Opinion ID: 354061
Heading Depth: 1
Heading Rank: 6

Heading: pg&e's counterclaim

Text: 86 In 1971, the Secretary began withdrawing power from Santa Clara, gradually cutting back on the City's 1970 allotment of 120,000 kilowatts. Pursuant to a contract between PG&E and Santa Clara, executed in 1969, PG&E is obligated to supply Santa Clara's power requirements to the extent that they are not met by the Secretary. Taking the position that the Secretary's attempted withdrawals were illegal and therefore ineffective, Santa Clara refused after 1971 to pay PG&E for any of the power purportedly supplied by it. Because, as we have seen, PG&E transmits CVP power over its own lines pursuant to government contract, so that it is not possible to differentiate CVP power from PG&E power except by reference to written records, Santa Clara took the position that the power purportedly furnished by PG&E was actually CVP power coming in over PG& E's transmission lines. Since 1971, the money claimed by PG&E has been paid into an escrow account which as of March 1, 1977, contained nearly $30,000,000. 87 PG&E and the Secretary both argue that regardless of the result in this case, PG&E is entitled to all of the money in the escrow. As we have seen, the trial court has, as an interim measure, awarded one-fourth of the money in the escrow to PG&E. (note 3, supra ) 88 If, as we surmise, the government cannot justify the marketing of power to PG& E while denying it to Santa Clara as a measure designed to safeguard the CVP's efficiency for irrigation purposes, then the past sales to PG&E of so much power as Santa Clara sought and was refused exceeded the Secretary's statutory authority under the reclamation laws. These past sales are void if unlawful, for administrative actions taken in violation of statutory authorization or requirement are of no effect. Utah Power & Light Co. v. United States, 1917, 243 U.S. 389, 410, 37 S.Ct. 387, 61 L.Ed. 791; Federal Crop Insurance Corp. v. Merrill, 1947, 332 U.S. 380, 384, 68 S.Ct. 1, 92 L.Ed. 10; Federal Maritime Commission v. Anglo-Canadian Shipping Co., 9 Cir., 1964, 335 F.2d 255, 258. 89 The trial court decided that PG&E's right to the disputed funds hinges on the lawfulness of the Secretary's decision to sell power to PG&E while refusing to allocate as much power to Santa Clara as that City requested. Consequently, the court concluded, the fate of the escrow account must await action by the district court on remand. 90 PG&E and the Secretary vigorously attack this ruling. Their position, as stated by counsel for PG&E, is that power cannot be retroactively allocated to Santa Clara because (a)t all times pertinent to this case all commercially available CVP power was sold to someone. . . . Accordingly, any retroactive reallocation of CVP power would necessarily entail either a whole or partial recission of some or even all of the sales transactions between the United States and its CVP customers from August 1971 to the present. Opening Brief of PG&E at 17. We think, however, that a reallocation of power to Santa Clara, retroactive to 1971 when the withdrawals began, can be accomplished without affecting past sales to other CVP customers. This is so because the Secretary has, over the years, and pursuant to his contract with PG&E, built up a sizeable bank account with PG&E. Presumably, that bank account is now available to retroactively satisfy the City's power needs. 91 Should the district court conclude on remand that the marketing of power to PG& E cannot be justified by reference to the reclamation laws, the government's bank account can simply be adjusted downward to reflect past sales to Santa Clara of so much power as the City sought unsuccessfully in the years after 1971. Such a readjustment of the bank account need affect neither past sales of power to other CVP users nor prior transactions between PG&E and its customers, aside from Santa Clara. 92 Without intending to bind the trial court to our suggestions, it seems to us that the consequences would be substantially as follows: 93 First, PG&E would be entitled to draw from the escrow the full amount (less, of course, what it has already received) that Santa Clara would have paid to the Secretary for the power that it is receiving retroactively. PG&E has paid the Secretary for that power, thereby discharging what should have been Santa Clara's duty. In addition, because it is Santa Clara that withheld the money, PG&E should receive interest at a reasonable rate on the moneys paid to it from the dates when those moneys should have been paid. (See 28 U.S.C. § 1961.) The remaining money in the escrow would go to Santa Clara. 94 Second, the power reallocated to Santa Clara should be treated as drawn from the Secretary's bank account with PG&E, thereby diminishing the amount of the power that the Secretary is entitled, under the PG&E contract, to repurchase. 95 Third, because PG&E will have received for the power sold by it to Santa Clara only the price that Santa Clara would have paid to the Secretary if he had allocated that power to Santa Clara, but that power is being treated as drawn by the Secretary from the bank account, it would appear that PG&E will have a claim against the Secretary. Presumably, that claim would be for the contract price applicable under the Secretary's contract with PG&E at the times as of which reallocation is made, less the price PG&E will have received from Santa Clara, plus reasonable interest for late payment. (See 28 U.S.C. § 2411(b) and § 2516.) 96 However, PG&E has counterclaimed only against Santa Clara. It has not filed any claim for relief against the Secretary. We express no opinion as to whether such a claim against the Secretary can be filed or considered by the trial court, see 28 U.S.C. § 1346(a)(2), Lowell O. West Lumber Sales v. United States, 9 Cir., 1959, 270 F.2d 12, 19-20, or in the Court of Claims, see 28 U.S.C. § 1491. 97 We base our assumptions as to interest upon a further assumption that PG&E is an innocent third party, caught between the conflicting claims of Santa Clara and the position of the Secretary. 98 These suggestions are in line with the ancient and favorite maxim of equity, that equity regards that as done which ought to be done. It is readily applicable here, because all parties to the contracts that are involved, PG&E, the Secretary, and Santa Clara, are before the court, and because what we suggest does not invalidate or violate either contract. The contract between PG&E and the Secretary expressly provides that the Secretary is to supply all of his preferred customers before selling to PG&E. It also expressly provides for the so-called banking arrangement. The contract between PG&E and Santa Clara requires sale by PG&E and purchase by Santa Clara of only that amount of power that exceeds the amount sold by the Secretary to Santa Clara. 99 The foregoing suggestions are just that; they are not directions because we recognize that the questions giving rise to them have not been fully considered up to now, and all parties should have an opportunity to present their views about them to the trial court. That court is to arrive at its own decision, taking into account, but not being bound by, our suggestions.