Court Opinion

ID: 884952
Source: CourtListenerOpinion
Date Created: 2013-06-05 03:20:20.482679+00
Date Added: 2024-06-11T09:10:03.408788
License: Public Domain

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                                                                No. 98-637

                           IN THE SUPREME COURT OF THE STATE OF MONTANA

                                                               1999 MT 222

BONNIE GRANBOIS,

Plaintiff and Appellant,

v.

BIG HORN COUNTY ELECTRIC

COOPERATIVE, INC., a Montana

corporation,

Defendant and Respondent.

APPEAL FROM: District Court of the Thirteenth Judicial District,

In and for the County of Big Horn,

The Honorable Susan P. Watters, Judge presiding.

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COUNSEL OF RECORD:

For Appellant:

D. Michael Eakin, Montana Legal Services; Billings, Montana

For Respondent:

James E. Torske, Attorney at Law; Hardin, Montana

For Amicus:

Maxon R. Davis and Tiffany B. Lonnevik, Davis, Hatley, Haffeman

& Tighe, P.C.; Great Falls, Montana (MECA)

Submitted on Briefs: June 3, 1999

Decided: September 22, 1999

Filed:

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__________________________________________

Clerk

Justice Jim Regnier delivered the opinion of the Court.

    1. ¶Big Horn County Electric Cooperative, Inc. (the Cooperative) provides electric
         service to property where Appellant, Bonnie Granbois, lives. The property is located
         on the Northern Cheyenne Indian Reservation. When Bonnie Granbois moved her
         trailer onto the property, the Cooperative informed her that before she could receive
         electric service, a delinquent bill of the person who previously lived on the property
         would have to be paid. Thus, Granbois paid $932.07 to satisfy the bill. Thereafter,
         she brought an action against the Cooperative, alleging that its actions constituted an
         unfair trade practice in violation of § 30-14-103, MCA, and that it breached its
         obligation to deal with her in good faith. Both parties filed motions for summary
         judgment. The District Court granted judgment in favor of the Cooperative.
         Granbois appeals, and we reverse.
    2.   ¶We restate the dispositive issues in this case as follows:
    3.   ¶1. Whether the Cooperative's bylaw provision, requiring payment of an existing
         member's delinquency prior to transfer of the membership to a new member, is
         reasonable?
    4.   ¶2. Is a condition of receiving electric service on Indian trust land subject to paying
         a prior customer's delinquent bill, in effect, a lien or encumbrance upon the land in
         violation of federal law?
    5.   ¶By resolving the first issue in the negative, we obviate the need to address the
         second issue in this opinion.

                                                FACTUAL BACKGROUND

    1. ¶The Cooperative is incorporated pursuant to Montana's Rural Electric and
       Telephone Act, now codified at Title 35, Chapter 18 of the Montana Code
       Annotated. The Cooperative provides the only electric service available to the
       property involved in this matter.
    2. ¶The property is a 40-acre parcel of Indian trust land located on the Northern
       Cheyenne Indian Reservation in Big Horn County. It is held in trust by the United
       States for the benefit of several owners who have undivided interests in the land.
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         One owner is the daughter of Bonnie Granbois and the wife of Jerry Spang, who
         lived on the property before Granbois. Granbois's other children also have
         ownership interests in the property.
    3.   ¶In 1992, the Cooperative constructed a single service line onto the property to
         service Spang's mobile home. The line was constructed as a result of Spang's
         "Application for Membership and Electric Service." In his application, he agreed to
         pay a minimum charge for electric service until February 25, 1997, as a condition
         for membership.
    4.   ¶In March 1995 the Cooperative terminated Spang's electric service because he was
         delinquent in his payments in the amount of $932.07. Spang eventually removed his
         mobile home from the property.
    5.   ¶Two years later, when Granbois decided to move her mobile home onto the
         property, the Cooperative instructed Granbois that Spang's delinquent bill must be
         paid before his membership to the Cooperative could be transferred to her as a new
         member. In addition, Granbois paid $299.50 in normal charges associated with a
         new membership. Electric service was then resumed.
    6.   ¶The bylaws of the Cooperative provide that the amount of a member's delinquent
         payments becomes a charge against the membership certificate "which must be paid
         when the membership is transferred to another person." The bylaws expressly
         provide that:

[T]he amount of any delinquent amounts unpaid by any consumer and/or member of the
Cooperative shall become a lien upon the property served or a charge against the
membership certificate of any consumer or member, which must be paid when the
membership is transferred to another person, provided, that in the event the property is
being served under the delinquent membership is Indian lands, whether allotted lands or
tribal lands, said charge shall not become a lien upon such allotted or tribal Indian lands.

Because the Cooperative does not allow multiple memberships at any single meter
location where a current membership exists, a membership must be terminated at a
particular location before a new member may receive electric service at that location.

    1. ¶After Granbois paid Spang's delinquent bill and became a member of the
         Cooperative, she commenced this action. Her complaint, which was filed on August
         27, 1997, alleged that the Cooperative used its superior bargaining position against
         her and that its actions constituted an unfair trade practice in violation of § 30-14-

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      103, MCA. She requested actual damages in the amount of $932.07 and treble
      damages, pursuant to § 30-14-133, MCA. She also alleged that the Cooperative
      breached its obligation to deal with her in good faith and that she should be entitled
      to recover punitive damages.
   2. ¶This matter was eventually submitted to the District Court on stipulated facts, and
      the parties filed cross motions for summary judgment. In her brief in support of her
      motion for summary judgment, Granbois asked the District Court to enter partial
      summary judgment in her favor on the issue of liability and unfair trade practice
      damages, reserving the issue of punitive damages for trial.
   3. ¶On October 5, 1998, the District Court entered summary judgment in favor of the
      Cooperative from which Granbois appeals.

                                                 STANDARD OF REVIEW

   1. ¶On appeal from a summary judgment, this Court reviews a case de novo based on
       the same criteria applied by the district court. See Stutzman v. Safeco Ins. Co.
       (1997), 284 Mont. 372, 376, 945 P.2d 32, 34 (citing Treichel v. State Farm Mut.
       Auto. Ins. Co. (1997), 280 Mont. 443, 446, 930 P.2d 661, 663). Since the parties
       submitted this case with a stipulation of the material facts, we must therefore
       determine whether the moving party is entitled to judgment as a matter of law. See,
       e.g., Stutzman, 284 Mont. at 377, 945 P.2d at 34.

                                                           DISCUSSION

   1. ¶Whether the Cooperative's bylaw provision, requiring payment of an existing
      member's delinquency prior to transfer of the membership to a new member, is
      reasonable?
   2. ¶The District Court granted summary judgment in favor of Big Horn and denied
      Granbois's motion for summary judgment. The trial court concluded that the bylaw
      provision which restricts transfer of a membership to a new member until delinquent
      accounts are made current, was reasonable as a matter of law. In doing so, it
      recognized that this Court addressed a similar issue in our decision in Howe v. Big
      Horn Elec. Coop., Inc. (1983), 206 Mont. 297, 670 P.2d 936, but concluded that our
      analysis of the issue in Howe was dicta and not dispositive. The District Court was
      persuaded by two Idaho cases, First Fed. Sav. & Loan Ass'n v. East End Mut. Elec.
      Co. (Idaho Ct. App. 1987), 735 P.2d 1073 and Stevenson v. Prairie Power Coop.,
      Inc. (Idaho 1990), 794 P.2d 620 which addressed similar issues. The District Court

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      ultimately rested its decision on the basis that cooperatives are exempt from
      regulatory control because of the unique relationship between a cooperative and its
      members. It determined that because of that relationship being contractual in nature,
      courts should not unnecessarily interfere with the parties' freedom to contract. The
      District Court concluded that a cooperative may place restrictions on the transfer of
      memberships through the enactment of bylaws. It further reasoned that the
      restrictions on membership are "to protect other members from bearing the
      economic consequences of the outgoing member's default." First Fed. Sav. & Loan
      Ass'n, 735 P.2d at 1077. Finally, the court stated that Big Horn's policy, expressed in
      the applicable bylaw provisions, was a reasonable means of achieving its goal of
      protecting its members.
   3. ¶Section 35-18-301, MCA, specifically authorizes a cooperative to create
      restrictions on memberships. In particular, § 35-18-301(2), MCA, provides that "[m]
      embership in the cooperative shall not be transferable, except as provided in the
      bylaws. The bylaws may prescribe additional qualifications and limitations in
      respect to membership." A Cooperative has the statutory power to adopt, amend,
      and repeal its bylaws, pursuant to § 35-18-106(11), MCA. Section 35-18-207,
      MCA, grants cooperatives broad flexibility to adopt bylaws defining the rights and
      duties of its members and the regulation and management of cooperative affairs.
      According to the stipulated facts, the members of the Cooperative duly adopted
      bylaws subsequent to the Cooperative's incorporation.
   4. ¶In Howe, we considered an electric cooperative's formal policy which allowed the
      manager of the cooperative to disconnect service to a member or customer who
      failed to pay the fees incurred for the service. Howe, 206 Mont. at 299, 670 P.2d at
      937. The facts in Howe were similar to the facts presented here. Attempting to
      secure electrical service for her home, a potential cooperative member agreed to pay
      ten dollars per month toward a previous member's delinquent bill until it was paid in
      full, plus her own fees, to acquire electric service. When the customer was unable to
      pay the full amount of the bill each month, she paid only her fees and one dollar
      toward the delinquent amount. Howe, 206 Mont. at 298-99, 670 P.2d at 937.
      Eventually, the cooperative disconnected her service. Howe, 206 Mont. at 299, 670
      P.2d at 937.
   5. ¶The Court in Howe faced the question of whether the cooperative's actions in
      disconnecting the member's service were reasonable. The parties stipulated to the
      material facts and further stipulated that the dispositive issue was "whether the
      policies and by-laws of the Electric Cooperative regarding the refusal of service
      based upon charges against the land is [sic] valid and proper." Howe, 206 Mont. at

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       299, 670 P.2d at 937. On appeal, however, the appellant framed the issue as, "May a
       rural electric cooperative make electric service to one customer contingent upon
       payment of the delinquent bill of another customer?" Howe, 206 Mont. at 299, 670
       P.2d at 937.
    6. ¶We concluded in Howe that the issue as framed could not be resolved on the basis
       of the record presented. Howe, 206 Mont. at 299-300, 670 P.2d at 937. We agreed
       with the District Court's finding that the policy of the Co-op allowing disconnection
       of service for nonpayment of fees was reasonable. However, we remanded the
       matter because we determined that the dispositive issue was not whether the policy
       was reasonable but whether its implementation was reasonable. We stated that this
       question could not be answered on the facts presented. It was clear from the record
       that the District Court assumed that the appellant had voluntarily agreed to pay for
       the previous customer's bill, thus making it reasonable to disconnect for
       nonpayment. We observed, however, that there was a basic disagreement between
       the parties as to whether the customer voluntarily agreed to make the payment or
       was required to do so as a condition of receiving service. We remanded the matter
       with instructions that:

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.

Howe, 206 Mont. at 301-02, 670 P.2d at 938 (emphasis added).

    1. ¶On remand our message to the District Court was clear: If it determined that the
       appellant had voluntarily paid the previous member's unpaid bill, then the
       implementation of the policy, that is, disconnection of service for nonpayment, was
       reasonable. However, if the District Court determined that the appellant was forced
       to pay the previous member's unpaid bill in order to get the service connected, the
       implementation was unreasonable.
    2. ¶In the case sub judice, as in Howe, the parties stipulated to the relevant facts and
       the matter was submitted to the District Court on cross motions for summary
       judgment. The wording of the bylaw provision at issue in this case is different than

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      the one we examined in Howe. In fact, the bylaw in question here, rather than
      simply providing that unpaid bills may result in a disconnection of electrical service,
      provides that delinquent accounts must be paid when a membership is transferred to
      another person. The Big Horn staff advised Granbois that the Spang membership
      would not be transferred and there would be no electrical services provided until the
      delinquency was paid.
   3. ¶Writing for the unanimous Court in Howe, Justice Harrison discussed the unique
      relationship between a cooperative and its membership. He recognized that electric
      cooperatives inherently hold a favored position in the law, and that conversely,
      cooperative members are often in a disadvantageous position with respect to the
      cooperative. This disadvantage is heightened in rural areas which are less likely to
      be serviced by a public utility and where citizens must rely on the cooperative for
      power. In dealing with an unreasonable rule, a member has only limited options:
      attempt to amend the rule or discontinue service. He said that such remedies, in and
      of themselves, are inadequate, especially when the member's residence is already
      connected with the cooperative and finding an alternative supply of electricity
      would be quite costly. Howe, 206 Mont. at 300, 670 P.2d at 937-38.
   4. ¶Accordingly, this Court concluded that although the relationship between the
      electric cooperative and each of its members is contractual in nature, as defined by
      the cooperative's bylaws, rules, and regulations, the bylaws, rules, and regulations,
      as well as their implementation, must be reasonable. See Howe, 206 Mont. at 300-
      01, 670 P.2d at 938. We stated quite clearly in Howe that "[i]t is unreasonable for a
      Co-op to use its superior bargaining position to force a prospective member to pay
      another members's delinquent bill and terminate service for nonpayment." Howe,
      206 Mont. at 301-02, 670 P.2d at 938. We conclude that the bylaw provisions at
      issue here, that make transfer of a membership to a new member contingent on the
      previous member's delinquent bill being paid in full, are unreasonable.
   5. ¶In reaching its decision that the bylaw provisions were reasonable, the District
      Court failed to consider whether the Cooperative's bylaws were reasonable to the
      potential consumer who has no other source for electric power. While existing
      Cooperative members protect themselves by not having to share in the debt of a
      delinquent member, the potential consumer may be forced to take on the burden of
      the debt to obtain electric service. This is especially true in situations like the one
      presented here, where a potential consumer is required to obtain a membership
      transfer instead of obtaining a "new" membership, and when no other electric
      service provider is available. The Cooperative argues that it didn't require Granbois
      to pay the bill, it just required the bill to be paid in full before electrical service

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        would be provided. Such a policy, however, unmistakably and unreasonably allows
        the Cooperative to pressure the new tenant or occupant of the property to pay the
        previous member's delinquent bill. There is simply no incentive whatsoever for the
        Cooperative to pursue payment from the person who actually owes the bill.
   6.   ¶Thus, there is more at issue than a potential consumer simply trying to meet an
        electric cooperative's conditions in obtaining a membership certificate. If a previous
        member vacates the premises leaving a delinquent account, the bylaws effectively
        allow the Cooperative to compel the new consumer to either pay the predecessor's
        delinquent bill or go without electricity. Such a disparity in the relative positions of
        the consumer and the cooperative necessarily requires the cooperative to deal with
        its members reasonably. The rule adopted by the Cooperative in this instance, that
        is, requiring potential customers to pay a previous member's delinquent bill in full is
        an unreasonable restriction on the electric consumer's access to electric service.
        Thus, we reverse the District Court's order granting summary judgment in favor of
        the Cooperative and remand this matter with instructions to enter partial summary
        judgment in favor of Granbois in the amount of $932.07.
   7.   ¶Since the District Court entered judgment in favor of the Cooperative, it never
        reached Granbois's claim that the actions of the Cooperative constitute a violation of
        the Montana Unfair Trade Practices and Consumer Protection Act, (the Act) §§ 30-
        14-101, et seq., MCA, specifically, § 30-14-133, MCA, which entitle her to treble
        damages. Nevertheless, the parties, as well as amicus, have partially briefed the
        issue on appeal. Under the circumstances, we feel it best to provide direction to the
        District Court on the issue.
   8.   ¶ The Cooperative asserts that it is exempt from the Act because it sells a product or
        service as a public utility, which is excluded from protection as provided in the
        definition section, § 30-14-202(1), MCA. This provision is found in part 2 of the
        Act which is entitled "Unfair Trade Practices Generally."
   9.   ¶Granbois's claim, however, is brought under part 1 of the Act which is entitled
        "Consumer Protection Act." The exemption provision in Part 1, found at § 30-14-105
        (1), MCA, specifically exempts "actions or transactions permitted under laws
        administered by the Montana public service commission acting under statutory
        authority of this part or the United States." This exemption does not include the
        Cooperative since the Cooperative is not regulated by the PSC. Part 1 clearly
        exempts only those transactions regulated by the Public Service Commission.
 10.    ¶It is apparent that the legislature provided different exemption provisions in parts 1
        and 2. While part 1 offers general consumer protection, part 2 primarily covers anti-
        competitive practices to protect businesses from the predatory practices of other

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      businesses. Since Granbois's claim is brought under part 1, we conclude that the
      Cooperative is not exempt.
  11. ¶The remaining matters to be determined are whether the actions of the Cooperative
      constitute a violation of the Montana Unfair Trade Practices and Consumer
      Protection Act, whether the actions constitute a breach of a duty of good faith and
      fair dealing as alleged by Granbois, and finally whether she is entitled to any further
      damages.
  12. ¶Reversed and remanded for further proceedings consistent with this opinion.

/S/ JIM REGNIER

We Concur:

/S/ J. A. TURNAGE

/S/ W. WILLIAM LEAPHART

/S/ WILLIAM E. HUNT, SR.

/S/ TERRY N. TRIEWEILER

Justice James C. Nelson did not participate.

Justice Karla M. Gray, dissenting.

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   1. ¶I respectfully dissent from the Court's opinion on the sole issue stated because
      Howe--the only case cited by the Court--clearly does not support the Court's
      decision. I also dissent from the Court's decision to address the Montana Unfair
      Trade Practices and Consumer Protection Act (Act).
   2. ¶The Court properly observes that, in the similar Howe case, we agreed with the
      district court that "the policy of the Co-op allowing disconnection of service for
      nonpayment of fees [relating in part to a prior member's delinquency] was
      reasonable." See Howe, 206 Mont. at 301, 670 P.2d at 938 (emphasis added). The
      Court also correctly notes that we remanded in Howe for a determination of whether
      the implementation of the reasonable policy was reasonable--that is, whether the
      plaintiff had voluntarily agreed to pay the delinquency, as the cooperative
      contended, or had been forced or required to do so, as the plaintiff alleged. See
      Howe, 206 Mont. at 301-02, 670 P.2d at 938. In purported reliance on Howe, the
      Court in this similar case then concludes that the bylaw provisions here--comparable
      to the policy we determined was reasonable in Howe--is unreasonable as a matter of
      law. I cannot understand how Howe's opposite conclusion on the policy at issue
      there can be used to support the Court's decision here. Indeed, with regard to the
      reasonableness of the bylaw provisions at issue here, it is clear that Howe mandates
      that we affirm the District Court.
   3. ¶Thus, I disagree with the Court's conclusion that the Cooperative's bylaw provision
      at issue here is unreasonable as a matter of law because that conclusion is totally at
      odds with our decision in Howe. Moreover, while I agree that a potential member's
      interests must be balanced with those of existing members, I disagree with the
      Court's implicit determination that the interests of existing members must give way
      as a matter of law to those of a potential new member. The Court's decision ignores
      both the interests of existing members of the Cooperative and the statutory authority
      of cooperatives to set the terms by which memberships can be transferred. See § 35-
      18-301(2), MCA. Indeed, I fear this decision will unravel the entire basis on which
      cooperatives have organized and managed themselves in Montana for six decades or
      more.
   4. ¶In addition, I simply cannot square the Court's instructions to the District Court to
      enter partial summary judgment for Granbois in the amount of $932.07 with its
      subsequent statement that matters remaining to be determined are whether the
      Cooperative's actions violated the Act and/or breached the covenant of good faith
      and fair dealing. Here, the only two causes of action alleged by Granbois are
      violation of the Act and breach of the covenant. If, as the Court says, the merits of
      Granbois' claims under those two theories remain to be decided, what is the basis for

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      entering judgment in her favor for a specified amount of damages? The Court does
      not explain and I am unaware of any legal principle under which damages can be
      awarded to a plaintiff as a matter of law prior to any decision that a defendant is
      liable for damages. This will make for interesting proceedings on remand, at the
      very least, and may prove to be an interesting precedent in future cases as well.
   5. ¶For these reasons, I would affirm the District Court and would not address the Act
      itself or its applicability here. The Court having done so, however, I feel compelled
      to comment briefly on its discussion. In the guise of "provid[ing] direction" to the
      District Court on this issue never addressed there, the Court actually resolves the
      issue of whether the Cooperative is exempt from the Act. In my opinion, it is both
      unwise and unnecessary for this Court to fall into the trap of addressing every issue
      parties brief on appeal, when the underlying proceedings never reached the stage of
      addressing such issues. To do so only increases our workload while, at the same
      time, intruding this Court into the proper realm of the district courts which are more
      than capable of making such determinations.
   6. ¶I would affirm the District Court and I dissent from the Court's failure to do so.

/S/ KARLA M. GRAY

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