Woodruff Elec. Co-op. Corp. v. Arkansas Public Service Commission

• Decision Date: 06 November 1961
• Docket Number: No. 5-2388,5-2388
• Citation: Woodruff Elec. Co-op. Corp. v. Arkansas Public Service Commission, 351 S.W.2d 136, 234 Ark. 118 (Ark. 1961)
• Parties: , 42 P.U.R.3d 303 WOODRUFF ELECTRIC COOPERATIVE CORPORATION et al., Appellants, v. ARKANSAS PUBLIC SERVICE COMMISSION et al., Appellees.
• Court: Arkansas Supreme Court

Page 136

351 S.W.2d 136

234 Ark. 118, 42 P.U.R.3d 303

WOODRUFF ELECTRIC COOPERATIVE CORPORATION et al., Appellants, v. ARKANSAS PUBLIC SERVICE COMMISSION et al., Appellees.

No. 5-2388.

Supreme Court of Arkansas.

Nov. 6, 1961.

Rehearing Denied Dec. 11, 1961.

Eldridge & Eldridge, Augusta, for Woodruff Elec. Co-op. Corp.

Leland F. Leatherman, Little Rock, for Ark. State Elec. Co-op., Inc.

Jack P. West, Forrest City, for City of Forrest City.

House, Holmes, Butler & Jewell, Forrest City. Mann & McCulloch, Little Rock, for Ark. Power & Light Co.

WARD, Justice.

The problems involved in this litigation were germinated in 1957 when the Arkansas Power and Light Company took over territory previously assigned to the Woodruff Electric Corporation. Several parties are involved so, before summarizing the factual background it will be helpful to identify them at this point. Appellant, Woodruff Electric Cooperative Corporation, will be referred to as Woodruff; Arkansas Power and Light Company as Power Company; the city of Forrest City as City; the Arkansas State Electric Cooperative as State Electric; and the Arkansas Public Service Commission as Commission.

Woodruff was organized in 1937 pursuant to Act 342 of that year. It is here noted that said act gave such organizations authority to operate in rural areas, and Sec. 2(8) of the Act defines 'Rural Area' as all area except that area in cities and towns having a population in excess of twenty five hundred. In 1948 the City leased to the Power Company (by a 31 page document signed by both parties) its power plant and auxiliary equipment with the right to serve the City. (This lease was not to be effective until the Power Company had completed a large power unit some miles outside the City limits). In 1950 Woodruff erected a large warehouse and office building on land adjacent to the north side of the City limits at a cost of approximately $150,000. In 1951 the Power Company's lease became effective when it took over the operation of the City's plant and distribution system. Following this, in 1953, the Commission allocated to Woodruff 120 acres of land north of the City limits which we will hereafter call 'area'. This area was near Woodruff's warehouse and office building. Also it was bisected by a through highway and was near the railroad.

Two or three years after the Commission made the allocation to Woodruff the citizens of the City became interested in a project to secure an out-of-state industry. This resulted in a firm named Yale & Towne agreeing to locate on the 'area' provided the City would extend its boundaries to include that location and also, it seems, provided it would be furnished electricity by the Power Company. Pursuant to the above, the City, on December 10, 1956, annexed a portion of the 'area' and on January 25, 1957 the Power Company contracted to furnish power to Yale & Towne. This resulted, of course, in Woodruff being deprived of a portion of its allocated territory including nine members therein which it had formerly been serving. So, on March 21, 1957 Woodruff filed a complaint before the Commission against the Power Company for relief under Act 85 of 1955. The City and the State Electric intervened, and after a full hearing the Commission ruled against Woodruff on the sole ground that Sec. 3 of said Act 85 precluded Woodruff from receiving any relief. On appeal by Woodruff and the State Electric to the Circuit Court of Pulaski County the Commission was affirmed, and they now prosecute an appeal to this Court for relief.

On appeal Woodruff insists that the only question for decision is the construction of Sec. 3 of Act 85 of 1955, but the Power Company and the City also challenge the constitutionality of the act.

Construction of Section 3. First we examine the history of Act 85 and our former interpretation of the prior Act No. 342 of 1937. The only decision of this Court which bears materially on the issue here is the case of Farmers Electric Cooperative Corporation v. Arkansas Power & Light Company, 220 Ark. 652, 249 S.W.2d 837, 839. In the cited case appellant served territory adjacent to the City of Newport which was later taken over by appellee. When the City annexed a portion of appellant's territory and appellee's service followed, appellant sought relief (as here) against appellee. On appeal we in effect held, that when the City extended its boundaries to take in new area appellee was obligated to serve such area and that there was no provision in the law whereby the cooperatives could be compensated for loss of territory. In speaking of the latter situation we said:

'No doubt the General Assembly failed to foresee the conflict here presented when Act 342 was being considered, else some provision would have been made for the awkward situation.'

There can be little doubt that the legislature had this 'awkward situation' in mind when it passed Act 85 of 1955. At any rate this act does provide a method of relief to a cooperative which has been deprived of a portion of its allotted territory. It is crystal clear that a situation could arise where it would be unjust to deprive a cooperative of a lucrative territory which it alone had developed over a long period of time. Whether or not that situation obtains to a small or large degree in the case before us now is immaterial because, in either event, the same principle is involved, and the interpretation of Act 85 would be the same. With this in mind we proceed to an analysis of said act.

Sec. 1 of Act 85 amends Sec. 2(8) of Act 342 of 1937 which, as before mentioned, merely defines the area in which cooperatives may operate. The amendment contains all the language in said Sec. 2(8) and also additional language relating thereto, but it is not material here. Then the section further provides as follows:

'* * * and said Corporation shall not be ousted from service in said rural area or deprived of the right to continue to provide electric service in said rural area subsequent to the granting of a Certificate of Convenience and Necessity by the Arkansas Public Service Commission, except as provided in this Act, as amended.'

It is conceded that Woodruff had been assigned the territory here involved by the Commission when the Power Company took it over. It is obvious therefore from the above quoted portion of Sec. 1 that Woodruff can be 'ousted', but it remains to be seen how and on what conditions.

The answers to the above questions are to be found in Sec. 2 of Act 85. One portion of Sec. 2 reads as set out below:

'If any rural area allocated by the Public Service Commission to a corporation organized under this Act shall be included in, or become a part of any incorporated city, town or village already being served with electricity by a regulated public utility, then the members of said corporation residing or operating within such city, town or village shall lose their membership and right to receive service from said corporation.'

The above quoted language tells how Woodruff can be 'ousted'. The rest of the paragraph tells on what conditions it can be 'ousted', and it reads:

'It shall be the duty of the Commission to enforce the provisions of this Act and to provide for adequate compensation to the corporation for its loss of area and property.'

The rest of the paragraph explains how 'adequate compensation' is to be arrived at by the Commission but we are not here concerned with that feature because the extent of compensation is a matter for the Commission and not this Court to decide, and it is not an issue at this time.

The conclusion deducible from what we have said so far about Act 85 is that Woodruff should be compensated for the loss of part of its territory. With certain reservations to be noted later we understand that appellees agree with the indicated conclusion.

However appellees contend (and the Commission held) that none of the above mentioned provisions of Act 85 are of any benefit to Woodruff because of Sec. 3 of the Act. This section reads:

'Nothing in this Act nor any of the provisions of Act 342 of the Acts of the Arkansas General Assembly of 1937 (Arkansas Statutes 1937, Section 77-1131) shall in any manner restrict or impair the right of any municipality to acquire, construct, expand, maintain or operate any electric generation, transmission or distribution facilities within the corporate limits of said city, town or village in Arkansas as such limits may now exist or as such limits may exist upon the extension or expansion of the city limits of said city, town or village.'

Fundamentally and generally speaking, appellees' contention in this connection is based on the fact that the Power Company is only a lessee and that the power plant and facilities are owned by the City. There can be no dispute that this is the true relationship between the two mentioned parties even though it is correctly pointed out by appellants the lease can run for eighty years and a large portion of the utility is owned outright by the Power Company. This, say appellees, makes the City the real party in interest in this litigation and therefore not liable for compensation because of said section. We have concluded, however, for reasons set out below, that said Sec. 3 does not admit of the interpretation placed on it by appellees.

(a) As mentioned before, we feel that the primary purpose of Act 85 was to remedy the unjust and 'awkward' situation previously mentioned. That being true the act should, we think, be liberally construed to effectuate that purpose. From the very nature of the business of supplying energy to customers in adjacent territories there will always be reason for rivalry between cooperatives and public utilities. Some of this rivalry may be advantageous to the general public, but the State has recognized the need for a mediator. This need has been partially met by requiring both parties to receive their allocations of territory in which to serve...