No. 83-85 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1983 

BETH HOWE, 

Plaintiff and Appellant, 

-vsBIG HORN ELECTRIC COOPERATIVE, INC., 

Defendant and Respondent. 

APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Big Born, 

The Honorable Robert 13. PJilson, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Patten & Renz, Billings, Montana 

D. Michael Eakin, Montana Legal Services, Billings, 

Montana 

For Respondent : 

Bert W. Kronmiller; Kronmiller & Seykora, 

Hardin, Montana 

Submitted on Briefs: July 14, 1983 

Decided: October 19, 1983 

Filed: ih.3 1 d /%3 

- Clerk 
Mr. Justice John Conway Harrison delivered the Opinion of 

the Court. 

This appeal involves the reasonableness of a Rural 

Electric Cooperative's termination of service to a customer. 

After a hearing in the District Court of the Thirteenth 

Judicial District of the State of Montana in and for the 

County of Big Horn, The Honorable Robert H. Wilson dismissed 

the member's complaint. 

Appellee Big Horn County Electric Cooperative, Inc., 

(hereinafter the Co-op) is a membership corporation 

organized and existing under the Rural Electric and 

Telephone Cooperative Act, Section 35-18-101, MCA, et. seq., 

and appellant is a member of the Co-op. On September 21, 

1979, appellant executed an "Application for Membership and 

for Electric Service," attempting to secure electric service 

for the house she was renting south of Lodge Grass, Montana, 

in an area served by the Co-op. The owner of the house, 

appellant's landlord, had been supplied electricity by the 

Co-op at the residence before he moved out and all the 

necessary wiring and other hardware were in place. At the 

time appellant applied for service, there was an outstanding 

bill of approximately $270 which had been amassed by 

appellant's landlord. Appellant agreed to be liable for and 

pay $10 per month to reduce the delinquent bill, though the 

record is unclear as to how the agreement came about. 

Appellant claims she was required to agree to this 

arrangement before she would be provided service, pursuant 

to a Co-op policy, but the Co-op contends she offered to 

make the payments. The application was approved and 
appellant's electricity was turned on. 

Appellant complied with the agreement through the 

remainder of 1979 and 1980. However, it appears that she 

lost her job in the winter of 1980-81 and began having 

difficulty making the payments. The payments were not 

always made on time, and instead of paying the extra $10 per 

month she was only paying $1 over her own bill. After 

sporadic payments in the spring of 1981, appellant received 

a "Notice of Termination of Service and Demand for Payment" 

on July 14, 1981. Appellant made one payment leaving the 

unpaid portion at $41.83, and on July 18, 1981, her service 

was disconnected. 

This action was commenced on August 10, 1981, by 

appellant, alleging that she was coerced into the agreement, 

which amounted to extortion and an unfair trade practice in 

violation of Sections 30-14-103 and 45-6-317, MCA. By her 

complaint, appellant sought a temporary restraining order to 

have her service reconnected, a declaratory judgment that 

the Co-op's policy was illegal and an injunction to prevent 

the Co-op from enforcing the policy. The temporary 

restraining order and order to show cause was issued and a 

hearing date set. 

At the hearing, it was stipulated between counsel that 

the issue upon which the case rested was whether "the 

policies and by-laws of the Electric Cooperative regarding 

the refusal of service based upon charges against the land 

is valid and proper." The specific policy concerned is 

commonly known as Policy Number 24A, which was adopted by 

the Board of Trustees of the Co-op on March 13, 1979. 

Policy 24A gives the manager of the Co-op the authority to 
discontinue service to a member or customer who fails to pay 

the fees incurred for the service. After certain documents 

and facts were stipulated to and briefs filed, the case was 

submitted to the District Court judge for his decision. On 

November 12, 1982, the judge found that the policies, rules 

and regulations of the Co-op were part of a binding contract 

between the Co-op and appellant, and that the policy in 

question was reasonable. The complaint was ordered 

dismissed and from this order the appeal is taken. 

Appellant has framed the issue thus: May a rural 

electric cooperative make electric service to one customer 

contingent upon payment of the delinquent bill of another 

customer? This issue is not capable of resolution on the 

District Court record as it stands. 

The relationship between the Co-op and each member is 

contractual in nature. Sutton v. Hunziker (1954), 75 Idaho 

395, 272 P.2d 1012. The articles of incorporation, by-laws, 

rules and regulations of the cooperative contain the 

provisions of the contract, as the member agrees to be bound 

by them in signing the application for membership. Such was 

the case in the present controversy as the Co-op's 

membership application provides that the member agrees to 

"comply with, and be bound by the provisions of the articles 

of incorporation and by-laws of the Cooperative, and such 

rules and regulations as may from time to time be adopted by 

the Cooperative." The rules, regulations and by-laws 

adopted after the execution of this contract became a valid 

part of the agreement. 

While it is true that the member is bound by this 

agreement, the articles, by-laws, rules and regulations of 
the cooperative must be reasonable. Sutton, supra; Smith v. 

Pickwick Electric Cooperative (1963), 212 Tenn. 62, 367 

S.W.2d 775. Cooperatives hold a favored position in the 

law. In Montana, rural electric cooperatives have limited 

powers of eminent domain, Section 35-18-106(9), MCA; have 

the right to conduct power lines across public 

thoroughfares, Section 35-18-106(8), MCA; and are exempt 

from Montana tax laws, Section 35-18-503, MCA. Conversely, 

cooperative members are often in a disadvantageous position 

with respect to the cooperative, as they are in rural areas 

which are less likely to be serviced by a public utility and 

must rely on the cooperative for power. In dealing with an 

unreasonable rule, a member has the option of either 

attempting to amend the adopted rule or to discontinue 

service, both of which are inadequate remedies. This 

inadequacy is exacerbated by the circumstances in the 

present case where the member's residence is already 

connected with the cooperative and finding an alternative 

supply of electricity would be quite costly. This disparity 

between the relative positions gives rise to an obligation 

on the part of the Cooperative to deal in a reasonable 

manner with its members. The Cooperative may not foist 

either unreasonable rules or interpretations of rules on its 

members simply because they have agreed to be bound by the 

actions taken by the governing body. The adoption and 

implementation of all rules must be done fairly and in a 

reasonable manner with proper regard for the rights of the 

member and his property. 

Whether a rule is reasonable is a question of fact. 

Sutton, supra. Likewise, the reasonableness of its 
interpretation is a question of fact. In the present case, 

the District Court found that the policy of the Co-op 

allowing disconnection of service for nonpayment of fees was 

reasonable. We do not disagree with this finding. However, 

the dispositive issue in this case is not whether the policy 

is reasonable, but whether its implementation was 

reasonable. As stated above, this issue is not capable of 

resolution on the present record. 

From its order dismissing appellant's complaint, it 

appears the District Court assumed that appellant agreed to 

be liable for the prior customer's bill of her own volition, 

making it reasonable for the Co-op to disconnect for 

nonpayment. However as noted above, there is a basic 

disagreement between the parties as to the facts and 

circumstances surrounding appellant's signing the 

application for electric service. Appellant contends she 

was required to agree to pay the delinquent bill before she 

would be provided service, but the Co-op claims she offered 

to make the payments. The District Court did not hold a 

hearing to determine whose contentions were correct, but 

relied on a stipulation of facts submitted by the parties 

which did not address the question either. Without first 

making a finding of the pertinent facts, the District Court 

erred by ruling that the Co-op acted reasonably. The 

District Court must find whether the agreement to pay was 

voluntary, or a result of unequal bargaining power to judge 

the reasonableness of the Co-op's use of Policy 24A. It is 

unreasonable for a Co-op to use its superior bargaining 

position to force a prospective member to pay another 

member's delinquent bill and terminate service for 
nonpayment. 

The District Court must further find whether appellant 

was delinquent so as to justify the termination of service. 

There was no finding of the amount of payments made, or 

whether they were made in payment of her own bill or her 

predecessor's bill. If the District Court finds that 

appellant was unreasonably coerced into paying the prior 

tenant's bill, such payments must be credited to her own 

bill and then a determination of its status made. If the 

District Court finds that appellant volunteered to pay the 

prior tenant's bill, then the court must find that she was 

delinquent to uphold the Co-op's termination of service. 

Appellant raises a second issue, whether a rural 

electric cooperative serving customers on Indian trust land 

may require that the charges for electric service run with 

the land. 

It was stipulated that the residence in question is 

located on the Crow Indian Reservation. The membership 

application provides that the member agrees to a lien on the 

property served to secure payment of the fees incurred. 

However, the application expressly exempts Indian trust land 

from this provision. 

Reversed and remanded for further proceedings in 

accordance with this opinion. 

We concur: ( w 1 

Chief Justice 
Justices /