City of Homestead v. Beard

• Decision Date: 07 May 1992
• Docket Number: No. 77352,77352
• Parties: 17 Fla. L. Weekly S273 CITY OF HOMESTEAD, Appellant, v. Thomas M. BEARD, etc., et al., Appellees.
• Court: Florida Supreme Court

Page 450

600 So.2d 450

17 Fla. L. Weekly S273

CITY OF HOMESTEAD, Appellant, v. Thomas M. BEARD, etc., et al., Appellees.

No. 77352.

Supreme Court of Florida.

May 7, 1992.

Michael L. Rosen, D. Bruce May and Susan L. Turner of Holland & Knight, Tallahassee, for appellant.

David E. Smith, Director of Appeals, Florida Public Service Com'n, and J. Christian Meffert of Bryant, Miller & Olive, P.A., Tallahassee, and K. Crandal McDougall, Miami, Florida Power & Light Co., for appellees.

McDONALD, Justice.

On August 7, 1967, the city of Homestead (City) entered into a territorial agreement with Florida Power & Light Company (FPL), a privately owned utility company. The agreement defined the geographic boundaries of their respective service areas in and around the city of Homestead. At the time of the agreement, the City's municipally owned electric utility was exempt from the regulatory jurisdiction of the Florida Public Service Commission (PSC). ¹ However, because of the PSC's regulatory authority over FPL, the parties submitted the agreement to the PSC for approval. The agreement did not provide for a specified duration or termination date. The PSC, in Florida Public Service Commission Order No. 4285, issued December 1, 1967, approved the agreement. In response to a petition for certiorari filed by customers whose service was being transferred pursuant to the new agreement, this Court upheld the PSC's order approving the agreement. Storey v. Mayo, 217 So.2d 304 (Fla.1968), cert. denied, 395 U.S. 909, 89 S.Ct. 1751, 23 L.Ed.2d 222 (1969).

In a letter to FPL dated May 11, 1988, the City gave formal notice of its intent to terminate the agreement effective August 7, 1988 and invited FPL to negotiate a new agreement. FPL responded that the agreement remains in full force and effect until a mutually acceptable change is approved by the PSC. On July 22, 1988, FPL filed a petition for declaratory statement with the PSC seeking a determination as to the rights and obligations of the parties under the agreement. On December 2, 1988, the PSC issued the declaratory statement requested by FPL, stating that the territorial agreement was a valid and binding agreement, but denying FPL's demand for prohibitive or injunctive relief against the City.

In response to a subsequent motion for reconsideration or clarification by FPL, the PSC stated that the agreement is subject to modification by the PSC in a proper proceeding, but declined to elaborate further because the City had filed an action in Dade County Circuit Court seeking a judicial declaration that the agreement is terminable upon the giving of reasonable notice. After the circuit court's denial of FPL's motion to dismiss and motion to abate on grounds that the PSC had exclusive jurisdiction in the matter, the PSC intervened and filed a petition for writ of prohibition in this Court. In Public Service Commission v. Fuller, 551 So.2d 1210 (Fla.1989), this Court held that the circuit court did not have jurisdiction to conduct further proceedings on the City's complaint for a declaratory judgment.

On September 4, 1990, the City initiated the present proceedings by filing a petition to "Acknowledge Termination or in the Alternative, Resolve Territorial Dispute" with the PSC. FPL responded by filing a motion to dismiss, which the PSC granted in Florida Public Service Commission Order No. 23955, issued January 3, 1991. ² The City then filed a notice of administrative appeal to obtain review of that order by this Court. ³

The City's position is that because it was not subject to the PSC's jurisdiction when the agreement was executed, the territorial agreement should be construed pursuant to the law of contracts rather than the law governing PSC orders. The City further asserts that, under the law in existence when the agreement was executed, a contract lacking a definite period of duration was terminable at will by either party. Thus, because the instant agreement did not have a provision governing its duration, the City had a contractual right to terminate the agreement at will and the PSC had no statutory or case law authority to deprive the City of its right to terminate. We disagree. In the absence of an express provision to the contrary in the approved agreement, the statutory and decisional law surrounding the modification or termination of PSC orders governs the territorial settlement agreement in the instant case.

In Fuller, this Court held that the territorial agreement between the City and FPL "has no existence apart from the PSC order approving it and that the territorial agreement merged with and became a part of" the PSC order. 551 So.2d at 1212. We further stated:

Any modification or termination of that order must first be made by the PSC. The subject matter of the order is within the particular expertise of the PSC, which has the responsibility of avoiding the uneconomic duplication of facilities and the duty to consider the impact of such decisions on the planning, development, and maintenance of a coordinated electric power grid throughout the state of Florida. The PSC must have the authority to modify or terminate this type of order so that it may carry out its express statutory purpose.

Id. (emphasis added). While these statements were made in the context of a jurisdictional issue, the principles set forth are applicable to the instant case.

In City Gas Co. v. Peoples Gas System Inc., 182 So.2d 429, 433 (Fla.1965), this Court held that territorial agreements between public utilities were not violative of antitrust law based on the premise that "the public welfare does not need Ch. 542 for protection against this kind of agreement.... because the public interest is adequately protected by an alternative arrangement under F.S. Ch. 366, F.S.A." We further concluded that the "agreement could result in monopolistic control over price, production, or quality of service only by the sufferance of the commission" and that its "statutory powers are more than sufficient to prevent any such outcome if properly employed." Id. at 435. In Storey, which upheld the PSC's approval of the instant agreement, this Court "recognized the importance of the regulatory function as a substitute for unrestrained competition" and commented that "a regulated or measurably controlled monopoly is in the public interest." 217 So.2d at 307. Therefore, our decisions exempting territorial agreements from antitrust legislation have been premised on the existence of a statutory system of regulations governing the public utilities that is sufficient to prevent any abuses arising from the monopoly power created by the agreements.

We recognize that when the agreement was executed, municipally owned electric utilities were exempt from state agency supervision under section 366.11, Florida Statutes (1967), and that they enjoyed "the privileges of legally protected monopolies within municipal limits." Storey, 217 So.2d at 307 (emphasis added). However, in this case the City sought PSC approval of an agreement which extended its territorial monopoly beyond its municipal boundaries to adjacent areas. Unlike the residents of the City, the customers residing outside the municipality lack a voice in the City's political process. By accepting the additional franchise granted under the PSC order approving the agreement, the City submitted itself to the PSC's regulatory authority with respect to the subject matter of the order. See Miami Bridge Co. v. Railroad Comm'n, 155 Fla. 366, 376, 20 So.2d 356, 361 (1945) (no improper impairment of the obligation of contracts when the franchise was "accepted with the full knowledge of the existence of the police power which authorizes regulations in behalf of the public"), cert. denied, 325 U.S. 867, 65 S.Ct. 1405, 89 L.Ed. 1987 (1945).

In Fuller, we expressly stated that there was "clear commission authority over these territorial agreements." 551 So.2d at 1212. This regulatory authority enables the PSC to carry out its statutory purpose and to fulfill its "responsibility to ensure that the territorial agreement works no detriment to the public interest." Utilities Comm'n v. Florida Pub. Serv. Comm'n, 469 So.2d 731, 732 (Fla.1985). PSC approval of a territorial agreement, in effect, makes the approved contract an order of the PSC. City Gas, 182 So.2d at 436. Merely because the agreement is to be interpreted under the law of contracts does not mean we are to ignore the law surrounding PSC orders.

The City was able to enter into the instant agreement only by obtaining PSC approval. The City may not accept the benefits flowing from antitrust immunity for a territorial agreement by obtaining PSC approval and then claim the agreement is not subject to the laws governing PSC orders. ⁴ Therefore, the law governing the modification or termination of PSC orders was applicable to the instant agreement to the extent it did not contradict the express terms of the agreement. ⁵

Moreover, even if we were to hold that the law of contracts should be strictly applied to the agreement, we would not construe the agreement to have granted the City the right to terminate at its discretion. When a contract does not contain an express statement as to duration, the court should determine the intent of the parties by examining the surrounding circumstances and by reasonably construing the agreement as a whole. See Southern Bell Tel. & Tel. Co. v. Florida E. Coast Ry. Co., 399 F.2d 854 (5th Cir.1968); Triple E Dev. Co. v. Floridagold Citrus Corp., 51 So.2d 435 (Fla.1951); Sound City, Inc. v. Kessler, 316 So.2d 315, 317 (Fla.1st DCA 1975) (citing 17A C.J.S. Contracts Sec. 385, p. 457); see also Institute for Scientific Info., Inc. v. Gordon & Breach Science Publishers, Inc., 931 F.2d 1002 (3d Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 302, 116 L.Ed.2d 245 (1991). If a period of duration can be inferred from the nature of a contract and the circumstances surrounding its...