City of Southaven, Mississippi v. 4-County Electric Power Association ( 2002 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2004-CA-00577-SCT
CITY OF STARKVILLE
v.
4-COUNTY ELECTRIC POWER ASSOCIATION
DATE OF JUDGMENT: 09/20/2002
TRIAL JUDGE: HON. ROBERT L. LANCASTER
COURT FROM WHICH APPEALED: OKTIBBEHA COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANT: MARC DARREN AMOS
DEWITT T. HICKS, JR.
WILLIAM DEAN STARK
ATTORNEYS FOR APPELLEE: DAVID L. SANDERS
JEFFREY JOHNSON TURNAGE
NATURE OF THE CASE: CIVIL - OTHER
DISPOSITION: AFFIRMED - 03/24/2005
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE WALLER, P.J., EASLEY AND CARLSON, JJ.
CARLSON, JUSTICE, FOR THE COURT:
¶1. The City of Starkville has appealed the Oktibbeha County Chancery Court’s entry of a
final judgment dismissing its complaint with prejudice. En route to granting summary
judgment in favor of 4-County Electric Power Association, the chancellor ruled, inter alia, that
the City’s right to purchase the power company’s distribution facilities and service rights
created under a 1963 Service Area Agreement was non-existent due to the City’s failure to
seasonably petition the Mississippi Public Service Commission for approval of its contract,
thus rendering the contract unenforceable. Finding the chancellor’s dismissal to be consistent
with well established law, we affirm.
FACTS AND PROCEEDINGS IN THE TRIAL COURT
¶2. In 1934, the Mississippi Legislature passed the Municipally Owned Utilities Act, which
gave our states’ municipalities autonomous control over the operation and improvement of
their individual public utility systems. Accordingly, an era began whereby municipalities were
given the exclusive power to either provide electrical service themselves or, in the alternative,
designate who would provide the city with service. 1934 Miss. Laws ch. 317 (now codified in
Miss. Code Ann. §§ 21-27-11 et seq. (1972)). In utilizing the 1934 utilities act, municipalities
routinely extended franchise agreements to third-party providers, thus granting them the use
of the streets, alleys and public ground. Miss. Code Ann. § 21-13-3 (1972). Typical of the era,
the citizens of the respective municipalities ultimately governed the quality of their own
service as ordinances granting franchises were generally required to be approved by a majority
of the qualified electors of each municipality. Id.
¶3. In furtherance of municipal autonomy, the Mississippi Legislature passed The
Municipal Electric Plant Law of 1936 (now codified in Miss. Code Ann. §§ 77-5-401 et seq.
(1972)), which authorized municipalities to acquire, operate, and maintain electric plants
within or without the corporate limits, without any restriction or limitation of other laws, and
to provide electric power and energy to consumers. Importantly, this law conferred upon the
municipalities the unique power of eminent domain in order to implement the purposes of the
statute. Miss. Code Ann. § 77-5-441 (1972).
2
¶4. In 1956, the Mississippi Legislature enacted the Public Utilities Act. 1956 Miss. Laws
ch. 372, §§ 1-40 (1956), codified in Miss. Code Ann. §§ 77-3-1, et seq. The 1956 Public
Utilities Act empowered the Mississippi Public Service Commission (“MPSC”) with the
exclusive authority to regulate public utilities in designated non-corporate areas. This Act
likewise empowered the MPSC with the authority to issue certificates of public convenience
and necessity. Additionally, the 1956 Act “grandfathered in” all existing utility service being
provided according to the franchise agreements and conferred administrative power to the
MPSC over all such future agreements. Also, under the 1956 Act all utilities seeking a
franchise, whether corporate or non-corporate, were required to obtain a certificate of public
convenience and necessity from the MPSC. However, while the Act created new
administrative powers in the MPSC, this power was exclusive of the state’s municipalities. In
this regard, municipalities expressly retained the power to acquire, purchase, negotiate or
condemn the facilities of any utility desiring to serve within their corporate limits. 1956 Miss.
Laws ch. 372 § 5(e), codified at § 77-3-17.
¶5. On December 31, 1963, the City of Starkville (Starkville) and 4-County Electric Power
Association (4-County) entered into a service area agreement (1963 Agreement). Consistent
with the 1956 Public Utilities Act, the 1963 Agreement guaranteed efficient continued utility
service to the local polity if Starkville subsequently decided to annex territory which was
within 4-County’s designated service area. The 1963 Agreement was contingent upon the right
of municipalities to annex land which was certificated by the MPSC, and the Agreement
provided that if Starkville exercised its right to include territory currently in the 4-County
3
service area via its power of eminent domain, then, in lieu of condemnation proceedings,1
Starkville could either grant 4-County a no-cost twenty-year franchise to continue operating
within the newly annexed area or effectuate an outright purchase of both 4-County’s
distribution facilities and its service rights. The relevant provisions of the 1963 Agreement
stated:
In the event Municipality at any time or from time to time changes the location
of its corporate boundaries in such manner as to enclose within said boundaries
an area of service, distribution facilities and/or consumers of Cooperative,
Municipality shall, within one-hundred twenty (120) days after annexation
becomes effective, elect either to (a) grant Cooperative a franchise without cost
to serve all present and future electric consumers within said annexed area for
a period of twenty (20) years or (b) buy all of Cooperative's service rights and
the associated distribution facilities within the annexed area, with such
exceptions as may be agreed upon by the parties. If Municipality elects to buy,
it shall be obligated to purchase, and Cooperative shall be obligated to sell to
Municipality, said service rights and facilities at a fair value determined as
hereinafter provided.
The 1963 Agreement further provided:
[I]n order to avoid wasteful duplication of facilities and uneconomic service to
ultimate consumers, Municipality and Cooperative desire to establish clearly
defined arrangements and procedures which will permit continued service to
their respective present consumers and the future expansion of Municipality’s
electric distribution facilities and service in areas which in the future may be
included by annexation within its corporate boundaries......
Additionally, both Starkville and 4-County acknowledged the role of the MPSC:
The parties hereto mutually agree to cooperate in petitioning for and in securing
such approval of this agreement by the Mississippi Public Service Commission
as is or may hereafter be required by law.
1
Under the then-applicable Public Utilities Act of 1956, municipalities could take by condemnation
a cooperative’s poles, power lines, equipment and rights to distribute electricity within the boundaries of the
annexed area.
4
(Emphasis added).
¶6. The procedure required by the 1956 Public Utilities Act remained largely intact for
over 30 years; however, in 1987 the Mississippi Legislature significantly revised the 1956 Act
(1987 Amendments). The focus of the 1987 Amendments was on three statutes – Miss. Code
Ann. §§ 77-3- 13, -17, & -21 (Senate Bill 2840, ch. 353). These 1987 Amendments conferred
further administrative authority upon the MPSC, including the power of approval over any
determination made concerning the certificated utilities. While a municipality retained the
authority to regulate within its borders, its eminent domain powers were severely curtailed.2
¶7. On November 7, 1994, 4-County provided Starkville with notice that it no longer
considered the parties’ 1963 Agreement valid. Specifically, 4-County informed Starkville that
pursuant to the Legislature’s 1987 Amendments to the 1956 Public Utilities Act, performance
under the parties’ contract had become impossible. Two and one-half months later, Starkville,
on January 27, 1995, annexed approximately 1.72 miles of 4-County’s certificated service area
and informed 4-County that, pursuant to the 1963 Agreement, it intended to exercise its option
to purchase 4-County’s service rights and associated distribution facilities located in the newly
annexed area. When 4-County subsequently refused to voluntarily sell its rights and property
in the certificated area, Starkville commenced suit in the Chancery Court of Oktibbeha County
via its filing of a complaint for specific performance, declaratory and injunctive relief and
damages. In due course, the chancery court granted 4-County’s motion for summary
2
We reviewed the 1987 Amendments in Cities of Oxford v. N.E. Miss. Elec. Power Ass’n, 704 So.
2d 59 (Miss. 1997), and determined that their restrictions on a municipality’s power of eminent domain was
constitutional.
5
judgment, and en route to the grant of summary judgment, the chancellor considered the
Legislature’s 1987 Amendments and reasoned that the amendments rendered the parties’ 1963
Agreement unenforceable as it was now unlawful to purchase a certificate of public
convenience and necessity without MPSC approval.
¶8. On January 10, 2002, this Court reversed the chancery court’s grant of summary
judgment, finding that, notwithstanding the 1987 Amendments, the 1963 Agreement between
Starkville and 4-County was valid and enforceable “within the bounds of the regulatory powers
of the Public Service Commission.” City of Starkville v. 4-County Elec. Power Ass’n, 819
So. 2d 1216, 1218 (Miss. 2002) (
Starkville I). We interpreted the 1987 Amendments as not
specifically voiding agreements to sell such as the one existing between Starkville and 4-
County. We also stated that “[i]f the legislature wishes to invalidate existing contracts between
entities delivering public utilities, it should say so plainly,” and we likewise recognized that
this determination was directly within the purview of the Legislature as “[t]he Legislature is
the foremost expositor of public policy.” Id. at 1221.
¶9. Within approximately three weeks after we handed down our decision in Starkville I,
Representative Tyrone Ellis 3 introduced a bill to amend Miss. Code Ann. § 77-3-13, with the
stated purpose being to clarify the legislative intent in passing the 1987 amendments to the
3
Representative Ellis resides in Starkville and represents District 38, comprised of parts of the
Counties of Clay, Lowndes, Noxubee and Oktibbeha.
6
1956 Public Utilities Act. House Bill 997 was passed on March 4, 2002 (2002 Miss. Laws,
ch. 303, §§ 1-2 (2002 Amendments).4
¶10. Upon remand to the chancery court, 4-County, not surprisingly, again filed a motion for
summary judgment, this time undergirding its motion with the Legislature’s 2002
Amendments. In its motion, 4-County asserted inter alia that Starkville failed to comply with
the 2002 Amendments and neither petitioned the MPSC nor demonstrated 4-County’s failure
to render “reasonably adequate service” to its members in the certificated areas. See Miss.
Code Ann. § 77-3-21. Starkville responded by inter alia challenging the constitutionality of the
new legislation and seeking a transfer of the case to the Circuit Court of Oktibbeha County for
a jury trial in order to determine compensatory as well as punitive damages due to 4-County’s
intentional breach of the parties’ 1963 Agreement.5
¶11. On September 23, 2002, the chancellor denied Starkville’s motion to transfer to circuit
court and granted partial summary judgment in favor of 4-County. See Miss. R. Civ. P. 56 (d).
En route to its grant of partial summary judgment, the chancellor analyzed and followed our
4
The full title of House Bill 997 was “AN ACT TO AMEND SECTION 77-3-13, MISSISSIPPI
CODE OF 1972, TO CLARIFY THAT MUNICIPAL UTILITIES ARE NOT REQUIRED TO OBTAIN
A CERTIFICATE OF CONVENIENCE AND NECESSITY FOR OPERATING WITHIN ONE MILE
OF THE CORPORATE LIMITS AND THAT MUNICIPAL UTILITIES MAY NOT OPERATE IN
AREAS CERTIFICATED TO ANOTHER UTILITY, AND TO CLARIFY THE PROCEDURE FOR
THE ACQUISITION OF CERTAIN UTILITY PROPERTY WITHIN MUNICIPALLY ANNEXED
AREAS; AND FOR RELATED PURPOSES.” This act took effect from and after its date of passage,
which was March 4, 2002. It is interesting to note that this was only four days after our denial of 4-County’s
motion for rehearing in Starkville I.
5
As will be discussed later in this opinion, in challenging the constitutionality of H. B. 997, Starkville
failed to give proper notic e to the Attorney General of the State of Mississippi. See Miss. R. Civ. P. 24(d).
7
decision in Starkville I as well as H. B. 997, and found that the 1963 Agreement could only
be enforceable if approved by the MPSC pursuant to the 1987 Amendments as clarified by H.
B. 997. The chancellor on the same day entered his partial summary judgment consistent with
his opinion, which partial summary judgment stated in part:
It is ordered and adjudged that [4-County] is awarded a partial summary judgment
against [Starkville] declaring the parties’ written agreement of December 31,
1963, is unenforceable unless the Public Service Commission shall approve the
sale under said agreement of that portion of [4-County’s] rights and properties
located within the portion of [Starkville] which was annexed into the said
municipality in 1994. It is further ordered and adjudged that this cause be and
it is hereby stayed until the parties have received a ruling by the Public Service
Commission on the validity of the proposed sale under the said agreement.
Instead of heeding the chancellor’s order, Starkville chose to file with the chancery court a
motion for certification for an interlocutory appeal to this Court. On October 22, 2002, the
chancellor denied M.R.A.P. 5 certification for an interlocutory appeal, and by order dated
January 15, 2003 and filed with the Oktibbeha County Chancery Clerk on January 22, 2003,
a three-justice panel of this Court denied Starkville’s petition for an interlocutory appeal.
¶12. Seventy days after receiving notice of this Court’s denial of its request for an
interlocutory appeal; 191 days after the chancellor’s grant of partial summary judgment; and,
instead of heeding the chancellor’s directive and petitioning the MPSC for approval of the sale
of the 1994 annexed area under the 1963 Agreement, Starkville chose instead to file with the
chancery court a motion for the chancellor to reconsider his September 23, 2002, order
granting partial summary judgment. On May 20, 2003, the chancellor by order denied
Starkville’s motion to reconsider.
8
¶13. On August 7, 2003, the chancery court sua sponte entered an order converting the
partial summary judgment into a final summary judgment inasmuch as Starkville, after the lapse
of a reasonable amount of time, failed to petition the MPSC for approval of the sale of the
1994 annexed area consistent with the provisions of the 1963 Agreement. Starkville’s appeal
to this Court followed.
¶14. Both parties set out the appropriate assignments of error using different phraseology
and address these assignments of error in different order. However, we will restate and reorder
these assignments of error for the sake of clarity.
DISCUSSION
I. WHETHER THE CHANCERY COURT ERRED IN FAILING TO
TRANSFER THIS CASE TO THE CIRCUIT COURT OF
OKTIBBEHA COUNTY, MISSISSIPPI.
¶15. The cases are legion where we have stated that the issue of jurisdiction is a question of
law which we must review applying a de novo standard. Trustmark Nat’l Bank v. Johnson,
865 So. 2d 1148, 1150 (Miss. 2004) (citing Briggs & Stratton Corp. v. Smith, 854 So. 2d
1045, 1048 (Miss. 2003); Rogers v. Eaves, 812 So. 2d 208, 211 (Miss. 2002)).
¶16. Starkville asserts that this suit has now become basically a breach of contract suit
wherein Starkville seeks to recover compensatory and punitive damages from 4-County for its
failure to comply with the terms of the 1963 Agreement. In addressing this issue, we look first
to Starkville’s Complaint for Specific Performance, Declaratory and Injunctive Relief, and
Damages, which Starkville itself chose to file in chancery court (not circuit court), on April
7, 1995, thus commencing this protracted litigation. The prayer contained in this complaint
9
sought relief via the chancery court’s (1) declaring that the 1963 Agreement was valid and
enforceable as between the parties; (2) ordering that 4-County specifically perform its
obligations under the 1963 Agreement by way of a good faith negotiation with Starkville for
its purchase of 4-County’s distribution and service rights within the newly annexed area; (3)
issuing a temporary and permanent injunction thus enjoining 4-County from extending its
distribution facilities in the newly annexed area; (4) finding that 4-County willfully and
wrongfully breached the 1963 Agreement (thus entitling Starkville to a recovery of actual and
punitive damages); and, (5) awarding “such other general and special relief as may be proper
in the premises.”
¶17. In its order denying Starkville’s motion to transfer this case to circuit court, the
chancellor stated that “[s]ubject matter jurisdiction is determined from the allegations of the
complaint. The complaint seeks specific performance of a contract which is an equitable
remedy.....”
¶18. In Trustmark, we held that the circuit court erred in denying a motion to transfer to
chancery court. In so doing, we readily acknowledged that most of our recently decided cases
on the issue of transfer involved the question of whether a case commenced in chancery court
should have been transferred to circuit court. 865 So. 2d at 1152 (citing Briggs & Stratton
Corp.; City of Ridgeland v. Fowler, 846 So. 2d 210 (Miss. 2003); United States Fid. & Guar.
Co. v. Estate of Francis, 825 So. 2d 38 (Miss. 2002)). We noted in Trustmark that the circuit
court complaint, while asserting claims of negligence, breach of contract, breach of fiduciary
10
duty and gross negligence, actually focused on the administration of a trust which had been
under “the exclusive jurisdiction of the [chancery court] and has been since its inception.” Id.
at 1151. We likewise stated in Trustmark:
The Plaintiffs counter that they seek legal action rather than equitable remedies
and that subject matter jurisdiction is proper in the circuit court; however, the
Plaintiffs concede that when determining the true nature of the claim, one must
look at the substance, and not the form, of the claim in order to determine
whether the claim is legal or equitable.[6] Briggs & Stratton Corp. v. Smith,
854 So. 2d at 1049; Tillotson v. Anders, 551 So. 2d 212, 214 (Miss. 1989);
Thompson v. First Miss. Nat’l Bank, 427 So. 2d 973, 976 (Miss. 1983);
Dixie Nat’l Life Ins. Co. v. Allison, 372 So. 2d 1081, 1085 (Miss. 1979). As
Trustmark correctly asserts, “[a]lthough, the Plaintiffs employ the language of
negligence and legal remedy, the fundamental substance of their claim is
testamentary and equitable.”
865 So. 2d at 1151.
¶19. When we review Starkville’s complaint in today’s case, we can state with confidence
that the relief sought on specific performance of a contract is typically the type of relief to be
considered by our chancellors sitting as a court of equity. Additionally, Starkville presumably
made a knowing and conscious decision to commence this litigation in chancery court (as
opposed to circuit court) when it filed its complaint in 1995. This case has been litigated in
chancery court, appealed to this Court, and relitigated in chancery court. As we stated in
Rogers, because the chancery court had already heard extensive litigation in the case, it was
certainly in the best position to hear and resolve the relevant issues in the related case which
had been commenced. 812 So. 2d at 211-12. In fact, in today’s case, the same chancellor has
6
This is exactly what the chancellor in today’s case did in addressing the jurisdictional issue when he
stated that the issue had to be resolved by reviewing “the allegations of the complaint.”
11
been involved with the litigation of this case since its inception in 1995. Who was in a better
position to fairly and correctly decide the issues in this case than the learned chancellor who
had presided over all the proceedings in this case from the very beginning? Trustmark, 865
So. 2d at 1151.
¶20. Thus, for the reasons stated, we find that the chancellor quite appropriately denied
Starkville’s motion to transfer this case to the Circuit Court of Oktibbeha County. Inasmuch
as we have determined that the Chancery Court of Oktibbeha County had jurisdiction to hear
and decide this case, we now turn to the remaining issues.
II. WHETHER THE CHANCERY COURT ERRED IN GRANTING
SUMMARY JUDGMENT IN FAVOR OF 4-COUNTY.
¶21. Just as in considering the issue of jurisdiction, our standard of review in considering
a trial court’s grant of summary judgment is de novo. Miller v. Meeks, 762 So. 2d 302, 304
(Miss. 2000) (citing Short v. Columbus Rubber & Gasket Co., 535 So. 2d 61, 63 (Miss.
1988)). Accordingly, this Court must employ a factual review tantamount to that of the trial
court when considering evidentiary matters in the record. Aetna Cas. & Sur. Co. v. Berry, 669
So. 2d 56, 70 (Miss. 1996). By design, the grant of summary judgment is governed by a high
standard and requires that “the pleadings, depositions, answers to interrogatories and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to judgment as a matter of law.” Miss.
R. Civ. P. 56(c).
12
¶22. In claiming error in the chancellor’s grant of 4-County’s motion for summary judgment,
Starkville raises several additional errors committed by the chancellor en route to his grant of
summary judgment. We will separately discuss these assertions of error.
A. Whether the chancellor erred in finding that Starkville lacked
standing to challenge the constitutionality of House Bill 997.
¶23. On the issue of Starkville’s standing to attack the constitutionality of H. B. 997, the
chancellor, in his opinion granting partial summary judgment, stated:
The City of Starkville is a political subdivision of the State. It is created by the
State and exists through the action of the State. All rights and powers possessed
by the City are at the discretion of the State by grant of statute. Therefore as
held in the Oxford case, a city cannot attack the constitutionality of State
legislation on grounds that its own rights have been impaired. [Starkville] has no
standing to raise an issue of unconstitutionality of the immediate statute. The
statute is presumed constitutional and can only be declared unconstitutional if
shown to be so beyond a reasonable doubt. As this lack of standing by
[Starkville] disposes of its challenge to H. B. 997, the constitutionality of the
statute need not be reached.
¶24. The “Oxford case” to which the chancellor referred in his opinion is our decision in
Cities of Oxford v. N. E. Miss. Elec. Power Ass’n, 704 So. 2d 59 (Miss. 1997). In Oxford,
twelve municipalities commenced a declaratory judgment action in circuit court seeking to
have the 1987 Amendments declared unconstitutional. Id. at 61. The municipalities in Oxford
conceded the right of the Legislature to take away the municipalities’ eminent domain power,
but asserted that the 1987 Amendments unconstitutionally placed in the hands of private
corporations (i.e., power companies) “the ability to prevent [the municipalities’] exercise of
the power of eminent domain.” Id. at 66. In affirming the circuit court’s grant of summary
judgment in favor of the utilities and against the municipalities, we stated:
13
The municipalities have no inherent power or right of eminent domain. The
municipalities have asserted that the defendant-utilities have some sort of “veto”
power over the municipalities’ eminent domain power. The 1987 Amendments
provide a procedure which the municipalities must follow before condemning
the land service areas and facilities of the defendant-utilities. Surely the
Legislature which may grant or deny the power of eminent domain to a
municipality may also establish a procedure or method by which it may be void.
Id. at 67.
¶25. However, with all deference to the chancellor and the parties in the case sub judice, the
issue here is not one of standing (just as it was not the issue in Oxford). If it were, then as
correctly asserted in its brief, Starkville would prevail on the standing issue. In City of
Belmont v. Miss. State Tax Comm’n, 860 So. 2d 289 (Miss. 2003), twenty municipalities
commenced a declaratory judgment action against the Mississippi State Tax Commission
(MSTC), in an effort to have the MSTC judicially mandated to divert state sales tax funds to
the municipalities. Id. at 291-92. In Belmont, relying on our decision in Harrison County
v. City of Gulfport, 557 So. 2d 780 (Miss. 1990), we set out our general rule on standing:
Parties may sue or intervene where they assert a colorable
interest in the subject matter of the litigation or experience an
adverse effect from the conduct of the defendant, see Dye v. State
ex rel. Hale, 507 So. 2d 332, 338 (Miss. 1987); Frazier v. State
of Mississippi, 504 So. 2d 675, 691-92 (Miss. 1987); Belhaven
Improvement Association, Inc. v. City of Jackson, 507 So. 2d 41,
45-47 (Miss. 1987), or as otherwise authorized by law, see, e.g.,
Canton Farm Equipment v. Richardson, 501 So. 2d 1098, 1105-
09 (Miss. 1987); City of Pascagoula v. Scheffler, 487 So. 2d
196, 198 (Miss. 1986).
Harrison County v. City of Gulfport, 557 So. 2d 780, 782 (Miss. 1990).
************
14
Because the Municipalities have a colorable interest in the subject matter of this
litigation, we find the trial court erred in dismissing this suit on the grounds that
the Municipalities lacked standing.
860 So. 2d at 296-97.
¶26. Clearly, Starkville had standing to challenge the constitutionality of H. B. 997, in that
Starkville (1) had a colorable interest in the subject matter of the litigation and (2) experienced
an adverse effect from the conduct of 4-County. Thus we find the chancellor erred in his
finding that Starkville lacked standing to challenge the constitutionality of H. B. 997; however,
such finding of error hardly ends the inquiry.
¶27. Notwithstanding a finding of Starkville’s lack of standing to challenge H. B. 997, the
chancellor still proceeded to address the bill’s constitutionality. The record clearly reveals
that Starkville was not in any way hampered in fully presenting its case before the chancellor
because of the chancellor’s finding of lack of standing. Thus, the chancellor’s error in this
regard is harmless beyond any doubt. See Guar. Nat’l Ins. Co. v. Pittman, 501 So. 2d 377, 386
(Miss. 1987).
B. Whether the chancellor erred in finding that performance under
the parties’ 1963 service area agreement requires specific approval
from the Mississippi Public Service Commission in accord with
the Legislature’s 1987 and 2002 Amendments.
¶28. At the heart of this ongoing litigation is the effect that the 1987 and 2002 Amendments
has on the parties’ ability to legally perform under their 1963 service area agreement. In 2002,
this same question was before this Court, and we concluded that the parties’ contract was valid
and enforceable within the bounds of the regulatory powers conferred upon the MPSC.
15
Starkville I, 819 So. 2d at 1218. In so holding, we invited the Legislature to act. “If the
Legislature wishes to invalidate existing contracts between entities delivering public utilities,
it should say so plainly” inasmuch as “[t]he Legislature is the foremost expositor of public
policy.” Id. at 1221. Opting not to affirm the chancellor’s grant of summary judgment and
dismiss this litigation, we remanded the case back to the chancery court stating, “[i]f public
policy now dictates that these contracts be voided, it is for the Legislature, not this Court, to
say so.” Id. In short order, the Mississippi Legislature responded to our invitation and within
days of our decision in Starkville I passed H. B. 997. We quote below from Miss. Code Ann.
§ 77-3-13(3), with the strikeouts and underline indicating the revisions to the last two
sentences of subsection (3) based on the passage of H. B. 997:
Provided, However, nothing in this section shall be construed as requiring such
certificate for a municipally owned plant, project or development, route, line or
system or extension thereof in areas within one (1) mile of the corporate
boundaries which are not certificated to another utility, and nothing in this
chapter or other provision of law shall be construed as allowing a municipally
owned plant, project or development, route, line or system or extension thereof
in areas certificated to another utility. Provided, further, No certificate shall be
required for extensions or additions within the corporate limits of a
municipality being served by the holder of a certificate of convenience and
necessity.[7]
The main revisions to Miss. Code Ann. § 77-3-13 resulted in the addition of a new paragraph.
Thus, pursuant to H. B. 997, the then-existing subsection (7) became subsection (8), and the
new subsection (7) provided:
7
The underlined language represents the language added to Miss. Code Ann. § 77-3-13(3) by H.B.
997.
16
(7) Before the acquisition pursuant to any negotiated purchase agreement
entered into before 1987, by any public agency, authority, district, state or other
agency, institution or political subdivision thereof, of any certificate of public
convenience and necessity or portion thereof, service areas or portion thereof,
or operating rights or portion thereof, issued or granted by the commission
pursuant to this section and/or the facilities or other properties and equipment
of the utility providing service therein of any regulated utility defined in Section
77-3-3(d)(I), the commission first shall determine that such service area,
certificate of public convenience and necessity, or operating right, or portions
thereof, shall be cancelled as provided in Section 77-3-21.
Miss. Code Ann. § 77-3-13(7); Laws, 2002, ch. 303, § 1, eff. from and after passage (approved
Mar. 4, 2002).
¶29. Based on this new statutory guidance, we now revisit the parties’ 1963 Agreement and
evaluate the effect that current procedural requirements, originally promulgated in 1987 and
clarified in 2002, have on the parties ability to perform their contract.
¶30. From their inception, public utilities have garnered much attention from our state
government. Accordingly, their important function places utility companies squarely in the
public eye and intermittently subject to legislative prerogative. It is no doubt important for
legislators to insure adequate service to their constituents and therefore important that they
stay abreast of the activities of their constituents’ utility providers. In 1987, the Legislature
decided to reassess the procedure by which it guaranteed reasonably adequate service to our
citizenry, and accordingly, amended Miss. Code Ann. §§ 77-3-13, -17 & 21, by passing Senate
Bill No. 2840, Laws, 1987, ch. 353, § 1.
¶31. With the passage of the 1987 Amendments, the Legislature sought to assure continued
adequacy of utility services to the citizens of this state, and in particular to the customers and
17
consumers of regulated public utilities. To do this, the Legislature conferred plenary authority
upon the MPSC over the inhabitants and consumers of those service areas which had been
included in certificates of public convenience and necessity and over the operating rights
granted therein. Id. In amending Section 77-3-13, the 1987 Legislature added paragraph (6):
(6) Prior to acquisition pursuant to Section 77-3-17, Mississippi Code of 1972,
or other provisions of law, by any public agency, authority, district, state or
other agency, institution or political subdivision thereof, of any certificate of
public convenience and necessity or portion thereof, service areas or portion
thereof, or operating rights or portion thereof, issued or granted by the
commission pursuant to the provisions of this Section 77-3-13 and/or the
facilities or other properties and equipment of the utility providing service
therein; of any regulated utility as defined in Section 73-3-3(d)(i),(ii) and (iii),
Mississippi Code of 1972, the commission shall first determine if such service
area, certificate of public convenience and necessity or operating right, or
portions thereof, should be cancelled as provided in Section 77-3-21,
Mississippi Code of 1972.
Miss. Code Ann. § 77-3-13 (1972) (see also Senate Bill No. 2840, 1987 Miss. Laws ch. 353,
§ 1).
¶32. Section 77-3-21 provides for adequacy hearings and when read in pari materia with
Section 77-3-17, works to curtail a municipalities’ ability to exercise eminent domain over
public utilities holding certificates of public convenience and necessity. Additionally, Section
77-3-21 provides in pertinent part:
Prior to any municipality exercising the power of eminent domain as provided
in Section 77-3-17, the commission shall determine that the certificate of
public convenience and necessity granted to the utility pursuant to Section 77-3-
13 for the service area wherein such facilities are located, shall be cancelled as
provided in this section.
Miss. Code Ann. § 77-3-21 (1972) (see also S. B. No. 2840, 1987 Miss. Laws ch. 353, § 1).
18
¶33. The first paragraph of section 77-3-21 expressly sets out the procedure by which a
certificate of public convenience and necessity is cancelled:
The commission may, after hearing had upon due notice, make such findings as
may be supported by proof as to whether any utility holding a certificate under
the provisions of this article is rendering reasonably adequate service in any area
covered by such utility’s certificate. In the event the commission finds that such
utility is not rendering reasonably adequate service the commission may enter
an order specifying in what particulars such utility has failed to render
reasonably adequate service and order that such failure be corrected within a
reasonable time, such time to be fixed in such order. If the utility so ordered to
correct such a failure fails to comply with such order of the commission and the
commission finds that cancellation of its certificate would be in the best
interest of the consuming public served by the holder of the certificate, its
certificate for the area affected may be revoked and cancelled by the
commission.
Miss. Code Ann. § 77-3-21 (1972).
¶34. It appears that the 1987 Amendments were initiated by the Legislature not only to
reform prevailing procedures which had either been reinforced by or implemented under the
1956 Public Utilities Act, but also to streamline diverse authority into a single administrative
body which could ultimately guarantee “reasonably adequate service” to consumers in
certificated areas. Accordingly, the amendments consolidated the authority and power
formerly instituted in the plurality of the state’s municipalities and conferred such authority
directly upon the MPSC. We first acknowledged the impact of the 1987 Amendments in City
of Clarksdale v. Miss. Power & Light Co., 556 So. 2d 1056 (Miss. 1990), where we stated
that “prior to a municipality exercising the power of eminent domain against a utility the
certificate of public convenience and necessity held by the utility had to be cancelled by the
[MPSC].” Id. at 1057. In Oxford, we again considered the amendments and stated, “[t]he 1987
19
Amendments provide a procedure which the municipalities must follow before condemning
the land service areas and facilities of the defendant-utilities.” 704 So. 2d at 67. “[P]rior to any
condemnation as provided for under the Miss. Code Ann. § 77-3-17, the [M]PSC must first
determine that the certificated utility is not providing reasonably adequate service in the area
in question and that the utility’s certificate of public convenience and necessity should be
canceled as provided in Miss. Code Ann. Section 77-3-21.” Id. at 64. The implicit intent of
the 1987 Amendments was to provide infrastructure and centralize the authority regulating
properly certificated utility providers and to obviate ad hoc agreements predicated on a
municipalities’ perceived unfettered right of condemnation and eminent domain. To this end,
we can safely conclude that the 1987 Amendments were enacted in an attempt to assure
efficient, economic and uninterrupted service to this state’s consuming public. In 2002, we
recognized this and noted:
For many years, eminent domain in these premises, unfettered by any reference
to the Public Service Commission, was in fact the public policy. This contract
and perhaps others were entered into during that period. If public policy now
dictates that these contracts be voided, it is for the Legislature, not this Court,
to say so.
Starkville I, 819 So. 2d at 1221. Today, we recognize that the Legislature has clearly stated
that it is no longer this State’s public policy for our municipalities to have unfettered eminent
domain power and that municipalities thus can no longer lay claim to land in a certificated area
and condemn certificated providers’ facilities and equipment, without express approval of the
MPSC.
20
¶35. While municipalities enjoyed unfettered use of their eminent domain power for over
thirty years, it eventually became the Legislature’s clear intent to relieve our municipalities
of such power and authority. In 2002, our Legislature explicitly clarified its intent and purpose
for enacting the 1987 Amendments via its passage of H. B. 997. With its most recent action,
it has become abundantly clear that the Mississippi Legislature has unbound the hands of
certificated service providers and thwarted the effect of leveraged service agreements formed
prior to the 1987 legislation.
¶36. In this case, Starkville is attempting to effectuate its last opportunity to exercise its
formerly conferred power of eminent domain. Starkville desires to legally avoid the all-
inclusive statutory effect of the Legislature’s 1987 Amendments by relying on its 1963
Agreement with 4-County. In essence, Starkville is demanding justice based entirely on a
snapshot of a public utility service law which was passed almost a half-century ago. In granting
partial summary judgment, the chancellor correctly interpreted and applied H. B. 997 as
expressly clarifying the intended legislative interpretation to be given to the 1987
Amendments to Sections 77-3-13, -17 & -21. The chancellor stated in his opinion:
The pre-1987 agreements to purchase cannot be enforced unless the subject
certificate held by the vendor-utility shall first be cancelled under Section 77-3-
21. This is a statutory condition of approval of any sale under a pre-1987
agreement of purchase and binds both the Public Service Commission [MPSC]
and any parties to a pre-1987 contract of purchase.
In concluding that the parties were ultimately subject to the authority of the MPSC, the
chancellor cited important contractual language from the parties’ 1963 Agreement whereby
21
both parties mutually agreed to cooperate in petitioning for, and securing the approval of the
MPSC “as is or may hereafter be required by law.”
¶37. Consistent with our decision in Starkville I, the chancellor found that the parties clearly
understood that the subject matter of their agreement was one regulated by the State and
subject to continued regulation by our Legislature. Accordingly, the chancery court
determined that the 2002 Amendments, which rendered the contract unenforceable unless
approved by the MPSC, was contemplated by the parties by the express provisions of their
1963 Agreement binding them to future legislative enactments. The chancellor thus quite
appropriately granted partial summary judgment pending Starkville’s petition to the MPSC for
approval of its proposed purchase of 4-County’s service rights and associated distribution
facilities within the annexed area in accordance with the 1963 Agreement.
¶38. The 1963 Agreement between Starkville and 4-County was predicated on the free reign
of a municipality to exercise its power of eminent domain in order to assure its citizens of
“reasonably adequate service”from its utility provider. In 1987, our Legislature expressly
revised this procedure and divested the municipalities of this unfettered right. Accordingly,
the Legislature vested the MPSC with plenary authority and jurisdiction over the regulation of
the state’s public utility services in certificated areas. The entire scope of the parties’ 1963
Agreement now falls squarely within the province of the MPSC, and while the parties in
contracting took note of the MPSC, even had they not, the clear mandate issued by the
Legislature in acting for the public interest places the subject matter of the service agreement
well within the powers the Legislature has conferred upon the MPSC.
22
¶39. With the passage of H. B. 997, the Legislature has expressly and inextricably bound pre-
1987 municipal-certificated service provider contracts to direct MPSC governance. In
consideration of this specific legislative directive and in the absence of the MPSC’s express
approval, it is abundantly clear that the 1963 Agreement can no longer be performed.
Moreover, the Legislature through amendments to Miss. Code Ann. §§ 77-3-13, -21, has
obviated Starkville’s ability to exercise its rights under its 1963 Agreement, inasmuch as
Starkville failed to petition the MPSC for approval of its contract of sale within a reasonable
time after the chancellor’s grant of partial summary judgment.
¶40. For the reasons stated, we conclude that the chancellor did not err in finding that
performance under the 1963 Agreement required the approval of the MPSC based on the 1987
and 2002 legislative amendments.
C. Whether the chancellor erred by retroactively applying House Bill
997 passed by the Mississippi Legislature in 2002.
¶41. This issue is obviously closely akin to the issue just discussed. Starkville argues that
Mississippi law prohibits the retroactive application of a statute absent the Legislature’s clear
intent to do so. We agree. It is well-settled in our jurisprudence that statutes be interpreted
prospectively, and where they are not, there must be a clear indication from the Legislature that
they be applied retrospectively as well. City of Belmont v. Miss. State Tax Comm’n, 860 So.
2d at 302 (citing Mladinich v. Kohn, 186 So. 2d 481, 483 (Miss. 1966)). A statute will not
be given retroactive effect unless it is manifest from the language that the Legislature intended
it to so operate. Mladinich, 186 So. 2d at 483.
23
¶42. As is abundantly clear by now, in 2002, the Legislature passed H. B. 997 within weeks
after we handed down Starkville I and explicitly stated what had been implicit in the 1987
Amendments to the Public Utilities Act of 1956. Accordingly, the Legislature added definitive
language to Miss. Code Ann. § 77-3-13 which expressly states that all contracts entered into
prior to 1987 are subject to the approval of the MPSC. “Before the acquisition pursuant to any
negotiated purchase agreement entered into before 1987...[t]he commission first shall
determine that such service area, certificate of public convenience and necessity, or operating
right, or portion thereof, shall be cancelled as provided in Section 77-3-21.” Miss. Code Ann.
§ 77-3-13(7) (Supp. 2002). By its very terms as stated above, H. B. 997 reveals a clear
legislative intent to have the 1987 Amendments apply retrospectively. It is certainly hard to
imagine a more manifest indication of legislative intent than the language used in House Bill
997 and codified as subsection (7) in Miss. Code Ann. § 77-3-13, especially when coupled
with the blinding speed in which the Legislature reacted to our decision in Starkville I.
¶43. While the clear intent of the Legislature was to have H. B. 997 apply directly to this
case, inasmuch as we invited the Legislature to do so, this Court has also affirmed cases
involving the retroactive application of statutory amendments to pending litigation. In
evaluating retroactive legislation in Belmont, we cited precedent as supporting “the retroactive
application of legislation, even when the legislation would abate litigation pending prior to the
legislation becoming adopted.” 860 So. 2d at 303-04 (see USPCI of Miss., Inc. v. State ex rel.
24
McGowan, 688 So. 2d 783, 786-87 (Miss. 1997); City of Clarksdale v. Miss. Power & Light
Co., 556 So. 2d 1056 (Miss. 1990)).
¶44. In Belmont, municipalities brought an action against the Mississippi State Tax
Commission in November of 1999, seeking declaratory, as well as injunctive relief, so as to
force the MSTC to comply with state law concerning the diversion of state sales tax to
municipalities. 860 So. 2d at 292. Four months later, in March of 2000, the Legislature passed
House Bill 987, and using definitive language endorsed the method employed by the MSTC for
calculating payments due all municipalities. Id. at 293. After the circuit court’s dismissal
pursuant to Miss. R. Civ. P. 12(b)(6), the municipalities appealed to this Court. In affirming
the circuit court’s dismissal, we held inter alia that this Court had previously allowed the
retroactive application of statutes, amendments and rules, citing Burrell v. Miss. State Tax
Comm’n, 536 So. 2d 848 (Miss. 1988). “[L]egislative enactment of House Bill No. 388 was
so integrally related to the adoption of House Concurrent Resolution 41, so that the latter,
once ratified, ought be taken as breathing legal life into the former. 536 So. 2d at 860.”
Belmont, 860 So. 2d at 302.
¶45. We addressed the very same amendments at issue in this case in Clarksdale and found
them determinative of pending litigation. In Clarksdal e, the city filed an eminent domain
action on March 5, 1987, in order to condemn the facilities of a certificated electrical utility.
556 So. 2d at 1057. Twelve days later, on March 17, 1987, the Mississippi Legislature adopted
the 1987 Amendments. Id. As stated previously, the 1987 Amendments severely curtailed a
25
municipality’s ability to exercise its power of eminent domain and specifically required, “that
prior to a municipality exercising the power of eminent domain against a utility the certificate
of public convenience and necessity held by the utility had to be cancelled by the [MPSC].” Id.
“The trial judge held that because the City’s right of eminent domain was a creation of statute,
under well-settled law any amendment to a statute was treated as though it had been a part of
the original statute.” Id. Since the MPSC had not acted on the utility's certificate of public
convenience and necessity, the trial judge ultimately dismissed the City's petition In affirming
the trial judge’s retroactive application of the 1987 amendments, we referred to precedent:
In Oliphant v. The Carthage Bank, 224 Miss. 386, 80 So. 2d 63, 72 (1955), we
held:
It is well-settled by the decisions of our Court, and in most every
other jurisdiction, that when proceedings are in process under a
statute and have not been completed, and have not reached the
stage of final judgment, and a new act is passed, modifying the
statute under which the proceedings were begun, the new statute
becomes integrated into and a part of the old statute as fully as if
written therein from the very time the old statute was enacted.
224 Miss. at 410, 80 So. 2d at 72.
556 So. 2d at 1057.
¶46. In USPCI, a county resident filed suit charging the Governor did not follow proper
procedures in connection with the proposed construction of a hazardous waste treatment
facility. 688 So. 2d at 785. While the suit was pending, the Legislature amended Miss. Code
Ann. § 23-43-5 to specifically exclude the Governor from these requirements. In reversing
the circuit court’s order which directed the Governor to comply with the Administrative
Procedures Law in adopting a capacity assurance plan for the construction of a hazardous waste
26
treatment facility, we stated: “An amended act is ordinarily construed as if the original statute
had been repealed, and as far as any action after the adoption of the amendment is concerned,
as if the statute had been originally enacted in its amended form.” Id. at 786-87 (citing Beatty
v. State, 627 So. 2d 355, 357 (Miss. 1983); Stone v. Independent Linen Serv. Co., 212 Miss.
580, 55 So. 2d 165 (1951); McMullen v. Sinclair Ref. Co., 207 Miss. 71, 41 So. 2d 382
(1949)). We concluded in USPCI:
“When cases are in the bosom of this Court and there is involved a statute that
is modified prior to a final decision of this Court, we take that modification into
consideration.” Bell v. Mitchell, 592 So. 2d 528 (Miss. 1991), citing Parker v.
Bailey, 437 So. 2d 33 (Miss. 1983).
688 So. 2d at 787.
¶47. As we have stated in this case and prior cases, we are keenly aware of our responsibility
regarding judicial review of legislative action. We indeed should be about the business of
interpreting legislative enactments while avoiding judicial legislating. This should be apparent
from our decision in Starkville I. With that in mind, we are again guided by our decision in
Belmont:
For those who might experience some consternation over whether today’s
decision somehow erodes the independence of the judicial branch of state
government, it should be remembered that municipalities are but creatures of
the state and they possess only such power as conferred upon them by
statute.....This concept should hardly be a shock to anyone.
860 So. 2d at 306.
¶48. Today, there is not only clear legislative intent that H.B. 997 should indeed apply to this
instant litigation, there is also clear precedent indicating that, if the Legislature chooses to
27
amend a statute while a case is still pending, we will apply that amendment as if it had been part
of the statute all along. H. B. 997 was styled “Act to Clarify the Procedure for Acquisition of
Certain Utility Property within Municipally Annexed Areas.” In no uncertain terms the 2002
Act makes explicit that which had been implicit in the 1987 Amendments, and the procedure
enacted under Miss. Code Ann. § 77-3-13 should unquestionably be read as if subsection (7)
had been a part of the statute all along.
¶49. We thus find for the reasons stated that the chancellor was indeed eminently correct
in retroactively applying House Bill 997 to this pending litigation.
D. Whether the chancellor in failing to find that H. B. 997 violates the
Contracts Clause of the United States Constitution as well as the
Mississippi Constitution.
¶50. Starkville asserts that the Contracts Clause prohibits all retrospective legislation that
violates vested contractual rights.
¶51. Before addressing the substance of this argument we must point out that Starkville’s
failure to notify the Attorney General of its constitutional challenge procedurally barred
Starkville from raising this issue. Miss. R. Civ. P. 24(d) requires a party challenging the
constitutionality of a statute to give notice to the Attorney General within such time as to
afford him an opportunity to intervene and argue the question of constitutionality. The purpose
of this provision is to protect the public’s interest in an action which may have far-reaching
implications. Miss. R. Civ. P. 24(d) states as follows:
In any action (1) to restrain or enjoin the enforcement, operation, or execution
of any statute of the State of Mississippi by restraining or enjoining the action
of any officer of the State or any political subdivision thereof, or the action of
28
any agency, board, or commission acting under state law, in which a claim is
asserted that the statute under which the action sought to be restrained or
enjoined is to be taken is unconstitutional, or (2) for declaratory relief brought
pursuant to Rule 57 in which a declaration or adjudication of the
unconstitutionality of any statute of the State of Mississippi is among the relief
requested, the party asserting the unconstitutionality of the statute shall notify
the Attorney General of the State of Mississippi within such time as to afford
him an opportunity to intervene and argue the question of constitutionality.
Miss. R. Civ. P. 24(d).
¶52. In Cockrell v. Pearl River Valley Water Supply District, 865 So. 2d 357 (Miss. 2004),
we barred a motorist from arguing on appeal the issue of the unconstitutionality of a statute
providing that all claims under the Mississippi Tort Claims Act were to be determined without
a jury. Id. at 357. We declined to address the issue and held:
“We accept without hesitation the ordinarily sound principle that
this Court sits to review actions of trial courts and that we should
undertake consideration of no matter which has not first been
presented to and decided by the trial court. We depart from this
premise only in unusual circumstances.”Educational Placement
Services v. Wilson, 487 So. 2d 1316, 1320 (Miss. 1986).
Barnes v. Singing River Hosp. Sys., 733 So. 2d 199, 202-03 (Miss. 1999).
865 So. 2d at 360. In Cockrell, the motorist failed to raise the issue of the constitutionality
of Miss. Code Ann. §11-46-13 before the trial court and also failed to notify the Attorney
General. We ultimately concluded that Rule 24(d) barred review. Again in referring to our
decision in Barnes, we stated that “Rule 24(d) of the Mississippi Rules of Civil Procedure
requires that proper notice be given to the Attorney General when the constitutionality of a
29
statute is challenged ‘to afford him an opportunity to intervene and argue the question of
constitutionality.’” Miss. R. Civ. P. 24(d). Id. at 360.
¶53. In the present case, Starkville did not provide notice at the trial court level to the
Attorney General of its constitutional challenge to H. B. 997. Instead, Starkville delayed
notifying the Attorney General of its constitutional challenge until after all primary briefing
was completed on appeal to this Court. In fact, it was not until October 4, 2004, that Starkville
filed with this Court a “Motion For Special Order” wherein it sought permission to serve a
copy of its appellate brief upon the Attorney General so that the Attorney General could
thereafter make an appearance in this case and file a brief with this Court. See M.R.A.P. 44.
Thereafter, the Chief Justice of this Court entered an order granting Starkville’s motion and
permitting the Attorney General to make an appearance and file a brief. Subsequent to this
order, the Attorney General of the State of Mississippi did in fact submit a brief in this case.
¶54. Notwithstanding this bar, this Court, in the alternative, has jurisdiction to consider
constitutional challenges absent proper notice if it desires. “Notice to the Attorney General
is mandatory even if the court thinks the constitutional issue frivolous, but failure to give the
notice does not deprive the court of jurisdiction to hear the case.” Miss. R. Civ. P. 24 cmt.
(See State v. Watkins, 676 So. 2d 247 (Miss. 1996)). In the case sub judice, the Attorney
General has filed a brief in which he raises procedural bar due to Starkville’s failure to give
proper notice in the trial court; however, the Attorney General has likewise quite appropriately
alternatively addressed on the merits the issue of the constitutionality of H.B. 997.
30
¶55. When reviewing the constitutionality of a legislative enactment, there is a strong
presumption of validity, and a party challenging the constitutionality of a statute must prove
the unconstitutionality of the statute beyond a reasonable doubt. Richmond v. City of Corinth,
816 So. 2d 373, 375 (Miss. 2002).
¶56. The Contracts Clause of the Mississippi Constitution, Miss. Const. Art. 3, § 16, is
nearly identical to that of the United States Constitution, U.S. Const. Art. I, § 10, and is
therefore generally construed under the same standards and analyses. Pub. Employees’ Ret.
Sys. v. Porter, 763 So. 2d 845, 849-50 (Miss. 2000). Accordingly, the United States Supreme
Court’s treatment of the Contracts Clause in relation to a state’s police power is categorical,
and the Court has refused to impair a state Legislature’s ability to act for the public good.
¶57. The United States Supreme Court’s treatment of the Contracts Clause as it relates to
the legislature’s ability to legislate for the public welfare is well-settled. Moreover, there is
clear precedent supporting a state legislature’s ability to obviate pre-existing contractual
obligation, in order to protect the lives, health, morals, comfort and general welfare of its
citizens. In Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 107 S. Ct. 1232,
94 L. Ed. 2d 472 (1987), an action brought by coal companies challenging the Pennsylvania
Subsidence Act which required that fifty percent of the coal beneath certain structures be kept
in place to provide surface support, the United States Supreme Court upheld legislative
prerogative in the realm of public interest. Id. Accordingly, the Supreme Court refused to
second-guess the Commonwealth’s legislative determinations and held inter alia that the public
31
purposes served by the Subsidence Act justified the impairment of the coal companies’
contractual agreements with the surface-owners. Id. at 1253. In support of its holding, the
Supreme Court revisited Contracts Clause jurisprudence:
[I]t is well settled that the prohibition against impairing the obligation of
contracts is not to be read literally. W.B. Wortham Co. v. Thomas, 292 U.S.
426, 433, 54 S. Ct. 816, 818, 78 L. Ed. 1344 (1934). The context in which the
Contracts Clause is found, the historical setting in which it was adopted,8 and our
cases construing the Clause, indicate that its primary focus was upon legislation
that was designed to repudiate or adjust pre-existing debtor-creditor
relationships that obligors were unable to satisfy. See e.g., ibid. Home Building
& Loan Assn. v. Blaisdell, 290 U.S. 398, 445, 54 S. Ct 231, 78 L. Ed. 413
(1934).
480 U.S. at 502-03. In drawing its ultimate conclusion, the Supreme Court reiterated standards
for evaluating impairments of contracts:
[T]he finding of a significant and legitimate public purpose is not, by itself,
enough to justify the impairment of contractual obligations. A court must also
satisfy itself that the legislature’s “adjustment of ‘the rights and responsibilities
of contracting parties [is based] upon reasonable conditions and [is] of a
character appropriate to the public purpose justifying [the legislation’s]
adoption.’” Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459
U.S. 400, 412, 103 S. Ct. 697, 704, 74 L. Ed. 2d 569 (1983) (quoting United
States Trust Co. v. New Jersey, 431 U.S. 1, 22, 97 S. Ct. 1505, 1517, 52
L. Ed. 2d 92 (1977)). But, we have repeatedly held that unless the State is itself
a contracting party, courts should “properly defer to legislative judgment as to
the necessity and reasonableness of a particular measure.” Energy Reserves
Group, Inc., 459 U.S. at 413 (quoting United States Trust, Co., 431 U.S. at 23).
480 U.S. at 505.
8
“The Contracts Clause was made part of the Constitution to remedy a particular social evil – the
state legislative practice of enacting laws to relieve individuals of their obligations under certain contracts –
and thus was intended to prohibit States from adopting ‘as [their] policy the repudiation of debts or the
destruction of contracts or the denial of means to enforce them.’” Home Building & Loan Ass’n v.
Blaisdell, 290 U.S. 398, 439; 54 S. Ct. 231, 78 L. Ed. 413 (1934).
32
¶58. In Home Building & Loan Assn. v. Blaisdell, a landmark case often referred to as the
leading modern case on the Contracts Clause, the United States Supreme Court upheld
Minnesota’s statutory moratorium against home foreclosures, in relevant part, because the
legislation at issue had the legitimate end of protecting a basic interest of society, and not just
to protect the economic advantage of some favored group. Id. at 445. The Blaisdell Court
referred to its decision in Manigualt v. Springs, 199 U.S. 473, 26 S. Ct. 127, 50 L. Ed. 274
(1904), and stated:
It is the settled law of this court that the interdiction of statutes impairing the
obligation of contracts does not prevent the State from exercising such powers
as are vested in it for the promotion of the common weal, or are necessary for
the general good of the public, though contracts previously entered into between
individuals may thereby be affected. This power, which in its various
ramifications is known as the police power, is an exercise of the sovereign right
of the government to protect the lives, health, morals, comfort and general
welfare of the people, and is paramount to any rights under contracts between
individuals.
290 U.S. at 437, 54 S.Ct. at 240. Similarly, in Hudson County Water Co. v. McCarter, 209
U.S. 349, 28 S. Ct. 529, 52 L. Ed. 828 (1908), the United States Supreme Court upheld a New
Jersey statute which prohibited the transportation of the state’s water into any other state.
Speaking through Justice Holmes, the Court stated, “[o]ne whose rights, such as they are, are
subject to state restriction, cannot remove them from the power of the State by making a
contract about them.” 209 U.S. at 357, 28 S.Ct. at 531.
¶59. In the case sub judice, the regulation of this State’s public utilities falls squarely within
our Legislature’s power and authority. It follows that the parties recognized this and even
33
contemplated it within the four corners of their contract. In passing the 1987 Amendments,
the Legislature sought to centralize state authority over the regulation of our public
certificated utility providers and, additionally, to extricate local interests from interfering with
this authority.
¶60. Starkville argues that its contractual rights had vested. We disagree. In State ex rel.
Pittman v. Ladner, 512 So. 2d 1271 (Miss. 1987), this Court explained that a vested right is
a right that must be a “contract right, a property right, or a right arising from a transaction in
the nature of a contract which has become perfected to the degree that it is not dependent on
the continued existence of the statute.” Id. at 1275-76. Accordingly, Starkville’s rights as of
1987 had yet to vest at the time its contract became subject to MPSC authority and, inasmuch
as Starkville failed to secure MPSC approval, its contractual rights have yet to vest.
¶61. Based on the foregoing reasons, we find that the chancellor did not err in finding that
H. B. 997 did not violate the Contracts Clause of our federal and state constitutions.
¶62. We thus conclude for the reasons stated that the chancellor did not err in granting
summary judgment against Starkville and in favor of 4-County.
CONCLUSION
¶63. In 1963, Starkville and 4-County entered into an agreement which provided among other
things that should Starkville thereafter annex territory serviced by 4-County, Starkville could
unilaterally buy 4-County’s service rights and distribution facilities within the newly annexed
area, and 4-County would be obligated to sell. Starkville and 4-County, by clear and
unequivocal language in their contract, mutually agreed for their contract to be subject to the
34
approval of the Mississippi Public Service Commission “as is or may hereafter be required by
law.” Based on this contractual provision, Starkville and 4-County obviously envisioned that
the Mississippi Legislature would possibly enact future laws which might affect their rights
and obligations created under the contract. The 1987 and 2002 Amendments are constitutional
beyond any doubt and the chancellor was eminently correct in retroactively applying the 2002
Amendments (H. B. 997), to this pending litigation.
¶64. If Starkville had any hope of buying 4-County’s service rights and distribution facilities
in the 1994 annexed area, it had to receive MPSC approval pursuant to the 1987 and 2002
Amendments. The record is devoid of any effort on the part of Starkville to secure MPSC
approval of its agreement, even after being specifically ordered by the chancellor to do so.
¶65. In sum, the chancellor did not err in (1) refusing to transfer this case to circuit court
and (2) granting summary judgment by finding that (a) the 1963 Agreement was subject to
approval of the MPSC pursuant to the 1987 and 2002 Amendments, (b) H. B. 997 should be
applied retroactively to this pending litigation, and (c) H. B. 997 did not violate the Contracts
Clause of the federal and state constitutions. While the chancellor erred in finding that
Starkville lacked standing to challenge the constitutionality of H. B. 997, such error is
harmless beyond any doubt since the chancellor alternatively addressed this issue.
¶66. Accordingly, we affirm the Oktibbeha County Chancery Court’s entry of a final
judgment of dismissal in favor of 4-County Electric Power Association and against the City
of Starkville.
¶67. AFFIRMED.
35
SMITH, C.J., WALLER AND COBB, P.JJ., EASLEY AND DICKINSON, JJ.,
CONCUR. GRAVES, J., CONCURS IN RESULT ONLY. DIAZ AND RANDOLPH, JJ.,
NOT PARTICIPATING.
36