Halifax Paper Co. v. Roanoke Rapids Sanitary Dist.

61 S.E.2d 378 (1950) 232 N.C. 421

HALIFAX PAPER CO., Inc.
v.
ROANOKE RAPIDS SANITARY DIST. et al.

No. 169.

Supreme Court of North Carolina.

October 11, 1950.

George C. Green, Weldon, and Lucas & Rand, Wilson, for plaintiff.

Kelly Jenkins, Roanoke Rapids, and Lassiter, Leager & Walker, Raleigh, for the District.

Allsbrook & Benton, Roanoke Rapids, and Gay & Midyette, Jackson, for Rosemary and its Associates.

DENNY, Justice.

The only assignment of error is based on the exception to the signing of the judgment, dissolving the temporary restraining order, and denying the plaintiff's prayer that such order be made permanent. Therefore, the only question presented is whether error appears on the face of the record. Parker v. Duke University, 230 N.C. 656, 55 S.E.2d 189, and cited cases. Such error appears where the facts found are insufficient to support the judgment, or where the conclusions of law are not supported by the facts. Culbreth v. Britt Corp., 231 N.C. 76, 56 S.E.2d 15; State ex rel. Employment Security Comm. v. Jarrell, 231 N.C. 381, 57 S.E.2d 403; Roach v. Pritchett, 228 N.C. 747, 47 S.E.2d 20; Lea v. Bridgeman, 228 N.C. 565, 46 S.E.2d 555; Smith v. Davis, 228 N.C. 172, 45 S.E.2d 51, 174 A. L.R. 643; Redwine v. Clodfelter, 226 N.C. 366, 38 S.E.2d 203; Rader v. Queen City Coach Co., 225 N.C. 537, 35 S.E.2d 609.

The appellant contends the lease entered into between the District and Rosemary, 1 August, 1932, as amended in 1940, is void insofar as Rosemary and its associates are given priority over other customers of the District who purchase water for industrial purposes.

It is well to keep in mind that we are dealing with a contract between a private corporation and a quasi-municipal corporation, G.S. § 130-39, which is not under the control or supervision of the North Carolina Utilities Commission as to services or rates. G.S. § 62-30(3). Therefore, the contention of the appellant is without merit unless the provisions in the lease of which it complains, constitute such unwarranted discrimination between customers of the District as to be against public policy. G.S. § 130-39(7).

A public utility, whether publicly or privately owned, "is under a legal obligation to serve the members of the public to whom its use extends, impartially and without unjust discrimination. * * * A public utility must serve alike all who are similarly circumstanced with reference to its system, and favor cannot be extended to one which is not offered to another, nor can a privilege given one be refused to another." 43 Am.Jur. 599; 51 C.J. 7. This is in accord with our decisions. North Carolina Public Service Co. v. Southern Power Co., 179 N.C. 18, 101 S.E. 593, 12 A.L.R. 304; Solomon v. Wilmington Sewerage Co., 133 N.C. 144, 45 S.E. 536; Griffin v. Goldsboro Water Co., 122 N.C. 206, 30 S.E. 319, 41 L.R.A. 240.

It is settled law with us that utility corporations under the jurisdiction and control of the North Carolina Public Utilities Commission must conform to the rates or charges established by the commission; and that a contract between such a utility corporation and a customer, fixing a lower rate for service than that established by the commission, is subject to the police power of the State, with respect to the rate to be charged under such contract. G.S. § 62-123. Corporation Commission v. Henderson Water Co., 190 N.C. 70, 128 S.E. 465; Corporation Commission v. Cannon Mfg. Co., 185 N.C. 17, 116 S.E. 178; North Carolina Public Service Co. v. Southern Power Co., supra.

According to numerous authorities, however, a distinction is made between contracts for public utility services generally and a private contract where a rate or service has been fixed as a part of the consideration for the conveyance of property to the utility. 43 Am.Jur. 641; Schiller Piano Co. v. Illinois Northern Utilities Co., 288 I11. 580, 123 N.E. 631, 11 A.L.R. 454; Cudahy Packing Co. v. City of Omaha, 8 Cir., 277 F. 49; Sunset Shingle Co. v. Northwest Electric Water Works, 118 Wash. 416, 203 P. 978; Southern Pac. Co. v. Spring Valley Water Co., 173 Cal. 291, 159 P. 865, L.R.A. 1917E, 680; Bond Bros. v. Louisville & Jefferson County Metropolitan Sewer Dist., 307 Ky. 689, 211 S.W.2d 867; State ex rel. Raymond Light & Water Co. v. Public Service Commission, 83 Wash. 130, 145 P. 215; Village of Long Beach v. Long Beach Power Co., 104 Misc. 337, 171 N.Y.S. 824. See also Twin City Pipe Line Co. v. Harding Glass Co., 283 U.S. 353, 51 S. Ct. 476, 75 L. Ed. 1112, 83 A.L.R. 1168.

It is stated in 51 C.J., p. 8, Sec. (19) F., "The fact that a business or enterprise is, generally speaking, a public utility, does not make every service performed or rendered by it a public service, but it may act in a private capacity as distinguished from its public capacity, and in so doing is subject to the same rules as a private person." City of Phoenix v. Kasun, 54 Ariz. 470, 97 P.2d 210, 127 A.L.R. 84; Western Union Telegraph Co. v. Louisville & N. R. Co., 5 Cir., 250 F. 199. And in 51 C.J. p. 6, Sec. (13) B., it is also said: "Public utilities have the right to enter into contracts between themselves or with others, free from the control or supervision of the State, so long as such contracts are not unconscionable or oppressive and do not impair the obligation of the utility to discharge its public duties." Oklahoma Gas & Electric Co. v. Wilson & Co., 146 Okl. 272, 288 P. 316; Oklahoma Gas & Electric Co. v. Oklahoma Natural Gas Co., 85 Okl. 25, 205 P. 768.

In our opinion the agreement between the District and Rosemary is a private contract and does not fall within the purview of rate making power, even if the District were under the control and supervision of the State as to services or rates.

In the case of Sunset Shingle Co. v. Northwest Electric Water Works, supra, the Supreme Court of Washington held that where an electric light company before the construction of its plant contracted with a lumber mill whereby it received the site for its plant and the waste from the lumber mill as fuel in exchange for furnishing steam heat and electricity for power and lighting, the dedication of the electric plant to public service was subject to the contract obligations, even though some of the services to be rendered thereunder were public services.

In the Schiller case, supra, the plaintiff company conveyed an interest in a power dam in consideration of the agreement by the purchaser to furnish it, its successors and assigns, a continuous supply of "72.4 kilowatts of electrical power or energy free of charge, unless prevented by act of God or inevitable accident." It was contended by the defendant, a successor to the original purchaser, that since it was subject to the provisions of the Public Utilities Act of the State of Illinois, the contract was void. However, the court held the contract was valid and enforceable against the purchaser, its successors and assigns; and, among other things, the court said: "Legislation in the exercise of the police power must have relation to and be appropriate for the protection, preservation, and promotion of the public health, safety, morals, or welfare. An act which has no tendency to affect or endanger the public in any of those particulars and which is entirely innocent in character is not within the police power. * * * Under the police power the state has authority to enact legislation to regulate the charges and business of a public utility corporation; but if such legislation operates as a confiscation of private property, or constitutes an arbitrary or unreasonable infringement on personal or property rights, it will be held void, as in violation of the constitutional guaranty that no person shall be deprived of his property without due process of law."

In the instant case, the District was utterly powerless to carry out the purposes for which it was created, unless it could obtain a supply of filtered water without being required to expend the amount necessary to construct a water filtering plant. And the terms and conditions upon which the lease was executed and amended are valid and binding on the District, unless they are discriminatory and impair the obligation of the District to discharge its public duties.

The officials of the District were expressly authorized by G.S. § 130-39(7) and G.S. § 130-39(9) (b) to negotiate and enter into an agreement with the owners of existing water supplies, sewerage systems or other such utilities as might be necessary to carry into effect the purposes for which the District was created. And it is the accepted principle with us "that courts may not interfere in a given case with the exercise of discretionary powers conferred on these local administrative boards for the public welfare, unless their action is so clearly unreasonable as to amount to an oppressive and manifest abuse of their discretion." Lee v. Town of Waynesville, 184 N.C. 565, 115 S.E. 51, 53; Mullen v. Town of Louisburg, 225 N.C. 53, 33 S.E.2d 484; Asbury v. Town of Albermarle, 162 N.C. 247, 78 S.E. 146, 44 L.R.A., N.S., 1189.

Under the terms of the first lease, the District obligated itself to furnish at cost to Rosemary and associates, water sufficient for all their requirements, and the District was entitled only to such surplus water as the District might filter in the leased plant, over and above the requirements of Rosemary and associates.

The amendment to the lease in 1940, entered into after Rosemary, at its own expense, had increased the capacity of the filter plant to one and one-half times its previous capacity, provided for the plant personnel to be placed under the joint control of the District and Rosemary, the annual rental to be only One dollar, and for the cost of the operation of the plant to be prorated between the District and Rosemary on a basis of consumption. The District under the terms of the lease as amended was given priority on the water filtered in the leased plant, insofar as the consumers of the District required it "for drinking, household and fire-fighting purposes", but Rosemary agreed only that industrial users in the District should be furnished water out of any surplus supply that remained after furnishing the District with water for the above enumerated purposes and Rosemary and its associates with sufficient water to meet all their requirements.

In our opinion the lease contract existing between the District and Rosemary is clearly in the public interest. The taxpayers of the District have contributed nothing towards the construction of the leased filter plant or for any equipment used in connection therewith. And yet, under the terms of the agreement as amended, the District is able to obtain sufficient filtered water to meet all the purposes for which it was created at the cost of filtering plus a nominal rent of One dollar per year, without making any investment in a filter plant. The taxpayers and consumers of the District are further protected, in that, in the event the cost of filtering water should exceed the maximum amount fixed in the agreement which Rosemary and associates may be required to pay for their prorata part of the water filtered in the plant, the District may cancel the lease. On the other hand, if the District shall fail to pay the rent or breach any of the conditions assumed and imposed upon it to be performed, Rosemary may terminate the lease. We find nothing in the arrangement between the District and Rosemary that constitutes an unlawful discrimination between customers of the District who are in similar circumstances.

Under the terms of the contracts between Rosemary and the District, the District has never been given the right to any water filtered in the leased plant for industrial purposes, except out of surplus water after the requirements of Rosemary and associates have been supplied. Of course in the disposal of any water the District may have for sale for industrial purposes, it must serve alike its industrial users who are "similarly circumstanced". 43 Am.Jur., 599. But the plaintiff and Rosemary and associates, in our opinion, are not "similarly circumstanced."

It is a matter of common knowledge that large amounts of water for industrial purposes are not usually available from municipally owned water plants. Ordinarily water for industrial purposes is provided by the particular industry requiring it or by special contract with the municipality where such municipality has an adequate supply.

We think the contracts under consideration are valid and enforceable, and that his Honor's conclusions of law are supported by his findings of fact.

The ruling of the court below will be upheld.

Affirmed.