City of Gastonia v. Duke Power Company

Annotate this Case

199 S.E.2d 27 (1973)

19 N.C. App. 315


No. 7327SC457.

Court of Appeals of North Carolina.

September 12, 1973.

Certiorari Denied November 1, 1973.

*29 Garland & Alala by James B. Garland, Gastonia, for plaintiff appellant.

W. H. Grigg, and W. I. Ward, Jr., Charlotte, for defendant appellee.

Certiorari Denied by Supreme Court November 1, 1973.

PARKER, Judge.

The parties to the 1929 contract which plaintiff now seeks to enforce failed to specify how long the provisions germane to this action should remain in effect. This State follows the generally accepted view that a contract of indefinite duration may be terminated by either party on giving reasonable notice. Rubber Co. v. Distributors, 253 N.C. 459, 117 S.E.2d 479; Fulghum v. Selma and Griffis v. Selma, 238 N.C. 100, 76 S.E.2d 368; Distributing Corp. v. Parts, Inc., 7 N.C.App. 483, 173 S.E.2d 41. To avoid injustice, however, this rule is subject to the qualification that such a contract may not be unilaterally terminated until it has been in effect for a reasonable time, taking into account the purposes the parties intended to accomplish. *30 Scarborough v. Adams, 264 N.C. 631, 142 S.E.2d 608; Atkinson v. Wilkerson, 10 N.C.App. 643, 179 S.E.2d 872; Hardee's v. Hicks, 5 N.C.App. 595, 169 S.E.2d 70. The North Carolina position is succinctly set forth in 2 Strong, N.C. Index 2d, Contracts, § 17, p. 322, as follows:

"As a general rule, where no time is fixed for the termination of a contract it will continue for a reasonable time, taking into account the purposes that the parties intended to accomplish; and where the duration of the contract cannot be implied from its nature and the circumstances surrounding its execution, the contract is terminable at will by either party on reasonable notice to the other."

Appellant does not challenge the adequacy of the two-week notice given by Duke on 14 October 1965, nor does appellant claim that it has so relied upon the continued vitality of the contract as to make its termination by Duke unjust or inequitable. Rather, appellant contends that the 36 years that elapsed between the creation and termination of the contract is not a reasonable time, and alternatively, that the parties, by their silence as to duration, actually intended that the contract last as long as Duke should supply electricity within the vicinity of the City. We find both arguments without merit.

In Fulghum v. Selma, supra, our Supreme Court construed a contract in some respects similar to the contract presently before us. In that case the Town of Selma agreed in 1946 to sell water to C. B. Fulghum at a point within the city limits. Fulghum then resold the water to inhabitants of nearby Selma Mill Village, conveying the water to the village in water mains built at his expense. The contract did not fix the time of its duration. The Town regularly supplied water under this agreement until 1952, when a Town ordinance raised the price of the water purchased by Fulghum. Fulghum thereupon instituted suit to compel the Town to continue supplying water at the original contract price. The trial court dismissed the action upon defendant's motion for nonsuit, and on appeal our Supreme Court affirmed on the grounds inter alia, that either party to a contract silent as to duration may terminate the contract after giving reasonable notice to the other. It would seem that in the present case Duke's right to terminate the 1929 contract is even clearer than that of the Town of Selma to terminate its contract with Fulghum. Not only was the 1929 contract with which we are here concerned in existence for a substantially longer time prior to being terminated than was the case in Fulghum, but Fulghum dealt with an ongoing contract, the Town supplying an average of 80,000 gallons of water a month under the agreement. In the present case there is little evidence, if any, that Duke ever sold its electric facilities to the City because of the 1929 contract. Rather, the sales of 1952, 1956, 1963 and 1965 reflected general corporate policy, the 1929 contract resurfacing only after that policy had been changed.

The Court in Fulghum, however, did not expressly deal with the question of reasonable time, and the appellant here, relying on Scarborough v. Adams, supra, argues that in the present case a reasonable time is "an indefinite time extending for the period in which Duke continues to serve consumers in the immediate vicinity of the City of Gastonia." Scarborough, however, does not support this inference. The contracts in Scarborough reflected the efforts of various political subdivisions of Buncombe County to solve a common waste disposal problem. Each subdivision contracted separately with the Metropolitan Sewerage District of Buncombe County in order to implement the plan. Each contract provided that the agreement was to continue in force only so long as the district sewerage disposal system remained in existence and in operation. The differences between Scarborough and the present case are apparent. The Scarborough contracts not only contained express provisions *31 as to duration, but also formed the contractual basis for a county-wide sanitary system. The contract between Duke and the City contains no provision as to duration, nor does it involve an attempt to solve a pressing metropolitan problem such that its termination would jeopardize a proposed solution.

Appellant suggests that in determining what is a reasonable time in this case an analogy should be drawn to the sixty-year limit placed on franchises by former G.S. § 160-2, citing Boyce v. Gastonia, 227 N.C. 139, 41 S.E.2d 355, as authority that where a franchise granted by a municipality fails to stipulate its duration, the statutory term of sixty years will be read into the contract. The Court in Boyce did apply this rule of construction, but it did not hold that the statute was always dispositive of the length of a franchise silent as to duration. Further, whatever the precedential weight of Boyce for curing problems of indefiniteness as to duration in franchise agreements, the case is not authority for treating other types of municipal contracts as franchises for that purpose. Appellant does not contend that the 1929 contract is a franchise in substance although not in form, and we see no reason to treat it as such.

Alternatively, appellant finds the silence of the contract to be eloquent, stating in its brief that "it would seem that the intention of the parties to an agreement that it should be perpetual and without time limit as to duration could not be more properly expressed than by silence as to any time limit or power of revocation." Thus appellant urges the following rule of law, "that where no limitation is expressed in the agreement, neither party can terminate it without the consent of the other, unless the nature of the contract itself indicates with sufficient clearness that the parties must have intended some other termination." The cases cited in support of this rule, however, contain specific equities, such as reliance or complete performance by one party, that would make termination by the other party unjust. The present case does not present such a situation.

Taking into account the nature and subject matter of the 1929 contract and the purposes which the parties intended to accomplish by its execution, we agree with the trial court's conclusion that the contract had been in existence a reasonable period of time when, more than 36 years after its date and on 14 October 1965, Duke gave notice of termination.

Since we agree with the trial court's further conclusion that the 1929 contract was terminated on 31 October 1965 as result of that notice, we find it unnecessary to pass upon the alternative ground for decision given by the trial judge, i. e., that in any event the 1929 contract related only to such electrical facilities as were in existence when the contract was entered into. The judgment appealed from is


BROCK, C. J., and MORRIS, J., concur.