City of Starkville v. 4-County Elec. Power Ass'n

• Citation: 909 So.2d 1094
• Decision Date: 24 March 2005
• Docket Number: No. 2004-CA-00577-SCT.,2004-CA-00577-SCT.
• Parties: CITY OF STARKVILLE v. 4-COUNTY ELECTRIC POWER ASSOCIATION.
• Court: United States State Supreme Court of Mississippi

909 So.2d 1094

CITY OF STARKVILLE v. 4-COUNTY ELECTRIC POWER ASSOCIATION.

No. 2004-CA-00577-SCT.

Supreme Court of Mississippi.

March 24, 2005.

Marc Darren Amos, Dewitt T. Hicks, Jr., Columbus, William Dean Stark, Starkville, attorneys for appellant.

David L. Sanders, Jeffrey Johnson Turnage, Columbus, attorneys for appellee.

Before WALLER, P.J., EASLEY and CARLSON, JJ.

CARLSON, Justice, for the Court.

¶ 1. The City of Starkville has appealed the Oktibbeha County Chancery Court's entry of a final judgment dismissing its complaint with prejudice. En route to granting summary judgment in favor of 4-County Electric Power Association, the chancellor ruled, inter alia, that the City's right to purchase the power company's distribution facilities and service rights created under a 1963 Service Area Agreement was non-existent due to the City's failure to seasonably petition the Mississippi Public Service Commission for approval of its contract, thus rendering the contract unenforceable. Finding the chancellor's dismissal to be consistent with well established law, we affirm.

FACTS AND PROCEEDINGS IN THE TRIAL COURT

¶ 2. In 1934, the Mississippi Legislature passed the Municipally Owned Utilities Act, which gave our states' municipalities autonomous control over the operation and improvement of their individual public utility systems. Accordingly, an era began whereby municipalities were given the exclusive power to either provide electrical service themselves or, in the alternative, designate who would provide the city with service. 1934 Miss. Laws ch. 317 (now codified in Miss.Code Ann. §§ 21-27-11 et seq. (1972)). In utilizing the 1934 utilities act, municipalities routinely extended franchise agreements to third-party providers, thus granting them the use of the streets, alleys and public ground. Miss.Code Ann. § 21-13-3 (1972). Typical of the era, the citizens of the respective municipalities ultimately governed the quality of their own service as ordinances granting franchises were generally required to be approved by a majority of the qualified electors of each municipality. Id.

¶ 3. In furtherance of municipal autonomy, the Mississippi Legislature passed The Municipal Electric Plant Law of 1936 (now codified in Miss.Code Ann. §§ 77-5-401 et seq. (1972)), which authorized municipalities to acquire, operate, and maintain electric plants within or without the corporate limits, without any restriction or limitation of other laws, and to provide electric power and energy to consumers. Importantly, this law conferred upon the municipalities the unique power of eminent domain in order to implement the purposes of the statute. Miss.Code Ann. § 77-5-441 (1972).

¶ 4. In 1956, the Mississippi Legislature enacted the Public Utilities Act.1956 Miss. Laws ch. 372, §§ 1-40 (1956), codified in Miss.Code Ann. §§ 77-3-1, et seq. The 1956 Public Utilities Act empowered the Mississippi Public Service Commission ("MPSC") with the exclusive authority to regulate public utilities in designated noncorporate areas. This Act likewise empowered the MPSC with the authority to issue certificates of public convenience and necessity. Additionally, the 1956 Act "grandfathered in" all existing utility service being provided according to the franchise agreements and conferred administrative power to the MPSC over all such future agreements. Also, under the 1956 Act all utilities seeking a franchise, whether corporate or non-corporate, were required to obtain a certificate of public convenience and necessity from the MPSC. However, while the Act created new administrative powers in the MPSC, this power was exclusive of the state's municipalities. In this regard, municipalities expressly retained the power to acquire, purchase, negotiate or condemn the facilities of any utility desiring to serve within their corporate limits. 1956 Miss. Laws ch. 372 § 5(e), codified at § 77-3-17.

¶ 5. On December 31, 1963, the City of Starkville (Starkville) and 4-County Electric Power Association (4-County) entered into a service area agreement (1963 Agreement). Consistent with the 1956 Public Utilities Act, the 1963 Agreement guaranteed efficient continued utility service to the local polity if Starkville subsequently decided to annex territory which was within 4-County's designated service area. The 1963 Agreement was contingent upon the right of municipalities to annex land which was certificated by the MPSC, and the Agreement provided that if Starkville exercised its right to include territory currently in the 4-County service area via its power of eminent domain, then, in lieu of condemnation proceedings,¹ Starkville could either grant 4-County a no-cost twenty-year franchise to continue operating within the newly annexed area or effectuate an outright purchase of both 4-County's distribution facilities and its service rights. The relevant provisions of the 1963 Agreement stated:

In the event Municipality at any time or from time to time changes the location of its corporate boundaries in such manner as to enclose within said boundaries an area of service, distribution facilities and/or consumers of Cooperative, Municipality shall, within one-hundred twenty (120) days after annexation becomes effective, elect either to (a) grant Cooperative a franchise without cost to serve all present and future electric consumers within said annexed area for a period of twenty (20) years or (b) buy all of Cooperative's service rights and the associated distribution facilities within the annexed area, with such exceptions as may be agreed upon by the parties. If Municipality elects to buy, it shall be obligated to purchase, and Cooperative shall be obligated to sell to Municipality, said service rights and facilities at a fair value determined as hereinafter provided.

The 1963 Agreement further provided:

[I]n order to avoid wasteful duplication of facilities and uneconomic service to ultimate consumers, Municipality and Cooperative desire to establish clearly defined arrangements and procedures which will permit continued service to their respective present consumers and the future expansion of Municipality's electric distribution facilities and service in areas which in the future may be included by annexation within its corporate boundaries......

Additionally, both Starkville and 4-County acknowledged the role of the MPSC:

The parties hereto mutually agree to cooperate in petitioning for and in securing such approval of this agreement by the Mississippi Public Service Commission as is or may hereafter be required by law.

(Emphasis added).

¶ 6. The procedure required by the 1956 Public Utilities Act remained largely intact for over 30 years; however, in 1987 the Mississippi Legislature significantly revised the 1956 Act (1987 Amendments). The focus of the 1987 Amendments was on three statutes — Miss. Code Ann. §§ 77-3-13, -17, & -21 (Senate Bill 2840, ch. 353). These 1987 Amendments conferred further administrative authority upon the MPSC, including the power of approval over any determination made concerning the certificated utilities. While a municipality retained the authority to regulate within its borders, its eminent domain powers were severely curtailed.²

¶ 7. On November 7, 1994, 4-County provided Starkville with notice that it no longer considered the parties' 1963 Agreement valid. Specifically, 4-County informed Starkville that pursuant to the Legislature's 1987 Amendments to the 1956 Public Utilities Act, performance under the parties' contract had become impossible. Two and one-half months later, Starkville, on January 27, 1995, annexed approximately 1.72 miles of 4-County's certificated service area and informed 4-County that, pursuant to the 1963 Agreement, it intended to exercise its option to purchase 4-County's service rights and associated distribution facilities located in the newly annexed area. When 4-County subsequently refused to voluntarily sell its rights and property in the certificated area, Starkville commenced suit in the Chancery Court of Oktibbeha County via its filing of a complaint for specific performance, declaratory and injunctive relief and damages. In due course, the chancery court granted 4-County's motion for summary judgment, and en route to the grant of summary judgment, the chancellor considered the Legislature's 1987 Amendments and reasoned that the amendments rendered the parties' 1963 Agreement unenforceable as it was now unlawful to purchase a certificate of public convenience and necessity without MPSC approval.

¶ 8. On January 10, 2002, this Court reversed the chancery court's grant of summary judgment, finding that, notwithstanding the 1987 Amendments, the 1963 Agreement between Starkville and 4-County was valid and enforceable "within the bounds of the regulatory powers of the Public Service Commission." City of Starkville v. 4-County Elec. Power Ass'n, 819 So.2d 1216, 1218 (Miss.2002) (Starkville I). We interpreted the 1987 Amendments as not specifically voiding agreements to sell such as the one existing between Starkville and 4-County. We also stated that "[i]f the legislature wishes to invalidate existing contracts between entities delivering public utilities, it should say so plainly," and we likewise recognized that this determination was directly within the purview of the Legislature as "[t]he Legislature is the foremost expositor of public policy." Id. at 1221.

¶ 9. Within approximately three weeks after we handed down our decision in Starkville I, Representative Tyrone Ellis³ introduced a bill to amend Miss.Code Ann. § 77-3-13, with the stated purpose being to clarify the legislative intent in passing the 1987 amendments to the 1956 Public Utilities Act. House Bill 997 was passed on March 4, 2002 (2002 Miss. Laws, ch. 303, §§ 1-2 (2002 Amendments)).⁴

¶ 10. Upon remand to the chancery court, 4-County, not surprisingly, again filed a motion for summary judgment, this time undergirding its...