Insights

Rules vary when dealing with commercial and residential utility services. The manner in which an account is established, however, doesn’t differ much. Generally, in both situations, an account can be established via a telephone call, wherein certain information must be provided by the applicant/customer in order to commence service. For a residential account, the name, address and a social security number are required to set up an account. In addition, a phone number for contact purposes is required. 

When establishing service for commercial use, however, the person who calls to request service may be any one of a variety of persons: the company owner, an officer of the company, or a mere employee. In each scenario, an account is established by providing the address location, the name for the account, if a different address is needed for billing purposes, a phone number, and hopefully a tax identification number.[1] Unfortunately, the case is often that the full name of the person calling to establish service is not noted, and the person’s relationship to the business is unknown. These are crucial pieces of information to obtain if the account later goes unpaid.

While most new accounts are paid timely for a period of time, inevitably, a portion of the claims will fall delinquent. After collection efforts through traditional means of billing and calls fail, an analysis must be made as to who can be held liable for the unpaid balance. In residential matters, normally the person who held the account is liable. There are, however, circumstances in which liability can be expanded beyond this one person.

In commercial matters, the analysis becomes more involved. At this juncture, the discovery is made that the person who established service for the business either isn’t around, or had no ownership interest in the business. Secondarily, it may also be determined at this stage that the business name provided for the account is not a legally recognized entity or a registered trade name of a legal entity. For example, the account may have been set up as “Joe’s Diner” only to find out, through a search of applicable secretary of state records, that no such entity exists. Then what?

In both cases, certainly the utility provider is entitled to be paid. The question is: by whom? In the simplest of cases, a suit can be filed against the person or business that established the account: Joe Smith, in the residential case, or Joe’s Diner, in the commercial matter. If Joe Smith is and has been deceased, the question to ask is who used and benefited from the utility service provided. If Joe’s Diner doesn’t exist, ask the same question. The second theory of liability, beyond an action on an account for services[2], is an equitable one: unjust enrichment.

Unjust enrichment is an action in equity where no contract exists, yet a service is conveyed and knowingly received by a party, which would be unjust to receive and not pay for[3]. What this means, in residential matters, is that those individuals who reside in the property where service was provided may be liable for the service balance, if the primary account holder, Joe Smith, is and was not alive during the time service was provided. In commercial matters, the business that knowingly received the utility service, without paying for the same, can be pursued.

In certain commercial circumstances, the law allows a utility provider to take liability a step further, and holds an individual liable, where the true identity of the entity was not disclosed, or not fully disclosed. In our example, where the name on the account was identified as “Joe’s Diner” and that name either is not a legal entity or a registered trade name of a legal entity, the individual who requested service (this is why its important to note the full name and relationship of that person), may be found to have “done business as” the entity, “Joe’s Diner'.[4]

This may be the case of liability, even if a valid entity was operating at the service address, using the utility service, if that entity name is completely different than that name provided to establish the account. Where the person setting up the account does not disclose the proper name of a registered entity, that person can be held liable as acting on behalf of an undisclosed or partially disclosed principal.[5] These theories of liability are useful to pursue, when “Joe’s Diner” has otherwise gone out of business, with no remaining assets, and not paid its bills.

In analyzing the facts of an unpaid account, it is worthwhile to determine when a customer vacated the service address. If the customer was a mere tenant of the service address and moved without advising the utility provider, an action may be had against not only the customer, but also against the land owner, if the facts demonstrate the landowner knowingly used the services with an obvious benefit from those services. This goes back to the unjust enrichment theory, and is applicable in both residential and commercial matters.

These options are not meant to be all encompassing, but rather are alternative legal theories to recovery on an unpaid utility account. Various state laws may enhance or limit the actions available to utility providers. For more information on this topic, please contact our Utility Practice Group, at wwr-utilities@weltman.com.