DeKalb County LP Gas Co., Inc. v. Suburban Gas, Inc.

• Decision Date: 25 November 1998
• Docket Number: No. 1971532., No. 1971443
• Parties: DeKALB COUNTY LP GAS COMPANY, INC. v. SUBURBAN GAS, INC., et al. Coosa Valley Electric Cooperative, Inc., and Coosa Valley Propane Services, Inc. v. Suburban Gas, Inc., et al.
• Court: Alabama Supreme Court

729 So.2d 270

DeKALB COUNTY LP GAS COMPANY, INC. v. SUBURBAN GAS, INC., et al.

Coosa Valley Electric Cooperative, Inc., and Coosa Valley Propane Services, Inc. v. Suburban Gas, Inc., et al.

Nos. 1932.

Supreme Court of Alabama.

November 25, 1998.

Applications for Rehearing Denied January 15, 1999.

Frank M. Bainbridge and Bruce F. Rogers of Bainbridge, Mims, Rogers & Smith, L.L.P., Birmingham; and George C. Douglas, Jr., Birmingham, for appellant DeKalb County LP Gas Co., Inc.

Ronald G. Davenport and Christopher S. Simmons of Rushton, Stakely, Johnston & Garrett, P.A., Montgomery; William C. Sullivan of Love, Love & Love, Talladega; and James W. Fuhrmeister of Allison, May, Alvis & Fuhrmeister, Birmingham, for appellants Coosa Valley Electric Cooperative, Inc., and Coosa Valley Propane Services, Inc.

Charles M. Crook of Balch & Bingham, L.L.P., Montgomery; Jon Terry of Bains & Terry, Bessemer; and Hewitt L. Conwill of Conwill & Justice, Columbiana, for appellee.

Mark D. Wilkerson and Amanda C. Carter of Brantley & Wilkerson, P.C., Montgomery; and Cecil Caine, Moulton, for amicus curiae Wheeler Basin Natural Gas Company, Inc., in support of the appellants.

HOUSTON, Justice.

These appeals present several issues. Specifically, the facts raise questions concerning (1) the applicability of the Alabama Administrative Procedure Act, Ala.Code 1975, § 41-22-1 et seq.; (2) standing; and (3) the proper interpretation of Ala.Code 1975, § 37-6-1 et seq., governing the establishment and operation of electric cooperatives. Coosa Valley Electric Cooperative, Inc. ("Coosa Electric"), is a special-purpose corporation that is, without question, a statutory creature. Formed under the provisions of what are now §§ 37-6-1 to 37-6-49 of the Alabama Code, Coosa Electric has provided electric service to its members since 1939. However, in 1996, Coosa Electric decided to get into the business of distributing propane gas. To that end, Coosa Electric incorporated Coosa Valley Propane Services, Inc. ("Coosa Propane"), in April of that year. Coosa Electric's officers and directors also served as the officers and directors of Coosa Propane. In September 1996, after Coosa Electric's members had approved the venture into the propane business, Coosa Propane purchased 100% of the stock of DeKalb County LP Gas Company, Inc. ("DeKalb Gas"). The purchase of DeKalb Gas meant that Coosa Propane did not need to acquire from the LP Gas Board a new LP gas permit, because DeKalb Gas already had a permit as an existing propane provider. After the purchase, the same officers and directors that served Coosa Electric and Coosa Propane were made officers and directors of DeKalb Gas.

In November 1996, a group of propane dealers in competition with DeKalb Gas ("Propane Dealers") filed an action in the Shelby County Circuit Court against Coosa Electric, Coosa Propane, and DeKalb Gas, requesting declaratory and injunctive relief based primarily on Blue Cross & Blue Shield v. Protective Life Ins. Co., 527 So.2d 125 (Ala.Civ.App.1987). The Propane Dealers argued that Coosa Electric, as a corporation formed under § 37-6-1 et seq., was prohibited from entering into the propane business because, they said, such a venture would be outside the scope of its enabling statute. Coosa Electric claimed that, although it was organized for a specific purpose, it was nonetheless given broad power by the legislature to acquire any amount of stock in other businesses, even if those businesses had been organized for a different purpose. In March 1998, the trial court entered a summary judgment for the Propane Dealers, holding that Coosa Electric's involvement in the propane business was unlawful. The trial court's judgment also permanently enjoined Coosa Electric from engaging in the propane business, and it directed Coosa Electric to divest itself of majority control in DeKalb Gas; that is, Coosa Electric was prohibited from holding more than 49% of the DeKalb Gas stock. Coosa Electric, Coosa Propane, and DeKalb Gas appealed. We reverse and remand.

The appellants raise three main issues: (1) Whether the Alabama Administrative Procedure Act ("AAPA") applies to these facts; (2) whether the Propane Dealers had standing to sue; and (3) whether the powers of stock acquisition under § 37-6-3(9) allow Coosa Electric to own 100% of DeKalb Gas, when propane services are not listed among the purposes of cooperatives in § 37-6-2.

Because there are no genuine issues of material fact, the summary judgment is appropriate only if the Propane Dealers were entitled to a judgment as a matter of law. Rule 56(c), Ala. R. Civ. P.; Wright v. Wright, 654 So.2d 542, 543 (Ala.1995). The question to be answered, then, is whether the trial court correctly decided the three issues above as a matter of law.

Alabama Administrative Procedure Act

The appellants argue that this case is governed by the AAPA and, therefore, that the trial court had no jurisdiction to hear the case until all administrative remedies had been exhausted. Ala.Code 1975, § 41-22-20. Indeed, this Court has acknowledged that failure to exhaust proper administrative remedies can preclude a court from acquiring subject-matter jurisdiction. Ex parte Crestwood Hosp. & Nursing Home, Inc., 670 So.2d 45 (Ala.1995); Faulkner v. University of Tennessee, 627 So.2d 362, 365 (Ala.1992) (citing Ex parte Graddick, 495 So.2d 1367 (Ala.1986)). Even the trial court in this case pointed out that it would have no jurisdiction if the AAPA applied. The Propane Dealers, however, argue that the AAPA does not apply, because, they contend, the limited involvement of Coosa Electric with the LP Gas Board did not amount to an administrative proceeding; therefore, they argue, there were no administrative remedies to be sought. We agree. In their arguments before the trial court concerning lack of jurisdiction, the appellants relied on § 41-22-20(a), a part of the AAPA:

"(a) A person who has exhausted all administrative remedies available within the agency, other than rehearing, and who is aggrieved by a final decision in a contested case is entitled to judicial review under this chapter. A preliminary, procedural, or intermediate agency action or ruling is immediately reviewable if review of the final agency decision would not provide an adequate remedy."

(Emphasis added.) A "contested case" is defined, in pertinent part, as "[a] proceeding, including but not restricted to ratemaking, price fixing, and licensing, in which the legal rights, duties, or privileges of a party are required by law to be determined by an agency after an opportunity for hearing." Ala.Code 1975, § 41-22-3(3). Also, the AAPA provides that "[i]n a contested case, all parties shall be afforded an opportunity for hearing after reasonable notice in writing delivered either by personal service as in civil actions or by certified mail, return receipt requested." Ala.Code 1975, § 41-22-12(a). It is clear from these statutes that a "contested case" is a proceeding before an agency in which legal rights, duties, or privileges are determined after one has been afforded the opportunity to appear and be heard. In the case at hand, the evidence before the trial court indicated that because it was acquiring an already existing gas company (DeKalb Gas), Coosa Electric did not need to go before the LP Gas Board and request a new gas permit. All that was required of Coosa Electric, according to a letter from the administrator of the LP Gas Board, was to furnish the Board with an updated copy of DeKalb Gas's articles of incorporation and a new certificate of insurance. Despite the appellants' arguments to the contrary, this "action" is not tantamount to the Board's making a "final decision in a contested case." Therefore, we hold that, under these facts, the AAPA does not govern and the trial court properly assumed jurisdiction over the case.

Standing

The appellants contend that the Propane Dealers do not have standing, because, they argue, the Propane Dealers are simply "competitors," under this Court's holding in Alabama State Florists Ass'n, Inc. v. Lee County Hosp. Bd., 479 So.2d 720 (Ala.1985). In that case, this Court stated that "[a]s a rule, `a competitor cannot attack acts of a corporation as ultra vires, merely on the ground of injurious competition.'" 479 So.2d at 722. However, the Propane Dealers argue that they do have standing, under this Court's decision in Traders & Farmers Bank v. Central Bank, 294 Ala. 622, 320 So.2d 638 (1975). In Traders & Farmers Bank, this Court wrote, "Clearly, the threat of competition is sufficient to provide standing to contest the legality of a competitor's facility." 294 Ala. at 625-26, 320 So.2d at 641. Although those two cases may require reconciliation at some point, the case now before this Court does not require it. Here, the Propane Dealers sought injunctive relief. Therefore, if any of the Propane Dealers had standing under some other rationale then we need not decide whether the others also had standing, for if the injunction was proper as to one of the Propane Dealers then it will clearly benefit all of the Propane Dealers. That is the case here.

As the Propane Dealers point out in their brief and as is evidenced in the record, one of their group, Suburban Gas, Inc., is a member of Coosa Electric. For certain economic associations, such as cooperatives, this Court has previously held that "members" are "the equivalent of `stockholders' of a corporation and thus ... enjoy the same equity ownership and property rights that shareholders enjoy in a commercial corporation." Opinion of the Justices, 373 So.2d 293, 296 (Ala. 1979); see also Ala.Code 1975, § 10-4-190. A member of a cooperative, then, would be able to contest a cooperative's power to act, under § 10-2B-3.04(b)(1), which states that an ultra-vires challenge may be brought "[i]n a proceeding by a shareholder against the corporation to enjoin the act." This language does not...