Montana Power Co. v. Public Service Com'n
| Decision Date | 27 October 1983 |
| Docket Number | No. 82-340,82-340 |
| Citation | 671 P.2d 604,206 Mont. 359 |
| Parties | The MONTANA POWER COMPANY, a Mont. corp., Plaintiff and Appellant, v. The PUBLIC SERVICE COMMISSION, as an agency of the State of Montana, Defendant and Respondent. |
| Court | Montana Supreme Court |
Gough, Shanahan, Johnson & Waterman, Ronald Waterman argued, Helena, for plaintiff and appellant.
Eileen Shore argued, Helena, for defendant and respondent.
Mike Greely, Atty. Gen., Helena, William H. Mellor, III and Constance F. Brooks (Mountain States Legal Foundation), Denver, Colo., for amicus curiae.
Montana Power Company (Montana Power) appeals from an order of the District Court of the First Judicial District, Lewis and Clark County. The District Court order denied Montana Power's application for a writ of prohibition and affirmed in part an order of the Public Service Commission (Commission), which prohibited Montana Power from proceeding with a proposed corporate reorganization. We reverse the order of the District Court.
The issues presented on appeal are:
1. Can the Commission act summarily without notice or hearing in prohibiting Montana Power from proceeding with the establishment of a holding company while the Commission investigates the proposed reorganization?
2. Does the Commission have the power to prohibit establishment of a holding company by Montana Power during the investigation by the Commission?
3. Does the Commission have subject matter jurisdiction to approve or disapprove the proposed reorganization?
Montana Power has proposed the formation of a new corporation, Montana Energy Company, and the reorganization of Montana Power to be accomplished by a reverse triangular merger. Upon completion of the merger, Montana Energy Company would become the sole shareholder of the common stock of Montana Power. The common shareholders of Montana Power would become shareholders of Montana Energy Company through a share-for-share exchange. Following merger, Montana Power would become a direct subsidiary of Montana Energy Company.
On February 23, 1982, the Board of Directors of Montana Power voted to present the reorganization plan to the shareholders at the annual meeting in May. On the following day, February 24, 1982, Montana Power explained the proposed reorganization to the Commission and advised the Commission that shareholder approval would be sought on May 4, 1982.
On March 1, 1982, the Commission instituted an investigation of the reorganization plan and issued an order prohibiting Montana Power from implementing the plan until the investigation was completed. The order provided:
The Commission issued this order without notice or hearing, and without any opportunity for appearance by Montana Power. No deadline was specified for the completion of the investigation. No termination date was prescribed for the order prohibiting action by Montana Power.
Following its unsuccessful attempt to invoke the jurisdiction of this Court, Montana Power filed a complaint in District Court on April 19, 1982, seeking a writ of prohibition or injunction on the grounds that the Commission's stay order was issued absent subject matter jurisdiction and absent power to enjoin. The District Court issued a preliminary order allowing the shareholder vote on the reorganization plan. However, the court enjoined implementation of the plan until "ten (10) days after entry of an appropriate judgment." The shareholders voted and approved the reorganization plan at the May 1982 shareholders' meeting.
The Commission refused to participate at the subsequent show cause hearing. Commission counsel chose not to present evidence or to cross-examine the three Montana Power witnesses, who testified as to the possible effects of the proposed reorganization. The Commission explained to the District Court that it refused to participate because the question of the Commission's subject matter jurisdiction over the proposed reorganization was still pending before the Commission. The Commission also argued that testimony was not required because the issues raised by Montana Power involved questions of law to be resolved by statutory interpretation. As a result, the evidence submitted for consideration by the District Court and this Court is limited to the uncontradicted testimony of the witnesses for Montana Power.
Can the Commission act summarily without notice or hearing in prohibiting Montana Power from proceeding with the establishment of a holding company while the Commission investigates the proposed reorganization?
The Montana Constitution guarantees equal protection of the laws and due process to all persons. Mont. Const. art. II, Secs. 4 & 17. All persons found within the State of Montana are subject to the jurisdiction of the courts; and corporations are included in the definition of "person." Rules 4A & 4B(1), Mont.R.Civ.P. "A corporation is a 'person' within the due process and equal protection clauses of the Fourteenth Amendment to the U.S. Constitution." Mt. States, Etc. v. Dept. of Pub. Serv. Reg. (Mont.1981), 634 P.2d 181, 188, 38 St.Rep. 1479, 1487.
The power to act summarily by issuing an order prohibiting action by a utility without a hearing is a drastic power to be implied only where required for the protection of the public. As noted by James O. Freedman, Professor of Law, University of Pennsylvania:
"... The power to act summarily is a drastic and sensitive one, akin to the injunctive power of a court; it is granted to agencies, usually those having the confidence of the legislature, only for the performance of a limited number of tasks. Given the political process by which administrative agencies are brought to birth and the drastic nature of the power to act summarily, it is justifiable to assume that a legislature's failure to delegate summary authority was not inadvertent. Whatever arguments can be made in favor of implying the existence in an agency of particular powers not expressly or precisely delegated, they are not appropriate to the power to act summarily.
J. Freedman, Summary Action by Administrative Agencies, 40 University of Chicago Law Review at 5-6 (1972) (emphasis added).
When a summary power is expressly granted, it is ordinarily limited to situations where the public risks avoided by the summary action outweigh the intrusions upon legal rights which would normally follow. Even in cases where a statute expressly grants the power of summary action, constitutional rights still must be protected.
Here the Commission acted without notice and without an opportunity for hearing on the part of Montana Power. That type of procedure is in striking contrast to the notice and hearing procedures required in the district courts when restraining orders, preliminary injunctions and permanent injunctions are sought under Title 27, Chapter 19, MCA.
Section 69-3-110(5), MCA specifies:
"In addition to the other remedies provided by this chapter for the prevention and punishment of any violation of the provisions thereof and all orders of the commission, the commission may compel compliance with the provisions of this chapter and of the orders of the commission by proceedings in mandamus, by injunction, or by other civil remedies."
This section shows the clear legislative intent that the Commission use the court system to seek enforcement by injunction, as distinguished from issuing any injunctive type order on its own part. Procedures to protect constitutional rights to notice and hearing are mandated by Title 27, Chapter 19, MCA, which governs issuance of injunctive orders by the courts.
Our review of the public utility law discloses that the legislature has not specifically addressed the topic with which we are here involved, i.e. corporate reorganization. Chapter 3 of Title 69, covering the regulation of utilities, does not contain any specific procedural requirements regarding notice or hearing. Neither do we find any provision in the Administrative Rules of Montana which authorizes the Commission to make a summary order without notice and opportunity for a hearing.
We have also reviewed Title 27, Chapter 19, MCA, entitled "Injunctions." Chapter 19 does not contain any legislative provision specifically applying to corporate reorganizations....
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