City of Starkville v. 4-County Elec. Power Ass'n


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Docket Number: 2004-CA-00577-SCT

Supreme Court: Opinion Date: 03-24-2005
Opinion Author: Carlson, J.
Holding: Affirmed

Additional Case Information: Topic: Public utilities - Jurisdiction - Standing to challenge constitutionality - H.B. 997 - Performance under contract - Retroactive application - Contracts Clause - M.R.C.P. 24(d)
Judge(s) Concurring: Smith, C.J., Waller and Cobb, P.JJ., Easley and Dickinson, JJ.
Non Participating Judge(s): Diaz and Randolph, JJ.
Concurs in Result Only: Graves, J.
Procedural History: Dismissal
Nature of the Case: CIVIL - OTHER

Trial Court: Date of Trial Judgment: 09-20-2002
Appealed from: Oktibbeha County Chancery Court
Judge: Robert L. Lancaster
Disposition: Entered a final judgment dismissing the complaint with prejudice.

  Party Name: Attorney Name:  
Appellant: City of Starkville




MARC DARREN AMOS DEWITT T. HICKS, JR. WILLIAM DEAN STARK



 

Appellee: 4-County Electric Power Association DAVID L. SANDERS JEFFREY JOHNSON TURNAGE  

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Topic: Public utilities - Jurisdiction - Standing to challenge constitutionality - H.B. 997 - Performance under contract - Retroactive application - Contracts Clause - M.R.C.P. 24(d)

Summary of the Facts: In 1963, the City of Starkville and 4-County Electric Power Association entered into a service area agreement. The Agreement guaranteed efficient continued utility service to the local polity if Starkville subsequently decided to annex territory which was within 4-County’s designated service area. The Agreement was contingent upon the right of municipalities to annex land which was certificated by the MPSC, and the Agreement provided that if Starkville exercised its right to include territory currently in the 4-County service area via its power of eminent domain, then, in lieu of condemnation proceedings, Starkville could either grant 4-County a no-cost twenty-year franchise to continue operating within the newly annexed area or effectuate an outright purchase of both 4-County’s distribution facilities and its service rights. In 1994, 4-County provided Starkville with notice that it no longer considered the parties’ 1963 Agreement valid. Specifically, 4-County informed Starkville that pursuant to the Legislature’s 1987 Amendments to the 1956 Public Utilities Act, performance under the parties’ contract had become impossible. Two and one-half months later, Starkville annexed approximately 1.72 miles of 4-County’s certificated service area and informed 4-County that, pursuant to the 1963 Agreement, it intended to exercise its option to purchase 4-County’s service rights and associated distribution facilities located in the newly annexed area. When 4-County subsequently refused to voluntarily sell its rights and property in the certificated area, Starkville filed a complaint for specific performance, declaratory and injunctive relief and damages. The court granted 4-County’s motion for summary judgment. The chancellor held that the Legislature’s 1987 Amendments rendered the parties’ 1963 Agreement unenforceable as it was now unlawful to purchase a certificate of public convenience and necessity without MPSC approval. Interpreting the 1987 Amendments as not specifically voiding agreements to sell such as the one existing between Starkville and 4-County, the Supreme Court reversed the decision. The Legislature then passed House Bill 997 to clarify the legislative intent in passing the 1987 amendments to the 1956 Public Utilities Act. 4-County again filed a motion for summary judgment. Starkville responded by challenging the constitutionality of the new legislation and seeking a transfer of the case to circuit court for a jury trial in order to determine compensatory as well as punitive damages due to 4-County’s intentional breach of the parties’ 1963 Agreement. The chancellor denied Starkville’s motion to transfer to circuit court and granted partial summary judgment in favor of 4-County. The chancery court sua sponte entered an order converting the partial summary judgment into a final summary judgment inasmuch as Starkville, after the lapse of a reasonable amount of time, failed to petition the MPSC for approval of the sale of the 1994 annexed area consistent with the provisions of the 1963 Agreement. Starkville appeals.

Summary of Opinion Analysis: Issue 1: Jurisdiction Starkville argues that this suit has now become basically a breach of contract suit wherein Starkville seeks to recover compensatory and punitive damages from 4-County for its failure to comply with the terms of the 1963 Agreement. When determining the true nature of the claim, one must look at the substance, and not the form, of the claim in order to determine whether the claim is legal or equitable. The relief sought on specific performance of a contract is typically the type of relief to be considered by our chancellors sitting as a court of equity. Additionally, Starkville presumably made a knowing and conscious decision to commence this litigation in chancery court when it filed its complaint in 1995. This case has been litigated and relitigated in chancery court. The same chancellor has been involved with the litigation of this case since its inception in 1995. Who was in a better position to fairly and correctly decide the issues in this case than the learned chancellor who had presided over all the proceedings in this case from the very beginning? Therefore, the chancellor quite appropriately denied Starkville’s motion to transfer this case. Issue 2: Standing to challenge constitutionality Starkville argues that the court erred in finding that Starkville lacked standing to attack the constitutionality of H. B. 997. Clearly, Starkville had standing to challenge the constitutionality of H. B. 997, in that Starkville had a colorable interest in the subject matter of the litigation and experienced an adverse effect from the conduct of 4-County. Since the chancellor still proceeded to address the bill’s constitutionality, however, Starkville was not in any way hampered in fully presenting its case before the chancellor because of the chancellor’s finding of lack of standing. Issue 3: Performance under contract Pursuant to H. B. 997, the Legislature has clearly stated that it is no longer this State’s public policy for our municipalities to have unfettered eminent domain power and that municipalities thus can no longer lay claim to land in a certificated area and condemn certificated providers’ facilities and equipment, without express approval of the MPSC. Starkville desires to legally avoid the allinclusive statutory effect of the Legislature’s 1987 Amendments by relying on its 1963 Agreement with 4-County. In essence, Starkville is demanding justice based entirely on a snapshot of a public utility service law which was passed almost a half-century ago. In granting partial summary judgment, the chancellor correctly interpreted and applied H. B. 997 as expressly clarifying the intended legislative interpretation to be given to the 1987 Amendments. The chancellor cited important contractual language from the parties’ 1963 Agreement whereby both parties mutually agreed to cooperate in petitioning for, and securing the approval of the MPSC as is or may hereafter be required by law. The chancellor thus quite appropriately granted partial summary judgment pending Starkville’s petition to the MPSC for approval of its proposed purchase of 4-County’s service rights and associated distribution facilities within the annexed area. Issue 4: Retroactive application Starkville argues that Mississippi law prohibits the retroactive application of a statute absent the Legislature’s clear intent to do so. A statute will not be given retroactive effect unless it is manifest from the language that the Legislature intended it to so operate. By its very terms, H. B. 997 reveals a clear legislative intent to have the 1987 Amendments apply retrospectively. The Act expressly states that all contracts entered into prior to 1987 are subject to the approval of the MPSC. Issue 5: Contracts Clause Starkville argues that the Contracts Clause prohibits all retrospective legislation that violates vested contractual rights. Under M.R.C.P. 24(d), Starkville’s failure to notify the Attorney General of its constitutional challenge procedurally barred Starkville from raising this issue. Notwithstanding this bar, the Court has jurisdiction to consider constitutional challenges absent proper notice if it desires. There is clear precedent supporting a state legislature’s ability to obviate pre-existing contractual obligation, in order to protect the lives, health, morals, comfort and general welfare of its citizens. The regulation of this State’s public utilities falls squarely within our Legislature’s power and authority. In passing the 1987 Amendments, the Legislature sought to centralize state authority over the regulation of our public certificated utility providers and, additionally, to extricate local interests from interfering with this authority. Starkville’s rights as of 1987 had yet to vest at the time its contract became subject to MPSC authority and, inasmuch as Starkville failed to secure MPSC approval, its contractual rights have yet to vest. Therefore, the chancellor did not err in finding that H. B. 997 did not violate the Contracts Clause of our federal and state constitutions.


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