Anchor Point, Inc. v. Shoals Sewer Co.
| Decision Date | 18 February 1992 |
| Docket Number | No. 23664,23664 |
| Citation | 308 S.C. 422,418 S.E.2d 546 |
| Court | South Carolina Supreme Court |
| Parties | , Util. L. Rep. P 26,215 ANCHOR POINT, INC., and Gary C. Kinert, Respondents, v. The SHOALS SEWER COMPANY and the Public Service Commission of South Carolina, Appellants. . Heard |
Marsha A. Ward and F. David Butler, Columbia, for appellant South Carolina Public Service Com'n.
Joseph G. Wright, III, of Wright and Trammell Law Firm, of Anderson, for appellant Shoals Sewer Co.
B. Craig Collins and John M.S. Hoefer, both of Law Offices of Mitchell Willoughby, Columbia, for respondents.
This is a sewer utility rate case in which appellants, the Public Service Commission (PSC) and the Shoals Sewer Company (Shoals Sewer), appeal from the order of the circuit court reversing the PSC's order. The PSC found that Shoals Sewer was a public utility and established rates. The circuit court reversed the PSC. We now reverse the circuit court.
(1) Is Shoals Sewer a "public utility"?
(2) Is Shoals Sewer collaterally estopped from seeking rate establishment before the PSC?
(3) Does Shoals Sewer have standing to apply for rate establishment?
(4) Does the PSC's rate establishment for Anchor Point unconstitutionally impair the Association's right to contract?
In 1974, Shoals I development was established by Fred Allen (Allen) as a horizontal property development. In 1984, the name of the development was changed to Anchor Point, Inc. In the master deed, the Shoals Recreation Association, Inc. (Association), was created as a nonprofit organization to provide recreational and sewer facilities for the condominium complex (Anchor Point) and Phase II of the development. The recreational facilities, including the sewer plant, are owned by the Association.
Anchor Point condominium owners possess 25% of the voting rights of the Association and Phase II property owners have 75% of the voting rights. Two-thirds of Anchor Point members must approve any amendments to the master deed. In the early 1980's, Allen defaulted on his loan and the entire development was in foreclosure for 3-4 years during which time Anchor Point operated the sewer system. Later Allen formed a new corporation, Shoals of Anderson, Inc. (Anderson), and reacquired the project. Currently, the majority of the Phase II property is owned by Anderson which owns Shoals Sewer Company (Shoals Sewer). Shoals Sewer is a subsidiary of Anderson and is also owned by Allen.
In 1985, the Association brought three actions against individual condominium owners for nonpayment of recreational assessments. 1 The trial court awarded the Association the late fees and concluded that the appropriate method for calculating the recreational assessment should be based on the voting rights. The Anchor Point owners and Phase II owners were to pay the remaining 75% of the expenses.
On April 6, 1989, Shoals Sewer filed an application with the PSC seeking rate establishment for sewer service to Anchor Point and Phase II. Respondents Anchor Point and Gary Kinert, President of Anchor Point, intervened and made a motion to dismiss the application, which the PSC denied. On October 4, 1989, the PSC issued an order which held that Shoals Sewer is a public utility and established rates for Shoals Sewer. Respondents appealed. The circuit court reversed the PSC's order and now the PSC and Shoals Sewer appeal.
On review the PSC's findings will only be set aside if unsupported by substantial evidence. Lark v. Bi-Lo, Inc., 276 S.C. 130, 276 S.E.2d 304 (1981). Substantial evidence is not a mere scintilla of evidence but is evidence which, considering the record as a whole, would allow reasonable minds to reach the conclusion the agency reached. Id.
The term "public utility"
includes every corporation and person furnishing or supplying in any manner gas, heat (other than by means of electricity), water, sewerage collection, sewerage disposal and street railway service, or any of them, to the public, or any portion thereof, for compensation ...
S.C.Code Ann. § 58-5-10(3) (1976). The phrase "public or any portion thereof" means:
the public generally, or any limited portion of the public, including a person, private corporation, municipality or any political subdivision of the State for which the service is performed or to which the commodity is delivered and whenever such corporation or person performs a service or delivers a commodity to the public, or any portion thereof, for which compensation is required such corporation or person is hereby declared to be a public utility subject to the jurisdiction and regulation of the Public Service Commission ...
S.C.Code Ann. § 58-5-10(4) (1976) (emphasis added).
South Carolina has no case law interpreting these sections. However, several other jurisdictions have construed the term "public utility." Initially, it should be noted that our definition of public by including "any limited portion of the public" is much broader than other states.
Generally, whether a utility operates for public use depends on the character and extent of the use. In re South Jersey Gas Co., 116 N.J. 251, 561 A.2d 561 (1989). An additional factor is whether the public can enjoy the utility by permission only or whether the utility is willing to serve the entire public within its service area. State ex rel. Utilities Comm'n v. Edmisten, 40 N.C.App. 109, 252 S.E.2d 516 (1979). Whether a given enterprise is public depends upon the facts of each particular case. 73B C.J.S. Public Utilities, § 3 (1978). Based on the facts before us and the broad language of the statute, we think that Shoals Sewer is a public utility as it serves a limited portion of the public.
Respondents argue that a system such as Shoals Sewer which is constructed solely to serve members of a non-profit organization is not a public utility. There is a split of authority as to associations which only serve their members. In Lockwood Water Users Ass'n v. Anderson, 168 Mont. 303, 542 P.2d 1217 (Mont.1975), the court held that if a utility confines its service to its own members who share the costs of operation, the utility is not ordinarily a public utility.
However, in Lewandowski v. Brookwood Musconetcong River Property Owners Ass'n, 37 N.J. 433, 181 A.2d 506 (1962), the court held that a nonprofit association organized by a developer to operate a water system which serviced all property owners in the development was a public utility. The court reasoned that the potential scope of the association's market which could include 350-400 lots was sufficient to establish public use.
In Garkane Power Co. v. Public Service Comm'n, 98 Utah 466, 100 P.2d 571 (Utah 1940), the court held that a nonprofit corporation which serves only its members is not a public utility. The court stated that as a matter of policy there is no need to regulate cooperatives because there is no conflict between the consumers and producers which are one and the same. If services are not satisfactory, the consumer-members have the power to demand certain changes. Therefore, the court concluded that the function of the commission in approving rates was not needed by the cooperative and its members. Id. 100 P.2d at 573.
In South Carolina the PSC has attempted to resolve this conflict through the promulgation of regulations addressing the unique situation of homeowners associations. "A 'homeowners association,' as defined in 3 of this rule and subject to the requirements set forth herein, upon Commission order may be found not to be a utility." 2 26 S.C.Code Ann.Reg. 103-502.2 (1991). The record in this case reveals that no entity has provided the PSC with the necessary documentation seeking approval for such an exemption. 3 We need not address whether Shoals Sewer would qualify as a homeowners association because the regulation does not state that a homeowners association is not a public utility. Rather, it provides that the PSC may exempt a homeowners association. We interpret this to mean that a homeowners association is a public utility and subject to the PSC's jurisdiction. On a case by case basis, the PSC may exempt a homeowners association, upon application. We now hold that Shoals Sewer is a public utility and, therefore, the PSC has jurisdiction.
In 1985, the Association brought three separate actions against individual Anchor Point condominium owners to foreclose on liens for unpaid recreational assessments. The court concluded that the recreational expenses...
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