Northern Gas Co. v. Town of Sinclair

• Decision Date: 02 April 1979
• Docket Number: Nos. 4981,4982,s. 4981
• Citation: 592 P.2d 1138
• Parties: NORTHERN GAS COMPANY, a Wyoming Corporation, Appellant (Defendant below), v. The TOWN OF SINCLAIR, a Wyoming Municipal Corporation, Appellee (Plaintiff below). The TOWN OF SINCLAIR, a Wyoming Municipal Corporation, Appellant (Plaintiff below), v. NORTHERN GAS COMPANY, a Wyoming Corporation, Appellee (Defendant below).
• Court: Wyoming Supreme Court

Page 1138

592 P.2d 1138

NORTHERN GAS COMPANY, a Wyoming Corporation, Appellant (Defendant below), v. The TOWN OF SINCLAIR, a Wyoming Municipal Corporation, Appellee (Plaintiff below).

The TOWN OF SINCLAIR, a Wyoming Municipal Corporation, Appellant (Plaintiff below), v. NORTHERN GAS COMPANY, a Wyoming Corporation, Appellee (Defendant below).

Nos. 4981, 4982.

Supreme Court of Wyoming.

April 2, 1979.

David G. Lewis of Brown, Drew, Apostolos, Massey & Sullivan, Casper, for appellant in Case No. 4981 and appellee in Case No. 4982.

K. Craig Williams, Rawlins, for appellee in Case No. 4981 and appellant in Case No. 4982.

Before RAPER, C. J., and McCLINTOCK, THOMAS, ROSE, and ROONEY, JJ.

THOMAS, Justice.

Northern Gas Company asks this court to exclude from the computation of a franchise fee payable to the Town of Sinclair sales of natural gas made to an oil refinery. Northern Gas Company claims there is an ambiguity in the ordinance granting the franchise which is developed from evidence relating to circumstances preceding the granting of the franchise. The district court held that the ordinance granting the franchise should be viewed as a taxing ordinance and that its terms were clear, unambiguous, and should be enforced. In so ruling it held that evidence of the surrounding circumstances preceding the ordinance was not material. Both parties to this appeal agree that the case should be disposed of under principles of contract law even though the district court treated the case as one involving a taxing ordinance. We will affirm the judgment of the district court awarding to the Town of Sinclair the one percent franchise fee on the sales of natural gas to the oil refinery, but we will do that on the basis of principles of contract law rather than rules relating to taxes. We will hold that evidence of surrounding circumstances cannot be relied upon to structure an ambiguity in otherwise clear language in order to invoke rules applicable to the construction of contracts.

In a cross-appeal the Town of Sinclair asks that interest be awarded to it upon the amount of the judgment. The trial court had refused to award pre-judgment interest, holding that such an award was not proper under the rules relating to taxes. We will reverse the judgment of the district court in this regard and hold that pre-judgment interest should have been awarded to the Town of Sinclair.

While not material to the disposition of this case, the history of the process of furnishing natural gas service to residents of the Town of Sinclair is helpful in understanding the position of Northern Gas Company. Northern Gas Company began selling natural gas to Sinclair Refining Company in 1952. Those sales were made pursuant to a certificate of public convenience and necessity issued by the Public Service Commission of Wyoming which did not include sales of natural gas to residents of the Town of Sinclair. The contract provided for delivery of the natural gas at the receiving pipeline of Sinclair Refining Company and that the obligation of providing a pipeline to a point of consumption was the responsibility of Sinclair Refining Company. This arrangement went on through a series of contracts up to the time of trial. In 1967, the point of delivery was changed to Sinclair's refinery yard at Sinclair, Wyoming, and at that time Sinclair Refining Company conveyed to Northern Gas Company the pipeline from the point where gas previously was delivered to the new point of delivery. Except for this information, the record is silent so far as the actual location of the natural gas pipelines or the distribution system in the Town of Sinclair is concerned.

The Town of Sinclair was a company town, and at least prior to 1959 Sinclair Refining Company distributed natural gas to homeowners and other users within the community. In 1959 the Town of Sinclair was granted a certificate of public convenience and necessity to operate all electric and gas utility properties within the Town of Sinclair. Apparently that situation continued until 1967, with the Town of Sinclair purchasing its natural gas from Sinclair Refining Company. At that time a conclusion was reached that the refining company could be viewed as a public utility because of its sale of natural gas to the Town of Sinclair. In the summer and fall of 1967 an arrangement was made to sell the gas distribution system in the Town of Sinclair to Northern Gas Company. ¹ The Town of Sinclair proposed to grant a franchise to Northern Gas Company to sell gas to domestic and commercial users within the Town of Sinclair. A special election was held in accordance with State law and the voters approved the proposed sale on October 2, 1967. On October 16, 1967, Ordinance No. 112 was adopted pursuant to which the franchise was granted to Northern Gas Company, and that franchise was accepted by Northern Gas Company on October 17, 1967. The Public Service Commission of Wyoming, in anticipation of that arrangement, entered its order authorizing Northern Gas Company to purchase the natural gas system described in the applications and exhibits which had been submitted to it, cancelling the certificate authority held by the Town of Sinclair, and authorizing Northern Gas Company to furnish the services pursuant to its existing authority. The ordinance provided with respect to consideration for the franchise as follows:

"Section 6. As a consideration for all franchise rights and contractual privileges granted by the Town of Sinclair under the franchise hereby granted, the Company shall pay to the Town of Sinclair an amount equal to one percent (1%) of the Company's gross revenue as said term is defined herein. Such payment shall be made quarterly on or before the 10th day of Jan 10, 1968, and on or before the 10th day of the month following the end of each succeeding calendar quarter during the term of this franchise.

"The term 'Gross Revenue' as used herein shall mean and be construed as the Company's gross operating revenue accruing during the preceding calendar quarter or fraction thereof from the sale of natural gas within the corporate limits of the Town of Sinclair, Wyoming, other than such revenue derived from transactions in interstate or foreign commerce, sales of natural gas to the Town or from business done with the U.S. Government or any agency thereof and after deducting therefrom any amounts paid by the Company to the United States or to the State of Wyoming as excise or business taxes upon the sale or distribution of natural gas in the Town of Sinclair, Wyoming, and at the election of the Company, Company may also deduct from 'gross revenues' the total of all uncollectible revenues from customers within the Town during the previous calendar quarter."

For a period of ten years Northern Gas Company paid the franchise fee on sales of natural gas to the inhabitants and commercial users in the Town of Sinclair excluding therefrom all sales to Sinclair Refining Company and its successors in interest. In February of 1977 the Town of Sinclair made demand upon Northern Gas Company for payment of the one percent franchise fee upon the sales of natural gas to the refinery for the 10-year period. Northern Gas Company refused to pay, and this action was then instituted by the Town of Sinclair to recover the franchise fee on the sales of natural gas to the refinery together with interest on the franchise fees on such sales from the time the payments were due.

After trial of the matter the district court entered its judgment awarding the amount of $39,658.78 to the Town of Sinclair. This sum represented the one percent franchise fee as applied to the sales of natural gas to the oil refinery. The facts for the most part were not disputed, and the parties stipulated that the oil refinery was situated within the corporate limits of the Town of Sinclair. The district court provided for interest only on the judgment, denying, however, the claim of the Town of Sinclair for pre-judgment interest. There does appear in the record an opinion letter of the district court which makes it clear that the district court treated the case as one arising from a taxing ordinance rather than as a matter of contract. It was the conclusion of the district court that because the matter involved a taxing ordinance it was not appropriate to award interest prior to judgment.

In its appeal Northern Gas Company states that the issue is whether Ordinance No. 112 is a taxing measure or whether it represents a contract between Northern Gas Company and the Town of Sinclair, the interpretation of which should be governed by Wyoming law regarding contracts. Northern Gas Company then makes the following arguments in support of its position that the one percent franchise fee should not be applied to the sales of natural gas to the oil refinery:

"I. A FRANCHISE GRANT MADE BY A MUNICIPALITY TO A PUBLIC SERVICE COMPANY IS, UPON ACCEPTANCE BY THE COMPANY, A CONTRACT.

"II. WHEN A DOUBT ARISES AS TO THE SUBJECT MATTER TO BE TAXED UNDER THE CONTRACT, THE TRIAL COURT SHOULD EXAMINE THE EXTRINSIC EVIDENCE ADMITTED TO DETERMINE THE INTENT OF THE PARTIES.

"III. IN DETERMINING THE INTENT OF THE PARTIES, WEIGHT SHOULD BE GIVEN TO THE CONSTRUCTION PUT ON THE CONTRACT CONTEMPORANEOUSLY BY THE PARTIES.

"IV. THE CONTEMPORANEOUS CONSTRUCTION PUT UPON AN ORDINANCE BY THE ADMINISTRATIVE AGENCY EXECUTING

IT SHOULD BE GIVEN WEIGHT AS TO ITS MEANING."

The Town of Sinclair in its brief and argument agreed that the franchise created by the adoption of Ordinance No. 112 and the acceptance of its conditions by Northern Gas Company resulted in a contract between the Town of Sinclair and Northern Gas Company. The Town of Sinclair does not and did not claim that this was a revenue measure adopted under its power to tax. We agree with this position taken by the parties. The concept is aptly expressed in 12 McQuillin, Municipal Corporations, § 34.06 p. 18 (3d Ed. 1970, Rev.), as...