No. 12828 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1975 

LOCKWOOD WATER USERS ASSOCIATION, 

Plaintiff and Respondent, 

GERALD W. ANDERSON, d/b/a 

MAGIC CITY VILLAGE, 

Defendant and Appellant. 

Appeal from: District Court of the Thirteenth Judicial District, 

Honorable A. B. Martin, Judge presiding. 

Counsel of Record: 

For Appellant : 

Towe, Neely & Ball, Billings, Montana 

Thomas E. Towe argued, Billings, Montana 

For Respondent: 

Moulton, Bellingham, Longo & Mather, Billings, Montana 

Ward Swanser argued, Billings, Montana 

Submitted: September 29, 1975 

Decided : NOV 1.7 1975 

/ ;t.,/'a. 

Filed : L4()'v ;. 1 ,.- u 
Mr. Justice John Conway Harrison delivered the Opinion of the Court. 

This is an appeal from a summary judgment and a permanent 

injunction issued by the district court, Yellowstone County, 

restraining defendant Gerald W. Anderson, d/b/a Magic City Village, 

from hooking up any mobile homes to the facilities owned by the 

plaintiff association, whether it be to take care of attrition or 

otherwise, until such time as he can do so and not violate the 

terms of the agreement and specifically the 60 unit limitation 

provided for in the agreement or until the parties enter into a 

new agreement which supercedes the existing agreement. 

In 1955 residents of the Lockwood area, adjacent to Billings, 

Montana, banded together in a voluntary nonprofit corporation 

organized for the purpose of supplying water to its members. When 

it was created there were approximately 150 homes servicing some 

650 people in an area of some 2,200 acres known as the Lockwood 

Community. In the 20 years of its existence the population of 

the area has increased to some 2,630 people who live in 774 homes. 

Some 590 are members of the Association while some 137 additional 

homes receive water from the Association through their mobile 

home courts that are treated as one unit for membership purposes. 

At the time of organization the Association obtained a 

loan from Farmers Home Administration (FHA) to put in a water 

service line. The loan has not been fully repaid. The FHA took 

a mortgage on the Association's property obligating it to conduct 

its business in accordance with the by-laws and certain rules of 

the FHA. Serious questions would arise from the mortgage provisions, if the Association were to be classified a "public utility". 

To finance the Association memberships were sold for $50. 

The Association adopted articles of incorporation and by-laws in 

the form suggested by the FHA and it is a nonprofit corporation 
organized for the purpose of supplying water to members only. 

Its by-laws provide: (1) That the Board of Directors shall have 

power to make, publish and enforce rules and regulations concerning the distribution, use and application of the water under 

its contract; (2) That the Board of Directors may take legal proceedings to prosecute, defend, compromise all lawsuits, to make 

all contracts in the name of the corporation necessary and proper 

for the conduct of the affairs and the carrying on of the business of the corporation; (3) That no membership shall be issued 

or connections made at any time when the capacity of the system 

or the available supply of water is exhausted by the needs and 

demands of existing members and connections; (4) That the manner 

of delivering, measuring and regulating the supply of water to 

members shall be prescribed by the corporation, and shall at all 

times be under its control, and the Board of Directors or the 

manager, with the consent of said Board, may make such rules and 

regulations regarding the distribution and delivery of the water 

as in its judgment may appear necessary or expedient for the best 

interests of the corporation and its members; (5) That the membership certificates of any member delinquent in the payment of 

assessments thereon shall be subject to sale; (6) That the corporation may, through its Board of Directors, after ten days notice 

by mail of such delinquency, terminate the supply of water to any 

user who is delinquent in the payment of any water charges, assessments or rentals. 

Through the years as the membership increased the Association has adopted rules and regulations which require new members 

to pay the expense of bringing water from the main to their property lines and then on to their dwellings. This was done through 

the Board of Directors elected by the membership and who serve 

without pay. Throughout its existence the Association has assumed 
it was not a public utility and at no time during this period 

has the Public Service Commission ever attempted to regulate the 

Association. 

In 1972, defendant Gerald W. Anderson, d/b/a Magic City 

Village, requested water for a trailer court. The first request 

was for a 300 unit court. He was advised by the Association's 

Board of Directors that he would be required to build a loop 

from the school to his property line, if he intended to develop 

the 300 units. He chose to cut down his request for water to 

60 units and he was allowed, for the 60 unit development, to take 

off from a nearby main. The 1972 agreement contains this statement: 

" * * * it is understood by and between the 

parties that no more than sixty (60) mobile 

home sites shall be served by such facilities." 

This 60 mobile home limitation was put in on the advice of the 

Association' s engineer. 

Service was provided to the defendant's development and 

by October 2, 1972, he was in violation of the agreement and he 

was requested by the Board to attend a meeting to discuss the 

matter. He refused to attend. On January 15, 1974, defendant 

was advised by letter that if he did not reduce the number of 

units to 60 his service would be terminated. Through his attorney, defendant answered the January 15 letter on January 28: 

"In return for your granting an extension of time 

on the shutoff date, my client will take the 

necessary steps to reduce the number of homes 

served back down to sixty (60) * * *. " 

In answer to this request the Association notified defendant's 

attorney that it was willing to try to work the problem out, 

"However, we will not grant an extension past the end of February." 

As a result of these letters BlaineAnderson, son of defendant, on February 7, attended a meeting of the Board of the 

Association and stated that his father would complete the water 
loop originally requested by the Association to get additional 

units. He asked the Board to allow normal attrition to reduce 

the number of trailers in the court back to 60. The Board 

agreed to this request but again defendant did not live up to 

agreements made with the Board. By March 11 there were 70 

trailers on the development. Defendant was notified he had 10 

days to reduce to 60. He not only did not comply but rather, in 

the next 30 days, he told all mobile home dealers of a planned 

expansion and ran advertisements for additional trailer spaces. 

On March 22, 1974, the Association filed a suit to enforce the terms of the agreement and to enjoin defendant from 

placing additional trailers on the court in violation of the agreement. Coincidently, defendant changed attorneys. 

At the time of the show cause hearing the Association's 

officers testified and introduced exhibits to show the violation 

of the agreement and that it was not a public utility. The only 

testimony of defendant went to the need for a restraining order 

and a bond. No testimony was offered as to the substance of the 

complaint or that the Association was a public utility. 

The trial court found that defendant had violated the 

contract; that defendant's assertion there was a mutual mistake 

or fraud in drawing up the agreement was groundless; and, that 

defendant was estopped from asserting this defense on the grounds 

he accepted the benefits of the contract and that this evidences 

an understanding consistent with the agreement. 

On appeal, defendant sets forth a number of issues, however we find the only real question to be resolved is whether or 

not plaintiff's operations come under the Public Service Comrnission. It is clearly apparent from the testimony of the witnesses 

and the exhibits introduced that to get water from the Association 

one must be a member. Only members, as such, are allowed to use 
the system and they use it on a nonprofit cost sharing basis, 

as required by the FHA. By joining the Association, members 

agree to be bound by its rules and regulations. 

Without holding that plaintiff is a form of utility, 

we will assume that it is and then decide if the service rendered is for the public for which compensation is received. 

Section 70-105, R.C.M. 1947, provides: 

"Every public utility is required to furnish 

reasonably adequate service and facilities. * * *" 

Defendant argues that under cases of this Court (City of 

Polson v. Public Service Commission, 155 Mont. 464, 473 P.2d 508; 

Hames v. City of Polson, 123 Mont. 469, 215 P.2d 950; State ex 

rel. Billings v. Billings Gas Co., 55 Mont. 102, 173 P. 799) the 

Association is a public utility, cannot deny service to anyone 

in its area, and being a public utility the agreement is unenforceable as contrary to public policy and the clear mandate of 

the law. Under the facts here, we do not agree. The general law 

is found in 73 C.J.S. Public Utilities 5 2, P. 992 and B 7b, 

"The test is, therefore, whether or not such 

person holds himself out, expressly or impliedly, 

as engaged in the business of supplying his product or service to the public, as a class, or to 

any limited portion of it, as contradistinguished 

from holding himself out as serving or ready to 

serve only particular individuals. * * * It has 

been stated that the true criterion by which to 

determine whether a plant or system is a public 

utility is whether or not the public may enjoy 

it of right or by permission only. * * *" 

"Accordingly, a utility must act toward all members 

of the public impartially, and treat all alike, 

and it cannot arbitrarily select the persons 

for whom it will perform its service or furnish 

its commodity, or refuse to one a favor or privilege 

which it has extended to another, since the term 

'public utility' precludes the idea of service 

which is private in its nature and is not to be 

obtained by the public. * * *" 

While Montana has not had occasion to define the term 

"public utility", a number of jurisdictions have established a 
workable definition by case law. 64 Am Jur 2d, Public Utilities, 

§5, p. 553, notes: 

" * * * In the absence of statute, the most important test used in determining whether such an 

organization or group is in fact a public utility 

in this respect is the factor of serving or willingness to serve the entire public within the 

area in which the facilities of the organization 

are located. If it confines its service to its 

own stockholders or to members of its own group, 

and does not serve or hold itself out as willing 

to serve the public, it is not ordinarily considered a public utility. * * *" 

See: Cherry Lake v. Kearce, 157 Fla. 484, 26 So.2d 434; 

Garkane Power Co. v. Public Service Com., 98 Utah 466, 100 P.2d 

571, 132 ALR 1490; State v. Nelson, 65 Utah 457, 238 P. 237, 239, 

42 ALR 349. 

In Nelson, cited with approval in Garkane Power Co., the 

Utah court held: 

"No one may successfully contend that it is competent for the Legislature to regulate and control 

in such respect a mere private business or to 

declare a private'business to be public service 

or a public utility. In other words, the state 

may not, by mere legislative fiat or edict, by 

regulating orders of a commission, convert mere 

private contracts or a mere private business into 

a public utility or make its owner a common carrier. 

[Citing cases] So, if the business or concern is 

not public service, where the public has not a 

legal right to the use of it, where the business 

or operation is not open to an indefinite public, 

it is not subject to the jurisdiction or regulation 

of the commission." 

See also: 73 C.J.S. Public Utilities S2, p. 991; So. Cal. Edison 

Co. v. Railroad Comission, 194 Cal. 757, 230 P. 661; Choctaw 

Electric Co-operative v. Redman, Okla. 1954, 293 P.2d 564; San 

Miguel Power Ass'n v. Public Service Corn., 4 Utah 2d 252, 292 P.2d 

In the instant case, the trial judge issued a memorandum 

and order, noting: 

"At the hearing on the restraining order plaintiff 

presented evidence covering the purpose, formation 

and operation of its business. Testimony was also 
taken as to negotiations leading up to the contract, 

the pertinent provisions of the contract, and defendants alleged violations thereof. The Court 

entered its findings of fact and conclusions of 

law by which it denied the defendant's claim that 

the Court had no jurisdiction, and thereafter 

entered judgment granting plaintiff the permanent 

injunction it sought." 

After careful examination and consideration of the trial 

court's findings of fact, conclusions of law and judgment, we 

find them to be correct. Here, service is rendered only to members who share the costs of operation. The service is contractual. 

Having so found, it is unnecessary for us to consider 

defendant's jurisdictional question. The trial court found a 

breach of contract and properly granted summary judgment. 

The judgment is affirmed h 

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We concur: 

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................................ 

Chief Justice . 

sitting in place of Mr. J 

Frank I. Haswell.