Pee Dee Electric Membership Corp. v. Carolina Power & Light Co.

Annotate this Case

117 S.E.2d 764 (1961)

253 N.C. 610

PEE DEE ELECTRIC MEMBERSHIP CORPORATION v. CAROLINA POWER & LIGHT COMPANY, Original Defendant; and The Town of Rockingham, Beler Dixon and Raymond Treece, Additional Defendants.

No. 456.

Supreme Court of North Carolina.

January 20, 1961.

*767 Branch & Hux, Enfield, W. G. Pittman, Rockingham, and Brock & McLendon, Wadesboro, for plaintiff, appellant.

W. Reid Thompson, A. Y. Arledge, Raleigh, and Bynum & Bynum, Rockingham, for defendant Carolina Power & Light Co., appellee.

A. A. Webb and C. B. Deane, Rockingham, for additional defendant Town of Rockingham, appellee.

Leath & Blount, Rockingham, for additional defendants Dixon and Treece, appellees.

William T. Crisp, Raleigh, for North Carolina Electric Membership Corp., amicus curiæ.

BOBBITT, Justice.

The basic contentions of the respective parties may be stated as follows:

Pee Dee contends: (1) The provisions of Article 8 of the contract of January 5, 1956, are applicable to Knob Hill. (2) In accordance therewith, it is entitled to enjoin the Power Company from serving residences within 300 feet of the distribution lines constructed by Pee Dee prior to January 9, 1957. (3) It is entitled to serve all residences within 300 feet of its said lines notwithstanding the annexation of Knob Hill by Rockingham and the refusal of Rockingham to grant it permission (franchise) to operate within its corporate limits and construct and maintain its lines over what are now public streets of Rockingham.

The Power Company contends: (1) The provisions of Article 8 of the contract of January 5, 1956, do not apply to Knob Hill but are applicable only to areas in which Pee Dee is authorized to operate, namely, rural areas. (2) Upon annexation by Rockingham, Knob Hill ceased to be a rural area and became an integral part of a municipality which, at all times since 1930, has had a population in excess of 2,500. (3) Upon annexation, the Power Company became obligated under its franchise to provide service throughout the enlarged corporate limits to all who applied therefor, including Dixon and Treece.

Rockingham contends: (1) Upon annexation, the Power Company is obligated by its franchise to provide service throughout the enlarged corporate limits to all who applied therefor. (2) Pee Dee has no right to operate within its corporate limits or to construct or maintain distribution lines over what are now public streets of Rockingham.

*768 Dixon and Treece contend: They are entitled, as owners of residences in Rockingham, to apply for and receive the same service the Power Company provides the owners of residential property located elsewhere within the corporate limits.

Pee Dee does not seek herein to enjoin the Power Company from constructing and maintaining in Knob Hill such distribution lines as may be necessary to provide street lighting and fire alarm systems. Nor does Pee Dee now challenge the Power Company's right to serve residences in Knob Hill elsewhere than within 300 feet of distribution lines constructed by Pee Dee prior to January 9, 1957.

Significant differences between the factual situation here considered and that considered in Carolina Power & Light Co. v. Johnston County Electric Membership Corp., 211 N.C. 717, 192 S.E. 105, include the following: (1) The record is silent as to whether said contract of January 5, 1956, was submitted to and approved by the Utilities Commission. (2) Pee Dee had no distribution lines or facilities and rendered no service within the corporate limits of Rockingham before its boundaries were extended so as to include Knob Hill. (3) The said contract contains no provision similar to paragraph "Twenty-Third" of the contract between Duke and Blue Ridge, quoted in the cited case.

Under the provisions of Article 8 of said contract of January 5, 1956, each party is barred as provided therein unless ordered to provide service in the restricted area "by a lawful order issued by a properly constituted authority." The Power Company, a public utility corporation, is subject to the jurisdiction of the Utilities Commission. To what extent, if any, Pee Dee is subject to the jurisdiction of the Utilities Commission need not be presently determined. This Court was held that an electric membership corporation is not required (by G.S. § 62-101), "before beginning the construction or operation of its facilities for serving its members by furnishing them electricity for lights and power, to obtain from the Utilities Commissioner of North Carolina a certificate that public convenience and necessity requires or will require the construction and operation" of such facilities. Carolina Power & Light Co. v. Johnston County Electric Membership Corp., 211 N.C. 717, 720, 192 S.E. 105, 106; McGuinn v. High Point, 219 N.C. 56, 77, 13 S.E.2d 48; Town of Grimesland v. Washington, 234 N.C. 117, 125, 66 S.E.2d 794. However, it would seem that the Utilities Commission has jurisdiction in respect of the rates and terms under which a power company may sell and supply power to Pee Dee for resale. State ex rel. North Carolina Utilities Commission v. Municipal Corporations, 243 N.C. 193, 90 S.E.2d 519.

Relevant statutory provisions relating to the authority of the Utilities Commission are cited in Carolina Power & Light Co. v. Johnston County Electric Membership Corp., supra. Suffice to say, nothing in the record indicates that the Utilities Commission has made any order relevant to the service to be provided by Pee Dee or by the Power Company in the Knob Hill area. Unless and until such order is made, decision must be based on the factual situation as of now.

It is clear, and apparently conceded, that the Power Company, under its said franchise, has the legal right and duty to serve Knob Hill except to the extent it is barred from so doing by the provisions of Article 8 of said contract of January 5, 1956.

It is presumed that both Pee Dee and the Power Company, when they executed said contract of January 5, 1956, were advertent to statutory provisions relating to the extension of the boundaries of municipality, G.S. § 160-445 et seq., and relating to powers conferred upon the governing body of a municipality in respect of territory outside, but within a mile of, its corporate limits, G.S. § 160-226, G.S. § 160-203. However, Article 8 of the contract of January 5, 1956, contains no provision *769 purporting to render it inapplicable as to territory subsequently included within the corporate limits of a municipality.

The applicability of the provisions of Article 8 of said contract of January 5, 1956, depends upon the right of Pee Dee after January 9, 1957, to render service in the defined area. We are of opinion, and so hold, that the Power Company is not barred from serving a customer Pee Dee may not lawfully serve.

The "Rural Electrification Act of 1936," U.S.C.A., Title 7, § 901 et seq., the Act creating the North Carolina Rural Electrification Authority, G.S. Ch. 117, Art. 1, and the Act providing for the formation of nonprofit membership corporations, G.S. Ch. 117, Art. 2, established a Federal-State policy to provide the benefits of electric service in rural areas not served or inadequately served with electricity. State ex rel. North Carolina Utilities Commission v. Municipal Corporations, supra, 243 N.C. page 202, 90 S.E.2d 519.

Congress defined "rural area" as "any area of the United States not included within the boundaries of any city, village, or borough having a population in excess of fifteen hundred inhabitants, and such term shall be deemed to include both the farm and nonfarm population thereof." U.S. C.A., Title 7, § 913. The North Carolina legislation does not define "rural area."

To form an electric membership corporation, interested persons must first obtain the approval of the North Carolina Rural Electrification Authority. G.S. § 117-9. If such approval is obtained, "(a)ny number of natural persons not less than three may * * * form a corporation not organized for pecuniary profit (but) for the purpose of promoting and encouraging the fullest possible use of electric energy in the rural section of the State by making electric energy available to inhabitants of the State at the lowest cost consistent with sound economy and prudent management of the business of such corporations." (Our italics.) G.S. § 117-10.

G.S. 117-16 provides that the corporate purpose of such membership corporation is "to render service to its members only," and "no person shall become or remain a member unless such person shall use energy supplied by such corporation and shall have complied with the terms and conditions in respect to membership contained in the bylaws of such corporation." G.S. 117-16 was amended in 1959 (S.L. 1959, c. 387, § 2) by adding the following: "Provided, that such terms and conditions of membership shall be reasonable; and provided further, that no bona fide applicant for membership, who is able and willing to satisfy and abide by all such terms and conditions of membership, shall be denied arbitrarily, or capriciously, or without good cause." Consideration of the Federal-State legislation impels the conclusion that an electric membership corporation is authorized to operate only in a "rural area" to serve members who are residents of such "rural area."

Knob Hill was a "rural area" when Pee Dee's distribution lines were constructed. It is no longer a "rural area." This is true if the definition of "rural area" in the Federal legislation is adopted. Be that as it may, it was stipulated that Knob Hill is now a "residential section" of Rockingham. Rockingham, the county seat of Richmond County since 1785, has a population, according to the 1960 census, of 5,512.

The crucial question, fraught with considerable difficulty, relates to the authority of Pee Dee to continue to operate in an area which was a "rural area" when its distribution lines were constructed but is now an integral part of Rockingham. Present statutes provide no answer. As stated by Wyatt, Presiding Justice, in his dissenting opinion in City of Moultrie v. Colquitt County Rural Elec. Co., 211 Ga. 842, 89 S.E.2d 657, 666: "It therefore becomes the duty of a court of equity to fill in the vacuum created by the law and do justice and equity to all parties concerned." In *770 so doing, we must keep in mind the basic statutory purpose of Pee Dee.

Consideration of all relevant factors leads to these conclusions: Pee Dee may continue to serve from distribution lines constructed in Knob Hill prior to January 9, 1957, persons who were its members on that date and who desire to continue their membership and to receive service from Pee Dee. Persons in the annexed area who did not become members of Pee Dee prior to January 9, 1957, are not eligible for such membership. Eligibility for membership is to be determined as of the date application therefor is made. City of Moultrie v. Colquitt County Rural Elec. Co., supra, 89 S.E.2d at page 665; State ex rel. Southwestern Gas & Elec. Co. v. Upshur Rural Electric Cooperative Corp., 156 Tex. 633, 298 S.W.2d 805.

In Farmers Electric Coop. Corp. v. Arkansas Power & L. Co., 220 Ark. 652, 249 S.W.2d 837, the court enjoined the cooperative (membership corporation) from continuing its service in an area which, by annexation, had become a part of a municipality. Our conclusion is in substantial accord with that reached in State ex rel. Southwestern Gas & Elec. Co. v. Upshur Rural Electric Cooperative Corp., supra, and in substantial accord with the views expressed by Wyatt, P. J., in his dissenting opinion in the cited Georgia case. Factual differences in these three cases are noted in Carolina Power & Light Co. v. Johnston County Electric Membership Corp., supra.

We are advertent to the legal consequences ordinarily resulting when additional territory is lawfully annexed by a municipality, G.S. § 160-449, and to the powers of a municipality with reference to control of its streets, G.S. § 160-222. But where Pee Dee, in accordance with express statutory authority, lawfully constructed its distribution lines in Knob Hill prior to its annexation on January 9, 1957, the Town of Rockingham may not force Pee Dee to discontinue service from said lines to those persons who were members of Pee Dee prior to January 9, 1957, so long as they continue members of Pee Dee and desire continuance of its service. However, Pee Dee, on and after January 9, 1957, had no right to extend its then existing facilities or to serve persons other than members whom it was serving when Knob Hill became a part of Rockingham.

It was error to enjoin Pee Dee from maintaining "upon, along or over the streets, roads and public ways of the Town of Rockingham," distribution lines it had constructed prior to January 9, 1957, and to order Pee Dee to dispose of and dismantle such lines and facilities within a specified time. It was also error to enjoin Pee Dee from continuing to provide service from distribution lines and facilities constructed by it prior to January 9, 1957, to persons who were then members of Pee Dee and who continued their membership and desire a continuance of its service. On account thereof, the judgment of the court below is vacated and the cause remanded for judgment in accordance with the law as stated herein.

It is noted: The Power Company, in its answer, offered to purchase at fair value "the useful portion" of Pee Dee's lines and facilities in Knob Hill. Its brief indicates it is still willing to do so. Such offer is significant only in relation to a negotiated adjustment of the matters in controversy. It is not relevant to an adjudication of the legal rights of the respective parties.

If it be considered undesirable that both Pee Dee and the Power Company should serve (different) customers in that part of Rockingham within 300 feet of the distribution lines constructed by Pee Dee prior to January 9, 1957, as contemplated by this decision, this suggests the need for legislation defining the public policy in a situation such as that here under review.

The costs on this appeal will be taxed as follows: One-third to Pee Dee, one-third *771 to the Power Company and one-third to the Town of Rockingham.

Error and remanded.

PARKER, Justice (concurring).

The trial court enjoined Pee Dee Electric Membership Corporation from maintaining its lines and facilities "upon, along or over the streets, roads and public ways of the town of Rockingham," and ordered it to dispose of or dismantle and remove its lines and facilities within a specified time. The Court holds that this is error.

I agree with the opinion of the Court on the facts in the present record.

However, I desire to put on record my views in respect to this question. N.C.G.S. § 160-222 provides: "The governing body of the city shall have power to control, * * * the streets and sidewalks of the city * * *, and regulate, control, license, prohibit, and prevent digging in said streets and sidewalks, or placing therein of pipes, poles, wires, fixtures, and appliances of every kind, whether on, above, or below the surface thereof, and regulate and control the use thereof by persons * * *; to prevent, abate, and remove obstructions, encroachments, pollution or litter therein * * *."

This is said in McQuillin, The Law of Municipal Corporations, 3rd Ed., Vol. 7, § 24.588: "Municipal corporations ordinarily may and do exercise police control over the erection and maintenance of poles, wires, pipes and similar apparatus of utility companies or others in streets, alleys and public ways. They can, in this respect, where they act reasonably, compel all generally accepted improvements which tend to decrease the obstruction of the streets or increase the safety or convenience of the public in their use. Municipal police power in this respect and for these purposes is not precluded by the fact that such structures have been erected and maintained under franchise or permission, the fact that the power to grant the franchise is vested in the legislature or the fact that the utility company has a sole and exclusive privilege, e. g., street lighting in part of the city. A municipality on incorporation becomes vested with police power over existing poles, wires, pipes, underground conduits and other apparatus of utility companies or others, located on, in or over streets and public ways within the municipality, irrespective of franchises or permits under which these structures have been erected and are maintained."

In my opinion, the town of Rockingham in the exercise of its police control has the power vested in it by N.C.G.S. § 160-222, and by the general law set forth in the quoted extract from McQuillin, over plaintiff's operations, equipment, and property in its streets, alleys and public ways.

MOORE, J., joins in concurring opinion.