No. 12201 INTHE SUPREME COURT OF TEE STATE OF MONTANA 1972

UPPER MISSOURI 

### G,&, T, ELECTKIC COOPERATIVE, INC., a corporation, Plaintiff and Respondent,

McCONE ELECTRIC CO-OP, INC., a corporation, Defendants and Appellants,

Appeal from: District Court of the Seventh JudicialDistrict, 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: 

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### 1972' Submitted: September 

### 26, 1972 Decided :

## #oV3 1972Mr. JusticeWesley Castles delivered the Opinion of the Court.

This 

### is an appeal from a summary judgment for Upper Missouri G & T Electric Cooperative, Inc. (hereinafter referred to as Upper Missouri), This case has been before this Court previously inUpper MissouriG & T Electric Cooperative, Inc. v, McCone Electric Co-op, Inc., 157 Mont. 239, 

### 484 P.2d 741. In that casewe found summary judgment should not have been granted McCone Electric Co-op, Inc. (hereinafter referred toasMcCone), and remanded the cause tothe district court. Following remand, further discovery, and pretrial proceedings

were had. Upper Missouri then filed a motion for summary judgment, which read: "COMES NOW the plaintiff and cross-defendant herein, and moves the Court, pursuant to Rule 56, Montana Rules of Civil Procedure, for Summary Judgment declaring the contract between plaintiff and defendant, and allthereof, a valid and subsisting contract, for the following reasons: 

### "1, That there 

### isno genuine issue as to any material fact and that plaintiff 

### isentitled to Judgment as 

### a matter of law; "2. That defendant's defenses and counter-claims arebarred by the statute of limitations and laches; "3. That the defenses and counter-claims of defendant are insufficient, sham, frivolous and 

### immaterial, and therefore, be stricken under Rule 12 (f) Montana Rules of Civil Procedure. "That the foregoing Motions arebased upon the pleadings, exhibits, written interrogatories, pre-trial and general admissions, and depositions on fileand of record in this cause, 1 I The court entered the followingjudgment:

It



### The above entitled matter having come on regularly forhearing before the above entitled Court upon motion of plaintiff for Summary Judgment, and the Court having entered itsFindings of Fact and Conclusions of Law: "IT ISORDERED, ADJUDGED AND DECREED: 

### "1, That the Motion for summary Judgment of plaintiff be and hereby 

### isgranted.

### 2 That the wholesale power contract between the plaintiff and defendant isvalid, binding and subsisting, "3. That the notice of withdrawal submitted to plaintiff by the defendant isof no legal effect, "4. That the counterclaims and defenses of defendant be and hereby are dismissed." On this appeal appellant McCone sets up a single issue-- the correctness of the summary judgment in that it contends there are still substantial material facts indispute and summary judgment should not have been granted. Basically, the issue revolves around thevalidity of a long term wholesale power contract under which McCone agreed topurchase itspower needs from respondent Upper Missouri for a period of 35 years. The contract was approved in 1959. McCone seems toassert that the articlesand by-laws of Upper Missouri did not permit Upper Missouri to enter into a wholesale power contract with Basin Electric Power Cooperative, (hereinafter referred to asBasin), Nine electric distribution cooperatives, includingMcCone, banded together to form Upper Missouri cooperative and obtained

a charter inApril 1958. InMay 1958, the trustees of Upper Missouri, including the trustee representative of McCone, adopted by-laws, The reason for the formation of Upper Missouri isbest stated inthe resolution of McCone passed inOctober 1959, authorizing the assignment of certainUnited States Bureau of Reclamation (hereinafter referred toasBureau) power to, and authorizing the execution of the contract with Upper Missouri. This resolution states inpart: "WHEREAS, McCone Electric Co-op, Inc. may be faced with a severe electric power and energy shortage in the near future; and, 

# *** "WHEREAS, this Cooperative believes that it 

### is the proper role for Upper Missouri toaccept the f u l l u t i l i t yresponsibility and furnish and provide the electricpower and energyneeded within its service area by this cooperative; and, 

# **

# *"WHEREAS, it appears now, that the Bureau of Reclamation willnot fulfill the requirements of this Cooperative inthe future, and "WHEREAS, it 

### isdesirable from a technical and economic standpoint that Upper Missouri arrange and negotiate for supplemental power for 

### its members; and

# *** "WHEREAS, it 

### is deemed tobe necessary and in the best interest of this Cooperative tohave Upper Missouri supply allthe present and future electricpower and energy requirements of this Cooperativewithin 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 

### in question, and the approval of the Rural ElectrificationAdministration was endorsed thereon dated November 30, 1959. Under this contract, McCone agreed topurchase 

### itspower and energy requirements from Upper Missouri until December 31, 1994, and topay rates asestablished under paragraph 

### 4(b) of the contract, which provides: "(b) The Board of Trustees of Upper Missouri at such intervals as it shalldeem appropriate, but in any event not less frequently than once ineach calendar year, shallreview the rate for electric power and energy hereunder and under similar agreements with other member cooperatives and, ifnecessary shallrevise such rate so that it shallproduce revenues which shallbe sufficient, but only sufficient, with the revenues of Upper Missouri from all other sources topay alloverhead and meet the cost of the operation and maintenance of the transmission system, generating plant and related facilities of Upper Missouri, the cost of transmission service, the cost of any power and energy purchased forresalehereunder by Upper Missouri, pay taxes, make payments on account of principal of and interest on all indebtedness of Upper Missouri, and toprovide for the establishment and maintenance of reasonable reserves 

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# * The consumer agrees that the rate from time to time establishedby the Board of Trustees of Upper Missouri shallbe deemed tobe substituted for the rateherein provided and agrees topay for electric power and energy furnished by Upper Missouri to it hereunder and after the effective date of any such revisions at such revised rates; provided, however, that no such revision shallbe effectiveunless approved by the Administrator. Il From the pretrial order, McCone has admitted: 

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# ** that allrateswere establishedby a majorityof the board of plaintiff and were approved by the Rural ElectrificationAdministration. Il Upper Missouri rented offices atSidney, Montana, and hired management. Upper Missouri thereafter entered into long term contractswith the Bureau topurchase hydrogenerated power. When it determined that the Bureau could not supply the needs of 

### itsmembers, itentered intomembership and a cooperative agreement topurchase thermo-generated power with Basin on a long 

### termbasis, and thereby participate ingeneration and direction

as a member of this organization. 

### On March 10, 1969, McCone advised Upper Missouri that itwould terminate 

### itsmembership effective on the meter reading date of the Bureau inJune 1969, and proceeded with attempts to obtain direct delivery of power from Upper Missouri suppliers. This actionwas thereafter instituted. Referring back tothe quoted parts of McCone's resolution, it 

### is seen that there 

### isnothing that even remotely suggests any limitation asurged by McCone. McCone urges that in 1959, atthe time of the wholesale power contract with Upper Missouri, itwas not contemplated that Upper Missouri would inthe future contract topurchase power from Basin. Rather, McCone contends, itwas contemplated that hydro-electric generating dams would be built on the upper Missouri river. Perhaps these contemplations were inthe minds of some of the incorporators; but the resolution concerned power needs through a cooperative power supply entity from any source, We have examined the wholesale power contract and find that it 

### isenforceableunder 

### its terms. The previous opinion of this Court sets out some of the pertinent and relevant provisions and 

### willnot be repeated here. In that opinion, appearing at 157 Mont. pp. 249,250 and 484 P,2d pp. 746, 747, we said: 

### inal ally

## ,the conclusionsconcerning public policy, restriction of trade, and fraud simply do not appear. The brief of

# *** McCone states:"'The contracts in this case are against public policy and the public good and are in restraint of trade because they result ina significant portion of the population of eastern Montana having topay additional costs for their electricity over the term of the contract and in that they prohibit McCone Electric incontracting with other andheaper sources of power developing coalreserves and power sources within the state of Montana

# ***,' "If every contract could be declared void because of a showing by an individual, a graup of individuals, or even a significant portion of individuals that they could save money by breaking it,chaos would result. Ten years after the contract, initiated and inspired, we are told, by defendant [McCone], defendant [McCone] now wants a better deal elsewhere. It 

### is as simple as that,11 The foregoing statement of this Court 

### isapplicable here, There 

### isno showing that the power contract 

### is against public policy or inrestraint of trade. There 

### isnothing inthe pleadings or the documents on filethat would even remotely indicate that the by-laws were against public policy or the public good, but are ordinaryby-laws, adopted with ~cCone's knowledge and consent, Upper Missouri did not perform acts detrimental toMcCone which were outside the original contemplation of the parties. Upper Missouri became 

### a member of Basin toobtain a power supply for 

### itsmembers, On cooperative principles Upper Missouri 

### isa part owner of Basin's generation and transmission systemwhich entitled Upper Missouri to a seat on the Basin board, Under the charter and by-laws, each of the nine cooperatives have a trusteeupon the Upper Missouri board. Certainly one trustee cannot prevent the taking of action and entering into agreements, which the others believe

### willbenefit the cooperative

as a whole. The entirebackground, resolution a.nd contract indicate unequivocally that the purpose atthe time was toobtain an adequate power supply to avoid a power shortage, and that Upper Missouri was to undertake the task to see that this did not happen, Upper Missouri fulfilled 

### itspart of the bargain; it has obtained and supplied that power, Now, many years after

### the fact,McCone is attempting to vary by par01 evidence the unimpeachable intent of the parties, as evidenced by the resolution 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 becoming 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