Ex parte York County Natural Gas Authority

• Decision Date: 10 February 1965
• Docket Number: No. B/2075.,B/2075.
• Court: U.S. District Court — District of South Carolina
• Parties: Ex parte YORK COUNTY NATURAL GAS AUTHORITY, Petitioner. In re Outstanding Bonds, Series of 1957, 1958, 1959, and 1960, Payable Solely From Revenues.

238 F. Supp. 964

Ex parte YORK COUNTY NATURAL GAS AUTHORITY, Petitioner.

In re Outstanding Bonds, Series of 1957, 1958, 1959, and 1960, Payable Solely From Revenues.

No. B/2075.

United States District Court W. D. South Carolina, Rock Hill Division.

February 10, 1965.

C. W. F. Spencer, Jr., Rock Hill, S. C., Huger Sinkler, Charleston, S. C., petitioner.

James P. Mozingo, Darlington, S. C., pro se and for Certain Bondholders.

HEMPHILL, District Judge.

Petitioner, seeking approval of its proposed plan of composition of outstanding indebtednesses allegedly in default, exhibited, on August 25, 1964, its petition, together with exhibits and references, alleging justification of same.¹ The action is pursued under the provisions of Title 11, Chapter 9, United States Code. This Chapter, formerly known as Chapter X of the Bankruptcy Act, insofar as sections 401-404 thereof are concerned, have been declared valid and constitutional by the Supreme Court of the United States. See United States v. Bekins, 304 U.S. 27, 58 S.Ct. 811, 82 L.Ed. 1137. The United States Constitution confers the power on Congress to enact necessary statutes.² Title 28, United States Code, § 1334 provides: "The district courts shall have original jurisdiction, exclusive of the courts of the States, of all matters and proceedings in bankruptcy."

The fact that the Constitution allows and the National Legislature enacts in accordance with its authority, however, does not enlarge the authority of those seeking relief to exceed the limitation imposed by statute.³ Within those limits this Court may proceed to render interlocutory decree, retaining such jurisdiction as may be necessary to implement, or carry out the provisions or directions of such decree.⁴ With such in mind this Court accepted and assumed jurisdiction.

York County Natural Gas Authority was originally created by the General Assembly of South Carolina in 1954,⁵ the Act was later amended April 6, 1957⁶ to function under changed circumstances which effectually substituted Carolina Pipeline Company as supplier of gas in place of Transcontinental Gas Pipeline Corporation. Pertinent parts of the Act as amended are:

"SECTION 1. Section 1 of Act 959 of 1954, amended — York County Natural Gas Authority created. — Section 1 of Act No. 959 of the Acts of 1954, is amended to read as follows:

"Section 1. There is hereby created a body corporate and politic of perpetual succession to be known as the York County Natural Gas Authority (hereinafter sometimes referred to as the authority). It shall be the function of the authority to purchase, lease, acquire, build, construct, maintain and operate natural gas distribution systems within the service area hereinafter defined and such transmission lines as may be necessary to transport natural gas to the distribution systems from the transmission lines to be constructed by Carolina Pipeline Company or other sources from which natural gas may now or hereafter become available, which transmission lines and distribution systems will serve persons, firms, corporations, municipal corporations, and any subdivision or division of the State located in and nearby to each of the incorporated municipalities of Clover, York, Rock Hill, Fort Mill or any other municipality or thickly populated area in York County. The transmission lines, distribution systems, their component parts, all apparatus, equipment and property incident thereto or used or useful in the operation thereof, and all additions, improvements, extensions and enlargements to any of the same, shall henceforth be referred to collectively in this act as the system. The authority shall have the further functions and duties prescribed by this act, and shall have all of the powers herein granted.

"SECTION 2. Service area further. —The Authority shall be empowered to furnish natural gas service throughout the County of York, and, for the purposes of this Act, the area of such county shall constitute the Service Area of the Authority.

* * * * *

"SECTION 4. Powers and duties. — * * *

"a. To sue and be sued.

* * * * *

"c. To make bylaws for the management and regulation of its affairs, and to define a quorum for its meetings.

"d. To acquire, purchase, hold, use, lease, mortgage, sell, transfer and dispose of any property, real, personal or mixed, or any interest therein.

* * * * *

"e. To purchase, lease, acquire, build, construct, maintain and operate distribution systems within its service area and such transmission lines as may be necessary to serve the distribution systems and from time to time enlarge and extend such distribution systems and transmission lines.

* * * * *

"g. To enter into contracts of long duration for the sale of interruptible gas only, but all of such contracts shall contain a provision permitting the Authority to increase the price charged its customers for gas if the Authority, in turn, shall be required to pay more for its gas than it did on the occasion that such contract was entered into, and no contract of any sort shall be entered into which shall not in all respects be subordinate to any covenant or undertaking which the Authority may make in the proceedings taken in connection with the issuance of any bond or other obligation of the Authority. And, no contract of any sort shall be made respecting the sale of firm gas, which shall be sold in accordance with such schedule of rates as shall from time to time be in effect.

* * * * *

"1. To appoint officers, agents, employees and servants, prescribe the duties of such, fix their compensation, and determine if and to what extent they shall be bonded for the faithful performance of their duties.

"m. In its discretion, to employ any person or corporation to operate its System for any fixed period of time, upon such terms and conditions as the Authority may deem proper.

* * * * *

"o. To borrow money and to make and issue negotiable bonds, notes, and other evidences of indebtedness, payable from all or any part of the revenues derived from the operation of its System. The sums borrowed may be those needed to pay all costs incident to the construction and establishment of the System, and any extension, addition, and improvement thereto, including engineering costs, construction costs, the sum needed to pay interest during the period prior to which the System, or any extension, addition or improvement thereto, shall be fully in operation, such sum as is needed to supply working capital to place the System in operation, and all other expenses of any sort that the Authority may incur in establishing, extending and enlarging the System. Neither the faith and credit of the State of South Carolina, nor of the municipalities of Clover, York, Rock Hill and Fort Mill, in York County, shall be pledged for the payment of the principal and interest of the obligations, and there shall be on the face of each obligation a statement, plainly worded to that effect. Neither the members of the Authority, nor any person signing the obligations, shall be personally liable thereon. To the end that a convenient procedure for borrowing money may be prescribed the Authority shall be fully empowered to avail itself of all powers granted by Sections 59-361 through 59-415 and 59-651 through 59-682, Code of Laws of South Carolina, 1952, as now or hereafter constituted, it being the intent of this provision that further amendments and modifications of these Code provisions shall be deemed to amend and revise correspondingly the powers granted by this paragraph. In exercising the powers conferred upon the Authority by such Code provisions, the Authority may make all pledges and covenants authorized by any provision thereof, and may confer upon the holders of its securities all rights and liens authorized by such Code provisions. Specifically, and notwithstanding contrary provisions in any of such Code provisions, if contrary provisions there be, the Authority may:

"(1) Provide that such bonds, notes or other evidences of indebtedness be payable, both as to principal and interest, from the net revenues derived from the operation of its System, as such net revenues may be defined by the Authority.

"(2) Covenant and agree that upon it being adjudged in default as to the payment of any instalment of principal or interest upon any obligation issued by it, or in default as to the performance of any covenant or undertaking made by it, that in such event the principal of all obligations of such issue may be declared forthwith due and payable, notwithstanding that any of them may not have then matured.

"(3) Confer upon a corporate trustee the power to make disposition of the proceeds from all borrowings and of all revenues derived from the operation of the System, in accordance with the resolutions adopted by the Authority as an incident to the issuance of any notes, bonds or other types of securities.

"(4) Dispose of all obligations at public or private sale, and upon such terms and conditions as it shall approve.

"(5) Make such provision for the redemption of any obligations issued by it prior to their stated maturity, with or without premium, and on such terms and conditions as the Authority shall approve.

"(6) Covenant and agree that any cushion fund established to further secure the payment of the principal and interest of any obligations shall be in a fixed amount.

* * * * *

"(8) Prescribe the procedure, if any, by which the terms of the contract with the holders of its obligations may be amended, the number of obligations whose holders must consent thereto, and the manner in which such consent shall be given.

"(9) Prescribe the events of default and the terms and conditions upon which all or any obligations shall become or may be declared due before maturity and the terms and conditions upon which such declaration and its consequences may be waived.

"SECTION 5. Disposition of revenues. — All net revenues derived from the System, whose disposition the Authority

...