Upper Mo. G T Co-Op. v. McCone El

No. 12201

I N THE SUPREME C U T O TEE STATE O MONTANA
OR F F

1972

UPPER MISSOURI G , &, T, ELECTKIC COOPERATIVE,
INC., a corporation,

P l a i n t i f f and Respondent,

McCONE ELECTRIC CO-OP, I N C . , a corporation,

Defendants and A p p e l l a n t s ,

Appeal from: D i s t r i c t Court of t h e Seventh J u d i c i a l D i s t r i c t ,
Honorable Paul G, H a t f i e l d , Judge p r e s i d i n g .

Counsel of Record :

For Appellants :

S a n d a l l , Moses and Cavan, B i l l i n g s , Montana.
J e r r y Cate argued, B i l l i n g s , Montana.

For Respondent :

V. G. Koch argued, Sidney, Montana.

Submitted: September 26, 1972

Decided : #oV 3 1972
Filed :
#pjs : 1972'
M r . J u s t i c e Wesley C a s t l e s d e l i v e r e d the Opinion of t h e Court.

This i s an appeal from a summary judgment f o r Upper Missouri
G & T E l e c t r i c Cooperative, Inc. (hereinafter referred t o a s
Upper Missouri),
This case has been before t h i s Court previously i n Upper
MissouriG & T E l e c t r i c Cooperative, Inc. v , McCone E l e c t r i c
Co-op, Inc., 157 Mont. 239, 484 P.2d 741. I n t h a t c a s e we found
summary judgment should not have been granted McCone E l e c t r i c
Co-op, Inc. ( h e r e i n a f t e r r e f e r r e d t o a s McCone), and remanded
the cause t o t h e d i s t r i c t c o u r t .
Following remand, f u r t h e r discovery, and p r e t r i a l proceedings
were had. Upper Missouri then f i l e d a motion f o r summary judg-
ment, which read:
" O E NOW t h e p l a i n t i f f and cross-defendant h e r e i n ,
C MS
and moves t h e Court, pursuant t o Rule 56, Montana Rules
of C i v i l Procedure, f o r Summary Judgment d e c l a r i n g t h e
c o n t r a c t between p l a i n t i f f and defendant, and a l l t h e r e -
o f , a v a l i d and s u b s i s t i n g c o n t r a c t , f o r t h e following
reasons :
"1, That t h e r e i s no genuine i s s u e a s t o any
m a t e r i a l f a c t and t h a t p l a i n t i f f i s e n t i t l e d t o
Judgment a s a matter of law;
"2. That defendant's defenses and counter-claims
a r e b a r r e d by t h e s t a t u t e of l i m i t a t i o n s and l a c h e s ;
"3. That t h e defenses and counter-claims of
defendant a r e i n s u f f i c i e n t , sham, f r i v o l o u s and i m -
m a t e r i a l , and t h e r e f o r e , be s t r i c k e n under Rule 12 ( f )
Montana Rules of C i v i l Procedure.
"That t h e foregoing Motions a r e based upon t h e pleadings,
e x h i b i t s , w r i t t e n i n t e r r o g a t o r i e s , p r e - t r i a l and general
admissions, and depositions on f i l e and of record i n
t h i s cause, 1I
The c o u r t entered t h e following judgment:
It
The above e n t i t l e d matter having come on r e g u l a r l y
f o r hearing before t h e above e n t i t l e d Court upon
motion of p l a i n t i f f f o r Summary Judgment, and t h e
Court having entered i t s Findings of Fact and Conclu-
s i o n s of Law:
"IT I S ORDERED, ADJUDGED AND DECREED:
"1, That t h e Motion f o r summary Judgment of p l a i n t i f f
be and hereby i s granted.
 2 That t h e wholesale power c o n t r a c t between
t h e p l a i n t i f f and defendant i s v a l i d , b i n d i n g
and s u b s i s t i n g ,
"3. That t h e n o t i c e of withdrawal submitted t o
p l a i n t i f f by t h e defendant i s of no l e g a l e f f e c t ,
"4. That t h e counterclaims and d e f e n s e s of de-
fendant be and hereby a r e dismissed."
O t h i s a p p e a l a p p e l l a n t McCone sets up a s i n g l e i s s u e - -
n
t h e c o r r e c t n e s s of t h e summary judgment i n t h a t i t contends
t h e r e a r e s t i l l s u b s t a n t i a l m a t e r i a l f a c t s i n d i s p u t e and
summary judgment should n o t have been g r a n t e d . Basically,
t h e i s s u e r e v o l v e s around t h e v a l i d i t y of a long term wholesale
power c o n t r a c t under which McCone agreed t o purchase i t s power
needs from respondent Upper Missouri f o r a p e r i o d of 35 y e a r s .
The c o n t r a c t was approved i n 1959.
McCone seems t o a s s e r t t h a t t h e a r t i c l e s and by-laws of
Upper Missouri d i d n o t permit Upper Missouri t o e n t e r i n t o a
wholesale power c o n t r a c t w i t h Basin E l e c t r i c Power Cooperative,
(hereinafter referred t o a s Basin),
Nine e l e c t r i c d i s t r i b u t i o n c o o p e r a t i v e s , i n c l u d i n g McCone,
banded t o g e t h e r t o form Upper Missouri c o o p e r a t i v e and obtained
a c h a r t e r i n A p r i l 1958. I n May 1958, t h e t r u s t e e s of Upper
Missouri, i n c l u d i n g t h e t r u s t e e r e p r e s e n t a t i v e of McCone,
adopted by-laws, The r e a s o n f o r t h e formation of Upper Missouri
i s b e s t s t a t e d i n t h e r e s o l u t i o n of McCone passed i n October
1959, a u t h o r i z i n g t h e assignment of c e r t a i n United S t a t e s Bureau
of Reclamation ( h e r e i n a f t e r r e f e r r e d t o a s Bureau) power t o ,
and a u t h o r i z i n g t h e execution of t h e c o n t r a c t w i t h Upper Missouri.
This r e s o l u t i o n s t a t e s i n p a r t :
"WHEREAS, McCone E l e c t r i c Co-op, I n c . may be
faced w i t h a s e v e r e e l e c t r i c power and energy
s h o r t a g e i n t h e n e a r f u t u r e ; and, ***
"WHEREAS, t h i s Cooperative b e l i e v e s t h a t i t
i s t h e proper r o l e f o r Upper Missouri t o a c c e p t
t h e f u l l u t i l i t y r e s p o n s i b i l i t y and f u r n i s h and
provide t h e e l e c t r i c power and energy needed
w i t h i n i t s s e r v i c e a r e a by t h i s c o o p e r a t i v e ;
and, * * *
 "WHEREAS, i t appears now, t h a t t h e Bureau of
Reclamation w i l l n o t f u l f i l l t h e requirements
of t h i s Cooperative i n t h e f u t u r e , and
"WHEREAS, i t i s d e s i r a b l e from a t e c h n i c a l and
economic s t a n d p o i n t t h a t Upper Missouri a r r a n g e
and n e g o t i a t e f o r supplemental power f o r i t s
members; and ***
"WHEREAS, i t i s deemed t o be n e c e s s a r y and i n
t h e b e s t i n t e r e s t o f t h i s Cooperative t o have
Upper Missouri supply a l l t h e p r e s e n t and f u t u r e
e l e c t r i c power and energy requirements of t h i s
Cooperative w i t h i n t h e Upper Missouri s e r v i c e
a r e a Jc* ;'c. "

The assignment of t h e Bureau c o n t r a c t was executed on
October 1 6 , 1959, by McCone and approved on November 24, 1959,
by t h e Bureau. A l s o , on October 1 6 , 1959, McCone executed
t h e c o n t r a c t i n q u e s t i o n , and t h e approval of the Rural E l e c t r i -
f i c a t i o n Administration was endorsed t h e r e o n dated November 30,
1959. Under t h i s c o n t r a c t , McCone agreed t o purchase i t s power
and energy requirements from Upper Missouri u n t i l December 31,
1994, and t o pay r a t e s a s e s t a b l i s h e d under paragraph 4 ( b )
of t h e c o n t r a c t , which provides:

"(b) The Board of T r u s t e e s of Upper Missouri a t
such i n t e r v a l s a s i t s h a l l deem a p p r o p r i a t e , b u t
i n any e v e n t n o t l e s s f r e q u e n t l y t h a n once i n each
c a l e n d a r y e a r , s h a l l review t h e r a t e f o r e l e c t r i c
power and energy hereunder and under s i m i l a r agree-
ments with o t h e r member c o o p e r a t i v e s and, i f neces-
s a r y s h a l l r e v i s e such r a t e s o t h a t i t s h a l l produce
revenues which s h a l l be s u f f i c i e n t , b u t only s u f f i -
c i e n t , w i t h t h e revenues of Upper Missouri from a l l
o t h e r sources t o pay a l l overhead and meet t h e c o s t
of t h e o p e r a t i o n and maintenance of t h e t r a n s m i s s i o n
system, g e n e r a t i n g p l a n t and r e l a t e d f a c i l i t i e s of
Upper Missouri, t h e c o s t o f t r a n s m i s s i o n s e r v i c e ,
t h e c o s t of any power and energy purchased f o r re-
s a l e hereunder by Upper Missouri, pay t a x e s , make pay-
ments on account of p r i n c i p a l of and i n t e r e s t on a l l
indebtedness o f Upper Missouri, and t o provide f o r
t h e e s t a b l i s h m e n t and maintenance of r e a s o n a b l e r e s e r v e s
* ** The consumer a g r e e s t h a t t h e r a t e from time t o
time e s t a b l i s h e d by t h e Board of T r u s t e e s of Upper
Missouri s h a l l be deemed t o be s u b s t i t u t e d f o r t h e
r a t e h e r e i n provided and a g r e e s t o pay f o r e l e c t r i c
power and energy f u r n i s h e d by Upper Missouri t o i t
hereunder and a f t e r t h e e f f e c t i v e d a t e of any such
r e v i s i o n s a t such r e v i s e d r a t e s ; provided, however,
t h a t no such r e v i s i o n s h a l l be e f f e c t i v e u n l e s s approved
by t h e Administrator. I l
From t h e p r e t r i a l o r d e r , McCone h a s admitted:
"* * * t h a t a l l r a t e s were e s t a b l i s h e d by a m a j o r i t y
 of t h e board of p l a i n t i f f and were approved by
t h e Rural E l e c t r i f i c a t i o n Administration. Il
Upper Missouri rented o f f i c e s a t Sidney, Montana, and h i r e d
management. Upper Missouri t h e r e a f t e r entered i n t o long term
c o n t r a c t s with t h e Bureau t o purchase hydrogenerated power.
When i t determined t h a t t h e Bureau could n o t supply t h e needs of
i t s members, i t entered i n t o membership and a cooperative agree-
ment t o purchase thermo-generated power with Basin on a long
t e r m b a s i s , and thereby p a r t i c i p a t e i n generation and d i r e c t i o n
a s a member of t h i s organization. On March 10, 1969, McCone
advised Upper Missouri t h a t i t would terminate i t s membership
e f f e c t i v e on t h e meter reading d a t e of t h e Bureau i n June 1969,
and proceeded with attempts t o o b t a i n d i r e c t d e l i v e r y of power
from Upper Missouri s u p p l i e r s . This a c t i o n was t h e r e a f t e r i n -
stituted.
Referring back t o t h e quoted p a r t s of McCone's r e s o l u t i o n ,
i t i s seen t h a t t h e r e i s nothing t h a t even remotely suggests any
l i m i t a t i o n a s urged by McCone.
McCone urges t h a t i n 1959, a t t h e time of t h e wholesale
power c o n t r a c t with Upper Missouri, i t was n o t contemplated t h a t
Upper Missouri would i n t h e f u t u r e c o n t r a c t t o purchase power
from Basin. Rather, McCone contends, i t was contemplated t h a t
h y d r o - e l e c t r i c generating dams would be b u i l t on t h e upper
Missouri r i v e r . Perhaps t h e s e contemplations were i n t h e minds
of some of t h e i n c o r p o r a t o r s ; b u t t h e r e s o l u t i o n concerned power
needs through a cooperative power supply e n t i t y from any source,
W have examined t h e wholesale power c o n t r a c t and f i n d t h a t
e
i t i s enforceable under i t s terms. The previous opinion of t h i s
Court s e t s out some of t h e p e r t i n e n t and r e l e v a n t p r o v i s i o n s and
w i l l n o t be repeated here. I n t h a t opinion, appearing a t 157
Mont. pp. 249,250 and 484 P,2d pp. 746, 747, we s a i d :
inal ally , the conclusions concerning public p o l i c y ,
r e s t r i c t i o n of t r a d e , and fraud simply do n o t
appear. The b r i e f of *** McCone s t a t e s :
 "'The c o n t r a c t s i n t h i s case a r e a g a i n s t
p u b l i c policy and t h e public good and a r e i n
r e s t r a i n t of t r a d e because they r e s u l t i n a
s i g n i f i c a n t p o r t i o n of t h e population of e a s t e r n
Montana having t o pay a d d i t i o n a l c o s t s f o r t h e i r
e l e c t r i c i t y over t h e term of t h e c o n t r a c t and i n
t h a t they p r o h i b i t McCone E l e c t r i c i n c o n t r a c t i n g
with o t h e r a n d h e a p e r sources of power developing
c o a l r e s e r v e s and power sources w i t h i n t h e s t a t e
of Montana * * *, '
"If every c o n t r a c t could be declared void because of
a showing by an i n d i v i d u a l , a graup of i n d i v i d u a l s ,
o r even a s i g n i f i c a n t portion of i n d i v i d u a l s t h a t
they could save money by breaking i t , chaos would
r e s u l t . Ten years a f t e r t h e c o n t r a c t , i n i t i a t e d
and i n s p i r e d , we a r e t o l d , by defendant [McCone],
defendant [McCone] now wants a b e t t e r d e a l e l s e -
where. I t i s a s simple a s t h a t , 11
The foregoing statement of t h i s Court i s a p p l i c a b l e h e r e ,
There i s no showing t h a t t h e power c o n t r a c t i s a g a i n s t p u b l i c
p o l i c y o r i n r e s t r a i n t of t r a d e . There i s nothing i n t h e
pleadings o r t h e documents on f i l e t h a t would even remotely
i n d i c a t e t h a t t h e by-laws were a g a i n s t p u b l i c p o l i c y o r t h e
public good, b u t a r e ordinary by-laws, adopted with ~ c C o n e ' s
knowledge and consent,
Upper Missouri d i d n o t perform a c t s d e t r i m e n t a l t o McCone
which were o u t s i d e t h e o r i g i n a l contemplation of t h e p a r t i e s .
Upper Missouri became a member of Basin t o o b t a i n a power
supply f o r i t s members, On cooperative p r i n c i p l e s Upper M i s -

s o u r i i s a p a r t owner of Basin's generation and transmission
system which e n t i t l e d Upper Missouri t o a s e a t on t h e Basin board,
Under t h e c h a r t e r and by-laws, each of t h e n i n e cooperatives
have a t r u s t e e upon t h e Upper Missouri board. C e r t a i n l y one
t r u s t e e cannot prevent t h e taking of a c t i o n and e n t e r i n g i n t o
agreements, which t h e o t h e r s b e l i e v e w i l l b e n e f i t t h e cooperative
a s a whole.
The e n t i r e background, r e s o l u t i o n a.nd c o n t r a c t i n d i c a t e
unequivocally t h a t t h e purpose a t t h e time was t o o b t a i n an
adequate power supply t o avoid a power shortage, and t h a t Upper
Missouri was t o undertake t h e t a s k t o s e e t h a t t h i s d i d not
happen, Upper Missouri f u l f i l l e d i t s p a r t of t h e bargain; i t
has obtained and supplied t h a t power, Now, many years a f t e r
 the fact, McCone is attempting to vary by par01 evidence the
unimpeachable intent of the parties, as evidenced by the reso-
lution and the contract. That a signatory to the Articles of
Incorporation, by-laws and other documents should, ten years
later, accuse Upper Missouri of undue influence and fraud is
unrealistic.
The circumstances and purpose of the contract before the
Court differ considerably from the restraint of trade cases
cited by McCone. McCone, with eight other cooperatives, banded
together to form an electric power supply cooperative to supply
power, each having a member trustee on the board and each be-
coming an owner of Upper Missouri; the contract was entered into
not to create a monopoly, fix prices nor limit competition, but
to avoid a shortage of power which was foreseen to be certain to
occur if an additional source of power was not found.
McCone has taken power and operated under the contract
and rates for ten years and should now be estopped to deny what has
been established by contract and performance.
The findings of fact and conclusions of law support the
judgment, and there are no material facts in issue. The ruling
of the district court was correct, and the judgment is affirmed.

~sskdiateJustice
concur :

/ /chief Justice