Pickwick Electric Cooperative v. Alcorn County Electric Power Assication (sic) ( 2004 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
September 21, 2004 Session
PICKWICK ELECTRIC COOPERATIVE v. ALCORN COUNTY
ELECTRIC POWER ASSICATION
A Direct Appeal from the Chancery Court for McNairy County
No. 7939 The Honorable Dewey C. Whitenton, Chancellor
No. W2003-02699-COA-R3-CV - Filed November 15, 2004
This is an appeal from the trial court’s grant of an injunction against Appellant to remove its
electrical lines and facilities from McNairy County. The trial court found that Appellant was a “non-
consumer owned electric system” and, as such, subject to injunction under T.C.A. §65-34-103.
Finding that Appellant is, in fact, an “electric and community service corporation,” we hold that
Appellant is not subject to injunction under T.C.A. §65-34-103. We reverse and remand.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Chancery Court Reversed and
Remanded
W. FRANK CRAWFORD , P.J., W.S., delivered the opinion of the court, in which ALAN E. HIGHERS,
J. and DAVID R. FARMER , J., joined.
James E. Price, Jr. of Corinth; Terry L. Wood of Corinth for Appellant, Alcorn County Electric
Power Association
Terry Abernathy of Selmer for Appellee Pickwick Electric Cooperative
J. Richard Lodge, Jr., and Russell S. Baldwin of Nashville for Tennessee Electric Cooperative
Association as Amicus Curiae
OPINION
Alcorn County Electric Power Association (“ACE,” “Defendant,” or “Appellant”) is a
member-owned non-profit electric service cooperative organized and doing business under the laws
of the State of Mississippi for the purpose of providing electric services to its members in Alcorn
County, Mississippi, pursuant to a certificate of authority from the Mississippi Public Service
Commission. Pickwick Electric Cooperative (“PEC,” “Plaintiff,” or “Appellee”) is a member-owned
non-profit electric cooperative organized and doing business under the laws of the State of Tennessee
for the purpose of providing electric service to its members within its exclusive geographic territory,
which includes McNairy County, Tennessee. In the fall of 2002, ACE constructed a three-phase,
12,000 volt electric line and related electric distribution facilities (including lighting and secondary
facilities for serving ultimate consumers) within PEC’s territory in McNairy County.
On April 22, 2003, PEC filed a Complaint in the Chancery Court of McNairy County against
ACE seeking a mandatory injunction to compel ACE to remove its power lines and distribution
facilities from McNairy County. The sole ground relied upon by PEC in the complaint was that the
erection and maintenance of these lines and facilities violated T.C.A. §65-34-103 because ACE was
allegedly a “non-consumer owned electric system” within the meaning of that statute. On May 5,
2003, ACE filed its Answer denying that it was a “non-consumer owned electric system.”
Incorporated into ACE’s Answer was a Motion to Dismiss on the grounds that the restrictive
provisions of T.C.A. §65-34-103 were not applicable to ACE because ACE was an “electric and
community service corporation,” as that term is used in the Tennessee statutes.
The matter was heard by the court sitting without a jury on August 25, 2003. On October 24,
2003, the trial court entered its “Final Decree and Judgment” (the “Judgment”), which incorporates
the “Trial Opinion” by reference. Specifically, the trial court held that: (1) ACE is a “non-consumer
owned electric system” under Tennessee law and, therefore, that ACE has violated T.C.A. §65-34-
103 by constructing and maintaining its electrical distribution facilities outside its geographic
territory; (2) that ACE’s facilities directly encroach upon PEC’s exclusive territorial rights as
provided by Tennessee law; (3) that ACE’s facilities limit or preclude PEC’s ability to expand or to
safely maintain its system; (4) that ACE’s equipment is placed in violation of the National Electric
Safety Code (“NESC”).
ACE appeals and raises one issue for review as stated in its brief: Whether ACE is a “non-
consumer owned electric system” within the meaning of Section 65-34-103, Tennessee Code
Annotated. If ACE is not a “non-consumer owned electric system” as that term is defined by
Tennessee law, then Section 65-34-103, Tennessee Code Annotated, is not applicable to it; and the
trial court erred in overruling its motion to dismiss.
The trial court’s interpretation of the statutory scheme at issue in this case is a question of
law. As such, our review of the trial court’s order is de novo upon the record with no presumption
of correctness accompanying the trial court’s conclusions of law. See Tenn. R. App. P. 13(d);
Waldron v. Delffs, 988 S.W.2d 182, 184 (Tenn. Ct. App. 1998); Sims v. Stewart, 973 S.W.2d 597,
599-600 (Tenn. Ct. App. 1998).
T.C.A. §65-34-103 (1993), under which the trial court granted PEC’s request for an
injunction, reads, in pertinent part, as follows:
65-34-103. Non-consumer owned electric system – Expansion
limits. – No non-consumer owned electric system may construct,
acquire, or maintain facilities, lines, poles, or other equipment used
or useful for the distribution or sale of electricity outside its current
geographic territory, nor may any non-consumer owned electric
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system provide, by sale or otherwise, electricity to any parcel of land
located outside its current geographic territory.
A “non-consumer owned electric system” is defined at T.C.A.§65-34-102(4) (1993) as follows:
“Non-consumer owned electric system” means any public electric
system other than electric and community service cooperatives and
municipal electric systems....
ACE argues that it is an “electric and community service cooperative” and, therefore, not a “non-
consumer owned electric system,” which is subject to the restrictions of T.C.A. §65-34-103. An
“electric and community service cooperative” is defined at T.C.A. §65-25-202(4) (Supp. 2003) as
follows:
“Cooperative” or “cooperatives” means one (1) or more nonprofit
cooperative membership corporations heretofore or hereafter
organized under or otherwise subject to this part, including
corporations transacting business in Tennessee pursuant to §65-25-
221 under this part or under its predecessor, the Electric Cooperative
Law, hereinafter called “foreign corporations.”
T.C.A. §65-25-221(a) (1993) defines a “foreign corporation” as follows:
Any corporation organized on a nonprofit or a cooperative basis for
the primary purpose and/or for one (1) or more secondary purposes
and operating in a state adjacent to this state shall be permitted to
transact business in this state without complying with any statute of
this state pertaining to the qualification of foreign corporations for the
transaction of business in this state.
Under the statutory scheme outlined above, if ACE qualifies as an “electric and community service
cooperative” under T.C.A. §65-25-202(4), then it is not a “non-consumer owned electric system”
subject to injunction under T.C.A. §65-34-103. According to the stipulated facts, ACE is a member
owned nonprofit corporation organized for the primary purpose of providing electricity to its
members in Mississippi, a state adjacent to Tennessee. We find, therefore, that ACE is an “electric
and community service cooperative” under T.C.A. §65-25-202(4), and could also be defined as a
foreign corporation under T.C.A. § 68-25-221(a). Because ACE is not a “non-consumer owned
electric system,” we find that the trial court erred in enjoining ACE to remove its lines and facilities
under T.C.A. §65-34-103.
Although PEC does not allege any grounds other than those found at T.C.A. §65-34-103 in
its Complaint, at the hearing on this matter, PEC proffered the testimony of its employee Carl
Dudley. Mr. Dudley testified that the placement of ACE’s lines and facilities is in violation of the
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NESC, and that ACE’s equipment interferes with PEC’s ability to service and/or expand their
equipment located in the area. Despite the fact that PEC’s Complaint was not amended to include
allegations that ACE’s equipment was placed in violation of the NESC or that it hindered PEC’s
ability to service its own system, no objection was made regarding this evidence. Rule 15.02 of the
Tenn. R. Civ. P. reads, in relevant part, as follows:
When issues not raised by the pleadings are tried by express or
implied consent of the parties, they shall be treated in all respects as
if they had been raised in the pleadings. Such amendment of the
pleadings as may be necessary to cause them to conform to the
evidence and to raise these issues may be made upon motion of any
party at any time, even after judgment; but failure so to amend does
not affect the result of the trial of these issues.
(Emphasis added).
Consequently, the fact that PEC’s Complaint does not include an allegation that the
placement of ACE’s equipment is a safety hazard or a hinderance to PEC’s own maintenance and/or
expansion efforts does not invalidate the trial court’s finding on the matter.
Mr. Dudley’s testimony is largely undisputed; however, there was not a comprehensive
inquiry below as to ACE’s alleged violations of safety standards, or as to the extent, if any, of their
interference with PEC’s equipment.
For the foregoing reasons, we reverse the trial court’s Judgment. We remand the case for
such further proceedings as may be necessary to determine whether and to what extent ACE’s lines
and facilities are placed in violation of the NESC, whether and to what extent ACE’s equipment
hinders PEC’s ability to expand and/or maintain its own equipment and, if any violations exist, then
to determine the means by which those violations may be remedied. Costs of this appeal are
assessed one-half to Appellant, Alcorn County Electric Power Association, and its surety, and one-
half to the Appellee, Pickwick Electric Cooperative.
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W. FRANK CRAWFORD, PRESIDING JUDGE, W.S.
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