Opinion ID: 2516695
Heading Depth: 3
Heading Rank: 2

Heading: Contracts Clauses

Text: ¶ 19 Next we must address Monticello City's contracts clause contentions, which if dispositive would be a sufficient ground upon which to affirm the trial court's summary judgment order on the referendum issue, thus obviating the need to determine if resolution 2000-2 is subject to referendum. Monticello City contends that a referendum should not be held because a referendum voiding Resolution 2000-2 would vitiate the currently binding contract between the City and Empire Electric in violation of the contracts clauses of the United States and Utah Constitutions. The Contracts Clause of the United States Constitution provides: No state shall . . . pass any . . . law impairing the obligations of contracts . . . . U.S. Const. art. I, § 10, cl. 1. Similarly, the contracts clause of the Utah Constitution provides: No . . . law impairing the obligation of contracts shall be passed. Utah Const. art. I, § 18. The contracts clauses' prohibitions of the passage of laws that impair the obligations of contracts extend to any form of legislative action, including referenda and other direct action by the people. See Ross v. Oregon, 227 U.S. 150, 163, 33 S.Ct. 220, 57 L.Ed. 458 (1913); Fuller-Toponce Truck Co. v. Pub. Serv. Comm'n, 99 Utah 28, 36-37, 96 P.2d 722, 726 (1939). Essentially, Monticello City contends that if a referendum is passed that abrogates resolution 2000-2, the voters would be passing a law impairing the city's obligation to repurchase the system under the city's contract with Empire. ¶ 20 However, we need not decide this question. A contract's obligation cannot be constitutionally impaired by the passage of a law if the contract itself relieves the parties of the obligations to perform, even if the duty to perform is rescinded by a clause in the contract that contemplates legislative action that would otherwise impair the obligations of contract. Nat'l Bldg. v. State Bd. of Educ., 85 N.M. 186, 510 P.2d 510, 512 (1973); see also Manhattan Bldgs., Inc. v. Hurley, 231 Kan. 20, 643 P.2d 87, 95 (1982). Indeed, contract obligations are not impaired if the contract itself relieves the parties of their obligations as a result of a provision of the contract that conditions the obligations to perform on the government's not passing a particular law. See Harper v. Great Salt Lake Council, Inc., 1999 UT 34, ¶ 14, 976 P.2d 1213 (stating that [f]ailure of a material condition precedent relieves the obligor of any duty to perform). ¶ 21 In the instant case, the city and Empire specifically agreed: If a REFERENDUM election relating to the purchase of the SYSTEM is held . . . and (i) the result of the election is that MONTICELLO Resolution 2000-2 is upheld, then the closing shall be scheduled for 60 days from the date of the election; or (ii) the result of the election is that MONTICELLO Resolution 2000-2 is rescinded, and/or the citizens vote that the City shall not purchase the SYSTEM, then EMPIRE's franchise under Ordinance 79-11 shall be extended for 20 years pursuant to Ordinance 79-11. According to the plain language of the parties' agreements, the repurchase of the system was expressly conditioned upon resolution 2000-2 being upheld in a referendum election if a referendum is held. In other words, the parties agreed in the contract itself that the continued contractual obligations regarding the purchase of the system would continue only if resolution 2000-2 is upheld by a referendum if a referendum were to be held and the parties would be relieved of their reciprocal respective duties to sell and purchase the system if the resolution were to be rescinded by referendum. Because the contract unequivocally conditioned the sale on resolution 2000-2 being upheld in a referendum if held, the contract obligations in this case cannot be impaired because the contract itself relieves the parties of the duties to perform if resolution 2000-2 is not upheld in a referendum. The very event that Monticello City claims would impair the obligations under the contract and would repudiate the parties' duties to perform is the same event which triggers the condition in the contract and upon which the continued duties to perform are conditioned if a referendum is ever held. See Nat'l Bldg., 510 P.2d at 512. ¶ 22 It is therefore impossible to contend that if a referendum repudiates resolution 2000-2, then the referendum would violate the contracts clauses of the United States and Utah Constitutions. Further, it is of no moment that this provision was in an agreement to extend the closing and not in the original contract because any agreement can be amended, modified, or altered by subsequent agreement of the parties, as is the case here. Copper State Leasing Co. v. Blacker Appliance & Furniture Co., 770 P.2d 88, 90 (Utah 1988); Rapp v. Mountain States Tel. & Tel. Co., 606 P.2d 1189, 1191-92 (Utah 1980). Therefore, a referendum election abrogating resolution 2000-2, if required in this case, see infra part I.C., does not contravene the contracts clauses of the United States and Utah Constitutions, and the trial court erred in concluding that the city properly refused to hold the referendum for this reason.