ELEC. & GAS CO. v. Town of Awendaw
| Decision Date | 11 May 2004 |
| Docket Number | No. 25820.,25820. |
| Citation | 359 S.C. 29,596 S.E.2d 482 |
| Court | South Carolina Supreme Court |
| Parties | SOUTH CAROLINA ELECTRIC & GAS CO. and Scana Corp., Respondents, v. TOWN OF AWENDAW and Berkeley Electric Cooperative, Inc., Petitioners. |
William B. Regan and Frances I. Cantwell, of Regan and Cantwell, LLC, of Charleston; and Dwayne M. Green of Hampton Green, LLC, of Charleston, for Petitioner Town of Awendaw; and Michael A. Molony, Stephen L. Brown and Lea B. Kerrison of Young, Clement, Rivers & Tisdale, L.L.P., of Charleston, for Petitioner Berkeley Electric Cooperative, Inc.
James B. Richardson, Jr., of Richardson & Birdsong; Catherine D. Taylor of South Carolina Electric & Gas Co.'s Legal Department; and Patricia T. Smith, all of Columbia, for Respondents.
Danny C. Crowe, of the Municipal Association of South Carolina, Columbia; and James M. Brailsford, III, of Edisto Island, for Amicus Curiae.
We granted the petitions of Town of Awendaw (Town) and Berkeley Electric Cooperative, Inc. (BEC) for a writ of certiorari to review the Court of Appeals' decision in South Carolina Elec. & Gas Co. v. Town of Awendaw, 351 S.C. 491, 570 S.E.2d 542 (Ct.App.2002). We reverse.
Rural electrical cooperative BEC provided service to all of Town's residents when Town was incorporated in 1992. About 1,033 residents live in Town, located in northern Charleston County. Town enacted an ordinance and adopted a franchise agreement in 1993 which designated BEC as the primary supplier of electricity to Town and granted BEC the right to use public streets to construct and maintain its facilities. In exchange, BEC agreed to pay Town an annual franchise fee equaling three percent of its gross revenues from the sale of electricity within Town's limits.
Town subsequently annexed the property of residents who are served by South Carolina Electric & Gas Co., a wholly owned subsidiary of SCANA Corp. (collectively, SCE & G). Some twenty-six residential customers inside Town's limits are now served by SCE & G, which has about 770 feet of line on four poles located along public streets in Town's limits. SCE & G served those customers prior to annexation because they were located within unincorporated areas previously assigned to the company by the S.C. Public Service Commission pursuant to S.C.Code Ann. § 58-27-640 (1976).
Town requested SCE & G enter into a franchise agreement. Town and SCE & G unsuccessfully attempted to negotiate the terms of such an agreement from 1995 to 1999. In late 1998, Town enacted a business license ordinance. That ordinance imposed franchise fees of three percent of gross revenues collected on sales within Town's limits on various utility providers, including electrical utilities. SCE & G paid franchise fees to Town under protest, paying $941 in 1999 and $760 in 2000.
In 1999, SCE & G initiated a lawsuit challenging Town's authority to impose a franchise fee on SCE & G's operations in Town's limits in the absence of a franchise agreement.1 BEC intervened in support of Town. SCE & G subsequently moved for summary judgment, arguing because it had no franchise agreement with Town, Town had no authority to unilaterally impose a franchise fee on SCE & G. SCE & G asserted, inter alia, the resolution of the issue is controlled by City of Abbeville v. Aiken Elec. Co-op., Inc., 287 S.C. 361, 338 S.E.2d 831 (1985). Town also moved for summary judgment, contending the franchise fee was proper under state law and relying primarily on BellSouth v. City of Orangeburg, 337 S.C. 35, 522 S.E.2d 804 (1999).
The master-in-equity granted Town's motion for summary judgment, concluding the franchise fee is proper under state law and BellSouth, supra.
The Court of Appeals reversed, interpreting City of Abbeville, supra, to prohibit the municipality's unilateral imposition of a franchise fee because an existing utility provider is allowed to continue serving its existing customers after annexation. The Court of Appeals' majority distinguished BellSouth, reasoning that case did not apply because Town and SCE & G never had entered into a franchise agreement, unlike the utility and municipality in BellSouth. The dissenting judge would have relied on BellSouth to conclude the imposition of the franchise fee was proper, provided it was not so unreasonable that it amounted to ouster of an existing utility provider following annexation pursuant to City of Abbeville.
"In reviewing the grant of a summary judgment motion, this Court applies the same standard which governs the trial court under Rule 56, SCRCP: summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Osborne v. Adams, 346 S.C. 4, 7, 550 S.E.2d 319, 321 (2001). "In determining whether any triable issues of fact exist, the evidence and all reasonable inferences therefrom must be viewed in the light most favorable to the non-moving party." Id. "On appeal from an order granting summary judgment, the appellate court will review all ambiguities, conclusions, and inferences arising in and from the evidence in a light most favorable to the non-moving party below." Id.
Did the Court of Appeals err in holding Town lacked the authority to impose a franchise fee on an electrical utility provider in the absence of a franchise agreement?
Town asserts the Court of Appeals misinterpreted state law and this Court's precedent to err in holding Town lacked the authority to impose a franchise fee on SCE & G in the absence of a franchise agreement. We agree.
Governmental franchises typically are obtained by service-type, monopolistic businesses such as electricity, water, telephone, and cable television providers. A franchise constitutes a special privilege granted by the government to particular individuals or companies to be exploited for private profits. Such franchisees seek permission to use public streets or rights of way in order to do business with a municipality's residents, and are willing to pay a fee for this privilege. Quality Towing, Inc. v. City of Myrtle Beach, 345 S.C. 156, 165, 547 S.E.2d 862, 867 (2001); City of Cayce v. AT&T Communications, 326 S.C. 237, 486 S.E.2d 92 (1997); State ex rel. Daniel v. Broad River Power Co., 157 S.C. 1, 153 S.E. 537, 548 (1929). While a franchise is a privilege, it also is viewed as a function delegated to private individuals to be performed for the furtherance of the public welfare and subject to public control. 12 McQuillin Mun. Corp. 34.01 (3d ed.1995).
A municipality in South Carolina may enact ordinances and regulations which grant franchises for the use of public streets and make charges for them, provided the ordinances and regulations are consistent with the Constitution and general law of the state. S.C.Code Ann. 5-7-30 (Supp.2003). The state Constitution vests the authority to make such decisions in a municipality's governing body. See S.C. Const. art. VIII, 15 ().
When an area is incorporated into a new municipality or annexed into an existing one, the municipality may not oust or evict a utility provider which previously has lawfully served the area, in the absence of statutorily delegated powers of eminent domain authorizing such an ouster. City of Abbeville,287 S.C. at 370-371,338 S.E.2d at 836 ().
Under City of Abbeville, a franchisee possessing a valid territorial assignment to serve an area subsequently annexed or newly incorporated is permitted to continue serving premises in that area which were being served as of the date of the annexation or incorporation. However, the franchisee is prohibited, without prior consent of the municipality, from extending or expanding service in that area by the use of any streets, alley, public property, or public ways after the date of the annexation or incorporation. Id.
In BellSouth, we concluded a municipality may exercise its authority under 5-7-30 to unilaterally impose a franchise fee on a utility provider even though no such fee had ever been imposed during the existence of a long-term franchise agreement. BellSouth, 337 S.C. 35, 522 S.E.2d 804. In that case, BellSouth operated under an 1894 franchise ordinance that allowed it to use the public streets of the city of Orangeburg to erect poles and wires and exempted BellSouth from all municipal taxation, licenses, or rentals for a term of five years. The original franchise agreement was expanded in 1914 to include underground use of public streets, but again no fee was required. BellSouth never had been obligated to pay a franchise fee until the city of Orangeburg enacted one by ordinance in 1993, ninety-nine years after the original agreement. BellSouth, 337 S.C. at 38-39, 522 S.E.2d at 806.
We upheld the unilaterally imposed franchise fee, rejecting BellSouth's arguments the fee actually is an impermissible tax, it conflicted with federal telecommunications law, the ordinance exceeded the municipality's power to manage public rights of way, the fee was not fair and reasonable, and it violated a state statute which granted telephone companies the right to construct and maintain its lines along public highways. We concluded the franchise fee was consistent with the state Constitution and state and federal law. Id. at 39-46, 522 S.E.2d at 806-809.
Neither BellSouth nor City of Abbeville directly answers the question presented in this case, i.e., whether Town may impose a franchise fee on SCE & G in...
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...issue as to any material fact and the moving party is entitled to judgment as a matter of law. South Carolina Elec. & Gas Co. v. Town of Awendaw, 359 S.C. 29, 34, 596 S.E.2d 482, 485 (2004) (quoting Osborne v. Adams, 346 S.C. 4, 7, 550 S.E.2d 319, 321 (2001)). On appeal, all ambiguities, co......