South Carolina Elec. & Gas Co. v. South Carolina Public Service Authority

• Decision Date: 01 August 1949
• Docket Number: 16244.
• Citation: 54 S.E.2d 777,215 S.C. 193
• Parties: SOUTH CAROLINA ELECTRIC & GAS CO. et al. v. SOUTH CAROLINA PUBLIC SERVICE AUTHORITY.
• Court: South Carolina Supreme Court

54 S.E.2d 777

215 S.C. 193

SOUTH CAROLINA ELECTRIC & GAS CO. et al. v. SOUTH CAROLINA PUBLIC SERVICE AUTHORITY.

No. 16244.

Supreme Court of South Carolina

August 1, 1949

[Copyrighted Material Omitted]

R. M. Jefferies, Walterboro, W. D. Simpson, Moncks Corner, Edgar A. Brown, Barnwell, R. McC. Figg, Jr Charleston, for appellant.

A. M. Williams, Jr., Columbia, Hagood, Rivers &amp Young, Charleston, W. C. McLain, Columbia, S. S. Tison, Bennettsville, J. B. S. Lyles, Columbia, Lee & Moise, Sumter, for respondents.

STUKES, Justice.

This action was commenced by the named power companies as plaintiffs against South Carolina Public Service Authority, defendant, in the Court of Common Pleas for Berkeley County on February 15, 1949. Demurrer to the complaint was overruled by order dated April 18, 1949 and this appeal followed. It is necessary to rather fully state the material allegations of the complaint, which will be done in succeeding paragraphs.

The companies are South Carolina corporations except Carolina Power & Light Company, which is incorporated under the laws of North Carolina. All are electric utility corporations and are lawfully engaged in business in this State. They own large amounts of real and personal property and pay very substantial taxes to the State and its subdivisions. The defendant is a State-owned corporation, created and operating pursuant to the statute which, as amended, constitutes sections 8555-11 to 8555-28 of the Code of 1942, originally enacted in 1934, 38 Stat. 1507. It is the contention of the complaint that the Authority is an 'electrical utility' as defined in the Act of 1932, 37 Stat. 1497 now codified as Secs. 8555-1 to 8555-8 of the Code, and subject to the terms of that law and thereby subjected to the jurisdiction of the Public Service Commission except as to the express exemptions contained in its enabling act which include only construction of its generating plant and the fixing of its rates.

Central Electric Power Cooperative, Inc., is a cooperative membership corporation, formed under the Rural Electric Cooperative Act of 1939 (now Sections 8555-91 to 8555-123 of the Code) for the purpose of supplying, etc., electricity in rural areas and exempt from all control of the Public Service Commission. Central Electric is nominally sponsored by fourteen cooperative membership corporations which have distribution systems, financed by the Rural Electrification Administration of the United States, in sections of the State in which the plaintiff power companies are also engaged in business. It was formed to borrow funds from the federal Rural Electrification Administration for the cost of construction of a transmission system for operation and ultimate ownership by the defendant.

Plaintiffs have operated in their respective territories since prior to 1932 and maintain transmission and distribution lines and other equipment necessary to render service in every way and have an ample supply of electricity to meet all demands, and have planned in advance to meet future demands, whereby they have acquired the right under Code Sec. 8555-2(23) to be free from competition in their respective territories.

Plaintiffs unsuccessfully undertook to enjoin the construction and operation of the defendant. Carolina Power & Light Co. v. S. C. Public Service Authority, D.C., 20 F.Supp. 854; 4 Cir., 94 F.2d 520. They have recently offered to purchase the surplus energy of the defendant and are now purchasing specified quantities of it which is, and will be, available to rural cooperatives, but the defendant has refused to accept the offer or to negotiate.

The proposed transmission system, the cost of which will be met by a loan from the Rural Electrification Administration to Central Electric Power Cooperative, Inc., will deliver energy from defendant's generating plant to the fourteen cooperative membership corporations in twenty-seven counties of the State which lie wholly within the service areas of the plaintiffs, and the defendant and Central Electric have contracted that the defendant will maintain and operate the system and make the annual payments required to service and amortize the construction loan over a period of thirty-five years, whereupon title to the transmission system will vest in defendant. The purpose of the defendant, as alleged in the complaint, is to use the completed transmission system to unlawfully compete with the plaintiffs, injure and finally destroy them, whereby industrial development of the areas will be adversely affected.

It is further alleged that the construction loan is in violation of the Federal law, 7 U.S.C.A. § 904, and of the State law relating to rural electric cooperatives, Code Sec. 8555-93(d); and the undertakings of the defendant are ultra vires and illegal because they will (a) duplicate existing transmission lines of the plaintiffs without certificate therefor from the Public Service Commission pursuant to Code Sec. 8555-2(23), (b) go beyond its geographical limits, result in the acquisition of a completed and operating transmission system, and compete with private utilities in their service areas, (c) violate the provisions of the enabling act which relate to the finances of defendant, (d) acquisition of the proposed transmission lines is not necessary or useful to performance of defendant's statutory functions, and (e) the plan will include a guaranty of the obligations of another corporation, in violation of the enabling act.

Plaintiffs allege that this action in equity is brought in their own right to establish and protect their property rights and the privilege to furnish electric service in their respective areas free from the illegal and destructive competition of defendant; and as taxpayers, for the benefit of themselves and others, to enjoin defendant from intended violations and evasion of the State and Federal statutes; and finally, to invoke the power of the court to enter a declaratory judgment with respect to the rights of plaintiffs and defendant, pursuant to Act No. 815 of 1948, 45 Stat. 2014. It is alleged that plaintiff's cannot successfully compete with defendant as to rates because the latter's generating plant was largely constructed with Federal grants and loans at low interest rates, and it is relieved of State and Federal taxes which plaintiffs have to pay; and the result will be disastrous to the industrial development of the territory involved for inability of plaintiffs, with this handicap, to expand their facilities to meet increased demand and defendant will have an insufficient supply of energy.

The prayer of the complaint is for relief by way of judgment declaring that plaintiffs have the right to freedom in their areas from competition by defendant, that the latter is subject to the jurisdiction of the Public Service Commission except as to the construction of its generating plant and the fixing of its rates, that the construction, operation and acquisition of the proposed transmission system are ultra vires of the defendant and in violation of State and Federal laws; and that the defendant be enjoined from performance of the contract between it and Central Electric, and from constructing or acquiring the contemplated transmission system, and from generating, transmitting, delivering or selling energy in the territory served by the plaintiffs and from otherwise competing therein.

The demurrer was upon the grounds (1) that the complaint shows that the court is without jurisdiction because (a) the Rural Electrification Administration of the United States and the Administrator thereof are necessary parties and they have not consented to be sued and the allegations of the complaint are insufficient to constitute a justiciable controversy because the acts of the defendant sought to be enjoined are authorized by law and within its discretion; and (2) that it appears that the plaintiffs are without capacity to sue as utilities or taxpayers; and (3) that the complaint does not state facts sufficient to constitute a cause of action because of the points made in (1) above.

The order under appeal overruled the grounds of the demurrer relating to defect of parties, to the jurisdiction of the court and the capacity of plaintiffs to sue which left for consideration the general ground that the complaint fails to state facts sufficient to constitute a cause of action. This was also overruled by the trial court, quoting, 'for the sole reason * * * that the complaint does set forth a good cause of action to ask the court for a declaratory judgment.'

The defendant took twenty-one exceptions which have been presented in briefer form, as will be seen. Respondents submit additional grounds to sustain the order to the effect that the allegations of the complaint entitle them, in their own right, to injunction against the competition threatened by the appellant, and also entitle them as taxpayers to injunction against the alleged ultra vires acts committed and threatened by appellant.

Appellant has stated the questions involved in the appeal, as follows:

I. Does the complaint, as an equitable action for an injunction, state facts sufficient to constitute a cause of action?

II. Did the Circuit Judge err in entertaining the action as one for a declaratory judgment, and in overruling the demurrer on the merits for the sole reason that the complaint states a cause of action to ask the Court for such a judgment?

III. Can the relief sought by the respondents be granted in the absence as a party of the Rural Electrification Administration of the United States, and the Administrator thereof?

Respondents made no counter-statement of issues and in their brief argued the stated questions in the above sequence and appropriately...