Duke Power Co. v. Blue Ridge Elec. Membership Corp., 311

• Decision Date: 20 January 1961
• Docket Number: No. 311,311
• Citation: 117 S.E.2d 812,253 N.C. 596
• Court: North Carolina Supreme Court
• Parties: , 37 P.U.R.3d 396 DUKE POWER COMPANY and the Town of Hudson v. BLUE RIDGE ELECTRIC MEMBERSHIP CORPORATION.

Page 812

117 S.E.2d 812

253 N.C. 596, 37 P.U.R.3d 396

DUKE POWER COMPANY and the Town of Hudson v. BLUE RIDGE ELECTRIC MEMBERSHIP CORPORATION.

No. 311

Supreme Court of North Carolina.

Jan. 20, 1961

L. H. Wall, Lenoir, for Town of Hudson, plaintiff appellee.

Carl Horn, Jr., William I. Ward, Jr., Charlotte, and Townsend & Todd, Lenoir, for Duke Power Co., plaintiff appellee.

Williams & Whisnant and Claude F. Seila, Lenoir, for defendant appellant.

William T. Crisp, Raleigh, for amicus curiae, North Carolina Electric Membership Corp.

RODMAN Justice.

The contract between Duke and Blue Ridge lies at the threshold of the controversy. (Actually there are two contracts, each designating a place where Duke will connect with Blue Ridge lines to furnish current, but they are identical so far as material to a decision of this case. Hence they are treated as a single instrument.) Each of these parties bases its right to relief on its interpretation of the contract, which is dated 21 December 1957. The contract obligates Duke to deliver and Blue Ridge to purchase current for a term of one year and continuing annual terms until terminated at the end of an annual period by sixty days' notice from one party to the other.

The provisions pertinent to the decision of this case read:

'Fourth: The electric power delivered hereunder is and shall be delivered for the purpose of resale primarily to rural homes and farm consumers who are members of the 'Consumer' in Caldwell County, North Carolina and who are not located in any incorporated city or town. Neither party shall furnish or offer to furnish electric energy to anyone who, at the time of the proposed service, is receiving electric service from the other, or whose premises are capable of being served by the existing facilities of the other without extension of its distribution system other than by the construction of secondary lines not exceeding 300 feet in length, nor shall either party unless ordered so to do by a properly constituted authority, duplicate the other's facilities, except insofar as such duplication shall be necessary in order to transmit electric energy between unconnected points on its lines. The electric power delivered hereunder shall be distributed by the Consumer solely to ultimate users, and shall not be sold or offered for sale by the Consumer to any person, firm, municipal or other corporation or association for resale, or sold or offered for sale by the Consumer to anyone who is receiving electric service or whose premises are capable of being served by the existing facilities (including additional secondary lines not exceeding 300 feet in length) of any municipal or other distribution system to which the Power Company sells electric power for resale, except where such municipality or other distributor refuses to furnish such service. The Consumer shall not, during the continuance of this contract, cause or permit electric power, from any source other than the Power Company, to be distributed over that portion of its system supplied with electric power delivered hereunder, without the written consent of the Power Company.'

'Seventh: All such electric power which shall be sold or otherwise disposed of by the Consumer to any person, firm or corporation shall be sold or disposed of subject to this contract.'

'Twenty-Third: This contract is subject to the rates, rules, regulations and conditions of the Power Company as the same are now on file with the Utilities Commission of the State of North Carolina, and as the same may be lawfully changed or modified from time to time, and such rates, rules, regulations and conditions are made a part of this contract to the same effect as if fully set forth herein.'

The contract provided that it should not be binding until approved by Duke's Board of Directors and the Administrator of the Rural Electrification Administration of the United States.

The contract, including all of its terms and conditions, has been formally approved by the North Carolina Utilities Commission.

This is the factual background presented for interpreting the contract: Blue Ridge came into existence by virtue of provisions of c. 117 of the General Statutes. For more than eighteen years it has been purchasing electric power from Duke for resale in Caldwell County, including the Hudson area. Caldwell County with an area of 476 square miles had, according to the 1950 census, only 7,888 urban citizens, all of whom lived in the town of Lenoir. The remaining inhabitants are listed in that census as rural. Hudson, incorporated by legislative act in 1905, Priv.Laws 1905, c. 239, had, in 1950, a population of 922. The 1960 census gives it a population of 1536.

Between March 1942 and June 1954 six homes near the western boundary of Hudson within its corporate limits connected to Blue Ridge lines and have been receiving current from Blue Ridge. Duke did not at that time have a power line within 300 feet of these homes. Blue Ridge did have such line.

In July 1956 Hudson changed a portion of its western boundary so as to include a home connected with Blue Ridge lines in October 1956.

In September 1957 Hudson changed its boundaries to include an area at its southeast corner. This action brought within its corporate limits two homes which were and had been receiving current from Blue Ridge since 1941. It also brought within the corporate limits the Hudson High School which had been receiving current from Blue Ridge since October 1955. So far as appears, Duke does not have a transmission line in this area.

In April 1959 Hudson changed its western boundary so as to bring within its corporate limits eleven homes, members of and receiving current from Blue Ridge.

The contract between Duke and Blue Ridge is headed 'Rural Resale.' Duke had a franchise from Hudson as early as 1927. This franchise was renewed in 1950.

Notwithstanding its franchise rights, Duke furnished current to Blue Ridge, which resold to its members, inhabitants of Hudson, as early as 1941. The contract between the parties made in June 1952 contained a provision identical with section Fourth of the present contract. Notwithstanding this contract provision, Duke continued to sell to Blue Ridge for resale to its members, inhabitants of Hudson from June 1952 until the institution of this action in August 1959.

When called upon to interpret a contract, courts seek to ascertain and give effect to the intent of the parties if that intent does not require the performance of an act prohibited by law. To interpret, we must ascertain the result which the parties intended to accomplish. Manifestly, the purpose of Duke, a private corporation, was to sell its wares (electricity) at a profit. The purpose of Blue Ridge, a nonprofit cooperative, was to promote and encourage 'the fullest possible use of electric energy in the rural section of the State by making electric energy available to inhabitants of the State at the lowest cost consistent with sound economy and prudent management * * *'. G.S. § 117-10.

The contract declares the current is sold 'for the purpose of resale primarily to rural homes and farm consumers who are members of the 'Consumer' in Caldwell County, North Carolina and who are not located in any incorporated city or town.'

Manifestly this is a mere rephrasing of the statutory purpose for which the cooperative was created. The contract does not define a rural home or a farm consumer, nor does our statute (c. 117 of the General Statutes) authorizing the creation of electric membership corporations contain a definition of a rural home or rural area. The Federal statute providing for rural electrification, Title VII, U.S.C.A. sec. 913, defines a rural area as 'any area of the United States not included within the boundaries of any city, village, or borough having a population in excess of fifteen hundred inhabitants.' Hudson and all of Caldwell County except the town of Lenoir were, when this contract was made, rural areas within the Federal definition.

It is, we think, manifest that the contracting parties intended to implement both State and Federal legislation relating to rural electrification. Denny, J., had, prior to the execution of this contract, said: 'The North Carolina legislation with respect to Electric Membership Corporations, was enacted to implement the Act of Congress creating the Rural Electrification Administration * * *'. State ex rel. North Carolina Utilities Commission v. Municipal Corporations, 243 N.C. 193, 90 S.E.2d 519, 523.

The parties themselves pointedly called attention to the Federal Act by requiring approval by the Federal Administrator to make the contract binding. To hold that the phrase 'who are not located in any incorporated city or town' was intended to prohibit it from serving its members residing in the village of Hudson who had been receiving current for many years would, in our opinion, do violence to the declared intention of the parties. It would leave these members without service. By express language of the contract Duke was Blue Ridge's sole source of supply. It would produce a prohibited discrimination between members of the cooperative. We think it certain the Federal Administrator would not have given his approval to such a discrimination. It would give the same meaning to the words 'primarily' and 'solely', when it is manifest they were used as having different meanings.

Although this phrase had been in contracts between the parties for more than five years prior to the execution of the present contract, no such interpretation had been put on the language at the time this contract was executed, nor was such interpretation placed thereon until nearly two years had elapsed after its execution. As said by Stacy, C. J., in Cole v. Industrial Fibre Co., 200 N.C. 484, 157 S.E. 857, 858: 'The general rule is that, where, from the language employed in a contract, a question of doubtful meaning arises, and it appears...