City of Starkville v. 4-COUNTY ELECTRIC POWER ASSN.

• Decision Date: 10 January 2002
• Docket Number: No. 1999-CA-00745-SCT.,1999-CA-00745-SCT.
• Citation: 819 So.2d 1216
• Parties: CITY OF STARKVILLE v. 4-COUNTY ELECTRIC POWER ASSOCIATION.
• Court: Mississippi Supreme Court

819 So.2d 1216

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

No. 1999-CA-00745-SCT.

Supreme Court of Mississippi.

January 10, 2002.

Rehearing Denied February 28, 2002.

Dewitt T. Hicks, Jr., Columbus, William Dean Stark, Starkville, Marc Darren Amos, Columbus, Attorneys for Appellant.

David L. Sanders, Columbus, Jeffrey Johnson Turnage, Columbus, Attorneys for Appellee.

EN BANC.

DIAZ, J., for the court.

¶ 1. This matter inquires into the continued validity of a contractual arrangement between the City of Starkville (the City) and 4-County Electric Power Association (4-County) which was entered into at a time when the City had a right of eminent domain to acquire power association properties upon annexation. During the course of the contractual arrangement, the City's right of eminent domain was removed by law. We conclude that the contract is valid and enforceable within the bounds of the regulatory powers of the Public Service Commission. Accordingly, we reverse the judgment of the chancery court and remand this matter to that court for further proceedings.

I.

¶ 2. In 1963, the City and 4-County agreed in a Service Area Agreement that upon the City's annexation of property within 4-County's service area, the City would either purchase 4-County's service rights and distribution facilities or grant 4-County a franchise. Following an annexation in 1994, the City attempted to purchase 4-County's rights and facilities. 4-County refused, contending that changes in the law had invalidated the agreement. The City sought to specifically enforce the agreement in the Oktibbeha County Chancery Court. The chancery court granted summary judgment in favor of 4-County, finding that the agreement was invalid.

¶ 3. In 1956, the Mississippi Legislature adopted the Public Utilities Act of 1956 which authorized the Public Service Commission to regulate certain public utilities which had until that point remained largely unregulated. For purposes of this discussion, the relevant portion of the Act is that provision which granted municipalities an unlimited right of condemnation. It provided that "[a]ny municipality shall have the right to acquire by purchase, negotiation or condemnation the facilities of any utility that is now or may hereafter be located within the corporate limits of such municipality." 1956 Miss. Laws, ch. 372, § 5(e), codified at Miss.Code Ann. § 77-3-17 (1972).

¶ 4. On December 31, 1963, the City and 4-County entered into a Service Area Agreement which provided that, in the event of an annexation, the City would have the option of either purchasing 4-County's service rights and distribution facilities or to grant 4-County a franchise to provide power to the newly annexed area. The relevant provisions of the agreement stated that:

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 services 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.

4-County maintains that its intent in entering into the agreement was to avoid the costs of litigation necessarily associated with an eminent domain proceeding when the loss of its rights and facilities was inevitable under then-existing law. The contract, however, does not mention eminent domain or in any way condition the mutual promises upon its availability.

¶ 5. On March 17, 1987, over the Governor's veto, the Mississippi Legislature passed Senate Bill No. 2840, amending Miss.Code Ann. §§ 77-3-13, -17, & -21 (2000) concerning the regulation of public utilities. As amended, Section 77-3-17 specifically provided that prior to a municipality exercising the power of eminent domain against a utility, the certificate of public convenience and necessity held by the utility had to be canceled by the Public Service Commission.¹ Moreover, the amended statute required that before the Commission could cancel a certificate of public convenience and necessity, it must first find that the utility was not providing "reasonably adequate service" and give the utility an opportunity to cure any deficiencies. Only if the utility failed to correct problems noted by the Commission could its certificate then be canceled.

¶ 6. On November 7, 1994, 4-County informed the City that it considered the agreement invalid and would no longer honor it. It explained, "[t]he sole purpose for this `Agreement' was to accommodate the City's absolute right of condemnation that then existed and avoid protracted litigation to determine value by establishing the `Tennessee Formula' as the methodology for determining value. In view of the substantial change in the City's power of condemnation implemented by the 1987 statutory amendments, the Service Area Agreement is invalid and no longer enforceable...." Following an annexation by the City in 1995, it informed 4-County that it intended to exercise its option to purchase 4-County's service rights and associated distribution facilities within the newly annexed area. 4-County again declared the agreement invalid and refused to convey its rights and facilities.

¶ 7. On April 7, 1995, the City filed suit in the Oktibbeha County Chancery Court seeking to specifically enforce the Service Area Agreement. The chancery court granted summary judgment in favor of 4-County, finding that the agreement was invalid. The City of Starkville appeals from that judgment.

II.

¶ 8. The Court employs a de novo standard of review to a trial court's grant of summary judgment. Rockwell v. Preferred Risk Mut. Ins. Co., 710 So.2d 388, 389 (Miss.1998). Summary judgment is appropriate if the evidence before the Court—admissions in the pleadings, answers to interrogatories, depositions, affidavits, etc.—shows that there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Id. The evidence must be viewed in the light most favorable to the party against whom the motion has been made. If, in this view, there is no genuine issue of material fact and, the moving party is entitled to judgment as a matter of law, summary judgment should forthwith be entered in his favor. Otherwise, the motion should be denied. McCullough v. Cook, 679 So.2d 627, 630 (Miss.1996).

a.

¶ 9. The overarching concern in this litigation is whether the contract at issue remains valid and enforceable despite the removal of the right of eminent domain, which was probably the motivating factor for 4-County's decision to enter into the agreement. We answer that question in the affirmative.

¶ 10. The record indicates that Starkville and 4-County Electric entered into a contract with which they honored for more than thirty years. This Service Area Agreement provided that in the event of Starkville's annexation of property within 4-County's service area, Starkville would purchase, and 4-County would sell, 4-County's service assets in that area at a price to be determined by a formula set forth in the agreement or, alternatively, Starkville would grant a franchise to 4-County at no cost. This Agreement served as a valid contract, supported by consideration and with definite terms, between the two parties. Merchants & Farmers Bank v. State ex rel. Moore, 651 So.2d 1060, 1061 (Miss.1995) (A court is obligated to enforce a contract executed by legally competent parties where the terms of the contract are clear and unambiguous); Lowndes Co-op. Ass'n v. Lipsey, 240 Miss. 71, 126 So.2d 276, 277-78 (1961)

(Consideration for a promise is (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification or destruction of a legal relation, or (d) a return promise, bargained for and given in exchange for the promise).

¶ 11. It is argued that subsequently enacted legislation, Miss.Code Ann. § 77-3-17 (2000), altered the relationship of the two parties and invalidates the contract. As we see it, nothing in this legislation speaks to the existing contractual arrangement. Nothing in the contract between the parties mentioned eminent domain or conditions the contract upon the power or exercise of eminent domain. Nothing in the record supports the inference that this was the basis for the contract.

¶ 12. This Court has stated:

In construing a written instrument, the task of courts is to ascertain the intent of the parties from the four corners of the instrument. Courts look at the instrument under consideration as a whole and determine what the parties intended by giving a fair consideration to the entire instrument and all words used in it. When a written instrument is clear, definite, explicit, harmonious in all its provisions, and is free from ambiguity, a court in construing it will look solely to the language used in the instrument itself.

Pfisterer v. Noble, 320 So.2d 383, 385 (Miss.1975). It follows that, the mere fact that the City no longer had an absolute right to eminent domain, which may have prompted 4-County Electric to enter into the Contract, does not render the contract void.

¶ 13. This Court has previously determined contracts void based on fraud and illegality. See, e.g., Dill v. Southern Farm Bureau Life Ins., 797 So.2d 858, 866 (Miss. 2001)

(stating that if an insurance company proves that it was misled in providing coverage under certain...