been continued to the property in that name.
Hendricks asserted that he had made no such call and claimed that
James W. Dandridge, a former business associate of Hendricks and
the former owner of the property, must have made the call,
impersonating Hendricks.
Although there are no termination notices in the record before
us, testimony was presented at the PSC hearing that BG&E had
terminated service to Hendricks on three occasions because of the
unpaid bill — in December 1991, in May 1993, and in June 1993.
Hendricks said that, on each occasion, he went to the BG&E office,
denied his responsibility for the bill, provided BG&E with the
documents it requested, and paid reconnection fees.  Throughout
this time, he paid his current monthly utility bills but made no
- 3 -
payment on the alleged arrearage.
BG&E investigated the claim and reviewed the documents
provided by Hendricks but nonetheless continued in its belief that
he was responsible for the bill.  It did, however, agree to
continue providing service pending a resolution of the dispute.
B. Administrative Proceedings
Pursuant to its statutory authority to adopt rules and
regulations (Maryland Code (1957, 1995 Repl. Vol.), Art. 78, § 64),
the PSC has adopted a set of regulations governing the termination
of service by public utilities subject to its jurisdiction.  They
appear in Code of Maryland Regulations (COMAR), title 20, subtitle
31.  In relevant part, they make clear that, although a customer is
responsible for past due bills for service provided to that
customer (COMAR 20.31.01.03D), a utility may not terminate service
because of the failure of a previous customer to pay for service to
the premises (COMAR 20.31.02.01A).
In subtitle 32 of title 20, the PSC has established a multi-
step procedure for resolving disputes over utility bills.  A
"disputed bill" is defined as a bill "which is the subject of a
controversy between a customer and a utility regarding [among other
things] billing for service for which the customer alleges he [or
she] was not responsible."  COMAR 20.32.01.02(5); see also COMAR
20.31.01.02B(3).  The first step in the dispute resolution process
with respect to terminations of service is for the customer to
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present an inquiry to the utility, which is required to investigate
the inquiry.  COMAR 20.32.01.03.  If the dispute cannot be settled
at that level, the customer may submit an inquiry to the PSC,
which, in turn, may refer the inquiry to its Consumer Assistance
and Public Affairs Section (CAPA).  COMAR 20.32.01.04.
Upon such a referral, CAPA may require the customer to submit
a more detailed written inquiry, including copies of relevant
correspondence 
and 
other 
documentation. 
 
After 
obtaining
information from the customer and the utility and reviewing
applicable laws, regulations, and tariffs, CAPA attempts to mediate
between the parties.  COMAR 20.32.01.04F.  CAPA may close the
inquiry if it finds that the utility has proceeded in accordance
with applicable law and its tariff.
If either party is dissatisfied with the CAPA decision, the
party may request further review by filing a request with CAPA's
Director.  If dissatisfied with the action of the Director, a party
may file a complaint with the PSC pursuant to Md. Code art. 78,
§ 77 and COMAR 20.07.03.
Section 77 of article 78 requires the PSC to receive
complaints from any person alleging circumstances that would
constitute a violation of the article.   If the Commission
determines that the complaint is "deserving of explanation," it
requires one from the utility.  In any event, it is directed, in
the absence of voluntary satisfaction, to take final action on
every complaint.  Although the PSC is exempt from the contested
- 5 -
case provisions of the Administrative Procedure Act, see Md. Code,
State Government article, § 10-203(a)(3)(vi), comparable provisions
regarding proceedings before the Commission are set forth in
article 78 and in the COMAR regulations.
Proceedings before the Commission on consumer complaints are
regarded as contested cases, and the complainant is entitled to an
evidentiary hearing.  Art. 78, §§ 79 - 82.  Upon an appeal from a
termination proceeding handled by CAPA, the PSC may determine the
matter based on the record before CAPA or conduct further
proceedings.  COMAR 20.07.03.04.  
The PSC is authorized by art. 78, § 20, to delegate to a
Hearing Examiner the authority to conduct any proceeding within its
jurisdiction.  At the conclusion of the hearing, the Hearing
Examiner files a proposed order, including findings of fact, which
becomes final unless appealed to the Commission.  If an appeal is
taken, the Commission considers the matter on the record made
before the Hearing Examiner and issues a final order.  A final
order of the Commission is declared by statute to be prima facie
correct and shall be affirmed upon any petition for judicial review
unless clearly shown to be (1) in violation of constitutional
provisions, (2) not within the statutory authority or jurisdiction
of the Commission, (3) made upon unlawful procedure, (4) arbitrary
or capricious, (5) affected by other error of law, or (6) if
entered in a contested case, not supported by substantial evidence
on the record considered as a whole.  Art. 78, § 97.
- 6 -
      Hendricks never contested that he was responsible for
2
service from and after July 24, 1991.  One problem was that BG&E
had not read the gas and electric meters for nearly a year, until
September 19, 1991, and it included in the bill sent following
that reading unsegregated charges for the entire period.  It was
not clear, therefore, how much was actually in dispute.  As we
indicated in footnote 1, supra, the parties eventually resolved
that part of the dispute.
Mr. Hendricks availed himself of these various procedures.  In
May, 1993, he filed an informal consumer complaint with the PSC,
which referred the complaint to a CAPA Utility Affairs Specialist.
That individual, after getting a response from BG&E, found in favor
of the company, as did the Director.  Hendricks then filed a
complaint with the Commission, which delegated the matter to a
Hearing Examiner.  The only significant factual issue was whether
Hendricks had ordered the utility service provided from July 30,
1990 until July 24, 1991.  If he did, he was responsible for the
charges for that service and, unless the bill was paid, BG&E was
entitled to terminate service; if he did not, BG&E was not entitled
to terminate service.2
At the commencement of the hearing, a question arose over who
was to proceed first.  The Hearing Examiner decided that, as the
complainant, Hendricks should proceed first, although he made clear
that the order of presentation did not resolve the more important
question of who had the burden of proof and persuasion.
Hendricks called as his first witness a BG&E consumer
representative, Jerry Johnson.  Mr. Johnson stated that BG&E
records indicated that, on July 27, 1990, James Dandridge, the
- 7 -
then-current occupant of 4500 Kathland Avenue, in whose name
service was then being provided, called to terminate the service in
his name.  Later that day, another call was received from a person
claiming to be Michael Hendricks, who asked that service be placed
in his name at that address.  The caller provided certain personal
information, including Hendricks's former address at 581 Laurens
Street and his Social Security number.  BG&E told the caller that
a $20 application fee and a $174 deposit would be required.
Neither was ever paid.  BG&E took a final reading of the meters and
sent Dandridge a final bill, which also was never paid.
Nonetheless, the company switched the service to Hendricks's name.
Not only were the fees and the final bill to Dandridge not
paid, no payment was ever made for subsequent service.  Although it
sent a monthly bill for the $20 application fee, BG&E, for whatever
reason, was unable to gain access to the property to read the
meters, and it therefore sent no bills for contemporaneous service.
Moreover, as the company had a policy of not terminating service
until the customer received a first bill and refused to pay, it
never sought to terminate the service, notwithstanding the lack of
any payment for over 11 months.  Mr. Johnson stated that the
company had no record of Mr. Hendricks's calling in July, 1991, and
that, had he done so, the company would not have missed the fact
that service was already in his name.  In summary, Johnson said
that, because the second caller on July 27, 1990, gave identifying
information, the company assumed that he was, in fact, Hendricks.
- 8 -
Mr. Hendricks denied that he ordered gas and electric service
on July 27, 1990.  He testified, and presented documentary evidence
to establish, that he did not obtain title to the property until
January, 1991, and that he did not move into it until July of that
year.
Until January, 1991, the property was owned by Mr. Dandridge,
with whom Mr. Hendricks had a number of business dealings.  In
1988, Hendricks lent Dandridge $30,000 and, when the loan was not
paid, Hendricks filed suit and obtained a judgment.  In April,
1990, he executed upon the property and purchased it at a sheriff's
sale.  Because Mr. Hendricks was unable to pay all of the fees and
costs associated with the auction sale right away, the sheriff's
deed to him was not dated and acknowledged until January, 1991, and
it was not recorded until August, 1993, when delinquent taxes were
finally paid.  Mr. Hendricks stated that, because of Dandridge's
violent nature, he was afraid to move into the property until after
he received his deed from the sheriff, that the property was in bad
shape, and that he did not have the funds to make necessary repairs
and improvements until July, 1991.  In the meanwhile, he said,
Dandridge continued to live in the property and to regard it as his
own.  In support of that statement, Hendricks placed into evidence
a note for $14,000 signed by Dandridge on June 17, 1992, secured by
a deed of trust on the property executed the same day.  As a result
of that conveyance, Hendricks was required to file a complaint
against the lender to quiet title.
- 9 -
      Mr. Dandridge offered other documentary evidence showing
3
his address as 4718 Dunkirk Avenue, but that evidence related to
times or events occurring before July 30, 1990, and was therefore
only marginally relevant.
Mr. Hendricks stated that, until July, 1991, he lived with his
mother at 4718 Dunkirk Avenue.  In support of that contention, he
presented pay stubs from his job as a substitute school teacher in
Baltimore City.  Stubs covering the period up to July 9, 1991 show
Dunkirk Avenue as his address; others, covering the period after
August 15, 1992, show 4500 Kathland Avenue as his address.3
No doubt in an effort to explain or rebut the evidence
relating to the second call made to BG&E on July 27, 1990, Mr.
Hendricks claimed that Mr. Dandridge must have made that call.  He
presented evidence that Dandridge was angry at him for purchasing
the property at the sheriff's sale and thus had a reason to cause
Hendricks harm or embarrassment.  Immediately after the sale, he
said, Dandridge physically attacked him, leading Hendricks to
report the matter to the police.  A police report and a subsequent
subpoena issued by the District Court were introduced into
evidence, the latter showing Hendricks's address in April, 1990, as
the Dunkirk Avenue residence.  Additionally, he stated that,
through the course of their dealings, Dandridge had the personal
information — Hendricks's former address and Social Security number
— given to BG&E on July 27, 1990.
In their written submissions to the Hearing Examiner after the
hearing, the parties disputed which side had the burden of proof.
- 10 -
BG&E argued that it had "established a prima facie case that Mr.
Hendricks applied for service on July 27, 1990, and at that point
in time became the customer of record liable for service used at
the premises . . . ."  Regarding Hendricks's defense as essentially
a claim of fraud on the part of Mr. Dandridge, it urged that
Hendricks had the burden of proving that fraud by clear and
convincing evidence, citing as authority  Everett v. Baltimore Gas
& Elec., 307 Md. 286, 302, 513 A.2d 882, 890-91 (1986).  Noting
that Hendricks had acquired title to the property in January, 1991,
the company additionally contended that, as the title owner, he
should be held responsible for the charges.  People's Counsel, on
behalf of Mr. Hendricks, disagreed.  He argued that Hendricks had
satisfied the minimal burden he had under Everett to establish a
dispute, and that it was then incumbent upon BG&E, as the entity
seeking termination of service, to prove that Hendricks was
responsible for the unpaid bill.
On August 25, 1994, the Hearing Examiner issued a Proposed
Order resolving the complaint in favor of Mr. Hendricks.  He
asserted that "the key factual dispute in this case comes down to
the question of who ordered utility service in July 1990 at the
premises in question . . ." and concluded that the "weight of
evidence does not support the conclusion that Michael Hendricks
made the telephone call applying for service in his name on July
27, 1990 or otherwise occupied the premises at that time, and he is
therefore not responsible for the utility service at that time."
- 11 -
The Hearing Examiner made reference to the dispute over
burdens of proof and responded, in a footnote, that "[w]hile the
higher `clear and convincing' standard may be necessary to
establish 
fraud 
in 
actions 
against 
the 
perpetrator, 
the
`preponderance of the evidence' standard is the applicable standard
in this billing dispute between the Company and non-fraudulent
customer."  He declared further, however, that "[i]rrespective of
who may have the burden, I find that Mr. Hendricks has shown by the
preponderance of the evidence on the record that he did not order
service in July 1990 so that he is not responsible for such utility
service until he did request service in July 1991."
In explanation, the Hearing Examiner recounted some of the
evidence that led him to that conclusion, including that Hendricks
had presented "a very believable scenario" that the former owner
and occupier, Mr. Dandridge, had sufficient information to make the
application in Mr. Hendricks's name and a behavior pattern to make
that scenario "the most likely explanation."  Noting in particular
that Dandridge had put a deed of trust on the property even after
he ceased to have an ownership interest in it, the Hearing Examiner
found it plausible that anyone who would commit such a fraudulent
act could very well have requested service in Hendricks's name.
His ultimate conclusion was "that the record in this case supports
the position of Mr. Hendricks that he did not occupy or otherwise
order utility service at 4500 Kathland Avenue until July 24, 1991,
and he is therefore not responsible for utility service prior to
- 12 -
such date."
BG&E appealed the Hearing Examiner's decision to the full
Commission, arguing that the Hearing Examiner erred in applying the
"preponderance" standard of proof to Hendricks's allegation of
fraud by Dandridge and that, in any event, Hendricks had failed to
meet his burden under that standard.  It contended that the "clear
and convincing" standard of proof should have applied and that,
under that standard, Hendricks could not have satisfied his burden.
The Commission rejected that argument and, on May 8, 1995,
adopted the Proposed Order of the Hearing Examiner.  Finding BG&E's
reliance on Everett misplaced, the Commission determined that
Hendricks
"did not bear the burden of proving that Mr.
Dandridge fraudulently or illegally applied
for utility service in July, 1990.  Nor does
the Commission make any factual finding that
Mr. Dandridge fraudulently applied for utility
service from BGE in July, 1990, since such a
finding is not necessary to resolve this
case."
The Commission concluded from Everett that, in a proposed
termination of service case, when the customer demonstrates a bona
fide dispute, the utility bears the burden of production and
persuasion in establishing grounds for the termination.  In the
instant case, it found that Mr. Hendricks had, indeed, established
a bona fide dispute as to whether he had ordered the service in
July, 1990, and that BG&E therefore bore the burden of establishing
that he was responsible for the charges emanating from that
- 13 -
service.  On the totality of the evidence, as analyzed by the
Hearing Examiner, the Commission concluded that the company had not
met that burden.
Responding to BG&E's petition for judicial review, the circuit
court reached essentially the same conclusion.  So shall we.
II. DISCUSSION
This is a simple case that is absolutely controlled by the
clear pronouncements of this Court in Everett v. Baltimore Gas &
Elec., supra, 307 Md. 286, 513 A.2d 882.  In making its argument
that "the Commission erred in holding that there is no burden on a
complaining customer to prove his allegations of fraud by a third
party," 
BG&E, 
unfortunately, 
misperceives 
the 
issue 
and
misconstrues what we held in Everett.
Everett was a fraud case.  BG&E attempted to terminate utility
service to Ms. Everett at 1600 Chilton Street because she had, in
its view, fraudulently obtained gas and electric service at another
property, 508 E. 43rd Street, and had failed to pay the charges for
that service.  Upon Everett's complaint, the PSC had determined
that, in such a case, the utility had the burden to prove, by a
preponderance of evidence, that the customer engaged in the fraud
and was responsible for the bill.  It found that BG&E had met that
burden, however, and therefore dismissed the complaint.  The
circuit court, on judicial review, agreed with the allocation of
the burden but concluded that the proper standard was clear and
- 14 -
convincing evidence, not a mere preponderance.  The Court of
Special Appeals also agreed that BG&E bore the burden of justifying
the termination of service but held that the issue was not whether
Everett had engaged in fraud, but simply whether she was
responsible for the charges for service rendered to the 43rd Street
address.  See Baltimore Gas & Elec. v. Everett, 61 Md. App. 288,
486 A.2d 248 (1985), rev'd, 307 Md. 286, 513 A.2d 882.
This Court agreed with the circuit court that the case did
present an issue of fraud and that the proper standard of proof was
clear and convincing evidence.  In addressing the allocation of the
burden, we held, first, that a customer disputing the proposed
termination of service bears an initial burden of "alleging
sufficient facts to show that a bona fide dispute exists between
[him or] her and the utility as to the proposed termination of
service."  307 Md. at 296-97, 573 A.2d at 887-88.  Once that
initial burden is met, however, the burden of persuasion shifts to
the utility.  We held:  "At a hearing to determine the
appropriateness of the proposed termination of a customer's
service, the burden of going forward and the burden of persuasion
rest on the utility to establish sufficient grounds to justify the
proposed termination."  307 Md. at 297, 513 A.2d at 888.
We pointed out, in support of that conclusion, that, as a
regulated utility, BG&E has an affirmative duty to provide service
to the public, that to discontinue service it must have grounds for
termination, and that, when "a bona fide controversy or dispute
- 15 -
      When the General Assembly rewrote the State Administrative
4
Procedure Act in 1993 — seven years after our discussion in
Everett — it directed that the standard of proof in contested
cases under the Act shall be the preponderance of evidence unless
the standard of clear and convincing evidence is imposed on the
agency by regulation, statute, or constitution.  See Maryland
Code (1995 Repl. Vol. & Supp. 1996), § 10-217 of the State
Government Article.
exists between the utility and the customer, the utility must show
that the proposed termination is justified."  307 Md. at 298, 513
A.2d at 888.  We noted as well that placing the burden of
persuasion on the utility was consistent with common law principles
regarding the allocation of the burden of proof, in that "the party
seeking to change the status quo bears the risk of failure of proof
or persuasion."  Id.
With respect to the standard of proof, we found it significant
that the company was not seeking to terminate Everett's service
because the service at her present premises was used fraudulently,
but rather because she allegedly obtained service at another
property in a fraudulent manner.  The service at that property was
not in her name, and she was therefore not the "customer" with
respect to that service.  BG&E's claim against her was not based on
a contractual obligation, but strictly on fraud.  That kind of
allegation, we held, had to be proved by clear and convincing
evidence.  307 Md. at 299-304, 513 A.2d at 889-91.4
BG&E is not contending, in this case, that Mr. Hendricks
obtained any service, at Kathland Avenue or anyplace else, by
fraud.  It was attempting to terminate current service at Kathland
- 16 -
Avenue because it believed that Mr. Hendricks had failed to pay for
earlier service rendered at that address, for which, as a customer
of that service, he was contractually responsible.  Once Hendricks
presented a bona fide dispute as to his responsibility for that
earlier service, however, under the clear and unmistakable holding
in Everett, BG&E had the burden of justifying its right to
terminate the service.  The PSC and the circuit court were
absolutely correct in so holding.  As the only basis for the
proposed termination was Hendricks's responsibility for the pre-
July, 1991 service, BG&E was obliged to show, by a preponderance of
the evidence, that Hendricks was, indeed, responsible for that
service.
Unlike Everett, this is not a case of fraud.  Mr. Hendricks
did not have to prove fraud on the part of Mr. Dandridge.  All he
had to do was to generate a bona fide dispute as to whether he was
responsible for the service prior to July 24, 1991, and he clearly
did so.  He established the controversy largely through his own
testimony, which would have sufficed on its own to generate the
dispute, but which he nonetheless supported through his pay stubs
and the other documentary evidence showing that, until January,
1991, he was not the owner of the property and until July 24, 1991,
he was not residing in the property.
The evidence regarding Mr. Dandridge was simply corroborative;
it offered a reasonable explanation of who, if not Mr. Hendricks,
may have ordered the service switched into Hendricks's name in
July, 1990.  That was not anything Mr. Hendricks had to prove in
order to thwart BG&E's threatened termination of service.  If
- 17 -
believed by the Hearing Examiner, as it was, it simply made
Hendricks's denial that he ordered the service more credible.  
JUDGMENT AFFIRMED;
APPELLANT TO PAY THE COSTS.