Case Title: UPPER MO G T CO-OP v MCCONE EL

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Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1972-11-30T00:00:00Z

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No. 12201 I N THE S U P R E M E C O U R T O F TEE STATE O F MONTANA 19 72 UPPER MISSOURI G , &, T, ELECTKIC COOPERATIVE, INC., a corporation, P l a i n t i f f and Respondent, M c C O N E ELECTRIC CO-OP, INC., a corporation, Defendants and Appellants, Appeal from: D i s t r i c t Court of the Seventh J u d i c i a l D i s t r i c t , Honorable Paul G, Hatfield, Judge presiding. Counsel of Record : For Appellants : Sandall, Moses and Cavan, Billings, Montana. Jerry Cate argued, Billings, Montana. For Respondent : V. G. Koch argued, Sidney, Montana. Filed : #pj s : 1972' Submitted: September 26, 1972 Decided : #oV 3 1972 M r . Justice Wesley Castles delivered the Opinion of the Court. This i s an appeal from a summary judgment for Upper Missouri G & T Electric Cooperative, Inc. (hereinafter referred t o as Upper Missouri), This case has been before t h i s Court previously i n Upper MissouriG & T Electric Cooperative, Inc. v, McCone Electric Co-op, Inc., 157 Mont. 239, 484 P.2d 741. In that case we found summary judgment should not have been granted McCone Electric Co-op, Inc. (hereinafter referred t o as McCone), and remanded the cause t o the d i s t r i c t court. Following remand, further discovery, and p r e t r i a l proceedings were had. Upper Missouri then f i l e d a motion for summary judg- ment, which read: " C O M E S NOW the p l a i n t i f f and cross-defendant herein, and moves the Court, pursuant t o Rule 56, Montana Rules of Civil Procedure, for Summary Judgment declaring the contract between plaintiff and defendant, and a l l there- of, a valid and subsisting contract, for the following reasons : "1, That there i s no genuine issue as t o any material fact and that plaintiff i s entitled t o Judgment as a matter of law; "2. That defendant's defenses and counter-claims are barred by the statute of limitations and laches; "3. That the defenses and counter-claims of defendant are insufficient, sham, frivolous and i m - material, and therefore, be stricken under Rule 12 (f) Montana Rules of Civil Procedure. "That the foregoing Motions are based upon the pleadings, exhibits, written interrogatories, pre-trial and general admissions, and depositions on f i l e and of record i n t h i s cause, 1 I The court entered the following judgment: I t The above entitled matter having come on regularly for hearing before the above entitled Court upon motion of plaintiff for Summary Judgment, and the Court having entered i t s Findings of Fact and Conclu- sions of Law: "IT I S O R D E R E D , ADJUDGED AND DECREED: "1, That the Motion for summary Judgment of p l a i n t i f f be and hereby i s granted. 2 That the wholesale power contract between the p l a i n t i f f and defendant i s v a l i d , binding and subsisting, "3. That the notice of withdrawal submitted t o p l a i n t i f f by the defendant i s of no l e g a l e f f e c t , "4. That the counterclaims and defenses of de- fendant be and hereby a r e dismissed." O n t h i s appeal appellant McCone sets up a single issue-- the correctness of the summary judgment i n t h a t it contends there a r e s t i l l substantial material f a c t s i n dispute and summary judgment should not have been granted. Basically, the issue revolves around the v a l i d i t y of a long term wholesale power contract under which McCone agreed t o purchase i t s power needs from respondent Upper Missouri f o r a period of 35 years. The contract was approved i n 1959. McCone seems t o a s s e r t t h a t the a r t i c l e s and by-laws of Upper Missouri did not permit Upper Missouri t o enter i n t o a wholesale power contract with Basin E l e c t r i c Power Cooperative, (hereinafter referred t o a s Basin), Nine e l e c t r i c d i s t r i b u t i o n cooperatives, including McCone, banded together t o form Upper Missouri cooperative and obtained a charter i n April 1958. I n May 1958, the t r u s t e e s of Upper Missouri, including the t r u s t e e representative of McCone, adopted by-laws, The reason f o r the formation of Upper Missouri i s b e s t s t a t e d i n the resolution of McCone passed i n October 1959, authorizing the assignment of c e r t a i n United States Bureau of Reclamation (hereinafter referred t o a s Bureau) power t o , and authorizing the execution of the contract with Upper Missouri. This resolution s t a t e s i n p a r t : "WHEREAS, McCone E l e c t r i c Co-op, Inc. may be faced with a severe e l e c t r i c power and energy shortage i n the near future; and, * * * "WHEREAS, t h i s Cooperative believes t h a t it i s the proper r o l e f o r Upper Missouri t o accept the f u l l u t i l i t y responsibility and furnish and provide the e l e c t r i c power and energy needed within its service area by t h i s cooperative; and, * * * "WHEREAS, it appears now, t h a t the Bureau of Reclamation w i l l not f u l f i l l the requirements of t h i s Cooperative i n the future, and "WHEREAS, it i s desirable from a technical and economic standpoint t h a t Upper Missouri arrange and negotiate f o r supplemental power f o r i t s members; and * * * "WHEREAS, i t is deemed t o be necessary and i n the b e s t i n t e r e s t of t h i s Cooperative t o have Upper Missouri supply a l l the present and future e l e c t r i c power and energy requirements of t h i s Cooperative within the Upper Missouri service area Jc * ;'c. " The assignment of the Bureau contract was executed on October 16, 1959, by McCone and approved on November 24, 1959, by the Bureau. Also, on October 16, 1959, McCone executed the contract i n question, and the approval of the Rural E l e c t r i - f i c a t i o n Administration was endorsed thereon dated November 30, 1959. Under t h i s contract, McCone agreed t o purchase i t s power and energy requirements from Upper Missouri u n t i l December 31, 1994, and t o pay r a t e s a s established under paragraph 4(b) of the contract, which provides: "(b) The Board of Trustees of Upper Missouri a t such i n t e r v a l s a s i t s h a l l deem appropriate, but i n any event not l e s s frequently than once i n each calendar year, s h a l l review the r a t e f o r e l e c t r i c power and energy hereunder and under similar agree- ments with other member cooperatives and, i f neces- sary s h a l l r e v i s e such r a t e so t h a t it s h a l l produce revenues which s h a l l be s u f f i c i e n t , but only s u f f i - c i e n t , with the revenues of Upper Missouri from a l l other sources t o pay a l l overhead and meet the c o s t of the operation and maintenance of the transmission system, generating plant and r e l a t e d f a c i l i t i e s of Upper Missouri, the c o s t of transmission service, the cost of any power and energy purchased f o r re- s a l e hereunder by Upper Missouri, pay taxes, make pay- ments on account of principal of and i n t e r e s t on a l l indebtedness of Upper Missouri, and t o provide f o r the establishment and maintenance of reasonable reserves * * * The consumer agrees t h a t the r a t e from time t o time established by the Board of Trustees of Upper Missouri s h a l l be deemed t o be substituted f o r the r a t e herein provided and agrees t o pay f o r e l e c t r i c power and energy furnished by Upper Missouri t o it hereunder and a f t e r the e f f e c t i v e date of any such revisions a t such revised r a t e s ; provided, however, t h a t no such revision s h a l l be e f f e c t i v e unless approved by the Administrator. I l From the p r e t r i a l order, McCone has admitted: "* * * t h a t a l l r a t e s were established by a majority of the board of plaintiff and were approved by the Rural Electrification Administration. Il Upper Missouri rented offices a t Sidney, Montana, and hired management. Upper Missouri thereafter entered into long term contracts with the Bureau t o purchase hydrogenerated power. When i t determined that the Bureau could not supply the needs of i t s members, it entered i n t o membership and a cooperative agree- ment t o purchase thermo-generated power with Basin on a long t e r m basis, and thereby participate i n generation and direction a s a member of t h i s organization. O n March 10, 1969, McCone advised Upper Missouri that i t would terminate i t s membership effective on the meter reading date of the Bureau i n June 1969, and proceeded with attempts t o obtain direct delivery of power from Upper Missouri suppliers. This action was thereafter in- stituted. Referring back t o the quoted parts of McCone's resolution, it is seen that there i s nothing that even remotely suggests any limitation as urged by McCone. McCone urges that i n 1959, a t the time of the wholesale power contract with Upper Missouri, i t was not contemplated that Upper Missouri would i n the future contract t o purchase power from Basin. Rather, McCone contends, it was contemplated that hydro-electric generating dams would be b u i l t on the upper Missouri river. Perhaps these contemplations were i n the minds of some of the incorporators; but the resolution concerned power needs through a cooperative power supply entity from any source, W e have examined the wholesale power contract and find that it i s enforceable under i t s terms. The previous opinion of t h i s Court s e t s out some of the pertinent and relevant provisions and w i l l not be repeated here. In that opinion, appearing a t 157 Mont. pp. 249,250 and 484 P,2d pp. 746, 747, we said: inal ally , the conclusions concerning public policy, restriction of trade, and fraud simply do not appear. The brief of * * * McCone states: "'The contracts i n t h i s case a r e against public policy and the public good and are i n r e s t r a i n t of trade because they result i n a significant portion of the population of eastern Montana having t o pay additional costs for t h e i r e l e c t r i c i t y over the term of the contract and i n that they prohibit McCone Electric i n contracting with other andheaper sources of power developing coal reserves and power sources within the s t a t e of Montana * * *, ' "If every contract could be declared void because of a showing by an individual, a graup of individuals, o r even a significant portion of individuals that they could save money by breaking it, chaos would result. Ten years a f t e r the contract, i n i t i a t e d and inspired, we are told, by defendant [McCone], defendant [McCone] now wants a b e t t e r deal else- where. It is a s simple as that, 11 The foregoing statement of t h i s Court i s applicable here, There i s no showing that the power contract is against public policy o r i n r e s t r a i n t of trade. There i s nothing i n the pleadings or the documents on f i l e that would even remotely indicate that the by-laws were against public policy or the public good, but are ordinary by-laws, adopted with ~cCone's knowledge and consent, Upper Missouri did not perform a c t s detrimental t o McCone which were outside the original contemplation of the parties. Upper Missouri became a member of Basin t o obtain a power supply for i t s members, O n cooperative principles Upper M i s - souri i s a part owner of Basin's generation and transmission system which entitled Upper Missouri t o a seat on the Basin board, Under the charter and by-laws, each of the nine cooperatives have a trustee upon the Upper Missouri board. Certainly one trustee cannot prevent the taking of action and entering into agreements, which the others believe w i l l benefit the cooperative a s a whole. The entire background, resolution a.nd contract indicate unequivocally that the purpose a t the time was t o obtain an adequate power supply t o avoid a power shortage, and that Upper Missouri was to undertake the task t o see that t h i s did not happen, Upper Missouri f u l f i l l e d i t s part of the bargain; it has obtained and supplied that power, Now, many years a f t e r the fact, McCone is attempting to vary by par01 evidence the unimpeachable intent of the parties, as evidenced by the reso- lution and the contract. That a signatory to the Articles of Incorporation, by-laws and other documents should, ten years later, accuse Upper Missouri of undue influence and fraud is unrealistic. The circumstances and purpose of the contract before the Court differ considerably from the restraint of trade cases cited by McCone. McCone, with eight other cooperatives, banded together to form an electric power supply cooperative to supply power, each having a member trustee on the board and each be- coming an owner of Upper Missouri; the contract was entered into not to create a monopoly, fix prices nor limit competition, but to avoid a shortage of power which was foreseen to be certain to occur if an additional source of power was not found. McCone has taken power and operated under the contract and rates for ten years and should now be estopped to deny what has been established by contract and performance. The findings of fact and conclusions of law support the judgment, and there are no material facts in issue. The ruling of the district court was correct, and the judgment is affirmed. concur : ~sskdiate Justice / /chief Justice