Chemical Bank v. Washington Public Power Supply System
| Decision Date | 06 November 1984 |
| Docket Number | No. 49868-7,No. 1,1,49868-7 |
| Citation | 691 P.2d 524,102 Wn.2d 874 |
| Parties | , 40 UCC Rep.Serv. 1026 CHEMICAL BANK, a New York corporation, Appellant, v. WASHINGTON PUBLIC POWER SUPPLY SYSTEM, a Washington municipal corporation and joint operating agency, Appellant, Public Utility Districtof Benton County, Washington; et al., Respondents. |
| Court | Washington Supreme Court |
Culp, Dwyer, Guterson & Grader, Richard C. Yarmuth, Michele Coad, Robert O. Marritz, Earle J. Hereford, Jr., Seattle, for Washington Public Power Supply System.
Gordon, Thomas, Honeywell, Malanca, Peterson & O'Hern, Albert Malanca, Kenneth G. Kieffer, Donald S. Cohen, Tacoma, for Washington Public Utilities Group.
Helsell, Fetterman, Martin, Todd & Hokanson, Richard S. White, David Jurca, Linda J. Cochran, Seattle, for Columbia Rural Elec. Assn., et al.
Riddell, Williams, Bullitt & Walkinshaw, Stimson Bullitt, John D. Lowery, Thomas W. Burt, Seattle, for 21 respondents.
Jones, Grey & Bayley, P.S., Hugo E. Oswald, Jr., Margaret A. Pageler, Richard L. Goldfarb, Seattle, George F. Hanigan, Cathlamet, James A. Miller, Richland City Atty., Richland, McNally & Stewart, James P. McNally, Ione, for City of Ellensburg, et al.
Lane, Powell, Moss & Miller, H. Peter Sorg, Jr., John R. Tomlinson, Timothy F. Brown, Seattle, for Oregon PUD's.
Hillis, Phillips, Cairncross, Clark & Martin, P.S., Jerome L. Hillis, Michael F. Schumacher, Gregory E. Keller, Seattle, for 9 respondents.
Halstead & Ingvalson, Dwight A. Halstead, Prosser, for Benton Rural Elec. Assn.
Brown, Thayer & Drummond, Robert M. Brown, Spokane, for Inland Power and Light Co. (Jaffe & Schlesinger, Robert H. Jaffe, Springfield, N.J., of counsel) for proposed plaintiff-intervenors Frederic Haberman, et al.
Thoreson, Berry Yost, & Matthews, Ernest C. Matthews, IV, Seattle.
John R. Allison, Sharon S. Armstrong, Alan P. Sherbrooke, Seattle, for City of Seattle.
Michael D. McKay, Seattle, Charles Webb, III, New York City, for National WPPSS 4 and 5 Bondholders Committee.
This case first came before our court in Chemical Bank v. WPPSS, 99 Wash.2d 772, 666 P.2d 329 (1983) (Chemical Bank I) for resolution of the issue of whether 28 municipalities and public utility districts (PUDs) had statutory authority to enter into agreements to build Washington nuclear plants (WNP) 4 and 5. We held that no statutory authority, express or implied, existed and remanded the case for action in accordance with the opinion.
The trial court entered summary judgment in favor of all 88 participants (respondents) in WNP 4 and WNP 5. On appeal, appellants Washington Public Power Supply System (WPPSS) and the bondholders' trustee, Chemical Bank, raise multiple challenges to the trial judge's order of summary judgment.
Appellants also seek review of our decision in Chemical Bank I under the terms of Rules of Appellate Procedure 2.5(c)(2).
This factual and legal background, discussed in Chemical Bank I, is exceedingly complex. The primary legal issues
discussed at length in this opinion can be summarized as follows:
Procedural Questions
1. Should this court reconsider its decision in Chemical Bank I?
2. Did the trial judge's order granting summary judgment in favor of all defendants exceed the proper scope of the declaratory judgment action initiated by Chemical Bank?
3. Are any bondholders entitled to intervene in this action at this stage in the proceeding?
4. Do the Washington municipalities and PUDs have statutory authority, either express or implied, to enter into contracts which impose the risk of dry holes on their ratepayers?
5. If the Washington municipalities and PUDs did not initially have statutory authority to enter into these contracts, did the Legislature subsequently ratify the agreements?
6. Did the trial judge err in holding that, because the contracts were unenforceable as to the Washington municipalities and PUDs, they were also unenforceable as to the remaining defendants under any of these three theories: a) indivisibility of contract? b) mutual mistake? c) commercial frustration and impracticability?
7. If the participants are not contractually obligated to the bondholders, are they nonetheless estopped from denying the obligation under either common law notions of estoppel or article 8 of the Uniform Commercial Code?
8. If the contracts are invalid, are the bondholders nonetheless entitled to restitution from the participants?
9. Did the release of the participants' contractual obligation violate the bondholders' constitutional rights?
Our resolution of this case is as follows:
I
For the reasons discussed below, we believe reconsideration of our decision in Chemical Bank I is appropriate. We find the summary judgment order did not exceed the scope of the declaratory judgment action and conclude the bondholders' motion to intervene should be denied.
II
We herein affirm our decision in Chemical Bank I and reject appellants arguments that the Legislature ratified the ultra vires contracts. We also affirm the trial judge's release of the 60 remaining participants' obligation on the grounds of commercial frustration and mutual mistake.
III
Our review of the historical origins of equitable estoppel convinces us that the doctrine should not be applied to the facts of this case. We find that the statutory equivalent of equitable estoppel under the Uniform Commercial Code, RCW 62A.8-202, is inapplicable.
IV
We find no violation of appellants' state or federal constitutional rights.
Procedurally, this case comes before the court following the trial judge's decision to grant summary judgment in favor of all defendants/participants in WNP 4 and WNP 5. Chemical Bank I contains an extensive factual recitation. In addition, the following information pertains to the present action.
WPPSS is a joint operating agency and municipal corporation composed of 19 Washington public utility districts (PUDs) and four cities. It was formed in 1957 under the provisions of RCW 43.52.360. That statute allows cities or public utility districts and combinations thereof to form an operating agency "for the purpose of acquiring, constructing, operating and owning plants, systems and other facilities ... for the generation and/or transmission of electric energy and power." The statute further provides that after such an agency is formed, any other city or PUD may become a member upon application and affirmative vote of a majority of its members. A member may withdraw provided "[t]hat all contractual obligations incurred while a member shall remain in full force and effect." The agency may be dissolved upon the unanimous agreement of its members and "the members, after making provisions for the payment of all debts and obligations, shall thereupon hold the assets thereof as tenants in common."
In the early 1970s, WPPSS started construction of three nuclear power plants, WNP 1, WNP 2, and WNP 3. The projects were developed in conjunction with the Bonneville Power Administration. Although those plants also ran into financial trouble, it is the fate of two subsequent plants, WNP 4 and WNP 5, which concerns us here. Plans for these plants were developed when the 88 participants, respondents, joined with WPPSS and Pacific Power & Light Company (WNP 5 only) to obtain financing. 1 Each participant signed an identical 63-page participants' agreement (PA) dated July 14, 1976.
WPPSS then adopted a bond resolution which provided for the construction of both plants and the issuance of revenue bonds. As many of the parties' claims stem from interpretation of the PA, a detailed analysis of this document is necessary. 2
As noted in Chemical Bank I, the PA provided that each participant purchase a "share of the Project Capability" and "a right to purchase a share of the capability of any other generating plants undertaken by [the] Supply System ..." PA, at 2. Project capability was defined as
the amounts of electric power and energy, if any, which the Projects are capable of generating at any particular time (including times when either or both of the Plants are not operable or operating or the operation thereof is suspended, interrupted, interfered with, reduced or curtailed, in each case in whole or in part for any reason whatsoever), less Project station use and losses.
In addition, the participants' agreement gave each participant certain rights, both individually and through representatives on a participants' committee. As appellants claim the participants' committee granted significant control to the participants, a detailed analysis of its function is appropriate.
The committee was to be composed of not less than two nor more than seven members and participants were entitled to designate which representative would vote their shares. PA § 15(a). The participants' committee was required to meet at least quarterly during the construction of the projects. PA § 15(b). Committee meetings could be called anytime, however, if representatives with 20 percent of the participant shares so requested. Casting individual votes for each participant's share they represented, committee members were required to vote the shares in the manner requested by the participants they represented. PA § 15(b), at 40.
The participants' agreement also detailed procedures for the transfer of information from WPPSS to the committee members and interested participants. The participants' agreement stated that the WPPSS was to provide the committee and any participants who so requested with the following information:
Determination of Minimum...
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