Thomas v. Alabama Mun. Elec. Authority

• Decision Date: 08 April 1983
• Citation: 432 So.2d 470
• Parties: Raimon G. THOMAS v. ALABAMA MUNICIPAL ELECTRIC AUTHORITY, a public corporation, etc., et al. 81-786.
• Court: Alabama Supreme Court

Page 470

432 So.2d 470

Raimon G. THOMAS v. ALABAMA MUNICIPAL ELECTRIC AUTHORITY, a public corporation, etc., et al.

81-786.

Supreme Court of Alabama.

April 8, 1983.

As Modified on Denial of Rehearing

June 3, 1983.

E. Terry Brown and Robert D. Segall of Copeland, Franco, Screws & Gill, Montgomery, for appellant.

Robert D. Thorington, W. Stanley Gregory, & David W. Spurlock of Johnson & Thorington, Montgomery, for appellees.

EMBRY, Justice.

This is an appeal from a decree of the Circuit Court of Montgomery County which validated and confirmed certain evidences of indebtedness proposed to be issued by the Alabama Municipal Electric Authority (Authority) and, in addition, authorized the execution of certain service agreements (Contracts) between the Authority and several state municipalities, utilities, and electric boards (Participants) for the purchase of electric power and energy.

The Authority is a public corporation of the State organized under the provisions of Act No. 81-681 (Act), now codified as § 11-50A-1, et seq., Code 1975. Generally, the Authority is empowered to construct, own and operate electric distribution systems and related facilities to assure that municipalities, utilities and electric authorities in the State have alternative sources of bulk electric power and energy in addition to those presently available and to operate their electric distribution systems in a dependable, efficient and economical manner.

The applicable proceedings and pertinent documents involved in the proposed financing sought to be validated are as follows:

NOTE RESOLUTION

On 11 March 1982 the Authority's Board of Directors (Board) adopted a resolution authorizing (1) the issuance, execution and delivery by the Authority of its Bulk Power Supply Services Revenue Notes (Note Resolution), (2) the execution and delivery of a loan agreement (Loan Agreement) with The Alabama National Bank of Montgomery (Bank), (3) the execution and delivery of the Contracts between the Authority and each of the Participants and, (4) the filing of a complaint pursuant to § 11-50A-10 and § 11-50A-11, Code 1975. The Note Resolution authorized the borrowing of the maximum aggregate principal amount of $3,000,000. Each of the notes authorized in the Note Resolution is to be dated the date of issuance, is to be payable to the lender or order in the amount evidenced thereby, is to be numbered from one up, is to be in such denomination as may be determined at the time of each borrowing evidenced thereby and is to mature on the first day of the month following the expiration of forty months from the date the first note is issued. The Note Resolution further provides that the notes are to bear interest from their date and their maturity at such rate or rates, fixed or floating, not exceeding 20% per annum, all as shall be provided for by the Authority prior to each borrowing or by contract authorized by the Board to be entered into by the Authority, with interest payable on 1 March and 1 September of each year. The notes and the interest thereon shall be payable at the principal office of the Bank and the notes reserve to the Authority the option of prepaying and redeeming any of the notes at any time

upon payment of the principal amount and interest accrued to date of prepayment. The Note Resolution provides that the notes shall not be general obligations of the Authority but shall be payable solely out of revenues derived by the Authority from the Contracts or, in certain events, a portion of the proceeds derived from the sale of the Authority's long-term bonds. In the Note Resolution, the Board pledges the revenues derived by the Authority from the Contracts solely for the payment of the principal of and interest on the notes.

LOAN AGREEMENT

On 13 May 1982, the Authority and the Bank entered into the Loan Agreement. It represents the terms and conditions of a portion of the $3,000,000 borrowing authorized by the Authority in the Note Resolution. Pursuant to that agreement, the Bank will lend the Authority a principal sum not exceeding $1,350,000 which loan will be evidenced by the notes. The notes will bear interest at a per annum rate equal to 63% of the Bank's prime lending rate, providing that such interest rate may never exceed 20% per annum. The proceeds of the notes shall be deposited in a Notes Proceeds Account as provided for in the Note Resolution and shall be disbursed out of that account to pay the costs of providing Bulk Power Supply Services, including without limitation (1) the costs of a feasibility study, (2) the costs incurred in connection with the issuance of the notes, and (3) the costs of reimbursing the Municipal Electric Utility Association of Alabama for monies advanced by that association to the Authority. The feasibility study to be financed from note proceeds will determine whether it is practical for the Authority to finance, require, construct, operate and maintain electric generation, transmission and distribution facilities in order to provide the participants with an alternative source of bulk electric power and energy to operate their respective electric distribution systems.

CONTRACTS

The Authority entered into Contracts with each of the Participants, ¹ and each Participant will be required to pay a pro rata portion of the "Costs of Bulk Power Supply Services," defined in the Contract as:

" 'Costs of Bulk Power Supply Services ' means the costs incurred by the Authority in providing Bulk Power Supply Services under the Contracts, including (without limitation) engineering, consultant and legal fees and expenses; costs of audits; costs of administrative and general overhead; costs of maintaining financial records and accounts and preparing reports required by the Contracts; the costs of reimbursing Municipal Electric Utility Association of Alabama for any moneys that may, prior to the issuance of the Notes, have been advanced to the Authority by Municipal Electric Utility Association of Alabama for payment of costs incurred by the Authority in providing Bulk Power Supply Services to Members of the Authority prior to the execution of the Contracts; the principal of and interest on the Notes and any other obligations issued by the Authority to finance the provision of Bulk Power Supply Services (whether or not the proceeds thereof are actually expended for such purposes, and the fees and expenses of fiduciaries and other items of expense incurred in connection with the issuance of any such obligations; provided, however, that no such cost, fee or expense (or portions thereof) paid out of moneys derived by the Authority from the issuance of any of its obligations shall be considered a 'Cost of Bulk Power Supply Services'; and provided further, that in the event the principal of or interest on any obligations issued by the Authority to finance the provision of Bulk Power Supply Services is paid by the Authority out of moneys derived from (a) such obligations (including any income earned by the Authority from the investment of the proceeds thereof) or (b) the issuance of other obligations by the Authority, the principal of or interest on the obligations so paid shall not be considered a 'Cost of Bulk Power Supply Services.' "

The pro rata cost to each participant is based on the number of kilowatt hours purchased by the respective Participant during the Participant's preceding fiscal year. Each Participant's allocated cost is payable solely out of the revenues to be derived by the respective Participant from the operation of its respective electric system, subject to certain prior lien pledges heretofore made by such Participant. The liability of the Participants under their respective Contracts for the payment of the costs of Bulk Power Supply Services to the Authority is several and not joint, each Participant being liable only for its allocated cost.

This action was commenced under and pursuant to § 11-50A-10 and § 11-50A-11, Code 1975. The complaint was filed on behalf of the Authority on 13 May 1982 in Montgomery County circuit court. On that same date, the circuit court entered an order scheduling the case for hearing on 16 June 1982 to show cause why the circuit court should not validate and confirm the Notes, Contracts, Loan Agreement, and all proceedings had or taken in connection therewith. That order also directed the clerk of the court to effect notice of the hearing to the taxpayers and citizens of the State by publication in a newspaper customarily published not less than five days during each calendar week in the cities of Montgomery, Birmingham, Mobile, and Huntsville, once a week for three consecutive weeks before the day of the hearing set above. The Participants and the Bank were joined as parties defendant because of their execution of, respectively, the Contracts and the Loan Agreement, which documents were sought to be validated by the circuit court. The case was submitted on the pleadings, the documents introduced in evidence in open court, and the oral testimony taken in open court. On 16 June 1982 the circuit court entered a decree validating and confirming the Notes, the Loan Agreement and the Contracts. Raimon G. Thomas, one of the defendants below, as a taxpayer and citizen of this State filed this appeal.

Appellant Thomas raises twelve issues on appeal. For ease of reference we will set out each of those issues together with our answer, in seriatim.

(1) Does the Act fail to comply with the requirements of Section 45 of the Alabama Constitution?

The Constitution of Alabama, 1901, § 45, requires, in part, that "[each] law shall contain but one subject, which shall be clearly expressed in its title."

"The purposes of the 'single subject' requirement Const. of Ala., 1901, § 45, are generally stated as: (a) notification to the public of the nature of the pending legislation; (b) avoidance of fraud on the legislature by inadvertent passage of provisions not related to the...