Public Utility Dist. No. 1 of Lewis County v. Washington Public Power Supply System

• Decision Date: 05 September 1985
• Docket Number: 50306-1,50363-0 and 50364-8,50354-1,50302-8,50305-2,50240-4,Nos. 50238-2,s. 50238-2
• Citation: 104 Wn.2d 353,705 P.2d 1195
• Parties: PUBLIC UTILITY DISTRICT NO. 1 OF LEWIS COUNTY, et al., Respondents, v. WASHINGTON PUBLIC POWER SUPPLY SYSTEM, a municipal corporation and joint operating agency, Respondent, and Chemical Bank, a New York corporation, Appellant.
• Court: Washington Supreme Court

Page 353

104 Wn.2d 353

705 P.2d 1195

PUBLIC UTILITY DISTRICT NO. 1 OF LEWIS COUNTY, et al., Respondents, v. WASHINGTON PUBLIC POWER SUPPLY SYSTEM, a municipal corporation and joint operating agency, Respondent and Chemical Bank, a New York corporation, Appellant.

Nos. 50238-2, 50240-4, 50302-8, 50305-2, 50306-1, 50354-1,

50363-0 and 50364-8.

Supreme Court of Washington En Banc.

Sept. 5, 1985.

Betts, Patterson & Mines, P.S., Michael Mines, Kim C. Pflueger, Seattle, for appellant Chemical Bank

Gordon, Thomas, Honeywell, Malanca, Peterson & O'Hern, Albert R. Malanca, Kenneth G. Kieffer, Donald S. Cohen, Tacoma, for respondent Wash. Public Utilities Group.

Culp, Dwyer, Guterson & Grader, Richard Yarmuth, Earle J. Hereford, Jr., Susan L. Guthrie, Ellen D. Bowman, Seattle, for respondent Wash. Public Power Supply System.

Williams, Novack & Hansen, James D. Twisselman, Jeffrey E. Pratt, Everett, for respondent Snohomish Co. PUD 1.

Roberts & Shefelman, George M. Mack, Joni H. Ostergaard, Bennett A. McConaughy, Seattle, for respondents City of Richland, et al.

Mary Gibbons, Gary A. Dahlke, Richard D. McWilliams, Spokane, Theodore J. Collins, Donald Kari, Seattle, Stephen S. Walters, Portland, Or., for Wash. Water Power Co., Puget Sound Power and Light Co., and Pacific Power and Light Co. (respondents).

Ralph K. Nickerson, Goldendale, Leavy, Schultz & Sweeney, Steven Palmer, Pasco, for respondent Klickitat & Franklin Co. PUD's 1.

Platt, Irwin, Colley, Oliver, Miller & Wood, Craig L. Miller, Bart G. Irwin, Stephen E. Oliver, Port Angeles, for respondent Clallam County PUD 1.

William R. Squires, III, Stephen M. Rummage, Seattle, amici curiae.

PEARSON, Acting Chief Justice.

In these consolidated cases, the Washington Public Power Supply System (WPPSS) and Chemical Bank challenge several summary judgments entered against them in the King, Lewis, and Benton County Superior Courts. The questions presented relate to loans advanced to WPPSS by numerous public utility districts (PUD's), municipalities and rural electric cooperatives to assist in the orderly preservation ("mothballing") and subsequent termination of Washington nuclear plants (WNP) 4 and 5. The trial courts concluded that the loans were immediately due and payable. In addition, the Lewis County judge ruled that money transferred by WPPSS to Chemical Bank following the maturation of the termination loans constituted a conversion. We now reverse the conversion judgment against Chemical Bank, affirm the orders holding the notes due and payable, limit the funds accessible for payment, and remand for a determination of attorney fees.

Facts

WPPSS is a joint operating agency formed pursuant to In the fall of 1981, when the plants were only partially constructed, it became apparent that further financing for the plants was doubtful. WPPSS therefore sought a way to mothball the plants until additional financing became available. Hence, WPPSS adopted Resolutions 1199 and 1201 authorizing execution of loan agreements to pay the costs of mothballing and issuance of subordinated revenue notes as evidence of the loans. In accordance with Resolutions 1199 and 1201, the Participants entered into "Participants Agreements to Advance Funds" in which they agreed to loan WPPSS money for the mothballing of WNP 4 and 5. These agreements are collectively known as bridge loans. As evidence of the loans, WPPSS issued subordinated revenue notes bearing a maturity date of July 1, 1984.

                RCW 43.52.360 and comprised of 19 Washington PUD's and four cities.   In 1974 WPPSS decided to construct WNP 4 and 5.   To facilitate construction of these plants, WPPSS entered into "Participants' Agreements" 1 with 88 PUD's, municipalities, and rural electric cooperatives ("Participants") and adopted Resolution 890 (the "Bond Resolution").   The Bond Resolution provided a plan for the construction of the plants and the issuance of revenue bonds.   The Participants' Agreements contractually obligated the Participants to purchase power produced by WNP 4 and 5, thus enabling WPPSS to cover debts incurred in constructing the plants.   Pursuant to these documents, WPPSS issued $2.25 billion in municipal bonds and began construction of the plants
                

Despite the money advanced through the bridge loans, the attempt to delay construction of WNP 4 and 5 was unsuccessful. Consequently, on January 22, 1982 WPPSS adopted Resolution 1204 formally terminating the plants and authorizing the execution of agreements for the Following termination of WNP 4 and 5, disputes arose over whether, pursuant to the Participants' Agreements, the Participants owed WPPSS sufficient money to pay the bonds, despite the fact that the plants would never yield power. This court eventually resolved these disputes in Chemical Bank v. Washington Pub. Power Supply Sys., 99 Wash.2d 772, 666 P.2d 329 (1983) (Chemical Bank I), and Chemical Bank v. Washington Pub. Power Supply Sys., 102 Wash.2d 874, 691 P.2d 524 (1984) (Chemical Bank II). In the meantime, it became apparent that without receipt of the money from the Participants, WPPSS would soon be unable to meet its financial obligations as they became due, including payments owed pursuant to the Bond Resolution. Prior to any notice of default, however, Chemical Bank was enjoined from declaring a default with respect to WPPSS' obligations to the bondholders. Thereafter, WPPSS failed to make the payments required by the Bond Resolution. ² In addition, on June 30, 1983, WPPSS failed to fulfill its obligations on the termination loans. Shortly thereafter the termination lenders began demanding repayment. The bridge lenders also began demanding repayment on the grounds that WPPSS' inability to meet its obligations in May, 1983 constituted an anticipatory breach of the bridge loans.

                advancement of termination costs and the issuance of subordinated revenue notes.   Thereafter the Participants entered into "Participants Agreements to Advance Termination Costs".   These agreements are collectively known as termination loans.   As evidence of the indebtedness, WPPSS issued subordinated revenue notes bearing a maturity date of June 30, 1983
                

On June 15, 1983 this court decided Chemical Bank I wherein it was determined that the 28 Washington PUD's and municipalities which were WPPSS participants lacked the authority to enter into the Participants' Agreements. Consequently, on July 22, 1983 WPPSS admitted its Following Chemical Bank's declaration, several bridge and termination lenders filed several summary judgment motions against WPPSS. In addition, in its Lewis County action against WPPSS, one group of lenders, the Washington Public Utilities Group (WPUG), added Chemical Bank as a defendant and moved for summary judgment against the Bank for conversion of the funds transferred to the Bank on July 25, 1983. Thereafter, summary judgment orders were entered against WPPSS on its obligations to repay the loans. The trial judges concluded that WPPSS' affirmative defenses failed to present genuine issues of material fact and that pursuant to RCW 43.52.391 the loans were due and payable. In addition, the Lewis County judge stated that pursuant to either RCW 43.52.391 or the loan agreements the loans were due and payable. The orders stated the judgments were payable After judgment against WPPSS was entered in the WPUG's action, several lenders sought to intervene against Chemical Bank. Intervention, however, was denied and the trial judge entered judgment against Chemical Bank and in favor of WPUG. Thereafter WPPSS appealed the judgments to the Court of Appeals. Chemical Bank appealed its judgment directly to this court as did the intervenors. On motion of Chemical Bank, we transferred the cases from the Court of Appeals and consolidated all actions for review by this court.

                inability to pay its debts incurred in the ownership and operation of WNP 4 and 5.   At the same time the injunction imposed against Chemical Bank was lifted.   On July 25, 1983, pursuant to Chemical Bank's request under section 11.3 of the Bond Resolution, 3 WPPSS transferred $723,255.70 in cash and $24,841,832.79 in United States Treasury bills to Chemical Bank.   The cash and treasury bills, derived primarily from the construction fund 4, constituted virtually all of the remaining funds of WNP 4 and 5.   On August 18, 1983, Chemical Bank declared the principal of all bonds and interest accrued[705 P.2d 1202]  thereon immediately due and payable
                from proceeds of revenue bonds, from operating revenues, or from any other fund of the agency.   In addition, two of the orders specified the judgments were not restricted to proceeds, funds or revenues of WNP 4 and 5.
                

I

Affirmative Defenses

We begin our resolution of this case by addressing WPPSS' contention that the bridge and termination loans should not have been held due and payable without a trial of the material factual issues raised by WPPSS' affirmative defenses and that it was error for the trial courts to either strike or fail to certify portions of affidavits submitted by WPPSS in opposition to the summary judgment motions. We see little merit in either of these arguments and conclude that the striking and failure to certify two affidavits does not amount to prejudicial error. We further conclude that the trial courts did not err in finding, as a matter of law, that there exists no genuine issues of material fact upon which reasonable persons could differ. See Olympic Fish Prods., Inc. v. Lloyd, 93 Wash.2d 596, 611 P.2d 737 (1980).

WPPSS argues that in two of the eight lower court actions, two of its affidavits were improperly stricken or not certified as part of the record. CR 56(e) requires that affidavits submitted in summary judgment proceedings be made on personal knowledge, set forth admissible evidentiary facts, and affirmatively show the affiant is competent to testify as to her averments. Meadows v. Grant's Auto We turn now to the question whether...