Public Util. Dist. No. 1 of Pend Oreille Co. v. United States

• Decision Date: 17 September 1969
• Docket Number: No. 23539.,23539.
• Citation: 417 F.2d 200
• Parties: PUBLIC UTILITY DISTRICT NO. 1 OF PEND OREILLE COUNTY, Appellee, v. UNITED STATES of America, Appellant, Inland Power & Light Co., Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

417 F.2d 200 (1969)

PUBLIC UTILITY DISTRICT NO. 1 OF PEND OREILLE COUNTY, Appellee, v. UNITED STATES of America, Appellant Inland Power & Light Co., Respondent.

No. 23539.

United States Court of Appeals Ninth Circuit.

September 17, 1969.

William G. Ennis (argued), of Ennis & Klobucher, Spokane Wash., for appellee.

Roger P. Marquis (argued), Glen E. Taylor, Acting Asst. Atty. Gen., Washington, D. C., Smithmoore P. Myers, U. S. Atty., Robert M. Sweeney, Asst. U. S. Atty., Spokane, Wash., for appellant.

Will Lorenz (argued), of Trezona, Chastek & Lorenz, Spokane, Wash., for respondent.

Before ELY and CARTER, Circuit Judges, and SMITH,^* District Judge.

RUSSELL E. SMITH, District Judge.

Public Utility District No. 1 of Pend Oreille County (PUD) is a municipal corporation. Inland Power & Light Co. (Inland) is a private non-profit membership corporation. Both are organized under the laws of Washington. Inland furnished electrical energy to its members in ten counties in Washington, including Pend Oreille County, and two counties in Idaho. It is and has been financed by the Rural Electrification Administration¹ and has mortgaged all of its assets to the Administration. PUD seeks to acquire the facilities of Inland in Pend Oreille County.

Federal law provides that a borrower of funds from the Administration may not sell or dispose of its property without the consent of the Administrator.² Inland has refused to sell and the Administrator refused to consent and both oppose the condemnation. The District Court upheld the right to condemn and this appeal followed. We reverse.

Under the law of Washington a public utility district may condemn any facilities for the generation or distribution of electrical energy³ even though those facilities are already devoted to a public use. The commissioners of the PUD by resolution determine the necessity for the taking and that determination is conclusive unless it can be shown that the commissioners acted fraudulently or capriciously. The law under which a PUD condemns does not provide for any factual consideration of the problem of public use or any weighing of the needs of the condemning PUD as against the needs of the condemnee. The public character of its ownership is deemed to make the use of the condemning PUD a higher use than that of the privately owned electric company.⁴

In 1936 Congress, concerned with the fact that those then engaged in the business of generating electrical energy had failed to extend electric service to the farms of America,⁵ created the Rural Electrification Administration.⁶ The Administrator was authorized to make low interest loans for rural electrification and to study the condition and program of electrification in rural areas.⁷

Congress determined that the national interest would be served by subsidizing the rural user of electricity. The federal purpose to electrify rural America was largely accomplished by 1955, by which time 93% of the farms were electrified.⁸ The continuing congressional interest in the electrification of the farms is indicated by the deliberate retention in 1955 of the requirement that the Administrator make a yearly unelectrified farm survey.⁹ True, the United States, when the loan is paid, no longer has the same direct interest in the borrowing distributor, but so long as the United States is interested in keeping the electric lamps lit on the farms, it is of necessity interested in the vehicles distributing the electricity which will light those lamps.

In an ordinary condemnation case the condemnee loses something of value but is paid for it. This is not an ordinary case because what is sought to be taken here is part of a system and even if the part taken is paid for, and if an award is made for the damage to the remaining portion, a question remains as to the capacity of the remaining portions of the system to function. As we understand the law of Washington, the capacity of a condemnee to continue to function as a healthy economic unit is not relevant to the issue of the taking. In this case if, as a result of the condemnation, the loans to Inland were paid in full, but the remaining portions of the system could not continue to operate with decent service and at decent rates, the Government would have been paid but the purpose of the Rural Electrification Act would have been frustrated.

The problem then comes down to this: May a part of the distribution system of a federally subsidized distributor of electricity be taken under a law which looks only to the necessity of the taker, which vests in the taker the right to determine the necessity, and which makes no requirement that an underlying federal purpose be considered? We think not.

There is no case law exactly in point. In a predecessor case, Public Utility Dist. No. 1 v. Inland Power & Light Co., 64 Wash.2d 122, 390 P.2d 690 (1964), the Supreme Court of Washington, in holding that the United States was an indispensable party to this kind of a condemnation suit, noted the substantial interest of the United States in the Inland properties. In City of Fairbanks v. Electric Distribution System (Alaska), 413 P.2d 165 (1966) the Supreme Court of Alaska, in considering the indispensability of the United States as a party, noted the interest of the United States in the continued functioning of an REA subsidized distributor and the possibility that a condemnation of a part of the system might damage the capacity of the condemnee to continue. In Alabama Power Company v. Alabama Electric Cooperative, Inc. et al., 394 F.2d 672 (5 Cir. 1968) cert. den. 393 U.S. 1000, 89 S.Ct. 488, 21 L.Ed.2d 465 (1968), the Court of Appeals for the Fifth Circuit, in holding an REA Cooperative exempt from the anti-trust laws, said:

"The Power Company would treat REA simply as a rival public utility. We agree with the recent decision of the Federal Power Commission in Dairyland Power Cooperative, 37 F.P. C. 12, 35 L.W. 2385, that rural electric cooperatives are something more than public utilities; they are instrumentalities of the United States. They were chosen by Congress for the purpose of bringing abundant, low cost electric energy to rural America.\'" Alabama Power, supra, at 677.

Later the Court of Appeals for the District of Columbia, in City of Paris, Kentucky, v. Federal Power Commission, 130 U.S.App.D.C. 250, 399 F.2d 983 (1968), held that a rural electric cooperative was...