Morgan County Rural Elec. Membership Corp. v. Public Service Co. of Ind., 569

• Decision Date: 26 February 1970
• Docket Number: No. 569,569
• Citation: 253 Ind. 541,255 N.E.2d 822,20 Ind.Dec. 354
• Parties: MORGAN COUNTY RURAL ELECTRIC MEMBERSHIP CORPORATION, Appellant, v. PUBLIC SERVICE COMPANY OF INDIANA, Inc., Appellee. S 109.
• Court: Indiana Supreme Court

Page 822

255 N.E.2d 822

253 Ind. 541

MORGAN COUNTY RURAL ELECTRIC MEMBERSHIP CORPORATION, Appellant, v. PUBLIC SERVICE COMPANY OF INDIANA, Inc., Appellee.

No. 569 S 109.

Supreme Court of Indiana.

Feb. 26, 1970.

H. Richard Miles, Martinsville, Parr, Richey, Obremskey, Pedersen & Morton, Lebanon, for appellant.

Greg K. Kimberlin and Duejean C. Garrett, Plainfield, for appellee; John E. Hurt, McNutt, Hurt & Blue, Martinsville, of counsel.

ARTERBURN, Judge.

This action was initiated upon appellant's (REMC) complaint wherein it sought a restraining order, temporary injunction and permanent injunction to restrain and permanently enjoin appellee (Public Service Co.) from constructing, maintaining and operating electrical distribution lines in a recently annexed addition (Wolfe's Eighth Subdivision) to the City of Martinsville, and further restrain appellee from selling electrical energy to any consumer in said territory.

Appellee filed a demurrer in response to appellant's complaint. The demurrer, which was supported by a memorandum, was sustained. Appellant refused to plead further and the trial court entered judgment adverse to appellant.

The memorandum in support of appellee's demurrer raised a single objection to appellant's complaint. That memorandum in substance stated that appellant's own articles of incorporation, which were attached to appellant's complaint as an exhibit, prohibited appellant from providing service within the limits of any incorporated town or city having in excess of fifteen hundred (1500) inhabitants. It was then noted that the area in question, having been annexed to the City of Martinsville, Indiana, was within an incorporated city having in excess of fifteen hundred (1500) inhabitants. The demurrer is not sustainable on this basis.

Appellant was organized and exists by virtue of the Indiana Rural Electric Membership Corporation Act, being Burns' Ind.Stat.Ann. § 55--4401 et seq. Appellant's articles of incorporation were approved on June 24, 1939. Appellant was granted a certificate of public convenience and necessity, to serve electricity to, among other areas, the territory in dispute before it was annexed. Appellant's articles of incorporation contain the following provision relating to the territory which appellant may service:

'But in any and every case, excepting any territory within the limits of any incorporated city or town having in excess of fifteen hundred (1500) inhabitants * * *'

This provision was taken directly from Burns' Ind.Stat.Ann. § 55--4404(b) as it then existed. In 1939 that statute provided that the Articles of Incorporation of a Rural Electric Membership Corporation must state:

'A reasonable description of the territory in which its operations are to be conducted, and which shall not include any incorporated city or town having a population in excess of fifteen hundred (1500) inhabitants * * *.'

It is appellee's contention, and presumably the reasoning of the trial court since it sustained appellee's demurrer, that on October 19, 1964, when the territory in question was annexed to the City of Martinsville, an incorporated city of more than fifteen hundred (1500) inhabitants both in 1937 when appellant was incorporated and certified and in 1964 when the annexation occurred, the annexed territory automatically ceased to be within appellant's authorized service area by virtue of the above quoted provision of appellant's articles of incorporation. With such reasoning we cannot agree.

The question, as a practical matter, is whether the clause should be interpreted to mean that appellant is unable to provide electrical service in a city or town which, subsequent to incorporation of appellant, has grown to include in excess of fifteen hundred (1500) inhabitants or whether the determination is to be made at the time of incorporation of the appellant. We feel that whether a city or town has in excess of fifteen hundred (1500) inhabitants is a determination that must, in all fairness, be made at the time of appellant's articles of incorporation are approved. We reach this conclusion on the basis of several considerations. We first note that the legislature, in 1953, clarified the meaning of Burns' Ind.Stat.Ann. § 55--4404. That statute now states that the Articles of Incorporation of a Rural Electric Membership Corporation must contain:

'A reasonable description of the territory in which its operations are to be conducted, and which shall not include any incorporated city or town having a population in excess of fifteen hundred (1500) inhabitants at the time such articles are first approved by the public service commission * * *.' (emphasis added)

We view this amendment as a clarification and not as the creation of a new statutory scheme. The desirability of the result we reach, and the result sought by the legislative amendment, is apparent. The territory of the appellant would thereby be fixed and subject to change only by authorized means. Such certainty is desirable.

We further point out that in this situation, where a portion of the service territory of appellant was annexed by an incorporated city of more than fifteen hundred (1500), the procedure whreby appellant ceases to have the authority to provide service in the territory so annexed is an orderly one as clearly set out in Burns' Ind.Stat.Ann. § 55--4418a. To adopt appellee's view that annexation ipso facto renders appellant unable to render service in the territory would torture the legislative scheme for the transfer of such service and make the statute to a great extent meaningless.

Burns' Ind.Stat.Ann. § 55--4418a reads as follows:

'Municipality annexing territory served by electric utility--Purchase of property--Condemnation.--Whenever a municipality in which a public utility (including a corporation organized, or admitted to do business, under this act (§§ 55--4401--55--4426)) is rendering electric utility service under a franchise, license or indeterminate permit or in which a municipally owned utility is rendering electric utility service, as the case may be (such public or municipal utility being hereinafter called the 'franchised utility'), annexes additional territory and such annexed territory includes any territory in which the franchised utility was not authorized to render electric utility service immediately prior to such annexation but in which some other public utility (including a corporation organized, or admitted to do business, under this act) or municipally owned utility (such public or municipally owned utility being hereinafter called the 'other utility') was lawfully rendering electric utility service at such time, then the franchised utility and the other utility shall promptly negotiate for the purchase by the franchised utility of the property owned by the other utility within the annexed territory and used and useful by the other utility in or in connection with the rendering of electric utility service therein. In the event that such property has not been purchased by the franchised utility within 90 days after such annexation takes place, then the franchised utility may bring an action in the circuit or superior court of the county where such municipality (or the major part thereof in area) is located...